Union Tank Car Company v. Maxwell

IN THE UNITED STATES DISTRICT COURT May 21, 2021

Nathan Ochsner, Clerk

FOR THE SOUTHERN DISTRICT OF TEXAS

HOUSTON DIVISION

UNION TANK CAR COMPANY, §

§

Plaintiff, §

§

VS. § CIVIL ACTION NO. H-19-1421

§

W. KEITH MAXWELL; NUDEVCO §

PARTNERS, LLC; NUDEVCO PARTNERS §

HOLDINGS, LLC; ASSOCIATED ENERGY §

SERVICES, LP; COPROTECTION, LLC; §

RETAILCO ACQUISITION CO, LLC; §

NMD HOLDINGS LLC (f/k/a SOLANDRI §

INVESTMENTS, LLC); NUDEVCO §

MIDSTREAM DEVELOPMENT, LLC (f/k/a §

MARLIN MIDSTREAM SERVICES, LLC); §

XCALIBUR LOGISTICS, LLC; AES §

VENTURES, LLC (f/k/a SPARK ENERGY §

VENTURES, LLC); NUDEVCO RETAIL §

HOLDINGS, LLC; NUDEVCO RETAIL, §

LLC; XCAL HOLDINGS, LLC (f/k/a §

BESTBUY ENERGY, LLC); NUDEVCO §

MIDSTREAM LAND COMPANY, LLC; §

AND AES VENTURES HOLDINGS, LLC §

(f/k/a MOBIL DOC, LLC), §

§

Defendants. §

MEMORANDUM AND OPINION

This case and a prior case litigated in the state courts in Illinois seek payments due under a

lease and guaranty. General Electric Railcar Services Corporation (GE Railcar), leased railcars to

Ponderosa Petroleum Company. (Docket Entry No. 1 at 9; Docket Entry No. 84 at 7). The

plaintiff, Union Tank Car Company, and the two of the entity defendants, NuDevco Partners

Holdings LLC (NuDevco), and Associated Energy Services, LP (Associated Energy), acquired

interests in the lease through assignments, taking on substantial liability. NuDevco, Associated

Energy, and other entity defendants then engaged in a series of cash and asset transfers, allegedly

without consideration, at the direction of the individual defendant, Keith Maxwell, who directly or

indirectly owned or controlled all the entity defendants. The result, alleges Union Tank Car, the

plaintiff, is that the entity defendants and Keith Maxwell owe it over $2 million in damages and

unpaid rent under the lease and guaranty.

The parties cross-move for summary judgment, raising four sets of issues: (1) whether

Union Tank has standing to sue NuDevco for breach of the guaranty agreement; (2) whether an

Illinois judgment entitles Union Tank to unpaid rent and expenses; (3) whether Union Tank can

recover against each of the defendants for fraudulent transfers; and (4) whether Associated

Energy’s commercial-frustration defense fails as a matter of law.

Based on the pleadings; the motions, replies, and responses; the summary judgment record;

the arguments of counsel at a hearing held on April 1, 2021; and the law, this court grants and

denies in part the cross-motions for summary judgment. The reasons are set out in detail below.

I. The Summary Judgment Record

GE Railcar leases and manages a fleet of railcars. Associated Energy, which provides

services to energy companies, leased 47 railcars from GE Railcar to haul petroleum products for

its customers. (See Docket Entry No. 1 at 9; Docket Entry No. 81-5 at 2–3; Docket Entry No. 84

at 8). The lease and its riders, executed on April 1, 2015, required Associated Energy to pay GE

Railcar monthly rent for each leased railcar. (Docket Entry No. 1 at 10; Docket Entry No. 84 at 9;

Docket Entry No. 81-1 at 1).

NuDevco, then Associated Energy’s parent company, signed a guaranty for the lease in

March 2015. (Docket Entry No. 92-1). NuDevco is a holding company that Keith Maxwell

indirectly owns, as he does the other entity defendants. (See Docket Entry No. 1 at 15; Docket

Entry No. 84 at 9; Docket Entry No. 102); (see also Docket Entry No. 81-4 at 1–5). In September

2015, Associated Energy stopped paying rent to GE Railcar and attempted to return the railcars it

had leased. (Docket Entry No. 1 at 12; Docket Entry No. 81-2 at 12–13 ¶¶ 33, 36; Docket Entry

No. 84 at 12).

Union Tank Car owns railway equipment and railcars that it offers for lease. On September

30, 2015, Union Tank bought the rights and assets under Associated Energy’s railcar lease from

GE Railcar. (Docket Entry No. 1 at 12; Docket Entry No. 84 at 11; see generally Docket Entry

No. 93-1). Union Tank’s purchase of the GE Railcar/Associated Energy lease from GE Railcar

granted Union Tank “all rights under [c]ustomer [a]greements” and “all causes of action against

third parties to the extent Related to the US Tank Car Assets,” (Docket Entry No. 93-1 § 2.01(b)),

as “exist[ing] immediately prior to the Asset Closing.” (Id. at § 2.01). Union Tank sought the

payments due under the lease from the guarantor, NuDevco, one of the entities that Maxwell

indirectly owned or controlled. See Union Tank Car Co. v. NuDevco Partners Holdings, LLC,

2019 IL App (1st), 123 N.E.3d 1177, 1181; (Docket Entry No. 84 at 9). NuDevco did not pay.

(Docket Entry No. 45 at ¶ 19).

In 2016, Union Tank sued NuDevco in Illinois state court to enforce the guaranty for the

railcar lease payments. (Docket Entry No. 1 at 13; Docket Entry No. 84 at 12; see generally Docket

Entry No. 81-5). In 2017, the Illinois court entered judgment for Union Tank, finding that

NuDevco breached the guaranty agreement and awarding damages. (Docket Entry No. 81-5 at 8,

10; Docket Entry No. 81-6 at 5). The Illinois final judgment required NuDevco to pay Union Tank

over $1.4 million in damages, plus prejudgment and postjudgment interest. (Docket Entry No. 1

at 7, 14; Docket Entry No. 81 at 7–9; Docket Entry No. 81-6 at 5). The Illinois court did not award

Union Tank damages for future rent because rent acceleration is not allowed under Illinois law.

(Docket Entry No. 1 at 15; Docket Entry No. 81-5 at 9); see also Union Tank Car, 123 N.E.3d at

1188.

NuDevco claims that it is insolvent, and it did not pay the Illinois court judgment. (Docket

Entry No. 1 at 7; Docket Entry No. 84 at 12). During postjudgment discovery in the Illinois case,

Union Tank learned of a series of transactions that it alleges show that NuDevco’s insolvency

resulted from fraud orchestrated by Maxwell and implemented through the defendant entities that

he owns or controls. (Docket Entry No. 1 at 15–18; see Docket Entry No. 84 at 8–11). The record

details many cash and LLC transfers in 2015 from NuDevco Holdings to the other defendant

entities. (See Docket Entry 1 at 15–19; Docket Entry Nos. 85-2, 85-3, 93-7 (documenting the

various LLC transfers); Docket Entry Nos. 93-8, 85-4 (documenting the various cash transfers)).

According to Union Tank, badges of fraud abound. (Docket Entry No. 92 at 17–20). According

to the defendants, explanations showing valid transactions abound.

By August 3, 2015, about a month before Associated Energy abandoned the railcars,

NuDevco had no assets, (Docket No. 84 at 10-12), and only $3,045 in cash. (Docket Entry No.

93-8 at 24). NuDevco and the other defendants explain the transfers that resulted in NuDevco’s

insolvency as part of a “corporate reorganization.” (Docket Entry No. 84 at 9). By September 28,

2015, NuDevco had no cash. (See Docket Entry No. 93-8 at 26–27). NuDevco explains the cash

transfers by its operation as a holding company, which “distribute[s] cash to its operating

companies on an as-needed basis to fund their operating expenses.” (Docket Entry No. 84 at 9).

In April 2019, Union Tank filed this lawsuit to collect the unpaid Illinois judgment and to

seek additional damages for the rent that became due between the Illinois judgment and the

expiration of all abandoned railcar leases. (Docket Entry No. 1 at 15). Union Tank argues that

Associated Energy breached the master lease, NuDevco breached the guaranty, and Maxwell, in

collaboration with the entity defendants he controls, fraudulently transferred assets to avoid paying

the damages. (Id. at 20–24). Union Tank asks for three equitable remedies as well as damages:

(1) an attachment for $2,352,745.46 (the amount of the Illinois judgment without interest and with

unpaid rent; (2) an injunction to prevent the defendants from transferring that amount; and (3) the

appointment of a receiver to locate and preserve the $2,352,745.46 that Union Tank seeks. (Id. at

24–28).

The parties cross-moved for partial summary judgment, responded, and replied. (Docket

Entry Nos. 81, 84, 92, 94, 96, 97). They dispute whether: (1) Union Tank has standing to sue

NuDevco for breaching the guaranty; (2) the Illinois judgment has preclusive effect so as to entitle

Union Tank to unpaid rent and expenses under the lease and guaranty; (3) Union Tank can recover

against each of the defendants for the allegedly fraudulent transfers; and (4) whether Associated

Energy’s commercial-frustration defense fails as a matter of law. (See Docket Entry No. 81 at 1–

2); (Docket Entry No. 84 at 3–5); (Docket Entry No. 92 at 2); (Docket Entry No. 94 at 12–13).

Each issue is discussed below under the applicable legal standards.

II. The Summary Judgment Standard

Summary judgment is proper when “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.” See Shepherd on

Behalf of Est. of Shepherd v. City of Shreveport, 920 F.3d 278, 282–83 (5th Cir. 2019) (quoting

Fed. R. Civ. P. 56(a)). “A fact is material if it would affect the outcome of the case” and “a dispute

is genuine if the evidence is such that a reasonable jury could return a verdict for the non-moving

party.” Warren v. Fed. Nat’l Mortg. Ass’n, 932 F.3d 378, 882–83 (5th Cir. 2019) (quotations

omitted). The moving party “always bears the initial responsibility of informing the district court

of the basis for its motion,” and identifying the record evidence “which it believes demonstrate[s]

the absence of a genuine issue of material fact.” Celotex Corp. v. Catrett, 477 U.S. 317, 323

(1986).

When the nonmovant has the burden of proof at trial, “the movant may merely point to the

absence of evidence and thereby shift to the nonmovant the burden of demonstrating that there is

an issue of material fact warranting trial.” Kim v. Hospira, Inc., 709 F. App’x 287, 288 (5th Cir.

2018) (per curiam) (alteration omitted) (quoting Nola Spice Designs, L.L.C. v. Haydel Enters. Inc.,

783 F.3d 527, 536 (5th Cir. 2015)). The moving party must show the absence of a genuine issue

of material fact, but it need not negate the elements of the nonmovant’s case. Austin v. Kroger

Tex., L.P., 864 F.3d 326, 335 (5th Cir. 2017) (per curiam). If the moving party cannot meet this

initial burden, the court must deny the motion, regardless of the non-movant’s response. Pioneer

Expl., L.L.C. v. Steadfast Ins. Co., 767 F.3d 503, 511 (5th Cir. 2014).

“When the moving party has met its Rule 56(c) burden, the nonmoving party cannot

survive a summary judgment motion by resting on the mere allegations of its pleadings.” Bailey

v. E. Baton Rouge Parish Prison, 663 Fed. App’x 328, 331 (5th Cir. 2016) (quoting Duffie v.

United States, 600 F.3d 362, 371 (5th Cir. 2010)). The non-movant must identify specific evidence

in the record and articulate how that evidence supports that party’s claim. Willis v. Cleco Corp.,

749 F.3d 314, 317 (5th Cir. 2014). “A party cannot defeat summary judgment with conclusory

allegations, unsubstantiated assertions, or only a scintilla of evidence.” Lamb v. Ashford Place

Apartments L.L.C., 914 F.3d 940, 946 (5th Cir. 2019) (quotations omitted). Courts deciding a

summary judgment motion “view the evidence in the light most favorable to the nonmovant and

draw all reasonable inferences in the nonmovant’s favor.” Adams v. Alcolac, Inc., 974 F.3d 540,

543 (5th 2020); see also Tolan v. Cotton, 572 U.S. 650, 656 (2014) (per curiam)).

III. Analysis

A. Union Tank’s Standing to Sue NuDevco

The defendants seek summary judgment on Union Tank’s claim that NuDevco breached

its guaranty of the lease when it failed to make the rent payments due under lease. (See Docket

Entry No. 97 at 10–11). The defendants argue that Union Tank has no standing to pursue these

claims because Associated Energy began abandoning the railcars on September 1, 2015, (see

Docket Entry No. 81 at 3), before Union Tank acquired the guaranty and lease from GE Railcar

on September 30, 2015. (See Docket Entry No 84 at 23–24); (see generally Docket Entry No. 93-

1) (purchase agreement between GE Railcar and Union Tank). The defendants’ argument is

unpersuasive, for two reasons.

First, the purchase agreement between GE Railcar and Union Tank shows that Union Tank

acquired GE Railcar’s rights and preexisting claims against third parties at closing. Union Tank’s

purchase agreement1 with GE Railcar granted it “all rights under [c]ustomer [a]greements” and

“all causes of action against third parties to the extent Related to the US Tank Car Assets,” (Docket

Entry No. 93-1 § 2.01(b)), “as exist[ing] immediately prior to the Asset Closing.” (Id. at § 2.01)

(emphasis added). Second, the defendants are precluded from claiming that Union Tank cannot

pursue a claim for breach of the guaranty against NuDevco because that issue was clearly decided

in, and necessary to, the Illinois judgment. See Hope Clinic for Women, Ltd. v. Flores, 991 N.E.2d

745, 764 (Ill. 2013) (collateral estoppel, or issue preclusion, prevents the parties from relitigating

issues that are identical to an issue necessary to a prior judgment if the parties are the same and

the judgment is final on the merits).

1 The defendants rely on the Notice of Sale to argue that Union Tank’s rights did not arise until after September 20,

2015. (See Docket Entry No. 84 at 16; Docket Entry No. 97 at 10–11). This argument is unsupported. It is the

Purchase Agreement, not the Notice of Sale, that governs the rights passed from GE Railcar to Union Tank. (See

generally Docket Entry No. 93-1).

Summary judgment is denied on this issue.

B. The Preclusive Effect of the Illinois Judgment

Union Tank argues that the Illinois judgment precludes NuDevco and Associated Energy

from relitigating liability for unpaid rent and expenses under the breached guaranty and lease.

Illinois law governs the preclusion analysis. Taylor v. Sturgell, 553 U.S. 880, 891 n.4 (2008)

(citing Semtek Int’l Inc. v. Lockheed Martin Corp., 531 U.S. 497, 508 (2001)) (“For judgments in

diversity cases, federal law incorporates the rules of preclusion applied by the State in which the

rendering court sits.”); see also Weaver v. Tex. Cap. Bank N.A., 660 F.3d 900, 906 (5th Cir. 2011)

(“In determining the preclusive effect of an earlier state court judgment, federal courts apply the

preclusion law of the state that rendered the judgment.”).

Illinois courts apply issue preclusion, or collateral estoppel, to prevent relitigation of issues

necessary to the earlier final judgment. Kindle v. Kinkaid Reeds Conservation Dist., No. 18-CV-

1516-RJD, 2020 WL 5517187, at *4 (S.D. Ill. Sept. 14, 2020). Issue preclusion under Illinois law

requires that: “(1) the issue decided in the prior proceeding is identical to the issue in the current

suit; (2) the prior judgment is final on the merits; and (3) the party against whom the estoppel is

asserted was a party to, or in privity with, a party to the prior adjudication.” Hope Clinic for

Women, Ltd. v. Flores, 991 N.E.2d 745, 764 (Ill. 2013). Preclusion applies to questions of law

and findings of fact. Du Page Forklift Service, Inc. v. Material Handling Servs., Inc., 744 N.E.2d

845, 849–50 (Ill. 2001). The party invoking preclusion has the burden of showing that preclusion

applies. See Gassman v. Clerk of the Cir. Ct. of Cook Cty., 71 N.E.3d 783, 793 (Ill. Ct. App. 2017).

NuDevco was a party to the first action. Associated Energy was not. The preclusive effect

of the Illinois judgment on each party is considered separately.

1. NuDevco is Liable for Unpaid Rent Under the Guaranty

The Illinois judgment establishes NuDevco’s liability for breach of the guaranty and

entitles Union Tank to unpaid rent accrued since that judgment. (Docket Entry No. 81-5 (trial

court judgment); Union Tank Car, 123 N.E.3d at 1188 (affirming the trial court’s judgment).

Each of the preclusion elements is met. The Illinois judgment is final. Union Tank and

NuDevco were parties in both actions. The Illinois judgment decided the same issue raised in this

case: whether NuDevco breached the guaranty. (Docket Entry No. 81-5 at 7 (“NuDevco is liable

under the guaranty”)); Union Tank Car, 123 N.E.3d at 1188 (affirming NuDevco’s liability on

appeal).

NuDevco makes several arguments that the Illinois judgment lacks preclusive effect. None

is persuasive, because none affect the issue of NuDevco’s liability.

NuDevco argues that the Illinois court did not “determine the specific amount of [u]npaid

[r]ent” that would accrue before the lease term ended. (See Docket Entry No. 94 at 14). This

argument does not undermine preclusion, because the Illinois court found NuDevco liable for

breaching the guaranty and directed Union Tank to sue for the future rent, either when it became

due or when the lease ended. (Docket Entry No. 81-5 at 8); Union Tank Car, 123 N.E.3d at 1188

(the Illinois court did not include the present value of future unpaid rent in the judgment because

“[u]nder the [state’s] common law, damages for breach of a lease do not include future

rent.”). When the lease term ended, Union Tank filed this lawsuit. (See Docket Entry No. 81 at

4; Docket Entry No. 1). NuDevco does not dispute the rental rate and term for each of the leased

railcars. (Docket Entry No. 81-4 at ¶¶ 24–25). NuDevco has not paid $935,600 in rent. (See

Docket Entry No. 81 at 4); (see also Docket Entry No. 81-4 at 13 ¶¶ 33, 36, 37, 40, 46). The

Illinois judgment establishes that “NuDevco is liable under the guaranty.” (Docket Entry No. 81-

5 at 7).

NuDevco also argues that this court should not rely on the Illinois judgment because Union

Tank did not incur the storage costs the Illinois court awarded. (Docket Entry No. 94 at 15; see

Docket Entry No. 81-5 at 9 (awarding “future storage” damages)). The Illinois appeal court

rejected NuDevco’s arguments about the future storage costs. Union Tank Car, 123 N.E.3d at

1184. The amount of storage costs is not material to the Illinois court’s finding of liability. See

Renwick, 901 F.3d at 611 (“A material fact is one that might affect the outcome of the suit under

governing law.”) (quotation marks omitted). Union Tank does not include the disputed amount

for future storage costs in its request for out-of-pocket expense damages, (Docket Entry No. 96 at

17–18), as explained below.

NuDevco’s final argument is that “injustice would result” if it is estopped from disputing

its liability to Union Tank for the unpaid rent. (Docket Entry No. 94 at 16). There is no injustice

in this straightforward application of issue preclusion. See Sims v. City of Madisonville, 894 F.3d

632, 644 (5th Cir. 2018) (“A final judgment in one state, if rendered by a court with adjudicatory

authority over the subject matter and persons governed by the judgment, qualifies for recognition

throughout the land.”).

NuDevco speculates about whether Union Tank would have performed under the lease.

(Docket Entry No. 94 at 16–17). The record fails to make this argument more than speculative.

The record instead shows that Associated Energy abandoned the railcars, was in breach of the

lease, and never attempted to cure. (Docket Entry No. 81-5 at 5–7).

The Illinois judgment establishes NuDevco’s liability for breach of guaranty. (See Docket

Entry No. 81-5); Union Tank Car, 123 N.E.3d at 1188. Summary judgment is granted for Union

Tank on this issue.

2. Associated Energy is Liable for Expenses Under the Breached Lease

The Illinois court awarded damages for expenses to Union Tank based on NuDevco’s

breach of the guaranty.2 The court found that Associated Energy, the party owing the underlying

rent obligation, breached the underlying lease. (See Docket Entry No. 81-5 at 6 (“[Associated

Energy’s] early return [of the railcars] constituted a breach of the terms of the leasing

agreement.”)); Union Tank Car, 123 N.E.3d at 1183 (“[T]he guaranty would not have been

triggered but for Associated Energy’s breach of the lease.”).3 That finding was essential to the

judgment against NuDevco, the guarantor.

“The term ‘privity’ is not precise, and there is no generally prevailing definition that can

automatically be applied in all cases.” City of Chicago v. St. John's United Church of Christ, 935

N.E.2d 1158, 1167 (Ill. App. Ct. 2010).4 The inquiry “requires a careful examination into the

circumstances of each case.” Purmal v. Roberts N. Wadington and Assocs., 820 N.E.2d 86, 94

(Ill. App. Ct. 2004). Parties are in privity when they are explicitly representative, share legal

interests in the outcome of the action, or are successors in a property interest. See Oshana v. FCL

2 The final Illinois judgment awarded Union Tank $418,092.90 in expenses. (See Docket Entry No. 81-5 at

10; Docket Entry No 81-6 at 5; Docket Entry No. 81-7 at 6, 11). Union Tank seeks only $320,876.19. (See

Docket Entry No. 81 at 21–22). That amount excludes the disputed “future storage costs” awarded by the

Illinois court. (See Docket Entry No. 94 at 15; Docket Entry No. 81-5 at 10).

3 The Illinois court rejected NuDevco’s argument that the UCC applied to Union Tank’s prior action. Union

Tank Car Co., 123 N.E.3d at 1183. The court acknowledges that Union Tank’s claim against Associated

Energy implicates the conditions precedent to recovery under the UCC. See id. The Illinois appellant court

found a “reasonable inference” that Union Tank would have met its performance obligations if the UCC

applied. Id.

4 This section includes cases discussing res judicata and cases discussing collateral estoppel. The standards

for privity are the same under both doctrines. See Direct Auto Ins. Co. v. Bahena, 131 N.E.3d 1094, 1109

(Ill. App. Ct. 2019).

Builders, Inc. 994 N.E.2d 77, 85 (Ill. Ct. App. 2013) (quoting RESTATEMENT (SECOND) OF

JUDGMENTS §75, cmt. A at 210 (1982). Privity based on shared legal interests requires adequate,

but not necessarily successful, representation. Lutkauskas v. Ricker, 28 N.E.3d 727, 739 (Ill.

2015). A nonparty may be bound by privity if the interests are so closely aligned to those of a

party that the party is the “‘virtual representative’ of the nonparty.” St. John’s United Church of

Christ, 935 N.E.2d at 1168. A shared legal interest, not the identity of the parties, controls when

determining privity. Lutkauskas, 28 N.E.3d at 739. The record shows that Associated Energy and

NuDevco were in privity throughout the Illinois action. The parties shared legal interests in that

action, which NuDevco adequately represented.

Associated Energy shared NuDevco’s legal interest in avoiding liability for the expenses

incurred under the breached lease. NuDevco adequately represented Associated Energy’s interest

in denying or avoiding its liability under the lease. See Union Tank Car, 123 N.E.3d at 1183

(“NuDevco maintains that . . . its liability under the guaranty is predicated on the amounts due

under the lease.”). NuDevco disputed and appealed the amount that Union Tank now seeks from

Associated Energy. (See Docket Entry No. 81-5 at 7) (NuDevco’s arguments against the lease

expenses); see also Union Tank, 123 N.E.3d at 1183 (“NuDevco contends that the [Illinois] trial

court erred in awarding damages to Union Tank for anticipated blasting and future storage costs.”).

In the Illinois action, NuDevco asserted the same commercial-frustration defense to the breach of

the underlying lease that Associated Energy now raises, but it was stricken. (Docket Entry No.

81-5 at 7). Associated Energy’s argument that NuDevco could not represent its interests because

the guaranty waived defenses is unpersuasive. (Docket Entry No. 94). NuDevco’s vigorous

litigation of Associated Energy’s liability under the lease shows a common legal interest.

NuDevco and Associated Energy also had a common legal interest based on their interests

in the railcars. Through his ownership of NuDevco Partners, Maxwell indirectly owned both

entities. Apollo Real Est. Inv. Fund, IV, LP v. Gelber, 935 N.E.2d 963, 974 (Ill. App. Ct. 2010)

(two corporations are in “privity” when they are closely and commonly held, commonly

controlled, or when no “other [entity has] an interest in the [earlier action’s] subject matter.”)

(quoting Cohen v. Schlossberg, 150 N.E.2d 218, 233 (1958)); see also Agolf, LLC v. Vill. of

Arlington Heights, 946 N.E.2d 1123, 1135 (2011) (privity exists between parties with mutual

property rights that form the basis of a prior action). NuDevco’s guaranty made it liable for all the

“rent, service charges, freight, railroad charges, lessee responsible repairs and maintenance,

casualties, return obligation, cleaning charges, etc.,” that Associated Energy incurred under the

lease. (Docket Entry No. 81-5 at 8). The entities’ common ownership, shared accountability

under the lease, and shared responsibility for the railcars all support finding a shared legal interest

in the subject of the Illinois action.

The same attorney who represented NuDevco in the Illinois action now represents

Associated Energy. (Docket Entry No. 96 at 15). On its own, common legal representation is not

enough for privity. (See Docket Entry No. 94 at 20); see also Gassman, 71 N.E.3d at 791–92

(there is no privity between the plaintiffs in a prior action and plaintiffs in a subsequent action

solely because the same attorney represented both groups of plaintiffs); Yorulmazoglu v. Lake

Forest Hosp., 834 N.E.2d 468, 474–75 (Ill. App. Ct. 2005) (common legal representation is not

enough, standing alone, to establish privity). Common representation is, however, a factor that

supports finding privity between NuDevco and Associated Energy. See, e.g., Yorulmazoglu, 834

N.E.2d at 475 (common legal representation “bolstered” finding privity when the parties also

shared a legal interest in collecting a debt against the same corporation). Associated Energy also

paid for NuDevco’s defense in the prior action. (Docket Entry No. 81-2 at 19–20; Docket Entry

No. 81-4 at 20).

The parties’ common legal representation and financing shows their shared interest in

fighting liability for expenses resulting from the breached lease. Summary judgment is granted

for Union Tank on this issue. Associated Energy is not precluded from raising its affirmative

defenses in this action.

IV. The Fraudulent Transfers

Under the Texas Uniform Fraudulent Transfer Act (TUFTA), Union Tank seeks avoidance

of the cash and LLC interest transfers from NuDevco to Maxwell and the other entity defendants.

The defendants move for summary judgment on the TUFTA claims, arguing that Union Tank lacks

evidence to support the claims against each defendant. (Docket Entry No. 84 at 6).

TUFTA allows a creditor to avoid a debtor’s fraudulent transfers “to the extent necessary

to satisfy the creditor’s claim.” TEX. BUS. & COM. CODE § 24.008(a)(1); see also GE Cap. Com.,

Inc. v. Worthington Nat’l Bank, 754 F.3d 297, 302 (5th Cir. 2014). TUFTA bars a debtor from

defrauding creditors by moving assets beyond their reach. GE Cap. Com., Inc, 754 F.3d at 302.

Creditors can recover against either “the first transferee of the asset or the person for whose

benefit the transfer was made,” or “any subsequent transferee other than a good faith transferee

who took for value or from any subsequent transferee.” TEX. BUS. & COM. CODE § 24.009. “[A]

determination of liability under TUFTA is a two-step process: first, a finding that a debtor made

an actual fraudulent transfer or a constructive fraudulent transfer; and, second, recovery for that

fraudulent transfer, or its value, from the transferees.”  Spring St. Partners–IV, L.P. v. Lam, 730

F.3d 427, 436 (5th Cir.2013) (citations omitted).

The court considers summary judgment issues under TUFTA as to each defendant.

1. The Statute of Limitations

TUFTA has a four-year statute of limitations for claims based on transfers that involve

actual fraud. TEX. BUS. & COM. CODE § 24.010(a). For actual fraud claims, the limitations

extends to up to one year after the transfer “could reasonably have been discovered by the

claimant.” Id. § 24.010(a)(1) (limiting the one-year deadline to claims brought under TEX. BUS.

& COM. CODE §24.005(a)(1), or those alleging “actual” fraud); see also Janey v. Romero, 817

F.3d 184, 189 (5th Cir. 2016) (applying §24.010(a)(1) to extend the TUFTA statute of limitations

to one year from when “the claimant knew or reasonably could have known both of the transfer

and that it was fraudulent in nature”).

The parties agree that the statute of limitations prevents Union Tank from avoiding

transfers before April 18, 2015, under a constructive-fraud theory. (See Docket Entry No. 1

(complaint filed on April 18, 2019); Docket Entry No. 92 at 23; Docket Entry No. 84 at 13).

Union Tank argues that its actual-fraud claims are within the statute of limitations because

it did not know, and could not in the exercise of reasonable care have known, about the fraudulent

transfers until October 12, 2018. (Docket Entry No. 92 at 10). “TUFTA requires that an [actual]

fraudulent-transfer claim must be filed within one year after the fraudulent nature of the transfer

is discovered or reasonably could have been discovered.” Janvey v. Democratic Senatorial

Campaign Comm., Inc., 712 F.3d 185, 195 (5th Cir. 2013). “When a plaintiff discovered or could

reasonably have discovered a transfer is generally a question of fact for the fact-finder.” Janey v.

Romero, 817 F.3d 184, 189 (5th Cir. 2016) (collecting cases).

The defendants argue that the claims are outside the statute of limitations because Union

Tank knew or reasonably could have known of the transfers in 2017. (Docket Entry No. 97 at 3).

The defendants cite to a 2017 cross-examination in the Illinois action in which Union Tank’s

counsel asked NuDevco’s corporate representative witness if NuDevco had “engaged in any

significant transfer of assets since March 2015.” (Id.; Docket Entry No. 97-1 at 26:6–26:9). The

response: “Yes.” (Docket Entry No. 97-1 at 23:10–26:12). This cursory response, without more,

does not make the allegedly fraudulent transfer “reasonably” apparent. Cf. Basic Cap. Mgmt., Inc.

v. Dynex Cap., Inc., 976 F.3d 585, 590 (5th Cir. 2020) (plaintiffs “knew or could have reasonably

discovered” transfers because the details of all transfers were documented in public financial

filings); Janey, 817 F.3d at 187–92 (given a court-appointed receiver’s busy work load and the

defendant’s complicated accounts, the receiver could not “reasonably” have discovered the

fraudulent transfers until a year after receiving access to the accounts).

Union Tank did not receive NuDevco’s financial information until NuDevco reluctantly

and belatedly responded to postjudgment discovery requests in October 2018. (See Docket Entry

No. 92 at 10; Docket Entry Nos. 92-7 at 25 (ordering NuDevco to produce financial documents

from 2015); Docket Entry Nos. 92-8 at 2 (order to show cause why NuDevco’s attorney should

not be held in contempt of court for failure to comply with the production request)). Union Tank

filed the present action less than a year later, on April 15, 2019. (See Docket Entry No. 1). The

statute of limitations does not bar Union Tank’s efforts to set aside the fraudulent transfers before

April 15, 2015, alleged to be actually fraudulent. Summary judgment for the defendants is denied

on this issue.

2. The Transferees and Beneficiaries

TUFTA creditors can recover against either “the first transferee of the asset or the person

for whose benefit the transfer was made,” or “any subsequent transferee other than a good faith

transferee who took for value or from any subsequent transferee.” TEX. BUS. & COM. CODE §

24.009. For either actual or constructive fraud claims, Union Tank has the burden to show that it

may recover against each of the defendants. Matter of Galaz, 850 F.3d 800, 804 (5th Cir. 2017)

(the judgment creditor has the burden to prove fraudulent transfer by a preponderance of evidence);

see also Doyle v. Kontemporary Builders, Inc., 370 S.W.3d 448, 453 (Tex. Ct. App. 2012) (the

plaintiffs must show all the elements as to each allegedly fraudulent transfer). Union Tank failed

to point to facts in the record showing beneficiary or transferee status for some of the entity

defendants. The court grants partial or full summary judgment for those defendants.

ii. The Cash Transfers

Union Tank has not pointed to record evidence raising factual disputes material to

determining whether certain entity-defendants—Coprotection, Xcal Holdings, AES Ventures

Holdings, and NMD Holdings— received or benefited from NuDevco’s 2015 cash transfers. (See

Docket Entry No. 93-8 at 21, 27; 85-4 at 2–3) (showing which defendants received funds from

NuDevco’s cash account debits in 2015). The court grants summary judgment for these defendant-

entities on the cash transfers only.

This absence of evidence is enough to grant the defendants’ motion for summary judgment

stemming from the cash transfers. See Kim, 709 F. App’x at 288 (“Where the non-movant has the

burden of proof at trial, the movant may merely point to the absence of evidence.” (quotation marks

omitted)); (Docket Entry No. 84 at 18–19) (limiting the request for summary judgment to the cash

transfers). Union Tank’s claims against these defendants based on the LLC transfers remain.

iii. The LLC Transfers

Union Tank has not pointed to evidence in the record factual disputes material to whether

Associated Energy and Retail Acquisition were beneficiaries or transferees of any LLC transfers.

That NuDevco transferred its LLC interests in Retail Acquisition to NuDevco Partners does not

indicate that Retail Acquisition either benefited or received assets from NuDevco. (See Docket

Entry No. 85-2 at 14) (describing the transfer); see also Citizens Nat’l Bank of Tex. v. NXS Const.,

Inc., 387 S.W.3d 74, 85 (Tex. Ct. App. 2002) (the bank was a transfer beneficiary because the

bank was actually involved in the transfer); Esse v. Empire Energy III, Ltd., 333 S.W.3d 166, 174,

181 (Tex. Ct. App. 2010) (shareholders were beneficiaries because they “assented to and benefitted

from [the] transfers” and “knowingly participated in the wrongdoing”).

Union Tank has not pointed to evidence that Associated Energy was involved in any of the

allegedly fraudulent LLC transfers occurring in 2015. (See generally Docket Entry Nos. 85-2, 85-

3, 93-7) (describing the allegedly fraudulent LLC transfers). Summary judgment is granted for

Associated Energy and Retail Acquisition for liability stemming from the LLC transfers.

iv. All Fraudulent Transfers

Union Tank has not raised factual disputes material to determining whether some

defendants were transferees or beneficiaries of any transfer. Those defendants are Xcalibur

Logistics, AES Ventures, NuDevco Retail, NuDevco Retail Holdings, Midstream Development,

and Midstream Land. Union Tank points to no record evidence against these parties in its response

to the defendant’s motion for summary judgment. (See Docket Entry No. 92 at 4, 7–10).

Union Tank points to no evidence in the complaint or in its response implicating Midstream

Land in either the cash or LLC transfers. (See Docket Entry Nos. 85-2, 85-3, 93-7) (documenting

the various LLC transfers); (Docket Entry Nos. 93-8, 85-4) (documenting the various cash

transfers); Docket Entry No. 92 (failing to describe any transfer that involved Midstream Land)).5

Union Tank rests its claim against Midstream Development on two transfers: (1)

Midstream Development transferred all of its LLC interests in Xcalibur Logistics to NuDevco on

5 The plaintiff’s theory of liability seems to be based on the fact that Midstream Development owned 100%

of Midstream Land at the time of the transfers. (See Docket Entry No. 92 at 8) (citing to Docket Entry No.

85-4 at 8). This theory is a stretch. Even if the court were to recognize a “benefit” based on an owner–

entity’s benefit, that argument fails here because Union Tank did not show that Midstream Development

either benefited from or participated in any of the allegedly fraudulent transfers. (See Docket Entry Nos.

85-2, 85-3, 93-7) (documenting the various LLC transfers); (Docket Entry Nos. 93-8, 85-4) (documenting

the various cash transfers).

July 31, 2015, (Docket Entry No. 85-2 at 2); and (2) Midstream Development made five

significant cash deposits into NuDevco’s bank account between May and August 2015. (See

Docket Entry No. 93-8 at 15, 18, 21); (see also Docket Entry No. 85-4 at 2–3). TUFTA allows

creditors to recover against the debtor’s transferees, not the debtor’s transferors. (See TEX. BUS.

& COM. CODE §24.009(b)). Midstream Development’s transfers of its own cash and LLC interests

to NuDevco do not make it a beneficiary or transferee of NuDevco’s allegedly fraudulent transfers.

Union Tank’s TUFTA claims against Xcalibur Logistics, AES Ventures, NuDevco Retail,

and NuDevco Retail Holdings fail because these entities were not involved in any of the transfers.

Union Tank does not point to evidence that NuDevco Retail was a transferee or beneficiary of any

transfer. NuDevco merely transferred its LLC interests in Xcalibur Logistics, AES Ventures, and

NuDevco Retail Holdings to other entities. (See Docket Entry No. 85-2 at 2-5) (NuDevco

transferred LLC interests in XCalibur Logistics to NuDevco Partners); (id. at 10–13) (NuDevco

transferred LLC interests in AES Ventures to NuDevco Partners); (id. at 14) (NuDevco transferred

LLC interests in NuDevco Retail Holdings to NuDevco Partners); (Docket Entry No. 85-3 at 2–5)

(NuDevco transferred LLC interests in NuDevco Retail Holdings to NuDevco Partners). Union

Tank did not point to evidence that these defendants benefited from NuDevco transferring its

interests in these defendants. See NXS Const., Inc., 387 S.W.3d at 85 (a bank was a transfer

beneficiary because the bank participated in the transfer and the transfer increased its value); see

also Esse, 333 S.W.3d at 174, 181 (shareholders were beneficiaries because they “assented to and

benefitted from [the] transfers” and “knowingly participated in the wrongdoing”). Similarly,

Union Tank does not point to evidence indicating that these defendants were involved in NuDevco

making the allegedly fraudulent cash transfers. (See Docket Entry No. 92 at 9–10); (see also

Docket Entry Nos. 85-2, 85-3, 93-7) (documenting the various LLC transfers); (Docket Entry Nos.

93-8, 85-4) (documenting the various cash transfers).

The record does not show that these defendants—Xcalibur Logistics, AES Ventures,

NuDevco Retail, NuDevco Retail Holdings, Midstream Development, and NuDevco Midstream

Land—were transferees or beneficiaries of any of NuDevco’s allegedly fraudulent cash or LLC

transfers. The court grants summary judgment for these defendants on Union Tank’s TUFTA

claims.

3. Union Tank’s Actual Fraud Claim Against the Defendants Other Than

NuDevco

The defendants other than NuDevco seek summary judgment as to Union Tank’s actual

fraud claims, arguing that the evidence does not show that each defendant acted with “intent to

hinder, delay, or defraud.” TEX. BUS. & COM. CODE §24.005(a)(1); (see Docket Entry No. 84 at

22–23). The defendants’ motion does not include NuDevco. (Docket Entry No. 84 at 22).

Union Tank argues that its claim is supported by circumstantial evidence of intent under

TUFTA’s badges of fraud. (Docket Entry No. 92 at 18). Union Tank has shown that at least four

badges of fraud apply to these defendants and that two apply to Retail Acquisitions.

Actual fraud exists “if the debtor made the transfer . . . with actual intent to hinder, delay,

or defraud any creditor of the debtor.” TEX. BUS. & COM. CODE § 24.005(a)(1). Because direct

proof of fraudulent intent is rarely available, “courts may consider circumstantial evidence to

determine whether the transfer was made with fraudulent intent.” Galaz, 850 F.3d at 804 (citation

omitted). TUFTA provides “a non-exhaustive list of facts and circumstances, which are known as

the ‘badges of fraud,’ to be considered in determining whether a transfer was made with actual

intent to defraud.” Id.; see also TEX. BUS. & COM. CODE § 24.005(b) (listing the eleven factors).

The judgment creditor must show that a transfer is fraudulent by a preponderance of the evidence.

Galaz, 850 F.3d at 804.

The badges of fraud are:

(1) the transfer or obligation was to an insider;

(2) the debtor retained possession or control of the property transferred after the transfer;

(3) the transfer or obligation was concealed;

(4) before the transfer was made or obligation was incurred, the debtor had been sued or

threatened with suit;

(5) the transfer was of substantially all the debtor's assets;

(6) the debtor absconded;

(7) the debtor removed or concealed assets;

(8) the value of the consideration received by the debtor was reasonably equivalent to the

value of the asset transferred or the amount of the obligation incurred;

(9) the debtor was insolvent or became insolvent shortly after the transfer was made or the

obligation was incurred;

(10) the transfer occurred shortly before or shortly after a substantial debt was incurred;

and

(11) the debtor transferred the essential assets of the business to a lienor who transferred

the assets to an insider of the debtor.

TEX. BUS. & COM. CODE § 24.005(b). “An individual badge of fraud is not conclusive, but a

concurrence of many badges in the same case will always make out a strong case of fraud.” Galaz,

850 F.3d at 804 (quoting Walker v. Anderson, 232 S.W.3d 899, 914 (Tex. Ct. App. 2007)); see

also id. at 805 (actual fraud established by six of the eleven badges).

Union Tank asserts that at least seven of the eleven badges apply. They are: (1) the transfer

to an insider; (2) the transferor’s retention of control over the property after transfer; (3) the

concealment of the transfer; (4) the transfer involved substantially all the debtor’s assets; (5) the

consideration debtor received was not reasonably equivalent to the value transferred; (6) the debtor

was insolvent shortly after the transfer; and (7) the transfer was shortly before or after a substantial

debt was incurred. (Docket Entry No. 92 at 18 (citing TEX. BUS. & COM. CODE § 24.005(b))).

The court considers the badges as to each of the seven remaining defendants: NuDevco

Partners, Associated Energy, Retail Acquisition, Coprotection, NMD Holdings, Xcal Holdings,

and AES Ventures. Each of these defendants was a transferee or beneficiary in at least one of

NuDevco’s 2015 transfers.

Associated Energy and Retail Acquisition were transferees of NuDevco’s cash assets. (See

Docket Entry No. 92 at 22; Docket Entry No. 93-8 at 15, 18, 21, 27; Docket Entry No. 85-4 at 2–

3 (listing 2015 cash transfers from NuDevco to Associated Energy and from NuDevco to Retail

Acquisition)).

NuDevco Partners, Coprotection, NMD Holdings, Xcal Holdings, and AES Ventures

Holdings were involved in or direct recipients of NuDevco’s LLC transfers. (Docket Entry No.

92 at 9 (chart of transfers); Docket Entry No. 85-2 at 2–5, 10–13, 14–17 (transfers to NuDevco

Partners); Docket Entry No. 85-3 at 2 (describing Coprotection’s receipt of LLC interests in

NuDevco Retail Holdings); Docket Entry No. 85-2 at 6–9 (NMD Holdings (f/k/a Solandri

Investments) was the subsequent transferee, without value, of NuDevco’s transfer transfer of LLC

interests in NuDevco Midstream Development) Docket Entry No 85-2 at 2–5 (Xcal Holdings (f/k/a

Bestbuy Energy) was the subsequent transferee, without value, of NuDevco’s transfer of LLC

interests in Xcalibur Logistics); Docket Entry No. 85-2 at 10–11 (AES Ventures Holdings (f/k/a

Mobil Doc) was the subsequent transferee, without value, of NuDevco’s transfer of LLC interests

in AES Ventures (f/k/a Spark Energy Ventures))). Each badge of fraud is discussed below:

i. Transfers to Insiders

TUFTA provides a nonexhaustive list defining “insiders to a corporate debtor,” including

“an affiliate.” See TEX. BUS. & COM. CODE § 24.002(7) (listing other examples of an “insider”).

“The cases which have considered whether insider status exists generally have focused on two

factors: (1) the closeness of the relationship between the transferee and the debtor; and (2) whether

the transactions between the transferee and the debtor were conducted at arm’s length.” Williams

v. Hous. Plants & Garden World, Inc., 508 B.R. 11, 17 (S.D. Tex. 2014) (citing Matter of

Holloway, 955 F.2d 1008, 1011 (5th Cir. 1992)). Union Tank has pointed to evidence to

uncontroverted evidence showing that Maxwell is an insider. (See Docket Entry No. 92 at 14–15).

Maxwell is NuDevco’s chief executive officer. He solely owns and controls NuDevco through its

parent corporation NuDevco Partners. (Docket Entry No. 81-4 at ¶ 3); see TEX. BUS. & COM.

CODE § 24.002(7) (“[An affiliate is] a person who directly or indirectly owns, [or] controls . . . the

debtor[.]”). Union Tank also pleaded facts and pointed to evidence supporting the inference that

the other remaining defendant–entities are affiliates. (See Docket Entry No. 81-4 at 1–2); (Docket

Entry No. 85-3 at 7-8) (organizational charts); see also TEX. BUS. & COM. CODE § 24.002(7)(B)

(an affiliate is “a corporation 20 percent or more of whose outstanding voting securities are directly

or indirectly owned, controlled, or held with power to vote, by the debtor or a person who directly

or indirectly owns, controls, or holds . . . the debtor”). The defendants’ concede that Maxwell

controls some of the defendant–entities, and do not dispute the insider status of the remaining

defendant–entities, the insider status of the defendant-entities. (See Docket Entry No. 81-4).

ii. Retention of Property

The record shows that Maxwell facilitated each of the LLC transfers and retained them

through his other interests in the defendant–entities. (See Docket Entry No. 84 at 9 (“NuDevco

Holdings and certain other Defendants commonly owned by Mr. Maxwell engaged in a company-

wide corporate reorganization”). The record does not show that any of the remaining defendants

retained the transferred assets. This badge of fraud is met as to Maxwell.

iii. Concealed Transfers

Union Tank points to record evidence that the transfers were “concealed.” TEX. BUS. &

COM. CODE § 24.005(b)(3); (Docket Entry No. 92 at 10–11) (documenting the NuDevco’s

resistance and delay in producing documents related to its assets and the transfers). Union Tank

does not describe how any of the defendants other than NuDevco concealed the transfers. The

record supports finding this badge of fraud met as to NuDevco but not as to the remaining

defendants.

iv. Transfer Involving Substantially All of Debtor’s Assets

Union Tank argues that the transfers involved substantially all of NuDevco’s assets. See

Docket Entry No. 92 at 10–11; see TEX. BUS. & COM. CODE § 24.005(b)(5). None of the individual

LLC transfers represented “substantially all” of NuDevco’s assets. (See generally Docket Entry

Nos. 85-2, 85-3, 93-7) (documenting the LLC interest transfers). By September 15, 2015,

NuDevco had no LLC interests. (See Docket Entry No. 92 at 8–9). It had approximately $3,000

in the bank when it received an almost $4 million credit-stock dividend from Spark Energy.

(Docket Entry No. 93-8 at 27). On September 24, 2015, NuDevco transferred its remaining cash

to NuDevco Partners and Associated Energy. (Id.). The September 24, 2015 cash transfers to

NuDevco Partners and Associated Energy represented “substantially all” of NuDevco’s assets.

(See Docket Entry No. 93-8 at 27). The record supports finding this badge of fraud for NuDevco

Partners and Associated Energy.

v. Lack of Reasonably Equivalent Consideration

The record shows that all the LLC interest transfers were made without consideration. TEX.

BUS. & COM. CODE § 24.005(b)(8); (see generally Docket Entry Nos. 85-2, 85-3, 93-7)

(documenting the various LLC transfers without describing any consideration); (see also Docket

Entry No. 85-1 at 77:16–78:3) (the NuDevco representative testified that NuDevco did not receive

any consideration in return for the LLC interests transferred to NuDevco Partners, Maxwell, and

the other defendants). The defendants do not point to controverting evidence. The record supports

finding the lack of reasonably equivalent consideration badge of fraud for NuDevco Partners,

Associated Energy, Retail Acquisition, Coprotection, NMD Holdings, Xcal Holdings, and AES

Ventures.

vi. Debtor Insolvency Shortly After Transfer

Union Tank cites record testimony showing that NuDevco had no assets and generated no

revenue less than one month after most of the LLC transfers. (See Docket Entry No. 92 at 11

(citing Docket Entry No. 85-1 at 22:22-23:13, 92:5-93:4)). The defendants concede that

NuDevco’s last LLC transfer occurred less than a month before Associated Energy breached the

lease. (See generally Docket Entry Nos. 85-2, 85-3, 93-7) (documenting the various LLC transfers

that occurred shortly before or after the breach); (see also Docket Entry No. 84 at 11)

(“NuDevco[’s] . . . transfer of its interests in various LLCs . . . was complete as of August 3,

2015.”). Cash transfers to Associated Energy and NuDevco Partners also occurred shortly before

or after the lease was breached. (See generally Docket Entry No 93-8) (describing the cash

transfers). The cash transfers to Retail Acquisition occurred in May 2015. These transfers are too

distant from the breach of the lease to support this badge of fraud for Retail Acquisition, but the

record supports finding this badge of fraud for NuDevco Partners, Associated Energy,

Coprotection, NMD Holdings, Xcal Holdings, and AES Ventures.

vii. Transfers Shortly Before or After a Substantial Debt

Finally, Union Tank alleges that the transfers occurred “shortly before or after a substantial

debt was incurred.” TEX. BUS. & COM. CODE § 24.005(b)(10). The allegedly fraudulent transfers

Union Tank identifies occurred in 2015. (See Docket Entry No. 92 at 7–10). The defendants

concede that NuDevco’s last asset transfer took place less than a month before Associated Energy

breached the lease. (See generally Docket Entry Nos. 85-2, 85-3, 93-7) (documenting the LLC

transfers that occurred shortly before or after the breach); (see also Docket Entry No. 84 at 11)

(“NuDevco[’s] . . . transfer of its interests in various LLCs . . . was complete as of August 3,

2015.”). Cash transfers to Associated Energy and NuDevco Partners also occurred shortly before

or after the lease was breached. (See Docket Entry No 93-8) (describing the cash transfers). The

cash transfers to Retail Acquisition occurred in May 2015. These transfers are too distant from

the breach of the lease to support this badge of fraud for Retail Acquisition. The record supports

finding this badge of fraud for the defendants except Retail Acquisition.

Union Tank points to record evidence that supports finding at least four badges of fraud

for each remaining defendant except Retail Acquisition: transfers to an insider; lack of reasonably

equivalent consideration; insolvency of the debtor shortly after the transfers; and transfer shortly

before or after substantial debt was incurred. Union Tank has pointed to two badges of fraud

supporting its claim of actual fraud against Retail Acquisition: transfer to an insider and lack of

reasonable consideration. Union Tank has raised issues of fact material to whether the defendants’

transfers were actually fraudulent. See Galaz, 850 F.3d at 804 (“An individual badge of fraud is

not conclusive, but a concurrence of many badges in the same case will always make out a strong

case of fraud.”). Summary judgment is denied as to NuDevco Partners, Associated Energy, Retail

Acquisition, Coprotection, NMD Holdings, Xcal Holdings, and AES Ventures.

4. The Constructive Fraud Claim

The defendants argue that Union Tank cannot prove the elements of constructive fraud by

a preponderance of the evidence. (Docket Entry No. 84 at 13). Under Texas law, a transfer is

constructively fraudulent if the debtor made the transfer:

[W]ithout receiving a reasonably equivalent value in exchange for the transfer . . .

and the debtor:

(A) was engaged or was about to engage in a business or a transaction for which

the remaining assets of the debtor were unreasonably small in relation to the

business or transaction; or

(B) intended to incur, or believed or reasonably should have believed that the debtor

would incur, debts beyond the debtor's ability to pay as they became due.

TEX. BUS. & COM. CODE § 24.005(a).

A transfer is also constructively fraudulent if:

[T]he debtor made the transfer or incurred the obligation without receiving a

reasonably equivalent value in exchange for the transfer or obligation and the

debtor was insolvent at that time or the debtor became insolvent as a result of the

transfer or obligation or if the transfer was made to an insider for an antecedent

debt, the debtor was insolvent at that time, and the insider had reasonable cause to

believe that the debtor was insolvent. . . .

TEX. BUS. & COM. CODE § 24.006.

Union Tank points to summary judgment evidence, in the form of Associated Energy’s

emails from late 2014 through September 2015 that discuss preparation to “get out of” the lease

agreement and reduce its railcar fleet even if it meant a “major penalty.” (Docket Entry Nos. 93-

3, 93-4, 93-5, 93-6). Associated Energy and NuDevco shared a Chief Financial Officer, Todd

Gibson, who signed the lease and the guaranty agreement. (Docket Entry No. 92-1 at 11; Docket

Entry No. 92-2 at 6). The record also shows that NuDevco had less than $4,000 in cash and no

LLC interests when it breached the lease. (See Docket Entry No. 93-8 at 24–27). Though

NuDevco received almost $4 million in stock dividends from Spark Energy on Sept. 15, 2015, the

record does not indicate that NuDevco had any reason to know it would receive those funds on

September 1, 2015, when Associated Energy abandoned the railcars. (See id.). There are issues

of fact material to whether the defendants and NuDevco participated in the transfers: (1) while

NuDevco was engaged or about to engage in a business transaction leaving them with

unreasonably small remaining assets, or (2) while the defendants believed, or reasonably should

have believed, that NuDevco would incur debts beyond the its ability to pay. See TEX. BUS. &

COM. CODE § 24.005(a). Summary judgment is denied for the entity defendants on this issue.

5. Maxwell’s Liability under TUFTA

The defendants argue that, as a corporate officer, Maxwell cannot be liable for the cash

transfers as a matter of law. (Docket Entry No. 84 at 20). Union Tank argues that Maxwell is

liable because had sole control over NuDevco and sole ownership over NuDevco Partners, which

he caused to transfer all LLC assets from NuDevco to other entities he indirectly owned or

controlled. (Docket Entry No. 92 at 16). The record shows that Maxwell was a direct recipient or

beneficiary of all the LLC interests and cash transfers. He facilitated all transfers, which resulted

in his continued control over all the assets. (See Docket Entry No. 92 at 16–17).

Under Texas law, an LLC owner cannot be held liable for any “matter relating to or arising

from the obligation [of the LLC] on the basis that the [owner] was the alter ego of the corporation

or on the basis of actual or constructive fraud, a sham to perpetrate a fraud, or other similar

theory[.]” TEX. BUS. ORGS. CODE § 21.223(a)(2). But an exception provides that Union Tank can

hold Maxwell liable if he used the LLCs involved in the transfers “for the purpose of perpetuating

and did perpetrate an actual fraud on [Union Tank] primarily for [his] direct personal benefit[.]”

Id. §21.223(b). Because Maxwell indirectly or directly received all of the asset transfers at issue,

the court denies summary judgment on this issue.

i. Cash Transfers

The defendants argue that Maxwell cannot be held liable for the cash transfers because

there is no evidence that he either transferred or received any of NuDevco’s cash transfers at issue.

(See Docket Entry No. 84 at 20). This argument is unpersuasive. It is undisputed that many of the

cash transfers in 2015 went to entities that were under Maxwell’s direct ownership or control. (See

Docket Entry Nos. 93-8, 85-4) (describing the cash transfers); (see also Docket Entry No. 46 at 2–

6) (Maxwell admitted sole control or ownership of many of the transferee–defendants). There is a

question of material fact as to whether these cash transfers directly benefited Maxwell because

they enabled him to retain all NuDevco’s cash assets through his other entities.

ii. LLC Transfers

Maxwell signed the transfer documents for all defendant–entities’ LLC transfers. (Docket

Entry No. 84 at 20); (see also Docket Entry Nos. 85-2, 85-3, 93-7) (documenting the various LLC

transfers). The defendants conceded during the April 1, 2021 oral argument that Maxwell’s

involvement as a transferee is enough for Union Tank to recover against him under TUFTA for

the LLC transfers. The defendants argued in their motion that mere facilitation of the LLC

transfers is not enough to hold Maxwell liable. (Docket Entry No. 84 at 20). The record supports

an inference of far more than mere facilitation. First, Maxwell was himself a transferee without

value of each of the LLC transfers. See Janvey v. Libyan Inv. Auth., 840 F.3d 248, 266 (5th Cir.

2012) (directors may be liable for transfers of their corporations if they “actually received

distributions of the transferred property”). Second, Maxwell was the majority shareholder of both

NuDevco and the receiving entities. See Esse, 333 S.W.3d at 181 (defendants were beneficiaries

of a fraudulent transfer because they were the majority shareholders of both the transferee and

transferor entities). Finally, Maxwell signed not just for NuDevco, but for every receiving entity

of the LLC transfers at issue. (Docket Entry Nos. 85-2, 85-3, 93-7); Citizens Nat’l Bank, 387

S.W.3d at 85 (the shareholder’s actual involvement with a transfer to another shareholder–owned

entity supported a finding that the shareholder was a beneficiary of the transfer). Maxwell can be

held liable for his role in the LLC transfers.

iii. Piercing the Corporate Veils

“[A] plaintiff seeking to pierce the veil of LLCs . . . must prove that the individual used the

LLC form to perpetrate actual fraud for the individual’s direct personal benefit.” Spring St.

Partners-IV, L.P., 730 F.3d 427, 444 (5th Cir. 2013); see also TEX. BUS. ORGS. CODE §§ 21.223(b),

21.224. Union Tank has pointed to evidence of six badges of fraud to support an inference that

Maxwell committed actual fraud: (1) Maxwell is an “insider” to NuDevco; (2) Maxwell “retained

possession or control of the property transferred” because he indirectly or directly owned or

controlled the transferee entities; (3) Maxwell facilitated and signed for all parties engaged in the

NuDevco LLC interest transfers for no consideration; (4) NuDevco “was insolvent or became

insolvent shortly after” the LLC transfers; (5) NuDevco transferred all of its cash to other

Maxwell–owned or controlled entities shortly before or after it acquired a substantial debt. See

TEX. BUS. & COM. CODE § 24.005(b)(1), (2), (8), (9), (10). The badges of fraud and the record

support at a minimum raise factual disputes material to determining whether the court can pierce

the corporate veil to hold Maxwell personally liable for the transfers. The defendants’ motion for

summary judgment on this issue is denied.

V. Associated Energy’s Commercial Frustration Defense

Associated Energy, the entity that originally defaulted on the lease, raised an affirmative

defense of commercial frustration based on “intervening and unforeseeable regulatory and industry

changes which effectively destroyed the fundamental purpose of the Master Lease.” (Docket Entry

No. 44 at 29). Union Tank argues that this defense fails as a matter of law, because Associated

Energy relies only on a changed economic situation, which is insufficient to show commercial

frustration under Illinois law. Associated Energy responds that it provided evidence of regulatory

and industry changes that were not foreseeable when it executed the lease. (Docket Entry No. 94

at 18).

The test for commercial frustration is: “(1) the frustrating event was not reasonably

foreseeable; and (2) the value of counterperformance has been totally or nearly destroyed by the

frustrating event.” N. Illinois Gas Co. v. Energy Co-op., Inc., 461 N.E.2d 1049, 1059 (Ill. App.

Ct. 1984). Changing market prices are not enough. Id. (“[T]he only certainty of the market is that

prices will change . . . If changed prices, standing alone, constitute a frustrating event sufficient

to excuse performance of a contract, then the law binding contractual parties to their agreements

is no more.”). Associated Energy points to three regulatory or market changes that happened after

it signed the railcar lease: (1) 2015 rules by the Pipeline and Hazardous Materials Safety

Administration requiring railcars shipping crude petroleum oil and other hazardous materials to be

replaced or retrofitted by 2018, (2) new $1,000 to $1,200 surcharges on railcars shipping crude

petroleum oil, and (3) “numerous railcar accidents . . . involving the shipment of flammable

liquids” and drawing increased regulatory scrutiny, including a Federal Railroad Administration

Emergency Order issued on April 17, 2015. (Docket Entry No. 94 at 3–4). But Associated Energy

has not pointed to evidence that these regulatory and market changes were not foreseeable. See

Illinois-Am. Water Co. v. City of Peoria, 774 N.E.2d 383, 391 (2002) (the doctrine of commercial

frustration did not apply when a company failed to present any evidence that a regulatory change

was not foreseeable.). It has not satisfied the “rigorous” test for commercial frustration. See Blue

Cross Blue Shield of Tennessee v. BCS Ins. Co., 517 F. Supp. 2d 1050, 1059 (N.D. Ill. 2007).

Drawing all reasonable inferences in favor of Associated Energy, the record supports

finding that Associated Energy “was aware of the potential for adverse market shifts which now

form the basis for its defense[].” N. Illinois Gas Co., 461 N.E.2d at 1059. Union Tank points to

evidence that Associated Energy was on notice of the impending regulatory changes before it

executed the lease in April 2015. First, while the final content of the rule was unknown, the

Pipeline and Hazardous Materials Safety Administration issued a notice of proposed rulemaking

activity eight months before Associated Energy assumed the lease. (Docket Entry No. 96 at 16).

Next, Associated Energy discussed the impending railcar surcharge in internal emails in late 2014

and filed a lawsuit to challenge it in March 2015. (Docket Entry No 81 at 11). Finally, the Federal

Railroad Administration Emergency Order that Associated Energy cites as unforeseeable details

years of similar regulatory concerns and similar orders leading up to the issuance of that order.

The April 17, 2015, emergency order explains that “[i]n the last two years, [the Department of

Transportation] . . . has taken numerous actions to address the safe transportation by rail of

flammable liquids . . . [including] three emergency orders and several safety advisories.” Fed.

Railroad Admin. Emergency Order No. 30 dated Apr. 17, 2015, available at

https://railroads.dot.gov/sites/fra.dot.gov/files/fra_net/14474/EO%2030%20%28FINAL%29.pdf.

Union Tank has pointed to the absence of evidence showing that the regulatory changes were

unforeseeable, and Associated Energy has failed to respond with more than “conclusory

allegations, unsubstantiated assertions, or only a scintilla of evidence.” Lamb, 914 F.3d at 946.

Nor has Associated Energy pointed to evidence showing that the value of its

counterperformance was totally or nearly totally destroyed by the intervening events. Associated

Energy states that, in response to the industry changes it outlines, it “was forced to and did analyze

its railcar fleet and business operations,” including whether to terminate leases or change the type

of railcar used. (Docket Entry No. 94 at 5). Union Tank points to summary judgment evidence,

in the form of Associated Energy’s emails from late 2014 through September 2015 that discuss

preparation to “get out of” the lease agreement and reduce its railcar fleet even if it meant a “major

penalty.” (Docket Entry Nos. 93-3, 93-4, 93-5, 93-6). None of this evidence raises an issue of

material fact as to whether the value of Associated Energy’s performance was “rendered

meaningless” due to the change in circumstances. Smith v. Roberts, 370 N.E.2d 271 (1977).

Instead, the record supports the inference that Associated Energy made an ordinary business

decision based on a cost-benefit analysis. Summary judgment for Union Tank is granted on

Associated Energy’s affirmative defense of commercial frustration.

VI. Union Tank’s Provisional and Equitable Remedy Claims Proceed with the

Underlying Substantive Fraud Claims

The defendants ask the court to dismiss Union Tank’s requests for an attachment (Count

IV), injunction (Count V), and appointment of a receiver (Count VI) if summary judgment is

granted in its favor regarding the TUFTA claim (Count III). (Docket Entry No. 84 at 23). TUFTA

allows successful creditors to seek provisional and equitable remedies like attachment, injunction,

appointment of a receiver, and “any other relief the circumstances may require.” See TEX. BUS. &

COM. CODE §24.008.

Union Tank’s claims for attachment, injunction, and the appointment of a receiver proceed

because the court has denied the defendants’ request for summary judgment on the TUFTA issues.

See Thomas v. EMC Mortg. Corp., 499 F. App’x 337, 343 n.15 (5th Cir.2012) (requests for

injunctive relief depend on the preservation of the underlying substantive claims). The court has

found that Associated Energy is liable under the lease and and NuDevco is liable under the

guaranty for the $1,417,145.46 in damages awarded by the Illinois court and the $935,600 in

unpaid rent Union Tank seeks.  Summary judgment for the defendants is denied.

VII. Conclusion

At bottom, despite the defendants’ elaborate organization and transfers, this is a collection

action, and it may proceed. Union Tank’s motion for summary judgment, (Docket Entry No. 81),

is granted and denied in part. Summary judgment is granted for Union Tank on the issue of

NuDevco’s liability under the guaranty and Associated Energy’s liability under the lease.

Summary judgment is granted for Union Tank on Associated Energy’s affirmative defense of

commercial frustration.

The defendants’ motion for summary judgment, (Docket Entry No. 84), is granted in part

and denied in part. Summary judgment for Xcalibur Logistics, AES Ventures, NuDevco Retail,

NuDevco Retail Holdings, Midstream Development, and NuDevco Midstream Land is granted on

all fraudulent transfer claims. Summary judgment is granted for Coprotection, Xcal Holdings,

AES Ventures Holdings, and NMD Holdings on the cash transfers. Summary judgment is granted

for Associated Energy and Retail Acquisition on the LLC transfers.

Associated Energy is liable under the lease and and NuDevco is liable under the guaranty

for the $1,417,145.46 in damages awarded by the Illinois court and the $935,600 in unpaid rent.

Fraudulent transfer claims based both on cash and LLC transfers proceed against Maxwell,

NuDevco Partners, and NuDevco Partners Holdings. The claims based on fraudulent transfers

of cash proceed against Associated Energy Services and Retail Acquisition. The claims based

on fraudulent transfers of LLC interests proceed as to Coprotection LLC, NuDevco, NMD

Holdings, Xcal Holdings, and AES Ventures Holdings.

Union Tank must confer with NuDevco and Associated Energy and file a proposed final

judgment on the claims for unpaid rent under Count I and Count II of the complaint and any

award of costs no later than June 4, 2021.

Union Tank must file a supplemental brief, not to exceed fifteen pages, no later than June

25, 2021, on whether a provisional remedy of attachment under Section 24.008 of the Texas

Business and Commerce Code, an injunction preventing the defendants from disposing of the

remaining funds, or the appointment of a receiver to locate and preserve the damages is needed.

The remaining defendants must respond, in a brief not to exceed fifteen pages, no later than July

16, 2021. Union Tank may respond, in a brief not to exceed five pages, no later than July 23,

2021.

SIGNED on May 21, 2021, at Houston, Texas.

Lee H. Rosenthal

Chief United States District Judge

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