Herman v. Tracage Development, L.L.C.

Citation: 201 So. 3d 935Docket: NO. 2016-CA-0082, NO. 2016-CA-0083

Court: Louisiana Court of Appeal; September 21, 2016; Louisiana; State Appellate Court

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The appeal involves Tracage Development, L.L.C. (the third-party plaintiff) against Joshua Rubenstein (the third-party defendant), stemming from a judgment that granted Rubenstein's special motion to strike and the peremptory exception of no cause of action. The trial court's judgment affirming the latter is upheld, while the motion to strike is reversed.

The dispute originates from Tracage's plans to construct a condominium in New Orleans, which faced opposition from some owners of the adjacent Lengsfield Lofts. After various lawsuits, certain plaintiffs and the Lengsfield Lofts Condominium Owners' Association (LLCOA) entered into a settlement with Tracage. However, the Hermans and LLCOA later sued Tracage, claiming it breached the agreement. In response, Tracage filed a reconventional demand against the plaintiffs and a third-party demand against Rubenstein, accusing him of abusing his rights by filing multiple lawsuits to harass Tracage. Tracage alleged that Rubenstein sought to extort $200,000 to refrain from opposing their development and intended to initiate litigation regardless of merit.

Rubenstein responded with a special motion to strike, arguing he could show his actions were protected under the law and that Tracage could not prove a likely success on its claim. The trial court initially denied this motion, leading to a writ application by Rubenstein, which was denied by a different appellate panel. Later, the trial court reconsidered and granted Rubenstein's motion to strike, awarded attorney's fees, granted the exception of no cause of action, and denied exceptions of prescription and prematurity. The appellate court's review is de novo, focusing on the legal correctness of the trial court's rulings.

Appellate courts utilize a de novo standard of review for trial court rulings on exceptions of no cause of action, as such exceptions involve a legal question focused on the sufficiency of the petition. The Louisiana Supreme Court defines a cause of action in this context as the operative facts that allow a plaintiff to assert their claim. The peremptory exception of no cause of action tests the legal sufficiency of the petition without considering evidence, relying solely on the well-pleaded allegations within the petition. The court determines whether the plaintiff is entitled to relief based on the petition's face.

Mr. Rubenstein argued that Tracage’s third party demand against him for abuse of right was invalid, asserting that under La. C.C.P. art. 1111, a third party plaintiff must demonstrate that the third party defendant is liable for part of the principal demand. He maintained that Tracage's claim did not establish him as a warrantor or liable for the principal demand, nor did it allege any agreement to indemnify Tracage for breaching a settlement agreement. Consequently, he contended that the third party demand failed to state a cause of action against him.

Tracage conceded that its third party demand was procedurally improper, acknowledging it did not claim that Mr. Rubenstein was liable for the principal demand or acted as a warrantor. Despite this concession, Tracage argued that it still presented a valid cause of action against Mr. Rubenstein for abuse of right.

Tracage argued that its abuse of right claim against Mr. Rubenstein was based on the same facts and legal issues as its reconventional demand against Mr. and Mrs. Herman and the LLCOA, and it asserted that Louisiana Code of Civil Procedure (C.C.P.) articles 4637 and 10648 permitted the inclusion of Mr. Rubenstein in the suit. The relevant rules for third-party demands are outlined in La. C.C.P. arts. 1033 and 1111. Article 1033 allows incidental demands to be filed without court approval until an answer to the principal demand is submitted. Article 1111 permits a defendant in a principal action to bring in any party who may be liable for all or part of the principal demand. The jurisprudence emphasizes that a third-party demand is primarily for claims of contribution or indemnity.

Tracage’s third-party demand was found to lack sufficient allegations to establish that Mr. Rubenstein was a warrantor or liable for the principal demand, leading to a failure to state a cause of action. Tracage contested the trial court's decision to grant Mr. Rubenstein’s exception of no cause of action, arguing it was a “form-over-substance” issue and contending that the court should classify Mr. Rubenstein as a “defendant-in-reconvention.” However, the jurisprudence allows courts to overlook miscaptioning in pleadings only if no party is prejudiced. The court found that changing the classification of Tracage’s third-party demand was inappropriate and that it failed to state a cause of action. Consequently, the trial court's decision to grant the exception of no cause of action was affirmed.

Additionally, the excerpt addresses the special motion to strike under La. C.C.P. art. 971, which allows for the dismissal of claims arising from acts in furtherance of free speech or petition rights unless the plaintiff shows a probability of success on the claim.

La. C.C.P. art. 971 establishes that a "petition" includes both a petition and a reconventional demand, while "plaintiff" encompasses any party initiating an action, and "defendant" refers to a party against whom an action is brought. The special motion to strike is applicable solely to petitions and reconventional demands. The court must evaluate the pleadings and affidavits when determining the motion's applicability. The Louisiana Supreme Court emphasizes that the assessment should be based on the plaintiff's current petition.

In the case at hand, Tracage's third-party demand against Mr. Rubenstein does not qualify as a petition or reconventional demand, making the special motion to strike inapplicable. Consequently, the trial court's decision to grant the motion to strike and the associated attorneys' fees is reversed. Mr. Rubenstein's request for additional attorneys' fees related to the appeal is rendered moot by this reversal. Additionally, his request to rule on the trial court's denial of his exceptions of prescription and prematurity is also moot, as the court affirms the trial court's ruling granting his exception of no cause of action. The final decree affirms the judgment on the exception while reversing the special motion to strike and the fees awarded. The dispute has been previously addressed by this court in multiple cases.

Plaintiffs informed the trial court of their previous filing of a breach of settlement claim as an intervention in a related suit in another division of Orleans Parish Civil District Court, which was dismissed without prejudice on February 28, 2014, following Tracage’s exceptions. The court's policy, per CDC Local Rule 9.3, mandates transferring related cases to the division of the original case to prevent forum shopping. The defendants included Tracage and three related entities—TWI Development, L.L.C., Gaiennie, L.L.C., and Spectrum Capital, L.L.C.—but only Tracage responded with a reconventional demand. The appeal pertains to all four entities. 

The trial court ruled in favor of Mr. Rubenstein, stating he exercised his right to free speech regarding a public issue, placing the burden on Tracage to demonstrate a likelihood of success, which it failed to do. Consequently, the court granted Rubenstein's motion to strike and awarded him $5,000 in attorney's fees. The court also granted an exception of no cause of action, asserting that third-party and reconventional demands must stem from the same transaction. 

On appeal, Tracage raised three errors: 1) the trial court improperly dismissed its abuse of right claim despite precedent against using a special motion to strike for such claims; 2) it contended the court wrongly granted the motion to strike, arguing a probability of success on the merits; and 3) it asserted that it had adequately stated a cause of action for abuse of right against Rubenstein, thus challenging the court's granting of Rubenstein’s exception. The court referenced La. C.C.P. art. 463 regarding the cumulation of actions and La. C.C.P. art. 1064 concerning the addition of parties to a reconventional demand, noting that there was no request for Tracage to amend the petition under La. C.C.P. art. 934.