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KSA Enterprises, Inc. v. Branch Banking & Trust Co.

United States District Court, W.D. Kentucky, Paducah Division

September 5, 2017



          Greg N. Stivers, United States District Judge.

         This matter comes before the Court on Defendant's Motion to Strike Plaintiffs' Jury Demand (DN 48), Defendant's Motion for Summary Judgment (DN 68), and Defendant's Motion to Exclude Plaintiffs' Expert Witness (DN 83). For the following reasons, Defendant's Motion for Summary Judgment is GRANTED, and Defendant's Motion to Strike Plaintiffs' Jury Demand and Defendant's Motion to Exclude Plaintiffs' Expert Witness are DENIED AS MOOT.

         I. BACKGROUND

         Between 2003 and 2010, a series of eleven commercial loans totaling $11 million were made by Defendant Branch Banking & Trust Company (“BB&T”) to Plaintiffs KSA Enterprises, Inc. (“KSA”), and Pain Management Resources, P.S.C. (“PMR”) (collectively “Plaintiffs”). (Def.'s Mot. Summ. J. Exs. 4-14, DN 68-5 to 68-15). Dr. Laxmaiah Manchikanti (“Manchikanti”), Plaintiffs' principal, entered into the loan agreements on Plaintiffs' behalf. (Def.'s Mot. Summ. J. Exs. 4-14). Manchikanti and Steve Hawkins (“Hawkins”), an accountant for Plaintiffs, served as points of contact with BB&T on all matters associated with the lending relationship. (Manchikanti Dep. 37:22-38:14, Aug. 24, 2016, DN 68-3). During the relevant period, Randle Hendon (“Hendon”), a loan officer at BB&T's Paducah branch, served as Plaintiffs' main contact at BB&T. (Hendon Dep. 33:5-35:13, Aug. 23, 2016, DN 68-16; Thomas Dep. 16:15-17:3, Oct. 27, 2016, DN 64).

         In 2010, Manchikanti asked Hendon to look into options for reducing Plaintiffs' interest rates by refinancing or consolidating Plaintiffs' loans. (Manchikanti Dep. 64:12-15, 67:12-21, 74:13-16; Hawkins Dep. 77:18-22, Aug. 24, 2016, DN 68-15). At some pointed during 2010, Hendon offered Plaintiffs a potential refinancing option for lowering their interest rates. (Manchikanti Dep. 68:4-25). Hendon spoke with a senior credit officer about the refinance request and the pair ran “through some of the numbers on what [they] thought [they] might be able to do.” (Hendon Dep. 40:24-42:8). A proposal was developed that included a lower interest rates for Plaintiffs, if they were willing to pay some amount equal to roughly half of the interest that would accrue in the following year. (Manchikanti Dep. 65:22-66:6; Hawkins Dep. 83:20-84:22). Manchikanti rejected the proposal. (Manchikanti Dep. 68:14-18; Hawkins Dep. 85:8-17; Hendon Dep. 43:25-44:16).

         Subsequently, Manchikanti again inquired into whether BB&T would consolidate or refinance his loans and on February 1, 2011, Hendon responded indicating that he thought BB&T “[would] be able to do something.” (Def.'s Mot. Summ. J. Ex. 17, at 1, DN 68-18 [hereinafter Emails]). Hendon stated that he would prepare a package to enable a regional loan administrator to review the refinance request. (Emails 1). In a series of e-mails throughout February and March 2011, Hendon told Plaintiffs that the refinance request was being prepared for review by BB&T. (Emails 1-5). On February 14, 2011, Hendon told Hawkins he would be the first to know when additional information was received about “what [it would] take” to come up with other potential refinancing options. (Emails 2). In a follow-up email later that month, Hendon apologized for the delay and explained that, because of the size of Plaintiffs' loans, additional information and more thorough analysis was needed. (Emails 3).

         On March 14, 2011, BB&T completed an internal “Loan Review Summary” assessing the status of Plaintiffs' loans and the parties' overall lending relationship. (Def.'s Mot. Summ. J. Ex. 1, DN 68-2 [hereinafter Loan Review Summary]). As part of the Loan Review Summary, BB&T prepared a “Global Financial Analysis” assessing the overall financial status and performance of Plaintiffs' and Manchikanti's various other companies, as well as that of Manchikanti and his wife, individually. (Loan Review Summary 6-7). In the Global Financial Analysis, BB&T expressed concern about Plaintiffs' financial status because of identified weaknesses in Manchikanti's businesses. (Loan Review Summary 6-7). As a result of these concerns, the Loan Review Summary recommended a downgrade of Plaintiffs' lending relationship to a “risk grade 7.” (Loan Review Summary 8).

         When one or more loans has a “total business exposure” of over $1 million and receives a risk grade of 7 or higher, it is classified internally as a “problem loan” and placed on a watch list. (Thomas Dep. 56:5-7; Thomas Decl. 4-5, DN 65). Under the terms of BB&T's Problem Loan Management Policy, “[d]ue to the high level of risk, [BB&T's] exposure strategy for Watch List clients [was] either “decrease” or “out.” (Def.'s Mot. Summ. J. Ex. 20, at 5, DN 67). Still, Mark Thomas, BB&T's Rule 30(b)(6) deponent, testified that a classification as a problem loan did not foreclose the possibility that BB&T would refinance Plaintiffs' existing loans. (Thomas Dep. 90:22-93:16, 95:14-96:4; Def.'s Mot. Summ. J. Ex. 18, ¶¶ 6-8, DN 68-19). According to Thomas, if BB&T determines that a refinance is appropriate in view of the attendant risk and exposure it can do so even if a loan has been classified as a problem or watch list loan. (Thomas Dep. 92:2-4, 93:8-94:22; Thomas Decl. ¶¶ 6-8). Further, BB&T's policies contemplate the idea of modifying a risk grade 7 loan, as the policy requires “co-approval by the appropriate Credit Officer, Loan Administrator and/or Special Assets Officer” to modify loans in this category. (Def.'s Mot. Summ. J. Ex. 19, at 9-10, DN 66).

         After the Loan Review Summary was released BB&T's credit officer, Warren Takacs (“Takacs”), notified Hendon that he had completed his review of Plaintiffs' relationship package. (Pls.' Resp. Def.'s Mot. Summ. J. Ex. 1, at 8, DN 75). Takacs sent comments which he directed Hendon to use during conversations with Plaintiffs prior to the Problem Loan Administration Asset Manager's involvement. (Pls.' Resp. Def.'s Mot. Summ. J. Ex. 1, at 8). Takacs stated “[i]t's not the most enjoyable part of our roles to see a client's financial stress issues result in classified loans for us, but to provide good client service and adhere our values we have to call it like we see it and help Dr. M to help himself out of harm's way.” (Pls.' Resp. Def.'s Mot. Summ. J. Ex. 1, at 8). Comments included in a “Commercial Loan Review Risk Summary” apparently prepared by Takacs in late March 2011, indicated that BB&T should “provide the financial counsel that [Plaintiffs'] non-core businesses and their debts should be reduced or liquidated before the problem grows larger.” (Pls.' Resp. Def.'s Mot. Summ. J. Ex. 1, at 9).

         On March 30, 2011, Hendon met with Hawkins and provided him with a portion of the Loan Review Summary. (Pls.' Resp. Def.'s Mot. Summ. J. Ex. 1, at 8). Hendon asked Hawkins for more information regarding Plaintiffs' and Manchikanti's finances, and Hawkins requested time to obtain this information. (Emails 6). Later, Hawkins informed BB&T by letter that the Manchikantis' 2010 personal tax returns would not be available until sometime in June and that their personal financial statement would not be completed until sometime before the end of July 2011. (Def.'s Mot. Summ. J. Ex. 21, at 3, DN 68-22 [hereinafter Hawkins Letter]). Hawkins's letter stated:

We have to be able to substantiate ongoing cash flow sufficient to meet the needs of the various Dr. M. owned companies, as well as Dr. M. personal debt and living expenses. Currently, we have too many unanswered questions to provide a sufficient level of comfort that Dr. M can sustain what is already outstanding. Of primary concern currently is the [fast-food restaurants'] performance.

(Hawkins Letter 3).

         Hawkins thereafter contacted Hendon on May 10, 2011, to check on the status of the “credit review/request.” (Emails 7). Hendon responded that he would let Hawkins know when he received any further information. (Emails 7-8). Hawkins followed up in June and again asked about the status of the “credit/refi review.” (Emails 10). Hendon answered that he had experienced some technical problems with his email and apologized for the lengthy review process. (Emails 10-11). On June 30, 2011, Hendon emailed Manchikanti to apologize that he had not been able to prepare a financing proposal for another unrelated transaction involving the purchase of a fast-food restaurant in Louisville. (Emails 12). Hendon said the loan review seemed to be taking too long and would be “pushing even harder” to move things forward now that BB&T had added another regional loan specialist. (Emails 12).

         Hendon reached out to Kim Patterson, a portfolio manager at BB&T, to discuss the status of Manchikanti's loan review. (Emails 13-16). Melanie Ranburger, another portfolio manager, reminded Hendon that BB&T was still waiting to receive Manchikanti's personal tax returns before it could proceed with the loan review. (Emails 17). On August 2, 2011, BB&T again requested Plaintiffs' 2010 financial documentation to assess the loans. (Emails 18).

         In September of 2011, Ajamu Stoner (“Stoner”), a “problem loan administrator” with BB&T, met with Manchikanti to discuss the loans. (Emails 20-21). Stoner explained BB&T's concerns about the loans and revealed to Manchikanti that the loans were classified as “problem loans.” (Manchikanti Dep. 195:5-13, 122:12-19). Manchikanti decided in early October 2011 to refinance Plaintiffs' loans with another lender. (Manchikanti Dep. 127:24-128:5). In July 2012, Plaintiffs refinanced most of their loans with Community Financial Services Bank (“CFSB”). (Manchikanti Dep. 129:21-22). At that time, CFSB had hired Hendon, who worked directly with Manchikanti to refinance his loans at CFSB, and Hendon still has an ongoing business relationship with Manchikanti at CFSB. (Manchikanti Dep. 129:23-130:25).

         Plaintiffs brought this action initially asserting claims of breach of contract, fraud, negligent misrepresentation, fraud in the inducement, unjust enrichment, and punitive damages. (Compl., DN 1). On September 23, 2015, this Court issued an Order dismissing Plaintiffs' claims for breach of contract, fraud in the inducement, and negligent misrepresentation, as well as narrowing Plaintiffs' claims for fraud and unjust enrichment. (Mem. Op. & Order 15, DN 13).[1] BB&T now moves for summary judgment of Plaintiffs' remaining claims. (Def.'s Mot. Summ. J., DN 68). Thus, this matter is ripe for adjudication.


         The Court has subject matter jurisdiction over this action under 28 U.S.C. § 1332 as there is complete diversity between the parties and the amount in controversy exceeds the sum of $75, 000.00.


         In ruling on a motion for summary judgment, the Court must determine whether there is any genuine issue of material fact that would preclude entry of judgment for the moving party as a matter of law. See Fed. R. Civ. P. 56(a). The moving party bears the initial burden of stating the basis for the motion and identifying evidence in the record that demonstrates an absence of a genuine issue of material fact. See Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). If the moving party satisfies its burden, the non-moving party must then produce specific evidence proving the existence of a genuine issue of fact for trial. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48 (1986).

         While the Court must view the evidence in the light most favorable to the non-moving party, the non-moving party must do more than merely show the existence of some “metaphysical doubt as to the material facts.” Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986) (citation omitted). Rather, the non-moving party must present specific facts proving that a genuine factual issue exists by “citing to particular parts of the materials in the record” or by “showing that the materials cited do not establish the absence . . . of a genuine dispute.” Fed.R.Civ.P. 56(c)(1). “The mere existence of a scintilla of evidence in support of the [non-moving party's] position will be insufficient; there must be evidence on which the jury could reasonably find for the [non-moving party].” Anderson, 477 U.S. at 252.

         IV. ...

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