KFC Corporation v. Iron Horse of Metairie Road, LLC et al
Filing
112
ORDER AND REASONS: The Court GRANTS IN PART plaintiff's 65 motion for summary judgment. Defendants' counterclaim for detrimental reliance is DISMISSED WITH PREJUDICE. The Court DENIES summary judgment as to defendants' counterclaim for abuse of rights as set forth in document. Signed by Judge Sarah S. Vance on 5/30/2018. (mmv)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF LOUISIANA
KFC CORPORATION
CIVIL ACTION
VERSUS
NO. 16-16791
IRON HORSE OF METAIRIE ROAD,
LLC AND IRON ROOSTER, LLC
SECTION “R” (5)
ORDER AND REASONS
Before the Court is plaintiff’s motion for summary judgment on
defendants’ counterclaims. 1 For the following reasons, the Court grants
summary judgment as to the counterclaim for detrimental reliance and
denies summary judgment as to the counterclaim for abuse of rights.
I.
BACKGROUND
A. Environmental Contamination
This case arises out of a dispute over the remediation of environmental
contamination on property in Metairie, Louisiana.2 In 1991, Kentucky Fried
Chicken (KFC) of California purchased a piece of real property located at 702
Metairie Road in Metairie, Louisiana (the Property).3 KFC California later
1
2
3
R. Doc. 65.
R. Doc. 1.
R. Doc. 65-3 at 1; R. Doc. 76-1 at 2.
learned that the Property and an adjoining property located at 800 Metairie
Road were contaminated with perchloroethylene and its metabolites (the
PERC contamination).4 According to the complaint, this contamination was
caused by a dry-cleaning facility that operated on the premises before KFC
California purchased the Property. 5
In 2000, the owner of the adjoining property filed suit against KFC
California and other defendants over the environmental contamination. 6
The litigation ended in a settlement and stipulated consent decree.7 In the
consent decree, KFC California agreed to remediate the PERC contamination
on its property at 702 Metairie Road and the adjoining property located at
800 Metairie Road. 8 The agreement provided that remediation would be
subject to oversight and approval by the Louisiana Department of
Environmental Quality (DEQ), and would follow timetables and deadlines
set by the DEQ.9
In November 2004, KFC California completed a Voluntary Remedial
Action Plan (VRAP) prepared by Professional Service Industries, Inc. (PSI).10
4
5
6
7
8
9
10
R. Doc. 65-3 at 1; R. Doc. 76-1 at 2.
R. Doc. 1 at 2.
R. Doc. 1-2; R. Doc. 65-3 at 2; R. Doc. 76-1 at 2.
R. Doc. 1-2.
Id. at 2.
Id. at 3.
R. Doc. 13-13; R. Doc. 13-16.
2
PSI is an environmental consultant.11 This plan was submitted in March
2005 and approved by the DEQ. 12 In 2005, KFC California transferred its
interest in the property to KFC U.S. Properties, Inc.13 KFC U.S. Properties
later merged into Plaintiff KFC Corporation. 14
KFC prepared several
addendums to the VRAP, which were approved by DEQ. 15
B. Sale of the Property
On September 20, 2013, Defendant Iron Horse of Metairie Road, LLC,
agreed to purchase the Property from KFC in a written purchase
agreement.16 The purchase agreement provided for a 30-day inspection and
due diligence period, and gave Iron Horse the right to cancel the purchase
agreement during this period. 17 Iron Horse later assigned the purchase
agreement to Defendant Iron Rooster, LLC. 18 On February 14, 2014, KFC
sold the property to Iron Rooster.19 On the date of sale, KFC, Iron Rooster,
and Iron Horse signed an Assignment, Assumption, and Indemnification
11
12
13
14
15
16
17
18
19
R. Doc. 65-3 at 2; R. Doc. 76-1 at 3.
R. Doc. 13-13; R. Doc. 13-17 at 39.
R. Doc. 65-3 at 3; R. Doc. 76-1 at 3.
R. Doc. 65-3 at 7; R. Doc. 76-1 at 5.
R. Doc. 13-13 at 2.
R. Doc. 13-9; R. Doc. 65-3 at 3; R. Doc. 76-1 at 4.
R. Doc. 13-9 at 2; R. Doc. 65-3 at 3; R. Doc. 76-1 at 4.
R. Doc. 65-3 at 7; R. Doc. 76-1 at 5.
R. Doc. 65-3 at 7; R. Doc. 76-1 at 5.
3
Agreement.20 The indemnification agreement provides that Iron Horse and
Iron Rooster assume KFC’s obligations related to the contamination, the
remediation, and the settlement agreement, and that they will complete the
remediation “in a diligent and expeditious manner.”21 The preamble to the
indemnification agreement states that remediation “is in progress pursuant
to a voluntary remediation plan” and “was and is being handled by
Professional Services Industries, Inc. (PSI).”22
C. Post-Sale Remediation Issues
After Iron Rooster purchased the property, it retained PSI to continue
working on the environmental remediation. 23 Joseph Caldarera, defendants’
sole member, attests that, in March 2014, Iron Rooster authorized PSI to
undertake confirmatory soil sampling to verify the required remediation. 24
In March 2015, PSI submitted a revised VRAP to the DEQ on Iron Rooster’s
behalf.25 According to Caldarera, the 2015 VRAP was not accepted by the
DEQ because KFC’s 2005 VRAP remained in place. 26 Caldarera asserts that
20
21
22
23
24
25
26
R. Doc. 13-11; R. Doc. 65-3 at 7; R. Doc. 76-1 at 5.
R. Doc. 13-11 at 3.
Id. at 2.
R. Doc. 23-4 at 12.
Id. at 1, 13.
R. Doc. 76-5; see also R. Doc. 23-4 at 13; R. Doc. 65-2 at 2.
R. Doc. 23-4 at 13.
4
KFC unreasonably refused to withdraw its 2005 VRAP. 27 Calderera further
attests that, in light of KFC’s refusal and in an effort to keep remediation on
track, Iron Rooster gave authorization to PSI in May 2015 to begin additional
testing to determine the status of contamination on the adjoining property.28
In May 2016, PSI provided results of this testing to the DEQ. 29
In June 2016, the DEQ sent letters to both KFC and Iron Rooster
regarding PSI’s report and the status of remediation. 30 The June 14, 2016
letter to Iron Rooster states that PSI’s off-site remediation sampling revealed
that constituents of concern exceeding applicable standards were present on
the adjoining property and would require additional remediation.31 The
June 6, 2016 letter to KFC states that on-site remediation and monitoring of
site conditions ceased after Iron Rooster purchased the property, and that
KFC remains obligated to remediate the on-site and off-site contamination. 32
On December 1, 2016, KFC filed suit against Iron Rooster and Iron
Horse.33 The court has diversity jurisdiction under 28 U.S.C. § 1332. 34 KFC
27
28
29
30
31
32
33
34
Id. at 14.
Id.
Id.; R. Doc. 76-4 at 1.
R. Doc. 1-2; R. Doc. 76-4.
R. Doc. 76-4 at 1.
R. Doc. 1-2 at 41-42.
R. Doc. 1.
Id. at 1-2.
5
alleges that defendants failed to fulfill their obligations under the purchase
agreement and the indemnification agreement to remediate the PERC
contamination. 35
On February 23, 2017, defendants filed an answer,
affirmative defenses, and counterclaims for detrimental reliance and abuse
of rights.36 Defendants assert that, during the due diligence period, KFC
directed their questions regarding the condition of the property and the
status of remediation to PSI.37 PSI allegedly represented to defendants that
remediation for the on-site property was almost finished and failed to
disclose that remediation was being done or was required for the adjoining
property. 38
Defendants allege that they detrimentally relied on these
representations in purchasing the property.39 Further, defendants assert
that KFC engaged in an abuse of rights because it wrongfully refused to
execute an amended VRAP application. 40
On August 15, 2017, KFC moved for summary judgment on its breach
of contract claim and defendants’ counterclaims.41 Judge Engelhardt denied
the motion, finding genuine issues of fact as to whether KFC or PSI made
35
36
37
38
39
40
41
Id. at 9-10.
R. Doc. 7.
Id. at 9.
Id.
Id.
Id. at 10-11.
R. Doc. 13.
6
material representations regarding the status of remediation, the extent of
defendants’ alleged efforts to fulfill their remediation obligations, the cause
of defendants’ failure to complete the required remediation, and KFC alleged
interference with defendants’ remediation efforts. 42 On May 18, 2018, the
case was transferred to this section of the Court. 43
KFC now moves for summary judgment on defendants’ counterclaims
on the grounds that these claims are prescribed.44
II.
LEGAL STANDARD
Summary judgment is warranted when “the movant shows that there
is no genuine dispute as to any material fact and the movant is entitled to
judgment as a matter of law.” Fed. R. Civ. P. 56(a); see also Celotex Corp. v.
Catrett, 477 U.S. 317, 322-23 (1986); Little v. Liquid Air Corp., 37 F.3d 1069,
1075 (5th Cir. 1994). When assessing whether a dispute as to any material
fact exists, the Court considers “all of the evidence in the record but refrain[s]
from making credibility determinations or weighing the evidence.” Delta &
Pine Land Co. v. Nationwide Agribusiness Ins. Co., 530 F.3d 395, 398-99
(5th Cir. 2008).
42
43
44
All reasonable inferences are drawn in favor of the
R. Doc. 87 at 9.
R. Doc. 94.
R. Doc. 65.
7
nonmoving party, but “unsupported allegations or affidavits setting forth
‘ultimate or conclusory facts and conclusions of law’ are insufficient to either
support or defeat a motion for summary judgment.” Galindo v. Precision
Am. Corp., 754 F.2d 1212, 1216 (5th Cir. 1985); see also Little, 37 F.3d at
1075. “No genuine dispute of fact exists if the record taken as a whole could
not lead a rational trier of fact to find for the non-moving party.” EEOC v.
Simbaki, Ltd., 767 F.3d 475, 481 (5th Cir. 2014).
If the dispositive issue is one on which the moving party will bear the
burden of proof at trial, the moving party “must come forward with evidence
which would entitle it to a directed verdict if the evidence went
uncontroverted at trial.” Int’l Shortstop, Inc. v. Rally’s, Inc., 939 F.2d 1257,
1264-65 (5th Cir. 1991) (internal citation omitted). The nonmoving party can
then defeat the motion by either countering with evidence sufficient to
demonstrate the existence of a genuine dispute of material fact, or “showing
that the moving party’s evidence is so sheer that it may not persuade the
reasonable fact-finder to return a verdict in favor of the moving party.” Id.
at 1265.
If the dispositive issue is one on which the nonmoving party will bear
the burden of proof at trial, the moving party may satisfy its burden by
pointing out that the evidence in the record is insufficient with respect to an
8
essential element of the nonmoving party’s claim. See Celotex, 477 U.S. at
325.
The burden then shifts to the nonmoving party, who must, by
submitting or referring to evidence, set out specific facts showing that a
genuine issue exists. See id. at 324. The nonmovant may not rest upon the
pleadings, but must identify specific facts that establish a genuine issue for
trial. See, e.g., id.; Little, 37 F.3d at 1075 (“Rule 56 mandates the entry of
summary judgment, after adequate time for discovery and upon motion,
against a party who fails to make a showing sufficient to establish the
existence of an element essential to that party’s case, and on which that party
will bear the burden of proof at trial.”) (quoting Celotex, 477 U.S. at 322).
III. DISCUSSION
A. Detrimental Reliance
1. Applicable Statute of Limitations
The parties first dispute the prescriptive period applicable to
defendants’ counterclaim for detrimental reliance.
The elements of
detrimental reliance under Louisiana law are “(1) a representation by
conduct or word; (2) justifiable reliance; and (3) a change in position to one’s
detriment because of the reliance.” Suire v. Lafayette City-Parish Consl.
Gov’t, 907 So. 2d 37, 59 (La. 2005). In Louisiana, the statute of limitations
for delictual, or tort, actions is one year and the statute of limitations for
9
contractual claims is ten years. See La. Civ. Code arts. 3492, 3499; Roger v.
Dufrene, 613 So. 2d 947, 948 (La. 1993).
State and federal courts have
“applied both statutes to claims denominated as ‘detrimental reliance’
because the nature of the action, rather than its label, governs which statute
applies.” Keenan v. Donaldson, Lufkin & Jenrette, Inc., 575 F.3d 483, 487
(5th Cir. 2009).
When “a party has been damaged by the conduct of another arising out
of a contractual relationship,” the plaintiff may have the choice to recover
damages in either tort or contract, and “the prescription applicable is
determined by the character which plaintiff gives his pleadings and the form
of his action.” Fed. Ins. Co. v. Ins. Co. of N. Am., 263 So. 2d. 871, 872 (La.
1972). Thus, “Louisiana courts look to the allegations and prayer for relief of
the petition to determine the true nature of the action and the applicable
prescriptive period.” Clark v. Constellation Brands, Inc., 348 F. App’x 19,
22 (5th Cir. 2009); see also SS v. State ex rel. Dep’t of Soc. Servs., 831 So. 2d
926, 931 (La. 2002); Starns v. Emmons, 538 So. 2d 275, 277 (La. 1989).
In determining the nature of the action, courts consider whether the
claim derives from a “breach of promise,” indicating a contract claim, or a
“breach of duty,” suggesting a tort claim. See Keenan, 575 F.3d at 487. The
former “flow[s] from the breach of a special obligation contractually assumed
10
by the obligor, whereas the latter flow[s] from the violation of a general duty
to all persons.” Clark, 348 F. App’x at 22 (quoting Trinity Univ. Ins. Co. v.
Horton, 756 So. 2d 637, 638 (La. App. 2 Cir. 2000)). Louisiana courts treat
a claim as a tort action “unless a specific contract provision or duty is
breached.” Id.
Here, the counterclaim asserts that KFC’s employees refused to speak
to defendants’ representative about the status of remediation during the due
diligence period, and instead directed him to speak to PSI. 45 Defendants
allege that PSI advised defendants’ representative that remediation for the
Property was almost finished.46 Further, PSI allegedly failed to disclose that
remediation was being done or was required for the adjoining property.47
Defendants assert that they detrimentally relied on these representations
when they purchased the Property, that KFC “owed defendants a duty to
timely, clearly and unambiguously disclose the extent of the contamination,
particularly the contamination off-site, and the obligations to remediate,”
and that they were damaged by KFC’s failure to disclose. 48
45
46
47
48
R. Doc. 7 at 9.
Id. at 9.
Id.
Id. at 9-10.
11
The factual allegations underlying this counterclaim sound in tort
rather than contract.
Defendants assert a breach of a general duty to
disclose, and do not reference any breach of specific contractual duties. See
Clark, 348 F. App’x at 22 (holding that a plaintiff’s claim that he entered into
a severance agreement because of the defendant’s failure to state the true
reason for his termination was based in tort rather than contract); 5876 57th
Dr., LLC v. Lundy Enter., LLC, No. 13-5012, 2014 WL 1246842, at *5 (E.D.
La. 2014) (finding that a breach of a general duty to provide accurate
information is actionable in tort, not contract); Ames v. Ohle, 97 So. 3d 386,
393 (La. App. 4 Cir. 2012) (finding that a detrimental reliance claim was
delictual rather than contractual because the plaintiff “assert[ed] that she
relied on false statements and omissions, not specific promises that were
never performed”).
In opposition to summary judgment, defendants argue that their
detrimental reliance claim is contractual in nature because it arises out of
specific commitments made by KFC. 49 Specifically, defendants assert that
KFC represented in the purchase agreement and the assignment agreement
that remediation was “in progress” on the Property and was being handled
49
R. Doc. 76 at 9.
12
by PSI.50
Defendants further assert that KFC and PSI made express
representations that any remaining contamination and remediation could be
addressed through a new VRAP.51
But these allegations do not appear in defendants’ counterclaim. The
counterclaim alleges that PSI, acting as KFC’s agent, failed to fully disclose
the extent of contamination and needed remediation. 52 The counterclaim
does not mention any representations or promises made in the parties’
contracts. Cf. Fed. Ins. Co., 263 So. 2d at 873 (noting that the plaintiff’s
petition specifically requested reimbursement under the contract). Nor does
the counterclaim allege any direct representations by KFC to defendants,
beyond directing them to speak with PSI. 53 Although defendants’ abuse of
rights counterclaim outlines KFC’s alleged refusal to execute the amended
VRAP, defendants do not allege that KFC made any promises with regard to
the VRAP. 54
“[T]he nature of the action” revealed in defendants’ counterclaim is
therefore based in tort rather than contract. Clark, 348 F. App’x at 22; see
also Fed. Ins. Co., 263 So. 2d at 872. Even if the Court were to permit
50
51
52
53
54
Id. at 3, 5.
Id. at 5-6.
R. Doc. 7 at 9.
Id.
Id. at 10-11.
13
defendants to supplement their counterclaim with allegations that KFC
represented that remediation was “in progress” in the purchase agreement
and the indemnification agreement, this would be insufficient to establish a
contractual claim for detrimental reliance. There is no indication in the
contracts that KFC specifically promised or warrantied that remediation was
currently underway or the status of the remediation. Cf. Lundy, 2014 WL
1246842, at *5 (finding that detrimental reliance claim was based in contract
because the defendants warrantied that they had applicable permits and
licenses in an estoppel certificate). Moreover, a statement that remediation
is “in progress” is insufficiently specific to support defendants’ allegations
that PSI and KFC represented that remediation was “almost finished” and
failed to disclose the need for remediation on the adjoining property. 55
Defendants also argue that KFC violated its implied contractual
obligation to perform contracts in good faith because it failed to disclose a
meeting with the DEQ, failed to disclose that the multi-phase extraction
(MPE) system contemplated in the 2005 VRAP had been abandoned,
encouraged Iron Rooster to rely on a new proposed VRAP and then refused
to allow the new VRAP to be implemented, and induced PSI to abandon its
55
R. Doc. 7 at 9.
14
relationship with Iron Rooster and return to work for KFC. 56 Defendants’
argument with regard to the alleged failures to disclose runs contrary to
caselaw holding that omissions and misrepresentations in contractual
negotiations are based in tort rather than contract. See Clark, 348 F. App’x
at 22; Lundy, 2014 WL 1246842, at *5; Ames, 97 So. 3d at 393.
Defendants’ arguments regarding the new proposed VRAP and Iron
Rooster’s relationship with PSI fall outside the scope of their pleaded claim
for detrimental reliance. Defendants’ counterclaim alleges only a failure to
disclose the extent of contamination and of needed remediation, and does
not allege that defendants relied on representations by KFC related to the
PSI contract or the new VRAP.57 The counterclaim thus fails to provide fair
notice to KFC that defendants might assert such claims. Defendants may not
raise new factual scenarios unsupported by allegations in the counterclaim
for the first time in opposition to summary judgment. See Cutrera v. Bd. of
Supervisors of La. State Univ., 429 F.3d 108, 113 (5th Cir. 2005) (“A claim
which is not raised in the complaint but, rather, is raised only in response to
a motion for summary judgment is not properly before the court.”).
56
57
R. Doc 76 at 6-7.
R. Doc. 7 at 9-10.
15
Accordingly, the Court finds that defendants’ counterclaim for
detrimental reliance sounds in tort, and the one-year prescriptive period for
delictual actions applies. See La. Civ. Code art. 3492.
2. Time of Discovery
KFC argues that the detrimental reliance counterclaim is prescribed
because defendants knew or should have known about the alleged
misrepresentations when they purchased the Property on February 14,
2014. 58 The prescriptive period for delictual actions “commences to run
from the day injury or damage is sustained.” La. Civ. Code art. 3492. The
burden of proof is ordinarily on the party asserting prescription. See Eastin
v. Entergy Corp., 865 So. 2d 49, 54 (La. 2004). But, if “more than a year has
elapsed between the time of the tortious conduct and the filing of the tort
suit, the burden shifts to [the party bringing the claim] to demonstrate
prescription was suspended or interrupted.”
Kling Realty Co., Inc. v.
Chevron USA, Inc., 575 F.3d 510, 517 (5th Cir. 2009). Here, KFC’s alleged
failure to disclose occurred over three years before defendants filed their
counterclaim.
Prescription may be suspended under the doctrine of contra non
valentem if the “cause of action is not known or reasonably knowable by the
58
R. Doc. 65-1 at 5.
16
plaintiff.” Wimberly v. Gatch, 635 So. 2d 206, 211 (La. 1994). In such cases,
“[p]rescription commences when a plaintiff obtains actual or constructive
knowledge of facts indicating to a reasonable person that he or she is the
victim of a tort.”
Campo v. Correa, 828 So. 2d 502, 510 (La. 2002).
“Constructive knowledge is whatever notice is enough to excite attention and
put the injured party on guard and call for inquiry.” Id. at 510-11. The
Louisiana Supreme Court has cautioned that “[t]his standard is exceedingly
stringent” and prescription should be suspended “only in exceptional
circumstances.” Eastin, 865 So. 2d at 54.
Defendants’ counterclaim is based on allegations that PSI, acting as
KFC’s agent, (1) represented that remediation was almost complete and (2)
failed to disclose that remediation was being done or was required for the
adjoining property.59 Defendants argue that they were first put on notice of
the facts underlying this counterclaim when they received the June 14, 2016
letter from the DEQ detailing major deficiencies in remediation and
deficiencies in the adjoining property.60
The Court finds no genuine dispute that defendants had constructive
knowledge of the facts underlying their detrimental reliance claim more than
59
60
R. Doc. 7 at 9.
R. Doc. 76 at 10; R. Doc. 76-4.
17
one year before they filed their answer and counterclaims on February 23,
2017. “[T]he prescriptive period commences when there is enough notice to
call for an inquiry about a claim, not when an inquiry reveals the facts or
evidence that specifically outline the claim.” Luckett v. Delta Airlines, Inc.,
171 F.3d 295, 300 (5th Cir. 1999). Although the letter from the DEQ may
have revealed the full extent of needed remediation for the first time, this
does not indicate that prescription was suspended until June 2016. See
Fontenot v. ABC Ins. Co., 674 So. 2d 960, 964 (La. 1996) (explaining that
“[i]gnorance or misunderstanding of the probable extent or duration of
injuries materially differs from ignorance of actionable harm which delays
commencement of prescription”).
It is undisputed that, when defendants purchased the Property, they
were aware of the past environmental contamination and expressly agreed
to assume and fulfill KFC’s obligations related to the contamination, the
litigation settlement, and the remediation. 61 Defendants assert that they
reasonably relied on PSI’s assurances both before and after the sale that the
DEQ would require only minimal further remediation on the Property and
no off-site investigation or remediation. 62 But defendants’ representative,
61
62
R. Doc. 13-11 at 3-4.
R. Doc. 76 at 12.
18
Caldarera, attests that Iron Rooster authorized PSI to commence additional
testing of the status of contamination of the adjoining property in May
2015.63 According to Caldarera, Iron Rooster authorized this testing “[i]n
light of KFC’s unreasonable refusal [to withdraw the 2005 VRAP], and in a
further
effort
to
keep
remediation
on
track.”64
Defendants’
counterstatement of material facts asserts that “KFC had no right to
condition its approval of a new VRAP on remediation of adjacent property,
inasmuch as that condition was not part of, or otherwise expressed, as part
of KFC’s endorsement of the proposed new VRAP in February 2014.” 65
The facts as presented by defendants and their representative make
clear that, as of May 2015, defendants were aware of a possible dispute over
the need for remediation on the adjoining property. This was “sufficient
information to incite their inquiry” into whether KFC and PSI
misrepresented that no remediation would be needed on the adjoining
property. Fontenot, 674 So. 2d at 964.
Defendants also had information before 2016 that reasonably should
have prompted further inquiry into KFC’s alleged representation that
remediation on the Property was almost complete. Defendants assert that
63
64
65
R. Doc. 23-4 at 14.
Id.
R. Doc. 76-2 at 16.
19
KFC failed to disclose before the sale that the 2005 VRAP was no longer
viable, that the MPE system contemplated in this plan became inoperable in
early 2012, and that KFC abandoned the MPE system.66 Defendants argue
that the June 14, 2016 letter from the DEQ first put them on notice that,
among other issues, “the MPES ha[d] been dismantled and removed offsite.”67 Defendants contend that the abandonment of the MPE system was
inconsistent with KFC’s assurances that remediation was in progress. 68
But defendants do not dispute that they had access to the DEQ
proceedings related to the remediation that were maintained in the DEQ’s
Electronic Document Management System (EDMS) before the sale. 69 The
existence of the DEQ file is specifically mentioned in the purchase
agreement, and Iron Horse acknowledged in the agreement that it had
studied or reviewed or would have the opportunity to study and review this
file during the due diligence period.70 Defendants also admit that a quarterly
report available on EDMS, dated August 20, 2013, states that “the MPE
system was not operating during the current quarter, and has been
66
67
68
69
70
R. Doc. 76 at 14-15; R. Doc. 76-2 at 9-10.
Id. at 12-13; see also R. Doc. 76-4 at 2.
R. Doc. 76 at 15 n.64.
R. Doc. 65-3 at 9; R. Doc. 76-1 at 5-6.
R. Doc. 13-9 at 7.
20
inoperable since January 2012 after major equipment breakdown
occurred.” 71
Defendants argue that this quarterly report was insufficient to put
them on notice that the MPE system had been abandoned because the report
referenced conditions during the time period leading up to March 31, 2013,
almost a year before the purchase was finalized. 72 Defendants also contend
that they lacked adequate notice because KFC failed to file quarterly reports
for the second, third, and fourth quarters of 2013, despite being obligated to
do so under the VRAP. 73 But, at a minimum, the first quarterly report was
sufficient to “put the [defendants] on guard and call for inquiry” into whether
the MPE system had been repaired and whether remediation was advancing
as represented by KFC. Campo, 828 So. 2d at 511. That KFC allegedly failed
to submit additional required quarterly reports before sale should have
prompted more rather than less inquiry from a reasonable buyer.
In sum, defendants fail to point to facts to suggest that “exceptional
circumstances” justify a suspension of the prescriptive period in this case.
See Eastin, 865 So. 2d at 54. The Court finds no genuine dispute that
defendants had constructive knowledge of the factual basis of their
71
72
73
R. Doc. 65-3 at 3, 9; R. Doc. 76-1 at 3, 5-6.
R. Doc. 76 at 21-22.
Id. at 23.
21
detrimental reliance counterclaim before February 2016. Accordingly, this
claim is prescribed and KFC is entitled summary judgment.
B. Abuse of Rights
Defendants’ abuse of rights counterclaim is subject to a one-year
prescriptive period. See La. Civ. Code art. 3492, cmt. b; see also Donahue v.
Strain, No. 15-6036, 2017 WL 3311241, at *19 (E.D. La. 2017). Defendants
assert a claim for abuse of rights based on KFC’s alleged refusal to execute
an amended VRAP without serious or legitimate motive. 74 KFC argues that
this claim is prescribed because defendants knew of KFC’s alleged refusal to
execute the VRAP in March 2015. 75 In support of this argument, KFC cites a
July 7, 2016 letter from Caldarera to the DEQ stating his concern with “the
refusal of KFC to execute the VRAP that was revised and presented by PSI
sixteen months ago.” 76
But Caldarera’s July 2016 letter makes clear that KFC was not asked to
join the VRAP in March 2015. Calderera states that PSI and Iron Rooster
assumed that there was no need to include KFC on the application, but later
listed KFC as a co-applicant at KFC’s request.77 Defendants argue that their
74
75
76
77
R. Doc. 7 at 10-11.
R. Doc. 65-1 at 11.
Id.; R. Doc. 65-2 at 2.
R. Doc. 65-2 at 2.
22
abuse of rights claim is not prescribed because KFC was still considering
joining the VRAP application at least as late as April 2016. 78 Defendants
attach an email from KFC’s counsel to defendants’ previous counsel dated
April 4, 2016 asking for a copy of the VRAP application. 79
It is unclear from the record when KFC allegedly refused to execute the
amended VRAP, and the Court therefore finds a genuine dispute as to
whether the abuse of rights counterclaim is prescribed. KFC is not entitled
summary judgment on this claim.
IV.
CONCLUSION
For the foregoing reasons, the Court GRANTS IN PART plaintiff’s
motion for summary judgment. Defendants’ counterclaim for detrimental
reliance is DISMISSED WITH PREJUDICE. The Court DENIES summary
judgment as to defendants’ counterclaim for abuse of rights.
30th
New Orleans, Louisiana, this _____ day of May, 2018.
_____________________
SARAH S. VANCE
UNITED STATES DISTRICT JUDGE
78
79
R. Doc. 76 at 19.
R. Doc. 76-6.
23
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