Opinion
CIVIL ACTION NO. 00-2229, SECTION "K" (1).
May 29, 2003.
Before the Court is Gerard and Connie Whittles', and Christopher Rayer's Motion to Dismiss Pursuant to FRCP 12(b)(1), Alternatively 12(b)(6). The motion requests that the Court dismiss all of Ms. Lorenz's third-party claims against them. The claims all related to the alleged wrongful transfer of corporate assets by the third-party defendants. For the following reasons, the Motion to Dismiss is hereby GRANTED, and Ellen Lorenz's third-party claims against Rayer and the Whittles are DISMISSED WITHOUT PREJUDICE.
I. INTRODUCTION
A. The Facts and the Parties
Gerard and Connie Whittle, (hereinafter "the Whittles"), and Christopher Rayer are third-party defendants in this action, which was originally instituted by the plaintiff, Reliance Insurance Company. Reliance had financed various construction projects for the defendants River/Road Construction, Inc., River/Road Recycling, Inc. River/Gulf Marine, L.L.C., Jackson Square Partnership, (hereinafter, "the Contractors"). Reliance issued performance and payment bonds to the Contractors to enable them to submit bids on public and private projects. Because Reliance was not willing to assume the sole risk in the event the Contractors failed to perform, the Contractors signed indemnity agreements whereby the signatories agreed to be liable to Reliance in the event the Contractors failed to perform. Not only did the Contractors agree to indemnify Reliance, but Uwe Jens Lorenz, Ellen Lorenz, Christopher Rayer, Gerard and Connie Whittle, signed the indemnity agreements individually. Uwe Jens Lorenz and Gerard Whittle also signed the agreement in their capacity as partners and officers in the contracting businesses.
On August 15, 2001, Reliance settled and compromised all of its claims in this matter with all of the above defendants, except Ellen Lorenz, and then dismissed with prejudice its claims against River/Road Recycling, Inc., River/Gulf Marine, L.L.C., Jackson Square Partnership, Uwe Jens Lorenz, Gerard M. Whittle, Connie Whittle, and Christopher Rayer.
Reliance alleged that Ellen Lorenz signed the 1995 and 1996 Indemnity Agreements, but not the 1999 Indemnity Agreement.See Reliance's First Supplemental and Amended Complaint, p. 3, ¶¶ XLV, XLVI.
Ellen Lorenz, Uwe Jens Lorenz's ex-wife, answered Reliance's complaint on July 23, 2002. On September 13, 2002 she filed a First Supplemental and Amended Answer asserting counterclaims against Traveler's Casualty and Surety Company (successor in interest to Reliance), third-party claims against former co-defendants Uwe Jens Lorenz, Gerard Whittle, Connie Whittle, and Christopher Rayer, and asserted an additional third-party claim against Reliance representative Vincent Easano. Vincent Fasano and Uwe Jens Lorenz have not filed Motions to Dismiss.
Uwe Jens Lorenz filed a petition for divorce on September 24, 1998. A judgment decreeing a Separation of Property was rendered on October 28, 1998, and a judgment of Divorce was subsequently entered on May 26 1999. See Ellen Lorenz's Answer, ¶ 112.
In Ms. Lorenz's First Supplemental and Amended Answer she alleges that in 1998 and 1999 Uwe Jens Lorenz transferred assets of the spousal community, (namely her community interest in one of the contracting companies) to Central Gulf Contractors, L.L.C., presumably so that they would be inaccessible in the division of marital assets during the divorce proceeding. See Ellen Lorenz's Answer ¶¶ 1-128. Her answer also alleges, without specific detail, that the Whittles and Rayer somehow assisted Uwe Jens Lorenz in his endeavors in depleting the spousal community.
The third-party complaint also alleges that the Whittles and Rayer are liable as third-party defendants for intentionally and fraudulently diverting the assets and resources from the community property regime between Ellen Lorenz and Uwe Jens Lorenz. Ms. Lorenz also asserts claims against the Whittles and Rayer pursuant to articles 2315 and 2324 of the Louisiana Civil Code. Additionally, she alleges that "the losses complained of by Reliance/Travelers under the 1995 and 1996 Indemnity Agreements . . . would not have been realized but for the actions of Reliance, Uwe Jens Lorenz, and the other Released Defendants." Also, Ms. Lorenz's third party demand asserts a claim for unjust enrichment against the defendants.
The term "Released Defendants" includes Uwe Jens Lorenz, Gerard Whittle, Connie Whittle and Christopher Rayer. See Ellen Lorenz's Answer, p. 20, n. 1. See Ellen Lorenz's Answer, ¶ 123 (asserting that losses suffered by Reliance would not have occurred but for the actions of the released defendants).
On April 7, 2003, Ellen Lorenz filed a Second Supplemental and Amended Answer, Counterclaim and Third-party Demand. In it, she alleges that Uwe Jens Lorenz, the Whittles and Christopher Rayer were all officers, directors, and shareholders of community interest entities. She alleges that the defendants diminished the assets of the entities in which she had an interest, breached the duty of good faith and fair dealing, and breach their fiduciary duty to her. She also alleges that Uwe Jens Lorenz, the Whittles and Christopher Rayer breached the indemnity agreements with Reliance, to which the defendants were co-signatories by diverting the assets of the community interest entities to a new entity, Central Gulf Contractors.
This Motion to Dismiss relates only to the claims asserted against Christopher Rayer and the Whittles and does not touch on the claims as they related to Vincent Fasano and Uwe Jens Lorenz, who have not brought Motions to Dismiss the third-party demands.
II. DISCUSSION
Did Ellen Lorenz assert a proper Third Party Demand?
The Whittles and Rayer argue Ellen Lorenz did not properly bring her third-party state law claims against them under Rule 14(a) and therefore the claims should be dismissed.
Federal Rule of Civil Procedure 14(a) states that:
At any time after the commencement of the action a defending party, as a third-party plaintiff, may cause a summons and complaint to be served upon a person not a party to the action who is or may be liable to the third party plaintiff for all or part of the plaintiff's claim against the third party plaintiff.
According to Central Bank of the South v. Cleveland, 1992 WL 31511, *2 (E.D. La.) and A.J. Kellos Construction Co. v. Balboa Ins. Co., 86 F.R.D. 544, 545 (S.D. Ga. 1980), the crucial characteristic of a Rule 14(a) claim is that liability is secondary or derivative to the main claim. "The mere fact that the alleged third-party claim arises from the same transaction or set of facts as the original claim is not enough." 6 Charles A. Wright, Arthur Miller Mary Kane, Federal Practice and Procedure, § 1446 (2ed. 1990). Rule 14 is not to be used as a vehicle for the assertion of an entirely independent and separate cause of action. See Central Bank, 1992 WL 315117 at *2.
As stated in Central Bank, a third-party claim may be asserted under Rule 14(a) only when the third-party's liability is in some way dependent on the outcome of the main claim or when the third-party is secondarily liable to the plaintiff.Id. In this case, the liability of the third-party defendants is in no way dependent on the outcome of the main claim. The main claim against the Whittles and Rayer was for their failure to perform obligations under the indemnity agreements with Reliance. Ellen Lorenz's third-party claims against the Whittles and Christopher Rayer for fraud, unjust enrichment, breach of contract, and breach of fiduciary duty arise from the fact that they allegedly diverted assets to a company in which Ellen Lorenz had no community interest, and settled their claims leaving her exposed to liability. These claims are separate and independent from the indemnity claim and the success or failure of Reliance on the main claim is independent of the outcome of Ellen Lorenz's claims against the defendants.
Even assuming, for the sake of argument, that Ellen Lorenz's third-party claims were derivative of the main claim when the original lawsuit was filed, they are no longer derivative because the Whittles and Rayer settled with Reliance on August 15, 2001, almost a year before she asserted her third-party demands. Because the Whittles and Rayer were dismissed, it is impossible for Ellen Lorenz's claims to be dependent or derivative of the determination of liability on the original claim.
Under Louisiana law, a settlement or compromise releases third party defendants from claims of contribution or indemnity. According to Barnes v. L.M. Massey, Inc., 312 So.2d 120, 125 (La. 1993),
It has long been established in our jurisprudence that when a plaintiff settles and releases one of two joint tortfeasors, reserving all of his rights against the other, the remaining tortfeasor is thereby deprived of his right to enforce contribution against the one who has been released.Barnes, 312 So.2d at125. Louisiana jurisprudence is quite clear that in the case that Ellen Lorenz's claim is derivative of the Whittles and Rayer's liability on the main claim she may not pursue a claim for contribution against them because they had previously settled with and were released from their obligations on the indemnity agreements. See Schouest v. Franke 526 So.2d 1342, 1346 (La.App. 5th Cir. 1988) (finding that a settlement nullified the original obligation of the third-party defendant and therefore third-party plaintiff could not pursue a claim of contribution); Systems Contractor's Corp. v. Williams and Assocs. Architects App., 99-1221 (La.App. 5 Cir. 9/26/00) (finding that when an obligee settles and releases a solidary obligor, the remaining solidary obligors are deprived of their right to contribution against the solidary obligor who has been released); Harvey v. Travelers Insurance Co., 163 So.2d 915, 918 (La.App. 3rd Cir. 1964); see also Louisiana Civil Code Art. 1803. Because the Whittles and Rayer are no longer liable under the indemnity agreements, Ellen Lorenz may not pursue a claim where the third-party defendants have no liability on the main claim. Further, the text of Rule 14 states in part that a third-party demand may be made on a person who "is or may be liable to the third-party plaintiff for all or part of the plaintiff's claim against the third-party plaintiff." Fed.R.Civ.P. 14(a). Following the logic of Rule 14(a), it is clear that in this case the third-party defendants have absolutely no liability to the plaintiff under the indemnity contract as a result of the release and settlement. Therefore, the third-party plaintiff has no right to any recovery from the third-party defendant.
Civil Code Art. 1803 reads in pertinent part:
Remission of debt by the obligee in favor of one obligor, or a transaction or compromise between the obligee and one obligor, benefits the other solidary obligors in the amount of the portion of that obligor.
Surrender to one solidary obligor of the instrument evidencing the obligation gives rise to a presumption that the remission of debt was intended for the benefit of all the solidary obligors.
To summarize what the Court has found so far: 1) Ellen Lorenz's third-party claims are improper under Rule 14 because it is separate and independent from the third-party defendants' liability on the main claim (the indemnity agreements) and 2) even if her third-party claims were derivative of the main claim and properly asserted under Rule 14, she cannot maintain her third-party demands because the settlement released the Whittles and Rayer from liability on the indemnity agreements. Her claims, therefore, cannot be derivative of the main claim because liability on the part of the third-party defendants did not exist at the time she filed her third-party demands.
Because the Court has found that Ellen Lorenz's third-party demands have been brought improperly, it does not reach the defendant's other grounds for dismissal: prescription and failure to plead fraud with particularity. However, the Court notes that Ellen Lorenz's claim for breach of a fiduciary duty, which she recently filed in her Second Supplemental and Amended Complaint, as well as her other claims, are not causes of action that she, as a shareholder or in her individual capacity is entitled to bring. Bordelon v. Cochrane, 533 So.2d 82, 86 (La.App. 3 Cir. 1989). Actions for mismanagement of corporate assets, fraud, and breach of fiduciary duty belong to the corporation not the stockholders and must be brought as a shareholder's derivative action. Id. A personal right of action exists only in contract. Id. Although Ellen Lorenz brings a breach of contract claim alleging that the third-party defendants and co-signatories of the indemnity agreements breached the indemnity agreement, this action belongs to Reliance, and any contract action based on the indemnity agreements that Ellen Lorenz has against the co-signatories, is not dependent on the outcome of the main claim. Other than the contract claim that Ellen Lorenz may have which the Court has already found was not properly brought under Rule 14, Ellen Lorenz does not have a private right of action against the third-party defendants.
Only one other exception to the general requirement that outside of a contract action, an action for mismanagement or fraud belongs to the corporation exists: a shareholder with an identifiably direct personal interest in a cause of action may bring suit even if the corporation's rights are also implicated.Nowling v. Aero Servs. Int'l, 752 F. Supp. 1304, 1315 (E.D. La. 1990). No matter how Ms. Lorenz's counsel attempts to twist and contort her cause of action to fit the rubric of an "identifiably direct personal interest" he has cited no case that suggests that her claims are "identifiably" different from an action to recover the diminution in value of her interest in the corporation's stock. Her claims do not amount to a direct and personal interest. The only direct and personal interest Ellen Lorenz potentially has, is contained in her allegations that the Whittles and Rayer committed fraud, conversion, and breach of a fiduciary duty when they transferred assets to Central Gulf Contractors, or when they exposed her to risk by setting. However, as mentioned earlier, these claims are not derivative of the outcome of the main claim, and therefore cannot be brought as a third-party demand.
Accordingly,
IT IS ORDERED that Ellen Lorenz's third-party demands against the Whittles and Christopher Rayer are hereby DISMISSED without prejudice.