AFC, Inc. et al v. Mathes Brierre Architects

Filing 60

ORDER AND REASONS granting in part, denying in part 42 MOTION for Summary Judgment Regarding Damages. Signed by Judge Lance M Africk on 6/26/2017.(blg)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF LOUISIANA
AFC, INC. ET AL.

CIVIL ACTION

VERSUS

No. 16-16560

MATHES BRIERRE ARCHITECTS

SECTION I

ORDER AND REASONS
Defendant Mathes Brierre was the architect for the Boomtown Casino in
Harvey; plaintiff AFC was a subcontractor. (Plaintiffs Ernest and Vonnie Ladner are
the principals of AFC.)

Alleged construction defects resulted in an arbitration

proceeding between the contractor of the Boomtown project and the plaintiffs here.
The arbitration ended after the plaintiffs paid the Boomtown contractor to settle the
arbitration.
Plaintiffs, alleging that the construction defects were solely due to the fault of
Mathes Brierre, then filed the present lawsuit seeking indemnity from Mathes
Brierre. Mathes Brierre now moves1 for summary judgment as to plaintiffs’ various
damages theories, arguing that they seek damages that are not recoverable under
Louisiana law. For the following reasons, the motion is granted in part and denied
in part.

1

R. Doc. No. 42.

I.
Summary judgment is proper when, after reviewing the pleadings, the
discovery and disclosure materials on file, and any affidavits, the court determines
that there is no genuine dispute of material fact. See Fed. R. Civ. P. 56. “[A] party
seeking summary judgment always bears the initial responsibility of informing the
district court of the basis for its motion and identifying those portions of [the record]
which it believes demonstrate the absence of a genuine issue of material fact.” Celotex
Corp. v. Catrett, 477 U.S. 317, 323 (1986). The party seeking summary judgment
need not produce evidence negating the existence of material fact, but need only point
out the absence of evidence supporting the other party’s case. Id.; Fontenot v. Upjohn
Co., 780 F.2d 1190, 1195 (5th Cir. 1986).
Once the party seeking summary judgment carries its burden pursuant to Rule
56, the nonmoving party must come forward with specific facts showing that there is
a genuine dispute of material fact for trial. Matsushita Elec. Indus. Co. v. Zenith
Radio Corp., 475 U.S. 574, 587 (1986). The showing of a genuine issue is not satisfied
by creating “‘some metaphysical doubt as to the material facts,’ by ‘conclusory
allegations,’ by ‘unsubstantiated assertions,’ or by only a ‘scintilla’ of evidence.” Little
v. Liquid Air Corp., 37 F.3d 1069, 1075 (5th Cir. 1994) (citations omitted). Instead, a
genuine issue of material fact exists when the “evidence is such that a reasonable
jury could return a verdict for the nonmoving party.” Anderson v. Liberty Lobby, Inc.,
477 U.S. 242, 248 (1986). The party responding to the motion for summary judgment
may not rest upon the pleadings, but must identify specific facts that establish a

2

genuine issue. Id. The nonmoving party’s evidence, however, “is to be believed, and
all justifiable inferences are to be drawn in [the nonmoving party’s] favor.” Id. at 255;
see also Hunt v. Cromartie, 526 U.S. 541, 552 (1999).
II.
Indemnity in Louisiana is an action “founded upon the general obligation to
repair the damage caused by one’s fault” and “the moral maxim that no one ought to
enrich himself at the expense of another.” Nassif v. Sunrise Homes, Inc., 739 So. 2d
183, 186 (La. 1999). Thus, for example, where a party is “exposed to liability and
compelled to pay damages and statutory attorney fees on account of the negligent act
of [another], an implied contract of indemnity [arises] . . . to prevent an unjust
enrichment.” Id. at 187. That implied contract of indemnity “shifts the entire loss to
the party who is actually at fault.” Id.
This Court previously determined that there was a genuine dispute of material
fact as to whether defendant Mathes Brierre was entirely at fault for the construction
defects. See R. Doc. No. 30. The parties now dispute the extent to which plaintiffs
may recover certain damages from Mathes Brierre provided that plaintiffs can
establish that Mathes Brierre was entirely at fault for the loss. 2
A.
Plaintiffs’ settlement agreement with the contractor included a provision that
plaintiffs would forfeit their final payment from the contractor. The parties dispute

“[A] party who is actually negligent or actually at fault cannot recover legal
indemnity.” Martco Ltd. P’ship v. Bruks Inc., 430 F. App’x 332, 335 (5th Cir. 2011)
(internal quotation marks and alterations omitted).
2

3

whether plaintiffs may recover for the final payment that plaintiffs never actually
received due to the settlement. Plaintiffs suggest they can because the forfeited
payment constitutes a de facto loss; defendants suggest that plaintiffs’ entire loss
cannot encompass what plaintiffs never actually had (i.e., since plaintiffs never
physically received the final payment, plaintiffs cannot lose that amount).
Neither side points to case law directly controlling this issue. In the absence
of controlling case law, however, this Court rejects Mathes Brierre’s approach, which
improperly exalts formalism over functionalism. Legal indemnity is ultimately an
equitable doctrine that entitles plaintiffs to compensation for an entire damages
award occasioned by another party’s fault. See Nassif, 739 So. 2d at 186-87. Given
those equitable roots, the Court sees little reason to adopt a rule that required the
plaintiffs to go through the silly process of receiving the last payment from the
contractor only to then immediately return it to the contractor as part of a settlement.
If the plaintiffs can show that Mathes Brierre was entirely at fault for the
construction defects, 3 plaintiffs can recover the forfeited amount from Mathes Brierre
in indemnity.

Mathes Brierre suggests in passing that the forfeited final payment somehow
establishes as a matter of law that plaintiffs necessarily share some fault for their
damages. However, the Court sees no reason why that would necessarily be true and
the record evidence substantiates a genuine dispute of material fact as to Mathes
Brierre’s sole fault. See R. Doc. No. 30, at 4.

3

4

B.
Some of plaintiffs’ settlement payments came from plaintiffs’ insurer rather
than plaintiffs themselves.

Mathes Brierre, relying on federal maritime cases,

suggests that the amounts paid by plaintiffs’ insurer are not recoverable because they
do not constitute actual losses to the plaintiffs. See Waters v. Harvey Gulf Int’l, Inc.,
592 F. Supp. 6, 8 (E.D. La. 1983). Plaintiffs counter that the collateral source rule
bars Mathes Brierre from using payments from plaintiffs’ insurer to decrease the
amount Mathes Brierre owes the plaintiff.
At the outset, Mathes Brierre’s reliance on federal maritime law is only so
helpful. Louisiana indemnity law does not invariably follow federal indemnity law.
See Kinsinger v. Taco Tico, Inc., 861 So. 2d 669, 673 (La. Ct. App. 5th Cir. 2003). But
even more importantly, Mathes Brierre’s argument appears inconsistent with
Louisiana’s version of the collateral source rule.

In Louisiana, “any payments

received by the plaintiff from an independent source are not deducted from the award
the injured party would otherwise receive from the wrongdoer.” Hoffman v. 21st
Century N. Am. Ins. Co., 209 So.3d 702, 704 (La. 2015). “In short,” in Louisiana, a
wrongdoer may not “benefit from the victim’s foresight in purchasing insurance and
other benefits.” Id.
Here, if plaintiffs’ version of the facts is accepted, Mathes Brierre’s tortious
conduct forced the plaintiffs to pay damages to the contractor on the Boomtown
project. That plaintiffs were able to rely on their insurance company to pay part of
the amount that plaintiffs legally owed should not otherwise decrease the amount

5

owed by Mathes Brierre. Id. at 704.

Plaintiffs paid for insurance coverage, 4 and

Mathes Brierre is not allowed to benefit from plaintiffs’ foresight in purchasing
insurance. Otherwise plaintiffs will be dissuaded from purchasing insurance and
wrongful conduct will be insufficiently deterred insofar as Mathes Brierre will not be
forced to pay the true cost of its (alleged) negligence. The collateral source rule
precludes Mathes Brierre’s attempt to rely on plaintiffs’ insurer to decrease the
damages that Mathes Brierre may owe to plaintiffs.
C.
The plaintiffs also seek compensation for their defense costs and attorney’s
fees—costs that were paid by both plaintiffs and their surety—in the underlying
arbitration.

Mathes Brierre argues that such costs are not recoverable in an

indemnity action. The Court agrees.
In contract indemnity actions, Louisiana has a “general rule that absent some
specific language in the indemnification contract, attorney fees and defense costs are
not owed.” Kinsinger, 861 So. 2d at 673. Unsurprisingly, then, Louisiana courts have
not permitted a party to recover that party’s own attorney’s fees and defense costs
when enforcing the implied contract of indemnity in a legal indemnity action. See,

See Hoffman, 209 So. 3d at 706 (“[I]n both Bozeman and Bellard, we emphasized a
fundamental consideration for application of the collateral source rule, in addition to
tort deterrence, is whether the victim, by having a collateral source available as a
source of recovery, either paid for such benefit or suffered some diminution in his or
her patrimony because of the availability of the benefit, such that no actual windfall
or double recovery would result from application of the rule.” (internal quotation
marks omitted)).
4

6

e.g., Eaves v. Spirit Homes, Inc., 931 So. 2d 1173, 1180 (La. Ct. App. 3d Cir. 2006). 5
And though the plaintiffs criticize those cases, this Court may “not disregard the
decisions of Louisiana’s intermediate courts unless” it is “convinced that the
Louisiana Supreme Court would decide otherwise.” In re Katrina Canal Breaches
Litig., 495 F.3d 191, 206 (5th Cir. 2007). Plaintiffs’ assorted citations do not provide
the Court with the requisite level of certainty necessary to disregard the rulings of
the Louisiana appellate courts in Kinsinger and Eaves. The Court finds that plaintiffs
may not seek indemnity for their own defense costs and attorney’s fees in the
underlying arbitration, and grants in part Mathes Brierre’s motion for summary
judgment.
D.
The parties agree that lost profits related to lost business opportunities are not
recoverable in indemnity actions. Therefore, the Court finds that such damages are
unavailable as a matter of law, and grants in part Mathes Brierre’s motion for
summary judgment.

A party may, however, recover any fees it had to pay the other party in the
underlying action. See Nassif, 739 So. 2d at 186 (“[W]e conclude that the equitable
principle of restitution applies in an action for indemnity to allow a defendant who is
only technically or constructively liable for a plaintiff's loss to recover from the party
actually at fault the attorney fees it was compelled to pay the plaintiff, even in the
absence of a statute or contract of indemnification.”).

5

7

IV.
Accordingly,
IT IS ORDERED that the motion for summary judgment is GRANTED IN
PART and DENIED IN PART as set forth above.
New Orleans, Louisiana, June 26, 2017.

_______________________________________
LANCE M. AFRICK
UNITED STATES DISTRICT JUDGE

8