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Khan v. South Arkansas Petroleum Co.

January 29, 2007


The opinion of the court was delivered by: J. Leon Holmes United States District Judge


Iqtidar Khan commenced this action seeking damages against South Arkansas Petroleum Company, Inc. ("SAPCO"), for malicious prosecution and abuse of process. Khan invoked jurisdiction pursuant to 28 U.S.C. § 1332 because Kahn is a resident of Virginia, SAPCO is an Arkansas corporation, and the amount in controversy exceeds $75,000. SAPCO has counterclaimed. SAPCO has moved for summary judgment on Khan's claims of malicious prosecution and abuse of process. SAPCO's motion is hereby denied with respect to the malicious prosecution claim and granted with respect to the abuse of process claim.


A court should enter summary judgment if the evidence, viewed in the light most favorable to the nonmoving party, demonstrates that there is no genuine issue of material fact and that the moving party is entitled to judgment as a matter of law. FED. R. CIV. P. 56(c); see also Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250, 106 S.Ct. 2505, 2511, 91 L.Ed. 2d 202 (1986); Cheshewalla v. Rand & Son Constr. Co., 415 F.3d 847, 850 (8th Cir. 2005). The party moving for summary judgment bears the initial responsibility of demonstrating the absence of a genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 2553, 91 L.Ed. 2d 265 (1986). If the moving party carries its burden, "the nonmoving party must come forward with 'specific facts showing that there is a genuine issue for trial.'" Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 1356, 89 L.Ed. 2d 538 (1986) (quoting FED. R. CIV. P. 56(e)). A genuine issue for trial exists only if there is sufficient evidence to allow a jury to return a verdict for the nonmoving party. Anderson, 477 U.S. at 249, 106 S.Ct. at 2511. When a nonmoving party cannot make an adequate showing on a necessary element of the case on which that party bears the burden of proof, the moving party is entitled to judgment as a matter of law. Celotex, 477 U.S. at 323, 106 S.Ct. at 2552.


On August 1, 2002, Khan entered into a lease agreement with SAPCO whereby he agreed to operate a BP convenience store in Brinkley, Arkansas. Khan and SAPCO also entered into a Motor Fuel Supply Agreement whereby Khan agreed to purchase branded motor fuel products from SAPCO to be sold at the BP convenience store. This agreement stated:

Buyer agrees to pay for said products at time of following delivery. Term is "Load to Load". Payment shall be by electronic funds transfer, unless otherwise specified by Seller. In the event Buyer fails to pay for the products on time, the Seller reserves the right to withdraw such credit immediately. Buyer hereby grants Seller a security interest in all motor fuel products supplied by Seller. Buyer also agrees to put up a Fuels Security deposit in the amount of $10,000.00.

Khan has submitted account statements maintained by SAPCO. These account statements seem to reflect the existence of an open account for gas purchases.

On or about April 22, 2003, SAPCO delivered fuel valued at $10,855.48 to Khan. On or about April 29, 2003, SAPCO delivered fuel valued at $11,238.81 to Khan. At the time of the April 29, 2003, delivery, Khan gave SAPCO a check in the amount of $3,299.32 either for partial payment of the April 22, 2003, charge of $10,855.48 or for payment on the account, or both. On or about May 5, 2003, SAPCO was informed by its bank that Khan's check for $3,299.32 was being returned because of insufficient funds. After learning about the bad check, James Johnson, President of SAPCO, attempted to contact Khan to discuss the matter. After some initial difficulty, Johnson was able to contact Khan, but Khan refused to discuss the matter or make arrangements to pay for the bad check.

According to SAPCO, on or about May 7, 2003, Johnson discussed the situation with the deputy prosecuting attorney, J. Baxter Sharp, III, for Monroe County. Johnson signed an affidavit for warrant stating the facts as to the bad check written by Khan. SAPCO contends that Johnson made full disclosure of the facts to Sharp, who determined that probable cause existed to believe that Khan had violated the Arkansas Hot Check Law, Ark. Code Ann. § 5-37-301 et seq. Khan argues that Johnson did not make a full disclosure of the facts to Sharp or on his affidavit. Khan contends Johnson's omission of material facts induced Sharp to seek a warrant for Khan's arrest for violation of the Arkansas Hot Check Law.

A circuit judge found there was probable cause to arrest Kahn and approved the arrest warrant. Trial was held on these charges in Monroe County on January 31, 2005. The Circuit Court dismissed the charges against Khan as the state failed to meet its burden of proof. The order of dismissal cited Ridenhour v. State, 279 Ark. 240, 650 S.W.2d 575 (1983), which held that the Arkansas Hot Check Law does not apply where a party pays a pre-existing debt with a worthless check because nothing of value is procured with the check, whereas the statute prohibits the use of a worthless check to procure something of value.


Khan has brought a claim of malicious prosecution against SAPCO. In Arkansas, [i]n order to establish a claim for malicious prosecution, a plaintiff must prove the following five elements: (1) a proceeding instituted or continued by the defendant against the plaintiff; (2) termination of the proceeding in favor of the plaintiff; (3) absence of probable cause for the proceeding; (4) malice on the part of the defendant; and (5) damages."

Sundeen v. Kroger, 355 Ark. 138, 142, 133 S.W.3d 393, 395 (2003) (citing SAPCO v. Schiesser, 343 Ark. 492, 495, 36 S.W.3d 317, 319 (2001); Harold McLaughlin Reliable Truck Brokers, Inc. v. Cox, 324 Ark. 361, 368, 922 S.W.2d 327, 331 (1996)). Three of these elements are not seriously in dispute. SAPCO did institute a proceeding against ...

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