Opinion
2022 CA 1252
08-01-2023
J. Brian Juban Kyle M. Keegan Amber N. Robichaux Baton Rouge, Louisiana Counsel for Appellant PLAINTIFF-INTELLIGENT MORTGAGE AND CONSULTING Services, LLC Brett W. Tweedel Tom Buck Metairie, Louisiana -and- Matthew J. Ungarino John Covington Henry Metairie, Louisiana Counsel for Appellees DEFENDANTS-ARBOR LENDING GROUP, L.L.C.; RAYMOND P. LEBLANC; AND KEVIN MORGAN Marjorie B, Breaux David O. Way Kenny L. Oliver Lafayette, Louisiana Counsel for Appellee INTERVENOR-Bankers Insurance Company Wayne J. Fontana Ross A. Dooley Bradley Guin New Orleans, Louisiana -and- Kenneth C. Bordes New Orleans, Louisiana -and- Savannah W. Smith Baton Rouge, Louisiana Counsel for appellee DEFENDANT-ANGELE MIXSON James H. Hailey, III John G. Al sobrook Jason C. Macfetters Paul A. Eckert Kelly C. Simpson Antonio J. Torres New Orleans, Louisiana Counsel for Appellee DEFENDANT-JELENA Biyant
Appealed from the Nineteenth Judicial District Court Parish of East Baton Rouge • State of Louisiana Docket Number 689083 • Division "D" • Section 21 The Honorable Ronald R. Johnson, Presiding Judge
J. Brian Juban Kyle M. Keegan Amber N. Robichaux Baton Rouge, Louisiana Counsel for Appellant PLAINTIFF-INTELLIGENT MORTGAGE AND CONSULTING Services, LLC
Brett W. Tweedel Tom Buck Metairie, Louisiana -and- Matthew J. Ungarino John Covington Henry Metairie, Louisiana Counsel for Appellees DEFENDANTS-ARBOR LENDING GROUP, L.L.C.; RAYMOND P. LEBLANC; AND KEVIN MORGAN
Marjorie B, Breaux David O. Way Kenny L. Oliver Lafayette, Louisiana Counsel for Appellee INTERVENOR-Bankers Insurance Company
Wayne J. Fontana Ross A. Dooley Bradley Guin New Orleans, Louisiana -and- Kenneth C. Bordes New Orleans, Louisiana -and- Savannah W. Smith Baton Rouge, Louisiana Counsel for appellee DEFENDANT-ANGELE MIXSON
James H. Hailey, III John G. Al sobrook Jason C. Macfetters Paul A. Eckert Kelly C. Simpson Antonio J. Torres New Orleans, Louisiana Counsel for Appellee DEFENDANT-JELENA Biyant
BEFORE: WELCH, LANIER, AND HESTER, JJ.
WELCH, J.
The question before us in this insurance coverage dispute is whether a business liability policy may be reasonably interpreted to include electronic data in the definition of "tangible property" to provide coverage to the insured for the alleged loss of use of that data. Plaintiff, Intelligent Mortgage and Consulting Services, LLC ("IMC"), appeals a summary judgment granted in favor of intervenor, Bankers Insurance Company ("Bankers"), that dismissed all claims against Bankers arising under the policy issued to its insured, defendant Arbor Lending Group, L.L.C. ("Arbor"), with prejudice. For the reasons that follow, we reverse.
FACTS AND PROCEDURAL HISTORY
IMC is a residential mortgage broker. Arbor is a competing residential mortgage broker, whose managing partners are Kevin Morgan and Raymond Paul LeBlanc. Angele Mixson and Jelena Bryant were formerly employed with IMC as loan originators and had employment agreements with IMC. All loan officers and originators are assigned a license number under the Nationwide Multistate Licensing System ("NMLS"). Each licensee is required to be registered with a single financial services provider and is prohibited from simultaneous registration with multiple providers.
Beginning around March 2019, while employed at IMC but secretly working for Arbor, Ms. Mixson and Ms. Bryant allegedly began emailing themselves electronic data files accessed from IMC's encrypted and password-protected computer system, which is hosted and administered by a third-party technology services provider. This electronic data consisted of at least fifty-five IMC loan files of prospective borrowers relating to their pending requests for mortgage financing. These loan files included proprietary information such as IMC customer lists, customer information, pre-approval letters, and other loan documents. IMC contended that Ms. Mixson and Ms. Bryant "stole" the loan files by attaching the electronic files to emails sent from IMC's computer systems to the employees' personal and Arbor-provided email addresses. Ms. Bryant resigned from IMC effective April 23, 2019, and registered as a loan officer with Arbor, transferring her NMLS license from IMC on April 24, 2019. IMC terminated Ms. Mixson on April 29,2019. She then registered as a loan officer with Arbor and transferred her NMLS license from IMC on May 6, 2019.
IMC alleged that prior to Ms. Mixson's April 29, 2019 termination (during the time she was still registered under the NMLS as a loan officer with IMC), Mr. Morgan and/or Mr. LeBlanc allowed Ms. Mixson to process loans of stolen IMC customers using Arbor's NMLS number as well as one or both of their own individual NMLS license numbers, which were registered with Arbor.
IMC filed a petition for damages on October 10, 2019, against Arbor, Mr. Morgan, Mr. LeBlanc, Ms. Mixson, and Ms. Bryant, alleging that the defendants used its stolen loan files to broker loans through Arbor for eleven of IMC's fifty-five stolen customers. IMC argued that it lost commissions on the eleven loans closed by Arbor, lost commissions on the remaining loans not closed by Arbor, and lost commissions that IMC would have earned on future loans to its fifty-five customers, as well as from customers referred by those clients. IMC contended that when its loan files were stolen and used to process Arbor loans, the IMC loans those files represented were no longer viable brokering opportunities for IMC; thus, IMC lost the use of those loan files. IMC alleged that those loan files were the "property" of IMC, pursuant to employment agreements between IMC and its former employees. IMC noted that the employment agreements provided that all loan information, including customer lists and all other information contained in any loan package (whether completed or not), is exclusively the property of IMC. Those employment agreements further prohibited the use of any such information for any reasons other than the performance of services for IMC.
IMC asserted claims of conversion, violations of Louisiana's Uniform Trade Secrets Act ("LUTSA"), violations of Louisiana's Unfair Trade Practices and Consumer Protection Law ("LUTPA"), tortious interference with business, breach of contract, fraud, negligence, and unjust enrichment. IMC alleged that its customer relationships had present value, based on the requests for financing under consideration at the time of the alleged theft, as well as significant prospective value, based on additional loans those same borrowers might seek in the future in addition to other lending opportunities potentially afforded to IMC by virtue of its relationship with its customers, such as referrals. IMC sought damages including, but not limited to, the loss of present and future revenues, customers, goodwill, reputation, business opportunity, and productivity.
See La. R.S. 51:1431, etseq.
See La. R.S. 51:1401, etseq.
Arbor's business liability carrier, Bankers, intervened. Following its intervention, Bankers filed a motion for summary judgment, arguing that the policy issued by Bankers to Arbor does not provide coverage for IMC's claims against Arbor, and further, that Bankers has no duty to defend the defendants against IMC's claims. Specifically, Bankers argued that its policy issued to Arbor provided coverage for "bodily injury," "property damage," or "personal or advertising injury" as defined in the policy. The policy defined "property damage" as "(p]hysical injury to tangible property, including all resulting loss of use of that property" or the "(l]oss of use of tangible property that is not physically injured." However, Bankers contended that IMC did not allege "bodily injury," "property damage," or "personal and advertising injury" as defined in the policy; therefore, Bankers argued that there was no coverage under the policy for IMC's claims against the defendants, and Bankers had no duty to defend the defendants against IMC's claims.
At the hearing on the motion, the parties confirmed the only coverage at issue was "property damage" under the policy's second definition, i.e., coverage for the "loss of use of tangible property that is not physically injured." Following the hearing, the trial court took the matter under advisement. Thereafter, the trial court granted Bankers' motion for summary judgment, decreeing that the Bankers policy issued to Arbor does not provide coverage for IMC's claims against the defendants; that Bankers does not owe a duty to defend the defendants against IMC's claims; and dismissing any and all claims that were or could have been asserted against Bankers under its policy issued to Arbor, with prejudice. The trial court signed an amended final judgment in accordance with its ruling on December 15, 2022. The trial court also issued written reasons for its judgment. IMC now appeals.
The owner/president of IMC, Brandon Abidin, testified that IMC is not making a claim for damage to its reputation or for defamation.
After the record on appeal was lodged with this Court, we issued a show cause order, noting the judgment on "appeal lacks the specificity required to constitute a final, appealable judgment, in that it fails to specifically identify the relief awarded as required by [La.] C.C.P. art. 1918(A)." In a joint response to the show cause order, IMC and Bankers filed a motion with the trial court, requesting that it sign an amended, final judgment. On December 15, 2022, the trial court signed an amended, final judgment that corrected the alleged deficiencies. The trial court supplemented the record on appeal with the amended, final judgement. Accordingly, we maintained the appeal. Intelligent Mortgage and Consulting Services LLC v. Arbor Lending Group, L.L.C., 20221252 (La.App. 1st Cir. 3/6/23) (unpublished action).
Although the trial court designated its December 15, 2022 amended judgment as "final" in accordance with La. C.C.P. art. 1915(B), that designation is unnecessary since the December 15, 2022 amended judgment is a final judgment without need of designation because the judgment dismissed a party, here Bankers. See La. C.C.P. art. 1915(A)(1).
IMC filed a motion for appeal on March 23, 2022. The trial court signed an order of appeal on March 25, 2022, notice of which was transmitted by the clerk of court to the parties on April 12, 2022. In accordance with La. C.C.P. arts. 2127 and 2128, plaintiff/appellant IMC designated portions of the record to constitute the record on appeal. See Uniform Rules, Courts of Appeal, Rules 2-1 to 2-1.16; Bezet v. Original Libr. Joe's, Inc., 2001-1586 (La.App. 1st Cir. 6/21/02), 835 So.2d 472, 475.
SUMMARY JUDGMENT
Appellate courts review the grant or denial of a motion for summary judgment de novo using the same criteria applied by the trial courts to determine whether summary judgment is appropriate. Jackson v. Wise, 2017-1062 (La.App. 1st Cir. 4/13/18), 249 So.3d 845, 850, writ denied, 2018-0785 (La. 9/21/18), 252 So.3d 914. After an opportunity for adequate discovery, a motion for summary judgment shall be granted if the motion, memorandum, and supporting documents show there is no genuine issue of material fact and that the mover is entitled to judgment as a matter of law. La. C.C.P. art. 966(A)(3); Campbell v. Dolgencorp, LLC, 2019-0036 (La.App. 1st Cir. 1/9/20), 294 So.3d 522, 526. A genuine issue of material fact is one as to which reasonable persons could disagree; if reasonable persons could reach only one conclusion, there is no need for trial on that issue and summary judgment is appropriate. Bass v. Disa Global Solutions, Inc., 2019-1145 (La.App. 1st Cir. 6/12/20), 305 So.3d 903, 906-07, writ denied, 2020-01025 (La. 11/4/20), 303 So.3d 651.
The burden of proof on a motion for summary judgment rests with the mover. La. C.C.P. art. 966(D)(1). If the mover will not bear the burden of proof at trial on the issue that is before the court on the motion for summary judgment, the mover's burden on the motion does not require him to negate all essential elements of the adverse party's claim, action, or defense. Rather, the mover must point out to the court the absence of factual support for one or more elements essential to the adverse party's claim, action, or defense. The burden is on the adverse party to produce factual support sufficient to establish the existence of a genuine issue of material fact or that the mover is not entitled to judgment as a matter of law. La. C.C.P. art. 966(D)(1).
INSURANCE COVERAGE
Summary judgment is appropriate for determining issues relating to insurance coverage. Bosse v. Access Home Insurance Co., 2018-0482 (La.App. 1st Cir. 12/17/18), 267 So.3d 1142, 1145. Additionally, interpretation of an insurance policy is usually a legal question that can be properly resolved by means of a motion for summary judgment. Sanchez v. Callegan, 99-0137 (La.App. 1st Cir. 2/18/00), 753 So.2d 403, 405. When determining whether a policy affords coverage for an
The parties' intent, as reflected by the words of an insurance policy, determines the extent of coverage, and the intent is to be determined in accordance with the plain, ordinary, and popular sense of the language used in the policy, unless the words have acquired a technical meaning. La. C.C. art. 2047; Highlands Underwriters, 691 So.2d at 1340. If the language in an insurance contract is clear incident, the insured bears the burden of proving that the incident falls within the policy's terms. Doerr v. Mobil Oil Corp., 2000-0947 (La. 12/19/00), 774 So.2d 119, 124, modified on other grounds on reh'g, 2000-0947 (La. 3/16/01), 782 So.2d 573. Summary judgment declaring a lack of coverage under an insurance policy may be rendered only if there is no reasonable interpretation of the policy, when applied to the undisputed material facts shown by the evidence supporting the motion, under which coverage could be afforded. Boudreaux v. Coco, 2021-1009 (La.App. 1stCir. 4/28/22), 342 So.3d 354, 360.
An insurance policy is a contract between the insured and the insurer and has the effect of law between the parties. Highlands Underwriters Ins. Co. v. Foley, 96-1018 (La.App. 1st Cir. 3/27/97), 691 So.2d 1336,1340. Thus, an insurance policy should be construed using the general rules of interpretation of contracts set forth in the Louisiana Civil Code. Mayo v. State Farm Mut. Auto. Ins. Co., 2003-1801 (La. 2/25/04), 869 So.2d 96, 99. See also Billiot v. Terrebonne Parish Sheriff's Office, 98-0246 (La.App. 1st Cir. 2/19/99), 735 So.2d 17, 24, writ denied, 99-1376 (La. 7/2/99), 747 So.2d 22. The judiciary's role in interpreting insurance policies is to determine the common intent of the parties to the contract. Mayo, 869 So.2d at 99. See also La. C.C. art. 2045. Courts look first to the insurance policy itself in order to determine the parties' intent. See La. C.C. art. 2046; Doerr, 774 So.2d at 124. When a contract can be construed from the four comers of the policy without extrinsic evidence, the question of contractual interpretation is answered as a matter of law. Brown v. Drillers, Inc., 93-1019 (La. 1/14/94), 630 So.2d 741, 749-50. and unambiguous, the agreement must be enforced as written, and a reasonable interpretation consistent with the obvious meaning and intent of the policy must be given. La. C.C. art. 2047; Highlands Underwriters, 691 So.2d at 1340; Robinson v. Heard, 2001-1697 (La. 2/26/02), 809 So.2d 943, 945.
If the contract cannot be construed based on language contained therein due to an ambiguity, the court may look to extrinsic evidence to determine the parties' intent. Doerr, 774 So.2d at 124. At that point, determining the intent of the parties becomes, in part, a question of fact. See Country Club of Louisiana Property Owners Association, Inc. v. Baton Rouge Water Works Company, 2019-1373 (La.App. 1st Cir. 8/17/20), 311 So.3d 395, 399. When making the determination as to the parties' intent, any ambiguities within the policy must be construed in favor of the insured to effect, not deny, coverage. Doerr, 774 So.2d at 124. Ambiguity in a policy will also be resolved by ascertaining how a reasonable insurance policy purchaser would construe the clause at the time the insurance contract was entered. Fleniken v. Entergy Corp., 99-3023 (La.App. 1st Cir. 2/16/01), 790 So.2d 64, 69 n.4, writs denied, 2001-1269, 2001-1295 (La. 6/15/01), 793 So.2d 1250, 1252. The determination of whether a contract is clear or ambiguous is a question of law. Watts v. Aetna Cas. and Sur. Co., 574 So.2d 364, 369 (La.App. 1st Cir.), writ denied, 568 So.2d 1089 (La. 1990).
DISCUSSION
Bankers, in support of its motion for summary judgment, offered the affidavit of Adam S. Edmundson, a claim representative employed by Bankers, with a true and correct copy of the Bankers insurance policy issued to Arbor attached thereto. According to the affidavit of Mr. Edmundson and its attachment, Bankers issued a business liability policy bearing policy number 17 0004936687 3 00 to the named insured, Arbor, which was in effect from October 12, 2018, through October 12, 2019. The policy contains standard language providing for general liability coverage and property coverage. The policy includes the "BusinessOwners [szc] Liability Coverage Form BP 00 06 06 89" and also contains a number of endorsements, including the "Louisiana Changes" to business liability coverage. The policy provides, in pertinent part:
A. COVERAGES
1. Business Liability.
a. We will pay those sums that the insured becomes legally obligated to pay as damages because of..."property damage"., .to which this insurance applies. We will have the right and duty to defend the insured against any "suit" seeking those damages. However, we will have no duty to defend the insured against any "suit" seeking damages for.. ."property damage".. .if all of the allegations of the "suit" are explicitly excluded by this insurance. We may, at our discretion, investigate any "occurrence" and settle any claim or "suit" that may result.
b. This insurance applies: (1) To "bodily injury" or "property damage" only if:
(a) The "bodily injury" or "property damage" is caused by an "occurrence" that takes place in the "coverage territory'" and
(b) The "bodily injury" or "property damage" occurs during the policy period. AAA
but only if the offense was committed in the "coverage territory" during the policy period.
d. "Property damage" that is loss of use of tangible property that is not physically injured will be deemed to occur at the time of the "occurrence" that caused it. [Emphasis added.]
The policy defines "property damage" as:
12. "Property Damage" means: a. Physical injury to tangible property, including all resulting loss of use of that property. All such loss of use shall be deemed to occur at the time of the physical injury that caused it; or b. Loss of use of tangible property that is not physically injured . All such loss of use shall be deemed to occur at
the time of the "occurrence" that caused it. [Emphasis added.]
The policy further defines an "occurrence" as "an accident, including continuous or repeated exposure to substantially the same general harmful conditions."
In further support of its motion for summary judgment, Bankers relied on IMC's petition for damages, IMC's responses to interrogatories, and the deposition testimony of IMC's owner/president, Brandon Abidin, to outline IMC's allegations and alleged losses. IMC alleged eight causes of action, all relating to the purported theft of IMC's loan files. IMC's alleged injuries consisted of loss of present and future revenues, customers, goodwill, reputation, business opportunity, and productivity. IMC sought attorney fees under LUTSA, treble damages and attorney fees under LUTPA, and damages for the full value of the amounts comprising the unjust enrichment of the defendants. IMC identified eleven of its customers who closed loans with Arbor, arguing that the defendants owed IMC commissions on those eleven loans, as well as commissions on the remaining loans not closed by Arbor. IMC claimed that the immediate and future value of its stolen loan files and customer relationships totaled $751,968.04.
Bankers argued that the policy issued to Arbor provided business liability coverage for sums that Arbor becomes legally liable to pay as damages as a result of "property damage" and that IMC's alleged losses do not arise out of "property damage." Pertinent to our inquiry, is the policy's definition of "property damage" as the "loss of use of tangible property that is not physically injured."
Based on Louisiana law, Bankers avers that IMC's electronic data (i.e., the loan files), customer relationships, present and future revenues, goodwill, reputation, business opportunity, and productivity are not tangible property because those things are not corporeal-i.e., things with a body, whether animate or inanimate, that can be felt or touched. Bankers further argues that loss of future opportunity for profit is not a loss of use of tangible property. Bankers contends that under Louisiana law, "loss of use" within the context of an insurance contract contemplates compensation for a period of time required to secure repairs to tangible property that has been damaged. Instead, Bankers avers that IMC seeks "purely economic damages" for the alleged loss of its loan files, customers, and revenue that is unrelated to any actual property damage, which is not covered by the Bankers policy.
Citing La. C.C. art. 461.
In opposition to Bankers' motion for summary judgment, IMC relied on the deposition testimony of IMC by its owner/president, Brandon Abidin, as well as the affidavit of Mr. Abidin and the attachments thereto. Mr. Abidin stated that IMC uses computer software called Calyx Point, widely used in the mortgage industry, to process loans for its customers. Each Point file, using a ".PCF" extension, contains information on the loan to which that file applies, including borrower/seller contact and financial information, the property being purchased or refinanced, and loan terms and conditions. Mr. Abidin indicated that IMC stores its Point files on an encrypted and password-protected computer system hosted and administered by a third-party. In addition to stealing IMC's electronic loan files, Mr. Abidin stated that it was likely Ms. Mixson and Ms. Bryant also misappropriated physical, paper loan files. Mr. Abidin averred that the theft of IMC's loan files rendered those physical files useless to IMC, as those files were no longer viable brokering opportunities for IMC. Mr. Abidin attempted to rehabilitate loans to borrowers whose files had been stolen, but was unsuccessful.
Exhibit 1-Ms. Mixson's employment agreement with IMC; Exhibit 2-April 21, 2019 emails showing Ms. Mixson emailing herself IMC loan files; Exhibit 3-text message; Exhibit 4-May 1, 2019 email from Mr. Abidin to Ms. Mixson, and April 30, 2019 email from Ms. Mixson to Mr. Abidin; Exhibit 5-March 25, 28, and 29, 2019 emails between Ms. Mixson and Mr. LeBlanc; and Exhibit 6-May 22, 2019 letter from IMC's attorney to the Arbor defendants.
IMC alleged that its electronic files were stolen and rendered useless, and that the corresponding physical, paper files remaining in its possession were also rendered useless, thereby triggering coverage under the Bankers policy. IMC further contended that its claims were not limited to loss of customer relationships and intangible economic losses. IMC alleged theft of its proprietary customer and loan information, in the form of loan files, electronic or otherwise. IMC argued that while Ms. Mixson's and Ms. Bryant's theft of the loan files did cause the loss of customer relationships and economic losses, that happened because of the theft of the IMC loan files. IMC contended that "the loss of relationships and loss of loan files are not mutually exclusive events."
There is no dispute that the Bankers policy issued to Arbor provided coverage for "property damage." At issue in this appeal is the policy's second definition of "property damage," i.e., the "loss of use of tangible property that is not physically injured." IMC has alleged that it lost the use of its electronic data, i.e., the Calyx Point loan files. The issue before this court is whether electronic data files stored on a password-protected and encrypted computer system are tangible property as defined under the liability policy at issue. Or, stated another way, are electronic data files tangible property that can be subject to a loss of use?
"Tangible property" is synonymous with the civilian concept of "corporeal movable" property. City of New Orleans v. Baumer Foods, Inc., 532 So.2d 1381, 1383 (La. 1988). See also Shaw Group, Inc. v. Kennedy, 2002-0655 (La.App. 1stCir. 7/2/03), 858 So.2d 667, 669; South Central Bell Telephone Co. v. Barthelemy, 94-0499 (La. 10/17/94), 643 So.2d 1240, 1243; Massey v. Decca Drilling Co., Inc., 25,973 (La.App. 2nd Cir. 12/7/94), 647 So.2d 1196, 1205, writs denied, 95-0069, 95-0411, 95-0417 (La. 4/21/95), 653 So.2d 563, 564. Louisiana Civil Code article 461 defines corporeals as things that "have a body, whether animate or inanimate, and can be felt or touched," while incorporeals are "things that South Central Bell, 643 So.2d at 1246 (citations and footnote omitted). have no body, but are comprehended by the understanding, such as the rights of inheritance, servitudes, obligations, and right of intellectual property." Louisiana Civil Code article 471 defines corporeal movables as "things, whether animate or inanimate, that normally move or can be moved from one place to another." Louisiana Civil Code article 473 defines incorporeal movables as "rights, obligations, and actions that apply to a movable thing.... Movables of this kind are such as bonds, annuities, and interests or shares in entities possessing juridical personality."
Although some other states differ, in Louisiana, computer software constitutes tangible personal property and is subject to taxation. Shaw Group, 858 So.2d at 669. The Louisiana Supreme Court has ruled that computer software is tangible property, which is synonymous with the civilian concept of corporeal movable property. South Central Bell, 643 So.2d at 1244. In South Central Bell, the primary issue before the Supreme Court was whether certain computer software constituted "tangible personal property" taxable under the sales and use tax imposed by the City of New Orleans. The Supreme Court discussed the basic characteristics of electronic computer software:
In its broadest scope, software encompasses all parts of the computer system other than the hardware.... In its narrowest scope, software is synonymous with program, which, in turn, is defined as "a complete set of instructions that tells a computer how to do something." Thus, another definition of software is "a set of instructions" or "a body of information."
When stored on magnetic tape, disc, or computer chip, this software, or set of instructions, is physically manifested in machine readable form by arranging electrons, by use of an electric current, to create either a magnetized or unmagnetized space. The computer reads the pattern of magnetized and unmagnetized spaces with a read/write head as "on" and "off', or to put it another way, "0" and "1". This machine readable language or code is the physical manifestation of the information in binary form.South Central Bell, 643 So.2d at 1246 (citations and footnote omitted).
The Supreme Court found that the electrical encoding of the information into a machine readable language "by arranging electrons, by use of an electric current, to create either a magnetized or unmagnetized space" (i.e., binary code) made the software tangible. South Central Bell, 643 So.2d at 1246. When recorded in a physical existence, the software takes up space on a tape, disc, computer chip, hard drive, or server, makes physical things happen, and can be perceived by the senses. South Central Bell, 643 So.2d at 1246. The Supreme Court held that the arrangement of matter, physically recorded on some tangible medium, constitutes a corporeal body. South Central Bell, 643 So.2d at 1246. The mode of delivery of the software was not relevant to the court's determination: "[t]hat the information, knowledge, story, or idea, physically manifested in recorded form, can be transferred from one medium to another does not affect the nature of that physical manifestation as corporeal, or tangible." South Central Bell, 643 So.2d at 1247. Accordingly, computer software consists of knowledge recorded in a physical form. As those physical forms-discs, tapes, hard drives, etc.-have a physical existence, take up space, and make things happen, they are tangible and taxable.
The Supreme Court then considered the secondary issue of whether the maintenance services South Central Bell acquired in relation to the software were taxable. Those services consisted of technical support, updating, enhancing, and reformatting of the software, as well as advising the taxpayer with respect to certain usages of the software. The City argued such services were taxable under its ordinance as repairs to tangible personal property, but the court determined the services acquired by South Central Bell did not fall under the rubric of "repair services" and were not taxable. In so doing, the court specifically noted that the services were "to enhance already operable software and make it perform as efficiently as possible." South Central Bell, 643 So.2d at 1250. See also Shaw Group, 858 So.2d at 671 ("work product," consisting of modifications and updates to computer software, is not taxable as tangible, personal property.).
Although the South Central Bell decision is almost thirty years old, the holding of that case and its analysis is still applicable. Courts, applying Louisiana law, have expanded the holding of South Central Bell beyond tax law and have applied the Supreme Court's analysis in numerous other contexts, including insurance coverage disputes regarding electronic data. Like the software at issue in South Central Bell, electronic data is "physically manifested in machine readable form" using electrical input. South Central Bell, 643 So.2d at 1246. Additionally, like the software, electronic data is not solely incorporeal knowledge. See generally South Central Bell, 643 So.2d at 1246. Electronic data is knowledge "recorded in a physical form which has physical existence" and "can be perceived by the senses." South Central Bell, 643 So.2d at 1246. It is less like a right or idea than a recorded "arrangement of matter" and should thus be classified as corporeal. South Central Bell, 643 So.2d at 1246. Additionally, electronic data must be stored somewhere; therefore, it is intertwined with other corporeal technological elements. South Central Bell, 643 So.2d at 1248. Just as software may have property rights affecting it, such as a copyright, without the software itself being a right, so should rights be allowed in data, primarily a right of ownership or quasi-ownership. See South Central Bell, 643 So.2d at 1248-49.
For example, the Louisiana Fifth Circuit Court of Appeal, in 2011, found that electronic data files generated by an engineer drawing software program were corporeal movables because the files were copied from the software and physically manifested onto CD ROMS. State v. Williamson, 2010-466 (La.App. 5th Cir. 12/13/11), 81 So.3d 156, 166. In 2012, the United States District Court for the Middle District of Louisiana, following South Central Bell, determined that electronic data stored on a hard disk storage system was a corporeal movable. Landmark Am. Ins. Co. v. Gulf Coast Analytical Labs, Inc., No. CV 10-809, 2012 WL 1094761 at *4 (M.D. La. Mar. 30, 2012). In 2016, the United States District Court for the Eastern District determined that under the Louisiana Supreme Court's analysis in South Central Bell, electronic configuration tables, customer data, and related account information for software programs were tangible items because they were stored on a disc, server, or hard drive. First American Bankcard, Inc. v. Smart Bus. Tech., Inc., No. CV 15-638, 2016 WL 5869787 at *6 (E.D. La. Oct. 7, 2016). In 2021, the United States District Court for the Eastern District affirmed the South Central Bell analysis, finding that digital information stored on hard drives constitutes corporeal property. Bureau Veritas Commodities &Trade, Inc. v. Nanoo, No. CV 20-3374, 2021 WL 2142466 at *13 (E.D. La. May 26, 2021).
Cf. CamSoft Data Sys., Inc. v. Southern Electronics Supply, Inc., 2019-0731, 2019-0514 (La.App. 1st Cir. 7/2/19) 2019 WL 2865359 at *3 n.3 (unpublished), writ denied, 2019-01229 (La. 11/19/19), 282 So.3d 1071. Therein, the plaintiff sued for the appropriation of business plans, pricing information, and other information from its business under the tort of conversion, which provides owners with a remedy for unlawful interference with a movable. CamSoft, 2019 WL 2865359 at * 1. On de novo review of a summary judgment, the CamSoft court recognized that CamSoft's confidential business information may be tangible property when it is recorded in physical form; however, the CamSoft court found that the plaintiff failed to introduce evidence at summary judgment to show that the allegedly converted information had physical form. The CamSoft court declined to extend the tort of conversion to "immovable, intangible information." Id. at *3. The CamSoft holding, however, did not focus on the Supreme Court's analysis on the nature of software as digital information, which is far more similar to data than the information allegedly converted in that case. Additionally, the CamSoft court's categorization of that information as an "immovable, intangible" thing appears to be in error because an "immovable, intangible" thing is an incorporeal immovable, which the Louisiana Civil Code defines as a right to immovable property. See La. C.C. art. 470. The CamSoft decision is also at odds with established Louisiana precedent that electronic data, when recorded or reduced in a physical format, is a tangible, corporal movable. See South Central Bell, 643 So.2d at 1246, and Williamson, 81 So.3d at 166 (recognizing that conversion protects digital or electronic property). See also First American Bankcard, 2016 WL 5869787 at *6 (rejecting the argument that digital information stored on the cloud is not subject to conversion under Louisiana law)); All Green Corp. v. Wesley, No. CV 20-0121, 2021 WL 314290 at *6 (W.D. La. Jan. 29, 2021) (under Louisiana law, digital information may be the basis for a conversion action when it is of a type that is "capable of being merged into a physical document."). The Supreme Court's decision in South Central Bell, and not CamSoft, governs our consideration of the electronic data in this case and its classification as tangible property. Accordingly, we find that the CamSoft court's classification of the plaintiff's business plans, pricing information, and other information in that case as "immovable, intangible information" is dicta and distinguishable from the instant matter.
In the era of cloud computing, interrelated networks, and file sharing, computer software and electronic data still exist in tangible form. Cloud computing relies on tangible software encoded onto physical servers to store the electronic information; those servers are connected to the end user through a network, such as the internet, rather than stored on the user's personal hard drive or local network server. First American Bankcard, 2016 WL 5869787 at *7 n.2 (citing Eric Griffith, "What is Cloud Computing" PC Mag, May 3, 2016, https://www.pcmag.com/how-to/what-is-cloud-computing (last updated February 15, 2022). Accordingly, the location of the physical servers hosting and administrating IMC's computer system does not make its computer software or electronic data any less tangible.
Like the electronic software data at issue in South Central Bell, IMC's electronic loan files have physical existence because the loan files take up space on the tape, disc, hard drive, and servers comprising IMC's computer system, and the loan files can be perceived by the senses. See South Central Bell, 643 So.2d at 1247. Thus, under the Supreme Court's analysis in South Central Bell, the electronic loan files must be considered corporeal movables. South Central Bell, 643 So.2d at 1246. Since IMC's electronic loan files are corporeal, and therefore, tangible in nature under Louisiana law, IMC's electronic data may be defined as "property" that is susceptible to "loss of use" for purposes of the Bankers policy.
Based on our de novo review of the evidence offered in support of and in opposition to Bankers' motion for summary judgment, we find that the policy at issue may reasonably be interpreted to provide coverage to the defendants for IMC's claims. Therefore, summary judgment was not appropriate as a matter of law. Since the policy may be reasonably interpreted to provide coverage for IMC's claims against the defendants, summary judgment determining a lack of coverage for the defendants under the policy was inappropriate. Accordingly, the trial court's judgment granting Bankers' motion for summary judgment, decreeing that the Bankers policy issued to Arbor does not provide coverage for IMC's claims against the defendants and that Bankers does not owe a duty to defend the defendants against IMC's claims, and dismissing any and all claims that were or could have been asserted against Bankers under its policy, with prejudice, is hereby reversed.
DECREE
We reverse the trial court's December 15, 2022 amended, final judgment. All costs of this appeal are assessed to the intervenor/appellee, Bankers Insurance Company.
REVERSED.