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Sentry Supply Inc. v. NLMK North America Plate LLC

United States District Court, W.D. Louisiana, Lake Charles Division

March 27, 2019





         Presently 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.


         1. Procedural History

         Plaintiff, 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.

         NLMK NA 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 Summary Judgment.

         2. Factual History

         Defendant NLMK NA is a Delaware limited liability company in the business of selling commercial steel plates to retail customers in the United States.[1] 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.[2] On May 6, 2013, Sentry purchased steel plates from ThyssenKrupp Steel Services Trading, a division of ThyssenKrupp Materials NA ("Thyssen").[3] 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.

         In late 2013, Sentry and NLMK NA began negotiations over the purchase of steel plates.[4]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.[5] 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.[6] Sentry sent a check dated August 4, 2014 as payment on Invoice No. 1046 in the amount of $1 lO, 6O8.49.[7] 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 1046.


         A. Summary Judgment Standard

         A court 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.

         If the 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 omitted).

         A court 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).

         B. Sentry's Defense of Set-off Based Upon Redhibition.

         NLMK NA 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 account claim.

         1. Does Sentry Satisfy the Elements of a Redhibition Claim?

         Sentry 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 provides that:

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 fruits.
A seller is deemed to know that the thing he sells has a redhibitory defect when he is a manufacturer of that thing.

         Redhibition 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").

         This "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.

         2. Can Sentry Rely on Louisiana's Single Business Enterprise Doctrine to Assert a Redhibition Claim Against NLMK NA?

         Sentry 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 incurring ...

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