Court Opinion

ID: 47671
Source: CourtListenerOpinion
Date Created: 2010-04-25 23:27:46+00
Date Added: 2024-06-11T17:18:06.182732
License: Public Domain

United States Court of Appeals
                                                                      Fifth Circuit
                                                                   F I L E D
                    UNITED STATES COURT OF APPEALS
                         FOR THE FIFTH CIRCUIT                    December 29, 2006

                        _______________________                Charles R. Fulbruge III
                                                                       Clerk
                              No. 05-11343
                        _______________________

    In the Matter of: ALL TRAC TRANSPORTATION, INC., Debtor.

                    ALL TRAC TRANSPORTATION, INC.,

                                                                 Appellant,

                                  versus

                     TRANSPORTATION ALLIANCE BANK,

                                                                  Appellee.

            On Appeal from the United States District Court
         for the Northern District of Texas - Dallas Division
                        Docket No. 3:04-CV-1759

Before JONES, Chief Judge, and SMITH and STEWART, Circuit Judges.

EDITH H. JONES, Chief Judge:*

            Appellant All Trac Transportation, Inc. (“All Trac”), a

Chapter 11 debtor, appeals the district court’s judgment affirming

the bankruptcy court’s rulings with respect to damages and the

dismissal of claims against Transportation Alliance Bank (“TAB”)

for numerous violations of the automatic stay.               Although the

outcome is disturbing given the gravity of TAB’s automatic stay

violations and the minimal damages awarded, the district court did

     *
            Pursuant to 5TH CIR. R. 47.5, the court has determined that this
opinion should not be published and is not precedent except under the limited
circumstances set forth in 5TH CIR. R. 47.5.4.
not err in upholding the bankruptcy court’s rulings.      Because both

of the lower courts devoted close attention to All Trac’s issues

and wrote comprehensively on them, we need not repeat their work in

order to AFFIRM.

                            I.   BACKGROUND

          All   Trac,   a   long-haul   trucking   company,   filed   for

Chapter 11 protection on August 13, 2002.     At the time, TAB was All

Trac’s bank.    Through its agent, TAB provided a pre-approved line

of credit, a demand account that All Trac used as a checking

account, and a reserve account.     Additionally, TAB was All Trac’s

factor, purchasing its accounts receivable.

          On August 15, 2002, after All Trac filed for bankruptcy,

TAB sent 528 letters to All Trac’s customers advising them that all

payments owed to All Trac should be paid to TAB, regardless of

contrary instructions from All Trac, and that a failure to do so

could result in civil liability. The relationship between All Trac

and TAB deteriorated, and on September 6, 2002, All Trac sought the

bankruptcy court’s permission to terminate its relationship with

TAB and enter into a post-petition factoring and security agreement

with Allied Capital Partners, L.P. (“Allied”). The court approved.

Shortly thereafter, on September 19, TAB sent another round of

letters to All Trac’s customers, again instructing them to make all

payments to TAB and warning of potential liability if they did not.

Additionally, on September 18 and 27, TAB bounced several of All

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Trac’s checks, although TAB held sufficient funds to cover the

checks.

           On September 23, All Trac filed an adversary proceeding

and applied for a temporary restraining order against TAB.              On

October 1, the bankruptcy court entered an agreed order that

adopted   several   stipulations   by   All   Trac,   TAB,   and   Allied,

terminating the banking relationship between All Trac and TAB, and

directing that customers’ future payments be made directly to

Allied.

           Months later, All Trac amended its complaint to include

(1) a motion to hold TAB in contempt of court for numerous

violations of the automatic stay and (2) a claim for tortious

interference with contracts between All Trac and its customers,

employees, Allied, and other secured creditors. All Trac contended

that TAB improperly withheld its accounts receivable, depriving it

of funds it needed to make adequate protection payments to secured

creditors; when it could not make those payments, All Trac faced

the foreclosure or sale of all its trucks and went out of business.

           The bankruptcy court tried the adversary proceeding and

contempt motion together and, following a lengthy bench trial,

concluded that TAB indeed violated the automatic stay and court

orders numerous times and tortiously interfered with All Trac’s

contractual relationships with Allied and All Trac’s customers.

The court rejected several of All Trac’s other allegations of

automatic stay violations, its contempt claims, and other tortious

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interference with contract claims.            It did not address All Trac’s

claims    for   tortious    interference      with     business      relations    and

prospective business relations.

              The court determined that All Trac had not proven TAB

responsible for the destruction of All Trac’s entire business, and

thus    was   not    entitled   to    lost   profits    for    the    cessation    of

operations.         Since All Trac did not itemize damages from the

specific automatic stay violations, it had failed to prove damages

aside    from   the    $5,698.80     surcharge   Allied       imposed   after     TAB

violated a court order, and the court limited damages to that

amount. The court also awarded All Trac $68,552 in attorneys’ fees

plus out-of-pocket expenses and prejudgment interest.

              All Trac appealed to the district court, contending that

(1) the bankruptcy court erred by failing to properly address its

tortious interference claims; (2) it proved that TAB caused the

destruction of All Trac’s business; (3) it met its burden of proof

as to lost profits; (4) the attorneys’ fee award was inadequate;

(5) the bankruptcy court erred in finding TAB did not act with

malice; (6) TAB committed violations of the automatic stay beyond

those found by the bankruptcy court; and (7) the bankruptcy court

erred in finding some of TAB’s actions justified.                     The district

court affirmed on all counts, and All Trac now appeals.

                                II.    DISCUSSION

                                         4
               This court reviews the district court’s decision on

appeal from the bankruptcy court by applying the same standards as

the district court.        Total Minatome Corp. v. Jack/Wade Drilling,

Inc., 258 F.3d 385, 387 (5th Cir. 2001).            We review conclusions of

law de novo and findings of fact only for clear error.             Id.    Under

the clearly erroneous standard, we will “defer to a bankruptcy

court’s   factual      findings   unless,   after    reviewing   all     of   the

evidence, ‘we are left with a firm and definite conviction that the

bankruptcy court made a mistake.’”          In re Cahill, 428 F.3d 536, 542

(5th Cir. 2005) (quoting In re Bradley, 960 F.2d 502, 507 (5th Cir.

1992) (internal quotation marks omitted)).           The bankruptcy court’s

unique ability to evaluate the witnesses and consider all the

evidence in context must be respected.         Gen. Elec. Capital Corp. v.

Acosta, 406 F.3d 367, 373 (5th Cir. 2005).              If the factfinder’s

view of the evidence is plausible in light of the record as a

whole, the appellate court may not reverse it.               Sequa Corp. v.

Christopher, 28 F.3d 512, 514-15 (5th Cir. 1994).

A.   Destruction of Business

               All Trac first contends that it proved TAB caused the

demise of its trucking business by wrongfully withholding the

proceeds of its accounts receivable, thereby leaving All Trac

unable    to    make   adequate   protection    payments    to   its   secured

creditors.       It argues that the bankruptcy court erred in making

several factual and legal conclusions and in using a hypothetical

                                      5
analysis to determine what would have happened if TAB had not

withheld the proceeds.

            Although All Trac contends it raises a legal question,

the bankruptcy court made a fact finding about All Trac’s failure

of proof that this court reviews for clear error.         We agree, as All

Trac   contends,    that    the   bankruptcy   judge   improperly    used   a

hypothetical to determine what may have happened had All Trac had

access to the funds improperly withheld by TAB.                This error,

however, is harmless, because the court also found that All Trac

had not shown how it would have been able to become profitable, in

light of its prebankruptcy financial condition, which could not be

attributed to TAB.         Significant evidence from financial experts

supported the finding that All Trac was not financially sound even

apart from any actions by TAB.         The court further found that All

Trac had not shown why, after the relationship with TAB ceased, All

Trac still could not pay the costs of its continuing operations.

Although    All    Trac    asserted   that   TAB’s   actions   affected     it

cumulatively, there was no evidence that any customers limited or

stopped doing business with it because of TAB’s actions.            At most,

the company proved that TAB caused the loss of one driver.            Thus,

even absent the improper hypothetical, the finding that All Trac

failed to prove TAB caused the destruction of All Trac’s entire

business is not clearly erroneous.

B.     Lost Profits

                                       6
           All Trac next argues the bankruptcy court erred by

failing to award All Trac damages for lost profits resulting from

TAB’s automatic stay violations. It contends the court erroneously

believed All Trac was constrained to provide an “all or nothing”

finding on damages, and because the court disbelieved some of All

Trac’s experts, it improperly denied all lost profits damages. All

Trac asserts that because the company offered substantial evidence

as to the damages caused by TAB’s actions, the court had a duty to

calculate the damages, even if it did not accept All Trac’s

calculations.    Again, the record does not support All Trac’s

claims.

           The bankruptcy court found that All Trac failed to prove

that TAB’s misconduct destroyed its business. This finding was not

clearly erroneous.    Thus, even assuming the correctness of All

Trac’s calculation of profits lost when it ceased operations, the

company lost profits because it closed down, not because TAB shut

it down.   Although TAB’s numerous violations of the automatic stay

undoubtedly damaged All Trac, it failed to connect the violations

to identifiable losses, leaving the bankruptcy court unable to

award damages for the specific violations.    Because All Trac did

not make the factual showing necessary to enable a determination of

damages attributable to TAB’s misconduct, the district court did

not err in affirming the denial of damages for lost profits.

C.   Tortious Interference

                                 7
     1.   Appropriate Legal Standard

          All Trac next argues that the district court erred by

failing to conduct a de novo review of the legal standard applied

by the bankruptcy court to its tortious interference claims and

that the bankruptcy court applied an improper clear and convincing

evidence standard instead of the preponderance of the evidence.

There is, however, nothing in the bankruptcy court’s opinion

discussing or applying the higher standard and nothing to indicate

it “imported by reference” a more stringent standard. The district

court properly denied this ground for relief.

     2.   Waiver of Claims

          All Trac purports to have asserted claims for tortious

interference with contract, tortious interference with business

relations, and tortious interference with prospective business

relations before the bankruptcy court.   TAB objected to including

any of these claims in the pretrial order, but the bankruptcy court

overruled the objection in part, as it stated that All Trac had

preserved its claim for tortious interference with contracts in the

amended complaint.   Ultimately, the court dealt carefully with

claims for interference with contracts but it did not address All

Trac’s business relations claims. The district court held that All

Trac waived, as inadequately briefed, its complaint that the

bankruptcy court erred by failing to consider the “omitted” claims.

See In re Nary, 253 B.R. 752, 762 n.23 (N.D. Tex. 2000).

                                8
          A careful reading of the record persuades us that All

Trac did adequately brief this contention to the district court.

That court’s   oversight   is,   however,   the   least   of   All   Trac’s

problems, because the bankruptcy court correctly limited the issues

to interference with contractual relations.       The bankruptcy court

found that the tortious interference with contracts claims were

properly before it because they were contained in paragraphs 44 and

45 of All Trac’s March 4, 2003, amended complaint.        Contrary to All

Trac’s position, the amended complaint makes no mention of the

business relations claims.   All Trac did not litigate those claims

in bankruptcy court and may not resurrect them on appeal.

                                   9
                        III.   CONCLUSION

          For the foregoing reasons, the judgment of the district

court, affirming the bankruptcy court, is AFFIRMED.

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