Conway Commercial Warehousing, LLC v. Fedex Freight East, Inc.
381 S.W.3d 94
| Ark. Ct. App. | 2011Background
- CCW breached the lease by failing to complete contract-required construction; FedEx incurred $189,861.60 plus $15,274.38 in fees seeking recovery.
- FedEx sued CCW for breach of a ten-year lease dated Oct 5, 2001, after FedEx paid Nabholz to finish punch-list work.
- Lease required CCW to construct a 12,000-square-foot facility per FedEx specifications, with CCW owner Joe Thielke also owning the builder.
- FedEx conducted a preoccupancy/punch-list inspection under section 7.3 (not section 7.1’s signed form) and moved in; dispute centered on whether this fulfilled contractual obligations.
- Nabholz completed the remaining punch-list items; FedEx paid Nabholz $158,218 and sought reimbursement from CCW, which led to FedEx’s amended complaint seeking the full damages and fees.
- The circuit court ruled CCW breached, rejected FedEx’s prejudgment interest claim, and awarded FedEx $189,861.60 plus $15,274.38 in attorney fees (half of requested); CCW and FedEx appealed crosswise.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether FedEx’s preoccupancy inspection breached lease duties. | FedEx’s section 7.3 inspection compliance fulfilled obligations. | FedEx’s failure to sign 7.1 form implicated first breach/waiver issues. | FedEx’s 7.3 inspection satisfied duties; no waiver; CCW liable. |
| Whether FedEx’s first breach by FedEx under 7.1 releases CCW from obligations. | First breach by FedEx does not release CCW given 7.3 compliance. | Noncompliance with 7.1 constitutes a material breach. | FedEx’s first breach did not bar CCW’s liability; breach deemed material but not excusing CCW. |
| Proper damages measure for CCW’s breach (cost of repairs vs. loss of use). | Damages under lease remedy cost FedEx’s repairs, including supervision fee. | Damages should be diminished value or loss of use due to extensive repairs. | Damages were recoverable as the contract provides a remedy; the court’s measure upheld (subject to later fee remand). |
| Whether prejudgment interest is available on damages. | Damages were ascertainable; prejudgment interest should apply. | Damages contested; trial court discretion prevents prejudgment interest. | Prejudgment interest denied because damages were not mathematically ascertainable without court’s discretion. |
| Whether attorney-fee award to FedEx was proper and adequately analyzed. | FedEx entitled to reasonable fees; amount appropriate. | Circuit court’s fee reduction lacked explanation; Chrisco factors needed. | Affirmed on direct appeal; remanded for documented Chrisco-factor-based analysis of fees. |
Key Cases Cited
- TXO Prod. Corp. v. Page Farms, Inc., 287 Ark. 304, 698 S.W.2d 791 (1985) (material breach and damages determination standards)
- Young v. Berman, 96 Ark. 78, 131 S.W. 62 (1910) (measure of damages for repair vs diminution in value)
- Pest Mgmt., Inc. v. Langer, 369 Ark. 52, 250 S.W.3d 550 (2007) (contract damages and remedies allowed by agreement; prevailing party fees)
- Swink v. Lasiter Constr., Inc., 94 Ark. App. 262, 229 S.W.3d 553 (2006) (when fee award reduced without explanation, remand for Chrisco analysis)
- Chrisco v. Sun Indus., 304 Ark. 227, 800 S.W.2d 717 (1990) (factors guiding reasonable attorney fees (Chrisco factors))
- City of Rockport v. City of Malvern, 2010 Ark. 449, 374 S.W.3d 660 (2010) (standard for reviewing factual findings in bench trial)