Editorial
Front Page - Friday, October 09, 2009
Eighth Circuit Recent Decisions
Wright, Lindsey & Jennings, LLP
All-Ways Logistics, Inc. v. USA Truck, Inc. and USA Logistics, No. 08-1054 (8th Cir. October 1, 2009)
In this case, the United States Court of Appeals for the Eight Circuit affirmed the District Court’s award of approximately $3 million to All-Ways on breach of contract claims and prejudgment interest and attorneys fees. The court rejected USA Truck’s arguments that the District Court erred by: (1) failing to instruct the jury on an affirmative defense; (2) awarding prejudgment interest; and (3) awarding an unreasonable amount of attorney fees.
In 1999, All-Ways and USA Truck entered into a commission agreement in which USA Truck agreed to pay All-Ways, an independent agent for freight carriers, a five percent (5%) commission on freight that All-Ways solicited and USA Truck transported. All-Ways brought several shipping accounts to USA Truck, the largest of which were Rheem Manufacturing Co. and W.W. Grainger, Inc. The parties operated under the commission agreement without conflict for more than two years, but in March 2002 USA Truck stopped paying commissions on the Rheem account, explaining that All-Ways’s services were no longer needed. Instead, USA Logistics, a logistics division of USA Truck, began contracting directly with Rheem to arrange for USA Truck to provide Rheem’s transportation needs.
The parties continued to operate under the commission agreement for other shipping accounts until the fall of 2004, when USA Truck began negotiating directly with Grainger. In August 2005, USA Truck notified All-Ways that it was cancelling the commission agreement, such cancellation becoming effective on October 6, 2005, under the terms of the commission agreement. In May 2006, All-Ways filed suit against USA Truck and USA Logistics alleging breach of contract under Arkansas law and seeking a commission on freight that USA transported through October 6, 2005, for all accounts solicited by All-Ways, including the Rheem and Grainger accounts.
At trial, the District Court entered judgment for All-Ways and awarded damages for both the Grainger ($40,268) and Rheem ($2,966,880) accounts. USA Truck subsequently filed a number of post-trial motions, all of which the District Court denied. Therefore, the District Court awarded All-Ways about $583,000 in prejudgment interest, $18,000 in costs, and $1 million in attorneys fees.
On appeal, USA truck first contended that the District Court abused its discretion by failing to instruct the jury on the affirmative defense of waiver of breach by acceptance of benefits, as applied to the Rheem account. USA Truck argued that All-Ways waived USA Truck’s breach of the commission agreement as to the Rheem account by continuing to accept commission payments for shipments made on other accounts. While the Eighth Circuit acknowledged that the question was a close one, it held that the District Court did not abuse its discretion by holding that the waiver instruction did not apply because the commission agreement was a severable contract divided into separate parts via the separate books of business that All-Ways brought to USA Truck. Moreover, the Eighth Circuit agreed with the District Court’s application of Arkansas law that the waiver of a breach must be voluntary, knowing, and intentional, and no such waiver was made by All-Ways.
Next, USA Truck contended that the District Court erred by awarding prejudgment interest to All-Ways because the commission amount was unliquidated and speculative. The District Court, on the other hand, determined that prejudgment interest could be calculated with certainty based on the rate of five percent (5 percent) set in the commission agreement and the revenues that USA Truck received on the Rheem account from March 2002 through the October 2005 cancellation of the agreement. The Eighth Circuit followed Arkansas law establishing that prejudgment interest must be awarded if a method exists for calculating the plaintiff’s damages at the time of the loss and affirmed the award of prejudgment interest from the date that USA Truck refused to pay the commissions on the Rheem account. The court found it inconsequential that the money owed under the breached contract accumulated over a period of time and carried each month, as it was ascertainable by mathematical computation.
Lastly, USA Truck argued that the District Court erred in awarding attorneys fees of more than $1 million based, in part, on a contingent arrangement. The District Court awarded fees under Arkansas Code Annotated section 16-22-308, which permits an award of reasonable attorney fees to prevailing parties in contract cases, after finding the one-third contingency fee agreed to by All-Ways and its counsel was reasonable given the contentious, time-consuming nature of the litigation and counsel’s experience. Nevertheless, the District Court computed another amount, $217,014, based on the lodestar method in case the Eighth Circuit disapproved of the fee award based on the one-third contingency agreement. The Eighth Circuit concluded that the District Court properly considered and discussed the applicable factors, listed in Chrisco v. Sun Indus., Inc., 800 S.W.2d 717, 718-19 (Ark. 1990), in reaching its award of attorneys fees. In addition, the Eighth Circuit noted its reluctance to change the award of attorneys fees issued by the District Court, who was more familiar with the services rendered by plaintiff’s counsel. Therefore, the Eighth Circuit affirmed the award of $1,002,282.
These summaries are provided as a service to the bar by the attorneys of Wright, Lindsey & Jennings LLP, Little Rock and Rogers, Ark.
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