Worley v. Callais Capital Mgmt., LLC, CIVIL ACTION 3:19-CV-489-JWD-EWD

615 B.R. 550

Michael Allen WORLEY, Appellant,

v.CALLAIS CAPITAL MANAGEMENT, LLC, Appellee.

CIVIL ACTION 3:19-CV-489-JWD-EWD

United States District Court, M.D. Louisiana.

Signed March 5, 2020

Arthur A. Vingiello, The Steffes Firm, LLC, Baton Rouge, LA, for Appellant.

David Felicien Waguespack, Peter J. Segrist, Carver Darden Koretzky Tessier Finn Blossman & Areaux, L.L.C., New Orleans, LA, for Appellee.

RULING AND ORDER AFFIRMING BANKRUPTCY COURT

JOHN W. deGRAVELLES, JUDGE

THIS MATTER is before the Court on an Appeal of the United States Bankruptcy Court for the Middle District of Louisiana's final judgment in Adversary Proceeding No. 18-1021 filed by Michael Allen Worley ("Appellant" or "Worley"). (Doc. 1.) Appellant filed an Appeal Brief of Appellant, Michael Allen Worley ("Appellant Brief "). (Doc. 6.) Callais Capital Management, LLC ("Appellee" or "Callais") filed a response entitled Brief of Plaintiff/Appellee, Callais Capital Management, LLC ("Appellee Brief "). (Doc. 7.) Pursuant to Fed. Bankr. R. 8019(b)(3), and the parties' waiver of oral argument, the Court concludes that oral argument is not necessary. Having reviewed the briefs, the record on appeal, the reasons expressed by the Bankruptcy Court, and the law, the Court will affirm the decision of the Bankruptcy Court.

PROCEDURAL HISTORY

Worley filed an individual Chapter 11 bankruptcy case on January 8, 2018. (Doc. 1 in Bankruptcy Case No. 18-10017.) Callais is a creditor in Worley's bankruptcy case and filed an adversary proceeding seeking to declare the debt Worley owed Callais non-dischargeable under 11 U.S.C. 523(a)(2)(B). (Doc. 1 in Adversary Proceeding No. 18-1021.) Callais filed a Motion for Summary Judgment Against Michael Allen Worley Pursuant to 11 U.S.C. § 523 (a)(2)(B) ("Motion "). (Doc. 39 in Adversary Pro. 18-1021). Worley opposed the Motion. (Docs. 45 & 46 in Adversary Pro. 18-1021.) On May 22, 2019, the Bankruptcy Court held a hearing and heard arguments on the Motion. (Doc. 65 in Adversary Pro. 18-1021.) At the May 22, 2019 hearing, the Bankruptcy Court granted the Motion and gave oral reasons explaining its decision. Id. Summary Judgment in favor of Callais was entered on June 10, 2019. (Doc. 61 in Adversary Pro. 18-1021.) On June 21, 2019, Worley filed the Notice of Appeal , which asks the Court to review the Bankruptcy Court's decision on summary judgment. (Doc. 63 in Adversary Pro. 18-1021.)¹

FACTS

When Worley filed his bankruptcy case, he controlled numerous business entities including SQOR, Inc. and W Resources, LLC. (Doc. 39-4 in Adversary Pro. 18-1021 at 25:1-3.) Michael Hammer ("Hammer") was Worley's representative in dealing with Callais to obtain financing for himself and the personal entities he controlled. (Id. at 34:17-21.) Worley worked with Hammer to create a "global recapitalization" of his existing debts. (Id. at 51:15-16.) Worley was successful at obtaining financing. As of the date that Debtor filed his bankruptcy case, Worley owed Callais $28,847,447.80. The total indebtedness came from Worley's unconditional personal guarantee of Callais' loans to SQOR ("Unconditional SQOR Guarantee") and from his personal loans from Callais. (Id. at 43:16-24.)

When Worley was seeking personal financing from Callais, he engaged the Hannis T. Bourgeois accounting firm ("Accounting Firm") to compile a global financial statement ("Financial Statement"). (Id. at 34:17-21.) Worley signed an engagement letter with the Accounting Firm in which he agreed that accuracy of the financial statement was his sole and exclusive responsibility, and that he was obligated to furnish the Accounting Firm with accurate information regarding his assets and liabilities. (Doc. 39-9 at 35:7-41:7.) Worley sent the Accounting Firm documentation concerning his net worth that was used to draft the Financial Statement. (Doc. 39-9 at 34:15-20; 21:6-10; 41:8-42:2; 42:10-13.) The Financial Statement was sent by email to Worley on March 4, 2016. (Doc. 39-9 at 19.) Also on March 4, 2016, Worley sent the Accounting Firm a letter certifying that all information provided and representations made by Worley for drafting the Financial Statement were true and correct ("Certification Letter"). (Doc. 39-9 at 50-51; 55-56.)

Worley admitted he lied on the Certification Letter and that the Financial Statement was materially false. (Doc. 39-4 at 110:5-113:10; and 67-86.) The Financial Statement omitted millions of dollars in debt and incorrectly listed some assets, including mineral rights and subsidiary inventory, as unencumbered when, in fact, they served as security for other indebtedness. (Id. ) Even though he was aware of the falsity of the Financial Statement, Worley sent the Financial Statement to Hammer, who as Worley's "go-between" with Callais and cognizant of Worley's need for financing, sent the Financial Statement to Callais. (Doc. 39-4 at 52.) Worley knew Hammer was seeking financing on his behalf. (Doc. 39-4 at 51.) On March 7, 2016, Hammer forwarded an email to Worley that included a page from the Financial Statement and asked Worley for a follow up call. (Doc. 39-3 at 65.) As such, Worley knew on March 7, 2016 that Hammer had shared the Financial Statement with prospective lenders. (Id. ) On March 29, 2016, Hammer forwarded Callais the email from the Accounting Firm with the Financial Statement attached. (Doc. 39-3 at 65.) Hammer's email to Callais stated, "Gentlemen, attached is a (12-31-15) PFS for Mike Worley. The $3MM CCM loan is not reflected on his statement. " (Id. )

STANDARD ON REVIEW

The Court reviews the Bankruptcy Courts decision to grant summary judgment de novo. Matter of Dallas Roadster, Ltd. , 846 F.3d 112, 123 (5th Cir. 2017) The Court "may affirm on any ground raised below and supported by the record, even if the [bankruptcy] court did not reach it." Williams v. J.B. Hunt Transp., Inc. , 826 F.3d 806, 810 (5th Cir. 2016).

Summary judgment is appropriate "if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a). "Only disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment." Anderson v. Liberty Lobby, Inc. , 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (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 "always bears the initial responsibility of informing the district court of the basis for its motion, and identifying those portions of the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, which it believes demonstrate the absence of a genuine [dispute] of material fact." Celotex Corp. v. Catrett , 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986) (internal quotation marks omitted). In responding to a properly supported motion for summary judgment, the nonmoving party "must do more than simply show that there is some metaphysical doubt as to the material fact." Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp. , 475 U.S. 574, 586, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986). The nonmovant must "go beyond the pleadings" and submit competent evidence demonstrating "specific facts showing that there is a genuine [dispute] for trial." Celotex , 477 U.S. at 324, 106 S.Ct. 2548 (internal quotation marks omitted). If the evidence is "merely colorable, or is not significantly probative, summary judgment may be granted." Anderson , 477 U.S. at 249–50, 106 S.Ct. 2505 (citations omitted).

The Fifth Circuit has further explained:

In resolving the motion, the court may not undertake to evaluate the credibility of the witnesses, weigh the evidence, or resolve factual disputes; so long as the evidence in the record is such that a reasonable jury drawing all inferences in favor of the nonmoving party could arrive at a verdict in that party's favor, the court must deny the motion.

Int'l Shortstop, Inc. v. Rally's, Inc. , 939 F.2d 1257, 1263 (5th Cir. 1991).

DISCUSSION ²

a. Bankruptcy Court's Ruling³

The Bankruptcy Court granted summary judgment for the Appellee, maintaining that there were no genuine disputes of material facts as to each element 11 U.S.C. § 523(a)(2)(B). As a threshold issue, the Bankruptcy Court determined that Callais had proven that Hammer was Worley's agent, explaining:

The debtor proffers an affidavit swearing that Hammer is not his agent to create an apparent material fact dispute in order to defeat Callais' motion, but the debtor's self-serving affidavit testimony directly conflicts with his earlier sworn deposition testimony in which he unequivocally stated that Hammer was his representative and even his agent in dealing with creditors in securing the loans. Again, I cite to his deposition, Page 34, Lines 19 through 21, and Page 32 – I'm sorry Deposition Page 125, Lines 17 through 21.

The Fifth Circuit's been very clear that a party cannot gin up a genuine issue of material fact by swearing out an affidavit that contradicts his previous sworn statements. "It is well settled that the court does not allow a party to defeat a motion for summary judgment using an affidavit that impeaches without explanation sworn testimony." That's a 1996 Fifth Circuit opinion in the matter S.W.S Erectors, Incorporated v. Infax, Incorporated , reported at 72 F.3d 489 [ (5th Cir. 1996) ], specifically Page 495. As the plaintiffs pointed out in its motion and supporting memoranda, Worley testified repeatedly that Hammer was his representative engaged in the process of seeking loans for both Mr. Worley and his enterprises. He cannot now claim that Hammer was not his agent in order to defeat summary judgment. Citation also to Albertson v. T.J. Stevenson & Company , 749 F.2d 223 [ (5th Cir. 1984) ], specifically Page 228, a Fifth Circuit opinion from 1984.

(Doc. 3-2, Oral Reasons, 21:4-22:5.) The...