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

Filing 501

ORDER AND REASONS GRANTING 462 Motion for Partial Summary Judgment. FURTHER ORDERED that 469 Motion for Summary Judgment Regarding Attorneys' Fees is DENIED. Signed by Judge Wendy B Vitter on 1/7/2020. (jeg)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF LOUISIANA

PAN AMERICAN LIFE INSURANCE
COMPANY

CIVIL ACTION

VERSUS

NO: 13-5027-WBV-DMD

LOUISIANA ACQUISITIONS CORP., ET AL.

SECTION: “D”(3)

ORDER AND REASONS
Before the Court is the Motion for Partial Summary Judgment (R. Doc. 462),1 filed
by the defendants, Inter-Continental Hotels Corporation (“IHC”) and Louisiana
Acquisitions Corporation (“LAC”). Also before the Court is the Motion for Summary
Judgment or in the Alternative, Motion for Partial Summary Judgment Regarding
Attorneys’ Fees (R. Doc. 469),2 filed by Plaintiff Pan American Life Insurance
Company (“PALIC”). Each motion is opposed.
I.

Factual Background

This is a diversity action for claims arising out of the parties’ operation and
management of, and relationship to, the New Orleans Inter-Continental Hotel

1
2

See R. Doc. 478 for the Response in Opposition.
See R. Doc. 482 for the Response in Opposition.

located in downtown New Orleans. For the sake of brevity, the Court will not reiterate
the factual background discussed at length in the Court’s August 21, 2017 Order3 and
the Fifth Circuit’s January 3, 2019 Order.4 In the August 21, 2017 Order, this Court
held that the Side Letter Agreement between PALIC and the defendants was a full
release of claims, stating that “four years of litigation and the completion of
exhaustive discovery has made clear that the SLA constitutes a compromise between
the partners that extinguished all ‘outstanding disputes’ between them . . . .”5 The
Court dismissed with prejudice PALIC’s complaint in its entirety and entered
judgment in favor of the defendants.6 PALIC appealed to the Fifth Circuit, which
affirmed this Court’s ruling.7 The case remained closed pending the outcome of the
appeal without prejudice to the defendants’ right to pursue their counterclaims after
the Fifth Circuit’s mandate was issued.8 The case has since been reopened for the
Court to decide the counterclaims.9
The defendants assert counterclaims for bad faith breach of contract, breach of
fiduciary duty, fraud in the inducement, negligent misrepresentation, and
detrimental reliance. The parties have submitted cross motions for summary

See R. Doc. 415.
See R. Doc. 453-1.
5 R. Doc. 415, pp. 18-19.
6 See R. Doc. 415.
7 See R. Doc. 453-1.
8 See R. Doc. 444.
9 See R. Docs. 454, 455.
3
4

judgment on the issues of PALIC’s liability and whether the defendants are entitled
to damages, specifically attorneys’ fees.10
II.

Legal Standard

Summary judgment is proper if the movant shows there is no genuine dispute as
to any material fact and that it is entitled to judgment as a matter of law.11 If the
movant shows the absence of a disputed material fact, the non-movant “must go
beyond the pleadings and designate specific facts showing that there is a genuine
issue for trial.”12 The Court views facts and draws reasonable inferences in the
plaintiff’s favor.13 The Court neither assesses credibility nor weighs evidence at the
summary judgment stage.14
III.

Analysis

The defendants assert that they are entitled to a liability judgment as a matter of
law on their counterclaims. The defendants believe that “the evidence in the existing
record establishes that PALIC induced LAC to give up valuable management and
ownership rights, sell the Hotel, and pay PALIC nearly half a million dollars in return
for PALIC’s agreement to compromise and release all outstanding disputes between
the parties.”15 The defendants contend that PALIC’s actions forced them to defend

See R. Docs. 462 and 469.
See FED. R. CIV. P. 56(a).
12 McCarty v. Hillstone Restaurant Grp., Inc., 864 F. 3d 354, 357 (5th Cir. 2017).
13 See Vann v. City of Southaven, Miss., 884 F. 3d 307, 309 (5th Cir. 2018).
14 See Gray v. Powers, 673 F. 3d 352, 354 (5th Cir. 2012) (internal citation omitted).
15 R. Doc. 462-3, p. 1.
10
11

themselves against claims they already paid to settle, requiring considerable cost,
time, and resources.
This Court has already determined that the Side Letter Agreement contained a
valid and binding compromise and release, encompassing the claims brought by
PALIC in this action.16 The defendants argue there is ample support for its claim that
PALIC fraudulently induced them to enter into the Side Letter Agreement.17 PALIC
rejoins that it had not decided to proceed with a lawsuit when it entered into the Side
Letter Agreement.
Damages, measured in costs and attorneys’ fees, allegedly amount to millions of
dollars as a result of PALIC’s actions.18 PALIC asserts that these kinds of damages
require a contract or statutory provision that the Louisiana Civil Code articles
relevant to this action do not provide for. Attorneys’ fees are recoverable “only if they
are authorized by statute or contract. . . . A breach of contract action does not fall
within one of the limited exceptions to the general rule; if the parties fail to expressly
provide an obligation to pay attorney’s fees, the law will not imply one.”19 Awarding

See R. Doc. 415.
See R. Doc. 462-3.
18 See id., p. 7.
19 Homestead Ins. Co. v. Guarantee Mut. Life Co., 459 F. App’x 398, 404-405 (5th Cir. 2012) (internal
citations omitted). See Chauvin v. La Hitte, 85 So.2d 43, 45 (La. 1956). (“On numerous occasions this
court has said that ordinarily attorney's fees are not assessable as an item of damages unless provided
for by law or by contract. The clear import of the language of the opinions is that no award of them can
be made if not so particularly authorized.”). See Theriot v. State Farm Mut. Automobile Ins. Co., 2019
WL 1320009 (W.D. La. March 22, 2019) (stating “Under Louisiana law, attorneys' fees generally are
not recoverable unless authorized by statute or contract. The Fifth Circuit has explained, ‘[i]t is beyond
peradventure that, under Louisiana law, attorney's fees are recoverable only if they are authorized by
statute or by contract.’” (internal citations omitted)). See Johnson v. Bayshore Towers, L.L.C., 2006
WL 8432429 (M.D. La. March 24, 2006) (“Under Louisiana law, attorney’s fees are recoverable only if
provided for by statute or contract.”).
16
17

attorneys’ fees is exceptional and penal in nature, and attorneys’ fees statutes are
construed strictly.20 Attorneys’ fees are awarded to discourage a particular activity or
activities on the part of the other party, not to make the injured party whole.21 “The
award of attorneys’ fees is left to the sound discretion of the trial court, which will not
be reversed on appeal unless that discretion was clearly abused.”22
In determining whether the defendants are entitled to attorneys’ fees, the Court
examines whether they have established that they are legally entitled to such an
award by virtue of any statute or contract. There is no contractual provision to
support the defendants’ claim for attorneys’ fees, so the Court must determine
whether relevant statutory law authorizes such an award under the facts of this
case.23 PALIC moves for judgment as a matter of law, claiming there is no statutory
provision permitting the defendants’ recovery of attorneys’ fees.
The defendants cite several Louisiana Civil Code articles, namely articles 1994, et
seq. However, these articles do not expressly authorize an award of attorneys’ fees.
Under Louisiana law, attorneys’ fees “characterized as breach of contract damages
are not compensable under Article 1994 and its corresponding statutes.”24 Therefore,
they cannot recover attorneys’ fees, even if the defendants prove their claim for
breach of contract.

See Homestead Ins. Co. v. Guarantee Mut. Life Co., 459 F. App’x 398, 405 (5th Cir. 2012) (internal
citations omitted).
21 See Benton v. Clay, 48245 (La. App. 2 Cir. Aug. 7, 2013) 123 So. 3d 212, 225.
22 1100 South Jefferson Davis Parkway, LLC v. Williams, 2014-1326 (La. App. 4 Cir. May 20, 2015)
165 So. 3d 1211, 1220.
23 See David Y. Martin, Jr., Inc. v. Heublein, Inc., 943 F. Supp. 637, 643 (E.D. La. 1996).
24 Homestead Ins. Co. v. Guarantee Mut. Life Co., 459 F. App’x 398, 405 (5th Cir. 2012).
20

The defendants also attempt to recover attorneys’ fees under the theory of fraud.
They argue that “A party that has suffered a loss due to fraud is entitled to rescission
and/or damages and attorneys’ fees,” and cite Louisiana Civil Code article 1958 as
support.25 The defendants clarify that they do not seek rescission of the contract,
“Rather, [we] seek recovery of all damages incurred as a result of PALIC’s fraudulent
breach of the Side Letter Agreement, including, but not limited to, attorneys’ fees,
costs and expenses.”26 In Louisiana, “[f]raud is a misrepresentation or a suppression
of the truth made with the intention either to obtain an unjust advantage for one
party or to cause a loss or inconvenience to the other.”27 It may result from silence or
inaction.28 The elements of a claim for intentional misrepresentation and a claim for
fraudulent inducement are (1) misrepresentation of a material fact; (2) made with
intent to deceive; and (3) causing justifiable reliance with resultant injury.29 The
defendants argue that PALIC fraudulently entered into the Side Letter Agreement,
such that the defendants are entitled to attorneys’ fees.
PALIC contends that Louisiana Civil Code article 1958 does not expressly
authorize an award for attorneys’ fees and that under current jurisprudence, such an
award cannot be made. PALIC discusses Benton v. Clay as support. In that case, a
winning land auction bidder, Ms. Benton, sued her joint purchaser, Mr. Clay, alleging

R. Doc. 462-3, p. 10. “The party against whom rescission is granted because of fraud is liable for
damages and attorney fees.” La. Civ. Code art. 1958.
26 R. Doc. 462-3, p. 10.
27 La. Civ. Code art. 1953.
28 See id.
29 See Davis v. Karl, 2010 WL 3312587, at *3 (E.D. La. Aug. 19, 2010) (citing Kadlec Med. Ctr. v.
Lakeview Anesthesia Assoc., 527 F.3d 412, 418 (5th Cir. 2008)).
25

that he intentionally made misrepresentations regarding her ability to participate in
the purchase of land when the Mr. Clay completed the transaction without Ms.
Benton’s knowledge. The Louisiana Second Circuit Court of Appeal stated, “Although
the record is clear that [the defendant’s] conduct was both fraudulent and in bad faith,
current Louisiana law simply does not allow for an award of attorney’s fees.”30 The
court noted that
it is inequitable that a party can be awarded attorney fees when a
contract is rescinded on the basis of fraud [see La. Civ. Code art. 1958],
but a party who breaches an obligation in bad faith and in a fraudulent
manner escapes liability for attorney fees. This is a matter that should
be addressed by the legislature.
Benton v. Clay, 48245 (La. App. 2 Cir. Aug. 7, 2013) 123 So. 3d 212, 225 n.6. The
Louisiana Supreme Court held in Stutts v. Melton, decided two months after Benton
v. Clay, that the plaintiffs were entitled to attorneys’ fees under Louisiana Civil Code
article 1958, where a reasonable factual basis existed for the trial court’s finding that
the defendants committed fraud by willfully misrepresenting on a Residential
Property Disclosure Statement that the home had a roof free of defects and the
plaintiffs did not seek a rescission of the purchase agreement:
Surely, the legislature did not intend the victim of fraud to go
uncompensated for attorney fees, or for that matter, any damages at all,
unless he seeks rescission of the entire contract. And, if La. C.C. art.
1958 is interpreted to mean that the plaintiff is only entitled to damages
and not attorney fees, then the fraudulent defendant is essentially being
treated as a good faith obligor, who is only liable for damages that were
Benton v. Clay, 48245 (La. App. 2 Cir. Aug. 7, 2013) 123 So. 3d 212, 225. “In the present case, the
plaintiff has not established that she was legally entitled to attorney fees by virtue of any statute or
contract. Although the record is clear that Mr. Clay's conduct was both fraudulent and in bad faith,
current Louisiana law simply does not allow for an award of attorney fees. Therefore, we are
constrained to find that the trial court erred in making an award of attorney fees in this matter.” Id.
30

foreseeable at the time the contract was made. La. C.C. art. 1996. This
is contrary to law as “[i]t should be clear that in Louisiana the liability
of an obligor who committed fraud in failing to perform his obligation,
rather than just acting in bad faith, would, for greater reasons, be at
least as extensive as the liability of an obligor in bad faith.” Saul
Litvinoff, 6 Louisiana Civil Law Treatise: The Law of Obligations, Part
II, Putting in Default and Damages, § 5.20, p. 133 (1999). Further, in
our view, the intent of the legislation providing attorney fees when the
obligor has committed fraud is to punish the fraudulent conduct,
regardless of whether the obligee seeks rescission of the contract.
Stutts v. Melton, 130 So. 3d 808, 814-15 (La. 2013). The Court reasoned that to provide
an equitable remedy for the plaintiffs, “it is reasonable and just to assume the
legislature intended at least the same type of damages for fraud where rescission of
the entire sale is not sought.”31 IHC and LAC cited this case in support for their
contention that they are entitled to attorney’s fees. PALIC rejoins that Stutts and
numerous other cases cited by the defendants are redhibition cases, thus
distinguishable from the facts at hand. After a careful review of the record and
applicable law, however, the Court finds that the legal framework and analysis put
forth by the Louisiana Supreme Court in Stutts applies to this action.
PALIC contends that Stutts has been interpreted narrowly, citing J & L
Family, L.L.C. v. BHP Billiton Petroleum Properties (N.A.), L.P. as support. In that
case, there was no contract at issue, but the parties’ relationship was controlled by
statute such that the defendant was required to pay the plaintiff its pro rata share of
the proceeds from the sale of oil and gas extracted from two drilling units.32 In that

Id. at 815.
See J & L Family, L.L.C. v. BHP Billiton Petroleum Properties (N.A.), L.P., 293 F. Supp. 3d 615
(W.D. La. Feb. 6, 2018). See Anderson v. Moreno Air Conditioning, Inc., 2014-27 (La. App. 3 Cir. June
4, 2014) 140 So. 3d 841.
31
32

case, the court stated, “In the only case to have applied Stutts to new facts, the
Louisiana Third Circuit held that Stutts did not apply to fraud in the context of a
‘verbal month-to-month lease,’ implicitly limiting the reach of Stutts to contracts of
sale.”33 PALIC argues that the alleged fraud is in the Side Letter Agreement, not the
sale of the Hotel to a third party.34 IHC and LAC respond by arguing that the
Louisiana Supreme Court’s holding in Stutts was not limited to “sale contracts” and
that Stutts has not been interpreted narrowly: “Indeed, [Stutts] has been recognized,
endorsed, adopted, and applied to award attorneys’ fees absent rescission in cases
involving, among other things, the breach of a release.”35
The defendants cite a more recent case, Spurgeon v. Leleaux, where the
plaintiff made claims for fraud, breach of a settlement agreement, and breach of a
release and indemnity agreement.36 The Western District of Louisiana found there
were numerous instances where the defendants engaged in fraud and that the
plaintiff was entitled to attorneys’ fees.37 Spurgeon discussed Stutts, stating,
The Louisiana Supreme Court has indicated that a plaintiff who has
been defrauded in the performance of a contract is entitled to damages,
including attorney's fees. Stutts v. Melton, 2013-C-0557 (La. 10/15/13),
130 So.3d 808. In Stutts, the Louisiana Supreme Court determined
whether attorney's fees are only available in a fraud case where the
plaintiff seeks rescission of the contract. After a detailed analysis, the
Court determined that attorney's fees are available to the plaintiff who
seeks damages from breach of contract based on fraud, the rationale
being that when an obligor has committed fraud, the Louisiana Civil
Code intends to punish the fraudulent conduct regardless of whether the
293 F. Supp. 3d 615, 622 (W.D. La. Feb. 6, 2018).
See R. Doc. 469-6, p. 14.
35 R. Doc. 482, p. 4.
36 See Spurgeon v. Leleaux, 2019 WL 138388, at *9-10 (W.D. La. Jan. 8, 2019).
37 See id., at *10.
33
34

plaintiff (obligee) seeks rescission of the contract or damages flowing
from a fraudulent breach.
Spurgeon v. Leleux, 2019 WL 138388, at *9-10 (W.D. La. Jan. 8, 2019). The court
found that there were numerous instances where the defendants engaged in fraud.38
Therefore, the court held that the plaintiff was entitled to judgment against certain
the defendants and awarded damages, including attorneys’ fees.39
Although this Court recognizes the holdings in J & L Family, L.L.C. v. NDP
Billiton Petroleum Properties (N.A.), L.P. and the related Louisiana Third Circuit
case, Anderson v. Moreno’s Air Conditioning, Inc., et al., those cases involve
completely different facts—a quasi-contract relationship regarding minerals and a
verbal month-to-month lease, respectively—than the action at hand—a release
agreement. The Court finds that the facts at hand align more closely with those of
Spurgeon. Therefore, the Court finds that the defendants may recover damages,
including attorneys’ fees, if they prove that PALIC engaged in fraud.
IHC and LAC contend that the record establishes that PALIC was inducing the
defendants to relinquish rights and pay money in return for a comprehensive release
that PALIC had no intention of honoring. In support, the following email from George
J. Fowler, III to Wade Webster, Jose Suquet, and Norman C. Sullivan, Jr., copying
Jerry Carlisle and Frank Varela on Tuesday, December 18, 2012, at 7:24 a.m., states,
“We have been quietly working on a complaint to be filed after the sale as instructed
together with an opinion letter on how to handle the claim. Somehow IHG learned of

38
39

Id.
Id.

Pan American’s intentions. I do not think this demand is coincidental. We need to
discuss.”40 An additional email from Wade Webster, although it is unclear who the
email was sent to, was sent on December 20, 2012 at 5:49 a.m., the day before the
Side Letter Agreement was executed. That email states, “Please advise Jerry and I
as to the strategy that you want to pursue, or the communication to send to IHG
advising that PALIC does not want to release IHG and requesting that IHG proceed
with the sale. . . . If IHG rejects the request to remove the release language, then at
least you will have the hard evidence for any litigation.”41 There is also an email in
the record from Wade Webster’s assistant, sent to Jose Suquet, copying Pat Fraizer,
Frank Varela, Jerry Carlisle, and Rudy Revuelta on August 15, 2012, at 4:46 p.m.,
months before the Side Letter Agreement was executed. That email discusses
Louisiana Rules of Professional Conduct regulating against a lawyer representing a
client and strategies to “minimize any claim by IHG that [the law firm Fowler,
Rodriguez, Vales-Fauli] was its counsel.” The email begins, “Following our conference
on July 13th, we researched the issue whether a conflict of interest might arise if our
Firm represents PANACON, then is retained on behalf of Pan-American Life
Insurance Company to sue the Intercontinental Hotel Group (“IHG”), or Louisiana
Acquisitions Corp.,”42 and continues with a full analysis of the issue of legal
representation for a future suit.43

See R. Doc. 462-5.
See R. Doc. 462-8.
42 PANACON is a partnership formed between PALIC and LAC to build and operate a hotel in
downtown New Orleans.
43 See R. Doc. 462-6.
40
41

The defendants argue that LAC would not have agreed to the sale of its interest
in the Hotel and LAC would not have paid PALIC $434,636 had it known of PALIC’s
intention to sue the defendants after the sale.44 The defendants believe that the
record unequivocally proves that PALIC had no intention of honoring the Side Letter
Agreement.
PALIC asserts that there is a genuine issue of material fact as to whether PALIC
acted fraudulently or maliciously at the time of signing the Side Letter Agreement or
when PALIC filed suit. PALIC claims that at the time it signed the documents, it
had not decided to bring this suit.45 PALIC directs the Court’s attention to an email
that states, “Just spoke to Jose and he just wants to close. We can talk about a claim
after we sell and just deal with whatever release language IHG demands after closing
if there is a decision to even make a claim.”46 Therefore, PALIC contends, “The fact
that PALIC was still reviewing whether there was a basis to file suit shows that there
was no fraudulent or malicious predetermination to dishonor the release when PALIC
signed the [Side Letter Agreement.]”47 PALIC states that the basis for its suit against
LAC was the mistaken belief that the release in the Side Letter Agreement was
unenforceable. The plaintiff briefly argues that it conducted “an intervening
investigation over six months . . . prior to PALIC deciding to file suit[.]”48 PALIC
believes that the evidence is insufficient to prove fraud. The Court is not convinced

See R. Doc. 462-3, p. 4.
See R .Doc. 478, pp. 2-4.
46 R. Doc. 478, p. 3.
47 Id.
48 Id., at p. 8.
44
45

that the mere lapse of time between signing the agreement and suing the defendants
shows a lack of intent to sue when the emails in the record reveal PALIC’s true
intent.49 This argument is made weaker by the idea that six months is not a relatively
short amount of time to investigate, draft a 42-page complaint, and file a significant
lawsuit against the defendants over claims that PALIC formerly released.50 Also, the
sole email produced by PALIC in support of its argument of lack of intent to sue does
not overcome the overwhelming proof of PALIC’s intent to deceive the defendants to
gain an unjust advantage.51
The Court finds, in fact, that there is no genuine issue of material fact, and
that the evidence clearly supports that PALIC engaged in fraud by willfully
misrepresenting or suppressing the truth of its intention not to abide by the Side
Letter Agreement and its intention to sue the defendants after the sale of the Hotel.
The Court finds that PALIC entered into the Side Letter Agreement with the purpose
of deceiving the defendants and with no intention of performing its obligations. The
Court believes that, although the defendants do not seek rescission of the contract,
they would be nonetheless entitled to rescission based on PALIC’s actions. Therefore,
the Court finds that the defendants have proven their claim for fraud and are entitled
to damages, including attorney’s fees. It is not appropriate to determine the extent of
those damages at this juncture in the litigation.

See R. Docs. 462-5, 462-6, 462-7, and 462-8.
“The contention that PALIC ‘immediately’ sued Counterclaimants is simply incorrect. The SLA was
signed on December 21, 2012. PALIC did not file suit until July 9, 2013.” See R. Doc. 478, p. 8.
51 See R. Docs. 462-5, 462-6, 462-7, and 462-8.
49
50

PALIC cites Arete Partners, L.P. v. Gunnerman, 594 F.3d 390 (5th Cir. 2010), as
support for the contention that its mistaken or flawed interpretation of the Side
Letter Agreement, standing alone, is not evidence of fraudulent intent.52 The Fifth
Circuit found that the evidence was insufficient to support a finding of fraud, stating
that the defendant’s conduct during pre-trial proceedings, including discovery
skirmishes, possible discovery abuses, or other pre-trial conduct that was displeasing
to the judge was not sufficient evidence to show that the defendant did not intend to
perform the settlement agreement.53 In finding that PALIC is liable for fraud, the
Court does not rely on the discovery abuse alleged by the defendants. The Court finds
that the emails discussed above evince PALIC’s fraudulent intent at the time of the
Side Letter Agreement.
The Court also finds that the defendants, for reasons discussed above, engaged in
a bad faith breach of contract. However, attorneys’ fees are not recoverable under the
breach of contract articles.54 Because the Court has found PALIC liable for fraud and
found that the defendants are entitled to damages, including attorneys’ fees, the
Court need not decide liability on the defendants’ other claims.
Accordingly,

See R. Doc. 478, p. 5.
See Arete Partners, L.P. v. Gunnerman, 594 F.3d 390,398 (5th Cir. 2010).
54 “An obligor in bad faith is liable for all the damages, foreseeable or not, that are a direct consequence
of his failure to perform.” La. Civ. Code art. 1997. See Sher v. Lafayette Ins. Co., 988 So. 2d 186, 201
(La. 2008) (stating that attorneys’ fees are not recoverable under article 1997).
52
53

IT IS HEREBY ORDERED that the defendants’ Motion for Partial Summary
Judgment (R. Doc. 462) is GRANTED;
IT IS FURTHER ORDERED that the plaintiff’s Motion for Partial Summary
Judgment Regarding Attorneys’ Fees (R. Doc. 469) is DENIED.
New Orleans, Louisiana, this the 7th day of January, 2019.

______________________________________
WENDY B. VITTER
UNITED STATES DISTRICT JUDGE