Engineered Floors, LLC v. Beaulieu of Am., Inc. (In re Beaulieu Grp.)

IN RE: BEAULIEU GROUP, LLC AND BEAULIEU TRUCKING, LLC, Debtors.

ENGINEERED FLOORS, LLC, Plaintiff, v. BEAULIEU OF AMERICA, INC.; BEAULIEU GROUP, LLC; PMCM 2, LLCin its capacity as the liquidating trustee for the Estates of Beaulieu Group, LLC, et al.;and LAKESHORE EQUIPMENT COMPANY D/B/A

LAKESHORE LEARNING MATERIALS, Defendants.

CASE NO. 17-41677-BEM

ADVERSARY PROCEEDING NO. 18-4031-BEM

UNITED STATES BANKRUPTCY COURT NORTHERN DISTRICT OF GEORGIA ROME DIVISION

November 16, 2020

IT IS ORDERED as set forth below:

CHAPTER 11

ORDER

This matter is before the Court on the Amended Motion for Partial Summary Judgment filed by Defendant Lakeshore Equipment Company ("Lakeshore") [Doc. 47], the Motion for Summary Judgment filed by Defendants Beaulieu Group, LLC ("Beaulieu") and Phoenix Corporate Recovery Services, LLC f/k/a PMCM 2, LLC (the "Liquidating Trustee" and with Beaulieu the "BLT Defendants") [Doc. 94], and the Motion to Compel Discovery filed by Plaintiff Engineered Floors, LLC ("EF") [Doc. 126].

I. Background

The parties to this proceeding are EF, which purchased certain assets from Beaulieu in its bankruptcy case under an Asset Purchase Agreement (the "APA") [Case No. 17-41677, Doc. 297, Ex. A & Doc. 335] that was approved by order of the Court (the "Sale Order") [Id. Doc. 345]; Defendant Lakeshore, which purchased carpet from Beaulieu prior to the closing of the APA and from EF after the closing of the APA; Beaulieu of America, Inc. and Beaulieu (the "Debtors"); and the Liquidating Trustee. EF filed an amended complaint seeking to resolve issues regarding EF's liability to Lakeshore for alleged defects in carpeting EF sold to Lakeshore, some of which was manufactured in whole or in part by Beaulieu and was purchased by EF under the APA (the "Amended Complaint" or "AC") [Doc. 79]. This proceeding arises from claims by Lakeshore for defective carpeting that fall into three different categories or buckets. Bucket 1 claims involve carpet manufactured by Beaulieu and sold to Lakeshore by Beaulieu. Bucket 2 claims involve carpet manufactured in whole or in part by Beaulieu and sold to Lakeshore by EF. Bucket 3 claims involve carpet manufactured by EF and sold to Lakeshore by EF.

EF's Amended Complaint contains the following counts: (1) declaratory judgment against Lakeshore and the Liquidating Trustee; (2) specific performance of the APA and enforcement of the Sale Order against Lakeshore and the Liquidating Trustee; (3) breach ofcontract and duty of good faith and fair dealing against the Liquidating Trustee; (4) money had and received, constructive trust against the Liquidating Trustee; (5) unjust enrichment against the Liquidating Trustee; (6) apportionment, indemnity, and contribution against the Liquidating Trustee; (7) injunction against Lakeshore; (8) allowance of administrative expense priority claim to the extent of benefit to the estate against the Liquidating Trustee; (9) civil contempt against Lakeshore; and (10) bad faith attorney fees against Lakeshore.

The Liquidating Trustee asserted a counterclaim objecting to EF's administrative expense claim (the "EF Claim"). [Doc. 80]. Lakeshore asserted the following counterclaims: (1) breach of implied-in-fact contract; (2) breach of contract; (3) breach of implied warranty of merchantability; (4) breach of implied warranty of fitness for a particular purpose; (5) breach of express warranties; (6) negligent misrepresentation; (7) breach of the implied covenant of good faith and fair dealing; (8) declaratory relief; and (9) transfers of claims to California. [Doc. 15 and Doc. 84 ¶ 132].

On June 2, 2020, the Court entered an order in the bankruptcy case approving a settlement between the Liquidating Trustee and Lakeshore. [Case No. 17-41677, Docs. 1928, 1944]. Under the settlement, all of Lakeshore's claims against the estate (including the Bucket 1 claims) will be resolved by allowance of Lakeshore's administrative expense claim in the amount of $102,500.¹ However, the settlement is contingent upon (1) the EF Claim either being disallowed or withdrawn, and (2) the dismissal of the BLT Defendants from this proceeding, both of which must occur by December 31, 2020.

The BLT Defendants' Motion for Summary Judgment (the "BLT Motion") seeks summary judgment on all claims against them and on their counterclaim objecting to the EF Claim.Lakeshore's Motion for Partial Summary Judgment (the "LS Motion") seeks an order finding that the Sale Order does not grant EF immunity from liability for defective products that were either (1) manufactured by Beaulieu and shipped by EF, or (2) manufactured and shipped by EF. Lakeshore also joined in the BLT Motion. [Doc. 105].

II. Summary Judgment Standard

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, 106 S. Ct. 2548, 2552 (1986); Fed. R. Civ. P. 56(a), (c); Fed. R. Bankr. P. 7056. The Court will only grant summary judgment when the evidence, viewed in the light most favorable to the nonmoving party shows no genuine dispute of material fact. Tippens v. Celotex Corp., 805 F.2d 949, 953 (11th Cir. 1986). A fact is material if it "might affect the outcome of the suit under the governing law ...." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S. Ct. 2505, 2510 (1986). A dispute of material fact is genuine "if the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Id.

The moving party has the burden of establishing its entitlement to summary judgment. Clark v. Coats & Clark, Inc., 929 F.2d 604, 608 (11th Cir. 1991). For issues on which the moving party would bear the burden of proof at trial, it "must affirmatively show the absence of a genuine issue of material fact, and support its motion with credible evidence demonstrating that no reasonable jury could find for the non-moving party on all the essential elements of its case." Landolfi. v. City of Melbourne, Fla., 515 F. App'x 832, 834 (11th Cir. 2013). When "the non-movant has the burden of proof at trial, the movant may carry the initial burden in one of two ways—by either (1) negating an essential element of the non-movant's case or (2) by showing thatthere is no evidence to prove a fact necessary to the non-movant's case." Wynn v. Paragon Systems, Inc., 301 F. Supp.2d 1343, 1349-50 (S.D. Ga. 2004) (citing Clark v. Coats & Clark, Inc., 929 F.2d 605, 606-08 (11th Cir. 1991)); see also Celotex, 477 U.S. at 323, 325, 106 S. Ct. at 2553, 2554 (stating that Rule 56 does not require "that the moving party support its motion with affidavits or other similar materials negating the opponent's claim" but that the moving party may satisfy its burden by "pointing out to the district court ... that there is an absence of evidence to support the nonmoving party's case.") (emphasis in original); see also Fitzpatrick v. City of Atlanta, 2 F.3d 1112, 1115-16 (11th Cir. 1993). The moving party must identify the pleadings, discovery materials, or affidavits that show the absence of a genuine issue of material fact. Celotex, 477 U.S. at 323, 106 S. Ct. at 2553. Once this burden is met, the nonmoving party cannot merely rely on allegations or denials in its own pleadings. Hairston v. Gainesville Sun Publ'g. Co., 9 F.3d 913, 918 (11th Cir. 1993). Rather, the nonmoving party must present specific facts supported by evidence that demonstrate there is a genuine material dispute. Id.

When the material facts are not in dispute, the role of the Court is to determine whether the law supports a judgment in favor of the moving party. Anderson, 477 U.S. at 250, 106 S. Ct. at 2511. "[W]hen the only question is what legal conclusions are to be drawn from an established set of facts, the entry of a summary judgment usually should be directed." Wright & Miller, 10A Fed. Prac. & Proc. Civ. § 2725 (4th ed.).

III. Undisputed Facts

The motions for summary judgment were filed by two separate defendants and are different in scope. Each motion is accompanied by a statement of facts to which the movant contends there is no dispute, and to which EF responded: Lakeshore's Statement of Undisputed Material Facts in Support of Amended Motion for Partial Summary Judgment ("LS SMF") [Doc.48], EF's response to the LS SMF [Doc. 61], the BLT Defendants' Statement of Material Fact as to Which Phoenix Corporate Recovery Services, LLC f/k/a PMCM 2, LLC Contends No Genuine Issue Exists to be Tried (the "BLT SMF") [Doc. 96], and EF's response to the BLT SMF [Doc. 112]. While the two statements of fact overlap to some extent, each statement contains facts not included in the other statement, although Lakeshore adopted the BLT SMF when it joined the BLT Motion in all respects. [Doc. 105].

In its responses, EF sets forth a number of facts it contends are material and in dispute, and it has sought additional discovery prior to a decision on the Motions. [Doc. 61 at 10-12; Doc. 112 at 10-14; Doc. 126]. Under Rule 56(d), "If a nonmovant shows by affidavit or declaration that, for specified reasons, it cannot present facts essential to justify its opposition, the court may: ... (2) allow time ... to take discovery[.]" Fed. R. Civ. P. 56(d)(2). A motion under Rule 56(d)² may be granted when the nonmovant "specifically demonstrate[s] how postponement of a ruling on the motion will enable [it], by discovery or other means, to rebut the movant's showing of the absence of a genuine issue of fact." Wallace v. Brownell Pontiac-GMC Co., Inc., 703 F.2d 525, 527 (11th Cir. 1983) (internal quotation marks and citations omitted). The disputed facts set forth in Docs. 61 and 112 generally go to the validity and amount of Lakeshore's claims for defective carpet, whether Lakeshore had notice of the bankruptcy case and the APA, and legal...