Pure Air Daigle L L C et al v. Stagg, II et al
Filing
142
MEMORANDUM RULING re 104 Motion for Partial Summary Judgment. Considering the evidence, the law, and the arguments of the parties, and for the reasons fully explained herein, the motion is DENIED. Signed by Magistrate Judge Patrick J Hanna on 9/15/2017. (crt,Alexander, E)
UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF LOUISIANA
LAFAYETTE DIVISION
PURE AIR DAIGLE, LLC, ET AL.
CIVIL ACTION NO. 6:16-cv-01322
VERSUS
MAGISTRATE JUDGE HANNA
CHARLES STAGG, II, ET AL.
BY CONSENT OF THE PARTIES
MEMORANDUM RULING
Currently pending is the defendants’ motion for partial summary judgment with
regard to the plaintiffs’ conspiracy and unfair trade practices claims. (Rec. Doc. 104).
The motion is opposed. Considering the evidence, the law, and the arguments of the
parties, and for the reasons fully explained below, the motion is DENIED.
BACKGROUND
Defendants Charles Stagg, II, Scott Lanclos, Phillip Courville, Jr., and Brad
Guidry (“the Employee Defendants”) were all formerly employed by Daigle Welding
Supply. The plaintiffs are the successors of that company. Defendant Capitol
Welders Supply Co. Inc. was a long-time supplier of the plaintiffs. In 2016, Capitol
formed defendant St. Landry Gas & Supply, L.L.C., which is a competitor of the
plaintiffs. The Employee Defendants left their employment with the plaintiffs and all
of them went to work for St. Landry Gas.
In their complaint, the plaintiffs asserted claims against the defendants for
breach of contract, violation of the Louisiana Unfair Trade Practices and Consumer
Protection Law (“LUTPA”), breach of fiduciary duties, conversion, conspiracy,
tortious interference with contractual relationships, and tortious interference with
business relationships. The instant motion relates solely to the plaintiffs’ LUTPA and
conspiracy claims.
LAW AND ANALYSIS
A.
THE SUMMARY JUDGMENT STANDARD
Under Rule 56(a) of the Federal Rules of Civil Procedure, summary judgment
is appropriate when there is no genuine dispute as to any material fact, and the
moving party is entitled to judgment as a matter of law. A fact is material if proof of
its existence or nonexistence might affect the outcome of the lawsuit under the
applicable governing law.1 A genuine issue of material fact exists if a reasonable jury
could render a verdict for the nonmoving party.2
The party seeking summary judgment has the initial responsibility of informing
the court of the basis for its motion and identifying those parts of the record that
1
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986); Sossamon v. Lone Star
State of Tex., 560 F.3d 316, 326 (5th Cir. 2009); Hamilton v. Segue Software, Inc., 232 F.3d 473, 477
(5th Cir. 2000).
2
Brumfield v. Hollins, 551 F.3d 322, 326 (5th Cir. 2008) (citing Anderson v. Liberty
Lobby, Inc., 477 U.S. at 252); Hamilton v. Segue Software, Inc., 232 F.3d at 477.
-2-
demonstrate the absence of genuine issues of material fact.3 If the moving party
carries its initial burden, the burden shifts to the nonmoving party to demonstrate the
existence of a genuine issue of a material fact.4 All facts and inferences are construed
in the light most favorable to the nonmoving party.5
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
there is insufficient proof concerning an essential element of the nonmoving party's
claim.6 The motion should be granted if the nonmoving party cannot produce
evidence to support an essential element of its claim.7
B.
THE APPLICABLE LAW
A federal court sitting in diversity must apply state substantive law and federal
procedural law.8 Because this is a diversity case, Louisiana’s substantive law must
3
Washburn v. Harvey, 504 F.3d 505, 508 (5th Cir. 2007) (citing Celotex Corp. v.
Catrett, 477 U.S. 317, 323 (1986)).
4
Washburn v. Harvey, 504 F.3d at 508.
5
Brumfield v. Hollins, 551 F.3d at 326 (citing Matsushita Elec. Indus. Co. v. Zenith
Radio, 475 U.S. 574, 587 (1986)).
6
Norwegian Bulk Transport A/S v. International Marine Terminals Partnership, 520
F.3d 409, 412 (5th Cir. 2008) (citing Celotex Corp. v. Catrett, 477 U.S. at 325).
7
Condrey v. Suntrust Bank of Ga., 431 F.3d 191, 197 (5th Cir. 2005).
8
Erie R. R. Co. v. Tompkins, 304 U.S. 64, 78 (1938); Gasperini v. Ctr. for Humanities,
Inc., 518 U.S. 415, 427 (1996); Coury v. Moss, 529 F.3d 579, 584 (5th Cir. 2008).
-3-
be applied.9 To determine Louisiana law, federal courts look to the final decisions
of the Louisiana Supreme Court.10 When the state's highest court has not decided an
issue, the court must make an “Erie guess” as to how the state supreme court would
decide the issue.11 In making such a guess, the federal court may rely upon state
appellate court decisions, unless persuasive data convinces the court that the state
supreme court would decide the issue differently.12 When making an Erie guess
concerning Louisiana law, the Fifth Circuit In making an Erie guess, relies upon “(1)
decisions of the [Louisiana] Supreme Court in analogous cases, (2) the rationales and
analyses underlying [Louisiana] Supreme Court decisions on related issues, (3) dicta
by the [Louisiana] Supreme Court, (4) lower state court decisions, (5) the general rule
on the question, (6) the rulings of courts of other states to which [Louisiana] courts
look when formulating substantive law and (7) other available sources, such as
treatises and legal commentaries.”13
9
See, e.g., Moore v. State Farm Fire & Cas. Co., 556 F.3d 264, 269 (5th Cir. 2009).
10
Moore v. State Farm Fire & Casualty Co., 556 F.3d at 269.
11
Temple v. McCall, 720 F.3d 301, 307 (5th Cir. 2013); Moore v. State Farm Fire &
Casualty Co., 556 F.3d at 269.
12
Guilbeau v. Hess Corporation, 854 F.3d 310, 311-12 (5th Cir. 2017); Temple v.
McCall, 720 F.3d at 307; Mem'l Hermann Healthcare Sys., Inc. v. Eurocopter Deutschland, GMBH,
524 F.3d 676, 678 (5th Cir. 2008).
13
Gulf and Mississippi River Transp. Co., Ltd. v. BP Oil Pipeline Co., 730 F.3d 484,
488–89 (5 Cir. 2013) (quoting Am. Int'l Specialty Lines Ins. Co. v. Rentech Steel, L.L.C., 620 F.3d
th
-4-
C.
LOUISIANA LAW REGARDING UNFAIR TRADE PRACTICES
In their complaint, the plaintiffs asserted a claim against the defendants for
violation of Louisiana’s Unfair Trade Practices and Consumer Protection Law
(“LUTPA”), La. R.S. 51:1401, et seq. This statute declares that “[u]nfair methods of
competition and unfair or deceptive acts or practices in the conduct of any trade or
commerce” are unlawful. “LUTPA grants a right of action to any person, natural or
juridical, who suffers an ascertainable loss as a result of another person's use of unfair
methods of competition and unfair or deceptive acts or practices in the conduct of any
trade or commerce.”14
The elements of a cause of action under LUTPA are: (1) an unfair or deceptive
trade practice declared unlawful; (2) that impacts a consumer, business competitor,
or other person to whom the statute grants a private right of action; (3) which has
558, 564 (5th Cir. 2010) (quoting Hodges v. Mack Trucks, Inc., 474 F.3d 188, 199 (5th Cir. 2006))).
14
Cheramie Services, Inc. v. Shell Deepwater Production, Inc., 2009-1633 (La.
04/23/10), 35 So.3d 1053, 1057.
-5-
caused ascertainable loss.15 Actual damages may be awarded under LUTPA.16 The
recovery of general damages is available under LUTPA, including damages for
mental anguish and humiliation.17 When a plaintiff is awarded damages under
LUTPA, the plaintiff is also entitled to recover an award of attorneys’ fees.18
Courts must decide, on a case-by-case basis, what conduct violates LUTPA.19
Under this statute, an act need not be both unfair and deceptive to be actionable.20 A
practice is unfair “when the practice is unethical, oppressive, unscrupulous, or
substantially injurious,”21 while a practice is deceptive when it amounts to “fraud,
15
Elliott Company v. Montgomery, No. 6:15-02404, 2016 WL 6301042, at *5 (W.D.
La. Sept. 28, 2016), report and recommendation adopted, 2016 WL 6301106 (W.D. La. Oct. 26,
2016); FloQuip, Inc. v. Chem Rock Techs., No. 6:16-0035, 2016 WL 4574436, at *16 (W.D. La.
June 20, 2016), report and recommendation adopted, 2016 WL 4581345 (W.D. La. Sept. 1, 2016);
Frontline Petroleum Training System, LLC v. Premier Safety Management, Inc., No. 6:13-cv-01259,
2013 WL 6667332, at *4 (W.D. La. Dec. 17, 2013); Who Dat Yat LLC v. Who Dat? Inc., No. 101333, 10-2296, 2011 WL 39043, at *3 (E.D. La. Jan. 4, 2011).
16
La. R.S. 51:1405.
17
Gandhi v. Sonal Furniture & Custom Draperies, L.L.C., 49,959 (La. App. 2 Cir.
07/15/15), 192 So.3d 783, 792, writ denied, 15-1547 (La.10/23/15), 184 So.3d 19.
18
La. R.S. 51:1409(A).
19
Cheramie Services, Inc. v. Shell Deepwater Production, Inc., 35 So.3d at 1059.
20
Jefferson v. Chevron U.S.A. Inc., 97-2436 (La. App. 4 Cir. 05/20/98), 713 So.2d 785,
792, writ denied, 98-1681 (La. 10/16/98).
21
Cheramie Services, Inc. v. Shell Deepwater Production, Inc., 35 So.3d at 1059-60.
-6-
deceit or misrepresentation.”22 Thus, “LUTPA claims are not limited solely to
allegations of fraud, but may be independently premised on a range of non-fraudulent
conduct.”23
Negligent acts do not violate the LUTPA,24 and LUTPA does not provide an
alternative remedy for breaches of contract.25 Furthermore, “LUTPA does not
prohibit sound business practices, the exercise of permissible business judgment, or
appropriate free enterprise transactions.”26
With regard to the particular context of this lawsuit, it is well established that
LUTPA is not violated when employees merely terminate their employment and then
go to work for their former employer’s competitor. “[A]t-will employees are free to
exercise their right to change employment, even if they decide to work for a
competitor of their former employer.”27 “[A]t the termination of [his] employment,
22
Rockwell Automation, Inc. v. Montgomery, No. 17-415, 2017 WL 2294687, at *3
(W.D. La. May 24, 2017); Southern General Agency, Inc. v. Burns & Wilcox, Ltd., 09-1918, 2012
WL 3987890, at *1 (W.D. La. Sept. 11, 2012).
23
Mabile v. BP, p.l.c., No. 11-1783, 2016 WL 5231839, at *24 (E.D. La. Sept. 22,
2016), 144 So.3d 1011, 1025.
24
Quality Environmental Processes, Inc. v. I.P. Petroleum Co., Inc., 2013-1582 (La.
05/07/14) 144 So.3d 1011, 1025; Turner v. Purina Mills, Inc., 989 F.2d 1419, 1422 (5th Cir. 1993).
25
Cheramie Services, Inc. v. Shell Deepwater Production, Inc., 35 So.3d at 1060
(quoting with approval Turner v. Purina Mills, Inc., 989 F.2d at 1422).
26
Cheramie Services, Inc. v. Shell Deepwater Production, Inc., 35 So.3d at 1060.
27
Cheramie Services, Inc. v. Shell Deepwater Production, Inc., 35 So.3d at 1060.
-7-
an employee can go to work for a competitor or form a competing business. Even
before termination, the employee can seek other work or prepare to compete.”28 “An
employee's involvement in forming a competitive entity, including the solicitation of
business and the hiring of employees, prior to terminating his current employment
relationship, is not an unfair trade practice.”29
Furthermore, while the solicitation and diversion of an employer’s customers
prior to termination of employment constitutes unfair competition entitling the former
employer to recover damages,30 the solicitation of customers after the end of
employment does not form the basis of a cause of action for unfair competition.31 An
employee is free to solicit customers from his former employer “as long as he does
so based on his memory, experience, or personal contacts, rather than through the use
28
American Machinery Movers, Inc., 136 F.Supp.2d at 604 (quoting United Group of
Nat. Paper Distributors, Inc. v. Vinson, 27,739 (La. App. 2 Cir. 01/25/96), 666 So.2d 1338, 1348,
writ denied, 96-0714 (La. 09/27/96), 666 So.2d 1338). See, also, SDT Industries, Inc. v. Leeper,
34,655 (La. App. 2 Cir. 08/16/01), 793 So.2d 327, 333, writ denied, 2001-2558 (La. 12/07/01), 803
So.2d 973.
29
SDT Industries, Inc. v. Leeper, 793 So.2d at 333.
30
Dufau v. Creole Engineering, Inc., 465 So.2d 752, 758 (La. App. 5th Cir.), writ
denied, 468 So.2d 1207 (La. 1985).
31
First Page Operating Under the Name and Corporate Entity, Groome Enterprises,
Inc. v. Network Paging, Corp., 628 So.2d 130, 137 (La. App. 4 Cir. 1993), writ denied, 634 So.2d
379 (La. 1994); Boncosky Servs., Inc. v. Lampo, 98-2239 (La. App. 1 Cir. 11/05/99), 751 So.2d 278,
287, writ denied, 2000-0322 (La. 03/24/00), 758 So.2d 798.
-8-
of confidential information of the former employer.”32 “A former employee who
enters business in competition with his former employer necessarily utilizes the
experience he acquired and the skills he developed while in a former employment.”33
“[T]he mere fact that each individual defendant brought with [him] his knowledge of
previous business contacts and relationships and specialized knowledge of the. . .
business does not constitute a violation of LUPTA.”34
D.
BREACH OF FIDUCIARY DUTIES
In ruling on a separate motion for partial summary judgment with regard to the
plaintiffs’ claim for breach of fiduciary duties, this Court noted the jurisprudence
finding that a claim for breach of fiduciary duty is often interwoven with a claim for
unfair trade practices and declined to rule on the motion addressing breach of
fiduciary duties without also addressing the claim for unfair trade practices. By the
same token, it would also be inappropriate for this Court to resolve a motion
addressing only the unfair trade practices claim without also addressing the plaintiffs’
claim for breach of fiduciary duty.
32
American Machinery Movers, Inc. v. Machinery Movers of New Orleans, LLC, 136
F.Supp.2d 599, 604 (E.D. La. 2001), affirmed, 34 Fed. App’x 150 (5th Cir. 2002); see also
CheckPoint Fluidic Systems Intern., Ltd. v. Guccione, 888 F.Supp.2d 780, 796 (E.D. La. 2012).
33
Boncosky Servs., Inc. v. Lampo, 751 So.2d at 287.
34
Creative Risk Controls, Inc. v. Brechtel, 01-1150 (La. App. 5 Cir. 04/29/03), 847
So.2d 20, 25, writ denied, 2003-1769 (La. 10/10/03), 855 So.2d 353.
-9-
In Louisiana jurisprudence, the issue of whether an employee has breached a
fiduciary duty owed to his employer is intertwined with the issue of whether the
employee’s actions constitute an unfair trade practice.35 More particularly, the issue
of whether an employee improperly competed with his employer’s business while still
employed, as is alleged in this case, implicates both the issue of whether the employee
breached fiduciary duties owed to his employer and the issue of whether the
employee engaged in unfair trade practices. But the instant motion does not raise
both issues. This Court finds that it would be an uneconomical use of judicial time
and effort – and therefore inappropriate – to resolve the issue of whether the
defendants engaged in unfair trade practices without also deciding whether they
breached their fiduciary duties to the plaintiffs, as these issues are so tightly
interwoven. Therefore, this Court declines the defendants’ invitation to address the
alleged use of unfair trade practices without also addressing the alleged breach of
fiduciary duties. For that reason, the instant motion will be denied.
E.
GENUINE ISSUE OF MATERIAL FACT PRECLUDE SUMMARY JUDGMENT IN
THE DEFENDANTS’ FAVOR REGARDING UNFAIR TRADE PRACTICES
35
See, e.g., Huey T. Littleton Claims Service, Inc. v. McGuffee, 497 So.2d 790, 794 (La.
App. 3 Cir. 1986) (finding that solicitation of employer’s customers prior to resigning and copying
employer’s confidential customer lists were both a breach of the employee’s fiduciary duty to his
employer and a violation of LUTPA).
-10-
This Court has decided not to consider the defendants’ motion for summary
judgment with regard to the plaintiffs’ unfair trade practices claim at this time.
However, this Court further notes that, if it were to rule on the instant motion at this
time, it would be required to find that there are genuine issues of material fact that
preclude summary judgment in the defendants’ favor.
In their motion for partial summary judgment, the defendants focused on the
damages element of the plaintiffs’ LUTPA claim and the plaintiffs’ allegation that the
Employee Defendants made disparaging comments to the plaintiffs’ customers in an
attempt to persuade them to stop doing business with Daigle and to switch their
business to St. Landry Gas. The defendants argued that the plaintiffs identified
twenty-one customers in answers to interrogatories that Daigle lost due to the
Employee Defendants’ derogatory comments and then identified only six customers
to whom derogatory comments were made. The defendants then submitted affidavits
from various persons in an effort to show that the alleged derogatory comments were
not made and that some of the customers who stopped using Daigle and switched to
St. Landry Gas did so because St. Landry Gas’s prices were lower and not because
of any comments made by any of the Employee Defendants.
But the plaintiffs did not allege in their complaint that their damages were
solely in the form of lost customers; they also alleged that they lost income as a result
-11-
of the alleged unfair trade practices.36 In opposition to the defendants’ motion, the
plaintiffs submitted the declaration of Rocky Slocum, the owner of Rocky’s Fuel
Express in Bunkie, Louisiana.37 Mr. Slocum stated that in December 2016, defendant
Scott Lanclos, then an employee of St. Landry Gas, made false statements to him that
Daigle might be going out of business and that the lawsuit between Daigle and St.
Landry had already been settled. Mr. Slocum also stated that St. Landry Gas offered
him lower prices than he was paying to Daigle, that he initially took steps to switch
his business to St. Landry Gas, but that he ultimately did not switch over because
Daigle lowered its prices to match those offered by St. Landry Gas. This declaration
raises the issue of whether Mr. Lanclos’s false statements were unfair trade practices
and establishes that Daigle potentially lost income by matching its formerly higher
prices to the lower ones offered by St. Landry Gas.
Therefore, if this Court were ruling on the motion for partial summary
judgment based on the record currently presented, this Court would find that there is
a genuine issue of material fact as to whether the conduct of the Employee
Defendants constituted unfair trade practices and whether that conduct resulted in
36
Rec. Doc. 1 at 14.
37
Rec. Doc. 114-4.
-12-
damages to the plaintiffs. These factual issues would preclude summary judgment
in the defendants’ favor.
E.
CONSPIRACY
Under Louisiana Civil Code Article 2324, “[h]e who conspires with another
person to commit an intentional or willful act is answerable in solido, with that
person, for the damage caused by such act.” But that statute does not, by itself,
impose liability for a civil conspiracy.38 “The actionable element in a claim under this
Article is not the conspiracy itself, but rather the tort which the conspirators agreed
to perpetrate and which they actually commit in whole or in part.”39 To recover under
a conspiracy theory of liability under Louisiana law, a plaintiff must prove that an
agreement existed to commit an illegal or tortious act; the act was actually committed
and resulted in the plaintiff's injury; and there was an agreement as to the intended
outcome or result.40 Whether or not a party has engaged in a conspiracy is itself a
question of fact.41
38
Ross v. Conoco, Inc., 2002-0299 (La. 10/15/02), 828 So.2d 546, 551-52.
39
Ross v. Conoco, Inc., 828 So.2d at 551-52 (quoting Butz v. Lynch, 97-2166 (La. App.
1 Cir. 04/08/98), 710 So.2d 1171, 1174, writ denied, 98-1247 (La. 06/19/98), 721 So.2d 473).
40
Marceaux v. Lafayette City-Parish Consol. Government, 921 F.Supp.2d 605, 642 n.
98 (W.D. La. 2013); Crutcher-Tufts Resources, Inc. v. Tufts, 2009-1572 (La. App. 4 Cir. 04/28/10),
38 So.3d 987, 991; Butz v. Lynch, 710 So.2d at 1174.
41
Quality Environmental Processes, Inc. v. IP Petroleum Company, Inc., 2016-0230
(La. App. 1 Cir. 04/12/17), 219 So.3d 349, 370.
-13-
In the context of the pending motion, there must be proof of unfair trade
practices in order for there to be an actionable conspiracy to commit unfair trade
practices. Having decided not to consider the unfair trade practices claim without
also considering the breach of fiduciary duty claim and having noted that there are
genuine issues of material fact concerning the underlying unfair trade practices claim,
this Court is constrained to find that there also are genuine issues of material fact
concerning the plaintiffs’ conspiracy claim.
CONCLUSION
For the reasons set forth above, this Court finds that it would be inappropriate
to rule on the pending motion for partial summary judgment with regard to the
plaintiffs’ unfair trade practices claim without simultaneously addressing the
plaintiffs’ breach of fiduciary duty claim; additionally, this Court finds that there are
genuine issues of material fact that preclude summary judgment in the defendants’
favor with regard to the plaintiffs’ unfair trade practices claim and with regard to the
plaintiffs’ conspiracy claim.
Accordingly, the defendants’ motion for partial
summary judgment (Rec. Doc. 104) is DENIED.
Signed at Lafayette, Louisiana on this 15th day of September 2017.
____________________________________
PATRICK J. HANNA
UNITED STATES MAGISTRATE JUDGE
-14-
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?