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finding the out-of-state law firm's construction of La. R.S. 9:5605 as applying to “any law firm whose activities are ‘authorized' - that is, permitted, allowed, and not prohibited - under Louisiana law” was “both reasonable and logical.”
Summary of this case from Henry v. Maxum Indem. Co.Opinion
Civil Action No. 01-1507 Section "N"
November 25, 2002
ORDER AND REASONS
Before the Court is a Motion to Dismiss Pursuant to FRCP Rules 12(b)(2) and 12(b)(6), and 15 U.S.C. § 78u-4 (b)(1), (2), and (3) for Lack of In Personam Jurisdiction and Failure to State a Claim Upon Which Relief Can Be Granted., filed by Skadden, Arps, Slate, Meagher Flom LLP ("Skadden Arps") and Skadden Arps lawyer, John W. Osborn. For the reasons that follow, the motion is GRANTED.
I. BACKGROUND
Plaintiffs, Scott A. Evans, Charles Cox, Samuel A. DeFranco, Robert Dunlop, Douglas Knight, Stan St. Pierre, and Greg F. Vogel, each allegedly owned travel agencies, which they sold during 1997 to U.S. Office Products Company ("Office Products") in exchange for stock in Office Products. See 3d Party Compl. (Rec. Doc. 14) at ¶ 20. In mid-January 1998, as part of a restructuring plan, Office Products allegedly announced an offer to purchase a percentage of its outstanding stock in a transaction referred to as a "self-tender." Id. at ¶ 22. Also in early 1998, CMS representatives Steven Lockshin and Matthew Petersen allegedly solicited the plaintiffs to buy a security product (referred to as a Maximum Monetization and Asset Protection or "MMAP" transaction) offered by Union Bank of Switzerland and UBS Warburg (collectively, "UBS"), which allegedly would enable plaintiffs to hedge the risk of a drop in the price of Office Products stock while avoiding the immediate tax liability they would face by selling the stock. Id. at ¶¶ 21-23. Upon entering into the MMAP agreements, the plaintiffs would pledge a certain amount of their stock to a UBS entity and, in exchange, would be paid a certain percentage of the stock's value. At the end of three years, depending upon the market price of the stock and subject to certain adjustments, the pledged stock would be transferred entirely to CBS or a portion of the stock would be returned to the plaintiffs.
Plaintiffs allege that between January and April 1998, Lockshin and Peterson, along with a CBS representative named Jeff Sparks, assuaged concerns expressed by certain plaintiffs as to whether entering into the MMAP would affect their ability to take full advantage of the self-tender offer. Id. at ¶¶ 25-27. According to plaintiffs, Lockshin and Peterson told plaintiffs that the self-tender offer would be excluded from and have no effect on the MMAP transaction. Id. Plaintiffs allege that it was these assurances that convinced them to invest in the MMAPs rather than proposals from other investment banks. Id. During the period from March to May 1998, plaintiffs each entered into a MMAP transaction by signing a Stock Purchase Agreement and Pledge Agreement. Id. at ¶ 29. Shortly thereafter, the self-tender was consummated, and CBS allegedly sent plaintiffs the cash purchase price for the 24 percent of their shares that was accepted in the self-tender. Orig. Pet. (Rec. Doc. 1, Tab A) at ¶ 18.
Then, in early summer 1998, a dispute arose between the plaintiffs and CBS regarding the effect of the Office Products restructuring plan. CBS took the position that Office Products' restructuring had diluted the value of the company's outstanding shares and therefore constituted a Potential Adjustment Event under the MMAP agreements. CBS allegedly wrote letters to the plaintiffs asking each of them to pay CBS a portion of the cash proceeds from the self-tender. Id. at ¶ 21.
In April 2001, shortly after allegedly receiving letters from CBS' attorney seeking approximately $5 million, plaintiffs brought this action in state court seeking a declaratory judgment against CBS. Id. at ¶¶ 24, 25. CBS removed the matter to this Court and filed a counterclaim against the plaintiffs. (Rec. Does. 1 and 2). Plaintiffs then filed a Third-Party Complaint against CMS, seeking indemnification from CMS on grounds of intentional and negligent misrepresentation, detrimental reliance, breach of fiduciary duty, and violations of federal and state securities laws. (Rec. Doc. 14). CMS responded by filing a cross claim against CBS and a third-party claim against Skadden Arps and John W. Osborn, a lawyer in Skadden Arps' New York office, who represented the plaintiffs in the MMAP transaction. (Rec. Doc. 34). According to CMS, "[i]f the plaintiffs were misled as to the MAP transactions by CMS . . ., then that could only be as a result of Mr. Osborn and Skadden, Arps failing to fulfill their duties to represent, counsel and advise their clients . . ., to explain the MMAP transactions to their clients, to be sure that their clients understood the MMAP transactions and be sure that their clients understood their obligations to CBS . . ." CMS' 3d Party Compl. (Rec. Doc. 34) at ¶ 8.
II. LAW AND ANALYSIS
Osborn and Skadden Arps urge three bases for dismissing CMS' third-party claim: (1) lack of personal jurisdiction as to Osborn; (2) peremption under section 9:5605 of Louisiana Revised Statutes; and (3) failure to state a claim on which relief may be granted. Because the Court finds the first two grounds for dismissal to be well founded, it does not reach the third argument.
A. In Personam Jurisdiction:
"In a diversity suit, a federal court has personal jurisdiction over a nonresident defendant to the same extent that a state court in that forum has such jurisdiction." Patin v. Thoroughbred Power Boats Inc., 294 F.3d 640, 652 (5th Cir. 2002). This determination generally requires a two-step evaluation to ensure that exercise of jurisdiction is proper both under the state long arm statute and under federal principles of constitutional due process. Id. "However, because Louisiana's long arm statute is coextensive with the limits of due process, `the sole inquiry into jurisdiction over a nonresident [under Louisiana law] is a one-step analysis of the constitutional due process requirements.'" Id. (quoting Petroleum Helicopters, Inc. v. Avco Corp., 834 F.2d 510, 514 (5th Cir. 1987)).
"`[T]he constitutional touchstone' of . . . whether an exercise of personal jurisdiction comports with due process `remains whether the defendant purposefully established `minimum contacts' in the forum State.'" Asahi Metal Industy Co., Ltd. v. Superior Court of California, Solano County, 480 U.S. 102, 108-09 (1987) (quoting Burger King Corp. v. Rudzewicz, 471 U.S. 462, 474 (1985) (quoting International Shoe Co. v. Washington, 326 U.S. 310, 316 (1945))). To satisfy due process, the defendant through his own affirmative acts must have established contacts with the forum state such that he can be said to have "`purposefully avail[ed] [him]self of the privilege of conducting activities within the forum State, thus invoking the benefits and protections of its laws.'" Asahi Metal, 480 U.S. at 112, 109 (quoting Burger King, 471 U.S. at 475); see also Holt Oil Gas Corp. v. Harvey, 801 F.2d 773, 777 (5th Cir. 1986) ("for an exercise of personal jurisdiction to be consistent with due process, the nonresident defendant must have some minimum contact with the forum which results from an affirmative act on the part of the nonresident"), cert. denied, 481 U.S. 1015 (1987). "The defendant's conduct and connection with forum state must be such that he should reasonably anticipate being haled into court in the forum state." Holt Oil, 801 F.2d at 777.
Minimum contacts can take two forms. Where a "litigation results from alleged injuries that arise out of or relate to" the defendant's contacts with the forum state, it is the "`relationship among the defendant, the forum, and the litigation'" that must be examined to determine whether the defendant has purposely availed himself of the forum state's benefits and protections. See, e.g., We're Talking Mardi Gras, LLC v. Davis, 192 F. Supp.2d 635, 637 (E.D. La. 2002) (quoting Shaffer v. Heitner, 433 U.S. 186, 204 (1977)). Where this relationship is sufficiently strong, the Court is said to have "specific jurisdiction" over the defendant. Id. Where a defendant's "`operations within a state [are] so substantial and of such a nature as to justify suit against [the defendant] on causes of action arising from dealings entirely distinct from those activities,'" then "the Court is said to have `general jurisdiction.'" Id. (quoting International Shoe, 326 U.S. at 318). CMS does not contend that Osborn has the continuous and systematic contacts with Louisiana necessary to support general jurisdiction. Thus, the inquiry here is limited to the question of specific jurisdiction. CMS bears the burden of presenting "sufficient evidence to support a prima facie case supporting jurisdiction." Panda Brandywine Corp. v. Potomac Electric Power Co., 253 F.3d 865, 868 (5th Cir. 2001).
Panda Brandywine Corp. v. Potomac Electric Power Co., 253 F.3d 865, 868 (5th Cir. 2001).
None of the facts put forth for purposes of this inquiry are controverted. At all times relevant to CMS' third-party claim, Osborn was a partner in the Skadden Arps law firm. He lives and works in New York City. In March 1998, he was contacted in his New York City office by Jeffrey Sparks of a UBS entity, who informed him that a group of individuals being advised by CMS needed representation regarding the documentation of certain transactions with UBS. Sparks' office was in New York City and/or Stamford, Connecticut. Osborn was later put in touch by telephone with Steven Lockshin of CMS, who asked Osborn to represent the plaintiffs in preparing documentation of their transactions with UBS. Osborn agreed. CMS' only office was in Rockville, Maryland. The plaintiffs resided in various states, including Colorado, Connecticut, Texas, and Washington. One plaintiff, Scott Evans, resided in Louisiana.
The transactions in question were the MMAP transactions discussed supra at page 2, which are at issue in this lawsuit. Performance under the MMAP agreements was to take place in New York City. UBS was to deliver the purchase price in New York, and the plaintiffs were to deliver the pledged stock to a Collateral Agent located in New York City.
UBS' counsel, Davis, Polk Wardwell ("Davis Polk"), sent to Osborn's New York City office drafts of the documents it had prepared, and Osborn made comments on the documents, which were communicated to Davis Polk's office in New York City. Between March and May 1998, Osborn participated in telephone conferences with CMS representatives, during some of which one or more plaintiffs were on the line. Scott Evans, the plaintiff who resides in Louisiana, "dialed into" one such telephone conference, which had been arranged by Steve Lockshin of CMS; others who dialed in included Lockshin, Sparks, Osborn, and several other of the plaintiffs. During this conference call, Osborn gave a general explanation of the MMAP transaction. Osborn spoke to Evans at least one other time by telephone. All of Osborn's activities were conducted in his office in New York City. Throughout the course of these activities, Osborn placed only three one-minute telephone calls to Louisiana. He did not visit Louisiana, and he did not direct any written correspondence, facsimile, or email to Louisiana.
From July to September 1998, after the dispute underlying this lawsuit arose, Osborn spoke several times by telephone to Virginia Boulet, a Louisiana lawyer who was then practicing with the New Orleans firm representing the plaintiffs in this lawsuit. During this time period, Osborn made seven telephone calls to Louisiana. See CMS' Opp. Memo, Exh. B.
In its third-party complaint, CMS asserts that Osborn is subject to personal jurisdiction in Louisiana because he "had the closest of contractual privity, i.e. an attorney-client relationship," with Scott Evans, a Louisiana resident. (Rec. Doc. 34 at p. 26). However, the Fifth Circuit case law is clear: "The bare existence of an attorney-client relationship is not sufficient" to establish personal jurisdiction over a non-resident. Trinity Industries, Inc. v. Myers Assocs., Ltd., 41 F.3d 229, 230 (5th Cir.), cert. denied, 516 U.S. 807 (1995); Wien Air Alaska, Inc. v. Brandt, 195 F.3d 208, 213 (5th Cir. 1999); see also We're Talking Mardi Gras, LLC v. Davis, 192 F. Supp.2d 635, 638 (E.D. La. 2002); First Trust National Ass'n v. Jones, Walker, Waechter, Poitevant, Carrèe Denègre, 996 F. Supp.2d 585, 590 (S.D. Miss. 1998). This derives from the more general rule "that merely contracting with a resident of the forum state is insufficient to subject the nonresident to the forum's jurisdiction," even on a suit arising out of the contractual relationship. Holt Oil, 801 F.2d at 778. Within the context of contractual privity, the test remains whether the defendant, through "an affirmative act on [his] part," has "purposefully availed himself of the privilege of conducting activities within the forum state, thus invoking the benefits and protection of its laws." Holt Oil, 801 F.2d at 777.
In its opposition memorandum, CMS no longer presses the attorney-client relationship as an adequate basis for exercising personal jurisdiction over Osborn. Instead, CMS struggles to fit its claim against Osborn into those cases where one contact alone has been found sufficient to support jurisdiction. It is true that "a single purposeful contact may in a proper case be sufficient to meet the requirement of minimum contacts when the cause of action arises from the contact." First Trust, 996 F. Supp.2d at 589-90. The primary examples of this are intentional tort cases. "When the actual content of communications with a forum gives rise to intentional tort causes of action, this alone constitutes purposeful availment." Wien Air, 195 F.3d at 213 (where defendant directed intentional misrepresentations into the forum state, defendant was subject to personal jurisdiction). The rationale behind this principle is that where a defendant has "`expressly aimed' . . . intentional, tortious conduct . . . toward the forum state," he necessarily "must `reasonably anticipate being haled into court there'" to answer for his conduct. Id. at 212 (quoting Calder v. Jones, 465 U.S. 783, 789-90 (1984)). Were the law otherwise, a defendant could "mail a bomb" to a person in the forum state and yet be immune to suit in the forum. Id.
A similar rationale is used to justify personal jurisdiction in the "stream of commerce" line of cases, where a defective product has been sent into the forum by a seller who has intentionally aimed its products at the forum state. See World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 297-98 (1980) ("if the sale of a product . . .is not simply an isolated occurrence, but arises from the efforts of the manufacturer or distributor to serve . . . the market for its product in other States, it is not unreasonable to subject it to suit in one of those States if its allegedly defective merchandise has there been the source of injury. . . The forum State does not exceed its powers under the Due Process Clause if it asserts personal jurisdiction over a corporation that delivers its products into the stream of commerce with the expectation that they will be purchased by consumers in the forum State."); Nuovo Pignone, SpA v. STORMAN ASIA M/V. ___ F.3d ___, 2002 WL 31318068 *4 (5th Cir. 2002) ("We have applied the stream-of-commerce principle to permit the assertion of personal jurisdiction over nonresident defendants that send a defective product into a forum."); Ruston Gas Turbines, Inc. v. Donaldson Co., Inc., 9 F.3d 415, 420-21 (5th Cir. 1993) (where defendant "intentionally placed its products into the stream of commerce by delivering them to a shipper destined for delivery in Texas," it "reasonably should have anticipated that it could be haled into court in Texas").
CMS' claim against Osborn does not fit within the rationale of these cases. Unlike in Wien Air and plaintiffs' third-party complaint against CMS, no one has alleged that Osborn directed intentional misrepresentations toward the forum state. To the contrary, CMS' claim against Osborn is one of nonfeasance — that he "fail[ed] to . . . advise [his] clients . . ., to explain the MMAP transactions to [his] clients, to be sure that [his] clients understood the MMAP transactions and be sure that [his] clients understood their obligations to UBS . . ." Rec. Doc. 34 at p. 28. There is no allegation that Osborn expressly aimed or directed any intentional tortious conduct at or into Louisiana.
Wien Air differs from this case also in the number of communications that the defendant directed into the forum state. Unlike Osborn, the defendant in Wien Air directed numerous letters, faxes, and phone calls into the forum state, many of which contained fraudulent misrepresentations. 195 F.3d at 212. The defendant also visited the forum state, obtaining confidential information that he would later use against the plaintiff. Id. at 214.
Plaintiffs allege that CMS' communications with them contained intentional misrepresentations. Moreover, CMS' contacts with Louisiana demonstrate purposeful availment even without the allegation of intentional, tortious conduct directed at Louisiana. Unlike Osborn, who did not solicit any business in Louisiana, CMS reached into Louisiana and directly solicited Evans, urging him to hire CMS for financial services and investment advice. See Rec. Doc. 18, Exh. A at ¶¶ 5-8. As part of this solicitation, CMS sent numerous written communications to Evans in Louisiana, including a letter promoting CMS' experience. Id. at Tab 1 ("I believe that . . . the expertise of our staff is uniquely positioned to consult with high net worth individuals like you."). As a result of these solicitations, Evans "agreed to employ [CMS] as [an] investment advisor." Id. at Tab 2, As Evans' financial advisor, CMS continued to send communications directed to him in Louisiana, ultimately urging him to enter into the MMAP transactions with UBS. Id. at ¶¶ 10-19. Later, in March and April 1998, CMS directed several written communications to Evans in Louisiana regarding the MMAPs. Id. at Tabs 7-11.
CMS also relies on Streber v. Hunter, 221 F.3d 701 (5th Cir. 2000), in which the Fifth Circuit upheld the district court's finding that Louisiana attorney, Glynn Blazier, had established minimum contacts in Texas in the course of representing two Texas sisters in a tax dispute that lasted from 1991 until 1995. CMS suggests that Blazier's sole contact with Texas was a piece of federal tax advice that he dispensed while sitting in his Louisiana office. See Opp. Memo at p. 5. That simply is not the case. First, a significant aspect of the alleged malpractice in Streber was based on Blazier's conduct at a mediation that took place in Houston, Texas. Streber, 221 F.3d at 718. Second, the tax advice given was not strictly federal, but "was (or, at least, should have been) based, in large part, upon the Texas law of gifts." Id. at 719 n. 26. The legal research and analysis included questions of Texas law on the subject of trusts and gifts. Id. at 715 n. 16. Indeed, the entire representation concerned interests in and proceeds from a joint venture for developing Texas real estate, and the proceeds themselves included lots of Texas land. Id. at 712. Third, the sisters alleged that Blazier had withheld material information from them, bringing him within the intentional tort line of cases. Id. at 718 n. 25 (citing Wien Air, 195 F.3d at 213). Finally, in contrast to the discreet piece of tax advice portrayed by CMS, Blazier's representation of the sisters continued over the course of a litigation that lasted four years. None of these circumstances exist here.
Another intentional misrepresentation case cited by CMS is Busch v. Buchman, Buchman O'Brien, 11 F.3d 1255, 1258 (5th Cir. 1994), a securities fraud case in which a Texas investor sued the lawyer whose opinion letter appeared in the prospectus. In addition to being distinguishable on the basis of the fraud allegations, Busch is inapposite because its holding rests on a "national contacts" analysis that is not at issue here. The Busch court held that because the claim was "based upon a federal statute providing for nationwide service of process, " i.e., the Exchange Act, the relevant inquiry was not whether the defendant had minimum contacts with the forum state, but whether he "had minimum contacts with the United States." Id. at 1258 (emphasis added). According to Busch, where "the relevant sovereign is the United States, it does not offend traditional notions of fair play and substantial justice to exercise personal jurisdiction over a defendant residing within the United States." Id. Because the lawyer "ha[d] minimum contacts with the United States and reside[d] herein," the court had personal jurisdiction over him. Id. CMS does not rely on national service of process. Moreover, a Fifth Circuit panel subsequent to Busch has expressed "grave misgivings" and emphatic disagreement with Busch. Bellaire General Hospital v. Blue Cross Blue Shield of Michigan, 97 F.3d 822, 825-26 (5th Cir. 1996) (questioning Busch's conclusion "that the proper personal jurisdiction test in a national service of process case is whether minimum contacts exists between the individual and the national sovereign").
Finally, CMS cites Calder v. Jones, 465 U.S. 783 (1984), arguing that Osborn should be subject to jurisdiction in Louisiana because his allegedly deficient performance caused "effects" in Louisiana. The Court agrees that a person in Osborn's shoes reasonably might have foreseen that negligence on his part could produce effects outside New York — in any state where a plaintiff resided, including Louisiana. But this type of foreseeability does not satisfy due process. Panda Brandywine, 253 F.3d at 869 (" Calder's effects' test `is not a substitute for a nonresident's minimum contacts that demonstrate purposeful availment of the benefits of the forum state. . . [T]he key to Calder is that the effects of an alleged intentional tort are to be assessed as part of the analysis of the defendant's relevant contacts with the forum.'") (emphasis in original) (quoting Allred v. Moore Peterson, 117 F.3d 278, 286 (5th Cir. 1997), cert. denied, 522 U.S. 1048 (1998)); see also Wien Air, 195 F.3d at 212 ("Foreseeable injury alone is not sufficient to confer specific jurisdiction, absent the direction of specific acts toward the forum."). Rather, "[t]he `foreseeability that is critical to due process analysis . . . is that the defendant's conduct and connection with the forum State are such that he should reasonably anticipate being haled into court there.'" Id. at 869 (emphasis in original) (quoting Burger King, 471 U.S. at 474). "To conclude that a defendant should `reasonably anticipate' being haled into the forum State requires `some act by which the defendant purposefully avails itself of the privilege of conducting activities within the forum State, thus invoking the benefits and protections of its laws,' or `purposefully directs' its efforts toward the forum State residents." Id. (quoting Burger King, 471 U.S. at 475, 476). Osborn's contacts with Louisiana simply do not meet this threshold.
Where, as here, the material performance in a contractual relationship is centered outside the forum state, even "extensive telephonic and written communication" between the resident and non-resident parties can fall short of this constitutional threshold. Holt Oil, 801 F.2d at 778. Here, Osborn's work for the plaintiffs was centered in New York City, communicating back and forth with UBS' counsel (also in New York City) regarding drafts of agreements which themselves called for performance in New York City. Osborn did not reach into Louisiana (or any of the other plaintiffs' home-states) to solicit this business — the plaintiffs (through CMS and/or UBS) came to him. In this context, particularly given the absence of intentional tort allegations, Osborn's few telephone contacts with Louisiana do not demonstrate a prima facie case of purposeful availment. Because the Court finds that the Osborn does not have the requisite minimum contacts with the forum necessary to support the exercise of jurisdiction over him, the Court need not address the fairness prong of the due process inquiry. B. Peremption under La. R.S. § 9:5605:
See, e.g., Panda Brandywine, 253 F.3d at 870 (where Texas plaintiffs alleged defendant had purposefully directed its intentional-interference-with-contract actions toward them, district court correctly held that such allegations were insufficient given that the contracts were not governed by Texas law, were not to be performed in Texas, and had no relation to Texas other than the fortuity that plaintiffs lived there); Holt Oil, 801 F.2d at 778 (given that material performance of the contract was centered outside the forum state, extensive telephonic and written communications between defendant and the forum in the course of developing and carrying out the contract was insufficient to support specific jurisdiction).
Wien Air, 195 F.3d at 215 ("Once a plaintiff has established minimum contacts, the burden shifts to the defendant to show the assertion of jurisdiction would be unfair.").
Skadden Arps argues that CMS' right to bring a claim against it has been extinguished under a Louisiana peremptive statute that places an absolute limit on the time for bringing malpractice-related claims in this state. See La. Rev. Stat. § 9:5605. Unlike prescription, which "merely prevents the enforcement of a right," peremption "destroys the right itself." La. Civ. Code art. 3458, comment (b). Peremption differs from prescription also in that it is not subject to interruption or suspension. La. Civ. Code art. 3461. To avoid peremption under section 9:5605, a claim must be brought "within one year from the date of the alleged act, omission, or neglect, or within one year from the date that the alleged act, omission, or neglect is discovered or should have been discovered." La. Rev. Stat. § 9:5605(A). Moreover, "even as to actions filed within [this] one year" period, "in all events such actions shall be filed at the latest within three years from the date of the alleged act, omission, or neglect." Id. Here, the latest possible date for the commencement of this three-year period is May 1, 1998, the date the last MMAP agreement was signed. CMS filed its third-party claim against Skadden Arps on May 7, 2002. (Rec. Doc. 34). Thus, if the statute is applied, CMS' claim is barred.
Osborn also makes this argument. However, because this Court has determined that it may not exercise personal jurisdiction over Osborn, it does not address Osborn's alternative arguments for dismissal.
CMS does not contest this date. CMS' claim against Skadden Arps is not based on any act or omission occurring after the MMAP agreements were signed, and CMS admits that the plaintiffs signed the agreements on or about the dates appearing on the agreements. See CMS' Answer (Rec. Doc. 34) at p. 10. The last agreement was signed by Charles Cox on May 1, 1998. See UBS' Answer (Rec. Doc. 2) at Tab A.
In opposition, CMS argues that the Court should not apply Louisiana's limitations statute because it is a Maryland company suing a New York law firm. Instead, CMS argues, the Court should simply apply a Maryland or New York statute of limitations. What CMS ignores is the well settled rule that federal courts apply the choice-of-law rules of the forum state, even where another state's substantive law might govern the merits of the claim. See Roberts v. Energy Devel. Corp., 104 F.3d 782, 786 (5th Cir. 1997) ("In federal diversity cases the conflicts law of the forum state, here Louisiana, governs."); Streber v. Hunter, 221 F.3d 701, 719 (5th Cir. 2000) ("Federal courts apply the choice-of-law rules of the forum state.").
CMS argues that Louisiana has no interest in having its peremption statute applied to a claim brought by a Maryland company against a New York firm. The Court strongly disgrees. One of the primary purposes behind limitations statutes is protecting the courts of the state from the burden of litigating stale claims. See, e.g., National Union Fire Ins. Co. v. Ward, 612 So.2d 964, 968 (La.App. 1993) ("The purpose of a statute of limitations or prescriptive period is to protect the parties and the local courts against the prosecution of stale claims."). "Each state determines for itself the period during which suit may be brought in its courts upon a particular claim." Id. (citing Restatement 2d of Conflict of Laws § 142, comment d (1971)). The Louisiana legislature has determined that the appropriate peremptive period for legal malpractice claims "brought in this state" is three years. La. Rev. Stat. § 9:5605(C).
CMS has (apparently) now abandoned its claim to contribution or indemnity under Louisiana law. in its third-party complaint, however, CMS claimed that it was entitled to indemnity and/or contribution from Skadden Arps under the law of each plaintiffs state of residence.
Louisiana has a choice-of-law rule directly applicable to the issue presented here. Louisiana Civil Code article 3549 provides that "the prescription and peremption law of this state [Louisiana] applies," even "[w]hen the substantive law of another state would be applicable to the merits" of the action and "the action is barred under the law of [Louisiana]." The only exception to this rule is where the circumstances are so compelling that they cry out for the Court to exercise "remedial justice" and the action would not have been barred under the law of the state whose substantive law applies. Id.
Article 3549 provides:
When the substantive law of this state would be applicable to the merits of an action brought in this state, the prescription and peremption law of this state applies.
When the substantive law of another state would be applicable to the merits of an action brought in this state the prescription and peremption law of this state applies, except as specified below:
(1) If the action is barred under the law of this state. the action shall be dismissed unless it would not be barred in the state whose law would be applicable to the merits and maintenance of the action in this state is warranted by compelling considerations of remedial justice.
(2) If the action is not barred under the law of this state, the action shall be maintained unless it would be barred in the state whose law is applicable to the merits and maintenance of the action in this state is not warranted by the policies of this state and its relationship to the parties or the dispute nor by any compelling considerations of remedial justice.
La. Civ. Code art. 3549 (emphasis added).
Under both Maryland and New York law, the limitations period for bringing a claim to recover damages caused by legal malpractice is three years. See Md. Code C.J. § 5-101; N.Y.C.P.L.R. § 214(6). This time would not begin running for CMS, however, until it was actually forced to pay damages properly attributable to Skadden Arps. Washington Suburban Sanitary Comm'n v. Riverdale Heights Volunteer Fire Co. Inc., 520 A.2d 1319, 1327 n. 3 (Md. 1987) ("claim for indemnification . . . or . . . contribution from a joint tortfeasor does not accrue for statute of limitations purposes until payment by the claimant"); Tavernier v. Toner, 548 N.Y.S.2d 961, 961 (N.Y.App.Div. 1989) ("Claims over for contribution and indemnification do not accrue until the party interposing the claims has paid on the underlying claim.").
CMS argues that it fits the "remedial justice" exception because, in order to bring its claim in Maryland or New York, it must first wait to see whether this Court actually enters judgment against CMS for damages properly attributable to Skadden Arps — otherwise, a court in New York or Maryland would dismiss its claim as premature. Even accepting this on its face as an accurate assessment of New York and Maryland procedural law (CMS cites no authority in this regard), the Court disagrees that CMS' desire for expeditiousness requires remedial justice. "`[T]he authors of the `compelling considerations of remedial justice` exception intended it to be used in only the most extraordinary of circumstances.'" Brown v. Slenker, 220 F.3d 411, 420 (5th Cir. 2000) (quoting Landry v. Ford Motor Co., 1996 WL 661052 at *3 (E.D. La. 1996)). The revision comments confirm this: the exception "refer[s] to cases where `through no fault of the plaintiff an alternative forum is not available as, for example, where jurisdiction could not be obtained over the defendant in any state other than the forum or . . . where suit in the alternative forum, although not impossible would be extremely inconvenient for the parties.'" Id., comment (f) (quoting Restatement 2d, Conflict of Laws § 142 (Supp. 1987)). "In cases where plaintiffs have litigated their claims in Louisiana by choice, not by necessity, claims of `compelling considerations' . . . have been consistently rejected." Brown, 220 F.3d at 420. Here, CMS could have waited and brought its claim in Maryland or New York, but it chose not to do so. The "remedial justice" exception does not apply under these circumstances. Accordingly, Louisiana's law of prescription and peremption govern CMS' claim.
The question that remains is which of Louisiana's laws to apply. Without question, the statute most directly on point is section 9:5605. It applies to any action "arising out of an engagement to provide legal services," whether the claim is based in "tort, or breach of contract, or otherwise." La. Rev. Stat. § 9:5605(A). Indeed, "[n]otwithstanding any other law to the contrary," section 9:5605 provides the exclusive limitations period "in all actions brought in this state against any attorney at law duly admitted to practice in this state, . . . or any professional law corporation, . . . or other commercial business or professional combination authorized by the laws of this state to engage in the practice of law." La. Rev. Stat. § 9:5605(C). Thus, section 9:5605 applies here unless, as CMS argues, Skadden Arps is excluded from the term a "commercial business or professional combination authorized by the laws of this state to engage in the practice of law."
CMS argues that section 9:5605 applies only to actions brought directly by clients against their attorneys. Nothing in the statutory language supports such a restriction. The statute applies to all actions "arising out of an engagement to provide legal services." Although CMS is not Skadden Arps' client, its claim arises out of an engagement to provide legal services and is based expressly and exclusively on alleged legal malpractice. See Sanches v. Morris, 802 So.2d 755, 761 (La.App. 5th Cir. 2001) (applying section 9:5605 to claim brought by legatee against testator's attorney).
Section 9:5605 provides in relevant part:
A. No action for damages against any attorney at law duly admitted to practice in this state, any partnership of such attorneys at law, or any professional corporation, company, organization, association, enterprise, or other commercial business or professional combination authorized by the laws of this state to engage in the practice of law, whether based upon tort, or breach of contract, or otherwise, arising out of an engagement to provide legal services shall be brought unless filed in a court of competent jurisdiction and proper venue within one year from the date of the alleged act, omission, or neglect, or within one year from the date that the alleged act, omission, or neglect is discovered or should have been discovered; however, even as to actions filed within one year from the date of such discovery, in all events such actions shall be filed at the latest within three years from the date of the alleged act, omission, or neglect.
B. . . . The one-year and three-year periods of limitation provided in Subsection A of this Section are peremptive periods within the meaning of Civil Code Article 3458 and, in accordance with Civil Code Article 3461, may not be renounced, interrupted, or suspended.
C. Notwithstanding any other law to the contrary, in all actions brought in this state against any attorney at law duly admitted to practice in this state, any partnership of such attorneys at law, or any professional law corporation, company, organization, association, enterprise, or other commercial business or professional combination authorized by the laws of this state to engage in the practice of law, the prescriptive and peremptive period shall be governed exclusively by this Section.
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Skadden Arps argues that given the statute's purpose ( i.e., to provide a predictable, absolute time bar for malpractice claims filed in the state of Louisiana), the most reasonable construction of the term is one that includes any law firm whose activities are "authorized" — that is, permitted, allowed, and not prohibited — under Louisiana law. CMS proffers no alternative construction of the term, but insists that Skadden Arps' exclusion from the statute "is manifest." See CMS' Supp. Memo at p. 2. According to CMS, Skadden is necessarily excluded because it is located in New York (among other places) and is organized under Delaware law. See CMS' Supp. Memo at p. 2. However, the statute does not use any term that connotes a restriction based on principal place of business or place of organization. Nor does it turn on where the alleged malpractice occurred. Rather, the language focuses on whether the enterprise in question is one authorized to engage in the practice of law. It encompasses " any professional corporation, company, organization, association, enterprise, or other commercial business or professional combination authorized by the laws of this state to engage in the practice of law." La. Rev. Stat. § 9:5605 (emphasis added).
Given the statute's purpose (to provide a clear, predictable bar to legal malpractice claims filed in this state), the construction urged by Skadden Arps is both reasonable and logical. The statute is not concerned with regulating law firms; it is concerned with restricting the malpractice claims filed in Louisiana courts. Moreover, the Court can find no alternative construction of the term (CMS offers none) that is reasonable and would not lead to arbitrary and unpredictable results. For example, an interpretation that encompassed only associations of Louisiana-licensed lawyers would not work. Louisiana law expressly permits visiting out-of-state attorneys to practice law within the borders of Louisiana simply by acting in association with a Louisiana lawyer. See La. Rev. Stat. § 37:214. In such cases, the lawyers and their firms plainly would be "authorized by the laws of this state to engage in the practice of law." Here, Skadden Arps was authorized to represent Evans without associating with a Louisiana lawyer.
If the visiting lawyer is "from a state" that would allow a Louisiana lawyer to appear in its courts without a local lawyer, then the visiting lawyer may practice law in Louisiana without associating a Louisiana lawyer. La. Rev. Stat. § 37:214.
The Court can find no reasonable construction of "commercial business or professional combination authorized by the laws of this state to engage in the practice of law" that would exclude Skadden Arps under the circumstances presented here. Consequently, the statute applies, and CMS' claim against Skadden Arps is time-barred.
III. CONCLUSION
Accordingly, for the foregoing reasons, IT IS ORDERED that the motion to dismiss filed by Skadden Arps and John W. Osborn is GRANTED.