Motwani v. Wet Willies Management Corp.
ORDER AND REASONS DENYING 12 Motion to Dismiss Claims IV, V & VI of the First Amended Complaint, as set forth in document. Signed by Judge Ivan L.R. Lemelle on 8/2/2017. (jls)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF LOUISIANA
WET WILLIES MANAGEMENT CORP.
ORDER AND REASONS
Corp.’s Motion to Dismiss Claims IV, V & VI of the First Amended
Complaint.” Rec. Doc. 12. Plaintiff timely filed an opposition
granted, leave to file a reply memorandum. Rec. Doc. 24. For the
reasons outlined below,
IT IS ORDERED that the motion to dismiss (Rec. Doc. 12) is
FACTUAL BACKGROUND AND PROCEDURAL HISTORY
operation of six restaurants known as “WILLIE’S CHICKEN SHACK.”
Rec. Doc. 1 at ¶¶ 13-15. He alleges that he owns the common law
marks “WILLIE’S CHICKEN SHACK” (the word mark) and “WILLIE’S
CHICKEN SHACK DAIQUIRIS COLD BEER” (the design mark). Id. at ¶¶
17-19. On July 22, 2016, he filed two federal applications to
register these marks and these applications are currently pending
in the United States Patent and Trademark Office (“USPTO”). Id. at
¶¶ 21-23. Examining Attorney Matthew C. Kline searched for prior
registrations containing similar terms and, on November 2, 2016,
stated that he had “found no conflicting marks that would bar
registration” of either mark. Id. at ¶¶ 28, 30-31, 36. On December
7, 2016, after determining that the marks were distinctive and not
likely to be confused with any pre-existing registration, the USPTO
issued notices of publication as to both marks, recognizing that
they appeared to be entitled to registration. Id. at ¶¶ 32-35, 3840. On December 27, 2016, Plaintiff’s applications were published
in the Trademark Official Gazette. Id. at ¶ 41.
registered several marks, including “WET WILLIE’S A BAR A PARTY AN
INSTITUTION” (Defendant’s design mark), “WEAK WILLIE” (Defendant’s
word mark for a frozen non-alcoholic daiquiri-flavored drink),
(Defendant’s word mark for a frozen alcoholic daiquiri drink).
Rec. Doc. 1 at ¶¶ 42-46. Defendant “is in the business of licensing
these marks to franchisees for use in connection with operating
daiquiri shops throughout the United States.” Id. at ¶ 48.
On January 27, 2017, Plaintiff’s counsel received a demand
letter from Defendant’s counsel accusing Plaintiff of infringing
on Defendant’s marks by using the terms “WILLIE” and “WILLIE’S” in
connection with restaurants that specialize in frozen daiquiris.
Rec. Doc. 1 at ¶¶ 49-50. Defendant insisted that Plaintiff file an
express abandonment of the marks, cease and desist from further
use of the marks, cancel any corporate name registrations, abandon
any domain name registrations, and execute a written agreement not
to use or register any similar trademarks, corporate names, or
domain names. Id. at ¶¶ 74-79. Defendant also filed a notice of
opposition with the USPTO to the registration of Plaintiff’s marks,
arguing that the marks are likely to lead to confusion or otherwise
dilute its marks pursuant to 15 U.S.C. §§ 1052(d), 1125(c). Id. at
Consequently, on March 10, 2017, Plaintiff filed the instant
suit pursuant to the Declaratory Judgment Act (28 U.S.C.
2201(a), 2202) seeking a declaratory judgment of trademark noninfringement, non-dilution, and unenforceability under the federal
Lanham Act (15 U.S.C. § 1051). Rec. Doc. 1 at ¶ 1. Plaintiff
alleges that the term “WILLIE’S” is commonly used in connection
with the operation of bars and/or restaurants and that the USPTO
nevertheless registers the use of marks containing the terms
“WILLIE,” “WILLY,” and/or “WILLEY.” Id. at ¶¶ 59-60. He further
argues that his marks are sufficiently dissimilar from Defendant’s
marks and that the services provided under these marks are not
likely to cause confusion. Id. at ¶¶ 65-68. Finally, Plaintiff
Plaintiff’s marks cannot “dilute” them. Id. at ¶¶ 69-70. Based on
these allegations, Plaintiff asserted that he is entitled to a
declaratory judgment of (1) trademark non-infringement under 15
U.S.C. § 1114 (Rec. Docs. 1 at ¶¶ 89-93; 7 at ¶¶ 132-36) and (2)
non-dilution under 15 U.S.C. § 1125(c) (Rec. Docs. 1 at ¶¶ 94-98;
7 at ¶¶ 137-41).
On May 10, 2017, Plaintiff filed an amended complaint to add
claims for a permanent injunction and damages in accordance with
Federal Rule of Civil Procedure 15(a)(1)(A). Rec. Doc. 7 at 1.1 He
specifically alleged that the demand letter “effectively demanded
restaurants throughout New Orleans, Louisiana, that specialize in
the service of fried chicken and include a full-service bar” and
that these demands were made in bad faith to discourage competition
as Defendant attempts to enter the New Orleans market. Id. at ¶¶
95, 97-105. Due to Defendant’s opposition, Plaintiff claims that
he has suffered anti-competitive harm, as evidenced by an email in
which an unknown party states that they cannot move forward with
franchising opportunities until the trademark dispute is resolved.
Id. at ¶¶ 108-28. Based on these allegations, Plaintiff added the
following claims in his amended complaint:
(3) a declaratory
The amended complaint also notes that (1) a “PINEAPPLE WILLY’S” mark was
approved by the USPTO on March 21, 2017, after Plaintiff applied for
registration of his marks, (2) Defendant never opposed the registration of that
mark, and (3) that mark used “an equivalent of ‘WILLIE’S’ and is also used in
connection with restaurant services, including the service of daiquiris.” Rec.
Doc. 7 at ¶ 73.
Defendant’s anti-competition actions under the Sherman Act, 15
U.S.C. § 2, and Clayton Act, 15 U.S.C. § 15 (id. at ¶¶ 147-51);
(5) an injunction, damages, attorney fees, and costs to address
Defendant’s unfair competition actions under the Louisiana Unfair
Trade Practices Act (“LUTPA”), LA. REV. STAT. ANN. § 51:1405 (id. at
¶¶ 152-56); and (6) an injunction, damages, attorney fees, and
Louisiana law, LA. CIV. CODE art. 2315 (id. at ¶¶ 157-60).
THE PARTIES’ CONTENTIONS
Defendant filed the instant motion pursuant to Federal Rule
of Civil Procedure 12(b)(6) to dismiss claims 4-6, Plaintiff’s
Sherman Act, LUTPA, and negligent interference claims. Rec. Doc.
12 at 1. It specifically argues that these claims are barred by
recognize negligent interference claims. Rec. Doc. 12-1 at 2.
Plaintiff responds that its claims are subject to the “sham”
Louisiana Supreme Court does not bar, per se, claims for negligent
interference. Rec. Doc. 16-1 at 2, 4.
III. LAW AND ANALYSIS
Under Rule 12(b)(6) of the Federal Rules of Civil Procedure,
a party can move to dismiss a complaint for failure to state a
claim upon which relief can be granted. FED. R. CIV. P. 12(b)(6);
see also Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007). Such
motions are viewed with disfavor and rarely granted. Lowrey v.
Tex. A & M Univ. Sys., 117 F.3d 242, 247 (5th Cir. 1997) (quoting
Kaiser Aluminum & Chem. Sales, Inc. v. Avondale Shipyards, Inc.,
677 F.2d 1045, 1050 (5th Cir. 1982)). Nonetheless, “[t]o 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)
(internal quotation marks omitted). A claim is facially plausible
“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. Further, when reviewing a motion to
dismiss, courts must accept all well-pleaded facts as true and
view them in the light most favorable to the non-moving party. See
Baker v. Putnal, 75 F.3d 190, 196 (5th Cir. 1996).
A. THE NOERR-PENNINGTON DOCTRINE
The Noerr-Pennington doctrine provides “that parties who
petition the government for governmental action favorable to them
cannot be prosecuted under the antitrust laws even though their
petitions are motivated by anticompetitive intent.” Video Int’l
Prod., Inc. v. Warner-Amex Cable Commc’ns, Inc., 858 F.2d 1075,
1082 (5th Cir. 1988) (citing E. R.R. Presidents Conference v. Noerr
Motor Freight, Inc., 365 U.S. 127 (1961); United Mine Workers of
Am. v. Pennington, 381 U.S. 657 (1965)). Accordingly, “‘petitions’
made to the executive or judicial branches of government, e.g., in
the form of administrative or legal proceedings, are exempt from
antitrust liability even though the parties seek ultimately to
destroy their competitors through these actions.” Id. Pre-suit
threats to litigate, such as cease-and-desist letters, made in
good faith are similarly exempt. Coastal States Mktg., Inc. v.
Hunt, 694 F.2d 1358, 1367 (5th Cir. 1983) (“it would be absurd to
hold that it does not protect those acts reasonably and normally
attendant upon effective litigation. The litigator should not be
protected only when he strikes without warning. If litigation is
in good faith, a token of that sincerity is a warning that it will
be commenced and a possible effort to compromise the dispute”)
(footnote and citations omitted); Constr. Cost Data, LLC v. Gordian
Grp., Inc., No. 16-114, 2017 WL 2266993, at *4 (S.D. Tex. Apr. 24,
2017), report and recommendation adopted, 2017 WL 2271491 (S.D.
Tex. May 22, 2017) (citations omitted); Wolf v. Cowgirl Tuff Co.,
No. 15-1195, 2016 WL 4597638, at *7 (W.D. Tex. Sept. 2, 2016);
Indus. Models, Inc. v. SNF, Inc., No. 15-689, 2015 WL 5606384, at
*2 (N.D. Tex. Sept. 23, 2015); Source Network Sales & Mktg., LLC
v. Ningbo Desa Elec. Mfg. Co., No. 14-1108, 2015 WL 2341063, at *8
(N.D. Tex. May 15, 2015); Credit Counseling Ctrs. of Am. v. Nat’l
Found. for Consumer Credit, Inc., No. 94-1855, 1997 WL 160180, at
*4 (N.D. Tex. Apr. 1, 1997).
“Although the Noerr-Pennington doctrine initially arose in
the antitrust field,” this Circuit has “expanded it to protect
[F]irst [A]mendment petitioning of the government from claims
brought under federal and state laws, including section 1983 and
Video Int’l, 858 F.2d at 1084 (citations omitted) (holding that
the doctrine extends to protect petitioning from claims brought
under state law, particularly a claim for common law tortious
interference with contractual relations).
petitioning activity is a “sham.” Bryant v. Military Dep’t of
Miss., 597 F.3d 678, 690 (5th Cir. 2010) (citations omitted). This
is because “‘application of the Sherman Act would be justified’
when petitioning activity, ‘ostensibly directed toward influencing
governmental action, is a mere sham to cover . . . an attempt to
competitor.’” Prof’l Real Estate Inv’rs, Inc. v. Columbia Pictures
Indus., Inc., 508 U.S. 49, 56 (1993) (quoting Noerr, 365 U.S. at
(1) “the lawsuit must be objectively baseless in the
sense that no reasonable litigant could realistically
expect success on the merits,” and (2) “only if the
challenged litigation is objectively meritless may a
court examine the litigant’s subjective motivation” to
determine “whether the baseless lawsuit conceals ‘an
attempt to interfere directly with the business
relationships of a competitor,’ through the ‘use [of]
the governmental process as opposed to the outcome.’”
Bryant, 597 F.3d at 690 (quoting Prof’l Real Estate Inv’rs, 508
U.S. at 60-61) (emphasis in original). “The plaintiff bears the
burden to disprove the challenged lawsuit’s legal viability before
subjective intent can be considered.” Id. at 690-92 (citing Prof’l
Real Estate Inv’rs, 508 U.S. at 60-61).2
Here, Defendant argues that Plaintiff’s claims under the
Sherman Act, LUTPA, and for negligent interference arise from
Defendant’s filing of the opposition (“which is an administrative
accordingly barred under the Noerr-Pennington doctrine. Rec. Doc.
12-1 at 7. Defendant further argues that the opposition and demand
letter are not subject to the sham exception to the doctrine,
baseless.” Id. at 8. Defendant insists that it based its claims in
those documents on federally-registered trademark rights, such
realistically expect success on the merits.’” Id. (citing RJ Mach.
“Of course, even a plaintiff who defeats the defendant’s claim to Noerr
immunity by demonstrating both the objective and the subjective components of
a sham must still prove a substantive antitrust violation. Proof of a sham
merely deprives the defendant of immunity; it does not relieve the plaintiff of
the obligation to establish all other elements of his claim.” Prof’l Real Estate
Inv’rs, 508 U.S. at 61.
Co. v. Can. Pipeline Accessories Co., No. 13-579, 2013 WL 8115445,
at *4 (W.D. Tex. Nov. 22, 2013)).
specifically alleged that Defendant’s opposition and allegations
in the demand letter were “groundless” and that Defendant’s actions
went “well-beyond any reasonable interpretation of the scope of
its actual rights.” Rec. Doc. 7 at ¶¶ 86-88. He also alleged that
his use of the marks did not infringe on or dilute Defendant’s
registrations. Id. at ¶¶ 80, 83.
Plaintiff specifically cited to various factual allegations
in the amended complaint that he believes significant. In turn,
Defendant responded to each.
First, the amended complaint recognized each of Defendant’s
“WILLIE’S CHICKEN SHACK.” Rec. Doc. 7 at ¶¶ 53-58. Defendant argues
that the fact that it does not hold a registration to a “WILLIE’S
objectively baseless as is required to invoke Noerr-Pennington’s
‘sham’ exception.” Rec. Doc. 24 at 3 (citing Thomas J. McCarthy,
McCarthy on Trademark and Unfair Competition (4th Ed.), §§ 23.20,
23.20.50 (“It is certainly not necessary to use an exact copy of
another’s mark for a reasonable buyer to be likely to be confused”
and “[w]here the goods and services are directly competitive, the
degree of similarity required to prove a likelihood of confusion
is less than in the case of dissimilar products”)).
Second, Plaintiff noted that the USPTO’s examining attorney
registration. Rec. Doc. 7 at ¶¶ 30-37, 44-51. Defendant argues
especially in light of the fact that the USPTO allows oppositions
to be filed to contest such findings. Rec. Doc. 24 at 3 (citing
McCarthy, § 20.2 (“it is not dispositive or even relevant in an
opposition proceeding that [the] applicant was able to convince
the Trademark Examining Attorney during ex parte examination that
Third, Plaintiff pleaded that the term “WILLIE’S” is common
in the industry, documented various registrations containing the
term “WILLIE” or similar terms, and otherwise noted that Defendant
did not question the March 21, 2017 registration of the mark
“PINEAPPLE WILLY’S,” which is used in connection with the service
consideration of “the number and nature of similar marks in use on
similar goods” is only the sixth of thirteen DuPont factors that
the USPTO and courts should consider and that “[w]hile these thirdparty registrations may have some bearing on the relative strength
or weakness of Defendant’s . . . marks, this would be but one
factor considered in an infringement analysis . . . .” Rec. Doc.
Ponsardin Maison Fondee en 1772, 396 F.3d 1369, 1373 (Fed. Cir.
2005) (citing Application of E. I. DuPont DeNemours & Co., 476
F.2d 1357, 1361 (C.C.P.A. 1973))).
Fourth, Plaintiff alleged that the services provided under
Defendant’s marks, namely the service of daiquiris, is not unique
and therefore that Defendant’s registrations are limited in scope.
Rec. Doc. 7 at ¶¶ 74-76. Defendant argues that under the second
DuPont factor, which considers the similarity and nature of the
services provided under the competing marks, the fact that both
(including in particular the service of daiquiris) . . . weighs in
favor of Defendant’s claims and in no way supports a position that
Defendant’s claims are objectively baseless.” Rec. Doc. 24 at 5
(citing DuPont, 476 F.2d at 1361; Century 21 Real Estate Corp. v.
Century Life of Am., 970 F.2d 874, 877 (Fed. Cir. 1992) (“When
marks would appear on virtually identical goods or services, the
degree of similarity necessary to support a conclusion of likely
sufficiently dissimilar to avoid consumer confusion, Plaintiff’s
use of his marks would not damage Defendant, and Defendant’s marks
protections under the Lanham Act. Rec. Doc. 7 at ¶ 77-79, 82, 84.
unsupported by fact. Rec. Doc. 24 at 6 (citing Yeti Coolers, LLC
v. Rtic Coolers, LLC, No. 15-597, 2016 WL 5956081, at *4 (W.D.
Tex. Aug. 1, 2016); ERBE Electromedizin GmbH v. Canady Tech. LLC,
529 F. Supp. 2d 577, 595 (W.D. Pa. 2007); aff’d sub nom., 629 F.3d
1278 (Fed. Cir. 2010)).
At this stage, Plaintiff only needs to allege facts that
plausibly entitle him to relief. First, at the very least, the
Court requires more information as to the similarity of the
services provided under the marks to determine whether or not
Defendant’s allegations were objectively baseless and/or whether
or not Plaintiff has proved the “sham” exception. Second, there is
a dispute as to the weight to be given to the examining attorney’s
findings. At the motion to dismiss stage, all well-pleaded facts
must be read in the light most favorable to the non-moving party,
in this case Plaintiff. Baker, 75 F.3d at 196. Third, even if the
use of similar marks is but one factor for the Court to consider,
the evidence produced by Plaintiff regarding the use of similar
marks by other entities indicates that Defendant’s allegations
against Plaintiff, alone, may have been objectively baseless.
this early stage, the evidence at least indicates that this factor
does not weigh in the moving party’s favor. Fourth, the fact that
both parties provide similar services, namely the service of
though, the facts must be viewed in the light most favorable to
Plaintiff and Plaintiff has alleged that this service is not unique
Finally, Plaintiff has sufficiently alleged that the marks are
dissimilar and would not lead to confusion. Even though Defendant
argues that these are conclusions unsupported by fact, Plaintiff
has provided various factual allegations, including a description
of the marks at issue, and these facts could allow the Court to
draw the “reasonable inference” that the marks are not likely to
cause confusion. In other words, the facts, accepted as true, could
relationships. This issue, if appropriate for pretrial disposition
at all, is certainly better decided at the motion for summary
judgment stage. Even one of the cases relied on by Defendant, ERBE,
was decided on a motion for summary judgment, not a motion to
dismiss under 12(b)(6).
Turning to the second prong of the sham exception, Defendant
argues that “[t]hough [Plaintiff] attempts to paint a picture of
[Defendant’s] actions being solely intended to reduce competition
in the daiquiri market in New Orleans to clear the way for its own
potential franchisee, [Plaintiff] fails to mention that he is using
the WET WILLIE’S mark in full in the form of the name of his
signature drink, the WILLIE’S WET WILLY.” Rec. Doc. 12-1 at 9.
In response, Plaintiff notes that he specifically alleged in
letter “were brought in bad faith” and that “Defendant lacks any
legitimate basis whatever, in fact or law, to assert” the claims
made in the opposition and demand letter, demonstrating an intent
to misuse its trademark . . . rights to prohibit” the use and
operation of the restaurants that use them. Rec. Doc. 7 at ¶ 97.
The amended complaint further provided that “Defendant’s said
course of action against Plaintiff is without regard to the outcome
. . . .” Id. at ¶ 98. Plaintiff also argues that his alleged use
of “WILLIE’S WET WILLY” is irrelevant to Defendant’s opposition to
Plaintiff is not attempting to register a “WILLIE’S WET WILLY”
mark. Rec. Doc. 16-1 at 16. According to Plaintiff, “[e]ither
Defendant aims to confuse the issue, or its . . . opposition is a
pretext to redress . . . an allegation of infringement [as to the
“WILLIE’S WET WILLY” mark], which is not the proper forum to
address such infringement allegations.” Id. at 16-17.
Defendant responds that Plaintiff’s use of “WILLIE’S WET
WILLY” is relevant to the analysis of whether or not Plaintiff’s
marks are likely to cause confusion and therefore suggests that
Defendant has a genuine interest in the outcome of its opposition.
Rec. Doc. 24 at 7-8 (citing Loreal S.A. & Loreal USA, Inc., 102
U.S.P.Q.2d 1434, 2012 WL 1267956, at *10 (T.T.A.B. Mar. 20, 2012)
(where the applicant repeatedly filed applications to register
well-known marks, the court was convinced that the applicant’s
adoption of the mark at issue was in bad faith and intended to
trade off of the opposer’s famous marks; “[s]uch bad faith is
strong evidence that confusion is likely, as such an inference is
drawn from the imitator’s expectation of confusion”)).
Again, Plaintiff pleaded sufficient factual content, accepted
as true and viewed in the light most favorable to him, to allow
the Court to draw the reasonable inference that Defendant merely
uninterested in the outcome of its opposition and demand letter.
B. NEGLIGENT INTERFERENCE WITH CONTRACTUAL RELATIONS
The parties dispute whether or not Louisiana law bars, per
se, negligent interference with contract claims or if the Louisiana
Supreme Court has refused to recognize such claims only after
appeared to recognize in 1984 that such claims are not necessarily
Dredging, 447 So. 2d 1058, 1060 (La. 1984). Yet, various lower
courts have subsequently found that “Louisiana does not recognize
a cause of action for negligent interference with contract rights.”
Carter v. Smith, 607 So. 2d 6, 7 (La. App. 2 Cir. 1992) (citing
Great Sw. Fire Ins. Co. v. CNA Ins. Cos., 557 So. 2d 966 (La.
1990); 9 to 5 Fashions, Inc. v. Spurney, 538 So. 2d 228, 229 (La.
1989)); see also, e.g., Brown v. Romero, 05-1016, p. 6 (La. App.
3 Cir. 2/1/06); 922 So. 2d 742, 747, writ denied, 06-0480 (La.
5/5/06); 927 So. 2d 315 (“the supreme court has expressly declined
to recognize a cause of action for negligent interference with
contract”) (citing Great Sw. Fire Ins., 557 So. 2d 966); Inka’s
S’Coolwear, Inc. v. Sch. Time, L.L.C., 97-2271 (La. App. 1 Cir.
11/6/98); 725 So. 2d 496, 502 (citing 9 to 5, 538 So. 2d at 232).
These lower courts primarily rely on two Louisiana Supreme
Court cases (from 1989 and 1990). These cases, and a more recent
Fifth Circuit case (from 2011), are briefly summarized below.
In 9 to 5, the Louisiana World Exposition, Inc. (“LWE”)
contracted with 9 to 5 Fashions (“9 to 5”) to supply uniforms for
the 1984 Louisiana World’s Fair. 538 So. 2d at 230 (La. 1989). The
trial court found that LWE’s chief executive officer caused 9 to
5 damage by failing to appoint a uniform coordinator until three
months before the fair. Id. The court of appeal reduced the
ultimate damage award, but otherwise affirmed, reasoning that the
CEO breached his duty of care. Id. The Louisiana Supreme Court
recognized the action as one for tortious interference with a
contractual relationship. Id. at 231. It noted that, in Louisiana,
“every act whatever of man that causes damage to another obliges
him by whose fault it happened to repair it.” Id. (citing LA. CIV.
CODE art. 2315). Nonetheless, “[i]nterference with contract . . .
has remained almost entirely an intentional tort; and, in general,
liability has not been extended to the various forms of negligence
by which performance of a contract may be prevented or rendered
negligent interference with contract is not generally recognized,
“there are strong reasons that corporate officers should enjoy
immunity from liability for negligent contractual interference
[and] . . . intentional interference committed within the scope of
corporate authority for the corporation’s benefit.” Id. Namely,
corporate officers owe fiduciary obligations to the corporation
and “their fidelity . . . aimed toward corporate benefit should
not be curtailed by undue fear of personal liability.” Id.
Considering that (1) Louisiana was “the only American state
that [did not] recognize the action for tortious interference with
contractual relations,” and (2) the basis for an earlier court’s
fundamental civil law principle that obliges a person to repair
damage caused another by his fault” (see Kline v. Eubanks, 33 So.
expressions barring absolutely any action based on a tortious
interference with a contract are annulled insofar as they conflict
with this opinion.” Id. at 232-34 (emphasis added).
However, the Court also specifically stated that it did not
intend “to adopt whole and undigested the fully expanded common
law doctrine of interference with contract . . . .” 538 So. 2d at
234. Accordingly, it specifically recognized only that “an officer
of a corporation owes an obligation to a third person having a
contractual relationship with the corporation to refrain from acts
intentionally causing the company to breach the contract or to
make performance more burdensome . . . unless the officer has
reasonable justification for his conduct.” Id. at 231 (emphasis
In Great Southwest, an excess insurer sued the primary insurer
to recover money expended due to the latter’s alleged bad faith
failure to properly defend and settle a lawsuit against their
common insured. 557 So. 2d at 966 (La. 1990). Specifically, after
an individual slipped and fell, he sued the common insured and was
awarded sums in excess of the primary policy limits. Id. The excess
insurer alleged that the sums in excess of the primary policy
limits were caused by the primary insurer’s failure to settle
within policy limits. Id. The Louisiana Supreme Court granted writs
to determine if the excess insurer had a private right of action
against the primary insurer and/or if the excess insurer could
assert the insured’s rights against the primary insurer through
subrogation. Id. at 967. The Court ultimately found that the excess
insured’s rights against the primary insurer. Id.
Significantly for our purposes, though, the Court was asked
to reverse the appellate court’s finding “that a primary insurer
does not owe a delictual duty to an excess insurer regarding the
defense or settlement of claims against their common insured.” 557
So. 2d at 969. The Court stated that to recognize such a duty would
be to recognize “something very similar to an action for negligent
interference with contract.” Id. It further stated that, in 9 to
5, it recognized “the possibility of a narrowly drawn action for
intentional interference with contractual rights.” Id. (emphasis
in original). However, courts generally do not extend liability
when “various forms of negligence have either prevented or rendered
more burdensome the performance of a contract,” because “while
physical harm generally has limited effects, a chain reaction
occurs when economic harm is done and may produce an unending
contract, or other business planning devices.” Id. at 970. Thus,
courts generally follow the policy against recovery based on
negligence and “with a few limited and narrow exceptions, have
refused to cross the bright line that has traditionally marked
negligence claims for economic harm as off limits which would
require them to substitute a case-by-case adjudication on the issue
of proximate cause . . . .” Id. Rather, the Court suggested that
most cases discussing negligent interference with contract could
be better understood “by reference to other legal principles,”
such as subrogation or the “general inhibition in negligence law
against compensation for purely economic loss not the result of
either bodily harm to the claimant or physical injury to property
in which [the] claimant has a proprietary interest.” Id. at 97071.
Considering the foregoing factors and others such as the
likelihood that a primary insurer’s good faith duty to
an excess carrier would evolve to include a duty to avoid
negligent interference, the difficulty in reserving the
negligent interference action to only excess insurers,
the substantial although indirect protection that is
already provided insurers legislatively by subrogation,
the injustice and inefficiency that may be produced by
intervene in litigious matters in competition with their
insureds, and the effect upon insurance administration
and rates of requiring primary insurers’ attorneys to
serve three masters, we conclude that the primary
insurer does not owe a duty of care or even of good faith
performance to the excess insurer of its insured.
Id. at 971 (emphasis added).
crawfish crop, buyers and processors of farm-raised crawfish sued
the pesticide manufacturer for their alleged economic losses under
the Louisiana Products Liability Act (“LPLA”). 645 F.3d at 692
(5th Cir. 2011). On motions for summary judgment, the manufacturer
argued that the claims were barred by the economic-loss rule, which
is based on Robins Dry Dock & Repair Co. v. Flint, 275 U.S. 303
(1927) and “bars recovery in tort when a party suffers economic
loss unaccompanied by harm to his own person or property.” Id. at
According to the Fifth Circuit, Louisiana “adopted a slightly
modified version of the economic-loss rule in PPG,” the case that
interference with contract claims are not barred per se. 645 F.3d
at 697. The Louisiana Supreme Court in PPG conducted a duty-risk
analysis and “left the door open for case-by-case adjustments” to
the economic-loss rule, “emphasized that policy considerations
determine the ‘reach’ of the rule,” and instructed courts to
examine the “ease of association” between the conduct, risk of
injury, and loss and to “consider the particular case in the terms
of the moral, social and economic values involved, as well as with
a view toward the ideal of justice.” Id. at 698 (citing PPG, 447
So. 2d at 1061). The plaintiffs in Wiltz attempted to distinguish
PPG. Id. at 699. Relevant here, they argued that they did not have
permitted to recover in tort. Id. at 700. However, the Fifth
Circuit reasoned that “by not negotiating [supply] contracts, the
plaintiffs would appear to have made a choice to bear the risk of
a supply disruption” and “PPG held that not even a binding,
contractual right to buy a third party’s property was sufficient
to create an ease of association between negligent damage to that
property and the plaintiff’s resulting economic loss.” Id. (citing
Roberts v. Benoit, 605 So. 2d 1032, 1056 (La. 1991), on reh’g (May
28, 1992)). The Fifth Circuit stated that the finding in PPG was
“consistent with the Louisiana courts’ refusal to recognize a cause
of action for negligent interference with contractual relations.”
Id. at 701 (citing PPG, 447 So. 2d at 1060 n.1; Carter, 607 So.2d
Ultimately, the Fifth Circuit affirmed the district court’s grant
of summary judgment against the plaintiffs after conducting a dutyrisk analysis and applying PPG. Id. at 702-03.
Notably, a factually identical case was proceeding in the
state courts (the Phillips litigation) at the same time the Fifth
Circuit was considering Wiltz. 645 F.3d at 693. In Phillips, a
jury found the manufacturer liable, but a five-judge panel of the
Louisiana Third Circuit reversed, reasoning that the plaintiffs
“failed to prove a proprietary interest in the crawfish crop . .
. .” Id. (citing Phillips v. G & H Seed Co., 08-934 (La. App. 3
Cir. 4/8/09); 10 So. 3d 339, writ denied, 09-1504 (La. 10/30/09);
21 So. 3d 284). The trial court then granted summary judgment based
on the panel’s decision and the plaintiffs appealed, arguing that
the trial court “should have used a multi-factor ‘duty-risk’
analysis to determine the scope of [the manufacturer’s] duty of
care.” Id. at 694 (citing Phillips v. G & H Seed Co., 10-1405 (La.
App. 3 Cir. 5/11/11); 66 So. 3d 507, writ granted, cause remanded,
11-1861 (La. 11/18/11); 75 So. 3d 460). On May 11, 2011, a threejudge
plaintiffs and accordingly remanded “to apply ‘a multi-factor,
policy driven, duty-risk analysis’ to determine ‘the scope and
extent’” of the manufacturer’s duties. Id.
The Wiltz decision was rendered on June 28, 2011, so the Fifth
Circuit did not have the opportunity to analyze the subsequent
progression of the related state suit. However, after the threejudge panel’s decision, on November 18, 2011, the Louisiana Supreme
Court granted writs and remanded for a hearing en banc. Phillips
v. G & H Seed Co., 11-1861 (La. 11/18/11); 75 So. 3d 460. On
exclusionary/proprietary interest rule illustrated in Robins Dry
Dock is not the law of this state. Rather, a duty-risk analysis
was adopted by the Louisiana Supreme Court in PPG.” Phillips v. G
& H Seed Co., 10-1405, p. 10 (La. App. 3 Cir. 3/7/12); 86 So. 3d
773, 780, writ granted, 12-775 (La. 6/22/12); 90 So. 3d 447.
Based on this case law, it is unclear whether or not the
Louisiana Supreme Court considers negligent interference
contract claims barred per se or if it requires courts to consider
such claims on a case-by-case basis under the duty/risk framework.
The holding in 9 to 5 annulling earlier cases that absolutely
barred tortious interference with contract claims “insofar as they
conflict with this opinion,” could mean either that such claims
are not absolutely barred or merely that no claims of intentional
interference by a corporate officer are so barred. The language
from Great Southwest, characterizing 9 to 5 as recognizing “the
interference with contractual rights,” suggests that the latter
interpretation is more likely. Yet, the Louisiana Supreme Court,
in PPG, 9 to 5, and Great Southwest, appeared to undertake a
duty/risk analysis, focusing on the duty and/or scope of the duty
elements. For example, the Great Southwest Court did not conclude
that a negligent interference with contract claim by an excess
insurer against a primary insurer is absolutely barred, but that
the primary insurer did not owe a duty of care to the excess
insurer. 557 So. 2d at 971. Plus, the Fifth Circuit in Wiltz and
the Louisiana Third Circuit in the Phillips litigation either
conducted or mandated a duty/risk analysis before reaching a
conclusion as to Louisiana’s approach to the economic-loss rule.
existence of a claim for negligent interference with contracts is
not clear. In Wiltz, the Fifth Circuit recognized that it had
previously noted that Robins Dry Dock “may be read as both denying
recovery for economic loss resulting from physical damage to the
property of another, and also denying recovery for negligent
interference with contractual rights.” Wiltz, 645 F.3d at 696
(citations omitted). It appears to this Court that the economicloss rule is, at the very least, one of several reasons why
Louisiana courts hesitate to recognize a claim for negligent
interference with contracts. See Great Sw., 557 So.2d at 970
interference with contract claims because “while physical harm
economic harm is done and may produce an unending sequence of
financial effects best dealt with by insurance, contract, or other
business planning devices”); Wiltz, 645 F.3d at 695 (where the
Fifth Circuit recognized the economic-loss rule “as a pragmatic
defendant’s duty of care”); Roberts, 605 So. 2d at 1052, 1056
(noting that PPG may be understood as a limitation on “legal or
proximate cause,” sometimes referred to as the “scope of the duty
inquiry”). In cases involving motions based on the economic-loss
rule, Louisiana courts and federal courts applying Louisiana law
have recognized the need to conduct a duty/risk analysis. See PPG,
447 So. 2d at 1059-60; Phillips, 86 So. 3d at 780-82; Wiltz 645
F.3d at 697-99.
Based on Fifth Circuit and Louisiana Supreme Court precedent,
this Court finds that article 2315 and the Louisiana Supreme Court
would require a duty/risk analysis before finding that Plaintiff’s
claim for negligent interference with contract is barred. However,
this does not mean that Plaintiff is likely to succeed on such a
claim. The Louisiana case law overwhelmingly suggests that this
claim is not viable. The Court’s decision today merely recognizes
the prudence in allowing the parties to brief the issue pursuant
to the duty/risk framework. If Plaintiff maintains his claim for
appropriate motion for summary judgment and the Court imagines
that its analysis will focus primarily, if not exclusively, on the
duty and scope of the duty elements and relevant case law.
For the reasons outlined above,
IT IS ORDERED that Defendant’s motion to dismiss (Rec. Doc.
12) is DENIED.
New Orleans, Louisiana, this 2nd day of August, 2017.
SENIOR UNITED STATES DISTRICT JUDGE
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