### IN THE UNITED STATES COURT OF APPEALS FOR THE FIFTH CIRCUIT

No. 16

- 60134 Summary Calendar

SMITHGROUP JJR, P.L.L.C.,

Plaintiff

- Appellant

v. FORREST GENERAL HOSPITAL,

Defendant

- Appellee

Appeal from the United States District Court for the Southern District of Mississippi USDC No. 2:13

- CV

- 150

Before DAVIS, SOUTHWICK, and HIGGINSON, Circuit Judges

. STEPHEN A. HIGGINSON, Circuit Judge : * SmithGroup JJR, PLLC (“SmithGroup”) appeals the district court’s judgment, after a bench trial, rejecting its claim that Forrest General Hospital (“FGH”) breached a contractual obligation to pay SmithGroup all of the fees it was owed for architectural design services. The sole issue SmithGroup raises on appeal is whether the district court erred by considering extrinsic evi denc e

* Pursuant to 5th Cir. R. 47.5 , the court has determined that this opinion sho uld not be published and is not precedent except under the limited circumstances set forth in 5th Cir. R. 47.5.4. United States Court of Appeals Fifth Circuit 

### FILED September 9, 2016 Lyle W. Cayce Clerk Case: 16-60134 Document: 00513672246 Page: 1 Date Filed: 09/09/2016No. 16

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2 bearing on the meaning of the term “actual construction cos t” in the parties’ agreement. We affirm.
I. FGH hired SmithGroup to design and oversee the construction of a new hospital and an adjacent medical office building in Picayune, Mississippi. That relationship was memorializ ed in a contract executed in February 2010

— several months before construction was to begin

. This contract outlined architectural, engineering, and related “Basic Services” that SmithGroup would provide at each stage of the proje ct’s planning and construction, for which FGH would pay a fixed perc entage of the construction cost

. The agreement also contemplated the performance of “Additional Services ,” which would be compensated separately

. Most of SmithGroup’ s work was to be performed and pa id for before construction or even the bidding process fo r a general contractor began

. Accordingly, the contractual terms of how FGH would compensate SmithGroup for Basic Services

— set forth at paragraph 11.1 , and providing the crux of this appeal

— contained estimated construction costs: The Basic Services for the Project shall be compensated at a rate of 6.0% of the construction costs. The construction co sts shall be

assume d to be $33 M illion ($1,980,000.00 in fees) for the Hospital, Administrative Build

- Out a nd Logistics Building and $5.2 M illion ($312,000 in fees) for the Administrative Building Core

- and

- Shell until the actual construction cost is established. At that tim e, the Basic Services Fees shall be recalculated and locked in as a lump sum amount. In May 2011

— after the chosen contractor signed a contract, and after construction had begun

— Travis Beatty, who works for a consulting firm hired by FGH , emailed SmithGroup a lette r about the Basic Services Fees. That letter stated that per paragraph 11.1, those fees were to “be at an assumed rate of cost until the construction contract was executed. At that point, the fees Case: 16-60134 Document: 00513672246 Page: 2 Date Filed: 09/09/2016No. 16

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3 would be ‘ locked in’ as a lump sum amount.” The letter’s purpose was to “serve to convey a detailed breakdown of the accepted fees that are now established.” A SmithGroup vice president, Paul Tonti, responded asking how fees for design services regarding owner

- supplied equipment would be handled. Beat ty replied that he would revise the letter to address that concern. A few weeks later, Beatty sent a revised letter calculating the “Total Construction Contract Price” as $38,418,704. We refer to this as the “bid cost.” Six percent of that total yields $2,305,122 , and that is the amount FGH paid in Basic Services
Fees

. Because of unanticipated design changes, however

— some but not all of which were due to “errors or contractual violations by SmithGroup”

— the total

c ost to complete the buildings was $40,79 9,669. We call this the “completion cost.” SmithGroup filed this lawsuit in July 2013. In Count I of its operative complaint, SmithGroup alleged that FGH breached the part ies’ contract by failing to pay six percent of the difference between the c ompletion cost and the bid cost, which comes to $155,980.14 plus interest. FGH maintained that it properly calculated and paid six percent of the “actual construction cost” based on the bid cost. Neither party moved for summary judgment, and the case

pro ceeded to a bench trial. At trial, b oth parties presented extrinsic evidence concerning the meaning of paragraph 11.1. For example, SmithGroup’s counsel referred Tonti
to key language in that paragraph and asked , “What did you understand that to mean when you read it?” Tonti responded: “My interpretation of this is when the project is complete, because I don’t know how you can achieve total actual construction costs until the project is complete and all those costs are rolled into a final construction num ber.” SmithGroup also elicited Tonti’s testimony that he was not aware of any project with “an interim lock

- in period. ” The district court additionally heard testimony from Beatty , and from FGH’s expert Case: 16-60134 Document: 00513672246 Page: 3 Date Filed: 09/09/2016No. 16

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4 Robert Luke, who testified that paragraph 11.1’s ve rbiage about locking in a lump sum was “rather unique language” that referred to fixing fees “once an actual construction amount is known,” which he distinguished from a “final construction amount or total construction amount.” SmithGroup never objected d uring trial to the introduction or consideration of any evidence on parol evidence rule grounds

. After trial, t he district court issued detailed written findings of fact and conclusions o f law

. Implicitly deeming the contract ambiguous and r elying in

pa rt on extrinsic evidence, the court concluded “that the fee due SmithGroup should be based on the construction cost of $38,418,704.00, and that the proper amount has been paid by FGH.” The district court therefore entered judgment in favor of FGH on Count I of SmithGroup’s operative complaint

. 1 SmithGroup timely appealed and now argues that the language “actual construction cost” unambiguously refers t o the total amount FGH paid to finish the project, which could only be determined after all construction ended. Therefore, SmithGroup
conte nds, the district court erred by considering evidence beyond the four corners of the contract in determining the meaning of paragraph 11.1. 2 II. “The standard of review for a bench trial is well established: findings of fact are reviewed for clear error and legal issues are reviewed de novo .” Guzman v. Hacienda Records & Recording Studio, Inc. , 808 F.3d 1031, 1036 (5th Cir. 2014) (quoting One Beacon Ins. Co. v. Crowley Marine Servs., Inc. , 648 F.3d 258, 262 (5th Cir. 2011)). In a diversity case, “[w]e look to state law for rules governing contract interpretation.” ACS Constr. Co., Inc. of Miss. v.

1 The district court entered judgment in SmithGroup’s favor for approximately $57,000 on a d ifferent breach

- of

- contract claim, and entered jud gment in FGH’s favor for approximately $310,000 on two counterclaims. None of these claims is at issue on appeal.
2 SmithGroup does not argue that even if the district court properly considered extrinsic evidence, its factual conclusions were clearly er roneous. Case: 16-60134 Document: 00513672246 Page: 4 Date Filed: 09/09/2016No. 16

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5 CGU , 332 F.3d 885, 888 (5th Cir. 2003) (quoting FDIC v. Firemen’s Ins. Co. of Newark , 109 F.3d 1084, 1087 (5th Cir. 1997) ). Here, that means that we apply Mississippi law “as interpreted by the state’s highest court.” Barfield v. Madison County , 212 F.3d 269, 271

– 72 (5th Cir. 2000). Mississippi courts analyze contracts using “a three

- step analysis.” Epperson v. SOUTHBank , 93 So.3d 10, 16 (Miss. 2012). First, the court “must determine whether the contract is ambiguous, and if it is not, then it must be enforced as written,” without consideration of parol evidence. Id. Determining whether a contract is ambiguous is a que stion of law. Tupelo Redev. Agency v. Abernathy , 913 So. 2d 278, 283 (Miss. 2005). If the court is unable to discern a clear meaning from this “four corners” inquiry, it should then “apply the discretionary ‘canons’ of contract construction.” 3 Id. at 28 4 . “Finally, if the contract continues to evade clarity as to the parties’ intent, the court should consider extrinsic or parol evidence .” Id. With these principles in mind, we turn to the case at hand. III. SmithGroup’s theory on appeal is that the contract at issue is unambiguous , so the district court erred by venturing beyond its four c orners

. F GH , though, responds that SmithGroup waived that argum ent by failing to raise it in the trial court and by itself eliciting parol evidence . Our usual rul e is that “[a]n argument not raised before the district court cannot be asserted for the first time on appeal.” XL Specialty Ins. Co. v. Kiewit Offshore Servs., Ltd. , 513 F.3d 146, 153 (5th Cir. 2008); see also Liberty Combustion Co. v. Thoreson Sales Co. , 322 F. 2 d 790, 791 (5th Cir. 1963) ( holding that an appellant waived a parol evidence rule argument). But in reply, SmithGro up

3 SmithGroup does not argue that the district court should have applied any discretionary canon of construction, so we do not address any. Case: 16-60134 Document: 00513672246 Page: 5 Date Filed: 09/09/2016No. 16

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6 contends that it did raise its argument in the district court and that, in any event, under Mississippi law such an argument ca nnot be waived. We treat the latter reply argument first, assuming without deciding that SmithGroup is cor rect that state law controls this waiver issue. 4 In Kelso v. McGowan , the Mississippi Supreme Court rejected an argument that the appellant “waive d the exclusion of parol evidence by failing to raise the issue at trial, ” stating: “ This Court has clearly held . . . that since the parol evidence rule is substantive, it prevails even in the absence of objection.” 604 So. 2d 726, 730 n.4 (Miss. 1992) ( citing Edrington v. Stephens , 114 So. 387 (Miss. 1927) ) . That statement from Mississippi’s highest court , albeit in a footnote, would seem to defeat FGH ’s waiver argument. More recently, however, the Mississippi Supreme Court reaffirmed “the holding in [ Service Fire Ins. Co. v. Craft , 67 So. 2d 874 (Miss. 1953)] that a party may not raise an objection to evidence on the grounds that it is violative of the Parol Evidence Rule for the first time on appeal.” Estate of Parker v. Dorchak , 673 S o. 2d 1379, 1384 (Miss. 1996). Although the court did not cite Kelso or Edrington , it noted that “the Parol Evidence Rule is a rule of substantive law”; for that reason, the court held that “a party should not lose the right to claim the benefit of said l aw merely because he failed to make a contemporaneous objection at the time the evidence was offered .” Id. (emphasis added). Rather, so long as a proper objection is raised “ prior to the consideration of said evidence by the trier of fact , such evidence should properly be disregarded.” Id. (emphasis added). In Dorchak , a bench trial, a motion to exclude testimony about contractual intent was filed after the evidence was offered, but “prior to the consideration of such testimony by the Chancellor as

4 Cf. Harville Rose Serv. v. Kellogg Co. , 448 F.2d 1346, 1349 (5th Cir. 1971) (“This court is bound in this diversity case to apply the parol evidence rule as the state court would.”). Case: 16-60134 Document: 00513672246 Page: 6 Date Filed: 09/09/2016No. 16

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7 trie r of fact”

— so it was timely. Id. at 1383

– 84. But in the Craft case that Dorchak reaffirmed, n o objection was ever made in the trial court to testimony that the appellant claimed contradicted the written instrument; therefore, that “testimony was before t he jury for what it was worth , ” and the Supreme Court made clear that it could “rest [its] decision on that state of the record.” Craft , 67 So. 2d at 876.
More recently still , the Mississippi Supreme Court considered an argument raised for the first ti me on appeal that an “ agreement [spoke] for itself and that parol evidence of an additional provision should not be considered.” Chantey Music Pub l’g , Inc. v. Malaco , 915 So. 2d 1052, 1060 (Miss. 2005). Citing the principle that a trial court cannot be h eld to have erred on a matter not presented to it , the high court held that the parol evidence issue was not properly before it. Id. Thus, the more recent cases show that the present state of Mississippi law does not allow a parol evidence argument such as SmithGroup’s to be raised for the first time on appeal. See Savoi e v. Huntington Ingalls, Inc. , 817 F.3d 457, 464 n.5 (5th Cir. 2016) (noting that federal courts are Erie

- bound on
state

- law questions by the state supreme court’s most recent authority); Broussard v. S. Pac. Transp. Co. , 625 F.2d 1242, 1245 n.3 (5th Cir. 1980) ( similar ). Bolstering this conclusion , the en banc Court of Appeals of Mississippi recently relied on Dorchak in holdi ng that because an appellant never raised a parol evidence rule objection in the trial court, he could not do so on appeal. DeJean v. DeJean , 982 So. 2d 443, 448

– 49 (Miss. Ct. App. 2007) (en banc). 5 Thus , SmithGroup waived this argument unless it objecte d to the consideration of parol evidence before the trial court made its decision.

5 SmithGroup cites Century 21 Deep South Prop., Ltd. v. Keys , 652 So. 2d 707 (Miss. 1995), for the propositio n that an objection to the consideration of parol evidence need not be made in the trial court to be preserved for appeal. But Keys does not support that rule

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8 SmithG roup does not dispute that it never objected at trial to the admission or consideration of extrinsic evidence, but does argue that it raised the issue in its post

- tri al proposed findings of fact and conclusions of law. SmithGroup points to its citation of case law for Mississippi principles of contract interpretation, including that a court “should first examine the four corners of the contract to determine how to int erpret it” and “accept the plain meaning of a contract as the intent of the parties where no ambiguity exists.” SmithGroup’s filing also stated: “If found ambiguous, the subsequent interpretation of the contract is a finding of fact. Ambiguity analysis, unlike affirmative defense analysis, is by its very nature a necessary step in the examination of every contract.” After these case citations, SmithGroup summarily concluded that there was “no doubt as to when total cost for construction is achieved,” sub mitting that it “ha[d] offered evidence and testimony in support of its claim for fees which is irrefutable.”
T his was not enough to “properly object[]” to consideration of the parol evidence elicited by both parties. See Dorchak , 673 So. 2d at 1384. The highlighted statements were set forth as boilerplate legal rules in the form of case citations , not arguments tied to this dispute. A nd “[c]iting cases that may contain a useful argument is simply inadequate to preserve that argument for appeal; ‘to be preserved, an argument must be pressed, and not merely intimated.’” Butler Aviation Int’l, Inc. v. Whyte (In re Fairchild Aircraft Corp.) ,

Instead, the Keys court rejected an argument that the trial court erred in finding parts of a contract to be ambiguous, even though the defendant

- appellee had not pleaded as an “affirmative defense” that the contract was ambiguous. Id. at 716

– 17. The court reasoned that “[t]he clarity of a contract must always be considered before a contract may be enforced, whereas the consideration of non

- plead affirmative defenses is not required.” Id. at 717. Tellingly, neither the Mississippi Supreme Court in Dorchak or Chantey Music , nor the Court of Appeals in DeJean , found Keys relevant when deciding mor e similar issues. Neither do we. The same goes for Rotenberry v. Hooker , 864 So. 2 d 266 (Miss. 2003), which Smith Group cites essentially for its recapitulation of Keys

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9 6 F.3d 1119, 1128 (5th Cir. 1993) (quoting Hays v. Sony Corp. , 847 F.2d 412, 420 (7th Cir. 1988)), abrogated on other grounds by Tex. Truck Ins. Agency , Inc. v. Cure (In re Dunham) , 110 F.3d 286 (5th Cir. 1997). W hat’s more, those citations included the instruction that a fact finder should interpret a contract as a factual matter if the contract is held ambiguous

— which is what the district court did

. Nowhere did SmithGroup make an actual argument that extrinsic evidence of paragraph 11.1’s meaning should not be considered , or

even that the provision is unambiguous

. Finally, even in the post

- trial briefing on whic h it now relies, SmithGroup cited expert testimony in support of its argument about paragraph 11.1. 6 Thus, SmithGroup never put the district judge on notice of any argument that extrinsic evidence should not be considered. See Chantey Music , 915 So. 2d at 1060 ; see also XL Specialty , 513 F.3d at 153 . Acc ordingly, we will not consider that argument on appeal

. IV

. SmithGroup failed to preserve for appeal its argument that because the relevant contractual term is unambiguous, the district court erred by considering extrinsic evidence in determining its meaning . Because SmithGroup argues no other ground for reversal, we AFFIRM the district court’s judgment.

6 We do not mean to suggest that a litigant cannot argue that a contract’s language is unambiguous and consideration of parol evidence therefore inappropriate, but rely in the alternative on extrinsic evidence. Here, SmithGroup did not present such alternative arguments to the district court. Case: 16-60134 Document: 00513672246 Page: 9 Date Filed: 09/09/2016