Stephens v. Brown & Root, Inc.

• Decision Date: 21 June 1971
• Docket Number: Civ. A. No. 13314.
• Parties: Alice Neilson STEPHENS et al. v. BROWN & ROOT, INC.
• Court: U.S. District Court — Western District of Louisiana

338 F. Supp. 680

Alice Neilson STEPHENS et al. v. BROWN & ROOT, INC.

Civ. A. No. 13314.

United States District Court, W. D. Louisiana, Alexandria Division.

June 21, 1971.

William E. Skye, Alexandria, La., for plaintiffs.

Richard B. Sadler, Jr., Alexandria, La., William A. Brown, Houston, Tex., for defendant.

EDWIN F. HUNTER, District Judge:

This subject matter has been with us for some time. It has its genesis when Brown & Root (Brown) sued O. R. Stephens and others (Civil Action No. 8166-A), alleging anti-trust violations. Brown & Root, Inc. v. Big Rock Corp., 383 F.2d 662 (5th Cir., 1967). Prior to the trial counsel for Brown notified the Court that it did not care to prosecute its anti-trust claim unless it was necessary to do so to provide a defense to threatened malicious prosecution claims. The anti-trust case was tried to a jury. The Court directed a verdict for Stephens. The present suit for malicious prosecution followed. The case was set for trial on June 16, 1969 and was continued at the request of the plaintiffs. Various and sundry motions have been presented. Subsequently, plaintiff O. R. Stephens passed away and his heirs were substituted as parties plaintiff. This resulted in further motions as to the survival of the action.

On January 17, 1971 we acknowledged that the survival issue presented a case of first impression involving Article 428 of the Louisiana Civil Code of Civil Procedure and its companion statute, Article 2315 of the Louisiana Civil Code, then proceeded to deny Brown's motion. In doing so we also dismissed Brown's second motion for summary judgment. Our denial was pegged on the belief that the issue of probable cause was for the jury.

Defendant's second motion for summary judgment must be re-examined insofar as it pertains to advice of counsel as a defense. Defense counsel's brief submitted with this motion dealt exhaustively with various issues and the particular issue was obscured in the mass of material. The motion was inspired largely by Kihneman v. Humble Oil and Refining Company, (E.D.La.1970), 312 F.Supp. 34. This opinion is a scholarly compilation of the Louisiana Law. Kihneman combined three separate actions: (1) invasion of privacy; (2) malicious prosecution; and (3) defamation by judicial pleadings. The Court granted summary judgment primarily on affidavits of Humble's attorneys, holding:

(1) "Litigants are encouraged to seek the courts to remedy their supposed wrongs, and the unsuccessful suitor is not to be held in damages merely because he was mistaken in his belief that he had a proper case."

(2) "But here again the policy that good faith litigation should not be discouraged protects even defamatory publications with a qualified privilege. This same policy permits the action for malicious prosecution only when, as the name of the Action implies, the prosecution originated in motives that the law deems malignant."

(3) "At common law, the privilege with respect to allegations in judicial proceedings is absolute * * * Hence at Common law the sole remedy with respect to improper use of the courts is malicious prosecution, * * Louisiana recognizes a civil action for malicious prosecution, but only when `a clear case * * * (is) established or where justice has been perverted for the gratification of private malice."

(4) "* * * where a litigant has made full disclosure to his attorney and has acted on his attorney's advice honestly and in good faith, the action for malicious prosecution will not lie * * * `Advice of counsel, even though erroneous, when accepted and acted on by the client in good faith, is a shield against charges of malice and bad faith' (citation). Here there is no showing that the defendants used the occasion for suing Harang to join Kihneman for any purpose other than to protect Humble's legal interests. Humble acted on the advice of counsel; it had probable cause to sue Kihneman."

(5) "There is no suggestion of any evidence whatsoever that Humble or any of its counsel bore any ill will toward the Plaintiff. In this respect Kihneman said only that malice "must" have existed because there was no other reason to sue him. But he suggests not a scintilla of evidence to support his assumption. Even though a summary judgment cannot usually be predicated on an inherently factual question, such as the absence of malice, the showing here is so clear and so factually uncontroverted that no inference of malice could permissibly be drawn."

(6) "In Louisiana, publications made in the course of judicial proceedings have only a qualified privilege, sometimes called a conditional privilege. * * * `The common law rule of absolute privilege in judicial proceedings is not the law of Louisiana. Here the privilege is qualified and subject to the rule that the allegation or comment must be material, with probable cause, and without malice.'"

(7) "* * * the privilege is lost if the publication is not made primarily for the purpose of furthering the interest which is entitled to protection * * * Defendants may not be spitefully abused, but counsel are permitted to frame pleadings in language that goes beyond stereotyped lawbook forms."

In Brooks v. Bank of Acadia, 138 La. 657, 70 So. 573, 575 (1916), the Louisiana Supreme Court said:

"Advice of counsel, even though erroneous, on questions of law, when accepted and acted on by the client in good faith is a shield against charges of malice and bad faith."

When we granted a directed verdict for O. R. Stephens in Civil Action 8166-A, counsel for Brown & Root argued a corporate merger theory under 15 U.S. C.A. Section 18, that the sale by O. R. Stephens and Stephens Gravel Company to Central Sand & Gravel Company of the Stephens-Big Rock pit, its leases, deposits and equipment, was an anti-trust violation because "the effect of such acquisition may be (was) substantially to lessen competition or to tend to create a monopoly * * *." We did not agree and rejected Brown's contention, saying:

"Not every acquisition of the assets of the corporation is illegal, but it is illegal if the effects of the acquisition is less than the effect * * * in lessening competition. Of course, if that is the law, then Mr. Brown is entitled to a directed verdict in this case. So, I don't think that's anything to submit to the jury on that." (Tr. 1388)

On appeal, Brown & Root urged this legal position in its Second Specification of Error (see 383 F.2d 665), but the Court of Appeals avoided decision of the anti-trust question because: "The Appellant, Brown & Root, by brief and oral argument, disclaims any desire for recovery of a money judgment and avows that its only desire is to procure a declaratory judgment that will protect it against liability for malicious prosecution to those against whom it asserted the anti-trust claim."

The Supreme Court of Louisiana in Eusant v. Unity Industrial Life Ins., etc. (1940), 195 La. 347, 196 So. 554, said:

"It is the settled jurisprudence of this court that `Where a party has communicated to his counsel all the facts bearing on the case of which he has knowledge, or could have ascertained by reasonable diligence or inquiry, and has acted upon the advice received honestly and in good faith, the absence of malice is established, the want of probable cause is negatived, and the action of malicious prosecution will not lie; and a fortiori is this the case where the counsel consulted is the public prosecutor." Sandoz v. Veazie, 106 La. 202, 30 So. 767. `Probable cause does not depend upon the actual state of the case in point of fact, but on the honest and reasonable belief of the party prosecuting.'"

To the same effect, see Sandoz v. Veazie (1901), 106 La. 202, 30 So. 767; Blanchard v. Employers Liability Assurance Corporation, (La.App.1967), 197 So.2d 386; Graham v. Interstate Electric Co., (1930) 170 La. 392, 127 So. 879; Glynn v. Le Normand, 80 So.2d 896 (La.App. 1955); Gould v. Gardner, Sager & Co. (1853) 8 La.Ann. 11. These decisions require that the then plaintifff seek the advice of counsel in good faith, without misrepresenting the facts or withholding a known material fact. Most cases dealing with this aspect of the advice-of-counsel defense, are criminal rather than civil. See quotation from Eusant v. Unity Industrial Life, Ins., etc. (1940) 195 La. 347, 196 So. 554.

Thus, if it be shown that defendant knowingly misrepresented the facts to his counsel, the defense does not avail. In Bladgy v. Giacomino (1930) 170 La. 638, 128 So. 661, the now defendant charged plaintiff with embezzling property which the now defendant knew he did not own. But it is abundantly clear that the actual state of facts do not control, but the then plaintiff's honest and reasonable belief as to the facts. In Blanchard v. Employers Liability Assurance Corp. (La.Ct.App.1967), 197 So.2d 386, the Court recited the established rule from Eusant v. Unity, etc., supra, that: "Probable cause does not depend upon the actual state of the case in point of fact, but on the honest and reasonable belief of the party prosecuting," and followed by saying:

"In the instant case there are no direct nor positive averments to show the defendants in instituting the damage suits aforesaid were actuated by malice. Furthermore, in the absence of affirmative allegations to the contrary, the claimants will be presumed to have acted on advice of counsel and not without probable cause."

Defendant accompanied its second motion for summary judgment with affidavits by the lawyers, describing the research undertaken, together with their facts, setting forth their belief that the facts as found were true and specifically denying that they were in any way animated by malice towards plaintiff. These affidavits reveal that Brown acted on its attorneys advice and the law seems clear that advice of counsel, even though erroneous, when accepted and acted on by the client in good faith, is a shield against charges of malice and bad faith. The affidavits...