United States District Court, N.D. Ohio, Eastern Division
MEMORANDUM OF OPINION AND ORDER
PATRICIA A. GAUGHAN, UNITED STATES DISTRICT JUDGE.
matter is before the Court upon Defendant's Motion for
Partial Summary Judgment (Doc. 332). This adversary
proceeding stems from the bankruptcy of Fair Finance. For the
reasons that follow, the motion is DENIED because the Court
does not find it to be the appropriate vehicle to address the
issue of setoff. Although the Court recognizes that other
courts have done so, given the unique posture of, and
evidence in, this case, the Court finds it more suitable to
address the imposition of a setoff after the jury verdict.
However, due to the importance of this issue, and in fairness
to the parties involved, the Court will thoroughly address
the arguments presented.
facts of this case have been set forth repeatedly in other
Orders and only those limited facts necessary for a
resolution of the instant motion are set forth herein.
is the Chapter 7 Trustee appointed for Fair Finance Company
(“Fair Finance” or “Debtor”). Fair
Finance filed a Chapter 7 petition in bankruptcy court. The
Trustee filed various adversary proceedings, including the
instant case filed against defendants, Textron Financial
Corporation (“Textron”), Fortress Credit
Corporation (“Fortress”), and Fair Facility, LLC
(“Fair Finance SPE”). Textron is the sole
January 7, 2002, Textron and another lender, United Bank
(later known as Unizan), entered into a loan and security
agreement (the “2002 Agreement”) with the Debtor
and FHI. The 2002 Agreement created a revolving line of
credit on which the Debtor could draw up to $22 million.
Under the 2002 Agreement, Textron was granted a security
interest in all of the present and future assets of the
Debtor and FHI. The Trustee does not seek damages as a result
of the security agreement or any payments made up until
January 6, 2004.
January 6, 2004, Textron, the Debtor, and FHI executed the
First Amended and Restated Loan and Security Agreement (the
“2004 Agreement”). Under the express terms of the
2004 Agreement, the total amount available to be borrowed at
any one time was reduced from $22 million to $17.5 million.
Unizan is not a party to the 2004 Agreement. The 2004
Agreement operated as a line of credit, pursuant to which the
Debtor made hundreds of draws. In other words, the Debtor
would borrow money from Textron and pay Textron back on a
fairly continuous basis. In total, it appears that the Debtor
received and repaid advances totaling approximately $316
million. At no point, however, could the total amount
outstanding exceed $17.5 million. Each advance was referred
to as a “Loan” under the 2004 Agreement. Before
advancing funds, Textron retained the right to ensure that
the Debtor was in compliance with all covenants set forth in
the 2004 Agreement. The 2004 Agreement further provided that
the Debtor provide to Textron “no less than weekly and
upon every request by [Textron], a Borrowing Base Certificate
identifying the specific receivables available to secure the
advances.” It is the transfers made by the Debtor to
Textron pursuant to the 2004 Agreement that are the subject
of this motion.
Court previously granted Textron's motion to dismiss the
Trustee's claims. That order was affirmed in part and
reversed in part. On remand, the Trustee filed a number of
claims. The sole remaining substantive claim is for actual
fraudulent transfer under the Ohio Uniform Fraudulent
Transfer Act, asserted pursuant to 11 U.S.C. § 544.
moves for summary judgment on the issue of damages and the
Trustee opposes the motion.
Judgment is appropriate when no genuine issues of material
fact exist and the moving party is entitled to judgment as a
matter of law. Celotex Corp. v. Catrett, 477 U.S.
317, 322-23 (1986) (citing Fed.R.Civ.P. 56(c)); see also
LaPointe v. UAW, Local 600, 8 F.3d 376, 378 (6th Cir.
1993). The burden of showing the absence of any such genuine
issues of material facts rests with the moving party:
[A] party seeking summary judgment always bears the initial
responsibility of informing the district court of the basis
for its motion, and identifying those portions of “the
pleadings, depositions, answers to interrogatories, and
admissions on file, together with affidavits, ” if any,
which it believes demonstrates the absence of a genuine issue
of material fact.
Celotex, 477 U.S. at 323 (citing Fed.R.Civ.P.
56(c)). A fact is “material only if its resolution will
affect the outcome of the lawsuit.” Anderson v.
Liberty Lobby, 477 U.S. 242, 248 (1986). Accordingly,
the nonmoving party must present “significant probative
evidence” to demonstrate that “there is [more
than] some metaphysical doubt as to the material
facts.” Moore v. Philip Morris Cos., Inc., 8
F.3d 335, 340 (6th Cir.1993). The nonmoving party may not
simply rely on its pleading, but must “produce evidence
that results in a conflict of material fact to be solved by a
jury.” Cox v. Kentucky Dep't. of Transp.,
53 F.3d 146, 150 (6th Cir. 1995).
evidence, all facts, and any inferences that may permissibly
be drawn from the facts must be viewed in the light most
favorable to the nonmoving party. Matsushita Elec. Indus.
Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986);
Eastman Kodak Co. v. Image Technical Servs., Inc.,
504 U.S. 451, 456 (1992). However, “[t]he mere
existence of a scintilla of evidence in support of the
plaintiff's position will be insufficient; there must be
evidence on which the jury could reasonably find for the
plaintiff.” Anderson, 477 U.S. at 252.
judgment should be granted if a party who bears the burden of
proof at trial does not establish an essential element of his
case. Tolton v. American Biodyne, Inc., 48 F.3d 937,
941 (6th Cir. 1995) (citing Celotex, 477 U.S. at
322). Moreover, if the evidence is “merely
colorable” and not “significantly probative,
” the court may decide the legal issue and grant
summary judgment. Anderson, 477 U.S. at 249-50
present dispute centers on the damages calculation should the
Trustee succeed on the merits of the actual fraudulent
transfer claim. According to Textron, the total amount of
damages cannot exceed $17.5 million plus interest and fees.
On the other hand, the Trustee argues that each and every
repayment of money from Debtor to Textron constitutes an
avoidable transfer for ...