Parkcrest Builders, LLC v. Housing Authority of New Orleans

Filing 607

ORDER AND REASONS denying 574 Motion for Writ; denying 577 Motion for Writ of Garnishment; denying 587 Motion to Stay. IT IS FURTHER ORDERED that HANO is directed to post supersedeas bond no later than December 21, 2018. IT IS FURTHER ORDERED that Gregg Fortner, in his official capacity as executive director of HANO, is directed to ensure HANO's compliance with this Order as stated herein. Signed by Judge Carl Barbier on 11/30/2018. (Reference: All cases)(cg)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF LOUISIANA
PARKCREST BUILDERS, LLC

CIVIL ACTION

VERSUS

NO: 15-1533
c/w 16-14118
16-15849

HOUSING AUTHORITY OF NEW
ORLEANS

SECTION: "J"(4)

ORDER AND REASONS
Before the Court are Petitions for Writs of Execution and Other Proceedings
Supplemental to Judgment (Rec. Docs. 574, 577) filed by Liberty Mutual Insurance
Company (“Liberty”) and Ted Hebert, LLC (“Hebert”), respectively. 1 The target of
these Motions, the Housing Authority of New Orleans (“HANO”), has filed an
opposition (Rec. Doc. 575) and upon order of this court, Liberty filed a supplemental
memorandum. (Rec. Doc. 586). Following Liberty’s motion, HANO filed its related
Second Motion to Stay Execution of Judgment (Rec. Doc. 587). Liberty filed
opposition (Rec. Doc. 594) to which HANO replied (Rec. Doc. 602). Having considered
the Motions, the memoranda, the record, and the applicable law the Court finds the
Motions should be DENIED.

Hebert’s motion is substantively identical to that of Liberty’s. For the sake of simplicity, the Court
will refer only to Liberty’s motion although the Court’s findings concerning the former are applicable
to the latter.
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FACTS AND PROCEDURAL HISTORY
This Court entered judgment in favor of Liberty, granting it $437,851.60, plus
costs and reasonable attorney’s fees, on July 10, 2017. (Rec. Doc. 541). HANO then
moved this Court to reconsider its decision to award attorney’s fees and moved for a
stay of execution of the judgment pending reconsideration. The Court denied both
motions. (Rec. Docs. 545, 542). HANO then filed a Motion to stay proceedings without
posting supersedeas bond, pending resolution of its appeal of the attorney’s fees
award. The Court also denied this petition for a stay because HANO had not satisfied
its burden of demonstrating that Liberty’s award for damages and fees was
adequately secured. (Rec. Doc. 559). The Court noted that it could grant a stay
without bond, if HANO could demonstrate that it would be willing and able to satisfy
the judgment upon resolution of the appeal.
Liberty then filed its petition for a writ of execution on August 17, 2018.
Pursuant to its motion, Liberty asks this Court to “issue a writ of execution
commanding the United States Marshall to seize the nonexempt portion of the
property of HANO sufficient to satisfy the amount of the Judgment subject to this
Petition--$437,851.60.” (Rec. Doc. 574 at 3). Liberty also asks to engage in discovery
pursuant to Fed. R. Civ. P. 69(a)(2) and for any other equitable relief this Court might
give. HANO promptly filed an opposition. The Court ordered that Liberty file
memoranda supporting its motion and Liberty did so. On October 7, 2018, HANO
filed a second motion to stay execution of the Court’s judgment. Liberty filed an
opposition memorandum to which HANO replied.
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PARTIES’ ARGUMENTS
HANO argues a writ of execution should not be issued because the Federal
Rules of Civil Procedure require the application of state law for application of
judgments and the Louisiana Constitution and Louisiana statutory law prevent
seizure of the property of a state entity such as the local housing authority. See Holly
& Smith Architects, Inc. v. St. Helena Congregate Facility, Inc., 943 So. 2d 1037, 1046
(La. 2006). Furthermore, HANO argues that this Court may not violate these antiseizure provisions unless there is a federal interest in the remedy, which there is not
in this diversity case. Freeman Decorating Co. v. Encuentro Las Americas Trade
Corp., 352 F. App’x. 921, 923 (5th Cir. 2009) (per curiam).

HANO also resists

discovery of its assets, because it suggests this Court has held that the state law antiseizure provisions “prevent Liberty from executing its judgment against HANO’s
assets.” (Rec. Doc. 575 at 8). To find that state law does not grant Liberty a judicial
mortgage over HANO’s property but allow Liberty post-judgment discovery “would
be a travesty.”
In support of its second motion to stay, HANO asserts that it is “committed to
submitting a request to HANO’s governing Board of commissioners for allocation of
funds to fulfill the judgment, if affirmed after appeal.” (Rec. Doc. 587-1 at 2-3). HANO
explains that it cannot offer a more definite promise than that because “HANO has
no independent funding to pay a judgment.” HUD is the sole source of operation
funds. (Rec. Doc. 602-2 at 2). According to federal regulations, HANO must receive
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approval from HUD of payment. Only upon HUD’s approval, says HANO, can it
request approval from its Board of Commissioners to pay the judgment.
Liberty counters that the Louisiana Constitution does not prohibit seizure of
state property because there is a federal interest in the enforcement of the judgment.
Liberty argues a federal interest exists in this case because (1) courts have an interest
in enforcing their judgments when recalcitrant state entities attempt to unfairly
immunize themselves from paying and (2) HANO is supported entirely with federal
funds. (Rec. Doc. 586 at 3-6). Liberty also suggests that even if there were no federal
interest, Louisiana law allows for execution on funds where those funds have been
appropriated for in a contract. (Rec. Doc. 586 at 6). Moreover, Liberty argues that
HANO’s motion to stay should be rejected because HANO has failed yet again to
provide any assurance that it will pay the judgment. Liberty urges that HANO has
promised nothing more than to seek permission to pay the judgment and points out
that when HANO sought permission to fund a supersedeas bond, at a cost of 2% of
the Court’s judgment against HANO, the request was denied. (Rec. Doc. 594 at 2).
LEGAL STANDARD AND DISCUSSION
I.
In a diversity action, the mechanics of execution are dictated by Federal Rule
of Civil Procedure 69(a): “The procedure on execution—and in proceedings
supplementary to and in aid of judgment or execution—must accord with the
procedure of the state where the court is located, but a federal statute governs to the

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extent it applies.” Thus, the Court must look to state law for the procedure of
execution against a state entity.
The Louisiana Constitution provides the proper course of action: funds are to
be appropriated by the state legislature or by the subdivision of the state that is the
judgment debtor. La. Const. Ann. art. XII, § 10. That same constitutional provision
explicitly prohibits seizure of public property. See Parkcrest Builders, LLC v. Hous.
Auth. of New Orleans, No. CV 15-1533, 2018 WL 3743812, at *5 (E.D. La. Aug. 7,
2018) (citing La. Const. Ann. art. XII, § 10). Neither HANO nor the state legislature
have appropriated funds, so according to state law Liberty may not yet execute on its
judgment. Id.; see also Freeman, 352 F. App’x. at 923.
However, state law is not dispositive of a federal court’s decision of whether to
grant a writ of execution. See Gates v. Collier, 616 F.2d 1268, 1271 (5th Cir. 1980).
There is an exception to the general rule: “when there is a federal interest in the
remedy, the federal courts may trump a state’s anti-seizure provision and enforce a
money judgment against a public entity.” Benson v. Regl. Transit Auth., No. CIV.A.
05-2777, 2015 WL 5321685, at *2 (E.D. La. Sept. 10, 2015) (quoting Freeman, 352 F.
App’x. at 923). For remedies of some actions, such as an action to enforce civil rights,
a federal interest is obvious. Bowman v. City of New Orleans, 914 F.2d 711 (5th
Cir.1990). In a diversity action like this one however, no federal interest is
immediately apparent. See Benson, 2015 WL 5321685, at *2.
Nevertheless, a federal interest may develop if a subdivision of the state proves
sufficiently resistant to paying a judgment. Gates, 616 F.2d at 1271 (5th Cir. 1980.
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“Federal courts are not reduced to issuing judgments against state officers and hoping
for compliance.” Id. (quoting Hutto v. Finney, 437 U.S. 678, 690 (1978)). “[W]here a
state expresses its unwillingness to comply with a valid judgment of a federal district
court, the court may use any of the weapons generally at its disposal to ensure
compliance.” Id.
However, the state entity must be guilty of more than mere sloth for a federal
interest to arise. Freeman, 352 F. App’x. at 925. The Fifth Circuit has noted it has
only “found a sufficient federal interest in the remedy when the governmental entity’s
behavior indicates an obstinance to ever satisfying the judgment.” Id. In an
unpublished decision, Freeman Decorating Co. v. Encuentro Las Americas Trade
Corp., 352 F. App'x 921, 925 (5th Cir. 2009), the Fifth Circuit found a state entity’s
behavior to amount to something less than obstinance where the city attorney sent a
letter indicating the City of New Orleans believed it did not have to satisfy a judgment
immediately. The city sent the letter nearly a year and half after judgment against
the City was issued. Id. at 922, 955.
In Gary W. v. State of La., 622 F.2d 804, 806 (5th Cir. 1980) the Fifth Circuit
examined a district court’s Rule 70 order directing the defendant, the Secretary of the
Louisiana Department of Health and Human Resources to pay the court’s judgment
from the department’s funds. 2 Id. at 805. The department argued that this violated

In that case, the clerk of the district court had already issued a writ of fieri facias directing the
marshal to seize the property of the property of the department. The district court declined to quash
the order.

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the Louisiana Constitution’s prohibition of payment of judgments by state entities
except from funds appropriated for that purpose by the legislature. Id. However, two
bills had been introduced by the legislature to authorize payment but had not passed.
Id. at 805-806. The Court of Appeals rejected the assertion that the district court’s
order was improper because an “order directing the responsible state official to satisfy
the judgment out of state funds [was] the only reasonable way to ensure compliance
with a valid federal judgment.” Id. at 806.
II.
There can be no doubt that HANO has strenuously resisted satisfying the
judgment it owes Liberty. Indeed, HANO’s refusal to reasonably cooperate spurred
this extensive litigation. However, past behavior does not necessarily dictate future
conduct; the Court requires some evidence that HANO will not be willing or able to
ever satisfy the judgment before it will allow execution to proceed.
As evidence that HANO intends to “resist the judgment until the bitter end,”
Gates, 616 F.2d at 1271-72, Liberty quotes deposition testimony from HANO’s
Executive Director, Gregg Fortner:
In New Orleans, and my lawyers can better explain this, we have
judgments on the books—and other liabilities we can’t pay because of
the lack of concurrence from HUD and the lack of resources that we have
for it because we don’t have a funding source that will allow us to pay
for those liabilities. Same situation as San Francisco.
(Rec. Doc. 586 at 5). According to Liberty, the situation in San Francisco was that
Mr. Fortner, as executive director of the San Francisco Housing authority, was held
in contempt by a state court for failing to pay judgments in his capacity as executive
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director of the San Francisco Housing Authority.
As further evidence, Liberty draws attention to the nature of HANO’s promise
regarding payment in its second motion to stay. In denying HANO’s first motion this
Court allowed HANO opportunity “to refile its motion if it includes evidence that
HANO will be able and willing to pay the judgment upon resolution of appeal.” (Rec.
Doc. 559 at 13). In its second motion HANO makes no commitment to pay on
resolution of appeal; rather, HANO’s General Counsel promises HANO will seek
authority to pay the judgment from HUD and from its board. (Rec. Doc. 587-2).
Regulation ties HANO’s hands from doing anything more than that, it avers. (Rec.
Doc. 602-2).
The Court must agree with Liberty that a promise to make a request for
payment from HUD provides little assurance to Liberty that it will be paid upon
resolution of appeal. HANO requested funding for a supersedeas bond from HUD and
HUD denied the request. A supersedeas bond can be obtained at fraction of the price
of the final judgment. Given HANO’s continued failure to “establish some type of
positive protection of the judgment creditor’s rights,” the Court must once again reject
HANO’s request to stay without posting bond.
Normally, the consequence of not staying execution is that execution proceeds.
Here however, because the judgment derives from diversity jurisdiction and is
against a state entity, execution may not proceed until HANO has demonstrated
“behavior [that] reaches the level of recalcitrance required under Gates.” Freeman,
352 F. App'x at 925. HANO urges it is not being recalcitrant, it is merely taking the
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only course of action it is allowed. Thus, while HANO has not provided adequate
security to its judgment creditor, HANO, arguably, has not refused to ever pay the
judgment either. This post-judgment litigation appears stuck in a legal no-man’s
land.
The Court believes that the best option is to preserve the status quo by
directing HANO’s Executive Director to purchase a supersedeas bond. Given multiple
opportunities to provide assurance that HANO will satisfy the judgment—only after
it has been upheld by the Fifth Circuit—HANO has repeatedly failed to do so. HANO
claims its hands are tied by regulation; fortunately, federal courts are empowered to
use their inherent powers, as codified in Rules 69 and 70, to resolve such an issue
with execution of a judgment. See Hankins v. Finnel, 964 F.2d 853, 860 (8th Cir. 1992)
(“Where state law fails to supply the necessary procedure, or actually stands in the
way of enforcement, the district court may take the necessary steps to ensure
compliance with its judgment.”); see also Spain v. Mountanos, 690 F.2d 742, 747 (9th
Cir. 1982) (noting a district court has “plenary power to enforce its commands”).
Given HANO’s repeated statements regarding its lack of autonomy over its own
budget, it would appear to this court that “an order directing the responsible state
official to satisfy the judgment out of state funds” may be “the only reasonable way to
ensure compliance with a valid federal judgment.” Gary W., 622 F.2d at 806-807.
However, given the short amount of time that has passed since this Court’s
judgment—the Court’s judgment is still on appeal—the Court thinks it would be too
drastic a step to allow execution on the judgment, unless HANO disobeys this Court’s
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Order to post supersedeas bond. The Court believes that its decision will serve to
adequately protect the judgment creditor while placing a minimum burden on HANO.
The Court is further convinced that this action is appropriate given the
particular facts of this case. First, HANO is unlike most state entities in that it is not
funded by State of Louisiana but by the federal government. (Rec. Doc. 602-2 at 2)
(“In truth, HUD is the sole source of operational funds for HANO, which leaves HANO
no option but to seek authority from HUD to expend those funds in accordance with
HUD’s mandates.”). The Court finds this extension of control by the federal
government through exclusive funding to be significant because it it potentially gives
rise to a federal interest independent to the Court’s interest in enforcing its
judgment. 3 Moreover, that HANO was allocated funds by the federal government to
pay for the housing project that gave rise to this litigation also severely lessens the
concern that this Court is “assuming the role of ‘superlegislature to judge the wisdom
or desirability of legislative policy determinations made in the local economic
sphere.’” Town of Ball v. Rapides Par. Police Jury, 746 F.2d 1049, 1060 (5th Cir. 1984)
(quoting New Orleans v. Dukes, 427 U.S. 297, 304 (1976)).
Second and relatedly, the “Court cannot substitute its own judgment as to the
wisdom of economic policies adopted by a democratically elected legislature,” Bennett
v. City of New Orleans, No. CIV.A. 03-912, 2004 WL 60316, at *7 (E.D. La. Jan. 9,

Courts have recognized a federal interest in the disbursement of federal funds in a variety of contexts.
See, e.g., S. Dakota v. Dole, 483 U.S. 203, 207 (1987), Massachusetts v. United States, 435 U.S. 444,
460 (1978).

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2004), but the Court’s decision to direct payment by HANO to secure a judgment
regarding a building contract for public works is directly in line with the intentions
of the Louisiana legislature. According to Louisiana law, “[a]ll public entities shall
promptly pay all obligations arising under public contracts when the obligations
become due and payable under the contract.” La. Stat. Ann. § 38:2191. If a public
entity fails to make “final payment when due” the entity “shall be subject to
mandamus to compel the payment of the sums due under the contract up to the
amount of the appropriation made for the award and execution of the contract,
including any authorized change orders.” Id. This type of relief is not “conditioned on
appropriated funds remaining available.” Quality Design & Const., Inc. v. City of
Gonzales, 146 So. 3d 567, 572 (La. App. 1 Cir. 3/11/14) (finding that the legislature
lacked an “intent to leave payment of these contracts to the discretion of [the public
entity] in any way”). HANO allocated $11,288,000.00 to pay for the construction of
the Florida Avenue New Affordable Housing Units project. HANO awarded the
contract for that amount to Parkcrest before it entered into a takeover agreement
with Liberty. (Rec. Doc. 505-5). HANO agreed that “the Contract Balance has been
dedicated to [Liberty] for use in completion of the Project, without offset for any claim
by Owner arising from Contractor’s work.” (Rec. Doc. No. 506-2 at ¶ 13). Finally,
HANO approved pay applications in the amount of $10,789,723.50, with $567,890.19
held in earned retainage. (Rec. Doc. No. 510-66). The Court does not use this provision
as a vehicle for its order—Liberty did not file a petition for a writ of mandamus—but
merely notes it as a reflection of the legislature’s will to provide “for the efficient
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facilitation of forcing public entities to promptly render monies owed under public
contracts.” St. Bernard Port, Harbor & Terminal Dist. v. Guy Hopkins Constr. Co.,
220 So. 3d 6, 13 (La. App. 4 Cir. 4/5/17). By ordering HANO to secure a supersedeas
bond, the Court fulfills the federal interest in having this Court’s judgment enforced
but also the state legislature’s interest in having HANO take a step towards
satisfying its contract debts.
CONCLUSION
Accordingly,
IT IS HEREBY ORDERED that the Petitions for Writ of Execution and Other
Proceedings Supplemental to Judgment (Rec. Docs. 574, 577) are DENIED
without prejudice. Petitioners may refile their motions as is necessary.
IT IS FURTHER ORDERED that HANO’s Second Motion to Stay Execution
of Judgment (Rec. Doc. 587) is DENIED.
IT IS FURTHER ORDERED that HANO is directed to post supersedeas
bond no later than December 21, 2018.
IT IS FURTHER ORDERED that Gregg Fortner, in his official capacity as
executive director of HANO, is directed to ensure HANO’s compliance with this
Order.
New Orleans, Louisiana, this 30th day of November, 2018.

___________________________________
CARL J. BARBIER
UNITED STATES DISTRICT JUDGE
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