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Pan American Life Insurance Co. v. Louisiana Acquisitions Corp.

United States District Court, E.D. Louisiana

August 18, 2017

PAN AMERICAN LIFE INSURANCE CO., INDIVIDUALLY AND AS A PARTNER IN PANACON
v.
LOUISIANA ACQUISITIONS CORP. AND INTER-CONTINENTAL HOTELS CORP.

         SECTION: "A" (3)

          ORDER AND REASONS

          JAY C. ZAINEY UNITED STATES DISTRICT JUDGE

         The following motions are before the Court: Motion for Partial Summary Judgment (Rec. Doc. 306) filed by Inter-Continental Hotels Corp.; Motion for Summary Judgment (Rec. Doc. 308) filed by Louisiana Acquisitions Corp.; Motion for Summary Judgment Against Inter-Continental Hotels Corp. (Rec. Doc. 345) filed by Plaintiff, Pan American Life Insurance Co.; Motion for Summary Judgment Against Louisiana Acquisitions Corp. (Rec. Doc. 347) filed by Plaintiff, Pan American Life Insurance Co. (“PALIC”); Motion to Strike the Declaration of Robert Patterson (Rec. Doc. 367) filed by Defendants, Inter-Continental Hotels Corp. and Louisiana Acquisitions Corp.

         All motions are opposed. The motions, submitted on June 28, 2017 and July 12, 2017, are before the Court on the briefs without oral argument. For the reasons that follow, Defendants' motions are GRANTED with the exception of the motion to strike, which is MOOT. Plaintiffs motions are DENIED.

         I.[1]

         This is a diversity action for breach of contract, breaches of fiduciary duties owed between partners, fraud, conversion, civil conspiracy, deceptive or unfair trade practices, and unjust enrichment arising out of the parties' operation and management of, and relationship to, the New Orleans Inter-Continental Hotel located in downtown New Orleans (referred to at times as “the Hotel”). (Rec. Doc. 17, SSAC 1).

         PALIC and Louisiana Acquisitions Corp. ("LAC”) formed a Louisiana partnership called PANACON on June 4, 1981, for the purpose of designing, building, and operating a luxury hotel in New Orleans. (SSAC 9). PALIC owned a two-thirds (2/3) interest in PANACON and LAC owned the other one-third (1/3). (Id. 10). The hotel opened in 1983 under the Inter-Continental brand name. (Id. 12). LAC is a wholly-owned subsidiary of Inter-Continental Hotels Corp. ("IHC”) and the two entities operate as commonly controlled business entities. (Id. ¶¶ 4-5).

         The PANACON partnership entered into an Operating and Management Agreement ("the Management Agreement”) with IHC to manage the Hotel. (SSAC 13). Later, LAC became manager of the Hotel pursuant to an assignment from IHC. PALIC claims that over the years LAC and IHC used the Management Agreement as a lucrative vehicle to double-charge or over-charge PANACON for services to the detriment of the partnership and PALIC, while garnering significant profits for Defendants. PALIC contends that Defendants failed to perform certain obligations owed under the Management Agreement, which inured to Defendants' financial gain but hurt the Hotel's ability to compete as a luxury hotel. PALIC also alleges that Defendants surreptitiously competed against PANACON by operating other hotels in the local market. Thus, according to PALIC, LAC and IHC maximized their profits not through their one-third ownership of PANACON but rather by abusing the Management Agreement - a scheme that produced profits for Defendants regardless of whether the hotel itself was profitable. PALIC complains that Defendants' strategy resulted in PALIC receiving no profits on its investment for years at a time.

         In 2005, PALIC began to take steps to sell the underperforming hotel. (SSAC 40). PALIC alleges a plethora of acts that Defendants are accused of committing in order to thwart the sale of the Hotel, which again was allegedly losing money for PALIC but proving quite profitable to Defendants.

         Prior to the January 2013 sale of the Hotel, PALIC became aware of some of the very conduct by Defendants that PALIC is complaining about in this action. (SSAC 18). According to PALIC, Defendants demanded that PANACON and PALIC execute two documents, a Side-Letter Agreement (Rec. Doc. 24-4, Exhibit C) and a Voluntary Termination Agreement (Rec. Doc. 24-5, Exhibit D) - documents that PALIC describes as including "a purported release" of PALIC's claims for breaches of the Management Agreement and fraud (Id. ¶¶ 19-20) - as a condition for their agreement to the pending sale of the Hotel. These documents were executed in December 2012. PALIC contends that Defendants insisted on the releases because Defendants knew that they had been discovered in their fraudulent scheme and that PALIC was forced to agree to the releases because of economic duress in light of its eagerness to finally sell the unprofitable hotel. (Id. && 65, 75).

         PALIC initiated this action, individually and as a partner in PANACON, against LAC and IHC on July 9, 2013, with a 149 paragraph complaint. Defendants initially responded with a Rule 12(b)(6) Motion to Dismiss (Rec. Doc. 24). On December 20, 2013, the Court granted in part and denied in part that motion, concluding that most of Defendants' arguments could not be resolved on the pleadings (Rec. Doc. 37). After that ruling, PALIC ostensibly had the following remaining claims in this lawsuit: breach of contract (Count I), breach of fiduciary duty (Count II), fraud (Count III), civil conspiracy (Count IV), conversion (Count V), unfair trade practices (Count VI), unjust enrichment (Count VII), and alter ego (Count VIII).

         Substantial fact discovery ensued after the Court declined to dismiss the case on the pleadings alone. The record reflects that discovery has not proceeded smoothly. Counsel have appeared for motion hearings before the magistrate judge on ten separate occasions (Rec. Docs. 93, 116, 124, 144, 151, 214, 229, 271, 338, 399). Counsel have appeared in this Court's chambers on numerous separate occasions. Through significant motion practice over the last four years, Defendants have whittled away at Plaintiff's case, narrowing the remaining issues and claims to breach of fiduciary duty, fraud, conversion, and LUTPA.[2]

         Defendants LAC and IHC now move for summary judgment as to all remaining claims. Additionally, Defendants move to strike the declaration of Robert Patterson.[3]PALIC has also filed two motions for summary judgment.

         The motions are addressed in turn below.

         II.

         Summary judgment is appropriate only if "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, " when viewed in the light most favorable to the non-movant, "show that there is no genuine issue as to any material fact." TIG Ins. Co. v. Sedgwick James, 276 F.3d 754, 759 (5th Cir. 2002) (citing Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249-50 (1986)). A dispute about a material fact is "genuine" if the evidence is such that a reasonable jury could return a verdict for the non-moving party. Id. (citing Anderson, 477 U.S. at 248). The court must draw all justifiable inferences in favor of the non-moving party. Id. (citing Anderson, 477 U.S. at 255). Once the moving party has initially shown "that there is an absence of evidence to support the non-moving party's cause, " Celotex Corp. v. Catrett, 477 U.S. 317, 325 (1986), the non-movant must come forward with "specific facts" showing a genuine factual issue for trial. Id. (citing Fed.R.Civ.P. 56(e); Matsushita Elec. Indus. Co. v. Zenith Radio, 475 U.S. 574, 587 (1986)). Conclusional allegations and denials, speculation, improbable inferences, unsubstantiated assertions, and legalistic argumentation do not adequately substitute for specific facts showing a genuine issue for trial. Id. (citing SEC v. Recile, 10 F.3d 1093, 1097 (5th Cir. 1993)).

         When faced with a well-supported motion for summary judgment, Rule 56 places the burden on the non-movant to designate the specific facts in the record that create genuine issues precluding summary judgment. Jones .v Sheehan, Young, & Culp, P.C., 82 F.3d 1334, 1338 (5th Cir. 1996). The district court has no duty to survey the entire record in search of evidence to support a non-movant's position. Id. (citing Forsyth v. Barr, 19 F.3d 1527, 1537 (5th Cir. 1992); Nissho-Iwai Am. Corp. v. Kline, 845 F.2d 1300, 1307 (5th Cir. 1988)).

         III.

         LAC's Motion for Summary Judgment

         LAC contends that discovery has confirmed what LAC has been arguing since it first filed its Rule 12(b)(6) motion to dismiss nearly four years ago-that PALIC fully and finally released all of the claims asserted in this lawsuit when it executed the Side-Letter Agreement (“SLA”) in exchange for nearly half a million dollars and LAC's cooperation in terminating the Management Agreement before its term expired. LAC contends that discovery has also demonstrated that PALIC has no viable defenses, i.e., fraudulent inducement and economic duress, to the enforceability of that compromise. Even if not compromised and released, LAC argues that PALIC's remaining claims are prescribed nonetheless or otherwise meritless.

         LAC filed its motion for summary judgment in October of last year, and the motion was continued to its current submission date for various reasons. In April of this year, LAC filed a supplemental memorandum in support (Rec. Doc. 342) based on documents that PALIC fought long and hard to avoid producing.[4] These documents, filed under seal, reveal the email communications between PALIC's principals, PALIC's hotel experts, and the attorneys who represented PALIC and PANACON in the weeks leading up to the sale of the hotel and the execution of the SLA. (Rec. Doc. 342-1, Exhibit A-Sealed). LAC contends that these communications demonstrate that PALIC understood without question that it was releasing the claims that it eventually brought in this lawsuit, and that it did so with a full appreciation of the implications of the release. LAC argues that PALIC escaped dismissal at the Rule 12(b)(6) stage by concocting a false litigation narrative that constitutes a colossal fraud upon the Court. LAC contends that PALIC's claims of economic duress and fraudulent inducement have now been exposed as blatant lies that PALIC and its attorneys have pressed for four years in order to keep this case alive.

         PALIC and LAC, the two partners of PANACON, executed the SLA for the purpose of establishing their respective rights and duties regarding the upcoming sale of the Hotel. (Rec. Doc. 308-4, SLA at 1). To the extent that the SLA contains a release of claims, the operative paragraph from the SLA is paragraph 6 which reads in relevant part as follows:

6. Existing Management Agreement. Simultaneously with the closing under the Purchase Agreement, LAC will execute, or cause LAC or other appropriate affiliates thereof to execute, such instruments or documents as may reasonably be required to affirm the termination of the Operating and Management Agreement dated July 2, 1980 between Intercontinental Hotels Corporation and PANACON, as amended (“Existing Management Agreement”). The termination of the Existing Management Agreement would be subject to the resolution of any disputes between PALIC and LAC (and its affiliates), and a release of LAC and its affiliates pursuant to a voluntary termination agreement. PALIC and LAC agree that LAC will pay PALIC the amount of $434, 636 on or prior to sale of the Hotel in resolution of outstanding disputes and such release of LAC and its affiliates will be for claims related to the Management Agreement and operation of the Hotel, including without limitation those related to (a) matters referenced in letters from PALIC to LAC and its Affiliate dated April 26, 2011, April 27, 2011, and May 10, 2011, and (b) the categories of intercompany ...

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