Bank of Montreal v. SK Foods, LLC

476 B.R. 588, 2012 WL 3286039, 2012 U.S. Dist. LEXIS 112941
CourtDistrict Court, N.D. California
DecidedAugust 10, 2012
DocketNo. 5:11-mc-80133-EJD
StatusPublished
Cited by9 cases

This text of 476 B.R. 588 (Bank of Montreal v. SK Foods, LLC) is published on Counsel Stack Legal Research, covering District Court, N.D. California primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Bank of Montreal v. SK Foods, LLC, 476 B.R. 588, 2012 WL 3286039, 2012 U.S. Dist. LEXIS 112941 (N.D. Cal. 2012).

Opinion

ORDER DENYING RESPONDENTS’ MOTION TO TRANSFER OR DISMISS AND GRANTING IN PART BMO’S MOTION TO AMEND THE JUDGMENT

EDWARD J. DAVILA, District Judge.

Presently before the court are the motions of Respondents SK PM Corp., Frederick Scott Salyer as trustee for the Scott Salyer Revocable Trust, and Frederick Scott Salyer in his individual capacity to stay this action or to transfer it to the Bankruptcy Court for the Eastern District of California. Also before the court is Bank of Montreal’s motion to amend the judgment to add the Respondents. For the reasons set forth below, the Respondents’ motions are denied and the bank’s motion is granted in part.

[593]*593I. BACKGROUND

A. Factual Background

On September 28, 2007, SK Foods LP and Bank of Montreal (“BMO”) executed a Credit Agreement by which SK Foods LP received access to $195 million of financing.1 SK Foods LLC unconditionally guaranteed SK Foods LP’s obligations under the Agreement. See Amended and Restated Credit Agreement (“Credit Agreement”) §§ 4.1-4.2, 12, Heiser Decl. Ex. 2 at BMO 40, 93-96.2 Scott Salyer, the president and sole owner of SK Foods LP and SK Foods LLC, signed for both companies. Id. at BMO 109. By April 16, 2009, SK Foods LP was in default, and BMO demanded payment from both SK Foods LP and SK Foods LLC.

B. The Eastern District Bankruptcy Proceedings

Unable to fulfil its obligations to BMO and other creditors, SK Foods LP filed a Chapter 11 bankruptcy petition on May 7, 2009, in the U.S. Bankruptcy Court for the Eastern District of California. In re SK Foods LP, No. 09-29162. The bankruptcy trustee in that case has initiated a number of adversary proceedings in the exercise of his duty to marshal the debtor’s assets. In one of those proceedings, the trustee seeks to substantively consolidate the assets of numerous Salyer-owned entities into the bankruptcy estate — including all the assets of Respondents SK PM Corp. and the Scott Salyer Revocable Trust — on the grounds that each of those entities is an alter ego of what was really one single enterprise. Adv. Proc. No. 10-02014 (the “Substantive Consolidation Proceeding”), filed Jan. 11, 2011.

C. The Chicago Action

On June 9, 2009, Bank of Montreal brought an action in the U.S. District Court for the Northern District of Illinois against SK Foods LLC for breach of the Credit Agreement guaranteeing SK Foods LP’s obligations. N.D. Ill. Case No. 09 C 3479 (the “Chicago Action”). SK Foods LLC was initially represented by counsel, but its attorneys withdrew while BMO’s summary judgment motion was pending and without ever filing a response. See Chicago Action ECF Nos. 11, 27, 71. That court granted BMO’s unopposed motion for summary judgment and, following a prove-up, entered a judgment in the amount of $128,256,391 against SK Foods LLC on September 28, 2010. Chicago Action ECF Nos. 72, 73, 81.

D. The Eastern District Criminal Case

Meanwhile, Scott Salyer faces criminal charges of racketeering, wire fraud, falsification of records in a federal investigation, and price fixing in the U.S. District Court for the Eastern District of California. E.D. Cal. Case No. 2:10-CR-0061-LKK. The criminal case was filed on January 5, 2010, while the Chicago action was ongoing. On March 23, 2012 — while the present motion to amend the Chicago judgment was pending in this case — Salyer and the prosecuting federal agency entered into a plea agreement which would resolve all the charges against him. Judge Karl-ton has yet to accept or reject the plea agreement; judgment and sentencing were [594]*594scheduled for July 10, 2012, but have been continued to September 5, 2012.

E. Stay Orders in the Criminal and Bankruptcy Cases

In April 2010, shortly after criminal charges were filed against Salyer, various Salyer-owned entities moved to stay the bankruptcy adversary proceedings. Bankruptcy Judge Bardwil denied the motions, but District Judge Karlton reversed on appeal and remanded with specific instructions to the parties and the bankruptcy court. All adversary proceedings were subsequently stayed. On June 6, 2012, after Salyer entered his guilty plea, Judge Karlton ordered the bankruptcy court to vacate the stays.

F. This Action

On June 13, 2011, BMO registered the judgment from the Chicago Action in this district pursuant to 28 U.S.C. § 1963, which opened this case file. Two weeks later, BMO filed in this case a request to amend the judgment to add three parties as judgment-debtors: (1) SK PM Corp., (2) the Scott Salyer Revocable Trust (“the Trust”), and (3) Scott Salyer in his individual capacity (collectively, the “Respondents”). BMO’s request is based on allegations that Scott Salyer controls all of the companies and has disregarded all corporate formalities, and argues that the Respondents are therefore liable as alter egos of SK Foods LLC.

On August 8, 2011, the Respondents filed a one-page request to stay the determination of whether the Respondents should be added to the judgment until the resolution of the alter ego adversary proceeding in the Eastern District of California Bankruptcy Court. This court heard both parties’ motions on August 19, 2011. The court requested further briefing and held another hearing on September 23, 2011. In the briefing, the Respondents moved to stay the case or to transfer it to the Eastern District of California.

On May 15, 2012, after the plea agreement was entered in Salyer’s criminal case, this court issued an order to show cause in order to give the Respondents an opportunity to explain what defenses they had been unable to present earlier. In response, the Respondents renew their request for a stay or transfer and, for the first time, oppose BMO’s motion to amend the judgment on its merits.

II. RESPONDENTS’ EVIDENTIARY OBJECTIONS

As an initial matter, the court must address the Respondents’ cursory challenge to the entire body of evidence that BMO has submitted in support of its motion to amend the judgment. Over the course of this action, BMO has submitted more than one hundred exhibits in support of its several briefs. See, e.g., ECF Nos. 3-7, 37. In the Respondents’ most recent filing (their response to the order to show cause), they complain that “much of BMO’s evidence is inadmissible hearsay, irrelevant and otherwise objectionable,” and purport to “preserve their objections to all evidence BMO submitted.” Resp. Order Show Cause at 4:20-21 & n. 2, ECF No. 54.

The Respondents have no preservable right to object to the evidence that BMO submitted more than nine months ago. BMO’s motion to amend the judgment was taken under submission by the court on September 23, 2011. The recent order to show cause allowed the Respondents to supplement the record with any evidence that it was unable or unwilling to submit while the investigation phase of the criminal proceeding was ongoing and to explain that evidence through briefing, but did not invite new theories on submitted matters. [595]*595Respondents’ objections — if they can even be so characterized — are overruled.

III. DISCUSSION

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Cite This Page — Counsel Stack

Bluebook (online)
476 B.R. 588, 2012 WL 3286039, 2012 U.S. Dist. LEXIS 112941, Counsel Stack Legal Research, https://law.counselstack.com/opinion/bank-of-montreal-v-sk-foods-llc-cand-2012.