In Re: Queyrouze, et al, No. 2:2014cv02715 - Document 29 (E.D. La. 2017)
Court Description: ORDER AND REASONS - IT IS ORDERED that the Court does not adopt the Bankruptcy Court's Report and Recommendation. Defendants' motion for summary judgment on the Trust's negligence claims is DENIED. IT IS FURTHER ORDERED that Defendants' motion to strike is DENIED AS MOOT. IT IS FURTHER ORDERED that this case be referred to the U.S. Bankruptcy Court for the Eastern District of Louisiana for trial. Signed by Judge Susie Morgan on 11/8/2017.(NEF: Bankruptcy)(bwn)
Download PDF
<![CDATA[
In Re: Queyrouze, et al Doc. 29 U N ITED S TATES D ISTRICT COU RT EASTERN D ISTRICT OF LOU ISIAN A IN RE: QU EYROU ZE, ET AL. CIVIL ACTION N O. 14 -2 715 SECTION : “E” ORD ER AN D REAS ON S This m atter is before the Court on review from the United States Bankruptcy Court for the Eastern District of Louisiana. 1 Steve Queyrouze, Plan Trustee for the Forty Acre Corporation Plan Trust (the “Trust”), opposes the Bankruptcy Court’s August 4, 20 16 report and recom m endation 2 that this Court grant Continental Casualty Com pany, Randall Alfred (“Alfred”), and Alfred, APLC’s (collectively “Defendants”) m otion for sum m ary judgm ent. 3 The Trust also seeks review of the Bankruptcy Court’s grant of the Defendants’ m otion to strike. 4 I. FACTU AL & PROCED U RAL BACKGROU N D 5 Forty Acre Corporation (“Forty Acre”) owned two tracts of land, a 942 acre tract (som etim es referred to as the “Property”) and an 8 0 acre tract, both in Terrebonne Parish, 1 Unless otherwise indicated, citations to the record herein are to case No. 14-2715. R. Doc. 20 ; see R. Doc. 23 (Defendants’ m em orandum in support of the Bankruptcy J udge’s report and recom m endation); R. Doc. 25 (the Trust’s m em orandum in opposition to the Bankruptcy J udge’s report and recom m endation). 3 Bankr. No. 14-10 50 , R. Doc. 60 . 4 Bankr. No. 14-10 50 , R. Doc. 79. 5 The Court derives the factual background from the Trust’s am ended com plaint, Bankr. No. 14-10 50 , R. Doc. 42; Defendants’ statem ent of uncontested m aterial facts, Ban kr. No. 14-10 50 , R. Doc. 60 -2; and the deposition transcript attached to the Trust’s opposition to the m otion for sum m ary judgm ent, Bankr. No. 14-10 50 , R. Doc. 74-4. The dates upon which Forty Acre’s reorgan ization plan and certain court orders were filed are derived from the Bankruptcy Court’s docket, Ban kr. No. 14-10 50 . The Trust did not respond to Defendants’ statem ent of uncontested m aterial facts; accordingly, they are deem ed to be adm itted. See U.S. Fidelity & Guar. Co. v. Prim elink Sy s., Inc., No. 0 2– 2629, 20 0 3 WL 217150 17, at *1 (E.D. La. J uly 22, 20 0 3) (“According to this Court’s Local Rule 56.2, an opposin g party's failure to controvert the m ovant’s statem ent of uncontested m aterial facts shall result in those facts being deem ed adm itted.”). 2 1 Dockets.Justia.com Louisiana. In 20 0 8, Michael and Kaye LeBlanc, Forty Acre’s sole shareholders, decided to sell both tracts and approached Alfred for legal advice. After becom ing aware that C&R Developers, Inc. (“C&R”) was interested in buying a portion of Forty Acre’s land, the LeBlan cs introduced Steven Serafin, Robert McCullough, and Robert Cook, C&R’s principals, to Alfred. Thereafter, Forty Acre agreed to sell C&R the Property for $ 3,50 0 ,0 0 0 .0 0 . Shortly after Alfred m et Serafin, McCullough, and Cook, Alfred agreed to serve as C&R’s registered agent for service of process. Alfred also allowed C&R to use his law office in Houm a to function as its Louisiana registered office. 6 As early as April 9, 20 0 9, Alfred and Serafin began discussing the possibility of Alfred’s being added to the Board of Directors of Serafin and McCullough’s com pany, Adventure Harbor Estates LLC (“Adventure Harbor”), and Alfred’s being included as an equity partner in the business. 7 During these discussions, Serafin (1) rem arked “I want to stress that [the LeBlancs] are very trusting of you and your opinion. I believe if you support this parallel direction they will be on board[,] especially with you[r] being on the Board of Directors”; (2) asked Alfred if he “h[ad] an interest in building [his] Bankruptcy business,” adding that he had a frien d who had “structured a deal with a large national Load Mod com pany that [wa]s referring the [bankruptcy] work to him ”; and that (3) “[h]e could get a sim ilar agreem ent for [Alfred] if [he were] interested.”8 On J une 23, 20 0 8 , with Alfred’s assistance, Forty Acre and C&R entered into a Secured Investm ent Agreem ent (the “Agreem ent”), whereby Forty Acre agreed to transfer 6 The office was registered with the Louisiana Secretary of State on J une 23, 20 0 8 . No. 14-10 50 , R. Doc. 74-5 (“[Alfred]: Here is a brief section from the business plan. Please review the ‘offerin g’ and let m e know your thoughts and draft a section for yourself as a m em ber of the board. There is no question if [Cook] falls on his face Bill and I will include you as an equity partner.”). 8 No. 14-10 50 , R. Doc. 74-5. 7 2 the Property to C&R in exchange for a later paym ent. Under the Agreem ent, C&R would secure two loans by using the Property as collateral. C&R would hold the proceeds of the first loan, secured by a collateral m ortgage on the Property, until C&R secured a second loan, which C&R would use to satisfy the first loan and pay Forty Acre the $ 3,50 0 ,0 0 0 .0 0 purchase price. If C&R were unable to secure the second loan, it would return the proceeds of the first loan to the len der, obtain a cancellation of the lien on the Property, and return the Property to Forty Acre unencum bered. Alfred represented to the LeBlancs that transferring ownership of the Property to C&R outright by quitclaim deed would allow C&R to receive m ore preferential lending term s from the bank. He also represented that the LeBlanc’s ownership interest in the Property would be protected, as C&R would provide Forty Acre with a counter letter, which Alfred contended would allow Forty Acre to rescind the transfer of the Property to C&R and return record ownership of the Property to Forty Acre at any tim e. Pursuant to the Agreem ent, the LeBlancs transferred ownership of the Property to C&R. C&R then used the Property as security to obtain a $ 999,999.0 0 loan from Louisiana Federal Land Bank (“Lan d Bank”). On J une 30 , 20 0 8, C&R issued a check for $ 90 0 ,0 0 0 .0 0 payable to Alfred with the m em o “for Mike and Kaye.” C&R also agreed to pledge two accounts, referred to as “the Wachovia Accounts,” as collateral, but Alfred did not obtain a control agreem ent on these accounts and later discovered the accounts did not exist, inform ation Alfred did not share with the LeBlancs. The deal ultim ately failed because C&R was not able to secure the second loan. On May 28, 20 0 9, Forty Acre recorded the counter letter, reconveying ownership of the Property back to Forty Acre. On J une 30 , 20 0 9, Serafin m ade a request to Alfred that he wait “5 to 6 weeks” before attem pting to negotiate the $ 90 0 ,0 0 0 .0 0 check. During August 20 0 9, Alfred attem pted 3 to negotiate the $ 90 0 ,0 0 0 .0 0 check, but C&R’s Wachovia account on which it was drawn had insufficient funds to honor its paym ent. Although C&R returned the Property to Forty Acre, it returned ownership of the Property with a $ 984,0 82.62 encum brance. C&R did not transfer the Lan d Bank loan proceeds to the LeBlancs, nor did it satisfy the Land Bank loan. Forty Acre, by and through the LeBlancs and on Alfred’s advice, executed crim inal affidavits against Cook in Terrebonne Parish, and the Terrebonne Parish District Attorney issued a warrant for Cook’s arrest. On March 18, 20 10 , Land Bank initiated foreclosure proceedings against the Property, 9 and on J anuary 11, 20 11, acting on Alfred’s advice, Forty Acre filed a Voluntary Petition for Relief under Chapter 11 of the Bankruptcy Code, em ploying Alfred as counsel. In its bankruptcy case, Forty Acre scheduled as assets and debts: (1) a 942 acre tract of land with a $ 5,0 0 0 ,0 0 0 .0 0 value but encum bered by a $ 999,0 0 0 .0 0 lien in favor of Land Bank; (2) an unencum bered 80 .235 acre tract of land with a $ 2,0 0 0 ,0 0 0 .0 0 value; an d (3) a checking account with a balance of $ 95.0 0 . Serafin, William McCollough, and Adventure Harbor subsequently filed unsecured proofs of claim totaling $ 3,0 50 ,0 0 0 .0 0 related to Forty Acre’s alleged breach of contract to sell the 80 acre tract to Adventure Harbor. 10 After being charged with crim inal fraud in Terrebonne Parish, Cook posted a $ 50 0 ,0 0 0 .0 0 bond which, upon Alfred’s m otion, was ultim ately forfeited and deposited into the Bankruptcy Court’s registry on Septem ber 16, 20 11. Forty Acre’s proposed reorganization plan was due to the Bankruptcy Court on J uly 11, 20 11. Alfred m oved for an extension of tim e to file the plan, and on J uly 25, 20 11, 9 Land Ban k ultim ately foreclosed on the Property on Decem ber 19, 20 13 for a bid price of $ 1.0 4 m illion . In J anuary 20 14, Land Ban k filed a com plete release of its claim in the Forty Acre ban kruptcy proceedin g, stating it had been paid in full. 10 See Adventure Harbor Estates, LLC v. LeBlanc, No. 12-1848, R. Doc. 223 (E.D. La.). 4 the Bankruptcy Court granted Alfred’s m otion, setting the new deadline as August 10 , 20 11. When the proposed plan was not filed by August 10 , 20 11, 11 pursuant to 11 U.S.C. §§ 1121 and 1123, Forty Acre was forced to file a joint disclosure statem ent with it creditor, Land Bank. Forty Acre and Land Bank filed their joint disclosure statem ent on April 20 , 20 12. The Bankruptcy Court ultim ately approved a subsequently filed joint plan (“the Plan”), establishing the Trust and nam ing Mark L. Roberts as Trustee. Queyrouze succeeded Roberts on J une 25, 20 14. Under the Plan, which went into effect on October 16, 20 12, the Trust received any and all property in Forty Acre’s estate, including the Property and the 8 0 acre tract, the $ 50 0 ,0 0 0 .0 0 proceeds from Cook’s bond forfeiture, and any causes of action held by Forty Acre on the confirm ation date. The Plan provided that a realtor would m arket the Trust’s real estate for seven m onths, with closing to be no later than nine m onths from the Plan’s effective date. The realtor could not sell the land for less than $ 3,50 0 ,0 0 0 .0 0 . If the realtor did not sell the land after nine m onths, Land Bank could foreclose on the Property. As for Serafin, McCollough, and Adventure Harbor’s proof of claim s, it was anticipated the Trust would object to the claim s; however, in the event the Trust’s objections were unsuccessful, the 80 acre tract would be sold at auction to satisfy the unsecured claim s. The $ 50 0 ,0 0 0 .0 0 in the Bankruptcy Court’s registry was disbursed to Alfred to hold in his trust account, pending transfer to the Trust. On October 3, 20 13, Alfred sent a letter to the LeBlancs and Forty Acre term inating his representation. In the letter, he stated: 11 On March 1, 20 12, the Ban kruptcy Court issued an Order for Alfred to Appear an d Show Cause as to why the case should not be dism issed for failure to prosecute. Bankr. No. 11-10 0 74, R. Doc 69. After a status conference held on March 16, 20 12, the Bankruptcy Court extended the deadline for filing the plan to April 20 , 20 12. Bankr. No. 11-10 0 74, R. Doc. 76. 5 I have received and listened to the m essages you left for m e on m y cell phone. I am of course disturbed by the tone and the content of these m essages. The basic understanding I have from them is that you intend to pursue a claim against m y errors and om issions insurance in conn ection with the bankruptcy an d foreclosure cases. I need to advise you that your position in that m atter m akes it im possible for m e to continue as your attorney. I will be form ally withdrawing from the bankruptcy m atter and suggest you im m ediately secure another attorney in the Chapter 11 cases as well as the Lank Bank foreclosure. 12 On Novem ber 7, 20 13, Alfred filed a Motion to Withdraw as Coun sel for Forty Acre, alleging the LeBlancs intended to file a m alpractice claim against him . 13 The Bankruptcy Court granted the m otion to withdraw on Novem ber 15, 20 13. On J une 28, 20 14, Alfred was deposed in connection with a separate case related to Forty Acre’s alleged breach of contract in the sale of its 80 acre tract to Adventure Harbor. During this deposition, Alfred revealed that he knew approxim ately six m onths before he attem pted to negotiate the $ 90 0 ,0 0 0 .0 0 check in late August 20 0 9, that the Wachovia accounts C&R prom ised to pledge as collateral did not exist. He also adm itted he never told the LeBlancs this fact, because they were “distraught,” and he did not want to upset them any further. On October 2, 20 14, the Trust filed a com plaint against Alfred an d his busin ess, Alfred, APLC, for negligence and breach of fiduciary duty. The Trust filed an am ended com plaint on J anuary 15, 20 16, adding as a defendant Continental Casualty Com pany, the m alpractice insurance carrier for Alfred and Alfred, APLC (collectively “Defendants”), and stating three causes of action: (1) breach of fiduciary duty, (2) pre-bankruptcy petition negligence, and (3) post-bankruptcy petition negligence. 12 Bankr. No. 14-10 50 , R. Doc. 74-11 at 1. In neither the letter, nor the m otion to withdraw, does Alfred m ention the date on which he alleges the LeBlancs told him they intended to file a m alpractice claim against him . 13 6 II. TH E TRU ST’S CLAIMS The Trust’s pre-bankruptcy petition negligence claim s are based on Alfred’s failure to: (1) “appropriately structure the sale an d transaction between C&R an d Forty Acre involving the 942 acres”; (2) “secure collateral from C&R upon closing in the J une 20 0 8 transaction”; (3) “tim ely deposit the security check provided by C&R to Forty Acre in connection with the J une 20 0 8 transaction”; (4) “require a control agreem ent on C&R and/ or Cook’s Wachovia accounts”; (5) “disclose m ultiple conflicts of interest to Forty Acre and its prin cipals”; (6) “tim ely pursue claim s against William McCollough, Steven Serafin and Adventure Harbor Estates, LLC in connection with a failed sale to Adventure Harbor Estates, LLC”; and on Alfred’s (7) “recom m en ding that Forty Acre provide a Quitclaim deed to C&R”; and (8) “advising Forty Acre to pass on other qualified and willing purchases of Forty Acre’s 942 (and 10 22) acres in lieu of the deal proposed by C&R.” The Trust’s post-bankruptcy petition negligence claim s are based on Alfred’s incom peten ce to handle a bankruptcy case, as evidenced by his failure to: (1) tim ely file a reorganization plan, leading to the J oint Plan with Land Bank that provided Forty Acre with less favorable term s; (2) challenge legality of the loan an d m ortgage to Louisiana Land Bank of the subject property in the bankruptcy; (3) disclose to the Trust the opportunity of sale to Sands Harris & Associates, LLC (“Sands Harris”) the two tracts totaling 10 22 acres belonging to the bankruptcy estate; (4) object to Land Bank’s secured claim ; (5) use the $ 50 0 ,0 0 0 .0 0 in the Court’s registry to negotiate a resolution with Land Bank; an d (6) disclose his conflicts of interest. The Trust’s breach of fiduciary duty claim s are based on Alfred’s conduct during the sale of the Property to C&R and the subsequent bankruptcy. According to the Trust, 7 (1) “[d]uring the course of Alfred’s discussions and n egotiations with C&R, its agents and representatives m ade prom ises of future business dealings and opportunities for financial profit to Alfred”; (2) “Alfred agreed to serve as registered agent for C&R”; (3) “Alfred allowed C&R to use Alfred’s law office in Houm a to serve as the com pany’s Louisian a business office”; (4) “Alfred notified the Louisiana Secretary of State that his law office would serve as the Louisiana business office of C&R”; (5) “Forty Acre and C&R had opposite and com petin g interests”; (6) and “Alfred did not disclose his conflict of interest to Forty Acre, and neither Forty Acre, nor the Plan Trustees knew nor had reason to know that Alfred had becom e conflicted during the period of tim e Alfred provided legal advice and counsel that was later revealed to be negligent and with catastrophic consequence for Forty Acre, the Plan Trust, and LeBlancs.” III. D EFEN D AN TS’ MOTION FOR SU MMARY JU D GMEN T On March 14, 20 16, Defendants filed a m otion for sum m ary judgm ent on the Trust’s pre- and post-bankruptcy m alpractice claim s, arguing the Trust’s m alpractice claim s are perem pted under Louisiana Revised Statutes 9:560 5A. 14 The Trust attached several exhibits to its Opposition to the m otion for sum m ary judgm ent in the Bankruptcy Court, including the affidavits of Queyrouze and Roberts. 15 14 Defendants m entioned the Trust’s breach of fiduciary duty claim , Ban kr. No. 14-10 50 , R. Doc. 60 at 5, but did not seek sum m ary judgm ent on this claim . See id at 11. “A claim for breach of fiduciary duty is separate and apart from a claim of legal m alpractice . . . .” Hiern v. Sarpy , No. 94-8 35, 1995 WL 640 528, at *13 (E.D. La. Oct. 31, 1995); see also Gerdes v. Cush, 953 F.2d 20 1, 20 4– 0 6 (5th Cir. 1992); N ew som e v. Mendler, No. 15-1195, 20 15 WL 50 12310 , at *4 n.1 (E.D. La. Aug. 20 , 20 15). If a claim in volves a lawyer’s “self-dealin g or a breach of the duty of loyalty,” then it is a breach of fiduciary duty claim . Gerdes, 953 F.2d at 20 4– 0 6. “Where the attorney has breached the fiduciary duty to the client . . . the ten year prescriptive period [found in Louisiana Civil Code article 3499] applies.” Hiern, 1995 WL 640 528, at *13 (quotin g Gerdes, 953 F.2d at 20 4). Instead, Defendants request the Court find “all [of the Trust’s m alpractice claim s] are perem pted by the on e and/ or three year provisions of La. R.S. 9:560 5[A].” Ban kr. No. 14-10 50 , R. Doc. 60 at 15. The Bankruptcy Court recom m ended the Court grant sum m ary judgm ent “on all claim s” asserted by the Trust but, as m ention ed above, Defendants did n ot file a m otion for sum m ary judgm ent on the breach of fiduciary duty claim . The Court will not grant sum m ary judgm ent on a claim for which sum m ary judgm ent was not requested or supported. 15 Bankr. No. 14-10 50 , R. Docs. 74-10 , 74-11. 8 On J une 17, 20 16, Defendants filed a m otion in the Bankruptcy Court to strike Queyrouze’s an d Roberts’ affidavits, arguing the affidavits “contain self-serving, conclusory statem ents about the Affiants’ lack of awareness of grounds for filing illegal m alpractice claim against Alfred” and were not provided to Defendants during the discovery process. The Bankruptcy Court ultim ately granted Defendants’ m otion to strike the two affidavits. 16 The Bankruptcy Court also recom m ended this Court grant Defendants’ m otion for sum m ary judgm ent because all the Trust’s claim s had prescribed or been perem pted. 17 In its Objection, 18 the Trust avers the Bankruptcy Court applied the incorrect prescriptive period to the m alpractice claim s, contending Alfred’s “intentional withholding of facts . . . constitutes fraud with[in] the m eaning of La RS 9:560 5E, m aking the perem ptive periods of 9:560 5 inapplicable in favor of the one-year prescriptive period set forth in La. C.C. art. 3492.”19 The Trust argues that, because Louisiana Civil Code article 3492 and the doctrine of contra non valentem apply to the Trust’s claim s, 20 the bankruptcy court erred in dism issing its negligence claim s as untim ely. 21 A. Stan d ard o f Re vie w 16 R. Doc. 20 at 6– 7. R. Doc. 20 at 36. 18 R. Doc. 23. 19 R. Doc. 23 at 10 . 20 See LA. CIV. CODE art. 3492; W ells v. Zadeck, 89 So. 3d 1145, 1150 (La. 20 12) (“Louisiana jurisprudence has long recogn ized the doctrine of contra non valentem as a m eans of suspending the runn in g of prescription . . . . [There are] four instances where contra non valentem can be applied to prevent the runnin g of prescription: (1) where there was som e legal cause which prevented the courts or their officers from takin g cognizance of or acting on the plaintiff's action; (2) where there was som e condition coupled with the contract or connected with the proceedings which prevented the creditor from suing or actin g; (3) where the debtor him self has done som e act effectually to prevent the creditor from availing him self of his cause of action; and (4) where the cause of action is not known or reasonably knowable by the plaintiff, even though this ignorance is not induced by the defendant.”). 21 R. Doc. 23 at 10 . 17 9 This Court reviews a bankruptcy court’s report and recom m endation on a m otion for sum m ary judgm ent de novo. 22 Sum m ary judgm ent is proper on ly “if the m ovant shows that there is no genuine dispute as to any m aterial fact and the m ovant is entitled to judgm ent as a m atter of law.”23 “An issue is m aterial if its resolution could affect the outcom e of the action.”24 When assessing whether a m aterial factual dispute exists, the Court considers “all of the evidence in the record but refrain[s] from m aking credibility determ inations or weighing the eviden ce.”25 All reasonable inferences are drawn in favor of the non-m oving party. 26 There is no genuine issue of m aterial fact if, even viewing the eviden ce in the light m ost favorable to the non-m oving party, no reasonable trier of fact could find for the non -m oving party, thus entitling the m oving party to judgm ent as a m atter of law. 27 “[A] party seeking sum m ary judgm ent always bears the initial responsibility of inform ing the district court of the basis for its m otion[] and identifying those portions of [the record] which it believes dem onstrate the absence of a genuine issue of m aterial fact.”28 If the dispositive issue is one on which the non-m oving party will bear the burden of persuasion at trial, to satisfy Federal Rule of Civil Procedure 56’s burden, the m oving party m ust do one of two things: it “m ay subm it affirm ative evidence that negates an essential elem ent of the nonm oving party’s claim ” or “dem onstrate to the Court that the nonm oving party’s eviden ce is insufficient to establish an essen tial elem ent of the 22 Jones v. N CN B Texas, N .A. (In re Jones), 143 B.R. 687, 68 9 (S.D. Tex. 1991). F ED. R. CIV. P. 56; see also Celotex, 477 U.S. at 322– 23. 24 DIRECTV, Inc. v. Robson, 420 F.3d 532, 536 (5th Cir. 20 0 5). 25 Delta & Pine Land Co. v. N ationw ide Agribusiness Ins. Co., 530 F.3d 395, 398 – 99 (5th Cir. 20 0 8 ); see also Reeves v. Sanderson Plum bing Prods., Inc., 530 U.S. 133, 150 – 51 (20 0 0 ). 26 Little v. Liquid Air Corp., 37 F.3d 10 69, 10 75 (5th Cir. 1994). 27 Hibernia N at. Bank v. Carner, 997 F.2d 94, 98 (5th Cir. 1993) (citing Am oco Prod. Co. v. Horw ell En ergy , Inc., 969 F.2d 146, 147– 48 (5th Cir. 1992)). 28 Celtic Marine Corp. v. Jam es C. Justice Cos., 760 F.3d 477, 481 (5th Cir. 20 14) (quoting Celotex, 477 U.S. at 323). 23 10 nonm oving party’s claim .”29 Under the Rule 56 standard, the m oving party bears the burden of presenting sum m ary judgm ent evidence that conclusively shows that the lim itations period has run. 30 If the m oving party successfully carries its burden, the burden of production then shifts to the non-m oving party to direct the Court’s attention to som ething in the pleadings or other evidence in the record setting forth specific facts sufficient to establish that a genuine issue of m aterial fact does indeed exist. 31 Thus, the non-m oving party m ay defeat a m otion for sum m ary judgm ent by “calling the Court’s attention to supporting eviden ce already in the record that was overlooked or ignored by the m oving party.”32 “[U]nsubstantiated assertions are not com petent sum m ary judgm en t evidence.”33 Rather, “the party opposing sum m ary judgm ent is required to iden tify specific eviden ce in the record and to articulate the precise m anner in which that evidence supports his or her claim . ‘Rule 56 does not im pose upon the district court a duty to sift through the record in search of evidence to support a party’s opposition to sum m ary judgm ent.’”34 B. Ap p licable Law Under Louisiana Revised Statutes 9:560 5, legal m alpractice cases m ust be brought: [W]ithin one year from the date of the alleged act, om ission, or neglect, or within one year from the date that the alleged act, om ission, or neglect is discovered or should have been discovered; however, even as to actions filed 29 Celotex, 477 U.S. at 331. Edm undson v. Am oco Prods. Co., 924 F.2d 79, 8 2 (5th Cir. 1991); see also St. Martin v . Quintana Petroleum Corp., No. 98-20 95, 1999 WL 232635, at *2 (E.D. La. Apr. 19, 1999) (“Dism issal on the basis of sum m ary judgm ent is appropriate if the m oving party dem onstrates that the plaintiffs failed to file suit before the prescriptive period applicable to their claim s had run , and the plaintiffs are unable to designate specific facts, beyond the pleadings, to show that the suit is not barred by prescription.”). 31 Celotex, 477 U.S. at 322– 25. 32 Id. at 332– 33. 33 Ragas v. Tenn . Gas Pipelin e Co., 136 F.3d 455, 458 (5th Cir. 1998) (citin g Celotex, 477 U.S. at 324). 34 Id. (quoting Skotak v. Ten neco Resins, Inc., 953 F.2d 90 9, 915– 16 & n .7 (5th Cir. 1992)) (citing Forsy th v. Barr, 19 F.3d 1527, 1537 (5th Cir. 1994)). 30 11 within one year from the date of such discovery, in all events such actions shall be filed at the latest within three years from the date of the alleged act, om ission, or n eglect. 35 The one-year prescriptive and three-year perem ptive periods, however, do “not apply in cases of fraud, as defin ed in Civil Code Article 1953.”36 Civil Code Article 1953 defines fraud as “A m isrepresentation or a suppression of the truth m ade with the intention either to obtain an unjust advantage for one party or to cause a loss or inconvenience to the other.” “[T]o bring a cause of action for fraud, the following three elem ents m ust be alleged: ‘(1) a m isrepresentation of m aterial fact, (2) m ade with the intent to deceive, (3) causing justifiable reliance with resultant injury.’”37 Civil Code article 1957 states “Fraud need only be proved by a preponderance of the eviden ce and m ay be established by circum stantial evidence.”38 Under Article 1953, “fraud m ay result not only from an act, such as a false assertion or suppression of the truth, but also from a failure to act, such as silence, that is calculated to produce a m isleading effect.”39 “To find fraud from silence, [however,] there m ust be a duty to speak.”40 If an attorney com m its fraud as defined in Louisiana Civil Code article 1953, the aggrieved client’s claim is governed by the one-year prescriptive period for delictual actions found in Louisiana Civil Code article 3492. 41 Under article 3492, a plaintiff’s legal 35 La. R.S. 9:560 5A. La. R.S. 9:560 5E. 37 Titus v. W ilson, 20 15-0 799 (La. App. 4 Cir. 1/ 20 / 16), 186 So.3d 255, 260 (quoting Chapital v. Harry Kelleher & Co., 13-160 6, p.13 (La. App. 4 Cir. 6/ 4/ 14), 144 So.3d 75, 86); see also W illiam s v. W MX Techs., 112 F.3d 175, 177 (5th Cir. 1997) (citing Cy rak v. Lem on, 919 F.2d 320 (5th Cir. 1990 )) (stating the requisite elem ents of a fraud claim as: “(1) a m isstatem ent or om ission; (2) of m aterial fact; (3) m ade with the intent to defraud; (4) on which the plaintiff relied; and (5) which proxim ately caused the plaintiff's injury”). 38 La. C.C. art. 1953. 39 La. C.C. art. 1953, note (b). 40 First Am . Bankcard, Inc. v . Sm art Business Tech., Inc., 178 F.Supp.3d 390 , 40 1 (E.D. La. 20 16). 41 Lom ont, 172 So. 3d at 637. Civil Code article 3292 states “Delictual actions are subject to a liberative prescription of one year. This prescription com m ences to run from the day injury or dam age is sustained.” 36 12 m alpractice claim is untim ely if it is filed m ore than one year after “the day injury or dam age is sustained.”42 Although Louisiana Civil Code article 3467 provides that “prescription runs against all persons unless [an] exception is established by legislation,” the Louisiana Suprem e Court has applied the jurisprudential doctrine of contra non valentem as an exception to this statutory rule. 43 Thus, the one-year period found in Louisiana Civil Code article 3492 is “suspend[ed] or delay[ed]” upon a showing that the attorney “has done som e act effectually to prevent the [plaintiff] from availing him self of his cause of action” or that “the cause of action is neither known nor reasonably knowable by the plaintiff even though plaintiff’s ignorance is not induced by the defendant.”44 C. An alys is The Trust filed the instant adversary com plaint against Defendants on October 2, 20 14. In its Am ended Com plaint, the Trust brings three causes of action: (1) prebankruptcy petition m alpractice, (2) post-bankruptcy petition m alpractice, and (3) breach of fiduciary duty. 45 Defendants seek sum m ary judgm ent on the Trust’s m alpractice claim s based solely on the applicability of the three-year perem ptive period found in Louisiana Revised Statutes 9:560 5A. 46 Defendants do not seek sum m ary judgm ent that La. C. C. art. 3292. “[T]he ‘date of discovery’ from which prescription/ perem ption begins to run is the ‘date on which a reasonable m an in the position of the plaintiff has, or should have, either actual or constructive knowledge of the dam age, the delict, and the relationship between them sufficient to indicate to a reasonable person he is the victim of a tort and to state a cause of action against the defendant.’” Lom ont, 172 So. 3d at 638 . 42 Id. at 637. 43 Lom ont, 172 So. 3d at 637. Louisiana recognizes “four factual situations in which contra non valentem prevents the runn ing of liberative prescription: (1) where there was som e legal cause which prevented the courts or their officers from takin g cognizance of or acting on the plaintiff's action; (2) where there was som e condition coupled with the contract or connected with the proceedin gs which prevented the creditor from suing or actin g; [(]3) where the debtor him self has done som e act effectually to prevent the creditor from availin g him self of his cause of action; or (4) where the cause of action is n either known nor reasonably knowable by the plaintiff even though plaintiff's ignorance is not induced by the defendant.” Id. 44 Id. 45 Bankr. No. 14-10 50 , R. Doc. 42. 46 Bankr. No. 14-10 50 , R. Doc. 60 -1; see also discussion supra note 14. 13 the claim s have prescribed even if Louisiana Revised Statutes 9:560 5E, Louisiana Civil Code 3492, and the doctrine of contra non valentem apply. To establish that the m alpractice claim s are prescribed on their face, thereby shifting the burden of proof to the Trust, Defendants m ust establish that Louisiana Revised Statutes 9:560 5A applies. Defendants’ argum ent that they are entitled to sum m ary judgm ent based on perem ption under subsection A is, in its entirety, that: Because perem ption is evident from the face of the Com plaint and Amended Complaint, the Trustee bears the burden of proving perem ption is not applicable. Here, the Trustee’s Com plaint alleges that Alfred acted improperly in connection with transactions between Forty Acre and C&R, which acts, om issions or errors occurred or were supposed to occur in 20 0 8. Thereafter, Alfred recorded a counter letter in May 20 09, and attem pted to negotiate C&R’s check in August 20 09. All of these acts or om issions occurred, however, more than three years before the Trustee filed the instant adversary proceeding on October 2, 20 14. Therefore, under the provisions of La. R.S. 9:5605, claim s arising out of those transactions are perempted. Sim ilarly, in his Com plaint, the Trustee alleges that Alfred negligently advised Forty Acre to file for Chapter 11 bankruptcy in J anuary 11, 20 11, and then failed to file a plan of reorganization within the exclusivity period, or by May 11, 20 11, which acts an d om issions also occurred m ore than three years before the Trustee filed the instant adversary proceeding on October 2, 20 14. 47 In effect, Defendants wish the Court to assum e that the Trust’s claim s are based on negligence, rather than fraud, and that as a result, subsection A applies. In their statem ent of undisputed m aterial facts, Defendants do not include any facts to show the Trust’s m alpractice claim s are based solely on negligence rather than fraud. 48 Instead, Defendants sim ply list the dates upon which certain events occurred, which does establish that subsection A applies. Those dates are: 6/ 20 0 8 9/ 20 0 9 1/ 11/ 20 11 47 48 C&R Transaction C&R Check for $ 90 0 ,0 0 0 returned NSF Forty Acre Bankruptcy filed/ Order for Relief Bankr. No. 14-10 50 , R. Doc. 60 -1 at 11. Bankr. No. 14-10 50 , R. Doc. 60 -3. 14 8 / 14/ 20 12 10 / 16/ 20 12 11/ 7/ 20 13 10 / 2/ 20 14 1/ 15/ 20 16 Plan of Reorganization Approved by Bankruptcy Court Effective Date of Plan (Forty Acre assets – including all claim s are placed in the Forty Acre Plan Trust, with an independent Trustee) Alfred withdraws as Forty Acre’s attorney in the bankruptcy proceeding Trustee files the origin al Com plaint against Alfred Trustee files the Am en ded Com plaint 49 Rule 56 states “A party m ay m ove for sum m ary judgm ent, identifying each claim or defense—or the part of each claim or defense—on which sum m ary judgm ent is sought.”50 In this case, Defendants seek sum m ary judgm ent based on the affirm ative defense of perem ption provided by Louisiana Revised Statutes 9:560 5A. Because Defendants assert an affirm ative defense, they bear “the initial responsibility of inform ing the district court of the basis for [their] m otion[] and identifying those portions of [the record] which [they] believe[] dem onstrate the absence of a genuine issue of m aterial fact.”51 The issue before the Court is whether subsection A or E applies. In its opinion, the Bankruptcy Court held that subsection A applies based on that court’s assum ption that, to plead fraud, the Trust had to specifically allege Defendants’ actions am ounted to “fraud” in their com plaint. 52 Whether a plaintiff m akes out a claim for fraud, however, does not depend on whether the actions are referred to as “fraud,” but rather on the 49 Bankr. No. 14-10 50 , R. Doc. 60 -3 at 6. F ED. R. CIV. P RO. 56(a). 51 Celtic Marin e Corp. v. Jam es C. Justice Cos., 760 F.3d 477, 481 (5th Cir. 20 14) (quoting Celotex, 477 U.S. at 323); see Edm undson v . Am oco Prods. Co., 924 F.2d 79, 8 2 (5th Cir. 1991); see also St. Martin v. Quintana Petroleum Corp., No. 98-20 95, 1999 WL 232635, at *2 (E.D. La. Apr. 19, 1999) (“Dism issal on the basis of sum m ary judgm ent is appropriate if the m ovin g party dem onstrates that the plaintiffs failed to file suit before the prescriptive period applicable to their claim s had run , and the plaintiffs are unable to designate specific facts, beyond the pleadings, to show that the suit is not barred by prescription.”). 52 R. Doc. 20 at 30 . The Ban kruptcy Court also focused only on whether the Trust pleaded facts sufficient to m ake out a claim of fraudulent concealm ent of malpractice; the court did not consider a situation in which the fraud is fraud by silence based on not disclosing both a conflict of interest and facts m aterial to the client’s decision-m akin g process during the course of the attorney’s representation. Id. “[E]ach case m ust be judged on its particular facts to determ ine whether the attorney’s actions are sufficient to in voke La. R.S. 9:560 5(E).” Lom on t, 172 So. 3d at 628 . 50 15 underlying facts alleged. 53 “Fraud can be averred by specifically alleging fraud, or by alleging facts that necessarily constitute fraud even if the term ‘fraud’ is not used.”54 The Bankruptcy Court failed to engage in an analysis of whether the facts alleged would support a claim for fraud. Because the Bankruptcy Court concluded that subsection A applied to the Trust’s m alpractice claim s, the Bankruptcy Court held that the com plaint was prescribed on its face, and shifted the burden to the Trust to show that the claim s had not prescribed. The Court finds that the proper analysis is for the Court to determ ine whether the underlying facts alleged by the Trust m ake out a claim for fraud. “In addition to Rule 8 (a)(2)’s pleading dem ands,[ 55] Rule 9(b) supplem ents Rule 8(a), if fraud is alleged, by requiring circum stances allegedly constituting fraud to be stated with particularity.”56 “Of prim ary im portance in understanding the requirem ent of Federal Rule 9(b) of pleading the circum stances of an alleged fraud with particularity is the recognition that it does not render the gen eral principles of sim plicity set forth in Rule 8 entirely in applicable to pleadings alleging fraud.”57 “‘What constitutes ‘particularity’ will necessarily differ with the facts of each case . . . . ‘Rule 9(b) requires allegations of the particulars of tim e, place, 53 W agoner v. Exxon Mobil Corp., No. 0 9-7257, 20 10 WL 316838 2, at *2 (E.D. La. Aug. 9, 20 10 ) (citin g In re Hollander, No. 0 9-3355, 20 0 9 WL 270 7445, at *4 (E.D. La. Aug. 25, 20 0 9)). 54 Id.; see also Jum onville v. Fed. Hom e Loan Mortgage Corp., No. 0 4– 2295, 20 0 5 WL 143150 5, at *6 (E.D. La. J une 10 , 20 0 5) (finding that a com plaint’s allegations that defendants “knew or should have known of the vices and defects of said hom e and did not inform the plaintiff of the sam e” were sufficient to sustain a claim of fraud even though “fraud” was not expressly pled); Kearns v. Ford Motor Co., 567 F.3d 1120 , 1124 (9th Cir. 20 0 9) (“Fraud can be averred by specifically alleging fraud, or by alleging facts that necessarily constitute fraud (even if the word ‘fraud’ is not used).”) (internal quotation m arks om itted); Ellington Credit Fund, Ltd. v. Select Portfolio Servicing, Inc., 837 F. Supp. 2d 162, 20 0 (S.D. N.Y. 20 11) (“The language of Rule 9(b) ‘is cast in term s of the conduct alleged, and is not lim ited to allegations styled or denom inated as fraud or expressed in term s of the constituent elem ents of a fraud cause of action.’”) (quotin g Rom bach v. Chang, 355 F.3d 164, 171 (2d Cir. 20 0 4))); 5A Charles Allen Wright et al., Federal Practice and Procedure § 1298, at 242– 48 (3d ed. 20 0 4). 55 Rule 8 (a) only requires the pleader to provide “a short and plain statem ent of the claim ” for relief. 56 Peaker En ergy Grp., LLC v. Cargill, Inc., 20 15 WL 48 79415, at * 6 (E.D. La. Aug. 14, 20 15). 57 Wright, supra note 54. 16 and contents of the false representations, as well as the identity of the person m aking the m isrepresentation and what he obtained thereby.’”58 [I]t is inappropriate to focus exclusively on the fact that Rule 9(b) requires particularity in pleading the circum stances of fraud.6 This is too narrow an approach and fails to take account of the general sim plicity an d flexibility contem plated by the federal rules and the m any cases construing them ; in a sense, therefore, the rule regarding the pleading of fraud does not require absolute particularity or a recital of the evidence, especially when som e m atters are beyond the knowledge of the pleader and can only be developed through discovery. 59 “[F]raud by om ission or silence is by its very nature difficult to plead with particularity because it does not involve an affirm ative m isrepresentation, it often does not occur at a specific place or precise tim e, or involve specific persons.”60 “[I]f circum stances are alleged showing that the pleader is entitled to relief from a fraud perpetrated upon him or her, the plaintiff's right to relief is unaffected by a failure to set forth either of these verbal conclusions in the com plaint.”61 Thus, when alleging fraud by silence, at a m inim um , a plaintiff m ust show (1) the inform ation that was withheld, (2) the general tim e period during which the fraudulent conduct occurred, (3) the relationship giving rise to the duty to speak, and (4) what the person or entity engaged in the fraudulent conduct gained by withholding the inform ation. 62 The Trust’s com plaint clearly m akes out a claim that Alfred com m itted a fraud by silence. First, it alleges Alfred withheld the fact that (1) he had a conflict of interest and 58 Benchm ark Elec. Inc. v . J.M. Huber Corp., 343 F.3d 719, 724 (5th Cir. 20 0 3) (quoting Guidry v. Bank of LaPlace, 954 F.2d 278 , 288 (5th Cir. 1992) and Tel-Phonic Servs., Inc. v . TBS Int'l, Inc., 975 F.2d 1134, 1139 (5th Cir. 1992)); U.S. ex rel Grubbs v. Kanneganti, 565 F.3d 180 , 188 (5th Cir. 20 0 9) (explaining that ‘Rule 9(b)’s ultim ate m eaning is context-specific,’ and thus there is no sin gle construction of Rule 9(b) that applies in all contexts”). 59 Wright, supra note 54. 60 First Am . Bankcard, Inc., 178 F. Supp. 3d at 40 2 (quoting Chry sler Credit Corp. v . W hitney N at'l Bank, 824 F. Supp. 587, 598 (E.D. La. 1993)). 61 Wright, supra note 54. 62 Chry sler Credit Corp., 824 F. Supp. at 598. 17 (2) his knowing that the Wachovia Accounts to be used as collateral did not exist. Secon d, the Trust alleges this conflict of interest and failure to disclose began as early as April 9, 20 0 9, when Alfred and Serafin began discussing the possibility of Alfred’s being added to Adventure Harbors’ Board of Directors and that the Trust did not learn of these alleged frauds until J une 28, 20 14, when Alfred was deposed in a related case. Third, the Trust alleges that, as the LeBlanc’s attorney, Alfred owed a duty to disclose both the conflict of interest and the withheld inform ation regarding the Wachovia accounts. 63 Finally, the Trust alleges Alfred stood to gain: (1) an equity share in Adventure Harbor, (2) a position on Adventure Harbor’s board of directors, and (3) a “deal with a large national Load Mod com pany that [would] refer[] [bankruptcy] work to him .”64 Alfred had a duty to disclose all m aterial inform ation to his clients. This included both his conflict of interest and the fact that the Wachovia accounts did not exist. “Under Louisiana law, the refusal to speak, in the face of an obligation to do so, is not m erely unfair, but is fraudulent.”65 In this case, the Court finds the Trust alleged the requisite elem ents of fraud with sufficient particularity, notwithstanding its failure to specifically refer to Alfred’s actions as fraud in the am ended com plaint. The Court finds that subsection E is applicable to the Trust’s two m alpractice claim s. In their m otion for sum m ary judgm ent, Defendants seek dism issal of “all” of the Trust’s claim s, but base their argum ent with respect to the negligen ce claim s entirely on Louisiana Revised Statutes 9:560 5A, and do not even seek sum m ary judgm ent on the 63 The “principle of undivided loyalty is firm ly em bedded in the Rules of Professional Conduct (RPC), adopted by [the Suprem e Court of Louisiana] pursuan t to its exclusive and plenary power to regulate the practice of law.” Scheffler v. Adam s & Reese, LLP, 20 0 6-1774 (La. 2/ 22/ 0 7), 950 So. 2d 641, 651. RPC 1.7 provides, with few exceptions, “a lawyer shall not represent a client if the representation involves a concurrent conflict of interest.” 64 See No. 14-10 50 , R. Doc. 74-5; Chry sler Credit Corp., 824 F. Supp. at 598 . 65 First Am . Bankcard, Inc., 178 F. Supp. 3d at 40 1 (quoting Lom ont, 172 So. 3d at 629). 18 Trust’s breach of fiduciary duty claim . Because Louisiana Revised Statutes 9:560 5E applies, the Defendants are not entitled to sum m ary judgm ent that the negligence claim s are perem pted under subsection A. Accordingly; CON CLU SION IT IS ORD ERED that the Court does not adopt the Bankruptcy Court’s Report and Recom m endation. Defendants’ m otion for sum m ary judgm ent on the Trust’s negligence claim s 66 is D EN IED . IT IS FU RTH ER ORD ERED that Defendants’ m otion to strike 67 is D EN IED AS MOOT. IT IS FU RTH ER ORD ERED that this case be referred to the U.S. Bankruptcy Court for the Eastern District of Louisiana for trial. N e w Orle an s , Lo u is ian a, th is 8th d ay o f N o ve m be r, 2 0 17. ________________________________ SU SIE MORGAN U N ITED S TATES D ISTRICT J U D GE 66 67 Bankr. No. 14-10 50 , R. Doc. 60 . R. Doc. 20 . 19
]]>
Some case metadata and case summaries were written with the help of AI, which can produce inaccuracies. You
should read the full case before relying on it for legal research purposes.
This site is protected by reCAPTCHA and the Google
Privacy Policy and
Terms of Service apply.
