United States Court of Appeals
Fifth Circuit
F I L E D
IN THE UNITED STATES COURT OF APPEALS November 20, 2003
FOR THE FIFTH CIRCUIT Charles R. Fulbruge III
Clerk
No. 02-30622
TAITA CHEMICAL COMPANY, LTD.,
Plaintiff - Counter Defendant - Appellant,
versus
WESTLAKE STYRENE, LP,
Defendant - Counter Claimant - Appellee.
Appeal from the United States District Court
For the Western District of Louisiana
Before HIGGINBOTHAM, STEWART, and PRADO, Circuit Judges.
HIGGINBOTHAM, Circuit Judge:
Taita Chemical Company sued Westlake Styrene for breach of
contract, arguing that Westlake failed to sell Taita styrene
monomer at a lower price to which Taita was entitled under the
contract. Westlake asserted affirmative defenses, including the
aiding and abetting of a breach of fiduciary duty and fraud.
Westlake also pled aiding and abetting breach of fiduciary duty and
fraud as counterclaims. The jury found that Taita aided and
abetted a breach of fiduciary duty and that it defrauded Westlake.
The jury awarded Taita nothing on its contract claim, but awarded
Westlake $16.297 million on its aiding and abetting breach of
fiduciary duty counterclaim. Westlake also recovered attorneys
fees based on the fraud finding.
Taita argues that the jury’s findings must be reversed because
the jury instructions were erroneous. We AFFIRM the judgment
denying Taita recovery under the contract and awarding Westlake
attorneys fees, but REVERSE the judgement’s award to Westlake on
the counterclaim for aiding and abetting a breach of fiduciary
duty.
I
This is the second time this contract dispute comes before
us.1 Westlake is a joint venture formed in 1990 to produce and
sell styrene monomer. There were four original shareholders of
Westlake: (1) Taita owned 40%; (2) BTR Nylex, which also held the
majority interest in Taita, owned 20%; (3) the Chao Group owned
20%; and (4) the Sumitomo Corporation and Sumitomo Corporation of
America owned 20%.
The previous opinion discussed the contract and the parties’
differing interpretations of it:
On January 15, 1991, Taita and Westlake entered into
a contract known as the "Off-Take Agreement." This long-
term agreement was a take-or-pay contract, under which
Taita agreed to purchase 40% of Westlake's styrene
monomer production capacity each month for the duration
1
See Taita Chem. Co., Ltd. v. Westlake Styrene Corp., 246
F.3d 377 (5th Cir. 2001).
2
of the contract. Price was to be determined on a monthly
basis in accordance with the contract's pricing clause.
This clause provided that each month Taita was to receive
the lowest of three alternative prices:
4. Price
The Contract Price per pound of Product
delivered or ordered for delivery, including
Deemed Delivery, during each month shall be
the U.S. Gulf Coast Styrene Monomer prices,
net after all discounts, for contract
transactions as last published in each month
by DeWitt & Company, Incorporated in its
Benzene & Derivatives Newsletter, or the price
for such month charged by WSC [Westlake
Styrene Corp.] to a consumer under a firm
multi-year contract or the posted contract
market price for comparable volumes of
Product, whichever is lower. Should such
publication cease to be published, Buyer and
Seller shall mutually select other
representative publications.
The meaning of this pricing clause and the parties'
conduct with respect to its terms lies at the center of
[the earlier] dispute. In essence, Taita argues that
Westlake overcharged it for styrene because Westlake did
not extend Taita a lower price provided by Westlake to
another customer as required under Taita's interpretation
of the second pricing mechanism. This second provision
states that Taita shall receive "the price for such month
charged ... to a consumer under a firm multi-year
contract." The parties have referred to this provision as
the "most favored nations" clause, for the obvious reason
that it ensures that Taita, as Westlake's largest
investor and principal styrene purchaser, will receive
the best available price. Westlake disputes Taita's
interpretation of the pricing clause, but urges that, in
any event, the evidence demonstrates that Taita
undeniably acquiesced in Westlake's differing reading of
the contract.2
Affirming the district court, we held that the pricing clause
entitled Taita to the lower price given to other customers,
2
Taita Chem. Co., Ltd., 246 F.3d at 380-81.
3
regardless of the volume of the other sales.3 However, we reversed
the district court’s decision to grant summary judgment on
defendant’s affirmative defenses.
On remand, Taita argued that it was entitled to reimbursement
for the amount it overpaid. In response, Westlake argued that the
contract on which Taita based its claim was secured by the Taita-
affiliated board members’ breach of fiduciary duty and fraud. The
alleged breach consisted of Taita-affiliated board members
remaining silent about their interpretation of the most-favored
nation provision until after Westlake entered into a lower-priced
contract with another company. Only then, argues Westlake, did
Taita reveal its interpretation of the contract and claim the price
reduction. Westlake argued that the lower-priced contracts would
not have been formed but for Taita’s aiding and abetting the breach
of fiduciary duty. That is, if the rest of the board knew of
Taita’s impending claim to the lower price, the board would not
have ratified the contracts. Therefore, Westlake argued that
Taita’s encouragement of the members to remain silent amounted to
aiding and abetting a breach of fiduciary duty and fraud, and as a
result, Taita should not recover. These allegations also formed
the basis of Westlake’s counterclaims for aiding and abetting
breach of fiduciary duty and fraud.
3
Id. at 385-86.
4
The jury found that (1) Taita should recover nothing; (2)
Taita aided and abetted the Taita-affiliated directors of Westlake
in their breach of fiduciary duty; (3) any price discounts to
which Taita may have been entitled resulted from its aiding and
abetting the breach of fiduciary duty; (4) Taita committed fraud;
(5) Westlake was entitled to $16.297 million for its aiding and
abetting breach of fiduciary duty counterclaim; and (6) Westlake
was entitled to attorneys fees.
Taita argues on appeal that the judge erroneously instructed
the jury, affecting the outcome of the case. Taita argues that the
court’s instructions were erroneous because (1) in explaining a
fiduciary’s duty to disclose information, the instructions did not
limit the obligation by the principle of inquiry notice; (2) by not
adequately explaining actual and apparent authority, the
instructions did not allow the jury to attribute the bad acts to
BTR, a different company; and (3) the instructions did not include
damages as a required element of Westlake’s aiding and abetting
breach of fiduciary duty counterclaim.
II
5
There are three requirements to successfully challenge jury
instructions.4 First, the appellant must show that viewing the
charge as a whole, the charge creates “substantial and ineradicable
doubt whether the jury has been properly guided in its
deliberations.”5 Second, even if erroneous, the appellate court
will not reverse if the error “could not have affected the outcome
of the case.”6 Third, the appellant must show that the proposed
instruction offered to the district court correctly stated the law.
Perfection is not required as long as the instructions were
generally correct and any error was harmless.7 This standard
provides the district court with great latitude concerning the
charge.
A litigant also must have preserved the error in the charge to
complain on appeal. Rule 51 of the Federal Rules of Civil
Procedure outlines the requirements that one must satisfy in order
to assign error for failing to give, or erroneously giving, jury
instructions. One may not complain of a jury instruction “unless
that party objects thereto . . . , stating distinctly the matter
4
Fed. Deposit Ins. Corp. v. Mijalis, 15 F.3d 1314, 1318 (5th
Cir. 1994); Bender v. Brumley, 1 F.3d 276-77 (5th Cir. 1993).
5
Mijalis, 15 F.3d at 1318 (quoting Bender, 1 F.3d at 276-77).
6
Id.
7
Bank One, Texas, N.A. v. Taylor, 970 F.2d 16, 30 (5th Cir.
1992).
6
objected to and the grounds of the objection.”8 General objections
to jury instructions are insufficient to meet Rule 51's
requirements.9 Furthermore, submission of an alternative
instruction does not necessarily preserve error for appeal.10 The
proposed instruction must make one’s “position sufficiently clear
to the court to satisfy Rule 51's objection requirement.”11
A party may be excused from Rule 51's strict requirements if
“the party’s position has previously been clearly made to the court
and it is plain that a further objection would be unavailing.”12
To find reversible error in this instance, the appellate court must
be certain that the district court was adequately informed of the
objection.13 Examples of this exception involve clear cases where
the exception is justified: a litigant who fails to object when
invited to do so but who had previously filed sufficient
8
FED R. CIV. P. 51.
9
Russell v. Plano Bank & Trust, 130 F.3d 715, 719-720 (5th
Cir. 1997); Bolton v. Tesoro Petroleum Corp., 871 F.2d 1266, 1272
(5th Cir.), cert. denied, 493 U.S. 823 (1989).
10
Kelly v. Boeing Petroleum Servs., Inc., 61 F.3d 350, 361
(5th Cir. 1995).
11
Id.
12
Russell, 130 F.3d at 720 (quoting 9A Charles Alan Wright et
al., Federal Practice and Procedure § 2553 (2d ed. 1995)).
13
Indus. Dev. Bd. of the Town of Section, Alabama v. Fuqua
Indus., Inc., 523 F.2d 1226, 1238 (5th Cir. 1975).
7
objections;14 a litigant who fails to object after the court
intimated that no more objections would be heard;15 and a previous
“emphatic” ruling by a judge made later objections futile.16
If error is not preserved, we review for plain error. To meet
this standard, a party must show: “(1) that an error occurred; (2)
that the error was plain, which means clear or obvious; (3) the
plain error must affect substantial rights; and (4) not correcting
the error would ‘seriously affect the fairness, integrity, or
public reputation of judicial proceedings.’”17 The plain error
exception is designed to prevent a miscarriage of justice where the
error is clear under current law.18
III
A
Taita first argues that the district court erred by failing to
give a sufficiently detailed description of a corporate officer’s
duty to disclose, but it failed to preserve this argument. During
the charge conference, Taita made only a general objection to the
14
Bender v. Brumley, 1 F.3d 271, 276-77 (5th Cir. 1993).
15
Crist v. Dickson Welding, Inc., 957 F.2d 1281, 1287 (5th
cir.), cert. denied. sub nom., Dickson Welding, Inc. v. Alexander
& Alexander, 506 U.S. 864 (1992).
16
Branch-Hines v. Hebert, 939 F.2d 1311, 1319 (5th Cir. 1991).
17
Id. (citations omitted).
18
Johnson v. Helmerich & Payne, Inc., 892 F.2d 422, 424 (5th
Cir. 1990).
8
court’s charge. Taita objected “to every one of the numbered
charges proposed and offered by Taita, one through 103, to the
extent they were not incorporated in the final charges.” This
general objection, coupled with 103 proposed charges, is not stated
distinctly nor accompanied by an explanation, as Rule 51 requires.19
Taita’s failure to properly object is not saved by the
exception because its position was not previously made so clear to
the district court that a subsequent objection would have been
futile.20 Taita argues otherwise by pointing to a letter it sent
the district court and to a pretrial conference, both of which
discussed the duty to disclose issue. More generally, Taita argues
that the issue was such a “prominent feature” of the case that no
objection was necessary. If Taita’s arguments prevailed, the
exception would threaten to swallow the rule. Presumably,
everything a litigant wants in the charge is a “prominent feature”
of the case, or part of the case’s general theme. However, jury
charges require particular and exact language. Rule 51 holds
litigants to a difficult standard of error preservation for good
reason. It requires that objections be brought before the trial
judge for a possible remedy at the trial court level, saving
judicial resources. There was no previous, clear objection by
19
See Russell, 130 F.3d at 720 (holding that an objection “‘to
the extent that the Plaintiff’s requested instructions were not
given’” was insufficient to satisfy Rule 51).
20
Russell, 130 F.3d at 720 (quoting 9A Charles Alan Wright et
al., Federal Practice and Procedure § 2553 (2d ed. 1995)).
9
Taita. There was no prior intimation by the judge that no
objection would be heard. There was no prior, emphatic ruling on
the issue that would make a later objection futile.
We are persuaded that no adequate objection was leveled at the
charge and we must review by the measure of plain error. Taita
contends that the charge lacked detail needed by the jury in
judging the duty to disclose. Perhaps so, but the result is not a
clear and obvious error that seriously affects substantial rights
and the fairness, integrity, or public reputation of judicial
proceedings. We cannot find plain error.
B
Taita’s second argument is that the district court erred by
failing to give a sufficiently detailed instruction on a corporate
actor’s actual and apparent authority to bind a corporation. We
disagree.21
Taita argues that by failing to give specific instructions
about actual and apparent authority, “the district court made it
far too easy for the jury to hold Taita accountable [for aiding and
abetting the breach of loyalty].” Taita argues that the alleged
bad acts should be attributed to BTR, a different corporation (that
owned a 51% interest in Taita). If the jury knew the law of actual
21
Westlake argues that Taita failed to preserve this point on
appeal, but by (1) objecting specifically to the court’s agency
instruction, (2) submitting proposed instructions that cited
relevant legal authority, and (3) considering a previous emphatic
ruling by the judge that took an opposing stance, Taita preserved
error.
10
and apparent authority, Taita argues, it could have attributed the
bad acts to BTR because the actors had no authority to bind Taita.
Taita relies on Thompson and Wallace of Memphis v. Falconwood
Corp.22 In Falconwood this Circuit held that the district court
erred in failing to give a detailed instruction on agency law. At
issue was whether a corporation’s employee bound the corporation
when he secured a loan with false invoices.23 Instead of giving a
detailed instruction on agency law, the court only instructed that
“in general, any agent or employee of a corporation may bind the
corporation by his acts and declarations made while acting within
the scope of his authority, delegated to him by the corporation or
within the scope of his duties as an employee of the corporation.”24
The court held that, considering the difficulty of agency law, the
court abused its discretion in failing to give a more detailed
instruction.25
In response, Westlake argues, among other things, that the
jury was adequately instructed. Specifically, Westlake argues that
the jury was alerted of the need to distinguish between the various
corporations. The instructions noted that the actors involved “can
bind their respective corporation by their actions or conduct that
22
100 F.3d 429 (5th Cir. 1996).
23
Id. at 434.
24
Id.
25
Id.
11
are related to or necessary for the performance of their duties.”
Westlake interprets this language as instructing the jury that “it
could hold liable only the corporation on behalf of which the
individual was acting.” Finally, it argues that the general
instruction on Westlake’s burden of proof was sufficient to
instruct the jury on its burden to prove the authority of Taita’s
actors.
Viewing the charge as a whole, Taita’s argument must fail.
Taita’s concern is being held liable for the acts of BTR. Even
assuming the primary portion of the charge dealing with agency is
insufficient, a later portion of the charge ensures that the jury
was adequately guided in its deliberations. The court instructed
the jury that if it found that the Taita-appointed officers
breached their fiduciary duties by not divulging information during
board meetings, “you must further consider whether Taita, through
the actions of its own officers and/or directors, knowingly joined
with or participated in that breach of loyalty.” It was instructed
further that if it found such a breach, it “must also find Taita
liable (or responsible) for that breach of loyalty.” This language
focused the jury on the fact that it must find Taita liable for the
acts, not BTR. The identities of the two companies and their
actors were probably confusing because of the overlapping actors
between the two companies. But with the arguments from the lawyers
and the context of trial, the instruction was clear enough. It is
12
at least not so unclear as to create “substantial and ineradicable
doubt whether the jury has been properly guided in its
deliberations.”26
The Falconwood case, while supportive of Taita’s argument, is
distinguishable. First, jury instructions must vary to fit the
particular facts of each case. Although the instructions in
Falconwood were insufficient for its facts, they may be sufficient
in response to another set of facts. Second, because the case
dealt with an alleged rogue agent of a corporation, the jury needed
a detailed explanation of when an individual may bind a
corporation. Here, on the other hand, the actors are the same; the
only question is which corporation must account for the acts.
Taita attempted to distance itself from BTR throughout the case.
This clearly alerted the jury of the attribution issue. The
instructions ensured that the jury face and answer this question
directly. Accordingly, the charge was not erroneous.
C
Taita’s third argument is that the trial court erred in
instructing the jury that it could hold Taita liable for aiding and
abetting breach of fiduciary duty without finding Westlake damaged
in any way. We agree.27
26
Mijalis, 15 F.3d at 1318.
27
Westlake argues that Taita failed to preserve its objection
by insufficiently explaining its basis. We disagree. Although
Taita’s oral objection was unclear as to its basis, the proposed
13
The Delaware Supreme Court makes clear that one must show
damages as an element of aiding and abetting breach of fiduciary
duty.28 Having failed to include an essential element of the claim,
the instructions provided insufficient guidance to the jury on
Westlake’s counterclaim. Under Delaware law, damages are a
required element of an aiding and abetting cause of action. Gotham
Partners, L.P. v. Hallwood Realty Partners29 and Malpiede v.
Townson,30 two Delaware Supreme Court cases, state that a plaintiff
must show that “damages to the plaintiff resulted from the
concerted action of the fiduciary and the non-fiduciary.”31
instruction submitted by Taita apprised the judge of the objection
and its basis. A submitted instruction does not necessarily
preserve error. However, a submitted instruction can preserve
error if it makes one’s “position sufficiently clear to the court
to satisfy Rule 51's objection requirement.” Kelly, 61 F.3d at
361.
Taita’s proposed instruction made its position clear: “One of
[the elements of aiding and abetting a breach of fiduciary duty]
requires that the person alleging such a breach prove that damages
resulted to them as a result of the concerted action of the
fiduciary and non-fiduciary. Thus, no damages should be awarded to
Westlake if they do not establish any damage, harm or loss to
themselves – Westlake – as a result of an alleged breach.” Taita’s
proposed instruction, along with the oral objection, provided
sufficient clarity and legal support to alert the court of the
grounds of the objection.
28
The parties agree that Delaware law controls Westlake’s
aiding and abetting counterclaim.
29
817 A.2d 160 (Del. 2002).
30
780 A.2d 1075 (Del. 2001).
31
Gotham Partners, 817 A.2d at 172; see also Malpiede, 780
A.2d at 1096.
14
Westlake cites no post-Gotham or post-Malpiede authority to support
its position. Instead, it argues that aiders and abettors may be
required to disgorge the profits resulting from the aiding and
abetting, citing Nash v. Schock,32 an unpublished opinion. However,
this case predates Gotham, and deals with restitution and unjust
enrichment, which were not pled in this case.
Considering that the jury was not instructed on an essential
element of aiding and abetting breach of fiduciary duty, the jury
was insufficiently guided in its deliberations. Therefore, the
only question is whether the error “could not have affected the
outcome of the case.”33 Taita argues that because the jury award
was based on disgorging its profits, and not on any harm suffered
by Westlake, the improper jury charge affected the outcome of the
case. Westlake responds that the attorney’s fees they incurred in
defending the lawsuit constitute harm. Westlake’s argument does
not account for the fact that the jury did not consider an
essential element of the claim. The jury award on Westlake’s
counterclaim must be vacated.
Because Westlake presented no evidence of any injury resulting
from Taita’s aiding and abetting breach of fiduciary duty, we do
not remand this counterclaim. Westlake chose to proceed with the
aiding and abetting counterclaim on a disgorgement theory, likely
32
No. 14721-NC, 1998 WL 474161 (Del. Ch. July 23, 1998).
33
Mijalis, 15 F.3d at 1318 (quoting Bender, 1 F.3d at 276-77).
15
because it knew it could not show any injury. The disgorgement
theory failed, and there is no evidence of injury to Westlake as a
result of Taita’s aiding and abetting breach of fiduciary duty.
Accordingly, we render judgement in favor of Taita on Westlake’s
aiding and abetting counterclaim.
Taita argues further that in addition to tainting the aiding
and abetting counterclaim, the erroneous instruction also taints
Westlake’s use of aiding and abetting breach of fiduciary duty as
an affirmative defense. Without a finding of damages to Westlake
from the aiding and abetting, the argument goes, it cannot be used
as an affirmative defense and this Court must remand Taita’s
contract claim as well.
We need not reach this argument because of the additional
finding by the jury that Taita defrauded Westlake. Even assuming
that the error in misstating the elements of aiding and abetting
breach of fiduciary duty tainted both Westlake’s claim and its
affirmative defense, we must uphold the verdict if the error “could
not have affected the outcome of the case.”34 The fraud claim was
based, like the breach of fiduciary duty, in part on the allegation
that Taita fraudulently induced Westlake into entering into the
lower-priced contracts. Taita’s fraudulent inducement resulted in
the price-discounts Taita claimed in its breach of contract action.
The jury found that Taita defrauded Westlake through this conduct,
34
Mijalis, 15 F.3d at 1318 (quoting Bender, 1 F.3d at 276-77).
16
and this finding supports the invalidity of Taita’s breach of
contract claim.
IV
We REVERSE the judgment’s award to Westlake on its aiding and
abetting counterclaim and RENDER judgment on that counterclaim in
favor of Taita. We AFFIRM the remaining portions of the judgment.
17
Taita Chemical Co. v. Westlake Styrene, LP
Court: Court of Appeals for the Fifth Circuit
Date filed: 2003-11-20
Citations: 351 F.3d 663
Copy CitationsCombined Opinion