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Pinnacle Bank v. Bluestone Energy Sales Corp.

United States District Court, W.D. Virginia, Roanoke Division

December 7, 2018



          Hon. Glen E. Conrad Senior United States District Judge.

         Pinnacle Bank ("Pinnacle") filed this interpleader action seeking to resolve competing claims to funds in the amount of $1, 403, 607.47, which were held in a business checking account with Pinnacle. On July 20, 2018, the court entered proposed orders granting a joint motion for distribution of interpleader funds and dismissing the action with prejudice. Pinnacle has filed a motion to amend judgment, arguing that the orders were entered prematurely since the bank previously reserved the right to seek attorneys' fees and costs. The case is presently before the court on that motion and Pinnacle's subsequent motion for attorneys' fees and costs. For the following reasons, the court will grant the motion to amend judgment and award Pinnacle fees and costs in the amount of $33, 606.71.


         Bluestone Energy Sales Corporation ("Bluestone"), A&G Coal Corporation ("A&G Coal"), Dynamic Energy, Inc. ("Dynamic Energy"), Justice Management Services, LLC ("Justice Management"), Kentucky Fuel Corporation ("Kentucky Fuel"), Nine Mile Mining, Inc. ("Nine Mile Mining"), and Tarns Management, Inc. ("Tarns Management") (collectively, the "Bluestone Defendants") are affiliated companies that opened a series of business checking accounts with Bank of North Carolina ("BNC") between May 30, 2017 and June 9, 2017. On June 16, 2017, BNC merged with and into Pinnacle, and BNC's separate corporate existence came to an end. As a result, the Bluestone Defendant's BNC accounts became Pinnacle accounts.

         The Bluestone Defendants arranged for their accounts to be linked together through a "sweep" or "zero balance" arrangement, which enabled funds to be easily transferred from one account to another. Bluestone's account served as the main account. At the end of each day, funds were transferred from the main account to the subsidiary accounts to cover any debits, and any deposits that were made into the subsidiary accounts were transferred to the main account.

         Between June 21 and June 29, 2017, the Internal Revenue Service ("IRS") issued levies to Pinnacle and BNC, respectively, against certain assets of A&G Coal, Dynamic Energy, Justice Management, Kentucky Fuel, Nine Mile Mining, and Tarns Management. In response, Pinnacle froze the accounts opened for each of those entities. Because the accounts were linked to Bluestone's account through the "sweep" or "zero balance" arrangement, Pinnacle also froze the funds in that account. Those funds constituted the disputed funds at issue in this case (the "Disputed Funds").

         On July 24, 2017, the Bluestone Defendants filed a lawsuit against BNC and Pinnacle in the Circuit Court for the City of Roanoke, alleging that Pinnacle and/or BNC had wrongfully frozen the Disputed Funds in Bluestone's account in response to the IRS levies. Pinnacle removed the action to this court on August 3, 2017. See Bluestone Energy Sales Corp. v. Bank of North Carolina, No. No. 7:17-cv-00365 (W.D. Va. Aug. 3, 2017).

         Faced with competing claims to the Disputed Funds from the Bluestone Defendants and the IRS, Pinnacle consulted with the Bluestone Defendants and the United States about the possibility of commencing an interpleader action to resolve the matter. After conferring with the other parties, Pinnacle commenced this action against the Bluestone Defendants and the United States on August 22, 2017. The first action removed from state court was then consolidated with the interpleader action.

         The Bluestone Defendants subsequently filed a cross-claim against the United States, and Carter Bank & Trust ("Carter Bank") moved to intervene. Although an IRS officer had initially recommended that Pinnacle file an interpleader action, the United States reversed course and moved to dismiss the action for lack of subject matter jurisdiction. Pinnacle opposed that motion and filed its own motion for summary judgment. The United States was the only party to oppose Pinnacle's motion. However, less than a month later, the United States withdrew the motion to dismiss, and the parties negotiated a consent order granting Pinnacle's motion for summary judgment and dismissing the related action removed from state court with prejudice. The consent order, which was entered on April 26, 2018, provided, in relevant part, as follows:

         It is hereby:

ORDERED that the Clerk of the Court shall accept the sum of $1, 403, 607.47 from Pinnacle (the "Disputed Funds") and deposit said funds in a non-interest-bearing account;
ORDERED that the Disputed Funds shall remain on deposit until further order of the Court; [and]
ORDERED that Pinnacle is hereby DISMISSED from this action, but such dismissal shall not affect or preclude Pinnacle's rights to move for recovery of its attorneys' fees from the non-governmental defendants, ...

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