Benson v. Rosenthal
Filing
266
ORDER AND REASONS denying 238 Motion for Partial Summary Judgment. Signed by Judge Jane Triche Milazzo. (ecm)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF LOUISIANA
THOMAS BENSON
CIVIL ACTION
VERSUS
NO: 15-782
ROBERT ROSENTHAL ET AL.
SECTION: “H”(2)
ORDER AND REASONS
Before the Court is Defendant Mary Rowe’s Motion for Partial Summary
Judgment (Doc. 238). For the following reasons, the motion is denied.
BACKGROUND
This is an action for declaratory judgment. Plaintiff Thomas Benson,
appearing as grantor of several trusts, asks this Court to declare that his
attempt to exchange certain assets held by those trusts for other assets of
equivalent value was effective. Over the course of several years, Plaintiff
established various trusts for the benefit of his daughter, Renee Benson, and
two grandchildren, Rita Benson LeBlanc and Ryan LeBlanc. Plaintiff created
three trusts in 2009 (the “2009 Trusts”), three trusts in 2012 (the “2012
Trusts”), a Grantor Retained Annuity Trust in 2012 (“2012 GRAT Trust”), and
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a Grantor Retained Annuity Trust in 2014 (“2014 GRAT Trust”). 1
Notwithstanding the dispute at issue, these trusts hold ownership interests in
various entities that in turn own valuable property, including the New Orleans
Saints and Pelicans franchises, the New Orleans Fox television affiliate,
automobile dealerships, and the Benson Tower and Champions Square
development. 2 Plaintiff asked Defendant Robert Rosenthal to serve as trustee
of these trusts. In 2015, Rosenthal resigned as trustee of the 2012 trusts and
appointed Defendant Mary Rowe in his place.
The aforementioned trust documents provide Plaintiff with the power to
reacquire or exchange property of the trust with property of equivalent value
without the approval of the trustee. In January of 2015, Plaintiff exercised
this power and sent correspondence to Defendant Rosenthal, stating his
intention to exchange the trust assets for promissory notes of equivalent value.
This correspondence was sent to Rosenthal on January 12, 2015 but intended
to make the exchange effective as of January 1, 2015. With the January 12
correspondence, Plaintiff included a preliminary schedule of values of the trust
assets, a Notice of Exchange of trust assets, and blank promissory notes
containing valuation adjustment clauses that would operate to adjust the notes
automatically to a later-determined appraised value.
The transfer also
included certain real estate and the forgiveness of nearly $100 million of
indebtedness owed to Plaintiff by some of the trusts.
Rosenthal refused to execute the documents required to complete the
exchange, stating that such an exchange requires a simultaneous transfer of
The trusts are the Renee Benson 2009 Irrevocable Trust, the Rita Benson LeBlanc
2009 Irrevocable Trust, the Ryan LeBlanc 2009 Irrevocable Trust, the Renee Benson 2012
Irrevocable Trust, the Rita Benson LeBlanc 2012 Irrevocable Trust, the Ryan LeBlanc 2012
Irrevocable Trust, the Tom Benson 2012 Grantor Retained Annuity Trust, and the Tom
Benson 2012 Grantor Retained Annuity Trust.
2 The parties dispute the effectiveness of the exchange attempted by Plaintiff and
whether the trusts at issue still own the assets affected by the exchange.
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property.
He also stated that an unsecured promissory note is “not an
appropriate trust investment” and that he must “make his own independent
verification that the assets to be exchanged are of equivalent value [with the
trust assets]” before the exchange could occur. 3
On January 24, 2015, Plaintiff supplemented his exchange request with
additional documents, including certifications of the values of each trust signed
by Plaintiff, collateral assignments granting the trusts security interests, and
seven promissory notes for values based on the most recent valuations
available.
These promissory notes also contained valuation adjustment
clauses. Plaintiff’s supplements failed to assuage Rosenthal’s concerns, and he
again rejected the exchange, stating that there had “not yet been an exchange
of assets of equivalent value.” 4
On August 24, 2015, after filing this suit, Plaintiff again supplemented
the Notice of Exchange in accordance with the valuation adjustment clauses
included in the promissory notes (“August 2015 Notes”). Based on an updated
valuation of the trust assets, Plaintiff delivered to Defendants thirteen new
promissory notes of specific values and collateral assignments securing each of
those notes. Defendants again rejected Plaintiff’s exchange. 5
On October 13, 2015, Defendants Rowe and Rosenthal filed Motions for
Judgment on the Pleadings, asking this Court to dismiss Plaintiff’s action on
several grounds. They argued that (1) Plaintiff’s attempted substitution was,
in fact, a request for a loan, which the trustee had the discretion to deny, or
alternatively that (2) Plaintiff’s purported substitution did not occur on
January 1, 2015 but occurred, at the earliest, on August 24, 2015, if Plaintiff
could prove that he exchanged property of equivalent value. As to the first
Doc. 1-47.
Doc. 1-48.
5 Docs. 48-4, 48-5.
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argument, this Court held that the determination that a transaction is a loan
is a finding of fact and such a finding was premature at that stage. As to the
second issue, the Court ruled that the trust instruments grant Plaintiff the
unilateral power to substitute assets, and that while the trustee must ensure
equivalent value, he does not have the power to prevent such an exchange. The
Court also held that Plaintiff complied with all of the requirements of the
trusts to effect a substitution on January 24, 2015.
On September 8, 2016, Plaintiff delivered promissory notes to the
trustees that were reformed to accommodate modifications requested by the
National Football League (“NFL”) (“September 2016 Notes”). Specifically, the
new notes are non-recourse, and bear a higher interest rate and shorter term.
The notes are of equivalent value to the August 2015 Notes. On September 9,
2016, Plaintiff amended his Complaint to address these reformed notes.
In light of the September 2016 Notes and the amended complaint,
Defendant Rowe has moved this Court for partial summary judgment,
rehashing old arguments and raising issues already addressed by this Court.
This Court will address her arguments in turn.
LEGAL STANDARD
Summary judgment is appropriate “if the pleadings, depositions,
answers to interrogatories, and admissions on file, together with affidavits, if
any, show that there is no genuine issue as to any material fact and that the
moving party is entitled to a judgment as a matter of law.” 6 A genuine issue
of fact exists only “if the evidence is such that a reasonable jury could return a
verdict for the nonmoving party.” 7
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Fed. R. Civ. P. 56(c) (2012).
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986).
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In determining whether the movant is entitled to summary judgment,
the Court views facts in the light most favorable to the non-movant and draws
all reasonable inferences in his favor. 8 “If the moving party meets the initial
burden of showing that there is no genuine issue of material fact, the burden
shifts to the non-moving party to produce evidence or designate specific facts
showing the existence of a genuine issue for trial.” 9 Summary judgment is
appropriate if the non-movant “fails to make a showing sufficient to establish
the existence of an element essential to that party’s case.” 10 “In response to a
properly supported motion for summary judgment, the non-movant must
identify specific evidence in the record and articulate the manner in which that
evidence supports that party’s claim, and such evidence must be sufficient to
sustain a finding in favor of the non-movant on all issues as to which the nonmovant would bear the burden of proof at trial.” 11 “We do not . . . in the absence
of any proof, assume that the nonmoving party could or would prove the
necessary facts.” 12 Additionally, “[t]he mere argued existence of a factual
dispute will not defeat an otherwise properly supported motion.” 13
LAW AND ANALYSIS
In her motion, Defendant Rowe asks this Court to find that the
September 2016 Notes are a request for a loan or, alternatively, that
September 8, 2016 should be the date of valuation for the requested exchange.
Coleman v. Houston Indep. Sch. Dist., 113 F.3d 528, 532 (5th Cir. 1997).
Engstrom v. First Nat’l Bank of Eagle Lake, 47 F.3d 1459, 1462 (5th Cir. 1995).
10 Celotex Corp. v. Catrett, 477 U.S. 317, 324 (1986).
11 John v. Deep E. Tex. Reg. Narcotics Trafficking Task Force, 379 F.3d 293, 301 (5th
Cir. 2004) (internal citations omitted).
12 Badon v. R J R Nabisco, Inc., 224 F.3d 382, 394 (5th Cir. 2000) (quoting Little v.
Liquid Air Corp., 37 F.3d 1069, 1075 (5th Cir. 1994)).
13 Boudreaux v. Banctec, Inc., 366 F. Supp. 2d 425, 430 (E.D. La. 2005).
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Despite having already addressed both of these issues in its prior order, this
Court will again entertain Defendant’s arguments.
A. September 2016 Notes as Loans
In reasserting that Plaintiff’s transaction is a request for a loan rather
than a substitution, Defendant does not raise any new arguments or point to
any new facts that would change this Court’s prior holding. Indeed, Defendant
merely adopts and incorporates her prior Motion for Judgment on the
Pleadings. Accordingly, this Court will likewise adopt its prior Order and
Reasons denying Defendant’s Motion for Judgment on the Pleadings on this
issue. 14
B. September 8 as Valuation Date
Next, Defendant argues that September 8, 2016 is the earliest date upon
which Plaintiff could effectuate the transfer and is therefore the earliest date
from which the trust assets can be valued. Defendant has based this argument
on her belief that the August 2015 Notes are subject to a suspensive condition
of NFL approval. Defendant argues that because the NFL has indicated that
it will not approve the August 2015 Notes for use in the exchange, then the
condition has failed and the obligations under the notes do not exist.
It is undisputed that the parties have understood throughout this
litigation that the NFL would be required to approve of any transfer or
encumbrance proposed by Plaintiff’s exchange of assets. Defendant argues
that the August 2015 Notes were therefore conditioned on this approval.
Specifically, Defendant argues that the notes were subject to a suspensive
condition. Under Louisiana law, a suspensive condition is a provision of a
contract by which “[t]he right to enforce the obligation does not arise until the
fulfillment of the suspensive condition, and the obligation may not be enforced
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Doc. 161.
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until the condition is met.” 15 Defendant argues that the August 2015 Notes
were conditioned on the approval of the NFL and that the NFL has indicated
that they will not approve of the use of the August 2015 Notes in the exchange.
Defendant argues that, therefore, the suspensive condition of approval never
occurred and thus the August 2015 Notes will never ripen into enforceable
obligations.
Defendant argues that because these notes are of no effect,
Plaintiff may not rely on those notes to obtain a valuation date of January 24,
2015. Instead, Defendant argues, the valuation date must be September 8,
2016—the date on which Plaintiff delivered new notes to the trustees.
The Court rejects this argument for several reasons. First, as Plaintiff
points out, the NFL has not rejected the August 2015 Notes. Indeed, the NFL
merely advised that the notes needed to be reformed in order to comply with
NFL rules. Accordingly, it is a stretch to say that the notes were rejected
thereby causing the condition to fail.
Second, this Court is not convinced that a suspensive condition even
exists in the August 2015 Notes. Defendant does not identify any provision of
the notes creating a suspensive condition. Instead, she merely argues that
Plaintiff has recognized that the NFL would have to approve his proposed
transaction. That may be so, but Louisiana courts have held that a court
should find that an obligation is subject to a suspensive condition “only when
the express language of the contract ‘compels’ such a construction.” 16
In
addition, “contractual provisions are construed as not to be suspensive
conditions whenever possible.” 17 Only a provision of the collateral assignments
delivered with the August 2015 Notes could support Defendant’s argument. It
states, “In the event of any conflict or inconsistency between the terms of the
Murry v. Murphy, 970 So. 2d 700, 702 (La. App. 3 Cir. 2007).
Mumblow v. Monroe Broad., Inc., 401 F.3d 616, 622 (5th Cir. 2005).
17 S. States Masonry, Inc. v. J.A. Jones Const. Co., 507 So. 2d 198, 201 (La. 1987).
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NFL Rules and the terms of the Note, this Agreement or the Notice, the terms
of the NFL rules control.” 18 This Court holds that this language does not
clearly create a suspensive condition of NFL approval. The language does not
say that if the terms of the note conflict with the NFL rules then the obligation
shall not exist. Rather, it indicates which rules shall apply in the event that
the notes conflict with the NFL rules. Necessarily then, the obligation will
continue to exist but be subject to new rules. In actuality, this provision
supports Plaintiff’s decision to reform the notes to comply with NFL rules.
When the language of a contract is clear and unambiguous, the Court need not
look elsewhere to determine the parties’ intent. 19 Accordingly, Defendant has
not carried her burden to show that the August 2015 Notes are subject to a
suspensive condition.
Finally and most compellingly, this Court fails to see how the
reformation of the notes Plaintiff has offered to exchange for trust assets has
any effect on this Court’s prior holding. As discussed above, this Court has
held that if a substitution occurred, it occurred on January 24, 2015 when
Plaintiff offered the trustee notes that he certified to be of equivalent value
with the trust assets that he sought to remove. In making this holding, the
Court looked to the language of the trust agreements and the practical
procedure by which Plaintiff could effect a substitution. This Court held that
Plaintiff had the unilateral right to make an exchange of assets and that the
trustee had the obligation to ensure the exchange was for equivalent value.
The Court specifically noted that this obligation did not entitle the trustee to
stall or delay the exchange. Rather, the exchange was effected when Plaintiff
offered assets that he believed to be of equivalent value. From that point
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Doc. 238-2, p. 21.
S. States Masonry, Inc., 507 So. 2d at 201.
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forward, the trustees’ obligation was to ensure that those assets were indeed
of equivalent value.
It appears to this Court, however, that the trustees have long ago lost
sight of this obligation. At every turn in this litigation, the trustees have
sought to prevent Plaintiff from performing an exchange that this Court has
held that he has an absolute and unilateral right to perform. They have
consistently sought to move the date of valuation from that selected by
Plaintiff. At every opportunity, this Court has asked Defendants to identify
how Plaintiff can practically effect an exchange if the trustees are permitted to
treat the valuation date as a moving target. The Court has been impressed by
the verbal acrobatics that have occurred in avoidance of this question. As this
Court has previously detailed at length, such a holding would permit the
trustees to prevent the exchange ad infinitum, rendering Plaintiff’s right to
make a substitution worthless.
In this the Defendants’ fourth quest to prevent Plaintiff from effecting
an exchange, Defendant Rowe has argued that the failure of a suspensive
condition in the August 2015 Notes means those notes never came into effect
and the September 2016 Notes cannot therefore be said to reform those nonexistent notes.
She argues that the September 2016 Notes are new
instruments offered to the trustee for exchange, and the valuation date should
now be the date upon which these new notes were offered—September 8, 2016.
This Court disagrees with this characterization. Rather, this Court views the
September 2016 Notes as the culmination of Plaintiff’s efforts to provide the
trustees with notes that will appease both the trustees and the NFL and
complete the equivalent value process began by the January 24, 2015
exchange. The September 2016 notes are a forward step in the process to
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resolve an exchange that Plaintiff has the absolute right to effect. Defendants
would be better served by joining in that endeavor. 20
CONCLUSION
For the foregoing reasons, Defendant’s Motion is DENIED.
New Orleans, Louisiana this 10th day of November, 2016.
____________________________________
JANE TRICHE MILAZZO
UNITED STATES DISTRICT JUDGE
Defendants are behooved to consider the value of further discovery regarding the
date of exchange in light of this opinion.
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