Court Opinion

ID: 9366241
Source: CourtListenerOpinion
Date Created: 2023-01-26 15:04:08.319018+00
Date Added: 2024-06-11T17:15:50.881876
License: Public Domain

Case: 21-11028     Document: 00516429121         Page: 1   Date Filed: 08/11/2022

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

                                                                           FILED
                                                                      August 11, 2022
                                  No. 21-11028
                                                                      Lyle W. Cayce
                                                                           Clerk
   Harrison Company, L.L.C.,

                                                           Plaintiff—Appellee,

                                      versus

   A-Z Wholesalers, Incorporated; Barkat G. Ali,

                                                      Defendants—Appellants.

                  Appeal from the United States District Court
                      for the Northern District of Texas
                               No. 3:19-CV-1057

   Before Smith, Duncan, and Oldham, Circuit Judges.
   Stuart Kyle Duncan, Circuit Judge:
         Harrison Co., L.L.C. executed a credit agreement with A-Z
   Wholesalers, Inc. to supply A-Z with tobacco products and other goods.
   Barkat Ali personally guaranteed A-Z’s payment. A-Z fell behind $2.6 million
   on payments for the goods it received, so Harrison sued A-Z and Ali. The
   district court granted summary judgment for Harrison. We affirm.
Case: 21-11028      Document: 00516429121          Page: 2   Date Filed: 08/11/2022

                                    No. 21-11028

                                         I.
                                         A.
          Harrison Co., L.L.C. is a food distributor based in Bossier City,
   Louisiana. It maintains a fully staffed warehouse there, where it stores its
   inventory and fulfills customer orders.
          In March 2011, Harrison and A-Z Wholesalers, Inc., a wholesaler of
   tobacco products and sundries with warehouses in Dallas and Waco, Texas,
   executed a credit agreement for Harrison to supply goods. A-Z’s president
   Barkat Ali personally guaranteed A-Z’s performance in a separate guaranty
   agreement. Harrison began supplying goods to A-Z, fulfilling each order from
   its Bossier City warehouse and delivering the goods for both A-Z’s Dallas and
   Waco accounts to A-Z’s Dallas warehouse. Harrison sent A-Z an invoice for
   each order.
          In 2014, Imperial Trading Co., L.L.C. acquired Harrison’s parent
   company Noble Feldman, Inc. and became Harrison’s sole member. In
   October 2014, Wayne Baquet, president of both Harrison and Imperial, sent
   a letter “in [his] capacity as Harrison’s President” to all Harrison customers.
   The letter, printed on Imperial letterhead, reads, “We are pleased to
   announce that effective, September 1, 2014, Harrison Company, Bossier City
   has legally become a division of Imperial Trading Co., LLC. This means we
   are one company, comprised of four divisions[,] [including] Imperial –
   Elmwood, Louisiana, [and] Imperial – Bossier City, Louisiana . . . .” It
   continues, “The acquisition of the Harrison Company in 2008 and now its
   official name change to Imperial – Bossier City further strengthens our ability
   to service your stores now and into the future. Your Bossier City team will
   continue to provide you customer driven service.”
          In 2015 and 2016, Imperial and Harrison consolidated accounting
   systems and bank accounts for efficiency and economy. As part of this

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   consolidation process, invoices sent to A-Z started to include Imperial’s logo
   with Bossier in smaller font. The Bossier notation tells Imperial “internally
   for accounting purposes, that the sales and revenue are attributed to
   Harrison.” While invoices instructed A-Z to remit payment to Imperial, A-Z
   receipts were credited on Harrison’s books.
          The consolidation of the accounting systems also resulted in A-Z’s
   receiving a new account number. From 2015 to 2016, A-Z’s invoices listed
   both its new account number and its old Dallas and Waco account numbers.
   The old account numbers were removed from the invoices in August 2016.
          Beginning in 2017, each delivery to A-Z included a “manifest” that,
   like the invoices, included Imperial’s logo with “Bossier” in smaller font. A
   Harrison truck driver and an A-Z representative signed each manifest,
   evidencing delivery from Harrison’s Bossier City warehouse to A-Z’s Dallas
   warehouse. The signature statement provided, “I acknowledge receipt of the
   product(s) listed on the above referenced invoice(s) and by signing this
   document agree that the company and/or person listed below is financially
   responsible for paying the amount of the invoice(s), and all costs and attorney
   fees associated with any collection efforts, to Imperial Trading Co., Inc.”
          Although Harrison and Imperial share “common upstream
   ownership” by the same management trust, they have “always” been
   “separate entities.” The trust’s practice has been to use “different brand
   names in different territories” when acquiring and integrating new
   companies. For example, if a caller dials Harrison’s main phone number, a
   recording states, “Thank you for calling Imperial Trading.” And while some
   of Harrison’s delivery trucks display “Harrison” and “Imperial,” Harrison
   employs the drivers and registers the vehicles. Imperial maintains its own
   warehouse in Harahan, Louisiana, has a separate customer base, and fulfills
   orders from its own inventory. Harrison and Imperial file independent tax

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   returns, invoices are differentiated internally based on the customers, and
   payments are credited on either entity’s general ledger.
          By the end of 2017, A-Z accumulated an unpaid balance of over $3
   million. Harrison tried to work with A-Z and Ali to cure the default while
   continuing to fill orders, to no avail. Harrison’s records list A-Z’s unpaid
   balance under “accounts receivable.” A-Z does not dispute accounting of
   approximately $2.6 million in unpaid goods.
          In January 2018, Imperial filed a UCC financing statement asserting a
   lien on A-Z’s assets. In March 2019, Imperial’s outside counsel sent a
   demand letter to A-Z and then sued A-Z and Ali on Imperial’s behalf in Texas
   state court. Brad Prendergast, CFO of Imperial and secretary/treasurer of
   Harrison, explained that counsel’s assertion that A-Z owed Imperial money
   was a mistake. Prendergast and Baquet had “hired and relied on outside
   counsel”—counsel shared by Harrison and Imperial—to “make demand on
   and, if no response, sue A-Z and Barkat Ali for the amounts due [to]
   Harrison.” Upon realizing the mistake, counsel nonsuited the case.
                                         B.
          In May 2019, the same law firm sent a demand letter on Harrison’s
   behalf to A-Z and Ali. Counsel then filed this suit, asserting claims for breach
   of contract and breach of guaranty. The district court denied A-Z and Ali’s
   motion to join Imperial as a necessary party. Harrison Co. v. A-Z Wholesalers,
   Inc., No. 3:19-CV-1057-B, 2020 WL 918749 (N.D. Tex. Feb. 26, 2020). It
   also denied the parties’ cross-motions for summary judgment, finding factual
   disputes over whether “A-Z missed any of the payments owed to
   [Harrison].” Harrison Co. v. A-Z Wholesalers, Inc., No. 3:19-CV-1057-B,
   2020 WL 5526555, at *6 (N.D. Tex. Sept. 15, 2020). In clarifying its ruling,
   the court noted that there was a fact dispute “as to whether A-Z’s debt is
   owed to Harrison or Imperial due to the merger of Harrison and Imperial.”

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   Harrison Co. v. A-Z Wholesalers, Inc., No. 3:19-CV-1057-B, 2021 WL 913286,
   at *3 (N.D. Tex. Mar. 10, 2021).
          As the parties prepared for trial, the district court reversed course,
   noting, “we need to just test [the] legal issues out and see if . . . at the end
   there’s a fact issue, because I just don’t think there is.” The parties then
   refiled their summary judgment motions.
          The district court denied A-Z and Ali’s motion and granted
   Harrison’s motion. Harrison Co. v. A-Z Wholesalers, Inc., No. 3:19-CV-1057-
   B, 2021 WL 2857248 (N.D. Tex. July 8, 2021). It found the evidence
   undisputedly proved that Harrison both supplied and delivered the goods to
   A-Z under the credit agreement and is the beneficiary of the guaranty. Id. at
   *7–9. The district court awarded Harrison “damages totaling $2,575,335.73
   plus reasonable attorneys’ fees and interest to be determined at a future
   time.” Id. at *10. A-Z and Ali timely appealed.
                                         II.
          We review a summary judgment de novo. United States v. Bittner, 19
   F.4th 734, 740 (5th Cir. 2021) (citation omitted), cert. granted, 142 S. Ct. 2833
   (2022). Summary judgment is appropriate “if the movant shows that 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). Once the movant
   satisfies this burden, the nonmovant “must present competent summary
   judgment evidence of the existence of a genuine [dispute] of fact.” Johnson
   v. World All. Fin. Corp., 830 F.3d 192, 195 (5th Cir. 2016) (citations omitted).
   This requires more than “conclusional allegations and denials, speculation,
   improbable     inferences,    unsubstantiated     assertions,   and    legalistic
   argumentation.” Houston v. Tex. Dep’t of Agric., 17 F.4th 576, 582 (5th Cir.
   2021) (alteration and citation omitted). “We view the evidence in the light

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                                          No. 21-11028

   most favorable to the nonmovant and draw all reasonable inferences in its
   favor.” Bittner, 19 F.4th at 740 (citation omitted).
                                               III.
           A claim for breach of contract under Texas law1 requires the plaintiff
   to show (1) a valid contract, (2) performance by the plaintiff as contractually
   required, (3) breach by the defendant, and (4) damages due to the breach.
   Villarreal v. Wells Fargo Bank, N.A., 814 F.3d 763, 767 (5th Cir. 2016)
   (citation omitted). To recover on a breach of guaranty claim, the plaintiff
   must prove “(1) the existence and ownership of the guaranty contract,
   (2) the terms of the underlying contract by the holder, (3) the occurrence of
   the conditions upon which liability is based, and (4) the failure or refusal to
   perform the promise by the guarantor.” Haggard v. Bank of Ozarks Inc., 668
   F.3d 196, 199 (5th Cir. 2012) (citation omitted).
           The parties agree that the sole issue is whether Harrison performed
   under the credit agreement by supplying goods to A-Z—element two for the
   breach of contract claim and element three for the breach of guaranty claim.
   A-Z and Ali argue there is a genuine dispute of material fact “as to whether
   the sales that Harrison is seeking payment for were, in reality, sales from
   Imperial following the merger of the two companies.” We disagree.

           1
             The district court applied both Texas and Louisiana law. A-Z and Ali claim Texas
   law applies. Harrison claims there is no “substantive difference between Texas and
   Louisiana law” for its claims and so does not dispute applying Texas law. We thus apply
   Texas law. See Am. Elec. Power Co. v. Affiliated FM Ins. Co., 556 F.3d 282, 285 n.2 (5th Cir.
   2009); see also R.R. Mgmt. Co. v. CFS La. Midstream Co., 428 F.3d 214, 221–22 (5th Cir.
   2005) (forgoing choice-of-law analysis because contract law of Texas and Louisiana did not
   conflict); Arthur W. Tifford, PA v. Tandem Energy Corp., 562 F.3d 699, 705 n.2 (5th Cir.
   2009) (“[B]y failing to brief any other state’s law, the parties have forfeited any choice of
   law argument.” (citation omitted)).

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                                    No. 21-11028

          Harrison introduced competent evidence that it, not Imperial, filled
   each A-Z order. Daniel Burgos, Harrison’s sales manager who oversaw A-
   Z’s account from 2017 to 2019, declared that “every A-Z order Harrison
   received . . . was filled by Harrison from Harrison’s warehouse in Bossier
   City . . . and that Harrison delivered those products to an A-Z warehouse in
   Dallas.” Christopher McClure, Harrison’s director of warehouse
   operations, declared that since Imperial’s 2014 acquisition of Noble
   Feldman, “every A-Z order was filled by Harrison from its inventory in its
   Bossier City warehouse.” And Scott Faley, Harrison’s transportation
   manager who oversaw trucks out of the Bossier City warehouse, confirmed
   that “Harrison delivered products for A-Z’s Dallas and Waco accounts to A-
   Z’s Dallas warehouse” and every delivery to A-Z “was made by Harrison in
   a Harrison truck.”
          A-Z and Ali first argue that the guaranty did not survive Imperial’s
   acquisition of Noble Feldman, citing Marshall v. Ford Motor Co., 878 S.W.2d
   629 (Tex. App.—Dallas 1994, no writ). But Marshall is inapposite. There,
   the court held a guaranty agreement for payment of goods did not survive a
   short-form merger between the goods-supplying subsidiary company and its
   parent company, where the subsidiary ceased to exist. Id. at 632. Here,
   Harrison and Imperial never “merged” and remain two separate entities.
   Imperial’s upstream acquisition of Noble Feldman accordingly had no effect
   on Harrison’s guaranty agreement.
          A-Z and Ali next point to evidence that they claim shows a fact
   dispute. This evidence generally falls into two categories: (1) Imperial’s
   mistaken assertion of claims against A-Z and Ali, and (2) efforts to promote
   Imperial’s brand and to integrate Harrison’s accounting services into
   Imperial’s after Imperial acquired Noble Feldman. None of this evidence
   creates a dispute as to whether Harrison filled the orders to A-Z.

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          Imperial’s mistaken assertion that A-Z owed it money does not show
   that Imperial supplied the goods. Imperial’s demand letter and UCC filing
   resulted from a mistake by Imperial and Harrison’s shared counsel. Upon
   realizing the mistake, “counsel recommended non-suiting the State Court
   Case and refiling this case, which Harrison did.” Any assertions made in that
   case are not binding. Sinclair Refining Co. v. Thompkins, 117 F.2d 596, 598 (5th
   Cir. 1941) (pleadings “bind unless withdrawn or altered by amendment”
   (citations omitted)); cf. Heritage Bank v. Redcom Lab’ys, Inc., 250 F.3d 319,
   329 (5th Cir. 2001) (“[J]udicial admissions are not conclusive and binding in
   a separate case from the one in which the admissions [were] made.” (citation
   omitted)). As the district court found, the mistake was “entirely plausible”
   given Harrison and Imperial’s business relationship and shared accounting
   systems. Harrison, 2021 WL 2857248, at *5.
          Nor is a dispute created by evidence concerning efforts to promote
   Imperial’s brand and to integrate Harrison’s and Imperial’s accounting
   systems. Baquet’s October 2014 letter simply explains Harrison’s efforts to
   promote Imperial. This included using Imperial’s name on Harrison’s trucks
   and phone line. But as the district court explained, this “does not mean that
   Imperial—a separate entity—became the seller of A-Z’s goods.” Id. at *2.
          As to the invoices directing payment to Imperial, it is undisputed that
   Imperial’s and Harrison’s shared accounting staff applied each payment
   from A-Z to Harrison’s account. And A-Z’s unpaid balance is listed under
   Harrison’s accounts receivable. A-Z and Ali claim they could not have known
   their payments were credited to only Harrison’s books. But their subjective
   belief that they were paying Imperial does not create a genuine dispute of
   material fact over who supplied the goods. See, e.g., Grimes v. Tex. Dep’t of
   Mental Health & Mental Retardation, 102 F.3d 137, 139–40 (5th Cir. 1996)
   (collecting cases).

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                                           No. 21-11028

           Imperial and Harrison are—and always have been—separate entities
   with their own employees, customers, and warehouses. As the district court
   explained, A-Z and Ali do not allege, let alone present evidence, “that A-Z
   experienced any changes in ordering procedures, pricing, delivery schedules,
   type or brand of goods, inventory availability, or any other indicia
   that . . . [shows] it was no longer doing business with Harrison.” Harrison,
   2021 WL 2857248, at *6. The district court did not err in granting summary
   judgment.2
                                                IV.
           The district court’s judgment is AFFIRMED.

           2
             Harrison requests a remand “to allow the district court to determine Harrison’s
   claims for attorneys’ fees and interest.” We need not do so because the district court has
   always retained jurisdiction over such matters. See, e.g., Creations Unlimited, Inc. v. McCain,
   112 F.3d 814, 817 (5th Cir. 1997).

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