D2 Excavating v. Thompson Thrift

Case: 21-40629 Document: 00516756396 Page: 1 Date Filed: 05/19/2023
United States Court of Appeals
for the Fifth Circuit United States Court of Appeals
Fifth Circuit
____________ FILED
May 19, 2023
No. 21-40629 Lyle W. Cayce
____________ Clerk
D2 Excavating, Incorporated,
Plaintiff—Appellee,
versus
Thompson Thrift Construction, Incorporated; Fidelity
& Deposit Company of Maryland,
Defendants—Appellants.
______________________________
Appeal from the United States District Court
for the Southern District of Texas
USDC No. 2:16-CV-538
______________________________
Before King, Stewart, and Haynes, Circuit Judges.
Per Curiam: *
This is the second appeal in this contract dispute between D2
Excavating Company (“D2”) and Thompson Thrift Construction
(“Thompson”). D2 sued Thompson for breach of contract after Thompson
refused to pay D2 for removing dirt from a construction worksite in excess of
the amount Thompson represented was at the site. A prior panel of this court
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*
This opinion is not designated for publication. See 5th Cir. R. 47.5.
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affirmed in part and reversed in part the district court’s judgment for D2 and
remanded the case for modification of the judgment consistent with its
opinion. D2 Excavating, Inc. v. Thompson Thrift Constr., Inc., 973 F.3d 430,
438 (5th Cir. 2020). Thompson now appeals the district court’s modified
judgment, arguing that the prior panel’s decision was clearly erroneous
because it relied on a breach-of-contract claim that was never pleaded or
proven. Thompson thus contends that the district court erred in
implementing the prior panel’s mandate. Thompson also argues that the
district court erred in awarding trial and appellate attorney’s fees to D2 by
failing to apply the “main issue” test that Texas law requires.
Finding no error in the district court’s adherence to the prior panel’s
mandate and no error in its award of attorney’s fees, we AFFIRM.
I. Facts & Procedural History 1
Thompson subcontracted with D2 to provide excavation services on
its worksite. The site was understood by both parties to be “balanced,”
meaning no dirt had to be added or removed from the site, and D2 would only
need to shift existing dirt around to meet the site plan’s specifications. This
turned out to be untrue, and D2 encountered dirt far in excess of what the
specifications called for. Because of this, D2’s expenses increased
significantly and it began requesting additional payment from Thompson.
Thompson assured D2 that it would be compensated for the extra work and
stated that it would issue a written change order once the work was finished
and the entire cost was determined. As D2 continued to work, Thompson
repeatedly requested that D2 regrade areas that other subcontractors
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1
The pertinent facts underlying this dispute are described in our previous opinion
and also briefly summarized here for purposes of clarity. See D2 Excavating, Inc., 973 F.3d
at 432–33.
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disturbed by leaving debris—work that was outside the scope of the
Subcontract. This interfered with D2’s ability to access certain areas to
complete performance of the Subcontract requirements. Thereafter, D2
again requested compensation for handling excess dirt and for all completed
labor and materials under the Subcontract, minus the payment for the work
that could not be accomplished due to the debris. Thompson refused to pay.
As a result, D2 ceased performing work.
D2 filed suit against Thompson and pursued multiple breach-of-
contract claims including (1) unpaid materials and labor and (2) costs
generated by the removal of excess dirt. D2 also sued for quantum meruit,
violations of the Texas prompt pay statute, and to foreclose on a statutory
and constitutional lien. Thompson counterclaimed, alleging that D2
breached the contract when it ceased performance prior to completion. Its
countersuit also included claims for breach of warranty, indemnification, and
a declaration that D2’s lien was unenforceable. The district court held a
bench trial and later issued a memorandum of findings of fact and conclusions
of law which rejected all of Thompson’s counterclaims. It also ruled in favor
of D2 on both breach-of-contract claims and the quantum meruit claim. It
thus awarded damages in the amounts of $81,068.00 for the unpaid materials
and labor and $257,588.53 for the costs generated by the excess dirt. Also
included in the judgment was an award of attorney’s fees in favor of D2 for
$356,080.91.
Thompson timely appealed and a previous panel of this court affirmed
in part and reversed in part. D2 Excavating, Inc., 973 F.3d at 438. The prior
panel determined that, because of the interference of the debris on the
construction site, D2 was entitled to cease performing before it completed
the work and was fairly owed the $81,068.00 outstanding balance on the
contract. Id. at 437. In doing so, it also affirmed the denial of Thompson’s
counterclaims. Id. It, however, reversed the portion of the district court’s
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judgment concerning the excess dirt, holding that “[n]either breach of
contract nor quantum meruit allow[ed] D2 to recover for ‘excavation of
unanticipated excess soil.’” Id. As a result, it remanded the case with
instructions to modify the judgment consistent with its opinion. Id. at 438.
Thompson sought relief from the judgment through a Rule 60(b)
motion. Specifically, Thompson argued that, because the previous panel
reversed the “only breach-of-contract finding,” the district court should
revisit the attorney’s fee award anew and hold that Thompson was the
prevailing party. D2 then moved for an amended final judgment. The district
court granted D2’s motion in part and denied Thompson’s. In granting D2’s
motion, the court removed the damages award for the excess dirt and left
intact the portion affirmed by the prior panel. It also awarded D2 statutory
interest, costs, and post-judgment interest. As for attorney’s fees, the district
court did not reduce the $356,080.91 in trial attorney’s fees that was awarded
to D2 before the appeal. It also added $111,159.25 in appellate attorney’s fees
to D2. Thompson appealed.
Thompson now seeks reversal of the district court’s post-remand
judgment for two reasons. First, Thompson argues that the district court
erred in implementing the prior panel’s mandate which, according to
Thompson, resulted in a manifest injustice. Second, Thompson argues that
the district court applied the wrong legal standard when it awarded
attorney’s fees to D2.
II. Standard of Review
“We review de novo a district court’s interpretation of our remand
order, including whether the law-of-the-case doctrine or mandate rule
forecloses any of the district court’s actions on remand.” Deutsche Bank
Nat’l Tr. Co. v. Burke, 902 F.3d 548, 551 (5th Cir. 2018) (quotation
omitted). “The mandate rule requires a district court on remand to effect
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our mandate and to do nothing else.” Id. (quotation omitted). We have,
however, provided that the mandate rule can be overcome in three
instances: “(i) the evidence on a subsequent trial was substantially
different, (ii) controlling authority has since made a contrary decision on
the law applicable to such issues, or (iii) the decision was clearly erroneous
and would work a manifest injustice.” Hopwood v. Tex., 236 F.3d 256, 272
(5th Cir. 2000).
An award of attorney’s fees by the district court is generally
reviewed for abuse of discretion, “bearing in mind that court’s superior
understanding of the litigation and of the costs and fees reasonably
incurred in that litigation.” Abner v. Kan. City S. Ry. Co., 541 F.3d 372, 378–
79 (5th Cir. 2008) (internal quotation marks and citation omitted). We
review the legal conclusions supporting a fee award de novo. Volk v.
Gonzalez, 262 F.3d 528, 534 (5th Cir. 2001).
III. Discussion
A. The Mandate Rule
Thompson argues that the district court should have disregarded the
prior panel’s mandate because its decision was clearly erroneous and
amounted to a manifest injustice. We disagree.
We have said that the manifest injustice exception is to be applied
narrowly, and that “mere doubts or disagreement about the wisdom of a prior
decision of this or a lower court will not suffice.” Hopwood, 236 F.3d at 272.
“To be clearly erroneous, a decision must strike us as more than just maybe or
probably wrong; it must be dead wrong.” Id. at 272–73. Thompson claims
this narrow exception applies here because D2 never pleaded nor
prosecuted the breach- of- contract claim affirmed by the prior panel.
Rather, the only claim D2 made, according to Thompson, is the excess-
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dirt claim that the panel reversed. Thus, Thompson argues that the
$81,068.00 damages award for unpaid labor and materials was improper
because Texas law does not allow for a “freestanding contractual damages
award.”
Thompson’s “single claim for breach of contract” argument directly
contradicts the record and the district court’s rulings. From the very outset
of the litigation, D2 pursued multiple breach-of-contract claims. Not only did
D2 allege that Thompson failed to pay for the removal of excess dirt, but it
also alleged that Thompson failed to pay for labor and materials pursuant to
the terms of their agreement. Thompson has consistently refuted the unpaid-
balance allegation throughout the litigation of this case—in its Answer and
on summary judgment. The claim nevertheless survived summary judgment
and the district court determined that Thompson was required to pay the
unpaid balance.
When the prior panel reviewed the district court’s decision on the
unpaid-balance claim, Thompson contended that it was not required to pay
the $81,068.00 because D2 stopped performing before it completed the
work. However, the panel agreed with the district court that “Thompson’s
prior breach and its failure to manage the construction site excused D2’s
failure to perform.” In other words, because D2 was unable to complete its
work in certain parts of the site because of debris, Thompson prevented D2
from performing its part of the contract, which is an excuse for
nonperformance. The panel therefore affirmed the district court on this
ground and held that Thompson breached the contract when it failed to pay
the unpaid balance for labor and materials, thereby causing damage to D2 in
the amount of $81,068.00. We see nothing “dead wrong” with that decision.
Deutsche, 902 F.3d at 551. Because the prior panel accurately interpreted the
district court’s factual findings and conclusions of law, we affirm the district
court’s order implementing the mandate.
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B. Attorney’s Fees
Next, Thompson challenges the award of trial and appellate
attorney’s fees in D2’s favor. “State law controls both the award of and the
reasonableness of fees awarded where state law supplies the rule of
decision.” Mathis v. Exxon Corp., 302 F.3d 448, 461 (5th Cir. 2002). In Texas,
parties are generally required to pay their own attorney’s fees unless a statute
or contract provides otherwise. 2 See In re Nat’l. Lloyds Ins. Co., 532 S.W.3d
794, 809 (Tex. 2017). In this case, the parties did not have a contract
provision providing for fees. Instead, D2 requested and the district court
awarded fees pursuant to Chapter 38 of the Texas Civil Practice and
Remedies Code.
i. Chapter 38 Fees
Chapter 38 “provides that a party ‘may recover reasonable attorney’s
fees from an individual or corporation, in addition to the amount of a valid
claim and costs, if the claim is for . . . an oral or written contract.’” Green
Int’l, Inc. v. Solis, 951 S.W.2d 384, 390 (Tex. 1997) (quoting § 38.001(8)).
“To recover attorney’s fees under [§] 38.001, a party must (1) prevail on a
cause of action for which attorney’s fees are recoverable, and (2) recover
damages.” Id. (citing State Farm Life Ins. Co. v. Beaston, 907 S.W.2d 430, 437
(Tex. 1995)); Intercontinental Grp. P’ship v. KB Home Lone Star L.P., 295
S.W.3d 650, 662 (Tex. 2009). Given our determination that the district court
did not err in issuing the $81,068.00 award of damages to D2, the second
prong is satisfied. The issue before us—whether D2 is entitled to Chapter 38
fees—thus turns on whether D2 prevailed on its cause of action.
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2
The parties agree that this issue is guided by Texas law.
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According to Thompson, Texas law requires courts to apply the
“main issue” test, and the district court committed reversible error by failing
to do so. Thompson contends that, had the district court applied the “main
issue” test, it would have identified the excess-dirt claim as the main issue of
the litigation and, because Thompson successfully defended against that
claim, the court would have determined that it was the prevailing party
instead of D2. We disagree.
In determining prevailing party status, Texas courts only consider
what the main issue of the litigation was “where both parties received
judgment under the cause of action, i.e., where both parties breached the
contract.” Flagship Hotel, Ltd. v. City of Galveston, 117 S.W.3d 552, 564 (Tex.
App. 2003); see also Hrdy v. Second St. Props. LLC, 649 S.W.3d 522, 560 (Tex.
App.—Houston [1st Dist.] 2022, pet. filed). But when only one party
receives a judgment in the cause of action, Texas courts focus the prevailing
party analysis on the “success on the merits, i.e., the party who is vindicated
by the trial court’s judgment.” Flagship Hotel, Ltd., 117 S.W.3d at 565 (citing
City of Amarillo v. Glick, 991 S.W.2d 14, 17 (Tex. App.—Amarillo 1997, no
pet.) (concluding that the plaintiffs were the prevailing party even though
they did not receive all requested relief)).
For example, in Flagship, the plaintiff sued the city for breach of
contract alleging (1) failure to properly maintain and repair the pier, (2)
liability for excess payments, and (3) liability for taxes collected in violation
of the lease. The plaintiff recovered damages on one of the three breach-of-
contract theories—liability for taxes—and he also recovered attorney’s fees.
On appeal, the city argued that the plaintiff was not entitled to fees
under § 38.001 because it won on the main issue—maintenance and repairs.
The court rejected this argument, emphasizing that the “main focus of the
inquiry should be whether the agreement was breached, not the extent of the
breach” because a prevailing party is not required to receive a judgment “to
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the extent of its original contention.” Id. at 564 (citation omitted). It thus
held that the plaintiff was entitled to attorney’s fees because it was the only
party to prevail on the breach-of-contract cause of action and receive
damages as required under § 38.001. Id. at 565.
Likewise, here, the only party that prevailed on a breach-of-contract
claim and received damages on that claim was D2. As the district court
pointed out, D2’s failure to recover damages in the amount that it originally
sought does not prevent it from obtaining Chapter 38 fees. See City of
Amarillo, 991 S.W.2d at 17. Recall, each party brought its own breach-of-
contract claim against the other party in this case. It was D2 that successfully
defended against Thompson’s breach-of-contract counterclaim and obtained
a take nothing judgment in its favor. Put simply, Thompson was not
vindicated by the district court’s judgment. See Flagship Hotel, Ltd., 117
S.W.3d at 565.
Thompson’s arguments to the contrary do not convince us otherwise.
It argues that Texas courts have applied the main issue test “when both
parties did not breach an agreement,” and thus Flagship is inconsistent with
Texas law. To support this notion, it cites Happy Endings Dog Rescue v.
Gregory, but that case is inapposite. 501 S.W.3d 287, 295 (Tex. App. 2016).
In Gregory, the Texas appellate court reversed the plaintiffs’ damages award
and, because they no longer prevailed on those claims, reversed their award
of attorney’s fees. Unlike the Gregory court, the previous panel in this case
affirmed the district court’s judgment for D2 on the breach-of-contract claim
for the unpaid balance, and as a result, D2 was properly awarded damages on
that claim.
It next argues that under Texas law a defendant can prevail by
successfully defending against an alleged breach. It then cites Rohrmoos
Venture v. UTSW DVA Healthcare, LLP, a case in which the Supreme Court
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of Texas applied the main issue test to construe “prevailing party” language
that was not defined in the commercial lease at issue. 578 S.W.3d 469, 486
(Tex. 2019). In doing so, Thompson ignores that the Rohrmoos Venture court
explained that cases involving Chapter 38 are merely instructive, not
controlling, because the contractual standard, which did not require that the
awardee obtain damages, was less stringent than Chapter 38. 3 Id. at 484–85.
This case therefore provides little precedential support for application of the
“main issue” test in this context.
To contravene this, Thompson cites Dees v. Dees for the proposition
that the main issue test is proper in Chapter 38 cases. No. 02-13-00184-CV,
2014 WL 2538750, at *6 (Tex. App.—Fort Worth June 5, 2014, no pet.)
(mem. op.). But this argument misses the point. In Dees, the court applied
the main issue test to a claim for attorney’s fees under Chapter 38 and held
that a party prevailed on the main issue—equitable subrogation. However, in
a footnote, it noted that the defendant also recovered a judgment against the
plaintiffs “on the loan agreement,” but those issues were not contested at
trial and thus not the main issue. Id. at *6 n.7. This case is therefore consistent
with Flagship in that it applied the main issue test where “both parties
received [a] judgment.” Flagship Hotel, Ltd., 117 S.W.3d at 564.
Accordingly, we hold that the district court did not err in determining
that D2 prevailed on the cause of action. And for this reason, it was
mandatory for the district court to assess a reasonable fee award. DP Sols.,
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3
What’s more, Thompson’s breach of the contract contradicts its assertion that it
successfully defended against the breach-of-contract suit. See Rohrmoos Venture, 578
S.W.3d at 486 (holding that counter-defendant was excused for its breach by obtaining a
jury verdict that the counter-plaintiff breached first, and thus it “successfully defended”
against the counterclaim). Bigbee v. Samadian Fam. Ltd. P’ship, 2022 WL 4298725, *5 (Tex.
App. Sept. 19, 2022).
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Inc. v. Rollins, Inc., 353 F.3d 421, 433 (5th Cir. 2003) (citations omitted)
(assessing reasonableness of district court’s award of Chapter 38 fees). 4
Lastly, Thompson argues that the district court erred in granting
appellate attorney’s fees because this court reversed the excess dirt claim on
appeal. However, in determining that D2 prevailed on its cause of action, we
are holding that it prevailed overall. Indeed, “Texas law requires that if an
award of trial attorney’s fees is mandatory under civil practice and remedies
code [§] 38.001, an award of appellate attorney’s fees is likewise mandatory.”
DaimlerChrysler Motors Co., LLC v. Manuel, 362 S.W.3d 160, 199 (Tex. App.
2012); see also Gill Sav. Ass’n v. Chair King, Inc., 797 S.W.2d 31, 32 (Tex.
1990) (per curiam). Having determined that the district court did not err in
awarding to D2 attorney’s fees under Chapter 38, we next turn to whether such
fees were reasonable. See Mathis, 302 F.3d at 461.
ii. Reasonableness of Fees
Typically, under these circumstances, the attorney’s fees would be
subject to a reduction that reflect the prevailing party’s minimized recovery on
appeal. However, Thompson made a strategic choice in this case to take an all-
or-nothing approach. That is, it never argued to the district court or on appeal
that the amount of fees awarded to D2 were unreasonable. 5 Instead, it only
argued that D2 was not entitled to attorney’s fees at all. Accordingly, we must
decide the case as it is presented to us.
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4
Given our holding that D2 was entitled to Chapter 38 fees, we need not address
the district court’s alternative holding that D2 is entitled to attorney’s fees under Texas
Property Code provisions §§ 28.005(b) and 53.156.
5
Thompson further confirmed at oral argument that it had not argued for the
apportionment or reasonableness of the fee awards because of its strongly held position that
D2 was not a prevailing party under the main issue test. See Oral Arg. at 1:20-2:33.
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Here, D2 submitted attorney’s fee affidavits, along with time records
for counsel, requesting a total award. The district court held that the award
of trial attorney’s fees should not be reduced on the basis of D2’s limited
recovery after the appeal. According to the district court, although D2 did
not recover an award on the excess-dirt claim, the legal work expended to
litigate the unpaid-balance claim was interrelated, especially with respect to
D2’s efforts to defeat Thompson’s counterclaim. As to the appellate
attorney’s fees, the district court reduced the amount sought by D2 by 30%
because the billing records included duplicative work. The district court did
so, even though Thompson offered no controverting evidence challenging
the entries of the fee requests.
Given our deferential standard of review and Thompson’s failure to
specify any expenses that were unreasonably granted, we cannot say that the
district court erred in granting the amount of attorney’s fees that it did. See
Bencon Mgmt. & Gen. Contracting, Inc. v. Boyer, Inc., 178 S.W.3d 198, 208–10
(Tex. App. 2005) (rejecting segregation and excessive challenge to attorney’s
fee award where party did not object and awarding fees two times more than
actual damages recovered); Lee v. Perez, 120 S.W.3d 463,469–70 (Tex. App.
2003) (holding that the court does not have discretion to award nothing when
there was uncontested evidence of reasonable appellate attorney’s fees that
were sought by a prevailing party); Bank of Tex. v. VR Elec., Inc., 276 S.W.3d 671,
685 (Tex. App. 2008) (holding that uncontroverted evidence was sufficient to
support the jury’s award of trial and appellate attorney’s fees that were four
times the damages recovered).
For these reasons, we AFFIRM the district court’s judgment in full.
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