Triad Electric & Controls, Inc. v. Power Systems Engineering, Inc.

REVISED

UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT

_____________________

No. 94-20783
_____________________

TRIAD ELECTRIC & CONTROLS, INC.,

Plaintiff/Counter-Defendant
Appellant/Cross-Appellee,

versus

POWER SYSTEMS ENGINEERING, INC., ET AL.,

Defendants,

POWER SYSTEMS ENGINEERING, INC.;
CENTURY CONTRACTORS WEST, INC.;
EMPLOYERS INSURANCE OF WAUSAU, INC.

Defendants/Counter-Claimants
Appellees/Cross-Appellants.

_________________________________________________________________

Appeals from the United States District Court
for the Southern District of Texas

_________________________________________________________________
June 30, 1997

Before HIGGINBOTHAM, SMITH, and BARKSDALE, Circuit Judges.

RHESA HAWKINS BARKSDALE, Circuit Judge:

The primary issues arising out of this Texas diversity action,

concerning a construction contract dispute tried to the district

court, are whether the court reversibly erred first, by allowing,

after close of the evidence, the addition of a fraud counterclaim,

and second, by then ruling in favor of that new claim, including
awarding punitive damages of $3 million, without allowing the

counterclaim defendant, Triad Electric & Controls, Inc., to defend,

post-addition, against the claim. Triad, the electrical

subcontractor on a construction project, appeals a take-nothing

judgment on its contract-based claims against both the project

owner’s engineer, Power Systems Engineering, Inc. (PSE), and the

general contractor, Century Contractors West, Inc.; the judgment

for Century on its counterclaim for overpayments; and the judgment

for Century and PSE on their counterclaim for fraud. Century

cross-appeals the denial of attorneys’ fees. We AFFIRM in part,

REVERSE in part, and REMAND for further proceedings.

I.

The following factual scenario is based primarily on the

voluminous and detailed findings of fact by the district court,

which, for the most part, Triad does not contest. In mid-1983, PSE

invited Century and other general contractors to submit bids for

the construction of a cogeneration facility (electricity and steam)

at a refinery near Houston, Texas. The PSE-provided bid package

consisted of engineering drawings, which included cable schedules

describing the electrical connections to be installed and setting

forth the approximate wire footage; the Specification for General

Construction, which established the quality and quantity standards

for the facility, specified types of material and construction

codes and practices, and incorporated by reference the PSE Standard

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Specifications; and the Design Control Specification (DCS), a

narrative document describing generally the facility’s systems,

operating parameters, and major items of equipment.

At that time, the facility’s design was only partially

complete; portions of it were described in detail in the

engineering drawings and the Specification for General

Construction, but other portions were described only in a narrative

manner in the DCS. In fact, the facility was to be constructed as

a “fast track” project; construction was to begin before the design

drawings were complete, and PSE continued to work on the design

after issuing the bid package.

PSE requested two bid prices from each invited general

contractor: a “base” bid, based on the incomplete drawings included

in the bid package; and a “guaranteed maximum” bid, which was to

include all work necessary to complete the project in accordance

with the DCS. Pursuant to the base/guaranteed maximum concept, the

successful bidder would receive extra payment, above the base

price, for any changes in the work described in the incomplete

drawings, up to the amount of the guaranteed maximum; but,

generally, the cost above that maximum, due to further changes to

the drawings, would be at the successful bidder’s risk. The

successful bidder would, however, be entitled to receive payment

above the guaranteed maximum price for work performed pursuant to

changes to the DCS.

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 In September 1983, Century and other general contractors

bidding on the project invited Triad and other electrical

subcontractors to bid the electrical and instrumentation portions.

Century furnished Triad with the portion of the bid package

pertaining to that portion of the work, including the Specification

for General Construction with attachments, the electrical drawings,

the piping and instrumentation diagrams, and the DCS. Century

invited only prequalified subcontractors to bid on the project;

prequalification was based partially on each subcontractor’s

representation that it was experienced in bidding projects from

conceptual design documents. Triad made such a representation.

Addendum No. 1 to the Specification for General Construction,

which was included in the bid package furnished to Triad, requested

that the electrical and instrumentation contractors “provide (a) a

base bid ... and (b) a guaranteed maximum bid”. The base bid was

defined as the “Scope of Work shown in [the] General ...

Specification”, which incorporated the engineering drawings. On

the other hand, the “guaranteed maximum bid” was defined as the

“Scope of Work in [the] General ... Specification ... plus that

additional amount necessary to furnish a plant which will start-up

and operate as stated in the [DCS]”.

The base/guaranteed maximum concept was defined further in

PSE’s 22 September 1983 Clarifications to Addendum No. 1:

The [DCS] establishes the design basis for an
operable and reliable plant as defined by
[PSE]. The conceptual design, process design,

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 and detail engineering design will be
performed by [PSE]. There is no requirement
for detail design evaluation, system
evaluation, detail auditing of PSE engineering
calculations, etc. The contractor is to
provide (a) a base bid based on the bid
documents, and (b) a guaranteed maximum bid
based on the level of confidence the
contractor feels that the plant described in
the Bid Documents can start-up and operate as
defined in the DCS.

Contrary to the foregoing, however, Triad submitted an

unpriced “scope letter” to Century on 28 September 1983, stating

that the electrical scope of work was “based on the cable

schedules”, which were part of the drawings included in the bid

package. Triad verbally informed Century that it would perform the

scope of work described in that letter for approximately $2.9

million. But, Triad submitted bids of approximately $3.9 million

to three other general contractors, Century’s competitors.

In November 1983, Century advised Triad that its initial bid

was non-responsive because Triad was not allowed to limit its scope

of work to the cable schedules; instead, it had to include

everything shown, implied, or required by the DCS. Century gave

Triad the option to participate in a base/guaranteed maximum bid,

as in the Century/PSE contract, but Triad declined.

Triad submitted its final proposal to Century in December

1983. That proposal removed the qualification/limitation to the

cable schedules, and proposed a price of approximately $3.1

million.

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 Subsequent to the 15 November 1984 Century/PSE contract,

Century issued a letter of intent to Triad in February 1985, and

Triad began work on the project. After several months of

negotiations over the Triad subcontract drafted by Century, it was

signed in mid-June 1985.

Triad’s subcontract consists of a Purchase Order and a

Subcontract Agreement which required it to supply all labor and

materials required for the installation of complete and operational

electrical and instrumentation systems for the “GUARANTEED MAXIMUM

LUMP SUM PRICE” of $3.4 million. In defining the scope of work,

the Purchase Order referenced the following: (1) the contract

specifications, as modified; (2) the DCS; (3) listed drawings,

which included the cable schedules; (4) an equipment list; and (5)

a list of instruments to be installed, calibrated, and connected by

instrumentation wiring. Those listed drawings -- the contract

drawings -- were the same as those included in the bid package.

After construction began, PSE decided, in order to take

advantage of tax incentives, to shorten the contract schedule so

that it could complete the facility by the end of 1985

(approximately two months earlier than called for in Triad’s

subcontract). PSE, Century, and Triad anticipated that Triad could

experience additional costs as the result of labor inefficiency due

to the shortened schedule. PSE and Century agreed to compensate

Triad for any man-hours over the number it had originally estimated

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to perform its contractual scope of work, the assumption being that

those extra hours would be the product of inefficiencies caused by

acceleration.

In that regard, Triad advised PSE and Century that, without

adjusting for extras or acceleration, it had estimated 83,000 man-

hours to perform its scope of work. Even though PSE and Century

each had independent estimates, the parties agreed to use Triad’s

estimate as the base.

In mid-July 1985, after several months of negotiations, and

approximately one month after the Century/Triad subcontract was

executed, PSE, Century, and Triad entered into an agreement

governing Triad’s compensation for the accelerated work (the

acceleration agreement). And, pursuant to acceleration agreement

¶ 1, PSE and Century advanced $372,338 to Triad in a series of

progress payments, with each payment the subject of a change order

to the Triad subcontract.

In contrast to its accepted 83,000 hours estimate, Triad used

approximately 119,000 to complete its portion of the work, and

sought additional compensation pursuant to acceleration agreement

¶ 3. PSE and Century refused to pay Triad any amount under ¶ 3,

maintaining that the earlier ¶ 1 payment was an advance toward the

total due under ¶ 3, which was to be adjusted at the end of the job

to account for Triad’s actual efficiency losses.

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 Shortly before completion of the project at the end of 1985,

Triad submitted to Century, and Century submitted to PSE, various

extra work order requests (EWOs) for payment above the contract

price, arising out of design changes that had increased Triad’s

scope of work (drawing EWOs). Triad’s first drawing EWO submittal

consisted primarily of stacks of invoices in no particular order;

PSE rejected it as unintelligible; and Triad resubmitted the EWOs

in a different format. In preparing its drawing EWOs, Triad

compared the work called for by the contract drawings (as noted,

those listed in the Purchase Order) with the work done pursuant to

the later “issued-for-construction” drawings.

Triad also submitted EWOs for extra work that it had been

directed to perform in the field (field EWOs). Triad’s EWOs

(drawing and field) requested approximately $2 million. (At trial,

Triad admitted that, even without the contested EWO payments, it

made a profit of approximately $350,000. It demanded nearly $3

million in this action.)

While Century and PSE were reviewing Triad’s EWOs, Triad

claimed that it was experiencing a negative cash flow; PSE agreed

to make interim payments to Century, to be passed on to Triad,

subject to adjustment upon completion of the EWO review process.

In early 1986, approximately $620,000 of the approximately $1.8

million requested by the drawing EWOs was advanced to Triad,

subject to further review and verification.

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 PSE, Century, and Triad agreed in April 1986 to designate one

field engineer from each entity to review and evaluate 11 of

Triad’s largest drawing EWOs. After doing so, the engineers

reached agreement on nine. They, however, did not have authority

to settle the EWO claims. PSE and Century did not agree with the

results of the engineers’ review, on the grounds that the analysis

was based on a misunderstanding of Triad’s contractual scope of

work.

Century advised Triad in August 1986 that Triad’s scope of

work was not limited by the contract drawings; and that the only

compensable changes were changes to the scope of work defined by

the DCS. Triad countered that its scope of work was limited to

what was shown on the contract drawings, plus items specified in

the DCS but not shown on those drawings. Simply put, the primary

dispute centered around increased cost to Triad for changes in the

design of the items specified in the DCS, as reflected in the

contract drawings, including changes both in the type conduit and

cable required and in the location of the specified items.

Triad filed this action in November 1986, ultimately resulting

in claims against Century and PSE for payment for extra work, for

sums due under the acceleration agreement, and for breach of

contract in connection with the acceleration. Century

counterclaimed for overpayment to Triad for extras and for design

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changes that deleted work from Triad’s contractual scope of work;

PSE did not seek affirmative relief.

The case was trifurcated for trial. Phase I was to adjudicate

whether, through the engineers’ review, the parties had settled

approximately $1.1 million of Triad’s EWOs; Phase II, to be tried

to a special master, was to address the amount due Triad for

unsettled EWOs; and Phase III, to be tried to the district court,

was to decide Triad’s acceleration claim and any other unresolved

issues.

Phase I was conducted in early 1991. In mid-1992, the

district court entered very comprehensive findings and conclusions.

It rejected Triad’s claims that the nine largest drawing EWOs had

been settled by the engineers’ review, holding both that they did

not determine any contractual scope issues, and that PSE’s and

Century’s engineers lacked authority to settle any EWOs. (Triad

does not appeal that ruling.)

The district court held further that Triad’s subcontract was

unambiguous; that it required Triad to perform a “guaranteed

maximum” scope of work; and that Triad was entitled to be

compensated only for design changes that were outside the “scope of

the DCS or resulting from PSE’s ‘gold plating’”. The court found

that, after the dispute over Triad’s scope of work arose in 1986,

Triad had lost its original estimate file; and that, in light of

the lack of any satisfactory explanation for the file’s

disappearance, “production of Triad’s estimate would show that it

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understood that it was required to supply a guaranteed maximum

scope of work”.

After entry of the Phase I rulings, and on motion of the

defendants and over Triad’s objection, the district court revoked

the “trifurcation” plan. Instead, the remaining issues would be

tried to the court (Phase II).

Phase II commenced in January 1993. At the conclusion of

Triad’s case-in-chief, and pursuant to FED. R. CIV. P. 52(c), the

court dismissed Triad’s claim for design change extras, reserving

decision on Triad’s claims for field extras and acceleration.

Moreover, during argument on the Rule 52(c) motion, Century

moved orally to amend its counterclaim to conform to the evidence,

stating that it would file a written motion for leave to add a

counterclaim for fraud, including $10 million in punitive damages,

“before the end of the week”; PSE announced that it would seek

sanctions. Triad objected to both.

This notwithstanding, the trial proceeded without any ruling

on Century’s oral “motion”. In fact, all parties rested the very

next day. PSE announced that it would join Century’s motion to add

the claim.

Three weeks after the close of the evidence, Century and PSE

filed the motion for leave to add a fraud claim, including seeking

punitive damages. They maintained that, during Phase II, they had

first learned that Triad’s claims for extras and for acceleration

inefficiencies were founded on material and intentional

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misrepresentations, including the time originally estimated to

perform Triad’s contractual scope of work and the extent of Triad’s

knowledge of that scope. Century and PSE also submitted proposed

findings of fact and conclusions of law, including that Triad had

committed fraud and was liable for punitive damages. Triad

objected; alternatively, it moved to reopen the record, for a

continuance, and for a jury trial because new fact issues had been

raised in the proposed claim.

Approximately a year and a half later, in September 1994, the

district court granted leave to add the fraud claim and denied

Triad’s motion for a continuance and jury trial. Accordingly, the

next day, the court entered judgment for Century for $593,215 for

overpayments, and for PSE and Century on the joint fraud claim for

$372,338 in compensatory damages and $3 million in punitive

damages. All of Triad’s claims were disallowed.

The district court found that Triad had “rigged the bid

process” by intentionally underbidding the job by $1 million; that

“Triad never intended to perform the guaranteed maximum scope of

work required by its contract ... [but] secretly intended to recoup

its underbid amounts through the submission of false and fraudulent

extra work claims”; that Triad’s claims for extras were for work

that was part of Triad’s guaranteed maximum scope; that Triad had

intentionally misrepresented “the number of man-hours [83,000]

required to perform its contractual scope of work”; that, in

reliance on that misrepresentation, Century and PSE had advanced

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$372,338 under acceleration agreement ¶ 1; that Triad had destroyed

the original of its 1983 estimate file to conceal its fraud; that,

because Triad underbid its work, it should not have made any

profit; that Triad’s EWO analysis was flawed because it assumed

“that PSE could not alter its preliminary and incomplete bid

drawings without having to pay additional compensation to Triad for

the change”; that Century had proved entitlement to a refund of

$593,215; and that the acceleration agreement was unenforceable

because it had been procured by Triad’s fraud.

Concerning the newly added fraud claim, the court rejected

Triad’s contention that it was prejudiced by lack of both notice

and an opportunity to defend against the claim, reasoning that

Triad could not claim surprise or prejudice because PSE and

Century’s case for fraud and concealment was made “from the mouths

of Triad’s own witnesses”. The court stated further that Triad was

on notice of “a claim of intentional wrongdoing” by virtue of the

statement in the pretrial order inserts of PSE and Century that

“Triad, at best, misconstrued and at worst misrepresented that the

drawings ... resulted in changes to Triad’s contractual scope of

work”. The court excused PSE and Century’s delay in presenting the

fraud claim on the basis that they “could not discover the fraud

until the trial of the case because Triad was actively attempting

to conceal it”. And, the court held that Triad was not entitled to

a jury trial on the fraud claim because it presented no new fact

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issues, “only a new theory of recovery arising out of the same

circumstances and events”.

After Triad filed its notice of appeal, PSE and Century moved

for attorney’s fees and sanctions, and to fix prejudgment interest;

the motions were heard in January 1995. While they were under

advisement, Triad moved for Rule 60(b) relief on the grounds of

newly-discovered evidence (the missing original estimate file,

which Triad claimed to have located and offered to make available

to the court and opposing counsel); misrepresentations by PSE and

Century in their proposed findings; and procedural and fundamental

due process deficiencies. The court, inter alia, denied the Rule

60(b) motion without a hearing; and denied PSE and Century’s

requests for sanctions and attorney’s fees.

In denying Rule 60 relief, the court held that Triad’s newly

found estimate file was not “newly discovered” evidence within the

meaning of Rule 60(b)(2), but was merely “newly produced”; and that

the production of the file would not have changed the trial result.

The other grounds asserted by Triad (denial of due process, right

to a jury trial, misrepresentations by PSE and Century) were

rejected as an attempt to use Rule 60(b) as a substitute for

appeal. (Triad appealed the order denying Rule 60(b) relief, but

did not brief that issue specifically; accordingly, it is

abandoned.)

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 II.

Century’s cross-appeal for attorney’s fees will be addressed

after the issues presented by Triad. It contends that the take-

nothing judgment is based on erroneous interpretations of the

subcontract and of the acceleration agreement, and that the fraud

judgment cannot stand because of insufficient evidence and

procedural and constitutional violations. Of course, we review the

district court’s factual findings only for clear error and its

conclusions of law de novo. FED. R. CIV. P. 52(a); e.g., Johnson v.

Gambrinus Co./Spoetzl Brewery, 109 F.3d 1040, 1044 (5th Cir. 1997).

In our application of this clearly erroneous standard, Triad

urges that we “take into account the district court’s lack of

personal attention to factual findings” in light of its “almost

verbatim” adoption of the defendants’ proposed findings. Our court

recently commented on that practice in Marine Shale Processors,

Inc. v. U.S. E.P.A., 81 F.3d 1371, 1386 (5th Cir. 1996), cert.

denied, ___ U.S. ___, 117 S. Ct. 682 (1997):

[W]e note that district courts occasionally
adopt wholesale the findings of fact and
conclusions of law written by a victorious
litigant. While we discourage this practice,
we have never radically altered the standard
of review in such cases, much less concluded
that such an adoption results in a per se due
process violation.... We tolerate the
occasional use of this device because of our
trust that district courts will closely
examine the proposed findings and will
carefully consider the objections and
arguments of the opposing party.

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 Indeed, the findings and conclusions are almost identical to

those proposed by the defendants. But, based on our review of the

record, we are confident that the district court closely examined

the proposals and likewise considered most carefully Triad’s

position. Moreover, in applying the clearly erroneous standard,

the findings are tested against the record. Finally, as noted, for

the most part Triad does not contest the findings. In sum, an

altered standard of review -- if that is what Triad is suggesting

-- is not in order.

A.

With respect to Triad’s EWO claims, the central issue is

whether its subcontract allows payment above the “guaranteed

maximum lump sum” price for work performed as a result of changes

to the design shown in the contract drawings, or whether, as the

district court held, additional payment is due only for work

resulting from either changes to the DCS or PSE’s “gold plating”.

The answer turns on the intended meaning of the contract phrase

“guaranteed maximum”.

Needless to say, whether a contract is ambiguous, as well as

the interpretation of an unambiguous contract, are questions of law

reviewed de novo. E.g., Clardy Mfg. Co. v. Marine Midland Business

Loans Inc., 88 F.3d 347, 352 (5th Cir. 1996), cert. denied, ___

U.S. ___, 117 S. Ct. 740 (1997). The district court held that the

contract was unambiguous; that it required Triad to furnish the

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same scope of work as Century owed to PSE; that the main document

which defined Triad’s guaranteed maximum scope of work was the DCS;

that Triad’s contractual scope includes everything necessary to

provide complete and operational systems for the facility within

the scope of the DCS; and that, as a result, Triad was entitled to

additional payment only for work added outside the scope of the DCS

or resulting from PSE’s “gold plating”.

Triad does not contend that the subcontract is ambiguous;

instead, that the court interpreted it erroneously. Triad asserts

that the conclusion that the DCS defined Triad’s scope, and that

everything else was subject to change without causing an increase

in Triad’s price, even if the contract design would have produced

a complete and operational plant, is inconsistent with the

subcontract’s definition of “guaranteed maximum” and contradicts

the plain language of the subcontract, which expressly tied Triad’s

scope of work to the underlying contract drawings, as well as to

the DCS.

Before turning to the contract documents, at least some light

needs to be shed on Triad’s suggestion that the original design

would have produced a complete and operational facility. Triad’s

reliance on its expert’s opinion that the quantities shown on the

contract cable schedules were adequate to construct a facility that

would start-up and operate is misplaced. For starters, although

the expert reviewed the bid package, including the DCS, he did not

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review Triad’s contract. Moreover, Triad agreed that the job, as

bid, was only approximately 70% engineered.

In any event, Triad subcontract ¶ 1, entitled “Scope of Work”,

provides that Triad “shall perform ... the work ... [i]n accordance

with plans, specifications and addend[a] listed on page (1) of

[the] Purchase Order”. And, Purchase Order page one provides that

Triad is to

complete all Electrical/Instrumentation work
in complete accordance with the intent of the
contract specifications, as modified by
Addendum 1 dated September 14, 1983,
clarifications to Addendum 1 dated September
22, 1983, Addendum 2 dated October 10, 1983,
drawings as listed on Attachment 1, and the
Design Control Specification dated August 31,
1983 modified by Revision 1 dated October 10,
1983, and Revision 2A dated December 5, 1983.

(Emphasis added.) The Purchase Order then provides that “[a]ll of

the following items shall be furnished complete and provide

complete operational systems meeting all requirements of the

Contractor, Engineer and owner, but not limited to”, and lists a

number of items Triad is to provide, “ALL FOR THE GUARANTEED

MAXIMUM LUMP SUM PRICE OF $3,400,000".

The Specification for General Construction, referenced in the

Purchase Order, contains a detailed definition of Triad’s scope of

work:

1.0 SCOPE OF WORK

This specification covers the ... performance of
all work necessary for construction of a
Cogeneration Facility.... The work shall include

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 the items described in the contract drawings and
this specification. In the event of conflict
between the drawings and specification involving
quality or quantities, THE HIGHEST QUALITY AND THE
GREATEST QUANTITY SHALL BE FURNISHED. The contract
drawings and specification are complementary and
what is required by either shall be as if required
by both, unless specifically stated otherwise.
Information presented on the drawings is as
accurate as surveys and planning can determine;
however, field verification of all dimensions is
directed. In the event of conflict between the
drawings and specification involving errors,
omissions, or inconsistencies, the Contractor shall
notify [PSE] of such conflict for the purpose of
clarification or correction.

.1 Work Included

.1 Perform all work described to the
extent shown on the drawings listed
on the attached [PSE] Drawing Index
(Attachment 1) Vendor Drawing Index
(Attachment 2), and as described in
this specification.

Among the drawings listed on the PSE Drawing Index (Attachment 1)

attached to the Specification for General Construction were cable

schedules, specifying wires and cables by size, type, and

approximate length, associated hardware, and items to be connected.

Addendum 1, referenced in the Purchase Order, defined the

guaranteed maximum price to include the “Scope of Work in [the] ...

Specification for [General] Construction ... plus the additional

amount necessary to furnish a plant which will start-up and operate

as stated in the Design Control Specification”. (Emphasis added.)

And, as noted supra, the clarifications to that Addendum, also

referenced in the Purchase Order, provide:

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 The [DCS] establishes the design basis for an
operable and reliable plant as defined by
[PSE]. The conceptual design, process design,
and detail engineering design will be
performed by [PSE]. There is no requirement
for detail design evaluation, system
evaluation, detail auditing of PSE engineering
calculations, etc. The contractor is to
provide (a) a base bid based on the bid
documents, and (b) a guaranteed maximum bid
based on the level of confidence the
contractor feels that the plant described in
the Bid Documents can start-up and operate as
defined in the DCS.

Thus, according to the definitions of “guaranteed maximum” in

the addenda, to the extent that the DCS described items that the

drawings did not address, the “Guaranteed Maximum Price” would

include the work associated with such items. Pursuant to that

definition, Triad assumed the risk that it had included in its

guaranteed maximum price a sufficient contingency to cover the

labor and materials necessary to complete the work in accordance

with the manner in which PSE chose to fill in the gaps left by the

contract drawings and specifications.

In addition, the district court held that Triad also assumed

the risk that it had included in its price a sufficient contingency

to account not only for completion of the design, but also for

changes in the contract drawings, so long as the changes were

neither “gold plating” nor outside the scope of the DCS. Triad

contends that its subcontract does not cover the risk that PSE

would change completed designs shown in the contract drawings, and

that the district court’s conclusion to that effect was based on an

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October 1983 agreement between PSE and Century, to which Triad was

not a party. That PSE/Century agreement, which defined and limited

the design modifications that would result in a change to Century’s

Guaranteed Maximum Price under its contract with PSE, provided:

Engineering changes are [guaranteed maximum]
changes only if they are outside of the scope
of the [DCS] or if they cause work out of the
normal sequence of work.... Engineering
errors are a change to the [guaranteed
maximum]. Changes to Owner furnished
equipment are changes to the [guaranteed
maximum].

Triad asserts that the absence of similar language in its

subcontract establishes conclusively that Triad was not required to

accept the risk that PSE might change the design shown in the

contract drawings.

Century acknowledges that language similar to the PSE/Century

definition of guaranteed maximum was not incorporated in the Triad

subcontract (or even in the PSE/Century contract); but, it asserts

that the concept embodied in that October 1983 PSE/Century

agreement was contained in Triad’s subcontract. Century concedes

further that the final design, as shown in the issued-for-

construction drawings, required Triad to install more cable than

detailed by the contract drawings. But, Century points out that

the contract cable schedules show all cable lengths as “APPROX.”

Further, it relies on Purchase Order ¶ 11, which requires Triad to

[f]urnish and install Electrical/Instrumenta-
tion items such as but not limited to: cable
tray, conduit and cable of certain items as

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 described in the [DCS] and or the addendums.
Cable for these items are [sic] over and above
the quantities specified in the Cable
Schedules.

(Emphasis added.)

According to Century, this ¶ 11 clearly expresses the parties’

intent that Triad could not limit its scope of work, in this

regard, to installing the quantity of cable specified in the

contract cable schedules, and establishes that Triad assumed the

risk that the contract cable schedules would be changed as PSE

completed the design. Century maintains that, because ¶ 11

specifically prohibited Triad from limiting its electrical scope of

work to the cable schedules, the only document to provide a

limitation on that scope was the DCS; accordingly, by definition,

only changes to the DCS could constitute a change to the guaranteed

maximum scope of work.

Triad responds that Century’s interpretation of ¶ 11 makes

other, more specific provisions of the contract meaningless or

nonsensical. Such other provisions include Purchase Order ¶ 1,

which defines Triad’s work as “all Electrical/Instrumentation work

in complete accordance with the contract specifications, ...

drawings as listed on Attachment 1, and the [DCS]”; ¶ 9, relating

to all lighting and power wiring, which states that “[c]onduit and

cable to be included to the extent shown on the conduit and cable

schedule”; and ¶ 16, which references the cable schedules as well

as the DCS and addenda. According to Triad, the only way to read

- 22 -
¶ 11 consistently with the rest of the subcontract is to construe

its use of the phrase “certain items” as referring to items in the

DCS for which no detail drawings existed. Triad asserts that ¶ 11

makes plain that Triad was required to “fill in the gaps” in the

design, because there were “certain items” in the DCS which were

not covered by the cable schedules. According to Triad, the phrase

“cable for these items” in ¶ 11 refers only to “certain items

described in the [DCS]”.

Triad’s interpretation of ¶ 11 is inconsistent with the

introductory clause on the first page of the Purchase Order, which

requires Triad to furnish “all” work “complete” for “complete

operational systems”. Moreover, because everything to be installed

in the plant is described in the DCS, the language of ¶ 11 applies

to all cable installed by Triad, and not just to those items

described in the DCS but not included in the cable schedules.

Finally, Triad contends that change order language in its

subcontract contradicts the district court’s conclusion that the

subcontract definition of guaranteed maximum scope of work is

consistent with the definition applied regularly in the

construction industry (contractor to supply everything required for

a complete and operational facility for a “guaranteed maximum”

price). Triad notes that subcontract ¶ 4 provides that Triad’s

price is “subject to alterations as herein provided for”; and that

¶ 5, entitled “Extra Work”, authorizes Century to “direct that

subcontractor perform extra work or furnish additional materials”,

- 23 -
and provides further that Triad’s price is to be equitably

adjusted.

Obviously, PSE and Century do not dispute that the contract

envisioned the possibility of extra compensation if Triad was

required to perform outside its contractual scope of work. Indeed,

Triad was given credit for EWOs which resulted from changes to the

DCS and from field extra work requests. But, this change order

language is not inconsistent with the district court’s

interpretation, and it does not answer the question whether a

particular change is a compensable change, i.e., a change to

Triad’s contractual scope of work.

In sum, the district court correctly interpreted Triad’s

“GUARANTEED MAXIMUM LUMP SUM PRICE” to include all work except that

performed as a result of either changes to the DCS or PSE’s “gold

plating”.

B.

As discussed, Triad was paid $372,338 pursuant to the July

1985 acceleration agreement ¶ 1. That paragraph states that “[PSE]

will pay Triad an additional $372,338 for acceleration of their

base electrical contract”. But, ¶ 3 of that agreement provides for

payments to Triad based upon the following formula:

A target incremental man-hour forecast of
25[%] over Triad’s base contract was agreed
for inefficiencies due to acceleration.
Triad’s base contract is 83,000 man-hours and
the corresponding target increment for
inefficiencies is 20,750 man-hours. [PSE] will

- 24 -
 pay Triad for all man-hours over 83,000 and
under 103,750 (83,000 + 20,750) at the
contract rate of $22.43. The savings between
the payment for incremental man-hours over
83,000 expended and the increment of 20,750
will be split 50-50 with Triad. Above the
25[%] target [PSE] will pay subcontractor’s
cost only, no profit. It was agreed that this
hourly cost is $19.18 per man-hour. The
maximum additional amount [PSE] will pay over
the 25[%] target is $150,000. Change orders
will be incrementally added to both the base
and the target amount (25[%] of the base) for
determination of the final sharing. This
agreement on electrical work applies where the
change order man-hours do not exceed 25[%] of
the base man-hours. If the change orders
exceed 25[%], this will be renegotiated for
any impact caused by the additional changes.

In short, ¶ 1 speaks of payment for “acceleration” of Triad’s

work, while ¶ 3 speaks of payment to Triad for “inefficiencies due

to acceleration”. Triad sought payment under ¶ 3, but without

giving a credit for the $372,338 paid under ¶ 1. In short, Triad

contends that the ¶ 1 payment was a “sign-up bonus” for agreeing to

accelerate; PSE and Century counter that it was an “advance”.

For this question, the district court held that the

acceleration agreement was ambiguous; accordingly, it allowed parol

evidence. Based on testimony by PSE and Century officers, the

court found that the parties intended that the amount paid under ¶

1 was an advance, and that ¶ 3 contemplated a post-job

reconciliation of Triad’s actual efficiency losses, against which

the advance would be credited.

The district court found also that Triad failed to prove its

actual efficiency losses because it had lost its original estimate

- 25 -
file and because there was evidence that, in fact, Triad had not

suffered a loss of productivity due to acceleration. (The court

also refused to enforce the acceleration agreement because it

concluded that Triad committed fraud, as discussed infra.)

Triad contends that the district court erred by holding that

the acceleration agreement is ambiguous and, concomitantly, by

allowing parol evidence. Triad asserts that the acceleration

agreement called for unconditional, objectively quantifiable

payments without regard to actual losses in Triad’s productivity;

that ¶ 1 was clear and unambiguous; that nothing in either

paragraph tied the ¶ 1 payment to ¶ 3's formula; and that nothing

in ¶ 3 mandated a credit for the ¶ 1 payment.

“The initial determination that a contract is ambiguous, such

that its interpretation warrants the consideration of extrinsic

evidence, is ... a legal conclusion subject to de novo review.”

Clardy Mfg. Co., 88 F.3d at 352 (emphasis in original). “[W]hen a

contract is ambiguous and its construction turns on the

consideration of extrinsic evidence, we review the district court’s

interpretation for clear error only.” Id. “We look to state law

to provide the rules of contract interpretation.” Id.

“Under Texas law, a contract is ambiguous if, after applying

established rules of interpretation, the written instrument

‘remains reasonably susceptible to more than one meaning.’” Id.

(quoting R & P Enterprises v. LaGuarta, Gavrel & Kirk, 596 S.W.2d

- 26 -
517, 519 (Tex. 1980)). “In determining whether the language of the

contract is unambiguous, ... we ‘should examine and consider the

entire writing in an effort to harmonize and give effect to all the

provisions of the contract so that none will be rendered

meaningless.’” Id. (quoting Coker v. Coker, 650 S.W.2d 391, 393

(Tex. 1983)). But, “even when the contract is ambiguous, and parol

evidence is therefore admissible to explain the ambiguity, such

evidence is not competent to vary the terms of the contract or

contradict the legal effect of its unambiguous provisions.”

Caviness Packing Co. v. Corbett, 587 S.W.2d 543, 546 (Tex. Civ.

App. -- Amarillo 1979, writ ref’d n.r.e.). As part of determining

whether ambiguity exists, the court must look at the contract as a

whole in light of the circumstances existing at the time of

execution. Reilly v. Rangers Mgmt., Inc., 727 S.W.2d 527, 529

(Tex. 1987).

The district court did not err by concluding that the

acceleration agreement is ambiguous. Paragraph 1 does not specify

whether the $372,338 was a “sign-up bonus” or an “advance” to be

credited later against the amount determined in accordance with ¶

3. And, Triad’s claim that ¶ 1 should be examined independently

from ¶ 3 is contrary to Texas law, which requires that the

agreement be read as a whole. It goes without saying that, because

the agreement is ambiguous, parol evidence was admissible. See R

& P Enterprises, 596 S.W.2d at 519.

- 27 -
 Likewise, the district court did not clearly err by finding

that the parties intended the ¶ 1 payment to be an advance to

finance inefficiencies subject to being adjusted pursuant to ¶ 3 at

the conclusion of the project, when the number of inefficient man-

hours could be calculated. There was testimony that the agreement

was intended to compensate Triad for any inefficiencies in a way

that would be fair to all of the parties. If the advance were

treated as a “sign-up bonus”, Triad could possibly be paid twice

for most, if not all, of the same inefficiencies: under ¶ 1, and

later under ¶ 3. Furthermore, ¶ 6, which provided for a “bonus” if

Triad met certain project completion dates, indicates that the

parties knew how to use that term when intended. Finally, in light

of the evidence of the parties’ intent, the fact that the $372,338

was paid pursuant to change orders (which, in fact, reference the

acceleration agreement) to Triad’s subcontract does not mean, as

Triad contends, that Century treated the payment as a bonus.

Based on the foregoing, the district court correctly denied

Triad’s acceleration claims.

C.

Long after the close of the evidence, the district court

granted leave to add the fraud counterclaim. The next day, it held

that Triad had committed fraud: (1) by inducing Century to advance

over $600,000 by misrepresenting both that it had a negative cash

flow and that the EWOs represented actual compensable changed work;

and (2) by inducing Century and PSE to advance the $372,338 under

- 28 -
the acceleration agreement for anticipated inefficiencies, by

misrepresenting that the 83,000 man-hours base was sufficient to

perform Triad’s contractual scope of work, when in fact it was

adequate only for a “qualified” scope of work, based on the

contract cable schedules.

Triad challenges the fraud judgment, including the $3 million

punitive damages, on grounds that it did not have adequate notice

of the counterclaim or an opportunity to defend against it; that it

was denied its right to a jury trial; and that, in any event,

Century and PSE failed to prove fraud. On this incomplete record

on the fraud issue, we are not able to review the sufficiency of

the evidence. Instead, we conclude that, although the court

properly granted leave to amend, it reversibly erred by entering

judgment on that new claim without re-opening the case to allow

Triad to defend against it, including before a jury.

1.

At the close of Triad’s Phase II case-in-chief, Century

partially moved orally for leave to add a counterclaim for fraud

and punitive damages (it stated that the written motion would be

filed in a few days); Triad objected; and Century did not then

obtain a ruling on the “motion”. And, PSE and Century rested the

next day, without presenting any evidence of fraud.

In fact, Century and PSE did not file the motion to amend

until approximately three weeks after the conclusion of the Phase

II trial. In opposition, Triad asserted that, if the court were to

- 29 -
grant leave to amend, Triad would be entitled to a continuance, to

have some of the court’s prior findings stricken, and to have the

issues tried before a jury. Nearly one and one-half years later,

the district court granted leave to add the claim, one day before

entering judgment.

The motion to amend was premised on FED. R. CIV. P. 13(f) and

15(b). Rule 13(f) provides:

When a pleader fails to set up a counterclaim
through oversight, inadvertence, or excusable
neglect, or when justice requires, the pleader
may by leave of court set up the counterclaim
by amendment.

(Emphasis added.) Rule 15(b) provides:

When issues not raised by the pleadings are
tried by express or implied consent of the
parties, they shall be treated in all respects
as if they had been raised in the pleadings.
Such amendment of the pleadings as may be
necessary to cause them to conform to the
evidence and to raise these issues may be made
upon motion of any party at any time, even
after judgment; but failure so to amend does
not affect the result of the trial of these
issues. If evidence is objected to at the
trial on the ground that it is not within the
issues made by the pleadings, the court may
allow the pleadings to be amended and shall do
so freely when the presentation of the merits
of the action will be subserved thereby and
the objecting party fails to satisfy the court
that the admission of such evidence would
prejudice the party in maintaining the party’s
action or defense upon the merits. The court
may grant a continuance to enable the
objecting party to meet such evidence.

- 30 -
(Emphasis added.) It goes without saying that the fraud claim was

not tried by express consent. Triad contends that it did not

receive adequate notice of the claim, and that it was not tried by

implied consent.

We review the leave to amend ruling for abuse of discretion.

E.g., Norman v. Apache Corp., 19 F.3d 1017, 1021 (5th Cir. 1994).

Concomitantly, it is most obvious that, “under Rules 15(a) and

13(f) the Court should not grant leave to amend (or to add a

counterclaim) where undue prejudice will result”. T. J. Stevenson

& Co., Inc. v. 81,193 Bags of Flour, 629 F.2d 338, 369-70 (5th Cir.

1980). For our purposes, “it is not often that amendments are

allowed after the close of evidence, since the opposing party may

be deprived of a fair opportunity to defend and to offer any

additional evidence”. Id. at 370 (emphasis added; internal

quotation marks, ellipses, brackets, and citations omitted).

Consistent with what the district court held, Century and PSE

assert that Triad cannot claim prejudice because Century and PSE’s

Phase II pretrial order inserts (filed less than two weeks before

that part of trial) put Triad on notice that they were presenting

a fraud claim, and because the evidence of fraud came “[f]rom the

mouths of Triad’s own witnesses”.

The district court’s conclusion that the pretrial order gave

Triad notice is based on two statements placed in that order by

Century and PSE: in the “Procedural History” portion, that “Triad,

- 31 -
at best, misconstrued, and at worst, misrepresented, that the

drawings issued by PSE after Triad was awarded the Subcontract

resulted in changes to Triad’s contractual scope of work”; and, in

the “Conclusion”, that “[t]he evidence at trial will show that

Triad’s claims for ... EWOs were greatly overstated due to Triad’s

misrepresentation (whether intentional or not) of its contractual

scope of work.”

In the light of the particularity required for pleading fraud,

FED. R. CIV. P. 9(b), and based on our review of this record, we

conclude that, despite the on-the-scene familiarity by the district

court with this question and, in the larger sense, this case, it

erred by finding that the pretrial order put Triad on notice of a

fraud claim. As noted, the statements that supposedly did so

appear only in the “Procedural History” and “Conclusion” portions;

those portions entitled “Contested Issues of Fact” and “Contested

Propositions of Law” contain no mention of fraud. Moreover, in the

pretrial order, PSE did not seek affirmative relief, and Century’s

refund claim is not couched as one for fraud:

Triad’s EWO submissions were flawed because
they were based upon an incorrect conception
of Triad’s contractual scope of work. Both
PSE and Century informed Triad on numerous
occasions that its EWO submissions were
flawed, but they accommodated Triad by making
the interim payments....

Likewise, Century’s claim for return of the $372,338 acceleration

payment was based on a theory of unjust enrichment, not fraud:

- 32 -
 Since ... Triad did not properly comprehend or
bid the correct scope of work, the fundamental
premise on which the July 15th [acceleration]
Agreement was based is invalid. Having lost
the original estimate Triad can never meet its
burden of proof.... Under these circumstances,
Triad, as a matter of law, can recover nothing
under the July 15th [acceleration] Agreement
... and Triad must repay to Century the sum of
$372,338 originally advanced.... To hold
otherwise would permit Triad to profit from
its own mistakes and wrongful conduct.

Of course, charging willful and malicious conduct in breach of

contractual obligations, without more, does not constitute a fraud

claim. See Kingsley v. Baker/Beech-Nut Corp., 546 F.2d 1136, 1142

(5th Cir. 1977). In sum, these pretrial order statements do not

constitute notice that Century and PSE were making a fraud claim.

Along that line, it is most inconsistent, if not disingenuous, for

Century and PSE to contend now that these statements put Triad on

notice of a fraud claim; at trial, when Century “moved” orally for

leave to amend, it stated that it had not done so earlier because

it had not become aware of the fraud until near the end of the

Phase II trial, because Triad had concealed it. Simply put, it

would hardly be fair to hold that Triad should have recognized a

fraud claim from the pretrial order statements, but yet allow the

parties who made them to excuse their failure to seek leave to

amend prior to trial by claiming ignorance of the fraud. See

Jimenez v. Tuna Vessel Granada, 652 F. 2d 415, 420 (5th Cir. 1981)

(“each party is entitled to know what is being tried, or at least

to the means to find out. Notice remains a first-reader element of

- 33 -
procedural due process, and trial by ambush is no more favored here

than elsewhere.”).

Pursuant to Rule 15(b), if “issues not raised by the

pleadings” -- the equivalent of “notice” -- are tried instead by

“express or implied consent of the parties, they shall be treated

in all respects as if they had been raised in the pleadings.” No

notice was given; nor was there express consent. Therefore, a

ruling on the new claim was allowable only if Triad had impliedly

consented to trial of the fraud claims. Toward that end, “trial of

unpled issues by implied consent is not lightly to be inferred

under Rule 15(b), [and] such inferences are to be viewed on a case-

by-case basis and in light of the notice demands of procedural due

process”. Jimenez, 652 F.2d at 422.

Whether an issue has been tried with the
implied consent of the parties depends upon
whether the parties recognized that the
unpleaded issue entered the case at trial,
whether the evidence that supports the
unpleaded issue was introduced at trial
without objection, and whether a finding of
trial by consent prejudiced the opposing
party’s opportunity to respond.... Whether
the parties recognized that the unpleaded
issue entered the case at trial often depends
on whether the evidence that supports the
unpleaded issue is also relevant to another
issue in the case. If the evidence that
supports the unpleaded issue is also relevant
to another issue in the case, the introduction
of this evidence may not be used to show
consent to trial of a new issue absent a clear
indication that the party who introduced the
evidence was attempting to raise a new issue.

- 34 -
United States v. Shanbaum, 10 F.3d 305, 312-13 (5th Cir. 1994)

(internal quotation marks and citations omitted).

The evidence of fraud, and its active concealment, that the

district court found came “from the mouths of Triad’s own

witnesses” was also relevant to the contractual issues being tried

in Phase II. Because there was no indication that Century and PSE

were presenting a fraud claim at the time that evidence was

introduced, it cannot be the basis for finding that Triad impliedly

consented to trial of a fraud claim.

Century and PSE respond that, because the “motion” to amend

was made at the close of Triad’s case and before they presented any

evidence, Triad received fair notice of the claim, and its conduct

thereafter amounted to a waiver of any right to complain. They

maintain that Triad responded to Century’s oral “motion” with a

“half-hearted” objection; note that Triad never obtained a ruling

on that objection, even when reminded at the conclusion of trial

that the motion to amend was pending; and note that, during the

balance of trial (one day), Triad did not, in its rebuttal case,

present evidence relating to the fraud claim, nor seek a

continuance to be allowed to do so, nor renew its objection or seek

to reopen the case when reminded at the conclusion of trial that

PSE and Century were pursuing a fraud claim.

As a point of embarkation, and as referenced earlier, it is

most debatable that, when Triad rested, Century even “moved” orally

- 35 -
for leave to amend. The comments by Century’s counsel, taken as a

whole, instead put the district court and Triad on notice that a

motion would be filed in the near future. This lack of certainty

as to what was being sought cannot be laid at Triad’s feet.

In any event, Century and PSE’s reliance on Dale Benz, Inc.,

Contractors v. American Casualty Co., 305 F.2d 641, 642 (9th Cir.

1962), in support of their assertion that Triad waived its right to

complain about the fraud judgment by failing to obtain a ruling on

its objection to Century’s oral motion for leave to amend, made

prior to the close of all the evidence, is misplaced; that case

dealt with a party’s failure to obtain a ruling on its objection to

the admissibility of evidence. In the absence of a ruling granting

leave to amend, which was the responsibility of Century and PSE to

obtain, Triad’s failure to obtain a ruling on its objection to the

proposed amendment cannot constitute a waiver of its objection to

trial of a fraud claim that was merely proposed, but had not been

allowed. And, because Century and PSE did not obtain a ruling on

the “motion”, it would have been most premature for Triad to seek

a continuance in order to introduce evidence on the fraud issue.

As Triad correctly notes, acceptance of the position advanced

by PSE and Century would create a classic “Catch-22" for a party

faced with an opponent’s oral, ungranted, mid-trial (arguably,

late-trial) motion for leave to add a claim. Failure to defend the

proposed claim during the remainder of trial would risk an order,

- 36 -
after both sides had rested, granting leave to file the claim and

a finding that the non-movant had waived any objection by failing

to defend. On the other hand, introducing evidence in opposition

to the proposed claim would risk a finding, after the close of

evidence, that leave to file should be granted pursuant to Rule

15(b) because the claim had been tried with the non-movant’s

implied, if not express, consent.

Triad was also prejudiced by the district court’s exclusion

during Phase II of evidence which, had Triad and the court been on

notice that a fraud claim was being tried, would have been relevant

to the elements required to prove fraud, such as whether Triad

intended to defraud, whether PSE and Century relied on Triad’s

representations, and whether either suffered damages. For example,

Triad sought to introduce evidence that it reduced its final price

after Century instructed it to exclude work shown in post-1983

design documents and assured it that the post-1983 design changes

would be handled as extras; evidence relating to Century’s in-house

estimate for the electrical and instrumentation portion of the

project, which was lower than Triad’s estimate of 83,000 man-hours;

evidence of the parties’ subjective intent and knowledge of Triad’s

scope; and evidence that Century was paid by PSE for Triad’s extra

work, as guaranteed maximum changes, while Century was claiming a

refund from Triad for the same work. And “last but certainly not

least”, Triad was deprived of the opportunity to defend against the

- 37 -
punitive damages demand. See Northeast Women’s Center, Inc. v.

McMonagle, 868 F.2d 1342, 1356 (3d Cir.) (punitive damages award

set aside where plaintiff failed to mention punitive damages in

pretrial order and then objected to evidence of defendant’s motive,

thereby preventing defendant from defending the claim), cert.

denied, 493 U.S. 901 (1989).

In sum, and based on our review of this record, we conclude

that, pursuant to Rule 13(f) (“when justice requires”), allowing

the addition of the fraud claim was not an abuse of discretion.

See Spartan Grain & Mill Co. v. Ayers, 517 F.2d 214, 220 (5th Cir.

1975) (courts have interpreted provisions of Rule 13(f) liberally,

in line with Rules’ goal of resolving disputes on the merits in a

single judicial proceeding); Budd Co. v. Travelers Indem. Co., 820

F.2d 787, 791 (6th Cir. 1987) (internal quotation marks and

citation omitted) (“Rule 13(f) permitting amendments `when justice

requires’ is especially flexible and enables the court to exercise

its discretion and permit amendment whenever it seems desirable to

do so.”). Concomitantly, we conclude that the district court

erred, after granting leave to amend, by ruling on the claim

without reopening the case to allow Triad to defend against it.

Accordingly, we must remand this case for further proceedings on

the fraud claim.

For remand purposes, and contrary to Century and PSE’s

assertions, the district court did not hold that Triad was required

- 38 -
to return the $372,338 acceleration agreement ¶ 1 advance on a

ground independent of its fraud finding. PSE’s only affirmative

claim for relief is the fraud claim. Likewise, in its initial

counterclaim, Century sought to recover only alleged overpayments

on Triad’s EWOs; it did not demand payment under the acceleration

agreement. In the joint pretrial order filed by Century and PSE

prior to the Phase II trial, they asserted that Triad “must repay

to Century” the acceleration agreement ¶ 1 payment to Triad of

$372,338, because Triad had lost its original estimate and,

therefore, could not prove the number of additional man-hours

caused by inefficiencies, as opposed to the number of man-hours

resulting from Triad’s underestimating the number of man-hours

necessary to perform its contractual scope of work. But, they

neither sought nor obtained a ruling from the district court on

that claim. Instead, they sought and received the award based

solely on their subsequent joint fraud claim.

2.

Also at issue is whether Triad was erroneously denied a jury

trial of the fraud claim. Although remand is mandated by our

holding that Triad was deprived of the right to defend against the

properly allowed fraud claim, we address this issue to assist the

district court on remand, in that the reasons advanced previously

for not allowing a jury trial might be reurged, erroneously, on

remand.

- 39 -
 A party may demand a jury trial of any issue triable of right

by a jury by serving upon the other parties a written demand “not

later than 10 days after the service of the last pleading directed

to such issue.” FED. R. CIV. P. 38(b). The district court held

that Triad was not entitled to a jury because the counterclaim did

not raise new issues of fact, but only a new theory of recovery

arising out of the same “circumstances and events” as Triad’s

claims for extras, for which it had not demanded a jury.

Concerning PSE, the new claim raised new issues of fact and

law (such as fraud and PSE’s damages) for which Triad had a right

to a jury; PSE had never before asserted any claim. Likewise, in

regard to Century, the claim raised new issues; for example,

whether punitive damages should be assessed against Triad. Triad

was entitled to demand a jury trial. See Daniel Int’l Corp. v.

Fischbach & Moore, Inc., 916 F.2d 1061, 1064 (5th Cir. 1990).

Maintaining that “the issue of Triad’s fraud had been in the

case at least since the pretrial order”, Century and PSE apparently

contend that the Rule 38(d) 10-day period for a jury demand began

to run from the date of that order. But, as stated, that order

(even assuming that such an order is the Rule 38(d) operative

“pleading”) did not give notice of a fraud claim. Moreover, as

also stated, if Century and PSE were aware of the facts giving rise

to a fraud claim at the time of that order, there was no excuse for

their waiting until much later in Phase II to move to amend.

- 40 -
 Century and PSE assert also that Triad waived a jury by

failing to request one after Century “moved” for leave to amend at

the conclusion of Triad’s Phase II case-in-chief. But, as also

discussed, even assuming arguendo that Century did so move at that

time, because Century and PSE did not then obtain a ruling on the

motion, it would have been premature for Triad to have then

requested a jury.

When all is said and done, this fraud claim is a classic

example of one requiring full notice and opportunity for defense,

to include a jury if desired. As noted, fraud commands its own

rule of pleading, requiring more pleading detail than normally

required. FED. R. CIV. P. 9(b) (“In all averments of fraud ..., the

circumstances constituting fraud ... shall be stated with

particularity.”) And, surely, a fraud claim presents credibility

and other fact-based questions that are most appropriate subjects

for a jury. On the other hand, we are most mindful of the

considerable time and attention already given this claim by the

district court. But, on this record, Triad is entitled to now

defend fully against this new claim, including, if desired, before

a jury.

D.

PSE does not appeal the denial of attorney’s fees; Century

does. It requested them pursuant to, inter alia, TEX. CIV. PRAC. &

- 41 -
REM. CODE ANN. § 38.001, et seq. Here, § 38.001 is the only basis

presented.

“The requisites to recover for attorney’s fees under [that]

statute ... are: 1) recovery of a valid claim in a suit on an oral

or written contract; 2) representation by an attorney; 3)

presentment of the claim to the opposing party or a representative

of the opposing party; and 4) failure of the opposing party to

tender payment of the just amount owed before the expiration of

thirty days from the day of presentment.” Sikes v. Zuloaga, 830

S.W.2d 752, 753 & n.1 (Tex. App. -- Austin 1992, no writ). The

party seeking attorney’s fees must both “plead and prove that

presentment of a contract claim was made to the opposing party and

that the party failed to tender performance.” Ellis v. Waldrop,

656 S.W.2d 902, 905 (Tex. 1983).

Among other reasons for denying the § 38.001-request, the

district court stated that, although Century “arguably” could

recover, it had failed, contrary to that section, to properly

allege in its pleadings both that a “demand” had been made on

Triad, and that Triad, in turn, had failed to tender performance.

We review the denial of attorney’s fees for abuse of discretion.

E.g., Richter, S.A. v. Bank of Am. Nat’l Trust & Sav. Ass’n, 939

F.2d 1176, 1195 (5th Cir. 1991).

Century asserts that the allegation in its counterclaim that

it told Triad that Triad had been overpaid, and Triad’s admission

- 42 -
in its reply to the counterclaim that Century made such a

statement, is adequate to plead a demand. Century maintains that

it was not necessary to plead Triad’s failure to tender performance

because it is implicit from its counterclaim that Triad refused to

tender the amount Century claimed owed. We disagree. As the

district court held, Century’s counterclaim did not give Triad the

requisite notice that attorney’s fees were being sought pursuant to

§ 38.001.

III.

On remand, the trial of the fraud claim will, no doubt, be

hotly contested and otherwise quite interesting, to say the least.

One example of the potent ingredients comprising the mix for this

issue is Triad’s original bid estimate file, already the subject of

extensive discussion, consideration, and district court rulings.

Concerning that file, some might say, to borrow a phrase, that it

“once was lost but now [is] found”; but, whatever may unfold, we

are most confident that, on remand, our very able district court

colleague will dispatch this, as well as the other issues,

carefully and expeditiously.

In sum, the denial of attorney’s fees is AFFIRMED; those parts

of the judgment disallowing Triad’s claims and awarding $593,215 to

Century are AFFIRMED; those parts concerning the joint fraud

counterclaim, awarding $372,338 in actual damages and $3 million in

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punitive damages, are REVERSED; and the case is REMANDED for

further proceedings consistent with this opinion.

AFFIRMED in PART and REVERSED and REMANDED in PART

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