COLLEEN KATHERINE LYNCH HANSEN, ET AL. Plaintiff-Appellees
RIVER CITIES DISPOSAL COMPANY, INC. Defendant-Appellant
from the First Judicial District Court for the Parish of
Caddo, Louisiana Trial Court No. 568379 Honorable Craig
RICHIE, RICHIE & OBERLE, L.L.P. Counsel for Appellant By:
C. Vernon Richie Margaret Richie Gaskins
KENNETH R. ANTEE, JR. WIENER, WEISS & MADISON Counsel for
Appellees By: Frank H. Spruiell, Jr. Roger Joseph Naus
MOORE, GARRETT, and BLEICH (Pro Tempore), JJ.
Cities Disposal Co. Inc. ("RCDC") appeals a
declaratory judgment recognizing that the estate of its
former consultant, Jim Lynch, had an ownership interest of
14½% of the net revenue from RCDC's marketing
agreement with Browning-Ferris Industries ("BFI").
For the reasons expressed, we affirm.
1980s, the City of Shreveport built the new Woolworth Road
landfill. Local produce distributor Tony Pernici, his
grandsons Scott and Rick Pernici, and other investors (John
Caruthers, Taylor Moore, David Watkins, Al Otto) formed a
startup company, River Cities Waste Inc. ("RCW"),
in 1986, to haul solid waste to Woolworth Road. The Pernicis
owned a lot of trucks, but had no experience in the field of
solid waste, so they turned to several consultants, including
Jim Lynch, previously the city's director of public
works. RCW developed a small business, principally hauling
for the Pernicis' established customers.
city eventually solicited proposals from solid waste
companies to operate Woolworth Road. RCW contacted BFI, an
industry leader, and struck a deal. Shareholders of RCW
formed a new corporation, RCDC, in March 1987, to execute a
landfill marketing agreement ("the marketing
agreement") with BFI. Under the marketing agreement,
RCDC was to receive 10% of BFI's gate revenues at
Woolworth Road. RCDC thus became the principal solid waste
hauler for Shreveport.
recognized that Lynch's experience and connections in the
industry were instrumental in the formation of RCW and in
securing the contract with BFI. Rather than paying him
up-front for his services, the shareholders agreed to pay
Lynch a percentage of RCDC's net revenue under the
marketing agreement. They wrote him the following letter
("the letter agreement"), on RCW letterhead, on
October 12, 1987:
This letter will serve as evidence of your ownership of
14½% of our net revenues from our Shreveport landfill
marketing agreement with BFI, Inc.
letter agreement was signed by Scott Pernici, president, and
John D. Caruthers Jr., secretary/treasurer, and RCDC began
paying Lynch the 14½% monthly.
was, at the time, seriously ill with emphysema, as RCDC's
shareholders were fully aware. He died in March 1989, having
received about $24, 000 from the letter agreement. RCDC
continued making the monthly payments, to his widow, Carolyn
Lynch; until her death, in 2012, she had received about $2
million from RCDC. Evidence at trial showed that RCDC treated
these payments, for tax purposes, as commissions, management
fees, consulting fees, or royalties to nonowners, all
deductible as necessary and ordinary business expenses.
Carolyn treated them as taxable income.
2008, Carolyn's CPA, George McGovern, noticed that the
RCDC payments were the largest asset in her estate. With her
consent, he emailed RCDC's attorney, Michael Wainwright,
asking for documentation of her 14½% ownership
"in the landfill." Wainwright replied that Lynch
never owned "any interest in" RCDC, the 14½%
payment was a "fee" to Lynch, after his death the
shareholders "decided to voluntary [sic]
continue" making those payments to Carolyn, and RCDC
intended to continue making the payment "during her
lifetime[.]" McGovern replied by email, "You have
resolved an issue we were having regarding her estate. * * *
I believe she is very content with the current
arrangement." Carolyn died in June 2012, and RCDC
immediately stopped sending the money, which was by then
about $12, 000 a month.
Hansen, Carolyn's daughter and executrix, and the other
children filed this suit for declaratory judgment in May
2013, seeking recognition of their ownership of 14½%
interest. RCDC countered that all payments made to Lynch, and
later to Carolyn, were donations, and lacked lawful cause; it