assignment of rights louisiana

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As the name suggests, a consent-to-assignment clause is one way of preventing an obligor from subsequently transferring its contractual rights and obligations to a third party assignee without the prior consent of the original obligee. The original intent behind including these clauses in contracts, such as leases, was to ensure that the assignee would be bound to the same terms and conditions as the original obligee or lessee. However, it has become more common for lessors to rely on such consent-to-assignment clauses as a mechanism to require lessees and/or their assigns to agree to more onerous terms and conditions than otherwise contemplated, such as requiring the lessee to remain liable to the lessor should the assignee default or requiring that the assignor compensate the lessor for consenting to the assignment. The express language of the consent-to-assignment clause, as well as the venue in which the issue is litigated, typically will determine the extent to which the lessor can lawfully condition its consent to a proposed assignment.

Consent-to-assignment clauses typically are categorized as either “qualified” or “unqualified.” Qualified consent-to-assignment clauses contain a caveat limiting the lessor’s right to withhold its consent, such as: “and such consent will not be unreasonably withheld.” The phrase “unreasonably withheld” has been interpreted to mean that “there are no sufficient grounds for a reasonably prudent business person to deny consent.”  Louisiana courts have found that “sufficient grounds” existed for the lessor to withhold its consent where the proposed sublessee or assignee is financially inferior compared to the present lessee; where the sublessee’s proposed use does not fall within the permitted uses in the lease or would inhibit the lessor’s ability to lease other spaces in the leased property; and where the sublease or assignment would cause the lessor to lose a lessee on the same property. However, a lessor’s refusal to consent to a sublease or assignment likely will be found unreasonable if the reasons for the refusal are pretextual, or if the proposed sublessee is identical to the lessee in financial status and proposed use of the property.

Alternatively, unqualified consent-to-assignment clauses (also referred to as “silent” consent-to-assignment clauses) do not expressly prohibit the lessor from withholding consent for unjustifiable reasons or for no reason at all. When litigating such silent consent-to-assignment clauses, lessees and potential sublessees have argued that courts should inject a reasonableness standard or that an implied standard of reasonableness exists based upon general contract principles. The majority of courts, including those in Texas, adhere to the traditional view that silent consent provisions allow a lessor arbitrarily to refuse to approve a proposed assignment or sublease, no matter how suitable the assignee or sublessee appears to be and no matter how unreasonable the lessor’s objection. These jurisdictions typically have found that there is no implied covenant of good faith requiring a lessor to be “reasonable” in refusing to consent. Other courts following the traditional view may simply refuse to rewrite what they consider to be unambiguous contractual language, especially in cases where there is evidence that the silent consent was included as a result of negotiation.

Louisiana, on the other hand, was the first jurisdiction in the nation to adopt the modern view of implying a standard of “reasonableness” when interpreting silent consent-to-assignment clauses. Louisiana courts historically implied an abuse of rights standard to restrain the lessor’s arbitrary refusal to consent to an assignment. In their view, allowing a lessor to arbitrarily refuse consent to an assignment or sublease virtually nullifies any right to assign or sublease. However, in 1987 the Louisiana Supreme Court limited the applicability of the abuse of rights doctrine, articulating that it applies only when one of the following conditions is met:

(1) if the predominant motive was to cause harm; (2) if there was no serious or legitimate motive for refusing; (3) if the exercise of the right to refuse is against moral rules, good faith, or elementary fairness; (4) if the right to refuse is exercised for a purpose other than that for which it is granted.

See Truschinger v. Pak , 513 So.2d 1151, 1154 (La.1987).

In Truschinger , the lessor conditionally consented to a proposed sublease in exchange for a cash payment of $40,000.00. The court held that because the lessor’s predominate motive was economic, serious, and legitimate, and was not a wish to harm, the lessor’s refusal was not an abuse of rights. It is questionable whether the historical authority for implying a standard of reasonableness has survived in the wake of Truschinger , considering that the court appeared tacitly to approve of lessors withholding or conditioning consent based on purely economic motives.

Even so, it is important to note that Truschinger and the cases cited therein relied upon La. Civ. Code. art. 2725 (1870) and the French interpretations of its ancillary provision in Code Napoléon as support for construing silent consent-to-assignment clauses against lessees. However, in 2004 La. Civ. Code. art. 2725 (1870) was revised and renumbered as La. Civ. Code art. 2713 and now expressly provides that a “provision that prohibits subleasing, assigning, or encumbering is to be strictly construed against the lessor .” The 2004 Revision Comment explains:

[This] sentence restates the principle of the second paragraph of Civil Code Article 2725 (1870) properly understood . . . . In derogation of general principles of interpretation, some cases have erroneously construed such interdiction against the lessee . The third sentence of Civil Code Article 2713 (Rev. 2004) corrects this error.

Although Article 2713 has been in effect for more than twelve years, no court has applied this article in the context of interpreting a silent consent-to-assignment clause.  Consequently, while Louisiana courts traditionally have been less favorable toward lessors when interpreting such clauses, a lessor’s conditioned consent or refusal to consent may nonetheless be lawful, absent a showing that such refusal equates to an abuse of rights as set forth in Truschinger .

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• assignments basic law

Assignments: The Basic Law

The assignment of a right or obligation is a common contractual event under the law and the right to assign (or prohibition against assignments) is found in the majority of agreements, leases and business structural documents created in the United States.

As with many terms commonly used, people are familiar with the term but often are not aware or fully aware of what the terms entail. The concept of assignment of rights and obligations is one of those simple concepts with wide ranging ramifications in the contractual and business context and the law imposes severe restrictions on the validity and effect of assignment in many instances. Clear contractual provisions concerning assignments and rights should be in every document and structure created and this article will outline why such drafting is essential for the creation of appropriate and effective contracts and structures.

The reader should first read the article on Limited Liability Entities in the United States and Contracts since the information in those articles will be assumed in this article.

Basic Definitions and Concepts:

An assignment is the transfer of rights held by one party called the “assignor” to another party called the “assignee.” The legal nature of the assignment and the contractual terms of the agreement between the parties determines some additional rights and liabilities that accompany the assignment. The assignment of rights under a contract usually completely transfers the rights to the assignee to receive the benefits accruing under the contract. Ordinarily, the term assignment is limited to the transfer of rights that are intangible, like contractual rights and rights connected with property. Merchants Service Co. v. Small Claims Court , 35 Cal. 2d 109, 113-114 (Cal. 1950).

An assignment will generally be permitted under the law unless there is an express prohibition against assignment in the underlying contract or lease. Where assignments are permitted, the assignor need not consult the other party to the contract but may merely assign the rights at that time. However, an assignment cannot have any adverse effect on the duties of the other party to the contract, nor can it diminish the chance of the other party receiving complete performance. The assignor normally remains liable unless there is an agreement to the contrary by the other party to the contract.

The effect of a valid assignment is to remove privity between the assignor and the obligor and create privity between the obligor and the assignee. Privity is usually defined as a direct and immediate contractual relationship. See Merchants case above.

Further, for the assignment to be effective in most jurisdictions, it must occur in the present. One does not normally assign a future right; the assignment vests immediate rights and obligations.

No specific language is required to create an assignment so long as the assignor makes clear his/her intent to assign identified contractual rights to the assignee. Since expensive litigation can erupt from ambiguous or vague language, obtaining the correct verbiage is vital. An agreement must manifest the intent to transfer rights and can either be oral or in writing and the rights assigned must be certain.

Note that an assignment of an interest is the transfer of some identifiable property, claim, or right from the assignor to the assignee. The assignment operates to transfer to the assignee all of the rights, title, or interest of the assignor in the thing assigned. A transfer of all rights, title, and interests conveys everything that the assignor owned in the thing assigned and the assignee stands in the shoes of the assignor. Knott v. McDonald’s Corp ., 985 F. Supp. 1222 (N.D. Cal. 1997)

The parties must intend to effectuate an assignment at the time of the transfer, although no particular language or procedure is necessary. As long ago as the case of National Reserve Co. v. Metropolitan Trust Co ., 17 Cal. 2d 827 (Cal. 1941), the court held that in determining what rights or interests pass under an assignment, the intention of the parties as manifested in the instrument is controlling.

The intent of the parties to an assignment is a question of fact to be derived not only from the instrument executed by the parties but also from the surrounding circumstances. When there is no writing to evidence the intention to transfer some identifiable property, claim, or right, it is necessary to scrutinize the surrounding circumstances and parties’ acts to ascertain their intentions. Strosberg v. Brauvin Realty Servs., 295 Ill. App. 3d 17 (Ill. App. Ct. 1st Dist. 1998)

The general rule applicable to assignments of choses in action is that an assignment, unless there is a contract to the contrary, carries with it all securities held by the assignor as collateral to the claim and all rights incidental thereto and vests in the assignee the equitable title to such collateral securities and incidental rights. An unqualified assignment of a contract or chose in action, however, with no indication of the intent of the parties, vests in the assignee the assigned contract or chose and all rights and remedies incidental thereto.

More examples: In Strosberg v. Brauvin Realty Servs ., 295 Ill. App. 3d 17 (Ill. App. Ct. 1st Dist. 1998), the court held that the assignee of a party to a subordination agreement is entitled to the benefits and is subject to the burdens of the agreement. In Florida E. C. R. Co. v. Eno , 99 Fla. 887 (Fla. 1930), the court held that the mere assignment of all sums due in and of itself creates no different or other liability of the owner to the assignee than that which existed from the owner to the assignor.

And note that even though an assignment vests in the assignee all rights, remedies, and contingent benefits which are incidental to the thing assigned, those which are personal to the assignor and for his sole benefit are not assigned. Rasp v. Hidden Valley Lake, Inc ., 519 N.E.2d 153, 158 (Ind. Ct. App. 1988). Thus, if the underlying agreement provides that a service can only be provided to X, X cannot assign that right to Y.

Novation Compared to Assignment:

Although the difference between a novation and an assignment may appear narrow, it is an essential one. “Novation is a act whereby one party transfers all its obligations and benefits under a contract to a third party.” In a novation, a third party successfully substitutes the original party as a party to the contract. “When a contract is novated, the other contracting party must be left in the same position he was in prior to the novation being made.”

A sublease is the transfer when a tenant retains some right of reentry onto the leased premises. However, if the tenant transfers the entire leasehold estate, retaining no right of reentry or other reversionary interest, then the transfer is an assignment. The assignor is normally also removed from liability to the landlord only if the landlord consents or allowed that right in the lease. In a sublease, the original tenant is not released from the obligations of the original lease.

Equitable Assignments:

An equitable assignment is one in which one has a future interest and is not valid at law but valid in a court of equity. In National Bank of Republic v. United Sec. Life Ins. & Trust Co. , 17 App. D.C. 112 (D.C. Cir. 1900), the court held that to constitute an equitable assignment of a chose in action, the following has to occur generally: anything said written or done, in pursuance of an agreement and for valuable consideration, or in consideration of an antecedent debt, to place a chose in action or fund out of the control of the owner, and appropriate it to or in favor of another person, amounts to an equitable assignment. Thus, an agreement, between a debtor and a creditor, that the debt shall be paid out of a specific fund going to the debtor may operate as an equitable assignment.

In Egyptian Navigation Co. v. Baker Invs. Corp. , 2008 U.S. Dist. LEXIS 30804 (S.D.N.Y. Apr. 14, 2008), the court stated that an equitable assignment occurs under English law when an assignor, with an intent to transfer his/her right to a chose in action, informs the assignee about the right so transferred.

An executory agreement or a declaration of trust are also equitable assignments if unenforceable as assignments by a court of law but enforceable by a court of equity exercising sound discretion according to the circumstances of the case. Since California combines courts of equity and courts of law, the same court would hear arguments as to whether an equitable assignment had occurred. Quite often, such relief is granted to avoid fraud or unjust enrichment.

Note that obtaining an assignment through fraudulent means invalidates the assignment. Fraud destroys the validity of everything into which it enters. It vitiates the most solemn contracts, documents, and even judgments. Walker v. Rich , 79 Cal. App. 139 (Cal. App. 1926). If an assignment is made with the fraudulent intent to delay, hinder, and defraud creditors, then it is void as fraudulent in fact. See our article on Transfers to Defraud Creditors .

But note that the motives that prompted an assignor to make the transfer will be considered as immaterial and will constitute no defense to an action by the assignee, if an assignment is considered as valid in all other respects.

Enforceability of Assignments:

Whether a right under a contract is capable of being transferred is determined by the law of the place where the contract was entered into. The validity and effect of an assignment is determined by the law of the place of assignment. The validity of an assignment of a contractual right is governed by the law of the state with the most significant relationship to the assignment and the parties.

In some jurisdictions, the traditional conflict of laws rules governing assignments has been rejected and the law of the place having the most significant contacts with the assignment applies. In Downs v. American Mut. Liability Ins. Co ., 14 N.Y.2d 266 (N.Y. 1964), a wife and her husband separated and the wife obtained a judgment of separation from the husband in New York. The judgment required the husband to pay a certain yearly sum to the wife. The husband assigned 50 percent of his future salary, wages, and earnings to the wife. The agreement authorized the employer to make such payments to the wife.

After the husband moved from New York, the wife learned that he was employed by an employer in Massachusetts. She sent the proper notice and demanded payment under the agreement. The employer refused and the wife brought an action for enforcement. The court observed that Massachusetts did not prohibit assignment of the husband’s wages. Moreover, Massachusetts law was not controlling because New York had the most significant relationship with the assignment. Therefore, the court ruled in favor of the wife.

Therefore, the validity of an assignment is determined by looking to the law of the forum with the most significant relationship to the assignment itself. To determine the applicable law of assignments, the court must look to the law of the state which is most significantly related to the principal issue before it.

Assignment of Contractual Rights:

Generally, the law allows the assignment of a contractual right unless the substitution of rights would materially change the duty of the obligor, materially increase the burden or risk imposed on the obligor by the contract, materially impair the chance of obtaining return performance, or materially reduce the value of the performance to the obligor. Restat 2d of Contracts, § 317(2)(a). This presumes that the underlying agreement is silent on the right to assign.

If the contract specifically precludes assignment, the contractual right is not assignable. Whether a contract is assignable is a matter of contractual intent and one must look to the language used by the parties to discern that intent.

In the absence of an express provision to the contrary, the rights and duties under a bilateral executory contract that does not involve personal skill, trust, or confidence may be assigned without the consent of the other party. But note that an assignment is invalid if it would materially alter the other party’s duties and responsibilities. Once an assignment is effective, the assignee stands in the shoes of the assignor and assumes all of assignor’s rights. Hence, after a valid assignment, the assignor’s right to performance is extinguished, transferred to assignee, and the assignee possesses the same rights, benefits, and remedies assignor once possessed. Robert Lamb Hart Planners & Architects v. Evergreen, Ltd. , 787 F. Supp. 753 (S.D. Ohio 1992).

On the other hand, an assignee’s right against the obligor is subject to “all of the limitations of the assignor’s right, all defenses thereto, and all set-offs and counterclaims which would have been available against the assignor had there been no assignment, provided that these defenses and set-offs are based on facts existing at the time of the assignment.” See Robert Lamb , case, above.

The power of the contract to restrict assignment is broad. Usually, contractual provisions that restrict assignment of the contract without the consent of the obligor are valid and enforceable, even when there is statutory authorization for the assignment. The restriction of the power to assign is often ineffective unless the restriction is expressly and precisely stated. Anti-assignment clauses are effective only if they contain clear, unambiguous language of prohibition. Anti-assignment clauses protect only the obligor and do not affect the transaction between the assignee and assignor.

Usually, a prohibition against the assignment of a contract does not prevent an assignment of the right to receive payments due, unless circumstances indicate the contrary. Moreover, the contracting parties cannot, by a mere non-assignment provision, prevent the effectual alienation of the right to money which becomes due under the contract.

A contract provision prohibiting or restricting an assignment may be waived, or a party may so act as to be estopped from objecting to the assignment, such as by effectively ratifying the assignment. The power to void an assignment made in violation of an anti-assignment clause may be waived either before or after the assignment. See our article on Contracts.

Noncompete Clauses and Assignments:

Of critical import to most buyers of businesses is the ability to ensure that key employees of the business being purchased cannot start a competing company. Some states strictly limit such clauses, some do allow them. California does restrict noncompete clauses, only allowing them under certain circumstances. A common question in those states that do allow them is whether such rights can be assigned to a new party, such as the buyer of the buyer.

A covenant not to compete, also called a non-competitive clause, is a formal agreement prohibiting one party from performing similar work or business within a designated area for a specified amount of time. This type of clause is generally included in contracts between employer and employee and contracts between buyer and seller of a business.

Many workers sign a covenant not to compete as part of the paperwork required for employment. It may be a separate document similar to a non-disclosure agreement, or buried within a number of other clauses in a contract. A covenant not to compete is generally legal and enforceable, although there are some exceptions and restrictions.

Whenever a company recruits skilled employees, it invests a significant amount of time and training. For example, it often takes years before a research chemist or a design engineer develops a workable knowledge of a company’s product line, including trade secrets and highly sensitive information. Once an employee gains this knowledge and experience, however, all sorts of things can happen. The employee could work for the company until retirement, accept a better offer from a competing company or start up his or her own business.

A covenant not to compete may cover a number of potential issues between employers and former employees. Many companies spend years developing a local base of customers or clients. It is important that this customer base not fall into the hands of local competitors. When an employee signs a covenant not to compete, he or she usually agrees not to use insider knowledge of the company’s customer base to disadvantage the company. The covenant not to compete often defines a broad geographical area considered off-limits to former employees, possibly tens or hundreds of miles.

Another area of concern covered by a covenant not to compete is a potential ‘brain drain’. Some high-level former employees may seek to recruit others from the same company to create new competition. Retention of employees, especially those with unique skills or proprietary knowledge, is vital for most companies, so a covenant not to compete may spell out definite restrictions on the hiring or recruiting of employees.

A covenant not to compete may also define a specific amount of time before a former employee can seek employment in a similar field. Many companies offer a substantial severance package to make sure former employees are financially solvent until the terms of the covenant not to compete have been met.

Because the use of a covenant not to compete can be controversial, a handful of states, including California, have largely banned this type of contractual language. The legal enforcement of these agreements falls on individual states, and many have sided with the employee during arbitration or litigation. A covenant not to compete must be reasonable and specific, with defined time periods and coverage areas. If the agreement gives the company too much power over former employees or is ambiguous, state courts may declare it to be overbroad and therefore unenforceable. In such case, the employee would be free to pursue any employment opportunity, including working for a direct competitor or starting up a new company of his or her own.

It has been held that an employee’s covenant not to compete is assignable where one business is transferred to another, that a merger does not constitute an assignment of a covenant not to compete, and that a covenant not to compete is enforceable by a successor to the employer where the assignment does not create an added burden of employment or other disadvantage to the employee. However, in some states such as Hawaii, it has also been held that a covenant not to compete is not assignable and under various statutes for various reasons that such covenants are not enforceable against an employee by a successor to the employer. Hawaii v. Gannett Pac. Corp. , 99 F. Supp. 2d 1241 (D. Haw. 1999)

It is vital to obtain the relevant law of the applicable state before drafting or attempting to enforce assignment rights in this particular area.

Conclusion:

In the current business world of fast changing structures, agreements, employees and projects, the ability to assign rights and obligations is essential to allow flexibility and adjustment to new situations. Conversely, the ability to hold a contracting party into the deal may be essential for the future of a party. Thus, the law of assignments and the restriction on same is a critical aspect of every agreement and every structure. This basic provision is often glanced at by the contracting parties, or scribbled into the deal at the last minute but can easily become the most vital part of the transaction.

As an example, one client of ours came into the office outraged that his co venturer on a sizable exporting agreement, who had excellent connections in Brazil, had elected to pursue another venture instead and assigned the agreement to a party unknown to our client and without the business contacts our client considered vital. When we examined the handwritten agreement our client had drafted in a restaurant in Sao Paolo, we discovered there was no restriction on assignment whatsoever…our client had not even considered that right when drafting the agreement after a full day of work.

One choses who one does business with carefully…to ensure that one’s choice remains the party on the other side of the contract, one must master the ability to negotiate proper assignment provisions.

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Post-Loss Assignments of Claims Under Insurance Policies in Louisiana

In the settlement of lawsuits involving insured claims, it is not uncommon that one condition of the settlement is that the defendant assign his or her claims under all applicable insurance policies to the party that filed suit.

Indeed, it is frequently the case that the defendant, particularly when the defendant is an individual, has a limited ability to pay a judgment and insurance coverage offers the best opportunity for a recovery by the suing party. Usually, such settlements are made without any serious thought being given to whether the defendant’s claim against its insurer is assignable; the assumption being that it is assignable.

However, insurance policies generally have anti-assignment clauses which prohibit the assignment of the policy, or an interest in the policy, without the insurer’s consent. These clauses come into play in determining the validity or enforceability of the assignment of a claim under an insurance policy and should be considered when such an assignment is part of a settlement.

When considering the enforceability of anti-assignment clauses in insurance policies, the courts generally draw a distinction between an assignment made prior to the occurrence of a covered loss (a “pre-loss” assignment) and an assignment made after the occurrence of a covered loss (a “post-loss” assignment).

In analyzing pre-loss assignments, the courts recognize that requiring an insurer to provide coverage to an assignee of its policy prior to the occurrence of a covered loss would place the insurer in the position of covering a party with whom it had not contracted nor been allowed to properly underwrite to assess the risks posed by that potential insured, and, accordingly, determine the appropriate premium to charge for the risks being undertaken or choose to decline coverage.

Post-loss assignments, on the other hand, take place after the insurer’s obligations under its policy have become fixed by the occurrence of a covered loss, thus the risk factors applicable to the assignee are irrelevant with regard to the covered loss in question. For these reasons, the majority of the courts enforce anti-assignment clauses to prohibit or restrict pre-loss assignments, but refuse to enforce anti-assignment clauses to prohibit or restrict post-loss assignments.

Katrina Cases

The Louisiana Supreme Court, which had not previously addressed the enforceability of anti-assignment clauses for post-loss assignments, was recently confronted with this issue in the In re: Katrina Canal Breaches Litigation, litigation involving consolidated cases arising out of Hurricane Katrina. The issue arose as a result of a lawsuit brought by the State of Louisiana as the assignee of claims under numerous insurance policies as part of the “Road Home” Program. The Road Home Program was set up following Hurricanes Katrina and Rita to distribute federal funds to homeowners suffering damage from the hurricanes. In return for receiving a grant of up to $150,000, homeowners were required to execute a Limited Subrogation/Assignment agreement, which provided in pertinent part:

“I/we hereby assign to the State of Louisiana . . . to the extent of the grant proceeds awarded or to be awarded to me under the [Road Home] Program, all of my/our claims and future rights to reimbursement and all payments hereafter received or to be received by me/us: (a) under any policy of casualty or property damage insurance or flood insurance on the residence, excluding contents (“Residence”) described in my/our application for Homeowner’s Assistance under the Program (“Policies”): (b) from FEMA, Small Business Administration, and any other federal agency, arising out of physical damage to the Residence caused by Hurricane Katrina and/or Hurricane Rita.”

Pursuant to these Limited Subrogation/Assignments, the State of Louisiana brought suit against more than 200 insurance companies to recover funds dispensed under the Road Home Program. The suit was removed to Federal Court under the Class Action Fairness Act and the insurers filed motions to dismiss, arguing that the assignments to the State of Louisiana were invalid under the anti-assignment clauses in the homeowner policies at issue.

On appeal, the United States Fifth Circuit Court of Appeals certified the following question to the Louisiana Supreme Court: “Does an anti-assignment clause in a homeowner’s insurance policy, which by its plain terms purports to bar any assignment of the policy or an interest therein without the insurer’s consent, bar an insured’s post-loss assignment of the insured’s claims under the policy when such an assignment transfers contractual obligations, not just the right to money due?”

In answering this question, the Louisiana Supreme Court began by noting that, as a general matter, contractual rights are assignable unless the law, the contract terms or the nature of the contract preclude assignment. Specific to the certified question, Louisiana Civil Code article 2653 provides that a right “cannot be assigned when the contract from which it arises prohibits the assignment of that right.” The Louisiana Supreme Court observed that the language of article 2653 is broad and, on its face, applies to all assignments, including post-loss assignments of insurance claims. The Court, therefore, construed the issue confronting it as whether Louisiana public policy would enforce an anti-assignment clause to preclude post-loss assignments of claims under insurance policies.

In addressing the public policy question, the Louisiana Supreme Court recognized the distinction between pre-loss assignments and post-loss assignments discussed by courts from other states and noted that the prevailing view was that anti-assignment clauses were invalid and/or unenforceable when applied to post-loss assignments. Notwithstanding this weight of authority, the Louisiana Supreme Court stated:

“[W]hile the Louisiana legislature has clearly indicated an intent to allow parties freedom to assign contractual rights, by enacting La. C.C. art. 2653, it has also clearly indicated an intent to allow parties freedom to contractually prohibit assignment of rights. We recognize the vast amount of national jurisprudence distinguishing between pre-loss and post-loss assignments and rejecting restrictions on post-loss assignments, however we find no public policy in Louisiana favoring assignability of claims over freedom of contract.”

Thus, Court refused to invalidate the enforceability of the anti-assignment clauses to the post-loss assignments before it based on public policy, adding that public policy determinations are better suited to the legislature.

Nonetheless, after having recognized the general enforceability of anti-assignment clauses to post-loss assignments, the Court immediately placed limits on when those clauses would be applicable, stating that to be applicable, they “must clearly and unambiguously express that the non-assignment clause applies to post-loss assignments.” The Court refused “to formulate a test consisting of specific terms or words,” which would satisfy this condition and remanded the case to the federal courts to determine whether the individual anti-assignment clauses in the various policies were sufficiently clear and explicit to be enforced with respect to post-loss assignments at issue.

A Broad Application

It should be noted that the Court’s opinion appears to apply broadly to all post-loss assignments irrespective of what specific rights are being assigned, despite the fact that the certified question was narrower and asked only about the applicability of a post-loss assignment where the assignment “transfers contractual obligations, not just the right to money due.”

In a footnote at the beginning of its opinion, the Louisiana Supreme Court observed that in certifying the question to it, the Fifth Circuit “disclaimed any intent” that the Court “confine its reply to the precise form or scope of the legal questions certified.” The footnote indicates that the Court’s opinion was not intended to be limited to only those post-loss assignments involving the assignment of contractual obligations.

Louisiana has departed from the majority view in holding that as a matter of general law, anti-assignment clauses are not inherently void with regard to post-loss assignments. However, it may be that in practical application, the results of individual cases may well be consistent with the majority rule of not enforcing anti-assignment clauses with regard to post-loss assignments because Louisiana courts may be reluctant to find that the anti-assignment clauses are sufficiently “clear and explicit” unless they specifically state that they apply to post-loss assignments, notwithstanding the Louisiana Supreme Court’s unwillingness to “formulate a test consisting of specific terms or words.”

Robert Redfearn, Jr. ([email protected]) is a partner in Simon, Peragine, Smith & Redfearn, a regional law firm with offices in New Orleans, La., and Mississippi.

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Home > Louisiana Defenses: What is a Valid Assignment of a Right to Sue?

Louisiana Defenses: What is a Valid Assignment of a Right to Sue?

Written by Kristin Lausten

In New Orleans and in Louisiana, the right of a landowner to sue for environmental contamination is a personal right. That is, the right to sue does not “run with the land.” If a given landowner sells the real property, the right to sue for past contamination remains with the former owner and does not pass to the new owner UNLESS there is a proper contractual assignment of that right. This is known as the subsequent purchaser doctrine (“SPD”). See Eagle Pipe & Supply, Inc. v. Amerada Hess Corp. , 79 So.3d 246 (La. Supreme Court 2011) (clarifying that the right to sue is a personal right; making the SPD applicable to latent or hidden contamination).

The idea behind the SPD is that, during the sale of property that has been damaged, it is assumed the damage would result in a loss of value to the property which would be reflected in the sale price. Since the former owner is the one receiving less consideration for the real property, the former owner retains the right to sue for loss of value.

In this article, we discuss what constitutes a valid and enforceable assignment of the right to sue for previous environmental contamination with reference to a recent Court of Appeals case. See Catahoula Lake Investments v. Hunt Oil , 237 So. 3d 585 (La. App. 3rd Cir. January 10, 2018). A proper assignment is, of course, important because if the assignment is ineffective, then a motion to dismiss will be granted based on the SPD.

Defending Louisiana Environmental Litigation: The Assignment Clause in Catahoula

  In Catahoula Lake Investments , the plaintiff purchased certain lands in 2007 and thereafter filed suit against certain defendants claiming that their past operations on the property under mineral leases caused environmental damage to the property. Defendants countered by asserting that, because all mineral operations had ceased prior to 2007, the SPD barred plaintiff’s claims since plaintiff’s 2007 purchase contract did not expressly and explicitly pass the seller’s personal rights of action to the purchaser.

That 2007 contract provided, in pertinent part (emphasis added):

“Vendor is selling the Property “AS IS, WHERE IS” without any warranties whatsoever as to fitness or condition, whether expressed or implied, and Vendee expressly waives the warranty of fitness and the guarantee against hidden or latent vices … Vendee forfeits the right to avoid the sale or reduce the purchase price on account of some hidden or latent vice or defect in the Property sold. Vendor expressly subrogates Vendee to all rights, claims and causes of action Vendor may have arising from or relating to any hidden or latent defects in the Property. ”

At the trial level, the court held that this language was “non-explicit” and too vague to be a proper assignment of the right to sue for environmental contamination. The trial court cited Louisiana caselaw to the effect that the assignment of the right to sue must be explicit. For example, this was the language from Eagle Pipe which the Louisiana Supreme Court held to NOT be explicit enough to transfer the right to sue:

“… [the sellers] do by these presents sell, transfer and deliver, with full guarantee of title and free from all encumbrances, and with full subrogation to all their rights and action of warranty against previous owners …”

The trial court also cited Matthews v. Alsworth , 45 La. Ann. 465, 12 So. 518 (1893) where, again, the Louisiana Supreme Court held contract language did NOT assign the right to sue. The pertinent language in that case was:

“This conveyance is made with complete transfer and subrogation of all rights and all actions of warranty or otherwise against all former claimants, proprietors, tenants, or warrantors of the property herein conveyed.”

Based on the foregoing caselaw and other caselaw, the trial court held that the 2007 purchase contract did not use language that was explicit enough to transfer to the plaintiff the right to sue the defendants for past environmental contamination.

However, the Court of Appeals reversed. The court focused on the language with respect to “latent and hidden defects.” For the Court of Appeals, the use of that language was an intentional attempt by the parties to protect the purchaser by transferring any rights the seller might have against a third party for “hidden or latent” contamination to the property. The court noted that, because the environmental contamination was hidden/latent, the underlying principle of the SPD was not implicated. That is, the purchaser was at risk for overpaying for the property. Thus, it was reasonable for the parties to protect the purchaser by assigning the right to sue for such hidden/latent contamination. When/if contamination was discovered, it would be the purchaser — not the seller — who would suffer loss in market value.

The holding in Catahoula Lake Investments seems stained. The language in the 2007 contract seems about as vague and non-explicit as the contract language in Eagle Pipe . It appears then that Louisiana courts are creating a new rule for hidden/latent defects where a certain level of vagueness in the contract language will be tolerated.

Defending Louisiana Environmental Litigation: Contact New Orleans Attorney Kristin M. Lausten

Need assistance? Have questions? Contact Kristin M. Lausten . Our legal team defends toxic tort and environmental cases in both state and federal courts throughout Louisiana. We use state-of-the art technology and maintain relationships with a broad range of scientific and legal experts who are needed for defending environmental contamination cases.

In addition, we provide legal consultation and planning so that you can decrease your risks of being sued for torts related to toxic substances.

The author may be contacted at:

Kristin M. Lausten

New Orleans, Louisiana Telephone: 504.377.6585 E-mail: [email protected] Web: www.kristinlausten.com

This article is provided as an educational service for general informational purposes only. The material does not constitute legal advice or rendering of professional services.

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Attorney Kristin M. Lausten strives to provide high-quality work tailored to each client’s desired outcome at a reasonable cost. Protecting your assets, reputation, and long-term viability is our primary concern. At The Lausten Group, LLC, we do not waste time or money drafting documents no one reads, will not bill for work never performed, and do not play games with the court or opposing counsel for the sole purpose of increasing costs.

Let us help you thrive. For cost-effective and highly responsive legal services, Contact The Lausten Group, LLC at the number provided or complete our online form .

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Disaster Relief: Is a Post-Loss Anti-Assignment Clause Prohibited in Louisiana?

In the aftermath of a devastating storm, when lives are upended and memories are scattered about, light and hope do arrive. They arrive in many forms, including: through first responders who clear the way and answer the call from every state in our great nation and beyond; through family and friends who make a way to care for their own; through those who have made it their life’s work and business to aid in disaster recovery efforts; and through the many volunteers who freely give of their energy and resources to aid their fellow beings in their most challenging times. But, sadly, among them also are wolves in sheep’s clothing.

We have seen this many times, including in the aftermath of Hurricanes Katrina, Rita, Ike, and most recently, Michael. We have heard the beautiful stories of selflessness, but also the stories of grief-upon-grief brought on by unscrupulous predators claiming to be contractors or to be able to provide other catastrophe related services in exchange for a quick check or an assignment of insurance benefits (AOB). We offer this caution: Be wary of self-proclaimed contractors who are really unlicensed or predatory or attempt to provide the services of public adjusters, who are heavily regulated by the State of Louisiana in order to protect its citizens.

With that caution, we also recognize there are many licensed contractors who are greatly appreciated and desperately needed after a devastating storm and often spend many months away from their loved ones to assist in the recovery efforts. They provide much-needed services and relief. It is often difficult for a policyholder immediately after a storm to pay for needed repairs out of pocket while they wait for anticipated insurance proceeds. As a means of relief, and overly simplified here for the purposes of this blog, some licensed contractors offer to enter a contract with the insured to collect the disaster repair costs from the insurance company through an assignment of the insurance proceeds. Considering that, as with any contract, a careful reading of the contract and legal advice should be sought.

While the majority of states void post-loss anti-assignment clauses in insurance policies as against public policy, Louisiana follows the minority rule that post-loss anti-assignment clauses are enforceable. After Hurricane Katrina, the Louisiana Supreme Court considered and distinguished pre-loss assignments and post-loss assignments in insurance policies and found:

[W]hile the Louisiana legislature has clearly indicated an intent to allow parties freedom to assign contractual rights, by enacting La. C.C. art. 2653, it has also clearly indicated an intent to allow parties freedom to contractually prohibit assignment of rights. We recognize the vast amount of national jurisprudence distinguishing between pre-loss and post-loss assignments and rejecting restrictions on post-loss assignments, however we find no public policy in Louisiana favoring assignability of claims over freedom of contract. 1

Though the court deferred public policy determinations to the legislature, it did proclaim that for post-loss anti-assignment clauses in insurance contracts to be enforceable, they “must clearly and unambiguously express that the non-assignment clause applies to post-loss assignments.” 2

Our thoughts and prayers are with those impacted by Hurricane Laura, and as in times before, we stand ready to assist. _____________________________________ 1 In re Katrina Canal Breaches Litig. , 63 So. 3d 955, 962-63 (La. 2011) . 2 Id.

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The Monson Law Firm Annihilates AOB in Louisiana

  The abuse of Assignments of Benefits (“AOB”) in first-party property insurance claims has been well documented. The Consumer Protection Coalition, formed to raise awareness of AOB abuse, reports Florida AOB lawsuits have increased 90,000 percent since 2000. Michael Carlson, executive director of the Personal Insurance Federation of Florida (PIFF), said “highly litigious” groups of trial firms as well as certain types of contractors have been taking advantage of the AOB provision in homeowners insurance policies. In many cases, contractors are inflating the cost of repair work and suing insurance companies if a claim is denied or not paid in full.

Recognizing the threat that AOB abuse poses to the insureds of Louisiana, The Monson Law Firm attorney Matthew Monson set out to end this problem.  His research revealed that the easiest way to protect policyholders from predatory AOB practices and keep control of the claim in the hands of the insured is by improving the language of property policies. The Louisiana Supreme Court addressed this issue in In re Katrina Canal Breaches Litig., holding “that parties may contract to prohibit post-loss assignments, [but also held that] the contract language must clearly and unambiguously express that the non-assignment clause applies to post-loss assignments.” 2010-1823 (La. 5/10/11), 63 So. 3d 955, 963.  More specifically, the Court held as follows:

“Post-loss assignment of claims arising under the policy is not equivalent to the assignment of the policy itself, or an interest in the policy. Given the categorical difference, we find it incumbent on insurers to include clear and unambiguous language in their policies. We do not find it necessary to formulate a test consisting of specific terms or words, however the insurer must include language making it clear and explicit that post-loss assignments are prohibited under the policy.” (emphasis added).  This case can be accessed  here.

According to this language, we recognized that the Louisiana Supreme Court provided a clear roadmap to addressing the issue of abuse of AOB – by including specific policy language that restricts post-loss Assignments of Benefits.  Thus, Matthew Monson drafted two possible clauses to add to the Assignment section of a property policy for presentation to the Louisiana Department of Insurance to protect Louisiana insureds.  These clauses are as follows:

Post-loss assignment of rights, benefits or claims arising under this policy are prohibited.

Post-loss assignment of rights, benefits or claims arising under this policy will not be valid unless we give our written consent.

Lighthouse Property Insurance Corporation was the first insurer nationwide to receive approval to include this language in its policies.  Since then, multiple insurers have also incorporated this language into their policies. The Monson Law Firm would like to thank Louisiana Insurance Commissioner Jim Donelon  and his team for their foresight in tackling this growing problem that threatens insureds in all states.

The Monson Law Firm also calls upon every state insurance regulatory body to take similar action to protect their policyholders.

#AOBAnnihilated

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Louisiana Notary

A Civil Law Tradition

Lease – Sublease or assignment of rights by lease

August 2, 2018 By Louisiana Notary Leave a Comment

Art. 2713. Lessee’s right to sublease, assign, or encumber. The lessee has the right to sublease the leased thing or to assign or encumber his rights in the lease, unless expressly prohibited by the contract of lease. A provision that prohibits one of these rights is deemed to prohibit the others, unless a contrary intent is expressed. In all other respects, a provision that prohibits subleasing, assigning, or encumbering is to be strictly construed against the lessor.

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Experts explain 112% increase in child solicitation cases in louisiana over past three years.

LOUISIANA - The state of Louisiana has seen a dramatic increase in cases involving sexual predators pursuing children online.

In 2021 there were 3,478 reported incidents, in 2022 there were 6,128, reported, and then in 2023 it skyrocketed to 13,644 reported cases in the state. That is a 112% increase in three years, with officials telling WBRZ that 2024 is looking to match or surpass that number.

The increase in reported incidents has led to a surge in arrests as well. David Ferris, the Cyber Crime Unit Supervisor, says that as they receive the cases, they target the offenders who pose the most danger and provide the most opportunity for them to rescue children.

"We are receiving so many cases at this point that we are essentially triaging the cases as they come in," Ferris said. 

Ferris also told WBRZ they get reports from many sources, including parents, teachers, or even the children themselves.

"We also receive them through children reporting it through social media platforms using the report abuse button themselves," Ferris said.

Mental health professionals like Lori Anderson say a child will continue to need help long after an arrest is made.

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"It becomes trauma packed on trauma; it's so important to reach out even after the situation is over, still get help for those individuals," Anderson said.

Anderson told WBRZ the trauma caused can affect those affected for a lifetime, especially if the victims do not get the right support.

"When people go through those types of traumas, it can lead to substance abuse problems later in life, unhealthy behaviors on how to cope with things so it can just snowball as they get older especially if it goes without being addressed. " Anderson said.

Ferris and Anderson both told me technology is a double-edged sword. It helps solve these cases, but it also gives predators more platforms through which to go after kids.

They both urge people to reach out to anyone that may be going through any type of abuse. 

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Louisiana AG asks court to dismiss lawsuit against new Ten Commandments law

Louisiana Attorney General Liz Murrill speaks holds up a mini-display showing the Ten Commandments during a press conference regarding the Ten Commandments in schools Monday, Aug. 5, 2024, in Baton Rouge, La. Murrill announced on Monday that she is filing a brief in federal court asking a judge to dismiss a lawsuit seeking to overturn the state’s new law requiring that the Ten Commandments be displayed in every public school classroom. (Hilary Scheinuk/The Advocate via AP)

Louisiana Attorney General Liz Murrill, right, speaks alongside Louisiana Gov. Jeff Landry during a press conference regarding the Ten Commandments in schools Monday, Aug. 5, 2024, in Baton Rouge, La. Murrill announced on Monday that she is filing a brief in federal court asking a judge to dismiss a lawsuit seeking to overturn the state’s new law requiring that the Ten Commandments be displayed in every public school classroom. (Hilary Scheinuk/The Advocate via AP)

Louisiana Attorney General Liz Murrill speaks alongside Louisiana Gov. Jeff Landry during a press conference regarding the Ten Commandments in schools Monday, Aug. 5, 2024, in Baton Rouge, La. Murrill announced on Monday that she is filing a brief in federal court asking a judge to dismiss a lawsuit seeking to overturn the state’s new law requiring that the Ten Commandments be displayed in every public school classroom. (Hilary Scheinuk/The Advocate via AP)

Louisiana Gov. Jeff Landry speaks alongside Louisiana Attorney General Liz Murrill during a press conference regarding the Ten Commandments in schools Monday, Aug. 5, 2024, in Baton Rouge, La. Murrill announced on Monday that she is filing a brief in federal court asking a judge to dismiss a lawsuit seeking to overturn the state’s new law requiring that the Ten Commandments be displayed in every public school classroom. (Hilary Scheinuk/The Advocate via AP)

Louisiana Gov. Jeff Landry ponders his response to a reporter’s question during a press conference regarding the Ten Commandments in schools Monday, Aug. 5, 2024, in Baton Rouge, La. Louisiana Attorney General Liz Murrill announced on Monday that she is filing a brief in federal court asking a judge to dismiss a lawsuit seeking to overturn the state’s new law requiring that the Ten Commandments be displayed in every public school classroom. (Hilary Scheinuk/The Advocate via AP)

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BATON ROUGE, La. (AP) — Louisiana’s attorney general announced Monday that she is asking a federal court to dismiss a lawsuit that seeks to overturn the state’s new law requiring the Ten Commandments to be displayed in every public school classroom by Jan. 1.

The suit was filed in June by parents of Louisiana public school children with various religious backgrounds who contend the law violates First Amendment language forbidding government establishment of religion and guaranteeing religious liberty. Proponents of the law argue that it is not solely religious but that the Ten Commandments have historical significance to the foundation of U.S. law.

As kids in Louisiana prepare to return to school this month, state officials presented large examples of posters featuring the Ten Commandments that Attorney General Liz Murrill argues “constitutionally comply with the law.” The Republican said she is not aware of any school districts that have begun to implement the mandate, as the posters “haven’t been produced yet.”

Murrill said the court brief being filed, which was not immediately available, argues that “the lawsuit is premature and the plaintiffs cannot prove that they have any actual injury.”

“That’s because they don’t allege to have seen any displays yet and they certainly can’t allege that they have seen any display of the Ten Commandments that violates their constitutional rights,” she added.

Murrill pointed to more than a dozen posters on display during Monday’s press conference to support her argument that the displays can be done constitutionally, saying that they also show the Ten Commandments’ historical and cultural significance. Some of the posters featured quotes from famous figures — late Supreme Court Justice Ruth Bader Ginsburg, Martin Luther King Jr., Moses and U.S. House Speaker Mike Johnson — referencing the Ten Commandments.

Other posters took a more modern approach, even using memes. One example was a poster that included a photo from the 2004 film “Mean Girls,” where a main character played by Rachel McAdams says, “Why are you so obsessed with me?” The meme was surrounded by news headlines about the lawsuit filed against the new mandate. Another display featured the Ten Commandments next to the lyrics from the “Ten Duel Commandments,” a song from Lin-Manuel Miranda’s Tony-award winning musical “Hamilton.”

“Each one of these posters illustrates something that we believe represents a constitutional application of the law,” Murrill said.

Based on the law’s language, “each public school governing authority” will decide exactly what their posters will look like. The Ten Commandments must be displayed on a poster or framed document at least 11 inches by 14 inches (28 by 36 centimeters) where the commandments are the central focus and “printed in a large, easily readable font.” In addition, each poster must be paired with the four-paragraph context statement.

Lawmakers also specified which version of Ten Commandments be used — a condensed version of the Scripture passage in Exodus. It has ties to “The Ten Commandments” movie from 1956, and it’s a variation of a version commonly associated with Protestants.

Republican Gov. Jeff Landry signed the legislation in June — making Louisiana the only state to require that the Ten Commandments be displayed in the classrooms of all public schools and state-funded universities. The measure was part of a slew of conservative priorities that became law this year in Louisiana.

When asked what he would say to parents who are upset about the Ten Commandments being displayed in their child’s classroom, the governor replied: “If those posters are in school and they (parents) find them so vulgar, just tell the child not to look at it.”

In an agreement reached by the court and state last month , the five schools specifically listed in the lawsuit will not post the commandments in classrooms before Nov. 15 and won’t make rules governing the law’s implementation before then. The deadline to comply, Jan. 1, 2025, remains in place for schools across the state.

Louisiana’s new law does not require school systems to spend public money on Ten Commandments posters. It allows the systems to accept donated posters or money to pay for the displays. Questions still linger about how the requirement will be enforced and what happens if there are not enough donations to fund the mandate.

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When Will Max Muncy Return to Dodgers? Dave Roberts Has Date Circled

Matt levine | aug 16, 2024.

• Los Angeles Dodgers

The Los Angeles Dodgers have been going through the motions of late, seeing a large lead in the National League West dwindle down to just two games. Los Angeles has had to withstand multiple injuries to key players across the roster but they seem to be getting healthy at the right time.

The Dodgers just got star Mookie Betts back from injury and they are gearing up for slugging third baseman Max Muncy to return soon as well. Dodgers manager Dave Roberts appeared on MLB Network Radio on SiriusXM to give the latest on the infielder.

"Muncy is with Tommy (Edman) rehabbing with that OKC team and he will be back with us on Tuesday so he'll play through the weekend, have Monday off, and be in the lineup on Tuesday against the Mariners."

Dave Roberts gives the latest on the #Dodgers injuries: Justin Wrobleski will start tonight Tommy Edman returns Monday Max Muncy returns Tuesday 🔗 https://t.co/6YbqEWG3tX pic.twitter.com/I2hVLIICUH — MLB Network Radio on SiriusXM (@MLBNetworkRadio) August 16, 2024

Muncy has been out of the lineup since May due to a right oblique strain. The veteran was supposed to be back earlier in the year but saw a few setbacks that delayed his return to the team. After dealing with the lingering injury, he is finally ready to return to the Dodgers.

Before the injury, Muncy provided the Dodgers with a solid power bat in the lineup. He slashed .223/.323/.475 with a .798 OPS for the season.

Muncy also hit nine home runs and drove in 28 runs for Los Angeles. The team has missed his consistent power threat in the lineup so his return will be a welcome sight.

While he has been out, the players that Los Angeles has put in to replace him haven't faired too well. The third baseman has hit .210 with 11 home runs and 42 runs batted in over 77 games.

Muncy has been a stable presence for the Dodgers over the years so his absence has been felt greatly. Putting him back into a lineup that has Betts, Shohei Ohtani, Freddie Freeman, Will Smith, and Teoscar Hernández, among others, gives Los Angeles one of the more lethal units across baseball.

The Dodgers will also be getting Edman back on Monday according to Roberts. Los Angeles traded for the utilityman at the trade deadline but he has yet to play this season due to offseason wrist surgery.

While the team now finds itself in a battle for the NL West, they can at least fall back on getting the majority of their main core back from injury. Unlike in previous years, the Dodgers stretch run seems to be getting very interesting.

MATT LEVINE

Matt earned a Master of Science degree in Sport Management from Louisiana State University in 2021. He was born and raised in the Los Angeles area, covering all Southern California sports in his career.

Follow @Levine1445