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Cotton Exchange Investment v. Xcel Air Conditioning

United States District Court, E.D. Louisiana

June 4, 2019


         SECTION “L” (5)

          ORDER & REASONS

         Before the Court is a motion for summary judgment filed by Defendant Xcel Air Conditioning Services, Inc. (“Xcel”). R. Doc. 195. The Motion is opposed. R. Doc. 199. Xcel has filed a reply. R. Doc. 205. 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 Commercial Renovation Services, Inc. (“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. 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. R. Doc. 23 at 2.

         In June 2015, Pacific Hospitality Group (“PHG”) entered into a purchase agreement with Supreme Bright to buy the hotel whereby PHG would assume 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 Cotton Exchange, including the contracts with Xcel, Campo, and CRS. Thereafter, Cotton Exchange executed the purchase agreement with Supreme Bright (the “Assignment and Assumption Agreement”). R. Doc. 1 at 4. On January 31, 2017, Cotton Exchange and Supreme Bright entered into a settlement agreement resolving a matter unrelated to the issue at bar, wherein the parties amended the Assignment and Assumption Agreement's terms by adding the following language:

Assignor hereby assigns, transfers and conveys all of Assignor's rights, title and interest in and to the Assigned Property, including all contractual and personal rights in and/or related to the Hotel, including without limitation the personal right to sue for damages, that Assignor has against CRS, subcontractors and vendors to CRS, and any other contractors or vendors engaged by [Supreme Bright] prior to the Closing Date.

R. Doc. 199-8 at 4-5.

         Cotton Exchange 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]

         On March 29, 2019, Defendant Campo filed a motion for summary judgement, R. Doc. 162, which the Court granted in part and denied in part, R. Doc. 190. With respect to Cotton Exchange's breach of contract and breach of warranty claims against Campo, summary judgement was granted because Campo and Supreme Bright's agreement contained language requiring Supreme Bright to obtain Campo's explicit consent before assigning their agreement to a third party. Id. at 8. However, with respect to Cotton Exchange's negligence claims against Campo, summary judgement was denied because part of Cotton Exchange's complaint alleges it sustained damage caused by Campo during its ownership of the property. Id. at 10.

         On March 22, 2019, Defendant CRS filed a motion to dismiss contending Cotton Exchange had no right of action in contract or tort. R. Doc. 156. On May 16, 2019, the Court denied CRS's motion, holding Supreme Bright retained its personal right to sue CRS after the sale to Cotton Exchange and thus validly transferred this right to Cotton Exchange over a year after the sale pursuant to the Assignment and Assumption Agreement. R. Doc. 198.


         In the instant motion, Defendant Xcel contends Cotton Exchange was not assigned the personal right to sue Xcel under two separate Aaon Unit repair contracts (R. Doc. 195-5; R. Doc. 195-5) or a fan coil unit cleaning (“FCU”) contract (R. Doc. 195-6). R. Doc. 195-1 at 2-3. According to Xcel, the Assignment and Assumption Agreement assigned the Preventative Maintenance Contract only.[2] Id. at 4. Furthermore, Xcel submits a lack of valid assignment warrants a dismissal of the claims related to the Aaon Unit and FCU contracts because a party not in privy to a contract cannot recover for its breach. Id. at 8. Additionally, Xcel argues the subsequent purchaser rule bars Cotton Exchange from recovering under the Aaon Unit and FCU contracts because “an owner of property has no right or actual interest in recovering from a third party for damage which was inflicted on the property before his purchase.” Id. at 8-9. Finally, Xcel points to this Court's order granting partial summary judgment in favor of Campo, arguing that order is controlling here.

         In opposition, Cotton Exchange acknowledges it has not sued Xcel for its work under the two Aaon Unit repair contracts, and therefore, does not oppose summary judgment on those contracts. R. Doc.199 at 2. Next, Cotton Exchange argues the Settlement Agreement reached between Supreme Bright and Cotton Exchange on January 31, 2017 amended the Assignment and Assumption Agreement specifically assigning to Cotton Exchange Supreme Bright's personal right to sue on the FCU contract. Id. at 3. Thus, Cotton Exchange contends, Xcel's motion to dismiss Cotton Exchange's claims based on that contract should be denied. Lastly, Cotton Exchange avers the Court's ruling on Defendant Campo's motion for summary judgement is not applicable here, as Supreme ...

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