United States District Court, E.D. Louisiana
TODD NOVAK, ET AL.
ST. MAXENT-WIMBERLY HOUSE CONDOMINIUM, INC., ET AL.
ORDER AND REASONS
J. Barbier, United States district Judge.
the Court are cross motions for summary judgment filed by
plaintiffs, Todd and Kate Novak, and defendants, St.
Maxent-Wimberly House Condominium, Inc., Michael Skinner,
Cynthia Cunningham, Ross Henry, Henry Insurance Services,
Inc., Kevin Cunningham, and State Farm Fire and Casualty
Company (collectively, “Defendants”). The motions
a Motion for Partial Summary Judgment Regarding Breach of
By-laws Regarding Arbitration and Accounting
(Rec. Doc. 95) submitted by Plaintiffs and
opposed by Defendants (Rec. Doc. 100);
a partial Rule 56 Motion for Summary Judgment
(Rec. Doc. 112) submitted by Defendants and
opposed by Plaintiffs (Rec. Doc. 114);
and a Motion for Partial Summary Judgment for
Misrepresentation and Breach of Contract in Violation of the
By-Laws and Louisiana Condominium Act (Rec. Doc.
137) submitted by Plaintiffs and opposed by
Defendants (Rec. Doc. 151).
the motions, the memoranda, the record, and the law, the
Court finds Plaintiffs' motions shall be
DENIED and Defendants' motion shall be
GRANTED in part and DENIED in
AND PROCEDURAL HISTORY
litigation devolved from a dispute over the Plaintiffs'
right to short-term lease a condominium unit they purchased
in the French Quarter. The Novaks are school teachers who
work in California; their plan was to buy a French Quarter
condo unit which they could use as a vacation home during
summer break but lease during the regular school year when
they would be teaching in California.
February 16 of 2015, in pursuit of their plan to buy a summer
retreat which would also turn a profit, the Plaintiffs agreed
to purchase one of the five units that make up St.
Maxent-Wimberly House (the
“House”). The House is a 150-year-old French Quarter
residence located on Governor Nichols Street. It was made into
a condominium in 1990 in accordance with the Louisiana
Condominium Act, La. R.S. 9:1121.101, et seq.
Novaks purchased their unit, Unit 1, from Jenny and Michael
Tilbury for $379, 000 through an “as is, ” no
warranty, cash sale. The purchase agreement gave the Novaks 14
days in which they could inspect the property and terminate
the sale based on the results of the
inspection. The Novaks exercised this right and hired
Henry & Hatchett Inspection Services to inspect the
House. Henry & Hatchett concluded the building to be in
“fair to good condition, ” and the Novaks
went ahead and executed their purchase of Unit 1 through an
Act of Cash Sale on March 30, 2015.
ownership of Unit 1 transferred, tensions began to rise
between the Novaks and the association tasked with managing
and regulating the condominium, St. Maxent-Wimberly
Condominium, Inc. (“St. Maxent”), which is
controlled by a board of directors (the
“Board”). Plaintiffs allege that after they
purchased their unit, the Board informed Plaintiffs that the
By-Laws had previously been amended to prohibit leases of
less than one year. Although there is evidence that the
Board voted to make this change in 2006, the amendment was
never recorded in the conveyance records of Orleans Parish,
as required by the By-Laws. Nevertheless, it appears that
it was the Board's position that leases for less than a
year were prohibited. This short-term rental prohibition
was obviously an obstacle to the Novaks' plan to lease
the unit nine months out of the year, and the Novaks
communicated their dissatisfaction with the short-term rental
August of 2015, Cynthia Cunningham informed Kate Novak that
the Board would consider allowing the Novaks to rent their
unit for 6-months but that it would require a vote from the
Board. The Novaks never followed up with the
Board, because they felt it was “not a very safe place
to rent to somebody” due to newly discovered problems
with mold and several episodes of vandalism the Novaks
experienced. Despite these alleged concerns, the
Novaks did make several short-term rentals of their unit.
Kate Novak testified that she and her husband used the online
marketplace Airbnb to rent their unit for short periods that
not only violated St. Maxent's By-Laws but also were
illegal pursuant to a 60-day minimum rental period set by the
Vieux Carré Commission. The Novaks were fined by the
Commission for violating the short-term rental
between the Novaks and the other members of St. Maxent did
not improve. In the fall of 2015, the Novaks allegedly
requested to examine St. Maxent's books in accordance
with the By-Laws, a request the Board denied. In January of
2016, the Novaks allegedly demanded an accounting of St.
Maxent's finances again. They also allege they asked for
arbitration pursuant to the By-Laws. The relevant section,
§ 6.02, states, “In the event there is any dispute
among the Unit Owners or among the members of the Board which
is not reconciled by a vote pursuant to these By-Laws, such
dispute shall be submitted to arbitration under the Louisiana
February 12, 2016, the unit owners (then, Michael Skinner,
Cynthia Cunningham, Ross Henry, Ehab Zagzoug, and Kate Novak)
and the Board (same, except Kate Novak refused to act as a
director) had their annual meeting. A majority of the Board
and unit owners voted to amend the By-Laws by adopting a
1-year lease restriction. The amendment was recorded by
the Clerk of Court for the Parish of Orleans on April 19,
March of 2016, the Novaks hired Gurtler Bros. Consultants,
Inc. to inspect the common areas of the house. The Gurtler
report concludes that deferred maintenance had caused various
common parts of the House to fall into
disrepair.The Novaks then hired Kotter &
Associates to create an estimate of the costs to repair
alleged defects in the building.
Novaks then initiated this litigation by filing a Petition to
Enforce Agreement to Arbitrate and to Compel Arbitration
(Rec. Doc. 1) on May 23, 2016, naming St. Maxent, Michael
Skinner, Cynthia Cunningham, Ross Henry, and State Farm as
defendants. The Petition asks for relief in the form of an
order compelling defendants to submit to arbitration.
Plaintiffs subsequently obtained new counsel and filed their
First Supplemental and Amended Complaint (Rec. Doc. 13). The
first sentence of the Amended Complaint states that
Plaintiffs “withdraw their request for
arbitration.” Plaintiffs then filed a Second
Supplemental and Amended Complaint (Rec. Doc. 53), this one
“meant to replace all previous complaints and
demands.” This complaint pleads seventeen causes of
action, including an allegation of civil conspiracy amongst
St. Maxent, the Board members, the realtors, and the
this amendment to the pleadings, the parties engaged in
extensive motion practice. The Court granted summary judgment
in favor of the realtors and the Tilburys; only St. Maxent.,
its board members, and their insurers remain as defendants in
judgment is appropriate when “the pleadings, the
discovery and disclosure materials on file, and any
affidavits show that there is no genuine issue as to any
material fact and that the movant is entitled to judgment as
a matter of law.” Celotex Corp. v. Catrett,
477 U.S. 317, 322 (1986) (citing Fed.R.Civ.P. 56); Little
v. Liquid Air Corp., 37 F.3d 1069, 1075 (5th Cir. 1994).
When assessing whether a dispute as to any material fact
exists, a court considers “all of the evidence in the
record but refrains from making credibility determinations or
weighing the evidence.” Delta & Pine Land Co.
v. Nationwide Agribusiness Ins. Co., 530 F.3d 395, 398
(5th Cir. 2008). All reasonable inferences are drawn in favor
of the nonmoving party, but a party cannot defeat summary
judgment with conclusory allegations or unsubstantiated
assertions. Little, 37 F.3d at 1075. A court
ultimately must be satisfied that “a reasonable jury
could not return a verdict for the nonmoving party.”
Delta, 530 F.3d at 399.
dispositive issue is one on which the moving party will bear
the burden of proof at trial, the moving party “must
come forward with evidence which would ‘entitle it to a
directed verdict if the evidence went uncontroverted at
trial.'” Int'l Shortstop, Inc. v.
Rally's, Inc., 939 F.2d 1257, 1264-65 (5th Cir.
1991). The nonmoving party can then defeat the motion by
either countering with sufficient evidence of its own, or
“showing that the moving party's evidence is so
sheer that it may not persuade the reasonable fact-finder to
return a verdict in favor of the moving party.”
Id. at 1265.
dispositive issue is one on which the nonmoving party will
bear the burden of proof at trial, the moving party may
satisfy its burden by merely pointing out that the evidence
in the record is insufficient with respect to an essential
element of the nonmoving party's claim. See
Celotex, 477 U.S. at 325. The burden then shifts to the
nonmoving party, who must, by submitting or referring to
evidence, set out specific facts showing that a genuine issue
exists. See Id. at 324. The nonmovant may not rest
upon the pleadings but must identify specific facts that
establish a genuine issue for trial. See, e.g., Id.
at 325; Little, 37 F.3d at 1075.
case has been needlessly complicated by the Plaintiffs'
unwieldy Second Amended Complaint, which meanders for 227
paragraphs. At its essence, Plaintiffs' grievance is
simply that St. Maxent is not maintaining the House and is
not keeping sufficient documentation for the association
members to determine what is being expended on maintenance,
all in violation of the By-Laws and the Louisiana Condominium
Act. This case should be as easy as determining (1) whether
St. Maxent breached these duties as they are clearly set
forth in the Act, and if so, (2) whether these breaches
resulted in provable damage, presumably in the form of lost
rents or a diminution in the value of the Novaks' unit.
case has been far from easy because Plaintiffs allege, for
example, that a “failure to maintain and repair the
building” gives rise to not just a cause of action
under the By-Laws or the Act, but also claims of negligent or
intentional or fraudulent misrepresentation (causes of action
9, 10), intentional or tortious interference with contract
(11), intentional or tortious interference with business
(12), breach of fiduciary obligation (13), civil conspiracy
(16), as well as a derivative action by the Novaks on behalf
of St. Maxent (17). Plaintiffs further complicate matters by
challenging in their complaint whether the association even
constitutes an incorporated entity and by claiming the
“Purported Board of Directors of St. Maxent” and
St. Maxent's board members are liable individually. The
Court begins by reviewing the statutory provisions
controlling the administration of condominiums before
resolving Plaintiffs' motions, and finally the
The Louisiana Condominium Act
Louisiana Condominium Act defines “condominium”
as “the property regime under which portions of
immovable property are subject to individual ownership and
the remainder thereof is owned in indivision by such unit
owners.” La. R.S. 9:1121.103(1). An “association,
”-such as St. Maxent-is defined as “a
corporation, or unincorporated association, owned by or
composed of the unit owners and through which the unit owners
manage and regulate the condominium.” La. R.S.
9:1121.103(8). By law, every association's membership
consists exclusively of all of its unit owners. La. R.S.
9:1123.101. If the association is incorporated, it may be as
a for-profit corporation, or a non-profit corporation as St.
Maxent is. Id. In the case it is a corporation, the
association is controlled by a board of directors. Pursuant
to the Act, St. Maxent's board has the power to:
“adopt and amend bylaws and rules and
regulations;” “adopt and amend budgets for
revenues, expenditures, and reserves and make and collect
assessments for common expenses from unit owners;”
“regulate the use, maintenance, repair, replacement,
and modification of common elements;” “exercise
any other powers conferred by the declaration or
bylaws;” and “exercise any other powers necessary
and proper for the governance and operation of the
association.” See La. R.S. 9:1123.102.
with scope of the association's powers, it is
“responsible for maintenance, repair, and replacement
of the common elements” and for keeping
“financial records sufficiently detailed to enable the
association to comply” with its maintenance obligation.
La. R.S. 9:1123.107, 9:1123.108. “All financial and
other records shall be made reasonably available for
examination by any unit owner and his authorized
agents.” La. R.S. 9:1123.108. Thus, the “Act
imposes a legal obligation upon condominium associations to
maintain, repair, or replace the common elements of the
condominium building, ” FIE, LLC v. New Jax Condo
Assn., Inc., 241 So.3d 372, 392 (La.App. 4th Cir. 2018),
and St. Maxent may be sued for its failure to satisfy this or
its record-keeping obligations as a condominium association
incorporated as a non-profit corporation. See id.;
see also La. Civ. Code art. 24. St. Maxent's
board, however, “is not a juridical person and lacks
the requisite procedural capacity” to be sued.
Wells v. Fandal, 136 So.3d 83, 91 (La.App. 5th Cir.
2014). While, the board of directors is the decision-maker
charged with steering an incorporated association, it is not
recognized as an entity to be held separately liable from the
association. Id. Furthermore, while the liability of
individual directors of all corporations is limited, the
liability of directors acting on behalf of condominium
associations is limited by a specific statute:
A person who serves as a director, officer, or trustee of a
homeowners association and who is not compensated for such
services on a salary basis shall not be individually liable
for any act or omission resulting in damage or injury,
arising out of the exercise of his judgment in the formation
and implementation of policy while acting as a director,
officer, or trustee of that association, or arising out of
the management of the affairs of that association, provided
he was acting in good faith and within ...