State of Louisiana v. Guidry

REVISED September 5, 2007 United States Court of Appeals
Fifth Circuit
IN THE UNITED STATES COURT OF APPEALS
F I L E D
FOR THE FIFTH CIRCUIT June 15, 2007
_____________________
Charles R. Fulbruge III
No. 06-30641 Clerk
_____________________
STATE OF LOUISIANA,
Plaintiff-Appellant,
versus
ROBERT GUIDRY,
Defendant-Appellee.
----------------------
Appeal from the United States District Court
for the Eastern District of Louisiana
----------------------
Before KING, WIENER, and OWEN, Circuit Judges.
WIENER, Circuit Judge:
Plaintiff-Appellant State of Louisiana (the “State”) sued
Defendant-Appellee Robert Guidry in Louisiana state court, alleging
(1) tortious acquisition of a riverboat license, (2) conspiracy to
breach a fiduciary duty, and (3) breach of fiduciary duty. All
those claims arose from Guidry’s participation in an
extortion/bribery scheme involving former Louisiana Governor Edwin
Edwards. After the state court denied Guidry’s motion to dismiss
the State’s action, he filed a third-party complaint against the
United States, seeking to enforce the terms of a cooperation
agreement that he had entered into with federal prosecutors which
purported to limit Guidry’s total financial obligation for his
criminal wrongdoing. The United States removed the case to the
district court, and Guidry again filed a motion to dismiss, which
was converted to a motion for summary judgment. The district court
granted Guidry’s summary judgment motion, and the State now
appeals. We affirm.
I. FACTS & PROCEEDINGS
A. The Extortion Scheme
Having been awarded a Certificate of Preliminary Approval for
a riverboat gaming license in June 1993, Robert Guidry met with
Andrew Martin, an aide to then-Louisiana governor Edwin Edwards, to
lobby for assistance in completing the next step in the approval
process, a suitability review before the Riverboat Gaming Division
of the Louisiana State Police. Martin demanded that, for Guidry to
even receive a suitability hearing, he must pay $100,000 monthly
(the “extortion payments”) to Martin, Edwin Edwards, and Stephen
Edwards. Guidry agreed and received a suitability hearing and a
gaming license about a year later. After Governor Edwards left
office in 1996, Guidry began making the extortion payments.
B. The Various State and Federal Investigations
Sometime in 1993, Doug Moreau, the District Attorney of East
Baton Rouge Parish, had begun to investigate the way that
2
particular riverboat gaming licenses had been awarded. At about
the time in May 1994 that he was awarded his license, Guidry was
called to testify before a state grand jury that Moreau had
assembled; Guidry denied any wrongdoing. In December 1996, federal
investigators, who were also probing the awarding of riverboat
licenses, learned of the extortion scheme involving Guidry from
wiretapped conversations of Edwin Edwards. In June 1997, Guidry
appeared before a federal grand jury and invoked his Fifth
Amendment right against self-incrimination. The following month,
the U.S. Attorney requested and received from Moreau transcripts of
the state grand jury proceedings. Shortly thereafter, the chairman
of the Louisiana Gaming Control Board1 met with an Assistant U.S.
Attorney, who laid out the government’s evidence of the extortion
scheme. Despite this evidence, the Gaming Board did not revoke
Guidry’s license, instead approving his October 1997 sale of that
license for approximately $170 million.
C. The Immunity Agreement
After receiving a “target letter” from the government and
again being called before a federal grand jury, Guidry decided to
negotiate a plea agreement with federal prosecutors. Before
1
In May of 1996, the Louisiana Gaming Control Board
replaced the Riverboat Gaming Commission as the regulatory agency
overseeing riverboat gaming.
3
reaching a deal, however, Guidry sought full immunity from state
prosecution. The State, through Moreau, agreed to defer to the
federal government and grant Guidry full state immunity. Guidry
successfully negotiated a plea agreement under which he pleaded
guilty in federal court to one count of conspiracy to commit
extortion in violation of 18 U.S.C. §§ 371 and 1951 and agreed to
pay $3.5 million in fines, restitution, and forfeiture. Guidry
also agreed to cooperate fully in the federal prosecution of his
alleged co-conspirators. In exchange for his cooperation, federal
prosecutors agreed not to pursue any other charges or forfeiture
actions against Guidry.
D. The State’s Civil Action
In June 1999, Guidry was subpoenaed by the Louisiana Attorney
General to testify in an administrative hearing related to the
renewal of the riverboat gaming license that Guidry had sold in
October 1997. Believing his testimony to be required by his
immunity agreement, which provided that he would “at all times in
the future cooperate in any state investigations or prosecutions in
related matters, and at all times provide truthful information and
testimony,” Guidry testified at the administrative hearing as to
the circumstances surrounding his procurement of the original
riverboat gaming license. Several months later, the State
initiated the instant action against Guidry in Louisiana state
4
court, alleging Guidry’s (1) tortious acquisition of a riverboat
license, (2) conspiracy, with Edwards and Martin, to breach their
fiduciary duties, and (3) breach of the fiduciary duty he owed to
the State as the holder of a riverboat gaming license. At the
request of federal prosecutors, the district court stayed the
state-court proceedings pending the resolution of the criminal
prosecution of the Edwardses and Martin.
E. Guidry Testifies, Receives Sentence; State Denied Criminal
Restitution
In accordance with his plea agreement, Guidry testified at the
federal trial of his co-conspirators for six days in January and
February 2000. The following January, Guidry was sentenced to
three years probation, five-months of which were to be served in a
“halfway house,” and ordered to pay a total of $3.5 million in
fines, restitutions, and forfeitures. At the federal sentencing
hearing, the State sought, but was denied, restitution under the
federal victim restitution law.2 The district court ruled that (1)
restitution for property loss was not appropriate, because the
State of Louisiana did not part with “property” when it issued
Guidry’s riverboat gaming license,3 and (2) restitution for any
loss suffered from Guidry’s conspiracy to breach fiduciary duty
2
18 U.S.C. § 3663.
3
The court relied on Cleveland v. United States, 531 U.S.
12, (2000).
5
(his own and that of state officials) was not appropriate, because
the harm alleged by the State was not the kind of direct harm that
warrants compensation under criminal restitution statutes.
F. The District Court Proceedings
The federal stay of the state-court proceedings automatically
expired at the conclusion of the federal criminal proceedings, and
the instant case resumed. Guidry first raised peremptory
exceptions of no cause of action and no right of action,
contending that the State suffered no compensable damages. In
denying Guidry’s exceptions, the state court (1) adopted the
rationale of Continental Mgmt, Inc. v. United States,4 which
recognized that a civil tort exists for bribery of a public
official resulting in loss of loyal service of a government
official, and (2) held that Plaquemines Parish Commn. Council v.
Delta Dev. Co.5 supported the State’s claim that Guidry assumed a
fiduciary duty to the State when he accepted his riverboat gaming
license.
Guidry applied for supervisory review in the Louisiana First
Circuit Court of Appeal. The court of appeal denied the writ,
stating simply that “[w]e find no error in the trial court’s denial
of the exceptions of no cause of action and no right of action.”
4
527 F.2d 613 (Ct. Cl. 1975).
5
502 So. 2d 1034, 1040 (La. 1987).
6
Guidry then applied to the Louisiana Supreme Court for supervisory
writs, which the court denied without comment.
Guidry returned to the state trial court in which he filed an
answer and reconventional demand, seeking a preliminary injunction
to bar the State from pursuing the instant case. He based this
demand on his immunized testimony from the federal criminal
proceedings. The state court denied Guidry’s request for a
preliminary injunction, ruling that District Attorney Moreau never
intended Guidry’s immunity agreement to extend to civil claims that
the State may have against him. Guidry again appealed to the
Louisiana First Circuit Court of Appeal; but while that appeal was
pending, Guidry filed a third-party demand against the United
States, grounded in his reliance on assurances made by state and
federal prosecutors that the aggregate $3.5 million in fines,
penalties, and restitution would be the maximum financial sanction
imposed on him as the result of his wrongdoing. The United States
removed the entire action to federal court before Guidry’s state-
court appeal was resolved.
After removal, Guidry filed a motion to dismiss, which was
converted, by sua sponte order of the court, to a motion for
summary judgment. In his motion, Guidry argued, inter alia, that
the State’s allegations of (1) tortious acquisition of a riverboat
gaming license, (2) civil conspiracy to breach fiduciary duty, and
7
(3) breach of fiduciary duty, did not establish any legitimate
cause of action under Louisiana law. The district court granted
Guidry’s motion on this issue,6 and the State initiated the instant
appeal.
II. ANALYSIS
A. Preliminary Issues
1. Erie Doctrine
The State first contends that the district court, in granting
Guidry’s summary judgment motion, “disregarded Louisiana’s
substantive law” in contravention of the Erie doctrine. The State
does not contend that the district court applied the wrong law
(e.g., federal), but rather that it misinterpreted Louisiana law or
made an improper “Erie guess.” As the district court’s grant of
summary judgment is subject to our de novo review, we shall address
whether the district court incorrectly interpreted or predicted
Louisiana law when we review each of the bases for the court’s
ruling. Accordingly, we need not treat the district court’s
6
Guidry also argued that (1) the immunity granted to him
barred the use of his immunized testimony in a civil matter, (2)
collateral estoppel barred the state’s claims, (3) the Noerr-
Pennington doctrine barred the State’s claims, and (4) the
State’s claims were prescribed. The district court did not
address any of these issues; and even though Guidry urges us to
consider them as alternative bases for affirmance, neither party
has briefed them sufficiently to allow us to do so.
8
alleged failure to comply with the Erie doctrine as a separate
issue on appeal.
2. Law-of-the-Case Doctrine
The State also contends that the district court violated the
law-of-the-case doctrine by dismissing the State’s suit in direct
contravention of the earlier state-court ruling that denied
Guidry’s peremptory exceptions of no cause of action and no right
of action. The State points out that, not only did the state trial
court deny Guidry’s exceptions, but the Louisiana court of appeal
”found no error in the trial court’s denial” that would warrant
supervisory review. The State insists that, under the law-of-the-
case doctrine, this “prior ruling” may be reexamined only if “(i)
the evidence on a subsequent trial was substantially different,
(ii) controlling authority has since made a contrary decision of
the law applicable to such issues, or (iii) the decision was
clearly erroneous and would work a manifest injustice.”7
Guidry responds that the state-court rulings in this case are
not entitled to control under the law-of-the-case doctrine, which
provides only that “an issue of law or fact decided on appeal may
not be reexamined either by the district court on remand or by the
7
Fuhrman v. Dretke, 442 F.3d 893, 897 (5th Cir. 2006).
9
appellate court on a subsequent appeal.”8 He notes correctly that,
under Louisiana law, “[a] denial of supervisory review is merely a
decision not to exercise the extraordinary powers of supervisory
jurisdiction, and does not bar reconsideration of, or a different
conclusion on, the same question when appeal is taken from final
judgment.”9 Consequently, Guidry insists, denial of supervisory
review is not a “decision on appeal” and thus not entitled to law-
of-the-case status. We agree.
Louisiana law makes clear that an appellate court’s refusal to
grant a supervisory writ is not a “decision on appeal.”10
Similarly, a trial court’s denial of a peremptory exception is an
interlocutory judgment, subject to reconsideration by that court.11
“[I]nterlocutory state court orders are transformed by operation of
8
United States v. Becerra, 155 F.3d 740, 752 (5th Cir.
1998) (citations omitted) (emphasis added).
9
Goodwin v. Goodwin, 607 So. 2d 8, 10 (La. App. 2 Cir.
1992) (quoting State v. Fontenot, 55 So. 2d 179 (La. 1989)
(emphasis added).
10
See Id.
11
See Bennett v. Arkansas Blue Cross Blue Shield, 943 So.
2d 1124, 1126 (La. Ct. App. 1 Cir. 2006); VaSalle v. Wal-Mart
Stores, Inc. 801 So. 2d 331, 334-35 (La. 2001) ("[I]nterlocutory
orders overruling ... peremptory exceptions cannot be binding
upon the trial court when it timely--but later--determines error
of judgment based upon the matter as submitted or upon subsequent
disclosures in the record which require a contrary holding.");
see also 1 Louisiana Civil Law Treatise-Civil Procedure, § 6.7
(4th ed. 2002).
10
28 U.S.C. § 1450 into orders of the federal district court to which
the action is removed.”12 The district court here was “free to
treat the order [overruling Guidry’s peremptory exceptions] as it
would any such interlocutory order it might itself have entered.”13
As “a district court is not precluded by the law-of-the-case
doctrine from reconsidering previous rulings on interlocutory
orders such as summary judgment motions,”14 the court was free to
consider Guidry’s motion for summary judgment, even though that
motion encompassed many of the arguments rejected by the state
trial court in its judgment overruling Guidry’s peremptory
exceptions.
For its part, the district court concluded that the state-
court ruling was “simply not controlling at the summary judgment
stage” and determined that, even if it were considered the law of
the case, it was nevertheless subject to reconsideration, because
12
Nissho-Iwai American Corp. v. Kline, 845 F.2d 1300, 1304
(5th Cir. 1988) (“[T]he state court's ruling is purely
interlocutory, [and] it remains subject to reconsideration just
as it had been prior to removal.”).
13
Id.
14
United States v. Palmer, 122 F.3d 215, 220 (5th Cir.
1997); see also Lavespere v. Niagara Mach. & Tool Works, Inc.,
910 F.2d 167, 185 (5th Cir. 1990) (holding that trial court is
free to reconsider and reverse its decision on an interlocutory
order “for any reason it deems sufficient, even in the absence of
new evidence or an intervening change in or clarification of the
substantive law”), abrogated on other grounds by Little v. Liquid
Air Corp., 37 F.3d 1069, 1076 (5th Cir. 1994).
11
it was clearly erroneous such that adherence to it “would work a
manifest injustice . . . under the facts at hand.”15 The district
court cited, as reasons for this conclusion, the state trial
court’s (1) failure to cite Louisiana jurisprudence applicable to
the facts of this case, and (2) reliance on a case from the Court
of Claims applying a common-law doctrine, which in Louisiana is
only persuasive authority at best.
We need not address whether the district court was correct on
that issue, however, because we are satisfied that the law-of-the-
case doctrine does not apply to the state-court ruling in this
case: Neither the trial court’s initial overruling of Guidry’s
peremptory exceptions nor the court of appeal’s denial of
supervisory review amounted to a “decision on appeal” that is
presumptively exempt from reexamination under the law-of-the-case
doctrine.16
B. Tortious Acquisition of a Riverboat Gaming License
The State next contends that Guidry’s wrongful conduct in
acquiring his riverboat gaming license renders him liable to the
15
See Fuhrman, 442 F.3d at 897 (recognizing the exceptions
to the law-of-the-case doctrine).
16
We are not here presented with a situation in which a
federal court with removal jurisdiction encounters a Louisiana
appellate court decision that would be considered a decision on
appeal thus requiring us to decide whether it is entitled to
law-of-the-case status in subsequent federal court proceedings.
We express no opinion on such a situation.
12
State for any profit or economic advantage he derived from that
license. To validate this contention, we would have to conclude
that either (1) Guidry’s criminal violation ipso facto creates a
civil cause of action for the State against him, or (2) Louisiana
law makes bribery of a public official actionable in tort. We
cannot credit either proposition.
1. Criminal Violation as Basis for Civil Action
In denying Guidry’s exception of no cause of action, the state
trial court stated that “it is clear that a violation of a criminal
statute may provide the basis for tort liability.” In opposition,
however, when the district court granted Guidry’s summary judgment
motion, it recognized that “criminal statutes may serve as
guidelines for the imposition of civil tort liabilities,” but noted
that “Louisiana courts use this practice sparingly when criminal
statutes such as forgery, conversion, or traffic violations are
involved.” On appeal, the State mischaracterizes the district
court’s ruling on this point as a determination that “the violation
of a criminal statute cannot form the basis of a civil claim
against Guidry.” In truth, the district court, at most, determined
that (1) violation of a criminal statute does not automatically
13
create a civil cause of action, and (2) Guidry’s conduct did not
create a cause of action for the State in this case.17 We agree.
The district court’s legal analysis on this point is correct.
Under Louisiana law, criminal statutes may provide the standard of
care in a tort action when the other fundamental elements of a tort
(duty of care, damages) are present. Alone, however, a criminal
violation will not create tort liability.18
2. Bribery as Tort
a. The State-Court Ruling and Continental
In recognizing the State’s claim for tortious acquisition of
a gaming license, the state trial court explicitly adopted the
rationale of Continental Mgmt., Inc. v. United States,19 in which
the Court of Claims ruled that bribery of a public official may
create an action in tort. In Continental, a group of mortgage
bankers sued the United States for sums allegedly due under
contracts of mortgage insurance issued by the Federal Housing
17
The district court also observed that Guidry pleaded
guilty only to one count of violating the Hobbs Act, and was not
convicted of a bribery violation.
18
Gugliuzza v. K.C.M.C., Inc., 606 So. 2d 790, 793 (La.
1992) (“Criminal statutes are not, in and of themselves,
definitive of civil liability and do not set the rule for civil
liability; but they may be guidelines for the court in fixing
civil liability.”); Pierre v. Allstate Ins. Co., 242 So. 2d 821,
829-30 (La. 1971) (same).
19
527 F.2d 613 (Ct. Cl. 1975).
14
Administration.20 The government countersued for an amount equal
to the sum of the bribes paid to FHA and Veterans Administration
employees by a former president of the plaintiffs' predecessor
corporation.21
The issue faced by the court in Continental was whether
criminal acts give rise to liability to the government when the
government cannot prove direct or specific monetary injury.22 The
bankers argued, as Guidry does here, that the government must prove
that some damage resulted from the bribery, and that the
government's failure to allege provable, measurable damages
warranted dismissal of its counterclaim.23 The government countered
that interference with the principal-agent relationship between it
and its employees was a compensable wrong per se, and that the
government need prove no other injury.24
The Court of Claims began its analysis by stating the general
proposition that “a third party's inducement of or knowing
participation in a breach of duty by an agent is a wrong against
20
527 F.2d at 614.
21
Id. The company president and four FHA employees had
pleaded guilty to bribery charges.
22
Id.
23
Id.
24
Id.
15
the principal which may subject the third party to liability.”25
It acknowledged, however, that all of the cases it cited for this
proposition were “technically distinguishable” from the one before
it, because the “monetary consequences of the agents' nefarious
dealings” in those cases was “clearer or more specific.”26
Nevertheless, the Continental court found that those cases’
“reasoning suggests that all who knowingly participate in a scheme
by which an agent obtains secret profits should be held liable to
the principal.”27 The court also ventured that “[a] sister line of
decisions indicates that the violation of a statutory standard of
conduct should normally meet with civil sanctions designed to
effectuate the purpose of the statute infringed.”28 The court
reasoned that “[t]he purpose of the bribery statute-the protection
of the public from the corruption of public servants and the evil
consequences of that corruption-will obviously be furthered by the
recognition of a civil remedy.”29
The Continental court then addressed the proof-of-damages
issue. For several reasons, it accepted the government’s position
25
Id. at 616-17 (citations omitted).
26
Id. at 617.
27
Id.
28
Id. (citations omitted).
29
Id.
16
that “it is enough to show the fact and amount of the bribes —
nothing further need be alleged or proved by way of specific or
direct injury.”30 First, it pointed out that “the briber deprives
the Government of the loyalty of its employees, upon which the
Government and the public must rely for the impartial and rigorous
enforcement of government programs.”31 Next, the court recognized
that “[b]ribery of officials can also cause a diminution in the
public's confidence in the Government, upon which the Government
must also rely.”32 Finally, the court noted, “[t]he Government
likewise incurs the administrative costs of firing and replacing
the venal employees and the costs of investigation, all of which
are compensable in fraud cases.”33
The court then recited the “old maxim of the law that, where
the fact of injury is adequately shown, the court should not cavil
at the absence of specific or detailed proof of the damages.”34 The
court concluded that even though “[s]ignificant elements of []
harm, such as the injury to the impartial administration of
governmental programs, are not susceptible to an accurate monetary
30
Id. at 618.
31
Id.
32
Id.
33
Id.
34
Id. at 619.
17
gauge,” it would not deny the government relief simply because its
injury was “not readily traceable or measurable.”35 In the end, the
court held that “the amount of the bribe provides a reasonable
measure of damage, in the absence of a more precise yardstick.”
The State’s argument in this case is largely the same as that
made by the government in Continental. The State contends that (1)
Guidry owed a duty to the State not to improperly obtain a
riverboat gaming license, and (2) in breaching that duty, he caused
the State to lose the gaming license itself, the loyal service of
its Governor and his assistant, and the honest and impartial
administration of its government. Moreover, the State insists
that, despite the difficulty of determining the quantum of its
damages, it is entitled to recover general damages for its loss.
b. Damages
In its summary judgment analysis of the State’s tortious
acquisition claim, the district court focused on whether the State
suffered compensable damages from Guidry’s wrongdoing. The court
did not address whether Guidry owed a general duty of care to the
State or, if so, whether he breached that duty.36 As the parties
have not asked us to decide that issue on appeal, we address only
35
Id.
36
The court separately considered, as will we, the State’s
claim that Guidry breach a fiduciary duty to the state.
18
whether the State suffered damages compensable through a tort
action.
i. The Gaming License
In its ruling, the district court first clarified that a
riverboat gaming license is not “property,” the loss of which could
provide the basis for a tort action. The court cited § 27.42(B) of
the Louisiana Riverboat Economic Development And Gaming Control
Act, which sets forth the public policy regarding riverboat gaming:
Any license, permit, approval, or thing obtained or
issued pursuant to the provisions of this Chapter is
expressly declared by the legislature to be a pure and
absolute revocable privilege and not a right, property or
otherwise, under the constitutions of the United States
or of the state of Louisiana.37
The court reasoned that “because the State could not have been
deprived of any property interest from the issuance of [Guidry’s
license], it may not claim damages equivalent to the value of the
license.”
The court found further support for this conclusion in
Cleveland v. United States,38 in which the Supreme Court unanimously
held that a regulator who issues a Louisiana video poker license
does not part with “property” for purposes of prosecuting a
37
La. Rev. Stat. Ann. § 27.42(B) (emphasis added).
38
531 U.S. 12 (2000).
19
licensee under the federal mail fraud statute.39 The Court in
Cleveland held that “whatever interests Louisiana might be said to
have in its video poker licenses, the State's core concern is
regulatory,” then distinguished each of Louisiana’s interests in
its poker licenses from true “property” interests.40
The district court determined that the regulatory system
established by the Louisiana legislature provides an alternative
civil remedy for an improper acquisition of a gaming license ——
revocation of that license. It also noted that, in this case, the
State elected not to avail itself of that remedy after discovering
Guidry’s unlawful conduct, opting instead to approve Guidry’s sale
of his riverboat license to a third party. The court reasoned that
the State, having eschewed the legislatively-created remedy of
revoking improperly acquired licenses, should not now be allowed
“to create a new means of seeking retribution” for that conduct.
The State insists that the district court’s reliance on
Cleveland was misplaced, as Cleveland’s holding applies only to
federal mail fraud cases and “has no bearing on a civil action for
damages.” It contends that Guidry’s alleged tort is analogous to
(1) unauthorized possession of movable property (civil law
conversion), (2) the common law tort of conversion, or (3) the
39
Id. at 20-26.
40
Id.
20
unauthorized use of a franchise. Finally, the State asserts that
whether the riverboat gaming license is “property” or a “privilege”
is not important, because the nature of the right associated with
the license “does not diminish the nature of the damage sustained
by the State as a result of Guidry’s tortious conduct,” and “a loss
of property is not essential to recovery in tort.”
The State’s first three contentions are unavailing. As noted
earlier, Louisiana law is clear that awarding a riverboat gaming
license does not confer on the licensee a property right of any
kind. Awarding such a license may create tangible economic
benefits for both the State and the licensee, but, in making the
award to Guidry, the State did not transfer any “property” interest
to him, such that it may demand that Guidry return the value of
that interest as part of a tort recovery. Consequently, the
State’s attempts to analogize its claim to one for unauthorized
possession of movable property, common law conversion, or the
unauthorized use of a franchise, are fruitless. As the cases cited
by the State illustrate, all of those claims involve interference
with discreet, determinable property rights.41
Furthermore, the State’s contention that the common law tort
of conversion “has been inferred” from article 2315 of the
41
See, e.g., Dual Drilling Co. v. Mills Equip. Inv., Inc.,
721 So. 2d 853 (La. 1998) (involving unauthorized possession of
an oil rig).
21
Louisiana Civil Code is simply incorrect. In Dual Drilling, the
case that the State cites for this proposition, the court
indisputably held otherwise:
Despite the use of this common law term, such actions are
not to be confused with the civil law tort of conversion.
In common law jurisdictions, conversion is an intentional
wrong giving rise to strict liability in an action for
the recovery of the value of a chattel
. . . .
“and the absolute liability which characterizes [common
law] conversion is in direct conflict with Article 2315
of the Louisiana Civil Code and the principle that
liability for wrongful dispossession rests on fault.”42
Finally, the State cites no authority for its contention that its
tortious-acquisition claim resembles that of a franchisee or
licensee for unauthorized use of intellectual property. By its
very nature, such a claim must involve a “property” interest held
by the plaintiff, and Louisiana law provides unequivocally that the
State neither has nor transfers a property interest in a riverboat
gaming license. The same “un-property” analysis used by the
Supreme Court in Cleveland for a video poker license fits that
purpose for riverboat gaming license. The distinction in the crime
framework of the cases is immaterial.
ii. General Damages
42
721 So. 2d at 857 n.3 (quoting A.N. Yiannopoulos,
Louisiana Civil Law Treatise §§ 357, 359 at 690-92, 695).
22
The State next contends that it is entitled to recover general
damages for its loss resulting from Guidry’s participation in a
bribery scheme confected by then-Louisiana Governor Edwards. It is
axiomatic that “property” rights are not a prerequisite to tort
recovery. Louisiana courts routinely award “general damages” for
losses such as pain and suffering or inconvenience that are
“inherently speculative in nature and cannot be fixed with
mathematical certainty.”43 In this case, the State alleges that
it suffered the loss of (1) reputation, and (2) honest and loyal
service of its employees, for which it has the right to recover.
To support this proposition, the State again cites Continental and
analogizes its claim to one for general damages resulting from
libel or defamation.
The district court did not directly address the viability of
the State’s claim for general damages. Nonetheless, we presume
that the district court found those damages insufficient to support
a tort claim. The court did address the Continental case, however,
and concluded that it was “clearly not binding authority” because
the common law doctrine on which it relies is, at most, persuasive
authority for a court applying Louisiana law. The district court’s
observation is plainly accurate. Louisiana tort law is primarily
43
Wainwright v. Fontenot, 774 So. 2d 70, 74 (La. 2000).
23
based in the Louisiana Civil Code and is informed by the relevant
interpretations thereof by courts of competent jurisdiction.
Courts applying Louisiana law may regard decisions based on the
common law as persuasive, but not as binding authority.
Consequently, the district court was in no way bound to follow the
reasoning of the Continental case.
The district court also observed that, unlike the Continental
case, in which the Court of Claims justified imposing civil
remedies as a way to further the goals of the federal bribery
statute, Louisiana already has an alternative civil remedy for the
improper acquisition of a riverboat gaming license (through bribery
or otherwise) —— revocation of the license. This observation is
compelling. If the State had elected to revoke Guidry’s gaming
license after learning of his misconduct, he would not have been
able to sell it for $170 million. That remedy, then, would have
had the same effect on Guidry as the State now seeks in tort,
forfeiture of his ill-gotten gains. The record provides little
insight into the State’s reasons for having foregone the remedy of
revocation, but none disputes that the appropriate state regulatory
agency knew of Guidry’s illicit conduct prior to his sale of his
license. The district court was correct, then, to rebuff the
State’s attempt to justify a novel tort action on the grounds that
allowing a civil remedy would bolster the criminal bribery statute,
24
when Louisiana already had established an alternative civil remedy
that would serve the same purpose in situations like the one
presented here.
For his part, Guidry attacks the State’s general damages claim
by noting that no court applying Louisiana law has ever awarded
tort damages for bribery of a public official. Such a claim, he
argues, is easily distinguishable from defamation, which has long
been recognized as involving compensable harm, despite the
difficulty in calculating the value of that harm.
As to Guidry’s first point, the State does not dispute that no
court applying Louisiana law has ever awarded the government
general damages for loss of reputation or loyal services resulting
from the bribery of a public official. The State cites only the
Continental case and two district court decisions in support of its
proposition that such a tort remedy exists. It provides no
Louisiana cases, pointing instead to the Louisiana Supreme Court’s
observation that public bribery constitutes “wrong done to the
people by the corruption in public service,”44 as evidence that
recognizing a civil remedy would further the goal of the criminal
bribery laws. Regarding its suggestion of an analogy to defamation
claims, the State does not compare the nature of the offense at
issue here (bribery, fraudulent license acquisition) with
44
State v. Bloomenstiel, 106 So. 2d 288, 290 (La. 1958).
25
defamation; it simply states that awarding general damages here
would be no different than awarding a defamation plaintiff general
damages.
iii. Conclusion
For the following reasons, we agree with the district court
that Guidry’s conduct in acquiring his riverboat gaming license
does not render him liable to the State in tort for any profit or
economic advantage he derived from that license. First, bribery is
a crime, and as a crime it subjects the briber to a range of
penalties, including restitution to the victim. As detailed
earlier, Guidry has already been punished for his crime, and the
State did not qualify as a victim of Guidry’s criminal conduct
deserving of restitution.
Second, despite the State’s contentions to the contrary,
Louisiana courts do not generally equate criminal violations with
compensable tortious conduct. Only in rare instances do Louisiana
courts even treat a criminal violation as clear evidence of a
breach of the applicable civil standard of care.
Third, the losses that the State alleges it suffered are more
than “difficult to calculate”; they are so attenuated and
speculative that they cannot form the basis of a tort action.
Unlike in defamation cases, which involve direct attacks by one
party on the good name of another, any loss of reputation in this
26
case was a by-product of a crime motivated by the greed of its
participants. Even though bribery of a public official undoubtedly
will, if discovered, affect a state’s reputation, the same is true
of all crimes, to some greater or lesser degree. As Guidry notes,
such loss of reputation is one of the multifarious elements of the
“societal harm” that a state’s criminal laws are designed to
redress, but only rarely will such loss provide the basis for a
tort claim. Guidry’s case does not present one of those rare
instances.
Furthermore, the State’s claim for loss of the “loyal service”
of its employees is dubious at best. The State’s entitlement to
the services of its employees arises from its contract with those
employees. As Guidry observes, Louisiana has already rejected the
notion that the State “owns” the services of its employees:
The parish and the state cannot own the services of their
employees. It has been held that ownership of services is
not conveyed by a contract with the party to whom they
are rendered because the knowledge or skill which a man
possesses is not subject to ownership. Gonsalves v.
Hodgson, 38 Cal. 2d 91, 237 P.2d 656 (1951). Human effort
and work are not the subject of ownership. If anyone owns
them it is the employees themselves . . . .45
As such, we cannot conceive how the State could recover general
tort damages for the loss of the loyal service of its employees.
45
State v. Gisclair, 382 So. 2d 914, 916 (La. 1980)
(construing whether services of employees were “movables” within
meaning of unauthorized use of movables statute).
27
Finally, as noted earlier, Louisiana has chosen its civil
remedy to address improper acquisition of a riverboat gaming
license —— revocation. Had the State revoked Guidry’s license when
it first learned of his conduct, it would have achieved largely the
same results it seeks now, i.e., preventing Guidry from profiting
from his criminal activity and furthering the purpose of the
criminal bribery statute. Of course, only tort recovery would
allow the State to keep for itself the ill-gotten gains generated
by Guidry’s sale of the license.
For the foregoing reasons, we affirm the district court’s
grant of summary judgment on the State’s claim against Guidry for
tortious acquisition of a riverboat gaming license.
C. Fiduciary Duty Claims
1. Conspiracy
The State next contends that Guidry is liable for conspiring
in the breach of the fiduciary duties owed to the State by then-
Governor Edwards and his assistant, Andrew Martin. The State bases
this contention on Article 2324 of the Louisiana Civil Code, which
states, in pertinent part:
He who conspires with another person to commit an
intentional or willful act is answerable, in solido, with
that person, for the damage caused by such act.
Prior to its amendment in 1987, this article read:
28
He who cause another person to do an unlawful act, or
assists or encourages in the commission of it, is
answerable, in solido, with that person, for the damage
caused by such act.
When that version of Article 2324 was in effect, courts
interpreted “unlawful act” to mean “tortious conduct” and applied
the article only to conspiracies based on an underlying tort.46 An
action against a fiduciary may involve his failure to meet some
general standard of care (negligence) and therefore sound in tort.
In contrast, an action for breach of a fiduciary duty arises from
the special relationship between the fiduciary and the one who
claims the duty [or “principal”], which therefore arises in
contract (or quasi-contract).47 As such, a breach of a fiduciary
46
See Roussel Pump & Elec. Co. v. Sanderson, 216 So. 2d 650
(La. Ct. App. 4 Cir. 1969) (“A breach of this [fiduciary]
obligation may be cause for legal redress against the offending
officer in a proper action ex contractu, but it is not an
‘unlawful’ act within the contemplation of LSA-C.C. art. 2324.”);
see also Hartman v. Greene, 190 So. 390, 391 (La. 1939)(“The term
‘an unlawful act’ does not mean necessarily a criminal act; it
means a wrongful act, or a tort-any wrongful act (not involving a
breach of contract) for which a civil action will lie.”).
47
See de la Vergne v. de la Vergne, 745 So. 2d 1271, 1275
(La. Ct. App. 4 Cir. 1999)(“[C]ourts must consider the underlying
claim to determine if the action is indeed one for breach of a
fiduciary duty which is governed by the 10 year prescriptive
period [for contract actions] or merely a suit against a
fiduciary for negligence which is governed by the one year
prescriptive period.”).
29
duty would not provide a basis for conspiratorial liability under
the previous version of article 2324.48
The State concedes both that (1) a breach of fiduciary duty
arises in contract, and (2) the pre-revision version of article
2324 recognized conspiratorial liability only for those who
participate in or induce tortious acts. The State insists,
however, that, by replacing “unlawful act” with “intentional and
willful act,” the Louisiana legislature broadened the applicability
of article 2324 beyond actions based in tort. The district court
concluded that, even post-revision, a conspiracy claim under
article 2324 will only lie if the underlying act is tortious (and
not contractual or quasi-contractual) in nature.
For its part, the State relies primarily on decisions from
common-law jurisdictions recognizing that one who conspires with a
fiduciary in a breach of the fiduciary’s duty is liable to the
principal.49 In the State’s view on appeal, the 1987 revision to
Civil Code article 2324 brings Louisiana law into consonance with
the laws of other jurisdictions in the United States. The State
does cite Guidry v. Bank of LaPlace,50 and C & B Sales and Servs.
48
See Roussel, 216 So. 2d at 655.
49
Citations omitted.
50
661 So. 2d 1052 (La. Ct. App. 4 Cir. 1995).
30
v. McDonald,51 both cases decided under Louisiana law in which the
plaintiff asserted an article 2324 conspiracy claim based on breach
of fiduciary duty. In the State’s view, these cases stand for the
proposition that one who conspires with a fiduciary to breach a
fiduciary duty is liable in solido with the fiduciary to his
principal.
In its summary judgment ruling, the district court first
observed that courts have continued to interpret revised article
2324 as applying only to conspiracies involving an underlying
tort.52 The court also noted that we have recognized that, even
though “the 1987 amendments changed the language of La. Civ. Code
art. 2324(A), the pre-amendment conspiracies still provide guidance
as to the applicable law in regards to conspiracies.”53 Therefore,
reasoned the district court, article 2324 continues to apply only
to alleged conspiracies in which the unlawful act is tortious
conduct. The district court also cited two post-revision cases
from the Eastern District of Louisiana recognizing that article
2324 conspiracy claims still must involve an underlying tort.54
51
95 F.3d 1308, 1316 (5th Cir. 1996).
52
See infra notes 53-54.
53
See C & B Sales, 95 F.3d at 1316; Chrysler Credit Corp.
v. Whitney Nat. Bank, 51 F.3d 553, 557 (5th Cir. 1995).
54
See Jefferson v. Lead Industries Ass’n, Inc., 930 F. Supp.
241, 247-248 (E.D. La. 1996) (“Louisiana law does not recognize
31
The district court challenged the State’s reliance on Guidry
as well. It concluded that the Guidry court did not recognize an
action under article 2324 for conspiracy to breach a fiduciary
duty, but simply adopted the reasoning from Nat’l Union Fire Ins.
Co. that the 1987 amendments merely rephrased the article “in terms
of conspiracy, conformable with the jurisprudence.”55
Finally, the district court addressed the common-law
authorities cited by the State. Acknowledging that those
authorities may lend support to the State’s argument that a cause
of action for conspiracy to breach a fiduciary duty may be treated
as a tort, the court reiterated that common-law authority is only
persuasive in Louisiana. The court quoted from two Louisiana
Supreme Court decisions clarifying that “the proper analysis to
determine [a] defendant’s liability is to be found in Louisiana’s
substantive law as found in the Louisiana Civil Code”56 and
cautioning that “‘due to underlying fundamental differences in
conceptual technique and methodology, borrowing of common law rules
an independent cause of action for civil conspiracy . . . . The
actionable element under article 2324 is the intentional tort the
conspirators agreed to commit and committed in whole or in part
causing plaintiff's injury.”); Rhyce v. Martin, 173 F. Supp. 2d
521, 535 (E.D. La 2001) (discussing the ruling in C & B Sales).
55
See Guidry, 661 So. 2d at 1058 (quoting Nat’l Union Fire
Ins. Co., 552 So. 2d at 634).
56
Porteous v. St. Ann’s Café and Deli, 713 So. 2d 454, 455
(La. 1998).
32
for the solution of problems arising under Louisiana law is both
unnecessary and confusing.’”57 In adherence to these directives,
the district court disregarded the common-law authority provided by
the State and held that, because “under Louisiana law, a breach of
fiduciary duty only arises in contract . . . [the State’s] cause of
action for conspiracy to breach a fiduciary duty lacks an essential
element - an underlying intentional tort” and must fail.
The district court’s reasoning is sound. Even after the
revision of article 2324, Louisiana courts continue to recognize
that its application is limited to conspiracies involving tortious
conduct.58 Additionally, the district court’s observations about
the necessity or propriety of adopting common-law tort principles
into Louisiana law are also correct. Despite many similarities to
common law, Louisiana courts may not and should not facilely adhere
to common-law authority as precedent. Consequently, the district
court was justified in limiting its guiding authority to Louisiana-
court decisions interpreting the Civil Code. We therefore affirm
57
Dual Drilling Co. v. Mills Equip. Inv., Inc., 721 So. 2d
853, 857 n.3 (quoting A.N. Yiannopoulos, Louisiana Civil Law
Treatise § 359, at 695).
58
See, e.g., Thomas v. North 40 Land Development, Inc., 894
So. 2d 1160, 1174 (La. Ct. App. 4 Cir. 2005) ; Sullivan v.
Wallace, 859 So. 2d 245, 248 (La. Ct. App. 2 Cir. 2003); Aranyosi
v. Delchamps, Inc., 739 So. 2d 911, 917 (La. Ct. App. 1 Cir.
1999); Butz v. Lynch, 710 So. 2d 1171, 1174 (La. Ct. App. 1 Cir.
1998); Hall v. Lilly, 697 So. 2d 676, 678-79 (La. Ct. App. 2 Cir.
1997).
33
the district court’s summary judgment dismissal of the State’s
cause of action for Guidry’s conspiracy to breach the fiduciary
duty of another, as “lack[ing] an essential element — an underlying
tort.”
2. Guidry’s Alleged Fiduciary Duty
The State next contends that Guidry owed it a fiduciary duty
by virtue of his holding a riverboat gaming license. The State
bases this contention on its assertion that Louisiana law imposes
“duties of good faith, honesty, candor, and confidence” on such
licensees. These duties, the State insists, amount to a fiduciary
duty in favor of the State. Guidry responds that the statutory
duties imposed on riverboat gaming licensees are “hefty,” but do
not rise to the high level of a fiduciary duty, either singly or in
combination. The district court agreed with Guidry, and so do we.
In trying to support its contention that the duty owed to it
by Guidry as a riverboat gaming license holder is that of a
fiduciary, the State references several provisions of the version
of the Louisiana Riverboat Economic Development and Gaming Control
Act that was in effect during the time Guidry held his riverboat
gaming license. Specifically, the State notes that, under that
version of the Gaming Control Act, (1) applicants for gaming
licenses were screened for “good character, honesty, and
34
integrity,”59 required to disclose those having a financial interest
in the gaming license, and prohibited from making false statements
in their applications;60 and (2) license holders were required to
report any violations of the Gaming Control Act.61 The State also
quotes from Capitol Houses Preservation Co. v. Perryman
Consultants, Inc., in which an intermediate state appellate court
observed that “the [Louisiana] legislature placed dual duties on
the [riverboat gaming] applicants and licensees, first a duty to be
honest and complete in the initial representations , and second, a
continuing duty to disclose any dishonest or fraudulent
misrepresentation.”62 The State urges us to conclude that these
obligations produce a fiduciary duty.
In addressing this issue, the district court recognized that
the Louisiana legislature has imposed many obligations on gaming
licensees and applicants. It disagreed, however, with the State’s
contention that these obligations operate to create a fiduciary
duty. The court first stated that, according to the Louisiana
Uniform Fiduciaries Law, a “fiduciary” includes the following:
59
La. Rev. Stat. § 27:70(A)(1) (repealed 2001).
60
La. Rev. Stat. § 27:99 (repealed 2001).
61
La. Rev. Stat. § 27:70(C) (repealed 2001).
62
725 So. 2d 523, 528 n.8 (La. Ct. App. 1 Cir. 1998).
35
a trustee under any trust, expressed, implied, resulting
or constructive, executor, administrator, guardian,
conservator, curator, receiver, trustee in bankruptcy,
assignee for the benefit of creditors, partner, agent,
officer of a corporation, public or private, public
officer, or any other persons acting in a fiduciary
capacity for any person, trust or estate.63
Next, the court quoted the Louisiana Supreme Court’s holding that
“[o]ne is said to act in a ‘fiduciary capacity’ . . . when the
business which he transacts, or the money or property which he
handles, is not his own or for his own benefit, but for the benefit
of another.”64 The court then observed:
Clearly, based on the Louisiana statutory authority,
Guidry does not fall into one of the enumerated
categories of fiduciary (i.e., Guidry was not a trustee,
guardian, executor, etc.). Nor did Guidry act as the
State’s fiduciary, when conducting business transactions
as a casino operator; the business transactions Guidry
entered into were soley [sic] for his own benefit, they
were not entered into on behalf of the State, and, as
previously discussed, the business transactions did not
involve a property right.
On appeal, the State insists that the district court’s
adoption of the definition of “fiduciary” set forth in the
Louisiana Uniform Fiduciaries Law was improper. That law, asserts
the State, deals exclusively with issues regarding the payment of
money, the endorsement of negotiable instruments, and the deposit
of funds, and is intended only to protect third parties, such as
63
La. Rev. Stat. § 9:3801(2).
64
State v. Hagerty, 205 So. 2d 369, 374 (La. 1968).
36
banks, that conduct transactions with “fiduciaries” as defined by
the Uniform Fiduciaries Law. The State argues that “[w]hether a
fiduciary relationship exists is most often a fact question that
can be determined only after an evaluation of the evidence
presented to the Court.”65 It submits that statutory authority is
not a prerequisite to the imposition of a fiduciary duty under
Louisiana law, adding that courts have found such duties
established, absent a specific statutory provision, even when
“detailed, comprehensive, statutes govern [an] area of law.”66
The only case cited by the State in support of these
contentions is Plaquemines Parish Comm’n Council v. Delta Dev.
Co., in which the Louisiana Supreme Court held that a parish
attorney owed a fiduciary duty to his statutory clients based on
his position both as a public official and an attorney.67 The State
quotes one passage of that holding in which the court observes that
“[t]he dominant characteristic of a fiduciary relationship is the
confidence reposed by one in the other.” A later passage reveals
a slightly different proposition: “A fiduciary relationship has
been further described as one that exists ‘when confidence is
65
Id. at 50.
66
Id. at 53.
67
502 So. 2d 1034, 1040-41 (La. 1987).
37
reposed on one side and there is resulting superiority and
influence on the other.’”68
The State’s argument on this point fails. Delta Development
involved an entirely different type of relationship than the one at
issue here, and therefore provides little support for the State’s
position. It does appear from the Commissioner’s Prefatory Note to
the Uniform Fiduciaries Act that the Act was meant to apply only to
“situations which arise where one person deals with another person
whom he knows to be a fiduciary,” and does not address the
liabilities of the fiduciary himself.69 Nevertheless, the
definition set forth in that Act is instructive. Moreover,
Louisiana courts largely incorporate it as part of the definition
of “fiduciary” typically adopted even outside of the context of the
Act. For example, in State v. Hagerty, the Louisiana Supreme Court
observed:
The word “fiduciary,” as a noun, means one who holds a
thing in trust for another, a trustee; a person holding
the character of a trustee, or a character analogous to
that of a trustee, with respect to the trust and
confidence involved in it and the scrupulous good faith
and candor which it requires; a person having the duty,
created by his undertaking, to act primarily for
another's benefit in matters connected with such
undertaking. Also more specifically, in a statute, a
68
Delta Dev., 502 So. 2d at 1041 (quoting Toombs v.
Daniels, 361 N.W.2d 801, 809 (Minn.1985) (citations omitted))
(emphasis added).
69
See La. Rev. Stat, Title 9, Code Title XV, Chapter 1.
38
guardian, trustee, executor, administrator, receiver,
conservator, or any person acting in any fiduciary
capacity for any person, trust, or estate.70
Even if we were to agree with the State’s position that the
list of fiduciaries enumerated in Louisiana’s Uniform Fiduciaries
Law is not exclusive, we still would not hold that a riverboat
gaming license holder meets the only slightly broader definition
adopted by the Louisiana Supreme Court. As discussed earlier, such
a gaming license does not transfer any property interest from the
State to the licensee; neither does a riverboat gaming licensee
“act primarily” for the State’s benefit. Any benefits the State
derives from riverboat gaming are welcome by-products, but not the
“primary” purpose, of the licensor-licensee relationship. We
therefore affirm the district court’s summary judgment dismissal of
the State’s breach of fiduciary duty claim against Guidry.
III. CONCLUSION
For the foregoing reasons, the district court’s order granting
summary judgment for Guidry to reject the State’s claims for (1)
tortious acquisition of a riverboat gaming license, (2) conspiracy
in the breach of a fiduciary duty, and (3) breach of a fiduciary
duty is, in all respects,
AFFIRMED.
70
205 So. 2d 369, 374 (La. 1968).
39