STATE OF LOUISIANA COURT OF APPEAL, THIRD CIRCUIT
CA 06-583
B & S UNDERWRITERS, INC.
VERSUS
CONSTITUTION STATE SERVICES COMPANY, ET AL.
**********
APPEAL FROM THE NINTH JUDICIAL DISTRICT COURT PARISH OF RAPIDES, NO. 213,243 HONORABLE GEORGE CLARENCE METOYER, JR., DISTRICT JUDGE
JOHN D. SAUNDERS JUDGE
Court composed of Sylvia R. Cooks, John D. Saunders, and Marc T. Amy, Judges.
REVERSED AND RENDERED.
Kenneth Alfred Doggett P.O. Box 13498 Alexandria, LA 71315-3498 (318) 487-4251 Counsel for Plaintiff/Appellant: B & S Underwriters, Inc.
John Patrick Doggett Provosty, Sadler, & DeLaunay P.O. Drawer 1791 Alexandria, LA 71309-1791 (318) 445-3631 Counsel for Plaintiff/Appellant: B & S Underwriters, Inc. Jimmy Roy Faircloth, Jr. Faircloth & Davidson, L.L.C. P.O. Box 12730 Alexandria, LA 71315-2730 (318) 442-9533 Counsel for Defendant/Appellee: Constitution State Services Company
Seth Andrew Schmeeckle 601 Poydras St., Suite 2775 New Orleans, LA 70130 (504) 568-1990 Counsel for Defendant/Appellee: Constitution State Services Company SAUNDERS, Judge.
This cause of action arises from an alleged breach of a three party contract
governed by Connecticut law and entered into in Louisiana. The parties consisted of
an Insurer, a Manager and Constitution State Services, L.L.C. f/k/a Constitution State
Services Company (hereinafter “CSSC”). The contract in question called for one of
the parties, the Insurer, to pay a refundable initial service fee to CSSC. This initial
service fee was refundable to the Insurer based upon conditions relating to the amount
of money deemed as charges and fees received by CSSC.
The party deemed Manager under the contract brought this action claiming that
CSSC owed it the full refund of the initial service fee. It based this claim on CSSC
improperly allocating money that should be deemed charges and fees as expenses.
CSSC filed an exception of no right of action due to the contract specifically
stating that it was Insurer that has a claim, if any, to reimbursement of the initial
service fee, and not Manager. The trial court dismissed this exception.
We reverse, and render.
FACTS AND PROCEDURAL HISTORY:
B&S Underwriters, Inc., (hereinafter “B&S”), is a managing general agent and
third party administrator of insurance products. B&S developed and owned the
workers’ compensation insurance program issued by and licensed to Guarantee
Mutual Life Company, (hereinafter “Guarantee Mutual”).
As a result of a regulatory requirement of the State of Georgia, B&S was
unable to provide claims administration services for the workers’ compensation
insurance sold in Georgia. B&S contacted CSSC, and entered into a contract wherein
B&S and Guarantee Mutual transferred the entire open claims inventory and agreed
to assign all future claims in the State of Georgia to CSSC for the provision of claims services. In the 1994 contract, CSSC received a $1,000,000 initial service fee to
protect against premature termination of the agreement due to incurring costs
associated with setting up a place of business to handle the claims. The contract
called for Guarantee Mutual to pay a $1,000,000 initial service fee to CSSC. This fee
was to be reimbursed to Guarantee Mutual based upon certain thresholds being met
by CSSC as they earned charges and fees. These reimbursements were to come when
Guarantee Mutual submitted to CSSC, in writing, a request to have these
reimbursements paid.
B&S brought a suit against CSSC for breach of contract. B&S alleged that it
was owed reimbursement of the initial service fee. B&S served CSSC with its petition
alleging that CSSC was using an improper procedure in calculating charges and fees
and propounded discovery to CSSC. B&S claimed that the 1994 contract could be
interpreted to include allocated lost adjustment expenses in calculating charges and
fees and under such method of calculating charges and fees, CSSC had reached the
threshold to reimburse all of the initial service fee.
CSSC filed the peremptory exception of no right of action claiming that B&S,
even if all of the allegations in its petition were true, had no remedy under the 1994
contract. The trial court denied this exception.
CSSC then filed an answer to the B&S petition but did not answer the
propounded discovery. Instead, CSSC filed a motion for summary judgment alleging
that there was no ambiguity in the 1994 contract that charges and fees did not include
allocated loss adjustment expenses, and as such, it was entitled to a judgment as a
matter of law. This motion was granted.
B&S applied for and was granted a rehearing on CSSC’s motion for summary
2 judgment. The trial court once again ruled in favor of CSSC’s motion. B&S appealed.
This court, on its own motion pursuant to La.Code Civ.P. art. 927, can notice
the peremptory exception of no right of action. The record reflects that B&S has no
right of action under the 1994 contract against CSSC for the reimbursement of the
initial service fee. As such, we reverse the trial court’s ruling denying CSSC’s
exception of no right of action and assess all costs of this appeal to B&S.
ASSIGNMENTS OF ERROR:
1. Did the trial court err in finding that there was no genuine issue of material fact regarding the interpretation and application of the contracts between Constitution State Services Company, B&S Underwriters, Inc. and Guarantee Mutual Life Company and that defendant/appellee was entitled to judgment as a matter of law, by concluding that money deemed as “Allocated Lost Adjustment Expenses” was not to be included within “Charges and Fees” for purposes of calculating CSSC’s obligation to refund the Initial Service Fee?
2. Did the trial court err in failing to apply the “Annual Minimum Charge” defined in the 1994 contract for purposes of determining CSSC’s obligation to refund the Initial Service Fee?
3. Did the trial court err in granting CSSC’s motion for summary judgment prior to its answering of discovery propounded to it by B&S?
CSSC’S EXCEPTION OF NO RIGHT OF ACTION:
CSSC did not appeal the trial court ruling that dismissed its peremptory
exception of no right of action. CSSC did submit some argument to this court that its
exception of no right of action should have been granted, but did not claim it as an
assignment of error. However, this court, on its own motion pursuant to La.Code
Civ.P. art. 927, can notice the peremptory exception of no right of action. We choose
to do so in this case.
Louisiana Code of Civil Procedure Article 927(B) states in pertinent part:
The nonjoinder of a party, or the failure to disclose a cause of action or a right or interest in the plaintiff to institute the suit, may be noticed by
3 either the trial or appellate court of its own motion.
B&S asserts in its petition that it is entitled to the return of remnants of an
Initial Service Fee from CSSC under section VII of a 1994 contract between B&S,
Guarantee Mutual and CSSC. We find that B&S has no right of action under the 1994
contract for return of any of the Initial Service Fee paid by Guarantee Mutual to
CSSC.
The test for the application of the peremptory exception of no right of action
is whether the plaintiff has the capacity or legal interest to enforce the rights asserted
in the petition. Babineaux v. Pernie-Bailey Drilling Co., 262 So.2d 328 (La.1972).
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STATE OF LOUISIANA COURT OF APPEAL, THIRD CIRCUIT
CA 06-583
B & S UNDERWRITERS, INC.
VERSUS
CONSTITUTION STATE SERVICES COMPANY, ET AL.
**********
APPEAL FROM THE NINTH JUDICIAL DISTRICT COURT PARISH OF RAPIDES, NO. 213,243 HONORABLE GEORGE CLARENCE METOYER, JR., DISTRICT JUDGE
JOHN D. SAUNDERS JUDGE
Court composed of Sylvia R. Cooks, John D. Saunders, and Marc T. Amy, Judges.
REVERSED AND RENDERED.
Kenneth Alfred Doggett P.O. Box 13498 Alexandria, LA 71315-3498 (318) 487-4251 Counsel for Plaintiff/Appellant: B & S Underwriters, Inc.
John Patrick Doggett Provosty, Sadler, & DeLaunay P.O. Drawer 1791 Alexandria, LA 71309-1791 (318) 445-3631 Counsel for Plaintiff/Appellant: B & S Underwriters, Inc. Jimmy Roy Faircloth, Jr. Faircloth & Davidson, L.L.C. P.O. Box 12730 Alexandria, LA 71315-2730 (318) 442-9533 Counsel for Defendant/Appellee: Constitution State Services Company
Seth Andrew Schmeeckle 601 Poydras St., Suite 2775 New Orleans, LA 70130 (504) 568-1990 Counsel for Defendant/Appellee: Constitution State Services Company SAUNDERS, Judge.
This cause of action arises from an alleged breach of a three party contract
governed by Connecticut law and entered into in Louisiana. The parties consisted of
an Insurer, a Manager and Constitution State Services, L.L.C. f/k/a Constitution State
Services Company (hereinafter “CSSC”). The contract in question called for one of
the parties, the Insurer, to pay a refundable initial service fee to CSSC. This initial
service fee was refundable to the Insurer based upon conditions relating to the amount
of money deemed as charges and fees received by CSSC.
The party deemed Manager under the contract brought this action claiming that
CSSC owed it the full refund of the initial service fee. It based this claim on CSSC
improperly allocating money that should be deemed charges and fees as expenses.
CSSC filed an exception of no right of action due to the contract specifically
stating that it was Insurer that has a claim, if any, to reimbursement of the initial
service fee, and not Manager. The trial court dismissed this exception.
We reverse, and render.
FACTS AND PROCEDURAL HISTORY:
B&S Underwriters, Inc., (hereinafter “B&S”), is a managing general agent and
third party administrator of insurance products. B&S developed and owned the
workers’ compensation insurance program issued by and licensed to Guarantee
Mutual Life Company, (hereinafter “Guarantee Mutual”).
As a result of a regulatory requirement of the State of Georgia, B&S was
unable to provide claims administration services for the workers’ compensation
insurance sold in Georgia. B&S contacted CSSC, and entered into a contract wherein
B&S and Guarantee Mutual transferred the entire open claims inventory and agreed
to assign all future claims in the State of Georgia to CSSC for the provision of claims services. In the 1994 contract, CSSC received a $1,000,000 initial service fee to
protect against premature termination of the agreement due to incurring costs
associated with setting up a place of business to handle the claims. The contract
called for Guarantee Mutual to pay a $1,000,000 initial service fee to CSSC. This fee
was to be reimbursed to Guarantee Mutual based upon certain thresholds being met
by CSSC as they earned charges and fees. These reimbursements were to come when
Guarantee Mutual submitted to CSSC, in writing, a request to have these
reimbursements paid.
B&S brought a suit against CSSC for breach of contract. B&S alleged that it
was owed reimbursement of the initial service fee. B&S served CSSC with its petition
alleging that CSSC was using an improper procedure in calculating charges and fees
and propounded discovery to CSSC. B&S claimed that the 1994 contract could be
interpreted to include allocated lost adjustment expenses in calculating charges and
fees and under such method of calculating charges and fees, CSSC had reached the
threshold to reimburse all of the initial service fee.
CSSC filed the peremptory exception of no right of action claiming that B&S,
even if all of the allegations in its petition were true, had no remedy under the 1994
contract. The trial court denied this exception.
CSSC then filed an answer to the B&S petition but did not answer the
propounded discovery. Instead, CSSC filed a motion for summary judgment alleging
that there was no ambiguity in the 1994 contract that charges and fees did not include
allocated loss adjustment expenses, and as such, it was entitled to a judgment as a
matter of law. This motion was granted.
B&S applied for and was granted a rehearing on CSSC’s motion for summary
2 judgment. The trial court once again ruled in favor of CSSC’s motion. B&S appealed.
This court, on its own motion pursuant to La.Code Civ.P. art. 927, can notice
the peremptory exception of no right of action. The record reflects that B&S has no
right of action under the 1994 contract against CSSC for the reimbursement of the
initial service fee. As such, we reverse the trial court’s ruling denying CSSC’s
exception of no right of action and assess all costs of this appeal to B&S.
ASSIGNMENTS OF ERROR:
1. Did the trial court err in finding that there was no genuine issue of material fact regarding the interpretation and application of the contracts between Constitution State Services Company, B&S Underwriters, Inc. and Guarantee Mutual Life Company and that defendant/appellee was entitled to judgment as a matter of law, by concluding that money deemed as “Allocated Lost Adjustment Expenses” was not to be included within “Charges and Fees” for purposes of calculating CSSC’s obligation to refund the Initial Service Fee?
2. Did the trial court err in failing to apply the “Annual Minimum Charge” defined in the 1994 contract for purposes of determining CSSC’s obligation to refund the Initial Service Fee?
3. Did the trial court err in granting CSSC’s motion for summary judgment prior to its answering of discovery propounded to it by B&S?
CSSC’S EXCEPTION OF NO RIGHT OF ACTION:
CSSC did not appeal the trial court ruling that dismissed its peremptory
exception of no right of action. CSSC did submit some argument to this court that its
exception of no right of action should have been granted, but did not claim it as an
assignment of error. However, this court, on its own motion pursuant to La.Code
Civ.P. art. 927, can notice the peremptory exception of no right of action. We choose
to do so in this case.
Louisiana Code of Civil Procedure Article 927(B) states in pertinent part:
The nonjoinder of a party, or the failure to disclose a cause of action or a right or interest in the plaintiff to institute the suit, may be noticed by
3 either the trial or appellate court of its own motion.
B&S asserts in its petition that it is entitled to the return of remnants of an
Initial Service Fee from CSSC under section VII of a 1994 contract between B&S,
Guarantee Mutual and CSSC. We find that B&S has no right of action under the 1994
contract for return of any of the Initial Service Fee paid by Guarantee Mutual to
CSSC.
The test for the application of the peremptory exception of no right of action
is whether the plaintiff has the capacity or legal interest to enforce the rights asserted
in the petition. Babineaux v. Pernie-Bailey Drilling Co., 262 So.2d 328 (La.1972).
This exception is a threshold device that terminates suits brought by one who cannot
enforce the right asserted judicially. Id.
“Whether a plaintiff has a right of action is a question of law.” Mississippi
Land Co. v. S&A Properties II, Inc., 01-1623, p.3 (La.App. 3 Cir. 5/8/02), 817 So.2d
1200. 1203. Because this suit is before us on a motion for summary judgment, we
have the record from below before us for review. We will review this question of law
de novo from the record before us and from the substance of the contract upon which
plaintiff has claimed its right of action. Id. Therefore, we look to the 1994 contract
to make a determination of what rights, if any, B&S has in recouping the Initial
Service Fee as it has claimed in its petition.
The parties agree that Connecticut law applies to the interpretation of the 1994
contract per the following choice of law provision:
SECTION XVII - APPLICABLE LAW
This Agreement shall be governed by the Laws of the State of Connecticut.
Louisiana Civil Code Article 3540 allows for choice of law provisions such as
4 the one in the 1994 contract “except to the extent that law contravenes the public
policy of the state whose law would otherwise be applicable under Article 3537.”
Louisiana Civil Code Article 3537 is the general article for selecting the law
applicable to a contract. Under La.Civ.Code art. 3537 only Louisiana and Connecticut
are states that could be chosen. We do not find any public policy that is offended in
either state regarding this choice of law provision; therefore, we will apply
Connecticut law.
Connecticut law is similar to Louisiana law when addressing the interpretation
of contracts. A contract is interpreted so as to put into effect the intent of the parties.
Niehaus v. Cowles Bus. Media, Inc., No. 16644 (Conn. 4/22/03), 819 A.2d 765. The
source in reaching the intent of the parties is the language used in the agreement. The
language that the parties choose to put into the contract must be given its common
usage and ordinary meaning. When this language is unambiguous, the contract is to
be interpreted according to its terms. Courts are not to twist or torture words to
attempt to import ambiguity where the substance of the agreement is clear. Any
ambiguity that the court finds must come from the words in the contract itself, rather
than one party’s idea of what the terms mean. Id.
Page one of the 1994 contract denotes that Guarantee Mutual will be referred
to as “Insurer”, B&S as “Manager” and Constitution State Services Company as
“CSSC”.
The 1994 contract reads as follows:
SECTION I - APPLICABILITY OF AGREEMENT This Agreement is between Insurer, Manager and CSSC. However, the right afforded by, and the duties set forth in, each section of the Agreement (or paragraphs and subsections thereof) apply only to the parties specifically referenced therein.
5 B&S claims it has a right to reimbursement of the Initial Service Fee under
section VII of the contract, which states:
SECTION VII - CHARGES AND FEES A. Charges and Fees earned by CSSC under this Agreement will be determined as follows.
1. CSSC will receive an Initial Service Fee of $1,000,000 payable by Insurer with $250,000 due June 9, 1994, and $250,000 due at the execution of this Agreement and $500,000 due August 1, 1994. If the Agreement is not executed by August 1, 1994, then $750,000 will be due on that date from the Insurer. The Initial Service Fee is fully earned upon payment and is non-refundable, except under the following conditions:
(a) If during the term of this Agreement of the Charges and Fees paid to CSSC by Insurer, excluding the Initial Service Fee, Start Up Charges and Termination Costs, exceed $5,000,000, then CSSC will return $500,000 of the Initial Service Fee to Insurer within 5 business days of receipt of Insurer’s written request for payment.
(b) If during the term of this Agreement the Charges and Fees paid to CSSC by Insurer, excluding the Initial Service Fee, Start Up Charges and Termination Costs, exceed $10,000,000, then CSSC will return the remaining $500,000 of the Initial Service Fee to Insurer within 5 business days of receipt of Insurer’s written request for payment, according to the following schedule:
Total Charges and Fees Initial Service Fee Returned
Greater Than or Equal to $10,000,000 and Less Than $11,000,000 $100,000
Greater Than or Equal to $11,000,000 and Less Than $12,000,000 $100,000
Greater Than or Equal to $12,000,000 and Less Than $13,000,000 $100,000
Greater Than or Equal to $13,000,000 and Less Than $14,000,000 $100,000
6 Greater Than or Equal to $14,000,000 $100,000
We find no reference to “Manager” in the relevant provision that B&S claims
it has a right of reimbursement for the Initial Service Fee from CSSC. From the clear
and unambiguous wording of the contract under section I, the right afforded by
section VII, if any, is granted by the contract to “Insurer”, Guarantee Mutual, and not
“Manager” B&S.
As such, we find that CSSC’s exception of no right of action should have been
granted. B&S has no right of action under the 1994 contract for reimbursement of the
Initial Service Fee. Accordingly, B&S cannot be afforded a remedy in this action.
Therefore, we reverse the trial court’s ruling and grant CSSC’s peremptory exception
of no right of action. Costs of the appeal are to be paid by B&S.
CONCLUSION:
We conclude that, based on the clear provisions of the 1994 contract, CSSC’s
peremptory exception of no right of action shall be granted. The assignment of errors
raised by B&S regarding whether Allocated Lost Adjustment Expenses should be
included in the calculation of Charges and Fees, whether the Annual Minimum
Charge should be applied and whether it was improper to grant CSSC’s motion for
summary judgment when discovery was outstanding are moot, as B&S has no remedy
against CSSC under the 1994 contract. Therefore, we grant CSSC’s exception of no
right of action and dismiss B&S’s suit with prejudice. We assess all costs of this
appeal to B&S.