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Brothers Petroleum, LLC v. Wagners Chef, LLC

United States District Court, E.D. Louisiana

July 31, 2018



          Carl J. Barbier, United States District Judge.

         Before the Court are Motions to Dismiss submitted by Defendants, Jadallah Enterprises, LLC and Ahmed 1, LLC, jointly, (Rec. Doc. 18); LNV Corporation (Rec. Doc. 20); Wagner World, LLC (Rec. Doc. 21); and Empire Express, LLC (Rec. Doc. 22). Brothers responded to Defendants with a single omnibus memorandum in opposition (Rec. Doc. 24), to which all Defendants except Empire Express have replied. This Court heard oral argument regarding the Motions on July 11, 2018. Having considered the motions and legal memoranda, the record, and the applicable law, the Court finds that LNV Corporation's, Wagner World's, and Empire Express's Motions should be GRANTED and the Motion by Jadallah Enterprises and Ahmed 1 should be GRANTED IN PART and DENIED IN PART.


         The central dispute of this case is between a petroleum distributor, Brothers Petroleum, LLC, (“Brothers”) and a petroleum retailer, Wagners Chef, LLC. In October of 2012, Brothers entered into a supply contract (the “Contract”) for Exxon branded fuel with the retail operator of a gas station and convenience store at the intersection of Chef Menteur Highway and Louisa Street in New Orleans, Louisiana (the “Property”). Less than a year later, Wagners Chef acquired the right to operate the gas station and storefront as well as the right to purchase fuel under the Contract from Brothers.[1] According to Brothers, the Contract does not terminate until at least September of 2026, with an automatic 5-year renewal.[2]

         Mr. Jadallah Saed-who is not a party to this suit-subsequently acquired a 100% interest in Wagners Chef.[3] Following the change in ownership, Wagners Chef initiated state court litigation against Brothers in July of 2014, alleging that Wagners Chef was not bound by the Contract.[4] However, the Louisiana Fourth Circuit Court of Appeal found the Contract valid, [5] and a state district court ordered specific performance of the Contract in May of 2016.[6] Brothers avers that despite these rulings, Wagners Chef continued to refuse to comply with the Contract.[7] Brothers attempted to force compliance by filing a motion for contempt proceedings against Wagners Chef, and sole owner, Mr. Saed.[8] It also sought a writ of distringas to have the Sheriff for the Parish of Orleans appointed to take control of the Property.[9] Brothers claims that Wagners Chef did not begin purchasing fuel from Brothers in compliance with the Contract and the order of specific performance, until September of 2016, and only complied at all due to the threat of further legal action.[10]

         While Wagners Chef operated the gas station and store, it did not own the Property; it leased the Property (the “Chef Lease”) from the then-owner, Wagner World, LLC. The Chef Lease allegedly “extended through February, 2022 with a seven (7) year option to purchase thereafter.”[11] However, on July 8, 2016, Wagners Chef cancelled the Chef Lease.[12] Brothers alleges that the Chef Lease was Wagners Chef's “single most valuable asset” because it operated its business from the Property, its operational licenses and permits relied on the lease, and the lease contained an option to purchase.

         On the same day as the lease cancellation, Jadallah Enterprises, LLC purchased the Property from Wagner World and then leased it to Ahmed 1, LLC. Jadallah Saed is the sole owner of both these entities, as well as Wagners Chef. First NBC Bank provided a multiple indebtedness mortgage to fund Jadallah Enterprise's purchase of the Property and Ahmed 1 executed an assignment of rents in favor of First NBC as security (the “First NBC Loans”). Brothers claims that a month before cancelling the lease, Wagners Chef received approval for $2.9 million dollar loan from First NBC for purchase of the Property.[13] Subsequently, Ahmed 1 subleased the Property to Empire Express and on November 8, 2016, Wagners Chef sold all of its assets to Empire Express, LLC.

         Brothers alleges that during the period after these transactions, but before the distringas hearing set for November 2, 2016, it was “necessary to deceive the [state] trial court into believing ‘all was well' and that they were and that they were willing to finally . . . honor the contract.”[14] Brothers further asserts that contemporaneously with this deception on the state trial court, Mr. Saed sent a verified application for a liquor license for the property on behalf of a single-member LLC which is not a party to this lawsuit, and then another application on behalf of Wagners Chef. In each of these applications, Mr. Saed allegedly indicated that the property was operated under a lease from Jadallah Enterprises, knowing this to be false, because Jadallah Enterprises had leased the entirety of the property to Ahmed 1, which had executed the assignment of rents in favor of First NBC.[15]

         On December 21, 2016, Brothers filed a revocatory action in state court seeking to annul the cancellation of the Chef Lease, the sale of the Property to Jadallah Enterprises, the lease to Ahmed 1, and the sale of Wagners Chef's assets to Empire Express. Brothers alleges that the cancellation of the lease and the transfers of the Property caused or increased the insolvency of Wagners Chef to the detriment of Brothers.[16] Further, Brothers claims that it is entitled to a judgment annulling both the multiple indebtedness mortgage and the assignment of rents because First NBC knew or should have known that these transactions would cause Wagners Chef to breach its Contract with Brothers and increase the insolvency of Wagners Chef.[17]Brothers also seeks damages for unfair trade practices, or alternatively, unjust enrichment from each of the Defendants (with the exception of NBC First's successor-in-interest).[18]

         First NBC was declared insolvent and the FDIC became First NBC's receiver in April of 2017. Per the extensive powers granted it under the Federal Institutions, Recovery, and Enforcement Act (“FIRREA”), the FDIC removed this case from state court on May 30, 2017. On July 17, 2017, the FDIC moved to stay these proceedings until it could complete its administrative review of any claims set forth by First NBC.[19] This Court granted a stay of proceedings extending for 180-days from the filing of Brothers' administrative claim, or until the FDIC denied Brothers claims for administrative relief, whichever occurred first.[20] In October of 2017, the FDIC as receiver conveyed the First NBC Loans to LNV Corporation. The Court then removed the FDIC-receiver as a defendant and added LNV.[21] This Court terminated the stay on January 19, 2018.[22] Soon after, Defendants filed their respective Motions to Dismiss.


         Under the Federal Rules of Civil Procedure, a complaint must contain “a short and plain statement of the claim showing that the pleader is entitled to relief.” Fed.R.Civ.P. 8(a)(2). The complaint must “give the defendant fair notice of what the claim is and the grounds upon which it rests.” Dura Pharm., Inc. v. Broudo, 544 U.S. 336, 346 (2005) (internal citations omitted). The allegations “must be simple, concise, and direct.” Fed.R.Civ.P. 8(d)(1).

         To survive a Rule 12(b)(6) motion to dismiss, the plaintiff must plead enough facts to “state a claim to relief that is plausible on its face.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). A claim is facially plausible when the plaintiff pleads facts that allow the Court to “draw the reasonable inference that the defendant is liable for the misconduct alleged.” Id. A court must accept all well-pleaded facts as true and must draw all reasonable inferences in favor of the plaintiff. Lormand v. U.S. Unwired, Inc., 565 F.3d 228, 232 (5th Cir. 2009); Baker v. Putnal, 75 F.3d 190, 196 (5th Cir. 1996). The Court is not, however, bound to accept as true legal conclusions couched as factual allegations. Iqbal, 556 U.S. at 678. “[C]onclusory allegations or legal conclusions masquerading as factual conclusions will not suffice to prevent a motion to dismiss.” Taylor v. Books A Million, Inc., 296 F.3d 376, 378 (5th Cir. 2002).

         When examining matters of state law, this Court will employ the principles of interpretation used by the state's highest court. Am. Int'l Specialty Lines Ins. Co. v. Rentech Steel LLC, 620 F.3d 558, 564 (5th Cir. 2010). Mindful of Louisiana's distinction between primary and secondary sources of law, the Court will begin its analyses with reliance on the Louisiana Constitution and statutes before looking to “jurisprudence, doctrine, conventional usages, and equity, [which] may guide the court in reaching a decision in the absence of legislation and custom.” Shaw Constructors v. ICF Kaiser Eng'rs, Inc., 395 F.3d 533, 547 (5th Cir. 2004) (quoting La. Civ. Code. art. 1 rev. cmt. b). If the Court must make an “Erie guess” on an issue of Louisiana law, the Court will decide the issue the way that it believes the Supreme Court of Louisiana would decide it. Id. (citation omitted). This Court is not strictly bound by the decisions of the state intermediate courts and will disregard them if the Court is “convinced that the Louisiana Supreme Court would decide otherwise.” In re Katrina Canal Breaches Litig., 495 F.3d 191, 206 (5th Cir. 2007).


         I. FIRREA and Plaintiff's Revocatory Actions

         LNV asserts that this Court is jurisdictionally barred by FIRREA from granting Brothers the equitable relief it seeks-rescission or annulment of the Defendants' various transactions and acts concerning the Property. If the Court finds for LNV on this ground, this Court would also be restrained from granting revocatory relief against the other Defendants.[23] Thus, the Court begins with examining the scope of FIRREA's anti-injunction provision. 12 U.S.C. § 1821(j), places the following limitation on court action: “Except as provided in this section, no court may take any action, except at the request of the Board of Directors by regulation or order, to restrain or affect the exercise of powers or function of the [FDIC] as a conservator or a receiver.”

         The language is clear: this Court cannot “restrain” (or even merely “affect”) any exercise of receivership powers by the FDIC. Obviously, “rescission is a ‘judicial restraint' that is barred by 1821(j).” Ward v. ADR Tr. Corp., 996 F.2d 99, 104 (5th Cir. 1993). Moreover, “[t]here is no question . . . that the disposition of a failed federal savings institution's assets is one of the quintessential statutory powers of the RTC/FDIC as receiver.” Save Our Wetlands, Inc. v. State of La., Landmark Lands Co., CIV. A. 95-4221, 1996 WL 194924, at *2 (E.D. La. Apr. 19, 1996). Finally, anti-injunction protection extends even in cases where the receiver has conveyed the asset to a third party. Dittmer Properties, L.P. v. F.D.I.C., 708 F.3d 1011, 1017 (8th Cir. 2013). Therefore, Brothers concedes (as it must) that FIRREA bars annulment of the First NBC loans.[24]

         Nevertheless, Brothers claims there is no “provision of FIRREA which frees LNV from the claims and defenses which were previously available against First NBC Bank or from its position as a defendant in the revocatory action presented in this litigation.”[25] Brothers apparently believes that this Court is not restrained from reinstating the Chef Lease, regardless of “detrimental effect upon the title to the property acquired by LNV's mortgagor, Jadallah Enterprises, ”[26] because the act to be rescinded preceded First NBC's involvement and insolvency, and any detrimental effect would be merely incidental. Brothers cites no authority for this proposition which defies the plain language of the statute.

         Ultimately, what Brothers seeks is to have the Wagners Chef's right to operate the Property reinstated so that Wagners Chef may fulfill its obligation to purchase fuel from Brothers. However, this cannot be achieved without also rescinding all the other downstream transactions between the various Defendants. Because the First NBC Loans would necessarily be detrimentally effected by an order rescinding or annulling any action by the Parties which transferred rights in the Property, Defendants other than just LNV also benefit from 1812(j)'s shield-even those who acted before First NBC even entered the picture. See Dittmer Properties, L.P. v. F.D.I.C., 708 F.3d 1011, 1017 (8th Cir. 2013) (citation omitted) (“An action can ‘affect' the exercise of powers by an agency without being aimed directly at the agency.”).

         In this case, even if the Court merely reinstated the Chef Lease, that court action would necessarily “restrain or affect the FDIC's powers to deal with the [First NBC Loans] it is charged with disbursing.” Id. That is so, because to accomplish this result, the Court would have to restore ownership of the Property to Wagner World, which would require dissolving Jadallah Enterprise's lease to Ahmed 1 and Ahmed 1's lease to Empire Express. The end result of all these revocations and annulments: LNV would be forced to foreclose on the First NBC Loans. Clearly, forcing LNV to foreclose on the assets it has been assigned by the FDIC would severely affect the exercise of the receiver's powers. See FDIC v. Urb. Partn. Bank, 17-CV-1517, 2018 WL 2021223, at *5 (N.D. Ill. May 1, 2018). This Court cannot grant relief that would entangle it in “the equitable thicket that FIRREA was intended to clear away.” Id. “Although this limitation on courts' power to grant equitable relief may appear drastic, it fully accords with the intent of Congress at the time it enacted FIRREA in the midst of the savings and loan insolvency crisis.” Freeman v. F.D.I.C., 56 F.3d 1394, 1398 (D.C. Cir. 1995). Thus, this Court finds that it does not have jurisdiction to grant relief in a revocatory action against LNV or against any of the Defendants.

         Brothers also asserts that its action should not be dismissed because it has elected to “continue on the claim in the federal district court where the failed bank's principal place of business is located” pursuant to § 1821(d)(6)(A).[27] This argument too, is unavailing. Subsection (d) of § 1821 provides an exhaustion requirement that funnels claims first through an administrative claims process. Freeman v. F.D.I.C., 56 F.3d 1394, 1400 (D.C. Cir. 1995). Once a claim has been disallowed, or a certain amount of time has passed, a rejected claimant may seek administrative review with the FDIC, or take their claim directly to district court for review. Id. Contrary to Brothers' statements in its opposition memorandum, Brothers has not asked this Court for review of its administrative claim. Brothers' sole cause of action against LNV in the instant matter is for revocatory relief. As noted above, this Court lacks jurisdiction to grant that equitable remedy. Dismissal of all claims against LNV is appropriate.[28]

         II. Unfair ...

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