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Cenac v. Orkin, L.L.C.

United States Court of Appeals, Fifth Circuit

October 18, 2019

CHRISTOPHER E. CENAC, JR., Doctor; AUDRA CENAC, Doctor, Plaintiffs - Appellants
ORKIN, L.L.C., Defendant-Appellee

          Appeal from the United States District Court for the Eastern District of Louisiana

          Before DAVIS, HO, and ENGELHARDT, Circuit Judges.


         Plaintiffs, Drs. Christopher and Audra Cenac, appeal the district court's summary-judgment dismissal of their claims against Defendant, Orkin, L.L.C. The Cenacs contracted with Orkin to protect their property against termites. In 2015, they discovered their home had become infested with Formosan termites. Orkin contends that, based on various contractual provisions, it is not liable for the cost of repairing the damage. The Cenacs filed this 28 U.S.C. § 1332 diversity action against Orkin asserting numerous claims under Louisiana law. We AFFIRM the district court's dismissal of all claims except the Cenacs' claim that Orkin was negligent or grossly negligent in directing and approving installation of a vapor barrier under their home. As to that claim, we VACATE the district court's judgment and REMAND.

         I. Factual Background

         In 2004, the Cenacs bought a house in Houma, Louisiana, from Allen Eschete. Eschete had a contract with Orkin, executed in 1991, entitled "Subterranean Termite Agreement" (1991 Agreement), in which Orkin agreed to treat the house for the prevention of subterranean termites. The contract also provided for an "Orkin Continuous Protection Guarantee" in the form of a "Full Renewable Subterranean Termite Home Ownership Repair Guarantee" (OR Guarantee). The OR Guarantee obligated Orkin to retreat when required and to repair any new damage to the house or its contents caused by subterranean termites.[1] The 1991 Agreement provided in the title of the agreement and at the conclusion of the paragraph containing the OR Guarantee: "DOES NOT PROTECT AGAINST FORMOSAN TERMITES." In their complaint, the Cenacs alleged that the OR Guarantee was transferred to them, with Orkin's approval and agreement, when they purchased their home from Eschete.

         In 2007, Orkin sent the Cenacs a letter informing them that when their home was originally treated, "the treatment and termiticides used were designed to stop the Native Subterranean Termite." The letter explained that such treatment was ineffective against the Formosan termite and that a "new termiticide was developed to stop and kill the Formosan and the Native Subterranean Termite." The letter stated that Orkin was making a "special offer" to its current customers who did "not have Formosan Termite coverage." It further provided: "This Supplemental Treatment will not affect your current coverage in any way at all. This treatment allows Orkin to retreat your home with the new termiticides designed to stop and kill Formosan and Native Subterranean termites."

         The Cenacs met with an Orkin representative in June 2007, at which time they paid Orkin an additional sum of money to have their home, as well as a large shed on the property, treated with the new termiticides for protection against both Formosan and subterranean termites. The Cenacs also executed two written contracts at that time: (1) a "Special Service Agreement" (SSA) and (2) a "Residential Single Family Dwelling, Louisiana Formosan and Subterranean Termite Retreatment Agreement, Orkin Continuous Protection Plan" (CPP). The Cenacs contend that the Orkin representative assured them during the meeting and afterwards that they were obtaining an OR Guarantee, including the damage repair part of that guarantee, for all types of termites. The Cenacs thus believed that their 2007 transaction with Orkin expanded the OR Guarantee such that Orkin was contractually obligated to repair damage caused not only by native subterranean termites, but also by Formosan termites.

         From 2004 through 2015, an Orkin representative inspected the Cenacs' home for evidence of termite infestation and any conditions that might be conducive to termite infestation. In 2013, Orkin noted on an inspection report that a condition conducive to termite infestation was present at the home. Specifically, the report noted that there was excessive moisture in the crawl space of the home. The Cenacs alleged that they "took corrective measures at [Orkin's] direction, which [Orkin] approved as adequate." They asserted that, as directed by Orkin, they installed a vapor barrier under their home, and that an Orkin representative approved the installation. The Cenacs further alleged that Orkin continued to accept their payments and "assure[d] them that they still qualified for [Orkin's] warranty coverage."

         In May 2015, the Cenacs noticed termites swarming around and coming out of one of the windows of the second floor of their house. They immediately notified Orkin, and Orkin sent out a technician to retreat the area near the window. The Cenacs vacated their home for two days during this time, but when they returned, they found more, larger swarms of termites coming from two windows near the window that had been retreated.

         The Cenacs notified Orkin again, and after assessing the situation, Orkin advised them that "certain destructive work to the interior" of the home would be necessary to investigate further areas of potential termite activity. The Cenacs alleged that Orkin agreed to reimburse them for the costs associated with such destructive investigation. They further alleged that upon Orkin's advice and authorization, they hired a contractor to perform some interior demolition in their home. The contractor discovered live, active Formosan termites and extensive termite damage in the kitchen area of the home. The Cenacs contended that although Orkin authorized the demolition and expressly agreed to reimburse them, Orkin refused to reimburse them for the initial destructive work.

         After their discovery of termites in the kitchen, the Cenacs discovered other areas of live termites and termite damage in their home. They contended that Orkin "failed and refused to participate with [them] in the necessary investigation of termite activity and damage, or to commit to repairing [their] home." By September 2015, the Cenacs' home was uninhabitable and in a state of partial destruction. They were forced to vacate their home indefinitely until the full extent of the termite infestation was uncovered, their home retreated, and repairs of the termite damage and investigatory demolitions completed.

         Because Orkin refused to accept responsibility for the Formosan termite damage, the Cenacs filed the instant lawsuit. They also hired contractors to do more demolition in order to locate all termite activity and damage, removed and placed in storage all contents of their home, and moved into a trailer home on their property.

         On April 18, 2016, Orkin paid the Cenacs $222, 168, of which $81, 800 was to reimburse them for relocation expenses and the lease of a trailer home, and of which $140, 368 was for demolition expenses and the "estimated cost to repair the termite damage." The Cenacs contend, however, that various contractors have estimated that it will cost between $860, 000 and $1.6 million to repair and rebuild their home.

         II. Procedural History

         In their complaint, the Cenacs assert claims against Orkin for (1) violation of the Louisiana Unfair Trade Practices Act; (2) breach of contract; (3) breach of an insurer's duties of good faith and prompt payment under the Louisiana Insurance Code; (4) detrimental reliance; (5) unjust enrichment;[2](6) negligence and/or gross negligence; and (7) negligent misrepresentation.

         In its answer, Orkin admitted that it entered into the 1991 Agreement with Eschete, that the 1991 Agreement was subsequently transferred to the Cenacs after they purchased the property, and that the Cenacs paid the annual renewal fee for that contract following the date of transfer. Orkin further admitted that it entered into the Special Service Agreement (SSA) with the Cenacs in 2007.

         Orkin subsequently filed a motion for summary judgment seeking dismissal of all the Cenacs' claims based on the provisions of the 1991 Agreement[3] and based on the provisions of the Orkin Continuous Protection Plan (CPP). Orkin pointed out that the CPP provided for a 10-year renewable Formosan and subterranean termite retreatment service but expressly provided that Orkin's service did "not cover any damage to the structure or its contents." Furthermore, the CPP provided that the customer "expressly release[ed] Orkin from any claims for termite damage or repair." Orkin contended that its liability consequently was limited to retreatment only and that it had no liability for any repairs to the home or its contents. Orkin also filed five partial motions for summary judgment addressing individually the various claims asserted by the Cenacs and seeking dismissal.

         The Cenacs also filed a motion for summary judgment requesting the district court to determine, as a matter of law, that all provisions of the 1991 Agreement, including the entire OR Guarantee, were transferred to them when they purchased the home.

         The district court granted the Cenacs' motion for summary judgment.[4]It also granted all of Orkin's summary judgment motions, ultimately dismissing the entirety of the Cenacs' claims.[5] The Cenacs timely appealed.

         III. Discussion

         This court reviews a district court's grant of summary judgment de novo.[6] Under Rule 56 of the Federal Rules of Civil Procedure, "the court shall grant summary judgment if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law."[7] When jurisdiction is based on diversity, this court must apply the substantive law of the forum state, here Louisiana.[8]

         A. Contractual Claim for Formosan Termite Damage Repair

         The Cenacs contend that the district court erred in granting summary judgment in favor of Orkin because there are genuine issues of material fact as to whether Orkin is contractually obligated to pay for the cost of repairing the Formosan-related termite damage to their home. They assert that the district court "overlooked" factual evidence that, if true, would defeat summary judgment. The Cenacs further argue that the district court failed to consider "clear ambiguities" in the contract forms, as modified by handwriting and originally written.

         Under Louisiana law, "interpretation of a contract is the determination of the common intent of the parties."[9] In ascertaining the common intent, "[t]he words of a contract must be given their generally prevailing meaning."[10]In addition, "[w]hen the words of a contract are clear and explicit and lead to no absurd consequences, no further interpretation may be made in search of the parties' intent."[11] If the plain text of a contract is subject to two or more reasonable interpretations, a court may look to parol evidence to determine the parties' intent.[12] Parol evidence, however, may not be used to create ambiguity in an otherwise unambiguous contract.[13] "Under Louisiana law, the interpretation of an unambiguous contract is an issue of law for the court."[14]

         As this court has described, interpretation of a written contract under Louisiana law "involves a two-step process."[15] First, the court must look to the plain text of the contract to determine whether its meaning is clear and unambiguous. If the text is clear and unambiguous, the court may not go beyond the text for further interpretation. If, however, the plain text is subject to more than one reasonable interpretation, the court may then resort to parol evidence to determine the parties' intent.[16] "In the context of contract interpretation, only when there is a choice of reasonable interpretations of the contract is there a material fact issue concerning the parties' intent that would preclude summary judgment."[17] Accordingly, careful review of the text of the agreements at issue is in order.

         1. 1991 Agreement

         The Cenacs' claim that Orkin is contractually obligated to pay for Formosan-related repair costs originates with the 1991 Agreement between Orkin and Eschete. As stated above, the 1991 Agreement contained an OR Guarantee, obligating Orkin to retreat the house when required and, more importantly, to "repair any new damage" to the house or its contents caused by native subterranean termites. The district court determined that the entirety of the 1991 Agreement, including the OR Guarantee, was transferred to the Cenacs when they purchased the home. Orkin does not challenge that ruling on appeal.

         Although Orkin agreed to a repair obligation as part of the OR Guarantee in the 1991 Agreement, the contract is clear and unambiguous that Orkin's repair obligation "is strictly limited to any new Subterranean Termite damage." Moreover, the contract specifically states in the title and at the end of the paragraph containing the OR Guarantee that it does not protect against Formosan termites.

         The Cenacs contend, however, that in 2007 Orkin agreed to extend its OR Guarantee (and, thus, its repair obligation) to include damage caused by Formosan termites. They acknowledge that they signed two documents at that time-the Special Service Agreement (SSA) and the Continuous Protection Plan (CPP)-relating to their home and shed and that they made two substantial payments to Orkin. The Cenacs assert (and Orkin agrees) that it is unclear which document applies to their home and which document applies to their shed. Nonetheless, they maintain that Orkin's branch manager assured them that Orkin was expanding its OR Guarantee to include Formosan termites. As stated above, however, we must first look to the plain text of the 2007 agreements to determine the parties' intent.

         2. CPP

         The CPP states that "Orkin shall treat Customer's structure" for Formosan and subterranean termites. It provides for a "10-year renewable Formosan and subterranean termite retreatment service." The agreement specifically states: "This Service does not cover any damage to the structure or contents." The CPP further provides: "Orkin is performing a service and expressly disclaims any guarantee of any kind, whether express or implied for any injury or damage related to the service performed. Customer expressly releases Orkin from any claims for termite damage or repair." These provisions of the CPP clearly and unambiguously show Orkin's intent not to undertake any type of termite repair obligation. Moreover, the provisions also clearly and unambiguously establish that the Cenacs agreed to relinquish any claims for termite damage or repair.

         The Cenacs, however, assert that the CPP contained "several ambiguities" that should be resolved in their favor for summary judgment purposes. They point to a note which was handwritten diagonally across the bottom half of the document providing: "Add on to original acct #588129." The Cenacs submit that this handwritten note meant, as the Orkin representative told them, that a repair obligation for Formosan termite damage was being "added to" the original OR Guarantee. We find this argument unpersuasive. The handwritten note did not indicate that it was canceling out the clear and unambiguous provisions limiting Orkin's liability to retreatment only. If anything, the note indicated that a new agreement (the CPP), which provided for no termite repair obligation (even as to subterranean termites), was being added to the Cenacs' account. Furthermore, as the district court rightly noted, the CPP contains an integration clause which provides, in pertinent part, that the terms of the CPP "may not be amended or altered unless a written change is approved and signed by a corporate officer of Orkin, and it has been approved by the Louisiana Structural Pest Control Commission." The integration clause further provides: "No other employees or agents of Orkin have authority to amend or alter any part of this Agreement." Consequently, any statements made by an Orkin representative to the Cenacs that Orkin was agreeing to a Formosan termite repair obligation could not alter the clear terms of the CPP.

         The Cenacs also point out that on the second page of the CPP, there are two provisions referencing "claims for termite damage repairs" such that there is an ambiguity as to whether the CPP, in fact, excludes such claims. The first sentence states that the customer "waives any claims for damages except for termite damage repairs as set out above." As the district court concluded, however, the CPP does not "set out above" any claims for termite damage repairs, but instead excludes all such claims. The second sentence which begins, "[w]ith the sole exception of any claim for termite damage repairs," also does not render ambiguous the CPP's clear and unambiguous waiver of claims for termite damage on the first page and cannot be read in isolation from the other terms of the agreement. In sum, like the district court, we determine that under the CPP, Orkin owed no obligation to the Cenacs to repair any type of termite damage.

         3. SSA

         The other agreement signed by the Cenacs in 2007, the SSA, contains very few provisions. Under "type and no. of structures to service," a handwritten note provides, "Residential - 1." Under "pests to be treated," another handwritten note provides: "Retreat to cover subterranean and Formosan termites." Under "Special Instructions," the box next to "1 Treatment" is checked. Next to "Products Purchased," an amount of $1708 is handwritten. Above the amount, the SSA states: "I agree to pay Orkin Pest Control the below amount at this time for treatment of the pest(s) indicated." Other than a lengthy provision calling for arbitration, the only other substantive provision states: "This Special Service Agreement is guaranteed for 30 days only and WILL NOT provide permanent control. For CONTINUOUS protection and control, we strongly recommend a REGULAR PEST CONTROL SERVICE."

         Like the district court, we conclude that the clear and unambiguous provisions of the SSA obligated Orkin to perform a single treatment with an express warranty disclaimer beyond thirty days. Nothing in the plain text of the SSA indicates that Orkin was undertaking any type of termite ...

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