Colbert et al v. Brennan et al

Filing 187

FINDINGS OF FACT AND CONCLUSIONS OF LAW. The Court finds that pltfs are entitled to judgment in their favor on their oblique action. Proposed judgment to be submitted by 12/17/12. Signed by Judge Susie Morgan.(cbn)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF LOUISIANA
EDWARD TUCK COLBERT, et al.,
Plaintiffs

CIVIL ACTION

VERSUS

NO. 12-137

THEODORE BRENNAN, et al.,
Defendants

SECTION “E”

FINDINGS OF FACT AND CONCLUSIONS OF LAW
This matter was tried before the Court, sitting without a jury, on December 10, 2012.1
Having considered the testimony and evidence at trial, the arguments of counsel, and the
applicable law, the Court now issues the following Findings of Fact and Conclusions of Law in
accordance with Federal Rule of Civil Procedure 52(a). To the extent that any findings of fact
may be construed as conclusions of law, the Court hereby adopts them as such. To the extent
that any conclusions of law constitute findings of fact, the Court adopts them as such.
PRELIMINARY STATEMENT
On December 4, 2012, the Court issued sanctions against defendants Theodore Brennan
(“Ted Brennan”) and Brennan’s, Inc. because of defendants’ repeated failure to comply with
their discovery obligations under the Federal Rules of Civil Procedure and with the Orders of
the assigned Magistrate Judge and of this Court.2 In that December 4, 2012 Order, the Court
found that plaintiffs Edward Tuck Colbert (“Mr. Colbert”) and Kenyon & Kenyon, LLP (“Kenyon
& Kenyon”) had established a prima facie case as to the five elements of their oblique action

1

R. Doc. 186 (Minute entry from Decem ber 10, 2012 bench trial).

2

See R. Doc. 163.

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against defendants.3 The Court also limited the evidence defendants would be allowed to
introduce at trial, and the witnesses defendants would be allowed to call to testify.4 The Court
levied these sanctions pursuant to Rule 37 of the Federal Rules of Civil Procedure, after finding
the sanctions were just and specifically related to defendants’ failure to comply with their
discovery obligations.5 On December 7, 2012, plaintiffs informed the Court that they did not
object to Ted Brennan or June Wiley testifying at trial, and the Court issued a Minute Entry in
which it ordered that Ted Brennan and June Wiley would both be permitted to testify at trial.6
Because the Court found that plaintiffs had established a prima facie case with respect
to the elements of their oblique action, the burden at trial was on defendants to rebut that prima
facie case. Plaintiffs were permitted, but were not required, to introduce documents into the
record at trial in support of their prima facie case.
FINDINGS OF FACT
1.

Mr. Colbert is an adult citizen and resident of the District of Columbia.7

2.

Kenyon & Kenyon is a limited liability partnership organized under the
laws of the State of New York and having its principal place of business in
the State of New York. Kenyon & Kenyon has sixty-four limited liability
partners, all of whom are individuals domiciled in the States of California,
Maryland, New Jersey, New York, Virginia, Pennsylvania and/or the

3

Id. See L A . C IV . C O D E . A N N . art. 2044.

4

Id. In this Order, the Court ordered that Ted Brennan and June W iley would not be allowed to
testify because they failed to appear for their depositions.
5

Id.

6

R. Doc. 183.

7

R. Doc. 1 (Complaint).

2

District of Columbia. None of the limited liability partners of Kenyon &
Kenyon is domiciled in Louisiana.8
3.

Ted Brennan is an adult citizen and resident of the State of Louisiana.9

4.

Brennan’s, Inc. is a corporation organized under the laws of the State of
Louisiana and having its principal place of business in the State of
Louisiana.10

5.

Mr. Colbert and Kenyon & Kenyon are judgment creditors of Brennan’s,
Inc. On March 31, 2011, the Civil District Court for the Parish of Orleans,
State of Louisiana, entered a judgment in favor of Mr. Colbert and Kenyon
& Kenyon against Brennan’s, Inc.11 As of December 10, 2012, the total
amount of that judgment, including interest, is $3,212,721.49.12 On June
14, 2011, the Civil District Court for the Parish of Orleans, State of
Louisiana, entered a judgment in favor of Mr. Colbert and Kenyon &
Kenyon against Brennan’s, Inc.13 As of December 10, 2012, the total
amount of that judgment, including interest, is $857,414.35.14 As of

8

Id.

9

Id.

10

Id.

11

See Trial Exhibit 18.

12

In reaching this figure, the Court utilized the 2012 Judicial Interest Calculator provided by the
Louisiana State Bar Association. The Court takes judicial notice of the Judicial Interest Rates for calendar
years 2004-2012. See Trial Exhibit 28.
13

See Trial Exhibit 19.

14

See supra note 12; see also Trial Exhibit 29.

3

December 10, 2012, the total amount Brennan’s, Inc. owes to Mr. Colbert
and Kenyon & Kenyon is $4,070,135.84.
6.

Brennan’s, Inc. has not paid any portion of the March 2011 judgment or
the June 2011 judgment. While Brennan’s, Inc. has appealed these
judgments to the Louisiana Court of Appeals, Fourth Circuit, Brennan’s,
Inc. did not post a suspensive appeal bond in the Civil District Court for
the Parish of Orleans, State of Louisiana. As a result, in September 2011,
plaintiffs began efforts to execute on the March 2011 judgment and the
June 2011 judgment.15

7.

Ted Brennan is indebted to Brennan’s, Inc. As of June 28, 2011, the
amount of Ted Brennan’s debt to Brennan’s, Inc. equaled $4,322,840.27.16

8.

Brennan’s, Inc. is not seeking repayment of Ted Brennan’s loans.17

9.

Brennan’s, Inc.’s liabilities exceed its fairly appraised assets.

As of

December 10, 2012, Brennan’s, Inc.’s fairly appraised assets equaled
$10,486,738.18 As of December 10, 2012, Brennan’s, Inc.’s liabilities

15

Mr. Colbert testified to this fact at trial.

16

In its December 4, 2012 Order and Reasons, the Court found that plaintiffs had established a
prima facie case as to the amount of Ted Brennan’s debt to Brennan’s, Inc. R. Doc. 163. Defendants did
not rebut plaintiffs’ prima facie case at trial.
17

In its December 4, 2012 Order and Reasons, the Court found that plaintiffs had established a
prima facie case that Brennan’s, Inc. is not seeking repayment of Ted Brennan’s loans. R. Doc. 163.
Defendants did not rebut plaintiffs’ prima facie case at trial.
18

See Trial Exhibits 7, 15, 20, and 22. In its December 4, 2012 Order and Reasons, the Court found
that plaintiffs had established a prima facie case as to the amount of Brennan’s, Inc.’s fairly appraised
assets. R. Doc. 163. Defendants did not rebut plaintiffs’ prima facie case at trial.

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equaled $17,120,820.30.19
10.

Mr. Colbert and Kenyon & Kenyon first learned of the extent of Brennan’s,
Inc.’s liabilities, the extent of Ted Brennan’s loans, and the fact that
Brennan’s, Inc. was not seeking repayment of Ted Brennan’s loans, after
a September 2, 2011 judgment debtor examination of Brennan’s, Inc.20
CONCLUSIONS OF LAW

1.

The Court has subject matter jurisdiction over this matter pursuant to 28
U.S.C. § 1332, because the parties are completely diverse and the amount
in controversy, exclusive of interest and costs, exceeds $75,000. Venue is
proper because the Court has personal jurisdiction over Brennan’s, Inc.
and Ted Brennan. See 28 U.S.C. § 1391(b), (c).

2.

In this diversity case, the Court applies the prescriptive period of the forum
state as substantive law. Holt v. State Farm Fire & Cas. Co., 627 F.3d 188,
191 (5th Cir. 2010).

Under Louisiana law, the burden of proving

prescription ordinarily rests with the defendant. Campo v. Correa, 012707 (La. 6/21/02); 828 So.2d 502, 508. However, if prescription is
evident on the face of the pleadings, the burden shifts to the plaintiff to
show that its claims have not prescribed. Id. at 508; Carter v. Haygood,
04-646 (La. 1/19/05); 892 So.2d 1261, 1267. Article 2041 provides the

19

See Trial Exhibits 1, 2, 3, 7, 9, 10, 14, 15, 18, 19, 20, 22, and 23. In its December 4, 2012 Order
and Reasons, the Court found that plaintiffs had established a prima facie case as to the amount of
Brennan’s, Inc.’s liabilities. R. Doc. 163. Defendants did not rebut plaintiffs’ prima facie case at trial.
20

Mr. Colbert testified that he and his law firm learned these facts for the first time after their
attorneys conducted the September 2, 2011 judgment debtor examination of Brennan’s, Inc. in the state
court action.

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prescriptive and peremptive periods for an oblique action: "The action of
the obligee must be brought within one year from the time he learned or
should have learned of the act, or the result of the failure to act, of the
obligor that the obligee seeks to annul, but never after three years from the
date of that act or result." LA . CIV. CODE ANN art. 2041; see also Nicholson
Mgmt. & Consultants, Inc. v. Bergman, 96-557 (La. App. 4 Cir. 9/25/96);
681 So.2d 471, 476 (article 2041 applies to oblique actions, even though it
is contained in the revocatory action section of the Civil Code). Because
plaintiffs first learned that Brennan’s, Inc.’s liabilities exceeded its fairly
appraised assets, the extent of Ted Brennan’s loans, and the fact that
Brennan’s, Inc.’s was failing to seek repayment of Ted Brennan’s loans, in
September 2011, well within the one year prescriptive period applicable to
oblique actions, plaintiffs’ oblique action is not facially prescribed or
perempted.21 As a result, the burden was on defendants to prove that
plaintiffs’ claims are prescribed or perempted. Campo, 828 So.2d at 508.
Defendants have not carried that burden. They have not introduced any
evidence indicating that prescription began to run on plaintiffs’ oblique
action any earlier than September 2011.22 As a result, plaintiffs’ oblique
21

Plaintiffs instituted their oblique action against defendants in this Court on January 18, 2012.
See R. Doc. 1.
22

During cross-examination of Mr. Colbert, counsel for defendants questioned Mr. Colbert
regarding the date Mr. Colbert, and Kenyon & Kenyon, learned of Ted Brennan’s loans and the fact that
Brennan’s, Inc. was failing to exercise its right to seek repayment of Ted Brennan’s loans. Counsel for
defendants questioned Mr. Colbert with respect to Trial Exhibit 32, which is a M arch 2011 state court
pleading in which counsel for Mr. Colbert and Kenyon & Kenyon made reference to loans by Brennan’s,
Inc. to the “Brennan Brothers.” Mr. Colbert explained, however, that he did not learn the extent of those
loans and the extent of Brennan’s, Inc.’s financial troubles, or the fact that Brennan’s, Inc. was not seeking

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action is timely.
3.

To succeed on their oblique action, plaintiffs were required to establish the
following elements: (1) that they are creditors of Brennan’s, Inc.; (2) that
a third party is indebted to Brennan’s, Inc. - in this case, that third party
is Ted Brennan; (3) that Brennan’s, Inc. is failing to exercise its right to
seek repayment of Ted Brennan’s debt to Brennan’s, Inc., which right is not
strictly personal to Brennan’s, Inc.; (4) that Brennan’s, Inc. is insolvent;
and (5) that Brennan’s, Inc.’s failure to exercise its right to seek repayment
of the debt owed by Ted Brennan either caused or increased that
insolvency. See LA . CIV. CODE ANN . art. 2044 (“If an obligor causes or
increases his insolvency by failing to exercise a right, the obligee may
exercise it himself, unless the right is strictly personal to the obligor.”) Mr.
Colbert and Kenyon & Kenyon have established a prima facie case with
respect to each of these elements.23

4.

Plaintiffs are judgment creditors of Brennan’s, Inc.

5.

Ted Brennan is indebted to Brennan’s, Inc.

6.

Brennan’s, Inc. is failing to exercise its right to seek repayment of Ted
Brennan’s debt to Brennan’s, Inc., which right is not strictly personal to
Brennan’s, Inc.

repayment of Ted Brennan’s loans, until September 2011. The Court finds that, even if Mr. Colbert and
Kenyon & Kenyon knew or should have known of Brennan’s, Inc.’s failure to seek repayment of Ted
Brennan’s loans in M arch 2011, and thus that the prescriptive period on plaintiffs’ began to run at that
time, this action, instituted in January 2012, would still be timely.
23

R. Doc. 163.

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7.

Under Louisiana Civil Code article 2037, “[a]n obligor is insolvent when
the total of his liabilities exceeds the total of his fairly appraised assets.”
Because Brennan’s, Inc.’s liabilities exceed the total of its fairly appraised
assets, Brennan’s, Inc. is insolvent.

8.

Brennan’s, Inc.’s failure to exercise its right to seek repayment of Ted
Brennan’s loans either caused or increased Brennan’s, Inc.’s insolvency.

9.

Defendants failed to rebut any of the elements of plaintiffs’ oblique action.
Defendants did not call any witnesses,24 and defendants’ cross-examination
of Mr. Colbert, plaintiffs’ only witness, did not yield any evidence
contradicting plaintiffs’ prima facie case.

10.

Mr. Colbert and Kenyon & Kenyon are entitled to judgment in their favor
on their oblique action. As a result, Mr. Colbert and Kenyon & Kenyon are
entitled to exercise Brennan’s, Inc.’s right, in Brennan’s, Inc.’s name, to
seek repayment of Ted Brennan’s loans, to the extent Ted Brennan’s loans
do not exceed Brennan’s, Inc.’s debt to plaintiffs. See La. Lift & Equip.,
Inc. v. Eizel, 33,747 (La. App. 2 Cir. 11/1/00); 770 So.2d 859, 864 (“In the
oblique action, the creditor exercises a right belonging to the debtor in the
debtor's name.”)

24

Neither Ted Brennan nor June W iley appeared for trial. No corporate representative of
Brennan’s, Inc. appeared at trial. Bridget Brennan Tyrrell, the individual who was designated as
Brennan’s, Inc.’s Rule 30(b)(6) corporate representative throughout this litigation, was not available to
testify at trial. Ms. Tyrrell’s August 2012 deposition, in which she testified as the corporate representative
of Brennan’s, Inc., was introduced into the record by plaintiffs in lieu of her live testimony. See Trial
Exhibits 33-34.

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CONCLUSION
Based on the above findings of fact and conclusions of law, the Court finds that
defendants failed to rebut plaintiffs’ prima facie case on their oblique action. Accordingly, the
Court finds that plaintiffs Edward Tuck Colbert and Kenyon & Kenyon, LLP are entitled to
judgment in their favor on their oblique action. The Court will enter a judgment to that effect
by separate order.
IT IS ORDERED that plaintiffs shall submit a proposed judgment for the Court’s
consideration no later than December 17, 2012, at 5:00 p.m.
New Orleans, Louisiana, this 13th day of December, 2012.
___

____________________________
SUSIE MORGAN
UNITED STATES DISTRICT JUDGE

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