Guarantor Fee Liability Vacated Pending Determination Whether Contractual Attorneys’ Fees Are Part of Senior Secured Debt Subject to Intercreditor Priority Allocation

1. Introduction

Mueller Brass Co. v. David Crompton (6th Cir. 2026-07-28) arises from the collapse of Quick Fitting, Inc. (“Quick Fitting”) and competing claims to the proceeds of a Rhode Island receivership sale. Quick Fitting had three relevant secured loans that ultimately came to be owned by Mueller Brass Company (“Mueller”): (i) the first-in-priority JPM Loan, (ii) the second-in-priority Antipodes Loan, and (iii) the third-in-priority Mueller LoanIntercreditor and Subordination Agreement.

The personal stake that produced the federal litigation was Defendant-Appellant David Crompton’s personal guaranty of the Antipodes Loan (the only loan he guaranteed). After Quick Fitting defaulted and entered receivership, Mueller demanded payment from Crompton under the guaranty and sued in the Western District of Tennessee. Crompton responded with counterclaims and third-party claims against Mueller and its parent, Mueller Industries, alleging (among other theories) breach of guaranty, promissory fraud, fraudulent misrepresentation, negligent misrepresentation, and breach of fiduciary duty.

The central appellate issue—driving a partial vacatur and remand—concerned whether the receivership settlement proceeds should be reallocated not only to satisfy principal according to intercreditor priorities, but also to satisfy Mueller’s claimed attorneys’ fees and costs (and, if so, whether that would discharge Crompton’s guaranty liability).

2. Summary of the Opinion

  • Affirmed the district court’s rejection of Crompton’s (i) breach-of-guaranty counterclaim, (ii) attempted revival of tort counterclaims/third-party claims (held abandoned/waived), and (iii) request for sanctions.
  • Vacated the district court’s award of attorneys’ fees and costs against Crompton under the guaranty.
  • Remanded for the district court to decide, in the first instance, Crompton’s argument that Mueller’s attorneys’ fees are part of Quick Fitting’s underlying Antipodes Loan obligation and therefore should be covered by the receivership settlement proceeds pursuant to the Antipodes Loan’s second-in-priority status.

Although the decision is labeled “NOT RECOMMENDED FOR PUBLICATION,” it is still a meaningful articulation of how the Sixth Circuit expects district courts to analyze (and not conflate) distinct theories about allocation of debt components versus independent guarantor fee obligations.

3. Analysis

3.1. Precedents Cited

A. Standards of review and procedural baselines

  • McKay v. Federspiel, 823 F.3d 862 (6th Cir. 2016) and Fed. R. Civ. P. 56(a) anchored de novo review of summary judgment and the “no genuine issue of material fact” framework.
  • Anderson v. Liberty Lobby, Inc., 477 U.S. 242 (1986) supplied the canonical definitions of “material” and “genuine” disputes.
  • Dutton v. Shaffer, 171 F.4th 858 (6th Cir. 2026) reiterated the requirement to credit the nonmovant’s evidence and draw justifiable inferences in its favor.
  • For pleading-stage dismissals, the court relied on Moshi v. Kia Am., Inc., 155 F.4th 652 (6th Cir. 2025) and Ashcroft v. Iqbal, 556 U.S. 662 (2009), and it relied on Com. Money Ctr., Inc. v. Ill. Union Ins. Co., 508 F.3d 327 (6th Cir. 2007) to confirm what materials may be considered without converting a motion to dismiss to summary judgment.
  • On sanctions, the court cited Jones v. Ill. Cent. R.R. Co., 617 F.3d 843 (6th Cir. 2010) (abuse of discretion review) and Bojicic v. DeWine, 145 F.4th 668 (6th Cir. 2025) (with Hall v. Liberty Life Assurance Co. of Bos., 595 F.3d 270 (6th Cir. 2010)) to define abuse of discretion as applying/misapplying legal standards or relying on clearly erroneous facts.

B. Appellate restraint and remand: issues “not passed upon below”

  • The remand posture was driven by the principle stated in Jackson v. City of Cleveland, 925 F.3d 793 (6th Cir. 2019) (quoting Lindsay v. Yates, 498 F.3d 434 (6th Cir. 2007)): appellate courts generally do not decide issues not addressed by the district court. The panel acknowledged the non-jurisdictional flexibility of this rule, but declined to depart from it due to unresolved questions (including choice-of-law and the settlement’s scope regarding fees).

C. Judicial estoppel and law-of-the-case limitations

  • Mueller’s judicial-estoppel argument was rejected under Mackey v. Rising, 106 F.4th 552 (6th Cir. 2024), referencing the Supreme Court’s acceptance that estoppel can apply in phases of the same case per Pegram v. Herdrich, 530 U.S. 211 (2000). The court applied the three-part test from Chaney-Snell v. Young, 98 F.4th 699 (6th Cir. 2024) and found Crompton’s positions were not “impossible-to-reconcile statements.”
  • The panel rejected Crompton’s “law-of-the-case” argument via Kilnapp v. City of Cleveland, 167 F.4th 909 (6th Cir. 2026), because the district court had explicitly not decided attorneys’ fee allocation earlier.

D. Tennessee contract principles: breach, interpretation, implied covenant, and guaranty construction

  • Elements of breach under Tennessee law: Fed. Ins. Co. v. Winters, 354 S.W.3d 287 (Tenn. 2011).
  • Intent and plain meaning: Allstate Ins. Co. v. Watson, 195 S.W.3d 609 (Tenn. 2006).
  • Guaranties construed strongly against the guarantor: Shreibman v. First Class Corp., 2018 WL 6721482 (Tenn. Ct. App. Dec. 21, 2018) quoting Farmers-Peoples Bank v. Clemmer, 519 S.W.2d 801 (Tenn. 1975).
  • No independent cause of action for breach of good faith; implied covenant cannot add duties: Clippinger v. State Farm Auto. Ins. Co., 173 F.4th 817 (6th Cir. 2026) (en banc).
  • Implied covenant cannot circumvent specific terms: Dick Broad. Co., Inc. of Tenn. v. Oak Ridge FM, Inc., 395 S.W.3d 653 (Tenn. 2013) (quoting Lamar Advert. Co. v. By-Pass Partners, 313 S.W.3d 779 (Tenn. Ct. App. 2009)).
  • Necessity of tying a good-faith theory to a specific breached provision: Beijing Fito Med. Co., Ltd. v. Wright Med. Tech., Inc., 763 F. App'x 388 (6th Cir. 2019) (quoting Solomon v. First Am. Nat'l Bank of Nash., 774 S.W.2d 935 (Tenn. Ct. App. 1989)).

E. “Material alteration” doctrine treated as a defense, not an affirmative breach theory

  • The panel distinguished Crompton’s reliance on Crossville, Inc. v. Kemper Design Ctr., Inc., 758 F. Supp. 2d 517 (M.D. Tenn. 2010), emphasizing that material alteration typically discharges a guarantor rather than creating a guarantor’s affirmative claim for breach.
  • It also cited out-of-circuit examples consistent with discharge framing: Eagerton v. Vision Bank, 99 So. 3d 299 (Ala. 2012) and Univ. Bank & Tr. Co. v. Dunton, 655 F.2d 23 (1st Cir. 1981).

F. Attorneys’ fees as damages: American Rule constraints

  • Tennessee’s American Rule and exceptions: Cracker Barrel Old Country Store, Inc. v. Epperson, 284 S.W.3d 303 (Tenn. 2009).
  • Fees not ordinarily contract damages: Individual Healthcare Specialists, Inc. v. BlueCross BlueShield of Tenn., Inc., 566 S.W.3d 671 (Tenn. 2019).
  • Crompton’s attempt to use Anchor Motor Freight, Inc. v. Int'l Brotherhood of Teamsters, 700 F.2d 1067 (6th Cir. 1983) failed because it applied federal common law and involved a covenant not to sue—distinct from a standard guaranty enforcement dispute.

G. Waiver/abandonment and sanctions doctrine

  • Abandonment and waiver principles were supported by Hunter v. United States, 146 S. Ct. 1702 (2026) (quoting United States v. Olano, 507 U.S. 725 (1993)), and by Sixth Circuit abandonment cases Kellar v. Yunion, Inc., 157 F.4th 855 (6th Cir. 2025) and United States v. Clark, 24 F.4th 565 (6th Cir. 2022).
  • The sanctions framework invoked: Wesco Ins. Co. v. Roderick Linton Belfance, LLP, 39 F.4th 326 (6th Cir. 2022) (abuse of judicial process), Goodyear Tire & Rubber Co. v. Haeger, 581 U.S. 101 (2017) (fee shifting for abuse), Metz v. Unizan Bank, 655 F.3d 485 (6th Cir. 2011) (bad-faith elements, quoting Chambers v. NASCO, Inc., 501 U.S. 32 (1991) and BDT Prods., Inc. v. Lexmark Int'l, Inc., 602 F.3d 742 (6th Cir. 2010)), plus deference to district courts under Collier v. LoGuiduice, 818 F. App'x 506 (6th Cir. 2020).
  • The panel also relied on forfeiture principles for late-raised sanctions arguments: United States v. Huntington Nat'l Bank, 574 F.3d 329 (6th Cir. 2009), Grand v. City of Univ. Heights, 159 F.4th 507 (6th Cir. 2025), Scottsdale Ins. Co. v. Flowers, 513 F.3d 546 (6th Cir. 2008).
  • Finally, the “close call” remand concept for sanctions was contrasted via: Meathe v. Ret, 547 F. App'x 683 (6th Cir. 2013) versus Moross Ltd. P'ship v. Fleckenstein Cap., Inc., 466 F.3d 508 (6th Cir. 2006).

3.2. Legal Reasoning

A. The key holding: the district court conflated two distinct questions about attorneys’ fees

The Sixth Circuit identified a methodological error at summary judgment: the district court resolved only whether Crompton’s guaranty language broadly obligated him to reimburse Mueller for enforcement fees, but it did not decide Crompton’s antecedent contention that those same fees were part of Quick Fitting’s underlying secured “debt” (and therefore should have been paid out of receivership proceeds under the Antipodes Loan’s second-priority status).

The panel framed this as a conflation of:

  • (1) Allocation/Priority Question: Are Mueller’s attorneys’ fees “part of the Antipodes Loan itself,” such that the settlement proceeds must be reallocated again under the Intercreditor and Subordination Agreement and the Antipodes Loan’s contractual fee provisions?
  • (2) Guaranty-Liability Question: Even if fees are not part of the underlying secured debt paid by the settlement, does the guaranty independently obligate Crompton to reimburse Mueller’s fees incurred enforcing the Antipodes Loan and the guaranty?

By deciding only (2), the district court left (1) unresolved—yet (1) could potentially eliminate or reduce the unpaid amount that would otherwise be pursued against Crompton (including, depending on governing documents and law, the component comprised of fees). Because that unresolved issue was not “passed upon below,” the court invoked Jackson v. City of Cleveland and remanded rather than deciding it in the first instance.

B. Why the Sixth Circuit declined to decide the allocation issue itself

The panel highlighted practical impediments that commonly arise in multi-document credit relationships:

  • Choice-of-law uncertainty: The record did not clearly show what sources of law govern interpretation of the interplay between the Antipodes Loan, the guaranty, the intercreditor agreement, and the receivership settlement.
  • Settlement terms may control: Whether the receivership settlement amount encompassed attorneys’ fees (and how) could matter materially.
  • Fee categorization matters: The district court may need to distinguish fees incurred enforcing the Antipodes Loan in receivership from fees incurred enforcing the guaranty in the federal litigation—because different instruments may allocate those categories differently.

The remedy matched the problem: the panel vacated the attorneys’ fee award against Crompton and remanded for a first-instance determination of the reallocation theory.

C. Judicial estoppel rejected

Mueller’s estoppel argument failed because Crompton’s positions were not clearly inconsistent under Chaney-Snell v. Young. Crompton consistently argued that allocation should follow priority and that attorneys’ fees should be allocated consistent with the Antipodes Loan’s second-in-priority position; those statements can cohere rather than “flip-flop.”

D. Breach-of-guaranty counterclaim rejected on contract-law fundamentals

Crompton attempted to convert Mueller’s allocation conduct into an affirmative breach of the guaranty. The Sixth Circuit affirmed dismissal/denial of reconsideration for two independent reasons:

  1. No identified breached provision / implied covenant limits: Under Tennessee law, the implied covenant cannot create “new contractual rights or obligations” (Clippinger v. State Farm Auto. Ins. Co.) and must be tied to a specific breached term (Beijing Fito Med. Co., Ltd. v. Wright Med. Tech., Inc.). Crompton did not identify a specific guaranty provision that Mueller breached.
  2. No cognizable damages: Even if breach existed, Crompton’s only asserted damages were his defense attorneys’ fees. Tennessee’s American Rule framework (Cracker Barrel Old Country Store, Inc. v. Epperson; Individual Healthcare Specialists, Inc. v. BlueCross BlueShield of Tenn., Inc.) generally does not treat such fees as contract damages absent a contractual/statutory basis or recognized exception, and Anchor Motor Freight, Inc. v. Int'l Brotherhood of Teamsters did not supply one here.

E. “Fundamental change/material alteration” rejected as an affirmative claim

Crompton’s “material alteration” theory was treated as a misfit: the doctrine is typically a defense that can discharge a guarantor, not a basis for the guarantor to sue for breach. The court also found the factual analogy to Crossville, Inc. v. Kemper Design Ctr., Inc. weak because the alleged reordering did not increase the principal liability in the way that drove the outcome in Crossville.

F. Tort counterclaims/third-party claims not revived: abandonment

The Sixth Circuit held Crompton abandoned his “offensive” tort claims because he failed to defend his standing to bring them in response to the motions to dismiss—triggering the abandonment rule in Kellar v. Yunion, Inc.. The court therefore declined to address the merits.

G. Sanctions denied: no bad faith and poor preservation

The panel declined to impose sanctions. It characterized the complained-of conduct as ordinary adversarial litigation behavior and found no showing that Mueller’s positions were meritless or pursued for improper purposes under Metz v. Unizan Bank. It further noted Crompton’s sanctions request was not properly preserved because it was first developed in a reply brief, implicating forfeiture principles (Grand v. City of Univ. Heights; Scottsdale Ins. Co. v. Flowers).

3.3. Impact

A. Practical rule for multi-instrument credit disputes: separate “debt composition” from “guaranty reimbursement”

The most consequential contribution of this opinion is its insistence on analytic sequencing in cases where: (i) a loan document makes attorneys’ fees part of the borrower’s obligations, (ii) an intercreditor agreement sets priority for “loans” or “senior loans,” and (iii) a guaranty separately obligates a guarantor to reimburse enforcement costs.

The Sixth Circuit signaled that courts must not assume that a broad guaranty fee clause ends the inquiry. If fees are part of the underlying secured debt and the receivership (or liquidation) proceeds must be applied by priority to that debt, the guarantor’s exposure may change materially depending on whether the secured “paid in full” concept includes contractual fees and costs.

B. Encourages careful drafting and settlement documentation

By emphasizing that “the terms of the receivership settlement—insofar as it encompasses attorneys’ fees—may bear on” the allocation inquiry, the opinion incentivizes:

  • explicit settlement language about which components (principal, interest, default interest, fees, costs) are being satisfied;
  • clarity in intercreditor definitions (e.g., whether “Senior Loans” include enforcement costs); and
  • segregated accounting of fees incurred in collateral enforcement versus guaranty enforcement.

C. Limits on creative counterclaims by guarantors

The opinion reinforces that, at least under Tennessee law applied here, guarantors cannot plead around contract text by recasting allocation disputes as “good faith” breaches without identifying a specific breached term. It also underscores that defense fees will rarely constitute recoverable contract damages under Tennessee’s American Rule.

4. Complex Concepts Simplified

  • Intercreditor/Subordination Agreement: A contract among lenders specifying who gets paid first from collateral proceeds. Here: JPM Loan first, Antipodes Loan second, Mueller Loan third.
  • Allocation/Reallocation of proceeds: Applying a lump-sum payment (here, a receivership settlement) across multiple debts. If applied out of priority, a junior loan might get paid while a senior loan remains unpaid—contrary to the intercreditor deal.
  • Are attorneys’ fees part of the “debt”? Many loan documents require the borrower to pay the lender’s “reasonable attorneys’ fees” incurred in enforcing remedies. If those fees are part of the secured obligation, they may need to be paid (by priority) from collateral proceeds before junior debts receive anything.
  • Guaranty fee clause: A separate promise by the guarantor to reimburse enforcement expenses. Even when present, it does not automatically answer whether the borrower’s collateral proceeds should have paid those expenses first.
  • Judicial estoppel: Prevents a party from winning by taking one position and later switching to an incompatible one. The court found Crompton’s positions reconcilable, so estoppel did not apply.
  • Law-of-the-case: Courts generally stick with earlier rulings in the same case. It did not apply because the district court previously declined to decide fee allocation.
  • American Rule (attorneys’ fees): Each side usually pays its own lawyers unless a contract, statute, or narrow exception allows shifting fees. Tennessee applies this rule strictly.

5. Conclusion

The Sixth Circuit’s core directive is procedural and substantive at once: when a guarantor argues that contractual attorneys’ fees are part of the borrower’s senior secured debt and should have been paid from receivership proceeds under intercreditor priorities, a district court must address that allocation theory directly rather than shortcutting to the guaranty’s broad fee-reimbursement language. Accordingly, the court vacated the fee award against Crompton and remanded for first-instance resolution of whether—and under what governing law and settlement terms—those fees belong in the Antipodes Loan “paid in full” calculus.

At the same time, the opinion tightens guardrails on ancillary litigation: implied-covenant theories must be tied to specific contract provisions; “material alteration” operates primarily as a discharge defense, not an affirmative breach claim; offensive tort theories can be lost by failure to defend standing at the motion-to-dismiss stage; and sanctions require a developed, preserved showing of bad faith rather than dissatisfaction with hard-fought litigation.