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CMS Mechanical Services LLC v. Petsmart Incorporated

United States District Court, D. Arizona

May 31, 2018

CMS Mechanical Services, LLC, Plaintiff,
PetSmart, Inc., Defendant.


          Neil V.Wake Senior United States District Judge

         Plaintiff CMS Mechanical Services, LLC (“CMS”) brought this breach of contract action against PetSmart, Inc. (“PetSmart”). On March 31, 2018, this Court granted summary judgment in favor of Defendant PetSmart. (Doc. 203.) Now before the Court are Defendant's Motion for Award of Attorneys' Fees and Costs (Doc. 208), the Response, and the Reply. The Court also requested a supplemental affidavit for fees incurred in drafting the Reply. (Doc. 214.) PetSmart submitted the affidavit (Doc. 216), and the deadline for CMS's optional reply has passed.

         I. BACKGROUND

         The Court described the minutiae of this case in its Summary Judgment Order (Doc. 203). For ease of reference, it restates key details here.

         CMS and PetSmart entered into an agreement under which CMS was to provide heating, ventilation, and air-conditioning (“HVAC”) services to 1, 157 PetSmart store locations. The agreement consisted of two separately executed documents. The first, a Master Agreement, provided general terms that would govern any working relationship between the parties. The second, a Statement of Work, provided the details of the HVAC servicing arrangement that was to last 60 months-subject to termination “for convenience” by either party with 30 days' notice. Although executed separately, the two documents formed a single contract. That contract clearly and unambiguously listed in an exhibit the service prices for each store down to the penny. The prices in the list totaled roughly $505, 000 per month.

         CMS contended, contradicting the contract's clear language, that the prices were intended to be estimates. It began to bill PetSmart for all stores using the formula in the Statement of Work that governed potential additional stores. The invoices resulting from this breach of the contract well exceeded $505, 000.

         Seeking to maintain their relationship, the parties agreed to a capped-billing arrangement. For the remaining months of 2014, the bills were capped at $525, 000. CMS sought to raise the billing cap for 2015, and PetSmart agreed to pay $550, 000 per month. In 2016, CMS began to bill for over $600, 000, claiming the bills represented a return to the proper pricing formula under the contract.

         PetSmart exercised its right to terminate. CMS then, for the first time, sent PetSmart an invoice for amounts it had “deferred” under the capped-billing arrangement. The invoice totaled $2.6 million, a figure CMS calculated by applying the additional-stores formula to all stores and subtracting what had already been paid. CMS never identified the deferrals in previous invoices. PetSmart had never previously agreed to pay for any deferrals and refused to pay when presented with the invoice.

         CMS filed this lawsuit to collect the $2.6 million. Over a year into the litigation, it claimed to have miscalculated the amount it was owed under the formula. It asserted the correct amount was actually $3.5 million.

         Nor was this the only time CMS changed its damages calculation. Shortly before discovery closed, CMS asserted in its third supplemental disclosure an entirely new theory of damages: lost revenues for the remaining duration of the Statement of Work. CMS calculated its damages under this theory “as not less than $20, 654, 537.60.” (Doc. 93-1, Ex. A at 5.) A flurry of expensive additional discovery ensued. PetSmart had to retain an expert to analyze CMS's internal revenue/profits calculations. CMS continued to move the goal post with respect to how it was calculating the damages, and its sole supporting witness on damages was its CEO. Ultimately, the Court excluded the lost revenue damages theory. (Doc. 143.) As the Court noted, CMS was attempting to effectuate, at the end of discovery, “a profound transformation in the nature of the lawsuit.” (Doc. 151 at 54.) The disclosure of the damages theory was untimely and “a serious violation of Rule 26.” (Id. at 78.) In fact, the Court noted that it was unaware of “anything post-discovery multiplying damages” like CMS's new theory had in this case. (Id. at 79.)

         PetSmart moved for summary judgment, and the Court found in its favor on all claims. CMS breached the contract in trying to apply the additional-stores formula to all the stores. It offered self-serving extrinsic evidence of the parties' negotiations- evidence barred by the parol evidence rule because it contradicted the only plausible reading of the contract's clear price terms. The parties agreed to billing caps that were fully performed. Despite all evidence demonstrating that PetSmart sought price stability, CMS contended that PetSmart was somehow on the hook for amounts not properly invoiced and far above the contract price. PetSmart did not breach by walking away from this preposterous supposed arrangement and did not owe CMS for its deferred billings.

         PetSmart now moves for attorneys' fees and costs under the contract and A.R.S. § 12-341.01.

         II. ANALYSIS

         A. Awarding Attorneys' Fees ...

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