Service Steel Warehouse Co. v. McDonnel Group, L.L.C., et al

Filing

UNPUBLISHED OPINION FILED. [16-30990 Affirmed ] Judge: CDK , Judge: JLD , Judge: GJC Mandate pull date is 04/20/2017 [16-30990]

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IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
No. 16-30990
Summary Calendar
SERVICE STEEL WAREHOUSE COMPANY, L.P.,

United States Court of Appeals
Fifth Circuit

FILED
March 30, 2017
Lyle W. Cayce
Clerk

Plaintiff - Appellee
v.
MCDONNEL GROUP, L.L.C.; ARCHER WESTERN CONTRACTORS,
L.L.C., formerly known as Archer Western Contractors, Limited;
MCDONNEL GROUP, L.L.C. ARCHER WESTERN CONTRACTORS, L.L.C.,
a Joint Venture,
Defendants - Appellants

Appeal from the United States District Court
for the Eastern District of Louisiana
USDC No. 2:14-CV-1416
Before KING, DENNIS, and COSTA, Circuit Judges.
GREGG COSTA, Circuit Judge:*
Service Steel Warehouse Company, L.P. brought this lawsuit against a
general contractor seeking payment on a reliance theory for deliveries of steel
to a subcontractor. The general contractor is a joint venture to build a jail

Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5TH
CIR. R. 47.5.4.
*

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between McDonnel Group, L.L.C. and Archer Western Contractors, L.L.C.
(McDonnel-Archer). As found by the district court after a bench trial, Service
Steel detrimentally relied on a promise by McDonnel-Archer to pay for steel it
delivered to the subcontractor when McDonnel-Archer did not later come
through with the money. McDonnel-Archer appeals, arguing that the district
court should not have found Service Steel reasonably relied and changed its
position based on its promise and, in the alternative, should have offset Service
Steel’s recovery for failure to mitigate damages. Because the findings of the
district court are supported by the record, we will not second guess its
determination of reasonable reliance. With respect to mitigation, McDonnelArcher rehashes its position on reasonable reliance and so also stumbles on the
factual findings made by the district court.
I.
McDonnel-Archer contracted to build a new jail for Orleans Parish. It
hired H&H Steel Fabricators, Inc. as the subcontractor for fabricated steel.
H&H purchased unfinished steel from Service Steel. During the course of the
project, it ceased paying Service Steel. In response, Service Steel threatened
to stop further deliveries and to pick up steel it had already delivered, as it had
a right to do. To keep Service Steel happy, McDonnel-Archer offered to add
Service Steel to the bond on the jail construction project and to make its checks
to H&H jointly payable to Service Steel. Service Steel accepted both benefits
but demanded more security in order to stay on board. McDonnel-Archer sent
an email promising to pay Service Steel for material currently stored by H&H
as well as future deliveries to H&H, fifty percent to be paid as soon as the steel
reached H&H and the other fifty percent once the steel was delivered to the
jail site. This is the promise that Service Steel claims it relied on to its
detriment.
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Service Steel continued to sell and ship steel to H&H, all of which was
ultimately delivered into the hands of McDonnel-Archer for the jail.
McDonnel-Archer made some payments but did not pay for all the steel; it
complains that the amount of material received exceeded its needs so that
much of the metal was never actually put into the building. Service Steel
brought this lawsuit seeking to be paid as McDonnel-Archer promised in its
email.
II.
Under Louisiana law, to establish detrimental reliance, a party must
prove the following: “(1) a representation by conduct or word; (2) made in such
a manner that the promisor should have expected the promisee to rely upon it;
(3) justifiable reliance by the promisee; and (4) a change in position to the
promisee’s detriment because of the reliance.” In re Ark-La-Tex Timber Co.,
482 F.3d 319, 334 (5th Cir. 2007).
McDonnel-Archer disagrees with the district court’s finding as to the
third element.

It asserts that it was not reasonable for Service Steel to

continue selling and shipping steel in reliance on its promise.

In the

alternative, it contends that it became unreasonable for Service Steel to rely
at some point in the relationship when Service Steel should have suspected
that the steel it was shipping was more than the jail project needed.
McDonnel-Archer tells us that we can ignore the district court’s
reasonableness finding and make our own decision after reading the trial
record. This is not a correct view of our appellate role; we do not write on a
clean slate. The reasonableness of relying on someone else’s statement is a
question of fact. Id. at 333. We review questions of fact decided after a bench
trial for clear error.

See id. at 333; French v. Allstate Indem. Co., 637 F.3d

571, 577 (5th Cir. 2011). Because of our deference to the district court, we will
reverse “only if we have a definite and firm conviction that a mistake has been
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committed.” Canal Barge Co. v. Torco Oil Co., 220 F.3d 370, 375 (5th Cir.
2000).
The district court heard and understood McDonnel-Archer’s defense but
found the facts disagreed with it. The district court determined that it “was
not until after Service Steel had delivered all of the requested steel to H&H
and McDonnel-Archer had received all of the fabricated steel from H&H that
McDonnel-Archer for the first time informed Service Steel that it had to prove
incorporation of its steel in order to be paid.” Speaking directly to McDonnelArcher’s argument that Service Steel should have noticed “red flags” that it
was shipping excess steel, the trial court held, “Tracking the amount of steel
required for the Project, however, was not Service Steel’s responsibility.” This
conclusion was supported by factual findings that McDonnel-Archer does not
controvert. For instance, the district court found that “Service Steel could not
know whether H&H was over-ordering steel as it did not know the total
amount of steel required,” and that “McDonnel-Archer was in the best positon
to know the steel expected for the Project and the steel delivered to H&H, as
McDonnel-Archer had full access to H&H’s information.”
McDonnel-Archer’s argument that Service Steel ignored red flags is
vitiated by the above conclusions of the district court. The builder also points
to a letter it received from Service Steel asserting a statutory lien on the
materials it had provided. It argues that the letter shows Service Steel must
have known it needed to prove that the steel was actually put into the building
to get paid because this is a requisite of the statutory lien in question. This is
weak soup—much too weak to overcome the deference we owe to the district
court. Just as McDonnel-Archer makes alternative arguments in this appeal,
the fact that Service Steel sought a statutory lien but has later pursued
recovery on a reliance theory is more plausibly proof of caution and diligence
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by its attorneys than it is of an expectation that McDonnel-Archer would only
pay for metal incorporated into the jail.
McDonnel-Archer also challenges the district court’s finding on the
fourth element—a change in position to one’s detriment because of the reliance.
It says that “not a single demand letter or claim letter from Service Steel
references that email or any representations by McDonnel-Archer.” To support
this assertion, it cites Service Steel’s initial complaint in this suit (in which the
email promise was not mentioned) and a letter that only asserted a statutory
lien. Against this, we have the finding of the district court that “even after the
Bond rider and Joint Check Agreement were issued, Service Steel informed
both H&H and McDonnel-Archer that, if it was not paid, it would pick up the
steel and stop selling steel for the project.” As a result, the district court found
that it was not until after McDonnel-Archer’s email promise to pay for past and
future deliveries of steel to H&H that “Service Steel left the Stored Material
with H&H and continued to sell them steel it ordered for the Project.” Once
again, Service Steel’s use of alternative theories in its quest for payment does
not demonstrate that it did not change its position as a result of the email
promise, much less imply that conclusion with sufficient force for us to displace
the district court’s findings of fact.
Lastly, we consider the mitigation argument. The district court said
nothing about mitigation in its findings of fact and conclusions of law—likely
because McDonnel-Archer’s mitigation argument is scarcely distinguishable
from its arguments on liability. In its brief, McDonnel-Archer tells us that its
reasons for both contentions are identical:
For the same reasons and based on the same facts discussed above,
Service Steel’s damages should be reduced because Service Steel
failed to mitigate those alleged damages. The district court should
not have allowed, and McDonnel-Archer urges that this Court
should not allow, Service Steel to sit idly by when Service Steel
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had knowledge, both based on its own information and information
that McDonnel-Archer provided it, that some of the material that
Service Steel had provided and was providing to H&H might not
have been delivered to the Project.
But these same reasons run into the same wall—the district court’s finding
that “Service Steel could not know whether H&H was over-ordering steel as it
did not know the total amount of steel required.” For the same reasons and
based on the same findings of fact discussed above, the mitigation argument
fails.
***
We AFFIRM.

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