Opinion
CIVIL ACTION NO: 00-1160 SECTION: "R"(5)
September 7, 2001
ORDER AND REASONS
Before the Court are defendants' motions for summary judgment. Also before the Court is defendant NationsBank's motion to strike portions of plaintiff's affidavit. For the reasons stated below, the Court grants defendant "s motion for summary judgment and denies the motion to strike as moot.
I. BACKGROUND
This case arises from plaintiff Cynthia Traina's resignation as a Chapter 7 trustee from the Office of the United States Trustee in New Orleans, Louisiana. Plaintiff sues EPIQ System, Inc. ("EPIQ") f/k/a Electronic Processing, Inc., a computer software and hardware provider, and NationsBank for breach of contract, breach of express and implied warranty, negligence, breach of fiduciary duty, intentional and negligent misrepresentation, unfair trade practices, and product liability. From 1990 until 2000, plaintiff served as a Chapter 7 trustee, charged with the duties of administrating Chapter 7 bankruptcy estates, liquidating assets, collecting money, and paying creditors under the Bankruptcy Code. AS a trustee, plaintiff had a fiduciary duty to the creditors of the bankrupt estates and was required to maintain a fidelity bond to protect those interests. From the summer of 1995 to November 1999, plaintiff employed her sister-in-law, Laura Lee, in her office. ( See NationsBank Mem. Supp. Mot. Summ. J. Ex. 6)
From late 1994 until June 2000, plaintiff used NationsBank (formerly Bank of America) for money market and checking account services for the Chapter 7 estates under her administration. In addition, EPIQ leased computer hardware and licensed computer software to plaintiff as trustee under a lease and license agreement. ( See EPIQ's Mem. Supp. Summ. J. Ex. B.) Under this agreement, NationsBank agreed to pay the licensing and leasing fees for the hardware and software in exchange for plaintiff's maintaining all or substantially all of her trustee accounts with NationsBank. ( See NationsBank's Mem. Supp. Summ. J. Ex. 1.) Plaintiff licensed the software to assist her in managing the reporting and recordkeeping requirements imposed on her as a bankruptcy trustee.
For simplicity, the Court will refer to Bank of America as NationsBank.
In late 1999 or early 2000, the New Orleans Office of the United States Trustee discovered a series of embezzlements and defalcations in plaintiff's office, leading to an investigation of plaintiff's accounts by administrative agencies. plaintiff has asserted that her sister-in-law committed the defalcations and embezzlements. On March 3, 2000, the United States Trustee filed a motion to remove plaintiff as trustee from all of her cases. ( See EPIQ's Mem. Supp. Summ. J. Ex. H.) The motion charged plaintiff with failing to account for and deposit estate funds, depositing funds into incorrect accounts, negligently supervising her estates and employees, delays in administration, operating under a conflict of interest, and providing inaccurate certified documents to the United States Trustee. During the pendency of this motion, plaintiff was temporarily suspended from her duties as a trustee. Plaintiff did not file an opposition to this motion, but instead resigned as a panel trustee in June of 2000. ( See NationsBank's Mem. Supp. Summ. J. Ex. 5.)
Before her resignation, plaintiff sued her brother, sister-in-law, and her brother's company, alleging that they embezzled from the estates and that as a result of this embezzlement plaintiff suffered loss of income, pain and suffering, loss of reputation, and was suspended, and could be removed as a panel trustee. ( See Id. Ex. 6.) On March 27, 2000, plaintiff filed this suit as a class action for damages in the 24th judicial District for Jefferson Parish against NationsBank and EPIQ seeking the same damages as a result of alleged deficiencies in defendants' financial and computer services. plaintiff argues that a defect in the computer software, which allowed a user to delete entries without leaving an audit trail, allowed her sister-in-law to use the software to embezzle funds and that NationsBank breached its legal duty in allowing these embezzlements.
Defendants removed this action to this Court and challenged the propriety of a class action. Defendants submitted evidence demonstrating that no other trustee had suffered the problems alleged in plaintiff's petition. Plaintiff did not oppose defendants' motion to dismiss the class action allegations, and the Court granted the motion on October 26, 2000. Defendants now move for summary judgment arguing that plaintiff has no viable claims against them.
II. DISCUSSION
A. Legal Standard
Summary judgment is appropriate when there are no genuine issues as to any material facts, and the moving party is entitled to judgment as a matter of law. See FED. R. CIV. P. 56(c); Celotex Corp. v. Catrett, 477 U.S. 317, 322-323, 106 S.Ct. 2548, 2552 (1986). A court must be satisfied that no reasonable trier of fact could find for the nonmoving party or, in other words, "that the evidence favoring the nonmoving party is insufficient to enable a reasonable jury to return a verdict in her favor." Lavespere v. Niagara Mach. Tool Works, Inc., 910 F.2d 167, 178 (5th Cir. 1990) (citing Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249, 106 S.Ct. 2505, 2511 (1986)). The moving party bears the burden of establishing that there are no genuine issues of material fact.
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 contains insufficient proof concerning an essential element of the nonmoving party's claim. See Celotex, 477 U.S. at 325, 106 S.Ct. at 2554; see also Lavespere, 910 F.2d at 178. 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 Celotex, 477 U.S. at 324, 106 S.Ct. at 2553. The nonmovant may not rest upon the pleadings, but must identify specific facts that establish a genuine issue exists for trial. See Id. at 325, 106 S.Ct. at 2553-54; Little v. Liquid Air Corp., 37 F.3d 1069, 1075 (5th Cir. 1996)
B. Breach of Contract
Plaintiff alleges that EPIQ and NationsBank breached their agreements with plaintiff to provide financial and computer services. ( See Compl. at ¶ 26-29) specifically, plaintiff asserts that EPIQ breached the software lease and licensing agreement, and NationsBank breached the contracts that were created by plaintiff's opening accounts with the bank. ( See Compl. at ¶ 26; Pl.'s Opp. NationsBank Mot. Supp. Summ. J. at 11) Defendants argue that plaintiff signed all contracts in her official capacity as trustee and therefore has no standing to recover in her individual capacity for breach of contract under Louisiana law. (NationsBank's Mem. Mot. Supp. Summ. J. at 4; EPIQ's Mem. Mot. Supp. Summ. J. at 9) Further, defendants claim that even if plaintiff could recover for breach of contract, plaintiff cannot recover for nonpecuniary damages. (EPIQ's Mem. Mot. Supp. Summ. J. at 11 n. 3)
In Louisiana, a person signing a contract as a representative or agent does not possess a right of action for damages sustained by the breach of the contract. See Ark Entm't. L.L.C. v. C.J. Gayfer Co., Inc., 1999 WL 717631, *3 (E.D. La. 1999) (holding that signatories of contract for corporation were not proper plaintiffs in a breach of contract action); Abbott Tours, Inc. v. Marriott Corp., 567 So.2d 170, 173-74 (La.App. 4 Cir. 1990) (dismissing individual claims of corporation's chief officer and signatory of a contract for breach of contract); Morein v. G.J. Deville Lumber Co., 215 So.2d 208, 210-11 (La.App. 3 Cir. 1968) (holding that president of a company who signed a contract as "owner" and "president" was not an individual party to the contract and could not recover for alleged humiliation and embarrassment caused by the breach).
Under the Bankruptcy Code, a trustee is a representative of the estate. See 11 U.S.C. § 323. "When persons perform duties in the administration of the bankruptcy estate, they act as "officers of the court' and not as private persons." In re Evangleine Refining Co., 890 F.2d 1312, 1323 (5th Cir. 1989). Trustees also have the right to sue and be sued as agents of the estate. See Fisher v. Apostolou, 155 F.3d 876, 879 (7th Cir. 1998); see also McNulta v. Lochridge, 141 U.S. 327, 12 S.Ct. 11, 13 (1891) (receiver's contracts and liabilities are official, not personal). Further, trustees enter contracts as a representative of the estate and can sue for breach of contract for damages to the estate. See In re Carter Paper Co., Inc., 220 B.R. 276, 288 (Bankr. M.D. La. 1998). Here, plaintiff signed all agreements with EPIO and NationsBank in her official capacity as trustee. The agreement between EPIQ and plaintiff clearly states that she was contracting "in the capacity as a Chapter 7 Bankruptcy Trustee." ( See EPIQ's Mem. Supp. Mot. Summ. J. Ex. B.) Further, plaintiff alleges that NationsBank's failure to perform was vis a vis the estate accounts, not plaintiff's personal accounts.
The Court therefore finds that plaintiff entered the contracts as a representative of the estate. Any obligations defendants owed under the contracts were obligations to the estate, not to plaintiff personally. That the consideration exchanged for the hardware and software was the agreement to keep plaintiff's trustee accounts with NationsBank evidences that plaintiff was merely contracting on behalf of the estates rather than on her own behalf. There is no indication that plaintiff paid anything personally for the software and hardware. Further, plaintiff does not seek damages for harm to the estates, but for her personal losses. Because plaintiff entered into the agreement in her official capacity as trustee, she has no personal interest in these contracts, and she may not sue defendants for personal damages.
Plaintiff argues that even if she is not a party to the contracts in her personal capacity, she may recover as a third-party beneficiary for personal damages arising from the purported breaches of the contracts.
Under Louisiana law, a contract for the benefit of a third party is referred to as a stipulation pour autrui. See Paul v. Louisiana State Employees' Group Benefit Program, 762 So.2d 136, 139 (La.App. 1 Cir. 2000). A stipulation pour autrui is never presumed; rather, the intent of the contracting parties to stipulate a benefit in favor of a third party must be clear. See Id. Additionally, to establish a stipulation pour autrui, the third-party relationship must form the consideration for a condition of the contract, and the benefit may not be merely incidental to the contract. See Id. Plaintiff has provided no evidence to demonstrate that the parties intended to confer any benefit on plaintiff personally. Thus, the Court finds that the contract does not contain a stipulation pour autrui. Because the Court finds that plaintiff cannot recover personally under the contracts, it need not address defendants' argument that plaintiff cannot recover nonpecuniary damages. The Court finds that plaintiff's breach of contract claims lack merit.
C. Breach of Warranty Claims
Plaintiff also sues EPIQ for breach of its express warranty that the license software complies with the reporting requirements of the United States Trustees and Bankruptcy Courts. In addition, plaintiff sues EPIQ for breach of implied warranty to deliver software free from hidden defects. pretermitting plaintiff's questionable standing to assert these claims, the agreement she signed waived any liability for consequential damages, which forecloses all of the damages she seeks to recover.
It is true that EPIQ expressly warranted that "the license software conforms with the reporting requirements of the U.S. Trustees and Bankruptcy Courts." (EPIQ Exh. B at ¶ 6) It is also true that under Louisiana law, implied warranties arise by operation of law in every contract of lease. La. Civ. Code art. 2695; Louisiana National Leasing Corp. v. ADF Services, Inc., 377 So.2d 92 (La. 1979); Gulf American Industries v. Airco Industrial Gases, 573 So.2d 481 (La.App. 5 Cir. 1990). Nevertheless, the parties agreed in paragraph 8 of their agreement that EPIQ will have no liability for "indirect, incidental, special or consequential damages" resulting from the use of its system. (EPIQ Exh. B at ¶ 8) Just as commercial parties may agree to waive warranties, they may legally contract to limit recoverable damages, provided the agreement clearly reflects the parties' intention to do so. See, e.g., Louisiana National Leasing Corp. v. ADF Services, supra; Rhodes v. congregation of St. Francis, 476 So.2d 461. (La.App. 1 Cir. 1985); Capelco Capitol, Inc. v. Gautreaux, 1999 WL 1034740 (E.D. La. 1999). To be enforceable, the damages limitation must be unambiguous and brought to the attention of the lessee. See Capelco Capitol, Inc., at 4; Gulf American Industries, 573 So.2d at 488. When the lease is between commercially sophisticated parties, the lessee is held to a higher standard than "an unknowledgeable consumer." Datamatic, Inc. v. International Business Machines Corp., 795 F.2d 458, 465 (5th Cir. 1986); see also Louisiana National Leasing Corp., 377 So.2d at 96. Here, plaintiff had served as a bankruptcy trustee for over ten years, administering the affairs of hundreds of estates. This position requires a high degree of commercial skill and sophistication. Estate trustees examine the debtor, investigate the existence of assets, collect and liquidate assets and distribute the proceeds pursuant to the Bankruptcy Code. 11 U.S.C. S 704. In administering the estates, trustees must comply with the directives of the United States Trustee and must satisfy the financial reporting requirements imposed by the U.S. Trustee, the courts and the Bankruptcy Code. Id. Ms. Traina therefore did not enter this lease as an unknowledgeable consumer. Further, the Court finds that the limitation of damages provision was sufficiently called to her attention because it was conspicuously set out in block letters in an agreement that was barely three pages long. Moreover, she signed the agreement, and it unambiguously excludes consequential damages:
NON-LIABILITY. NEITHER PARTY NOR THE DEPOSITORY DANK SHALL HAVE LIABILITY FOR INDIRECT, INCIDENTAL, SPECIAL, OR CONSEQUENTIAL DAMAGES ARISING OUT OF OR IN CONNECTION WITH THE DELIVERY, USE OR PERFORMANCE OF THE SYSTEM.
EPIQ Ex. B at ¶ 8. Given the clear terms of the agreement and Ms. Traina's financial acumen and experience, her contention that the damages limitation language was not orally discussed with or explained to her does not bar its enforcement. She does not contend that the provision was sneaked into the agreement unbeknownst to her. Moreover, she specifically asked for "consequential damages" in her complaint, which suggests that she understands what these words mean. Furthermore, the Louisiana Supreme Court has enforced a waiver clause in a commercial equipment lease when the waiver was stated in block letters and was signed by the lessee. See Louisiana National Leasing Corp. v. ADF Services, Inc., 377 So.2d 92. The Court therefore finds the damages limitation enforceable and that plaintiff's asserted damages for loss of personal income, lost time in dealing with bankruptcy investigators to audit estate records, hedonic damages and attorney's fees are consequential damages excluded by the contract.
D. Fiduciary Duty/Negligence/Negligent Misrepresentation
In her petition, plaintiff alleges that NationsBank "as a depository for estate accounts" failed to faithfully discharge its fiduciary duty when it allowed the unauthorized transfer of funds, failed to adequately safeguard plaintiff's accounts by allowing duplicate checks to be issued, failed to verify signatures on accounts, and deposited estate funds without proper authorization and/or documentation. (Compl. at ¶ 31) plaintiff also appears to claim that EPIQ and NationsBank were negligent by not providing a defect free software system and a secure "depository environment," respectively. (Id. at ¶¶ 32-35) Further, plaintiff claims that defendants negligently misrepresented their capabilities in providing these services. (Compl. at ¶¶ 34-35)
Louisiana courts have adopted a duty-risk analysis to determine whether a party is liable in tort. See Peterson v. Gibraltar Savings and Loan, 733 So.2d 1198, 1203 (La. 1999); National Council on Comp. Ins. V. Quixx Temp. Serv., Inc., 665 So.2d 120, 122 (La.App. 4 Cir. 1995). Under the duty-risk analysis, the plaintiff must prove (1) the conduct in question was the cause-in-fact of the resulting harm; (2) defendant owed a duty of care to the plaintiff; (3) the requisite duty was breached by the defendant; and (4) the risk of harm was within the scope of protection afforded by the duty breached. Id. at 1203-1204 (citing cases). In a negligent misrepresentation claim, plaintiff must show that the defendant owed a duty to plaintiff to supply correct information. National Council, supra, 665 So.2d at 122.
Duty is a question of law for the Court. E.g., Stroik v. Fonseti, 699 So.2d 1072, 1077 (La. 1997). The Court finds that defendants owed no duty to plaintiff in her personal capacity. First, NationsBank's duties as a depository institution did not run to plaintiff in her personal capacity. Traina dealt with NationsBank in a representative capacity on behalf of the bankruptcy estates she administered. All of the depository duties that she alleges were breached ran to the bankruptcy estates whose deposits the bank maintained and not to plaintiff personally. She therefore cannot recover personal damages for any of the asserted breaches of fiduciary duty by NationsBank. The same rationale precludes plaintiff's claims for negligence and negligent misrepresentation. Defendants' duties were to the estates and to plaintiff only as their representative to provide financial and accounting software and depository services. Defendants had no duty to protect plaintiff personally from the loss of her job. Further, the risk of harm, here plaintiff's loss of employment and her attendant emotional and reputational damage, was not within the scope of protection of defendant's duties. Those duties encompassed risks to the interests of the depository estates. See generally LaFleur f. John Deer Co., 491 So.2d 624, 631 (La. 1986) (plaintiff's worry about his financial situation not within the scope of defendant's duty to deliver a useful drill). Further, that plaintiff resigned rather than seeking to vindicate herself in response to the U.S. Trustee's motion to remove her indicates that defendants did not cause her to lose her job. Accordingly, all of these claims fail as a matter of law.
E. Intentional Misrepresentation
In her petition, plaintiff alleges that EPIQ intentionally misrepresented the condition of its software and that NationsBank intentionally misrepresented its ability to comply with fiduciary and statutory responsibilities imposed on trustees. (Compl. at ¶ 34 35)
The Fifth Circuit has explained that "an allegation of intentional misrepresentation is essentially an allegation of fraud." Ummobil 84, Inc. v. Spurney, 797 F.2d 214, 217 (5th Cir. 1996) (citing Altex Ready-Mixed Concrete Co. v. Employers Commercial Union Ins. Co., 308 So.2d 889, 892 (La.App. 1 Cir. 1975)). In Louisiana, the elements of fraud or intentional misrepresentation are: (1) a misrepresentation of a material fact, (2) made with the intent to deceive, and (3) causing justifiable reliance with resultant injury. See Guidry v. U.S. Tobacco Co., Inc., 188 F.3d 619, 627 (5th Cir. 1999) (citing cases).
Putting aside the other problems with this claim (i.e., the existence vel non of a duty to plaintiff in her personal capacity and the remoteness of the alleged harm from the scope of the duties defendants did owe), plaintiff has presented no evidence that either defendant possessed any intent to deceive Traina. In fact, plaintiff produced evidence of the opposite with respect to EPIQ. (Pl.'s Opp. to EPIQ's Mot. Supp. Summ. J. Ex. F) Testimony from an officer at EPIQ suggests the feature allowing the user to delete entries was put in place at the request of the trustees themselves. Id. Alleged promises or statements, absent evidence that they were made with the intent to deceive, cannot constitute fraud. See Dutton Vaughan, Inc. v. Spurney, 496 So.2d 1126, 1129 (La.App. 4 Cir. 1986). Accordingly, plaintiff's fraud claim must be dismissed.
F. Unfair Trade Practices
Plaintiff also alleges that defendants engaged in unfair trade practices under the Louisiana Unfair Trade Practices Act ("LUTPA"), LA. REV. STAT. §§ 51:1401, et seq. (Compl. at ¶ 36.) Under LUTPA, parties who are harmed by another party's unfair or deceptive practices may bring suit to recover actual damages. See LA. REV. STAT. § 51:1409. The text of section 1409 suggests that "any person who suffers ascertainable loss" may recover. Id. However, the Fifth Circuit has read this statute narrowly, limiting relief to consumers and business competitors. See 5-Star Premium Finance, Inc. v. Wood, 2000 WL 1532896, *1 (E.D. La. 2000) (citing Orthopedic Sports Injury Clinic v. Wang Labs, Inc., 922 F.2d 220, 226 (5th Cir. 1991)). In order to qualify as a business competitor, the plaintiff must actually or potentially engage in business that competes directly or indirectly with the defendant. See Sears, Roebuck and Co. v. Danny Williams Plumbing, Inc., 1999 WL 280439, *3 (E.D. La. 1999) (citing cases). Here, plaintiff is clearly not a business competitor of EPIQ or NationsBank. With regard to her status as a consumer, the Fifth Circuit has held that the act only applies to consumer transactions, "the subject of which transaction is primarily intended for personal, family, or household use." Wang, 922 F.2d at 226. See also KFC Ventures, L.L.C. v. Metairie Med. Equipment Leasing Corp., 2000 WL 1252596, *2 (E.D. La. 2000). Although plaintiff asserts that she is a consumer of the software, plaintiff provides no evidence that EPIQ's software pertained to anything even remotely related to personal, family, or household use; therefore, plaintiff has no claim under the LUTPA. Furthermore, NationsBank, as a "bank charted by or under the authority of the United States acting under statutory authority of this state or the United States to regulate unfair or deceptive trade practices," is exempt from the Act. LA. REV. STAT. § 51:1406. Accordingly, the Court dismisses plaintiff's LUTPA claim.
G. Product Liability (LPLA)
Plaintiff also sues EPIQ under the Louisiana Products Liability Act, LA. REV. STAT. §§ 9:2800.54, et seq. Relying on Section 2800.58, plaintiff claims that the software was unreasonably dangerous because it failed to conform with EPIQ's express warranty, which cause her injury. (Compl. ¶ 37) See LA. REV. STAT. § 9:2800.58 ("A product is unreasonably dangerous when it does not conform to an express warranty made at any time by the manufacturer about the product if the express warranty has induced the claimant or another person or entity to use the product and the claimant's damage was proximately caused because the express warranty was untrue.").
The LPLA "establishes the exclusive theories of liability for manufacturers for damages caused by their products." Jefferson v. Lead Indus. Ass'n, Inc., 106 F.3d 1245, 1250 (5th Cir. 1997) (citing LA. REV. STAT. § 9:2800.52 (West 1998)). See also Jurls v. Ford Motor Co., 752 So.2d 260, 264 (La.App. 2 Cir. 2000). The LPLA provides that a manufacturer of a product is liable to a claimant for damage proximately caused by a characteristic of the product that rendered it unreasonably dangerous when the damage arose from a reasonably anticipated use of the product by the claimant. See Id. at 1251 (citing LA. REV. STAT. § 9:2800.54A (West 1998)). Thus, a plaintiff must show that a characteristic of the product rendered it unreasonably dangerous and that this characteristic proximately caused plaintiff's injury. See Williams v. Emerson Electric Co., 909 F. Supp. 395, 397 (M.D. La. 1995). The LPLA was not intended to eliminate Louisiana's duty-risk approach to proximate causation. J. Kennedy, A Primer on the Louisiana Products Liability Act, 49 La. L. Rev. 565, 583 n. 88 (1989) ("The LPLA does not change the duty/risk analysis of proximate cause").
The Court's prior analysis of the remote relationship between plaintiff's claimed injury and defendant's alleged breach of duty applies equally here. Because the risk of plaintiff's injury was not within the scope of EPIQ's duty when it furnished the software, plaintiff cannot establish that EPIQ is liable to her under the LPLA. Moreover, plaintiff's LPLA claim is defective because Section 2800.58 requires plaintiff to prove that the user of the product relied on the warranty in using the product, i.e., that the express warranty induced "the claimant or another person or entity to use the product." LA. REV. STAT. § 9:2800.58. Here, Ms. Traina is the claimant and her sister-in-law was the "user" of the software product who, in plaintiff's words, "discovered this [defective] feature and utilized it to accomplish a protracted fraud and embezzlement scheme to Traina's demise [sic]." Plaintiff's Opp. to EPIQ's Motion at 1. See Kennedy, 49 La. L. Rev. 565, 620 ("whoever was using the product at the time the claimant sustained damage must have been induced to do so by the express warranty."). Indeed, Traina asserts as an "uncontested" fact that her sister-in-law accomplished the fraud without her assistance. Thus, in no sense was the embezzling user relying on EPIQ's warranty that the software satisfied the reporting requirements of the U.S. Trustee when she used the software to embezzle funds. Accordingly, plaintiff's LPLA claim fails as a matter of law.
III. CONCLUSION
In this case, plaintiff advances tortured theories of liability to shift the blame to a bank and a software provider for the actions of a dishonest employee whom plaintiff hired and to whom she delegated significant aspects of her own responsibilities, apparently with little effective supervision. Although this Court is convinced that the systematic defalcations that took place would never have happened had plaintiff done her job properly, it need not so find. The Court grants summary judgment because plaintiff's claims suffer from the defects cited in this opinion. For the reasons stated, the Court grants EPIQ and NationsBank's motions for summary judgment and denies NationsBank's motion to strike as moot.