Adventure Harbor Estates, LLC et al v. LeBlanc et al
Filing
230
ORDER granting in part and denying in part 209 Motion for Summary Judgment; granting in part and denying in part 210 Motion for Summary Judgment. Signed by Judge Jay C. Zainey on 8/13/14. (Reference: 12-1848, 13-142, 13-4925)(jrc)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF LOUISIANA
ADVENTURE HARBOR ESTATES, LLC,
ET AL.
CIVIL ACTION
VERSUS
NO: 12-1848 C/W 13-142
& 13-4925
MICHAEL A. LEBLANC, ET AL.
SECTION: "A" (5)
ORDER AND REASONS
[REF: ALL CASES]
The following motions are before the Court: Motion for Summary Judgment
(Rec. Doc. 209) filed by Allstate Insurance Co. and Motion for Summary Judgment
Against Allstate For Payment of Attorney's Fees (Rec. Doc. 210) filed by Michael A.
LeBlanc and Mary Kaye LeBlanc. The motions, noticed for submission on July 16, 2014, are
before the Court on the briefs without oral argument. For the reasons that follow, both
motions are GRANTED IN PART AND DENIED IN PART.
I.
BACKGROUND
These consolidated actions arise out of the attempted purchase of certain property
owned by Forty Acre Corporation and/or Mary Kaye and Michael LeBlanc. The property at
issue ("the Property") comprises numerous acres located in Terrebonne Parish, Louisiana.
The principals of defendant Forty Acre are defendants, Mary Kaye and Michael LeBlanc. The
plaintiffs in the lead action (12-1848) are Adventure Harbor Estates, LLC, Steven Serafin, and
William McCollough.
According to the complaint, in January 2008 Plaintiffs entered into a Land Purchase
Agreement ("the Agreement") with Defendants for the purchase of the Property for
$1,930,000.00. (Comp.¶ A(1) {12-1848}). The Agreement required the LeBlancs to give
Adventure Harbor reasonable access to the Property to conduct inspections, tests, and
studies. (Id. ¶ 6).
During the course of the negotiations, Plaintiffs advised Defendants that the financing
company which was to provide the money to purchase the Property required a current
wetlands delineation to complete the analysis of the loan application. (Id. 7). Plaintiffs allege
that the LeBlancs assured them that a wetlands delineation had already been performed, and
that they would provide the appropriate documentation for the lender. (Id. ¶ 8). Plaintiffs
claim that the LeBlancs repeatedly delayed producing the wetlands document and when they
did produce it, the document was not a wetlands delineation. (Id. ¶¶ 8, 9). According to
Plaintiffs, Defendants then resisted their requests for full access to the Property for the
purpose of performing a complete wetlands study, and the lender eventually refused to allow
the transaction to close. (Id. ¶ 9). Plaintiffs assert that they were unable to obtain financing
because of Defendants' breaches of the Agreement and were damaged in excess of
$2,000,000.00 when the deal fell through. (Id. ¶ 12). Based on the foregoing, Plaintiffs' first
cause of action is for breach of contract. Plaintiffs allege that the LeBlancs acted outside the
scope of their corporate authority and that the corporation was their "alter ego," rendering
them personally liable on the breach of contract claim. (Id. ¶¶ A(1)-(2)).
Serafin and McCollough each assert a second cause of action for defamation and
malicious prosecution. The basis of this claim is that the LeBlancs filed criminal complaints
against Serafin and McCollough accusing them of stealing nearly $1,000,000.00 from the
LeBlancs in conjunction with the failed land deal. (Comp.¶¶ B(2), V(2) {12-1848}).
Prior to the filing of Civil Action 12-1848 in this Court, defendant Forty Acre filed for
bankruptcy protection in this district (Bankr. Case No. 11-10074). Adventure Harbor, Serafin,
and McCollough filed an adversary complaint (Adv. Pro. No. 12-1043) against Forty Acre in
the bankruptcy proceedings. The allegations in the adversary complaint were nearly identical
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to those being asserted in Civil Action 12-1848. The Court granted Plaintiffs' motion to
withdraw the reference to the bankruptcy court, and the adversarial complaint was allotted as
Civil Action 13-142, which this Court then consolidated with Civil Action 12-1848.
Meanwhile the LeBlancs and Forty Acre/The Forty Acre Corporation Plan Trust1 filed
suit against Robert Morris Cook, Serafin, and McCollough in state court. Cook is alleged to
have absconded with $900,000.00 in loan proceeds that he obtained by mortgaging a portion
of the LeBlancs' property. The LeBlancs had transferred a portion of the Property to Cook and
his corporation, C&R, so that Cook could confect a financing deal to enable Serafin and
McCollough to purchase the entirety of the property. McCollough removed that suit to this
Court as Civil Action 13-4925, which this Court then consolidated with the lead case.
During the course of the litigation the LeBlancs filed third party demands against
Certain Underwriters at Lloyd's of London (Rec. Doc. 52) and Allstate Insurance Co. (Rec.
Doc. 94). Allstate issued a homeowner's policy to the LeBlancs, naming as insureds Michael
A. LeBlanc and Mary Kaye LeBlanc (Id. ¶ III). Allstate initially agreed to provide a defense
under a reservation of rights. (Id. ¶ IV).
Earlier this year Allstate moved for summary judgment on the issue of its duty to
defend and coverage. The Court denied the motion as to the duty to defend and found the
coverage issue to be premature. (Rec. Doc. 190).
The magistrate judge conducted a settlement conference on June 24, 2014. All claims
were settled with the exception of the LeBlancs' personal claims against Serafin and
McCollough. (Rec. Doc. 207). The Court disposed of those claims in favor of Serafin and
As noted above, Forty Acre filed for Chapter 11 bankruptcy protection prior to the
commencement of litigation in district court. The Confirmation Order directed Forty Acre to
transfer certain assets, including the Terrebonne Parish land and Forty Acre's causes of action,
to The Forty Acre Corporation Plan Trust. (Rec. Doc. 1-2 {13-4925}).
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McCollough via summary judgment on July 31, 2014.2 (Rec. Doc. 223).
Via the instant motions Allstate and the LeBlancs each move for summary judgment
on the question of whether Allstate must reimburse the LeBlancs for all of the defense costs
that they incurred in defense of the claims brought against them. Allstate also moves for
summary judgment on the "bad faith" damages claim raised in the LeBlancs' Second
Supplemental and Amended Third Party Complaint (Rec. Doc. 199).
II.
DISCUSSION
Summary judgment is appropriate only if "the pleadings, depositions, answers to
interrogatories, and admissions on file, together with the affidavits, if any," when viewed in
the light most favorable to the non-movant, "show that there is no genuine issue as to any
material fact." TIG Ins. Co. v. Sedgwick James, 276 F.3d 754, 759 (5th Cir. 2002) (citing
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249-50 (1986)). A dispute about a material
fact is "genuine" if the evidence is such that a reasonable jury could return a verdict for the
non-moving party. Id. (citing Anderson, 477 U.S. at 248). The court must draw all justifiable
inferences in favor of the non-moving party. Id. (citing Anderson, 477 U.S. at 255). Once the
moving party has initially shown "that there is an absence of evidence to support the nonmoving party's cause," Celotex Corp. v. Catrett, 477 U.S. 317, 325 (1986), the non-movant
must come forward with "specific facts" showing a genuine factual issue for trial. Id. (citing
Fed. R. Civ. P. 56(e); Matsushita Elec. Indus. Co. v. Zenith Radio, 475 U.S. 574, 587 (1986)).
Conclusional allegations and denials, speculation, improbable inferences, unsubstantiated
assertions, and legalistic argumentation do not adequately substitute for specific facts
showing a genuine issue for trial. Id. (citing SEC v. Recile, 10 F.3d 1093, 1097 (5th Cir. 1993)).
The lawsuit against the LeBlancs was filed on July 13, 2012, and the LeBlancs
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The LeBlancs' claims against absent defendant Robert Morris Cook remain pending.
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answered the complaint on September 20, 2012. (Rec. Docs. 1 & 8). After the Court
disqualified the LeBlancs' personal attorney Randall Alfred on November 9, 2012 (Rec. Doc.
15), the LeBlancs hired Robert T. Myers and Donald L. Foret to represent them in this
litigation. Myers and Foret began representing the LeBlancs on January 14, 2013. (LeBlancs'
Uncontested Fact #3). Allstate did not receive notice of the lawsuit against the LeBlancs until
June 20, 2013. (Allstate Uncontested Fact #1; LeBlancs Uncontested Fact #4). Allstate agreed
to defend the LeBlancs under a reservation of rights on July 26, 2013, (Allstate Uncontested
Fact #2; Allstate Exhibit 2), and notified the LeBlancs on August 7, 2013, that Allstate had
assigned the defense to attorney Bryan Haydel at the Porteous, Hainkel & Johnson lawfirm in
New Orleans.3 (LeBlancs Uncontested Fact #5; LeBlancs Exhibit B).
The LeBlancs' contention is that Allstate did not actually begin to provide a defense to
the LeBlancs until Wednesday, September 11, 2013, which was after the depositions of Serafin
and McCollough. (LeBlancs Uncontested Fact #6). Myers was present at the depositions but
Haydel was not. Myers' fees and costs for representing the LeBlancs through September 11,
2013, total $73,588. (Id. #9).
As previously noted, the Court has already determined based on "the four corners" of
Allstate's policy and the claims asserted against the LeBlancs that Allstate had a duty to
defend. (Rec. Doc. 190). The question before the Court is whether Allstate must reimburse the
LeBlancs for the defense costs that they incurred after they hired Myers. But the cross
motions actually present two distinct legal questions: First, there is the question of the preJune 20, 2013 defense costs, which are those defense costs that the LeBlancs incurred prior to
notifying Allstate about the suit filed against them; second, there are the legal costs that the
Allstate's letter refers to the New Orleans office. Mr. Haydel is actually with the firm's
Baton Rouge office.
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LeBlancs incurred after the notice date of June 20, 2013, and until September 11, 2013, which
is the date that the LeBlancs contend that Allstate's attorney actually began to defend the
lawsuit.
Pre-notice Fees and Costs
Allstate contends that its obligations with respect to pre-notice fees and costs is
governed by its policy, which according to Allstate, expressly disavows any obligation to pay
for attorney's fees that an insured incurs prior to notifying Allstate about a claim.4
In opposition, the LeBlancs argue that Allstate must pay for all of its insured's fees and
costs because the duty to defend attaches from the date that the suit is filed against the
insured. The LeBlancs also point out that all of their attorney's work inured to Allstate's
benefit. The LeBlancs argue that the Louisiana case law on the subject is uniform in that the
insured is entitled to all defense costs, even prior to notice, so long as the costs were necessary
to protect the insured, inured to the benefit of the insurer, and there was no actual prejudice
to the insurer.
In Peavey Co. v. M/V ANPA, 971 F.2d 1168, 1178 (5th Cir. 1992), the Fifth Circuit held
that the insurer was liable for pre-notice defense costs in that particular case because the
insurer could demonstrate no actual prejudice from the delayed notice of the claim, and
because the insurer had relied entirely on the insured's pre-notice investigations when later
taking over the defense. But the policy in Peavey apparently did not contain express language
to govern the result, and neither Peavey nor any of the Louisiana authorities cited in the
Allstate also points out that Certain Underwriters has already paid the LeBlancs for
their pre-notice attorney's fees and costs but Allstate does not argue the legal significance of this
fact. (Rec. Doc. 209-4, Allstate's Memo in Support at 5; Allstate Uncontested Fact #11). The
Court therefore assumes that Allstate raises this point in support of its contention that the
LeBlancs have sustained no damages as a result of any conduct on Allstate's part.
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decision suggest that principles of prejudice override the policy language itself.5 Allstate's
policy states that after a loss, Allstate "will provide a defense with counsel of our choice,
even if the allegations are not true." (Rec. Doc. 209-11, Exhibit 7) (emphasis added). Under
the Conditions, the policy puts the onus on the insured to "[p]romptly notify" Allstate of the
claim and mandates transmittal to Allstate of all legal papers received relating to the claim or
suit. (Id. Allstate's policy, Pt. 4, § 2, ¶¶ 1(a), (b)). Perhaps the LeBlancs would have a better
argument under the case law that they cite if the policy had stopped here. But the catchall
paragraph at the end of these instructions to the insured states as follows:
An insured person will not voluntarily pay any money, assume any obligation or
incur any expense, except at that person's own cost, other than for first aid
to others at the time of the loss . . . .
Id. (emphasis added).
In this case the LeBlancs waited nearly a year to notify Allstate of the suit that was
filed against them individually. Thus, there is no argument to be made in this case that
exigencies forced the LeBlancs to incur expenses to defend the suit before Allstate could step
in to provide a defense. In the interim between being sued and finally notifying Allstate about
the lawsuit, the LeBlancs retained the attorney of their choice, which was their prerogative to
do, but under the clear terms of the policy they had to exercise that prerogative at their own
cost. Allstate is entitled to judgment as a matter of law as to the pre-notice attorney's fees and
expenses.6
Post-notice Fees and Costs
In fact, the Gully decision cited in Peavey, which held that pre-notice defense costs
were not recoverable, was based on clear policy language that the insured failed to follow. Gully
& Assocs., Inc. v. Wausau Ins. Cos., 536 So. 2d 816, 818 (La. App. 1st Cir. 1988).
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The parties do not clarify how much of the $73,588 that the LeBlancs seek constitutes
pre-notice fees and costs.
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It is undisputed that after Allstate assumed the LeBlancs' defense on July 26, 2013, its
retained counsel failed to appear for two key depositions. Myers was present at those
depositions because he was still working for the LeBlancs to prosecute their claims against
Serafin, McCollough, and Cook. But because Allstate's attorney was not present Myers was in
fact the only attorney present who represented the LeBlancs.
Clearly, Allstate had a duty to the LeBlancs to defend their case after July 26, 2016,
and Allstate breached that duty by failing to have counsel present at the depositions of Serafin
and McCollough.7 Allstate's arguments about why its lawyer was not present at those key
depositions are not convincing. Allstate's main argument is that its attorney was not named
on the deposition notices, and this argument could be persuasive but for two reasons. First,
Allstate offers no sworn statement from its counsel to the effect that he lacked actual
knowledge about the depositions. And second, if the attorney did lack actual knowledge of the
depositions because his name was left off of the notices, then Allstate cannot cast blame on
the other lawyers in the case for that occurrence. The record shows that Allstate's retained
lawyer did not move to enroll in the case until September 12, 2013, which was after the
depositions. (Rec. Doc. 104). The Court is persuaded that Allstate must reimburse the
LeBlancs for Myers' fees and costs in conjunction with the depositions that the retained
lawyer failed to attend.
As to damages resulting from the breach, the Court finds that the LeBlancs have failed
Again, the parties have not divided the $73,588 total that the LeBlancs seek into prenotice fees and post-notice fees and costs. The Court assumes that most of the $73,588
comprises pre-notice fees and costs. The Court makes this assumption because Allstate received
notice on June 20, 2013, and Allstate assumed full defense of the suit no later than September
11, 2013. See text, supra, page 5.
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to create an issue of fact on this claim.8 Allstate is entitled to summary judgment on the
damages claim.
III.
CONCLUSION
Both motions are GRANTED IN PART AND DENIED IN PART. The LeBlancs' motion
for summary judgment is GRANTED as to the post-notice fees and costs attributable to the
two depositions that Allstate's retained attorney did not attend in their defense. Allstate's
motion for summary judgment is GRANTED as to all pre-notice defense fees and costs, and
the claim for damages in conjunction with the failure to defend. This ruling disposes of all
remaining claims between the LeBlancs and Allstate.
Accordingly, and for the foregoing reasons;
IT IS ORDERED that the Motion for Summary Judgment (Rec. Doc. 209)
filed by Allstate Insurance Co., and the Motion for Summary Judgment Against
Allstate For Payment of Attorney's Fees (Rec. Doc. 210) filed by Michael A. LeBlanc
and Mary Kaye LeBlanc are GRANTED IN PART AND DENIED IN PART as explained
above.
August 13, 2014
_______________________________
JAY C. ZAINEY
UNITED STATES DISTRICT JUDGE
Damages are not supported by the evidence but Allstate will pay Myers' fees and costs
in conjunction with the depositions that its attorney failed to attend without regard to how
much of Myers' time at those depositions was devoted to actually defending the LeBlancs versus
prosecuting their claims.
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