Court Opinion

ID: 9394046
Source: CourtListenerOpinion
Date Created: 2023-05-12 00:00:29.781021+00
Date Added: 2024-06-11T17:18:57.125446
License: Public Domain

Case: 22-30322        Document: 00516747490             Page: 1      Date Filed: 05/11/2023

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

                                                                                            FILED
                                                                                        May 11, 2023
                                       No. 22-30322
                                                                                       Lyle W. Cayce
                                                                                            Clerk

   Northern Frac Proppants, L.L.C.; Northern Frac
   Proppants, L.L.C., Series 1; Northern Frac Proppants,
   L.L.C., Series 2,

                                                                  Plaintiffs—Appellants,

                                            versus

   Regions Bank, N.A.,

                                                                   Defendant—Appellee.

                     Appeal from the United States District Court
                         for the Middle District of Louisiana
                               USDC No. 3:19-CV-811

   Before Ho, Oldham, and Douglas, Circuit Judges.
   Per Curiam:*
         Northern Frac Proppants, LLC and its subsidiaries appeal the grant of
   summary judgment in favor of Regions Bank, N.A. We AFFIRM.

         *
             This opinion is not designated for publication. See 5th Cir. R. 47.5.
Case: 22-30322     Document: 00516747490          Page: 2   Date Filed: 05/11/2023

                                   No. 22-30322

                                        I.
         In 2012, Kenneth Landgaard formed Northern Frac Proppants, LLC
   (“NFP”) to succeed the sand fracking business of his company NF Holdings.
   NFP was organized as a Series LLC. It later created two sub-entities,
   Northern Frac Proppants, LLC Series I (“Series I”) and Northern Frac
   Proppants, LLC Series II (“Series II”).
         Soon after NFP’s formation, Landgaard brought on Jefferies Alston
   to serve as chief executive officer, a member, and a manager of NFP. NFP
   authorized Alston to open a bank account on its behalf. On January 11, 2013,
   Alston opened an account at Regions Bank (“Account 0083”) in NFP’s
   name using NFP’s EIN. NFP didn’t inform Regions Bank of any limits on
   Alston’s authority. NFP received monthly bank statements at an address
   Alston provided. In March 2013, NFP enrolled in online banking, giving it
   online access to account information, statements, and transactions. Each
   bank statement informed NFP of its duty to promptly review and report any
   problems reflected on the statement as well as time limits and procedures for
   reporting errors to Regions Bank.
         A few months later, Alston created a new company, Northern Frac
   Proppants II, LLC (“NFP II”), unaffiliated with NFP, Series I, and Series II.
   Then Alston instructed Brian Mora, a signatory on Account 0083, to direct
   Regions Bank to change the name and EIN number of Account 0083 to NFP
   II’s name and EIN number, effectively transferring all the assets in Account
   0083 to NFP II. Regions Bank changed the EIN number on January 8, 2014,
   and the account name to Northern Frac Proppants II, LLC on March 31,
   2014. The February 2014 statement was the last one addressed to
   “NORTHERN FRAC PROPPANTS LLC.” The March 2014 statement
   reflected the change of ownership, addressing “NORTHERN FRAC
   PROPPANTS II LLC” in three separate places. NFP still had access to

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   Account 0083’s information and bank statements after the change. Regions
   Bank didn’t receive any complaints or reported errors from NFP.
          From 2015 to 2017, Landgaard, NF Holdings, and NFP brought a
   series of lawsuits against Alston and others—but not Regions Bank. In
   compliance with subpoenas, Regions Bank produced the February 2014 and
   March 2014 bank statements three times beginning in March 2017. The email
   exchange between Mora and Regions Bank to change the name and EIN
   number of Account 0083 was introduced as an exhibit in a deposition of Mora
   on July 10, 2018.
          After these lawsuits settled, NFP, Series I, and Series II (collectively
   “the NFP Entities”) commenced this action against Regions Bank in
   November 2019. They brought Louisiana state law claims alleging breach of
   contract, negligence, and violation of the Louisiana Uniform Fiduciaries
   Law.
          The parties conducted discovery. Regions Bank filed a motion for
   summary judgment. Then the district judge sua sponte recused himself and
   reassigned the case to another judge. One week later, both judges issued an
   order, stating:
          On February 11, 2022, the presiding Judge entered an order
          recusing himself from the above-captioned action. (Doc. 94).
          Upon further review, this recusal order was entered in error.
          Accordingly, IT IS ORDERED that the February 11, 2022
          Order of Recusal (Doc. 94) be and is hereby STRICKEN. IT
          IS FURTHER ORDERED that the above-captioned action be
          and is hereby returned to the Hon. Brian A. Jackson for all
          further proceedings.
   ROA.5227. Neither party objected.
          The district court awarded summary judgment for Regions Bank in
   April 2022. Of relevance here, the district court concluded that the NFP

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   Entities’ negligence and breach of contract claims were time-barred and the
   doctrine of contra non valentem could not save the NFP Entities’ claims. The
   NFP Entities appealed.
                                         II.
          The NFP Entities first urge us to vacate the summary judgment order
   because the recusal order violated 28 U.S.C. § 455(e). True, the district court
   erred by failing to follow the procedures of § 455(e). See Doddy v. OXY USA,
   Inc., 101 F.3d 448, 458 (5th Cir. 1996).
          But the NFP Entities’ objection is untimely. See United States v.
   Sanford, 157 F.3d 987, 989 (5th Cir. 1998) (holding that a challenger’s
   “objection [was] untimely” when he “knew of the facts purportedly causing
   an appearance of impropriety” under 28 U.S.C. § 455 but waited to raise the
   recusal issue for the first time months later and on appeal). The NFP Entities
   were obligated to raise this objection “at the earliest moment” after they
   learned of the violation. Id. at 988 (quotation omitted). The NFP Entities
   knew of the rescinded recusal order on February 18, 2022. They then brought
   several motions before the district court without mention of the order. In fact,
   the NFP Entities never raised this issue in the district court. They instead
   waited until after the district court entered a summary judgment order against
   them and after they appealed. See id. at 989 (rejecting a recusal objection “on
   appeal when the challenger waited to see if he liked an outcome before
   springing the recusal issue”). The NFP Entities have not shown “good
   cause” for this delay nor “exceptional circumstances why we should
   consider the issue for the first time on appeal.” Clay v. Allen, 242 F.3d 679,
   681 (5th Cir. 2001) (quotation omitted).
                                         III.
          We now proceed to the merits. We review the district court’s
   summary judgment determination de novo. See Playa Vista Conroe v. Ins. Co.

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   of the W., 989 F.3d 411, 414 (5th Cir. 2021). Summary judgment is
   appropriate when “there is no genuine dispute as to any material fact and the
   movant is entitled to judgment as a matter of law.” Fed R. Civ. P. 56(a).
   We agree with the district court that both (A) the breach of contract and (B)
   the negligence claims are time-barred.1
                                              A.
           First, we assess the breach of contract claim. Under Louisiana law,
   these claims are subject to a ten-year prescription period. See La. C.C. art.
   3499. But a more specific statute can provide a shorter limitations period. See
   id.; Smith v. Citadel Ins. Co., 19-00052 (La. 10/22/19), 285 So. 3d 1062, 1067.
   Here, the one-year bar from La. R.S. § 10:4-406 applies. This statute “places
   a duty on a bank customer to examine the bank statement and notify the bank
   of any unauthorized transactions.” Ducote v. Whitney Nat’l Bank, 16-574 (La.
   App. 5 Cir. 2/22/17), 212 So. 3d 729, 734, writ denied, 17-0522 (La. 5/26/17),
   221 So. 3d 860. The statute provides:
           (a) A bank that sends or makes available to a customer a
           statement of account showing payment of items for the account
           shall either return or make available to the customer the items
           paid or provide information in the statement of account
           sufficient to allow the customer reasonably to identify the items
           paid. The statement of account provides sufficient information
           if the item is described by item number, amount, and date of
           payment. . . .
           (c) If a bank sends or makes available a statement of account or
           items pursuant to Subsection (a), the customer must exercise
           reasonable promptness in examining the statement or the items

           1
            The NFP Entities do not contest the district court’s dismissal of their Uniform
   Fiduciaries Law claim against Regions Bank. Thus, we do not reach this issue. See Allen v.
   U.S. Postal Serv., 63 F.4th 292, 299 (5th Cir. 2023).

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          to determine whether any payment was not authorized because
          of an alteration of an item or because a purported signature by
          or on behalf of the customer was not authorized. If, based on
          the statement or items provided, the customer should
          reasonably have discovered the unauthorized payment, the
          customer must promptly notify the bank of the relevant facts.
   La. R.S. § 10:4-406. And “La. R.S. 10:4–406(f) imposes an absolute bar to
   any customer claim based upon an unauthorized transfer not reported within
   one year after the bank statement has been made available.” Ducote, 212 So.
   3d at 734. It provides in full:
          (f) Without regard to care or lack of care of either the customer
          or the bank, a customer who does not within one year after the
          statement or items are made available to the customer
          (Subsection (a)) discover and report the customer’s
          unauthorized signature on or any alteration on the item is
          precluded from asserting against the bank the unauthorized
          signature or alteration. If there is a preclusion under this
          Subsection, the payor bank may not recover for breach of
          warranty under R.S. 10:4-208 with respect to the unauthorized
          signature or alteration to which the preclusion applies.
   La. R.S. § 10:4-406(f). Regions Bank changed the name of Account 0083
   on March 31, 2014. This name change was an unauthorized transfer within
   the meaning of the statute. See Ducote, 212 So. 3d at 734. The March 2014
   statement reflected this change in three separate places. The NFP Entities
   had access to the March 2014 statement via online banking. But the NFP
   Entities failed to exercise “reasonable promptness in examining the
   statement . . . to determine whether any payment was not authorized,” La.
   R.S. § 10:4-406(c), and then “discover and report” the problem in one year,
   id. § 10:4-406(f); see also Costello v. City Bank (S.D.), N.A., 45,518 (La. App.
   2 Cir. 9/29/10), 48 So. 3d 1108, 1113 (“Plaintiffs’ failure to review the
   statements which were sent to them has caused their claims to prescribe.”).

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   The NFP Entities “should reasonably have discovered the unauthorized
   payment” “based on the statement” and alerted Regions Bank. La. R.S.
   § 10:4-406(c). And even if the March 2014 statement was insufficient to
   notify them under Subsection (a), they later had sufficient information. NFP
   CEO Landgaard had a copy of the email transferring the account at least as
   early as July 10, 2018. See Ducote, 212 So. 3d at 736 (holding that where a
   customer received memos recording unauthorized fund transfers over email
   and telephone, the customer had sufficient notice). But the NFP Entities
   never presented this problem to Regions Bank and sued over a year later in
   November 2019. Thus, their breach of contract claim is barred.
                                         B.
          The NFP Entities’ negligence claim is also time-barred. Under
   Louisiana law, negligence actions are subject to a one-year prescription
   period, beginning on “the day injury or damage is sustained.” La. C.C. art.
   3492. The NFP Entities concede they did not bring the negligence claim
   within this time frame.
          The doctrine of contra non valentem does not save their claim. This
   doctrine tolls the statute of limitations against a plaintiff “whose cause of
   action is not reasonably known or discoverable by him” until “the date the
   negligence was discovered or should have been discovered by a reasonable
   person in the plaintiff’s position.” Teague v. St. Paul Fire & Marine Ins. Co.,
   2007-1384 (La. 2/1/08), 974 So. 2d 1266, 1274–75. The NFP Entities had the
   Account 0083 statements, cancelled checks, and signature cards addressed
   to NFP II as well as notice of the email transferring Account 0083 for more
   than one year before they filed this lawsuit. Over a year passed from the date
   a reasonable person should have discovered the negligence. See id.
          AFFIRMED.

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