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In Thomas v. Dow, 2003 WL 222630 (N.D. Tex. Jan. 28, 2003) (Buchmeyer, J.), the court considered whether the defendant raised the issue of choice of law in a timely manner.
Summary of this case from Vannoy v. Verio Inc.Opinion
Civil Action No. 3:01-CV-2160-R
January 28, 2003
MEMORANDUM OPINION AND ORDER
Now before this Court are post-trial briefs by Plaintiff and Defendants regarding the issue of attorney's fees. For the reasons discussed below, Plaintiffs Motion for Attorney's Fees is DENIED.
Specifically, the pleadings under consideration in this Opinion are: Plaintiff's Motion To Enter Judgment and in Support of the Award of Attorneys'[sic] Fees (filed November 22, 2002) ("Plaintiff's Motion"); Defendants' Post Trial Brief (filed November 25, 2002) ("Defendants' Brief"); Plaintiff's Reply to Defendants' Response to Attorney's Fee Brief (filed December 3, 2002) ("Plaintiff's Reply"); and Defendants' Response to Plaintiff's Motion to Enter Judgment and in Support of the Award of Attorney's Fees (filed December 12, 2002)("Defendants' Response").
I. BACKGROUND
Steven B. Thomas ("Plaintiff") filed suit against John Dow, Airborne, Inc. ("Airborne") and First Flight Management, L.L.C. (collectively, the "Defendants") in Dallas County Court on October 1, 2001. After removal to this Court, a three day jury trial was held on October 21-23, 2002. The jury returned a unanimous verdict finding, inter alia, that one of the Defendants, Airborne, failed to comply with the Employment Agreement entered into with Plaintiff (dated October 20, 1999) (the "Agreement"). For this breach of contract, the jury awarded Plaintiff damages in the amount of $106,348.72. However, the jury rejected Plaintiffs tort claims, finding that Defendants had not made negligent misrepresentations (upon which Plaintiff had justifiably relied) nor committed fraud. The jury also found that Plaintiff had not foreseeably and substantially relied to his detriment on any promise made by Defendants.
The original suit also named Lazard Frères Co., L.L.C ("Lazard") as a Defendant; however, Lazard was dismissed from this case by order of this Court filed July 1, 2002.
As the prevailing party, Plaintiff now argues that it is entitled to attorney's fees under Texas law. TEX. CIV. PRAC. REM. CODE § 38.001. Defendants contend that no attorney's fees are due as New York law should apply, and New York law does not provide for the award of attorney's fees to a prevailing party in a contract dispute. Plaintiff rejects Defendants' choice of law arguments, both on the merits, and on the grounds of waiver.
Alternatively, Defendant contends that, under Texas law, it is within the Court's discretion to not award attorney's fees. See Defendants' Brief at 3-6. As the discussion infra establishes the applicability of New York law, the Court need not address this argument.
II. ANALYSIS
A. WAIVER
As a preliminary matter antecedent to the choice of law question, this Court finds that, contrary to the assertions of Plaintiff, Defendants have not waived their right to argue the applicability of New York law. "[F]ederal courts are required," according to the Fifth Circuit, "to take judicial notice of the content of the laws of every state of the Union." Kucel v. Heller, 813 F.2d 67, 74 (5th Cir. 1987) (citation omitted). Defendants were not required to raise the choice of law issue in preliminary pleadings. Rather, Defendants simply had the "obligation to call the applicability of [New York] law to the court's attention in time to be properly considered." Id. Under the facts of this case, Defendants have met this obligation. In Defendants' Trial Brief (filed October 18, 2002), Defendants raised the issue of choice of law and argued for the applicability of New York law to the contract claims of this case. At pretrial conference, on the morning of trial, October 21, 2002, Defense counsel again raised the issue before this Court. At that time, the Court informed the parties that, as New York and Texas law did not differ materially on the contract claims (except for the issue of attorney's fees), the choice of law would be addressed, if necessary, post-trial. Thus, while Defendants did raise the issue of choice of law quite close to the date of trial, the issue was raised in time for the Court to consider its applicability to the trial and the Court reasonably concluded that the issue could be addressed post-trial. There was no waiver.
See Plaintiff's Reply at 3 (stating that Defendant was "laying behind the log" by not raising the choice of law issue "until literally the eve of trial").
B. CHOICE OF LAW
Turning to the choice of law question, the Fifth Circuit has stated that an "award of attorney's fees is part of the substantive right of a suit," and "[t]hus the award of attorney's fees in a diversity case depends on the law of the state whose rules govern the substantive claims." Kucel, 813 F.2d at 73. To determine whether Texas or New York law governs the contract claims, a federal district court applies the choice of law principles of the forum state — in this case Texas. Id.; see also Kona Technology Corp. v. Southern Pacific Transportation Co., 225 F.3d 595, 614 (5th Cir. 2000). Choice of law is a different inquiry than jurisdiction. Id. ("Texas law may control the award of fees, not because Texas is the forum state, but only if Texas law governs the other substantive rights").
Under Texas law, contracts which lack choice of law provisions — such as the Agreement in this case — are generally analyzed under the "most significant relationship" test set out in § 188 of the Restatement. RESTATEMENT (SECOND) CONFLICTS § 188 (1971); Minnesota Mining and Manufacturing Co. v. Nishika Ltd., 953 S.W.2d 733, 735 (Tex. 1997); Duncan v. Cessna Aircraft Co., 665 S.W.2d 414, 421 (Tex. 1984); DeSantis v. Wackenhut Corp., 793 S.W.2d 670, 679 (Tex. 1990); Nunez v. Hunter Fan Co., 920 F. Supp. 716, 718-19 (S.D.Tex. 1996). However, if the contract, is one "for the rendition of services, the Texas Supreme Court has particularly relied on section 196 of the Restatement." Pruitt v. Levi Strauss Co., 932 F.2d 458, 461 (5th Cir. 1991) (citing DeSantis, 793 S.W.2d at 679) abrogated on other grounds by Floors Unlimited, Inc. v. Fieldcrest Cannon, Inc., 55 F.3d 181, 185-86 (5th Cir. 1995). Under section 196 of the Restatement, the law to be applied in resolving a dispute relating to a contract for services is "the local law of the state where the contract requires that the services, or a major portion of the services, be rendered, unless, with respect to the particular issue, some other state has a more significant relationship." RESTATEMENT (SECOND) CONFLICTS § 196 (1971). Thus, "as a rule" in the absence of exceptional circumstances, the location of services to be rendered "alone is conclusive in determining what state's law is to apply." DeSantis, 793 S.W.2d at 679.
Section 196, in full, states: Contracts for the Rendition of Services. The validity of a contract for the rendition of services and the rights created thereby are determined, in the absence of an effective choice of law by the parties, by the local law of the state where the contract requires that the services, or a major portion of the services, be rendered, unless, with respect to the particular issue, some other state has a more significant relationship under the principles stated in [Restatement] § 6 to the transaction and the parties, in which event the local law of the other state will be applied. Id.
In this case, the Agreement from which the breach of contract claim arose is an employment contract which was entered into by Plaintiff and Airborne for employment services to be rendered in New York. Prior to being employed, Plaintiff was interviewed in New York City. After entering the Agreement, Plaintiff moved from Richardson, Texas to Elmira, New York to begin his employment. Plaintiff was employed by Airborne, in New York, for over one year before being terminated. The money owed to Plaintiff by virtue of Airborne's breach of contract relates to severance and moving expenses due Plaintiff, based on employment services rendered in New York state, and would be owed to Plaintiff regardless of where or if he moved after termination. There is no evidence that either Plaintiff or Airborne intended for Plaintiff to render any services under the Agreement, or that Plaintiff rendered any such services, in any state other than New York. Any benefits to which Plaintiff may have been entitled under the Agreement, including those awarded due to Airborne's breach of contract, arose from a contract for services rendered in New York.
As New York was the state in which the services were rendered, New York law will apply unless this case is a "rare situation in which a different state has a more significant relationship to the transaction and the parties." Pruitt, 932 F.2d at 461. Based on the facts reviewed supra, this court finds that no state has a more significant relationship to the Agreement than New York; therefore, New York law will apply.
Under New York law, an award of attorney's fees to a prevailing party in a contract dispute is not permitted unless agreed to in the contract, by statute or by other legal provision. See, e.g., Hooper Associates, Ltd. v. AGS Computers, Inc., 548 N.E.2d 903, 904 (N.Y. 1989)("Under the general rule, attorney's fees are incidents of litigation and a prevailing party may not collect them from the loser unless an award is authorized by agreement of the parties, statute or court rule.") (citations omitted). The Court is not aware of (nor has Plaintiff cited) any contractual, statutory or other provision of New York law which would make Plaintiff eligible for an award of attorney's fees in this case.
C. PREJUDGMENT AND POSTJUDGMENT INTEREST
Calculation of prejudgment interest on the contract claim is a substantive issue, and is therefore governed by New York law. Baker v. Dorfman, 239 F.3d 415, 425 (2d Cir. 2000); Wachs v. Winter, 569 F. Supp. 1438, 1450-51 (E.D.N.Y. 1983). New York law mandates prejudgment simple interest at the rate of 9% annually for contract actions. N.Y. C.P.L.R. §§ 5001(a), 5003, 5004 (McKinney 1992 Supp. 2002); Gussack Realty Co. v. Xerox Corp., 224 F.3d 85, 93 (2d Cir. 2000). "Interest shall be computed," according to New York statute, "from the earliest ascertainable date the cause of action existed, except that interest upon damages incurred thereafter shall be computed from the date incurred." Id. § 5001(b). Where damages "were incurred at various times," interest may be computed for all damages "from a single reasonable intermediate date." Id. In this case, the jury awarded Plaintiff damages in the amount of $106,384.72. This amount relates to Airborne's breach of contractual obligations to make severance payments and to reimburse the moving expenses of Plaintiff. The jury was not instructed to disaggregate the damages and Plaintiff has not briefed the timing issue. As the demand letter from Plaintiff's counsel to Airborne was dated July 26, 2001, the Court concludes that July 26, 2001 is a "reasonable intermediate date" from which to begin the calculation of prejudgment interest.
The parties stipulated at trial that "Defendant still owes Plaintiff a portion of his severance pay and all of his moving expenses for his move from Elimira, New York to Dallas, Texas." See The Court's Instructions to the Jury at 3.
Defendant did brief this issue, suggesting the use of multiple dates. See Defendant's Response at 5, Attachment A.
Postjudgment interest shall be calculated from the date of judgment, according to 28 U.S.C. § 1961, on the sum of $106,384.72 plus the prejudgment interest. See Chapman Cole v. Itel Container Intern. B. V., 865 F.2d 676, 689-90 (5th Cir. 1989). Judgment will be entered accordingly.
III. CONCLUSION
For the foregoing reasons, Plaintiffs Motion for Attorney's Fees is DENIED.