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Cotton Exchange Investment v. XCEL Air Conditioning

United States District Court, E.D. Louisiana

August 21, 2019


         SECTION “L” (5)

          ORDER & REASONS

          Eldon E. Fallon U.S. District Court Judge.

         Before the Court is a motion seeking reconsideration of the Court's partial grant of summary judgment filed by Plaintiff Cotton Exchange Investment Properties LLC (“Cotton Exchange”). R. Doc. 229. Defendant John T. Campo (“Campo”) opposes the motion. R. Doc. 237. 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 Campo and Commercial Renovation Services, Inc. (“CRS”) during the hotel's renovation. R. Doc. 23 at 6, 10, 16. Plaintiff 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 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 the hotel's renovation. Id. 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 for 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 renovation 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. Id. at 4. Thereafter, Cotton Exchange executed the purchase agreement with Supreme Bright (the “Assignment and Assumption Agreement”). Id. Notably, section 10.3 of the contract Campo held with Supreme Bright addresses the issue of the assignment of rights, stating:

The Owner [Supreme] and Architect [Campo], respectively, bind themselves, their agents, successors, assigns and legal representatives to this Agreement. Neither the Owner nor the Architect shall assign this Agreement without the written consent of the other, except that the Owner may assign this Agreement to a lender providing financing to the Project if the lender agrees to assume the Owner's rights and obligations under this Agreement.

R. Doc. 162-5 at 16. Section 10.5 of the contract states, “[n]othing contained in the Agreement shall create a contractual relationship with or cause of action in favor of a third party against either the Owner or Architect.” Id.

         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 to Assignee 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 6. Plaintiff claims it had to close the hotel because of this extensive damage. Id. at 6. In December 2015, Plaintiff alleges it terminated the HVAC contract with Xcel pursuant to its terms and notified Xcel of the damage on three occasions. R. Doc. 1 at 5, 6. Xcel allegedly did not respond to the demand for indemnity. Id. at 6. Additionally, Plaintiff avers it demanded indemnity from CRS and Campo, but was also unsuccessful in these demands. R. Doc. 23 at 7. Consequently, 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. Id. at 7-16.[1]

         On March 29, 2019, Defendant Campo filed a motion for summary judgment, R. Doc. 162, which the Court granted in part and denied in part on May 3, 2019, R. Doc. 190. With respect to Cotton Exchange's breach of contract and breach of warranty claims against Campo, the Court granted summary judgment because sections 10.3 and 105 of 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, which Supreme Bright never obtained. Id. at 8. With respect to Cotton Exchange's negligence claims against Campo, however, the Court denied summary judgment ...

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