Searching over 5,500,000 cases.

Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

Tennenbaum Capital Partners LLC v. Kennedy

September 11, 2009



Plaintiff Tennenbaum Capital Partners LLC ("Tennenbaum" or "Plaintiff") brings this breach of contract action against Defendant Michael T. Kennedy ("Kennedy" or "Defendant") alleging that Defendant has failed to pay Plaintiff $10 million owed under a guaranty agreement. Plaintiff moves the Court for summary judgment pursuant to Rule 56 of the Federal Rules of Civil Procedure. Defendant opposes Plaintiff's motion, arguing, inter alia, that he is entitled to discovery under Rule 56(f), and moving to compel discovery by way of a letter motion directed to Magistrate Judge Freeman. The Court has jurisdiction of this action pursuant to 28 U.S.C. § 1332. The Court has considered carefully all of the parties' submissions. For the reasons stated below, Defendant's Rule 56(f) application is denied and Plaintiff's motion for summary judgment is granted as to Defendant's liability for principal, interest and attorneys' fees. Defendant's letter motion to compel discovery is denied as moot.


The following material facts are undisputed. Defendant is a citizen of Pennsylvania. (Def's 56.1 ¶ 2; Pl's 56.1 ¶ 2.) Defendant was the CEO and majority shareholder of Radnor Holdings Corporation ("Radnor"). (Kennedy Decl. ¶ 2.) Pursuant to a Credit Agreement dated December 1, 2005 (the "Credit Agreement"), certain lenders (the "Lenders") loaned Radnor $95 million. The two secured loans making up the $95 million loan were referred to as Tranches A and B. (Def's 56.1 ¶ 5; Pl's 56.1 ¶ 5; Credit Agreement dated December 1, 2005 (Ex. 3 to the Hollander Decl.).) Under the Credit Agreement, Plaintiff is designated the Agent and Collateral Agent for the Lenders, with the power to act on behalf of the Lenders. (Def's 56.1 ¶ 6; Pl's 56.1 ¶ 6.) On or about April 4, 2006, the Lenders made an additional loan to Radnor in the principal amount of $23.5 million, referred to as the Tranche C Loan, pursuant to Amendment No. 1 to the Credit Agreement. (Def's 56.1 ¶ 7; Pl's 56.1 ¶ 7.) Plaintiff continued as the Agent and Collateral Agent for the Lenders under the amendment. (Hollander Decl. ¶ 6.) In connection with the Tranche C Loan, Defendant executed a Guaranty and Negative Pledge Agreement (the "Guaranty"), pursuant to which Defendant guaranteed repayment of not more than $10 million of the principal amount of the Tranche C Loan. (Def's 56.1 ¶ 8; Hollander Decl., Ex. 5.)*fn2

Radnor defaulted on payment of the Tranche A, B and C Loans. (Hollander Decl. ¶ 8; Pl's 56.1 ¶ 9.) By letter dated August 17, 2006, Plaintiff demanded payment from Defendant under the Guaranty. (Pl's 56.1 at ¶ 11; Hollander Decl., Ex. 6.) On August 21, 2006, Radnor and certain of its affiliates (collectively "Radnor") filed for Chapter 11 bankruptcy protection in the United States Bankruptcy Court for the District of Delaware. (Def's 56.1 ¶ 13; Pl's 56.1 ¶ 13.) In the course of the Chapter 11 proceedings, the Bankruptcy Court determined that the Plaintiff and the Lenders had an allowed secured claim of approximately $128.8 million and that the only competent evidence of record showed that the collateral securing the claim, consisting of substantially all of Radnor's assets, was valued at more than $132 million. (See Kennedy Decl., Ex. 1, In Re Radnor Holdings Corp., 353 B.R. 820, 846-47 (Bank. D. Del. 2006).) The bankruptcy court authorized the holder of the allowed $128.8 million claim to credit bid "any or all" of the claim "at any sale of property of [Radnor] that is subject to a lien that secures such Allowed Claim, and [to] offset any or all of such amounts against the purchase price of such property." (Judgment in Favor of Defendant on All Counts, dated Nov. 16, 2006, in Official Committee of Unsecured Creditors of Radnor Holdings Corp. v. Tennenbaum Capital Partners LLC (In Re Radnor Holdings Corp.), Adv. Pro. No. 06-50909, Chap. 11 Case No. 06-10894 PJW. (Ex. 1 to Def's Br. In Opp.) ("Judgment").)

In a September 22, 2006, order, the bankruptcy court approved bidding procedures for a sale of substantially all of Radnor's assets. (See Nov. 21, 2006, Order (1) Approving Sale of Substantially all of Debtors' Assets Free and Clear of all Liens, Claims, Interests and Encumbrances; (2) Approving Assumption and Assignment of Certain Contracts and Leases; and (3) Granting Related Relief, in In re Radnor Holdings Corp. ("Sale Order") (Ex. 7 to Hollander Decl.), at 2; see also Pl's 56.1 ¶ 15.) Plaintiff formed TR Acquisitions Co., LLC ("TRAC"), an affiliate, to be the entity that would, if necessary, bid for and acquire the Radnor assets. (Def's 56.1 ¶ 16; Pl's 56.1 ¶ 16.) The court's November 21, 2006, Sale Order approving the sale of substantially all of Radnor's assets to TRAC under an Amended and Restated Asset Purchase Agreement (the "APA") and pursuant to, inter alia, sections 105 and 363 of the Bankruptcy Code (11 USC §§ 105, 363) found that "Purchaser [TRAC] holds an allowed claim . . . in the amount of $128,835,557.26 . . . and was authorized [under the Judgment] to credit bid any or all of such Allowed Claim" at the auction. (Sale Order at ¶ Q.) The bankruptcy court held that the credit bid portion of TRAC's consideration for the sale was "a valid and proper offer pursuant to the Bid Procedures and Bankruptcy Code Sections 363(b) and 363(k)." (Sale Order at ¶ Q.) According to the APA, the "Credit Bid Amount" offered as part of the aggregate consideration for the assets, includes "$95,000,000, plus the amount of any accrued and unpaid interest payable to the lenders under Tranches A and B of the Tennenbaum Credit Agreement (the "Tennenbaum Lenders") through the Auction Date." (Id., Ex. A, APA at 3.1(a)(ii).) As previously noted, $95 million was the principal amount of the Tranche A and B loans. The APA makes no reference to the $23.5 million Tranche C loan. The bankruptcy court found that the total consideration bid by TRAC was "the highest and best offer received by Debtors" and approved the sale of Radnor's assets to TRAC "free and clear of all Liens, Claims, Interests and Encumbrances, because, with respect to each creditor asserting a Lien, Claim or Interest, one or more of the standards set forth in Bankruptcy Code §363(f)(1)-(5) has been satisfied." (Sale Order ¶¶ R, T.)

The Sale Order provides that it is binding on, among others, "all creditors and equityholders of any of the Debtors." (Id. at ¶ 25; see also fn. 1 (identifying debtors).)


Summary judgment in favor of a moving party is appropriate where the "pleadings, the discovery and disclosure materials on file, and any affidavits show that there is no genuine issue as to any material fact and that the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(c). A fact is material "if it 'might affect the outcome of the suit under the governing law,'" and "[a]n issue of fact is 'genuine' if 'the evidence is such that a reasonable jury could return a verdict for the nonmoving party.'" Holtz v. Rockefeller & Co., 258 F.3d 62, 69 (2d Cir. 2001) (quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986)). The nonmoving party "must do more than simply show that there is some metaphysical doubt as to the material facts. . . . [T]he nonmoving party must come forward with specific facts showing that there is a genuine issue for trial." Caldarola v. Calabrese, 298 F.3d 156, 160 (2d Cir. 2002) (quoting Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586-87 (1986) (alteration in original)). The opposing party's facts "must be material and of a substantial nature, not fanciful, frivolous, gauzy, spurious, irrelevant, gossamer inferences, conjectural, speculative, nor merely suspicions." Contemporary Mission, Inc. v. United States Postal Service, 648 F.2d 97, 107 n. 14 (2d Cir. 1981) (quotation marks omitted); see also Cifarelli v. Vill. of Babylon, 93 F.3d 47, 51 (2d Cir. 1996) (holding that "mere conclusory allegations, speculation or conjecture" will not provide a sufficient basis for a non-moving party to resist summary judgment). The Court must view the evidence in the light most favorable to the nonmoving party and draw all reasonable inferences in the nonmoving party's favor. Rubens v. Mason, 527 F.3d 252, 254 (2d Cir. 2008).

Rule 56(f) provides that, "[i]f a party opposing the motion shows by affidavit that, for specified reasons, it cannot present facts essential to justify its opposition, the court may: (1) deny the motion; (2) order a continuance to enable affidavits to be obtained, depositions to be taken, or other discovery to be undertaken; or (3) issue any other just order." Fed. R. Civ. P. 56(f). The party seeking discovery pursuant to Rule 56(f) must file an affidavit explaining "the nature of the uncompleted discovery; how the facts sought are reasonably expected to create a genuine issue of material fact; what efforts the affiant has made to obtain those facts; and why those efforts were unsuccessful." Paddington Partners v. Bouchard, 34 F.3d 1132, 1138 (2d Cir. 1994). However, a party is not automatically entitled to discovery under 56(f); "[e]ven where a Rule 56(f) motion is properly supported, a district court may refuse to allow additional discovery if it deems the request to be based on speculation as to what potentially could be discovered." National Union Fire Insurance Company of Pittsburgh v. Stroh Companies, Inc., 265 F.3d 97, 117 (2d Cir. 2001). Rule 56(f) is not a shield against all summary judgment motions and a "bare assertion" that evidence supporting a party's allegations lies in the hands of the opposing party is insufficient to justify denying a summary judgment motion. Paddington, 34 F.3d at 1138.

Defendant's arguments in opposition to Plaintiff's motion for summary judgment focus principally on his asserted need for discovery in order to determine (i) Plaintiff's citizenship and the basis of this Court's subject matter jurisdiction; (ii) whether Plaintiff's claim against Radnor, if it did not credit bid the Tranche C Loan amount, has been sold to another, paid or substantially reduced; and (iii) whether Plaintiff has been made whole because the assets purchased were worth more than Plaintiff paid for them. Defendant has, however, failed to proffer anything more than speculative assertions in support of his Rule 56(f) application and, with respect to the merits, the materiality of the information he claims he needs and, thus, has failed to demonstrate the need for further discovery prior to resolution of the merits of Plaintiff's summary judgment motion.


Plaintiff has proffered, in response to an order to show cause issued by the Court, the Declaration of Attorney Leonard Benowich, detailing the citizenship of Plaintiff. (See Docket Entries No. 3, 5.) Under penalty of perjury and based on personal knowledge, Benowich declares that Tennenbaum is a limited liability company organized under the laws of the state of Delaware consisting of twelve members. (See Docket Entry No. 5, at ¶¶ 3, 5.) Each of these members is a citizen of the State of California and none is a citizen of the State of Pennsylvania. (Id. at ¶ 5.) Benowich and David Hollander, Plaintiff's Managing Director, have also provided declarations in support of Plaintiff's motion for summary judgment. In Hollander's Reply Declaration, under penalty of perjury and based on personal knowledge, Hollander again states that each of Plaintiff's members is a citizen of California and that none is a citizen of Pennsylvania. (See Hollander Reply Decl. ¶ 2.) Hollander also states that the identity of Plaintiff's members is proprietary and extremely confidential and is not even shared with all of the other senior employees of the Plaintiff. (Id. at ¶ 3.)*fn3

Notwithstanding Defendant's failure to proffer any factual basis for an inference of lack of subject matter jurisdiction the Court, mindful of its obligation to determine that it is acting in a matter of which it has jurisdiction, see E.R. Squibb & Sons v. Accident & Cas. Ins. Co., 160 F.3d 925, 929 (2d Cir. 1998) ("Since subject matter jurisdiction is an unwaivable sine qua non for the exercise of federal judicial power [the Court] must consider whether there is diversity jurisdiction in this action" (internal quotations and citations omitted)), has examined in camera the declarations from Benowich and Hollander proffering that all of Plaintiff's members were citizens of California as of the time this action was commenced, as well as a list of Plaintiff's members at the time the action was commenced. The Court finds that Plaintiff's proffers regarding its citizenship are sufficient to establish that the Court has diversity jurisdiction of this action. The materials submitted for the Court's in camera review will remain sealed based on Plaintiff's affidavits attesting to the commercial sensitivity of the entity membership information included therein.

Defendant asserts that he continues to lack information sufficient to confirm or deny Plaintiff's jurisdictional allegations, speculates that other companies allegedly controlled by Plaintiff might be alter egos of Plaintiff and that their citizenship might destroy diversity were they joined here, and complains of Plaintiff's refusal to reveal the citizenship information absent a confidentiality condition. (See note 2.) Defendant, however, provides no factual basis for his contention that the Court may lack subject matter jurisdiction. In the face of Plaintiff's proffered evidence, including repeated declarations made under penalty of perjury regarding Plaintiff's citizenship, Defendant offers only speculation and bare assertion that discovery of the ...

Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.