                             UNPUBLISHED

                  UNITED STATES COURT OF APPEALS
                      FOR THE FOURTH CIRCUIT


                             No. 11-2054


TRAXYS NORTH AMERICA LLC,

                Plaintiff - Appellee,

           v.

CONCEPT MINING INCORPORATED,

                Defendant - Appellant.



Appeal from the United States District Court for the Western
District of Virginia, at Abingdon.   James P. Jones, District
Judge. (1:1-cv-00029-JPJ-PMS)


Argued:   December 5, 2012                 Decided:   February 19, 2013


Before DUNCAN, AGEE, and DAVIS, Circuit Judges.


Affirmed in part and reversed in part by unpublished opinion.
Judge Agee wrote the opinion, in which Judge Duncan and Judge
Davis concur.


Robert Hannen, ECKERT SEAMANS CHERIN & MELLOTT, LLC, Canonsburg,
Pennsylvania, for Appellant. Wade Wallihan Massie, PENN, STUART
& ESKRIDGE, Abingdon, Virginia, for Appellee.


Unpublished opinions are not binding precedent in this circuit.
AGEE, Circuit Judge:

             In    this     diversity-based        breach   of       contract      action,

Concept Mining,         Inc. (“Concept”) 1 appeals a                damages award of

$4,167,760,       and   a   prejudgment       interest,     attorneys'        fees,    and

litigation    expenses       award     of    $547,518.19       in    favor    of   Traxys

North America, LLC (“Traxys”).                   The district court held that

Concept breached its 2009 obligation to deliver coal to Traxys

and that this breach excused Traxys from having to exercise an

option to extend the obligation through 2010.                              It thus held

Concept liable in damages to Traxys for both 2009 and 2010.

Pursuant to the parties’ agreement, Traxys was also entitled to

recover prejudgment interest and “legal costs” arising from the

breach.     The district court construed this provision to include

attorneys' fees, expert witness fees, and certain witness travel

expenses.

            For     the     reasons     set      forth   below,       we     affirm   the

district     court’s        judgment        regarding    the        2009     breach   and

attendant damages, but we reverse the district court’s judgment

as to a breach in 2010 or any resulting damages.                            In light of

this disposition, and because we conclude the district court

misconstrued the provision regarding recovery of “legal costs,”


     1
       In 2008, ArcelorMittal acquired Concept; for simplicity,
the opinion will refer simply to Concept.



                                             2
we   also    vacate     the     district         court’s    judgment            concerning

prejudgment      interest,     attorneys'        fees,   and    certain         litigation

expenses, and remand the case in order for the district court to

recalculate an appropriate award.



                                           I.

            In 2007, Concept and Traxys entered into a contract

(the “Contract”) in which Concept agreed to supply Traxys with

approximately      4,000   tons      of    coal   per    month       for    a    total   of

approximately 48,0000 tons in 2008.                A Special Provisions Clause

set forth reciprocal options to extend the Contract beyond 2008:

     This transaction has an additional two year term that
     is an integral part of the contract with a $5.00 (Five
     Dollar) collar for each year.    Commencing on November
     1, 2008, the Parties shall mutually agree to negotiate
     in good faith and attempt to agree upon a new Contract
     to be in effect for Contract year 2009. . . . If . . .
     Traxys is unwilling to pay $83.00 per ton fob car as a
     Base Price[,] . . . then [Concept] and [Traxys] agree
     this Agreement shall terminate on December 31, 2008.

(J.A. 23.)

            In    the   fall   of    2008,      Traxys   elected       to    extend      the

Contract    one   additional        year   when    it    sent    Concept         a   letter

agreeing to pay the high-end $5.00 collar of $83.00 per ton fob

car of coal in 2009.           Although the parties remained in contact

throughout    2009,     Concept     did    not    deliver      any    coal      to   Traxys




                                           3
toward the 2009 obligation.    Neither party exercised the option

to extend the Contract into 2010. 2

          In May 2010, Traxys filed the underlying complaint in

the United States District Court for the Western District of

Virginia alleging Concept had breached the Contract by failing,

inter alia, to supply coal in 2009 and 2010. 3    Concept then filed

a   counterclaim   alleging   Traxys   breached   the   Contract   by

thwarting delivery of the coal and thereby violating its duty of

good faith and fair dealing.      Both parties asserted they were

entitled to damages based on the other party failing to fulfill

its obligations during 2009 and 2010, which resulted in no coal

being shipped for either year.    At the heart of these claims lay

the interpretation of the Special Provisions Clause, whether a

binding Contract existed in 2009 and/or 2010, and which party

(if either) breached the Contract in 2009 and/or 2010.

          Following a bench trial, the district court entered

judgment upon an opinion in favor of Traxys on its claim and

     2
       Although the parties disputed some of these facts at
various stages in the proceedings below, they do not dispute
them on appeal.
     3
       Traxys also sought damages for a small portion of coal
Concept failed to deliver under the 2008 obligation.     Concept
does not raise any issue relating to the district court’s
findings regarding a partial 2008 default and damages arising
therefrom, and as such this opinion does not address or affect
the district court’s disposition of Traxys’ claims as to damages
for the 2008 default.



                                 4
against    Concept’s          counterclaim.          Traxys     N.    Am.     v.    Concept

Mining, Inc., 808 F. Supp. 2d 853 (W.D. Va. 2011).                           The district

court found that Concept’s lead coal buyer for the Americas,

Liem Hazoumé, had misinterpreted the Contract, which mistakenly

“led him, on behalf of Concept, to take the position with Traxys

that there was no binding agreement for 2009.”                         Id. at 860.          It

further found that “Concept was obligated to deliver the 2009

tonnage” as a result of Traxys’ exercise of the 2009 option, and

that   Concept       materially       breached   the       Contract     by    failing       to

deliver coal toward its 2009 obligation.                         Id.        The district

court concluded that Traxys’ remedies for the breach included

awaiting performance, and that it did not violate a duty of good

faith by remaining silent, despite the fact that its “silence

may    have     been     in    part    strategic      and      sensitive      to     market

considerations.”         Id. at 862.

               The   district     court    rejected        Concept’s    argument          that

“Traxys’       refusal    to    communicate      .    .    .   frustrated          Concept’s

ability to fulfill its obligations.”                      Id. at 863.        This is so,

the    court    concluded,       because    Traxys        “advised     Concept       of    its

ability to accept any proposed delivery dates,” id. at 864, and

yet Concept never sent Traxys any such dates and thus had not

“demonstrated its willingness to perform and [thereby] signified

its intent to remedy its delinquency.”                    Id. at 863.



                                            5
            In addition, the district court found that “[b]ecause

Concept    repudiated      any    obligation    to    deliver      coal    under    the

Contract after 2008 and was in breach of the Contract throughout

2009, Traxys was not required to give any notice of an election

to take the 2010 tonnage.”               Id. at 860.        The court concluded

that   Concept’s     “ongoing       breach     throughout       2009      had     legal

consequence    for   the    parties’      status     in   2010.”       Id.   at     865.

Namely, it held that because Concept was in breach of contract

in 2009, Concept had no right to demand performance of condition

precedents to performance such as requiring Traxys to make “a

futile election on the 2010 tonnage.”                Id.    The court concluded

Concept was liable to Traxys for its failure to deliver any coal

during 2010.

            On appeal, the parties do not dispute the district

court’s method of calculating damages.                 Broken out by year, the

damages award consisted of $46,696 for 2008, $800,367 for 2009,

and $3,324,697 for 2010, for a total award of $4,167,760.                           Id.

at 866.

            After entry of the damages judgment, Traxys moved for

prejudgment    interest,         attorneys’    fees,      and   other      litigation

expenses.     The Contract provided that in the event of Concept’s

unexcused failure to perform, Concept would be obligated to pay

“Legal Costs incurred by [Traxys].”                  (J.A. 27.)         The parties

disputed    the   definition        of   “Legal      Costs,”    and       whether    it

                                          6
included       the    attorneys'    fees    and    litigation     expenses.    The

district court found “that the plain meaning of ‘Legal Costs’ as

used in the Contract includes expenses incidental to litigation,

such as attorneys’ fees and disbursements, as well as expert

witness fees.”         Traxys N. Am., LLC v. Concept Mining, Inc., Case

No. 1:10CV00029, 2011 U.S. Dist. LEXIS 108530 (W.D. Va. Sept.

22, 2011).       It explained:

     [t]here would be no need to expressly provide in the
     Contract for the recovery of court costs to a
     prevailing   party,   since   such   costs   would    be
     recoverable as a matter of course.      The additional
     recovery of “Legal Costs” in the Contract must include
     attorneys’ fees and other normal litigation expenses.

Id. at *4.           Concept did “not contest the [calculation] of the

attorneys’ fees and disbursements sought or the amount of the

expert witness fees,” which the district court concluded were

reasonable.           Id.    It    did,    however,     reduce   “certain   witness

travel expenses.”           Id.    at *4.       Accordingly, the court awarded

Traxys     a     total      of    $547,518.19     for     prejudgment   interest,

attorneys’ fees and disbursements, witness fees, and expenses.

Id. at *5.

               Concept noted a timely appeal from both orders, and we

have jurisdiction under 28 U.S.C. § 1291.




                                            7
                                             II.

            In   this     appeal     from         a    bench      trial,   we    review   the

district    court’s       findings      of    fact          for    clear   error    and   its

conclusions of law de novo.              Roanoke Cement Co. v. Falk Corp.,

413 F.3d 431, 433 (4th Cir. 2005).                          Contract interpretation is

also subject to de novo review.                        Frahm v. United States, 492

F.3d 258, 262 (4th Cir. 2007).                        As a court possessing federal

jurisdiction by virtue of diversity of citizenship, we apply

state law in interpreting the Contract.                           See Universal Concrete

Prods. v. Turner Constr. Co., 595 F.3d 527, 529 (4th Cir. 2010).

Pursuant to the Contract’s choice-of-law provision, the law of

the state of New York controls in this case.                                New York has

adopted the Uniform Commercial Code, N.Y. U.C.C. (“hereinafter

U.C.C.”), which applies to the Contract.                           See N.Y. U.C.C. Law §

2-101 et subseq.



                                         III.

             Concept first contends the district court erred in

concluding that it materially breached the Contract by failing

to supply Traxys with coal pursuant to the 2009 obligation.                                It

asserts that the failure to deliver coal does not constitute a

material breach because Traxys’ conduct excused Concept from any

obligation   under      the   Contract.                To    support     this    contention,

Concept    points    to    what    it    identifies               as   Traxys’   systematic

                                              8
avoidance    and     refusal     to    communicate       with   Concept     in   2009.

Concept argues the district court erred in failing to conclude

that these acts by Traxys violated the duty of good faith and

fair dealing.            As a result of this claimed breach by Traxys,

Concept contends it was excused from fulfilling any obligation

to perform under the Contract.

             To establish a prima facie case of breach of contract

under New York law, a plaintiff must prove: “(1) the existence

of a contract; (2) a breach of that contract; and (3) damages

resulting from the breach.”               Nat’l Mkt. Share, Inc. v. Sterling

Nat’l Bank, 392 F.3d 520, 525 (2d Cir. 2004).                          Concept avers

that Traxys failed to establish the second element of a prima

facie case, that Concept’s failure to deliver coal constituted a

“breach” of the parties’ contract in light of Traxys’ conduct.

             We have reviewed the record and conclude the district

court did not err in holding that Concept materially breached

the Contract and that Traxys was not in breach as to 2009.

Concept    was     thus     correctly     found    to    be   liable    for   damages

arising from its failure to deliver coal to Traxys in 2009.

Significantly, Concept’s argument on appeal differs considerably

from   the   position        that    it   took    both    during   the    events    in

question     and    at     various     stages     in    the   proceedings     in   the

district court.          While it now concedes that Traxys exercised the

2009   option      and    that   the   parties     consequently    had    a   binding

                                           9
contract that year, that is not the position it previously held.

The record unmistakably reflects that Concept’s employee Hazoumé

did not believe that Concept was obligated to deliver any coal

toward a 2009 obligation because he did not believe the parties

had   a   binding       agreement      covering             that    period       of    time.        In

communication           after      communication,                  he        demonstrated          his

willingness        to    enter     into      a        new    agreement          for    2009,       but

disavowed      any      existing       obligation.                   Hazoumé’s         deposition

testimony similarly reflects his mistaken interpretation of the

Contract’s Special Provisions Clause and the legal effect of

Traxys’     letter      exercising      the       2009       option,         which    led    to    his

belief      that    there        was   not       a     binding          contract       for     2009.

Hazoumé’s communications to Traxys informed them that Concept

did   not    intend      to      deliver      coal          toward       a     2009   obligation.

Moreover,     because       the    Contract           provided          that    Concept      was    to

deliver approximately 4,000 tons of coal each month, at the end

of each month in 2009 when Concept had not delivered any coal,

Concept was in breach.

             Contrary       to    Concept’s           argument,         Traxys’       conduct      did

not excuse Concept from the obligation to deliver coal in 2009.

Notably, Concept’s breach preceded the period of time during

which it claims Traxys refused to communicate.                                  See N.Y. U.C.C.

Law § 2-610, cmt. 1 (stating that an anticipatory repudiation

occurs “upon an overt communication of intention or an action

                                                 10
which    renders      performance        impossible      or    demonstrates         a    clear

determination         not    to    continue       with    performance.”).                Upon

Concept’s prior breach, Traxys was entitled under U.C.C. § 2-610

to     “await    performance        by     the     repudiating            party”    “for    a

commercially reasonable time.”                   See also N.Y. U.C.C. Law § 2-

610, cmt. 4 (discussing the right of a non-breaching party to

choose “[i]naction and silence” so long as it does not mislead

the breaching party).              Furthermore, Concept overstates Traxys’

“silence,”       as    the    record      reflects       that        Traxys       maintained

communication         with    Concept      throughout         2009     even    though       it

channeled        contact      through       one      representative               and    that

representative strategized as to how and when to communicate

with     Concept.            The    record        also    reflects           that       Traxys

unequivocally informed Concept that it was “completely flexible

on loading dates each month and [stood] willing to work with

Concept     on    a    loading     schedule        favorable         to    both     parties.

[Traxys] look[ed] forward to [Concept’s] response as to when

[it] will begin shipping tons.”                  (J.A. 392.)         That sentiment was

repeated in numerous communications to Concept throughout 2009.

Yet at no time did Concept suggest any potential loading dates—a

duty that it had under the plain language of the Contract—in




                                            11
order     to   initiate       the    process        of    scheduling   transfer     of    the

coal. 4

               At    bottom,        it   was    Concept’s        misperception     that     a

contract       did     not    exist       rather         than   Traxys’    behavior      that

resulted in a material breach of the Contract by Concept.                                 The

district       court    did    not       err   in    concluding     that    Concept,      not

Traxys, materially breached the Contract by failing to deliver

coal in 2009.



                                                    IV.

               Concept       next    contends        the    district      court   erred    in

determining it breached the Contract as to 2010 and in awarding

damages arising from its failure to deliver coal for that year.

It asserts the district court erred in excusing Traxys from the

condition precedent to exercise the 2010 option by agreeing to

the price collar set forth in the Special Provisions Clause. 5



      4
       Traxys also raises numerous arguments challenging the
district court’s conclusion Concept breached the Contract by
failing to set a shipping date because the parties’ course of
performance modified the Contract’s terms.  We have considered
those arguments and reject them for substantially the same
reasons expressed in the district court’s opinion.  See 808 F.
Supp. 2d at 863-64.
      5
       Concept also challenges the district court’s determination
of what price the Special Provisions Clause set for 2010.
Because we are reversing the court’s decision on other grounds,
we need not address that argument.



                                               12
Concept maintains that because Traxys never formally exercised

the     2010        option,        no       contract         existed        for     that     year.

Consequently,          Concept      argues        it    cannot        be    held    liable    for

damages arising from any failure to deliver coal during that

year.

               We agree that the district court erred in excusing

Traxys from the Contract requirement to exercise the 2010 option

and holding Concept in breach for failing to deliver coal in

2010.       As noted, the Contract’s original term ended at the end

of December 2008.             The Special Provisions Clause contained two

one-year reciprocal options allowing the parties to extend the

Contract       under    certain         conditions.           But     unless       either    party

exercised       its     option,         there     was    no        binding    contract      after

December 31, 2008.             An option contract is simply “an agreement

to hold an offer open and [it] confers on the optionee . . . the

right to purchase at a later date.                            While the optionor cannot

act    in    derogation       of    the      terms      of    an    option    agreement,       the

optionee is not bound until the option is actually exercised.”

22    N.Y.    Jur.     Contracts        §    55   (citing          Kaplan    v.    Lippman,    552

N.E.2d       151,    153   (N.Y.        1990)).          In        exercising      the     option,

however, the optionee must act strictly “in accordance with the

time and in the manner specified in the option.”                                    Kaplan, 552

N.E.2d at 153.



                                                  13
            Here, Traxys properly exercised a one-year option to

extend    the    Contract       through       2009.        But    because       the    Special

Provisions      Clause       established       two    separate       one-year         options,

Traxys was required to independently exercise the second one-

year option before the Contract’s term could be extended into

2010.       Until    Traxys       exercised          the    option,       Concept’s          only

obligation was to hold open the sale offer; it had no duty to

deliver    coal     in   2010     absent      Traxys’       proper       exercise      of     the

second one-year option.            See Toroy Realty Corp. v. Ronka Realty

Corp.,    493     N.Y.S.2d        800,     882-83          (N.Y.     App.       Div.     1985)

(“Ordinarily,        option        contracts           create        only         unilateral

obligations upon the seller to hold a sale offer open for the

duration of the option.                 The obligations of the parties are

transformed      into    a    bilateral       contract       of    sale    only       upon    the

exercise of the option[.]”) (citing Benedict v. Pincus, 84 N.E.

284, 286 (N.Y. 1908)).

            Traxys       failed    to     provide          the    requisite       notice       to

extend the Contract’s duration beyond December 31, 2009.                                 While

Concept’s       breach    in    2009     affected          the    parties’      rights        and

responsibilities         in    2009,     it    did     not       alter    the     Contract’s

duration or relieve Traxys of its independent duty to exercise

the 2010 option if it so desired.                    The district court thus erred

in concluding otherwise.               Accordingly, we reverse the district



                                              14
court’s judgment with respect to the 2010 obligation and its

award of damages to Traxys for that year.



                                             V.

              Concept’s final challenge is to the district court’s

award    of   prejudgment      interest,     attorneys'    fees,    and   certain

witness-related litigation expenses.               In light of our holding

that the district court erred in awarding damages related to a

2010    breach    of    contract,    this    judgment    would   necessarily    be

vacated in order for the district court to reassess the matter

based on the modified damages award.

              Because it is almost assuredly going to arise during

remand, we will briefly address Concept’s argument regarding the

district court’s interpretation of the Contract’s fee-shifting

provision.        See    United     States   ex   rel.   Drakeford   v.     Tuomey

Healthcare Sys., Inc., 675 F.3d 394, 406 (4th Cir. 2012) (“[O]ur

precedent is clear that we may address issues that are likely to

recur on remand.”). Concept asserts the district court erred

when it interpreted the Contract’s provision permitting Traxys

to recover “Legal Costs” as including attorneys' fees, expert

witness fees, and certain witness travel expenses.                 It maintains

that in light of New York case law holding that fee-shifting

provisions       must   be   strictly   interpreted,      the    district   court

erred in construing “Legal Costs” to include these amounts when

                                        15
it is not clear from the record that was the intention of the

parties.

           We agree that the district court’s interpretation of

the fee-shifting provision was too broad. 6                Under New York law,

“while parties may agree that attorneys’ fees should be included

as   another    form      of   damages,     such   contracts   must     be   strictly

construed to avoid inferring duties that the parties did not

intend to create.”             Oscar Gruss & Son, Inc. v. Hollander, 337

F.3d 186, 199 (2d Cir. 2003).               Moreover, courts must not “infer

a party’s intention to waive the benefit of the [American Rule]

unless the intention to do so is unmistakably clear from the

language   of       the    promise.”         Hooper    Assocs.,    Ltd.      v.   AGS

Computers, Inc., 548 N.E.2d 903, 905 (N.Y. 1989).

           The      Contract’s       fee-shifting     provision    provides       that

Traxys can recover “Legal Costs.”                   (J.A. 779.)       The term is

unmodified and undefined.              Because legal costs could encompass

or   exclude    a    range      of   fees   associated    with    the    underlying

litigation and the parties’ intent is not clear from the plain

language of the Contract, the term is ambiguous.                  We believe the


      6
       Although courts review the reasonableness of an attorneys'
fee award for abuse of discretion, we review the court’s
interpretation of the Contract – i.e., whether it permits
recovery of attorneys' fees and other costs – de novo.      Oscar
Gruss & Son, Inc. v. Hollander, 337 F.3d 186, 198 (2d Cir.
2003).



                                            16
analysis of U.S. Fid. and Guar. Co. v. Braspetro Oil Servs. Co.,

369 F.3d 34 (2d Cir. 2004), to be persuasive on this point.

There, the Second Circuit considered the precise issue presented

in this case: whether a provision allowing recovery of “legal

costs”     encompassed    attorneys'       fees.      After   reviewing     the

relevant    New   York   case   law   and   finding    nothing   directly    on

point, the Second Circuit turned to three dictionary definitions

of “legal costs,” only one of which included “attorneys' fees.”

Id. at 74-77. 7      In the absence of any extrinsic evidence on

point, and faced with “two, equally valid interpretations” of

the provision, the Second Circuit concluded that “it [was] not

unmistakably clear that the use of the term ‘legal costs’ in

[the parties’ contract] was intended to obligate” the breaching

party to pay attorneys’ fees.          Id. at 77.      As such, no recovery

for attorneys' fees was permitted.

            Similarly, here, the Contract calls for recovery of

“legal costs” without any clear indication of what that term

     7
       We note that Black’s Law Dictionary, one of the three that
the Second Circuit relied on, defines “cost” in three ways, none
of which are particularly useful in determining whether the
parties under the Contract intended for recovery of attorneys'
fees.    Black’s Law Dictionary 349 (7th ed. 1999) (“1.       The
amount paid or charged for something; price or expenditure. . .
. 2. (pl.) The charges or fees taxed by the court, such as
filing fees, jury fees, courthouse fees, and reporter fees. . .
. 3. (pl.)    The expenses of litigation, prosecution, or other
legal transaction, esp. those allowed in favor of one party
against the other.”).



                                      17
encompasses.    Traxys points to a declaration in the record from

its employee Janet Billups, who drafted the Contract, in which

she indicates that she intended for the provision to include

attorneys' fees.        However, this evidence is of limited value

given the uncertainty as to what both parties intended for it to

mean.   Given that New York narrowly construes such fee-shifting

provisions, and requires that it must be “unmistakably clear

from the language of the promise,” Hooper Assocs., Ltd., 548

N.E.2d at 905, what the parties intended, we conclude that the

district court erred in interpreting the Contract to include

attorneys' fees.

            The parties’ briefs focus on the appropriateness of

including attorneys' fees as “Legal Costs” even though Concept

also challenges the recovery of expert witness fees and witness

travel expenses.     Although this is perhaps a closer call, it is

nonetheless a “call” given that the term used – “Legal Costs” –

is ambiguous.      As such, we also hold that the district court

erred in concluding that the Contract was “unmistakably clear”

in intending to encompass such expert witness fees and travel

expenses.     On remand, the district court should recalculate an

appropriate    amount    of   prejudgment   interest   and   permissible

“Legal Costs” to be allowed in conformity with this opinion.




                                    18
                               VI.

           For the aforementioned reasons, we affirm the district

court’s damages judgment in part and reverse it in part, and we

vacate and remand the judgment relating to prejudgment interest

and “Legal Costs” for further proceedings consistent with this

opinion.


                                                AFFIRMED IN PART,
                                                REVERSED IN PART,
                                             VACATED AND REMANDED




                                19
