Inspire Up v. B R F Hospital Holdings ( 2022 )

Case: 22-30052 Document: 00516500169 Page: 1 Date Filed: 10/06/2022
United States Court of Appeals
for the Fifth Circuit
United States Court of Appeals
Fifth Circuit
FILED
October 6, 2022
No. 22-30052 Lyle W. Cayce
Clerk
Inspire Up, L.L.C., formerly known as Inspire, L.L.C.,
Plaintiff—Appellant,
versus
B R F Hospital Holdings, L.L.C., doing business as
University Health System,
Defendant—Appellee.
Appeal from the United States District Court
for the Western District of Louisiana
USDC No. 5:21-CV-2043
Before Jones, Southwick, and Ho, Circuit Judges.
Per Curiam:*
Plaintiff Inspire Up brought suit for breach of contract. The suit
alleges that Defendant University Health terminated the contract with less
than six months notice but failed to pay the fees required under the contract
for such terminations. The district court granted Defendant’s motion to
*
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opinion should not be published and is not precedent except under the limited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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No. 22-30052
dismiss because it found that Plaintiff’s claim was untimely under
Louisiana’s three-year prescription period for actions based on
compensation for services rendered. We disagree. This breach of contract
suit does not concern compensation for services rendered, so the three-year
prescription period does not apply. We accordingly reverse and remand for
further proceedings.
I.
Plaintiff provided consulting services to Defendant under a
Professional Services Management Agreement (“Agreement”), which
allowed either party to terminate the Agreement without cause. The parties’
respective obligations upon termination turned on whether the terminating
party provided six months notice. If Defendant provided six months notice,
Plaintiff was required to furnish, for pay, “a minimum of twenty (20)
consulting dates per month” during the six-month “notice period.” If
Defendant provided less than six months notice, Defendant was required to
pay “a sum equal to consulting services over a six-month period” but
Plaintiff did not have a reciprocal obligation.
On March 27, 2015, Defendant terminated the Agreement “effective
immediately.” Since Defendant provided less than six months notice, it
owed Plaintiff six months’ worth of consulting fees. However, Defendant
refused to pay. Plaintiff filed suit six years later, on July 15, 2021, and
Defendant moved to dismiss the complaint as untimely under Louisiana’s
three-year prescriptive period for claims for past due wages, see LA. CIV.
CODE art. 3494(1). Plaintiff responded that Louisiana’s general ten-year
prescriptive period for personal actions applied instead. The district court
found that Plaintiffs’ claim was a claim for severance payments and that
severance payments fall within Article 3494(1). Accordingly, the district
court granted Defendant’s motion to dismiss. Plaintiff timely appealed.
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II.
We review de novo dismissals based on prescription. Brown v. Slenker,
220 F.3d 411, 419 (5th Cir. 2000). The parties agree that Louisiana law
provides the relevant prescriptive period.
Under Louisiana law, “[u]nless otherwise provided by legislation, a
personal action is subject to a liberative prescription of ten years.” LA. CIV.
CODE art. 3499. One exception to this general rule is Article 3494, which
provides a “liberative period of three years” for “[a]n action for the recovery
of compensation for services rendered, including payment of salaries, wages,
commissions, professional fees, fees and emoluments of public officials,
freight, passage, money, lodging, and board.” Id. art. 3494(1).
Plaintiff argues that the district court erred in finding that Article
3494’s three-year prescription period governed Plaintiff’s claim. Instead,
Plaintiff contends that Article 3494(1) unambiguously applies only to claims
of compensation “for services rendered.” And according to Plaintiff, its
breach of contract claim did not seek compensation for any services that it
rendered. Plaintiff argues that it instead sought a severance payment that was
unrelated to any service it had rendered and was owed only because
Defendant terminated the Agreement with less than six months notice.
We agree. Article 3494(1) unambiguously applies only to
“compensation for services rendered.” Plaintiff does not seek compensation
for any services that it rendered. As a straightforward textual matter,
Plaintiff’s argument is convincing.
Defendant disagrees and would have us equate “compensation for
services rendered” with “compensation for no services rendered.” We
reject this atextual interpretation of Article 3494.
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Defendant argues—and the district court agreed—that (1) Minor v.
Monroe Surgical Hosp., LLC, 49,367 (La. App. 2 Cir. 11/19/14), 154 So. 3d
665, holds that Section 3494 applies to independent contractors, and (2)
Louisiana courts have held that Section 3494 applies to claims for payments
due upon the termination of a contract irrespective of whether that payment
is compensation for services rendered. Red Br. at 11, 14.
Neither argument is convincing. First, Minor is not relevant here.
The district court addressed the applicability of Section 3494 to independent
contractors because Plaintiff disputed it before the district court. Plaintiff
does not dispute that issue on appeal. The only question here is whether
Section 3494 applies to Plaintiff’s severance claim. Second, the Louisiana
state court cases that the district court relied on relied on, Assaleh v. Sherwood
Forest Country Club, Inc., 2007-1939 (La.App. 1 Cir. 5/2/08), 991 So.2d 67,
and Raborn v. Gulf States Pipeline Corp., 41,974 (La.App. 2 Cir. 4/4/07), 954
So.2d 353, did not extend Article 3494 to claims for payments due upon the
termination of a contract where the payments are not compensation for
services rendered.
Defendant argues that Article 3494 applies to Plaintiff’s claim for
severance payments because Assaleh applied Article 3494’s three-year
prescriptive period to “a claim for additional salary or additional severance
pay.” 991 So.2d at 72 (quotations omitted). However, the “additional
severance pay” at issue in Assaleh was not a typical severance payment due
upon termination without any reciprocal obligation on the non-terminating
party. Rather, because of Assaleh’s unique facts, the “additional severance
pay” was actually compensation for services already rendered by the
plaintiff. This explains why the Assaleh court also characterized the payment
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as “additional salary” and applied Article 3494, which the court described as
governing claims “based on the recovery of wages.”1 Id.Raborn does not help Defendant either. Although Raborn affirmed the
trial court’s holding that Article 3494 governed the plaintiff’s claims, which
included a severance claim, the only issue on appeal was whether the
Defendant’s contractual obligation to issue stock was compensation for the
plaintiff’s services. 954 So.2d at 355. Accordingly, Raborn did not affirm the
district court’s holding as to the severance claim and did not even discuss the
severance claim. At the very least, Raborn does not support the district court
and Defendant’s interpretation of Article 3494 as including claims for
severance payments for which no services were rendered.
At best, Assaleh and Raborn offer an alternative interpretation of
Article 3494. But Louisiana law clearly instructs that “where there are two
permissible interpretations of a prescriptive statute, the courts must adopt
the one that favors maintaining rather than barring the action.” In re Woods,
02-685 (La. App. 5 Cir. 12/30/02), 836 So. 2d 512, 514; see also Price v.
Stranco, Inc., 2003-1762 (La. App. 1 Cir. 9/8/04), 887 So. 2d 82, 84
(“Statutes providing for prescriptive periods are to be strictly construed in
1
In Assaleh, the plaintiff’s employment contract required the employer to give the
plaintiff ninety-days’ notice before terminating the contract. Id. at 69. The employer gave
the plaintiff his ninety-days’ notice on December 10, 2003, id., which meant that he was
technically employed until March 9, 2004. However, the employer applied the notice and
termination retroactively to November 18, 2003 and gave him “severance pay” for ninety
days from November 18, 2003 until February 16, 2004. Id. This meant the employer either
did not pay the plaintiff the wages he was due for the services he rendered between
November 18 and December 10 or gave him a “severance pay” that included those wages,
resulting in a “severance pay” for less than ninety days. Thus, the court described the
plaintiff’s claim as “a claim for additional salary or additional severance pay.” Id. at 72.
But since it does not appear from the court’s decision that the plaintiff was contractually
entitled to severance pay, the plaintiff’s “severance” claim was really a claim for
compensation for the services he rendered between November 18, and December 10.
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favor of maintaining a cause of action.”). Moreover, “prescriptive statutes
are stricti juris and will not be extended beyond the letter of the law.” Gulf
Oil Corp. v. State Min. Bd., 317 So. 2d 576, 578 (La. 1974). Even under the
most charitable reading of Defendant’s argument, we must err on the side of
allowing Plaintiff’s claim to proceed.
***
For the foregoing reasons, we reverse and remand for further
proceedings.
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