Court Opinion

ID: 5175887
Source: CourtListenerOpinion
Date Created: 2022-01-04 19:00:30.812469+00
Date Added: 2024-06-11T08:26:18.366650
License: Public Domain

Case: 21-30199     Document: 00516152667          Page: 1     Date Filed: 01/04/2022

              United States Court of Appeals
                   for the Fifth Circuit                           United States Court of Appeals
                                                                            Fifth Circuit

                                                                          FILED
                                                                    January 4, 2022
                                   No. 21-30199                      Lyle W. Cayce
                                                                          Clerk

   Jeremy Shephard; Emily Shephard; Michael Jackson;
   Tamisa Jackson,

                                                            Plaintiffs—Appellants,

                                       versus

   St. Paul Fire & Marine Insurance Company,

                                                            Defendant—Appellee.

                  Appeal from the United States District Court
                     for the Western District of Louisiana
                           USDC No. 5:18-CV-1603

   Before Stewart, Haynes, and Graves, Circuit Judges.
   Per Curiam:*
          Plaintiffs-Appellants appeal the district court’s order dismissing their
   suit. For the following reasons, we AFFIRM.

                             I.    Background

          *
            Pursuant to 5th Circuit Rule 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   opinion should not be published and is not precedent except under the limited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 Circuit Rule 47.5.4.
Case: 21-30199      Document: 00516152667           Page: 2   Date Filed: 01/04/2022

                                     No. 21-30199

          In June 2014, Plaintiffs-Appellants Jeremy Shephard, his wife, Emily
   Shephard, and another married couple, Michael and Tamisa Jackson
   (collectively, “the Shephards”), filed suit against AIX Energy, Inc. (“AIX”)
   in Louisiana state court for personal injuries suffered during an oil well
   explosion that occurred in 2013. AIX’s defense was provided by its insurer,
   Defendant-Appellee St. Paul Fire and Marine Insurance Company insured
   AIX and therefore provided AIX’s defense in the Shephards’ suit.
          In its answer to the Shephards’ complaint, AIX stated that it was the
   owner of the well. However, in response to the Shephards’ discovery
   requests asking AIX to identify the “owner and/or custodian” of the well on
   the date of the explosion, AIX objected to the form of the interrogatory, said
   it was unsure what “owner and/or custodian” referred to, and directed the
   Shephards to exhibits consisting of drilling permits and regulatory filings that
   did not identify the owner of the well. The Shephards also propounded a
   Request for Production asking AIX to produce “the contract under which
   defendant conducted operations at the well.” AIX objected to the term
   “conducting operations” as vague and ambiguous, stated that AIX was not
   “conducting operations” at the well, and explained that “[c]ompletion
   operations and/or work over services and/or well services were contracted
   out to Dykes, Bear Creek and Republic.”
          In March 2015, the Shephards amended their complaint to add a
   direct claim against St. Paul. In October 2015, AIX filed for bankruptcy,
   which stayed the personal injury litigation. In re AIX Energy, No. 15-34245,
   2015 WL 9687321 (Bankr. N.D. Tex. Dec. 4, 2015). To lift the stay, the

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   Shephards agreed with St. Paul and AIX to “only proceed as to collectible
   insurance of [AIX] with St. Paul.” Id. In October 2016, St. Paul filed an
   answer stating that it “adopts, reiterates, reaffirms and reavers all prior
   responses, defenses, allegations, and assertions made in the pervious [sic]
   filings by then Assured, AIX ENERGY, INC.” At trial in December 2016,
   the jury found in favor of the Shephards and returned a verdict that exceeded
   St. Paul’s liability coverage to AIX by over $10 million. But the trial court
   nevertheless limited the judgment to AIX’s liability insurance proceeds.
          On January 18, 2017, St. Paul and AIX filed a post-trial motion for
   judgment notwithstanding the verdict, in which they revealed for the first
   time that in 2012, AIX sold seventy-five percent of its ownership interest in
   the well to NextEra. On March 6, 2017, St. Paul and AIX produced a Joint
   Operating Agreement (“JOA”) that designated AIX as the “operator” of the
   well at the time of the explosion. The JOA required NextEra to be added as
   an additional insured on all of AIX’s insurance policies and stated that
   NextEra agreed to assume seventy-five percent of AIX’s liabilities “incurred
   in operations” of the well. St. Paul’s post-trial motion was denied, and the
   trial court entered judgment in favor of the Shephards on April 10, 2017.
          St. Paul and AIX suspensively1 appealed the trial court judgment to
   the Louisiana Court of Appeal for the Second Circuit. On May 23, 2018, the

          1
            Under Louisiana law, a suspensive appeal is “an appeal that suspends the effect
   or the execution of an appealable order or judgment.” LA. CODE CIV. PROC. ANN. ART.
   2123.

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   Louisiana Court of Appeal for the Second Circuit affirmed the damages
   award in relevant part in favor of the Shephards and, citing AIX’s bankruptcy
   order, limited the enforcement of any judgment to the policy limit of AIX’s
   insurance with St. Paul. The Louisiana Supreme Court denied AIX and St.
   Paul’s writ of appeal on November 5, 2018.
           On December 12, 2018, the Shephards sued St. Paul in federal district
   court      for   misrepresentation    under       Louisiana    Revised    Statute
   § 22:1973(B)(1). The Shephards alleged St. Paul knowingly misrepresented
   AIX as the owner, instead of as the operator, of the well during the state court
   proceedings. The Shephards also alleged St. Paul failed to disclose the
   existence of NextEra and the JOA, which the Shephards contend was
   responsive to discovery requests and identified a potential liable entity other
   than AIX. The Shephards alleged they detrimentally relied on St. Paul’s
   misrepresentations and nondisclosure in the pleadings and were therefore
   fraudulently induced to proceed only against the amount of collectible
   insurance in AIX’s policy. Because St. Paul allegedly failed to disclose
   NextEra, the Shephards further asserted they were deprived of their ability
   to conduct discovery regarding NextEra’s liability and insurance policies and
   in turn, to potentially recover damages in the amount of their unrecovered
   verdict.
           St. Paul filed a Rule 12(b)(6) motion to dismiss arguing, inter alia, that
   the Shephards’ Section 1973 claims were prescribed. The district court
   granted the motion and dismissed the Shephards’ suit on the grounds that
   prescription began to run on March 6, 2017 when the Shephards received the

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   JOA, and the Shephards did not file suit until December 12, 2018, over one
   year later. This appeal followed.
                       II.     Standard of Review

          This court reviews “a district court's dismissal under a Rule 12(b)(6)
   motion de novo, accepting all well-pleaded facts as true and viewing those
   facts in the light most favorable to the plaintiffs.” Wolcott v. Sebelius, 635 F.3d
   757, 763 (5th Cir. 2011) (citation and internal quotation marks omitted). We
   similarly “review de novo the district court’s ruling on prescription.” Brown
   v. Slenker, 220 F.3d 411, 419 (5th Cir. 2000) (citation omitted). Under
   Louisiana law, “prescriptive statutes are strictly construed against
   prescription and in favor of the obligation sought to be extinguished.”
   Richard v. Wal-Mart Stores, Inc., 559 F.3d 341, 346 (5th Cir. 2009) (quoting
   Lima v. Schmidt, 595 So. 2d 624, 629 (La. 1992)).

                             III.      Discussion
          The parties agree that the Shephards’ claims were subject to a one-
   year prescriptive period under LOUISIANA CIVIL CODE ARTICLE 3492. Their
   dispute centers around when the prescriptive period began to run. The
   Shephards argue that the prescriptive period began on November 5, 2018

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   when the Louisiana Supreme Court denied St. Paul’s writ of appeal. 2 Thus,
   the Shephards contend that they were well within the prescriptive period
   when they filed their complaint on December 12, 2018. We disagree.
           Under LOUISIANA CIVIL CODE ARTICLE 3492, the one-year
   prescriptive period for delictual actions “commences to run from the day
   injury or damage is sustained.” LA. CIV. CODE ANN. ART. 3492 (2021). The
   Louisiana Supreme Court has held that a plaintiff’s damages must be more
   than merely speculative for prescription to run under Article 3492, but they
   need not be certain, fully incurred, or incurred in some particular quantum
   to give the plaintiff a right of action. Harvey v. Dixie Graphics, Inc., 593 So. 2d
   351, 354 (La. 1992). The party pleading prescription typically bears the
   burden of proving that the plaintiff’s claims have prescribed, but “once it is
   shown that more than a year has elapsed between the time of the tortious
   conduct and the filing of a tort suit, the burden shifts to the plaintiff to prove
   either suspension, interruption, or some exception to prescription, utilizing
   one of any number of legal constructs including but not limited to the
   doctrine of contra non valentem.” Terrebonne Par. Sch. Bd. v. Mobil Oil Corp.,
   310 F.3d 870, 877 (5th Cir. 2002) (citation omitted).

           2
            The Shephards contend that November 5, 2018 is when their “excess judgment”
   became final. However, the district court clarified that the Shephards did not obtain an
   excess judgment. While the jury verdict exceeded St. Paul’s policy limits, the trial court
   judgment limited recovery to the amount of AIX’s insurance coverage with St. Paul
   pursuant to the bankruptcy order. Thus, neither the judgment by the trial court nor the
   affirmance by the Louisiana court of appeal gave the Shephards a legally enforceable right
   to recover in excess of St. Paul’s policy limits.

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          “Under the doctrine of contra non valentem, the prescription period
   does not run when ‘the cause of action is not known or reasonably knowable
   by plaintiff, even though his ignorance was not induced by defendant.’”
   Eldredge v. Martin Marietta Corp., 207 F.3d 737, 743 (5th Cir. 2000) (quoting
   Landreneau v. Fruge, 598 S.2d 658, 662 (La. Ct. App. 1991)). Louisiana courts
   only extend this doctrine’s benefits up to “the time that the plaintiff has
   actual or constructive knowledge of the tortious act.” Id. (citation and
   internal quotation marks omitted).
          Here, the Shephards did not know of St. Paul’s alleged
   misrepresentations and omissions in AIX’s discovery responses at the time
   they were made. They did know about the alleged misrepresentations and
   omissions, however, on March 6, 2017 when St. Paul produced the JOA
   showing that NextEra had agreed to assume seventy-five percent of AIX’s
   tort liabilities incurred in the operation of the well. By this date, the
   Shephards had lost the opportunity to name NextEra as a defendant, having
   instead sued AIX, and they agreed to seek recovery only to the extent of
   AIX’s insurance coverage with St. Paul. The Shephards had also lost the
   opportunity to conduct discovery regarding the JOA and NextEra during the
   underlying state court suit, as they explained in their original complaint in
   this case. Thus, the Shephards had suffered actual and appreciable damages
   by the time they gained actual knowledge of St. Paul’s alleged tortious act.
   Accordingly, the district court correctly held that prescription began to run
   on March 6, 2017 and that the Shephards claims were prescribed because
   they filed suit after the one-year prescriptive period had expired.

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            The Shephards rely on Smith v. Citadel Insurance Co., 285 So. 3d 1062
   (La. 2019) and Belanger v. Geico General Insurance Co., 623 F. App’x 684 (5th
   Cir. 2015) for the proposition that a Section 1973 claim does not begin to run
   until the judgment in the underlying suit becomes final and enforceable. But,
   both of those cases involve a plaintiff who was harmed by an excess judgment
   they were liable to pay. Smith, 285 So. 3d at 1066; Belanger, 623 F. App’x at
   687–89. Here, as the district court explained, the Shephards were never liable
   for an excess judgment. Moreover, their damages had occurred before the
   trial court judgment was final. Accordingly, Smith and Belanger are inapposite
   here.3
            As to the damages the Shephards had sustained by March 6, 2017,
   they attempt to distinguish their case from Harvey v. Dixie Graphics, Inc. on
   the grounds that, in contrast to the Harvey plaintiff, for whom prescription
   was triggered by the incurrence of attorneys’ fees and costs, the Shephards
   had not sustained costs or fees until the underlying judgment became final.
   The Shephards contend that if the judgment had been reversed on the issue
   of AIX’s liability, they would have sustained no damages from the loss of the
   ability to pursue an action against NextEra. However, the district court
   reasoned: “[The Shephards] had lost the ability to name NextEra as a
   defendant in the underlying litigation and the right to pursue discovery

            3
              The Shephards cite the same cases in support of their argument that they could
   not have brought this suit prior to the Louisiana Supreme Court’s denial of St. Paul’s writ
   of appeal because their claims would have been dismissed as premature. We find this
   argument unpersuasive given that the cases they cite involve excess judgments in failure-
   to-settle claims by insureds against insurers.

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   regarding the JOA in the underlying litigation. These damages were
   independent of any additional damages Plaintiffs could eventually quantify
   with certainty upon successfully defending their jury verdict on appeal and
   were thus actual and appreciable at the time Plaintiffs discovered the
   misrepresentation and saw the JOA.” We observe no error in this reasoning.
         Thus, we hold that the district court did not err in dismissing the
   Shephards’ claims because they were prescribed.
                          IV.     Conclusion
         For the foregoing reasons, we AFFIRM the district court’s order
   granting St. Paul’s motion and dismissing the Shephards’ suit.

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