KFC Corporation v. Iron Horse of Metairie Road, LLC et al

Filing 87

ORDER and REASONS denying 13 Motion for Summary Judgment. IT IS ORDERED that KFC Corporation's Motion is DENIED without prejudice. At present, the Court finds that, on the showing made, there remain numerous issues of material fact that are better decided by the trier of fact at trial on the merits, as set forth herein. Signed by Chief Judge Kurt D. Engelhardt on 5/8/2018. (sa)

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 "N" (5)

ORDER AND REASONS
Presently before the Court is a motion for summary judgment filed by plaintiff and
defendant-in-counterclaim, KFC Corporation ("KFC"). (Rec. Doc. 13). Defendants, Iron Horse of
Metairie Road, LLC and Iron Rooster, LLC ("Defendants"), oppose the motion. (Rec. Doc. 23). KFC
filed a reply memorandum in response to Defendants' opposition. (Rec. Doc. 27). Having carefully
reviewed the parties' submissions, the record, and applicable law, the Court, on the present showing
made, is not in a position to find Plaintiff to have demonstrated, as required by Rule 56, that "there
is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of
law." See Fed. R. Civ. P. 56. Thus, IT IS ORDERED that the motion is DENIED.
I.

BACKGROUND

The present case involves alleged breach of contract claims in connection with Defendants'
purchase of immovable property from KFC. In 1991, Kentucky Fried Chicken of California ("KFC
California")1 purchased immovable property located at 700 Metairie Road in Metairie, Louisiana (the
"Property"). (Rec. Doc. 13-1 at p. 2). After purchasing the Property, KFC California claims that it

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Kentucky Fried Chicken of California, Inc. purchased the property in 1991. In 2005, KFC
California transferred the Property to an affiliated company, KFC U.S. Properties, Inc. KFC U.S. Properties
entered into the Purchase Agreement with Iron Horse of Metairie Road, LLC, defendant herein (Iron Horse
subsequently assigned the Purchase Agreement to its affiliate, Iron Rooster, LLC). Finally, after the Purchase
Agreement was signed, KFC U.S. Properties was merged into KFC Corporation, plaintiff herein. (Rec. Doc.
13-1 at pp. 1-4).

discovered that the Property and adjoining property, located at 800 Metairie Road (the "adjoining
property"), were contaminated with perchloroethylene and its metabolites, dichloroethylene, and
trichloroethylene (the "PERC Contamination"), allegedly caused by the operation of a former drycleaning facility. (Id.). A lawsuit ensued regarding the PERC Contamination, in which KFC
California was a named defendant. Ultimately, KFC alleges that the parties reached a settlement, and
that a Stipulated Consent Decree was entered on September 9, 2002, wherein KFC California
"voluntarily agreed with the Louisiana Department of Environmental Quality (the "DEQ") to
remediate the PERC Contamination on the Property and on the Adjoining Property." (Id. at pp. 2-3).
In 2013, allegedly while "remediation was still in progress," KFC U.S. Properties, Inc. ("KFC
U.S."), entered into a purchase agreement with defendant herein, Iron Horse of Metairie Road, LLC
(Id. at p. 3). KFC contends that the Purchase Agreement included "specific references to and
disclosures of" the PERC Contamination, the PERC Plume, the remediation, the voluntary remedial
action plan, the environmental litigation, the settlement documents, the contract between KFC
California and its environmental consultant, Professional Service Industries, Inc. ("PSI"), and the
DEQ proceedings, "all of which Iron Horse had an opportunity to inquire about, study, and review
prior to signing the Purchase Agreement." (Id.). Iron Horse subsequently assigned the Purchase
Agreement to Iron Rooster, LLC, defendant herein, allegedly resulting in Iron Horse and Iron
Rooster becoming "jointly, severally, and solidarily liable under the Purchase Agreement." (Id.).
On February 14, 2014, KFC Corporation, successor to KFC U.S., sold the Property to Iron
Rooster. (Id. at. p. 4). On that same date, KFC Corporation, Iron Horse, and Iron Rooster signed an
Assignment, Assumption, and Indemnification Agreement (the "Indemnification Agreement"). KFC
alleges that pursuant to the Indemnification Agreement:
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[1] KFC Corporation assigned its rights under the Settlement
Documents, the PSI Contract,2 and the VRAP3 to Iron Rooster. [2]
Both defendants assumed all of the obligations of KFC California,
Tricon, Yum, KFC U. S., KFC Corporation, and all of their respective
related or affiliated companies, as well as their respective
predecessors, successors, and assigns (collectively, the "KFC
Companies"), relating to the PERC Contamination, the
Environmental Litigation, the Settlement Documents, the PSI
Contract, the Remediation, and the VRAP, and [3] both defendants
agreed to use their best efforts to complete the Remediation in a
diligent and expeditious manner at their sole cost and expense, and to
also fulfill all of the KFC Companies' remaining obligations relating
to the PERC Contamination, the Environmental Litigation, the
Settlement Documents, the PSI Contract, and the VRAP.

(Rec. Doc. 13-1 at p. 4). Next, KFC alleges that on June 6, 2016, it was notified by the DEQ that
"Since acquisition of the property by Iron Rooster, on-site remediation and monitoring of site
conditions have ceased." (Id. at p. 5). In response to the letter, KFC claims it hired PSI to prepare
a work plan with respect to the remaining remediation, which was approved by the DEQ on October
19, 2016. (Id. at p. 6). KFC subsequently filed this lawsuit seeking specific performance and
indemnity for Defendants' alleged failure to satisfy obligations that they allegedly assumed with the
purchase of the Property from KFC. (Rec. Doc. 1). In response, Iron Rooster filed an answer denying
KFC's entitlement to the relief sought and asserting a counterclaim for damages due to KFC's failure
to disclose the extent of the contamination at issue. (Rec. Doc. 7).
KFC filed the instant motion for summary judgment, arguing that there are no genuine issues
of material fact, and that it is entitled to summary judgment on both its main demand and

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The contract between KFC California and its environmental consultant, Professional Service
Industries, Inc. ("PSI"). PSI, now a third-party defendant, maintains that the contract between KFC

and PSI was not assignable. (Rec. Doc. 77).
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The voluntary remedial action plan. (See Rec. Doc. 13-1 at p. 3).

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Defendants' counterclaim, claiming: "it is undisputed that defendants have failed to complete and
fulfill, in a diligent and expeditious manner, or at all, the Remediation of the PERC Contamination
and KFC Companies' remaining obligations relating to the PERC Contamination, the Environmental
Litigation, the Settlement Documents, the PSI Contract, and the VRAP, including payment of the
Post-Closing DEQ Costs, all of which defendants became liable and obligated pursuant to the
Purchase Agreement and/or the Indemnification Agreement." (Rec. Doc. 13-1 at p. 6). In support of
its contention, Plaintiff claims that Defendants admitted to signing the Purchase and Indemnification
Agreements, admitted that they had access to the Property and to relevant documents during the due
diligence period, and admitted that they had not completed the remediation. (Id. at p. 7). KFC alleges
that Defendants contractually assumed KFC's PERC Contamination-related obligations and agreed
to defend, hold harmless, and indemnify KFC, citing to language in the signed agreements that KFC
claims is "clear, explicit, [and] enforceable." (Id. at pp. 9-14). Thus, KFC contends that Defendants
breached the Purchase Agreement and the Indemnification Agreement by failing to satisfy those
contractually assumed obligations, "which defendants have admitted or not denied." (Id. at p. 14).
Additionally, KFC contends that "there is no genuine issue of material fact with respect to
defendants' Counterclaim, and plaintiff is entitled to judgment in its favor...as a matter of law,
dismissing defendants' Counterclaim, with prejudice, at defendants' sole cost and expense." (Rec.
Doc. 13-1 at p. 18). KFC rejects Defendants' asserted defenses and counterclaims as lacking merit.
(Id. at p. 15). Specifically, KFC attacks Defendants' claim that had Defendants known of the off-site
remediation obligations, they would not have purchased the Property or would have paid a lower
price, claiming that "their admissions clearly show that defendants knew or should have known, and
certainly could have learned from an examination of the record" that the assumed obligations "also
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included remediation of the PERC Contamination that extended onto the Adjoining Property." (Id.
at p. 16). Finally, KFC argues that "contrary to defendants' [] allegation in their Counterclaim that
plaintiff's refusal to agree to an amended VRAP constituted an abuse of rights, plaintiff prudently
rejected the [proposed] amended VRAP because...[it] would have left KFC exposed to penalties and
fines by the DEQ for failing to remediate contamination on the Adjoining Property." (Id. at p. 17-18).
In opposition, Defendants contend that summary judgment is inappropriate due to remaining
issues of material fact. (Rec. Doc. 23). Defendants claim, inter alia, that KFC should be estopped
from enforcing the Agreements because KFC and PSI "flagrantly" misrepresented the status of the
remediation, and failed to disclose that KFC had abandoned remediation, which Iron Rooster relied
upon to its detriment. (Id. at pp. 2-3, 14). Citing the affidavits of Fernando Iturralde, a Geology
Supervisor/Hrydrogeologist for the LDEQ; Jacqueline McPherson, attorney representing Defendants
in sale; and Joseph Caldarero, the sole member of the Defendant LLCs, Defendants claim:
Prior to the 2014 Sale and throughout the due diligence period, KFC
repeatedly assured Iron Rooster that no further remediation remained
offsite and that only minimal remediation remained onsite. Neither
representation was true. Among other things, the multiphase
extraction system ("MPE") - the principal form of remediation
adopted for the KFC Property - had been abandoned more than two
years before the sale. Iron Rooster could not have discovered from the
public record the fact that KFC had abandoned the MPE and KFC did
not disclose its abandonment of the MPE system. In fact, KFC and its
consultant repeatedly and expressly represented just the opposite.

(Id. at pp. 2-3). Further, Defendants claim that KFC misrepresented and failed to disclose the fact
that KFC had abandoned remediation of the Property in the Agreement itself. (Id. at p. 9).
Next, Defendants argue that "KFC's [concealed] actions between the Due Diligence Period and
the sale...fundamentally reset the DEQ's approach to the KFC property in a materially different
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direction than was represented to Iron Rooster." (Id. at p. 6). As a purported example of KFC's
concealed efforts Defendants refer to an alleged meeting--held the day after the due diligence period
expired--where PSI and the DEQ discussed a "new path forward" to replace the current remedial
plan, without notifying Defendants. (Id. at p. 7). Finally, Defendants contend that they diligently
pursued remediation of the Property, but their efforts "were prevented due to (1) KFC's wrongful
refusal to allow its 2005 VRAP to be replaced by the new 2015 VRAP that KFC itself had endorsed
at the time of the 2014 Sale, and (2) KFC's wrongful action entering a new contract with PSI." (Id.
at p. 10). Defendants claim KFC's actions are in breach of KFC's obligations, namely KFC's
assignment of the VRAP and the PSI Contract to Defendants. (See id. at pp. 10-14).
Ultimately, Defendants assert that summary judgment should be denied because there are
issues of fact regarding whether KFC misrepresented critical facts which Defendants relied upon to
their detriment, and whether those misrepresentations bar KFCs' enforcement of the Agreement. (Id.
at pp. 14-17). Defendants also argue that there remain questions of fact concerning whether KFC
performed the Agreement in good faith. Finally, Defendants argue that KFC is not entitled to
summary judgment as a matter of law because KFC seeks indemnity against its own fault, claiming
that KFC is "wholly responsible for any delay in the remediation of the KFC Property." (Id. at p. 19),
Further, Iron Rooster disputes that indemnity has been triggered, claiming that it has "diligently and
expeditiously" pursued remediation. (Id. at pp. 20-21).
II.

LAW AND ANALYSIS

Pursuant to Rule 56(a) of the Federal Rules of Civil Procedure, summary judgment shall be
granted "if the movant shows that there is no genuine dispute as to any material fact and the movant
is entitled to a judgment as a matter of law." Fed. R. Civ. P. 56(a). The materiality of facts is

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determined by the substantive law's identification of which facts are critical and which facts are
irrelevant. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). A fact is material if it "might
affect the outcome of the suit under the governing law." Id.
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 summary judgment burden by merely pointing out that the
evidence in the record contains insufficient proof concerning an essential element of the nonmoving
party's claim. See Fed. R. Civ. P. 56(c); Celotex Corp. v. Catrett, 477 U.S. 317, 325 (1986); see
also Lavespere v. Liberty Mut. Ins. Co., 910 F.2d 167, 178 (5th Cir. 1990). Once the moving party
carries its burden pursuant to Rule 56(a), the nonmoving party must "go beyond the pleadings and
by [his] own affidavits, or by the 'depositions, answers to interrogatories, and admissions on file,'
designate 'specific facts showing that there is a genuine issue for trial.'" Celotex, 477 U.S. at 324;
see also Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986);
Auguster v. Vermillion Parish School Bd., 249 F.3d 400, 402 (5th Cir. 2001).
When considering a motion for summary judgment, the Court views the evidence in the light
most favorable to the nonmoving party, Gillis v. Louisiana, 294 F.3d 755, 758 (5th Cir. 2002), and
draws all reasonable inferences in favor of that party. Hunt v. Rapides Healthcare System, L.L.C.,
277 F.3d 757, 764 (2001). Factual controversies are to be resolved in favor of the nonmoving party,
"but only when there is an actual controversy, that is, when both parties have submitted evidence of
contradictory facts." Little v. Liquid Air Corp., 37 F.3d 1069, 1075 (5th Cir.1994) (citations
omitted). The Court will not, "in the absence of any proof, assume that the nonmoving party could
or would prove the necessary facts." See id. (emphasis in original) (citing Lujan v. Nat'l Wildlife
Fed'n, 497 U.S. 871, 888 (1990)).

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Although the Court is to consider the full record in ruling on a motion for summary
judgment, Rule 56 does not obligate it to search for evidence to support a party's opposition to
summary judgment. See Fed. R. Civ. P. 56(c)(3)("court need consider only the cited materials");
see also Malacara v. Garber, 353 F.3d 393, 405 (5th Cir. 2003). Thus, the nonmoving party should
"identify specific evidence in the record, and articulate" precisely how that evidence supports his
claims. Forsyth v. Barr, 19 F.3d 1527, 1537 (5th Cir. 1994), cert. denied, 513 U.S. 871 (1994).
The nonmovant's burden is not satisfied merely by creating "some metaphysical doubt as to
the material facts," "by conclusory allegations," by "unsubstantiated assertions," or "by only a
scintilla of evidence." Little, 37 F.3d at 1075. Rather, a factual dispute precludes a grant of
summary judgment only if the evidence is sufficient to permit a reasonable trier of fact to find for
the nonmoving party. Smith v. Amedisys, 298 F.3d 434, 440 (5th Cir. 2002).
Given that the both contracts provide for the application of Louisiana law (Rec. Docs. 13-9
at p. 16 and 13-11 at p. 5) and the Court has jurisdiction based on diversity, the Court's resolution
of the present dispute is grounded in Louisiana law. "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." Clovelly
Oil Co., LLC v. Midstates Petroleum Co., LLC (La. 2013) (citations and quotations omitted). As a
general rule, "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." La. Civ. Code
Art. 2046. Louisiana law requires that contracts be performed in good faith. La. Civ. Code Art. 1983.
In Louisiana, "although a party may keep absolute silence and violate no rule of law or equity...if he
volunteers to speak and to convey information which may influence the conduct of the other party,
he is bound to disclose the whole truth." First American Bankcard, Inc. v. Smart Bus. Tech., Inc.,

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178 F. Supp. 3d 390, 401 (E.D. La. 2016). "A contract of indemnity will not be construed to
indemnify an indemnitee against losses resulting to him through his own negligent act, unless such
an intention was expressed in unequivocal terms." Polozola v. Garlock, Inc., 343 So. 2d 1000, 1003
(La. 1977).
Applying the foregoing principles to the evidence adduced by the parties, the Court does not
find, on the present showing made, that KFC is entitled to the relief it seeks. The Court finds that
the Plaintiff has failed to show the absence of genuine dispute as to any material fact. Specifically,
the Court finds that whether KFC and/or PSI, KFC's consultant, made material representations
regarding the status of the remediation is a plainly disputed question of fact. Additionally, although
it is undisputed that the remediation is not complete, the parties dispute the extent of Defendants'
alleged efforts to fulfill the remediation obligations, specifically whether such efforts were "diligent
and expeditious," as required by the contract. Moreover, the parties dispute the cause for Defendants'
failure to complete and fulfill the contractually required remediation. Specifically, Defendants'
contested allegations that KFC interfered with Defendants' remediation efforts is significant to the
indemnification claim given that the contract did not explicitly and unequivocally provide
indemnification for KFC's own actions.
Given the foregoing, KFC's motion for summary judgment is DENIED without prejudice.
At present, the Court finds that, on the showing made, there remain numerous issues of material fact
that are better decided by the trier of fact at trial on the merits.
New Orleans, Louisiana, this 8th day of May 2018.

________________________________
KURT D. ENGELHARDT
UNITED STATES DISTRICT JUDGE
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