LAD Services of Louisiana, L.L.C. v. Superior Derrick Services, LLC, 167 So. 3d 746

Background

Superior Derrick Services (SDS) contracted with LAD Services to lease two barges and to build two additional barges (contracts executed Dec 2007 and Mar 2008). SDS paid down payments and advanced funds for steel for the barges; progress payments were required.
SDS canceled the contract for the second barge after its customer PDVSA insisted SDS use another builder; LAD stopped work and retained the steel on its yard.
LAD sued SDS for unpaid rent on leased barges, lost profits for the cancelled second-barge contract, storage and retrieval costs, and underpayment on the first barge; SDS reconvened seeking return of advance funds, defects, and liquidated damages.
A jury returned a verdict for LAD: $99,700 (rental), $204,600 (barge one), and $566,806.50 (barge two), and found LAD did not breach. The trial judge later granted SDS a JNOV, vacating the jury verdict and ordering LAD to return funds to SDS based on a finding LAD breached the barge-two security clause.
On appeal the First Circuit reversed the JNOV, reinstated the jury judgment in part, reduced the barge-two award by disallowing bad-faith damages, and remanded for interest, attorney fees (to LAD on the construction contracts), and costs.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether the directed verdict on LAD’s breach of the security clause was effective when the issue nevertheless went to the jury	LAD: the directed verdict should not override jury consideration	SDS: the directed verdict was proper	Court: where the court granted a directed verdict but allowed the issue to go to the jury, the jury verdict controls; assignment moot
Whether trial court erred in granting JNOV reversing jury verdict	LAD: JNOV inappropriate because reasonable jurors could reach contrary conclusions	SDS: LAD substantially breached security clause, excusing SDS; JNOV appropriate	Court: JNOV reversed — reasonable jury could find SDS failed to prove LAD’s breach was substantial or causal; jury verdict reinstated
Whether LAD’s alleged failure to follow the security clause amounted to a substantial breach excusing SDS’s performance	LAD: any alleged security shortfalls did not substantially cause SDS’s nonperformance	SDS: LAD breached security clause (segregation/marking) and defaulted; SDS excused	Court: SDS failed to prove substantial breach — PDVSA’s rejection was the actual cause; lack of required written default notice and conflicting evidence made findings for jury reasonable
Whether SDS’s cancellation of barge-two contract constituted a bad-faith breach and amount allowed	LAD: jury’s bad-faith finding should stand and include full bad-faith damages	SDS: cancellation was for legitimate business reasons (to keep PDVSA) — not bad faith	Court: no reasonable factual basis for bad-faith finding as to the cancellation; reduced damages: allowed $534,664.90 for simple breach and disallowed $32,141.60 as bad-faith component

Key Cases Cited

McNeely v. Ford Motor Co., Inc., 763 So.2d 659 (La. App. 1st Cir. 1999) (standard and discretion for directed verdicts)
Smith v. State, Dep’t of Transp. & Dev., 899 So.2d 516 (La. 2005) (standard for JNOV review — JNOV only when evidence so overwhelming no reasonable person could disagree)
Giant Enters., Inc. v. Cent. La. Elec. Co., 371 So.2d 641 (La. App. 3d Cir. 1979) (substantial breach requires actual causation of nonperformance)
Commerce Ins. Agency, Inc. v. Hogue, 618 So.2d 1048 (La. App. 1st Cir. 1993) (substantial breach by one party can excuse the other’s performance)
Mart v. Hill, 505 So.2d 1120 (La. 1987) (two-part test for appellate review of factual findings)
Rosell v. ESCO, 549 So.2d 840 (La. 1989) (manifest error standard for appellate review of fact findings)
Stobart v. State Through Dep’t of Transp. & Dev., 617 So.2d 880 (La. 1993) (appellate review: trier-of-fact findings reasonable prevents reversal)
Meador v. Toyota of Jefferson, Inc., 332 So.2d 433 (La. 1976) (measure of contract damages: loss sustained and profit deprived)