In re American Intern. Refinery, Bankruptcy No. 04-21331.

CourtUnited States Bankruptcy Courts. Fifth Circuit. U.S. Bankruptcy Court — Western District of Louisiana
Writing for the CourtRobert Summerhays
Citation402 B.R. 728
PartiesIn re AMERICAN INTERNATIONAL REFINERY, American International Petroleum, Debtors. Jason Searcy, Trustee, et al., Plaintiffs v. James Knight, et al., Defendants.
Docket NumberAdversary No. 06-2018.,Bankruptcy No. 04-21332.,Bankruptcy No. 04-21331.
Decision Date19 May 2008
402 B.R. 728
In re AMERICAN INTERNATIONAL REFINERY, American International Petroleum, Debtors.
Jason Searcy, Trustee, et al., Plaintiffs
v.
James Knight, et al., Defendants.
Bankruptcy No. 04-21331.
Bankruptcy No. 04-21332.
Adversary No. 06-2018.
United States Bankruptcy Court, W.D. Louisiana.
May 19, 2008.

Page 729

COPYRIGHT MATERIAL OMITTED

Page 730

COPYRIGHT MATERIAL OMITTED

Page 731

COPYRIGHT MATERIAL OMITTED

Page 732

COPYRIGHT MATERIAL OMITTED

Page 733

Robin B. Cheatham, New Orleans, LA, for Debtors.

Gail Bowen McCulloch, Shreveport, LA, for Trustee.

REASONS FOR DECISION

ROBERT SUMMERHAYS, Bankruptcy Judge.


The present adversary proceeding was commenced by American International Petroleum Corporation ("AIPC" or "Debtor"), American International Petroleum Kazakhstan ("AIPK"), and Jason Searcy as

the Trustee of the American International Petroleum Corporation Liquidating Trust (the "Trust"). Mr. Searcy subsequently withdrew and Robbye Waldron was appointed Trustee. Plaintiffs assert an array of fraud, contract, fiduciary duty, conversion, and federal and state fraudulent transfer claims against defendants Bridge Hydrocarbons LLC, Petrocaspian, LLC, Caspian Gas Corp., Lemington Investments, LTD., Baring Vostock Capital Limited Partners, Bank Turanalem, and seven former officers and directors of AIPC (collectively, "Defendants"). Most of the defendants filed motions to dismiss and/or motions for more a definite statement under rules 12(b)(6) and 12(e) of the Federal Rules of Civil Procedure (collectively, the "Motions"). On October 1, 2007, the court entered an amended order ruling on the Motions as follows:

(1) James E. Knight's Partial Motion to Dismiss Original Complaint and Motion for More Definite Statement ("Knight's Motion"), Defendant Daniel Kim's Motion for More Definite Statement, Motion to Compel Initial Disclosures and Incorporated Memorandum in Support ("Kim's Motion"), Motion of Defendants George Faris, William Smart, Donald Rynne and John Kelly to Compel Initial Disclosures, Motion for More Definite Statement and Incorporated Memorandum ("Faris' Motion"), and Motion of Defendants Bridge Hydrocarbons LLC, f/k/a Petrocaspian, LLC and Caspian Gas Corp. to Dismiss Certain Claims and For More Definite Statement ("Bridge Hydrocarbons' Motion") were granted in part and denied in part without prejudice;

(2) the request for a more definite statement pursuant to Rule 12(e) as set forth in the Motions was granted in

Page 734

part with respect to Counts 1, 3, 6, 7, 8, 10, 11-13, 16, 20, 22, 23, and 24, on the grounds that the allegations in Plaintiffs' Original Complaint (the "Complaint") that refer to the officer and director defendants collectively as a group do not comply with Rules 8(a) and 9(b) of the Federal Rules of Civil Procedure, and should be amended to allege the wrongful conduct attributable specifically to each individual officer and director defendant;

(3) the request for a more definite statement pursuant to Rule 12(e) as set forth in the Motions was further granted in part with respect to Counts 1, 3, 6, 11, 12, 20, 22, 23, and 24 on the grounds that the allegations of fraud in the Complaint do not comply with Rule 9(b);

(4) Kim's Motion to Compel Initial Disclosures was denied without prejudice on the grounds that this request was premature given the court's ruling on the Motions;

(5) Knight's and Bridge's Request for Judicial Notice was denied to the extent that it seeks judicial notice of documents filed in AIPC's bankruptcy case; and

(6) in all other respects, the relief requested in the Motions was denied without prejudice.

After further consideration, the court will modify its October 1st order as follows: (1) the court's ruling with respect to the fraud allegations that refer to the officer and director defendants collectively also applies to the allegations of fraud that refer to the other defendants collectively as "Defendants"; and (2) the court will grant Knight's and Bridge's request that the court take judicial notice of certain pleadings filed in AIPC's bankruptcy case. The following constitutes the court's Reasons for Decision. An amended order incorporating these modifications will be entered contemporaneously with these Reasons for Decision.

BACKGROUND

1. AIPC and AIRI

AIPC historically carried on its operations through wholly-owned subsidiaries. Through its subsidiaries, AIPC refined crude oil feed stock, produced, processed and marketed products at its Lake Charles, Louisiana refinery, and engaged in oil and gas exploration and development in western Kazakhstan. Debtor AIRI is a wholly-owned subsidiary of AIPC. AIRI, in turn, owned the Lake Charles refinery. According to the Debtors' Disclosure Statement, none of AIPC's subsidiaries were conducting any ongoing operations as of the date AIPC and AIRI filed for bankruptcy relief.

1. AIPK

Plaintiffs' claims center on one of AIPC's non-filing subsidiaries, AIPK. AIPC formed AIPK to hold assets related to its exploration and development activities in Kazakhstan. At the time the bankruptcy case was commenced, AIPK's primary assets were (1) a gas concession for the Shagyrly-Shomyshty gas field in Kazakhstan ("License 1551"); and (2) 95% of the outstanding shares of Too Med Shipping Usturt Petroleum Limited ("MSUP"), which in turn owned 100% of another Kazakh concession ("License 953").

3. The Challenged Sale of AIPK's Assets to Bridge

Plaintiffs' fraudulent transfer claims center on a pre-petition sale of certain assets held by AIPK to Bridge. In October 2003, Caspian Gas Corporation ("CGC") was created as a wholly-owned subsidiary of AIPK, and License 1551 was transferred to CGC. Complaint at ¶ 36. In

Page 735

January 2004, AIPC and AIPK transferred 85% of the outstanding shares of CGC to Bridge for approximately $5 million. Complaint at ¶ 38. As part of the agreement, Bridge was to maintain a $50 million line of credit and obtain $189 million in financing for the development of License 1551. Complaint at ¶¶ 38-39.

Plaintiffs allege that Bridge did not maintain the line of credit, nor did it obtain financing for the development of License 1551. See Complaint at ¶ 39. Plaintiffs also allege that approximately $500,000 of the sale price was paid to defendant Lemington Investments as a commission. Complaint at ¶ 40. Plaintiffs further allege that defendant James Knight, the President and Chief Operating Officer of AIPC, resigned his position with AIPC and took a position as president of CGC (which was then 85% owned by Bridge) in February 2005. Complaint at ¶ 17.

Although the financial statements and schedules filed by AIPC in the bankruptcy case identify AIPK as the owner of CGC, Plaintiffs contend that AIPK's assets "were held by AIPK as the trustee, nominee, and/or agent of AIPC," and that any assets held by AIPK "were held by AIPK in name only." Complaint at ¶¶ 29, 31. Plaintiffs also allege that "AIPK was a mere conduit and alter ego of AIPC," and that AIPC and AIPK "operated as a single business enterprise, sharing officers and directors." Complaint at ¶ 30.

4. AIPC and AIRI File For Relief Under Chapter 11 and Sell AIPK's Remaining Stake in CGC and License 1551

AIPC and AIRI filed separate voluntary petitions for relief under Chapter 11 of the Bankruptcy Code on October 7, 2004, and the cases were administratively consolidated. On December 12, 2005, AIPC filed a motion under 11 U.S.C. § 363 requesting court approval to sell AIPK's remaining 15% stake in CGC to Polgraft Oil Ltd. (which is not a party in this case) for $16 million (the "Motion to Sell") [Docket No. 267]. Although the motion sought court approval under section 363(b) and 363(f), the Motion to Sell alternatively requested a determination by the court that the sale was not subject to court approval because AIPK was not a debtor. In support of the Motion to Sell, AIPC represented that the Kazakh government had threatened to seize AIPK's assets, and that if the government followed through with its threat and seized AIPK's assets—namely, its remaining stake it CGC and License 1551— AIPC's estate would be rendered "valueless." Motion to Sell at 3. The Motion to Sell acknowledged that "AIPK's fiduciary obligations may not be identical to AIPC's," but noted that GCA Strategic Investment Fund Limited ("GCA") was the primary creditor of both AIPC and AIPK.

AIPC filed an amended motion to sell on January 12, 2006 (the "Amended Motion to Sell") [Docket No. 298]. The Amended Motion to Sell revealed that AIPK had received a previous offer to purchase its remaining stake in CGC for $10 million, but that the offer was rejected because "AIPK did not believe that was a fair price." Amended Motion to Sell at 3. The motion further stated that "AIPK's interests constitute substantially all of the value of AIPC," and that the sale "guarantees payment to virtually all" allowed claims. Amended Motion to Sell at 2.

After a hearing on the matter, the court entered an order on February 9, 2006, approving the sale of AIPK's remaining interest in CGC under sections 363(b) and 363(f) (the "Sale Order") [Docket No. 349]. The court found that the purchase price was "reasonably equivalent value and fair consideration under the Bankruptcy Code and any applicable non-bankruptcy law." Sale Order at 4. The court also found that

Page 736

the sale was "in the best interests of AIPC, its estate, creditors, and all parties in interest." Sale Order at 3.

5. Plan Confirmation and Creation of the AIPC Liquidation Trust

The Debtors' plan of reorganization was confirmed on August 17, 2006 (the "Confirmed Plan" or "Plan"). [Docket No. 557]. The Confirmed Plan provided for the creation of the Liquidation Trust as a representative of the estate. The role of the Trust was to liquidate the AIPC's assets (including causes action held by the estate) for the benefit of creditors. Confirmed Plan at 19-20. Jason Searcy was appointed as the initial Liquidating Trustee (or...

To continue reading

Request your trial
90 practice notes
  • McKey v. August, Civil Action 16-13642-WBV-MBN
    • United States
    • United States District Courts. 5th Circuit. United States District Court (Eastern District of Louisiana)
    • August 13, 2021
    ...[30] Maloney Gaming Mgmt., LLC v. St. Tammany Parish, 456 Fed.Appx. 336, 340-41 (5th Cir. 2011). [31] In re American Intern. Refinery, 402 B.R. 728, 749 (W.D. La. 2008) (citing Cisco Systems, Inc. v. Alcatel USA, Inc., 301 F.Supp.2d 599, 602 n.3 (E.D. Tex. 2004)). [32] R. Doc. 1 in McKey II......
  • In Re: Soporex Inc. Et Al., CASE NO. 08-34174-BJH-7
    • United States
    • U.S. Bankruptcy Court — Northern District of Texas
    • March 7, 2011
    ...case. Nute v. Pilgrim's Pride Corp., No. 07-0081, 2010 WL 2521724 at *1, n.4 (W.D. La. June 16, 2010); In re American Intern. Refinery, 402 B.R. 728 (Bankr. W.D. La. 2008); In re James, 300 B.R. 890 (Bankr. W.D. Tex. 2003). Here, Inc.'s schedules do not list patient accounts receivable as a......
  • Martin v. Dep't of Children & Family Servs., CIVIL ACTION NO. 19-11876-WBV-MBN
    • United States
    • United States District Courts. 5th Circuit. United States District Court (Eastern District of Louisiana)
    • November 13, 2020
    ...in state court, without converting Defendants’ Motion to Dismiss into a motion for summary judgment. In re American Intern. Refinery , 402 B.R. 728, 749 (W.D. La. 2008) (citing Cisco Systems, Inc. v. Alcatel USA, Inc., 301 F. Supp. 2d 599, 602 n.3 (E.D. Tex. 2004) ).19 R. Doc. 1-5.20 Id. at......
  • Goodman v. (In re Gulf Fleet Holdings, Inc.), Bankruptcy No. 10–50713.
    • United States
    • United States Bankruptcy Courts. Fifth Circuit. U.S. Bankruptcy Court — Western District of Louisiana
    • April 2, 2013
    ...pleading requirements apply to fraudulent transfer claims grounded on allegations of actual fraud. In re American International Petroleum, 402 B.R. 728, 738 (Bankr.W.D.La.2008). Under Rule 9(b), a plaintiff must “allege facts that give rise to a strong inference of fraudulent intent.” In re......
  • Request a trial to view additional results
86 cases
  • McKey v. August, Civil Action 16-13642-WBV-MBN
    • United States
    • United States District Courts. 5th Circuit. United States District Court (Eastern District of Louisiana)
    • August 13, 2021
    ...[30] Maloney Gaming Mgmt., LLC v. St. Tammany Parish, 456 Fed.Appx. 336, 340-41 (5th Cir. 2011). [31] In re American Intern. Refinery, 402 B.R. 728, 749 (W.D. La. 2008) (citing Cisco Systems, Inc. v. Alcatel USA, Inc., 301 F.Supp.2d 599, 602 n.3 (E.D. Tex. 2004)). [32] R. Doc. 1 in McKey II......
  • In Re: Soporex Inc. Et Al., CASE NO. 08-34174-BJH-7
    • United States
    • U.S. Bankruptcy Court — Northern District of Texas
    • March 7, 2011
    ...case. Nute v. Pilgrim's Pride Corp., No. 07-0081, 2010 WL 2521724 at *1, n.4 (W.D. La. June 16, 2010); In re American Intern. Refinery, 402 B.R. 728 (Bankr. W.D. La. 2008); In re James, 300 B.R. 890 (Bankr. W.D. Tex. 2003). Here, Inc.'s schedules do not list patient accounts receivable as a......
  • Martin v. Dep't of Children & Family Servs., CIVIL ACTION NO. 19-11876-WBV-MBN
    • United States
    • United States District Courts. 5th Circuit. United States District Court (Eastern District of Louisiana)
    • November 13, 2020
    ...in state court, without converting Defendants’ Motion to Dismiss into a motion for summary judgment. In re American Intern. Refinery , 402 B.R. 728, 749 (W.D. La. 2008) (citing Cisco Systems, Inc. v. Alcatel USA, Inc., 301 F. Supp. 2d 599, 602 n.3 (E.D. Tex. 2004) ).19 R. Doc. 1-5.20 Id. at......
  • Goodman v. (In re Gulf Fleet Holdings, Inc.), Bankruptcy No. 10–50713.
    • United States
    • United States Bankruptcy Courts. Fifth Circuit. U.S. Bankruptcy Court — Western District of Louisiana
    • April 2, 2013
    ...pleading requirements apply to fraudulent transfer claims grounded on allegations of actual fraud. In re American International Petroleum, 402 B.R. 728, 738 (Bankr.W.D.La.2008). Under Rule 9(b), a plaintiff must “allege facts that give rise to a strong inference of fraudulent intent.” In re......
  • Request a trial to view additional results

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT