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LOUISIANA SUPREME COURT ALLOWS CREATION OF SALES TAX SHELTER LLC
Recently, the Louisiana Supreme Court addressed whether an out-of-state limited liability company can be formed for the sole purpose of avoiding payment of Louisiana sales tax. In the case of Thomas v. Bridges, 2013-1855 (La. 5/7/14) -- So.3d --, a Montana limited liability company was formed by Thomas, a Louisiana resident, to purchase an RV and to avoid sales taxes. The Louisiana Dept. of Revenue assessed Thomas with the sales tax personally, which was upheld by the Board of Tax Appeals. The Supreme Court disagreed, and found that: (1) the Louisiana Dept. of Revenue failed to recognize the existence of a validly formed LLC; (2) sales tax could not be assessed on Thomas personally unless the veil of the LLC was pierced; and, (3) Montana law would have governed any attempt by the Department to “pierce to corporate veil.”
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Misrepresentations Lead to Dismissal of Suit
In a case handled by Keogh Cox lawyers Steve Whitlow and Jenny McLin, a Louisiana court of appeal has affirmed the ruling of a Workers Compensation Judge holding that an employee who made misrepresentations about his claim forfeited his right to workers compensation benefits. Arguello v. Brand Energy, 13-CA-990 (La. App. 5th Cir. 5/21/14), ___ So. 3rd ___.
In ruling for the employer, the trial court found that the claimant had committed three separate violations of La.R.S. 23:1208. The claimant was also assessed with a $500 civil penalty payable to the Kids Chance Scholarship Program.
Workers' Compensation
Resource
"INCURRED" MEDICAL CHARGES PAYABLE UNDER "MED-PAY" TAKE INTO ACCOUNT DISCOUNTS PROVIDED BY THE HEALTH CARE PROVIDER TO THE INSURED
The Louisiana Supreme Court recently considered whether an automobile liability policy’s “med pay” coverage reimburses for the full, non-discounted amount of a hospital bill when the policy covers all “incurred” medical expenses. See, Hoffman, et. al v. Travelers Indem. Co. of Am.,2013-1575 (La. 5-7-14) -- So.3d --. The Court held that the insurer was only required to reimburse the discounted total because its insured was not obligated to pay the pre-discount costs and, therefore, never "incurred" a charge for the full amount.
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TRAGIC ACCIDENT ON A CARNIVAL RIDE RAISES ISSUE OF WHETHER FAIRGROUNDS CAN BE LIABLE IN NEGLIGENCE AS HOST
In Lewis v. Pine Belt, et. al, 2014 WL 1805306 (La. App. 2 Cir. 5/7/14), the Louisiana Second Circuit upheld the denial of a partial summary judgment filed by The State Fair of Louisiana (the “State Fair”). The case involved horrific facts. During 2011, the four year old plaintiff was taken to the fair along with his “Head Start” class. At the fair, his class rode the “Twin-Ring Demolition Derby Carnival Ride” and became trapped between moving components when one of his classmates gained access to an unattended control panel. Initial attempts to rescue the plaintiff with the “Jaws of Life” were unsuccessful and the plaintiff experienced severe brain damage.The owner and operator of the ride was the Lowery Carnival Company (“Lowery”). Prior to the partial motion for summary judgment at issue, the State Fair had demonstrated in a separate motion that Lowery was an independent contractor such that the State Fair was not vicariously liable for its actions.Through its subsequent motion, the State Fair cited to a string of cases holding that the owner of carnival rides possesses “exclusive control” such that the hosts or sponsors of a fair cannot be held liable for injuries sustained on the rides. See, e.g., St. Pierre v. Frye Amusement, 93-0653 (La. App. 4 Cir. 3/29/94), 635 So. 2d 358. Nevertheless, the trial judge found those cases distinguishable. The court cited to evidence that the State Fair held itself out to the public as the “owner, host and promoter of a safe fair.” As such, the court identified a duty on the part of the State Fair to ensure that the rides had safety measures in place to prevent a customer from gaining access to the control panels for the rides. Stating that it was a “close call,” the trial court held that the fact the State Fair possesses no duty to control the operation of the rides did not prevent it from owing the duty “to ensure that all of the rides were safe from unauthorized tampering.”
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PLAINTIFF’S BURDEN TO PROVE A “SLIP AND FALL” FOUND UNDER BOTH THE SLIP AND FALL STATUTES AND GENERAL NEGLIGENCE STANDARD
In Davis v. U-Haul Company of Louisiana, 2014 WL 1923230 (La. App. 5 Cir. 5/14/14), the Louisiana Fifth Circuit upheld summary judgment where the plaintiff could not offer “positive evidence” that the condition complained of (a cooked onion on the floor) existed for “such a period of time” that it would have been identified and corrected by a reasonable proprietor under Louisiana’s “slip and fall” statute, LSA-R.S. 9:2800.6. The Davis court held that a plaintiff cannot recover without a demonstration of all of the elements required both by the slip and fall statute and by Louisiana’s general negligence standard.
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News
Appellate court affirms ruling of a Workers Compensation Judge
In a case handled by Keogh Cox lawyers Steve Whitlow and Jenny McLin, a Louisiana court of appeal has affirmed the ruling of a Workers Compensation Judge holding that an employee who made misrepresentations about his claim forfeited his right to workers compensation benefits. Arguello v. Brand Energy, 13-CA-990 (La. App. 5th Cir. 5/21/14), ___ So. 3rd ___. In ruling for the employer, the trial court found that the claimant had committed three separate violations of La.R.S. 23:1208. The claimant was also assessed with a $500 civil penalty payable to the Kids' Chance Scholarship Program.
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THIRD CIRCUIT REQUIRES “ADMISSION” OF SUMMARY JUDGMENT EVIDENCE
Merely "offering, filing and introducing" evidence in support of a summary judgment has been held insufficient to have the evidence considered – at least in Louisiana’s Third Circuit – which recently ruled that the introduction of evidence does not permit a trial court to consider such evidence in granting a motion for summary judgment. See, Bourque v. Transit Mix, 2014 WL 1805368 (La. App. 3 Cir. 5/7/14). To be considered, the evidence must be introduced and the judge must then admit the evidence into the record. **Update, the Third Circuit’s ruling has been addressed in the latest iteration of the summary judgment rules. Courts are no longer required to “admit” evidence for summary judgment.
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News
Keogh Cox maintains its victory at the U.S. Supreme Court
Keogh Cox obtained dismissal of the suit asserted against the Sabine River Authority of Louisiana and Entergy by numerous plaintiff landowners alleging flood damages. Plaintiffs alleged their state law negligence and constitutional claims were preserved under Section 10(c) of the Federal Power Act [16 U.S.C. § 803], which provides that the licensee is liable for "all damages occasioned by the ... operation of the project works." Because the Toledo Bend Dam was not designed or licensed as a flood control dam, Keogh Cox argued on behalf of its clients that this provision does not permit claims based on conduct not required under the FERC license. To do so, Keogh Cox argued, amounts to a collateral attack of the FERC license and wrests operational control of the licensed project away from the Federal Energy Regulatory Commission [FERC] and places it in the hands of a trial judge.
The U.S. District Court for the Western District of Louisiana agreed with Keogh Cox's position. On appeal, the Fifth Circuit recognized the issue as one of first impression in the circuit. It found that the plaintiff's claims were conflict preempted by the FPA, and maintained that Section 10(c) of the FPA "cannot be interpreted so broadly as to allow state tort law to supplant FERC's exclusive control of dam operations." Plaintiffs filed a writ of certiorari to the United States Supreme Court, and on April 21, 2014, the U.S. Supreme Court denied writs, thereby preserving the Fifth Circuit's ruling.
The Fifth Circuit's interpretation of the scope of FPA Section 10(c)'s "savings clause" for damage claims against FERC licensees will likely become very important precedent throughout the United States. Keogh Cox is proud of its efforts in achieving this victory for the Sabine River Authority and the entire hydropower industry. John P. Wolff, III, Nancy B. Gilbert, Martin E. Golden and Virginia J. McLin were the attorneys handling the case for Keogh Cox.
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Lawsuit "Tripped Up" by Open and Obvious Defense
Louisiana premises liability law continues to evolve in the wake of the Louisiana Supreme Court's decision in Broussard v. State, 113 So.3d 175 (La. 2013). The Broussard decision was believed to limit the application of the open and obvious defense in the context of a Motion for Summary Judgment on liability.On February 18, 2014, the First Circuit Court of Appeals decided Gustafson v. Priority Electric, Inc., et al, 2013 CA 1096, 2014 WL 647704 (2/18/14) (not designated for publication), providing additional insight as to how Broussard will affect the applicability of the open and obvious defense. Based on Gustafson, the open and obvious defense may still be alive in the context of a Motion for Summary Judgment.While the Gustafson's home was under construction, Ms. Gustafson entered the home unescorted. She stood facing a newly repainted wall and took several steps backward to broaden her perspective of the wall. As she walked backwards, she tripped on one of two unfinished PVC conduit "stub-outs" containing electrical wire that would ultimately service floor-mounted outlets in an adjoining den. The lawsuit ensued.Priority Electric filed a Motion for Summary Judgment on the grounds that the stub-out presented an open and obvious condition that was readily discoverable had plaintiff exercised reasonable care. The company further argued that it had no duty to warn. The Trial Court agreed that the stub-out was an open and obvious condition and granted the motion.The Appellate Court conducted a de novo. The defendants argued, and the Trial Court agreed, that "if a defect is obvious and apparent, then there is no correlative duty to warn of its existence." Citing Broussard, the Appellate Court found that statement to be a misstatement of the law, noting that Broussard's analytic framework for evaluating an unreasonable risk of harm is classified as a determination of whether a defendant breached a duty owed, rather than a determination of whether a duty is owed ab initio.In light of Broussard, the Trial Court's reasoning underlying the grant of summary judgment was flawed. Nevertheless, the Appellate Court found a basis to support the Trial Court's dismissal of the claims utilizing a "risk-utility" analysis considering multiple factors.
1. Utility of the Stub-Outs
The necessity and utility of the stub-outs was not disputed.
2. Likelihood and Magnitude of Harm
The decision turned on this element. The utility of the stub-outs must be weighed against the likelihood and magnitude of harm presented by their defective condition, including whether the defect was open and obvious. The plaintiffs did not make a showing that any of the numerous contractors, subcontractors or visitors to the premises ever tripped. They also failed to offer expert testimony to show that the stub-outs presented an unreasonable risk of harm. Instead, they relied solely on the testimony of Ms. Gustafson, who admitted she was walking backwards and not paying attention. Unlike in Broussard, there was no evidence that the stub-outs were not "open and obvious to all who encountered them..."3. Cost of Preventing the HarmNo expert testimony was presented to show that the use of PVC stub-outs was unconventional in a new home or that there were reasonable alternatives to their use. No evidence was presented to show how the stub-outs could have been better placed or made more visible. Although plaintiffs argued that warning cones should have been in place, no evidence was presented to show that the contrast of the blue pipes on the gray cement was insufficient to alert an unsuspecting person.4. Nature of Plaintiff's ActivityPlaintiff was walking backwards when she fell. She acted unreasonably. The home was under construction and could have encountered a number of hazards. She failed to offer countervailing evidence on this issue.Upon balancing all of the factors above, all evidence showed that the accident would not have occurred "but for" Ms. Gustafson's own inattention and negligence.
Constitutional Law
Negligence
Slip and Fall
Insight
Keogh Cox's Win Prevents Plaintiff from Recovering Louisiana Lottery Jackpot
The United States District Court for the Eastern District of Louisiana grants defendant, Circle K's, Motion to Dismiss concluding that plaintiff has no right to claim loss of opportunity to win the Louisiana Lottery Powerball jackpot, $103,100,000.00, because of an expired ticket issued in error.
This matter arose from plaintiff's purchase of two sets of Powerball tickets on or about January 19, 2012. The drawing that was the subject of the purchase was to be held on January 21, 2012 with a jackpot of $103,100,000.00. Sometime after the drawing date, plaintiff discovered the purchased tickets were printed on January 18, 2012 and worthless for the January 21, 2012 drawing. Plaintiff filed suit seeking damages in the amount of the Powerball jackpot.
After removal to Federal Court, on behalf of Circle K, Keogh Cox moved to dismiss the suit by claiming that Louisiana law affords no relief to plaintiff for the alleged claims. Specifically, Louisiana law explicitly precludes any relief to the plaintiff.
Keogh Cox cited La. R.S. 47:9009 which states "that there shall be no liability on the part of and no cause of action shall arise against the corporation, its governing board, staff, agents, vendors, or employees, arising out of or in connection with the issuance, failure to issue, or delivery of a lottery ticket."
Moreover, Keogh Cox asserted that the Louisiana Statute precludes payment of prize money on the basis of lottery tickets produced or issued in error. The United States District Court found merit in these assertions after extensive briefing and arguments by Keogh Cox attorneys, John P. Wolff, III, Nancy B. Gilbert, Richard W. Wolff and Mark Assad.
The United States District Court found that Circle K was statutorily exempt from the suit and, under the directives of the lottery itself, it is the sole responsibility of plaintiff to verify the accuracy of the game play. Plaintiff failed to do so and, as such, was barred from suit.
Contracts
Federal Courts
News
Gracella Simmons has been named a Super Lawyer 2014
Gracella Simmons has been named a Super Lawyer 2014. Super Lawyers honors attorneys who have been nominated by their peers and evaluated through independent research.Jenny McLin has been named a Rising Star 2014 by Super Lawyers.Mary Anne Wolf will present a seminar on Design Professional Contract Review at the 18th Annual Joint Engineering Societies Conference in Lafayette on January 22, 2014. For information see www.les-state.org.
Related People
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Back to the Beginning - Veil Piercing
The longstanding rule that the analysis for "piercing the corporate veil" of an LLC is substantially the same as the analysis for piercing the veil of corporations has been called into question by the recent Louisiana Supreme Court decision in Ogea v. Travis Merritt and Merrit Construction, LLC, 2013-1085, --- So.3d ---. In Ogea, the Court addressed "the extent of the limitation of liability afforded to a member of an LLC" and the statutory basis for exceptions to this limited liability.
Typical of a veil piercing case, the Ogea Court began its discussion by citing familiar Louisiana cases on the topic: Riggins v. Dixie Shoring Co., Inc., 590 So.2d 1164 (La. 1991) and the more recent Charming Charlie, Inc. v. Perkins Rowe Associates, L.L.C., 11-2254 (La. App. 1 Cir. 7/10/12), 97 So.3d 595. However, the similarities stopped there.
The Court noted that traditional veil piercing doctrine was not invoked by the lower courts or the plaintiff. Instead, the Court's analysis turned on the interpretation of an infrequently cited statute within Title 12 that addresses the limitation of liability for LLC members. La. R.S. 12:1320(A) states that the liability of members and managers of an LLC "shall at all times be determined solely and exclusively by the provisions of this Chapter." Subsection (B) provides that members and managers are generally not liable for the debts, obligations, or liabilities of the LLC. Subsection (D) prescribes the exceptions to this limitation of liability, to include fraud, breach of professional duty, and any other negligent or wrongful act by the member or manager.
Addressing this statute as a matter of first impression, the Ogea Court applied the statute to the facts of the case. Merritt Construction, LLC was hired to build a home for plaintiff, Mary Ogea. As part of the process, Ms. Ogea requested that she have a friend prepare the site for the foundation. Travis Merritt, the sole member of Merritt Construction, LLC, informed Ms. Ogea that having someone else prepare the site would waive the warranty. Mr. Merritt subsequently operated the bulldozer to prepare the site for a subcontractor to pour the concrete slab. A dispute arose when a concrete contractor informed Ms. Ogea of problems with the home's foundation. Under these facts, the Court concluded Mr. Merritt was not personally liable under the exclusive exceptions to limited liability found in La. R.S. 12:1320(D).
The first exception, fraud, was rejected because no evidence in the record supported a finding that Mr. Merritt committed fraud.
Turning to the next exception, the Court also rejected the argument that plaintiff breached a professional duty as the sole member of the construction company. The professions recognized in Louisiana's corporate laws do not include individuals who perform construction work. Thus, Mr. Merritt could not breach a "professional duty" as contemplated by the statute. The Court also noted that the contract at issue only recognized Merritt Construction, LLC as a licensed contractor and did not reference any contractor's license held by Mr. Merritt personally.
Finally, the Court addressed the final exception to limited liability: "negligent or wrongful act." Plaintiff asserted that the term "negligence" in the statute only required proof of a tort by the individual. The Court quickly rejected this argument, noting that such an interpretation would improperly expand the liability of LLC members.
Rather, the Court set forth four factors to assist in the analysis under the last "negligence" exception: 1) whether a member's conduct could be fairly characterized as a traditionally recognized tort; 2) whether a member's conduct could be fairly characterized as a crime, for which a natural person, not a juridical person, could be held culpable; 3) whether the conduct at issue was required by, or was in furtherance of, a contract between the claimant and the LLC; and 4) whether the conduct at issue was done outside the member's capacity as a member.
It appears from the Ogea Court's focus that the prior analysis for "piercing the veil" of an LLC has perhaps been set aside and replaced with a new analysis which considers the exceptions to limited liability listed in La. R.S. 12:1320. However, the Court failed to expressly state that the prior analysis is improper and therefore no longer applicable. For now, it appears that the rules for piercing the veil of an LLC have changed but the true impact of Ogea remains to be seen.
Construction
Corporate Law
Louisiana Supreme Court
Negligence