Halperin v. Moreno (In re Green Field Energy Servs., Inc.), Case No. 13–12783 (KG) (Jointly Administered)
| Decision Date | 24 January 2018 |
| Docket Number | Adv. Pro. No. 15–50262 (KG),Case No. 13–12783 (KG) (Jointly Administered) |
| Citation | 585 B.R. 89 |
| Parties | IN RE: GREEN FIELD ENERGY SERVICES, INC., et al., Debtors. Alan Halperin, as Trustee of the GFES Liquidation Trust, Plaintiff, v. Michel B. Moreno; MOR MGH Holdings, LLC ; MOR DOH Hodlings, LLC; Shale Support Services, LLC ; Dynamic Group Holdigns, LLC; Dynamic Industries, Inc.; Frac Rentals, LLC; Turbine Generation Services, LLC ; Aerodynamic, LLC; Casafin II, LLC; Moreno Properties, LLC; Elle Investments, LLC ; LQT Industries, LLC (k/a Dynamic Energy Services International LLC, Defendants. |
| Court | U.S. Bankruptcy Court — District of Delaware |
Thomas M. Horan, Shaw Fishman Glantz & Towbin LLC, Steven K. Kortanek, Womble Carlyle Sandridge & Rice, LLP, Thomas G. Macauley, Macauley LLC, Morgan L. Patterson, Womble Bond Dickinson (US) LLP, Wilmington, DE, Joseph N. Argentina, Jr., Patrick A. Jackson, Steven K. Kortanek, Drinker Biddle & Reath LLP, Wilmington, DE, for Plaintiff.
Alison R. Ashmore, Aaron M. Kaufman, Dykema Cox Smith, Jeffrey R. Fine, Dykema Gossett PLLC, Dallas, TX, Marc J. Phillips, Manion Gaynor & Manning LLP, Geoffrey G. Grivner, Buchanan Ingersoll & Rooney PC, William D. Sullivan, Sullivan Hazeltine Allinson LLC, Wilmington, DE, Deborah D. Williamson, Dykema Cox Smith, San Antonio, TX, Mark A. Mintz, Jones Walker LLP, New Orleans, LA, for Defendants.
Dynamic Industries, Inc., pro se.
KEVIN GROSS, U.S.B.J.
Alan Halperin, in his capacity as Trustee (the "Trustee") of the GFES Liquidation Trust (the "Trust") brought a motion for partial summary judgment (the "Trustee's Motion") against Michel B. Moreno ("Moreno"), MOR MGH Holdings, LLC ("MOR MGH"), Aerodynamic, LLC ("Aerodynamic"), Casafin II, LLC ("Casafin"), Frac Rentals, LLC ("Frac Rentals"), and Turbine Generation Services, LLC ("TGS") (collectively "Defendants"). From the thirty-five count amended complaint (the "Complaint")2 , the Trustee moved for summary judgment on his breach of contract claims (Counts 11 and 12); tortious interference with contract claims (Count 14); preference action claims (Counts 19, 21, 23, and 24); objections to proofs of claim from the recipients of preferential transfers (Count 29); objections to Moreno's bankruptcy proofs of claim (Counts 30 and 31); and declaratory judgment claims (Counts 34 and 35).
In response to the Trustee's Motion, Defendants filed a cross-motion seeking partial summary judgment ("Defendants' Motion") on the preference claims (Counts 19, 21, 23, and 24), and moved to deny the Trustee's Motion on all remaining counts.
Originally formed in 1969 under the name Hub City Industries, LLC, Green Field Energy Services, Inc. ("GFES") served for many years as a traditional oil and gas well-related service company before entering into the fracking business in December 2010.3 Declaration of James W. Stoll, dated May 25, 2017 ("Stoll Decl.") Ex. 1, at ¶ 10, 15; Adv. D.I. 372. In October 2011, Moreno took control of GFES through recapitalization and buy-outs, converting the entity into a Delaware corporation. Stoll Decl. Ex. 2, at pp. 5, 31. As of October 17, 2011, MOR MGH owned 88.9% of GFES's common stock and Moody Moreno & Rucks, LLC ("MMR")4 owned 11.1%. Stoll Decl. Ex. 1, at ¶ 15; Ex. 2, at p.4; Ex. 3, at p.3. Acting as managing member, Moreno ran MOR MGH which acted as a holding company wholly owned by two grantor-retained annuity trusts ("GRAT's"): MBM 2011 MGH GRAT and TCM MGH GRAT (collectively, the "MGH Trusts").5 Stoll. Decl. Ex. 2, at p. 83; Ex. 7; Deposition of Michel B. Moreno, dated March 23, 2017 ("Moreno Depo."), 26:4–27:16. Expecting a successful venture, Moreno placed ownership of GFES into a GRAT structure to ameliorate expected taxes on the company. Declaration of Michel B. Moreno ("Moreno Decl.")6 ¶¶ 3–6.
Upon taking control of GFES in October 2011, Moreno assumed the positions of Chief Executive Officer and Chairman of GFES's board of directors (the "GFES Board"). Stoll Decl. Ex. 2, at p. 78, Ex. 3, at p. 64. Moreno also established the remaining executive structure of GFES as follows: Enrique Fontova ("Fontova") became the President of GFES and a member of the GFES Board; Earl Blackwell ("Blackwell") maintained his position as Chief Financial Officer; and Charles Kilgore ("Kilgore"), Mark Knight ("Knight") and Charles T. Goodson ("Goodson") were all appointed to the GFES Board. Stoll Decl. Ex. 2, at p. 78; Ex. 3, at p. 64–65; Ex. 11; Deposition of Earl J. Blackwell, dated March 16, 2017 ("Blackwell Depo"), 15:24–16:12.
After taking control of GFES, Moreno continued the company's transition from well-related services to fracking. Stoll Decl. Ex. 2, at p. 32; Moreno Depo. 12:11–15. In order to successfully transition into the fracking industry, GFES entered into an equipment purchase agreement with Marine Turbine Technologies, LLC ("MTT")7 to acquire turbine fracking equipment, including a number of turbine engines. Stoll Decl. Ex. 16. In September 2011, Moreno and McIntyre entered into a joint venture causing GFES and MTT Properties, LLC ("MTT Properties") to form Turbine Powered Technology, LLC ("TPT") whereby each entity would own 50% of the newly formed TPT. Stoll Decl. Moreno Depo. 34:10–37.2; Ex. 19. Pursuant to the TPT Operating Agreement, GFES was the sole source of funding for TPT's operations, TPT was the sole manufacturer of GFES's turbine powered fracking pumps and TPT entered into a fully paid and royalty free exclusive license to use the Frack Stack Pack technology MTT had developed in perpetuity. Stoll Decl. Ex. 19; Ex. 20; Moreno Depo. 35:19–36:9.
To finance GFES's entry into the highly competitive fracking market, the company borrowed heavily from several different sources, beginning with a $53 million bridge loan (the "Bridge Loan") from Jeffries & Company. Stoll Decl. Ex. 24, at § 6.2. GFES intended the Bridge Loan to finance working capital needs, fund the manufacture of the first operational fleet of turbine powered fracking pumps, bridge GFES to an eventual note issuance and to refinance its obligations under a then existing credit agreement with JP Morgan. Id.
To further finance its entry into the market, GFES entered into a "Contract for High Pressure Fracturing Services" (the "Shell Contract") with SWEPI, LP, successor to Shell Western Exploration and Production, Inc. (collectively with its affiliates and subsidiaries, "Shell").8 Stoll Decl. Ex. 25. In the Shell Contract, GFES agreed to furnish certain fracking spreads at Shell drilling sites and service such sites at a discounted rate; in return, Shell agreed to provide up to an aggregate amount of $100 million in senior secured term loans (the "Prepayment Funding"). Stoll Decl. Ex. 1, at ¶ 48; Ex. 25; Moreno Depo. 16:23–17:20. Under the Shell Contract, the Prepayment Funding was to be distributed in stages, with $42.5 million disbursed as of the contract effective date, $32.5 million disbursed upon achieving certain milestones and the remaining $25 million disbursed upon the delivery of the first fracking equipment. Stoll Decl. Ex. 25, at p. 30–31. To ensure further protection, Moreno personally guaranteed the Shell Contract in his individual capacity. Blackwell Depo. 191:3–192:8; Stoll Decl. Ex. 25.
On November 15, 2011, GFES engaged in a bond issuance (the "Bond Issuance") and raised an additional $250 million through high interest secured notes from public markets. Stoll Decl. Ex. 1, at ¶ 54; Moreno Depo. 46:5–22. The Bond Issuance was memorialized on November 15, 2011, by an indenture (the "Indenture")9 between GFES and Wilmington Trust, National Association, as trustee and collateral agent (the "Indenture Trustee").10 Stoll Decl. Ex. 1, at ¶ 54; Moreno Depo. 46:23–47:2; Ex. 26. Once GFES obtained the Bond Issuance, it sought to get its new technology to market and immediately invested the funds into expanding its fracking fleet. Stoll Decl. Ex. 26.
Shortly after the Bond Issuance, the oil and gas industry experienced a significant decline in natural gas prices, which in turn impacted the fracking industry. Stoll Decl. Ex. 29, at pp 3–5; Kearns. Decl. ¶ 7. Consequently, GFES was well behind its forecasted projections for the first half of 2012, experiencing a negative EBITDA of approximately $8.5 million as compared to the forecasted positive $54 million of EBITDA in GFES's 2011 projections. Kearns Decl. ¶ 9; Stoll Decl. Ex. 31, at p. 30. To offset its downturn in projections, GFES sought additional financing from Shell in April 2012. Stoll Decl. Moreno Depo. 45:22–46:12.
GFES and Shell agreed to revise the structure of the Shell Contract, replacing the interest free Prepayment Funding with a $30 million revolving senior credit facility (the "Shell Senior Credit Facility"). Stoll Decl. Ex. 25, at MORE_00571013. In May 2012, GFES fully drew the $30 million from the Shell Senior Credit Facility, but this proved still insufficient to satisfy their cash requirements. Id. Shell therefore agreed to amend the Shell Senior Credit Facility and added an additional $70 million in funding (the "Shell Amended Senior Credit Facility"). Id.
In order to obtain additional borrowing under the Shell Amended Senior Credit Facility, Moreno approached the bondholders with a consent solicitation (the "Consent Solicitation") that proposed to modify Section 4.08 of the Indenture to permit a "one-time incurrence of up to $95.0 million in senior term loans secured by a first priority security interest in all of the company's motor vehicles and equipment under a credit agreement with one of [GFES's] key customers, [Shell]...." See Stoll. Decl. Ex. 32, at p. 1–2. As consideration, on October 24, 2012, MOR MGH and MMR (the GFES shareholders) agreed to provide additional equity investments into GFES under a share purchase agreement (the "2012 SPA"). Stoll Decl. Ex. 32, at pp 9–10; Ex. 33, at p. 1. Section 2.01(a) of the 2013...
To continue reading
Request your trial