Pan American Life Insurance Company v. Louisiana Acquisitions Corp. et al

Filing 287

ORDER granting in part and denying in part 163 Motion for Partial Summary Judgment. Signed by Judge Jay C. Zainey on 5/18/16. (jrc)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF LOUISIANA
PAN AMERICAN LIFE INSURANCE
CO., INDIVIDUALLY AND AS A
PARTNER IN PANACON

CIVIL ACTION

VERSUS

NO: 13-5027

LOUISIANA ACQUISITIONS CORP.
AND INTER-CONTINENTAL
HOTELS CORP.

SECTION: "A" (3)

ORDER AND REASONS
The following motion is before the Court: Motion for Partial Summary
Judgment Barring Liability for Any Act or Omission That Occurred Prior to July 9,
2010 (Rec. Doc. 163) filed by defendants Louisiana Acquisitions Corp. and InterContinental Hotels Corp. (collectively “Defendants”). Plaintiff Pan American Life
Insurance Co. (APALIC@) opposes the motion. The motion is before the Court on the
briefs without oral argument. 1 For the reasons that follow, the motion is GRANTED IN
PART AND DENIED IN PART.
I.
This is a diversity action for breach of contract, breaches of fiduciary duties owed
between partners, fraud, conversion, civil conspiracy, deceptive or unfair trade

1

Defendants have requested oral argument but the issues presented by their motion are
thoroughly briefed in their memoranda and do not require additional argument.
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practices, and unjust enrichment arising out of Defendants= operation and management
of, and relationship to, the New Orleans Inter-Continental Hotel located in downtown
New Orleans. (Rec. Doc. 17, SSAC & 1).
PALIC and Louisiana Acquisitions Corp. (ALAC@) formed a Louisiana partnership
called PANACON on June 4, 1981, for the purpose of designing, building, and operating
a luxury hotel in New Orleans. (SSAC & 9). PALIC owned a two-thirds (2/3) interest in
PANACON and LAC owned the other one-third (1/3). (Id. & 10). The hotel opened in
1983 under the Inter-Continental brand name. (Id. & 12). LAC is a wholly-owned
subsidiary of Inter-Continental Hotels Corp. (AIHC@) and the two entities operate as
commonly controlled business entities. (Id. && 4-5).
The PANACON partnership entered into an Operating and Management
Agreement (Athe Management Agreement@) with IHC to manage the hotel. (SSAC & 13).
On September 15, 1983, LAC became manager of the hotel pursuant to an assignment
from IHC. (Id. & 14). PALIC claims that over the years LAC and IHC used the
Management Agreement as a lucrative vehicle to double-charge or over-charge
PANACON for services to the detriment of the partnership and PALIC, while garnering
significant profits for Defendants. PALIC contends that Defendants failed to perform
certain obligations owed under the Management Agreement, which inured to
Defendants= financial gain but hurt the hotel=s ability to compete as a luxury hotel.
PALIC also alleges that Defendants surreptitiously competed against PANACON by
operating other hotels in the local market. Thus, according to PALIC, LAC and IHC
maximized their profits not through their one-third ownership of PANACON but rather by
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abusing the hotel Management Agreement—a scheme that produced profits regardless
of whether the hotel itself was profitable. PALIC complains that Defendants= strategy
resulted in PALIC receiving no profits on its investment for years at a time.
In 2005, PALIC began to take steps to sell the underperforming hotel. (SSAC &
40).

PALIC alleges a plethora of acts that Defendants are accused of committing in

order to thwart the sale of the hotel, which again was allegedly losing money for PALIC
but proving quite profitable to Defendants.
Prior to the January 2013 sale of the hotel, PALIC became aware of some of the
very conduct by Defendants that PALIC is complaining about in this action. (SSAC &
18). According to PALIC, Defendants demanded that PANACON and PALIC execute
two documents, a Side-Letter Agreement (Rec. Doc. 24-4, Exhibit C) and a Voluntary
Termination Agreement (Rec. Doc. 24-5, Exhibit D)—documents that PALIC describes
as including Aa purported release@ of PALIC=s claims for breaches of the Management
Agreement and fraud (Id. && 19-20)—as a condition for their agreement to the pending
sale of the hotel. These documents were executed in December 2012. PALIC contends
that Defendants insisted on the releases because Defendants knew that they had been
discovered in their fraudulent scheme and that PALIC was forced to agree to the
releases because of economic duress in light of its eagerness to finally sell the
unprofitable hotel. (Id. && 65, 75).
PALIC initiated this action, individually and as a partner in PANACON, against
LAC and IHC on July 9, 2013, with a 149 paragraph complaint. Defendants initially
responded with a Rule 12(b)(6) Motion to Dismiss (Rec. Doc. 24). On December 20,
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2013, the Court granted in part and denied in part that motion, concluding that most of
Defendants’ arguments could not be resolved on the pleadings (Rec. Doc. 37, Order
and Reasons). PALIC ostensibly has seven remaining claims in this lawsuit: breach of
contract (Count I), breach of fiduciary duty (Count II), fraud (Count III), civil conspiracy
(Count IV), conversion (Count V), unfair trade practices (Count VI), unjust enrichment
(Count VII), and alter ego (Count VIII).
Substantial fact discovery has been conducted. The record reflects that discovery
has not proceeded smoothly. Counsel have appeared for motion hearings before the
magistrate judge on eight separate occasions (Rec. Docs. 93, 116, 124, 144, 151, 214,
229, 271). Counsel have appeared in this Court’s chambers on three separate
occasions (Rec. Docs. 27, 109, 223), and have participated in a principals’ conference
(Rec. Doc. 43). The magistrate judge conducted a settlement conference last fall and
the case did not settle. (Rec. Doc. 233).
In June 2015, Defendants filed the instant motion for partial summary judgment.
Additional fact discovery ensued and it is the Court’s understanding that it is nearly
complete. This motion was submitted on February 23, 2016, with the filing of
Defendants’ reply.
II.
Defendants seek partial summary judgment barring liability for any acts or
omissions occurring prior to July 9, 2010, which is three years prior to the date that PALIC
filed this action on July 9, 2013. Defendants’ motion is grounded on La. R.S. § 12:1502,
which they contend includes a three-year “peremptive” period that applies to all of
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PALIC’s remaining claims, none of which are grounded on breach of contract. 2
Defendants argue that the three-year “peremptive” period can be applied as a matter of
law without consideration of knowledge, notice, or other fact-based inquiries. According
to Defendants, PALIC’s lawsuit is largely directed to unsubstantiated allegations of
wrongdoing dating back over a decade.
In opposition, PALIC argues that Defendants are attempting to improperly
expand the reach of La. R.S. § 12:1502 to cover causes of action that do not fall within
its purview. PALIC argues that the statute only affects claims for breach of duties owed
by a partner, and since IHC was not a partner in PANACON, none of the claims brought
directly against this entity would be perempted. PALIC also argues that its unfair trade
practices claims are subject to the more specific and separate prescriptive period found
in La. R.S. § 51:1409. 3
Chapter 24 of Title 12 is called Prescriptive Periods Applicable to Business

2

PALIC’s Count I breach of contract claim is not at issue in this motion for partial summary
judgment. Count I is the subject of another pending motion for partial summary judgment (Rec.
Doc. 153) that will be addressed separately. Defendants recognize that La. R.S. § 12:1502 does
not govern the Count I breach of contract claim. (Rec. Doc. 258, Reply at 6).

3

PALIC also argues that Defendants’ motion is deficient because Defendants do not explain or
support with evidence which part of which claims they seek to have declared prescribed or
perempted. (Rec. Doc. 240, Opposition at 1). As the Court appreciates Defendants’ motion,
Defendants are not contending at this juncture that the three-year period of § 12:1502
forecloses in toto any of the causes of action. Rather, because PALIC’s factual support for its
causes of action includes events that occurred well before the three-year mark, Defendants
seek a ruling that these pre-July 9, 2010 acts or omissions are not actionable as a matter of law.
That PALIC contends that Defendants’ acts and omissions were continuous in nature and
continued up until the hotel was sold in 2013 is beside the point. Even if a cause of action is not
completely foreclosed due to prescription, any potential recovery for that cause of action may be
significantly impacted if liability and damages cannot be based on pre-July 9, 2010 events.
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Organizations. (emphasis added). Louisiana Revised Statute § 12:1502, entitled Actions
Against Persons Who Control Business Organizations, provides in relevant part:
****
C. No action for damages against any [officer, director, shareholder,
member, manager, general partner, limited partner, managing partner, or
other person similarly situated] for an unlawful distribution, return of an
unlawful distribution, or for breach of fiduciary duty, including without
limitation an action for gross negligence, but excluding any action covered
by the provisions of Subsection D of this Section, shall be brought unless it
is filed in a court of competent jurisdiction and proper venue within one year
from the date of the alleged act, omission, or neglect, or within one year
from the date that the alleged act, omission, or neglect is discovered or
should have been discovered, but in no event shall an action covered by
the provisions of this Subsection be brought more than three years
from the date of the alleged act, omission, or neglect.
D. No action for damages against any [officer, director, shareholder,
member, manager, general partner, limited partner, managing partner, or
other person similarly situated] for intentional tortious misconduct, or for an
intentional breach of a duty of loyalty, or for an intentional unlawful
distribution, or for acts or omissions in bad faith, or involving fraud, or a
knowing and intentional violation of law, shall be brought unless it is filed in
a court of competent jurisdiction and proper venue within two years from the
date of the alleged act or omission, or within two years from the date the
alleged act or omission is discovered or should have been discovered, but
in no event shall an action covered by the provisions of this
Subsection be brought more than three years from the date of the
alleged act or omission.
E. The time limitations provided in this Section shall not be subject to
suspension on any grounds or interruption except by timely suit filed in
a court of competent jurisdiction and proper venue.
****
La. Rev. Stat. Ann. § 12:1502 (West Supp. 2016). Louisiana courts characterize §
12:1502 as a “hybrid liberative prescription statute and peremption statute,” rather than

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a peremptive statute. Wooley v. Lucksinger, 14 So. 3d 311, 219 (La. App. 1st Cir. 2008)
(explaining why § 12:1502 does not provide for a peremptive period as a matter of law),
reversed in part on other grounds, 61 So. 3d 507 (La. 2011). In other words, the statute
is a prescriptive statute that is subject to time limitations that have peremptive attributes.
Suhren v. Gibert, 55 So. 3d 941, 947 (La. App. 4th Cir. 2011). Importantly, under §
12:1502, prescription is triggered when a plaintiff discovers or should have discovered
the wrongful act, not by proof of damages, which need not be quantifiable or fully
incurred. 4 Robert v. Robert Mgt. Co., 164 So. 3d 922, 936 n.25 (La. App. 4th Cir. 2015)
(citing Bailey v. Khoury, 891 So. 2d 1268, 1276 (La. 2005)).
At the outset, the Court notes that alter ego and civil conspiracy are not causes
of action. Alter ego is a theory of liability used to hold a parent entity liable for the
actions of its subsidiary. See Alomang v. Freeport-McMoRan, Inc., 811 So. 2d 98, 101
(La. App. 4th Cir. 2002). Civil conspiracy is not an actionable claim under Louisiana law.
Crutcher-Tufts Res., Inc. v. Tufts, 992 So. 2d 1091, 1094 (La. App. 4th Cir. 2008) (citing
Ross v. Conoco, Inc., 828 So. 2d 546 (La. 2002) (explaining that it is the tort that the
conspirators agreed to perpetrate and which they actually commit that constitutes the
actionable elements of the claim). The Court also notes that PALIC cannot satisfy the
elements required for a cause of action grounded on unjust enrichment. 5 Thus, the only

4

Defendants contend that many, if not all, of PALIC’s claims are actually subject to shorter
prescriptive periods than the three-year period at issue in this motion but that issue is not
currently before the Court. (Rec. Doc. 163-1, Defs.’ Memo at 1).

5

The pivotal element in a claim for unjust enrichment under Louisiana law is that there must be
no other remedy at law available to the plaintiff. Baker v. Maclay Props. Co., 648 So. 2d 888,
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causes of action actually pending in this case for purposes of the § 12:1502 analysis are
breach of partnership and fiduciary duty (Count II), fraud (Count III), conversion (Count
V), and unfair trade practices (Count VI).
PALIC’s claims for breach of partnership/fiduciary duties, fraud, and conversion
vis à vis LAC are easily addressed. PALIC and LAC were partners in PANACON, which
was a Louisiana partnership. Section 12:1502 is unquestionably implicated, and PALIC
concedes as much as to its breach of partnership/fiduciary duties under Count II. (Rec.
Doc. 240, Opposition at 6).
The Court is persuaded that PALIC’s claims against LAC for fraud and
conversion are also covered by the statute. Section 1502(D) expressly extends the
statute to claims for intentional tortious misconduct, or for an intentional breach of a duty
of loyalty, or for acts or omissions in bad faith, or involving fraud. PALIC’s fraud and
conversion claims against LAC unquestionably fall into this category of acts.
PALIC argues that § 12:1502(D) does not cover its fraud and conversion claims
because Paragraph D should be read not as a standalone paragraph but rather as a
prescriptive regime for instances where the actions covered by Paragraph C were done
intentionally, in bad faith, or involving fraud. In other words, PALIC construes the entire

897 (La. 1995). As demonstrated by PALIC’s complaint and this Court’s denial of Defendants’
Rule 12(b)(6) motion to dismiss, PALIC has remedies at law against both LAC and IHC.
Whether or not those causes of action are timely or meritorious is of no moment. See Garber v.
Badon & Ranier, 961 So. 2d 92, 100 (La. App. 3d Cir. 2008) (citing La. Nat’l Bank of Baton
Rouge v. Belello, 577 So. 2d 1099, 1102 (La. App. 1st Cir. 1991)). In other words, unjust
enrichment does not provide a safety net to cure an injustice or wrong should the legal remedies
available to a plaintiff fail.
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statute to govern only claims for breach of fiduciary duty whether intentional or
unintentional.
Nothing about the structure or text of La. R.S. § 12:1502 supports PALIC’s
construction of the statute. To the contrary, the lead in language for both paragraphs is
identical (“No action for damages against any person listed in Section A of this Section
for . . . ”) before the specific conduct at issue in each paragraph is recited. Nothing
suggests that Subsection C limits the otherwise extremely broad scope of Subsection D.
Subsection C expressly excludes actions covered by the provisions of Subsection D.
Even the title of the statute, “Actions against persons who control business
organizations,” suggests broad applicability and does not hint at limiting the statute to
breaches of fiduciary duty. When a law is clear and unambiguous and its application
does not lead to absurd consequences, the law shall be applied as written. La. Civ.
Code art. 9. Section 12:1502 is clear and unambiguous in that it applies to all claims in
tort between partners.
The question whether La. R.S. § 12:1502 applies to PALIC’s unfair trade
practices claims against LAC is not as straightforward. Militating in favor of application is
that the broadly-worded Subsection D of the statute unqualifiedly applies it to “a
knowing and intentional violation of law.” (emphasis added). The statute does not
define “violation of law.” But § 1405(A) of Louisiana’s Unfair Trade Practices and
Consumer Protection Law, 51:1401, et seq. (“LUTPA”), states that “[u]nfair methods of
competition and unfair or deceptive acts or practices in the conduct of any trade or
commerce are hereby declared unlawful.” (emphasis added). Assuming that a given
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set of facts is sufficiently offensive to be “unlawful,” 6 and therefore plausibly
characterizable as a “violation of law,” Defendants’ contention is that when the LUTPA
claim is asserted against a former partner, § 12:1502’s time limitations apply the same
as they would with a tort claim.
The questions regarding applicability arise because the LUTPA is a statutory
scheme with its own prescriptive period in § 51:1409(E) (“The action provided by this
section shall be prescribed by one year running from the time of the transaction or act
which gave rise to this right of action.”). In stark contrast to § 12:1502, the LUTPA’s
prescriptive period has no peremptive attributes of its own so concepts such as
continuing tort and the discovery rule may apply to stave off prescription. PALIC argues
that Defendants have no case law whatsoever to support their contention that § 12:1502
applies to their LUTPA claims, and that the Legislature could easily have included
LUTPA in Subsection D where other causes of action are named.
Both sides rely on the principle that when two statutes deal with the same subject
matter but cannot be harmonized or reconciled, the statute specifically directed to the
matter at issue must prevail as an exception to the statute more general in character.
See McGlothlin v. Christus St. Patrick Hosp., 65 So. 3d 1218, 1228 (La. 2011) (citing
LeBreton v. Rabito, 714 So. 2d 1226, 1229 (La. 1998)). PALIC contends that §
51:1409(E) of the LUTPA is the more specific statute with § 12:1502 being the more

6

As the Court explained in its ruling on Defendants’ motion to dismiss, LUTPA does not define
the specific acts that are “unlawful” so courts must decide on a case-by-case basis what
conduct falls within the statute’s prohibition. (Rec. Doc. 37 at 10).
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general statute, and Defendants contend the exact opposite. Because § 12:1502 deals
with causes of action against a specific type of defendant, i.e., persons who control
business organizations, Defendants analogize § 12:1502 to other
prescriptive/peremptive regimes that apply to specific type of defendants, e.g., doctors
and attorneys, regardless of the legal theory involved.
The principles of Erie v. Tompkins, 304 U.S. 64 (1938), require a federal court
sitting in diversity to apply the law of the state as declared by its legislature or the state’s
highest court. In the absence of an on-point decision, this Court must make an “Erie
guess” or prediction as to how the Louisiana Supreme Court would decide the question
of whether § 12:1502 trumps the LUTPA’s own prescriptive provision. See Keen v.
Miller Envir. Grp., Inc., 702 F.3d 239, 243-44 (5th Cir. 2012).
The Court’s Erie prediction is that Louisiana courts would treat La. R.S. §
12:1502 as the more specific statute when the defendant being sued under the LUTPA
is a partner, which is one of the specific corporate individuals identified in Subsection A
of the statute. Section 1502 singles out for favorable treatment certain corporate
persons who the Legislature has determined should receive greater protection from
liability for past acts. Subsection D is broadly written to be inclusive of causes of action
not specifically enumerated in the statute, which does not purport to contain an
exhaustive list of legal theories. Moreover, it is hard to give much weight to the fact that
the statute does not expressly list LUTPA claims as being included in its scope because
it is not even clear under Louisiana law that the LUTPA can apply outside the context of
competitors and consumers. It is only via another Erie guess by this Court that PALIC
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has even been allowed to pursue a LUTPA claim in this litigation. (Rec. Doc. 37,
12/20/13 Order and Reasons at 8-9) (discussing the Cheramie plurality). Further, it is
telling that the Legislature did expressly exempt certain causes of action from the
statute’s reach, see La. R.S. § 12:1502(A), but the LUTPA was not one of them even
though the LUTPA predates § 12:1502 by about thirty years. Thus, the Court is
persuaded that La. R.S. § 12:1502 applies to PALIC’s LUTPA claims against LAC.
III.
IHC was not a partner in PANACON so any claims that PALIC has asserted
directly and independently, i.e., not premised on alter ego, against IHC are not
governed by § 12:1502. 7 Thus, PALIC’s claims against IHC for fraud, conversion, and
unfair trade practices are unaffected by La. R.S. § 12:1502.
IV.
La. R.S. § 12:1502 governs the tort claims and the LUTPA claim asserted by
PALIC against LAC. Any liability against LAC under Counts II, III, IV, V, VI, VII, and VIII
predicated on acts or omissions occurring prior to July 9, 2010, is barred as a matter of
law.

7

In response to PALIC’s assertion that its fraud and conversion claims against IHC are not
governed by § 12:1502 because IHC was not a partner in PANACON, IHC argued that PALIC
has no individual claims directly against IHC because IHC did not own the hotel, did not operate
or manage the hotel, and was not a partner in PANACON. (Rec. Doc. 258, Reply at 9). IHC
points out that PALIC has put forth no evidence with its opposition to support such as claim.
In accordance with Defendants’ own characterization of their motion, the Court
construes the motion as presenting only questions of law as to the scope of La. R.S. § 12:1502.
As the Court stated above, § 12:1502 does not govern any claims against non-partner IHC. If
Defendants believe that PALIC cannot create an issue of fact as to any direct claim against ICH
then eventually they should move for summary judgment on that issue.
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Accordingly, and for the foregoing reasons;
IT IS ORDERED that the Motion for Summary Judgment Barring Liability for
Any Act or Omission That Occurred Prior to July 9, 2010 (Rec. Doc. 163) filed by
defendants Louisiana Acquisitions Corp. and Inter-Continental Hotels Corp. is
GRANTED IN PART AND DENIED IN PART as explained above.
May 18, 2016

__________________________________
JAY C. ZAINEY
UNITED STATES DISTRICT JUDGE

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