Amegy Bank National Ass'n v. Monarch Flight II, LLC

870 F. Supp. 2d 441, 2012 U.S. Dist. LEXIS 59199, 2012 WL 1494340
CourtDistrict Court, S.D. Texas
DecidedApril 27, 2012
DocketCivil Action No. 4:11-CV-3218
StatusPublished
Cited by4 cases

This text of 870 F. Supp. 2d 441 (Amegy Bank National Ass'n v. Monarch Flight II, LLC) is published on Counsel Stack Legal Research, covering District Court, S.D. Texas primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Amegy Bank National Ass'n v. Monarch Flight II, LLC, 870 F. Supp. 2d 441, 2012 U.S. Dist. LEXIS 59199, 2012 WL 1494340 (S.D. Tex. 2012).

Opinion

MEMORANDUM AND ORDER

LEE H. ROSENTHAL, District Judge.

This dispute arises out of a $15 million loan made by the plaintiff, Amegy Bank National Association. Amegy sued Monarch Flight II, LLC (“Monarch”), the borrower, and William B. Johnson (“Johnson”), the guarantor, after Monarch defaulted. Amegy also sued John T. Bobo, an attorney who represented Monarch and Johnson in connection with the Amegy loan; Bobo’s law firm, Bobo, Hunt, White & Nance; Host Hotels & Resorts L.P., an entity in which Johnson owned partnership units that were pledged as collateral for the loan; Host Hotels & Resorts, Inc., a corporation whose shares Johnson would receive if he chose to redeem his partnership units in Host Hotels & Resorts L.P.; Sandra T. Johnson, Johnson’s wife; and five business entities Johnson owns or controls (the “Johnson entities”).1 Amegy alleges the right to recover the outstanding principal and interest, as well as attorneys’ fees, under numerous causes of action, including fraud, conversion, money had and received, breach of contract, conspiracy, theft, and fraudulent transfers.

Monarch, Johnson, Johnson’s wife, and the Johnson entities (the “moving defendants”) have moved to dismiss in favor of arbitration and to compel arbitration. (Docket Entries No. 21, 66 & 72.) The motions argue that Amegy’s claims are subject to an arbitration agreement among Amegy, Johnson, and Monarch. That agreement provides for binding arbitration of disputes “in any way arising out of, pertaining to or in connection with” the $15 million loan or underlying documents. (Docket Entry No. 21-1, at 2.) Amegy has responded to the motions. (Docket Entries No. 75 & 90.) Amegy argues that because the arbitration agreement excludes injunctive-relief claims from arbitration and because it seeks permanent injunctive relief, compelling arbitration on the damages claims would be inefficient because the parties would simultaneously litigate the same issues in two fora. Amegy also argues that Johnson’s wife and the Johnson entities cannot compel arbitration because they were not parties to the arbitration agreement.

The court heard argument on the motions. Based on the pleadings; the motions and responses; the arguments of counsel; and the relevant law, this court grants the motions to compel arbitration and stays this action as to the moving [445]*445defendants pending the arbitration. A hearing on Amegy’s motion for contempt, (Docket Entry No. 86), and a status conference as to the claims against the Bobo defendants are set for May 11, 2012 at 2:30 p.m.

The reasons for these rulings are explained below.

1. Background2

Johnson is the sole owner and managing member of Monarch. In 2008, Monarch borrowed $15 million from Amegy. The loan was documented by a May 1 promissory note executed by Johnson as managing member of Monarch. Monarch was required to make monthly interest payments from July 1, 2008 until May 1, 2011, when all outstanding principal and accrued interest became due. (Docket Entry 33-1, at 1.) The $15 million was to be used to finance the purchase, repair, and upgrade of a Gulfstream Aerospace Gill Jet; to finance the development of Orchid Bay, a real-estate development project in the Bahamas; and “for any other Borrower or Guarantor purpose.” (Id. at 6.)

When Monarch executed the promissory note, Amegy entered into a guarantee agreement with Johnson and two security agreements, one with Johnson and one with Monarch. In the guarantee agreement, Johnson agreed to assume Monarch’s obligations under the note if Monarch defaulted. (Docket Entry No. 33-2, at 1.) The two security agreements pledged collateral to secure Amegy’s loan. The first security agreement — between Amegy and Monarch — granted Amegy a security interest in the GUI Jet. (Docket Entry No. 33-4, at 1.) The second security agreement — between Johnson and Amegy — granted Amegy a security interest in 825,457 Host Hotels & Resorts, L.P. partnership units that Johnson personally owned and in any shares of Host Hotels & Resorts, Inc. that Johnson would own as a result of redeeming the partnership units. (Docket Entry No. 33-3, at 1-2.) The agreement stated that Johnson would not “sell, assign, convey, pledge or otherwise dispose” of the units and shares without Amegy’s “prior written consent.” (Id. at 4.)

Johnson and Monarch also entered into an arbitration agreement with Amegy. The arbitration agreement’s “Binding Arbitration” clause stated, in relevant part:

Notwithstanding any provision in any Documents (defined below) to the contrary, upon the request of any of the undersigned ... whether made before or after the institution of any legal proceeding, any action, dispute, claim or controversy of any kind (for example, whether in contract or in tort, under statutory or common law, or legal or equitable) now existing or hereafter arising between or among the parties in any way arising out of, pertaining to or in connection with (1) the referenced Loan, any related agreements, documents, or instruments (collectively, “Documents”) or any transaction contemplated thereby, before or after maturity, or (2) any aspect of the past or present relationships of the parties to the loan Documents shall be resolved by mandatory and binding arbitration in accordance with the terms of this Arbitration Agreement.

(Docket Entry No. 21-1, at 2.) The agreement’s “Preservation of Remedies” clause stated that “[n]o provision of, nor the exercise of any rights under, this Arbitration Agreement shall limit the right of any party to employ other remedies, including [446]*446... obtaining provisional or ancillary remedies such as ... injunctive relief, sequestration, attachment, garnishment, or the appointment of a receiver from a court having jurisdiction before, during, or after the pendency of any arbitration.” (Id. at 3.) The clause also stated that “[t]he institution and maintenance of an action for judicial relief, pursuit of provisional or ancillary remedies, or exercise of self-help remedies shall not constitute a waiver of the right of any party ... to submit any Dispute to arbitration nor render inapplicable the compulsory arbitration provisions hereof.” (Id.) Neither Johnson’s wife nor the Johnson entities signed the arbitration agreement.

In December 2009 — after Monarch made some late interest payments on the Amegy loan and after Amegy requested a 50% prepayment of the principal under section 6(b) of the promissory note — Bobo sent Amegy a letter confirming that Johnson had 825,457 partnership units in Host Hotels, that the units were pledged to Amegy, and that they had a value of $9,666,101.44. (Docket Entry No. 33-8, at 1.) Five days later, Johnson sent Host Hotels a notice exercising his right to redeem the partnership units. In the notice, Johnson stated as follows:

the undersigned (a) has marketable and unencumbered title to such Units, free and clear of the rights of or interests of any other person or entity, (b) has the full right, power and authority to redeem and surrender such Units as provided herein and (c) has obtained the consent or approval of all persons or entities, if any, having the right to consult or approve such redemption and surrender.

(Docket Entry No. 33-9, at 2.)

Johnson did not inform Amegy that he was redeeming his Host Hotels partnership units. In January 2010, Johnson sold the redeemed units for $9,516,052.12.

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870 F. Supp. 2d 441, 2012 U.S. Dist. LEXIS 59199, 2012 WL 1494340, Counsel Stack Legal Research, https://law.counselstack.com/opinion/amegy-bank-national-assn-v-monarch-flight-ii-llc-txsd-2012.