Horizon River Rests. v. French Quarter Hotel Operator, LLC
| Decision Date | 02 March 2023 |
| Docket Number | Civil Action 22-3955 |
| Parties | HORIZON RIVER RESTAURANTS LLC v. FRENCH QUARTER HOTEL OPERATOR, LLC |
| Court | U.S. District Court — Eastern District of Louisiana |
ORDER & REASONS
Before the Court is a motion[1] by plaintiff and counter-defendant Horizon River Restaurants LLC (“Horizon”), pursuant to Federal Rule of Civil Procedure 12(b)(6), to dismiss counts II and III of defendant and counter-claimant French Quarter Hotel Operator, LLC's (“FQHO”) counterclaim,[2] which alleges negligent misrepresentation and fraudulent misrepresentation, respectively. For the reasons that follow, the Court denies Horizon's motion without prejudice, and grants FQHO leave to amend.
This is a contract dispute arising from a sublease agreement (“the Lease”) signed by Horizon and FQHO on February 19, 2018, pursuant to which FQHO would lease Horizon a property on Canal Street in New Orleans for the purposes of opening a Pizza Hut location.[3] Horizon also agreed to build out office space in the property for use by FQHO as an office.[4] As a result of delays related to the COVID-19 pandemic, Horizon and FQHO executed an amendment to the Lease on June 30, 2021 (the “Third Amendment”).[5] The Third Amendment provided in relevant part that Horizon would receive a 50% rent abatement for the period from October 1, 2021 to March 31, 2022, that the Pizza Hut restaurant would be opened for business on March 31, 2022, and that the office space construction would be completed on October 28, 2021.[6]
On March 22, 2022, an employee of FQHO emailed Horizon instructing it to “[h]old off on any build out, material purchases, or construction until further notice.”[7]In response, Horizon sent a letter on May, 24, 2022 as “notice of Landlord's defaults and to demand cure.”[8] On June 29, 2022, Horizon provided FQHO with formal notice of termination of the Lease.[9]
Horizon filed this action on October 17, 2022, seeking a declaratory judgment that its termination of the lease was “a valid exercise of Horizon's right under Section 2.10 of the Lease to terminate the Lease due to [FQHO's] defaults, and that the Lease was and is therefore terminated.”[10] Horizon also alleges breach of contract, breach of the warranty of peaceful possession, bad faith breach of contract, bad faith breach of the warranty of peaceful possession. It also seeks damages, attorney's fees and costs.[11] FQHO filed a counterclaim on November 30, 2022, which alleges breach of contract, negligent misrepresentation, and fraudulent misrepresentation. It seeks damages, attorney's fees and costs.[12]
Horizon seeks dismissal of FQHO's negligent misrepresentation and fraudulent misrepresentation claims, contending that (1) the claims are prescribed by La. Civ. Code art. 3492, (2) FQHO's counterclaim failed to identify any false representation of fact made by Horizon, and (3) FQHO failed to allege fraud with sufficient particularity, as required by Federal Rule of Civil Procedure 9(b).[13]
Rule 12(b)(6) of the Federal Rules of Civil Procedure allows for dismissal of a complaint for “failure to state a claim upon which relief can be granted.” Fed.R.Civ.P. 12(b)(6). “To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citation and internal quotations omitted). A claim is facially plausible “when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Id. “The plausibility standard is not akin to a probability requirement, but it asks for more than a sheer possibility that a defendant has acted unlawfully.” Culbertson v. Lykos, 790 F.3d 608, 616 (5th Cir. 2015) (citation omitted) (internal quotation marks omitted).
“[T]he face of the complaint must contain enough factual matter to raise a reasonable expectation that discovery will reveal evidence of each element of the plaintiffs' claim.” Hi-Tech Elec., Inc v. T&B Constr. & Elec. Servs., Inc., No. 15-3034, 2017 WL 615414, at *2 (E.D. La. Feb. 15, 2017) (Vance, J.) (emphasis added) (citing Lormand v. U.S. Unwired, Inc., 565 F.3d 228, 255-57 (5th Cir. 2009)). A complaint is insufficient if it contains “only labels and conclusions, or a formulaic recitation of the elements of a cause of action.” Whitley v. Hanna, 726 F.3d 631, 638 (5th Cir. 2013) (citation and internal quotations omitted). It “must provide the defendant with fair notice of what the plaintiff's claim is and the grounds upon which it rests.” Dura Pharms., Inc. v. Broudo, 544 U.S. 336, 346 (2005) (internal quotations omitted).
In considering a motion to dismiss, a court views the complaint “in the light most favorable to the plaintiff, accepting as true all well-pleaded factual allegations and drawing all reasonable inferences in the plaintiff's favor.” Lovick v. Ritemoney Ltd., 378 F.3d 433, 437 (5th Cir. 2004). The Court may consider “the complaint, its proper attachments, ‘documents incorporated into the complaint by reference, and matters of which a court may take judicial notice.'” Randall D. Wolcott, M.D., P.A. v. Sebelius, 635 F.3d 757, 763 (5th Cir. 2011) (quoting Dorsey v. Portfolio Equity, Inc., 540 F.3d 333, 338 (5th Cir. 2008)).
Pursuant to Federal Rule of Civil Procedure 9(b), when “alleging fraud or mistake, a party must state with particularity the circumstances constituting fraud or mistake.” Fed.R.Civ.P. 9(b). Rule 9(b) imposes a heightened pleading standard compared to “Rule 8(a)(2)'s threshold requirement that the ‘plain statement' possess enough heft to ‘sho[w] that the pleader is entitled to relief.'” Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 545 (2007).
The Fifth Circuit applies “Rule 9(b) to fraud complaints with ‘bite' and ‘without apology[.]'” United States ex rel. Grubbs v. Kanneganti, 565 F.3d 180, 185 (5th Cir. 2009) (quoting Williams v. WMX Techs., Inc., 112 F.3d 175, 178 (5th Cir. 1997)). While it is true that “Rule 9(b) supplements but does not supplant Rule 8(a)'s notice pleading,” and “does ‘not reflect a subscription to fact pleading,'” it does “require[] . . . simple, concise, and direct allegations of the circumstances constituting fraud.” Id. at 186 (quoting Williams, 112 F.3d at 178).
The Fifth Circuit requires “plaintiff[s] to plead ‘the time, place and contents of the false representation[], as well as the identity of the person making the misrepresentation and what that person obtained thereby.'” Id. (quoting United States ex rel. Russell v. Epic Healthcare Mgmt. Grp., 193 F.3d 304, 308 (5th Cir. 1999)) (first alteration added, second in original). In short, the plaintiff must “set forth the who, what, when, where, and how of the alleged fraud.” Frazier v. Runnels, No. 182340, 2019 WL 763511, at *2 (E.D. La. Feb. 21, 2019) (Lemelle, J.) (quoting United States ex rel. Steury v. Cardinal Health, Inc., 625 F.3d 262, 266 (5th Cir. 2010)).
Both Horizon and FQHO agree that negligent misrepresentation and fraudulent misrepresentation claims are delictual in nature and are therefore subject to the one-year prescriptive period established by La. Civ. Code art. 3492.[14] Pursuant to La. Civ. Code art. 3492, the one-year prescriptive period “commences to run from the day injury or damage is sustained.” The question before the Court is therefore when FQHO's alleged injury or damage was sustained.
“Damage is considered to have been sustained, within the meaning of the article, only when it has manifested itself with sufficient certainty to support accrual of a cause of action.” Cole v. Celotex Corp., 620 So.2d 1154, 1156 (La. 1993) (citing McCray v. N.E. Ins. Co., 579 So.2d 1156 (La.App. 2 Cir. 1991)). “Prescription commences when a plaintiff obtains actual or constructive knowledge of facts indicating to a reasonable person that he or she is the victim of a tort.” Guerin v. Travelers Indem. Co., 296 So.3d 625, 629 (La.App. 1 Cir. 2020) (citing Campo v. Correa, 828 So.2d 502, 510 (La. 2002)). Pursuant to the discovery rule, there must be actual or constructive notice of “the tortious act, the damage caused by the tortious act, and the causal link between the act and the damage before one can be said to have ‘constructive notice' of one's cause of action.” Becker v. Murphy Oil Corp., 70 So.3d 885, 915 (La.App. 4 Cir. 2011) (quoting Ducre v. Mine Safety Appliances, 963 F.2d 757, 760 (5th Cir. 1992)).
“Louisiana law also cautions that a prescription defense is not favored at the pleadings stage because ‘[d]etermination of when prescription commences under the discovery rule is a fact-intensive inquiry.'” Doe v. Bd. of Supervisors of Univ. of La. Sys., No. 22-338, 2023 WL 143171, at *18 (M.D. La. Jan. 10, 2023) (quoting Bailey v. Khoury, 891 So.2d 1268, 1284 (La. 1/20/05). Louisiana law also holds that “it is the defendant's burden to prove prescription, and that this burden shifts only if the ‘plaintiff's claim is barred on its face.'” Id. (quoting Bailey, 891 So.2d at 1284); see also In re Taxotere (Docetaxel) Prod. Liab. Litig., 995 F.3d 384, 388-89 (5th Cir. 2021) (“The burden of proof is normally on the party pleading prescription[.]”).
Horizon asserts that the prescriptive period for FQHO's misrepresentation claims began to run on October 1, 2021 because Horizon's “alleged misrepresentations ‘induced' FQHO into entering [into] the Third Amendment, and October 1, 2021 is the date on which FQHO first incurred damage as a result of that inducement.”[15] In other words,...
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