83 So. 3d 1066
La. Ct. App.2011Background
- Piazzas owned a 43.19% stake in Paul Piazza & Son, Inc. (P&S) and sought to sell their interests in 2007.
- Contemporaneously, P&S engaged Kristen Baumer under a contingency fee contract to pursue insured-loss claims arising from Katrina/Rita; the contract assigned 10% to Baumer, 20% if trial, and was executed on behalf of P&S by Shepherd Baumer and the Piazzas.
- A stock purchase agreement allocated insurance proceeds to shareholders by their ownership percentage, after deducting fees and costs, including attorney’s fees, and taxes.
- P&S and Baumer later paid Piazzas several installments from insurance proceeds, and the Piazzas later claimed the company had deducted excessive attorney’s fees.
- In 2010-2011, Piazzas filed a reconventional demand for damages, attorney’s fees, and return of excessive attorney’s fees; Kristen Baumer and then Baumer entities moved to dismiss on no-right-of-action grounds.
- The trial court granted the exceptions of no right of action, and the appellate court affirmed, concluding the Piazzas’ claims were derivative to the corporation and not personal.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Piazzas have a personal right to sue for fees. | Piazzas allege a direct personal injury from excessive fees. | Rights to challenge fees belong to the corporation; Piazzas lack a personal right. | No personal right; action is derivative. |
| Whether the fees were a corporate debt and properly deducted. | Fees improperly deducted reducing Piazzas’ share. | Fees were a corporate obligation governed by the contingency agreement and stock purchase terms. | Fees were a corporate debt, properly paid by P&S. |
| Whether Piazzas are shareholders with standing to bring a direct action. | Loss was peculiar to Piazzas as individuals. | Loss was indirect or shared by corporation and shareholders; no standalone right. | Loss was indirect; no standing for a direct action. |
| Standard and scope of review for exception of no right of action. | N/A (not disputed on standard). | De novo review confirms lack of right of action. | De novo review affirmed the ruling. |
Key Cases Cited
- Badeauc v. S.W. Computer Bureau, Inc., 929 So.2d 1211 (La. 3/17/2006) (treats exception of no right of action in context of corporate liability)
- First Bank and Trust v. Duwell, 57 So.3d 1076 (La.App. 5 Cir. 12/14/2010) (affirms appellate standard on corporate claims)
- St. Bernard Optical Corp. v. Schoenberger, 925 So.2d 604 (La.App. 4 Cir. 1/25/2006) (relative to corporate liability and standing)
- Monroe v. Baron One, L.L.C., 902 So.2d 529 (La.App. 5 Cir. 4/26/2005) (illustrates derivative vs personal action concepts)
- Glod v. Baker, 851 So.2d 1255 (La.App. 3 Cir. 8/6/2003) (discusses personal vs derivative losses)
- Amador v. Reggie, 924 So.2d 415 (La.App. 3 Cir. 3/1/2006) (related analysis of corporate-right action boundaries)