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In re Bankston

United States Court of Appeals, Fifth Circuit

April 18, 2014

In the Matter of: DENISE M. BANKSTON, Debtor
v.
DENISE M. BANKSTON, Appellant HESS MANAGEMENT FIRM, LLC, Appellee,

Page 400

Appeal from the United States District Court for the Western District of Louisiana.

For HESS MANAGEMENT FIRM, L.L.C., Appellee: Joseph R. Ward, Jr., Esq., Ward & Condrey, Covington, LA; James Willis Berry, Esq., Law Office of James W. Berry, Rayville, LA.

For DENISE M. BANKSTON, Appellant: Curtis Ray Shelton, Jody Todd Benson, Ayres, Warren, Shelton & Williams, L.L.C., Shreveport, LA.

Before OWEN and HAYNES, Circuit Judges and LEMELLE, District Judge.[*]

OPINION

Page 401

LEMELLE, District Judge

In this adversary proceeding connected to the bankruptcy of Denise M. Bankston (Bankston), Hess Management Firm, L.L.C. (Hess) sought to enforce Bankston's guaranty on a contract between Hess and Premier Aggregates, L.L.C (Premier). The bankruptcy court held that Premier breached the contract in bad faith, but the court limited the damages award to $375,000. Hess appealed to the district court, which overruled the bankruptcy court and awarded Hess the full value of the contract -- $1.5 million. Bankston appealed to this Court. For the reasons enumerated below, we reverse.

Facts and Procedural History:

The contract (Management Agreement or Agreement) had been entered into by Hess and Premier; Bankston was a member in Premier and served as a guarantor of the agreement. Hess sought to enforce the guaranty against Bankston following Premier's breach of the contract and subsequent insolvency.

The Agreement stated that Hess would provide certain management services related to the operation of the Fluker Pit, a gravel pit owned by Premier. In return for providing these services, Premier promised to pay Hess the greater of (1) $25,000 per month or (2) $0.50 per ton on all gravel produced by the Fluker Pit during a particular month. The Agreement provided for an initial term of five years and for the option of one-year renewals that could extend the term for another five years. The Agreement also provided that it could be terminated on certain conditions, as follows:

[A]t any time, either party may terminate this Agreement as to that Managed Pit on 180 days notice provided that Owner [(Premier)] may only terminate this Agreement as to that Managed Pit if Manager [(Hess)] is then in default of any of its material obligations under this Agreement, which Manager has not cured within 5 days notice thereof, or if Owner permanently shuts down the use of that Managed Pit. If and when the Agreement has been terminated as to the last Managed Pit then subject to this Agreement, the Agreement shall be terminated except for those obligations that survive the termination of the Agreement. Notwithstanding the foregoing, in the event that the operation of a Managed Pit(s) is unprofitable, then Owner may terminate this Agreement with respect to that Managed Pit(s) on a one month advanced notice to Manager.

In addition, the Agreement separately provided that it could be terminated by Premier if Hess did not remedy any deficient performance within three business days of receiving notice. The parties executed the Agreement on November 6, 2007, but provided that the Agreement was retroactively effective as of August 21, 2007.

On November 30, 2007, Premier, through its attorneys, sent Hess a notice stating that it was " completely dissatisfied with Hess's performance as Manager" and warning Hess that if it did not begin performing fully within three days, Premier would terminate the Agreement. Hess responded through its ...


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