Opinion
NO. 2023 CA 0320
12-27-2023
STATE of Louisiana, THROUGH It’s DIVISION OF ADMINISTRATION, Office of Facility Planning and Control v. The MIGUES DELOACH COMPANY, LLC and Hartford Fire Insurance Company
Carlos Romanaeh, Hilary T. LeBlanc, Bridget B. Denicola, Baton Rouge, Louisiana, Counsel for Plaintiff/Appellant State of Louisiana, through its Division of Administration, Office of Facility Planning & Control Catherine S. Giering, Mary Anne Wolf, Baton Rouge, Louisiana, Counsel for Defendant/Appellee Sigma Corporation
Appealed from the 19th Judicial District Court, In and for the Parish of East Baton Rouge, State of Louisiana, Case No. C647500, The Honorable Trudy M. White, Judge Presiding
Carlos Romanaeh, Hilary T. LeBlanc, Bridget B. Denicola, Baton Rouge, Louisiana, Counsel for Plaintiff/Appellant State of Louisiana, through its Division of Administration, Office of Facility Planning & Control
Catherine S. Giering, Mary Anne Wolf, Baton Rouge, Louisiana, Counsel for Defendant/Appellee Sigma Corporation
BEFORE: GUIDRY, C.J. CHUTZ, AND LANIER, JJ.
LANIER, J.
2Plaintiff, the State of Louisiana, through its Division of Administration, Office of Facility Planning and Control (the State), seeks review of the Nineteenth Judicial District Court’s November 16, 2022 granting of summary judgment in favor of defendant, Sigma Corporation (Sigma), thereby dismissing the State’s claims against Sigma with prejudice. Sigma answers the instant appeal, requesting that, in the event this court reverses the November 16, 2022 judgment, this court review Sigma’s motion for summary judgment on the basis of prescription. For the following reasons, we affirm the district court’s judgment in part and reverse in part, and dismiss Sigma’s answer to the appeal as moot.
FACTS AND PROCEDURAL HISTORY
On June 8, 2009, the State executed a public works contract with the Migues Deloach Company, LLC (MDC) to construct a multi-purpose building on the campus of Louisiana State University (LSU) at Alexandria. The contract required that a sprinkler system be installed in the building. MDC provided the State a performance bond equal to the contract sum of over $10 million through Hartford Fire Insurance Company (Hartford). Before completion of the project, the contract sum exceeded $11 million due to change orders. The State accepted the building as "substantially complete" on August 1, 2011, and paid MDC the full sum of the contract. MDC and Hartford had agreed under the contract to correct any work that was not done in satisfaction with the terms of the contract, either before or after completion.
In August of 2011, leaks in the building’s sprinkler system were first discovered. MDC was notified and made efforts to repair the leaks. The leaks were believed to have been repaired during this time. However, on August 21, 2014, extensive corrosion was discovered on the pipes of the sprinkler system, and MDC was again notified. An architectural firm and LSU representatives 3conducted an inspection and testing on the sprinkler system. After testing was done on the corroded pipes, it was reported to MDC that there was deficient threading on the pipe ends, which caused the leaking and resulting buildup of corrosion. On October 29, 2014, it was recommended that the corrosion could be cleaned from the piping, and any piping that was still usable could be reused. Any piping that was not reusable would be replaced and new piping would be installed. On November 11, 2014, MDC conducted its own inspection and determined that the corrosion did not result from their own poor workmanship, and therefore refused to make any repairs.
The State first attempted amicable demand with MDC, and then on February 20, 2015, made a formal demand to MDC to repair the sprinkler system. MDC responded to the State’s demand on March 16, 2015, denying liability for the corroded sprinkler system. The State then filed a petition for damages on April 12, 2016, naming MDC and Hartford as defendants and alleging that the defendants were liable to the State for damages through breach of the construction contract and performance bond.
On June 27, 2019, the State filed a supplemental, amending, and restated petition for damages, naming Ferguson Fire and Fabrication, Inc. (Ferguson), ABC Insurance Company (ABC), Sigma Corporation, and National Fire Insurance Company of Hartford (National) as defendants. The State alleged therein that, along with the allegations made in the original petition, Sigma was the manufacturer of the sprinkler system components, and that those components had latent defects when Sigma manufactured them. The State claimed that it became aware of those defects in July of 2018, when it received notice of the defects from an expert report regarding the sprinkler system, which stated the leaking resulted from defective threads on "Weld-O-Let" components manufactured by Sigma. The State therefore claimed that Sigma and National as Sigma’s insurer were liable 4for damages related to redhibitory defects of the Weld-O-Lets, pursuant to the Louisiana Products Liability Act (LPLA).
La. R.S. 9:2800.51, et seq.
The State also alleged that the sprinkler system was fabricated by Ferguson as MDC’s subcontractor, and that the sprinkler system contained defects at the time it left Ferguson’s fabrication facility. The State claimed that Ferguson would have had knowledge of the defective Weld-O-Lets that it incorporated into the entire sprinkler system, and was liable, along with ABC as its insurer, for the damages caused by the defects.
On December 7, 2021, MDC filed a third-party demand against Unique Industrial Product Company, L.P., Unique Fittings & Flanges, L.P., and UIPC, Inc. (collectively Unique), in which MDC claimed it was the general contractor on the building project and subcontracted with Custom Automatic Sprinkler Company, Inc. (Custom) for installation of the sprinkler system. MDC further alleged that Custom contracted with Ferguson to procure water sprinkler components. Upon MDC’s information and belief, it alleged that the faulty sprinkler components, which led to the leaking and subsequent corrosion, were the Weld-O-Lets manufactured and/or sold either by Unique or Sigma. Ferguson supplied the defective Weld-O-Lets to Custom, which installed them in the building’s sprinkler system. MDC therefore asserted that Unique should be held liable as third-party defendants, should MDC be held liable in the State’s principal demand. On June 23, 2022, MDC filed a supplemental and amending third-party demand, which made the same alle- gations as in the original third-party demand. In addition, MDC alleged that the defective Weld-O-Lets were distributed by Ferguson to Custom on or before January 20, 2010.
On September 16, 2022, Sigma filed a motion for summary judgment, in which it claimed there was no genuine issue of material fact that it did not 5manufacture the defective Weld-O-Lets, and that all the claims against Sigma should be dismissed with prejudice. Sigma attached to its motion as an exhibit an Asset Purchase Agreement (APA) dated March 10, 2010, which reflects that Sigma purchased certain assets of Unique. Specifically, Sigma acquired "finished goods inventories, parts and components," and "work or assembly in process." The APA also stated that Sigma, as the buyer, would not "assume any liability of [Unique]" not expressly transferred to Sigma under the terms of the APA. Product liabilities were listed as expressly retained by Unique. Sigma argued it had no involvement in or liability for the manufacture, sale, or distribution of the defective Weld-O-Lets, all of which occurred before the execution of the APA.
In the alternative, Sigma claimed that the claims by the State and MDC against it were prescribed. With regard to the State, Sigma claimed that its petition was filed outside of the one-year prescriptive period set forth by the LPLA. Further, Sigma sought attorney’s fees and costs pursuant to La. C.C.P. art. 863. Sigma claimed that the State did not act in good faith after Sigma had sent a draft of its memorandum in support of its motion for summary judgment, in the hope of 6avoiding litigation and costs through a voluntary dismissal, but the State insisted on opposing the motion.
Louisiana Code of Civil Procedure article 863 states, in pertinent part:
B. Pleadings need not be verified or accompanied by affidavit or certificate, except as otherwise provided by law, but the signature of an attorney or party shall constitute a certification by him that he has read the pleading, and that to the best of his knowledge, information, and belief formed after reasonable inquiry, he certifies all of the following:
(1) The pleading is not being presented for any improper purpose, such as to harass, cause unnecessary delay, or needlessly increase the cost of litigation.
(2) Each claim, defense, or other legal assertion in the pleading is warranted by existing law or by a nonfrivolous argument for the extension, modification, or reversal of existing law.
(3) Each allegation or other factual assertion in the pleading has evidentiary support or, for a specifically identified allegation or factual assertion, is likely to have evidentiary support after a reasonable opportunity for further investigation or discovery.
(4) Each denial in the pleading of a factual assertion is warranted by the evidence or, for a specifically identified denial, is reasonably based on a lack of information or belief.
….
D. If, upon motion of any party or upon its own motion, the court determines that a certification has been made in violation of the provisions of this Article, the court shall impose upon the person who made the certification or the represented party, or both, an appropriate sanction which may include an order to pay to the other party the amount of the reasonable expenses incurred because of the filing of the pleading, including reasonable attorney fees.
Following a hearing, the district court signed a final and appealable judgment on November 16, 2022, granting summary judgment in favor of Sigma, dismissing all claims against Sigma with prejudice. Specifically, the district court found that: Sigma did not manufacture or sell the defective Weld-O-Lets; Sigma did not retain liability for the defective Weld-O-Lets under the APA; and invoices from 2010 reflect that Unique manufactured the defective Weld-O-Lets. The district court further granted Sigma’s motion for attorney’s fees and costs. The State has appealed this judgment.
ASSIGNMENTS OF ERROR
The State alleges the following assignments of error:
1. The district court committed legal error when it granted Sigma’s motion for summary judgment.
2. The district court committed legal error when it found as a fact that Sigma did not manufacture or sell the Weld-O-Let parts at issue.
3. The district court committed legal error when it found as a fact that the 2010 invoices reflect that Unique manufactured the part at issue.
4. The district court committed error when it found as a fact that Sigma did not retain liability under the APA.
5. The district court committed legal error when it imposed sanctions against the State under La. C.C.P. art. 863.
STANDARD OF REVIEW
[1] A motion for summary judgment is a procedural device used to avoid a full-scale trial when there is no genuine issue of material fact. Stanfield on Behalf of Leblanc v. Lafourche Parish School Board, 2022-1196 (La. App. 1 Cir. 4/14/23), 365 So.3d 816, 819. After an opportunity for adequate discovery, a motion for summary judgment shall be granted if the motion, memorandum, and supporting 7documents show that there is no genuine issue as to material fact and that the mover is entitled to judgment as a matter of law. La. C.C.P. art. 966(A)(3).
We note that La. C.C.P. art. 966 has been amended, effective August 1, 2023. However, we find these recent amendments to the article are substantive, and therefore not applied retroactively. See Ricketson v. McKenzie, 2023-0314 (La. 1 Cir. 10/4/23), 380 So.3d 1. We shall therefore apply La. C.C.P. art. 966 as it was written prior to August 1, 2023.
The mover bears the initial burden of proof on the motion for summary judgment. However, 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, but rather to 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. Once this is done, the burden shifts to 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). If the non-moving party fails to produce factual support in opposition sufficient to establish that he or she will be able to satisfy his or her evidentiary burden of proof at trial, La. C.C.P. art. 966(D)(1) mandates the motion for summary judgment be granted. Stanfield, 365 So.3d at 820.
[2, 3] Appellate courts review evidence de novo using the same criteria that govern the trial court’s determination of whether summary judgment is appropriate. Thus, appellate courts ask the same questions: is there any genuine issue of material fact and is the mover entitled to judgment as a matter of law. In determining whether a factual issue is genuine for purposes of summary judgment, a court should not consider the merits, make credibility determinations, evaluate testimony, or weigh evidence. Crescent City Property Redevelopment Association, LLC v. Muniz, 2021-00371 (La. 6/1/21), 347 So.3d 682, 684. Because it is the applicable substantive law that determines materiality, whether a particular fact in dispute is 8material can be seen only in light of the substantive law applicable to the case. Stanfield, 365 So.3d at 820.
DISCUSSION
Identity of Manufacturer
The Louisiana Products Liability Act is set forth in La. R.S. 9:2800.51, et seq., and establishes the exclusive theories of liability of manufacturers for damages caused by their products. La. R.S. 9:2800.52. Specifically, the LPLA provides that "[t]he manufacturer of a product shall be liable to a claimant for damage proximately caused by a characteristic of the product that renders the product unreasonably dangerous when such damage arose from a reasonably anticipated use of the product by the claimant or another person or entity." La. R.S. 9:2800.54(A). To recover under the LPLA, a plaintiff must establish four elements: (1) that the defendant is a manufacturer of the product; (2) that the claimant’s damage was proximately caused by a characteristic of the product; (3) that this characteristic made the product unreasonably dangerous; and (4) that the claimant’s damage arose from a reasonably anticipated use of the product by the claimant or someone else. See La. R.S. 9:2800.54(A); Daigrepont v. Exxon Mobil Corporation, 2021-0534 (La. App. 1 Cir. 12/30/21), 340 So.3d 1018, 1023. If a plaintiff fails to establish any one of the above elements, his claim must fail and he cannot recover.
[4] At the root of the State’s cause of action against Sigma is the contention that Sigma manufactured the defective Weld-O-Let components. Louisiana Revised Statutes 9:2800.53(1) defines a "manufacturer" as:
[A] person or entity who is in the business of manufacturing a product for placement into trade or commerce. "Manufacturing a product" means producing, making, fabricating, constructing, designing, remanufacturing, reconditioning or refurbishing a product. "Manufacturer" also means:
9(a) A person or entity who labels a product as his own or who otherwise holds himself out to be the manufacturer of the product.
(b) A seller of a product who exercises control over or influences a characteristic of the design, construction or quality of the product that causes damage.
(c) A manufacturer of a product who incorporates into the product a component or part manufactured by another manufacturer.
(d) A seller of a product of an alien manufacturer if the seller is in the business of importing or distributing the product for resale and the seller is the alter ego of the alien manufacturer. The court shall take into consideration the following in determining whether the seller is the alien manufacturer’s alter ego: whether the seller is affiliated with the alien manufacturer by way of common ownership or control; whether the seller assumes or administers product warranty obligations of the alien manufacturer; whether the seller prepares or modifies the product for distribution; or any other relevant evidence. A "product of an alien manufacturer" is a product that is manufactured outside the United States by a manufacturer who is a citizen of another country or who is organized under the laws of another country.
One of the exhibits Sigma filed with the district court in support of its motion for summary judgment was the invoice from Ferguson, dated January 28, 2010. The invoice lists a number of items described as "Uni-Let WOL." Another invoice submitted by Sigma that comes from Custom, dated January 28, 2010, does not identify the sprinkler components as specifically as the Ferguson invoice. Sigma also submitted as an exhibit the deposition of Jon Lopez, a representative of Ferguson, who said that the part numbers contained on the Ferguson invoice start with a letter that denotes the manufacturer. Mr. Lopez stated that those parts with part numbers on the invoice beginning with "U," relating to the "Uni-Let WOL" components, were manufactured by Unique. According to the APA, the transfer of ownership of Unique’s assets and inventory occurred on March 10, 2010. Therefore, reviewing all of Sigma’s exhibits together, the defective Weld-O-Lets, bearing the initial "U" and manufactured by Unique, were acquired by Ferguson on January 28, 2010, approximately two months before Sigma acquired Unique.
10In opposition to the motion for summary judgment, the State filed, without objection, two separate investigative reports that were originally compiled for MDC: one authored by Engineering Systems, Inc. (ESI), and another authored by Seneca Fire Engineering, LLC (Seneca). The ESI report states that the "[Uni-Let] is a product manufactured by [Sigma]" and contains a diagram from Sigma’s product catalog of the Uni-Let. In the Seneca Report, there is an attached cover letter that states Ferguson supplied the defective "UL-listed outlets … specifically ‘[Uni-Let]’ welded outlets by Sigma Piping Products." The Seneca report contains Sigma’s product catalog, which displays the same diagram of the Uni-Let found in the ESI report.
Sigma submitted these two reports to the district court, but only to establish a factual background, and not for the truth of the expert opinion. Counsel for MDC objected to Sigma's submission of the reports, and the district court struck the reports from the record. However, these same reports were introduced by the State and accepted by the district court. The district court was therefore able to view a photograph in the ESI report that shows a sample Weld-O-Let taken from the project site that has the product marking "UL" engraved on it.
Both the ESI and Seneca reports are dated August 31, 2018, at which time Sigma would in fact have been the manufacturer of the Weld-O-Lets. Neither report, however, states that Sigma manufactured the defective Weld-O-Lets that are indicated on the Fergusson and Custom invoices, respectively dated January 28 and 28, 2010, prior to Sigma’s acquisition of Unique. Furthermore, the Sigma Catalog containing the Uni-Let diagram was copyrighted in 2016. From our review of the exhibits submitted in support and in opposition of the motion for summary judgment, we find that Sigma met its burden of proving that it did not manufacture the defective Weld-O-Lets that were acquired by Ferguson on January 28, 2010, thereby shifting the burden to the State. We also find the State failed to prove that there exists an issue of material fact, as the exhibits submitted by the State do not indicate that Sigma was the manufacturer of the Weld-O-Lets on January 28, 2010.
Retention of Liability
[5] 11The State alternatively argues that if Sigma cannot be held liable as the manufacturer of the defective Weld-O-Lets, it is still liable as a successor entity of Unique due to Sigma’s purchasing of all of Unique’s assets. In support of this argument, the State references Giles v. Oak Lane Memorial Park, LLC, 2019-0357 (La. App. 1 Cir. 11/15/19), 290 So.3d 685, 695, which stated:
Generally, when one corporation sells all of its assets to another, the latter is not responsible for the seller’s debts or liabilities. However, there are three exceptions to this general rule, where either: (1) the purchaser expressly or impliedly agrees to assume the obligations; (2) the purchaser is merely a continuation of the selling corporation; or (3) the transaction is entered into to escape liability. (Citations omitted.)
Giles suggests that only one of the three above exceptions would need to be true for Sigma to be a successor in liability for Unique. See Id. As to the first exception, the APA expressly states in Schedule 1.04 that product liabilities prior to the execution of the APA were retained by Unique. Therefore, pursuant to the APA, Sigma expressly declined to assume liability for any defects in Unique’s products that were manufactured prior to March 10, 2010.
As to the second exception, the threshold question of whether Sigma would be a "continuation" of Unique is whether Sigma purchased all or substantially all the assets of Unique. See Giles, 290 So.3d at 696. While Schedule 1.01 of the APA lists a number of assets acquired by Sigma, including finished goods, intellectual property, and warranties, Schedule 1.03, titled "Excluded Assets," lists the assets of Unique that Sigma did not acquire. Those assets are listed as follows:
(a) all contracts of insurance and policies of insurance, including, without limitation, casualty, liability or group life, health or accident insurance;
(b) all personnel records and other records that [Unique] is required by law to retain in its possession;
(c) all minute books, partnership interest and stockholder records and seals;
(d) the partnership interests of [Unique] or the equity interests of the General Partner;
(e) all rights to any refunds or credits (including, in each case, interest with respect thereto) in respect of Taxes paid or required to be paid 12by [Unique] pursuant to this Agreement or otherwise, to any Governmental Body for any period but not those to which [Sigma] is entitled in connection with personal property transferred by [Unique] to [Sigma]
(f) all returns and other Tax records pertaining to the operations of [Unique] … for all taxable periods prior to the Closing;
(g) all rights in connection with and assets of the Benefit Plans;
(h) all rights of [Unique] in this Agreement and the other Transaction Documents;
(i) the assets listed in Schedule 1.03; and
(j) cash and other cash equivalents existing as of the close of business on [March 10, 2010], except any cash and cash equivalents included in the Closing Date Settlement.
While it is clear that some assets were not acquired by Sigma, the APA nevertheless states in the paragraph titled "Background" that "[Sigma] desired to purchase, and [Unique] desires to sell, substantially all of its assets relating to the Business on the terms and subject to the conditions set forth in this Agreement." Despite this language, Schedule 1.03 definitely indicates that there were in fact a number of Unique’s assets that were not acquired by Sigma, and therefore Sigma did not acquire all or "substantially all" of Unique’s assets. As to the third exception of Giles, there was no evidence either Unique or Sigma entered into the APA to escape liability. There is no evidence in the record of either Unique or Sigma being under financial or legal duress, for which they would have sought to destroy the remedies of third parties through the voluntary sale of all or substantially all of Unique’s assets. See Giles, 290 So.3d at 698. Additionally, both parties agreed to retain or acquire some liabilities under the APA. Schedule 1.04 states that "[a]ll Liabilities not expressly transferred to [Sigma] hereunder are retained by [Unique]." In addition, Mr. Bhattacharji’s deposition testimony, with relation to the wording of the APA, states:
All I know is that we were very clear that if there’s any issue related to a product that was sold by [Unique], they are responsible. If there’s anything going forward [from the effective date of the APA] that’s [Sigma’s] responsibility, not [Unique’s] responsibility.
13Mr. Bhattacharji further stated that the effective date by which product liability and other liabilities would transfer from Unique to Sigma was March 10, 2010.
[6, 7] A contract constitutes the law between the parties. Pareti v. Sentry Indem. Co., 536 So.2d 417, 420 (La. 1988). If the contract’s wording is clear and expresses the intent of the parties, the agreement must be enforced as written. Id. The APA was submitted as an exhibit in the State’s opposition to the motion for summary judgment. However, the APA clearly shows that the liability for Unique’s products manufactured before March 10, 2010 would be retained by Unique. The State has offered no further evidence or legal argument that would impute product liability for the defective Weld-O-Lets to Sigma. Therefore, the district was correct in granting summary judgment in favor of Sigma. As we affirm the district court’s ruling on the motion for summary judgment, we dismiss Sigma’s answer to the appeal as moot.
Sanctions Under La. C.C.P. art. 863
[8] In its motion for summary judgment, Sigma claimed that the State lacked good faith in its opposition to Sigma’s motion, and moved for the State to be assessed with attorney’s fees and costs pursuant to La. C.C.P. art. 863. In its judgment, the district court ordered the State and Sigma to each pay half of the court costs in the matter, and the State was ordered to pay attorney’s fees to Sigma.
[9–11] Louisiana Code of Civil Procedure article 863 does not empower a district court to impose sanctions on lawyers simply because a particular argument or ground for relief is subsequently found to be unjustified. The failure to prevail does not of itself trigger an award of sanctions. Fleming v. Spinnaker Insurance Company, 2021-1564 (La. App. 1 Cir. 6/3/22), 343 So.3d 200, 203. The article is intended to be used only in exceptional circumstances; where there is even the slightest justification for the assertion of a legal right, sanctions are not warranted. Id.
14In the instant case, the State failed in its opposition against Sigma’s motion for summary judgment. However, we do not find that the State lacked good faith when it persisted in that opposition, requiring the motion to be litigated, even though it would not ultimately prevail. The State presented proper evidence and a legal argument at the hearing on the motion, thereby asserting its legal right to argue that a genuine issue of material fact existed in the instant case. Thus, as there was justification for the assertion of a legal right in the instant case, we find that the district court was clearly wrong in imposing sanctions under La. C.C.P. art. 863, and we reverse that portion of the district court’s judgment that awarded attorney’s fees to Sigma. See Fleming, 343 So.3d at 203.
DECREE
The portion of the judgment of the Nineteenth Judicial District Court awarding attorney’s fees to Sigma Corporation is reversed. In all other respects, the judgment is affirmed. Sigma’s answer to the appeal is dismissed as moot. Costs in the amount of $9,503.00 associated with this appeal are assessed equally to Sigma Corporation and the State of Louisiana, through its Division of Administration, Office of Facility Planning and Control.
AFFIRMED IN PART, REVERSED IN PART. ANSWER TO APPEAL DISMISSED.
Guidry, J. concurs in the result.
Chutz, J. concurs with reasons.
Chutz, J., concurs in the result and assigns reasons.
1Considering the conflicting evidence presented, I disagree with the majority’s conclusion that no genuine issue of material fact exists regarding the identity of the manufacturer of the defective Weld-O-Lets. Accordingly, I believe summary judgment was improperly granted in this case. Nevertheless, I will concur in the result reached by the majority because I believe the State’s claims were prescribed and should have been dismissed on that basis. The district court erred in failing to sustain Sigma’s peremptory exception raising the objection of prescription. By 2014, the State had constructive knowledge of the defective Weld-O-Lets and the damages they caused. The States’s original petition was not filed until more than a year later in 2016, and Sigma was not named as a defendant until 2019. Because the one-year prescriptive period for delictual actions begins to run from the day the injury or damage is sustained, the State’s claims were prescribed. See La. C.C.P. art. 3492.