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

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IN RE: BEAULIEU GROUP, LLC et al., Debtors.

ENGINEERED FLOORS, LLC, Plaintiff, v. BEAULIEU OF AMERICA, INC., et al., Defendants.

No. 17-41677-BEM

Adversary Proceeding No. 18-4031-BEM

United States Bankruptcy Court, N.D. Georgia, Rome Division

April 11, 2023

CHAPTER 11

ORDER

BARBARA ELLIS-MONRO, U.S. BANKRUPTCY JUDGE

This matter is before the Court on Plaintiff Engineered Floors LLC's ("EF") Motion for Contempt [Doc 192] and Motion for Partial Summary Judgment (the "Summary Judgment Motion"). [Doc. 213]. Defendant Lakeshore Equipment Company ("Lakeshore") filed a response to both Motions, and EF filed a reply relating to the Summary Judgment Motion. [Docs. 221, 222]. The Motions are now ripe for determination.

I. Background

Debtor Beaulieu Group, LLC was a manufacturer and seller of carpet. During the bankruptcy case, EF purchased Beaulieu's carpet inventory under an Asset Purchase Agreement ("APA"), which was approved by this Court in an Order (A) Approving Asset Purchase Agreement And Authorizing The Sale Of Assets Of The Debtors Outside The Ordinary Course Of Business, (B) Authorizing The Sale Of Assets Free And Clear Of All Liens, Claims, Encumbrances And Interests, (C) Authorizing The Assumption And Sale And Assignment Of Certain Executory Contracts and Unexpired Leases And Establishing Cure Costs In Connection Therewith, And (D) Granting Related Relief (the "Sale Order"). Lakeshore is a former customer of Beaulieu, who has alleged that carpets it purchased from Beaulieu and later from EF are defective. At issue here are carpets manufactured by Beaulieu and purchased from Beaulieu prior to the sale of assets ("Bucket 1" carpet) and carpets manufactured by Beaulieu and delivered by EF after the close of the sale of assets ("Bucket 2" carpet).

In a prior summary judgment order in this proceeding, the Court determined that EF is not liable for warranty and product liability claims relating to Bucket 1 carpet but that it was liable for warranties it issued for the Bucket 2 carpet (the "Prior SJ Order").^[1] [Doc. 136 at 27-28, 33-35]. EF seeks to hold Lakeshore in civil contempt for allegedly violating the APA and Sale Order by claims Lakeshore has asserted against EF in this proceeding and in nonbankruptcy proceedings.

All claims and counterclaims in this proceeding have been resolved or dismissed except for EF's claim against Lakeshore for civil contempt, which is Count IX of the First Amended and Restated Complaint for Injunction, Declaratory Judgment, Damages and Other Relief [Doc. 79]. In the Motion for Summary Judgment, EF seeks partial summary judgment in the form of a determination that Lakeshore is bound by the APA and Sale Order and that Lakeshore violated the APA and Sale Order. In the Motion for Contempt, EF reasserts its civil contempt claim against Lakeshore and asks the Court to sever and convert the contempt claim into a separate contested matter.

II. The Motion for Contempt

Before considering the Motion for Summary Judgment, the Court will consider EF's request to convert this proceeding into a contested matter as the contempt claim is the only remaining claim. "The court recognizes that pursuant to Federal Rule of Bankruptcy Procedure 9020 and 9014, the traditional way to bring an action for contempt is by motion. However, because an adversary proceeding provides a defendant with more, not less procedural protection than in a Rule 9014 contested matter brought by motion, 'courts routinely hear contempt actions brought as adversary proceedings.'" Daniels v. Howe Law Firm, P.C. (In re Daniels), 591 B.R. 814, 820 (Bankr. N.D.Ga. 2018) (Ritchey Craig, J.) (quoting Bennett v. Morton Bldgs., Inc. (In re Bennett), 2015 WL 8147588, at *2 (Bankr.N.D.Ohio Dec. 7, 2015) and citing Henriquez v. Green Tree Serv., LLC (In re Henriquez), 536 B.R. 341, 343 n.2 (Bankr. N.D.Ga. 2015) (Sacca, J.)). There has been substantial progress in this matter, including a previous motion for summary judgment, appeals, and discovery, and there is nothing to be gained by converting the proceeding to a contested matter at this point. Therefore, the request for conversion will be denied and the Motion for Contempt will be denied as duplicative of Count IX.

III. The Summary Judgment Motion

A. 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 Fed.Appx. 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 that there 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, 929 F.2d at 606-08); 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.).

B. Procedural Posture

EF filed a Statement of Material Facts as to Which It Contends No Genuine Issue Exists to Be Tried in Support of Motion for Summary Judgment (the "EF SMF") [Doc. 215]. Lakeshore filed a response to the EF SMF (the "Response") [Doc. 219] as well as a Supplement to the Statement of Material Facts to Which It Contends No Genuine Issue Exists to Be Tried in Support of Motion for Summary Judgment (the "Supplement"). [Doc. 220]. In the Response, Lakeshore denies several numbered facts as stated on the grounds that the portion of the record cited by EF does not support the factual allegation [Doc. 219 ¶ 8, 10, 21, 23, 24, 43, 44, 46] and denies other facts as stated with further elaboration. [Doc. 219 ¶ 25, 30, 37, 42, 48]. EF objects to Lakeshore's Supplement on the grounds that it is not provided for by BLR 7056-1, but nevertheless responded to each asserted fact. [Doc. 223].

BLR 7056-1(a)(1) requires the movant to file a statement of material facts to which it contends no genuine issue exists to be tried. The Local Rule requires the respondent to include with its response

a separate and concise statement of material facts, numbered separately, as to which the respondent contends a genuine issue exists to be tried. Response should be made to each of the movant's numbered material facts. All material facts contained in the moving party's statement that are not specifically controverted in respondent's statement are deemed admitted.

BLR 7056-1(a)(2). Nothing in this language precludes a respondent from asserting additional facts that it contends are material and cannot be disputed. Additionally, Fed.R.Civ.P. 56(c) and (d) contemplate that the nonmovant may assert facts in opposition to the motion, and provide a remedy if the nonmovant is unable to do so for specified reasons. Therefore, the Court will consider Lakeshore's Supplement and EF's responses thereto.

On March 7, 2023 Lakeshore filed its Notice of Defendant Lakeshore Equipment Company d/b/a Lakeshore Learning Materials' Request for Judicial Notice [Doc. 224] in which it asks this Court to take judicial notice of an order entered by the District Court for the Central District of...