Akeem v. Dasmen Residential, LLC

UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF LOUISIANA

JOSHUA AKEEM, et. al. CIVIL ACTION

VERSUS NO. 19-13650 c/w 19-13673;

19-13705; 19-14634; 19-636;

DASMEN RESIDENTIAL, LLC, et. al. 19-14637; 20-187

SECTION M (3)

Pertains to all cases

ORDER & REASONS

Before the Court is a motion by defendants RH East Lake, LLC (“RH East Lake”), RH

Chenault Creek, LLC (“Chenault Creek”), RH Lakewind East, LLC (“Lakewind East”), RH

Copper Creek, LLC (“Copper Creek”), RH Windrun, LLC (“Windrun”), RH New Orleans

Holdings, LLC (“New Orleans Holdings”) (collectively, “RH Defendants”), and Dasmen

Residential Management, LLC (“Dasmen”) to dismiss certain claims pursuant to Rule 12(b)(6) of

the Federal Rules of Civil Procedure.1 Plaintiffs respond in opposition,2 and the RH Defendants

and Dasmen reply in further support of their motion.3 Having considered the parties’ memoranda,

the record, and the applicable law, the Court issues this Order & Reasons granting the motion.

I. BACKGROUND

These consolidated matters involve a putative class action brought by current and former

tenants and maintenance workers of five apartment complexes (“Plaintiffs”) against the current

and former owners and property managers (“Defendants”) for damages allegedly caused by

hazardous conditions. In their master amended complaint, which combines the allegations of the

1 R. Doc. 179.

2 R. Doc. 194.

3 R. Doc. 203.

six consolidated actions, Plaintiffs allege that the apartment complexes’ current and former owners

and property managers “allowed deteriorating structural components of buildings such as roofs,

plumbing, gutters, slabs, siding, stairwells, etc. to cause persistent water-intrusion spurring

widespread mold-infestation.”4 Plaintiffs also allege that Defendants provided inadequate

security, failed to properly dispose of trash, failed to address insect, rodent, and reptile infestations,

and failed to adhere to fire and safety codes, all of which created hazardous conditions.5 Plaintiffs

seek to represent a class defined as follows:

All persons who sustained damage through hazardous conditions, including, but

not limited to, exposure to water intrusion and/or exposure to fungal substances

such as mold and mold spores which were growing on building materials and were

released into the air of the following apartment complexes in New Orleans: Hidden

Lakes/Laguna Run, Lakewind East/Laguna Reserve, Copper Creek/Laguna Creek,

Chenault Creek/Carmel Brooks and Wind Run/Carmel Springs,6 and who meet any

one of the following criteria:

1. You currently and/or formerly resided and/or had an employment

relationship with (meaning reported to work at) the apartment complexes

known as Hidden Lakes/Laguna Run, Lakewind East/Laguna Reserve,

Copper Creek/Laguna Creek, Chenault Creek/Carmel Brooks; and Wind

Run/Carmel Springs, before December 13, 2017, and you allege damages

from hazardous conditions, including, but not limited to, water intrusion

and/or exposure to fungal substances such as mold and mold spores which

were growing on building materials and were released into the air.

2. You currently and/or formerly resided and/or had an employment

relationship with (meaning reported to work at) the apartment complexes

known as Hidden Lakes/Laguna Run, Lakewind East/Laguna Reserve,

Copper Creek/Laguna Creek, Chenault Creek/Carmel Brooks, and Wind

Run/Carmel Springs, after December 13, 2017 to the present, and you allege

damages from hazardous conditions including, but not limited to, water

intrusion and/or exposure to fungal substances such as mold and mold

spores which were growing on building materials and were released into the

air.7

4 R. Doc. 165 at 4.

5 Id.

6 The first name is the apartment complex’s former name, and the second is its current name. After this block

quote, each apartment complex will be referenced only by its current name.

7 Id. at 2 (emphasis in original).

The ownership of the buildings changed on December 13, 2017. Prior to that date,

defendants Triangle Real Estate of Gastonia, Inc. (“Triangle”), Southwood Realty Co.

(“Southwood”), and Lakewind East Apartments, LLC (“Lakewind”) (collectively, “Triangle

Defendants”), which are related entities, owned four of the apartment complexes.8 Specifically,

Triangle owned Carmel Brooks, Lakewind owned Laguna Reserve, and Southwood owned Laguna

Creek.9 While the Triangle Defendants owned these buildings, Southwood served as the property

management company.10 On December 13, 2017, the Triangle Defendants sold their respective

properties to Chenault Creek (Carmel Brooks), Lakewind East (Laguna Reserve), and Copper

Creek (Laguna Creek).11 Defendant Eastlake Development, LLC (“Eastlake”) owned Laguna Run

from December 11, 2012, until December 14, 2017, when it sold the property to RH East Lake.12

Latter & Blum Management, Inc. (“Latter & Blum”) was Laguna Run’s property manager from

April 25, 2016, through December 14, 2017.13 After the sales, defendants KFK Group, LLC, KFK

Development, LLC, Dasmen, and the Lynd Company managed the various properties.14

Plaintiffs’ master amended complaint alleges that all the owners and property managers

knew about the water, mold, and numerous other issues with the properties and failed to properly

fix them.15 They further allege that the property managers did not provide to the maintenance

workers personal protective equipment or adequate training on mold remediation, but rather simply

8 Id. at 9-10.

9 R. Doc. 169-1 at 2. Wind Run Apartments, LLC (“Wind Run”), another entity that is related to the Triangle

Defendants but was not named in this suit, owned Carmel Springs. Id.

10 Id. Southwood is sued only in its capacity as an owner, and not as a property manager. See R. Doc. 165

at 9-11.

11 R. Doc. 169-1 at 2. Wind Run sold Carmel Springs to RH Wind Run, LLC. Id.

12 R. Doc. 174-1 at 3.

13 Id. Latter & Blum never owned or managed Carmel Brooks, Laguna Reserve, Carmel Springs, or Laguna

Creek. Id. at 7. Indeed, Plaintiffs do not advance any allegations against Latter & Blum related to these properties.

See R. Doc. 165.

14 Id. at 10-11.

15 Id. at 12-107.

instructed them to spray the affected areas with Kilz or bleach and paint over them.16 Plaintiffs

also allege that Eastlake and the Triangle Defendants misrepresented that the properties were in

good condition and free of vices, ruin, and defects when the properties were sold in December

2017.17 Moreover, Plaintiffs allege that all owner defendants breached the lease agreements in

various ways, including failing to tender apartment units that were clean, safe, and in good working

condition, and that the RH Defendants breached their contracts with the United States Department

of Housing and Urban Development (“HUD”) to provide low-income housing that complied with

federal regulations.18 Plaintiffs assert several theories of liability including strict liability,

negligence, fraud, negligent misrepresentation, and breach of contract as to all Plaintiffs, and

intentional tort as to the employee Plaintiffs.19

II. PENDING MOTION

The RH Defendants argue that Plaintiffs cannot state a claim against them for allegedly

breaching their contracts with HUD by failing to comply with federal regulations regarding the

conditions of low-income housing because 24 C.F.R. § 5.703(f), the regulation relied upon by

Plaintiffs, does not confer a private right of action.20 The RH Defendants argue that

“[n]otwithstanding whether Plaintiffs receive a benefit or right from the implementation of [§

5.703(f)], the [r]egulation omits any language displaying an intent to create a private remedy.”21

They contend that the purpose of HUD regulations, such as § 5.703(f), is to set standards that

owners must meet in order to receive government funding for low-income housing assistance

programs, not to confer a private right of action on the tenants.22 The RH Defendants further

16 Id. at 16, 17, 23, 25, 27, 29-30, 103-07.

17 Id. at 13, 21-22, 24, 26, 28.

18 Id. at 33-103.

19 Id. at 108-13.

20 R. Doc. 179-1 at 3.

21 Id. at 6.

22 Id. at 5.

assert that even if the regulation did confer a private right of action, Plaintiffs lack standing to

bring their breach-of-contract claim because they lack privity of contract and cannot show that any

alleged contract between the RH Defendants and HUD contains a stipulation pour autrui in

Plaintiffs’ favor.23

Dasmen argues that the employee Plaintiffs’ intentional tort claim should be dismissed

because Plaintiffs do not plead sufficient factual allegations to establish the “intentional act”

exception to the Louisiana Workers’ Compensation Act (“LWCA”).24 Dasmen maintains that its

alleged negligence was not intentional and therefore this claim does not fall within the narrow

exception to an employee’s exclusive remedy for work-related injuries.25 Further, Dasmen asserts

that the requisite intent or intentional act is absent from Plaintiffs’ allegations because they “cannot

demonstrate that the incident or [their] injuries were inevitable consequences of or substantially

certain to occur while working at the subject apartment complexes.”26

In opposition, Plaintiffs argue that § 5.703 confers a private right of action for a breach-of-

contract claim in their favor because they are third-party beneficiaries to their landlords’ agreement

with HUD and the Housing Authority of New Orleans pursuant to Louisiana Civil Code article

1978.27 Plaintiffs contend that under Louisiana jurisprudence, landlords and property managers of

publicly funded housing are “contractually bound to provide mold-free housing,” and “ha[ve] a

duty, as a matter of Louisiana tort law, to exercise the degree of care specified in the federal

regulations.”28 Further, Plaintiffs assert that Congress intended § 5.703 to benefit tenants and thus

Plaintiffs have standing to sue for breach of contract.29 Finally, Plaintiffs argue that Dasmen

23 Id. at 7-8; R. Doc. 203 at 3-5.

24 R. Doc. 179-1 at 8.

25 Id. at 11.

26 Id. at 15.

27 R. Doc. 194 at 11.

28 Id. at 13 (quoting In re New Orleans Train Car Leakage Fire Litig., 795 So. 2d 364, 396 (La. App. 2001)).

29 Id. at 14.

knowingly exposed employees to a dangerous work environment which amounts to an intentional

tort because Dasmen chose to disregard the law.30 Therefore, the employee Plaintiffs say, their

tort claim falls under the “intentional act” exception of the LWCA and Dasmen is not immune

from civil tort liability.31

III. LAW & ANALYSIS

A. 12(b)(6) Standard

The Federal Rules of Civil Procedure require a complaint to contain “a short and plain

statement of the claim showing that the pleader is entitled to relief.” Fed. R. Civ. P. 8(a)(2). Rule

8 “does not require ‘detailed factual allegations,’ but it demands more than an unadorned, the-

defendant-unlawfully-harmed-me accusation.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)

(quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007)). The statement of the claim must

“‘give the defendant fair notice of what the ... claim is and the grounds upon which it rests.’”

Twombly, 550 U.S. at 555 (quoting Conley v. Gibson, 355 U.S. 41, 47 (1957)). A pleading does

not comply with Rule 8 if it offers “labels and conclusions,” “a formulaic recitation of the elements

of a cause of action,” or “‘naked assertions’ devoid of ‘further factual enhancement.’” Iqbal, 556

U.S. at 678 (quoting Twombly, 550 U.S. at 555, 557) (alteration omitted).

Rule 12(b)(6) of the Federal Rules of Civil Procedure permits a party to move to dismiss

for “failure to state a claim upon which relief can be granted.” Fed. R. Civ. P. 12(b)(6). “To

survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true,

to ‘state a claim to relief that is plausible on its face.’” Iqbal, 556 U.S. at 678 (quoting Twombly,

550 U.S. at 570). A claim is plausible on the face of the complaint “when the plaintiff pleads

factual content that allows the court to draw the reasonable inference that the defendant is liable

30 Id. at 16-17.

31 Id. at 15.

for the misconduct alleged.” Id. (citing Twombly, 550 U.S. at 556). Plausibility does not equate to

probability, but rather “it asks for more than a sheer possibility that a defendant has acted

unlawfully.” Id. (citing Twombly, 550 U.S. at 556). “Where a complaint pleads facts that are

‘merely consistent with’ a defendant’s liability, it ‘stops short of the line between possibility and

plausibility of “entitlement to relief.”’” Id. (quoting Twombly, 550 U.S. at 557). Thus, if the facts

pleaded in the complaint “do not permit the court to infer more than the mere possibility of

misconduct, the complaint has alleged – but it has not ‘shown’ – ‘that the pleader is entitled to

relief.’” Id. at 679 (quoting Fed. R. Civ. P. 8(a)(2)) (alteration omitted).

In considering a Rule 12(b)(6) motion to dismiss for failure to state a claim, a court employs

the two-pronged approach utilized in Twombly. The court “can choose to begin by identifying

pleadings that, because they are no more than conclusions [unsupported by factual allegations],

are not entitled to the assumption of truth.” Iqbal, 556 U.S. at 679. However, “[w]hen there are

well-pleaded factual allegations, a court should assume their veracity and then determine whether

they plausibly give rise to an entitlement to relief.” Id. “[The] task, then, is to determine whether

the plaintiff has stated a legally cognizable claim that is plausible, not to evaluate the plaintiff’s

likelihood of success.” Body by Cook, Inc. v. State Farm Mut. Auto. Ins., 869 F.3d 381, 385 (5th

Cir. 2017) (quoting Doe ex rel. Magee v. Covington Cty. Sch. Dist., 675 F.3d 849, 854 (5th Cir.

2012)). Motions to dismiss are disfavored and rarely granted. Turner v. Pleasant, 663 F.3d 770,

775 (5th Cir. 2011) (citing Harrington v. State Farm Fire & Cas. Co., 563 F.3d 141, 147 (5th Cir.

2009)).

A court’s review of a Rule 12(b)(6) motion to dismiss “is limited to the complaint, any

documents attached to the complaint, and any documents attached to the motion to dismiss that

are central to the claim and referenced by the complaint.” Lone Star Fund V (U.S.), L.P. v.

Barclays Bank PLC, 594 F.3d 383, 387 (5th Cir. 2010) (citing Collins v. Morgan Stanley Dean

Witter, 224 F.3d 496, 498-99 (5th Cir. 2000)). A court may also take judicial notice of certain

matters, including public records and government websites. Dorsey v. Portfolio Equities, Inc., 540

F.3d 333, 338 (5th Cir. 2008); see also Kitty Hawk Aircargo, Inc. v. Chao, 418 F.3d 453, 457 (5th

Cir. 2005). Thus, in weighing a Rule 12(b)(6) motion, district courts primarily look to the

allegations found in the complaint, but courts may also consider “documents incorporated into the

complaint by reference or integral to the claim, items subject to judicial notice, matters of public

record, orders, items appearing in the record of the case, and exhibits attached to the complaint

whose authenticity is unquestioned.” Meyers v. Textron, Inc., 540 F. App’x 408, 409 (5th Cir.

2013) (citing Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308, 322 (2007)).

B. Analysis

1. Breach-of-contract claim

Plaintiffs seek redress as purported third-party beneficiaries for the RH Defendants’ alleged

breach of their contract with HUD. Federal regulations require publicly funded housing to be free

of health and safety hazards including mold and pest infestation. 24 C.F.R. § 5.703(f). To receive

public subsidies, owners of these properties must fulfill the requirements imposed on them by

federal regulations. Banks v. Dall. Hous. Auth., 271 F.3d 605, 609-10 (5th Cir. 2001) (statute

enacted “for the purpose of placing conditions upon the property owners’ receipt of assistance

payments, not in order to confer a benefit upon tenants of public housing”). Such regulations “may

not confer a private right of action upon plaintiffs” but “may be utilized in determining whether

defendants violated their duties and obligations under Louisiana law.” Claborne v. Hous. Auth. of

New Orleans, 165 So. 3d 268, 286 (La. App. 2015). Thus, although public safety laws, such as

these regulations, are “very useful in determining the standard of care applicable in a negligence

action,” id. (quoting In re New Orleans Train Car Leakage, 795 So. 2d at 396), courts recognize

that “there is no private right of action for failure to comply with HUD regulations.” Wingfield v.

Carrington Mortg. Servs., LLC, 2015 WL 4886462, at *2 (N.D. Tex. Aug. 13, 2015).

Plaintiffs, relying on Claborne, contend that § 5.703 affords them a private right of action

to assert a breach-of-contract claim. Plaintiffs clearly misread Claborne, which explicitly states

that the regulation does not confer a private right of action. 165 So. 3d at 286. In Claborne, the

court, relying on In re New Orleans Train Car Leakage, did not find a private right of action under

a HUD regulation but instead held that such provisions are useful to determine duties and establish

a standard of care under Louisiana tort law. Id. In the case at bar, Plaintiffs attempt to bring a

breach-of-contract claim pursuant to § 5.703, which is not permitted. Thus, Plaintiffs do not have

a private right of action under § 5.703 to bring such a claim.32

Even if the regulation did provide a private right of action, Plaintiffs lack standing to bring

a breach-of-contract claim against the RH Defendants for allegedly breaching their purported

contract with HUD. Recognizing that they are not parties to the allegedly breached contract,

Plaintiffs argue that the purported contract between the RH Defendants and HUD contains a

stipulation pour autrui for their benefit. Under Louisiana law, a stipulation pour autrui exists if

(1) the contract manifests a clear intention to benefit the third party; (2) there is certainty as to the

benefit provided the third party; and (3) the benefit is not a mere incident of the contract between

the parties. Joseph v. Hosp. Serv. Dist. No. 2, 393 So. 2d 1206, 1212 (La. 2006). “A stipulation

pour autrui is never presumed,” and “[t]he party claiming the benefit bears the burden of proof.”

Id.

32 Plaintiffs assert that their negligence and intentional tort claims are brought pursuant to § 5.703. R. Doc.

194 at 12. Perhaps so, but Plaintiffs’ general negligence claim is not the subject of the RH Defendants’ motion now

before the Court.

Plaintiffs have not plausibly shown that there was a contract between the RH Defendants

and HUD or that they are parties to any such contract. Nor do they point to any specific provision

in said contract manifesting a clear intention to provide a benefit in their favor. As with the

statutory provision at issue in Banks, the alleged contractual requirement to abide by § 5.703 in

this case “focuses on the recipients of federal funding and on the federal agencies – not on the

class represented by the plaintiffs.” 272 F.3d at 611. If the RH Defendants failed to comply with

the regulation, they placed their federal funding in jeopardy, but they did not confer a private

remedy on Plaintiffs. While Plaintiffs certainly would benefit from clean and safe housing, any

benefit they received (or were supposed to receive) was a mere incident of the alleged contract.

Plaintiffs have not borne their burden of demonstrating the existence of a stipulation pour autrui

for their benefit. Therefore, Plaintiffs’ breach-of-contract claim against the RH Defendants

concerning any contract between the RH Defendants and HUD is dismissed with prejudice.

2. Employees’ intentional tort claim

The employee Plaintiffs argue that their intentional tort claim against Dasmen is not barred

by the LWCA. The LWCA is the exclusive remedy for employees in cases of injury, sickness, or

disease arising within the scope of their employment. La. R.S. 23:1032(A)(1)(a). In making their

tort claim, Plaintiffs’ rely upon the “intentional act” exception to the exclusiveness of the LWCA

remedy, which states:

Nothing in this Chapter shall affect the liability of the employer, or any officer,

director, stockholder, partner, or employee of such employer or principal to a fine

or penalty under any other statute or the liability, civil or criminal, resulting from

an intentional act.

La. R.S. 23:1032(B). This exception allows employees to recover damages outside of the LWCA

if their injuries are the result of an intentional tort. In the context of an LWCA claim, the Louisiana

supreme court held that an intentional act occurs when “the person who acts either (1) consciously

desires the physical result of his act, whatever the likelihood of that result happening from his

conduct; or (2) knows that that result is substantially certain to follow from his conduct, whatever

his desire may be as to that result.” Bazley v. Tortorich, 397 So. 2d 475, 481 (La. 1981).

“‘Substantially certain to follow’ requires more than a reasonable probability that an injury will

occur and ‘certain’ has been defined to mean ‘inevitable’ or ‘incapable of failing.’” Jasmin v.

HNV Cent. Riverfront Corp., 642 So. 2d 311, 312 (La. App. 1994). Substantial certainty “requires

more than a reasonable probability, even more than a high probability, that an accident or injury

will occur.” Bridges v. Carl E. Woodward, Inc., 663 So. 2d 458, 463 (La. App. 1995). “Believing

that someone may, or even probably will, eventually get hurt if a workplace practice is continued

does not rise to the level of an intentional act, but instead falls within the range of negligent acts

that are covered by workers’ compensation.” Reeves v. Structural Pres. Sys., 731 So. 2d 208, 212

(La. 1999). Louisiana appellate courts have narrowly construed the intentional act exception and

have “almost universally held that employers are not liable under the intentional act exception for

violations of safety standards or for failing to provide safety equipment.” Id. (collecting cases);

see, e.g., Jacobsen v. Se. Distribs., Inc., 413 So. 2d 995 (La. App. 1982) (holding that failure to

provide safety equipment was not an intentional act).

Here, Plaintiffs claim that Dasmen “made a choice to ignore the law” when it did not

provide the employee Plaintiffs with adequate mold abatement training or proper safety equipment,

which they liken to “sending them into a snake-pit.”33 Plaintiffs do not allege that Dasmen desired

for Plaintiffs to become sick after mold exposure, so the question is whether the allegations

plausibly show that it was “substantially certain” Plaintiffs would become sick as a result of

Dasmen’s conduct. Bazley, 397 So. 2d at 481. Substantial certainty has been held to mean

33 R. Doc. 194 at 16-17.

“inevitable” or “incapable of failing” – a high bar to meet. Jasmine, 642 So. 2d at 312. Even if

dangerous, Plaintiffs have not alleged it is certain that sickness will result from mold exposure.

Instead, Plaintiffs contend that Dasmen “knew or should have known” that it was violating

standards for mold abatement because it is a professional in the housing field.34 But allegedly

breaking a law does not mean that Dasmen acted intentionally for the purposes of the LWCA.

Mott v. River Par. Maint., Inc., 432 So. 2d 827, 832 (La. 1983) (“Violation of a statute alone is not

per se such an intentional act as will result in the employer’s tort liability if injuries are sustained

by an employee because of the violation.”). Furthermore, in pleading their tort claim, Plaintiffs

used the language of negligence, perhaps even gross negligence (terms like “should have known”),

but they did not use the language of intentional tort. Bridges, 663 So. 2d at 463; see Tapia v.

Schwegmann Giant Supermarkets, Inc., 590 So. 2d 806, 807-08 (La. App. 1991) (“Mere

knowledge and appreciation of a risk does not constitute intent. Reckless or wanton conduct by an

employer does not constitute intentional wrongdoing.”). Therefore, even if Dasmen allegedly

“made a choice to disregard the law” or “should have known” that sending workers into the

apartment complexes with no training or protective equipment was dangerous, it does not amount

to an intentional act for the purposes of the exception from the LWCA. Because the LWCA is the

exclusive remedy for employers injured while in the scope of their employment, and Plaintiffs’

tort claim does not fall within the narrow “intentional act” exception, this claim is dismissed with

prejudice.

34 Id. at 23.

IV. CONCLUSION

Accordingly, for the forgoing reasons,

IT IS ORDERED that the RH Defendants’ motion to dismiss the tenant Plaintiffs’ breach-

of-contract claim premised on the RH Defendants’ alleged breach of its contract with HUD (R.

Doc. 179) is GRANTED, and this claim is DISMISSED WITH PREJUDICE.

IT IS FURTHER ORDERED that Dasmen’s motion to dismiss the employee Plaintiffs’

intentional tort claim (R. Doc. 179) is GRANTED, and this claim is also DISMISSED WITH

PREJUDICE.

New Orleans, Louisiana, this 10th day of August, 2021.

________________________________

BARRY W. ASHE

UNITED STATES DISTRICT JUDGE