Wells Fargo Bank, N.A. v. Star Texas Gasoline & Oil Distributors, Inc.

Filing 25

MEMORANDUM AND ORDER (Signed by Judge Hilda G Tagle) Parties notified.(mserpa, 2)

IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF TEXAS
CORPUS CHRISTI DIVISION
WELLS FARGO BANK, N.A.,
Plaintiff,
v.
STAR TEXAS GASOLINE & OIL
DISTRIBUTORS, INC.,
Defendant.

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CIVIL NO. 2:14-CV-453

MEMORANDUM AND ORDER
The Court has before it briefing of the Parties on dismissal of this action
under Federal Rule of Civil Procedure 12(b)(6), Dkt. Nos. 17 and 24 and Plaintiff’s
Emergency Motion for Expedited Discovery, Dkt. No. 23.

I.

Procedural History
Plaintiff Wells Fargo Bank, N.A. (“Wells Fargo”) commenced this action by

filing its Emergency Application for Appointment of Receiver (the “emergency
application”) on November 17, 2014. Dkt. No. 1. It asserted that Defendant Star
Texas Oil & Gasoline Distributors, Inc. (“Star Texas”) has defaulted on loan
agreements with a then-current outstanding balance of approximately $7 million.
Id. ¶¶ 1, 16. Wells Fargo further pleads that these loans, as subsequently modified,
were secured by two agreements dated December 14, 2012, granting Wells Fargo “a
security interest in and to all accounts, contract rights, promissory notes, chattel
paper, instruments, deposit accounts, equipment, tools, machinery, furniture, other
goods and payment and general intangibles, all inventory, goods held for sale or
lease, or to be furnished under a contract, raw materials, component parts, work in
process, and other materials used or consumed in Borrower's business, together
with all rights to payment of any kind arising out of the sale, lease, collection,
exchange or other disposition of any of the property,” Id. ¶ 8, and three deeds of
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trust against Star Texas’s real property in Nueces, Gregg, and Midland Counties,
Texas. Id. ¶ 10. According to Wells Fargo, Star Texas lacks an adequate source of
funding. See id. ¶ 13. As a result, Wells Fargo contends that this Court should
appoint a receiver in accordance with the loan agreements and deeds of trust to
protect the value of its collateral because “[a]n orderly winding down of [Star
Texas]’s business affairs will maximize the value of its business assets for the
benefit of all its creditors.” Id.
This Court conducted a telephonic conference on November 24, 2014, and
gave Star Texas until December 1, 2014, to hire non-conflicted counsel and cause a
notice of appearance to be filed.

See Ct. Order, Nov. 25, 2014, Dkt. No. 8

(memorializing this ruling). Counsel appeared for Star Texas on December 2, 2014,
Dkt. No. 12, and this Court ordered the parties to propose a plan for briefing the
emergency application and submitting it for decision, Dkt. No. 14. The parties did
so. Dkt. No. 15. On December 8, 2014, this Court entered an order effectuating the
parties’ proposed plan. Dkt. No. 16. In addition to its briefing, Wells Fargo filed a
motion seeking limited, expedited discovery from Star Texas before any hearing on
the emergency application. Dkt. No. 17.
The Court entered an order expediting consideration of Wells Fargo’s motion
for discovery on December 16, 2014. Dkt. No. 20. In that order, the Court also
advised the parties that it was considering dismissing this action under Federal
Rule of Civil Procedure 12(b)(6). Id. at 2 (citing Carroll v. Fort James Corp. 470
F.3d 1171, 1177 (5th Cir. 2006) (other citations omitted).

The order stated as

follows:
In its emergency application to appoint a receiver, Plaintiff states that
“[t]his is a receivership action ancillary to an anticipated arbitration
proceeding arising out of Borrower's breach of the terms and conditions
of its Loan Documents with Wells Fargo.” Dkt. No. 1 ¶ 1. The prayer
for relief section of the application requests “the following ancillary
relief” and then lists the appointment of a receiver and “such other and
further relief, both general and special, at and law in equity, to which
Plaintiff is justly entitled under Federal Rule of Civil Procedure 66 and
federal common law governing receiverships.” Id. at 16. Further, a
review of this document reveals no facial claim for breach of contract or
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for coercive relief related to the anticipated arbitration other than the
request to appoint a receiver.
Id. The Court invoked the general rule that “[t]here is no occasion for a court
of equity to appoint a receiver of property of which it is asked to make no further
disposition.” Id. at 1 (quoting Tucker v. Baker, 214 F.2d 627, 632 (5th Cir. 1954)).
The Court provided the parties with an opportunity to be heard on this matter. Id.
at 3. Consequently, in addition to Wells Fargo’s motion for discovery, the Court has
before it the parties’ memoranda on the Rule 12(b)(6) issue raised by the Court.
Dkt. Nos. 23, 24. Wells Fargo also has advised the Court that, on December 17,
2014, it filed a statement of claim with the American Arbitration Association
commencing an arbitration proceeding stemming from the claimed breach of loan
agreements asserted in this lawsuit. See Dkt. No. 23 Ex. A.

II.

Failure to State a Claim
To survive a motion to dismiss under Federal Rule of Civil Procedure

12(b)(6), "a complaint must contain sufficient factual matter, accepted as true, to
'state a claim to relief that is plausible on its face.'" Ashcroft v. Iqbal, 556 U.S. 662,
677 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)); See also,
e.g., In re Great Lakes Dredge & Dock Co. LLC, 624 F.3d 201, 210 (5th Cir. 2010).
That is, "the complaint's ‘factual allegations must be enough to raise a right to relief
above the speculative level.'" In re Great Lakes, 624 F.3d at 210 (brackets omitted)
(quoting Twombly, 550 U.S. at 555). When performing a Rule 12(b)(6) analysis, all
well-pleaded facts in the complaint must be accepted as true, and the complaint
must be construed in the light most favorable to the plaintiff. S.E.C. v. Cuban, 620
F.3d 551, 553 (5th Cir. 2010); In re Great Lakes, 624 F.3d at 210 (citing Doe v.
MySpace, Inc., 528 F.3d 413, 418 (5th Cir. 2008)). However, "conclusory allegations,
unwarranted factual inferences, [and] legal conclusions" need not be accepted as
true. Ferrer v. Chevron Corp., 484 F.3d 776, 780 (5th Cir. 2007) (quoting Plotkin v.
IP Axess Inc., 407 F.3d 690, 696 (5th Cir. 2005)); accord Iqbal, 556 U.S. at 662; In re
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Great Lakes, 624 F.3d at 210. Also, “[a] copy of a written instrument that is an
exhibit to a pleading is a part of the pleading for all purposes.” Fed. R. Civ. P. 10(c).
Although presenting matters outside the pleadings on a Rule 12(b)(6) motion
generally converts a motion to dismiss into one for summary judgment, see Fed. R.
Civ. P. 12(b), “Documents that a defendant attaches to a motion to dismiss are
considered part of the pleadings if they are referred to in the plaintiff's complaint
and are central to her claim,” and the Court may consider such documents when
deciding a Rule 12(b)(6) motion. In re Katrina Canal Breaches Litigation, 495 F.3d
191, 205 (5th Cir. 2007) (quoting Causey v. Sewell Cadillac–Chevrolet, Inc., 394 F.3d
285, 288 (5th Cir. 2004).

III.

Analysis
Wells Fargo’s emergency application begins by declaring that “[t]his is a

receivership action ancillary to an anticipated arbitration proceeding arising out of
Borrower's breach of the terms and conditions of its Loan Documents.” Dkt. No. 1 ¶
1. In its December 15, 2014, order, this Court observed that Wells Fargo facially
pleaded no breach-of-contract claim or other claim for relief apart from its request
to appoint a receiver. See Dkt. No. 1 at 1, 16 (requesting only appointment of
receiver in prayer for relief).

Wells Fargo apparently concedes that this Court

correctly reads its emergency application as asserting no primary claim other than
the then-anticipated arbitration proceeding. See Dkt. No. 24 at 1. It argues instead
that this Court can appoint a receiver ancillary to the pending arbitration
proceeding based on the following language from a credit agreement executed by
Star Texas on December 14, 2010:
“The arbitration requirement does not limit the right of any party to . .
. (iii) obtain provisional or ancillary remedies such as replevin,
injunctive relief, attachment or the appointment of a receiver, before
during or after the pendency of any arbitration proceeding. This
exclusion does not constitute a waiver of the right or obligation of any

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party to submit any dispute to arbitration or reference hereunder . . .
.”1 Dkt. No. 1 Ex. A ¶ 7.14(c); Dkt. No. 24 Ex. A ¶ 7.14(c).
The Supreme Court has stated that “[a] receivership is only a means to reach
some legitimate end sought through the exercise of the power of a court of equity. It
is not an end in itself.” Kelleam v. Md. Cas. Co., 312 U.S. 377, 381 (1941) (quoting
Gordon v. Washington, 295 U.S. 30, 37 (1935)). Consequently, “a federal court of
equity should not appoint a receiver where the appointment is not a remedy
auxiliary to some primary relief which is sought and which equity may
appropriately grant.” Id. (citations omitted); See also Santibanez v. Wier McMahon
& Co., 105 F.3d 234, 241 (5th Cir.1997) (quoting 12 Charles A. Wright & Arthur R.
Miller, Federal Practice and Procedure § 2983 (1973)) (explaining that “receivership
may be an appropriate remedy for a judgment creditor[, inter alia,]

. . . who

otherwise is attempting to have the debtor's property preserved from dissipation
until his claim can be satisfied.”); Tucker v. Baker, 214 F.2d 627, 632 (5th Cir. 1954)
(quoting Gordon v. Washington, 295 U.S. at 55 (1935)) (“There is no occasion for a
court of equity to appoint a receiver of property of which it is asked to make no
further disposition.”); Kinnebrew v. La. Ice Co. 89 F. Supp. 809, 810-11 (W.D. La.
1950) (citations omitted) ( “[i]t has been uniformly held that a receiver will not be
appointed where in primary relief, such as the adjudication of some substantial
right or interest in property, is sought . . . .”).
In RGI, Inc. v. Tucker Associates., Inc. 858 F.2d 227, 229 (5th Cir. 1988), the
Fifth Circuit acknowledged a split among the Circuits on the question of whether
preliminary injunctive relief is available in an action involving an agreement to
arbitrate under the Federal Arbitration Act (FAA), 9 U.S.C. § 1 et seq.

See 858

F.2d at 229 (contrasting as exemplary of split Merrill Lynch, Pierce, Fenner &
Smith, Inc. v. Hovey, 726 F.2d 1286, 1291 (8th Cir. 1984) and Teradyne v. Mostek
Corp., 797 F.2d 43, 43 (1st Cir.1986)). The RGI court did not take a side in this
1

Wells Fargo also relies on language from an alleged guaranty agreement signed by Ronnie King, Star Texas’s President, on
December 14, 2010. Dkt. No. 24 Ex. B. The Court does not rely on this agreement to reach its decision, however, because Wells
Fargo’s emergency application does not refer to it. See In Re Katrina Canal Breaches Litigation, 495 F.3d at 205 (quotation
omitted)(stating documents attached to motion to dismiss can be considered “if they are referred to in [plaintiff’s] complaint.”).

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split. Id. Instead, it resolved the case based on a split-bridging “consensus . . .
[that] a preliminary injunction [may issue] where the parties had contemplated its
use beforehand.” Id. (citing Hovey, 726 F.2d at 1291); See also Janvey v. Alguire,
647 F.3d 585, 592 (5th Cir. 2011) (stating that RGI court “did not enter the fray” of
the split). The district court in RGI entered a preliminary injunction preserving the
status quo of the contracting relationship and ordered the case to arbitration in
accordance with the FAA. See id. at 228. The Fifth Circuit affirmed because the
parties’

written

agreement

included

a

“bargained-for

provision

clearly

contemplat[ing] that the status quo is to continue pending arbitration.”
(quoting language of agreement).

Id.

That is, the RGI court held that “[w]here an

arbitration agreement contemplates the use of a preliminary injunction to maintain
the status quo, the district court has the power to issue a preliminary injunction for
that purpose.” Weeks Marine, Inc. v. BAE Sys. Se. Shipyards Alabama, LLC, No.
14-905, 2014 WL 2533408, at *2 (E.D. La. June 4, 2014) (citing RGI, 828 F.2d at
230).
Like the plaintiff in RGI, Wells Fargo alleges in its emergency application
that the credit agreements at issue include a bargained-for provision contemplating
a court-ordered receivership pending arbitration.

The RGI Court reasoned that

enforcing a bargained-for agreement to preserve the status quo pending arbitration
did not risk injecting the district court into the merits of the issues to be
arbitrated—the concern articulated by the Hovey court and others holding that
coercive relief is not generally available pending arbitration—because the district
court did not need to “involve itself in balancing the various factors to determine
whether a preliminary injunction should be issued” when enforcing such a
provision. 858 F.2d at 229 (citing Miss. Power & Light v. United Gas Pipeline, 760
F.2d 618, 621 (5th Cir. 1985)). In the case at hand, Wells Fargo alleges that Star
Texas “has consented to the appointment of a receiver, before and during the
pendency of an arbitration proceeding, in the event of a default under the terms and
conditions of the Loan Documents, and has agreed that Wells Fargo shall be
entitled to such appointment as a matter of strict right.”
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Dkt. No. 1 ¶ 1.

Determining whether the credit agreements strictly entitle Wells Fargo to
appointment of a receiver pending arbitration injects this Court no further into the
merits of the underlying loan dispute than did deciding whether to enforce the
bargained-for provision in RGI. See Digital Generation, Inc. v. Boring, 869 F. Supp.
2d 761, 773–74 (N.D. Tex. 2012) (considering motion for preliminary injunction and
distinguishing RGI because “[t]he language in the parties' agreement expressly
states that DG may seek injunctive relief from a court of competent jurisdiction or
the arbitrator”); Merrill Lynch, Pierce, Fenner & Smith, Inc. v. Chapman, No. 981615, 1998 WL 792501, at *1 (N.D. Tex. Nov. 3, 1998) (applying RGI to hold that
parties contemplated injunctive relief where agreement stated that defendant
“consent[ed] to the issuance of a temporary restraining order or a preliminary or
permanent injunction”); Morrison Home Center v. Hilti, Inc., No. 98-1660, 1998 WL
397894 (E.D. La July 15, 1998) (holding preliminary injunction could be entered
under GI where agreement included clause stating that “pending arbitration, either
party may seek injunctive relief in a court of competent jurisdiction.”).
Consequently, Wells Fargo states a claim which, when viewed in the light most
favorable to it and assuming all well-pleaded factual allegations to be true, can be
granted. See RGI, Inc., 858 F.2d at 229. This Court intimates no view on whether a
receivership is available in the absence of an alleged bargained-for provision like
that enforced in RGI.

IV.

Motion for Leave to Conduct Expedited Discovery
Wells Fargo also seeks leave to conduct specific discovery before The Court

holds a hearing on the emergency application. Dkt. No. 17. “A party may not seek
discovery from any source before the parties have conferred as required by Rule
26(f), except in a proceeding exempted from initial disclosure under Rule
26(a)(1)(B), or when authorized by these rules, by stipulation, or by court order.”2

Because the parties have not briefed the question, The Court does not decide whether this case
qualifies as an “action to enforce an arbitration award” as that phrase is used in Rule 26(a)(1)(B)(ix).
2

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Fed. R. Civ. P. 26(d)(1). The record includes no evidence that the parties have
conducted a scheduling conference under Rule 26(f).
Wells Fargo’s motion for expedited discovery and Star Texas’s response
demonstrate that the parties have stipulated to limited discovery in the event that
the Court does not dismiss this action. See Black’s Law Dictionary 1550 (9th ed.
2009) (defining stipulation as, inter alia, “a voluntary agreement between opposing
parties concerning some relevant point”). In its motion for expedited discovery,
Wells Fargo seeks leave to: (1) depose Ronnie king, Star Texas’s principal, on
specified subjects; (2) subpoena documents related to Star Texas’s accounts with
Prosperity Bank; and (3) subpoena accounts payable records of Baker Hughes
concerning payments made to Star Texas since November 17, 2014. Dkt. No. 17 at
3–4. Star Texas responds that “it does not oppose an expedited deposition of Ronnie
King” if the Court decides not to dismiss this action.3

Dkt. No. 22 at 2. Nor does

Star Texas oppose in substance either of Wells Fargo’s requests for obtaining
documents. See id. at 2. In response to Wells Fargo’s third proposal, Star Texas
states that it will voluntarily produce the Baker Hughes-related records. Id. Based
on these representations, the Court concludes that the parties have agreed to
limited expedited discovery, making a court order to permit it unnecessary. See Fed.
R. Civ. P. 26(d)(1) (discovery before scheduling conference “by stipulation”);
(Huffington v. Enstar Corp., 589 F. Supp. 624, 625 (S.D. Tex. 1984) reciting in
procedural history that court set a briefing schedule for parties when they agreed to
conduct expedited discovery at hearing); But see Providence Property & Cas. Ins. Co.
v. Peoplease Corp., 2007 WL 2241492, at *1 (E.D. Tex. Aug. 3, 2007) (granting
unopposed motion for expedited discovery because “the documents [the plaintiff] has
requested will aid the Court in determining whether to grant Providence's request
for preliminary injunction”).

3Star

Texas asks that any deposition be scheduled after January 5, 2015, due to the holidays. Dkt.
No. 22 at 2. That request has been mooted by the passage of time.

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V.

Conclusion
For the foregoing reasons, the Court determines that Wells Fargo’s

emergency application states a claim for which relief can be granted and DENIES
AS MOOT its Emergency Motion for Expedited Discovery. Dkt. No. 17. The Court
ORDERS the parties to confer and advise the Court within seven days after the
entry of this order of their plan to conduct the discovery to which they have
stipulated.

After the Court receives the parties’ discovery schedule, a hearing on

the merits of the emergency application will be scheduled.

SIGNED this 29th day of January, 2015.

___________________________________
Hilda Tagle
Senior United States District Judge

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