Opinion ID: 10313
Heading Depth: 2
Heading Rank: 3

Heading: Liability of Humphrey, CCC, and COI

Text: 46 C & B seeks to hold Humphrey solidarily liable with McDonald for his breach of trust and purported fraud. Following the bench trial, the district court found as a fact that Humphrey asked McDonald on more than one occasion to disclose his interest to C & B, and that McDonald assured Humphrey that he had done so. Accordingly, it found that Humphrey had not intentionally aided McDonald's breach and declined to hold him liable. 47 Questions of solidary liability in Louisiana are governed by La.Civ.Code art. 2324, section (A) of which reads: He who conspires with another person to commit an intentional or willful act is answerable, in solido, with that person, for the damage caused by such act. This article was amended in 1987. Its prior version stated: He who causes another person to do an unlawful act, or assists or encourages in the commission of it, is answerable, in solido, with that person, for the damage caused by the act. In Chrysler Credit Corp. v. Whitney Nat'l Bank, 51 F.3d 553 (5th Cir.1995), we interpreted the amended version, stating: 48 Although the 1987 amendments changed the language of La.Civ.Code art. 2324(A), the pre-amendment conspiracies still provide guidance as to the applicable law in regards to conspiracies. National Union Fire Ins. Co. v. Spillars, 552 So.2d 627, 634 (La.Ct.App.1989), writ denied, 556 So.2d 61 (La.1990) (stating that the 1987 amendment to art. 2324 rephrased it in terms of conspiracy, conformably to prior jurisprudence). 49 Id. at 557 n. 2. We also set out the legal standard established by this provision: 50 The unlawful act is tortious conduct. The action is for damages caused by acts committed pursuant to a formed conspiracy, and all of the conspirators will be regarded as having assisted or encouraged the performance of those acts. The plaintiff must therefore prove an unlawful act and assistance or encouragement that amounts to a conspiracy. This assistance or encouragement must be of such quality and character that a jury would be permitted to infer from it an underlying agreement and act that is the essence of the conspiracy. 51 Id. at 557 (citations omitted). The 1987 amendment rephrased the article in terms of conspiracy: The plaintiff must therefore prove an unlawful act and assistance or encouragement that amounts to a conspiracy. National Union Fire Ins. Co. v. Spillars, 552 So.2d 627, 634 (La.Ct.App.1989), writ denied, 556 So.2d 61 (La.1990). Accordingly, conspiracy is required before liability can be imposed under Louisiana law for aiding and abetting. Guidry v. Bank of LaPlace, 661 So.2d 1052, 1058 (La.Ct.App.1995), writ denied, 666 So.2d 295, and writ denied, 666 So.2d 295, and writ denied, 666 So.2d 296 (1996). 52 C & B alleges two intentional acts with which to find Humphrey liable under a conspiracy theory: (1) breach of fiduciary duty and (2) fraud. The district court found that C & B failed to establish the requisite acts under La.Civ.Code art. 2324. Specifically, the court found that (1) Humphrey asked McDonald more than once to disclose his interest in COI to C & B and (2) McDonald assured Humphrey that such disclosure had been made. The court found Humphrey's actions to be neither intentional nor willful. 53 The district court's factual findings on conspiracy are not clearly erroneous. The court's findings do not support an inference that Humphrey conspired with McDonald to commit an unlawful act. In fact, Humphrey's insistence that McDonald disclose his self-dealing directly contradicts such an inference. Without a conspiracy, there can be no violation of article 2324. 1
54 In the course of closing the deal with Hanover, C & B released COI and its officers and directors from liability relating to the transactions involved in this lawsuit. The district court found that the release was valid, dismissed COI and Humphrey, and awarded them attorney's fees. While we agree with the district court's ruling on the validity of the release, we find the court's award of attorney's fees to be erroneous. 55 C & B contends that the release is invalid because it was procured by fraud and the fear of economic injury and violates public policy. It also contends that the release does not cover Humphrey personally. C & B's assertions are conclusory and have no supporting authority. 56 First, assuming that the release was procured through fraud, C & B cannot show that it reasonably relied on any representations. C & B admits that it already knew that McDonald owned a 50 percent interest in COI; thus, it was on notice that McDonald had engaged in double-dealing and may have diverted corporate opportunities. Second, C & B cites no authority for the proposition that fear of economic injury voids a release. Instead, it relies on La.Civ.Code art. 3079, which states that a contract may be rescinded in case of mistake, fraud, or threat of violence. Third, C & B's argument that the release does not cover Humphrey is specious: as the district court found, the plain language of the release includes officers, directors, and shareholders of COI. Finally, while contracts that violate public policy can be void in limited instances, C & B once again fails to cite any authority for the proposition that those procured by fraud fall within such an exception; in fact, such a finding would render article 3079's prohibition superfluous. 57 C & B is correct, however, with regard to the award of attorney's fees. In Louisiana, attorney's fees are not recoverable unless specifically included in the contract itself or where a fair reading of the agreement suggests such costs were contemplated to be covered. Perry v. Chevron U.S.A., Inc., 887 F.2d 624, 629 (5th Cir.1989); see also Spiers v. Seal, 426 So.2d 631, 636 (La.Ct.App.1982), writ denied, 432 So.2d 269 (1983), and writ denied, 432 So.2d 270 (1983), and writ denied, 433 So.2d 150 (1983). There is no such condition in the agreement in the case sub judice. 58 Humphrey, COI, and CCC argue that attorneys' fees which are incurred as a result of the wrongful act of another are a recoverable item of damages. They rely on Ramp v. St. Paul Fire and Marine Ins. Co., 263 La. 774, 269 So.2d 239 (1972), and Jenkins v. St. Paul Fire and Marine Ins. Co., 393 So.2d 851 (La.Ct.App.1981), aff'd, 422 So.2d 1109 (La.1982). These cases are distinguishable, however. Both involved attorney malpractice claims and allowed recovery for the cost of hiring new attorneys to do what the original, negligent attorneys had failed to do. Ramp and Jenkins only allowed the plaintiff to recover the costs of hiring attorneys to pursue a separate action. In contrast, the appellees seek the cost of having attorneys litigate the claim before the court. 59 The holding of Ramp is applicable here. Plaintiff is entitled to recover the loss he has sustained by reason of having to pay attorney fees to indirectly pursue his claim against the railroad, which the defendants had obligated themselves to do without charge except on a contingent basis. The award of this item of loss or damage does not amount to an award of attorney fees incurred in order to pursue the malpractice action as such, but is to compensate for the additional cost, i.e., attorneys fees, incurred by plaintiff in order to have the railroad's liability to him judicially determined. 60 Jenkins, 393 So.2d at 859. 61 The appellees also contend that the district court was entitled to award attorney's fees under its inherent supervisory powers, citing Chambers v. NASCO, Inc., 501 U.S. 32, 111 S.Ct. 2123, 115 L.Ed.2d 27 (1991). The inherent supervisory power in Chambers, however, stemmed from the court's need to protect the integrity of the judicial process from unethical litigants. Nothing in Chambers suggests that power allows a court to punish behavior such as C & B's: a breach of contract that does not undermine the integrity of the judicial process. For these reasons we reverse the award of attorney's fees.