The Dallas/Fort Worth International Airport Board v. Inet Airport Systems, Inc. et al

Filing 157

Memorandum Opinion and Order: The court ORDERS that INET LLC is the appropriate entity to which plaintiff should pay the $318,189.40 previously determined to be owed and that INET LLC should recover from DFW reasonable and necessary attorney's fees in the amount of $975,539.34, for a total recovery by INET LLC from DFW of $1,293,728.74. (Ordered by Judge John McBryde on 6/16/2015) (trs)

V.S. DISTRICT COURT
NORTHERN DISTRICT Of TEXAS

FILED

IN THE UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF TEXAS
FORT WORTH DIVISION
THE DALLAS/FORT WORTH
INTERNATIONAL AIRPORT BOARD,
Plaintiff,

vs.
INET AIRPORT SYSTEMS, INC.,
ET AL.
I

Defendants.

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JUN I 6 2015

CLERK, U.S. DISTRICT COURT
By----::-----Deputy

NO. 4:13-CV-753-A

MEMORANDUM OPINION AND ORDER
On June 8, 2015, came on for nonjury trial the issues
remaining for decision in the above-captioned action.
Plaintiff/counterdefendant, The Dallas/Fort Worth International
Airport Board (uDFWn), and defendants/counterplaintiffs INET
Airport Systems, Inc.

{uiNET Inc.n), and INET Airport Systems,

LLC, as successor in interest to INET Airport Systems, Inc.
{uiNET LLCn), appeared by and through their respective attorneys
of record and corporate representatives. 1 In accordance with the
court's rulings during the trial, and upon review of filings made
pursuant to the court's order during the trial, 2 the record, and
applicable authorities, the court determines that the outstanding
payment of $318,189.40 owed by DFW should be paid to INET LLC,

1

1NET Inc. and INET LLC are hereinafter collectively referred to as "INET."

2

The court requested briefing on the issue of whether recovery could be made for attorney's fees
incurred in the preparation, filing and pursuit of the motion for attorney's fees.

and that INET LLC should have and recover from DFW reasonable and
necessary attorney's fees in the amount of $975,539.34, for a
total recovery by INET LLC from DFW of $1,293,728.74.
I.

Events Leading to the Trial
On March 30, 2015, the court signed a memorandum opinion and
order granting in part and denying in part DFW's motion for
summary judgment and granting defendants' motion for summary
judgment. 3 Doc. 85. 4 Of primary import was the court's
determination that DFW, rather than INET Inc., had first
materially breached the contract between them. Id. at 13-14. The
court also determined that DFW's claims against Hartford were
barred by limitations, id. at 16, 18, and made that ruling final
by separate judgment, Doc. 86.
On April 6, 2015, the court conducted the pretrial
conference and signed the pretrial order presented by the
parties. Doc. 92. During the pretrial conference, based on
discussions with counsel, the court determined that DFW's claims
against defendant Colaco should be dismissed. Doc. 94 at 6. The

3

At that time, the defendants were INET Airport Systems, Inc., Michael F. Colaco ("Colaco"),
and Hartford Fire Insurance Company ("Hartford").
4

The "Doc._" references are to the number assigned to the referenced item on the Clerk's
docket for this Case No. 4: 13-CV-753-A.
2

court so ordered, Doc. 90, and made that ruling final by separate
judgment, Doc. 91.
To the court's surprise, DFW apologetically announced during
the pretrial conference that, although it had never raised the
issue before, it had that morning filed a motion to dismiss
!NET's counterclaim on the ground that the court lacked subject
matter jurisdiction by reason of the provisions of sections
271.151-.160 of the Texas Local Government Code. See Doc. 94 at
35-38; Doc. 87. Following full briefing, the court, by memorandum
opinion and order signed April 27 1 2015, denied the motion to
dismiss. 5 Doc. 103. The court determined that the immunity from
suit claimed by DFW did not implicate subject matter
jurisdiction. Id. at 7-10. Rather 1

immunity was a privilege that

could be and was waived by DFW's conduct. Id. at 7.
On April 27, 2015, the court also signed an order setting
deadlines for the accomplishment of certain things relative to
the nonjury trial of the action, Doc. 104, consistent with the
waiver by the parties of jury trial made during the pretrial
conference, Doc. 94 at 4-5. In that order, the court explained,
in footnote 1 on page 2, that it anticipated that the issues to
be tried would not be expanded beyond those remaining after the
rulings of the court in its March 30 memorandum opinion and order

5

This order was corrected by order signed June 8. Doc. 144.
3

and at the pretrial conference and concessions made by DFW at the
pretrial conference. Doc. 104 at 2, n.1. Specifically, the record
at that time made clear that there would be no issues to be
resolved at trial except {1) possibly an issue concerning which
of the counterclaimants, INET Inc. or INET LLC, would be entitled
to recover the $318,189.40 determined to be owed by DFW, and (2)
the amount of attorney's fees to be recovered by INET from DFW.
DFW conceded at the pretrial conference that an INET entity,
INET Inc. or INET LLC, would be entitled to recover the funds
owed by DFW under the contract, which consisted of retainage and
payment of an outstanding pay request for work done by INET Inc.,
if certain information could be provided. Doc. 94 at 26-30.
Accordingly, the court required defendants to provide to DFW {1)
documentation to show that INET LLC was the successor to INET
Inc.,

(2) the consent of Hartford to DFW's release of the

retainage, and {3) verification that all subcontractors had been
paid, and to file a document reflecting that they had done so.
Doc. 89. Defendants filed their notice of compliance on April 16,
2015, Doc. 96, and attached as proof of compliance the documents
that had been provided to DFW, id. attachs. 1-3. On April 17, DFW
filed a notice of intent to file a response to the notice, Doc.
98, and, on April 22, filed such response with an appendix in
support, Docs. 100 & 101. The sole focus of the response was that

4

INET LLC was not the successor to INET Inc. DFW did not question
the consent of Hartford to release of the retainage or the
representation that all subcontractors had been paid. The court
ordered INET to reply, Doc. 102, which they did, Doc. 110. By
motions filed April 28 and 29, DFW sought leave to file further
supplements to its response. Docs. 105 & 108.
By order signed April 30, 2015, the court discussed the
filings described in the preceding paragraph and noted that DFW
was again seeking to raise issues that had not been raised prior
to that time and that had been waived, to wit:

(1)

INET Inc. did

not assign the right to collect any account receivable from DFW
to INET LLC,

(2)

INET LLC had never been joined as a party, and

(3) Cavotec INET US, Inc. was a necessary party that had never
been joined. Doc. 112 at 2-3. In particular, DFW had known of the
sale of assets to Cavotec since at least September 20, 2013, when
it had filed its first amended complaint. 6 And, DFW had already
represented to the court at the pretrial conference that it stood
ready to make the payment of the retainage and the outstanding
invoice for work performed once it received the letter from
Hartford and the verification that all subcontractors had been
paid. Doc. 94 at 30. That payment would be made either to INET

6

According to defendants, DFW had been in possession of documents concerning the Cavotec
sale since 2012. Doc. 110 at 3.
5

Inc. or !NET LLC. The court denied DFW's requests to further
supplement its response 7 and again described the two issues that
the court anticipated would be tried. Doc. 112 at 4.
By order signed June 1, 2015, the court for a third time
following the pretrial conference clarified that the issues to be
tried were (1) which of the !NET entities was to recover the
$318,289.40 owed by DFW, and (2) the amount of reasonable and
necessary attorney's fees that were equitable and just to be
recovered by one or both of the !NET entities. Doc. 140. By order
signed June 4, 2015, the court notified the parties that it had
determined that !NET LLC had the better of the argument regarding
the first issue, and that the court was prepared to receive
evidence as to the attorney's fees issues. 8 Doc. 143.

II.
The Trial
At the trial, Colaco and attorneys Craig Taggart and David
Walton were sworn and testified. Exhibits 1-3 and 7-18 were
admitted. 9 Doc. 145.

7

The motions sought leave to file hearsay statements ofCavotec's attorney.

8

lt appeared that the parties intended to rely on the motion for attorney's fees and supporting
documents that had been filed, rather than to present evidence at trial. Thus, the order was necessary to
clarify the court's intent that the matter be tried.
9

Exhibits 1-3 and 7-13 were agreed upon trial exhibits and exhibits 14-18 were exhibits identified
during the trial as INET exhibits, to which DFW did not object.
6

III.
Analysis of the Issues
A.

Recovery by !NET LLC
As the court long-ago determined, and DFW has admitted based

on the court's ruling as to breach of the contract, DFW owes
either !NET Inc. or !NET LLC for the work done by !NET Inc.
pursuant to the contract at issue in this action. At the pretrial
conference, DFW acknowledged that to be the effect of the court's
summary judgment rulings. Doc. 94 at 25. There is no dispute that
!NET Inc. signed the contract, performed the work thereunder, and
submitted its pay request to DFW. 10 Ex. 3. To the extent there
were any prerequisites to the payment for work done and release
of the retainage, they have occurred. 11
As for which entity is entitled to collect the moneys DFW
has been withholding, the evidence establishes the following:
Colaco was the sole owner of !NET Inc. Doc. 152 at 16. By
contribution agreement dated August 9, 2012, Colaco transferred

10

The payment request showed entitlement by INET to both amounts being awarded to INET
LLC, the $78,825.15 retainage and the $240,364.25 unpaid balance. Ex. 3.
11

At the trial, counsel for DFW tried to make much of the fact that Ex. 9, the letter authorizing
release of the retainage, was signed by the bond department of the parent company of Hartford and
provided that the retainage could be released to Colaco, the sole shareholder of !NET LLC. Doc. 152 at
27-29. Of course, DFW never objected that the letter was not sufficient. See pl.'s resp. to defs.' notice of
compliance filed April 22, 2015. This was not a contested issue listed in the pretrial order. And, at this
point, any objection by Hartford to release of the retainage would be invalid, as Hartford has been
dismissed from the lawsuit and has no interest in the retainage. And, Colaco testified that payment
should be made to INET LLC. Id. at 20.
7

all of his shares of !NET Inc. to !NET LLC. Id. at 10; Ex. 7. On
August 10, 2012, Colaco as sole director and !NET LLC as sole
stockholder caused !NET Inc. to be dissolved. Ex. 8. All assets
of !NET Inc., including the amounts receivable under the contract
between !NET Inc. and DFW, were transferred to !NET LLC. Id. As
!NET Inc. no longer exists, and !NET LLC is the surviving entity,
!NET LLC is entitled to recover the moneys owed by DFW. This is
consistent with section 30.0 of the special provisions of the
contract, which provides that the contract is binding on and
inures to the benefit of successors of the parties thereto. Ex. 1
at DFW 1536242.
B.

Attorney's Fees
The primary issue for trial was the amount of attorney's

fees to be awarded for the pursuit of !NET's counterclaim
discussed above. The parties are in accord that the provisions of
Tex. Local Gov't Code

§§

271.153 govern. Doc. 115 at 1-2; Doc.

130 at 6, , 11 and 20, , 41; Doc. 151 at 5, , 16.

Reasonable and

necessary attorney's fees that are equitable and just are
recoverable in a case such as this. Tex. Local Gov't Code

§

271.153 (a) (3).
DFW insists that fees can only be awarded for work
attributable to !NET's pursuit of its counterclaim and exclusive
of work done to defeat DFW's claim. This despite the fact that

8

the only conclusion to be drawn from the summary judgment
evidence considered by the court in making its March 30 rulings,
by the admissions of DFW during the pretrial conference, and by
the evidence at trial is that DFW withheld payment on the invoice
and refused to release the retainage because it took the position
that INET Inc. had breached the contract. In order to prevail on
its own claims, INET had to defeat DFW's claim that INET Inc. was
the first to breach the contract. Thus, an award as sought by
INET is appropriate. Campbell Harrison & Dagley, L.L.P. v. Blue,
843 F. Supp. 2d 673, 692-93

(N.D. Tex. 2011) (citing De La Rosa v.

Kaples, 812 S.W.2d 432, 434

(Tex. App.-San Antonio 1991, writ

denied) i 7979 Airport Garage, L.L.C. v. Dollar Rent A Car Sys.,
Inc., 245 S.W.3d 488, 507 (Tex. App.-Houston [14th Dist.] 2007,
pet. denied))

i

Varner v. Cardenas, 218 S.W.3d 68, 69 (Tex. 2007).

The primary case upon which DFW relies makes this abundantly
clear:
For example, to prevail on a contract claim a
party must overcome any and all affirmative
defenses (such as . . . prior material
breach) , and the opposing party who raises
them should not be allowed to suggest
that overcoming those defenses was
unnecessary.
Tony Gullo Motors I, L.P. v. Chapa, 212 S.W.3d 299, 314

(Tex.

2006) (emphasis added) . An affirmative defense asserted by DFW to
the counterclaim was prior material breach: whether DFW or INET

9

would be able to recover on its claims under the contract
depended upon which party first materially breached the
contract. 12 The argument that the claims had to be mirror images
in order for attorney's fees to be recovered is absurd. 13
INET relies on the testimony of Messrs. Taggart and Walton
and the evidence of exhibits 11-18, as supplemented by the notice
of correction filed following the trial with regard to Mr.
Walton's testimony, Doc. 148, to support its request for
attorney's fees.

In accordance with the testimony at trial, the

court finds that counsel limited the fees sought to those
attributable to work done to further the counterclaim for payment
of the unpaid invoice and retainage, which necessarily included
work done to defeat the claim asserted by DFW. Counsel omitted
time for all work performed on behalf of defendants Hartford and
Colaco. Doc. 152 at 41. And, counsel eliminated time related to
other claims, such as INET's unjust enrichment claim. See, e.g.,
Doc. 152 at 53-55.

12

DFW obviously understood this to be the case as evidenced by its attorneys refusal to admit
that it was withholding the payment due and the retainage based on the contention that INET Inc. had
breached the contract, i.e. INET first had to defeat DFW's claim before it could prevail on its
counterclaim, when, as stated, that is the only conclusion to be reached. Doc. 152 at 76-77. In other
words, counsel for DFW refused to answer the court's questions, knowing that truthful answers would
result in DFW being liable for the attorney's fees sought (based on the court's determination of
reasonableness, necessity, equity, and justice).
13

DFW apparently fails to understand what is meant by the term "segregate." INET has met its
burden by showing that it has omitted from its request for attorney's fees all work unrelated to the things
necessary to prevail and make a recovery on its counterclaim for the moneys owed by DFW.

10

Although California counsel charged their clients much
higher rates,

INET LLC is are only seeking to recover rates that

are recognized as reasonable in this district. Doc. 152 at 57.
DFW does not dispute that the hourly rates sought are reasonable.
Doc. 152 at 78-79. Nor does it dispute the number of hours for
which reimbursement is sought. Id. at 79. 14
An important part of the court's assessment of a fee request
is to consider whether counsel exercised billing judgment, by
which is meant exclusion of hours that are excessive, redundant,
or otherwise unnecessary. Hensley v. Eckerhart, 461 U.S. 424, 434
(1983). Here counsel testified that they exercised billing
judgment. See, e.g., Doc. 152 at 63-64; 68-69. And, as noted, DFW
did not object that the number of hours should be reduced for any
reason.
Thus, the court finds that INET incurred reasonable and
necessary attorney's fees in the amount of $975,539.34 15 in
14

The court had asked for further briefing on the issue of whether INET could recover fees
incurred in the filing, presentation and pursuit of its motion for attorney's fees. It occurs to the court that
DFW has waived any complaint in this regard, inasmuch as DFW did not object to the hours to which
counsel for INET testified, which included significant time on these tasks. In any event, the court is
satisfied by the briefing that Texas does allow recovery for time spent in the pursuit of attorney's fees.
See, e.g., Johnson v. Mississippi, 606 F.2d 635, 638 (5 1h Cir. 1979). The statute at issue is not so limited
as DFW urges; instead, the only limitation is that the fees awarded be reasonable and necessary,
equitable and just. Tex. Local Gov't Code§ 271.153. In this case, where DFW has been anything but
reasonable, it has very little room to complain about the fees INET was required to incur in reference to
unreasonable positions DFW repeatedly has taken.
15

This amount is the sum of the $862,763.34 attributable to work by !NET's California counsel as
testified to by Mr. Taggart, Doc. 152 at 40-42, and $112,776.00 attributable to work by !NET's local
(continued ... )

11

pursuing its counterclaim for payment. The court further finds
that an award to INET LLC of such amount would be equitable and
just. Bocguet v. Herring, 972 S.W.2d 19, 21 (Tex. 1998). As the
court has noted in various orders, DFW's conduct throughout the
proceedings has been abhorrent. DFW has caused the proceedings to
be prolonged by seeking to re-litigate matters that had already
been resolved and to raise issues long after the time for doing
so had passed. DFW insisted on proceeding to trial when any
reasonable party would have resolved the issues remaining at the
pretrial conference. There is simply no reason that the two
issues remaining needed to be tried. 16 This is borne out by the
failure of DFW to make any points in cross-examination at trial
and its concession that it did not question the number of hours
spent by INET's attorneys in pursuing the counterclaim. The
recalcitrant conduct is not limited to the litigation, however,
it has permeated the course of proceedings between DFW and INET
from inception of the contract. As set forth in the court's March

1
\

.. continued)
counsel as testified to by Mr. Walton, Doc. 152 at 65-68, and as set forth in the notice of correction filed
June 8, 2015, by INET, Doc. 148.

16

As Mr. Taggart noted at the pretrial conference, INET's "attorneys fees are definitely, you
know, considerably negotiable. We would like to resolve the case. I mean, we really do. So, I mean, I
think that we could sit-I think that we could sit down and reach a resolution of this ... "Doc. 152 at 52.
And, although DFW's representative said that DFW was willing to sit down and talk, id., no resolution
was reached. Instead, DFW continued to urge the totally unmeritorious position that the court lacked
subject matter jurisdiction and other similarly frivolous arguments.

12

30, 2015, memorandum opinion and order, DFW knew early on that it
needed to issue a change order because its plans and
specifications for installation of the air handling units was
insufficient. Yet, it refused to act reasonably, insisting that
INET was in default. Doc. 85 at 8-11. All of the fees incurred by
INET were as a result of DFW's breach of the contract and its
willful failure to cooperate in seeking resolution of the dispute
between the parties. See Abraxas Pet. Corp. v. Hornburg, 20
S.W.3d 741, 763

(Tex. App.-El Paso 2000, no pet.) (award of

attorney's fees proper based on misconduct of breaching party).
Unlike Knighton v. Int'l Bus. Machines Corp., 856 S.W.2d 206, 210
(Tex. App.-Houston [1st Dist.] 1993, writ denied), the court
cannot find that DFW had legitimate rights to pursue such that
each party should bear its own attorney's fees. Rather, the only
just and equitable ruling would be for DFW to bear !NET's
attorney's fees.

IV.
Order
For the reasons given above,
The court ORDERS that INET LLC is the appropriate entity to
which plaintiff should pay the $318,189.40 previously determined
to be owed and that INET LLC should recover from DFW reasonable

13

and necessary attorney's fees in the amount of $975,539.34, for a
total recovery by INET LLC from DFW of $1,293,728.74. 17
SIGNED June 16, 2015.

17

The court is not awarding prejudgment interest as neither party presented any evidence on that

subject.

14