Do Not Pass Go

In a case handled by our firm, a Lafayette-based global catering and life support client was sued by an employee based in Dubai for alleged violations of the Americans with Disabilities Act. The jury unanimously found that the employer (1) did not discriminate against the plaintiff because of a disability or (2) retaliate against him because he raised a complaint regarding the alleged discrimination.

The plaintiff had a written contract of employment with a one-year term that automatically renewed if he was not terminated. Upon the contract expiration date, the employer advised plaintiff that the contract would not be renewed for a successive term.

Plaintiff, an Army veteran, suffered from PTSD following his military service and deployment in Iraq. He claimed defendant discriminated against him on the basis of his PTSD, which he claimed as a mental health disability. Plaintiff further claimed that defendant retaliated against him after he complained to his direct supervisor and the head of human resources about the alleged discrimination. To support his case, plaintiff claimed he was not disciplined before his termination and did not receive negative performance reviews during employment. Significant pre-trial motion practice occurred and framed the issues for trial in two ways.

First, the defense learned of actions taken by plaintiff following the termination of his employment that would have provided a legitimate basis for termination had the actions been discovered before he was terminated. The defense argued that evidence of such “after-acquired” misconduct was relevant to credibility and independently relevant to calculate backpay that plaintiff sought, citing McKennon v. Nashville Banner Pub. Co. and McClung v. Hajek. Over defendant’s objection, the Trial Court excluded the evidence as highly prejudicial, instead finding that back pay was an equitable remedy to be decided by the Court in a subsequent evidentiary hearing related to the issue of back pay.

Second, the defense argued that non-certified medical record evidence submitted by plaintiff was hearsay and thus inadmissible to prove a disability. The Court agreed with the defendant and issued a limiting instruction that the jury was not to consider uncertified medical records for the truth of the matter asserted.

At trial, our client presented ample evidence of plaintiff’s performance deficiencies with respect to the vetting of vendors, which jeopardized the employer’s government contracts and the jobs of other employees. The majority of plaintiff’s performance issues arose in Dubai, plaintiff’s key area of oversight. Therefore, it was unbelievable that he would not know of, or take responsibility for, those performance deficiencies. In addition, the language of the written employment contract allowed for non-renewal of the contract. In a unanimous verdict as required by Fed. R. Civ. P. 48, the jury ultimately found that although the plaintiff proved he suffered a disability, he failed to prove discrimination or retaliation under the Act.

References:

Staples v. Taylor International Services, Inc., et al., 6:20-cv-00192-RRS-CBW.

McKennon v. Nashville Banner Pub. Co., 513 U.S. 352, 361–62, 115 S. Ct. 879, 886, 130 L. Ed. 2d 852 (1995).

McClung v. Hajek, 79 F.3d 1145 (5th Cir. 1996).

The Louisiana Supreme Court recently held that the New Home Warranty Act ("NHWA") is not the exclusive remedy for a purchaser of a new home where the builder fails to disclose known defects in the Residential Property Disclosure Act ("RPDA"). Stutts v. Melton, 2013-0557, -- So.2d. ----. The Court also upheld an award of damages and attorney fees for fraud victims who elect not to seek rescission of a sales contract despite no Civil Code article expressly allowing for attorney fees in such instances.

Builder Chad Melton completed a home in Walker, Louisiana in 2004. He and his wife lived in the home for approximately nine months prior to selling the home to James and Lisa Stutts. The Residential Property Disclosure Act, La. R.S. 9:3196, et seq., requires disclosures of known problems with a home prior to sale. Melton provided the Stutts with a disclosure form, but failed to mention that color had previously been observed bleeding onto the walls of the home from the roof.

In Stutts, it was factually established that Melton was aware of the roof defect because he had entered into a $13,600 settlement with the roof manufacturer to fund the replacement of the roof. Nevertheless, Melton cleaned the walls and installed gutters instead of the more expensive roof replacement.

Melton's gutter solution was ill-advised and unsuccessful. After discovering the problem in the summer of 2006, the Stutts filed suit seeking as damages: the repair costs for the roof; costs for additional repairs; and attorney fees.

The Stutts filed a motion for summary judgment on their fraud claim citing La. C.C. art. 1953. The Meltons opposed the motion, arguing that the NHWA provides the "exclusive remedy" available to the Stutts. The motion was granted and, after a bench trial on damages, the trial judge awarded damages to include attorney fees.

The court of appeal reversed both the summary judgment and the money judgment, holding that the Stutts' claims were untimely under the NHWA.The NHWA provides a one year warranty period for new home construction and an additional thirty day period in which to file suit under the Act. By its terms, the NHWA provides the "exclusive remedies" between a builder and an owner relative to home construction.

The Louisiana Supreme Court reversed and reinstated that lower court's judgment. The Court held that the RPDA applied in this case because the home had been occupied by the Meltons after construction was completed. Even though the NHWA claims were prescribed, the Stutts possessed a timely claim that Melton had provided a fraudulent disclosure in violation of the RPDA.

The Court next addressed the Stutts' claim for attorney fees. The Court observed that no statute specifically authorized attorney fees where the plaintiff does not seek rescission of the sale. However, the Court reasoned, citing principles of equity found in Louisiana Civil Code article 4, that the legislature surely did not intend for victims of fraud to go uncompensated if they elect not to seek full rescission of the sale. Accordingly, attorney fees were held appropriate where fraud is committed but the victim elects not to seek rescission of the contract.

The Court's holding in Stutts may have a limited impact on the NHWA because of the peculiar facts of the case, i.e. the builder of the new construction living in the completed home before selling it to plaintiffs. However, the Court's award of attorney fees is an interesting development in the law. Time will tell whether the Court may be inclined to create further exceptions to the established rule that attorney fees cannot be awarded in the absence of statutory or contractual language awarding attorney fees.

In a first-party action obtained by assignment for excess liability against an insurer, the Louisiana Supreme Court in Smith v. Citadel Insurance,19-00052 (La. 10/22/19) ruled that the claim against the carrier is subject to the 10-year contract prescription period under La. law, stating:

“For the above reasons, we hold an insurer’s duty of good faith owed to its insured under La. R.S. 22:1973 does not exist separate and apart from an insurer’s contractual obligations. The duty of good faith is codified in La. R.S. 22:1973, but this duty is an outgrowth of the contractual and fiduciary relationship between the insured and the insurer, and the duty of good faith and fair dealing emanates from the contract between the parties. Thus, first-party bad faith claims against an insurer are governed by the ten-year prescriptive period set forth in La. C.C. art. 3499. Consequently, Ms. Smith’s first-party bad faith claim against GoAuto, brought pursuant to an assignment of rights from the insured, was subject to a 10-year prescriptive period and is not prescribed.”

The concurring justice noted that it was not necessary to engage in the protracted discussion concerning the duties of insurers relative to first-party claims. Nevertheless, the court offered an in-depth discussion of these duties.