Opinion ID: 2978163
Heading Depth: 3
Heading Rank: 2

Heading: Dynamic’s Motion for Summary Judgment

Text: In its cross-claim against Dynamic, SCS asserted that Dynamic was the “alter ego” of the Debtor because, based upon their interactions, there was no reason to differentiate between the Debtor and Dynamic. SCS asserted, therefore, that Dynamic should be held jointly and severally liable with the Debtor. In order to prove an “alter ego” theory under Mississippi law and disregard the corporate entity, a party must demonstrate: (1) some frustration of expectations regarding the party to whom he looked for performance; (2) the flagrant disregard of corporate formalities by the defendant corporation and its principals; and (3) a demonstration of fraud or other equivalent misfeasance on the part of the corporate shareholder. Gray v. Edgewater Landing, Inc., 541 So. 2d 1044, 1047 (Miss. 1989). Dynamic responded to the allegations of SCS with its motion for summary judgment asserting that SCS could not demonstrate all of the essential elements of an alter ego. In support of its motion, Dynamic presented the affidavit of one of its members, W. Craig Barber (“Barber”), attesting that Dynamic did not have any employees, did not manage, own, operate or control the Debtor or any of its restaurants, did not have any involvement or authority with the Debtor’s accounts payable, maintained a separate accounting system from the Debtor, and never had a contractual relationship with SCS. In addition, Dynamic provided copies of twenty-nine invoices from SCS submitted to the Debtor and checks paying those invoices drawn on an account of the Debtor. SCS did not file a substantive response to Dynamic’s motion for summary judgment. Instead, SCS filed a motion to deny or continue Dynamic’s motion pursuant to Rule 56(f) seeking additional time for discovery. In support of its Rule 56(f) motion, SCS submitted an affidavit of its counsel asserting that it had not had an opportunity to depose Barber and was in the process of reviewing approximately 400 boxes of documents in the possession of the chapter 7 trustee, some of which, including various emails, belied some of Barber’s assertions. In particular, SCS sought additional time to discover information relevant to Dynamic’s role in the acquisition of the Debtor, 15 as well as information about allegedly shared email addresses, websites, and facilities between Dynamic and the Debtor. The bankruptcy court denied SCS’s Rule 56(f) motion without discussion. It then went on to consider the affidavit of Barber and the procedural response of SCS. Finding that the affidavit of SCS did not rebut Barber’s statements and contained merely “conclusory allegations, speculation, and unsubstantiated assertions” which are insufficient to defeat summary judgment, the bankruptcy court granted Dynamic’s motion pursuant to Federal Rule of Civil Procedure 56(e).11 As with SCS’s Rule 56(f) motion filed in regard to Wells Fargo’s motion for summary judgment, this Panel applies the factors set forth by the Sixth Circuit in Plott: (1) when the appellant learned of the issue that is the subject of the desired discovery; (2) whether the discovery would have changed the ruling below; (3) how long the discovery period lasted; (4) whether the appellant was dilatory in its discovery efforts; and (5) whether the appellee was responsive to discovery requests. Plott, 71 F.3d at 1196-97. The adversary proceeding was filed in January 2008, and between that time and August 2008, when the parties entered an agreed upon pretrial order, SCS issued no discovery requests. SCS did not propound discovery to Dynamic until September 12, 2008, to which Dynamic timely responded. Additionally, while the bankruptcy court denied SCS’s motion to amend the pretrial order, it granted SCS an additional 10 days to respond to Dynamic’s motion for summary judgment. SCS then once again requested additional discovery time through its Rule 56(f) motion. While SCS asserts that it did not have an opportunity to depose Barber, it never requested to depose him, not even with the additional 10 days the bankruptcy court granted it. Additionally, while SCS presented an affidavit that conformed with Rule 56(f) in that it detailed the discovery it sought to conduct and what it sought to show, it failed to demonstrate how the information it seeks is material or would change the ruling below and why it did not previously 11 Federal Rule of Civil Procedure Rule 56(e) provides in pertinent part: “W hen a motion for summary judgment is made and supported as provided in this rule, an adverse party may not rest upon the mere allegations or denials of the adverse party’s pleading . . . . If the adverse party does not so respond, summary judgment, if appropriate, shall be entered against the adverse party.” 16 seek to depose Barber. See PNC Bank v. M.T. Person, III, 2007 WL 2874459, at  (W.D. Ky. 2007) (finding defendant failed to meet burden of demonstrating need for additional discovery time because affidavit did not detail how information sought was material to resolution or why it did not previously seek information). Before alter ego liability could be placed upon Dynamic, SCS had to show fraud or other equivalent misfeasance on the part of the Debtor or the Debtor’s shareholders. While SCS had nine months to take discovery, in its affidavit, SCS failed to assert such corporate fraud or misfeasance by the Debtor. Based on the statements made in SCS’s affidavit, there is no indication that additional time for discovery would have changed the bankruptcy court’s ruling. Plott, 71 F.3d at 1196-97. Since SCS’s affidavit did not allege facts sufficient to state a cause of action against Dynamic on an alter ego theory, the bankruptcy court did not abuse its discretion in denying SCS’s motion for additional discovery and refusing to defer summary judgment under Rule 56(f). Consequently, because SCS presented no substantive opposition to Dynamic’s properly supported motion for summary judgment, the bankruptcy court did not err in granting Dynamic’s motion for summary judgment. See Fed. R. Civ. Proc. 56(e).