Articles Posted in Business Dispute

person-writing-on-notebook-669615-1024x678Non-competition, or non-compete, clauses are a common part of business and employment agreements.  They serve to prevent one party from taking knowledge or trade secrets to a competing business. Like any contract, these agreements are sometimes scrutinized to make sure they are actually fair to all parties.  Courts will not uphold such clauses that are so limiting as to be unjust. In 2017, the Fifth Circuit of Louisiana considered such an agreement.  

The parties to this case, Frederick Yorsch and Stephen Morel, were business partners in Metairie, Louisiana.  They ran NOLA Title Company, L.L.C., which provided services related to the selling of real estate, such as title insurance.  They also began a separate company, My Tax Sale Resources, L.L.C., which provided tax services related to real property sales.  Both parties signed an agreement that included a non-circumvention and non-competition clause. At some point, Mr. Morel began working for CivicSource, a competing company.  Mr. Yorsch, the plaintiff, sought to have the court enforce the clauses within their agreement with an injunction . The trial court ruled that the clauses were too restrictive on employment opportunities and were unenforceable.  Mr. Yorsch appealed.

The issue for the Fifth Circuit was whether such broadly written clauses are impermissible.  Louisiana law, as a policy, seeks to prevent people from losing their ability to work. Restored Surfaces, Inc. v. Sanchez, 82 So.3d 524 (La. Ct. App. 2011).  Thus, courts will not enforce any contract or agreement that would restrain anyone from “exercising a lawful profession, trade, or business of any kind” except in very specific circumstances.  La. R.S. 23:921.  One exception is that members of limited liability companies may agree not to be involved in similar business as the company of which they are members within a certain parish or municipality.  La. R.S. 23:921(L).

1-us-bank-note-47344-1024x724Benjamin Franklin had good reason to make the statement, “neither a borrower nor a lender be.” The potential for risk on either side of the transaction is significant. Be it the likelihood of not getting paid, or the possibility that you will not be able to repay the debt, many find that it is better to avoid the perils of money lending altogether. But that is just not practical. The way big plans are realized is often with money we do not yet have. And loaning money at interest is usually a great short-term investment, if you have the cash to spare. How do we assure our debt agreements will hold up in court?

On February 24, 2014, New Orleans resident Lois Guillory made a $40,000 loan to Percy Goulette and Alan Sagely, with interest totaling $5,000 and due in one year’s time. The parties signed a promissory note memorializing all the terms. But once February 24, 2015 came around, Goulette and Sagely refused to pay the obligation. When Ms. Guillory filed a lawsuit to recover her investment, Mr. Goulette tried to have the claim dismissed, stating that his business Goulette Ice actually borrowed the money. Goulette claimed he and Sagely did not borrow the money individually, but signed the note in their capacity as agents of Goulette Ice. In fact, the note identified the men as owners of Goulette Ice in two places, one of which was below the signature line. This, in Goulette’s eye, meant he and Sagely were not personally guaranteeing repayment, and not liable for the loan. The Trial Court granted Goulette’s peremptory exception of no cause of action, and Ms. Guillory appealed. 

A peremptory exception for no cause of action is essentially one party asking the court to dismiss the case because there has been no offense for which to sue. These exceptions are judged solely on the pleadings, and neither party may introduce evidence to support or object to the exception. La. C.C.P. art. 931. Ms. Guillory’s original petition contained a copy of the promissory note, and the Appellate Court closely reviewed that document. 

36-Email-06-24-19-PHOTO-1024x569Terms of Sale commonly include an “escape clause,” which gives the buyer a way out of a contract if unplanned circumstances arise. It is often a lawyer’s obligation to ensure that this clause is present in a contract, because if the lawyer fails to include one, this could result in malpractice.  However, in order to receive recovery from the malpractice, the aggrieved party must promptly bring a lawsuit. The Longs family of Long’s Preferred Products, Inc. in Alexandria, LA, learned this the hard way when they sued their lawyer in the Ninth Judicial District Court Parish of Rapides for not including an escape clause in a stock purchase.

 Charles Elliot represented the Longs in a stock purchase of $500,000 worth of shares from Linda Minton. On March 28, 2011, both parties agreed to the Terms of Sale and on April 29, 2011, the Longs signed the $500,000 promissory note that promised payment to Linda Minton. The Longs relied on receiving loan approval in order to pay on this note, but on August 11, 2011, the Longs’ loan was denied. Twelve days later, they discovered that they were sued to enforce the promissory note. The Longs hoped that an escape clause in the Terms of Sale would relieve them from the duty to pay; however, their lawyer, Elliot, failed to include one.

 In May 2013, the Longs spoke with a different lawyer, and on April 28th, 2014, the Longs sued Elliot for malpractice in the Ninth Judicial District Court. The District Court ruled that this lawsuit was perempted, which means that the Longs lost their right to bring a lawsuit.

62-Email-06-24-19-picture-1024x768Running a small business is a challenging endeavor that can prove even more difficult if someone publishes false information about your company.  This is situation is exactly what happened to husband and wife Robbie and Susan Arnaud, owners of Robbie’s Wrecker Service, a towing business located just outside Eunice, Louisiana.

In fall 2010, Ronald Dies was elected Police Chief for City of Eunice, effective January 1, 2011.  Eunice Police Department’s rotation list for situations needing a wrecker service had previously included Robbie’s Wrecker Service. However, after being elected, Dies took action to remove Robbie’s Wrecker Service from the list. In a letter dated December 31, 2010, Dies told the Arnauds that their business would be removed from the list effective January 1, 2011, and that only wrecker services headquartered inside Eunice City limits could be on the list. On January 3, 2011, Dies spoke with a reporter for a local newspaper, The Eunice News, and stated that there had been numerous complaints about the company’s selective response to calls. This claim of “numerous complaints” formed the basis of Arnauds’ defamation claim. 

The required elements in a defamation claim are (1) a false and defamatory statement involving another, (2) an unprivileged publication to a third party, (3) fault (at least at the level of negligence) of the publisher; and (4) resulting injury. See Costello v. Hardy, 864 So.2d 129 (La. 2004).  At trial, the court held that the Arnauds had not proven either defamation or damages and dismissed all of the Arnauds’ claims against Dies. The Arnauds appealed.

mercantile-bank-building-dallas-1228577-771x1024There is no shortage of frivolous lawsuits. As a result, courts have developed many different ways to nip these sorts of lawsuits in the bud. One way is by allowing defendants to file an exception of no cause action, which is essentially a request that asks the court to drop the plaintiff’s lawsuit because there is no factual support to justify the lawsuit. In the case below, the plaintiff truly believed she was wronged by her employer, but because the facts she provided in her lawsuit did not support a valid claim, her lawsuit was ultimately denied. So, how can you avoid your lawsuit being dismissed by no cause of action in Louisiana? 

Gina K. Lusich worked as the branch manager at Capital One Bank in St. Bernard Parish, Louisiana. Lusich’s employment with Capital One was terminated in June 2013. She then filed a lawsuit against Capital One for wrongful termination. Lusich argued in her petition that she was terminated wrongfully because of a false accusation claiming that she instructed other employees to falsify time cards. She also claimed that her personal property was stolen by Capital One. Capital One responded by filing an exception of no cause action. The trial court granted this exception in favor of Capital One, and Lusich appealed to Louisiana’s Fourth Circuit Court of Appeal.

When an appellate court reviews an appeal of an exception of no cause of action, it must examine the sufficiency of the claims within the lawsuit. In other words, the court must seek to determine whether the law can sufficiently provide a remedy for the plaintiff. Badeaux v. Southwest Computer Bureau, Inc., 929 So.2d 1211, 1217 (La. 2006). In doing so, the court must accept the facts as stated by the plaintiff’s petition to be true, asking whether the plaintiff would be entitled to a remedy based on those facts. Jackson v. State, 785 So.2d 803 (La. 2001). However, the lawsuit should be dismissed if the plaintiff cannot show some theory under which he can prove the facts that would support his claim. Wallace C. Drennan, Inc. v. Sewerage & Water Bd. of New Orleans, 753 So.2d 861 (La. Ct. App. 1999).

clock-face-1631303-1024x683Summary judgment is a legal procedure courts may use to dispose of a case when there are not enough facts in dispute to proceed with a lawsuit. This is a good strategy to use when applicable because it purges certain claims that have no merit, saving time and money. The Fifth Circuit Court of Appeal demonstrated the principles of summary judgment within the context of an employment discrimination lawsuit when it comes to untimely filing.

The plaintiff in this case, DeBlanc, suffered from a condition called “chemo brain” after undergoing prior breast cancer treatments. When DeBlanc was fired, she sued her employer for failure to tell her why she was terminated. DeBlanc alleges that the St. Tammany Parish School Board violated the Americans with Disabilities Act (“ADA”) and discriminated against her when they fired her because of her medical condition. A Federal Court in Louisiana determined that summary judgment in favor of St. Tammany was appropriate because DeBlanc failed to file her discrimination claim within the required timeframe and failed to show that the time limit should be tolled. Thus, the claim was barred. DeBlanc appealed. The issue upon appeal was whether the trial court abused its discretion when refusing to apply equitable tolling to save DeBlanc’s claim. Equitable tolling is applied when the court decides there is a legal and justifiable basis to extend the time in which plaintiff can file her claim. The Fifth Circuit Court of Appeal agreed with the trial court and affirmed summary judgment in favor of St. Tammany School Board.

A former employee has three hundred days from the date of termination to file an Equal Employment Opportunity Commission (“EEOC”) complaint alleging that they were terminated based on discrimination. See 42 U.S.C. § 2000e-5(e)(1); 42 U.S.C. § 12117(a). Filing a timely discrimination claim with the EEOC is a requirement that is subject to waiver, estoppel, and equitable tolling. Granger v. Aaron’s, Inc., 636 F.3d 708, 711 (5th Cir. 2011). However, equitable tolling is applied sparingly, and the burden is on the plaintiff to prove its application.

businessmen-shaking-hands-1240995-1024x643A non-compete agreement often takes the form of a clause in an employment contract whereby an employer seeks to restrict a former employee’s ability to compete with the employer after the employment relationship is terminated. These types of clauses are usually valid if they are reasonable in scope, time, and area and line of business. But, what happens happens when someone ignores a non-compete agreement in Louisiana?

In the present case, four investors formed a company in Shreveport, Louisiana, called Endurall, Inc. to manufacture and sell rod guides to local businesses in the oil and gas industry. The four investors signed a non-compete agreement, which stated that, if any of them were to be terminated as shareholders, they would not establish another business to compete against Endurall for at least two years after termination.

Billy Joe Edwards was terminated as a shareholder of Endurall on July 31, 2013. Less than a year after his termination from Endurall, in March 2014, Edwards and his son formed a new company, DHE, LLC in Benton, Louisiana, which posed competition for Endurall in the manufacture and sale of rod guides. As a result, several Endurall sales representatives left Endurall to work at DHE, and some of Endurall’s customers switched from Endurall products to DHE products, causing Endurall’s sales to decline.

supply-vessel-1449728-1-698x1024Contracts between parties working toward a common goal can sometimes result in detail-oriented litigation when something goes wrong. When those parties need to subcontract with a third party, the responsibility for that third party if something goes wrong can be a point of contention.

In the Western District of Louisiana, a lawsuit and appeal revolved around whether the defendant-appellant, W & T Offshore Incorporated (W&T), or the defendant-appellee, Triton Diving Services (Triton), was responsible for injuries sustained by the plaintiff, Jakarta Grogan. W&T contends that Triton is liable because the injury occurred on Triton’s vessel. Triton disputes all liability and contends that W&T must pay for Mr. Grogan’s injuries, due to the contractual relationship between them.

W&T operates a pipeline in the Gulf of Mexico and hired Triton to participate in a recommissioning project. Triton was to be responsible for flushing the pipeline for impurities and was able to do so by using a dive support vessel called the Achiever. The two parties signed a Master Services Contract that allowed Triton operational control of the vessel but granted overall operational control to W&T. During the flushing process, Triton detected potentially unsafe levels of hydrogen sulfide being released. Due to this hazard, Triton consulted with W&T engineer, Alan Greig, about how to proceed. Mr. Greig recommended they hire a third party to help resolve the issue, and they brought Tiger Safety onto the project. W&T representatives, including Mr. Greig himself, made the necessary arrangements with Tiger Safety. The Plaintiff, Mr. Grogan, was one of Tiger Safety’s personnel that boarded the Achiever in order to resolve the hydrogen sulfide issue. Mr. Grogan acted under the direction of W&T’s on-site representative and provided necessary information gathered to said representative. The problem was resolved, and Tiger Safety’s personnel had been discharged. During the departure from the Achiever, Mr. Grogan fell. He subsequently sued both W&T and Triton for the injuries he sustained. W&T and Triton filed cross-claims against one another, and each defendant claimed indemnification. Simply, each defendant claimed that they could not be held liable for Mr. Grogan’s injuries because the other defendant had contracted to release them from any potential claims. The contract between the parties held that Triton indemnified W&T from personal injury claims brought by members of the ‘contractor group’. The term ‘contractor group’ was meant to refer to the Contractor, its parent company, affiliated companies, and all respective officers, employees, and invitees on the work sites. The district court held in favor of Triton and found that, based on all relevant facts, Mr. Grogan was W&T’s invitee. W&T appealed the ruling.

agreement-blur-business-261621-1024x768Louisiana citizens interact with contract law every day, in many cases without even realizing it. Whether buying groceries at a supermarket with a credit card or installing a new iPhone app, countless purchases are governed by consumer agreements. What may be even less known to purchasers is that many of these agreements include an arbitration clause, which provides that any disputes arising out of that agreement must be handled by an arbitrator rather than a court. Arbitration is a form of “alternative dispute resolution” in which an arbitrator — typically a certified attorney —  evaluates the parties’ claims and renders a binding decision as to who should prevail. In general, companies prefer arbitration because it costs less than litigation. But because the rules of arbitration can vary significantly from the rules of court, the consumer does not always benefit from being kept away from the courthouse. The validity of arbitration clauses is a common point of contention. Although Louisiana generally favors arbitration, the legislature has enacted the Louisiana Arbitration Act (“LLA”) (see La. R.S. 9:4201) to ensure that arbitration proceeds fairly.

Arbitration is also common in commercial agreements. In 2013, a sales representative of UniFirst Corporation (“UniFirst”) approached the shop foreman at the Homer, Louisiana location of Fluid Disposal Specialties, Inc. (“FDS”). The shop foreman’s job title was Manager of Transportation Logistics. The purpose of the meeting was to discuss FDS’s entering into a contract with UniFirst to provide uniforms to FDS employees. After nearly six months of negotiation, a price was agreed upon and the FDS shop foreman executed a contract with UniFirst. The contract contained an arbitration clause. Later, FDS attempted to void the contract, citing that the shop foreman did not have the authority to bind the company. Unifirst argued that, based on the arbitration clause in the agreement, the matter should be settled by an arbitrator. FDS, preferring to avail itself of the court, argued that because the contract itself was invalid, any clauses within it — including the arbitration clause — could not be valid either.

The case eventually made its way to Louisiana’s Second Circuit Court of Appeal, which applied a two-step analysis commonly relied upon by the courts. The first step is to determine whether there is a valid agreement to arbitrate between the parties; the second is to determine whether the dispute in question falls within the scope of that arbitration agreement. In applying the first step, the Court determined that the agreement was invalid because the FDS shop foreman lacked the authority to enter into a contract with UniFirst. In response to UniFirst’s argument that the foreman had apparent authority, a doctrine in which an innocent third party (Unifirst) could rely on the representations of an agent (the FDS shop foreman) when entering an agreement (see American Zurich Insurance Co. v. Johnson, 850 So. 1112 (La. Ct. App. 2003)), the Court found that both the shop foreman’s job title and the six-month negotiation period should have indicated to UniFirst that the foreman was not in a position to enter into a contract for uniform services. For these reasons, the Court found that no agreement existed between the parties and therefore there was no need to apply the second step of the analysis. Arbitration cannot be compelled under an agreement that never came into being. The Court went on to note, however, that UniFirst could still proceed against FDS for any obligation or damages arising from FDS’s use of the uniforms that UniFirst provided the shop.

competition-1024x683A non-compete clause is a common feature in many employment agreements in Louisiana. The clause is a way for an employer to restrict an employee from going to work for a competitor and thus potentially harming the original employer. Most non-compete clauses, in order to be enforceable, must contain some limitation as to time and geographical location.

Katie Urban-Kingston was hired by Billedeaux Hearing Center (“Billedeaux”) in Lafayette in May of 2014. Urban-Kingston and Billedeaux entered into an employment agreement containing a non-compete clause that applied to certain areas of Louisiana, Arkansas, Texas, and Mississippi, and allowed for the collection of any costs incurred by Billedeaux for legal enforcement of the clause. Less than a year later, Urban-Kingston left Billedeaux and became employed by Williamson Hearing Center (“Williamson”), just outside of Baton Rouge. Billedeaux sought and was granted a temporary restraining order in February 2015 to enjoin Urban-Kingston from working for Williamson, and a show-cause hearing for a preliminary injunction was set for early March.

At the hearing, the parties stipulated that Urban-Kingston was trained by Billedeaux, that she left Billedeaux’s employ and worked for Williamson at the time of the trial, and that Williamson is in direct competition with Billedeaux. Urban-Kingston claimed as a defense against the issuance of a preliminary injunction, however, that the non-compete clause in her employment agreement with Billedeaux was too broad. The trial court determined that the only issue to decide based on Urban-Kingston’s defense was whether the two hearing centers were actually in competition. But since the parties had already stipulated that point, the court rejected the defense, issued the preliminary injunction in Billedeaux’s favor, and ordered Urban-Kingston to pay Billedeaux’s attorney fees of approximately $6,000.