                                                                                 United States Court of Appeals
                                                                                          Fifth Circuit
                                                                                       F I L E D
                      IN THE UNITED STATES COURT OF APPEALS
                                                                                        August 18, 2003

                                                                                   Charles R. Fulbruge III
                                  FOR THE FIFTH CIRCUIT                                    Clerk



                                           No. 02-10229



MANAGEMENT INSIGHTS, INC.,

                                                            Plaintiff-Counter Defendant-Appellant,

                                               versus


BAXTER HEALTHCARE CORPORATION,

                                                            Defendant-Counter Claimant-Appellee.




                           Appeal from the United States District Court
                               for the Northern District of Texas
                                        (3:00-CV-2130-R)




Before KING, Chief Judge and HIGGINBOTHAM and STEWART, Circuit Judges.

CARL E. STEWART, Circuit Judge:*

       Management Insights, Inc. (“MII”) appeals from the district court’s judgment dismissing its

claim against Baxter Healthcare Corporation (“Baxter”) for additional compensation that MII claims

Baxter owes for tax support services provided by MII to Baxter under a contract between the parties.


  *
     Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion should not be published
and is not precedent except under the limited circumstances set forth in 5TH CIR. R. 47.5.4.
MII furt her appeals from the district court’s award of damages to Baxter for MII’s breach of

contract. For the following reasons, we affirm the dismissal of MII’s claim against Baxter and reverse

the district court’s award of contractual damages to Baxter.

                       FACTUAL AND PROCEDURAL BACKGROUND

       In January 1991, MII and Baxter entered into a contract, the State Tax Benefits Agreement

(the “Agreement”), whereby MII would provide Baxter consulting and tax support services. As

outlined in the Agreement, Baxter desired to “obtain certain services from MII with regard to

qualifying for Tax Benefits.” The Agreement further delineated the “Services to be Rendered by MII”

as follows:

       1. Services to be Rendered by MII MII shall exercise its best efforts to assist
       [Baxter] in qualifying for Tax Benefits available under the Statutes. . . . Under this
       Agreement, MII will provide the following services as appropriate: (a) Research
       state tax benefit programs; (b) Assist in the identification and collection of necessary
       data; (c) Edit and match client location data to enterprise zones in MII’s database; (d)
       Process necessary state applications for benefits; (e) Determine client eligibility for
       state programs; (f) Calculate tax benefits; (g) Provide a quarterly report on the status
       of MII activity; (h) Prepare an annual tax report and supporting documentation that
       can be used to file returns with the appropriate taxing authority; and (i) Communicate
       with state and local agencies.

In return, Baxter agreed to “fully cooperate with MII in identifying and implementing Tax Benefit

programs available under the Statutes.” Specifically, Baxter agreed to furnish certain information to

MII within ninety-days, including the amount of state taxes paid by Baxter within the preceding two

years, the amount of tax benefits previously claimed by Baxter within the last two years, copies of

Baxter’s unemployment compensation returns for the prior two years, information concerning new

and existing locations of Baxter’s business operations, and information concerning any future

locations, additions, expansions, and remodeling.



                                                  2
       Under the Agreement, Baxter was to pay MII a fee equal to twenty percent of the tax benefits

“made available to” Baxter by MII “for each and every taxing authority.” This fee was limited each

year to “the amount of Tax Benefit actually used to offset a tax liability otherwise owed to a taxing

authority.” MII agreed to reimburse Baxter “for any fees paid by [Baxter] to MII with respect to any

Tax Benefits which are ultimately disallowed by the taxing authority.”1

       The initial term of the Agreement was fifteen months. The Agreement further provided for

automatic renewal fo r one-month periods unless canceled by either party upon thirty days written

notice. Upon termination, MII is entitled to “its fees with respect to all Benefits which have been

made available by MII to [Baxter] even though such Tax Benefits are not available to [Baxter] until

after the termination of this Agreement as long as such Tax Benefits are attributable to periods ending

on or befo re t he date” of cancellation. Finally, the Agreement contains a merger clause and the

following provision concerning MII’s liability:

       (h) IN THE EVENT THAT ANY TAX BENEFITS ARE NOT OBTAINED OR
       ULTIMATELY DISALLOWED AS A RESULT OF ANY NEGLIGENT ACT OR
       OMISSION BY MII, THEN MII SHALL REIMBURSE CLIENT FOR ANY FEES
       PAID TO MII WITH RESPECT TO SUCH DISALLOWED TAX BENEFITS. MII
       SHALL NOT BE LIABLE, OTHER THAN AS SET FORTH HEREIN, FOR ANY
       DISALLOWANCE OF TAX BENEFITS OR FOR THE RENDITION OF ITS
       SERVICES UNDER THIS AGREEMENT.

       On August 25, 2000, MII brought suit against Baxter in Texas state court, alleging breach

of the Agreement. MII asserted that Baxter owed it additional compensation because MII “made

available” to Baxter certain state tax credits, Baxter obtained the benefits from these credits, but

Baxter did not pay MII the required twenty-percent fee. On October 13, 2000, Baxter sent MII


   1
      Exhibit A to the Agreement contained a list of tax benefits that Baxter was currently claiming
as of the date of the Agreement. Under the Agreement, MII could not claim compensation for
assisting Baxter in procuring these tax credits.

                                                  3
written notice of its intent to terminate the Agreement. The case was removed to federal court based

on diversity jurisdiction. Baxter filed a counterclaim alleging that MII breached the Agreement by

failing to provide “documentation support services” during an audit of Baxter’s 1994 and 1995

California state tax returns. Aft er a bench trial, the district court dismissed MII’s claims with

prejudice and awarded $148,632 to Baxter on its counterclaim. MII appeals.

                                           DISCUSSION

       We review the district court’s findings of fact for clear error and its conclusion of law de

novo. Triad Elec. & Controls, Inc. v. Power Sys. Eng’g, Inc., 117 F.3d 180, 186 (5th Cir. 1997).

Under the clear error standard, we will reverse the district court’s findings of fact “only if we have

a definite and firm conviction that a mistake has been committed.” Mid-Continent Cas. Co. v.

Chevron Pipe Line Co., 205 F.3d 222, 229 (5th Cir. 2000). “[W]hether a contract is ambiguous, as

well as the interpretation of an unambiguous contract, are questions of law review de novo.” Triad

Elec. & Controls, Inc., 117 F.3d at 187.

       In this case, we look to the law of Texas to provide the rules of contract interpretation. See

id. at 191. Under Texas law, a contract is ambiguo us if, “after applying established rules of

interpretation, the written instrument remains reasonably susceptible to more than one meaning.” Id.

In determining whether the contract is ambiguous, we “examine and consider the entire writing in an

effort to harmonize and give effect to all the provisions of the contract so that none will be rendered

meaningless.” Id.

I.     Compensation Due Under the Agreement

       The district court held that MII was not entitled to any additional compensation because it

had not performed the necessary services required under the Agreement. MII argues that the


                                                  4
Agreement does not require it to perform all of the services delineated in section 1(a)-(i). MII

contends that its compensation is not dependent on it providing services each and every year, rather

that “[t]he only reasonable interpretation is that MII contracted for a right somewhat akin to a

royalty.” Under this view, once MII identified a credit to Baxter, that credit was “made available”

to Baxter, thus MII would be entitled to twenty-percent of Baxter’s tax savings each year Baxter used

the credit. Baxter asserts that the plain language of the Agreement illustrates that it was as an

agreement for services, specifically that MII agreed to provide support services in order to assist

Baxter in qualifying for tax benefits.

        We find that the only reasonable interpretation of the Agreement is that is was an agreement

for services. As such, MII is not entitled to compensation for years in which it provided no services.

Under the Agreement, MII was entitled to twenty-percent “of the Tax Benefits made available to

[Baxter].” (emphasis added). Under the Agreement, MII was obligated to do more than just initially

identify a tax credit in order to reap this benefit every year the tax credit was utilized. MII was

entitled to compensation for those years in which Baxter reaped a benefit from MII’s consulting and

tax support services by way of a tax savings and MII assisted Baxter in reaping this benefit. Although

the Agreement does not require that MII perform each and every one of the delineated services each

year, we are unpersuaded by MII’s contention that the language “MII will provide the following

services as appropriate” indicates that MII need not perform any services in order to reap twenty-

percent of the benefit Baxter received in tax savings for a given year.2 After considering the entire


    2
       MII further asserts that it is owed additional compensation resulting from the use of the
Louisiana Inventory Franchise Tax Credit (“LITC”) by Allegiance, a spin-off company of Baxter.
MII performed services pertaining to the LITC and made the LITC available to Baxter. As such, MII
argues that it should be paid for Allegiance’s use of the LITC during 1996. The district court
determined that “MII failed to present evidence that Allegiance took the [LITC] for tax year 1996.”

                                                  5
writing, see Triad Elec. & Controls, Inc., 117 F.3d at 191, we are persuaded that the Agreement is

unambiguously an Agreement for services and that MII’s construction is unreasonable. For these

reasons, we affirm the district court’s decision that MII is owed no additional compensation under

the Agreement.3

II.       Counterclaim

          Baxter claimed the California Manufacturer’s Investment Tax Credit (“MIC”) for tax year

1995 based, in part, on work performed by MII. MII retained the supporting documentation it

compiled for this credit. In December 1999, Baxter’s claim was audited by the California taxing

authorities. As a result of the audit, MII provided Baxter with copies of the invoices it had compiled

in support of the California MIC. As part of the audit, Baxter received an information and document

request (“IDR”) concerning the California MIC. Baxter asserts that it requested that MII “provide

the appropriate services to help defend the audit.” Specifically, on December 27, 1999, Baxter

forwarded MII a copy of the IDR along with a letter which indicated that Baxter was not “pursuing

the necessary documentation for any items subject to the MIC” valued under $10,000. The letter

indicated, however, that “MII may on its own, wish to use its resources, to further pursue the

requested necessary documentation for the items listed which are less than this amount.” The letter

further stated the following:




After reviewing the record, we agree.
      3
      We further reject MII’s argument that it is entitled to attorney’s fees under the Agreement
whether or not it prevails in this action. Under the Agreement, MII is entitled to attorney’s fees “[i]n
the event it becomes necessary for MII to enforce its rights under this contract.” Because we have
rejected MII’s claims that it is owed additional compensation, MII has not enforced any “rights”
under the Agreement.

                                                   6
       If you have any additional information or support that MII has gathered and wishes
       to provide to the CA Auditor regarding any of the IDR listed items, please provide
       us with that documentation just as soon as possible. If we are unsuccessful in
       gathering the additional support, information and documentation that has been
       requested by the CA auditor for the MII listed 1994 and 1995 Hyland assets, no CA
       MIC will be applicable to these purchases.

       Baxter claims that MII breached the Agreement by failing to provide documentation support

services to assist Baxter in defending the audit. Unlike the district court’s extensive findings

concerning MII’s claim for additional compensation under the Agreement, with regard to the

counterclaim the district court simply found that MII’s failure to provide the services requested by

Baxter constituted a breach of the Agreement and awarded Baxter $148,632 in damages, i.e. the cost

incurred by Baxter to retain outside audit support services. MII argues that it was not obligated to

provide post-filing audit support services. We agree. Upon a careful review of the record, we find

no evidence to support the district court’s finding. The resolution of this issue turns on the plain

language of the Agreement.

       Under the Agreement, MII was to perform the following services as appropriate: “Assist in

the identification and collection of necessary data; . . . Prepare an annual tax report and supporting

documentation that can be used to file returns with the appropriate taxing authority.” MII was not

obligated to provide services beyond what it did - it produced the documentation it had compiled in

support of filing the claimed credit. If the parties had intended for MII to bear the burden of

defending against an audit, which most certainly these parties contemplated might occur, the

Agreement would have clearly stated this duty. 4 The Agreement does not clearly state such an


   4
     This point is belied by the Agreement’s provision limiting MII’s liability for negligent acts or
omissions to reimbursement of any fees paid to MII with respect to any disallowed tax benefits. As
the Agreement clearly states, “MII SHALL NOT BE LIABLE, OTHER THAN AS SET FORTH
HEREIN, FOR ANY DISALLOWANCE OF TAX BENEFITS OR FOR THE RENDITION OF ITS

                                                  7
obligation, nor allude to one. Accordingly, we reverse the district court ’s award of contractual

damages to Baxter.

                                         CONCLUSION

       For the reasons stated above, we AFFIRM the district court’s dismissal of MII’s claim against

Baxter and REVERSE the award of contractual damages to Baxter.




SERVICES UNDER THIS AGREEMENT.”

                                                8
