Bagby Elevator Company, Inc. v. Derald Armstrong

Filing

Bagby Elevator Company, Inc. v. Derald Armstrong

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Case: 09-10804

Document: 00511166014

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Date Filed: 07/07/2010

REVISED July 7, 2010 IN THE UNITED STATES COURT OF APPEALS FOR THE FIFTH CIRCUIT
United States Court of Appeals Fifth Circuit

FILED
N o . 09-10804 June 21, 2010 Lyle W. Cayce Clerk B A G B Y ELEVATOR COMPANY, INC., P la in t iff-A p p e lle e Cross-Appellant v. S C H I N D L E R ELEVATOR CORP., D e fe n d a n t -A p p e lla n t Cross-Appellee

A p p e a l from the United States District Court fo r the Northern District of Texas

B e fo r e KING, WIENER, and DENNIS, Circuit Judges. W I E N E R , Circuit Judge: A p p e lla n t Schindler Elevator Corp. ("Schindler") appeals from a jury v e r d ic t awarding appellee Bagby Elevator Co., Inc. ("Bagby") economic and e x e m p la r y damages for tortious interference with contract. We affirm. I . FACTS AND PROCEEDINGS A. B ackgrou n d A s competitors in the Dallas area elevator-servicing market, both Bagby a n d Schindler provide commercial clients with a variety of services, including e le v a t o r maintenance, modernization, construction, installation, and repair. In

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No. 09-10804 2 0 0 3 , Bagby hired Derald Armstrong as the company's salesperson for that area. Armstrong quickly developed business contacts with the management at Younan P r o p e r tie s ("Younan"), a California-based company which owns and mortgages c o m m e r c ia l office buildings in the Dallas area and across the country. Through Armstrong's efforts, Bagby soon obtained contracts to perform v a r io u s maintenance services for Younan. In early 2006, Younan contracted w it h Bagby to provide full elevator maintenance services for a building that the c o m p a n y was leasing to KPMG. Prior to that agreement, Younan had depended primarily on Schindler to s e r v ic e its commercial properties. In late 2006, however, Younan complained of S c h in d le r 's poor work quality and cancelled the parties' existing servicing a g r e e m e n ts . In a letter to Schindler formalizing the cancellation, Younan

e x p la in e d that Schindler's work quality had deteriorated to such an extent that Y o u n a n feared it was "exposing [its] tenants to undue risk and potential injury." S h o r t ly after cancelling its contracts with Schindler, Younan asked Bagby t o furnish price quotations for several of the remaining properties. With

A r m s t r o n g acting as its point person, Bagby eventually proposed prices for, and s e c u r e d five-year service contracts on, eight of Younan's properties in the Dallas a r e a . To fulfill those contracts, Bagby hired an additional technician and added a new route to its servicing department. D e s p ite Armstrong's success in securing the Younan properties, tensions d e v e lo p e d between him and Bagby after the company discovered that he had b e e n using his company credit card for personal expenses, including his personal i n s u r a n c e and his family's cell phone plan. Then, after discovering that

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No. 09-10804 A r m s t r o n g had also charged more than $2,000 in personal fuel expenses to the c a r d , Bagby immediately terminated his employment. P rior to his termination, Armstrong had contacted Schindler's Dallas office sev era l times about possible employment opportunities, although the parties had n e v e r reached an agreement. Within days after his termination by Bagby, h ow ev er, Armstrong again contacted Schindler about employment opportunities. This time, Schindler agreed to terms with Armstrong and offered him a position w it h the company. Armstrong's principal job with Schindler was to recover p r e v io u s ly cancelled contracts, such as the contracts for servicing the Younan p r o p e r tie s . S h o r t ly after starting work for Schindler, Armstrong set up a meeting b e tw e e n Schindler and Younan to discuss the Bagby contracts. Prior to the m e e t in g , Armstrong provided Schindler with the terms of the Bagby service c o n t r a c ts , enabling Schindler to undercut Bagby by offering lower rates. After t h e meeting, Younan and Schindler signed new contracts for Schindler to replace B a g b y as its primary elevator-servicing company for the eight Younan p r o p e r tie s . A few days after signing the contracts with Schindler, Younan informed B a g b y that it was cancelling all of their earlier contracts. In a letter confirming t h e cancellation, Younan explained that it preferred to do business with a n a t io n a l service provider, i.e., Schindler, and was thus cancelling its contracts p u r s u a n t to a purported "30-day cancellation clause" in each agreement. In that le t t e r , Younan ordered Bagby to cease all maintenance work on Younan p r o p e r t ie s immediately. Bagby protested the cancellations and demanded that

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No. 09-10804 Y o u n a n abide by the terms of the contracts, which, according to Bagby, did not c o n t a in the 30-day cancellation clause that Younan alleged. I n response, Younan sent Bagby another letter, again explaining that it h a d elected to exercise its right to cancel the agreements pursuant to the p u r p o r t e d 30-day cancellation clauses. Schindler, through Armstrong, had

in fo r m e d Younan that all of its contracts with Bagby contained cancellation c la u s e s , even though they did not. Younan apparently never bothered to check t h e s e contracts. For several months thereafter, Bagby continued to insist that (1 ) Schindler cease work on the Younan buildings and stop interfering with B a g b y 's contracts, and (2) Younan abide by the terms of the still-valid contracts w it h Bagby. Both Younan and Schindler refused. I n late 2007, Bagby sued Younan for breach of contract. Younan

im m e d ia t e ly contacted Schindler and Armstrong for assistance in defending the s u it and requested evidence of the 30-day cancellation clauses. In response, A r m s t r o n g produced a suspicious letter that he claimed to have written in D e c e m b e r 2006 when he was still a Bagby employee. In the letter, Armstrong p u r p o r t s to give Younan a unilateral right to cancel any contracts with Bagby b y furnishing 30 days notice. There is good reason to believe that the letter is n o t authentic, however, as none of the parties had any record of it before A r m s t r o n g produced it in connection with this litigation, and its terms do not a p p e a r in any of the parties' documents. B. Proceedings

I n its lawsuit, Bagby sought to recover approximately $240,000 in lost p r o fit s resulting from Schindler's repeated interference with the Younan c o n t r a c ts . Prior to trial, the district court granted summary judgment in favor

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No. 09-10804 o f Schindler on several of Bagby's claims, including tortious interference with its b u s in e s s prospects and tortious interference with its non-compete agreement w it h Armstrong. At trial, the district court declined to instruct the jury on S c h in d le r 's proposed "unclean hands" defense, as the court determined that, u n d e r Texas law, the defense is limited solely to equitable actions and does not a p p ly in intentional tort suits for damages. A t the conclusion of trial, the jury found in favor of Bagby on its claim for t o r t io u s interference with contract. Over Schindler's objection, the district court u s e d the Texas Pattern Jury Instruction on exemplary damages to instruct the ju r y that it could award such damages to Bagby if it found that Schindler acted w it h either actual malice or gross negligence. Concluding that Bagby was

e n tit le d to exemplary damages, the jury awarded Bagby a total of $210,222.95 in economic damages and $500,000 in exemplary damages.1 I I . ANALYSIS 2 A. J u r y instructions S c h in d le r first contends that the district court erred by instructing the ju r y that it could award exemplary damages on a finding of either actual malice o r gross negligence. According to Schindler, Texas law requires a finding of a c t u a l malice as a prerequisite to awarding exemplary damages in cases of t o r t io u s interference with contract. In response, Bagby urges that the district c o u r t did not err reversibly when it gave Texas's pattern jury instruction on e x e m p la r y damages. We review the propriety of jury charges and instructions
Pursuant to Tex. Civ. Prac. & Rem. Code § 41.008, the district court reduced this amount to $420,445.90, or twice the amount of economic damages. As this is a diversity case, we apply the substantive law of Texas. See Erie R.R. Co. v. Tompkins, 304 U.S. 64 (1938).
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No. 09-10804 u n d e r the deferential abuse of discretion standard.3 As district courts "are given w id e latitude in formulating jury charges," the challenging party "must show t h a t the instruction as a whole creates substantial doubt as to whether the jury w a s properly guided."4 Further, even an erroneous jury instruction will not rise t o the level of reversible error if, given the entire record, "[the] challenged in s t r u c t io n could not have affected the outcome of the case." 5 H e r e , the district court based the charge at issue on Texas Pattern Jury C h a r g e s § 115.36B, which states that exemplary damages may generally be a w a r d e d if the jury finds, by clear and convincing evidence, that the defendant a c t e d with malice, gross negligence, or fraud.6 The commentary on § 115.36B s t a t e s expressly that the charge is appropriate for use in cases involving tortious in t e r fe r e n c e with contract.7 That commentary further explains that, because of a change in Texas substantive law regarding the standard for awarding e x e m p la r y damages, the charge should only be used in cases filed "on or after S e p t e m b e r 1, 2003."8 In contrast, there is a separate jury charge provided for u s e in cases filed before September 1, 2003, which does not allow for the

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Carrizales v. State Farm Lloyds, 518 F.3d 343, 348 (5th Cir. 2008). Id. (internal quotation marks and citation omitted). Dahlen v. Gulf Crews, Inc., 281 F.3d 487, 494 (5th Cir. 2002). TEX. PATTERN JURY CHARGES § 115.36B (2008 ed.).

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See TEX. PATTERN JURY CHARGES § 115.36B, Comment ("When to use. [This charge] is used as a predicate to ... the question for exemplary damages. It is based on an affirmative finding to a liability question such as ... 106.1 (interference with existing contract).").
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Id.

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No. 09-10804 c o n s id e r a t io n of gross negligence.9 Importantly, the charge selected by the

d is t r ic t court directly mirrors the current Texas statute on exemplary damages, w h ic h states that, in general, e x e m p la r y damages may be awarded only if the claimant proves by c le a r and convincing evidence that the harm with respect to which t h e claimant seeks recovery of exemplary damages results from: (1) fr a u d ; (2) malice; or (3) gross negligence.1 0 S c h in d le r has not cited any case to us in which the courts of Texas or the federal c o u r ts applying Texas law have made an exception to the general rule cited a b o v e , and we have found none. And, we find it persuasive that Texas courts h a v e repeatedly approved the Texas Pattern Jury Charges as a correct s t a te m e n t of the law.1 1 Accordingly, under our highly deferential standard of r e v ie w , we perceive no reversible error in the district court's decision to use the p a t t e r n jury instruction here. B. S u f f i c i e n c y of the evidence S c h in d le r also asserts that, notwithstanding the jury charge, there is in s u ffic ie n t evidence to support an award of exemplary damages. Bagby

c o u n t e r s that the record contains ample evidence of both malice and gross n e g lig e n c e to support the award. When evaluating the sufficiency of the

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See TEX. PATTERN JURY CHARGES § 115.36A (2008 ed.).

TEX. CIV. PRAC. & REM. CODE § 41.003 (2008 ed.); see also Clements v. Withers, 437 S.W.2d 818, 822 (Tex. 1969) (explaining that a plaintiff seeking to recover exemplary damages for tortious interference with contract must generally show actual malice but that "[t]he existence of such malice may not be necessary in a case where the defendant's acts are accompanied by fraud or other aggravating circumstances" (emphasis added)).
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See, e.g., Acord v. Gen. Motors Corp., 669 S.W.2d 111, 116 (Tex. 1984).

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No. 09-10804 e v id e n c e , we accord "great deference to the jury's verdict."1 2 Thus, we will "view a ll of the evidence in the light most favorable to the verdict and reverse only if t h e evidence points so strongly and overwhelmingly in favor of one party that the c o u r t believes that reasonable jurors could not arrive at any contrary c o n c l u s i o n . "1 3 "Where the jury could have reached a number of different

r e a s o n a b le conclusions, all of which would have sufficient support based on the e v id e n c e , the jury's findings will be upheld." 14 V ie w in g the evidence in the light most favorable to the verdict, we c o n c lu d e that there was sufficient evidence of both malice and gross negligence t o support an award of exemplary damages. As for malice, the jury could have d e t e r m in e d that (1) Schindler hired Armstrong for the express purpose of in t e r fe r in g with Bagby's contract with Younan; (2) Schindler entered into new c o n t r a c ts with Younan knowing that Younan had five-year, non-cancelable c o n t r a c ts with Bagby; (3) Schindler and its employee, Armstrong, deliberately m is le d Younan to believe that it could cancel its Bagby contracts, even going so fa r as to fabricate evidence in support of their claims; and (4) Schindler sought t o "recover" more properties from Bagby than it had initially lost. Likewise, the e v id e n c e was sufficient to support a finding of gross negligence, as the jury could h a v e reasonably concluded that Schindler acted with conscious indifference to B a g b y 's rights despite being aware of an extreme risk that it was causing Bagby s ig n ific a n t harm by interfering with its valid contracts. Although this evidence w a s not uncontroverted, we are satisfied that, when viewed in the light most
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Baltazar v. Holmes, 162 F.3d 368, 373 (5th Cir. 1998). Id. Dawson v. Wal-Mart Stores, Inc., 978 F.2d 205, 208 (5th Cir. 1992).

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No. 09-10804 fa v o r a b le to the jury's verdict, it is sufficient to support the award of exemplary dam ages. C. C a u s a t io n S c h in d le r contends further that the district court erred in denying its m o t io n for judgment as a matter of law, in support of which it urged that there is insufficient evidence of causation to support a finding of tortious interference w it h contract. "A motion for judgment as a matter of law . . . in an action tried b y jury is a challenge to the legal sufficiency of the evidence supporting the jury's v e r d ic t ." 1 5 U n d e r Texas law, a plaintiff seeking to establish causation for tortious in t e r fe r e n c e with a contract must show "that the evidence, and logical inferences d r a w n from the evidence, support a reasonable probability that the defendant's a c t s or omissions were a substantial factor in bringing about the injury." 1 6 Here, t h e r e is ample evidence of causation to support the verdict. For example, the ju r y heard that Schindler hired Armstrong immediately after his termination by B a g b y for the sole purpose of recovering contracts previously lost to Bagby, such a s those for the Younan properties. And, just a few days into his employment a t Schindler, Armstrong set up a meeting between Schindler and Younan to d is c u s s those contracts. The jury also heard that Younan based its acts, at least in part, on Schindler's misrepresentation that Younan was free to cancel its c o n t r a c ts with Bagby. And, even when it became clear that Bagby's contracts w it h Younan did not contain any such clause, Schindler continued to interfere.

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Allstate Ins. Co. v. Receivable Fin. Co., 501 F.3d 398, 405 (5th Cir. 2007). Richardson-Eagle, Inc. v. William M. Mercer, Inc., 213 S.W.3d 469, 474 (Tex. App.

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2006).

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No. 09-10804 W e are satisfied that there is sufficient evidence of causation to support the ju r y 's verdict. D. S c h i n d le r 's "unclean hands" defense F in a lly , Schindler insists that the district court erred by refusing to in s t r u c t the jury on its proposed "unclean hands" defense. Schindler urges that it should have been absolved of liability on a showing that Bagby had acted im p r o p e r ly when it obtained the Younan contracts from Schindler in the first p la c e . Schindler's argument is unavailing, however, as Texas courts have long h e ld that the affirmative defense of unclean hands is available only in equity.17 U n d e r Texas law, "[t]he clean hands doctrine requires that one who seeks equity, d o e s equity."1 8 As at least one Texas court has explained, the doctrine "should n o t be applied unless the party asserting [it] has been seriously harmed and the w r o n g complained of cannot be corrected without the application of the d o c t r in e ."1 9 Thus, the district court did not err by denying Schindler's proposed d e fe n s e in the instant case. I I I . CONCLUSION F o r the foregoing reasons, the judgment of the district court is, in all resp ects, A F F IR M E D .

See, e.g., Furr v. Hall, 553 S.W.2d 666, 672 (Tex. App. 1977) ("The `clean hands' maxim is strictly an equitable doctrine not applicable outside equitable proceedings.").
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Dunnagan v. Watson, 204 S.W.3d 30, 41 (Tex. App. 2006). Id.

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