LAKEFRONT MANAGEMENT * NO. 2025-CA-0324 AUTHORITY * COURT OF APPEAL VERSUS * FOURTH CIRCUIT J & J PARTNERS, L.L.C. * STATE OF LOUISIANA
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APPEAL FROM CIVIL DISTRICT COURT, ORLEANS PARISH NO. 2020-08075, DIVISION “F-14” Honorable Jennifer M Medley, ****** Judge Rachael D. Johnson ****** (Court composed of Judge Joy Cossich Lobrano, Judge Rachael D. Johnson, Judge Karen K. Herman)
LOBRANO, J., CONCURS IN THE RESULT
David Jefferson Dye DAVID JEFFERSON DYE, L.L.C. 1415 Esplanade Avenue New Orleans, LA 70116
Al J. Robert, Jr. AL J. ROBERT, JR., LLC 650 Poydras Street Suite 2828 New Orleans, LA 70130
COUNSEL FOR PLAINTIFF/APPELLANT
Joseph R. Ward, Jr. WARD & CONDREY, LLC 438 S New Hampshire St. Covington, LA 70433
Randy George McKee MCKEE LAW FIRM, LLC 1100 Poydras Street Suite 1475 New Orleans, LA 70163
Robert Joseph Daigre BURGOS & ASSOCIATES, L.L.C. 3535 Canal Street New Orleans, LA 70119
COUNSEL FOR DEFENDANT/APPELLEE
NO RIGHT OF ACTION EXCEPTION OVERRULED; AFFIRMED IN PART; REVERSED IN PART; REMANDED IN PART FEBRUARY 13, 2026 Appellant/Defendant-in-Reconvention, Lakefront Management Authority RDJ KKH (LMA), seeks review of the March 13, 2025 district court judgment finding LMA
liable to Appellee/Plaintiff-in-Reconvention, J & J Partners, LLC (J & J) for
breach of contract, fraud, and inverse condemnation. In addition, LMA filed an
exception of no right of action with this Court. We overrule LMA’s exception of
no right of action, affirm the district court’s finding on J & J’s claim of breach of
contract, reverse the district court’s finding on J & J’s claims of fraud and inverse
condemnation, and remand this matter to the district court for further proceedings
consistent with this opinion.
FACTUAL BACKGROUND AND PROCEDURAL HISTORY
This Court efficiently summarized the facts of this case in Lakefront
Management Authority v. J & J Partners, L.L.C.:
On November 4, 1994, J & J Partners, represented by John Dane, entered into a 25-year lease with the former Board of Commissioners of the Orleans Levee District for the property with the municipal address of 7412 Lakeshore Drive in New Orleans, Louisiana and located along the New Basin Canal. Concerning the term of the lease, paragraph 2 provides:
This lease is for a term of twenty-five (25) years beginning on August 1, 1994 and ending on July 31, 2019. Further, provided lessee shall spend the sum of
1 FIVE HUNDRED THOUSAND DOLLARS ($500,000.00) for permanent improvements located on the property, the term of the lease shall be extended an additional twenty-five years from July 31, 2019.
The leased premises (where there was a 60 + year old metal building) were initially used as an office building. In 1999, the management and ownership of J & J Partners was assumed by Frank D’Amico, Jr. The property suffered severe damage during Hurricane Katrina in 2005. Not only was the building condemned by the City of New Orleans, but the City also blocked access to this property and others located along the New Basin Canal. J & J Partners continued to pay rent during this time.
The lease agreement provides that if the lessee intends to rebuild the premises after they are damaged by “fire, the elements, unavoidable accident or other casualty” then re-construction must be “vigorously pursued.” After having the Katrina damages estimated by his insurer, Mr. D’Amico decided to rebuild. Mr. D’Amico approached the LMA about getting the appropriate approval as required by paragraph 9 of the lease agreement, but was told that the agency was overwhelmed by other property loss issues and he was free to rebuild as he saw fit. After obtaining the proper permits from the City, Mr. D’Amico proceeded to rebuild and re-purpose the building and the adjacent open space as an event venue. Mr. D’Amico estimated that he spent over $800,000.00 on improvements to the property; these included rebuilding the foundation piers, rebuilding the interior of the building (from the shell), and rebuilding the courtyard area.
Management and control of J & J Partners was assumed by Cesar Burgos in July of 2015. In connection with his purchase of J & J Partners, Mr. Burgos obtained a 20[-]year mortgage from FNBC Bank. The bank had the property appraised and it was valued at $910,000.00. The bank reviewed the documentation evidencing expenses made and was satisfied that over $500,000.00 in permanent improvements had been made to the property. Between 2016 and 2018, Mr. Burgos continued to operate the premises as an event venue and made additional permanent improvements to the property in an amount exceeding $200,000.00.
In 2018, FNBC was placed into receivership and Mr. Burgos needed to refinance his mortgage loan. In connection with his refinance loan request, Hancock Whitney obtained an appraisal of the property, which established a fair market value of $1,300,000.00. Hancock Whitney approved the loan but requested some acknowledgement from the LMA that the lease was extended for the second 25[-]year term. In October of 2018, J & J Partners requested that the LMA acknowledge that the lease term had been extended 25 years pursuant to paragraph 2 of the lease agreement. On October 17, 2018, the LMA
2 indicated that J & J Partners was required to make a formal request for the extension and added that it would have to be board approved. Mr. Burgos submitted a formal letter dated November 16, 2018. On November 26, 2018, the LMA had an appraisal on the subject property done in part to address the “highest and best use” for the property.
In February of 2019, the LMA's legal counsel advised Mr. Burgos that “permanent improvements” did not include “ ... repairs or replacement of systems in the building, such as replacement of an HVAC system, and also do not include repairs made to the buildings after hurricanes, such as Katrina ...”1 Mr. Burgos belied that this interpretation was wrong and not supported by the plain language of the lease agreement. J & J Partners provided documentation including cancelled checks and invoices along with explanations from Mr. D’Amico, Mr. Burgos and Mr. Burgos’ personal assistant, Lee Jin Danielson, backing up the materials supplied. On April 15, 2019, the LMA stated from its initial review it agreed only $88,183.00 was expended on permanent improvements, but $859,539.72 was stated to be “undetermined.” On June 27, 2019, the LMA changed its opinion to state that it agreed $170,046.75 were made in permanent improvements, while $778,733.41 remained “undetermined.” Later, at a public meeting, it was revealed by the chairwoman of the LMA, Wilma Heaton, the LMA had determined that $460,000.00 had been made in permanent improvements. This was confirmed by the LMA’s long-time real estate consultant, Albert Papalardo.
Although some further discussions took place between the parties, they were unable to agree that the lease had been extended to the second term or a new lease. Thereafter, the LMA brought a summary proceeding for possession and to evict against J & J Partners.2 J & J filed a verified answer and a reconventional demand,3 which the trial court did not address.
1 LMA’s legal counsel further stated that “Permanent improvements are those permanently attached to the land that will remain indefinitely and become an integral part of the property.” This definition was not in the lease agreement and was not provided to J & J Partners until February 2019, via email. 2 At the September 2020 meeting, an LMA member motioned to amend the meeting schedule,
which was approved. Then, the LMA Vice Chair offered a motion to amend the schedule to authorize the institution of legal proceedings to evict J & J from the property and to institute any other legal action necessary to obtain possession of the property. LMA made a call for public comment before voting on the motion at that same meeting. Nobody approached the Board to make a comment. LMA unanimously approved the motion. 3 J & J Partners’ reconventional demand included claims for breach of contract, fraud, and
inverse condemnation. LMA’s ambiguity as to whether it would extend the lease resulted in J & J Partners booking fewer events, since events must be booked months to even more than a year in advance. Mr. Burgos informed LMA via email in August 2019 that “[t]his issue [of the lease extension] has put a stop to our business and is affecting us.” He reiterated this in January 2020, saying “I am being damaged . . . this situation is extremely damaging to my business.”
3 A hearing took place over the period of January 13-20, 2021. At the hearing, J & J Partners presented two experts, a CPA (Lori Leal) and an architect (John Williams) to provide evidence as to how the term “permanent improvement” is defined in accounting and commercial real estate development and construction. The CPA and the architect also opined on whether the documentation provided proved that J & J Partners had met the $500,000.00 threshold. Contrary to LMA’s expert, these two experts reviewed the documentation, questioned Mr. D’Amico and Mr. Burgos about the expenditures and each inspected the premises before rendering any opinion. The LMA’s expert architect Paul Dimitrios never visited the site and also gave conflicting valuations of the permanent improvements made; he initially found only $87,000 in permanent improvements, but in a later email to the LMA board president he conceded that the figure was around $460,000.00. He testified that he actually agreed with his initial estimate.
On February 1, 2021, the trial court rendered judgment denying the petition for possession and the rule to evict accompanied by written reasons.
2021-0102, pp. 1-5 (La. App. 4 Cir. 11/10/21), 331 So. 3d 434, 435-37.
In its reasons for judgment, the district court found that J & J had met and
“most likely far exceeded” the $500,000 threshold, but that LMA avoided
acknowledging this due to its desire to have the property “redeveloped into what
they considered a higher and better use.”
LMA appealed. This Court affirmed the judgment of the trial court on
November 20, 2021;4 LMA’s Writ Application with the Louisiana Supreme Court
was denied on February 22, 2022.5
A five-day trial was held in July 2024 on J & J’s reconventional demand.
The district court found that LMA was liable to J & J for breach of contract, fraud,
and inverse condemnation. LMA appealed.
4 Lakefront Mgmt. Auth., 2021-0102 at p. 9, 331 So. 3d at 439. 5 Lakefront Mgmt. Auth., 2021-01855, p. 1 (La. 2/15/22), writ denied, 332 So. 3d 1188.
4 ASSIGNMENTS OF ERROR
LMA submits four assignments of error on appeal:
1. The district court erred by holding that LMA breached the Lease
Agreement’s warranty of peaceful possession where the LMA’s only action
was filing an eviction proceeding, where no express repudiation took place,
and where the district court found that J & J remained in possession of the
leased premises.
2. The district court erred by finding fraud where there was no evidence of a
material misrepresentation or justifiable reliance, and fraud claims based on
unfulfilled promises require proof of intent not to perform at the time the
promise was made.
3. The district court erred in awarding inverse condemnation damages and
attorney fees under La. R.S. 13:5111 where the claim arose from a
commercial lease, not a statutory or constitutional taking, and there was no
deprivation of economic use.
4. The district court erred in awarding damages for lost profits to J & J based
upon a speculative proforma where the alleged damages belong to nonparty
entities that own and operate the events venue business on the leased
premises.
STANDARD OF REVIEW
This Court has previously held that “[a] trier of fact’s factual conclusions
respecting a breach of contract claim are governed by the manifest error or clearly
wrong standard of review.” IV Waste, LLC v. Jim Hotard Properties, LLC, 2023-
0610, p. 17 (La. App. 4 Cir. 9/17/24), 400 So. 3d 1008, 1021 (quoting Brenner v.
Zaleski, 2014-1323, p. 3 (La. App. 4 Cir. 6/3/15), 174 So. 3d 76, 79). “The
5 standard of review for a damage award for breach of contract is whether the trial
court abused its discretion.” Stallings Const. Co. v. Klein Steel, Inc., 2012-1482,
pp. 3-4 (La. App. 4 Cir. 3/27/13), 112 So. 3d 389, 392 (citing Taaffe v. Factory
Direct Installations, Ltd., 2008-0175, p. 14 (La. App. 4 Cir. 4/15/09), 13 So. 3d
562, 569).
“The existence of fraud is a question of fact; thus the trial court’s
determination of fraud or its absence is subject to the manifest error standard of
review on appeal.” River Rental Tools, Inc. v. Smith Power Solutions, LLC, 2021-
0716, p. 4 (La. App. 4 Cir. 6/15/22), 342 So. 3d 1052, 1056 (citing Monroe v.
McDaniel, 2016-0214, p. 8 (La. App. 5 Cir. 12/07/16), 207 So. 3d 1172, 1178).
Whether a constitutional taking has occurred in the context of a contractual
dispute is a question of law and is thus subject to de novo review. See Sarpy v.
ESAD, Inc., 2007-0347, p. 4 (La. App. 4 Cir. 9/19/07), 968 So. 2d 736, 738 (citing
La. Mun. Ass’n v. State, 2004-0227, p. 35 (La. 1/19/05), 893 So. 2d 809, 836)
(“Questions of law are reviewed under the de novo standard.”).
DISCUSSION
We will address the fourth Assignment of Error, the exception of no right of
action, before addressing the other assignments of error. The determination of this
exception has the potential to dispose of all other substantive claims.
Exception of No Right of Action
LMA asserts on appeal that J & J cannot recover lost business profits
belonging to 7412 Lakeshore Drive, LLC and La Maison du Lac, LLC, non-parties
to the case sub judice. LMA argues that the business licenses, bank accounts,
contracts, payroll accounts, receipts, and tax filings for the event venue business
underlying the litigated claims belonged to entities other than J & J Partners; as
6 such, profits that the operator LLCs earned belong to their separate patrimonies,
not J & J’s.
J & J argues that LMA has raised this exception too late. We disagree.
Louisiana Code of Civil Procedure article 2163(A) provides that a party can raise
an exception of no right of action for the first time in an appellate court if the
exception is pleaded prior to submission of the case for decision and if proof of the
grounds of the exception appears in the record.
Nevertheless, this Court overrules LMA’s exception of no right of action.
The Louisiana Supreme Court has explained the function of the peremptory
exception of no right of action:
The function of an exception of no right of action is to determine whether plaintiff belongs to the class of persons to whom the law grants the cause of action asserted in the petition. La.Code Civ.P. art. 927; Dering v. Dering, 21-691 (La. 10/1/21), 324 So.3d 1042 (citing Turner v. Busby, 03-3444 (La. 9/9/04), 883 So.2d 412). The exception of no right of action serves to question whether the plaintiff in the particular case is a member of the class of persons that has a legal interest in the subject matter of the litigation. Id.
Pickett v. Pickett, 2023-01374, p. 1 (La. 11/15/23), 373 So. 3d 49, 50 (Mem). We
find that as a lessee, J & J has the right to bring a breach of contract action for its
lessor’s, LMA’s, refusal to adhere to the terms of their lease agreement. The
district court and this Court have previously found that J & J fulfilled the requisite
suspensive condition outlined in the contract, yet LMA refused to acknowledge the
lease extension.
The question of whether and precisely how much LMA owes J & J in
damages is a separate issue from J & J’s right to bring a breach of contract claim.
As such, that issue will be addressed below.
7 Breach of Contract
Both times these parties came before the district court on these facts, the
district court found that J & J expended over $500,000 in permanent
improvements. This Court previously upheld that finding.6 Therefore, pursuant to
the terms of the lease agreement, the lease should have renewed for another 25
years. LMA breached the lease agreement by failing to acknowledge the lease
extension and filing eviction proceedings against J & J.
The district court found that LMA filing a Petition for Possession and Rule
to Evict on September 25, 2020 constituted an anticipatory breach of the lessor’s
obligation to ensure the lessee’s peaceful possession for the duration of the lease.7
The district court reasoned that “[a] lessor who fails to meet his or her obligations
under the provisions of La. C.C. art. 2682 by wrongfully dispossessing the lessee
of the premises is generally liable for any resulting damages.” See Duhon v. Briley,
2011-1137, p. 5 (La. App. 4 Cir. 5/23/13), 117 So. 3d 253, 258.
Although this Court indeed finds that LMA breached the lease agreement,
we reach this conclusion based on different reasoning. While the district court
relied on the general obligation of lessors to warrant peaceful possession through
the duration of the lease, we instead rely on the specific terms of the lease
agreement between the parties.
6 See Lakefront Mgmt. Auth., 2021-0102 at p. 7, 331 So. 3d at 439. 7 According to Louisiana Civil Code article 2682, a lessor’s principal obligations to a lessee are:
(1) to deliver the thing leased to the lessee; (2) to maintain the thing leased in a condition suitable for the purpose of which it was leased and (3) to protect the lessee’s peaceful possession for the duration of the lease. (Emphasis added).
8 The district court reasoned that LMA breached the lease agreement when it
took “physical acts”8 to throw obstacles in the way of J & J enjoying its possession
of the property. Those physical acts included requiring J & J to submit a formal
written request to the Board for approval, and for the lease/extension to be adopted
via resolution; requiring an appraisal to be performed; including a “best and
highest use” evaluation in the appraisal; instructing Mr. Burgos that issuance of
permits did not amount to approval of lease extension; implying that Mr. Burgos
would have to sign an entirely new lease; retaining an outside architect without the
knowledge of J & J and giving the architect a new definition of “permanent
improvements.”
On appeal, LMA rejects the district court’s reasoning that “physical acts” are
any acts which hinder a lessee’s enjoyment. Rather, LMA argues that the term
“physical acts” per La. C.C.P. art. 3659(B) is limited to corporeal interference; that
the acts referenced above are administrative acts rather than physical acts
constituting a disturbance in fact; and that because LMA never physically
dispossessed J & J nor denied J & J use of the premises, it never committed a
disturbance in fact. Likewise, LMA argues that the filing of a Petition for
Possession and Rule to Evict does not amount to disturbance of J & J’s peaceful
possession.
It is not necessary to determine whether those administrative acts amount to
“physical acts” pursuant to La. C.C.P. art. 3659(B). Arguments rooted in the
8 Per Louisiana Code of Civil Procedure article 3659(A)-(B), a disturbance of possession which
gives rise to a possessory action is either a disturbance in fact or a disturbance in law. “A disturbance in fact is an eviction, or any other physical act that prevents the possessor of immovable property or of a real right therein from enjoying his possession quietly, or that throws any obstacle in the way of that enjoyment.” (Emphasis added).
9 general obligations of lessors are superfluous and distract from the essence of the
litigation at hand. We need only look to the lease agreement itself to recognize that
breach has occurred.
LMA breached the contract when it did not recognize J & J’s lease
extension, regardless of whether its acts would be considered “physical acts” under
La. C.C.P. art. 3659(B). In this same vein, though LMA is correct that filing a
Petition for Possession and Rule to Evict does not itself amount to a disturbance of
J & J’s peaceful possession,9 it still shows that LMA did not respect the terms and
conditions of the lease it entered in 1994. As J & J demonstrated to both the district
court and this Court, it fulfilled the suspensive condition of expending $500,000 in
permanent improvements. Consequently, J & J was entitled to the lease extension.
In not recognizing the extension and instead filing a Petition for Possession and
Rule to Evict, we find that LMA breached the lease.
We affirm the district court’s finding that J & J’s claim against LMA for
breach of contract has merit. The question of quantum of damages for breach of
contract shall be remanded to the district court. In calculating the damages, the
district court should consider which damages belong to J & J as a lessee and the
only party to this litigation.
Fraud
Louisiana Civil Code article 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.” This
9 See Horizon River Rests., LLC v. West Centro, LLC, 2018-0412, p. 10 (La. App. 4 Cir. 1/23/19), 318 So. 3d 848, 855 (quoting Constantin Land Tr. v. Pitre Indus., LLC, 2016-0993, p. 5 (La. App. 1 Cir. 7/10/17), 225 So. 3d 1089, 1093) (“an [eviction] action or proceeding filed adversely to a possessor . . . is not a disturbance [of the lessee’s peaceful possession].”).
10 Court has noted that “the two essential elements of fraud are the intent to defraud
or gain an unfair advantage and actual or probable damage.” McGaha v. Franklin
Homes, Inc., 2021-0244, p. 37 (La. App. 4 Cir. 2/4/22), 335 So. 3d 842, 865
(quoting Yi-Zarn Wang v. Boudreaux, 2020-0249, p. 12 (La. App. 4 Cir. 1/15/20),
310 So. 3d 730, 738). The essential elements of “intentional misrepresentation”
are: (1) a misrepresentation of material fact, (2) made with the intent to deceive,
(3) causing justifiable reliance with resulting injury. Id. (quoting Sys. Eng’g &
Sec., Inc., v. Sci. & Eng’g Ass’ns, Inc., 2006-0974, p. 3 (La. App. 4 Cir. 6/20/07),
962 So. 2d 1089, 1091).
The district court characterized the lease between the parties as the “material
facts” and found that LMA made material misrepresentations about the
requirements of the lease in order to secure an “unjust advantage,” namely, to
secure a new lease which LMA felt exercised a “higher and better use” of the
property. The district court reasoned that these misrepresentations reasonably led
to J & J justifiably relying on the fact that LMA would not honor the terms of the
lease, resulting in substantial loss to J & J by way of lost profits. Thus, the district
court found LMA liable for fraud against J & J for all of the material
misrepresentations the LMA made and imposed on J & J in renewing and
extending the lease at issue.
We find that the district court was manifestly erroneous in finding that
LMA’s actions rose to the level of fraud. It appears it is more accurate to
characterize the aforesaid actions as indication of disagreement between the parties
about the necessary procedure for extending the lease. J & J did not show that
LMA’s actions involved the requisite level of deceit to be considered fraudulent.
LMA going against the plain terms of the lease and trying to make J & J jump
11 through various administrative hoops for the lease extension is a breach of contract
issue, but it is not in itself fraudulent. We reverse the district court’s finding that
LMA is liable for fraud. We do not find that LMA’s actions throughout the lease
extension process/negotiations amount to fraud.
Inverse Condemnation
The Louisiana Supreme Court set forth a three-prong analysis to determine
whether a claimant is entitled to compensation for a constitutional taking: (1) a
recognized species of property right has been affected; (2) the property has been
taken or damaged in a constitutional sense; and (3) the taking or damaging was for
a public purpose under Article I, Section 4 of the Louisiana Constitution.10
This Court has clarified the purpose of an inverse condemnation claim:
The purpose of an inverse condemnation claim is to provide a procedural remedy for an owner who seeks compensation for a taking that has happened to their land by a government or private entity. Faulk v. Union Pac. R.R. Co., 2014-1598 (La. 6/30/15), 172 So. 3d 1034, 1043–44. Under the constitution, a taking is “any substantial interference with the free use and enjoyment of property.” State Through Dep't of Transp. & Dev. v. Chambers Inv. Co., 595 So. 2d 598, 602 (La. 1992).
Fanny Farms, LLC v. Plaquemines Par. Gov’t, 2023-0098, pp. 11-12 (La. App. 4
Cir. 11/21/23), 377 So. 3d 838, 847. The district court’s finding of inverse
condemnation is an error of law subject to our de novo review.
We find that when LMA filed a Petition for Possession and Rule to Evict, it
was acting in its contractual capacity as a commercial lessor. There is nothing in
the record to support that it was acting based on a statute, regulation, or ordinance.
There is no indication that it was exercising police or legislative power. Thus, this
10 State, Dep’t of Transp. and Dev. v. Chambers Inv. Co., 595 So. 2d 598, 603 (La. 1992).
12 action by the LMA is outside of the scope of government action and does not
trigger constitutional scrutiny.
On this point, the U.S. Fifth Circuit has explained:
Where an alleged taking implicates government contracts . . . a successful takings claim is unlikely. A government acting “in its commercial or proprietary capacity in entering contracts, rather than in its sovereign capacity,” is treated just as any other party to a contract, and contract law remedies provide the proper recourse for any wrongdoing. Preston Hollow Cap., L.L.C. v. Cottonwood Dev. Corp., 23 F.4th 550, 553 (5th Cir. 2022) (quoting Hughes Commc'ns Galaxy, Inc. v. United States, 271 F.3d 1060, 1070 (Fed. Cir. 2001)). Put differently, actions “that would constitute a simple breach of contract when a non-governmental entity is involved do not become a constitutional violation simply because the contracting party is a municipality.” Id. at 552 (quoting Massó-Torrellas v. Mun. of Toa Alta, 845 F.3d 461, 468 (1st Cir. 2017)).
Mesquite Asset Recovery Group, LLC v. City of Mesquite, Tex., 154 F. 4th 313,
316 (5th Cir. 2025). The Court of Federal Claims has echoed this viewpoint:
“When a plaintiff possesses enforceable rights under a contract with the
government, ‘interference with such contractual rights generally gives rise to a
breach claim not a taking claim.’” Century Exploration New Orleans, Inc. v.
United States, 103 Fed. Cl. 70, 77 (Fed. Cl. 2012) (quoting Sun Oil Co. v. United
States, 572 F. 2d 786, 818 (Ct. Cl. 1978)).
Plaintiffs may, however, plead both a breach of contract claim and a takings
claim as alternative theories of recovery when challenging the same government
action. Mesquite Asset Recovery Group, LLC, 154 F. 4th at 317; Century
Exploration New Orleans, Inc., 103 Fed. Cl. at 77. A court will first assess the
breach of contract claim and will examine the takings claim if the breach claim
falters. Mesquite Asset Recovery Group, LLC, 154 F. 4th at 317.
Here, LMA acted in its capacity as a lessor when entering the 1994 lease
agreement with J & J. The fact that this lessor is a governmental entity does not
13 convert the breach of contract into a Fifth Amendment violation. J & J asserted
both a breach of contract claim and an inverse condemnation claim, two alternative
theories of recovery. The district court should only have evaluated the inverse
condemnation claim if the breach of contract claim failed. Since the breach claim
succeeded, the inverse condemnation claim should have been dismissed.
Even if this was “government action” subject to constitutional scrutiny, the
inverse condemnation claim fails on the second prong; J & J’s property has not
been “taken” in a constitutional sense. J & J argues LMA engaged in a physical
constitutional taking of the property when it told J & J its lease had expired and
filed a petition to evict J & J, thereby rendering the property totally useless to J & J
and causing J & J significant damage.
As this Court explained in Fanny Farms, LLC:
An unconstitutional taking does not arise merely because the owner is unable to maximize the economic potential of their property. State, Dep't of Soc. Servs. v. City of New Orleans, 95-1757 (La. App. 4 Cir. 5/29/96), 676 So. 2d 149, 154. Denying one avenue of developing your property would not necessarily amount to a taking either. Major v. Pointe Coupee Par. Police Jury, 2007-0666 (La. App. 1 Cir. 12/21/07), 978 So. 2d 952, 957. In order for a taking to arise in this situation, the taking must require the owner to suffer a permanent invasion of its property and deprive the owner of all economically beneficial use of its property. Faulk, 172 So. 3d at 1057.
Id. at p. 13, 377 So. 3d at 847.
J & J has not illustrated that LMA’s refusal to uphold the lease extension
amounts to deprivation of all economically beneficial use of the property. J & J
remained in possession of the property and continued to derive profit. Though the
uncertainty of the lease extension meant J & J could not book events such as
weddings, which must be booked well in advance, this is not the only economically
beneficial use of the property.
14 At issue is a contractual dispute, not a constitutional taking. We reverse the
district court’s finding that J & J proved its claim for inverse condemnation as well
as the associated damages and attorney fees.11
CONCLUSION
J & J has demonstrated to multiple courts that it satisfied the suspensive
condition in the 1994 lease. Thus, LMA should have honored the lease extension.
In not doing so, LMA breached the lease agreement. J & J, as the lessee of the
breached agreement, has a right to bring an action against LMA for this breach.
However, we find that LMA’s actions do not rise to the level of fraud. We also
find that LMA was acting in its commercial/contractual capacity in entering the
lease agreement and that J & J’s property was not taken such that it amounted to
inverse condemnation. For these reasons, we overrule LMA’s exception of no right
of action, affirm the finding that there was breach of contract, reverse the findings
of fraud and inverse condemnation, and remand to the district court for further
proceedings consistent with this opinion.
11 The standard for an award of attorney fees in inverse condemnation cases is set forth in Title
13, Section 5111 of the Louisiana Revised Statutes, and reads, in pertinent part:
A. A court of Louisiana rendering a judgment for the plaintiff, in a proceeding brought against the state of Louisiana, a parish, or municipality or other political subdivision or an agency of any of them, for compensation for the taking of property by the defendant, other than through an expropriation proceeding, shall determine and award to the plaintiff, as a part of the costs of court, such sum as will, in the opinion of the court, compensate for reasonable attorney fees actually incurred because of such proceeding.
Thus, we reverse the statutorily-mandated attorney fees alongside the reversal of the underlying inverse condemnation claim.