Richard v. Wal-Mart Stores, Inc.

This dispute arises out of a life insurance program through which Defendants-Appellees Wal-Mart Stores, Inc. and Wal-Mart Stores Incorporated Corporation Grantor Trust (“Wal-Mart”) procured life insurance policies on its rank-and-file employees. These policies have been challenged for violating prohibitions on obtaining life insurance policies without an insurable interest. Plaintiff-Appellant Jennifer Bruney Richard (“Richard”), on behalf of herself, the estate of Dewey Bruney (“Bruney”), and all others similarly situated, filed suit against Wal-Mart seeking damages on such a policy under Louisiana’s insurable interest statute. La. Rev.Stat. § 22:613(B). The case turns on whether Richard’s suit is timely. The district court granted summary judgment for Wal-Mart finding Richard’s suit time-barred. Richard appeals. For the reasons set forth below, we reverse.

I. FACTS AND PROCEEDINGS

On December 28, 1993, Wal-Mart took out a life insurance policy on its employee Bruney. Wal-Mart purchased this policy as part of its “Corporate Owned Life In*344surance” (“COLI”) program, in effect from 1993 to 2000. Bruney died on January 19, 1996 and Wal-Mart received the life insurance proceeds on November 27, 1998. Richard did not become aware of Wal-Mart’s COLI program until some time in June 2005. She filed suit against Wal-Mart on August 24, 2006 seeking the insurance benefits obtained by the company, claiming that Wal-Mart violated Louisiana’s insurable interest statute by obtaining a life insurance policy on an individual in whom it had no insurable interest.1 La.Rev.Stat. § 22:613(A)-(B). Richard also sued for unjust enrichment and sought class action certification under Rule 23. Fed.R.CivP. 23(b)(3).

On May 21, 2007, the district court granted summary judgment in favor of Wal-Mart, dismissing Richard’s unjust enrichment claim. On October 9, 2007, the district court granted a second summary judgment in favor of Wal-Mart. The district court determined that Richard’s claim was a tort action subject to the one-year statute of limitations and dismissed Richard’s claim as time-barred. Richard timely appealed.

II. STANDARD OF REVIEW

This court reviews a district court’s grant of summary judgment de novo. See Richardson v. Monitronics Int’l, Inc., 434 F.3d 327, 332 (5th Cir.2005). Summary judgment is appropriate “if the pleadings, the discovery and disclosure materials on file, and any affidavits show that there is no genuine issue as to any material fact and that the movant is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(c). “We consider the evidence in a light most favorable to [Richard], the non-mov-ant, but she must point to evidence showing that there is a genuine fact issue for trial” to survive summary judgment. Richardson, 434 F.3d at 332.

III. APPLICABLE LAW

Richard’s claim arises under Louisiana’s insurable interest statute. La.Rev. Stat. § 22:613(B). Thus, Louisiana law governs.2 See Krieser v. Hobbs, 166 F.3d 736, 739 (5th Cir.1999) (holding that a federal court sitting in diversity applies state substantive law). The Louisiana statute provides a cause of action to recover benefits from anyone who procures and re-*345ceives benefits under a life insurance policy without an insurable interest. La.Rev. Stat. § 22:613(A)-(B). Section 22:613 does not specify a prescription period and does not define the cause of action as either tort or contract. The court must therefore ascertain the nature of Richard’s action and apply the relevant prescription period.

Under Louisiana law, “[t]he correct prescriptive period to be applied in any action depends on the nature of the action; it is the duty breached that should determine whether an action is in tort or contract.” Terrebonne Parish Sch. Bd. v. Mobil Oil Corp., 310 F.3d 870, 886 (5th Cir.2002); see also Trinity Universal Ins. Co. v. Horton, 756 So.2d 637, 638 (La.Ct.App.2000). Contract actions are governed by a ten year prescriptive period. See La. Civ.Code art. 3499; Strahan v. Sabine Ret. & Rehab. Ctr., 981 So.2d 287, 291 (La.Ct.App.2008). The prescription period begins to run from the time of breach or the time the cause of action arises. Donald G. Lambert Contractor, Inc. v. Parish of Jefferson, 700 So.2d 894, 897 (La.Ct.App.1997). Actions for unjust enrichment also have a ten year statute of limitations period. See La. Civ.Code art. 3499; Safeco Ins. Co. v. Farm Bureau Ins. Co., 490 So.2d 565, 570 (La.Ct.App.1986). Like other delictual actions, conversion3 has a one year prescriptive period. See La. Civ. Code. art. 3492; Johnson v. Concordia Bank & Trust Co., 671 So.2d 1093, 1098 (La.Ct.App.1996). Prescription begins to run from the date injury or damage is sustained. La. Civ.Code art. 3492. Plaintiff bears the burden of showing that prescription has not run when the face of the petition shows that the action is time-barred. Wimberly v. Gatch, 635 So.2d 206, 211 (La.1994).

IV. DISCUSSION

I. Nature of the Cause of Action

To determine whether a cause of action is tort or contract, Louisiana courts look to the nature of the underlying duty. Terrebonne, 310 F.3d at 886. Louisiana courts have consistently held that:

The classical distinction between “damages ex contractu” and “damages ex de-licto” is that the former flow from the breach of a special obligation contractually assumed by the obligor, whereas the latter flow from the violation of a general duty owed to all persons. Even when tortfeasor and victim are bound by a contract, courts usually apply the delic-tual prescription to actions that are really grounded in tort.

Trinity, 756 So.2d at 638. Even when a contract exists, unless a specific contract provision is breached, Louisiana treats the action as tort. Id. Under Louisiana law, conversion is committed when any of the following occurs:

1) possession is acquired in an unauthorized manner; 2) the chattel is removed from one place to another with the intent to exercise control over it; 3) possession of the chattel is transferred without authority; 4) possession is withheld from the owner or possessor; 5) the chattel is altered or destroyed; 6) the chattel is used improperly; or 7) ownership is asserted over the chattel.

Dual Drilling Co. v. Mills Equip. Inv., Inc., 721 So.2d 853, 857 (La.1998). Under Louisiana law, unjust enrichment has five elements:

*346(1) there must be an enrichment, (2) there must be an impoverishment, (3) there must be a connection between the enrichment and resulting impoverishment, (4) there must be an absence of “justification” or “cause” for the enrichment and impoverishment, and finally (5) the action will only be allowed when there is no other remedy at law, i.e., the action is subsidiary or corrective in nature.

Minyard v. Curtis Prods., Inc., 251 La. 624, 205 So.2d 422, 432 (La.1968); Safeco, 490 So.2d at 569.

The district court was correct in finding that Richard’s statutory cause of action is not analogous to a contractual claim since there was no contract between the parties or specific contractual duties breached. But, the court erred in concluded that Richard’s action is most analogous to a conversion action which sounds in tort. While Richard’s action is somewhat analogous to one for conversion, because Wal-Mart breached the general duty to refrain from procuring life insurance policies when it lacks an insurable interest, Richard’s suit is more analogous to an action for unjust enrichment.4 Wal-Mart was enriched by the COLI policies since the central purpose of the life insurance policies was to provide Wal-Mart with proceeds on the death of an employee. If Wal-Mart is found to have violated Louisiana’s insurable interest statute, it is because it took possession of benefits properly belonging to the Richard estate. Thus, the impoverishment element is also met. The impoverishment is statutorily created. The Louisiana insurable interest statute creates a cause of action to recover benefits received in violation of the statute. La.Rev.Stat. § 22:613(B). Richard also meets the causal element requiring a connection between Wal-Mart’s enrichment and the estate’s impoverishment because it was Wal-Mart’s actions, in contravention of Louisiana law, which gave rise to the statutorily recognized impoverishment. With respect to the “justification” or “cause” element, Wal-Mart has provided no defense for its COLI policies or ancillary reasons to deny relief. Because there was no specific contractual obligation between the parties and the cause of action does not fit the definition of a delict, Richard does not have another remedy at law.

Furthermore, Louisiana law favors redressability. The Louisiana Supreme Court has long held that “prescriptive statutes are strictly construed against prescription and in favor of the obligation sought to be extinguished; thus, of two possible constructions, that which favors maintaining, as opposed to barring, an action should be adopted.” Lima v. Schmidt, 595 So.2d 624, 629 (La.1992). Therefore, state precedent militates against finding that a cause of action is time-barred when a more appropriate cause exists that also preserves the suit.

II. Applicable Prescription

To maintain her suit as timely, Richard must have commenced this action within ten years of events giving rise to the claim against Wal-Mart. See La. Civ.Code art. 3499; Safeco, 490 So.2d at 570. Wal-Mart received the insurance benefits due to the *347Bruney estate on November 27, 1998. Richard filed suit on August 24, 2006 — -well within the ten year prescription period. The suit is therefore timely. We express no opinion on the ultimate merits of Richard’s statutory cause of action.

Having found that Richard’s suit under the Louisiana insurable interest statute is most analogous to one for unjust enrichment, the balance of the parties’ arguments that would either toll the prescription period or limit its application require no further discussion.

V. CONCLUSION

The judgment of the district court is REVERSED and the case is REMANDED to the district court for further proceedings.