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Kentucky Petroleum Operating Ltd. v. Golden

United States District Court, E.D. Kentucky, Southern Division, London

May 7, 2015

MAX L. GOLDEN, et al., Defendants.


AMUL R. THAPAR, District Judge.

Ordinarily, an arbitration award or the entry of summary judgment-or even the entry of summary judgment confirming an arbitration award-would signal that litigation is drawing to a close. Not so here. Each order seems to be fodder for a new dispute between these two parties-or in this case, the basis for revisiting an old one.


More than four years ago, the parties on one side[1] of this litigation, 7921 Energy, LLC and Macar Investments, LLC (collectively "the Macar parties"), sold oil and gas leases to two of the parties on the other side: KPO, LLC, and KPO, Ltd. (collectively "the KPO debtors"). A dispute developed over whether the KPO debtors satisfied their obligations under those sales contracts and whether the Macar parties delivered all of the promised leasehold. After arbitration, the arbitrator awarded to Macar Investments a lump sum of $466, 187. R. 28-1. He also awarded to both Macar and 7921 the royalties and revenues due to them under the terms of the contracts. R. 28-1. The Court entered a judgment confirming the award. R. 32; R. 33.

The arbitration award and judgment did not resolve the dispute. While arbitration was pending, the KPO debtors executed a mortgage and UCC-1 financing statement that gave a related company, Kentucky Petroleum Limited Partnership ("KPLP"), a security interest in all of the leases they bought from the Macar parties. The KPO debtors also transferred to KPLP all of their rights and revenue from the leases. R. 123-2 at 6-9. So once the arbitrator issued his final award, the KPO debtors had no assets with which to pay the Macar parties. Predictably, this sparked more litigation.

The next round of litigation involved the Macar parties seeking to set aside the mortgage and UCC-1 statement as fraudulent conveyances. R. 115. To guard against any future asset-shifting, the Macar parties asked to pierce the corporate veil of five related entities: KPO, LLC, KPO, Ltd., KPLP, Kentucky Petroleum Investment Corp. ("KPIC"), and N.A. Energy Resources Corp (collectively designated "the KPO entities"). Id. Piercing the corporate veil would allow the Macar parties to collect their arbitration judgment against whichever entity held the needed assets. Two months ago, the Court entered summary judgment in favor of the Macar parties on both the fraudulent conveyance and veil-piercing claims. R. 142 (Memorandum Opinion and Order); R. 143 (Judgment). But the litigation continues still.

The KPO entities now ask the Court to reconsider its judgment pursuant to Federal Rule of Civil Procedure 59(e). R. 235. The KPO entities also seek to quash 45 writs of garnishment because execution of the judgment is stayed while a Rule 59 motion is pending. R. 238. For the reasons stated below, the Rule 59 motion will be denied, which in turn moots the motion to quash.


The KPO entities contend that the grant of summary judgment was improper in four ways: (1) the Court incorrectly considered non-evidentiary matters in deciding the case, (2) there is no evidence that the challenged conveyances were made in bad faith, (3) the Macar parties cannot pierce the corporate veil of the KPO entities, and (4) in light of a recent, post-judgment arbitration demand, the Court's order should not be final. But in their motion, the KPO entities do not point to a "manifest error of law" in the prior opinion or "present newly discovered evidence"-the only acceptable grounds for a Rule 59(e) motion. See Sault Ste. Marie Tribe of Chippewa Indians v. Engler, 146 F.3d 367, 374 (6th Cir. 1998) (quoting FDIC v. World Univ. Inc., 978 F.2d 10, 16 (1st Cir. 1992)). Rather, the KPO entities largely present anew their old arguments against summary judgment. A party cannot simply re-litigate old arguments in a Rule 59(e) motion, see id., and their arguments fare no better on a second look.

I. Evidentiary Objections

The KPO entities object, as they did in opposition to summary judgment, to 65 of the Macar parties' 125 statements of fact. According to the KPO entities, the objected-to statements have no support in the record: 48 of the statements are based on KPIC's and KPLP's Offering Memoranda filed with the British Columbia Securities Commission ("BCSC"), two statements are based on the KPO debtors-to-KPLP mortgage, and the rest come from various "unauthenticated" filings in the record. R. 235 at 3. Relying on Hanover Insurance Co. v. American Engineering Co., 33 F.3d 727, 730 (6th Cir. 1994), the KPO entities argue that the Court cannot consider the objected-to materials because they would not be admissible at trial. And because the grant of summary judgment relied on non-evidentiary materials, the argument goes, the judgment must be vacated.

Setting aside the fact that the KPO entities improperly reargue a rejected contention, the argument fails here for the same reason it did on summary judgment: the KPO entities are wrong about the law. Specifically, they misread Hanover. In Hanover, the Sixth Circuit explained that "[t]he same evidentiary standard of proof applies on summary judgment as would apply at trial on the merits." 33 F.3d at 730 (citing Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 252-53 (1986)). The "standard of proof" referred to in Hanover and Anderson is the burden of proof a party must meet to prevail at trial. That is, if a party must prove its case by a preponderance of the evidence at trial, then the Court "asks [on summary judgment] whether reasonable jurors could find by a preponderance of the evidence that a plaintiff is entitled to a verdict." Anderson, 477 U.S. at 252. The form of evidence the Court may consider in answering that question is a different matter-one not addressed by Hanover or Anderson.

The Supreme Court did address the form-of-evidence issue in Celotex Corp v. Catrett, 477 U.S. 317, 324 (1986), and its decision squarely contradicts the KPO entities' position. On summary judgment, a party does not have to submit evidence "in a form that would be admissible at trial." Id.; see also Shazor v. Prof'l Transit Mgmt., Ltd., 744 F.3d 948, 960 (6th Cir. 2014). Rather, a party need only show that the substance of the evidence would be admissible. Shazor, 744 F.3d 960 (citing Alpert v. United States, 481 F.3d 404, 409 (6th Cir. 2007)). For the reasons outlined in the Memorandum Opinion, the Macar parties clear that hurdle as to the mortgage and BCSC Offering Memorandum. See R. 142 at 4-7. And review of the Memorandum Opinion reveals that the material facts for the purposes of summary judgment ...

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