Magnolia Financial Group LLC v. Antos et al

Filing 200

ORDER AND REASONS denying 140 Motion for Summary Judgment. Signed by Judge Jane Triche Milazzo. (ecm)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF LOUISIANA
MAGNOLIA FINANCIAL GROUP

CIVIL ACTION

VERSUS

NO: 15-7144

KENNETH ANTOS, ET AL

SECTION “H”

ORDER AND REASONS
Before the Court is a Motion for Summary Judgment filed by Twin
Towers Trading Site Management, LLC; Donald Porges; and Porges and
Eisenberg CPA, LLC (Doc. 140). For the following reasons, this Motion is
DENIED.
BACKGROUND
This is a declaratory judgment action on a promissory note that was
removed from the 29th Judicial District Court for the Parish of St. Charles.
On November 11, 2013, Defendants KCI Investments, LLC (“KCI”), Kenneth
Antos, and David Becklean executed a Secured Promissory Note (the “Note”)
with Plaintiff Magnolia Financial Group, LLC, (“Magnolia”) for the principal
sum of $2,000,000 with an interest rate of 15% per annum. Defendant
Becklean also executed a Pledge and Security Agreement (the “Security

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Agreement”) in favor of Magnolia, wherein he pledged his interest in the
proceeds of a Settlement Agreement dated September 22, 2012 among Twin
Towers Trading Site Management, LLC, Jeffrey Brandon, Eric Scholer,
Becklean, and SMG Group (the “Settlement Agreement”). This pledge was
recorded. Subsequently, on January 13, 2015, Defendants entered into a
second agreement to borrow an additional $100,000 from Magnolia (the
“Second Note”). Plaintiff contends that no principal payments were paid on
the Notes by the maturity dates and that $2,457,805.60 of principal and
interest remains due and owing on the Notes. Plaintiff filed the instant suit
seeking a declaratory judgment recognizing its rights under the Notes and
the Security Agreement.
Plaintiff filed a Motion for Partial Summary Judgment, seeking a
judgment (1) defining the undisputed amount owed on the promissory note,
(2) recognizing its appointment as attorney-in-fact for purposes of carrying
out the pledge, and (3) establishing its right to collect attorneys’ fees at the
termination of the litigation. The Court denied the motion relative to defining
an undisputed amount owed on the promissory note but granted it with
respect to recognizing Plaintiff as attorney-in-fact and establishing Plaintiff’s
right to collect attorneys’ fees at the termination of the litigation.
Following the Court’s ruling on the Motion for Summary Judgment,
Twin Towers intervened in this action and filed an interpleader complaint
relative to a portion of the settlement proceeds. Plaintiff responded, averring
that Twin Towers is not entitled to interpleader relief. Plaintiff also brought
cross claims against, inter alia, Twin Towers, Donald Porges, and Porges &
Eisenberg CPA, LLC (collectively the “Porges Defendants”) for tortious
interference

with

contractual

relations,

fraud,

bad

faith

breach

of

conventional obligation, and negligence. Plaintiff alleges that Porges, acting

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personally and on behalf of the other Porges Defendants, represented to
Plaintiff that Twin Towers would forward payments under the Settlement
Agreement to Plaintiff in the event of Defendants’ default, but later acted to
prevent Plaintiff from obtaining the funds.
On motion from the Porges Defendants, the Court dismissed the claims
for tortious interference with contractual relations. The Porges Defendants
now move for summary judgment on Plaintiff’s remaining cross claims.
Plaintiff responds in opposition.
LEGAL STANDARD
Summary judgment is appropriate if “the record, including depositions,
documents, electronically stored information, affidavits or declarations,
stipulations. . . , admissions, interrogatory answers, or other materials”
“shows that there is no genuine dispute as to any material fact and the
movant is entitled to judgment as a matter of law.” 1 A genuine issue of fact
exists only “if the evidence is such that a reasonable jury could return a
verdict for the nonmoving party.” 2
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. 3 “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.” 4 Summary
judgment is appropriate if the non-movant “fails to make a showing sufficient

Fed. R. Civ. P. 56 (2012).
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986).
3 Coleman v. Houston Indep. Sch. Dist., 113 F.3d 528, 533 (5th Cir. 1997).
4 Engstrom v. First Nat’l Bank of Eagle Lake, 47 F.3d 1459, 1462 (5th Cir. 1995).
1
2

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to establish the existence of an element essential to that party’s case.” 5 “In
response to a properly supported motion for summary judgment, the
nonmovant 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 nonmovant on
all issues as to which the nonmovant would bear the burden of proof at
trial.” 6 The Court does “not . . . in the absence of any proof, assume that the
nonmoving party could or would prove the necessary facts.” 7 Additionally,
“[t]he mere argued existence of a factual dispute will not defeat an otherwise
properly supported motion.” 8
LAW AND ANALYSIS
The Porges Defendants have challenged Plaintiff’s claims for bad faith
breach of a conventional obligation and tortious interference with contractual
relations.
I.

Bad Faith Breach of Conventional Obligation
Plaintiff’s cross claim alleges that the Porges Defendants were

obligated to forward to it the proceeds of the Settlement Agreement upon
Defendants’ default and that their failure to do so was in bad faith. “In order
to recover for breach of contract under Louisiana law, the plaintiff must
prove: (1) the obligor’s undertaking of an obligation to perform; (2) that the
obligor failed to perform the obligation (i.e. breach); and (3) that the breach
resulted in damages to the obligee.” 9 “Louisiana law enhances the liability for
Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986).
Johnson v. Deep E. Tex. Reg. Narcotics Trafficking Task Force, 379 F.3d 293, 301
(5th Cir. 2004) (internal citations omitted).
7 Badon v. R J R Nabisco, Inc., 224 F.3d 382, 393–94 (5th Cir. 2000) (quoting Little
v. Liquid Air Corp., 37 F.3d 1069, 1075 (5th Cir. 1994)).
8 Boudreaux v. Banctec, Inc., 366 F. Supp. 2d 425, 430 (E.D. La. 2005).
9
SnoWizard, Inc. v. Robinson, 897 F. Supp. 2d 472, 478 (E.D. La. 2012).
5
6

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a breach in bad faith, creating liability for all damages resulting from the
breach.” 10
In support of its contention that the Porges Defendants were under an
obligation to forward to it the disputed settlement payments, Plaintiff has
attached a letter from Donald K. Porges dated November 13, 2013 (the
“Porges Letter”). Therein, Porges indicates that Antos and Becklean
authorized him, in case of default, to make the settlement payments to
Magnolia Financial Group, LLC. The Porges Defendants argue that this
claim should be dismissed because this letter is insufficient evidence of a
contract between the Porges Defendants and Plaintiff. The Court disagrees.
When viewed in the light most favorable to the non-moving party, this letter
is sufficient to create a genuine issue of material fact as to whether the
Porges Defendants undertook an obligation to forward the settlement
payments to Plaintiff in the event of Becklean’s default. Accordingly, the
Motion must be denied in this respect.
II.

Fraud and Collusion
The Porges Defendants next argue that Plaintiff’s fraud claims must be

dismissed because they have submitted insufficient evidence in support of the
same. The elements of a Louisiana fraud or intentional misrepresentation
claim are: 1) a misrepresentation of a material fact; 2) made with intent to
deceive; and 3) causing justifiable reliance with resultant injury. 11 The Court
finds that Plaintiff has presented sufficient evidence to create a genuine issue
of material fact as to each element of fraud. Plaintiff avers that the
representations made in the Porges Letter—namely, that Twin Towers would
forward settlement proceeds to Magnolia on Becklean’s default—were false
when made and were used to induce Magnolia into making the loan. This
10
11

Meredith v. La. Fed’n of Teachers, 209 F.3d 398, 407 (5th Cir. 2000).
Kadlec Med. Ctr. v. Lakeview Anesthesia Assoc., 527 F.3d 412, 418 (5th Cir. 2008).

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presents a genuine issue of material fact precluding summary judgment on
this claim.
III.

Remaining Claims
The Porges Defendants finally aver that the Amended Cross Claim

contains unspecified and amorphous counts that are insufficient as a matter
of law. Alternatively, to the extent that Plaintiff stated claims for negligent
breach of contract, negligent misrepresentation, and general negligence, the
Porges Defendants aver that these claims fail as a matter of law. The Porges
Defendants point to the following language:
Alternatively, the actions of the defendants, Twin Towers, Porges
and Eisenberg and/or Porges or their agents, representatives,
members, directors, officers or employees were made in error,
mistake, or oversight and constitute negligent actions, inactions
or omissions on the part of the defendants which they knew, or
should have known would cause actual damage and actual
economic loss to MFG. These acts or omissions on the part of the
defendants further constitute failure to perform their
professional job duties, services or responsibilities in a
reasonable, business-like and professional manner and these
failures caused loss and harm to MFG and subject defendants to
liability to MFG under general principles of negligence and fault.
Contrary to the contention of the Porges Defendants, the Court finds that
this language adequately apprises them of the claims against them.
Furthermore, the Court finds that there are genuine issues of material
facts that preclude summary judgment on the negligence claims. As the
Court has previously noted, there is a genuine issue of fact as to the existence
of a contract between the Porges Defendants and Plaintiff, which is material
to a claim of negligent breach of contract. Likewise, there is a genuine issue
of fact as to the truth or falsity of the Porges letter, which is material to a
theory of negligent misrepresentation. More generally, there are disputed
facts about the extent of the Porges Defendants’ involvement with each other,

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the other defendants, and the circumstances under which the settlement
payments continued to flow to Becklean. All of these disputes are material to
what, if any, duty the Porges Defendants owed Plaintiff. 12
CONCLUSION
For the foregoing reasons the Porges Defendants’ Motion for Summary
Judgment is DENIED.
New Orleans, Louisiana this 23rd day of August, 2017.

____________________________________
JANE TRICHE MILAZZO
UNITED STATES DISTRICT JUDGE

See, e.g., Hyatt v. Rovig, No. 13-6328, 2014 WL 970152, at *7–8 (E.D. La. Mar. 12,
2014) (preserving a general negligence claim on the same facts that supported a negligent
misrepresentation claim); Conerly Corp. v. Regions Bank, No. 08-813, 2008 WL 4975080, at
*8 (E.D. La. Nov. 20, 2008) (holding that, because of the extent of its relationship with
insolvent contractor, a lending bank could be liable to third parties for negligence);
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