The New Orleans Saints have been rocked by plenty of bad news lately.
Last week, the NFL slapped the Louisiana franchise with the harshest penalties in league history for its illegal bounty program, and suspended head coach Sean Payton for a year. Then, the Fifth Circuit Court of Appeals announced that former punter Mitch Berger is stuck pursuing fraud claims against former deep snapper Kevin Houser in binding arbitration.
Since this is an appellate law blog, you already know which of these let-downs we have to cover.
Kevin Houser drew several of his teammates, (Drew Brees, Jeremy Shockey, Mitch Berger, and Charles Grant), his coach, (the now-suspended Payton), and Saints luminary Archie Manning into a bogus investment scheme involving Louisiana's Motion Picture investor tax credit. (For what it's worth, Houser didn't seem to know it was a scheme; he invested $125,000 of his own money in the failed plan.)
Louisiana Film Studios, LLC was at the center of the fraud. Wayne Read, the executive behind the company, approached Houser to become an investment partner in the studio. Houser declined, but inquired about buying tax credits from the studio, reports the Times-Picayune.
Louisiana's tax credit program offers film companies credits and rebates to shoot in the state. Motion picture productions and studio projects can earn transferable Louisiana tax credits based on the amount they spend with Louisiana businesses, which are converted into financing for movies. They can be sold at a discount to individuals or businesses that want to reduce their state tax liabilities.
Here, Louisiana Film Studios never submitted a final application for the credits, and failed to meet the requirements to earn them. Last year, Read was sentenced to four years in prison after bilking 27 members of the Saints organization out of almost $1.9 million in unfulfilled tax credits, according to the Times-Picayune.
There are plenty of lawsuits in this case -- Payton, Grant, and Shockey, who collectively lost $600,000 are also suing Houser -- but the Fifth Circuit Court of Appeals ruled this week that Mitch Berger's claims against Houser must be resolved in arbitration. That's because Houser wasn't just Berger's teammate, he was his financial advisor, too, reports The Associated Press.
In January 2004, Berger opened a securities brokerage account with Brecek & Young Advisors, Inc. (BYA); Houser was BYA's registered representative for the account.
When opening the account, Berger signed a "New Account Form," which contained an arbitration clause. The arbitration clause stated that "any controversy" between Berger and BYA would be settled by arbitration. The Fifth Circuit Court of Appeals ruled this week that "any controversy" does, in fact, mean any controversy, including this one.
Lesson learned: Arbitration clauses are binding, even on Saints.
- Berger v. Houser (Fifth Circuit Court of Appeals)
- 'Not All Securities Frauds are Ponzi Schemes' (FindLaw's Fifth Circuit Blog)
- Attorney Misconduct vs. Unsportsmanlike Conduct: Don't be a Saint (FindLaw's Fifth Circuit Blog)