Fraud

Unfair Trade Practices in Louisiana and Home Foreclosure

Published on: July 23, 2014 | By Berniard Law Firm

Like many states, Louisiana has an unfair trade practices act. In Louisiana, it is known as the Louisiana Unfair Trade Practices and Consumer Protection Law. Just as the name implies, this law is meant to protect consumers from the unfair, misleading, or fraudulent acts of those provide services, goods, and financing. Any contract or agreement entered into in violation of this law is void. However, the Louisiana Unfair Trade Practices and Consumer Protection Law (“Law”) has a serious limitation; it does not apply to a financial institution that is federally insured, including most banks and lending institutions.

The Law’s limitation means that an average mortgage arrangement from a large or national financial institution will not be affected by the protection that the Law affords. The United States Court of Appeals for the Fifth Circuit provides an example of this exception in a recent decision. In that case, a woman arranged for a home mortgage through Bank of America. Bank of America then assigned the mortgage to Wells Fargo. Both of these companies are large financial institutions that are federally insured.

When the woman defaulted on her mortgage, Wells Fargo sought to foreclose on her home. She applied for assistance from a federal government program called Home Affordable Modification Program (“HAMP”) during the foreclosure process. HAMP is designed to help modify mortgages for those who are in foreclosure proceedings so that they can keep their homes and pay a more affordable monthly payment. While the woman’s HAMP application was pending, the foreclosure proceeding was supposed to be put on hold. However, despite this application, her home was sold at a foreclosure sale before she received word back from HAMP to determine whether he application had been approved. She also claimed that she did not receive notice of the sale. Essentially, she argued that her home was sold out from under her without her knowledge.

She attempted to sue both Bank of America and Wells Fargo. She argued that Bank of America should not have allowed Wells Fargo to purchase the mortgage. She also argued that the foreclosure proceedings violated the Louisiana Unfair Trade Practices and Consumer Protection Law. However, the state court determined that even if they did violate the Law, the Law did not apply to them because of the financial institutions exception.

After a loss in state court, the woman appealed the case to the federal district court. However, the district court pointed out that it cannot sit as a court of appeals for state-exclusive actions. That means that the federal district court cannot hear a case where the only arguments are based on state law. Instead, a district court can only hear a case where there is some sort of federal jurisdiction based on either federal law or involves parties from different states, unless Congress has authorized the district court to act otherwise. Nonetheless, where a case questions the procedures of the state court, instead of applying substantive state law, then the federal court could hear the case. For example, if the woman argued that he procedure violated her constitutional rights, then the district court would likely be able to hear the case. This concept is known as the Rooker-Feldman doctrine. As the court explains, “Reduced to its essence, the Rooker-Feldman doctrine holds that inferior federal courts do not have the power to modify or reverse state court judgments except where authorized by Congress.”

In this case, the woman complained that the proceedings in the state court were incorrect; therefore, she was not just asking the district court to review the state court decision. As a result, the district court had the authority to review the case. Despite that fact, the woman failed to state a claim because both Bank of America and Wells Fargo are federally insured financial institutions that are not subject to the Louisiana Unfair Trade Practices and Consumer Protection Law. That meant that the Court of Appeals had to affirm the lower court, and the woman failed in her efforts to appeal.

It may have been possible to assert other arguments based on federal law, but the woman failed to do so. In fact, there were several arguments that the woman waived because she failed to timely assert them. In an appeal, if you do not assert every argument that you have in your opening brief, then you effectively lose the ability to use that argument at any point in the rest of the appeal. In this case, this may have been crucial to the woman’s case because she failed on the arguments that she presented originally (the state law claims). That point highlights the importance of competent attorneys who can argue effectively for you. Continue reading

Careful Review of Home Insurance Policy Crucial

Published on: July 14, 2014 | By Berniard Law Firm

It is extremely important to review your home insurance policy to determine what types of damages the policy will actually cover, especially in areas prone to suffer from hurricane damages. Under Louisiana law, the insured individual is required to first prove that the insurance policy covers the cause of the claim. For example, if the policy only covers certain types of causes of damage, such as wind and hail, then the insured must prove that the damage was in fact caused by either wind or hail. Once the insured has done this, then the insurance company can argue that the incident is not covered by the policy. Therefore, it is extremely important that the insured take the time to determine the cause of the damage in order to prove that the policy covers their claim.

A case arising from Lake Charles, Louisiana illustrates this point. In this case, a homeowner suffered roof damage that they believed was caused by Hurricane Ike around September 13, 2008. Four shingles were missing and the insured claimed that this resulted in leakage in several rooms of the home. However, State Farm, the homeowner’s insurance company, determined that the leakage was not caused by Hurricane Ike and reclassified the claim as a “non-hurricane” claim.

State Farm, using several experts, determined that the leakage resulted from normal wear and tear on the roof, and therefore the homeowner’s insurance policy did not cover the leakage damage. Instead, State Farm concluded that only the four missing shingles were the result of wind and that they were the only damages that State Farm should reimburse to the insured; State Farm did not reimburse the insured for the damages caused by the leakage, but just the replacement value of the four damaged or missing shingles. The total damages that State Farm paid were under $500.00.

The insured had damages that were estimated at $9,385.00 by one expert and $204,717.78 by another expert. However, while these experts estimated what the cost of the leakage damage and repairing the roof would be, neither expert determined the actual cause of the damages. One of the insured’s experts thought that the wind had lifted the house’s flat roofing, which allowed water to enter the home. However, the expert could not explain why the nails on the flat roofing were still in place if the wind had lifted it. The State Farm expert, on the other hand, determined that the wind damage only included those four damaged or missing shingles and the leakage was actually caused by normal wear and tear. The State Farm expert concluded that there was “no evidence of roof damage that would be caused by severe weather . . . . The roofs, both asbestos shingle and built up roofs and all associated flashings are past their life cycle and are in need of replacement.”

The insured’s policy did not cover “poor workmanship; wear, tear, deterioration, or latent defect; settling, cracking, or expansion of walls, roofs, or ceilings; or leakage of water from air conditioning systems, household appliances, or plumbing.” Since the State Farm expert determined that the cause of the damage was from normal wear and tear, there was no way that the insured could satisfy the requirement to prove that the policy covered his claim. As such, the court granted State Farm summary judgment.

The court will grant summary judgment where one party cannot meet their required burden as a matter of law at trial. Summary judgment allows the court to avoid costly trials where there is one clear winner before the trial even begins. In this case, where the insured had no evidence that all of the damage he was claiming was caused by an occurrence included in the insurance policy, the court determined that summary judgment was appropriate. If the insured had employed experts that specifically testified as to the cause of the leakage damage, then the court may have allowed the case to proceed to trial. Further, the insured could have made a more diligent effort to report leakage as it occurred, which would help prevent the damage from spreading in the long run.

This case illustrates several very important points for the average homeowner. First, you should carefully read your policy so that you know what type of damage is covered. Second, if necessary, you may need to acquire experts that can explain what caused the damage to your home. Lastly, report damages immediately so that you can avoid costly repairs later on. Continue reading

Understanding the Direct Action Statute and Insurance Disputes

Published on: July 1, 2014 | By Berniard Law Firm

Louisiana has a Direct Action Statute that allows injured third parties to sue an insurance company directly when the insurance company’s insured causes an injury. For example, if you are involved an automobile accident where you are not at fault, you can sue the at-fault driver’s insurance company directly instead of suing the at-fault driver themselves. The Direct Action Statute is beneficial because it gives injured third parties access to the entity that will actually pay compensation for the injuries. It can be especially helpful where the insured fails to file a claim with their insurance company themselves. However, the injured third-party’s ability to sue the insurance company directly is limited by the insurance contract between the insurance company and the insured.

Despite the fact that the insurance contract is between the insurance company and the insured, an injured third party must still comply with most of the terms of the contract. This overarching rule applies specifically to whether the policy covers the insured and whether the policy covers a particular event. The insurance company will ask: Did this person have coverage when this accident happened? and Does this policy cover this type of event? For example, in insurance contracts limited to specific times, the insurance company will not cover a claim that occurred outside the time frame of the contract, regardless of who brings the claim. In a related example, automobile coverage that is limited to only certain vehicles will cover only those vehicles, regardless of who brings the claim. That is, the injured third party can have no greater rights than the insured would have had if he or she brought the complain themselves.

In a United States Fifth Circuit Court of Appeals case, the court determined that specific requirements of the contract also extend to injured third parties. That case involved a “claims-made-and-reported” policy. That type of policy not only requires that a claim arise within the policy period, but also that the insured (or another party under the Direct Action Statute) had to have reported the claim within the policy period. This type of notice requirement helps insurance companies avoid claims that are reported years after they happen; instead, this policy requires notice within a certain amount of time.

Business Problems Arise Out Of Ambiguous Contract Terms

Published on: October 30, 2013 | By Berniard Law Firm

One area where lawyers must continue to improve is drafting contracts. It is imperative that lawyers learn the intricacies of legal writing and the different meanings words have in the legal community and their ordinary meaning. If a word or phrase in a company’s contract is ambiguous, it is susceptible to multiple interpretations and might result in litigation at some point. A common example of litigation like this involves insurance policies. Therefore, it’s important to draft clear and concise contracts in order to save the time, money, and effort associated with litigation.

Ambiguous contractual provisions are to be strictly construed against the insurer and in favor of coverage for the insured. Insurance coverage is meant to protect the insured, so the public policy reflects this favoring. However, this strict construction rule applies only if the ambiguous policy provision is susceptible to two or more reasonable interpretations. The key is that it must be reasonable, not just another interpretation. If the word or phrase is clear, then no further interpretation is necessary. The words and phrases used in insurance policies are to be construed using their plain, ordinary, and generally prevailing meaning unless the words have acquired a technical meaning.

This seems to be a clear explanation of how contract terms are to be interpreted, but even so, many cases arise with an insured claiming that a certain phrase is ambiguous and they should not be denied relief under their policy. For example, Herbert Farms, who conducts a rice farming operation in St. Landry Parish, Louisiana, claimed the phrase “rice drying house” in their policy was ambiguous and other reasonable interpretations of the phrase was possible. Herbert Farms filed a claim for losses under its policy when its rice was damaged while in storage, seeking coverage under a section that listed “grain tanks” as covered property. However, there is a clear and unambiguous exclusionary clause that states that property covered in certain sections, including the section listing grain tanks, is not covered. The two pertinent pieces of property not covered in Herbert Farms’ policy were the contents of a rice warehouse and rice drying houses.

Louisiana Courts Take Firm Stance Against Misleading Health-Related Materials

Published on: August 16, 2013 | By Berniard Law Firm

Both trial and appellate courts found Janssen Pharmaceutica liable for damages under the Louisiana’s Medical Assistance Programs Integrity Law (MAPIL). The issue was whether the Attorney General could bring this action without alleging actual damages, as MAPIL requires. The courts considered the legislative intent behind the law to determine that Janssen was still liable.

The Attorney General of Louisiana filed suit against Janssen Pharmaceutica for violating the MAPIL, which prohibits people from presenting false or fraudulent claims or misrepresentations to the state medical assistance program funds. The jury concluded that Janssen had violated the law over 35,000 times, resulting in a fee of over $257 million.

The appellate court upheld the trial court’s decision. It would only be able to overturn the trial court if it found the trial court had abused its discretion. In other words, if the trial court’s interpretation of the statute was not reasonable, the appellate court could reverse it. However, this is a very high standard. Previous Louisiana case law required the court to read the relevant subsection of the statute in the context of the remainder of the MAPIL legislation, and the appellate court found that the trial court had done this, and its interpretation was reasonable. Thus, it was reasonable to interpret the statute to mean that if the Attorney General could prove false, misleading, deceitful statements, Janssen would be liable for civil penalties.

Haynesville Shale Frenzy Leads to Fraud Claim in Caddo Parish

Published on: July 30, 2013 | By Berniard Law Firm

Along with a much-needed economic boom, the recent shale frenzy in northwestern Louisiana has brought the typical controversy. Accidents and spills have raised environmental concerns and caused some to question whether the new jobs are safe. For one Caddo Parish couple, however, the shale boom has brought a very unique set of concerns—from whom should one accept legal advice?

Chesapeake Louisiana, L.P. held a mineral lease on the Stockmans’ property which was set to expire on July 14, 2008. The Stockmans desired to continue leasing the property, so in April they signed an extension of the lease. A month later, they were solicited by an agent of Petrohawk Properties, L.P., a competing mineral producer. The Stockmans informed the Petrohawk agent that they had already leased the property to Chesapeake. This, however, did not deter the Petrohawk agent.

The Petrohawk agent explained that “Louisiana is a race state” and “if Petrohawk recorded its lease first, the Chesapeake extension would be invalid.” It is true that in a “race” state, the first party to the courthouse to record the lease is said to have put the entire world on notice of the lease. That party’s lease then takes precedence over any subsequent lease on that property, even if the subsequent lease was signed first. While this may seem silly at first, the “race” concept reflects a basic preference the law makes for certainty. Recording provides a far more objective measure by which parties may determine priority and, indeed, this entire dispute could have been avoided if Chesapeake had simply recorded its extension immediately after signing.

On the other hand, while this statement may have been loosely true with respect to Petrohawk, it was highly misleading with respect to the Stockmans. Although the Petrohawk lease, if filed first, would trump the Chesapeake lease, it would nevertheless render the Stockmans liable for breach of the Chesapeake lease, in violation of the most fundamental principle of property law—that one may not sell what he does not own.

Unfortunately, tempted by the prospect of higher lease payments, the Stockmans took Petrohawk’s misguided advice without professional legal counsel. Instead Mr. Stockman only confirmed that Louisiana was indeed a “race” state and spoke with his neighbor, a geologist. His neighbor advised him to strike the warranty of title from the Petrohawk lease, an act which did nothing to relieve the Stockmans of their duties to Chesapeake. Upon learning of the Petrohawk lease, Chesapeake immediately slapped the Stockmans with a breach of contract suit.

Undoubtedly furious over having been lied to, the Stockmans filed a claim against Petrohawk for fraud. In Louisiana, a fraud claim has three elements: first, a “misrepresentation, suppression, or omission of true information”; second, the “intent to obtain an unjust advantage or cause damage or inconvenience to another”; and third, “that the error induced by the fraudulent act relates to a circumstance that substantially influenced the victim’s consent to the contract.”

The Stockmans claim rested on the notion that Petrohawk told them a half-truth. In stating that Petrohawk’s winning the race to the courthouse would “invalidate” the Chesapeake lease, Petrohawk assumed a duty to disclose to the Stockmans the rest of the truth. By only telling the Stockmans as much as they did, however, Petrohawk led them to believe they would not be in breach of their existing contract. This omission, the court held, amounted to fraud.

While the Stockmans eventually got out of their legal problems, they only did so at the expense of considerable time and resources. Real property law presents many complications and pitfalls for the ordinary layperson, the nuances of which should be explained by competent legal counsel. Avoid the hassle.

Insurance Company Lawsuit Involving Healthcare Providers Illustrates Class Certification Rules

Published on: June 8, 2013 | By Berniard Law Firm

A group of healthcare providers sued a number of insurance companies alleging that their worker’s compensation bills were discounted under a preferred provider agreement without notice as required by Louisiana state law. When the judge was deciding whether or not to certify the group of healthcare providers as a class, allowing them to bring one lawsuit all together instead of each having to pursue a suit individually, the insurance companies claimed the providers had no right to bring the case at all. The judge did not address the issue and certified the class. The insurers appealed the decision.

The insurers argued that healthcare providers are barred by Louisiana law from directly suing insurance companies because the law does not allow contract claims and the claim the healthcare providers brought was a contract case. The healthcare providers argued that their claim was not contractual but of a breach of a statutory duty, which is a duty created by a specific law. A party has standing, which means they are allowed to bring a case, when they have a legally protectable stake in a litigated matter. This case stems from a case against a party insured by the insurance companies. The healthcare providers settled with the insured party but retained the right to sue the insurance companies.

Louisiana law does not allow the providers to sue the insurance companies independently but they do have a right to sue the insurance companies if they have a substantive case against the insured party. The fact that the healthcare providers settled with the insured party does not automatically mean they can no longer sue the insurance companies. The appeals court decided that the healthcare providers could sue the insurance companies because their claim was a violation of a statutory duty, not a contract dispute, and because they had specifically retained their right to sue the insurance companies in their settlement agreement with the insured party.

The appeals court then went on to review whether the class certification was proper. An appeals court is always deferential to a trial court’s decision to certify a class and will only overturn the decision if there was manifest error, or the decision was obviously wrong. In order to be certified as a class the group of plaintiffs must meet these requirements: 1) The group must be so large that treating each plaintiff as an individual would be too complicated 2) The questions of law and fact in the case must be the same for all the plaintiffs 3) the plaintiffs who take the lead in the case must have claims typical of all the class members 4) the plaintiffs who take the lead, and their lawyers, must adequately and fairly represent the interests of everyone in the class. If these requirements are met the case can go forward as a class action.

The trial court found that the class representative was adequate to represent the class and the appeals court agreed. The trial and appeals court also agreed that common issues predominated over individual issues. The defendant insurance companies insured the same insured party on which the claims were based, the claim for all the providers was the same, that their bills were illegally discounted, this is definitely enough commonality and typicality for a class certification. The appeals court upheld the trial courts decision and sent the case back to the trial court to continue the case.

Even preliminary legal issues, such as standing to sue, are highly complicated and very important aspects of a case.