Opinion
CIVIL ACTION NO. 94-3090 SECTION "L"(4)
April 15, 2004
ORDER REASONS
Before the Court is Plaintiff Berk-Cohen's Motion in limine to exclude: (1) evidence of structural changes to Forest Isle Apartments, including the report and testimony of Charles Montgomery and Robert Kunst; and (2) evidence of conditions at the property which are alleged to be conducive to termite infestations, including the reports of Mr. Montgomery and Mr. Kunst, as well as exhibits 5 through 16 and exhibit 30. For the following reasons, those motions are GRANTED IN PART and DENIED IN PART.
I. BACKGROUND
Berk-Cohen Associates is the current owner of the Forest Isle Apartments, a 707 unit apartment complex built in 1971. Orkin contracted to provide extermination services for the Forest Isle Apartments in 1981. The contract between Forest Isle and Orkin obligated Orkin to issue a "Lifetime Retreatment Guarantee" upon completion of the initial treatment. According to the terms of that Guarantee, Orkin must apply, at no extra cost, any additional treatment to the premises if an infestation of subterranean termites is found in the premises during the effective period of the Guarantee. The extermination services contract further provided that the Guarantee was effective for an initial period of two years and thereafter so long as renewal payments are made annually. Since the expiration of the initial two-year renewal period in 1983, both Berk-Cohen and its predecessors allege they have paid the renewal amount to keep the Guarantee in force.
In 2002, Orkin repudiated its obligations under the extermination services contract and the Guarantee. When asked about the termination, Orkin informed Berk-Cohen that it had canceled the contract due to nonpayment of the annual renewal fee. Berk-Cohen then offered to pay the 2002 renew fee, which Orkin promptly rejected. Berk-Cohen claims that since the initial two-year renewal period expired in 1983, Orkin has sent annual renewal notices to Forest Isle Apartments and each renewal payment was made. Berk-Cohen argues that Orkin intentionally failed to send a renewal notice to Forest Isle in 2002 so that it could cancel the Lifetime Retreatment Guarantee. Berk-Cohen contracted with another extermination company to retreat the property, and then initiated this suit against Orkin for damages.
On April 7, 2003, Defendant Orkin filed an answer to the plaintiff's complaint. In that answer, Orkin raised several alternative defenses to the plaintiff's claims that are the subject of the plaintiff's instant motion. Orkin asserted that it terminated the contract for nonpayment. Orkin also asserted alternative defenses that its termination of the contract was proper due to changes that the Plaintiff made to the property and that the Plaintiff is at fault for failing to remedy conditions on the premises that encouraged infestation. The Plaintiff now moves to prevent the Defendant from presenting its alternative defenses based on the hoary "mend the hold" doctrine. The phrase "mend the hold" originated as nineteenth-century wrestling parlance "meaning to get a better grip (hold) on your opponent." Harbor Ins. Co. v. Cont'l Bank Corp., 922 F.2d 357, 362 (7th Cir. 1990). The phrase first entered the legal lexicon in Railway Co. v. McCarthy, 96 U.S. 258 (1877), in which the Supreme Court of the United States applied this concept to prevent a nonperforming party in a contract suit from asserting a defense that it had not raised prior to the close of evidence. 96 U.S. at 267-68. From that case, two modern forms of the mend the hold doctrine have developed: (1) a minority version of the rule that limits a nonperforming party to defenses first raised after litigation is underway; and (2) a majority version of the rule that limits the nonperformer's potential defenses to those explanations asserted at the time of nonperformance. Robert H. Sitkoff, Comment, "Mend the Hold" and Erie: Why an Obscure Contracts Doctrine Should Control in Federal Diversity Cases, 65 U. Chi. L. Rev. 1059, 1059-60 (1998).
Several Louisiana courts, including the Supreme Court of Louisiana, invoked the mend the hold doctrine in published opinions. The first mention of the doctrine in published Louisiana jurisprudence appears in Koenig v. Huck, 26 So. 543 (La. 1899), where the Supreme Court held that a party accused of making a fraudulent conveyance had not attempted to "mend his hold, to shift his ground, or to aver . . . a state of facts different from those which were fully disclosed. . . ." Id. at 545. The last recorded mention of the doctrine in Louisiana caselaw appears in Norton v. Crescent City Ice Mfg. Co., 1 50 So. 855 (La. 1933). Neither counsel nor the Court has been able to locate any citation to the mend the hold doctrine in the last seventy years.
The Plaintiff now urges the Court to invoke the mend the hold doctrine in its capacity as an Erie court. The Plaintiff argues that although the caselaw is dated, Louisiana's prior use of the doctrine is consistent with the majority version of mend the hold, which limits a nonperforming party to the defenses raised at the time of the nonperformance. The Plaintiff asks the Court to prevent the Defendant from raising alternative defenses that were included in the Defendant's initial answer but not asserted at the time of nonperformance.
The Defendant argues that mend the hold was never valid Louisiana law because the scant references to "mend the hold" in prior cases never rose to the level of jurisprudence constante. The Defendant urges the Court to reject mend the hold in its entirety and to permit it to raise any alternative defenses that are proper under the rules of civil procedure. In the alternative, the Defendant contends that Louisiana's mend the hold doctrine, if it does exist, is the minority version of the rule. In either case, the Defendant urges that the Court permit it to introduce evidence in support of its affirmative defenses.
In the event that the Court rejects the majority version of mend the hold, the Plaintiff asks that the Court limit any evidence relating to the structural modification defenses to any structural changes or conditions that occurred after June 2002. The record reflects that June 2002 was the last time that Defendant Orkin offered to retreat the plaintiff's apartment complex. The Plaintiff invokes general estoppel and waiver principles in support of this argument. The Court heard oral argument on these motions and is now ready to rule on them.
II. ANALYSIS
A. The Erie Doctrine and Louisiana Law
The matter is before the Court based on diversity of citizenship, and both this motion and also the validity of "mend the hold" must be resolved by the application of the substantive law of Louisiana. The parties disagree as to what that substantive law is.
Defendant Orkin contends that the mend the hold doctrine is not the substantive law of Louisiana. To the extent that it has been recognized by Louisiana courts, Orkin argues that the common law mend the hold doctrine is not jurisprudence constante and should be viewed as a secondary source of law under Louisiana's civilian legal system. Orkin argues that an accurate "Erie guess" shows that the doctrine is in direct conflict with Louisiana law.
Berk-Cohen submits that "mend the hold" is the established law of Louisiana, and is not inconsistent with the civil code. In fact, the Plaintiff contends that the contractual good faith requirements of Civil Code Article 1983 endorse the equitable principles underlying the mend the hold doctrine.
A federal court must apply substantive state law when adjudicating state law claims. Erie R.R. Co. v. Tompkins, 304 U.S. 64 (1938). Thus it is necessary at the outset to discern the state's substantive law. Louisiana's civilian tradition complicates the Erie analysis. See generally, Alvin B. Rubin, Hazards of a Civilian Venturer in a Federal Court: Travel and Travail on the Erie Railroad, 48 La. L. Rev. 1369 (1988). Louisiana law originates from both legislation and custom, but custom cannot abrogate legislation. La. Civ. Code Ann. arts. 1, 3 (West 2004). Louisiana's primary sources of law are the state's constitutions, codes, and statutes. Am. Int'l Specialty Lines Ins. Co. v. Canal Indemnity Co., 352 F.3d 254, 260 (5th Cir. 2003). The civilian system does not abide by the common law doctrine of stare decisis, and thus judicial precedent, even when so uniform and entrenched as to become jurisprudence constante, is only a secondary source of law that does not strictly bind Louisiana's lower courts. Id. at 361.
Because of this civilian tradition, Louisiana substantive law requires that a federal court's Erie guess "employ the appropriate Louisiana civilian methodology to decide the issues the way that we believe the Supreme Court of Louisiana would decide it." Lake Charles Diesel, Inc. v. CMC, 328 F.3d 192, 197 (5th Cir. 2003). Judicial precedent serves a persuasive rather than an authoritative role in the civilian system, and Louisiana courts remain free to change their legal minds. "It is only when courts consistently recognize a long-standing rule of law outside of legislative expression that the rule of law will become part of Louisiana's custom under Civil Code article 3 and be enforced as the law of the state." Doerr v. Mobil Oil Corp., 774 So.2d 119, 129 (La. 2000).
B. Louisiana's "Mend the Hold" Doctrine
The mend the hold doctrine, as originally announced by the Supreme Court of the United States, provides that "where a party gives a reason for his conduct and decision touching any thing involved in a controversy, he cannot, after litigation has begun, change his ground, and put his conduct upon another and a different consideration. He is not permitted thus to mend his hold." Railway Co. v. McCarthy, 96 U.S. 258, 267-68 (1877). Plaintiff Berk-Cohen argues that this doctrine prevents Defendant Orkin from asserting any defense not raised at the time of the alleged breach of the extermination services contract. Though the Defendant's initial answer raises affirmative defenses relating to structural conditions, the Plaintiff argues that the mend the hold doctrine bars the consideration of any defense not raised at the time of nonperformance. The Plaintiff moves the Court to exclude certain evidence relating to these affirmative defenses.
Because the Supreme Court of Louisiana has adopted some form of the mend the hold doctrine in prior cases, this Court need not make a blind "Erie guess" on the continued existence of the doctrine. It is true that the cases are old, but old or anomalous Louisiana Supreme Court caselaw, though nonbinding as stare decisis, remains highly persuasive authority on an Erie court. Songbyrd, Inc. v. Bearsville Records, No. 96-30670, 1997 U.S. App. LEXIS 12684, at *20 (5th Cir. Feb. 4, 1997) (finding fifty-year-old jurisprudence instructive in answering a question of Louisiana law). It is generally true that a federal court should not disregard state authority unless convinced by other persuasive data that the state's highest court would decide the matter otherwise. See Transcon. Gas Pipe Line Corp. v. Transp. Ins. Co., 953 F.2d 985, 988 (5th Cir. 1992) (quoting West v. American Tel. Tel. Co., 311 U.S. 223, 327 (1940)). Thus this Court concludes that the mend the hold doctrine is still viable in Louisiana.
Louisiana's version of the mend the hold doctrine, however, does not limit a Defendant to those defenses asserted at the time of contractual nonperformance. Rather, it appears to limit a party to defenses and explanations asserted in its pleadings. In Norton v. Crescent City Ice Manufacturing Co., 150 So. 855 (La. 1933), the Supreme Court of Louisiana prevented the decedent's heirs from asserting new damage claims after judgment was rendered. The court noted that the plaintiff's had an earlier opportunity to amend their pleadings and commented, "we do not think at this late date they should be permitted to mend their hold. . . ." Id. at 858. The Supreme Court thus invoked the doctrine to prevent a post-litigation change in position. This interpretation of the mend the hold doctrine is bolstered by the Louisiana Supreme Court's decision in Frisco. Land Co. v. Nevis, 66 So. 300 (La. 1914). There, the Supreme Court refused to consider, on appeal, an additional defense that was not pled to the trial court. Id. Louisiana Supreme Court caselaw appears consistent in treating the mend the hold doctrine as a form of judicial estoppel to be applied only where a party changes his position after litigation has commenced. The genesis of the common law mend the hold doctrine, Railway Co. v. McCarthy, further supports the interpretation of the mend the hold doctrine as a form of judicial estoppel. In Railway, the Supreme Court of the United States first used the doctrine to prevent the defendant from invoking an additional defense that was not raised before the close of evidence. 96 U.S. at 267. Louisiana's Code of Civil Procedure also weighs against the broad, alternative interpretation urged by the Plaintiff. Louisiana's Code of Civil procedure permits an answer to "set forth two or more defenses in the alternative, even though the factual or legal bases thereof may be inconsistent or mutually exclusive." La. Code Civ. Proc. Ann. art. 1006 (West 1984). As Defendant Orkin correctly observes, the rules also permit a defendant to assert new defenses by amending his or her pleading, which in certain circumstances may be done without leave of court. La. Code Civ. Proc. Ann. art. 1151 (West 1984).
To the extent that the aged doctrine continues to exist in Louisiana, it thus appears that mend the hold binds a party to the defenses it raises in its pleadings. Louisiana's mend the hold doctrine does not, as the Plaintiff suggests, limit the nonperforming party's defenses to those asserted at the time of nonperformance.
The plaintiff's arguments in favor of the majority version of the mend the hold doctrine make little sense given Louisiana's commitment to notice pleading. The majority version does not encourage good faith and fair dealing in contract. Instead, it encourages silence by the nonperforming party. The plaintiff's position would limit the talkative nonperforming defendant to the casual explanation made at the time of his nonperformance. At the same time, a silent nonperformer would be permitted to assert an unlimited array of alternative defenses once suit was brought under the normal notice pleading rules. Such inconsistent treatment makes little sense, and the Court rejects the plaintiff's argument.
The plaintiff's interpretation of the mend the hold doctrine makes some sense where a nonperforming party has an affirmative duty to justify its breach, such as in the insurance arena. Applying that interpretation to general obligations, where there is no such duty and a party may breach for any reason or no reason at all, is inconsistent with Louisiana precedent and Louisiana's Code of Civil Procedure.
The Court's best "Erie guess" on the continued viability of the mend the hold doctrine is that Louisiana recognizes the minority version of the mend the hold doctrine. To the extent that the mend the hold doctrine continues to exist at all, it applies only to prevent a party from mending its hold and raising additional defenses that are not included in the initial pleadings. It does not prevent Defendant Orkin from arguing its properly pled affirmative defenses, which were made more than a year ago prior to the commencement of formal discovery.
C. Limitation on the Scope of Orkin's Affirmative Defenses
The Defendant last offered to renew the retreatment contract in June 2002. The record reflects the fact that the extermination services contract had been continuously renewed for two decades, and that the Defendant inspected the apartment complex in the course of providing extermination services. The Court finds that general waiver and estoppel principles limit the Defendant's affirmative defenses to any structural changes or modifications made after June 2002, the last occasion on which Orkin offered to renew the annual retreatment policy.
III. CONCLUSION
For the foregoing reasons, the plaintiff's Motion in limine is GRANTED IN PART and DENIED IN PART. Defendant Orkin is permitted to introduce evidence in support of the affirmative defenses raised in its pleadings. Orkin may not, however, introduce evidence of any structural modification or condition that occurred prior to June 2002.