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Cotton Exchange Investment Properties, LLC v. XCEL Air Conditioning Services, Inc.

United States District Court, E.D. Louisiana

August 25, 2017

COTTON EXCHANGE INVESTMENT PROPERTIES, LLC
v.
XCEL AIR CONDITIONING SERVICES, INC. ETAL

         SECTION "L"(5)

          ORDER & REASONS

         Before the Court is Defendant Xcel Air Conditioning Services, Inc. Motions to Dismiss for Failure to State a Claim. R. Docs. 17, 35. Plaintiff opposes the motion. R. Doc. 24. The Court held oral arguments on this matter on August 23, 2017. Having considered the parties' arguments, submissions, and the applicable law, the Court now issues this Order and Reasons.

         I. BACKGROUND

         This case arises from damages allegedly resulting from defective maintenance and repairs to the HVAC system of a New Orleans hotel. R. Doc. 1 at 1. Plaintiff Cotton Exchange Investment Properties LLC ("CEIP"), a Delaware limited liability company, alleges that its hotel property was damaged by water and moisture exposure during a renovation of the HVAC system performed by Defendant Xcel Air Conditioning Services, Inc. R. Doc. 1 at 1. Xcel Air Conditioning Services ("Xcel") is a Louisiana corporation that performs HVAC installations and repairs. R. Doc. 1 at 1. Defendant Commercial Renovation Service, Inc. ("CRS") is a Georgia corporation that provides general contracting services. R. Doc. 23 at 2. Defendant John T. Campo & Associates is a Louisiana corporation that specializes in architectural and engineering services.[1] R. Doc. 23 at 2.

         Plaintiff contends that in 2014, Supreme Bright New Orleans LLC ("Supreme Bright") owned the Cotton Exchange Building in downtown New Orleans and executed several contracts for its renovation. R. Doc. 23 at 2. In January 2014, Supreme Bright contracted with Xcel to provide HVAC services, including the maintenance of the hotel's cooling tower, rooftop units, and chilled water pumps. R. Doc. 1 at 3. That same month, Supreme Bright entered into a contract with Campo whereby Campo would provide architectural, design, and engineering services. R. Doc. 23 at 4. A few months later, Supreme Bright contracted with CRS to serve as general contractor for the project. R. Doc. 23 at 2. Management of the HVAC system was included in both the contracts with Campo and CRS. R. Doc. 23 at 3, 4. In June 2015, the hotel was bought by Pacific Hospitality Group ("PHG"), who assumed the rights to all three contracts. R. Doc. 1 at 3. PHG subsequently assigned all of its rights, title, and interest in the purchase to Plaintiff, including the contracts with Xcel, Campo, and CRS. R. Doc. 1 at 4. Plaintiff alleges that under the terms of the contract, all three defendants agreed to indemnify CEIP for any property damage caused by negligent acts or omissions related to the scope of the work. R. Doc. 1 at 5; R. Doc. 23 at 3-4.

         Plaintiff alleges that the hotel suffered serious water/moisture damage as a result of Xcel's defective or faulty workmanship, including water damaged walls and floors due to exposed chilled water piping, missing or improperly sealed insulation, and cracked or leaking draining pans. R. Doc. 23 at 7. Plaintiff alleges that due to this extensive damage, they had to close the hotel and incurred damages from loss of use and repairs. R. Doc. 23 at 6. Plaintiff canceled the HVAC contract pursuant to its terms in December 2015, and notified Xcel of the damage on three occasions. R. Doc. 1 at 5, 6. It appears that Xcel did not respond to the demand for indemnity. R. Doc. 1 at 6. Additionally, Plaintiff avers that it demanded indemnity from CRS and Campo, but was unsuccessful in its demand. R. Doc. 23 at 7.

         Plaintiffs theory of recovery involves breach of contract and negligence claims against all three Defendants and breach of warranty of good workmanship claims against CRS and Campo. R. Doc. 23 at 7-16. Plaintiff alleges that it owns the rights to the three contracts and that defects and deficiencies in the work each party performed caused extensive damage to the floors, walls, and other aspects of the hotel. R. Doc. 23 at 7-16. Plaintiff argues that each defendant breached its respective contract by failing to properly perform the required work and failing to indemnify Plaintiff for the resulting damage. R. Doc. 23 at 7-16. Plaintiff also alleges that the damage was the direct and proximate result of the parties' negligence. R. Doc. 23 at 9. Plaintiff avers that each party owed a duty of reasonable care to perform its work in a manner that did not create an unreasonable risk of harm, and that each party negligently violated this duty when it unreasonably damaged the hotel. R. Doc. 23 at 9. Plaintiff also asserts that the parties knew, or should have known, that negligent performance would cause harm. R. Doc. 23 at 9.

         II. PRESENT MOTIONS

         Defendant Xcel filed a motion to dismiss for failure to state a claim, arguing that Plaintiffs alleged facts are insufficient to state a plausible claim for relief.[2]R. Doc. 17 at 1. In particular, Xcel avers that Plaintiff brings suit for breach of a contract to which it is not a party and for which there can be no assignment of benefits. R. Doc. 17 at 1. Xcel argues that the contract does not identify Plaintiff as a beneficiary of the contract or a party with any rights under it. R. Doc. 17-1 at 2. Defendant further alleges that the agreement between PHG and Plaintiff failed to assign any rights to the HVAC contract from PHG to Plaintiff, and that such an assignment is not allowed under Louisiana law. R. Doc. 17-1 at 2.

         III. LEGAL STANDARDS

         a. Federal Rule of Civil Procedure 12(b)(6)

         Federal Rule of Civil Procedure 12(b)(6) allows a party to file a motion to dismiss for "failure to state a claim upon which relief can be granted." When a court considers a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6) "well-pleaded facts are viewed in the light most favorable to the plaintiff, but plaintiff must allege facts that support the elements of the cause of action in order to make out a valid claim." City of Clinton, Ark. v. Pilgrim's Pride Corp., 632 F.3d 148, 152 (5th Cir. 2010) (citing Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007)). "To avoid dismissal, a plaintiff must plead sufficient facts to 'state a claim to relief that is plausible on its face.'" Gentilello v. Rege, 627 F.3d 540, 544 (5th Cir. 2010) (quoting Twombly, 550 U.S. at 570). A court "do[es] not accept as true conclusory allegations, unwarranted factual inferences, or legal conclusions." Plotkin v. IP Axess Inc., 407 F.3d 690, 696 (5th Cir. 2005).

         b. Louisiana Contractual Interpretation

         "The words of a contract must be given their generally prevailing meaning." La. Civ. Code. art. 2047; see also Cadwallader v. Allstate Insurance Company, et al, 2002-1637 (La. 6/27/03), 848 So.2d 577, 580. "When the words of a contract are clear and explicit and lead to no absurd consequences, no further interpretation may be made in search of the parties' intent." La. Civ. Code. art. 2046. "When interpreting a contract, the court must discern the parties' common intent." Cadwallander, 8848 So.2d at 580. "Where the terms of the contract are clear and explicit and do not lead to absurd consequences, no further interpretation may be made in search of the intent of the parties." Id. '"[W]ords of a contract must be given their generally prevailing meaning, ' but '[w]ords of art and technical terms must be given their technical meaning when the contract involves a technical matter.'" Id. (quoting La. Civ. Code. art. 2047) (alterations ...


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