MacRo Companies, Inc. v. Dearybury Oil & Gas, Inc.

STATE OF LOUISIANA
COURT OF APPEAL, THIRD CIRCUIT

CA 20-174

MACRO COMPANIES, INC.

VERSUS

DEARYBURY OIL & GAS, INC., ET AL.

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APPEAL FROM THE
FIFTEENTH JUDICIAL DISTRICT COURT
PARISH OF LAFAYETTE, NO. C-20184283
HONORABLE JULES D. EDWARDS III, DISTRICT JUDGE

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ELIZABETH A. PICKETT
JUDGE

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Court composed of Elizabeth A. Pickett, Billy Howard Ezell, and D. Kent Savoie,
Judges.

AFFIRMED.

Thomas J. Bernard
David C. Eppling
Staines, Eppling & Kenney
3500 N. Causeway, Suite 820
Metairie, LA 70002
(504) 838-0019
COUNSEL FOR DEFENDANTS/APPELLEES:
Florida Marine Transporters, LLC
Kenneth R. Pullen

Charles A. Mouton
Mahtook & Lafleur, L.L.C.
Post Office Box 3089
Lafayette, LA 70502
(337) 266-2189
COUNSEL FOR DEFENDANT/APPELLEE:
Dearybury Oil & Gas, Inc.

Robert D. Felder
Davidson, Meaux, Sonnier, McElligott, Fontenot, Gideon & Edwards, LLP
810 S. Buchanan Street
Lafayette, LA 70501
(337) 237-1660
COUNSEL FOR PLAINTIFF/APPELLANT:
Macro Companies, Inc.

PICKETT, Judge.

The plaintiff filed suit asserting claims for breach of contract and detrimental

reliance against three defendants to recover a commission it claims to be owed. It

now appeals the trial court‟s judgment granting the defendants‟ motions for

summary judgment and dismissing its claims.

FACTS

On September 20, 2017, Hurricane Maria made landfall on Puerto Rico.

The storm left the area in desperate need of fuel for emergency services. The

Federal Emergency Management Agency (FEMA) contacted Macro Companies,

Inc. (Macro), to supply five million gallons of fuel. Pursuant to FEMA‟s need,

Macro sought to purchase fuel and sell it to FEMA, and arrange for its

transportation to Puerto Rico. In an effort to provide the fuel services, Macro

contacted Kenneth R. Pullen at Florida Marine Transporters, LLC (FMT) for

assistance in purchasing and transporting the fuel. Mr. Pullen identified Dearybury

Oil & Gas, Inc. (Dearybury) as a source for Macro‟s fuel purchase.

Macro was already working with FEMA setting up a diesel fuel distribution

plan on Puerto Rico to supply hospitals, nursing homes, and water plants. Shortly

after it initiated negotiations with FMT and Dearybury to purchase and transport

fuel, Macro decided it was not in its best interest to proceed with FEMA‟s request.

Macro did not, however, walk away from the negotiations. Instead, Macro and

Dearybury agreed Dearybury would sell fuel directly to FEMA, and it would pay

Macro a five-cent commission on the sale. Before deciding not to contract with

FEMA, Macro also negotiated with FMT to transport frac tanks to Puerto Rico to

implement the distribution of the fuel at different ports on the island.

Dearybury then began negotiating with FEMA to sell it the five million

gallons of fuel Macro originally sought from it. FEMA solicited public bids for the

fuel service contract. FEMA awarded Dearybury a contract (the contract) for the

fuel and storage services “not to exceed $19,633,500.00.” Pursuant to the Federal

Acquisitions Regulations (FAR), specifically, 48 C.F.R. 52.205-3, the contract

contained a provision prohibiting Dearybury from paying a contingent fee to a

third party for assistance in obtaining the contract, and Dearybury refused to pay

Macro the five-cent commission. Macro filed suit against Dearybury, FMT, and

Mr. Pullen, asserting breach of contract and detrimental reliance claims to recover

the commission it negotiated with Dearybury. Macro asserted that FMT and Mr.

Pullen acted as Dearybury‟s agents in its negotiations with Dearybury and that it

relied to its detriment on their actions and representations allegedly made on

Dearybury‟s behalf. FMT answered the suit and asserted a counterclaim against

Macro to recover monies it allegedly incurred preparing for Macro‟s anticipated

contract with FEMA.1

In April 2019, Macro filed a motion for summary judgment, seeking to have

some of FMT‟s claims against it dismissed. The trial court granted the motion, and

FMT appealed the trial court‟s judgment. Another panel of this court determined it

did not have jurisdiction to consider the appeal because the judgment did not

dismiss any of FMT‟s claims. Thereafter, the defendants filed motions for

summary judgment, citing FEMA‟s contingent fee prohibition in the contract and

seeking to have Macro‟s claims dismissed. Macro filed another motion for

summary judgment, seeking to have FMT‟s claims against it dismissed.

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After suit was filed, FMT filed a motion to remove the suit to federal court. The motion
was denied, and the matter was remanded to the trial court. Thereafter, FMT filed an answer.

2

After a hearing, the trial court granted the motions for summary judgment

and dismissed all the parties‟ claims. Macro, FMT, and Mr. Pullen appealed.2

ASSIGNMENTS OF ERROR

Macro assigns two errors with the trial court‟s granting summary judgment

dismissing its claims against Dearybury, FMT, and Mr. Pullen:

1. The trial court erred in granting summary judgment on Macro‟s
breach of contract claims, considering that fuel is a “commercial
item” to which the FAR clause at issue does not legally apply, and
further considering extensive evidence showing why the FAR clause
does not apply to Macro‟s claims (or why, at the very least, there are
issues of fact).

2. The trial court erred by granting summary judgment dismissing
Macro‟s detrimental reliance claims, when detrimental reliance had
not been raised in Defendants‟ summary judgment motions.

SUMMARY JUDGMENT

Appellate courts review summary judgments de novo. “The summary

judgment procedure is designed to secure the just, speedy, and inexpensive

determination of every action[.]” La.Code Civ.P. art. 966(A)(2). It is favored and

must be construed to accomplish this purpose. Id. Summary judgment should be

granted, if the parties have had the opportunity to conduct “adequate discovery”

and the evidence shows there is “no genuine issue as to material fact and that the

mover is entitled to judgment as a matter of law.” La.Code Civ.P. art. 966(A)(3).

The mover has the burden of proof. La.Code Civ.P. art. 966(D)(1). When,

as here, the adverse party will have the burden of proof at trial, the mover must

show that an essential element to the adverse party‟s claim is lacking. Id. The

adverse party must then “produce factual support sufficient to establish” that a

2
FMT‟s appeal of the trial court‟s dismissal of its claims against Macro is addressed in
Macro Companies., Inc. v. Dearybury Oil & Gas, Inc., et al, 20-254 (La.App. 3 Cir. 2/ /21), ___
So.3d ___.

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genuine issue of material facts exists or “that the mover is not entitled to judgment

as a matter of law.” Id. The allegations or denials in the adverse party‟s pleading

will not defeat the motion. La.Code Civ.P. art. 967(B).

“When summary judgment is granted in the context of statutory

interpretation, there are no material issues of fact in dispute and the sole issue

before us is a question of law as to the correct interpretation of the statute at issue.”

Milbert v. Answering Bureau, Inc., 13-22, p. 8 (La. 6/28/13), 120 So.3d 678, 684.

Pursuant to the rules of statutory interpretation, “we are bound to a strict

interpretation of the plain language of the statutory provisions which are before

us.” Id.

DISCUSSION

Are Macro’s Claims Prohibited by the Contract?

In their motions for summary judgment, Dearybury, FMT, and Mr. Pullen

assert the contract prohibits Macro from collecting a contingent fee for any

assistance it may have provided Dearybury in obtaining the contract. Macro

argues the trial court improperly applied the prohibition without considering the

facts surrounding the contract and because it is for the purchase of a commercial

item; therefore, the contingent fee prohibition clause has no application here.

The contract contained the following provision:

(a) The Contractor warrants that no person or agency has been
employed or retained to solicit or obtain this contract upon an
agreement or understanding for a contingent fee, except a bona fide
employee or agency. For breach or violation of this warranty, the
Government shall have the right to annul this contract without liability
or to deduct from the contract price or consideration, or otherwise
recover, the full amount of the contingent fee.

(b) Bona fide agency, as used in this clause, means an established
commercial or selling agency, maintained by a contractor for the

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purpose of securing business, that neither exerts nor proposes to exert
improper influence to solicit or obtain Government contracts nor
holds itself out as being able to obtain any Government contract or
contracts through improper influence.

Bona fide employee, as used in this clause, means a person,
employed by a contractor and subject to the contractor‟s supervision
and control as to time, place, and manner of performance, who neither
exerts nor proposes to exert improper influence to solicit or obtain
Government contracts nor holds out as being able to obtain any
Government contract or contracts through improper influence.

Contingent fee, as used in this clause, means any commission,
percentage, brokerage, or other fee that is contingent upon the success
that a person or concern has in securing a Government contract.

Improper influence, as used in this clause, means any influence
that induces or tends to induce a Government employee or officer to
give consideration or to act regarding a Government contract on any
basis other than the merits of the matter.

48 C.F.R. 52.203-5 (emphasis added).

The statute plainly states its purpose is to protect the Government against

improper influences by scrutinizing and limiting the hiring of an intermediary on a

contingent basis to secure Government contracts. Thus, the prohibition is intended

to restrict “how the contract between the parties may be structured in an effort to

prevent corrupt practices.” CapitalKeys, LLC v. Ciber, Inc., 875 F.Supp.2d 59, 65

(D.D.C. 2012). The covenant also seeks to distinguish influence peddlers from

genuine intermediaries who provide legitimate services and benefits to potential

contractors by allowing contractors to engage bona fide employees or agencies on

a contingent fee basis. 48 C.F.R. 52.203-5.

Macro argues the defendants‟ arguments that its claims that are prohibited

by 48 C.F.R. 52.203-5 lack merit because 48 C.F.R. 3.404 excepts contracts for

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“commercial items,” such as fuel, from the contingent fee prohibition. Section

3.404 states:

The contracting officer shall insert the clause at 52.203-5,
Covenant Against Contingent Fees, in all solicitations and contracts
exceeding the simplified acquisition threshold, other than those for
commercial items . . . .
Macro asserts that the term “commercial items” is defined to include fuel. See

Federal Register Vol. 84, No.91/Friday, May 10, 2019/Proposed Rules, pg. 20607.

The defendants urge this argument is not properly before this court on

appeal because Macro did not argue it to the trial court as contemplated by Rule 1–

3 of the Uniform Rules–Courts of Appeal. Rule 1–3 limits appellate court review

to “issues which were submitted to the trial court and which are contained in

specifications or assignments of error, unless the interest of justice clearly requires

otherwise.”

Macro contends it did present this claim to the trial court and identifies

pages in the record to support its argument. Our review of the cited pages show,

however, that counsel for Macro made general arguments that the FAR do not

apply to the facts herein because they are meant “to prevent lobbying” and,

focused on the fact that it was not acting as a lobbyist.

Macro also argues the defendants‟ reliance on Adams v. Lori Heaphy &

Assoc., 14-580 (La.App. 3 Cir. 12/17/14), 155 So.3d 170, in support of its

arguments that it did not present the commercial item/fuel argument until appeal is

misplaced. In Adams, the claimant filed suit against the court reporter who

recorded and transcribed his deposition. He asserted complaints about the court

reporters‟ formatting of his deposition, urging that it was defaced in his 1008

claim, his affidavit, his opposition to the defendant‟s motion for summary

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judgment, and in oral argument to the trial court. Unlike Adams, Macro referenced

nothing remotely involving commercial items and, specifically, fuel, until appeal.

We find Macro‟s general references to FAR in the context of lobbying insufficient

notice of this new defense and conclude Macro did not present this specific issue to

the trial court.

Moreover, as the defendants point out, Section 3.404‟s use of the term

“shall” mandates that the contracting officer include the Covenant Against

Contingent Fees in all contracts . . . other than those for commercial items,” but it

does not mandate that the contracting officer not include the covenant in contracts

in which fuel is purchased. Macro has not shown this interpretation to be

incorrect. Furthermore, the defendants point out that the contract is for fuel, as

well as transportation to and storage of the fuel at Puerto Rico. For these reasons,

we find the interest of justice does not clearly require that we consider Macro‟s

arguments on this issue.

Macro next argues the trial court erred in concluding that the contingent fee

provision of the contract prohibits Macro from enforcing the contract against

Dearybury, arguing that the facts surrounding the negotiations should be

considered in determining the merits of the defendants‟ claims. It relies on

Troutman v. S. Ry. Co., 441 F.2d 586 (5th Cir. 1971), cert. denied, 404 U.S. 871,

92 S.Ct. 81 (1971)); where an attorney/lobbyist filed suit to enforce a contingent

fee contract against his client after he successfully obtained the relief sought by the

client. In Troutman, an attorney sued to collect a legal fee for his services in

obtaining an audience with President Kennedy and requesting his involvement in

the Interstate Commerce Commission‟s pending enforcement of increased rates for

transporting grain shipments. The attorney was successful, and the rates were not

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increased, which benefitted his client. Troutman did not deal with a plaintiff

seeking to collect a contingency fee for his assistance in securing a federal contract

that prohibited such fee. Accordingly, it has no application here.

Section 52.203-5(b) excepts only bona fide agencies or employees from the

contingent fee prohibition and specifies the criteria for determining who is a bona

fide agency or employee. Macro does not contend and has not shown that it falls

within this exception. Regardless, Macro argues the facts here show it did not

engage in conduct the prohibition is meant to prevent.

The defendants cite CapitalKeys, 875 F.Supp.2d 59, and Quinn v. Gulf &

Western Corp., 644 F.2d 89 (2d Cir. 1981), wherein the courts held that

contingency fee contracts entered in violation of government procurement

regulations were unenforceable, in support of their motions. The facts in

CapitalKeys are similar to the facts here: the plaintiff, who was not a contractor in

the business of securing business, engaged in a temporary relationship with the

defendant that resulted in the award of a single government contract. The court

determined that even though the plaintiff did not use personal influence, its fee

contract with the defendant was unenforceable because the plaintiff‟s payment was

contingent on the defendant being awarded the contract. The court rejected the

plaintiff‟s argument that the contract should be upheld because “it did not use

improper means in helping secure [the defendant‟s] sale,” finding that was of no

moment because: “„the corrupting tendency‟ of contingent fee agreements, not the

actual use of improper means, justifies voiding the agreement[]. Noonan v.

Gilbert, 68 F.2d 775, 775 (D.C.Cir.1934).” CapitalKeys, 875 F. Supp. at 64.

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Finding the reasons in CapitalKeys persuasive, we conclude the trial court

did not commit legal error in holding that Section 52.203-5‟s prohibition applies to

Macro‟s claims and dismissing them.

The trial court also dismissed Macro‟s claim of detrimental reliance against

FMT for the same reason. Macro contends this claim was not put at issue in the

defendants‟ motion for summary judgment and should not have been addressed by

the trial court. The defendants‟ motions for summary judgment sought dismissal

of Macro‟s claims but did not specifically address its claims for detrimental

reliance.

Pursuant to La.Code Civ.P. art. 927(B), the trial court or appellate court can

notice on its own motion the plaintiff‟s “failure to disclose a cause of action . . . to

institute the suit[.]” In Silverman v. Mike Rogers Drilling Co., 45,119 (La.App. 2

Cir. 4/14/10), 34 So.3d 1099, writ denied, 10-1128 (La. 9/17/10), 45 So.3d 1049,

the court of appeal affirmed the trial court‟s conclusion that because the plaintiff‟s

claim was predicated on contractual provisions that violated Louisiana public

policy, the plaintiff had no cause of action against the defendant.

“An obligation cannot exist without lawful cause.” La.Civ.Code art. 1966.

“The cause of an obligation is unlawful when the enforcement of the obligation

would produce a result prohibited by law or against public policy.” La.Civ.Code

art. 1968. Accordingly, the trial court did not err in considering whether Macro‟s

claims for detrimental reliance were void because they violate public policy.

Silverman, 34 So.3d 1099; see also, Domingue v. Dickinson, 611 So.2d 796

(La.App. 3 Cir. 1992). Furthermore, federal law prohibits Macro‟s claims for a

contingent fee. Therefore, the cause of Macro‟s detrimental reliance claims

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violates public policy, and the claims are void. The trial court‟s dismissal of

Macro‟s detrimental reliance claims is affirmed.

CONCLUSION

For these reasons, the trial court‟s judgment dismissing Macro Companies,

Inc.‟s claims against Dearybury Oil & Gas, Inc., Florida Marine Transporters,

LLC, and Kenneth R. Pullen is affirmed. All costs associated with Macro

Companies, Inc.‟s claims against Dearybury Oil & Gas, Inc., Florida Marine

Transporters, LLC, and Kenneth R. Pullen are assessed to Macro Companies, LLC.

AFFIRMED.

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