     Case: 10-30746 Document: 00511412738 Page: 1 Date Filed: 03/16/2011



                UNITED STATES COURT OF APPEALS
                     FOR THE FIFTH CIRCUIT United States Court of Appeals
                                                    Fifth Circuit

                                                 FILED
                                                                          March 16, 2011

                                                                           Lyle W. Cayce
                                     No. 10-30746                               Clerk
                                   Summary Calendar




AUNT SALLY’S PRALINE SHOP, INCORPORATED,

                                                         Plaintiff-Appellee,

v.

UNITED FIRE & CASUALTY COMPANY, INCORPORATED,

                                                         Defendant-Appellant.


                   Appeal from the United States District Court
                for the Eastern District of Louisiana, New Orleans
                             USDC No. 2:06-CV-7674



Before KING, BENAVIDES, and ELROD, Circuit Judges.
PER CURIAM:*
       This appeal arises from a suit filed by Aunt Sally’s Praline Shop, Inc.
seeking payments for hurricane damage pursuant to an insurance policy
issued by United Fire & Casualty Company Inc.                  After two trials before a
jury, the district court entered judgment against United Fire for $454,246.00

       *
         Pursuant to 5th Cir. R. 47.5, the Court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5th Cir.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.


                                              1
    Case: 10-30746 Document: 00511412738 Page: 2 Date Filed: 03/16/2011


                                 No. 10-30746

in damages and $100,000 in penalties under Louisiana law.           United Fire
appeals, challenging the district court’s decision to exclude some of United
Fire’s defenses, certain of the district court’s evidentiary rulings, and the
sufficiency of the evidence to support the jury’s verdict. We AFFIRM.
                                        I
      Aunt Sally’s manufactures and sells pralines — sweet confections made
of sugar, cream, butter and pecans — as well as other merchandise from its
stores in New Orleans. Its facilities suffered extensive damage when
Hurricane Katrina hit New Orleans on August 29, 2005. Aunt Sally’s had a
commercial property and liability insurance policy with United Fire.           It
therefore made a claim under its United Fire policy seeking payment for
damages caused by the hurricane, including damages for lost business
income.   United Fire initially denied its claims.   After further discussions,
United Fire eventually paid some of Aunt Sally’s claims, but nothing
approaching the total of the damages for which Aunt Sally’s believed United
Fire was responsible.

      Aunt Sally’s filed a lawsuit in Louisiana state court against United Fire
seeking damages and penalties under Louisiana state law for United Fire’s
failure to make contractually required insurance payments.          United Fire
properly removed the case to the United States District Court for the Eastern
District of Louisiana. In its answer — which was filed in December 2006 —
United Fire claimed (among other things) that Aunt Sally’s had failed to state
a claim, that it was contributorily negligent, that it had failed to mitigate its
damages and that the damage incurred by Aunt Sally’s was caused by third
parties. United Fire also included in its answer a broad invocation of “all
provisions, limitations, exclusions and endorsements” stated in its insurance
policy with Aunt Sally’s. It did not, however, specifically plead any policy

                                       2
    Case: 10-30746 Document: 00511412738 Page: 3 Date Filed: 03/16/2011


                                  No. 10-30746

exclusion as an affirmative defense.        Supplemental petitions and answers
were filed in 2007, which also did not mention any specific policy exclusions.

      More than 18 months of discovery and other pre-trial proceedings
followed United Fire’s initial answer. A few weeks before the scheduled trial
date in June 2008, United Fire declared its intention to raise specific policy
exclusions at trial. At the pretrial conference, United Fire enumerated each
of the policy exclusions it intended to assert. Aunt Sally’s filed a motion in
limine seeking to prohibit United Fire from belatedly asserting those
defenses, citing the prejudice it would suffer in attempting to refute United
Fire’s arguments without the benefit of discovery. The district court agreed
and granted Aunt Sally’s motion. Although the trial date was then continued
at United Fire’s request for several months, the district court agreed to the
continuance on the basis of keeping the case in its then current posture. That
is, no further amendments to the pleadings, no additional discovery and no
further deadline extensions.    Although United Fire later asked for another
continuance, trial was scheduled for, and commenced on, September 29, 2008.
At the conclusion of trial, the jury found in favor of Aunt Sally’s on all claims,
and returned a verdict of $364,671.00 in damages and $114,234.00 in
penalties. That award was based on the jury’s specific finding, as required
under Louisiana law, that United Fire’s failure to pay Aunt Sally’s claims was
arbitrary, capricious or without probable cause.

      United Fire then filed a motion for new trial on several bases.         The
district court granted that motion in part, holding that a new trial was
necessary to determine how long it had taken to restore Aunt Sally’s location
on Chartres Street in New Orleans after the hurricane, the quantum of
“business income” damages for both of Aunt Sally’s locations and the period
and quantum for “extended business income” and penalties.          However, the
                                        3
    Case: 10-30746 Document: 00511412738 Page: 4 Date Filed: 03/16/2011


                                  No. 10-30746

court rejected United Fire’s motion for a new trial with respect to the court’s
decision to grant the policy exclusion in limine motion. Before the second,
limited trial commenced, United Fire filed a motion in limine seeking to
exclude evidence with respect to damages that may have been incurred by
Aunt Sally’s between the first and second trials. The court denied United
Fire’s motion, and the second trial commenced on November 2, 2009.

      Aunt Sally’s first witness at this trial was its CEO, Frank Simoncioni.
He testified broadly with respect to Aunt Sally’s business, the damage
incurred by the business during the hurricane and its efforts to recover from
the storm. Simoncioni also attempted to testify about Aunt Sally’s potential
net income had Katrina not struck. United Fire objected, saying that
Simoncioni’s testimony was improper speculation.             The district judge
overruled United Fire’s objection, holding that Simoncioni’s testimony was
permissible lay opinion testimony of a witness with knowledge of Aunt Sally’s
value and business prospects.      The judge instructed United Fire’s counsel,
however, that it was permitted          to   vigorously   challenge   Simoncioni’s
conclusions. The jury again returned a verdict for Aunt Sally’s, and therefore
awarded additional damages and penalties. United Fire then filed a motion
for judgment as a matter of law and a motion for new trial. The district court
denied both motions. This appeal ensued. United Fire appeals four issues: (1)
the district court’s exclusion of United Fire’s policy exclusions; (2) the district
court’s admission of Simoncioni’s testimony, and thus the jury’s award of
damages and penalties; and (3) the sufficiency of the evidence to support the
jury’s verdict. We discuss these claims in turn.




                                        4
     Case: 10-30746 Document: 00511412738 Page: 5 Date Filed: 03/16/2011


                                 No. 10-30746



                                           II

A.    United Fire’s Failure to Plead its Policy Exclusions

      United Fire challenges the district court’s decision to prevent United
Fire from asserting its policy exclusions at trial. Rule 8(c) requires a
defendant to “plead an affirmative defense with enough specificity or factual
particularity to give the plaintiff fair notice of the defense that is being
advanced.” Rogers v. McDorman, 521 F.3d 381, 385 (5th Cir. 2008) (internal
quotation marks omitted). “In the years since adoption of the rule, the
residuary clause [of Rule 8(c)] has provided the authority for a substantial
number of additional defenses which must be timely and affirmatively
pleaded. These include: exclusions from a policy of liability insurance . . . .”
Ingraham v. United States, 808 F.2d 1075, 1078 (5th Cir. 1987).            In a
diversity case, state law determines what constitutes an affirmative defense
for the purposes of Rule 8(c). Lucas v. United States, 807 F.2d 414, 417 (5th
Cir. 1986).

      It is clear that in the general case, a policy exclusion is an affirmative
defense under Louisiana law that must be pleaded specifically. See, e.g,
Griffin v. Schwegman Bros. Giant Supermarkets, Inc., 542 So.2d 710, 714 (La.
App. 4th Cir. 1989). Sher v. Lafayette Ins. Co., 988 So.2d 286 (La. 2008) is not
to the contrary. There, although the Louisiana Supreme Court did leave the
exact contours of the pleading requirements for contract exclusions open, the
court held that “in the specific case” where the plaintiff itself had raised the
policy exclusions in its petition —   that is, where the plaintiff had put the
policy exclusions into question — the courts below had erred in finding that
policy exclusions were affirmative defenses. That fact-based holding has no

                                       5
    Case: 10-30746 Document: 00511412738 Page: 6 Date Filed: 03/16/2011


                                    No. 10-30746

application here, where not even United Fire alleges that Aunt Sally’s put the
policy exclusions into play, and where it is clear that United Fire’s late
invocation of the exclusions raised new matters for trial. See Sher, 988 So.2d
at 203-204; see also Williams v. Allstate Indem. Co., 2009 WL 723526 No. 07-
6797, at *3-4 (E.D.La. Mar. 19, 2009) (recognizing that Sher created only a
“slim exception” to the general rule). Thus, the policy exclusions here were
affirmative defenses that had to be pleaded specifically. Contrary to United
Fire’s assertions, they were not.

      To be sure, a technical failure to comply precisely with Rule 8(c) is not
fatal. Allied Chemical Corp. v. Mackay, 695 F.2d 854, 895 (5th Cir. 1983).
Rather, it is left up to the discretion of the trial court to determine whether
the party against whom the unpleaded affirmative defense has been raised
has suffered prejudice or unfair surprise.         Id. Thus, we review a district
court’s decision to prevent a party from untimely pleading an affirmative
defense under Rule 8(c) for abuse of discretion.

      United Fire argues that the district court erred in foreclosing its policy
exclusion arguments because Aunt Sally’s would have suffered no prejudice
had it been forced to address United Fire’s policy exclusions. We disagree.
As United Fire’s own brief shows, litigating the policy exclusions would have
been a highly fact intensive exercise.       For example, one of the exclusions
United Fire attempted to raise was for loss of market. That is, United Fire
tried to argue that the real reason Aunt Sally’s lost money was not because of
actual loss arising from direct physical damage (which is covered) but because
people had stopped visiting New Orleans (which might not be covered). It is
obvious that Aunt Sally’s response to that argument depends on factual
development, on consultation with experts, and on the opportunity to test the
scope of the legal applicability of the exclusion through dispositive motions.
                                         6
     Case: 10-30746 Document: 00511412738 Page: 7 Date Filed: 03/16/2011


                                  No. 10-30746

Indeed, United Fire effectively concedes the point by claiming that the
necessary factual development could have been achieved by reopening
discovery in the three months between the time United Fire belatedly raised
its policy exclusions and the delayed start of trial. That a trial court could
have further delayed trial or reopened fact discovery just months before an
already delayed trial date does not mean it was required to do so, especially
when the party seeking relief could have raised its new arguments years
previously. We find no abuse of discretion in the district court’s decision to
exclude the policy exclusion defenses from trial.

B.     The Jury’s Award of Damages and Penalties under Louisiana
       Law

       United Fire next contends that the district court erred by admitting
Simoncioni’s testimony as to Aunt Sally’s potential net income, over United
Fire’s objection.    Because that testimony was the sole basis for the jury’s
award of consequential damages and penalties under Louisiana insurance
law, United Fire argues, the jury’s award must be reversed. We disagree.

       It is well-settled that a business owner or officer who has personal
knowledge of the facts may testify as to the business prospects of that
business.    See Versai Mgmt. Corp. v. Clarendon Am. Ins. Co., 597 F.3d 729,
737 (5th Cir. 2010) (permitting a business’s president to testify as to the
losses in income as a result of a hurricane); see also Texas A&M Research
Found. v. Magna Transp., Inc., 338 F.3d 394, 403 (5th Cir. 2003) (citing with
approval Miss. Chem. Corp. v. Dresser-Rand Co., 287 F.3d 359, 373-374 (5th
Cir. 2002) (holding that a corporation’s director of risk management could
testify to lost profits)).




                                       7
    Case: 10-30746 Document: 00511412738 Page: 8 Date Filed: 03/16/2011


                                    No. 10-30746

      Here, it is evident from the record that, as CEO, Simoncioni had
personal knowledge of Aunt Sally’s business prospects and could properly
testify as to Aunt Sally’s potential net income. That Simoncioni’s testimony
was based on new investments in equipment rather than purely historical
figures does nothing to change that conclusion.       In fact, the only case on
which United Fire relies supports the propriety of Simoncioni’s testimony. In
DIJO Inc. v. Hilton Hotels Corp., 351 F.3d 679 (5th Cir. 2003), this court
found that a financial consultant who was not an employee or officer of the
company at issue could not offer lay testimony as to the company’s value. In
so holding, the court observed that Federal Rule of Evidence 701 does not
“place any restrictions on the . . . practice of allowing business owners or
officers to testify based on particularized knowledge derived from their
position.” DIJO, 351 F.3d at 685. Therefore, there was no error in permitting
Simoncioni to testify.

      In the alternative, United Fire argues that the district court erred by
failing to limit evidence of damages that occurred between the first and
second trials.   Its claim is that if its limited motion for a new trial was
justified, then its failure to pay until the second trial could not be arbitrary,
capricious or without probable cause as a matter of law. But United Fire has
provided the court with no authority for that novel proposition, and we have
found none. Therefore, the district court did not err by allowing the question
of whether Aunt Sally’s was due payment for damages that occurred between
the two trials to go to the jury.

C. Insufficiency of Evidence

      United Fire next asserts that the evidence was insufficient to support
two of the jury’s findings. First, United Fire disputes the jury’s finding that
hurricane damage to the Chartres Street facility caused the suspension of
                                  8
    Case: 10-30746 Document: 00511412738 Page: 9 Date Filed: 03/16/2011


                                   No. 10-30746

Aunt Sally’s business.     Second, United Fire argues that the jury erred in
awarding damages for betterments and improvements, business personal
property and extra expenses. This court upholds a jury verdict unless “there
is no legally sufficient evidentiary basis for a reasonable jury to find” as it did.
Vadie v. Mississippi State University, 218 F.3d 365, 372 (5th Cir. 2000).

      As to the Chartres Street facility, the evidence with respect to the
connection between the hurricane damage and the suspension of Aunt Sally’s
business at that location was more than sufficient to provide a basis for the
jury’s finding. For example, Aunt Sally’s presented testimony that damages
sustained to the Chartres location caused the suspension of operations.
Moreover, evidence at trial showed that even as production at the facility
started again in the wake of Katrina, it was many months before full
operations were restored.      While it may be true that the damage to the
Chartres Street facility could have been more severe, that is not a basis on
which to reverse a jury’s verdict.      Similarly, United Fire’s argument that
there is insufficient evidence supporting the jury’s award for betterments and
improvements, business personal property and extra expenses also fails.
Those awards were also based on evidence in the record showing that the
damage at issue was caused by water damage, including testimony by United
Fire’s own employees. The jury could very easily have credited that
testimony.   Therefore, the jury’s verdict was supported by the evidence.

      For the foregoing reasons, the judgment of the district court is hereby
AFFIRMED.




                                         9
