Strategic Well Site Materials & Logistics LLC v. Frac Master Sands LLC et al

Filing 107

MEMORANDUM OPINION. Signed by Judge Inge P Johnson on 3/25/13. (ASL)

FILED
2013 Mar-25 PM 02:51
U.S. DISTRICT COURT
N.D. OF ALABAMA

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ALABAMA
NORTHWESTERN DIVISION
STRATEGIC WELL-SITE MATERIALS
& LOGISTICS, LLC,
PLAINTIFF,
vs.

CASE NO. CV 12-J-1132-NW

FRAC MASTER SANDS, LLC
n/k/a FMS TECHNOLOGICAL
SYSTEMS, LLC, et al.,
DEFENDANTS.
MEMORANDUM OPINION
Pending before the court is plaintiff Strategic Well Site Materials & Logistics
LLC’s motion for summary judgment and brief in support as to claims under the
Alabama Fraudulent Transfer Act (AFTA), Ala. Code § 8-9A-4 et seq, against
defendants Leigh Ann Kidd (Mrs. Kidd”) and Billy Kidd, Jr. (“Kidd Jr.”) (doc. 102).
Defendants have failed to respond.1 The court finds as follows:
Factual Background
On April 12, 2011, Frac Master Sands, LLC, (“FMS”) and Strategic Well-Site
Materials and Logistics, LLC. (“Strategic Well-Site”) entered into an agreement for
the purchase of silica sand (the “Agreement”). Pl.’s Ex. 1 (doc. 102) at 1. Pursuant to

1

Pursuant to the Court’s Scheduling Order (doc. 31) Ex. A, Defendants had 14 days to
respond from the filing of the motion for summary judgment by plaintiff. See also Order of
3/4/2013 (doc. 103).

the terms of the Agreement, Strategic Well-Site provided FMS with a prepayment in
the amount of four million dollars ($4,000,000). Id. at 4. This Prepayment entitled
Strategic Well-Site to a credit towards its purchase of sand. Id. Strategic Well-Site
wired FMS a payment of $1,500,000 on April 8, 2011 and a payment of $2,500,000
on May 9, 2011, totaling $4,000,000. Pl.’s Ex. 3 (doc. 32).
On July 17, 2012, Strategic Well-Site filed a First Amended and Supplemental
Petition (“Petition”) seeking the return of fraudulent transfers made by FMS to Kidd
Jr. and Mrs. Kidd. See (doc. 35). Records from Bank Independent show Mrs. Kidd
received the three payments from FMS totaling $12,000.00 and Kidd Jr. received
payments from FMS totaling $172,900.00. Pl.’s Ex. 2 & 3 (doc. 102).
On September 6, 2012, Strategic Well-Site’s motion for summary judgment
against FMS and Billy Kidd Sr. on its breach of contract claim was granted. See (doc.
49). This court found that Strategic Well-Site and FMS had entered into a “valid and
binding contract” on April 12, 2011 and that FMS had breached its obligations under
the Agreement by failing to provide sand or return the $4 million Prepayment. Id. On
November 15, 2012, a final judgment in favor of Strategic Well-Site Materials &
Logistics LLC and against Frac Master Sands, LLC and Billy Kidd, Sr., jointly and
severally, in the amount of $4,270,246.50 was entered. (doc. 69).

2

Standard of Review
A moving party is entitled to summary judgment if there is no genuine issue of
material fact, leaving final judgment to be decided as a matter of law. See Federal
Rules of Civil Procedure 56; Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475
U.S. 574, 587 (1986). As the Supreme Court has explained the summary judgment
standard:
[T]he plain language of Rule 56(c) mandates the entry of summary
judgment, after adequate time for discovery and upon motion, against a
party who fails to make a showing sufficient to establish the existence
of an element essential to that party’s case, and on which that party will
bear the burden of proof at trial. In such a situation, there can be no
genuine issue as to any material fact, since the complete failure of proof
concerning an essential element of the non-moving party’s case
necessarily renders all other facts immaterial.
Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986). The party moving for
summary judgment bears the initial burden of informing the court of the basis for its
motion and identifying those portions of the pleadings or filings which it believes
demonstrates the absence of genuine issues of material fact. Id. at 323. The burden
then shifts to the nonmoving party to “go beyond the pleadings and by ... affidavits,
or by the ‘depositions, answers to interrogatories, and admissions on file’ designate
‘specific facts showing that there is a genuine issue for trial.’” Celotex, 477 U.S. at
324. The nonmoving party “must do more than simply show that there is a

3

metaphysical doubt as to the material facts” to meet their burden Matsushita Elec.
Indus. Co., 475 U.S. at 586. The non-movant must “demonstrate that there is indeed
a material issue of fact precluding summary judgment.” Clark v. Coates & Clark, Inc.,
929 F.2d 604, 608 (11th Cir. 1991).
The court shall construe the evidence and factual inferences arising therefrom
in the light most favorable to the nonmoving party when deciding motions for
summary judgment. See Adickes v. S. H. Kress & Co., 398 U.S. 144, 157 (1970). The
substantive law will identify which facts are material and which are irrelevant.
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). All “reasonable doubts”
about the facts and all justifiable inferences are resolved in favor of the non-movant.
Fitzpatrick v. City of Atlanta, 2 F.3d 1112, 1115 (11th Cir. 1993). However, all
“doubts” need not be so resolved. Barnes v. Southwest Forest Industries, Inc., 814
F.2d 607, 609 (11th Cir. 1987). “The moving party is entitled to ‘judgment as a
matter of law’ when the nonmoving party fails to make a sufficient showing of an
essential element of the case to which the nonmoving party has the burden of proof.”
Everett v. Napper, 833 F.2d 1507, 1510 (11th Cir. 1987) (citing Celotex, 477 U.S. at
324).
There is a genuine dispute “if the evidence is such that a reasonable jury could
return a verdict for the nonmoving party.” Anderson, 477 U.S. at 248. When the
4

evidence is merely colorable, or is not significantly probative, summary judgment
may be granted. Id. at 249. “The basic issue before the court on a motion for
summary judgment is ‘whether the evidence presents a sufficient disagreement to
require submission to a jury or whether it is so one-sided that one party must prevail
as a matter of law.’” Nat'l Mining Ass'n v. Apfel, 97 F. Supp. 2d 1070, 1076 (N.D.
Ala. 1999) (quoting Holcombe v. Alabama Dry Dock & Shipbuilding, 1998 WL
758012 (S.D. Ala. 1998)). Summary judgment is appropriate where the moving party
shows an absence of evidence to support an essential element of the nonmoving
party’s case. Weiss v. School Board of Hillsborough County, 141 F.3d 990, 994 (11th
Cir. 1998).
Legal Analysis
Plaintiff asserts there are no disputed material facts as to the elements of
Strategic Well-Site’s AFTA claims and Mrs. Kidd and Kidd Jr. Plaintiff has shown
that both Mrs. Kidd and Kidd Jr. received payments from FMS. See (Pl.’s Ex. 3-5
(doc. 102) . Plaintiff asserts these payments were made at a time that FMS owed
obligations to Strategic Well-Site and that Mrs. Kidd and Kidd Jr. bear the burden of
proving that they provided equivalent value for the monies they received.
To have a conveyance of property voided as a fraudulent transfer under
Alabama law, Strategic Well-Site must prove three elements: (1) it or another creditor
5

was defrauded; (2) the debtor intended to defraud by actual or constructive fraud; and
(3) Strategic Well-Site’s claim “could have been satisfied or partially satisfied by the
conveyed property.” In re Robinson, 2008 WL 1756357, *2 (Bankr. S.D. Ala. 2008)
(citing Champion v. Locklear, 523 So. 2d 336, 338 (Ala. 1988)). Importantly, once
Strategic establishes that it was a creditor of FMS at the time a transfer was made,
“‘the burden shifts to the grantee to show that (1) the grantor owed a debt to the
grantee; (2) the consideration for the conveyance was the extinguishment of the
existing debt; and (3) the value of the property conveyed was no more than a fair
equivalent for the debt amount.’” Cox v. Hughes, 781 So. 2d 197, 201 (Ala. 2000)
(quoting Granberry v. Johnson, 491 So. 2d 926, 928-29 (internal citations and
quotations omitted)).
This Court held in its September 2012 Memorandum Opinion, the Agreement
was a valid and binding contract between Strategic Well-Site and FMS that was
entered into on April 11, 2011. See (doc. 49) at pg 6-9. “Anyone is a creditor, under
[the AFTA], who has a right by law to demand, either presently or upon future
contingency, the fulfillment of any obligation or contract.” Foy v. Foy, 447 So. 2d
158, 163 (Ala. 1984) (citing Gannard v. Eslava, 20 Ala. 732 (1852)); see also Bibb
v. Freeman, 59 Ala. 612, 615 (Ala. 1877) (“Whoever has, or may have a claim or
demand upon a contract in existence at the time the voluntary conveyance is
6

executed, is a creditor within the meaning of the statute. A contingent claim, is as
fully protected, as a claim that is certain and absolute”). Because Strategic Well-Site
had an existing contract with FMS, and thus a contingent claim, at the time the
conveyances to Mrs. Kidd and Kidd Jr. were made, Strategic Well-Site is a creditor
within the meaning of the AFTA. This shifts the burden to Mrs. Kidd and Kidd Jr. to
show that FMS owed a debt to each of them; that the payments provided to them
extinguished those existing debts; and that the payments were a “fair equivalent” for
the amount of debt owed to them. See Cox, 781 So. 2d at 201.
“Constructive fraud is found when a grantor, indebted at the time, conveys
property without receiving valuable consideration.” In re Robinson, 2008 WL
1756357 at *2 (emphasis in original) (quoting Aucoin v. Aucoin, 727 So. 2d 824, 827
(Ala. Civ. App. 1998) (internal citations and quotations omitted). Importantly, the
“actual, subjective intent of the grantor is irrelevant to the conclusion of constructive
fraud.” Id. (citing Champion v. Locklear, 523 So. 2d at 338). In addition, because
Mrs. Kidd and Kidd Jr. are family members of Billy Kidd Sr., the managing member
of FMS, the court “automatically infer[s] constructive fraud if the transfer was made
to a family member and there was no valuable consideration.” Id. (citing Peoples v.
AuburnBank, 814 So. 2d 297, 300 (Ala. Civ. App. 2001); McPherson Oil Co., Inc. v.
Massey, 643 So. 2d 595, 596 (Ala. 1994). “‘Once constructive fraud is alleged in a
7

family transaction, as it has been here, the grantee [Mrs. Kidd and Kidd Jr.] has the
burden of proving the bona fide character of the underlying transaction.’” Id. (quoting
Champion, 523 So. 2d at 338).
Mrs. Kidd and Kidd Jr. have not presented any evidence that they provided
valuable consideration in exchange for the payments they received, thus those
payments are voided as “constructive fraud” under Ala. Code § 8-9A-5(a). As such,
Strategic Well-Site, as the creditor defrauded by those transfers and whose claim
against FMS is entitled to summary judgment on its fraudulent transfer claims against
Mrs. Kidd and Kidd Jr.
Conclusion
Having considered the foregoing and finding that defendants have failed to
establish a genuine issue of material fact sufficient to allow this case to proceed to
trial on the fraudulent transfer claim, the court FINDS that plaintiff’s motion for
partial summary judgment (doc. 102) is due to be GRANTED, and the court shall so
order by Separate Order.
DONE and ORDERED this the 25th day of March 2013.

INGE PRYTZ JOHNSON
SENIOR U.S. DISTRICT JUDGE
8