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Harvest Oil & Gas, LLC v. Salsbury

United States District Court, W.D. Louisiana

February 16, 2015

HARVEST OIL & GAS, LLC, ET AL
v.
BARRY RAY SALSBURY, ET AL

REASONS FOR JUDGMENT

C. MICHAEL HILL, Magistrate Judge.

This case was tried to the Court, without a jury. During trial, the Court dismissed the plaintiffs' fraud and negligent misrepresentation claims pursuant to Rule 52(c), F.R.C.P for the reasons stated on the record. Accordingly, only the plaintiffs' breach of contract claim and the defendants' malicious prosecution and attorneys' fee counter-claims remain pending.

FINDINGS OF FACT AND CONCLUSIONS OF LAW

After due consideration of the facts, the stipulations of the parties and evidence which was presented by the parties at the trial of this matter through live witnesses, exhibits and deposition testimony, and having had the opportunity to assess the demeanor of the live witnesses, and review and weigh the evidence, the Court hereby makes the following findings of fact and conclusions of law pursuant to Rule 52(a) of the Federal Rules of Civil Procedure, which the Court finds and holds were established by a preponderance of the evidence.[1]

CONCLUSIONS OF LAW

Breach of Contract

The essential elements of a breach of contract claim are (1) the obligor's undertaking an obligation to perform, (2) the failure of the obligor to perform the obligation (the breach) and (3) the failure to perform resulted in damages to the obligee. Favrot v. Favrot, 68 So.3d 1099, 1108-09 (La.App. 4th Cir. 2011).

"An obligor is liable for the damages caused by his failure to perform a conventional obligation. A failure to perform results from nonperformance, defective performance, or delay in performance." La. C.C. Art. 1994.

If the obligee has proven a failure to perform an obligation which has caused the obligee to sustain damages, the Court then inquires as to whether the obligor failed to perform in good faith or in bad faith, which in turn determines the extent of the obligee's recoverable damages. Favrot, at 1109. "An obligor in good faith is liable only for the damages that were foreseeable at the time the contract was made." La. Civil Code Art. 1996. By contrast, "[a]n obligor in bad faith is liable for all the damages, foreseeable or not, that are a direct consequence of his failure to perform." La. Civil Code Art. 1997.

"Foreseeable damages are such damages as may fall within the foresight of a reasonable man. In distinguishing foreseeable from unforeseeable damages, the court should consider the nature of the contract, the nature of the parties' business, their prior dealings, and all other circumstances related to the contract and known to the obligor. Any special circumstances made known to the obligor by the obligee should also be taken into account." Article 1996, Revision Comments - 1984 (b).

"An obligor is in bad faith if he intentionally and maliciously fails to perform his bligation." Article 1997, Revision Comments -1984 (b). Thus, "[t]he term bad faith means more than mere bad judgment or negligence, it implies the conscious doing of a wrong for dishonest or morally questionable motives." MKR Services, L.L.C. v. Dean Hart Constr., L.L.C., 16 So.3d 562, 566 (La.App. 2nd Cir. 2009). "Bad faith generally implies actual or constructive fraud or a refusal to fulfill contractual obligations, not an honest mistake as to actual rights or duties." Delaney v. Whitney Nat'l Bank, 703 So.2d 709, 718 (La.App. 4th Cir. 1997).

Malicious Prosecution

It is well settled that actions for malicious prosecution have never been favored and, in order to sustain them, a clear case must be established, demonstrating that "the forms of justice have been perverted to the gratification of private malice and the willful oppression of the innocent." McClanahan v. McClanahan, 82 So.3d 530, 535 (La.App. 5th Cir. 2011) citing Johnson v. Pearce, 313 So.2d 812, 816 (La. 1975).

The elements of a malicious prosecution action are: (1) the commencement or continuance of an original criminal or civil judicial proceeding; (2) its legal causation by the present defendant in the original proceeding; (3) its bona fide termination in favor of the present plaintiff; (4) the absence of probable cause for such proceeding; (5) the presence of malice therein; and (6) damage conforming to legal standards resulting to plaintiff. Jones v. Soileau, 448 So.2d 1268, 1271 (La.1984). Strict compliance with all essential elements is required. McClanahan at 530.

Probable cause depends not upon the actual state of the case in point of fact, but on the honest and reasonable belief of the party instituting the litigation. McClanahan 82 So.3d at 534-535 citing Eusant v. Unity Industrial Life Ins. & Sick Benefit Ass'n of New Orleans, 195 La. 347, 353, 196 So. 554, 556 (1940); Jones, 448 So.2d at 1272. Stated differently, "probable cause to file suit is a question which depends upon the particular facts as perceived by the person bringing the action." Hibernia Nat. Bank of New Orleans v. Bolleter, 390 So.2d 842, 843-844 (La. 1980). However, "public policy requires that all persons have the right to resort to the courts for redress of wrongs, and the law protects them when they act in good faith and upon reasonable grounds in commencing a civil proceeding." Id. at 844 citing Johnson v. Pearce, 313 So.2d 812 (La.1975).

"Malice may be inferred from the lack of probable cause or inferred from a finding that the defendant acted in reckless disregard of the other person's rights." Miller v. East Baton Rouge Parish Sheriff's Dept., 511 So.2d 446, 453 (La. 1987) (citations omitted). Where there is a lack of probable cause resulting from "wanton and reckless disregard of the rights of the party sued, evincing absence of that caution and inquiry a party should employ before filing suit, malice will be inferred." Jones, 448 So.2d at 1273 quoting Hibernia National Bank, 390 So.2d at 844.

Damages are presumed when the other five elements are established. Jones, 448 So.2d at 1273 citing Hibernia National Bank, supra. Although the trial judge has "much discretion" in assessing damages in the case of an offense or quasi offense, only compensatory damages may be awarded in malicious prosecution suits. Jones, 448 So.2d at 1243 citing Robinson v. Goudchaux's, 307 So.2d 287, 291 (La. 1975).

FINDINGS OF FACT

On April 1, 2007, Harvest Oil & Gas, LLC ("HOG") and The Harvest Group, LLC ("THG") entered into a contract with Professional Oil & Gas Marketing, LLC ("POGM"), a single member Louisiana liability company owned by Henry Calongne ("Calongne"), (collectively "the defendants") under which POGM was granted the exclusive right to market oil and gas on behalf of HOG and THG. The contract contains a list of services which were to be provided by POGM, including that POGM "calculate and pay any and all government/nongovernment royalties, severance taxes and any other government fees." The contract provides a primary term through ...


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