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Alesco Preferred Funding XIV Ltd v. DNIC Insurance Holdings Inc.

United States District Court, N.D. Texas, Dallas Division

January 5, 2018




         Before the Court is Plaintiff's Motion for Summary Judgment. Doc. 49. For the reasons that follow, the Court GRANTS the motion.



         This is a breach-of-contract case. In December 2006, Defendant DNIC Insurance Holdings Inc (DNIH) issued nearly fifteen and a half million dollars worth of debt securities to U.S. Bank National Association (Trustee) as trustee of DNIH's capital trust (Trust). Doc. 56, Def.'s Resp., 2. The Trust simultaneously issued to its investors fifteen million dollars of preferred securities. Id. Plaintiff Alesco Preferred Funding XIV LTD (Alesco) purchased those preferred securities from the Trust for fifteen million dollars. Id. In exchange, DNIH promised to return to Alesco the fifteen-million-dollar principal (the Principal) plus interest. Id. This transaction occurred pursuant to a Junior Subordinated Indenture (Indenture). Id. At issue in this case is the Indenture's “Significant Subsidiaries” provision. It prevents DNIH from selling its significant subsidiaries unless the buyer expressly assumes DNIH's obligation to pay Alesco in a supplemental indenture, which must be executed at the sale's closing. Id. at 2-3; see also Doc. 1-1, Indenture, § 8.1(a).

         In March 2013, DNIH sold Dallas National Insurance Company (DNIC), one of DNIH's significant subsidiaries, to Lonestar Holdco, LLC (Lonestar). Id. at 5. Yet DNIH and Lonestar did not execute a supplemental indenture requiring Lonestar to assume DNIH's repayment obligations before closing. Doc. 50, Pl.'s Br. in Supp., 5; see also Doc. 1-6, Certificate to Trustee, 2. Instead, DNIH and Lonestar agreed to execute a supplemental indenture sometime after the sale. Doc. 56, Def.'s Resp., 5-6. But they never did. Id.

         DNIH's failure to timely execute a supplemental indenture constituted a default under the Indenture. Doc. 1-1, Indenture, § 5.1(c). So on October 5, 2015, Alesco accelerated DNIH's repayment obligation, making the Principal and any accrued interest due to Alesco immediately. Doc. 50, Pl.'s Br. in Supp., 7. DNIH did not pay Alesco, so in March 2016, Alesco filed this breach-of-contract lawsuit to recover from DNIH the Principal and more than two million dollars of interest accrued since May 1, 2017. Id. at 8-9.

         Alesco filed a motion for summary judgment, Doc. 49, arguing DNIH breached the Indenture by failing to execute a supplemental-indenture before selling DNIC to Lonestar, Doc. 50, Pl.'s Br. in Supp., 11. According to Alesco, DNIH must now return the Principal to Alesco, plus interest. Id. DNIH counters that its default should be excused, and, in the alternative, argues Alesco is not entitled to the interest yet. Doc. 56, Def.'s Resp., 12-15. Alesco's motion for summary judgment is now ripe before the Court.



         Summary judgment is appropriate “if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a). A dispute “is ‘genuine' if the evidence is sufficient for a reasonable jury to return a verdict for the non-moving party.” Burrell v. Dr. Pepper/Seven Up Bottling Grp., 482 F.3d 408, 411 (5th Cir. 2007). And a fact “is ‘material' if its resolution could affect the outcome of the action.” Id.

         The summary judgment movant bears the burden of proving that no genuine issue of material fact exists. Latimer v. Smithkline & French Labs., 919 F.2d 301, 303 (5th Cir. 1990). Usually this requires the movant to identify “those portions of the pleadings, depositions, answers to interrogatories, and admissions on file, together with affidavits, if any, which it believes demonstrate the absence of a genuine issue of material fact.” Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986) (internal quotation marks omitted). But if the non-movant ultimately bears the burden of proof at trial, the movant may satisfy its burden just by pointing to the absence of evidence supporting the non-movant's case. Id. at 322-23.

         If the movant meets that burden, then the non-movant must “show with significant probative evidence that there exists a genuine issue of material fact.” Hamilton v. Segue Software Inc., 232 F.3d 473, 477 (5th Cir. 2000) (internal quotation marks omitted). And significant probative evidence is just that: significant. See Little v. Liquid Air Corp., 37 F.3d 1069, 1075 (5th Cir. 1994) (per curiam). “[M]etaphysical doubt as to material facts, ” “conclusory allegations, ” “unsubstantiated assertions, ” or a mere “scintilla of evidence” will not do. Id.(internal citations and internal quotation marks omitted). Rather, “the non-movant must go beyond the pleadings and present specific facts indicating a genuine issue for trial.” Bluebonnet Hotel Ventures, L.L.C. v. Wells Fargo Bank, N.A., 754 F.3d 272, 276 (5th Cir. 2014).

         To be sure, the court views evidence in the light most favorable to the non-movant when determining whether a genuine issue exists. Munoz v. Orr, 200 F.3d 291, 302 (5th Cir. 2000). But it need not “sift through the record in search of evidence to support a party's opposition to summary judgment.” Ragas v. Tenn. Gas Pipeline Co., 136 F.3d 455, 458 (5th Cir. 1998) (quoting Skotak v. Tenneco Resins, Inc., 953 F.2d 909, 915-16 & n.7 (5th Cir. 1992)). Simply put, the non-movant must “identify specific evidence in the record” and “articulate the ...

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