Landry v. Base Camp Management, LLC

CHUTZ, J.

[gAt issue in this case is whether any cause of action lies against an adversary’s attorney for exceeding the scope of the mandate given to the attorney by his clients, where no intent or malice has been alleged. We find no cause of action is stated under these circumstances,

FACTS AND PROCEDURAL HISTORY

The following facts are not disputed. In 2010, the successful alligator hunters and seafood fishermen in Assumption Parish who star in the television series, Swamp People, Troy Landry and Jacob Landry, and company, Troy Landry Productions, LLC [“the Landrys”], retained Roy H. Maughan, Jr., The Maughan Law Firm, LLC, Base Camp Management, LLC, and Creative Media Solutions, LLC [“the Mau-ghan parties”], to assist them with their entertainment related pursuits. The first contractual agreement between the Lan-drys and Maughan parties was executed in 2010 [“Maughan I”], the same year that the Swamp People series commenced to air.

By 2011, the Landrys wished to renegotiate their contract to adjust their fee agreement with the Maughan parties. The Landrys retained attorney, Alfred S. Lipp-man, to represent them in the negotiations. The negotiations began in June 2011 and continued until October 2011, when a new professional services agreement was reached by the Landrys and Maughan parties [“Maughan II”]. The terms of Mau-ghan II included an arbitration clause, whereby the parties agreed to arbitrate any disputes that may arise out of the contract.

A year later, in November 2012, the Landrys terminated Maughan II. The Maughan parties subsequently sought payment for services they claimed were still owed to them under the terms of the contract.

This litigation began in June 2013, when the Landrys filed a Petition for Declaratory Judgment against the Maughan parties in the district court, seeking to |avoid Mau-ghan II, inter alia, on grounds the contract contained an unenforceable arbitration clause.¹ According to the Landrys, the arbitration clause was unenforceable because it lacked the requisite disclosures about the effect the attorney’s arbitration clause would have on their rights. The disclosure requirements cited by the Lan-drys stem from a Louisiana Supreme Court decision that was issued after Mau-ghan II was executed, which requires attorneys to make certain disclosures to their clients in order to enforce an arbitration clause that is contained within an attorney-client . retainer agreement. See Hodges v. Reasonover, 2012-0043 (La. 7/2/12), 103 So.3d 1069, cert. denied, — U.S. —, 133 S.Ct. 1494, 185 L.Ed.2d 548 (2013).

The Maughan parties met the petition with an exception of prematurity, contending that the issues raised therein were subject to Maughan II’s arbitration provision and therefore had to be arbitrated before suit could be filed. After conducting a full evidentiary hearing on the matter, the district court denied the exception. In reasons for judgment, the district court found that it was incumbent on Mr. Lipp-man, as the Landrys’ attorney, to advise them of the full consequences of the arbitration clause. The court found that Mr. Lippman’s failure to make the disclosures rendered the arbitration clause void and unenforceable.

After the district court found that Maugham II’s arbitration clause was unenforceable, the Maughan parties filed a third-party petition against Mr. Lippman and his law firm, Lippman & Mahfouz, LLC [collectively referred to as “Attorney Lipp-man”], alleging that Attorney Lippman breached the duties he owed his clients, the Landrys, by failing to advise them that Maughan II contained an arbitration agreement and by failing to advise them of the legal effects of the 14arbitration clause.² The Maughan parties then alleged that they were “direct, identifiable, and intended beneficiaries” of Attorney Lippman’s representation of the Landrys, such that they were entitled to recover damages as a result of the breach.

In response to the suit, Attorney Lipp-man filed exceptions raising the objections of no right and no cause of action, asserting, among other things, that the petition failed to state a cause of action in legal malpractice as the petition failed to allege that any attorney-client relationship existed between Attorney Lippman and the Maughan parties.

Before the exceptions were heard, the district court granted the Maughan parties leave to-file an amended third party petition [“the amended petition”]. Therein, the Maughan parties added a new allegation that Attorney Lippman exceeded the scope of the authority that was given to him by his clients, the Landrys, by including an arbitration agreement in Maughan II without obtaining the Landrys’ authorization to do so; by committing the Landrys to a for-cause termination provision when they were not authorized to do so; by committing the Landrys to an allegedly excessive fee for the services the Maughan parties would provide; by committing the Landrys to pay a combined fee for services rendered by the Maughan Law Firm and Base Camp Managément; and by committing the Landrys to every other complained of grievance enumerated in the Landrys’ petition for declaratory judgment. Consequently, the Maughan parties alleged that Attorney Lippman was liable to them—the intended beneficiaries of the Landrys’ engagement of Attorney Lipp-man—under La. C.C. article 3019, which provides that a mandatary who exceeds his authority is personally bound to the third person |fiwith whom he contracts, unless that person knew at the time the contract was made that the mandatary had exceeded his authority or unless the principal ratifies the contract. The Maughan parties did not allege any facts tending to suggest that Attorney Lippman committed any intentional torts.

Attorney Lippman filed new exceptions raising the objections of no right and no cause of action in response to the amended petition, contending that the Maughan parties also lacked a right or cause of action under the theory of mandate. After a hearing, the district court granted Attorney Lippman’s exceptions in a judgment signed March 27, 2015. The March 27th judgment granted the Maughan parties 30 days to amend their pleading, but the Maughan parties did not file an amended petition within that timeframe. Subsequent to the expiration of the 30-day period, the district court entered a final judgment dismissing the Maughan parties’ claims against Attorney Lippman with prejudice. The Maughan parties have appealed the judgment sustaining Attorney Lippman’s exceptions.

DISCUSSION

On appeal, the Maughan parties present two arguments in support of their contention that they have stated a cause of action against Attorney Lippman. First, they argue that Louisiana courts have long recognized a cause of action brought against an attorney by a third-party, non-client, when the attorney exceeds the limits of his agency. Second, they argue that the First Circuit has previously recognized that a negligence cause of action may lie against an attorney when brought by a non-client, third-party beneficiary of the attorney’s work. See Blanchard v. Blanchard, 2012-0106 (La.App. 1 Cir. 12/31/12), 112 So.3d 243, 251, writ denied, 2013-0488 (La. 4/12/13), 111 So.3d 1013. In presenting these arguments, the Maughan parties attempt to distinguish the Louisiana Supreme Court’s decision in Montalvo v. Sondes, 93-2813 (La. 5/23/94), 637 So.2d 127, 131, which held that a non-client must plead facts sufficient to state a cause of faction in intentional tort in order to state a cause of action against an adversary’s attorney.

We will begin our analysis by considering the merits of the peremptory exception raising the objection of no cause of action. No Cause of Action

Since the exception of no cause of action raises a question of law and the district court’s decision is based solely on the sufficiency of the petition, appellate courts review rulings on an exception of no cause of action de novo. Louisiana State Bar Association v. Carr and Associates, Inc., 2008-2114 (La.App. 1 Cir. 5/8/09), 15 So.3d 158, 167, writ denied, 2009-1627 (La. 10/30/09), 21 So.3d 292. The exception is triable on the face of the pleadings, and for purposes of resolving the exception, the well-pleaded facts in the petition are accepted as true in order to determine whether the law affords a remedy on the facts alleged in the petition. Id. The pertinent question is whether, construing the petition in the light most favorable to the plaintiff and with every doubt resolved in the plaintiffs favor, the petition states any valid cause of action for relief. Id.

|7In Louisiana, the general rule is that a non-client cannot hold his adversary’s attorney personally liable for either malpractice or negligent breach of a professional obligation. Penalber v. Blount, 550 So.2d 577, 581 (La. 1989). The purpose of this rule is to prevent a chilling effect on the adversarial practice of law and to prevent a division of the loyalty owed a client. Id. After all, the attorney’s paramount duty is to his client. Id. Rather, a petition must allege facts showing specific malice or an intent to cause direct harm on the part of the attorney in order to state a cause of action against an adversary’s attorney. See Montalvo, 637 So.2d at 130. In both Penalber and Montalvo, the Supreme Court cited the adversarial relationship between the parties as grounds for limiting the causes of action that can be pled against an adversary’s attorney.

Louisiana courts have only recognized the existence of a cause of action brought by a non-client against an attorney, where no intentional tort was alleged, in a small handful of cases; many were decided before Montalvo, supra. See Succession of Killingsworth, 292 So.2d 536, 543 (La. 1973) (pre-Montalvo decision where the Louisiana Court found that a lawyer’s failure to use reasonable care in drafting a will could subject him to a claim for damages brought by an injured legatee)’, Capital Bank & Trust Company v. Core, 343 So.2d 284, 287-88 (La. App. 1st Cir. 1977), writ not considered, 345 So.2d 61 (La. 1977) (pre-Montalvo decision where the First Circuit found that a bank stated a cause of‘action in malpractice against an attorney that issued an erroneous title opinion, citing the fact that the bank relied upon the title opinion to make the loan and the fact that the attorney knew the bank would be relying on his title opinion)’, Dupre v. Marquis, 467 So.2d 65, 68 (La. App. 3d Cir. 1985), writ denied, 472 So.2d 38 (La. 1985) (pre-Montalvo decision where the Third Circuit recognized the existence of a defamation cause of action that was brought against an adversary’s attorney)’, Anderson v. Collins, 26,142 (La.App. 2 Cir. 1/6/95), 648 So.2d 1371, 1378, writs denied, 95-0629 (La. 4/21/95), 653 So.2d 576 (post-Montalvo decision where the court recognized the existence of a cause of action that was brought by a new succession representative against the attorney retained by the prior succession representative; in reaching this conclusion, the court emphasized the fact that the succession representative was not an adversary to the heirs); and Flettrich v. Touro Infírmary, 2007-1621 (La. App. 4th Cir. 5/20/09), 13 So.3d 1196, 1200 (post-Montalvo decision where an expert tvitness sued the law firm that solicited his services on behalf of a client of the law firm, after the, client failed to pay the entirety of the expert’s bill; the expert witness alleged that the law firm exceeded the scope of the authority granted to it by its client). See also Blanchard, 112 So.3d at 251 (post-Montalvo decision where, the First Circuit found that the | ¿plaintiff had stated a cause of action in negligence and intentional tort against her ex-husband’s personal injury attorneys with regard to the manner in which the attorneys calculated her portion of the settlement proceeds; in reaching its decision, the court emphasized that the plaintiff was not an adversary of her ex-husband in the personal injury litigation). The Supreme Court in Penalber addressed two of the foregoing cases, Succession of Killingsworth and Capital Bank, distinguishing them on the basis that the suing non-clients therein were not adversaries, but third-party beneficiaries. Penalber, 550 So.2d at 578, n.2.

Since Montalvo, no Louisiana court has recognized the existence of a cause of action that was brought by a non-client against an adversary’s attorney without alleging the Montalvo requirements of intent to cause direct harm and malice. We do not see any indication in the jurisprudence that any exception to the general rule set forth in Montalvo should be made for non-clients suing their adversaries’ attorneys on grounds that the adversaries’ attorneys exceeded the scope of authority that was given to them by their clients. Further, we do not find that it would be in the interests of justice to create an exception herein, where the essence of the Mau-ghan. parties’ claims against Attorney Lippman is that he failed to foresee that the Louisiana Supreme Court would subsequently issue new disclosure requirements for attorney-client retainer agreements that include arbitration clauses. See Hodges, 103 So.3d at 1077.

Rather, we find that the requirements of Montalvo squarely apply' herein because the Maughan parties and the Lan-drys were adversaries with regard to their negotiation of the fee agreement that would be paid to the Maughans under Maughan II. This adversarial relationship is evidenced by the fact that the Landrys hired their own attorney to represent them in the contract negotiations. Further, we find that the requirements of Montalvo apply herein because the Maughan parties do not state a cause of action as third-party beneficiaries of the legal services contract between Attorney Lippman and the Landrys, as the Maughan parties fail to point to any actual provision in the legal services | ^contract between Attorney Lipp-man and the Landrys that manifests a clear expression of intent to benefit the Maughan parties.³ See Canal/Claiborne, Ltd. v. Stonehedge Development, LLC, 2014-0664 (La. 12/9/14), 156 So.3d 627, 633. See also Pearl River Basin Land and Development Co., L.L.C. v. State ex rel. Governor’s Office of Homeland Security and Emergency Preparedness, 2009-0084 (La.App. 1 Cir. 10/27/09), 29 So.3d 589, 594.

Under Montalvo, the Maughan parties’ amended petition had to allege that Attorney Lippman acted with malice or an intent to cause direct harm to the Maughan parties in order to state a cause of action against Attorney Lippman. As the amended petition clearly lacks any allegations suggesting that Attorney Lippman acted with malice or an intent to cause direct harm to the Maughan parties, we conclude that the amended petition fails to allege facts sufficient to state a cause of action against Attorney Lippman in intentional tort. Accordingly, we find no error in the district court’s grant of Attorney Lipp-man’s exception raising the objection of no cause of action and dismissal of the claims asserted against him.⁴,⁵

DECREE

For the reasons assigned, we affirm the March 27, 2015 judgment of the district court, granting the exception of no cause of action in favor of Alfred S. Lippman and Lippman & Mahfouz, LLC, and dismissing, with prejudice, the claims of The Mau-ghan Law Firm, LLC, Roy H. Maughan, Jr., Base Camp |10Management, LLC, and Creative Media Solutions, LLC, against Alfred S. Lippman and Lippman & Mahfouz, LLC. All costs of this appeal are assessed to The Maughan Law Firm, LLC, Roy. H. Maughan, Jr., Base Camp Management, LLC, and Creative -Media Solutions, LLC.

AFFIRMED.

Theriot, J. Dissents with reasons.

1 . The Landrys also contended that Maughan II was unenforceable because it improperly limited the Landrys' right to terminate the attorney-client relationship; set forth an unreasonable fixed percentage based fee arrangement for legal and non-legal work; and improperly permitted fee sharing among attorneys and non-attorneys.

2 . Base Camp Productions, LLC, was also named as a plaintiff in the third-party petition, even though it was never named as a defendant in the principal action brought by the Landrys against the Maughan parties. Attorney Lippman objected to its inclusion, and the' Maughan parties subsequently omitted any reference to Base Camp Productions when they filed their amended third-party petition.

3 .While a Court must accept' facts alleged in the petition without reference to any extraneous supporting or controverting evidence when deciding whether a petition states a cause of action, the mere conclusion of the pleader unsupported by facts does not set forth a cause of action. Montalvo, 637 So.2d at 131.

4 . In light of our decision with regard to the exception raising the objection of no cause of action, we pretermit consideration of the exception raising the objection of no right of action.

5 . Because the Maughan parties failed to comply with the lower court’s order to amend, the action must be dismissed. See La. C.C.P. art. 934.