Bernhard Mechanical v. St Paul Co ( 2008 )

IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT United States Court of Appeals
Fifth Circuit
FILED
August 8, 2008
No. 07-30905 Charles R. Fulbruge III
Summary Calendar Clerk
BERNHARD MECHANICAL CONTRACTORS, INC.
Plaintiff-Appellant
v.
ST. PAUL COMPANIES; ST. PAUL FIRE & MARINE INS. CO.
Defendant-Appellee
Appeals from the United States District Court
for the Western District of Louisiana
Case No. 6:04-0439
Before HIGGINBOTHAM, BARKSDALE, AND HAYNES, Circuit Judges.
PER CURIAM:*
Bernhard Mechanical Contractors, Inc. (BMC) appeals an adverse
summary judgment on its detrimental reliance, breach of contract, and bad faith
breach of contract claims against St. Paul Fire & Marine Insurance Company
and St. Paul Companies (collectively St. Paul). The district court determined
that BMC’s claims were perempted by LA. REV. STAT. § 9:5606 (1991), which
requires plaintiffs to bring actions against insurance agents arising out of an
*
Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5TH CIR.
R. 47.5.4.
No. 07-30905
engagement to provide insurance services within one year of the alleged
misconduct or the discovery thereof.1 BMC brought no claims against Gene Pool,
St. Paul’s purported agent,2 and did not otherwise allege misconduct on his part.
Nevertheless, the district court held that section 9:5606 applied because Pool’s
conduct was “essential to” BMC’s claims against St. Paul and, under Louisiana
law, an insurance agent’s actions are imputed to the insurer. We disagree that
section 9:5606 applies to claims against an insurer merely because the agent’s
conduct, which the plaintiff does not contend is wrongful, is imputed to the
insurer. Therefore, we vacate the district court’s judgment and remand the case
for further proceedings consistent with this opinion.
I. FACTUAL AND PROCEDURAL BACKGROUND
This appeal arises from St. Paul’s declination to bond BMC’s work on the
Louisiana State University (LSU) cogeneration project.3 BMC is a contractor
that specializes in the installation of comprehensive plumbing, heating, and
cooling systems for large construction projects. In 1998, BMC employed an
independent bonding broker, Burch, Marcus, Pool, Krupp, Daniel & Babineaux
(Burch Marcus), to secure its construction bonds. Gene Pool served as BMC’s
primary contact at Burch Marcus. After investigating potential sureties for
BMC, Pool settled on St. Paul. According to St. Paul, “Pool’s attempt to match
BMC and St. Paul was perfected when BMC executed the [general indemnity
agreement].”
1
BMC does not contend that the “discovery” date is different than the “misconduct”
date.
2
St. Paul contests that Pool acted as its agent in this transaction. However, in the
motion granted by the district court, St. Paul stated: “any action against St. Paul based on the
imputed actions of the broker is time-barred.” Because St. Paul’s peremption motion relied
upon the premise that the broker’s actions would be imputed to it, we assume without deciding
that Pool acted as BMC’s agent for the purposes of this opinion.
3
The LSU cogeneration project is a multi-million dollar undertaking intended to
substantially reduce the University’s utility costs.
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No. 07-30905
In late 2000, LSU issued a request for proposals to build the cogeneration
project. BMC submitted a proposal approximately forty-five days later. A
necessary inclusion in that proposal was a letter from St. Paul regarding a bond
for the project, which BMC contends Pool signed as St. Paul’s agent.4 The letter
served to show that BMC could obtain a bond if LSU awarded it the project.
BMC further contends that St. Paul “actively participated in the contractual
negotiations between BMC and LSU and directly influenced the negotiations.”
BMC ultimately obtained the project but, on March 12, 2002, St. Paul declined
to issue the bond for what BMC contends was a trumped up reason. This suit
followed on February 13, 2004, approximately twenty-three months after St.
Paul officially declined to issue the bond.
BMC filed suit in the United States District Court for the Western District
of Louisiana, bringing claims against St. Paul for detrimental reliance, breach
of contract, and bad faith breach of contract. BMC did not name Pool as a
defendant, and its complaint alleges no wrongdoing on his part. The parties
filed cross-motions for summary judgment. In its partial summary judgment
motion on BMC’s detrimental reliance claim, St. Paul argued: (1) that Pool
made no promise upon which anyone could rely; (2) if Pool made a promise, it
could not be imputed to St. Paul; and (3) if Pool’s “promise” could be imputed to
St. Paul, the peremptory bar of section 9:5606 applied. The district court denied
St. Paul’s detrimental reliance summary judgment in its entirety and set the
case for trial.
On the fourth day of trial, the district court declared a mistrial after
disqualifying three jurors. The district judge then recused himself and the case
was reassigned to another district judge. That judge reopened summary
4
BMC’s most recent complaint alleges: “On February 20, 2001, Gene Pool, St. Paul’s
agent, issued a letter to LSU, stating that ‘we [St. Paul] are prepared to issue the requisite
performance and payment bonds should they [BMC] be the successful bidder.’”
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No. 07-30905
judgment and instructed the parties to point to any trial testimony that might
have resolved issues of fact that remained after the first round of summary
judgments. The parties again filed cross-motions for summary judgment.
The case was then reassigned to a third district judge of the Western
District of Louisiana. That judge set the pending summary judgment motions
for hearing and ordered the parties to file any opposition briefs fifteen days
before the hearing. During a subsequent pretrial conference, however, the
district judge referred the pending summary judgment motions to trial and set
a date for the second trial.
At the conclusion of the first day of trial, the district judge informed the
parties that he had reviewed their summary judgment motions and was “very
disturbed” by the peremption issue. He informed the parties that they should
be prepared to argue the issue the following morning.
The next morning, the district judge indicated that he was prepared to
issue “a Rule 50 in favor of the defendant, holding that St. Paul is a beneficiary
of [section] 9:5606 under the facts of this case,” but would give the parties an
opportunity to convince him otherwise. He noted that no court had specifically
addressed the applicability of section 9:5606 to an insurance company.
Nevertheless, he cited the parties to the Louisiana Court of Appeals decision in
Klein v. Am. Life & Cas. Co., 858 So. 2d 527 (La. Ct. App. 2003), a case in which
the plaintiffs contended that section 9:5606 did not apply to their claims against
an insurance company. He noted that in response to this proposition the court,
“in almost throwaway language,” proceeded to hold “[b]ecause the acts of an
insurance agent are generally imputable to the insurer he represents we
conclude [section 9:5606's] peremptive periods apply to the claims against [the
insurer] under the facts of this case.”
During the hearing that ensued, the judge repeatedly asked BMC’s counsel
whether Pool’s agency for St. Paul was “essential to” BMC’s claims. After
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No. 07-30905
receiving a qualified concession, the judge gave the parties fifteen days to brief
the legislative history of section 9:5606. Approximately one month later, he
entered a judgment dismissing BMC’s claims with prejudice “for the reasons
orally assigned in open court.”5 This appeal followed.
II. DISCUSSION
BMC raises a host of contentions challenging the procedural propriety of
the district court’s judgment. We need not address those issues, however, as we
agree with BMC that section 9:5606 does not apply to the facts of this case as
currently pleaded.
The district court determined that the peremptory bar of section 9:5606
applied to BMC’s claims against St. Paul, an insurance company, because its
agent’s actions were “essential to” BMC’s claims. The statute reads in relevant
part:
No action for damages against any insurance agent, broker, solicitor, or
other similar licensee under this state, whether based upon tort, or breach
of contract, or otherwise, arising out of an engagement to provide
insurance services shall be brought unless filed in a court of competent
jurisdiction and proper venue within one year from the date of the alleged
act, omission, or neglect, or within one year from the date that the alleged
act, omission, or neglect is discovered or should have been discovered.
LA. REV. STAT. § 9:5606.
The dates underlying the summary judgment are not in dispute. St. Paul
informed BMC of its declination to issue the LSU bond no later than March 12,
2002. BMC sued twenty-three months later. BMC brought claims solely against
St. Paul; Pool is not a named defendant. BMC does not allege that Pool engaged
5
BMC contends that the district court improperly invoked FED. R. CIV. P. 50 in
dismissing its case. We do not address this contention, however, as the procedural history of
this case and the substance of the district court’s judgment indicate that the court acted under
FED. R. CIV. P. 56, and we choose to construe its judgment accordingly. See Galin Corp. v. MCI
Telecomms. Corp., 12 F.3d 465, 468 (5th Cir. 1994) (treating order as a judgment under Rule
56 even though trial court purported to act under Rule 50(a)).
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No. 07-30905
in any wrongful conduct that can be imputed to St. Paul; rather, BMC alleges
that Pool merely facilitated the agreement that St. Paul breached. Thus, we
must decide whether the Louisiana rule that an agent’s actions are imputed to
the insurer operates to extend the peremptory bar of section 9:5606 to claims
against an insurer where the actions of the insurer’s agent, while not wrongful,
are nevertheless “essential to” the claims.6
The Louisiana Civil Code sets out rules of statutory construction that
guide us in resolving this issue of first impression. “When a law is clear and
unambiguous and its application does not lead to absurd consequences, the law
shall be applied as written and no further interpretation may be made in search
of the intent of the legislature.” LA. CIV. CODE art. 9 (1988). If, however, “the
language of the law is susceptible of a different meaning, it must be interpreted
as having the meaning that best conforms to the purpose of the law.” Id. art. 10.
“When the words of a law are ambiguous, their meaning must be sought by
examining the context in which they occur and the text of the law as a whole.”
Id. art. 12. Finally, Louisiana courts construe peremptive statutes strictly
against peremption “and in favor of the claim that is said to be extinguished.”
Albach v. Kennedy, 801 So. 2d 476, 482 (La. Ct. App. 2001). Thus, when faced
with two possible constructions, courts should favor the one that permits, rather
than bars, the action. Id.Applying these principles, we conclude that the peremptory bar of section
9:5606 does not apply to claims against an insurer merely because those claims
rely on imputing the conduct of an agent to the insurer. We base our decision
first on the language of section 9:5606. By its terms, section 9:5606 applies only
to actions for damages against an “insurance agent, broker, solicitor, or other
6
Given BMC’s allegations which, at this stage, must be taken as true–that St. Paul
actively participated in the LSU/BMC negotiations and then abruptly declined to issue the
bond for a false reason–it is not clear that Pool’s conduct was “essential to” the claim.
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No. 07-30905
similar licensee.” It is undisputed that an insurance company is neither an
insurance agent, broker, or solicitor. While St. Paul contends that it can be
considered a “similar licensee,” we fail to see the similarity between an
insurance agent and an insurance company.
Under basic cannons of statutory construction, the meaning of the general
phrase “other similar licensee” must be constricted to the specific class of words
which it follows. Circuit City Stores, Inc. v. Adams, 532 U.S. 105, 114 (2001)
(Under the established interpretative canon of ejusdem generis, “where general
words follow specific words in a statutory enumeration, the general words are
construed to embrace only objects similar in nature to those objects enumerated
by the preceding specific words.” (quoting 2A N. Singer, Sutherland on Statutes
and Statutory Construction § 47.17 (1991)). The Louisiana Insurance Code
makes a clear distinction between insurance agents and insurance companies.
Generally, insurers are required to obtain certificates of authority rather than
licenses. See LA. REV. STAT. § 22:34 (1958) (requiring a domestic insurer to
obtain a certificate of authority from the commissioner of insurance before
transacting business); id. § 22:981 (requiring a foreign insurer to obtain, among
other things, a certificate of authority to transact domestic business). In
contrast, the Code groups insurance agents, brokers, and solicitors together, see
id. § 22:1132(6) (2002), and requires them to obtain a “license.” See id. §
22:1132(8). Finally, the Code specifically states that insurers are not required
to obtain an insurance agent’s license and notes that the phrase “insurer” does
not include an insurance company’s “officers, directors, employers, subsidiaries,
or affiliates.” Id. § 22:1134(A). Given this clear statutory distinction between
insurers and their agents, brokers, and solicitors, we fail to see how the phrase
“other similar licensee” as used in section 9:5606 can be construed to encompass
an insurer. Indeed, if the legislature intended section 9:5606 to apply to
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No. 07-30905
insurers, it would have explicitly said so as it has in other statutes throughout
the Insurance Code.
At least one court has implicitly recognized the limited scope of section
9:5606. In Preis v. Lexington Ins. Co., 508 F. Supp. 2d 1061 (S.D. Ala. 2007), a
plaintiff brought claims against both an insurer and its agents based on the
agents’ alleged misconduct. Id. at 1078. The court, citing to Klein, held that
section 9:5606 perempted the claims against both the agents and the insurer
“because the acts of an insurance agent are generally imputable to the insurer
he represents.” Id. (citations omitted). In so doing, however, the court noted
that the plaintiffs’ claims against the insurer were derivative of its claims
against its agents. Id. Thus, Preis implicitly recognizes that the general
imputation rule would not extend the protections afforded by section 9:5606 to
an insurer whose agent acted merely as a benign participant in the transaction
giving rise to the plaintiff’s claim.
Indeed, in each of the cases that St. Paul relies on, the insurer’s potential
liability arose from the misconduct of its agents rather than its own independent
conduct. In Klein, the plaintiffs brought claims for breach of contract, breach of
fiduciary duty, negligence, and negligent supervision predicated on the
investment advice of the insurer’s agent. Id. at 529-30. In Kobeszko v. State
Farm Fire & Cas. Co., No. 06-7678, 2007 U.S. Dist. LEXIS 36900 (E.D. La. May
18, 2007), an unpublished opinion, the court specifically noted that the insurer’s
potential liability arose “through the errors and omissions of [its] agent,” and
that the plaintiffs did “not allege any improper conduct by [the insurer] apart
from the asserted actions and/or omissions of its agent.” Id. at *2 (emphasis in
original).
Section 9:5606 itself arguably mandates the holdings in Preis, Klein, and
Kobeszko. If courts did not impute the protections of section 9:5606 to insurers
in cases where their liability arises solely from the misconduct of their agents,
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No. 07-30905
plaintiffs could sue insurers beyond the one-year-peremptive period, leaving
insurers with no recourse against their culpable agents. See Life Investors Ins.
Co. of Am. v. John R. Young Chevrolet, Inc., 730 So. 2d 519, 520-521 (La. Ct.
App. 1999) (noting that a suit for contractual indemnity is a suit for damages
and that section 9:5606 prohibits all suits for damages after one year based upon
contract or otherwise). But these concerns do not exist where the insurer’s
potential liability arises solely from its own misconduct and the insurer’s agent
merely facilitated the underlying transaction.
We do not mean to suggest that a plaintiff can avoid the peremptory bar
of section 9:5606 by simply declining to sue an insurer’s agent. It is the basis of
the insurer’s liability–i.e., whether or not the insurer’s liability is predicated on
the wrongful acts of its agent–and not the style of the case, that determines
whether the peremptory bar of section 9:5606 applies to claims against an
insurer. Here, the district court granted summary judgment in favor of St. Paul
on the mistaken belief that section 9:5606 protected an insurer so long as the
actions of the insurer’s agent were “essential to” the plaintiff’s claims, without
more. Thus, its judgment cannot stand on the face of this record.
St. Paul has raised a number of alternative basis for upholding the district
court’s summary judgment. Given the unusual procedural course by which this
judgment arose, however, we find it imprudent to address those claims at this
time. See Breaux v. Dilsaver, 254 F.3d 533, 537 (5th Cir. 2001) (“Although this
court may decide a case on any ground that was presented in the trial court, we
are not required to do so.”); cf. FDIC v. Barton, 233 F.3d 859, 865 (5th Cir. 2000)
(declining to reach alternative grounds for affirming summary judgment). Here,
the district court was in the midst of trying the case when it decided to readdress
St. Paul’s motion for summary judgment on peremption. It did not do so with
the myriad other summary judgment motions previously filed. Thus, in order
to provide notice and an opportunity to be heard on any other grounds, we will
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No. 07-30905
decline to address those grounds at this stage. See Dandridge v. Williams, 397
U.S. 471, 475 n.6 (1970) (noting that “when attention has been focused on other
issues, or when the court from which a case comes has expressed no views on a
controlling question, it may be appropriate to remand the case rather than deal
with the merits of that question in this Court.”). Accordingly, the district court’s
judgment is VACATED and the case is REMANDED for further proceedings
consistent with this opinion.
10