Opinion
Civil Action No. 04-0017, Section: "S" (5).
November 15, 2005
ORDER AND REASONS
IT IS HEREBY ORDERED that Orkin, Inc.'s motion to dismiss the plaintiff's exemplary damages claims, construed as a motion to strike the demand for exemplary damages, is DENIED. (Document #52.)
I. BACKGROUND
From 1953 until December 31, 1997, Orkin Exterminating Company, Inc. (Orkin) conducted a pest control business at 102 and 102b City Park Avenue, pursuant to a lease with The Firemen's Charitable Benevolent Association of New Orleans (Firemen's), the owner of the property. Orkin stored or disposed of various toxic pesticides in its operations: chlordane, heptachlor, heptachlor epoxide, DDE, DDT, and dieldrin. A 1988 lease amendment obligated Orkin to remove "all contamination resulting from the use of the premises," and not to use the property for any purpose that "tends to injure or depreciate the property." Further, the 1998 lease amendment required Orkin to maintain $21,000,000 of public liability insurance coverage to protect Firemen's against any damage claims, liability or expense.
When Orkin ceased activities on the leased property on December 31, 1997, it began remediation and cleanup of chemicals in accordance with the terms of the lease. In January 1999, Orkin completed the remediation and cleanup under the supervision of the Louisiana Department of Agriculture and Forestry, which approved the back-filling of portions of the property where contaminated soil was removed and replaced with new soil.
In February 2003, Firemen's hired McCune Consultants, Inc. to conduct a soil investigation to determine whether any contamination existed on the property and to evaluate the distribution of indicator constituents in shallow soils. After April 1, 2002, McCune provided Firemen's with laboratory results showing that Orkin had contaminated and failed to clean up the leased property, and that chemicals remained in quantities above Louisiana regulatory standards. For example, soil samples collected from boring SB-1 and boring SB-5 showed the presence of Chlordane, a banned pesticide.
Firemen's filed a complaint against Orkin, asserting claims of negligence; strict liability; a continuing, ongoing, and damaging nuisance and trespass to Firemen's property interest; loss of use and enjoyment of the property, including lower property values, quiet use and enjoyment, and potential liability to state, federal, and municipal environmental agencies, landowners, and injured third parties; contractual liability to restore the leased property to its original condition under La. Civ. Code articles 2719 and 2720; unjust enrichment; and exemplary damages, pursuant to La. Civ. Code art. 2315.3. Firemen's alleges that it suffered damage because Orkin engaged in dangerous land spillage, disposal, and storage practices and failed to act responsibly or reasonably to the danger. Firemen's alleges that, rather than remove the toxins that contaminated the ground, surface waters, and ground waters, Orkin abandoned the contamination as a routine practice, allowing the spread and migration of the toxic pollution. Further, Orkin failed to warn the public and Firemen's that the sites were contaminated or that there was a hazard to persons and property. Orkin also seeks injunctive relief mandating Orkin to restore the property and prohibiting Orkin from engaging in conduct which contributes to the migration of the toxic pollution, and a declaratory judgment that Orkin has breached its contractual obligations.
Prior to its repeal in 1996, article 2315.3 provided in pertinent part:
In addition to general and special damages, exemplary damages may be awarded, if it is proved that Plaintiff's injuries were caused by the defendant's wanton or reckless disregard for public safety in the storage, handling, or transportation of hazardous or toxic substances.
Orkin filed a motion to dismiss the exemplary damages claims, pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure. The type of relief sought by Orkin is not available in a Rule 12(b)(6) motion, and the court construes the motion as a motion to strike a demand for exemplary damages not recoverable as a matter of law.
II. DISCUSSION
The court recognizes the longstanding rule that "when a party has been damaged by the conduct of another arising out of a contractual relationship, the former may have two remedies, a suit in contract, or an action in tort, and that he may elect to recover his damages in either of the two actions." Federal Ins. Co. v. Ins. Co. of North America, 263 So.2d 871, 872 (La. 1972). "The most common type of damages in the delictual context is compensatory damages, which encompasses those damages 'designed to place the plaintiff in the position in which he would have been if the tort had not been committed.'" Wainwright v. Fontenot, 774 So.2d 70, 74 (La. 2000) (quoting Frank L. Maraist Thomas C. Galligan, Jr., Louisiana Tort Law § 7-1 (1996). "Compensatory damages are further divided into the broad categories of special damages and general damages." Id. Exemplary damages under former La. Civ. Code art. 2315.3 are recoverable on a derivative basis where a plaintiff is entitled to recover tort damages." Corbello v. Iowa Production, 850 So.2d 686, 707 (La. 2003). The phrase "in addition to general and special damages, exemplary damages may be awarded" in art. 2315.3 "implies that exemplary damages are only available to those persons who are eligible to recover general damages and special damages." Adams v. J.E. Merit Const., Inc., 712 So.2d 88, 93-94 (La. 1998). Exemplary damages under art. 2315.3 "are not applicable to breach of contract claims" and "are recoverable on a derivative basis where a plaintiff is entitled to recover tort damages." Corbello v. Iowa Production, 850 So.2d at 707.
Orkin argues that Firemen's cannot recover exemplary damages because, in order to be entitled to exemplary damages, it must be entitled to recover both general damages and special damages. Orkin contends that former art. 2315.3 makes the availability of both general and specific damage a prerequisite to the recovery of exemplary damages. Orkin's relies on Adams v. J.E. Merit Const., Inc. to support its position.
In Adams, the Supreme Court of Louisiana considered whether the exclusivity provision of the Workers' Compensation Act, La.Rev.Stat. 23:1032, precludes employees from recovering exemplary damages from their employer under former article 2315.3. The Court concluded that, because La.Rev.Stat. 23:1032 is the exclusive remedy of an employee against an employer, general and special damages are not available, and an award of exemplary damages is therefore precluded. Id. at 93-94. Adams does not apply in this case because Firemen's has filed claims in tort and for breach of contract, and compensatory damages are available in a tort-based claim.
Firemen's does not dispute that art. 2315.3 requires the availability of tort-based compensatory damages as a prerequisite to asserting exemplary damages. However, Firemen's disagrees with Orkin's contention that the language "general and special damages" in art. 2315.3 requires the award of both general and special damages.
The court agrees with Firemen's interpretation of the statute. "General and special damages" are categories of compensatory damages in tort, and there is no authority which suggests that the award of both general and special damages is a prerequisite to recovering exemplary damages. In Corbello, the court disallowed exemplary damages under art. 2315.3 because the plaintiffs filed only a breach of contract claim against Shell Oil Company for improperly disposing of salt water and waste products. Corbello, 850 So.2d at 708. Therefore, Firemen's is not entitled to exemplary damages for breach of contract, but if there is an award of compensatory damages in tort (for the period prior to the repeal of the statute), Firemen's may be entitled to exemplary damages under art. 2315.3.
Orkin also argues that Firemen's is a juridical person, not entitled to general damages under article 24 of the Louisiana Civil Code; therefore, it cannot recover exemplary damages. Orkin relies on Whitehead v. American Coachworks, Inc., 837 So.2d 678, 682 (La.App. 2002), in which the Court of Appeal reversed an award of general damages for the loss of enjoyment to State Farm Mutual Automobile Insurance Company because it is a corporation "incapable of experiencing loss of enjoyment, mental anguish, and inconvenience." Whitehead is inapplicable in this case because Firemen's general damages claim is not limited to loss of enjoyment, which Whitehead precludes for a juridical person.
"A natural person is a human being. A juridical person is an entity to which the law attributes personality, such as a corporation or a partnership." La. Civ. Code art. 24.
Accordingly, Orkin has not established that Firemen's is precluded from recovering exemplary damages under their tort based claims, and the motion to strike the demand for exemplary damages under art. 2315.3 is denied.