Court Opinion

ID: 57722
Source: CourtListenerOpinion
Date Created: 2010-04-26 02:12:05+00
Date Added: 2024-06-11T08:50:50.152455
License: Public Domain

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

                                                                            FILED
                                                                         January 22, 2008

                                       No. 06-31020                   Charles R. Fulbruge III
                                                                              Clerk

WESTERN AMERICAN TRANSPORTATION LLC

       Plaintiff

NATIONAL UNION FIRE INSURANCE COMPANY OF LOUISIANA

       Intervenor Plaintiff - Counter Defendant - Appellee

v.

ROBBIE MORROW, Individually and doing business as Houston Trucklines,
doing business as Western Intermodal Container Services; JOHNNY
MONTEMAYOR, individually and doing business as Houston Trucklines,
also known as Western Intermodal Container Services

       Defendants - Intervenor Defendants - Counter Claimant - Appellants

                   Appeal from the United States District Court
                      for the Western District of Louisiana
                             USDC No. 6:99-CV-2217

Before JONES, Chief Judge, and WIENER and CLEMENT, Circuit Judges.
PER CURIAM:*
       Robbie Morrow and Johnny Montemayor appeal the district court’s grant
of summary judgment in favor of National Union Fire Insurance Company of

       *
         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 R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5TH CIR.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.
                                No. 06-31020

Louisiana (“National Union”), an insurer for Western American Transportation,
L.L.C. (“Western American”). We affirm.
                     I. FACTS AND PROCEEDINGS
      In 1996, Morrow and Montemayor entered into an agreement with
Western American to operate a truck terminal in Houston, Texas under the
Western American name and to lease trucks from Western American in
exchange for all the revenues generated by the leased trucks. In December 1999,
Western American sued Morrow and Montemayor, alleging, inter alia, that
Morrow and Montemayor had violated the parties’ agreement by diverting
business and accounts receivable away from Western American.            In its
complaint, Western American alleged that Morrow and Montemayor had
breached its contract and wrongfully withheld funds that should have gone to
Western American, thereby committing theft and conversion. Western American
sought and obtained a writ of sequestration.
      Morrow and Montemayor answered and counterclaimed that Western
American’s allegations of theft and conversion were defamatory and asserted a
claim for wrongful sequestration. Western American continued to retain a law
firm to prosecute its original breach of contract claim against Morrow and
Montemayor, but sought a defense from National Union against the
counterclaims. National Union hired a law firm to defend Western American
and reimbursed Western American for its fees and costs incurred in defending
against the counterclaims.
      In July 2001, convinced that its policy did not cover the counterclaims
against Western American, National Union intervened in the action pursuant
to 28 U.S.C. § 2201(a), seeking a declaration of no insurance coverage. Morrow
and Montemayor answered and counterclaimed directly against National Union
pursuant to the Louisiana Direct Action Statute, arguing that the policy did
cover its counterclaims against Western American.

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                                  No. 06-31020

        In March 2003, two days after the trial on the breach of contract claims
commenced, Western American, Morrow, and Montemayor entered into a partial
settlement (“the Settlement”). In the Settlement, the parties stipulated that:
(1) “[a]ll allegations of theft and conversion . . . are not true”; and, (2) Western
American “did not make the allegations of theft and conversion . . . knowing they
were false; rather, these allegations were based on a misunderstanding . . . . ”
Western American entered into the Settlement without consulting National
Union, despite the insurer’s prior warning to Western American of its duty to
cooperate with National Union before entering into any settlement agreement
with Morrow and Montemayor. After National Union learned that Western
American settled with Morrow and Montemayor, National Union formally
objected to the Settlement.
        National Union subsequently filed a motion for summary judgment,
seeking a declaration of no coverage as to the defamation and wrongful
sequestration claims Morrow and Montemayor had reserved against it. In
December 2005, the district court agreed with National Union and dismissed all
of Morrow’s and Montemayor’s claims.
        Morrow and Montemayor did not dispute the district court’s dismissal of
their wrongful sequestration claim, but moved for reconsideration of their
defamation claim, insisting that the district court erred in failing to give them
the benefit of the presumption of malice that accompanies statements that are
defamatory per se. In August 2006, the district court issued an amended order
with the same result in which it held that the policy did not cover the defamation
claim     against   National    Union     because    (1)   Western     American’s
theft-and-conversion allegations were protected by the qualified privilege
accorded statements made in the context of litigation, and (2) Western
American’s breach of the policy’s cooperation clause eliminated National Union’s
coverage responsibility. Morrow and Montemayor timely appealed.

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                                  No. 06-31020

                        II. STANDARD OF REVIEW
      We review the district court’s grant of summary judgment de novo. Am.
Int’l Specialty Lines Ins. Co. v. Canal Indem. Co., 352 F.3d 254, 259 (5th Cir.
2003). A motion for summary judgment should be granted only when there is
no genuine issue of material fact. Weeks Marine, Inc. v. Fireman’s Fund Ins. Co.,
340 F.3d 233, 235 (5th Cir. 2003). In determining whether there is a genuine
issue of material fact, we view all facts and draw all inferences in favor of the
non-moving party. Id.
                           III. APPLICABLE LAW
      “Four elements are necessary to establish a defamation cause of action: (1)
a false and defamatory statement concerning another; (2) an unprivileged
publication to a third party; (3) fault (negligence or greater) on the part of the
publisher; and (4) resulting injury.” Costello v. Hardy, 864 So. 2d 129, 139 (La.
2004) (internal quotations omitted). “The fault requirement is often set forth in
the jurisprudence as malice, actual or implied.” Id. “Words which expressly or
implicitly accuse another of criminal conduct . . . are considered defamatory per
se.” Id. at 140.
      However, “even when a plaintiff makes a prima facie showing of the
essential elements of defamation, recovery may be precluded if the defendant
shows . . . that [the statement] was protected by a privilege, absolute or
qualified.” Id. at 141. In Louisiana, a defamatory statement by an attorney in
a judicial proceeding is protected by a qualified privilege, but “the statement
must be material and must be made with probable cause and without malice.”
Freeman v. Cooper, 414 So. 2d 355, 359 (La. 1982).
                             IV. DISCUSSION
      The parties agree that Western American’s theft-and-conversion
allegations were defamatory per se and are accorded a presumption of malice.

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                                    No. 06-31020

Therefore, we must decide whether the allegations satisfy the requirements of
the qualified privilege defense.
      First, Western American’s allegations satisfy the materiality element.
Western American sued Morrow and Montemayor in December 1999 for breach
of contract, alleging that Morrow and Montemayor had, inter alia, violated their
agreement by improperly withholding business and accounts receivable and that
their actions amounted to theft and conversion.            The validity of Western
American’s breach of contract claim, along with the related theft-and-conversion
allegations, formed the core issue in that suit. As Western American’s theft-and-
conversion allegations were central to its case, they were material to the
proceeding.
      Second, Western American’s statements were made with probable cause
and without malice. The district court’s conclusion that Western American’s
allegations were “colorable” and thus made with probable cause and without
malice is supported by the facts. The court found:
      [T]he allegations suggest that (1) Morrow & Montemayor had an
      agreement with Western American for exclusive representation; (2)
      business conducted pursuant to that agreement belonged to Western
      American; (3) Morrow and Montemayor had been collecting funds
      properly belonging to Western American . . . ;[] and (4) Morrow and
      Montemayor had not been transferring those funds to Western
      American. It is no stretch to state that a party which believes that
      its obligee has been “diverting all or part of accounts receivable” —
      were those facts proved to be true — arguably would be justified in
      asserting that its obligee was guilty of theft and conversion.
      Therefore, the allegations . . . rise to the level of a colorable claim for
      theft or conversion.
W. Am. Transp., LLC v. Morrow, No. 99-CV-2217, slip op. at 43 (W.D. La Aug.
15, 2006).    Under Louisiana law, malice “for the purposes of the tort of
defamation is a lack of reasonable belief in the truth of the statement giving rise
to defamation.” Costello, 864 So. 2d at 143. We agree with the district court that

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                                  No. 06-31020

Western American did not unreasonably disregard the truth when it accused
Morrow and Montemayor of theft and conversion.
      Morrow and Montemayor suggest that the presumption of malice accorded
a statement that is defamatory per se prevents a defendant from proving a lack
of malice when asserting a qualified privilege defense. However, a presumption
of malice may be rebutted by the defendant. Huxen v. Villasenor, 798 So. 2d 209,
212 (La. App. 2001). Morrow and Montemayor also fail to acknowledge that the
qualified privilege for statements made in the context of litigation is an
affirmative defense which “will have the effect of defeating the defamation
claim.” Costello, 864 So. 2d at 142 n.13. We hold that the district court correctly
found that the elements of qualified privilege were met and the defamation claim
was defeated.
      Because we hold that Western American’s allegations of theft and
conversion were protected by the qualified privilege for statements made in the
context of litigation, we need not address whether Western American breached
the National Union policy’s cooperation clause.
                              IV. CONCLUSION
      The judgment of the district court is AFFIRMED.

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