Court Opinion

ID: 9556797
Source: CourtListenerOpinion
Date Created: 2023-08-18 18:00:55.069345+00
Date Added: 2024-06-11T09:02:31.404394
License: Public Domain

Case: 22-30602         Document: 00516863420               Page: 1      Date Filed: 08/18/2023

             United States Court of Appeals
                  for the Fifth Circuit
                                                                                        United States Court of Appeals
                                                                                                 Fifth Circuit

                                      ____________                                             FILED
                                                                                         August 18, 2023
                                       No. 22-30602                                       Lyle W. Cayce
                                      ____________                                             Clerk

   In the Matter of AKD Investments, L.L.C.

                                                                                           Debtor,

   AKD Investments, L.L.C.,

                                                                                    Appellant,

                                              versus

   Magazine Investments I, L.L.C.,

                                                                                        Appellee.
                      ______________________________

                      Appeal from the United States District Court
                         for the Eastern District of Louisiana
                                USDC No. 2:22-CV-619
                      ______________________________

   Before Duncan and Wilson, Circuit Judges, and Mazzant, District
   Judge.*
   Cory T. Wilson, Circuit Judge:
         In November 2014, AKD Investments, LLC (AKD), filed for
   bankruptcy. At that time, Magazine Investments I, LLC (Magazine), held

         _____________________
         *
             District Judge in the Eastern District of Texas, sitting by designation.
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   the notes on AKD’s main asset, a building on Magazine Street in New
   Orleans, Louisiana. After Magazine resumed foreclosure proceedings, AKD
   sought permission from the bankruptcy court to obtain financing to pay off
   Magazine’s notes and thereby avoid the looming foreclosure sale of the
   building. In a February 2015 order, the bankruptcy court authorized the
   transaction, and the parties performed under the order. The bankruptcy
   court confirmed AKD’s reorganization plan in April 2017. In August 2020,
   AKD brought this action against Magazine as a core proceeding within the
   still-open bankruptcy case. AKD alleged that it had overpaid Magazine in
   2015 and sought to recoup the overpayment. But the bankruptcy court
   granted summary judgment to Magazine, concluding that AKD’s claim was
   barred by the law-of-the-case doctrine because the amount AKD paid
   Magazine had been established by the court’s 2015 order. AKD appealed,
   and the district court affirmed. AKD then timely appealed to our court.
          AKD contends that the bankruptcy court erred in applying the law-of-
   the-case doctrine because the 2015 order did not actually decide the amount
   AKD owed Magazine. The order is ambiguous on that point. But deferring
   to the bankruptcy court’s reasonable interpretation of its order, we
   nonetheless affirm.
                                           I.
          AKD owned a building on Magazine Street in New Orleans (the
   Property). AKD obtained two mortgages on the Property, one for $1.4
   million and one for $100,000, both from a local bank.1 AKD failed to make
   timely payments on the notes. Magazine acquired the non-performing notes

          _____________________
          1
            AKD obtained its mortgages from Hancock Bank of Louisiana. Not long after,
   Hancock Bank of Louisiana became Whitney Bank, which then held AKD’s notes until
   they were sold to SummitBridge Credit Investments IV, LLC, in December 2012.

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   and initiated foreclosure proceedings against AKD in Louisiana state court in
   July 2014. The state court scheduled a foreclosure sale for November 13,
   2014.
           On the eve of the scheduled sale, AKD filed for Chapter 11
   bankruptcy. This triggered an automatic stay preventing any collection
   efforts against AKD or the Property. See 11 U.S.C. § 362(a). The foreclosure
   sale was cancelled. A few days later, Magazine sought to lift the stay so that
   foreclosure proceedings could continue. The bankruptcy court granted
   Magazine’s request in December 2014. See 11 U.S.C. § 362(d) (authorizing
   such motions). As a result, the foreclosure sale was reset for February 26,
   2015.
           Bankruptcy proceedings continued simultaneously. The bankruptcy
   court ordered Magazine to file a proof of claim for AKD’s outstanding debt,
   including an estimated “payoff” amount. Magazine filed its proof of claim
   on February 2, 2015, specifying that AKD owed Magazine $2,174,844.27 as
   of January 31, 2015, with interest and expenses continuing to accrue.
           Seeking to forestall the scheduled foreclosure sale, AKD sought
   financing to satisfy its debt with Magazine. AKD found a willing lender—
   James M. Huger—and reached an agreement with Huger, memorialized in a
   loan commitment letter dated February 19, 2015. The commitment letter
   specified that Huger would loan AKD $2,225,000 to pay, among other
   things, “the then outstanding amount of the loan” owed to Magazine in
   order “to pay off [the] first mortgage note[s] held by Magazine.” The deal
   was conditional upon the bankruptcy court’s approval.
           AKD filed an emergency motion seeking approval under 11 U.S.C.
   § 364(e) on February 20, 2015. AKD’s motion included the payoff amount
   from Magazine’s proof of claim but emphasized that AKD “disputed the
   amount of Magazine’s claim.” Because of the dispute, AKD requested that

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   Huger loan proceeds of approximately $2,175,000 “be held in escrow”
   pending resolution of the dispute.
          Magazine opposed AKD’s motion, contending the amount to be
   placed in escrow was insufficient. Because it was pegged to the payoff
   amount in the proof of claim, the proposed escrow amount did not include
   funds to cover the interest and attorney’s fees that had accrued since January
   31 and that would continue to accrue while in escrow. Id. Magazine averred
   that, as of February 25, 2015, Magazine’s claim was at least $2,177,817.10.2
          In response to Magazine’s opposition, AKD amended its motion for
   approval of the transaction. The amended motion dropped any reference to
   a dispute over the amount owed. And it no longer sought to have funds held
   in escrow; instead AKD proposed to use the Huger loan proceeds, as well as
   bank deposits and rental income as necessary, to pay Magazine “in full the
   amount of the claim of Magazine without prejudice immediately upon closing
   of the loan.”     Magazine continued to oppose AKD’s motion, even as
   modified.
          On February 25, 2015, the day before the scheduled foreclosure sale,
   the bankruptcy court held a hearing to consider AKD’s amended motion.
   The next day, the court entered an order granting the motion (the Order).
   Specifically, the Order authorized AKD “to obtain credit and borrow from
   James M. Huger $2,225,000 . . . pursuant to the terms and conditions of the
   loan commitment letter,” and then “to pay Magazine . . . $2,181,919.72 by
   cashier’s check in immediately available funds . . . on or before 11:30 am
   central time on February 26, 2015.” Upon closing, Huger would receive a

          _____________________
          2
             This estimate also excluded the commission Magazine would owe the sheriff,
   pursuant to Louisiana law, if the bankruptcy court ordered cancellation of the writ of
   seizure on the Property.

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   first-priority lien against the Property, and all liens held by Magazine would
   be cancelled, as would the foreclosure sale.3                 The parties performed
   according to the Order’s terms.
           Two years later, in April 2017, the bankruptcy court confirmed
   AKD’s plan of reorganization.
           In August 2020, AKD filed this action as a core proceeding within its
   bankruptcy case.        AKD alleged that it had paid Magazine “excessive
   attorney’s fees, interest charges, and other charges and expenses” in the
   2015 transaction and sought to recover sums allegedly overpaid. After
   discovery, Magazine filed a motion for summary judgment, which the
   bankruptcy court granted. The court concluded that AKD’s action was
   barred by the law-of-the-case doctrine because the Order set the amount
   AKD paid Magazine. The bankruptcy court entered final judgment in favor
   of Magazine and dismissed the action.
           AKD appealed to the district court, which affirmed. Then AKD
   timely appealed to this court.
                                              II.
           We review a “bankruptcy court’s grant of summary judgment de novo,
   using the same standard employed by the district court.” In re Shcolnik, 670
   F.3d 624, 627 (5th Cir. 2012). In adversarial proceedings in bankruptcy, Rule
   56 of the Federal Rules of Civil Procedure governs review of summary
   judgment motions.         F. R. Bankr. P. 7056.                Summary judgment is
   appropriate when “the movant shows that there is no genuine dispute as to

           _____________________
           3
            The Order also directed that Magazine would not be liable for any commission
   due the sheriff in relation to cancellation of the foreclosure sale. See supra n.2. Instead,
   “[s]hould any additional costs or commissions be owed, the Sheriff sh[ould] file a proof of
   claim in” AKD’s bankruptcy case.

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   any material fact and the movant is entitled to judgment as a matter of law.”
   Fed. R. Civ. P. 56(a).
          While we usually review the bankruptcy court’s interpretation of its
   own orders de novo, we “defer to the bankruptcy court’s reasonable
   resolution of . . . ambiguities in those documents.” In re Nat’l Gypsum Co.,
   219 F.3d 478, 484 (5th Cir. 2000). “[H]owever, the documents must truly
   be ambiguous, even in light of other documents in the record, before we will
   defer.” Id.
                                        III.
          The law-of-the-case doctrine “is based on the salutary and sound
   public policy that litigation should come to an end.” White v. Murtha, 377
   F.2d 428, 431 (5th Cir. 1967). Despite its importance, the doctrine “is an
   amorphous concept” with no “precise requirements.” Arizona v. California,
   460 U.S. 605, 618 (1983). Generally, “when a court decides” an issue, “that
   decision should continue to govern the same issues in subsequent stages of
   the same case.” Id. The doctrine has an important limitation: It “applies
   only to issues that were actually decided, rather than all questions in the case
   that might have been decided but were not.” Alpha/Omega Ins. Servs. v.
   Prudential Ins. Co. of Am., 272 F.3d 276, 279 (5th Cir. 2001) (emphasis
   added). But “the issues need not have been explicitly decided; the doctrine
   also applies to those issues decided by ‘necessary implication.’” Id. (quoting
   In re Felt, 255 F.3d 220, 225 (5th Cir. 2001)).
          The parties dispute whether the bankruptcy court properly applied
   the law-of-the-case doctrine in this case. They spar over whether the
   bankruptcy court actually decided the payoff amount in the Order, such that
   the doctrine bars AKD’s claim to recover its alleged overpayment to
   Magazine. AKD contends that “neither the correctness of the amount AKD
   paid Magazine nor the merits of AKD’s claim[] to recover[] the amount of

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   its overpayment” were actually decided in the Order. Magazine counters
   that the Order “decided the issue.”
           AKD’s argument hangs on a single phrase in the Order: “without
   prejudice.” The Order provides “that immediately upon closing of the
   Huger [l]oan, [AKD] is authorized to pay Magazine . . . the Magazine
   [p]ayoff by the [p]ayoff [d]eadline without prejudice and without conditions
   by cashier’s check as provided above from the proceeds of the Huger
   [l]oan.”4     According to Black’s Law Dictionary, the phrase “without
   prejudice”:
           import[s into a transaction] that the parties have agreed that,
           as between themselves, the receipt of the money by one, and
           the enjoyment by the other, shall not . . . have any legal effect
           upon the rights of the parties” and “that such rights will be as
           open to settlement by negotiation or legal controversy as if the
           money had not been turned over by the one to the other.

   Without Prejudice, Black’s Law Dictionary (11th ed. 2019). AKD
   reasons that the inclusion of “without prejudice” in the Order thus means
   that the Order did not determine “the correct amount [AKD] owed to
   Magazine.”
           By contrast, Magazine contends that the Order actually decided the
   final, correct payoff amount. Magazine points to two sections of the Order
   that emphasize the finality of its terms as evidence that the Order did not
   leave the payoff amount open to subsequent challenge. The first provides:

           _____________________
           4
             AKD also points out that it “specifically stated in its original motion for
   authorized [sic] to refinance its debt [that] it disputed the amount of Magazine’s claim.”
   But as the district court pointed out, “this was not the motion that was granted.” Instead,
   “[a]ny language in the first motion regarding a potential dispute . . . was removed [by
   AKD] upon amendment [and] is therefore of no moment.” But AKD included in its
   amended motion a request that the payment be made “without prejudice.”

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         that the [c]ommitment [l]etter and all other documents,
         agreements and instruments necessary to effectuate and
         consummate the transaction contemplated by the
         [c]ommitment [l]etter together with the provisions and terms
         of this Order are specifically enforceable against and binding
         upon, and shall not be subject to rejection or avoidance, by
         [AKD], and any assigns, including without limitation an[y]
         trustee,    responsible     person,    estate    administrator,
         representative or similar person hereinafter appointed for or in
         connection with [AKD]’s estate or affairs in this or any
         subsequent or controverted case under the Bankruptcy Code
         involving [AKD].

   And the second details:
         that the terms and conditions of the [c]ommitment [l]etter are
         an integral part of the refinancing and that, in view of: (i) the
         good faith of the lender and of Magazine Investments I, LLC,
         (ii) the reasonableness of the terms of the [c]ommitment
         [l]etter, and (iii) the fact that the terms and conditions of the
         [c]ommitment [l]etter are integral part of the refinancing, the
         reversal or modification on appeal or otherwise of this Order
         shall not affect the validity or enforceability of the payoff of the
         debt of Magazine Investments I, LLC or the validity or
         enforceability of the Huger [l]oan or the validity,
         enforceability, or priority of the lien or mortgage against the
         Property granted to James M. Huger or his assign(s) pursuant
         to this Order or any of the terms or conditions of the
         [c]ommitment [l]etter . . . .

         Read in isolation, the sections of the Order cited by each side
   somewhat support their proposed interpretations of the Order.                AKD
   correctly points out that the Order says that AKD’s payment to Magazine
   was made “without prejudice,” seemingly meaning that the terms of
   payment remained open for legal controversy. Yet the two sections cited by
   Magazine clearly state that the Order and its terms—presumably including

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   the payoff amount to Magazine—are “specifically enforceable against and
   binding upon, and shall not be subject to rejection or avoidance by,” AKD.
   Read as a whole, the Order appears internally inconsistent about whether the
   payoff amount was “without prejudice” (as AKD contends) or “specifically
   enforceable against and binding upon” AKD (as Magazine contends).
   Neither party offers a compelling way to harmonize the Order in toto, making
   sense of the apparent contradiction.
           AKD suggests that we could resolve the contradiction by reading the
   two sections cited by Magazine as limited only to securing the liens granted
   under the Order.         Specifically, according to AKD, those two sections
   “addressed only the effectiveness, enforceability, and perfection of the
   security interests granted to Huger to secure the Huger loan” and therefore
   do not render unreviewable the amount AKD paid Magazine. But this
   suggested reading conflicts with the text of the relevant sections of the Order,
   which are plainly not limited to Huger’s lien. Instead, the first section
   extends broadly to “the [c]ommitment [l]etter and all other documents,
   agreements, and instruments necessary to effectuate and consummate the
   transaction contemplated by the [c]ommitment [l]etter together with the
   provisions and terms of this Order.” And the second section specifically
   emphasizes “the validity [and] enforceability of the payoff of the debt of
   Magazine” in addition to the validity of Huger’s lien. Accordingly, AKD’s
   proposed reading is untenable.5

           _____________________
           5
              AKD relies on out-of-circuit cases regarding 11 U.S.C. § 364(e) to support its
   preferred reading. See Shapiro v. Saybrook Mfg. Co., 963 F.2d 1490, 1493 (11th Cir. 1992);
   see also Kham & Nate’s Shoes No. 2, Inc. v. First Bank of Whiting, 908 F.2d 1351, 1355 (7th
   Cir. 1990). But we have never read § 364(e) to focus myopically on liens. Instead, we have
   read it as a stay requirement. See In re TMT Procurement Corp., 764 F.3d 512, 519 (5th Cir.
   2014) (“A failure to obtain a stay of an authorization under [§ 364(e)] moots an appeal of
   that authorization[.]”); see also In re Pacific Lumber Co., 584 F.3d 229, 240 (5th Cir. 2009)

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           Magazine suggests that “without prejudice” is of no moment here
   because it is insufficiently specific to reserve any rights.              As support,
   Magazine cites two Louisiana intermediate appellate court opinions. See
   Barnett v. La. Med. Mut. Ins. Co., 51908 (La. App. 2 Cir. 5/23/18), 248 So. 3d
   594; Advanced Com. Contracting v. Powell Ins. Agency, 09-758 (La. App. 5 Cir.
   12/29/09), 30 So. 3d 851. We fail to see the relevance of these cases, which
   pertain to the interpretation of reservation-of-rights clauses in private
   settlement agreements under state law, to our immediate task of interpreting
   an order entered by the bankruptcy court. Regardless, we hesitate to agree
   with Magazine that the phrase “without prejudice” is without meaning.
   Rather, we “lean in favor of a construction which will render every word
   operative, rather than one which may make some idle and nugatory.”
   Antonin Scalia & Bryan A. Garner, Reading Law: The
   Interpretation of Legal Texts 174 (2012) (citations omitted). So
   we endeavor to give meaning to all the words written into the Order by the
   bankruptcy court. But Magazine is right insofar as the scope of “without
   prejudice” is the source of ambiguity in the Order.
           Reviewing the Order, the Huger commitment letter, and the
   bankruptcy court record, we find nothing that clarifies the scope and import
   of “without prejudice” as used in the Order.                   Thus, the Order is
   “truly . . . ambiguous, even in light of other documents in the record.” In re
   Nat’l Gypsum Co., 219 F.3d at 484. In these circumstances, we apply a
   deference rule: As long as the bankruptcy court reasonably resolved the
   ambiguity as it construed the Order in weighing Magazine’s motion for
   summary judgment in this case, we defer to that court’s interpretation. Id.

           _____________________
   (Section 364(e) “prevent[s] the appellate reversal of an order to sell property or obtain
   post-petition financing unless such orders were stayed pending appeal.”).

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          The bankruptcy court resolved the ambiguity by concluding that the
   Order specifically decided that AKD owed Magazine $2,181,919.72. This
   was reasonable. When the bankruptcy court issued the Order in 2015, it had
   before it Magazine’s proof of claim, including its suggested payoff amount as
   of January 31, 2015, and a breakdown of how Magazine calculated that
   amount; Magazine’s updated estimate as of February 25; the relevant
   mortgage documents; and the parties’ stipulations and discussion during the
   hearing on the motion. Based on this information, the resulting Order set the
   payoff amount at $2,181,919.72, a very specific number. To be sure, the full
   scope of “without prejudice” remains unclear, but in granting Magazine
   summary judgment in this case, the bankruptcy court reasonably determined
   that the phrase—whatever its scope—did not apply to the payoff amount to
   Magazine. The court’s interpretation of its prior Order is entitled to
   deference.
          AKD disagrees, contending that the bankruptcy court’s interpretation
   conflicts with Alpha-Omega Insurance Services, Inc. v. Prudential Insurance Co.
   of America, where our court stated:
          [E]ven when issues have not been expressly addressed in a
          prior decision, if those matters were “fully briefed to the
          appellate court and . . . necessary predicates to the [court’s]
          ability to address the issue or issues specifically discussed,
          [those issues] are deemed to have been decided tacitly or
          implicitly, and their disposition is law of the case.”

   272 F.3d 276, 279 (5th Cir. 2001) (all alterations except first in original)
   (quoting In re Felt, 255 F.3d 220, 225 (5th Cir. 2001)). Based on Alpha-
   Omega, AKD asserts that the Order could not have decided the payoff
   amount because “neither party briefed” “the correct [payoff] amount”
   “either in connection with the refinancing motion or elsewhere” “in the
   main bankruptcy case.”       But AKD’s contention miscasts the record.

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   Magazine briefed the correct payoff amount in the main bankruptcy case,
   both in its proof of claim and in its opposition to AKD’s motion. Moreover,
   AKD misconstrues Alpha-Omega. That case specifically does not limit a
   court’s ability to decide issues presented but not fully briefed. See Alpha-
   Omega, 272 F.3d at 281 (recognizing that the court “could have gone beyond
   the scope of the . . . parties’ briefs to independently assess the . . . issue”).
   Rather, Alpha-Omega reiterates our rule from In re Felt that an issue briefed
   on appeal that is a “necessary prerequisite[]” to an issue actually decided in
   the appellate opinion is the law of the case, even if the appellate court’s
   opinion does not explicitly decide the prerequisite issue or grapple with the
   arguments in the briefs. In re Felt, 255 F.3d at 225–26. Here, though, we
   defer to the bankruptcy court’s reasonable determination that the Order in
   fact determined the correct value for the payoff amount, whatever the scope
   of the parties’ briefs, and whatever the scope of “without prejudice” as used
   in the Order.6
                                            IV.
          The bankruptcy court’s 2015 Order is internally contradictory. Its
   meaning is therefore ambiguous as to the question at hand: Whether the
   Order actually decided the correct amount that AKD owed to Magazine.
   Accordingly, we defer to the bankruptcy court’s reasonable interpretation of
   its Order—that it did—and affirm its invocation of the law-of-the-case
   doctrine to grant Magazine summary judgment as to AKD’s claim here.
                                                                        AFFIRMED.

          _____________________
          6
             Because we affirm on law-of-the-case grounds, we need not reach whether AKD’s
   instant claim is also barred by res judicata or prior settlement.

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