294 F.3d 640 (5th Cir. 2002), 00-31283, Patin v. Thoroughbred Power Boats Inc.

Docket Nº:00-31283, 01-30881.
Citation:294 F.3d 640
Party Name:George Randall PATIN; Laura Wier Patin, Plaintiffs-Appellees, v. THOROUGHBRED POWER BOATS INC.; et al., Defendants, Thoroughbred Power Boats Inc.; Steven Stepp; Velocity Power Boats Inc., Defendants-Appellants. Catherine Ilene Boley; Darin Lane Watkins, Plaintiffs-Appellees, v. Thoroughbred Power Boats Inc., Defendant-Appellant. Louisiana Farm Bure
Case Date:June 12, 2002
Court:United States Courts of Appeals, Court of Appeals for the Fifth Circuit
 
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Page 640

294 F.3d 640 (5th Cir. 2002)

George Randall PATIN; Laura Wier Patin, Plaintiffs-Appellees,

v.

THOROUGHBRED POWER BOATS INC.; et al., Defendants,

Thoroughbred Power Boats Inc.; Steven Stepp; Velocity Power Boats Inc., Defendants-Appellants.

Catherine Ilene Boley; Darin Lane Watkins, Plaintiffs-Appellees,

v.

Thoroughbred Power Boats Inc., Defendant-Appellant.

Louisiana Farm Bureau Insurance Company, Plaintiff-Appellee,

v.

Thoroughbred Power Boats Inc.; et al., Defendants,

Thoroughbred Power Boats Inc., Defendant-Appellant.

Nos. 00-31283, 01-30881.

United States Court of Appeals, Fifth Circuit

June 12, 2002

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        E. Wade Shows (argued), John C. Walsh, Shows, Cali & Berthelot, Baton Rouge, LA, for George and Laura Patin, Boley and Watkins.

        David C. Forrester (argued), Victor Lawrence Crowell, Forrester, Jordan & Dick, Baton Rouge, LA, for Louisiana Farm Bureau Ins. Co.

        Lawrence R. Anderson, Jr. (argued), Seale, Smith, Zuber & Barnette, Baton Rouge, LA, for Thoroughbred Power Boats Inc., Stepp and Velocity Power Boats Ins.

        Appeals from the United States District Court for the Middle District of Louisiana.

        Before KING, Chief Judge, and HIGGINBOTHAM and EMILIO M. GARZA, Circuit Judges.

        KING, Chief Judge:

        Defendants-Appellants Steven Stepp and Velocity Power Boats, Inc. appeal the district court's judgment denying their motion to dismiss Plaintiff-Appellee Louisiana Farm Bureau Insurance Company's complaint for lack of personal jurisdiction. Defendant-Appellants Thoroughbred Power Boats, Inc., Velocity Power Boats, Inc., and Steven Stepp appeal the district court's award of damages in favor of Plaintiff-Appellee George Randall Patin and Plaintiff-Appellee Louisiana Farm Bureau Insurance Company, arguing that the district court improperly failed to condition execution of the redhibition judgment in favor of these plaintiffs on tender to Thoroughbred of the boat that is the subject of the redhibition claim. For the following reasons, we AFFIRM the judgment of the district court, excepting that portion of the

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judgment awarding damages based on the redhibition claim. We VACATE the portion of the district court's judgment awarding damages based on the redhibition claim and REMAND the case to the district court for recalculation of damages consistent with this opinion.

        I. Factual and Procedural Background

        On May 6, 1995, George Randall Patin and Laura Wier Patin (the "Patins"), along with Catherine Irene Boley and Darin Lane Watkins ("Boley and Watkins"), were involved in a boating accident while operating a boat manufactured by Thoroughbred Power Boats, Inc. ("Thoroughbred") and purchased by the Patins from Thunder Marine, Inc. ("Thunder Marine"). The Patins filed suit against Thoroughbred and Thunder Marine in Louisiana state court alleging that the accident was caused by a defective condition of the boat and seeking recovery for the purchase price of the boat and recovery for personal injuries and other damages arising from the accident. Boley and Watkins filed a separate suit against Thoroughbred, also in Louisiana state court, seeking recovery for damages arising from the accident. The Patins' insurer, the Louisiana Farm Bureau Insurance Company ("the LFBIC"), filed a third state court action under subrogation to recover the amounts it paid to or on behalf of the Patins for damage to the boat, salvage and storage of the damaged boat, and loss of Mrs. Patin's jewelry in the accident.

        On Thoroughbred's motion, all three suits were removed to federal district court based on diversity of citizenship. The district court then consolidated the suits into the instant action. Thoroughbred1 filed answers to the Plaintiffs' complaints.2 These answers did not question the Louisiana federal district court's authority to exercise personal jurisdiction over Thoroughbred. The Plaintiffs then moved for partial summary judgment as to liability. Thoroughbred did not respond to this motion. Accordingly, on May 19, 1997, the district court granted partial summary judgment in favor of the Plaintiffs, finding that the boat was defective and that Thoroughbred was liable to the Plaintiffs in redhibition and under the Louisiana Products Liability Act.3

        The Plaintiffs subsequently became aware that Thoroughbred had ceased doing business. Accordingly, on July 30, 1997, the Plaintiffs filed two amended complaints naming Steven Stepp ("Stepp") and Velocity Power Boats ("Velocity") as additional defendants, alleging that Velocity was a "successor corporation" to Thoroughbred and that Velocity and Thoroughbred were both alter egos of Stepp.4 The first of these amended complaints, filed by the individual plaintiffs (i.e., the Patins and Boley and Watkins), was never served on either Stepp or Velocity, and was subsequently dismissed without prejudice. However, the LFBIC, who filed the second amended complaint, sought and obtained Stepp's and Velocity's consent to waive service.5

        Stepp and Velocity filed a motion to dismiss the LFBIC's amended complaint,

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arguing that the Louisiana federal district court lacked personal jurisdiction over them. On May 21, 1998, the district court denied Stepp and Velocity's motion to dismiss without prejudice, in order to allow for discovery.

        On December 15, 1998, Stepp and Velocity filed a motion for summary judgment, seeking to dismiss the LFBIC's amended complaint for lack of personal jurisdiction, and, alternatively, seeking a judgment on the merits that there was insufficient evidence to raise a genuine issue of material fact regarding the appropriateness of piercing the corporate veil of Thoroughbred or imposing successor corporation liability upon Velocity. The district court found that it lacked personal jurisdiction over Stepp and Velocity.6 However, the court held open the possibility that Stepp and Velocity might be subject to personal jurisdiction if those defendants were found liable (based on the doctrines of piercing the corporate veil and successor liability) for claims against Thoroughbred, because Thoroughbred waived its personal jurisdiction defense.7 The district court accordingly denied Stepp and Velocity's motion for summary judgment, finding that there were genuine issues of material fact regarding whether Thoroughbred's corporate veil could be pierced and whether Velocity could be held liable as a successor corporation of Thoroughbred.

         The court conducted the damages phase of the trial as a bench trial on July 17 and 18, 2001. At the close of the Plaintiffs' evidence, the Defendants moved for judgment as a matter of law pursuant to Federal Rule of Civil Procedure 52(c), arguing: (1) that the LFBIC's action against Stepp and Velocity should be dismissed for lack of personal jurisdiction; and in the alternative, (2) that the LFBIC's action against Stepp and Velocity should be dismissed because the Plaintiffs failed to show that piercing the corporate veil or imposing successor liability was appropriate.

        The district court issued a memorandum ruling dated September 21, 2000. The district court held that, under the choice of law rules of the forum state (i.e., Louisiana), the substantive law of Florida governed the court's determinations whether Velocity was a successor of Thoroughbred and whether the corporate veil could be pierced. The district court determined that, under Florida law, Velocity was the successor of Thoroughbred because the transformation of Velocity and Thoroughbred constituted a "de facto merger" of the two corporations and because Velocity was merely a continuation of its predecessor, Thoroughbred. The district court also held that, under Florida law, it was appropriate to pierce the corporate veil and hold Stepp liable for the obligations of Velocity and Thoroughbred.8 Accordingly, the district

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court concluded that it was appropriate to impute Thoroughbred's waiver of the defense of lack of personal jurisdiction to Velocity and Stepp and to hold Velocity and Stepp liable for Thoroughbred's obligations to the LFB1C.9

        Pursuant to this ruling, on September 22, 2000, the district court entered judgment: (1) in favor of George Patin against Thoroughbred for the sum of $23,000 minus the salvage value of the boat; (2) in favor of Laura Patin against Thoroughbred for the sum of $2328; (3) in favor of Boley and Watkins against Thoroughbred for the sums of $3841 and $3836, respectively; and (4) in favor of the LFBIC against Thoroughbred, Velocity, and Stepp in the sum of $49,004. The district court also ordered the parties to file a joint stipulation as to the salvage value of the boat or to notify the court that such stipulation was not possible within twenty-one days after entry of judgment.

        The parties subsequently proved unable to reach an agreement as to the salvage value of the boat. The district court accordingly instructed Magistrate Judge Stephen Riedlinger to conduct a hearing inquiring into the salvage value of the boat. On February 9, 2001, the magistrate judge issued a report that determined the salvage value of the boat to be $5000, and a

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recommendation that this amount be deducted from the award to George Patin. On June 6, 2001, the district court concurred with the magistrate judge's findings and ordered that the salvage value of the boat be set at $5000 and that the previously-entered judgment in favor of George Patin be reduced by that amount.

        Thoroughbred, Velocity, and Stepp filed the instant appeal of the district court's judgment on October 20, 2000,10 arguing: 1) that Stepp is not liable to the LFBIC because the corporate veils of Thoroughbred and Velocity cannot be pierced to reach Stepp; 2) that Velocity is not liable...

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