Wakin' Bakin' L.L.C., Conrad Chura & Crystal Chura v. Jay Rabalais, Cpa-Jay, L.L.C., Accounting Services Unlimited L.L.C., Accounting Services Unlimited Baton Rouge L.L.C., Abc Insurance Company, Xyz Insurance Company

• Court: Louisiana Court of Appeal
• Decided: November 15, 2023
• Docket: 2023-CA-0432
• Status: Published

Opinion

WAKIN' BAKIN' L.L.C., * NO. 2023-CA-0432 CONRAD CHURA & CRYSTAL CHURA * COURT OF APPEAL VERSUS * FOURTH CIRCUIT JAY RABALAIS, CPA-JAY, * L.L.C., ACCOUNTING STATE OF LOUISIANA SERVICES UNLIMITED ******* L.L.C., ACCOUNTING SERVICES UNLIMITED BATON ROUGE L.L.C., ABC INSURANCE COMPANY, XYZ INSURANCE COMPANY

APPEAL FROM CIVIL DISTRICT COURT, ORLEANS PARISH NO. 2022-10024, DIVISION “L” Honorable Kern A. Reese, Judge ****** Judge Karen K. Herman ****** (Court composed of Judge Joy Cossich Lobrano, Judge Rosemary Ledet, Judge Karen K. Herman)

Michael R. Dodson FISHMAN HAYGOOD, L.L.P. 201 St. Charles Avenue 46th Floor New Orleans, Louisiana 70170-4600

COUNSEL FOR PLAINTIFFS/APPELLANTS

David M. McDonald Molly M. Jones LAW OFFICES OF JOHN BUTLER 3939 N. Causeway Blvd., Suite 300 Metairie, Louisiana 70002

COUNSEL FOR DEFENDANTS/APPELLEES

REVERSED November 15, 2023 KKH JCL RML Wakin’ Bakin’ L.L.C., Conrad Chura, and Crystal Chura (collectively,

“plaintiffs”), appeal the May 9, 2023 judgment granting an exception of no cause

of action in favor of Accounting Services Unlimited L.L.C. and Accounting

Services Unlimited of Baton Rouge (collectively, “ASU”), dismissing with

prejudice all claims asserted by plaintiffs against ASU. For the reasons set forth

below, we reverse.

STATEMENT OF FACTS AND PROCEDURAL HISTORY

The Churas own and operate the Wakin’ Bakin’ restaurants. On October 27,

2022, plaintiffs filed suit against ASU, Jay Rabalais, and his company, CPA-JAY,

L.L.C. (collectively “Rabalais”). The petition asserts the following:

In 2013, plaintiffs contracted with ASU to provide general accounting

services for the business. Shortly thereafter, ASU began offering tax services to

their customers. Plaintiffs inquired about the new tax service and were informed

that ASU had in-house certified public accountants (“CPAs”) with whom ASU

worked closely in providing tax services. ASU connected plaintiffs with Rabalais,

who began preparing tax returns for plaintiffs in 2014.

1 Plaintiffs terminated their relationship with Rabalais in 2019. They

terminated their relationship with ASU in 2020.

In 2021, Wakin’ Bakin’ applied for a COVID-19 Economic Injury Disaster

Loan with the SBA (which required the applicant to provide its tax returns). The

application was denied on August 10, 2021. Plaintiffs were first told that the loan

was denied because the business did not file its 2019 tax return. However, after

further communication with the IRS, plaintiffs learned for the first time on

November 4, 2021, that the application was denied because the 2019 business tax

return (filed on September 15, 2020 by Rabalais) had all line items for income

(mistakenly/improperly) filled in with all zeros. Plaintiffs amended the 2019

return to reflect the correct amount of business income, but it was too late. The

SBA fund had been exhausted. For these reasons, plaintiffs allege an economic

loss.

The petition specifically pleads that: 1) ASU employed CPAs “in a fee-

sharing arrangement in which an accountant performs work for clients of ASU and

retains a percentage of the money paid for the tax services rendered”; 2) ASU

drafted payments for Rabalais’ tax services directly from plaintiffs’ bank account;

3) ASU owed a duty to plaintiffs to oversee that its CPAs “were performing their

job correctly, filing the appropriate tax documents, and not filing tax documents

for prior clients that had terminated their relationship with one of ASU’s

accountants”; 4) ASU owed a duty to plaintiffs “to provide a competent reference

for a [CPA] to perform tax filings”; and 5) ASU “breached this duty by providing a

reference to an incompetent [CPA] that filed incorrect tax documents for

[plaintiffs].”

2 In response to the petition, ASU filed an exception of prescription and an

exception of no cause of action, arguing that: 1) plaintiffs’ negligence claim had

prescribed; and 2) plaintiffs’ breach of contract claim failed to state a cause of

action.1 Regarding the breach of contract claim, ASU advanced one argument –

that plaintiffs have no breach of contract claim because plaintiffs’ contract with

ASU had terminated before Rabalais filed the 2019 tax return.

Plaintiffs filed an opposition to ASU’s exceptions and also prayed for leave

to amend their petition. As to prescription, plaintiffs asserted that the petition was

filed within one year from their discovery of the unauthorized/incorrect tax return.

As to their breach of contract claim, plaintiffs asserted that they attempted to

terminate their relationship with ASU and Rabalais. However, the unauthorized

return was nevertheless filed.

The exceptions came for hearing on April 28, 2023. Judgment was rendered

May 9, 2023, sustaining ASU’s exception of no cause of action, and dismissing

with prejudice all claims asserted by plaintiffs against ASU.2

Written reasons for judgment were not provided. However, from the bench,

the trial court indicated that the exception of no cause of action (as to ASU) was

granted, finding that:

I do not view them as direct parties in interest to have any cause of action pending. The Court views them as a conduit merely for responsibility that was delegated to the defendant, Mr. Rabalais, who in turn actually took the action that resulted in any potential damage to the plaintiff.”

1 Rabalais also filed exceptions of prescription and no cause of action. Those exceptions were denied in the May 9 2023 judgment, but are not before us here. Plaintiffs’ action against Rabalais remains. 2 It appears from the transcript that the trial court orally denied ASU’s exception of prescription.

However, the judgment does not specifically reference the exception of prescription.

3 LAW AND ANALYSIS

On appeal, plaintiffs maintain that the trial court erred in: 1) sua sponte

raising and sustaining, without notice and an opportunity for briefing, an exception

of no cause of action premised on whether ASU was a mere “conduit” for

Rabalais’ actions; 2) finding that ASU was a mere “conduit” for Rabalais’ actions

and dismissing ASU with prejudice; and 3) failing to allow an opportunity to

amend.

Standard of Review

“An exception of no cause of action presents a question of law, so an

appellate court reviews a trial court’s ruling on an exception of no cause of action

de novo.” Cunningham v. City of New Orleans, 2021-0532, p. 9 (La. App. 4 Cir.

3/30/22), 336 So.3d 977, 986. “A peremptory exception of no cause of action

questions whether the law extends a remedy against a defendant to anyone under

the factual allegations of a petition.” Id. at p. 10, 336 So.3d at 986 (citations

omitted).

Regarding the first two assignments of error, plaintiffs argue that the issue of

whether ASU was only a “conduit” for Rabalais’ misconduct was neither raised in

ASU’s exception nor briefed by the parties. Thus, plaintiffs maintain that the trial

court improperly raised and sustained an exception of no cause of action ex proprio

motu without any prior notice or meaningful opportunity to be heard on the issue.

We find no merit in this argument.

It is well-settled that the trial court can sua sponte raise its own exception of

no cause of action. See Moreno v. Entergy Corp., 2010-2268, p. 3 (La. 2/18/11),

64 So.3d 761, 762; and La. C.C.P. art. 927(B). Moreover, as we stated in Fertitta

4 v. Regions Bank, 2020-0300, p. 6 (La. App. 4 Cir. 12/9/20), 311 So.3d 445, 450-

51,

“A peremptory exception of no cause of action questions whether the law extends a remedy against a defendant to anyone under the factual allegations of a petition.” White v. New Orleans Ctr. for Creative Arts, 2019-0213, p. 7 (La. App. 4 Cir. 9/25/19), 281 So.3d 813, 819. The exception tests “the legal sufficiency of the petition by determining whether the law affords a remedy on the facts alleged in the pleading.” Green v. Garcia-Victor, 2017-0695, p. 4 (La. App. 4 Cir. 5/16/18), 248 So.3d 449, 453 (quoting Moreno v. Entergy Corp., 2010-2281, p. 3 (La. 2/18/11), 62 So.3d 704, 706).

“In deciding an exception of no cause of action a court can consider only the petition, any amendments to the petition, and any documents attached to the petition.” Green, 2017-0695, p. 5, 248 So.3d at 453 (quoting 2400 Canal, LLC v. Bd. of Sup’rs of Louisiana State Univ. Agr. & Mech. Coll., 2012-0220, p. 7 (La. App. 4 Cir. 11/7/12), 105 So.3d 819, 825). “A court cannot consider assertions of fact referred to by the various counsel in their briefs that are not pled in the petition.” Id. “The grant of the exception of no cause of action is proper when, assuming all well pleaded factual allegations of the petition and any annexed documents are true, the plaintiff is not entitled to the relief he seeks as a matter of law.” Id. “[A]ny doubt must be resolved in the plaintiffs’ favor.” Id. Nevertheless, the mere conclusions of the plaintiff which are unsupported by facts do not set forth a cause of action. Green, 2017-0695, p. 5, 248 So.3d at 453-54 (citing 831 Bartholomew Investments-A, L.L.C. v. Margulis, 2008- 0559, p. 10 (La. App. 4 Cir. 9/2/09), 20 So.3d 532, 538).

“The essential elements of a breach of contract claim are the existence of a

contract, the party’s breach thereof, and resulting damages.” 1100 South Jefferson

Davis Parkway, LLC v. Williams, 2014-1326, p. 5 (La. App. 4 Cir. 5/20/15), 165

So.3d 1211, 1216 (citing Favrot v. Favrot, 2010-0986, pp. 14-15 (La. App. 4 Cir.

2/9/11), 68 So.3d 1099, 1108-09).

Pursuant to our de novo review of the pleadings, and applying the legal

principles set forth above, we conclude that the petition sufficiently alleges a cause

of action for breach of contract. Accordingly, we find that the trial court erred in

granting ASU’s exception of no cause of action.

5 CONCLUSION

For the foregoing reasons, the judgment granting ASU’s exception of no

cause of action is reversed.

REVERSED