Articles Posted in Business Dispute

hotel-hilton-santo-domingo-1222125-1024x768Securing a loan with collateral might seem like a simple and everyday task, but even the smallest of mistakes in the process can carry severe consequences. Brent Kovach (Mr. Kovach), a shareholder in a few New Orleans French Quarter hotels, experienced the repercussions of a simple oversight when one paragraph in his collateral assignment nearly offset his entire life insurance policy. The following case delves into just how critical hiring an excellent attorney might be when interpreting seemingly straightforward contracts and when those contract disputes turn to a lawsuit.

Mr. Kovach was a shareholder of St. Peter Inc.’s Hotel and a member of A Creole House, LLC, which managed a French Quarter hotel. In the wake of Hurricane Katrina, these hotels required refinancing and in order to secure the necessary loans, Mr. Kovach personally guaranteed them with his life insurance policy as collateral. Mr. Kovach and his wife, Ellen Kovach (Mrs. Kovach), acquired the one million dollar life insurance policy on Mr. Kovach in 1995 from New England Mutual Life Insurance Company.

After receiving the refinancing, the hotels failed to make loan payments and in May 2010 the bank requested a cash surrender of the value of the policy from New England Mutual Life Insurance Company. The life insurance company paid the value of the policy, $52,316.33, to the bank based upon the terms of the assignment and canceled Mr. Kovach’s life insurance plan without any notification to him.

the-old-red-barn-1233750-1024x736In litigating claims, parties (particularly the attorneys) must exercise diligence. This means being timely when it comes to gathering evidence, complying with a court order, or filing a pleading, motion, appeal etc. In its Commentary to the Model Rules of Professional Responsibility, the American Bar Association specifically warns that procrastination can seriously harm a client’s cause. Good attorneys heed this warning. Procrastination can and will often prompt the court to dismiss a litigant’s claims or objections. Illustrative is a recent case from the U.S. Fifth Circuit Court of Appeal.

In 2011, Red Barn Motors, Inc. entered into a financing agreement with Dealer Services Corporation (“DSC”). Under the financing agreement, DSC would finance Red Barn’s purchase of vehicles at auction. But soon, things went sour. In March of 2013, Red Barn stopped making payments on its line of credit with DSC and DSC began seizing some of Red Barn’s assets. The next month, Red Barn delivered several vehicles to Louisiana’s First Choice Auto Auction, L.L.C. First choice was supposed to sell the vehicles, but instead, it delivered them to DSC. Red Barn eventually declared bankruptcy. At some point, DSC was absorbed by another company, NextGear Capital Inc.

Red Barn filed a lawsuit in the U.S. District Court for the Middle District of Louisiana against NextGear and First Choice. Red Barn alleged that NextGear breached the financing agreement and benefited from unjust enrichment and that NextGear and First Choice committed conversion. According to Red Barn’s petition, sometimes six to eight weeks would pass before the auction house could transfer title to DSC, and DSC would refuse to pay the auction house until it received the title, though it would charge interest and fees starting from Red Barn’s initial purchase.

shopping-center-1507250-1024x768Even if a property is zoned for commercial purposes, a city may discretionarily deny a business from buying and developing that property if the city determines it is against the public interest. The city of Shreveport, Louisiana was challenged when they denied a Dollar General’s site plan to develop a commercially zoned, “use by right” 1.13-acre lot. While Dollar General’s developer, GBT Realty Corporation, petitioned the trial and appellate courts for damages resulting from loss of a business opportunity, the courts ruled that the city was immune from tort liability when a city exercises its discretion in the use of its commercially zoned properties.

In May 2012, GBT appeared before the Shreveport Metropolitan Planning Commission (MPC) at a public hearing to develop a Dollar General store. The MPC expressed concerns relating to the proximity of a Family Dollar store across the street from the proposed Dollar General site as well as concerns about the appearance and landscaping of the proposed Dollar General store. A month later, GBT presented an updated plan with changes made to the store’s landscaping and facade at an MPC public hearing. Nonetheless, amid concerns by the public as well as the MPC, the board unanimously vetoed Dollar General’s plan citing that the plan did not comply with proposed zoning changes for the city’s “2020 Master Plan” and that the site in question was too small to accommodate Dollar General’s store plan. In response, GBT filed an action before the First Judicial District Court to approve the first site plan. The District Court approved the plan and reversed the MPC’S decision. In April 2013, GBT filed a lawsuit against the MPC and city of Shreveport alleging a tort claim for loss of business opportunity due to the delay in approval has caused the plan to fall apart.

The trial court concluded that the city was protected from liability from exercising its discretion in disapproving the site plan. Louisiana statute protects public bodies, including cities and its officers, when they perform discretionary acts that are within the scope of their governmental responsibilities.  La. R.S. 9:2798.1. The trial court recognized that the city exercised its discretion in denying the Dollar General site plan based on issues of impact to the nearby property, traffic, and other public safety concerns. The trial court also concluded that the plan fell apart because of disagreements between GBT and Dollar General rather than falling apart due to the delay caused by the MPC denial and the district court’s approval. Accordingly, the trial court ruled in favor of the city of Shreveport.

residence-1226143-768x1024In joint real estate ventures, all partners are presumed to be equal unless agreed otherwise. All parties should have equal decision-making power, share equally in gains and losses, and possess equal interests in the subject property. Cooperation among the partners is essential to the success of the venture. Each person must enter into the transaction with an open mind towards other partner’s ideas and business tactics. However, when one person uses the other partners for his own personal gain, litigation usually follows. This was the unfortunate situation in the following case.

The defendant, Mr. Paul Barranco, wanted to purchase three apartment complexes in Baton Rouge, LA as investment properties. After failing to obtain financing on his own, he enlisted the help of Plaintiffs, Mr. Brignac and Mr. Godchaux. The three parties formed God-Brig-Bar, LLC. Plaintiffs sent their tax information to Mr. Barranco for the purposes of obtaining financing. Mr. Barranco advised Plaintiffs that he was selling another apartment complex located on Ned Drive in Baton Rouge and that the proceeds from that sale may be used as a down-payment on the three apartment complexes. Each Plaintiff gave a check to Mr. Barranco for their one-third deposit amount on the three complexes in the amount of $10,000.00 each.

Mr. Barranco deposited the funds and advised Plaintiffs that Palisades Properties expressed interest in acquiring the purchase agreements to the three properties. The sale of the three complexes to Palisades Properties would yield $1,132,000.00 in profits to be split three ways. Mr. Barranco drafted and signed a letter of intent in his name only to Palisades Properties, stating that he would sell it the three purchase agreements, one for each complex. Plaintiffs advised Mr. Barranco that they wanted the letter of intent changed to include all of their names. Mr. Barranco refused to do so and asserted that it might scare off the potential buyer since they were already nervous about such a large investment.

the-law-society-1241368-683x1024Louisiana law strongly encourages arbitration as a method of resolving disputes. Arbitration is a form of alternative dispute resolution whereby parties agree to be bound by the decision of neutral third parties. Arbitration promotes efficiency in dispute resolution because it attempts to resolve disputes before court involvement becomes necessary. It prevents courts from becoming backlogged with excessive caseloads. While arbitration promotes court efficiency, it can be a burdensome roadblock to certain litigants seeking recovery. A recent Louisiana case is illustrative.

Tiffany Christian and David were associate attorneys at The Law Office of Paul C. Miniclier in New Orleans, Louisiana. In 2008, both resigned, taking along with them one of the firm’s clients, Carolyn Hall-Williams. At the time of Ms. Christian and Mr. Binegar’s resignation, Ms. Hall-Williams had a lawsuit pending in the federal District Court for the Eastern District of Louisiana. While that lawsuit was eventually settled, the Miniclier Law Firm wanted to collect fees associated with Ms. Hall-William’s representation during her time as a client of the firm. The Miniclier Law Firm filed an intervention with the federal District Court. A magistrate judge awarded the law firm the costs associated with Ms. Hall-Williams representation, but no attorney fees. That award was later modified by a federal District Court judge to include a sum for attorney fees.

Unsatisfied with the award, the Miniclier Law Firm appealed to the U.S. Fifth Circuit Court of Appeal. The Fifth Circuit kicked the case back down to the federal District Court and ordered that the case is stayed (or postponed) until the parties commenced with arbitration. The federal District Court ordered Ms. Hall-Williams to proceed to arbitration, and a petition to arbitrate was filed with the Louisiana State Bar Association (“LSBA”). The LSBA has a Fee Dispute Program which helps resolve disputes between lawyers and their clients as well as disputes between lawyers. Ms. Hall-William’s fee agreement with the Miniclier Law Firm required that fee disputes be arbitrated with the LSBA. The LSBA dismissed the arbitration, in part because the parties could not reach an agreement concerning the scope of the proceedings and the potential impact on the law regarding attorney fee contracts.

whistle-1423801-1024x768The State of Louisiana has laws in place to protect whistleblowers with legitimate claims. These laws are critical to protecting workers and promoting healthy corporate self-governance. In Louisiana, La. R.S. 23:967 protects an employee whistleblower from retaliatory actions when in good faith, the employee advised the employer of some unlawful practice. It allows the employee to commence a civil action against the employer for the employer’s retaliatory actions. In a recent case, the U.S. Fifth Circuit Court of Appeal spells out the legal elements required to succeed on a whistleblower claim.

Justin Richardson worked for Axion Logistics, LLC, in Baton Rouge.  Axion promoted Richardson to general manager within two months of hiring him.  Shortly thereafter, Richardson became aware that two Axion employees were fraudulently billing an Axion client.  Richardson reported these acts up the chain of command, including Axion’s president, its CEO and its CFO.

At one point, Axion’s CEO requested that Richardson not to tell anyone about the matter. Axion’s CEO and president allowed the illegal practice when they refused to inform the client.  Subsequently, Richardson expressed to the CFO that Richardson would notify the client if Axion was unwilling to do so.  A few weeks thereafter, Axion management criticized Richardson’s job performance.  The president then terminated Richardson’s employment within a month, on the grounds that Richardson “was not a good fit” for the company.

money-money-money-1240837-1024x768Getting a judgment in your favor can often feel like a big win in court. After a judgment has been declared by the court many people believe the losing side simply gets out their checkbook and pays what they owe. While this may happen in some cases, many times after getting a judgment a person must fight an uphill battle to collect on that judgment. This is exactly what happened when a Louisiana company, Monster Rentals, obtained a default judgment against Coonass Construction of Arcadia (CCA).

In March of 2013 Monster Rentals brought a lawsuit against CCA to collect $4122.28 in unpaid invoices. CCA failed to answer the complaint. In accordance with Louisiana law, a default judgment was entered against the company. Essentially, if after a party being sued fails to answer a lawsuit for a certain period of time it is assumed they agree that they owe the amount in controversy. This is one reason it is so important to seek a good lawyer when you find out there is litigation pending against you. If you simply ignore the problem in hopes it will disappear it often can be a sure way to lose the case and end up owing money. In the default judgment against CCA the Trial Court awarded Monster Rentals both the $4122.28 and reasonable attorney fees.

Monster Rentals then began the difficult task of attempting to collect on the judgment. In order to collect on a judgment when someone is unwilling to pay, the party that is entitled to collect needs to get the court to place a lien or garnishment on some asset owned by the party that owes the money. In order to collect, Monster Rentals tried to place a garnishment on unpaid receivables owned by CCA. In order to do this Monster Rentals approached the court and asked it to set a fixed dollar amount for attorney fees in order to facilitate the collection of the judgment.

us-capitol-building-7-1233904-1-1024x683In a lawsuit, a client’s claims need to be monitored every step of the way. If an issue is revived in an appeal, an attorney must keep track of it and reinforce it at each new representation. If an attorney doesn’t continue to assert a claim, a court might think the party abandoned the issue and the court will not review it on appeal. Keeping these claims alive is not a major undertaking, but as Glenn E. Alphonse, Jr. learned in his recent case, even the slightest misstep in this area can make or break an outcome.

In 2010, Mr. Alphonse defaulted on his mortgage, so Arch Bay Holdings, LLC began foreclosure proceedings on his house.  Alphonse filed a lawsuit against Arch Bay Holdings, LLC under the Louisiana Unfair Trade Practices Act (LUTPA) and Federal Debt Collection Practices Act (FDCPA). After various motions and appeals, the District Court dismissed Alphonse’s case. Alphonse appealed this ruling to the Fifth Circuit Court of Appeal.

A central issue to Alphonse’s appeal was whether federal question jurisdiction existed. Federal question jurisdiction allows a plaintiff to proceed with a case in federal court; it is what gives the official power to a court to make legal decisions and judgments. The Fifth Circuit first examined whether Alphonse waived his right to certain claims during the litigation of his case which gave rise to federal question jurisdiction. If Alphonse waived his rights to these claims then he waived his right to proceed under federal question jurisdiction. Waiver of Alphonse’s federal claims during the appeals process meant that those claims could not be brought before the District Court for consideration.  Alphonse admitted that he waived some of his federal claims during the appeals process, but claimed that he left one claim intact and argued that he still possessed federal question jurisdiction.

himba-2-1622262-689x1024We enter into contracts all the time without putting the agreement in writing; we form contracts when we buy a cup of coffee, when we shop online, etc. Some types of contracts, however, are required by law to be in writing. Kevin and Monica Schmidt (the Schmidts) learned this the hard way when they could not enforce an oral agreement to frack oil wells in Beauregard Parish.

The Schmidts’ complaint alleged that they entered into an oral agreement with J-Lu Company Limited, L.L.C. (J-Lu) to fracture oil wells in which J-Lu owned an interest. Under their agreement, the Schmidts, in return for their fracking services, would split J-Lu’s interest in the wells. Thus, the split interests meant that both the Schmidts and J-Lu would share profits from the oil produced from the wells. Despite its agreement with the Schmidts, J-Lu subsequently made a deal with Will-Drill Operating Company (Will-Drill) to fracture the same oil wells.

The Schmidts subsequently filed a lawsuit to enforce their contract with J-Lu, claiming their injury was the lost profits they would be entitled to under the agreement. J-Lu filed a motion to dismiss the Schmidts’ lawsuit, and the district court granted it because Louisiana law requires a written contract when transferring interests in mineral (i.e. oil and gas) rights. La. C.C. Art. 1839; La. R.S. 31:18. The Schmidts appealed the District Court’s decision.

house-i-1491881-1024x768Sometimes even the best-planned of deals amongst parties may fall through. Parties often turn to the courts to resolve contractual disputes. When a court is interpreting a contract between two parties, it is often as simple as applying the “four corners” rule. I.e. it will not look at anything outside the four corners of the contract. This particular method of interpretation is useful (and under Louisiana law mandatory) where a contract is written clearly and is not ambiguous. In a recent case, the Louisiana Fourth Circuit Court of Appeal upheld this method of interpretation when faced with a contract dispute out of Orleans Parish.

In 1999, Mr. and Mrs. Tubbs made an offer to purchase a house from Mr. and Mrs. Schafer. The Schafers accepted this offer, creating a contract to sell the house. As part of the deal, the Tubbses made a deposit of about $53,000 via a promissory note. Among the terms of this contract was a provision that would cancel the contract should the Tubbses be unable to obtain sufficient financing for the purchase price. If this happened, then the Schafers would have to return the promissory note deposit the Tubbses had paid as part of the arrangement. The Tubbses were unable to get the necessary funding so they did not show up to the closing.

The Schafers sued to collect the note as damages stipulated in the contract. In response, the Tubbses responded that the contract should be considered null and void since they were unable to obtain financing because the financing contract itself required that their home is sold by a specified time. The Tubbses attempted to sell their former home to a family suggested by the Schafers. When the deal fell through due to the bankruptcy of the would-be buyer, they were unable to keep the 7% interest rate they had been promised.