Court Opinion

ID: 801410
Source: CourtListenerOpinion
Date Created: 2012-06-01 14:49:35+00
Date Added: 2024-06-11T18:00:00.094416
License: Public Domain

Case: 11-30788     Document: 00511873040         Page: 1     Date Filed: 05/31/2012

            IN THE UNITED STATES COURT OF APPEALS
                     FOR THE FIFTH CIRCUIT  United States Court of Appeals
                                                     Fifth Circuit

                                                                            FILED
                                                                           May 31, 2012

                                       No. 11-30788                        Lyle W. Cayce
                                                                                Clerk

CHRISTOPHER WHITE,

                                                  Plaintiff-Appellant
v.

STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY; STATE
FARM LIFE INSURANCE COMPANY; STATE FARM FIRE & CASUALTY
COMPANY; STATE FARM GENERAL INSURANCE COMPANY,

                                                  Defendants-Appellees

                   Appeal from the United States District Court
                       for the Middle District of Louisiana
                             USDC No. 3:09-CV-991

Before REAVLEY, HAYNES, and GRAVES, Circuit Judges.
PER CURIAM:*
        Plaintiff-Appellant Christopher White appeals the district court’s
judgment dismissing with prejudice his claim for bad-faith breach of contract
and his state-law racial discrimination claim against Defendant-Appellants
State Farm Mutual Automobile Insurance Company, State Farm Life Insurance

        *
         Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5TH CIR.
R. 47.5.4.
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Company, State Farm Fire & Casualty Company, and State Farm General
Insurance Company (collectively “State Farm”).
      We AFFIRM the judgment with respect to the discrimination claim. With
respect to the contractual claim, we REVERSE the judgment and REMAND the
case for further proceedings.
                                I. BACKGROUND
      White worked as an agent under a one-year agency agreement, effective
from March 1, 2007, until February 29, 2008, during which he operated an
agency in Baton Rouge, Louisiana. The agency agreement obliged White to
establish a State Farm insurance agency and operate it according to State
Farm’s policies. The agreement states that “[State Farm] and [White] expect
that by entering into this Agreement, and by the full and faithful observance and
performance of the obligations and responsibilities herein set forth, a mutually
satisfactory relationship will be established and maintained.” The agreement
obliged State Farm to allow White to control his daily activities and to exercise
his own judgment in running his agency and otherwise carrying out the
agreement. State Farm was also obliged to provide White with information and
guidance regarding the operation and management of the agency, to “from time
to time . . . designate specific employees to offer advice to [him] regarding [his]
activities,” and to invite White to meetings “for the purpose of introducing new
products, ideas, services and procedures, promoting sales, and furnishing [him]
with assistance, guidance, and consultation.” The agreement did not guarantee
renewal. It stated that “State Farm has no obligation to offer any additional
agreement, and State Farm reserves the right to decide whether or not to offer
an additional agreement to the agent.”
      State Farm designated Eric Andrews and John Michelli to provide White
with assistance in operating his agency. At his deposition, White testified that
Andrews and Michelli did not allow him to control the daily operation of the

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agency office, nor which employees he hired or retained. He was not allowed to
select the office location, and he did not have control over which State Farm
insurance products on which to focus his marketing efforts.
      Andrews and Michelli failed to provide White with assistance, beyond
some guidance as to the hours the agency’s office should be open. White would
receive a call from Andrews and Michelli about once a month, whereas another
State Farm agent on a temporary contract testified that Andrews would call him
once a week. At one point White suggested that Andrews meet with him on a
weekly basis, but Andrews came to only one meeting. He arrived smelling like
liquor, either intoxicated or suffering from a hangover. On another occasion,
Andrews cancelled a meeting with White at the last minute, saying he was “too
hung over” to meet. And he was intoxicated when he met with White at a
gathering of State Farm agents. White reported the issues with Andrews’s
drinking to Michelli and to a more senior State Farm representative, Robert
Englund.
      When White, Andrews, and Michelli met for White’s six-month review,
Michelli and Andrews were largely satisfied with White’s performance. But
Michelli called White just over a week later and said that he had learned that
White had reported Andrews’ drinking to Englund, and he was angry with White
for that. Around the same time as the call, Michelli emailed White a memo in
which Michelli expressed an assessment of White’s overall performance that was
much more critical than the view he expressed at the six-month review meeting.
White was also held responsible for customer service incidents that were outside
of his or his subordinates’ control. Fearing more retaliation from Michelli, White
was reluctant to complain to more senior State Farm staff about Michelli and
Andrews’ failing to assist him. On January 4, 2008, State Farm told White he
would not be offered renewal after his contract expired on February 29.

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          White is African-American. Believing he had been treated differently
than white first-year agents, he filed a discrimination charge with the Equal
Employment Opportunity Commission in November 2008. The EEOC sent him
a right-to-sue letter on April 27, 2009. He filed this suit on July 24, 2009, in the
19th Judicial District Court for the Parish of East Baton Rouge, Louisiana.
      White’s petition alleged that he had been treated differently from other
first-year agents because of his race, and he related various circumstances
suggesting racial bias. The petition’s factual allegations also relate some of the
ways in which Andrews and Michelli had failed to support White in running the
agency. The petition stated that Andrews “repeatedly showed up for White’s
evaluations . . . while under the influence of alcohol,” that Michelli “became
enraged and threatening” when White complained about Andrews’ drinking, and
that White was given unfavorable performance reviews on the basis of routine
customer complaints.          White brought claims under Title VII for racial
discrimination and retaliation, a racial discrimination claim under the Louisiana
Employment Discrimination Law (“LEDL”), LA. REV. STAT. § 23:301, et seq., a
retaliation claim under LA. REV. STAT. § 51:2256(1), a claim under Louisiana’s
“abuse-of-rights” doctrine, and a claim alleging that the above actions “were done
in bad faith and constitute breaches of Defendants’ implied duty to perform its
contractual obligations in good faith.” The petition cited LA. CIV. CODE art. 1983,
which makes contractual promises legally obligatory in Louisiana and requires
they be performed in good faith.1 The petition also cited LA. CIV. CODE art.

      1
          LA. CIV. CODE art. 1983 provides:
     Contracts have the effect of law for the parties and may be dissolved only through
     the consent of the parties or on grounds provided by law. Contracts must be
     performed in good faith.

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1994,2 which imposes monetary liability for breaching a contract, and Articles
19973 and 1998,4 which relate to the measure of damages for the breach.
      State Farm removed the case to federal court and then filed a motion to
dismiss the bad-faith breach-of-contract claim, the abuse-of-rights claim, and the
state-law retaliation claim. State Farm contended that the bad-faith breach-of-
contract claim and the abuse-of-rights claim were subject to the one-year
prescription period for delictual actions provided by LA. CIV. CODE art. 3492.
The district court granted the motion, concluding that those claims sounded in
tort, and were therefore subject to LA. CIV. CODE art. 3492’s one-year period.
      State Farm later moved for summary judgment on the merits of White’s
LEDL claim and his federal-law discrimination claims. State Farm contended
that White’s LEDL claim was prescribed under the one-year period provided by
LA. REV. STAT. § 23:303(D). State Farm also offered evidence that White’s

      2
          LA. CIV. CODE art. 1994 provides:
     An obligor is liable for the damages caused by his failure to perform a conventional
     obligation.
     A failure to perform results from nonperformance, defective performance, or delay
     in performance.
      3
          LA. CIV. CODE art. 1997 provides:
     An obligor in bad faith is liable for all the damages, foreseeable or not, that are
     a direct consequence of his failure to perform.

      4
          LA. CIV. CODE art. 1998 provides:
     Damages for nonpecuniary loss may be recovered when the contract, because of its
     nature, is intended to gratify a nonpecuniary interest and, because of the
     circumstances surrounding the formation or the nonperformance of the contract,
     the obligor knew, or should have known, that his failure to perform would cause
     that kind of loss.
     Regardless of the nature of the contract, these damages may be recovered also
     when the obligor intended, through his failure, to aggrieve the feelings of the
     obligee.

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                                      No. 11-30788

performance as an agent had not been satisfactory, in order to show a legitimate
non-discriminatory reason for declining to renew his contract. State Farm’s
summary judgment motion did not discuss the bad-faith breach-of-contract
claim. White mentioned the contract, however, in his response. Addressing
State Farm’s proffered non-discriminatory reason, White argued that his
performance could not have been unsatisfactory given State Farm’s failure to
support him as promised in the agreement.5 With respect to the LEDL claim,
White disputed when his claim accrued and argued that LA. REV. STAT.
§ 23:303’s one-year period should not apply.
      The district court granted the summary-judgment motion. The court
concluded that White’s LEDL claim accrued on January 4, 2008, when he was
informed he would not receive a new contract and prescribed one year later
under LA. REV. STAT. § 23:303. Regarding White’s contractual claim, the district
court stated:
    [I]n the opposition to the motion for summary judgment, plaintiff
    briefly mentions a breach of contract claim. Insofar as plaintiff may
    have intended reference to his claim of breach of the implied duty of
    good faith, that claim has already been dismissed, and the mention
    may be due simply to a typographical error. To the extent that
    plaintiff may have intended to assert a claim for breach of contract
    aside from the claim of breach of the implied duty of good faith, the
    Court’s review of the record has demonstrated no previous assertion
    of such a claim. Moreover, plaintiff has failed to direct the court to any
    specific provision of the contract which defendants are alleged to have
    breached. More importantly, plaintiff has failed to set forth evidence
    to establish a genuine dispute of fact regarding a breach of contract
    claim.
The district court then entered a judgment dismissing the entire case with
prejudice, and White filed this appeal.

      5
          White abandoned his Title VII claims.

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                                        II. DISCUSSION
A. Standard of Review
      We review the district court’s grant of a motion to dismiss de novo, viewing
the facts as pleaded in the light most favorable to the non-moving party. Bustos
v. Martini Club, Inc., 599 F.3d 458, 461 (5th Cir. 2010). We also review the
district court’s grant of summary judgment de novo, applying the same standard
as the district court. Chaney v. Dreyfus Serv. Corp., 595 F.3d 219, 228 (5th Cir.
2010). Summary judgment is appropriate “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.” FED. R. CIV. P. 56(a). In considering the evidence, we view
the facts in the light most favorable to the non-movant. Chaney, 595 F.3d at
229. “To determine issues of state law, we look to the final decisions of that
state’s highest court.” Id. In the absence of such a decision, we must attempt to
predict “how that court would resolve the issue if presented with the same case.”
Id. (internal citation and quotation marks omitted).
B. The LEDL Claim
      White contends that the district court erred in finding that his LEDL
claim is prescribed. We disagree. White brought his LEDL claim under LA. REV.
STAT. § 23:332(F),6 and LA. REV. STAT. § 23:303(D) provides that “[a]ny cause of
action provided in [LA. REV. STAT. §§ 23:301—72] shall be subject to a

      6
          Under § 23:332(F), an insurer may not:
    (1) Intentionally fail or refuse to appoint or to discharge any insurance agent, or otherwise to
    intentionally discriminate against any insurance agent with respect to his compensation, terms,
    conditions, or privileges of employment, because of the insurance agent’s race, color, religion,
    sex, or national origin.
    (2) Intentionally limit, segregate, or classify his insurance agents or applicants for an insurance
    agent in any way which would deprive or tend to deprive any insurance agent or applicant of
    employment opportunities, or otherwise adversely affect his status as an insurance agent or
    applicant because of the insurance agent’s or applicant’s race, color, religion, sex, or national
    origin.

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prescriptive period of one year.” As to when the claim accrued, the district court
followed the Louisiana Supreme Court’s holding in Eastin v. Entergy Corp., 865
So. 2d 49 (La. 2004), that in employment discrimination cases “prescription
begins to run when the termination decision has been made and conveyed to the
employee, even if the employment does not cease until a future date.” Id. at 54.
Eastin relied on Title VII case law stating that “the proper focus is on the time
of the discriminatory act, not the point at which the consequences of the act
become painful.” Id. (citation and internal quotation marks omitted, emphasis
in original). The district court applied that reasoning to this case, viewing State
Farm’s decision to refuse to offer White another contract as the discriminatory
act. As noted above, White was told of that decision on January 4, 2008, more
than one year before he filed suit. We see no flaw in that reasoning, nor any
reason why White’s status as an independent contractor would prompt the
Louisiana Supreme Court to apply a different analysis.
C. The Contractual Claim
       White contends that the district court erred in characterizing his bad-faith
breach-of-contract claim as a tort claim subject to LA. CIV. CODE art. 1983’s one-
year prescription period.7 We agree. “Louisiana jurisprudence is well settled
that the character of an action given by a plaintiff in his pleadings determines
the prescription applicable to it.” Duer & Taylor v. Blanchard, Walker, O’Quin
& Roberts, 354 So. 2d 192, 194 (La. 1978). “It is the nature of the duty breached
that should determine whether the action is in tort or in contract.” Roger v.
Dufrene, 613 So. 2d 947, 948 (La. 1993). “Contractual damages arise out of the
breach of a special obligation contractually assumed, and delictual damages

       7
         “Delictual actions are subject to a liberative prescription of one year,” LA. CIV. CODE
art. 3492, whereas contractual claims are subject to the default prescription period set by LA.
CIV. CODE art. 3499, which states that “[u]nless otherwise provided by legislation, a personal
action is subject to a liberative prescription of ten years.” See also Qayyum v. Morehouse Gen.
Hosp., 874 So. 2d 371, 374 (La. Ct. App. 2004).

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arise out of the violation of a duty owed to all persons.” Strahan v. Sabine
Retirement & Rehab. Ctr., Inc., 981 So. 2d 287, 291 (La. Ct. App. 2008). All of
the damages White seeks in this claim arise from the alleged breach of the
provisions of the agreement requiring State Farm to support White’s agency and
allow him discretion in operating it.
       The district court reasoned that “a claim of a breach of the duty to act in
good faith does not allege a breach of an obligation imposed by contract, but
instead alleges the breach of a separate duty implied by law or imposed by
statute.” However, breaching the obligation to perform a contract in good faith
is actionable only when conjoined with breach of a particular obligation created
by the contract. Favrot v. Favrot, 68 So. 3d 1099, 1110 (La. Ct. App. 2011)
(“[J]udicial determination of good-faith (or bad-faith) failure to perform a
conventional obligation is always preceded by a finding that there was a failure
to perform, or a breach of the contract.”)8 While the duty to perform in good faith
does arise from LA. CIV. CODE art. 1983 rather than the parties’ agreement
alone, that is true of all Louisiana-law contractual obligations.9 The only
differences between a typical breach-of-contract claim and a bad-faith breach-of-
contract claim are that the latter alleges a culpable mental state and allows the

       8
          If the contract allows a party discretion in carrying out an obligation, the underlying
breach may take the form of the party exercising that discretion in a manner calculated to
injure or deceive the other party. See Adams v. First Nat’l Bank of Commerce, 644 So. 2d 219,
222 (La. Ct. App. 1994). The district court relied on Office of Comm’r of Ins. v. Hartford Fire
Ins. Co., 623 So. 2d 37 (La. Ct. App. 1993). But that case involved an action for “breach of the
duties of ‘good faith’ and ‘reasonable care’ imposed by [LA. REV. STAT.] 40:1299[.44](C)(7) . . . ,”
not bad-faith breach of contract. Id. at 40.
       9
         See LA. CIV. CODE art. 1983 (“Contracts have the effect of law for the parties and may
be dissolved only through the consent of the parties or on grounds provided by law.”)
See also, e.g., Family Care Servs., Inc. v. Owens, 46 So. 3d 234, 241 (La. Ct. App. 2010)
(citing LA. CIV. CODE art. 1983 for the proposition that “Contracts have the effect of law for
the parties and must be performed in good faith”); Davis v. Russell, 26 So. 3d 950, 952 (La.
Ct. App. 2009) (same).

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recovery of all the damages from the defendant’s failure to perform, rather than
merely those that were reasonably foreseeable.10 We believe that the Louisiana
Supreme Court would regard claims alleging breach of a contractual duty in bad
faith as a species of breach-of-contract claim rather than one sounding in tort.
       State Farm argues that White did not adequately plead the contractual
claim. Although we recognize that White’s pleading fell short of what FED. R.
CIV. P. 8 would require, White initially filed his case in Louisiana state court,
and that state’s fact-pleading standard does not require a plaintiff to spell out
the particular legal theories under which the facts he alleges entitle him to
recovery.11 “After removal, repleading is unnecessary unless the court orders it,”
FED. R. CIV. P. 81(c)(2), so we do not fault White for failing to spontaneously
amend his pleading to conform to the federal pleading standard. Moreover, the
federal pleading standard “requires only a short and plain statement of the claim
showing that the pleader is entitled to relief, in order to give the defendant fair
notice of what the claim is and the grounds upon which it rests . . . .” Bell Atl.
Corp. v. Twombly, 550 U.S. 544, 555, 127 S. Ct. 1955, 1964 (2007) (internal
citations, quotation marks, and ellipsis omitted). Although White’s pleading
should have identified the particular contractual provisions requiring support
of his agency and giving him discretion to run it, State Farm was not unfairly
prejudiced by that omission. Given the petition’s factual allegations and the fact
that any Louisiana bad-faith breach-of-contract claim must arise from breach of
a particular contractual obligation, a liberal construction of White’s petition
suggests that his contractual claim arose from the agreement’s provisions

       10
         Compare LA. CIV. CODE art. 1996 (“An obligor in good faith is liable only for the
damages that were foreseeable at the time the contract was made”), with LA. CIV. CODE art.
1997 (“An obligor in bad faith is liable for all the damages, foreseeable or not, that are a direct
consequence of his failure to perform.”).
       11
            See First S. Prod. Credit Ass’n v. Georgia-Pacific, 585 So. 2d 545, 548 (La. 1991).

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concerning support and discretion in running the agency. Pre-trial procedures
afforded State Farm ample opportunity to confirm that interpretation or
otherwise compel White to clarify his theory of recovery.
D. White’s Damages
      State Farm contends that no claim for breach of the agreement can
support damages resulting from White’s not receiving a new contract, because
the agreement unequivocally disclaims any obligation for State Farm to offer
him a new agreement. There is evidence, however, that White’s compensation
as an agent depended in part on the volume of his agency’s sales. He may have
suffered recoverable losses to the extent that his performance was impaired by
State Farm’s failure to support him as promised. Also, if White can prove that
State Farm would have elected to renew their agreement but for its bad-faith
breach of the support provisions, then the measure of his recovery will be “all the
damages, foreseeable or not, that are a direct consequence of his failure to
perform.” LA. CIV. CODE art. 1997. The parties did not raise in the district court
or on appeal what effect State Farm’s freedom to deny renewal would have in
light of that expansive measure of damages. They also have not raised the
extent of whatever additional compensation White might have otherwise earned
during his year as an agent.
      Indeed, no challenge to the merits of White’s contractual claim was
properly raised before the district court. State Farm’s summary judgment
motion did not address that claim, and White received no notice that the district
court might address its merits in disposing of State Farm’s motion. See FED. R.
CIV. P. 56(f). We therefore leave all issues regarding the merits of the breach-of-
contract claim for consideration in the first instance on remand.
                               III. CONCLUSION
      The district court’s judgment is REVERSED with respect to White’s claim
for bad-faith breach of the one-year agency agreement, and the case is

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REMANDED for further proceedings on that claim. In all other respects, the
district court’s judgment is AFFIRMED.

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