Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca5-09-50770/USCOURTS-ca5-09-50770-0/pdf.json

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

---

IN THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

No. 09-50770

CFS FORMING STRUCTURES CO., INC.

Plaintiff-Appellee

v.

FLINTCO, INC.

Defendant-Appellant

Appeal from the United States District Court

for the Western District of Texas

No. USDC 1:07-cv-00973-LY

Before KING, WIENER, DENNIS, Circuit Judges.

PER CURIAM:

*

This contract dispute arises out of a construction contract to build a

conference center in San Marcos, Texas. Defendant-Appellant Flintco, Inc.

(“Flintco”) is a general contractor who contracted with Plaintiff-Appellee CFS

Forming Structures, Inc. (“CFS”) to perform concrete work on the conference

center and an adjacent hotel. During the course of construction, Flintco sent

CFS a “cure” letter, pursuant to their subcontract, which directed CFS to

“commence” installation of concrete work. Ten days later, asserting that

United States Court of Appeals

Fifth Circuit

F I L E D

August 16, 2010

Lyle W. Cayce

Clerk

 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.

 Case: 09-50770 Document: 00511205235 Page: 1 Date Filed: 08/16/2010
No. 09-50770

installation had not commenced, Flintco terminated its subcontract with CFS

and hired another concrete subcontractor. CFS sued Flintco for breach of

contract, and Flintco counterclaimed for breach of contract. A jury returned a

verdict for CFS and against Flintco. Flintco properly moved, post-verdict, for a

judgment as a matter of law (“JMOL”), which the district court denied. Flintco

then timely filed a notice of appeal, asserting that the district court abused its

discretion in instructing the jury and erred in denying Flintco’s motion for

JMOL. We affirm.

I. FACTS AND PROCEEDINGS

The subcontract at issue was signed on February 6, 2007. It provided that

CFS’s work was to occur on or before the date specified in the “master project

schedule.” This term was not defined in the subcontract, and no date for work

completion was specified. The subcontract also contained a “time is of the

essence” provision. Crucially, paragraph 9 of the subcontract also gave CFS the

right to “cure” any noncompliance under the subcontract for “fail[ure] or refus[al]

to proceed with or properly perform Work as directed by FLINTCO . . . .”

Specifically, the subcontract stated that “FLINTCO shall notify Subcontractor

in writing of Subcontractor’s failure to comply. If FLINTCO determines that

Subcontractor has not remedied and cured the event(s) of default within three

(3) days of written notification, then FLINTCO may . . . terminate this

Subcontract . . . .”

Central to the organization and coordination of the overall construction

project was the “master project schedule,” which the district court held to be the

“critical path method” schedule (the “CPM”). This CPM scheduled the project's

tasks, specifying both commencement and completion dates, and arranged the

sequence of each task so that, as necessary, it would occur before, during, or

after other tasks. “Noncritical” tasks were those that, if delayed or not timely

completed, would not delay the project’s ultimate completion date; “critical”

2

 Case: 09-50770 Document: 00511205235 Page: 2 Date Filed: 08/16/2010
No. 09-50770

tasks were those whose delayed or untimely completion would delay the project.

The CPM was updated and re-issued by Flintco monthly as tasks were

completed or not completed; a particular task’s status could shift between

noncritical and critical.

The bid documents that predated the subcontract’s execution contained a

baseline schedule outlining the subtasks and the project completion date. This

was re-issued on February 22, 2007, with new interim dates and a project

completion date of October 14, 2008. This completion date never changed during

the course of the nine interim CPM updates that CFS received between the

subcontract’s execution and its termination by Flintco on October 9, 2007.

Completion dates for some tasks did change, however, including, for example,

CFS’s slab work, which was eventually scheduled to be completed by October

25th. After construction commenced, there were multiple alterations to the CPM

schedule issued by Flintco, which pushed back CFS’s schedule several times.

Accordingly, CFS could not and did not commence or complete its work either as

originally scheduled or by the updated schedule.

Because of delays attendant on the installation of concrete by CFS, Flintco

became concerned about meeting the project’s ultimate deadline and being able

to proceed with other components of the project, such as structural steel

installation. Attributing the delay in concrete floor installation to what Flintco

considered to be CFS’s dilatory performance, Flintco’s project manager sent CFS

a “cure letter” on September 28, 2007, which directed that CFS “commence”

operations on the “conference center slab on grade” task. The cure letter stated

that the slab work was scheduled to be completed by October 8. Immediately

after sending the letter, the project manager left on vacation. As soon as it

received the letter, CFS “commenced” the slab work by laying down vapor

barriers, applying pest control, grading the site, and the like. It also scheduled

concrete pours for October 10 and 11. Importantly, CFS put on evidence at trial

3

 Case: 09-50770 Document: 00511205235 Page: 3 Date Filed: 08/16/2010
No. 09-50770

that the cure letter’s October 8 completion date came from an older CPM update

and that the CPM date in effect on September 28 was actually October 25.

The project manager returned from vacation on October 8 and was

authorized by Flintco to terminate CFS’s subcontract on October 9. He did so by

letter, stating that, because “no significant carton form operation has taken

place” Flintco deemed CFS to have refused to commence work under the

subcontract.

At the jury charge conference before commencement of the jury trial on the

parties’ opposing breach of contract claims, the opposing parties’ lawyers

disagreed on the appropriate structure of the jury charge. Flintco wanted the

court to use a so-called Mustang Pipeline charge (“Mustang Charge”) which

1

would ask disjunctively (1) whether either party was in breach, and (2), if so,

which breach occurred first. Flintco also objected to the fact that the court’s

proposed jury charge would ask if CFS was in breach at the time of the Flintco

cure letter, September 28, rather than at the time of the subcontract’s

termination, October 9.

The district court denied these objections and submitted the jury charge

without Flintco’s proposed changes. The court also held as a matter of law that

the CPM in effect on September 28 was the “master project schedule” for

purposes of CFS’s putative breach, ruling that this date was the only reasonable

candidate. Flintco argued that the February baseline schedule should be the

master schedule, but the court discounted this, reasoning that heavy rain delays

in the spring, which in turn had delayed the beginning of construction, as well

as the fact that the CPM updates effected multiple changes in interim task

completion dates, rendered the February schedule untenable.

The submitted jury charge read:

Mustang Pipeline Co. v. Driver Pipeline Co., 134 S.W.3d 195 (Tex. 2004). 1

4

 Case: 09-50770 Document: 00511205235 Page: 4 Date Filed: 08/16/2010
No. 09-50770

Question 1: Do you find that CFS was in compliance with the master

project schedule on September 28? If “No”proceed to question 2; if yes,

proceed to question 3.

Question 2: Do you find that CFS satisfied the notice in the “cure letter”

of September 28 by commencing operations? If yes, proceed to question 3;

if “no” proceed to question 4.

Question 3: What amount of money would compensate CFS for Flintco’s

termination?

Question 4: What amount of money would compensate Flintco for CFS's

breach?

The jury found that CFS was not in breach of the subcontract on

September 28 and awarded it damages for Flintco’s unjustified termination.

Flintco then moved for a JMOL, asserting that CFS’s actions were a material

breach of contract because of the “time is of the essence” clause. The district

court denied this motion.

On appeal, Flintco contends that the district court abused its discretion by

(1) not giving a Mustang Charge in the disjunctive, and (2) not instructing the

jury to determine CFS’s putative breach as of the day that Flintco terminated

the subcontract with CFS. Flintco also claims that the district court erred in

denying its JMOL motion because CFS’s actions constituted a material breach

of the subcontract by virtue of its “time is of the essence” clause.

II. ANALYSIS

A. Standard of Review

We review challenges to jury instructions for abuse of discretion. “A

2

judgement will be reversed only if the charge as a whole creates substantial and

ineradicable doubt whether the jury has been properly guided in its

deliberations.” “In diversity actions, a federal court's jury instructions must

3

accurately describe the applicable state substantive law, but the district court

Huss v. Gayden, 571 F.3d 442, 460 (5th Cir. 2009).

2

United States v. Monroe, 178 F.3d 304, 307 (5th Cir. 1999).

3

5

 Case: 09-50770 Document: 00511205235 Page: 5 Date Filed: 08/16/2010
No. 09-50770

has wide discretion in formulating the charge.” Even if we find error, “we will

4

not reverse if we determine, based on the entire record, that the challenged

instruction could not have affected the outcome of the case.”

5

We review a district court’s grant or denial of a JMOL de novo, applying

the same legal standard as the district court. “A motion for judgment as a

6

matter of law . . . in an action tried before a jury is a challenge to the legal

sufficiency of the evidence supporting the jury’s verdict.” JMOL is proper when,

7

after a party as been heard by a jury, there is no legally sufficient evidentiary

basis for a reasonable jury to have found for that party with respect to that

issue.

8

B. Discussion

The facts here closely track those in Mustang Pipeline . There, the pipeline

owner Mustang Pipeline contracted with Driver to build a pipeline. The contract

dictated that time was of the essence in the completion of the work by Driver.

9

Driver’s work was delayed, and Mustang repeatedly asked for assurances that

the work would be timely completed. Convinced by Driver’s pattern of delay that

the project would not be completed on time, Mustang ultimately terminated the

Driver contract forty days before the targeted completion date and hired another

pipeline contractor.

 Baker v. Canadian Nat'l/Ill. Cent. R.R., 536 F.3d 357, 363-64 (5th Cir.2008).

4

Wright v. Ford Motor Co., 508 F.3d 263, 268 (5th Cir.2007). 5

Flowers v. Southern Regional Physician Serv’s, Inc., 247 F.3d 229, 235 (5th Cir. 2001) 6

(citation omitted).

Ford v. Cimarron Ins. Co., 230 F.3d 828, 830 (5th Cir. 2000).

7

Id. 8

The several opinions that resulted are silent as to whether there was also a “cure” 9

provision, but if such a provision existed, it played no role in the determinations of either the

trial court or the appellate courts. 

6

 Case: 09-50770 Document: 00511205235 Page: 6 Date Filed: 08/16/2010
No. 09-50770

Mustang then sued Driver for breach of contract, and Driver

counterclaimed for wrongful termination of the contract. The case was tried to

a jury, and the trial court submitted the following four-question charge:

1) Did Driver Pipeline Company fail to comply with the contract it

had with Mustang Pipeline Company?

2) Was Mustang Pipeline Company justified or not justified in

terminating Driver Pipeline Company?

3) What sum of money, if any, if now paid in cash would fairly and

reasonably compensate Mustang Pipeline Company for its damages,

if any, that resulted from such failure to comply?

4) What sum of money would fairly and reasonably compensate

Driver for its damages, if any, that resulted from Mustang's failure

to comply with the Contract?

10

Although the jury found that Driver had breached the contract, it also

found that Mustang had wrongfully terminated the contract. Mustang moved

to set aside the jury’s verdict as to Mustang’s conduct, arguing that, if Driver

materially breached the contract first, Driver could not then seek damages for

wrongful termination. The trial court denied Mustang’s motion, and it appealed.

The intermediate appellate court affirmed the trial court, holding that the jury

verdict as to Mustang could only be set aside if Driver’s breach was material,

and that materiality was a question for the jury. The Texas Supreme Court

reversed, holding that, based on the evidence of Driver’s delay, the emphasis

that Mustang had placed on (1) timeliness, (2) the aggressive schedule which

had never varied in target completions dates, and (3) the “time is of the essence”

clause, Driver’s breach was material as a matter of law. Accordingly, the Texas

11

Supreme Court set aside the verdict against Mustang.

12

Id. at 197.

10

Id. at 200.

11

Id. 12

7

 Case: 09-50770 Document: 00511205235 Page: 7 Date Filed: 08/16/2010
No. 09-50770

The court then noted in dicta that the jury instruction’s defects could have

been avoided by a charge worded in the disjunctive, reasoning:

These problems could have been avoided had the trial court submitted the

breach of contract question disjunctively (“Did Driver Pipeline Company

or Mustang Pipeline Company fail to comply with the parties’ contract?”)

accompanied by an appropriate instruction directing the jury to decide

who committed the first material breach.

....

In the standard contract dispute, one party cancels the contract or refuses

to pay due to alleged breaches by the other; in such circumstances, jurors

will often find both parties failed to comply with the contract (as the jury

did here) unless instructed that they must decide who committed the first

material breach.

13

Flintco insists that this case is indistinguishable from Mustang Pipeline

and that the district court abused its discretion in refusing to give the

disjunctive jury instruction mentioned in dicta by the Texas Supreme Court.

Specifically, Flintco asserts that “when a party contends that its termination of

a contract is excused because the other committed a material breach first, the

issue should be submitted . . . in the disjunctive. That is, the question should

ask whether either party breached, and if both did, which party breached first.”

Flintco also urges that the jury instructions submitted by the district court were

in error because they presume that, if the jury should find that CFS was either

not in breach on September 28 or was in breach and failed to cure that breach

in the cure period, Flintco’s termination was automatically wrongful. Flintco

asserts that a Mustang Charge would have obviated this problem, i.e., when both

parties are in putative breach, by allowing the jury to determine which party

breached first. According to Flintco, this would effectuate the principle that a

contract is not enforceable against a party in putative breach when there is an

antecedent material breach by the other party.

Id. (emphasis added).

13

8

 Case: 09-50770 Document: 00511205235 Page: 8 Date Filed: 08/16/2010
No. 09-50770

Contrary to Flintco’s contention that the sequence of the breaches is the

essential issue, the key question that the Texas Supreme Court’s instruction in

Mustang Pipeline attempted to resolve is materiality. If the jury finds that both

parties breached the contract under facts akin to those in Mustang Pipeline, i.e.,

a second breach that occurs as a result of an earlier breach, the sequence of the

breach – who breached first – is obvious. In Mustang Pipeline, Driver had to

breach first because that was the antecedent event to the subsequent breach by

Mustang, after which no further business was done between the parties.

Because Driver was alleged to have breached first and Mustang second, the

determinative question was whether Driver’s initial breach was material. This

is borne out by the Mustang Pipeline court’s analysis, which was concerned solely

with whether Driver’s delay constituted a material breach as a matter of law,

and thus excused Mustang’s subsequent breach.

14

The district court’s jury instructions here adequately capture the question

of materiality despite their not being worded in the disjunctive. The charge

contains the implicit assumption that the breaches, if they occurred, were

material. That is, the jury questions require that, (1) if the jury finds that

15

CFS breached the subcontract by failing to comply with the CPM , Flintco must

Mustang Pipeline, 134 S.W.3d at 200. 14

Under the jury instructions, this is true for both parties. If the jury had found that 15

CFS was not in compliance on September 28th and failed to cure, its breach was deemed,

under the questions, to be material because the jury was then to assess damages.

Importantly, if the jury had found CFS to be in breach, it was not to consider whether Flintco

breached the subcontract, presumably because, as CFS’s delay was material, Flintco’s

termination could not be wrongful.

This assumption of materiality by the jury instructions is supported by the fact that

the questions specifically refer to discrete occurrences as potential breaches. Contrast the

specificity of these instructions with those in Mustang Pipeline: “Did Driver Company fail to

comply with the contract it had with Mustang Pipeline?”. 134 S.W.3d at 197. In fact, the very

generality of the Mustang Pipeline instructions is what gives rise to the need for the Texas

court’s fix because, under the original instructions, it is impossible to know which specific act

of Driver’s constituted the breach and, therefore, whether it was material.

9

 Case: 09-50770 Document: 00511205235 Page: 9 Date Filed: 08/16/2010
No. 09-50770

be awarded damages, but (2) if CFS was in compliance, then Flintco’s

termination was wrongful and the jury must determine the quantity of damages

incurred by CFS. Even though they do not explicitly require the jury to decide

materiality, these instructions will nevertheless establish which breach, if any,

16

is material. And, because of the “cure” provision, CFS could only be in breach

under the instant facts if it were first notified of a putative breach and afforded

an opportunity to cure. There is no question that Flintco terminated the

subcontract and that it purported to do so because of CFS’s putative failure to

cure the delay outlined in the “cure letter.” It necessarily follows that if CFS

was not actually in breach vel non, then the termination for that breach was

wrongful.

Under the facts presented at trial, there were only two potential breaches

at issue: (1) CFS’s tardiness as of September 28, and (2) Flintco’s contract

termination for delay. The district court’s jury instructions put the question of

materiality of both breaches to the jury and did so in a way that prevented any

possible conflicting jury findings. The charge was proper, given the fact that

CFS’s “breach” triggered a “cure letter” under the subcontract, and Flintco’s

breach terminated the entire subcontract before completion. The jury

instructions prevented an inconsistent jury verdict, such as the one that

occurred in Mustang Pipeline. Accordingly, Flintco has failed to show

“substantial and ineradicable doubt whether the jury has been properly guided

in its deliberations.”

Put another way, by structuring the instruction in the way that it did, the district 16

court appears to have held that, as a matter of law, each breach, if proved, was material. This

is amply supported by the evidence. First, it is clear that an unwarranted termination of the

subcontract is a material breach. Termination is only unwarranted if the reason for the

breach – here CFS’s delay – was not material. Failure to satisfy the requirements of a valid

cure letter is also, under the terms of the subcontract, a material breach. Clearly then, both

putative breaches at issue were potentially material. 

10

 Case: 09-50770 Document: 00511205235 Page: 10 Date Filed: 08/16/2010
No. 09-50770

Flintco’s other issues with the jury instructions are that (1) the verdict

form asked the jury whether CFS was in compliance on the date of the cure

letter rather than the date of Flintco’s termination of the subcontract, and (2) the

jury charge refers to “first floor slab,” the cure letter refers to commencement of

the “slab on grade operation,” and the termination letter refers to “slab on carton

form operation,” potentially confusing the jury.

Flintco has failed to show an abuse of discretion under either issue. First,

the termination letter refers to CFS’s delay and failure to cure as the reasons for

terminating the subcontract, and it references the Paragraph of the subcontract,

that outlines the materiality of delay, the right to cure, and the termination

consequences for failing to cure. The right to cure for delay means that Flintco

had to send the cure letter and give CFS 72 hours to commence curing the delay.

Necessarily, CFS could not be in breach until and unless it were never given

such notice and right to cure.

Flintco argues in response that CFS’s conduct following receipt of the cure

letter but before Flintco terminated the subcontract could have supported

Flintco’s claim of breach. The flaw in this argument is that Flintco sent only one

cure letter. It certainly may be (and the jury instructions capture this fact) that

if CFS failed to comply with the cure letter in this interim period, it was in

breach. Under the terms of the cure provision in the subcontract, however, CFS’s

conduct during the interim period can only fall into one of four categorical

descriptions: (1) continuing compliance with the subcontract, notwithstanding

the cure letter’s complaints; (2) resulting compliance with the subcontract by

correcting the earlier breaches outlined in the cure letter; (3) continuing noncompliance with the subcontract through failure to comply with the cure letter;

or (4), irrespective of any earlier breach, committing an independent breach of

the subcontract.

11

 Case: 09-50770 Document: 00511205235 Page: 11 Date Filed: 08/16/2010
No. 09-50770

The jury instructions capture only the first three of these possibilities by

charging the jury to consider CFS’s alleged breach as of September 28. This is

absolutely the correct date to use, however, because CFS could only have been

in breach for delay after being notified and afforded the opportunity to cure. If

CFS had in fact committed a new breach in the interim period after the cure

letter, i.e., conduct other than that complained of in the cure letter, Flintco

would have been obliged to issue a new cure letter and give CFS another 72

hours to cure before lawfully terminating the contract. Otherwise, any conduct

occurring in the interim period would not be actionable or be related to the

initial cure letter. As it is undisputed that Flintco sent only the September 28

cure letter, the district court’s decision to charge the jury with determining

CFS’s compliance as of that date was not only not an abuse of discretion, but the

only licit choice. If instead of the cure letter’s date, the court had specified the

subcontract’s termination date as the material date of breach, the jury could

have found CFS in breach for conduct unrelated to the September 28th cure

letter. Such a finding would have been wrongful, however, because the evidence

shows that no subsequent conduct was ever afforded the cure period as required

by the subcontract. By setting September 28 as the date of putative breach, the

district court prevented this erroneous outcome. Accordingly, the court’s date

of choice does not give rise to substantial doubt that the jury was misguided in

its deliberations.

Flintco also claims that the term “first floor slab” may have misled the jury

to conclude that CFS’s initial steps to lay down the concrete slab constituted

“commencement” under the cure letter when, in fact, the cure and termination

letter’s terminology actually contemplated commencement of the “final stages”

of the slab work. Flintco simply states that the term “first floor slab” is

“narrower,” and that the “earlier steps” CFS undertook after the cure letter were

12

 Case: 09-50770 Document: 00511205235 Page: 12 Date Filed: 08/16/2010
No. 09-50770

not what Flintco complained of and “should not have been considered steps

toward compliance.”

Beyond these bald assertions, Flintco does not otherwise support its

contention that the term “first floor slab” misled the jury to view non-compliant

conduct erroneously as compliant. The cure letter lucidly states that CFS has

72 hours after receipt to “commence” its concrete work, and the evidence

adduced at trial supports a jury finding that CFS did in fact commence this

work. Even assuming that the term is inaccurate, Flintco’s self-serving

assertions as to the definitions of these terms fail to give rise to “substantial and

ineradicable doubt” that the jury was misled or, assuming error, that it affected

the outcome of the trial.

Finally, Flintco argues that it is entitled to a JMOL because the “time is

of the essence” clause in the subcontract renders CFS’s myriad delays material

breaches. As discussed above, however, the Texas Supreme Court held in

Mustang Pipeline held that, under the discrete facts of that case, Driver’s delay

was a material breach of the contract as a matter of law. That court did not

17

hold that, in every case, a “time is of the essence” provision ipso facto makes any

delay a material breach. Under the JMOL standard, Flintco had to show that

the “time is of the essence” provision meant that, in light of the evidence

adduced, “there is no legally sufficient evidentiary basis for a reasonable jury to

have found” that CFS was in compliance on September 28. First, unlike in

Mustang Pipeline, CFS had a right to cure any breach for delay. Under the

terms of the subcontract, CFS would only be in material breach if it were notified

of that fact and afforded an opportunity to cure. As none of the delays prior to

the September 28 cure letter prompted a cure letter, CFS could not have been

 137 S.W.3d at 200. 17

13

 Case: 09-50770 Document: 00511205235 Page: 13 Date Filed: 08/16/2010
No. 09-50770

in material breach for any conduct preceding the conduct that prompted the cure

letter of September 28.

As for its conduct that did prompt the September 28 letter, CFS points out

that evidence adduced at trial proved that CFS’s work on the slab operation was

not delaying the overall project. For example, the CPM in effect on September

28 confirms that the slab was to be completed on October 25, and that it was a

“noncritical” task. Furthermore, contrary to Flintco’s assertion that the

structural steel installation was delayed by CFS’s conduct, CFS has shown that

Flintco’s project superintendent testified that the slab work did not need to be

completed for steel installation to commence.

In sum, Flintco has failed to meet the high standard of showing that there

is no “legally sufficient evidentiary basis” for the jury’s verdict.

IV. CONCLUSION

For the foregoing reasons, the district court is, in all respects,

AFFIRMED.

14

 Case: 09-50770 Document: 00511205235 Page: 14 Date Filed: 08/16/2010