In re Adelphia Communications Corp.

• Decision Date: 11 June 2007
• Docket Number: Adversary No. 03-04942 (REG).,Bankruptcy No. 02-41729 (REG).
• Citation: 365 B.R. 24
• Parties: In re ADELPHIA COMMUNICATIONS CORP., et al., Debtors. Adelphia Communications Corp. and its Affiliated Debtors and Debtors in Possession and Official Committee of Unsecured Creditors of Adelphia Communications Corp., Plaintiffs, v. Bank of America, N.A., et al., Defendants.
• Court: U.S. Bankruptcy Court — Southern District of New York

Page 24

365 B.R. 24

In re ADELPHIA COMMUNICATIONS CORP., et al., Debtors Adelphia Communications Corp. and its Affiliated Debtors and Debtors in Possession and Official Committee of Unsecured Creditors of Adelphia Communications Corp., Plaintiffs, v. Bank of America, N.A., et al., Defendants.

Bankruptcy No. 02-41729 (REG).

Adversary No. 03-04942 (REG).

United States Bankruptcy Court, S.D. New York.

June 11, 2007.

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Kasowitz, Benson, Torres & Friedman LLP, by David M. Friedman, Esq. (argued), Andrew K. Glenn, Esq., Adam L. Shiff, Esq., Jonathan E. Minsker, Esq., Sean C. Shea, Esq., New York, NY, for Plaintiff Official Committee of Unsecured Creditors.

Klee, Tuchin, Bogdanoff & Stern LLP, by Edward T. Attanasio, Esq. (argued), David M. Stern, Esq., Martin R. Barash, Esq., Los Angeles, CA, Willkie Farr & Gallagher LLP, by Marc Abrams, Esq., Brian E. O'Connor, Esq., Paul Shaloub, Esq., Morris J. Massel, Esq., New York, NY, for Plaintiff Debtors and Debtors in Possession.

Bragar Wexler Eagel & Morgenstern, P.C., by Peter D. Morgenstern, Esq., Gregory A. Blue, Esq. (argued), Debra Kramer, Esq., Kate Webber, Esq., New York, NY, for Plaintiff Official Committee of Equity Security Holders.

Simpson Thacher & Bartlett LLP, by Peter V. Pantaleo, Esq. (argued), John J. Kerr, Jr., Esq., William T. Russell, Jr., Esq. (argued), Sean Thomas Keely, Esq., Elisha D. Graff, Esq., New York, NY, for Defendants Wachovia Bank, N.A. and Wachovia Capital Markets, LLC (f/k/a Wachovia Securities, Inc.).

Haynes and Boone, LLP, by Robin E. Phelan, Esq. (argued), Richard D. Anigian, Esq. (argued), Thomas E. Kurth, Esq., Dallas, TX, by Judith Elkin, Esq., New York, NY, White & Case LLP, by Howard S. Beltzer, Esq., Glenn M. Kurtz, Esq. (argued), Karen M. Asner, Esq., New York, NY, for Bank of America, N.A.

Milbank, Tweed, Hadley & McCloy LLP, by Luc A. Despins, Esq. (argued), Scott A. Edelman, Esq., Brian D. Hail, Esq. (argued), New York, NY, for Citibank, N.A. and Citicorp USA, Inc., as Administrative Agent for the Century TCI Facility.

Milbank, Tweed, Hadley & McCloy LLP, by James C. Tecce, Esq. (argued), Dennis F. Dunne, Esq., David R. Gelfand, Esq., Thomas A. Arena, Esq., Jeffrey L. Nagel, Esq., New York, NY, for Defendant JP Morgan Chase Bank, as Administrative Agent for the FrontierVision Lenders.

Mayer, Brown, Rowe & Maw LLP, by J. Robert Stoll, Esq., Robert J. Ward, Esq., Jean-Marie L. Atamian, Esq., Kenneth E. Noble, Esq. (argued), Scott E. Mortman, Esq., New York, NY, by Robert F. Finke Esq., Chicago, IL, for Defendants Bank of Montreal and Harris Nesbitt Corp.

Luskin, Stern & Eisler LLP, by Michael Luskin, Esq. (argued), Trevor Hoffmann, Esq., New York, NY, for The Bank of Nova Scotia.

Chadbourne & Parke LLP, by Andrew P. Brozman, Esq. (argued), Janice A. Payne, Esq., Jennifer C. DeMarco, Esq., New York, NY, for Defendants Credit Lyonnais New York Branch, Credit Lyonnais Securities (USA) Inc. and LCM I Limited Partnership.

Clifford Chance, by Margot Schonholtz, Esq., Scott T. Talmadge, Esq. (argued), New York, NY, for Defendants CIBC, Inc. and CIBC World Markets.

Gibson, Dunn & Crutcher LLP, by Marshall R. King, Esq. (argued), Jonathan M. Landers, Esq., Robert F. Serio, Esq., Michael J. Passante, Esq., Michael J. Riela, Esq., New York, NY, for Merrill Lynch & Co., Inc.

Duane, Morris & Heckscher LLP, by Lawrence J. Kotler, Esq., Philadelphia, PA, for Defendant SG Cowen Company, LLC (f/k/a SG Cowen Securities Corp.).

Wilmer Cutler Pickering Hale & Dorr, LLP, by John A. Valentine, Esq. (argued), Theresa Titolo, Esq. Washington, D.C., by Phillip D. Anker, Esq., New York, NY, for Defendants Credit Suisse First Boston (USA), Inc. and The Royal Bank of Scotland PLC.

Cleary Gottlieb Steen & Hamilton LLP, by Lindsee P. Granfield, Esq. (argued), Jennifer L. Kroman, Esq. (argued), Mitchell A. Lowenthal, Esq., Thomas J. Moloney, Esq., David Bober, Esq., Jane Kim, Esq., New York, NY, for Defendants Thirteen Investment Banks.

Winston & Strawn LLP, by James A. Beha II, Esq., Steven M. Schwartz, Esq. (argued), New York, NY, for Defendant J.P. Morgan Securities, Inc.

Stroock & Stroock & Lavan LLP, by Brian Cogan, Esq., Lewis Kruger, Esq., New York, NY, for Defendants D.E. Shaw & Co., LLC and D.E. Shaw Laminar Portfolios, LLC.

Bingham McCutchen LLP, by Alexis Freeman, Esq., New York, NY, for Defendant GECC.

Greenberg Traurig, LLP, by Douglas A. Amedeo, Esq., Richard Miller, Esq., New York, NY, for Defendant Barclays Bank.

DECISION AND ORDER ON MOTIONS TO DISMISS

ROBERT E. GERBER, Bankruptcy Judge.

                Table of Contents
                Facts ....................................................................................31
                  I.  Rule 12(b)(6) standards ............................................................33
                 II.  Creditors' Committee Claims ........................................................34
                      A.  Fraudulent Transfer Claims (Claims 1-12 (Co-Borrowing Lenders)
                            Claims 13-16 (Century-TCI Lenders) Claims 17-24 (Sabres Lenders
                            HSBC, Fleet Key) Claims 25-28 (Bank of Nova Scotia) Claims 29-30
                            (CIBC) Claim 31 (Margin Lenders)) ............................................34
                          1.  Intentional Fraudulent Transfers (Co-Borrowing Lenders) (Claims 1
                                3, 5, 7, 9, 11) ..........................................................34
                          2.  Constructive Fraudulent Transfers (Co-Borrowing Lenders) (Claims
                                2, 4, 6, 8, 10, 12) ......................................................35
                

                          3.  Intentional Fraudulent Transfers (Century-TCI Lenders) (Claims
                                13, 15), (Bank of Nova Scotia (Claims 25, 27)) (CIBC (Claim 29))
                                (Margin Lenders (Claim 31))...............................................37
                          4.  Constructive Fraudulent Transfers (Century-TCI Lenders (Claims
                                14, 16)) (Bank of Nova Scotia (Claims 26, 28)), (CIBC (Claim 30)).........38
                      B.  Aiding and Abetting Breach of Fiduciary Duty Claims (Claim 37) 38
                          1.  Choice of Law ..............................................................39
                          2.  Extent to Which Aiding and Abetting Is Actionable in Pennsylvania ..........41
                          3.  In Pari Delicto ............................................................45
                          4.  Statute of Limitations Defenses ............................................57
                          5.  Possible Exceptions — Particular Defendant Groups ....................59
                      C.  Aiding and Abetting Fraud Claims (Claim 38) ....................................60
                      D.  Breach of Fiduciary Duty Claims (Claim 36) .....................................62
                          1.  Bank Agents Generally ......................................................63
                          2.  FrontierVision/Parnassos/Century-TCI Facilities ............................64
                          3.  CCH Facility 64
                          4.  Investment Banks ...........................................................65
                      E.  Gross Negligence Claims (Claim 39 (Agent Banks) Claim 40 (Investment
                            Banks)) ......................................................................66
                      F.  Equitable Subordination and Disallowance Claims (Claim 33) .....................67
                          1.  Equitable Subordination ....................................................67
                          2.  Equitable Disallowance .....................................................70
                      G.  Recharacterization of Debt as Equity Claims (Claim 34 (Co-Borrowing
                            Lenders) Claim 35 (Century-TCI Lenders)) .....................................73
                      H.  Bank Holding Company Act Claims (Claim 32) .....................................75
                      I.  Equitable Estoppel (Claim 48) ..................................................78
                      J.  Unjust Enrichment Claims (Claims 45-47) ........................................78
                      K.  Preference Claims Claims 43 (Century-TCI) ......................................79
                              Claim 44 (Parnassos) .......................................................79
                              Claim 49 (FrontierVision) ..................................................79
                              Claim 50 (CCH) .............................................................79
                              Claim 51 (Olympus) .........................................................79
                              Claim 52 (UCA/HHC)) ........................................................79
                      L.  Declaratory Judgment Claims (Claim 41 (CCH Facility) Claim 42
                            (Olympus Facility)) ..........................................................80
                      M.  Sabres Claims (Claims 17-24) ...................................................80
                III.  Remaining Contentions ..............................................................81
                Conclusion ...............................................................................81
                

In this adversary proceeding under the umbrella of the chapter 11 cases of Adelphia Communications Corporation and its subsidiaries, the Creditors Committee and Equity Committee assert claims, on behalf of the Adelphia Estate, against the Estate's bank lenders and investment banks. Defendants have moved to dismiss the great bulk of the claims under Fed. R.Civ.P. 12(b)(6).

The motions are granted in part and denied in part, as set forth more specifically below and in the table accompanying this decision.

Facts

The facts that have been alleged in this adversary proceeding were set forth generally in the Court's decision granting the Creditors' Committee and Equity Committee standing to sue,¹ and need not be set out at comparable length here. In general, the two committees bring this suit against numerous commercial banks and their investment bank affiliates (the "Defendants"), charging wrongdoing on the part of the Defendants in their dealings with Adelphia's former management, John,...