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Keybank National Association v. Fleetway Leasing Co.

United States District Court, E.D. Pennsylvania

August 23, 2019

KEYBANK NATIONAL ASSOCIATION, et al.,, Plaintiffs,
v.
FLEETWAY LEASING COMPANY, et al., Defendants, AND 1ST SOURCE BANK, Intervenor Plaintiff, AND SANTANDER BANK,, Intervenor Defendant.

          MEMORANDUM

          Paul S. Diamond, Judge

         William T. Hangley, acting as Receiver pendente lite for the Fleetway Entities, asks me to order Fleetway's secured creditors to disclose the legal fees and expenses they have incurred during this litigation. (Receiver's Mot., Doc. No. 275.) KeyBank has already provided the Receiver with this information. (Doc. No. 278.) Four of the creditors-Santander, TD Bank, PNC, and 1st Source-refuse to do so, objecting primarily on standing, attorney-client privilege, and relevance grounds. (Doc. Nos. 277, 279, 281, 283.) I will overrule the Banks' objections, but deny the Receiver's Motion without prejudice.

         I. BACKGROUND

         On February 14, 2018, KeyBank filed a Complaint against Fleetway Leasing Company and FMC3, LLC (a related entity) seeking recovery of monies owed, the appointment of a receiver, and relief from the Fleetway Entities' fraudulent misrepresentations that induced KeyBank to extend credit. (Doc. No. 1.)

         Two other banks to which Fleetway was indebted-Santander and 1st Source-were granted permission to intervene. (Doc. Nos. 7, 11, 18.) 1st Source subsequently filed its own Complaint against Fleetway, FMC2, Inc. (another Fleetway entity), and the Stampses (Fleetway's owners). (Doc. No. 21.)

         In February and April 2018, Santander and KeyBank filed separate Confession of Judgment Complaints against the Stampses for amounts due under the guaranties that William, Carole, and Eric Stamps had pledged to the Banks in return for loans to the Fleetway Entities. (Compl., Doc. No. 1, Civ. No. 18-1303; Compl., Doc. No. 1, Civ. No. 18-1559; Compl., Doc. No. 1, Civ. No. 18-1560.) The Clerk of Court subsequently entered Judgment by Confession against the Stampses and in favor of Santander and KeyBank in amounts ranging from seven to ten million dollars. (Doc. No. 3, Civ. No. 18-1303; Doc. No. 8, Civ. No. 18-1559; Doc. No. 8, Civ. No. 18-1560.)

         On February 15, 2018, KeyBank asked Judge McHugh (to whom this matter was then assigned) to appoint a receiver to take control of the Fleetway Entities because of financial distress and ongoing mismanagement of the vehicles that served as the Banks' collateral. (Doc. No. 3.)

         On February 27, 2018, Judge McHugh held a hearing attended by Fleetway's secured creditors: KeyBank, Santander, TD Bank, PNC, and 1st Source. (See Feb. 27, 2018 Hr'g Tr., Doc. No. 24.) The creditors were concerned that the Stampses were self-dealing and misrepresenting Fleetway's finances. As KeyBank told Judge McHugh: “we've got a number of different banks here, with different interests, all at the same-or much of the same collateral that, clearly and admittedly, is not going to cover all of the outstanding debt.” (Id. at 20.) KeyBank thus asked Judge McHugh to appoint a receiver: “somebody who's overarching, reporting to the Court, and also beholden to everybody, and not reporting up to the principals of the defendants.” (Id. at 20- 21; see also id. at 33 (“[R]ight now, it's all within the control of Fleetway. And there isn't a great deal of confidence, even with [Fleetway's new manager].”).) 1st Source was similarly concerned: “[T]here's $35 million that are owed, in the aggregate, to these secured lenders. And pats on the back and notions of, you know, we'll take care of you, simply won't suffice.” (Id. at 37.)

         Fleetway argued that a receiver was unnecessary because, “with the outside folks in place, who are running a much cleaner ship and much more effective ship, ” Fleetway was “in a much better position to maximize value.” (Id. at 22.) Fleetway acknowledged, however, that questions remained respecting commingling and distributing funds, and that the main concern was “how do we keep this moving forward, so that everyone can get paid as much as possible.” (Id. at 33-35.)

         This assurance notwithstanding, the Banks continued to express their apprehension that Fleetway would favor one creditor over another. (See id. at 43 (“I was told that 1st Source was not going to be paid at the end of December, and I was told that Santander was not going to be paid at the end of December, but that PNC Bank and that TD Bank were going to be paid. And that turned out to be the case, we did not receive payment.”).)

         Santander objected to the appointment of a receiver, arguing that this would be an unnecessary expense on its collateral. (Id. at 36-38 (“[I]f a receiver was appointed for all the creditors, at this point, that's going to be on my client's back.”).)

         On March 9, 2018, Judge McHugh denied KeyBank's request for the appointment of a receiver, anticipating that with its new manager, Fleetway might work through its difficulties. (Doc. No. 19.)

         On April 23, 2018, all the cases related to Fleetway and the Stampses' indebtedness were reassigned to me. (Doc. No. 41; Doc. No. 7, Civ. No. 18-1559; Doc. No. 7, Civ. No. 18-1560.) On May 7, 2018, I consolidated the related cases before me in Civil Action Number 18-667. (Doc. No. 42.)

         On May 15, 2018, I ordered the Parties to file weekly status reports regarding their ongoing global settlement discussions. (Doc. No. 54.) I also ordered the Stampses to file any Petitions to Strike or Open the confessed judgments against them by May 31, 2018. ...


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