Threadgill, et al v. Orleans Parish Sch, et al

Filing 248

ORDER AND REASONS granting 200 Motion to Dismiss for Failure to State a Claim. Party New Orleans City (02-1460) and New Orleans City dismissed. Signed by Chief Judge Sarah S. Vance on 10/7/2012. (Reference: All Cases)(mmm)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF LOUISIANA
BUTCH THREADGILL, ET AL.

CIVIL ACTION

VERSUS

NO: 02-1122

CITY OF NEW ORLEANS, ET AL.

SECTION: R(1)

ORDER AND REASONS
Before the Court is the City of New Orleans' Rule 12 (c)
motion to dismiss the First Amended Complaint of plaintiffs Butch
Threadgill and General Contracting and Consulting Services.

In

the alternative, the City moves for summary judgment pursuant to
Rule 56.

For the following reasons, the Court grants the City's

motion for summary judgment.

I. BACKGROUND
On January 23, 2000, a severe hail storm caused significant
roof damage to Orleans Parish schools.

The City of New Orleans

contracted with Mitchell Crusto, d/b/a Angelic Asset Management,
Inc., to provide damage assessments for hail damage to City
buildings.

Under the agreement, Crusto was to survey City

property for damage and process loss/damage claims with CNA
Insurance Company, the City's insurer.1

Crusto entered into a

Marketing Agreement with Butch Threadgill and Tom Weems through
their business, General Contracting and Consulting Services, LLC
1

R. Doc. 83-1 at 2.

("GCCS"), to prepare bids and estimates for loss and damage to
the City's buildings.2

Plaintiffs were to receive no

compensation for their services under the Agreement.

Rather, the

quid pro quo was Crusto's commitment to use the plaintiffs
exclusively to perform the repair work, limited by the
acknowledgment that Crusto did not control the City's employment
of contractors.3

Plaintiffs allege that Crusto "was to use his

influence to assign the repair work" to them4 and that they
expected to earn a 30-35% profit on the repairs.5

For their

part, plaintiffs were obligated under the Agreement to pay Crusto
a "sales commission" of 10% of the amount plaintiffs received
from CNA to perform the repair work.6
Plaintiffs performed dozens of damage assessments of City
properties, as well as of properties owned by the Orleans Parish
School Board ("OPSB") under a similar Marketing Agreement,
incurring total costs of $154,609.25.7

After learning that he

was required to comply with Louisiana's Public Bid Law in
assigning the repair work, Crusto terminated both Marketing

2

Id. at 3-4.

3

Id. at 4.

4

R. Doc. 214-2 at 2.

5

R. Doc. 166 at 3.

6

R. Doc. 83-1 at 4.

7

Id. at 4-5.
2

Agreements by letter on December 13, 2001.8

Plaintiffs allege

that they demanded return of the damage and repair estimates, but
Crusto refused.9

Plaintiffs received no repair work for any of

the City properties.10
In 2002, plaintiffs sued Crusto and the OPSB,11 and later
sued Crusto, the City, and the City’s insurers.12
were consolidated.13

The two suits

Plaintiffs alleged that they submitted

repair estimates and bid proposals to Crusto that were
copyrighted to Tom Weems, all rights reserved.14 Plaintiffs also
stated that they negotiated damage estimates with CNA Insurance
Company.15

They claimed that Crusto did not pay them for the

work done and that he used the estimates and photographs in
promotional material sent to other cities as examples of his own
work.16

Finally, plaintiffs alleged that Crusto distributed the

8

Id. at 6.

9

R. Doc. 166 at 4.

10

R. Doc. 83-1 at 7.

11

R. Doc. 1.

12

No. 02-1460, R. Doc. 1.

13

R. Doc. 31.

14

No. 02-1460, R. Doc. 1 at 4.

15

Id.

16

Id.
3

bids to the City as his own for approval and payment.17

As to

the City, the plaintiffs' only allegation was that the City
should have known that the work being used by Crusto was
copyrighted material belonging to plaintiffs.18
Plaintiffs asserted claims under federal copyright law, the
Louisiana Unfair Trade Practices Act ("LUTPA"), and state tort
and contract law.

They brought their tort claim under Louisiana

Civil Code Article 2315, Louisiana's general negligence
provision, alleging conversion and misappropriation of their
privileged and copyrighted material.19 Plaintiffs sought treble
damages and attorneys fees under LUTPA, actual damages plus loss
of profits or statutory damages under the federal copyright laws,
and damages for loss of business, loss of profits, loss of
income, exemplary damages, attorneys' fees, and interest under
the state tort and property laws.20
In 2003, plaintiffs and Crusto entered into an arbitration,
and the Court stayed the litigation.

The arbitrator found that

by committing to use the plaintiffs exclusively to perform the
repair work, Crusto had implied in the Marketing Agreement that

17

Id.

18

Id. at 6-7.

19

Id. at 6.

20

Id. at 7-8.
4

he had the ability to influence the City's assignment of work.21
He determined that the plaintiffs had entered into the Marketing
Agreement with the mistaken belief that Crusto had this ability,
when he in fact had no such influence and was not even assigned
by the City to assist in obtaining roof repairs until after he
had terminated the Marketing Agreement.22

The arbitrator

determined that the plaintiffs' mistake was unilateral, because
Crusto knew or should have known that the repair work was outside
the scope his agreement with the City.

The arbitrator concluded

that the plaintiffs' consent to the Marketing Agreement was
vitiated by unilateral error regarding the principal cause of the
contract.23

The arbitrator also found that the plaintiffs'

Marketing Agreement pertaining to the OPSB properties was
vitiated by bilateral error.

The arbitrator awarded the

plaintiffs their out-of-pocket expenses in preparing the City and
OPSB bids.

Notably, the arbitrator commented that additional

damages may be awarded in certain cases of rescission due to
error, but the plaintiffs had presented no evidence of damages,
"an essential claim element."24

In dismissing plaintiffs'

copyright claim, the arbitrator again commented on plaintiffs'

21

R. Doc. 83-1 at 7.

22

Id. at 8.

23

Id.

24

Id. at 9.
5

failure to present evidence of actual damages or profits of the
infringer attributable to the alleged infringement.25
The Court entered a judgment confirming the arbitration
award on June 17, 2009.26

Plaintiffs then sought to lift the

stay to allow the case to proceed among the remaining parties,
which the Court granted.27

As the parties prepared for trial,

they discovered that the City had never been notified that the
stay had been lifted and a trial set.

Once served, the City

moved to dismiss plaintiffs’ claims in the original complaint.
The Court granted that motion but gave plaintiffs leave to amend
the complaint.28
On April 3, 2013, Threadgill and GCCS filed a Consolidated
Amended Complaint that abandoned their copyright, LUTPA,
conversion, and misappropriation claims against the City and OPSB
and asserted only a claim of unjust enrichment.29

The plaintiffs

argue that the City and OPSB knew that the plaintiffs prepared
the damage and repair estimates and were negotiating with the

25

Id.

26

R. Doc. No. 84.

27

R. Doc. No. 106.

28

R. Doc. No. 156.

29

R. Doc. No. 166. Weems failed to file an amended
complaint and is no longer a party to this litigation.
6

insurers.30

They allege that the OPSB and the City obtained

substantially higher insurance payments than were originally
quoted as a direct result of the plaintiffs' damage estimates,
yet they still were never paid.31

On August 19, 2013, the City

filed this motion seeking dismissal of, or in the alternative,
summary judgment against the plaintiffs' unjust enrichment
claim.32

II. STANDARD
Summary judgment is warranted when “the movant shows that
there is no genuine dispute as to any material fact and the
movant is entitled to judgment as a matter of law.” Fed. R. Civ.
P. 56(a); Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986);
Little v. Liquid Air Corp., 37 F.3d 1069, 1075 (5th Cir. 1994).
When assessing whether a dispute as to any material fact exists,
the Court considers “all of the evidence in the record but
refrains from making credibility determinations or weighing the
evidence.” Delta & Pine Land Co. v. Nationwide Agribusiness Ins.
Co., 530 F.3d 395, 398 (5th Cir. 2008).

The Court must draw all

reasonable inferences in favor of the nonmoving party, but
“unsupported allegations or affidavits setting forth ultimate or

30

Id. at 4-5.

31

Id. at 5.

32

R. Doc. 200.
7

conclusory facts and conclusions of law are insufficient to
either support or defeat a motion for summary judgment.” Galindo
v. Precision Am. Corp., 754 F.2d 1212, 1216 (5th Cir. 1985)
(internal quotation marks omitted).
If the dispositive issue is one on which the moving party
will bear the burden of proof at trial, the moving party “must
come forward with evidence that would entitle it to a directed
verdict if the evidence went uncontroverted at trial.” Int’l
Shortstop, Inc. v. Rally’s, Inc., 939 F.2d 1257, 1263-64 (5th
Cir. 1991)(citation omitted). The nonmoving party can then defeat
the motion by either countering with sufficient evidence of its
own, or “showing that the moving party’s evidence is so sheer
that it may not persuade the reasonable fact-finder to return a
verdict in favor of the moving party.” Id. at 1265.
If the dispositive issue is one on which the nonmoving party
will bear the burden of proof at trial, the moving party may
satisfy its burden by merely pointing out that the evidence in
the record is insufficient with respect to an essential element
of the nonmoving party’s claim. See Celotex, 477 U.S. at 325. The
burden then shifts to the nonmoving party, who must, by
submitting or referring to evidence, set out specific facts
showing that a genuine issue exists. See id. at 324.
The nonmovant may not rest upon the pleadings but must
identify specific facts that establish a genuine issue for trial.

8

Id. at 325. See also Little, 37 F.3d at 1075 (“Rule 56 ‘mandates
the entry of summary judgment, after adequate time for discovery
and upon motion, against a party who fails to make a showing
sufficient to establish the existence of an element essential to
that party’s case, and on which that party will bear the burden
of proof at trial.’”) (citing Celotex, 477 U.S. at 332).

III. DISCUSSION
Louisiana Civil Code article 2298 is Louisiana's unjust
enrichment statute.

It provides:

A person who has been enriched without cause at the expense
of another person is bound to compensate that person. The
term "without cause" is used in this context to exclude
cases in which the enrichment results from a valid
juridical act or the law. The remedy declared here is
subsidiary and shall not be available if the law provides
another remedy for the impoverishment or declares a
contrary rule.
La. Civ. Code art. 2298.

Louisiana courts interpret this

provision to require a five-part showing in order to recover. To
succeed on an unjust enrichment claim:
(1) there must be an enrichment, (2) there must be an
impoverishment, (3) there must be a connection between the
enrichment and the resulting impoverishment, (4) there must
be an absence of "justification" or "cause" for the
enrichment and impoverishment, and finally (5) the action
will only be allowed when there is no other remedy at law,
i.e., the action is subsidiary or corrective in nature.
Richard v. Wal-Mart Stores, Inc., 559 F.3d 341, 346 (5th Cir.
2009)(quoting Minyard v. Curtis Prods., Inc., 205 So.2d 422, 432
9

(La. 1968)).
Here, plaintiffs' claim for unjust enrichment fails because
(1) there was no impoverishment, (2) there is justification for
any enrichment the City may have experienced and (3) the
plaintiffs had other remedies at law available to them.
A person is impoverished when his patrimonial assets
diminish or his liabilities increase. La. Civ. Code Ann. art.
2298 revision comments.

Plaintiffs acknowledge that the

arbitrator awarded them compensation for the expenses they
incurred in preparing the estimates.33

However, they now demand

a percentage of the increase in the City's insurance proceeds
over CNA's original estimate.

Plaintiffs contend that they "did

not assemble a team of professionals from Texas and other parts
of the country to spend nine-months [sic] mobilized in New
Orleans intensively inspecting and estimating the [City's] haildamaged properties only to break even on their costs . . . ."34
If plaintiffs experienced an impoverishment beyond their
out-of-pocket costs, it would be the result of lost profits from
their failure to obtain the repair work, not from the City's
refusal to pay them for the estimates.

Neither Crusto nor the

City ever promised the plaintiffs payment for the estimates, as a
percentage of the insurance proceeds or otherwise.

33

R. Doc. 214 at 20.

34

Id. at 20-21.
10

As for the

repair work, Crusto's contractual commitment to assign the work
exclusively to plaintiffs "was limited by the acknowledgment that
Crusto did not control the City's employment of contractors."35
Regardless of whether Crusto implied that he could influence the
City to assign the work to the plaintiffs, the plaintiffs never
had any guarantee that the City would select them for the repair
work, and the City never had any obligation to do so.

Any

measure of impoverishment would therefore be purely
speculative.36
Plaintiffs' claim also fails because there is justification

35

R. Doc. 83-1 at 4. The contract stated that it was
"expressly understood by the parties to this agreement that
Angelic does not control which contractor the City will employ to
perform the replacement work." R. Doc. 214-19 at 47.
36

This Court has expressed its doubt as to the legality of
the Marketing Agreement's 10% "sales commission" provision in a
related case brought by the OPSB against the plaintiffs and
Crusto. No. 03-1064, R. Doc. 118 at 12. An Investigative
Auditor's Report released by the Office of the Legislative
Auditor for the State of Louisiana concluded that Crusto violated
state public bid law and OPSB policy by entering into a
confidential "kickback" scheme with another contractor, Horizon
Group. Id. at 3. The agreement between Crusto and the Horizon
Group contained the same language as the Marketing Agreement
between Crusto and the plaintiffs in this case, except as to the
percentage of profits Crusto would receive in exchange for
awarding the repair work. Id. at 12. Although the legality of
the Marketing Agreement is not at issue in this litigation, the
Court notes that a party to a contract that has been nullified
for illegality is precluded from recovering lost profits, even in
the absence of bad faith. See Trade-Winds Envtl. Restoration,
Inc. v. Stewart, CIV.A. 06-3299, 2008 WL 3551705 (E.D. La. Aug.
11, 2008) (quoting Boxwell v. Dep't of Highways, 14 So.2d 627,
632 (La. 1943)).

11

for any enrichment the City may have experienced by using the
plaintiffs' estimates.

An enrichment is justified "if it is the

result of, or finds its explanation in, the term of a valid
juridical act between the impoverishee and the enrichee or
between a third party and the enrichee."

City of New Orleans v.

BellSouth Telecomm., Inc., 690 F.3d 312, 326 (5th Cir. 2012)
(emphasis added) (quoting SMP Sales Mgmt., Inc., v. Fleet Credit
Corp., 960 F.2d 557, 560 (5th Cir. 1992) (quoting Carter v.
Flanagan, 455 So.2d 689, 692 (La. Ct. App. 1984))).

Assuming

without deciding that the plaintiffs' adjusting work influenced
CNA's decision to increase its payment to the City, the
enrichment was the direct result of a valid contract between
Crusto and the City, under which Crusto would perform damage
assessments and process claims with the City's insurer.

Crusto

may have falsely implied that he could influence the City to
assign the repair work to the plaintiffs if they would provide
him with the estimates he needed, but that arrangement does not
affect the validity of the underlying agreement between Crusto
and the City.

Plaintiffs therefore cannot show that the

enrichment was without justification, an essential element of
their claim.
Finally, plaintiffs' claim fails because there were other
legal remedies available to them.

The remedy of unjust

enrichment "is subsidiary and shall not be available if the law

12

provides another remedy for the impoverishment or declares a
contrary rule."

La. Civ. Code art. 2298.

For this reason,

"unjust enrichment is a remedy of 'last resort' and is available
only to fill a gap in the law.

See Port of S. Louisiana v.

Tri-Parish Indus., Inc., 927 F. Supp. 2d 332, 341 (E.D. La. 2013)
(citing Hall v. James, 986 So.2d 817, 820 (La. Ct. App. 2008).
Here, plaintiffs initially sought damages–including lost
profits–against Crusto on a number of theories, including
copyright infringement, breach of contract, conversion,
misappropriation, and violations of the Louisiana Unfair Trade
Practices Act.

For whatever reason, the plaintiffs failed to

produce evidence in the arbitration of the damages they claim to
have suffered.

Plaintiffs now claim that they have no available

remedy at law because (A) the arbitrator found that plaintiffs'
consent to the Marketing Agreement was vitiated by unilateral
error and thus no contract ever existed between Crusto and the
plaintiffs on which they could recover, and (B) whether or not
the plaintiffs had a remedy against Crusto, they have no other
remedy against the City.
The first argument fails because even if the plaintiffs had
no remedy in contract for lost profits, they potentially could
have recovered in tort, copyright, or under LUTPA had they
provided the arbitrator with evidence of their damages.

To

recover for the tort of conversion, for example, plaintiffs

13

needed to show only that Crusto committed a wrongful act of
dominion over their property, in denial of or inconsistent with
their rights in the property.

See Aymond v. State, Dept. of

Revenue & Taxation, 672 So.2d 273, 275 (La. Ct. App. 1996).
Similarly, LUPTA prohibits "any unfair or deceptive acts or
practices in the conduct of any trade or commerce."

Cheramie

Servs. v. Shell Deepwater Prod., 35 So.3d 1053, 1059 (La. 2010)
(quoting La. Rev. Stat. § 51:1409(A)).

The statute permits "any

person who suffers any ascertainable loss" to recover in the case
of "egregious actions involving elements of fraud,
misrepresentation, deception, or other unethical conduct . . . ."
Id. at 1060.

The allegations in plaintiffs' original complaint

plausibly stated a claim for relief against Crusto under these
theories.

Whether plaintiffs ultimately would have recovered

after a full examination of the facts is immaterial, for "it is
not the success or failure of other causes of action, but rather
the existence of other causes of action, that determine [sic]
whether unjust enrichment can be applied."

Garber v. Badon &

Ranier, 981 So.2d 92, 100 (La. Ct. App. 2008) (emphasis in
original).
That plaintiffs either failed to present evidence of their
other claims, or the claims were rejected by the arbitrator,does
not matter; all that matters is that they existed.

See Walters

v. MedSouth Record Mgmt., LLC., 38 So.3d 245, 246 (La. 2010) (per
14

curiam) ("Having pled a delictual action, we find plaintiff is
precluded from seeking to recover under unjust enrichment.")
(citation omitted); Gallant Invs., Ltd. v. Illinois Cent. R.R.
Co., 7 So.3d 12, 18 (La. Ct. App. 2009) ("[W]e conclude that any
equitable action for unjust enrichment is precluded by the
availability of the unambiguously-pleaded delictual action . . .
.").37
Plaintiffs second argument also fails.

The inquiry is

whether the plaintiff had another potential remedy available;
against whom that remedy existed is immaterial.

In II Fire

Records, L.L.C. v. Clouden, 951 So. 2d 1272 (La. Ct. App. 2007),
the plaintiff, a recording company, sued a competing company for
unjust enrichment after Derren Clouden, an artist with whom the
plaintiff held an exclusive recording contract, recorded a number
of albums and movies with the defendant.

Louisiana's Fourth

Circuit held:
In the instant case, it is clear that the fifth requirement
for proving unjust enrichment cannot be met, because II Fire
had a remedy against Mr. Clouden. In fact, II Fire has a
final judgment against Mr. Clouden. We need not determine
whether Forefront and Inner City were unjustly enriched at
the expense of II Fire, because II Fire's remedy was against
Mr. Clouden. It is clear that Mr. Clouden was the party who
was contractually obligated to II Fire. Had he complied with
the II Fire Contract, Forefront and Inner City would not
even be involved in this lawsuit. If Mr. Clouden breached

37

Moreover, the arbitrator indicated the plaintiffs might
have been able to recover damages other than their out-of-pocket
costs, but that their complete failure to provide evidence of
damages precluded recovery.
15

his contract with II Fire, then Mr. Clouden, not Forefront
and Inner City, is the responsible party. He caused the
situation that is the subject of the instant case to exist,
and II Fire's remedy was against him.
Id. at 1280.

Here, plaintiffs likewise had a potential remedy,

and ultimately a final judgment, against Crusto.

The Court need

not determine whether the City was enriched at the expense of the
plaintiffs, because their remedy was against Crusto.

Had Crusto

not misled the plaintiffs into believing he would procure the
repair work for them, and had he not continued to use the
plaintiffs' estimates even after cancelling the Marketing
Agreement, the plaintiffs and the City would not be involved in
this litigation.

The City was never obligated to the plaintiffs

in any way; nor is it now.

Like the plaintiff in II Fire,

Threadgill and GCCS did not recover the profits they had hoped to
obtain in their suit against the true party at fault.

See Id. at

1274 (noting that II Fire had recovered only $75,000 from Clouden
when its estimated profit loss was between $200,000 and
$500,000).

The Court emphasizes once again, however, that the

ultimate success or failure of the alternative legal remedy is
irrelevant.

Because the plaintiffs had a remedy against the true

party at fault, their unjust enrichment claim against the City
fails.

16

IV. Conclusion
For the foregoing reasons, the Court GRANTS the City's
motion for summary judgment.

7th
New Orleans, Louisiana, this _______ day of October, 2013.

______________________________
SARAH S. VANCE
UNITED STATES DISTRICT JUDGE

17