Jacqueline Bazile v. Nestle' USA, Inc.

STATE OF LOUISIANA
COURT OF APPEAL, THIRD CIRCUIT

06-223

JACQUELINE BAZILE

VERSUS

NESTLÉ USA, INC., ET AL.

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APPEAL FROM THE
TWELFTH JUDICIAL DISTRICT COURT
PARISH OF AVOYELLES, NO. 2004-6626-B
HONORABLE WILLIAM BENNETT, DISTRICT JUDGE

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ULYSSES GENE THIBODEAUX
CHIEF JUDGE

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Court composed of Ulysses Gene Thibodeaux, Chief Judge, Jimmie C. Peters, and J.
David Painter, Judges.

PAINTER, JUDGE, CONCURS AND ASSIGNS WRITTEN REASONS.

REVERSED AND RENDERED.

Stephen C. Resor
Sullivan, Stolier & Resor
909 Poydras Street - #2600
New Orleans, LA 70112
Telephone: (504) 561-1044
COUNSEL FOR:
Defendant/Appellee - Dolgencorp, Inc.

Jason R. Bonnet
Kendra Leigh Duay
Leake & Anderson
1100 Poydras Street - Suite 1700
New Orleans, LA 70163
Telephone: (504) 585-7500
COUNSEL FOR:
Defendant/Appellant - Nestlé USA, Inc.

Cory Paul Roy
P. O. Box 544
Marksville, LA 71351
Telephone: (318) 240-7800
COUNSEL FOR:
Plaintiff/Appellee - Jacqueline Bazile

THIBODEAUX, Chief Judge.

This case involves the assessment of damages against a private

corporation for failure to fund a settlement within thirty days. The plaintiff,

Jacqueline Bazile, sued Nestlé USA, Inc. (Nestlé) after allegedly finding worms in

a candy bar manufactured by Nestlé. No insurance companies were involved in the

suit. The parties settled the matter for $1,500.00, and the settlement was funded

approximately sixty-four days later. However, when the settlement was not funded

within thirty days, Bazile filed a motion for enforcement of the settlement and for bad

faith damages. The trial court assessed $5,000.00 in bad faith damages against Nestlé

pursuant to La.R.S. 22:1220, which governs an insurer’s duty to fund a settlement

within thirty days from settlement. It is from this judgment, and from a judgment

denying a new trial, that Nestlé appeals. We reverse the judgment for the bad faith

penalty against Nestlé. It is not an “insurer” within the meaning of La.R.S. 22:1220.

I.

ISSUES

We must decide whether the trial court erred in applying the thirty-day

time restriction of La.R.S. 22:1220 to a settlement not involving an insurer.

II.

FACTS AND PROCEDURAL HISTORY

On July 12, 2004, Bazile sued the Nestlé corporation and Dolgencorp,

Inc. after allegedly discovering worms in a candy bar that she had purchased from a

Dollar General store in December 2003. Dolgencorp, Inc. was subsequently

dismissed. No insurance companies were named in the suit or involved in the

litigation.

On December 6, 2004, Nestlé accepted the counteroffer from Bazile to

settle the suit for $1,500.00 and faxed a letter to Bazile confirming the amount. The

letter agreed to “pay plaintiff $1,500, inclusive of medical specials and court costs,

in exchange for a full and final dismissal of all claims against Nestlé USA, Inc.” The

letter also requested a tax identification number (TIN) from Bazile’s attorney for the

funding of the settlement. The parties had previously agreed that Nestlé would pay

the court costs in addition to the settlement amount. Therefore, this letter of

December 6, 2004, inaccurately reflects that the amount of $1,500.00 includes and

settles all damages and all court costs. Bazile did not respond to this mistake but later

argued that the settlement was confected in this letter of December 6, 2004. Bazile

also did not respond to the request for the TIN.

On December 8, 2004, Nestlé forwarded a Receipt and Release and

Motion to Dismiss and again requested the TIN for the settlement. Bazile did not

respond to this correspondence, even though the enclosed dismissal again failed to

reflect that court costs would be paid by Nestlé.

As of January 7, 2005, Nestlé had not received the signed settlement

documents. On this date, Nestlé forwarded correspondence requesting the executed

copies of the Receipt and Release and also requesting the TIN for a third time.

On January 12, 2005, Bazile wrote Nestlé, acknowledging the January

7, 2005 correspondence and enclosing the executed Receipt and Release. However,

at this time Bazile requested a revised Motion to Dismiss that reflected the parties’

agreement that all costs would be paid by Nestlé. Counsel for Bazile did not ask

about the settlement check, nor did he provide his TIN as requested for the settlement.

Counsel for Nestlé obtained the TIN of counsel for Bazile by phone and wrote it on

2

the January 12, 2005 correspondence. Nestlé would later argue that the settlement

was confected no earlier than January 12, 2005.

On January 21, 2005, Bazile wrote Nestlé, enclosing the executed

revised Motion to Dismiss reflecting that all costs would be borne by Nestlé.

On January 27, 2005, counsel for Nestlé inadvertently filed the Motion

to Dismiss before funding the settlement. The record indicates that the Nestlé

corporation’s third-party claims administrator transferred the file to another office and

that this transfer contributed to miscommunications between the attorney’s office and

the claims office and contributed to some delay in confecting the settlement check.

On January 29, 2005, Bazile filed a motion to enforce the settlement and

requested damages for bad faith handling of the settlement pursuant to La.R.S.

22:1220. The motion to enforce was ostensibly filed to protect Bazile’s interests in

light of the premature filing by Nestlé of the motion to dismiss.

On February 4, 2005, Nestlé cut the settlement check for $1,500.00 and,

upon receipt of same, counsel for Nestlé sent the check by Federal Express to counsel

for Bazile. Accompanying the check was correspondence dated February 7, 2005.

The correspondence contained an apology for the premature filing of the Motion to

Dismiss before sending the settlement check which prompted the filing of the motion

to enforce. The correspondence also confirmed in writing a verbal agreement

wherein counsel for Bazile agreed to withdraw the motion to enforce upon receipt of

the settlement check. At the hearing, counsel for Bazile did not deny the agreement

to withdraw the motion to enforce but attempted to discount it by indicating that there

was no proof of the agreement.

On April 26, 2005, Bazile filed a motion to reopen the case for

submission of additional evidence. Counsel for Bazile asserted that he hand wrote

3

a response on Nestlé’s first offer to settle wherein Bazile made the counteroffer of

$1,500.00, and that this letter was inadvertently omitted from the exhibits. The trial

court granted the motion, and after a hearing on May 16, 2005, the court accepted the

letter with the handwritten response.1 While there is confusion in the record

regarding the date of this letter with the handwritten response, the letter is of no

moment. The December 6, 2004 letter from Nestlé, which is in the record, without

any response, confirms the previous counteroffer of $1,500.00, and there are no

allegations of a confected settlement prior to December 6, 2004.

The trial court found in favor of Bazile and assessed a $5,000.00 penalty

against Nestlé pursuant to La.R.S. 22:1220 for failure to fund the settlement within

thirty days from December 6, 2004.

On June 27, 2005, Nestlé filed a motion for a new trial based upon

La.Code Civ.P. arts. 1971 and 1972(1), on the grounds that the judgment was

contrary to the law and the evidence. In its supporting memorandum, Nestlé argued

for the first time that it was not an insurer and, therefore, not subject to La.R.S.

22:1220 or its thirty-day limitation on funding a settlement. Nestlé has continued to

maintain that, despite the inapplicability of the statute, the settlement was funded

timely under La.R.S. 22:1220, where the settlement was not confected until January

12, 2005, and the settlement was funded on February 9, 2005. Nestlé further argues

that La.R.S. 22:1220 is inapplicable because Nestlé never knowingly held the check.

1
This letter does not appear in the record.

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III.

LAW AND DISCUSSION

Whether Nestlé Is an Insurer under La.R.S. 22:1220

Nestlé contends that the trial court erred in applying the thirty-day time

restriction of La.R.S. 22:1220 to the Nestlé settlement in this case where Nestlé is not

an insurer under the meaning of that statute. We agree. Louisiana Revised Statutes

22:1220 is a penal statute and must be strictly construed. Bennett v. State Farm Ins.

Co., 03-1195 (La.App. 3 Cir. 3/24/04), 869 So.2d 321. It provides in pertinent part:

La.R.S. 22:1220. Good faith duty; claims settlement
practices; cause of action; penalties

A. An insurer, including but not limited to a foreign
line and surplus line insurer, owes to his insured a duty of
good faith and fair dealing. The insurer has an affirmative
duty to adjust claims fairly and promptly and to make a
reasonable effort to settle claims with the insured or the
claimant, or both. Any insurer who breaches these duties
shall be liable for any damages sustained as a result of the
breach.

B. Any one of the following acts, if knowingly
committed or performed by an insurer, constitutes a breach
of the insurer’s duties imposed in Subsection A:

(1) Misrepresenting pertinent facts or
insurance policy provisions relating to any
coverages at issue.

(2) Failing to pay a settlement within
thirty days after an agreement is reduced to
writing.

(3) Denying coverage or attempting to
settle a claim on the basis of an application
which the insurer knows was altered without
notice to, or knowledge or consent of, the
insured.

(4) Misleading a claimant as to the
applicable prescriptive period.

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(5) Failing to pay the amount of any
claim due any person insured by the contract
within sixty days after receipt of satisfactory
proof of loss from the claimant when such
failure is arbitrary, capricious, or without
probable cause.

....

C. In addition to any general or special damages to
which a claimant is entitled for breach of the imposed duty,
the claimant may be awarded penalties assessed against the
insurer in an amount not to exceed two times the damages
sustained or five thousand dollars, whichever is greater.
Such penalties, if awarded, shall not be used by the insurer
in computing either past or prospective loss experience for
the purpose of setting rates or making rate filings.

Nestlé cites Thibodeaux v. Stapp Towing Co., Inc., 96-1511, 96-1514

(La.App. 3 Cir. 8/27/97), 702 So.2d 693, where the trial court awarded punitive

damages to the plaintiffs under La.R.S. 22:1220, after the defendant towing

company’s vessel drifted into the plaintiffs’ pleasure craft and dock. In reversing the

trial court, a panel of this court held that the statute imposing a duty of good faith and

fair dealing upon an insurer and prescribing penalties for violating this duty did not

permit an award of punitive damages against the defendant, who was not an insurer.

More specifically, after making it clear that the award of negligence damages was not

at issue, but rather the only issue was whether the trial court erred as a matter of law

in assessing a penalty under La.R.S. 22:1220, the panel articulated as follows:

The gist of defendant’s argument is that because it is
not an insurer, it should not have been held liable for
punitive or exemplary damages, as the penal provisions of
La.R.S. 22:12202 explicitly imposes [sic] both the duty and
the penalties only against insurers. As defendant points
out, La.R.S. 22:1212 defines the term “insurer” as follows:

§ 1212. Definitions

Louisiana Revised Statutes 22:1220 was amended by 2006 La. Acts No. 12, § 1; however,
2

the amendment does not affect the issues addressed in this opinion.

6

C. “Insurer” means any person,
reciprocal exchange, interinsurer, Lloyds
insurer, fraternal benefit society, or any other
legal entity engaged in the business of
insurance, including insurance agents,
insurance brokers, surplus lines brokers, and
insurance solicitors. Insurer shall also mean
medical service plans, hospital service plans,
health maintenance organizations, and
prepaid limited health care service plans. For
the purposes of this Part, these foregoing
entities shall be deemed to be engaged in the
business of insurance.

In view of the fact that there is no question but that
defendant is not and never has been alleged to be an insurer
within the purview of La.R.S. 22:1212, we are compelled
to reverse the judgment of the trial court. When a statutory
or codal provision enacted by the Louisiana Legislature is
clear and unambiguous, its letter shall not be disregarded
under the pretext of pursuing its spirit; rather, the law is to
be applied as written and no further interpretation may be
made in search of the intent of the legislature.
La.Civ.Code art. 9; La.R.S. 1:4. La.R.S. 22:1220,
particularly when read in conjunction with La.R.S.
22:1212(C), only imposes upon insurers the duty to settle
upon pain of penalties, and the trial court erred in holding
to the contrary, for the law of Louisiana is clear insofar as
it provides that a party cannot recover damages for failure
to settle a case, except in the limited circumstances
provided by statute. Yoes v. Shell Oil Co., 95-12 (La.App.
5 Cir. 5/10/95); 657 So.2d 241, writ denied, 95-2087 (La.
11/17/95); 663 So.2d 714; Guillory v. Gulf South
Beverages, Inc., 506 So.2d 181 (La.App. 5 Cir. 1987).

In this case, plaintiffs can allude to no legal authority
by which defendant, neither an insurer nor a health
provider, can be held answerable for more than the
damages occasioned by its delict.

Id. at 694.3

Nestlé also cites Rawls v. City of Bastrop, 38,449 (La.App. 2 Cir.

5/12/04), 873 So.2d 934. In this property damage case, the plaintiffs filed suit against

the City of Bastrop, claiming that paint overspray from the negligent painting of a

3
Judge Thibodeaux dissented in Thibodeaux. He has now abandoned his contrary position.

7

municipal building damaged their vehicle. The trial court found the city liable for

damages, penalties, and attorney fees. The city appealed and argued that the trial

court erred in awarding inappropriate damages and in awarding penalties and attorney

fees. The appellate court affirmed the damage award, but reversed the award of

penalties and attorney fees, stating as follows:

The City’s second issue on appeal is whether the
trial court erroneously awarded penalties and attorney fees.
On this issue, the City argues that it is a member of the
Louisiana Municipal Association Risk Management
Agency (“LMARMA”) and part of a self-insurance fund.
The City further argues that there is a distinct difference
between a regular insurance company and the LMARMA.
In support of this argument, the City cites the provisions of
La.R.S. 33:1345, which state in pertinent part that an
interlocal risk management agency is not an insurance
company or an insurer under the laws of Louisiana, and
that the development and administration by such agency of
one or more group self-insurance funds shall not constitute
doing insurance business.

In opposition to this argument, the plaintiffs assert
that the record in this matter does not reflect that the City
is anything other than a self-insured entity. They also
argue that the trial court did not indicate that the City was
an insurance company, but that the court simply likened the
City to any other self-insured company, and that because of
the untimely manner in which the City satisfied its liability
in this case, the court concluded it was appropriate to
sanction the City as though it were an insurance company.
In this regard, the plaintiffs argue that the duties of good
faith and fair dealing incumbent upon insurers pursuant to
the provisions of La.R.S. 22:658 and 22:1220 should also
apply to self-insurers.

Id. at 937.

After reviewing the statutory provisions, the court in Rawls disagreed

with the plaintiffs, quoting La.R.S. 22:1220(A) and (C) and stating as follows:

The above-quoted provisions are found in Part 26 of
Chapter 1 of the Louisiana Insurance Code. Part 26,
entitled “Unfair Trade Practices,” is designed to regulate
the trade practices in the business of insurance, in
accordance with federal law, by defining or providing for

8

the determination of all acts, methods, and practices which
constitute unfair methods of competition and unfair or
deceptive acts and practices in this state, and to prohibit the
same. La.R.S. 22:1211.

Id. at 938.

After quoting the definition of an insurer pursuant to La.R.S.

22:1212(C), as did this court in Thibodeaux, the Rawls court stated as follows:

As we held in Block v. St. Paul Fire & Marine Ins.
Co., 32,306 (La.App. 2d Cir. 9/22/99), 742 So.2d 746,
statutes requiring timely payment of claims and imposing
a duty of good faith and fair dealing are penal in nature
and, therefore, must be strictly construed. Even without
the definition of “insurer” quoted above, a strict
interpretation of the word “insurer” would not include the
City in the instant case. . . . [T]he above-quoted definition
of “insurer” plainly shows that the legislature intended to
include only those entities engaged in the business of
insurance; the City is not in the insurance business.
Accordingly, the City is not an “insurer” for purposes of
La.R.S. 22:1220.

Because the penal provisions of this statute must be
strictly construed, they cannot be applied by analogy to the
City when the City does not fall within the plain reading of
the words of the statute. Thibodeaux v. Stapp Towing Co.,
96-1514 (La.App. 3d Cir. 8/27/97), 702 So.2d 693.
Moreover, because the City is not an insurer, we also find
inapplicable the penalty and attorney fee provisions of
La.R.S. 22:658.

Id. at 939.

Accordingly, based upon the foregoing, we find that the trial court erred

as a matter of law in finding that Nestlé was an insurer under Title 22 and in assessing

a $5,000.00 penalty under La.R.S. 22:1220 for failure to fund a settlement within

thirty days. Because we find La.R.S. 22:1220 inapplicable, we need not address

whether the settlement was reduced to writing on December 6, 2004, as Bazile argues,

or on January 12, 2005, as Nestlé argues.

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Nestlé has further contended that the trial court erred in finding that the

thirty-day limitation on funding the Nestlé settlement began to run before counsel for

Bazile supplied his TIN to counsel for Nestlé. Again, since we find that

La.R.S.22:1220 is inapplicable to Nestlé in the present case, it is likewise not

necessary to address the issue of the TIN or the issue of the denial of Nestlé’s motion

for a new trial.

IV.

CONCLUSION

Based upon the foregoing, the judgment of the trial court is reversed.

Costs of this appeal are to be borne by plaintiff-appellee, Jacqueline Bazile.

REVERSED AND RENDERED.

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STATE OF LOUISIANA
COURT OF APPEAL, THIRD CIRCUIT

06-223

JACQUELINE BAZILE

VERSUS

NESTLÉ USA, INC., ET AL.

Painter, Judge, concurs.

Were it possible under the law, I would affirm the trial court’s judgment

assessing Nestlé with penalties. However, the law as written allows Nestlé avoid the

consequences of its failure to pay by self-insuring. Under the existing law no result

other than that reached by the majority is possible. Basically, the law provides no

penalty where a self-insured defendant fails to pay a plaintiff after settlement. Even

worse, if the defendant has a shadow insurer that does not appear on the surface, the

same result can occur. In this case, there is no evidence that Nestlé is anything other

than self-insured and La.R.S. 22:1220 must be strictly construed. It may be that this

problem is one which should be corrected by the legislature. As a result, I concur in

the result reached by the majority.