Bank of America NA v. Garden District Pet Hospital, Inc. et al, No. 2:2015cv01386 - Document 26 (E.D. La. 2016)
Court Description: ORDER AND REASONS granting in part and denying in part 11 Motion for Summary Judgment. The Court GRANTS summary judgment to Bank of America on Garden District, Inc's and Griffith's liability and DENIES Bank ofAmerica's motion for summary judgment on French Quarter, Inc.'s liability.. Signed by Judge Sarah S. Vance on 3/14/16. (jjs)
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Bank of America NA v. Garden District Pet Hospital, Inc. et al Doc. 26 UNITED STATES DISTRICT COURT EASTERN DISTRICT OF LOUISIANA BANK OF AMERICA, N.A. CIVIL ACTION VERSUS NO: 15-1386 GARDEN DISTRICT PET HOSPITAL, INC., ET AL. SECTION: R ORD ER AN D REASON S Plaintiff Bank of Am erica m oves the Court for sum m ary judgm ent against defendants Garden District Pet Hospital, Inc., Scott Griffith, and The French Quarter Vet, Inc.1 For the following reasons, the Court grants in part and denies in part the m otion. I. BACKGROU N D In this lawsuit, plaintiff Bank of America seeks to collect amounts unpaid under a loan it extended to Garden District Pet Hospital, Inc. Bank of Am erica seeks to recover from several defendants in different capacities. Specifically, it has sued Garden District, Inc. as the defaulting borrower, Scott Griffith as the borrower's guarantor, and a second corporation, The French Quarter Vet, Inc., as an alleged corporate successor of Garden District, Inc.2 1 R. Doc. 11. 2 R. Doc. 1. Dockets.Justia.com A. Th e Fin an ce Agre e m e n t On Septem ber 18, 20 0 9, Bank of Am erica executed a Project Finance Term Loan Agreem ent (the "Finance Agreem ent") in favor of a borrower identified as "Garden District Pet Hospital."3 By its term s, the Finance Agreem ent includes a prom issory note, a security agreem ent, and a guaranty agreem ent, "all of which are to be construed together and are binding on the parties."4 The Finance Agreem ent provides that Bank of Am erica will m ake advances to the borrower of up to $ 350 ,0 0 0 for the purpose of financing the developm ent, establishm ent, and operation of the borrower's veterinary practice.5 It also contem plates a "Project Closing Date," at which point the advances are converted into a perm anent loan, which m ust be repaid in m onthly installm ents.6 Several events of default are specified in the Finance Agreem ent, including "the failure to m ake any paym ent of the Indebtedness," which "continues for 10 days after it first becom es due."7 The Finance Agreem ent also contains an acceleration clause, which provides that in the 3 R. Doc. 11-4. 4 Id. at 1. 5 R. Doc. 11-4 at 2, 11; R. Doc. 18 at 7. 6 R. Doc. 11-4 at 2. 7 Id. at 5. 2 event of default, Bank of Am erica has the option to declare all rem aining am ounts due under the Finance Agreem ent im m ediately due and payable, charge interest at the default rate, and exercise all of Bank of Am erica's rights as a secured party.8 Scott Griffith signed the Finance Agreem ent as the borrower's authorized representative.9 In connection with the Finance Agreem ent, Griffith also executed a continuing guaranty agreem ent, in which he absolutely, unconditionally, and irrevocably guaranteed the borrower's obligations. The agreem ent provides, in relevant part: Each Guarantor absolutely, unconditionally, jointly and severally guarantees the prom pt paym ent when due of all Indebtedness. If Borrower fails to pay all or part of any Indebtedness when due, Guarantor shall im m ediately pay to Lender the outstanding balance of all Indebtedness, regardless of whether or not Lender first pursues Borrower or exhausts any of its rights or rem edies against Borrower, the Collateral, or other Security.10 It further provides that "[t]his is a continuing guaranty and m ay not be term inated or revoked by Guarantor unless and until all Indebtedness to Lender has been indefeasibly paid in full in cash. . . ."11 8 Id. at 6. 9 Id. at 12. 10 Id. at 13. 11 Id. 3 Also, under the Finance Agreem ent, the borrower granted Bank of Am erica "a security interest in the Collateral and proceeds of the Collateral to secure paym ent and perform ance of the Indebtedness."12 The Finance Agreem ent defines "Collateral" as "all of the business personal and business assets of Borrower, and, if applicable, any Guarantor, wherever located, and now owned or hereafter acquired. . . ."13 Bank of Am erica perfected the security interest by filing a UCC Financing Statem ent in 20 0 9.14 As to the identity of the borrower, the Finance Agreem ent provides, in a box labeled "BORROWER: Legal Nam e," that the borrower is "Garden District Pet Hospital."15 In separate box, the Finance Agreem ent lists the borrower's "type of organization" as "lim ited liability com pany."16 It also lists the borrower's address as "1116 Louisiana Avenue, Unit 4, New Orleans, LA 70 115."17 It is undisputed that when the Finance Agreem ent was executed, Griffith was associated with two entities using the "Garden District Pet Hospital" nam e. The first was a lim ited liability com pany, Garden District Pet 12 Id. at 3. 13 Id. at 10 . 14 R. Doc. 1-3. 15 R. Doc. 11-4 at 1. 16 Id. 17 Id. 4 Hospital, LLC ("Garden District, LLC").18 Although neither party has provided inform ation on the nature of Garden District, LLC's business, records from the Louisiana Secretary of State indicate that the company maintained its business address at 80 9 Marengo Street, New Orleans, Louisiana 70 115.19 The second entity was a corporation, Garden District Pet Hospital, Inc. ("Garden District, Inc."), of which Griffith was the sole shareholder, director, and corporate officer.20 During his deposition, Griffith testified that Garden District, Inc. operated a sm all anim al clinic at the address listed in the Finance Agreem ent, 1116 Louisiana Avenue, Unit 4, New Orleans, Louisiana 70 115.21 In October 20 0 9, approximately one month after the Finance Agreement was executed, Griffith and Bank of Am erica executed a second docum ent, titled "Ch an ge Notification an d Ackn owledgm en t" (the "Chan ge Agreem ent").22 The Change Agreem ent states that its purpose is to "change[], am end[] and m odif[y] the Project Finance and Term Loan Agreem ent 18 R. Doc. 18 at 6. 19 R. Doc. 17-1. Garden District, LLC was organized in Novem ber 20 0 6 as Vibrational Prosperity, LLC. It changed its nam e to Garden District Pet Hospital, LLC in August 20 0 9 and subsequently changed its nam e to Marengo Lilies, LLC in October 20 0 9. The Louisiana Secretary of State revoked its articles of organization in 20 12. 20 R. Doc. 18 at 6, 9-10 . 21 R. Doc. 11-5 at 5, 9. 22 R. Doc. 14-2 at 4. 5 ('Finance Agreem ent') between Bank of Am erica, N.A. ('Lender') and Garden District Pet Hospital, Inc. ('Borrower')."23 Specifically, the Change Agreem ent provides that the borrower's type of organization is changed from "lim ited liability com pany" to "corporation," while the borrower's legal nam e is changed from "Garden District Pet Hospital, LLC" to "Garden District Pet Hospital, Inc."24 It further provides that "[e]xcept as m odified by this Change Agreem ent, all other term s and conditions of the Finance Agreem ent, and any other docum ents or instrum ents executed in connection with it, shall rem ain unchanged and in full force and effect."25 Griffith signed the Change Agreem ent in his capacity as Garden District, Inc.'s representative.26 On April 20 , 20 10 , Bank of Am erica's project advances under the Finance Agreem ent were converted into a perm anent loan in the principal am ount of $ 366,729.95 with a term of 60 m onths and a fixed interest rate of 7.15 percent. On that date, Bank of Am erica and Griffith, on behalf of Garden 23 Id. 24 Id. 25 Id. 26 Id. 6 District, Inc., executed a "Final Disbursem ent, Change, and Repaym ent Schedule," setting forth the term s of the final loan.27 B. D e fau lt After the Finance Agreem ent loan becam e perm anent, the sm all anim al clinic operated by Garden District, Inc. failed, and the com pany went out of business. Garden District, Inc. has since been dissolved as a corporation.28 It is undisputed that Garden District, Inc. defaulted under the Finance Agreem ent by failing to pay the m onthly installm ent due on J anuary 1, 20 15 and each paym ent due since that date.29 It is also undisputed that Bank of Am erica provided Garden District, Inc. and the guarantor a written notice of default and an opportunity to cure.30 No paym ents were m ade, and Bank of Am erica accelerated all sum s due under the Finance Agreem ent.31 C. Litigatio n On April 28, 20 15, Bank of Am erica filed this lawsuit, seeking both collection of unpaid sum s and a judgm ent recognizing the validity and 27 R. Doc. 1-2. 28 R. Doc. 18 at 6. 29 Id. at 8. 30 Id. 31 Id. at 9. 7 enforceability of the security interest granted by the Finance Agreem ent.32 Bank of Am erica nam ed as defendants Griffith, Garden District, Inc., and a second corporation, The French Quarter Vet, Inc. ("French Quarter, Inc."). According to Bank of Am erica, French Quarter, Inc. is liable for Garden District, Inc.'s debt under the Finance Agreem ent because it is a successor corporation and m ere continuation of Garden District, Inc. Bank of Am erica now m oves for sum m ary judgm ent against all three defendants. All parties agree that Garden District, Inc. is liable to Bank of Am erica as the defaulting borrower under the Finance Agreem ent.33 In a listing of uncontested facts filed with the Court, the parties subm it that, as of J anuary 28, 20 16, the balance due under the Finance Agreem ent is as follows: Unpaid Principal $ 288,798.55 Interest $ 23,918.53 Late Fees $ 5,299.32 To tal $ 3 18 ,0 16 .4 0 plus interest accruing at the daily rate of $ 57.36, together with late charges, attorneys' fees and costs that accrued as of J anuary 28, 20 16, and that continue to accrue thereafter, until all obligations 32 R. Doc. 1. 33 R. Doc. 18 at 9. 8 of Borrower and Guarantor to Bank of Am erica under the [Finance] Agreem ent are paid in full.34 Bank of Am erica contends that, under the term s of the Finance Agreem ent, Griffith is also liable to Bank Am erica as Garden District, Inc.'s guarantor. Griffith contends that he is not liable because he agreed only to guaranty the debt of the entity nam ed in the Septem ber 18, 20 0 9 contract, Garden District, LLC.35 According to Griffith, the October 20 0 9 Change Agreem ent extinguished that debt and replaced it with a new debt owed by a different entity, Garden District, Inc. In other words, Griffith contends that the Change Agreem ent was a subjective novation, in which Bank of Am erica agreed to discharge one borrower, whose debts Griffith had guaranteed, and substitute in its place a new, unsecured borrower, Garden District, Inc. In support, Griffith subm its an affidavit, in which he states that he entered the Finance Agreem ent on behalf of Garden District, LLC and that "he at no tim e agreed to personally guarantee the debt of Garden District Pet Hospital, Inc."36 Bank of Am erica argues that the Change Notification was not intended to effect a subjective novation. Rather, its purpose was to correct a clerical 34 Id. at 10 . 35 R. Doc. 14 at 3-4. 36 R. Doc. 14-2 at 1-2. Griffith's deposition occurred on J anuary 21, 20 16, and his affidavit is dated February 8, 20 16. 9 error in the written Finance Agreem ent, which m istakenly identified the borrower as a lim ited liability com pany when it was, in fact, a corporation.37 Thus, Bank of Am erica's position is that all parties to the Finance Agreem ent intended Garden District Hospital, Inc. to be the borrower, that the written contract executed on Septem ber 18, 20 0 9 failed to reflect this agreem ent, and that the Change Agreem ent m odified the written contract to reflect the parties' true intent. In support, Bank of Am erica subm its the affidavit of a Bank of Am erica official fam iliar with the loan, who states that Bank of Am erica entered the Finance Agreem ent with Garden District, Inc., with Griffith acting as guarantor.38 Bank of Am erica also cites Griffith's deposition testim ony. Testifying on behalf of Garden District, Inc.--and, notably, not as a representative of Garden District, LLC--Griffith testified as follows: Q. Now, in 20 0 9, did Garden District Pet Hospital, Inc. obtain a loan from Bank of Am erica. A. Yes. Q. And what was the purpose of that loan? A. To establish a practice, renovate, purchase equipm ent, and establish a build-out for the clinic. . . . 37 R. Doc. 17 at 2. 38 R. Doc. 11-3 at 1. 10 Q. And did you personally guarantee the debt of the borrowing entity, Garden District Pet Hospital? A. Yes.39 As to the second corporation, French Quarter, Inc., Bank of Am erica contends that it is liable for Garden District, Inc.'s debt under the successor corporation doctrine. According to Bank of Am erica, the circum stances surrounding French Quarter, Inc.'s creation suggest that it is a m ere continuation of Garden District, Inc. During his deposition, Griffith testified that French Quarter, Inc. was form ed in Decem ber 20 11.40 As with Garden District, Inc., Griffith was and rem ains French Quarter, Inc's sole shareholder, director, and officer.41 Griffith testified that while both corporations operated a sm all anim al clinic/ hospital, they operated in under different nam es and in different physical locations.42 Moreover, due to the distance between the facilities, the anim al clinics served different sets of clients.43 Griffith further testified that both corporations em ployed him as a veterinarian and his son as 39 R. Doc. 11-5 at 9. 40 Id. at 14. 41 Id. at 14-15. 42 Id. at 15-16. 43 Id. at 16. 11 a practice m anager.44 Otherwise, the corporations did not have any com m on em ployees.45 Griffith also testified that although Garden District, Inc. is no longer in business, French Quarter, Inc. has its own physical assets and does not em ploy any of the equipm ent previously used by Garden District, Inc. 46 II. LEGAL STAN D ARD Sum m ary judgm ent is warranted when "the m ovant shows that there is no genuine dispute as to any m aterial fact and the m ovant is entitled to judgm ent as a m atter of law." Fed. R. Civ. P. 56(a); Celotex Corp. v. Catrett, 477 U.S. 317, 322– 23 (1986); Little v. Liquid Air Corp., 37 F.3d 10 69, 10 75 (5th Cir. 1994). When assessing whether a dispute as to any m aterial fact exists, the Court considers "all of the evidence in the record but refrains from m aking credibility determ inations or weighing the evidence." Delta & Pine Land Co. v. Nationw ide Agribusiness Ins. Co., 530 F.3d 395, 398– 399 (5th Cir. 20 0 8). The Court m ust draw reasonable inferences in favor of the nonm oving party, but "unsupported allegations or affidavits setting forth 'ultim ate or conclusory facts and conclusions of law' are insufficient to either 44 Id. at 16-19. 45 Id. at 18; R. Doc. 18 at 10 ("French Quarter Vet did not have the sam e em ployees as Garden District Inc. with the exception of Dr. Griffith and Lee Griffith."). 46 Id. at 19. 12 support or defeat a m otion for sum m ary judgm ent." Galindo v. Precision Am . Corp., 754 F.2d 1212, 1216 (5th Cir. 1985) (quoting 10 B Charles Alan Wright & Arthur R. Miller, Federal Practice and Procedure: Civil § 2738 (2d ed.1983)). If the dispositive issue is one on which the m oving party will bear the burden of proof at trial, the m oving party "m ust com e forward with evidence that would entitle it to a directed verdict if the evidence went uncontroverted at trial." Int'l Shortstop, Inc. v. Rally 's, Inc., 939 F.2d 1257, 1264– 65 (5th Cir. 1991) (quotation m arks rem oved). The nonm oving party can then defeat the m otion by either countering with sufficient evidence of its own, or "showing that the m oving party's evidence is so sheer that it m ay not persuade the reasonable fact-finder to return a verdict in favor of the m oving party." Id. at 1265. If the dispositive issue is one on which the nonm oving party will bear the burden of proof at trial, the m oving party m ay satisfy its burden by m erely pointing out that the evidence in the record is insufficient with respect to an essential elem ent of the nonm oving party's claim . See Celotex, 477 U.S. at 325. The burden then shifts to the nonm oving party, who m ust, by subm itting or referring to evidence, set out specific facts showing that a genuine issue exists. See id. at 324. 13 The nonm ovant m ay not rest upon the pleadings but m ust identify specific facts that establish a genuine issue for trial. Id.; see also Little, 37 F.3d at 10 75 ("Rule 56 'm andates the entry of sum m ary judgm ent, after adequate tim e for discovery and upon m otion, against a party who fails to m ake a showing sufficient to establish the existence of an elem ent essential to that party's case, and on which that party will bear the burden of proof at trial.'") (quoting Celotex, 477 U.S. at 322). III. D ISCU SSION A. Ch o ice o f Law The parties do not dispute the issue of choice of law. The Finance Agreem ent contains a choice of law provision, which states that the agreem ent and "all m atters arising out of, resulting from or in any way connected with this Agreem ent" shall be governed by "the internal laws of the State of the Borrower's principal place of business"--in this case, Louisiana.47 Accordingly, the Court applies Louisiana law. See La. Civ. Code art. 3540 . B. Gard e n D is trict, In c.'s Liability As Bo rro w e r Bank of Am erica m oves for sum m ary judgm ent against Garden District, Inc., Griffith, and French Quarter, Inc. for am ounts due under the Finance 47 R. Doc. 11-4 at 8. 14 Agreem ent. Bank of Am erica asserts that the balance due under the Finance Agreem ent as of J anuary 28, 20 16 is $ 318,0 16.40 , that late fees and interest continue to accrue, and that defendants also owe attorney's fees and costs. Garden District, Inc. adm its that it is liable under the Finance Agreem ent to Bank of Am erica for the am ounts asserted by Bank of Am erica.48 The record contains no evidence to challenge Garden District, Inc.'s liability. Accordingly, the Court grants Bank of Am erica's m otion for sum m ary judgm ent against Garden District, Inc. Also, because no party has challenged the validity of the security interest granted by the Finance Agreem ent and perfected by Bank of Am erica, the Court grants Bank of Am erica's m otion for sum m ary judgm ent on that issue as well. 48 R. Doc. 18 at 4, 6, 8-9. 15 C. Griffith 's Liability As Gu aran to r Next, the Court considers Griffith's liability as a guarantor under the Finance Agreem ent. Although Griffith does not dispute that he executed the Septem ber 18, 20 0 9 Finance Agreem ent as a guarantor, he contends that the guaranty is no longer in effect. In support, Griffith relies on the October 20 0 9 Change Agreem ent, which am ended the Finance Agreem ent by changing the borrower's legal nam e from "Garden District Pet Hospital, LLC" to "Garden District Pet Hospital, Inc." Griffith contends that the Change Agreem ent was, in effect, a subjective novation of the original Finance Agreem ent, which extinguished the debt owed by one entity, Garden District, LLC, and substituted in its place, a new debt owed by a different entity, Garden District, Inc. Griffith argues that he did not guarantee Garden District, Inc.'s debt, and he is therefore not liable for its indebtedness. Bank of Am erica argues that the Change Agreem ent's purpose was to correct a clerical error in the written Finance Agreem ent, which m istakenly identified the borrower as a lim ited liability com pany when it was, in fact, a corporation. Under Louisiana law, "[n]ovation is the extinguishm ent of an existing obligation by the substitution of a new one." La. Civ. Code art. 1879. A subjective novation--the variety alleged by Griffith--occurs when "a new obligor is substituted for a prior obligor who is discharged by the obligee." La. 16 Civ. Code art. 1882. The m ost im portant factor in determ ining whether a novation has occurred is the intent of the parties. Scott v. Bank of Coushatta, 512 So.2d 356, 360 (La. 1987). The intention to effect a novation m ay be shown by the character of the transaction, the facts and circum stances surrounding the transaction, as well as the term s of the agreem ent itself. Id.; W ainer v. A.J. Equities, Ltd., 984 F.2d 679, 683 (5th Cir. 1993). A novation, however, may never be presum ed, and "the intention to extinguish the original obligation m ust be clear and unequivocal." La. Civ. Code art. 1880 . The burden of proving a novation is on the party seeking its protection. Scott, 512 So. 2d at 360 ; Ciolino v. First Guar. Bank, 133 So. 3d 686, 691 (La. App. 1st Cir. 20 13). Here, the language of the Change Agreem ent does not dem onstrate an unequivocal intention to effect a novation. As an initial m atter, the term "novation" does not appear anywhere in the agreem ent. Nor does the agreem ent state that one borrower has been substituted for the other, that any existing obligations have been extinguished, or that any new obligations have been created by the agreem ent's execution. Instead, the language provides that the Change Agreem ent "m odifies the Project Finance and Term Loan Agreem ent ('Finance Agreem ent') between Bank of Am erica, N.A. ('Lender') 17 and Garden District Pet Hospital, Inc. ('Borrower')."49 It further provides that "[e]xcept as m odified by this Change Agreem ent, all other term s and conditions of the Finance Agreem ent . . . shall rem ain unchanged and in full force and effect."50 Nothing in this language suggests that the parties intended to extinguish the original Finance Agreem ent and replace it with a new agreem ent involving a new borrower. Cf. Harris v. S. Fid. Ins. Co., No. CIV.A. 0 9-6631, 20 10 WL 323561, at *2 (E.D. La. J an. 21, 20 10 ) (finding novation when insurer informed policyholder that a different company had assumed full responsibility for the insurer's obligations under the policy and expressly indicated that the assum ption of liability was intended to be a novation). Rather, it suggests that the parties intended to m odify the already existing Finance Agreem ent between Bank of Am erica and Garden District, Inc. by am ending the written contract to reflect the borrower's actual business structure. Thus, the Change Agreem ent's text supports Bank of Am erica's contention that Garden District, Inc. was the original borrower and that the Change Agreem ent m erely fixed a clerical error in the written contract, leaving all other term s, including Griffith's guaranty, in "full force and effect." 49 R. Doc. 14-2 at 4. 50 Id. 18 Further, the nature of the parties' agreem ent and the surrounding circum stances dispel any notion that the parties intended the Change Agreem ent to effect a novation. As Griffith acknowledges, the purpose of the loans m ade under the Finance Agreem ent was to finance the developm ent and operation of the borrower's veterinary practice.51 The original Finance Agreem ent states that the address of the intended borrower--and, hence, the location of the recipient veterinary practice--is 1116 Louisiana Avenue, Unit 4, New Orleans, Louisiana 70 115.52 During his deposition, Griffith testified that the anim al clinic located at that address was operated by Garden District , Inc.53 By contrast, records from the Louisiana Secretary of State indicate that the Garden District, LLC m aintained its business address at 80 9 Marengo Street, New Orleans, Louisiana 70 115.54 This discrepancy suggests that, although the original contract described the borrower as a lim ited liability com pany, the parties--including Griffith as guarantor--intended the Finance Agreem ent loans to benefit Garden District, Inc. Griffith him self testified to this effect during his deposition. When asked whether "Garden District Pet 51 R. Doc. 11-4 at 2, 11; R. Doc. 18 at 7. 52 R. Doc. 11-4 at 1. 53 R. Doc. 11-5 at 5, 9. 54 R. Doc. 17-1. 19 Hospital, Inc. obtain[ed] a loan from Bank of Am erica" in 20 0 9, Griffith testified, "yes."55 When asked whether he "personally guarantee[d] the debt of the borrowing entity," Griffith testified that he had.56 Nonetheless, Griffith argues that his affidavit creates a fact issue as to the parties' intent to novate, thereby precluding sum m ary judgm ent. In his affidavit, Griffith states--directly contrary to his deposition testim ony--that he "at no tim e agreed to personally guarantee the debt of Garden District Pet Hospital, Inc."57 This conclusory statem ent does not raise a genuine issue of fact concerning the parties' intent. See Biscuit Investm ents, Inc. v. Cajun Enterprises, Inc., No. CIV. A. 89-2778, 1994 WL 160 494, at *4 (E.D. La. Apr. 22, 1994) ("While intent is the determ inative factor in deciding whether the parties effected a novation, the Court does not find that AFC's self-serving, conclusory and post hoc affidavit raises a genuine issue as to the parties' intent."). In sum , neither the term s of the Finance Agreem ent and Change Notification, nor the circum stances surrounding their execution support Griffith's assertion that the parties intended a novation. This is particularly 55 R. Doc. 11-5 at 9. 56 Id. 57 R. Doc. 14-2 at 1. 20 true given that, for Bank of Am erica, a novation would have replaced a debt secured by Griffith's absolute, unconditional, and irrevocable guarantee with a debt owed by a different entity and lacking any com parable security. Griffith has provided no evidence to suggest that Bank of Am erica intended a routine contract m odification form to effect such a result. See Ciolino, 133 So. 3d at 691 (noting that courts should not presum e a novation because "creditors are not in the business of releasing debtors who have not paid"); First Nat. Bank of Abbeville v. Greene, 612 So. 2d 759, 763 (La. Ct. App. 3 Cir. 1992) ("It is not reasonable to believe the Bank intended to substitute an unsecured debt for one secured by collateral m ortgage notes and personal guarantees."). The Court therefore finds that Bank of Am erica is entitled to judgm ent against Griffith as a m atter of law. Griffith is liable to Bank of Am erica as guarantor for Garden District, Inc.'s indebtedness. D. Fre n ch Qu arte r, Co rp o ratio n In c.'s Liability As A Su cce s s o r Finally, the Court turns to the alleged liability of French Quarter, Inc. Bank of Am erica argues that French Quarter, Inc. is liable for the obligations of Garden District, Inc. under the corporate successor doctrine. According to Bank of Am erica, French Quarter, Inc. is a m ere continuation of Garden District, Inc. because Griffith is the sole shareholder, director, and officer of 21 both corporations, both corporations operated a sm all anim al clinic, and both shared two em ployees, Griffith and his son. To support its contention that these circum stances give rise to successor liability, Bank of Am erica cites Hollow ell v. Orleans Reg'l Hosp. LLC, 217 F.3d 379 (5th Cir. 20 0 0 ). There, the Fifth Circuit, applying Louisiana law, held that a corporation that acquires the assets of another is liable for the debts of the old corporation when "circum stances attending the creation of the new [corporation] . . . were of such a character as to warrant the finding that the new, is m erely a continuation of the old, corporation." Id. at 390 . The purpose of this "m ere continuation" exception to the rule of non-liability is to "prevent[] two corporations from m erging in effect while lim iting the liability of the surviving corporation by structuring the transaction as a sale of assets." Murray v. B&R Mach.950 73937, No. CIV. A. 92-40 30 , 1995 WL 133346, at *4 (E.D. La. Mar. 24, 1995) (citing Bourque v. Lehm ann Lathe, Inc., 476 So.2d 1125, 1127 (La. Ct. App. 3 Cir. 1985)). Accordingly, as Louisiana court have noted, "[a] threshold requirem ent to trigger a determ ination of whether successor liability is applicable under the 'continuation' exception is that one corporation m ust have purchased all or substantially all of the assets of another." See J.D. Fields & Co. v. Nottingham Const. Co., LLC, 20 15-0 723, 20 15 WL 6875153, at *7 (La. App. 1 Cir. 20 15); Pichon v. Asbestos Defendants, 22 52 So. 3d 240 , 244 (La. App. 4 Cir. 20 10 ) (sam e); see also Com ardelle v. Pennsy lvania Gen. Ins. Co., No. CIV.A. 13-6555, 20 14 WL 7139436, at *3 n. 31 (E.D. La. Dec. 15, 20 14) (doubting that successor liability doctrine applied when predecessor corporation did not sell substantially all of its assets to alleged successor). Here, although Bank of Am erica identifies certain com m onalities between French Quarter, Inc. and Garden District, Inc., it has produced no evidence of an asset purchase. To the contrary, Griffith testified during his deposition that the two corporations operated anim al clinics in different locations, using different sets of equipm ent. He further testified that French Quarter, Inc. did not acquire any physical assets from Garden District, Inc. when that corporation went out of business.58 Accordingly, Bank of Am erica has failed to establish that the doctrine of successor liability has any relevance to this case. See J.D. Fields, 20 15 WL 6875153, at *7; Pichon, 52 So. 3d at 244. Even if Bank of Am erica could clear this hurdle, however, the record does not reveal the level of closeness of identity required to im pose liability on French Quarter, Vet. for Garden District, Inc.'s indebtedness. The Fifth Circuit recognizes eight factors that are probative of whether a successor corporation is a "m ere continuation" of the predecessor: (1) retention of the sam e 58 R. Doc. 11-5 at 19. 23 em ployees; (2) retention of the sam e supervisory personnel; (3) retention of the sam e production facility in the sam e physical location; (4) production of the sam e product; (5) retention of the sam e nam e; (6) continuity of assets; (7) continuity of general business operations; and (8) whether the successor holds itself out as the continuation of the previous enterprise. Russell v. SunAm erica Sec., Inc., 962 F.2d 1169, 1176 n. 2 (5th Cir. 1992). While it is true that French Quarter, Inc. and Garden District, Inc. have a com m on shareholder, director, and officer, that is only one factor in the analysis. See J.D. Fields, 20 15 WL 6875153, at *7; see also Bona Fide Dem olition & Recovery , LLC v. Crosby Const. Co. of Louisiana, 690 F. Supp. 2d 435, 443 (E.D. La. 20 10 ) (noting that "[c]orporations function as distinct legal entities, separate from the individuals who own them , and their shareholders are not generally liable for the debts of the corporation"). During his deposition, Griffith testified that French Quarter, Inc. operates its anim al clinic at a different location than was used by Garden District, Inc. He further testified that the two anim al clinics had different nam es and--due to the distance between them --served different clienteles. Moreover, while both anim al clinics em ployed Griffith and his son, Griffith testified that French Quarter, Inc. has had "eight to ten" em ployees since it opened for business. 59 R. Doc. 11-5 at 16. 24 59 Other than the Griffiths, none of those em ployees worked for Garden District, Inc. for any period of tim e. This case is therefore distinguishable from the prim ary case upon which Bank of Am erica relies, Munive v. Chet Morrison Offshore, LLC, No. CIV.A. 0 6-1120 3, 20 0 8 WL 544183, at *4 (E.D. La. Feb. 25, 20 0 8). There, the court found on a m otion for sum m ary judgm ent that a lim ited liability com pany that purchased the assets of a corporation was a m ere continuation of the corporation. The court reasoned that the successor com pany operated in the sam e location as its predecessor, used the sam e facilities, operated under a sim ilar nam e, retained m any of the sam e personnel, and conducted the sam e business for the sam e set of custom ers. Here, by contrast, the two corporations operate in different locations, have few com m on em ployees, use different nam es, and serve different clienteles. Many of the relevant factors therefore weigh against a finding that French Quarter, Inc. is a m ere continuation of Garden District, Inc. For these reasons, Bank of Am erica's m otion for sum m ary judgm ent against French Quarter, Inc. is denied. IV. CON CLU SION 25 For the foregoing reasons, the Court GRANTS IN PART and DENIES IN PART plaintiff's m otion. The Court GRANTS sum m ary judgm ent to Bank of Am erica on Garden District, Inc's and Griffith's liability and DENIES Bank of Am erica's m otion for sum m ary judgm ent on French Quarter, Inc.'s liability. New Orleans, Louisiana, this 14th day of March, 20 16. ___ _________________________________ SARAH S. VANCE UNITED STATES DISTRICT J UDGE 26
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