Opinion ID: 21694
Heading Depth: 2
Heading Rank: 1

Heading: Kona’s Claims

Text: Kona claims that the district court erred because the court precluded Kona from presenting evidence regarding the proper interpretation of Section 20 of the shipping agreement between Chevron and the Railroads. Kona claims also that the district court erred when it precluded Kona from presenting evidence to show the amount of overcharge Chevron was entitled to receive from the Railroads due to Section 20 violations. Finally, Kona claims that the district court improperly denied its request for attorneys’ fees. The district court in a pretrial ruling dismissed Kona’s contractual claim against the Railroads because Kona was not a signatory to the shipping agreement between the Railroads and Chevron. As such, the Railroads and Chevron maintain that the district court properly barred Kona from presenting evidence regarding Section 20 violations to prove damages because Kona was not a party to the shipping contract between Chevron and Railroads. In other words, the Railroads and Chevron assert that only the parties to the shipping agreement may present evidence regarding damages for Section 20 violations. Chevron also contends that the district court correctly denied Kona’s request for attorneys’ fees. A. Exclusion of Evidence on Section 20 Violations and Damages We review a district court's decision to admit or to exclude evidence under the abuse of discretion standard. See United States v. Wallace, 32 F.3d 921, 927 (5th Cir.1994). Thus, we will not reverse a district court's evidentiary rulings unless substantial prejudice results to the complaining 7 party. See Fed. R. Evid. 103(a); Munn v. Algee, 924 F.2d 568, 573 (5th Cir.), cert. denied, 502 U.S. 900, 112 S.Ct. 277, 116 L.Ed.2d 229 (1991). The burden of proving substantial prejudice lies with the party asserting error. FDIC v. Mijalis, 15 F.3d 1314, 1318 (5th Cir.1994). Because this case comes to us under diversity jurisdiction, we are Erie bound to apply Texas substantive law. In order for any litigant to maintain a suit it is necessary that he have standing to litigate the matters in issue. Hunt v. Bass, 664 S.W.2d 323, 324 (Tex. 1984). Generally, only parties to a contract may sue to enforce the rights provided in the four corners of the agreement. However, it is well settled that a person who is not a party to a contract may nevertheless have standing to enforce the contract if it was made for that person’s benefit. See Paragon Sales Co., Inc. v. New Hampshire Ins. Co., 774 S.W.2d 659, 661 (Tex.1989); Knox v. Ball, 144 Tex. 402, 191 S.W.2d 17, 23-24 (1945); see also Texas State Employees Union/CWA Local 6184 A.F.L.C.I.O. v. Texas Workforce Commission, 16 S.W.3d 61, 67 (Tex. App. –Austin 2000); Barnes v. Wendy's Int'l, Inc., 857 S.W.2d 728, 730-31 (Tex.App.--Houston [14th Dist.] 1993, no writ); Gonzalez v. City of Mission, 620 S.W.2d 918, 922 (Tex.App.--Corpus Christi 1981, no writ). Kona does not refer to any contractual language in the shipping agreement between Chevron and the Railroads that indicates that Kona was an intended third party beneficiary to the agreement. Furthermore, our independent review of the shipping agreement at issue does not reveal any language that suggests that Kona was intended to be a beneficiary of the rights created under the agreement. Additionally, in Kona’s proffer before the district court during the final hearing on damages, Kona did not refer the court to any language in the shipping agreement between the Railroads and Chevron that would indicate that it was an intended beneficiary of the agreement. Nonetheless, Kona refers the court to Texas caselaw to buttress its claim that it has a 8 justiciable interest in the shipping agreement between Chevron and the Railroads. However, the principal cases that Kona refers to involve statutes that created standing. See Lokey v. Texas Methodist Foundation, 479 S.W.2d 260 (Tex. 1972)(Article 7425b–39 of the Texas Trust Act created standing for any person affected by or having an active interest in the administration of the trust estate); Maurer v. Sayre, 833 S.W.2d 680, (Tex. App. –Fort Worth 1992)(Tex. Prob.Code Ann. §§ 10, 3(r) provides that any person interested in an estate has standing to be heard in a probate proceeding); In re Rasco, 552 S.W.2d 557 (Tex. Civ.App. – Dallas 1977)(a surety is an interested person under section 408(a) under the Texas Probate Code). Kona does not argue that it is entitled to standing by statute. Although the amount of Kona’s recovery under its contract with Chevron was affected by the amount Chevron recovered from the Railroads under the shipping agreement, Kona does not show that the right s est ablished under the shipping agreement were intended to benefit Kona. As such, the district court did not abuse its discretion when it precluded Kona from introducing evidence to establish breach of contract and damages under the shipping agreement between the Railroads and Chevron.1 B. Kona’s Request for Attorneys’ fees Kona claims that because it prevailed against Chevron at trial, the district court erred when it denied Kona’s request for attorneys’ fees. Kona points the court to sections 37.009 and 38.001 of the Texas Civil Practice and Remedies Co de to supports its claim of attorneys’ fees. Section 37.009, which is under the Texas Declaratory Judgment Act, provides that the court “may” award attorneys’ fees. Bocquet v. Herring, 972 S.W.2d 19, 20 (Tex. 1998). Thus, trial courts are afforded 1 Because we find that Kona does not have standing to assert claims under the shipping agreement between Chevro n and the Railroads, we need not review Kona’s claim that the district court erroneously interpreted the agreement. 9 discretion in deciding whether to award attorneys’ fees or not. Commissioners Court v. Agan, 940 S.W.2d 77, 81 (Tex. 1997); Barshop v. Medina County Underground Conservation Dist., 995 S.W.2d 618, 637-38 (Tex. 1996). Section 38.001 provides that a party “may” recover reasonable attorneys’ fees in suits based upon a written contract. See Stable Energy v. W.B. Newberry, 999 S.W.2d 538, 556 (Tex.App. –Austin 1999); Budd v. Gay, 846 S.W.2d 521, 524 (Tex.App. Houston [14th Dist.] 1992, no writ). If a party prevails in his or her breach of contract claim and recovers damages, he or she is entitled to attorneys’ fees. See Green Int’l, Inc. v. Solis, 851 S.W.2d 384, 390 (Tex. 1997)(emphasis added). Thus, attorneys’ fees under section 38.0001 are mandatory.2 Kona is not entitled to attorneys’ fees under Section 38.001 because Kona’s judgment and recovery against Chevron were not based on a finding of breach of contract. Our review of the trial court’s conclusions of law does not reveal a finding of breach committed by Chevron. The trial court stated that “Kona is entitled under its Freight Bill Audit Agreement to a declaration of its right to receive fifty percent (50%) of the actual amounts collected by Chevron Chemical . . . from the railroads, or alternatively, fifty percent (50%) in quantum meruit (with interest), due to the Section 20 overcharge.” (parentheticals in the original). Because the district court found in favor of Kona based on its declaratory action, Kona does not prove that the court erred when it declined to award attorneys’ fees under Section 38.001. 2 Because section 37.009 provides that the court “may” award attorneys’ fees and section 38.001 provides that a party “may” recover attorneys’ fees, it appears counterintuitive to construe the former as discretionary and the latter as mandatory. However, notwithstanding that 38.001 uses the term “may,” the Texas Supreme Court has declared that attorneys’ fees under section 38.001 are not discretionary. See Bocquet, 972 S.W.2d at 20 (“Statutes providing that a party ‘may recover,’ ‘shall be awarded,’ or ‘is entitled to attorneys’ fees are not discretionary.’”). As such, we are Erie bound to adhere to the state high court’s interpretation. 10 Regarding an award of attorneys’ fees under section 37.009 of the Declaratory Act, a prevailing party is not entitled to attorneys’ fees simply as a matter of law. United Loans, Inc. v. Pettijohn 955 S.W.2d 649. “Entitlement depends upon what is equitable and just and the trial judges’s power is in that respect discretionary.” Id. at 654 (citing Worford v. Stamper, 801 S.W.2d 108, 109 (Tex. 1990)). In the instant case, the district court ruled that the attorneys’ fees should be determined by the contingency fee agreement between Kona and its counsel. Furthermore, the district court awarded Kona $138,255.91 for technology expenses Kona incurred to pursue the underlying litigation. Under these circumstances, Kona does show that the district court’s denial of attorneys’ fees in this respect was an abuse of discretion, inequitable, or unjust.