Hamilton v. Business Partners, Inc., Civil Action No. 96-CV-2366.

• Court: U.S. District Court — Eastern District of Louisiana
• Writing for the Court: BERRIGAN
• Citation: Hamilton v. Business Partners, Inc., 938 F.Supp. 370 (E.D. La. 1996)
• Decision Date: 12 September 1996
• Docket Number: Civil Action No. 96-CV-2366.
• Parties: David and Ruth HAMILTON, et al. v. BUSINESS PARTNERS, INC.

938 F. Supp. 370

David and Ruth HAMILTON, et al. v. BUSINESS PARTNERS, INC.

Civil Action No. 96-CV-2366.

United States District Court, E.D. Louisiana.

September 12, 1996.

Edmund Schmidt, III, Stephan M. Cooper, Jefferson, for plaintiffs.

T. Jay Seale, Mark E. Seamster, Russell W. Weeks, Hammond, for defendant.

ORDER AND REASONS

BERRIGAN, District Judge.

Defendant, Business Partners, Inc. d/b/a Kingdom of Toys ("Business Partners"), has moved to dismiss the plaintiffs' claims under the Louisiana Unfair Trade Practices and Consumer Protection Law, La.Rev.Stat. 51:1401, et seq, on the basis that the complaint fails to state a claim for which relief can be granted under the statute. For the reasons stated below, the motion is reluctantly GRANTED.

Business Partners is alleged to be a supplier of Walt Disney licensed products which it sells through a network of independent distributors.¹ Each of the plaintiffs are alleged to have purchased such a distributorship after attending a promotional sales seminar sponsored by the defendants.² The crux of the law suit is the plaintiffs' claim that the defendants failed to fulfill the promises and commitments made in connection with those contracts, causing the plaintiffs financial loss.³ In addition to other claims,⁴ the plaintiffs allege the defendants' conduct constituted unfair trade practices under La.Rev.Stat. 51:1405, et seq.⁵ It is the latter claim that the defendants now seek to have dismissed.

Louisiana's Unfair Trade Practices and Consumer Protection Law ("LUTPA") was enacted in 1972. It declares unlawful "unfair methods of competition and unfair or deceptive acts or practices in the conduct of any trade or commerce." La.Rev.Stat. 51:1405 A. In addition to providing for injunctive relief on behalf of the state to restrain and enjoin the prohibited acts, La.Rev.Stat. 51:1407, the statute also created a private right of action:

Any person who suffers any ascertainable loss of money or moveable property, corporeal or incorporeal, as a result of the use or employment by another person of an unfair or deceptive method, act or practice declared unlawful by R.S. 51:1405, may bring an action individually but not in a representative capacity to recover actual damages.

La.Rev.Stat. 51:1409 A.

The defendants contend the LUTPA claim should be dismissed because LUTPA creates a private cause of action only for consumers or business competitors and the plaintiffs here are neither.⁶ The defendants further argue that the plaintiffs cannot be considered consumers as the statute limits that concept to persons who obtain goods primarily for personal, family or household use.

The plaintiffs answer that the statute refers to "any person" who is aggrieved by an unfair trade practice and therefore does not limit relief to only business competitors or consumers.⁷ Furthermore, even if the statute were so construed, the plaintiffs argue that they are in fact "consumers" under the statute.

Analysis

A motion to dismiss may be granted only if it appears that no relief can be granted under any set of facts that could be proven consistent with the allegations of the complaint. All well-pleaded facts in the complaint are accepted as true and all allegations are construed in favor of the plaintiff. Meadowbriar Home for Children, Inc. v. Gunn, 81 F.3d 521, 529 (5th Cir.1996). In a diversity case such as this, the substantive law of Louisiana applies under Erie R. Co. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938). In ascertaining state law, the federal court is bound to apply the interpretation of state law rendered by the state's highest court and should not disregard a decision by an intermediate appellate state court unless it is convinced that the highest court of the state would decide the issue differently. Texas Dept. of Housing & Community Affairs v. Verex Assurance, Inc., 68 F.3d 922, 928 (5th Cir.1995).

a. Is relief under LUTPA limited to business competitors and consumers?

The short answer is "yes" as the federal Fifth Circuit has held that only consumers or business competitors have a cause of action under LUTPA. Orthopedic & Sports Injury Clinic, v. Wang Laboratories, Inc., 922 F.2d 220 (5th Cir.1991); Delta Truck & Tractor, Inc. v. J.I. Case Co., 975 F.2d 1192 (5th Cir.1992). This Court is of course obligated to follow that precedent. Nevertheless, this area of Louisiana law is fluid, and the federal jurisprudence resting upon it therefore subject to change. Furthermore, as the plaintiffs point out, the seminal Louisiana case upon which subsequent jurisprudence relied, Gil v. Metal Service Corp., 412 So.2d 706 (La.App. 4th Cir.1982), writ denied, 414 So.2d 379 (La.1982), may well be flawed. For those reasons, a discussion of the state jurisprudence and the federal interpretation of it appears worthwhile.

Interpretation of LUTPA begins for our purposes with Reed v. Allison & Perrone, 376 So.2d 1067 (La.App. 4th Cir.1979). Suit was brought by several lawyers against a competing legal clinic for false advertising. The Fourth Circuit did not discuss the scope of the statute but clearly the plaintiffs, as competitors of the defendant, fell within the class that could state a cause of action under the statute since the statute prohibits "unfair methods of competition." In the subsequent case of National Oil Service of Louisiana, Inc. v. Brown, 381 So.2d 1269 (La.App. 4th Cir.1980), the plaintiffs were also business competitors of the defendant. Again, the Fourth Circuit did not discuss the scope of the statute, beyond finding that LUTPA applied since it prohibited unfair methods of competition.

Two years later, the Fourth Circuit again considered the statute in Gil, supra. In that case, a discharged employee sued his former employer for his allegedly unlawful termination. The employee claimed he was fired because he refused to engage in unfair trade practices of his employer. Both the district court and the appellate court found the employee had no cause of action under LUTPA. In so finding, the Fourth Circuit declared that "(LUTPA) has been construed to give protection only to consumers and business competitors," citing its prior two cases above. Gil, 412 So.2d at 706. Neither National Oil Service nor Reed, however, declared that LUTPA's relief is restricted to only consumers or business competitors. That issue didn't rise since in both cases, the plaintiffs were in fact competitors and clearly within the range of the statute.

In Morris v. Rental Tools, Inc., 435 So.2d 528 (5th Cir.1983), Louisiana's Fifth Circuit cited Gil for the proposition that LUTPA applied to consumers and business competitors⁸ and then found that the plaintiff in fact was a business competitor. In Roustabouts, Inc. v. Hamer, 447 So.2d 543 (La.App. 1st Cir.1984), the First Circuit noted that the statute confers a right of action "on both consumers and business competitors," citing Morris, supra. Roustabouts, 447 So.2d at 548. The plaintiff in Roustabouts was a competitor. The First Circuit revisited LUTPA in 1991 in Jarrell v. Carter, 577 So.2d 120 (1st Cir.1991), writ denied, 582 So.2d 1311 (La.1991). Factually, the plaintiff was found to be a competitor of the defendant. Significantly though, in dicta, the court did not limit the range of the statute:

Although business consumers and competitors are included in the group afforded this private right of action, they are not its exclusive members.

Jarrell, 577 So.2d at 123, citing Roustabouts, supra.

The First Circuit again discussed LUTPA in Thibaut v. Thibaut, 607 So.2d 587 (La. App. 1st Cir.1992), writ denied, 612 So.2d 37 (La.1993). The individual plaintiffs were neither consumers nor competitors. Without mentioning its contrary dicta in Jarrell, the court cited Gil and held that the individual plaintiffs had no cause of action under LUTPA.⁹

In Monroe Medical Clinic, Inc. v. Hospital Corp. of America, 622 So.2d 760 (La.App. 2nd Cir.1993), writ denied, 629 So.2d 1135 (La.1993), Louisiana's Second Circuit stated that the class of persons who can bring a LUTPA claim "includes, but is not limited to business competitors and consumers," citing Roustabouts, supra, and Jarrell, supra. The plaintiff in that case was unquestionably a competitor.

In Davis v. Manpower International, Inc., 623 So.2d 946 (La.App. 4th Cir.1993), writ denied, 629 So.2d 1173 (La.1993), the plaintiff was an employee suing her employer, claiming the adverse working conditions forced her to resign. The court cited Gil for the proposition that LUTPA is limited to consumers and business competitors, then proceeded to analyze whether the plaintiff could be considered a competitor and concluded she was not.

Most recently, in Lilawanti Enterprises, Inc. v. Walden Book Co., Inc., 670 So.2d 558 (La.App. 4th Cir.1996), the plaintiff was a subleasee who sued the owners/lessors of the subject property. Among other claims, he alleged a violation of LUTPA in the failure of the defendant to honor his lease. There was no discussion on appeal regarding whether the plaintiff was within the scope of the statute but apparently he was neither a consumer nor a business competitor of the defendant. Nonetheless, the court reached the merits of his claim.¹⁰

To summarize, the Louisiana appellate courts have given conflicting messages about LUTPA's scope, with no state supreme court decision rendering the definitive answer.

The Fifth Circuit apparently first dealt with LUTPA's range in Wang, supra. The plaintiff clinic sued a computer company for failing to properly repair and service the clinic's computer equipment. The defendants successfully sought summary judgment on the LUTPA claim on the basis that the clinic was neither a consumer nor a business competitor of the defendant. The plaintiff appealed, arguing it was a consumer. The Fifth Circuit upheld summary judgment, finding that the plaintiff was not in fact a consumer. While the court did not specifically discuss the scope...