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           IN THE UNITED STATES COURT OF APPEALS
                    FOR THE FIFTH CIRCUIT

                                                                      United States Court of Appeals

                                      No. 17-60298
                                                                               Fifth Circuit

                                                                             FILED
                                                                         May 18, 2018

STEEL DYNAMICS COLUMBUS, L.L.C.,                                        Lyle W. Cayce
                                                                             Clerk
              Plaintiff - Appellant Cross-Appellee

v.

ALTECH ENVIRONMENT USA CORPORATION,

              Defendant - Appellee Cross-Appellant




                  Appeals from the United States District Court
                     for the Northern District of Mississippi
                             USDC No. 1:14-CV-124


Before REAVLEY, JONES, and GRAVES, Circuit Judges.
PER CURIAM:*
       This case is about a buyer’s burden to prove damages under Mississippi’s
enactment of the Uniform Commercial Code. Steel Dynamics Columbus,
L.L.C., purchased two pollution monitoring systems from Altech Environment
USA Corp. The systems did not function as expected and Steel sued.
       After a bench trial, the district court found that Altech breached its
express warranty to Steel. The district court awarded some incidental damages


       * 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 R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5TH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.
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but also found that Steel failed to prove its direct damages and attorneys’ fees.
Steel appealed the denial of its direct damages and attorneys’ fees. Altech
cross-appealed Steel’s award of incidental damages, arguing the district court
should have enforced a contractual limitation on their recovery. We affirm.
                            I.    BACKGROUND
      As its name implies, Steel operates a steel mill in Columbus, Mississippi.
The plant is regulated by the Mississippi Department of Environmental
Quality (MDEQ). The MDEQ issued Steel a “Title V” permit under the Clean
Air Act. 42 U.S.C. § 7401 et seq. To comply with the permit, Steel contracted
with Altech for the purchase and installation of two continuous emissions
monitoring systems, or “CEMS.” The two systems cost $447,610.20.
      Three provisions of the parties’ contract are relevant on appeal. First,
Altech warranted the CEMS “shall be of good quality and free from defects,
latent and patent, in design, materials and workmanship; [and] . . . shall be
suitable and sufficient for their specified purpose.” Before trial, the parties
stipulated that Altech “understood that [Steel] intended to use the CEMS units
to monitor emissions in compliance with the Title V permit.” Second, the
contract provided, “If [Altech] breaches its warranty . . . [Altech] shall, at its
option, repair and/or replace . . . any of the Goods which breach this Warranty.”
The “exclusive” remedy for breach of warranty was repair or replacement.
Third, the contract limited damages: “[I]n no event shall [Altech] be liable for
special, indirect, incidental, consequential, or punitive damages whether
attributable to contract, warranty, tort (including negligence), strict liability
or otherwise.”
      Altech installed the units in January and July of 2011, but they never
functioned properly. In June of 2013, the MDEQ issued Steel a Notice of
Violation (NOV) for both the inadequate CEMS and the failure to report
malfunctions. Following the NOV, Steel self-reported 11 other violations, and
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the MDEQ assessed a fine of $135,000. With the existing CEMS still unable to
function properly, Steel contracted with a third party to install a different
CEMS. Steel received over $23,000 in credit from the third party for equipment
initially provided by Altech.
       Steel sued Altech for breach of express warranty (among other things)
and sought damages for: (1) the full purchase price of the Altech CEMS (direct
damages); (2) incidental costs sunk while trying to fix the Altech CEMS
(incidental damages); (3) the $135,000 fine; and (4) attorneys’ fees incurred in
dealing with environmental regulatory issues (consequential damages). 1
Following a three-day bench trial, the district court found that the “recurrent
malfunctions” of Altech’s CEMS rendered them “unsuitable and insufficient for
the specified purpose,” in breach of the contract’s express warranty. The
district court found, however, that Steel could not recover its direct damages
because it failed to prove the value of the CEMS as received. Further, the
district court denied Steel its attorneys’ fees, finding that Steel failed to
attribute its fees or the fine to Altech’s breach. Ultimately, the court awarded
Steel $83,320.27 in incidental damages for Steel’s efforts to fix the CEMS.
       Steel appealed only from the district court’s denial of direct damages (the
purchase price) and attorneys’ fees. Altech cross-appealed, arguing that the
district court should have enforced the contract’s limitation on consequential
and incidental damages. 2
                                  II.    DISCUSSION
A. Standard of Review




       1Importantly, Steel did not seek attorneys’ fees under a fee-shifting statute. Instead,
Steel characterized its fees as consequential damages.
       2  Altech also asserts two conditional issues in its cross-appeal. Because we affirm the
district court’s judgment, we do not address those conditional issues.
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      Following a bench trial, “findings of fact are reviewed for clear error and
legal issues are reviewed de novo.” In re Mid-S. Towing Co., 418 F.3d 526, 531
(5th Cir. 2005). “A finding is clearly erroneous if it is without substantial
evidence to support it, the court misinterpreted the effect of the evidence, or
this court is convinced that the findings are against the preponderance of
credible testimony.” Becker v. Tidewater, Inc., 586 F.3d 358, 365 (5th Cir.
2009).
B. The Purchase Price
      The general measure of damages for breach of warranty is “the difference
at the time and place of acceptance between the value of the goods accepted
and the value they would have had if they had been as warranted.” MISS. CODE
ANN. § 75-2-714(2). This requires proof of the value as warranted and as
accepted. See § 75-2-714(2). The burden of proof is on the buyer seeking
damages. Gast v. Rogers-Dingus Chevrolet, 585 So. 2d 725, 731 (Miss. 1991)
(“This burden cannot be met by mere conjecture or inferences unsupported by
adequate evidence.”).
      The district court found that it was “far from clear that the CEMS were
worthless.” However, Steel asserts that it proved the CEMS were worthless as
accepted because they were unrepairable. Steel relies on Fedders Corp. v.
Boatright, 493 So. 2d 301 (Miss. 1986), to argue that, under Mississippi law,
proof that a good is unrepairable constitutes proof of worthlessness at the time
of acceptance. Such an argument is contrary to the language of Fedders.
      Fedders dealt with a broken heating system. Id. at 303. There, the court
stated, “If the heat pump could not be repaired and was worthless, the
[plaintiff] under § 75-2-714 would have been entitled to a refund of the
purchase price.” Id. at 309. Contrary to Steel’s assertion, “could not be repaired
and was worthless” is not the same as “the goods were worthless because they
could not be repaired.” (emphasis added). While it is true that an unrepairable
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good may also be worthless, it does not follow that such a good is always
worthless. Mississippi law makes clear just who bears the burden to prove
worthlessness.
      In Gast v. Rogers-Dingus Chevrolet, 585 So. 2d 725 (Miss. 1991), the
Supreme Court of Mississippi required a buyer to show proof of the value of
the goods as accepted, especially where the buyer retained some value. The
Gasts purchased a car that required constant repairs and even caught fire. Id.
at 727–28. After trying to trade in the car, the Gasts gave it to the bank––
which reduced their outstanding loan. Id. at 727.
      The Gasts sued the dealer for breach of an implied warranty. Id. at 727.
The jury awarded damages, but the trial court set aside the award for, among
other things, failure to prove damages. Id. On appeal, the Gasts argued
“evidence establishing the purchase price paid for the vehicle, and inferences
from the evidence . . . support[ed] their theory that the defective vehicle was
essentially valueless.” Id. 730–31. The Supreme Court of Mississippi found the
approach “flawed,” explaining:
            The [buyer] offered no evidence to show either the
            amount received by the bank from the sale of the
            vehicle and applied for the benefit of the [buyer] to
            their note, or the value of the vehicle at the time of its
            sale. This is not sufficient to support an award of
            damages under § 75-2-714.
Id. at 730. Thus, a buyer must prove the value as accepted and cannot do so by
relying on “inferences from the evidence” that the good is “essentially
valueless.” See id. (“Having failed to submit requisite proof of damages, no
recovery was permissible under 75-2-714.”).
      Here, the district court found Steel did not prove that the CEMS were
worthless at the time of acceptance. A review of the record supports this
finding. In fact, the evidence shows Steel retained at least some value from the
CEMS. Bryan Vogel, one of Steel’s engineers, testified Steel received $23,340
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in credit for components of the Altech CEMS. Thus, an award of the full
purchase price would not only relieve Steel of its burden, but would result in
its unjust enrichment to the tune of at least $23,340. A buyer cannot meet its
burden by only proving half of the equation; the value of the good as accepted
must also be proven. See Gast, 585 So. 2d at 731. The district court did not err
by denying Steel its purchase price.
C. Damages Limitation
       On cross-appeal Altech asserts the district court erred by not enforcing
a contractual limitation on incidental damages. Because the damage
limitation, if enforceable, would foreclose Steel’s recovery of attorneys’ fees, we
address it before discussing the fees.
       Section 75-2-719 allows for the limitation of damages. MISS. CODE ANN.
§§ 75-2-719(1–4). But at the same time, “[w]here circumstances cause an
exclusive or limited remedy to fail of its essential purpose, remedy may be had
as provided in this code.” MISS. CODE ANN. §§ 75-2-719(2). As the comment to
section 75-2-719 explains, “[W]here an apparently fair and reasonable clause
because of circumstances fails in its purpose or operates to deprive either party
of the substantial value of the bargain, it must give way to the general remedy
provisions in this Article.” MISS. CODE. ANN § 75-2-719 cmt. 1. In turn, the
Supreme Court of Mississippi has declined to enforce a damage limitation
when an exclusive repair or replace warranty fails of its essential purpose.
Massey-Ferguson, Inc. v. Evans, 406 So. 2d 15, 19 (Miss. 1981) (“[S]uch
limitation of damages as allowed under section 75-2-719 presupposes that the
warrantor has fulfilled his warranty.”). 3


       3 Both parties point to contrasting cases applying same or similar provisions from
other states. See Reynolds Metal Co. v. Westinghouse Elec. Corp., 758 F.2d 1073 (5th. Cir.
1985) (applying Texas law); Riley v. Ford Motor Co., 442 F. 2d 670 (5th Cir. 1971) (applying
Alabama law). Because Massey-Ferguson interprets Mississippi law, it controls. See also
Royal Lincoln-Mercury Sales, Inc. v. Wallace, 415 So. 2d 1024, 1028 (Miss. 1982) (“Such
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       Here, Altech provided an exclusive repair or replace warranty. The
warranty failed of its essential purpose when Altech—over the course of
years—was continually unable to repair the CEMS. Thus, the district court did
not err in holding the limitation on consequential and incidental damages also
failed. See Massey-Ferguson, 406 So. 2d at 19–20 (affirming recovery of
consequential damages despite contractual exclusion).
D. Attorneys’ Fees
       Steel appeals the district court’s denial of its $172,704.97 in attorneys’
fees. Steel asserts the fees are consequential damages incurred to address
“environmental regulatory issues and the MDEQ fine caused by the defective
Altech CEMS units.” The district court concluded that because the MDEQ fine
could have been the result of Steel’s reporting violations, attorneys’ fees
incurred dealing with the MDEQ could not be traced to Altech’s breach.
       Damages must be reasonably certain. See Frierson v. Delta Outdoor, Inc.,
794 So. 2d 220, 225 (Miss. 2001) (“[D]amages may only be recovered when the
evidence presented at trial ‘removes their quantum from the realm of
speculation and conjecture and transports it through the twilight zone and into
the daylight of reasonable certainty.’” (quoting Wall v. Swilley, 562 So. 2d 1252,
1256 (Miss. 1990))). A party seeking to recover damages for breach of contract
must “trace them directly to the breach of the contract and make them definite
enough to comply with the governing rules of law.” Ammons v. Wilson & Co.,
170 So. 227, 229 (Miss. 1936).




repair and replacement warranty provides confidence and assurance to the buyer that he will
secure goods conforming to the contract, and a limitation of liability to the seller. If it fails,
however, as a remedy in its essential purpose, then its function as a limitation of liability
also fails.”).
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      1. Trial Testimony
      Steel’s corporate representative, Anna Chappell, testified that, “[Steel]
engaged a law firm . . . to help us navigate the violation, the penalties, and the
subsequent agreed order.” (emphasis added). Chappell posited that the fees
“were incurred as a direct result of the issue [of the] Notice of Violation that
was a result of the CEMS not functioning properly.” However, she admitted
that the fines assessed by the MDEQ and the agreed order were not entirely
related to the CEMS. In fact, the agreed order contained several reporting
violations committed by Steel.
      Michael Caples, one of Steel’s attorneys, testified, “[T]he tasks that are
part of [the billing records] are totally related to the CEMS unit and the
nonoperating Notice of Violation of the CEMS unit.” He also testified that Steel
self-reported multiple violations to the MDEQ. 4
      2. Billing Records
      Steel argues that any entries not directly related to the CEMS were
deducted from the $172,704.97 in fees it sought to recover. Further, Steel says
the district court ignored “Steel’s unchallenged, unrebutted testimony and
evidence at trial that Steel meticulously subtracted from its invoices any
attorneys’ fees and costs unrelated to the CEMS units.” Steel’s argument
misses the point. The issue is not whether the fees are “related to” the CEMS
or the NOV. The issue is whether the fees resulted from Altech’s breach. See
MISS. CODE ANN. § 75-2-714(1) (stating a buyer may recover damages for the
loss “resulting in the ordinary course of events from the seller’s breach”)




      4 Caples was not designated as an expert and the district court disregarded his
testimony that the MDEQ did not consider the self-reported violations in choosing the fine
amount. Steel did not appeal the ruling.
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(emphasis added); § 75-2-715(2) (“[C]onsequential damages resulting from the
seller’s breach include . . . .”) (emphasis added).
       A review of the record does not show that Steel’s attorneys’ fees resulted
from Altech’s breach. For example, over 30 hours relate to Steel’s “response” to
the MDEQ’s NOV—of which a large portion is devoted to Steel self-reporting
its own violations. Further, there is an entry of 5.4 hours for “Review of stack
testing data and information provided by A. Gurley as relates to NOV and
other potential violations.” (emphasis added). The bills also contain multiple
entries related to the agreed order, which Steel (through Chappell) admitted
was not wholly related to the CEMS. 5
       Confronted with Caples’s testimony, Chappell’s admission about the
agreed order, and billing entries unrelated to Altech’s breach, the district court
was free to assign more weight to the entries and Chappell’s admission. Thus,
the district court’s finding—that Altech did not prove with reasonable certainty
the fees resulted from Altech’s breach—is supported by the evidence. The
district court did not commit clear error in denying recovery of Altech’s
attorneys’ fees.
       Judgment AFFIRMED.




       5 Examples of entries related to the agreed order include: (1) “01/22/14 GCR . . .
conference with Chris Wells (MDEQ) re: disclosure of noncompliance issue related to non-
reporting of September stack test and request of conference with MDEQ to work on issues
associated with Agreed Order;” (2) “04/04/14 GCR . . . conference with Wells re: revision to
Agreed Order;” and (3) “04/10/14 GCR . . . begin drafting SEP proposal and revisions to draft
Agreed Order.” (emphasis added).
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