ACF 2006 Corp. v. Merritt, 557 F. App'x 747

Background

ACF loaned money to Merritt & Associates Law Firm under a Master Loan and Security Agreement and amendments, creating a continuing security interest in the Firm’s accounts and receivables for legal fees and expenses.
Rice litigation: Fee Agreement provided 50% of total recovery to attorney and required Rice to reimburse one-half of incurred litigation expenses; Rice settled for $700,000 with defined payment of $200,000 to Rice and $500,000 to the Firm as fees/expense reimbursement.
Intervenors (Bean & Associates, Sandia Safety Sciences, Ernst, Inc., TKS Consulting) provided services for the Rice case and claimed entitlement to unpaid expenses (~$170,000) from the settlement proceeds.
A receiver was appointed to manage the Firm’s assets; he proposed disbursing part of the Rice settlement to Rice and objected-to expenses, which the district court partially denied.
ACF moved for summary judgment asserting priority of its perfected Article 9 security interest over Intervenors’ claims; the district court granted partial summary judgment in favor of ACF.
This appeal followed, with the appellate court affirming the district court’s decision as to the disputed funds.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether ACF’s security interest covers the Disputed Funds	ACF’s perfected security interest in the Law Firm’s accounts receivable extends to funds allocated to the Firm from the Rice settlement.	Intervenors argue the funds are not “accounts” or “amounts to be received” and that the Firm had no right to keep them.	Yes; the funds are governed by the security interest and priority is with ACF.
Whether the Fee Agreement violates Oklahoma law limiting attorney fees	Fee Agreement complies with Oklahoma 50% net recovery rule; expenses are split, with client reimbursing half of expenses.	Agreement improperly yields a windfall to Firm and ACF by treating gross recovery as basis for fees.	No; the Fee Agreement, as construed with settlement terms, results in a 50% net-recovery-based fee consistent with law.
Whether Intervenors hold liens or constructive trusts superior to ACF	Intervenors may have contractual/equitable liens; ACF’s security interest has priority due to perfection.	Intervenors have no perfected security interest; claims are unsecured or unperfected.	Intervenors’ claims are subordinate to ACF’s perfected security interest; no superior lien established.
Whether Intervenors were beyond receiver’s reach for the Disputed Funds	Disputed Funds are law firm proceeds to be disbursed; ACF’s interest attaches to funds.	Intervenors were entitled to funds not subject to receiver’s control.	ACF’s priority overrides Intervenors; funds subject to receiver’s allocation in line with security interest.
Whether the district court properly allocated the $500,000 to the Firm and $200,000 to Rice	Allocation followed Fee Agreement and settlement, with Rice netting $200,000 and Firm $500,000 before expenses.	Allocation misreads the settlement and ignores Intervenors’ claims.	Allocation was correct under Fee Agreement and settlement terms; ACF entitled to remaining proceeds.

Key Cases Cited

Montgomery v. City of Ardmore, 365 F.3d 926 (10th Cir. 2004) (final-appealability under final-judgment doctrine)
Bowdry v. United Airlines, Inc., 58 F.3d 1483 (10th Cir. 1995) (final-judgment review and finality)
Squires v. Breckenridge Outdoor Educ. Ctr., 715 F.3d 867 (10th Cir. 2013) (summary-judgment standard; de novo review)
Braswell v. Cincinnati Inc., 731 F.3d 1081 (10th Cir. 2013) (summary judgment standard; evidentiary requirements)
In re Howell Enterprises, Inc., 934 F.2d 969 (8th Cir. 1991) (mere possession insufficient to establish security interest)
Pontchartrain State Bank v. Poulson, 684 F.2d 704 (5th Cir. 1982) (security interest; ownership limits; conduit theory)
Morris v. Leverett, 434 P.2d 912 (Okla.1967) (constructive trust principles under Oklahoma law)