Fat Catz Music Club, Inc. v. Fountain Servs. of La., Inc.

APPEAL FROM CIVIL DISTRICT COURT, ORLEANS PARISH
NO. 2015-01681, DIVISION "L"
Honorable Kern A. Reese, Judge

Judge Edwin A. Lombard

(Court composed of Judge Edwin A. Lombard, Judge Sandra Cabrina Jenkins, Judge Tiffany G. Chase)

W. Patrick Klotz
KLOTZ & EARLY
909 Poydras Street, Suite 2950
New Orleans, LA 70112

COUNSEL FOR PLAINTIFFS/APPELLEES

I. Matthew Williamson
MILLER & WILLIAMSON LLC
1515 Poydras Street, Suite 2130
New Orleans, LA 70112

COUNSEL FOR DEFENDANTS/APPELLANTS

AFFIRMED IN PART; REVERSED IN PART AND RENDERED

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EAL

SCJ

TGC

The Appellants, Fountain Services of Louisiana, Inc. ("FSL") and Jerry Schiffman, seek review of the May 26, 2020 judgment of the district court wherein the court found the Appellants committed fraud, breached a beverage distribution contract, and violated the Louisiana Unfair Trade Practices Act ("LUTPA"). The court further awarded damages, costs and attorneys' fees totaling $651,394.34 to the Appellees, Fat Catz Music Club, Inc. d/b/a Fat Catz; Funky 544, LLC d/b/a Funky 544; Parsa Inc. d/b/a Industry Bar & Kitchen; Lower Decatur Entertainment LLC d/b/a Balcony Music Club; Bourbon At Toulouse LLC d/b/a Old Opera House; MBS Management LLC d/b/a Famous Door; Bourbon Nighttime LLC d/b/a Krazy Korner; and Promenade Entertainment LLC d/b/a Bourbon Bandstand. Additionally, the Appellants seek review of a January 24, 2019 judgment, wherein the district court granted a motion to compel in favor of the Appellees.

Based upon our review of the applicable facts and law, we find that the district court committed a legal error in awarding the Appellees treble damages under LUTPA. Thus, we reverse in part the May 26, 2020 judgment, rendering judgment in the amount of $155,093.89, which represents the Appellants actual

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damages. Additionally, we reduce the award of attorneys' fees proportionately to $62,037.55. In all other respects, the May 26, 2020 judgment is affirmed. Lastly, we affirm the January 24, 2019 judgment of the district court, granting the Appellees' motion to compel.

This appeal stems from a breach of contract and unfair trade practices dispute between the parties based upon the Appellants selling of counterfeit fountain soda syrup, primarily Coca Cola, products, to the Appellees, which are two corporations and six limited liability companies that operate various bars, music venues and restaurants in New Orleans. Jude Marullo is the president of said corporations and the member/manager of the limited liability companies at issue herein.

In 2009, the Appellees, through Mr. Marullo, sought beverage bids from distributors who delivered authentic Coca Cola or Coke products, including from the Appellants who had been supplying juice and other beverages to the Appellees since 2006. Based upon Mr. Schiffman's assurances that his company, FSL, sold authentic Coke products, Mr. Marullo consented to the Appellants supplying three of the Appellees with Coke, Diet Coke, 7-Up and an energy drink called Sin Maker.¹ Later the distribution agreement was expanded to cover all eight of the Appellees' locations.² A written agreement was never executed between the parties.

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The beverage distribution agreement came to a halt in June 2014, however, after the Appellees learned the Appellants were actually distributing generic soda syrups to them.

Mr. Marullo initially alerted that the Appellants may have been distributing counterfeit soda products to the Appellees as a result of being contacted by David Richard in the spring of 2014. Mr. Richard's limited liability company, Nola Beverage Group, owned Sin Maker. He suspected that the Appellants were not distributing the genuine Sin Maker product to FSL customers. As mentioned above, the Appellees were Sin Maker-purchasers for their respective locations. Mr. Richard visited with Mr. Marullo at one of the Appellees' locations to taste the Sin Maker drink the Appellants had supplied. Upon tasting the drink, Mr. Richard confirmed the beverage was inauthentic and further observed counterfeit labels on the beverages-in-boxes (BIBs) on his product as well as the Coke products at the location. Through Mr. Richard, Mr. Marullo was put in contact with Special Agent Peter Orlando of the United Stated Food and Drug Administration ("FDA").

Special Agent Orlando later met with Messrs. Marullo and Richard at Funky 544. At this meeting, the men discovered the labeling on the BIBs to be counterfeit. They also tasted certain beverages and discovered the products had the incorrect flavor, not corresponding to their labels. Special Agent Orlando was given a sampling of BIBs, which the Appellants had supplied, for testing. He

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subsequently informed Mr. Marullo that the tested products were counterfeit. Consequently, Mr. Marullo cancelled his distribution agreement with the Appellants in June 2014.

In late June 2014, the FDA executed a search warrant on the Appellants' warehouse, seizing all of its contents including counterfeit labels, mislabeled BIBs and drums of generic soda. Federal criminal charges were ultimately filed against Mr. Schiffman in United States District Court, Eastern District of Louisiana. On December 21, 2017, Mr. Schiffman pled guilty to the charge of "selling misbranded food." In his plea, he admitted to selling counterfeit beverages to FSL customers from 2012 through 2014. He further admitted to placing in FSL BIBs counterfeit drinks made from Al's Cola and Lemon UP, which are products of Al's Beverage Company of Connecticut.

The Appellees filed a Petition for Breach of Contract and for Damages on February 24, 2015, against the Appellants, raising claims for fraudulent inducement under the Louisiana Civ. Code arts. 1953 and 1958, and breach of contract as well as violations of La. Rev. Stat. 51:1401, et seq., known as LUTPA. The Appellants alleged purchasing approximately $155,093.83 worth of products from the Appellees and sought reimbursement of the same as well as attorney's fees.

Following a December 10, 2019 bench trial, the district court rendered judgment in favor of the Appellants, finding their claims against the Appellants under the Louisiana Civil Code and LUTPA had merit and awarding them $651,394.34 in damages plus interest and costs.³ The award of damages represents

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actual damages of $155,093.89, which the Court tripled in accordance with LUTPA, totaling $465,281.67, combined with attorney's fees of $186,112.67. Thereafter, the Court denied the Appellants' motion for new trial. This timely appeal followed.

The Appellants raise six assignments of error:

1) Denying the Appellants' dilatory exceptions of vagueness and nonconformity, and their peremptory exceptions of no cause of action and no right of action;

2) Granting the Appellees' motion to compel and erroneously ordering Appellants to answer discovery that had previously been responded to sufficiently, and to pay fees and costs to counsel for the Appellees;

3) Denying the Appellants' motion for summary judgment;

4) Allowing into evidence during the trial on the merits details concerning Mr. Schiffman's criminal conviction beyond that permitted by Article 609 of the Louisiana Code of Evidence, and overruling the Appellants' timely objection thereto;

5) Denying the Appellants' motion for involuntary dismissal; and

6) Rendering judgment in favor of the Appellees and against Appellants on the merits of the case.

Despite raising the aforementioned assignments of error, the Appellants failed to brief assignments of error one, three and five. Pursuant to the Uniform Rules, Courts of Appeal, "[a]ll assignments of error and issues for review must be briefed. The court may consider as abandoned any assignment of error or issue for review which has not been briefed." Rule 2-12.4 (B)(4), Uniform Rules, Courts of

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Appeal. Deeming the un-briefed assignments of error as abandoned, we decline to consider these arguments.

The remaining three assignments of error focus on the district court's granting of a motion to compel and alleged errors made during the trial, which we...