CDIC of NC Protected Cell A-600 LLC v. Gottlieb

CDIC OF NC PROTECTED CELL A- 600 LLC, et al, Plaintiffs, v. JOSHUA GOTTLIEB, et al, Defendants.

No. 4:18-cv-04142

United States District Court, S.D. Texas, Houston Division

September 3, 2021

OPINION AND ORDER GRANTING MOTION FOR PARTIAL SUMMARY JUDGMENT

HON CHARLES ESKRIDGE UNITED STATES DISTRICT JUDGE

The motion for partial summary judgment by Plaintiff CDIC of NC Protected Cell A-600, LLC, for itself and as successor-in-interest to Series A-600 of Capital Development Insurance Company, LLC, on its claims against Defendants Asset Retention Trust Co, LLC, Energy Redevelopment Company Inc, and GGR Realty Management, LLC for breach of promissory note is granted. Dkt 50. Objections by ART, ERC, and GGR to certain summary judgment evidence are denied as moot. Dkt 53.

1. Background

As noted above, Plaintiff here has a complicated name, which the parties have referred to simply as A-600. That convention will be used here. Defendant Joshua Gottlieb formed A-600 as the captive insurance company for Plaintiffs Aquamarine Pools of Houston LLC and Aquamarine Pools of Texas, LLC. Plaintiff Aquamarine Risk Management, LLC is the sole member of A-600 and Plaintiffs Mark Naras, Donna Naras, and John Mehrman own the three Aqua entities. Once he formed A-600, Gottlieb served as one of its managers. Plaintiffs claim that Gottlieb unilaterally initiated loans from A-600 to ART, GGR, and ERC, each of which he allegedly owns and controls. Dkt 50 at 11-12.

Gottlieb claims he issued the promissory notes to his entities as manager of A-600 with the informed consent of Donna Naras. He also claims that A-600 issued the notes to ART (at least in part) to fund loans ART made to other entities owned and controlled by the Narases and Mehrman. Then, he says, those latter entities used the proceeds to fund life insurance premiums for policies held by the Narases and Mehrman. Dkt 52 at 9.

Gottlieb executed one promissory note on behalf of ART, three on behalf of GGR, and two on behalf of ERC. Dkt 50-1 at 27-33 (May 2016 note to ART), 35-37 (June 2016 note to GGR), 39-40 (December 2016 note to ERC), 42-44 (December 2016 note to GGR), 47-49 (April 2017 note to GGR), 51-53 (April 2017 note to ERC). A-600 owns and holds each note. And as consideration for executing the notes in its favor, A-600 collectively loaned $270, 000 to ART, $932, 000 to GGR, and $150, 000 to ERC. Id. at 32-33, 37, 41, 45, 49, 53. Thus, A-600 seeks actual damages (including unpaid principal plus unpaid interest as of December 31, 2019) totaling $1, 568, 085.99 plus interest, attorney fees and costs, an order entering final judgment pursuant to Rule 54(b) of the Federal Rules of Civil Procedure, and post-judgment interest. Dkt 50 at 22-23.

Plaintiffs filed their third amended complaint in May 2021. Dkt 113. Pertinent here, they assert claims against ART, ERC, and GGR for money had and received, conversion, civil conspiracy, and breach of promissory note. Id. at ¶¶ 78-79, 8183. But before filing the third amended complaint, A-600 alone moved for partial summary judgment in February 2020 on its breach of promissory note claims against ART, ERC, and GGR. Dkt 50. A-600 solely moves for partial summary judgment because it alone owns and holds the notes. The parties agree that the motion remains ripe and was unaffected by the third amended complaint.

A hearing was scheduled on the motion for August 5, 2021, with notice sent the month before. Dkt 127. Counsel for A-600 traveled from San Antonio to appear as ordered, but counsel for ART, ERC, and GGR failed to appear without prior notice or explanation. The Court expressed its inclination to grant the motion and ordered counsel for ART, ERC, and GGR to show cause for their failure to appear. Dkt 131. Counsel responded with reference to non-specific health exigencies, while noting that ART, ERC, and GGR were prepared to “offer stipulation as to liability on the narrow issue of the Notes in question.” Dkt 132 at 1.

2. Legal standard

Rule 56(a) of the Federal Rules of Civil Procedure requires a court to enter summary judgment when the movant establishes that “there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” A fact is material if it “might affect the outcome of the suit under the governing law.” Sulzer Carbomedics v Oregon Cardio-Devices, Inc, 257 F.3d 449, 456 (5th Cir 2001), quoting Anderson v Liberty Lobby, Inc, 477 U.S. 242, 248 (1986). And a dispute is genuine if the “evidence is such that a reasonable jury could return a verdict for the nonmoving party.” Royal v CCC & R Tres Arboles, LLC, 736 F.3d 396, 400 (5th Cir 2013), quoting Anderson, 477 U.S. at 248.

The summary judgment stage doesn't involve weighing the evidence or determining the truth of the matter. The task is solely to determine whether a genuine issue exists that would allow a reasonable jury to return a verdict for the nonmoving party. Smith v Harris County, 956 F.3d 311, 316 (5th Cir 2010), quoting Anderson, 477 U.S. at 248. Disputed factual issues must be resolved in favor of the nonmoving party. Little v Liquid Air Corp, 37 F.3d 1069, 1075 (5th Cir 1994). All reasonable inferences must also be drawn in the light most favorable to the nonmoving party. Connors v Graves, 538 F.3d 373, 376 (5th Cir 2008), citing Ballard v Burton, 444 F.3d 391, 396 (5th Cir 2006).

The moving party typically bears the entire burden to demonstrate the absence of a genuine issue of material fact. Nola Spice Designs, LLC v Haydel Enterprises, Inc, 783 F.3d 527, 536 (5th Cir 2015) (quotation omitted); see also Celotex, Corp v Catrett, 477 U.S. 317, 322-23 (1986) (citations omitted). If the movant meets this burden, then “the nonmovant must go beyond the pleadings and designate specific facts showing that there is a genuine issue for trial.” Little, 37 F.3d at 1075; see also Celotex, 477 U.S. at 325. “This burden is not satisfied with some metaphysical doubt as to the material facts, by conclusory allegations, by unsubstantiated assertions, or by only a scintilla of evidence.” Little, 37 F.3d at 1075 (quotations and citations omitted). But if facts specifically alleged by the nonmovant “contradict facts specifically averred by the movant, the motion must be denied.” Lujan v National Wildlife Federation, 497 U.S. 871, 888 (1990).

But even if the nonmovant fails to respond appropriately or to respond at all, summary judgment isn't automatically awarded to the movant simply by default. See Ford-Evans v Smith, 206 F App'x 332, 334 (5th Cir 2006); Hetzel v Bethlehem Steel Corp, 50 F.3d 360, 362 n 3 (5th Cir 1995), quoting Hibernia National Bank v Administracion Central Sociedad Anonima, 776 F.2d 1277, 1279 (5th Cir 1985); John v Louisiana, 757 F.2d 698, 708 (5th Cir 1985). Instead, summary judgment is appropriate only if the movant demonstrates the absence of a genuine dispute of material fact and shows that judgment is warranted as a matter of law. See Adams v Travelers Indemnity Co of Connecticut, 465 F.3d 156, 163 (5th Cir 2006).

3. Analysis

ART, ERC, and GGR previously argued that A-600 isn't entitled to summary judgment because it “lacked capacity to file the instant claims, ” while also asserting that Plaintiffs brought this action without the consent of the then-managers of A-600 as required by its operating agreement. Dkt 52 at 12-16. They now concede that Plaintiffs have corrected this standing issue, apparently referencing Plaintiffs' subsequent ratification of their original complaint after removing the managers. Dkt 132 at 3. And they concede that all of the notes at issue are valid and enforceable, and that summary judgment “may be appropriate” as to the claims related to each note. Id. at 3.

Their only argument in continued opposition to the grant of partial summary judgment is that the motion “mischaracterizes the facts and circumstances under which the Notes were issued, as well as the use of the proceeds.” Ibid. They also raise tangential arguments relating to attorney fees and oppose the entry of a final judgment under Rule 54(b) for the reasons set forth in their prior response. Ibid.

But those arguments don't affect the validity of the notes. The entry of partial summary judgment is appropriate as to each note for the following reasons.

a. May 4, 2016 note issued to ART

Gottlieb executed a promissory note governed by Ohio law on behalf of ART and in favor of A-600 on May 4, 2016 under which A-600 allegedly disbursed two loans to ART. Dkt 50-1 at 27-33. The first loan was for $150, 000, and ART initially delivered a promissory note to A-600 dated December 24, 2015 to document it. Dkt 50 at 12; Dkt 50-1 at 32. That note was superseded by the May 4, 2016 note. Dkt 50 at 12; Dkt 50-1 at 32. With that came the second loan for $120, 000. Dkt 50-1 at 32. Each loan was subject to an interest rate of between 0% and 3% depending on the date of repayment with the rate increasing based on later repayment dates. Id. at 33. A-600 claims that it “performed its obligations under the May 4, 2016 ART Note” by loaning the combined amount of $270, 000 to ART in accordance with its terms. Dkt 50 at 16.

A-600 claims that ART breached the note in two ways. First, it claims that ART hasn't made any payments and hasn't cured its default despite being given notice and an opportunity to do so. Dkt 50 at 16. Second, A-600 claims ART hasn't delivered a statement of the value of the note under an assumption of full maturity to the note within thirty days after the end of each calendar year, as the note requires. Ibid; Dkt 50-1 at 28-30. A-600 argues this to mean that it's entitled to summary judgment on its claim against ART for breaching the May 4, 2016 promissory note. It seeks actual damages totaling $285, 937.40 (inclusive of unpaid...