Palowsky v. Cork

304 So.3d 867

Stanley R. PALOWSKY, III

v.W. Brandon CORK, Anthony White, OHC Services, L.L.C. and Alternative Environmental Solutions, Inc.

NUMBER 2019 CA 0148

Court of Appeal of Louisiana, First Circuit.

Judgment Rendered: MAY 20, 2020

Sedric E. Banks, Monroe, LA and Joseph R. Ward, Jr., Covington, LA, Counsel for Plaintiff/Appellant Stanley R. Palowsky, III and Plaintiff/Appellant Alternative Environmental Solutions, Inc.

R. Keith Jarrett, Tiffany D. Davis, Randy J. Marse, Jr., New Orleans, LA, Counsel for Defendant/Appellee Anadarko Petroleum Corporation

BEFORE: WHIPPLE, C.J., GUIDRY, AND BURRIS,¹ JJ.

GUIDRY, J.

Plaintiffs, Stanley R. Palowsky, III and Alternative Environmental Solutions, Inc. (AESI), appeal from a trial court judgment sustaining defendant's, Anadarko Petroleum Corporation (Anadarko), peremptory exception raising the objection of no cause of action, denying plaintiffs’ motion for leave of court to file a fourth supplemental and amending petition for damages, and dismissing plaintiffs’ claims against Anadarko with prejudice. For the reasons that follow, we affirm in part and reverse in part.

FACTS AND PROCEDURAL HISTORY

Palowsky and W. Brandon Cork were each members and fifty percent owners of AESI, which provides environmental consulting services with an emphasis in industrial applications. AESI began providing environmental services to Anadarko and worked on a project called the "Carpenter project." In furtherance of its work on this project, AESI entered into a master service agreement with OHC Services (OHC) to provide equipment and other services. OHC thereafter subcontracted with TP Environmental & Pipeline Services, L.L.C. (TP Environmental). OHC and TP Environmental were engaged in environmental remediation services, i.e., soil shredding, on the Carpenter project.

In 2012, Palowsky discovered an invoice showing that OHC had excessively marked up its invoice for services rendered by overstating the shredding rate. The invoice had been given to AESI, who in turn gave the invoice to Anadarko. Palowsky thereafter filed a shareholder's derivative action on behalf of AESI, naming Cork, OHC, and OHC's agent and managing member, Anthony White, as defendants. Palowsky subsequently filed a second supplemental and amending petition on April 25, 2014, naming TP Environmental and Michael L. Holder, TP Environmental's officer, agent and/or employee. Palowsky asserted that Cork, Holder, and White had developed a scheme to skim money from payments made by AESI to OHC. The purported scheme involved TP Environmental overcharging for services performed on the Carpenter project. The overcharges were then incorporated into the invoices submitted by OHC to AESI. When AESI remitted payment to OHC, OHC remitted a portion of the sum back to TP Environmental. The allegedly skimmed money, totaling over one million dollars, was then placed into one or more accounts owned and controlled by White and/or Holder. The funds were then used to fund the purchase of equipment for a new unincorporated enterprise owned and controlled by Holder, White, and Cork.

Thereafter, on February 14, 2017, Palowsky filed a third supplemental and amending petition, naming as defendants Anadarko and its employee, Dana Howard. Palowsky alleged that after discovering the scheme to overbill, he contacted Howard to discuss billing issues on the Carpenter project. Palowsky alleged that Howard was involved with the other defendants in developing the scheme to skim money and aided and abetted defendants in continuing their wrongful acts against Palowsky and AESI. Particularly, Palowsky alleged that Howard made it possible for defendants to overbill AESI and Anadarko for work performed by dictating the shredding rate to be used to generate the projected budget estimate that Anadarko used to establish financial reserves for the project. Palowsky alleged that Howard knew by authorizing the shredding rate, Cork, White, and Holder would receive a windfall that would enrich them. Further, Palowsky alleged that Howard went against Anadarko policy when she did not obtain a work order for the project, which allowed defendants to overbill freely without constraints of a contract. Palowsky asserted that as a result of defendants’ actions, AESI lost all business opportunities with Anadarko. Accordingly, Palowsky asserted claims against Howard for conspiracy to commit fraud, racketeering, and aiding and abetting. With respect to Anadarko, Palowsky asserted that because Howard was acting in the course and scope of her employment with Anadarko, it was vicariously liable for her actions.

In response, on March 29, 2018, Anadarko filed a peremptory exception raising the objection of no cause of action, asserting that Anadarko cannot be held liable under a respondeat superior theory on the facts alleged. Anadarko asserted that the facts, as alleged, demonstrate that Howard was acting outside the course and scope of her employment. Specifically, Anadarko asserted that actions of an employee to defraud her employer fall outside of the employer/employee relationship and are not within the course and scope of employment. Accordingly, because the only cause of action asserted against Anadarko was vicarious liability, Anadarko asserted that Palowsky failed to state of cause of action.

On April 4, 2018, Palowsky and AESI filed a motion for leave of court to file a fourth supplemental and amending petition. Plaintiffs alleged that he had discovered information revealing Anadarko's true motive for retaliating against Palowsky after reporting the overbilling issues. Plaintiffs asserted that Anadarko had engaged in a pattern of under-reporting its environmental liabilities to maintain its stock prices with the help of consultants, who were willing to underestimate remediation costs in exchange for Anadarko turning a blind eye to and/or actively concealing the consultant's overcharging for the remediation work and/or skimming money from payments and/or taking kickbacks. Plaintiffs alleged that in addition to Howard, other employees of Anadarko aided and abetted defendants, making it possible for them to overbill Anadarko. Plaintiffs asserted that because he was not willing to go along with the overbilling scheme and was close to uncovering Anadarko's scheme to reduce its reported liabilities to artificially inflate its stock prices, Anadarko removed AESI and Palowsky from all work it had with Anadarko as well as put them on "inactive" status as a contractor.

Anadarko opposed the filing of the fourth supplemental and amending petition, asserting that it failed to state a valid cause of action against Anadarko and therefore, allowing the amendment would be futile. Following a hearing on Anadarko's peremptory exception and plaintiffs’ motion for leave to amend, the trial court signed a judgment sustaining Anadarko's exception raising the objection of no cause of action, denying plaintiffs’ motion for leave to file fourth supplemental and amending petition, and dismissing all of plaintiffs’ claims against Anadarko with prejudice. Palowsky and AESI now appeal from the trial court's judgment.

DISCUSSION

No Cause of Action

The purpose of the peremptory exception raising the objection of no cause of action is to test the legal sufficiency of a pleading by determining whether the law affords a remedy on the facts alleged in the pleading. Fink v. Bryant, 01-0987, p. 3 (La. 11/28/01), 801 So. 2d 346, 348-49. The exception is triable on the face of the pleading, and for the purpose of determining the issues raised by the exception, the well-pleaded facts in the pleading must be accepted as true. Carr v. Sanderson Farm, Inc., 15-0953, p. 4 (La. App. 1st Cir. 2/17/16), 189 So. 3d 450, 454.

In ruling on a peremptory exception raising the objection of no cause of action, the court must determine whether the law affords any relief to the claimant if the factual allegations in the pleading were proven at trial. Frigon v. Universal Pictures, Inc., 17-0993, p. 6 (La. App. 1st Cir. 6/21/18), 255 So. 3d 591, 596, writ denied, 18-1868 (La. 1/18/19), 262 So. 3d 896. A petition should not be dismissed for failure to state a cause of action unless it appears beyond doubt that the plaintiff can prove no set of facts in support of any claim. Fink, 01-0987 at p. 4, 801 So. 2d at 349. Any doubts are resolved in favor of the sufficiency of the petition. Van Hoose v. Gravois, 11-0976, p. 6 (La. App. 1st Cir. 7/7/11), 70 So. 3d 1017, 1021.

Louisiana has chosen a system of fact pleading. Therefore, it is not necessary for a plaintiff to plead the theory of his case in the petition. However, the mere conclusions of plaintiff unsupported by facts do not set forth a cause of action. Ramey v. DeCaire, 03-1299, p. 7 (La. 3/19/04), 869 So. 2d 114, 118.

The burden of demonstrating that the petition states no cause of action is on the mover. Ramey, 03-1229 at p. 7, 869 So. 2d at 119. In reviewing the trial court's ruling sustaining an exception raising the objection of no cause of action, appellate courts conduct a de novo review, because the exception raises a question of law, and the trial court's decision is based solely on the sufficiency of the petition. Lay v. Rachel-Major, 99-0476, p. 5 (La. App. 1st Cir. 5/12/00), 761 So. 2d 723, 726.

In the instant case, plaintiffs’ third supplemental and amending petition asserts that Anadarko is vicariously liable to plaintiffs for the actions of its employee, Howard.

An employer is liable for the torts committed by his employee if, at the time, the employee was acting within the course and scope of his employment. Baumeister v. Plunkett, 95-2270, p. 3 (La. 5/21/96), 673 So. 2d 994, 996. The two terms are not synonymous. The course of employment test refers to the time and place. The scope of employment test examines the employment-related risk of injury.

Benoit v. Capitol Manufacturing Company, 617 So. 2d 477, 479 (1993).

In order for an employer to be vicariously liable for...