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RSDC Holdings, LLC v. M.G. Mayer Yacht Services, Inc.

United States District Court, E.D. Louisiana

November 26, 2018

RSDC HOLDINGS, LLC
v.
M.G. MAYER YACHT SERVICES, INC., ET AL.

         SECTION M (5)

          ORDER & REASONS

          BARRY W. ASHE, UNITED STATES DISTRICT JUDGE

         Before the Court are cross-motions for summary judgment filed by the plaintiff and defendant-in-counterclaim, RSDC Holdings, LLC (“RSDC”), and third-party defendant, Donald Joe Calloway (“Calloway”);[1] and the defendant, M.G. Mayer Yacht Services, Inc. (“Mayer”).[2]Having considered the parties' memoranda and the applicable law, the Court issues this Order & Reasons.

         I. BACKGROUND

         This maritime action arises out of two liens on the Tuna Taxi, a 48-foot ocean sport fishing vessel, filed by Mayer for allegedly unpaid repairs.[3] On or about October 29, 2012, Calloway paid $65, 000 to First NBC Bank to acquire the Tuna Taxi as part of an extra-judicial foreclosure.[4]Mayer contends that, as of October of 2012, Calloway believed himself to be owner of the vessel, having testified as much.[5] RSDC and Calloway dispute this, claiming that the act of transfer, endorsement, assignment, and subrogation of note between Calloway and First NBC Bank dated August 14, 2014, mark the first moment of Calloway's ownership.[6] Regardless, both parties agree that, after submitting payment to First NBC Bank in October of 2012, Calloway and Richard Sanderson, Calloway's business associate, traveled to California to obtain the vessel.[7] In order for the vessel to be transported to New Orleans, its bridge had to be removed from the main body of the vessel.[8] Thus, upon arriving in New Orleans, Calloway and Sanderson sought to have the bridge reattached.

         While Calloway testified that he never intended Sanderson to have Mayer perform any repair work because of Mayer's purported unreliable reputation in the business community,[9] Calloway also admits that he submitted payment for the bridge repair and intended Sanderson to communicate with Mayer about completing the bridge repair.[10] The parties agree that Sanderson directed Mayer to complete repairs of the vessel pursuant to a work order dated November 16, 2012, which provided that unpaid invoices within thirty days of receipt would be charged interest at eighteen percent per annum, and that the buyer would owe costs incurred to collect them, including attorney's fees.[11] The parties dispute the extent of repairs that Sanderson requested and that Mayer ultimately performed.[12] While Sanderson and Calloway contend that the only repair either authorized or performed was that of the bridge reassembly, Mayer claims that Sanderson authorized and performed much more work, up until July of 2013.[13] Of the twenty-two invoices issued between December 2, 2012, and July 14, 2013, Mayer received one partial payment for the first invoice from Sanderson on behalf of Calloway in the amount of $1, 023.13.[14] In February of 2013, Mayer issued a fifty percent credit totaling $10, 472.15 on nine invoices.[15]

         All invoices were addressed to Sanderson.[16] Calloway and RSDC dispute ever receiving the invoices.[17] Mayer's owner, Michael Mayer, testified he did not believe Mayer contracted with RSDC or Calloway, but with Sanderson.[18] A Mayer employee, Rene Gros, testified by way of affidavit that he believed Sanderson was the vessel's owner at the time of Mayer's dealings with Sanderson.[19] On or about March 18, 2013, Mayer filed its first notice of lien with the U.S. Coast Guard for $31, 085.75, the amount of the then-outstanding invoices.[20] Thereafter, Mayer submitted additional invoices, and, failing payment, Mayer filed a second notice of recorded lien for $4, 588.40 on or about July 24, 2013.[21]

         RSDC alleges that Mayer released the vessel to Calloway in July of 2013 after completing the bridge repair and warranting it free of all liens.[22] Mayer, on the other hand, claims the vessel was moored at its dock from December 2012 to July 2013, and claims to have performed work authorized by RSDC and Calloway through their agent Sanderson.[23] RSDC, the current owner of the Tuna Taxi, initiated this civil action seeking a declaratory judgment that the Tuna Taxi is not subject to any liens in favor of Mayer.[24] By way of counterclaim and third-party demand asserting claims for suit on open account under Louisiana law, breach of contract, quantum meruit, and detrimental reliance, Mayer seeks to recover the cost of the repairs (as invoiced), finance charges, collection expenses, and attorney's fees.[25]

         II. PENDING MOTIONS

         In their motion for summary judgment, RSDC and Calloway argue that Mayer's contract claims have the character of an open-account claim and are prescribed because Mayer filed suit more than three years after the last invoice.[26] Regardless, RSDC and Calloway continue, Mayer's contract claims fail because Mayer lacks contractual privity with RSDC or Calloway.[27] RSDC and Calloway also contend that Mayer's alternative claims for equitable relief must be dismissed as mere “gap fillers.”[28] Mayer responds that its claims are not prescribed because they sound in contract, which has a prescriptive period of ten years; that Sanderson acted as agent, with either actual or apparent authority, to bind Calloway as principal; and that Sanderson, acting on behalf of the owner, is presumed to have authority to procure necessaries under the Federal Maritime Lien Act.[29] In their reply, RSDC and Calloway argue that Sanderson lacked actual authority to order repairs beyond the bridge reassembly; that an apparent agency theory fails because Mayer never believed it contracted with the principals (whether RSDC or Calloway); and that the Federal Maritime Lien Act is inapplicable to Mayer's in personam claims for damages.[30] In particular, to support their request that Mayer's contract claims be dismissed, RSDC and Calloway point both to the invoices, which were solely addressed to Sanderson, and to Michael Mayer's testimony, in which he states that he did not contract directly with RSDC or Calloway.[31]

         In its cross-motion for summary judgment, Mayer seeks (1) dismissal of RSDC's suit to have the Tuna Taxi declared free of liens and (2) judgment in Mayer's favor on the issues of liability and damages asserted in its third-party complaint against Calloway (the same claims RSDC and Calloway seek to have dismissed by their own motion for summary judgment).[32] The parties largely repeat the arguments summarized above in connection with RSDC and Calloway's motion for summary judgment. In its reply, Mayer argues that even if Sanderson lacked actual or apparent authority, RSDC and Calloway are nonetheless bound because they ratified Sanderson's conduct.[33] Mayer also notes it has since dismissed its open-account claim, now believing the true nature of its cause of action to involve the breach of a maritime contract.[34]

         III. LAW & ANALYSIS

         A. Summary Judgment Standard

         Summary judgment is proper “if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.” Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986) (citing Fed.R.Civ.P. 56(c)). “Rule 56(c) mandates the entry of summary judgment, after adequate time for discovery and upon motion, against a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which the party will bear the burden of proof at trial.” Id. A party moving for summary judgment bears the initial burden of demonstrating the basis for summary judgment and identifying those portions of the record, discovery, and any affidavits supporting the conclusion that there is no genuine issue of material fact. Id. at 323. If the moving party meets that burden, then the nonmoving party must use evidence cognizable under Rule 56 to demonstrate the existence of a genuine issue of material fact. Id. at 324.

         A genuine issue of material fact exists if a reasonable jury could return a verdict for the nonmoving party. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1996). The substantive law identifies which facts are material. Id. Material facts are not genuinely disputed when a rational trier of fact could not find for the nonmoving party upon a review of the record taken as a whole. See Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986); Equal Emp't Opportunity Comm'n v. Simbaki, Ltd., 767 F.3d 475, 481 (5th Cir. 2014). “[U]nsubstantiated assertions, ” “conclusory allegations, ” and merely colorable factual bases are insufficient to defeat a motion for summary judgment. See Anderson, 477 U.S. at 249-50; Hopper v. Frank, 16 F.3d 92, 97 (5th Cir. 1994). In ruling on a summary judgment motion, a court may not resolve credibility issues or weigh evidence. See Delta & Pine Land Co. v. Nationwide Agribusiness Ins. Co., 530 F.3d 395, 398-99 (5th Cir. 2008). Furthermore, a court must assess the evidence, review the facts, and draw any appropriate inferences based on the evidence in the light most favorable to the party opposing summary judgment. See Tolan v. Cotton, 572 U.S. 650, __, 134 S.Ct. 1861, 1866 (2014); Daniels v. City of Arlington, 246 F.3d 500, 502 (5th Cir. 2001). Yet, a court only draws reasonable inferences in favor of the nonmovant “when there is an actual controversy, that is, when both parties have submitted evidence of contradictory facts.” Little Liquid Air Corp., 37 F.3d 1069, 1075 (5th Cir. 1994) (en banc) (citing Lujan v. Nat'l Wildlife Fed'n, 497 U.S. 871, 888 (1990)). Nor must the court consider uncited evidence in the record. Fed.R.Civ.P. 56(c)(3).

         After the movant demonstrates the absence of a genuine dispute, the nonmovant must articulate specific facts and point to supporting, competent evidence that may be presented in a form admissible at trial. See Lynch Props., Inc. v. Potomac Ins. Co. of Ill., 140 F.3d 622, 625 (5th Cir. 1998); Fed.R.Civ.P. 56(c)(1)(A) & (c)(2). Such facts must create more than “some metaphysical doubt as to the material facts.” Matsushita, 475 U.S. at 586. When the nonmovant will bear the burden of proof at trial on the dispositive issue, the moving party may simply point to insufficient admissible evidence to establish an essential element of the nonmovant's claim in order to satisfy its summary judgment burden. See Celotex, 477 U.S. at 322-25; Fed.R.Civ.P. 56(c)(B). Unless there is a genuine issue for trial that could support a judgment in favor of the nonmovant, summary judgment must be granted. See Little, 37 F.3d at 1075-76.

         B. Mayer's Motion for Summary Judgment on RSDC's Declaratory Judgment Action Concerning the Tuna Taxi Liens and on Mayer's Third-Party Demand Against Calloway

         To establish a maritime lien for necessaries such as ship repairs, the lienholder must prove that it provided “necessaries to a vessel on the order of the owner or a person authorized by the owner.” Lake Charles Stevedores, Inc. v. Professor Vladimir Popov MV, 199 F.3d 220, 223-24 (5th Cir. 1999); 46 U.S.C. § 31342. Among those presumed to have the authority to procure necessaries is an agent appointed by an agreed buyer in possession of the vessel. 46 U.S.C. § 31341. When there is doubt as to the agent's authority, it is resolved under general principles of agency law. Lake Charles Stevedores, Inc., 199 F.3d at 226. But see Crescent City Marine, Inc. v. M/V Nunki, 20 F.3d 665, 668-69 (5th Cir. 1994) (applying Louisiana mandatary law and general agency law to analyze sufficiency of authority to give rise to maritime lien).

         “An agent acts with actual authority when, at the time of taking action that has legal consequences for the principal, the agent reasonably believes, in accordance with the principal's manifestations to the agent, that the principal wishes the agent so to act.” Restatement (Third) Agency § 2.01. Under Louisiana law, the mandatary's (or agent's) authority is similarly composed of actual authority, expressed or implied, and the apparent authority which the principal has invested in him by his conduct. Jefferson Parish Hosp. Serv. Dist. No. 2 v. K & W Diners, LLC, 65 So.3d 662, 668 (La.App. 2011) (citing Boulos v. Morrison, 503 So.2d 1, 3 (La. 1987)).

         “Apparent authority is created as to a third person by conduct of the principal which, reasonably interpreted, causes the third person to believe that the principal consents to the act done on his behalf by the person purporting to act for him. Apparent authority is distinguished from actual authority because it is the manifestation of the principal to the third person rather than to the agent that is controlling.” Cactus Pipe & Supply Co. v. M/V Montmartre, 756 F.2d 1103, 1111 (5th Cir. 1985) (citing Restatement (Second) Agency § 27). Similarly, in order for apparent authority to apply under Louisiana law, “the principal must first act to manifest the alleged mandatary's authority to an innocent party. Then, the third party must reasonably rely on the mandatary's manifested authority.” Jefferson Parish Hosp. Serv. Dist. No. 2, 65 So.3d at 668.

         If the agent had neither actual, nor implied, nor apparent authority, the principal may still be bound to contracts made by an agent with a third party if the principal ratifies the agent's unauthorized acts. See Restatement (Third) Agency § 4. “A ratification is not effective unless it encompasses the entirety of an act, contract, or other single transaction.” Id. § 4.07. Louisiana law provides that ratification occurs when “the principal, knowing of the contract, does not repudiate it but accepts its benefits.” Bamber Contractors, Inc. v. Morrison Eng'g & Contracting Co., 385 So.2d 327, 331 (La.App. 1980). The party asserting ratification must prove that the principal clearly intended to ratify the act. Id.

         Mayer contends that summary judgment in its favor as lienholder is warranted because Sanderson was Calloway's agent, thereby binding Calloway to pay for the total unpaid amount of $36, 394.15 due for vessel repairs allegedly authorized by Sanderson.[35] Moreover, Mayer continues, even if Sanderson was not Calloway's agent, Calloway ratified his acts and so owes the aforementioned amounts.[36] Thus, Mayer argues that RSDC's complaint should be dismissed because the liens reflect the amounts due and owing.

         RSDC and Calloway deny contractual privity on the grounds that Mayer admits it never believed it contracted with RSDC or Calloway, thereby undermining Mayer's apparent agency theory.[37] They also dispute the scope of Sanderson's actual authority to order repairs.[38] For instance, Calloway testified that he told Sanderson not to use Mayer for any repairs, [39] but also that he desired Sanderson to act as intermediary between him and Mayer for any repairs, [40] and paid Sanderson for the bridge reassembly.[41] Further, Sanderson testified that he never ordered any work besides the bridge repair and claims that Mayer fabricated the invoices while Sanderson was in poor health, knowing Sanderson would not contest them.[42] Because the nature and extent of the underlying repairs are disputed, RSDC and Calloway submit that Mayer is not entitled to summary judgment.[43]

         Though there was no express contract between Sanderson and Calloway, the parties essentially agree that Calloway authorized Sanderson to order the Tuna Taxi 's bridge reassembly.[44] If Sanderson did indeed order further repairs, Mayer does not point to undisputed evidence establishing that Sanderson acted with actual or apparent authority to do so. Similarly, the question of ratification is also disputed and cannot be resolved on summary judgment. Finally, the parties dispute the nature and extent of repairs that gave rise to the liens that Mayer filed. Specifically, Sanderson contests ordering any repairs beyond that of the bridge.[45] Even if Sanderson were Calloway's agent, the agent disputes ordering all other repairs. Given these disputed material facts, the Court cannot grant summary judgment in favor of Mayer on its motion.

         C. RSDC and Calloway's Motion for Summary Judgment Seeking the Dismissal of Mayer's Counterclaim and Third-Party Demand

         RSDC and Calloway seek summary judgment dismissing Mayer's counterclaim and third-party demand, urging that Louisiana's three-year prescriptive period on open-account claims bars all of Mayer's contract claims; that Mayer was not in contractual privity with either RSDC or Calloway, whether directly or through agency; and that Mayer's alternative theories do not support recovery because they are mere “gap fillers.” The Court has already explained that factual disputes forestall summary judgment on the issues of contractual privity and agency, which conclusion applied with equal force to RSDC and Calloway's cross-motion for summary judgment directed to Mayer's counterclaim and third-party demand as it does to Mayer's motion for summary judgment in its favor on these same claims. The Court turns now to RSDC and Calloway's other arguments.

         1. Mayer's Contract Claims

         RSDC and Calloway contend that Mayer's claims for an open account and breach of contract are prescribed. The state prescriptive period for suits on open account is three years from the date the payment is exigible. La. Civ. Code arts. 3494, 3495. The most recent invoice was dated July 13, 2013, and RSDC and Calloway contend that Mayer did not bring suit until August 26, 2016, when Mayer filed its counterclaim.[46] Using these dates, the prescriptive period would have accrued on July 13, 2016. Therefore, any claims Mayer might have had for suit on open account are arguably prescribed under Louisiana law.

         Sometime after filing its motion for summary judgment and opposition to RSDC and Calloway's cross-motion for summary judgment, Mayer must have come to this same conclusion and voluntarily dismissed its open-account claim, leaving only the breach-of-contract, quantum meruit, and detrimental-reliance claims.[47] While Mayer acknowledges this in its reply in support of its motion for summary judgment, it claims a ten-year prescriptive period applies to its claims for breach of a maritime contract, citing a case holding that a ten-year prescriptive period applied to a breach for workmanlike performance under general maritime law.[48] But RSDC and Calloway argue that Mayer cannot rely on the ten-year prescriptive period because it pursued claims more properly characterized as one brought for violation of Louisiana's open-account statute.[49]

         Under Louisiana law, the voluntary dismissal of a prescribed cause of action in favor of another does not change the nature of the cause of action; instead, the prescriptive period is determined by the “character of an action disclosed in the pleadings.” Starns v. Emmons, 538 So.2d 275, 277 (La. 1989). Here, Mayer described the contract as one where RSDC “would be invoiced weekly for the previous work performed.”[50] Accordingly, Mayer alleged it “performed the necessary work and subsequently charged [RSDC's] account with the total sum of … $36, 394.15 … for the services performed.”[51] Further, Mayer also indicated it issued a credit to RSDC totaling $10, 472.15 for certain of the invoices.[52] And Mayer alleges that the balance of every invoice is past due.

         The Louisiana open-account statute defines an “open account” as one that:

includes any account for which a part or all of the balance is past due, whether or not the account reflects one or more transactions and whether or not at the time of contracting the parties expected future transactions. “Open account” shall include debts incurred for professional ...

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