United States District Court, W.D. Louisiana, Lake Charles Division
R. SUMMERHAYS UNITED STATES DISTRICT JUDGE.
before the court is the Motion for Summary Judgment filed by
NLMK North America Plate LLC ("NLMK NA"). The
parties have fully briefed the motion and the matter is now
ripe for decision.
Sentry Supply, Inc. d/b/a Superior Supply & Steel
("Sentry") filed its "Petition for Declaratory
Judgment" against Defendant, NLMK North America Plate,
LLC ("NLMKNA"), on July 8, 2016 in the 14th
Judicial District for the Parish of Calcasieu. The complaint
seeks declaratory judgment that Sentry properly withheld the
sum of $207, 950.39 as compensation for a redhibition claim.
Defendant, NLMK NA filed a Notice of Removal based on 28
U.S.C. § 1332, which provides jurisdiction of civil
actions where the matter is between citizens of different
states and the amount in controversy exceeds the sum or value
of $75, 000, exclusive of interest and costs. Plaintiff,
Sentry, is incorporated in Louisiana and has its principal
office address in Sulphur, Louisiana. For purposes of
diversity jurisdiction, it is therefore a citizen of
Louisiana. See 28 U.S.C. § 1332(c)(1) (a corporation is
a citizen in its state of incorporation and its principal
place of business). NLMK NA is a limited liability company
whose sole member is Top Gun Investment Corp. II ("Top
Gun"), a Delaware corporation with its principal place
of business located at 15 Roemer Boulevard, Farrell,
Pennsylvania 16121. Top Gun is therefore a citizen of
Delaware and Pennsylvania. See Id. NLMK NA is
likewise a citizen of Delaware and Pennsylvania for diversity
purposes. See Harvey v. Grey Wolf Drilling Co., 542
F.3d 1077, 1080 (5th Cir. 2008) ("the citizenship of a
LLC is determined by the citizenship of all of its
members.") Accordingly, the parties are completely
diverse. The amount in controversy is clearly stated in the
complaint as $207, 950.39. Accordingly, the Court has
jurisdiction over this case under §1332.
has filed a counterclaim against Sentry seeking a judgment
for $207, 950.39 as the amount due on an open account. Sentry
answered the counterclaim and the matter is currently
scheduled for trial. NLMK NA filed the present Motion for
NLMK NA is a Delaware limited liability company in the
business of selling commercial steel plates to retail
customers in the United States. NLMK NA does not own or operate
facilities for manufacturing steel plates. To fill
customers' orders, NLMK purchases steel plates
manufactured by NLMK Clabecq, S.A., NLMK Dan Steel, S.A., and
NLMK Verona, S.p.A. On May 6, 2013, Sentry purchased steel
plates from ThyssenKrupp Steel Services Trading, a division
of ThyssenKrupp Materials NA
("Thyssen"). Thyssen is an independent broker that
purchases steel plates from third party manufacturers such as
NLMK Verona. The steel plates were manufactured by NLMK
Verona. There is no dispute the steel plates were defective.
Sentry was unable to resolve its complaint over the defective
plates with Thyssen.
2013, Sentry and NLMK NA began negotiations over the purchase
of steel plates.Sentry's representative raised the
problem with the prior Thyssen sale with a salesman for NLMK
NA, Thomas Ernst, Based on the discussions, Sentry believed
that Ernst would attempt to resolve Sentry's complains
over the defective steel plates purchased from Thyssen.
However, there is no evidence of any formal agreement to
address the prior Thyssen sale nor is there evidence that the
later purchases were conditioned on NLMK NA addressing the
problems with the prior Thyssen sale. From January 2014 to
March 2015, Sentry sent six purchase orders to NLMK NA for
steel plates. The steel plates for each of those
purchases were manufactured by NLMK Verona. Sentry cited no
problems with the steel plates from any of those purchase
orders. On July 3, 2014, NLMK NA issued Invoice No. 1046 to
Sentry, requesting payment on Purchase Order No. 114892-4 in
the amount of $318, 558.88. Sentry sent a check dated August
4, 2014 as payment on Invoice No. 1046 in the amount of $1
lO, 6O8.49. The $207, 950.39 difference between the
August 2014 check and the invoice reflected the amount in
dispute regarding the defective plates from the prior
transaction involving Thyssen. When NLMK NA started
collection efforts, Sentry filed the present Petition for
Declaratory Relief seeking a finding that the offset was
proper. NLMK NA disputes the offset and that contends Sentry
owes them the remaining sum of $207, 950.39 due for Invoice
Summary Judgment Standard
should grant a motion for summary judgment when the movant
shows "that there is no genuine dispute as to any
material fact and the movant is entitled to judgment as a
matter of law." FED. R. CIV. P. 56. The party moving for
summary judgment is initially responsible for identifying
portions of pleadings and discovery that show the lack of a
genuine issue of material fact. Tubacex, Inc. v. M/V
Risan, 45 F.3d 951, 954 (5th Cir. 1995). The Court must
deny the motion for summary judgment if the movant fails to
meet this burden. Id.
movant makes this showing, however, the burden then shifts to
the non-moving party to "set forth specific facts
showing that there is a genuine issue for trial."
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248
(1986) (quotations omitted). This requires more than mere
allegations or denials of the adverse party's pleadings.
Instead, the nonmovant must submit "significant
probative evidence" in support of his claim. State
Farm Life Ins. Co. v. Gutterman, 896 F.2d 116, 118 (5th
Cir. 1990). "If the evidence is merely colorable, or is
not significantly probative, summary judgment may be
granted." Anderson, 477 U.S. at 249 (citations
may not make credibility determinations or weigh the evidence
in ruling on a motion for summary judgment. Reeves v.
Sanderson Plumbing Prods., Inc., 530 U.S. 133, 150
(2000). The court is also required to view all evidence in
the light most favorable to the non-moving party and draw all
reasonable inferences in that party's favor. Clift v.
Clift, 210 F.3d 268, 270 (5 th Cir. 2000). Under this
standard, a genuine issue of material fact exists if a
reasonable trier of fact could render a verdict for the
nonmoving party. Brumfield v. Hollins, 551 F.3d 322,
326 (5th Cir. 2008).
Sentry's Defense of Set-off Based Upon
argues that Sentry breached its contractual obligations when
it failed to pay the full amount due under Invoice No. 1046.
NLMK NA also argues that Sentry is liable for interest on the
amount due from the time it was due. La. Civ. Code Art. 2000.
Finally, NLMK NA argues that Sentry is liable for attorney
fees pursuant to La. R.S. 9:2781, the Louisiana Open Account
Statute. Sentry counters that the $207, 950.39 it deducted
from NLMK NA's invoice was a valid offset for a
redhibition claim arising from the prior purchase of steel
plates from Thyssen. The court first addresses Sentry's
reliance on redhibition as a defense to NLMK NA's open
Does Sentry Satisfy the Elements of a Redhibition
contends that it has a claim for redhibition under Louisiana
law based on the original sale of defective plates by
Thyssen, and that it is entitled offset this claim against
the amount owed to NLMK NA. Louisiana Civil Code Article 2545
A seller who knows that the thing he sells has a defect but
omits to declare it, or a seller who declares that the thing
has a quality that he knows it does not have, is liable to
the buyer for the return of the price with interest from the
time it was paid, for the reimbursement of the reasonable
expenses occasioned by the sale and those incurred for the
preservation of the thing, and also for damages and
reasonable attorney fees. If the use made of the thing, or
the fruits it might have yielded, were of some value to the
buyer, such a seller may be allowed credit for such use or
A seller is deemed to know that the thing he sells has a
redhibitory defect when he is a manufacturer of that thing.
thus allows a buyer to rescind a sale, in whole or in pail,
because of a redhibitory defect in the product purchased.
Ahrens v. TPLC, Inc., 955 F.Supp. 54, 56 (E.D. La.
1997). But an essential element of a redhibition claim is
that the seller must have an ownership interest in the
defective goods. Id. at 57 (agreeing that
"Louisiana courts have consistently held that to be a
seller under the law of redhibition, a transfer of ownership
must take place").
"transfer of ownership" requirement is fatal to
Sentry's redhibition claim, The parties do not dispute
that the steel plates purchased from Thyssen were defective
or that Thyssen transferred ownership when it sold the
defective plates to Sentry. NLMK NA, however, was not a party
to the Thyssen sale and had no ownership interest in the
defective plates. Defendant's affiliate, NLMK Verona, had
an ownership interest in the defective plates that was
transferred to Thyssen. But NLMK NA is a separate corporate
entity from NLMK Verona, which is not a party in this case.
Sentry cannot, therefore, rely on a potential redhibition
against Thyssen and NLMK Verona to offset amounts owed to
NLMK NA that arise from a separate and distinct transaction.
Can Sentry Rely on Louisiana's Single Business Enterprise
Doctrine to Assert a Redhibition Claim Against NLMK
argues next that NLMK NA had an ownership interest in the
defective Thyssen plates because NLMK NA and NLMK Verona
should be considered a "single business enterprise"
under Louisiana law. Sentry thus seeks to pierce NLMK
NA's corporate veil and hold it liable for claims against
NLMK Verona. The concept of the "corporate veil" is
rooted in the protections afforded by the limited liability
of corporate owners. In Louisiana and elsewhere, a
corporation is deemed a distinct legal entity separate from
its shareholders. See Riggins v. Dixie Shoring Co.,
590 So, 2d 1164, 1167 (La. 1991); Brennan's, Inc. v.
Colbert,85 So.3d 787, 791 (La.App. 4th Cir.2012). This
distinction between corporation and shareholder insulates a
corporation's shareholders from personal liability for
the corporation's debts. Riggins, 590 So.2d at
1167; M. Hayes & AssociatesRealty Co., LLC
v. Moliere,982 So.2d 173, 178 (La.App. 5th Cir.2008);
La. R.S. 12:93 (codifying the limited liability of corporate
shareholders). Courts have recognized that this limitation of
shareholder liability "promote[s] commerce and
industrial growth by encouraging [shareholders] to make
capital contributions to corporations without subjecting all
of their personal wealth to the risks of business."
Smith v. Cotton's Fleet Service, Inc., 500 So.2d
759, 762 (La. 1987). Applying this principle of limited
liability, parent corporations can create and conduct their
business through separately incorporated subsidiaries without