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West Linn Paper Co. v. Alberta-Pacific Forest Industries, Inc.

United States District Court, D. Oregon

October 19, 2018

WEST LINN PAPER COMPANY; COLUMBIA RIVER LOGISTICS, INC.; and 6200605 CANADA, INC., Plaintiffs,
v.
ALBERTA-PACIFIC FOREST INDUSTRIES, INC.; CANFOR PULP AND PAPER SALES, LTD.; CARGILL, INC.; MERUBENI AMERICA CORPORATION; and RESOLUTE FP, INC., Defendants. CANFOR PULP AND PAPER SALES LTD., Third-Party Plaintiff,
v.
WELLS FARGO BANK, N.A., and BELGRAVIA PULP HOLDINGS, INC., Third-Party Defendants.

          JOSEPH M. VANLEUVEN NICHOLAS A. KAMPARS BLAKE J. ROBINSON DAVIS WRIGHT TREMAINE LLP ATTORNEYS FOR PLAINTIFF WEST LINN PAPER COMPANY AND COLUMBIA RIVER LOGISTICS, INC.

          TARA J. SCHLEICHER JASON M. AYRES, ROBERT J. KEACH LINDSAY ZAHRADKA MILNE ADAM R. PRESCOTT BERNSTEIN, SHUR, SAWYER & NELSON, P.A. ATTORNEYS FOR PLAINTIFF 6200605 CANADA, INC., AND THIRD-PARTY DEFENDANT BELGRAVIA PULP HOLDINGS, INC.

          CLIFFORD S. DAVIDSON SUSSMAN SHANK, LLP ATTORNEYS FOR DEFENDANT ALBERTA-PACIFIC FOREST INDUSTRIES, INC.

          CONDE T. COX, KEITH Y. BOYD ATTORNEYS FOR DEFENDANT/THIRD-PARTY PLAINTIFF CANFOR PULP AND PAPER SALES, LTD.

          OPINION AND ORDER

          ANNA J. BROWN UNITED STATES SENIOR DISTRICT JUDGE

         This matter comes before the Court on the Motion (#70) for Summary Judgment and Revised Motion (#108) for Summary Judgment filed by Plaintiff 6200605 Canada, Inc. (605 Canada) and the Cross-Motion (#79) for Summary Judgment filed by Defendant Canfor Pulp and Paper Sales, Ltd.[1]

         Plaintiffs and Defendant Alberta-Pacific Forest Industries, Inc. (Al-Pac) settled their dispute before the Court's resolution of 605 Canada's Motion, and, therefore, the Court DENIES as moot that part of 605 Canada's Motion against Al-Pac.

         For the reasons that follow, the Court DENIES 605 Canada's Motion against Canfor and GRANTS in part and DENIES in part Canfor's Cross-Motion against 605 Canada.

         BACKGROUND

         The following facts are taken from the Joint Statements of Undisputed Material Facts (#100, #101) and the materials submitted by the parties regarding the Motions and are undisputed unless otherwise noted. Because the record is sufficiently developed to resolve these matters, the Court concludes oral argument is unnecessary.

         I. Factual Background

         Plaintiff West Linn Paper Company operated a paper mill in Clackamas County, Oregon. As part of its mill operations West Linn purchased wood-pulp products from, among others, Al-Pac and Canfor.

         Plaintiff Columbia River Logistics, Inc. (CRL) is located in Vancouver, Washington, and provides storage, warehousing, transportation, and loading/unloading logistical services for wood-pulp products.

         Brian Konen is the president of West Linn; CRL; and Belgravia Investments, Inc., the parent company of Third-Party Defendant Belgravia Pulp Holdings, Inc. (BPH).

         As a result of agreements between West Linn, 605 Canada, CRL, BPH, Wells Fargo, and other entities that are not parties to this case, 605 Canada obtained and perfected security interests in all real and personal property belonging to West Linn and BPH obtained and perfected its security interests in West Linn's property.

         In January 2016 Canfor executed an agreement (Canfor Agreement) to sell West Linn 10, 000 metric tons of wood pulp per calendar year in monthly shipments of 500 metric tons from January through April 2016 and 1, 000 metric tons for May through December 2016. Paragraph 5 of the Canfor Agreement provides: “Invoicing and Method and Place of Delivery: CPT [West Linn's] Mill in West Linn, OR. . . . Product will be invoiced upon departure from [CRL], or as appropriate.” Between August 10, 2017, and October 12, 2017, Canfor shipped wood pulp (Canfor Inventory) to CRL pursuant to the Canfor Agreement with West Linn.

         On October 16, 2017, however, West Linn ceased operations.

         On October 19, 2017, Canfor requested CRL allow removal of the Canfor Inventory from CRL, but CRL refused and indicated 605 Canada and BPH, as secured creditors of West Linn, asserted security interests in the Canfor Inventory.

         In response to notice from West Linn that it would be discontinuing operations, Canfor sent a letter to West Linn and CRL on October 20, 2017, in which Canfor stated the Canfor Inventory was in the process of being delivered or had been delivered. Canfor demanded delivery of the Canfor Inventory to be stopped and/or the Canfor Inventory to be returned to Canfor.

         West Linn and CRL did not release the Canfor Inventory.

         On January 2, 2018, the Court authorized the deposit by Canfor of $1, 200, 000 with the Clerk of Court that represents the value of the Canfor Inventory as stipulated by the parties, and the physical goods were released to Canfor by CRL/West Linn with the approval of 605 Canada and BPH. It is undisputed that the Canfor Inventory was not physically moved from CRL until sometime after January 9, 2018.

         The parties agree during 2016 and 2017 Canfor sold to West Linn other wood pulp that is not part of the Canfor Inventory. The parties also agree West Linn is indebted to Canfor for unpaid invoices (Schedule A - Unpaid Invoices) in the amount of $621, 660.772 for such wood-pulp shipments.

         II. Procedural Background

         On November 22, 2017, Plaintiffs filed a Complaint (#1) for Declaratory Judgment. Plaintiffs allege Canfor asserts an interest in the goods Canfor sold to West Linn that were held by CRL and that are now in the form of the funds held by the Clerk of Court. Plaintiffs seek a determination that any of Canfor's interests therein are inferior to the security interests of 605 Canada and that West Linn and CRL are entitled to liquidate the goods and to remit the proceeds to 605 Canada free of any interests of Canfor.

         As noted, on December 19, 2017, the parties stipulated (#29) the value of the Canfor Inventory was $1, 200, 000; that Canfor could deposit funds in that amount with the Clerk of Court; and that Canfor could take possession of the Canfor Inventory for sale to other third parties. Thereafter on January 2, 2018, the Court approved (Order #34) the parties' Stipulation and authorized Canfor to deposit funds with the Clerk of Court to be held pending resolution of Plaintiffs' Claims. On January 9, 2018, Canfor ...


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