SE Property Holdings, LLC v. Unified Recovery Group, LLC et al

Filing 164

ORDER AND REASONS regarding 145 , 146 and 151 Motions for Summary Judgment. Having considered the motions and legal memoranda, the record, and the applicable law, the Court finds that JKS's motion should be DENIED, SEPH's motion should be DENIED, and the IRS's motion should be GRANTED IN PART for the reasons set forth herein. Signed by Judge Carl Barbier on 9/30/2019. (Reference: All cases)(cg)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF LOUISIANA
SE PROPERTY HOLDINGS, LLC

CIVIL ACTION

VERSUS

No.: 14-mc-1739
c/w 14-2060

UNIFIED RECOVERY GROUP,
LLC, ET AL.

SECTION: “J”(1)
Applies to all cases

ORDER & REASONS
Before the Court are Motions for Summary Judgment filed by the United
States of America (the “IRS”) (Rec. Doc. 145), SE Property Holdings, LLC (“SEPH”)
(Rec. Doc. 146), and JKS-URG Management Co., LLC (“JKS”) (Rec. Doc. 151), as
well as various responses. Having considered the motions and legal memoranda, the
record, and the applicable law, the Court finds that JKS’s motion should be DENIED,
SEPH’s motion should be DENIED, and the IRS’s motion should be GRANTED IN
PART for the reasons set forth herein.
FACTS AND PROCEDURAL BACKGROUND
The facts of this case are set forth more fully in the Court’s initial opinion. See
SE Prop. Holdings, LLC v. Unified Recovery Grp., LLC, 357 F. Supp. 3d 537, 541-43
(E.D. La. Nov. 30, 2018). The central dispute here concerns whose interest has
priority to funds pertaining to certain accounts receivables that were generated from
work performed in the aftermath of Hurricanes Katrina and Isaac.

St. Bernard Parish contracted with Unified Recovery Group, LLC (“URG”) to
remove debris following Katrina (the “Katrina Contract”) and again after Isaac (the
“Isaac Contract”). URG completed all of the debris removal by the end of 2012.
On August 29, 2008, URG entered into two sets of transactions. One set,
involving SEPH,1 allowed URG to obtain revolving loans from SEPH and granted
SEPH a security interest in, inter alia, “all of [URG’s] accounts of any kind . . .
whether now existing or hereafter arising.”2 SEPH filed a corresponding financing
statement into the UCC registry of Louisiana on August 29, 2008, and has since filed
routine continuation statements through August 1, 2018.3
The second set of transactions restructured URG to effect a buyout of two of its
members and created a new organization, JKS.4 URG and JKS entered into a
“Contribution Agreement” in which URG transferred its interest in “[a]ll accounts
receivable of [URG] . . . billed on or before” August 29, 2008, to JKS.5 JKS
acknowledges that no document was ever filed in the public registry or record of any
state giving notice of this transfer.6
SEPH made its first advance to URG on September 2, 2008. URG did not repay
the loans and, in 2013, SEPH obtained a money judgment against URG for more than

Technically, URG transacted with Vision Bank, but SEPH is Vision Bank’s successor-in-interest due
to a 2012 merger. The Court follows the parties’ practice of using “SEPH” to refer to both.
2 (Rec. Doc. 151-9, at 4).
3 (Rec. Doc. 106-3, at 4-5).
4 Two related entities bearing the name JKS-URG have attempted to intervene in this case: JKS-URG,
LLC and JKS-URG Management Co., LLC. The Court refers to these entities collectively as “JKS” for
the sake of simplicity.
5 (Rec. Doc. 151-6, at 2).
6 (Rec. Doc. 151-1, at 6).
1

2

$20,000,000.7 Before that judgment issued, the IRS filed a notice of tax lien on
January 29, 2013, with the East Baton Rouge Clerk of Court claiming unpaid federal
taxes with interest.8
St. Bernard Parish filed this interpleader action in 2014 for the Court to
determine who had priority to $610,081.45 in FEMA funds distributed to the parish
to pay for the debris removal. The IRS intervened, claiming it is entitled to
$311,170.45 as of March 31, 2019, plus interest until paid and costs.9
In its prior order, the Court determined that SEPH’s security interest in the
Katrina Contract receivables had priority over the IRS’s lien but could not determine
priority as to the Issac Contract funds based on the evidence submitted by the parties.
SE Prop. Holdings, 357 F. Supp. 3d at 551-53. However, because Invoice No. 80157410
under the Katrina Contract had been billed before URG and JKS entered into the
Contribution Agreement, the Court allowed JKS to intervene and argue its
entitlement to the funds traceable to that invoice. Id. at 550.
Accordingly, the Court granted partial summary judgment in favor of SEPH
as to funds traceable to the Katrina contracts, excepting Invoice No. 801574, and
ordered SEPH and the IRS to file new motions for summary judgment pertaining to
the Isaac Contract invoices. Id. at 554. The parties’ motions for summary judgment
are now before the Court on the briefs and without oral argument.

SE Prop. Holdings, LLC v. Unified Recovery Grp., LLC, No. 3:12-cv-231-JJB, 2013 WL 1385398 (M.D.
La. Apr. 3, 2013).
8 (Rec. Doc. 145-6, at 63).
9 (Rec. Doc. 145-1, at 2).
10 The remaining invoices under the Katrina Contract were billed after the date of the Contribution
Agreement. (Rec. Doc. 115-1, at 13-14).
7

3

PARTIES’ ARGUMENTS
I.

INVOICE NO. 801574
JKS first contends that the provisions of UCC Article 9 (LA. R.S. § 10:9-101 et

seq., hereinafter “Chapter 9”) do not apply to Invoice No. 801574 because JKS
acquired the account either “as part of a sale of the business out of which [the account]
arose” or as “an assignment of accounts . . . for the purpose of collection only,” invoking
the exceptions under Louisiana Revised Statute § 10:9-109(d)(4)–(5). Next, JKS
asserts that if Chapter 9 applies, SEPH, as successor in interest to Vision Bank, is
estopped from asserting an interest in the account because Vision Bank recognized
that it did not have an interest in the JKS receivables. JKS maintains that URG
lacked authority to incur the $10,000,000 of indebtedness from the promissory note
prior to executing the Contribution Agreement because doing so would have been
outside the ordinary course of business and there is no evidence that a majority of
URG’s members voted to do so. Finally, JKS argues it was not a “buyer” within the
meaning of Chapter 9 for purposes of the Contribution Agreement.
SEPH opposes JKS’s motion, arguing first that the exceptions JKS asserts do
not apply because those provisions only pertain to situations “that, ‘by their nature,
do not concern commercial financing transactions.’”11 SEPH avers that JKS has failed
to demonstrate that equitable estoppel applies, as JKS cites no authority for this
argument, and further contends that the language of the Security Agreement is
unambiguous, such that looking to extrinsic evidence of Vision Bank’s knowledge

11

(Rec. Doc. 157, at 4) (quoting LA. R.S. § 10:9-109, UCC cmt. 12).
4

violates the parol evidence rule and Louisiana principles of contract interpretation.
Finally, SEPH notes that JKS’s argument that it was not a “buyer” is inconsistent
with its position that the transaction was a sale of accounts and again misinterprets
the scope of Chapter 9.
The IRS does not oppose JKS’s motion.12 In its reply, JKS focuses only on its
argument that Chapter 9 does not apply because the transaction was a sale of
accounts as part of a sale of the business out of which the accounts arose.
II.

THE ISAAC CONTRACT
SEPH first argues, contrary to the Court’s prior order,13 that documentation

was not required as part of URG’s performance under the Isaac Contract because St.
Bernard Parish retained its own representative, Witt O’Brien (“WO”), to document
URG’s debris removal activities, as evidenced in a newly-submitted declaration by
one of the parish’s representatives.14 But assuming that a documentation
requirement existed, SEPH contends that URG fulfilled the requirement on the day
it surrendered its invoices and the documentation prepared by WO to the parish for
payment, which means that SEPH has priority for six of the seven Isaac Contract
invoices, totaling $226,724.03. Finally, SEPH disputes that approval of URG’s
documentation by St. Bernard was required for URG to complete performance, but
maintains that if it was, SEPH has priority as to the IRS’s second notice of tax lien.

(Rec. Doc. 156).
“[T]he Court finds that in order to achieve performance under the Isaac Contract, URG was required
to provide documentation.” (Rec. Doc. 135, at 22).
14 (Rec. Doc. 146-27).
12
13

5

The IRS contends that URG’s performance was not completed until January
20, 2016, the date on which the payment recommendations for the URG invoices were
submitted to St. Bernard Parish by Barowka & Bonura Engineers & Consultants,
LLC (“BBEC”), a consultant retained by the parish to help “resolve certain problems
that were preventing it from obtaining FEMA reimbursements for the URG
Invoices.”15 Although the parish had first approved the URG invoices on March 3,
2014, and submitted its reimbursement request based on those invoices to FEMA on
March 17, 2014, the IRS asserts that this approval was ineffective because the parish
later revoked it after learning that the payment recommendations for these invoices
were “materially deficient” and retained BBEC in February 2015 to resolve the
problems preventing the parish from obtaining reimbursements from FEMA.16 Thus,
because approval came after March 16, 2013 (the 46th day after the IRS filed its
notice of tax lien), the IRS’s interest takes priority over SEPH’s.
LEGAL STANDARD
Summary judgment is appropriate when “‘the pleadings, the discovery and
disclosure materials on file, and any affidavits show that there is no genuine issue as
to any material fact and that the movant is entitled to judgment as a matter of law.’”
Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986) (quoting FED. R. CIV. P. 56(c)); Little
v. Liquid Air Corp., 37 F.3d 1069, 1075 (5th Cir. 1994). When assessing whether a
dispute as to any material fact exists, a court considers “all of the evidence in the
record but refrains from making credibility determinations or weighing the evidence.”

15
16

(Rec. Doc. 154-1, at 11-12).
Id. at 19.
6

Delta & Pine Land Co. v. Nationwide Agribusiness Ins. Co., 530 F.3d 395, 398 (5th
Cir. 2008). All reasonable inferences are drawn in favor of the nonmoving party, but
a party cannot defeat summary judgment with conclusory allegations or
unsubstantiated assertions. Little, 37 F.3d at 1075. A court ultimately must be
satisfied that “a reasonable jury could not return a verdict for the nonmoving party.”
Delta, 530 F.3d at 399.
If the dispositive issue is one for which the moving party will bear the burden
of proof at trial, the moving party “must come forward with evidence which would
‘entitle it to a directed verdict if the evidence went uncontroverted at trial.’” Int'l
Shortstop, Inc. v. Rally’s, Inc., 939 F.2d 1257, 1264-65 (5th Cir. 1991). The nonmoving
party can then defeat the motion by either countering with sufficient evidence of its
own, or “showing that the moving party’s evidence is so sheer that it may not
persuade the reasonable fact-finder to return a verdict in favor of the moving party.”
Id. at 1265.
If the dispositive issue is one for which the nonmoving party will bear the
burden of proof at trial, the moving party may satisfy its burden by merely pointing
out that the evidence in the record is insufficient with respect to an essential element
of the nonmoving party’s claim. See Celotex, 477 U.S. at 325. The burden then shifts
to the nonmoving party, who must, by submitting or referring to evidence, set out
specific facts showing that a genuine issue exists. See id. at 324. The nonmovant may
not rest upon the pleadings but must identify specific facts that establish a genuine
issue at trial. See id. at 325; Little, 37 F.3d at 1075.

7

When examining matters of state law, the Court will employ the principles of
interpretation used by the state’s highest court. Am. Int’l Specialty Lines Ins. Co. v.
Rentech Steel LLC, 620 F.3d 558, 564 (5th Cir. 2010). Mindful of Louisiana’s
distinction between primary and secondary sources of law, the Court will begin its
analysis with reliance on the Louisiana Constitution and statutes before looking to
“‘jurisprudence, doctrine, conventional usages, and equity, [which] may guide the
court in reaching a decision in the absence of legislation and custom.’” Shaw
Constructors v. ICF Kaiser Eng’rs, Inc., 395 F.3d 533, 546 (5th Cir. 2004) (quoting LA.
CIV. CODE art. 1 rev. cmt. b). If the Court must make an “Erie guess” on an issue of
Louisiana law, the Court will decide the issue the way that it believes the Supreme
Court of Louisiana would decide it. Id. The Court is not strictly bound by the decisions
of the state intermediate courts and will disregard them if the Court is “convinced
that the Louisiana Supreme Court would decide otherwise.” In re Katrina Canal
Breaches Litig., 496 F.3d 191, 206 (5th Cir. 2007).
DISCUSSION
Following the Court’s prior grant of summary judgment, two issues remain: (1)
whether SEPH or JKS is entitled to the funds traceable to Invoice No. 801574; and
(2) whether URG completed performance under the Isaac Contract before the 45-day
state-lien grace period for the IRS’s tax lien expired on March 16, 2013.
I.

INVOICE NO. 801574
The Court must first consider JKS’s argument that Chapter 9 does not apply

to the Contribution Agreement. If the Court finds that it does, then the Court must

8

consider JKS’s remaining arguments that SEPH is precluded from asserting its
interest in the Invoice No. 801574 funds.
A.

Whether Chapter 9 Applies
Generally, Chapter 9 applies to “a sale of accounts.” LA. R.S. § 10:9-109(a)(3).

However, it does not apply to either “a sale of accounts . . . as part of a sale of the
business out of which they arose” or “an assignment of accounts . . . for the purpose
of collection only.” § 10:9-109(d)(4)–(5). The purpose of these provisions is to “exclude
. . . certain sales and assignments of receivables that, by their nature, do not concern
commercial financing transactions.” § 10:9-109, UCC cmt. 12. The Court concludes
that neither exception applies in the instant case.
First, the Court finds that the Contribution Agreement was not a “sale of the
business” under § 10:9-109(d)(4). The Contribution Agreement states that it was
made between URG and JKS.17 Its purpose was to “transfer and convey to [JKS] all
of [URG’s] right, title and interest in and to certain assets” and for JKS to “assume
certain liabilities” from URG.18 It goes on to define the assets to be conveyed to JKS,
the liabilities JKS would assume, and the assets and liabilities to be retained by URG,
which included “[a]ll obligations and liabilities arising solely out of the operation by
[URG] of its business from and after the Effective Date.”19 Further, the language of
the Purchase and Sale Agreement describes the Contribution Agreement as a distinct
transaction: “[I]mmediately prior to the closing of the transactions contemplated by

(Rec. Doc. 151-6, at 1).
Id.
19 Id. at 1-3.
17
18

9

this Agreement, certain assets and liabilities of [URG] will be assigned, transferred,
and conveyed by [URG] to [JKS].”20 Clearly, then, while the Contribution Agreement
could be considered a sale of accounts, it was not “a sale of the business out of which
[the accounts] arose.” § 10:9-109(d)(4).
Quite tellingly, JKS acknowledges in its reply brief “that something less than
URG’s entire business was sold.”21 Its assertion that the exception applies when “the
account arises ‘as part of a sale’”22 is almost entirely divorced from the language of
the statute, which requires that the accounts be sold “as part of a sale of the business
out of which they arose.” Id. (emphasis added). While the accounts arose out of the
operation of URG, the Contribution Agreement did not effect a sale of URG. Thus,
the exception in § 10:9-109(d)(4) does not apply. Cf. In re Biloxi Prestress Concrete,
Inc., 98 F.3d 204, 208 (5th Cir. 1996) (construing UCC Article 9 exception narrowly
to exempt only “the singular transaction” that met the statutory criteria).
The Court also finds that the Contribution Agreement was not “for the purpose
of collection only.” § 10:9-109(d)(5). “This exception generally applies when accounts
are assigned to a collection agency for collection.” Texas Dev. Co. v. Exxon Mobil Corp.,
119 S.W.3d 875, 883 (Tex. App. 2003) (interpreting Texas version of Chapter 9). An
assignment is “for collection only” where it allows an assignee to “br[ing] suit to collect
money owed to [its] assignors” and the assignee “promised to turn over to those

(Rec. Doc. 151-11, at 1). The Purchase and Sale Agreement labels the transactions underlying the
Contribution Agreement “the ‘Spin-Off.’” Id. A spin-off is “[a] corporate divestiture in which a division
of a corporation becomes an independent company and stock of the new company is distributed to the
corporation’s shareholders.” Spin-off, BLACK’S LAW DICTIONARY (11th ed. 2019).
21 (Rec. Doc. 163, at 4).
22 Id. (quoting § 10:9-109(d)(4)).
20

10

assignors the proceeds secured through litigation.” Sprint Commc’ns Co. v. APCC
Servs., Inc., 554 U.S. 269, 280 (2008). This is plainly not the case here, as the
Contribution Agreement assigned to JKS “all of [URG’s] right, title and interest in
and to the Contributed Assets.”23
The present situation can be distinguished from In re Biloxi Prestress Concrete,
Inc., where the Fifth Circuit held this exception under Mississippi’s version of the
UCC applied to an assignment of accounts receivable from an unsecured creditor to
a secured creditor of the same debtor. 98 F.3d at 208. In that case, title to the accounts
had not passed to the secured creditor, the unsecured creditor continued to claim the
accounts as its property, and the assignment was not made for payment or to secure
another transaction between the creditors—rather, the secured creditor admitted it
was acting as the collection agent for the unsecured creditor. Id. at 206. Here, by
contrast, the Contribution Agreement purported to vest all title in the account to JKS
and effected a restructuring of URG.
The Court finds additional support for its conclusion that Chapter 9 governs
here in the UCC’s mandate that it “shall be liberally construed and applied.” LA. R.S.
§ 10:1-103(a); see Coastal Agric. Supply, Inc. v. JP Morgan Chase Bank, N.A., 759
F.3d 498, 506 (5th Cir. 2014). Therefore, the Court holds that Chapter 9 applies to
the Contribution Agreement.
B.

23

JKS’s Remaining Arguments

(Rec. Doc. 151-6, at 1).
11

JKS next argues that SEPH is estopped from asserting its interest in the
Invoice No. 801574 funds because Vision Bank, SEPH’s predecessor in interest, had
actual knowledge of the transfer of the account to JKS. In opposition, SEPH
maintains that JKS fails to cite any authority supporting its estoppel argument and
that none of the elements of estoppel are met here. The Court finds that JKS has
failed to carry its burden of showing that equitable estoppel applies. See Luther v.
IOM Co., 2013-0353, p. 11 (La. 10/15/13); 130 So. 3d 817, 825 (“Estoppels are not
favored in [Louisiana] law; therefore, a party cannot avail himself of that doctrine if
he fails to prove all essential elements of the plea.”). Moreover, JKS’s argument is
contrary to Louisiana law: “‘The Louisiana rule is that actual knowledge by third
parties of an unrecorded interest is immaterial; proper filing alone is dispositive.’”
First Nat’l Bank of Picayune v. Pearl River Fabricators, Inc., 2006-2195, p. 22 (La.
11/16/07); 971 So. 2d 302, 316 (quoting LA. R.S. § 10:9-317 cmt. a.).
Finally, as to JKS’s contention that it was not a “buyer” for purposes of § 109:318, the Court flatly disagrees. Title 10 defines “purchase”24 broadly to include
“taking by sale . . . or any other voluntary transaction creating an interest in
property.” LA. R.S. § 10:1-201(b)(29). A “purchaser,” naturally, is one who “takes by
purchase.” § 10:1-201(b)(30). And “a person gives value for rights if the person
acquires them . . . in return for any consideration sufficient to support a simple
contract.” LA. R.S. § 10:1-204(4).

“Purchase” is the more formal version of “buy,” but otherwise the words are synonyms. BRYAN A.
GARNER, THE OXFORD DICTIONARY OF AMERICAN USAGE AND STYLE 51 (2000).
24

12

The Contribution Agreement gave JKS a property interest in the Contributed
Assets “[f]or and in consideration for the assumption of certain liabilities by” JKS. 25
Plainly, JKS should be considered a buyer under this agreement.
In sum, this situation is exactly one that the priority rules were developed to
address, and JKS cannot now escape the reach of Chapter 9. “The policy, which has
prevailed in Louisiana, is to deny the benefits of security to a creditor who does not
take the steps the law declares are necessary to give publicity to his interest.” Tetra
Applied Techs., Inc. v. H.O.E., Inc., 2003-1523, p. 9 (La. App. 3 Cir. 5/26/04); 878 So.
2d 708, 714. Because JKS failed to perfect its interest in the URG receivables, URG
“is deemed to have rights and title to the account . . . identical to those [it] sold” at
the time it entered the Security Agreement with SEPH, and SEPH’s security interest,
perfected on September 2, 2008, takes priority over JKS’s unperfected interest. § 109:318(b) & UCC cmt. 3. The Court concludes that judgment should be entered in favor
of SEPH as to Invoice No. 801574.
II.

THE ISAAC CONTRACT
The Court will first address when URG completed performance under the Isaac

Contract. If URG completed performance before March 16, 2013, then its right to
payment became “choate” at that time such that SEPH’s security interest has priority
over the IRS’s tax liens. SE Prop. Holdings, 357 F. Supp. 3d at 553. The Court will
then consider the IRS’s new argument regarding the amount of funds traceable to the
Isaac Contract.

25

(Rec. Doc. 151-6, at 1).
13

A.

When URG Completed Performance
In its prior order, the Court held:
URG had a contractual responsibility not merely to provide invoices for
the work it completed but also to “[a]ssist in preparation of
documentation for claims submitted for reimbursement of [URG’s]
activities under this agreement.” This obligation did not persist until
FEMA actually gave final approval but it at least continued until the
parish received the evidence that it needed to seek reimbursement from
FEMA—regardless of when and if FEMA approved reimbursement.
Therefore, the Court believes that URG fulfilled its obligations under
the Isaac Contract, at the latest, when URG provided documentation—
be it an invoice or other evidence—of its debris removal work and the
parish or the parish’s representative gave its approval of this
documentation. . . . Although other events could possibly mark an end
to performance, the Court believes that parish approval of an invoice is
the event that best evidences URG’s resolution of its responsibilities.
Accordingly, if an invoice was approved before March 16, 2013, then
SEPH is entitled to priority as to funds traceable to that invoice.26

The Court then directed the parties to submit new motions for summary judgment
“briefing the issue of when the parish approved contested Isaac Contract invoices.”27
SEPH’s first argument, that URG was not required to provide documentation
to the parish because the parish had retained its own representative to do so, is easily
refuted by the language of the contract:
Documentation and Inspections: All debris removal operations and all
debris shall be subject to inspection and monitoring by the [parish]. [The
parish] may engage a third party to undertake monitoring and
inspection for [the parish]. . . . [URG] and the [parish] shall have in place
at the DMS each’s own personnel to verify and maintain records
regarding the contents and cubic yards of the vehicles entering and
leaving the DMS(s).28

(Rec. Doc. 135, at 24) (first alteration in original) (footnote omitted).
Id. at 26.
28 (Rec. Doc. 145-9, at 6) (emphasis added).
26
27

14

Thus, the parish retaining WO to monitor debris removal and maintain records did
not relieve URG of its own responsibility to do so.
SEPH next contends that URG completed performance when it provided its
records to the parish and WO because WO was responsible for approving URG’s
invoices. Therefore, SEPH claims it has priority to six of the seven Isaac Contract
invoices, based on the date of those invoices.
Not only does SEPH fail to offer any evidence of when these invoices were
actually provided to the parish or its representative, as the IRS points out, but this
argument also fails to address the approval requirement as explained in the Court’s
earlier opinion. While the Court’s opinion leaves open the possibility that a different
event could indicate URG’s completion of performance, SEPH fails to identify any
language in the Isaac Contract supporting its proffered interpretation.
The evidence reflects that WO transmitted to the parish its payment
recommendation for six of the seven invoices on March 18, 2013, and its payment
recommendation for the final invoice on April 24, 2013.29 The Department of Public
Works then approved all of these invoices on March 3, 2014.30 While the IRS contends
that this approval date should not be considered the date URG completed
performance because these approvals were later revoked, the Court need not consider
this argument because in either case the approval date comes after the effective date
of the IRS’s tax liens. Accordingly, the Court holds that the IRS’s tax liens have

29
30

(Rec. Doc. 145-10, at 2).
Id.
15

priority over SEPH’s interest in the URG receivables under the Isaac Contract, which
came into existence, at the earliest, on March 3, 2014.
B.

Funds Traceable to the Isaac Contract
To date, four deposits have been made to the Court’s registry in this matter:

(1) $227,075.00, traceable to Invoice No. 801574 under the Katrina Contract; 31 (2)
$279,205.21, traceable to the Isaac Contract invoices;32 (3) $36,204.09, traceable to
two invoices under the Katrina Contract;33 and (4) $67,597.15, traceable to four
invoices under the Katrina Contract.34 In total, $330,876.24 is traceable to the
Katrina Contract and $279,205.21 is traceable to the Isaac Contract.
However, in a clever attempt to circumvent the Court’s ruling that SEPH has
priority over the IRS as to funds traceable to the Katrina Contract, the IRS now
asserts that $366,547 of the interpleaded funds should be attributed to the Isaac
Contract. The IRS reasons that because St. Bernard Parish used some of the funds it
received in reimbursement from FEMA for the Isaac Contract to pay subcontractors
of URG for work performed pursuant to the Katrina Contract, those amounts, totaling
$87,342, should be deducted from the funds in the Court’s registry attributable to the
Katrina Contract and instead be attributed to the Isaac Contract.
“An obligor who owes several debts to an obligee has the right to impute
payment to the debt he intends to pay.” LA. CIV. CODE art. 1864. The evidence clearly
shows that the parish intended to pay debts related to the Isaac Contract invoice with

(Rec. Doc. 21; Rec. Doc. 115-1, at 13).
(Rec. Doc. 74; Rec. Doc. 115-1, at 14).
33 (Rec. Doc. 111; Rec. Doc. 115-1, at 14).
34 (Rec. Doc. 111; Rec. Doc. 115-1, at 14).
31
32

16

the deposit of $279,205.21 to the Court.35 However, the IRS has not presented any
evidence to show that the parish intended to satisfy any Isaac Contract debts with
any of the other deposits; to the contrary, its prior response to SEPH’s statement of
uncontested facts clearly shows that it believed the remaining funds were traceable
to the Katrina Contract.36 To the extent that the IRS now attempts to assert
otherwise, the Court finds that it is judicially estopped from doing so. See In re
Coastal Plains, Inc., 179 F.3d 197, 205 (5th Cir. 1999) (“[A] party who has assumed
one position in his pleadings may be estopped from assuming an inconsistent
position.”).
CONCLUSION
In conclusion, the Court holds that (1) SEPH is entitled to the funds traceable
to Invoice No. 801574, and (2) the IRS’s tax liens have priority over SEPH’s security
interest in the Isaac Contract receivables. Accordingly,
IT IS HEREBY ORDERED that JKS’s Motion for Summary Judgment (Rec.
Doc. 151) is DENIED and SEPH is AWARDED $227,075.00, the funds traceable to
Invoice No. 801574 under the Katrina Contract.
IT IS FURTHER ORDERED that SEPH’s Motion for Summary Judgment
(Rec. Doc. 146) is DENIED and the IRS’s Motion for Summary Judgment (Rec.
Doc. 145) is GRANTED IN PART. The IRS is AWARDED $279,205.21, the funds
traceable to the Isaac Contract. The IRS’s motion is DENIED to the extent it seeks
a greater award.

35
36

(Rec. Doc. 152-30, at 1).
(Rec. Doc. 115-1, at 13-14).
17

IT IS FURTHER ORDERED that SEPH is AWARDED $103,801.24, the
remaining funds traceable to the Katrina Contract.
New Orleans, Louisiana this 30th day of September, 2019.

CARL J. BARBIER
UNITED STATES DISTRICT JUDGE

18