Court Opinion

ID: 25025
Source: CourtListenerOpinion
Date Created: 2010-04-25 08:30:49+00
Date Added: 2024-06-11T15:04:44.440203
License: Public Domain

Revised August 29, 2001

                          IN THE UNITED STATES COURT OF APPEALS

                                            FOR THE FIFTH CIRCUIT

                                           ________________________

                                                 No. 00-30964
                                           ________________________

CITY OF SHREVEPORT

        Plaintiff-Appellee

-vs-

SHREVEPORT CANADIAN FOOTBALL, INC., et al.

        Defendants-Appellants

                _____________________________________________________

                         Appeal from the United States District Court
                            for the Western District of Louisiana
                _____________________________________________________

                                                      August 8, 2001

Before HIGGINBOTHAM and BENAVIDES, Circuit Judges, and LITTLE, District Judge.*

LITTLE, District Judge:

        For the reasons that follow, we remand for the district court’s further consideration

of this contract dispute.

        *
            Chief Judge F.A. Little, Jr. of the Western District of Louisiana, sitting by designation.
                                                BACKGROUND

       Professional football is indeed a sport well accepted by its American audience. In the

year 2000, attendance at National Football League games set an attendance record for the

third consecutive year. Total regular-season ticket sales were 16,387,289, an average of

66,078 per game. The league played to ninety percent of its overall stadium capacity, even

though average ticket prices rose to nearly $50, up from $45 in 1999.1

       North of our borders, the Canadian Football League pits its own teams in combat, all

to the seeming satisfaction of its many supporters. With an eye toward capturing some of the

paying enthusiasm of United States fans for football, our Canadian neighbors invaded

Louisiana when they licensed a Canadian Football League (“CFL”) franchise in Shreveport

in 1994. For reasons not readily apparent from the record, the 1994 season was not a

financial bonanza. Not to be deterred, management, led by franchise owner Bernard

Glieberman, approached the City of Shreveport seeking the City’s financial involvement in

retaining the team in Shreveport for the 1995 season.

       Municipal entanglement as an equity owner or as a creditor are proscribed

participations. The City could, however, promote the franchise, from which the city would

benefit, by being a franchise sponsor. With that altruistic goal in mind, the City and the

management of the CFL Shreveport franchise entered into a contract, which they labeled a

Cooperative Endeavor Agreement (“CEA”).                         The principal obligation of the City, an

obligation all agree was fulfilled, was to contribute $1,000,000 to Shreveport Canadian

       1
           See Richard Alm, Sports Business Briefs, Dallas Morning News, Jan. 6, 2001, at 2F.

                                                          2
Football, Inc. (“Football”). The franchisee for the lackluster 1994 season was Shreveport

Pirates, Inc. (“SPI”). The City was reticent to supply its sponsor dollars directly to SPI,

believing that SPI creditors for past due obligations might be paid in preference to the money

demands for the 1995 season. Football, a Michigan corporation, was formed with the

intention of being the operating corporation, a fresh start entity.                              Payments to Football

therefore would not be commingled with the property of SPI.2

          The million dollar sponsorship was not without some condition and contingency.3

Stripped to its barest essentials, the CEA provided that the City would contribute a

sponsorship payment of $1,000,000 or 50% of Football losses, whichever was less. City

made the equivalent of an advance payment on its sponsorship obligation by making a

contribution, over a period of time, of $1,000,000. There would be a reimbursement to the

City if Football’s losses did not exceed $2,000,000. For example, if the team lost $750,000,

City would be reimbursed $625,000. If the team lost $2,000,000 or more the City would not

receive any reimbursement. Provision also was made for return of sponsorship contributions

in the event the team turned a profit.

          After the 1995 season ended, the City demanded return of the $1,000,000 sponsorship

payment. The City asserted that Football had not sustained any loss and therefore, according

to the CEA, the City was entitled to be reimbursed the entire $1,000,000 sponsorship

          2
              Glieberman also personally guaranteed the obligations of Football.
          3
              As further consideration for the sponsorship, Football agreed to give the City numerous advertising, promotion and
public relations benefits. These benefits included a “stay-in-school” program to be implemented with the assistance of Pirates
players. In addition, Football agreed to provide free season tickets to certain students and to provide development assistance for
neighborhoods and businesses near Independence Stadium.

                                                               3
contribution. Football refused payment and defended its stance by positing that: (1) its agent,

SPI, operated the team, (2) SPI received the City sponsorship payments from Football, (3)

SPI operated at a loss, and (4) the loss was the loss of the principal, Football. The City sued

in state court, Football removed to the Federal District Court for the Western District of

Louisiana, Shreveport Division. After a three-day bench trial, the district judge held in favor

of City and against Football and guarantor Glieberman.

                                         ANALYSIS

       The district court did not rul e, as a matter of law, that SPI was not the agent of

Football. The district court decided the case by first “[a]ssuming defendants’ argument that

Football was the principal.” The court then reasoned, applying Louisiana law, that because

there had not been a demand from SPI to Football for repayment of the losses SPI sustained,

Football had not suffered any loss. Without evidence of any loss, Football, under the plain

language of the contract, owed the City $1,000,000. We review the decision of the district

court de novo.

       The Erie doctrine requires that we apply Louisiana law to the issue of the necessity

of demand as a predicate for recovery by an agent from its principal for reimbursement of

expenses incurred by the former on behalf of the latter. See Erie R. Co. v. Tompkins, 304

U.S. 64, 58 S. Ct. 817 (1938); Salve Regina College v. Russell, 499 U.S. 225, 239-40,111

S. Ct. 1217, 1225 (1991) (holding that federal courts of appeal should conduct de novo

review of a district court’s determination of state law). The theory or concept of mandate,

                                              4
as agency is nominated in the civil law, is found in Book III, Chapter 2, of the Louisiana Civil

Code. The definitional article provides that “[a] mandate is a contract by which a person, the

principal, confers authority on another person, the mandatary, to transact one or more affairs

for the principal.” La. Civ. Code art. 2989. As to loss, the Civil Code provides that “[t]he

principal is bound to compensate the mandatary for loss the mandatary sustains as a result of

the mandate, but not for loss caused by the fault of the mandatary.” La. Civ. Code art. 3013.

       When asked if a putting in default, or demand, must precede establishment of

responsibility by the principal to the mandatary, the Louisiana Civil Code is the oracle. The

demand provision applicable to all conventional obligations or contracts provides that:

“[d]amages for delay in the performance of an obligation are owed from the time the obligor

is put in default. Other damages are owed from the time the obligor failed to perform.” La.

Civ. Code art. 1989. As the obligation of Football to indemnify SPI for its losses incurred in

operating the Shreveport based team is not a claim for delay damages, it is abundantly clear

from Article 1989 that no demand by Football was necessary to establish its obligation to

repay SPI for the losses SPI incurred. Our opinion is buttressed if not ordained by the

language of a prior panel of this court in General Electric Capital Corp. v. Southeastern

Health Care, Inc.:

       When the obligations provisions of the Code were revised . . . the importance
       of putting an obligor in default was greatly reduced, almost to the point of
       elimination. Although an obligee seeking damages resulting from delay in the
       performance of an obligation may only recover such damages from the time
       the obligor is put in default, other damages are owed from the time the obligor
       fails to perform–a putting in default is not required.

                                               5
950 F.2d 944, 951 (5th Cir. 1991). The resulting rule can only be that a claim for damages

need not be preceded by a putting in default unless the damages are for delay in performance

by the obligor.

                                      CONCLUSION

       The district court erred when it presumed, but did not find, the presence of mandate.

This case is remanded to the trial court for retrial on that key issue, and for further

proceedings consistent with this opinion. If the court discerns the presence of mandate, then

it should proceed to determine the consequence of the damages incurred by the mandatary.

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