Jesco Operating, L.P. v. Hess Corporation

402 S.W.3d 320, 2013 WL 2180741, 2013 Tex. App. LEXIS 6193
Court of Appeals of Texas·Decided May 21, 2013·No. 14-11-00843-CV·Published·Cited by 1 cases

Opinion

OPINION

MARTHA HILL JAMISON, Justice.

Jesco Operating, L.P. appeals from a take-nothing judgment favoring Hess Corporation. Jesco sued Hess for breach of a pipeline construction contract and fraudulent inducement, and Hess counterclaimed, seeking an offset for Jesco’s own breach of the same contract. A jury declined to find either party liable on any theory submitted. The trial court entered judgment in accordance with the verdict. On appeal, Jesco contends that the jury’s verdict is not supported by legally and factually sufficient evidence. We affirm.

I. Background

Hess accepted Jesco’s $1.4 million bid to build a gas pipeline as part of a gas field expansion project near Seminole, Texas. As the March 31, 2009 completion deadline neared, it became clear that Jesco would not be able to finish the project on time. Jesco pointed to problems with a company employed by Hess to lay liner for the pipeline as the cause for the delays. Jesco therefore asked that Hess issue a new work order for sums above the agreed contract price to pay for work Jesco claimed was beyond the scope of the project as bid. Hess denied that request, apparently blaming cost overruns on Jes-co’s having damaged other pipelines in the project area during construction. Jesco then filed suit against Hess.

On April 16, 2009, representatives of the two companies, primarily Jesco’s owner Allan Williamson and Hess’s project manager Brock Hajdik, met to discuss the dispute. Based on agreements reached at this meeting, the parties signed a supple *322 mental letter agreement on April 24, 2009 that expressly amended the original contract. Under the supplemental agreement, Jesco agreed to dismiss its lawsuit and to finish the pipeline “at a ‘cost basis’ without uplift or increase” as was to be reflected in a “revised rate sheet.” The agreement left open the process for creating the new rate sheet, but the agreement reaffirms Hess’s right of audit, as contained in the original agreement, and requires that Jesco “provide to Hess on demand all relevant documents in support of the cost basis.” Hess also agreed to pay Jesco an additional $289,000 for work Jes-co already had completed. It was undisputed that the purpose of the letter agreement was to “wipe the slate clean” between the two companies going forward.

Thereafter, Jesco continued working on construction of the pipeline, and new disputes arose as to the “at cost” rates Hess was to pay for Jesco’s labor and equipment. Hess did not dispute that Jesco was entitled to recoup as costs some of its overhead on the project, but expressed frustration at the lack of documentation Jesco provided regarding the rates used on its invoices. The parties never agreed to a rate sheet as contemplated in their supplemental agreement. At one point, project manager Hajdik sent Hess employee Edward DelaO to Jesco’s local office to collect data on Jesco’s labor costs. According to Hajdik, the key disputes regarding labor costs included a lack of substantiation of rates and hours worked as well as how to account for Jesco’s overhead costs.

Hess paid on only four invoices after April 17, 2009, the point at which the “slate” had been “wiped clean.” All four invoices were for equipment costs. Hess did not pay any invoice earmarked for labor costs.

Three of the equipment invoices were ostensibly “pass through” invoices wherein Jesco was to simply pass along the cost identified in a third-party, equipment rental invoice it had received. Hess also paid part of a fourth invoice that was disputed. This payment came after a series of emails and telephone conversations principally between Williamson and Hajdik on the question of rates. Williamson recorded a June 17, 2009 telephone conversation in which Sam Hakes, a local supervisor for Hess on the project, joined the call with Hajdik and indicated that certain equipment charges on the invoice were in error. At the conclusion of the phone call, Williamson agreed to amend the invoice as requested, and Hajdik agreed to pay it. Hajdik testified at trial, however, that in an earlier telephone call that same day, he had reserved the right to further review the equipment charges, and upon further review, Hakes discovered additional problems with the charges. According to Haj-dik, he subsequently agreed to pay only what Jesco could substantiate at the time, and Williamson agreed to accept that payment. Hajdik further explained that he agreed to make the payment without adequate substantiation because he knew Jes-co needed the funds to pay employees and continue in operation.

When Hess refused to pay later invoices, Jesco quit working on the pipeline and filed the present lawsuit. Hess then paid another pipeline construction company, Ferguson Construction, to finish the project. Hess’s position at trial was that when it finally audited Jesco’s books (during the litigation), it determined that Hess had overpaid by so much on the equipment invoices, above Jesco’s actual costs, that it had “covered” the amounts due for Jesco’s labor costs, without ever having paid a *323 penny specifically earmarked for labor. 1 Hess additionally argued at trial that it was entitled to offset the amounts paid to Ferguson against any amounts it might be found to owe Jesco. As discussed in detail below, Jesco makes numerous arguments as to why Hess’s numbers are incorrect. Jesco places particular emphasis on statements by Hajdik that it claims were admissions that Hess still owes Jesco under the agreement.

Although the jury was given a rather lengthy charge, it answered only two questions. In response to Question 1, the jury answered “No” when asked if Hess failed to comply with the agreement by failing to pay the “full amount” it agreed to pay for the services provided by Jesco. In response to Question 18, the jury again answered “No” when asked whether Jesco failed to comply with the agreement by failing to complete its work on the pipeline.

On appeal, Jesco contends that the evidence conclusively demonstrated that Hess failed to pay Jesco all it owed and thus Hess failed to comply with the agreement. Jesco additionally argues that its damages and attorney’s fees were conclusively proven, and in the alternative, the jury’s verdict is against the great weight and preponderance of the evidence, necessitating a remand for a new trial. Hess does not contest any jury finding or any part of the trial court’s judgment.

II. Standards of Review

In its three issues, Jesco challenges the sufficiency of the evidence to support the jury’s negative response to Question 1 regarding whether Hess failed to comply with the supplemental agreement by failing to pay the full amount due to Jesco under the agreement. In challenging the legal sufficiency of the evidence, Jesco must establish that the evidence conclusively demonstrated that Hess failed to pay the full amount it was required to pay under the agreement. See Dow Chem. Co. v. Francis, 46 S.W.3d 237, 241-42 (Tex.2001). In considering a legal-sufficiency challenge, we view the evidence in the light most favorable to the fact finding, crediting favorable evidence if reasonable persons could, and disregarding contrary evidence unless reasonable persons could not. City of Keller v.

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Jesco Operating, L.P. v. Hess Corporation, 402 S.W.3d 320, 2013 WL 2180741, 2013 Tex. App. LEXIS 6193 (Tex. Ct. App. 2013).

402 S.W.3d 320 (Jesco Operating, L.P. v. Hess Corporation) — published by Counsel Stack Legal Research, free access to 12M+ legal documents.

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