Opinion
Civil Action NO. 98-3426
July 31, 2000.
ORDER AND REASONS
Plaintiff/Defendant-in-Counterclaim, Mark Samuels ("Samuels"), has filed a motion to dismiss the counterclaim filed by defendants, Ironite Products Company and Gas Sweetener Associates, Inc., d/b/a The SulfaTreat Company ("the Companies"), or alternatively, to grant him a summary judgment on the counterclaims. Defendant/Plaintiff-in-Counterclaim opposes the motion.
Facts and Procedural History
Samuels filed the instant suit on October 8, 199B in Civil District Court for the Parish of Orleans, State of Louisiana, seeking damages against defendants for tortious interference with contract and under the Louisiana Unfair Trade Practices Act (UTPA), LSA-R.S. 51:1401. Defendants removed the suit to this federal court on November 19, 1998 and filed an answer and counterclaim on November 25, 1998. In the counterclaim, defendants sought damages under the UTPA for the claim having been groundless and brought in bad faith or for purposes of harassment and for breach of fiduciary duty. On January 19, 1999, defendants filed a motion to dismiss plaintiff's claim for violation of Louisiana's UTPA and to transfer other claims to be considered by the court in Missouri where a similar case was pending. Defendants thereafter filed an unopposed motion to continue hearing from February 10, 1999 to March 24, 1999. On March 24, 1999, the Court granted the defendants' motion to dismiss plaintiff's UTPA claim.
This statute is also referred to as the Louisiana Unfair Trade Practices and consumer Protection Law.
By way counterclaim, defendants now seek attorney's fees and court costs in the sum of $ 21,523.38 which have been incurred through January 24, 2000 defending the UTPA claim, and reserve the right to request additional attorney's fees and court costs on this claim. They also seek damages on the breach of fiduciary duty claim in the amount of $ 80,139.29, which is attorney's fees and court costs incurred through January 24, 2000, and reserve the right to request additional attorney's fees and court costs on this claim.
The facts underlying the action under the Louisiana UTPA claim arise out of a dispute between the plaintiff and the Companies. Plaintiff's father, Alvin Samuels, and Irwin Fox formed the Companies to pursue business opportunities marketing products and processes in the oil and gas industries. All of the stock in both companies was owned equally by the Samuels and the Fox families. The two Companies, Ironite and SulfaTreat were operated as one combined company with one board of directors. The Companies were operated such that Alvin Samuels would administer the division located in the New Orleans, Louisiana area and Irwin Fox would administer the division located in the St. Louis, Missouri area, and that if the Companies were successful, a son of each founder would be invited to join the business. Eventually, Irwin Fox's son, Richard Fox joined the business in St. Louis and Alvin Samuels' son, Mark Samuels, the plaintiff, joined the business in New Orleans.
After the sons began working for the Companies, congenial relations between the families declined to a point where they resembled the legendary Hatfields and McCoys. The unfortunate and unexpected death of Irwin Fox in an automobile accident exacerbated the situation. Richard Fox assumed the presidency of the Companies. Eventually, Richard Fox required Mark Samuels to relocate to St. Louis against his wishes and then terminated him on the grounds that Mark Samuels failed to report to the Board of Directors that a former female employee told Mark Samuels, after she was terminated, that she was sexually harassed during her employment. This incident involving the former female employee is the basis of the breach of fiduciary duty suit by the Companies against plaintiff Mark Samuels. The events surrounding plaintiff's termination is the basis of Samuel's UTPA suit.
Discussion
Defendants seek in excess of $ 21,000 in attorney's fees and costs in defending a claim which was filed in state court on October 8, 1998, removed on November 19, 1998, and dismissed on March 24, 1999. Defendants candidly admit that they are not only seeking fees expended during this time period, but also fees it incurred thereafter, and continues to incur over one year later, in establishing the claim was in bad faith. The source for this attorney's fee claim is section 1409, part A, of the Louisiana Unfair Trade Consumer Protection Act, which states in pertinent part:
Any person who suffers any ascertainable loss of money or movable property, corporeal or incorporeal, as a result of the use or employment by another person of an unfair or deceptive method, act or practice declared unlawful by R.S. 51:1405, may bring an action individually but not in a representative capacity to recover actual damages. . . In the event that damages are awarded under this Section, the court shall award to the person bringing such action reasonable attorney's fees and costs. Upon a finding by the court that an action under this section was groundless and brought in bad faith or for purposes of harassment, the court may award to the defendant reasonable attorney's fees and costs.
51:1409(A), (emphasis added)
It is plain that to recover under this section, the action must be found by the court to be both groundless and EITHER(1) brought in bad faith OR(2) for purposes of harassment. Defendants argue that there are material issues of fact which preclude summary judgment because the court granted its motion to dismiss based upon jurisprudence holding that employees cannot bring a claim against their employers under the UTPA and there is sufficient evidence to establish that the claim was groundless and brought in bad faith or for purposes of harassment. Defendants direct the Court to cases interpreting Article 863 of the Louisiana Code of Civil Procedure, which allows the court to sanction a party or an attorney who signs a pleading in violation of the requirements contained in the article, which requires the signer to certify, by his signature, that:
[T]hat to the best of his knowledge, information, and belief, formed after reasonable inquiry it is well grounded in fact; that it is warranted by existing law or a good faith argument for the extension, modification, or reversal of existing law; and that it is not interposed for any improper purpose, such as to harass or to cause unnecessary delay or needless increase in the
cost of litigation.
LSA-C.C.P. art. 863. Courts interpreting this article, noting that it derives from Rule 11 of the Federal Rules of Civil Procedure, looked to federal jurisprudence for guidance. In Diesel Driving Academy. Inc. v. Ferrier, 563 So.2d 898, 902 (La.App. 2d Cir. 1990), listed a number of factors to be considered in determining whether the article has been violated, and noted:
Rule 11 [and CCP 863] [seek] to strike a balance between the need to curtail abuse of the legal system and the need to encourage creativity and vitality in the law. . . . The Rule is not breach if after reasonable legal research and adequate factual investigation, a party and counsel in good faith decide to challenge existing law. . . . [Sanctions] do not automatically or usually follow an adverse judgment or ruling. Substantially more is required.563 So.2d at 902, quoting Gaiardo v. Ethyl Corp., 835 F.2d 479, 483-44 (3d Cir. 1987) (emphasis added)
The Court has reviewed carefully the entire record in this matter, including specifically the submissions of the parties directed to the UTPA and the counterclaim. The Court agrees with the plaintiff's remarks that although this Court followed decisions which did not allow employees to bring UTPA claims against their former employers, in general the UTPA is broadly construed. The decision of Capitol House v. Perryman Consultants, Inc., 725 So.2d 523 (La.App. 1st Cir. 1998), summarizes its spacious parameters, as follows:
Generally, the courts have held that a trade practice is unfair when it offends public policy, and when the practice is immoral, unethical, oppressive, unscrupulous, or substantially injurious to consumers, or when it involves fraud, misrepresentation, deception, breach of fiduciary duty, or other unethical conduct. . . . "Any person who suffers damage as a result of an unfair or deceptive act or practice which is unlawful under § 1405 has a private cause of action." If a plaintiff alleges facts sufficient to classify himself as a member of a group provided a remedy by La. R.S. 51:1409(A), it is of no moment if plaintiff is not a consumer or business competitor of defendant.Id. at 529-30 (citations omitted)
Given the very wide range of practices which could violate this act and the less than specific definition of who is afforded a private right of action, the fact that plaintiff did not fall in such a class as a matter of law does not transport his claim to the groundless category. The factual record in opposition to the instant summary judgment motion does not contain information sufficient to establish as a matter of law that the plaintiff brought the action either in bad faith or for purposes of harassment. Under Rule 56(c) of the Federal Rules of Civil Procedure, summary judgment is mandated after adequate time for discovery and upon motion against a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case on which the party will bear the burden of proof at trial. Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 2552 (1986); Dunn v. State Farm Fire Cas. Co 927 F.2d 869, 872 (5th Cir. 1991). "If the evidence which a nonmovant has developed does not, even when viewed deferentially, raise a genuine issue of material fact on an element essential to the nonmovant's case and on which the nonmovant will bear the burden of proof at trial, summary judgment is appropriate." Barbetta v. S/S Bermuda Star, 848 F.2d 1364, 1368 (5th Cir. 1988) Celotex, 477 U.S. at 322-23, 106 S.Ct. at 2552-53.
The Court finds that the evidence which defendants/plaintiffs| in-counterclaim have produced to prove its entitlement to attorney's fees and costs in defending the plaintiff's UTPA claim is insufficient for a finding that the claim was groundless and brought in bad faith or for purposes of harassment. The evidence does not support a finding that plaintiff intended merely to harass the defendants or was in bad faith in alleging a claim under the UTPA. Summary judgment on this claim must be granted.
Because it is unnecessary to rule on the question, the court will not address the issue whether attorney's fees and costs incurred after the claim has been dismissed solely for the purpose of establishing entitlement to such fees under the UTPA can be recovered. The court will merely note that there is a dearth of jurisprudence supporting defendants/plaintiffs-in-counterclaim's argument that such fees are recoverable and they seem particularly inappropriate and unwarranted here when the claim was dismissed summarily soon after the lawsuit was filed.
The second and larger claim for attorney's fees and costs arise out of the Companies' claim against Mark Samuels for breach of fiduciary duty. Samuels argues, quite correctly, that in opposition to his motion for summary judgment on their claim for attorney's fees and costs as damages for breach of fiduciary duty, the Companies raise only fact questions. They cite to no authority, either under Louisiana or Missouri law, which entitles them to attorney's fees and costs for a breach of fiduciary duty claim. On the contrary, plaintiff has cited cases under both Louisiana and Missouri law which hold that absent statutory authority or contractual agreement, each litigant bears his own fees, and in general, attorney's fees cannot be recovered as damages. See Cajun Concrete Services. Inc. v. J. Caldarera Company, Inc., 759 So.2d 237, 240 (La.App. 5th Cir. 2000) and Burris v. Burris, 904 S.W.2d 564, 572 (Mo.Ct.App. So. Dist., 1995). Without any legal authority which allows attorney's fees and costs to be recovered as damages for breach of fiduciary duty under either Missouri or Louisiana law, the counterclaim for this damages fails.
Accordingly, for the above and foregoing reasons,
IT IS ORDERED that the motion of Mark Samuels, plaintiff/defendant-in-counterclaim, for summary judgment on the counterclaim against him be and is hereby GRANTED