Hercules Offshore, Inc. v. Lafayette Parish School Board, Sales and Use Tax Dept.

• Court: Louisiana Court of Appeal
• Decided: February 11, 2015
• Docket: CA-0014-0701
• Status: Unknown

Opinion

STATE OF LOUISIANA COURT OF APPEAL, THIRD CIRCUIT

14-701

HERCULES OFFSHORE, INC.

VERSUS

LAFAYETTE PARISH SCHOOL BOARD, SALES AND USE TAX DEPT.

**********

APPEAL FROM THE FIFTEENTH JUDICIAL DISTRICT COURT PARISH OF LAFAYETTE, NO. C-20076491, DIVISION “B” HONORABLE JULES DAVIS EDWARDS, III, DISTRICT JUDGE

ULYSSES GENE THIBODEAUX CHIEF JUDGE

Court composed of Ulysses Gene Thibodeaux, Chief Judge, James T. Genovese, and David Kent Savoie, Judges.

AFFIRMED.

Stephen Hawley Myers Stephen Hawley Myers, L.L.C. P. O. Box 51222 Lafayette, LA 70505-1222 Telephone: (337) 408-3626 COUNSEL FOR: Plaintiff/Appellant - Hercules Offshore, Inc.

Robert Frederick Mulhearn, Jr. Rainer Anding Talbot & Mulhearn 8480 Bluebonnet Boulevard - Suite D Baton Rouge, LA 70810 Telephone: (225) 766-0200 COUNSEL FOR: Defendants/Appellees - Carl Meche, Director Sales Tax, LPSB and Lafayette Parish School Board Sales and Use Tax Department THIBODEAUX, Chief Judge.

The plaintiff, Hercules Offshore, Inc. (Hercules), appeals the trial

court’s denial of its motion to vacate an order of dismissal finding that Hercules

had abandoned its suit for refund against the Lafayette Parish School Board, Sales

and Use Tax Department (Department). Finding no manifest error on the part of

the trial court in denying Hercules’ motion to vacate, we affirm.

I.

ISSUES

We must decide whether the trial court manifestly erred in denying

Hercules’ motion to vacate the court’s order dismissing Hercules’ suit under the

law on abandonment.

II.

FACTS AND PROCEDURAL HISTORY

Hercules received a 2004 tax assessment from the Department for

unpaid sales and use taxes for 1998 through 2001. Hercules paid the total amount

due, $339,698.74 ($192,513.44––taxes + $99,056.94––interest + $48,128.36––

penalty) under protest and filed suit on December 5, 2007, for a redetermination

and refund of the taxes.

In November, 2013, the Department’s Collector filed a motion to

dismiss Hercules’ suit due to abandonment, asserting that the last step in the

litigation, under La.Code Civ.P. art. 561, occurred on September 1, 2009.

The trial court issued an order of dismissal. Hercules filed a motion to

vacate the order of dismissal which was denied. III.

STANDARD OF REVIEW

An appellate court may not set aside a trial court’s findings of fact in

absence of manifest error or unless it is clearly wrong. Stobart v. State, Through

DOTD, 617 So.2d 880 (La.1993); Rosell v. ESCO, 549 So.2d 840 (La.1989). A

two-tiered test must be applied in order to reverse the findings of the trial court.

Mart v. Hill, 505 So.2d 1120 (La.1987). The appellate court must find from the

record (1) that a reasonable factual basis does not exist for the finding of the trial

court and (2) that the record establishes that the finding is clearly wrong

(manifestly erroneous). Id.

IV.

LAW AND DISCUSSION

At issue is whether Hercules’ 2007 suit to redetermine and refund the

tax paid under protest was abandoned. Under La.Code Civ.P. art. 561, an action is

abandoned “when the parties fail to take any step in its prosecution or defense in

the trial court for a period of three years.” La.Code Civ.P. art. 561(A). A party

takes a “step” in the prosecution or defense of a suit when he takes formal action,

before the court, intended to hasten the matter to judgment. Chevron Oil Co. v.

Traigle, 436 So.2d 530, 532 (La.1983). Formal discovery “served on all parties

whether or not filed of record, including the taking of a deposition with or without

formal notice, shall be deemed to be a step in the prosecution or defense of an

action.” La.Code Civ.P. art. 561(B). Abandonment operates without a formal

order, “but, on ex parte motion of any party or other interested person by affidavit

which provides that no step has been timely taken in the prosecution or defense of

2 the action, the trial court shall enter a formal order of dismissal as of the date of its

abandonment.” La.Code Civ.P. art. 561(A)(3).

The Louisiana Supreme Court has interpreted Article 561 as imposing

three requirements: (1) a party must take some step in the prosecution or defense

of the litigation; (2) the step must be taken in the litigation and must appear in the

record, with the exception of formal discovery; and (3) that step must have been

taken within three years of the last step taken by either the plaintiff or defendant.

Clark v. State Farm Mut. Auto. Ins. Co., 00-3010 (La. 5/15/01), 785 So.2d 779.

The two jurisprudential exceptions are (1) a showing of contra non valentem by the

plaintiff, or (2) waiver by the defendant.1 Id.

Here, Hercules filed its petition in December 2007.

The 2008 filings consisted of the defendant’s answer, reconventional

demand, request for notice, and affidavit. The plaintiff’s answer to the

reconventional demand was also included.

In 2009, the plaintiff filed a motion to schedule a status conference,

and the defendant filed a motion for summary judgment. The parties filed various

supporting memoranda and continuances, and the trial court issued judgment in

July, 2009, denying partial summary judgment to the defendants based upon issues

of fact. The last filing was an August, 2009 order granting the plaintiff an

extension of time to answer discovery. The defendants admit that the plaintiff

answered discovery on September 1, 2009, which they assert was the last date of

activity that qualifies as a step in the litigation under Article 561.

1 “Properly viewed, these two exceptions evidence two well-established rules of prescription: (1) Prescription[] does not run against one who is unable to interrupt it (contra non valentem agere nulla currit prescriptio), and (2) prescription may be interrupted by acknowledgment.” Melancon v. Continental Cas. Co., 307 So.2d 308, 311 (La.1975).

3 Nothing was filed in 2010 or in 2011. The only filing in 2012 was the

June 19, 2012 request for notice filed by the plaintiff. Nothing was filed in 2013

until the defendant’s November 14, 2013 motion to dismiss due to abandonment.

A request for notice, such as that filed by Hercules on June 19, 2012,

is not a step intended to hasten the matter to judgment; rather, it is a request for

notification in the event that steps are taken. See Haisty v. State, DOTD, 25670

(La.App. 2 Cir. 3/30/94), 634 So.2d 919. A motion that grants counsel the right to

take steps, or to prepare to take steps, toward the prosecution or defense of a case,

but does not itself hasten the matter to judgment, is not an Article 561 step. See

Chevron, 436 So.2d 530. Thus, where the last undisputed activity, Hercules’

response to formal discovery, was September 1, 2009, steps sufficient to interrupt

abandonment had to have occurred by September 1, 2012.

Correspondence

Hercules submitted an affidavit attaching several e-mails dated in

September, 2011, which indicate efforts to set up a settlement meeting for the

following month. However, ‘“[e]xtrajudicial efforts,’ such as informal settlement

negotiations between the parties, have uniformly been held to be insufficient to

constitute a step for purposes of interrupting abandonment.” Clark, 785 So.2d at

790. Correspondence evidencing even extensive settlement negotiations between

the parties is deemed insufficient to interrupt abandonment. Chevron, 436 So.2d

530. The reasoning is that ongoing negotiations do not prevent counsel from

taking formal action in the trial court within the intent of Article 561. Id.

Counsel for Hercules also attaches a two-paragraph letter from

himself to the Tax Director of Hercules dated November 10, 2011, stating that the

4 above settlement meeting was held and that he disagreed with the outcome. Again

under the reasoning of Chevron, the plaintiffs retain the ability to set the matter for

trial if they feel the negotiations are not progressing satisfactorily. See Id.

A November 19, 2012 letter from Hercules counsel to the Collector is

not a step because it concerns settlement discussions and because it is dated after

the September 1, 2012 deadline signaling abandonment. This is also true of the

letter from the Department’s counsel dated November 30, 2012, offering to settle

the tax dispute in an amount that would refund Hercules $18,971.32.

Hercules asserts that verbal discussions and document retrieval was

ongoing, and counsel submits an unsupported log of entries showing that some

work, such as a phone call, a letter, or review of documents, was done in most

months during the three-year period at issue.2 Hercules argues that these events

show an intent not to abandon and asserts that the law changed in 2011, changing

the traditional analysis “to review certain non-formal actions by Plaintiff as a ‘step’

in the prosecution of a claim.” This assertion is misplaced. Hercules cites La.

DOTD v. Oilfield Heavy Haulers, L.L.C., 11-912 (La. 12/6/11), 79 So.3d 978,

which involved an action by the defendant. Hercules egregiously misquotes the

case by stating that abandonment “must” be set aside, wherein Oilfield actually

quotes Clark’s 2001 statement that abandonment “may” be set aside by showing a

cause outside the record. See Oilfield, 79 So.3d at 985. In its block quote

attributed to Oilfield, Hercules further inserts “Plaintiffs” in brackets next to a

reference to “defendants” to enlarge the meaning of Oilfield when Oilfield clearly

2 We note that the log contains no timed entries and does not attach time sheets or billing and, thus, appears to have been created for the purpose of this litigation. Further, the correspondence reported in the log does not comport to the correspondence put in evidence in the record.

5 applied its reasoning and Clark’s reasoning to actions by a “defendant” as the party

whom the formal action requirement was designed to protect. See Id.

Hercules further misinterprets Oilfield’s partial abrogation of

Melancon, 307 So.2d 308, in support of its assertion that the law changed in 2011.

This simply is not true. Oilfield in 2011 was not the first time the Louisiana

Supreme Court criticized the language in Melancon, as it had previously done so in

Clark in 2001, which referred to the court’s mistaken dicta in Melancon in 1975.

Melancon, Chevron, Clark, and Oilfield all involved a defendant’s steps in the

abandonment procedure, based upon the change in the law in 1960.

As explained in Clark, in 1960 the procedural rules on abandonment

were transferred from La.Civ.Code art. 3519, which had addressed only the

plaintiff’s actions, to La.Code Civ.P. art. 561, which added (1) that abandonment is

self-operative, and (2) that failure by the parties to take steps in the prosecution or

defense of the suit leads to abandonment. The latter change was construed by

Melancon “as codifying the defense-oriented waiver exception as a step in the

defense.” Clark, 785 So.2d at 788. However, Melancon indicated that the

defendant’s waiver had to incorporate formal action. Thus, the mistaken broad

remark in Melancon was, ‘“extrinsic proof of such a waiver cannot be permitted.’”

Id. (quoting Melancon, 307 So.2d at 312). The 2001 Clark court made it clear that

an unconditional tender of an undisputed amount was not a settlement negotiation,

but was a defendant’s acknowledgement of liability to the plaintiff, which

constituted waiver, which could be proved by extrinsic evidence.

In 2011, the Oilfield court quoted extensively from its 2001 decision

in Clark, including Clark’s criticism of Melancon regarding extrinsic evidence of

waiver, but it did not change the Clark analysis of the law. The Oilfield court

6 found that, when the plaintiff failed to answer discovery timely, the defendant’s

letter to all parties scheduling a mandatory discovery conference under Louisiana

District Court Rule 10.1 constituted a step in the defense of the action because it

hastened the matter to trial. Thus, a subsequent dismissal for abandonment

obtained by the defendants was vacated when a defendant’s own action was found

to have interrupted the abandonment period. Essentially, the Oilfield decision was

about waiver, which has long been held an exception that could be proved by

extrinsic evidence.

Only two categories of causes outside the record are permitted; namely, those causes falling within the two jurisprudential exceptions to the abandonment rule. Those two exceptions are: (1) a plaintiff-oriented exception, based on contra non valentem, that applies when failure to prosecute is caused by circumstances beyond the plaintiff’s control; and (2) a defense-oriented exception, based on acknowledgment, that applies when the defendant waives his right to assert abandonment by taking actions inconsistent with an intent to treat the case as abandoned.

Clark, 785 So.2d at 784-85 (footnote omitted).

While thoroughly discussing Clark, and reiterating the three criteria

for abandonment under Article 561 and the above two exceptions to the formal

action requirement, the Oilfield court stated as follows:

Thus, the formal action requirement was designed to protect defendants, as “allowing informal, ex parte actions to serve as a step in the prosecution ‘might interrupt prescription against abandonment without the opposing parties formally learning of them for months or years, to their possible prejudice.’” Id. (quoting DeClouet [v. Kansas City Southern Ry. Co.], 176 So.2d [471,] 476 [(La.App. 3 Cir. 1965)]. The Court concluded the absence of defendant’s unconditional tender from the record did not prevent it from constituting waiver, because “[t]he purpose underlying the rule is not present when, as here, it is the defendant taking action and doing

7 so in defense of plaintiff’s suit to avoid penalties and attorney’s fees.” Id.

We find the reasoning in Clark is equally applicable to the present case. The April 24th letter was sent by defendant OHH and served on the remaining defendants. Further, like the insurer in Clark, OHH sent the letter in defense of the suit, i.e., to obtain discovery responses from DOTD. We conclude the purpose underlying the formal action requirement would not be served in the present case, as all defendants were aware of the letter, and thus, there is no issue of notice.

In reaching its decision in Clark, this Court also criticized our decision in Melancon v. Continental Casualty Co., 307 So.2d 308 (La.1975), which held an agreement by defendant not to take action in state court during the pendency of a federal proceeding was not a waiver, because the agreement was not filed in the state trial court. Id. at 312. Specifically, we found the “broad remark” in Melancon, stating “extrinsic proof of ... waiver cannot be permitted,” was “mistaken to the extent it precludes establishing an acknowledgment by the defendant of an obligation to plaintiff,” as it was “inconsistent with the jurisprudence holding that an order of dismissal based on abandonment may be set aside based upon ‘a showing that a cause outside the record prevented accrual of the [three] years required for abandonment’....” Clark, 00-3010, p. 14-15; 785 So.2d at 788-89 (quoting DeClouet, 176 So.2d at 476). Similarly, today, we hold the broad language in Melancon, requiring “any action taken by a party that is alleged to be a step in the prosecution or defense of the suit must appear in the court record” is mistaken to the extent it precludes actions made by defendants and known to all parties from constituting a step in the prosecution or defense of an action sufficient to interrupt abandonment.

Oilfield, 79 So.3d at 985 (emphasis added).

Thus, contrary to Hercules’ assertions, Oilfield did not change the law

in 2011, or the Clark analysis in 2001 of the three criteria for abandonment under

Article 561, or the Clark conclusion that a defendant’s waiver could be shown with

extrinsic evidence of the defendant’s action that is inconsistent with an intent to

8 abandon the case. Hercules has not shown any such action by the defendant. It is

undisputed that waiver is not at issue in this case. Rather, Hercules raises the other

exception, contra non valentem.

Contra Non Valentem Exception to Abandonment

The plaintiff-oriented exception based on contra non valentem applies

when the plaintiff makes a showing that his failure to prosecute was caused by

circumstances beyond his control. Clark, 785 So.2d 779. Such circumstances

contemplate events which create a legal impediment, such as a plaintiff’s active

service in the military or confinement to a mental institution, which makes it

impossible for the plaintiff to take the necessary steps to prevent abandonment. Id.

The exception may apply to the automatic stay attendant with bankruptcy petitions.

See Wolf Plumbing, Inc. v. Matthews, 47,822 (La.App. 2 Cir. 9/25/13), 124 So.3d

494, writs denied, 13-2510, 13-2516 (La. 1/17/14), 130 So.3d 949, 950. However,

when the plaintiff obtains such a stay and leaves it in place, that is not deemed a

circumstance beyond his control. Faust v. Greater Lakeside Corp., 03-808

(La.App. 4 Cir. 11/26/03), 861 So.2d 716, writ denied, 04-424 (La. 4/2/04), 869

So.2d 887. Courts have found that circumstances beyond the plaintiff’s control

include natural disasters but do not include a pro se litigant’s lack of knowledge of

applicable deadlines. See Food Perfect, Inc. v. United Fire & Cas. Co., 12-2492

(La. 1/18/13), 106 So.3d 107.

Recently, in Roy v. Belt, 13-1116 (La.App. 3 Cir. 10/8/14), 149 So.3d

957, this court found no error in the trial court’s determination that the death of a

judge and the subsequent issue concerning which judge had the authority to hear

the case did not create a circumstance beyond the plaintiffs’ control. In Johnson v.

9 Calcasieu Parish Sheriff's Dep’t, 06-1179 (La.App. 3 Cir. 2/7/07), 951 So.2d 496,

this court found that the plaintiffs’ suits to recover a reward were not abandoned

where the reward was dependent upon a conviction, and the conviction was

obtained, then overturned, and a re-trial was in the sole discretion of the District

Attorney.

Here, Hercules has attached in an exhibit the Lafayette Parish Sales

and Use Tax Ordinance and has enumerated some of its procedural requirements in

an effort to show that the Department controlled the litigation. It further contends

that it had no control over when and if the taxpayer’s vendors would cooperate in

providing documentation; or thousands of invoices in the hands of third parties; or

delays caused by the parish auditors because of multiple ongoing audits. Hercules

cites Hyman v. Hibernia Bank & Trust Co., 139 La. 411, 71 So. 598 (La.1916), and

asserts that another exception exists when the inability of the plaintiff to act is

brought about by the practices of the defendant. The Hyman case is highly

distinguishable and inapposite because it involved fraud, concealment, and

conspiracy to prevent the filing of suit; thus, Hyman involved different issues,

facts, and legal analyses.

Factors that Hercules asserts as beyond its control include the

Department’s timing of its 2004 assessment (for taxes owed through 2001) and the

Department’s requirement that the assessed taxes be paid within several weeks.

Hercules did not file its suit for refund until December, 2007. In terms of policy

and the documentation difficulties that Hercules relies upon to show circumstances

beyond its control, it seems that document gathering should have started shortly

after the assessment in 2004 and should have yielded some results sufficient to

claim that a refund was owed when suit was filed in 2007. The Department did not

10 seek dismissal of the suit for refund until 2013, nine years after the assessment and

twelve years after the tax period ended. This was a lingering matter.

“Abandonment is a device that the Legislature adopted ‘to put an end

to the then prevailing practice of filing suit to interrupt prescription, and then

letting the suit hang perpetually over the head of the defendant unless he himself

should force the issue.’” Clark, 785 So.2d at 786 (citing Sanders v. Luke, 92 So.2d

156 (La.App. 1 Cir. 1957)). While we understand the complexities involved in

collecting documentation from predecessors whose employees and vendors have

scattered, the courts have remedies for such problems. We find that these general,

business-type delays are not the legal impediments or circumstances described in

the jurisprudence that make it impossible for the plaintiff to take steps to hasten his

own matter to trial.

V.

CONCLUSION

Based upon the foregoing, we affirm the judgment of the trial court

denying Hercules’ motion to vacate the order of dismissal due to abandonment.

All costs of appeal are assessed to Hercules Offshore, Inc.