                                                               United States Court of Appeals
                                                                        Fifth Circuit
                                                                      F I L E D
               IN THE UNITED STATES COURT OF APPEALS
                                                                         May 5, 2006
                         FOR THE FIFTH CIRCUIT
                                                                   Charles R. Fulbruge III
                         ))))))))))))))))))))))))))                        Clerk
                                  No. 04-31167

                         ))))))))))))))))))))))))))

WILSON W. WILSON,
appearing in his capacity as the curator
of the interdict,

                                                       Plaintiff-Appellee,

versus

STATE FARM FIRE AND CASUALTY INSURANCE CO.,

                                                       Defendant-Appellant.




            Appeal from the United States District Court
                for the Middle District of Louisiana
                        USDC No. 3:96-CV-3345




Before GARWOOD, PRADO, and OWEN, Circuit Judges.

PER CURIAM:*

I.   BACKGROUND

     This case involves Plaintiff-Appellee Wilson’s allegation that

Defendant-Appellant State Farm Fire and Casualty Company (“State

Farm”)   failed   to   pay   an    insurance   claim   owed   to    an   insured

homeowner, Christel Fontenot, when her house was destroyed in a



     *
      Pursuant to 5TH CIR. R. 47.5, the court has determined that
this opinion should not be published and is not precedent except
under the limited circumstances set forth in 5TH CIR. R. 47.5.4.
fire.    On Monday, July 17, 1995, a fire caused substantial damage

to the dwelling owned in community by Christel Fontenot and her

husband Martin Fontenot.    The house, located in Baton Rouge, was

insured by State Farm.   At the time of the fire, Martin and Christel

Fontenot had been married for approximately twenty-nine years and

had owned the house for seventeen years.

     About ten years before the fire, doctors diagnosed Christel

Fontenot with a bipolar disorder, which involves alternating periods

of depression and manic behavior.   State Farm alleges that Christel

Fontenot’s mental illness interrupted her work as a teacher for two

years.   Moreover, the malady allegedly induced her to neglect her

children and to engage in a pattern of excessive spending which she

could not afford.   Martin Fontenot claims that because he could not

persuade his wife to comply with a drug therapy regimen that would

stabilize her mental health, he made the decision to end his

marriage.   Consequently, on July 7, 1995, ten days before the fire,

he packed his belongings, moved out of the home, and stated that he

would be filing for a divorce.

     Although it is undisputed that Christel Fontenot was not

properly served with divorce papers until after the fire, trial

testimony suggests that after Martin Fontenot moved out of the home

Christel Fontenot began burning paper in the back yard, an activity

that she had not engaged in previously.      Additionally, Christel

Fontenot began parking in the driveway or on the street in front of

the house as opposed to her normal place in the garage, purportedly

                                 -2-
because there was too much gasoline in the garage.

     On the day before the fire, Martin Fontenot took three of his

sons on a trip to Houston, Texas, leaving Christel Fontenot alone

in the house.    After the children departed with their father,

Christel Fontenot began ripping out the carpet in the master bedroom

of the house.   On Monday, the day of the fire, she continued to

remove strips of carpet from the home.       Additionally, Christel

Fontenot spread newspaper throughout the house, taping it to the

walls and stuffing it under doors in some instances.         Although

Christel Fontenot claims that she spread the newspaper in order to

inhibit the spread of dust following the removal of the carpet in

the master bedroom, newspaper was spread beyond the bedroom’s

vicinity.

     Before departing the residence on the evening of the fire,

Christel Fontenot removed framed and loose photographs from the

walls of the home, packed two of her three jewelry boxes, and packed

a box with numerous personal, family, and work-related documents.

Fontenot locked the house and departed a few minutes before the fire

was reported to 911.   The Baton Rouge Fire Department received the

report of the fire at 6:36 p.m.   Although she alleges that when she

left her home, she was going to visit friends        in    Destrehan,

Louisiana, Christel Fontenot never reached Destrehan.     Instead, she

checked into a Baton Rouge motel.

     Initially, under sworn testimony, Fontenot stated that she left

her home around noon.     However, she later recanted.       There is

                                  -3-
testimony from two separate individuals who had conversations with

her only minutes before she actually left the house after 6:00 p.m.

One of those individuals, Arthur Fabre, a neighbor of the Fontenot

family was the last person on the family’s property.     He had been

asked by Martin Fontenot to feed the horses on the property, and

noticed that Christel Fontenot’s car was gone when he finished his

task.    A few minutes after departing from the Fontenot family land,

while standing outside with a friend, Fabre noticed that the

Fontenot family’s residence was on fire and called 911.      He also

attempted to extinguish the flames with a garden hose.

     Upon arriving at the scene of the fire, firefighters found that

the home had been locked and secured.   There were no signs of forced

entry.   Martin Fontenot, Christel Fontenot, and their kids were the

only individuals with keys to the house.   Firefighters also noticed

that the fire started in the master bedroom closet.

     At the conclusion of State Farm’s investigation, it decided to

deny the Fontenot family’s claim under their insurance policy.

However, State Farm separately settled with Martin Fontenot after

the claim was denied, and paid him the full amount for his interest

in the destroyed property and for that of his children.        State

Farm’s management decided to settle with Martin Fontenot because

there was no evidence that Martin Fontenot was involved in causing

the loss.    Christel Fontenot, on the other hand, was not paid any

of her claim against State Farm notwithstanding her claim that she

did not start the fire.

                                  -4-
       On May 23, 1998, the district court conducted a non-jury trial.

On March 28, 2003, the district court entered judgment in favor of

Plaintiff-Appellee, and against State Farm. State Farm timely filed

a notice of appeal.        On appeal, this Court determined that (1) the

district court failed to assign any written reasons for its ruling

in violation of Federal Rule of Civil Procedure 52(a); (2) the

district court committed reversible error when it, sua sponte,

excluded the testimony of Christel Fontenot by finding her to be

incompetent to testify; and (3) the evidence in the record did not

support the court’s judgment.              On October 13, 2004, the trial

resumed with the parties stipulating that the entire record of the

first trial would carry over.            The only additional evidence added

to    the   record   was   the   trial    testimony   of   Christel   Fontenot.

Following that testimony, the district court, again, rendered

judgment in favor of Plaintiff-Appellee, and against State Farm.

The district court, this time, gave oral reasons for its judgment.

On November 4, 2004, State Farm timely filed a Notice of Appeal.

II.    STANDARD OF REVIEW

       This court reviews a district court’s conclusions of law de

novo and its findings of fact for clear error.                 Rimade Ltd. v.

Hubbard Enter., Inc., 388 F.3d 138, 142-43 (5th Cir. 2004) (citing

Joslyn Mfg. Co. v. Koppers Co., 40 F.3d 750, 753 (5th Cir. 1994)).

We will only reverse a finding of fact if, notwithstanding evidence

to support it, we are left with a “definite and firm conviction”


                                         -5-
that a mistake has been made.     Justiss Oil Co., Inc. v. Kerr-McGee

Ref. Corp., 75 F.3d 1057, 1062 (5th Cir. 1996).         However, when a

finding of fact is premised on an improper legal standard, it loses

the insulation of the clearly erroneous rule.        Maritrend, Inc. v.

Serac & Co. (Shipping) Ltd., 348 F.3d 469, 470 (5th Cir. 2003).

III. DISCUSSION

      State Farm makes three main claims: (1) the finding for

Plaintiff-Appellee was clearly erroneous because Defendant-Appellant

submitted sufficient evidence to succeed on its arson defense; (2)

after State Farm met its initial burden with regard to its arson

defense, the district court should have switched the burden of proof

to   Plaintiff-Appellee   to   offer   reasonable   proof   to   exonerate

herself; and (3) at trial, Defendant-Appellant proved that Fontenot

made knowing material misrepresentations of fact concerning her

actions, thus voiding the insurance policy.         Because we determine

that the trial evidence presented by State Farm preponderates in

favor of State Farm in such a convincing manner that a finding for

Plaintiff-Appellee would be clearly erroneous, we reverse the

district court’s judgement, and render judgment for State Farm.

      First, State Farm claims that the district court erred in

finding that it failed to carry its burden of proof to succeed on

its arson defense to policy coverage.        Under Louisiana law,1 to


      1
      Because this case falls within federal diversity
jurisdiction, we must apply Louisiana law. See Erie R.R. Co. v.
Tompkins, 304 U.S. 64, 79-80 (1938).

                                  -6-
sustain the defense of incendiarism, insurers bear the burden of

proving the defense by a preponderance of the evidence--unlike in

criminal cases where the State must prove the guilt of an arsonist

beyond a reasonable doubt.           Sumrall v. Providence Washington Ins.

Co., 60 So. 2d 68, 69 (La. 1952).               Recognizing that in most cases

the only evidence of arson is circumstantial due to the fact that

perpetrators        of   incendiarism     do    not   engage   in    such     activity

notoriously, the Louisiana Supreme Court has repeatedly stated that:

             Inasmuch as the defense is arson, the burden
             rested upon the insurer to establish, by
             convincing proof, that the fire was of
             incendiary origin and that plaintiff was
             responsible for it. It is well settled that
             the insurer need not prove its case against a
             plaintiff beyond a reasonable doubt; it
             suffices that the evidence preponderates in
             favor of the defense. Proof, of course, may
             be and invariably is entirely circumstantial.
             And, in these instances, a finding for
             defendant is warranted where the evidence is
             of such import that it will sustain no other
             reasonable hypothesis but that the claimant is
             responsible for the fire.

Id.; Rist v. Commercial Union Ins. Co., 376 So. 2d 113, 113-14 (La.

1979).    Hence, under Sumrall, the preponderance of the evidence

standard is the appropriate standard for considering whether or not

a defendant has met its burden of proving an arson defense.                      As an

evidentiary matter, “[m]otive plus the incendiary origin of the fire

[will],   in    the      absence   of    believable     rebuttal      evidence,     be

sufficient     to    sustain   the      affirmative    defense      pleaded    by   the

insurer.” Sumrall, 60 So. 2d at 70 (citations omitted).


                                          -7-
     Some   Louisiana   appellate    courts   have,   however,   construed

Sumrall to mean that, in cases depending solely on circumstantial

proof, the evidence must be so convincing that it will sustain no

other reasonable hypothesis but that the plaintiff was responsible

for the fire.    Christensen v. State Farm Mut. Auto. Ins. Co., 552

So. 2d 1377, 1378-79 (La. Ct. App. 5th Cir. 1989) (citation omitted)

(“Where circumstantial evidence is relied upon, the facts, “[t]aken

as a whole ... must exclude other reasonable hypotheses with a fair

amount of certainty.”); Wallace v. State Farm Fire & Cas. Ins. Co.,

345 So. 2d 1004, 1006-07 (La. Ct. App. 3d Cir. 1977) (“When proof

is circumstantial, the evidence must be so convincing that it will

sustain no other reasonable hypothesis but that plaintiff was

responsible for the fire.”); see also Baghramain v. MFA Mut. Ins.

Co., 315 So. 2d 849, 851 (La. Ct. App. 3d Cir. 1975).

     It is this more rigorous standard that the district court

seemed to apply in the case at hand.      In finding that State Farm did

not meet its burden, the court wrote:

            I threw out Fabre not to say that he did it or
            anything like that, but to say that there are
            reasonable explanations for what happened
            other than that Mrs. Christel Fontenot did it.
            And another possible explanation that the
            court cannot ignore is the fact that Martin
            Fontenot was only four hours away from Baton
            Rouge in Houston.... Again, that’s not to say
            Martin Fontenot started the fire, but that is
            to say that the evidence that Christel
            Fontenot was the cause of the fire does not-
            the evidence that she caused it does not
            exclude- the circumstantial evidence that she
            caused   the  fire   does   not  exclude   the

                                    -8-
             reasonable possibility that it was started by
             someone else. Fabre and Martin Fontenot being
             just two reasonable possibilities.


Hence, the district court subscribed to the notion that in order to

prevail on its arson defense, State Farm had to exclude all other

reasonable causes of the fire.

     There is an obvious tension between the two articulations of

the standard of proof insurers asserting the defense of arson must

meet.     In Viviano v. Travelers Insurance Company, 533 F. Supp. 1

(E.D. La. 1981), the district court addressed this very issue.

There, the court chose to adhere to the preponderance of evidence

standard alone.        Id. at 7.      First, the court reasoned that “the

preponderance of the evidence requirement bears the imprimatur of

the ultimate construer of Louisiana law,” the Louisiana Supreme

Court.    Id.

     Next,      the   court   explained     that   the   “no   other   reasonable

hypothesis standard” seems to have grown out of a misunderstanding

of the holding of Sumrall.            Id.    In Sumrall, the facts of that

particular case were such that the evidence would sustain no other

reasonable hypothesis than that the claimant started the fire.                 Id.

However, there was no holding that the defendant must exclude other

reasonable possibilities in order to prevail on its arson defense.

Rather,    the    Sumrall     court   emphasized    that,      in   cases   relying

primarily on circumstantial evidence, a finding for the defendant

is warranted where the evidence is so strong that it will sustain

                                       -9-
no other reasonable hypothesis but that the claimant started the

fire.   Sumrall, 60 So. 2d at 69; see also Viviano, 533 F. Supp. at

7.    Hence, in Viviano, the court held that in order to meet the

burden of proof regarding an arson defense, the evidence need only

preponderate in favor of the defense.          Viviano, 533 F. Supp. at 7.

      We approve of the Viviano court’s interpretation of Louisiana

law and apply the preponderance of the evidence requirement as the

proper standard of proof an insurer must meet in order to sustain

an arson defense.        State Farm not only met this initial burden to

sustain its arson defense; but because the circumstantial evidence

is so strong, we find that State Farm has also convincingly proven

that there are no other reasonable explanations for the fire

notwithstanding Christel Fontenot’s testimony that she did not start

the fire.    It is undisputed that the fire was of incendiary origin.

Additionally, Christel Fontenot, the only individual with a key to

the house in Baton Rouge, left the house only minutes before the

fire was discovered.         Christel Fontenot’s financial pressures and

the impending divorce serve as evidence of motive.                   Moreover,

Fontenot’s removal of jewelry, family photographs, and important

documents just before the fire are also probative of the fact that

she   caused   the   loss.      Together,    this   circumstantial    evidence

preponderates in favor of the defendant in such a way that a finding

for Plaintiff-Appellee, irrespective of the standard used, would be

clearly     erroneous.       The   hypothetical     reasonable   alternatives


                                      -10-
proffered by the district court find no evidentiary support in the

record.      Furthermore, a review of the record suggest no other

reasonable alternatives in addition to the ones proposed by the

district court.     Consequently, we reverse the district court’s

judgement, and render judgment for State Farm.   See Sumrall, 60 So.

2d at 71.2    Because we reverse the district court’s judgment based

on the arson defense, we do not reach State Farm’s other arguments.

     REVERSED and RENDERED.

GARWOOD, Circuit Judge, dissenting in part:

     The trial court’s judgment is based on the legally erroneous

premise that State Farm’s defense of arson required it to eliminate

all reasonable possibilities other than the plaintiff’s arson. I

would accordingly reverse. Given plaintiff’s testimony, implausible

though it is, – which the trial court may or may not have credited

– I would not now render.




     2
      In light of the fact that this is our second occasion to
correct the district court’s errors and because any finding for
Plaintiff-Appellee would be clearly erroneous, the interests of
judicial economy would best be served by not sending this case
back to the district court, notwithstanding Plaintiff-Appellee’s
claim that she did not start the fire.

                                 -11-
