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Textron Financial, Inc. v. Bash

United States District Court, N.D. Ohio, Eastern Division

July 22, 2019

Textron Financial, Inc., Movant,
v.
Brian A. Bash, Trustee, Respondent.

          MEMORANDUM OF OPINION AND ORDER

          PATRICIA A. GAUGHAN, UNITED STATES DISTRICT JUDGE.

         INTRODUCTION

         This 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

         The 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.

         Plaintiff 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 remaining defendant.

         On 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.

         On 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.

         This 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.

         Textron moves for summary judgment on the issue of damages and the Trustee opposes the motion.

         STANDARD OF REVIEW

         Summary 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).

         The 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.

         Summary 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 (citation omitted).

         ANALYSIS

         The 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 ...


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