Louisiana Litigation in Review Q3 2023
This quarterly review is an opportunity to update you on recent developments in Louisiana litigation. In this edition, Andy Mendez, Emily Hickman, and Faith Flugence summarize five Louisiana cases. These articles feature recent court decisions that may be of interest to business people and legal professionals alike.
STORE HELD NOT RESPONSIBLE FOR ACTIONS OF SECURITY GUARD WHO WAS INDEPENDENT CONTRACTOR
Duronslet v. Wal-Mart Stores, Inc., 2022-CA-0019 (La. App. 4 Cir. 7/27/22); 345 So. 3d 1136.
Whether a person is an "employee" or an "independent contractor" has many ramifications. Generally, an employer can be held liable for the actions of an employee (within the course and scope of employment), while a party that hires an independent contractor is not responsible for his or her actions.
In Duronslet v. Wal-Mart Stores, Inc., Mr. Duronslet ("Plaintiff") alleged that he was manhandled by a security guard while attempting to fill a prescription. The guard was an off-duty sheriff's deputy working a security detail through U.S. Security Associates, Inc. ("U.S. Security"). Plaintiff sued Wal-Mart Stores, Inc. ("Wal-Mart") and the Orleans Parish Sheriff. In response, Wal-Mart asserted that it was not responsible for the guard's action because he was an independent contractor, rather than a Wal-Mart employee.
Wal-Mart moved for summary judgment, pointing to its "Security Services Master Agreement" with U.S. Security, in which U.S. Security agreed to provide guards to Wal-Mart stores. Wal-Mart argued that, under that contract, the guard was not its employee, but merely an independent contractor, for whose acts Wal-Mart was not responsible.
The trial court agreed with Wal-Mart, and dismissed Plaintiff's claims against it on summary judgment. On appeal, the Louisiana Fourth Circuit Court of Appeal identified the relevant factors for determining whether the guard was Wal-Mart's employee or an independent contractor. They are whether: (1) there was a contract between the parties; (2) the work was of an independent nature and could be done more than one way; (3) the contract called for specific work to be done, but allowed the worker to choose his own methods; (4) a price was agreed upon for specific work to be performed; and (5) the work was for a specific duration, rather than open-ended.
Plaintiff did not dispute the first, fourth or fifth factors. He did dispute the second and third factors – whether the work was of independent nature, and whether the guard could use his own methods to accomplish it. The Fourth Circuit analyzed the two factors together in terms of whether Wal-Mart retained control over the manner in which the guard performed his work. The court held the guard was an independent contractor, noting (among other things) that the contract gave guards discretion to exercise "their professional judgment" to protect themselves and others, and that Wal‑Mart did not provide the guards with supplies or equipment. While the contract required guards to perform their duties "as directed by store management," that alone did not create an employer-employee status.
This decision illustrates how the terms of a contract can be critical in determining whether a worker is an employee or an independent contractor, and thus whether the party that hires the worker can be held liable to others for the worker's actions.
LOUISIANA LAW DOES NOT REQUIRE CONSIDERATION FOR A VALID CONTRACT, ONLY CAUSE
Southeast Holdings, LLC v. Mouhaffel, 2021-1176 (La. App. 1 Cir. 9/26/22); 353 So. 3d 136.
Unlike most states, Louisiana does not recognize the common law concept of "consideration," or a reciprocal exchange, as an essential element of a valid contract. Instead, Louisiana requires a lawful "cause" – the reason why a party binds himself – in lieu of consideration.
In Southeast Holdings v. Mouhaffel, Southeast Holdings ("Plaintiff") a limited liability company, alleged that property in its possession was fraudulently mortgaged and then sold when one of its members, Bryan Addington ("Addington"), misrepresented himself as the sole member of the LLC when contracting with Assad Mouhaffel ("Defendant").
Addington, allegedly acting on behalf of Plaintiff, issued a promissory note to Defendant with Plaintiff's property as collateral. The Defendant sued Plaintiff for defaulting on the note. On the same day that Defendant filed his petition, Addington, again purporting to act on behalf of Southeast Holdings, sold the property to Defendant for "sufficient consideration." In exchange, Defendant agreed not to foreclose on the property.
Plaintiff sued Defendant seeking to have the sale of its property and the related mortgage declared null and void. Plaintiff then filed a motion for summary judgment on the grounds that there was no valid sale contract because it, as the owner, had not received any payment or other consideration for the sale. The trial court agreed and granted Plaintiff's motion, nullifying the sale. Defendant appealed, arguing that Louisiana does not require consideration for a valid contract. On appeal, the Louisiana First Circuit Court of Appeal acknowledged that, unlike most states, Louisiana law requires "cause" rather than "consideration" for a valid contract. So long as the parties each have a valid "cause" (reason for binding themselves), they have a valid contract.
The court found that, because both parties exhibited a willingness to be bound by the contracts at the time of their execution, they were enforceable.
This decision illustrates how Louisiana differs from most states that require consideration – the receipt of something in exchange – for a valid contract. Instead, Louisiana only requires cause, or a reason for agreeing to be bound.
PROVING THE EXISTENCE OF AN ORAL CONTRACT MAY BE DIFFICULT
Barges Unlimited Inc. v. Morgan City Stevedores, LLC, 2022-0691 (La. App. 1 Cir. 2/2/23); 2023 WL 1463263
Proof of the existence of an oral agreement must be shown by the testimony of a credible witness and corroborating circumstances. The corroborating circumstances, however, cannot come from the party alleging a valid oral agreement.
In Barges Unlimited Inc. v. Morgan City, Cornelius Tabor ("Tabor") owned Barges Unlimited, Inc. (collectively "Plaintiffs"), a company that would rent and broker barges. Barges Unlimited worked with Morgan City Stevedores ("MCS"), owned by Lee Babin ("Babin") and another man, (collectively "Defendants") which operated barges. Tabor was contacted by a company seeking to use barges to carry equipment. Tabor brought this work to MCS. Tabor then sent commission invoices to MCS, including one invoice seeking $26,000 allegedly owed to Tabor as a commission for his work in bringing this business to MCS.
Plaintiffs brought suit against Defendants asserting multiple claims, including suit on open account related to the commission invoices sent to MCS. The court ordered MCS to pay Tabor for his assistance in helping MCS obtain business, noting that such a fee was an unwritten custom in the shipping industry. Defendants appealed, arguing that there was no binding agreement to pay commissions to Tabor.
On appeal, the Louisiana First Circuit Court of Appeal explained that when a claim is brought for suit on an open account, there must be an underlying agreement on which the debt is based (in this case an alleged oral agreement between Tabor and Babin). The court noted that the existence of an oral agreement is a finding of fact. A party asserting a valid oral agreement for payment of money above $500 must prove its existence and the terms of the contract by at least one credible witness and other corroborating circumstances. A party may be his own credible witness, however, evidence of corroborating circumstances must come from a source other than the party alleging the existence of the oral agreement.
Although Tabor qualified as a credible witness, the court found that there was no corroborating circumstances presented and, thus, no valid oral agreement. Because Tabor was the party claiming an oral agreement, his own actions could not be corroborating circumstances to prove the oral contract. Likewise, communications between the parties were insufficient to establish corroborating circumstances because they did not refer to any agreement to pay commissions. Finally, the commission invoices alone were also insufficient to establish corroborating circumstances.
This case shows that proving the validity of an oral contract may be difficult. When contracting, it is almost always better to consult counsel to draft a written agreement.
AN EMPLOYMENT CONTRACT IS "AT WILL" UNLESS A TERM IS STATE IN THE CONTRACT, AND RELIANCE ON AN "AT WILL" CONTRACT WITHOUT A TERM IS NOT REASONABLE
Medwick v. MADCON Corp., 2021-1620 (La. App. 1 Cir. 8/8/22), 348 So. 3d 106
A contract for employment may specify a term, for example, one month or one year. Unless an employment contract specifies a term, it is for "at will" employment, meaning that it may be terminated by either the employer or employee at any time.
In Medwick v. MADCON Corporation, three commercial drivers ("Plaintiffs") received job offers from MADCON Corporation ("MADCON") to work on a project that MADCON set a goal of completing in 90 days. As an incentive, MADCON's offer also included a bonus which each individual would receive if the project was completed in 90 days. Plaintiffs accepted MADCON's offer and believed that the project would begin between February and April of 2019. However, Plaintiff's did not attend the pre-job meeting until early April of 2019 and the project did not commence until late July or early August of 2019. None of the Plaintiffs actually worked on the project, and instead eventually accepted other employment due to the long delay before they could start work. As a result, Plaintiffs sued MADCON for earnings they lost because they turned down other offers while waiting for MADCON's project to begin. Plaintiffs alleged their employment contract was for a term of 90 days and that they should be paid for that period. Additionally, Plaintiffs argued they detrimentally relied on the term contract (detrimental reliance is a theory that allows a party to enforce a promise that may otherwise be unenforceable). The trial court found in Plaintiffs' favor and awarded them damages based on the term employment contract and their detrimental reliance.
On appeal, the Louisiana First Circuit Court of Appeal reversed and instead found that the employment contract was not for a term because, although it repeatedly referenced 90 days, that does not indicate the parties' intent to enter into a term agreement. Further, the Court noted that no testimony was presented to show that the parties' common intent was to be bound for 90 days. Additionally, the Court found that although the Plaintiffs relied on MADCON's offer by foregoing other employment, their reliance was not reasonable because the offer was for "at will" employment that did not assure employment for any specific period.
This case illustrates how the language of an employment offer may determine whether it is for a specific term or "at will."
SUMMARY JUDGMENT WILL BE PRECLUDED WHEN A COURT MAKES CREDIBILITY DETERMINATIONS AND IMPROPERLY WEIGHS EVIDENCE IN ORDER TO FIND THAT A CONTRACT WAS MODIFIED
Circle, LLC v. M & L Engine, L.L.C., 2023-C-00063 (La. 03/28/2023); 358 So. 3d 40
Proving that a contract has been modified may be a fact-intensive determination that can only be resolved by a trial.
In Circle, LLC v. M&L Engine, LLC, Plaintiff entered into a contract with Defendant that required Defendant to install certain pumps. Defendant subcontracted with another party to provide the pumps and start up services, which posed an issue for Plaintiff because the manufacturer delayed delivery of the pumps. Defendant eventually delivered the pumps to Plaintiff, but later than Plaintiff anticipated. As a result of the delay, Plaintiff refused to pay the balance due to Defendant.
In an effort to resolve their dispute, representatives of Plaintiff and Defendant met. Plaintiff alleged that, at the meeting, Defendant agreed that Plaintiff could retain $35,000 of the balance owed to Defendant's due to the delay. However, Defendant disputed that such an agreement was reached. Nevertheless, Plaintiff withheld $35,000 from the payment made to Defendants and hired another company to complete the pump installation once Defendant stopped working on the project. Plaintiff sued Defendant for damages for Defendant's delay in delivering and setting up the pumps. In turn, Defendants countersued for payment of $35,000 that Plaintiff had withheld. Defendants moved for summary judgment. Both the trial court and the appellate court affirmed summary judgment for Defendants, finding that Plaintiff had failed to show there was a genuine fact dispute as to whether the contract had been modified.
On appeal, the Louisiana Supreme Court granted review and reversed the lower court's decision, finding that there was a genuine fact dispute as to whether the contract had been modified, and that the lower courts had improperly made credibility determination (which may generally only be made at trial, rather than on summary judgment).
This decision demonstrates that modifications to contract, like contracts, must be carefully documented to increase the chances that they will be enforceable without the delay and expense of going to trial.