Opinion
Civil Action No. 03-2981, Section "K"(3).
June 29, 2005
ORDER AND REASONS
Before the Court is Defendants' Joint Motion for Summary Judgment (Doc. No. 122) filed by the Parish of Jefferson ("Jefferson Parish") and Sheriff Harry Lee ("Lee"). Defendants seek judgment on the issue of damages. The background to this case was set forth extensively in its Order and Reasons of June 18, 2004 (Rec. Doc. No. 59) and is reiterated herein. After having entertained and ruled on a plethora of motions, the final issue before the Court is the issue of damages due by Jefferson Parish and Sheriff Harry Lee on the First Amendment claim against Jefferson Parish and Sheriff Lee, in his official capacity, and the Equal Protection claim against Sheriff Lee, in his official capacity, to Toga Society d/b/a Krewe of Aladdin ("Toga"). The defendants have conceded that in light of the rulings of the Court, Toga is entitled to $3,485.00 in security costs paid in 2002 for its 2003 parade. However, they have filed the instant motion seeking summary judgment on the issue of the additional damages that Toga seeks. Having reviewed the pleadings, memoranda, exhibits, deposition testimony and the argument of counsel, the Court finds merit in the motion.
Background and Defendants' Contentions
Toga was formed in 1999 and apparently experienced increased membership from the first year it paraded in 2000 with 310 members until, it contends, Sheriff Lee threatened the organization with an exorbitant security fee nine days prior to its parade in 2003. Because of the threat that it would not be able to parade, Toga maintains that it experienced a huge drop in membership, and it is entitled to damages that are extrapolated from that alleged decline. Toga provides the following break-down of its Past and `Projected" Membership. It must be noted that after its highest number of members paraded in 2003, the organization determined that it would aim for membership of 800, because of the physical difficulties it had encountered with the larger number of members.
Parade Year Membership Actual Members Projection
2000 200 310 2001 300 612 2002 1,000 1149 2003 1,000 1015 2004 800 432 2005 800 360 2006 800 414
Based on the difference between the actual number of members and the "projected" number of members, Toga seeks damages for revenue lost from membership, throws, Court participation, Ball participation, fund-raiser participation, bingo, float costs, and the sale of a building. It maintains that it is entitled to total damages in the amount of $436,057.24 for its losses for three "parade" years — those being 2003-04, 2004-05, and 2005-06. (Corrected Supplemental Analysis of Damage to the Krewe of Aladdin Other Than Already Awarded by the Court Updated to Reflect 2005 Actual Figures, Opposition to Joint Motion for Summary Judgment, Exhibit 3) ("Damage Analysis").
Defendants claim that these damages cannot be proved by plaintiff because no competent evidence has been adduced. Furthermore, using the tax returns filed in for the years in question, even when membership was at its all time high, the organization reported losses to the Internal Revenue Service. Plaintiff has not produced any properly kept or prepared records of either its profits and losses and has not maintained proper records that would constitute admissible evidence to support its claim that membership declined in the numbers alleged because of the threat of the security fee and its inability to meet these costs. Defendants have also argued that the specific elements of damages sought are not supported by the evidence.
Standard for Motion for Summary Judgment
Rule 56(c) of the Federal Rules of Civil Procedure provides that summary judgment should be granted "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c). The party moving for summary judgment bears the initial responsibility of informing the district court of the basis for its motion, and identifying those portions of the record which it believes demonstrate the absence of a genuine issue of material fact."Stults v. Conoco, 76 F.3d 651, 656, (5th Cir. 1996), (citingSkotak v. Tenneco Resins. Inc., 953 F.2d 909, 912-13 (5th Cir. 1992) (quoting Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). When the moving party has carried its burden under Rule 56(c), its opponent must do more than simply show that there is some metaphysical doubt as to the material facts. The nonmoving party must come forward with "specific facts showing that there is a genuine issue for trial." Matsushita Elec. Industrial Co. v. Zenith Radio Corp., 475 U.S. 574, 588 (1986) (emphasis supplied); Tubacex Inc. v. M/V Risan, 45 F.3d 951, 954 (5th Cir. 1995).
Thus, where the record taken as a whole could not lead a rational trier of fact to find for the nonmoving party, there is no "genuine issue for trial." Matsushita Elec. Industrial Co. v. Zenith Radio Corp., 475 U.S. 574, 588 (1986). Finally, the court notes that the substantive law determines materiality of facts and only "facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986).
The Court now turns to the merits of the arguments with these standards in mind.
Standard for Proof of Damages in the Context of a Section 1983 Suit
In American Marine Rail, NJ, L.L.C. v. City of Bayonne, 289 F. Supp. 2nd 569 (D.N.J. 2003) where applying 42 U.S.C. § 1983, the court stated:
On the issue of future lost profits under its section 1983 claims, plaintiff bears the burden of proving first that a particular injury it sustained — its future loss of profits — was caused by defendants' allegedly unconstitutional conduct. See generally Carey v. Piphus, 435 U.S. 247, 257-58, 98 S. Ct. 1042, 55 L.Ed.2d 252 (1978) (noting that although 42 U.S.C. § 1983 does not expressly mention causation as an element, damages under the statute are compensable only if caused by deprivation of a constitutional right.) Second, if plaintiff establishes that this particular injury was caused by defendants' conduct, then the "level of damages is ordinarily determine from the common law of torts." Blanche Road Corp. v. Bensalem Township, 57 F.3d 253, 265 (3rd Cir. 1995) ( abrogated on other grounds by United Artists Theatre Circuit, Inc. v. Township of Warrington, 316 F.23d 392 (3rd Cir. 2003) (internal quotations omitted).Id. at 588 (emphasis added). Thus, Toga must establish that the constitutional violations found actually caused the damages — lost profits — alleged. Then, the level of damages must be determined based on the common law of torts.
The standard to be used in the federal context to determine the level of damages is that lost profits must proved with reasonable certainty. Darren B. Swain, Inc. v. ATT Corp., 1997 WL 222914, pp. 3-4 (N.D.Tex. 1997) (emphasis added) citing Delta Steamship Lines, Inc. v. Avondale Shipyards Inc., 747 F.2d 995, 1000 (5th Cir. 1983) (holding that lost profits must be proved to a reasonable certainty in the admiralty context); Harrison Higgins, Inc. v. ATT Communications, Inc., 697 F. Supp. 220, 224 (E.D. Va. 1988) (holding that lost profits must be proved to a reasonable certainty where they formed a component of damages for an alleged violation of the FCA).
The Swain court rejected plaintiffs claims because they failed to adduce any evidence that would remove the question of lost profits from the realm of sheer speculation. In that case, plaintiffs relied on a report prepared by the national Economic Research Associate ("NERA"). The court noted that the report was not completed, was only preliminary and the amount of damages sought were only an "upper bound" on damages. The NERA witness testified that the report did not take into account DBS's actual operating history, and that he had "little indication of what [DBS's] profit stream is and what it will be. Id. at *3. The Swain court then examined the operating history of the enterprise.
It stated:
The court recognizes the absence of a profit history is a factor to be considered but is not dispositive on the issue of the recoverability of lost profits. See Hiller, 59 F.3d at 1521. In the absence of a history of profitability, however, a plaintiff must come forward with other evidence that establishes lost profits with reasonable certainty. Id. at 1519. Plaintiffs have failed to do so in the instant case. Plaintiffs' history of losses, combined with the absence of evidence indicating that DBS had the ability to become profitable, leads to the inevitable conclusion that lost profits have not been established with reasonable certainty. A reasonable trier of fact could not find that plaintiffs sustained any recoverable damages.Id. (emphasis added).
Under Louisiana law of torts, a claim for lost profits must likewise be proved with reasonable certainty by plaintiff. Borden, Inc. v. Howard Trucking Co., Inc., 454 So.2d 1081, 1092 (La. 1983). Furthermore a claim for lost profits based solely on the testimony of the injured party and unsubstantiated by other evidence does not constitute reasonable certainty. New Orleans Riverwalk Associates v. Robert P. Guastella Equities, Inc., 664 So.2d 151, (La.App. 4th Cir. 1995), writ granted, 671 So.2d 327 (La. 1996) citing Louisiana Joint Underwriters of Audubon Ins. Co. v. Gant, 429 So.2d 1153, 1157 (La.App. 4th Cir.), writ denied, 443 So.2d 589 (La. 1983).
Failure to Provide Reliable Evidence
Plaintiff contends that it sustained damage because it lost membership and with a reduction in membership it lost profits that it would otherwise have made. However, plaintiff has failed to demonstrate with reliable evidence that membership translates into profits, thus it has failed to prove with reasonable certainty the first prong of its damage claim — causation. Indeed, the rudimentary profit and loss statements that are attached to the deposition testimony of Debbi Ducote who prepared the tax returns for plaintiff provided the following "back-up" information:
Year Income Expenses Membership Loss Increase 1999 $134,051.60 $133,600.22 2000 $234,636.05 $239,388.66 110 persons $ 4,752.61 2001 $371,150 $411,405 312 persons $40,255.00
(Deposition of Debbie Ducote, Exh. 8, 9 and 10). No other back-up materials were provided in this deposition for the subsequent years. Thus, with each an increase in membership, Toga experienced greater losses. More direct evidence is in the actual tax returns which show the following losses for each year preceding the constitutional violation:
Year Losses 2000 $2,818 2001 $39,259 2002 $31,170 2003 $2,124
(Doc. 158, Exh. E). In addition, the Court finds that a total lack of competency in the books and records of the organization. Nothing has been presented to the Court that would meet the standard required under general accounting principles. Apparently, all records from 1999 to 2003 were destroyed, and no specific portions of the minutes from the Minutes from the Board/Officer Meetings ("Board Minutes") have been cited.
Nonetheless, the Court has reviewed the Board Minutes. The board apparently did not meet on a regular schedule. Not one of the reports included a separate financial report or balance sheet that would provide a comprehensive discussion concerning the financial status of Toga or any discussion that the action of Lee had any effect on the profitability of the organization. The first discussion of damages occurred at the July 12, 2004 meeting and was raised only in the context of the subject suit.
These minutes were attached as an in globo exhibit to Opposition to Motion for Summary Judgment (Exhibit 9).
The minutes were for the following dates: March 1, 1999, May 11, 2001, September 13, 2001, October 6, 2001, November 2, 2001, November 30, 2001, February 11, 2003, March 3, 2002, February 11, 2003, May 3, 2003, March 1, 2004, July 12, 2004, January 20, 2005, February 10, 2005, March 16, 2005 and a final report which because is without date by virtue of the copy being made with a note over the date.
In addition, plaintiff has not presented to the Court any bank records to back up any of the figures alleged. At oral argument, counsel for plaintiff contended that defendants had these records available and that they could have ordered them from the banks involved. Plaintiff has failed and continues to fail to recognize that it must present the positive proof of its claim. There is no assumption to be rebutted; Toga must adduce evidence to prove with reasonable certainty its claim of causation of lost profits, and simply put, it has not. The argument that it has mounted a parade each year is simply not enough.
Thus, it is clear to the Court, that as a general matter, plaintiff has failed to prove a causal connection between the constitutional violation and the damages claimed. A cursory review of the individual items claimed further supports this finding.
Failure of Proof as to Individual Claim Calculations
To begin, the Damage Analysis itself is without any cogent and admissible supporting documents. This document was prepared by Errol Heindel, the captain of the Krewe of Aladdin, and plaintiff's counsel. As noted by defendants' experts, this "analysis" is at best a self-serving affidavit attested to by the captain of this organization, who apparently has run this organization as his own fiefdom. (See Minutes of Board Meeting, May 2003). There are no back-up documents or any independent proof of the sums alleged.
Furthermore, all of the specific damage calculations are multiplied by the difference between the "projected" number of members of 800 and the actual number of members of Toga each year. There is absolutely no proof that 800 members is a realistic "projection" supported by any independent data. Indeed, in its own minutes of February 10, 2005, after the security costs had been eliminated from the offending ordinance in April of 2004, Toga's membership aim was for 600 members.
In addition, it appears that Toga has not been forthcoming in discovery or in its disclosures. Affidavits from ex-members were authorized to be obtained at the July 17, 2004 meeting. Affidavits were presented in Toga's opposition as Exhibits 11 and 12. Only 11 ex-members and 26 prospective members signed these documents all of which were executed in July of 2004. Some aver that they left because of a dues increase; some aver they left because of Sheriff Lee's threats about not being able to parade or for fear of retaliation by him. The affidavits are confusing in time frame and are not sufficient to support Toga's massive claims based on numbers far exceeding the number of affidavits. Also, these affidavits were never made available to counsel during the course of the litigation in response to disclosure requirements, interrogatories and production requests. As such, the Court is chary to rely on documents that have not been produced and have not been properly traversed through plaintiff's own intransigence and failure to abide by the rules of court.
Loss of Revenue from Dues
As to the Loss in Dues Income, the calculation is not based in on a proper accounting of the actual costs which were to be covered by the dues themselves. Furthermore, it is clear from the minutes of the Board meetings, that there was never envisioned a clear "profit" margin based on dues. There is no comparison made to other organizations or comparable parades concerning membership levels, dues, fees, or costs. Indeed, from the income tax statements, Bingo revenue was the major source of funds for this organization's operation until that source began to dwindle. (See Board Minutes of November 30, 2001.) These calculations cannot be said to meet the standard of proof of reasonable certainty.
Throw Revenue
The "evidence" presented with respect to throw revenue is unconvincing. There is no competent evidence, and there is no expert testimony or comparison as to the amount that a krewe normally makes off of selling throws.
In addition, Clarence F. Favret, III attested that he filed suit on behalf of J. Clark Promotions, Inc. against Toga to recover delinquent debts in the amount of $33,423.22. On June 18, 2003, a Writ of Fifa/Garnishment was issued in the amount of $45,737.12 against Toga's account with Mississippi River Bank. The sum of $11,448.92 was paid and the remainder is still due and owing. Toga established a new corporation, Krewe of Aladdin, Inc., to avoid the garnishment and has funneled dues and all moneys through this new corporation to avoid this garnishment.
Finally, the krewe decided to only sell throws that were not readily available at local shops for its 2003 parade. (Board Minutes of February 2, 2002). Again, there is no specific contemporaneous records of the "profits" made from this endeavor.
Float Contract Obligations
Toga opines that it owes money to McKinley J. Cantrell Son, Inc. for floats that it has not used because of a reduction in its membership. Oddly, again, there is no mention of this money being due and owing in the Minutes of the Board meetings. No contemporaneous bill for the years alleged has been presented. Furthermore, the floats that are used in this parade are not made exclusively for the Aladdin. At best, it appears that this company has now decided to get on what plaintiff perceives as the gravy train of this litigation to recover what it is allegedly "losing" in rent because the organization is not using all of the floats that it initially thought it would in its 2001 contract. The first "invoice" is dated July 13, 2004, and includes amounts due for 2006.
Loss of Court Membership and Effect on Revenue and Profit
There is no specific evidence concerning the "profit" that was made from these positions. It appears that at best money generated by "royalty" was used to offset the cost of the float that the "court member" would occupy, and in some instances the fee was insufficient to cover the cost. (See Minutes of Board Meeting, April 1, 1999).
Losses Involving the Aladdin Ball
Kendell Hyatt (Exh. D, p. 71, lines 20-25) and the treasurer Heidi Thiel (Exh. J, Dep. at 75-76) testified that the ball was always a "break-even sort of thing" and that Bingo was the only thing that ever brought in money for us. (Exh. J, Thiel at 76-77). Indeed, in the Board Minutes, there is discussion consistently as to whether the Ball costs should be included in the dues or if there should be an additional charge. There is simply no competent proof that this activity was a "profit center" for Toga.
Losses from Fund-Raisers
Likewise, the fund-raisers were marginally successful. The "losses" it seeks again is a the amount it would have been raised had the organization had "full" projected membership and each member had sold the tickets and participated in each event. The proof provided again does not amount to that which gives this Court reasonable certainty that these moneys would have been collected.
Bingo
It is clear from the Board Minutes that Bingo as a profit making proposition had diminished by November 30, 2001. Indeed, in the minutes of the February 2, 2002 meeting, "the crew expressed the desire to move out of the Gretna Hall to Elmwood Room in Harahan because Errol was now the hall manager." In a subsequent entry, it is noted that "sabotage" was discussed with respect to Bingo. Indeed, Heindel testified that the organization decided to get out of the bingo business because bingo started "to go down" around 1999 or 2000. (Dep. of Heindel at 113 13-22). Furthermore, unsubstantiated allegations based on hearsay of an alleged conversation between Mr. Carmadelle, the Manager os Azalea Bingo Hall in Marrero, and Sheriff Lee and alleged fear of retribution with respect to Bingo does not demonstrate a sufficient nexus to the alleged constitutional violation for which plaintiff seeks damages. In addition, it is interesting to note that in the last Board Minutes provided (undated) it states, "Bingo-license is in progress. We paid the outstanding fine and faxed proof that Jimmy Clark cannot seize our game." Thus, apparently, the outstanding judgment for the throws may have been the cause of the shut-down of Bingo. Certainly, there is not proof to a reasonable certainty that these losses were caused by the constitutional violation.
The Court assumes this refers to Errol Heindel, the captain.
KOA, Inc.
In what the Court finds the most intriguing claim, Toga seeks to recoup the loss that it allegedly incurred for the purchase of a building in September 2001 and its subsequent sale at a loss in 2004. Apparently, a Subchapter S corporation named KOA, Inc. of which the Board members who signed the note for the purchase were the stockholders was formed to buy this property. There is no mention in the Board meetings of KOA's formation or of it being affiliated with Toga. Although there is the mention of the impending purchase on September 13, 2001 Board Minutes, and there is one mention of the desirability to sell the building, even for a small loss, because of the expenses, there is no mention or explanation of the financial arrangement or corporate resolution authorizing the purchase in these documents. Toga's expenses for rent jumped from a negligible amount prior to the purchase to $27,293 in its 2001 tax return. In the meantime the Subchapter S stockholders were allowed to deduct depreciation on the building and took a deduction for the losses when the building was sold.
None of the details of these transactions were presented to the Court in a form that would constitute admissible evidence. There is no proof that Toga is the proper party to sue for these "losses" and furthermore, there is no actual proof other than a footnote to an Act of Sale. There are no accounting records to show the rents obtained, the costs incurred.
Conclusion
The Court finds that the only damages to which Toga is entitled to $3,485.00 in security costs paid in 2002 for its 2003 parade. The rest of the claims are specious at best and without any support in admissible evidence. The lynchpin of Toga's case is that declining membership due to defendants' actions caused them a loss of profits. Even accepting plaintiff's gossamer thin proof devoid of any substantial records, it has failed to prove causation much less loss of profits. Moreover, in the year that Toga had its largest membership (in 2001-1149 members), it lost $31,170. Furthermore, there is no evidence that establishes lost profits with reasonable certainty. In fact, it appears the only reasonable certainty is that number of members does not correlate to more profits for Toga. Accordingly, IT IS ORDERED that Defendants' Joint Motion for Summary Judgment (Doc. No. 122) is GRANTED and judgment shall be entered in favor of Toga Society, Inc. d/b/a the Krewe of Aladdin and against the Parish of Jefferson and Sheriff Harry Lee in his official capacity in the amount of $3,485.00 plus legal interest from the date of judgment pursuant to federal law and attorneys' fees and costs.
IT IS FURTHER ORDERED that the proper amount of costs to be awarded shall be determined by the Clerk of Court pursuant to L.R. 54. The proper amount of attorney fees to be awarded shall be determined by the magistrate judge pursuant to 28 U.S.C. § 636(b)(1)(B).