Antitrust Law Daily Wrap Up, STATE UNFAIR TRADE PRACTICES—La. App.: Failure to distribute profits to shareholders was not an unfair trade practice, (May 5, 2016)

By Linda O’Brien, J.D., LL.M.

In a shareholder derivative suit against the president of a trucking company, Louisiana’s unfair trade practices and consumer protection statute did not apply to the distribution or failure to distribute profits by a corporation to its shareholders, the Louisiana Court of Appeals in Lake Charles has ruled (Guillory v. Broussard, May 4, 2016, Thibodeaux, U.).

Samuel Broussard Trucking Company (SBT) is a family-owned freight hauling and trucking business, located in New Iberia, Louisiana. Samuel Broussard and his three sisters—Simone Guillory, Lamar Lopresto, and Michelle Cart—are all shareholders in SBT, with Broussard owning the majority of the shares. Broussard serves as president and Cart is on the corporation’s board of directors.

In June 2012, Guillory and Lopresto filed a shareholders’ derivative action against Broussard and Cart, asserting claims of breach of fiduciary duty, self-dealing, and abuse of control. Specifically, Guillory and Lopresto alleged that Broussard paid himself excessive compensation and refused to distribute corporate profits to the shareholders in violation of the Louisiana Unfair Trade Practices Act (LUTPA). The trial court dismissed the suit, and Guillory appealed.

The court determined that Guillory presented no evidence to show that the failure to distribute profits in the form of shareholder dividends was an unfair or deceptive act committed in the conduct of any trade or commerce. Guillory contended that Broussard’s attempt to coerce the shareholders into dismissing their lawsuit against him by refusing to distribute SBT’s profits constituted an unfair and deceptive trade practice under the LUTPA.

The LUTPA provides that “unfair methods of competition and unfair or deceptive acts or practices in the conduct of any trade or commerce” were unlawful. The court noted that the range of prohibited practices under the LUTPA was extremely narrow. Specifically, the Act prohibited fraud, misrepresentation, or similar conduct, but not mere negligence.

“Trade” or “commerce” within the meaning of the LUTPA meant the advertising, sale, or distribution of services or property. This definition of “trade and commerce” under the Act did not include the distribution or the failure to distribute profits of a corporation to its shareholders. Therefore, the LUTPA did not apply to the situation in the case and the dismissal of the plaintiffs’ claim was not erroneous, the court concluded.

Dissent. In a dissent, Judge Conery found that a fair reading of the LUTPA indicated that there was no basis for the trial court’s decision that the definition of “trade and commerce” did not include the distribution or failure to distribute corporate profits to its shareholders under the circumstances of the case. In Conery’s view, Guillory established a prima facie case that Broussard acted in bad faith when he unilaterally—and without his sisters’ consent—substantially increased his executive compensation, thereby depriving them of the normal dividends from company profits that they should have received.

The case is No. 15-953.

Attorneys: Philip A. Franco, Lauren Lopresto Tafaro, and Diana Cole Surprenant (Adams and Reese LLP) for Simone B. Guillory. Donald W. Washington and Justin J. Marocco (Jones Walker LLP) for Samuel S. Broussard, Jr.

Companies: Samuel Broussard Trucking Company, Inc.

Cases: StateUnfairTradePractices LouisianaNews