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In re Deepwater Horizon

United States Court of Appeals, Fifth Circuit

May 12, 2017

IN RE: DEEPWATER HORIZON
v.
LAKE EUGENIE LAND & DEVELOPMENT, INCORPORATED, ET AL, Plaintiffs LOUIS J. FREEH, Special Master, Appellee
v.
BP EXPLORATION & PRODUCTION, INCORPORATED, ET AL, Defendants
v.
CRYSTAL SEAFOOD COMPANY, INCORPORATED, DWH Claimant 100100245, Claimant - Appellant
v.
PATRICK A. JUNEAU, In His Capacity as Claims Administrator and Trustee, Movant - Appellee

         Appeal from the United States District Court for the Eastern District of Louisiana

          Before DAVIS, CLEMENT, and COSTA, Circuit Judges.

          W. EUGENE DAVIS, Circuit Judge:

         Appellant Crystal Seafood Company, Inc. appeals a district court order holding Crystal and two of its officers (the Trans) jointly and severally liable for a $1, 034, 228.42 payment that Crystal received pursuant to the BP settlement.[1] For the reasons set out below, we AFFIRM.

         I.

         In 2013, the district court appointed a Special Master to examine and investigate suspicious past or pending claims submitted to the Deepwater Horizon Economic Claims Center ("DHECC"). The district court further ordered the Special Master to initiate legal action to "clawback" any already paid fraudulent claims.

         In 2015, the Special Master and the Claims Administrator filed a joint clawback motion seeking to recoup $1, 034, 228.42 that the DHECC paid to Crystal Seafood Company, Inc. In order to obtain this $1, 034, 228.42, Crystal was required to and did swear, inter alia, that it did not constitute a "failed business" under the terms of the settlement agreement. The Special Master and the Claims Administrator alleged that this misstatement constituted fraud, and sought to have the district court order Crystal and any individuals who benefitted from Crystal's misstatement to remit the full $1, 034, 228.42 to the DHECC.

         On May 24, 2016, the district court granted the clawback motion without a hearing, holding that there is no genuine dispute of material fact that Crystal was a failed business under the terms of the settlement agreement and that Crystal's sworn statement to the contrary constituted fraud. The district court then went on to pierce Crystal's corporate veil and hold two of Crystal's officers, Loc "Victor" Tran and Christopher Tran, jointly and severally liable with Crystal for the $1, 034, 228.42 owed.

         Crystal - and only Crystal - now appeals.

         II.

         Pursuant to the settlement agreement, we review the district court's grant of a clawback motion without a hearing as a grant of summary judgment. We review a district court's grant of summary judgment de novo, viewing all facts and drawing all inferences in a light most favorable to the non-moving party.[2] Summary judgment is proper when there is "no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law."[3]

         III.

         We treat a DHECC clawback motion as a common law fraud claim brought under general maritime law. To prove common law fraud, the Special Master and the Claims Administrator must establish: (1) that the claimant knowingly or recklessly (2) made a material misrepresentation (3) that he intended to be acted upon, and was in fact acted upon, to the detriment of the DHECC.[4]

         Crystal alleges that there is, at a minimum, a genuine dispute of material fact as to the first and second elements. We address each below.

         A.

         We first consider whether Crystal made a material misrepresentation.

         The settlement agreement defines a failed business as, inter alia, a business that subsequent to May 1, 2010, but prior to December 31, 2011: (1) ceased operations and wound down, or (2) initiated or completed a liquidation of substantially all of its assets.

         Crystal is a shrimp processor. It buys shrimp, processes them, and sells them for redistribution.

         In terms of operations, it is undisputed that Crystal processed the last of its shrimp approximately one year before the oil spill, in April or May 2009. It is also undisputed that Crystal sold the last of its frozen inventory approximately three months after the oil spill, in August 2010.

         In terms of liquidation, it is undisputed that Crystal submitted profit and loss statements to the DHECC - under oath - illustrating that Crystal stopped taking a depreciation expense[5] on its processing equipment the month of the oil spill, in May 2010. It is also undisputed that Crystal submitted tax returns to both the DHECC and the Internal Revenue Service ("IRS") - under oath - representing that Crystal "disposed" of all of its assets on or before December 31, 2010.

         Based upon this information, the district court held that Crystal was a failed business and was therefore ineligible for the $1, 034, 228.42 that it received. This finding was, again, based upon Crystal's own sworn statements. Crystal took a depreciation expense in every month prior to May 2010 - therefore, the district court held that Crystal initiated a liquidation of substantially all of its assets subsequent to May 1, 2010. Crystal "disposed" of all of its assets on or before December 31, 2010 - therefore, the district court held that Crystal completed a liquidation of substantially all of its assets prior to December 31, 2011.

         Crystal attacks its own 2010 tax returns on two grounds. First, it provides the affidavit of Victor Tran. Tran attests that Crystal "continues to own . . . well more than a million dollars" worth of processing equipment and implies that Crystal's 2010 tax returns were in error. It is, nonetheless, well-established that a non-movant "cannot create a genuine issue of fact sufficient to survive summary judgment simply by contradicting his or her own previous sworn statement . . . without explaining the contradiction or attempting to resolve the disparity."[6] Tran's implicit ...


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