UNITED STATES COURT OF APPEALS
For the Fifth Circuit
No. 95-60096
LEWIS MOORE, United States of America
for the use of d/b/a Lewis Moore Painting,
Plaintiff-Appellant,
VERSUS
GIBBS CONSTRUCTION COMPANY, INC., ET AL.,
Defendants-Appellees.
Appeal from the United States District Court
For the Southern District of Mississippi
(1:93-CV-491-RR)
February 23, 1996
Before GARWOOD, EMILIO M. GARZA, and DeMOSS, Circuit Judges.
PER CURIAM:*
Plaintiff Lewis Moore (Moore) appeals from final judgment
entered sua sponte prior to trial on the basis of arguments
presented in the parties' cross-motions to limit evidence. We
vacate and remand to the district court for further proceedings.
*
Pursuant to Local Rule 47.5, the Court has determined that
this opinion should not be published and is not precedent except
under the limited circumstances set forth in Local Rule 47.5.4.
BACKGROUND
Defendant Gibbs Construction Company (Gibbs) contracted with
the United States to repair and renovate the interior of the Tyler
House apartments on Kessler Air Force Base in Biloxi, Mississippi.
As required by law, Gibbs arranged for a bond as surety for payment
of claims against Gibbs. The payment bond was issued by co-
defendant Fidelity & Deposit Company of Maryland (Fidelity).1 In
November 1991, Gibbs subcontracted with Moore to paint and install
wall coverings inside the Tyler House.
After Moore commenced performance, it became apparent that the
existing surface on the interior doors and door frames in the Tyler
House would not bond with the paint called for in Moore's
subcontract with Gibbs. Moore delivered a sample of the door
surface to the paint manufacturer and it was examined by a chemist,
who specified an extensive surface preparation procedure for
getting the paint to adhere. Moore then informed Gibbs in writing
that the doors would require substantially more surface preparation
than was contemplated by the subcontract. Accordingly, Moore
requested a change order granting additional compensation for
reworking the doors which Moore had already painted and for
preparing the surface on the balance of the doors. Gibbs denied
Moore's request for additional compensation, responding that the
subcontract placed the burden of selecting and completing the
proper surface preparation on Moore. Thereafter, Moore wrote
1
For purposes of this appeal Fidelity's interests are
aligned with those of Gibbs. The defendants are referred to
collectively as "Gibbs."
2
directly to the Air Force about the problem. Following an
investigation, the Air Force agreed with Gibbs.
As a result of the ongoing dispute, Gibbs withheld part of
Moore's requested payment for September.2 In October 1992, Gibbs
did not submit any pay request for Moore to the Air Force. Gibbs
claims that it never received Moore's October pay request, and that
funds would have been withheld anyway because Moore's performance
continued to be unsatisfactory. Moore contends that the request
was mailed to Gibbs according to his usual procedure.
On November 9, 1992, Moore walked off the job, leaving
approximately half of the painting work incomplete. Gibbs
subsequently subcontracted with another painting contractor and was
able to complete the painting work for less than the amount
provided in Moore's subcontract, although the dispute with Moore
did significantly delay Gibbs' departure from the job site.
PROCEDURAL HISTORY
Moore filed this suit in October 1993. Federal jurisdiction
was based on the Miller Act, 40 U.S.C. § 270a et seq., which
requires certain contractors in privity with the United States on
federal construction projects to provide a payment bond for the
protection of subcontractors that are not in privity with the
United States. Id. at § 270a. The Act creates a statutory cause
of action, in favor of the subcontractor, and against the surety
bond, when the subcontractor is not paid on a timely basis for
2
The subcontract provided for Moore to receive progress
payments for work completed each month.
3
labor and materials furnished to the federal project. Id. at §
270b(a).
Moore also alleged claims, in the alternative, under
Mississippi state law for (1) breach of contract, and (2) fraud and
misrepresentation. Moore's breach of contract claim was based on
Gibbs' non-payment and Gibbs' failure to issue a change order after
Moore encountered a job site that materially differed from that
contemplated by the parties. Moore's fraud and misrepresentation
claims were based on allegations that project managers for both
Gibbs and the Air Force represented to Moore prior to contracting
that the surface preparation required would be minimal. Moore
sought recovery of the following damage elements: (1) $ 30,794.50
for labor and materials already supplied to the contract; (2) $
6,858 for materials purchased by Moore for the contract; (3) $
3,807 for extra-contractual work performed to remedy the surface
adhesion problem; (4) $ 17,233.16 in attorney fees, on the basis of
Gibbs' bad faith; (5) $ 15,983.52 in expectation damages, for
profits lost due to Gibbs' alleged breach; (6) $ 50,000 in punitive
damages; and (7) pre-judgment interest.
Gibbs answered that Moore committed the first breach by
abandoning performance, and that Moore failed to mitigate his
damages because he refused to sell materials purchased for the job
to Gibbs. Therefore, Gibbs claimed entitlement to an offset for
more than the damages claimed by Moore. Gibbs further answered
that unambiguous subcontract language imposed upon Moore the
obligation and expense of selecting an appropriate method of
4
surface selection, and that the contract specifications
contemplated the extent of surface preparation required at the
Tyler House.
Moore demanded a jury trial and the case was initially set for
October 1994. In early October 1994, the parties signed a pretrial
order and trial was reset for March 1995. The pretrial order was
entered on October 18, 1994.
On October 14, 1994, the district court received Gibbs' motion
to limit evidence and for leave of court. On November 4, Moore
also moved to limit evidence and for leave of court. On December
20, the district court heard argument on the parties' cross-motions
to limit evidence.
On January 13, 1995 the district court issued a lengthy order:
(1) determining that Mississippi law applied; (2) excluding all of
Moore's evidence; and (3) declining to recognize any offset
recovery in favor of Gibbs. On January 18, 1995, after a hearing
on Moore's request that the district court reconsider its January
13 ruling, the district court announced that it would enter final
judgment in seven days unless the parties settled.
On February 27, 1995, the district court entered an order sua
sponte "dismissing" the case. The February 27 order clarified that
the district court had intended to deny all of Moore's claims in
its January 13 order. The February 27 order further stated that
the rights and liabilities of all parties had been fully
adjudicated, and ordered entry of final judgment in accordance with
5
Federal Rule of Civil Procedure 58. Final judgment was entered
March 1, 1995. Moore filed a timely notice of appeal.
On March 6, after final judgment was entered, the district
court entered an order, sua sponte taking notice that the evidence
excluded by its January 13 order was not part of the record. The
March 6 order required the parties to submit copies of the excluded
evidence by March 10, 1995.
Moore raises three main issues on appeal. First, Moore
challenges the procedure employed by the district court, arguing
that his case was thrown out of court without adequate notice and
without a fair hearing. Second, Moore contends that the district
court erroneously determined that the entire dispute was governed
by Mississippi law because his Miller Act claims are governed by
federal law standards that displace state law. Third, Moore
contends that the findings made by the district court in the
January 13 order are erroneous.
MOORE'S PROCEDURAL CHALLENGES
The district court entered judgment sua sponte, and as a
matter of law, before trial. There were no motions to dismiss or
for summary judgment docketed in the case. Neither the district
court's January 13 order nor the district court's February 27 order
mention Federal Rule of Civil Procedure 12 or Federal Rule of Civil
Procedure 56. Instead, the district court's disposition is based
entirely upon its analysis of the parties' cross-motions to limit
evidence. The February 27 order directing the entry of judgment
simply clarified that the district court intended, by the January
6
13 order, to deny all of Moore's claims for relief because the
rights and liabilities of the parties were adjudicated at that
time.
Moore argues that the district court used improper standards
to evaluate the admissibility of the parties' evidence and then
improperly granted judgment as a matter of law without fair notice.
Gibbs responds that the district court properly decided the cross-
motions to limit evidence on the basis that parole evidence was not
admissible to contradict the unambiguous terms of the subcontract.
Gibbs further argues that once all of Moore's evidence was
excluded, the district court was within its authority to enter
summary judgment sua sponte, because there were no genuine issues
of material fact for trial.
The district court's January 13 order does not evaluate the
admissibility of the evidence in terms of traditional evidentiary
principles. Instead, the district court purported to be deciding:
(1) which party breached the contract; and (2) what money was owed
to each party. As part of that determination, the district court
decided key factual issues in favor of Gibbs, then concluded that
Moore's evidence was not relevant because he was not entitled to
prevail. In the context of conflicting evidence, the court made
"findings" that: (1) the site condition did not differ from that
contemplated by the contract; (2) the required surface preparation
was contemplated by the contract; (3) the adhesion problem was not
latent and could have been discovered by Moore at the time he bid
the job; and, of utmost importance to the district court's
7
disposition, (4) that Moore never properly requested a change
order.
At the conclusion of the lengthy order, the district court
excluded Moore's evidence on virtually every issue, including: (a)
whether Moore performed extra-contractual work; (b) whether the
problem encountered by Moore required extra-contractual surface
preparation; (c) Moore's claim for lost profits; (d) Moore's Miller
Act claims for labor and materials; and (e) Moore's claim for
attorney fees. The district court also reached the following legal
conclusions: (1) that Gibbs' decision to withhold Moore's September
progress payment was not a material breach of contract; (2) that
Moore did not encounter a differing site condition; and (3) that
Moore was not entitled to reimbursement for labor and materials
under the Miller Act.
Gibbs argues that the district court properly excluded
evidence extrinsic to the unambiguous terms of the written
subcontract, apparently trying to invoke the parole evidence rule.
Although the district court briefly mentions the unambiguous nature
of the subcontract, most of the district court's exclusions are not
supported by application of the parole evidence rule. For example,
the district court excluded evidence relating to Moore's claim for
lost profits because Moore "failed to properly document such
claim." The district court also excluded evidence relating to
Moore's Miller Act claims based on the legal and factual conclusion
that Moore failed to mitigate his damages as required by
Mississippi law.
8
Only the district court's exclusion of Moore's evidence
relating to his claim for extra-contractual work, and his claim
that the adhesion problem constituted a differing site condition
are even potentially supported by the parole evidence rule. As to
those claims, however, the district court still applied incorrect
standards. First, the district court did not limit its
consideration to contract terms. Instead it mentions evidence
extrinsic to the contract, and reaches a result that excludes only
evidence offered by Moore. Second, Mississippi's parole evidence
rule provides only that parole evidence is not admissible to vary
the terms of an unambiguous contract. MISSISSIPPI CODE § 75-2-202
(1981). The statutory rule does not operate to exclude evidence
bearing on the parties' course of performance. Id. at § 75-2-
202(a). Moore's evidence relating to whether he requested a
written change order, and whether he was fully paid for work
already completed under the subcontract, clearly falls into that
category. Finally, the parole evidence rule does not exclude
evidence relating to a parties claim of fraud or misrepresentation
in the making of the contract. Nichols v. Shelter Life Ins. Co.,
923 F.2d 1158, 1163 (5th Cir. 1991). Moore offered evidence to
support his contention that both Gibbs and the Air Force had made
specific pre-contract representations to him about the extent of
surface preparation required by the subcontract. That evidence
would not be excluded by the parole evidence rule.
Our Circuit has consistently required careful review when
categories of evidence are excluded wholesale on the basis of
9
pretrial motions. E.g., Kelly v. Petroleum Svcs., 61 F.3d 350, 357
(5th Cir. 1995) ("We agree with other circuits that an appellate
court should carefully examine blanket pretrial evidentiary
rulings."); Jackson v. Firestone Tire & Rubber Co., 788 F.2d 1070,
1084 (5th Cir. 1986) (pretrial blanket exclusion of evidence caused
artificial and unreasonable results). The district court's order
fails to articulate a cohesive theory to support the exclusion of
virtually all of Moore's evidence.
Nor is the district court's disposition salvaged by a summary
judgment analysis. "District courts can enter summary judgment sua
sponte so long as the losing party has ten days notice to come
forward with all of its evidence." Washington v. Resolution Trust
Corp., 68 F.3d 935, 939 (5th Cir. 1995). Given the circumstances
of this case, however, the district court failed to afford proper
notice. Further, even if notice had been proper, there is no
indication that the district court adhered to the rigid standards
mandated by Federal Rule of Civil Procedure 56.
On January 18, 1995, the district court informed the parties
that it intended to enter judgment, absent settlement, in seven
days. The court waited more than the required ten days before
ordering the entry of judgment on February 27, 1995. But summary
judgment was actually decided on the basis of the January 13 order
excluding all of Moore's evidence. Therefore, Moore had no
opportunity, either before or after that date, to supplement the
record with knowledge that an adverse judgment would be the
10
consequence for failure to do so. The district court failed to
provide Moore with adequate notice.
Moreover, the district court's February 27 memorandum order is
not framed in terms of Rule 56's requirement that there be no
genuine issue of fact. Instead, the order states that the parties'
rights have been adjudicated. Further, the February 27 order
relies solely upon the January 13 order, which clearly decided
several disputed issues of fact in Gibbs' favor.
The incomplete state of the appellate record compounds the
difficulty of our inquiry and, we can only surmise, must also have
affected the district court's disposition. Many important
documents were docketed late or not at all. For example, Gibbs'
motion to limit evidence was received by the district court on
October 14, 1994, but not filed with the clerk's office until two
months later, on December 21, 1994. Moore's response to that
motion, which is cited in the record and in the parties' briefs on
appeal, is not docketed and does not actually appear in the record.
In addition, the record and briefs on appeal indicate that both
parties filed lengthy memoranda in support of their respective
cross-motions to limit evidence. Those documents are likewise not
docketed and do not appear in the record. It is thus impossible to
tell what was before the district court at any given time. Indeed,
two days after judgment was entered, the district court entered
another order, sua sponte taking notice of the fact that the
evidence excluded by the January 13 order, and made the basis of
final judgment in the February 27 order, was not part of the
11
record. On the other hand, items that should never have been part
of the record, a hand-edited excerpt from a rough-draft of an
appellate brief for example, did make it into the record.
Taken together, the procedural anomalies identified by Moore
and the incomplete state of the record require that the case be
remanded for reconsideration in light of controlling evidentiary
principles, and with reference to the standards articulated in the
Federal Rules of Civil Procedure for granting judgment as a matter
of law prior to trial.3
APPLICABLE LAW
Moore also contends that the district court erroneously
determined that the entire dispute was controlled by Mississippi
law. We agree. Federal law controls Miller Act claims. United
States ex rel. General Elec. Supply, Inc. v. Wiring, Inc., 646 F.2d
1037, 1042 (5th Cir. 1981). State law can be relied upon to fill
the interstices only when there are no applicable federal
standards. E.g., United States ex rel. Lochridge-Priest, Inc., 950
F.2d 284, 287-88 (5th Cir. 1992).
The district court determined that all of Moore's substantive
claims were governed by Mississippi law. For example, the district
court entered judgment on Moore's claim for attorney fees because
there is "no legitimate basis in Mississippi law" for such an
3
Moore also argues that the cross-motions to limit evidence
were untimely and barred by the pretrial order's joint stipulation
that the evidence at issue was admissible. The district court's
disposition was improper regardless of whether the motions were
properly before the court. Therefore, we need not reach those
issues.
12
award. The Supreme Court has expressly held that federal law
controls the availability of attorney fees in Miller Act cases.
F.D. Rich v. United States ex rel. Indus. Lumber Co., 94 S. Ct.
2157, 2164 (1974). Although the American Rule generally prohibits
fee shifting, fees may be awarded to a prevailing party when the
opponent acts in "bad faith, vexatiously, wantonly, or for
oppressive reasons." Id. at 2165. The district court's
application of Mississippi law to determine attorney's fees was in
error. Similarly, the district court applied Mississippi law
instead of federal law to determine whether Moore could recover for
extra-contractual work performed to correct adhesion problems.
Miller Act claimants have been allowed to recover in quantum meruit
for work that benefits the prime contract, even when the work
performed falls outside the claimant's subcontract. Hensel Phelps
Constr. Co. v. United States ex rel. Reynolds Elec. and Eng'r Co.,
413 F.2d 701 (10th Cir. 1969). On remand, the district court
should take care to ensure that federal law is applied, where
available, to Moore's Miller Act claims.
CONCLUSION
The incomplete state of the record and the procedure employed
by the district court make it impossible for us to provide a
meaningful review of the district court's decision.
13
Accordingly, the judgment entered in favor of the defendants
is VACATED and the case REMANDED to the district court for further
proceedings consistent with this opinion.4
4
This disposition makes it unnecessary for the Court to
consider Moore's remaining argument that the district court's fact
findings on the merits were clearly erroneous. We note, however,
that there appear to be substantial fact questions concerning
whether the adhesion problems encountered by Moore fall within the
scope of the contract as written.
14