B & P RESTAURANT GROUP, LLC, ET AL NO. 18-CA-442
VERSUS FIFTH CIRCUIT
DELTA ADMINISTRATIVE SERVICES, LLC, COURT OF APPEAL ET AL STATE OF LOUISIANA
ON APPEAL FROM THE TWENTY-FOURTH JUDICIAL DISTRICT COURT PARISH OF JEFFERSON, STATE OF LOUISIANA NO. 767-037, DIVISION "C" HONORABLE JUNE B. DARENSBURG, JUDGE PRESIDING
September 04, 2019
STEPHEN J. WINDHORST JUDGE
Panel composed of Judges Fredericka Homberg Wicker, Jude G. Gravois, and Stephen J. Windhorst
REVERSED AND REMANDED SJW JGG
CONCURS WITH REASONS FHW COUNSEL FOR PLAINTIFF/APPELLANT, B & P RESTAURANT GROUP, LLC, ET AL Richard B. Ehret Ross A. Ledet
COUNSEL FOR DEFENDANT/APPELLEE, DAVID LAWRENCE Norman A. Mott, III Michael S. Blackwell WINDHORST, J.
Appellants/plaintiffs, B & P Restaurant Group, LLC, d/b/a the Rum House of
New Orleans, LLC, Highlights Catering & Gourmet Shop, LLC, Island Time
Management, LLC, The Rum House of Baton Rouge, LLC, and the Red Dog Diner,
LLC (“appellants”) appeal the district court’s granting of the motion for summary
judgment filed by David Lawrence, appellee/defendant (“appellee” or “Lawrence”)
and the dismissal with prejudice of all appellants’ claims against him. For the
following reasons, we reverse the district court’s judgment and remand for further
proceedings.
FACTS AND PROCEDURAL HISTORY
Appellee, Lawrence, is the sole owner and manager of Delta Administrative
Services, LLC (“DAS”), which provides administrative services, including payroll,
tax administration, workers’ compensation administration, risk management and
human resource issues. Appellants each entered into a contract for services with
DAS entitled “Service Agreement,” which Lawrence signed on behalf of DAS.
Pursuant to this agreement, DAS was responsible for withholding and remittances
of pay-roll related taxes, including those taxes under FICA, FUTA, and SUTA.1
Under Administrative Fees, each service agreement states the “CLIENT
agrees to pay a fee to DAS for services” and that “[t]hese fees will be charged on
each payroll, as applicable.” The fee schedule attached to the service agreement
reflects that the administrative fee (also referred to herein as the “service fee”) is
1.50% of gross payroll. The fee schedule also states the following:
This rate is on gross payroll only. These rates include the additional charges for FICA, FUTA, SUTA, and Workers Compensation. The only additional charges will be any company paid benefits you choose to offer your employees. There is no reduction upon reaching the cut- offs for FUTA and SUTA.
1 FICA stands for Federal Insurance Contributions Act. FUTA stands for Federal Unemployment Tax Act. SUTA stands for State Unemployment Tax Act.
18-CA-442 1 On December 1, 2016, appellants filed a petition for damages against DAS
and Lawrence, asserting claims based on breach of contract, intentional
misrepresentation, and violation of the Professional Employer Organizations (PEO)
statute, La. R.S. 23:1761 et seq. The only claim asserted against Lawrence
individually is the intentional misrepresentation claim. Appellants allege that after
maximum SUTA and FUTA tax thresholds had been met, DAS continued to charge
appellants for SUTA and FUTA taxes as if they were still owed, and did not pay this
collected money to the appropriate taxing authorities but instead wrongfully retained
the overcharged amounts for itself.
Under the intentional misrepresentation claim, appellants allege that DAS and
Lawrence misrepresented or suppressed material facts to obtain an unjust advantage
over appellants by failing to advise them or state in the service agreements that DAS
would continue charging appellants FUTA and SUTA taxes after the maximum
thresholds were met and would keep those funds as additional, hidden fees.
Appellants assert that if they had known DAS and Lawrence would continue
charging FUTA and SUTA after the maximum thresholds were met and would retain
those amounts as additional, hidden fees, Plaintiffs would never have agreed to do
business with them.
On November 7, 2017, appellants filed a first supplemental petition for
damages, asserting a claim against DAS and Lawrence individually alleging
overcharges involving workers’ compensation premiums. The supplemental
petition was filed after the May 31, 2017 motion for summary judgment at issue
here. On May 31, 2017, Lawrence filed a motion for summary judgment, seeking
dismissal of appellants’ claims against him personally based on La. R.S. 12:1320,
arguing that the statute frees him from individual liability for the debts, obligations
or liability of DAS, as the owner and sole member of DAS. Lawrence asserted that
he is not liable for DAS’s alleged breach of the agreement because he is not a party
18-CA-442 2 to the agreement; he is not liable for the alleged intentional misrepresentation
because he is shielded from liability under La. R.S. 12:1320 and appellants cannot
prove fraud; and he is not liable for alleged breaches under La. R.S. 23:1763 because
this statute creates a duty for the employer (DAS), not its member. After Lawrence
filed his motion for summary judgment, the parties participated in written discovery
and depositions were taken. Lawrence filed a second summary judgment motion
with DAS on March 20, 2018.1 In this second summary judgment motion, DAS and
Lawrence sought dismissal of all of appellants’ claims.
In their opposition to the motion for summary judgment, appellants attached
excerpts of depositions from multiple individuals who were involved with hiring
DAS to provide payroll services and/or worked with Lawrence relative to the
services DAS provided appellants, DAS invoices, DAS detailed cost reports,
correspondence with Lawrence and the fee schedule. In the depositions, the
appellant representatives asserted that they had conversations with Lawrence
regarding the DAS rates and he never disclosed that the FUTA and SUTA taxes
continued after thresholds were met, or that these amounts were converted to
administrative fees for DAS. The appellant representatives also testified that
Lawrence did not disclose to them during negotiations or contract discussions that
any part of the FUTA or SUTA taxes were actually service fees.
An appellant representative of Island Time Management, LLC stated in her
deposition that, in January 2014, Island Time informed DAS that it needed taxes
broken out from administrative fees on its invoices.2 Thereafter, Island Time
believed that the invoices separated the two from each other but later learned that
they were not.
1 The pleadings related to the second motion for summary judgment are not part of the designated appeal record. 2 Although Island Time is only one of the appellant entities involved in this matter, it is referred to specifically herein because the opposition to the summary judgment motion contained evidence specifically referencing this appellant.
18-CA-442 3 In opposition, appellants also asserted that each invoice constituted a
misrepresentation because even when the FUTA and SUTA taxes were converted to
administrative fees, on the invoices, the amount was still represented as FUTA and
SUTA taxes. Specifically, on the invoices, the administrative fee is separated out
from the other payments, such as gross payroll, hourly employee, salary employee
and workers’ compensation. The invoices do not state that excess FUTA and SUTA
taxes convert to an administrative fee after cutoffs are satisfied.
Another exhibit to appellants’ opposition is an email dated January 29, 2015,
in which Lawrence as president of DAS informed one of the appellants, Island Time,
that DAS would reduce Island Time’s rate to 1.0% as of February 1, 2015. A series
of emails dated August 19, 2016 through August 22, 2016 indicates that Island Time
had recently learned that DAS continued to charge FUTA and SUTA taxes beyond
the cutoff and that DAS retained these amounts as part of its administrative fee. The
emails also show that Island Time was having difficulties reconciling the amounts
paid to DAS with the amounts Island Time had calculated as owing DAS for its
services. Island Time requested clarification on multiple occasions before learning
the truth.
Appellants further rely on Lawrence’s deposition testimony in their
opposition. Appellants questioned him regarding detailed cost reports DAS
generated and sent to its clients. Lawrence testified that every report has a different
function, and that a company’s costs can be broken down by department. When
asked why a report did not reflect what is being charged for FUTA and SUTA,
Lawrence stated that “it does. It’s included in the fee.” When asked where this is
reflected, Lawrence responded “Um, I’ll have to look at the numbers to break it out.”
Lawrence was specifically asked “does this [detailed cost report] show an
itemization of the actual federal and state unemployment taxes owed by the PEO
client and then equally paid by Delta on behalf of that client to the taxing
18-CA-442 4 authorities?” Lawrence responded “It may be in another report.” Lawrence’s
testimony indicates that it is unlikely a client could understand from a DAS report
the breakdown of fees from taxes, and that to obtain this information, a client would
have to specifically request it from DAS.
Both Lawrence’s summary judgment motion and Lawrence and DAS’s
summary judgment motion were argued before the district court on May 2, 2018.
The district court rendered judgment on both in one judgment dated May 2, 2018.
The district court granted Lawrence’s first summary judgment motion and dismissed
all claims against Lawrence. The court found that appellants had not provided any
proof to suggest that Lawrence is individually liable for his actions as a member of
DAS. It also granted the second summary judgment motion as to Lawrence, but
denied that motion as to DAS. Appellants have only appealed the judgment on the
first summary judgment motion and designated the record to include the pleadings
related to that motion but not the second summary judgment motion.
On September 11, 2018, appellee filed a motion to dismiss this appeal as moot,
asserting that appellants’ failure to also appeal the trial court’s granting of the second
motion for summary judgment (the March 20, 2018 motion) and designation of a
limited record excluding evidence related to the second motion results in an
abandonment of the issue. More specifically, appellee argues that because the trial
court dismissed appellants’ claims against him based on two different summary
judgment motions and appellants’ did not appeal the granting of both motions, the
judgment on the second motion is a final judgment between the parties, and thus this
appeal is moot. In opposition to the motion to dismiss, appellants assert that the
ruling on the second summary judgment motion (which is in the same judgment as
the ruling on the first summary judgment motion) is an absolute nullity because
Lawrence had already been dismissed when the trial court rendered that judgment.
18-CA-442 5 ASSIGNMENTS OF ERROR
On appeal, appellants assert that (1) the trial court erred in finding there was
no evidence submitted in the memorandum in opposition to the motion for summary
judgment to support a misrepresentation claim; and (2) the trial court erred in
granting summary judgment on a misrepresentation claim that involves the
intentional acts and omissions of the movant.
MOTION TO DISMISS
We first address appellee’s motion to dismiss. We deny this motion for the
following reasons. Although the one May 2, 2018 judgment grants the first motion
for summary judgment and the second motion for summary judgment as to
Lawrence, the judgment expressly only dismisses all claims against Lawrence after
the language granting the first summary judgment. There is no additional decretal
language, i.e., an express dismissal of Lawrence, with regard to the second summary
judgment motion. Notably, when ruling on the second motion in open court, the
district court recognized that although both Lawrence and DAS had filed the second
summary judgment motion, Lawrence had already been dismissed by the granting
of the first motion. Thus, appellants properly appealed the granting of the first
summary judgment motion.
In addition, because appellants’ claim against Lawrence was expressly
dismissed pursuant to granting of the first summary judgment motion, a ruling on
the second summary judgment as to Lawrence was unnecessary. According to
Louisiana jurisprudence, an issue is “moot” when a judgment or decree on that issue
has been “deprived of practical significance” or “made abstract or purely academic.”
Cat’s Meow, Inc. v. City of New Orleans Through Dep’t of Fin., 98-0601 (La.
10/20/98), 720 So.2d 1186, 1193. A case is “moot” when a rendered judgment or
decree can serve no useful purpose and give no practical relief or effect. Id. Thus,
we find the judgment on the second motion for summary judgment as to Lawrence
18-CA-442 6 was moot. Therefore, appellants’ failure to appeal that judgment does not affect
their appeal of the granting of the first motion for summary judgment. Accordingly,
we deny appellee’s motion to dismiss.
STANDARD OF REVIEW
Appellate courts review summary judgments de novo, while considering the
record and all reasonable inferences drawn from the record in the light most
favorable to the non-movant. G.A. Lotz Co. v. Alack, 13-674 (La. App. 5 Cir.
4/9/14), 140 So.3d 94, 98. The Court must consider whether summary judgment is
appropriate under the circumstances of the case and whether there is a genuine or
triable issue on which reasonable minds could disagree. Id.
LAW AND ANALYSIS
La. C.C.P. art. 966 provides that “[a]fter an opportunity for adequate
discovery, a motion for summary judgment shall be granted if the motion,
memorandum, and supporting documents show that there is no genuine issue as to
material fact and that the mover is entitled to judgment as a matter of law.” The
movant bears the burden of proof. Bourgeois v. Allstate Ins. Co., 15-451 (La. App.
5 Cir. 12/23/15), 182 So.3d 1177. If, however, the movant will not bear the burden
of proof at trial on the matter that is before the court on the motion for summary
judgment, the movant’s burden on the motion does not require him to negate all
essential elements of the adverse party’s claim, action, or defense. Instead, the
movant must establish that there is an absence of factual support for one or more
elements essential to the adverse party’s claim, action, or defense. Id.
A “material fact” is one which, the existence or nonexistence of, may be
essential to a plaintiff's cause of action under the applicable theory of recovery.
When a motion for summary judgment is made and supported, the adverse party may
not rest on the allegations or denials of his pleadings, but must set forth specific facts
showing that there is a genuine issue for trial. If he does not so respond, summary
18-CA-442 7 judgment, if appropriate, shall be rendered against him. La. C.C.P. art. 967(B).
Bourgeois, 182 So.3d at 1181-82. Although summary judgment is seldom
appropriate for determinations based on subjective facts of motive, intent, good faith,
knowledge, or malice, “summary judgment may be granted on subjective intent
issues when no issue of material fact exists concerning the pertinent intent.”
Bourgeois, 182 So.3d at 1180.
Lawrence asserts that he is not liable to appellants because he is shielded from
liability under La. R.S. 12:1320. This statute states as follows:
A. The liability of members, managers, employees, or agents, as such, of a limited liability company organized and existing under this Chapter shall at all times be determined solely and exclusively by the provisions of this Chapter.
B. Except as otherwise specifically set forth in this Chapter, no member, manager, employee, or agent of a limited liability company is liable in such capacity for a debt, obligation, or liability of the limited liability company.
C. A member, manager, employee, or agent of a limited liability company is not a proper party to a proceeding by or against a limited liability company, except when the object is to enforce such a person’s rights against or liability to the limited liability company.
D. Nothing in this Chapter shall be construed as being in derogation of any rights which any person may by law have against a member, manager, employee, or agent of a limited liability company because of any fraud practiced upon him, because of any breach of professional duty or other negligent or wrongful act by such person, or in derogation of any right which the limited liability company may have against any such person because of any fraud practiced upon it by him.
Appellants assert that Lawrence is liable under the fraud exception in La. R.S.
12:1320(D). They allege Lawrence misrepresented or suppressed material facts with
the intention of obtaining an unjust advantage over appellants and caused them
monetary loss by failing to inform them that they continued to charge FUTA and
SUTA taxes after the thresholds had been met, and continued to list these FUTA and
SUTA taxes on invoices despite that the funds were not paid to these taxing
18-CA-442 8 authorities, but were instead retained by DAS. Lawrence asserts that appellants have
failed to present any evidence Lawrence committed fraud. As fraud is not defined
in La. R.S. 12:1320, the provisions on fraud in the Louisiana Civil Code govern. La.
C.C. art. 1953 defines fraud as “a misrepresentation or a suppression of the truth
made with the intention either to obtain an unjust advantage for one party or to cause
a loss or inconvenience to the other. Fraud may also result from silence or inaction.”
Ogea v. Merritt, 13-1085 (La. 12/10/13), 130 So.3d 888, 897-98. A party may
recover damages when he has suffered a loss due to intentional fraudulent
misrepresentation. Shields v. Par. of Jefferson, 13-481 (La. App. 5 Cir. 12/27/13),
131 So.3d 1048, 1052. The two elements necessary to establish fraud are an intent
to defraud or gain an unfair advantage, and a resulting loss or damage. Mooers v.
Sosa, 01-286 (La. App. 5 Cir. 9/25/01), 798 So.2d 200, 207. Pursuant to La. C.C.
art. 1954, fraud does not vitiate consent when the party against whom a fraud is
directed could have ascertained the truth without difficulty, inconvenience or special
skill. Autin v. Autin, 617 So.2d 229, 233 (La. App. 5th Cir. 1993), writ denied, 620
So.2d 846 (La. 1993). Fraud need only be proved by a preponderance of the
evidence and may be established by circumstantial evidence. La. C.C. art. 1957.
Considering the following facts together and summary judgment law on fraud
determinations, we find that genuine issues of material fact exist regarding
appellants’ intentional misrepresentation claim against Lawrence, namely whether
Lawrence intended to defraud appellants. First, the various service agreements
represent the administrative fee as a fee on total wages. The agreements do not refer
to any other additional administrative fees, or the conversion of any tax payments or
workers compensation premiums to fees.
In addition to other claims of fraud arguably supported by deposition
testimony, in her March 8, 2018 1442 deposition of Island Time [Exhibit 1], Terri
18-CA-442 9 Savoie testified that David Lawrence “misrepresented the whole thing. I think he
conned me.” (Record, p. 394, ll. 23-24). She went on to state:
“Because we sat several times, several times, and talked about the rate of workmen’s comp and the rate of his administrative fee, and how it equaled my workers’ comp and my rate at another payroll company, and how it was a wash, and how he gave me more service for the same price. And that is why I moved. “That was continual. That was a continual, continual representation all through my relationship with David. That was all we spoke of.” [Emphasis added.] (Record, p. 395, ll. 1-12)
This or similar testimony, if believed by the trier of fact, may provide sufficient
evidentiary support for misrepresentation or for the fraud claim. Regardless, for the
purposes of summary judgment, it creates a genuine issue of material fact.
Second, Lawrence was involved in the negotiation of this agreement with
appellants and signed the agreement on behalf of DAS. The deposition testimony
suggests that despite Lawrence’s contract negotiations and meetings with various
members of appellants’ management team regarding DAS’s administrative fees,
Lawrence never disclosed to any of the appellant clients involved in this matter that
the FUTA and SUTA taxes converted to an administrative fee at any point.
Third, members of appellants’ management testified that several times they
requested clarification specifically regarding the continued charges of FUTA and
SUTA taxes after the cutoffs had been satisfied. This raises a genuine issue of
material fact as to whether Lawrence evaded the issue in order to defraud appellants
of the excess FUTA and SUTA taxes and workers’ compensation premiums.
Fourth, in a January 29, 2015 email, Lawrence represented to one appellant,
Island Time, that DAS was reducing its rate to a 1% administrative fee of the gross
profit as of February 1, 2015, without any mention of other administrative fees being
collected from excess FUTA and SUTA taxes and workers’ compensation
premiums. Here, Lawrence represented that DAS was reducing appellants’
administrative fee but still did not disclose or discuss with appellants the truth
18-CA-442 10 regarding excess FUTA and SUTA taxes. This document raises a genuine issue of
material fact as to whether Lawrence intended to defraud appellants of excess FUTA
and SUTA taxes and workers’ compensation premiums. If reasonable persons could
disagree after considering the evidence, a genuine issue exists. Shields v. Par. of
Jefferson, 13-481 (La. App. 5 Cir. 12/27/13), 131 So.3d 1048, 1052. In determining
whether an issue is genuine, courts cannot consider the merits, make credibility
determinations, evaluate testimony or weigh evidence. Id.
In light of the foregoing, although the Fee Schedule states that there is no
reduction of FUTA and SUTA taxes upon reaching cut-offs, we find a genuine issue
of material fact exists at this time as to appellants’ fraud and/or intentional
misrepresentation claim. Accordingly, we reverse the district court’s granting of
Lawrence’s motion for summary judgment and the dismissal of all of appellants’
claims against him and remand for further proceedings.
REVERSED AND REMANDED
18-CA-442 11 NO. 18-CA-442 B & P RESTAURANT GROUP, LLC, ET AL FIFTH CIRCUIT VERSUS COURT OF APPEAL DELTA ADMINISTRATIVE STATE OF LOUISIANA SERVICES, LLC, ET AL
WICKER, J. CONCURS WITH REASONS
While I agree with the outcome in this case, respectfully I write separately to emphasize that we find only that there are genuine issues of material fact which preclude summary judgment. It is not our intention to opine in any manner with regard to the merits of the case.
18-CA-442 1 SUSAN M. CHEHARDY MARY E. LEGNON
CHIEF JUDGE INTERIM CLERK OF COURT
FREDERICKA H. WICKER CHIEF DEPUTY CLERK JUDE G. GRAVOIS MARC E. JOHNSON ROBERT A. CHAISSON SUSAN BUCHHOLZ STEPHEN J. WINDHORST FIRST DEPUTY CLERK HANS J. LILJEBERG JOHN J. MOLAISON, JR. FIFTH CIRCUIT MELISSA C. LEDET JUDGES 101 DERBIGNY STREET (70053) DIRECTOR OF CENTRAL STAFF POST OFFICE BOX 489 GRETNA, LOUISIANA 70054 (504) 376-1400
(504) 376-1498 FAX www.fifthcircuit.org
NOTICE OF JUDGMENT AND CERTIFICATE OF DELIVERY I CERTIFY THAT A COPY OF THE OPINION IN THE BELOW-NUMBERED MATTER HAS BEEN DELIVERED IN ACCORDANCE WITH UNIFORM RULES - COURT OF APPEAL, RULE 2-16.4 AND 2-16.5 THIS DAY SEPTEMBER 4, 2019 TO THE TRIAL JUDGE, CLERK OF COURT, COUNSEL OF RECORD AND ALL PARTIES NOT REPRESENTED BY COUNSEL, AS LISTED BELOW:
18-CA-442 E-NOTIFIED 24TH JUDICIAL DISTRICT COURT (CLERK) HONORABLE JUNE B. DARENSBURG (DISTRICT JUDGE) RICHARD B. EHRET (APPELLANT) MICHAEL S. BLACKWELL (APPELLEE)
MAILED MICHAEL E. PONDER (OTHER) ROSS A. LEDET (APPELLANT) NORMAN A. MOTT, III (APPELLEE) ATTORNEY AT LAW ATTORNEY AT LAW ATTORNEY AT LAW 1342 SOUTH COLUMBINE STREET 400 POYDRAS STREET 650 POYDRAS STREET BATON ROUGE, LA 70808 SUITE 1540 SUITE 2600 NEW ORLEANS, LA 70130 NEW ORLEANS, LA 70130