* Pursuant to Local Rule 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this opinion should not be published and is not precedent except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 Local Rule 47.5.4. UNITED STATES COURT OF APPEALS

For the Fifth Circuit

No. 95-60096

LEWIS MOORE, United States of America

for the use of d/b/a Lewis Moore Painting,

Plaintiff-Appellant,

VERSUS

GIBBS CONSTRUCTION COMPANY, INC., ET AL.,

Defendants-Appellees.

Appeal from the United States District Court

For the Southern District of Mississippi

(1:93-CV-491-RR)

February 23, 1996

Before GARWOOD, EMILIO M. GARZA, and DeMOSS, Circuit Judges.

PER CURIAM: *

Plaintiff Lewis Moore (Moore) appeals from final judgment

entered sua sponte prior to trial on the basis of arguments

presented in the parties' cross-motions to limit evidence. We

vacate and remand to the district court for further proceedings.1 For purposes of this appeal Fidelity's interests are

aligned with those of Gibbs. The defendants are referred to

collectively as "Gibbs."

2 BACKGROUND

Defendant Gibbs Construction Company (Gibbs) contracted with

the United States to repair and renovate the interior of the Tyler

House apartments on Kessler Air Force Base in Biloxi, Mississippi.

As required by law, Gibbs arranged for a bond as surety for payment

o f claims against Gibbs. The payment bond was issued by codefendant Fidelity & Deposit Company of Maryland (Fidelity). 1 In

November 1991, Gibbs subcontracted with Moore to paint and install

wall coverings inside the Tyler House.

After Moore commenced performance, it became apparent that the

existing surface on the interior doors and door frames in the Tyler

House would not bond with the paint called for in Moore's

subcontract with Gibbs. Moore delivered a sample of the door

surface to the paint manufacturer and it was examined by a chemist,

who specified an extensive surface preparation proced ure for

getting the paint to adhere. Moore then informed Gibbs in writing

that the doors would require substantially more surface preparation

than was contemplated by the subcontract. Accordingly, Moore

requested a change order granting additional compensat i on for

reworking the doors which Moore had already painted and for

preparing the surface on the balance of the doors. Gibbs denied

Moore's request for additional compensation, responding that the

subcontract placed the burden of selecting and completing the

proper surface preparation on Moore. Thereafter, Moore wrote2 The subcontract provided for Moore to receive progress

payments for work completed each month.

3 directly to the Air Force about the problem. Following an

investigation, the Air Force agreed with Gibbs.

As a result of the ongoing dispute, Gibbs withheld part of

Moore's requested payme nt for September. 2 In October 1992, Gibbs

did not submit any pay request for Moore to the Air Force. Gibbs

claims that it never received Moore's October pay request, and that

funds would have been withheld anyway because Moore's performance

continued to be unsatisfactory. Moore contends that the request

was mailed to Gibbs according to his usual procedure.

On November 9, 1992, Moore walked off the job, leaving

approxima tely half of the painting work incomplete. Gibbs

subsequently subcontracted with another painting contractor and was

able to complete the painting work for less than the amount

provided in M oore's subcontract, although the dispute with Moore

did significantly delay Gibbs' departure from the job site.

PROCEDURAL HISTORY

Moore filed this suit in October 1993. Federal jurisdiction

was based on the Miller Act, 40 U.S.C. § 270a et seq. , which

requires certain contractors in privity with the United States on

federal const ruction projects to provide a payment bond for the

protection of subcontractors that are not in privity with the

United States. Id . at § 270a. The Act creates a statutory cause

of action, in favor of the subcontractor, and against the surety

bond, when the subc ontractor is not paid on a timely basis for4

lab or and materials furnished to the federal project. I d

. at §

270b(a).

M oore also alleged claims, in the alternative, under

Mississippi state law for (1) breach of contract, and (2) fraud and

misrepresentation. Moore's breach of contract claim was based on

Gibbs' non-payment and Gibbs' failure to issue a change order after

Moore encountered a job site that ma terially differed from that

contemplated by the parties. Moore's fraud and misrepresentation

claims were based on allegations that project m anagers for both

Gibbs and the Air Force represented to Moore prior to contracting

that the surface preparation required would be minimal. Moore

sought recovery of the following damage elements: (1) $ 30,794.50

for labor and materials already supplied to the contract; (2) $

6,858 for materials purchased by Moore for the contract; (3) $

3,807 for extra-contractual work performed to rem edy the surface

adhesion problem; (4) $ 17,233.16 in attorney fees, on the basis of

Gibbs' bad faith; (5) $ 15,983.52 in expectation damages, for

profits lost due to Gibbs' alleged breach; (6) $ 50,000 in punitive

damages; and (7) pre-judgment interest.

Gib bs answered that Moore committed the first breach by

abandoning performance, and that Moore failed to mitigate his

damages because he refused to sell materials purchased for the job

to Gibbs. Therefore, Gibbs claimed entitlement to an offset for

more than the damages claimed by Moore. Gibbs further answered

that unambiguous subcontract lang uage imposed upon Moore the

obligation an d expense of selecting an appropriate method of5

surface selection, and that the contract specifications

contemplated the extent of surface preparation requ ired at the

Tyler House.

Moore demanded a jury trial and the case was initially set for

October 1994. In early October 1994, the parties signed a pretrial

order and trial was reset for March 1995. The pretrial order was

entered on October 18, 1994.

On October 14, 1994, the district court received Gibbs' motion

to limit evidence and for leave of court. On November 4, Moore

also moved to limit evidence and for leave of court. On December

20, the district court heard argument on the parties' cross-motions

to limit evidence.

On January 13, 1995 the district court issued a lengthy order:

(1) determining that Mississippi law applied; (2) excluding all of

Moore's evidence; and (3) d eclining to recognize any offset

recovery in favor of Gibbs. On January 18, 1995, after a hearing

on Moore's request that the district court reconsider its January

13 ruling, the district court announced that it would enter final

judgment in seven days unless the parties settled.

On February 27, 1995, the district court entered an order sua

sponte "dismissing" the case. The February 27 order clarified that

the district court had intended to deny all o f Moore's claims in

its January 13 or der. The February 27 order further stated that

the rights and liabilities of all parties had been fully

adjudicated, and ordered entry of final judgment in accordance with6

Federal Rule of Civil Procedure 58. Final judgment was entered

March 1, 1995. Moore filed a timely notice of appeal.

On March 6, after fin al judgment was entered, the district

court entered an order, sua sponte taking notice that the evidence

excluded by its January 13 order was not part of the record. The

March 6 order required the parties to submit copies of the excluded

evidence by March 10, 1995.

Moore raises three main issues on appeal. First, Moore

challenges the procedure employed by the district court, arguing

that his case was thrown out of court without adequate notice and

without a fair hearing. Second, Moore contends that the district

court erroneously determined that the entire dispute was governed

by Mississippi law because his Miller Act claims are governed by

federal law s tandards that displace state law. Third, Moore

contends that the findings made by the district court in the

January 13 order are erroneous.

MOORE'S PROCEDURAL CHALLENGES

The district court entered judgment s ua sponte , and as a

matter of law, before trial. There were no motions to dismiss or

for summary judgment docketed in the case. Neither the district

court's January 13 order nor the district court's February 27 order

mention Federal Rule of Civil Procedure 12 or Federal Rule of Civil

Procedure 56. Instead, the district court's disposition is based

entirely upon its analysis of the parties' cross-motions to limit

evidence. The February 27 order directing the entry of judgment

simply clarified that the district court intended, by the January7

13 order, to deny all of Moore's claims for relief because the

rights and liabilities of the parties were adjudicated at that

time.

Moore argues that the district court used improper standards

to evaluate the admissibi lity of the parties' evidence and then

improperly granted judgment as a matter of law without fair notice.

Gibbs responds that the district court properly decided the crossmotions to limit evidence on the basis that parole evidence was not

admissible to contradict the unambiguous terms of the subcontract.

Gibbs further argues that once all of Moore's evidence was

excluded, the district court was within its authority to enter

summary judgment sua sponte , because there were no genuine issues

of material fact for trial.

The district court's January 13 order does no t evaluate the

admissibility of the evidence in terms of traditional evidentiary

principles. Instead, the district court purported to be deciding:

(1) which party breached the contract; and (2) what money was owed

to each party. As part of that determination, the district court

decided key factual issues in favor of Gibbs, then concluded that

Moore's evidence was not relevant because he was not entitled to

prevail. In the context of conflicting evidence, the court made

"findings" that: (1) the site condition did not differ from that

contemplated by the contract; (2) the required surface preparation

was contemplated by the contract; (3) the adhesion problem was not

latent and could have been discovered by Moore at the time he bid

t he job; and, of utmost importance to the district court's8

disposition, (4) that Moore never properly requested a change

order.

At the conclusion of the lengthy order, the district court

excluded Moore's evidence on virtually every issue, including: (a)

whether Moore performed e xtra-contractual work; (b) whether the

problem encountered by Moore required extra-contractual surface

preparation; (c) Moore's claim for lost profits; (d) Moore's Miller

Act claims for labor and materials; and (e) Moore's claim for

attorney fees. The district court also reached the following legal

conclusions: (1) that Gibbs' decision to withhold Moore's September

progress payment was not a material breach of contract; (2) that

Moore did not encounter a differing site condition; and (3) that

Moore was not entitled to reimbursement for labor and materials

under the Miller Act.

Gibbs argues that the district cour t properly excluded

evidence extrinsic to the unambiguous terms o f the written

subcontract, apparently trying to invoke the parole evidence rule.

Although the district court briefly mentions the unambiguous nature

of the subcontract, most of the district court's exclusions are not

supported by application of the parole evidence rule. For example,

the district court excluded evidence relating to Moore's claim for

lost profits because Moore "faile d to properly document such

claim." The district court also excluded evidence relating to

Moore's Miller Act claims based on the legal and factual conclusion

that Moore failed to mitigate his damages as required by

Mississippi law.9

Only the district court's ex clusion of Moore's evidence

relating to his claim for extra-contract ual work, and his claim

t hat the adhesion problem constituted a differing site condition

are even potentially supported by the parole evidence rule. As to

those claims, however, the district court still applied incorrect

standards. First, the district court did not limit its

consideration to contract terms. Instead it mentions evidence

extrinsic to the contract, and reaches a result that excludes only

evidence offered by Moore. Second, Mississippi's parole evidence

rule provides only that parole evidence is not admissible to vary

the terms of an unambiguous contract. M I SSISSIPP I C O DE § 75-2-202

(1981). The statutory rule does not operate to exclude evidence

bearing on the parties' course of p erformance. I d

. at § 75-2-

202(a). Moore's evidence relating to whether he requested a

written change order, and whether he was fully paid for work

already completed und er the subcontract, clearly falls into that

category. Finally, the parole evidence rule does not exclude

evidence relating to a parties claim of fraud or misrepresentation

in the making of the contract. Nichols v. Shelter Life Ins. Co.

,

923 F.2d 1158 , 1163 (5th Cir. 1991). Moore offered evidence to

support his contention that both Gibbs and the Air Force had made

specific pre-contract representations to himabout the extent of

surface preparation required by the subcontract. That evidence

would not be excluded by the parole evidence rule.

Our Circuit has consistently required careful review when

categories of evidence are excluded wholesale on the basis of10

pretrial motions. E .g.

, Kelly v. Petroleum Svcs.

, 61 F.3d 350, 357

(5th Cir. 1995) ("We agree with other circuits that an appellate

court should carefully examine blanket pretrial evidentiary

rulings."); Jackson v. Firestone Tire & Rubber Co.

, 788 F.2d 1070,

1084 (5th Cir. 1986) (pretrial blanket exclusion of evidence caused

artificial and unreasonable results). The district court's order

fails to articulate a cohesive theory to support the exclusion of

virtually all of Moore's evidence.

Nor is the district court's disposition salvaged by a summary

judgment analysis. "District courts can enter summary judgment s ua

sponte so long as the losing party has ten days notice to come

forward with all of its evidence." W ashington v. Resolution Trust

Corp. , 68 F.3d 935, 939 (5th Cir. 1995). Given the circumstances

of this case, however, the district court failed to afford proper

notice. Further, even if notice had been proper, there is no

indication that the district court adhered to the rigid standards

mandated by Federal Rule of Civil Procedure 56.

On January 18, 1995, the district court informed the parties

that it intended to enter judgment, abs ent settlement, in seven

days. The court waited more than the required ten days before

ordering the entry of judgment on February 27, 1995. But summary

judgment was actually decided on the basis of the January 13 order

excluding all of Moore's evidence. Therefore, Moore had no

opportunity, either before or after that date, to sup plement the

record with knowledge that an adverse judgment would be the11

con sequence for failure to do so. The district court failed to

provide Moore with adequate notice.

Moreover, the district court's February 27 memorandum order is

not framed in term s of Rule 56's requirement that there be no

genuine issue of fact. Instead, the order states that the parties'

rights have been adjudicated. Further, the February 27 order

relies solely upon the January 13 order, which clearly decided

several disputed issues of fact in Gibbs' favor.

The incomplete state of the appellate rec ord compounds the

difficulty of our inquiry and, we can only surmise, must also have

affected the district court's disposition. Many important

docum ents were docketed late or not at all. For example, Gibbs'

motion to limit evidence was received by the district court on

October 14, 1994, but not filed with the clerk's office until two

months later, on December 21, 1994. Moore's response to that

motion, which is cited in the record and in the parties' briefs on

appeal, is not docketed and does not actually appear in the record.

In addition, the record and briefs on appeal indicate that both

parties filed l engthy memoranda in support of their respective

cross-motions to limit evidence. Those documents are likewise not

docketed and do not appear in the record. It is thus impossible to

tell what was before the district court at any given time. Indeed,

two days after judgment was entered, the district court entered

another order, sua sponte taking notice of the fact that the

evidence excluded by the January 13 order, and made the basis of

final judgmen t in the February 27 order, was not part of the3 Moore also argues that the cross-motions to limit evidence

were untimely and barred by the pretrial order's joint stipulation

that the evidence at issue was admissible. The district court's

d isposition was improper regardless of whether the motions were

properly before the court. Therefore, we need not reach those

issues.

12 record. On the other hand, items that should never have been part

of the record, a hand-edited excerpt from a rough-draft of an

appellate brief for example, did make it into the record.

Taken together, the procedural anomalies identified by Moore

and the incomplete state of the record require that the case be

remanded for reconsideration in light of cont rolling evidentiary

principles, and with reference to the standards articulated in the

Federal Rules of Civil Procedure for granting judgment as a matter

of law prior to trial. 3

APPLICABLE LAW

Moore also contends that the district court erroneously

deter mined that the entire dispute was controlled by Mississippi

law. We agree. Federal law controls Miller Act claims. U nited

States ex rel. General Elec. Supply, Inc. v. Wiring, Inc.

, 646 F.2d

1037, 1042 (5th Cir. 1981). State law can be relied upon to fill

the interstices only when there are no applicable federal

standards. E .g.

, United States ex rel. Lochridge-Priest, Inc.

, 950

F.2d 284, 287-88 (5th Cir. 1992).

The district court determined that all of Moore's substantive

claims were governed by Mississippi law. For example, the district

court entered judgment on Moore's claim for attorney fees because

there is "no legitimate basis in Mississippi law" for such an13

award. The Supreme Court has expressly held that federal law

controls the availability of attorney fe es in Miller Act cases.

F.D. Rich v. United States ex rel. Indus. Lumber Co.

, 94 S. Ct.

2157, 2164 (1974). Although the American Rule generally prohibits

fee shift ing, fees may be awarded to a prevailing party when the

opponent acts in "bad faith, ve xatiously, wantonly, or for

oppressive reasons." I d

. at 2165. The district court's

application of Mississippi law to determine attorney's fees was in

error. Similarly, the district court applied Mississippi law

instead of federal law to determine whether Moore could recover for

extra-contractual work performed to correct adhesion problems.

Miller Act claimants have been allowed to recover in quantum meruit

for work that benefits the prime contract, even when the work

performed falls outside the claimant's subcontract. H ensel Phelps

Constr. Co. v. United States ex rel. Reynolds Elec. and Eng'r Co.

,

413 F.2d 701 (10th Cir. 1969). On remand, the district court

should take care to ensure that federal law is applied, where

available, to Moore's Miller Act claims.

CONCLUSION

The incomplete state of the record and the procedure employed

b y the district court make it impossible for us to pr ovide a

meaningful review of the district court's decision.4 This disposition makes it unnecessary for the Court to

consider Moore's remaining argument that the district court's fact

findings on the merits were clearly erroneous. We note, however,

that there appear to be substantial fact questions concerning

whether the adhesion problems encountered by Moore fall within the

scope of the contract as written.

14 Accordingly, the judgment entered in favor of the defendants

is VACATED and the case REMANDED to the district court for further

proceedings consistent with this opinion. 4