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Autozone Parts, Inc. v. Red Hot International, LLC

United States District Court, W.D. Tennessee, Western Division

June 27, 2017

AUTOZONE PARTS, INC., Plaintiff,
v.
RED HOT INTERNATIONAL, LLC, MIDLAND AMERICAN CAPITAL CORPORATION, RHI GLOBAL, LLC, DAVID BRANCH, and MICHEAL BROWN, Defendants.

          ORDER

          SAMUEL H. MAYS, JR. UNITED STATES DISTRICT JUDGE

         Before the Court is the Motion for Summary Judgment (the “Summary-Judgment Motion”) filed by Defendant Midland American Capital Corp. (“Midland”) on October 26, 2016. (ECF No. 40.) No party has filed a response to the Summary-Judgment Motion, and the deadline for doing so has passed. L.R. 7.2(a)(2).

         For the reasons stated below, the Summary-Judgment Motion is GRANTED.

         I. HISTORY

         On October 28, 2015, Plaintiff AutoZone Parts, Inc. (“AutoZone”) filed a Complaint for Interpleader (the “Interpleader Complaint”). (ECF No. 1.) The Interpleader Complaint names five defendants: Midland; Red Hot International, LLC (“Red Hot”); RHI Global, LLC (“RHI”); David Branch (“Branch”); and Michael Brown (“Brown”).[1] (Id. ¶¶ 2-6.)

         The Interpleader Complaint alleges the following: In April 2014, AutoZone entered into an agreement (the “Vendor Agreement”) to purchase lighters from Red Hot. (Id. ¶¶ 10, 27.) Red Hot began selling lighters to AutoZone. (Cf. id. ¶¶ 24, 27 (discussing invoices).) In a letter to AutoZone dated February 9, 2015, Red Hot represented that, as of October 1, 2014, it had “assign[ed] its performance obligations under the April 2014 Vendor Agreement to [RHI] and that all purchase orders should be directed to [RHI] and not [Red Hot].” (Id. ¶ 14.)

         In March 2015, Midland filed suit against AutoZone in New York state court. (Id. ¶ 18.) Midland's complaint (the “Midland Complaint”) is attached to the Interpleader Complaint. (See id. ex. E.) The Midland Complaint alleged that, in March 2014, Midland and Red Hot had entered into a Factoring and Supply Agreement (“FSA”).[2] (Midland Compl. ¶ 3.) Under the FSA, “Midland purchased certain accounts receivable of [Red Hot], and became the irrevocable assignee of Red Hot's accounts receivable.” (Id.) The Midland Complaint alleged that, “[b]y virtue of its failure to pay pursuant to the terms of [certain invoices dated between October 2014 and December 2014], AutoZone has breached its contract with Red Hot to make payment, and Midland is the assignee of those contractual rights.” (Id. ¶ 11.) The invoices totaled $72, 824.00. (Id. ¶ 12; see also Interpleader Compl. ¶ 19.) Midland and AutoZone reached a settlement addressing the invoices in October 2015. (Interpleader Compl. ¶ 24.)

         In the Interpleader Complaint, AutoZone admits that, notwithstanding the settlement, it still owes payment for distinct invoices “pertain[ing] to goods . . . ordered between November 2014 and March 2015.” (Id. ¶¶ 27, 30; see also id. exs. J, K (schedule of invoices and copies of invoices).) Those invoices total $111, 101.76. (See, e.g., id. ¶ 27.) AutoZone alleges that it has received “conflicting demands” for payment “from various persons purporting to represent the interests of [Red Hot] and/or [RHI].” (Id. ¶ 20; see also id. ¶¶ 21-23 (detailing demands).) AutoZone alleges that it “is unable to assess the validity of the competing claims made by the Defendants in this matter.”[3] (Id. ¶ 26.) AutoZone sought to interplead $111, 101.76 (the “Disputed Funds”) so that the Court could resolve Defendants' interests in the Funds. (Id. ¶¶ 28, 34.)

         On the day it filed the Interpleader Complaint, AutoZone filed a Motion for Leave to Deposit Funds in the Court's Registry (the “Deposit Motion”). (ECF No. 4.) The motion was granted on October 29, 2015. (Order Granting Mot. for Leave to Deposit Funds in Ct.'s Registry, ECF No. 13.) On or about November 17, 2015, AutoZone sent the Clerk's Office a check for the amount of the Disputed Funds. (Not. of Deposit of Funds in Ct.'s Registry, ECF No. 15 (“Deposit Notice”).)

         On December 21, 2015, Branch filed a document titled “Objection to [AutoZone's] Complaint for Interpleader” (the “Branch Objection”). (ECF No. 20.) Branch argues that “[t]he defendants in this matter are all victims of an orchestrated fraud by AutoZone.” (Id. ¶ 1.) The Objection does not assert that Branch is entitled to any portion of the Disputed Funds. (See generally id. ¶¶ 1-3.)

         On February 11, 2016, AutoZone filed a motion to dismiss Brown from the action. (Mot. to Dismiss Brown.) The motion was granted later that day. (Order Granting Mot. to Dismiss Def. Micheal Brown Without Prejudice, ECF No. 29.)

         The same day, Midland answered the Interpleader Complaint (the “Midland Answer”). (Def.'s Answer to Interpleader Compl., ECF No. 30.) After answering the allegations of the Complaint, Midland asked, inter alia, that the Court “enter an order dismissing [AutoZone] from the action, ” and that the Court “determine that the Disputed Funds constitute ‘Collateral' of Red Hot, to which Midland has a first priority security interest pursuant to the [FSA] . . . and therefore, Midland is entitled to all of the Disputed Funds . . . .” (Id. at 3.)

         On June 14, 2016, AutoZone filed a Motion for Discharge, Relief from Liability, and Permanent Injunction (the “Discharge Motion”). (ECF No. 35.) The Discharge Motion sought an order “(1) discharging AutoZone from this statutory interpleader ac- tion; (2) relieving AutoZone from any liability as to the [Disputed Funds], and (3) enjoining all further actions with respect to the disputed funds.” (Id. at 1.) On June 15, 2016, the Court entered an order granting the Discharge Motion (the “Discharge Order”). (Order Granting Mot. for Discharge, Relief from Liability, and Permanent Inj., ECF No. 36.) That order stated that “AutoZone is hereby discharged from this statutory interpleader action; AutoZone is relieved from any liability as to the disputed funds that have been deposited into the Court's registry; and any further actions with respect to the disputed funds are permanently enjoined.” (Id. at 1.)

         On the same day the Court entered the Discharge Order, Midland filed a motion seeking the entry of defaults against Red Hot and RHI. (Def. Midland Am. Capital Corp.'s Mot. for Entry of Defaults Against Defs. Red Hot Int'l, LLC and RHI Global, LLC, ECF No. 37.) Midland stated that, although Red Hot and RHI had been served with process, neither had responded to the Interpleader Complaint. (Id. at 1.) On August 8, 2016, the Clerk of Court docketed an Entry of Default as to Red Hot and RHI. (Entry of Default, ECF No. 39.)

         On October 26, 2016, Midland filed the Summary-Judgment Motion. Midland argues that it “is the only Defendant who has asserted a claim to the Disputed Funds, ” and that “it is entitled to recover the Disputed Funds.” ...


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