Pure Air Daigle, LLC v. Stagg

• Decision Date: 15 September 2017
• Docket Number: CIVIL ACTION NO. 6:16-cv-01322
• Parties: PURE AIR DAIGLE, LLC, ET AL. v. CHARLES STAGG, II, ET AL.
• Court: U.S. District Court — Western District of Louisiana

PURE AIR DAIGLE, LLC, ET AL. v. CHARLES STAGG, II, ET AL.

CIVIL ACTION NO. 6:16-cv-01322

UNITED STATES DISTRICT COURT WESTERN DISTRICT OF LOUISIANA LAFAYETTE DIVISION

September 15, 2017

MAGISTRATE JUDGE HANNA

BY CONSENT OF THE PARTIES

MEMORANDUM RULING

Currently pending is the defendants' motion for partial summary judgment with regard to the plaintiffs' claims against defendant Brad Guidry. (Rec. Doc. 107). The motion is opposed. Considering the evidence, the law, and the arguments of the parties, and for the reasons fully explained below, the motion is GRANTED.

BACKGROUND

Defendants Charles Stagg, II, Scott Lanclos, Phillip Courville, Jr., and Brad Guidry ("the Employee Defendants") were all formerly employed by Daigle Welding Supply. The plaintiffs are the successors of that company. Defendant Capitol Welders Supply Co. Inc. was a long-time supplier of the plaintiffs. In 2016, Capitol formed defendant St. Landry Gas & Supply, L.L.C., which is a competitor of the plaintiffs. The Employee Defendants left their employment with the plaintiffs and all of them went to work for St. Landry Gas.

In their complaint, the plaintiffs asserted claims against the defendants for breach of contract, violation of the Louisiana Unfair Trade Practices and Consumer Protection Law ("LUTPA"), breach of fiduciary duties, conversion, tortious interference with contractual relationships, tortious interference with business relationships, and conspiracy. No breach of contract claim was asserted against Mr. Guidry, and the breach of contract claim against Mr. Stagg, Mr. Lanclos, and Mr. Courville was previously dismissed with prejudice. (Rec. Docs. 131, 132). The tortious interference with contractual relations claim was previously dismissed with prejudice. (Rec. Docs. 135, 136). The conversion claim was previously dismissed with prejudice. (Rec. Docs. 133, 134). The instant motion relates solely to the plaintiffs' claims against Mr. Guidry. The claims remaining against Mr. Guidry are for unfair trade practices, breach of fiduciary duty, tortious interference with business relations, and conspiracy.

LAW AND ANALYSIS

A. THE SUMMARY JUDGMENT STANDARD

Under Rule 56(a) of the Federal Rules of Civil Procedure, summary judgment is appropriate when there is no genuine dispute as to any material fact, and the moving party is entitled to judgment as a matter of law. A fact is material if proof of its existence or nonexistence might affect the outcome of the lawsuit under theapplicable governing law.¹ A genuine issue of material fact exists if a reasonable jury could render a verdict for the nonmoving party.²

The party seeking summary judgment has the initial responsibility of informing the court of the basis for its motion and identifying those parts of the record that demonstrate the absence of genuine issues of material fact.³ If the moving party carries its initial burden, the burden shifts to the nonmoving party to demonstrate the existence of a genuine issue of a material fact.⁴ All facts and inferences are construed in the light most favorable to the nonmoving party.⁵

If the dispositive issue is one on which the nonmoving party will bear the burden of proof at trial, the moving party may satisfy its burden by pointing out that there is insufficient proof concerning an essential element of the nonmoving party'sclaim.⁶ The motion should be granted if the nonmoving party cannot produce evidence to support an essential element of its claim.⁷

B. THE APPLICABLE LAW

A federal court sitting in diversity must apply state substantive law and federal procedural law.⁸ Because this is a diversity case, Louisiana's substantive law must be applied.⁹ To determine Louisiana law, federal courts look to the final decisions of the Louisiana Supreme Court.¹⁰ When the state's highest court has not decided an issue, the court must make an "Erie guess" as to how the state supreme court would decide the issue.¹¹ In making such a guess, the federal court may rely upon state appellate court decisions, unless persuasive data convinces the court that the state supreme court would decide the issue differently.¹² When making an Erie guessconcerning Louisiana law, the Fifth Circuit In making an Erie guess, relies upon "(1) decisions of the [Louisiana] Supreme Court in analogous cases, (2) the rationales and analyses underlying [Louisiana] Supreme Court decisions on related issues, (3) dicta by the [Louisiana] Supreme Court, (4) lower state court decisions, (5) the general rule on the question, (6) the rulings of courts of other states to which [Louisiana] courts look when formulating substantive law and (7) other available sources, such as treatises and legal commentaries."¹³

C. LOUISIANA LAW REGARDING UNFAIR TRADE PRACTICES

In their complaint, the plaintiffs asserted a claim against Mr. Guidry for violation of Louisiana's Unfair Trade Practices and Consumer Protection Law ("LUTPA"), La. R.S. 51:1401, et seq. This statute declares that "[u]nfair methods of competition and unfair or deceptive acts or practices in the conduct of any trade or commerce" are unlawful. "LUTPA grants a right of action to any person, natural or juridical, who suffers an ascertainable loss as a result of another person's use of unfair methods of competition and unfair or deceptive acts or practices in the conduct of any trade or commerce."¹⁴

The elements of a cause of action under LUTPA are: (1) an unfair or deceptive trade practice declared unlawful; (2) that impacts a consumer, business competitor, or other person to whom the statute grants a private right of action; (3) which has caused ascertainable loss.¹⁵ Actual damages may be awarded under LUTPA.¹⁶ The recovery of general damages is available under LUTPA, including damages for mental anguish and humiliation.¹⁷ When a plaintiff is awarded damages under LUTPA, the plaintiff is also entitled to recover an award of attorneys' fees.¹⁸

Courts must decide, on a case-by-case basis, what conduct violates LUTPA.¹⁹ Under this statute, an act need not be both unfair and deceptive to be actionable.²⁰ A practice is unfair "when the practice is unethical, oppressive, unscrupulous, orsubstantially injurious,"²¹ while a practice is deceptive when it amounts to "fraud, deceit or misrepresentation."²² Thus, "LUTPA claims are not limited solely to allegations of fraud, but may be independently premised on a range of non-fraudulent conduct."²³

Negligent acts do not violate the LUTPA,²⁴ and LUTPA does not provide an alternative remedy for breaches of contract.²⁵ Furthermore, "LUTPA does not prohibit sound business practices, the exercise of permissible business judgment, or appropriate free enterprise transactions."²⁶

With regard to the particular context of this lawsuit, it is well established that LUTPA is not violated when employees merely terminate their employment and then go to work for their former employer's competitor. "[A]t-will employees are free to exercise their right to change employment, even if they decide to work for acompetitor of their former employer."²⁷ "[A]t the termination of [his] employment, an employee can go to work for a competitor or form a competing business. Even before termination, the employee can seek other work or prepare to compete."²⁸ "An employee's involvement in forming a competitive entity, including the solicitation of business and the hiring of employees, prior to terminating his current employment relationship, is not an unfair trade practice."²⁹

Furthermore, while the solicitation and diversion of an employer's customers prior to termination of employment constitutes unfair competition entitling the former employer to recover damages,³⁰ the solicitation of customers after the end of employment does not form the basis of a cause of action for unfair competition.³¹ An employee is free to solicit customers from his former employer "as long as he doesso based on his memory, experience, or personal contacts, rather than through the use of confidential information of the former employer."³² "A former employee who enters business in competition with his former employer necessarily utilizes the experience he acquired and the skills he developed while in a former employment."³³ "[T]he mere fact that each individual defendant brought with [him] his knowledge of previous business contacts and relationships and specialized knowledge of the. . . business does not constitute a violation of LUPTA."³⁴

D. BREACH OF FIDUCIARY DUTIES

The elements of a claim for breach of fiduciary duty under Louisiana law include: (1) the existence of a fiduciary duty, (2) a violation of that duty by the fiduciary, and (3) damages resulting from the violation of duty.³⁵ "[W]hether a fiduciary duty exists, and the extent of that duty, depends upon the facts andcircumstances of the case and the relationship of the parties."³⁶ Employees and mandataries owe duties of fidelity and loyalty to their employers and principals.³⁷ "An employee owes his employer a duty to be loyal and faithful to the employer's interest in business."³⁸ An employee is duty-bound not to act in antagonism or opposition to the interest of his employer.³⁹

Louisiana courts have determined that, under circumstances where an employee solicited customers and copied confidential customer lists of his employer while still employed, a breach of fiduciary duty may be found.⁴⁰ However,

[w]ithout a restrictive agreement, at the termination of her employment, an employee can go to work for a competitor or form a competing business. Even before termination, the employee can seek other work or prepare to compete, except that she may not use confidential information acquired by her from her previous employer. . . . [A]nemployee's involvement in forming a competitive entity, including the solicitation of business and the hiring of employees, prior to terminating her current employment relationship, is not an unfair trade practice. [An employee has] a right to explore alternatives to her current

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