The Cadle Company II, Inc. v. Crescent Bank & Trust

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SO ORDERED. * | wo Sane, |

SIGNED March 314, 2025. SP ESS

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W. KOLWE

ED STATES BANKRUPTCY JUDGE

UNITED STATES BANKRUPTCY COURT

WESTERN DISTRICT OF LOUISIANA

LAFAYETTE DIVISION

In re: Case No. 17-51323

Linder Oil Company, A Partnership,

Debtor

Lucy G. Sikes, Chapter 7 Trustee and Chapter 7

the Cadle Company, II, Inc.,

Plaintiffs

Judge John W. Kolwe

Vv.

Crescent Bank & Trust; Consolidated Adv. Proc. No. 19-5105

Reserves Company, L.C.; Roger D.

Linder; G. Miles Biggs, Jr.; Louisiana

General Oil Company; and Linder

Energy Company

Defendants

RULING ON MOTIONS FOR PARTIAL SUMMARY JUDGMENT

This is an action to recover alleged fraudulent conveyances brought by Lucy G.

Sikes, the Chapter 7 Trustee (“Trustee”) in the Linder Oil Company, A Partnership

(“LOCAP” or “Debtor’) bankruptcy case, and The Cadle Company II, Inc. (“Cadle’”),

the successor to LOCAP’s primary lender, First NBC Bank. (Cadle is also an assignee

of certain claims from the LOCAP bankruptcy estate and a party to a litigation

support agreement with the Trustee.) The Complaint as amended asserts claims

under §§ 544(b), 548, and 550 of the Bankruptcy Code against defendants

Consolidated Reserves Company, L.C. (“Consolidated”), Roger D. Linder (“Roger

Linder”), G. Miles Biggs (“Biggs”), Louisiana General Oil Company (“Louisiana

General”), Linder Energy Company (“Linder Energy;”), and Crescent Bank

(“Crescent”). Before the Court are Motions for Partial Summary Judgment filed by

each party. These matters were taken under advisement following oral argument,

subsequent briefing by the parties, and a final hearing. The Court has considered the

parties’ pleadings, oral arguments, and the summary judgment record, and rules as

follows.

BACKGROUND

A. Overview of the Debtor’s Business and Relationship of the Parties1

Prior to bankruptcy the Debtor was a general partnership owned by defendants

Linder Energy and Louisiana General. Linder Energy is a corporation owned by

Roger Linder, and Louisiana General is a corporation owned by Biggs. The Debtor’s

business purpose was to operate oil and gas properties owned by companies that were

also owned and controlled by Roger Linder and Biggs, namely, Consolidated,

Reserves Management, L.C. (“Reserves”) and Destin Resources, LLC (“Destin”).2 The

services the Debtor provided included “general administration services together with

field operating and property development services” for a monthly fee.3 The Debtor

and each defendant, except Crescent, are affiliated through ownership, but “each is

1 Unless otherwise noted, the undisputed facts set out in this section come from the Plaintiff’s

Statement of Contested Facts Relative to Crescent’s Motion for Partial Summary Judgment, ¶¶ B-E

(ECF #453); and/or Crescent’s Statement of Undisputed Material Facts in Support of Motion for

Partial Summary Judgment, ¶¶ 1-5 (ECF #426-2).

2 Id. Consolidated is owned by Roger Linder and Biggs. Reserves was owned by Roger Linder and

Biggs and Roger Linder was the majority owner of Destin (Roger Linder’s son-in-law owns a minority

interest in Destin).

3 Id.; see also Company Profile: Consolidated Reserves Company, L.C., Reserves Management, L.C.

Destin Resources, LLC and Linder Oil Company, A Partnership and Its Partners Linder Energy

Company/Louisiana General Oil Company (“Company Profile”), pp. 14-19 (ECF # 434), citing to p. 16.

Additionally, see Transcript of 30(b)(6) Deposition of Louisiana General Oil Co., pp. 16-27 (ECF #434-

2).

maintained and strictly operated as separate business entities having separate and

distinct organization and business plans.”4

Operations on the various oil and gas properties owned by Consolidated,

Destin, and Reserves were financed by bank loans made directly to those entities by

Crescent and First NBC. Beginning in 2006 through at least 2010, Crescent made

certain loans to Consolidated and/or a wholly owned affiliate of Consolidated,

CRCOne, LLC (referred to collectively as “Consolidated”).5 These loans were later

combined into one loan (the “Crescent Loan”) that was guaranteed by Roger Linder

and Biggs.6 Additionally, Roger Linder granted a mortgage and security interest

covering his home and other interests to Crescent.

Crescent claims that Consolidated owned certain oil and gas interests at the

time it made the loans, but those interests were assigned by Consolidated to Destin

and Reserves.7 It is undisputed, however, that LOCAP was not a party to or

guarantor of the Crescent Loan. It is also undisputed that Crescent did not have a

security interest in any of LOCAP’s assets or in any of the oil and gas properties

owned by Consolidated, Destin, or Reserves. The Crescent Loan was outstanding

during all time periods at issue in this litigation.8

First NBC made a series of loans to Destin and Reserves beginning in 2009.

These loans were secured by mortgages and security interests in oil and gas

properties owned by Destin and Reserves. The Debtor, LOCAP, as well as Louisiana

General, Linder Energy, and Roger Linder also executed guaranty agreements in

favor of First NBC.

4 Company Profile, p. 17 (ECF #434).

5 CRCOne, LLC is a Delaware limited liability company that was formed in 2004 by Consolidated

and FC Energy Finance I, Inc. (“FC”), a subsidiary of Banc One Capital Corporation (now JPMorgan

Chase Co.) to own certain proved producing properties in and offshore Louisiana. FC later sold a

portion of its interest to Northwestern Mutual Life Insurance Company. In August 2010, Consolidated

acquired the interests of JP Morgan Chase and The Northwestern Mutual Life Insurance Company

and from that point has been the sole owner of CRCOne. See Plaintiff’s Statement Material Facts Not

in Dispute, ¶ 5 (ECF #410), and Company Profile, p. 15 (ECF #434).

6 See Crescent’s Statement of Material Facts in Support of Motion for Partial Summary Judgment,

¶ 9 (ECF #425-2).

7 Id. at ¶ 8.

8 See Plaintiff’s Statement Material Facts Not in Dispute, ¶¶ 27, 119-25 (ECF #410).

In April 2017, First NBC was closed by the Louisiana Office of Financial

Institutions, and the FDIC was named the bank’s receiver. In September 2017, Cadle

purchased the First NBC loans from the FDIC. The total indebtedness owed to First

NBC/Cadle on the loans exceeds $100 million.9

Soon after First NBC’s closure and Cadle’s commencement of collection efforts,

LOCAP, Destin and Reserves also met their demise. LOCAP filed its chapter 7 case

in this court on October 10, 2017, followed soon after by Reserves on December 4,

2017 (Case No. 17-51570), and Destin on December 18, 2017 (Case No. 17-51634).

The Reserves and Destin bankruptcies were also chapter 7 proceedings that were

filed in this court.

LOCAP’s Trustee entered into a series of agreements with Cadle, including a

litigation support agreement, that provides for a sharing of proceeds which may be

recovered in the litigation by the Trustee, net of litigation costs. The Trustee also

assigned certain claims to Cadle. The Trustee and Cadle commenced this action on

October 10, 2019.

B. The Trustee’s Claims

The focus of this action is on the recovery of what the Trustee alleges were

fraudulent cash transfers totaling $7,172,074.77. These transfers can be separated

into two categories: transfers to Consolidated, with subsequent transfers to Crescent

(the “Consolidated Transfers”); and partner distributions to Linder Energy and

Louisiana General, with subsequent transfers to Roger Linder and Biggs (the

“Partner Distributions”). These transfers occurred generally on a monthly basis, and

the total represents all monthly transfers running from August 1, 2010, to the date

of LOCAP’s bankruptcy, October 10, 2017.10

9 Cadle filed a number of Proofs of Claim in the main bankruptcy case: Claim Nos. 33, 34, 35, 36,

38, 39, 40, 42, 43, 44, 45, and 46.

10 The August 1, 2010, date corresponds to a prior ruling by this Court concerning the application

of a 2013 legislative change to Louisiana law concerning the prescriptive period on revocatory actions.

Prescription on the Trustee’s revocatory action will be discussed in Section A.4 of the “Law and

Analysis” section of this Opinion, entitled “Prescription on the Revocatory Action.”

1. The Consolidated Transfers and grounds for recovery

As to the Consolidated Transfers, the Trustee states that the Debtor was an

oil and gas operator that held proceeds from the sale of production from wells owned

by Destin and Reserves.11 The Trustee generally claims that over the period at issue

in this lawsuit, the Debtor transferred portions of these production revenues to

Consolidated, instead of using those proceeds to pay the Debtor’s creditors, with the

balance being paid over to Destin and Reserves, as the owners of the mineral

interests. The Trustee further claims that the Debtor disguised these payments as

loans in its financial records for which it received nothing of value in return from

Consolidated.12

As the reason for these transfers, the Trustee asserts that Roger Linder and

Biggs, who effectively controlled the Debtor and related entities, had personally

guaranteed Crescent’s loan to Consolidated, and Roger Linder had also granted

Consolidated a mortgage over his home and other personal property to secure the

Consolidated loan, thus giving both of them an incentive to divert the funds from the

Debtor to Consolidated. Additionally, the Trustee claims Roger Linder had a close

friendship with Fred Morgan, “Crescent’s president, founding shareholder, and the

loan officer in charge of all non-automobile loans (including the loan to

Consolidated),” which he had an incentive to preserve.13 In essence, the Trustee

alleges in her lawsuit and argues here that the Debtor was not legally obligated to

repay Consolidated’s loan to Crescent, and Crescent knew that Consolidated could

not afford to make payments on its own; nevertheless, Roger Linder and Biggs

wrongfully caused the Debtor to transfer funds to Consolidated to repay the Crescent

loan to the detriment of the Debtor and its creditors.

The Trustee has asserted three grounds for avoiding these transfers: the

Louisiana revocatory action as authorized under § 544(b) of the Bankruptcy Code

(Count 1), actual fraud under 11 U.S.C. § 548(a)(1)(A) (Count 2), and constructive

11 First Amended Complaint, ¶11 (ECF # 74).

12 See id. at ¶¶ 11-12, 17-54.

13 Id., ¶ 30.

fraud under 11 U.S.C. § 548 (a)(1)(B) (Count 3). The Trustee seeks to recover the

Consolidated Transfers from the initial and subsequent transferees, including

Crescent, as allowed by 11 U.S.C. § 550 (Count 4).

The Plaintiffs’ Statement of Material Facts Not in Dispute and the voluminous

bank records attached to it set forth the transfers that were made by the Debtor to

Consolidated and from Consolidated to Crescent running from August 1, 2010, to

October 10, 2017. With respect to the claims under 11 U.S.C. § 548(a) (Counts 2 and

3), which has a look-back period dating back two years from October 10, 2017, the

summary judgment record shows that LOCAP made monthly payments to

Consolidated totaling $612,800. These transfers were made from either LOCAP’s

Chase Bank Account or its First NBC Bank Account to Consolidated’s Chase Bank

Account.14 During this same period, Consolidated made monthly transfers to

Crescent totaling $608,385.41.15 The transfers from Consolidated to Crescent

occurred on the same day that Consolidated received the transfer from LOCAP, with

the exception of the transfers in December 2016 and January 2017, in which the

transfers to Crescent occurred one day and three days, respectively, from the date

LOCAP made the transfer to Consolidated.16

The look-back period for the Trustee’s claims under § 544(b) (Count 1), which

incorporates the applicable look-back period for revocatory actions under Louisiana

law, is at least three years, and under the circumstances of this case, may go back to

August 1, 2010. Thus, in addition to the transfers during the two year period, the

Trustee has identified, for the period from October 10, 2015 back to August 2010,

monthly transfers from LOCAP to Consolidated totaling $2,970,274.77.17 During this

same period, Consolidated made monthly transfers to Crescent totaling

$2,486,375.94.18

14 Plaintiff’s Statement of Material Facts Not in Dispute, ¶ 40 (ECF #410).

15 Id.

16 Id.

17 Plaintiff’s Statement of Material Facts Not in Dispute, ¶¶ 42-42 (ECF #410).

18 Id.

Crescent admits that it received each of the transfers outlined by the Trustee.

However, all the defendants dispute the transfers from LOCAP to Consolidated on

the grounds that “Plaintiffs have failed to attach sufficient evidence of the”

transfers.19 The Court has reviewed the bank records submitted by the Trustee in

support of the transfers and finds that they specifically identify the accounts from

which the funds were transferred and the accounts into which the funds were

transferred. The defendants have not offered any evidence showing that these

accounts were not owned by LOCAP and/or Consolidated. Thus, the Court finds that

the summary judgment record establishes each of the transfers made by LOCAP to

Consolidated, and that it further establishes the subsequent transfers to Crescent.

2. The Partner Distributions and grounds for recovery

The second category of transfers at issue in the First Amended Complaint are

the Partner Distributions from LOCAP to Linder Energy and Louisiana General,

with subsequent transfers to Roger Linder and Biggs.20 The First Amended

Complaint identifies only two transfers as Partner Distributions: $4,374,000 in 2009

and $4,568,500 in 2010.21 However, the Trustee “reserve[d] the right to supplement

this claim through discovery.”22 She claims the Partner Distributions were made with

the actual intent to defraud creditors because they were made at a time when the

Debtor’s creditors were not being paid.

The summary judgment record shows that the total distributions made to

LOCAP’s partners are much less than the amounts alleged in the Amended

Complaint. The record shows that for the period dating from calendar year 2010 up

to the date of LOCAP’s bankruptcy in 2017 the Debtor made distributions to Linder

Energy (Roger Linder) totaling $2,940,000.23 During the same period, $646,500 was

19 See Crescent’s Response to Plaintiff’s Statement of Material Facts Not in Dispute, ¶¶ R, S, and

T (ECF #455-1). Note that the Non-Bank Defendants adopted these statements. See Non-Bank

Defendants’ Response to Statement of Material Facts Not in Dispute, ¶¶ 40-42 (ECF #446-1).

20 See First Amended Complaint, ¶ 55.

21 Id.

22 Id, ¶ 100.

23 Plaintiff’s Statement of Material Facts not in Dispute, ¶¶ 52-62 (ECF # 410).

distributed to Louisiana General (Biggs).24 The Trustee has asserted two grounds for

recovering these transfers: a revocatory action under Louisiana law as allowed by §

544(b) of the Code (Count 5) and a claim for transferee liability under § 550 of the

Code (Count 4).

Absent from the Amended Complaint is a claim to recover the Partner

Distributions for actual fraud under § 548 of the Code. Nonetheless, the Trustee’s

Motion for Summary Judgment seeks to recover these transfers under § 548, which

the Non-Bank Defendants oppose. The Court will address the Trustee’s failure to

specifically assert a § 548 claim as to the Partner Distributions below in its analysis

of the § 548 issues presented by the motions for partial summary judgment.

C. Cadle’s Claims

The First Amended Complaint also sets forth two state law grounds for

recovery of the Consolidated Transfers and the Partner Distributions by Cadle: a

breach of fiduciary duty claim against Roger Linder and Biggs (Count 6) and a suit

on open account under La. R.S. 9:2781 against Consolidated (Count 7). These are

claims owned the Debtor’s estate that were conveyed to Cadle by the Trustee under

the terms of the Litigation Support Agreement.25

As to Count 6, Cadle alleges Roger Linder and Biggs, as the owners and

managers of the Debtor, owed the Debtor fiduciary duties, including duties of loyalty,

good faith, candor, due care, full disclosure and a duty to refrain from self-dealing.

Cadle claims these duties were breached by Roger Linder and Biggs when they caused

the Debtor to make the Consolidated Transfers and Partner Distributions without

receiving reasonably equivalent value or any value whatsoever.

Finally, Cadle claims the transfers by the Debtor to Consolidated were

accounted for on the Debtor’s books as advances or loans that may be recovered under

Louisiana’s open account statute (Count 7).

24 Id., ¶¶ 63-73.

25 See Amended Litigation Agreement (ECF #569), attached to the Court’s October 9, 2019

Amended Order Approving Motion for Entry of Order Authorizing Trustee to Employ Special Counsel.

D. The Parties’ Motions for Partial Summary Judgment

The parties have completed discovery and have indicated that the case is ready

for trial. To possibly pare down the triable issues, each party has moved for partial

summary judgment on certain elements of, or defenses to, each of the Counts set forth

in the First Amended Complaint, with the exception of Count 6, which is not

addressed by any of the parties. The Court will summarize each party’s basis for

summary judgment in the “Law and Analysis” section of this opinion. For the reasons

that follow, the Court will deny each party’s motion, with the exception of the Non-

Bank Defendants, which the Court recommends be granted as to their argument that

Count 7 should be dismissed, but otherwise denied.

JURISDICTION

Before turning to the merits of the motions, the Court will examine its

jurisdiction over this matter. The defendants contend the bankruptcy court does not

have the constitutional authority to enter a final judgment on the parties’ motions for

summary judgment. First, they assert that this court lacks the authority to enter

final orders and judgments, citing Stern v. Marshall,26 because, according to them,

Cadle, not the Trustee, is the real party in interest. Second, some of the defendants

claim that because they did not submit a proof of claim in LOCAP’s bankruptcy case,

they have a right to a jury trial on all claims.27 The Court will examine each of these

assertions.

A. Overview of Bankruptcy Court Jurisdiction

Bankruptcy jurisdiction “is grounded in, and limited by, statute.”28 Federal

district courts “have original jurisdiction but not exclusive jurisdiction of all civil

26 564 U.S. 462, 131 S. Ct. 2594 (2011) (holding that even though 28 U.S.C. § 157(b)(2)(C)

designated common law counterclaims to proofs of claims as falling within a bankruptcy court’s core

jurisdiction, it is nonetheless unconstitutional to the extent that it authorizes non-Article III

bankruptcy judges to enter final orders and judgments on such counterclaims).

27 See Granfinanciera, S.A. v. Nordberg, 492 U.S. 33, 36, 109 S. Ct. 2782 (1989) (holding that the

Seventh Amendment of the United States Constitution entitles a person who has not submitted a claim

against a bankruptcy estate to a trial by jury on a fraudulent conveyance claim, notwithstanding

Congress’ designation of fraudulent conveyance actions as “core proceedings” in 28 U.S.C.

§ 157(b)(2)(H)).

28 Celotex Corp. v. Edwards, 514 U.S. 300, 307 (1995); In re Wilborn, 609 F.3d 748 (5th Cir. 2010).

proceedings arising under title 11, or arising in or related to cases under title 11.”29

There are thus three types of bankruptcy jurisdiction: “arising under,” “arising in,”

and “related to” jurisdiction. “Arising under” jurisdiction encompasses claims created

by Title 11, such as an avoidance claim under 11 U.S.C. § 544(b).30 “Arising in”

jurisdiction pertains to matters that could only arise in a case under Title 11.31

“Related to” jurisdiction exists when “the outcome of that proceeding could

conceivably have any effect on the estate being administered in bankruptcy.”32 The

district court is authorized under 28 U.S.C. § 157(a) to refer “any and all proceedings

arising under title 11 or arising in or related to a case under title 11” to the

bankruptcy judges within the district.

“Arising under,” “arising in,” and “related to” bankruptcy jurisdiction is further

classified into “core” and “noncore” jurisdiction under the statutory framework

established by 28 U.S.C. § 1334 and 28 U.S.C. § 157. Proceedings that arise under or

arise in title 11 are defined as “core” matters and those that are only related to a title

11 case are defined as noncore matters.33 Bankruptcy courts may statutorily enter

final judgments in “core” proceedings, while in “noncore” matters bankruptcy courts

may only submit proposed findings of fact and conclusions of law to the district court

for that court’s review and issuance of a final judgment.34

But while a proceeding may be “core” in nature, under 28

U.S.C. § 157(b)(2), and the bankruptcy court, therefore, has

the statutory power to enter a final judgment on the claim

under 28 U.S.C. § 157(b)(1), Stern instructs that any

district court, in evaluating whether a bankruptcy court

has the ability to issue final orders and judgments, must

resolve not only: (a) whether the bankruptcy court has the

statutory authority under 28 U.S.C. § 157(b) to issue a final

judgment on a particular claim; but also (b) whether the

29 28 U.S.C. § 1334(b).

30 See, e.g., Carlton v. BAWW, Inc., 751 F.2d 781 (5th Cir. 1985).

31 Wilborn, 609 F.3d at 752.

32 In re Wood, 825 F.2d 90, 93 (5th Cir. 1987) (quoting Pacor, Inc. v. Higgins, 743 F.2d 984, 994 (3d

Cir. 1984)).

33 See Stern, 564 U.S. at 473-474. Core proceedings include but are not limited to 16 different types

of matters, including “counterclaims by [a debtor’s estate] against persons filing claims against the

estate.” 28 U.S.C. § 157(b)(2)(C).

34 See 28 U.S.C. § 157(c)(1).

conferring of that authority on an Article I bankruptcy court

is constitutional (and this turns on whether “the action at

issue stems from the bankruptcy itself or would necessarily

be resolved in the claims allowance process”).35

Thus, even if a claim meets the definition of “core,” this Court is only

constitutionally authorized to render final judgment on the matter if the claim

derives from the bankruptcy case or relates to the claims allowance process. If a claim

is a Stern claim, the bankruptcy court must submit proposed findings of fact and

conclusions of law to the district court. Finally, parties may consent to the bankruptcy

court’s adjudication of noncore matters, including Stern claims, without implicating

Article III issues “when the parties knowingly and voluntarily consent to adjudication

by a bankruptcy judge.”36

B. The Stern analysis

Turning to this case, the determination of this court’s jurisdiction and

authority to enter final orders rests on the nature of the claims asserted in this

proceeding. The claims asserted in Counts 1 through 5 are within the jurisdictional

grant of 28 U.S.C. § 1334(b). Those Counts set forth fraudulent transfer and

avoidance claims under 11 U.S.C. §§ 544, 548 and 550 by the Trustee. These claims

are created by the Bankruptcy Code, and thus fall within the court’s “arising under”

jurisdiction. This also makes them “core” claims.37 Moreover, since the claims are a

product of the Bankruptcy Code, they necessarily stem from LOCAP’s bankruptcy.

Thus, the bankruptcy court appears to have the authority to render final judgments

and orders in this matter under the reasoning of Stern.

Crescent disagrees, arguing that Cadle, as the partial assignee of certain

claims by the Trustee, is the true party in interest—even in the claims asserted by

the Trustee. With little explanation Crescent claims the agreement between the

35 Highland Capital Management L.P. v. Highland Capital Management Services, Inc. (In re

Highland Capital Management L.P.), 2021 WL 7541482 *3 (Bankr. N.D. Tex. 2021), quoting Stern,

564 U.S. at 499 (emphasis added).

36 Wellness Int’l Network v. Sharif, 135 S. Ct. 1932, 1939 (2015).

37 See 28 U.S.C. § 157(b)(2)(H) (“Core proceedings include, but are not limited to— …(H)

proceedings to determine, avoid, or recover fraudulent conveyances.”).

Trustee and Cadle makes the Trustee’s claims Stern claims and asserts that this

Court lacks jurisdiction to enter final orders without the consent of all parties, which

Crescent does not give. Thus, Crescent contends this Court should issue its opinion

on the various motions for summary judgment as a report and recommendation to

the District Court.

The Court rejects Crescent’s assertion. The claims in Counts 1 through 5 arise

under the Bankruptcy Code, the Trustee has an ownership interest in those claims,

and, under the court approved litigation agreement, she has the authority to direct

the litigation. Thus, under both the governing statutes and Stern, this Court has the

authority to enter final orders and judgments on Counts 1 through 5.

Counts 6 and 7 are different. They set forth estate claims for breach of fiduciary

duty and the collection of an open account under Louisiana state law that were

assigned to Cadle by the Trustee prior to the filing of the Complaint. These claims do

not fall within the court’s “arising under” or “arising in” jurisdiction established by 28

U.S.C. § 1334(b), and thus they are not “core” matters under 28 U.S.C. § 157. The

question is whether the Court has “related to” jurisdiction over these claims. The

parties seem to believe that to be the case, as they have not questioned the Court’s

jurisdiction over those Counts. Nonetheless, the Court has an independent duty to

examine its jurisdiction.

The Court finds “related to” jurisdiction over Counts 6 and 7 to be questionable

under the “time-of-filing” rule.38 This rule, which dates from 1824 and is described by

the Fifth Circuit as “hornbook law,” provides “that subject matter jurisdiction is

determined when a federal court’s jurisdiction is first invoked.”39 “Although courts

have not often considered the time-of-filing rule for cases related to bankruptcy, it

applies to bankruptcy jurisdiction no less than it applies to diversity or federal

38 See Double Eagle Energy Servs., L.L.C. v. Markwest Utica Emg, L.L.C., 936 F.3d 260 (5th Cir.

2019).

39 Id., at 263, citing Grupo Dataflux v. Atlas Glob. Grp., L.P., 541 U.S. 567, 570, 124 S. Ct. 1920,

158 L. Ed. 2d 866 (2004); see also Mollan v. Torrance, 22 U.S. (9 Wheat.) 537, 539, 6 L. Ed. 154 (1824)

(“The jurisdiction of the court depends upon the state of things at the time of the action brought.”).

question jurisdiction.”40 At the time this adversary proceeding was filed, the Trustee

had already assigned the claims in Counts 6 and 7 to Cadle. Since these are state law

claims between third parties, “related to” jurisdiction under § 1344(b) appears to have

been lacking on these Counts at the time this case was filed.41

There is an additional factor to consider, however. Under the terms of the

agreement between the Trustee and Cadle, the Debtor’s bankruptcy estate retained

a right to share in Cadle’s recovery, if any, on the former estate claims asserted in

Counts 6 and 7. Perhaps this is sufficient to trigger “related to” jurisdiction because

the outcome may impact the distribution to creditors.42 Put another way, there is a

sufficient nexus between the claims in Counts 6 and 7 and the bankruptcy estate such

that it is conceivable that the outcome on those claims could have an effect upon the

bankruptcy estate because it has the potential to increase distributions to unsecured

creditors.

These claims, however, are subject to the procedure for litigating non-core

“related to” matters under § 157. Section 157(c)(1) provides that a bankruptcy judge

“may hear a proceeding that is not a core proceeding but that is otherwise related to

a case under title 11,” and that “the bankruptcy judge shall submit proposed findings

of fact and conclusions of law to the district court, and any final order or judgment

shall be entered by the district judge after considering the bankruptcy judge’s

proposed findings and conclusions and after reviewing de novo those matters to which

any party has timely and specifically objected.”

The Non-Bank Defendants have moved for summary judgment on Count 7.

Accordingly, the Court’s decision on that claim represents this Court’s proposed

40 Id.

41 Ironically, the court’s holding in Double Eagle indicates that had the Trustee filed suit asserting

the claims in Counts 6 and 7 and then later assigned the claims to Cadle, this Court may have retained

the “related to” jurisdiction that clearly existed at the time the Trustee asserted the claims. This is

because “the related-to-bankruptcy jurisdiction that existed at the outset of this case never went

away.” Id. at 264.

42 See COLLIER ON BANKRUPTCY, ¶ 3.01[e][v] (“Put another way, litigation that would not have an

impact upon . . . the distribution to creditors, cannot find a home in the district court based on the

court’s bankruptcy jurisdiction.” (emphasis added)).

findings of fact and conclusions of law for the district court’s consideration and

issuance of a final decision.

C. The Defendants’ Right to a Jury Trial

Crescent, Consolidated, Linder Energy, and Louisiana General previously

moved to withdraw the reference based on their alleged right to a jury trial as

defendants who did not submit claims against the bankruptcy estate, and who do not

consent to this court conducting a jury trial, assuming the district court would allow

it.43 The district court entered orders denying the motions as premature, explaining:

“While the demand for a jury trial is grounds to withdraw the reference, the Court

finds that it is premature to withdraw the reference. The Bankruptcy Court is the

most qualified court to address pretrial matters and get the matter ready for trial.”44

Now that discovery has concluded, these Motions for Partial Summary

Judgment remain the only significant remaining step prior to trial. Accordingly, this

Court’s order on the parties’ motions for partial summary judgment will include a

directive that the defendants in question again move to withdraw the reference on

the grounds that the case is ready for a jury trial before the district court.

SUMMARY JUDGMENT STANDARD

The Motions for Partial Summary Judgment are subject to the usual Fed. R.

Civ. P. 56 summary judgment standards, made applicable to adversary proceedings

by Fed. R. Bankr. P. 7056. “The court shall grant summary judgment if the movant

shows that there is no genuine dispute as to any material fact and that the movant

is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(a). The purpose of

summary judgment is to pierce the pleadings, to assess the proof, and to determine

whether there is a genuine need for trial.45 Summary judgment procedure is designed

43 See Granfinanciera, 492 U.S. at 36; see also 28 U.S.C. § 157(e) (“If the right to a jury trial applies

in a proceeding that may be heard under this section by a bankruptcy judge, the bankruptcy judge

may conduct the jury trial if specially designated to exercise such jurisdiction by the district court and

with the express consent of all the parties.”).

44 See District Court Orders (ECF ##155 and 156).

45 Goodman v. Triple “C” Marine Salvage, Inc. (In re Gulf Fleet Holdings, Inc.), 485 B.R. 329, 334

(Bankr. W.D. La. 2013), citing Matsushita Electric Industries v. Zenith Radio Corp. 475 U.S. 574, 587,

106 S. Ct. 1348, 89 L. Ed. 2d 538 (1986).

to isolate and dispose of factually unsupported claims or defenses.46 If the movant

bears the burden of persuasion at trial on a claim or defense addressed in the motion

for summary judgment, the movant must establish that there is no genuine dispute

of material fact as to those claims or defenses. To satisfy this burden, the movant

must come forward with competent summary judgment evidence conclusively

establishing that no reasonable trier of fact could find other than for the moving

party.47 To avoid summary judgment, the non-movant must then come forward with

evidence showing that there is a genuine dispute of material fact.

LAW AND ANALYSIS

A. Counts 1 and 5: Louisiana Revocatory Action—§ 544(b) and La. Civ.

Code art. 2036

Counts 1 and 5 present claims under the Louisiana revocatory action, as

authorized by § 544(b) of the Code. Under 11 U.S.C. § 544(b), a trustee succeeds to

the rights of an unsecured creditor to avoid a transaction under non-bankruptcy law.

In other words, if an actual, unsecured creditor can, on the date of the bankruptcy,

reach property that the debtor has transferred to a third party, the trustee may use

§ 544(b) to step into the shoes of that creditor and “avoid” the debtor’s transfer. The

Trustee’s rights under § 544 arise under federal law, but the scope of the rights are

defined by non-bankruptcy law.48

The non-bankruptcy law relied upon by the Trustee is the Louisiana revocatory

action found in La. Civ. Code art. 2036. It provides that “[a]n obligee has a right to

annul an act of the obligor, or the result of a failure to act of the obligor, made or

effected after the right of the obligee arose, that causes or increases the obligor’s

insolvency.”49 To be successful on a revocatory action, it must be shown that (1) there

was an act by the obligor—here the debtor—that occurred after the obligee’s—i.e. the

46 Id., citing Celotex Corp. v. Catrett, 477 U.S. 317, 323–24, 106 S. Ct. 2548, 91 L. Ed. 2d 265 (1986).

47 Id., citing Calderone v. United States, 799 F.2d 254, 259 (6th Cir. 1986).

48 See In re Gulf Fleet Holdings, Inc., 491 B.R. 747, 762 (Bankr. W.D. La. 2013) (citations omitted).

49 La Civ. Code art. 2036.

creditor’s—right to payment by the obligor arose, and (2) the act caused or increased

the debtor’s insolvency.50

Equally important in a revocatory action is the prescriptive period. This period

is provided in La. Civ. Code art. 2041, which for all time periods at issue in this case,

provided a one year prescriptive period from the date the obligee learns of the “act”

that may have caused or increased the obligor’s insolvency “but never after three

years from the date of that act,” except “in cases of fraud,” in which the three year

limitation “shall not apply.”51

Each party has moved for partial summary judgment on certain elements of

the revocatory action and collectively the motions require the Court to determine:

(1) whether each Consolidated Transfer and Partner Distribution was an “act of the

obligor” as contemplated by Article 2036; (2) whether the Trustee has identified any

unsecured creditors that held claims against the Debtor both at the time of each “act

of transfer” at issue in this case and on the Debtor’s petition date that would “trigger”

her right to bring the revocatory action under § 544(b); (3) whether, as a matter of

law, the solvency determination required by Article 2036 can be based on the assets

of the entire “Linder Group” instead of just the Debtor, individually; and (4) where

this is a “case of fraud” that allows for extension of the prescriptive period under La.

Civ. Code art. 2041 (2013).

1. “Act of the obligor”

The Trustee asserts that each Consolidated Transfer and Partner Distribution

satisfies the requirement of an “act.”52 The Non-Bank Defendants, who are the only

defendants targeted in Counts 1 and 5, generally agree with the Trustee’s assertion,

50 See Gaubert Oil Company v. Bayou Fuel Marine and Hardware Sup., Inc. 280 So. 3d 1013, 1020-

1021 (La. Ct. App. 2019).

51 See La. Civ. Code art. 2041 (2013).

52 See Memorandum in Support of Trustee’s Motion, pp. 12-13 (ECF #409). The Trustee relies upon

Official Comment (d) to La. Civ. Code art. 2036, which provides, in part: “The term ‘act’ in this Article

encompasses contracts, acts of payment, and any ‘contrivance’ employed by an obligor to defeat his

obligee’s rightful claim. . . . According to the jurisprudence, any arrangement, whether made through

judicial machinery or otherwise, whereby an obligor tries to give an obligee an advantage over others

may be attacked by the injured obligees. . . .”

stating: “Non-Bank Defendants do not contest that the alleged transfers would

constitute an interest of the Debtor in property, per se.”53

As noted above, the summary judgment record establishes each of the

Consolidated Transfers and the Partner Distributions. Accordingly, the Court finds

that the Trustee has met the requirement of showing an “act” that may have

impoverished the Debtor to the prejudice of its unsecured creditors.

2. The “Triggering Creditors”

“Under section 544(b)(1), the trustee succeeds to the rights of an unsecured

creditor in existence at the commencement of the case who may avoid the transfer

under applicable” non-bankruptcy law.54 Put another way, a trustee can bring an

action under § 544(b) of the Bankruptcy Code only if there is at least one “triggering”

unsecured creditor that could have brought an action when the bankruptcy petition

was filed.55 For purposes of the Louisiana revocatory action, it must be shown that

the same creditor also had a claim to payment by the Debtor at the time of each act

of transfer. Thus, to satisfy both § 544(b) of the Code and La. Civ. Code art. 2036, the

Trustee must show that the same creditor holds a claim at the time of each transfer

in question and at the time of the debtor’s bankruptcy filing.56

Here, the Trustee claims there are at least three creditors that satisfy this

requirement: B&J, Inc., Offshore Specialty Fabricators, LLC and Wood Group,

successor to Grasso Production Management, Inc. (collectively, the “Triggering

Creditors”). The Trustee asks the Court to take judicial notice of the proofs of claims

filed by B&J and OSF, as well as the Debtor’s schedules, which lists each of these

Triggering Creditors as unsecured creditors on the Debtor’s petition date.

Additionally, the summary judgment record includes numerous exhibits submitted

by the Trustee that show that each Triggering Creditor had a claim against the

53 Non-Bank Defendants Memorandum in Opposition, pp. 2 & 11 (ECF #446).

54 5 COLLIER ON BANKRUPTCY ¶ 544.06[1]-[2] (Richard Levin & Henry J. Sommer eds., 16th ed.).

55 U.S. Bank Nat’l Ass’n v. Verizon Communs., Inc., 479 B.R. 405, 411 (N.D. Tex. 2012).

56 See 5 COLLIER ON BANKRUPTCY, supra, ¶ 544.06.

Debtor at the time of each Consolidated Transfer and Partnership Distribution.57 The

Trustee also goes to great lengths to explain why each Triggering Creditor’s claim

remains viable. Finally, the Trustee argues that Cadle, as the successor to First NBC,

also satisfies the triggering creditor requirement.

In opposition, the Non-Bank Defendants and Crescent do not contest that the

Court can take judicial notice of the proofs of claim and schedules regarding the

Triggering Creditors. Nor do they offer any evidence refuting the Trustee’s assertions

that the Triggering Creditors held claims at the time of each transfer at issue in this

case and on LOCAP’s petition date. Instead, they contend that even if these creditors

did have a viable claim at the time of each transfer, all transfers occurring more than

three years before LOCAP’s bankruptcy filing have prescribed.58 Moreover, to the

extent Cadle is the triggering creditor, they argue the Trustee’s claims are subject to

a one-year prescriptive period because Cadle’s predecessor, First NBC, had

knowledge of each of the transfers.

Since §544(b) of the Bankruptcy Code only requires the existence of “a creditor

holding an unsecured claim that is allowable under section 502,” the Court finds that

the Trustee has satisfied this requirement irrespective of whether Cadle is a

triggering creditor.59 This is because the summary judgment record shows that each

Triggering Creditor held claims against the Debtor both at the time of the

Consolidated Transfers and the Partner Distributions and at the time the Debtor

57 See Memorandum in Support of Trustee’s Motion, pp. 13-17 (ECF #409), and the exhibits

identified in those pages. The record shows that the Triggering Creditors held claims at the time of

each of the transfers at issue in this case except Wood Group, which did not hold a claim at the time

of three of the transfers.

58 See Non-Bank Defendants’ Memorandum in Support of Motion for Partial Summary Judgment,

pp. 7-16 (ECF #398). See Crescent’s Memorandum in Support of Motion for Partial Summary

Judgment, pp. 16-21 (ECF #420-5).

59 11 U.S.C. § 544(b) (emphasis added). The Court previously addressed the issue of whether Cadle

was the triggering creditor when it considered an earlier Motion for Judgment on the Pleadings (ECF

#347) by the Non-Bank Defendants seeking dismissal of Counts 1 and 5. In that Motion the Defendants

argued that the Trustee had not identified any triggering creditors in the Amended Complaint other

than Cadle. They argued that Cadle could not be the triggering creditor under § 544(b) because it was

a secured creditor at the time the Debtor’s bankruptcy case was filed. The Court concluded that Cadle

was not the triggering creditor but concluded that the Trustee had nonetheless satisfied the pleading

requirements on this issue. See the Court’s July 30, 2024 Order Denying the Motion for Judgment on

the Pleadings (ECF #393), referencing reasons orally assigned by the Court at the hearing.

filed its chapter 7 petition. The Court also finds, based on the summary judgment

record, that those claims were viable on LOCAP’s bankruptcy petition date. Section

544(b) does not require more than one creditor, and the summary judgment record

establishes the existence of at least one creditor. This requirement is met. (The Non-

Bank Defendants’ prescription argument will be addressed below.)

3. “Group Insolvency”

A key requirement of the revocatory action is that the “act” must cause or

increase the obligor’s insolvency.60 Thus, the Trustee must prove that each

Consolidated Transfer and each Partner Distribution caused or increased the

Debtor’s—i.e., LOCAP’s—insolvency. The parties did not present any summary

judgment evidence addressing the Debtor’s insolvency at any given point in time,

much less on the date of each of the transfers at issue. That failure precludes any

definitive resolution of the Trustee’s revocatory action at this stage of the

proceeding.61

However, one of the defendants, Crescent, has moved for summary judgment

with respect to the methodology that the Court should employ to determine the

Debtor’s solvency. Crescent contends, “as a matter of law” that “this court must

consider the solvency of all the Linder Oil Group in its analysis of Debtor’s solvency

under the revocatory action.”62 Crescent’s argument appears to stem from the fact

that the Non-Bank Defendants guaranteed Crescent’s loan to Consolidated and the

loan from First NBC. According to Crescent:

And, as for Crescent, it considered Linder Oil Group,

[Roger] Linder and Biggs as part of the integrated

business in relying on the personal guaranties of

[Roger] Linder and Biggs. Therefore, in considering the

solvency of the guarantor of First NBC’s debt, one must

60 La. Civ. Code art. 2036. “An obligor is insolvent when the total of his liabilities exceeds the total

of his fairly appraised assets.” La. Civ. Code art. 2037.

61 The summary judgment record shows that the Debtor booked each transfer to Consolidated as

a loan. The Court presumes, then, that at trial the Trustee may need to prove this method of

accounting for each transfer was a sham in order to show that they caused or increased the Debtor’s

insolvency.

62 See Crescent’s Memorandum in Support of Motion for Partial Summary Judgment, pp. 19-21

(ECF #420-5).

consider the solvency of the primary borrowers: Destin and

Reserves, as well as the other guarantors: [Roger] Linder,

Biggs, Louisiana General, and Linder Energy. For that

reason, the solvency of each member of the Linder Oil

Group, Biggs and [Roger] Linder should be considered for

purposes of the revocatory action.63

Crescent argues that because it, Crescent, views the amorphously defined

“Linder group” as an integrated or single business enterprise, the insolvency

determination should be based on the collective solvency of the group rather than the

solvency of only the Debtor (presumably on the assumption that with enough

potentially solvent entities considered in addition to the Debtor a finding of

insolvency will be impossible).

At the outset, the Court finds that how Crescent views the Linder entities for

purposes of determining insolvency is irrelevant. That question is governed by the

straightforward wording of La. Civ. Code art. 2036, which allows an “obligee” to

revoke an “act” of its “obligor” that causes or increases the “obligor’s” insolvency.

Thus, the important viewpoint in the revocatory action is that of the obligee. It allows

the obligee to focus on the actions of its obligor, the party liable for the debt owed the

obligee, and how those actions may impact the obligor’s solvency. This is how it should

be, as the obligee can only look to its own obligor for payment and for this reason,

only the solvency of that obligor matters in determining whether an act may be

revoked.

Here, the obligees are the Triggering Creditors on whose behalf the Trustee is

authorized to bring this action under § 544(b) of the Code. The obligor is the Debtor,

LOCAP, which is the only entity contractually bound to pay the Triggering Creditors.

There is no evidence, much less an assertion, that Consolidated, Destin, Reserves, or

any of the other Linder entities are contractually or legally responsible to pay the

Triggering Creditors’ debt. Thus, since the Debtor is the only obligor, and only its

assets can be considered to satisfy the Triggering Debtor’s claims, it follows that only

the Debtor’s assets and liabilities should be considered in determining insolvency.

63 Id. at p. 21 (italic emphasis in original; bolded emphasis added by the Court).

Crescent’s assertion otherwise simply flies in the face of the clear and unambiguous

wording of La. Civ. Code art. 2036.

Crescent, however, does not base its group insolvency argument on Article

2036. Instead, it relies on two cases: First Guar. Bank v. Carter, 563 So. 2d 1240 (La.

Ct. App. 1990) and 3 Eagles Aviation, Inc. v. Rousseau, 2005 WL 32787 (E.D. La. Jan.

5, 2005). As the following discussion of these cases shows, Crescent’s reliance is

misplaced as First Guaranty Bank does not address insolvency at all, and 3 Eagles

Aviation only considers the insolvency of the single obligor on the debt at issue.

In First Guaranty Bank the court was faced with an objection of improper

cumulation of actions. The facts show that the plaintiff bank made a loan to Carter

Mobile Homes, Inc. The owners of that company, referred to as the “Carter Brothers,”

executed continuing guarantees in favor of the bank, guaranteeing repayment of the

Carter Mobile Homes’ debt. After Carter Mobile Homes filed bankruptcy, the bank

filed suit against the Carter Brothers to enforce the continuing guarantees. After the

bank sued, the Carter Brothers proceeded to encumber and transfer their individual

properties to third parties. Thereafter, the bank filed an amended and supplemental

petition which added these third parties to the suit, and alleged that these actions

were done at a time when the Carter Brothers were insolvent or that they were made

insolvent by these transfers, and that they could be set aside in a revocatory action.64

The question was whether the bank could combine its suit against the brothers to

enforce the continuing guarantees with its suit against the brothers and the third-

party transferees under the Louisiana revocatory action, and the Court concluded

that it could.

Despite there being no discussion in the case regarding insolvency or how

insolvency was to be determined, Crescent claims First Guaranty Bank is relevant

because the court “allowed an obligee to proceed against the guarantor without

naming the principal obligor.”65 It is unclear why this conclusion is pertinent to

Crescent’s group insolvency question, as obligees are generally always free to proceed

64 First Guar. Bank,563 So. 2d at 1241-1242.

65 Id. at pp. 19-20.

against a guarantor when the principal obligor defaults or goes into bankruptcy.

Under the terms of the guaranty agreement, the guarantor is the obligor to the bank,

the obligee. Simply put, the Court does not find any support for Crescent’s group

insolvency argument in First Guaranty Bank.

Crescent also relies on 3 Eagles Aviation, which Crescent claims “held that an

obligee can maintain a revocatory action against the principal obligor and the

guarantor. This means that the Eastern District of Louisiana necessarily considered

the solvency of both the principal obligor and the guarantor.”66 A review of the facts

of 3 Eagles shows this assertion by Crescent is simply wrong.

In 3 Eagles Aviation, the plaintiff, 3 Eagles Aviation, sued Wayne Rousseau,

who had executed personal guaranties in favor of the plaintiff on a 1997 personal note

owed to the plaintiff by Rollins Air. Rollins Air soon defaulted on the note, triggering

the guarantee and making Mr. Rousseau personally liable to the plaintiff. The

plaintiff eventually sued Mr. Rousseau under the Louisiana revocatory action

because he had made certain transfers in 2002 that the plaintiff claimed caused or

increased his insolvency. The Court found that the revocatory action could proceed:

The Court finds that 3 Eagles has proved that it should

prevail on the present revocatory action. First, Mr.

Rousseau owed 3 Eagles an antecedent debt at the time of

the transfers. This is because Rousseau guaranteed the

note on September 24, 1997 and December 18, 1997, and

Rollins Air fell into arrears in its payments around

February of 1999. Rollins Air remained in default on the

note. 3 Eagles sent Rousseau demand letters as guarantor

of the note during the summer of 2001, and this Court

enforced Mr. Rousseau’s guaranty of the note by judgment

on October 15, 2002. Notably, the transfers at issue took

place between July 29, 2002 and October 31, 2002.

Therefore, 3 Eagles’ right arose long before the transfers

took place. Accordingly, the Court finds that Mr. Rousseau

effected the transactions after 3 Eagles’ right under the

note arose, as required by article 2036. The defendants

have introduced no evidence to the contrary.67

66 Id. at p. 20.

67 3 Eagles Aviation, Inc. v. Rousseau, 2005 WL 32787 *2 (E.D. La. Jan. 5, 2005).

Again, nothing in 3 Eagles Aviation can be construed to support Crescent’s

“group insolvency” argument. Mr. Rousseau’s guarantee in that case, once triggered

by Rollins Air’s default under the note, was the antecedent debt at issue, the transfers

were made by Mr. Rousseau alone around the time that he was cast in judgment on

the guaranty agreement, and the revocatory action was against him alone for his

conduct. The bottom line is that the case says nothing about looking to the solvency

of Rollins Air and Mr. Rousseau together, and thus provides no support to Crescent’s

group insolvency argument.

In its Supplemental Brief, filed after the initial hearing on this matter,

Crescent cites two cases from the late 19th century that purportedly support its

position that a creditor must sue all solidary obligors on a debt, and thus look to the

solvency of all the obligors when asserting a revocatory action: Dreyfous v. Childs, 48

La. Ann. 872 (1896); and Hart v. Bowie, 34 La. Ann. 323 (1882). The Court has

examined both cases, and indeed, the court in each dismissed the action because the

plaintiff had failed to allege in his petition that the transfers at issue had caused the

insolvency of all of the obligors.

The key fact in these old cases is that multiple obligors were liable to the

plaintiff for the debt at issue. That is not the case here. As shown above, only the

Debtor was liable for the debts of the Triggering Creditors. Thus, the 19th century

cases cited by Crescent are distinguishable and the Court declines to follow them.

In summary, Crescent has failed to present any support for its “group

insolvency” theory, and the Court can find no case law that has even considered the

theory. Perhaps most importantly, Crescent’s argument finds no support in the

governing Louisiana statute, La. Civ. Code art. 2036. The Court therefore rejects

Crescent’s “group insolvency” theory.68

68 The Court’s decision on this issue is based on Crescent’s argument that the insolvency

determination should be based on the solvency of the entire Linder Group, which Crescent defines to

include the Debtor, the Debtor’s general partners, Linder Energy and Louisiana General, plus

Consolidated, Destin, Reserves, Roger Linder, and Biggs. The Court notes, however, that the solvency

of the Debtor’s general partners, Linder Energy and Louisiana General, may be relevant in

determining the insolvency of the Debtor at the time of the transfers based on the definition of

4. Prescription on the Revocatory Action

Louisiana Civ. Code art. 2041 defines the prescriptive period for revocatory

actions. As originally enacted in 1984 it provided:

The action of the obligee must be brought within one year

from the time he learned or should have learned of the act,

or the result of the failure to act, of the obligor that the

obligee seeks to annul, but never after three years from the

date of that act or result.69

This provision provides a one year prescriptive period running from the time

the obligee knew or should have known of the “act” by the obligee, subject to an

absolute bar against the action after three years from the date of the “act.” In the

bankruptcy context, it generally limits a trustee’s avoidance powers to transfers (acts)

occurring up to three years prior to the debtor’s bankruptcy filing.

Article 2041 was amended effective August 1, 2013 (the “2013 amendment”).

This amendment maintains the original wording of the Article and adds the following

sentence:

The three year period provided in this Article shall not

apply in cases of fraud.70

This sentence eliminates the three year bar “in cases of fraud,” but otherwise

the three year bar still applies. The 2013 amendment was short-lived as a legislative

amendment in 2021 deleted the above sentence, thus returning Article 2041 to its

original 1984 form. Although Louisiana law generally allows retroactive application

of amendments to prescriptive statutes, retroactive application cannot operate to

divest a party of vested rights.71 Thus, although now repealed, the 2013 amendment

applies here.

“insolvency” for partnership debtors in the Bankruptcy Code. See 11 U.S.C. § 101(32)(B); see also

COLLIER ON BANKRUPTCY, supra, ¶ 546.06[3]; In re WRT Energy Corp., 282 B.R. 343, 410-411 (Bankr.

W.D. La. 2001) (same balance sheet test of insolvency used in proceeding under constructive fraud

provision of bankruptcy fraudulent transfer statute also applies in revocatory action under Louisiana

law).

69 La. Civ. Code art. 2041 (1984).

70 La. Civ. Code art. 2041 (2013).

71 See the section of this Opinion entitled “Retroactive Application of the 2013 amendment,” infra,

Application of the 2013 amendment to the facts of this case is significant

because, as the Non-Bank Defendants point out, it has the potential to triple the

Trustee’s potential recovery if she can show this case fits the parameters of “in cases

of fraud.”72 Thus, prescription is the most hotly contested issue in this case, including

in the parties’ motions for partial summary judgment.

Most of the parties’ arguments have centered on the meaning and parameters

of the term “fraud,” which was not defined in the amendment. Thus, the Court will

first consider and determine that issue, followed by an examination of the summary

judgment record to determine whether the Trustee at least survives the Defendants’

motions for partial summary judgment on the issue of fraud as it applies to extending

the prescriptive period on the revocatory action. Finally, the Court will revisit its

prior decision on the retroactive application of the 2013 amendment to address issues

raised during the hearing on the parties’ motions.

(a) The Meaning of the Phrase “In Cases of Fraud”

There is little agreement between the parties on the meaning of the term fraud

in the 2013 amendment, or its parameters. On the one hand, there is the position of

the Trustee, who has set forth three different definitions of the term. She initially

claimed it should be defined by the definition contained in La. Civ. Code art. 1953.73

However, weeks later, in her opposition to the defendants’ motions, she completely

abandoned that position and argued instead that “‘fraud’ in Article 2041 should be

interpreted by referencing Article 2036’s source articles, which focus on prejudice

(fraus), rather than deliberate deceit (dolus).”74 Finally, in her supplemental brief,

for a discussion of the concept of vested rights and the effect of changes in prescriptive statutes on

those rights.

72 See Non-Bank Defendant’s Opposition to the Trustee’s Motion for Summary Judgment, pp. 9-10

(ECF #434). According to the Non-Bank Defendants, if the Trustee is limited to the three year look-

back period for recovery of the Consolidated Transfers, her potential recovery would be just shy of

$1,000,000. But if she is able to expand the prescriptive period, her potential recovery will balloon to

just under $3,000,000. The expanded prescriptive period would have a similar impact on the claims

involving the Partner Distributions.

73 Plaintiff’s Memorandum in Support of Motion for Summary Judgment, pp. 18-19 (ECF #409)

74 Plaintiffs’ Memorandum in Opposition to Defendants’ Motion for Summary Judgment, p. 4 (ECF

filed after the oral arguments on the motions, she again changes position on the

definition, contending now that fraud means “fraudulent conveyance” because the

Louisiana revocatory action, which is based on the Paulian action under Roman civil

law, is “strikingly similar” to the common law fraudulent conveyance action.75 The

Trustee claims that under this standard she is only required to prove a “general

intent to hinder, delay, or defraud future creditors; proof of the target’s identity is not

required.”76

On the other hand, the defendants contend (more accurately, assume) that the

term fraud in the 2013 amendment should be defined by reference to the definition

of fraud in La. Civ. Code art. 1953. They claim this definition requires the Trustee to

show a misrepresentation or suppression of the truth aimed at the Triggering

Creditors, which they claim the Trustee has not and cannot show. Additionally, they

argue fraud cannot be shown by silence because the Debtor was under no duty to

speak or disclose the Debtor’s financial condition to the Triggering Creditors.

The Court is now tasked with making an Erie guess as to how the Louisiana

Supreme Court would define the term fraud under these circumstances.77 The Court

has carefully considered the parties’ arguments and other sources and, for the

#454). See also Murray v. Stacy Trust (In re Goldberg), 277 B.R. 251 (Bankr. M.D. La. 2002), a case in

which the court engaged in an exhaustive review of the history of the revocatory action, tracing it back

to Actio Pauliana in Roman law. As part of that analysis, the court discussed the differences between

the Latin terms fraus and dolus: “‘The point is that the term fraus, in Latin, does not really mean

‘fraud’ at all in the sense of ‘deceit’—at any rate, not deliberate fraud. The word for that is dolus. The

word fraus means ‘prejudice’ or ‘disadvantage.’” Id. at 273, quoting Radin, “Fraudulent Conveyances

at Roman Law,” 18 Va. L. Rev. 109, 110-111 (1931). Thus, in her reply brief, the Trustee essentially

argued that she only needed to show a disadvantage to creditors in order to extend the prescriptive

period beyond three years. Although the Trustee ultimately abandoned this argument, the Court

nonetheless rejects it as it would render the three year bar in Article 2041 meaningless. See Credit v.

Richland Par. Sch. Bd., 85 So. 3d 669, 678 (La. 2012), citing ABL Mgmt., Inc., v. Board of Supervisors

of Southern Univ., 773 So. 2d 131, 135 (La. 2000) (“[I]t is a cardinal rule of statutory interpretation

that ‘it will not be presumed that the Legislature inserted idle, meaningless or superfluous language

in the statute or that it intended for any part or provision of the statute to be meaningless, redundant

or useless.’”).

74 Plaintiff’s Reply to Defendant’s Oppositions to Motion for Partial Summary Judgment, pp. 3-8

(ECF #469).

75 Id.; see also La. Civ. Code Ann. art. 2036, Official Comments—1984, Comment (c) (“The

revocatory action, an institution derived from Roman law, is the civil law analogue to the common law

suit to set aside a fraudulent conveyance.”).

76 Id., citing COLLIER ON BANKRUPTCY, ¶ 548.04[1].

77 See Erie R.R. v. Tomkins, 304 U.S. 64; 58 S. Ct. 817 (1938).

following reasons, concludes that the Louisiana Supreme Court would define “fraud”

in the 2013 amendment as described in La. Civ. Code art. 1953.

First, the Louisiana Supreme Court, in Ogea v. Merritt,78 showed no hesitation

in looking to Article 1953 to define “fraud” as used in La. R.S. 12:1320(D), which did

not include a definition of fraud. That statute provides a “fraud exception” to the

general rule of limited liability afforded members of limited liability companies. The

Court stated:

With our interpretive inquiry framed by a general rule of

limited liability, a rule which is made subject to exceptions,

we turn to the first exception to limited liability at issue in

this case, i.e., fraud. As noted, fraud is not defined in La.

R.S. 12:1320(D); therefore, we must turn elsewhere for a

definition. Louisiana’s most longstanding legislative

compilation, the Civil Code, provides the following

definition: “Fraud is a misrepresentation or a suppression

of the truth made with the intention either to obtain an

unjust advantage for one party or to cause a loss or

inconvenience to the other. Fraud may also result from

silence or inaction.” La. C.C. art.1953. This definition of

fraud has remained essentially unchanged from that

contained in Article 1847(6) of the Civil Code of 1870. See

La. C.C. art.1953, Revision Comment–1984, comment (a).

It is appropriate to draw from such a longstanding

definition because, when the legislature enumerated the

term “fraud” but did not define “fraud” in La. R.S. 12:1320,

“this Court must assume the Legislature was aware of

existing laws on the same subject.” See Foti v. Holliday, 09–

0093, p. 6 (La.10/30/09), 27 So. 3d 813, 817.79

The reasoning in Ogea is sound, and the Court will follow it. The definition of

fraud in Article 1953 has remained virtually the same since it appeared in Article

1847(6) of the Civil Code of 1870, and the Legislature is presumed to have been aware

78 139 So. 3d 888 (La. 2013).

79 Id. at 897-898; see also Fontenot v. Reddell Vidrine Water Dist., 836 So. 14, 24 (La. 2003); Najor

v. Plaquemines Clay Co., LLC, 2019 WL 1597872, *5 (E.D. La. Apr. 15, 2019) (without any analysis in

a Rule 12(b)(6) motion, the court defined “fraud” in Article 2041 by reference to La. Civ. Code art. 1953,

for purposes of determining whether the plaintiff had stated a claim for fraud).

of this law when it enacted the 2013 amendment.80 The court’s reasoning also

highlights the need for consistency in the meaning of terms in the law, particularly

in circumstances in which the Legislature has not provided a contrary or inconsistent

meaning. Thus, it seems likely the Louisiana Supreme Court would define “fraud” in

the 2013 amendment to Article 2041 by reference to Article 1953, consistent with its

approach in Ogea.

Second, the 2013 amendment is not the first time the Louisiana Legislature

has established a fraud exception to the running of a three year bar to a claim. It has

occurred at least two other times: La. R.S. 9:5605 (defining the prescriptive period on

legal malpractice actions) and La. R.S. 9:5606 (defining the prescriptive period on

insurance agent liability). Like La. Civ. Code art. 2041, both of these statutes provide:

(i) a one year prescriptive period from the date the plaintiff discovers or should have

discovered the act; (ii) a three year bar to the filing of such claims running “from the

date of the alleged act, omission, or neglect”;81 and (iii) a fraud exception to the three

year period (“The peremptive period provided in Subsection A of this Section shall

not apply in cases of fraud, as described in Civil Code Article 1953.”82).

Simply put, the prescriptive and peremptive periods in the malpractice

statutes above are virtually identical to the prescriptive period on revocatory actions

as set forth in La. Civ. Code art. 2041 as amended in 2013. The only difference is that

the Legislature did not include the clause “as described in Civil Code Article 1953”

after the phrase “in cases of fraud” in the 2013 amendment. Louisiana law provides:

“Laws on the same subject matter must be interpreted in reference to each other.”83

Applying this directive here, the Court finds that the Legislature’s reference to Article

1953 for the definition of fraud for purposes of determining the fraud exception to the

peremptive period running on these malpractice actions likely means that the term

80 See Eicher v. La. State Police, Riverboat Gaming Enf’d Div., 710 So. 2d 799, 805 (La. Ct. App.

1998) (the Legislature is presumed to have enacted the statute with deliberation and with full

knowledge of all existing laws on the same subject, and with the intention of achieving “a consistent

body of law.” (citations omitted)).

81 La. R.S. 9:5605(A); La. R.S. 9:5606(A).

82 La. R.S. 9:5605(E); La. R.S. 9:5606(C) (emphasis added).

83 La. Civ. Code art. 13.

“fraud” in the 2013 amendment to Article 2041 should similarly be defined “as

described in Civil Code Article 1953.” This is especially so here because there is no

direct or implicit indication that the Legislature intended a different definition to be

used.

Accordingly, it is this Court’s Erie guess that the Louisiana Supreme Court

would likely define fraud in the 2013 amendment to Article 2041 by reference to La.

Civ. Code art. 1953, which provides:

Fraud is a misrepresentation or a suppression of the truth

made with the intention either to obtain an unjust

advantage for one party or to cause a loss or inconvenience

to the other. Fraud may also result from silence or

inaction.84

The Court now turns to the questions of the parameters of the fraud, such as

whether the fraud must relate to the actual “acts” that give rise to the revocatory

action and whether there must be a nexus between the fraud and the Triggering

Creditors. There are no Louisiana cases that have considered the 2013 amendment,

but there are Louisiana cases interpreting the “in cases of fraud” provision in the

legal malpractice statute, La. R.S. 9:5605(E), including the Louisiana Supreme Court

case of Lomont v. Bennett.85 Because the wording of La. R.S. 9:5605(E) is virtually

identical to the wording of the 2013 amendment, this case is particularly instructive.

The issue in Lomont was whether the fraud exception in La. R.S. 9:5605(E)

was only applicable in cases where the fraudulent act itself constituted the

malpractice, or whether the concealment of the malpractice could also constitute

fraud. Prior to the Supreme Court’s decision, lower Louisiana courts had generally

refused to find post-malpractice concealment by the attorney to equate to fraud,

finding instead that the act of malpractice itself had to be fraudulent.86

84 La. Civ. Code art. 1953.

85 172 So. 3d 620 (La. 2015).

86 See Lomont v. Myer-Bennett, 164 So. 3d 843 (La. Ct. App. Cir. 2014), 164 So. 3d 843, rev’d sub

nom, Lomont v. Bennett, 172 So. 3d 620 (La. 2015); Carriere v. Bodenheimer, Jones, Szwak & Winchell,

L.L.P., 120 So. 3d 281 (La. Ct. App. 2012); Broadscape.com, Inc. v. Matthews, 980 So. 2d 140 (La. Ct.

App. 2008); Brumfield v. McElwee, 976 So. 2d 234 (La. Ct. App. 2008); Smith v. Slattery, 877 So. 2d

Lomont overruled the lower courts and concluded that post-malpractice actions

may trigger the fraud exception, depending on the facts of each case. In reaching its

conclusion, the court employed an expansive view of “fraud” for purposes of

determining whether the exception to peremption applied:

The language of La. R.S. 9:5605(E) excepts the peremptive

period “in cases of fraud, as defined by La. C.C. art.1953,”

with no additional restrictions or limitations. La. C.C. art

1953 defines fraud as “a misrepresentation or a

suppression of the truth made with the intention either to

obtain an unjust advantage for one party or to cause a loss

or inconvenience to the other.” Thus, under the clear

wording of the statute and the Code article, any action

consisting of “a misrepresentation or a suppression of the

truth made with the intention either to obtain an unjust

advantage for one party or to cause a loss or inconvenience

to the other” will prohibit application of the peremptive

period. Concealment of malpractice to avoid a malpractice

claim conforms to this definition. It would be absurd to

interpret the statute to exclude fraudulent concealment of

the malpractice. There is no support for an interpretation

that would allow attorneys to engage in concealment of

malpractice until the three-year peremptive period has

expired. As this court noted in Borel v. Young, albeit in

dictum, “[p]resumably, by exempting claims of fraud, the

legislature intended to restore the third category of contra

non valentem so as to prevent a potential defendant

from benefitting from the effects of peremption by

intentionally concealing his or her wrongdoing.” 07–

0419 (La.11/27/07), 989 So. 2d 42, on reh’g, (7/1/08), 989 So.

2d at 61 n. 3 (emphasis added). The basic rule governing

statutory interpretation is stated in Louisiana Civil Code

article 9: “When a law is clear and unambiguous and its

application does not lead to absurd consequences, the law

shall be applied as written and no further interpretation

may be made in search of the intent of the legislature.”

Applying the clear and unambiguous language of the

statute, we hold allegations of misrepresentation,

244 (La. Ct. App. 2004), writ denied, 885 So. 2d 592 (La. 2004); Atkinson v. LeBlanc, 860 So. 2d 60 (La.

Ct. App. 2003).

suppression or concealment of malpractice can constitute

fraud within the meaning of La. R.S. 9:5605(E).87

There are a few key takeaways from Lomont that are relevant here. First, the

court makes it clear that any action consisting of a misrepresentation or a

suppression of the truth made with the intention either to obtain an unjust advantage

for one party or to cause a loss or inconvenience to the other will prohibit application

of the peremptive period. And the court also makes it abundantly clear that the fraud

does not need to be tethered to the act itself. Thus, it is this Court’s Erie guess that

the Louisiana Supreme Court would establish similar parameters on the application

of the fraud exception set forth in the 2013 amendment.

Second, inherent in the Louisiana Supreme Court’s decision is that the fraud

must be directed to the party making the claim. This follows from the court’s quoting

from Article 1953 when it states the misrepresentation or suppression of the truth

must be aimed at providing an unjust advantage to one party or a loss or

inconvenience to the other party. Thus, this would require proof of the identity of the

target of the fraud.

Finally, Lomont provides further insight into the likely intent behind fraud

exceptions to prescriptive periods. The court stated: “‘[p]resumably, by exempting

claims of fraud, the legislature intended to restore the third category of contra non

valentem so as to prevent a potential defendant from benefitting from the

effects of peremption by intentionally concealing his or her wrongdoing.’”88

Contra non valentem is a jurisprudential doctrine establishing criteria that will

prevent the running of prescription on claims. The third category of that doctrine

provides: “(3) where the debtor himself has done some act effectually to prevent the

creditor from availing himself of his cause of action.”89

It is tempting to conclude here that the legislative intent behind the fraud

exception in the 2013 amendment was to target obligors who have taken actions to

87 Lomont v. Bennett, 172 So. 3d 620, 628-29 (La. 2015), (emphasis in original).

88 Id., quoting Borel v. Young, 989 So. 2d 42 (La. 2007), on reh'g, 989 So. 2d at 61 n. 3 (2008)

(emphasis in Lomont).

89 In re Queyrouze, 580 B.R. 671, 681 f. 20 (E.D. La. 2017).

prevent the obligee from availing himself of pursuing the revocatory action,

particularly since the fraud exception is in the article establishing the prescriptive

period on revocatory actions and not an underlying element of the revocatory action

itself.90 The Court is reluctant to make this conclusion its Erie guess, however,

primarily because the Louisiana Supreme Court states that it is only making a

presumption regarding the legislative intent behind the exception, and because in the

same paragraph the court states that any action consisting of a misrepresentation

or suppression of the truth may trigger the exception.

Thus, it is this Court’s Erie guess that the Louisiana Supreme Court would

define the parameters of the fraud exception in the 2013 amendment just like it did

in Lomont:

Thus, under the clear wording of the statute and the Code

article, any action consisting of “a misrepresentation or a

suppression of the truth made with the intention either to

obtain an unjust advantage for one party or to cause a loss

or inconvenience to the other” will prohibit application

of the peremptive period.91

In reaching this conclusion, the Court rejects the Trustee’s latest argument

that the Legislature, by sticking the word fraud in the prescriptive statute on

revocatory actions, intended to import into Louisiana law the entire body of

fraudulent conveyance law emanating from § 548(a)(2)(A) of the Bankruptcy Code

and the common law Uniform Fraudulent Conveyance Act.

90 There is support for this conclusion when Official Comment (a) to La. Civ. Code art. 2041 is

considered. This Comment shows that the potential for a “devious obligor” to conceal his actions was

actively considered when the original prescriptive statute was enacted. This is why Article 2041

provides that the one year prescriptive period does not begin to run until the obligee knew or should

have known of his obligor’s act of transferring property. But the Louisiana Legislature determined

that the security of transactions, particularly title to immovable property, takes priority at the three

year mark from the date of the act, thus the reason for the three year bar. Given the concern that a

“devious obligor” may conceal his actions until after the running of the prescriptive period, it is

reasonable to conclude that the Legislature, by inserting the fraud exception to the three year bar on

revocatory actions, intended to prevent an obligor from benefitting from the effects of that bar by

intentionally concealing his acts.

91 Lomont, 172 So. 3d at 628-629 (“any action” emphasized in original; other emphasis added).

In summary, the Court makes the following conclusions—Erie guesses—on the

meaning and parameters of fraud as set forth in the 2013 amendment to La. Civ.

Code art. 2041:

1. The term fraud in the 2013 amendment to Article 2041 shall be defined by

reference to the definition of fraud in La. Civ. Code art. 1953, and the

elements necessary for the Trustee to prove fraud under that Article are:

“‘(1) a misrepresentation of material fact, (2) made with the intent to

deceive, (3) causing justifiable reliance with resulting injury;’”92

2. Any action consisting of a misrepresentation or a suppression of the truth

made with the intention either to obtain an unjust advantage for one party

or to cause a loss or inconvenience to the other will prohibit application of

the three year bar to the revocatory action; and

3. There must be a nexus between the fraud and the Triggering Creditors.

(b) Evidence of Potential Fraud in the Summary Judgment

Record

The Court now turns to whether the summary judgment record contains any

evidence of fraud aimed at the Triggering Creditors that may make the fraud

exception in the 2013 amendment applicable in this case. The Defendants point to

the Trustee’s testimony that she is not aware of any fraud. The Defendants also assert

that the Trustee has not presented any evidence of fraud. However, as the Trustee

points out, there is evidence of a representative of the Debtor contacting at least one

of the Triggering Creditors by email and leading them to believe the Debtor had no

excess cash to pay their invoices:

This company [the Debtor] acknowledges the amount owed

to OSFI, and intends to pay the entire amount as soon as

possible. The problem is that the company is under

considerable pressure from BSEE to complete a series of

projects in the OCS . . . The best guess estimate is that the

92 D.H. Griffin Wrecking Co., Inc. v. 1031 Canal Dev., LLC, 463 F. Supp. 3d 713, 725–26 (E.D. La.

2020), quoting Sys. Eng’g & Sec., Inc. v. Sci. & Eng’g Associations, Inc., 962 So. 2d 1089, 1091 (La. Ct.

App. 2007).

current condition of the company will continue for at least

the next 12 months. During that period I will make

every effort to send any, excess cash if any, the

company may develop to OSFI as an installment

payment. . . . the company is committed to sending as much

as possible as often as possible. . . .93

If the Debtor, by making these statements, intended to prevent one of the

Triggering Creditors from pursuing collection efforts while at the same time the

Debtor was transferring cash (i.e., excess cash) to a company to which it owed no

money (Consolidated), then the fraud exception may be triggered. The Court is unable

to grant summary judgment to the Trustee on this issue, however, because it is not

clear in the record as to which “12 months” the Debtor was referring when it stated

it may not have “excess cash” available. Moreover, the summary judgment record

contains evidence that the Debtor may have been using property owned by

Consolidated for its offices, which may support the payments being made to

Consolidated. The record also contains evidence that the arrangement between the

Debtor, Crescent, and First NBC regarding payments by the Debtor to Consolidated

had been in place many years before any amounts were owing to the Triggering

Creditors, which may militate against a finding of specific intent by the Non-Bank

Defendants to gain an advantage over the Triggering Creditors. Since the Court is

unable to weigh the evidence at the summary judgment stage, both the Trustee’s and

the Defendants’ motions for partial summary judgment on this issue must be denied.

(c) Retroactive Application of the 2013 Amendment

Before leaving the issue of prescription on the revocatory action, the Court will

address the issue of retroactive application of the 2013 amendment. In connection

with an earlier motion in this case, the Court examined Louisiana law on the

retroactivity of statutes to determine whether the 2013 amendment may be applied

retroactively (the standard for procedural changes) or prospective only (the standard

93 Plaintiffs’ Memorandum in Opposition to Defendants’ Motion for Partial Summary Judgment,

p. 7 (ECF #454) (emphasis added).

for substantive changes).94 After a careful analysis of Louisiana law, the Court

concluded that the amendment was procedural in nature because its application only

impacted the determination of the applicable prescriptive period; it did not change

any of the substantive elements of the revocatory action contained in La. Civ. Code

art. 2036 or create a new right or cause of action.95 Thus, the Court concluded the

amendment could be applied retroactively.

In reaching that conclusion, however, the Court also found that retroactive

application could not operate to divest the defendants of vested rights. Thus, given

the effective date of the amendment, August 1, 2013, the Court ruled that the

defendants had a vested right in asserting that any claim arising more than three

years before August 1, 2013, which is August 1, 2010, was perempted under the

existing three year peremption rule in Article 2041:

Here, the question is whether the 2013 amendment adding

the exception for fraud would divest Crescent of the right

to plead peremption on any of the claims against it. That

would only be true as to a claim that had already been

perempted as of the effective date of the amendment,

August 1, 2013. Given the three year peremptive period,

that would mean any claim for transactions occurring prior

to August 1, 2010. Any claim for transactions occurring

after August 1, 2010 would have still been alive on August

1, 201[3] and thus would be subject to the new fraud

exception.96

94 See La. Civ. Code art. 6 (“In the absence of contrary legislative expression, substantive laws

apply prospectively only. Procedural and interpretative laws apply both prospectively and

retroactively, unless there is legislative expression to the contrary.”). “A substantive law is one that

creates an obligation; its acts are generally defined as those which create, confer, define, or destroy

rights, liabilities, causes of action or legal duties.” National Equity Life Ins. Co. v. Eicher, 633 So. 2d

1351, 1354-1355 (La. App. 1st Cir. 1994). “Procedural acts describe methods for enforcing, processing,

administering, or determining rights, liabilities, or status.” Id. See also Ebinger v. Venus Const. Corp.,

65 So. 3d 1279, 1285 (La. 2011); Chance v. Am. Honda Motor Co., 635 So. 2d 177, 178 (La. 1994) (both

cases holding that changes to prescription statutes cannot operate retroactively to divest a party of

rights that have already vested). See also, Matter of O’Connor, 153 F.3d 258, 262 (5th Cir. 1998) (“While

this article [a Louisiana Civil Code article defining when the interruption of prescription against a

surety becomes effective against the principal obligor] was not in effect when the option contract was

made, it is retroactive because the statute addresses prescription so it is procedural.”), citing Chance,

635 So. 2d at 178.

95 See October 27, 2021 Memorandum Opinion, pp. 17-21 (ECF #206).

96 Id. at p. 20.

During the hearing on the present matters before the Court, counsel for the

parties and the Court again engaged in a discourse as to whether the amendment to

Article 2041 was substantive rather than procedural in nature. Although the parties

did not formally ask the Court to reconsider its ruling on this matter, the Court stated

during the hearing that it would take a second look at this question.97

On second look, the Court will abide by its original determination on the issue

for several reasons. First, the Louisiana Supreme Court’s analysis of the fraud

exception to the three year peremptive period on attorney malpractice actions in

Lomont shows that the determination of whether the exception is triggered is a

procedural question. The issue there was raised in a peremptory exception of

prescription, which is a Louisiana procedural tool for determining issues such as

prescription in advance of trial on the merits of the underlying claim. The court

reviewed the evidentiary record, concluded the fraud exception had been triggered,

and then remanded the case to the trial court for further proceedings on the

underlying claim.

Following the remand, in a subsequent appeal of the case, the court discussed

the difference between the procedure to establish fraud for purposes of determining

whether the exception to peremption had been triggered and the trial on the merits

of the underlying malpractice claim:

We note that Ms. Lomont, in her pleadings to the district

court and this Court, has also taken an expansive position

regarding the scope of the ruling of the Louisiana Supreme

Court in the first appeal of this matter, arguing that its

ruling has resolved the issue of Ms. Myer-Bennett’s

liability for legal malpractice, and that the only issue left

to be tried is the amount of Ms. Lomont’s damages. We note

that the only ruling issued by the Supreme Court is an

97 See Fed. R. Bankr. P. 7054, which makes Fed. R. Civ. P. 54(b) applicable to bankruptcy cases.

Rule 54(b) authorizes a court to modify an interlocutory order. See United States v. Renda, 709 F.3d

472, 479 (5th Cir. 2013) (“Rule 54(b) authorizes a district court to reconsider and reverse its prior

rulings on any interlocutory order for any reason it deems sufficient.”) (internal quotation marks and

citation omitted). The Court may exercise this authority sua sponte. See McKethan v. Texas Farm

Bureau, 996 F.2d 734, 736 n. 6 (5th Cir. 1993) (approving district court’s sua sponte reversal of a denial

of partial summary judgment); Stephens v. Fla. Marine Transporters, Inc., No. 12-1873, 2013 WL

5236624, at *1, n. 1 (E.D. La. Sept. 16, 2013) (sua sponte reconsidering a ruling on a motion in limine).

interlocutory ruling on an exception of peremption,

wherein the Court made a factual determination, based

upon the evidence in the record before it at that time,

regarding Ms. Myer-Bennett’s fraudulent concealment of

an act that is alleged to be legal malpractice. Ms. Lomont

appears to erroneously fail to make a distinction between

fraud in the post-malpractice concealment of an act that is

alleged to constitute legal malpractice, and the act of

alleged legal malpractice itself. In the Supreme Court’s

Lomont opinion, it succinctly discussed this distinction in

analyzing whether the fraud exception in La. R.S.

9:5605(E) applies to fraudulent acts of post-malpractice

concealment, or only where the fraudulent act itself

constitutes the malpractice. We therefore note that there

has been no trial on the merits of the alleged legal

malpractice, no finding of fact as to the alleged legal

malpractice (as distinguished from the Supreme Court’s

factual finding of subsequent fraudulent concealment of an

act that is alleged to be legal malpractice), and no judgment

rendered on Ms. Lomont’s underlying legal malpractice

claim.98

This excerpt explains that whether a prescriptive period should be extended

for fraud is a separate procedural determination from the determination of the merits

of the underlying action. Thus, the Supreme Court’s decision in Lomont, and the

lower court’s interpretation of that decision, indicate that the fraud determination in

a prescriptive statute is a procedural inquiry, not a determination of the actual cause

of action.

Second, Crescent sought leave from the district court to appeal this Court’s

interlocutory order, which was denied on the grounds that (i) Crescent had failed to

show that this Court applied the incorrect standard for answering the question; (ii) it

would have only a minor impact on discovery and related motion practice in the

adversary proceeding; and (iii) the issue will be reserved and can be reviewed after a

final judgment based on the entirety of the record.99 Thus, since the issue is preserved

in the event there is an appeal following a final judgment in this case, the more

98 Lomont v. Myer–Bennett, 210 So. 3d 435, f. 3 (La. Ct. App. 2016).

99 See Crescent Bank & Tr. v. Cadle Co. II, Inc., 2022 WL 569746, at *4 (W.D. La. Feb. 24, 2022).

efficient course of action is to treat this Court’s previous decision as the law of the

case.

This brings the Court to its third reason for resting on its original decision:

reversing that decision would not avoid a determination of the fraud exception. Even

if the amendment to Article 2041 were limited to prospective application only, it

would still apply from the August 1, 2013 effective date forward and therefore include

some periods beyond the standard three year look-back period from the petition date

if it is shown that this is a case of fraud. Thus, the trial court would still have to

determine whether at least some of the transfers trigger the exception to the three

year prescriptive period “in cases of fraud.”

B. Count 2: Actual Fraud under § 548

The Trustee has asserted a claim for actual fraud under 11 U.S.C.

§ 548(a)(1)(A). Both the Non-Bank Defendants and Crescent have moved for partial

summary judgment on the grounds that the Trustee has failed to prove the elements

of actual fraud. “To prevail on a claim for fraudulent transfer under § 548(a)(1)(A),

the Trustee must prove the following elements: (1) a transfer was made of the

Debtor’s property; (2) the transfer was made within two years of the Petition Date;

and (3) the transfer was made with actual intent to hinder, delay, or defraud the

Debtor’s creditors.”100 The Fifth Circuit has identified various “badges of fraud” that

tend to evidence a transfer made with intent to defraud under § 548:

(1) the lack or inadequacy of consideration; (2) the family,

friendship or close associate relationship between the

parties; (3) the retention of possession, benefit or use of the

property in question; (4) the financial condition of the party

sought to be charged both before and after the transaction

in question; (5) the existence or cumulative effect of the

pattern or series of transactions or course of conduct after

the incurring of debt, onset of financial difficulties, or

100 In re Advanced Modular Power Sys., Inc., 413 B.R. 643, 673 (Bankr. S.D. Tex. 2009), aff’d sub

nom. Hsu v. West, No. ADV 08-03177, 2009 WL 7760300 (S.D. Tex. Dec. 30, 2009) (citing § 548(a)(1)(A);

Havis v. AIG Sunamerica Life Assurance Co. (In re Bossart), No. 06–3540, 2007 WL 4561300, at *8

(Bankr. S.D. Tex. Dec. 21, 2007)).

pendency or threat of suits by creditors; and (6) the general

chronology of events and transactions under inquiry.101

Both the Non-Bank Defendants and Crescent have moved for partial summary

judgment on this claim on the grounds that the Trustee has failed to prove the

elements of actual fraud. The Trustee counters that the transfers (both the

Consolidated Transfers and the Partner Distributions) satisfy many of the badges of

fraud because they were made to the Non-Bank Defendants either directly or through

entities controlled by them, and the transfers directly benefited the Non-Bank

Defendants.

Based on the summary judgment record, it appears that many of the Badges

of Fraud are present here and may support an inference of actual intent to defraud

by the Non-Bank Defendants. However, and even though the Trustee did not move

for summary judgment on the actual fraud aspect of her § 548(a)(1)(A) claim, the

Court nonetheless notes that this same evidence depicts a long-standing arrangement

between the Non-Bank Defendants, First NBC and Crescent, which may counter

against a finding of actual fraud. Moreover, as noted above, the Non-Bank

Defendants claim the Debtor was utilizing a building owned by Consolidated for its

offices, which may support part of the Consolidated Transfers. The Court simply

cannot weigh this evidence at the summary judgment stage.

Accordingly, the Court denies the Non-Bank Defendants and Crescent’s

Motions for Partial Summary Judgement on Count 2.

C. Count 3: Constructive Fraud under § 548

The Trustee seeks summary judgment on her claim for constructive fraud

under § 548(a)(1)(B). “[T]o establish a claim for avoidance of a transfer as

constructively fraudulent under § 548(a)(1)(B), the [Trustee] must prove each of the

following elements: (i) that the transfer was of an interest of the Debtor in property;

(ii) that the Debtor made the transfers on or within two years before the petition date;

(iii) that the Debtor received less than a reasonably equivalent value in exchange for

101 Soza v. Hill (In re Soza), 542 F.3d 1060, 1067 (5th Cir. 2008) (citations omitted).

the transfers; and, inter alia, (iv) that the Debtor was insolvent on the date that the

transfer was made or that the Debtor intended to incur, or believed he would incur,

debts that would be beyond his ability to pay as such debts matured.”102 “Put simply,

this section allows a trustee to nullify certain inflated transactions to conserve the

debtor’s estate for the benefit of creditors. Any significant disparity between the value

received and the obligation assumed will have significantly harmed the innocent

creditors of the debtor. Unlike the provisions on actual fraud, the constructive fraud

provision is not concerned with the debtor’s intent, but rather the value the debtor

received.” 103

Under the constructive fraud theory, “[w]hether a debtor received reasonably

equivalent value is a two-part inquiry: (1) whether the debtor received value, and (2)

whether that value was reasonably equivalent.”104 Value, which is determined on the

date of transfer, is not subject to later fluctuations in the value of assets, nor is it

necessary for a debtor to receive exact equivalent value.105 “There is no bright line

rule used to determine when reasonably equivalent value is given. The important

elements to consider are (1) fair market value and (2) whether there was an arm’s

length transaction. A determination of reasonably equivalent value is ‘fundamentally

one of common sense, measured against market reality,’” and courts look to the

totality of the circumstances.106 However, “[w]hen a debtor makes a payment on

antecedent debt and receives a dollar-for-dollar reduction of that debt, however, the

question is easy because the debtor by definition receives reasonably equivalent

value—indeed, exactly equivalent value, assuming, of course that the debt itself was

based upon value.”107

The Trustee alleges that the Debtor did not receive “reasonably equivalent

value” for its transfers to Consolidated, in that the Trustee claims the Debtor received

102 In re Triplett, 651 B.R. 196, 202–03 (Bankr. E.D. Tex. 2023).

103 Matter of Louisiana Pellets, Inc., 838 F. App’x 45, 49 (5th Cir. 2020) (citations and internal

quotation marks omitted).

104 Id.

105 Id.

106 In re Lindell, 334 B.R. 249, 255–56 (Bankr. D. Minn. 2005) (citations omitted).

107 Louisiana Pellets, 838 F. App’x at 50 (citations omitted, emphasis in original).

nothing of value. In their response to the Trustee’s Motion for Partial Summary

Judgment on the constructive fraud issue, they correctly note that “reasonably

equivalent value” is a factual determination, and they point to facts tending to show

that the Debtor may have received such value by paying Consolidated, including the

fact that the Crescent loan to Consolidated was secured in part by a mortgage in an

office where one of the Debtor’s offices was located.108

The problem is that whether the Debtor received “reasonably equivalent value”

is a factual issue. The summary judgment record contains opposing facts and

competing interpretations of those facts on these claims. It is impossible to reach a

finding of fact on summary judgment on constructive fraud because to do so would

require making numerous judgment calls and weighing evidence, something that is

not permitted under Rule 56. (The Court also notes that this would be only a partial

summary judgment because the parties did not address all of the elements, such as

insolvency.) Accordingly, summary judgment will be denied.

D. Count 4: Transferee Liability under § 550

All three motions seek summary judgment on Count 4, which states: “To the

extent the Transfers are avoided under any of counts three, four, or five of this

Complaint, the Trustee is entitled to recover the value of the avoided transfers from

Consolidated, Linder and Biggs, as initial transferees and/or beneficiaries of the

avoided transfers, and Crescent, as immediate and/or mediate transferee” under 11

U.S.C. § 550.109 Section 550 provides, in relevant part:

(a) Except as otherwise provided in this section, to the

extent that a transfer is avoided under

section 544, 545, 547, 548, 549, 553(b), or 724(a) of this

title, the trustee may recover, for the benefit of the estate,

the property transferred, or, if the court so orders, the

value of such property, from—

(1) the initial transferee of such transfer or the

entity for whose benefit such transfer was made; or

108 See Non-Bank Defendants’ Opposition to the Trustee’s Motion, p. 4 (ECF #446).

109 See Amended Complaint, ¶ 96 (ECF #74).

(2) any immediate or mediate transferee of such

initial transferee.

(b)The trustee may not recover under section (a)(2) of this

section from—

(1) a transferee that takes for value, including

satisfaction or securing of a present or antecedent

debt, in good faith, and without knowledge of the

voidability of the transfer avoided; or

(2) any immediate or mediate good faith transferee

of such transferee. . . .

Id.

The Non-Bank Defendants raise the simple argument that the Trustee is

limited to the specific underlying counts listed in the Complaint, i.e., Counts 3, 4, or

5, and so cannot seek transferee liability under the unlisted counts, i.e., Count 1 (the

Louisiana revocatory action relating to the Consolidated Transfers, even though

Count 5, the Louisiana revocatory action relating to the Partner Distributions, is

included) or Count 2 (actual fraudulent transfer under § 548).110 The Non-Bank

Defendants also point out that Count 4 references itself as the basis for transferee

liability, which is nonsensical.111 In response, the Trustee argues that this is clearly

a typo, that the Non-Bank Defendants’ harsh reading ignores other language

throughout the Amended Complaint that makes the intent clear, and that the typo

in that paragraph does not prejudice the Defendants.112 The Court agrees that the

Plaintiff’s intent is clear and does not prejudice the defendants. Accordingly, the

Court denies summary judgment on the Non-Bank Defendants’ argument.

Crescent asserts a more substantive basis for summary judgment on Count 4.

It argues that under § 550(b), the Trustee may not recover against Crescent because

it took the transfers for value, in good faith, and without knowledge of the voidability

110 See Non-Bank Defendants’ Memorandum in Support of Motion for Partial Summary Judgment,

p. 27 (ECF #398).

111 Id.

112 See Trustee’s Opposition to the Non-Bank Defendants’ Motion for Partial Summary Judgment,

p. 2 (ECF #454).

of the transfer involved.113 The Trustee points out that Crescent knew that

Consolidated could not be the actual source of the funds it was using to repay the

Crescent loan because it received financial statements not only from Consolidated

(showing negative net worth and income from 2010 through 2017) but also from Roger

Linder and the Debtor.114 These factual arguments are well taken because they create

substantial doubt as to whether Crescent accepted the Consolidated loan repayments

in good faith and without knowledge of their voidability. Because it would be

impossible for the Court to make these findings of fact without weighing the evidence

and making credibility calls, summary judgment is not appropriate under the Rule

56 standard, so Crescent’s Motion for Partial Summary Judgment will be denied as

well.

E. Count 7: Suit on an Open Account

Assuming, as explained above, that the Court has jurisdiction to determine

Count 7, the Court finds that the claim should be dismissed. In Count 7 of the

Complaint, Cadle, as the successor to the Debtor with respect to amounts owed by

Consolidated to the Debtor, asserts a claim on an open account under Louisiana law,

La. R.S. § 9:2781, against Consolidated. The Non-Bank Defendants argue that

Louisiana’s open account statute is strictly construed, and because there was no “open

account” between Consolidated and the Debtor, this claim fails as a matter of law.115

The Non-Bank Defendants’ argument is compelling, as an “open account”

under Louisiana law does not simply mean the creation of any debt but instead

anticipates that the account is for services or goods rendered, and they point out that

Cadle’s own corporate representative admitted at Cadle’s 30(b)(6) deposition that the

debt in question is not an open account and that the claim should have been amended

to a contract claim.116

113 See Crescent’s Memorandum in Support of Motion for Partial Summary Judgment, pp. 21-24

(ECF #420-5).

114 See Trustee’s Opposition to Crescent’s Motion for Partial Summary Judgment, pp. 13-16 (ECF

#451).

115 See Non-Bank Defendants’ Memorandum in Support of Motion for Partial Summary Judgment,

pp. 27-28 (ECF #398).

116 Id.

In response, the Trustee cites no law showing that Count 7 actually involves

an open account and indeed admits that its claim against Consolidated “is more akin

to a claim for an unpaid loan or breach of contract than a claim for open account.”

Given those admissions, the Court recommends granting the Non-Bank Defendants’

Motion in part and dismissing Count 7.

Affirmative Defenses

Finally, the Trustee seeks to strike the defendants’ affirmative defenses.117 The

Court believes these issues are best reserved for trial to the extent they have not

already been address, especially because the Trustee’s brief cites very little law or

evidence in support of her contentions. Nevertheless, the Court will briefly address

each of these defenses in the interest of completeness.

Standing: As the Trustee notes, the Court has previously ruled on the

standing issue. As such, there is no need to address it again.118

Statutes of Limitations: The defendants raised the affirmative defense of

statutes of limitations under various formulations, and the Trustee’s brief devotes

four paragraphs to the subject at a high level. The Court does not believe it prudent

to take action on such thin briefing, especially when specific timeliness issues are

better addressed on a claim-by-claim basis, as with the prescription/peremption

discussion under the Louisiana revocatory action above.

Waiver and Estoppel: This is an inherently factual question that will need

to be resolved at trial.

Good Faith and Value: This is an inherently factual question that will need

to be resolved at trial.

117 See Trustee’s Memorandum in Support of Motion for Partial Summary Judgment, pp. 29-36

(ECF #309).

118 See, e.g., the Court’s May 1, 2020 Order Granting Motion for Abstention as to Counts I and II

of the Complaint, Denying Motion to Dismiss, and Denying Motion to Transfer Venue (ECF #71),

which rejected the argument raised in Crescent’s Motion (ECF #41) that the Trustee lacks standing to

bring the Chapter 5 claims because she allegedly sold those claims to Cadle. See also In re S. Coast

Supply Co., 91 F.4th 376 (5th Cir. 2024) (holding that a preference claim arising under § 547 of the

Bankruptcy Code is an estate asset that a trustee is free to sell, and the purchaser need not be a

representative of the estate to pursue such a purchased preference claim).

Laches and/or Failure of Discussion: As the Trustee acknowledges, to the

extent this applies, it would apply to the revocatory action, which will need to be tried.

Failure to State a Claim: The Trustee acknowledges that the Court has

already ruled on the defendants’ previously asserted motions to dismiss for failure to

state a claim. This is not a live issue.

Revocatory Action; Waiver (Failure to Identify a Predicate Creditor):

The Trustee acknowledges that the Court already addressed this issue, and indeed

the Trustee has since identified three potential predicate creditors (i.e., Triggering

Creditors) that could support a revocatory action. There is no need to relitigate this

issue.

Damages Caused by Another, Setoff and/or Recoupment, and Consent:

The Trustee argues that these affirmative defenses are not available under the

Chapter 5 claims at issue, but the Trustee’s briefing is short and conclusory. The

Court will reserve these issues for trial where they can be better presented, if at all,

by the parties.

Assumption of Risk and Sale of Litigious Right: These concern Cadle’s

purchase of certain notes from the FDIC. The Trustee’s briefing is not extensive, and

these issues are better reserved for trial, when they can be developed by the parties.

Res Judicata and/or Collateral Estoppel: The Court has already ruled on

these issues and will not relitigate them here.119

Because the Court believes that each of these issues has either already been

addressed or will need to be tried, summary judgment on the affirmative defenses

will be denied.

Conclusion

For the reasons set out above,

119 In its Opposition to the Trustee’s Motion, p. 15 (ECF #455), “Crescent admits that this issue

[i.e., res judicata/collateral estoppel] has already been ruled upon through this Court’s orders on

Crescent’s First, Second, and Third Motion to Dismiss [ECF 41, 42, 85, 87, 165 and 166]” but reserves

the right to raise its arguments on appeal.

IT IS RECOMMENDED that the Non-Bank Defendants’ Motion for Partial

Summary Judgment (ECF #397) be GRANTED IN PART as to Count 7 (Suit on Open

Account). Otherwise,

IT IS ORDERED that the Non-Bank Defendants’ Motion for Partial Summary

Judgment (ECF #397) be DENIED IN PART and that the Plaintiff’s and

Crescent’s Motions for Partial Summary Judgment (ECF ##408 and 420) be

DENIED.

IT IS FURTHER ORDERED that the defendants who previously moved to

withdraw the reference file new motions to withdraw the reference to the

bankruptcy court so that the case may proceed to a jury trial before the district

court, with the requirement that the motion to withdraw the reference be filed

within thirty (30) days from the date of this ruling.