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B & P Restaurant Group, LLC v. Delta Administrative Services, LLC

Court of Appeals of Louisiana, Fifth Circuit

September 4, 2019

B & P RESTAURANT GROUP, LLC, ET AL
v.
DELTA ADMINISTRATIVE SERVICES, LLC, ET AL

          ON APPEAL FROM THE TWENTY-FOURTH JUDICIAL DISTRICT COURT PARISH OF JEFFERSON, STATE OF LOUISIANA NO. 767-037, DIVISION "C" HONORABLE JUNE B. DARENSBURG, JUDGE PRESIDING

          COUNSEL FOR PLAINTIFF/APPELLANT, B & P RESTAURANT GROUP, LLC, ET AL Richard B. Ehret, Ross A. Ledet.

          COUNSEL FOR DEFENDANT/APPELLEE, DAVID LAWRENCE Norman A. Mott, III, Michael S. Blackwell.

          Panel composed of Judges Fredericka Homberg Wicker, Jude G. Gravois, and Stephen J. Windhorst.

          STEPHEN J. WINDHORST JUDGE

         Appellants/plaintiffs, B & P Restaurant Group, LLC, d/b/a the Rum House of New Orleans, LLC, Highlights Catering & Gourmet Shop, LLC, Island Time Management, LLC, The Rum House of Baton Rouge, LLC, and the Red Dog Diner, LLC ("appellants") appeal the district court's granting of the motion for summary judgment filed by David Lawrence, appellee/defendant ("appellee" or "Lawrence") and the dismissal with prejudice of all appellants' claims against him. For the following reasons, we reverse the district court's judgment and remand for further proceedings.

         FACTS AND PROCEDURAL HISTORY

         Appellee, Lawrence, is the sole owner and manager of Delta Administrative Services, LLC ("DAS"), which provides administrative services, including payroll, tax administration, workers' compensation administration, risk management and human resource issues. Appellants each entered into a contract for services with DAS entitled "Service Agreement," which Lawrence signed on behalf of DAS. Pursuant to this agreement, DAS was responsible for withholding and remittances of pay-roll related taxes, including those taxes under FICA, FUTA, and SUTA.[1]

         Under Administrative Fees, each service agreement states the "CLIENT agrees to pay a fee to DAS for services" and that "[t]hese fees will be charged on each payroll, as applicable." The fee schedule attached to the service agreement reflects that the administrative fee (also referred to herein as the "service fee") is 1.50% of gross payroll. The fee schedule also states the following:

This rate is on gross payroll only. These rates include the additional charges for FICA, FUTA, SUTA, and Workers Compensation. The only additional charges will be any company paid benefits you choose to offer your employees. There is no reduction upon reaching the cut­offs for FUTA and SUTA.

         On December 1, 2016, appellants filed a petition for damages against DAS and Lawrence, asserting claims based on breach of contract, intentional misrepresentation, and violation of the Professional Employer Organizations (PEO) statute, La. R.S. 23:1761 et seq. The only claim asserted against Lawrence individually is the intentional misrepresentation claim. Appellants allege that after maximum SUTA and FUTA tax thresholds had been met, DAS continued to charge appellants for SUTA and FUTA taxes as if they were still owed, and did not pay this collected money to the appropriate taxing authorities but instead wrongfully retained the overcharged amounts for itself.

         Under the intentional misrepresentation claim, appellants allege that DAS and Lawrence misrepresented or suppressed material facts to obtain an unjust advantage over appellants by failing to advise them or state in the service agreements that DAS would continue charging appellants FUTA and SUTA taxes after the maximum thresholds were met and would keep those funds as additional, hidden fees. Appellants assert that if they had known DAS and Lawrence would continue charging FUTA and SUTA after the maximum thresholds were met and would retain those amounts as additional, hidden fees, Plaintiffs would never have agreed to do business with them.

         On November 7, 2017, appellants filed a first supplemental petition for damages, asserting a claim against DAS and Lawrence individually alleging overcharges involving workers' compensation premiums. The supplemental petition was filed after the May 31, 2017 motion for summary judgment at issue here. On May 31, 2017, Lawrence filed a motion for summary judgment, seeking dismissal of appellants' claims against him personally based on La. R.S. 12:1320, arguing that the statute frees him from individual liability for the debts, obligations or liability of DAS, as the owner and sole member of DAS. Lawrence asserted that he is not liable for DAS's alleged breach of the agreement because he is not a party to the agreement; he is not liable for the alleged intentional misrepresentation because he is shielded from liability under La. R.S. 12:1320 and appellants cannot prove fraud; and he is not liable for alleged breaches under La. R.S. 23:1763 because this statute creates a duty for the employer (DAS), not its member. After Lawrence filed his motion for summary judgment, the parties participated in written discovery and depositions were taken. Lawrence filed a second summary judgment motion with DAS on March 20, 2018.[1] In this second summary judgment motion, DAS and Lawrence sought dismissal of all of appellants' claims.

         In their opposition to the motion for summary judgment, appellants attached excerpts of depositions from multiple individuals who were involved with hiring DAS to provide payroll services and/or worked with Lawrence relative to the services DAS provided appellants, DAS invoices, DAS detailed cost reports, correspondence with Lawrence and the fee schedule. In the depositions, the appellant representatives asserted that they had conversations with Lawrence regarding the DAS rates and he never disclosed that the FUTA and SUTA taxes continued after thresholds were met, or that these amounts were converted to administrative fees for DAS. The appellant representatives also testified that Lawrence did not disclose to them during negotiations or contract discussions that any part of the FUTA or SUTA taxes were actually service fees.

         An appellant representative of Island Time Management, LLC stated in her deposition that, in January 2014, Island Time informed DAS that it needed taxes broken out from administrative fees on its invoices.[2] Thereafter, Island Time believed that the invoices separated the two from each other but later learned that they were not.

         In opposition, appellants also asserted that each invoice constituted a misrepresentation because even when the FUTA and SUTA taxes were converted to administrative fees, on the invoices, the amount was still represented as FUTA and SUTA taxes. Specifically, on the invoices, the administrative fee is separated out from the other payments, such as gross payroll, hourly employee, salary employee and workers' compensation. ...


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