Petition — Herman Blum Consulting Engineers, Inc. v. Hadra

| Bitice - Supreme Court, U.S.

| ak | FILED

80-1518

— MAR 6 1988

HEITOR sev

CLERK

NO. ee

IN THE

Supreme Court of the United States

OCTOBER TERM, 1980

HERMAN BLUM CONSULTING ENGINEERS, INC.

Petitioner,

Vv.

Cart M. HapRA

Respondent.

PETITION FOR WRIT OF CERTIORARI TO

THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

MIKE A. HATCHELL

Box 629

Tyler, TX 75701

214-597-3301

Attorney for

Petitioner

QUESTIONS PRESENTED FOR REVIEW

The questions presented for review are:

1. Whether the court of appeals contravened the

standards enunciated by this court in Gasoline Products

Co. v. Champlin Refining Co., 51 S.Ct. 513, 283 U.S.

494, 75 L.Ed. 1188 (1931), by its holding that the trial

court was not in error when it limited the second trial

in this cause to the issue of damages.

2. Whether or not the trial court’s order granting a

new trial as to damages only denied petitioner the full

measure of its rights to trial by jury as guaranteed by

the 7th Amendment to the Constitution of the United

States.

3. Whether or not the trial court’s order granting

a new trial as to damages only was, on the record, an

abuse of discretion as a matter of law.

4, Whether or not the trial court transgressed the

limits of Rule 59, Fed. R. Civ. Proc., by granting a new

trial limited to damages only.

LIST OF PARTIES

The following are parties in the trial and appellate

courts whose judgments are sought to be reviewed:

1. Herman Blum Consulting Engineers, Inc., the

defendant-petitioner.

2. Carl M. Hadra, the plaintiff-respondent.

SUBJECT INDEX

List of Authorities

Reference to Official Reports

Grounds of Jurisdiction

Constitutional Provisions and Rules of

Procedure Involved

Statement of the Case

A. Facts Giving Rise to the Controversy

B. The First Trial; the Partial New Trial

C. The Decision of the Court of Appeals

Reasons Why the Writ Should Issue

1. A limited retrial is not a constitutionally

permitted option unless certain criteria

are affirmatively established by

the record

a. Wholly unrelated issues

b. Proper jury functioning

2. As a matter of law, an absence of inter-

dependence between liability and damages

does not clearly — on this record;

indeed, the interrelationship is manifest

a. Hadra’s character and credibility

b. Blum’s good faith in context

c. Multiple damage theories

3. There is reasonable doubt that the jury

functioned properly

a. Compromise

b. Confusion of issues

Conclusion

Appendix

LIST OF AUTHORITIES

Ajax Hardware, Mfg. Corporation wv, Industrial

Plants Corporation, 569 F.2d 181,

184-185 (2nd Cir. 1977) . asceluccdics 7 a a a

Camalier & Buckle ‘Seiten. -_ v. Madison

Hotel, Inc., 518 F.2d 407, 422 wees

Cir. 1975) Pree | _ 18, 15, 18, 19

Caskey v. Village of Wayland, 375 E. od 1004

(2nd Cir. 1967) . - _ 19,20

Constitution of the United States,

7th Amendment . ae, eae

Federal Rules of Civil acsniin Rule 59 2

Federal Rules of Civil Procedure, Rule 59 (a) 10

Feinberg v. Mathai, 60 F.R.D. 69, 70-71

(D.C Penn. 1973) _ fee 12, 19

Franchi Construction tas v. sila lhiaienenhs

Co., 580 F.2d 1, 7-8 (1st Cir.1978) ..~-—«<12,17

Fury Imports, Inc. v. a Co., BBA

F.2d 1376 (5th Cir. 1977) 20

Gardner v. roeel, 237 F. nee 119 ( D.C.

Penn. 1964) | ie

— Products Co. v. Pian plin 1 Refining

51 S.Ct. 513, 283 U.S. 494, 75

ari 1188 (1931) ee Re

Geffen v. Winer, 244 F.2d 375, 376 5 (D. C.

Cir. 1957) 12

Grimm v. California S) leeks Chisels

264 F.2d 145 (9th Cir. 1959) 19

Hadra v. Herman Blum Consulting pene,

Inc., 632 F.2d 1242 (5th Cir. 1980) CA

i

LIST OF AUTHORITIES — (Continued)

Hatfield v. Seaboard Airline Railroad

Company, 396 F.2d 721, 723-724 eel

Cir. 1968) ae

Haug v. sonia 251 F.2d 503 (th Cir

1958) | } | 19

Jamison Co. v. Weibides Conporation, 530

F.2d 34 (5th Cir. 1976) eas, 20

Korbut v. Keystone Shipping Co., 380 F. od

352, 354 (5th Cir. 1967) 12, 15

Richardson v. Communication alien of

America, 530 F.2d 126, 120 (8th Cir. 1976) 12, 15

Romer v. Baldwin, 317 F.2d 919, 922-923

(3rd Cir. 1963) | 12, 13, 16

Rosa v. City of Chester, PA, 278 F. od

876, 883 (3rd Cir. 1960) | 12

Shuerholz v. Roach, 58 F.2d 32 (4th Cir. 1932) 19

28 USS.C., §1254(1) of Oh Aa aoe 2

28 U.S.C., §2101(c) Lae ey 2

United Airlines v. Weiner, 286 F 2a 302,

306 (9th Cir. 1961) iF: 12, 15

Vizzini v. Ford Motor Co., 569 F. 2d 754,

760-761 (3rd Cir. 1977) 12, 13, 19

Williams v. Slade, 431 F.2d 605, 608-609

MT I ooo de dus aadayotascaancasinheincisunn .... 12,18,19

NO.

IN THE

Supreme Court of the United States

OCTOBER TERM, 1980

HERMAN BLUM CONSULTING ENGINEERS, INC.

Petitioner,

Vv.

Cart M. HapRa

Respondent.

PETITION FOR WRIT OF CERTIORARI TO

THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

To The Honorable Supreme Court of The United States:

Comes now Herman Blum Consulting Engineers,

Inc., as petitioner, pursuant to Supreme Court Rule 21

and submits the following in support of its petition for

writ of certiorari to review a decision and judgment of

the United States Court of Appeals for the Fifth

Circuit:

REFERENCE TO OFFICIAL REPORTS

The official reference to the decision of the Court of

Appeals is: Hadra v. Herman Blum Consulting Engi-

neers, Inc., 632 F.2d 1242 (5th Cir. 1980).

GROUNDS OF JURISDICTION

The jurisdictional bases upon which the petition is

founded are:

a. The opinion and judgment of the court of appeals

are dated December 17, 1980. (See Appendix A & F.)

b. Time for filing a motion for rehearing was extend-

ed to January 14, 1981. A motion for rehearing was

served January 9, 1981, and overruled by order of the

court on January 27, 1981. (See Appendix F.)

c. Under 28 U.S.C., §2101(c), the time period for

filing this petition runs to April 27, 1981.

d. The jurisdiction of the Court is invoked under 28

U.S.C., §1254(1).

|

|

CONSTITUTIONAL PROVISIONS AND

RULES OF PROCEDURE INVOLVED

Provisions of law applicable to the case are:

a. The 7th Amendment to the Constitution of the

United States which, in pertinent part, provides:

“In Suits at common law, where the value in

ed shall exceed $20.00, the right of trial

a, Rag & 5» be preserved, and no fact tried by a

be otherwise re-examined in any Court

of tt the United States, than according to the rules of

the common law.”

b. That part of Rule 59, Fed. R. Civ. Proc., which

states:

“*** A new trial may be granted .. . on all or part

of the issues . . . in an action in which there has

been a trial by jury nicdiadlas

3

STATEMENT OF THE CASE

Hadra brought this diversity suit against Blum, under

Texas law, for breach of a contract of employment. (R.

226.) *

The case was tried to a jury which returned a verdict

of liability favorable to Hadra but awarding “0” conse-

quential damages for the breach of contract. (Tr. 632-

635.) The trial court granted a new trial limited to

damages for the breach. (R. 327-328; Appendix B.) The

second jury trial resulted in a verdict awarding conse-

quential damages of $97,205.10, making no allowance

for failure to mitigate. (II Tr. 259-260.) This finding,

along with other sums not pertinent here, was the basis

of a judgment against Blum for $121,705.09. (R. 406;

Appendices C and E.)

The court of appeals affirmed. (632 F.2d 1242.)

The facts which are the basis of the cause of action

and the issues brought forward here are:

A. Facts Giving Rise to the Controversy.

Blum is a large, impressively qualified firm of con-

sulting mechanical and electrical engineers. (‘Tr. 6-18.)

In 1974, Blum hired Hadra as an engineer under a five-

year contract at an annual salary of $30,000.00 per year.

(Tr. 33-34.) Simultaneously Blum purchased Hadra’s

engineering firm in Phoenix for $50,000.00 to be paid in

* “R” refers to the volume of pleadings; “Tr.” refers to the

transcript wg gacensinne in the first trial; “II R” refers to

proceedings in the second trial. Petitioner has

requested from the clerk of the court of appeals that these

items be certified to this court in conjunction with considera-

tion of the petition.

-

five annual installments of $10,000.00 over the life of

Hadra’s employment contract. (Tr. 33-34.)

In early 1974, Blum, as a result of previous business

contacts, was invited by Westinghouse and Hughes Air-

craft to explore the possibility of providing its consult-

ing services to a major project in Iran. (Tr. 121-122.)

Hadra was assigned to pursue the opportunity. (Tr.

47-48.) Over a period of several months, commencing

May of 1974, Hadra negotiated with Iranian authorities

and ultimately, in September of 1974, concluded a con-

tract to provide mechanical drawings and engineering

supervision relative to construction of a weapons manu-

facturing facility in Shiraz, Iran. (Tr. 47-48, 124-125.)

The price for the plans was $320,000.00; the cost of one

supervising engineer was $130,000.00. (Tr. 125-126.)

In October of 1974, Hadra and Blum renegotiated

Hadra’s contract to provide for Hadra to represent

Blum in Iran for two years at $130,000.00 annually. (R.

231; Tr. 127, 225-229.) It was further agreed, however,

that the contract would be null and void if the Shiraz

project ceased. (Tr. 50-53, 128.)

The purpose of Hadra’s new assignment was twofold:

first, to provide the supervisory services contracted for

the Shiraz project; second, and equally important, to

solicit new business in Iran where the influx of petro-

dollars into the country had created an unparalleled

explosion in the construction industry. (R. 234; Tr. 231,

238-239, 268-269.)

Hadra assumed his new duties in December of 1974.

(R. 231.) He performed the technical aspect of his

employment well enough. (R. 135.) However, Herman

Blum grew disenchanted with Hadra’s marketing ef-

forts. (Tr. 132-137, 484.) He went to Iran personally,

in February of 1975, and consulted with Hadra, firmly

making known his requirements on the marketing as-

pect of their arrangement. (Tr. 133-138.) No increase

in new business being forthcoming, and deeming there

was no improvement in Hadra’s marketing efforts, Blum

dispatched its marketing manager, Ken Wallace, to

Iran in July of 1974 to further evaluate the situation.

(Tr. 143.) After a period of observation, Wallace con-

cluded Hadra had no organized marketing plan and was

not pursuing future contracts with any degree of skill

or effort. (Tr. 485-490.) Consequently, he presented

Hadra a letter (R. 231) which stated:

“A decision has been made by Herman Blum

Consulting Engineers, Inc. to terminate your em-

ployment in Iran upon the delivery of this letter

to you by Ken Wallace effective immediately.”

“We simultaneously offer you employment in

our Dallas office in the position of Project —

Engineer under the direction of Mr. Fernando

Meneses.” (Tr. 146, 301-302.)

Feigning as an excuse reliance upon an illusory tax

credit for foreign employment, to which he was never

able to show himself duly entitled (Tr. 361; II Tr.

126-157), Hadra deposited himself and his family on

the island of Majorca where he languished for approxi-

mately ten months (Tr. 363), as he said, “ *** huddled

over a radiator more than we went on the beach. *** ”

(II Tr. 16, line 3.) Hadra subsequently made repeated

representations that this stay was an “*** extended

vacation in Spain. ***” (E.g., Tr. 425-426.) While he

engaged with others in academic discussion of em-

ployment in Iran (Tr. 416), he made no serious effort

to obtain any of the abundant engineering jobs avail-

able at the time in the country. (Tr. 503; II Tr. 171-

177.) Indeed, Hadra entertained the notion, albeit

erroneous, it was illegal for him to work in Iran. (II

Tr. 17, 20.) Although he did some wool gathering about

ethereal, potential projects in various countries (Tr.

361-362), he did not obtain employment while on Ma-

jorca nor did he make serious effort in that regard.

(Tr. 361-363, 420.) In fact, he stated that he believed

it was illegal for him to work anywhere in Europe (II

Tr. 16-17) and that it was his intention actually to

remain on Majorca “*** (u)ntil the 510 days tax

advantage ceased. ***” (Tr. 420, line 7.) Hadra sti-

pulated that his “ *** first efforts to find new employ-

ment were in August, 1976, when he returned to

Phoenix, Arizona *** ” (R. 236), which was after the

expiration of the term of his contract as found by the

jury. (R. 236, Stipulation #30.)

This suit resulted and the issues formed around the

foregoing course of events.

B. The First Trial; the Partial New Trial.

The first trial was lengthy, complex, and contentious.

The controlling issues were hotly contested. The intan-

gible qualities of Hadra’s job performance and the

sincerity of his efforts to mitigate damages were the

subject of bitter disagreement. The credibility of all

parties was made a central issue.

The first jury was asked to enter this Serbonian bog

and untangle the morass via a general charge and spe-

cial interrogatories —in response to which it found:

7

1. Blum and Hadra cancelled their first contract

by the 1974 agreement. (Tr. 632.)

2. Blum did not “*** re-assign *** ” Hadra to

Dallas. (Tr. 633.)

3. Hadra performed the 1974 Iranian assignment

in a “ *** satisfactory manner ***.” (Tr. 633.)

4. The 1974 agreement was intended to be null

and void when and if the Shiraz — was

completed (which ultimately proved to be

January 31, 1976). (Tr. 633-634.)

5. Hadra suffered “0” consequential damages as a

result of his termination. (Tr. 634.)

The district court entered judgment on that verdict

for $24,500.00, representing certain sums Hadra was

due for the purchase by Blum of his business and for

unreimbursed expenses while in Iran (R. 299-300), but,

just as quickly, the court set aside the judgment by

reason of the “0” damage finding. (R. 327-328.) The

order granting new trial recited:

“ *** The court feels that the jury based upon the

evidence before them could have inferred that

plaintiff might have mitigated within sometime

after he was terminated, but could not have in-

ferred the amount by which he could mitigate it

(sic) would have equaled or exceeded the lower

on} of his contractual damages. ***” (R. 327-

The significant aspect of the order was that the new

trial was limited to “ *** the damages plaintiff suffered

as a result of defendant’s breach. *** ” (R. 328.)

The case proceeded to trial again — ostensibly to

determine damages, although Hadra was permitted to

extol the competency of his performance (II Tr. 18),

8

to excoriate the injustice in his termination (II Tr.

ing his version of the termination. (II Tr. 190-207.)

Blum was sternly rebuffed when it made even the

most oblique reference to those circumstances. (II Tr.

mitigation of damages. What Hadra did, or did not

do, in mitigation by seeking gainful employment was

relatively undisputed. At issue was why it had taken

him so long to become re-employed in the otherwise

effulgent market for engineers prevailing at the time in

Iran. (II Tr. 170-177.) This issue, in turn, was depen-

dent upon Hadra’s peculiar vocational philosophy, his

character, his competency, his industriousness, and the

motivation behind his actions vis a vis the pursuit of

his vocation — all of which was inextricaby tied to the

circumstances surrounding his employment and the

basis for his termination in Iran. Not being able to

show this, Blum was rendered an impotent sparring

partner for whatever punches Hadra wished to throw.

To make matters worse, the second trial provided

the occasion for the district court to change the rules

of the game in so far as mitigation was concerned.

Whereas in the first trial, the court had charged that

damages from any breach of contract by Blum should

be reduced by sums Hadra “*** could or should

through the exercise of due diligence have earned

through other employment ***” (Tr. 613) over the

remaining life of the contract, in the second trial this

duty was confined to a “ *** geographical area [not]

unreasonably distant from his usual place of employ-

ment. ***” (II Tr. 246.) As Hadra had voluntarily

abandoned his “ *** usual place of employment *** ”

(Iran) in pursuit of the elusive tax credit, and was

further operating on the assumption it was illegal for

him to work in Iran and throughout Europe, the new

instruction, in context, virtually took mitigation out of

the case.*

Under the limitations imposed in the second trial,

the outcome was predictable. Whereas the first jury

(which heard all the evidence and was able to assess

the motivation of all parties in context) had a low

assessment of Hadra’s efforts in mitigation, the second

jury (which was given only a small peek at the entire

relationship between the parties) reached a diametri-

cally opposite result, giving Hadra literally every pen-

ny he asked for. (II Tr. 259.) Judgment was entered

accordingly. (R. 406, Appendix E.)

C. The Decision of the Court of Appeals.

The court of appeals gave but cursory attention to

Blum’s point complaining of the partial new trial. Giv-

ing lip service to the Champlin criteria, it approved

partial retrial by reasoning: (i) that the verdict was

not “compromise” in nature, since no jury misconduct

was shown and (ii) that liability and damages were

“*** separate ***”, failing in the latter instance to

* While Blum believes, along with the dissenting justice

below (632 F.2d 1247, et seq) that this instruction is a grave

misinterpretation of Texas w, it recognizes such issues are

not generally deemed “certworthy”. The error is a factor,

however, which is rightfully looked to to underscore the harm

resulting from the partial new trial.

10

give the benefit of its reasoning or justify the conclu-

sion in terms of the record. (632 F.2d 1246.) *

Hence this appeal upon that point!

REASONS WHY THE WRIT SHOULD ISSUE

1.

A limited retrial is not a constitutionally

permitted option unless certain criteria are

affirmatively established by the record.

The issue posed by Blum’s petition does not ques-

tion the district court’s constitutional power, under

approximate circumstances, to order a new trial re-

stricted to damages. The constitutionality of such pro-

cedure under the 7th Amendment was decided long

ago in Gasoline Products Co. v. Champlin Refining Co.,

51 S.Ct. 513, 283 U.S. 494, 75 L.Ed. 1188 (1931), and

the power has been enabled in federal court by the

provisions of Rule 59(a), Fed. R. Civ. Proc.

The issue, instead, is when the power may be exer-

cised. Blum’s petition asks: Are there constitutional

criteria, and what are they, which trigger the right to

utilize the power of partial retrial?

The initial and pervasive fallacy of the court of

appeals’ approval of the use of the procedure here lies

oe a however, points to no circumstances, such as

those listed in Hatfield, that indicate the eng meng of a com-

promise verdict and concedes in its brief that jury misconduct

was unlikely here. mrs! the — » whether a

was wrongfully termina is separate from issues 0

much he would have made under his contract and could have

made in other reasonably obtainable employment. Thus where,

as here, the jury’s findings on questions relating to liabili

were based on sufficient evidence and made in accordance wi

law, it was proper to order a new trial only as to damages. ***”

(632 F.2d 1246)

11

in its failure to answer that threshold constitutional

question. Its fallacious approach begins at the end of

the problem and reasons backwards; i.e., it accepts that

the power was exercisable, ab initio, and then it

searches the record only to determine if it conclusively

impugns what it deems a simple exercise of discretion

by the trial court.

That approach cannot be reconciled with the Cham-

plin doctrine. If anything is clear from that opinion,

it is that the inquiry in these cases starts with the

assumption that partial retrial is never to be indulged

unless certain factual criteria are shown to exist. In

support of that proposition, one need look no further

than the Champlin court’s holding that:

“Where the practice permits a partial new trial,

it may not properly be resorted to unless...”

(283 U.S. 500, 75 L.Ed. 1191, emphasis added.)

The word “*** unless ***” clearly renders the

power conditional. Case law has developed two nega-

tive criteria, operating in an either/or tandem, on the

establishment of which—and only upon the estab-

lishment of which — the power of retrial becomes an

available option, viz:

a. Wholly unrelated issues: The first requirement

is that there be no interrelationship of issues. The issue

to be separately tried must be totally distinct from

other issues in the case. This prerequisite is found in

the Champlin opinion, itself, when it says:

“*** partial new trial... may not properiy be

resorted to unless it clearly appears that the issue

to be retried is so distinct and separable fron the

others that a trial of it alone may be had without

injustice. *** ” (283 U.S. 500, 75 L.Ed. 1191.)

12

The separation must be absolute. Even a tangential

connection or a philosophical overlapping is sufficient

to foreclose utilization of the partial retrial procedure.

See Richardson v. Communication Workers of Amer-

ica, 530 F.2d 126, 1380 (8th Cir. 1976); Franchi Con-

struction Co. v. Combined Insurance Co., 580 F.2d 1,

7-8 (1st Cir. 1978); United Airlines v. Weiner, 286

F.2d 302, 306 (9th Cir. 1961); Korbut v. Keystone

Shipping Co., 380 F.2d 352, 354 (5th Cir. 1967); Wil-

liams v. Slade, 431 F.2d 605, 608-609 (5th Cir. 1970).

b. Proper jury functioning: Secondly, there must

be no suggestion that the first verdict was a compro-

mise of the jurors’ conflicting viewpoints on liability

and damages nor can there exist the possibility that

the jury was affected by factors which caused defective

deliberations. Vizzini v. Ford Motor Co., 569 F.2d 754,

760-761 (3rd Cir. 1977); Ajax Hardware Mfg. Corpora-

tion v. Industrial Plants Corporation, 569 F.2d 181,

184-185 (2nd Cir. 1977); Hatfield v. Seaboard Airline

Railroad Company, 396 F.2d 721, 723-724 (5th Cir.

1968); Feinberg v. Mathai, 60 F.R.D. 69, 70-71 (D.C.

Penn. 1973).

In the fifty years since Champlin was decided, fed-

eral courts have taken heed to “*** proceed with

caution ***” in finding that the power to partially

retry exists. E.g., Romer v. Baldwin, 317 F.2d 919, 922-

923 (3rd Cir. 1963) ; Geffen v. Winer, 244 F.2d 375, 376

(D.C. Cir. 1957); Rosa v. City of Chester, PA, 278

F.2d 876, 883 (8rd Cir. 1960). This court’s unequivocal

admonition that the prerequisite criteria must “***

clearly appear[] *** ” (283 U.S. 500, 75 L.Ed 1191)

has been taken at face value. While the phrase “ ***

clearly appears *** ” is not otherwise defined in the

13

Champlin opinion, it has been applied to require a

positive showing that the two prerequisite factors do

not exist, Camalier & Buckley-Madison, Inc. v. Madi-

son Hotel, Inc., 513 F.2d 407, 422 (D.C. Cir. 1975), that

their total negation must be “ *** plain *** ”, Romer

v. Baldwin, supra, at 922, virtually to the point of being

beyond a reasonable doubt. Camalier & Buckley- Mad-

ison, Inc. v. Madison Hotel, Inc., supra at 422; Ajax

Hardware Mfg. Corporation v. Industrial Plants Cor-

poration, supra, at 185— (“ *** the reasonable pos-

sibility of a compromise verdict warranted a new trial

on all issues. *** ”) As aptly summed up in Williams

v. Slade, supra, 431 F.2d 605 (5th Cir. 1970):

“*** © court may properly award a partial new

trial only when the issues affected by the error

could have in no way influenced the verdict on

those issues which will not be included in the new

trial. *** ” (431 F.2d 608, emphasis added.)

While cases may be found which say that a district

court’s order for partial retrial is reviewable only for

abuse of discretion, Vizzini v. Ford Motor Co., supra,

569 F.2d 754, 760 (3rd Cir. 1977), Champlin, and cases

following it, make clear that the power to indulge that

discretion does not arise until the record sufficiently

negates interrelationship of issues and/or jury dysfunc-

tion. The district court does not, as the court of appeals

seems to imply, have “discretion” in ascertaining whe-

ther the state of the record invokes the power of partial

retrial; that determination is subject exclusively to the

objective, stringent standard of Champlin.

This is the crux of the lower court’s error, because,

as we now show, by no stretch of the imagination can

it be said that a total absence of interdependent issues

14

or jury dysfunction “*** clearly appears ***” on the

face of this record.

As a matter of law, an absence of interdependence

between liability and damages does not clearly appear

on this record; indeed the interrelationship is manifest.

The fundamental interdependence of liability and

damage issues in this suit, sufficient to pre-empt the

right to order partial retrial, is found in the following

factors:

a. Hadra’s character and credibility: There was utter

disagreement as to Hadra’s performance of the non-

technical aspects of his Iranian assignment. According

to him, complaints as to his administrative efficiency

were untrue or entirely Blum’s fault. (Tr. 252-272.) He

pictured himself as devoting effective efforts to the pro-

curement of new business (Tr. 238, 280-295) to the

point of producing “*** several million dollars ***”

for Blum. (II Tr. 18, line 24.) According to Blum

and Wallace, on the other hand, Hadra defaulted on

the administrative requirements of his job (Tr. 133-

135) and his marketing efforts were wholly ineffective,

if not nonexistent. (Tr. 135-143, 166-168, 478, 485-495.)

This testimonial dispute over liability issues called

into question Hadra’s character, his industriousness,

his competency, and, significantly, his credibility as a

witness. These same traits bore directly upon, and thus

interrelated with, the sufficiency of his efforts at miti-

gation, the motivation for his conduct after termination

and the believability of his testimony as to those efforts.

These traits, in other words, permeate the entire case

and are not subject to isolation on partial retrial, as is

15

clearly seen in such cases as Richardson v. Communica-

tion Workers of America, supra, 530 F.2d 126 (8th Cir. |

1976), Korbut v. Keystone Shipping Co., supra, 380

F.2d 352 (5th Cir. 1967), United Airlines v. Weiner,

supra, 286 F.2d 302 (9th Cir. 1961), where the nature

of the overall conduct of the parties, their character,

and their credibility were intangible but common

threads which linked liability and damages sufficiently

to preclude partial retrial.

b. Blum’s good faith in context: Another important

factor binding liability and damages together is the

element of Blum’s good faith in its actions taken in the

context of the parties overall dealings.

Blum proved, from its standpoint, that its actions in

terminating Hadra in Iran were based upon good cause,

sound business judgment, not determined precipitously,

but premised upon careful, thoughtful evaluation. (Tr.

135-143, 168, 485-495, 585-586.) Hadra, of course, dis-

agreed and supported his disagreement with his own

assessment. (Tr. 238, 280-295.)

This element of motivation and good faith had its

impact upon both liability and damages. The district

court’s limitation of the scope of the second trial and

his instruction to the jury that Hadra “*** was termi-

nated by Mr. Blum ***” had the potential for verifying

Hadra’s view that his termination not only was without

cause but was attended with evil motive (Tr. 272, 304,

311, 365, 409; II Tr. 25-26), possible slander (II Tr.

12), and obstruction of justice (Tr. II 191-192) —

liability factors which Hadra liberally capitalized upon

in the second trial to increase damages.

The decision in Camalier & Buckley-Madison, Inc.

v. Madison Hotel, Inc., supra, 513 F.2d 407 (D.C. Cir.

16

1975) , demonstrates why there is an invariable relation-

ship between liability and damages in a complex con-

tractual dispute where there are claims, counterclaims,

myriad issues and theories of damage, questions of

mitigation, and testimonial disputes. The following

passage from that case, which likewise involved an al-

legedly wrongful contract termination and the issue of

mitigation, could just as easily be speaking of our case

in its elucidation of the error of partial retrial, to wit:

“We think these instructions, albeit inadvertent-

ly, may have so distorted the postural image of

the litigation in the jury’s mind that its verdict

cannot safely be a as a proper award of

damages should Camalier prevail on retrial of the

issue of liability. The unelucidated statement that

Madison’s ‘conduct breached [Camalier’s] rights’

may well have led the jury to erroneously believe

that the dispute over relocation of Camalier’s shop

had been legally resolved against Madison, and

that Camalier was inexorably entitled to remain in

its quarters in the hotel building; and that false

notion, in turn, could have impermissibly influ-

enced the jury’s award of damages. It could have

aggravated the amount which the verdict included

for lost profit; it could have settled for the jury

Camalier’s bona fides in renewing the lease for a

second five-year term; it could have dictated the

jury’s conclusion on mitigation of damages, as well

as on punitive damages. In calling attention to

the more conspicuous probabilities of prejudice,

we do not suggest that the list is exhaustive.”

(513 F.2d 422.)

See also, Romer v. Baldwin, supra, 317 F.2d 919, 923

(3rd Cir. 1963), further emphasizing the critical rela-

tionship between the jury’s understanding of liability

and its assessment of damages (“*** such awareness

17

is in itself a significant safeguard against capricious or

cavalier treatment of the issue of damages. ***” — 317

F.2d 923.)

c. Multiple damage theories: Finally there is the nu-

merily of Hadra’s damage theories. His suit encom-

passed more than compensatory damages from his

termination. It included sums due from the purchase of

his business, allegedly unreimbursed business expenses,

loss of tax benefits, even loss on the sale of a boat and

other personal possessions. (R. 226-227.) These ele-

ments could only be fairly judged in relation to one

another, and all were integrally involved with the

parties negotiations and the factual context out of

which their agreement arose which, in turn, is insepar-

able from the issue of contractual liability. The court

determined some of these elements in light of the reso-

lution of liability, but left others for the second jury.

As succinctly observed in Franchi Construction Co. v.

Combined Insurance Co. of America, supra, 580 F.2d 1

(1st Cir. 1978), on the propriety of partial retrial in

such a context:

“*** the action may not be splintered in that

fashion. In order to render informed findings as

to each item in dispute, the triers of fact would

have to hear testimony about all of the parties’

dealings under contract. The testimony about indi-

vidual items was not distinct and separable from

but rather was interwoven with the damages ques-

tions raised and resolved at the first trial. The

trial court’s emphasis on a possible economic bene-

fit to be realized in conducting a resumed trial

must yield to the injustice ting herein “em

interconnected damages issues separably to dif-

ferent juries.*** ” (580 F.2d 8.)

18

As did the court in Camalier, supra, we do not suggest

that the possible bases of interrelationship between

liability and damages discussed above is exhaustive.

Blum does believe it gainsaid, however, that the inter-

relationship exists so patently that any potential power

to partially retry died a’borning.

3.

There is reasonable doubt that the jury

functioned properly.

If the court of appeals is correct in its holding that

there was no evidence at the first trial by which the

jury could find any failure to mitigate on Hadra’s part,

then, the jury wholly disregarded its instructions to

base its verdict upon evidence. (Tr. 602-605.) There

are two possible explanations for that presumed disre-

gard and the consequent finding of “0” consequential

damages, to wit:

a. Compromise: For the jury to have honesty be-

lieved there was a breach, for it to have awarded some

damages ($4,500.00) as a result of that breach, but to

have denied (upon a barren record) the major portion

of damages raises the suspicion, indeed the high degree

of likelihood, that the verdict represents a compromise

between conflicting viewpoints.

In that regard, it is important to note that verdicts

which are set aside for inadequate damages are the ones

invariably thought to be compromise in nature. Indeed,

inadequate damage cases form virtually the entire

foundation for the “compromise” verdict enjoinder

against the power of partial retrial. See Williams v.

19

Slade, 431 F.2d 605 (5th Cir. 1970); Caskey v. Village

of Wayland, 375 F.2d 1004 (2nd Cir. 1967); Grimm v.

California Spray-Chemical Corporation, 264 F.2d 145

(9th Cir. 1959); Shuerholz v. Roach, 58 F.2d 32 (4th

Cir. 1932); Haug v. Grimm, 251 F.2d 523 (8th Cir.

1958); Hatfield v. Seaboard Airline Railroad Co., 396

F.2d 721 (5th Cir. 1968) ; Gardner v. Vogel, 237 F. Supp.

119 (D.C. Penn. 1964); Feinberg v. Mathai, 60 F.R.D.

69 (D.C. Penn. 1973).

The extreme factual disputes, the extent to which

good faith and fair dealing of both parties was at issue,

the complex nature of the parties’ arrangements, the

extent to which liability was to be resolved on those

intangible issues are too suggestive of compromise to be

ignored. It at least cannot be said beyond any doubt

that the jury deliberations were not so affected. Blum

would remind that it is not its burden to demonstrate

“compromise” to the exclusion of all other possibilities.

It need only show that compromise is a reasonable

explanation for the verdict. Camalier & Buckley-Mad-

ison, Inc. v. Madison Hotel, Inc., supra, at 513 F.2d 422;

Vizzini v. Ford Motor Co., supra, at 569 F.2d 760-761;

Ajax Hardware Mfg. Corporation v. Industrial Plants

Corporation, supra, at 569 F.2d 185.

b. Confusion of issues: The only possible alternative

to compromise is confusion of issues by the jury.

While the jury was instructed that the standard for

judging breach of an employment contract was termi-

nation “*** without cause ***”, strangely enough, the

jury was nowhere asked in the charge to decide that

ultimate fact. All it found, in response to Question No.

20

3, was that Hadra did not fail “*** to perform in a

satisfactory manner his duties and obligations ***”

under the 1974 agreement. Having been charged on the

question of “good cause”, the jury could have legiti-

mately have been confused as to whether or not a mere

“*** satisfactory ***” performance would, ipso facto,

preclude cause for termination particularly in light of

the divergent philosophical viewpoint as to the market-

ing aspects of Hadra’s performance. The possibility that

such confusion existed is likewise an impediment to ex-

ercise of the power of partial retrial. See Jamison Co.

v. Westvaco Corporation, 530 F.2d 34 (5th Cir. 1976) ;

Fury Imports, Inc. v. Shakespeare Co., 554 F.2d 1376

(5th Cir. 1977); Caskey v. Village of Wayland, supra,

375 F.2d 1004 (2nd Cir. 1967).

The possibility of compromise or confusion and, thus,

jury dysfunction exists. Indeed Blum would challenge

respondent to point to a more rational explanation. But

the possibility is enough; it stands as an immovable

obstacle to the power of partial retrial.

CONCLUSION

If the provisions of the 7th Amendment are the

equivalent of judicial fairness, the staggering difference

in the two verdicts here discloses a sufficient constitu-

tional deprivation. That dollars-and-cents difference is

secondary to a larger issue, however. No case more

graphically demonstrates the precarious balance be-

tween judicial economy and the utter trampling of

constitutional rights inherent in the power of partial

retrial. No case better illustrates the wisdom of the

caution enjoined upou the exercise of that power. This

case is too interrelated and complex, the accuracy of

21

the jury verdict too suspect for it to be concluded that

7th Amendment rights have been accorded petitioner.

Writ of certiorari should issue because:

(i) The court of appeals has improperly applied

the Champlin doctrine by refusing to require the

necessary criteria to clearly appear prerequisite to

the existence of the power; indeed, by imputing the

power when those criteria clearly did not appear,

Supreme Court Rule 17(c), and

(ii) the court of appeals has likewise held con-

trary to other courts of appeals (including decisions

of its own) by deciding that the inadequate damages

in the first trial do not, as a matter of law, evidence

compromise or jury malfunction. Supreme Court

Rule 17(c).

WHEREFORE, PREMISES CONSIDERED, petitioner prays

that its petition be granted, that the case be set down

for briefing and oral argument, and, upon final hearing,

that the judgments of the courts below be reversed

and the cause remanded for retrial. Petitioner addi-

tionally prays for such other and further relief to which

it may justly be entitled at law or in equity.

Respectfully submitted,

~~.

P. O. Box 629

ler, Texas 75710

(214) 597-3301

OF COUNSEL

Neal E. Y

10 Ke th

13551 North Central Expressway

Dallas, Texas 75243

(214) 234-4288

CERTIFICATE OF SERVICE

It is hereby certified that three copies of the fore-

going petition for writ of certiorari have been served

upon Mr. Marvin Johnson, 45 West Jefferson, Phoenix,

Arizona 85003, by placing the same in the United

States mail, properly addressed and postage prepaid,

on this the S*. day of March, 1981.

A. HaTCHELL

Appendix

Appendix

Appendix

Appendix

Appendix

Appendix

APPENDICES

The Opinion of the Court of Appeals.

District Court Order Granting New

Trial in First Suit.

District Court Memorandum Opinion

and Order on Motion for Judgment

NOV &/or New Trial After Second

Trial.

The Judgment of the District Court

on the First Trial.

The Judgment of the District Court

on the Second Trial.

Court of Appeals Judgment; Orders on

Rehearing.

A-1

APPENDIX A

IN THE

United States Court of Appeals

FIFTH CIRCUIT

DEC. 17, 1980

NO. 79-1012

Cart M. Hapra,

Plaintiff-Appellee,

v.

HERMAN BLUM CONSULTING ENGINEERS,

a Texas Corporation,

Defendant-Appellant.

Richard L. Arnold, Dallas, Tex., for defendant-appel-

lant.

Marvin Johnson, John P. Otto, Phoenix, Ariz., for

plaintiff-appellee.

Appeal from the United States District Court for the

Northern District of Texas.

Before GODBOLD, SIMPSON and THOMAS A.

CLARK, Circuit Judges.

GODBOLD, Circuit Judge:

Plaintiff Hadra recovered on his claim for wrongful

discharge by defendant Blum and successfully defended

against Blum’s counterclaim alleging fraud by Hadra in

the sale of his business to Blum. We find all issues in

Hadra’s favor and affirm.

A-2

Dealing between Hadra and Blum began in 1972

when Hadra sold his engineering consulting firm in

Phoenix, Arizona, to Blum and began working for Blum.

In late 1974, under the terms of a new contract, Hadra

and his family moved to Tehran, Iran, so that he could

manage Blum’s operations in Iran and seek new con-

tracts there for Blum. On July 22, 1975, Blum termi-

nated Hadra’s duties in Iran and offered him a position

as a project engineer in Dallas. Hadra rejected this

offer, however, and moved his family to Majorca, an

island off the coast of Spain. Hadra’s employment con-

tract with Blum expired by its own terms January 31,

1976. Hadra stipulated that he did not begin to look for

new employment until his return to the United States

in August 1976.

In the first trial of this case the district court directed

a partial verdict for Hadra, holding that the statute of

limitations had run on Blum’s claim that Hadra fraudu-

lently misrepresented the business prospects of his

engineering firm. On the remaining issues the jury

found, in response to interrogatories, that Hadra had

satisfactorily performed his duties in Iran, that Blum

had not reassigned him to Dallas, and that Blum owed

Hadra $4,500 for unreimbursed business expenses. Also,

to an interrogatory asking the amount of damages suf-

fered by Hadra from Blum’s breach of Hadra’s employ-

ment contract, the jury answered “$0.” The district

court entered judgment for Hadra in the amount of

$24,500, including $4,500 for unreimbursed expenses and

$20,000 for the unpaid balance owed by Blum for Had-

ra’s engineering firm in Phoenix.

Hadra moved for a new trial, which the district court

granted in part, limiting the new trial to the issue of

A-3

damages that Hadra had suffered through January 1976

because of Blum’s breach of the employment contract.

The court held that the award of $0 was inappropriate

because the evidence would not support an inference

that Hadra reasonably could have mitigated all of his

contractual damages.’

In the second trial the jury found that Hadra had the

right to receive $97,205.10 under the terms of his em-

ployment contract and that he could not have earned

any money in the exercise of reasonable diligence in

other employment between July 22, 1975, and January

31, 1976. The district court awarded Hadra $121,705.10,

including the contractual damages and the damages

awarded in the first tiial, plus 6% interest thereafter.

[1,2] Blum urges first that the district court should

not have granted Hadra a new trial on the ground of

lack of proof of failure to mitigate. A district court’s

ruling on a motion for new trial will usually stand ab-

sent an abuse of discretion, but closer scrutiny is re-

1. The trial gen explained in his order that there was evi-

dence from which the jury could have inferred that Hadra

could have mitigated his damages in part and had failed to

do so; but that there was not evidence permitting an infer-

ence that he could have totally mitigated and had failed to

do so, and that absent such a permissible inference the

verdict of zero damages could not stand.

[ w ]ithout analyzing the evidence in detail, it was defend-

ant’s burden, after a showing of contractual breach by

defendant, to establish the possibility of mitigation and

the amount by which mitigation was ible. The Court

feels that the jury, based upon the evidence before them,

could have inferred that plaintiff might have mitigated

within some time after he was terminated, but could not

have inferred that the amount by which he could [have]

mitigated would have equaled or exceeded the lower limit

of his contractual damages.

A-4

quired in reviewing a district court’s order granting a

new trial on the ground that the jury’s verdict was

based on insufficient evidence. See Spurlin v. General

Motors Corp., 528 F.2d 612 (5th Cir. 1976); Massey v.

Gulf Oil Corp., 508 F.2d 92 (5th Cir. 1975). A new trial

is required where there is no evidence supporting the

jury’s verdict. See Parker v. Wideman, 380 F.2d 433

(5th Cir. 1967); cf. Urti v. Transport Commercial

Corp., 479 F.2d 766, 769-70 (5th Cir. 1973); Indamer

Corp. v. 'Crandon, 217 F.2d 391, 393 (5th Cir. 1954)

(refusal to order a new trial in such circumstances error

of law).

[3-5] Under Texas law the defendant has the burden

of proving the amount of money that a wrongfully dis-

charged employee could have earned in mitigation of

damages. See A. J. Foyt Chevrolet, Inc. v. Jacobs, 578

S.W.2d 445, 447 (Tex.Civ.App. 1979) ; Mr. Eddie’s, Inc.

v. Ginsberg, 430 S.W.2d 5, 9 (Tex.Civ.App.1968) , writ

ref’d n.r.e.. Blum urges that there was evidence support-

ing an inference that Hadra could have mitigated all

damages flowing from the breach of contract. There was

no such evidence. There was no substantial evidence of

the amount of money that Hadra could have earned;

indeed Blum implicitly concedes in its brief that the

only evidence of the amount that Hadra could have

earned after breach was Hadra’s own testimony that he

actually earned a few thousand dollars working as a

consultant while he was in Majorca. Our Brother Clark

suggests that the district court was in error because of

the offer to Hadra of a position as project engineer in

Dalles. This argument presupposes that there was evi-

dence on the basis of which the jury could find that the

Dallas position was comparable to the job in Iran and

A-5

that the salary for the Dallas position was at least as

great as that for Iran. Blum concedes that the Dallas

position entailed less responsibility because it did not

carry management duties as did Hadra’s job in Iran.

There was no evidence of what the salary would have

been for the Dallas job.? Moreover, Blum’s contention

that the Dallas offer was evidence relating to mitigation

is new on appeal. Its position at trial was it had not

breached the employment contract — because it had

never fired Hadra but merely transferred him by reas-

signing him to an equivalent position in Dallas and that,

under the employment contract, it could do this. The

jury rejected this contention. The theory that the offer

of the Dallas position was evidence of available post-

breach employment to be considered in mitigation of

damages was not presented to either jvdge or jury at

the trial. It may not be considered on appeal in the

absence of a manifest miscarriage of justice. See Ala-

bama Great Southern Railroad Co. v. Allied Chemical

Corp., 501 F.2d 94, 103 (5th Cir. 1974) , opinion adopted

by court en banc, 509 F.2d 539 (5th Cir. 1975). There

is no such injustice here. Thus the offer of a position in

Dallas was not evidence tending to discharge Blum’s

burden of proving the amount of money that Hadra

could have earned.

[6] The district court did not err in granting a new

trial only as to damages arising from the breach of the

2. Blum argues that the jury reasonably could infer that it

would have paid Hadra the same salary he had always

received and that there would have been no break in other

employment benefits in the Dallas position. This would have

been a conclusion based upon speculation rather than evi-

dence, and also would have ignored the revealed differences

between compensation for employment in Iran and stateside

employment.

A$

employment contract. Blum urges that the jury in the

first trial did not find that Hadra had been wrongfully

discharged and, therefore, this issue should have been

retried. That jury did find, however, that Hadra has

substantially performed his duties in Iran and that

Blum had not reassigned him to Dallas. Under Texas

law these findings mean that Hadra was wrongfully dis-

charged. See Dixie Glass Co. v. Pollak, 341 S.W.2d 530,

542 (Tex.Civ.App.1960), writ ref’d n.r.e., 347 S.W.2d

596 (Tex.1961) (finding of substantial performance

leads to inference of dismissal without good cause).

[7] Blum argues that the issues of wrongful dis-

charge and damages are so interwoven that it was in-

herently unjust to order a new trial only of the latter.

See Gasoline Products Co. v. Champlin Refining Co.,

283 U.S. 494, 51 S.Ct. 513, 75 L.Ed. 1188 (1931); Wil-

liams v. Slade, 431 F.2d 605, 608-09 (5th Cir. 1970).

Blum also suggests that a complete new trial was re-

quired because the first jury’s answers were the result

of a compromise. See Hatfield v. Seaboard Air Line

Railroad Co., 396 F.2d 721 (5th Cir. 1968). Blum, how-

ever, points to no circumstances, such as those listed in

Hatfield, that indicate the possibility of a compromise

verdict and concedes in its brief that jury misconduct

was unlikely here. Moreover, the question of whether

Hadra was wrongfully terminated is separate from the

issues of how much he would have made under his con-

tract and could have made in other reasonably obtain-

able employment. Thus where, as here, the jury’s

findings on questions relating to liability were based on

sufficient evidence and made in accordance with law, it

was proper to order a new trial only as to damages. See

Gasoline Products Co. v. Champlin Refining Co., supra;

A-7

Edwards v. Sears, Roebuck & Co., 512 F.2d 276, 281-83

(5th Cir. 1975); Parker v. Wideman, supra, 380 F.2d

at 437.

[8] Blum challenges the district court’s charge to

the jury in the second trial on the issue of mitigation,

contending that it was prejudicial error to instruct

that: (1) Hadra had a duty, at least for a reasonable

time after his discharge, only to seek employment

comparable to his previous job; (2) after that time

he had to seek and accept any work for which he

was qualified; and (3) he was not required to consider

opportunities unreasonably distant from his usual place

of employment. These limitations are derived from

long-standing Texas law and are not error. See, e.g.,

Kramer v. Wolf Cigar Store Co., 99 Tex. 597, 91 S.W.

775 (1906); San Antonio & A. P. Ry. Co. v. Collins,

61 S.W.2d 84 (Tex. Comm. App. 1933) ; 38 Tex. Jur.2d,

Master & Servant § 22. These limitations on the con-

cept of “reasonable diligence” were not eliminated by

the more general statements in Dixie Glass and Mr.

Eddie’s, supra, where limitations such as these were

not at issue. Moreover, the decision in Kramer was by

the Texas Supreme Court and not subject to being

overruled by Court of Civil Appeals cases cited by

appellant.

Under the above instructions the jury necessarily

found that the United States (and Texas in particular)

is unreasonably distant from the place of employment,

or that the Dallas position was not “comparable” to

the job in Iran, or it found both. We see no basis on

which to predict that Texas would change its law of

mitigation and hold that when one has lived in the

United States and is employed to work outside the

A-8

United States and is fired in breach of contract he

must, as a matter of law and, without regard to dis-

tances involved, mitigate by returning to the United

States and accepting employment. Nor can we predict

that Texas would amend its mitigation law by holding

that for such a person, as a matter of law, salary sub-

ject to United States income tax is “comparable” to

salary not subject to United States income tax.

[9] Blum asserts that the district court erred in

refusing to order remittitur because the parties had

stipulated that Hadra’s annual salary in Iran was

$50,000. This argument ignores that it was also stipu-

lated that Hadra was to receive $50,000 per year in

expenses, Hadra’s wife was to be paid $30,000 annually,

and compensation under the employment contract was

to be allocated in a manner that minimized Hadra’s

tax liability. Reading these stipulations together, the

district court correctly held that the jury could reason-

ably infer that the entire $130,000 due annually under

the contract was actually meant to be compensation

to Hadra.

[10] The district court did not err in awarding pre-

judgment interest from the date that the employment

contract ended. A. J. Foyt Chevrolet, Inc., supra,

recently upheld such an award in a case involving

issues of wrongful discharge and mitigation. See also

Watkins v. Junker, 90 Tex. 584, 40 S.W. 11 (1897);

McDaniel v. Tucker, 520 S.W.2d 543 (Tex. Civ. App.

1975); Beck v. Lawler, 422 S.W.2d 816 (Tex.Civ.App.

1967), writ ref’d n.r.e. (interest due when “measure of

recovery is fixed by the conditions existing at the time

the injury is inflicted ....”); cf. Mr. Eddie’s, Inc. v.

Ginsberg, supra (award of prejudgment interest not

A-9

error in case of wrongful discharge in absence of excep-

tion). Winandy Greenhouse Construction, Inc. v. Gra-

ham Wholesale Floral, Inc., 456 S.W.2d 470 (Tex.Civ.

App.1970), no writ, and the other cases cited by Blum

are distinguishable on their facts and contrary to the

weight of Texas authority.

[11] Finally, Blum urges that its claim that Hadra

fraudulently misrepresented the business prospects of

his Phoenix firm was not barred as a matter of law by

the two-year statute of limitations. Mr. Blum, how-

ever, stated to the court that he was aware in May

1973 that Hadra’s projections did not seem to be cor-

rect and that the firm was not generating as much

money as expected. That knowledge should have been

enough to cause a reasonably prudent person to inquire

further. Thus, the limitations period began to run at

that time, see Susanoil, Inc. v. Continental Oil Co., 519

S.W.2d 230, 238 (Tex.Civ.App.1975), writ ref’d n.r.e.,

and expired long before Blum raised the issue of fraud

as either an affirmative defense in February 1976 or a

counterclaim in February 1977.

AFFIRMED.

THOMAS A. CLARK, Circuit Judge, dissenting:

Respectfully, I dissent, I disagree with the majority's

handling of two of the issues raised on appeal by Her-

man Blum Consulting Engineers. First, in my view,

the district court erred in granting Carl Hadra’s motion

for a new trial. Second, even if the grant of a new trial

was appropriate, the district court’s charge to the jury

in the second trial on the issue of mitigation of dam-

age was inadequate as a matter of law thereby substan-

tially prejudicing Blum’s defense.

A-10

In granting Hadra’s motion for a new trial, the

district court ruled that once the jury in the first

trial found that Blum had breached his employment

contract with Hadra, the jury could not, under the

instructions it was given and the evidence adduced at

trial have determined that Hadra was not entitled to

damages for lost salary.' In reviewing the district

court’s ruling, I agree with the majority opinion that

this court’s decision in Massey v. Gulf Oil Corporation,

508 F.2d 92 (5th Cir. 1975), should guide us:

Our review of an order granting a motion for new

trial is somewhat broader than review of an order

denying a motion for new trial.

We [have] noted that where the judge denies the

motion and leaves undisturbed the jury’s determina-

tion, all factors press in the direction of leaving the

trial judge’s ruling undisturbed. But where the judge

has granted a new trial, the factors oppose each

other. Deference to the trial judge is subjected to

opposing tension of deference to the jury as the body

to whom fact finding is constitutionally allocated and

1. In its order granting a partial new trial, the district court

stated in pertinent part:

The court has concluded that the jury could not, under

the instructions it was given, have properly reached the

conclusion that an award of $0 was appropriate, based

upon the evidence adduced at trial. Without analyzing the

evidence in detail, it was defendant’s burden, after a show-

ing of contractual breach by defendant, to establish the

possibility of mitigation and the amount by which mitiga-

tion was possible. court feels that the jury based upon

the evidence before them could have inferred that plaintiff

might have mitigated within some time after he was ter-

minated, but could not have inferred that the amount by

which he could mitigated [sic] would have equalled or

exceeded the lower limit of his contractual damages.

A-11

deference to the decision which the jury has reached

pursuant to that authority. Furthermore, where a

new trial is granted on the ground that the verdict

is against the weight of the evidence, we exercise

closer scrutiny than where the ground is that some

undesirable or pernicious influence has intruded into

the trial, because to an extent the judge has substi-

tuted his judgment of the facts and credibility of

witnesses for that of the jury. Thereby we protect

the litigants’ right to jury trial.

Id., at 94-95.

I part company with the majority, howeven, when

it concludes that a new trial was required in this case

because there was no evidence to support an inference

by the jury in the first trial that Hadra could have

mitigated his damages resulting from the breach of the

employment contract. Upon review of the record, I

am convinced that the jury in the first trial had ample

evidence to support its verdict.

Blum terminated Hadra’s assignment in Teheran,

Iran, on July 22, 1975. Hadra was advised of his dis-

missal by a letter from the firm’s president, Herman

Blum, which was hand delivered to Hadra by Blum’s

marketing manager, Mr. Ken Wallace. The termination

letter read as follows:

July 2, 1975

Mr. Carl Hadra

C/O Iran Electronics Industries

Box 66/1500

Saltanatabad, Teheran, Iran

Dear Carl:

A decision has been made by Herman Blum Con-

sulting Engineers, Inc. to terminate your employment

A-12

in Iran upon the delivery of this letter to you by

Ron Wallace effective immediately.

Simultaneously, we terminate reimbursement [sic]

for any and all allowances and expenses. We request

you hand over to Mr. Wallace all Herman Blum

Consulting Engineers, Inc. credit cards.

We simultaneously offer you employment in our

Dallas office in the position of Project Design En-

gineer under the direction of Mr. Fernando Meneses.

Shovld you accept this position and stay employed

with us for 12 months after arrival in Dallas, we will

then reimburse you for reasonable moving expenses.

Yours very truly,

HERMAN BLUM CONSULTING

ENGINEERS, INC.

By: /S/

Herman Blum, President

In evaluating Blum’s motion for a new trial the key

question is whether there was adequate evidence pre-

sented at the first trial to support the jury’s conclusion

that Hadra could have mitigated all of his damages

resulting from Blum’s breach of the employment con-

tract. “Could have mitigated” required Hadra to make

some effort to seek employment. As stated in the ma-

jority opinion, Hadra stipulated that he did not begin

to look for new employment until his return to the

United States in August, 1976. Hadra testified that

he chose to remain overseas, jobless, until the summer

of 1976 so that he could take advantage of federal

income tax provisions which provide favorable tax

treatment for American expatriates who live and work

A-13

overseas for an extended period. Thus, Hadra appar-

ently hoped to reduce his U.S. income taxes on the

approximately $50,000 in total compensation which he

had received from Blum Consulting Engineers prior

to his discharge on July 22, 1975. Of course, while so-

journing on Majorca, a Mediterranean resort island

off the coast of Spain, Hadra also permitted his pos-

sible claim against Blum to accrue for last compensa-

tion from July 22 until January 1, 1976. Although there

was significant disagreemnt at trial over how much of

the $130,000 annual total compensation package was

actually Hadra’s salary, it is clear that while in Tehe-

ran his salary was significantly higher than it had been

in this country apparntly because of the extremely

high cost of maintaining a satisfactory American life-

style in Iran.

Hadra obtains here that which we all dream about

— enjoying our cake and it being there after the feast.

As the result of the new trial on damages only, Hadra

spent a year relaxing on Majorca, received the

$97,205.10 in salary and expenses for the remainder

of the unexpired employment contract and avoided

federal income taxes. The Texas jurors hearing this

evidence had ample evidentiary basis for the zero ver-

dict, believing as I do that Hadra should have accepted

the job offer from Blum, returned to Dallas and paid

his income taxes. If Hadra had not wanted to work

for Blum, he could have returned and obtained a com-

parable position at a city of his choice, as he did in Los

Angeles after returning in 1976. In my view the jury

took a common sense view of what was fair between

the parties and the district court erred in ruling that

there was no basis for the zero verdict.

A-+14

At the first trial the jury was given special interrog-

atories to answer. Question number two asked: “Do

you find from a preponderance of the evidence that

in July 1975, Blum Engineering reassigned Hadra to

Dalias, Texas?” The jury answered that Blum “did not

reassign” Hadra to Dallas. However, while Hadra may

not have been “reassigned” to Dallas, the letter repro-

duced above clearly indicates that Blum Engineering

did offer Hadra a new position back at the firm’s head-

quarters in Dallas. it was perfectly reasonable for the

jury to find, as it apparently did, that although Blum

did not reassign Hadra to Dallas, it did make Hadra

a good faith offer of new employment at the Dallas

office. This conclusion is perfectly reasonable when

one considers the nature of the employment relation-

ship between Hadra and Blum. Hadra was working for

Blum in Teheran under the terms of an employment

contract. The terms of that contract stated that Hadra

was to represent Blurn Engineering in its efforts to

expand its business with the Iranian government. Ha-

dra was hired under the contract to work only in Iran.

Unlike the typical employer-employee relationship in

which an employer may reassign his employee to a new

work location, the contract in dispute here would not

permit Blum to reassign Hadra to its Dallas office.

Thus, although the jury found that Hadra was not

reassigned to Dallas, it is quite clear from the record

that Blum had offered Hadra a comparable job back

in this country.

The majority concludes that the jury could not have

considered the Dallas job offer as evidence relating to

Hadra’s duty to mitigate because Blum did not present

this “theory” to the jury. I can see no reason why the

A-15

jury could not or should not have considered the evi-

dence relating to the Dallas job offer in determining

whether Hadra had fulfilled his duty to mitigate. In my

view, the “theory” was presented to the jury in the

first trial. Just-as“the majority acknowledges in its

statement of facts, it is abundantly clear that Hadra

was offered a new job with the firm back in Dallas.

In addition to the offer included in the termination

letter set forth above, the jury also heard testimony

concerning the job offer. Herman Blum testified that

his firm offered Hadra a Dallas job because the firm

“had a heavy workload in Dallas and needed his en-

gineering expertise.”? Furthermore, Blum explained

that he had conditioned the reimbursement of Hadra’s

reasonable moving expenses from Teheran to Dallas

on Hadra’s remaining with Blum Consulting Engineers

because Blum had accidentally heard that Hadra was

trying to negotiate an employment contract with an-

other firm and Blum did not want to pay Hadra’s

moving expenses back to Dallas then have Hadra

resign shortly thereafter.

I submit that the jury in the first trial had sufficient

evidence before it to support its finding that Blum

Consulting Engineers had met its burden on the miti-

gation of damages issue and that Hadra had failed

completely to mitigate his damages resulting from his

wrongful discharge.

At the second trial, the trial judge gave the follow-

ing charge to the jury on the issue of mitigation of

damages:

After an employment contract has been breached,

the employee has a duty to mitigate damages. That

2. Tr.Vol. ITI, at 147.

Arm > A186

means that the employee must exercise reasonable

diligence in seeking employment of the same or

similar quality as the wrongfully terminated employ-

ment for a reasonable time. The employee may exer-

cise reasonble diligence by seeking employment

which pays a comparable salary and which consists

of a position of similar prestige as the wrongfully

terminated employment.

However, after a reasonable time, the employee must

seek and accept any employment for which he is

qualified. In the exercise of reasonable diligence, an

employee must consider all opportunities for the kind

of employment which he has a duty to seek, whom-

ever the employer, provided the place of employment

is not a geographical area unreasonably distant from

his usual place of employment. (Emphasis added.)

This jury charge was not given at the first trial. The

majority upholds the jury charge on the basis that the

limitations on the duty to mitigate, including the geo-

graphical limitation, “are derived from long-standing

Texas law and are not error.” The majority cites as

authority Kramer v. Wolf Stores Co., 99 Tex. 597, 91

S.W. 775 (1906), and San Antonio & A. P. Ry. Co. v.

Collins, 61 S.W.2d 84 (Tex.Comm.App.1933). My view

is that under the circumstances of this case Texas law

would not narrow Hadra’s duty to search for new em-

ployment to an area not “unreasonably distant from

his usual place of employment,” i.e., ‘Ceheran.

The district court's charge had the effect of limiting

Hadra’s efforts to secure new employment to only

Teheran or somewhere else in Iran. Therefore, under

the charge as given the jury would not have been

A-17

allowed to consider Hadra’s job opportunities back in

the United States in evaluating where he had satisfied

his duty to mitigate.

The cases relied upon by the majority are an insuffi-

cient basis on which to support the geographical limita-

tion on the duty to mitigate. Kramer was an action

brought by a wrongfully discharged employee who had

served as a cigar store manager in the Dallas area

beginning in 1902. There the evidence indicated that,

once discharged, the ex-cigar store manager had

made no effort to secure any other employment

after his discharge and before he went into business

for himself, for the reason, as he states, that he knew

that the attempt to secure employment of the same

character as that which he had of defendant would

be useless as there were none such open in Dallas.

91 S.W. at 777. However, although the Texas court

did not hold that a discharged employee must secure

“by reasonable diligence .... another position of sub-

stantially the same character and grade as that which

he had held,” the court made no specific mention that

the former cigar store manager could restrict his job

seeking efforts to the Dallas area only.

In San Antonio & A. P. Ry. Co. v. Collins, supra, the

employee was discharged in 1921 from his position as

a switchman for the railroad company at its yards in

Houston. Although the company offered the worker

a job at either the San Antonio or Kennedy railroad

yards, Collins refused and eventually filed suit. Ack-

nowledging a wrongfully discharged employee’s general

duty to mitigate as stated in Kramer, the court in San

Antonio & A. P. Ry. Co. held that Collins satisfied his

A-18

general duty to mitigate by “making a reasonable effort

to secure other employment at Houston; and his re-

fusal to accept employment at distant places, involving

change of residence and loss of position and security

in the Houston yards, was within his rights under the

contract.” 61 S.W.2d at 89.

However long-standing the Texas law as stated by

Kramer and San Antonio & A. P. Ry. Co. may be,

neither case addresses the geographical limitation on

the duty to mitigate in the context of modern sophisti-

cated employment relationships between large firms

engaged in multinational operations and their thou-

sands of American expatriate employees who serve

their companies abroad. In this age when American

businesses are actively engaged in overseas business

ventures such as oil exploration, mining, and construc-

tion projects of all kinds in all parts of the world, it is

unrealistic to conclude from the authority relied on

by the majority that Texas law would require a wrong-

fully discharged expatriate employee to search for new

employment only in the vicinity of their former foreign

assignment.

But that is just what happened in this case. The

trial court effectively forced the jury in the second

trial to ignore job opportunities that Hadra had in the

United States in its consideration of his duty to miti-

gate. In my opinion, Texas law would require that an

expatriate employee who loses his overseas job and is

unable to secure comparable employment in the gen-

eral vicinity of that overseas assignment should return

to his home in this country, within a reasonable period

of time and undertake serious efforts to secure employ-

ment here. Application of the geographical limitation

A-19

to the duty to mitigate under the circumstances of

this case necessitates an illogical, unnecessary result.

I would hold that the district court erred in grant-

ing the appellee’s motion for a new trial. I would vacate

the verdict of the jury in the second trial and reinstate

the jury’s verdict from the first trial. Failing that, I

submit that the trial judge’s charge to the jury in the

second trial on the issue of mitigation unfairly pre-

judged the appellant, necessitating a new trial on the

issue of damages.

B-1

APPENDIX B

IN THE

United States District Court

FOR THE NORTHERN DISTRICT OF TEXAS

DALLAS DIVISION

CarL M. Hapra,

Plaintiff

v.

HERMAN BLUM CONSULTING ENGINEERS,

a Texas Corporation,

Defendant

CIVIL ACTION NO. CA-3-75-1041-D

ORDER

Came on for consideration Plaintiff's Motion for New

Trial of March 6, 1978. The court is of the opinion, after

review of the briefs and the arguments of counsel, that

the Motion should be granted.

The court has concluded that the jury could not,

under the instructions it was given, have properly

reached the conclusion that an award of $0 was appro-

priate, based upon the evidence adduced at trial. With-

out analyzing the evidence in detail, it was defendant’s

burden, after a showing of contractual breach py de-

fendant, to establish the possibility of mitigation and

B-2

the amount by which mitigation was possible. The court

feels that the jury based upon the evidence before them

could have inferred that plaintiff might have mitigated

within some time after he was terminated, but could

not have inferred that the amount by which he could

mitigated would have equalled or exceeded the lower

limit of his contractual damages. Accordingly, a new

trial is appropriate. The court will limit the issue to be

tried to: the damages plaintiff suffered as a result of

defendant’s breach of the employment contract through

January, 1976.

Trial of this issue is set on the jury docket for July

17, 1978, at 9:30 A.M.

It is so ORDERED.

Dated this 23rd day of April, 1978.

United States District Judge

C-1

APPENDIX C

IN THE

United States District Court

FOR THE NORTHERN DISTRICT OF TEXAS

DALLAS DIVISION

Cart M. HApra,

Plaintiff

v.

HERMAN BLUM CONSULTING ENGINEERS,

a Texas Corporation,

Defendant

CIVIL ACTION NO. CA-3-75-1041-D

MEMORANDUM OPINION AND ORDER

Came on for consideration Defendant’s Motion for

Judgment N.O.V., or in the Alternative, Motion for

New Trial. Plaintiff’s Motion for Judgment Re: Income

Tax Loss, and Plaintiff’s Motion to Enter J udgment for

Prejudgment Interest.

DEFENDANT’S MOTION FOR JUDGMENT

N.O.V., OR IN THE ALTERNATIVE, MOTION

FOR NEW TRIAL

Defendant contends that the court erred in permit-

ting the jury to consider the $30,000 allocated in plain-

tiff’s employment agreement to his wife’s salary, and the

C-2

$50,000 allocated therein to expenses, in determining

plaintiff's damages. Defendant argues that plaintiff’s

stipulation that “(i)t was agreed that Hadra’s salary

while in Iran was to be $50,000.00 per year plus

$50,000.00 expenses and Mrs. Hadra was to receive a

salary of $30,000.00 per year” precludes recovery of

expenses and his wife’s salary as damages. Pre-trial

Order at 6. The parties stipulated also that a memo-

randum dated October 29, 1974, from Roy Krull to

Herman Blum (Blum) set forth the terms of the em-

ployment agreement, providing that it “will be couched

in terms to provide the most tax benefits possible to

Carl Hadra and his family.” Pre-trial Order at 7-8.

Thus, the stipulations do not preclude a finding that

plaintiff had the right to receive all the proceeds under

the contract and to allocate them in a way that would

supposedly minimize taxes. The upper limit of plaintiff’s

recovery is the present cash value of the employment

agreement to him if it had not been breached. Dixie

Glass Co. v. Pollack, 341 S.W.2d 530, 538 (Tex. Civ.

App. — Houston, 1960), aff’d per curiam, 347 S.W.2d

596 (‘Tex. 1961). The jury could reasonably have found

that the present cash value of the agreement to plaintiff

included the sums allocated to his wife as salary and to

him as expenses and that, therefore, they were recover-

able by plaintiff as damages.

Defendant further argues that, since the jury in the

first trial found $4,500 damages for the “expenses . . .

incurred (by plaintiff) in Iran in the performance of his

duties which have not been paid by Blum Engineering,”

Question No. 9, Court’s Charge to the Jury, the jury in

this trial could not award plaintiff damages based on the

$50,000 provided for yearly expenses in his employment

C-3

contract. The memorandum from Roy Krull, supra, also

provided;

[A]ll travel and expenses associated with the de-

veloping (sic) new business will, of course, be on

a reimbursible (sic) basis. An allowance will be

arrived at for other expenses associated with en-

tertaining, etc., etc. .... Pre-trial Order at 8.

The $4,500 previously awarded plaintiff, thus, repre-

sented compensation for unreimbursed business ex-

penses. The $50,000 compensation under the employ-

ment contract allocated to expenses could, therefore,

have represented expenses other than business expens-

es, such as living expenses. The jury award of $4,500 in

the first trial did not preclude consideration in this trial

of the $50,000 allocated to expenses in the employment

contract. Furthermore, the jury could reasonably have

found that plaintiff had an absolute right to receive the

$50,000 allocated to expenses and could reasonably have

awarded damages based on that item of compensation

absent proof of actual living expenses incurred in Iran.

Defendant also contends that plaintiff’s counsel intro-

duced “fundamental error” into the trial when, during

closing argument, he quoted from a portion of Blum’s

deposition not admitted into evidence. In closing, plain-

tiff’s counsel quoted Blum as saying, “[t]he total deal

that I was surprised to find is the fact that Krull had

agreed to pay the full $130,000 to Hadra plus additional

expenses;” whereas, during cross-examination of Blum,

plaintiff’s counsel omitted to introduce that statement

into evidence but did introduce the following testimony

from Blum’s deposition:

Question: So you knew at the outset from day

one, as you put it, that $130,000 was to be paid to

C-4

Hadra, was indeed a fact or an agreement between

him and Krull, right?

Answer: Right.

Defendant did not object at trial to the reading of

Blum’s non-admitted deposition testimony during clos-

ing argument. Therefore, he can not raise this miscon-

duct by plaintiff’s counsel as a ground for new trial.

Curtis Publishing Co. v. Butts, 351 F.2d 702, 714 (5th

Cir. 1965), aff’d, 388 U.S. 130 (1967). Furthermore, this

is not a case where the error is so fundamental that

gross injustice would result if a new trial was not grant-

ed. See Wright and Miller, Federal Practice and Pro-

cedure, § 2805 at 39. The erroneously argued deposition

testimony was largely repetitive of other testimony in-

troduced at trial indicating that plaintiff’s compensation

was to be $130,000 plus expenses.

Defendant next contends that plaintiff’s stipulation

that his “first efforts to find new employment were in

August, 1976 when he returned to Phoenix, Arizona,”

Pre-trial Order at 11, established a breach of his duty

to mitigate damages and requires entry of judgment

that plaintiff take nothing. Under Texas law, the de-

fendant employer has the burden of proving the amount

of money that a wrongfully discharged employee could

have earned in mitigation of damages. Call of Houston,

Inc. v. Mulvey, 343 S.W.2d 522, 527 (Tex. Civ. App.

— Houston 1961, no writ) ; Copeland v. Hill, 126 S.W.2d

567, 569 (Tex. Civ. App.— Austin 1939, no writ) ;

Weber Gas & Gasoline Engine Co. v. Bradford, 79 S.W.

46, 47-48 (Tex. Civ. App. 1904, no writ). See also Annot.

44 ALR 3d 629, 639 (1972). Thus plaintiff’s stipulation

does not, of itself, mandate that plaintiff take nothing,

C-5

even though it does establish a breach of his duty to

mitigate damages.

Defendant may reduce plaintiff's recovery only by

proof of earnings which plaintiff would have received if

he had properly discharged his duty to mitigate. The

jury could reasonably have concluded that defendant

failed to prove such earnings. The jury could reasonably

have found that plaintiff had no duty to accept defend-

ant’s offer of re-employment and that he could not have

worked elsewhere in Iran because he lacked a work

permit. The jury could also have found that the part-

nership opportunity that plaintiff rejected in Arizona

did not qualify as employment of the same or similar

character as the wrongfully terminated employment.

In Kramer v. Wolf Cigar Stores Co., 99 Tex. 597, 91

S.W. 775, 777 (1906), the Texas Supreme Court dis-

cussed measurement of the amount by which damages

recoverable by an employee who makes no effort to

secure other employment after discharge should be re-

duced. Under the rule that after a-reasonable time an

employee must accept any employment for which he is

fitted, an employee who «xnows that he cannot secure

employment of the same or similar character as that

from which he was discharged must accept any employ-

ment for which he is suited. The amount he could have

earned in such employment during the remaining term

of the employment contract sued upon then becomes

the measure of deduction from his damage Id. In the

case sub judice, however, Hadra did not testify that he

knew of no available employment comparable to that

from which he was discharged. Rather, he indicated

that he had made some efforts to secure comparable

employment while living in Mallorca. Furthermore, the

C4

jury was instructed that Hadra had a duty after a rea-

sonable time to seek and accept any employment for

which he was qualified. The jury could reasonably have

found that Hadra did not know that he could not find

comparable employment and, therefore, that he did not

have a duty to seek any employment for which he was

qualified before the end of the employment contract

with defendant.

All other errors asserted by defendant should be over-

ruled. Defendant’s Motion for Judgment N.O.V., or in

the Alternative, Motion for New Trial, should be

denied.

PLAINTIFF’S MOTION FOR JUDGMENT

RE: INCOME TAX LOSS

Plaintiff's motion for entry of judgment for the plain-

tiff in the sum of $42,000 representing the amount of

damages plaintiff has suffered by virtue of his loss of the

court of country income tax exclusion should be denied.

Plaintiff urges Beggs v. Dougherty Overseas, Inc., 287

F.2d 80 (2d Cir. 1961) as authority for its claim for

income tax loss. In Beggs, supra, the court applied the

standard announced in the venerable case of Hadley v.

Baxendale, 9 Exch. 341, 156 Eng.Reprint 145, to allow

a wrongfully discharged employee compensation for the

loss of the income tax advantage conferred by I.R.C.

§ 911 upon individuals who engage in foreign employ-

ment for over 18 months. The court was of the view

that the parties to the employment contract had con-

templated the employee’s income tax advantage in

entering the contract, and therefore, the damages re-

sulting from the loss of the income tax advantage caused

by the breach of the contract were forseeable and in the

C-7

reasonable contemplation of the parties. Beggs, supra,

987 F.2d at 83. The court is unwilling to adopt Beggs

because it doubts whether the damages flowing from

the loss of a tax advantage are ever forseeable. The

discharged employee suffers damages only if he must

pay higher taxes on the amounts ultimately recovered

on a judgment than he would have paid on the earnings

under the employment contract if it had not been

breached. The parties to an employment contract can-

not reasonably foresee what the employee’s tax situation

will be when, and if, he ultimately recovers a judgment.

They can foretell neither the tax laws nor the em-

ployee’s financial situation as of that date. C. F. John-

son v. Penrod Drilling Co., 510 F.2d 234, 236-37 (5th

Cir.), cert. denied, 423 U.S. 839 (1975).

Even if this court did adopt Beggs, this case would

not fall within the facts of Beggs. In the first trial of

this case, the jury found that “the parties agreed that

the (employment agreement) was to be null and void

when the services to be performed by defendant under

the contract with Military Industries of Iran . . . were

completed and that these services were completed in

January, 1976.” Question No. 4, Court’s Charge to the

Jury. Unlike Beggs, where the “basic contemplated

term of the employment contract was one of eighteen

months,” Beggs, supra, 287 F.2d at 83, this case involves

an agreement which could, and did, terminate, prior to

the running of the eighteen month period necessary to

take advantage of I.R.C. § 911. Thus, the parties to the

agreement could not reasonably have contemplated

that plaintiff would enjoy the benefit of I.R.C. § 911

and, conversely, that he would lose this benefit if the

contract was breached.

C-8

For the foregoing reasons, the court is of the opinion

that plaintiff should not recover any damages attribu-

table to the alleged loss of the out of country income

tax exclusion.

PLAINTIFF’S MOTION TO ENTER JUDGMENT

FOR PREJUDGMENT INTEREST

Plaintiff seeks an award of prejudgment interest as a

judicially recognized item of damages, and not eo

nomine as provided in Tex. Rev. Civ. Stat. Ann., art.

5069-1.03.' Texas courts allow recovery of prejudgment

interest as damages upon unliquidated demands if,

under the oft-stated rule, the principal damages are

determinable and established at a definite time, either

by rules of evidence or known standards of value.

McDaniel v. Tucker, 520 S.W.2d 543, 549 (Tex. Civ.

App. — Corpus Christi 1975, no writ). The award of

interest as damages is not within the discretion of the

court. Colonial Refrigerated Transportation Inc. v.

Mitchell, 403 F.2d 541, 554 (5th Cir. 1968). But see

Phillips Petroleum Co. v. Adams, 513 F.2d 355, 366 (5th

_ Cir.) cert. denied, 423 U.S. 930 (1975). Although Texas

courts have reached disparate results in applying the

accepted rule for awarding interest as damages, see

Colonial Refrigerated Transportation, I ne., supra, 403

1 Plaintiff cannot recover pre-judgment interest under art.

5069-1.03 because that statute provides for recovery of in-

terest on “all written contracts ascertaining the sum pay-

able,” and this case involves an oral contract cvhheneed | by

a written memorandum. Further, a claim based on services

performed pursuant to an oral contract is not a claim on an

open account within the meaning of art. 5069-1.03. Kin

tical v. Automatic Data a Dallas, Inc., 543

S.W.2d 213, 217 (Tex. Civ. App. —

aco 1976, writ ref’d

n.r.e.).

C-9

F.2d at 554, several have awarded prejudgment interest

to wrongfully discharged employees. Haggar Co. v. Rut-

kiewicz, 405 S.W.2d 462 (Tex. Civ. App. — Waco 1966,

no writ); G & W Marine, Inc. v. Morris, 471 S.W.2d

644 (Tex. Civ. App. — Beaumont 1971, no writ).

Applying the accepted rule to the instant case, the

court is of the opinion that plaintiff’s principal damages

were determinable and established on January 31, 1976,

when the employment contract sued upon terminated.

Until that time, it was not determinable whether plain-

tiff could have mitigated his reco by earnings from

employment which he had a duty to seek and accept.

Not until the date of termination of the employment

contract could it be ascertained that no such employ-

ment had become available after July 22, 1975, when

the employment contract was breached. See Colonial

Refrigerated Transportation, Inc., supra, 403 F.2d at

554-55; Marion v. Layton, 373 S.W.2d 122, 123 (Tex.

Civ. App. — Amarillo 1963, no writ). The court is there-

fore of the opinion that plaintiff shall recover interest on

the sum of $97,205.10 in the amount of six percent per

annum? from January 31, 1976, to the date of entry of

judgment.

2 The court has considered, and rejected, the possibility that

plaintiff should recover prejudgment interest at the rate of

nine percent, the legal rate of interest which became a plic-

able to sums payable — to judgment on September 1,

1975. The court is of the opinion that art. 5069-1.03 provides

the rate applicable to an award of prejudgment interest as

damages.

Watkins v. Tucker, 90 Tex. 584, 40 S.W. 11 (1897)

stated that “the courts have, by analogy, adopted the legal

rate of interest fixed by statute as the standard by which

to be governed in assessing damages for the detention of

money.” The Watkins court applied a 6 percent rate of

interest but did not specify whether it derived that rate

C-10

It is so ORDERED.

Dated this 29th day of November, 1978.

United States District Judge

from the predecessor to art. 5069-1.03 or the predecessor to

art. 5069-1.05, both of which were in effect at the time of

the decision. Article 5069-1.01 defines “legal interest” as

“that interest which is allowed by law when the parties to a

contract have not agreed on any particular rate of interest.”

This definition is applicable to the interest provided in both

art. 5069-1.03 and art. 5069-1.05. The issue therefore is:

which — rate of interest is the appropriate analogy for an

award of prejudgment interest as damages?

The Texas cases are not helpful. In Earl Hayes Rents

Cars & Trucks v. City of Houston, 557 S.W.2d 316, 322

(Tex. Civ. App.— Houston (1st Dist.) 1977, writ ref’d

n.r.e.), the court awarded poe mere interest as damages

at the rate of nine percent after tember 1, 1975. In City

of Ingleside v. Stewart, 554 S.W.2d 939, 946-47 (Tex. Civ.

App. — Corpus Christi, 1977, no writ), however, the court

affirmed an award of prejudgment interest as damages at the

rate of six percent after September 1, 1975. Neither court

i the issue of which rate to apply.

Since art. 5069-1.03 provides specifically for prejudg-

ment interest, that provision would seem the more appro-

priate analogy. It would be anomolous to apply a six percent

rate to prejudgment interest allowed eo nomine and to apply

a nine percent rate to rma interest awarded as

damages. Until the Texas legislature remedies the current

disparity in legal rates of interest, the court feels bound to

apply a six percent rate to the prejudgment interest awarded

in case.

C-11

IN THE

United States District Court

FOR THE NORTHERN DISTRICT OF TEXAS

DALLAS DIVISION

CarL M. Hapra,

y, Plaintiff

HERMAN BLUM CONSULTING ENGINEERS,

a Texas Corporation,

Defendant

CIVIL ACTION NO. CA-3-75-1041-D

JUDGMENT

This matter came on to be heard before the Court

and a jury, Honorable Robert M. Hill, District Judge,

presiding, and the issues having been duly tried and

the jury having duly returned its verdict.

It is ORDERED and ADJUDGED that Carl M.

Hadra, plaintiff, recover from the defendant, Herman

Blum Consulting Engineers:

(1) the sum of $121,705.09;

(2) interest at the rate of 6% per annum on the

sum of $101,705.09 from January 31, 1976, to

the file date hereof;

(3) interest at the rate of 9% per annum on (1)

and (2) above from the file date hereof;

(4) plaintiff’s cost of suit.

Signed this 29th day of November, 1978.

United States District Judge

D-1

APPENDIX D

IN THE

United States District Court

FOR THE NORTHERN DISTRICT OF TEXAS

DALLAS DIVISION

CarL M. Hapra,

Plaintiff

v.

HERMAN BLUM CONSULTING ENGINEERS,

a Texas Corporation,

Defendant

CIVIL ACTION NO. CA-3-75-1041-D

JUDGMENT

Be It REMEMBERED that in the above cause, Defend-

ant, Herman Blum Consulting Engineers, Inc., having

moved for entry of judgment based on the jury verdict

that Plaintiff take nothing on his claims for lost salary;

Plaintiff, Carl M. Hadra, having moved for entry of

judgment on the Court’s directed verdict in favor of

Plaintiff as to that portion of his claim for $20,000.00

for the sale of his Phoenix business and against De-

fendant as to its counterclaim and set-off concerning

the Phoenix business; Defendant having further moved

for entry of judgment based on the Court’s directed

verdict and Defendant’s waiver and voluntary dismissal

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of his claims for office furniture and equipment, losses

on the sale of his house, his boat, his car, and his furni-

ture, loss of tax benefits, travel expenses and enhance-

ment; and Plaintiff having further moved for entry of

judgment on that portion of the jury verdict awarding

him his unreimbursed expenses in the amount of

$4,500.00 and it appearing unto the Court that such

motions should be granted;

It Is THEREFORE ORDERED, ADJUDGED AND DECREED

by the Court that Plaintiff, Carl M. Hadra, have and

recover of and from Defendant, Herman Blum Con-

sulting Engineers, Inc., the sum of Twenty-Four Thou-

sand Five Hundred and no/100 Dollars ($24,500.00),

and that all other claims for losses, damages, and/or

expenses are hereby expressly denied and dismissed

with prejudice to their refiling;

It Is FURTHER ORDERED, ADJUDGED AND DECREED by

the Court that Defendant, Herman Blum Consulting

Engineers, Inc., take nothing on its Counterclaim and

set-off.

It Is FURTHER ORDERED, ADJUDGED AND DECREED by

the Court that all costs of Court incurred in connection

with this action are assessed against the defendant,

Herman Blum Consulting Engineers, Inc.

All other relief not herein specifically granted is

hereby denied.

SIGNED AND ENTERED this 23rd day of February, 1978.

United States District Judge

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APPENDIX E

IN THE

United States District Court

FOR THE NORTHERN DISTRICT OF TEXAS

DALLAS DIVISION

Cart M. Hapra,

Plaintiff

Vv.

HERMAN BLUM CONSULTING ENGINEERS,

a Texas Corporation,

Defendant

CIVIL ACTION NO. CA-3-75-1041-D

JUDGMENT

This matter came on to be heard before the Court

and a jury, Honorable Robert M. Hill, District J udge,

presiding, and the issues having been duly tried and

the jury having duly returned its verdict;

Ir Is ORDERED AND ApDsupcED that Carl M. Hadra,

plaintiff, recover from the defendant, Herman Blum

Consulting Engineers:

(1) the sum of $121,705.09;

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(2) interest at the rate of 6% per annum on the

sum of $101,705.09 from January 31, 1976, to

the file date hereof;

(3) interest at the rate of 9% per annum on (1)

and (2) above from the file date hereof;

(4) plaintiff’s cost of suit.

Signed this 29th day of November, 1978.

- United States District Judge

F-1

APPENDIX F

IN THE

United States Court of Appeals

FOR THE FIFTH CIRCUIT

NO. 79-1012

D. C. Docket No. 3-75-1041-D

Cart M. HAnpra,

Plaintiff-Appellee,

v.

HERMAN BLUM CONSULTING ENGINEERS,

a Texas Corporation,

Defendant-Appellant.

Appeal from the United States District Court

for the Northern District of Texas

Before GODBOLD, SIMPSON and THOMAS A.

CLARK, Circuit Judges.

JUDGMENT

This cause came on to be heard on the transcript of

the record from the United States District Court for

the Northern District of Texas, and was argued by

counsel;

ON CONSIDERATION WHEREOF, It is now here

ordered and adjudged by this Court that the judgment

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of the said District Court in this cause be, and the same

is hereby, affirmed;

It is further ordered that defendant-appellant pay to

plaintiff-appellee the costs on appeal, to be taxed by the

Clerk of this Court.

December 17, 1980

THOMAS A. CLARK, Circuit Judge, dissenting.

ISSUED AS MANDATE:

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IN THE

United States Court of Appeals

FOR THE FIFTH CIRCUIT

OFFICE OF THE CLERK

December 29, 1980

MEMORANDUM TO COUNSEL OR

PARTIES LISTED BELOW:

NO. 79-1012

Cart M. Hapra,

Plaintiff-Appellee,

v.

HERMAN BLUM CONSULTING ENGINEERS,

a Texas Corporation,

Defendant-Appellant.

The following action has this day been taken in

the above case:

(xxxx) AN EXTENSION OF TIME has been

granted to and including

JANUARY 14, 1981°

( ) for filing appellant’s/petitioner’s brief.

( ) for filing appellee’s/respondent’s brief.

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( __) for filing reply brief.

( xxx ) for filing petition for rehearing — appellant

Grpert F. GANUCHEAU, Clerk

By

Deputy Clerk

*Must be physically filed in this offce.

F-5

IN THE

United States Court of Appeals

FOR THE FIFTH CIRCUIT

NO. 79-1012

Cart M. HapRA

Plaintiff-Appellee,

Vv.

HERMAN BLUM CONSULTING ENGINEERS,

a Texas Corporation,

Defendant-Appellant.

Appeal from the United States District Court

for the Northern District of Texas

ON PETITION FOR REHEARING

(JANUARY 27, 1981)

Before GODBOLD, SIMPSON and THOMAS A.

CLARK, Circuit Judges.

PER CURIAM:

Ir Is Orperep that the petition for rehearing filed in

above entitled and numbered cause be and the same

is hereby DENIED.

ENTERED FOR THE COURT:

United States Circuit Judge

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