Util. Constructors, Inc. v. Perez

UTILITY CONSTRUCTORS, INC. ET AL. v. LYNN PERKINS PEREZ ET AL.

CIVIL ACTION No. 15-4675 SECTION I

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF LOUISIANA

October 5, 2016

ORDER AND REASONS

This litigation sprouted from dirt. On one side of the lawsuit are Lynn Perkins Perez, Stella Lands, Inc., and Edmond Fitzmaurice III, in his capacity as Trustee of the CKCC Trust (collectively "the Perez entities"). On the other side are Utility Constructors, Inc. ("UCI"), CEL Operations, LLC ("CEL"), Stella Plantation Excavators, LLC ("SPE"), Christopher Lovelace ("Chris"), and Terry Lovelace ("Terry") (collectively "the contractors").¹

The Perez entities own Stella Plantation, a large piece of property located on the east bank of the Mississippi River in Plaquemines Parish. In the wake of Hurricane Katrina, the federal government and the Louisiana parish governments undertook construction projects in order to improve the levees in and around the areas affected by the hurricane. These improvements required millions of tons of suitable dirt. The Perez property consists of more than 1500 acres and purportedly was in a prime position to meet that demand. Accordingly, the Perez entities begandiscussions with construction contractors regarding the excavation and sale of dirt from the Perez property.

In the second half of 2011, the Perez entities began negotiating with Chris Lovelace and Terry Lovelace. The Perez entities claim that Chris, Terry, and UCI—the company Chris and Terry own and/or control—were prepared to enter into an agreement with the Perez entities, but that Chris and Terry did not want the agreement to become public knowledge. In order to keep the agreement private, the Perez entities state that Terry and Chris proposed the creation of a new entity, SPE (titled after the name of the Perez property), to enter the agreement on Chris, Terry, and UCI's behalf.² According to the Perez entities, the Perez entities agreed to contract with SPE as long as UCI would act as a surety for SPE's obligations under the contract. The Perez entities assert that Chris and Terry understood that the Perez entities would not enter into an agreement with SPE without a surety agreement.

The Perez entities allege that by December 8, 2011, the parties had arrived at an understanding regarding the principal obligations that would govern their business relationship. On that day, both parties admit that Chris and Terry, both in their individual capacities and on behalf of UCI, CEL, and SPE, signed a document titled "Supplemental Terms and Conditions" ("Supplemental Agreement"). The Perez entities claim that they also signed the Supplemental Agreement, although the original version which contained their signatures was apparently lost in a subsequenthurricane. The copy that has been provided to the Court is signed only by Chris, Terry, UCI, and SPE.³

The Supplemental Agreement states that the Perez entities and SPE "entered into a Site Development Agreement (the 'Agreement') on this the 8th day of December, 2011."⁴ It then provides:

The Perez family, SPE, Christopher Lovelace, Terry Lovelace and Utility Constructors now wish to supplement the terms of the Agreement with certain additional terms and conditions. All capitalized terms used in this supplement shall have the same meaning as provided in the Agreement.⁵

The Supplemental Agreement proceeds to create a suretyship obligation whereby UCI was to guarantee any liability that SPE might incur under the Site Development Agreement. In addition, the Supplemental Agreement also contained exclusivity and liquidated damages provisions. The Perez entities contend that, pursuant to those provisions, the contractors agreed not to supply any projects in Plaquemines Parish with dirt from a source other than Stella Plantation, and that the Perez entities agreed not to allow any other contractor to obtain dirt from Stella Plantation. If the contractors violated the exclusivity provision, the Supplemental Agreement provided that they would be liable to the Perez entities for liquidated damages in the amount of $1,000,000 plus certain other amounts.⁶

Everyone agrees that a Site Development Agreement was not executed on December 8, 2011. While a draft of that Agreement was in existence on December 8, 2011,⁷ and although the parties agree that at the time the Supplemental Agreement was signed they all anticipated executing the Agreement later the same day, the Agreement was not finalized and signed until January 10, 2012. The execution of the Agreement was delayed in order that the parties could continue negotiating on two issues: (1) certain aspects of an escrow account that SPE would establish pursuant to the Agreement, and (2) modification of the Agreement in order to optimize tax consequences.

The only parties to the final Agreement were the Perez entities and SPE. When the Agreement was finally signed on January 10, 2012, a new Supplemental Agreement was not executed. The final Agreement nowhere refers to a Supplemental Agreement.

The specific provisions of the primary Agreement and of a later modification to the Agreement added on June 1, 2012 are not relevant to the present motions. Only the validity of the Supplemental Agreement is implicated in the three motions for partial summary judgment. Suffice it to say that before a dispute arose, the parties performed—at least in part—under the primary Agreement for a period of approximately three years. At that point, the dispute arose which gave rise to the present litigation.

MOTIONS FOR PARTIAL SUMMARY JUDGMENT

I. Standard of Law

Summary judgment is warranted when "the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a); see also Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986); Little v. Liquid Air Corp., 37 F.3d 1069, 1075 (5th Cir. 1994). When assessing whether a dispute as to any material fact exists, the Court considers "all of the evidence in the record but refrain[s] from making credibility determinations or weighing the evidence." Delta & Pine Land Co. v. Nationwide Agribusiness Ins. Co., 530 F.3d 395, 398-99 (5th Cir. 2008). All reasonable inferences are drawn in favor of the nonmoving party, but "unsupported allegations or affidavits setting forth 'ultimate or conclusory facts and conclusions of law' are insufficient to either support or defeat a motion for summary judgment." Galindo v. Precision Am. Corp., 754 F.2d 1212, 1216 (5th Cir. 1985); see also Little, 37 F.3d at 1075. "No genuine dispute 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." EEOC v. Simbaki, Ltd., 767 F.3d 475, 481 (5th Cir. 2014).

If the dispositive issue is one on which the moving party will bear the burden of proof at trial, the moving party "must come forward with evidence which would entitle it to a directed verdict if the evidence went uncontroverted at trial." Int'l Shortstop, Inc. v. Rally's, Inc., 939 F.2d 1257, 1264-65 (5th Cir. 1991). The nonmoving party can then defeat the motion by either countering with evidence sufficient to demonstrate the existence of a genuine dispute of material fact, or "showing that themoving party's evidence is so sheer that it may not persuade the reasonable fact-finder to return a verdict in favor of the moving party." Id. at 1265.

If the dispositive issue is one on which the nonmoving party will bear the burden of proof at trial, the moving party may satisfy its burden by merely pointing out that the evidence in the record is insufficient with respect to an essential element of the nonmoving party's claim. See Celotex, 477 U.S. at 325. The burden then shifts to the nonmoving party, who must, by submitting or referring to evidence, set out specific facts showing that a genuine issue exists. See id. at 324. The nonmovant may not rest upon the pleadings, but must identify specific facts that establish a genuine issue for trial. See, e.g., id.; Little, 37 F.3d at 1075 ("Rule 56 mandates the entry of summary judgment, after adequate time for discovery and upon motion, against a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial." (quoting Celotex, 477 U.S. at 322)).

II. The Suretyship Provision

Both sides move for summary judgment with respect to the validity of the suretyship provision contained within the Supplemental Agreement. The Perez entities argue that it is valid. The contractors argue that it is not.

As the parties arguing to enforce the contract, the Perez entities have the burden of demonstrating its validity. La. Civ. Code art. 1831; see also Price Farms, Inc. v. McCurdy, 42 So. 3d 1099, 1104 (La. App. 2 Cir. 2010). While the interpretation of a contract's provisions is typically a matter of law, Rousset v. Smith, 176 So. 3d632, 637 (La. App. 4 Cir. 2015), the existence or validity of a contract is a finding of fact. Mark A. Gravel Properties, LLC v. Eddie's BBQ, LLC, 139 So. 3d 653, 658 (La. App. 3 Cir. 2014). Because it is a fact question, this Court can grant summary judgment as to the validity of the suretyship provision only if the record taken as a whole could not lead a rational trier of fact to adopt the view urged by the contractors. See Simbaki, Ltd., 767 F.3d at 481. Because the Court finds that no genuine dispute of material fact exists with respect to the validity of the suretyship provision, the Court agrees with the Perez entities that it is enforceable.

Under Louisiana law,⁸ a contract is defined as "an agreement by two or more parties whereby obligations are created, modified, or extinguished." La. Civ. Code art. 1906. "A contract is formed by the consent of the parties established through offer and acceptance." La. Civ. Code art. 1927. "A contract is null when the requirements for its formation have not...