In re Miami Metals I, Inc.

• Court: U.S. Bankruptcy Court — Southern District of New York
• Writing for the Court: Sean H. Lane, UNITED STATES BANKRUPTCY JUDGE
• Citation: In re Miami Metals I, Inc., 603 B.R. 727 (Bankr. S.D.N.Y. 2019)
• Decision Date: 09 August 2019
• Docket Number: Case No. 18-13359 (shl) (Jointly Administered)
• Parties: IN RE: MIAMI METALS I, INC., et al., Debtors.

603 B.R. 727

IN RE: MIAMI METALS I, INC., et al.,¹ Debtors.

Case No. 18-13359 (shl) (Jointly Administered)

United States Bankruptcy Court, S.D. New York.

Signed August 9, 2019

Yelena Archiyan, John Mitchell, Akerman LLP, Dallas, TX, Susan F. Balaschak, Akerman Senterfitt LLP, New York, NY, Mary Katherine Fackler, Akerman LLP, Jacksonville, FL, Joanne Gelfand, Akerman LLP, Miami, FL, for Debtors.

MEMORANDUM OF DECISION ON DEBTORS' AND SENIOR LENDERS' JOINT MOTION FOR SUMMARY JUDGMENT AS TO BUCKET 1 CUSTOMERS [ECF NO. 938]

Sean H. Lane, UNITED STATES BANKRUPTCY JUDGE

Before the Court is the Debtors' and Senior Lenders' Joint Motion for Summary Judgment as to Bucket 1 Customers (the "Motion") [ECF No. 938 ]. The Court is not deciding the Motion in its entirety. Rather, the Court's ruling today covers eight of the 26 Bucket One Customers (as defined herein) where the factual record is most developed and hopefully should offer some general guidance for the other Customers (as defined herein) going forward.

BACKGROUND

When the Debtors filed their motion to approve use of cash collateral [ECF No. 10 ] back in November 2018, they received more than 40 objections and responses from customers (collectively, the "Customers" and each a "Customer") claiming ownership interests in raw metals and other assets that the Debtors believe constitute property of the estate. In January, the Court entered an order establishing uniform procedures to resolve such ownership disputes in an efficient and systematic way. See ECF No. 395. Consistent with such procedures, the Debtors and Senior Lenders² grouped the Customers into different "buckets" and filed this Motion to address the claims made by the Customers in so-called Bucket One.³ See Mar. 21, 2019 Hr'g Tr. at 32:8–10 [ECF No. 872 ] ("The debtor lenders [sic] would like to bring forward dispositive motions on certain issues—we've been talking about buckets, concurrently while discovery is going on.").

According to the Debtors, Bucket One is comprised of Customers who sold raw materials to the Debtors pursuant to the Debtors' "Standard Terms and General Operating Conditions," which are attached as Exhibit B (with respect to the Debtor formerly known as RMC) and Exhibit C (with respect to the Debtor formerly known as RMC2) to the Amended Declaration of Scott Avila in Support of the Motion (the "Avila Declaration" or "Avila Decl.") [ECF No. 1005 ]. See Motion at 1. Broadly, the Debtors and the Bucket One Customers disagree as to whether the terms signed by the Bucket One Customers (the "Executed Terms") provide for a purchase and sale or a bailment of the Bucket One Customers' metals. The Debtors argue that the Executed Terms unambiguously evidence a purchase and sale and that no extrinsic evidence need be or even can be considered. The Bucket One Customers argue that the contracts contain elements of both sale and bailment, requiring the Court to look at the parties' course of dealing. The Bucket One Customers further posit that the Debtors' course of dealing with each of them evidences bailment relationships. The Bucket One Customers submitted supporting evidence in varying degrees, with some submitting no evidence at all. Compare Alex Morningstar Corp.'s Joinder in "Bucket 1" Customers' Joint Opposition to Debtors' and Senior Lenders' Joint Motion for Summary Judgment [ECF No. 1090 ] (attaching a declaration from their principal describing course of dealing with RMC and supporting documentation in the form of transaction documents from a typical sale) with Joinder of Pyropure, Inc. d/b/a Pyromet in "Bucket 1" Claimants' Response to and Brief Opposing Joint Motion for Summary Judgment [ECF No. 1083 ] (stating their intent to join in the Joint Response to Debtors' and the Senior Lenders' Joint Statement of Mutual Undisputed Facts (the "Joint Response") [ECF No. 1081 ], but offering no declaration, exhibits, or any other evidentiary support).⁴

Notwithstanding the Debtors' claim that all 26 Bucket One Customers signed "standard" terms, there are actually multiple iterations of such terms, with some Bucket One Customers having signed no terms at all. See Avila Decl., Composite Ex. D. Cognizant of this issue, the Court has reviewed Composite Exhibit D to identify Bucket One Customers who are similarly situated and where there is a sufficiently developed factual record for a ruling. Based on that review, the Court has separated out for a ruling today those Bucket One Customers for whom the Debtors have submitted a complete set of Executed Terms with RMC. These eight Customers—a group that the Court will refer to as the "Silo One Customers"—are:

• Alex Morningstar Corp. d/b/a Morningstar's;

• Bay Area Metals;

• Brilliant Jewelers / MJJ Inc.;

• Geib Refining Corp.;

• Mitchell Levine (Erie Management Partners, LLC) (Plat/Co.);

• Noble Metal Services, Inc.;

• Pyropure, Inc. d/b/a Pyromet; and

• Texas EZPAWN, L.P.

The Silo One Customers do not have identical Executed Terms, but any differences in such terms are immaterial for purposes of today's ruling. For the avoidance of doubt, today's ruling does not encompass Bucket One Customers for whom the Debtors did not attach a complete set of Executed Terms with RMC or any Executed Terms at all. Nor does it encompass Bucket One Customers whose Executed Terms pertain to RMC2.

LEGAL STANDARD

A. Summary Judgment

Federal Rule of Civil Procedure 56 governs the granting of summary judgment. "[S]ummary judgment is proper ‘if 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 [movant] is entitled to a judgment as a matter of law.’ "

Celotex Corp. v. Catrett , 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986) (quoting Fed. R. Civ. P. 56 ). "The party seeking summary judgment bears the burden of establishing that no genuine issue of material fact exists and that the undisputed facts establish [the movant's] right to judgment as a matter of law." Rodriguez v. City of New York , 72 F.3d 1051, 1060–61 (2d Cir. 1995). "In deciding whether material factual issues exist, all ambiguities must be resolved and all reasonable inferences must be drawn in favor of the nonmoving party." In re Ampal-Am. Israel Corp. , 2015 WL 5176395, at *10 (Bankr. S.D.N.Y. Sept. 2, 2015) (citing Matsushita Elec. Indus. Co. v. Zenith Radio Corp. , 475 U.S. 574, 587, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986) ).

To the extent that a party asserts that a fact cannot be or is genuinely disputed, such party must provide support for its position by either:

(A) citing to particular parts of materials in the record, including depositions, documents, electronically stored information, affidavits or declarations, stipulations (including those made for purposes of the motion only), admissions, interrogatory answers, or other materials; or

(B) showing that the materials cited do not establish the absence or presence of a genuine dispute, or that an adverse party cannot produce admissible evidence to support the fact.

Fed. R. Civ. P. 56(c)(1).

Rule 56 also contemplates situations where a non-moving party is unable to present facts that are essential to justify its opposition to a motion for summary judgment. In such instance, the Court may: (1) defer considering the motion or deny it, (2) allow time to obtain affidavits or declarations or to take discovery, or (3) issue any other appropriate order. See Fed. R. Civ. P. 56(d) (formerly Fed. R. Civ. P. 56(f) ). However, this requires the non-moving party to submit an affidavit showing: (1) what facts are sought to resist the motion and how they are to be obtained, (2) how those facts are reasonably expected to create a genuine issue of material fact, (3) what effort affiant has made to obtain them, and (4) why the affiant was unsuccessful in those efforts. See Gurary v. Winehouse , 190 F.3d 37, 43 (2d Cir. 1999). "The requirement of a sufficient affidavit or declaration is a strict one." Halebian v. Berv , 869 F. Supp. 2d 420, 438 (S.D.N.Y. 2012) (citing Gurary , 190 F.3d at 43–44 ("[T]he failure to file such an affidavit is fatal[.]")).

If a party fails to properly support its own assertion of fact or address another party's assertion of fact, the Court may, among other things, consider the fact undisputed for purposes of the motion or grant summary judgment if the motion and supporting materials show that the movant is entitled to it. See Fed. R. Civ. P. 56(e) ; see, e.g. , Sanchez v. Nat'l Cleaning Co. , 11 F. Supp. 2d 453, 454 (S.D.N.Y. 1998) (" Rule 56(e) provides that if the non-movant fails to respond to a summary judgment motion by setting forth specific facts showing that there is a genuine issue for trial, then summary judgment, if appropriate, shall be entered against the adverse party.") (internal quotations omitted).

B. Choice of Law

The Debtors, the Senior Lenders, and the majority of the Silo One Customers assert that Florida law governs the dispute. See Motion at 11–12; see also ECF Nos. 425, 444, 468, 478, 481. Other Customers in Bucket One, including two of the Silo One Customers, contend that New York law may govern. See ECF No. 463. Still other Silo One Customers do not take a position as to choice of law at all. See ECF Nos. 411, 452. As the outcome of the disputes is the same under both Florida and New York law, the Court need not perform a choice of law analysis but will cite to both Florida and New York statutes and case law. See Motion at 10; IBM v. Liberty Mut. Ins. Co. , 363 F.3d 137, 143 (2d Cir. 2004) ("Choice of law does not matter, however, unless the laws of the competing jurisdictions are actually in conflict.... In the absence of substantive difference, however, a New York court will dispense with choice of law analysis[.]"); see generally Joint Memorandum of Law of Bucket 1 Customers in Opposition to the Debtors' and Senior Lenders' Motion (the "Opposition") [ECF No. 1080 ] (citing to the...