Progressive Waste Solutions of LA, Inc. v. St.Bernard Parish Government

Filing 119

ORDERED that the SDT Defendants' 101 106 Motions to Dismiss are GRANTED in part and DENIED in part. They are GRANTED as they relate to PWSs claim that Section 9.7 of the Purchase Agreement includes a duty to indemnify. They are DENIED as th ey relates to PWSs claims that the SDT Defendants owe indemnification because the counterclaims arise from a misrepresentation or omission in the Purchase Agreement. FURTHER ORDERED that PWS's 109 Motion for Summary Judgment is DENIED. FURTHER ORDERED that the parties contact the case manager, Dean Oser, to set a scheduling conference with the Court. Signed by Judge Eldon E. Fallon on 4/11/2017. (Reference: 16-8669, 16-15830)(cms)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF LOUISIANA

PROGRESSIVE WASTE SOLUTIONS OF LA, INC.

CIVIL ACTION

V.

NO. 16-8669 C/W
16-15830

ST. BERNARD PARISH GOVERNMENT

SECTION "L" (5)

ORDER & REASONS
Currently before the Court are Consolidated Defendants SDT, Inc. and Sidney D. Torres,
IV’s (“SDT Defendants”) Motion to Dismiss for Failure to State a Claim (R. Docs. 101, 106) and
Plaintiff Progressive Waste Solution’s Motion for Summary Judgment (R. Doc. 109). After
reviewing the briefs, the applicable law, and counsels’ statements at oral argument, the Court
now issues this Order & Reasons.

I.

BACKGROUND
These consolidated cases arise out of a contract dispute. Plaintiff Progressive Waste

Solutions of LA, Inc. (“PWS”) is a Delaware corporation that specializes in solid waste removal.
R. 1 at 1–2. In early 2006, St. Bernard Parish Government (“St. Bernard”) issued a Request for
Proposals for Municipal Solid Waste Removal, Curb Side Pick Up. R. 1 at 2. SDT Waste &
Debris Services, LLC, (“SDT”) submitted a proposal, and on July 27, 2006, contractually agreed
to provide solid waste removal services to St. Bernard. R. 1 at 2. On February 7, 2007, SDT
entered into a Time Contract with St. Bernard regarding both curb side pick-up services and
dumpster pick-up services. The Time Contract was set to commence on January 28, 2008, and
terminate on January 27, 2014. R. 1 at 3. The Time Contract also provided SDT the option to
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extend the agreement through July 26, 2016. R. 1 at 3.
In June of 2011, SDT was purchased by IESI LA Corporation, which included the
transfer and assignment of the July 27, 2006 Agreement and the February 7, 2007 Time Contract.
Despite the purported term of the Time Contract extending to at least January 27, 2014, St.
Bernard told IESI that St. Bernard intended to terminate the contractual relationship. On
December 5, 2011, St. Bernard sought bids for curb side pick-up services and dumpster pick up
services. R. 1 at 3–4. On December 8, 2011, IESI filed a Petition for Temporary Restraining
Order, Preliminary and Permanent Injunction, and Declaratory Judgment in the Thirty-Fourth
Judicial District Court for the Parish of St. Bernard. R. 1 at 4. The state court issued the
preliminary injunction on December 14, 2011, and enjoined St. Bernard from requesting
proposals for bids for solid waste collection. R. 1 at 4. One week later, the state court enjoined
St. Bernard from entering into any new contract for the services currently being performed by
IESI. R. 1 at 4.
IESI changed its name to Progressive Waste Solutions of LA, Inc. (“PWS”) on January
12, 2012. In May of 2013, St. Bernard once again issued Requests for Proposals inviting vendors
to submit proposals for the waste collection services provided by PWS. R. 1 at 4. In response,
PWS filed a Motion for Contempt and a Second Supplemental and Amending Petition for
Temporary Restraining Order, Preliminary and Permanent Injunction and Declaratory Judgment
in state court on May 20, 2013. R. 1 at 4–5. The parties resolved their differences before the state
court could rule. St. Bernard agreed to extend the Time Contract through December 31, 2020.
PWS in turn reduced its rates from $20.00 per household per month to $15.50 per household. R.
1 at 5. Two months later, PWS and St. Bernard entered into a new Time Contract that extended
PWS’s provision of solid waste services until December 31, 2020.
On May 19, 2016, St. Bernard wrote to PWS stating that they intended to unilaterally
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terminate the solid waste services contract on July 6, 2016. St. Bernard provided two reasons for
the termination: (1) the St. Bernard Home Rule Charter prohibits contracts for services not
covered by public bid law exceeding three years; and (2) PWS breached the contract by missing
residential pickups. R. 1 at 6, 1-7. PWS filed suit in response, requesting injunctive relief and a
declaratory judgment. R. 1 at 7–9. PWS also sought damages for breach of contract, detrimental
reliance, and deprivation of rights under color of law. R. 1 at 9–13.
In response, St. Bernard filed five counter claims against PWS. R. 35. First, St. Bernard
alleges a breach of contract claim for overbilling for the quantity of services performed from
August 1, 2006 through December 31, 2012. R. 35 at 8-9. Second, St. Bernard alleges a breach
of contract claim for overbilling in pricing from January 20, 2014 to December 31, 2014 and
January 21, 2015 and December 31, 2015. R. 35 at 10. Third, St. Bernard alleges that “PWS
breached its obligations under the contract” by failing to collect trash on certain dates and times,
and allowing spillage to occur during garbage collection. R. 35 at 11. Fourth, St. Bernard sought
a declaratory judgment that the first and second SDT contracts, as well as the PWS contract were
awarded in violation of Louisiana’s public bid law. R. 35 at 12. Finally, St. Bernard sought a
declaration that the second SDT contract and PWS contract violated the St. Bernard Charter. R.
35 at 14. PWS seeks indemnification from the SDT Defendants in relation to the first
counterclaim.
Pelican Waste and Debris, LLC (“Pelican”), filed a Motion for Leave to File Intervention
on June 16, 2016. R. 11. The Court granted the Order, finding that Pelican had an interest in the
litigation. Specifically, Pelican alleged that it was hired by St. Bernard to replace PWS as the
provider of residential waste removal services in St. Bernard Parish, and that its interests will be
frustrated and it will be prejudiced if PWS receives its requested relief.
The Court denied the Motion for Preliminary Injunction on Friday, June 24, 2016. On
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August 9, 2016, the Court issued an Order resolving various motions for summary judgment
filed by the parties. The Court found that St. Bernard’s contract with PWS was invalid as it
violated the terms of the St. Bernard Charter, and its contract with Pelican was invalid because it
was reached without following St. Bernard Parish’s procedures for public service contracts. See
R. 97.
Then on October 25, 2016, PWS filed this consolidated case against SDT, Inc. and
Sidney D. Torres, IV, (“SDT Defendants”) seeking a declaratory judgment. No. 16-15830, R. 1.
PWS alleges that at on June 1, 2011 Torres owned 100% of SDT Waste & Debris Services, LLC
(“SDT Waste & Debris), when IESI LA Corp, now known as PWS, entered a Purchase
Agreement to acquire 100% ownership of SDT. According to the terms of that Agreement, SDT
and Torres agreed to “indemnify, defend, protect and hold harmless” IESI or its successors from
any losses, liabilities, or claims, including costs and expenses, sustained by IESI or a successor
corporation as a result of any intentional misrepresentations or omissions by SDT or Torres in
the Purchase Agreement. R. 1 at 4. Plaintiffs allege this included an obligation to defend IESI in
any proceeding that was instituted after June 1, 2011 if those claims arose before June 1, 2011.
R. 1 at 4.
According to Plaintiffs, St. Bernard Parish has a current suit pending in this Court against
PWS as a result of SDT’s overbilling between August 1, 2006 and December 31, 2012.
Specifically, Plaintiffs allege that a dispute between SDT and St. Bernard arose during this
period regarding disposal costs, and while the SDT Defendants claim this dispute was resolved,
St. Bernard Parish considered litigating these issues, and each party retained a forensic
accountant to evaluate these claims. Plaintiffs aver they were not notified of this dispute in the
Purchase Agreement. R. 1 at 6. Plaintiffs claim St. Bernard and SDT had another dispute
regarding the appropriate number of units SDT should bill St. Bernard during this same period.
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R. 1 at 7. Plaintiffs allege that St. Bernard reduced its payments to SDT, while SDT continued to
bill St. Bernard for the same amounts. Plaintiffs aver that the parties never resolved this dispute,
and it was not disclosed to PWS at the time of the purchase. R. 1 at 7.
Plaintiffs claim that each of the above disputes led to the lawsuit between PWS and St.
Bernard, as St. Bernard seeks to recover payments made as a result of services SDT did, or did
not, provide prior to June 1, 2011. R. 1 at 8. Further, Plaintiffs allege that Torres’ threats of a
lawsuit against Mr. Taffaro, St. Bernard Parish President, constitute a threat to institute a claim,
as contemplated in the Purchase Agreement. R. 1 at 9. Because PWS was not notified of these
potential claims and suits at the time of the sale, it now seeks a declaratory judgment that it is
entitled to indemnification and defense costs for the portion of the St. Bernard counterclaim that
arises from the actions of the SDT Defendants prior to June 1, 2011. R. 1 at 10. PWS submitted a
demand letter to SDT reflecting such, and SDT responded that even if the claims fell within the
terms of the indemnification provision, that provision expired four years after the sales date, and
thus the indemnification provision no longer applies. R. 1-6. However, SDT agreed that if the St.
Bernard claims are covered by Section 9.7 of the Purchase Agreement, which sets out SDT’s
ongoing duty to defend, than SDT would provide a defense—but not indemnification—for the
relevant counterclaim. SDT explained it had retained counsel to coordinate this defense. R. 1-6 at
2.
PWS argues that the temporal limitations do not apply to the indemnification agreement,
because the claims existed prior to the agreement and were intentionally not disclosed. PWS
seeks a declaratory judgment from this Court as to its rights to defense and indemnification
under the terms of the agreement. R. 1 at 13. Plaintiffs also seek attorney fees. R. 1 at 14.
II.

Purchase Agreement
Before reviewing the parties’ arguments, the Court finds it appropriate to discuss the
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relevant terms of the Purchase Agreement. On June 1, 2011, IESI (now known as PWS), SDT,
Inc. and Sidney D. Torres, IV, entered a purchase agreement. The agreement contains a chapter
outlining the indemnifications obligations SDT owed to IESI/PWS after the sale. The relevant
sections of that chapter provide:
9.1
Indemnification by Sellers. Subject to section 9.2, each of the Sellers
covenants and agrees to indemnify, defend, protect, and hold harmless Buyer . . .
from and against and in respect of all liabilities, losses, claims, damages . . . and
costs and expenses (including without limitation reasonable attorneys’ fees)
(collectively, “Damages”) sustained, incurred, or paid by the Buyer Indemnified
Parties in connection with, resulting from, or arising out of directly or indirectly;
(a) any misrepresentation in, omission from, breach or claim of breach or any
representation or warranty of either of the Sellers set forth in Section 2.3, and any
intentional misrepresentation or omission by either of the Sellers contained in this
Agreement or any other document or instrument delivered in connection with this
Agreement.

9.2

Limitation of Indemnification by Sellers.
(a) Notwithstanding the foregoing, (i) Sellers’ aggregate liability for
indemnification under this Agreement with respect to any claims under Section
9.1 shall not exceed the amount equal Ten Million and No/100 Dollars
($10,000,000) and (ii) Buyer may not bring any claim under Section 9.1 after
the fourth anniversary of the Closing Date. (emphasis added).
(b) Notwithstanding the foregoing, the provisions contained in Section
9.2(a) shall not apply to any claim for indemnification with respect to (i) claims
made under Section 9.1(a) . . . or (iii) claims made under Sections 9.1(f), (g) or
(h) or Section 9.7.” (emphasis added).
Thus, read in conjunction, Sections 9.1 and 9.2 provide that the Seller has an
obligation to defend and indemnify the Buyer for any claims or damages which relate to
the Seller’s conduct before the Purchase Agreement. This obligation ends four years after
the date of the Purchase Agreement. However, if the claim arises from a
misrepresentation or omission the Seller made in the Agreement, the four year time limit
does not apply. Further, Section 9.7 of the agreement provides:
(a) Sellers jointly and severally agree to defend Buyer and the other Buyer
Indemnified Parties . . . against any and all claims or demands made or threatened
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to be made or causes of actions or proceedings instituted or threatened to be
instituted against such persons in connection with any of the matters set forth on
Schedule 9.7 . . . and any other claims, causes of actions or other proceedings that
are either made or instituted (i) prior to the Closing Date or (ii) subsequent to the
Closing Date to the extent that such claims, actions or proceedings relate to or
arise out of any period of time on or before the Closing.
(d) sellers agree to pay for any costs incurred in connection with the defense of
the Existing Claims, including any fines, orders, interests, penalties, settlement
amounts or other damages payable in connection therewith.
In other words, Seller [SDT] agrees to defend 1 Buyer [PWS] from claims that are made
before the Closing Date, or relate to or arise out of the Seller’s actions before the Closing. PWS
has now filed a Complaint seeking a Declaratory Judgment that the SDT Defendants have an
obligation to indemnify PWS for any liability it incurs as a result of St. Bernard’s counterclaims.
First, PWS argues the indemnity obligation arises from Section 9.1 of the Agreement, as the
counterclaims arise from a misrepresentation or omission in the Purchase Agreement. Second,
PWS contends that Section 9.7 includes both a duty to defend and indemnify.
III.

PRESENT MOTIONS
Currently pending before the Court are Defendants’ Motion to Dismiss, R. 101, 106, and

Plaintiff’s Motion for Summary Judgment, R. 109. Each motion is opposed.
A.

Defendants’ Motion to Dismiss (R. 101, 106)

Defendants have filed a Motion to Dismiss PWS’s claims for declaratory judgement,
arguing PWS is not entitled to indemnification under either Section 9.1 or 9.7 of the Purchase
Agreement. SDT argues that the plain language of the Purchase Agreement defines the extent of
its indemnification and defense obligations. R. 101 at 3. The Agreement provides that it shall be
construed in accordance with Louisiana law which provides, “[w]hen the words of a contract are
clear and explicit and lead to no absurd consequences, no further interpretation may be made in

1

The Parties’ dispute what is included in this obligation to “defend,” as discussed more fully

below.

7

search of the parties’ intent.” La. Civ. Code art. 2046. According to SDT, PWS’s Complaint
relates to two separate portions of the purchase agreement. R. 101 at 4. First, Section 9.1 and 9.2
of the agreement, which discuss indemnification rights and obligations, and second, Section 9.7,
entitled Defense of Claims. Section 9.1 requires SDT to defend and indemnify the Buyer for any
claims that relate to conduct before the Purchase Agreement; however, Section 9.2 provides “(ii)
Buyer may not bring any claim under Section 9.1 after the fourth anniversary of the Closing
Date.” R. 101 at 5. Because the closing date was June 1, 2011, SDT avers that PWS’ claim for
defense and indemnification under Section 9.1 is time-barred. R. 101 at 5.
Addressing PWS’ argument that SDT must defend and indemnify under Section 9.7, SDT
admits that Section 9.7 of the agreement provides “(d) Sellers agree to pay for any costs incurred
in connection with the defense of the Existing Claims, including any fines, orders, interests,
penalties, settlement amounts or other damages payable in connection therewith,” but argues that
this Section does not impose a duty to indemnify. R. 101 at 7. The SDT Defendants explain they
have already agreed to provide for a defense, at their own cost, to the portion of St. Bernard’s
counterclaims which relate to conduct before the Purchase Agreement. R. 101 at 7. Therefore,
they argue they have fulfilled their obligations under the agreement, and Plaintiff’s Complaint
seeking a Declaratory Judgment must be dismissed. R. 101 at 7.
B.

Plaintiff’s Response (R. 99)

Plaintiff opposes the Motion, and argues SDT and Torres did not disclose the disputes
which now form the basis of St. Bernard’s counterclaims at the time of the Agreement, and
therefore the counterclaims arise from a material omission from the Purchase Agreement, such
that the four-year time limit for indemnification under Section 9.1 does not apply. Additionally,
Plaintiff argues Section 9.7’s duty to defend includes an obligation to indemnify. R. 99 at 1-2.
Plaintiff avers that the Agreement required SDT and Torres to “disclose all possible
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claims” at the time of the Purchase Agreement, and despite the fact they had full knowledge of
these potential claims, the SDT Defendants did not disclose them to PWS. R. 99 at 2. PWS
explains that because SDT and Torres knew of these potential claims yet did not disclose them,
they made an intentional misrepresentation or omission, and therefore the temporal limitation in
Section 9.2 does not apply. Thus, the SDT Defendants have a continuing obligation to defend
and indemnify under Section 9.1. R. 99 at 4.
In support of this position, PWS explains the events that transpired between Mr. Torres
and Mr. Taffaro, the Parish President at the time, at a St. Bernard Parish Council Meeting in
early 2011. R. 99 at 6. As a result of a heated disagreement and accusations made during the
meeting, Mr. Torres and Mr. Taffaro exchanged a series of correspondence which, according to
PWS, indicates SDT and Torres were aware St. Bernard had potential claims against them prior
to the June 1, 2011 sale date. R. 99 at 6-8. PWS argues because SDT was aware of the potential
claims at the time of the Purchase Agreement, and did not disclose them, the counterclaims arise
from a misrepresentation or omission. 2
Next, PWS argues that even if the four-year time limit does apply, the SDT Defendants
still have an obligation to defend and indemnify under Section 9.7. That Section provides
“Sellers agree to pay for any costs incurred in connection with the defense of the Existing
Claims, including any fines, orders, interests, penalties, settlement amounts or other damages
payable in connection therewith.” Based on this language, PWS contends that SDT has a duty

2

PWS also explains that its position is supported by the Louisiana concept of contra non valentum.
“The doctrine of contra non valentem agere nulla curit praescriptio prevents the running of liberative
prescription where the cause of action is not known or reasonably knowable by the plaintiff.” Cole v.
Celotex Corp., 620 So. 2d 1154, 1156 (La. 1993).

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to defend and indemnify under Section 9.7. R. 99 at 8.
C.

Plaintiff’s Motion for Summary Judgment (R. 109)

PWS filed a Motion for Summary Judgment arguing it is entitled to a Declaratory
Judgment that SDT and Torres have an obligation under the terms of the Purchase Agreement to
defend and indemnify PWS in regards to the counterclaims asserted by St. Bernard Parish. R.
109 at 1-3. PWS restates many of the arguments made in its response to SDT’s Motion to
Dismiss, but the Court will review them again here.
First, PWS argues that SDT and Torres represented there were no pending or threatened
claims, actions, suits, proceedings, or investigations against SDT at the time of the Purchase
Agreement. R. 109 at 3-4. However, PWS argues that the facts indicate SDT and Torres were in
fact aware of these potential claims. R. 109 at 4. According to PWS, this demonstrates SDT and
Torres made a misrepresentation or omission, which was a breach of the terms of the Purchase
Agreement. R. 109 at 4. Thus, PWS avers that SDT’s obligations to indemnify PWS for St.
Bernard’s counterclaims are governed by Section 9.2(b) of the agreement, which explains that
the four year indemnification time limit does not apply to claims that arise from material
misrepresentations or omissions made by Sellers. R. 109 at 4.
Second, PWS argues that Section 9.7(d) of the Agreement sets out defense obligations for
claims based on conduct that occurred prior to the Agreement, and provides “Sellers agree to pay
for any costs incurred in connection with the defense of the Existing Claims, including any
fines, orders, interests, penalties, settlement amounts or other damages payable in connection
therewith.” According to PWS, this provision imposes a duty for SDT and Torres to indemnify
PWS for claims based on conduct that occurred prior to the June 1, 2011 Purchase Agreement.
R. 109 at 7-11. PWS contends SDT and Torres had a duty not only to defend these claims, but

10

also to indemnify PWS for any settlement or judgment they may have to pay in relation to St.
Bernard’s counterclaims. R. 109 at 6-7, 16.
D.

Defendant’s Response (R. 114)

The SDT Defendants argue that they fully disclosed “all known pending litigation and
investigations” at the time of the Purchase Agreement. R. 114 at 3. They admit SDT and St.
Bernard had a dispute regarding the correct number of units SDT should be billing the parish for
sanitation services. However, SDT explains this conflict was resolved and the parties entered a
Resolution Agreement in January 2009, and Defendants were not aware of any pending claims
St. Bernard had threatened against them at the time of the Purchase Agreement. R. 114 at 3-4.
Next, Defendants argue that the language of the Agreement unequivocally states that a
temporal limitation applies to any indemnification obligations. Section 9.1 states:
For the avoidance of doubt, there shall be no indemnification under this
Agreement for any claim made after the Closing that any of the representations
and warranties made by Sellers in Article 2 were not accurate as of the Closing
Date, except for any claim related to either (x) an alleged breach of the
representation in Section 2.3 (Ownership and Equity of the Company) or (y) an
intentional misrepresentation or omission in any of the representations and
warranties made by Sellers in Article 2.
SDT argues it did not intentionally misrepresent or omit any information related to the
counterclaims at issue, and therefore the limited exception in section 9.1(y) does not
apply. The Purchase and Sale Agreement further provides:
Section 9.2 Limitation of Indemnification by Sellers.
(a) Notwithstanding the foregoing, (i) Sellers’ aggregate liability for
indemnification under this Agreement with respect to any claims under Section
9.1 shall not exceed the amount equal Ten Million and No/100 Dollars
($10,000,000) and (ii) Buyer may not bring any claim under Section 9.1 after the
fourth anniversary of the Closing Date.

11

Relying on this provision, Defendants aver that under the plain language of the agreement, any
indemnification obligation terminates four years after the date of sale; therefore PWS is not
entitled to indemnification in this case. R. 114 at 4-5.
Additionally, Defendants argue that PWS’ claim for indemnity as an element of defense
costs is barred. They agree that Section 9.7 of the agreement provides that Defendants shall pay
defense costs for claims that arise out of conduct that occurred before the closing date but
explain the indemnification provision under the defense costs obligation only applies if the Seller
has not already assumed responsibility for defending the Existing Claims within a reasonable
period of time. R. 114 at 5-6. Defendants argue this provision does not include an unlimited
obligation to indemnify, because such an interpretation would render the remaining portions of
Section 9 of the Purchase Agreement—which delineate Seller’s indemnification obligations—
meaningless. R. 114 at 5-6. Finally, Defendants argue these claims do not arise from prePurchase Agreement conduct, but stem from the 2013 contract between PWS and St. Bernard
Parish, which superseded the prior agreement between SDT and St. Bernard. R. 114 at 8-9.
IV.

LAW AND ANALYSIS
A.

Principles of Louisiana Contractual Interpretation

A federal court sitting in diversity applies state substantive law, including the state's
choice of law rules and method of statutory interpretation. Erie R.R. Co. v. Tompkins, 304 U.S.
64, 78 (1938); Keenan v. Donaldson, Lufkin & Jenrette, Inc., 529 F.3d 569, 572–73 (5th Cir.
2008). “To determine Louisiana law, we look to the final decisions of the Louisiana Supreme
Court.” In re Katrina Canal Breaches Litig., 495 F.3d 191, 206 (5th Cir. 2007) (internal citations
omitted). “In the absence of a final decision by the Louisiana Supreme Court, we must make
an Erie guess and determine, in our best judgment, how that court would resolve the issue if

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presented with the same case.” Id. In Clovelly Oil Co., LLC v. Midstates Petroleum Co., LLC, the
Supreme Court of Louisiana explained the law applicable to contract interpretation:
Contracts have the effect of law for the parties and the interpretation
of a contract is the determination of the common intent of the parties.
The reasonable intention of the parties to a contract is to be sought
by examining the words of the contract itself, and not assumed.
When the words of a contract are clear and explicit and lead to no
absurd consequences, no further interpretation may be made in
search of the parties' intent. Common intent is determined, therefore,
in accordance with the general, ordinary, plain and popular meaning
of the words used in the contract. Accordingly, when a clause in a
contract is clear and unambiguous, the letter of that clause should
not be disregarded under the pretext of pursuing its spirit, as it is not
the duty of the courts to bend the meaning of the words of a contract
into harmony with a supposed reasonable intention of the parties.
However, even when the language of the contract is clear, courts
should refrain from construing the contract in such a manner as to
lead to absurd consequences. Most importantly, a contract must be
interpreted in a common-sense fashion, according to the words of
the contract their common and usual significance. Moreover, a
contract provision that is susceptible to different meanings must be
interpreted with a meaning that renders the provision effective, and
not with one that renders it ineffective. Each provision in a contract
must be interpreted in light of the other provisions so that each is
given the meaning suggested by the contract as a whole.
2012-2055, p. 5-6 (La. 3/19/13); 112 So.3d 187, 192 (citations and quotations omitted).
However, if the “written expression of the common intention of the parties is
ambiguous,” parol or extrinsic evidence is admissible to interpret the contract. Campbell v.
Melton, 2001-2578, p. 6 (La. 5/14/02); 817 So.2d 69, 75 (citing Ortego v. State, Through the
Dep't of Transp. & Dev., 96-1322 (La. 2/25/97); 689 So.2d 1358). “A contract is considered
ambiguous on the issue of intent when either it lacks a provision bearing on that issue, the terms
of a written contract are susceptible to more than one interpretation, there is uncertainty or
ambiguity as to its provisions, or the intent of the parties cannot be ascertained from the language
employed.” Id. (citations omitted).

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B.

Discussion
1.

SDT Defendant’s Motion to Dismiss
a)

Motion to Dismiss Standard

The Federal Rules of Civil Procedure permit a defendant to seek a dismissal of a
complaint based on the “failure to state a claim upon which relief can be granted.” Fed. R. Civ.
P. 12(b)(6). A complaint should not be dismissed for failure to state a claim “unless it appears
beyond doubt that the plaintiff can prove no set of facts in support of his claim which would
entitle him to relief.” Conley v. Gibson, 355 U.S. 41, 47 (1957). Generally, when evaluating a
motion to dismiss pursuant to Rule 12(b)(6), the court should not look past the pleadings.
“To survive a motion to dismiss, a complaint must contain sufficient factual matter,
accepted as true, to ‘state a claim to relief that is plausible on its face.’ ” Ashcroft v. Iqbal, 556
U.S. 662, 678 (2009) (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007)). The
district court must construe facts in the light most favorable to the nonmoving party and must
accept as true all factual allegations contained in the complaint. Ashcroft, 556 U.S. at 678. “A
claim has facial plausibility when the plaintiff pleads factual content that allows the court to
draw the reasonable inference that the defendant is liable for the misconduct alleged.” Id. A court
“do[es] not accept as true conclusory allegations, unwarranted factual inferences, or legal
conclusions.” Plotkin v. IP Axess Inc., 407 F.3d 690, 696 (5th Cir. 2005).
b)

Analysis

To prevail on their Motion to Dismiss, the SDT Defendant would need to demonstrate
PWS cannot prove any set of facts which would entitle them to relief. See Conley, 355 U.S. at
47. First, the SDT Defendants argue they do not have a duty to indemnify under Section 9.1,
because these claims do not arise out of a misrepresentation or omission. SDT admits there were
conflicts between SDT, Torres, and St. Bernard Parish regarding disposal rates and quantities,
14

but that these conflicts were completely resolved at the time of the agreement. Alternatively,
PWS avers that the SDT Defendants knew these claims had not been resolved, and failed to
notify PWS about the potential liability at the time of the sale. Viewing the evidence in the light
most favorable to the nonmoving party, PWS’s claim is plausible on its face. See Bell Atlantic
Corp., 550 U.S. at 570. While the evidence is far from conclusive at this stage in the
proceedings, the SDT Defendants may have known about these potential claims at the time of the
agreement. If they did, and failed to disclose them to PWS, the four-year time limit would not
apply, and PWS would be entitled to indemnity under Section 9.1. Thus, SDT’s Motion to
Dismiss in regards to indemnity under Section 9.1 is DENIED.
However, whether Section 9.7 imposes an obligation to indemnify as well as defend will
turn solely on the language of the contract. The relevant portion of Section 9.7 provides, “sellers
agree to pay for any costs incurred in connection with the defense of the Existing Claims,
including any fines, orders, interests, penalties, settlement amounts or other damages payable in
connection therewith.” The SDT Defendants aver this obligation includes fines or damages
related to the defense of the claim, rather than the claim itself, whereas PWS contends this
portion provides a separate indemnification obligation—without any temporal limitation. Even
viewing the facts in the light most favorable to PWS, this interpretation is not plausible. “Even
when the language of the contract is clear, courts should refrain from construing the contract in
such a manner as to lead to absurd consequences.” Clovelly Oil, 112 So.3d at 192. If Section 9.7
included a continuing duty to indemnify, there would be no reason to have a separate Section
addressing the Sellers indemnification obligations.
Additionally, PWS’ interpretation of Section 9.7 would render much of Section 9.1
meaningless. Section 9.1 provides,

15

For the avoidance of doubt, there shall be no indemnification under this
Agreement for any claim made after the Closing that any of the representations
and warranties made by Sellers in Article 2 were not accurate as of the Closing
Date, except for any claim related to either (x) an alleged breach of the
representation in Section 2.3 (Ownership and Equity of the Company) or (y) an
intentional misrepresentation or omission in any of the representations and
warranties made by Sellers in Article 2.
This provision is further limited by Section 9.2, which explains that “Buyer may not
bring any claim under Section 9.1 after the fourth anniversary of the Closing Date.” “Each
provision in a contract must be interpreted in light of the other provisions so that each is given
the meaning suggested by the contract as a whole.” Id. Applying this principle, the Court finds
that Section 9.7 includes a duty to defend, and to pay damages that arise from that defense, but
does not include a separate duty to indemnify PWS for any liability they may face on the
underlying claims. Therefore, the SDT Defendants’ Motion is GRANTED as it relates to the
indemnification obligations under Section 9.7 of the Purchase Agreement.
2.

PWS’s Motion for Summary Judgment
a)

Summary Judgment Standard

Summary judgment is appropriate when the record before a court supports the conclusion
that there is no “genuine issue as to any material fact and that the moving party is entitled to
judgment as a matter of law.” Fed. R. Civ. P. 56. A party moving for summary judgment bears
the initial burden of demonstrating the basis for summary judgment and identifying those
portions of the record, discovery, and any affidavits supporting the conclusion that there is no
genuine issue of material fact. See Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). If the
moving party meets that burden, then the nonmoving party must use evidence cognizable under
Rule 56 to demonstrate the existence of a genuine issue of material fact. See id. at 324.
A genuine issue of material fact exists if a reasonable jury could return a verdict for the
nonmoving party. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1996).
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“[U]nsubstantiated assertions,” “conclusory allegations,” and merely colorable factual bases are
insufficient to defeat a motion for summary judgment. See Hopper v. Frank, 16 F.3d 92, 97 (5th
Cir. 1994); see also Anderson, 477 U.S. at 249-50. In ruling on a summary judgment motion,
however, a court may not resolve credibility issues or weigh evidence. See Int'l Shortstop, Inc. v.
Rally's Inc., 939 F.2d 1257, 1263 (5th Cir. 1991). Furthermore, a court must assess the evidence
and draw any appropriate inferences based on the evidence in the light most favorable to the
party opposing summary judgment. See Daniels v. City of Arlington, Tex., 246 F.3d 500, 502
(5th Cir. 2001).
b)

Analysis

According to the plain language of the contract, the Seller has an obligation to indemnify
PWS for claims that arise from any intentional misrepresentation or omissions Seller, SDT
and/or Torres, made in the Purchase Agreement. This obligation extends beyond the four year
time limit. To determine if this time limit applies, the Court must consider whether the SDT
Defendants made any “intentional misrepresentations or omissions” in the Purchase Agreement,
and whether PWS’s claims for indemnity arise from these alleged misrepresentations, such that
the time limit is inapplicable. To prevail on its Motion for Summary Judgment, PWS must
demonstrate there is no genuine issue of material fact regarding whether SDT made a
misrepresentation or omission in the Purchase Agreement. See Celotex Corp., 477 U.S. at 323.
The evidence demonstrates the SDT Defendants were aware of a conflict regarding
alleged overbilling for the quantity of services provided in the Parish at some point prior to the
Purchase Agreement. However, there is a fact question regarding whether the SDT Defendants
were aware this conflict constituted a potential or threatened claim at the time of the agreement.
For example, PWS explains that Mr. Torres and Mr. Taffaro, the St. Bernard Parish President in
2011, had a heated disagreement during a February, 2011, Council meeting. R. 99 at 6. During
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the meeting, Mr. Taffaro accused Mr. Torres of stealing money from St. Bernard Parish. R. Doc.
99 at 6. As a result of these accusations, Mr. Torres indicated he wanted to file suit against Mr.
Taffaro. R. 99 at 6. PWS avers that this dispute was never resolved, and forms the basis of the
counterclaims which St. Bernard has asserted in this litigation. R. 109 at 11.
Conversely, Torres explains that these conflicts were all resolved prior to the Purchase
Agreement, and therefore they do not arise out of a misrepresentation or omission in the
Purchase Agreement. First, Torres explains that SDT and St. Bernard resolved their dispute
regarding the cost of waste disposal at the transfer station in January, 2009. R. 114 at 6. Second,
he contends St. Bernard and SDT reached an agreement regarding the number of residential
billing units in September, 2010, when the Parish amended the Time Contract it had with SDT.
R. 114 at 7; R. 109-4 at 15 (Mr. Taffaro’s Deposition). According to Torres, after the altercation
at the St. Bernard Parish Council meeting, he sent a letter to Mr. Taffaro threatening to file a
defamation lawsuit. However, Mr. Taffaro issued a written apology, and Torres believe the
matter was resolved. Further, he explains this conflict did not involve a potential claim by St.
Bernard against SDT, but rather a potential claim by Mr. Torres against Mr. Taffaro.
Based on this evidence, whether St. Bernard’s counterclaims against PWS arise from any
misrepresentations or omissions the SDT Defendants made in the Purchase Agreement is a
question of material fact. Therefore, at this point, the Court cannot resolve whether the four-year
limitation on the Seller’s duty to defend and indemnify applies to the St. Bernard counterclaims.
PWS’s Motion for Summary Judgment must be DENIED as it relates to SDT’s indemnification
obligations under Section 9.1.
At oral argument, counsel for PWS argued that either the claims arise from a material
misrepresentation, such that the four-year time limit does not apply, or they were resolved prior
to the Purchase Agreement such that St. Bernard’s counterclaims must be dismissed. However,
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in reaching today’s decision, the Court does not hold that the conflicts between SDT and St.
Bernard were resolved prior to the Purchase Agreement, but merely that a fact question
precludes determining this issue on Summary Judgment. As the Court previously held, St.
Bernard’s counterclaim regarding overbilling for the quantity of services performed raises
factual questions, which precludes summary judgment. R. 97 at 30.
Finally, PWS argues it is entitled to summary judgment on its claim that Section 9.7 of
the Purchase Agreement includes a duty to indemnify in addition to its duty to defend. This
ambiguity is purely a legal issue of contractual interpretation, and is thus ripe for summary
judgment. Louisiana law provides that “[w]hen the words of a contract are clear and explicit and
lead to no absurd consequences, no further interpretation may be made in search of the parties'
intent.” La. Civ. Code art. 2046. “Each provision in a contract must be interpreted in light of the
other provisions so that each is given the meaning suggested by the contract as a whole.” La.
Civ. Code art. 2050. Thus, applying Louisiana law to the terms of the Purchase Agreement,
Section 9.7 dictates that SDT has an obligation to defend PWS against St. Bernard’s
counterclaim as it relates to alleged overbilling that occurred between August 1, 2006 and June
1, 2011, and must pay any fees and damages that arise from that defense, but Section 9.7 does
not make SDT responsible for indemnifying PWS for damages it may be required to pay as a
result of the underlying claim.
As discussed above, if Section 9.7 included a duty to indemnify, it would render other
portions of the Purchase Agreement meaningless. Because every provision in the Purchase
Agreement “must be interpreted in light of the other provisions so that each is given the meaning
suggested by the contract as a whole.” Clovelly Oil, 112 So.3d at 192. Thus, the Court finds that
Section 9.7 does not include a separate duty to indemnify PWS for liability it may incur on the

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underlying claims. Therefore, PWS’s Motion for Summary Judgment is DENIED as it relates to
the indemnification obligations under Section 9.7 of the Purchase Agreement.

V.

CONCLUSION
For the foregoing reasons, IT IS ORDERED that the SDT Defendants’ Motions to

Dismiss, R. 101 and 106, are GRANTED in part and DENIED in part. They are GRANTED as
they relate to PWS’s claim that Section 9.7 of the Purchase Agreement includes a duty to
indemnify. They are DENIED as they relates to PWS’s claims that the SDT Defendants owe
indemnification because the counterclaims arise from a misrepresentation or omission in the
Purchase Agreement.
IT IS FURTHER ORDERED that PWS’s Motion for Summary Judgment, R. 109, is
DENIED.
IT IS FURTHER ORDERED the parties contact the case manager, Dean Oser, to set up
a scheduling conference with the Court.
New Orleans, Louisiana, this 11th day of April, 2017.

UNITED STATES DISTRICT JUDGE

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