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

Heading: Chevron versus Kona

Text: Chevron claims that the district court erred when it declared that Kona was entitled to recover 50% of Chevron’s judgment from the Railroads, or in the alternative, 50% in quantum merit due to Section 20 overcharges.3 Kona also contends that Chevron breached its fiduciary duty as an agent because Chevron did not authorize Kona to sue the Railroads for Section 20 violations. As such, Chevron maintains that Kona forfeited any recovery that Chevron collected from the Railroads for Section 20 violations.
Chevron failed to include these issues in the parties' Joint Pre-Trial Order, and it now raises them for the first time on appeal. “It is a well-settled ruled that a joint pretrial order signed by both parties supersedes all pleadings and governs the issues and evidence to be presented at trial.” 3 The amount the district court awarded Kona was $6,846,173.00 which is half of the initial $13,692,346.00 that the district court awarded Chevron on its breach of contract claim against the Railroads for Section 20 violations. 11 McGehee v. Certainteed Corp., 101 F.3d 1078, 1080 (5th Cir. 1996); Branch-Hines v. Herbert, 939 F.2d 1311, 1319 (5th Cir. 1991). The claims, issues, and evidence are narrowed by the pretrial order to expedite the proceeding. Elvis Presley Enterprises, Inc. v. Capece, 40 F.3d 188, 206 (5th Cir. 1998). Once the pretrial order is entered, it controls the scope and course of the trial. See Fed.R.Civ.Proc. 16. If a claim or issue is omitted from the order, it is waived, even if it appeared in the complaint. Elvis, 40 F.3d at 206; Valley Ranch Dev. Co. v. FDIC, 960 F.2d 550, 554 (5th Cir.1992); Flannery v. Carroll, 676 F.2d 126, 129 (5th Cir.1982). Because Chevron omitted its claims of breach of fiduciary duty and forfeiture from the joint pre-trial order, they are waived.
Chevron claims that the district court erred when it ruled that Kona was entitled to 50% of its recovery from the Railroads for Section 20 violations. The interpretation of a contract is a question of law which we review de novo. Nautilus Insurance Co. v. Zamora, 114 F.3d 536, 538 (5th Cir. 1997). The Freight Bill Audit Agreement provides: Chevron shall pay contractor (Kona) a percent of the actual amounts collected from the carriers, including interest, when paid, according to the percentages agreed upon as shown on Attachment A of this contract. . (parenthetical added). Attachment “A” specifies that Chevron shall pay the contractor (Kona) 50% of the actual claim collected. The agreement also essentially provided an at-will termination clause with a 60-day written notice requirement. Thus, the agreement created a limited agency relationship between Kona, the agent, and Chevron, the principal. Essentially, Chevron argues that Kona is not entitled to any percentage of its recovery from the Railroads because the audit work that Kona performed under the January 1, 1991 Freight Bill 12 Audit Agreement did not result in the collections of any overcharges prior to Chevron terminating the agreement on April 28, 1993. In other words, Chevron apparently argues that any collections for overcharges due to Sect ion 20 violations resulted from its own efforts to pursue its cross-claim against the Railroads. Because Kona sued the Railroads for Section 20 violations after Chevron terminated the agency relationship on April 28, 1993, Chevron contends that Kona is not entitled to any percentage of its recovery from the Railroads. An agent who has not breached the terms of the contract may recover fees and commissions provided under the contract before the transaction is consummated. See Ramesh v. Johnson, 681 S.W.2d 256, 259 (Tex. App–Houston [14th Dist.] 1994, writ ref’d n.r.e.). Thus, a principal’s termination of an agency agreement for reasons other than breach of contract before the underlying transaction is consummated does not ipso jure preclude an agent from recovering fees or commissions provided under the express language of the agreement. See id. at 259; Goodwin v. Gunter, 109 Tex. 56, 185 S.W. 295, 296 (Tex. 1916). In the instant case, Chevron did not allege in the joint pre-trial order that Kona was in breach of the Freight Audit Bill Agreement nor did the district court find that Kona breached the agreement by bringing suit against the Railroads. Furthermore, Kona made several attempts prior to the termination of the Audit Agreement to notify Chevron of possible Section 20 violations. In February 1993, Kona sent a letter to Chevron stating that a “possible violation of Section 20 has occurred.” In March 1993, Kona made two attempts to notify Chevron of possible Section 20 violations. Kona suggested that Chevron review its freight bill records for bills sent by the Railroads because the bills on their face may indicate lower rates that the Railroads charged other shippers. Kona also informed Chevron that another shipper of plastic resins was receiving a lower rate from the Railroads for 13 shipments to Virginia. In May 1993, Kona made a written certification request to the Railroads pursuant to Section 20 of Contract 6018. The Railroads responded that the request would not be recognized because Kona was not a proper party to make the request. Chevron officials orally and in writing disagreed with the Railroads’ assessment and later that same day made a Section 20 certification request with the Railroads. Although Chevron purports that it did not act on Kona’s recommendations regarding Section 20 violations until after the Audit Agreement was terminated, Chevron’s recovery for Section 20 violations was related to overcharges that occurred during the existence of the audit freight agreement. Kona was the only company that performed freight bill audits to detect Section 20 violations for Chevron. Furthermore, our review of the Audit Agreement does not indicate that the collection of the overcharges due to Section 20 violations must have occurred before the contract was terminated in order for Kona to be compensated by Chevron. Under these circumstances, the district court did not err when it found that Kona was entitled under the Audit Agreement to half of Chevron’s recovery due to Section 20 overcharges notwithstanding that the collection of overcharges did not occur during the existence of the Audit Agreement. In the alternative, the district court’s alternative judgment awarding 50% in quantum meruit was not erroneous. Quantum meruit is an equitable remedy which does not arise out of a contract and is independent of it. See Vortt Exploration Co., Inc. v. Chevron U.S.A., 787 S.W.2d 942, 944 (1990)(citing Colbert v. Dallas Joint Stock Land Bank, 129 Tex. 253, 102 S.W.2d 1031, 1034 (1937)). Recovery in quantum meruit will be had when non payment for the services rendered would “result in an unjust enrichment to the party benefitted [sic] by the work.” Id. (citing City of Ingleside v. Stewart, 554 S.W.2d 939, 942 (Tex. Civ. App.–Corpus Christi 1977, writ ref’d n.r.e.)). To recover under quantum meruit, a claimant must prove that: 14 1) valuable services were rendered or materials furnished; 2) for the person sought to be charged; 3) which services and materials were accepted by the person sought to be charged, used and enjoyed by him; 4) under such circumstances as reasonably notified the person sought to be charged that the plaintiff in performing such services was expecting to be paid by the person sought to be charged. See id.; Bashara v. Baptist Memorial Hospital System, 685 S.W.2d 307, 310 (Tex. 1985). In the instant case, the trial record reveals that Chevron was benefitted by Kona’s audits of the Railroads rates awarded to Chevron’s competitors. The trial record supports the trial court’s finding that “[t]hroughout this controversy and even through the trial of this case, Kona [was] the only company to perform the audit [on] the freight bills of Chevron Chemical under Master Contract 6018 for Section 20 purposes.” Additionally, it was reasonable for Chevron to expect that Kona would seek compensation for the auditing services that Kona rendered. Finally, the trial court’s judgment in favor of Chevron against the Railroads was predicated on Section 20 violations under Contract 6018. Therefore, the trial court’s alternative judgment based on quantum meruit for 50% of Chevron’s recovery for Section 20 violations against the Railroads was proper.