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84 Lumber Co. v. Paschen

United States District Court, E.D. Louisiana

March 27, 2018

84 LUMBER COMPANY
v.
F.H. PASCHEN, S.N. NIELSEN & ASSOCIATES, LLC, ET AL.

         SECTION “R” (5)

          ORDER AND REASONS

          SARAH S. VANCE, UNITED STATES DISTRICT JUDGE.

         Defendant F.H. Paschen, S.N. Nielsen & Associates, LLC (Paschen) moves for attorney's fees, and plaintiff 84 Lumber Company moves to amend or alter final judgment under Federal Rule of Civil Procedure 59(e).[1] For the following reasons, the Court denies both motions.

         I. BACKGROUND

         This case arises out of two school construction projects in Louisiana.[2]Paschen entered into contracts to build an elementary school at the Mildred Osborne School in New Orleans (Osborne Project) and a high school in South Plaquemines Parish (South Plaquemines Project).[3] On both projects, Paschen was the general contractor.[4] Both projects were subject to the provisions of the Louisiana Public Works Act (LPWA), La. R.S. § 38:2241, et seq., and therefore each project required the general contractors to post payment bonds before construction could begin.[5] Defendants Continental Casualty Company, Safeco Insurance Company of America, and Fidelity & Deposit Company of Maryland (collectively, the Sureties) issued the required bonds.[6] Paschen subcontracted a portion of both projects to J&A Construction Management Resources Company, Inc. (J&A).[7] J&A in turn subcontracted a portion of its work on both projects to 84 Lumber.[8]

         According to 84 Lumber, in April 2011, Paschen and J&A stopped paying 84 Lumber for its work on the projects.[9] As a result, on November 29, 2011, 84 Lumber filed sworn statements of claims for money owed on both projects in compliance with the LPWA. Specifically, 84 Lumber claimed at least $549, 778.16 for the Osborne Project and at least $1, 666, 921.66 for the South Plaquemines Project.[10] 84 Lumber also filed a statement of claim for $3, 507.16 in materials supplied on the Osborne Project.[11]

         In an attempt to “compromise partially their differences, ” Paschen and 84 Lumber entered into two agreements in May 2012, covering both projects.[12] Under the agreements, Paschen agreed to pay 84 Lumber $1, 297, 603, and 84 Lumber agreed to indemnify, defend, and hold Paschen harmless from certain claims related to 84 Lumber's work on the projects.[13]Also in May 2012, 84 Lumber cancelled its November 2011 sworn statements for both projects and removed them from the mortgage records of Orleans Parish and Plaquemines Parish, respectively.[14]

         Less than one month after cancelling both statements, on June 8, 2012, 84 Lumber filed two new sworn statements of claims, one for each project. 84 Lumber claimed $808, 520.39 for the Osborne Project, and $1, 042, 080.09 for the South Plaquemines Project.[15] Paschen and Continental later posted release bonds for these statements of claim.[16]

         On July 5, 2012, 84 Lumber sued Paschen and the Sureties, alleging that 84 Lumber was not paid in full for work performed on the Osborne and South Plaquemines Projects.[17] 84 Lumber sued under the LPWA, seeking payment on its June 2012 statements of claim from both Paschen and the Sureties.[18] 84 Lumber amended its complaint on April 17, 2017, seeking recovery from the release bonds.[19] The Court granted summary judgment dismissing 84 Lumber's initial LPWA claims because the June 2012 statements of claim lacked proper notice under Louisiana Revised Statutes § 38:2242(B).[20] Later, the Court granted judgment on the pleadings and dismissed 84 Lumber's release bond claim.[21] The Court entered final judgment on January 22, 2018.[22]

         On February 2, Paschen moved for attorney's fees based on the May 2012 compromise agreements.[23] 84 Lumber then moved to amend or alter final judgment in light of new evidence purportedly included in Paschen's motion.[24]

         II. DISCUSSION

         A. May 2012 Agreements

         Paschen's and 84 Lumber's motions both seek relief based on the May 2012 agreements signed by the parties. Each agreement, one for the Osborne Project and the other for the South Plaquemines Project, is entitled “Partial Compromise and Agreement for Defense and Indemnity.”[25] The agreements explain that Paschen had been making joint payments to J&A and 84 Lumber for work performed by 84 Lumber, but had ceased doing so in recent weeks. The parties entered into the agreements “in order to compromise partially their differences, and induce Paschen to continue payments under the J&A Subcontract.”[26]

         Under the terms of the South Plaquemines Project agreement, 84 Lumber agreed to “indemnify, defend and hold Paschen . . . harmless from and against any claim . . ., and against any suit to enforce or recover on such [claim], ” including attorney's fees, arising “from or in connection with 84 Lumber's work, on the Plaquemines Project, or related to work, materials or equipment supplied or asserted to have been supplied, by any of 84's direct or lower-tier subcontractors.”[27] This indemnity obligation did not apply to claims by subcontractors “who contracted directly with J&A, with whom J&A did not contract at 84 Lumber's insistence.”[28]

         In return, Paschen agreed to pay 84 Lumber $1, 297, 603 for the South Plaquemines Project.[29] This payment would be by check, jointly payable to 84 Lumber and J&A, and already endorsed by J&A. Paschen also agreed to “[m]ake future payments to 84 Lumber jointly with J&A, . . . without 84's having to produce lien waivers from its subcontractors and suppliers.”[30] But Paschen would “not be obliged to make any payment for work which Owner has withheld payment to Paschen because of a lien filed on either Project.”[31]The agreement applied “only to obligations of the signing parties to each other on that project.”[32]

         B. Attorney's Fees

         Paschen asserts that it is entitled attorney's fees under the May 2012 agreements. Specifically, Paschen argues that 84 Lumber agreed to pay attorney's fees expended in defense of any claims that arise from or in connection with 84 Lumber's work on the projects-including 84 Lumber's own claims in this lawsuit.[33]

         Litigants are liable for their own attorney's fees, absent a statute or contract providing otherwise. See Alyeska Pipeline Co. v. Wilderness Soc'y, 421 U.S. 240 (1975). Under Federal Rule of Civil Procedure 54(d)(2), a party can seek attorney's fees by motion no later than 14 days after the entry of judgment “unless the substantive law requires those fees to be proved at trial as an element of damages.” Fed.R.Civ.P. 54(d)(2)(A). The Advisory Committee Note explains that Rule 54(d) does not “apply to fees recoverable as an element of damages, as when sought under the terms of a contract; such damages typically are to be claimed in a pleading and may involve issues to be resolved by a jury.” Fed.R.Civ.P. 54 advisory committee's note to 1993 amendment. Courts have distinguished between attorney's fees under “prevailing party” contract provisions (which are properly sought in a Rule 54(d) motion) and attorney's fees under other types of contract provisions (which are recoverable as damages and must be pleaded and proved). Compare Engel v. Teleprompter Corp., 732 F.2d 1238, 1242 (5th Cir. 1984) (defendant entitled to attorney's fees when he became “prevailing party” after appeal), and Rissman v. Rissman, 229 F.3d 586, 588 (7th Cir. 2000) (“Fees for work done during the case should be sought after decision, when the prevailing party has been identified . . . .”), with Kraft Foods N. Am., Inc. v. Banner Eng'g Sales, Inc., 446 F.Supp.2d 551, 578 (E.D. Va. 2006) (“Where attorney's fees are an element of damages, such as in an indemnification clause, the award of attorneys' fees should be denied where the party seeking them fails to carry its burden of proof at trial.”); see also Malin Int'l Ship Repair & Drydock, Inc. v. M/V SEIM SWORDFISH, 611 F.Supp.2d 627, 636 (E.D. La. 2009) (noting this distinction).

         Paschen seeks attorney's fees based on 84 Lumber's duty to indemnify, defend, and hold harmless-not based on the prevailing party provision of the May 2012 settlement agreements.[34] As an initial matter, Paschen has not shown that it is entitled attorney's fees under these contracts. The contractual language itself is ambiguous. On the one hand, 84 Lumber's indemnity obligation may be read as applying to any claim arising from 84 Lumber's work on the projects and any claim related to work by 84 Lumber's subcontractors. This broader interpretation would cover claims by 84 Lumber itself, thus operating as a release of 84 Lumber's claims against Paschen. Cf. In re Y & S Marine, Inc., No. 10-2094, 2013 WL 3874883 (E.D. La. July 25, 2013) (interpreting indemnity obligation to cover direct claims between the parties in addition to third-party claims). On the other hand, the obligation may extend only to claims by 84 Lumber's subcontractors, and arising from 84 Lumber's work. This narrower interpretation accords with general usage of indemnification provisions. See, e.g., Soverign Ins. Co. v. Texas Pipe Line Co., 488 So.2d 982, 984-85 (La. 1986) (discussing a broadly worded indemnification provision in terms of claims by third parties against the indemnitee). Additionally, it would be absurd to read the contracts as requiring 84 Lumber to defend Paschen against 84 Lumber's own claim. The contracts also expressly exclude claims by J&A's subcontractors “with whom J&A did not contract at 84 Lumber's insistence, ” which may reasonably be read to include 84 Lumber itself.[35]

         Reading the contract as a whole, in light of general usage, the scope of 84 Lumber's indemnity obligation is ambiguous. But parol evidence suggests that the parties did not intend for 84 Lumber's indemnity obligation under the May 2012 agreements to operate as a release of 84 Lumber's direct claims against Paschen. In an email dated March 28, 2012, 84 Lumber's counsel sought to clarify that “[Paschen] and 84 are reserving all rights regarding the ‘disputed' amounts” Paschen allegedly owed 84 Lumber.[36] In response, Paschen's counsel stated: “We understand you reserve rights to dispute backcharges.”[37] Paschen has not pointed to any extrinsic evidence suggesting that the parties intended for 84 Lumber's indemnity obligation to operate as a release of 84 Lumber's direct claims against Paschen. Thus, Paschen has not shown that it is entitled attorney's fees under the May 2012 agreements.

         Even if Paschen were entitled attorney's fees, however, a Rule 54(d) motion is not the proper vehicle to seek such fees. Under Louisiana law, a claim for indemnification is its own cause of action. See Meloy v. Conoco, Inc., 504 So.2d 833, 839 (La. 1987). Moreover, “a cause of action for indemnification for cost of defense does not arise until the lawsuit is concluded and defense costs are paid.” Id. In earlier pleadings, Paschen generally asserted that it is entitled attorney's fees, and argued that the May 2012 agreements constituted a release of 84 Lumber's claims against it. But Paschen neither pleaded nor proved a cause of action for indemnification for attorney's fees in this action, and could not have done so in any event because the cause of action had not yet accrued. Thus, Paschen may not now seek attorney's fees based on 84 Lumber's duty to indemnify, defend, and hold harmless.

         C. Amendment ...


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