Patin v. Thoroughbred Power Boats Inc.

IN THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT
_____________________

Nos. 00-31283, 01-30881
_____________________

GEORGE RANDALL PATIN; LAURA WIER PATIN

Plaintiffs-Appellees

v.

THOROUGHBRED POWER BOATS INC; ET AL

Defendants

THOROUGHBRED POWER BOATS INC; STEVEN STEPP; VELOCITY POWER
BOATS INC

Defendants-Appellants

_____________________

CATHERINE ILENE BOLEY; DARIN LANE WATKINS

Plaintiffs-Appellees

v.

THOROUGHBRED POWER BOATS INC

Defendant-Appellant

_____________________

LOUISIANA FARM BUREAU INSURANCE COMPANY

Plaintiff-Appellee
v.

THOROUGHBRED POWER BOATS INC; ET AL

Defendants

THOROUGHBRED POWER BOATS INC

Defendant-Appellant
_________________________________________________________________

Appeals from the United States District Court
for the Middle District of Louisiana
_________________________________________________________________
June 12, 2002
Before KING, Chief Judge, and HIGGINBOTHAM and EMILIO M. GARZA,
Circuit Judges.

KING, Chief Judge:

Defendants-Appellants Steven Stepp and Velocity Power Boats,

Inc. appeal the district court’s judgment denying their motion to

dismiss Plaintiff-Appellee Louisiana Farm Bureau Insurance

Company’s complaint for lack of personal jurisdiction.

Defendant-Appellants Thoroughbred Power Boats, Inc., Velocity

Power Boats, Inc., and Steven Stepp appeal the district court’s

award of damages in favor of Plaintiff-Appellee George Randall

Patin and Plaintiff-Appellee Louisiana Farm Bureau Insurance

Company, arguing that the district court improperly failed to

condition execution of the redhibition judgment in favor of these

plaintiffs on tender to Thoroughbred of the boat that is the

subject of the redhibition claim. For the following reasons, we

AFFIRM the judgement of the district court, excepting that

portion of the judgment awarding damages based on the redhibition

claim. We VACATE the portion of the district court’s judgment

awarding damages based on the redhibition claim and REMAND the

case to the district court for recalculation of damages

consistent with this opinion.

2
 I. Factual and Procedural Background

On May 6, 1995, George Randall Patin and Laura Wier Patin

(the “Patins”), along with Catherine Irene Boley and Darin Lane

Watkins (“Boley and Watkins”), were involved in a boating

accident while operating a boat manufactured by Thoroughbred

Power Boats, Inc. (“Thoroughbred”) and purchased by the Patins

from Thunder Marine, Inc. (“Thunder Marine”). The Patins filed

suit against Thoroughbred and Thunder Marine in Louisiana state

court alleging that the accident was caused by a defective

condition of the boat and seeking recovery for the purchase price

of the boat and recovery for personal injuries and other damages

arising from the accident. Boley and Watkins filed a separate

suit against Thoroughbred, also in Louisiana state court, seeking

recovery for damages arising from the accident. The Patins’

insurer, the Louisiana Farm Bureau Insurance Company (“the

LFBIC”), filed a third state court action under subrogation to

recover the amounts it paid to or on behalf of the Patins for

damage to the boat, salvage and storage of the damaged boat, and

loss of Mrs. Patin’s jewelry in the accident.

On Thoroughbred’s motion, all three suits were removed to

federal district court based on diversity of citizenship. The

district court then consolidated the suits into the instant

action. Thoroughbred1 filed answers to the Plaintiffs’

1
Thoroughbred agreed to assume the defense of Thunder
Marine and to indemnify and hold Thunder Marine harmless from any
judgment.

3
complaints.2 These answers did not question the Louisiana

federal district court’s authority to exercise personal

jurisdiction over Thoroughbred. The Plaintiffs then moved for

partial summary judgment as to liability. Thoroughbred did not

respond to this motion. Accordingly, on May 19, 1997, the

district court granted partial summary judgment in favor of the

Plaintiffs, finding that the boat was defective and that

Thoroughbred was liable to the Plaintiffs in redhibition and

under the Louisiana Products Liability Act.3

The Plaintiffs subsequently became aware that Thoroughbred

had ceased doing business. Accordingly, on July 30, 1997, the

Plaintiffs filed two amended complaints naming Steven Stepp

(“Stepp”) and Velocity Power Boats (“Velocity”) as additional

defendants, alleging that Velocity was a “successor corporation”

to Thoroughbred and that Velocity and Thoroughbred were both

alter egos of Stepp.4 The first of these amended complaints,

filed by the individual plaintiffs (i.e., the Patins and Boley

and Watkins), was never served on either Stepp or Velocity, and

was subsequently dismissed without prejudice. However, the

LFBIC, who filed the second amended complaint, sought and

2
The Patins, Boley and Watkins, and the LFBIC will be
referred to collectively in this opinion as “the Plaintiffs.”
3
At this time, the consolidated cases were assigned to
Chief Judge Polozola. The cases subsequently were transferred to
Judge Melançon on June 30, 2000.
4
Thoroughbred, Stepp, and Velocity will be referred to
collectively in this opinion as “the Defendants.”

4
obtained Stepp’s and Velocity’s consent to waive service.5

Stepp and Velocity filed a motion to dismiss the LFBIC’s

amended complaint, arguing that the Louisiana federal district

court lacked personal jurisdiction over them. On May 21, 1998,

the district court denied Stepp and Velocity’s motion to dismiss

without prejudice, in order to allow for discovery.

On December 15, 1998, Stepp and Velocity filed a motion for

summary judgment, seeking to dismiss the LFBIC’s amended

complaint for lack of personal jurisdiction, and, alternatively,

seeking a judgment on the merits that there was insufficient

evidence to raise a genuine issue of material fact regarding the

appropriateness of piercing the corporate veil of Thoroughbred or

imposing successor corporation liability upon Velocity. The

district court found that it lacked personal jurisdiction over

Stepp and Velocity.6 However, the court held open the

possibility that Stepp and Velocity might be subject to personal

jurisdiction if those defendants were found liable (based on the

doctrines of piercing the corporate veil and successor liability)

for claims against Thoroughbred, because Thoroughbred waived its

5
Thus, at this point in the litigation, the only
defendant to the individual plaintiffs’ actions is Thoroughbred,
while Thoroughbred, Velocity, and Stepp are all defendants to the
LFBIC’s action.
6
The court adopted this finding from a determination
made by District Judge John Parker in a separate series of civil
actions against Velocity. See Ruling on Motion to Dismiss, Civil
Action Nos. 97-1092 and 98-402.

5
personal jurisdiction defense.7 The district court accordingly

denied Stepp and Velocity’s motion for summary judgment, finding

that there were genuine issues of material fact regarding whether

Thoroughbred’s corporate veil could be pierced and whether

Velocity could be held liable as a successor corporation of

Thoroughbred.

The court conducted the damages phase of the trial as a

bench trial on July 17 and 18, 2001. At the close of the

Plaintiffs’ evidence, the Defendants moved for judgment as a

matter of law pursuant to Federal Rule of Civil Procedure 52(c),

arguing: (1) that the LFBIC’s action against Stepp and Velocity

should be dismissed for lack of personal jurisdiction; and in the

alternative, (2) that the LFBIC’s action against Stepp and

Velocity should be dismissed because the Plaintiffs failed to

show that piercing the corporate veil or imposing successor

liability was appropriate.

The district court issued a memorandum ruling dated

September 21, 2000. The district court held that, under the

choice of law rules of the forum state (i.e., Louisiana), the

substantive law of Florida governed the court’s determinations

whether Velocity was a successor of Thoroughbred and whether the

corporate veil could be pierced. The district court determined

7
Both parties agree that Thoroughbred waived its defense
to personal jurisdiction by filing an answer to the Plaintiffs’
original complaints without raising the issue of personal
jurisdiction.

6
that, under Florida law, Velocity was the successor of

Thoroughbred because the transformation of Velocity and

Thoroughbred constituted a “de facto merger” of the two

corporations and because Velocity was merely a continuation of

its predecessor, Thoroughbred. The district court also held

that, under Florida law, it was appropriate to pierce the

corporate veil and hold Stepp liable for the obligations of

Velocity and Thoroughbred.8 Accordingly, the district court

8
In support of these conclusions, the district court
entered, inter alia, the following findings of fact:
12. Until August, 1996, Stepp manufactured
[pleasure] boats through Thoroughbred Power
Boats, Inc.
13. In August, 1996, Thoroughbred ceased
manufacturing and selling pleasure boats.
14. In August, 1996, Velocity Power Boats,
Inc. began manufacturing and selling pleasure
boats.
15. Beginning in August, 1996, Stepp
manufactured his boats through Velocity.
19. The boats manufactured by Velocity after
July 1996, were essentially the same boats
that had been manufactured by Thoroughbred.
20. Thoroughbred and Velocity were wholly
owned by Steven Stepp and his wife.
21. Steven Stepp and his wife were the only
officers and board members of Thoroughbred
and Velocity.
22. Thoroughbred and Velocity shared the
same address and telephone numbers.
23. After August 1996 Steven Stepp leased
the same property to Velocity that he had
leased to Thoroughbred prior to August, 1996.
24. After August 1996, Thoroughbred “leased”
its employees; and after July, 1996, many of
the same “leased” employees became the
“leased” employees of Velocity.
...
29. By check dated August 13, 1996, Velocity
transferred $80,000 to Thoroughbred.
30. On or about September 5, 1996, $60,000

7
concluded that it was appropriate to impute Thoroughbred’s waiver

of the defense of lack of personal jurisdiction to Velocity and

Stepp and to hold Velocity and Stepp liable for Thoroughbred’s

obligations to the LFBIC.9

was transferred from Velocity to
Thoroughbred.
...
32. Steven Stepp’s testimony was less than
credible, in particular, but not limited to
his testimony accounting for the transfer of
$80,000 and $60,000 from Velocity to
Thoroughbred and his contention that he took
certain corporate or economic action because
his accountant or attorney told him to do so.
33. Steven Stepp did not provide a
satisfactory or believable rational [sic] for
the transformation of Thoroughbred and
Velocity in 1996.
34. That Thoroughbred might have an
obligation as a result of a judgment in this
lawsuit was a factor in Steven Stepp’s
decision to discontinue the manufacture of
boats through Thoroughbred and begin
production through velocity.
...
38. Velocity is the successor corporation of
Thoroughbred.
39. The transformation of Velocity and
Thoroughbred constituted a “de facto merger”
of the two corporations.
40. Velocity is merely a continuation of its
predecessor, Thoroughbred.
41. Velocity is and Thoroughbred was the
alter ego of Steven Stepp.
42. As there was improper conduct by
defendants in the transformation of Velocity
and Thoroughbred which was used to mislead
creditors or avoid liabilities of
Thoroughbred, the corporate veils of Velocity
and Thoroughbred should be pierced.
9
Regarding the redhibition issue, the district court
found that calculation of damages for the total loss of a boat
was analogous to calculation of damages for the total loss of a
car. The court found that, under Louisiana law, when a boat is

8
 Pursuant to this ruling, on September 22, 2000, the district

court entered judgment: (1) in favor of George Patin against

Thoroughbred for the sum of $23,000 minus the salvage value of

the boat; (2) in favor of Laura Patin against Thoroughbred for

the sum of $2328; (3) in favor of Boley and Watkins against

Thoroughbred for the sums of $3841 and $3836, respectively; and

(4) in favor of the LFBIC against Thoroughbred, Velocity, and

Stepp in the sum of $49,004. The district court also ordered the

parties to file a joint stipulation as to the salvage value of

the boat or to notify the court that such stipulation was not

possible within twenty-one days after entry of judgment.

The parties subsequently proved unable to reach an agreement

as to the salvage value of the boat. The district court

accordingly instructed Magistrate Judge Stephen Riedlinger to

conduct a hearing inquiring into the salvage value of the boat.

On February 9, 2001, the magistrate judge issued a report that

determined the salvage value of the boat to be $5000, and a

recommendation that this amount be deducted from the award to

George Patin. On June 6, 2001, the district court concurred with

the magistrate judge’s findings and ordered that the salvage

value of the boat be set at $5000 and that the previously-entered

judgment in favor of George Patin be reduced by that amount.

totally lost as a result of an accident, the owner is entitled to
the market value of the boat before the accident, less salvage
value, if any.

9
 Thoroughbred, Velocity, and Stepp filed the instant appeal

of the district court’s judgment on October 20, 2000,10 arguing:

1) that Stepp is not liable to the LFBIC because the corporate

veils of Thoroughbred and Velocity cannot be pierced to reach

Stepp; 2) that Velocity is not liable to the LFBIC because

Velocity is not the successor corporation of Thoroughbred; 3)

that Thoroughbred’s waiver of the defense of lack of personal

jurisdiction should not be imputed to Velocity and Stepp under

the theories of piercing the corporate veil and successor

corporation liability because Stepp and Velocity specifically

alleged the defense of lack of personal jurisdiction in their

first responsive pleading; and 4) that the district court erred

in failing to condition execution of judgment as to George Patin

and the LFBIC’s redhibition claims on tender of the boat to

Thoroughbred. We address each of these claims in turn.11

10
The Defendants subsequently filed an amended notice of
appeal on June 19, 2001, after the salvage value of the boat was
determined. As both parties agree, this amended notice of appeal
provides this court with appellate jurisdiction.
11
Though ordinarily the issue of subject matter or
personal jurisdiction must be considered by the court before
other challenges “since the court must find jurisdiction before
determining the validity of a claim,” Moran v. Kingdom of Saudi
Arabia, 27 F.3d 169, 172 (5th Cir. 1994) (quoting Gould, Inc. v.
Pechiney Ugine Kuhlmann, 853 F.2d 445, 449 (5th Cir. 1988)),
because the factual determinations that we review in assessing
the successor liability of Thoroughbred and the personal
liability of Stepp are also the factual determinations critical
to our adjudication of the personal jurisdiction issue, for the
sake of convenience we address the successor liability and
personal liability issues first. Cf. Spector v. LQ Motor Inns,
Inc., 517 F.2d 278, 284 (5th Cir. 1975) (noting that when
“jurisdictional and substantive issues are factually meshed” and

10
II. Did the district court err in piercing the corporate veil of
Thoroughbred and Velocity to reach Stepp?

In this diversity case, we apply the choice of law rules of

the forum state (i.e., Louisiana) to ascertain which state’s law

governs the substantive determination whether to pierce a

corporate veil. Marchesani v. Pellerin-Milnor Corp., 269 F.3d

481, 485 (5th Cir. 2001). The Louisiana Supreme Court has not

explicitly determined what law is applicable in evaluating

whether to pierce the corporate veil of a defendant company in a

products liability case. Accordingly, this court must determine

as best it can what the state’s highest court would decide

regarding the appropriate choice of law rule. Howe v. Scottsdale

Ins. Co., 204 F.3d 624, 627 (5th Cir. 2000).

In predicting how the Louisiana Supreme Court would decide

this issue, this court will be guided by the decisions of state

intermediate appellate courts unless other persuasive data

indicates that the Louisiana Supreme Court would decide

otherwise. First Nat’l Bank of Durant v.Douglass, 142 F.3d 802,

809 (5th Cir. 1998). At least one Louisiana intermediate

appellate court has concluded that the law of the state of

incorporation applies in determining whether it is appropriate to

pierce the corporate veil. See Quickick, Inc. v. Quickick Int’l,

304 So.2d 402, 406 (La. Ct. App. 1974). A number of federal

“decision on the jurisdictional issues is dependent on decision
of the merits” decision on the jurisdictional issue “should . . .
be reserved until a hearing on the merits”). We note that both
parties followed this logical structure in their briefing.

11
district courts have reached the same conclusion when

interpreting Louisiana law in related contexts. See, e.g., San

Francisco Estates v. Westfeldt Bros., No. 97-1102,

1998 WL 12243 at *4 (E.D. La. Jan. 13, 1998) (holding that that

the substantive law of a company’s state of incorporation should

be used to determine the viability of its corporate structure);

Powerup of Southeast La. Inc. v. Powerup U.S.A., Inc., 94-1441,

1994 WL 543631 (E.D. La. Oct. 5, 1994) (same); cf. Lone Star

Indus., Inc. v. Redwine, 757 F.2d 1544, 1548 n.3 (5th Cir. 1985)

(determining that the Louisiana Supreme Court would apply the law

of the state of incorporation to determine the viability of a

corporation after dissolution).

In light of these authorities, we agree with the district

court’s determination that the Louisiana State Supreme Court

would most likely conclude that the law of the state of

incorporation governs the determination when to pierce a

corporate veil. Accordingly, this court will apply the law of

Florida (the state of incorporation for both Velocity and

Thoroughbred) in assessing whether the district court erred in

piercing the corporate veils of Velocity and Thoroughbred. This

court reviews a federal district court’s decision to pierce the

corporate veil for clear error.12 Huard v. Shreveport Pirates,

12
While Erie dictates that we apply Florida substantive
law in determining whether it is appropriate to pierce the
corporate veil in the instant case, “as a matter of independent
federal procedure” we utilize our own federal standards of
appellate review in evaluating the district court’s findings.

12
Inc., 147 F.3d 406, 409 (5th Cir. 1998); see also Hollowell v.

Orleans Reg’l Hosp. LLC, 217 F.3d 379, 385 (5th Cir. 2000)

(noting that, while the determination whether to pierce to

corporate veil is a factual conclusion subject to deferential

review, disputes regarding the particular factfindings that are

necessary to support a decision to pierce the corporate veil

raise questions of law that this court reviews de novo).

The leading Florida case addressing the piercing of

corporate veils is Dania Jai-Alai Palace, Inc. v. Sykes, 450

So.2d 1114 (Fla. 1984). In Dania Jai-Alai, the Florida Supreme

Court held that in order to pierce the corporate veil of a

defendant corporation, a plaintiff must prove both: (1) that the

corporation is a “mere instrumentality” or alter ego of the

defendant; and (2) that the defendant engaged in “improper

conduct” in the formation or use of the corporation. See id. at

1120-21 (quoting Advertects, Inc. v. Sawyer Indus., Inc., 84

So.2d 21, 24 (Fla. 1955) (internal quotations omitted)); accord

Bellairs v. Mohrmann, 716 So.2d 320, 322 (Fla. Dist. Ct. App.

1998). In defining what constitutes “improper conduct,” the

Florida Supreme Court explained that the corporate veil “will not

be penetrated either at law or in equity unless it is shown that

Mid-America Pipeline Co. v. Lario Enters., Inc., 942 F.2d 1519,
1524 (10th Cir. 1991); cf. Tutor v. Ranger Ins. Co., 804 F.2d
1395, 1398 (5th Cir. 1986) (explaining that “[i]n a diversity
case, we apply the [] federal standard of review to assess the
sufficiency of the evidence in relation to the verdict, but we
refer to state law to determine the kind of evidence that must be
produced to support a verdict”).

13
the corporation was organized or employed to mislead creditors or

to work a fraud upon them.” Id. at 1120 (quoting Advertects, 84

So.2d at 23-24 (internal quotations omitted)).

Since Dania Jai-Alai, intermediate Florida appellate courts

and federal courts applying Florida law have elaborated further

on the meaning of “improper conduct.” In Steinhardt v. Banks,

511 So.2d 336, 339 (Fla. Dist. Ct. App. 1987), the Florida

District Court of Appeal for the Fourth District offered a

“workable formula for applying the reference to ‘improper

conduct.’” The court stated:

Florida decisions uniformly hold that courts
will look through the screen of a corporate
entity to the individuals who compose it in
cases in which the corporation was a mere
device or sham to accomplish some ulterior
purpose, ... or where the purpose is to evade
some statute or to accomplish some fraud or
illegal purpose, or where the corporation was
employed by the stockholders for fraudulent
or misleading purposes, was organized or used
to mislead creditors or to perpetrate a fraud
upon them, or to evade existing personal
liability.

Id. (quoting Tiernan v. Sheldon, 191 So.2d 87, 89 (Fla. Dist. Ct.

App. 1966) (internal quotations omitted). This formulation has

been cited with approval by other Florida courts and federal

courts applying Florida law. See, e.g., In re Warmus, 276 B.R.

688, 697 (Bankr. S.D. Fla. 2002); In re Hillsborough Holdings

Corp., 166 B.R. 461, 469 (Bankr. M.D. Fla. 1994); Acquisition

Corp. of Am. v. Am. Cast Iron Pipe Co., 543 So.2d 878, 882 (Fla.

Dist. Ct. App. 1989).

14
 The district court in the instant case found: (1) that

“Velocity is and Thoroughbred was the alter ego of Steven Stepp”;

and (2) that “there was improper conduct by defendants in the

transformation of Velocity and Thoroughbred which was used to

mislead creditors or avoid liabilities of Thoroughbred.” The

district court thus concluded that “the corporate veils of

Velocity and Thoroughbred should be pierced.” The Defendants

contend that the district court’s finding that “improper conduct”

occurred is clearly erroneous because both corporations (Velocity

and Thoroughbred) “conducted their business publicly and without

any subterfuge or deception” and because both corporations

“complied with all necessary corporate formalities and filed all

tax returns required by federal and state law.” However, the

Defendants point to no authority (and independent investigation

reveals no authority) suggesting a corporate veil may not be

pierced under Florida law when a corporation has conducted

business publicly and complied with all necessary corporate

formalities. Several courts interpreting Florida law have held

that such factors (particularly observance of corporate

formalities) can be relevant in assessing both alter ego status

and improper conduct. See, e.g., Raber v. Osprey Alaska, Inc.,

187 F.R.D. 675, 679 (M.D. Fla. 1999) (“Where the plaintiff pleads

that a corporation is the instrumentality of the defendant and

that the defendant engaged in improper conduct by failing to

observe corporate formalities, by commingling funds of the

15
corporation with funds of other corporations and with personal

funds, by using the assets of the corporation for his own

personal use, by failing to adequately capitalize the

corporation, and by using the corporate form to avoid liability,

piercing the corporate veil is appropriate.”) (internal citations

and quotations omitted); In re Brickell Inv. Corp., 85 B.R. 164,

167 (Bankr. S.D. Fla. 1988) (“When determining whether an alter

ego theory exists, several factors should be considered

including; whether corporate formalities were observed; whether

one corporation dominated another by virtue of its ownership,

control, and congruency of established goals; and whether there

was a transfer or commingling of assets between the

corporations.”). However, none of these courts suggest that

observance of corporate formalities (or the lack thereof) should

be determinative in assessing alter ego status or in determining

whether improper conduct has occurred. Moreover, any such

conclusion appears inconsistent with the Florida Supreme Court’s

elaboration of the corporate veil-piercing inquiry in Dania Jai

Alai and with the Fourth District Court of Appeals’s subsequent

elaboration in Steinhardt.

Our own review of the record reveals that numerous factors

support the district court’s finding that the transformation of

Thoroughbred to Velocity involved “improper conduct.” These

factors include, but are not limited to: the nature of Stepp’s

financial transactions with the two companies, the timing of

16
Stepp’s actions in transferring Thoroughbred’s activities to

Velocity, and Stepp’s admitted use of this transformation to

avoid liability in the instant case. In addition, our review of

the record also supports the district court’s finding that

Thoroughbred and Velocity are both alter egos of Stepp.

Accordingly, the district court did not clearly err in piercing

the corporate veil in the instant case.

III. Did the district court err in finding that Velocity is
subject to successor liability for the obligations of
Thoroughbred?

Florida law likewise governs our substantive determination

whether Velocity is subject to successor liability for the

obligations of Thoroughbred. Florida follows the traditional

corporate law rule that a successor corporation does not, as a

general rule, assume the liabilities of a predecessor

corporation. However, Florida also recognizes all four of the

traditionally-accepted exceptions to this rule. Pursuant to

these exceptions, the liabilities of a predecessor corporation

can be imposed upon a successor corporation when: (1) the

successor expressly or impliedly assumes obligations of the

predecessor; (2) the transaction is a de facto merger; (3) the

successor is a mere continuation of the predecessor; or (4) the

transaction is a fraudulent effort to avoid the liabilities of

the predecessor. Bernard v. Kee Mfg. Co., Inc., 409 So. 2d 1047,

1049 (Fla. 1982).

17
 The district court determined that Velocity should be held

liable for the obligations of Thoroughbred under two of these

exceptions. The court concluded: (1) that “Velocity is merely a

continuation of its predecessor, Thoroughbred,” and (2) that

“[t]he transformation of Velocity and Thoroughbred constituted a

‘de facto merger’ of the two corporations.” We need address only

the first of these exceptions.13

The applicability of these exceptions to the rule against

successor liability is generally treated as an issue of fact by

this court and our sister circuits. See, e.g., Frank IX & Sons,

Inc. v. Phillipp Textiles, Inc., 165 F.3d 32 (7th Cir. 1998)

(table decision) available at 1998 WL 709463 at *5 (noting that

imposing liability on a successor corporation based on fraudulent

intent to escape liability “involves . . . reviewing the district

court’s findings of fact, which we can only reverse for clear

error”); Ed Peters Jewelry Co., Inc., v. C & J Jewelry Co., Inc.,

124 F.3d 252, 269 (1st Cir. 1997) (explaining that “the ‘mere

continuation’ inquiry is multifaceted, and normally requires a

cumulative, case-by-case assessment of the evidence by the

factfinder”); Monzingo v. Correct Mfg. Corp., 752 F.2d 168, 175-

76 (5th Cir. 1985) (treating the determination whether a

successor corporation should be held liable for the obligations

13
While the de facto merger exception and the mere
continuation exception are related and have similar
characteristics, most Florida courts have treated them as
separate theories. See Bud Antle, Inc. v. E. Foods, Inc., 758
F.2d 1451, 1457 (11th Cir. 1985) (listing cases).

18
of its predecessor on a “continuity of enterprise” theory as a

question of fact for the jury). Accordingly, we review the

district court’s finding that Velocity is a “mere continuation”

of Thoroughbred for clear error. However, to the extent that the

parties dispute the findings required by Florida law to support a

determination of successor liability, such disputes present legal

questions that we review de novo. Cf. Hollowell, 217 F.3d at 385

(noting that, while the determination whether to pierce to

corporate veil is a factual conclusion subject to deferential

review, disputes regarding the particular factfindings that are

necessary to support the conclusion that piercing is appropriate

raise questions of law subject to de novo review).

The Florida Supreme Court has not significantly elaborated

on the nature of the “mere continuation” exception to the general

rule against successor liability. Accordingly, we turn to

decisions by state intermediate appellate courts and federal

courts interpreting Florida law for guidance in predicting what

elements the Florida Supreme Court would find necessary to invoke

this exception.

“The concept of continuation of business arises where the

successor corporation is merely a continuation or reincarnation

of the predecessor corporation under a different name.”

Sculptchair, Inc. v. Century Arts, Ltd., 94 F.3d 623, 630 (11th

Cir. 1996) (quoting Amjad Munim, M.D., P.A. v. Azar, 648 So. 2d

145, 154 (Fla. Dist. Ct. App. 1994) (internal citations and

19
quotations omitted)). In other words, a “mere continuation of

business” will be found where the purchasing corporation is

merely a “new hat” for the seller with the same or similar

management and ownership. Bud Antle, Inc. v. E. Foods, Inc., 758

F.2d 1451, 1458 (11th Cir. 1985) (interpreting the same “mere

continuation” exception under Georgia law). Under Florida law,

“a ‘mere continuation of business’ will be found where one

corporation is absorbed by another, as evidenced by an identity

of assets, location, management, personnel, and stockholders.”

Sculptchair, 94 F.3d at 630; accord Azar, 648 So.2d at 154.

The district court in the instant case found: (1) that

Thoroughbred and Velocity were both wholly owned by Steven Stepp

and his wife; (2) that Steven Stepp and his wife were the only

officers and board members of both Thoroughbred and Velocity;

(3) that Thoroughbred and Velocity shared the same address and

telephone numbers, and (4) that Stepp leased the same property

and many of the same employees to both corporations. These

findings, which are supported by the record, demonstrate an

identity of assets, location, management, personnel, and

stockholders between Velocity and Thoroughbred, as required by

the courts in Sculptchair and Azar.

The Defendants argue, however, that such findings are

insufficient to support the conclusion that Velocity is a “mere

continuation” of Thoroughbred. Relying on the Eleventh Circuit’s

decision in Bud Antle, the Defendants contend that all four

20
exceptions to the traditional corporate law rule prohibiting

successor liability require a transfer of assets from the

predecessor corporation to the successor corporation. See 758

F.2d at 1457 (“All four of these exceptions require a transfer of

assets in order to hold the acquiring corporation liable.”).

Because the district court failed to explicitly find that a

transfer of assets occurred in the instant case, the Defendants

maintain that the mere continuation exception cannot apply in the

instant case.

We need not determine whether Florida law requires a

“transfer of assets” (as suggested by the Bud Antle court), or

merely an “identity of assets” (as suggested by the Sculptchair

and Azar courts) to support application of the mere continuation

exception. To the extent that there is a meaningful distinction

between these two concepts, we assume without deciding that

Florida law requires a transfer of assets. We further find that

the district court’s detailed factual findings, supported by

ample evidence in the record, demonstrate the existence of such a

transfer of assets in the instant case.

The district court found, inter alia, that Stepp leased the

same equipment to Velocity that he had leased to Thoroughbred,

that Velocity “leased” many of the same employees that

Thoroughbred had previously leased, and that Velocity

manufactured power boats under the same trade name that

Thoroughbred had previously used. The Defendants do not contest

21
the accuracy of these findings. The crux of the Defendant’s

position appears to be that, while the assets of Velocity and

Thoroughbred were substantially the same — including, but not

limited to, the companies’ equipment, employees, and trade name —

no transfer of assets occurred because Thoroughbred never

directly sold any of these assets to Velocity.14 However, the

successor liability doctrine does not require evidence of such a

direct sale of assets from the predecessor to the successor for

there to be a “transfer of assets” between two corporations.

Initially, as a number of federal courts interpreting the

mere continuation exception have recognized, a “transfer of

assets” does not necessarily require a sale of assets. See,

e.g., Kaiser Found. Health Plan of the Mid-Atlantic States v.

Clary & Moore, P.C., 123 F.3d 201, 207 (4th Cir. 1997) (applying

the “mere continuation” exception under Virginia law and

considering a lease of equipment and personnel from the

predecessor corporation to the successor corporation in assessing

whether the transfer of assets between the two entities involved

adequate consideration); Stoumbos v. Kilimnik, 988 F.2d 949, 961

14
Instead, the record reveals that Stepp engaged in a
complex series of transactions involving a web of companies (all
of which were solely owned and controlled by Stepp and/or other
members of his immediate family) that resulted in the indirect
transfers of assets from Thoroughbred to Velocity. For example,
regarding the boat construction equipment, the record reveals
that Stepp purchased this equipment from Thoroughbred. Stepp
then leased this equipment back to Thoroughbred for a short time.
He then leased the same equipment to Velocity when Thoroughbred
ceased operations, and ultimately sold the equipment to Velocity.

22
(9th Cir. 1993) (applying the “mere continuation” exception under

Washington law and recognizing that liability under this

exception extends “to transfers other than straightforward

purchases” because holding otherwise would permit “unscrupulous

businesspersons . . . to avoid successor liability and cheat

creditors merely by changing the form of the transfer”); Florom

v. Elliot Mfg., 867 F.2d 570, 574-75 (10th Cir. 1989))

(interpreting Colorado law and recognizing that the four

traditional exceptions to the rule against successor liability

apply when a “predecessor sells or otherwise transfers all its

assets to the successor”); State of New York v. N. Storonske

Cooperage Co., Inc., 174 B.R. 366, 376 (Bankr. N.D.N.Y. 1994)

(interpreting New York law, recognizing that the four traditional

exceptions to the rule against successor liability apply “so long

as there is some form of a ‘transfer’ of assets” and that “a

literal ‘purchase’ of assets is not required to establish

successor liability”); cf. NLRB v. Band-age, Inc., 534 F.2d 1, 5

(1st Cir. 1976) (explaining that “[t]he fact that the transfer

[of assets] took the form of a lease rather than an outright sale

is not of great significance” for purposes of determining

successor liability in the labor law context). Similarly, the

fact that a transfer of assets involves an intermediary rather

than a direct transfer from predecessor to successor does not

necessarily preclude application of the mere continuation

exception, particularly when the intermediary is under the

23
control of or otherwise tied to the principals in both the

predecessor and successor corporations. Ed Peters Jewelry, 124

F.3d at 269-70. Finally, the fact that the entirety of the

predecessor’s assets were not transferred to the successor does

not render the mere continuation exception inapplicable.15 See,

e.g., id. at 269.

In sum, in considering whether a “transfer of assets” has

occurred, we do not think Florida courts would elevate form over

substance. Instead, we predict that the Florida Supreme Court

would follow the courts in Ed Peters Jewelry and Kaiser

Foundation and look to the true nature of the overall transaction

in assessing whether a transfer of assets has occurred. See id.

at 270; accord Kaiser Foundation, 123 F.3d at 205. In the

instant case, both the district court’s factual findings and the

record support the existence of a transfer of assets between

Thoroughbred and Velocity. Accordingly, the district court did

not clearly err in concluding that Velocity is a mere

continuation of Thoroughbred and thus holding that Velocity is

responsible for the obligations of Thoroughbred.16

15
It is important to clarify that this court is not
suggesting that the nature of a transfer of assets, the
directness of that transfer, or the extent of the assets
transferred are not relevant factors in assessing the
applicability of the mere continuation exception under Florida
law. We simply conclude that a transfer of assets can be found
in the absence of a direct sale of all assets from predecessor to
successor.
16
Because we affirm the district court’s finding that
Velocity is a mere continuation of Thoroughbred, we need not

24
 IV. Can Thoroughbred’s waiver of personal jurisdiction be
imputed to Stepp and Velocity?

Whether in personam jurisdiction can be exercised over a

defendant is a question of law subject to de novo review by this

court. Dickson Marine, Inc. v. Panalpina, Inc., 179 F.3d 331,

335 (5th Cir. 1999). In a diversity suit, a federal court has

personal jurisdiction over a nonresident defendant to the same

extent that a state court in that forum has such jurisdiction.

Wilson v. Belin, 20 F.3d 644, 646 (5th Cir. 1994). Accordingly,

the district court can exercise personal jurisdiction over the

Defendants in the instant case only if the Defendants are subject

to personal jurisdiction in the Louisiana state courts.

Generally, this court conducts a two-prong analysis to

determine if a state court may exercise personal jurisdiction

over a nonresident defendant. “First, we determine whether the

long-arm statute of the forum state confers personal jurisdiction

over the defendant. Second, we ask whether the exercise of such

jurisdiction by the forum state is consistent with due process

under the United States Constitution.” J.R. Stripling v. Jordan

Prod. Co., LLC, 234 F.3d 863, 869 (5th Cir. 2000) (internal

citations and quotations omitted). However, because Louisiana’s

long arm statute is coextensive with the limits of due process,

“the sole inquiry into jurisdiction over a nonresident [under

evaluate whether Velocity might also be responsible for the
obligations of Thoroughbred pursuant to the de facto merger
theory of successor liability.

25
Louisiana law] is a one-step analysis of the constitutional due

process requirements.” Petroleum Helicopters, Inc. v. Avco

Corp., 834 F.2d 510, 514 (5th Cir. 1987).17

The district court adopted Judge Parker’s finding that Stepp

and Velocity would not ordinarily be subject to personal

jurisdiction in Louisiana courts. However, the court found that

exercise of personal jurisdiction in the instant case was

nonetheless appropriate because Thoroughbred’s consent to

personal jurisdiction could be imputed to its alter ego (Stepp)

and its successor (Velocity). While the Defendants do not

dispute that Thoroughbred waived any objection to personal

jurisdiction by making a general answer to the Plaintiffs’

complaints without raising personal jurisdiction as a defense,

the Defendants contend that this waiver cannot be imputed to

Stepp or Velocity. They point out that both Stepp and Velocity

pleaded lack of personal jurisdiction in their first responsive

pleadings, and they maintain that Stepp and Velocity lack the

requisite minimum contacts with the State of Louisiana to satisfy

the requirements of due process. In support of their contention

that personal jurisdiction cannot be “imputed” under these

17
The constitutional due process analysis for personal
jurisdiction imposes two requirements. First, the defendant must
have sufficient minimum contacts with the forum state to comport
with “traditional notions of fair play and substantial justice.”
See Int’l Shoe Co. v. Washington, 326 U.S. 310, 316 (1945)
(quoting Milliken v. Meyer, 311 U.S. 457, 463 (1940)). Second,
there must be reasonably adequate notice to afford the party an
opportunity to defend. See Burger King Corp. v. Rudzewicz, 471
U.S. 462, 475 n.17 (1985).

26
circumstances, the Defendants rely on language in the Supreme

Court’s opinion in Rush v. Savchuck, 444 U.S. 320, 332 (1980),

suggesting that, while “the parties’ relationships with each

other may be significant in evaluating their ties to the forum,”

the due process requirements of International Shoe “must be met

as to each defendant over whom a state court exercises

jurisdiction.”

This language in Rush, however, does not preclude us from

imputing the jurisdictional contacts of a predecessor corporation

to its successor corporation or individual alter ego. As the

Plaintiffs correctly point out, federal courts have consistently

acknowledged that it is compatible with due process for a court

to exercise personal jurisdiction over an individual or a

corporation that would not ordinarily be subject to personal

jurisdiction in that court when the individual or corporation is

an alter ego or successor of a corporation that would be subject

to personal jurisdiction in that court.18 The theory underlying

18
See, e.g., Howard v. Everex Systems, Inc., 228 F.3d
1057, 1069 n.17 (9th Cir. 2000) (“Although jurisdiction over a
subsidiary does not automatically provide jurisdiction over a
parent . . . where the parent totally controls the actions of the
subsidiary so that the subsidiary is the mere alter ego of the
parent, jurisdiction is appropriate over the parent as well.”);
Minnesota Mining & Mfg. Co. v. Eco Chem Inc., 757 F.2d 1256, 1265
(Fed. Cir. 1985) (finding that the exercise of personal
jurisdiction over a successor corporation with no ties to the
forum state was appropriate when the successor corporation was a
“mere continuation” of the predecessor corporation and exercise
of personal jurisdiction would have been appropriate over the
predecessor); Marine Midland Bank, N.A. v. Miller, 664 F.2d 899,
903 (2d Cir. 1981) (finding that the fiduciary shield doctrine,
which prevents courts from imputing the jurisdictional contacts

27
these cases is that, because the two corporations (or the

corporation and its individual alter ego) are the same entity,

the jurisdictional contacts of one are the jurisdictional

contacts of the other for the purposes of the International Shoe

due process analysis. See, e.g., Lakota Girl Scout Council, 519

F.2d at 637 (explaining that “if the corporation is [the

individual defendant’s] alter ego, its contacts are his and due

process is satisfied”).

Only a few federal courts have specifically considered the

related question whether a successor corporation is bound by its

predecessor corporation’s waiver of personal jurisdiction (or,

similarly, whether an individual is bound by his or her corporate

alter ego’s waiver of personal jurisdiction). However, those

courts have uniformly found that it is consistent with due

process to impute a corporation’s waiver of personal jurisdiction

of corporations to their stockholders, is inapplicable when the
corporation is a “mere shell” for the individual stockholder);
Lakota Girl Scout Council, Inc. v. Havey Fund-Raising Mgmt.,
Inc., 519 F.2d 634, 637-38 (8th Cir. 1975) (finding that the
chief executive officer of a corporation was subject to in
personam jurisdiction based on the corporation’s activities in
the forum state when the evidence indicated that the corporation
was merely the alter ego of the chief executive officer); Huth v.
Hillsboro Ins. Mgmt., Inc., 72 F. Supp.2d 506, 510 (E.D. Pa.
1999) (holding that the acts of a predecessor corporation may be
attributed to its successor for purposes of determining whether
jurisdiction over the successor is proper); Kinetic Instruments,
Inc. v. Lares, 802 F. Supp. 976, 985 (S.D.N.Y. 1992) (“It is
clear that if a court has jurisdiction over a corporation, it may
obtain jurisdiction over a corporate officer or shareholder by
disregarding the corporate entity.”).

28
to its successor (or its individual alter ego),19 for the same

reasons that imputation of jurisdictional contacts is

appropriate. As the Packer court explained, imputing a

corporation’s consent to personal jurisdiction to its individual

alter ego is consistent with the underlying rationale justifying

piercing of the corporate veil. 959 F. Supp. at 203. When a

corporation is deemed the “alter ego” of an individual, then

those entities are considered to be one and the same under the

law: “the corporation’s acts must be deemed to be [the

individual’s] own.” Id. Accordingly, just as a corporation that

has previously submitted to the jurisdiction of a court cannot

subsequently object to that court’s exercise of jurisdiction on

due process grounds, see Fed. R. Civ. P. 12(h), an individual

19
See, e.g., Hale Propeller, L.L.C. v. Ryan Marine Prods.
PTY., LTD., 98 F. Supp. 2d 260, 264-65 (D. Conn. 2000),
aff’d, __ F.3d __ (Fed. Cir. June 5, 2002) (table decision),
available at 2002 WL 1218028, (acknowledging that an individual
could be bound by his corporate alter ego’s waiver of personal
jurisdiction); Totalplan Corp. of Am. v. Lure Camera, Ltd., 613
F. Supp. 451, 458 (W.D.N.Y. 1985) (finding that a corporation’s
waiver of personal jurisdiction could be imputed to its
shareholders when piercing of the corporate veil was appropriate
because “it would be inapropos to allow the company effectively
to negate its waiver”); Mi-Jack Products, Inc. v. The Taylor
Group, Inc., No. 96-C-7850, 1997 WL 441796, at *4 (N.D. Ill.
1997) (holding that a parent corporation’s waiver of personal
jurisdiction could be imputed to its subsidiary if the subsidiary
could be shown to be only an alter ego of the parent); cf. Packer
v. TDI Systems, Inc., 959 F. Supp. 192, 202 (S.D.N.Y. 1997)
(holding that “[a] corporation’s consent to jurisdiction under a
forum selection clause can be applied to obtain jurisdiction over
an individual officer by disregarding the corporate entity under
the doctrine of piercing the corporate veil”).

29
alter ego of a corporation that has waived personal jurisdiction

cannot subsequently attempt to negate that waiver.

Similarly, imputing a predecessor corporation’s waiver of

personal jurisdiction to its successor corporation when the

successor is a “mere continuation” of the predecessor is also

consistent with the principles underlying this exception to the

general rule against successor liability. The premise underlying

the “mere continuation” exception to the rule against successor

liability is that the successor corporation is, in fact, the same

corporate entity as the predecessor corporation, simply wearing a

“new hat.” Bud Antle, 758 F.2d at 1458; Azar, 648 So.2d at 154.

Under such circumstances, if the predecessor corporation has

already submitted to the jurisdiction of a court, it cannot

subsequently object to that jurisdiction on due process grounds

simply because it has put on its “new hat.” “Any other ruling

would allow corporations to immunize themselves [from liability]

by formalistically changing their titles.” Duris v. Erato

Shipping, Inc., 684 F.2d 352, 356 (6th Cir. 1982).

Accordingly, we conclude that a successor corporation that

is deemed to be a “mere continuation” of its predecessor

corporation can be bound by the predecessor corporation’s

voluntary submission to the personal jurisdiction of a court.

Similarly, an individual can be bound by a corporation’s

voluntary submission to the personal jurisdiction of a court when

the corporate veil has been pierced and the corporation is deemed

30
to be the “alter ego” of that individual. Consequently, in the

instant case, because Thoroughbred, Stepp, and Velocity are

functionally the same entity in the eyes of the law, jurisdiction

over that entity is appropriate after it has (wearing any one of

its “hats”) voluntarily submitted to the personal jurisdiction of

the court by making a general appearance.20

V. Did the district court calculate the correct redhibition
remedy under Louisiana law?

Both parties agree that Louisiana law is applicable to the

Plaintiffs’ redhibition claim. Redhibition is an avoidance of

sale on account of a defect in the manufacture or design of a

thing sold “which renders it either absolutely useless, or its

use so inconvenient and imperfect, that it must be supposed that

the buyer would not have purchased it, had he known of the vice.”

La. Civ. Code Ann. art. 2520 (West 1973).21 Typically, the

20
Accordingly, contrary to the Defendants’ suggestion, we
need not conduct a due process inquiry into the district court’s
exercise of jurisdiction over Thoroughbred, Velocity, or Stepp
(or instruct the district court to do so on remand). The fact
that Thoroughbred, Velocity, and Stepp may not have had the
requisite “minimum contacts” with Louisiana to support exercise
of personal jurisdiction by Louisiana courts (or federal courts
sitting in Louisiana) is irrelevant in the instant case.
Personal jurisdiction is an individual right that is subject to
waiver. See Ins. Corp. of Ireland, LTD v. Compagnie des Bauxites
de Guinee, 456 U.S. 694, 704 (1982). Once that right is waived,
a party that has voluntarily submitted to the jurisdiction of a
court cannot subsequently object to that court’s exercise of
jurisdiction on due process grounds.
21
The sections of the Louisiana Civil Code governing
sales were amended in 1993. See 1993 La. Sess. Law Serv. 841 § 1
(West). These amendments became effective on January 1, 1995.
See id. Because the boat at issue in the instant case was
purchased in 1993, the law in effect at that time governs and all

31
remedy contemplated in a redhibitory action under Louisiana law

is full recission of the sale. Recission “requires the seller to

return the purchase price and the buyer to return the thing

purchased, thus placing the parties in the positions they held

before the sale.” Lindy Invs., LP v. Shakertown Corp., 209 F.3d

802, 806 (5th Cir. 2000) (citing Capitol City Leasing Corp. v.

Hill, 404 So.2d 935, 939 (La. 1981)). However, when a

redhibitory defect merely diminishes the product’s value or

utility rather than rendering the product totally unfit for its

intended use, “a party can recover quanti minoris damages for a

reduction in the purchase price without having to return the

defective product.” Id.

The trial court “has discretion to award either rescission

or quanti minoris in a successful redhibitory action, but cannot

award both.” Id. (internal citations and quotations omitted).

When a trial court awards recission, the appropriate measure of

damages is restoration of the purchase price, plus reimbursement

of reasonable expenses occasioned by the sale and expenses

incurred in the preservation of the item, see, e.g., La. Civ.

Code Ann. art. 2531 (West 1973); Poché v. Bayliner Marine Corp.,

93-721 (La. App. 5 Cir. 2/9/94), 632 So.2d 1170, 1174),22 minus

references herein will use the language of the articles prior to
revision. See Fly v. All-Star Ford Lincoln Mercury, Inc., 95
1216 (La. App. 1 Cir. 8/21/96), 690 So.2d 759, 761 n.2.
22
In addition to restitution of the purchase price and
repayment of expenses (including reasonable attorney fees), a bad
faith seller is also answerable for other damages. See La. Civ.

32
any appropriate discount for the value the buyer received from

use of the item, see La. Civ. Code Ann. art. 2531 (West 1973);

Alexander v. Boroughs, 359 So.2d 607, 610 (La. 1978).23 See

also Lindy Invs., 209 F.3d at 809. When a trial court makes a

quanti minoris award, the appropriate measure of damages is the

difference between the actual selling price and the price that a

reasonable buyer and seller would have agreed upon if they had

both known of the defects. See Fly, 690 So.2d at 763. Factors

to consider in making a quanti minoris award include “the number

of defects, the frequency and length of attempted repairs of the

defects, the inconvenience associated with the repairs, the

actual damage, if any, caused by the defects, the actual cost of

repairs and the curtailed use of the thing due to its defects.”

Id.; accord Robert v. Bayou Bernard Marine, Inc., 514 So.2d 540,

546-47 (La. Ct. App. 1987).

Code Ann. art. 2545 (West 1973). These damages can include, for
example, non-pecuniary damages for mental anguish, aggravation
and inconvenience. See Kent v. Cobb, 35-663 (La. App. 2 Cir.
3/8/02), 811 So.2d 1206, 1215.

23
See Alexander v. Boroughs, 359 So.2d 607, 610 (La.
1978) (holding that “credit for a purchaser’s use of a product
may be proper in certain instances, even in favor of a bad faith
seller,” but clarifying that “[c]ompensation for the buyer’s use
. . . ought not be granted automatically by the courts; even the
value of an extensive use may be overridden by great
inconveniences incurred because of the defective nature of the
thing and constant interruptions in service caused by the
seller's attempts to repair”).

33
 The parties dispute whether the district court calculated

the appropriate measure of damages in the instant case. Indeed,

the parties apparently disagree as to the type of award

(recission or quanti minoris) that the district court was

attempting to make. The Defendants contend that the district

court was attempting to award a recission and that the court thus

erred in failing to instruct the Plaintiffs to return the boat to

the Defendants. The Plaintiffs argue in response that the

district court was actually attempting to award quanti minoris

damages (i.e., a reduction in the purchase price); thus the

district court correctly determined that the Plaintiffs were not

required to return the boat to the Defendants.

The district court’s factual findings and conclusions of law

reveal that the court awarded the Plaintiffs “the market value of

the boat before the accident, less salvage value, if any.” The

district court apparently relied upon cases addressing the

measure of damages for destruction of an automobile or boat by a

third party tortfeasor, including Phelps v. White, 645 So.2d 698

(La. App. 3 Cir. 1994), and Coleman v. Victor, 326 So.2d 344 (La.

1976), in calculating this redhibition award. This

conceptualization of the damage award ignores the unique nature

of a redhibition claim.

Redhibition is an avoidance of sale. Accordingly, the goal

of the remedy is to return the injured party to the position he

or she was in before the sale occurred, not to the position he or

34
she was in before his or her injury, as in a tort remedy. See

Lindy Invs., 209 F.3d at 806. These distinct inquiries will not

necessarily produce the same measure of damages. For example, it

appears in the instant case that the district court included the

value of the Patins’ improvements to the boat, as well as any

post-sale appreciation or depreciation in the value of the boat,

in calculating the “market value” of the boat. However,

improvements made by the buyer to a purchased item and post-sale

fluctuations in the market value of that item are not necessarily

relevant in calculating a damage award pursuant to a redhibition

claim, as that award is designed to rescind the sale and

accordingly revolves around the purchase price of the boat.

While it appears that the Plaintiffs are correct that the

district court was actually attempting to award some form of

quanti minoris-type damages in the instant case rather than a

complete recission of sale, the reasoning expressed by the

district court in its conclusions of law indicate that the court

most likely erred in its calculation of the quanti minoris award.

Because the district court’s factual findings do not enable this

court to determine what the correct award should be, a remand to

the district court is necessary to recalculate the appropriate

award.

VI. Conclusions

For the foregoing reasons, we AFFIRM the judgment of the

district court in all respects excepting that portion of the

35
judgment awarding damages based on the redhibition claim (i.e.,

awarding damages to George Patin against Thoroughbred and

awarding damages to the LFBIC against Thoroughbred, Velocity, and

Stepp). We VACATE the portion of the district court’s judgment

awarding damages based on the redhibition claim and REMAND to the

district court for recalculation of damages consistent with this

opinion. Costs shall be borne by Appellants.

36