AI Int'l Holdings (BVI) Ltd. v. MUFG Union Bank, N.A. (In re Weinstein Co. Holdings, LLC)
| Decision Date | 20 December 2018 |
| Docket Number | Case No. 18-10601 (MFW) (Jointly Administered),Adv. No. 18-50486 |
| Citation | 595 B.R. 455 |
| Parties | IN RE: The WEINSTEIN COMPANY HOLDINGS, LLC, et al., Debtors. AI International Holdings (BVI) Ltd., Plaintiff, v. MUFG Union Bank, N.A.; as Administrative and Collateral Agent and UnionBanCal Equities, Inc., Defendants. |
| Court | U.S. Bankruptcy Court — District of Delaware |
Davis Lee Wright, Robinson & Cole LLP, Wilmington, DE, for Plaintiff.
Sean Matthew Beach, Michael S. Neiburg, Robert S. Brady, Elizabeth Soper Justison, Young Conaway Stargatt & Taylor, LLP, Wilmington, DE, William B. Freeman, Jerry L. Hall, Katten Muchin Rosenman LLP, Los Angeles, CA, for Defendants.
Before the Court is the Motion for Summary Judgment filed by MUFG Union Bank ("MUFG") and UnionBanCal Equities ("UBE") (collectively the "Defendants") on the complaint filed by AI International Holdings, Ltd. (the "Plaintiff") requesting a determination that the Defendants' claims and liens are invalid, in whole or in part. The Defendants contend that they are entitled to summary judgment because (1) the Plaintiff's claims are barred by res judicata and (2) the Plaintiff does not allege facts establishing it has an injury in fact to support standing to challenge the extent, validity, or amount of the Defendants' secured claims. For the reasons discussed below, the Court will deny the Defendants' Motion for Summary Judgment.
On March 19, 2018 (the "Petition Date"), The Weinstein Company Holdings, LLC, and its affiliates (collectively, the "Debtors"), filed for relief under chapter 11 of the Bankruptcy Code. The Weinstein Company Holdings ("Holdings") is the parent company of Weinstein Television, LLC ("TV"), The Weinstein Company, LLC ("Company"), and TWC Borrower 2016, LLC ("Borrower 2016"). Weinstein Global Film Corporation ("Global Film") and TWC Domestic, LLC ("Domestic") are subsidiaries of Company. The Plaintiffs lent $45 million to Borrower 2016, which was secured by Company's interests in the stock of Global Film, by Global Film's interest in distribution and exploitation rights to certain Foreign Film Collateral, and by Holdings' membership interests in TV. The Plaintiff filed proofs of claim asserting a secured claim in excess of $46 million.
The Defendant MUFG is the administrative agent under a pre-petition credit agreement between MUFG and Domestic, which was guaranteed by Company. Domestic scheduled MUFG as a secured creditor with a claim of approximately $156 million; Company scheduled MUFG as a secured creditor in an unknown amount. UBE is the administrative agent of a pre-petition security agreement with Domestic, which scheduled it as a secured creditor in the amount of approximately $15 million. Neither MUFG nor UBE have filed any proofs of claim.
The Court entered a final order authorizing the Debtors to obtain post-petition financing on April 19, 2018 (the "Final DIP Order"). (Adv. D.I. 1-13, Ex. M.) The Final DIP Order authorized a DIP loan of up to $25 million between the Debtors and MUFG, as administrative agent for itself and the other DIP lenders. The Final DIP Order also allowed all non-debtor parties in interest seventy-five "days from the petition date to investigate the validity, perfection and enforceability of the Pre-Petition Liens and the Pre-Petition Obligations ... and to assert any other claims or causes of action against the Pre-Petition Secured Parties or UBE Secured Parties." (Id. at ¶ 16.) The Order stated that "nothing contained in the DIP Loan Documents or this Final Order shall be deemed to confer standing on any party-in-interest to commence a challenge" of the Defendants' claims. (Id. ) The Order also allowed the Defendants to receive the proceeds of the sale of the Debtors' assets "subject to disgorgement to the extent any Challenge asserted in accordance with the terms of this Final Order is ultimately sustained by the Court." (Id. at ¶ 28.)
Early in the case, the Debtors sought approval to sell substantially all of their assets to Lantern Capital ("Lantern") for $310 million. (APA Ex. P, Adv. D.I. 1-16.) On April 6, 2018, the Court approved the Debtors' proposed bidding procedures, but when no overbid was received, the Court entered a Sale Order on May 9, 2018, confirming the sale to Lantern.
On June 2, 2018, the seventy-fifth day from the Petition Date, the Plaintiff filed an adversary complaint objecting to the Defendants' claims and seeking, inter alia, a determination of the extent of the Defendants' security interests.2 11 U.S.C. § 506(a). The Defendants filed an answer on August 27, 2018, and a Motion for Summary Judgment on September 7, 2018. The Plaintiff filed a response to the Motion on October 5, 2018. A notice of completion of briefing was filed on October 31, 2018. The matter is ripe for decision.
The Court has jurisdiction over this matter pursuant to 28 U.S.C. §§ 157(K), (N), (O) and 1334. Further, this proceeding requires the interpretation and enforcement of certain terms of the Sale Order and the Final DIP Order previously entered in this case. "Bankruptcy courts have subject matter jurisdiction to interpret and enforce their own orders." In re Insilco Techs., Inc., 351 B.R. 313, 319 (Bankr. D. Del. 2006) (citing In re Allegheny Health, Education and Research Foundation, 383 F.3d 169, 175–76 (3d Cir.2004) ). Thus, the Court has subject matter jurisdiction to hear and determine the issues raised by the Motion for Summary Judgment.
Pursuant to Rule 56(a) of the Federal Rules of Civil Procedure, summary judgment is appropriate when the "movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(c) ; Fed. R. Bankr. P. 7056. A genuine dispute of material fact exists where a reasonable jury could return a verdict in the non-moving party's favor. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). The Court should view the facts in the light most favorable to the non-moving party. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587–88, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986).
The moving party bears the initial burden to identify the absence of material issues of fact. Celotex Corp. v. Catrett, 477 U.S. 317, 325, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). This can be achieved by showing the absence of admissible evidence which would "support an essential element in a non-moving party's case." In re W.R. Grace & Co., 355 B.R. 462, 472 (Bankr. D. Del. 2006) (citing Celotex, 477 U.S. at 325, 106 S.Ct. 2548 ). The moving party cannot succeed on summary judgment by offering speculation and conclusory allegations. See Ridgewood Bd. of Educ. v. N.E. ex rel. M.E., 172 F.3d 238, 252 (3d Cir. 1999). If the moving party satisfies its burden, the burden shifts to the non-moving party to "come forward with specific facts showing that there is a genuine issue for trial." Matsushita Elec., 475 U.S. at 587, 106 S.Ct. 1348. The non-moving party "must do more than simply show that there is some metaphysical doubt as to the material facts." Id. at 586, 106 S.Ct. 1348. This requires the non-moving party to present "concrete evidence from which a reasonable jury could return a verdict in his favor." Anderson, 477 U.S. at 256, 106 S.Ct. 2505.
The doctrine of res judicata or claim preclusion serves "the dual purpose of protecting litigants from the burden of relitigating an identical issue with the same party or his privy and ... promoting judicial economy by preventing needless litigation." Parklane Hosiery Co. v. Shore, 439 U.S. 322, 326, 99 S.Ct. 645, 58 L.Ed.2d 552 (1979). Res judicata applies to bar a claim when there was a previous cause of action which came to a final judgment on the merits and then a subsequent dispute on the same issue between the same parties or their privies. See Lubrizol Corp. v. Exxon Corp., 929 F.2d 960, 963 (3d Cir. 1991) (); In re SAI Holdings Ltd., No. 06-33227, 2012 WL 3201893 (Bankr. N.D. Ohio Aug. 3, 2012) (). The party asserting application of the doctrine of res judicata bears the burden of proof that it applies. See, e.g., Winget v. JP Morgan Chase Bank, N.A., 537 F.3d 565, 572 (6th Cir. 2008).
The Defendants argue that summary judgment is appropriate because the Sale Order and Final DIP Order are final, non-appealable orders and therefore any collateral attack on them is precluded by the doctrine of res judicata.
The Defendants argue that the express provisions of the Sale Order bar the Plaintiff from challenging the allocation of the sale proceeds set forth in the APA. See, e.g., Providence Hall Assocs. Ltd. P'ship v. Wells Fargo Bank, N.A., 816 F.3d 273, 279-80 (4th Cir. 2016) (); Winget, 537 F.3d at 577-78 (). They contend that the Court specifically authorized the allocation of the sale proceeds to the Defendants under the Sale Order.
However, the express language of the Sale Order belies that argument. Paragraph 8 of the Sale Order states:
The DIP Agent is hereby authorized to distribute the amount received by the DIP Agent, which amount shall be deemed indefeasible, to the DIP Lenders in accordance with the terms of the DIP Loan Documents. The Pre-Petition Agent is hereby authorized to distribute the amount received by the Pre-Petition...
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