Shephard v. St. Paul Fire ( 2022 )

Case: 21-30199 Document: 00516152667 Page: 1 Date Filed: 01/04/2022
United States Court of Appeals
for the Fifth Circuit United States Court of Appeals
Fifth Circuit
FILED
January 4, 2022
No. 21-30199 Lyle W. Cayce
Clerk
Jeremy Shephard; Emily Shephard; Michael Jackson;
Tamisa Jackson,
Plaintiffs—Appellants,
versus
St. Paul Fire & Marine Insurance Company,
Defendant—Appellee.
Appeal from the United States District Court
for the Western District of Louisiana
USDC No. 5:18-CV-1603
Before Stewart, Haynes, and Graves, Circuit Judges.
Per Curiam:*
Plaintiffs-Appellants appeal the district court’s order dismissing their
suit. For the following reasons, we AFFIRM.
I. Background
*
Pursuant to 5th Circuit Rule 47.5, the court has determined that this
opinion should not be published and is not precedent except under the limited
circumstances set forth in 5th Circuit Rule 47.5.4.
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In June 2014, Plaintiffs-Appellants Jeremy Shephard, his wife, Emily
Shephard, and another married couple, Michael and Tamisa Jackson
(collectively, “the Shephards”), filed suit against AIX Energy, Inc. (“AIX”)
in Louisiana state court for personal injuries suffered during an oil well
explosion that occurred in 2013. AIX’s defense was provided by its insurer,
Defendant-Appellee St. Paul Fire and Marine Insurance Company insured
AIX and therefore provided AIX’s defense in the Shephards’ suit.
In its answer to the Shephards’ complaint, AIX stated that it was the
owner of the well. However, in response to the Shephards’ discovery
requests asking AIX to identify the “owner and/or custodian” of the well on
the date of the explosion, AIX objected to the form of the interrogatory, said
it was unsure what “owner and/or custodian” referred to, and directed the
Shephards to exhibits consisting of drilling permits and regulatory filings that
did not identify the owner of the well. The Shephards also propounded a
Request for Production asking AIX to produce “the contract under which
defendant conducted operations at the well.” AIX objected to the term
“conducting operations” as vague and ambiguous, stated that AIX was not
“conducting operations” at the well, and explained that “[c]ompletion
operations and/or work over services and/or well services were contracted
out to Dykes, Bear Creek and Republic.”
In March 2015, the Shephards amended their complaint to add a
direct claim against St. Paul. In October 2015, AIX filed for bankruptcy,
which stayed the personal injury litigation. In re AIX Energy, No. 15-34245,
2015 WL 9687321 (Bankr. N.D. Tex. Dec. 4, 2015). To lift the stay, the
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Shephards agreed with St. Paul and AIX to “only proceed as to collectible
insurance of [AIX] with St. Paul.” Id. In October 2016, St. Paul filed an
answer stating that it “adopts, reiterates, reaffirms and reavers all prior
responses, defenses, allegations, and assertions made in the pervious [sic]
filings by then Assured, AIX ENERGY, INC.” At trial in December 2016,
the jury found in favor of the Shephards and returned a verdict that exceeded
St. Paul’s liability coverage to AIX by over $10 million. But the trial court
nevertheless limited the judgment to AIX’s liability insurance proceeds.
On January 18, 2017, St. Paul and AIX filed a post-trial motion for
judgment notwithstanding the verdict, in which they revealed for the first
time that in 2012, AIX sold seventy-five percent of its ownership interest in
the well to NextEra. On March 6, 2017, St. Paul and AIX produced a Joint
Operating Agreement (“JOA”) that designated AIX as the “operator” of the
well at the time of the explosion. The JOA required NextEra to be added as
an additional insured on all of AIX’s insurance policies and stated that
NextEra agreed to assume seventy-five percent of AIX’s liabilities “incurred
in operations” of the well. St. Paul’s post-trial motion was denied, and the
trial court entered judgment in favor of the Shephards on April 10, 2017.
St. Paul and AIX suspensively1 appealed the trial court judgment to
the Louisiana Court of Appeal for the Second Circuit. On May 23, 2018, the
1
Under Louisiana law, a suspensive appeal is “an appeal that suspends the effect
or the execution of an appealable order or judgment.” LA. CODE CIV. PROC. ANN. ART.
2123.
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Louisiana Court of Appeal for the Second Circuit affirmed the damages
award in relevant part in favor of the Shephards and, citing AIX’s bankruptcy
order, limited the enforcement of any judgment to the policy limit of AIX’s
insurance with St. Paul. The Louisiana Supreme Court denied AIX and St.
Paul’s writ of appeal on November 5, 2018.
On December 12, 2018, the Shephards sued St. Paul in federal district
court for misrepresentation under Louisiana Revised Statute
§ 22:1973(B)(1). The Shephards alleged St. Paul knowingly misrepresented
AIX as the owner, instead of as the operator, of the well during the state court
proceedings. The Shephards also alleged St. Paul failed to disclose the
existence of NextEra and the JOA, which the Shephards contend was
responsive to discovery requests and identified a potential liable entity other
than AIX. The Shephards alleged they detrimentally relied on St. Paul’s
misrepresentations and nondisclosure in the pleadings and were therefore
fraudulently induced to proceed only against the amount of collectible
insurance in AIX’s policy. Because St. Paul allegedly failed to disclose
NextEra, the Shephards further asserted they were deprived of their ability
to conduct discovery regarding NextEra’s liability and insurance policies and
in turn, to potentially recover damages in the amount of their unrecovered
verdict.
St. Paul filed a Rule 12(b)(6) motion to dismiss arguing, inter alia, that
the Shephards’ Section 1973 claims were prescribed. The district court
granted the motion and dismissed the Shephards’ suit on the grounds that
prescription began to run on March 6, 2017 when the Shephards received the
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JOA, and the Shephards did not file suit until December 12, 2018, over one
year later. This appeal followed.
II. Standard of Review
This court reviews “a district court's dismissal under a Rule 12(b)(6)
motion de novo, accepting all well-pleaded facts as true and viewing those
facts in the light most favorable to the plaintiffs.” Wolcott v. Sebelius, 635 F.3d
757, 763 (5th Cir. 2011) (citation and internal quotation marks omitted). We
similarly “review de novo the district court’s ruling on prescription.” Brown
v. Slenker, 220 F.3d 411, 419 (5th Cir. 2000) (citation omitted). Under
Louisiana law, “prescriptive statutes are strictly construed against
prescription and in favor of the obligation sought to be extinguished.”
Richard v. Wal-Mart Stores, Inc., 559 F.3d 341, 346 (5th Cir. 2009) (quoting
Lima v. Schmidt, 595 So. 2d 624, 629 (La. 1992)).
III. Discussion
The parties agree that the Shephards’ claims were subject to a one-
year prescriptive period under LOUISIANA CIVIL CODE ARTICLE 3492. Their
dispute centers around when the prescriptive period began to run. The
Shephards argue that the prescriptive period began on November 5, 2018
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when the Louisiana Supreme Court denied St. Paul’s writ of appeal. 2 Thus,
the Shephards contend that they were well within the prescriptive period
when they filed their complaint on December 12, 2018. We disagree.
Under LOUISIANA CIVIL CODE ARTICLE 3492, the one-year
prescriptive period for delictual actions “commences to run from the day
injury or damage is sustained.” LA. CIV. CODE ANN. ART. 3492 (2021). The
Louisiana Supreme Court has held that a plaintiff’s damages must be more
than merely speculative for prescription to run under Article 3492, but they
need not be certain, fully incurred, or incurred in some particular quantum
to give the plaintiff a right of action. Harvey v. Dixie Graphics, Inc., 593 So. 2d
351, 354 (La. 1992). The party pleading prescription typically bears the
burden of proving that the plaintiff’s claims have prescribed, but “once it is
shown that more than a year has elapsed between the time of the tortious
conduct and the filing of a tort suit, the burden shifts to the plaintiff to prove
either suspension, interruption, or some exception to prescription, utilizing
one of any number of legal constructs including but not limited to the
doctrine of contra non valentem.” Terrebonne Par. Sch. Bd. v. Mobil Oil Corp.,
310 F.3d 870, 877 (5th Cir. 2002) (citation omitted).
2
The Shephards contend that November 5, 2018 is when their “excess judgment”
became final. However, the district court clarified that the Shephards did not obtain an
excess judgment. While the jury verdict exceeded St. Paul’s policy limits, the trial court
judgment limited recovery to the amount of AIX’s insurance coverage with St. Paul
pursuant to the bankruptcy order. Thus, neither the judgment by the trial court nor the
affirmance by the Louisiana court of appeal gave the Shephards a legally enforceable right
to recover in excess of St. Paul’s policy limits.
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“Under the doctrine of contra non valentem, the prescription period
does not run when ‘the cause of action is not known or reasonably knowable
by plaintiff, even though his ignorance was not induced by defendant.’”
Eldredge v. Martin Marietta Corp., 207 F.3d 737, 743 (5th Cir. 2000) (quoting
Landreneau v. Fruge, 598 S.2d 658, 662 (La. Ct. App. 1991)). Louisiana courts
only extend this doctrine’s benefits up to “the time that the plaintiff has
actual or constructive knowledge of the tortious act.” Id. (citation and
internal quotation marks omitted).
Here, the Shephards did not know of St. Paul’s alleged
misrepresentations and omissions in AIX’s discovery responses at the time
they were made. They did know about the alleged misrepresentations and
omissions, however, on March 6, 2017 when St. Paul produced the JOA
showing that NextEra had agreed to assume seventy-five percent of AIX’s
tort liabilities incurred in the operation of the well. By this date, the
Shephards had lost the opportunity to name NextEra as a defendant, having
instead sued AIX, and they agreed to seek recovery only to the extent of
AIX’s insurance coverage with St. Paul. The Shephards had also lost the
opportunity to conduct discovery regarding the JOA and NextEra during the
underlying state court suit, as they explained in their original complaint in
this case. Thus, the Shephards had suffered actual and appreciable damages
by the time they gained actual knowledge of St. Paul’s alleged tortious act.
Accordingly, the district court correctly held that prescription began to run
on March 6, 2017 and that the Shephards claims were prescribed because
they filed suit after the one-year prescriptive period had expired.
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The Shephards rely on Smith v. Citadel Insurance Co., 285 So. 3d 1062(La. 2019) and Belanger v. Geico General Insurance Co., 623 F. App’x 684 (5th
Cir. 2015) for the proposition that a Section 1973 claim does not begin to run
until the judgment in the underlying suit becomes final and enforceable. But,
both of those cases involve a plaintiff who was harmed by an excess judgment
they were liable to pay. Smith, 285 So. 3d at 1066; Belanger, 623 F. App’x at
687–89. Here, as the district court explained, the Shephards were never liable
for an excess judgment. Moreover, their damages had occurred before the
trial court judgment was final. Accordingly, Smith and Belanger are inapposite
here.3
As to the damages the Shephards had sustained by March 6, 2017,
they attempt to distinguish their case from Harvey v. Dixie Graphics, Inc. on
the grounds that, in contrast to the Harvey plaintiff, for whom prescription
was triggered by the incurrence of attorneys’ fees and costs, the Shephards
had not sustained costs or fees until the underlying judgment became final.
The Shephards contend that if the judgment had been reversed on the issue
of AIX’s liability, they would have sustained no damages from the loss of the
ability to pursue an action against NextEra. However, the district court
reasoned: “[The Shephards] had lost the ability to name NextEra as a
defendant in the underlying litigation and the right to pursue discovery
3
The Shephards cite the same cases in support of their argument that they could
not have brought this suit prior to the Louisiana Supreme Court’s denial of St. Paul’s writ
of appeal because their claims would have been dismissed as premature. We find this
argument unpersuasive given that the cases they cite involve excess judgments in failure-
to-settle claims by insureds against insurers.
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regarding the JOA in the underlying litigation. These damages were
independent of any additional damages Plaintiffs could eventually quantify
with certainty upon successfully defending their jury verdict on appeal and
were thus actual and appreciable at the time Plaintiffs discovered the
misrepresentation and saw the JOA.” We observe no error in this reasoning.
Thus, we hold that the district court did not err in dismissing the
Shephards’ claims because they were prescribed.
IV. Conclusion
For the foregoing reasons, we AFFIRM the district court’s order
granting St. Paul’s motion and dismissing the Shephards’ suit.
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