Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca10-89-05087/USCOURTS-ca10-89-05087-0/pdf.json

Nature of Suit Code: 190
Nature of Suit: Other Contract Actions
Cause of Action: 

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UNITED STATES COURT OF APPEALS 

FOR THE TENTH CIRCUIT 

STEEL & PIPE SUPPLY CO., INC., 

Plaintiff-Appellant, 

. FILED 

United Stat•" , ... - f " '""' "-PUft o ~'\ppeals Tenth Circuit 

JUN 2 2 1990 

&OBERT L. HO.ECKER 

Clerk 

v. 

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No. 89-5087 

HOUSTON AND KLEIN, INC.; DAVID F. 

JAMES; E. JOHN EAGLETON; and 

JAMES R. EAGLETON 

Defendants-Appellees. 

ORDER AND JUDGMENT* 

(D.C. No. 88-C-1223-B) 

(N.D. Okla.) 

Before MOORE, BRIGHT,** and BRORBY, Circuit Judges. 

**Honorable Myron H. Bright, Circuit Judge, United States Court of 

Appeals for the Eighth Circuit, sitting by designation. 

Steel & Pipe Supply Co., Inc. (Steel & Pipe) brought this 

action against the Tulsa law firm of Houston and Klein (H & K), 

and three partners of H & K, David F. James, E. John Eagleton, and 

James R. Eagleton (sometimes referred to collectively herein as 

the defendants). Steel & Pipe is a Manhattan, Kansas, corporation 

with a volume of business surpassing fifty million dollars per 

year. In 1982, it entered a steel handling agreement with Freight 

* This order and judgment has no precedential value and shall 

not be cited, or used by any court within the Tenth Circuit, 

except for purposes of establishing the doctrines of the law of 

the case, res judicata, or collateral estoppel. 10th Cir. R. 

36.3. 

Appellate Case: 89-5087 Document: 010110036918 Date Filed: 06/22/1990 Page: 1 
& Container Services, Inc. (F & C), an Oklahoma entity in which 

Bob James, a real estate broker and brother of defendant David 

James, was an active manager. The location of the business 

activity was a 15,000 square-foot facility at the Port of Catoosa 

at Tulsa, Oklahoma. David James drafted the 1982 steel handling 

agreement. Almost immediately, Steel & Pipe began negotiations 

with F & C for an expanded operation in the Port of Catoosa. Its 

goal was to have a "turn-key" facility several times the size of 

its original venture, at which it would eventually perform its own 

steel handling functions. Steel & Pipe and F & C agreed that the 

larger facility would be owned and leased to Steel & Pipe by Port 

Partnership, an Oklahoma general partnership. 

John and James Eagleton and David James each had financial 

interests in either F & C or Port Partnership or both, although 

the Eagletons had no direct involvement with the transactions at 

issue here, either in their capacities as partners of H & K or 

through their affiliations with F & C or Port Partnership. David 

James drafted and revised the documents necessary for the 

expansion, which consisted of a lease of the facility to 

Steel & Pipe from Port Partnership, a sublease to F & C from 

Steel & Pipe terminable on 90 days notice, and a steel handling 

agreement between Steel & Pipe and F & C also terminable on ninety 

days notice. In addition to his work on the 

Steel & Pipe/F & C/Port Partnership transaction, David James also 

supervised the negotiations and document preparation for the 

financing of the larger facility. 

2 

Appellate Case: 89-5087 Document: 010110036918 Date Filed: 06/22/1990 Page: 2 
The negotiations for the larger facility culminated in early 

June 1985 with the execution of the lease, sublease and steel 

handling agreement. David James had drafted the preliminary 

documents and had revised the drafts to reflect the continuing 

negotiations between Steel & Pipe and F & C. One component of the 

final version of the lease was a formula for rent escalation tied 

to the amount of the loan payment which Port Partnership was 

required to make. Port Partnership's financing agreement called 

for two years of interest-only payments, with payments calculated 

on principal and interest thereafter. 

Steel & Pipe's dissatisfaction began when the loan payment 

rate ballooned, thus dramatically increasing its rent obligation. 

Steel & Pipe claimed that David James represented it during the 

negotiations for the rental escalation clause, that he assured 

officers of Steel & Pipe that the clause reflected Steel & Pipe's 

negotiating position when in fact it did not, and that they relied 

on his assurances. After Steel & Pipe refused to pay the 

increased portion of the rent, Port Partnership won a state court 

judgment against it enforcing the terms of the lease as written. 

The state court found that the lease was unambiguous and 

secured through fraud. R. Vol. I doc. 5 ex. A at 1. 

pending on that state court action. 

was not 

Appeal is 

After the conclusion of the state trial court action, 

Steel & Pipe brought this action in the federal court, with its 

claims against David James, the law firm in which David James is a 

partner and two of his law partners. The two Steel & Pipe 

officers in charge of the negotiations claimed that they did not 

3 

Appellate Case: 89-5087 Document: 010110036918 Date Filed: 06/22/1990 Page: 3 
know that David James was a partner in F & C and Port Partnership 

and that he had an obligation to disclose that information to 

Steel & Pipe because Steel & Pipe was relying on his advice. They 

also claimed that their position in the negotiations was for a 

rent escalation tied only to the interest rate on the underlying 

financing, and that David James was dishonest when he assured them 

that the rent escalation formula in the final draft of the lease 

tracked their wishes. 

The federal district court granted summary judgment in favor 

of the defendants. R. Vol. I tab 37. It found that David James 

represented F & C and Port Partnership in the negotiations. The 

court found that Steel & Pipe had divergent interests from those 

of F & C and Port Partnership, and that the parties were dealing 

in arm's length negotiations. Id. at 4. It found that David 

James had no fiduciary or attorney-client relationship with 

Steel & Pipe. Further, the district court found no fraud or 

misrepresentation in David James' communications with the officers 

of Steel & Pipe, because the record reflected no justifiable 

reliance. Id. at 5. The district court concluded by denying the 

defendants' motion for Rule 11 sanctions. Id. 

Steel & Pipe appeals the adverse holding of summary judgment, 

reiterating the arguments presented to the district court. The 

defendants, in response to the appeal, request that Rule 38 

sanctions be imposed against Steel & Pipe and its attorney for 

filing a frivolous appeal. 

"Summary judgment is proper if the record before the court 

shows that 'there is no genuine issue as to any material fact and 

4 

Appellate Case: 89-5087 Document: 010110036918 Date Filed: 06/22/1990 Page: 4 
that the moving party is entitled to a judgment as a matter of 

law.' Fed. R. Civ. P. 56(c)." Flanagan v. Munger, 890 F.2d 1557, 

1561 (10th Cir. 1989). As correctly cited by the court below, 

[T]he plain language of Rule 56(c) mandates the entry of 

summary judgement, after adequate time for discovery and 

upon motion, against a party who fails to make a showing 

sufficient to establish the existence of an element 

essential to that party's case, and on which that party 

will bear the burden of proof at trial. 

Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). 

After thorough review of the entire record on appeal, 1 we 

affirm the decision of the district court for substantially the 

reasons stated in its order. 2 Steel & Pipe failed to prove 

essential elements of its claims. It did not present evidence 

sufficient to establish that it had a reasonable expectation of an 

attorney-client relationship with H & K or any of H & K's 

individual attorney/partners. It did not present evidence that 

would support the contention that H & K should have foreseen that 

Steel & Pipe would rely on David James or H & K to protect 

Steel & Pipe's interests in this arm's length business 

transaction, notwithstanding the extensive interaction between 

Steel & Pipe's representatives and David James. See Vanguard 

Production, Inc. v. Martin, 894 F.2d 375, 378 (10th Cir. 

1990)(applying Oklahoma law to an attorney malpractice suit by a 

third party). It did not present evidence that H & K or any of 

H & K's individual partners stood in a fiduciary relationship to 

1 Defendants' motion to change this 

Steel & Pipe's request to supplement 

additional material is hereby denied. 

2 We also hereby deny the motion 

under Rule 38. 

5 

of 

court's order 

the record to 

appellees for 

granting 

include 

sanctions 

Appellate Case: 89-5087 Document: 010110036918 Date Filed: 06/22/1990 Page: 5 
it; and it did not present any evidence of fraud or 

misrepresentation which could overcome the inescapable fact that 

its officers had sufficient opportunity to read the documents 

carefully and seek independent review, were experienced 

businessmen for a large and successful business, and initialled 

the lease document after David James signed it in his capacity as 

partner of Port Partnership, with his signature clearly labeled in 

such capacity. 

The judgment of the United States District Court for the 

Northern District of Oklahoma is AFFIRMED. 

ENTERED FOR THE COURT 

PER CURIAM 

6 

Appellate Case: 89-5087 Document: 010110036918 Date Filed: 06/22/1990 Page: 6 
No . 89-5087, Steel & Pipe Supply Co., Inc. v. Houston and Klein, 

Inc. 

BRIGHT, Circuit Judge, concurs in the result of this order and 

judgment. 

7 

Appellate Case: 89-5087 Document: 010110036918 Date Filed: 06/22/1990 Page: 7