United States District Court, E.D. Louisiana
ORDER & REASONS
E. FALLON U.S. DISTRICT COURT JUDGE.
the Court is a motion to dismiss filed by Defendant
Commercial Renovation Services, Inc. (“CRS”). R.
Doc. 156. The Motion is opposed. R. Doc. 166. CRS has filed a
reply. R. Doc. 176. The Court heard oral argument on the
motion on April 22, 2019. R. Doc. 179. On May 3, 2019, the
Court ordered the parties to file additional briefing, R.
Doc. 189, which the parties provided on May 6, 2019, R. Docs.
192, 193. The Court now rules as follows.
Cotton Exchange Investment Properties LLC (“Cotton
Exchange”) alleges its hotel was damaged as a result of
faulty workmanship performed by Defendants CRS and John T.
Campo & Associates (“Campo”) during the
hotel's renovation. R. Doc. 23 at 2. Plaintiff further
contends the hotel also sustained damages as a result of
defective maintenance and repairs to the hotel's HVAC
system performed by Defendant Xcel Air Conditioning Services,
Inc. (“Xcel”). In the present suit, Cotton
Exchange seeks recovery for its damages.
complaint, Plaintiff alleges that in 2014, Supreme Bright New
Orleans LLC (“Supreme Bright”), which owned the
hotel at the time, executed several contracts for its
renovation. R. Doc. 23 at 2. In January 2014, Supreme Bright
contracted with Xcel to provide HVAC services, including the
maintenance of the hotel's cooling tower, roof top units,
and chilled water pumps. R. Doc. 1 at 3. That same month,
Supreme Bright entered into a contract with Campo, whereby
Campo would provide architectural, design, and engineering
services. R. Doc. 23 at 4. A few months later, Supreme Bright
contracted with CRS to serve as general contractor for the
project (the “Construction Contract”). R. Doc. 23
at 2. In June 2015, the hotel was bought by Pacific
Hospitality Group (“PHG”), who assumed the rights
to all three contracts. R. Doc. 1 at 3. PHG subsequently
assigned all of its rights, title, and interest in the
purchase to Plaintiff, including the contracts with Xcel,
Campo, and CRS. R. Doc. 1 at 4. Plaintiff alleges that under
the terms of their respective contracts, Cotton Exchange was
indemnified by all three Defendants for any property damage
caused by their negligent acts or omissions related to the
scope of their work. R. Doc. 1 at 5; R. Doc. 23 at 3-4.
to Cotton Exchange, the hotel suffered serious moisture
damage as a result of Defendants' faulty workmanship,
including water damaged walls and floors due to exposed
chilled water piping, missing or improperly sealed
insulation, and cracked or leaking draining pans. R. Doc. 23
at 7. Plaintiff claims it had to close the hotel because of
this extensive damage. R. Doc. 23 at 6. Plaintiff canceled
the HVAC contract pursuant to its terms in December 2015 and
notified Xcel of the damage on three occasions. R. Doc. 1 at
5, 6. Xcel did not respond to the demand for indemnity. R.
Doc. 1 at 6. Additionally, Plaintiff avers it demanded
indemnity from CRS and Campo, but was also unsuccessful in
these demands. R. Doc. 23 at 7. As a consequence, Plaintiff
filed suit on December 16, 2016, bringing breach of contract
and negligence claims against all three Defendants and breach
of warranty of good workmanship claims against CRS and Campo.
R. Doc. 23 at 7-16.
their motion,  CRS challenges whether Cotton Exchange
acquired from Supreme Bright the right to bring claims
against CRS for damages CRS allegedly inflicted during
Supreme Bright's ownership of the building. R. Doc. 156
at 1. CRS argues that, pursuant to the Louisiana Supreme
Court's holding in Eagle Pipe v. Amerada Hess
Corp., Cotton Exchange has no right of action against
CRS in either contract or tort. Because “[t]he various
documents effecting and related to the sale of the property
at issue in this case did not contain a valid assignment of
the personal right to sue [CRS] for alleged defects related
to a renovation of the property by CRS prior to the sale,
” CRS moves the Court to vacate Cotton Exchange's
arbitration demand and dismiss with prejudice all of Cotton
Exchange's claims against CRS. Id. at 1-2.
opposition, Cotton Exchange argues CRS's motion should be
denied, as the act of sale transferring ownership of the
hotel from Supreme Bright to Cotton Exchange included the
transfer of Supreme Bright's personal right to sue, and,
even if the assignments did not contain a valid transfer of
this right, the settlement reached between Supreme Bright and
Cotton Exchange specifically and unequivocally contained a
valid, retroactive assignment thereof. R. Doc. 166 at 2.
reply, CRS reiterates its argument that the fact that Cotton
Exchange entered into an amended sales contract is
irrelevant, given that the right to sue for damages “is
a personal right that must be specifically assigned at
the time of sale.” LeJeune Bros. v. Goodrich
Petrol. Co., L.L.C., 2006-1557, p. 12 (La.App. 3 Cir.
11/28/07), 981 So.2d 23, 31 (emphasis added). As a result,
CRS argues, because Cotton Exchange did not obtain the
personal right to sue at the time of sale, “[Cotton
Exchange] cannot avail itself of the provisions [of the
Construction Contract], including the arbitration
clause.” R. Doc. 176 at 1-3.
LAW & ANALYSIS
motion challenges whether Supreme Bright validly assigned to
Cotton Exchange its personal right to sue CRS for breach of
contract, breach of warranty, and negligence arising out of
the Construction Contract and CRS's allegedly negligent
execution thereof. For the reasons stated in the Court's
previous order, R. Doc. 189, the Court considers this issue
under the Rule 56 standard.