Rick M. Sutton, Individually And Derivatively On Behalf Of Rjano Holdings, Inc. And Maison Royale, Llc v. Jack Adams, Maison Royale, Llc And Rjano, Inc.

Supreme Court of Louisiana
March 07, 2023
Chief Deputy Clerk of Court
For the Court
The Supreme Court of the State of Louisiana
RICK M. SUTTON, INDIVIDUALLY AND
DERIVATIVELY ON BEHALF OF RJANO
HOLDINGS, INC. AND MAISON ROYALE, LLC
VS.
JACK ADAMS, MAISON ROYALE, LLC AND
RJANO, INC.
No. 2022-C-01672
_ _
_ _ _ _
I
N RE: Rick M. Sutton - Applicant Plaintiff; Derivatively on behalf of Rj ano
Holdings, Inc. - Applicant Plaintiff; Maison Royale, LLC - Applicant Plaintiff;
Applying For Writ Of Certiorari, Parish of Orleans Civil, Orleans Civil District
Court Number(s) 14-10709, Court of Appeal, Fourth Circuit, Number(s) 2019-CA-
0992;
_ _ _ _ _ _
March 07, 2023
Writ application granted. See per curiam.
JDH
JLW
SJC
JTG
WJC
JBM
PDG
03/07/2023 "See News Release 012 for any Concurrences and/or Dissents."

SUPREME COURT OF LOUISIANA
No. 2022-C-01672
RICK M. SUTTON, INDIVIDUALLY AND DERIVATIVELY ON BEHALF
OF RJANO HOLDINGS, INC. AND MAISON ROYALE, LLC
vs.
JACK ADAMS, MAISON ROYALE, LLC AND RJANO, INC.
&
Nos. 2022-C-1674 & 2022-C-1677
JACKADAMS
vs.
RICK SUTTON
On Writ of Certiorari to the Court of Appeal, Fourth Circuit,
Parish of Orleans Civil
PER CURIAM
Writs granted. In these applications, the applicant, Rick Sutton, seeks review
of: 1) an April 26, 2019 judgment of Division N of the Orleans Parish Civil District
Court, wherein the court sustained Jack Adams' exceptions of no right of action and
res judicata and dismissed the applicant's Breach of Contract suit with prejudice; 2)
a ruling of the Fourth Circuit Court of Appeal sustaining Adams' exception of res
judicata and reversing a December 7, 2018 judgment' of Division L rendered in
favor of the applicant on his mandamus action; and, 3) the Fourth Circuit's reversal
of a September 3, 2019 judgment of Division L which overruled the exception of res
judicata filed by Maison Royale, LLC in opposition to the applicant's third-party
demand and granted the applicant's motion for nullity. Specifically, the Fourth
1 The December 7, 2018 Judgment ordered Adams to recognize the applicant's 50% ownership in
Rjano Holdings, Inc. and prohibited Adams from asserting any claim that he may act unilaterally
for, or on behalf of, Rjano Holdings, Inc. without a vote of all shareholders. Adams v. Sutton,
19-0247 (La. App. 4 Cir. 10/12/22), -- So.3d--, 2022 WL 6944288.
1
03/07/2023

Circuit: sustained Maison Royale's exception of res judicata and dismissed the
applicant's third-party demand against it with prejudice; sustained Adams'
exception of nonjoinder of indispensable parties; vacated the district court's grant of
the motion for nullity; and, dismissed the nullity motion filed by applicant in
Division L.
THE RICO JUDGMENT
The objections raising the exceptions of res judicata in these matters all arise
from a single judgment rendered by Division D on October 25, 2017 (the RICO
judgment.) Applicant instituted the proceedings underlying the RICO judgment
with the filing of a Petition for Damages, naming Jack Adams, Charles Adams (Jack
Adams' father), and Polly Point Imports Corporation, as defendants. Therein, the
applicant alleged causes of action for: (1) violations of the Louisiana Racketeering
Act (RICO); (2) violations of the Louisiana Unfair Trade Practices Act (LUTPA);
(3) fraud and misrepresentation; (4) breach of fiduciary duty; and, (5) detrimental
reliance. Applicant claimed that Adams breached the settlement agreement entered
into by the parties subsequent to the filing of the Breach of Contract suit filed in
Division N, failed to disclose information that was pertinent to the settlement, and
failed to negotiate in good faith. Applicant further alleged that Adams, his father,
and Polly Point impermissibly sold jewelry at the Maison Royale, LLC store at "fire
sale" prices, in violation of the settlement agreement, as well a-; in violation of the
RICO and LUTPA statutes, through fraudulent means, and in breach of fiduciary
duties owed to him. Following a hearing, the district court rendered the RICO
judgment, wherein it sustained the except ion of no cause of action as to all of the
applicant's claims, and sustained the exception of no right of action as to the RICO,
LUTPA, and breach of fiduciary duty claims, dismissing the applicant's claims
against all defendants with prejudice. The RICO judgment was affirm.ed on appeal
and writs were denied by the Louisiana Supreme Court. Sutton v. Adams, 18-196
2

(La. App. 4 Cir. 12/19/2018), 318 So.3d 776, writ denied, 19-346 (La. 4/22/19), 267
So.3d 1112, reconsideration denied, 19-346 (La. 9/6/19), 278 So.3d 362.
RES JVDICATA
Res judicata is designed to "promote judicial efficiency and final resolution
of disputes," and generally precludes the re-litigation of claims arising out of the
same facts and circumstances between the same parties of a previous suit in which
there is a valid, final judgment. Avenue Plaza, LLC v. Falgoust, 96-173 (La.
7/2/96), 676 So.2d 1077. The standard of review of a peremptory exception of res
judicata requires an appellate court to determine if the trial court's decision is legally
correct. Myers v. Nat'l Union Fire Ins. Co. of Louisiana, 09-1517, p. 5 (La. App.
4 Cir. 5/19/10), 43 So.3d 207, 210 (citation omitted). Louisiana courts recognize
that "a final judgment has the authority of res judicata only as to those issues
presented in the pleading and conclusively adjudicated by the court." Id. Moreover,
the doctrine of res judicata is stricti juris and, accordingly, any doubt concerning
the applicability of the principle must be resolved against its
application. Interdiction of Hunter, 18-685 (La. App. 4 Cir. 12/19/18), 318 So.3d
784, writ denied. 19-208 (La. 4/8/19), 267 So.3d 608.
The requirements that must be met for Louisiana courts to determine that a
matter is resjudicata are set forth in LSA-R.S. 13:4231, as follows:
Except as otherwise provided by law, a valid and final judgment is
conclusive between the same parties, except on appeal or other direct
review, to the following extent:
(1) If the judgment is in favor of the plaintiff, all causes of action
existing at the time of final judgment arising out of the transaction
or occurrence that is the subject matter of the litigation are
extinguished and merged in the judgment.
(2) If the judgment is in favor of the defendant, all causes of action
existing at the time offinaljudgm.ent arising out of the transaction
or occurrence that is the subject matter of the litigation are
extinguished and the judgment bars a subsequent action on those
causes of action.
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(3) A judgment in favor of either the plaintiff or the defendant is
conclusive, in any subsequent action between them, with respect to
any issue actually litigated and determined if its determination was
essential to that judgment.
I. April 26, 2019 Judgment
We note that the applicant's Breach of Contract suit, filed in November of
2014, was filed two years prior to the RICO suit filed in November of 2016. Under
its plain language, the res judicata statute applies to bar "a subsequent action"
between the same parties as to causes of action existing at the time of the final
judgment and arising out of the same transaction or occurrence that is the subject
matter of the litigation. LSA-R.S. 13:4231(2). Additionally, "[a] judgment in favor
of either the plaintiff or the defendant is conclusive, in any subsequent action
between them, with respect to any issue actually litigated and determined if its
determination was essential to that judgment." LSA-R.S. 13:4231(3). (Emphasis
added). This court has previously explained that, regarding res judicata, "the chief
inquiry is whether the second action asserts a cause of action which arises out of the
same transaction or occurrence that was the subject matter of the first action."
Burguieres v. Pollingue, 02-1385 (La. 2/25/03), 843 So.2d 1049, 1053. (Emphasis
added). Insofar as the district court sustained an exception of res judicata rendered
in a subsequent action to bar the claims alleged in the Breach of Contract suit ( a prior
suit), the court essentially applied res judicata in reverse. Based on the clear and
unambiguous language of the statute, the district court erred in finding that the RICO
judgment was res judicata as to the applicant's Breach of Contract suit.
Notwithstanding the statutory language, even assuming that a subsequent
action could bar a prior action, we find error in the lower courts' determination that
the "failed business relationship" between the parties was the relevant "transaction
or occurrence" in these suits. The causes of action alleged in the applicant's Breach
of Contract suit arise from claims that Adams breached an oral agreement that was
4

reached by the parties. Specifically, the applicant alleged that, in the summer of
2011, the parties agreed to open a jewelry store and fine art gallery together, and that
two entities would be formed: Rjano Holdings, Inc., to lease the property; and
Maison Royale, LLC, to operate the store. Applicant further alleged that the parties
agreed that Adams would handle all of the corporate and LLC paperwork, including
filing the requisite formation documents. Applicant alleged that, in October of 2014,
Adams breached their agreement and effectively froze him out of the business,
causing him financial losses. As such, the applicant, individually and derivatively
on behalf of Rjano Holdings, Inc. and Maison Royale, LLC, filed a petition for
damages for breach of contract and injunctive relief, preventing Adams from acting
unilaterally on behalf of Rjano Holdings, Inc. and Maison Royale, LLC. On
December 1, 2014, judgment was rendered in favor of the applicant, granting the
injunctive relief he sought.
In the RICO suit, the applicant reiterates the parties' factual history, stating
that he and Adams agreed to form Rjano Holdings, Inc. and Maison Royale, LLC
for the purpose of operating a jewelry store and fine art gallery, but that Adams
essentially froze him out of the business in October of 2014, necessitating the filing
of the Breach of Contract suit. Applicant further alleged that, in December of 2015,
after the Breach of Contract suit was filed, the parties entered into a settlement
agreement, pursuant to which the applicant was to buy out Adams' interest in Maison
Royale, LLC. Applicant alleges, however, that Adams failed to honor the settlement
agreement, and that he "committed numerous acts demonstrating that he never
intended to settle the outstanding issues," and conspired with his father, Charles
Adams, to hold a "fire sale" at Maison Royale, LLC and offer up to 70% discounts
on items subject to the proposed settlement agreement. Additionally, the applicant
alleged that Adams fraudulently induced him to enter into the settlement agreement
without disclosing all of the material facts. Applicant alleged that defendants'
5

"pattern of conduct" violated the RICO and LUTP A statutes, and asserted various
causes of action stemming from Adams' alleged failure to honor the settlement
agreement, his fraudulent and bad faith dealings, and his attempts to defraud the
applicant.
Based on the respective allegations, the suits are clearly based on separate and
distinct causes of action. While the Breach of Contract suit seeks damages for
actions that occurred prior to November 2014, and arising from the breach of the
parties' agreement vis-a-vis the formation, control, and operation ofRjano Holdings,
Inc. and Maison Royale, LLC, the RICO suit seeks damages resulting from Adams'
breach of the December 15, 2015 settlement agreement, and his actions in
conducting a fire sale and mishandling the financial assets of the business, all of
which occurred on or after December 15, 2015. Additionally, we note that the
applicant attempted to supplement and amend the breach of contract suit to add the
RICO suit causes of action. The district court, however, would not allow the
amendment. According to the applicant, the court did not want to enlarge the
pleadings. In any event, the applicant was therefore required to file a separate
lawsuit in order to preserve his claims.
II. December 7, 2018 Judgment
We also find error in the Fourth Circuit's rulings sustaining the exceptions of
res judicata filed by Adams and Maison Royale, LLC, and dismissing the applicant's
mandamus action and third-party demand, with prejudice. We initially note that
both the mandamus action and the third-party demand were filed in response and/or
opposition to Adams' Abuse of Process suit. Specifically, it was Adams' allegation
that he was the sole shareholder ofRjano Holdings, Inc. in the second supplemental
and amending abuse of process petition that prompted the applicant to request the
issuance of a Writ of Mandamus and a Writ of Quo Warranto directed to Adams,
6

pursuant to LSA-C.C.P. arts. 3901,2 3902,3 and 3864.4 The Writ of Quo Warranto
ordered Adams to show by what authority he claimed to represent the interests of
Rjano Holdings, Inc., and to establish who Rjano's shareholders were. The Writ of
Mandamus directed Adams to either recognize the applicant's 50% ownership
interest in Rjano Holdings, Inc., or show cause why he should not have to do so. A
four-day evidentiary trial was held at which the parties introduced "substantial
evidence," as well as extensive testimony.5 Following the trial, Division L rendered
judgment, ordering Adams to recognize the applicant's 50% ownership of Rjano
Holdings, Inc. and prohibiting him from asserting any claim that he may act
unilaterally for or on Rjano 's behalf without a vote of the shareholders. In his appeal
of the December 7, 2018 judgment, Adams raised the exception of res judicata,
alleging that the applicant's mandamus action was barred by the RICO judgment.
The Fourth Circuit sustained Adams' exception, finding that Adams' Abuse of
2 LSA-C.C.P. art. 3901 states:
Quo warrauto is a writ directing au individual to show by what authority he claims
or holds public office, or office in a corporation or limited liability compauy, or
directing a corporation or limited liability compauy to show by what authority it
exercises certain powers. Its purpose is to prevent usurpation of office or of powers.
'LSA-C.C.P. art. 3902 states:
When the court finds that a person is holding or claiming office without author ity,
the judgm ent shall forbid him to do so. It may declare who is entitled to the office
aud may direct au election when necessary.
When the court finds that a corporation or limited liability compauy is exceeding
its powers, the judgment shall prohibit it from doing so.
•LSA-C.C.P. art. 3864 states:
A. A writ of mandamus may be directed to a corporation or au officer thereof to
compel either of the following:
( 1) The holding of au election or the performa nce of other duties required by the
corporation's articles of incorporation or bylaws, or as prescribed by law.
(2) The recognition of the rights of the corporation's members or shareholders.
B. A writ ofmandamus may be directed to a limited liability compauy or a member
or mauager thereof to compel either of the following:
(1) The holding of au elect ion or the performance of other duti.es required by the
limited liability company's articles of organizati.on or operating agreement, or
as prescribed by law.
(2) The recognition of the rights of the limited liability company.
5 It is noted that Adams testified at the hearing, however, he ultimately invoked his 5th Amendment
right against self-incrimination.
7

Process suit, the applicant's mandamus action, and the RICO suit all arose from the
same business agreement and dispute over control and operation of the store, and
therefore, the causes of action asserted in the mandamus action arose out of the same
transaction or occurrence that was the subject matter of the RICO suit.
Consequently, the Fourth Circuit sustained Adams' exception of res judicata,
reversed the December 7, 2018 judgment making the applicant's mandamus action
peremptory, and remanded the case for further proceedings on Adams' Abuse of
Process claims.
As stated previously, the causes of action alleged in the RICO suit arose from
Adams' breach of the December 2015 settlement agreement, and his failure to
engage in good faith negotiations and fair dealing, as well as his actions in allegedly
selling store inventory at "fire sale" prices, in breach of the parties' agreement and
his fiduciary duties. The December 7, 2018 mandamus judgment resulted from the
applicant's request for relief pursuant to LSA-C. C.P. arts. 3 90 l, 3 902, and 3 8 64, and
was prompted by the allegation of Adams that he was the sole shareholder ofRjano
Holdings, Inc. In light of the responsive nature of the applicant's request for the writ
of mandamus, and considering the allegations raised in the RICO suit, we find that
the causes of action raised in the two did not arise from the same transaction or
occurrence. The Fourth Circuit's ruling, sustaining the exception of res judicata
and dismissing the December 7, 2018 judgment on the mandamus is in error.
ill. September 3, 2019 Judgment
We likewise find legal error in the Fourth Circuit rulings with regard to the
September 3, 2019 judgment.6 Specifically, we find that the Fourth Circuit erred in
reversing Division L's denial of Maison Royale' s exception of res judicata to the
6 In the September 3, 2019 judgment, Division L: denied Adams' exception ofnonjoinder of
indispensable parties, granted the applicant's motion to declare the RICO judgment an absolute
nullity, and denied Maison Royale's exceptions to the applicant's third-party demand., including
the exception of res judicata.
8

applicant's third-party demand and dismissing the demand with prejudice based on
its determination that the issue of the applicant's membership in Maison Royale,
LLC was "conclusively determined" in the RICO judgment. Maison Royale, LLC
is not a party to the RICO suit, nor does any language whatsoever regarding Maison
Royale's membership appear in the RICO judgment. We further note that, in its
reasons for judgment, Division L notes that the RICO judgment was rendered and
affirmed without the benefit of the four-day trial during the Writ of Quo Warranto
proceedings that were held in that court. Specifically, the court noted that, "[i]n this
proceeding, and having heard the extensive testimony of Mr. Adams, including the
invocation of his Fifth Amendment rights, this Court determined that Mr. Adams
had little to no credibility whatsoever." The court further noted that it determined
the "limited documents" relied upon by the RICO court to be of little to no value,
and that, in light of more extensive, developed testimony and evidence, it had found
the applicant to be a member ofRjano Holdings, Inc., "a corporation that Mr. Adams
himself testified was rolled directly into [the] Maison Royale partnership." In any
event, the court found that the "particular issues" raised in the applicant's
reconventional demand, third-party demand, and petition for declaratory judgment
had not previously been adjudicated, and that the matters raised therein were
distinguishable from the issues presented in the RICO case. Thus, res judicata did
not attach.
EXCEPTIONAL CIRCUMSTANCES
Louisiana law provides that an earlier judgment does not bar another action
by the plaintiff when exceptional circumstances justify relief from the res judicata
effect of the judgment. LSA-R.S. 13:4232(A)(l). This provision gives the court
discretion to grant relief from the judgment for exceptional circumstances. This
discretion must be exercised on a case-by-case basis and such relief should be
granted only in truly exceptional cases, otherwise the purpose of res judicata would
9

be defeated. Nevertheless, this discretion is necessary to allow the court to balance
the principle of res judicata with the interests of justice. The official comment to
the statute refers to Rule 60(b) of the Federal Rules of Civil Procedure for guidance
on what constitutes "exceptional circumstances." Rule 60(b) gives courts wide­
ranging equitable discretion to relieve a party from a final judgment, "especially if
no intervening rights have attached in reliance upon the judgment and no actual
injustice will ensue." 11 Charles Alan Wright, Arthur R. Miller, and Mary
Kane, Federal Practice and Procedure§ 2857, 256 (2nd ed. 1995). In
particular, Rule 60(b)(6) is a " gr and reservoir of equitable power to do justice in a
particular case when relief is not warranted" on other grounds specified in the rule,
and this clause "gives the courts ample power to vacate judgments whenever such
action is appropriate to accomplish justice." Hesling v. CSX Transp., Inc., 396
F.3d 632, 643 (5th Cir. 2005); Chauvin v. State Farm Mut. Auto. Ins. Co., 2007
WL 2903321, at *6 (E.D. La. 2007). It is designed to protect those drawn into error
by an awkward factual or legal scenario, not those who can allude to
no circumstance to justify their inaction below. Spear v. Prudential Property and
Cas. Ins. Co., 98-1663 (La. App. 4 Cir. 1/13/99), 727 So.2d 640, 642-43; Centanni
v. Ford Motor Co., 93-1133 (La. App. 3 Cir. 5/4/94), 636 So.2d 1153, writ
denied. 94-1949 (La. 10/28/94), 644 So.2d 656.
The evidence admitted at the trial of the mandamus in Division L indicates a
risk of a miscarriage of justice in this case. 7 Adams admitted under oath to falsifying
7 The evidence introduced at that trial established that the applicant: I) signed a lease on the store
premises as a duly authorized representative ofRjano Holdings, Inc., and as a personal guarantor,
assuming personal liability in excess of $2 million; 2) took no salary or other wages for
approximately 15 months; 3) put over $57,000 of his own money into the business in cash loans
and equity investments; and, 4) worked exclusively for the business, including making sales,
managing employees, traveling to view and purchasing art for sale in the store.

alleged corporate documents which he attempted to introduce into evidence as proof
that he was the sole shareholder ofRjano Holdings, Inc.8
CONCLUSION
For the reasons expressed herein, we vacate the April 26, 2019 judgment
rendered by Division N of the Orleans Parish Civil District Court, the Fourth
Circuit's ruling sustaining the exception of res judicata as to the applicant's
mandamus action, and the Fourth Circuit's ruling sustaining the exception of res
judicata and dismissing with prejudice the applicant's third-party demand against
Maison Royale, LLC, with prejudice. These matters are remanded to Division N for
a contradictory hearing pursuant to LSA-C.C.P. art. 1561,9 LSA-C.C.P. art. 253.2,10
and CDC App. 9.3 of the Louisiana District Court Rules,11 to determine whether
consolidation would be appropriate and/or in the interest of justice.
• At the trial of the mandamus, Adams attempted to introduce a copy of a purported stock certificate
as evidence that he was the sole shareholder of Rjano Holdings, Inc. However, during his
testimony, he admitted under oath that he had altered the purported certificate by both signing and
"back dating" the document well after litigation between th.e parties had co=enced.
'LSA-C.C.P. art. 156l(A) states:
A. When two or more separate actions are pending in the same court, the section or
division of the court in which the first filed action is pending may
order consolidation of the actions for trial or other limited purposes after a
contradictory hearing, upon a finding that co=on issues of fact and law
predominate, and, in the event a trial date has been set in a subsequently filed action,
upon a finding that consolidation is in the interest of justice. The contradictory
hearing may be waived upon the certification by the mover that all parties in all
cases to be consolidated consent to the consolidation.
10 The intcrdivisional transfer of cases is gover ned by LSA-C.C.P. art. 253.2, which states as
follows:
After a case has been assigned to a particular section or division of the court, it may
not be transferred from one section or division to another section or division within
the same court, unless agreed to by all parties, or unless it is being transferred to
effect a consolidation pursuant to Article 1561. However, the supreme court, by
rule, may establish uniform procedures for reassigning cases under circumstances
where an expeditious disposition of cases may be effectuated.
11 CDC App. 9.3 states, in pertinent part, as fol lows:
ALLOTMENT OF CASES
***
4. To achieve continuity of case management, and to avoid the appearance of
forum shopping, it is the policy of the court that subsequent but related cases
should be transferred to the division to which the orii,,'lllal case was allotted,
whether or not such earlier case is still pending. It shall be the duty of any
attorney in such cases to call to the court's attention the existence of such earlier
case.
***
11

VACATED AND REMANDED WITH INSTRUCTIONS.
TRANSFER AND CONSOLIDATION
l. To facilitate the fair and expeditious resolution of cases, it is the policy of the
court to transfer to the lower numbered suit and consolidate for trial those cases
in which such consolidation is appropriate. The transfer and consolidation shall
be by order of the judge to whom the case is being transferred, after
contradictory hearing wit h all parties in each case, or with their written
approval. It shall. be the duty of any attorney in any case which ought to be
consolidated to so move or call to the court's attention the pendency of related
cases that should be considered for consolidation.
12