govinfo:USCOURTS-alnd-2_25-cv-01772-0

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UNITED STATES DISTRICT COURT 
FOR THE NORTHERN DISTRICT OF ALABAMA 
SOUTHERN DIVISION 
 
REGIONS BANK, et al. , 
 
Plaintiffs, 
 
v. 
 
MONTGOMERY TRANSPORT 
GROUP, INC. et al, 
 
Defendants. 
 
} 
} 
} 
} 
} 
} 
} 
} 
} 
 
 
 
 
 

 
MEMORANDUM OPINION AND ORDER 
 
Nucor has moved for relief from the receivership order in this case. (Doc. 
37). Nucor is a steel manufacturer that contracted with the defendants, the 
Montgomery Transport entities, to transport Nucor’s products to customers. (Doc. 
37, p. 3, ¶ 7). The Receiver contends that Nucor must pay the defendants’ estate for 
the defendants’ t ransportation services. (Doc. 37, pp. 4 –5). Nucor seeks setoff 
and/or recoupment for the amounts it owes based on the Montgomery Transport 
defendants’ failure to pay subcontracted carriers and the defendants’ obligation to 
indemnify Nucor against customer claims. (Doc. 37, pp. 3–7; Doc. 56, p. 10). The 
Receiver opposes Nucor’s motion; the Receiver argues that Nucor is in the same 
position as other unsecured creditor s and may not setoff or recoup contingent, 
unliquidated claims against the estate’s liquidated claims. (Doc. 50). The Court 
FILED
 
 2026 Jun-18 AM 08:39
U.S. DISTRICT COURT
N.D. OF ALABAMA

2 
held a hearing on this matter on April 16, 2026, and ordered supplemental briefing 
on choice of law issues. (Docs. 82, 85, 86). 
This opinion resolves Nucor’s motion. The Court first discusses the choice 
of law issues concerning Nucor’s motion. Then, consistent with that law, the Court 
considers whether Nucor’s requests for relief qualify as recoupment and/or se toff. 
Finally, the Court identifies a procedure to resolve Nucor’s requests for relief. 
*** 
Generally, courts look to federal bankruptcy law and historical equity practice 
to interpret and implement a receivership order. See Sec. & Exch. Comm’n v. Quiros, 
966 F.3d 1195 , 1199 (11th Cir. 2020) (“Given the similarity between bankruptcy 
and receivership proceedings, we often apply bankruptcy principles to receivership 
cases because we have limited receivership precedent. ”); Bendall v. Lancer Mgmt. 
Grp., LLC, 523 Fed. Appx. 554, 557 (11th Cir. 2013) (“Given that a primary purpose 
of both receivership and bankruptcy proceedings is to promote the efficient and 
orderly administration of estates for the benefit of creditors, we will apply cases from 
the analogous context of bankruptcy law, where instructive, due to limited case law 
in the receivership context.”). 
The Bankruptcy Code preserves the right of setoff, but 11 U.S.C. § 553 “does 
not create a right of setoff . . . . Substantive law, usually state law, determines the 
validity of the right.” In re Patterson, 967 F.2d 505, 509 (11th Cir. 1992) (citations 

3 
omitted), abrogated in part on other grounds, Citizens Bank of Maryland v. Strumpf, 
516 U.S. 16 (1995) (finding that bank could freeze debtor’s account pending 
resolution of setoff claim) ; see also , e.g., In re Esteva , No. 23 -14050, 2025 WL 
2171062, at *7 (11th Cir. July 31, 2025) (citation omitted) (“Section 553 provides 
limits on the enforcement of state setoff laws—it ‘does not create a right of setoff.’”). 
Similarly, the Bankruptcy Code does not create or limit a right of recoupment.1 
As a federal court sitting in Alabama, this Court applies Alabama’s conflict 
of law rules. See, e.g., Colonial Life & Acc. Ins. Co. v. Hartford Fire Ins. Co. , 358 
F.3d 1306, 1308 (11th Cir. 2004) (“A federal court in a diversity case is required to 
apply the laws, including principles of conflict of laws, of the state in which the 
federal court sits. ”). “Alabama law has long recognized the right of parties to an 
agreement to choose a particular state ’s laws to govern an agreement. ” Cherry, 
Bekaert & Holland v. Brown, 582 So. 2d 502, 506 (Ala. 1991). 
The estate’s right to payment from Nucor, if any, derives from the contracts 
between Nucor and the Montgomery Transport entities. ( See Doc. 37, p. 7 , ¶ 28; 
Doc. 50, p . 3, ¶¶ 5–7). The choice of law clause s in the contracts state that the 
 
1 The Bankruptcy Code does not mention recoupment, but recoupment has “long [been] applied in 
the bankruptcy context.” 5 Collier on Bankruptcy ¶¶ 553.04, 553.10 (16th ed. 2026). Bankruptcy 
law places certain limitations on setoffs but not recoupment. See 11 U.S.C. § 553 ( preserving 
setoff rights “except to the extent” that certain exclusions apply); 5 Collier on Bankruptcy ¶ 553.10 
(16th ed. 2026) (“[A]s a general rule, the requirements and limitations of section 553 do not apply 
to recoupments.”). The Receiver has not argued that the special exclusions in 11 U.S.C. § 553 for 
setoffs apply here; rather, the Receiver argues that there is no underlying state right to setoff or 
recoupment. 

4 
agreements “shall be governed by and construed in accordance with the laws of the 
State of Delaware ” and that e ach party “expressly and irrevocably consents to the 
exclusive jurisdictions of the state and federal courts located in the State of Delaware 
. . . for any litigation which may arise out of or be related to this Master Agreement 
or any other agreement related hereto.” (Doc. No. 37-1, pp. 17, 42, 92). The parties 
agree that under these clauses, Delaware law applies to Nucor’s recoupment claims. 
(Doc. 85, p. 3; Doc. 86, p. 3, ¶ 4). 
With respect to Nucor’s requests for setoff, Nucor argues that Delaware law 
applies because the requests concern the master agreements. ( Doc. 85, p p. 3–4). 
The Receiver disagrees. The Receiver argues: 
Nucor’s alleged right to setoff is governed by Delaware 
law if its claims arise from the MTA and by Alabama law 
if they do not. This issue is not as straightforward as it 
seems because the supposed “carrier claims” allegedly 
giving rise to Nucor’s right of setoff are not only 
contingent, unliquidated, and disputed, but the vast 
majority are actually unasserted. Nucor has provided no 
details concerning the carriers or the underlying claims in 
question and no analysis of how those claims are subject 
to the indemnification provisions of the MTA. It is 
therefore not possible to evaluate whether these 
hypothetical claims arise from the MTA, or if they are 
based on tort, or even if they are truly more of a “remedy” 
to counterclaim, which would require the Court to use the 
lex fori test, resulting in the application of Alabama law. 
(Doc. 86, pp. 4–5). 

5 
The contingent, unliquidated, or disputed nature of Nucor’s recoupment or 
setoff claims does not change the fact that the claims relate to the master 
agreements.2 To the extent that the Receiver suggests that Alabama law applies to 
all setoff claims because setoff is a remedy, the Court is not persuaded. The choice 
of law provis ion in the master agreements is broad enough to cover demands for 
setoff where Nucor’s liability and the amount it seeks to setoff are related to the 
master agreement. Application of Delaware law also best accords with the parties’ 
expectations and Alabama’s general approach to conflict of laws. 
The parties have not cited, and the Court has not found, an Alabama case that 
discusses conflict of law rule s for setoff claims. Generally, Alabama follows “the 
traditional view of the Restatement (First) of Conflicts of Law.” Ex parte U.S. Bank 
Nat. Ass ’n, 148 So. 3d 1060 , 1070 (Ala. 2014) (citing Fitts v. Minnesota Min. & 
Mfg. Co., 581 So. 2d 819 , 820–23 (Ala. 1991)) (applying First Restatement rule of 
lex loci delicti to tort case). Occasionally, the Alabama Supreme Court has cited the 
 
2 If Nucor intends to setoff amounts that do not relate to the master agreements, the company has 
not provided “ facts from which the court could . . . determine[] which state ’s law might . . . 
appl[y],” so the Court will default to Alabama law for such claims. Sun Life Assurance Co. of 
Canada v. Imperial Premium Fin., LLC, 904 F.3d 1197, 1207–09 (11th Cir. 2018) (explaining that 
district courts may default to forum law if the foreign law proponent fails to adequately plead 
application of foreign law). Under the Eleventh Circuit’s binding interpretation of Alabama law, 
a defendant may not setoff immature claims against mature ones, even in the event of bankruptcy. 
In re Patterson , 967 F.2d 505, 509 (11th Cir. 1992 ). Because the Court does not believe the 
question is before it, the Court does not decide whether Alabama law or bankruptcy law would 
allow setoff for claims that mature during receivership proceedings. See 5 Collier on Bankruptcy 
¶¶ 553.04, 553. 03[1][h][i]–[ii] (16th ed. 2026) (discussing possibility of contingent claims 
ripening). 
 

6 
Restatement (Second) of Conflict of Laws for narrow purposes. See, e.g., Foster v. 
Foster, 304 So. 3d 211 , 216 (Ala. 2020); Ex parte Bentley, 50 So. 3d 1063 , 1070–
74 (Ala. 2010). 
Under the First Restatement, 
The law of the forum determines whether a claim of a 
defendant may be pleaded by way of set -off or 
counterclaim. 
Comment 
a. When counterclaim alters effect of original transaction. 
The rule stated in this Section is applicable to determine 
what disputes between the parties may be tried in the same 
action. It is not applicable [,] however, where to allow a 
set-off or counterclaim constitutes an alteration of the 
rights of the parties as determined by the original 
transaction. Thus, if a negotiable promissory note is 
executed and delivered to the payee and endorsed to a 
holder in due course in a state where such holder is not 
subject to any set -off or counterclaim which the maker 
might have against the payee, no such set -off or 
counterclaim will be allowed in an action between the 
holder and the maker although suit is brought in a state 
where such set -offs or counterclaims are generally 
allowed. Conversely, if a negotiable promissory note is 
made and endorsed to a holder in due course in a state 
where the holder is subject to a set -off which the maker 
has against the payee, such set -off will be allowed 
although suit is brought in a state where set -offs are 
generally not allowed. 
Restatement (First) of Conflicts of Law § 593 & cmt. a. 
Similarly, under the Second Restatement: 

7 
The forum will apply its own local law in determining 
whether a claim may be pleaded by way of set -off, 
counterclaim or other defense unless under the otherwise 
applicable law the defendant's claim, if allowed, would 
operate to qualify the plaintiff's claim in whole or in part. 
In the latter event, the defendant will be permitted to plead 
his claim as a defense. 
Comment 
a. Rationale. Ordinarily, the question is simply whether 
the parties’ claims against each other can be disposed of in 
a single action. In such a case, the local law of the forum 
governs and will be applied to determine whether the 
defendant may plead his claim against the plaintiff by way 
of set-off, counterclaim or other defense in the plaintiff's 
action. There are, however, the exceptional situations 
discussed in Comment c. 
b. Whether the defendant may plead a claim by way of set-
off, counterclaim or other defense must be distinguished 
from the question whether the defendant has a claim to 
assert. This latter question is determined by the otherwise 
applicable law. Suppose, for example, that an instrument 
in the form of a promissory note, which was executed and 
made payable in state X, is delivered and endorsed to a 
holder in X, who under X local law takes the instrument 
free from certain defenses that the maker migh t have 
against the payee. In a suit by the holder against the maker 
in state Y, the maker will not be permitted to assert such 
defenses against the holder, even though he will have been 
permitted to do so by the Y courts if his obligations under 
the instrument had been governed by Y local law (compare 
§ 214). Conversely, the maker would be permitted by the 
Y courts to raise such defenses against the holder as are 
accorded him by X local law even though he would not 
have had such defenses if his obligations under the 
instrument had been governed by Y local law. 

8 
c. When defendant ’s claim qualifies plaintiff's claim. 
Situations will arise where under the otherwise applicable 
law the defendant's claim, if allowed, would operate to 
qualify in whole or in part the plaintiff ’s claim. In such 
situations, the question is not simply one of avoiding two 
suits. Rather, the question is whether the plaintiff’s claim 
against the defendant is reduced or extinguished by the 
defendant’s claim against the plaintiff. In such situations, 
the defendant will be permitted to plead his claim as a 
defense. 
Restatement (First) of Conflicts of Law § 128 & cmts. a, b & c. 
In sum, under either Restatement’s formulation, the underlying substantive 
law (here, Delaware) governs whether there is an underlying substantive right to 
setoff, while the law of the forum governs how this right should be pleaded, a 
procedural issue. For procedural issues, the relevant “forum” is federal court. See, 
e.g., Smith v. R.J. Reynolds Tobacco Co., 880 F.3d 1272, 1280–81 (11th Cir. 2018) 
(“In diversity of citizenship actions, state law defines the nature of defenses, but the 
Federal Rules of Civil Procedure provide the manner and time in which defenses are 
raised.”). Neither the Federal Rules of Civil Procedure nor federal bankruptcy 
practice prohibits a party from asserting setoff as a defense or counterclaim if there 
is a valid claim for setoff under state law . See 5 Collier on Bankruptcy ¶¶ 553.03, 
553.11 (16th ed. 2026). Accordingly, the Court applies Delaware law to resolve 
Nucor’s setoff and recoupment claims. 
*** 

9 
Both se toff and recoupment involve a defendant’s attempt to reduce the 
amount the defendant owes a plaintiff by amounts the plaintiff owes the defendant. 
For this reason, parties sometimes use the terms “s etoff” and “recoupment” 
interchangeably, even though the two doctrines are not identical . See generally 5 
Collier on Bankruptcy ¶ 553.10 (16th ed. 2026).3 “[T]he chief distinction” between 
setoff and recoupment is “that the defense of set -off arises out of an independent 
transaction, but the defense of recoupment goes to the reduction of the plaintiff ’s 
damages for the reason that he, himself, has not complied with the cross obligations 
arising under the same contract.” Finger Lakes Cap. Partners, LLC v. Honeoye Lake 
Acquisition, LLC, 151 A.3d 450, 453 (Del. 2016). 
“[T]he fact that a single contract is involved does not suffice to demonstrate 
that the necessary transactional nexus exists ” for recoupment. TIFD III-X LLC v. 
Fruehauf Prod. Co., 883 A.2d 854, 864 (Del. Ch. 2004); see also Finger Lakes, 151 
A.3d at 452, 454 (approving of TIFD’s analysis and stating that “ the transactional 
nexus requirement under recoupment [is] tightly constrained”). If both claims relate 
to the same “contract[] involving [a] one-off transaction[], such as loans or sales of 
 
3 Nucor argues both setoff and recoupment in its motion and reply, (Doc. 37, pp, 10–11; Doc. 56, 
p. 3), but the Receiver did not address recoupment in its response, other than one reference to 
“recoupment or setoff ,” (Doc. 50, p. 7). During the hearing, the Receiver argued that Nucor’s 
recoupment claims fail for the same reason that Nucor’s setoff claims allegedly fail. In its 
supplemental brief on the conflict of laws question, the Receiver argued that Nucor’s recoupment 
claims fail under Delaware law because the claims do not share a “common factual core” with the 
Receiver’s claims. (Doc. 86, pp. 9–10). 
 

10 
goods or services, . . . it is sensible to consider the plaintiff’s own performance under 
the contract in evaluating its claim for damages against the defendant [;]” however, 
not all claims related to a contract establishing “a long-term, ongoing relationship” 
will be sufficiently related to each other for recoupment purposes. TIFD, 883 A.2d 
at 864 (not all claims related to partnership agreement sufficiently related); see also 
Finger Lakes , 151 A.3d at 45 1–52, 454 (finding that defendant could not use 
recoupment to subtract years of overdue unprofitable portfolio company 
management fees from plaintiff’s share of proceeds from sale of profitable portfolio 
company, even though both claims were related to a term sheet governing the 
parties’ overall relationship). 
Nucor’s unpaid carrier claims most likely qualify as recoupment claims. 
Nucor’s contracts with the defendants provided that the defendants could ship 
products themselves or could subcontract the shipping to other carriers. (Doc. 37-1, 
pp. 3, 29, 54). In the latter scenario, the defendants agreed to pay the carriers, to 
require carriers to perform in accordance with the terms of their contract with Nucor, 
and to indemnify Nucor for claims by carriers. (See, e.g., Doc. 37-1, pp. 3–4, 7, 13–
14). Nucor asserts that the defendants are entitled to payment only “if they actually 
paid the freight carriers,” i.e., if they performed their obligations under the contract. 
(Doc. 56, pp. 8–9, ¶ 26). For each shipment, the payments the defendants allegedly 
owed the carriers presumably are slightly lower than what Nucor would have owed 

11 
the defendants for the same shipment. An individual shipment is equivalent to a 
“contract[] involving one-off transactions,” TIFD, 883 A.2d at 864, even if the terms 
of those shipments are set in part by an overarching agreement. 
Nucor’s customer claims may require setoff in addition to recoupment . For 
example, Nucor has asserted claims for shipments which were not actually delivered 
or which were damaged in transit . (See Doc. 37, pp. 4–5, Doc. 37 -1, p. 102 ). In 
these cases, the amount the Montgomery Transport defendants owe Nucor may be 
more than Nucor owes the defendants for the shipment. For each shipment, Nucor 
may assert recoupment up to the amount Nucor owes the Montgomery Transport 
defendants on that specific shipment. If Nucor wishes to credit excess damages from 
one shipment against the amount it owes the defendants on other shipments, Nucor 
must meet the requirements for setoff, not just recoupment. 
*** 
The Receiver argues primarily that Nucor may not setoff or recoup its losses 
because the losses are contingent, unmature, or unliquidated. (Doc. 50, pp. 5 –7, 
¶¶ 8–11). Nucor does not dispute that its right to recoupment or setoff is contingent 
upon whether it is liable to the carriers or its customers.4 
 
4 The Receiver does not dispute that, even though the Montgomery Transport defendants—not 
Nucor—contracted with the carriers, state law may make Nucor liable for nonpayment unless the 
defendants had the carriers expressly release Nucor from liability. (Doc. 37, pp. 6, 8 –9, ¶¶ 20–
24, 31–36; Doc. 50, p. 7 , ¶ 12; Doc. 79, p. 1, ¶ 4). Nucor has represented, and the Receiver has 
not disputed, that carriers have been asserting damages claims against Nucor, that the Receiver has 
not provided confirmation to Nucor of whether other carriers have been paid, that the Receiver has 

12 
The general common-law rule, which Delaware appears to follow, is that 
recoupment claims need not be liquidated or mature to be asserted. See, e.g., Shimp 
v. Siedel , 11 Del. 421 , 426 (Del. Super. Ct. 1881) (“[R]ecoupement is allowed 
though both demands are unliquidated damages, for when the demands of both 
parties spring out of the same contract or transaction, the defendant may recoupe, 
although the damages on both sides are unliquidated; but he can only set-off when 
the demands of both parties are liquidated or capable of being ascertained by 
calculation.”); 80 C.J.S. Set-off and Counterclaim § 32 (“Unliquidated damages may 
be recouped, provided they arise out of the transaction forming the basis of the 
plaintiff's action.”); 6 Charles A. Wright & Arthur R. Miller, Federal Practice & 
Procedure § 1401 (3d ed. Apr. 2026 update) (“[T]he utility of setoff [as compared to 
recoupment] was limited by the requirement that the claim either be for a liquidated 
amount or arise out of a contract or judgment.”) ; 5 Collier on Bankruptcy ¶ 553.10 
(16th ed. 2026) (footnotes omitted) (“Recoupment often arises in contract cases, but 
it is not limited to contractual obligations, nor must the amount to be recouped be 
liquidated in order for the right to apply. Mutuality is also not required, and the 
relevant obligations need not both be prepetition in nature. . . . [P]roperly construed, 
 
not provided information to Nucor regarding contracts between the defendants and the carriers, 
and that Nucor does not have access to this information. (Doc. 37, p. 9, ¶ 35; Doc. 79, p. 2, ¶¶ 9–
10). The Court will not require Nucor to prove the absence of payments or the contents of contracts 
Nucor is not a party to without an opportunity for reasonable discovery. The carriers currently are 
not parties to this proceeding, so the carriers’ claims against Nucor are not before this Court, and 
the Court does not purport to resolve those claims. 

13 
recoupment applies to define the obligation in question, rather than establish or 
enforce a separate debt. ”); Matter of Holford , 896 F.2d 176 , 178 (5th Cir. 1990) 
(“We also reject the district court’s holding that the uncertainty of the fraud damages 
owed bars recoupment. Because most recoupment cases arise in adversarial 
proceedings in the bankruptcy court, the ‘amount to be recouped’ is almost always 
in question.”); United States v. Bank of Shelby , 68 F.2d 538 , 539 (5th Cir. 1934) 
(“But there is present here another potent fact [justifying crediting of plaintiff’s 
unmature debt against defendant’s obligation to plaintiff ], that the two obligations 
arose out of the same transaction and the one is the consideration for the other. It 
would be manifestly inequitable to enforce one obligation when the other cannot be 
enforced.”); Matter of Kosadnar , 157 F.3d 1011, 1016 (5th Cir. 1998) (citation 
omitted) (“[A] debtor may not assume the favorable aspects of a contract (post -
petition payments) and reject the unfavorable aspects of the same contract (the 
obligation to repay pre -petition overpayments by means of recoupment). ”).5 This 
makes sense given that, under common law, a plaintiff who partially performed 
contractual obligations was not due payment unless the defendant prevented the 
plaintiff’s full performance (in which case the defendant would have to institute a 
separate action for recoupment , until the courts reformulated recoupment as a 
 
5 Fifth Circuit cases decided before October 1, 1981, are binding precedent in the Eleventh Circuit. 
Bonner v. City of Prichard, 661 F.2d 1206, 1207 (11th Cir. 1981) (en banc). 

14 
defense to avoid “circuity and multiplicity of action” ). Shimp, 11 Del. at 424–28 
(explaining origins of recoupment in Delaware). Accordingly, Nucor may assert its 
recoupment claims, regardless of whether those claims are contingent, unmature, or 
illiquid. 
As for Nucor’s setoff claims, under the general common -law rule, followed 
by Delaware and most courts nationwide, a party ordinarily may not setoff 
contingent, unmature, or unliquidated losses. See, e.g. , CanCan Dev., LLC v. 
Manno, No. CIV.A. 6283-VCL, 2011 WL 4379064, at *5 (Del. Ch. Sept. 21, 2011) 
(“A contingent or unmatured obligation which is not presently enforceable cannot 
be the subject of set-off.”). 
Still, as a matter of common law or equity, courts have long recognized an 
exception for when one party becomes insolvent. See, e.g., Bank of Shelby, 68 F.2d 
at 539 (citations omitted) (“The general rule in the absence of statute is that to set 
off an unmatured debt because of insolvency requires the action of equity; but that 
insolvency alone is a sufficient basis in equity for the set-off not only as between the 
parties but as against a receiver, an assignee for the benefit of creditors, a trustee in 
bankruptcy, or a garnisher. ”); Carr v. Hamilton, 129 U.S. 252, 256 (1889) (“[T]he 
principle of set -off between mutual debts and credits has for nearly two centuries 
past been adopted in the English bankrupt laws, and has always prevailed in our own 
whenever we have had such a law in force on our statute book; and it mattered not 

15 
whether the debt was due at the time of bankruptcy or not. . . . [A] settlement of the 
company’s affairs cannot be postponed to await the determination of every 
contingency on which its policy engagements are suspended. This would postpone 
a settlement for at least half a century. [But e]very person’s interest in life insurance 
is capable of instant and present valuation, almost as certain and determinate as the 
discount of a note or bill payable in the future.”); Am. Bank & Tr. Co. v. Morris, 16 
F.2d 845, 847 (5th Cir. 1927) (“There is no doubt that the general rule is that a bank 
has the right to set off a deposit made in the usual course of business against loans 
to the depositor, at maturity or in case of his insolvency, and may do so even in the 
event of bankruptcy.”). 
The Receiver has not pointed to (and the Court is not aware of) a Delaware 
case holding that contingent debts are necessarily barred from setoff against even an 
insolvent party. At least one Delaware court appears to have noted, albeit possibly 
in dicta, that setoff of contingent claims is appropriate in some circumstances. Fell 
v. Sec. Co. of N. Am., 95 A. 346, 347–49 (Del. Ch. 1915) (noting setoff was “properly 
applied” to contingent debt in Carr but that “its applicability depends upon the facts 
in each case,” and denying setoff where setoff proponents and others had invested 
money into company bonds and setoff proponents had then borrowed money against 
the bonds). Accordingly, the Court finds that Delaware allows setoff of contingent 
or illiquid claims when the other party is insolvent, subject to equitable 

16 
considerations. Cf. Brook v. Chase Bank USA, N.A. , 566 Fed. Appx. 787, 789–90 
(11th Cir. 2014) (“As long as Florida law neither mandates nor prohibits set off under 
the FCCPA—and it does not—it is entirely within the bankruptcy court’s discretion 
whether to allow set off under the circumstances of the case.”). 
As noted above, federal bankruptcy or receivership law does not present an 
obstacle to setoff. Modern bankruptcy laws do not state how to treat contingent 
setoff or recoupment claims, but the laws allow contingent or unliquidated claims 
generally. 11 U.S.C. §§ 101(5), 502(b)(1). The value of contingent or unliquidated 
claims may be estimated so as not to unduly delay the bankruptcy proceedings, and 
the estimated value may be adjusted later as necessary. 11 U.S.C. § 502(c), (j); In 
re Stone & Webster, Inc., 279 B.R. 748, 811 (Bankr. D. Del. 2002). 
Accordingly, in the bankruptcy context, many courts have held that setoff or 
recoupment may be applied to contingent, unmature, or unliquidated claims where 
allowed by state law. See, e.g., Newbery Corp. v. Fireman's Fund Ins. Co., 95 F.3d 
1392, 1398 (9th Cir. 1996) (ellipses in Newbery Corp. ) (quoting 4 Collier on 
Bankruptcy ¶ 553.01[4], at 553 –6 (15th ed. 1995) ) (“[A] claim may ... be set off 
without regard to whether it is contingent or unliquidated, as long as the claim 
qualifies as ‘mutual’ under applicable nonbankruptcy law....”); Braniff Airways, Inc. 
v. Exxon Co., U.S.A., 814 F.2d 1030, 1034–36 (5th Cir. 1987) (holding that opposing 
debts were mutual, prepetition debts subject to setoff even though the actual amount 

17 
creditor-seller owed debtor -buyer was not calculated before petition was filed 
because “to say that [the seller] did not have a pre-petition debt to [the buyer] would 
be to say that [the seller] could have retained the fuel prepayment funds and not have 
delivered any fuel to [the buyer]”); In re Hoffman, 51 B.R. 42, 46 (Bankr. W.D. Ark. 
1985) (“[T]he filing of a bankruptcy acts to accelerate the maturity of all debts and, 
therefore, the right of setoff may be asserted postpetition .”); In re GMJ Glob. 
Logistics, Inc., 498 B.R. 290, 292–93, 297 (Bankr. D. Kan. 2013) (allowing shipper 
to setoff settlements of carrier claims against shipper’s liability to shipping -broker-
debtor).6 
When the requirements for setoff are met , “[t] he district court [still] has 
discretion whether to allow a setoff against a receiver, and this decision will be 
 
6 At the hearing, based on In re Patterson, 967 F.2d 505, 509 (11th Cir. 1992), the Receiver argued 
that there was no mutuality under Alabama law. The Court need not address this argument because 
the Court is not applying Alabama law. To the extent the Receiver intended to argue that there is 
no mutuality under federal bankruptcy law because Nucor’s indemnification claims accrued after 
the receivership order, federal courts of appeal that have addressed the issue have rejected the idea 
that the critical time is claim accrual. See 5 Collier on Bankruptcy ¶ 553.03[1][b] (16th ed. 2026) 
(providing overview of different tests) . The Eleventh Circuit uses the “relationship test” in 
determining whether debts are pre-petition. Epstein v. Off. Comm. of Unsecured Creditors of Est. 
of Piper Aircraft Corp. , 58 F.3d 1573 , 576 –77 (11th Cir. 1995) ; In re United States Pipe & 
Foundry Co., 32 F.4th 1324, 1330 (11th Cir. 2022). Like the “conduct test,” this test focuses on 
“when the [debtor’s] conduct giving rise to the alleged liability occurred,” but adds the requirement 
that there be a “ relationship established before [bankruptcy plan] confirmation between an 
identifiable claimant or group of claimants and that prepetition conduct ,” i.e., with the debtor. 
Epstein, 58 F.3d at 1577. Here, the parties had a preexisting relationship. The defendants’ conduct 
gave rise to Nucor’s recoupment and setoff claims because the defendants did not fulfill their 
preexisting contractual obligations to p ay carriers and ensure shipments were delivered safely. 
Nucor’s claims are thus no t post-petition; t he claims would be post -petition if the parties had 
arranged for post-receivership shipment brokerage services. 

18 
overturned [only] for an abuse of discretion.” S.E.C. v. Elliott, 953 F.2d 1560, 1572 
(11th Cir. 1992). There is a “strong federal policy towards . . . . [and] practically a 
presumption in favor of allowing setoff. ” Elliott, 953 F.2d at 1572. If a claim is 
eligible for setoff, “[t]he burden is on the party moving to deny setoff to prove that 
setoff should be denied .” Elliott, 953 F.2d at 1572. Thus, to the extent Nu cor’s 
contingent claims materialize or can be estimated, and are eligible for setoff, the 
equities weigh in favor of allowing setoff. 
The Receiver faults Nucor for not immediately forfeiting all disputed funds 
and asserting its claims in the ordinary claims process. (Doc. 50, p. 3–4, 8–9, ¶¶ 3–
4, 15–17). In a situation like this, where a party asserts the right to recoupment or 
setoff, that party may petition the court for relief from or a modification of the 
receivership order. See 11 U.S.C. § 362 (d)–(g) (allowing a party to request relief 
from a bankruptcy stay ); 11 U.S.C. § 542 (b) (“[A]n entity that owes a debt that is 
property of the estate and that is matured, payable on demand, or payable on order, 
shall pay such debt to, or on the order of, the trustee, except to the extent that such 
debt may be offset under section 553 of this title against a claim against the debtor.”); 
Citizens Bank of Maryland v. Strumpf, 516 U.S. 16, 19–21 (1995) (finding that bank 
could properly freeze deposit account of insolvent depositor until court determined 
whether the bank had a right to setoff the deposit account against the amount the 
depositor owed the bank). 

19 
And while setoff is subject to an automatic bankruptcy stay per the express 
terms of 11 U.S.C. § 362(a)(7), the majority view is that recoupment is not ordinarily 
subject to an automatic bankruptcy stay because it is essentially a defense to the 
debtors’ claims; i.e., the funds subject to recoupment are not the debtors’ property 
in the first place, and thus need not be turned over without court order. See, e.g., In 
re Holford, 896 F.2d 176 , 179 (5th Cir. 1990) (“[T]o the extent the damages equal 
or exceed the funds withheld, the debtor has no interest in the funds and, therefore, 
the stay has not been violated.”); Matter of Kosadnar, 157 F.3d 1011, 1014 (5th Cir. 
1998) (citation omitted) (“[M]oney recouped by creditors from an amount owed to 
a debtor post-petition would not be subject to the automatic stay.”).7 
*** 
Accordingly, the Court orders the Receiver to produce the defendants’ carrier 
contracts and carrier payment records to Nucor . The Receiver and Nucor shall 
attempt to reconcile amounts which are subject to recoupment or setoff in 
accordance with this opinion. For carriers that have not been paid, the Receiver and 
Nucor shall presume that payments are subject to recoupment unless the Receiver 
can show that the carrier contracts or the law that applies to a carrier contract will 
not allow the carrier to recover against Nucor. To the extent that shipments have not 
 
7 The best practice would be for the party asserting recoupment to promptly seek guidance from 
the Court, especially where, as here, the liabilities of the party are contingent or illiquid, and thus 
in need of determination or estimation. 

20 
been delivered, the Receiver and Nucor shall presume that Nucor owes no payment 
for that contract , and Nucor may seek setoff of the balance of the value of the 
shipment against other contracts for which there is mutuality of parties. To the extent 
that Nucor has actually incurred other damages, such damages may be recouped 
against the amounts due on the same contract or setoff against the amounts due on 
other contracts if there is mutuality of parties. To the extent that other damages are 
probable but have not occurred or there is substantial uncertainty as to any of the 
above items, the parties shall attempt to mutually estimate the value of the claim. 
Nucor shall keep custody of the presumed and estimated amounts of 
recoupment and setoff and promptly remit the remainder to the Receiver. For 
disputes, Nucor shall not finalize recoupment or setoff on its records until the 
disputes are resolved. If the presumed or estimated amount of recoupment or setoff 
later proves inaccurate, the party retaining the excess funds shall remit such excess 
funds to the other party monthly. Until a final resolution is reached, the Receiver 
takes funds subject to Nucor’s setoff and recoupment rights , if any . Accordingly, 
each party shall take reasonable steps to preserve funds which may later be remitted 
to the other party . To preserve property which may ultimately revert to the estate, 
Nucor shall not settle carrier claims without prior approval from the Receiver or this 
Court. 
 

21 
DONE and ORDERED this June 17, 2026. 
 
 
 _________________________________ 
 MADELINE HUGHES HAIKALA 
 UNITED STATES DISTRICT JUDGE 
 
 

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