Arrowhead Capital Finance, Ltd. v. Royal Alice Properties, LLC (In re Royal Alice Properties, LLC)
| Decision Date | 23 September 2021 |
| Docket Number | ADV. 20-1022,19-12337 |
| Parties | IN RE: ROYAL ALICE PROPERTIES, LLC, DEBTOR. v. ROYAL ALICE PROPERTIES, LLC, DEFENDANT. ARROWHEAD CAPITAL FINANCE, LTD, PLAINTIFF, |
| Court | U.S. Bankruptcy Court — Eastern District of Louisiana |
Before the Court are the following matters:
Also before the Court are:
For the reasons discussed below, the Court GRANTS the Trustee MSJ, dismissing all remaining claims in the Complaint filed in the above-captioned adversary proceeding and sustaining the objection filed by the Debtor to the proof of claim filed by Arrowhead.1[] The Court further DENIES AS MOOT the Hoffman MSJ as well as the Request for Judicial Notice of May 2021 Order and the Request for Judicial Notice of June 2021 Order.
This Court has jurisdiction to grant the relief provided for herein pursuant to 28 U.S.C. § 1334(b). The matters presently before the Court constitute core proceedings that this Court may hear and determine on a final basis under 28 U.S.C. §§ 157(b)(2)(A), (B), (K) & (O). The venues of the Debtor's chapter 11 case and the related adversary proceeding are proper under 28 U.S.C. §§ 1408 and 1409(a).
The Debtor, a Louisiana limited liability company, filed a voluntary petition for bankruptcy relief under chapter 11 of the Bankruptcy Code on August 29, 2019. [No. 19-12337, ECF Doc. 1]. The Debtor's only assets consist of three real estate properties in the French Quarter neighborhood in New Orleans, Louisiana: (a) 900-902 Royal Street; (b) 906 Royal Street, Unit E; and (c) 910-912 Royal Street, Unit C. [No. 19-12337, ECF Doc. 2]. Only two creditors have filed proofs of claim against the Debtor's estate. One of those creditors, Arrowhead, filed a proof of claim against the estate for $1 million, and also initiated the above-captioned adversary proceeding, alleging in both that the Debtor is liable under alter-ego and/or single-business-enterprise theories for the unsatisfied obligations of several non-debtor affiliates of the Debtor (the "Seven Arts Companies").
The facts alleged and claims asserted in the Complaint have been fully detailed in this Court's Order of August 28, 2020. [ECF Doc. 55]. In that Order, the Court granted in part the Debtor's motion to dismiss filed pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure and dismissed several of Arrowhead's claims. Thus, the remaining claims are: Count I (single business enterprise), Count III (breach of trust/fiduciary duty), Counts IV & V (construed by the Court as breach-of-contract claims), and Count VI (simulation). As discussed below, it is undisputed that Arrowhead obtained money judgments against the Seven Arts Companies in New York courts and later obtained recognition of those judgments by a Louisiana court. Arrowhead obtained those judgments as a result of a contractual dispute with the Seven Arts Companies emanating from a 2006 Master Agreement executed among Cheyne Specialty Finance, L.P. ("Cheyne") as Senior Lender, Arrowhead as Subordinated Lender, and the Seven Arts Companies as the Borrowers to finance the production of three films. As observed by this Court in the August 28, 2020 Order, to hold the Debtor liable for the New York judgments against the Seven Arts Companies-now independent Louisiana judgments-Arrowhead must show that the Debtor is one member of a single business enterprise with the Seven Arts Companies. Indeed, the success of all of the remaining claims alleged in the Complaint are contingent upon Arrowhead prevailing on Count I, its claim that the Debtor and the Seven Arts Companies are operated as a single business entity, a Louisiana legal theory that allows "the legal fiction of a distinct corporate entity [to] be disregarded when a corporation is so organized and controlled as to make it merely and instrumentality or adjunct of another corporation." Green v. Champion Ins. Co., 577 So. 2d 249, 257 (La. App. 1 Cir. 1991).
The Trustee seeks summary judgment of all remaining claims against the estate alleged in the Complaint. He argues that summary judgment is warranted because Arrowhead cannot show a common business purpose between the Debtor and the Seven Arts Companies, as is required for the single-business-enterprise theory to apply here. The Court agrees.
Summary judgment is appropriate when "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986) (citing Fed. R. Civ. P. 56(c)); see also Fed. R. Bankr. P. 7056. Indeed, "[s]ummary judgment is warranted where, after adequate time for discovery and upon motion, a party fails to make a showing sufficient to establish the existence of an element essential to its case and upon which it carries the burden of proof at trial." In re Betteroads Asphalt, LLC, 594 B.R. 516, 541 (Bankr. D.P.R. 2018) (citing Celotex Corp., 477 U.S. at 322).
A party seeking summary judgment must demonstrate: (i) an absence of evidence to support the non-moving party's claims or (ii) an absence of a genuine dispute of material fact. See Sossamon v. Lone Star State of Tex., 560 F.3d 316, 326 (5th Cir. 2009); Warfield v. Byron, 436 F.3d 551, 557 (5th Cir. 2006). A genuine dispute of material fact is one that could affect the outcome of the action or allow a reasonable fact finder to find in favor of the non-moving party. See Royal v. CCC & R Tres Arboles, L.L.C., 736 F.3d 396, 400 (5th Cir. 2013) (citing Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986)).
A court views the facts and evidence in the light most favorable to the non-moving party. See City & Cnty. of S.F., Cal. v. Sheehan, 575 U.S. 600, 603 (2015). Nevertheless, the Court is not obligated to search the record for the non-moving party's evidence. See Malacara v. Garber, 353 F.3d 393, 405 (5th Cir. 2003). A party asserting that a fact cannot be or is genuinely disputed must support the assertion by citing to particular parts of materials in the record, showing that the materials cited do not establish the absence or presence of a genuine dispute, or showing that an adverse party cannot produce admissible evidence to support the fact. See Fed. R. Civ. P. 56(c)(1). The Court need consider only the cited materials, but it may consider other materials in the record. See Fed. R. Civ. P. 56(c)(3). The Court may not make credibility determinations or weigh the evidence in the course of its summary judgment analysis. See Turner v. Baylor Richardson Med. Ctr., 476 F.3d 337, 343 (5th Cir. 2007). "A court ultimately must be satisfied that 'a reasonable jury could not return a verdict for the nonmoving party.'" In re Chinese-Manufactured Drywall Prods. Liab. Litig., MDL No. 2047, No. 14-2722, 2020 WL 4939482, at *3 (E.D. La. Aug. 24, 2020) (quoting Delta & Pine Land Co. v. Nationwide Agribusiness Ins. Co., 530 F.3d 395, 399 (5th Cir. 2008)).
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