Filed: Jul. 10, 2003
Latest Update: Feb. 21, 2020
Summary: United States Court of Appeals Fifth Circuit F I L E D July 10, 2003 IN THE UNITED STATES COURT OF APPEALS Charles R. Fulbruge III Clerk FOR THE FIFTH CIRCUIT _ No. 02-50530 _ In the Matter of: NEWELL INDUSTRIES, INC., Debtor _ CAMDEN IRON & METAL, INC., Appellant versus ANDREW B. KRAFSUR, Trustee Appellee Appeal from the United States District Court For the Western District of Texas Before GARWOOD and HIGGINBOTHAM, Circuit Judges, and FELDMAN,* District Judge. FELDMAN, District Judge: I. * Dist
Summary: United States Court of Appeals Fifth Circuit F I L E D July 10, 2003 IN THE UNITED STATES COURT OF APPEALS Charles R. Fulbruge III Clerk FOR THE FIFTH CIRCUIT _ No. 02-50530 _ In the Matter of: NEWELL INDUSTRIES, INC., Debtor _ CAMDEN IRON & METAL, INC., Appellant versus ANDREW B. KRAFSUR, Trustee Appellee Appeal from the United States District Court For the Western District of Texas Before GARWOOD and HIGGINBOTHAM, Circuit Judges, and FELDMAN,* District Judge. FELDMAN, District Judge: I. * Distr..
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United States Court of Appeals
Fifth Circuit
F I L E D
July 10, 2003
IN THE UNITED STATES COURT OF APPEALS
Charles R. Fulbruge III
Clerk
FOR THE FIFTH CIRCUIT
_______________________
No. 02-50530
_______________________
In the Matter of: NEWELL INDUSTRIES, INC., Debtor
_______________________________
CAMDEN IRON & METAL, INC.,
Appellant
versus
ANDREW B. KRAFSUR, Trustee
Appellee
Appeal from the United States District Court
For the Western District of Texas
Before GARWOOD and HIGGINBOTHAM, Circuit Judges, and FELDMAN,*
District Judge.
FELDMAN, District Judge:
I.
*
District Judge of the Eastern District of Louisiana, sitting
by designation.
1
Camden Iron & Metal, Inc. is a metal recycling and salvaging
company engaged in shredding and processing old automobiles and
appliances. The scrap that is left is sold to steel mills and
aluminum foundries and processed into new products.
In April 1998, Camden agreed with Newell Industries, Inc. to
buy a MegaShredder. The MegaShredder is a specialized, complex
machine that is designed to shred large metal objects into fist-
sized scrap metal. Newell agreed to design, manufacture and
deliver an unassembled MegaShredder within 180 days for a price
of $2.53 million. The deal became plagued with performance
problems.
After Newell failed to meet some of its early deadlines,
Camden representatives discovered that Newell had somehow
arranged to sell the MegaShredder to a company in Denmark.
Camden then stopped making payments. Predictably, a flurry of
lawsuits followed. Newell sued Camden in Texas state court for
breach of contract and interference with delivery of equipment,
and Camden sued Newell for breach of contract and fraud.1
The parties subsequently reached an agreement which provided
that Newell would complete the manufacture of the MegaShredder
and Camden would monitor its progress. Three months later,
however, substantial components of the MegaShredder remained
unfinished.
1
The two cases were later consolidated.
2
In November 1999, Newell filed for bankruptcy protection
under Chapter 11 of the Bankruptcy Code. Camden in turn sued
Newell in bankruptcy court to prevent it from selling,
transporting or disassembling the unfinished MegaShredder or any
of its parts.
Thereafter, Newell and Camden reached still another
agreement under Bankruptcy Rule 9019. They set a delivery date
of May 20, 2000, increased the purchase price by $200,000,2 and
agreed that a Camden engineer could observe the manufacturing
process and review design plans.
After Newell again failed to meet its obligations, Camden
and the trustee entered one more final agreement. The terms of
the last agreement were recited in open court:
1) The Newell estate will deliver the manufactured
MegaShredder by July 15, 2000;
2) Camden will provide the estate a $200,000 line of
credit, to be drawn on only when it spends such amount
in manufacturing or when the MegaShredder is completed;
and
3) Camden can oversee and direct the order in which the
components are manufactured, have access to all
assembly plans, specifications and drawings,3 and will
be provided an engineer to oversee assembly at its
facilities.
After the last agreement, Newell’s estate spent an
2
The $200,000 was to be paid under a letter of credit in
installments.
3
Newell agreed to file a complete set of plans under seal with
the court.
3
additional $209,000 making the MegaShredder’s components.
Camden, however, refused to pay the $200,000 fee because it
claimed the trustee failed to provide it with both a supervising
engineer and sufficient design plans. The trustee then moved the
bankruptcy court to determine and compel compliance with the
agreement.
The bankruptcy court held, among other things, that the
trustee was not required to pay for Camden’s supervising engineer
during assembly, that Camden was entitled to all the design
plans, specifications and drawings that the trustee had filed
with the court, and that Camden could claim a $50,000 offset for
the expenses it incurred as a result of the incomplete design
plans. The district court affirmed. We affirm in part and
reverse in part.
II.
The bankruptcy court's findings of fact “will not be set
aside unless clearly erroneous.” Matter of Faden,
96 F.3d 792,
795 (5th Cir. 1996). Conclusions of law, on the other hand, are
subject to plenary review on appeal. See
id. (“[W]hen a finding
of fact is premised on an improper legal standard, that finding
loses the insulation of the clearly erroneous rule.”).
The interpretation of a contract is a matter of law, as is
the determination that a contract is ambiguous, and both are
reviewed de novo. See In re Liljeberg Enterprises, Inc., 304
4
F.3d 410, 439 (5th Cir. 2002). A contract is not ambiguous if it
can be given a definite or certain meaning as a matter of law.
See Columbia Gas Transmission Corp. v. New Ulm Gas, Ltd.,
940
S.W.2d 587, 589 (Tex. 1996).
A. Engineer During Assembly
The appellant first contends that the bankruptcy and
district courts erred by holding that the trustee was not
required to provide Camden with an engineer to oversee the
installation and assembly of the MegaShredder.4 The final
agreement clearly instructs:
The bankrupt estate will furnish at its own expense an
engineer to oversee the installation and assembly of
Job 559 on Camden’s facilities.
Although the plain language of the agreement clearly and
definitely states that the trustee was required to provide Camden
with an engineer during assembly, the court nonetheless found the
provision to be ambiguous because it is subject to various
reasonable interpretations.5 In particular, the district court
4
The bankruptcy court denied Camden’s request for an engineer
because it was not claimed in the original pleadings. While
appellant contests this finding, we need not review the bankruptcy
court’s rationale because neither the district court nor the
appellee’s brief relied on such reasoning.
5
Camden asserts that neither the parties nor the bankruptcy
court raised the issue of ambiguity below, and therefore the
district court exceeded its scope of review by sua sponte raising
the issue. The interpretation of the contract and determination of
ambiguity, however, is a matter of law, and the court “may conclude
that a contract is ambiguous even in the absence of such a pleading
5
found it reasonable to interpret the agreement as capping the
trustee’s total expenditures at $200,000. The district court
thus concluded that, after the trustee spent $200,000, all
further manufacturing, installation and assembly costs, including
engineers, were to be paid by Camden. We disagree with the
court’s reading of the agreement. The simple text requires no
added complexity.
The language and intent of the agreement make clear that the
$200,000 line of credit limits only the trustee’s manufacturing
expenditures. For example, the agreement states:
If the $200,000 is reached, or if the machine is
completed prior to the expenditure of $200,000, then
the letter of credit will be drawn down on. If the
machine is completed for a sum of less than $200,000,
that money will go into a special escrow account to be
used by Camden at their assembly and fit in Camden, New
Jersey.
This provision contemplates a payment surplus after manufacturing
at Newell’s headquarters, but prior to assembly and fit at
Camden’s facilities. If the $200,000 had been intended to limit
the trustee’s total expenditures, as the district court believed,
a payment surplus could never exist until manufacture and
assembly has been completed. The court’s interpretation that the
trustee’s total expenditures were limited at $200,000 is at odds
with the agreement’s direct language.
by either party.” Sage St. Assoc. v. Northdale Constr. Co.,
863
S.W.2d 438, 445 (Tex. 1993).
6
The estate contends, in the alternative, that the agreement
could be read to require it to provide an engineer only “if the
MegaShredder was not completed and Camden was forced to attempt
to complete the [manufacturing of the] MegaShredder on its own.”
Such an interpretation is similarly baseless because it
contravenes other provisions within the agreement.
The agreement states that the “bankrupt estate will furnish
at its own expense an engineer to oversee the installation and
assembly of Job 559 on Camden’s facilities.” If the trustee
failed to finish the manufacturing of the MegaShredder, there
would be no installation or assembly for an estate-financed
engineer to oversee. The engineer would supposedly oversee the
completion of the manufacturing process only. The estate’s
interpretation directly conflicts with the language of the
engineer provision, which is expressly limited to oversight
during the assembly phase. Moreover, if the parties had intended
for an engineer to be provided at the manufacturing phase, or for
the engineer costs to be included as part of the $200,000 line of
credit, the parties would have included such language in their
agreements. They did not. Thus, we find the estate’s
interpretation unreasonable.
Given the clear and certain language of the agreement, and
the unreasonableness of offered alternative interpretations, we
find that the district court erred in holding that the last
agreement is ambiguous. The agreement clearly dictates that the
7
trustee provide Camden with an engineer during assembly. We
reverse the finding of the bankruptcy and district courts, and
remand for a determination of the cost incurred by Camden in
obtaining an engineer.6
B. Assembly Plans, Specifications, and Drawings
The appellant next asserts that the bankruptcy court erred
by holding that Camden was entitled to only those plans,
specifications, and drawings that the trustee had filed with the
court, and by awarding Camden only a $50,000 offset for the
expenses incurred as a result of the incomplete plans. We find
that such claims are without merit.
The agreement makes clear that the trustee was required to
provide Camden “access at all times to plans and specifications .
. . through assembly and fit.”7 The trustee agreed to file under
seal a complete set of the design documents to assist Camden
should the estate not complete its manufacturing obligations.8
6
The Trustee’s award should be offset by this amount.
7
Newell initially agreed to provide Camden only those
“drawings necessary for foundation, electrical and plumbing
installation.” After litigation ensued, however, Camden became
concerned that Newell would not complete the MegaShredder, and the
parties stipulated that a Camden representative would be able to
review the “plans, specifications, drawings, shop drawings and
construction drawings” while monitoring Newell’s performance.
8
The parties agreed that the sealed documents would be
transferred to the bankruptcy court, and “held pending the
construction and delivery of the MegaShredder.” If the complete
8
Unbeknownst to Camden, however, the trustee did not file a
complete set of plans with the court.
When the trustee failed to give Camden’s engineer a set of
design plans, Camden sought access to all plans that the trustee
had filed under seal, and requested an offset for the expenses it
incurred as a result of the incomplete plans. The bankruptcy
court held that Camden could review all the design plans filed
under seal,9 and that it was entitled to a $50,000 offset on the
MegaShredder purchase price.
Upon review of the plans under seal, however, Camden
realized that the estate had failed to file a complete set of
plans with the court. Although the $50,000 offset was based upon
testimony taken prior to this discovery, the bankruptcy court
refused to reopen the damages issue.10
Camden first appeals the decision to release only those
plans filed under seal. Camden peculiarly contends that the
plans were not delivered, Camden could obtain the documents under
a one-time license agreement.
9
The order was conditioned on a confidentiality agreement not
to disclose the contents to third parties except for fabrication
purposes in which case the third party also had to sign a
confidentiality agreement. The confidentiality agreement was
necessary to protect a third party which had purchased the
intellectual property rights to the plans from the trustee.
10
The district court affirmed the bankruptcy court’s ruling
that Camden was entitled to the drawings under seal. It noted,
however, that the missing drawings had been sold and the bankruptcy
court could not order access to them.
9
court erred by granting its motion for access to plans under
seal; it asserts that the court should have instead ordered the
trustee to produce all plans, specifications, and drawings.11
Because the requested relief exceeds that which was actually
requested by Camden, we find no error. Moreover, by the time
Camden finally realized the complete plans were not under seal,
the trustee had already sold the design plans to another company.
Thus, it is doubtful that the court even had the authority to
compel production.
Camden also asserts that the court erred in calculating an
offset based on testimony offered before Camden learned that the
sealed drawings were incomplete. The court’s award was based on
the testimony of a Camden expert who testified that damage caused
by the absence of plans was between $50,000 and $75,000. We find
that $50,000 is a reasonable award based upon record evidence of
foreseeable damages available at the date the order was issued.
While Camden has clearly been injured by the trustee’s
failure to provide a complete set of design plans, it could have
pursued relief in a number of more effective ways. For example,
it could have appealed the court’s refusal to reopen the damages
11
The court responded that it could only rule on what was
pled, and that it was “not saying that you’re not entitled to other
drawings. . . . I’m just saying that I’m granting [what was pled].”
The court moreover suggested that Camden would have to file a
supplemental motion if it wanted access to any other drawings.
10
issue, or it could have filed a supplemental motion to compel
production of the missing drawings. Because Camden’s injuries
are attributed to their own litigation conduct, we affirm the
order granting Camden all the design plans under seal and a
$50,000 offset against the MegaShredder purchase price.
III.
We find the agreement at issue required the trustee to
provide Camden with a supervising engineer during assembly.
Moreover, no error was committed by holding that Camden was
entitled to only those design plans, specifications, and drawings
that the trustee had filed under seal, and by awarding Camden
only $50,000 in offsets for the expenses it incurred as a result
of the incomplete design plans. AFFIRMED IN PART, REVERSED IN
PART and remanded for further proceedings.
11