Case: 20-50271 Document: 00515791655 Page: 1 Date Filed: 03/23/2021
United States Court of Appeals
for the Fifth Circuit United States Court of Appeals
Fifth Circuit
FILED
March 23, 2021
No. 20-50271 Lyle W. Cayce
Clerk
Transverse, L.L.C.,
Plaintiff—Appellee Cross-Appellant,
versus
Iowa Wireless Services, L.L.C., doing business as i wireless,
Defendant—Appellant Cross-Appellee.
Appeal from the United States District Court
for the Western District of Texas
USDC 1:10-CV-517
Before Higginbotham, Smith, and Dennis, Circuit Judges.
Patrick E. Higginbotham, Circuit Judge:
In these cross appeals we address whether either party to this long-
running contract dispute is entitled to attorneys’ fees. Iowa Wireless
Services, LLC (IWS) contends that it is entitled to a fee award under the
Texas Theft and Liability Act and that the district court ignored our prior
decision when it concluded otherwise. IWS also contends that the district
court erred by awarding fees to Transverse, LLC on its claim for breach of
the parties’ Supply Contract. Transverse disagrees on both issues and
contends that it is entitled to an additional fee award for prevailing on its
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claim for breach of the parties’ Non-Disclosure Agreement. We reverse in
part and remand.
I.
This case has come before us on two previous occasions. In
Transverse I, we heard cross appeals from jury and bench trials that resulted
in an $11.7 million award to Transverse on its breach-of-contract claim
against IWS.1 IWS, a wireless telephone service provider, had hired
Transverse to develop custom billing software called “blee(p).” The parties’
relationship was formalized in a Supply Contract and a Mutual Non-
Disclosure Agreement (NDA). When IWS realized that Transverse could
not deliver the custom billing software on schedule, it sought the services of
a competitor and terminated the Supply Contract.2 Transverse then sued
IWS under the Supply Contract, the NDA, the Texas Theft Liability Act
(TTLA), and tort theories of conversion and misappropriation. 3 IWS
counterclaimed for breach of the Supply Contract. The parties tried the
Supply-Contract claims to a jury and submitted the remainder to a bench trial
based on a jury-waiver provision in the NDA.4 After these proceedings, the
district court rendered judgment for Transverse on its claim that IWS’s
termination had breached the Supply Contract. But the district court held
that IWS had not breached the NDA and was not liable to Transverse in tort.
Both parties appealed.
1
Transverse, L.L.C. v. Iowa Wireless Servs., L.L.C. (“Transverse I”), 617 F. App’x
272 (5th Cir. 2015).
2
Transverse I, 617 F. App’x at 274.
3
Id. at 273.
4
Id. at 274.
2
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We affirmed that IWS’s termination breached the Supply Contract
but reversed the district court on the NDA claim, holding that IWS had
breached that agreement by sharing meeting notes containing Transverse’s
confidential information with a competitor.5 We remanded for consideration
of “the proper amount and type of damages that Transverse may collect on
its breach-by-termination claim; the amount of damages, if any, that
Transverse may collect for IWS’s breach of the NDA; and whether IWS is
liable under any of the tort theories pressed by Transverse.”6 On remand, the
district court awarded Transverse $1,700,000 in reliance damages on its
Supply-Contract claim. But the district court ordered Transverse to “take
nothing” on its claims for breach of the NDA, violation of the TTLA,
conversion, and misappropriation of trade secrets. Both parties again cross-
appealed.
In Transverse II, we affirmed the district court’s award of reliance
damages to Transverse on the Supply-Contract claim and the take-nothing
judgment on the NDA claim.7 We also affirmed that Transverse had failed to
establish its tort claims against IWS.8 But we determined that IWS was, in
fact, the prevailing party on the TTLA claim.9 Thus, we vacated
Transverse’s take-nothing judgment on the TTLA claim and remanded the
5
Id. at 282.
6
Id.
7
Transverse, L.L.C. v. Iowa Wireless Servs., L.L.C. (“Transverse II”), 753 F. App’x
184, 188–89 (5th Cir. 2018).
8
Id. at 190.
9
Id. at 190-91.
3
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case for further consideration because “IWS is entitled to a mandatory award
of costs and attorney’s fees on this claim.”10
After the second remand, the district court referred the parties’
motions for attorneys’ fees to the magistrate judge. Based on the operative
pleading, the only viable basis Transverse asserted for recovering fees was
Texas Civil Practice & Remedies Code § 38.001. Fearing that the operative
pleading would be inadequate if Iowa law applied, Transverse requested
leave to amend its complaint “to make clear that its attorneys’ fee claim
includes a claim for attorney’s fees under” the NDA and Supply Contract as
well. The magistrate judge recommended denying leave to amend, noting
that an amendment “would delay the Court’s consideration of the [fee] issue
now before it, and unduly prejudice IWS.” The magistrate judge elaborated
that, “while perhaps not ‘futile,’ the amendment is not necessary, as Texas,
and not Iowa law is applicable.”
The magistrate judge then addressed whether Transverse was entitled
to fees on the NDA and Supply-Contract claims. He rejected Transverse’s
contention that it had prevailed on the NDA claim because “Transverse was
not awarded damages on its breach, and damages are an essential element of
a contract claim under Texas law.” Thus, he recommended denying
Transverse fees on the NDA claim. On the Supply-Contract claim, the
magistrate judge first determined that Texas law was controlling under the
law of the case, citing a previous statement to that effect by the district court.
In so holding, he rejected IWS’s argument that Iowa law controlled based on
the Supply Contract’s Iowa choice of law provision. Because Transverse had
prevailed on its Supply Contract claim, the magistrate judge recommended
an award of $2,001,442 in attorney’s fees.
10
Id. at 191.
4
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Next, the magistrate addressed IWS’s motion for fees on the TTLA
claim. IWS sought fees totaling $2,563,009, which was “approximately 50%
of all fees it incurred in this case.” IWS represented that it had removed
(1) “any fees relating to Transverse’s claim for breach of contract based on
early termination,” (2) “fees related solely to discrete elements of
Transverse’s ‘disclosure’ claims,” and (3) “fees that would not have been
incurred on the TTLA claim alone.” But IWS contended that “all other
claims in the case are ‘inextricably intertwined’ with the TTLA claim,” and
thus it could not further segregate the remaining fees. The magistrate judge
observed that the Transverse II mandate limited IWS to an “award [of]
attorneys’ fees only for the TTLA claim.” He found that IWS failed to show
that the fees attributable to the TTLA claim could not be segregated from the
non-recoverable claims and, consequently, IWS was requesting fees for
claims on which it was not entitled to recover. The magistrate judge
recommended denying IWS’s motion for fees without prejudice and
directing IWS “to submit documentation to the Court supporting its claim
for attorneys’ fees for the TTLA claim only.” The district court adopted the
magistrate’s report and recommendations.
IWS filed an amended fee application with an affidavit and a series of
supporting exhibits, requesting the same $2,563,009 in fees. IWS contended
that the magistrate had applied an overly stringent segregation standard at
odds with Texas law, by requiring IWS to isolate work performed solely on
the TTLA claims. Counsel for IWS explained that to calculate recoverable
fees, she had:
reviewed each of the invoices that IWS paid for legal services
and determined which services would have been necessary to
defend the TTLA claim only, i.e., “even if” Transverse had
not brought the related “disclosure” claims that arise from the
same set of underlying facts . . . . excluded all time and entries
for work related solely to Transverse’s claim for breach of
5
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contract based on early termination . . . . excluded all time and
entries for work related solely to other, non-TTLA disclosure
claims . . . . [but] did not exclude services provided to defend
the TTLA claim that also furthered IWS’s defense of related
claims based on the same underlying facts[.]
Transverse opposed the amended application, and the district court again
referred IWS’s motion.
The magistrate judge characterized IWS’s amended application as
“defiant,” because it sought the exact same fee award as the original. Citing
Transverse’s opposition, the magistrate gave several examples of IWS’s
allegedly improper fees, including:
(1) over $360,000 in fees that were incurred before IWS
admitted the disclosure that led to Transverse’s claim;
(2) $60,000 in fees for the deposition of Kleavin Howatt, who
offered no testimony about any disclosure claims; (3) fees
relating to the analysis of Transverse’s entire document
production, when the disclosure claim production totaled
about 240 pages, while the (unrecoverable) contract claim
production totaled approximately 3,000,000 million pages;
(4) fees for an Iowa suit filed in federal court by IWS that was
purely a breach of contract case; (5) 22 of IWS’s 628 exhibits
relate to the disclosure claims, yet IWS seeks 50% of its total
fees for just the disclosure claims; and (6) . . . fees for review of
Transverse’s damage expert reports that had placeholders for
later discussion of the disclosure claims.
The magistrate judge rejected IWS’s renewed argument for a less
stringent fee-segregation standard, explaining that “intertwined facts do not
make fees recoverable. Instead, the focus is whether the legal work performed
6
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pertains solely to claims for which attorney’s fees are unrecoverable.” 11
Holding that the district court has discretion to deny fees where the applicant
fails to adequately segregate, he recommended denial here because IWS
“affirmatively refused to try to carry” its burden to segregate. After de novo
review, the district court adopted the recommendations and rejected IWS’s
fee application in part, awarding only costs in the amount of $32,903.58 for
the TTLA claim. For a third time, both parties cross-appealed.
II.
“An award of attorney’s fees is entrusted to the sound discretion of
the trial court.”12 Where a district court awards fees, our review is for abuse
of discretion.13 But “[t]he availability of attorneys’ fees—as opposed to the
amount awarded—is a question of law that we review de novo.”14 “We
review de novo a district court’s compliance with our mandate.”15
A. IWS’s Fees Under the Texas Theft Liability Act
We begin with IWS’s entitlement to fees under the TTLA. In
Transverse II, we held that “IWS is the prevailing party” on the TTLA claim
“and is entitled to a mandatory award of attorney’s fees and costs.”16 On
11
Westergren v. Nat’l Prop. Holdings, L.P., 409 S.W. 3d 110, 137 (Tex. App.—
Houston [14th Dist.] 2013) aff’d in part, rev’d in part, 453 S.W.3d 419 (Tex. 2015)) (cleaned
up).
12
Tex. Com. Bank Nat. Ass’n v. Cap. Bancshares, Inc., 907 F.2d 1571, 1575 (5th Cir.
1990).
13
ATOM Instrument Corp. v. Petroleum Analyzer Co., L.P., 969 F.3d 210, 216–17
(5th Cir. 2020), as revised (Sept. 17, 2020).
14
GIC Servs., L.L.C. v. Freightplus USA, Inc., 866 F.3d 649, 665 (5th Cir. 2017).
15
In re Deepwater Horizon, 928 F.3d 394, 398 (5th Cir. 2019) (internal quotations
omitted).
16
Transverse II, 753 F. App’x at 191.
7
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remand, the district court concluded that IWS had not shown that fee
segregation was “impossible,” so IWS needed to segregate its TTLA-related
fees from those related to all other claims, including the NDA claim,
Transverse’s failed claim for breach based on “access to Service,” and the
claims for conversion and misappropriation of trade secrets. IWS concedes
that it needed to segregate certain fees, but it argues that the district court
used an overly demanding standard to assess its segregation efforts and
contravened this Court’s mandate by awarding IWS no fees on the TTLA
claim. We agree.
“In diversity cases state law governs the award of attorney’s fees.” 17
Texas follows the American Rule, under which a court may not award fees
“unless authorized by statute or contract.” 18 The TTLA provides this
authorization, stating that a court “shall” award fees to “each person who
prevails in a suit under this chapter.”19 This includes those, like IWS, who
successfully defend against a TTLA claim.20
Where fees are authorized, “fee claimants have always been required
to segregate fees between claims for which they are recoverable and claims
for which they are not.”21 The party seeking fees bears the burden of properly
segregating them.22 An exception to the fee-segregation requirement exists
“when the fees are based on claims arising out of the same transaction that
17
Tex. Com. Bank Nat. Ass’n, 907 F.2d at 1575.
18
Tony Gullo Motors I, L.P. v. Chapa, 212 S.W.3d 299, 310 (Tex. 2006).
19
Tex. Civ. Prac. & Rem. Code Ann. § 134.005(b).
20
See Transverse II, 753 F. App’x at 190-91 (citing Spear Mktg., Inc. v. BancorpSouth
Bank, 844 F.3d 464, 470 n.6 (5th Cir. 2016)).
21
In re Alonzo, 540 F. App’x 370, 373 (5th Cir. 2013) (internal quotations omitted).
22
Merritt Hawkins & Assocs., L.L.C. v. Gresham, 861 F.3d 143, 156 (5th Cir. 2017).
8
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are so intertwined and inseparable as to make segregation impossible.” 23 But
the exception requires more than a “common set of underlying facts[;]” “it
is only when discrete legal services advance both a recoverable and
unrecoverable claim that they are so intertwined that they need not be
segregated.”24 Whether claims are so intertwined is a “mixed question of law
and fact.”25
IWS contends that Transverse’s “disclosure claims”—breach by
“access to the service,” breach of the NDA, misappropriation of trade
secrets, and conversion—are “intertwined with the fees incurred in defense
of the TTLA claim.” Each of these claims was premised on IWS’s alleged
disclosure of meeting notes and a document containing the parties’ “user-
acceptance-test” criteria for the custom billing system to Transverse’s
competitor.26 Transverse contends that the “disclosure” claims are not
inseparable because they require proof of different elements.
Texas provides no general rule for determining when claims are
sufficiently intertwined to come within the exception. But the Texas
Supreme Court has deemed the exception applicable where, for instance, a
plaintiff in a breach-of-contract case must overcome related counterclaims in
order to recover on that claim.27 Here, certain disclosure claims have an
analogously close legal relationship to the TTLA claim. Although the
abstract claim elements are different, the district court believed that each
disclosure claim was subject to the same proof, given that all turned on the
23
Kinsel v. Lindsey, 526 S.W.3d 411, 427 (Tex. 2017).
24
Tony Gullo Motors, 212 S.W.3d at 313; Kinsel, 526 S.W.3d at 427.
25
Tony Gullo Motors, 212 S.W.3d at 313.
26
Transverse I, 617 F. App’x at 274, 280-82.
27
Varner v. Cardenas, 218 S.W.3d 68, 69 (Tex. 2007) (per curiam).
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legal significance of IWS’s alleged disclosure of meeting notes to
Transverse’s competitor. In its post-trial findings of fact and conclusions of
law, the district court observed that “Transverse’s theft-of-trade-secret
claim rests on the same evidence and seeks the same damages as
Transverse’s misappropriation-of-trade-secrets and conversion claims that
the court has found subsumed in Transverse’s claim for breach of the NDA.”
The district court then concluded that Transverse’s TTLA claim must fail
“for the same reasons Transverse’s misappropriation of trade secrets and
conversion claims fail.”
When this Court remanded after Transverse I, the district court
repeated verbatim its explanation of how the disclosure claims were
functionally identical to the TTLA claim.28 This view of the interrelatedness
of the claims was even shared by counsel for Transverse, at least earlier in the
case.29
Our earlier decisions in this dispute prompt us to stop short of finding
that all the disclosure claims are inextricably intertwined with the TTLA
claim. In Transverse I, we resolved the “access to Service” breach claim,
based solely on the language of the Supply Contract, indicating that this claim
is not inextricably intertwined with the other disclosure claims, which are
28
Transverse, LLC v. Iowa Wireless Serv., LLC, No. A-10-CV-517-LY, 2016 WL
11586869, at *5 (W.D. Tex. Sept. 21, 2016) (“Transverse’s theft-of-trade-secret claim rests
on the same evidence and seeks the same damages as Transverse’s misappropriation-of-
trade-secrets and conversion claims that the court has found subsumed in Transverse’s
claim for breach of the NDA. Therefore, for the same reasons Transverse’s
misappropriation-of-trade-secrets and conversion claims fail, Transverse’s theft-of-trade-
secrets claim also fails.”).
29
In a 2013 communication, counsel for Transverse wrote to counsel for IWS
stating: “The ‘giving a competitor access’ breach of Contract claim involved the same
issues, facts, arguments, and work that the NOA, trade secret misappropriation, Theft
Liability Act, and conversion claims involved.”
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more closely related to the NDA.30 But in Transverse II, we agreed with the
district court “that Transverse’s misappropriation of trade secrets,
conversion, and Texas Theft Liability Act claims fail” all because “IWS’s
disclosure resulted in no lost value to Transverse.” 31 This was also the basis
on which we affirmed the district court’s take-nothing judgment on the NDA
claim.32 Thus, this Court upheld the district court’s view that the resolution
of these nominally distinct claims tended to collapse into one analysis under
the circumstances of this case. Apart from the breach-by-access claim under
the Supply Contract, our reasoning in Transverse II supports IWS’s argument
that the TTLA claim was inextricably intertwined with the remaining
disclosure claims.
Regardless of the necessary degree of fee segregation, the district
court erred when it concluded that it had discretion to deny completely
IWS’s application for fees on the TTLA claim. Although a district court
typically has discretion to award attorney’s fees, the TTLA states that the
court “shall” award fees to a person prevailing under it. 33 Based on the plain
statutory language, “[a]n award of attorney fees is mandatory when the
statutory requirements under the TTLA are met.”34 In Transverse II, this
Court held that IWS qualified as a prevailing person under the TTLA and
was entitled to a mandatory fee award. 35 This holding met the TTLA’s
30
Transverse I, 617 F. App’x at 277–78.
31
Transverse II, 753 F. App’x at 190.
32
Id. at 189 (“[T]he district court correctly determined that Transverse failed to
establish any lost value to blee(p) based on IWS’s disclosure of the User Acceptance Test
document and meeting notes.”).
33
Tex. Civ. Prac. & Rem. Code § 134.005(b).
34
Raytheon Co. v. Indigo Sys. Corp., 895 F.3d 1333, 1344–45 (Fed. Cir. 2018).
35
Transverse II, 753 F. App’x at 190-91.
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requirements and became law of the case, which the district court was not at
liberty to revisit.36
Although the district court retained its traditional discretion to
determine the appropriate amount of fees, its discretion did not extend to
denying IWS fees entirely. This follows from the decisions of this Court, the
Texas Supreme Court, and numerous lower Texas courts concluding that a
“failure to segregate attorneys [sic] fees does not preclude an attorneys-fees
recovery.”37 Where a fee applicant has failed to segregate its fees properly, it
is appropriate to “remand to the trial court for reconsideration of the
attorneys-fees award.”38 Further, it is incorrect to say that “IWS has not
submitted evidence as to the proper award of fees as to the discrete TTLA
claim.” Even where the fee applicant fails to adequately segregate,
“[u]nsegregated attorney’s fees for the entire case are some evidence of what
the segregated amount should be.”39 In addition to halving its total case fees,
36
“The mandate rule is a subspecies of the law-of-the-case doctrine: . . . . It []
operates on a vertical plane—constricting a lower court vis-à-vis a higher court. The
vertical variant is what we call the ‘mandate rule,’ and it’s the kind at issue here.” In re
Deepwater Horizon, 928 F.3d at 398 (internal citations omitted).
37
Kinsel, 526 S.W.3d at 428 (citing Tony Gullo Motors, 212 S.W.3d at 314); see also
Navigant Consulting, Inc. v. Wilkinson, 508 F.3d 277, 298 (5th Cir. 2007) (“But the failure
to segregate does not mean that a party cannot recover any of its attorney’s fees.”);
Rappaport v. State Farm Lloyds, 275 F.3d 1079 (5th Cir. 2001) (“[I]f a party does not
properly segregate attorney’s fees, it would be error to completely deny attorney’s fees on
contract claims, as evidence of unsegregated attorney’s fees is more than a scintilla of
evidence of segregated fees.”); Jacks v. G.A. Bobo, No. 12-10-00163-CV, 2011 WL 2638751,
at *4 (Tex. App.–Tyler June 30, 2011, no pet.) (“A failure to segregate attorney’s fees does
not mean that the claimant cannot recover any attorney’s fees.”) (citing Tony Gullo
Motors, 212 S.W.3d at 314); 7979 Airport Garage L.L.C. v. Dollar Rent A Car Sys., Inc., 245
S.W.3d 488, 510 (Tex. App.–Houston [14th Dist.] 2007, pet. denied) (same).
38
Kinsel, 526 S.W.3d at 428.
39
Navigant Consulting, Inc., 508 F.3d at 298 (quoting Tony Gullo Motors, 212
S.W.3d at 314).
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IWS submitted an affidavit and several exhibits affording the district court
adequate bases for making a fee award. Because IWS is entitled to some fee
award on the TTLA claim, we remand for a determination of the proper
amount.
We do not hold that IWS is entitled to the full fee amount requested
in its latest two petitions. Within the principles set forth here, we entrust to
the district court the task of looking at the fee application anew. But we clarify
that the mandate of Transverse II did not depart from Texas law governing
fee segregation, and fees incurred defending the TTLA claim do not become
unrecoverable simply because they may have furthered another non-
recoverable claim as well.40 IWS “did not have to keep separate time
records” by claim, and Texas’s standard for fee segregation “does not
require more precise proof for attorney’s fees than for any other claims or
expenses.”41 To the extent the district court is inclined to reduce fees on
work that did “double duty,” it can simply “allocat[e] as a percentage of total
fees the amount that likely would have been incurred even if the
unrecoverable claims were not in the case,” “instead of requiring
burdensome retrospective itemizations by claim.”42
B. Transverse’s Fees Under the Supply Contract
IWS contends the district court erred by relying on Texas law,
specifically Texas Civil Practice & Remedies Code § 38.001, to award
40
Tony Gullo Motors, 212 S.W.3d at 313 (“To the extent such services would have
been incurred on a recoverable claim alone, they are not disallowed simply because they do
double service.”).
41
Id. at 314.
42
Bear Ranch, LLC v. Heartbrand Beef, Inc., No. 6:12-CV-14, 2016 WL 1588312, at
*4 (S.D. Tex. Apr. 20, 2016) (Costa, J. sitting by designation).
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Transverse fees for the Supply Contract claim because the Supply Contract
is governed by Iowa law, and Iowa law does not allow for fee recovery under
the facts of this case. Alternatively, IWS contends that § 38.001 does not
permit an award of fees against an unincorporated business entity, like an
LLC. We leave for another day the question of § 38.001’s application to
unincorporated business entities. For purposes of this appeal, it suffices to
say that the district should have applied Iowa, not Texas, law when assessing
whether Transverse is entitled to fees under the Supply Contract, in view of
that agreement’s unambiguous Iowa choice-of-law provision.
Transverse argues that we ought not reach the choice-of-law question
because IWS has waived its argument by failing to effectively raise it in one
of the prior appeals and because the law-of-the-case doctrine prevents us
from revisiting the district court’s determination that Texas law applies.
Transverse is incorrect that the law of the case affects the viability of IWS’s
choice-of-law argument on appeal. Neither Transverse I nor Transverse II
determined whether or not the Supply Contract was governed by Iowa law.43
Absent such a determination, there is no law of the case controlling this
43
Transverse II, 753 F. App’x at 187 n.2 (“IWS again does not articulate or even
identify a conflict between Texas or Iowa law, so our choice-of-law analysis necessarily
stops. Accordingly, we will not reach this issue.”); Transverse I, 617 F. App’x at 275 n.3
(“It is not entirely clear whether Texas or Iowa contract law governs the dispute, but the
parties agree that the laws of the two states are essentially identical. Both parties cite cases
from both states, as do we.”).
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panel.44 The district court may decline to revisit its prior rulings, but those
rulings do not bind this Court.45
This leaves the matter of waiver. Assuming arguendo, that IWS failed
to raise the choice-of-law issue adequately in the prior appeals, we may
address it now under the plain error standard.46 Under plain-error review,
IWS “must show (1) an error; (2) that is plain or obvious; (3) that affects his
substantial rights.”47 Because this is a diversity case, we apply Texas’s
choice-of-law principles.48
The argument for Iowa law is based on § 25.7 of the Supply Contract,
which states unambiguously that “[t]his Contract shall be governed and
construed by the laws of the State of Iowa.” Texas honors such contractual
choice-of-law clauses, provided “the law chosen by the parties (1) has a
reasonable relationship to the parties and the chosen state and (2) is not
44
K.P. v. LeBlanc, 729 F.3d 427, 436 (5th Cir. 2013) (“The rule of the law of the
case is a rule of practice . . . . [which] provides that an issue of law or fact decided on
appeal may not be reexamined either by the district court on remand or by the appellate
court on a subsequent appeal.”) (internal quotations omitted) (emphasis original).
45
The law of the case “operates on a horizonal plane—constricting a later panel
vis-à-vis an earlier panel of the same court. It also operates on a vertical plane—constricting
a lower court vis-à-vis a higher court.” In re Deepwater Horizon, 928 F.3d at 398 (internal
citation omitted).
46
See Crawford v. Falcon Drilling Co., 131 F.3d 1120, 1123 (5th Cir. 1997) (“[O]ur
Court has adopted the practice of reviewing unpreserved error in a civil case using
the plain-error standard of review.”); see also Med. Ctr. Pharmacy v. Holder, 634 F.3d 830,
836 (5th Cir. 2011) (“Only plain error justifies departure from the waiver doctrine.”)
(internal quotations omitted).
47
Quinn v. Guerrero, 863 F.3d 353, 358 (5th Cir. 2017).
48
Weber v. PACT XPP Techs., AG, 811 F.3d 758, 770 (5th Cir. 2016) (“A federal
court sitting in diversity applies the forum state's choice-of-law rules to determine which
substantive law will apply.”).
15
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contrary to a fundamental policy of the state.”49 IWS’s headquarters in Iowa
provide the requisite reasonable relationship, and no fundamental policy of
Texas is contravened when the law of a reasonably-related state is used to
assess attorneys’ fees.50
Transverse argues that another section of the Supply Contract, § 19.6,
allows for application of Texas law or at least makes the import of § 25.7
ambiguous. Section 19.6 concerns the parties’ agreement to submit to
mediation before commencing litigation and the venue for that mediation; it
specifies that mediation will occur “within the county of Travis, by or
recommended by, Austin Dispute Resolution Center, according to its
mediation rules, and any ensuing litigation shall be conducted within said
county, according to Texas law.” This last clause is the basis for
Transverse’s argument that the Supply Contract is actually governed by
Texas law. But reading this provision in the manner that Transverse
advocates would nullify the separate choice-of-law provision in § 25.7, which
is contrary to the manner in which Texas courts interpret a contract.51
Transverse attempts to resolve the contradiction by interpreting § 25.7 to
provide the law governing only non-contractual disputes such as “personal
injury, defamation, and other [cases] unrelated” to “the meaning,
performance, or enforcement of [the] Contract.” This is a plainly
unreasonable interpretation of § 25.7, which states that the “Contract” will
be governed by Iowa law. By contrast, IWS’s interpretation—that the Texas
49
Provident Fin. Inc. v. Strategic Energy L.L.C., 404 F. App’x 835, 839 (5th Cir.
2010).
50
Id.
51
Under Texas law, courts “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.” Pathfinder Oil & Gas, Inc. v. Great W. Drilling, Ltd., 574 S.W.3d 882, 889
(Tex. 2019).
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law clause refers to Texas procedural law and choice of law principles—is not
unreasonable and it avoids creating surplusage.52
Thus, it is clear that the district court should have applied Iowa law to
assess the breach of the Supply Contract and any entitlement to attorneys’
fees under that agreement. On the question of breach, the failure to do so was
likely harmless because both states require proof of the same claim elements,
but on the question of fees, it was outcome-determinative. Iowa, like Texas,
requires that any fee award be authorized by either statute or contract. But
unlike Texas, Iowa does not have a statute authorizing a fee award in breach-
of-contract cases. Because the Supply Contract itself does not authorize
attorneys’ fees, under Iowa law, the district court lacked a basis on which to
award Transverse attorney’s fees for IWS’s breach of this agreement. IWS
has made the showing necessary to prevail under plain-error review, and we
reverse the fee award to Transverse on the Supply-Contract claim.
C. Transverse’s Fees Under the Non-Disclosure Agreement
Finally, Transverse contends that the district court erred by failing to
recognize it as the prevailing party on the NDA claim and refusing to award
Transverse the related fees. Unlike the Supply Contract, the NDA includes
a provision expressly authorizing an award of attorney’s fees to the
“substantially prevailing party.” Transverse did not invoke this provision in
its pleadings and now seeks leave to amend to do so. We need not address
this request because such an amendment would be futile; Transverse did not
prevail, substantially or otherwise, on its NDA claim. Finding no error, we
affirm.
52
“If we determine that only one party’s interpretation of the insurance policy is
reasonable, then the policy is unambiguous and the reasonable interpretation should be
adopted.” Nassar v. Liberty Mut. Fire Ins. Co., 508 S.W.3d 254, 258 (Tex. 2017).
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In Transverse I, we held that “the district court should have awarded
judgment to Transverse on Transverse’s claim that IWS breached the
NDA.”53 Nonetheless, on remand, the district court determined that
Transverse should “TAKE NOTHING on its claims against Iowa Wireless
Services . . . for breach of the NDA.” In Transverse II, we “affirm[ed] the
district court’s take-nothing judgment for Transverse.”54 Based on its earlier
take-nothing judgment, the district court determined that Transverse was
not entitled to fees on the NDA claim.
Transverse contends that damages are not a prerequisite to prevailing
party status because the Transverse I ruling “provided actual relief to
Transverse . . . by resolving in Transverse’s favor several major disputed
issues . . . [and] materially alter[ing] the legal relationships between the
parties.” “Whether a party prevails turns on whether the party prevails upon
the court to award it something, either monetary or equitable.” 55 A finding
that one party violated a contract, without more, will not suffice.56 Although
Transverse contends that the Transverse I holding provided “an enforceable
judgment that materially alters the legal relationships between the parties,”
it identifies no equitable relief awarded in the district court’s actual
judgment. This is unsurprising given that Transverse requested no specific
equitable or declaratory relief in its operative pleadings.
Transverse cites several cases for the proposition that a judgment
materially altering the legal relationship between the parties confers
53
Transverse I, 617 F. App’x at 282.
54
Transverse II, 753 F. App’x at 189.
55
Intercontinental Grp. P’ship v. KB Home Lone Star L.P., 295 S.W.3d 650, 655 (Tex.
2009).
56
Id.
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prevailing party status, but these cases are inapposite because they concern
claims under a variety of federal laws—§ 1983, the Clean Water Act, the Fair
Housing Amendments Act, and the Americans with Disabilities Act—not a
claim for breach of contract under Texas law.57 Under Texas law, “[n]either
law nor logic favors a rule that bestows ‘prevailing party’ status” on a party
that receives only a take-nothing judgment, as Transverse has.58 And in the
absence of equitable relief, “[a] zero on damages necessarily zeros out
‘prevailing party’ status,” a fact unaffected by this Court’s earlier holding
that IWS breached the NDA.59
This conclusion is not altered by the NDA’s language allowing for an
award of attorneys’ fees to a “substantially prevailing party.” This Court has
explained that this phrase still “retains the need to prevail” and held that a
plaintiff does not prevail in any meaningful sense where it obtains “no court-
ordered relief modifying the [defendant’s] behavior.”60 Texas courts are in
accord. Even in cases where a plaintiff need only “substantially prevail,”
Texas courts hew to the reasoning of KB Homes, which requires a plaintiff to
obtain actual relief in the form of damages or equitable relief before fees can
be awarded.61 Where all of a plaintiff’s “requested relief was either expressly
57
See Buckhannon Bd. & Care Home v. W. Va. Dep’t of Health & Human Res., 532
U.S. 598 (2001); Farrar v. Hobby, 506 U.S. 103, 111–12 (1992); Env’t Conservation Org. v.
City of Dallas, 307 F. App’x 781, 783 (5th Cir. 2008).
58
KB Home, 295 S.W.3d at 656.
59
Merritt Hawkins & Assocs., 861 F.3d at 156 (quoting KB Home, 295 S.W.3d at 655–
56) (Plaintiff was not the prevailing party where the court found breach but awarded no
damages or equitable relief.).
60
Env’t Conservation Org., 307 F. App’x at 784.
61
Nehls v. Hartman Newspapers, LP, 522 S.W.3d 23, 31 (Tex. App. 2017) (applying
the “‘prevailing party’ test articulated in KB Home” “when deciding whether a party has
‘substantially prevailed’”).
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or impliedly denied” the plaintiff has not “substantially” prevailed in the
eyes of Texas courts.62 Thus, to the extent the word “substantially” modifies
the standard for prevailing, it does not obviate the need to obtain some relief.
Consequently, the district court did not err in denying Transverse fees on the
NDA claim because Transverse’s failure to obtain any cognizable relief on
that claim prevents it from attaining prevailing-party status.
III.
We reverse the district court’s order denying IWS attorney’s fees for
the TTLA claim and remand for consideration of the proper amount. We also
reverse the district court’s fee award to Transverse on the Supply-Contract
claim. Finally, we affirm the district court’s denial of fees to Transverse for
the NDA claim.
62
Dallas Morning News, Inc. v. City of Arlington, 2011 WL 182886, at *4 (Tex. App.
Jan. 21, 2011).
20