Opinion
CIVIL ACTION NO: 07-8581-MVL-SS.
February 19, 2009
Harry Cantrell, Jr., for plaintiff.
Chase Chassaignac and Jesse Wales, for defendants.
ORDER
STATE FARM'S MOTION FOR SANCTIONS (Rec. doc. 37)
GRANTED
Before the undersigned is the motion of the defendant, State Farm Insurance Company ("State Farm"), for an order finding Copeland Company, LLC ("Copeland Co.") in contempt and sanctioned for their failure to comply with subpoenas.
BACKGROUND
On August 29, 2007, the plaintiff, Second Highway Baptist Church ("Second Baptist"), filed a petition in state court against the defendant, State Farm Fire and Casualty Company ("State Farm"), for damages caused by Hurricanes Katrina and Rita. Rec. doc. 1. Second Baptist's claims pertain to two properties in Marrero, Louisiana: one at 1533 Haydel Drive; and the other at 5315 August Avenue. Rec. doc. 80. State Farm removed the case to federal court. Rec. doc. 1. The discovery deadline was January 21, 2009. The pretrial conference was set for February 19, 2009 and the trial is set for March 2, 2009. Rec. doc. 7.
On April 16, 2008, State Farm served written discovery on counsel for Second Baptist. Rec. doc. 10 (Exhibit 1). Although the Federal Rules of Civil Procedure required that Second Baptist respond to the discovery within thirty days, its counsel did not respond and did not seek an extension. On July 18, 2008, State Farm sent a follow-up letter to counsel for Second Baptist.Id. (Exhibit 2). Pursuant to the Local Rules of this Court, counsel for Second Baptist was required to participate in a conference with counsel for State Farm which was scheduled for August 1, 2008. L.R. 37.1. Counsel for Second Baptist did not participate in the conference. Pursuant to the Local Rules of this Court, counsel for Second Baptist was required to file an opposition to State Farm's motion to compel by September 30, 2008. L.R. 7.5. Counsel for Second Baptist did not file any opposition to the motion. On October 8, 2008, the motion was granted as unopposed. On September 22, 2008, State Farm filed a motion to compel discovery responses from the plaintiff. Second Baptist was ordered to serve discovery responses by October 23, 2008. Notwithstanding the failure of Second Baptist and its counsel to comply with the Federal Rules of Civil Procedure and the Local Rules of this Court, State Farm's request for sanctions was denied. Rec. doc. 12.
On October 23, 2008, State Farm filed a motion to dismiss Second Baptist's claims with prejudice for its failure to comply with the October 8, 2008 discovery order. Rec. doc. 13. On November 11, 2008, State Farm's counsel notified the Court that counsel for Second Baptist finally responded to its discovery requests. Its motion was thereby moot. Rec. doc. 15.
On November 21, 2008, State Farm filed a motion to compel inspection of Second Baptist's property. State Farm made numerous attempts to schedule the inspection of the property. Rec. doc. 16 (Exhibits B-I). Second Baptist was ordered to submit an opposition by December 4, 2008. Rec. doc. 19. Notwithstanding the order to file an opposition, counsel for Second Baptist did not do so. The motion was granted as unopposed. Second Baptist was ordered to permit State Farm's experts to inspect the property on December 16, 2008. Rec. doc. 22.
On December 8, 2008, State Farm moved to strike Second Baptist's witnesses and exhibits because it did not produce an expert report as required by the Court's scheduling order, it did not make initial disclosures as required by the Federal Rules of Civil Procedure and the scheduling order, and its witness and exhibit lists identified persons and evidence that were not disclosed in its discovery responses. Rec. doc. 24. On February 3, 2008, the District Judge denied the motion without prejudice. The order provides that, "[b]ecause the plaintiff has not filed any expert reports nor has asserted that any of his witnesses would be testifying as an expert, the Court finds that this issue is not yet ripe." Rec. doc. 61 at 2.
MOTIONS FOR PARTIAL SUMMARY JUDGMENT
On January 6, 2009, State Farm filed motions for partial summary judgment on Second Baptists' claims for: (1) damages for State Farm's alleged bad faith (Rec. doc. 39); (2) damages for mental anguish (Rec. doc. 40); and (3) attorney's fees (Rec. doc. 41). Regarding the bad faith claims and attorneys fees, the District Judge stated:
[T]he plaintiff has wholly failed to present any evidence that would create a genuine issue of material fact as to whether State Farm acted arbitrarily and capriciously in handling the plaintiff's claim. Plaintiff's refusal to submit rational documentation is patent. Because the plaintiff has failed to establish an essential element of its claims for bad faith penalties and attorneys fees, these claims are therefore dismissed.
Rec. doc. 80 at 6 (emphasis in original). The District Judge held that the plaintiff could not recover for emotional distress, inconvenience, or any other form of mental anguish because it was an organization and not an individual. The District Judge stated that, "[t]he claim is frivolous." Id. at 7. On February 18, 2009, State Farm's motions for partial summary judgment were granted.
A copy of the District Judge's order of February 18, 2009 is attached to the copy of this order, which will be sent to Reverend Joseph Walker, III.
MOTION FOR SANCTIONS
On January 6, 2009, State Farm filed a motion for sanctions. Second Baptist had identified Kevin and Bruce Copeland of Copeland Co. as witnesses. Kevin Copeland was described as a site inspector and a witness. Bruce Copeland was identified as a public adjuster and estimator. Rec. doc. 20. On December 19, 2009, State Farm had served Copeland Co. with subpoenas for Bruce and Kevin Copeland by mailing them to Bruce Copeland as manager of the firm at the address provided by the Secretary of State. Subpoenas were also served on Bruce and Kevin Copeland by service on Harry Cantrell, who is the registered agent for service of process for Copeland Co. and also counsel for Second Baptist. Rec. doc. 37 (Exhibit 1A-B). The subpoenas sought production of the records by December 29, 2009. State Farm reported that Bruce and Kevin Copeland did not produce the entire Copeland file on Second Baptist. On January 14, 2009, Second Baptist filed a response and stated:
Plaintiff has been in contact with Copeland Company, LLC regarding the requested production of records as request [sic] by the Defendant. That on/or about January 8, 2008 [sic] counsels' office did deliver all record [sic] it had received from Copeland Company, L.L.C. and Pastor Lawrence Walker in response to the Notice of Record Deposition and Subpoenas received.
Rec. doc. 55.
On January 15, 2009, there was a telephone settlement conference with the undersigned. Bruce Copeland participated in the conference along with Mr. Cantrell on behalf of plaintiff. It was agreed that settlement discussions were premature. Second Baptist was ordered to produce the documents which were subpoenaed from Bruce Copeland by no later than January 29, 2009. It was noted that all of these documents should have been produced as part of the initial disclosures required by Fed.R.Civ.P. 26. The minute entry provided that any documents not produced by January 29, 2009 would be excluded from evidence and could not be used to support plaintiff's claim. Mr. Copeland was required to make a return under oath certifying that all of the documents in his possession or generated by him on behalf of Second Baptist in support of his expert report were produced. Rec. doc. 57. The issue of the imposition of sanctions was not resolved at that time.
A copy of the January 15, 2009 minute entry is attached to the copy of this order which will be sent to Reverend Joseph Walker, III.
On February 13, 2009, State Farm filed a motion to strike the testimony of Bruce Copeland and any unproduced and untimely evidence in his or plaintiff's possession. Rec. doc. 74. The motion is set before the District Judge. State Farm states that, "[p]laintiff did not produce any evidence in response to Magistrate Shushan's Minute Entry/Order by January 29, 2009." Id. at 2. Second Baptist filed an opposition in which it states, "all evidence in possession of Bruce Copeland or used by Bruce Copeland to calculate the damage estimate for the property in question was supplied to the defendant on more than one occasion." Rec. doc. 75. State Farm replies that: (1) Second Baptist did not produce the documents by January 29, 2009; (2) neither Second Baptist nor Copeland produced the contract between them and many other documents used by Copeland; and (3) Second Baptist did not provide the certification from Bruce Copeland as required by the January 15, 2009 minute entry. Rec. doc. 81.
ANALYSIS
Pursuant to Fed.R.Civ.P. 37(b)(2)(A), "[i]f a party . . . fails to obey an order to provide or permit discovery, including an order under Rule 26(f), 35, or 37(a), the court where the action is pending may issue further just orders." Id. The Rule further provides that:
Instead of or in addition to the orders above, the court must order the disobedient party, the attorney advising that party, or both to pay the reasonable expenses, including attorney's fees, caused by the failure, unless the failure was substantially justified or other circumstances make an award of expenses unjust.
In summary, Second Baptist failed to: provide its initial disclosures; respond to State Farm's written discovery; comply timely with the October 8, 2008 discovery order; comply with State Farm's requests for an inspection of the property; produce a timely report of its expert; and comply with the orders contained in the January 15, 2009 minute entry. Neither Second Baptist nor Cantrell have demonstrated that these failures were substantially justified or that other circumstances make an award of expenses unjust.
The record does not demonstrate that Second Baptist or its principal, the Reverend Walker, were responsible. Instead, the record demonstrates that Second Baptist's counsel, Harry Cantrell, completely ignored his obligation to comply with the Federal Rules of Civil Procedure and the Local Rules of this Court and to prepare this case for trial. Claims that Cantrell included in the petition were described by the District Judge as frivolous. State Farm has been prejudiced by Cantrell's conduct. It was required to file motions to compel (Rec. doc. 10), to dismiss for failure to comply with discovery order (Rec. doc. 13), to compel entry upon land (Rec. doc. 16), and for sanctions (Rec. doc. 37). It was required to participate in a settlement conference which was premature because Cantrell had not produced the information from Bruce Copeland. Rec. doc. 57.
Throughout this process the undersigned refrained from the imposition of sanctions, including attorneys' fees. The orders were directed at securing the information from Second Baptist required by State Farm to defend and evaluate the case and to put it in a posture where either it is settled or was ready for trial. Cantrell obstructed this effort. Monetary sanctions will be imposed on him for his violations of the discovery orders.
State Farm sought sanctions from Copeland Co. Mr. Copeland was present as the January 15 conference and assured the undersigned that he would comply with the terms of the order entered that day. He did not do so. But, Mr. Copeland is not counsel of record for plaintiff and cannot be held responsible for Mr. Cantrell's obligations to the Court. After the issuance of the January 15, 2009 minute entry the burden rested with Cantrell.
Mr. Copeland does appear to be much more in control of the litigation than Mr. Cantrell, but Mr. Copeland is not an attorney.
Sanctions will not be imposed on Second Baptist because there is no evidence that it participated with Cantrell in the refusal to comply with the applicable rules and the orders of this Court. A copy of this order will be sent to Reverend Walker. From this point forward Reverend Walker is on notice that any further failure by Second Baptist to comply with its obligations as a litigant will result in sanctions being imposed upon it, including a recommendation that its claims be dismissed with prejudice.
On a side note, Mr. Cantrell and Reverend Walker first met a few weeks ago at the time Reverend Walker was deposed. It appears that all prior contact regarding this litigation, pending for a year and one-half, has been between Mr. Copeland and Reverend Walker.
Cantrell will be ordered to pay State Farm $3,000.00 in attorney's fees. This sum is significantly less than the reasonable attorney's fees and costs incurred by State Farm in attempting to secure information required for its trial preparation. Cantrell shall pay State Farm the $3,000.00 from his own funds. He shall not seek, directly or indirectly, reimbursement of this payment from Second Baptist.
IT IS ORDERED that: (1) State Farm's motion for sanctions (Rec. doc. 37) is GRANTED; and (2) within five (5) working days of the entry of this order, Harry Cantrell shall deliver a check in the amount of $3,000.00 payable to State Farm to its counsel.
ATTACHMENT 1
UNITED STATES DISTRICT COURT EASTERN DISTRICT OF LOUISIANA SECOND HIGHWAY BAPTIST CHURCH CIVIL ACTION VERSUS NO. 07-8581 STATE FARM INSURANCE COMPANY SECTION "F"ORDER AND REASONS
Before the Court are defendant's Motions for Partial Summary Judgment as to Bad Faith Claims, Attorneys Fees, and Mental Anguish or Other Extra-Contractual Damages. For the foregoing reasons, the motions are GRANTED.Background
Plaintiff had an insurance policy covering two properties in Marrero, Louisiana, located at 1533 Haydel Drive, which had a coverage limit of $742,515, and 5315 August Avenue, which had a coverage limit of $95,025, adjusted pursuant to an inflation index. The policy was in effect when Hurricane Katrina struck the Gulf Coast.
The plaintiff filed a claim for wind-related damaged caused by Katrina. The plaintiff submitted a second claim for damages caused by Hurricane Rita, which was consolidated with the Katrina claim. An independent insurance adjuster inspected the properties in October and November of 2005, and estimated that the total covered loss for both properties was $133,066.19. State Farm paid the plaintiff $100,861.24 (the estimated amount less depreciation and deductible) on November 25, 2005.
At the October 20th inspection of the August Avenue property, a representative of the plaintiff agreed to obtain and forward to the defendant documentation relating to the church steeple installation three years before Katrina; the defendant states it never received this information. On July 16, 2006, State Farm received an invoice from the plaintiff, which quoted $6,885.00 for a steeple, plus $1,960.00 for shipping. It was unclear whether installation was included in this price and whether this was the same type of steeple that was previously installed. Defendant asserts that multiple attempts to obtain clearer information regarding the previously installed steeple and this invoice were fruitless. Additionally, State Farm claims that the company listed on the invoice denies that this was their invoice.
The plaintiff filed suit in state court on October 15, 2007, which was removed by State Farm to federal court. In November 2008, following an Order granting State Farm's Motion to Compel, plaintiff produced discovery responses that identified certain property damages that it claimed remained unresolved. Plaintiff asserted that the property was approximately 50% complete and required about $200,000 to complete repairs. The plaintiff stated it had spent nearly $160,000 in repairs, but the defendant countered that the plaintiff had only itemized expenses of $127,107. The defendant points out that the documentation was vague, there were no underlying invoices for any supplies or materials listed, there was a different steeple invoice (for $7,274) and a separate claim for steeple installation of $11,847.97, and there were only two labor contracts totaling $24,100. State Farm not unreasonably points out that these documents are insufficient for State Farm to determine whether any additional amounts are due under the policy. And three minute entries by Magistrate Judge Shushan also reflect plaintiff's obvious inability to cooperate as required.
State Farm notes that the plaintiff has received approximately $135,000 from State Farm and the Clinton/Bush fund, which exceeds the itemized expenses.
The defendant moves for partial summary judgment, arguing that the plaintiff is not entitled to bad faith penalties under La.R.S. 22:658 or 22:1220, attorneys fees, mental anguish damages, or any other extra-contractual damages. The plaintiff responds that it never represented to the defendant that it was satisfied with the defendant's payment and that the defendant had been on notice that it owed additional funds for the steeple as early as November 2005.
I.
Rule 56 of the Federal Rules of Civil Procedure instructs that summary judgment is proper if the record discloses no genuine issue as to any material fact such that the moving party is entitled to judgment as a matter of law. No genuine issue of fact exists if the record taken as a whole could not lead a rational trier of fact to find for the non-moving party. See Matsushita Elec. Indus. Co. v. Zenith Radio., 475 U.S. 574, 586 (1986). A genuine issue of fact exists only "if the evidence is such that a reasonable jury could return a verdict for the non-moving party."Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986).
The Court emphasizes that the mere argued existence of a factual dispute does not defeat an otherwise properly supported motion. See id. Therefore, "[i]f the evidence is merely colorable, or is not significantly probative," summary judgment is appropriate. Id. at 249-50 (citations omitted). Summary judgment is also proper if the party opposing the motion fails to establish an essential element of his case. See Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986). In this regard, the non-moving party must do more than simply deny the allegations raised by the moving party. See Donaghey v. Ocean Drilling Exploration Co., 974 F.2d 646, 649 (5th Cir. 1992). Rather, he must come forward with competent evidence, such as affidavits or depositions, to buttress his claims. Id. Hearsay evidence and unsworn documents do not qualify as competent opposing evidence.Martin v. John W. Stone Oil Distrib., Inc., 819 F.2d 547, 549 (5th Cir. 1987). Finally, in evaluating the summary judgment motion, the court must read the facts in the light most favorable to the non-moving party. Anderson, 477 U.S. at 255.
II.
A. Bad Faith Claims and Attorneys FeesUnder La.R.S. 22:1220, an insurer "owes to his insured a duty of good faith and fair dealing." An insurer who breaches this duty is liable to the insured for damages and penalties. Among the enumerated breaches of this duty of good faith is failing to pay a claim within 60 days following the receipt of satisfactory proof of loss "if that failure is 'arbitrary, capricious, or without probable cause." Dickerson v. Lexington Ins. Co., ___ F.3d ___, 2009 WL 130207, at *5 (Jan. 21, 2009). La.R.S. 22:658 provides for penalties if the insurer is arbitrary and capricious in failing to pay a claim within 30 days and, under an amendment effective as of August 15, 2006, also provides for attorneys fees in such cases. A plaintiff may recover penalties under only one of the statutes; however, he may seek attorney's fees under 22:658 while seeking damages and penalties under 22:1220. Id.
The Louisiana penalty statutes were renumbered in January 2009. La.R.S. 22:658 is now 22:1892 and La.R.S. 22:1220 is now 22:1973. For convenience, this Court will use the previous numbering system.
To recover penalties under these statutes, "[a] plaintiff has the burden of proving that his insurer (1) received satisfactory proof of loss, (2) failed to pay within the required time, and (3) acted in an arbitrary and capricious manner." Id. Acting in a manner that is arbitrary and capricious means "unjustified, without reasonable or probable cause or excuse." Id. An insurer does not act arbitrarily and capriciously "when it withholds payment based on a genuine (good faith) dispute about the amount of a loss or the applicability of coverage." Id.
Partial summary judgment on the issue of bad faith claims and attorneys fees is appropriate in this case. See DeFrancesch, M.D., L.L.C. v. Employers Mutual Casualty Co., No. 06-5920, 2008 WL 1930450, at *1 (E.D. La. Apr. 30, 2008) (granting summary judgment on plaintiff's bad faith claims where no "triable issue exist[ed] with respect to defendant's alleged bad faith"). State Farm has shown that it has a good faith dispute about the amount of the covered losses. It paid the plaintiff over $100,000 within 30 days of completing its inspections and has pointed to several areas in which the documentation of plaintiff's claims were inadequate or contained discrepancies. In contrast, the plaintiff has wholly failed to present any evidence that would create a genuine issue of material fact as to whether State Farm acted arbitrarily and capriciously in handling the plaintiff's claim. Plaintiff's refusal to submit rational documentation is patent. Because the plaintiff has failed to establish an essential element of its claims for bad faith penalties and attorneys fees, these claims are therefore dismissed.
B. Mental Anguish Claims
Damages for mental anguish may be awarded under La.R.S. 22:1220 for breaches of the duty of good faith. Dickerson, 2009 WL 130207, at *9. However, "[a] business entity is incapable of experiencing loss of enjoyment, mental anguish, and inconvenience." Frank C. Minvielle, L.L.C. v. IMC Global Operations, Inc., 380 F. Supp. 2d 755, 772 (W.D. La. 2004). Damages for "inconvenience" fall under the umbrella of mental anguish damages. Young v. Exxonmobil Corp., 155 F. App'x 798, 799 (5th Cir. 2005; Warwick Apartments Baton Rouge v. State, No. 93-162 (La.App. 1 Cir. 3/11/94), 633 So. 2d 895, 899. The plaintiff in this case is a "religious organization . . . doing business in the State of Louisiana." Therefore, the plaintiff cannot recover for emotional distress, inconvenience, or any other form of mental anguish damages. The claim is frivolous.
For the foregoing reasons, the defendant's Motions for Partial Summary Judgment as to Bad Faith Claims, Plaintiff's Claims for Attorneys Fees, and Mental Anguish or Other Extra-Contractual Damages are GRANTED. Plaintiff's claims for bad faith penalties, attorneys fees, and mental anguish, including emotional distress and inconvenience, are hereby dismissed.
New Orleans, Louisiana, February 18, 2009. ______________________________ MARTIN L. C. FELDMAN UNITED STATES DISTRICT JUDGEATTACHMENT 2
UNITED STATES DISTRICT COURT EASTERN DISTRICT OF LOUISIANA SECOND HIGHWAY BAPTIST CHURCH CIVIL ACTION versus NO: 07-8581-MVL-SS STATE FARM INSURANCE COMPANY A telephone settlement conference was held this date.After initial discussion, it was agreed that settlement discussions are premature. The parties will proceed as follows: Counsel for defendant is to serve on Bruce Copeland and Mr. Cantrell via e-mail a copy of the subpoena issued to and served on Bruce Copeland along with a listing of any documents it believes it requires in order to evaluate plaintiffs' claims. All of these documents should have previously been produced by way of initial disclosure pursuant to Rule 26, F.R.C.P., pursuant to discovery requests, or pursuant to the subpoena issued to Mr. Copeland. All such documents shall be produced to counsel for the defendant no later than January 29, 2009. Any documents not produced by that date shall be excluded from evidence and may not be used to support plaintiff's claims.
Mr. Copeland shall make a return on the subpoena by January 29th which certifies under oath that he has personally reviewed the subpoena, and that the documents being produced are all of the documents in his possession or generated by him on behalf of plaintiff in support of his expert report. In addition, Mr. Copeland shall certify that all other responsive documents are included in the production. Any documents not included in Mr. Copeland's production may not be used to support his opinion.
The deposition of Reverend Walker shall take place at Mr. Cantrell's office on Friday, January 23rd at 1:00 p.m. The deposition of Mr. Copeland will take place at 10:00 a.m. on Friday, February 6th at Mr. Cantrell's office.
A further follow-up settlement conference will be held on Wednesday, February 11, 2009 at 1:30 p.m. by TELEPHONE. On or before noon on Tuesday, February 10, 2009, the parties are to submit to the undersigned an in-camera letter no longer than two pages double spaced updating their earlier submissions and certifying that they have exchanged realistic offers to settle this case.