Quality Constr. & Prod. LLC v. Collins

QUALITY CONSTRUCTION & PRODUCTION L L C v. TROY COLLINS ET AL

CASE NO. 6:19-CV-01308

UNITED STATES DISTRICT COURT WESTERN DISTRICT OF LOUISIANA LAFAYETTE DIVISION

February 24, 2021

JUDGE ROBERT R. SUMMERHAYS

MAGISTRATE JUDGE WHITEHURST

MEMORANDUM RULING

The present matter before the Court is a Motion for Summary Judgment [ECF No. 43] filed by defendant Troy Collins seeking the dismissal of claims asserted against him by plaintiff Quality Construction & Production, LLC ("Quality"). For the reasons explained below, the Court GRANTS Collins' Motion in part and DENIES the Motion in part.

I.BACKGROUND

This case involves disputes between Quality and its co-founder and former 50% owner, defendant Troy Collins, as well as certain former employees of the company. Quality provides onshore and offshore services for clients in the maritime and energy production industries. These services include spool piping, production modules, manifolds, deck extensions, riser guards and clamps, hook-ups, facilities maintenance and upgrades, compressor installations and field welding. Quality filed a petition for relief under Chapter 11 of the Bankruptcy Code on March 16, 2018.¹ MidSouth was Quality's largest secured creditor at the time of the bankruptcy filing with a claim of $15,455,880.² Quality filed its first Joint Plan of Reorganization on November 26, 2018.³ Thisplan provided that MidSouth's "entire claim will be refinanced in exchange for a lump sum payment of $9,500,000."⁴ In return, MidSouth was to "cancel all of its notes and release all of its collateral and guarantees."⁵ The plan also created an equity class consisting of Quality's two pre-petition members: Collins and Nathan Granger.⁶ The plan provided that Collins and Granger would retain their equity interest in Quality in exchange for a "new value" contribution of $500,000.⁷

MidSouth then assigned its claim to Energy Services Notes Acquisition, LLC ("ESNA").⁸ ESNA is controlled by Tony Martinez, a former competitor of Quality.⁹ ESNA ultimately filed a competing Joint Plan of Reorganization.¹⁰ This competing plan provided that ESNA's claim would be converted to equity in Quality and the other filing debtors, and that ESNA would also receive a Promissory Note.¹¹ ESNA's competing plan also provided that the equity interest of Collins and Granger would be cancelled.¹² Quality and ESNA subsequently filed amended plans and engaged in extensive litigation in Bankruptcy Court and state court. Collins, Granger, Quality, and ESNA ultimately agreed to settle their disputes and entered into a settlement agreement on May 14, 2019 (the "First Settlement Agreement").

The First Settlement Agreement provides that Collins and Granger would not oppose ESNA's Joint Plan of Reorganization, including the provisions of the plan providing that their equity interest would be cancelled and ESNA's claim would be converted to an equity interest in the reorganized debtors.¹³ The agreement further provided that Collins and Granger would "workin good faith through the Effective Date to effectuate an orderly turnover of all property and equipment, including keys, codes and computer passwords," but states that, after the "effective date," Collins "shall not owe any duty to either the Debtors or Reorganized Debtors [Quality] and there shall be no restriction [on him], without limitation, to compete with the Debtors or Reorganized Debtors or to contact or solicit vendors, customers or employees of the Debtors or the Reorganized Debtors."¹⁴ The First Settlement Agreement also includes global releases. Collins' release states:

Effective as of the Effective Date, the Plan Proponents, the Intervenors (as defined below), the Debtors and the Reorganized Debtors each hereby release and forever discharge (a) Collins and Granger and their immediate family members (spouses, children, parents and siblings), and (b) Quality USA, Kayro, Offshore Service & Supply, LLC, Stephen Granger, Kaylie Marie Collins and Vallie Theresa Collins (collectively, the "State Court Defendant Released Parties") from any and all liability for any and all claims, demands, and causes of action of any nature, whether known or unknown, asserted or unasserted, arising out of or related in any way to the dealings between the Parties or the operations or debts of the Debtors, including, but not limited to, (i) all claims brought or that could be brought in the Jointly-Administered Chapter 11 Cases, (ii) all claims brought or that that could be brought in the State Court Suit, (iii) all claims or rights related in any way to the MidSouth Claims or the MidSouth Filings, and (iv) all claims arising from or related to the MidSouth Assignment or the Redemption Motion.¹⁵

ESNA's final Joint Chapter 11 Plan of Reorganization (the "Plan of Reorganization" or "Quality's Plan of Reorganization") was confirmed after a hearing on May 21, 2019, and on May 22, 2019, the Bankruptcy Court entered a confirmation order (the "Confirmation Order").¹⁶ The controlling equity interest in Quality was transferred to ESNA on the "effective date" of the Plan of Reorganization: May 23, 2019. The "effective date" of the releases in the First SettlementAgreement was May 23, 2019 as well.¹⁷ As per the parties' agreement, Collins' employment with Quality terminated on May 23, 2019.¹⁸

Shortly after confirmation, Quality filed an adversary proceeding in Bankruptcy Court against Collins and other defendants (the "Adversary Proceeding"), alleging that Collins had misappropriated and converted Quality's property and breached his fiduciary duties.¹⁹ Specifically, Quality alleged that Collins conspired with other parties to remove various pieces of equipment from Quality's premises, including blasting and painting equipment.²⁰ The parties then quickly entered into a settlement agreement ("Second Settlement Agreement") and requested that the Bankruptcy Court dismiss the Adversary Proceeding.²¹ The Second Settlement Agreement provides:

In consideration for the Payment, the Plaintiffs release and forever discharge Collins from and against any and all claims, liability or causes of action related to or arising out of the facts or allegations set forth in the Adversary Proceeding and/or the Complaint (including the exhibits thereto).²²

The parties signed the Second Settlement Agreement on June 4, 2019 and the adversary proceeding was dismissed with prejudice.²³

Quality filed the present action in the district court on October 7, 2019.²⁴ In this action, Quality alleges that before and after the Effective Date of the confirmed plan, Collins and the other defendants "embarked upon a coordinated scheme of unfair competition against [Quality] for the benefit of themselves and United Production & Construction Services, Inc."²⁵ United Production& Construction Services, Inc. ("United") was acquired by Collins and is a competitor of Quality.²⁶ Quality alleges that this scheme included "converting the assets [Quality], the raiding of [Quality] employees, misappropriation of proprietary data and business records of [Quality], and expenditure of [Quality's] funds for the benefit of themselves and [United]."²⁷ According to Quality, the former-employee defendants engaged in this conduct while they were still employed by Quality and after they left their employment with Quality and joined Collins at United.²⁸ Quality's complaint alleges eight causes of action for violations of the Defend Trade Secrets Act (18 U.S.C. § 1836), violations of the Louisiana Uniform Trade Secrets Act (La. R.S. 51:1431 et seq.), violations of the Computer Fraud Abuse Act (18 U.S.C. § 1030), conversion, breach of fiduciary duty, violations of the Louisiana Unfair Trade Practices and Consumer Practices Act (La. R.S. 51:1401 et seq.), conspiracy, and breach of contract.²⁹

Collins then filed the present Motion for Summary Judgment seeking dismissal of all the claims asserted against him. Collins first asserts that Quality's claims against him are barred by the global releases in the First Settlement Agreement because these claims are grounded on conduct occurring before the Effective Date of the agreement. Second, Collins contends that Quality's Plan of Reorganization bars Quality's claims against him in the present case. Collins points to provisions in the Plan of Reorganization that adopt the First Settlement Agreement and confirm the releases granted in that agreement. He also contends that plan confirmation is res judicata with respect to the claims asserted by Quality in the present case. Third, Collins contends that the dismissal of the Adversary Proceeding and the release in the Second Settlement Agreement, likewise, bar the claims asserted against him.

II.SUMMARY JUDGMENT STANDARD

Summary judgment is proper if the pleadings, discovery products on file, and affidavits show that there is no genuine dispute as to any material fact and that the movant is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(a). The purpose of summary judgment is to pierce the pleadings, to assess the proof, and to determine whether there is a genuine need for trial.³⁰ Summary judgment procedure is designed to isolate and dispose of factually unsupported claims or defenses.³¹ If the movant bears the burden of persuasion at trial on a claim or defense addressed in the motion for summary judgment, the movant must establish that there is no genuine dispute of material fact as to those claims or defenses. To satisfy this burden, the movant must come forward with competent summary judgment evidence conclusively establishing that no reasonable trier of fact could find other than for the moving party.³² To avoid summary judgment, the non-movant must then come forward with evidence showing that there is a genuine dispute of material fact.

If the non-moving party has the burden of persuasion at trial with respect to an issue addressed in the motion for summary judgment, the moving party may satisfy its initial burden by either (1) demonstrating...