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Board of Supervisors of Louisiana State University v. Southern Electronics, Inc.

Court of Appeals of Louisiana, Fourth Circuit

June 6, 2018

BOARD OF SUPERVISORS OF LOUISIANA STATE UNIVERSITY AND AGRICULTURAL AND MECHANICAL COLLEGE
v.
SOUTHERN ELECTRONICS, INC. (F/K/A SOUTHERN RADIO SUPPLY CO. INC.) AND THE CITY OF NEW ORLEANS

          APPEAL FROM CIVIL DISTRICT COURT, ORLEANS PARISH NO. 2011-01631, DIVISION "L-6" Honorable Kern A. Reese, Judge

          J. Kenton Parsons Luke F. Piontek Thomas J. Capella Christian Rhodes Shelley Ann McGlathery ROEDEL PARSONS KOCH BLACHE BALHOFF & McCOLLISTER COUNSEL FOR PLAINTIFF/APPELLANT

          Leopold Z. Sher James M. Garner Peter Hilbert, Jr. Joshua S. Force Jacob A. Airey SHER GARNER CAHILL RICHTER KLEIN & HILBERT, L.L.C. COUNSEL FOR DEFENDANT/APPELLEE

          Court composed of Judge Roland L. Belsome, Judge Rosemary Ledet, Judge Tiffany G. Chase

          BELSOME, J., DISSENTS WITH REASONS

          Tiffany G. Chase, Judge

         The Board of Supervisors of Louisiana State University and Agricultural and Mechanical College (hereinafter the "Board") seeks review of the trial court's award of attorney's fees following an expropriation trial in which judgment was rendered in favor of Southern Electronics Supply, Inc. (hereinafter "Southern Electronics"). The Board sets forth three assignments of error, all of which assert the attorney's fees awarded by the trial court are excessive. Based upon our review of the record and for the reasons that follow, we find that the trial court did not abuse its discretion in awarding attorney's fees in the amount of $2, 177, 500.00. However, we amend the judgment solely to reflect a credit to the Board in the amount of $578, 384.98 in attorney's fees previously paid by Southern Electronics to its attorneys. Thus, the Board is responsible for the remaining balance of the trial court's judgment, or $1, 599, 115.02. In all other respects the judgment is affirmed.

         Factual and Procedural History

         The underlying facts of this case concern the expropriation of property located at 1909 Tulane Avenue in New Orleans (hereinafter the "Property"). The land at issue was located within the footprint of the area that would later become the new University Medical Center.

         On December 29, 2008, the Board notified Southern Electronics of its intent to expropriate its property in furtherance of the plan to replace the old medical center damaged by Hurricane Katrina (hereinafter the "Project"). The Board and Southern Electronics actively engaged in negotiations; however, after Southern Electronics rejected two settlement offers, the Board filed a petition for expropriation. The Board deposited $1, 750, 000.00 into the registry of the court for just compensation, along with an additional $1, 527, 150.00 for business losses.[1]

         On December 14, 2009, two years prior to the filing of the petition for expropriation, Southern Electronics entered into an agreement with the firm of Sher, Garner, Chaill, Richter, Klein, and Hilbert, L.L.C. (hereinafter "Sher Garner") for Sher Garner to represent Southern Electronics in connection with the expropriation. On April 16, 2010, Southern Electronics received an offer of $1, 750, 000.00 from the Board for just compensation. Leopold Z. Sher (hereinafter "Mr. Sher"), a senior partner with Sher Garner, testified that Southern Electronics and its counsel had several protracted meetings with Board representatives where Sher Garner endeavored to settle the matter. During those meetings, Southern Electronics produced additional evidence demonstrating potential business losses and provided the Board with additional property valuation appraisals. After substantial negotiations, the Board offered an additional $1, 527, 150.00 for business losses but declined to increase the just compensation offer. When all settlement offers were rejected by Southern Electronics, this ligation followed.

         On February 16, 2011, the Board filed a petition for expropriation against Southern Electronics and the City of New Orleans. Southern Electronics filed an answer and a reconventional demand on April 5, 2011, seeking full and just compensation from the Board along with costs and attorney's fees. In its reconventional demand, Southern Electronics maintained that it was entitled to the replacement cost of its expropriated property, an amount far higher than the amount offered by the Board. Specifically, Southern Electronics submitted that the building at 1909 Tulane Avenue was both unique and indispensable to its business for two reasons: (1) the location was uniquely situated to provide service to its customers, allowed walk-in business to generate new accounts, and allowed for close proximity to much of the City of New Orleans; and (2) the buildings were specifically built and tailored for its operational requirements, providing ample office and air-conditioned warehouse space, and allowing for maximum efficiency and quality control of electronics parts, among many other benefits.

         In August 2011, Southern Electronics relocated to 2301 Julia Street in New Orleans, a location it contends was completely deficient when compared to its former facility, did not constitute a replacement facility, and resulted in business losses due to its undesirable location. Following a hearing, Southern Electronics was granted leave to amend its petition, specifically related to damages it alleged were incurred due to relocation. In its amended petition, it sought the replacement cost to move its business from Julia Street to a more desirable location; damage to its reputation; loss of business and products; or in the alternative, costs to rehabilitate Julia Street to a more permanent facility; damages for criminal damage to its property; and compensation for security systems and services at the new location.

         The trial on the just compensation issue spanned twenty-three days, over a seven week period of time, and was held in late 2014. The matter was taken under advisement at the conclusion of testimony. After the matter was taken under advisement, but before judgment being issued, Southern Electronics fell behind on its legal bills. Southern Electronics and Sher Garner agreed to modify the hourly billing agreement.[2] A letter dated July 1, 2015, from Sher Garner to Southern Electronics, provides that after June 15, 2015, the parties' agree to convert to a contingency fee agreement.

         On June 30, 2016, the trial court issued judgment on the underlying suit, along with "reasons for judgment."[3] Judgment was in favor of Southern Electronics in the amount of $5, 000, 000.00 for the replacement cost of the property, subject to a credit of $1, 750, 000.00, which the Board previously deposited in the registry of the court. In addition to replacement costs, Southern Electronics was awarded an additional $1, 527, 150.00 for business losses, which reflected the amount the Board previously deposited into the registry of the court, along with five percent interest on the judgment. Thus, the total amount awarded equaled $6, 527, 150.00. Attorney's fees and costs were to be determined at a later date. In the reasons for judgment, the trial court found Southern Electronics entitled to an award of the replacement cost of the unimproved land and improvements, rather than limiting the recovery to the property's fair market value. Specifically, it found that the property was both unique and indispensable to Southern Electronics' family business, entitling Southern Electronics to additional compensation. The trial court did not award attorney's fees in this judgment but noted that La. R.S. 19:8 and Bd. of Sup'rs of Louisiana State Univ. & Agric. & Mech. Coll. v. Villavaso, 2014-1277, p.19 (La.App. 4 Cir. 12/23/15), 183 So.3d 757, 769, authorized it to award reasonable attorney's fees, when the highest amount offered in expropriation cases is less than the compensation awarded for the property and severance damages.

         On October 20, 2016, the issue of attorney's fees, expert fees and court costs proceeded to trial. Southern Electronics' counsel sought $2, 335, 991.23 in attorney's fees; $401, 875.82 in expert fees and $163, 315.44 in court costs, totaling $2, 901, 182.49. At trial, Southern Electronics addressed the fact that there had been a contractual change from an hourly fee to a contingency fee arrangement with Sher Garner during the pendency of the case. Mr. Sher represented to the trial court that Mr. Iggie Perrin (hereinafter "Mr. Perrin"), Southern Electronics' president, sought a different contractual arrangement, due to the financial strain of the protracted litigation. At the time Mr. Perrin sought a new contractual arrangement, Southern Electronics had paid $578, 384.98 to Sher Garner in connection with this litigation. At the conclusion of the trial on attorney's fees, expert fees and court costs, the trial court indicated it would allow the parties to present additional evidence, holding the record open for that purpose.

         The trial court issued judgment on April 20, 2017, and awarded Southern Electronics the following: $2, 177, 500.00 in attorney's fees, $321, 704.68 in expert fees and $148, 240.70 in costs, totaling $2, 647, 445.8. The judgment on attorney's fees, expert fees and costs was issued without any accompanying reasons for judgment. Following judgment, the Board appealed only the attorney's fees award, arguing the fees are excessive. Neither the underlying expropriation judgment, nor the witnesses' fees and costs awards are challenged.

         DISCUSSION

         Standard ...


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