Fat Catz Music Club, Inc. v. Fountain Services of Louisiana, Inc. and Jerry Schiffman

FAT CATZ MUSIC CLUB, * NO. 2020-CA-0586
INC., ET AL.
*
VERSUS COURT OF APPEAL
*
FOUNTAIN SERVICES OF FOURTH CIRCUIT
LOUISIANA, INC. AND JERRY *
SCHIFFMAN STATE OF LOUISIANA
*******

APPEAL FROM
CIVIL DISTRICT COURT, ORLEANS PARISH
NO. 2015-01681, DIVISION “L”
Honorable Kern A. Reese, Judge
******
Judge Edwin A. Lombard
******
(Court composed of Judge Edwin A. Lombard, Judge Sandra Cabrina Jenkins,
Judge Tiffany G. Chase)

W. Patrick Klotz
KLOTZ & EARLY
909 Poydras Street, Suite 2950
New Orleans, LA 70112

COUNSEL FOR PLAINTIFFS/APPELLEES

I. Matthew Williamson
MILLER & WILLIAMSON LLC
1515 Poydras Street, Suite 2130
New Orleans, LA 70112

COUNSEL FOR DEFENDANTS/APPELLANTS

AFFIRMED IN PART;
REVERSED IN PART AND
RENDERED

APRIL 21, 2021

EAL

SCJ
The Appellants, Fountain Services of Louisiana, Inc. (“FSL”) and Jerry
TGC
Schiffman, seek review of the May 26, 2020 judgment of the district court

wherein the court found the Appellants committed fraud, breached a beverage

distribution contract, and violated the Louisiana Unfair Trade Practices Act

(“LUTPA”). The court further awarded damages, costs and attorneys’ fees totaling

$651,394.34 to the Appellees, Fat Catz Music Club, Inc. d/b/a Fat Catz; Funky

544, LLC d/b/a Funky 544; Parsa Inc. d/b/a Industry Bar & Kitchen; Lower

Decatur Entertainment LLC d/b/a Balcony Music Club; Bourbon At Toulouse LLC

d/b/a Old Opera House; MBS Management LLC d/b/a Famous Door; Bourbon

Nighttime LLC d/b/a Krazy Korner; and Promenade Entertainment LLC d/b/a

Bourbon Bandstand. Additionally, the Appellants seek review of a January 24,

2019 judgment, wherein the district court granted a motion to compel in favor of

the Appellees.

Based upon our review of the applicable facts and law, we find that the

district court committed a legal error in awarding the Appellees treble damages

under LUTPA. Thus, we reverse in part the May 26, 2020 judgment, rendering

judgment in the amount of $155,093.89, which represents the Appellants actual

1

damages. Additionally, we reduce the award of attorneys’ fees proportionately to

$62,037.55. In all other respects, the May 26, 2020 judgment is affirmed. Lastly,

we affirm the January 24, 2019 judgment of the district court, granting the

Appellees’ motion to compel.

Facts and Procedural History

This appeal stems from a breach of contract and unfair trade practices

dispute between the parties based upon the Appellants selling of counterfeit

fountain soda syrup, primarily Coca Cola, products, to the Appellees, which are

two corporations and six limited liability companies that operate various bars,

music venues and restaurants in New Orleans. Jude Marullo is the president of said

corporations and the member/manager of the limited liability companies at issue

herein.

In 2009, the Appellees, through Mr. Marullo, sought beverage bids from

distributors who delivered authentic Coca Cola or Coke products, including from

the Appellants who had been supplying juice and other beverages to the Appellees

since 2006. Based upon Mr. Schiffman’s assurances that his company, FSL, sold

authentic Coke products, Mr. Marullo consented to the Appellants supplying three

of the Appellees with Coke, Diet Coke, 7-Up and an energy drink called Sin

Maker.1 Later the distribution agreement was expanded to cover all eight of the

Appellees’ locations.2 A written agreement was never executed between the

parties.

1
The three Appellees the Appellants initially supplied beverages to were Fat Catz, Funky 544
and Industry Bar and Kitchen.
2
The Appellants distributed beverages to these eight locations for the following time periods:
2

The beverage distribution agreement came to a halt in June 2014, however,

after the Appellees learned the Appellants were actually distributing generic soda

syrups to them.

Mr. Marullo initially alerted that the Appellants may have been distributing

counterfeit soda products to the Appellees as a result of being contacted by David

Richard in the spring of 2014. Mr. Richard’s limited liability company, Nola

Beverage Group, owned Sin Maker. He suspected that the Appellants were not

distributing the genuine Sin Maker product to FSL customers. As mentioned

above, the Appellees were Sin Maker-purchasers for their respective locations. Mr.

Richard visited with Mr. Marullo at one of the Appellees’ locations to taste the Sin

Maker drink the Appellants had supplied. Upon tasting the drink, Mr. Richard

confirmed the beverage was inauthentic and further observed counterfeit labels on

the beverages-in-boxes (BIBs) on his product as well as the Coke products at the

location. Through Mr. Richard, Mr. Marullo was put in contact with Special Agent

Peter Orlando of the United Stated Food and Drug Administration (“FDA”).

Special Agent Orlando later met with Messrs. Marullo and Richard at

Funky 544. At this meeting, the men discovered the labeling on the BIBs to be

counterfeit. They also tasted certain beverages and discovered the products had the

incorrect flavor, not corresponding to their labels. Special Agent Orlando was

given a sampling of BIBs, which the Appellants had supplied, for testing. He

1. Funky 544: January 2010 through June 2014
2. Fat Catz Music Club: January 2010 through June 2014
3. Industry Bar and Kitchen: January 2010 through June 2014
4. Balcony Music Club: April 2012 through June 2014
5. Old Opera House: November 2012 through June 2014
6. Famous Door: December 2012 through June 2014
7. Krazy Korner: May 2013 through June 2014
8/ Bourbon Bandstand: September 2013 through June 2014
3

subsequently informed Mr. Marullo that the tested products were counterfeit.

Consequently, Mr. Marullo cancelled his distribution agreement with the

Appellants in June 2014.

In late June 2014, the FDA executed a search warrant on the Appellants’

warehouse, seizing all of its contents including counterfeit labels, mislabeled BIBs

and drums of generic soda. Federal criminal charges were ultimately filed against

Mr. Schiffman in United States District Court, Eastern District of Louisiana. On

December 21, 2017, Mr. Schiffman pled guilty to the charge of “selling

misbranded food.” In his plea, he admitted to selling counterfeit beverages to FSL

customers from 2012 through 2014. He further admitted to placing in FSL BIBs

counterfeit drinks made from Al’s Cola and Lemon UP, which are products of Al’s

Beverage Company of Connecticut.

The Appellees filed a Petition for Breach of Contract and for Damages on

February 24, 2015, against the Appellants, raising claims for fraudulent

inducement under the Louisiana Civ. Code arts. 1953 and 1958, and breach of

contract as well as violations of La. Rev. Stat. 51:1401, et seq., known as LUTPA.

The Appellants alleged purchasing approximately $155,093.83 worth of products

from the Appellees and sought reimbursement of the same as well as attorney’s

fees.

Following a December 10, 2019 bench trial, the district court rendered

judgment in favor of the Appellants, finding their claims against the Appellants

under the Louisiana Civil Code and LUTPA had merit and awarding them

$651,394.34 in damages plus interest and costs.3 The award of damages represents

3
Four witnesses testified at trial, two for each party: Mr. Schiffman and FSL employee Eva
Manguno for the Appellants, and the deposition of Mr. Richard was introduced and Mr. Marullo
4

actual damages of $155,093.89, which the Court tripled in accordance with

LUTPA, totaling $465,281.67, combined with attorney’s fees of $186,112.67.

Thereafter, the Court denied the Appellants’ motion for new trial. This timely

appeal followed.

Assignments of Error

The Appellants raise six assignments of error:

1) Denying the Appellants’ dilatory exceptions of
vagueness and nonconformity, and their peremptory
exceptions of no cause of action and no right of action;

2) Granting the Appellees’ motion to compel and
erroneously ordering Appellants to answer discovery that
had previously been responded to sufficiently, and to pay
fees and costs to counsel for the Appellees;

3) Denying the Appellants’ motion for summary
judgment;

4) Allowing into evidence during the trial on the merits
details concerning Mr. Schiffman’s criminal conviction
beyond that permitted by Article 609 of the Louisiana
Code of Evidence, and overruling the Appellants’ timely
objection thereto;

5) Denying the Appellants’ motion for involuntary
dismissal; and

6) Rendering judgment in favor of the Appellees and
against Appellants on the merits of the case.

Despite raising the aforementioned assignments of error, the Appellants

failed to brief assignments of error one, three and five. Pursuant to the Uniform

Rules, Courts of Appeal, “[a]ll assignments of error and issues for review must be

briefed. The court may consider as abandoned any assignment of error or issue for

review which has not been briefed.” Rule 2-12.4 (B)(4), Uniform Rules, Courts of

testified. The district court, Judge Kern Reese, noted that he only found the testimony of Messrs.
Marullo and Richard to be credible.
5

Appeal. Deeming the un-briefed assignments of error as abandoned, we decline to

consider these arguments.

The remaining three assignments of error focus on the district court’s

granting of a motion to compel and alleged errors made during the trial, which we

address below. In reviewing these assignments of error, we apply a manifest error

or abuse of discretion standard to the factual findings of the district court, while

legal errors are reviewed de novo. The First Circuit in Markerson v. Composite

Architectural Design Sys., LLC, 17-1252, p. 9 (La. App. 1 Cir. 7/10/18), 255 So.3d

1065, 1072–73, explains these differing standards of review:

This state's appellate review standard, which is
constitutionally based and jurisprudentially driven, is that
a court of appeal may not overturn a judgment of a trial
court absent an error of law or a factual finding which is
manifestly erroneous or clearly wrong. Stobart v. State
through Dept, of Transp. and Development, 617 So.2d
880, 882, n. 2 (La. 1993) Any legal issues are reviewed
using the de novo standard of review, under which the
trial court's legal conclusions are not entitled to
deference. TCC Contractors, Inc. v. Hospital Service
Dist. No. 3 of Parish of Lafourche, 2010-0685 (La. App.
1 Cir. 12/8/10), 52 So.3d 1103, 1108; Gordon v.
Gordon, 2016-0008 (La. App. 4 Cir. 6/8/16), 195 So.3d
687, 689, writ denied, 2016-1282 (La. 10/28/16), 208
So.3d 886.

Motion to Compel

The Appellants aver that the district court erred in granting the Appellees’

motion to compel and ordering the Appellants to answer discovery that had

previously been responded to sufficiently, and to pay fees and costs to counsel for

Appellants.4 The record reflects that in November 2018, the Appellees filed a

4
A judgment granting a motion to compel is an interlocutory judgment, which is not generally
appealable under La. Code Civ. Proc. arts. 1841 and 2083. Nevertheless, appellants are “entitled
6

motion to compel and for sanctions asserting they received insufficient and

incomplete responses that were initially propounded in May 2015. In addition to

the Appellants delaying their response to the point that a December 2018 trial date

had to be continued, the Appellees further asserted that the Appellants’ responses

were incomplete.

“A party seeking to compel discovery bears the burden of proving that the

matters sought to be discovered are relevant. In determining whether to compel

discovery, the trial judge has vast discretion.” State ex. rel. Ieyoub v. Racetrac

Petroleum, Inc., 01-458, p. 18 (La.App. 3 Cir. 6/20/01), 790 So.2d 673, 685.

Moreover, absent a clear showing of abuse, a trial court's broad discretion in

regulating pre-trial discovery will not be disturbed on appeal. Moak v. Ill. Cent.

R.R. Co., 93-783 (La. 1/14/94), 631 So.2d 401, 406. Thus, we review this matter

for an abuse of discretion.

The record reflects that at a January 11, 2019 hearing on the motion, the

district court noted seeing a pattern of evasive and “woefully insufficient”

responses. Consequently, the Court granted the motion to compel and awarded

$2,500 in attorneys’ fees and $73 in costs. The district court, Judge Kern Reese,

further read aloud at the hearing a series of discovery responses that were either

objected to or that were responded to with “unknown at this time” by the

Appellant, evidencing the Appellants pattern of providing nonresponsive answers.

Based upon the foregoing, we cannot say that the district court abused its

to seek review of all adverse interlocutory judgments prejudicial to them, in addition to
the review of the final judgment when an unrestricted appeal is taken.” Lavigne v. Allied
Shipyard, Inc., 18-0066, p. 8 (La. App. 4 Cir. 1/15/20), 289 So.3d 1088, 1097 [internal citations
omitted]. In the instant matter, the Appellants initially sought review of the motion to compel in
case number 2019-CA-0446, which was dismissed on their own motion.
7

discretion in granting the motion to compel where there was a reasonable basis for

determining the Appellees were being evasive.

Moreover, the district court’s sanction award is in accord with La. Code Civ.

Proc. art. 1471(C), entitled Failure to comply with order compelling discovery;

sanctions, which provides

In lieu of any of the foregoing orders or in addition
thereto, the court shall require the party failing to obey
the order or the attorney advising him or both to pay the
reasonable expenses, including attorney fees, caused by
the failure, unless the court finds that the failure was
substantially justified or that other circumstances make
an award of expenses unjust.

We further note that the district court is able to render any order that is just

to address the failure of a party to provide or permit discovery. La. Code Civ. Proc.

art. 1471(A). The district court did not abuse its discretion in ordering the

Appellants to pay attorney’s fees in consideration of the Appellants years-long

delay in responding to discovery and failure to provide substantive responses to the

same. This assignment of error is without merit.

Admitting Evidence of Mr. Schiffman’s Federal Criminal Conviction

The Appellants’ next assert that the district court erred in admitting evidence

of Mr. Schiffman’s federal criminal conviction at trial. We also find this

assignment of error to be without merit because under the facts of this case such

evidence is admissible pursuant to the Louisiana Code of Evidence.

Mr. Schiffman’s December 2017 Factual Basis, which formed the basis for

his guilty plea, was admitted into evidence at trial. As stated above, he pled guilty

to one count of “sale of misbranded foods” and admitted to “engaging in the sale of

misbranded food.” The Factual Basis further reveals that when Special Agent

8

Orlando executed the aforementioned search warrant on FSL’s warehouse in June

2014, Mr. Schiffman was present and confessed to selling FSL customers BIBs

that were “falsely labeled” and filled with either generic cola or lemon-lime syrup

from Al’s Beverage Company in Connecticut in addition to other soda syrups he

purchased from another company.

Additionally, Mr. Schiffman admitted to whiting-out expiration dates on

counterfeit labels and using copies of said labels to tape onto BIBs that he “sold to

customers as authentic products.” Indeed the execution of the search warrant as

notes above and as detailed in the Factual Basis reflects that counterfeit labels,

generic soda drums and mislabeled BIBs were recovered from the warehouse

during the seizure. Furthermore, Special Agent Orlando was able to corroborate

Mr. Schiffman’s fraud through the business records of other businesses, such as

Al’s Beverage Company. Pursuant to the Factual Basis, Mr. Schiffman consented

to paying restitution to the three soda companies whose products he counterfeited.

In Louisiana, evidence of crimes that involve dishonesty or false statement

are “admissible without requiring the court to weigh its prejudicial effect” under

La. Code Evid. art. 609(A)(2). Hebert v. Hartford Ins. Co. of the Midwest, 94-316,

p. 3 (La. App. 3 Cir. 11/2/94), 649 So.2d 631, 634. As stated above, the instant

matter involves the Appellants’ fraudulent inducement of the Appellees to enter

into a beverage distribution agreement as well as the Appellants’ deceit in selling

purposely mislabeled counterfeit soda over four years.

Furthermore, as the Appellees note, La. Code Evid. art. 404(B)(1) allows

"evidence of other crimes, wrongs, or acts to be admitted for other purposes, such

as proof of motive, opportunity, intent, preparation, plan, knowledge, identity,

absence of mistake or accident, . . . or when it relates to conduct that constitutes an
9

integral part of the act or transaction that is the subject of the present proceeding.”

In this matter, the district court could have reasonably determined that evidence of

Mr. Schiffman’s guilty plea evidenced intent, preparation, knowledge and/or an

absence of a mistake in his dealings with the Appellees. Thus, we find this

assignment of error to be without merit.

Judgment on the Merits
Lastly, the Appellants assert that the district court erred in ruling in favor of

the Appellees at trial due to eight alleged errors the Court made pertaining to

LUTPA, rescission of the beverage agreement, no cause of action, nonconformity

of Coca Cola Products and Mr. Schiffman’s personal liability.

LUTPA

The Appellants aver that the district court made three erroneous LUTPA

rulings: ignoring the legal prerequisite to a private right of action under LUTPA

that the plaintiff suffer an ascertainable loss of money or movable property;

ignoring that as a legal prerequisite to the recovery of treble damages under

LUTPA there must be the commission of an unfair trade practice after being put on

notice of such by the secretary of state; and ignoring LUTPA’s prescription

provision.

A claim for unfair trade practices is governed by LUTPA, which declares as

unlawful “unfair methods of competition and unfair or deceptive acts or practices

in the conduct of any trade or commerce.” La. Rev. Stat. 51:1405(A). LUTPA

provides a means of recovery for “[a]ny person who suffers any ascertainable loss

of money or movable property, corporeal or incorporeal, as a result of the use or

employment by another person of an unfair or deceptive method, act, or practice

declared unlawful by [Revised Statute] 51:1405.” La. Rev. Stat. 51:1409(A).
10

“Only egregious actions involving elements of fraud, misrepresentation, deception,

or other unethical conduct will be sanctioned based on LUTPA,” which “does not

provide an alternate remedy for simple breaches of contract.” Gandhi v. Sonal

Furniture & Custom Draperies, L.L.C., 49,959, pp. 15-6 (La. App. 2 Cir. 7/15/15),

192 So.3d 783, 792.

The Appellants first assert that the Appellees did not establish they suffered

an ascertainable loss as required by LUTPA. Louisiana Rev. Stat. 51:1409(A)

provides:

Any person who suffers any ascertainable loss of
money or movable property, corporeal or incorporeal,
as a result of the use or employment by another
person of an unfair or deceptive method, act, or
practice declared unlawful by R.S. 51:1405, may
bring an action individually but not in a
representative capacity to recover actual damages.

It is uncontested in this matter that the Appellees paid the Appellants for

over four years-worth of counterfeit beverages, a loss the district court calculated

to be $155,093.89. The Appellees introduced invoice summaries and FSL invoice

registers into evidence at trial, to substantiate their claims. Thus, the monetary loss

of paying for non-conforming beverages was indeed ascertainable. Moreover, the

district court rejected the Appellants’ argument that the Appellees did not suffer a

loss because the counterfeit beverages were sold to customers, which made the

Appellees a profit. We find this argument to be meritless because the issue of

whether the Appellees made a profit from third parties does not change the fact

that the Appellants profited from defrauding the Appellees with nonconforming

beverages for which they paid.

11

Regarding prescription, LUTPA claims are subject to a one-year delictual

prescriptive period that runs from the time of the transaction or act which gave rise

to the right of action. La. Rev. Stat. 51:1409(E); see also 2802 Mag. St., L.L.C. v.

Eggspressions of N. Am., L.L.C., 19-0085, pp. 8-9 (La. App. 4 Cir. 5/22/19), 274

So.3d 1279, 1284-85. In the instant matter, Mr. Marullo received confirmation

from the FDA in June 2014, that the Appellants sold him counterfeit beverages.

The Appellees filed suit less than a year later in February 2015.

Moreover, the Appellants’ counterfeit operation was continuous, originating

with Mr. Schiffman’s pre-agreement misrepresentations and lasting until Mr.

Marullo terminated the parties’ agreement in June 2014. We have previously

explained how under unique factual circumstances the continuous tort doctrine

applies to delay the running of prescription:

‘The prescriptive period for delictual actions is one year,
which commences to run from the day injury or damage
is sustained. La. C.C. art. 3492. One of the exceptions to
this rule is the jurisprudentially recognized doctrine of
continuing tort.’ Risin v. D.N.C. Investments, L.L.C., 05-
0415, p. 4 (La. App. 4 Cir. 12/7/05), 921 So.2d 133, 136.
A continuing tort is ‘[w]here the cause of injury is a
continuous one giving rise to successive damages.’ Id.
(citing South Central Bell Telephone Co. v. Texaco Inc.,
418 So.2d 531, 533 (La. 1982)). ‘[P]rescription does not
begin to run until the conduct causing the damage is
abated.’ Id. Likewise, ‘[t]he scope of application of
continuing tort is limited’ as ‘[b]oth conduct and damage
must be continuous.’ Id., 05-0415, p. 8, 921 So.2d at 138.

Id., 19-0085, p. 6, 274 So.3d at 1283.

In the matter sub judice, the fraudulent conduct and the Appellees’ damages

were abated by default when Mr. Marullo terminated the parties’ agreement. The

Appellants’ deceit was incessant and this served to delay the running of

prescription under the continuous tort doctrine. The district court, therefore, did not

12

err in determining that the one year delictual prescription period had not run. This

issue is without merit.

The Appellants additionally aver that treble damages are unwarranted here.

The LUTPA statute that allows for the recovery of treble damages is La. Rev. Stat.

51:1409(A), providing in pertinent part:

Any person who suffers any ascertainable loss of money
or movable property, corporeal or incorporeal, as a result
of the use or employment by another person of an unfair
or deceptive method, act, or practice declared unlawful
by R.S. 51:1405, may bring an action individually but not
in a representative capacity to recover actual damages. If
the court finds the unfair or deceptive method, act, or
practice was knowingly used, after being put on notice by
the attorney general, the court shall award three times the
actual damages sustained. In the event that damages are
awarded under this Section, the court shall award to the
person bringing such action reasonable attorney fees and
costs.

The record reflects the Louisiana Attorney General's Office sent the

Appellants a notice dated July 21, 2015, informing them that a LUTPA claim was

filed against them and further to provide the Appellants the “opportunity to

evaluate its position and if necessary to cease such activity.” The notice concludes

with the following statement:

Having received this notice, should the same be found by
a court of competent jurisdiction to constitute a violation
of Louisiana Revised Statute 51:1401, et seq., the Unfair
Trade Practices Ace and Consumer Protection Law, the
petitioner in said suit will have fulfilled the notice
requirement of La. R.S. 51:1409, and may be entitled to
treble damages under the statutes. [Emphasis added].

The district court explained in its Reasons for Judgment that it awarded

treble damages because successful plaintiffs in LUTPA actions are “entitled to

‘three times the actual damages sustained,’ as well as “reasonable attorney fees and

costs” pursuant to La. Rev. Stat. 51:1409(A). However, as mentioned in both the
13

statute and the Louisiana Attorney General’s letter, recovery for treble damages is

limited to instances where defendants knowingly persist in employing the same

unfair or deceptive method, act, or practice at issue in litigation against a plaintiff

after the notice was issued. 5 A party who prevails under LUTPA is not

automatically entitled to treble damages based on the plain wording of the statute,

which is why the Attorney General’s letter indicates that such an award is not

definite. It is undisputed that the Appellants did not continue to sell and/or supply

counterfeit beverages to the Appellees past June 2014.

The Appellees rely upon AIM Business Capital L.L.C. v. Reach Out

Disposal, No. 13-241, 2014 WL 1401526, at *3 (W.D. La. Apr. 8, 2014), in

support of their argument that they are entitled to treble damages. The Appellees

assert that AIM is applicable and treble damages awardable because the

“Appellants failed to repay Appellees the funds it had obtained from Appellees via

fraudulent inducement, leaving Appellants unjustly enriched as part of the ‘overall

scheme,’ ” after receiving a July 2015 notice from the Louisiana Attorney

General. However, in AIM, the defendants defrauded the plaintiffs through their

manipulation and fabrication of invoices, which were sent to the plaintiffs. Id. The

Western District in AIM determined that the defendant’s “failure to honor”

fraudulent invoices it had verified constituted part of the defendant’s “overall

scheme” and “hindered AIM’s ability to investigate, leading to possible further

damage.” Id. Thus, arguably, the defendant’s failure to repay the plaintiffs could be

interpreted as a continuation of the same type of fraud. See Thomas Indus. &

5
“The interpretation of a statute starts with the language of the statute itself. When a law is clear
and unambiguous and its application does not lead to absurd consequences, the law shall be
applied as written, and no further interpretation may be made in search of the intent of the
legislature.” Louisiana Municipal Association v. State, 04-0227, pp. 35-6 (La. 1/19/05) 893
So.2d 809, 836-37)(internal citations omitted) and citing La. Civ. Code. art. 9.
14

Mech. Contractors, LLC v. Just, No. CV 20-1102, 2020 WL 3429892, at *4 (E.D.

La. June 23, 2020).

Moreover, in McFadden v. Import One, Inc., 10-952 (La. App. 3 Cir.

2/9/11), 56 So.3d 1212, the Third Circuit determined that an award of treble

damages was appropriate in a conversion lawsuit where the defendant retained the

plaintiff's trade-in vehicle, after the Louisiana Attorney General had issued its

notice, because the defendant was attempting to the force the plaintiff into a car

sale at an interest rate that was higher than the parties agreed upon. Id., 10-952,

pp. 14-5, 56 So.3d at 1222-23.

In the matter sub judice, the Appellants’ overall scheme involved selling a

counterfeit product for a profit. Sales ceased in June 2014, while the Appellants

were still in possession of their ill-gotten profits. Does the fact that the Appellants

had not returned the profits constitute a continuation of the scheme while a lawsuit

is pending on the LUTPA claims and the amount of damages owed? Is every

defendant sued under LUTPA automatically liable for treble damages if they fail to

settle or attempt to settle a fraud claim prior to trial? We do not think so.

The plain language of La. Rev. Stat. 51:1409(A) requires the purposeful

continuation of the “unfair or deceptive method, act, or practice” on a plaintiff,

following receipt of the attorney general’s notice. Under the facts of this case, we

do not find that the Appellants engaged in any such methods, acts or practices after

the notice was issued. More specifically, we find the Appellants decision not to

repay the Appellees during the pendency of this matter does not meet the statutory

requirement for recovery of treble damages. Because there is no evidence that the

Appellants committed and/or continued to commit fraud after the attorney

general’s notice was issued, we reverse that portion of the district court’s judgment
15

awarding the Appellees treble damages and affirm the district court’s award of

actual damages in the amount of $155,093.89.

Moreover, the reduction of the Appellees’ award for damages necessitates

that the award of attorneys’ fees is proportionately decreased. The district court

awarded the Appellees attorneys’ fees in the amount of 40% of the total damages

pursuant to the Louisiana Civil Code and LUTPA. Thus, we reduce the district

court’s award of $186,112.67 to 40% of $155,093.89, which is $62,037.55.

Recission

The Appellants aver the district court made two errors pertaining to

recission: awarding the Appellees the return of the sales price without also

requiring the return of the object of the sale or any of the other legal requirements

for recission; and, relying on La. Civ. Code art. 1958, involving rescission of a

contract, when no rescission was made in this matter.

In addressing the Appellants’ arguments pertaining to recission of a

contractual agreement, we recognize that in Louisiana “consent may be vitiated by

error, fraud, or duress.” La. Civ. Code art. 1948. Moreover, Louisiana Civil Code

articles 1953 and 1958 are two interrelated articles pertaining to fraud located in

Title IV of the Civil Code, entitled “Conventional Obligations or Contracts,”

Chapter 4, “Vices of Consent,” Section Two. Article 1953, which defines fraud as

a vice of contractual consent, provides:

Fraud is a misrepresentation or a suppression of the truth
made with the intention either to obtain an unjust
advantage for one party or to cause a loss or
inconvenience to the other. Fraud may also result from
silence or inaction.

Moreover, “[a]s vitiation of consent is grounds for rescission, La. C.C. art. 1958

provides that '[t]he party against whom rescission is granted because of fraud is
16

liable for damages and attorney fees.’ ” Stutts v. Melton, 13-0557, p. 9 (La.

10/15/13), 130 So.3d 808, 814.

The district court determined the parties were operating under a beverage

distribution agreement which the Appellees were fraudulently induced by the

Appellants into entering. The Court explained in its Reasons for Judgment that

evidence and testimony adduced at trial revealed that the Appellees consent to said

agreement was vitiated by fraud, the Appellees were entitled to an award of

attorney fees and actual damages representing the amount Appellees paid to

Appellants for the counterfeit beverages because “restoration in kind is impossible

given the consumable nature of the products involved.”6

Pursuant to our de novo review, we do not find that the district court erred as

the record reflects that the Appellants were bad faith obligors who used fraud to

obtain the Appellees consent to enter into a beverage distribution agreement for

authentic beverage products the Appellants knew they were unable to provide. A

6
In its Reasons for Judgment, the district court additionally relied on the following
jurisprudence and civil code articles in reasoning the Appellees were entitled to actual damages:

 “[t]he measure of damages in a breach of contract action depends
upon whether the breach was in good faith or bad faith.”
Brennan’s, Inc. v. Colbert, 2015-0325, p. 39 (La. App. 4 Cir.
4/13/16), 191 So.3d 1101, 1121;

 an obligor in bad faith is liable for all damages, foreseeable or not,
that are a direct consequence of his failure to perform. La. Civ.
Code art. 1997;

 upon dissolution of a contract, the parties shall be restored to the
situation that existed before the contract was made. If restoration in
kind is impossible or impracticable, the court may award damages.
La. Civ. Code art. 2018.

Appellate courts review judgments, not reasons for judgment. Wooley v. Lucksinger, 09-
0571, 09-0584, 09-0585, 09-0586, p. 77 (La. 4/1/11), 61 So.3d 507, 572 (quoting Bellard v.
American Cent. Ins. Co., 2007-1335, p. 25 (La. 4/18/08), 980 So.2d 654, 671). Nevertheless,
appellate courts may review the district court's reasons for judgment to gain insight into the
judgment. Id., 09-0571, 09-0584, 09-0585, 09-0586, p. 78, 61 So.3d at 572.

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return in kind of the beverages was impossible under the facts of this case; thus,

ordering the Appellants to return the purchase price to the Appellees for the

nonconforming beverages was the only option left to restore the Appellees to a

situation that existed pre-agreement under La. Civ. Code art. 2018. This

assignment of error is without merit.

No Cause of Action Exists without Actual Damage, Loss or Injury
The Appellants additionally assert that the district court erred in ignoring

basic legal principles establishing that no cause of action exists without the

existence of actual damage, loss or injury. We pretermit discussion of this

assignment of error as we have discussed above that the Appellees award of

damages under LUTPA and as well as for breach of contract and fraud were valid

as their collective loss in this matter was the purchase price paid for the

nonconforming beverages. The district court was legally correct in determining

that the law provides a remedy for the causes of action raised by the Appellees in

this matter.

Nonconformity of Coca Cola Products
The Appellants assert the district court erred in finding that all of the Coca

Cola products sold by the Appellants to the Appellee were nonconforming even

though there was no evidence whatsoever to support that conclusion. Considering

the testimony of Mr. Schiffman, and the evidence introduced at trial, including Mr.

Schiffman’s guilty plea and the list of items seized from the Appellants’

warehouse, we find this argument to be disingenuous.

Mr. Schiffman testified that FSL was not a licensed distributor of Coke

products. Additionally, only generic soda syrups were seized at the Appellants’

warehouse, further evidencing that the authentic beverages the Appellees

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negotiated for were not being supplied. We find this assignment of error to be

without merit.

Personal Liability of Mr. Schiffman

Lastly, the Appellants aver the district court erred in ignoring basic

principles of corporate law establishing that a corporation is a separate and distinct

legal entity from its shareholders and that absent special circumstances a

shareholder is not liable for the legal liability of the corporation.

When individual member(s) of a juridical entity mismanage the entity or

“otherwise thwart the public policies justifying treating the entity as a separate

juridical person,” the individual member(s) have been subjected to personal

liability for obligations for which the juridical entity would otherwise be solely

liable, in narrowly defined circumstances. Ogea v. Merritt, 13-1085, p. 6 (La.

12/10/13), 130 So.3d 888, 895. When individual member(s) are held liable under

such circumstances, it is said that the court is “piercing the corporate veil.” Id.

(citing Charming Charlie, Inc. v. Perkins Rowe Associates, L.L.C., 11-2254, p. 6

(La.App. 1 Cir. 7/10/12), 97 So.3d 595, 598).

The Louisiana Supreme Court has held that the corporate veil may be

pierced in instances "where a corporation is simply the “alter ego” of the

shareholder." Andretti Sports Mktg. Louisiana, LLC v. Nola Motorsports Host

Comm., Inc., 147 F. Supp. 3d 537, 561-62 (E.D. La. 2015). This doctrine has been

applied in "situations where fraud or deceit has been practiced by the shareholder

acting through the corporation.” Id.

Mr. Schiffman’s fraudulent and deceitful actions are fully writhed

throughout the facts of this matter. He personally lured Mr. Marullo into

contracting with FSL, knowing it did not sell the products Mr. Marullo specifically
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requested. Mr. Schiffman proceeded to stay silent for four and half years as his

company sold and supplied the Appellees with nonconforming beverage products.

Moreover, he testified during his April 4, 2019 deposition, that he was the only

person behind this scheme while he employed others at the FSL warehouse to carry

on the manual work required to maintain the fraud, such as mislabeling BIBs to

appear as though they are the genuine beverages the Appellees and other customers

ordered. Thus, under the facts of this matter, we find that the district court did not

err in finding Mr. Schiffman personally liable.

DECREE

For the foregoing reasons, we affirm that portion of the May 26, 2020

judgment awarding the Appellees actual damages in the amount of $155,093.89.

However, we reverse the award of treble damages under LUTPA as well as the

award of attorneys’ fees, which is reduced to $62,037.55. Lastly, the January 24,

2019 judgment of the district court, granting the Appellees’ motion to compel, is

also affirmed.

AFFIRMED IN PART;
REVERSED IN PART AND
RENDERED

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