Opinion

UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF ALABAMA

SOUTHERN DIVISION

REGIONS BANK, et al. , }

}

Plaintiffs, }

}

v. } Case No.: 2:25-cv-01772-MHH

}

MONTGOMERY TRANSPORT }

GROUP, INC. et al, }

}

Defendants.

MEMORANDUM OPINION AND ORDER

Nucor has moved for relief from the receivership order in this case. (Doc.

37). Nucor is a steel manufacturer that contracted with the defendants, the

Montgomery Transport entities, to transport Nucor’s products to customers. (Doc.

37, p. 3, ¶ 7). The Receiver contends that Nucor must pay the defendants’ estate for

the defendants’ transportation services. (Doc. 37, pp. 4–5). Nucor seeks setoff

and/or recoupment for the amounts it owes based on the Montgomery Transport

defendants’ failure to pay subcontracted carriers and the defendants’ obligation to

indemnify Nucor against customer claims. (Doc. 37, pp. 3–7; Doc. 56, p. 10). The

Receiver opposes Nucor’s motion; the Receiver argues that Nucor is in the same

position as other unsecured creditors and may not setoff or recoup contingent,

unliquidated claims against the estate’s liquidated claims. (Doc. 50). The Court

held a hearing on this matter on April 16, 2026, and ordered supplemental briefing

on choice of law issues. (Docs. 82, 85, 86).

This opinion resolves Nucor’s motion. The Court first discusses the choice

of law issues concerning Nucor’s motion. Then, consistent with that law, the Court

considers whether Nucor’s requests for relief qualify as recoupment and/or setoff.

Finally, the Court identifies a procedure to resolve Nucor’s requests for relief.

***

Generally, courts look to federal bankruptcy law and historical equity practice

to interpret and implement a receivership order. See Sec. & Exch. Comm’n v. Quiros,

966 F.3d 1195, 1199 (11th Cir. 2020) (“Given the similarity between bankruptcy

and receivership proceedings, we often apply bankruptcy principles to receivership

cases because we have limited receivership precedent.”); Bendall v. Lancer Mgmt.

Grp., LLC, 523 Fed. Appx. 554, 557 (11th Cir. 2013) (“Given that a primary purpose

of both receivership and bankruptcy proceedings is to promote the efficient and

orderly administration of estates for the benefit of creditors, we will apply cases from

the analogous context of bankruptcy law, where instructive, due to limited case law

in the receivership context.”).

The Bankruptcy Code preserves the right of setoff, but 11 U.S.C. § 553 “does

not create a right of setoff. . . . Substantive law, usually state law, determines the

validity of the right.” In re Patterson, 967 F.2d 505, 509 (11th Cir. 1992) (citations

omitted), abrogated in part on other grounds, Citizens Bank of Maryland v. Strumpf,

516 U.S. 16 (1995) (finding that bank could freeze debtor’s account pending

resolution of setoff claim); see also, e.g., In re Esteva, No. 23-14050, 2025 WL

2171062, at *7 (11th Cir. July 31, 2025) (citation omitted) (“Section 553 provides

limits on the enforcement of state setoff laws—it ‘does not create a right of setoff.’”).

Similarly, the Bankruptcy Code does not create or limit a right of recoupment.1

As a federal court sitting in Alabama, this Court applies Alabama’s conflict

of law rules. See, e.g., Colonial Life & Acc. Ins. Co. v. Hartford Fire Ins. Co., 358

F.3d 1306, 1308 (11th Cir. 2004) (“A federal court in a diversity case is required to

apply the laws, including principles of conflict of laws, of the state in which the

federal court sits.”). “Alabama law has long recognized the right of parties to an

agreement to choose a particular state’s laws to govern an agreement.” Cherry,

Bekaert & Holland v. Brown, 582 So. 2d 502, 506 (Ala. 1991).

The estate’s right to payment from Nucor, if any, derives from the contracts

between Nucor and the Montgomery Transport entities. (See Doc. 37, p. 7, ¶ 28;

Doc. 50, p. 3, ¶¶ 5–7). The choice of law clauses in the contracts state that the

1 The Bankruptcy Code does not mention recoupment, but recoupment has “long [been] applied in

the bankruptcy context.” 5 Collier on Bankruptcy ¶¶ 553.04, 553.10 (16th ed. 2026). Bankruptcy

law places certain limitations on setoffs but not recoupment. See 11 U.S.C. § 553 (preserving

setoff rights “except to the extent” that certain exclusions apply); 5 Collier on Bankruptcy ¶ 553.10

(16th ed. 2026) (“[A]s a general rule, the requirements and limitations of section 553 do not apply

to recoupments.”). The Receiver has not argued that the special exclusions in 11 U.S.C. § 553 for

setoffs apply here; rather, the Receiver argues that there is no underlying state right to setoff or

recoupment.

agreements “shall be governed by and construed in accordance with the laws of the

State of Delaware” and that each party “expressly and irrevocably consents to the

exclusive jurisdictions of the state and federal courts located in the State of Delaware

. . . for any litigation which may arise out of or be related to this Master Agreement

or any other agreement related hereto.” (Doc. No. 37-1, pp. 17, 42, 92). The parties

agree that under these clauses, Delaware law applies to Nucor’s recoupment claims.

(Doc. 85, p. 3; Doc. 86, p. 3, ¶ 4).

With respect to Nucor’s requests for setoff, Nucor argues that Delaware law

applies because the requests concern the master agreements. (Doc. 85, pp. 3–4).

The Receiver disagrees. The Receiver argues:

Nucor’s alleged right to setoff is governed by Delaware

law if its claims arise from the MTA and by Alabama law

if they do not. This issue is not as straightforward as it

seems because the supposed “carrier claims” allegedly

giving rise to Nucor’s right of setoff are not only

contingent, unliquidated, and disputed, but the vast

majority are actually unasserted. Nucor has provided no

details concerning the carriers or the underlying claims in

question and no analysis of how those claims are subject

to the indemnification provisions of the MTA. It is

therefore not possible to evaluate whether these

hypothetical claims arise from the MTA, or if they are

based on tort, or even if they are truly more of a “remedy”

to counterclaim, which would require the Court to use the

lex fori test, resulting in the application of Alabama law.

(Doc. 86, pp. 4–5).

The contingent, unliquidated, or disputed nature of Nucor’s recoupment or

setoff claims does not change the fact that the claims relate to the master

agreements.2 To the extent that the Receiver suggests that Alabama law applies to

all setoff claims because setoff is a remedy, the Court is not persuaded. The choice

of law provision in the master agreements is broad enough to cover demands for

setoff where Nucor’s liability and the amount it seeks to setoff are related to the

master agreement. Application of Delaware law also best accords with the parties’

expectations and Alabama’s general approach to conflict of laws.

The parties have not cited, and the Court has not found, an Alabama case that

discusses conflict of law rules for setoff claims. Generally, Alabama follows “the

traditional view of the Restatement (First) of Conflicts of Law.” Ex parte U.S. Bank

Nat. Ass’n, 148 So. 3d 1060, 1070 (Ala. 2014) (citing Fitts v. Minnesota Min. &

Mfg. Co., 581 So. 2d 819, 820–23 (Ala. 1991)) (applying First Restatement rule of

lex loci delicti to tort case). Occasionally, the Alabama Supreme Court has cited the

2 If Nucor intends to setoff amounts that do not relate to the master agreements, the company has

not provided “facts from which the court could . . . determine[] which state’s law might . . .

appl[y],” so the Court will default to Alabama law for such claims. Sun Life Assurance Co. of

Canada v. Imperial Premium Fin., LLC, 904 F.3d 1197, 1207–09 (11th Cir. 2018) (explaining that

district courts may default to forum law if the foreign law proponent fails to adequately plead

application of foreign law). Under the Eleventh Circuit’s binding interpretation of Alabama law,

a defendant may not setoff immature claims against mature ones, even in the event of bankruptcy.

In re Patterson, 967 F.2d 505, 509 (11th Cir. 1992). Because the Court does not believe the

question is before it, the Court does not decide whether Alabama law or bankruptcy law would

allow setoff for claims that mature during receivership proceedings. See 5 Collier on Bankruptcy

¶¶ 553.04, 553.03[1][h][i]–[ii] (16th ed. 2026) (discussing possibility of contingent claims

ripening).

Restatement (Second) of Conflict of Laws for narrow purposes. See, e.g., Foster v.

Foster, 304 So. 3d 211, 216 (Ala. 2020); Ex parte Bentley, 50 So. 3d 1063, 1070–

74 (Ala. 2010).

Under the First Restatement,

The law of the forum determines whether a claim of a

defendant may be pleaded by way of set-off or

counterclaim.

Comment

a. When counterclaim alters effect of original transaction.

The rule stated in this Section is applicable to determine

what disputes between the parties may be tried in the same

action. It is not applicable[,] however, where to allow a

set-off or counterclaim constitutes an alteration of the

rights of the parties as determined by the original

transaction. Thus, if a negotiable promissory note is

executed and delivered to the payee and endorsed to a

holder in due course in a state where such holder is not

subject to any set-off or counterclaim which the maker

might have against the payee, no such set-off or

counterclaim will be allowed in an action between the

holder and the maker although suit is brought in a state

where such set-offs or counterclaims are generally

allowed. Conversely, if a negotiable promissory note is

made and endorsed to a holder in due course in a state

where the holder is subject to a set-off which the maker

has against the payee, such set-off will be allowed

although suit is brought in a state where set-offs are

generally not allowed.

Restatement (First) of Conflicts of Law § 593 & cmt. a.

Similarly, under the Second Restatement:

The forum will apply its own local law in determining

whether a claim may be pleaded by way of set-off,

counterclaim or other defense unless under the otherwise

applicable law the defendant's claim, if allowed, would

operate to qualify the plaintiff's claim in whole or in part.

In the latter event, the defendant will be permitted to plead

his claim as a defense.

Comment

a. Rationale. Ordinarily, the question is simply whether

the parties’ claims against each other can be disposed of in

a single action. In such a case, the local law of the forum

governs and will be applied to determine whether the

defendant may plead his claim against the plaintiff by way

of set-off, counterclaim or other defense in the plaintiff's

action. There are, however, the exceptional situations

discussed in Comment c.

b. Whether the defendant may plead a claim by way of set-

off, counterclaim or other defense must be distinguished

from the question whether the defendant has a claim to

assert. This latter question is determined by the otherwise

applicable law. Suppose, for example, that an instrument

in the form of a promissory note, which was executed and

made payable in state X, is delivered and endorsed to a

holder in X, who under X local law takes the instrument

free from certain defenses that the maker might have

against the payee. In a suit by the holder against the maker

in state Y, the maker will not be permitted to assert such

defenses against the holder, even though he will have been

permitted to do so by the Y courts if his obligations under

the instrument had been governed by Y local law (compare

§ 214). Conversely, the maker would be permitted by the

Y courts to raise such defenses against the holder as are

accorded him by X local law even though he would not

have had such defenses if his obligations under the

instrument had been governed by Y local law.

c. When defendant’s claim qualifies plaintiff's claim.

Situations will arise where under the otherwise applicable

law the defendant's claim, if allowed, would operate to

qualify in whole or in part the plaintiff’s claim. In such

situations, the question is not simply one of avoiding two

suits. Rather, the question is whether the plaintiff’s claim

against the defendant is reduced or extinguished by the

defendant’s claim against the plaintiff. In such situations,

the defendant will be permitted to plead his claim as a

defense.

Restatement (First) of Conflicts of Law § 128 & cmts. a, b & c.

In sum, under either Restatement’s formulation, the underlying substantive

law (here, Delaware) governs whether there is an underlying substantive right to

setoff, while the law of the forum governs how this right should be pleaded, a

procedural issue. For procedural issues, the relevant “forum” is federal court. See,

e.g., Smith v. R.J. Reynolds Tobacco Co., 880 F.3d 1272, 1280–81 (11th Cir. 2018)

(“In diversity of citizenship actions, state law defines the nature of defenses, but the

Federal Rules of Civil Procedure provide the manner and time in which defenses are

raised.”). Neither the Federal Rules of Civil Procedure nor federal bankruptcy

practice prohibits a party from asserting setoff as a defense or counterclaim if there

is a valid claim for setoff under state law. See 5 Collier on Bankruptcy ¶¶ 553.03,

553.11 (16th ed. 2026). Accordingly, the Court applies Delaware law to resolve

Nucor’s setoff and recoupment claims.

***

Both setoff and recoupment involve a defendant’s attempt to reduce the

amount the defendant owes a plaintiff by amounts the plaintiff owes the defendant.

For this reason, parties sometimes use the terms “setoff” and “recoupment”

interchangeably, even though the two doctrines are not identical. See generally 5

Collier on Bankruptcy ¶ 553.10 (16th ed. 2026).3 “[T]he chief distinction” between

setoff and recoupment is “that the defense of set-off arises out of an independent

transaction, but the defense of recoupment goes to the reduction of the plaintiff’s

damages for the reason that he, himself, has not complied with the cross obligations

arising under the same contract.” Finger Lakes Cap. Partners, LLC v. Honeoye Lake

Acquisition, LLC, 151 A.3d 450, 453 (Del. 2016).

“[T]he fact that a single contract is involved does not suffice to demonstrate

that the necessary transactional nexus exists” for recoupment. TIFD III-X LLC v.

Fruehauf Prod. Co., 883 A.2d 854, 864 (Del. Ch. 2004); see also Finger Lakes, 151

A.3d at 452, 454 (approving of TIFD’s analysis and stating that “the transactional

nexus requirement under recoupment [is] tightly constrained”). If both claims relate

to the same “contract[] involving [a] one-off transaction[], such as loans or sales of

3 Nucor argues both setoff and recoupment in its motion and reply, (Doc. 37, pp, 10–11; Doc. 56,

p. 3), but the Receiver did not address recoupment in its response, other than one reference to

“recoupment or setoff,” (Doc. 50, p. 7). During the hearing, the Receiver argued that Nucor’s

recoupment claims fail for the same reason that Nucor’s setoff claims allegedly fail. In its

supplemental brief on the conflict of laws question, the Receiver argued that Nucor’s recoupment

claims fail under Delaware law because the claims do not share a “common factual core” with the

Receiver’s claims. (Doc. 86, pp. 9–10).

goods or services, . . . it is sensible to consider the plaintiff’s own performance under

the contract in evaluating its claim for damages against the defendant[;]” however,

not all claims related to a contract establishing “a long-term, ongoing relationship”

will be sufficiently related to each other for recoupment purposes. TIFD, 883 A.2d

at 864 (not all claims related to partnership agreement sufficiently related); see also

Finger Lakes, 151 A.3d at 451–52, 454 (finding that defendant could not use

recoupment to subtract years of overdue unprofitable portfolio company

management fees from plaintiff’s share of proceeds from sale of profitable portfolio

company, even though both claims were related to a term sheet governing the

parties’ overall relationship).

Nucor’s unpaid carrier claims most likely qualify as recoupment claims.

Nucor’s contracts with the defendants provided that the defendants could ship

products themselves or could subcontract the shipping to other carriers. (Doc. 37-1,

pp. 3, 29, 54). In the latter scenario, the defendants agreed to pay the carriers, to

require carriers to perform in accordance with the terms of their contract with Nucor,

and to indemnify Nucor for claims by carriers. (See, e.g., Doc. 37-1, pp. 3–4, 7, 13–

14). Nucor asserts that the defendants are entitled to payment only “if they actually

paid the freight carriers,” i.e., if they performed their obligations under the contract.

(Doc. 56, pp. 8–9, ¶ 26). For each shipment, the payments the defendants allegedly

owed the carriers presumably are slightly lower than what Nucor would have owed

the defendants for the same shipment. An individual shipment is equivalent to a

“contract[] involving one-off transactions,” TIFD, 883 A.2d at 864, even if the terms

of those shipments are set in part by an overarching agreement.

Nucor’s customer claims may require setoff in addition to recoupment. For

example, Nucor has asserted claims for shipments which were not actually delivered

or which were damaged in transit. (See Doc. 37, pp. 4–5, Doc. 37-1, p. 102). In

these cases, the amount the Montgomery Transport defendants owe Nucor may be

more than Nucor owes the defendants for the shipment. For each shipment, Nucor

may assert recoupment up to the amount Nucor owes the Montgomery Transport

defendants on that specific shipment. If Nucor wishes to credit excess damages from

one shipment against the amount it owes the defendants on other shipments, Nucor

must meet the requirements for setoff, not just recoupment.

***

The Receiver argues primarily that Nucor may not setoff or recoup its losses

because the losses are contingent, unmature, or unliquidated. (Doc. 50, pp. 5–7,

¶¶ 8–11). Nucor does not dispute that its right to recoupment or setoff is contingent

upon whether it is liable to the carriers or its customers.4

4 The Receiver does not dispute that, even though the Montgomery Transport defendants—not

Nucor—contracted with the carriers, state law may make Nucor liable for nonpayment unless the

defendants had the carriers expressly release Nucor from liability. (Doc. 37, pp. 6, 8–9, ¶¶ 20–

24, 31–36; Doc. 50, p. 7, ¶ 12; Doc. 79, p. 1, ¶ 4). Nucor has represented, and the Receiver has

not disputed, that carriers have been asserting damages claims against Nucor, that the Receiver has

not provided confirmation to Nucor of whether other carriers have been paid, that the Receiver has

The general common-law rule, which Delaware appears to follow, is that

recoupment claims need not be liquidated or mature to be asserted. See, e.g., Shimp

v. Siedel, 11 Del. 421, 426 (Del. Super. Ct. 1881) (“[R]ecoupement is allowed

though both demands are unliquidated damages, for when the demands of both

parties spring out of the same contract or transaction, the defendant may recoupe,

although the damages on both sides are unliquidated; but he can only set-off when

the demands of both parties are liquidated or capable of being ascertained by

calculation.”); 80 C.J.S. Set-off and Counterclaim § 32 (“Unliquidated damages may

be recouped, provided they arise out of the transaction forming the basis of the

plaintiff's action.”); 6 Charles A. Wright & Arthur R. Miller, Federal Practice &

Procedure § 1401 (3d ed. Apr. 2026 update) (“[T]he utility of setoff [as compared to

recoupment] was limited by the requirement that the claim either be for a liquidated

amount or arise out of a contract or judgment.”); 5 Collier on Bankruptcy ¶ 553.10

(16th ed. 2026) (footnotes omitted) (“Recoupment often arises in contract cases, but

it is not limited to contractual obligations, nor must the amount to be recouped be

liquidated in order for the right to apply. Mutuality is also not required, and the

relevant obligations need not both be prepetition in nature. . . . [P]roperly construed,

not provided information to Nucor regarding contracts between the defendants and the carriers,

and that Nucor does not have access to this information. (Doc. 37, p. 9, ¶ 35; Doc. 79, p. 2, ¶¶ 9–

10). The Court will not require Nucor to prove the absence of payments or the contents of contracts

Nucor is not a party to without an opportunity for reasonable discovery. The carriers currently are

not parties to this proceeding, so the carriers’ claims against Nucor are not before this Court, and

the Court does not purport to resolve those claims.

recoupment applies to define the obligation in question, rather than establish or

enforce a separate debt.”); Matter of Holford, 896 F.2d 176, 178 (5th Cir. 1990)

(“We also reject the district court’s holding that the uncertainty of the fraud damages

owed bars recoupment. Because most recoupment cases arise in adversarial

proceedings in the bankruptcy court, the ‘amount to be recouped’ is almost always

in question.”); United States v. Bank of Shelby, 68 F.2d 538, 539 (5th Cir. 1934)

(“But there is present here another potent fact [justifying crediting of plaintiff’s

unmature debt against defendant’s obligation to plaintiff], that the two obligations

arose out of the same transaction and the one is the consideration for the other. It

would be manifestly inequitable to enforce one obligation when the other cannot be

enforced.”); Matter of Kosadnar, 157 F.3d 1011, 1016 (5th Cir. 1998) (citation

omitted) (“[A] debtor may not assume the favorable aspects of a contract (post-

petition payments) and reject the unfavorable aspects of the same contract (the

obligation to repay pre-petition overpayments by means of recoupment).”).5 This

makes sense given that, under common law, a plaintiff who partially performed

contractual obligations was not due payment unless the defendant prevented the

plaintiff’s full performance (in which case the defendant would have to institute a

separate action for recoupment, until the courts reformulated recoupment as a

5 Fifth Circuit cases decided before October 1, 1981, are binding precedent in the Eleventh Circuit.

Bonner v. City of Prichard, 661 F.2d 1206, 1207 (11th Cir. 1981) (en banc).

defense to avoid “circuity and multiplicity of action”). Shimp, 11 Del. at 424–28

(explaining origins of recoupment in Delaware). Accordingly, Nucor may assert its

recoupment claims, regardless of whether those claims are contingent, unmature, or

illiquid.

As for Nucor’s setoff claims, under the general common-law rule, followed

by Delaware and most courts nationwide, a party ordinarily may not setoff

contingent, unmature, or unliquidated losses. See, e.g., CanCan Dev., LLC v.

Manno, No. CIV.A. 6283-VCL, 2011 WL 4379064, at *5 (Del. Ch. Sept. 21, 2011)

(“A contingent or unmatured obligation which is not presently enforceable cannot

be the subject of set-off.”).

Still, as a matter of common law or equity, courts have long recognized an

exception for when one party becomes insolvent. See, e.g., Bank of Shelby, 68 F.2d

at 539 (citations omitted) (“The general rule in the absence of statute is that to set

off an unmatured debt because of insolvency requires the action of equity; but that

insolvency alone is a sufficient basis in equity for the set-off not only as between the

parties but as against a receiver, an assignee for the benefit of creditors, a trustee in

bankruptcy, or a garnisher.”); Carr v. Hamilton, 129 U.S. 252, 256 (1889) (“[T]he

principle of set-off between mutual debts and credits has for nearly two centuries

past been adopted in the English bankrupt laws, and has always prevailed in our own

whenever we have had such a law in force on our statute book; and it mattered not

whether the debt was due at the time of bankruptcy or not. . . . [A] settlement of the

company’s affairs cannot be postponed to await the determination of every

contingency on which its policy engagements are suspended. This would postpone

a settlement for at least half a century. [But e]very person’s interest in life insurance

is capable of instant and present valuation, almost as certain and determinate as the

discount of a note or bill payable in the future.”); Am. Bank & Tr. Co. v. Morris, 16

F.2d 845, 847 (5th Cir. 1927) (“There is no doubt that the general rule is that a bank

has the right to set off a deposit made in the usual course of business against loans

to the depositor, at maturity or in case of his insolvency, and may do so even in the

event of bankruptcy.”).

The Receiver has not pointed to (and the Court is not aware of) a Delaware

case holding that contingent debts are necessarily barred from setoff against even an

insolvent party. At least one Delaware court appears to have noted, albeit possibly

in dicta, that setoff of contingent claims is appropriate in some circumstances. Fell

v. Sec. Co. of N. Am., 95 A. 346, 347–49 (Del. Ch. 1915) (noting setoff was “properly

applied” to contingent debt in Carr but that “its applicability depends upon the facts

in each case,” and denying setoff where setoff proponents and others had invested

money into company bonds and setoff proponents had then borrowed money against

the bonds). Accordingly, the Court finds that Delaware allows setoff of contingent

or illiquid claims when the other party is insolvent, subject to equitable

considerations. Cf. Brook v. Chase Bank USA, N.A., 566 Fed. Appx. 787, 789–90

(11th Cir. 2014) (“As long as Florida law neither mandates nor prohibits set off under

the FCCPA—and it does not—it is entirely within the bankruptcy court’s discretion

whether to allow set off under the circumstances of the case.”).

As noted above, federal bankruptcy or receivership law does not present an

obstacle to setoff. Modern bankruptcy laws do not state how to treat contingent

setoff or recoupment claims, but the laws allow contingent or unliquidated claims

generally. 11 U.S.C. §§ 101(5), 502(b)(1). The value of contingent or unliquidated

claims may be estimated so as not to unduly delay the bankruptcy proceedings, and

the estimated value may be adjusted later as necessary. 11 U.S.C. § 502(c), (j); In

re Stone & Webster, Inc., 279 B.R. 748, 811 (Bankr. D. Del. 2002).

Accordingly, in the bankruptcy context, many courts have held that setoff or

recoupment may be applied to contingent, unmature, or unliquidated claims where

allowed by state law. See, e.g., Newbery Corp. v. Fireman's Fund Ins. Co., 95 F.3d

1392, 1398 (9th Cir. 1996) (ellipses in Newbery Corp.) (quoting 4 Collier on

Bankruptcy ¶ 553.01[4], at 553–6 (15th ed. 1995)) (“[A] claim may ... be set off

without regard to whether it is contingent or unliquidated, as long as the claim

qualifies as ‘mutual’ under applicable nonbankruptcy law....”); Braniff Airways, Inc.

v. Exxon Co., U.S.A., 814 F.2d 1030, 1034–36 (5th Cir. 1987) (holding that opposing

debts were mutual, prepetition debts subject to setoff even though the actual amount

creditor-seller owed debtor-buyer was not calculated before petition was filed

because “to say that [the seller] did not have a pre-petition debt to [the buyer] would

be to say that [the seller] could have retained the fuel prepayment funds and not have

delivered any fuel to [the buyer]”); In re Hoffman, 51 B.R. 42, 46 (Bankr. W.D. Ark.

1985) (“[T]he filing of a bankruptcy acts to accelerate the maturity of all debts and,

therefore, the right of setoff may be asserted postpetition.”); In re GMJ Glob.

Logistics, Inc., 498 B.R. 290, 292–93, 297 (Bankr. D. Kan. 2013) (allowing shipper

to setoff settlements of carrier claims against shipper’s liability to shipping-broker-

debtor).6

When the requirements for setoff are met, “[t]he district court [still] has

discretion whether to allow a setoff against a receiver, and this decision will be

6 At the hearing, based on In re Patterson, 967 F.2d 505, 509 (11th Cir. 1992), the Receiver argued

that there was no mutuality under Alabama law. The Court need not address this argument because

the Court is not applying Alabama law. To the extent the Receiver intended to argue that there is

no mutuality under federal bankruptcy law because Nucor’s indemnification claims accrued after

the receivership order, federal courts of appeal that have addressed the issue have rejected the idea

that the critical time is claim accrual. See 5 Collier on Bankruptcy ¶ 553.03[1][b] (16th ed. 2026)

(providing overview of different tests). The Eleventh Circuit uses the “relationship test” in

determining whether debts are pre-petition. Epstein v. Off. Comm. of Unsecured Creditors of Est.

of Piper Aircraft Corp., 58 F.3d 1573, 576–77 (11th Cir. 1995); In re United States Pipe &

Foundry Co., 32 F.4th 1324, 1330 (11th Cir. 2022). Like the “conduct test,” this test focuses on

“when the [debtor’s] conduct giving rise to the alleged liability occurred,” but adds the requirement

that there be a “relationship established before [bankruptcy plan] confirmation between an

identifiable claimant or group of claimants and that prepetition conduct,” i.e., with the debtor.

Epstein, 58 F.3d at 1577. Here, the parties had a preexisting relationship. The defendants’ conduct

gave rise to Nucor’s recoupment and setoff claims because the defendants did not fulfill their

preexisting contractual obligations to pay carriers and ensure shipments were delivered safely.

Nucor’s claims are thus not post-petition; the claims would be post-petition if the parties had

arranged for post-receivership shipment brokerage services.

overturned [only] for an abuse of discretion.” S.E.C. v. Elliott, 953 F.2d 1560, 1572

(11th Cir. 1992). There is a “strong federal policy towards . . . . [and] practically a

presumption in favor of allowing setoff.” Elliott, 953 F.2d at 1572. If a claim is

eligible for setoff, “[t]he burden is on the party moving to deny setoff to prove that

setoff should be denied.” Elliott, 953 F.2d at 1572. Thus, to the extent Nucor’s

contingent claims materialize or can be estimated, and are eligible for setoff, the

equities weigh in favor of allowing setoff.

The Receiver faults Nucor for not immediately forfeiting all disputed funds

and asserting its claims in the ordinary claims process. (Doc. 50, p. 3–4, 8–9, ¶¶ 3–

4, 15–17). In a situation like this, where a party asserts the right to recoupment or

setoff, that party may petition the court for relief from or a modification of the

receivership order. See 11 U.S.C. § 362(d)–(g) (allowing a party to request relief

from a bankruptcy stay); 11 U.S.C. § 542(b) (“[A]n entity that owes a debt that is

property of the estate and that is matured, payable on demand, or payable on order,

shall pay such debt to, or on the order of, the trustee, except to the extent that such

debt may be offset under section 553 of this title against a claim against the debtor.”);

Citizens Bank of Maryland v. Strumpf, 516 U.S. 16, 19–21 (1995) (finding that bank

could properly freeze deposit account of insolvent depositor until court determined

whether the bank had a right to setoff the deposit account against the amount the

depositor owed the bank).

And while setoff is subject to an automatic bankruptcy stay per the express

terms of 11 U.S.C. § 362(a)(7), the majority view is that recoupment is not ordinarily

subject to an automatic bankruptcy stay because it is essentially a defense to the

debtors’ claims; i.e., the funds subject to recoupment are not the debtors’ property

in the first place, and thus need not be turned over without court order. See, e.g., In

re Holford, 896 F.2d 176, 179 (5th Cir. 1990) (“[T]o the extent the damages equal

or exceed the funds withheld, the debtor has no interest in the funds and, therefore,

the stay has not been violated.”); Matter of Kosadnar, 157 F.3d 1011, 1014 (5th Cir.

1998) (citation omitted) (“[M]oney recouped by creditors from an amount owed to

a debtor post-petition would not be subject to the automatic stay.”).7

***

Accordingly, the Court orders the Receiver to produce the defendants’ carrier

contracts and carrier payment records to Nucor. The Receiver and Nucor shall

attempt to reconcile amounts which are subject to recoupment or setoff in

accordance with this opinion. For carriers that have not been paid, the Receiver and

Nucor shall presume that payments are subject to recoupment unless the Receiver

can show that the carrier contracts or the law that applies to a carrier contract will

not allow the carrier to recover against Nucor. To the extent that shipments have not

7 The best practice would be for the party asserting recoupment to promptly seek guidance from

the Court, especially where, as here, the liabilities of the party are contingent or illiquid, and thus

in need of determination or estimation.

been delivered, the Receiver and Nucor shall presume that Nucor owes no payment

for that contract, and Nucor may seek setoff of the balance of the value of the

shipment against other contracts for which there is mutuality of parties. To the extent

that Nucor has actually incurred other damages, such damages may be recouped

against the amounts due on the same contract or setoff against the amounts due on

other contracts if there is mutuality of parties. To the extent that other damages are

probable but have not occurred or there is substantial uncertainty as to any of the

above items, the parties shall attempt to mutually estimate the value of the claim.

Nucor shall keep custody of the presumed and estimated amounts of

recoupment and setoff and promptly remit the remainder to the Receiver. For

disputes, Nucor shall not finalize recoupment or setoff on its records until the

disputes are resolved. If the presumed or estimated amount of recoupment or setoff

later proves inaccurate, the party retaining the excess funds shall remit such excess

funds to the other party monthly. Until a final resolution is reached, the Receiver

takes funds subject to Nucor’s setoff and recoupment rights, if any. Accordingly,

each party shall take reasonable steps to preserve funds which may later be remitted

to the other party. To preserve property which may ultimately revert to the estate,

Nucor shall not settle carrier claims without prior approval from the Receiver or this

Court.

DONE and ORDERED this June 17, 2026.

Laat HUGHES HAIKALA

UNITED STATES DISTRICT JUDGE

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