Sophisticated plaintiffs beware. In Bayou Fleet, Inc. v. Bollinger Shipyards, Inc., et al., the Louisiana Fourth Circuit Court of Appeal concluded that contra non valentem, a judicially created exception to prescription, did not apply to prevent the running of prescription on a claim for wrongful conversion when the plaintiff company, the owner of a destroyed crane boom, was run by sophisticated businessmen who failed to check up on a more-than-a-million dollar asset more than once a year. In doing so, the Fourth Circuit affirmed the judgment of the district court dismissing the conversion claim of the company with prejudice.
Following in the wake of Hurricane Katrina, a crane boom stored at a shipyard leased by Bollinger Shipyards, Inc. and Bollinger Gulf Repair, L.L.C. (collectively, “Bollinger”) and owned by plaintiff, Bayou Fleet, Inc., was destroyed by contractors hired by Bollinger. Bayou Fleet filed suit in Louisiana state court against Bollinger alleging wrongful conversion of the boom. However, because suit was not filed until March of 2009, and the petition alleged that the boom had been destroyed in November 2007, Bollinger filed an exception of prescription, arguing that the one year prescriptive period for the wrongful conversion claim had passed and plaintiff’s claim was now time-barred on the face of the petition. The trial court initially denied the exception, but later, following a bench trial, entered a final judgment against Bayou Fleet, dismissing its conversion claim with prejudice, finding that the claim had prescribed as Bayou Fleet should have known that the boom had been destroyed before the one-year prescriptive period had run.
In an attempt to obtain a reversal of the district court’s ruling on prescription, on appeal to the Fourth Circuit Bayou Fleet argued, among other things, that the “exceptional remedy” of contra non valentem, specifically the “discovery rule,” applied to prevent the running of prescription, arguing it did not learn of the destruction of the boom until 2008 – well within the year prior to filing suit. In taking up this argument, the Fourth Circuit first briefly summarized the doctrine of contra non valentem, which prevents the running of prescription, noting there are four categories under this doctrine, but finding that at issue here was the fourth category “where the cause of action is not known or reasonably knowable by the plaintiff, even though this ignorance is not induced by defendant.” As the court noted, actual knowledge is not necessary for prescription to start running, as long as there is constructive knowledge – the “acquisition of sufficient information, which, if pursued, will lead to the true condition of things.” However, paramount in determining constructive knowledge is “the reasonableness of the plaintiff’s action or inaction in light of his education, intelligence, and the nature of the defendant’s conduct.” Ignorance due to a plaintiff’s own willfulness or neglect does not prevent prescription from running.
Was Bayou Fleet’s conduct “reasonable”? The Fourth Circuit didn’t think so. The court first analyzed the “education and intelligence” of the plaintiff’s two owners. Finding that both owners: (1) had college educations and beyond, and (2) were “sophisticated businessmen with nearly 40 years of experience in managing and owning marine businesses”, the appellate court found these facts weighed against application of the exceptional remedy of contra non. The appellate court also found that Bayou Fleet was “unreasonable” in the following ways: (1) by visiting the boom at the shipyard only once a year, especially considering the boom’s valuation at over $1 million and the short distance from the company’s location to the shipyard; and (2) by failing to return phone calls from a Bollinger representative prior to the scrapping of the boom. Moreover, articles published in the local newspaper on the shipyard’s closure as well as testimony noting this fact was common knowledge in the marine industry also weighed against finding that contra non valentem applied, the court stated.
The Fourth Circuit thus concluded that “contra non” was not applicable, noting the lack of the “extreme circumstances” requisite to application of the doctrine, and further finding that plaintiff’s “ignorance of the destruction of the boom was attributable to its own lack of diligence or neglect.” The appellate court therefore affirmed the district court’s finding that the conversion claim was prescribed.
As noted at the outset, the Bayou Fleet decision presents a cautionary tale for plaintiffs and fleshes out the judicially created doctrine of contra non valentem noting particular facts which may support a finding that the exception does not apply and constructive knowledge is present – in particular, sophistication of the plaintiff, newspaper articles on the topic, or common industry knowledge.
A copy of the Fourth Circuit’s decision can be found here. For more information regarding the decision, please contact Erin Bambrick at ebambrick@liskow.com or Rob McNeal at rbmcneal@liskow.com.
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