Key Points

  • The Fifth Circuit affirmed denial of attorneys' fees to McDonnel Group after it won a jury verdict against Archer Western's capital-contribution claims.
  • The joint venture agreement's fee provision required a judicial determination that the paying party actually breached, not merely that the other party did not.
  • The court held this was a default/indemnity fee clause, not a prevailing-party provision.
  • The jury instruction to disregard any fault of Archer foreclosed McDonnel's argument that the verdict implied Archer breached.
  • McDonnel failed to identify any specific contractual provision that Archer allegedly violated.

A construction company that beat back breach-of-contract claims at trial was not entitled to attorneys' fees under the parties' joint-venture agreement because no court or jury ever found that the other side actually breached, the Fifth Circuit ruled Monday.

A per curiam panel of Judges Jerry Smith, Catharina Haynes, and Kurt Engelhardt affirmed the district court's denial of fees to McDonnel Group, L.L.C. in the long-running dispute with Archer Western Contractors, L.L.C. over a law-enforcement construction project in Orleans Parish, Louisiana.

The unpublished decision turned on the text of the agreement's fee-shifting provision, which obligated a "Defaulting Party" to pay the legal expenses of the "Non-Defaulting Party" arising from "the Defaulting Party's breach." McDonnel argued that winning on Archer Western's claims made Archer the defaulting party. The Fifth Circuit disagreed.

"As we see it, the agreement requires that the issue of breach actually be litigated," the panel wrote. The jury's finding that McDonnel did not breach, the court held, "was not enough" to establish that Archer had.

The underlying dispute arose from a joint venture the two companies formed to perform a construction contract for the Orleans Parish Law Enforcement Division. Under the agreement, profits and losses would be shared in proportion to each party's interest in the venture.

During construction, the project hit cash-flow problems caused in part by the Division's failure to pay. Archer Western, as the venture's managing party, demanded capital contributions from both itself and McDonnel. When McDonnel refused, Archer paid McDonnel's share and treated the payments as demand loans under the agreement.

The dispute escalated after McDonnel, without informing Archer, brokered a $2.7 million settlement with the Division. None of that money went to Archer or the joint venture.

Archer Western sued. The district court granted summary judgment for Archer on a breach-of-contract claim arising from the secret settlement. A Fifth Circuit panel affirmed that ruling in March. But claims about whether McDonnel breached by refusing the capital contributions went to trial, and a jury found that McDonnel had not breached the agreement.

McDonnel then moved for attorneys' fees under Article 15(e) of the joint venture agreement. That provision states that any defaulting party "shall indemnify and hold harmless the Non-Defaulting Party" for losses arising from breach and "further agrees to pay all legal expenses required of or by the Non-Defaulting Party to protect their interests or defend any action arising out of the Defaulting Party's breach, including court costs and disbursements and fees on a solicitor and his own client basis."

The district court denied the motion, concluding that the agreement's language conditioned a fee award on an adjudicated breach by the party who would have to pay. McDonnel appealed.

On appeal, McDonnel argued first that the provision did not require a judicial determination of breach, and alternatively that the jury's finding in McDonnel's favor necessarily implied that Archer had breached.

The Fifth Circuit rejected both arguments. Applying Louisiana law, which governed under the agreement's choice-of-law provision, the panel reasoned that common sense required some determination of whether a breach occurred. McDonnel's reading, the court said, "would effectively allow it to unilaterally determine that Archer breached. That cannot be correct."

The court also noted what the provision did not say. "This is not a prevailing party provision," the panel wrote. "Yet, that is just what McDonnel's reading would convert it into. That is not what the parties bargained for."

Quoting the Louisiana Supreme Court, the panel observed that "it is not the duty of the courts to bend the meaning of the words of a contract into harmony with a supposed reasonable intention of the parties."

McDonnel's alternative theory fared no better. The court found two independent reasons why the jury's verdict did not constitute an implied adjudication that Archer breached.

First, the jury had been instructed to "disregard any testimony or exhibit reference related to any fault of Archer . . . because there is no such claim." The panel said it "would be remiss if we were to conclude that the jury impliedly found the fact of Archer's breach" given those instructions.

Second, McDonnel never identified any specific provision of the agreement that Archer supposedly violated by demanding the capital contributions. "At the end of the day," the court wrote, "there was no finding that Archer breached the agreement."

The case is Archer Western Contractors, L.L.C. v. McDonnel Group, L.L.C., No. 25-30739, in the United States Court of Appeals for the Fifth Circuit.