CARL J. BARBIER, District Judge.
Before the Court are cross motions for summary judgment filed by plaintiffs, Todd and Kate Novak, and defendants, St. Maxent-Wimberly House Condominium, Inc., Michael Skinner, Cynthia Cunningham, Ross Henry, Henry Insurance Services, Inc., Kevin Cunningham, and State Farm Fire and Casualty Company (collectively, "Defendants"). The motions are:
Considering the motions, the memoranda, the record, and the law, the Court finds Plaintiffs' motions shall be
This litigation devolved from a dispute over the Plaintiffs' right to short-term lease a condominium unit they purchased in the French Quarter. The Novaks are school teachers who work in California; their plan was to buy a French Quarter condo unit which they could use as a vacation home during summer break but lease during the regular school year when they would be teaching in California.
On February 16 of 2015, in pursuit of their plan to buy a summer retreat which would also turn a profit, the Plaintiffs agreed to purchase one of the five units that make up St. Maxent-Wimberly House (the "House").
The Novaks purchased their unit, Unit 1, from Jenny and Michael Tilbury for $379,000 through an "as is," no warranty, cash sale.
After ownership of Unit 1 transferred, tensions began to rise between the Novaks and the association tasked with managing and regulating the condominium, St. Maxent-Wimberly Condominium, Inc. ("St. Maxent"), which is controlled by a board of directors (the "Board").
In August of 2015, Cynthia Cunningham informed Kate Novak that the Board would consider allowing the Novaks to rent their unit for 6-months but that it would require a vote from the Board.
Relations between the Novaks and the other members of St. Maxent did not improve. In the fall of 2015, the Novaks allegedly requested to examine St. Maxent's books in accordance with the By-Laws, a request the Board denied.
On February 12, 2016, the unit owners (then, Michael Skinner, Cynthia Cunningham, Ross Henry, Ehab Zagzoug, and Kate Novak) and the Board (same, except Kate Novak refused to act as a director) had their annual meeting.
In March of 2016, the Novaks hired Gurtler Bros. Consultants, Inc. to inspect the common areas of the house. The Gurtler report concludes that deferred maintenance had caused various common parts of the House to fall into disrepair.
The Novaks then initiated this litigation by filing a Petition to Enforce Agreement to Arbitrate and to Compel Arbitration (Rec. Doc. 1) on May 23, 2016, naming St. Maxent, Michael Skinner, Cynthia Cunningham, Ross Henry, and State Farm as defendants. The Petition asks for relief in the form of an order compelling defendants to submit to arbitration. Plaintiffs subsequently obtained new counsel and filed their First Supplemental and Amended Complaint (Rec. Doc. 13). The first sentence of the Amended Complaint states that Plaintiffs "withdraw their request for arbitration." Plaintiffs then filed a Second Supplemental and Amended Complaint (Rec. Doc. 53), this one "meant to replace all previous complaints and demands." This complaint pleads seventeen causes of action, including an allegation of civil conspiracy amongst St. Maxent, the Board members, the realtors, and the Tilburys.
Following this amendment to the pleadings, the parties engaged in extensive motion practice. The Court granted summary judgment in favor of the realtors and the Tilburys; only St. Maxent., its board members, and their insurers remain as defendants in this case.
Summary judgment is appropriate when "the pleadings, the discovery and disclosure materials on file, and any affidavits show that there is no genuine issue as to any material fact and that the movant is entitled to judgment as a matter of law." Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986) (citing Fed. R. Civ. P. 56); Little v. Liquid Air Corp., 37 F.3d 1069, 1075 (5th Cir. 1994). When assessing whether a dispute as to any material fact exists, a court considers "all of the evidence in the record but refrains from making credibility determinations or weighing the evidence." Delta & Pine Land Co. v. Nationwide Agribusiness Ins. Co., 530 F.3d 395, 398 (5th Cir. 2008). All reasonable inferences are drawn in favor of the nonmoving party, but a party cannot defeat summary judgment with conclusory allegations or unsubstantiated assertions. Little, 37 F.3d at 1075. A court ultimately must be satisfied that "a reasonable jury could not return a verdict for the nonmoving party." Delta, 530 F.3d at 399.
If the dispositive issue is one on which the moving party will bear the burden of proof at trial, the moving party "must come forward with evidence which would `entitle it to a directed verdict if the evidence went uncontroverted at trial.'" Int'l Shortstop, Inc. v. Rally's, Inc., 939 F.2d 1257, 1264-65 (5th Cir. 1991). The nonmoving party can then defeat the motion by either countering with sufficient evidence of its own, or "showing that the moving party's evidence is so sheer that it may not persuade the reasonable fact-finder to return a verdict in favor of the moving party." Id. at 1265.
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 merely pointing out that the evidence in the record is insufficient with respect to an essential element of the nonmoving party's claim. See Celotex, 477 U.S. at 325. The burden then shifts to the nonmoving party, who must, by submitting or referring to evidence, set out specific facts showing that a genuine issue exists. See id. at 324. The nonmovant may not rest upon the pleadings but must identify specific facts that establish a genuine issue for trial. See, e.g., id. at 325; Little, 37 F.3d at 1075.
This case has been needlessly complicated by the Plaintiffs' unwieldy Second Amended Complaint, which meanders for 227 paragraphs. At its essence, Plaintiffs' grievance is simply that St. Maxent is not maintaining the House and is not keeping sufficient documentation for the association members to determine what is being expended on maintenance, all in violation of the By-Laws and the Louisiana Condominium Act. This case should be as easy as determining (1) whether St. Maxent breached these duties as they are clearly set forth in the Act, and if so, (2) whether these breaches resulted in provable damage, presumably in the form of lost rents or a diminution in the value of the Novaks' unit.
This case has been far from easy because Plaintiffs allege, for example, that a "failure to maintain and repair the building" gives rise to not just a cause of action under the By-Laws or the Act, but also claims of negligent or intentional or fraudulent misrepresentation (causes of action 9, 10), intentional or tortious interference with contract (11), intentional or tortious interference with business (12), breach of fiduciary obligation (13), civil conspiracy (16), as well as a derivative action by the Novaks on behalf of St. Maxent (17). Plaintiffs further complicate matters by challenging in their complaint whether the association even constitutes an incorporated entity and by claiming the "Purported Board of Directors of St. Maxent" and St. Maxent's board members are liable individually. The Court begins by reviewing the statutory provisions controlling the administration of condominiums before resolving Plaintiffs' motions, and finally the Defendants' motion.
The Louisiana Condominium Act defines "condominium" as "the property regime under which portions of immovable property are subject to individual ownership and the remainder thereof is owned in indivision by such unit owners." La. R.S. 9:1121.103(1). An "association,"—such as St. Maxent—is defined as "a corporation, or unincorporated association, owned by or composed of the unit owners and through which the unit owners manage and regulate the condominium." La. R.S. 9:1121.103(8). By law, every association's membership consists exclusively of all of its unit owners. La. R.S. 9:1123.101. If the association is incorporated, it may be as a for-profit corporation, or a non-profit corporation as St. Maxent is. Id. In the case it is a corporation, the association is controlled by a board of directors. Pursuant to the Act, St. Maxent's board has the power to: "adopt and amend bylaws and rules and regulations;" "adopt and amend budgets for revenues, expenditures, and reserves and make and collect assessments for common expenses from unit owners;" "regulate the use, maintenance, repair, replacement, and modification of common elements;" "exercise any other powers conferred by the declaration or bylaws;" and "exercise any other powers necessary and proper for the governance and operation of the association." See La. R.S. 9:1123.102.
Consistent with scope of the association's powers, it is "responsible for maintenance, repair, and replacement of the common elements" and for keeping "financial records sufficiently detailed to enable the association to comply" with its maintenance obligation. La. R.S. 9:1123.107, 9:1123.108. "All financial and other records shall be made reasonably available for examination by any unit owner and his authorized agents." La. R.S. 9:1123.108. Thus, the "Act imposes a legal obligation upon condominium associations to maintain, repair, or replace the common elements of the condominium building," FIE, LLC v. New Jax Condo Assn., Inc., 241 So.3d 372, 392 (La. App. 4th Cir. 2018), and St. Maxent may be sued for its failure to satisfy this or its record-keeping obligations as a condominium association incorporated as a non-profit corporation. See id.; see also La. Civ. Code art. 24. St. Maxent's board, however, "is not a juridical person and lacks the requisite procedural capacity" to be sued. Wells v. Fandal, 136 So.3d 83, 91 (La. App. 5th Cir. 2014). While, the board of directors is the decision-maker charged with steering an incorporated association, it is not recognized as an entity to be held separately liable from the association. Id. Furthermore, while the liability of individual directors of all corporations is limited, the liability of directors acting on behalf of condominium associations is limited by a specific statute:
La. R.S.. § 9:2792.7.
Plaintiffs have filed two partial summary judgment motions against Defendants. They first ask for summary judgment "as it relates to their demand for arbitration and for an accounting of Homeowners' Association funds, as provided for in the By-Laws." (Rec. Doc. 95). However, Plaintiffs specifically withdrew their request for arbitration when they amended their complaint, and Plaintiffs' Second Amended Complaint (Rec. Doc. 53), as exhaustive as it would appear, does not allege that Defendants breached any contract with Plaintiffs by failing to arbitrate. The Court cannot grant summary judgment on a claim that has not even been properly pleaded.
Likewise, summary judgment is not warranted on Plaintiffs' assertion that Defendants breached the By-Laws by failing to provide an accounting. Plaintiff cites to no record evidence in its memorandum of any request by Plaintiffs that Defendants denied. Elsewhere, Plaintiffs do cite to the unsworn declaration of Malcolm Kelso, who states, "In our pursuit of the alleged amendment, we noticed systemic failures on the part of the BOD, and requested an accounting of the St, Maxent books and records."
Plaintiffs filed a second partial summary judgment motion (Rec. Doc. 137) against Defendants for negligent misrepresentation, breach of contract and the By-Laws, and violation of the Louisiana Condominium Act. First, Plaintiffs ask for summary judgment because St. Maxent misrepresented:
Confusingly, Plaintiffs cite to the Defendants' Responses for Request for Production in this litigation as evidence of the Defendants' negligent misrepresentations and yet they allege that "Defendants made these misrepresentations to others prior to Plaintiffs[`] purchase of the property."
Second, Plaintiffs alleges that Defendants breached its contract with the Novaks by violating the By-Laws by:
Again, Plaintiffs rely almost entirely on the Defendants' Responses for Request for Production as evidence of these claims. Plaintiffs cite to no relevant case law. They cite to no evidence of damages, claiming without citation to the record that they have been unable to lease or sell Unit 1 due to the alleged breaches of contract. Summary judgment cannot issue on such a showing.
The Defendants' motion (Rec. Doc. 112) is also for partial summary judgment. Defendants request "dismissal of all of plaintiffs' prior acts claims, and Causes of Action 6, 7, and 8."
The sixth cause of action is a request for a declaratory judgment that Board improperly amended St. Maxent's by-laws to restrict short-term rentals to 1-year and not 6-months. The Court agrees with Defendants that this demand for declaratory relief is moot, given that the Board properly amended the By-Laws in early 2016 to adopt a 1-year rental restriction.
The seventh cause of action is a demand for damages resulting from the Novaks' inability to rent the unit pursuant to the unauthorized and improper changes to the By-Laws. Defendants argue that this cause of action is likewise moot because the By-laws were properly amended to preclude short-term rentals of less than 1year. However, the Board did not elect to make this change until February of 2016, and the amendment was not recorded until April of 2016. Therefore, unlike the request for declaratory relief, Plaintiffs can theoretically recover against St. Maxent for any damages they suffered due to lost 6-12-month rentals because St. Maxent improperly enforced such a restriction in contradiction to the properly recorded By-Laws. Summary judgment is denied on the seventh cause of action.
The eighth cause of action is a demand for damages due to the "purported Board's" breach of the By-Laws. The Board is "purported" to exist according to Plaintiffs because "[t]here was not a properly and legally-constituted Board of Directors as per the governing requirements of the By-Laws at any time material to this Complaint."
Defendants argue the eighth cause of action is unduly speculative to the extent it asks for damages arising from Plaintiffs' membership in an unincorporated condominium association. The Court agrees; Plaintiffs have not even hinted at how they have been damaged by St. Maxent's failure to hold annual meetings or its failure to appoint officers and directors in the years before the Novaks became members of St. Maxent. Moreover, Plaintiffs fail to provide any authority supporting their assertion that St. Maxent should be treated as an "unincorporated [condominium] association" or that the defendant directors should be considered members of a "purported BOD."
Accordingly, where Plaintiffs allege that the "purported BOD" breached some duty, this is properly considered an allegation against St. Maxent, the corporate entity "having legal personality under La. Civ. Code art. 24." See Wells, 136 So. 3d at 91. Because the Plaintiffs have already named St. Maxent as a defendant, no amendment to the pleadings is necessary. See id.
With that clarification, Plaintiffs' eighth cause of action is simply a claim against St. Maxent for breach of the By-Laws, and some of these alleged breaches may give rise to a claim to non-speculative damages. However, the Defendants point out that many of the alleged actions or inactions by St. Maxent occurred in the 10-15 years before the Plaintiffs purchased Unit 1. Defendants argue they are not liable for this conduct occurring before the Novaks were members of the association pursuant to Louisiana's duty and standing requirements. See La. Code Civ. Proc. art. 681.
Plaintiffs counter that "Defendants' bad acts prior to Plaintiffs' purchase of the property are indicative of their bad acts after, and indeed are indicative of the manner in which they are governing St. Maxent today."
Accordingly,