CASHMAN EQUIPMENT CORPORATION v. ACADIAN SHIPYARD, INC., (E.D.La. 2002)

BARBIER, Judge

In a minute entry dated June 4, 2002, the Court requested that the parties submit memoranda to the Court addressing:

1. Whether Sentry has standing to bring any claims against Cashman under the LUTPA, in that only consumers and business competitors have standing to bring a private action under that statute?

2. Whether Sentry's claims are precluded by res judicata, as it appears the exact same issues were litigated in the arbitration proceeding and damages awarded on the claims?

The only claims left in this matter are Sentry's counterclaims against Cashman brought under the Louisiana Unfair Trade Practices Act. After reviewing the parties' memoranda and the applicable law, the Court concludes that Sentry's claims should be dismissed on summary judgment.

"[D]istrict courts are widely acknowledged to possess the power to enter summary judgments sua sponte." Celotex Corp. v. Catrett, 477 U.S. 317, 326, 106 S.Ct. 2548, 2554, 91 L.Ed.2d 265 (1986). The power to enter summary judgment sua sponte is tempered by the requirement that the parties be provided adequate prior notice, which in this case, was done. See Leatherman v. Tarrant County Narcotics Intelligence and Coordination Unit, 28 F.3d 1388 (5th Cir. 1994).

DISCUSSION

The factual and procedural background of this case have been detailed by the Court several times in prior opinions and, therefore, will not be repeated herein.

I. Standing Under Louisiana Unfair Trade Practices Act

Both parties point out to the Court that, while the Fifth Circuit has interpreted Louisiana law as limiting the private right of action under the LUTPA to consumers and business competitors, there is a split in the Louisiana circuit courts of appeal on the issue, which the Louisiana Supreme Court has not resolved. See La. Rev. Stat. § 51:1409. Sentry points out that the Louisiana First Circuit Court of Appeal, the circuit in which the events in this matter occurred, has held that, "[a]lthough business consumers and competitors are included in the group afforded this private right of action . . . they are not its exclusive members." Jarrell v. Carter, 577 So.2d 120, 123 (La.App. 1st Cir. 1991).See also Capitol House Preservation Co. v. Perryman, 98-1514, p. 12 (La.App. 1st Cir. 12/10/98), 725 So.2d 523, 530 ("If a plaintiff alleges facts sufficient to classify himself as a member of the group provided a remedy by [the statute], it is of no moment if plaintiff is not a consumer or a business competitor of defendant.").

La. Rev. Stat. § 51:1409(A) grants a right of action to "[a]ny person who suffers any ascertainable loss of money or movable property . . . as a result of the use or employment by another person of an unfair or deceptive method, act or practice declared unlawful by [the LUTPA]."

However, both the Louisiana Fourth and Fifth Circuits have held to the contrary, finding that only consumers and business competitors have a private right of action. Furthermore, the Fifth Circuit has consistently interpreted the LUTPA as providing only customers and business competitors standing to bring a private action. See, e.g., Delta Truck Tractor, Inc. v. J.I. Case Co., 975 F.2d 1192, 1205 (5th Cir. 1992). While, in Gardes Directional Drilling v. U.S. Turnkey Exploration Co., 98 F.3d 860, 867-68 (5th Cir. 1996), the Fifth Circuit did express some hesitation regarding the application of the narrow interpretation, in light of the statute's broad language and the Louisiana First Circuit's interpretation, the court concluded that there had been no subsequent decisions of the Louisiana courts demonstrating that the Delta Truck opinion was clearly wrong.

See, e.g., Jefferson v. Chevron U.S.A., Inc., 98-0254 (La.App. 4th Cir. 5/20/98), 713 So.2d 785; Morris v. Rental Tools, Inc., 435 So.2d 528 (La.App. 5th Cir. 1983).

Even having found that its interpretation was debatable given the split in the Louisiana appellate courts in Gardes, the Fifth Circuit just recently affirmed its interpretation once again in Tubos de Acero de Mexico, S.A. v. American Intern. Inv. Corp., Inc., Nos. CIV.A. 00-31054, 00-31187, 2002 WL 1041042, *7 (5th Cir. 6/10/02). The court in that case stated that "LUTPA's private right of action is limited to direct consumers or to business competitors. . . . Thus, to have standing under LUTPA, [plaintiff] must demonstrate that it is either a consumer or a business competitor of [defendant]." Id.

While Sentry is correct that were the Louisiana First Circuit to address the issue in this case it would in all likelihood conclude that Sentry had standing to bring a LUTPA claim, this Court is not bound by the lower Louisiana courts' decisions. Rather, the Court must "look to final decisions of the highest court of the state. When there is no ruling by the state's highest court, it is the duty of the federal court to determine as best it can, what the highest court of the state would decide." Labiche v. Legal Sec. Ins. Co., 31 F.3d 350, 351 (5th Cir. 1994).

Moreover, the Fifth Circuit has repeatedly affirmed its interpretation of the LUTPA as only providing a right of action for consumers and competitors, despite the Louisiana First Circuit's contrary interpretation, this Court is bound to follow the law in this circuit. Accordingly, as the parties in the instant matter do not dispute that there is no genuine issue of material fact that Sentry is neither a consumer nor a competitor of Cashman, the Court concludes that Sentry's counterclaim under LUTPA should be dismissed.

II. Res Judicata

While the Court's determination that Sentry lacks standing to bring its counterclaim under LUTPA as a matter of law, even if Sentry did have a right of action under the statute, the Court finds that its claims are barred from being litigated in this action by principles of res judicata.

In the Fifth Circuit, an action is barred by res judicata if: (1) the parties are identical in both actions; (2) the prior judgment was rendered by a court of competent jurisdiction; (3) the prior judgment was final on the merits; and (4) the cases involve the same cause of action.Agrilectric Power Partners, Ltd. v. General Electric Co., 20 F.3d 663, 665 (5th Cir. 1994). Under federal law, "[t]he critical issue is . . . whether the plaintiff bases the two actions on the same nucleus of operative facts." Travelers Insurance v. Saint Jude Hospital, 37 F.3d 193, 195 (5th Cir. 1994) (quoting In re Howe, 913 F.2d 1138, 1144 (5th Cir. 1990)). Res judicata bars "all claims that were or could have been advanced in support of the cause of action on the occasion of its former adjudication . . . ." Id.

The three remaining claims by Sentry against Cashman in the instant action are for:

(1) Cashman's wrongful withholding of progress payments;

(2) Cashman's wrongful failure to recognize force majeure extent ions;

(3) Cashman's wrongful refusal to accept delivery of the vessel upon completion.

Sentry argues that, like Cashman's contract reformation claim brought, its LUTPA claims were not litigated in the prior arbitration and therefore should not be barred by res judicata. Sentry asserts that the instant claims for damages were withdrawn by Acadian at the arbitration in order to reduce the amount of damages claimed to less than one million dollars. Sentry argues that, as a result of Cashman's objection to proceeding in front of one arbitrator, Acadian dropped its claims for productivity losses, interest expenses, and additional crane costs. Sentry states that these are the damages it is attempting to recover herein and that those losses were not, and could not be, arbitrated based on Cashman's objection.

Apparently, Cashman objected to proceeding before a single arbitrator and demanded a three arbitrator panel unless Acadian reduced its damages claim below one million.

Cashman, on the other hand, notes that the arbitrator did decide these exact same claims brought by Acadian against Cashman in the arbitration and awarded Acadian damages for those claims. Furthermore, Sentry, as surety, was subrogated to Acadian's claims, and, by agreement between those two parties, is to receive certain assigned percentages of Acadian's recovery. Finally, Cashman asserts that any claims voluntarily waived during the arbitration cannot be resurrected in this proceeding.

The Court agrees with Cashman on both points. First, the claims raised by Sentry in this case were raised by Acadian and Sentry in the arbitration. Specifically, in their joint brief submitted to the arbitrator, Acadian and Sentry claimed a credit against liquidated damages under the force majeure provision of the contract, a credit against liquidated damages caused by Cashman's failure to make progress payments in accordance with the Contract, a credit against liquidated damages for delays in delivery of the vessel caused by repair of damage by surveyors, a 198 day extension on the delivery date, and damages resulting from Cashman's initial refusal to take possession of the barge.

The arbitrator considered these claims and deducted a total of 188 days from Cashman's liquidated damages claim for excusable delays due to the force majeure events and non-payment by Cashman of progress payments. The arbitrator also awarded damages to Acadian as a result of the force majeure events. Finally, the arbitrator denied Acadian's claims for delays and damages due to survey damage, survey repair, and repair of the interior coatings, all of which resulted in Cashman refusing initially to accept delivery of the barge. As demonstrated, all of the exact claims raised by Sentry in this matter were, in fact, litigated and decided in the arbitration.

Second, any claims for additional damages arising out of these same alleged wrongful acts by Cashman could have been brought in the arbitration, and, in fact, were apparently brought and then voluntarily dropped. As explained above and in the Court's previous opinion in this same case, res judicata bars "all claims that were or could have been advanced in support of the cause of action on the occasion of its former adjudication . . . ." Travelers Insurance v. Saint Jude Hospital, 37 F.3d 193, 195 (5th Cir. 1994). Despite Sentry's comparison of its LUTPA claims to Cashman's reformation claim, the key difference is that Cashman's claim for reformation could not have been adjudicated in the arbitration. It appears that Sentry's underlying claims were in fact adjudicated and any additional claims for damages arising out of the same facts were voluntarily waived so that the parties could arbitrate in front of one arbitrator rather than three.

See Cashman Equipment Corp. v. Acadian Shipyard, Inc., No. CIV. A. 01-2411, 2001 WL 1387921 (E.D.La., Nov 06, 2001) (discussing why Cashman's reformation claim in this action was not barred by res judicata).

CONCLUSION

For all of these reasons, the Court finds that Sentry's remaining claims brought under the LUTPA should be, and hereby are DISMISSED WITH PREJUDICE. Not only does Sentry lack standing to bring those claims, but the claims were previously litigated in the arbitration proceeding and, therefore, are barred by res judicata.