519 F.3d 239 (5th Cir. 2008), 07-30229, Audler v. CBC Innovis Inc.

Docket Nº:07-30229
Citation:519 F.3d 239
Party Name:Brian A. AUDLER, on his own behalf and on behalf of all others similarly situated, Plaintiff-Appellant, v. CBC INNOVIS INC., et al., Defendants-Appellees.
Case Date:February 27, 2008
Court:United States Courts of Appeals, Court of Appeals for the Fifth Circuit

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519 F.3d 239 (5th Cir. 2008)

Brian A. AUDLER, on his own behalf and on behalf of all others similarly situated, Plaintiff-Appellant,


CBC INNOVIS INC., et al., Defendants-Appellees.

No. 07-30229

United States Court of Appeals, Fifth Circuit.

February 27, 2008

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David A. Bowling (argued), Wilson, Bowling & McKinney, R. Glen Cater, Willis & Buckley, New Orleans, LA, for Plaintiff-Appellant.

Harry Alston Johnson, III (argued), Marshall M. Redmon, Virginia Y. Trainor, Phelps Dunbar, Baton Rouge, LA, for CBC Innovis Inc.

Paul H. Spaht, Kantrow, Spaht, Weaver & Blitzer, Baton Rouge, LA, for Advantage Air, Land and Sea Inc.

Isaac H. Ryan, Deutsch, Kerrigan & Stiles, New Orleans, LA, for America's Flood Services Inc. and Nationwide Total Flood Services Inc.

Lance James Arnold, Baldwin, Haspel, Burke & Mayer LLC, New Orleans, LA, Steven Arthur Levy, Goldberg Kohn, Chicago, IL, for American Flood Research Inc.

William J. Wegmann, Law Firm of William J. Wegmann, Metairie, LA, for Retail Merchants Association Inc.

Larry Bruce Feldman, Jr., McGlinchey Stafford, New Orleans, LA, for Federal Flood Certification Corp., Landsafe Flood Determination Inc. and Stewart Mortgage Information.

Benjamin Wesley Pitts, Kevin L. Cole, Galloway, Johnson, Tompkins, Burr & Smith, Mandeville, LA, for Floodgard Inc.

Jeffrey Edward Richardson (argued), Charles F. Gay, Jr., Adams & Reese, New Orleans, LA, for FNIS Flood Services L.P. and Geotrac Inc.

Nancy Jane Marshall, Deutsch, Kerrigan & Stiles, New Orleans, LA, for Integrated Loan Services.

Susan Fahey Desmond, Watkins, Ludlam, Winter & Stennis, Gulfport, MS, for Kroll Factual Data.

Claude David Vasser, Jr., Vasser & Vasser, Baton Rouge, LA, for Property Research Data Ltd.

Clark Willis Richards, Hilgers, Bell & Richards, Austin, TX, Vincent James Booth, New Orleans, LA, for Stormwater Research Group.

Glenn Paul Orgeron, Lisa Ann Easterling, Kean, Miller, Hawthorne, D'Armond, McCowan & Jarman, New Orleans, LA, Stephen Julian Newman, Stroock & Stroock, Los Angeles, CA, for Trans Union Settlement Solutions Inc.

Terrence K. Knister, Gordon, Arata, McCollam, Duplantis & Eagan, New Orleans, LA, Charles A. Newman, Bryan Cave, St. Louis, MO, for Wells Fargo Ins. Inc. and First American Real Estate Solutions of Texas LP.

Edward T. Lyons, Jr., Jones & Keller, P.C., Denver, CO, for Kroll Factual Data, Inc.

Appeal from the United States District Court for the Eastern District of Louisiana

Before STEWART, OWEN, Circuit Judges, and MEANS, District Judge.[*]

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CARL E. STEWART, Circuit Judge

Brian A. Audler ("Audler") appeals from the district court's dismissal of his class action lawsuit predicated on the Defendants' allegedly erroneous determinations that property owned by Audler and the other class members was located outside of a Special Flood Hazard Area ("SFHA") when, in fact, the property was located in a SFHA. We first find that Audler lacks standing to bring claims against any Defendant other than CBC Innovis Inc. ("CBC"), and therefore dismiss these claims for lack of standing. The primary remaining issue on appeal is whether under Louisiana law, CBC, a company which provides flood zone determinations to lenders, owed a duty to Audler, the owner of a property allegedly erroneously determined to be located outside of a SFHA. Because we agree with the district court's holding that there was no duty owed by CBC to Audler, we affirm the district court's dismissal of Audler's claims for negligence, negligent misrepresentation, and failure to warn. In addition, finding no reversible error, we affirm the district court's dismissal of Audler's claims for detrimental reliance and breach of warranty.


The National Flood Insurance Act of 1968 ("NFIA"), 42 U.S.C. § 4001, et seq., established the National Flood Insurance Program ("NFIP") because private insurers were unable to offer reasonably priced flood insurance to the increasing number of people living in flood-prone areas. The NFIP (1) made federally subsidized flood insurance available in flood-prone areas and (2) encouraged states and localities to adopt land use policies and regulations that reduce the risk of flood damage. 42 U.S.C. § 4001(a)-(e); Till v. Unifirst Fed. Sav. & Loan Ass'n, 653 F.2d 152, 159 (5th Cir. 1981). In 1973, Congress enacted the Flood Disaster Protection Act, which amended the NFIA to require flood insurance for loans secured by improved real estate situated within a federally-created SFHA and to mandate that banks and similar lending institutions determine whether a property is located in a SFHA and, if so, ensure that flood insurance is obtained. See 42 U.S.C. § § 4104a and 4012a(b)(1).

After widespread floods in the Midwest in 1993, Congress enacted the National Flood Insurance Reform Act ("Reform Act"), which imposed new obligations on mortgage originators and services. The Reform Act amended the NFIA to require that if a lender determines that a purchaser's property is located in a SFHA, the lender must notify the purchaser of the flood hazard in a written notice within a reasonable time before the completion of the transaction. 42 U.S.C. § 4104a(a)(1); 12 C.F.R. 339.9. In addition, the Reform Act also strengthened the mandatory purchase requirements by requiring lenders to force-place flood insurance if it is determined that flood insurance is inadequate or non-existent. 42 U.S.C. § 4102a(b); 12 C.F.R. 339.7. The Reform Act also amended the NFIA to permit lenders to delegate to third parties the task of determining whether a particular piece of property falls within a SFHA, but "only to the extent that such person guarantees the accuracy of the information." 42 U.S.C. § 4104b(d).

A determination under the NFIA that a property is not located within a SFHA does not prevent a borrower from purchasing private flood insurance.


In March 2001, Audler refinanced his home located at 3612 Juno Drive, Chalmette, Louisiana with Gulf Coast Bank

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and Trust Company ("Gulf Coast"). Gulf Coast is a regulated lender, and in compliance with the NFIA, Gulf Coast requested and obtained a Standard Flood Hazard Determination from CBC. CBC provides flood zone determinations to lenders subject to the NFIA. On March 19, 2001, at the request of Gulf Coast, CBC executed a flood zone determination regarding Audler's Chalmette, Louisiana property utilizing the "Standard Flood Hazard Determination" form. The form provides the following certification: "Is building/ mobile home in special flood hazard area." On the form executed by CBC in relation to Audler's property, this question was answered in the negative. Audler alleges that the certification was incorrect, and that his property is actually located within a SFHA.

On August 29, 2005, Audler's property was damaged by floodwaters from Hurricane Katrina. At the time, Audler's property was not insured by flood insurance. He alleges that his failure to obtain flood insurance was due to CBC's certification that the property was not located in a SFHA.

Audler filed suit against CBC Innovis Inc. ("CBC")1 and nineteen other Defendants alleged to be in the flood determination business, on his own behalf and as a representative of a class consisting of all homeowners and business owners (1) who sustained flood damage from Hurricanes Katrina and Rita in the state of Louisiana; (2) who had no flood insurance at the time of their flood losses; and (3) regarding whose property a flood zone determination was performed prior to the hurricanes which incorrectly determined their property to be outside of a Special Flood Hazard Area. Audler asserts a number of causes of action, all arising under Louisiana law: (1) negligence and negligent misrepresentation pursuant to Louisiana Civil Code Articles 2315 and 2316; (2) failure to warn;(3) detrimental reliance;(4) breach of guaranty or warranty; and (5) stipulation pour autrui. Audler's petition states that all claims are separate and apart from the federal flood insurance legislation governing lenders and that none of his claims arise under that legislation.

This case was originally filed in Louisiana state court in the Thirty-Fourth Judicial District Court for the Parish of St. Bernard, and was removed to federal court by Defendant FNIS Flood Services, L.P. based on jurisdiction under the Class Action Fairness Act, 28 U.S.C. § 1332(d) ("CAFA"), and diversity jurisdiction under 28 U.S.C. § 1332(a). Shortly thereafter, CBC timely filed another Notice of Removal which provided additional explanation for the CAFA and diversity jurisdictional grounds and also asserted other grounds for federal jurisdiction: federal question jurisdiction under 28 U.S.C. § 1331 and the NFIA, and supplemental jurisdiction under 28 U.S.C. § 1367. Audler did not contest removal.2

Two motions to dismiss were then filed. First, CBC filed a motion to dismiss under Rule 12(b)(6) asserting that Audler's complaint does not state any grounds for relief

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under state law, either in tort or in contract.3 With respect to the tort claims, CBC argued that when a flood zone determination company is hired by a lender to perform a flood zone determination, the flood zone determination company does not owe a duty to the borrower in the loan transaction. Second, the remaining Defendants ("Class Defendants"), 4 none of whom were involved in the preparation of Audler's flood zone determination, filed a motion to dismiss adopting the arguments of CBC, but also setting forth additional grounds for dismissing the claims against them: lack of standing, failure to allege causation, and improper joinder. After oral argument on the motion, the district court concluded that Audler's petition failed to state a claim for relief under...

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