FTE Networks, Inc. v. Ivie (In re Ivie)

587 B.R. 729
CourtUnited States Bankruptcy Court, D. Idaho
DecidedJuly 2, 2018
DocketCase No. 16-00374-TLM; Adv. No. 16-06020-TLM
StatusPublished
Cited by5 cases

This text of 587 B.R. 729 (FTE Networks, Inc. v. Ivie (In re Ivie)) is published on Counsel Stack Legal Research, covering United States Bankruptcy Court, D. Idaho primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
FTE Networks, Inc. v. Ivie (In re Ivie), 587 B.R. 729 (Idaho 2018).

Opinion

TERRY L. MYERS, CHIEF U. S. BANKRUPTCY JUDGE

*733Plaintiffs FTE Networks, Inc. and its wholly owned subsidiary Jus-Com, Inc. (referred to collectively as "FTE") brought this adversary proceeding seeking to except a debt from the discharge of defendant, chapter 7 debtor Ronald Ivie, Jr. ("Ivie"), under § 523(a)(6).1 The matter was tried on October 18 and 19, 2017.2 After the parties submitted written closing arguments, the matter was taken under advisement on February 12, 2018. This decision constitutes the Court's findings of fact and conclusions of law.3

FACTS

A. The Contractual Relationships

FTE is a contractor in the business of constructing telecommunications networks. Ericsson Inc. ("Ericsson") is a project manager that oversees construction projects for telecommunication service providers, such as CenturyLink. FTE and Ericsson entered into a "Master Service Agreement" in July 2014, which provided the terms of the relationship between Ericsson and FTE as its subcontractor on any future "task orders." Ex. 2017 ("MSA"). The MSA provides that any task orders accepted by FTE are subject to and become "a part of" the MSA. Id. at 2-3. The MSA included a three-year term, which automatically renewed for additional one-year terms until either party provided appropriate notice and terminated the MSA. Id. at 3.

Under the MSA, FTE performed construction of an expansion of CenturyLink's fiber optic network in Seattle, referred to by the parties as the "pilot project." In July 2014, Ivie, as president and manager of ID Consulting Solutions, LLC ("IDCS"), signed a contract with FTE to perform engineering and design work on the pilot project. Ex. 2039 at 12. IDCS was a business at least partially owned by Ivie.4

Ericsson later issued an additional task order awarding FTE the task of further expanding the fiber optic network for CenturyLink in Seattle and also a task order to expand CenturyLink's network in Las Vegas.5

In October 2014, FTE contracted with IM Services, LLC ("IMS") to provide engineering and design services related to the expansion of CenturyLink's fiber optic networks in Seattle and Las Vegas. Ex. 1000. IMS was a company created by Ivie and Alex McLarty ("McLarty"). According to McLarty, it was formed for the purpose of locating projects and obtaining funding for the projects. TR 2 at 7. After entering into its agreement with FTE, IMS then subcontracted with IDCS to perform the required engineering and design services. Once the services were rendered, IDCS

*734invoiced IMS, who in turn invoiced FTE for payment.6

On January 5, 2015, Ivie, as the president of IDCS, contacted FTE requesting payment of outstanding invoices. Ivie explained that more than $360,000 was owed and that IDCS was unable to continue performing work under the contract for FTE without payment. Ex. 1030. FTE responded that a "closing" was scheduled for the following week, suggesting that payment would be available then. Id.7

On January 16, 2015, Ivie again contacted FTE by email and explained that "I cannot continue spending $150K a month with $20K revenue," and "I have to have at least $15K a week to get caught up, if not, I will not make it." Ex. 1031. FTE responded by explaining that "[w]e are moving as fast as we can to get the docs in order" to complete "closing." Id.

On January 26, 2015, Ivie again contacted FTE, explaining "I'm running low on funds and cannot make payroll.... At this point, if we do not get paid up in a week, I will be forced ... to submit a lien on the Seattle and LV project. I have no choice.... This is coming to a point now, I have tried to hang on as long as possible, I have nowhere to go." Doc. No. 1032. FTE responded that it was finalizing a "refi" and that it would pay the outstanding invoices when it was complete. Further, FTE warned that filing liens would "be extremely bad for both of us" and would "get you no closer to being paid but will push it out much further." Id.

FTE failed to pay the outstanding invoices and the parties entered into negotiations regarding potential resolutions.8 One such solution involved FTE purchasing IDCS. FTE and Ivie, on behalf of IDCS, entered into an "Interest Purchase Agreement" ("IPA"), under which FTE would purchase a one-hundred percent interest in IDCS. Ex. 1027. However, another individual, Randy Dinger, claimed an interest in IDCS and would not agree to the transaction, and the IPA was eventually rescinded by FTE. Ex. 1035. Despite this attempt by IDCS and FTE to resolve their issues, and the commencement of an arbitration proceeding, no final resolution was reached.

B. IDCS's Chapter 11 Case

On July 10, 2015, Ivie caused IDCS to file a petition under chapter 11. Case No. 15-00918-TLM (the "IDCS Chapter 11"). IDCS, under Ivie's control, wanted to collect the FTE receivable. The schedules in the IDCS Chapter 11 case asserted FTE owed $729,285.01. Ex. 1045. The approach taken to collect this receivable is at the heart of this action.

Though IDCS was represented by counsel, Ivie consulted only with IDCS's bookkeeper and controller, Sabitha Kelsey ("Kelsey"), and McLarty. Kelsey, who had some prior experience filing liens for a residential construction company in Nevada, suggested that mechanics liens might be a means by which IDCS could secure and collect the amounts due. Kelsey testified she was on the "forefront" of the effort to determine whether mechanics liens could be used to secure what IDCS was owed. McLarty, who had no prior experience with filing mechanics liens, assisted Kelsey in researching whether using *735mechanics liens was a viable option. To that end, McLarty contacted an attorney in the Seattle area and, as a result, he and Kelsey thought it was appropriate to file mechanics liens against real properties in the area that would be serviced by the fiber optic networks for which IDCS provided engineering and design work. Ivie decided the liens should be threatened, then filed, and directed Kelsey to prepare the necessary documents to send to the property owners. Over the course of several days, Kelsey identified hundreds of property owners in Seattle and Las Vegas and prepared notices to be sent to each property owner.

On July 21, 2015, IDCS, under Ivie's direction, issued fifteen-day notices of intent to lien, with attached letters signed by Ivie as president of IDCS (the"Lien Letters"). The Lien Letters were sent to hundreds of home and other real property owners in Seattle and Las Vegas. See, e.g. , Exs. 2002, 2006. The Lien Letters generally outlined the relationships between CenturyLink, Ericsson, FTE, and IDCS, and explained that IDCS had provided engineering and design services necessary for expansion of CenturyLink's fiber optic network. The Lien Letters further explained that FTE had failed to pay IDCS for its services and, despite contacting Ericsson and CenturyLink, IDCS remained unpaid. The Lien Letters asserted that FTE's nonpayment created a "financial crisis" and that IDCS was forced to file liens in order to secure payment.

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Bluebook (online)
587 B.R. 729, Counsel Stack Legal Research, https://law.counselstack.com/opinion/fte-networks-inc-v-ivie-in-re-ivie-idb-2018.