In re 15375 Memorial Corp.

• Citation: 382 B.R. 652
• Decision Date: 15 February 2008
• Docket Number: Bankruptcy No. 06-10859(KG).,Adversary No. 06-50822(KG).
• Parties: In re 15375 MEMORIAL CORPORATION, et al., Debtors. Santa Fe Minerals, Inc., Plaintiff, v. BEPCO, L.P., formerly known as Bass Enterprises Production Company, Defendant, GlobalSantaFe Corporation, GlobalSantaFe Corporate Services Inc. and Entities Holding, Inc., Intervenors.
• Court: U.S. Bankruptcy Court — District of Delaware

382 B.R. 652

In re 15375 MEMORIAL CORPORATION, et al., Debtors.

Santa Fe Minerals, Inc., Plaintiff, v. BEPCO, L.P., formerly known as Bass Enterprises Production Company, Defendant, GlobalSantaFe Corporation, GlobalSantaFe Corporate Services Inc. and Entities Holding, Inc., Intervenors.

Bankruptcy No. 06-10859(KG).

Adversary No. 06-50822(KG).

United States Bankruptcy Court, D. Delaware.

February 15, 2008.

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

John D. Demmy, Esq., Stevens & Lee, P.C., Wilmington, DE, Marnie E. Simon, Esq., John C. Kilgannon, Esq., Stevens & Lee, P.C., Philadelphia, PA, for Debtors and Debtors in Possession.

Gregory Werkheiser, Esq., Kelly M. Dawson, Esq., Morris, Nichols, Arsht &amp Tunnel LLP, Wilmington, DE and M. Hampton Carver, Esq., Stephen Rose, Esq., Leann Opotowsky Moses, Esq., Carver, Darden, Koretzky Tessier, Finn, Blossman & Areaux, LLC, New Orleans, LA, for Defendant.

Francis A. Monaco Jr., Esq., Kevin J. Mangan, Esq., Womble Carlyle Sandridge & Rice PLLC, Wilmington, DE, Philip Eisenberg, Esq., Locke Liddell & Sapp, LLP, Houston, TX, for Intervenors.

FINDINGS OF FACT AND CONCLUSIONS OF LAW

KEVIN GROSS, Bankruptcy Judge.

The Debtors are 15375 Memorial Corporation ("Memorial") and Santa Fe Minerals, Inc. ("Santa Fe"). Debtors commenced their Chapter 11 bankruptcy cases on August 16, 2006 ("the Bankruptcy Cases"). On September 8, 2006, Santa Fe brought an adversary proceeding ("the Adversary Proceeding") against BEPCO, L.P., formerly known as Bass Enterprises Production Company ("BEPCO"). The parties' dispute arose when Debtors filed for bankruptcy shortly before a trial was scheduled to begin in which Debtors and BEPCO were co-defendants. The bankruptcy resulted in Debtors being dismissed from the litigation and BEPCO being faced with all of the liability. BEPCO therefore challenged the validity of the bankruptcy and sought leave of the Court to proceed against Debtors and related entities. The Court is issuing its Findings of Fact and Conclusions of Law following the trial held on October 19, 2006, and September 17-18, 2007 ("the Trial").

I. THE PENDING MOTIONS

The pending motions ("the Pending Motions") include the following: (a) the Motion for Preliminary Declaratory and Injunctive Relief and a related memorandum of law in support thereof (Adv. D.I. 3 & 4), filed by Santa Fe (together, "the Injunction Motion"); (b) the Motion of BEPCO, L.P. f/k/a Bass Enterprises Production Company, for Order (I) Dismissing Debtors' Chapter 11 Cases for Bad Faith, Cause Under 11 U.S.C. § 1112(b) and Ineligibility Under 11 U.S.C. § 109, (II) Dismissing or Suspending Debtors' Chapter 11 Cases Under 11 U.S.C. § 305(a)(1), (III) Converting Debtors' Chapter 11 Cases to Cases Under Chapter 7 of the Bankruptcy Code Pursuant to 11 U.S.C. § 1112(b), (IV) Appointing a Trustee Pursuant to 11 U.S.C. § 1104(a), or, (V) Appointing an Examiner Pursuant to 11 U.S.C. § 1104(a) and a related memorandum of law in support thereof (D.I. 21 & 22), filed by BEPCO (together, "the BECO Dismissal/Conversion Motion"); and (c) the Motion for Modification of the Automatic Stay Under 11 U.S.C. § 362 and a related memorandum of law in support thereof (D.I. 23 & 26), filed by BEPCO ("the BEPCO Stay Relief Motion").

In a motion to shorten (D.I. 25), BEPCO asked the Court to consider the BEPCO Dismissal/Conversion Motion and the BEPCO Stay Relief Motion no later than October 20, 2006. BEPCO sought the expedited ruling because BEPCO's Motion to Reinstate in the litigation captioned William M. Tebow, et al., v. Bradex Oil & Gas, Inc., et al., Docket No. 2005-7728 pending in the 12th Judicial District Court for the Parish of Avoyelles in the State of Louisiana ("the Tebow Action") was scheduled to be heard on October 20, 2006. BEPCO wanted the Court to whether BEPCO was able to pursue its claims against the Debtors and the GSF Entities in connection with the original trial of the Tebow Action. The Court scheduled the BEPCO Dismissal/Conversion Motion to be considered on October 19, 2006, with the remaining Motions to be considered at a two day hearing initially scheduled for the first week in December 2006.

On October 19, 2006, the hearing was Commenced to consider, among other things, the BEPCO Dismissal/Conversion Motion. At the conclusion of that hearing, the Court took the BEPCO Dismissal/Conversion Motion and arguments presented in connection therewith under advisement. (B-Exh. 230 at 96). Thereafter, the Court decided to defer its ruling because a more complete record was necessary. (B-Exh. 231 at 3-4). Accordingly, on November 22, 2006, this Court entered an order scheduling the entirety of the Pending Motions to be considered at a hearing to be convened in January 2007 (Adv. D.I. 45).

On December 29, 2006, the GSF Entities (defined below) filed the Motion of Global-SantaFe Corporation, GlobalSantaFe Corporate Services Inc., and Entities Holdings, Inc., to Dismiss BEPCO, L.P.'s F/K/A Bass Enterprises Production Company, Motion for Modification of the Automatic Stay Under 11 U.S.C. Section 362 (D.I. 100) ("the GSF Motion to Dismiss") in opposition to the BEPCO Stay Relief Motion. The GSF Entities argued that the Court should deny the BEPCO Stay Relief Motion based on BEPCO's alleged failure to adduce adequate evidence in support of the claims BEPCO asserted against the GSF Entities on the basis of alter ego, veil piercing, single business enterprise and similar theories of recovery.

On January 9, 2007, the Court entered the Order Regarding Discovery and Adjourning Evidentiary Hearing which, inter alia, held the GSF Motion To Dismiss in abeyance until the hearing on the Pending Motions (Adv. D.I. 49). Reaffirming its ruling, on February 7, 2007, this Court entered the Order Regarding Discovery and Related Issues (Adv. D.I. 84) which stated, in pertinent part, that "[f]urther briefing and decision on GlobalSantaFe's Motion to Dismiss is hereby deferred until after the hearing and post-hearing briefing." (B-Exh. 147 at ¶ 8).

In addition to the Pending Motions and the GSF Motion To. Dismiss, on June 25, 2007, the Debtors' circulated and later filed a summary judgment motion (D.I. 243) ("the Summary Judgment Motion"). The Pending Motions, as defined, are the subject of the Court's rulings.

II. THE PARTIES¹

A. The Debtors

1. 15375 Memorial Corporation, f/k/a GlobalSantaFe Holding Company, f/k/a Santa Fe (U.S. Holdings) Inc.

Memorial, formerly known as Santa Fe (U.S. Holdings) Inc. and GlobalSantaFe Holdings Company, is a Delaware corporation and the immediate parent of SantaFe Minerals, Inc. ("Santa Fe"). (B-Exh. 118; B-Exh. 120 at ¶ 3; B-Exh. 162; Jt Pre-Tr. Or. at 6; 9/17/07 Tr. at 49, 111). In June 2001, Memorial voluntarily dissolved. (B-Exh. 228 at 5, 36; B-Exh. 230 at 64; B-Exh. 241; Jt. Pre-Tr. Or. at 6; 9/17/07 Tr. at 113-14). The dissolution was later revoked in June 2004 "under the advice of counsel in litigation." (B-Exh. 228 at 5, 36; B-Exh. 230 at 65; B-Exh. 241; Jt. Pre-Tr. Or. at 6; 9/17/07 Tr. at 114). Memorial is now a holding company with no employees and engages in no business other than to act as the sole shareholder of Santa Fe. (B-Exh. 128; B-Exh. 228 at 5; 9/17/07 Tr. at 113, 115). Global-SantaFe Corporate Services Inc. ("GSFCSI"), other affiliate entities and outside vendors provide. Memorial with all support services, including but not limited to, legal, tax, and purchasing. (Jt. Pre-Tr. Or. at 7; 9/17/07 Tr. at 111).

2. Santa Fe Minerals, Inc.

Debtor Santa Fe was a corporation organized under the laws of the state of Wyoming until it dissolved in December 2000 pursuant to a non-judicial Wyoming statutory dissolution procedure. (B-Exh. 120 at ¶ 3; B-Exh. 179 at ¶ 7; B-Exh. 228 at 10, 17, 38-39; B-Exh. 230 at 37; Jt. Pre-Tr. Or. at 7-8). Prior to its dissolution, Santa Fe was an indirect, wholly owned subsidiary of SantaFe International Corporation (which later merged into GSF Corp. (as defined below)). (B-Exh. 228 at 10, 17, 38-39; Jt. Pre-Tr. Or. at 7; 9/17/07 Tr. at 119). Santa Fe's business was oil and gas exploration and related activities. (B-Exh. 228 at 10, 17, 38-39; Jt. Pre-Tr. Or. at 7; 9/17/07 Tr. at 119). Santa Fe's dissolution means that it is able to act only through its sole shareholder, Memorial, in furtherance of winding up its remaining business. (B-Exh. 162; B-Exh. 165; B-Exh. 228 at 10; B-Exh. 230 at 32, 34; 9/17/07 Tr. at 47, 49; Jt. Pre-Tr. Or. at 8). Santa Fe currently has no officers, directors or employees and engages in no business. (B-Exh. 228 at 10, 12, 26, 48; B-Exh. 230 at 32; Jt. Pre-Tr. Or. at 7). Santa Fe's defunct status is undisputed and a matter of public record in these cases. Santa Fe's Monthly Operating Reports since the outset of these cases has contained the following statement (or one similar to it) in lieu of otherwise required financial statements and other information:

Debtor is a dissolved Wyoming corporation and as such it operates no business. Debtor has no employees, property, and maintains no bank accounts of any sort. In addition therefore, no financial statements are prepared.

(B-Exh. 166, 169, 170, 171, 172, 173, 174, 175, 176, 177, 177A, 177B & 177C).

Both Debtors identify 15375 Memorial Drive, Houston, Texas, as their address, which is the U.S. headquarters of GSF Corp. and other related entities. (B-Exh. 118; B-Exh. 162; B-Exh. 228 at 25-26; Jt. Pre-Tr. Or. at 8; 9/17/07 Tr. At 115). Neither Debtor actually has offices at this address or at any other location. (B-Exh. 228 at 25-26; 9/17/07 Tr. at 115-16).

B. The GSF Entities

1. GlobalSantaFe Corporation

GlobalSantaFe Corporation ("GSF Corp."), a Cayman Islands corporation, is the ultimate parent in the GlobalSantaFe family of companies. (B-Exh. 181 at 2). The GlobalSantaFe entities are one of the world's largest offshore oil and gas drilling contractors and a leading provider of drilling services. (9/17/07 Tr....