Abington Emerson Capital, LLC v. Adkins

• Decision Date: 22 January 2021
• Docket Number: Case No.: 2:17-cv-143
• Parties: ABINGTON EMERSON CAPITAL, LLC, Plaintiff, v. JASON ADKINS, et al., Defendants.
• Court: U.S. District Court — Southern District of Ohio

ABINGTON EMERSON CAPITAL, LLC, Plaintiff, v. JASON ADKINS, et al., Defendants.

Case No.: 2:17-cv-143

UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF OHIO EASTERN DIVISION

January 22, 2021

Judge Sarah D. Morrison

Magistrate Judge Jolson

OPINION & ORDER

Plaintiff Abington Emerson Capital, LLC loaned Defendant Jason Adkins $1.5 million to facilitate the purchase and sale of off-the-road ("OTR") mining tires in the hopes of making a high profit with a quick turnaround. Neither the tires nor the sale materialized, however. Adkins is currently awaiting sentencing for wire fraud, money laundering, and tax evasion for his role in this and other similar deals gone bad; Abington sued him and numerous others in an attempt to recoup its losses.

Defendants XPO Logistics, Inc. and XPO Global Forwarding, Inc. (collectively "XPO") are two of those defendants. XPO now moves for summary judgment, and both sides have filed numerous preliminary motions. The Court has thoroughly reviewed the record in this case and determines that oral argument is unnecessary. For the reasons set forth below, XPO's Motion for Summary Judgment is DENIED. (ECF Nos. 332, 338.) The remaining motions are addressed seriatim.

I. BACKGROUND

Abington is a California company that specializes in offering purchase order financing to high-risk borrowers with bad credit. (ECF Nos. 365 at 43 and 342 at 82.) XPO Logistics, Inc. is a holding company and the parent company of its wholly owned subsidiary, XPO Global Forwarding, Inc.¹ (ECF No. 338 at 8 n.2.) XPO Global is a Delaware corporation that "acts as an intermediary to coordinate the shipment of customer freight through the necessary channels, like air, ocean, trucking, rail or some combination thereof, to get it from Point A to Point B." (ECF No. 338-8 at ¶ 3.) The remaining defendants are:

Jason Adkins

President and CEO of non-defendant Landash

Corporation. Ohio resident.

Afif Baltagi

Former branch manager of XPO's Houston,

Texas location. Texas resident.

John Eckerd2

Friend of Adkins. Texas resident.

Todd Wilkin3

President of Mid America Tire of Hillsboro,

Inc. d/b/a Best-One Tire & Service of Hillsboro.

Ohio resident.

Mid America Tire of Hillsboro, Inc.

d/b/a Best-One Tire & Service of

Hillsboro4

Tire seller and distributor. Ohio corporation.

Abington secures much of its business through loan brokers. (ECF Nos. 341 at 132 and 342 at 47-48.)⁵ In February 2015, a broker named Gerald Watson alerted Abington to a potential purchase-order financing deal involving OTR tires with Landash Corporation as the borrower.(ECF No. 342 at 120-23 and Ex. 3.) Landash wanted to buy twenty-four OTR tires from Mid-America and re-sell them to Giant Tyres, an Australian corporation, for a profit of $528,000. (ECF No. 67 at 31-32.) The e-mail stated that Adkins was "looking at potential of up to $30 million in 80-inch tire purchases" and needed money to pay for the tires. (ECF No. 342-5.) The broker included documents purportedly showing Adkins's previous OTR sales and Adkins's unsigned 2014 net worth statement in the correspondence. (ECF No. 342-4.)

Abington had no experience in the OTR tire market and had not worked with Adkins before. (ECF No. 343 at 106.) Abington employees Omid Shokoufandeh (an analyst) and Michael Urtel (an underwriter) reviewed the documents. (ECF Nos. 342 at 125 and 343 at 58). Shokoufandeh and Urtel then spoke to Adkins and Watson. Adkins said that he was Landash's president and sole employee. (ECF No. 341-45.) Adkins wanted Abington to loan Landash $1,523,000 so Landash could buy tires from Mid-America to re-sell them to Giant Tyres at a profit. (ECF Nos. 341-45 and 342 at 244.) Adkins told Shokoufandeh that he had done business with Giant Tyres before. (ECF No. 342 at 144.)

Adkins suggested using LAD Impex Corporation as the freight forwarder and escrow agent for the deal. (ECF Nos. 343-1 at 133-34 and 341 at 244.) Abington was familiar with another freight forwarding company, C.H. Robinson Project Logistics. (ECF No. 343 at 134-139.) So, Abington asked C.H. Robinson to participate in lieu of LAD. However, C.H. Robinson declined to participate, stating that the deal made "no sense" for C.H. Robinson because it is "a freight forward[er] that makes money moving freight and not by facilitating payments to suppliers and buyers." (ECF No. 343-14.)

Adkins also suggested that the parties use XPO's Houston location as the storage facility because that was Giant Tyres's preferred warehouse. (ECF No. 265-29.) Adkins provided Abington with Baltagi's name as XPO's contact. Id.

Adkins had met Baltagi in 2012, when Baltagi was working for Concert Group Logistics ("Concert"). (ECF No. 265-1 at 20, 251-3.) Adkins used Concert for tire deals. Id. Concert became XPO Global Logistics and Adkins kept working with Baltagi at XPO. (ECF No. 265-1 at 251-3 and 349 at 52.) Baltagi was Adkins' sole contact at XPO. (ECF No. 265-1 at 24-5, 71.) As the Houston branch manager, Baltagi was responsible for client development and sales. (ECF No. 338-8 at ¶ ¶ 2, 5.) Adkins directed Baltagi when to accept and when to release tires. (ECF No. 265-1 at 71-2, 79.)

When Abington began the underwriting process, Adkins did not speak to Abington much and he did not complete a loan application. Abington did not conduct a criminal background check on Adkins. Abington did not contact any major OTR tire manufacturer to confirm that Landash was an approved buyer. (ECF No. 343 at 203.) Abington did not contact anyone on Adkins' prior sales lists to verify that those sales took place. (ECF No. 343 at 207-09.) Abington did not engage an accountant to inspect Adkins's or Landash's financial records. (ECF No. 342 at 221.)

Abington did search for UCC financing statements for Adkins' companies and court cases involving Adkins using only his first and last name. (ECF No. 343-16.) The results showed: (1) three federal tax liens totaling almost $24,000; (2) state tax liens totaling almost $15,000; (3) civil judgments totaling almost $20,000; and (4) a UCC financing statement against Landash for twelve mining tires located at XPO in Houston. (ECF No. 343-16.) Additionally, Shokoufandeh and Urtel spoke with whom they believed to be David Judd at Giant Tyres toconfirm that Giant Tyres would be buying the tires. (ECF Nos. 265-1 at 46 and No. 343 at 87-89.) Adkins coordinated the call. (ECF No. 342 at 206-7.) Urtel and Shokoufandeh also spoke to Wilkin to confirm Mid-America's intent to sell the tires to Landash. (ECF No. 342 at 351.)

Satisfied with its research, Abington issued a term sheet to Adkins, which pertinently provided that:

1. A[bington] must approve any and all warehousing providers intended to be used to receive tires from seller and securely hold tires during the buyer's inspection and diligence period.

2. A[bington] must receive and approve [an] invoice from seller prior to issuing a letter of credit or disbursing funds to seller or seller's agent.

3. A[bington] must receive confirmation that full payment from buyer is received prior to releasing tires to buyer or buyer's agent.

(ECF No. 343-15.) The term sheet indicated that funds were to be used solely to facilitate the "purchase, shipping and warehousing of OTR tires." Id. Abington would acquire a security interest in all of Landash's assets, and Adkins would personally guarantee the loan. Id. Lastly, Landash would pay Abington a $2,500 "due diligence" fee. Id. Adkins signed the term sheet and paid the fee.

Shortly thereafter, Shokoufanedh and Urtel traveled to Houston to meet with Adkins, Eckerd, Baltagi and Watson. (ECF Nos. 343 at 143, 186 and 265-1 at 38 and 342 at 173-75.) Shokoufandeh and Urtel believed Eckerd was Adkins's partner. (ECF No. 342 at 173-75.) Baltagi said he had worked with Adkins before and he showed Urtel some of Landash's tires that were being stored outdoors in a fenced field at the XPO facility. (ECF No. 343 at 144-45.)

After returning to the office, Urtel completed an Executive Summary ("Summary") of Landash, the OTR tire industry, and the loan's terms. The terms were that: Landash would sign a promissory note for $1,523,000, Landash would execute a blanket security interest in the tires toAbington, Adkins would personally guarantee the loan, and repayment with a 7.25% annual interest rate would be due on or before June 2, 2015. (ECF No. 265-33 at 4.)

The Summary detailed the acquisition and resale process as follows: (1) Landash would provide Abington with a purchase order setting forth the seller name, address, quantity of tires to be purchased, tire make and model, and total purchase price; (2) Mid-America would ship the tires to XPO in Houston; (3) XPO would notify Abington in writing about receipt and condition of the tires, specifying their serial numbers; (4) Abington would record a UCC financing statement on the tires; (5) Landash would give Abington a purchase order from Giant Tyres stating the quantity, make and model of tires to be sold; and (6) Abington would wire the loan money to Landash's bank account. (ECF Nos. 342-17 and 265-33.)

Abington's loan committee, of which Urtel was one of three members, reviewed the Summary when deciding whether to approve the deal. (ECF Nos. 343-1 at 198-202 and 343-25.) The loan analysis indicated that Abington would earn $133,593.75 from the deal, which equated to a 47.9% internal rate of return. (ECF No. 341-45.) The loan committee decided to proceed with the loan, and the documents were signed on March 4, 2015. (See ECF Nos. 265-33, 265-34, 265-35, 265-36 and 342 at 102.)

Numerous documents were then sent to Abington. First, Adkins e-mailed Abington the Mid-America and Giant Tyres purchase orders on March 9, 2015. (ECF No. 265-37.) Each contained the required information as to the make, model and quantity of tires at issue.

Second, on March 16, 2015, Baltagi e-mailed Wilkin and Adkins a Warehouse Receipt ("Warehouse Receipt"). (ECF No. 265-43.) It appeared as follows:

WAREHOUSE RECEIPT (NON-NEGOTIABLE)

Recei...