Cole v. Nabors Corporate Servs., Inc. (In re CJ Holding Co.)

• Decision Date: 08 February 2019
• Docket Number: Civil Action No. H-18-3250
• Citation: 597 B.R. 597
• Parties: IN RE: CJ HOLDING CO., et al., Debtors. John Cole, Appellant, v. Nabors Corporate Services, Inc., Appellee.
• Court: U.S. District Court — Southern District of Texas

597 B.R. 597

IN RE: CJ HOLDING CO., et al., Debtors.

John Cole, Appellant,

v.Nabors Corporate Services, Inc., Appellee.

Civil Action No. H-18-3250

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

Signed February 8, 2019

Bernard R. Given, II, Loeb Loeb LLP, Los Angeles, CA, for Debtors.

Alan Sanford Gerger, The Gerger Law Firm PLLC, Broocks McClure Wilson, Moulton Wilson Arney LLP, Houston, TX, for Appellant.

Henry Flores, Christina Fontenot Crozier, Kelli S. Norfleet, Haynes and Boone LLP, Houston, TX, for Appellee.

MEMORANDUM OPINION AND ORDER

Lee H. Rosenthal, Chief United States District Judge

Cole appeals from the bankruptcy court's Order enforcing a December 2016 Confirmation Order and Plan provision enjoining him from pursuing litigation or arbitration against Nabors Corporate Services, Inc. and Nabors Industries, Ltd. (Bankr. Docket Entry Nos. 2501, 2514). Cole challenges the bankruptcy court's jurisdiction to enforce the December 2016 Confirmation Order and argues that the court violated Bankruptcy Procedure Rule 9006(d). (Docket Entry No. 6). Nabors responded, and Cole replied. (Docket Entry Nos. 8, 9).

Based on the parties' briefs, the response and reply, the record, and the applicable law, the court denies Cole's appeal and affirms the bankruptcy court's Order. The reasons are detailed below.

I. Background

John Cole was an employee of Nabors Completion & Production Services. In May 2014, Cole filed a claim with the Equal Employment Opportunity Commission for sexual harassment, discrimination, and retaliation against Nabors Completion. The Commission issued a right-to-sue order in August 2016. (Docket Entry No. 2 at 3505). In 2015, Nabors Completion became a wholly owned subsidiary of C&J Energy Services, Ltd., and changed its name to C&J Well Services.¹

In July 2016, C&J Well Services and several other affiliated companies filed voluntary petitions under Chapter 11 of the United States Bankruptcy Code. (Docket Entry No. 2 at 3505). The bankruptcy court entered a Bar Date Order, requiring any person asserting claims against the debtors to file proofs of claim by November 8, 2016. (Bankr. Docket Entry No. 756). The Order stated that creditors who did not file proofs of claim by that date would be "forever barred, estopped, and enjoined from asserting such claims against the [d]ebtors," and the "[d]ebtors and their property shall be forever discharged from any and all indebtedness or liability with respect to or arising from such claim." (Id. ).

The debtors provided Cole, among others, notice of the Bar Date Order. He did not file a proof of claim by the bar date. On November 17, 2016, 10 days after the bar date expired, Cole filed a motion for relief from the automatic stay, seeking the bankruptcy court's permission to bring his claims against C&J Well Services in litigation or in arbitration. (Bankr. Docket Entry No. 821). The next day, before the bankruptcy court ruled on the motion, Cole sued Nabors Industries, Ltd. and Nabors Corporate Services, Inc. in the United States District Court for the Western District of Texas,² asserting the same claims he had asserted before the Equal Employment Opportunity Commission. (Docket Entry No. 8 at 12 & n.5).

The bankruptcy court confirmed the debtors' reorganization Plan in December 2016. (Bankr. Docket Entry No. 1057). The Confirmation Order released all claims against the debtors, stating as follows:

Release by Holders of Claims and Interests . As of the Effective Date, each Releasing Party is deemed to have released and discharged each Debtor, Reorganized Debtor, and Released Party from any and all Causes of Action, whether known or unknown, including any derivative claims, asserted on behalf of the Debtors, that such entity would have been legally entitled to assert (whether individually or collectively), based on or relating to, or in any manner arising from, in whole or in part, the Debtor[']s, the Debtors' in- or out-of-court restructuring efforts, intercompany transactions...the Plan..., or upon any other related act or omission, transaction, agreement, event, or other occurrence , taking place on or before the Effective Date....[T]he foregoing release does not release any obligations of any party under the Plan or any document, instrument, or agreement executed to implement the Plan.

Injunction . [A]ll Entities who have held, hold, or may hold Claims or Interests that have been released, discharged, or are subject to exculpation are permanently enjoined, from and after the Effective Date, from taking any of the following actions against...the Debtors...or the Released Parties: (1) commencing or continuing in any manner any action or other proceeding of any kind on account of or in connection with or with respect to any such Claims or Interest;...and (5) commencing or continuing in any manner any action or other proceeding of any kind on account of or in connection with or with respect to any such Claims or Interests released or settled pursuant to the Plan.

Defined Terms .

"Released Party " means...(a) the Supporting Creditors; (b) the Backstop Parties; (c) the Credit Agreement Agent; (d) the Lenders;...(j) Nabors; and (k)...each of the foregoing entities'...current and former Affiliates and subsidiaries....

"Releasing Parties" means...(a) the Supporting Creditors; (b) the Backstop parities, (c) the DIP Facility Lenders, (d) the Credit Agreement Agent, (e) the Lenders, (f) the DIP Facility Agent, (g) the Committee and its members, (h) Nabors, (i) all holders of Claims, (j) all holders of Interests, and (k)...each of the forgoing entities['] current and former Affiliates and subsidiaries....

"Nabors" means Nabors Industries Ltd. and its subsidiaries and Affiliates other than the Debtors.

(Docket No. 2 at 3917, 3919–20, 3951–53) (emphasis added).

The Confirmation Order also stated that:

[t]he release by the Releasing Parties...set forth in...the Plan, is an essential provision of the Plan. The Third Party Release is: (a) in exchange for the good and valuable consideration provided by the Released Parties; (b) a good-faith settlement and compromise of the claims and Causes of Action released by the Third Party Release; (c) materially beneficial to, and in the best interests of, the Debtors, their Estates, and their stakeholders, and is important to the overall objectives of the Plan to finally resolve certain Claims among or against certain parties in interest in these Chapter 11 Cases; (d) fair, equitable, and reasonable; (e) given and made after due notice and opportunity for hearing; and (f) a bar to any of the Releasing Parities asserting any claim or Cause of Action released by the Third Party Release against any of the Released Parties; and (g) consistent with sections 105, 524, 1123, 1129, and 1141 and other applicable provisions of the Bankruptcy Code.

(Docket Entry No. 2 at 3706–07).

On March 4, 2017, Cole filed an amended motion in the bankruptcy court for relief from the automatic stay so that he could pursue his lawsuit against Nabors Corporate and Nabors Industries. (Bankr. Docket Entry No. 1325). The bankruptcy court held a hearing and then denied Cole's motion, with prejudice. (Bankr. Docket Entry No. 1403). Cole moved for reconsideration, and the bankruptcy court modified the order to deny the motion without prejudice. (Bankr. Docket Entry Nos. 1440, 1449). Cole did not file a new motion or appeal the denial.

Cole proceeded with his lawsuit against Nabors Corporate and Nabors Industries. In March 2017, the district court compelled Cole to proceed to arbitration. (Docket Entry No. 8 at 14). On August 23, 2018, before the arbitration hearing was held, Nabors Corporation filed a motion with the bankruptcy court, seeking a permanent injunction precluding Cole from pursuing either his lawsuit or arbitration. (Id. ; Bankr. Docket Entry No. 2491).

On August 28, 2018, the bankruptcy court granted Nabors Corporation's motion, ruling that Cole "is permanently enjoined from pursuing any and all claims" against the debtors and other parties released in the Plan. (Bankr. Docket Entry No. 2501). The bankruptcy court ordered Cole to dismiss with prejudice both his lawsuit in the district court and the related arbitration. (Id. ). Cole argues that he did not have enough time to respond to the motion before the bankruptcy court ruled, without a hearing, six days after the motion was filed. Cole appealed the Order in September 2018. (Docket Entry No. 1).

Cole argues that the bankruptcy court did not have jurisdiction to enforce the Confirmation Order and Plan Injunction by enjoining him from pursuing his lawsuit and arbitration against the Nabors entities, because they were not parties to the bankruptcy proceeding, and because the lawsuit and arbitration would not affect either the debtors' estate or the bankruptcy administration. Cole also argues that the bankruptcy court violated the Federal Rules of Bankruptcy Procedure by not either allowing him time to respond to the motion, issuing an order shortening the time to respond, or holding a hearing. (Docket Entry No.1); FED. R. BANKR. P. 9006, 9014.

The Nabors entities respond that the bankruptcy court had jurisdiction to enjoin Cole from pursuing claims against released parties in the Plan Confirmation Order. Cole had the opportunity to file proofs of these claims in the bankruptcy court, but he failed to do so. Cole may not, according to Nabors, bring these claims in litigation or in arbitration, because claim and issue preclusion apply, and he may not collaterally attack the bankruptcy court's jurisdiction to issue the Confirmation Order and the subsequent injunction.

Nabors Corporate and Nabors Industries also argue that, even if the bankruptcy court issued the August 2018 injunction without giving Cole time to respond, the error is harmless. They contend that Cole did not, and cannot, show that his claims against the Nabors entities can survive the December 2016 Confirmation Order.

Each argument and response is...