Asarco LLC v. Americas Min. Corp.

• Decision Date: 12 October 2007
• Docket Number: Civil No. B-07-018.
• Citation: 382 B.R. 49
• Parties: ASARCO LLC, Southern Peru Holdings, LLC, Plaintiffs, v. AMERICAS MINING CORPORATION, Defendant.
• Court: U.S. District Court — Southern District of Texas

382 B.R. 49

ASARCO LLC, Southern Peru Holdings, LLC, Plaintiffs, v. AMERICAS MINING CORPORATION, Defendant.

Civil No. B-07-018.

United States District Court, S.D. Texas, Brownsville Division.

October 12, 2007.

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George Irvin Terrell, Baker Botts, L.L.P., Houston, TX, James R. Prince, Eric A. Soderlund, Fernando Rodriguez, Jr., Jack L. Kinzie, Thomas Edward O'Brien, Baker Botts, L.L.P., Dallas, TX, Kevin M. Sadler, Baker Botts, L.L.P., Austin, TX, Michael C. Massengale, Rebeca Aizpuru Huddle, Samuel Wollin Cooper, Baker Botts, L.L.P., Houston, TX, Garland Doty Murphy, IV, Smyser, Kaplan & Veselka, L.L.P., Houston, TX, Shelby A. Jordan, Jordan Hyden, et al., Corpus Christi, TX, Michahel J. Urbis, Jordan Hyden, et al., Brownsville, TX, for Plaintiffs.

Charles A. Beckham, Jr., Brian F. Antweil, Elizabeth Brooks Hamilton, Kirk L. Worley, Haynes & Boone, Houston, TX, David R. Gelfand, Luc A. Despins, Stacey J. Rappaport, Alan J. Stone, Melanie Westover, Milbank, Tweed, et al., New York, NY, David S. Cohen, Milbank Tweed, et al., Washington, DC, for Defendant Americas Mining Corporation.

J.A. Tony Canales, Canales & Simonson, Corpus Christi, TX, for Movant Daniel Tellechea.

Evelyn H. Biery, Zack A. Clement, Mark Allan Worden, Sharon Marie Beausoleil-Mayer, Fulbright Jaworski LLP, Houston, TX, Louis Raymond Strubeck, Jr., Fulbright & Jaworski, Dallas, TX, for Intervenor Official. Committee of Unsecured Creditors of ASARCO LLC.

Jacob Lee Newton, Robert T. Brousseau, Sander L. Esserman, Steven A. Felsenthal, Stutzman Bromberg, et al., Dallas, TX, Jo E. Hartwick, Attorney at Law, Dallas, TX, for Intervenor Official Committee of Unsecured Creditors of the Subsidiary Debtors.

Debra L. Innocenti, John H. Tate, II, Raymond W. Battaglia, Oppenheimer, Blend, Harrison & Tate, San Antonio, TX, for Future Claims Representative Robert C. Pate.

ORDER

ANDREW S. HANEN, District Judge.

ASARCO LLC and Southern Peru Holdings, LLC filed their First Amended Complaint ("Complaint") (Doc. No. 70) on May 4, 2007, adding Southern Peru Holdings, LLC as a party plaintiff. Pending before this Court is Americas Mining Corporation's Motion to Dismiss the First Amended Complaint ("AMC's Motion") (Doc. No. 82), filed on May 18, 2007. Plaintiffs have offered ASARCO, LLC and Southern Peru Holdings, LLC's Response to Americas Mining Corporation's Motion to, Dismiss the First Amended Complaint ("ASARCO's Response"). (Doc. No. 100), and Defendant, in turn, filed Americas Mining Corporation's Reply Memorandum of Law in Support of Its Motion to Dismiss the First Amended Complaint ("AMC's Reply") (Doc. No. 112) ASARCO LLC and Southern Peru Holding, LLC's Motion for Leave to File a Reply (Doc. No. 128) is GRANTED; and Americas Mining Corporation's Motion to Strike Plaintiffs' Reply Dated August 15, 2007 (Doc. No. 131) is DENIED.

After considering all the pertinent pleadings, this Court hereby DENIES AMC's Motion to Dismiss pursuant to Rule 12(b)(6). The Court also conditionally DENIES AMC's Motion to Dismiss pursuant to Rule 9(b) and ORDERS Plaintiffs to amend their Complaint, specifying any statutory basis for their fraudulent transfer claim, within fifteen days from this order, if they intend to base any claim on a statute.

I. STANDARD OF REVIEW

To qualify for dismissal under Rule 12(b)(6), a complaint must, on its face, show a bar to relief. Fed.R.Civ.P. 12(b)(6); Clark v. Amoco Prod. Co., 794 F.2d 967, 970 (5th Cir.1986). In deciding a motion to dismiss, the Court must not go outside the pleadings. Fee v. Herndon, 900 F.2d 804, 807 (5th Cir.1990). Dismissal "can be based either on a lack of a cognizable legal theory, or the absence of sufficient facts alleged under a cognizable legal theory." Frith v. Guardian Life Ins. Co., 9 F.Supp.2d 734, 737-38 (S.D.Tex. 1998).

In considering whether dismissal for failure to state a claim is warranted, "the Court accepts as true all allegations contained in the plaintiffs complaint," and "all reasonable inferences are to be drawn in favor of the plaintiff's claims." Id. at 738. However, courts "are not bound to accept as true a legal conclusion couched as a factual allegation." Papasan v. Allain, 478 U.S. 265, 286, 106 S.Ct. 2932, 92 L.Ed.2d 209 (1986). "While a complaint attacked by a Rule 12(b)(6) motion to dismiss does not need detailed factual allegations, a plaintiff's obligation to provide the grounds of his entitlement to relief requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do." Bell Atlantic Corp. v. Twombly, ___, U.S. ___, ___ _ ___, 127 S.Ct. 1955, 1964-65, 167 L.Ed.2d 929 (2007) (omitting citations). The factual allegations must be enough to raise a right to relief above the speculative level. Id. at 1965.

ASARCO's Complaint seeks relief based upon five causes of action, in addition to a claim for punitive damages. ASARCO alleges the following causes: (1) fraudulent transfer (actual); (2) fraudulent transfer with constructive intent; (3) breach of a fiduciary duty AMC allegedly owed ASARCO and ASARCO's creditors; (4) aiding and abetting Grupo and ASARCO's directors' breaches of fiduciary duties; and (5) civil conspiracy between AMC and Grupo and/or ASARCO's directors.

AMC's Motion argues that ASARCO has failed to state a claim as to each of its counts as a matter of law. Additionally, AMC argues that it is entitled to dismissal as a matter of law because ASARCO lacks standing since it did not own the SPCC stock, whose transfer is at issue in all of the claims. Finally, AMC argues that ASARCO has failed to plead fraud with particularity in compliance with Rule 9(b). See Fed.R.Civ.P. 9(b). To survive AMC's Motion on each of its claims, ASARCO must plead essential factual allegations that could suggest necessary inferences for any cognizable legal theory for each claim it asserts. See Bell Atlantic, 127 S.Ct. at 1965.

II. FACTUAL BACKGROUND¹

This case involves the transfer of stock among a group of parent and wholly-owned-subsidiary corporations: (1) Grupo Mexico ("Grupo"); (2) Americas Mining Corporation, ("AMC"), a wholly-owned subsidiary of Grupo Mexico; (3) ASARCO, LLC, previously ASARCO, Inc., (referring to both entities as "ASARCO" for purposes of this order), a wholly-owned subsidiary of AMC; (4) Southern Peru Holdings, LLC, previously Southern Peru Holdings Corporation, a wholly-owned subsidiary of ASARCO (for purposes of this Order, the Court will refer to both as "SPH"); and (5) Southern Peru Copper Corporation, now Southern Copper Corporation (this order will refer to both as "SPCC"). (Compl. ¶¶ 2-6; AMC's Motion, at 1.)

ASARCO was previously a wholly-owned subsidiary of Grupo, purchased in a leveraged buyout in 1999. According to the Plaintiffs, Grupo created AMC in October 2000 as a sham to perpetrate a fraud on ASARCO and ASARCO's creditors. (Compl. ¶ 4.) Until Grupo directed the creation of SPH, SPCC was a partially-owned subsidiary of ASARCO, directly. (Id. ¶ 6.) Plaintiffs claim SPH was formed as a sham to perpetrate a fraud on ASARCO and ASARCO's creditors as well.² SPH had no business other than owning SPCC shares. (Id.) Plaintiffs claim that. SPH was a mere instrumentality, agent and alter ego of ASARCO and that SPH and ASARCO operated as a single business enterprise. (Id.) Plaintiffs allege that all actions relating to the purportedly fraudulent transfer were taken by ASARCO and that the transaction occurred between ASARCO and AMC, not SPH and AMC. (Id. ¶ 6.)

Plaintiffs claim that soon after Grupo purchased ASARCO in 1999, Grupo planned to form AMC and transfer ASARCO's interest in SPCC to AMC in order to "remove ASARCO's most valuable asset from the reach of ASARCO's creditors." (Id. ¶ 22.) Plaintiffs claim ASARCO was inadequately capitalized early on, as a result of intentional decisions directed by Grupo, including the sale of ASARCO's chemical and aggregate subsidiaries, OMI/Enthone and American Limestone, in order to pay an acquisition debt that Grupo had guaranteed. These changes left ASARCO vulnerable to the cyclical copper markets. (Id. ¶ 20.) Plaintiffs describe ASARCO as desperate for cash throughout 2000 and 2001. (Id. ¶ 28.) Unable to pay its debts, ASARCO began selling its real estate and equipment, often to Grupo and AMC affiliates. (Id.)

In September 2000, Pricewaterhouse-Coopers appraised the value of ASARCO's (SPH's) 54.2% ownership interest in SPCC at $978,586,000.00. (Id. ¶ 23). AMC³ directed ASARCO to retain Houlihan Lokey Howard & Zukin to give them another opinion, which they did in June 2001, deeming the valuation of $720 million to be "fair to ASARCO from a financial point of view." (Id. ¶ 25.) In late 2001, Grupo and AMC initially proposed having. AMC purchase the SPCC shares for $100 million and assumption of $350 million of ASARCO's debt. (Id. ¶ 27.) By April 2002, however, "AMC began planning to pay $600 million" for the SPCC shares. (Id. ¶ 34.)

Plaintiffs claim that by late 2001, ASARCO "began making plans for a possible chapter 11 bankruptcy." (Id. ¶ 31.) ASARCO was in a liquidity crisis in December 2001 when AMC directed ASARCO to redeem $50 million bonds at par. (Id. ¶ 32.) AMC provided ASARCO with a $42 million "advance" on its purchase of ASARCO's interest in SPCC, so that it could redeem the bonds. (Id.) ASARCO grew more insolvent in 2002, and was in arrears $138 million, according to ASARCO's Vice President of Finance and Administration, James O'Neil. (Id. ¶ 33.)

In August 2002, in the interest of pending environmental liabilities, the Department of Justice ("DOJ") sued to enjoin the transfer of the SPCC shares, alleging that ASARCO was insolvent. (Id. ¶ 41.) ASARCO settled the suit with the DOJ, at AMC's direction, agreeing to put $100 million from the anticipated SPCC sale into an environmental...