CHS Inc v Plaquemines Holdings, LLC
Filing
11
ORDER & REASONS that defendant Plaquemines Holdings, LLCs 6 Motion to Dismiss is DENIED. Signed by Judge Eldon E. Fallon on 6/27/12. (dno, )
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF LOUISIANA
CHS, INC.
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PLAQUEMINES HOLDINGS, LLC
CIVIL ACTION
NO. 11-2391
SECTION "L"(2)
ORDER & REASONS
Before the Court is defendant Plaquemines Holdings, LLC’s (“Plaquemines Holdings” or
“Plaquemines”) Motion to Dismiss Pursuant to Rule 4(m). (R. Doc. 6). For the following
reasons, this Motion is DENIED.
I.
BACKGROUND
The present matter arises out of the sale and purchase of a litigious right and the attempt
to redeem this right. Plaintiff CHS, Inc. is a corporation organized and existing under the laws
of the state of Minnesota, with its principal place of business in Minnesota. CHS has filed to do
business in the Louisiana with the Louisiana Secretary of State as “CHS Inc. of Minnesota.”
Non-party, CHS-SLE Land, LLC is a Louisiana limited liability company, whose two members
are CHS and non-party, South Louisiana Ethanol, LLC (“SLE”).
Defendant Plaquemines Holdings is a limited liability company organized and existing
under the laws of the state of Louisiana. The sole member of Plaquemines is non-party J.A.H.
Enterprises, Inc., a corporation organized and existing under the laws of the state of Louisiana,
and with its principal place of business in Louisiana.
On August 29, 2009, SLE filed a voluntary petition for relief under chapter 11 of title 11
of the United States Code, in a proceeding captioned In re South Louisiana Ethanol, Case No.
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09-12676, pending in the United States Bankruptcy Court for the Eastern District of Louisiana.
On April 19, 2011, the Bankruptcy Court confirmed SLE’s Amended Plan of Reorganization by
Liquidation Including Immaterial Modifications Under Chapter 11 of the Bankruptcy Code of
South Louisiana Ethanol, LLC (the “Plan”). As of April 20, 2011, SLE was operating as a
reorganized donor. Pursuant to the terms of the Plan:
All of the assets of the Debtor, less and except its fifty (50%) percent interest in CHSSLE Land, LLC shall be sold...With regard to the Debtor’s fifty (50%) percent
membership interest of 4.5 acres (batture land), if no consensual agreement can be
confected with CHS, Inc., relative to the transfer of Debtor’s membership interest, Debtor
shall institute legal proceedings to dissolve the limited liability company and partition the
real property asset of CHS-SLE Land, LLC to be divided in kind. This litigation may or
may not be successful. If successful, the rights, interest, and entitlements awarded to the
Debtor will be transferred to the Purchaser of the Property and option, upon the timely
exercise of the option. If the litigation is not successful, it is Debtor’s intention to either
assign its economic attributes and retain its membership in CHS-SLE Land, LLC or SLE
will remain in existence until it is able to liquidate this asset, subject to the consent and
approval of security interest holder, Whitney National Bank.
On May 31, 2011, pursuant to the terms of the Plan, SLE filed a lawsuit in the 25th
Judicial District Court for the Parish of Plaquemines. In this litigation, SLE sued to dissolve the
LLC and to distribute all of its property to its members, CHS and SLE, on the grounds that the
business purpose of the LLC has been frustrated and that there is a deadlock between the
members. On June 20, 2011, CHS timely removed the case to the United States District Court
for the Eastern District of Louisiana. On June 21, 2011, CHS timely filed an answer denying
these and other allegations. On July 19, 2011, the case was referred to the United States
Bankruptcy Court for the Eastern District of Louisiana.
Meanwhile, on June 7, 2011, the Bankruptcy Court approved an order authorizing SLE to
sell, by public auction, certain assets (the “Sale Order”). Pursuant to the terms of the Sale Order,
SLE was authorized to sell, by public auction, the following: (1) immovable property located in
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Plaquemines Parish and commonly known as Tract A-1C1; (2) all movable property located on
Tract A-1C; and (3) “an option to purchase all rights, title and interest distributed to Seller, SLE,
resulting from the dissolution of limited liability company [CHS-SLE Land, LLC] (collectively
“Sale Items”). On or about June 9, 2011, J.A.H. submitted a bid of $6,802,000, which was
accepted by SLE for the Sale Items. On July 31, 2011, pursuant to the terms of the Sale Order,
the Bankruptcy Court issued an order approving the sale (the “Approval Order”) of all of the
Sale Items to J.A.H. in the amount of $6,802,000. Pursuant to the terms of the Approval Order,
J.A.H. agreed to pay $202,000.00 for the “option to purchase all rights, title and interest
distributed to Seller, SLE, resulting from a dissolution of limited liability company [CHS-SLE
Land, LLC].” The Approval Order provided that J.A.H. and SLE would close on the sale of the
Sale Items at a later date. J.A.H. eventually assigned its rights under the Sale Order and the
Approval Order to Plaquemines Holdings. On or about August 23, 2011, Plaquemines Holdings
and SLE closed on the sale (the “Sale”), and Plaquemines Holdings became the owner of the
Sale Items.
On the Sale Date, and as part of the transactions contemplated by the Sale Order and
Approval Order, SLE and Plaquemines Holdings also executed an Option Agreement (the
“Option Agreement”). The Option Agreement provided, in Paragraph 1(a), that in consideration
of $202,000, SLE granted to Plaquemines Holdings an exclusive option to acquire from SLE all
of its “right, title and interest in and to all distributions (the ‘Property’) made to [SLE] in the
liquidation of [CHS-SLE Land, LLC] resulting from the Judgment.” The Option Agreement
further provides that “the acquisition price for the Property shall be One Dollar cash, plus the
option price paid to [SLE] pursuant to the terms of Paragraph 1(a).”
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On September 9, 2011, Whitney National Bank filed a motion in the Bankruptcy Court
seeking an order to distribute certain proceeds of the Sale. This motion is the first time that CHS
learned that the Sale had closed. It is also the first time that CHS learned that Plaquemines
Holding was the entity that actually purchased the Sale Items.
On September 22, 2011, CHS filed a Complaint for Redemption in this Court against
Plaquemines Holdings. (R. Doc. 1). CHS cites as a basis for the litigation, Article 2652 of the
Louisiana Civil Code, Sale of a Litigation Right, which provides that “[w]hen a litigious right is
assigned, the debtor may extinguish his obligation by paying to the assignee the price the
assignee paid for the assignment, with interest from the time of the assignment.” It further
provides that a “right is litigious, for that purpose, when it is contested in a suit already filed.”
CHS alleges that the litigation was commenced on May 31, 2011, and CHS answered, denying
the allegations in the litigation on June 21, 2011, and Plaquemines Holdings, in effect, purchased
the claims that are the subject of the litigation on August 23, 2011. According to CHS, this
sequences demonstrates the purchase of a litigious right by Plaquemines Holdings from SLE.
CHS, thus, makes a redemption demand upon Plaquemines Holdings for $202,000, together with
interest at the judicial rate, commencing on the Sale Date. CHS prays for the following relief
from the Court: (1) declare that Plaquemines Holdings purchased the claims that are the subject
of the litigation pursuant to Louisiana Civil Code Article 2652 when it entered into the Option
Agreement; (2) declare that CHS is entitled to redeem the property purchased by Plaquemines
Holdings in the Option Agreement; (3) order Plaquemines Holdings sell the property it
purchased in the Option Agreement to CHS for $202,000; and (4) grant CHS further relief as the
Court deems just, proper and equitable.
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II.
PENDING MOTIONS
A.
Plaquemines Holdings’ Motion
Plaquemines Holdings filed the present Motion pursuant to Federal Rule of Civil
Procedure 4(m), arguing that because the summons was not issued until after 120 days of filing
the Complaint, the Court must dismiss the action, unless there is good cause, and there exists no
good cause. According to Plaquemines Holdings, the litigious redemption issue in this case is
also at issue in the cases pending before the Bankruptcy Court, and CHS appears to have waited
to issue summons until a ruling was made in these cases on the litigious redemption issue. This,
argues Plaquemines Holdings, does not constitute good cause for delay.
B.
CHS’s Response
CHS filed a Response in opposition to Plaquemines’ Motion. (R. Doc. 8). CHS alleges
that the Court has the discretion under Rule 4(m) to either dismiss the action without prejudice or
direct that service be effected with a specific time period, asking the Court do the latter. Further,
CHS alleges that its delay in serving Plaquemines with the summons was due to good cause,
particularly that it was awaiting decisions from the Bankruptcy Court and the Eastern District on
the proper jurisdiction for the related cases, and as soon as jurisdictional decisions were made, it
served Plaquemines. Finally, CHS argues that because service has now been made, there is
further reasons to deny the present Motion.
III.
LAW & ANALYSIS
Federal Rule of Civil Procedure 4(m) governs the time limit for service, providing, “[i]f a
defendant is not served within 120 days after the complaint is filed, the court–on motion or on its
own after notice to the plaintiff–must dismiss the action without prejudice against the defendant
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or order that service be made within a specified time. But if the plaintiff shows good cause for
the failure, the court must extend the time for service for an appropriate period....” A district
court thus is afforded discretion to enlarge the time for service even if there is no good cause
shown. See Henderson v. United States, 517 U.S. 654, 662-63 (1996). Stated differently, if
good cause is shown, a court must extend the time for service, but if good cause is not shown, a
court may, in its discretion, extend the time for service. Thompson v. Brown, 91 F.3d 20, 21 (5th
Cir. 1996)(citing Pretrucelli v. Bohringer & Ratzinger, GMBH, 46 F.3d 1298, 1305-06 (3d Cir.
1995)). “Good cause” for purposes of Rule 4(m) requires “at least as much as would be required
to show excusable neglect, as to which simple inadvertence or mistake of counsel or ignorance
of the rules usually does not suffice.” Lambert v. United States, 44 F.3d 296, 299 (5th Cir.
1995). In addition, courts generally require “some showing of good faith on the part of the party
seeking an enlargement and some reasonable basis for noncompliance within the time
specified....” Id.
It is undisputed that CHS failed to serve Plaquemines Holdings within the 120 day time
limit proscribed by Rule 4(m). See (R. Docs. 1, 5). Thus, the Court must determine whether to
dismiss the action without prejudice, order that service be made within a specified time, or if
there is good cause for the delay, extend the time for service. Service has since been made on
Plaquemines Holdings, rendering unnecessary an order directing that service be made or the time
for service extended. In considering whether to dismiss or retain the action, the Court notes that
CHS served the complaint only a few weeks past the 120 day deadline and its delay was not
done in bad faith, but rather in order to obtain relevant rulings in related litigation. These facts
demonstrate, at the most, good cause and, at the least, a reasonable basis for the Court to exercise
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its discretion to deny the present Motion. Accordingly, the Court retains the case for further
proceedings.
IV.
CONCLUSION
For the foregoing reasons, IT IS ORDERED that Plaquemines Holdings’ Motion to
Dismiss Pursuant to Rule 4(m)(R. Doc. 6) is DENIED.
New Orleans, Louisiana this 27th day of June, 2012.
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UNITED STATES DISTRICT JUDGE
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