Mex-Tex Feeds Inc v. Cargill Incorporated

• Court: Court of Appeals for the Fifth Circuit
• Decided: March 26, 1998
• Docket: 19-60489
• Status: Unpublished

Opinion

IN THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT _______________

No. 97-20199 Summary Calender _______________

MEX-TEX FEEDS, INC; DARRELL HALL

Plaintiffs-Appellants,

v.

CARGILL INCORPORATED

Defendant-Appellee

DARRELL HALL; MEX-TEX FEEDS INC

Plaintiffs - Counter Defendants - Appellants

CARGILL INCORPORATED, ET AL

Defendants

Defendant - Counter Claimant - Appellee

_________________________

Appeal from the United States District Court for the Southern District of Texas (H-95-CV-292) _________________________

March 26, 1998

Before JONES, SMITH, and STEWART, Circuit Judges. JERRY E. SMITH, Circuit Judge:*

Mex-Tex Feed, Inc. (“Mex-Tex”), and Darrell Hall appeal a

judgment as a matter of law (“j.m.l.”) and an award of attorney's

fees and costs. Finding no error, we affirm.

I.

This diversity case, removed from state court, arises from the

death of several dairy cows in Aguascalientes, Mexico, on July 4,

1994. The central question is whether Mex-Tex introduced

sufficient evidence indicating that the deaths were caused by

defective feed supplied by defendant Cargill, Incorporated

(“Cargill”).

A.

In 1992, Mex-Tex and its owner, Darrell Hall, signed an

agreement to purchase cattle feed manufactured by Cargill, then

transport and resell it to dairy farmers in Mexico. The feedSSa

liquid supplement called “Synergy 20/20"SSderived its name from the

respective percentages of fat and protein (in the form of urea) in

the mixture. Mex-Tex's sales of Synergy 20/20 to Mexican farmers

began in early 1993.

* 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 R. 47.5, the court has determined that this opinion should not be published and is not precedent except under the limited circumstances set forth in 5TH CIR.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.

2 Mex-Tex soon fell behind in its payments to Cargill. In early

1994, Hall signed a promissory note to Cargill securing a personal

guaranty he had previously made. Although feed sales continued,

Mex-Tex remained in arrears. Finally, in December 1994, Cargill

demanded payment, triggering the instant lawsuit, filed by Mex-Tex

and Hall in January 1995.

Mex-Tex charged that Cargill had supplied it with defective

cattle feed that caused the cows' deaths.1 Mex-Tex alleged that

word of the deaths had spread quickly through the Mexican dairy

farming community and that, as a result, no farmers would buy

Synergy 20/20 from Mex-Tex, and its business collapsed. The flaw

in the feed, Mex-Tex argued, was separation: The fat content rose

to the top of the mixture in the tank, while the urea content

(potentially dangerous, in pure form, to the bovine system) sunk to

the bottom. According to Mex-Tex, when the cattle were fed from

spouts at the bottom of the tank, they ingested excessive urea,

causing sickness, then death. Mex-Tex contended that Synergy 20/20

was defective in that its chemical composition was prone to

separation when used in a humid climate (such as Mexico's) or when

transported over long distances (such as when shipped from Texas to

Mexico). Mex-Tex concluded that the feed did in fact separate,

causing the deaths.

1 Although Mex-Tex had been selling Synergy 20/20 in Mexico for about 1½ years, this was apparently the firstSSand onlySSreported problem with the product.

3 B.

Mex-Tex premised its suit on a variety of legal theories,

alleging breach of contract, fraud, negligence, gross negligence,

and violation of the Texas Deceptive Trade Practices Act (“DTPA”).

Cargill then counterclaimed for the balance due under the

promissory note and to collect payments due under outstanding

invoices.

The matter was tried to a jury in January 1997. At the close

of Mex-Tex's case, the court granted Cargill's motion for j.m.l. on

all claims, finding that Mex-Tex had failed to introduce evidence

establishing that the chemical composition of Synergy 20/20 was

defective and that this defect caused the cows' deaths. The court

also granted Cargill j.m.l. on its counterclaim and awarded

attorney's fees and costs to Cargill pursuant to a term in Hall's

promissory note.

II.

We review a j.m.l. de novo, applying the same legal standard

employed by the district court. Murray v. Red Kap Indus., Inc.,

124 F.3d 695, 697 (5th Cir. 1997). The entry of j.m.l. is

appropriate if, after considering the evidence presented and

viewing all reasonable inferences in the light most favorable to

the non-moving party, no rational jury could render a verdict for

the nonmovant. Id; FED. R. CIV. P. 50(a). But j.m.l. is

4 inappropriate when substantial evidence of such quality and weight

exists so that reasonable and fair-minded jurors might reach a

different conclusion. London v. MAC Corp. of Am., 44 F.3d 316, 318

(5th Cir. 1995).

The district court granted j.m.l. because it found that Mex-

Tex had failed to introduce evidence showing that, as of July 4,

1994, Synergy 20/20 was defective because of a flawed chemical

composition. Without establishing that some sort of defect in the

product caused the deaths, Mex-Tex's various claimsSSfor breach of

contract, negligence, fraud, and violation of the DTPASScould not

stand.2

In determining whether j.m.l. was proper, we must examine the

evidence Mex-Tex introduced at trial. First, it offered lab

reports performed on samples of Synergy 20/20 drawn by Cargill's

employee, John Spears. One sample suggested that the feed may have

separated.3 But as the district court noted, these lab reports

were not evidence that the product was defective. The feed may

have separated because of tampering, because of poor handling by

the farmers themselves, or because rainwater leaked into the tanks.

2 In its effort to prove breach of contract, Mex-Tex claims it received something it did not bargain forSSdefective feed (that is, feed that separated), rather than good feed (that is, feed that did not separate). To establish fraud and a deceptive trade practice, Mex-Tex claims that Cargill did not tell Mex-Tex that its feed could separate. In short, all of Mex-Tex's causes of action boil down to the question whether there was some sort of flaw or defect in the chemical composition of Synergy 20/20 that led to separation.

3 Mex-Tex does not specify precisely when this alleged separation occurred. The district court explicitly found that when the Synergy 20/20 left the factory, it was manufactured to the standards set in the product specifications.

5 Moreover, many of the samples relied upon for the lab reports were

taken on July 13, nine days after the deaths.

In short, the lab results did not suggest that the chemical

composition of Synergy 20/20 was flawed in that the feed was

susceptible to separation when hauled over long distances or

maintained in humid climates.4 The district court properly

concluded that the lab reports did not speak to whether Cargill's

product was defective.

Second, Mex-Tex offered testimony from Ramon Ortiz Gonzales

(“Ortiz”) and Martin Saldivar. Ortiz owns a veterinary supply

company in Aguascalientes that bought Synergy 20/20 from Cargill;

Saldivar is a veterinarian employed by Ortiz. Both testified that

they observed ill cows and that they believed the illness was

caused by bad feed. This evidence may support Mex-Tex's theory

that the cows ate the Synergy 20/20 and subsequently became ill,

but it does not indicate that the product caused the illness,

norSSif the feed indeed was to blameSSthat its chemical composition

was defective.

Third, Mex-Tex presented Robert Albin, an expert witness who

had studied the lab reports on the Aguascalientes samples and

testified that the feed theoretically could separate with heat or

over time. He stated that he compared samples taken from tanks on

4 The district court also found that the lab reports showed different results among different tanks, suggesting the likelihood of tampering rather than a flaw in the chemical composition that would have produced more uniform results.

6 July 4 and July 13 and found that the chemical compositions

differed. Albin further stated that none of the samples he

examined contained lethal levels of urea and that the cows'

carcasses were not tested to determine whether the deaths were

caused by ingesting excessive urea. Albin's testimony falls far

short of being probative as to whether the Synergy 20/20, as of

July 4, had separated into a lethal mixture because of an

inherently defective chemical composition.

As the district court noted, in the absence of testing the

dead cows and of proof as to whether the separation (if it even

occurred) was caused by a defective chemical composition, Mex-Tex

cannot prevail. Mex-Tex failed to introduce more than speculative

evidence that the feed the cows consumed on July 4 had separated as

a result of a product defect. Because Mex-Tex did not offer

probative evidence on this crucial point, j.m.l. was proper.

III.

Mex-Tex also appeals the j.m.l. on the counterclaim, arguing

that because the feed was defective, it was under no obligation to

pay the money it owed Cargill under the contract. But because we

have concluded that Mex-Tex failed to introduce evidence

establishing a defect, its defense evaporates, so j.m.l. was

appropriate.

IV.

7 Mex-Tex contends that the district court erred in awarding

Cargill attorney's fees and costs. We review for abuse of

discretion. Nickel v. Estate of Estes, 122 F.3d 294, 301 (5th Cir.

1997).

The promissory note provides: “[I]f suit is brought to collect

this Note, the holder shall be entitled to collect all reasonable

costs and expenses of suit, including, but not limited to,

reasonable attorney's fees.” Mex-Tex argues that Cargill is not

entitled to costs and fees stemming from the “tort” lawsuit,

because Mex-Tex's tort claim is distinct from Cargill's breach of

contract counterclaim.

The problem with this argument is that the central issue on

both the claim and the counterclaim is whether the Synergy 20/20

separated. In order to prosecute its breach of contract action,

Cargill needed to confront the question whether its product was

defective; in fact, Mex-Tex's defense to the breach of contract

counterclaim was that Cargill's goods were flawed.

Texas courts have consistently held that “when the causes of

action involved in the suit are dependent upon the same set of

facts or circumstances and thus are 'intertwined to the point of

being inseparable,' the party suing for attorney's fees may recover

the entire amount covering all claims.” Stewart Title Guar. Co. v.

Sterling, 822 S.W.2d 1, 11 (Tex. 1991) (quoting Gill Sav. Ass'n v.

Chair King, Inc., 783 S.W.2d 674, 680 (Tex. App.SSHouston [14th

8 Dist.] 1989), modified, 797 S.W.2d 31 (Tex. 1990)). In seeking to

segregate the two lawsuits, Mex-Tex draws too fine a distinction.

The district court did not abuse its discretion in awarding

attorney's fees and costs.

AFFIRMED.