Dorvin et al v. 3901 Ridgelake Drive, LLC et al
Filing
246
ORDER AND REASONS denying 202 Motion for Partial Summary Judgment on Issue of Piercing 3901 Ridgelake Drive, LLC's Corporate Veil. Signed by Judge Ivan L.R. Lemelle. (ijg, )
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF LOUISIANA
DOROTHY WATKINS DORVIN, ET AL
CIVIL ACTION
VERSUS
11-CV-696
3901 RIDGELAKE DRIVE, LLC, ET AL
SECTION B(2)
ORDER AND REASONS
IT IS ORDERED that Plaintiffs’ Opposed Motion for Partial
Summary Judgment on Issue of Piercing 3901 Ridgelake Drive, LLC’s
Corporate Veil is DENIED. (Rec. Doc. Nos. 202-210).
PROCEDURAL HISTORY
The Court has already detailed the procedural history of the
present case (Rec. Doc. No. 109), and presents only an abridged
version of the relevant history here.
The instant suit was filed in the 24th Judicial District for
the Parish of Jefferson on February 15, 2008 against 3901 Ridgelake
Drive, LLC, Gayle O. Jenkins, Arlen Jenkins, Gayle O. Jenkins
Properties, and Southwinds Express Construction, LLC, alleging
negligence, breach of contract, and breach of the duty of good
faith and fair dealing arising out of Plaintiffs’ purchases of
condominiums in the Pontchartrain Caye Complex.1 (Rec. Doc. No.
1
This case was removed to the United States District Court on March 31,
2011 under 28 U.S.C. § 1334(e)(1), as Jenkins filed for bankruptcy. (Rec. Doc.
No. 1). The matter was referred to the Bankruptcy Court after Jenkins claimed
that a judgment in the instant matter would affect her bankruptcy estate. (Rec.
Doc. No. 8-1, p.1). On July 7, 2011, the Eastern District “withdrew the reference
49).
Defendants
added
CSI,2
Fidelity
and
Deposit
Company
of
Maryland, ABC, Clayton Roofing and Construction, Inc., Soprema,
Simms
Hardin
Company,
LLC,
Sharp,
Gallo
Mechanical,
Inc.,
Commercial Paint, Crasto, Year Round, and Thrasher Waterproofing
Corp as third-party defendants.3 (Id. at 1-2).
On March 28, 2012, the Court granted Plaintiffs’ Motion for
Partial Summary Judgment on the Issue of the New Home Warranty Act
and denied CSI’s Motion for Partial Summary Judgment against 3901.
(Rec. Doc. No. 109). In that Order, the Court ruled that the
arbitration award was not granted preclusive effect as to 3901's
claims against CSI in the instant suit. (Rec. Doc. No. 109, pp.1316).
Plaintiffs now seek partial summary judgment, arguing that
3901's
corporate
veil
has
been
pierced
and
that
Jenkins
is
personally liable unto Plaintiffs under Louisiana’s res judicata
doctrine. (Rec. Doc. No. 202). Jenkins has opposed Plaintiffs’
of this matter to the Bankruptcy Court” because all parties desired a jury trial.
(Rec. Doc. No. 5).
2
Arbitration proceedings occurred between 3901, CSI, and defendant Gayle
O. Jenkins between November 8, 2010, and December 17, 2010. The arbitrator found
that 3901's corporate veil had been pierced and imposed personal liability on
Jenkins as a managing member of 3901. (Rec. Doc. No. 202-4, Ex. B to Pl.’s Mot.
Summ. J.).
3
Several other crossclaims, counterclaims, and third-party claims have
been filed by numerous parties in this case, which are not detailed here.
2
Motion, claiming that the res judicata doctrine does not apply.
(Rec. Doc. No. 210).
LAW AND ANALYSIS
A.
Summary Judgment Standard of Review
Federal Rule of Civil Procedure 56 permits a court to grant
summary judgment “if 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). In making this
determination, a district court must consider “the pleadings,
depositions, answers to interrogatories, and admissions on file,
together with the affidavits, if any” are presented. Fed. R. Civ.
P. 56(c). A party requesting summary judgment “must establish that
there are no genuine issues of material fact.” Provident Life &
Acc. Ins. Co. v. Goel, 274 F.3d 984, 991 (5th Cir. 2001). In the
Fifth Circuit, an issue is material if its resolution has the
potential to affect the outcome of the action. See, e.g.,
Roberts
v. Cardinal Services, Inc., 266 F.3d 368, 373 (5th Cir. 2001).
Summary judgment cannot be granted if the evidence available would
permit a reasonable jury to return a verdict for the non-moving
party. See, e.g., Hunt v. Rapides Healthcare System, LLC, 277 F.3d
757, 762 (5th Cir. 2001).
If the moving party can demonstrate that there is no genuine
issue of material fact, the “burden shifts to the nonmoving party
3
to show that summary judgment is not appropriate.” Fields v. City
of S. Houston, 922 F.2d 1183, 1187 (5th Cir. 1991). For a nonmoving party to prevail on a motion of summary judgment, it must
“go beyond the pleadings and by her own affidavits, or by the
‘depositions, answers to interrogatories, and admissions on file,’
[and] designate ‘specific facts showing that there is a genuine
issue for trial.’” Celotex Corp. v. Catrett, 477 U.S. 317, 324
(1986), quoting Fed. R. Civ. P. 56. For the purposes of a motion
for summary judgment, “[t]he evidence of the non-movant is to be
believed, and justifiable inferences are to be drawn in his favor.”
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255 (1986).
B.
Collateral Estoppel
As noted by Jenkins, this Court has already determined that
the arbitration decision does not have preclusive effect in the
instant case. (Rec. Doc. No. 109).
For
the
outcome
of
the
arbitration
proceeding
to
have
preclusive effect in the instant case, this Court must determine
whether the procedure had appropriate due process, that the general
requirements of res judicata are met, and that there is no federal
interest raised that warrants special protection.4 Universal Am.
4
In the instant case, there is no allegation of improper due process
during the arbitration proceedings; therefore, the first of the Universal
American Barge factors is fulfilled. Universal American Barge Corp. v. J-Chem,
Inc., 946 F.2d 1131, 1142 (5th Cir. 1991). Similarly, there are no “federal
interests warranting special protection” alleged by any of the parties. Id.
4
Barge Corp., 946 F.2d at 1142. The parties must be the same (or in
privity with one another), the transactions in the first and second
action must be the same, and there must be a final judgment on the
merits in the first action. Russell v. Sunamerica Sec., Inc., 962
F.2d 1169, 1173 (5th Cir. 1992). In order for res judicata to take
effect, Louisiana law requires that:
(1) the judgment [be] valid; (2) the judgment [be] final;
(3) the parties are the same; (4) the cause or causes of
action asserted in the second suit existed at the time of
final judgment in the first litigation; and (5) the cause
or causes of action asserted in the second suit arose out
of the transaction or occurrence that was the subject
matter of the first litigation.
Burguieres v. Pollingue, 843 So.2d 1049, 1053 (La. 2/25/03).
Plaintiffs argue that they can establish the third element of
res judicata, namely, that the parties are the same, because they
share the same “quality or capacity” with CSI. (Rec. Doc. No. 2012, p.6, citing Myers v. Nat’l Union Fire Ins. Co. of La., 43 So.3d
207, 211 (La.App. 4th Cir. 2010)).5 The plaintiff in Myers was
involved in an accident in which a 1990 Bell Model 412 helicopter
purchased by Petroleum Helicopters, Inc. from Bell Helicopter
Textron, Inc. made a forced emergency landing in the Gulf of
Mexico. Richard Tucker, Michael Leboeuf, and Kyle Myers were all
5
The requirement that the parties are the same in both suits does not mean
that the parties must have the same physical identity, but that the parties must
appear in the “same quality or capacity.” Myers at 211, citing Berrigan v.
Deutsch, Kerrigan & Stiles, LLP, 806 So.2d 163, 167 (La.App. 4th Cir. 1/2/02).
5
passengers on the helicopter, and each filed a separate lawsuit.
Myers at 208. The trial court in Mr. Tucker’s action6 found Bell
Helicopter
Textron,
Inc.
to
be
completely
at
fault
for
the
helicopter accident. Id. at 209. Mr. Myers subsequently filed a
motion for partial summary judgment, intending to establish that he
was free from fault from the subject accident. Id. at 210.
The issue before the Myers court was whether Mr. Tucker’s
action had any preclusive effect on Mr. Myers’ action.7 The court
found res judicata to apply because the parties in Myers were the
same as the parties in the Tucker judgment. Id. at 212. The court
noted that the “only parties that could be liable in this action,
Bell and PHI, are in the same position as they were in the Tucker
trial.”
Id.
Since
the
parties
were
“appearing
in
the
same
capacities,” they were considered by the court to be “the same
parties.” Id. The court also found that Mr. Myers’ interest, which
was to determine which party was at fault in causing the helicopter
accident, was adequately represented in the Tucker matter. Id.
In order for the Court to determine whether the arbitrator’s
finding of piercing the corporate veil grants Plaintiffs preclusive
6
Tucker v. Petroleum Helicopters, Inc., 9 So.3d 966 (La.App. 4th Cir.
3/23/09), writ den., 10 So.3d 736 (La. 6/19/09).
7
Bell Helicopter Textron, Inc. presented two assignments of error: first,
that the parties to the judgment in Tucker are not the same as the parties in
that matter, and; second, that the final judgment of Tucker resolved different
liability issues than those at issue in the Myers action. Myers, 43 So.3d at 207.
6
effect, the Court must examine the capacities in which CSI and
Plaintiffs brought their actions. The arbitration proceeding was
between CSI, 3901, and Jenkins. (Rec. Doc. No. 11-2, p.1). The
subject matter of the arbitration was CSI seeking recovery of
damages for the construction of the condominiums, and 3901 seeking
recovery of damages from CSI for defective work. (Rec. Doc. No. 112 at 1). The Court also notes that the plaintiffs in Myers and
Tucker both sought damages arising out of the helicopter accident.
Here, however, the arbitration arose out of a contract dispute
between the contractor and the subcontractor, whereas the instant
suit arose out of a contract dispute between the seller and the
purchasers of property. The parties in the arbitration action were
not acting in the same capacity as they are here. As such,
Louisiana’s res judicata doctrine does not apply.
C.
Piercing the Corporate Veil
Louisiana law insulates a member of a limited liability
company from personal liability for a debt or obligation of the
limited liability company. LA. REV. STAT. § 12:1320(B). However,
Subsection D of this same statute clearly provides a cause of
action against a member of a limited liability company because of
any breach of professional duty, as well as for any fraud or other
negligent or wrongful act by such person. W.J. Spano Co., Inc. v.
Mitchell, 943 So.2d 1131, 1132–33 (La.App. 1st Cir. 9/15/06). Thus,
7
members
of
limited
liability
companies
generally
may
not
be
assessed with personal liability for the debts and obligations of
their limited liability company to third parties, unless there is
proof of negligence or wrongful conduct by that person. Regions
Bank v. Ark–La–Tex Water Gardens, L.L.C., 997 So.2d 734, 740
(La.App. 2nd Cir. 11/5/08), writ den., 5 So.3d 119 (La. 3/13/09).
Furthermore, “[i]n determining whether to pierce the corporate
veil to impose contractual or legal obligations on an individual,
competing
policies
supporting
the
recognition
of
a
separate
corporate existence and those justifying piercing the veil must be
weighed to determine if there is some misuse of the corporate
privilege or other justification for limiting it under the facts of
a particular situation.”
Prasad v. Bullard, 51 So.3d 35, 41
(La.App. 5th Cir. 10/12/10).
The arbitrator in the action between CSI, 3901, and Jenkins
determined whether to pierce 3901's veil as it related to the
contractual transaction between CSI and 3901. (Rec. Doc. No. 202-4,
Exhibit B to Pl.’s Mot. Summ. J.). But, in the present action, the
Court must examine the “facts of [the] particular situation”
between Plaintiffs and 3901 to determine whether to pierce 3901's
veil. Thus, even had there been some “sameness” between the parties
and because the inquiry into piercing the corporate veil turns on
8
the specific facts in dispute, the arbitrator’s finding cannot
apply to Plaintiffs’ claims against 3901 and Jenkins.
CONCLUSION
Louisiana’s res judicata doctrine does not apply since the
parties in the arbitration action were not acting in the same
capacity as they are here. Furthermore, to pierce 3901's corporate
veil, there must first be a finding of negligence or wrongful
conduct on the part of 3901 vis-a-vis Plaintiffs. Such is a
question of fact reserved for the fact-finder at trial and is not
proper at the summary judgment stage.
New Orleans, Louisiana, this 20th day of August, 2012.
________________________________
UNITED STATES DISTRICT JUDGE
9
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