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Cotton Exchange Investment v. Xcel Air Conditioning

United States District Court, E.D. Louisiana

May 16, 2019


         SECTION “L” (5)

          ORDER & REASONS


         Before 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.

         I. BACKGROUND

         Plaintiff 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.

         In its 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.

         According 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.[1]


         In their motion, [2] 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.

         In 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.

         In 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.

         III. LAW & ANALYSIS

         The CRS 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.

         a. Summary ...

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