Villarreal v. Ashley Architecture

Opinion

UNITED STATES COURT OF APPEALS FOR THE FIFTH CIRCUIT

No. 98-40026 Summary Calendar

JOHNNY VILLARREAL, d/b/a PAN AMERICAN REALTY & CONSTRUCTION,

Plaintiff-Appellee,

versus

ASHLEY ARCHITECTS, ARCHITECTO GARCIA & ASSOCIATES, and CRUZ RODRIGUEZ, d/b/a SATISFACTION HOMES,

Defendants-Appellants.

Appeal from the United States District Court for the Southern District of Texas (B-93-CV-140) February 11, 1999

Before HIGGINBOTHAM, JONES, and DENNIS, Circuit Judges.

By EDITH H. JONES:*

Appellee Johnny Villarreal filed suit in Texas state

court alleging that appellants, the San Benito Public Housing

Authority (the “Authority”) and others1, tortiously interfered with

his contract to repair a public housing project damaged by floods.

After appellants removed the case to federal court, a jury found

them liable for both compensatory and punitive damages totaling

$130,000. The appellants now argue that the federal court lacked

* Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion should not be published and is not precedent except for the limited circumstances set forth in 5TH CIR. R. 47.5.4. 1 The other defendants included the City of San Benito, the above-named appellants and Victor Trevino, (Executive Director of the Housing Authority). subject matter jurisdiction. They alternatively contend that there

was insufficient evidence to sustain the jury verdict and that the

district court erred by refusing to credit them for pre-trial

settlements entered into with the public defendants. Finding that

the federal court had jurisdiction but erroneously failed to credit

the appellants for the pre-trial settlement, we affirm in part and

reverse and remand in part.

BACKGROUND

The San Benito Public Housing Authority received a grant

from the United States Department of Housing and Urban Development

to repair a flood-damaged public housing project. After accepting

competitive bids from several contractors, the Authority awarded

Villareal a contract to repair all 54 units. Some time later,

however, the Authority reopened the bidding process and allowed

other contractors to compete against appellee’s bid. As a result,

Villareal's contract was limited to only 14 of the 54 units while

other contractors, including appellant Rodriguez, were awarded

contracts to repair the remaining 40 units.

Villareal sued the appellants, the Authority and its

Executive Director, and the City of San Benito alleging violations

of federal bidding requirements, denial of due process and equal

protection, interference with a contract and prospective contract,

violation of Texas bidding statutes, conversion of trade secrets,

violation of the Texas Free Enterprise and Antitrust Act, and

unfair competition. The defendants removed the case to federal

district court, asserting federal question jurisdiction arising

2 from the alleged violation of federal bidding requirements and due

process and equal protection rights. Before trial, Villareal

settled with the public defendants for $62,000. The remaining

parties agreed to try the case before the magistrate judge, and

after a jury trial, the court entered judgment on the jury’s

verdict for $100,000 in compensatory damages and $30,000 in

punitive damages, apportioned among the three remaining defendants.

The court’s amended final judgment did not, however, credit the

appellants for the $62,000 settlement already received by the

appellee.

JURISDICTION

Although they instigated removal, the appellants first

contend that the case was improperly removed to federal court

because the court lacked subject matter jurisdiction. Under the

well pleaded complaint rule, a defendant may not remove a case to

federal court unless the plaintiff’s complaint establishes that the

cause of action arises under the Constitution, laws, or treaties of

the United States. 28 U.S.C. § 1331; see also Franchise Tax Bd. v.

Construction Laborers Vacation Trust, 463 U.S. 1, 103 S. Ct. 2841

(1983). In making this determination, federal courts examine the

“complaint as it existed at the time the petition for removal was

filed.” Boelens v. Redman Homes, Inc., 759 F.2d 504, 507 (5th Cir.

1985) (quoting IMFC Prof’l Services, Inc. v. Latin Am. Home Health,

Inc., 676 F.2d 152, 157 (5th Cir. Unit B 1982)). When, as in this

case, a complaint seeks recovery directly under the United States

Constitution, the court must entertain the suit unless 1) the

3 federal question “clearly appears to be immaterial and made solely

for the purpose of obtaining jurisdiction”, or 2) the federal

claim “is wholly insubstantial and frivolous.” Bell v. Hood, 327

U.S. 678, 682-83, 66 S. Ct. 773, 776 (1946). Appellants' objection

to removal jurisdiction is silly. At the very least,2 the

appellee’s complaint alleged due process and equal protection

violations, and neither of the Bell exceptions applies.

In particular, Villareal alleged that the Agency

arbitrarily rescinded his construction contract, awarded the

contract to his competitors, and refused to hold a hearing to

resolve the dispute. Appellants never sought clarification whether

this claim was founded on federal or state law. It can hardly be

said at this late date that the constitutional due process claim

was “insubstantial” or “frivolous.”3 It is also too late to

complain that the original removed petition does not specify

whether the Texas or United States constitutional claims were at

issue. In federal practice, “a pleading . . . need not specify in

exact detail every possible theory of recovery—it must only give

the defendant fair notice of what the plaintiff’s claim is and the

grounds upon which it rests.” Thrift v. Hubbard, 44 F.3d 348, 356

2 Because we find that the plaintiff’s due process/equal protection claim justified jurisdiction in this case at the outset, we need not address whether a violation of the federal bidding requirements contained in the Code of Federal Regulations creates a federal cause of action justifying jurisdiction in federal court. 3 Although Villareal did not pursue its due process and equal protection claims at trial because, the Authority had settled with him, this did not deprive the federal court of jurisdiction. "[A] plaintiff’s voluntary amendment to a complaint after removal to eliminate the federal claim upon which removal was based will not defeat federal jurisdiction.” Boelens v. Redman Homes, Inc., 759 F.2d 504, 507 (5th Cir. 1985).

4 (5th Cir. 1995) (quoting Conley v. Gibson, 355 U.S. 41, 47, 78 S.

Ct. 99, 103 (1957)) (internal quotations omitted). The federal

court therefore properly exercised jurisdiction.

SUFFICIENCY OF THE EVIDENCE

The appellants next argue that there was insufficient

evidence to support the jury’s verdict. Villareal asserts that

they did not properly comply with Federal Rule of Civil Procedure

50(b) and failed to preserve this issue for appeal. Assuming

arguendo that the appellants properly preserved error, there was

sufficient evidence to support the jury’s verdict. When a party

preserves error, this court will not overturn the jury’s verdict

“[u]nless the evidence is of such quality and weight that

reasonable and impartial jurors could not arrive at such a verdict

. . . .” Ham Marine, Inc. v. Dresser Indus. Inc., 72 F.3d 454,

459 (5th Cir. 1995). On appeal, we view the evidence presented at

trial and all reasonable inferences in the light most favorable to

the verdict, even though we might have reached a different

conclusion as the trier of fact. See Hiltgen v. Sumrall, 47 F.3d

695, 700 (5th Cir. 1995).

Appellants contend that there was no evidence proving the

existence of a contract between the appellee and the Agency for

repair of all 54 units. This is inaccurate. Several witnesses

testified that Villareal was initially the lowest bidder, that the

Authority mailed a certified letter to the appellee informing it

that it had been awarded the contract (which letter was introduced

into evidence), and the Authority instructed the appellee to

5 execute the construction contract. The jury could have reasonably

concluded that a contract or prospective contract existed between

the appellee and the Authority. The appellants also argue that the

evidence was insufficient to justify an award of punitive damages.

However, after reviewing the record and trial transcript, we find

that the jury could have reasonably concluded that the Authority

and the appellants maliciously interfered with appellee’s contract.

CREDIT FOR PRE-JUDGMENT SETTLEMENT

Finally, the appellants argue that the district court

erred by failing to credit them with the $62,000 pre-trial

settlement Villareal received. Under Texas law, “after the trier

of fact has determined the total amount of damages that the

plaintiff is entitled to recover, the district court must reduce

this amount to offset the benefit that the plaintiff has received

from prior settlements.” Hardy v. Gulf Oil Corp., 949 F.2d 826,

832 (5th Cir. 1992); see also Tex. Civ. Prac. & Rem. Code Ann. §

33.012. The defendant has the option to reduce the judgment by the

dollar amount of the settlement or by a sliding scale percentage of

the damages awarded by the jury. See § 33.012(b). If the defendant

elects a dollar-for-dollar credit, Texas law requires that the

defendant make a written election of the credit before the case is

submitted to the jury, see § 33.014, and prove the settlement

amount by admitting the settlement agreement or some other proof

showing the settlement amount. See Mobil Oil Corp. v. Ellender,

968 S.W.2d 917, 927 (Tex. 1998) (stating that the announcement, in

6 open court, of the settlement amount satisfies the defendant’s

burden).

As the appellants satisfied the statutory requirements

necessary to receive a dollar-for-dollar credit, the magistrate

judge should have credited them for the prior settlement. Before

the case went to the jury, the defendants filed a statutory

“Election of Settlement Credits”, opting for the dollar-for-dollar

credit. Villareal's only response is that the appellants never

themselves presented evidence of the dollar amount of the

settlement and thus waived their right to a credit. This argument

is meritless. First, the Texas Supreme Court requires only that

the settlement amount be contained somewhere in the record. See

Mobil Oil, 968 S.W.2d at 927. Second, the record shows that the

settlement amount was known by all, was placed of record by

Villareal, and the magistrate judge initially entered judgment and

ordered a remittitur totaling $62,000 due to the settlement.

CONCLUSION

For the foregoing reasons, we AFFIRM the judgment of

liability, but REVERSE the magistrate judge's decision not to

credit appellants for pre-trial settlements, and REMAND the case

with instructions to enter a new final judgment crediting each

appellant for its share of the $62,000 settlement obtained by the

appellee.

AFFIRMED in Part, REVERSED and REMANDED in Part.