United States District Court, E.D. Louisiana
ORDER & REASONS
J. BARBIER, UNITED STATES DISTRICT JUDGE.
the Court are Motions for Summary Judgment filed by
the United States of America (the “IRS”)
(Rec. Doc. 145), SE Property Holdings, LLC
(“SEPH”) (Rec. Doc. 146), and
JKS-URG Management Co., LLC (“JKS”) (Rec.
Doc. 151), as well as various responses. Having
considered the motions and legal memoranda, the record, and
the applicable law, the Court finds that JKS’s motion
should be DENIED, SEPH’s motion should
be DENIED, and the IRS’s motion should
be GRANTED IN PART for the reasons set forth
AND PROCEDURAL BACKGROUND
facts of this case are set forth more fully in the
Court’s initial opinion. See SE Prop. Holdings, LLC
v. Unified Recovery Grp., LLC, 357 F.Supp.3d 537, 541-43
(E.D. La. Nov. 30, 2018). The central dispute here concerns
whose interest has priority to funds pertaining to certain
accounts receivables that were generated from work performed
in the aftermath of Hurricanes Katrina and Isaac.
Bernard Parish contracted with Unified Recovery Group, LLC
(“URG”) to remove debris following Katrina (the
“Katrina Contract”) and again after Isaac (the
“Isaac Contract”). URG completed all of the
debris removal by the end of 2012.
August 29, 2008, URG entered into two sets of transactions.
One set, involving SEPH,  allowed URG to obtain revolving loans
from SEPH and granted SEPH a security interest in, inter
alia, “all of [URG’s] accounts of any kind . . .
whether now existing or hereafter
arising.” SEPH filed a corresponding financing
statement into the UCC registry of Louisiana on August 29,
2008, and has since filed routine continuation statements
through August 1, 2018.
second set of transactions restructured URG to effect a
buyout of two of its members and created a new organization,
URG and JKS entered into a “Contribution
Agreement” in which URG transferred its interest in
“[a]ll accounts receivable of [URG] . . . billed on or
before” August 29, 2008, to JKS. JKS acknowledges
that no document was ever filed in the public registry or
record of any state giving notice of this
made its first advance to URG on September 2, 2008. URG did
not repay the loans and, in 2013, SEPH obtained a money
judgment against URG for more than $20, 000,
Before that judgment issued, the IRS filed a notice of tax
lien on January 29, 2013, with the East Baton Rouge Clerk of
Court claiming unpaid federal taxes with
Bernard Parish filed this interpleader action in 2014 for the
Court to determine who had priority to $610, 081.45 in FEMA
funds distributed to the parish to pay for the debris
removal. The IRS intervened, claiming it is entitled to $311,
170.45 as of March 31, 2019, plus interest until paid and
prior order, the Court determined that SEPH’s security
interest in the Katrina Contract receivables had priority
over the IRS’s lien but could not determine priority as
to the Issac Contract funds based on the evidence submitted
by the parties. SE Prop. Holdings, 357 F.Supp.3d at
551-53. However, because Invoice No. 801574under the
Katrina Contract had been billed before URG and JKS entered
into the Contribution Agreement, the Court allowed JKS to
intervene and argue its entitlement to the funds traceable to
that invoice. Id. at 550.
the Court granted partial summary judgment in favor of SEPH
as to funds traceable to the Katrina contracts, excepting
Invoice No. 801574, and ordered SEPH and the IRS to file new
motions for summary judgment pertaining to the Isaac Contract
invoices. Id. at 554. The parties’ motions for
summary judgment are now before the Court on the briefs and
without oral argument.
Invoice No. 801574
first contends that the provisions of UCC Article 9 (La. R.S.
§ 10:9-101 et seq., hereinafter “Chapter
9”) do not apply to Invoice No. 801574 because JKS
acquired the account either “as part of a sale of the
business out of which [the account] arose” or as
“an assignment of accounts . . . for the purpose of
collection only, ” invoking the exceptions under
Louisiana Revised Statute § 10:9-109(d)(4)–(5).
Next, JKS asserts that if Chapter 9 applies, SEPH, as
successor in interest to Vision Bank, is estopped from
asserting an interest in the account because Vision Bank
recognized that it did not have an interest in the JKS
receivables. JKS maintains that URG lacked authority to incur
the $10, 000, 000 of indebtedness from the promissory note
prior to executing the Contribution Agreement because doing
so would have been outside the ordinary course of business
and there is no evidence that a majority of URG’s
members voted to do so. Finally, JKS argues it was not a
“buyer” within the meaning of Chapter 9 for
purposes of the Contribution Agreement.
opposes JKS’s motion, arguing first that the exceptions
JKS asserts do not apply because those provisions only
pertain to situations “that, ‘by their nature, do
not concern commercial financing
transactions.’” SEPH avers that JKS has failed
to demonstrate that equitable estoppel applies, as JKS cites
no authority for this argument, and further contends that the
language of the Security Agreement is unambiguous, such that
looking to extrinsic evidence of Vision Bank’s
knowledge violates the parol evidence rule and Louisiana
principles of contract interpretation. Finally, SEPH notes
that JKS’s argument that it was not a
“buyer” is inconsistent with its position that
the transaction was a sale of accounts and again
misinterprets the scope of Chapter 9.
does not oppose JKS’s motion. In its reply, JKS focuses
only on its argument that Chapter 9 does not apply because
the transaction was a sale of accounts as part of a sale of
the business out of which the accounts arose.
The Isaac Contract
first argues, contrary to the Court’s prior order,
that documentation was not required as part of URG’s
performance under the Isaac Contract because St. Bernard
Parish retained its own representative, Witt O’Brien
(“WO”), to document URG’s debris removal
activities, as evidenced in a newly-submitted declaration by
one of the parish’s representatives. But assuming
that a documentation requirement existed, SEPH contends that
URG fulfilled the requirement on the day it surrendered its
invoices and the documentation prepared by WO to the parish
for payment, which means that SEPH has priority for six of
the seven Isaac Contract invoices, totaling $226, 724.03.
Finally, SEPH disputes that approval of URG’s
documentation by St. Bernard was required for URG to complete
performance, but maintains that if it was, SEPH has priority
as to the IRS’s second notice of tax lien.
contends that URG’s performance was not completed until
January 20, 2016, the date on which the payment
recommendations for the URG invoices were submitted to St.
Bernard Parish by Barowka & Bonura Engineers &
Consultants, LLC (“BBEC”), a consultant retained
by the parish to help “resolve certain problems that
were preventing it from obtaining FEMA reimbursements for the
URG Invoices.” Although the parish had first approved
the URG invoices on March 3, 2014, and submitted its
reimbursement request based on those invoices to FEMA on
March 17, 2014, the IRS asserts that this approval was
ineffective because the parish later revoked it after
learning that the payment recommendations for these invoices
were “materially deficient” and retained BBEC in
February 2015 to resolve the problems preventing the parish
from obtaining reimbursements from FEMA. Thus, because
approval came after March 16, 2013 (the 46th day after the
IRS filed its notice of tax lien), the IRS’s interest
takes priority over SEPH’s.
judgment is appropriate when “‘the pleadings, the
discovery and disclosure materials on file, and any
affidavits show that there is no genuine issue as to any
material fact and that the movant is entitled to judgment as
a matter of law.’” Celotex Corp. v.
Catrett, 477 U.S. 317, 322 (1986) (quoting Fed.R.Civ.P.
56(c)); Little v. Liquid Air Corp., 37 F.3d 1069,
1075 (5th Cir. 1994). When assessing whether a dispute as to
any material fact exists, a court considers “all of the
evidence in the record but refrains from making credibility
determinations or weighing the evidence.” Delta
& Pine Land Co. v. Nationwide Agribusiness Ins. Co.,
530 F.3d 395, 398 (5th Cir. 2008). All reasonable inferences
are drawn in favor of the nonmoving party, but a party cannot
defeat summary judgment with conclusory allegations or
unsubstantiated assertions. Little, 37 F.3d at 1075.
A court ultimately must be satisfied that “a reasonable
jury could not return a verdict for the nonmoving
party.” Delta, 530 F.3d at 399.
dispositive issue is one for which the moving party will bear
the burden of proof at trial, the moving party “must
come forward with evidence which would ‘entitle it to a
directed verdict if the evidence went uncontroverted at
trial.’” Int'l Shortstop, Inc. v.
Rally’s, Inc., 939 F.2d 1257, 1264-65 (5th Cir.
1991). The nonmoving party can then defeat the motion by
either countering with sufficient evidence of its own, or
“showing that the moving party’s evidence is so
sheer that it may not persuade the reasonable fact-finder to
return a verdict in favor of the moving party.”
Id. at 1265.
dispositive issue is one for which the nonmoving party will
bear the burden of proof at trial, the moving party may
satisfy its burden by merely pointing out that the evidence
in the record is insufficient with respect to an essential
element of the nonmoving party’s claim. See
Celotex, 477 U.S. at 325. The burden then shifts to the
nonmoving party, who must, by submitting or referring to
evidence, set out specific facts showing that a genuine issue
exists. See Id . at 324. The nonmovant may not rest
upon the pleadings but must identify specific facts that
establish a genuine issue at trial. See Id . at 325;
Little, 37 F.3d at 1075.
examining matters of state law, the 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 analysis
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, 546 (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.
The 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., 496 F.3d 191, 206 (5th Cir. 2007).
the Court’s prior grant of summary judgment, two issues
remain: (1) whether SEPH or JKS is entitled to the funds
traceable to Invoice No. 801574; and (2) whether URG
completed performance under the Isaac Contract before the
45-day state-lien grace period for the IRS’s tax lien
expired on March 16, 2013.
Invoice No. 801574
Court must first consider JKS’s argument that Chapter 9
does not apply to the Contribution Agreement. If the Court
finds that it does, then the Court must consider JKS’s
remaining arguments that SEPH is precluded from asserting its
interest in the Invoice No. 801574 funds.