Southland Health Servs., Inc. v. Bank of Vernon

887 F.Supp.2d 1158

SOUTHLAND HEALTH SERVICES, INC., et al., Plaintiffs,

v.BANK OF VERNON, et al., Defendants.

No. 7:08–cv–2414–LSC.

United States District Court,

N.D. Alabama,

Western Division.

Aug. 9, 2012.

Joseph Goljan, O. Lee Squitieri, Squitieri & Fearon, LLP, New York, NY, for Plaintiff.

Matthew F. Carroll, Balch & Bingham LLP, Gilbert C. Steindorff IV, The Steindorff Firm LLC, Birmingham, AL, Charles A. Hardin, David A. Hughes, Hardin & Hughes LLP, Robert P. Reynolds, Reynolds Reynolds & Duncan, LLC, Tuscaloosa, AL, for Defendant.

MEMORANDUM OF OPINION

L. SCOTT COOGLER, District Judge.

I. Introduction

Before the Court are three motions for summary judgment filed by the various Defendants; one from Citizens State Bank (“Citizens”), one jointly submitted by Bank of Vernon (“BOV”) and West Alabama Bank and Trust (“WABT”), and one filed by Dudley Bell, Clanton Dubose, and T. Alan Walls (collectively the “individual defendants”). (Docs. 117, 118, and 119, respectively.) Each of these summary-judgment motions incorporates arguments that were made in earlier motions to dismiss. ( See Doc. 117 at 4, 118 at 3, 119 at 4.) The Court therefore considers the arguments made in those earlier motions (Docs. 16, 19, 78, 80, and 83), and their associated briefs, in addition to the arguments presented in the present summary-judgment motions and briefs. Also before the Court are three motions to strike, filed by Defendant Citizens. All of these motions have been fully briefed and are now ripe for decision.

II. Facts¹

Plaintiff Southland Health Services, Inc., (“Southland”) was an ambulance and medical services company that operated across seven states through its various subsidiaries.² At one point it employed over 800 people. Plaintiff Larry Lunan (“Lunan”) was the majority shareholder and CEO of Southland throughout the relevant time period, and was also the personal guarantor of Southland's debt. Southland then became wholly owned by Paladin Holdings (“Paladin”). Lunan is also the sole ³ shareholder and president of Paladin.

The Individual Defendants—Dudley Bell (“Bell”), Clanton Dubose (“Dubose”), and T. Alan Walls (“Walls”)—were officers of Southland. Plaintiffs claim that over the course of three years, the individual defendants engaged in a scheme of intentionally devaluing the plaintiff corporations through the “systematic theft of checks and negotiable instruments, unauthorized use of company funds for payment of personal expenses, misuse of corporate credit cards, unauthorized checks and wire transfers to personal accounts, and other unauthorized takings of corporate monies and assets.” (Doc. 75 at 6.) Plaintiffs claim that the defendant banks “disregarded obvious and suspicious circumstances, its own procedures, and industry norms in repeatedly cashing or accepting for deposit, without inquiry, over $3,000,000.00 in stolenchecks that bore forged, unauthorized or missing endorsements.” (Doc. 21 at 2.) Plaintiffs filed suit in this Court on December 29, 2008, for “violations of state and federal lending laws, civil RICO violations, conversion, violations of certain sections of Title 7 of the Alabama Code, unjust enrichment, money had and received, and various and sundry other violations of statutory law, federal law and Alabama common law.” (Doc. 21 at 1.) The amended complaint, filed on May 2, 2011, listed a total of fourteen counts—some specific to the bank defendants, some specific to the individual defendants, and some against all Defendants. Since the filing of the amended complaint, the relevant issues have been somewhat narrowed by Plaintiffs' voluntary dismissal of two other individual defendants, Susan Bell and Gary Bradford. (Doc. 87 at 4.) Plaintiffs have also voluntarily withdrawn Count Ten, alleging civil RICO violations, as to all defendants (Doc. 81 at 7, Doc. 82 at 1 n. 1) in addition to withdrawing Count Eleven—alleging fraudulent suppression—as against Citizens (Doc. 81 at 7).

III. Standard

Summary judgment is proper “if 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.” Fed.R.Civ.P. 56(c). The party moving for summary judgment “always bears the initial responsibility of informing the district court of the basis for its motion, and identifying those portions of [the evidence] which it believes demonstrate the absence of a genuine issue of material fact.” Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). The movant can meet this burden by presenting evidence showing that there is no genuine dispute of material fact, or by showing that the nonmoving party has failed to present evidence in support of some element of its case on which it bears the ultimate burden of proof. Celotex, 477 U.S. at 322–23, 106 S.Ct. 2548. In evaluating the arguments of the movant, the court must view the evidence in the light most favorable to the nonmoving party. Mize v. Jefferson City Bd. of Educ., 93 F.3d 739, 742 (11th Cir.1996).

Once the movant has met its burden, Rule 56(e) “requires the nonmoving party to go beyond the pleadings and by her own affidavits, or by the ‘depositions, answers to interrogatories, and admissions on file,’ designate ‘specific facts showing that there is a genuine issue for trial.’ ” Celotex, 477 U.S. at 324, 106 S.Ct. 2548 (quoting Fed.R.Civ.P. 56(e)). “A factual dispute is genuine only if a ‘reasonable jury could return a verdict for the nonmoving party.’ ” Info. Sys. & Networks Corp. v. City of Atlanta, 281 F.3d 1220, 1224 (11th Cir.2002) (quoting United States v. Four Parcels of Real Property, 941 F.2d 1428, 1437 (11th Cir.1991)).

IV. Discussion

There are essentially three motions for summary judgment for the Court to consider. One was filed jointly by BOV and WABT, who share the same counsel. (Doc. 118.) Defendant Citizens filed its own motion. (Doc. 117.) Finally, the individual Defendants, who are represented jointly, filed a joint motion for summary judgment. (Doc. 119.) The analysis below addresses each of these three motions in turn.

A. Claims against BOV and WABT

BOV and WABT raise a host of arguments in support of dismissal or summary judgment, including arguments based on statute of limitations, preemption, and other defenses. They also point to the presenceof arbitration agreements between them and the Plaintiffs. Notably, BOV and WABT raise arbitration last, asking the Court to first rule on their motions to dismiss and for summary judgment, and only then to send any remaining claims to arbitration. (Doc. 16 at 16, Doc. 118 at 34.) But as Plaintiffs point out, this would put the proverbial cart before the horse. (Doc. 21 at 2 n. 1) Addressing the dispositive motions before considering the arbitration agreements would frustrate the purpose of the arbitration clause, and would unfairly provide BOV and WABT with “two bites at the apple.” Instead, whenever enforcement of an arbitration agreement is requested, this Court is required to send the parties to arbitration “upon being satisfied that the issue involved in such suit or proceeding is referable to arbitration.” 9 U.S.C. § 3. It does not matter that BOV and WABT wish to treat arbitration as a last-ditch effort rather than their first line of defense; since they have raised the issue, the first question for the Court is to determine whether the claims against them are “referable to arbitration.”

1. Arbitration

BOV and WABT argue that this claim is subject to binding arbitration as a result of several arbitration agreements, entered into by Lunan both in his personal capacity and as a representative of Southland, and by Dubose as Vice President of Southland. Arbitration agreements between BOV or WABT and one or more Plaintiffs were signed on March 3, 2006 (Doc. 16–5 at 1–2), October 7, 2006 (Doc. 16–7 at 1–2), January 31, 2007 (Doc. 16–9 at 1), and November 6, 2007 (Doc. 16–3 at 1). The material terms of these agreements are all identical:

Lender and the undersigned acknowledge that all the transactions contemplated by this Agreement have a substantial impact on interstate commerce and agree that all disputes, claims, or controversies whether based upon any prior, current, or future agreement, loan, account, service, activity, transaction (proposed or actual), event or occurrence (“Disputes”) whether individual, joint, or class in nature, including contract and tort disputes and any other matter at law or equity between them, their heirs, personal representatives, agents, employees, officers, directors, affiliated companies, parent companies, subsidiaries and shareholders, present, future or past (“Parties”) shall be resolved by arbitration upon request of either party at any time, notwithstanding the prior filing by either party of any legal action, except as indicated in this Agreement or agreed to in writing by the parties.... It is understood and agreed that arbitration pursuant to this agreement shall be binding upon the Parties.

(Docs. 16–3 at 1, 16–5 at 1, 16–7 at 1, 16–9 at 1.) Plaintiffs raise essentially two arguments against the enforcement of these arbitration agreements. First, they contend that the arbitration agreements do “not relate to the acts alleged in Plaintiff's Complaint,” making them inapplicable to the claims at issue. (Doc. 21 at 6.) Second, Plaintiffs challenge “whether the Plaintiffs have agreed to arbitrate their claims at all,” asserting they are “non-signatories” who are outside the arbitration agreements in question. (Doc. 21 at 10.)

a. Claims subject to the arbitration agreement

The crux of Plaintiffs' first argument is that a dispute, in order to be arbitrable, must be “characterized as arising out of or relating to the subject matter of the contract.” (Doc. 21 at 7 (quoting Ex parte Cupps, 782 So.2d 772, 776 (Ala.2000)).) Plaintiffs cite several...