Intrastate Gas v. Dow Chemical Company

• Court: Court of Appeals for the Fifth Circuit
• Decided: January 29, 2001
• Docket: 99-20603
• Status: Unpublished

Opinion

UNITED STATES COURT OF APPEALS FOR THE FIFTH CIRCUIT _______________________________

No. 99-20603 _______________________________

INTRASTATE GAS GATHERING COMPANY; ET AL., Plaintiffs,

GRAYSON COUNTY JOINT VENTURE NO. 1 Plaintiff-Appellant,

v.

DOW CHEMICAL COMPANY; ET AL., Defendants,

DOW CHEMICAL COMPANY, Defendant-Appellee.

_________________________________________________________________

Appeal from the United States District Court for the Southern District of Texas Houston Division (C.A. No. H-92-1828) _________________________________________________________________ January 26, 2001

Before BARKSDALE AND BENAVIDES, Circuit Judges and VELA1, District Judge.

PER CURIAM2:

This case is a dispute between Grayson County Joint Venture

No. 1 (“appellant”) and Dow Chemical Company (“appellee”) over a

1 District Judge of the Southern District of Texas, sitting by designation. 2 Pursuant to 5th Cir. R. 47.5, the Court has determined that this opinion should not be published and is not precedent except under the limited circumstances set forth in 5th Cir. R. 47.5.4.

1 natural gas transportation agreement. In 1980, appellant’s

predecessor-in-interest, South Texas Gas Gathering Company, Inc.

(“South Texas”), entered into a contract with appellee titled the

Gas Transportation Agreement. This agreement was amended in

November of 1982. Under the agreement, South Texas was to pipe

gas from the area described in the contract to an interconnect

with another pipeline belonging to Texas Utilities Fuels Company

(“Tufco”). In return, appellee agreed to pay a fee based on the

amount of gas South Texas delivered to the interconnect from the

area described in the agreement.

In 1992, appellant, as successor-in-interest of South Texas,

brought suit against appellee for failure to pay a transportation

fee on some of the gas delivered to the interconnect. The

parties stipulated to the amount of gas on which no fee was paid,

but they disagree on whether a fee was actually owed on this gas.

Appellee argued that no fee was owed because it was delivered

from an area outside that described in the agreement. Appellee

also asserted, as an affirmative defense, that appellant had

waived any right to the fee.

The case was tried to a jury and, during the trial, the

district court made several decisions relevant to this appeal.

The district court excluded five of appellant’s exhibits on the

ground that they were irrelevant, included a question in the

charge that asked whether a “reasonable person” would understand

2 the agreement to apply to the disputed gas, submitted a second

question asking whether appellant waived its right to the fee,

and sent charts and graphs, not admitted into evidence, to the

jury room during deliberations.

The jury found that a “reasonable person” would not

understand the fee to apply to the disputed gas and that

appellant waived any right it had to the fee. Based on the

jury’s findings, the district court entered judgment that

appellant take nothing.

In this court, appellant argues that the contract

unambiguously applies to the disputed gas and therefore the

district court erred by failing to render judgment as a matter of

law in appellant’s favor. Further, appellant argues that there

was no evidence to support submission of the waiver question,

that the district court erred by sending charts and graphs not

admitted into evidence to the jury room during deliberations,

that the district court erred by excluding five of its exhibits

on the ground they were irrelevant, and that submission of the

question asking whether a “reasonable person” would find the

agreement to apply to the disputed gas was error.

I.

The first issue is whether the district court erred by

failing to render judgment as a matter of law in appellant’s

favor. Appellant argues that the transportation agreement

3 unambiguously applies to the disputed gas and, therefore, the

district court should not have submitted this issue to the jury.

The district court may grant a motion for judgment as a matter of

law where there is no legally sufficient basis for the jury to

find against the movant on that issue. See Fed R. Civ. P.

50(a)(1). However, the party seeking judgment as a matter of law

must move for judgment “before submission of the case to the

jury.” Id. at 50(a)(2). “Where a party has failed to preserve

the issue of sufficiency of the evidence for appellate review by

moving for judgment as a matter of law,” we must limit our

inquiry to “whether there was any evidence to support the jury's

verdict, irrespective of its sufficiency.” Great Plains

Equipment, Inc. v. Koch Gathering Systems, 45 F.3d 962, 968 (5th

Cir. 1995). There was ample evidence in the record on which the

jury could base its decision that appellant had waived its right

to the fee and that the agreement did not apply to the gas on

which no fee was paid.

II.

The district court’s charge asked whether appellant had

waived its right to the fee. Appellant argues that there was no

evidence to support submission of this question. In a diversity

case involving a dispute over a contract, this Court must apply

the substantive law in which the district court sits. See

Godchaux v. Conveying Techniques, Inc., 846 F.2d 306, 314 (5th

4 Cir. 1988). Under this rule, Texas contract law applies to the

instant case. However, this Court applies a federal standard for

determining whether the evidence is sufficient to create a jury

question. See Atchison, Topeka and Santa Fe Railway Company v.

Sherwin-Williams Company, 963 F.2d 746, 749 (5th Cir. 1992).

Evidence is sufficient to support a jury’s finding if taking all

the evidence and reasonable inferences that can be drawn from

that evidence, “a reasonable person could have made such a

finding.” Id. So, while Texas law defines the defense of

waiver, federal law determines whether the evidence is legally

sufficient to support a finding of waiver.

Waiver is an affirmative defense and can be asserted against

“a party who intentionally relinquishes a known right or engages

in intentional conduct inconsistent with claiming that right.”

Tenneco Inc. v. Enterprise Products Co., 925 S.W.2d 640, 643

(Tex. 1996). Silence or inaction for a long period of time can

constitute waiver. See id. For example, in Tenneco Inc. v.

Enterprise Products Co., the plaintiff waived his right to daily

delivery of the amount of gas specified under a contract because

for three years the plaintiff failed to complain about shortages

in the supply. Id. In the instant case, appellee offered

evidence that appellant failed to bill appellee for fees on the

disputed gas from 1984 to 1992. Also, appellee offered evidence

that Jack Wiewall, owner of appellant’s principal partner, was

5 aware the fees were not being billed and did not object to lack

of payment for several years. Therefore, there was some evidence

to support submission of a jury question on the affirmative

defense of waiver.

III.

Over appellant’s objection, the district court sent charts

and overlays that were not admitted into evidence to the jury

room during deliberations. This court reviews the decision to

send such demonstrative aids to the jury room for an abuse of

discretion. See Big John v. Indian Head Grain Co., 718 F.2d 143,

148 (5th Cir. 1983). The submission of materials, “whether or

not admitted in evidence,” to the jury during deliberations is

not error so long as the district court instructs the jury on the

proper use of the materials. Id. For example, in Big John v.

Indian Head Grain Co., the district court did not commit

reversible error where it submitted charts used in argument and

instructed the jury that “the chart is not the evidence . . . and

you will treat the chart just as you would treat the argument.”

Id. at 149. Here, the district court submitted charts and

overlays used as demonstrative aids during the trial with the

instruction that “those are not additional evidence,” and

“they’re like arguments, they’re just an illustration, and

they’re certainly not additional evidence of whatever they

represent.” Because the district court instructed the jury on

6 the proper use of the demonstrative aids, it did not commit

reversible error by sending them to the jury room during

deliberations.

IV.

The district court excluded appellant’s exhibits numbered 5,

10, 17, 27, and 28 on the ground they were irrelevant. We review

a district court’s decision to exclude evidence “under the

deferential abuse-of-discretion standard.” Kelly v. Boeing

Petroleum Services, Inc., 61 F.3d 350, 356 (5th Cir. 1995). We

will reverse a judgment based on the improper exclusion of

evidence “only where the challenged ruling affects a substantial

right of a party.” Johnson v. Ford Motor Co., 988 F.2d 573, 578

(5th Cir. 1993). An error does not affect a substantial right

“if the court is sure, after reviewing the entire record, that

the error did not influence the jury or had but a very slight

effect on its verdict.” EEOC v. Manville Sales Corp., 27 F.3d

1089, 1094 (5th Cir. 1994). After reviewing each excluded

exhibit and the record in this case, we are satisfied that the

exclusion of the exhibits did not affect a substantial right of

appellant.

A. Exhibit #5

Exhibit #5 is a note written by one of appellee’s employees

describing the “intent of the 11-4-82 Amendment” to the original

agreement. The exhibit states that the amendment changes the

7 calculation of the fee and describes the basis for its

calculation. This exhibit states only what is included in the

amendment itself. Since the amendment, and therefore the

information contained in exhibit #5, was admitted in evidence for

the jury to consider, the exhibit’s exclusion could not have

affected the jury’s verdict. Therefore, the trial court did not

abuse its discretion and reversal is not warranted based on the

exclusion of exhibit #5.

B. Exhibit #10

Exhibit #10 is a hand-written exchange between two of

appellee’s employees. In the note, one employee explains that

Tufco reimburses appellee for certain transportation fees. The

information contained in exhibit #10 was also included in the Gas

Purchase and Exchange Agreement which was admitted as a joint

exhibit for the jury to consider. Since the jury could consider

the information contained in exhibit #10, exclusion of the

exhibit could not have affected its verdict. The trial court did

not abuse its discretion and reversal of the judgment is not

warranted by exclusion of exhibit #10.

C. Exhibit #17

Exhibit #17 is a letter from appellee’s gas supply manager

to one of appellant’s owners that asks when a particular well can

be connected to the pipeline. This letter shows that appellant

piped certain gas for appellee, but this fact was never disputed.

8 The central issue in the case is whether appellee owed a fee on

that gas, not whether appellant piped gas for appellee. Since

exhibit #17 has nothing to do with the relevant issue, its

exclusion could not have affected the jury’s verdict. Thus, the

trial court did not abuse its discretion by excluding the

evidence and reversal is not warranted.

D. Exhibit #27 and exhibit #28

These two exhibits are letters between appellee, Tufco, and

a company called Enmark regarding the construction of a new

interconnect with Tufco’s pipeline. Appellant offered these

letters to prove that appellee had been wrongfully using

appellant’s interconnect with the Tufco pipeline. However, the

issue in the case is whether appellee owed a fee on gas appellant

delivered. The issue was not whether appellee owed money for

wrongfully using appellant’s interconnect. Because exclusion of

this evidence did not affect the jury’s verdict, the district

court did not abuse its discretion and reversal is not warranted.

The first question in the charge asks whether a “reasonable

person would understand the agreement to apply to gas delivered

to Tufco from the areas outside the original dedicated area?”

Appellant objected to the wording of this question on the ground

that use of an objective, third person standard was

inappropriate. This court reviews the wording of jury questions

9 “with deference and will only reverse a judgment when the charge

as a whole leaves us with substantial and ineradicable doubt

whether the jury has been properly guided in its deliberations.”

Concise Oil and Gas Partnership v. Louisiana Intrastate Gas

Corp., 986 F.2d 1463, 1474 (1993). However, the charge should

submit “the ultimate questions of fact” to the jury. Id. By

asking how a reasonable person would understand the agreement,

the question embraces an objective legal standard rather than a

factual question on whether the parties agreed that the fee would

apply to certain gas. The question does, however, embrace the

relevant issue and certainly does not leave us with “substantial

and ineradicable doubt” about whether the jury has been properly

guided. The use of an objective standard in the question is a

technical error that does not constitute reversible error.

CONCLUSION

Appellant has failed to move for judgment as a matter of law

so he cannot now seek rendition of judgment in its favor on the

contract. There was evidence to support submission of the waiver

question to the jury. The district court did not commit error by

submitting demonstrative aids to the jury during deliberations

along with appropriate instructions. The exclusion of the

exhibits because they were irrelevant did not affect a

substantial right of appellant. Finally, although technically

incorrect, the use of an objective legal standard in the first

10 question to the jury regarding the applicability of the agreement

does not constitute reversible error. Accordingly, we affirm the

judgment of the district court.