Land Ventures for 2, LLC v. Fritz et al

Filing 37

MEMORANDUM OPINION AND ORDER: it is ORDERED as follows: (1) Fritz's Motion to Strike (MP Doc. # 44) is GRANTED as to paragraphs 5 & 6 of Scott's Declaration (MP Doc. # 40-2, Ex. B); (2) Land Ventures' Objection (MP Doc. # 50) is OVERRU LED; (3) The Recommendation on the issue of causation (Doc. # 34) is ADOPTED; (4) Fritz's Motion for Summary Judgment (MP Doc. # 33) is GRANTED; and (5) Land Ventures' Motion for Summary Judgment (MP Doc. # 31) is DENIED. Signed by Chief Judge William Keith Watkins on 10/29/2015. (furn: Bankruptcy Clerk) (wcl, )

IN THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF ALABAMA
NORTHERN DIVISION
LAND VENTURES FOR 2, LLC,
Plaintiff,
v.
MICHAEL A. FRITZ, SR., et al.,
Defendants.

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CASE NO. 2:12-CV-240-WKW
[WO]

MEMORANDUM OPINION AND ORDER
I. INTRODUCTION
Plaintiff Land Ventures for 2, LLC (“Land Ventures”) was in the business of
buying and selling real property.

When the economic downturn affected the

business’s bottom line, Todd Pittman (Land Ventures’ 99% owner) sought
assistance from bankruptcy counsel and eventually retained the defendants,
Michael Fritz and his law firm (collectively “Fritz”), in July 2009. In March 2010,
Fritz filed a Chapter 11 bankruptcy proceeding on behalf of Land Ventures in order
to forestall foreclosure proceedings that Farm Credit of NW Florida (“Farm
Credit”) had commenced against two of Land Ventures’ most valuable properties.
Throughout the bankruptcy proceedings, Land Ventures failed to offer Farm
Credit adequate protection on its secured claim. Farm Credit was an aggressive
creditor, objecting to most of Land Ventures’ filings in the bankruptcy case, and

early on sought relief from the automatic stay in order to proceed with the
foreclosures on the two properties.

(BP Doc. # 50.)1

The bankruptcy court

ultimately lifted the stay, after a hearing. (BP Doc. # 106.)
During the pendency of the bankruptcy, Land Ventures never filed a Chapter
11 plan, and, the bankruptcy court, after denying Land Ventures’ motion to extend
time to file a plan, converted the case to a Chapter 7 proceeding. (BP Docs. #167,
176, 180.) A Chapter 7 trustee was appointed, and she liquidated Land Ventures’
remaining assets.
On March 15, 2012, Land Ventures filed this malpractice action against Fritz
in the district court.2 The matter was referred to the bankruptcy court, where the
parties filed opposing motions for summary judgment (Doc. # 28; MP Docs. # 31,
33.) Before the court is the bankruptcy judge’s Recommendation that Fritz’s
motion for summary judgment be granted, that Land Ventures’ motion for

1

The briefs and exhibits are filed in the district court case (2:12-CV-240) as attachments
to the bankruptcy clerk’s certification of the record (Doc. # 34). It is efficient to cite the record
by reference to the docket in the miscellaneous proceeding opened in the bankruptcy court (Case
No. 13-MP-302) upon referral of this matter, as the document numbers in the latter proceeding
align with those in the briefs and objection. Additionally, Defendants refer to the pleadings of
record in the underlying bankruptcy case in support of their motion. Documents filed in the
underlying bankruptcy proceeding (Bankruptcy Case No. 10-30651) are cited as “BP
Doc. # . . . ,” and those filed in the bankruptcy miscellaneous proceeding are cited as “MP
Doc. # . . . .”
2

Until October 9, 2015, Chief Magistrate Judge Susan Russ Walker presided over this
action pursuant to the parties’ consent and a general order of the court regarding the primary
assignment of a percentage of specified civil cases to the magistrate judges. For reasons
explained in a recent order (Doc. # 36), the district court, on its own motion, vacated the consent
and primary assignment of this action to the magistrate judge.
2

summary judgment be denied, and that the civil action be dismissed with prejudice.
(Doc. # 34-1.) Land Ventures filed a timely objection (MP Doc. # 50) to the
Recommendation to which Fritz filed a response. (MP Doc. # 52.)
After careful consideration of the record, the applicable case law, and the
Recommendation, the court finds that the Recommendation on the issue of
causation is due to be adopted, Land Ventures’ motion for summary judgment (MP
Doc. # 31) is due to be denied, and Fritz’s motion for summary judgment (MP
Doc. # 33) is due to be granted.
II. JURISDICTION AND VENUE
The bankruptcy judge determined that subject-matter jurisdiction was proper
pursuant to 28 U.S.C. § 1332.

Although this court disagrees with that

determination, it nonetheless finds that subject-matter jurisdiction is proper under
28 U.S.C. § 1334(b). Section 1334(b) provides that “the district courts shall have
original but not exclusive jurisdiction of all civil proceedings arising under title 11,
or arising in or related to cases under title 11.” 28 U.S.C. § 1334(b). A case is
“related to” a case under title 11 if “‘the outcome of the proceeding could
conceivably have an effect on the estate being administered in bankruptcy.’”
Cont’l Nat’l Bank of Miami v. Sanchez (In re Toledo), 170 F.3d 1340, 1345 (11th
Cir. 1999) (quoting Miller v. Kemira, Inc. (In re Lemco Gypsum, Inc.) 910 F.2d
784, 788 (11th Cir. 1990)).
3

As found in the prior Order that withdrew the referral to the magistrate
judge, this action is “related to” Land Ventures’ bankruptcy proceeding, which
undisputedly is a “case[ ] under title 11,” § 1334(b). (See Doc. # 36, at 8–14.)
Based on those findings, the court properly exercises subject-matter jurisdiction
pursuant to § 1334(b). Personal jurisdiction and venue are not contested.
III. STANDARDS OF REVIEW
The court reviews de novo “those matters [in the Recommendation] to
which any party has timely and specifically objected.” 28 U.S.C. § 157(c)(1).
The court applies the same standard as the bankruptcy judge. To succeed on
summary judgment, the movant must demonstrate “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). “[T]he court must view all evidence and make all reasonable
inferences in favor of the party opposing summary judgment.” Haves v. City of
Miami, 52 F.3d 918, 921 (11th Cir. 1995).
The party moving for summary judgment “always bears the initial
responsibility of informing the district court of the basis for its motion.” Celotex
Corp. v. Catrett, 477 U.S. 317, 323 (1986).

This responsibility includes

identifying the portions of the record illustrating the absence of a genuine dispute
of material fact. Id. Or a movant who does not have a trial burden of production
can assert, without citing the record, that the nonmoving party “cannot produce
4

admissible evidence to support” a material fact. Fed. R. Civ. P. 56(c)(1)(B); see
also Fed. R. Civ. P. 56 advisory committee’s note (“Subdivision (c)(1)(B)
recognizes that a party need not always point to specific record materials. . . . [A]
party who does not have the trial burden of production may rely on a showing that
a party who does have the trial burden cannot produce admissible evidence to carry
its burden as to the fact.”). If the movant meets its burden, the burden shifts to the
nonmoving party to establish—with evidence beyond the pleadings—that a
genuine dispute material to each of its claims for relief exists. Celotex, 477 U.S.
at 324.

A genuine dispute of material fact exists when the nonmoving party

produces evidence allowing a reasonable fact finder to return a verdict in its favor.
Waddell v. Valley Forge Dental Assocs., 276 F.3d 1275, 1279 (11th Cir. 2001).
On the other hand, “[i]f the evidence is merely colorable or is not significantly
probative, summary judgment may be granted.” Anderson v. Liberty Lobby, Inc.,
477 U.S. 242, 249–50 (1986).
IV. BACKGROUND
Throughout the present litigation, Land Ventures has asserted that Fritz’s
conduct led to the conversion of its Chapter 11 bankruptcy to a Chapter 7
bankruptcy and the subsequent liquidation of all of its assets. Land Ventures
maintains that there were three possible plans that Fritz could have proposed that
would have been confirmed by the bankruptcy court and under which Land
5

Ventures could have successfully reorganized and maintained possession and
control of the majority of its properties.
Land Ventures owned two properties (located in Luverne, Alabama, and
Holmes County, Florida), which secured a loan from Farm Credit. It also owned
Pittman’s home and the surrounding property (Deerfield Plantation), which
secured a loan from Regions Bank, as well as several unencumbered properties.
The balance owed on the loan to Farm Credit was roughly $700,000, and the
balance of the Regions Bank loan was approximately $650,000.
In 2008, Land Ventures stopped paying Farm Credit (with the exception of
one payment of $25,000 in April 2009), and in 2009, it stopped paying Regions
Bank. Pittman attempted, unsuccessfully, to negotiate a modification with Farm
Credit, and Fritz continued these negotiations. However, in March 2010, Farm
Credit began foreclosure proceedings on the Luverne and Holmes County
properties. In order to stop the proceedings, Fritz filed a Chapter 11 bankruptcy on
behalf of Land Ventures.
In the three years prior to the bankruptcy filing, Land Ventures had been
unable to sell its properties, and the tax returns for those years show annual losses
from $25,000 to nearly $45,000. Due to the lack of cash on hand, it appears that
the only way for Land Ventures to avoid conversion to Chapter 7 and liquidation
was to pledge or sell its unencumbered assets. However, it failed to do so. Pittman
6

testifies that he readily would have pledged or sold any of his other properties to
keep the Luverne property and save his company, if Fritz had advised him that
such action was necessary, but that Fritz advised against it. To the contrary, Fritz
testifies that he tried to get Pittman to pledge or sell the unencumbered assets, but
Pittman adamantly refused to utilize any of Land Ventures’ unencumbered
property to satisfy its debt to Farm Credit.
Land Ventures filed this action against Fritz for malpractice pursuant to
Alabama Code § 6-5-570, et. seq., the Alabama Legal Services Liability Act
(“ALSLA”). The parties filed cross motions for summary judgment. In a written
opinion, the bankruptcy judge recommended that Land Ventures’ motion be denied
and Fritz’s motion be granted for the reasons that (1) Land Ventures offered no
admissible evidence that Fritz’s conduct violated the standard of care; (2) Land
Ventures offered no admissible evidence concerning damages; and (3) Land
Ventures failed to establish causation. (Doc. # 34-1.)
Land Ventures filed objections to the Recommendation. (MP Doc. # 50.) It
is not necessary to reach each of the forty-five objections because (1) Land
Ventures’ objections to the referral of this matter to the bankruptcy court are
without merit, and (2) Land Ventures has not raised a genuine dispute of material

7

fact on the causation element of its ALSLA claim (i.e., that but for Fritz’s
negligence, it would have had a better outcome in its bankruptcy proceeding).3
V. DISCUSSION
A.

Reference to the Bankruptcy Court
Land Ventures, in its first four objections, asserts that the referral of this

action to the bankruptcy court was improper because the bankruptcy judge had
made rulings in the bankruptcy case giving rise to the malpractice allegations.
According to Land Ventures, the bankruptcy judge could not set aside his
perceptions from those prior proceedings in order to apply proper legal standards
on summary judgment in this malpractice action. Land Ventures contends that the
order of referral “implicitly or impliedly” required the bankruptcy court to
reconsider many rulings and that this was “unfair” to the bankruptcy judge. It also
asserts that it did not move the district court to reconsider the order of referral
because the “unfairness” of the referral was not evident until the entry of the
Recommendation, which revealed the bias against Land Ventures. (MP Doc. # 50,
at 5–10.)
Land Ventures’ contention that the referral was improper because the
bankruptcy judge had formed a bias against Land Ventures during the underlying

3

The issues concerning breach and damages need not be discussed, as the lack of
evidence to support a causal connection between Fritz’s conduct and any damages is sufficient to
support the entry of summary judgment in Fritz’s favor.
8

bankruptcy case is without merit. The “extrajudicial source” factor applies to 28
U.S.C. § 455(a) recusal analysis. Liteky v. United States, 510 U.S. 540, 554
(1994). “[J]udicial rulings alone almost never constitute a valid basis for a bias or
partiality motion . . . . Almost invariably, they are proper grounds for appeal, not
for recusal.” Id.at 555. Moreover, “opinions formed by the judge on the basis of
facts introduced or events occurring in the course of the current proceedings, or of
prior proceedings, do not constitute a basis for a bias or partiality motion unless
they display a deep-seated favoritism or antagonism that would make fair judgment
impossible.” Id.
Land Ventures’ objections are based solely upon the bankruptcy judge’s
knowledge of certain aspects of the malpractice suit gained from his position as the
judge presiding over the bankruptcy proceeding in which the malpractice suit
arose. Land Ventures presents no evidence suggesting that the bankruptcy judge
harbored hostility or partiality toward any party or counsel so as to raise a specter
of deep-seated bias. Therefore, the objections based upon the alleged bias of the
bankruptcy judge are due to be overruled.
B.

Causation
1.

General Principles of Law on Causation Under ALSLA

To prevail on its ALSLA claim, Land Ventures must prove that Fritz failed
“to comply with the applicable standard of care[,] the breach of which proximately
9

cause[d] the injury or damages.” Ala. Code § 6-5-572(4); see also id. § 6-5-580;
Indep. Stave Co. v. Bell, Richardson & Sparkman, P.A., 678 So. 2d 770, 772 (Ala.
1996) (elements of ALSLA claim essentially are the same as those of an ordinary
negligence claim: duty, breach, injury, proximate cause, and damages). Under
Alabama law, the proximate cause element of the ALSLA claim requires Land
Ventures to prove that, but for Fritz’s breaches of the standard of care, the
underlying bankruptcy proceeding would have resolved more favorably to Land
Ventures, not merely that the result of the proceeding might have been more
favorable. See Cribbs v. Shotts, 599 So. 2d 17, 19 (Ala. 1992) (affirming directed
verdict; stating, “[T]he Cribbses failed to show that, but for [their attorney’s]
alleged negligence, the disposition of the sale for division proceeding would have
been different,” and, “[a]lthough the result of the proceeding may have been
different had [their attorney] been present at the hearing, the Cribbses were
required [but failed] to meet the higher burden of proving that the result would
have been different.”); see also Bonner v. Lyons, Pipes & Cook, P.C., 26 So. 3d
1115, 1125 (Ala. 2009) (affirming directed verdict for attorney and firm in legal
malpractice action alleging that attorney’s untimely renewal notice to franchisor
caused client to lose franchise and concluding that, even if notice had been timely,
franchisee did not have a legal right to renewal because it had failed to pay 50% of
the initial franchise fee at the time of renewal as required by the franchise
10

agreement); Pickard v. Turner, 592 So. 2d 1016, 1019 (Ala. 1992) (“In addition to
the traditional elements of a negligence action, the legal malpractice plaintiff must
prove that the transaction would have had a different result if the alleged
negligence had not occurred.”); id. (“‘Generally, actionable [legal] malpractice
cannot be established in the absence of a showing that the attorney’s wrongful
conduct has deprived the client of something to which he would otherwise have
been entitled.’”) (quoting 7A C.J.S. Attorney and Client § 255 at 462 (1980)).
2.

General Principles of Law on Chapter 11 Plan Feasibility

A bankruptcy court may not confirm a Chapter 11 plan unless it determines
that the plan is feasible, i.e., that “[c]onfirmation of the plan is not likely to be
followed by the liquidation, or the need for further financial reorganization, of the
debtor or any successor to the debtor under the plan, unless such liquidation or
reorganization is proposed in the plan.”

11 U.S.C. § 1129(a)(11).

To be

“feasible,” a plan “must offer a reasonable prospect of success and be workable.”
United States v. Haas (In re Haas), 162 F.3d 1087, 1090 (11th Cir. 1998); F.H.
Partners, LP v. Inv. Co. of the Sw, Inc. (In re Inv. Co. of the Sw., Inc.), 341 B.R.
298, 310 (B.A.P. 10th Cir. 2006) (“Feasibility is the shorthand term for the
requirement of confirmation as set forth in § 1129(a)(11); it imposes a requirement
that any plan must provide a realistic and workable framework for
reorganization.”). The debtor bears the burden of showing, by a preponderance of
11

the evidence, that a proposed plan is feasible. Id.; Save Our Springs (S.O.S.)
Alliance, Inc. v. WSI (II)-COS, LLC (In re Save Our Springs (S.O.S.) Alliance,
Inc.), 632 F.3d 168, 172 (5th Cir. 2011). In determining feasibility, the bankruptcy
court may consider
(1) the adequacy of the debtor’s capital structure; (2) the earning
power of the debtor’s business; (3) economic conditions; (4) the
ability of the debtor’s management; (5) the probability of the
continuation of the same management; and (6) . . . any other related
matter which determines the prospects of a sufficiently successful
operation to enable performance of the provisions of the plan.
S.O.S. Alliance, 632 F.3d at 173 n.6 (citation omitted). “Feasibility determinations
must be ‘firmly rooted in predictions based on objective fact.’” Danny Thomas
Properties II, Ltd. P’ship v. Beal Bank, S.S.B. (In re Danny Thomas Props. II Ltd.
P’ship), 241 F.3d 959, 964 (8th Cir. 2001) (quoting Clarkson v. Cooke Sales and
Service Co. (In re Clarkson), 767 F.2d 417, 420 (8th Cir. 1985)).
3.

Analysis

Based on the foregoing principles of law, Land Ventures must raise a
genuine dispute of material fact that it could have presented a feasible
reorganization plan that would have been confirmed by the bankruptcy court and
successfully completed by Land Ventures.

Land Ventures submitted three

hypothetical plans – two during discovery (Plan # 1 and Plan # 2) and one attached
to its brief in opposition to Fritz’s motion of summary judgment (Plan # 3) – that it

12

contends “clearly meet[] the feasibility test.”

(MP Doc. # 40, at 22; Land

Ventures’ Ex. D to MP Doc. # 40.) The analysis begins with Plan # 3.4
a.

Plan # 3

Land Ventures asserts that, if Fritz had proposed Plan # 3 at the outset of the
Chapter 11 case, Land Ventures could have paid Farm Credit’s allowed claim
entirely and the arrearage on the Regions Bank loan within ninety days of filing the
petition for bankruptcy. Land Ventures’ Debtor-In-Possession (“DIP”) account
would have had $115,013.02 remaining from these transactions.

From this

amount, Land Ventures would have paid $10,800 to the IRS for non-filing
penalties, and, therefore, it “would still have had $104,213.02 in its DIP account
after the payment of the allowed claims as well as its monthly cash flows
(whatever those amounts were).” (MP Doc. # 40, at 22–23 and Ex. D.)
According to Land Ventures, if this hypothetical plan had been offered to
and confirmed by the bankruptcy court, Land Ventures would have continued to
hold title to several pieces of real estate, including a one-half interest in the two
properties previously mortgaged to Farm Credit. Land Ventures also would have
4

In its brief in opposition to Fritz’s motion for summary judgment, Land Ventures does
not address the feasibility of Plan # 1 or Plan # 2. Its only reference to any plan other than Plan
# 3 was a reference to Fritz’s deposition testimony that a plan proposing liquidation of some of
Land Ventures’ assets “could” have been approved. (MP Doc. # 40, at 20–21.) While unclear in
the brief, the deposition reveals that the discussion was in relation to Plan # 2. (MP Doc. # 40-5,
at 271–74.) Since Land Ventures devotes its brief to the feasibility of Plan # 3, this plan will be
discussed prior to the discussion of the two hypothetical plans that were presented during
discovery.
13

continued to own the Deerfield Plantation property, subject to the Regions Bank
remaining mortgage lien in an approximate amount of $660,000.
To demonstrate causation on the basis of Plan # 3, Land Ventures ultimately
must prove that: (1) the proposed plan rests on objective facts supported by the
evidence; and (2) those objective facts are such that the bankruptcy court would
have – not may have – approved the reorganization plan as one with a reasonable
prospect of success. See Cribbs, 599 So. 2d at 19; Haas, 162 F.3d at 1090; Danny
Thomas Props., 241 F.3d at 964.
The success of Plan # 3 rests upon two transactions that would have given
Land Ventures an infusion of cash and therefore the ability to pay off its
obligations to Farm Credit and the IRS and still retain money to pay allowed
claims in the Chapter 11 case. The evidence does not give rise to a reasonable
inference that either of these transactions was likely to occur.
The first transaction relied upon by Plan # 3 is an oral agreement between
Gregory Scott (on behalf of his construction company, 2H&V) and Pittman for
2H&V to purchase a half-interest in the Luverne, Alabama, and Holmes County,
Florida, properties, contingent upon the properties being unencumbered. (MP Doc.
# 40-9, at 9–18, 42, 53–55.) This agreement never was committed to writing, and
when questioned, Scott testified that 2H&V’s ability to make the investment was
not with cash, but rather, a line of credit. (MP Doc. # 40-9, at 65–67.) During his
14

deposition in October 2013, Scott was not able to confirm whether 2H&V would
have had to open a new line of credit, whether the line of credit would have been
secured or unsecured, what Regions Bank (the creditor) would have required
before allowing the draw, what the credit terms would have been, or whether
2H&V would have had the ability to service the debt associated with the draw.
(MP Doc. # 40-9, at 67–71.) Additionally, Scott testified that he and his partner
“most likely” would have obtained appraisals of the properties prior to closing on a
deal, and he was unable to give “a good answer” as to whether he would have gone
forward with the transaction if the appraisals had been much lower than the two he
had seen previously. (MP Doc. # 40-9, at 75–76.)
Recognizing the deficiencies in Scott’s deposition testimony, Land Ventures
supplemented it by filing a declaration that Scott executed on March 1, 2014. (MP
Doc. # 40-2.) Fritz filed a motion to strike the declaration, arguing that part of the
declaration conflicted with Scott’s deposition testimony. (MP Doc. # 43.) Land
Ventures opposed the motion. (MP Doc. # 44.) The motion to strike remains
pending and requires an examination of whether the sham-affidavit rule precludes
consideration of the declaration.
Under the sham-affidavit rule, on summary judgment, the district court can
disregard a party’s affidavit as a sham when the affidavit “contradicts, without
explanation, previously given clear testimony.” Van T. Junkins & Assocs., Inc. v.
15

U.S. Indus., Inc., 736 F.2d 656, 657 (11th Cir. 1984); see also Kernel Records Oy
v. Mosley, 694 F.3d 1294, 1300 n.6 (11th Cir. 2012) (accord).
During his October 2013 deposition, while Scott testified that he and his
partner “easily” had “the financial wherewithal” to pay $650,000 to purchase the
land (MP Doc. # 40-9, at 18), upon further questioning, he clarified that this was
not as certain as he originally had conveyed. Instead, according to Scott, the
$650,000 was not available in cash, but as a line of credit, and he was unsure as to
certain details, such as whether the line of credit was already existing or whether
2H&V would be required to obtain a new line of credit, what the limit and terms of
the line of credit would be, what conditions Regions Bank would put on the line of
credit, and whether 2H&V would have the ability to service the line of credit. (MP
Doc. # 40-9, at 67–71.) Scott additionally testified that he and his partner “[m]ost
likely” would have obtained appraisals of the property prior to closing on the
transaction, and he was unable to give “a good answer” about whether 2H&V
would have gone forward with the deal if the appraisals revealed a much lower
value for the properties than the preexisting appraisals. (MP Doc. # 40-9, at 75–
76.)
In his subsequent March 2014 declaration, Scott declares:
3. I am familiar with the corporate records and acts of 2H&V
Construction Services, LLC including the business records of the
company.
16

4. At any time from the summer of 2009 through the end of
2010 2H&V Construction Services, LLC had liquid assets in the form
of cash or credit lines with which to purchase the desired one half
interest in the Luverne and Holmes County Florida properties for
$650,000.
5. 2H&V Construction Services, LLC could have closed on the
transaction with Land Ventures for 2, LLC with very little notice.
6. The only prerequisite to consummating the purchase that
2H&V Construction Services, LLC had was that upon delivering the
payment of $650,000 both parcels would be unencumbered.
(MP Doc. # 40-2.)
Paragraph six of Scott’s declaration contradicts his previous testimony that
there would “[m]ost likely” be appraisals prior to consummating the deal and that
he did not know if there would be a deal if the appraisal showed significantly
decreased values in the properties. (MP Doc. # 40-9, at 75–76.) Additionally,
paragraph five of the declaration contradicts Scott’s testimony that he was unsure
as to the availability of cash funds and the terms of the line of credit. Absent an
explanation of why Scott’s testimony changed from financial uncertainty to
certainty, paragraphs five and six contradict the earlier deposition testimony.
Therefore, Fritz’s motion to strike (MP Doc. # 43) is due to be granted as to
paragraphs five and six of Scott’s declaration.
Accepting as true that 2H&V wanted to purchase a half-interest in the two
properties, had the financial means to pay $650,000 in 2009 and 2010, and, even
that it could have closed on the transaction with “very little notice,” Land
17

Ventures’ evidence still is insufficient to establish that Fritz could have proposed a
Chapter 11 reorganization plan that included a binding contract with 2H&V at or
near the outset of the bankruptcy proceeding. Viewed in the light most favorable
to Land Ventures, the evidence is not sufficient to permit a reasonable inference
that, had Fritz or Pittman asked him to do so in the spring/summer of 2010, Scott
would have signed a written contract binding 2H&V to pay $650,000 for a onehalf interest in the Luverne and Holmes County properties with the only condition
being that they were unencumbered. On the summary judgment record, it is not
reasonable to infer that Scott would have signed such a contract without first
obtaining independent appraisals, in view of Scott’s deposition testimony that he
most likely would have done so before going through with the transaction, and that
he could not give a “good answer” about whether 2H&V would have closed on the
deal if the independent appraisals came in low. (MP Doc. # 40-9, at 75–76.)
The appraisal for the Luverne property that Pittman had shown to Scott was
sufficient to support a total value of $1,026,000 for the two properties subject to
Farm Credit’s mortgage lien.5 The amount of that appraisal does not permit a
reasonable inference that an independent appraisal obtained by 2H&V would have
5

See Case No. 2:10cv839-MHT (appeal from bankruptcy court’s ruling on Farm Credit’s
motion to lift the bankruptcy stay); Doc. # 3-18, $770,000 value for Luverne property as of
2/25/2010, according to Mitchell appraisal); Doc. # 3-18, Doc. # 3-15 ($256,000 for Holmes
County, FL property as of 6/21/2010); Scott Dep., at 59–62. (The appraisals were not
themselves introduced on the present summary judgment motion but they are referenced in
testimony and other documents submitted on the present motion).
18

been as high. In fact, Farm Credit obtained a much lower appraisal in June 20106
($771,000 total value for the two properties), which the bankruptcy court found
more accurately reflected the value of the properties.7

In short, whether an

independent appraisal obtained by 2H&V would have reported a value sufficient,
along with the unconfirmed rumor that Scott and his partner had heard from
Pittman that Walmart might be interested in the property, to cause Scott to go
through with the transaction is speculative. (See MP Doc. # 4-9, at 75–76.)8 See
Cordoba v. Dillard’s, Inc., 419 F.3d 1169, 1181 (11th Cir. 2005) (“Speculation
does not create a genuine issue of fact; instead, it creates a false issue, the
demolition of which is a primary goal of summary judgment.” (internal quotation
marks and citation omitted)).
The second transaction that Plan # 3 relies upon is the sale of a property
owned by Land Ventures in Rutledge, Alabama. Even if Fritz could have reached
a binding deal with 2H&V, the $650,000 would not have been sufficient to pay off

6

See Case No. 2:10-CV-839-MHT, Doc. # 3-16.

7

See MP Doc. # 35-12, at 40–49; see also Case No. 2:10-CV-839-MHT, Doc. # 2-4, at
53; Docs. # 2-4, 3-17.
8

After foreclosing on the property, Farm Credit sold the Holmes County property for
$200,000. Farm Credit sold the Luverne property for $300,000, after marketing it for almost two
years. (MP Doc. # 40-8, at 111–14.)
19

the loan to Farm Credit and the arrearage on the secured loan with Regions Bank.9
Therefore, the sale of the Rutledge property also would have been necessary for
Plan # 3 to be successful. The evidence is not sufficient, however, to permit a
reasonable inference that Fritz could have advanced the second contract cited in
the hypothetical plan, for the sale of the entire Rutledge property to Stephens
Construction for $202,400, in the early stages of the bankruptcy proceeding.
Land Ventures has filed the declaration of Michelle Stephens, CEO of
Stephens Construction.

Stephens states that she purchased two acres of the

Rutledge property from Land Ventures for $20,000 in a transaction approved by
the bankruptcy court and, after conversion to Chapter 7, purchased the remainder
of the Rutledge property (approximately nine acres) from the bankruptcy trustee
for $182,400. She states that she would have purchased the entire eleven-acre
property “at any time in 2010 for the sum of $202,400” and that Stephens
Construction had cash on hand to pay for the tract of land. (MP Doc. # 40-3.)
Thus, it is undisputed that Stephens paid $202,400 for the entire Rutledge
tract and would have done so “at any time in 2010.” However, Land Ventures has
not pointed to any evidence that it would have accepted an offer from Stephens to

9

As of June 17, 2010, the arrearage on the Regions Bank loan was $24,502.56, not
including late charges and fees; on the filing date of the bankruptcy petition, the arrearage was
$16,357.08. (BP Doc. # 66, at 3; BP Claim # 4-1.) As of July 13, 2010, Land Ventures owed
Farm Credit $707,449.53 in principal and interest, not including default interest, late charges, or
collection costs. (7/13/2010 H’rg Tr., at 40.)
20

purchase the entire tract in 2010 for $202,400. The evidence does not permit a
reasonable inference that Land Ventures would have done so. Here is why.
On April 23, 2010, Pittman (in his capacity as Land Ventures’ manager and
99% owner) testified at a meeting of creditors that the Rutledge property was then
listed for sale for $750,000 and had been listed at that price for several months
previously. (MP Doc. # 35-11, at 33–34.) At the August 26, 2010 continuation
hearing in the bankruptcy court on Farm Credit’s motion to lift the bankruptcy
stay, Pittman testified that, since July, he had been negotiating with Stephens
regarding a sale of the Rutledge property. He testified that Stephens had offered
$385,000 for the entire property ($35,000 per acre for eleven acres), that Pittman
had countered the offer with a price of $400,000 and, thereafter, that he and
Stephens ended up negotiating for the sale of just two acres on the back of the
property. Ultimately, they agreed to a sale of the two acres, “probably the worst
two acres on the tract” according to Pittman’s deposition testimony, at the price of
$10,000 per acre. (MP Doc. # 35-12, at 31–35; MP Doc. # 40-7, at 455.) On
September 6, 2011, almost eighteen months after the bankruptcy petition was filed,
Pittman, in his capacity as a creditor of Land Ventures, filed a pro se motion in
which he contended that the trustee’s proposed sale of the remaining acreage to
Stephens was objectionable because “the proposed sale price [of $182,400] is for
sums less than the fair market value of the property.” (BP Doc. # 241.)
21

Since Land Ventures did not accept Stephens Construction’s offer of
$385,000 for the Rutledge property in July/August 2010, while Land Ventures was
in the midst of litigating a potential lift of the bankruptcy stay as to Farm Credit,
Land Ventures fails to show how it is reasonable to infer that Land Ventures would
have accepted an offer of $202,400 at that time or earlier. Thus, Land Ventures
has failed to introduce evidence sufficient to raise a genuine dispute of material
fact that Fritz could have proposed a plan early in the bankruptcy proceeding that
included a contract to sell the Rutledge property for $202,400.
In addition to the feasibility issues presented based on these two speculative
real estate transactions, Plan # 3 also fails for its lack of providing service of its
debt to Regions Bank. When the bankruptcy case was filed, Land Ventures was in
default on its Regions Bank loan for the payments due November 1, 2009, and
thereafter. (BP Doc. # 66, at 3.) Land Ventures argues that Farm Credit would
have responded favorably to its plan. However, it advances no argument and cites
no evidence indicating how Regions Bank, also a secured creditor, would have
viewed Plan # 3. In particular, Plan # 3 does not propose payment in full of
Regions Bank’s “claim within the first ninety days of the Chapter 11 case,” but
proposes only to pay the arrearage upon closing on the Stephens Construction and
2H&V contracts, and does not explain how Land Ventures intended to service its
debt to Regions Bank going forward. (See MP Doc. # 40, at 23.)
22

In the recommendation, the bankruptcy judge observes that Land Ventures
“had a negative cash flow,” as evidenced by its monthly operating reports (MP
Doc. # 33-14) and Roger Spain’s analysis (MP Doc. # 20). The bankruptcy judge
concludes that whether Land Ventures can satisfy the causation element of its
malpractice claim “turns on the validity of the two sales.” (Doc. # 34-1, at 30.) As
previously discussed, both of the sales are speculative, and the evidence does not
permit a reasonable inference that Fritz would have been able to obtain binding
contracts with 2H&V or Stephens on the terms described in Plan # 3.
b.

Plan # 1

Land Ventures presented two additional hypothetical plans during discovery.
Plan # 1, in contrast to Plan # 3, does not include the contract with Stephens, but
provides for liquidation of unspecified properties if the plan’s cash flow was not
sufficient to make Land Ventures’ monthly payments to Regions Bank. Plan # 1
also provides for the payment of $500,000 to Farm Credit from the proceeds of the
sale of a one-half interest in the Luverne and Holmes County properties, and for a
blanket lien on all of Land Ventures’ remaining unsecured properties to secure
payment of the approximately $250,000 loan balance. The plan states that Land
Ventures “intends to sell one or more currently unencumbered properties to pay the
remaining balance of the claim to [Farm Credit] and will pay adequate protection
payments to [Farm Credit] until the balance is paid in full” or, in the alternative,
23

that Land Ventures will seek financing from another lender. (MP Doc. # 33-1, at
44, 46.)
However, the plan does not specify a time within which or means by which
Land Ventures intended to sell the properties. Land Ventures made no argument
regarding the feasibility of this plan, and as discussed, the evidence does not give
rise to a reasonable inference that Fritz could have presented a binding offer from
2H&V in support of a reorganization plan. Even assuming that Land Ventures’
evidence regarding the 2H&V contract were sufficient, it has not pointed to
evidence sufficient to demonstrate that its proposal to liquidate unspecified
unencumbered assets to satisfy its debt to Regions Bank and its remaining
obligation to Farm Credit would have resulted in confirmation of Plan # 1. See
Danny Thomas Props., 241 F.3d at 963 (a plan provision requiring a sale of assets
to satisfy claims does not render a plan feasible as a matter of law); In re Hoffman,
52 B.R. 212, 215 (Bankr. D.N.D. 1985) (“[T]he [c]ourt is not satisfied that the
proposed sale of the real estate as contemplated [by the Plan] is sufficiently
concrete to assure either consummation within the two years or that even if sold
within the two-year period the price obtained would be sufficient to pay the
principal balance and accrued interest owing to Federal Land Bank.”).

24

c.

Plan # 2

In Plan # 2, Land Ventures proposes to “liquidate certain of its properties in
order to satisfy the indebtedness owed to [Farm Credit].” (MP Doc. # 33-1, at 53.)
Plan # 2 additionally offers an adequate protection payment of $500 monthly to
Farm Credit, along with a blanket lien upon the unencumbered properties. Farm
Credit would receive 80% of the net received upon the sale of a property toward
satisfaction of its claim, and the remaining 20% would be used for payment of
other claims in the case, as well as expenses and fees. (MP Doc. # 33-1, at 53.)
The plan provides payment of the Regions Bank debt from “ongoing operations of
the business” or, if the cash flow is not sufficient to make monthly payments to
Regions, liquidation of the debtor’s assets. (MP Doc. # 33-1, at 51.)
Plan # 2, in a similar fashion to Plan # 1, relies on the liquidation of
unspecified unencumbered assets. Land Ventures’ business consisted of selling its
real estate assets. The record demonstrates that it had not been able to operate this
real estate sales business in a profitable manner in the three years preceding the
petition. Although Plan # 2 commits to Farm Credit $500 per month in “adequate
protection payments” while Land Ventures liquidates “certain of its properties,”
and pledges to Farm Credit 80% of the net proceeds from any real estate sales that
it consummates during the unspecified period of reorganization, it is essentially the
same plan that Land Ventures followed before bankruptcy. That is, Land Ventures
25

will pay its creditors out of income derived from selling its real estate, whenever it
is able to sell its real estate.
Land Ventures’ history of operations provides no support for the plan’s
provision that Regions Bank would “continue to be paid from the ongoing
operations of the business.” (MP Doc. # 33-1, at 51.) Land Ventures had not been
able to make its monthly payments to Regions for five months pre-petition (see BP
Doc. # 66, at 3), and there is no evidence suggesting that the real estate market was
improving in the months following Land Ventures’ petition for relief.
Additionally, Plan # 2 makes no provision for curing the arrearage to Regions
Bank, and its fall-back plan for paying Regions Bank is to “liquidate assets.” (MP
Doc. # 33-1, at 51.) However, the plan allocates 100% of the net proceeds from
the sale of any property for purposes other than paying Regions, at least until Farm
Credit is paid in full. (MP Doc. # 33-1, at 53.)
Land Ventures bears the burden at trial of proving, that but for Fritz’s breach
of the standard of care, the bankruptcy proceeding would have resolved more
favorably to Land Ventures, not merely that it could have done so. Land Ventures
has offered three hypothetical reorganization plans in an attempt to demonstrate
that it satisfies the causation element of its ALSLA claim. However, the evidence
does not permit a reasonable inference that the bankruptcy court would have found
any of the three hypothetical plans to be feasible, as required for confirmation by
26

11 U.S.C. § 1129(a)(11), or that Land Ventures would have completed any of the
plans successfully. Accordingly, at summary judgment, Land Ventures has failed
to establish a genuine dispute of material fact on the issue of whether the
underlying bankruptcy proceeding would have resolved more favorably to Land
Ventures, but for Fritz’s alleged breaches of the standard of care.

Summary

judgment is due to be entered against Land Ventures and in favor of Fritz.
VI. CONCLUSION
For the foregoing reasons, it is ORDERED as follows:
(1)

Fritz’s Motion to Strike (MP Doc. # 44) is GRANTED as to

paragraphs 5 & 6 of Scott’s Declaration (MP Doc. # 40-2, Ex. B);
(2)

Land Ventures’ Objection (MP Doc. # 50) is OVERRULED;

(3)

The Recommendation on the issue of causation (Doc. # 34) is

ADOPTED;
(4)

Fritz’s Motion for Summary Judgment (MP Doc. # 33) is GRANTED;

(5)

Land Ventures’ Motion for Summary Judgment (MP Doc. # 31) is

and

DENIED.
A final judgment will be entered separately.
DONE this 29th day of October, 2015.
/s/ W. Keith Watkins
CHIEF UNITED STATES DISTRICT JUDGE
27