In The Pension Committee of the University of Montreal Pension Plan, et al. v. Banc of America Securities LLC, et al., 685 F.Supp.2d 456 (S.D.N.Y. 2010), Judge Scheindlin—author of the renowned Zubulake decisions—further develops the boundaries of discovery duties in a lengthy opinion. Although the opinion does not require parties to meet a standard of perfection during discovery, the opinion serves as an important guide that offers concrete rules and potentially burdensome standards that attorneys should heed to avoid sanction.

Writing systematically, Scheindlin initially frames the fundamental concepts underlying the nature and scope of a party’s duty to preserve, collect, review, and produce requested records during discovery:

The first [critical issue] is plaintiffs’ level of culpability-that is, was their conduct of discovery acceptable or was it negligent, grossly negligent, or willful. The second is the interplay between the duty to preserve evidence and the spoliation of evidence. The third is which party should bear the burden of proving that evidence has been lost or destroyed and the consequences resulting from that loss. And the fourth is the appropriate remedy for the harm caused by the spoliation. (1)

Further, Scheindlin suggests that failing to collect relevant records from all employees involved in anticipated litigation is mere negligence. Likewise, a failure to take “all appropriate measures to preserve [electronically stored information]” is negligent. (4)  The court also held that the “failure to issue a written litigation hold constitutes gross negligence because that failure is likely to result in the destruction of relevant information.” (5)  Indeed, this failure may be enough to warrant an adverse inference by itself. (6) 

Second, Scheindlin discusses the relationship between the duty to preserve and spoliation. Noting the court’s “inherent power” to protect the “integrity of the judicial process,” the judge warns parties and their attorneys of the possibility of imposing sanctions for breaches of the duty to preserve evidence after litigation has become reasonably foreseeable. (7)  Particularly, Scheindlin suggests that a plaintiff’s duty to preserve is triggered before litigation begins because plaintiffs generally “control the timing of litigation” and therefore reasonably anticipate its commencement. (8) 

Next, Scheindlin’s opinion examines burdens of proof for determining what should be done when relevant documents are no longer available as a result of spoliation. Specifically, who should bear the burden of establishing the relevance of the lost evidence, as well as the prejudice the loss has caused? As Judge Scheindlin explains, the degree of the burden of proof is dependent upon the severity of the sanction:

For less severe sanctions-such as fines and cost-shifting-the inquiry focuses more on the conduct of the spoliating party than on whether documents were lost, and if so, whether those documents were relevant and resulted in prejudice to the innocent party…[F]or more severe sanctions-such as dismissal, preclusion, or the imposition of an adverse inference-the court must consider, in addition to the conduct of the spoliating party, whether any missing evidence was relevant and whether the innocent party has suffered prejudice as a result of the loss of evidence. (9) 

Particularly, Scheindlin suggests that it is insufficient for an innocent party to demonstrate that lost or destroyed evidence would have been merely responsive to a discovery request. Rather, the innocent party must show that the lost evidence would have been useful in proving its claims or defenses and that it is prejudiced without the evidence. Despite this discussion about proving sanctionable misconduct, Scheindlin cautions against litigation becoming a “gotcha game.” (10)

Notably, in her opinion, Scheindlin employs a burden-shifting test:

When the spoliating party’s conduct is sufficiently egregious to justify a court’s imposition of a presumption of relevance and prejudice, or when the spoliating party’s conduct warrants permitting the jury to make such a presumption, the burden then shifts to the spoliating party to rebut that presumption. (11)

Finally, Scheindlin discusses the appropriate remedies for spoliation, implementing the Second Circuit’s three-part test. First, appropriate sanctions should deter the parties from engaging in spoliation. Second, they should shift the risk of an error in judgment to the party who wrongfully created the risk. Third, they should restore the innocent party to the same position it would have enjoyed absent the prejudicial destruction or loss of evidence by the spoliating party. Additionally, the judge recognizes that a court should impose the least harsh sanction that can provide an adequate remedy. Thus, sanctions that terminate the action—like dismissal—are only appropriate when a party has engaged in egregious behavior, like perjury, evidence tampering, or intentional destruction of evidence by burning, shredding, or hard drive wiping. Because the plaintiffs in this case only engaged in negligent behavior, draconian sanctions were not necessary.

Throughout the opinion, Judge Scheindlin additionally offers useful tips and examples regarding specific discovery issues. For instance, the failure to preserve documents in the possession, custody, or control of former employees supports a determination of gross negligence. Furthermore, the opinion provides guidance on the issue of the preservation of backup tapes. Scheindlin dismisses the existence of a duty to preserve backup tapes, unless, of course, the tapes are the only source of relevant information.

Entitled “‘Zubulake’ Revisited: Six Years Later,” the Pension Committee decision will assuredly serve as an often-used guide to assist attorneys in wrestling with the duties and challenges of discovery—especially in the quickly and constantly evolving domain of electronic discovery.
 

************************

(1) Pension Committee, 685 F.Supp.2d at 463.
(2) Id. at 464.
(3) Id. at 465.
(4) Id.
(5)  Id. at 464–465.
(6) But see Surowiec v. Capital Title Agency, Inc., 2011 WL 1671925, at *7 (D.Ariz. 2011)(disagreeing with Pension Committee, holding that “[p]er se rules are too inflexible for this factually complex area of the law where a wide variety of circumstances may lead to spoliation accusations”). See also Rimkus Consulting Group, Inc. v. Cammarata, 688 F.Supp.2d 598, 616–17 (S.D.Tex.2010)(refusing to follow Pension Committee’s approach of presuming relevance and prejudice when the spoliating party is grossly negligent); Steuben Foods, Inc. v. Country Gourmet Foods, LLC, 2011 WL 1549450, at *5 (W.D.N.Y. 2011)(holding that the failure to issue a written litigation hold is not a per se ground to presume or infer loss of relevant documents).
(7) Pension Committee, 685 F.Supp.2d at 466.
(8) Id.
(9) Id. at 467.
(10) Id. at 468.
(11)  Id. at 468–469.

Picture this: former wife sues her ex-husband for cutting and selling timber from a co-owned 120-acre timberland tract. The timberland tract was purchased during the couple’s marriage and was community property. As part of a divorce settlement, the ex-couple remained co-owners of the timberland. Thereafter, the ex-husband had the timber cut and sold – and checks for the timber sold were made payable to the then girlfriend (now wife) of the ex-husband. When the former wife found out, she sued the ex-husband, seeking treble damages (among other things), under Louisiana’s so-called “timber piracy” statute.

As a co-owner, is the ex-husband liable to his former wife under Louisiana’s “timber piracy” statute? This was the issue presented to the Louisiana Supreme Court in the case, Sullivan v. Wallace, 2010-0388 (La. 11/30/10), 51 So.3d 702. The Court concluded that he was not, because the “timber piracy” statute did not apply to suits between co-owners.

Louisiana has had a “timber piracy” statute since 1974. Prior to the recent amendment, the “timber piracy” statute made it unlawful for any person to cut or remove timber from the land of another without the consent of the property’s owner or legal possessor. It provided for civil damages of three times the fair market value of the trees cut or removed (treble damages) for willful or intentional timber theft, plus reasonable attorney fees. Even the “good faith” removal of timber could subject the violator to treble damages, if the violator should have been aware that his actions were without the consent of the owner or legal possessor. A “good faith” violator failing to pay the required damages within 30 days of notification by the owner or legal possessor could also then be assessed reasonable attorney fees.

So what does the recent amendment do to the “timber piracy” statute and why was the law revised? At the heart of the matter is who is included in the phrase “any person.” The amended law basically retains the present law but adds protection for co-owners or co-heirs for the unauthorized removal of timber from co-owned land. That is, a co-owner of timber must obtain the consent from other co-owners prior to the cutting or removal of timber from co-owned land. Failure to do so subjects the offending co-owner to the statute’s provisions regarding treble damages and attorney fees. This is accomplished by the addition of subparagraph A(2) to the statute, which states in pertinent part: “It shall be unlawful for any co-owner or co-heir to cut, fell, destroy, remove, or to divert for sale or use, any trees, or to authorize or direct his agents or employees to cut, fell, destroy, remove, or to divert for sale or use, any trees, growing or lying on co-owned land, without the consent of, or in accordance with the direction of, the other co-owners or co-heirs, or in accordance with specific terms of a legal contract or agreement.”

For a concept that seems simple enough on the surface, our Louisiana appellate courts have struggled with co-ownership rights under the “timber piracy” statute. The Louisiana Second Circuit Court of Appeal (based in Monroe) considered the issue in Alexander v. Dunn, 44,272 (La. App. 2d Cir. 6/3/09), 15 So.3d 302, where a defendant owned one-half of the community timberlands property and his deceased wife’s five children owned the other half. When the defendant sold the timber, the co-owning children sued. On appeal, the Second Circuit Court held that the “timber trespass” statute does not apply to co-owners of immovable property. Thus, disputes among co-owners in that appellate circuit were to be handled by the Louisiana Civil Code articles on co-ownership, which do not allow for treble damages. Meanwhile, in the Louisiana Third Circuit Court of Appeal (based in Lake Charles), the appellate court reached a different conclusion in the case, Prewitt v. Rodrigues, 04-1195 (La. App. 3d Cir. 2/2/05), 893 So.2d 927. In Prewitt, the Third Circuit Court affirmed an award of treble damages and attorney’s fees against a brother who had willfully sold timber co-owned with his sister with no intention of providing her with her share. The Third Circuit reasoned that, while the “timber trespass” statute may have been inartfully drafted, its purpose was to impose penalties on those who flagrantly disregard the rights of timber owners, whether strangers or co-owners.

Thus, to resolve the split in the appellate courts, the Louisiana Supreme Court addressed the issue of co-owners in the case, Sullivan v. Wallace, 2010-0388 (La. 11/30/10), 51 So.3d 702, wherein Bruce Sullivan contracted with a third party in the mid-1990s to cut and remove timber from a 120-acre tract of land in Claiborne Parish, co-owned with his former wife, Janice Sullivan. Payments were made to Mr. Sullivan’s girlfriend at the time, Priscilla Wallace. Upon gaining knowledge of the timber harvest, Janice Sullivan filed suit seeking treble damages and attorney fees under the “timber theft” statute. The Louisiana Supreme Court, finding the statute “facially ambiguous with regard to co-owners” of timberland, concluded that the “timber trespass” statute was inapplicable in suits involving co-owners of immovable property.

The Louisiana Supreme Court also noted that if LSA-R.S. 3:4278.1 applied to co-owners, then one co-owner who holds more than 80% of the ownership interest and permits the timber to be cut in accordance with LSA-R.S. 3:4278.2 (the “80% Rule” for a valid sale of timber owned in indivision with co-owners) would become liable to the other co-owners for treble damages under the “timber theft” statute. The Court reasoned that such an inconsistency could not have been what the Louisiana Legislature intended.

To be sure, the Louisiana Legislature responded swiftly and decisively to address both issues during this most recent legislative session. Not only was the “timber piracy” statute amended to specifically include co-owners and co-heirs among the persons protected by its provisions, but language was also included in the amendment stating that the “provisions of this Paragraph shall not apply to the sale of an undivided timber interest pursuant to R.S. 3:4278.2.” Thus, a co-owner owning 80% or more of the timber may still sell the timber and a minority co-owner is only entitled to his share of the fair market value of the timber removed under R.S. 3:4278.2. Accordingly, minority co-owners cannot pursue an action against the 80% or more majority co-owner(s) under the “timber piracy” statute. Likewise, timber buyers obtaining consent from at least 80% of the timber co-owners are equally protected from the penalties contained in the “timber piracy” statute.
The recent amendment to the “timber piracy” statute clarifies the rights of co-owners against “rogue” co-owners. Considering the path taken by the courts and the legislature, one should be mindful of proper estate planning for timberlands.

*  This article originally appeared in the September 2011 edition of Forests & People magazine. 
 

By Brittany L. Buckley

Maritime attachment is a powerful procedure that allows an aggrieved party to garnish any of the defendant's property located within a particular federal judicial district.  Attachment is especially powerful because the garnished property can be used to ensure satisfaction of a claim, even if the property within the judicial district is not related to the claim that has been filed there.  This right can prove invaluable for securing payment of claims from a foreign defendant who cannot be easily traced down and sued.  This particular species of attachment is unique to admiralty law and is only available to satisfy "admiralty" or "maritime" claims, including contractual obligations that are separable from an non-maritime aspects of a contract. 

While AFL and Alphamate were arbitrating this contractual dispute in Europe, Alphamate also initiated maritime attachment proceedings in the United States District Court for the Eastern District of Louisiana. Through maritime attachment, Alphamate seized a shipment of corn in New Orleans while it was aboard a third party’s vessel en route to AFL. The Fifth Circuit found that Alphamate could not use maritime attachment to seize the corn because the underlying dispute between AFL and Alphamate did not involve a maritime claim. In particular, the court determined that the AFL-Alphamate contract primarily called for the sale of grain and that the obligation to ship the grain by sea did not convert the contract into a maritime claim. The Fifth Circuit further rejected Alphamate’s argument that the demurrage and detention claims were independent maritime obligations capable of sustaining maritime attachment proceedings. The court reasoned that these claims were too intertwined with the non-maritime breach of contract claims to provide a basis for maritime jurisdiction.

Notwithstanding the Fifth Circuit’s rejection of maritime attachment proceedings in Alphamate, the Court left open the possibility that a party can still use maritime attachment to secure payment of loss-of-use damages if the breached contract includes an independent obligation for demurrage. This ruling emphasizes the importance of including a contractual clause that expressly sets forth an obligation to pay demurrage fees in the event that a vessel is unjustly detained by the charterer. According to the Fifth Circuit, this clause is necessary to establish maritime jurisdiction over claims for demurrage and detention, thereby allowing an aggrieved party to utilize maritime attachment to secure payment of such fees from foreign defendants. Absent such an express demurrage provision, Alphamate illustrates that damages for loss of use can only be recovered through a breach of contract action – a more arduous process that, unlike maritime attachment, fails to provide security for the satisfaction of successful claims.
 

Does an insurer waive its policy defenses when it breaches its duty to defend?  In Arceneaux v. Amstar Corp., 211 WL 2591701 (La. July, 2011), the insurer breached its duty to defend by issuing a denial of coverage and withdrawing from the insured’s defense.  The insurer’s action was based on the mistaken belief that its policies contained an exclusionary provision when, in fact, the exclusion was no longer effective.  According to the trial court, breaching the duty to defend resulted in a waiver of the coverage defenses.  The Louisiana Supreme Court concluded to the contrary, differentiating between a breach and a waiver.  Waiver is an intentional relinquishment of a known right or power, and occurs when an insurer with knowledge of the facts indicating non-coverage assumes or continues the defense without obtaining a non-waiver agreement to reserve its coverage defenses.  Under those circumstances, the insured is led to believe that the insurer has given up that right and the insured has the right to believe that the insured’s counsel is acting in the insured’s best interest without regard to coverage defenses.  An insurer cannot avoid liability based on a coverage defense if it has defended the insured without a reservation of rights.  To the contrary, a breach of the duty to defend is not a waiver and does not mislead the insured into believing there could be coverage because there is no expressed intent to release its right to deny coverage.  Under such circumstances, waiver principles do not apply.  Consequently, a breach of the duty to defend is not a waiver of policy defenses.

The application of corporate veil piercing theories to limited liability companies is still in its early stages in Louisiana jurisprudence. In Hollowell v. Orleans Regional Hosp. LLC, the U.S. Court of Appeals for the Fifth Circuit became the first court applying Louisiana law to pierce the veil of a Louisiana limited liability company on an “alter ego basis,” adopting from corporate veil piercing jurisprudence a non-exhaustive list of factors, namely: 1) commingling of corporate and shareholder funds; 2) failure to follow statutory formalities for incorporating and transacting corporate affairs; 3) undercapitalization; 4) failure to provide separate bank accounts and bookkeeping records; and 5) failure to hold regular shareholder and director meetings. 217 F.3d 379, 385-386 (5th Cir. 7/18/00); citing Riggins v. Dixie Shoring Co., 590 So.2d 1164, 1168 (La. 1991). The court emphasized that the inquiry is in fact a “totality of the circumstances” test, and “courts are not limited to these five factors when invoking the alter ego doctrine.” Id., at 387, citing Riggins, at 1168.

(1) MBW’s funds were commingled with the funds of Mr. Washauer and a separate company of his, as MBW did not have a separate bank account to transact its own affairs, and the only payments made to ORX under the agreement were made on MBW’s behalf by Mr. Washauer and his separate company. Id., at 937-938.

(2) Mr. Washauer failed to follow statutory formalities for incorporating by signing the agreements with ORX on MBW’s behalf before MBW was recognized as an LLC by the Louisiana Secretary of State. Id., at 938. The court apparently rejected Mr. Washauer’s argument that he complied with the statutory requirements as a result of his acquisition of a working interest in the land (including oil, gas and mineral leases) on behalf of MBW and the subsequent issuance by the Secretary of State of a certificate of organization to MBW. Mr. Washauer cited La. R.S. 12:1310.1, which provides that when immovable property is acquired by an individual-who is acting in any capacity for and in the name of any LLC-and the LLC is later issued a certificate of organization, the LLC's existence is retroactive to the date of acquisition of the interest in the immovable property. Id., at 936-937.

(3) MBW was undercapitalized, as it never owned any assets apart from its working interest in the oil and gas wells related to the agreement with ORX. Furthermore, MBW never used its own capital to pay its expenses for the venture with ORX. Id., at 938.

(4) MBW did not have a separate bank account to transact its own affairs. After issuing a check to ORX on MBW’s behalf, Mr. Washauer “did not see the point in creating a checking account and getting a tax ID for a one time investment. He anticipated that the above-referenced check was going to be the last payment made relative to the [agreement].” Id.

(5) Although Louisiana LLC law does not require members or managers to hold meetings, keep minutes, or act through formal resolutions, the court found the fact that MBW had not had a meeting in over a year further evidenced that “Mr. Washauer was operating MBW at his leisure and discretion,” and that the corporate veil should be pierced. Id.
 

In an arbitration, the parties agree to hire one or more neutral third parties to hear the dispute and issue a ruling.  The parties further agree to abide by that ruling.  If one party fails to do so, the ruling can be enforced by a court of law just as if an actual judgment had been entered.  Some suggest the process is less costly and more efficient than litigation; however, significant rights can be lost under the guise of so called legal efficiency.

Federal:  Federal Arbitration Act 9 U.S.C. § 10(a) 

To vacate: 1) award procured by fraud or corruption; 2) arbitration partiality; 3) arbitrator misconduct in failing to postpone a hearing or admit evidence pertinent and material; or 4) arbitrator’s exceeding authority. 

To modify: 1) evident miscalculation; 2) award rendered on subject matter not referred to them; 3) imperfect as to form not affecting the merits. 

State:  (La. R.S. 9:4210)

To vacate: 1) arbitrator fraud or corruption; 2) arbitrator misconduct; and 3) arbitrator exceeded authority. 

To modify: 1) material miscalculation; 2) award of a matter not submitted; and 3) irregularities as to form.

Some federal and state courts recognize one additional non-statutory ground for vacating an arbitration award, i.e., manifest disregard of the law or misapplication of the facts. However, the U.S. Fifth Circuit Court of Appeal recently ruled, “…manifest disregard of the law is no longer an independent ground for vacating arbitration awards under the FAA.” Citigroup Global Markets, Inc. v. Bacon, 562 F.2d 349, 355 (5th Cir 2009).

Louisiana appellate courts are divided on this issue.  Four of Louisiana’s five appellate courts recognize the “manifest disregard for the law as an additional, non-statutory ground for attacking an arbitration award.”  However, to date, the First Circuit Court of Appeal has not.  Instead, the First  Circuit will not consider a challenge to an arbitration unless one of the specified statutory grounds exists.  The First Circuit Court of Appeal, “see[s] no reason to deviate from [its] consistent line of jurisprudence of strict adherence to statutory mandates.” JK Developments, LLC v. Amtek of Louisiana, Inc., 958 So.2d 199, 203 (La. 1st Cir. La. 2008) cert. den, 983 So.2d 1276 (2008).  So even in a situation in which the arbitrator misunderstands or misconstrues the facts and/or disregards Louisiana law, the unsuccessful party may be left without an ability to challenge the award.

In this unfortunate circumstance, the alleged benefits of arbitration hardly seem worth the price.

 

Electronic Discovery, or “E-Discovery”, is not considered the “novel issue” it once was. However, E-Discovery still presents problems that litigants and courts struggle with. Below is a summary of recent Louisiana Federal Court opinions dealing with the issues surrounding E-Discovery.

In Frees, Inc. v. McMillian, 2007 WL 184889 (W.D. La. Jan. 22, 2007), the Western District of Louisiana granted the plaintiff’s motion to compel. In an unfair competition and trade secret theft action, the plaintiff claimed that the defendant, a former employee, had stolen various data files. Plaintiff had unsuccessfully requested production of defendant’s laptop and desktop. The Court granted the motion to compel the defendant to produce these two items because they were the most likely places that the data files would be located. The Court did institute protective measures so as to prevent the disclosure of any irrelevant or personal information.
 

In Green v. Fluor Corp., 2009 WL 1668376 (M.D. La. June 11, 2009), a case in the Middle District of Louisiana, the defendant sought access to the plaintiff’s phone and e-mail system to obtain the original version of a photograph the plaintiff had given to the defendant as part of discovery. The defendant claimed the produced photograph taken from a phone was of low quality and wanted access to the plaintiff’s phone and e-mail to obtain a clearer picture. The Court denied the motion because the defendant failed to ask for the particular form of the discovery in regards to the picture and therefore had to settle with what the plaintiff had produced.

In Marketfare Annunciation, LLC v. United Fire & Casualty Ins. Co., 2007 WL 3273440 (E.D. La. Nov. 5, 2007), the Eastern District of Louisiana dealt with a spoliation issue involving electronic evidence in a claim that arose due to Hurricane Katrina. The defendant failed to produce certain e-mails even after the plaintiff put the defendants on notice to preserve them. However, the plaintiff waited until the eve of the close of discovery to file sanctions and therefore the court denied the request.

In Thomas v. IEM, 2008 WL 695230 (M.D. La. Mar. 12, 2008), the Middle District of Louisiana dealt with a civil rights violation. The plaintiff served a Rule 45 subpoena on the defendant in order to obtain access to nine named individuals’ e-mail boxes. The Court held this was an attempt to circumvent discovery deadlines under Rules 26 and 34 and therefore did not grant the request.

In Canon USA, Inc. v. SAM, Inc., 2008 WL 2522087 (E.D. La. June 20, 2008), the Eastern District of Louisiana granted a motion to compel electronically stored data that the defendant had at his home in Florida. After Hurricane Katrina, defendant moved his computer to Florida but when discovery requests were made he did not search the computer to provide complete answers to interrogatories. The court held that this “lackadaisical” treatment of discovery was unacceptable and held that any undeleted information on the computer was discoverable. The Court ordered the defendant to obtain the services of a “forensic computer specialist” and fully respond to the discovery request.

In re Riverside Healthcare, Inc., 2008 WL 4183609 (M.D. La. Sept. 11, 2008), a case in the Middle District of Louisiana, a bankruptcy liquidating supervisor accused a creditor of destroying evidence and sought the adverse presumption that follows spoliation. The creditor had deleted e-mails that the liquidating supervisor considered necessary evidence. However, the court held that spoliation requires bad faith and here there was no bad faith due to the fact that the creditor destroyed e-mails automatically every sixty to ninety days.

In Johnson v. Big Lots Stores, Inc., 2008 WL 2191357 (E.D. La. May 7, 2008), the Eastern District of Louisiana ruled that a plaintiff could not take another deposition of the defendant’s representatives regarding how the defendants preserved and collected electronic data. The Court stated that since the plaintiffs failed to list “e-Discovery” as an issue at the original deposition and since they waited until two days before the close of discovery, the motion to compel the second deposition was denied. The Court also stated that “e-discovery” matters are no longer the novel issues that they once were with the advent of the Internet and wide expansion of computerized data collection and the plaintiffs had no legitimate excuse as to why they failed to make issue of “e-discovery” at the original deposition.

In Hoover v. Fla. Hydro, Inc., 2008 WL 4467661 (E.D. La. Oct. 1, 2008), the Eastern District of Louisiana allowed discovery of two non-parties’ computers. In this breach of contract claim, the defendant sought the electronic data from the plaintiff’s mother and a friend who helped him in his business. The Court held that this would not create an undue burden on the mother because the non-party was involved in the plaintiff’s business and would have relevant information stored on her computer. The subpoena was quashed as to the friend because he had adequately answered the discovery request.

In May v. Fedex Freight Southeast, Inc., et al., 2009 WL 1605211 (M.D. La. June 8, 2009), a Middle District of Louisiana case, the plaintiff brought suit for sexual harassment while she was employed by the defendant. Plaintiff sought “any and all e-mails referencing, as well as those sent to and from, plaintiff and [the accused sexual harasser].” The defendant claimed that this was not possible because the e-mail was inaccessibly archived and unsorted. The Court held that the plaintiff and defendant had to meet with the defendant’s IT department to discuss the “burden and expense of producing the e-mails requested by plaintiff.” If then there was still no agreement, the plaintiff was urged to reassert her motion to compel.
 

The Louisiana Supreme Court in Cheramie Services, Inc. v. Shell Deepwater Production, 2010 W.L. 1631977 (La. 2010) construed the Louisiana Unfair Trade Practices Act (“LUTPA”) to mean that persons other than business consumers and competitors may sue for alleged violations of the Act. Regardless of the context of the legislation, according to the Supreme Court, the term “any person” means exactly that – any person.

In the action, Cheramie Services, Inc. (“Cheramie”) entered into a contract with Shell to provide personnel to its platforms. Shell placed two Cheramie employees, Kenneth Ward and Kevin Kays, on a platform. Shell paid Cheramie who paid the employees who were placed on these specific platforms. Ward and Kays alternated working fourteen day shifts so one of them was always on the platform. About six months thereafter, Shell stopped making payments to Cheramie and began paying Filco International, Inc. (“Filco”) for the services provided by Kays and Ward. Additionally, Cheramie sent an employee to meet with Shell about filling a position on another platform. The employee met with Shell and was told that if she wanted the position, she would have to work for Filco, because it had submitted the successful bid.
 

LUTPA states that unfair methods of competition and unfair deceptive acts or practices in the conduct of any trade or commerce are declared unlawful. See La. R.S. 51:1405. LUTPA further states that any person who sustains a loss as a result of the use of employment by another person of an unfair deceptive method, act or practice declared unlawful, may bring an action. See La. R.S. 51:1409. The Supreme Court concluded that an examination of the sections of the Act reveals that the legislation contains no language that clearly and expressly bars a person, such as the Plaintiffs in this action, to bring an action for unfair trade practice. LUTPA grants a right of action to any person who sustains a loss by such conduct. Although business consumers and competitors are included in the group afforded this private right of action, they are not its exclusive members. The Court stated “An evaluation of the words of the statute leads to the conclusion that, consistent with the definition and usage of the word ‘person,’ there is no such limitation on those who may assert a cause of action.” The Court stated that the standing limitation that has found its way into the jurisprudence occurred without proper analysis of the statute. Because of the language of the statute, which does not contain a clear, unequivocal and affirmative expression that the private right of action provided extends only to business competitors or consumers, LUTPA does not exclude other persons who assert loss of money or property as a result of the use or employment of the unfair deceptive method.

Although the Court found LUTPA to be available to plaintiffs other than business competitors and consumers, in addressing the merits of the motion for summary judgment, the Court pointed out that the Plaintiffs still have the burden of proving an act to be unfair and deceptive. The range of prohibited practices is extremely narrow. It cited Turner v. Purina Mills, Inc., wherein the U.S. Fifth Circuit stated LUTPA does not prohibit sound business practices, the exercise of permissible business judgment, or free enterprise transaction; businesses are still free to pursue profits so long as the means are not egregious and the Act is not an alternative remedy for simple breaches of contract. The Court further stated that at-will employees are free to exercise their right to change employment, even if they decide to work for a competitor of their former employer. Only egregious actions involving elements of fraud, misrepresentation and deception, or other unethical conduct, will be sanctioned based on LUTPA.

The Court agreed with Shell that there was simply an absence of factual support for the essential element of the Plaintiffs’ claim and that they were unable to show any collusion between Shell and Filco to steal Plaintiffs’ employees. Plaintiffs could produce no evidence to show that the workers were not merely exercising their prerogative of at-will employees to change companies for which they worked. In their affidavits, Kays and Ward testified that they voluntarily left the employ of Cheramie for Filco. Plaintiffs failed to produce evidence of actions by Shell which would be tantamount to unfair or deceptive acts in the conduct of their operations and the LUTPA claim was dismissed.

In a concurring opinion, Justice Johnson agreed with the dismissal of the Petition, but disagreed with the majority’s finding that the Plaintiffs are entitled to bring the action. According to Justice Johnson, (a) LUTPA’s reference to “competition” and “trade or commerce” and (b) the purpose of the Act being to protect consumers, means the legislature intended to limit the action to consumers and business competitors. Justice Knoll concurred only in the results, while Justice Guidry agreed with the results and labeled the standing discussion as mere dicta.

We will have to wait and see if the ruling opens the “litigation floodgates” and/or whether the Louisiana legislature takes any action to further limit the meaning of or redefine the term “any person” in LUTPA.
 

The United States Supreme Court recently resolved conflicts among the Circuit Courts about the citizenship of a corporation for determining diversity of citizenship jurisdiction (1). This will allow corporations to analyze with more predictable results whether to remove a case to federal court. In Hertz Corp. v. Friend, et al, No. 08-1107 (February 23, 2010) (a unanimous decision, which is unusual in and of itself), the Court decided that when determining a corporation’s citizenship for diversity of citizenship jurisdiction, the “principal place of business” of the corporation is “the place where the corporation’s high level officers direct, control, and coordinate the corporation’s activities”—something that courts have referred to as the “nerve center” of the corporation.

The District Court and Ninth Circuit determined diversity did not exist because they determined that although Hertz did business in 44 states its business activity was “significantly larger” and “substantially predominated” over activity in other states. Therefore, Hertz’s “principal place of business” and thus, its citizenship, was in California. The Supreme Court agreed to review the Ninth Circuit’s decision.

The Court’s decision focused on the meaning of “principal place of business” in Section 1332(c)(1). It started its analysis with a discussion of the history and rationale for diversity jurisdiction starting with the first diversity jurisdiction statue enacted in 1789 and ending with the current version of 28 U.S.C. §1332(c)(1) which was enacted in 1958. The court then reviewed the various tests used by federal appellate courts to determine the location of a corporation’s “principal place of business.” For example, the First Circuit used a “nerve center” test (the location from which the corporations activities are directed and controlled); the Second Circuit used a “business activities” test (where a corporation’s actual business activities are located); the Sixth and Tenth circuits used a “total activities” test (a combination of the “nerve center” and “business activities” tests); the Fifth and Eleventh circuits used a two-part test (are corporate activities “centralize or de-centralized” and then either a “place of operations” or a “nerve center” test.

The old “nerve center” test won out. The Court found that the best way to identify the principal place of business of a corporation as “the place where a corporation’s officers direct, control, and coordinate the corporation’s activities.” This conclusion was reached for three reasons: (1) the statutory language supported the approach of identifying a single state as the principal place of business; (2) it leads to “administrative simplicity” and predictability that will allow courts to focus on the underlying merits of a case rather than jousting over jurisdiction; and (3) the legislative history supported the conclusion.
 

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 (1) The diversity jurisdiction statute, 28 U.S.C. §1332(c)(1) says that “a corporation shall be deemed to be a citizen of any State by which it has been incorporated and of the State where it has its principal place of business.”

The Louisiana Civil Code provides an implied warranty for all things sold.  Specifically, a seller warrants the buyer against all redhibitory vices and defects.  A defect is “redhibitory” if it renders the item so useless or inconvenient that a buyer would not have purchased it or would have purchased it for a lesser price.   Louisiana does not have warranty statutes which are specific to marine products.  The following outline is an overview of Louisiana's warranty statutes in connection with marine products such as boats, personal watercraft, and outboard motors.

Louisiana does not have warranty statutes which are specific to marine products.

B. General Warranty Statutes

The Louisiana Civil Code provides an implied warranty, “redhibition”, for all things sold. Specifically, a seller warrants the buyer against all redhibitory vices and defects. A defect is “redhibitory” if it renders the item so useless or inconvenient that a buyer would not have purchased it or would have purchased it for a lesser price. (La. C.C. art. 2520). The defect is not redhibitory, if it was disclosed to the buyer or should have been discovered by reasonably prudent buyer. (La. C.C. art. 2521). The defect must exist at the time of delivery of the thing, but is presumed to have existed if the defect appears within three days of delivery. (La. C.C. art. 2530). Additionally, a thing must be reasonably fit for its intended use; and it must be of the particular kind or quality if such was specified in the sale. (La. C.C. arts. 2524 and 2529).

Typically, a buyer is required to give notice to a seller of a discovered defect, and permit the seller an opportunity to repair the defect; however, this notice is not required when the seller had actual notice of the defect. (La. C.C. art. 2522). Unfortunately, by law, a manufacture is deemed to have known of the defect. (La. C.C. art. 2545).

The buyer has a choice of remedies which includes full rescission of the sale or merely a reduction in the purchase price. (La. C.C. art. 2541). A manufacturer—a seller deemed by law to know of the defect—is liable for the return of the purchase price with interest from the date paid, reimbursement of the reasonable expenses of the sale and preservation of the thing, damages and attorney fees, minus a credit for any value the buyer received from use of the thing. (La. C.C. art. 2545).

The implied warranty of redhibition may be excluded or limited by agreement, but it must be clear and unambiguous and brought to the attention of the buyer. (La. C.C. art. 2548). The exclusion will not apply if the claim is that the thing was not of the quality declared in the sale. Moreover, despite a valid exclusion with the seller, the buyer may step into the warranty rights his/her seller may have against others.

A seller who is held liable for a defect has an action against the manufacturer of the defective thing, if the defect existed at the time the thing was delivered by the manufacturer to the seller. (La. C.C. art. 2531). The manufacturer cannot eliminate this obligation by contract. (Id.; see also La. R.S. 32:1621.1, providing that a manufacturer must hold harmless and indemnify its franchised dealers).

Statute of Limitations: The statute of limitations is called “prescription” under Louisiana’s Civil Code. The prescriptive period against a manufacturer—a seller deemed by law to know of the defect—is one year from the date the defect is discovered. The prescriptive period against good faith sellers is four years from delivery of the thing or one year from the date the defect is discovered, whichever occurs first.

Recoverable Attorneys’ Fees: A manufacturer—a seller deemed by law to know of the defect—is liable for reasonable attorney fees. (La. C.C. art. 2545).

C. Lemon Law

For the most part, Louisiana’s “Lemon Law,” La. R.S. 51:1941, et seq., does not apply to boats or marine products. However, the Lemon Law does apply to a “personal watercraft” which is sold in Louisiana which is used exclusively for personal and not commercial purposes. “Personal watercraft” means a vessel which uses an inboard motor powering a water jet pump as its primary source of motive power and which is designed to be operated by a person sitting, standing, or kneeling on the vessel, rather than the conventional manner of sitting or standing inside the vessel (La. R.S. 34:855.2).

If a manufacturer has established an informal dispute settlement procedure which substantially complies with the provisions of Magnuson-Moss Warranty Act, the provisions of the Lemon Law concerning refunds or replacement will not apply to any consumer who has not first resorted to such procedure. (La. R.S. 51:1944(D)).

Statute of Limitations: The consumer has no more than three years from the date he purchased the personal watercraft or until one year from the end of the warranty period, whichever is longer, in which to file suit against the manufacturer. (La. R.S. 51:1944(E)).

Recoverable Attorneys’ Fees: If the consumer has complied with the requirements of the Lemon Law, the consumer shall be entitled to reasonable attorney fees actually incurred if a judgment is rendered in part or whole in his favor. (La. R.S. 51:1947).

D. Warranty Reimbursement Rate Statute

Unless provided otherwise in the contract between the manufacturer and the dealer, “in no event shall any manufacturer or distributor pay its dealers at a price or rate for warranty work that is less than that charged by the dealer to the retail customers of the dealer for nonwarranty work of like kind.” La. R.S. 32:1262.

E. Louisiana Consumer Protection Act

Louisiana’s Unfair Trade Practices and Consumer Protection Law, La. R.S. 51:1401, et seq., creates a cause of action for unfair methods of competition and unfair or deceptive acts or practices in the conduct of any trade or commerce. If the court finds practices were knowingly used, after being put on notice by the attorney general, the court shall award three times the actual damages sustained. (La. R.S. 51:1409(A)).

Statute of Limitations: The private action prescribes one year from the time of the transaction or act which gave rise to the action. (La. R.S. 51:1409(E)).

Recoverable Attorneys’ Fees: The person bringing a private action is entitled to reasonable attorney fees and costs. However, if the court finds that an action under this section was groundless and brought in bad faith or for purposes of harassment, the court may award to the defendant reasonable attorney fees and costs. (La. R.S. 51:1409(A)).

Mr. Jalenak’s practice includes products liability defense, products warranty defense, and the representation of recreational product manufacturers in dealer disputes.
 

The Fifth Circuit Court of Appeals recently addressed the standard for a declaratory judgment action in the context of trademark rights. In Vantage Trailers, Inc. v. Beall Corporation, 567 F.3d 745 (5th Cir. 2009), Vantage filed civil action seeking declaratory judgment finding that its designed for a new aluminum bottom dump trailer would not infringe on any valid trademark rights of Beall Corporation.  Beall manufacturers and sells an aluminum bottom dump trailer which is protected by a registered trademark.  In early 2006, Vantage began designing its own aluminum bottom dump trailer.  In July 2006, Beall’s vice president sent a letter to Vantage stating that if your company places any trailers into service that violate any of Beall’s trademarks we will pursue legal action to stop the infringement. In response to the letter, Vantage filed a civil action seeking a declaratory judgment that Beall’s trademark is invalid and that the design of Vantage’s trailer did not infringe on any intellectual property rights of Beall’s.

Vantage argued that its activities related to the design and attempted sale of an aluminum bottom dump trailer demonstrated the immediacy and reality of the controversy between itself and Beall.  Vantage had worked with an engineer on private development and began construction of a new manufacturing facility, purchased specialized equipment, built a sub-frame and offered to sell its new model trailers.  Although it was undisputed that Vantage had begun to manufacture a type of trailer, Vantage’s design was not substantially fixed and definite when it filed the action.  Even during the litigation, Vantage had made modifications to the external configuration or appearance of the trailers it was working to build.  Thus, the court could not compare the potentially infringing characteristics of Vantage’s trailer against those of the Beall trailers.

This ruling highlights that although a threatening letter had been sent, this threat alone cannot create an actual controversy under the Declaratory Judgment Act.  In order for a case to exist, a person must use a trademark or service mark.  A word, slogan, design or product configuration can only function as a trademark or service mark if used in commerce to identify and distinguish certain goods/services from those of others.  A mark is used in commerce when it is affixed to a good or service which is sold or transported in commerce. In this instance, the potentially infringing elements, i.e., the appearance of the trailers, were not substantially fixed, so as to constitute a distinctive shape that functioned to identify a source.  Therefore, no true controversy existed. Vantage was not yet using a mark in commerce so as to give rise to a controversy.  The ruling shows that the “cart must be before the horse” – a controversy must in fact exist as a matter of law before one can seek a declaration as to rights and obligations involving such controversy, regardless of the “warning shot” letter.
 

Read the entire article from Around the Bar by Katie D. Bell and reprinted with permission from the Baton Rouge Bar Association. 

Since that time, a number of lawsuits related to Chinese drywall have been filed in various State and Federal Courts. 

In an effort to organize the numerous lawsuits that have been filed in Federal Courts, the Judicial Panel on Multidistrict Litigation recently issued a Transfer Order that class action suits filed around the country against Chinese drywall manufacturers would be docketed in the Eastern District of Louisiana.

The United States Judicial Panel on Multidistrict Litigation is an entity of the United States Federal Court System.  It was created by Congress in 1968 under 28 U.S.C. §1407.  The Panel has the responsibility of determining whether civil actions pending in two or more federal judicial districts should be transferred to a single federal district court for pretrial proceedings.  When asked to consider a transfer, the Panel will:

1. determine whether civil actions pending in different Federal district courts involve one or more common questions of fact such that the actions should be transferred to one federal district for coordinated or consolidated pretrial proceedings; and

2. Select the judge or judges and court assigned to conduct such proceedings.

[United States Judicial Panel on Multidistrict Litigation]

The rationale behind combining the lawsuits in this way for pretrial proceedings is to avoid discovery duplication, to prevent inconsistent pretrial rulings; and to conserve the resources of the parties, their counsel, and the judiciary.  Generally, the court will set standing orders or pretrial orders informing the lawyers involved of the ground rules, deadlines and procedures the court expects the litigants to follow.  After discovery and completion of pretrial matters, the case will be remanded back to the transferor court for trial.

While the Transfer Order for the Chinese drywall cases listed only ten cases, it is likely that the many other cases filed will be considered tag – along cases.  A case may only be characterized as a "tag-along action" if it involves "common questions of fact with actions previously transferred" under 28 U.S.C. § 1407.  See, Rule 1.1 of the General Rules for Judicial Panel on Multidistrict Litigation for the definition.  Upon learning of the pendency of a potential “tag-along action,” as defined in Rule 1.1, an order may be entered by the Clerk of the Panel transferring that action on the basis of the prior hearings and for the previously expressed reasons of the Panel.  The Panel then issues a Conditional Transfer Order transferring to the court tag-along actions that the Panel determined has “questions of fact common to the actions previously transferred”.  The order does not become effective until it is filed with the transferee district court.  The transmittal of the order to the transferee district court shall be stayed fifteen days from the entry thereof and if any party files a notice of opposition with the clerk of the Panel with in this fifteen day period, a stay will be continued until further order of the Panel. [See Rule 7.4 of the General Rules for Judicial Panel on Multidistrict Litigation]
 

The Louisiana Legislature has adopted House Concurrent Resolution No. 185, authored by Representative Tim Burns.  The resolution urges and requests that the Department of Health and Hospitals and the Deptartment of Insurance, in consultation with the Louisiana State Licensing Board for Contractors, investigate the health risks associated with living in homes that contain drywall imported from China, study the potential homeowners insurance coverage issues, including triggers, endorsements, and exclusions to policies that are related to drywall imported from China, and determine whether such material should be identified as a substandard, unsafe building material.  The resolution goes on to request a report of the findings and recommendations of this study to the legislature prior to the convening of the 2010 regular session.

A copy of the enrolled version of the resolution can be seen here: Download file

Facebook is taking certain steps to prevent infringement of intellectual property through “name-squatting.” In connection with this, Facebook is allowing Federally registered trademark holders to prevent the registration of usernames that would infringe their intellectual property rights.

There is a link to the form on Facebook’s Web site if you want to complete the form yourself. You will need the trademark registration number and the exact wording of the trademark as registered.

For more information, or to protect your trademark, please contact Pamela Baxter at pamela.baxter@keanmiller.com (225.389.3761) or Russel Primeaux at russel.primeaux@keanmiller.com (225.382.3454).

In today's difficult economic climate, franchisors are often faced with a decision to consolidate, not renew or terminate unprofitable franchises.  Generally, franchise agreements have been entered into in better economic times and contain provisions that attempt to minimize adverse economic consequences to the franchisor arising from a non-renewal or termination.  The termination decision often leads to legal challenges involving the validity of such provisions.  These challenges include a determination of whether the termination is permitted by the contract, termination procedures, buy back issues and any damages that flow from the termination or non-renewal.

La. R.S. 26:805, et seq, with regard to wholesalers and suppliers of beer, imposes certain mandatory conditions on amendments, modifications, cancellations, failure to renewals or termination with regard to the distribution agreements.  The statute also contains provisions for reasonable compensation to the franchisee upon a violation of the statutory provisions.

La. R.S. 32:812 et seq. contains general provisions applicable to all recreational product dealers and manufacturers.  These provisions also include specific provisions regarding manufacturer mandatory repurchase requirements dealing with motorcycles, ATV’s, marine products, recreational vehicles, travel trailers and utility trailers.

Issues related to motor vehicle franchises are addressed in both federal and state law.  The federal Automobile Dealers Suits Against Manufacturers Act provides in part that an automobile dealer may bring suit against any automobile manufacturer engaged in commerce, in any district court of the United States in the district in which said manufacturer resides, or is found, or has an agent, without respect to the amount in controversy, and shall recover the damages sustained and the cost of suit by reason of the failure of said automobile manufacturer to act in good faith in performing or complying with any of the terms or provisions of the franchise, or in terminating, canceling, or not renewing the franchise with said dealer, provided that in any such suit the manufacturer shall not be barred from asserting in defense of any such action the failure of the dealer to act in good faith.

The federal Automotive Dealers Suit statute also, however, provides that its provisions shall not invalidate any provision of the laws of any State except insofar as there is a direct conflict between an express provision and an express provision of State law which can not be reconciled.  Thus, it is important to also consider the provisions of La. R.S. 32:1251 et seq. as they pertain to the cancellation of motor vehicle franchises.  The statute defines a “Franchise” as any written contract or agreement between a motor vehicle dealer, a motor vehicle lessor, or a specialty vehicle dealer and a manufacturer, motor vehicle lessor franchisor, or converter of a new motor vehicle or specialty vehicle or its distributor or factory branch by which the motor vehicle dealer, motor vehicle lessor, or specialty vehicle dealer is authorized to engage in the business of selling or leasing the specific makes, models, or classifications of new motor vehicles or specialty vehicles marketed or leased by the manufacturer, motor vehicle lessor franchisor, or converter and designated in the franchise agreement or any addendum thereto.  It applies to, any written modification, amendment, or addendum to the original franchise agreement, which changes the rights and obligations of the parties to the original franchise agreement, shall constitute a new franchise agreement, effective as of the date of the modification, amendment, or addendum.  These provisions include instances where there is a death or incapacity of the dealer and sets forth rights and obligations that are applicable to the termination of certain agreements. L ouisiana law also provides that any provision in a franchise agreement requiring arbitration or litigation conducted outside of Louisiana or which seeks to apply other than Louisiana law in connection with disputes is null and unenforceable; however, there is little reported case law interpreting the validity of such a provision.

The repurchase of farm, industrial, lawn and garden equipment by a wholesaler is governed by La. R.S. 51:481 et seq.  Those statutes contain provisions that govern the death of a dealer, as well as a failure to renew, termination or cancellation of written contracts where by the dealer has agreed to maintain a stock of parts or equipment. T he provisions govern repurchase obligations for equipment and repair parts. With regard to these provisions, however, a federal court has found that a contractual choice of law provision other than Louisiana will govern.

La. R.S. 51:1451 et seq. – Service Stations Dealers Day in Court Act purportedly apply to a refiner/franchisor who cancels, terminates, or who refuses to renew a franchise agreement.  However, it is important to note that Louisiana Service Station Dealer's Day in Court Act, which imposes good faith standards upon franchisors and franchisees with regard to termination and non renewal of franchises, is preempted by the federal Petroleum Marketing Practices Act insofar as the Service Station Dealers Act imposes a greater duty of good faith than required by the federal Act.

Thus, whether franchisee or franchisor, it is important to remember that Louisiana law does contain both protections and obligations relative to the termination, non-renewal or cancellation of certain types of distributorship and franchise agreements.

* This article is limited to Louisiana law provisions and does not include federal law or regulation provisions, exceptas to preemption issues.

Hurricane Gustav recently wreaked havoc and felled trees throughout the heavily wooded areas of Southeast Louisiana.  As such, many property owners may be concerned who bears the responsibility for a fallen tree. Obviously, if a tree in a homeowner’s yard falls on his house, then that homeowner should contact his insurance agent for assistance in repairing the tree damage. The remainder of this article addresses the issue of tree-owner responsibility when a tree located on the property of one person (the “tree owner”) falls on the property of his neighbor (the “property owner”) damaging the house, car, fence or other property.

Louisiana Civil Code article 2317.1 states:  The owner or custodian of the thing is answerable for damage occasioned by its ruin, vice, or defect, only upon a showing that he knew or, in the exercise of reasonable care, should have known of the ruin, vice or defect which caused the damage, that the damage could have been prevented by the exercise of reasonable care, and that he failed to exercise such reasonable care. 

Thus, to establish liability for damage caused by a defective thing (ie—a fallen tree), the property owner must demonstrate that the tree owner should have known, in the exercise of reasonable care, of the defective tree that caused the damage, that the damage could have been prevented by the exercise of reasonable care, and that the tree owner failed to exercise such reasonable care. Caples v. USSA Ins. Co., 806 So.2d 148, 150 (La. App. 1 Cir. 2001).

In Hoerner v. Beulah Title, 968 So.2d 217 (La. App. 4 Cir. 2007), the Louisiana Fourth Circuit addressed damage caused to one homeowner’s property by the trees of another. The Hoerner’s yard was damaged by trees in the yard of their neighbor, Ms. Title. The Hoerners filed suit alleging that the Ms. Title was liable under Louisiana Civil Code article 2317.1. Ms. Title, argued in her defense that the trees were not defective. She also argued that she was entitled to the defense of force majeure because the trees were felled by Hurricane Katrina.

The Hoerners testified that they had problems with Ms. Title’s pine trees and her foliage since 1991. However, there were no allegations that the trees in question were defective through disease or otherwise. Indeed, photographic evidence demonstrated that the trunks of the trees were blown over by Hurricane Katrina. There was no independent evidence that the trees fell due to the lack of maintenance or improper trimming. Nevertheless, the Hoerners argued that the trees were defective because they were neglected, overgrown, and placed too close to their backyard brick wall.

In support of their argument, the Hoerners argued that Brown v. Williams, 850 So 2d 1116 (La. App. 2 Cir. 2003) applied. In Brown, the tree which caused the damage had not been maintained in over 25 years. The branches had not been pruned, and the health of the tree had never been assessed. The Brown defendants were ultimately found liable because they should have known of the trees’ defective condition, and, in the exercise of reasonable care, the Brown defendants could have prevented the damage caused by their tree with ordinary maintenance.  However, as the Hoerner tree did not involve a total lack of maintenance and/or disease, Brown did not apply. As such, the Hoerners’s claims were dismissed. Moreover, the Fourth Circuit held that Ms. Title was entitled to the defense of force majeure because the winds of Hurricane Katrina caused trees to fall and damage property regardless of maintenance and/or location. 

Responsibility of removing a fallen tree from one’s own or one’s neighbor’s property rests squarely upon the issue of ownership of the tree. The owner of the ground out of which a tree grows is legally presumed to also own that tree. La. C.C. art. 491 (West 2008). This maxim holds true unless the owner of the ground has been divested of ownership of the tree and there is evidentiary support of separate ownership. Allen v. Simon, 888 So.2d 1140, 1144 (La. App. 3rd Cir. 2004). The Simon Court held that the obligation to remove one’s property off one’s neighbor’s property has long been recognized by Louisiana law.

The Simon case involved claims by a neighbor for reimbursement of tree-removal expenses against the neighboring tree owner. The tree owner asserted the Act of God defense, the common law equivalent to the Louisiana civil law doctrine of force majeure, declining liability for the tree removal because it was felled by an unforeseen force of nature, or other irresistible force. The appellate court overruled the trial judge’s application of the Act of God defense and found that the defendant’s decision not to remove the tree was not caused by any act of God. The court concluded that the Act of God defense did not relieve the defendant from his responsibility to remove his fallen tree from his neighbor’s property. Although an Act of God or force majeure may have caused the tree to fall, it did not serve to divest the tree owner of his ownership of the tree. Hence, responsibility to remove a fallen tree from neighboring property rests with the owner of the tree.
 

According to the Louisiana Supreme Court, a commercial general liability policy unambiguously excluded coverage for a contractor’s faulty workmanship. Supreme Services & Specialty Co. Inc. v. Sonny Greer, 958 So.2d 634 (La. 2007). The homeowner instituted legal action claiming that cracks in the slab were the result of faulty and defective design and construction, alleging causes of action based on breach of contract and breach of warranty. Relying on the "work product" exclusion in the policy, the court recognized that it reflected the insurance company’s intent to "avoid the possibility that coverage under a CGL policy will be used to repair and replace the insured’s defective products and faulty workmanship."

The court further concluded that the work product exclusion and the products completed operations hazard are not inherently ambiguous. While the work product exclusion precludes coverage to the insured’s work or product caused by faulty workmanship, the products completed operations hazard provides coverage for damages other than the faulty product or work itself arising out of the faulty workmanship. In other words, the products completed operations provision applies to damages and injuries that might occur as a result of the damaged product.

On March 23, 2007, the Louisiana First Circuit addressed the validity of an arbitration agreement in Lafleur v. Law Offices of Anthony G. Buzbee, 2007 WL 858859 (La. App. 1^st Cir. 2007). The opinion has not been released in permanent law reports and is still subject to revision or withdrawal.

The case arises out of a contract between Mr. Lafleur, a Louisiana resident, and his Texas attorneys, Jeffrey M. Stern and the firm of Stern, Miller, and Higdon. Mr. Lafleur retained the Stern defendants to pursue his maritime claim for personal injuries he sustained while traveling on a vessel in navigable waters off the coast of Louisiana. He executed an agreement with the Stern defendants which stated, "Any and all disputes, controversies, claims or demands arising out of or relating to this Agreement or any provisions hereof, the providing of services by the Stern defendants to Mr. Lafleur, or in any way relating to the relationship between the Stern defendants and Mr. Lafleur, whether in contract, tort or otherwise, at law or in equity, for damages or any other relief, made by or on behalf of Mr. Lafleur shall be resolved by binding arbitration pursuant to the Federal Arbitration Act in accordance with the Commercial Arbitration Rules then in effect with the American Arbitration Association." It also provided "the expense of any arbitration shall be a Case Advance pursuing the claims" and that "Mr. Lafleur understands and acknowledges that Mr. Lafleur is waiving all rights to a trial by jury or a judge."

The First Circuit affirmed that Louisiana law applied to the matter since it has the most significant relationship to the parties and subject matter. More importantly, the First Circuit agreed with the trial court’s determination that the arbitration clause was unduly burdensome. Although the Court recognized that under federal and state law the weight of the presumption in favor of arbitration is heavy, there was no error in the trial court’s conclusion that this provision was adhesionary due to the lack of mutuality and unconscionability. The contract attempted to solely bind Mr. Lafleur while allowing the attorneys to avail themselves of procedural and substantive law remedies. It also imposed the expense of any arbitration exclusively on Mr. Lafleur as a case advance repayable and reimbursable to the attorneys under paragraph 7 of the agreement regardless of the outcome of the arbitration proceedings.

The First Circuit concluded that it is unconscionable for an attorney to be allowed to draft a contract with an arbitration provision that unilaterally takes away the client’s right to a trial while allowing the attorney to pursue any and all remedies. The Court stated, "the lack of mutuality in the arbitration requirement, along with the obligation that the client alone is to bear the expense of the arbitration proceedings accentuated the burdensome and unconscionable elements in this arbitration provision that was drafted by the attorneys without any input from the client." The Court affirmed the trial court's judgment denying the Stern defendants' dilatory exception of prematurity and alternative motions to stay the proceedings and compel arbitration.

Most commercial leases for multi-tenant properties contain clauses which regulate the tenants' use of the leased premises. Many tenants will require a landlord to grant the tenant the exclusive right to operate a certain business or sell a certain product to avoid competing with other tenants. These provisions are appropriately referred to as exclusive use clauses. For the landlord to satisfy its obligations under an exclusive use clause of one lease, the landlord is required to incorporate provisions in its other leases prohibiting the other tenants from using the leased premises for the restricted purpose. These clauses are commonly referred to as prohibited use clauses. 

A tenant being able to negotiate an exclusive use provision in the lease can have a significant impact on the financial success of the business. However, landlords will be hesitant to grant an exclusive use if it will limit the landlord's ability to rent the other locations on the property. If a landlord does grant an exclusive use, the landlord must be prepared to incorporate corresponding prohibited use clauses in the leases of all of the other tenants.