Court Opinion

ID: 9960644
Source: CourtListenerOpinion
Date Created: 2024-04-16 18:00:40.757989+00
Date Added: 2024-06-11T08:19:43.048138
License: Public Domain

Case: 23-30773           Document: 46-1         Page: 1      Date Filed: 04/16/2024

          United States Court of Appeals
               for the Fifth Circuit                                          United States Court of Appeals
                                                                                       Fifth Circuit
                                  ____________
                                                                                     FILED
                                                                                  April 16, 2024
                                   No. 23-30773
                                 Summary Calendar                                 Lyle W. Cayce
                                 ____________                                          Clerk

Heidi C. Burke, On behalf of themselves and those similarly situated;
Jonathan F. Burke, On behalf of themselves and those similarly situated,

                                                               Plaintiffs—Appellants,

                                         versus

GeoVera Specialty Insurance Company; GeoVera
Advantage Insurance Services, Incorporated,

                                           Defendants—Appellees.
                  ______________________________

                  Appeal from the United States District Court
                     for the Eastern District of Louisiana
                           USDC No. 2:23-CV-2352
                  ______________________________

Before Davis, Ho, and Ramirez, Circuit Judges.
Per Curiam: *
      Plaintiffs-Appellants, Heidi and Jonathan Burke, appeal the district
court’s dismissal of their complaint with prejudice pursuant to Federal Rule
of Civil Procedure 12(b)(6) as barred under the doctrine of res judicata. We
AFFIRM.

      *
          This opinion is not designated for publication. See 5th Cir. R. 47.5.
Case: 23-30773         Document: 46-1          Page: 2    Date Filed: 04/16/2024

                                    No. 23-30773

                                          I.
       As alleged in the Burkes’ complaint, on August 29, 2021, Hurricane
Ida caused wind damage to their home in Kenner, Louisiana. At that time,
the property was insured by Defendant-Appellee GeoVera Specialty
Insurance Company’s (“GeoVera Specialty”) residential wind and hail
policy. The Burkes subsequently filed a claim with GeoVera Specialty and
received payment pursuant to their policy. In calculating that payment,
GeoVera Specialty adjusted the Burkes’ damage claim pursuant to its Roof
System Payment Schedule, which lists the criteria used in reducing roof
damage claims based on depreciation. Based on that schedule, GeoVera
Specialty reduced the roof damage component of the Burkes’ claim by forty-
eight percent.
       In March of 2022, before filing the instant action, the Burkes filed suit
in Louisiana state court alleging that GeoVera Specialty undervalued their
Hurricane Ida claim. GeoVera Specialty removed the action to federal court,
asserting diversity jurisdiction. On September 8, 2022, the parties filed a
joint motion to dismiss the lawsuit after reaching an amicable settlement,
which the district court granted.
       Over a year later, in July of 2023, the Burkes filed this suit against
GeoVera Specialty and GeoVera Advantage Insurance Services, Inc. 1
(“GeoVera Advantage”).          In the instant suit, the Burkes again attack
GeoVera Specialty’s payment of their Hurricane Ida claim, but this time on
the grounds that GeoVera Specialty’s use of the Roof System Payment
Schedule violated Louisiana Revised Statutes § 22:1892(B)(6)(e).
Specifically, the Burkes allege that the Roof System Payment Schedule is a
“predetermined rate of depreciation to be applied to every roof based

       1
         According to the Burkes’ complaint, GeoVera Advantage “adjusted the claims of
the Burkes on behalf of GeoVera Specialty.”

                                          2
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                                          No. 23-30773

exclusively on its objective age and roofing material without regard for its
actual condition prior to the covered wind damage.” They further allege that
this runs counter to the requirement of § 22:1892(B)(6)(e) that
“[d]epreciation shall be reasonable and based on a combination of objective
criteria and subjective assessment, including the actual condition of the
property prior to loss.” 2
        GeoVera Specialty and GeoVera Advantage both moved to dismiss
under Federal Rule of Civil Procedure 12(b)(6). The district court granted
both motions and dismissed the Burkes’ complaint with prejudice. The court
concluded that the Burkes’ claims against GeoVera Specialty were barred by
res judicata based on the dismissal of the Burkes’ earlier suit against GeoVera
Specialty for the same property damage. The court also granted GeoVera
Advantage’s motion to dismiss on the grounds that the Burkes failed to state
a claim against GeoVera Advantage, who was not their insurer, and it was
unclear what duties the Burkes believed GeoVera Advantage violated. 3 The
Burkes timely appealed.
                                               II.
        “The res judicata effect of a prior judgment is a question of law that
this court reviews de novo.” 4 We also review de novo a district court’s
dismissal under Rule 12(b)(6). 5 “To survive a motion to dismiss, a complaint
must contain sufficient factual matter, accepted as true, to ‘state a claim to

        2
            La. Rev. Stat. § 22:1892(B)(6)(e).
        3
           The Burkes do not challenge the district court’s dismissal of their claims against
GeoVera Advantage on appeal. Accordingly, they have forfeited any such challenge. See
Rollins v. Home Depot USA, 8 F.4th 393, 397 (5th Cir. 2021).
        4
            Test Masters Educ. Servs., Inc. v. Singh, 428 F.3d 559, 571 (5th Cir. 2005).
        5
         Basic Cap. Mgmt., Inc. v. Dynex Cap., Inc., 976 F.3d 585, 588 (5th Cir. 2020).

                                                3
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                                          No. 23-30773

relief that is plausible on its face.’” 6 This Court has previously held that
dismissal of a complaint “under Rule 12(b)(6) is appropriate if the res
judicata bar is apparent from the pleadings and judicially noticed facts.” 7
                                               III.
        “Claim preclusion, or res judicata, bars the litigation of claims that
either have been litigated or should have been raised in an earlier suit.” 8 To
determine the preclusive effect of a prior judgment issued by a federal court
sitting in diversity, we apply the preclusion law of the forum state. 9 Under
Louisiana law, “a second action is precluded when five elements are satisfied:
‘(1) the judgment is valid; (2) the judgment is final; (3) the parties are the
same; (4) the cause or causes of action asserted in the second suit existed at
the time of the final judgment in the first litigation; and (5) the cause or causes
of action asserted in the second suit arose out of the transaction or occurrence
that was the subject matter of the first litigation.’” 10
        It is undisputed that the final four elements are satisfied here, thus,
the only issue in this appeal is whether there was a valid judgment in the
Burkes’ prior lawsuit. The Burkes argue that the district court’s order of
dismissal in their initial lawsuit was not a valid judgment because it resulted
from the parties’ settlement agreement, which in turn was based on a

        6
         Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550
U.S. 544, 570 (2007)).
        7
          Basic Cap. Mgmt., 976 F.3d at 591 (internal quotation marks and citation omitted).
The district court here correctly acknowledged that “all of the relevant facts upon which
GeoVera Specialty’s res judicata defense is based are uncontroverted and contained in the
public record of this Court.”
        8
          Dotson v. Atl. Specialty Ins. Co., 24 F.4th 999, 1002 (5th Cir. 2022) (internal
quotation marks and citation omitted).
        9
            Id.
        10
             Id. at 1003 (quoting Chevron U.S.A., Inc. v. State, 993 So. 2d 187, 194 (La. 2008)).

                                                 4
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                                          No. 23-30773

depreciation calculation that violated § 22:1892(B)(6). The Burkes further
assert that a settlement “based on the use of the unlawful, illicit depreciation
calculation in the claims process is absolutely null and void as a matter of
law,” under Louisiana Civil Code Article 2030. Article 2030 provides that
“[a] contract is absolutely null when it violates a rule of public order, as when
the object of a contract is illicit or immoral.” 11
        The district court rejected the Burkes’ argument and concluded that
§ 22:1892(B)(6)(e) is not a rule of public order, and therefore its prior
judgment of dismissal in the Burkes’ initial lawsuit bars this action under the
doctrine of res judicata. The district court emphasized that rules of public
order focus on protecting “societal concerns broader than the concerns of
the parties to the contract,” and that § 22:1892(B)(6)(e) was enacted “to
protect the individual insured.” It further stated that there was “no broader
societal concerns implicated when an individual insured does not dispute the
validity of the depreciation method used on a claim.” We agree.
        Assuming without deciding that GeoVera Specialty’s Roof System
Payment Schedule violates § 22:1892(B)(6)(e), the success of the Burkes’
argument       depends       on     our     acceptance       of    their     position     that
§ 22:1892(B)(6)(e) is a rule of public order within the meaning of Article
2030. However, the Burkes cite no authority holding that § 22:1892(B)(6)(e)
is a rule of public order, and instead rely on the statement in Louisiana
Revised Statutes § 22:2 that “[i]nsurance is an industry affected with the

        11
           La. Civ. Code art. 2030. “Although the terms ‘illicit’ and ‘immoral’ are not
defined in . . . [the statute], the term ‘illicit’ is interchangeable with the term ‘unlawful.’”
Quaternary Res. Investigations, LLC v. Phillips, 316 So. 3d 448, 468 (La. App. 1 Cir. 2020)
(citation omitted).

                                               5
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                                          No. 23-30773

public interest and it is the purpose of this Code to regulate that industry in
all its phases.” 12
        Acceptance of the Burkes’ § 22:2 legislative intent argument would
mean that every Louisiana statute regulating the insurance industry
constitutes a rule of public order. But, as we have previously acknowledged,
“the statute [that is, Article 2030] refers specifically to ‘rules of public
order,’ not to a ‘public interest’ in general.” 13 Moreover, our decision in
Brown v. Phoenix Life Insurance Co., 14 undermines the Burkes’ argument. In
Brown, we rejected the insured’s claim that his universal life insurance policy
was an absolute nullity under Article 2030 because the insurer failed to
deliver the policy in violation of Louisiana Revised Statutes § 22:873(A). 15 In
so holding, we emphasized that the insured cited “no authority holding that
§ 22:873(A) is a rule of public order,” and instead courts had come to the
opposite conclusion and declined to declare contracts null when an insurer
fails to deliver a policy. 16 Accordingly, Brown is inconsistent with the Burkes’
argument that all statutes regulating the insurance industry are rules of public
order. 17

        12
             La. Rev. Stat. § 22:2(A)(1).
        13
             In re PetroQuest Energy, Inc., 54 F.4th 299, 306 n.13 (5th Cir. 2022).
        14
             843 F. App’x 533 (5th Cir. 2021) (per curiam) (unpublished).
        15
             Id. at 546–47.
        16
         Id. at 547 (citing In re Matter of Complaint of Settoon Towing, L.L.C., 720 F.3d
268, 280–82 (5th Cir. 2013)).
        17
            Although the Burkes make several arguments about how this case is
distinguishable from Brown, they do not dispute that Brown relied on other cases, such as
Settoon, in holding that “courts have not declared the relevant contracts null . . . when an
insurer fails to deliver a policy in violation of § 22:873(A).” Id. (citing Settoon, 720 F.3d at
280–82).

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                                          No. 23-30773

        The Burkes additionally rely on three Louisiana cases holding that
statutes outside the insurance context constitute rules of public order.
Specifically, the Burkes rely on two cases involving contracts with unlicensed
professionals, Leija v. Gathright, 18 and West Baton Rouge Parish School Board
v. T.R. Ray, Inc. 19 In both cases, the courts held that contracts made by
unlicensed professionals were null based on prior precedent establishing that
the relevant licensing requirements were rules of public order. 20 Similarly,
in Succession of Crute v. Crute, 21 the court held that a divorce settlement which
prohibited the couple from partitioning property for an indefinite period of
time violated a rule of public order based on caselaw establishing that the
“underlying rationale behind the right to partition is that it would be against
public policy for property to be taken out of commerce and rendered unusable
because of fragmented ownership.” 22 The Burkes’ reliance on these three
cases is unconvincing given that they point to no similar precedent

        18
             211 So. 3d 592 (La. App. 2 Cir. 2016).
        19
             367 So. 2d 332 (La. 1979).
        20
            See T.R. Ray, Inc., 367 So. 2d at 334–35 (collecting cases involving licensing
requirements); Leija, 211 So. 3d at 596 (“Several decisions by Louisiana courts have
recognized that the failure to meet contractor licensing requirements can invalidate
contractual agreements.”). Additionally, both cases cited the fact that the goal of
Louisiana’s licensing statutes “is to protect ‘the health, safety, and general welfare of all
those persons dealing with persons engaged in the contracting vocation, and the affording
of such persons of an effective and practical protection against the incompetent,
inexperienced, unlawful, and fraudulent acts of contractors with whom they contract.’”
Leija, 211 So. 3d at 595 (quoting La. Rev. Stat. § 37:2150); T.R. Ray, Inc., 367 So. 2d at
334–35 (same). Such a clear legislative statement of protecting public welfare and safety is
distinguishable from the legislative statement relied on by the Burkes that insurance “is an
industry affected with the public industry and it is the purpose of this Code to regulate that
industry.” La. Rev. Stat. § 22:2(A)(1) (emphasis added).
        21
             226 So. 3d 1161 (La. App. 1 Cir. 2017).
        22
             See id. at 1173–74 (collecting cases).

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                                       No. 23-30773

establishing that an insurance policy is null based on a violation of the
Insurance Code.
                                           IV.
       In sum, the district court correctly held that § 22:1892(B)(6)(e) is not
a rule of public order and instead is “a rule intended for the protection of
private parties.” 23     It thus follows that the district court’s judgment
dismissing the Burkes’ initial lawsuit bars this action based on res judicata.
Accordingly, we AFFIRM the judgment of the district court.

       23
            La. Civ. Code art. 2031.

                                            8