The opinion
February 08, 2024
Nathan Ochsner, Clerk
IN THE UNITED STATES BANKRUPTCY COURT
FOR THE SOUTHERN DISTRICT OF TEXAS
HOUSTON DIVISION
IN RE: §
§ CASE NO: 20-31973
CARBO CERAMICS, INC., et §
al., § CHAPTER 11
§
Debtors. §
§
CARBO CERAMICS, INC., §
§
Plaintiff, §
§
VS. § ADVERSARY NO. 21-3031
§
BOARD OF TAX ASSESSORS §
FOR WILKINSON COUNTY §
GEORGIA, et al., §
§
Defendants. §
MEMORANDUM OPINION
This memorandum opinion addresses the remaining issues in this
case: (1) the amount of Payments In Lieu Of Taxes (“PILOTS”) (and
statutory interest) owed by CARBO Ceramics, Inc. to Wilkinson County,
Georgia; and (2) whether the County is entitled to attorneys’ fees. The
County is entitled to $3,395,872.59 in unpaid PILOTs for tax years
2018–2022, $1,005,143.64 in pre-judgment interest, and post-judgment
interest at the rate of 4.76% per annum. The County is not entitled to
attorneys’ fees.
BACKGROUND
On March 29, 2020, CARBO filed a voluntary petition for chapter
11 relief. Case No. 20-31973, ECF No. 1. On June 30, 2020, the Board
of Tax Assessors for Wilkinson County, Georgia filed its Proof of Claim
No. 0000010117 against CARBO to collect the additional payments in
lieu of taxes (PILOTs) it claimed CARBO owed under the parties’ bond-
for-title tax-incentive agreement. ECF No. 74-33. On April 21, 2021,
the Assessors filed an amended proof of claim to include PILOTs for
additional tax years. ECF No. 74-34.
On February 24, 2021, CARBO initiated this adversary
proceeding against the Assessors and County seeking a refund in
PILOTs on account of an alleged force majeure event. ECF No. 1 at 6.
On April 5, 2021, the Assessors filed a counterclaim against CARBO
seeking payment of the PILOTs owed for tax years 2018–2020. ECF No.
21 at 1. The parties have agreed the tax years that are the subject of
the Assessors’ proof of claim and this adversary proceeding are 2018–
2022. ECF No. 73 at 6.
The Court conducted an evidentiary hearing on November 21,
2022. ECF No. 76. The Court requested briefing from the parties on the
narrow legal issue of whether CARBO was entitled to claim additional
depreciation on PILOTs due to its alleged force majeure event. ECF No.
87 at 296–300. On April 12, 2023, the Court issued its Memorandum
Opinion deciding this threshold issue. ECF No. 98 at 1. The Court
answered the question in the negative, finding that the MOU’s valuation
provisions were valid and enforceable at all times and did not allow
CARBO to claim additional depreciation in the form of inutility and
economic obsolescence. ECF No. 98 at 16.
The Court scheduled a hearing on June 21, 2023, to determine the
amount, if any, of attorneys’ fees and expenses to be awarded to the
County. ECF No. 109. The County failed to timely file its exhibits for
the hearing, resulting in no evidence being collected. The Court ordered
to parties to meet and confer to discuss the amount of litigation expenses
incurred by the Assessors and County due to its dispute with CARBO.
The Court also allowed CARBO to file a motion for reconsideration
explaining any issues with the Court’s opinion.
The Court now decides the amount of PILOTs and statutory
interest CARBO owes the County and whether the County is entitled to
attorneys’ fees.
JURISDICTION
The District Court has jurisdiction over this proceeding under 28
U.S.C. § 1334(a). Venue is proper in this District pursuant to 28 U.S.C.
§ 1409. This is a core proceeding under 28 U.S.C. § 157(b)(2). The
dispute has been referred to the Bankruptcy Court under General Order
2012-6.
The Court has the authority to enter final judgment in this matter
under the Plan, Confirmation Order, and because the parties have
stipulated that this adversary proceeding is core. ECF No. 69 at 2. The
parties have consented to entry of final judgment by a bankruptcy judge.
ECF No. 69 at 2.
DISCUSSION
I. THE COUNTY IS ENTITLED TO UNPAID PILOTS AND STATUTORY
INTEREST
A. The County Is Entitled to $3,395,872.59 in Unpaid
PILOTs for Tax Years 2018–2022
Since CARBO is not entitled to claim additional depreciation on
PILOTs under the parties’ bond-for-title agreement, the County is
entitled to an award of the difference between the amount of assessed
PILOTs and the amount of PILOTs CARBO has paid for tax years 2018–
2022. Evidence containing these figures is uncontested and has been
admitted without objection. ECF Nos. 74-19–74-28, 74-103.
The parties agree on CARBO’s pre-admitted summary of assessed
taxes and amounts paid. ECF No. 75 at 4. Pursuant to the table,
CARBO owes the County $3,395,872.59 for tax years 2018–2022.1 ECF
No. 74-103.
The County is entitled to $3,395,872.59 before statutory interest.
B. The County Is Entitled to $1,005,143.64 in Statutory
Interest
The County claims statutory interest pursuant to Ga. Code Ann.
§ 48-2-40. Section 48-2-40 provides interest on all unpaid taxes. The
parties’ agreement is a sale-leaseback and bond issuance transaction.
CARBO transferred title of its two facilities to the Development
Authority of Wilkinson County in exchange for tax incentives and
project financing. ECF No. 70-26 at 134, 139, 223. As part of the
transaction, CARBO then leased the facilities back from the
Development Authority. ECF No. 70-26 at 139, 223. CARBO is exempt
from paying ad valorem taxes, instead making payments in lieu of taxes
under the 2008 MOU. ECF No. 70-26 at 246. Since the PILOTs are not
a tax, the County is not entitled to interest under § 48-2-40 unless
provided for in the parties’ agreement. Neither the MOU nor the 2008
lease provide for the payment of statutory interest on unpaid PILOTs.
Georgia law provides for the payment of pre-judgment interest on
liquidated contract claims. Ga. Code Ann. § 13-6-13 (“In all cases where
an amount ascertained would be the damages at the time of the breach,
it may be increased by the addition of legal interest from that time until
the recovery.”); Norair Eng'g Corp. v. Saint Joseph's Hosp., Inc., 147 Ga.
App. 595, 605 (1978); Braner v. S. Tr. Ins. Co., 255 Ga. 117, 119 (1985).
“The rule is that interest must be awarded on a liquidated sum from the
time the liability arises . . . .” Wheels & Brakes, Inc. v. Cap. Ford Truck
Sales, Inc., 167 Ga. App. 532, 534 (1983) (citing Ga. Code Ann. § 7-4-15).
1 This figure is calculated using the deltas between the assessed PILOTs (reflected
under Column C titled “County Tax”) and the PILOTs CARBO has paid (reflected
under Column G titled “2017 Tax Paid”) for tax years 2018–2022. ECF No. 74-103.
“The legal rate of interest shall be 7 percent per annum simple interest
where the rate percent is not established by written contract.” Ga. Code
Ann. § 7-4-2(a)(1)(A); Chacon v. Holcombe, 290 Ga. App. 767, 767–68
(2008) (permitting an award of pre-judgment interest under § 13-6-13 at
the rate established by § 7-4-2(a)(1)(A)).
Federal law governs the award of post-judgment interest. Meaux
Surface Prot., Inc. v. Fogleman, 607 F.3d 161, 173 (5th Cir. 2010). “Post-
judgment interest is awarded as a matter of course.” Id. (citing 28
U.S.C. § 1961(a)). Section 1961 governs awards of post-judgment
interest in civil cases, including in bankruptcy adversary proceedings.
In re Imperial Petroleum Recovery Corp., 84 F.4th 264, 271 (5th Cir.
2003). Under § 1961(a):
[I]nterest shall be calculated from the date of
the entry of the judgment, at a rate equal to
the weekly average 1-year constant maturity
Treasury yield, as published by the Board of
Governors of the Federal Reserve System, for
the calendar week preceding the date of the
judgment.
Fed. R. Evid. 201 allows the Court to take judicial notice of
Treasury yields published by the Federal Reserve. Federal law provides
for post-judgment interest accrual on the entire judgment, including the
pre-judgment interest award. Mid-Continent Cas. Co. v. Petroleum
Sols., Inc., 248 F. Supp. 3d 837, 847 (S.D. Tex. 2017) (citing Fuchs v.
Lifetime Doors, Inc., 939 F.2d 1275, 1280 (5th Cir. 1991)).
CARBO must pay the County $1,005,143.64 in pre-judgment
interest. Post-judgment interest accrues at the rate of 4.76% per
annum.
II. THE COUNTY IS NOT ENTITLED TO CONTRACTUAL ATTORNEYS’
FEES
“Generally, an award of attorney fees is not available in Georgia
unless authorized by statute or contract.” Moon v. Moon, 277 Ga. 375,
379 (2003). Contractual provisions for attorneys’ fees are routinely
enforced in Georgia. See Cheeley Invs., L.P. v. Zambetti, 332 Ga. App.
115, 118 (2015); see also Sylar v. Hodges, 250 Ga. App. 42, 43 (2001)
(footnotes omitted) (“Parties may establish contract terms on any
subject matter in which they have an interest so long as their agreement
is not prohibited by statute or public policy. There is no public policy
against contracting for the recovery of attorney fees. And we know of no
statute prohibiting the recovery of attorney fees as set forth in the
contract in this case. In fact, we have upheld contracts which similarly
provide that a prevailing party shall recover attorney fees.”).
The Assessors and County claim entitlement to attorneys’ fees
through Section 10.4 of the 2008 lease agreement. ECF No. 113 at 4.
Section 10.4 provides:
Section 10.4. Company to Pay Fees and
Expenses. In the event the Company should
default under any of the provisions of this
2008 Lease and the Issuer or the Holder
should employ attorneys, accountants, or
other experts or incur other expenses for the
collection of amounts due it hereunder or the
enforcement of performance or observance of
any obligation or agreement on the part of the
Company herein contained for its benefit, the
Company agrees that it shall on demand
therefor pay to such Person the reasonable
fees of such attorneys, accountants, or other
experts and such other expenses so incurred
by the Issuer. Any attorneys' fees required to
be paid by the Company under this 2008
Lease shall include attorneys' and paralegal's
fees through all proceedings, including, but
not limited to, negotiations, administrative
hearings, trials, and appeals, court costs and
reimbursable expenses of such attorneys. The
Company and the Holder shall be entitled to
enforce their respective rights under this
Article and the Issuer's rights under this
Article shall be one of the Unassigned Rights.
This section shall survive the termination of
this 2008 Lease.
ECF No. 74-30 at 56. In the event that CARBO defaults under the 2008
lease, Section 10.4 permits an award of litigation expenses incurred by
the “Issuer” or “Holder” for collection of amounts due or enforcement of
performance under the lease.
The 2008 lease agreement defines the “Issuer” as the
Development Authority of Wilkinson County. ECF No. 74-30 at 26. The
lease defines the “Holder” as “the person in whose name the Bond is
registered on the registration books of the Issuer and, as stated in
Section 4.2 of this 2008 Lease, initially means the Purchaser.” ECF No.
74-30 at 26. CARBO is the initial holder of the bond and continues to
hold the bond today. ECF No. 74-30 at 30; ECF No. 98 at 15. By the
plain meaning of these defined terms, Section 10.4 would permit an
award of litigation expenses only to the Development Authority of
Wilkinson County. See Anderson v. David, 367 Ga. App. 883, 888 (2023)
(citation omitted) (“‘Words generally bear their usual and common
signification,’ OCGA § 13-2-2 (2), and courts must interpret the contract
terms ‘using their plain, ordinary, and popular sense[.]’” (quoting
Davista Holdings, LLC v. Cap. Plaza, Inc., 321 Ga. App. 131, 133
(2013))), cert. denied (Nov. 7, 2023). There are no ambiguities in Section
10.4’s language.
The Assessors and County allege that, because the lease requires
CARBO to make PILOTs under the MOU, “to which the County and
Assessors are parties and the Development Authority a beneficiary,”
since this case involves “enforcing the obligation of payment of PILOTs
by CARBO, the Lease authorizes the recovery of the County’s reasonable
attorneys’ fees.” ECF No. 113 at 5. The Court agrees with the premise
that CARBO’s failure to make the required payments under the MOU
allows for the recovery of attorneys’ fees under Section 10.4 of the lease.
See, e.g., ECF 74-30 at 245 (“[CARBO] shall, in consideration of the lease
structure and other benefits, make payments in lieu of taxes, in
accordance with the payment percentages and terms provided in the
Second Amended and Restated Memorandum of Understanding (the
“2008 MOU”)... .”). However, the Assessors’ and County’s conclusion
that the County is therefore entitled to attorneys’ fees does not follow.
The County is not a party to the 2008 lease, and as explained, Section
10.4 allows fees only to the Development Authority. ECF No. 74-30 at
61-62. The Development Authority is not a party to this proceeding.
The County is not entitled to attorneys’ fees.
CONCLUSION
The County is entitled to a total award of $4,401,016.23. The
Court will enter final judgment in a separate order.
SIGNED 02/08/2024
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_S/—4—
Marvin Isgur
United States Bankruptcy Judge
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