Treaty Energy Corp v. Hallin (In Re Treaty Energy Corp.) , 619 F. App'x 443 ( 2015 )

Case: 15-30113 Document: 00513248451 Page: 1 Date Filed: 10/27/2015
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
No. 15-30113 United States Court of Appeals
Fifth Circuit
FILED
October 27, 2015
In the Matter of: Lyle W. Cayce
TREATY ENERGY CORPORATION,
Clerk
Debtor.
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TREATY ENERGY CORPORATION,
Appellant,
versus
DAVID A. HALLIN; RONDA HYATT; JEFFEREY A. MORGAN;
ALEXANDER RASHBURY; DAVID MCCOURTNEY; MACK MAXCEY,
Appellees.
Appeal from the United States District Court
for the Eastern District of Louisiana
USDC No. 2:14-CV-2109
Before JOLLY, HIGGINBOTHAM, and SMITH, Circuit Judges.
JERRY E. SMITH, Circuit Judge: *
Treaty Energy Corporation (“TECO”) sued the named petitioning
*Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5TH
CIR. R. 47.5.4.
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No. 15-30113
creditors (“defendants”) for alleged losses resulting from their filing of an invol-
untary bankruptcy petition against it. The bankruptcy court dismissed the
petition, then denied costs and damages; the district court affirmed. We affirm.
I.
The bankruptcy court dismissed the involuntary petition because the
defendants failed to satisfy 11 U.S.C. § 303(b). TECO then moved for costs,
attorney’s fees, and compensatory and punitive damages. Because the dismis-
sal of the petition was without defendants’ consent, TECO was authorized
under 11 U.S.C. § 303(i)(2) to seek costs and damages, including “any damages
proximately caused” by “any petitioner that filed the petition in bad faith.”
TECO’s motion included a claim for losses allegedly incurred in the sale
of restricted shares of its stock during the pendency of the petition. Between
the time when the petition was filed and when it was eventually dismissed
(May 7 to June 12, 2013), TECO concluded 41 stock purchase agreements, in
which it committed to sell 84,557,360 restricted shares of its common stock.
TECO claims that it intended to sell these shares for 40% off the market price
of unrestricted shares of its stock but that the filing of the involuntary petition
forced it to sell its restricted shares at a discount of more than that. TECO
alleges that the resulting loss in stock-sales income was $453,750.46. Although
the average price at which TECO sold restricted shares was about 0.5¢ imme-
diately before, during, and immediately after the pendency of the petition, the
market price of its unrestricted shares increased during that period from about
1.4¢ to 1.8¢ before declining to 1.7¢.
The bankruptcy court granted partial summary judgment to petitioners
on TECO’s claim of stock-sales losses. The district court affirmed.
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II.
We review a bankruptcy court’s grant of summary judgment de novo. In
re Placid Oil Co., 753 F.3d 151, 154 (5th Cir. 2014). Summary judgment is
proper in district court “if the movant shows that there is no genuine dispute
as to any material fact and the movant is entitled to judgment as a matter of
law.” FED. R. CIV. P. 56(a). The same standard applies to summary judgment
in bankruptcy court. FED. R. BANKR. P. 7056 (expressly incorporating FED. R.
CIV. P. 56). All “facts and inferences [must be drawn] in the light most favora-
ble to the party opposing the motion.” Hunt v. Rapides Healthcare Sys., LLC,
277 F.3d 757, 762 (5th Cir. 2001). “Only disputes over facts that might affect
the outcome of the suit under the governing law will properly preclude the
entry of summary judgment. Factual disputes that are irrelevant or unneces-
sary will not be counted.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248
(1986).
The bankruptcy court gave two reasons for granting partial summary
judgment. The first is that the stock purchase agreements were not valid sales,
because, at the time they were entered into, TECO was not authorized to issue
any additional shares. Because this issue of law is essential to TECO’s claim
for damages, the bankruptcy court’s conclusion, if correct, would entitle defen-
dants to partial summary judgment. We expressly decline to consider this
issue, however, because partial summary judgment was proper in light of the
second reason given by the bankruptcy court: The sales price of TECO’s stock
did not decline during the pendency of the involuntary petition. By itself, that
finding of fact would be insufficient to support the grant of partial summary
judgment, because TECO rests its claim for damages not on a decline in the
absolute sales price of restricted shares, but rather on its inability to sell
restricted shares for as much as it had originally intended to. When taken
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together with TECO’s failure to prove that it intended to sell the shares at a
40% discount, however, the bankruptcy court’s finding justified partial sum-
mary judgment. Because we “may affirm [the] judgment on any grounds sup-
ported by the record, ” Palmer v. Waxahachie Indep. Sch. Dist., 579 F.3d 502,
506 (5th Cir. 2009) (citation omitted), we affirm on this basis.
Summary judgment is proper “against a party who fails to make a show-
ing sufficient to establish the existence of an element essential to that party’s
case, and on which that party will bear the burden of proof at trial.” Celotex
Corp. v. Catrett, 477 U.S. 317, 322 (1986). The movant may introduce evidence,
such as an affidavit, negating the nonmovant’s evidence or instead demonstrat-
ing that the nonmovant has failed to meet its burden of production. Id. at 323.
In such a situation, there can be “no genuine issue as to any material
fact,” since a complete failure of proof concerning an essential element
of the nonmoving party’s case necessarily renders all other facts imma-
terial. The moving party is “entitled to judgment as a matter of law”
because the nonmoving party has failed to make a sufficient showing
on the essential element of [its] case with respect to which [it] has the
burden of proof.”
Id. at 322–23.
The defendants, as movants, showed that the materials cited by the non-
movant, TECO, failed to establish an element essential of TECO’s case and on
which TECO would bear the burden of proof. To succeed, TECO would have to
demonstrate at trial either that the sales price of restricted shares actually
declined or that it intended to sell restricted shares at 40% off the market price
for unrestricted shares. The evidence that TECO introduced, however, was
either inadmissible or failed to substantiate those elements of its case.
First, as the bankruptcy court rightly found, the data that TECO intro-
duced demonstrated that there had been no actual decline in the sales price of
restricted shares of TECO stock. Though the sales price of restricted shares
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did fluctuate, it averaged 0.5¢ immediately before, during, and after the pen-
dency of the involuntary petition.
Second, TECO failed to introduce any proper evidence that it intended
to sell restricted shares at a 40% discount. Its sole evidence was an affidavit
by Sean Douglass, its investor-relations and public-relations officer. Most of
the affidavit, however, is inadmissible because it fails to “be made on personal
knowledge, set out facts that would be admissible in evidence, [or] show that
the affiant or declarant is competent to testify on the matters stated.” FED. R.
CIV. P. 56(c)(4). To the contrary, Douglass’s affidavit freely admits that he “was
not involved in the direct selling or solicitation of any securities related to”
TECO and that “[a]ny and all securities solicitations and/or transactions were
handled directly by [his] superiors.” Douglass claims that he “did assist in the
process when requested, which included gathering information when given dir-
ect instructions by [his] superiors.” But he does not claim any personal knowl-
edge of the sales price of restricted shares or of TECO’s intention to sell
restricted shares at a 40% discount.
The judgment of the district court, affirming the bankruptcy court, is
AFFIRMED.
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