Tubbs v. AgSpring Miss. Region, LLC
| Decision Date | 04 April 2022 |
| Docket Number | Civ. ACTION 3:21-03268 |
| Parties | LARRY TUBBS, ET AL. v. AGSPRING MISSISSIPPI REGION, L. L. C., ET AL. |
| Court | U.S. District Court — Western District of Louisiana |
REPORT AND RECOMMENDATION
Before the undersigned Magistrate Judge, on reference from the District Court, are the following motions: 1) motion to abstain and for remand, plus an associated request for costs expenses, and fees [doc. # 2] filed by Plaintiffs Larry Tubbs; Tubbs Rice Dryers, Inc.; Chief Ventures, L.L.C.; and Big River Grain, L.L.C.; 2) motion to transfer venue [doc. # 6] filed by Defendant, Pacific Investment Management Company L.L.C.; and 3) motion to transfer [doc. # 9] filed by Defendants, Agspring Mississippi Region, L.L.C.; Agspring L.L.C.; Agspring Holdco, L.L.C.; and Lake Providence Rice & Grain, L.L.C. The motions are opposed. For reasons set forth below, it is recommended that the motion to abstain and remand be DENIED and that the motions to transfer be GRANTED.
On September 30, 2019, Plaintiffs Larry Tubbs; Tubbs Rice Dryers, Inc.; Chief Ventures, L.L.C.; and Big River Grain L.L.C. (collectively referred to in the singular as “Tubbs”) filed the instant lawsuit against a host of defendants in the Sixth Judicial District Court for the Parish of Madison, State of Louisiana. (Petition). Tubbs filed an amended petition on December 9, 2019, which, from what the court may discern, represents the most recent and operative complaint in the matter. See First Amended and Restated Petition [doc. # 1-2] (hereinafter referred to as “Complaint” or “Compl.”).
According to the Complaint, Larry Tubbs was the president and a stockholder of Tubbs Rice Dryers, Inc. and a member of both Chief Ventures, L.L.C. and Big River Grain, L.L.C. (Compl., ¶ 5). Tubbs owned and operated a grain elevator business with facilities in Mer Rouge and Pioneer, Louisiana. Id., ¶ 6. Effective June 26, 2013, Tubbs sold the Mer Rouge and Pioneer facilities and other assets to Agspring Mississippi Region, L.L.C. (“AMR”) in exchange for a $7 million note to be paid in full in five years. Id., ¶¶ 8-10. Between September 2013 and February 2014, AMR borrowed more money from Tubbs via amended and/or additional notes until AMR's total debt to Tubbs reached $22 million. Id., ¶¶ 12-15. As additional security for the loans, Tubbs obtained a guaranty from AMR's parent company, Agspring L.L.C. (“Agspring”). Id. Larry Tubbs negotiated the transactions on behalf of Tubbs, wherea Bradley Clark, then president of both AMR and Agspring, represented the two companies he headed. Id. From June 2013 until he retired in 2015, Larry Tubbs worked for AMR as CEO of its Louisiana operations. Id., ¶ 17.
NGP Energy Capital Management (“NGP”) formed Agspring in 2012 to serve as a platform to acquire and consolidate agribusiness firms into a major company. Id., ¶¶ 18-21. Agspring used its wholly-owned subsidiary, AMR, to acquire Tubbs, as part of its plan to become a significant player in the global grain market. Id. By the end of 2014, however, NGP decided to sell its interest in Agspring. Id.
Several companies combined resources to form and fund a limited partnership, Agspring LP (“ALP”), to serve as a vehicle to facilitate the purchase of Agspring. Id., ¶¶ 23-25. ALP's partners included American Infrastructure MLP II IP Feeder, LP; American Infrastructure MLP Management II, L.L.C.; American Infrastructure MLP PE Management, L.L.C.; American Infrastructure MLP Yield Management, L.L.C.; and American Infrastructure MLP Funds, L.P. (collectively referred to as “AIM, ” or “AIM entities”); plus, Pacific Investment Management Company, L.L.C. (“PIMCO”); and Barings, L.L.C. (“Barings”). Id.
In December 2015, NGP sold and transferred its membership interest in Agspring to ALP. See Compl., ¶¶ 26-27. According to Tubbs, the sale/transfer of Agspring to ALP resulted in Agspring and AMR becoming undercapitalized because PIMCO treated its equity funding to ALP as a loan made to Agspring and its subsidiaries, including AMR. Id., ¶¶ 28-33. Tubbs contends that PIMCO is pretending that it has a right to repayment of its equity funding as though it were a creditor of Agspring, when, in reality, it is an equity investor. Id. According to Tubbs, PIMCO disguised its equity funding to ALP as a $77.4 million term revolving loan to Agspring, which Tubbs descriptively named the “Dirty Loan, ” and which the court will refer to as the “Term Loan.” Id. Tubbs alleged that Agspring received no consideration for the Term Loan because PIMCO paid the funds into ALP, which used the money to buy NGP's membership interest in Agspring. Id.
To secure the Term Loan, PIMCO had its agent, U.S. Bank National Association, take a security interest in all of AMR's “personal property.” Id., ¶ 34-36. The Term Loan thus permitted PIMCO to prioritize its equity funding payments to the detriment of Agspring and AMR's other creditors, including Tubbs. Id. In September 2017, ALP was converted into a newly created limited liability company, Agspring Holdco, L.L.C. (“AHL” or “Holdco”). Id.
According to Tubbs, PIMCO received cash and membership shares in AMR, Agspring, and AHL (sometimes collectively referred to as “Agspring entities”). Id., ¶¶ 37-38. Tubbs further believes that the payments to PIMCO on the Term Loan played a factor in Agspring and AMR's financial distress. Id.[1]
On March 1, 2018, Agspring proposed to Tubbs a possible restructuring of the Agspring entities' debt, including that owed to Tubbs by AMR. Id., ¶ 46-58. In April 2018, Mark Beemer[2] represented to Tubbs that the Agspring entities were headed for bankruptcy unless Tubbs forgave some of the debt that AMR owed them. Id. The parties held more discussions in September 2018, where, inter alia, Beemer advised Tubbs that the Agspring entities had a long-term debt of $97 million. Id. Tubbs also learned that PIMCO had an almost 97 percent equity interest in AMH, which was Agspring's sole member, which, in turn, owned AMR. Id.
At a September 18, 2018 meeting in Louisiana, Greg Kennedy, [3] Mark Beemer, and Bruce Chapin[4] reiterated to Tubbs that since the equity interest holders were losing money in the Agspring entities, PIMCO wanted Tubbs to share in the losses by forgiving a large portion of the AMR debt. Id., ¶¶ 59-60. Kennedy, Beemer, and Chapin cautioned Tubbs that if he did not forgive some the debt, then Agspring would file for bankruptcy. Id.
Until October 1, 2018, AMR timely paid installments on the note owed to Tubbs. Id., ¶ 62. However, AMR made no further payments on the note after that date. Id., ¶ 64.
On October 10, 2018, Tubbs exercised his right to accelerate the due date on the note in response to AMR's failure to timely pay the note. Id., ¶¶ 65-68. However, neither AMR, nor Agspring paid the debt or the amounts due on the note. Id., ¶¶ 68-69. By November 2019, the balance of the note plus accrued interest totaled $25 million. Id., ¶ 95.
In January 2019, AMR recorded a deed wherein it purported to donate to Lake Providence Rice and Grain, L.L.C. (apparently incorrectly sued as “Lake Providence Grain and Rice, L.L.C.) (hereinafter, “LPRG”) all of its rights, title, and interest to four tracts of immovable property located in Richland and Franklin Parishes that were appraised at $17 million in April 2018. Id., ¶¶ 146-152. LPRG is owned or controlled by the Agspring entities. Id.
Tubbs filed the instant lawsuit in September 2019 against Defendants, Greg Kennedy, Mark Beemer, PIMCO, Barings, five AIM entities, AHL, Agspring, AMR, Bruce Chapin, LPRG, and two fictitiously named insurance companies. (Compl., ¶ 1 [doc. # 1-2]). He requested the following relief:
Following service, Defendants obtained extensions of time to answer and, thereafter, filed various exceptions. . The state court set the exceptions for hearing on December 11, 2020, and on February 2, 2021, denied all of the contested[5] exceptions. See Reasons for Judgment; M/Abstain, Exh. A. Prior to the hearing, Tubbs filed a motion to dismiss the five AIM entities, which the court granted on the day of the hearing. (Dec. 11, 2020 Order [doc. # 1-2, pg. 396]. Tubbs later settled his claims against Kennedy, Beemer, and Chapin, and they were dismissed from the suit on June 23, 2021. (June 23, 2021 Order [doc. # 1-3, pg. 286-289, 297-300]).
Meanwhile on April 22, 2021, Tubbs filed a “Motion for Partial Summary Judgment on the Note, Mortgages and Security Interests and to Designate Judgment Final Pursuant to La. C.C.P. Art. 1915(B)(1)” (“Foreclosure Motion”), which sought to reduce the debt to judgment, recognize that the mortgages secured the judgment, and allow Tubbs to seize and sell property. . The state court set the Foreclosure Motion for hearing to be held on September 13, 2021. (May 3, 2021 Order [doc. # 1-3, pg. 281]). The court also set the matter for a two-week jury trial to begin on August 29, 2022. ).[6] On August 27, 2021, Agspring and AMR...
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