Hugel v. Southeast Lousiana Flood Protection Authority-East

Case: 10-30420 Document: 00511508034 Page: 1 Date Filed: 06/14/2011

IN THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT United States Court of Appeals

Fifth Circuit

FILED

June 14, 2011

No. 10-30420 Lyle W. Cayce

Clerk

DIETER M. HUGEL,

Plaintiff - Appellant

v.

SOUTHEAST LOUISIANA FLOOD PROTECTION AUTHORITY - EAST,

Orleans Levee District, Division of Non-Flood Assets (OLD); ORLEANS

LEVEE DISTRICT, DIVISION OF NON-FLOOD ASSETS,

Defendants - Appellees

Appeal from the United States District Court

for the Eastern District of Louisiana

USDC No. 2:09-CV-4215

Before GARZA, STEWART, and HAYNES, Circuit Judges.

PER CURIAM:*

Dieter M. Hugel, a lessee of certain land and water bottoms at the Orleans

Marina in New Orleans, Louisiana, appeals the district court’s dismissal of his

42 U.S.C. § 1983 action against the Orleans Levee District (“Levee District”), his

lessor. The district court concluded that Hugel’s cause of action was barred

*

Pursuant to 5TH CIR . R. 47.5, the court has determined that this opinion should not

be published and is not precedent except under the limited circumstances set forth in 5TH CIR .

R. 47.5.4.

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No. 10-30420

under Louisiana’s doctrine of res judicata because it “existed” at the time of final

judgment in a previous case between the parties, in Adams v. Board of

Commissioners for Orleans Levee District, 966 So. 2d 660 (La. Ct. App. 2007).

But the district court erroneously construed Hugel’s cause of action in this case,

thereby imbuing the correctness of its res judicata analysis with doubt. On this

limited record, we cannot make a satisfactory determination whether Hugel’s

claims are in fact barred by res judicata or warrant dismissal on any other

ground. Because in Louisiana “any doubt concerning application of the principle

of res judicata must be resolved against its application,” Kelty v. Brumfield, 633

So. 2d 1210, 1215 (La. 1994), we VACATE the district court’s judgment and

REMAND for further proceedings.

I

In Adams, Hugel and other lessees sued the Levee District in state court

over the Levee District’s decision to impose higher rental terms.1 Hugel’s lease,

like many of the other Marina lessees’, was originally set to expire in 2006.2 In

1994 and 1996, the Levee District passed resolutions permitting the lessees to

further extend their lease agreements by 15 years, “under terms to be developed

by the Marina Committee.” Adams, 966 So. 2d at 664. The few lessees who

responded to the 1994 resolution received favorable lease terms.3 Hugel and the

remaining lessees responded to the 1996 resolution believing that they would

receive the same favorable terms. But the Levee District adopted higher rental

1

The defendant in Adams was the Board of Commissioners of the Levee District, which

managed the leaseholds until 2007, when the Louisiana legislature abolished the Board. For

simplicity, in this opinion we refer to the Board and Levee District collectively as the Levee

District.

2

Hugel has leased Marina property from the Levee District since 1984.

3

These lessees executed their lease options with an amendment that specified a fixed

rental amount. The Louisiana Fourth Circuit Court of Appeal held that this amendment was

valid in Fourroux v. Board of Commissioners for Orleans Levee District, 837 So. 2d 698 (La.

Ct. App. 2003). Hugel was not a plaintiff in Fourroux.

2

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terms for the lease agreements authorized by the 1996 resolution, and the

lessees’ suit in Adams followed.

The Levee District’s decision to impose higher rental terms resulted in

large part from an opinion issued in 2000 by the Louisiana Attorney General.

The Levee District’s existing lease agreements contained a reversion clause

specifying that a lessee owned any improvements, such as a boathouse, made to

her leased property during the term of her lease; but that ownership vested in

the Levee District when the agreement ended. Hugel, like many of his fellow

lessees, constructed a substantial boathouse on his leasehold, and his rental

term did not reflect the value of his boathouse. After offering to extend the

lessees’ agreements by another 15 years, the Levee District requested the

Attorney General’s opinion on whether it was required to increase the lessees’

rental terms to account for the leasehold improvements. The Attorney General

answered in the affirmative. Because extending the lease terms would prevent

the Levee District from taking ownership of the improvements, the Attorney

General advised that the Levee District was required to account for the value of

the improvements in its new rental terms. Otherwise, the Levee District’s

extension of the leases would be subject to challenge as a prohibited donation

under Article 7, Section 14(A) of the Louisiana Constitution.

The lessees in Adams raised multiple causes of actions against the Levee

District. They sought a declaratory judgment that they were entitled to the

favorable lease terms provided in 1994; challenged the Levee District’s rental

increase under the Equal Protection Clause; and alleged that the reversion

clause in the existing lease agreements effected an improper taking under the

state and federal constitutions. They also requested a declaratory judgment that

the Levee District’s attempts to base future rental amounts on the value of the

lessees’ improvements constituted an improper taking under the state and

federal constitutions.

3

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The Louisiana trial court entered judgment in favor of the Levee District,

and the Louisiana Fourth Circuit Court of Appeal affirmed. Adams, 966 So. 2d

at 671. Both courts concluded that the lease options offered by the Levee

District in its 1994 resolution were unenforceable for lack of a determinable

rental term, as they were subject to “terms to be developed by the Marina

Committee.” Neither court addressed Hugel’s takings claim with respect to the

higher rental terms. Adams became final when the Louisiana Supreme Court

denied the lessees’ application for writs in December 2007.

In July 2008, after unsuccessfully attempting to negotiate his lease terms,

Hugel entered into a new lease with the Levee District. One year later, he filed

the underlying action under § 1983, alleging that the higher rental terms in his

lease constituted an impermissible taking of his property without just

compensation, in violation of the Fifth and Fourteenth Amendments of the

United States Constitution, and Article I, Section 4 of the Louisiana

Constitution. His complaint specified that the July 2008 lease commenced the

actual “taking” of his property. Invoking Adams, the Levee District moved to

dismiss Hugel’s claims under Federal Rule of Civil Procedure 12(b)(6) as barred

by res judicata.4 The district court granted the motion, concluding in part that

Hugel’s cause of action in this case “existed” at the time of final judgment in

Adams.

II

A

“The res judicata effect of a prior judgment is a question of law that this

court reviews de novo.” Test Masters Educ. Servs., Inc. v. Singh, 428 F.3d 559,

4

The defendants also moved to dismiss the Flood Protection Authority as a defendant

because it allegedly “has no ownership, management, authority or control over the matters

asserted in” the complaint. The district court did not address this argument and neither do

we.

4

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571 (5th Cir. 2005). We also review de novo a district court’s dismissal under

Rule 12(b)(6).5

To determine whether Hugel’s claims are barred by res judicata, we apply

Louisiana’s res judicata doctrine. See Prod. Supply Co. v. Fry Steel Inc., 74 F.3d

76, 78 (5th Cir. 1996) (“A federal court asked to give res judicata effect to a state

court judgment must apply the res judicata principles of the law of the state

whose decision is set up as a bar to further litigation.” (internal quotation marks

omitted)); see also St. Paul Mercury Ins. Co. v. Williamson, 224 F.3d 425, 436

(5th Cir. 2000) (noting that to determine preclusive effect of state court judgment

in subsequent federal lawsuit, “a federal court must refer to the preclusion law

of the state in which judgment was rendered”).

The doctrine of res judicata in Louisiana is set forth in Louisiana Revised

Statute § 13:4231, which was amended in 1990 to provide in relevant part:

Except as otherwise provided by law, a valid and final

judgment is conclusive between the same parties, except on

appeal or other direct review, to the follow extent:

...

(2) If the judgment is in favor of the defendant, all causes of

action existing at the time of final judgment arising out of the

transaction or occurrence that is the subject matter of the

litigation are extinguished and the judgment bars a

subsequent action on those causes of action.

L A. R EV. S TAT. § 13:4231(2). Based on the above statutory language, the

Louisiana Supreme Court “has established the following five elements that must

5

We have noted that “generally a res judicata contention cannot be brought in a motion

to dismiss.” Norris v. Hearst Trust, 500 F.3d 454, 461 n.9 (citing Test Masters Educ. Servs.,

Inc., 428 F.3d at 570 n.2)). But see 5B Charles Alan Wright & Arthur R. Miller, FEDERAL

PRACTICE AND PROCEDURE § 1357 at 721, 728 (3d ed. 2004) (“[A]ffirmative defenses that have

been considered on a motion to dismiss under Rule 12(b)(6) include . . . the barring effect of

res judicata and related preclusion principles.”) (citing numerous decisions). Given our

disposition of this appeal, we need not decide the propriety of bringing a res judicata defense

in this manner.

5

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be satisfied for a finding that a second action is precluded by res judicata.”

Chevron U.S.A., Inc. v. State, 993 So. 2d 187, 194 (La. 2008) (emphasis added).

These elements are: “(1) the judgment is valid; (2) the judgment is final; (3) the

parties are the same; (4) the cause or causes of action asserted in the second suit

existed at the time of final judgment in the first litigation; and (5) the cause or

causes of action asserted in the second suit arose out of the transaction or

occurrence that was the subject matter of the first litigation.” Id. (quoting

Burguieres v. Pollingue, 843 So. 2d 1049, 1053 (La. 2003)).6 Only the fourth and

fifth element are disputed in this case.

The Louisiana Supreme Court has emphasized that “[t]he doctrine of res

judicata cannot be invoked unless all its essential elements are present . . . and

each necessary element must be established beyond all question. ” Kelty v.

Brumfield, 633 So. 2d 1210, 1215 (La. 1994). This is because “[t]he doctrine of

res judicata is stricti juris.” Id. Indeed, “any doubt concerning application of the

principle of res judicata must be resolved against its application.” Id.; see also

St. Paul Mercury Ins. Co., 224 F.3d at 437 (“When determining if res judicata

applies, Louisiana courts have narrowly construed the doctrine’s scope. . . . Any

doubt as to compliance with the requirements of res judicata is to be resolved in

favor of maintaining the second action.”).

B

In concluding that Hugel’s cause of action in this suit “existed” at the time

of final judgment in Adams—as required under the fourth element of Louisiana’s

res judicata doctrine—the district court apparently believed that the accuracy

of the Attorney General’s opinion was “central” to Hugel’s cause of action. The

6

Although the “chief inquiry” under the doctrine “is whether the second action asserts

a cause of action which arises out of the transaction or occurrence that was the subject matter

of the first action,” this “is not the only inquiry.” Burguieres, 843 So. 2d at 1053. Indeed, the

absence of just one of the five elements precludes a finding that the res judicata applies. Id.

6

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district court thus stated: “As to the fourth element . . . [Hugel] must prove that

the Attorney General Opinion in regards to the prohibited donation issue did not

exist at the time of judgment in Adams.” But this construction of Hugel’s cause

of action places undue weight on the Attorney General’s opinion; it also misses

the point. The cause of Hugel’s alleged taking is not the Attorney General’s

opinion; it is the Levee District’s actual imposition, beginning in July 2008, of

higher rental terms. While Hugel’s complaint with the Attorney General’s

opinion is certainly relevant to his takings claim, it is immaterial to whether a

taking has in fact occurred under the new lease terms. In other words, whether

Hugel’s cause of action—his takings claim—existed at the time of final judgment

in Adams does not at all depend on when the Attorney General’s opinion issued.7

Instead, to determine whether a cause of action previously existed, we

must consider when the cause of action arose or accrued. “A cause of action

which arose after the rendition of the final judgment could not have been

asserted earlier and would not be precluded by the judgment.” L A. R EV. S TAT.

§ 13:4231 cmt. e (1990); see also Smith Int’l, Inc. v. Egle Group, LLC, 490 F.3d

380, 385 (5th Cir. 2007) (“[I]f [party’s] causes of action did not accrue until after

the Louisiana court entered final judgment against it, then [party’s] causes of

action did not exist at the time of final judgment . . . .” (internal quotation marks

omitted)).

On this limited record, we do not find sufficient information to determine

whether Hugel’s takings claim “existed” at the time of final judgment in Adams;

or whether, as Hugel argues, the claim came to “exist” with the commencement

of Hugel’s July 2008 lease. Accordingly, we cannot conclude that this fourth

element—that Hugel’s cause of action existed at the time of final judgment in

7

Similarly, the district court erroneously concluded that the Louisiana Fourth Circuit

Court of Appeal had previously, in Adams and Fourroux, declared the inverse condemnation

issue “moot’; in neither case did the court address the claim Hugel brings in this action.

7

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Adams—was “established beyond all question” in the district court.8 Kelty, 633

So. 2d at 1215.

III

Because the district court’s determination that res judicata bars Hugel’s

claim is not supported by a clear, unequivocal indication in the record that

Hugel’s cause of action in this case existed at the time of final judgment in

Adams, we must vacate that determination. We remand for further

consideration of whether Hugel’s cause of action under the Takings Clause

“existed” at the time of final judgment in Adams, and for further proceedings.

VACATED and REMANDED.

8

We also conclude that the district court’s discussion of res judicata’s fifth

element—whether the cause of action asserted in the second suit arose out of the transaction

or occurrence that was the subject matter of the first—being incomplete, warrants further

analysis on remand.

8