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Louisiana Secretary of State Issues Advisory Notice to All Louisiana Business Owners

Posted in Business and Corporate, Louisiana In General

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By Meg Kaul

The Louisiana Secretary of State recently issued an advisory notice to all Louisiana business owners regarding certain postcards that were sent to business owners warning that they may have “potential compliance violations.” The postcards were sent by a company called Business Compliance Division, which is not affiliated or associated with the Louisiana Secretary of State’s office or any other Louisiana state office in any way.  It is a private company that has apparently sent similar solicitations in other states over the past few months. Louisiana businesses are not required to call or have any dealings with this company. Therefore, if you receive a postcard from this company, you are encouraged to discard it immediately.

The Louisiana Secretary of State’s office offers an email notification system aimed at protecting Louisiana business owners from fraud and identity theft.  Anyone can subscribe to this system which generates messages regarding changes to commercial entities, non-governmental correspondence, office closures and most importantly, warnings involving possible fraudulent activity.

For more information on the Secretary of State’s office, visit www.sos.la.gov or contact a Commercial Division staff member at 225.925.4704 or commercial@sos.la.gov.

 

Legal Considerations for Cell Tower Leasing and Servitude Sales in Louisiana

Posted in Business and Corporate, Louisiana In General

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by Mark D. Mese

As an attorney who owns properties covered by a cell tower lease, and who represents landowners in leases and servitude agreements with cell tower companies and cell tower consolidators, I have noticed increased interest in new leases, lease extensions and buyouts. While the financial terms of agreements covering cell towers are important, the effect on the value of the underlying property is often the most important consideration.

Landowners negotiating leases or servitude sales (buyouts) with tower companies or consolidators should consider the effect of these agreements on the landowner’s ability to use the land. The leases and buyouts will affect not only the actual land covered by the tower and its footprint, but may include nearby land within specific distances of the tower.

The lease and buyout forms we have seen favor the tower companies and the consolidators. Leases drafted by consolidators, who sell packages of cell tower leases and servitudes to tower companies, may be more one-sided than tower company leases to facilitate the consolidator’s acquisition loans needed to pay for the cell towers and related leases or servitudes. Many current cell tower and consolidator form leases and buyout agreements impose extremely onerous termination conditions on Landlords to protect consolidator lenders.

Louisiana is a civil law jurisdiction, and terminology for leases and servitudes can be confusing and may cause title problems for landowners. Obtaining a lawyer familiar with cell tower leases, servitudes and Louisiana civil law should be a priority for any landowner in Louisiana considering leasing, extending a lease or selling a servitude to a cell tower company or a consolidator.

 

 

Recent Developments Regarding the Business Utilities Tax Payments and Taxpayer’s Rights to Protest

Posted in Business and Corporate, Louisiana Electric Utility Regulation, Louisiana In General, State and Local Taxation

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By Chris Dicharry and Jason Brown

As is now widely known, the Louisiana Legislature has adopted HCR No. 8, which purports to suspend the sales tax exemptions business utilities effective July 1, 2015. On July 1, 2015, the Louisiana Chemical Association (“LCA”) filed a declaratory judgment proceeding attacking the validity of HCR No. 8. The Legislature and the Louisiana Department of Revenue (the “LDR”) have contested the right of LCA to bring the suit on behalf of its members. The LCA suit was amended to add affected taxpayers as parties to the suit.

Kean Miller LLP advises affected taxpayers to make payment of the tax under protest and file suit within thirty days of the protest letter to the LDR in order to obtain optimum protection of your interests. While Louisiana law does allow for protest suits to be filed with the Louisiana Board of Tax Appeals (“BTA”), it is not clear that the BTA has jurisdiction over cases involving constitutional issues. Accordingly, it is recommended that the suit be filed in the 19th Judicial District Court rather than the BTA.

Since the LCA lawsuit was filed, the LDR has issued a statement discouraging payments under protest. In Statement of Acquiescence No. 15-001 (August 13, 2015), the LDR states:

Pending the outcome of the Lawsuit, taxpayers may pay the sales taxes, as they become due and then file an administrative claim for refund under La. R.S. 47:1621 utilizing the Louisiana Department of Revenue Claim for Refund of Overpayment Form (R-20127). If a final, non-appealable judgment is issued by a court of competent jurisdiction declaring HCR No. 8 to be unconstitutional, then LDR will acquiesce that the sales tax payments made pursuant to HCR No. 8 are overpayments within the meaning of La. R.S. 47:1621 regardless of whether the taxpayer initiated its own lawsuit or paid under protest.  All claims for refund must be filed in accordance with the prescriptive period imposed by La. R.S. 47:1623.

It is very likely that the LDR is acting in good faith and attempting to ease the administrative burden of protests for both taxpayers and the LDR. This type of statement by the LDR is not fully binding on the LDR, however. The statement issued by the LDR states that it “is not binding on the public, but is binding on the Department unless superseded by a later [Statement], declaratory ruling, rule, statute, or court case.”

That is, the LDR’s position could change, particularly if a court ruled that payment under protest was the proper procedure. Accordingly, it is strongly recommended that taxpayers pay disputed taxes under protest as previously recommended. Protested taxes must be segregated by the LDR so that they can be promptly refunded.

Taxpayers who wish to preserve the right to a refund of the business utilities sales tax should pay under protest. Failure to protest payments may preclude the eventual refund of sales taxes paid even if the court determines that the tax is invalid. Additionally, taxpayers who do not protest and who are able to get the taxes returned may not receive interest on the returned taxes and may need to get an appropriation from the Legislature before the taxes are returned.

 

Hollywood South Legal: Clearing Your Script

Posted in Film and Entertainment, Intellectual Property

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by Meg Kaul

* This article originally appeared in Issue 3, 2015 of Louisiana Film & Video magazine. 

If you’ve written a script recently, it may have references to certain copyrighted or trademarked material — the hero reaches for his iPhone, takes a sip of a Coca-Cola or leaps into her new Range Rover. If these products are mentioned, used or displayed on the screen, you should consult with an attorney to obtain permission from the owners of the trademarked or copyrighted products before you use them in your production.  If you cannot get permission from these  owners, you may be able to display the products without the brand packaging.  For example, you may blur the items from the scene, or remove them entirely if you have not begun to shoot the film.

Entertainment attorneys, or script clearance companies, will perform what is commonly referred to as a “script clearance,” or a search of your script to identify all materials or references that may represent possible legal conflicts if used in your film.  A script clearance will recognized and report items such as character names, locations and signs, products and brand names, defamatory references, and even seemingly harmless items like artwork, music and photographs.

Your attorney should review the results, and work with you to contact the owners of the “famous” materials to obtain permission and secure any required licenses. There is no “magic path” to make this happen, but you should strive to ensure that the permission has been granted by the owner, or a confirmed representative of the owner, and have the release made in writing if at all possible. You should also have authorization to use the name of any celebrities or their image and/or likeness with their agent.  If the celebrity has an active trademark in their name, you may be required to obtain rights to use their trademark. The script clearance results are important to share with your director, producer and crew, set decorators and art department, and anyone else who will be creating the set and other elements of your film.

This clearance is also important for distribution purposes.  The distributor of your film will want a guarantee that your film does not contain any materials that could have negative legal implications. These claims can range from copyright infringement to defamation of character or the need to obtain life rights from a celebrity.

If you are shooting scenes that involve brief or background views of a brand, like the display of a billboard in the background of a passing shot on the freeway, you may be able to use such footage without permission based on the concept of “fair use.” Copyright law provides the owner of a copyrighted work with certain exclusive rights, such as the right to reproduce the work, prepare derivative works or perform the work publicly. However, the fair use doctrine also provides third parties with a limited exception to use the protected materials without permission from the owner in certain circumstances. 17 U.S. Code §107 provides that it is not an infringement of copyright to use a copyrighted work for purposes such as criticism, comment, news reporting, teaching (including multiple copies for classroom use), scholarship, or research.

In addition, even though there is no real definition of “fair use,” the following four-factor balancing test set forth in 17 U.S. Code § 107 may be used to determine whether the use outside of those stated purposes is fair. These factors include: (1) the purpose and character of the use, including whether such use is of a commercial nature or is for nonprofit educational purposes; (2) the nature of the copyrighted work; (3) the amount and substantiality of the portion used in relation to the copyrighted work as a whole; and (4) the effect of the use upon the potential market for or value of the copyrighted work.

It is often wise to obtain (and is typically required by distributors) Errors & Omissions (“E&O”) insurance, which protects filmmakers from lawsuits pertaining to copyright infringement and other claims based on the content of a film.  Exclusions may be inserted into the coverage for copyrighted images that are not cleared or licensed.

As a general rule, if you don’t own it and want to use it in your film, you should get permission from the owner. Otherwise, you may open the theater door to lawsuits, injunctions and an uphill battle to obtaining distribution of your feature film.

* This article originally appeared in Issue 3, 2015 of Louisiana Film & Video magazine. 

 

Arbitration Rulings are Final, Even When the Arbitrators Get It “Wrong on the Law”

Posted in Alternative Dispute Resolution, Construction Law, Louisiana In General

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By David K. Nelson*

Parties involved in the construction industry have long been familiar with mandatory arbitration as a dispute resolution procedure.

Originally arbitration was said to be more efficient and less expensive than litigation. Over time, experience has shown that arbitration is not necessarily more efficient or more timely.

Regardless of its potential benefits, one fact remains absolute – an arbitration ruling is almost always final and therefore not subject to appeal or review.  The Louisiana Supreme Court recently confirmed this fact in the case of Crescent Property Partners, LLC v. American Manufacturers Mutual Insurance Company, et al; 158 So.3d 798, 2014-C-0969 c/w 2014-C-0973 (La. 1/28/15).  In Crescent, the general contractor and its subcontractors filed motions for summary judgment with the arbitration panel alleging that plaintiff’s claims were preemptive because they were not filed within five years of the issuance of the Certificate of Occupancy.  The arbitration panel, relying upon the case of Ebinger v. Venus Construction Corporation, 10-2516 (La. 7/1/11), 65 So. 3d 1279, found that Ebinger dictated the retroactive application of the 2003 amendment to La. R.S. 9:2772 and ruled that plaintiff’s claims were untimely asserted outside the preemptive period.  The defendants filed suit in district court to confirm the arbitration ruling.  Plaintiffs opposed the filing and moved to vacate the award on the grounds that the arbitration panel ruling was not in accordance with law. The district court denied plaintiff’s application to vacate the award and confirmed the arbitration ruling the judgment of the district court.

Plaintiffs, thereafter, sought review in the Court of Appeal. The Court of Appeal reversed the trial court finding that the arbitration panel had incorrectly concluded the 2003 amendment reducing the time limitation from seven years to five years could be retroactively applied to preempt plaintiff’s claims. The general contractor and subcontractor thereafter requested the Louisiana Supreme Court to consider the issue.  The Supreme Court granted the writ “to determine whether the Court of Appeal ruling vacating the arbitration panel decision was proper.”

The Supreme Court recognized that the grounds for vacating an arbitration award are very narrow, and are limited to the exclusive grounds set forth in La. R.S. 9:4210, which provides:

In any of the following cases the court in and for the parish wherein the award was made shall issue an order vacating the award upon the application of any party to the arbitration.

  1. Where the award was procured by corruption fraud or undue means.
  2. Where there was evident partiality or corruption on the part of the arbitrators or any of them.
  3. Where the arbitrators were guilty of misconduct and refusing to postpone the hearing, upon sufficient cause shown, or in refusing to hear evidence pertinent and material to the controversy, or of any other misbehavior by which the rights of any party have been prejudiced.
  4. Where the arbitrators exceeded their powers or so imperfectly executed them that a mutual, final and definitive award upon the subject matter submitted was not made.

The Supreme Court ruled that the Court of Appeal erred in vacating the arbitration panel’s award stating: “The upshot of both the Court of Appeal’s reasoning and the arguments of Crescent is that the panel just got it wrong on the law. We reiterate our long line of jurisprudence that an error of fact or law will not invalidate an otherwise fair and honest arbitration award.” Crescent at 808.

The takeaway from this ruling is that absent proof of dishonesty, bias, bad faith, willful misconduct, on the part of an arbitrator, the arbitration ruling will be final and not subject to appeal—even if the arbitrator gets it wrong on the law and/or facts.

* Mr. Nelson serves as the Chair of the Construction and Commercial Litigation practice group of the Louisiana Association of Defense Counsel.

New Federal Regulations Seek Federal Contractor Assistance with Preventing Human Trafficking

Posted in Construction Law, Corps of Engineers, New Orleans/Louisiana Recovery

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By Jessica Engler 

On March 2, 2015, new federal regulations went into effect which seek to strengthen the protections against human trafficking. A large part of these new regulations, which are updates to the Federal Acquisition Regulation (“FAR”), provide a stronger framework to discourage federal contractor employers from trafficking workers into the country illegally. Since a significant number of federal government contracts are for construction projects, it is imperative that contractors who bid on and win federal contracts be aware of these new regulations.

The United States has long had policies prohibiting government employees and government contractors from engaging in trafficking of persons, and the recent Executive Order, titled “Strengthening Protections Against Trafficking in Persons in Federal Contracts”, and Title XVII of the National Defense Authorization Act for Fiscal Year 2013 have served to heighten the requirements on federal contractors to comply with federal rules against human trafficking. Prior to the implementation of these new rules, federal law prohibited government employees and contractors from participating in trafficking activities including “severe forms of trafficking in persons.” Severe forms of trafficking in persons is defined by section 103 of the Trafficking Victims Protection Act of 2000 to include the recruitment, harboring, transportation, provision, or obtaining of a person for labor or services, through the use of force, fraud, or coercion for the purpose of subjection to involuntary servitude.

Under the new regulations, all contractors and subcontractors (not just those contracting with the federal government) are expressly prohibited from engaging in the following trafficking-related activities:

  • Destroying, concealing, removing, confiscating, or otherwise denying access to an employee’s identity or immigration documents;
  • Failing to provide return transportation for an employee from a foreign country to the country from which the employee was recruited, unless the contractor is exempted or the employee is a victim of trafficking that is seeking redress in his country of employment or is a witness to human trafficking;
  • Solicitation of a person for employment, or offering employment, through materially false or fraudulent pretenses, falsehoods, or promises about that employment. This includes misrepresentations concerning key aspects of employment such as wage payments, fringe benefits, location, and conditions of employment;
  • Use of recruiters who do not comply with local labor laws and charging “recruitment fees” to employees;
  • Providing or arranging housing that fails to meet applicable housing and safety standards; and
  • If required by law or contract, failing to provide an employment contract, recruitment contract, or other required paperwork in writing, in the employee’s native language, prior to departure from the employee’s country of origin.

The regulations impose several additional obligations on federal contractors. For example, these new regulations mandate that such contractors (1) inform their employees and agents of the federal government’s anti-trafficking policies and the penalties for non-compliance, which include removal from contract, reduction in benefits, and termination of employment; and (2) fully cooperate with the federal agencies that are responsible for audits, investigations, or corrective actions related to human trafficking.

Additional rules apply to contractors performing work outside of the United States under a contract valued over $500,000, who must:

  • Create and implement a compliance plan to prevent any prohibited trafficking in persons and implement procedures to prevent any such activities, which must be appropriately designed with regard to the size and complexity of the project, and submitted upon award of the contract and annually thereafter, and published at the contractor’s workplace and website by the start of the contract performance;
  • Certify that, after performing the appropriate due diligence, to the best of the contractor’s knowledge and belief: (1) none of the contractor’s agents, subcontractors, or their agents are engaged in trafficking activities; and (2) if abuses have been found, the contractor has taken the appropriate remedial and referral actions.

Should a violation occur, the contracting officer will consider the compliance plan as a mitigating factor when determining the penalties for the violation.

As stated above, these new requirements apply to all new bids, contracts, and solicitations for federal contracts dated March 2, 2015 onward. Given the heightened new requirements for federal contracts, contractors considering such projects may want to review their current policies and procedures to ensure compliance with the new requirements. Contractors may also consider revising their employee handbooks in light of the new requirements. Consulting a labor and employment or construction attorney may be beneficial in assessing changes to contract labor policies and compliance plans.

 

 

Tax Provisions In Highway Trust Fund Extension Law

Posted in Estate Planning, Tax, and Probate Law

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By Kevin C. Curry

On July 31, 2015, President Obama signed into law the “Surface Transportation and Veterans Health Care Choice Improvement Act of 2015” (the Act).  The Act was primarily designed as a temporary extension of the Highway Trust Fund and related issues.  However, the Act also includes a number of important tax provisions, some of which are outlined below.

New Due Dates for Certain Income Tax Returns.

The Act changes the due dates for both partnership and C corporation income tax returns.  Effective generally for returns for tax years beginning after December 31, 2015, partnerships will have to file their returns by the 15th day of the third month after the end of the tax year.  Thus, a calendar year partnership will have to file its return by March 15th of the following year.  This due date is the same as the due date for S corporations.  Both organizations are “flow through” entities and the earlier due date will assist individuals having to file their returns timely.  The prior due date for partnerships was the same due date as individuals which often created the difficulties in filing individual returns timely.

C corporations will have to file their returns by the 15th day of the fourth month after the end of the tax year.  The former deadline was the 15th day of the third month so this amounts to an extension of one month for C corporation returns.

New Extension Periods for Certain Income Tax Returns.

The new law also revises the extended due dates for many returns that will be effective for returns for tax years beginning after December 31, 2015.  The Act directs the IRS to modify it regulations to provide that the maximum extension for the following returns will be as follows:

  • Partnerships (Form 1065) – 6 month period ending on September 15th for calendar year taxpayers.
  • Trusts (Form 1041) – 5½ month period ending on September 30th for calendar year taxpayers.
  • Exempt organizations filing Form 990 – 6 month period ending on November 15th for calendar year filers.

The Act also included a number of other revised extension dates for other less common types of returns.

New Basis Consistency and Reporting Rules.

The Act requires consistent basis reporting for transfer tax and income tax purposes requiring a taxpayer to use the value as finally reported on a federal estate tax return for income tax basis purposes.  The Act implements a new information reporting requirement for inherited property requiring the executor of an estate required to file a federal estate tax return to submit an information return as prescribed by the IRS.  This is effective for any estate tax return filed after July 31, 2015.  While only required for estates that are required to file federal estate tax returns, the Secretary is given the authority to prescribe regulations to apply a similar rule to property where no estate tax return is required to be filed.  Therefore, it appears that the intent of the Act is to implement an information reporting system to connect that transfer tax system to the income tax system for purposes of basis reporting.

The Act also overrules a Supreme Court case that had held the overstatement of one’s basis was not an omission of gross income for purposes of a 6 year statute of limitations for the IRS to assess a deficiency.  The Act provides that the overstatement of basis will be an omission of gross income that could trigger the 6 year statute of limitations as opposed to the general 3 year statute of limitations.  This change is effective for returns filed after July 31, 2015 and for returns filed on or before that date if the assessment period under the prior law had not yet expired as of July 31, 2015.

 

Louisiana Business Corporation Act (LBCA) Replaces Louisiana Business Corporation Law

Posted in Business and Corporate, Louisiana In General, Real Estate

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By Matthew C. Meiners

Effective January 1, 2015, the Louisiana Business Corporation Law was replaced in its entirety by the new Louisiana Business Corporation Act (LBCA).  Here are some of the highlights of the changes effected by the LBCA:

  • New Remedy for Oppressed Shareholders – Buyout. If a corporation engages in oppression of a shareholder, the shareholder may withdraw from the corporation and require the corporation to buy all of the shareholder’s shares at their fair value (without discounting for lack of marketability or minority status).
  • No Director or Officer Liability for Money Damages (default rule).  The default rule has been flipped, but the articles of incorporation may still modify the default rule.  Under the old law, the articles of incorporation of the corporation could eliminate or limit the personal liability of a director or officer to the corporation or its shareholders for monetary damages for breach of fiduciary duty, with certain exceptions.  Under the LBCA, no director or officer shall be liable to the corporation or its shareholders for money damages for any action taken, or any failure to take action, as a director or officer, with exceptions; however, the articles of incorporation can limit or reject this protection against liability.
  • Amendment to Articles of Incorporation – Required Approval.  An amendment to the articles of incorporation now requires a majority of the shareholder votes entitled to be cast on that amendment (unless the articles of incorporation require a greater vote).  Under the old law, an amendment to the articles of incorporation required the vote of at least 2/3 of the voting power present at a shareholders’ meeting (unless the articles of incorporation required a larger or smaller vote).
  • Corporate Records – New Inspection Right.  The old law’s 5% ownership requirement remains for shareholder inspection of “any and all of the records of the corporation,” but a new right of inspection of certain key records by any and all shareholders has been created.
  • Annual Meetings – Shareholder Right to Demand Calling.  Under the LBCA, a single shareholder still has the right to demand the calling of an annual shareholders’ meeting.  However, the LBCA now allows directors to be elected by written consent in lieu of an annual meeting, and a shareholder only has the right to demand the calling of an annual shareholders’ meeting if:  (1) no annual shareholders’ meeting is held for a period of eighteen months, and (2) directors are not elected by written consent in lieu of an annual meeting during that period.
  • Unanimous Governance Agreements Allowed.  The LBCA allows “unanimous governance agreements,” a new form of governance document which can eliminate the board of directors or restrict the discretion or powers of the board of directors, as well as provide for the management of the corporation by one or more shareholders or other persons.
  • Shares May Now Be Issued for Promissory Notes and for Contracts for Services to be Performed.  The LBCA permits the board of directors to authorize shares to be issued for consideration consisting of any tangible or intangible property or benefit to the corporation, including cash, promissory notes, services performed, contracts for services to be performed, or other securities of the corporation.  The old law did not permit issuance of shares for promissory notes or contracts of future performance.
  • Modification of Default Quorum Rule.  Under the LBCA, the default rule for the constitution of a quorum for purposes of a shareholders’ meeting (i.e., “a majority of the votes entitled to be cast on the matter”) can only be altered by the articles of incorporation, as opposed to the old law’s allowance of modification by the articles of incorporation or the bylaws.
  • Simplified Termination Option.  The LBCA allows corporations to terminate by simplified articles of termination if the corporation:  (1) does not owe any debts; (2) does not own any immovable property; and (3) has not issued shares or is not doing business.  Under the old law, “dissolution by affidavit” provided a similar option, but after dissolution, the shareholders became personally liable for any debts or claims, if any, against the corporation.   Under the LBCA’s simplified termination procedure, no such liability attaches to the shareholders.
  • Electronic Notices and Other Communications Now Permitted. A notice or other communication may be given or sent by any method of delivery, except that electronic transmissions must be in accordance with the statute.
  • Five Day Grace Period for Filing After Execution – Now Only for Original Articles of Incorporation.  Under the LBCA, a corporation’s original articles of incorporation become effective when signed if the articles are received for filing by the Secretary of State within five days, exclusive of legal holidays, after the date that the articles are signed.  This grace period no longer applies to any other filed document.
  • Grace Period for Filing Annual Reports Now 90 Days.  Under the LBCA, the grace period for the filing of annual reports has been reduced to 90 days (formerly 3 years), plus a 30 day notice period.

Laws Governing Trusts in Louisiana Became Animal-Friendly This Year

Posted in Estate Planning, Tax, and Probate Law, Louisiana In General, State and Local Taxation

Dogs and Cats

By Mark D. Mese and Carey J. Messina

The Louisiana Legislature added a new chapter to our Trust Code in 2015 entitled:  “Trust for the Care and Benefit of an Animal” (click here).  The statute is new and is modeled on similar provisions in the Uniform Trust Code and the Uniform Probate Code.

Under the new law, a person may designate a caregiver to one or more animals, and a trustee of the trust for an animal or animals.  The statute also allows for reasonable compensation to be provided for the trustee and for the animal caregiver.

If a court determines that the amount of property held by the trust substantially exceeds the needs of the animals covered by the trust, a court may reduce the amount of property held by the trust and allow the property to be distributed to the designated person or entity named as beneficiary.

The trust terminates with the death of the last animal covered by the trust.  Upon termination of the trust, the remaining property is distributed to a designated person or entity named as beneficiary.

Act No 219 (2015)

Louisiana Rejects Negligent Spoliation of Evidence as a Tort Claim

Posted in Business Litigation, General Litigation, Louisiana In General, Products Liability, Professional Liability

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By J. Eric Lockridge

The Louisiana Supreme Court recently determined that there is no tort liability for negligent spoliation of evidence.  “Regardless of any alleged source of the duty, whether general or specific, public policy in our state precludes the existence of a duty to preserve evidence.  Thus, there is no tort.”  Reynolds v. Bordelon, No. 2014-2362, — So.3d — , 2015 WL 3972370 (La. 6/30/2015).

The lawsuit that led to the Reynolds decision was filed as a result of multi-vehicle accident that occurred in 2008.  Reynolds filed suit against the other driver and against Nissan North America, the manufacturer of his own car, based on the allegation that his airbag did not deploy as it should have.  The petition also alleged that his insurer and his insurer’s custodian for his vehicle were liable for damages relating to their failure to preserve his vehicle for inspection after he specifically put them on notice that the vehicle needed to be preserved.  The trial court eventually sustained the insurer and storage company’s exceptions of no cause of action, which means that the facts stated in the petition, accepted as true, did not entitle the plaintiff to any legal relief against them.

After reviewing the foundation of tort liability under Louisiana law, the history of negligence and intentional spoliation-based claims in Louisiana and other states, and considering many duty and policy-related factors, the Louisiana Supreme Court concluded that “Louisiana law does not recognize the duty to preserve evidence in the context of negligent spoliation.”  While the factual scenario presented in the Reynolds case dealt with third-party negligence, the logic could be applied to situations where a party to a litigation negligently allowed spoliation to occur, particularly if it occurred before that party was on notice of a potential claim.  This decision offers no comfort to litigation parties who allow or encourage spoliation.  The Court specifically noted that discovery sanctions and criminal sanctions are available for first-party spoliators, and that Louisiana recognizes an adverse presumption against litigants who had access to evidence and did not make it available or destroyed it.

For more information on spoliation and how it can affect Louisiana litigation, please click here.

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