Louisiana Defenses: Shorten the Prescription Period by Arguing Breach of Duty, Not Breach of Contract
Under Louisiana law, if parties have a contractual relationship and one party has been damaged or injured by the other, the injured party often can choose to recover damages in either tort or contract. The choice is important for many reasons including differing prescription periods — one year for torts and 10 years for breach of contract.
A recent US District Court decision provides a reminder that the plaintiff’s choice should be scrutinized with care. Louisiana courts look to the actual nature of what is being alleged, not just what the plaintiff SAYS is being alleged. See KFC Corporation v. Iron Horse of Metairie Road, LLC, Civil Action No. 16-16791 (US E.D. La. May 30, 2018). A potentially successful defense strategy can be arguing that the claims of the case really amount to a tort case. This might provide a defense based on the expiration of the prescription period.
Louisiana Tort Defense: Legal Principles
The question of whether the real cause of action being alleged is contract or tort turns on whether the claim derives from a breach of promise — a contract claim — or from a breach of duty — a tort claim. A contract claim flows from breach of a specific obligation assumed by the breaching party whereas a tort claim arises from the various duties that are owed to all persons. The “default” position is that the claim is a breach of duty “unless a specific contract provision or duty is breached.” Trinity Univ. Ins. Co. v. Horton, 756 So. 2d 637 (La. App. 2 Cir. 2000).
The statute of limitations here in Louisiana for delictual actions — tort actions — is one year; and the statute of limitations for contractual claims is 10 years. See La. Civil Code Arts. 3492 and 3499.
The issue in KFC Corporation v. Iron Horse of Metairie Road, LLC concerned various contracts related to environmental remediation on property in Metairie, Louisiana. During the early 2000s, litigation was initiated related to contamination of the property. In 2004-2005, KFC agreed to a voluntary remedial action plan subject to oversight and approval by the Louisiana Department of Environmental Quality. The remediation efforts are continuing.
In September 2013, KFC signed a written sales agreement to sell the property to Iron Horse of Metairie Road, LLC (“Iron Horse”). The sales agreement provided Iron Horse with various inspection and due diligence periods. Iron Horse was made aware of the remediation litigation and the continuing efforts. The sale/purchase was finalized in February 2014 and, as part of the transaction, Iron Horse signed an agreement whereby Iron Horse assumed KFC’s obligations related to the contamination, the remediation, and the settlement agreement and under which Iron Horse agreed to complete the remediation “in a diligent and expeditious manner.”
Matters did not go well for Iron Horse as it turned out that the remaining remediation obligations were substantially more than they expected. Eventually, KFC sued Iron Horse for alleged breach of its obligations to complete the remediation. Iron Horse counter-sued KFC claiming breach of contract among other causes of action.
KFC defended the counterclaim by, among other things, arguing that Iron Horse’s claims were really tort claims — detrimental reliance — and that the tort claims were barred by the one-year prescription period. Various motions for summary judgment were filed. The District Court agreed.
In deciding that the breach of contract allegations were actually breach of duty claims, the court focused on several factors, including:
- Counterclaim itself clearly sounded in tort — counterclaim alleged that Iron Horse was told that remediation for the property was “almost finished” and that agents for KFC allegedly concealed/failed to disclose the fact that remediation was being done or was required for an adjoining property
- No violation of provisions in the Purchase/Sales Contract were alleged
- Alleged violation of implied contract covenants of good faith also sounded in tort under Louisiana caselaw
The Iron Horse counterclaim was filed in February 2017 well beyond the one-year prescription period for tortious detrimental reliance. As such, the District Court dismissed the claims with prejudice (other causes of action were not dismissed).
Louisiana Defense Law: Contact New Orleans Defense Attorney Kristin M. Lausten
Do you need assistance defending against a tort or contract claim? Kristin M. Lausten is an experienced Louisiana insurance defense lawyer with a team of lawyers and support staff ready and able to provide the best defense for you and your business. Lausten has experience with the full spectrum of defense cases, from small to complex.
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Kristin M. Lausten
This article is provided as an educational service for general informational purposes only. The material does not constitute legal advice or rendering of professional services.