In re Aegean Marine Petroleum Network Inc.

• Decision Date: 08 April 2019
• Docket Number: Case No. 18-13374 (MEW) (Jointly Administered)
• Citation: 599 B.R. 717
• Parties: IN RE: AEGEAN MARINE PETROLEUM NETWORK INC., et al., Debtors.
• Court: U.S. Bankruptcy Court — Southern District of New York

599 B.R. 717

IN RE: AEGEAN MARINE PETROLEUM NETWORK INC., et al., Debtors.

Case No. 18-13374 (MEW) (Jointly Administered)

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

Signed April 8, 2019

KIRKLAND & ELLIS LLP, Attorneys for Debtors and Debtors in Possession, 300 North LaSalle, Chicago, IL 60654, BY: MARC KIESELSTEIN, BEN WINGER

AKIN GUMP STRAUSS HAUER & FELD LLP, Attorneys for the Creditors' Committee, One Bryant Park, New York, NY 10036, BY: KEVIN ZUZOLO, ABID QURESHI

MILBANK, TWEED, HADLEY & MCCLOY LLP, Attorneys for Mercuria Asset Holdings (Hong Kong ) Limited, 55 Hudson Yards, New York, NY 10001, BY: ALEXANDER B. LEES, LAUREN C. DOYLE, ABHILASH RAVAL

SILVERMAN ACAMPORA, Attorneys for Mercuria US Asset Holdings, LLC, 100 Jericho Quadrangle, Suite 300, Jericho, NY 11753, BY: RONALD J. FRIEDMAN

UNITED STATES SECURITIES AND EXCHANGE COMMISSION, 3 World Financial Center, New York, NY 10281, BY: ALAN S. MAZA

LOWENSTEIN SANDLER LLP, Attorneys for Utah Retirement System, 1251 Avenue of the Americas, New York, NY 10020, BY: MICHAEL S. ETKIN

WHITE & CASE LLP, Attorneys for Oaktree/Hartree, 1221 Avenue of the Americas, New York, NY 10020, BY: HARRISON DENMAN

UNITED STATES DEPARTMENT OF JUSTICE, Attorneys for the U.S. Trustee, 201 Varick Street, Suite 1006, New York, NY 10014, BY: BRIAN MASUMOTO

BENCH DECISION DENYING REQUEST FOR IMPOSITION OF NONCONSENSUAL THIRD-PARTY RELEASES IN CONNECTION WITH CONFIRMATION OF A PROPOSED PLAN OF REORGANIZATION

MICHAEL E. WILES, UNITED STATES BANKRUPTCY JUDGE

I have before me the Debtors' request that I confirm their chapter 11 plan of reorganization (the "Plan"). Objections have been filed by the Securities and Exchange Commission and by the Office of the United States Trustee regarding certain third-party releases that the Debtors have asked me to impose on a non-consensual basis.

By way of background: the Plan provides a number of protections to the Debtors' directors, officers, and various other parties. These include both consensual and non-consensual releases, exculpation provisions and injunctions.

First, the Plan provides for various consensual releases that will be binding only on the following persons as releasors: (i) creditors who were entitled to vote and who voted in favor of the Plan; (ii) creditors and holders of interests who did not vote for the Plan (or who were not eligible to vote) but who nevertheless have submitted forms in which they affirmatively elected to grant the requested releases; and (iii) certain other parties who have agreed to give releases in connection with the Plan, including parties who consented to give releases through their joinder in a Plan Support Agreement that the Court previously approved. I have received no objections to the consensual releases.

Second, in section 9(b) of the Plan the Debtors have agreed to release all of their own claims against a broad group of released parties. The releases by the Debtors cover virtually any kind of claim that might have been asserted by the Debtors, although the releases do carve out certain defined litigation claims and securities law claims that parties will still have the right to pursue. The Debtors' releases of their own claims will have the effect of releasing any derivative claims that creditors or shareholders might have filed with respect to the released matters, and the Plan so states.

It is often the case that a Bankruptcy Court is asked to enforce a debtor's own releases by issuing an injunction that prevents third parties from asserting claims that belonged to the estate and that were released by the debtor, and the Plan in this case includes such an injunction. These are sometimes described as third-party releases or as injunctions against third-party claims, but that is not really an accurate characterization of what they are. Injunctions of this kind are more properly described as injunctions against interference with a debtor's court-approved decisions about the disposition of claims that belonged to the debtor. See, e.g. , MacArthur Co. v. Johns-Manville Corp. (In re Johns-Manville Corp.) , 837 F.2d 89 (2d Cir. 1988) (confirming that it was appropriate to enjoin creditors from pursuing claims that belonged to the debtors and that the debtors had released). Injunctions of this kind do not take away claims that belong to third parties; they just enforce the debtors' releases of the debtors' own claims.

I have received no objections to the proposed releases of the Debtors' own claims, or to the injunction against efforts by third parties to enforce claims that belonged to the estate and that are being released by the Debtors.

Third, the Plan in this case includes an exculpation provision that is meant to insulate court-supervised fiduciaries and some other parties from claims that are based on actions that relate to the restructuring, with the exception of claims that are based on allegations of fraud, willful misconduct, or gross negligence. To some extent, these exculpation provisions are based on the theory that court-supervised fiduciaries are entitled to qualified immunity for their actions. See In re PWS Holding Corp. , 228 F.3d 224, 246 (3d Cir. 2000) ; In re A.P.I., Inc. , 331 B.R. 828, 868 (Bankr. D. Minn. 2005), aff'd sub nom. OneBeacon Am. Ins. Co. v. A.P.I., Inc. , No. CIV. 06-167 (JNE), 2006 WL 1473004 (D. Minn. May 25, 2006) ; Pan Am Corp. v. Delta Air Lines, Inc. , 175 B.R. 438, 514 (S.D.N.Y. 1994). While the reported case law is thin, however, I think that a proper exculpation provision is a protection not only of court-supervised fiduciaries, but also of court-supervised and court-approved transactions. If this Court has approved a transaction as being in the best interests of the estate and has authorized the transaction to proceed, then the parties to those transactions should be not be subject to claims that effectively seek to undermine or second-guess this Court's determinations. In the absence of gross negligence or intentional wrongdoing, parties should not be liable for doing things that the Court authorized them to do and that the Court decided were reasonable things to do. Cf. Airadigm Commc'ns., Inc. v. FCC (In Re Airadigm Communs., Inc.) , 519 F.3d 640, 655-57 (7th Cir. 2008) (approving a plan provision that exculpated an entity that funded a plan from liability arising out of or in connection with the confirmation of the Plan, except for willful misconduct); In re Granite Broad. Corp. , 369 B.R. 120, 139 (Bankr. S.D.N.Y. 2007) (approving exculpation provision that was limited to conduct during the bankruptcy case and noting that the effect of the provision is to require "that any claims in connection with the bankruptcy case be raised in the case and not be saved for future litigation.").

In this case, the proposed definition of exculpated parties includes not only the Debtors, the Committee and their respective advisors and employees, but also Mercuria (which is the acquiring party and the debtor-in-possession lender), the debtor-in-possession agents and lenders, the prepetition secured credit facility agents and lenders, and the unsecured notes indenture trustees. The proposed exculpation provision in the Plan provides generally that each exculpated party shall have no liability to anyone for any claim "related to any act or omission based on" (1) the Chapter 11 cases, (2) the restructuring support agreement, (3) the court-approved disclosure statement, (4) the Plan, (5) the Plan supplement, or (6) "any restructuring transaction, contract, instrument, release, or other agreement or document created or entered into in connection with the disclosure statement or the Plan," all of which is subject to a general exclusion for claims that are determined in a final order to have constituted actual fraud, willful misconduct, or gross negligence.

I think, as I said during argument, that to some extent, the wording of this provision is too broad. Certainly, for example, the exculpation provision should not bar the enforcement of contracts that were entered into in the course of the case and that were approved by the Court, but literally that is what the proposed language would do. I believe that an appropriate exculpation provision should say that it bars claims against the exculpated parties based on the negotiation, execution, and implementation of agreements and transactions that were approved by the Court.

The United States Trustee does not object to the exculpation provision of the Plan insofar as it relates to the Debtors and the members of the Official Committee of Unsecured Creditors, and their respective advisors, but it has objected to the inclusion of parties such as Mercuria who are not estate fiduciaries. I believe that if the exculpation is limited, as described above, then it is not problematic, and that it is appropriate for the reasons that I have already stated.

The Plan in this case therefore provides for a number of consensual releases, which I have been told will be binding on ninety-nine percent of the unsecured creditors; it provides for broad releases of the Debtors' own claims, which thereby bar derivative claims; and it provides an exculpation provision which, under my rulings, protects people from claims based on their negotiation, execution and implementation of transactions that I approved.

In addition to all of the foregoing, however, the Debtors have asked me to impose certain non-consensual releases that would be binding even if the releasing parties did not agree to provide such releases. These proposed releases do not involve claims against the Debtors themselves. Nor are they limited to claims that are derivative in nature and that are pursued in the name and stead of the Debtors. They also are not limited to transactions that occurred during the bankruptcy case or that this Court has supervised and previously approved. Instead, the proposed involuntary releases would immunize certain parties from all claims that are owned directly by...