In re Asia Global Crossing, Ltd.

• Decision Date: 10 November 2005
• Docket Number: No. 02 B 15749(SMB).,02 B 15749(SMB).
• Citation: 332 B.R. 520
• Parties: In re ASIA GLOBAL CROSSING, LTD., et al., Debtors.
• Court: U.S. Bankruptcy Court — Southern District of New York

332 B.R. 520

In re ASIA GLOBAL CROSSING, LTD., et al., Debtors.

No. 02 B 15749(SMB).

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

November 10, 2005.

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Golenbock Eiseman Assor Bell & Peskoe LLP (Jonathan L. Flaxer, Esq., of Counsel), New York, NY, for trustee.

Willkie Farr & Gallagher LLP (Alan J. Lipkin, Esq., Matthew V. Wargin, Esq., of Counsel), New York, NY, for 360networks Corporation.

OPINION AND ORDER GRANTING LIMITED REARGUMENT, BUT UPON REARGUMENT, ADHERING TO THE ORIGINAL DECISION

STUART M. BERNSTEIN, Chief Judge.

The pending matter relates to an earlier ruling that concerned the Trustee's objection to a $100 million claim filed by 360networks Corporation ("360networks"), see In re Asia Global Crossing, Ltd., 326 B.R. 240 (Bankr.S.D.N.Y.2005)(the "Opinion"), familiarity with which is assumed. The claim was based on a payment and performance guaranty (the "Guaranty") given by the debtor, Asia Global Crossing, Ltd. ("Asia Global"). The Guaranty pertained to the obligations undertaken by Global Crossing Bandwidth, Inc. ("GC Bandwidth"), pursuant to a certain Master Agreement, to provide telecommunications capacity to 360networks.

Each side moved for summary judgment. The Court ruled that on January 29, 2003 — but not before then — the debtor committed an anticipatory repudiation of the Guaranty. Opinion, 326 B.R. at 256. The Court also held that 360networks would be required to prove, at a trial, that it was ready, willing and able to perform its own obligations but for the repudiation. Id. at 257. Finally, the Court determined, in accordance with Fed.R.Civ.P. 56(d), that certain facts existed without substantial controversy. Id.

Each side moved for reargument. For the reasons that follow, the Court denies the Trustee's motion in its entirety, grants 360networks' motion for the limited purpose of addressing the Rule 56(d) order, and upon reargument, adheres to its original decision.

DISCUSSION

A. Standards Governing the Motion

Motions for reargument or reconsideration¹ are governed by Local Bankruptcy Rule 9023-1(a), BANKR.S.D.N.Y. R. 9023-1(a), which states:

A motion for reargument of a court order determining a motion shall be served within 10 days after the entry of the Court's order determining the original motion, or in the case of a court order resulting in a judgment, within 10 days after the entry of the judgment, and, unless the Court orders otherwise, shall be made returnable within the same amount of time as required for the original motion. The motion shall set forth concisely the matters or controlling decisions which counsel believes the Court has not considered. No oral argument shall be heard unless the Court grants the motion and specifically orders that the matter be re-argued orally.

The movant must show that the court overlooked controlling decisions or factual matters "that might materially have influenced its earlier decision." Anglo American Ins. Group, P.L.C. v. CalFed Inc., 940 F.Supp. 554, 557 (S.D.N.Y.1996)(quoting Morser v. AT & T Information Sys., 715 F.Supp. 516, 517 (S.D.N.Y.1989)); accord Banco de Seguros Del Estado v. Mutual Marine Offices, Inc., 230 F.Supp.2d 427, 428 (S.D.N.Y.2002), aff'd 344 F.3d 255 (2d Cir.2003); Griffin Indus., Inc. v. Petrojam, Ltd., 72 F.Supp.2d 365, 368 (S.D.N.Y.1999); Farkas v. Ellis, 783 F.Supp. 830, 832-33 (S.D.N.Y.), aff'd, 979 F.2d 845 (2d Cir.1992). "Alternatively, the movant must demonstrate the need to correct a clear error or prevent manifest injustice." Griffin Indus., 72 F.Supp.2d at 368 (internal quotation marks and citations omitted); accord Banco de Seguros Del Estado, 230 F.Supp.2d at 428.

The rule permitting reargument is strictly construed to avoid repetitive arguments on issues that the court has already fully considered. Griffin Indus., 72 F.Supp.2d at 368; Monaghan v. SZS 33 Assocs. L.P., 153 F.R.D. 60, 65 (S.D.N.Y.1994); Farkas, 783 F.Supp. at 832. In addition, the parties cannot advance new facts or arguments; a motion for reargument is not a vehicle for "presenting the case under new theories, securing a rehearing on the merits, or otherwise taking a `second bite at the apple.'" Sequa Corp. v. GBJ Corp., 156 F.3d 136, 144 (2d Cir.1998)(discussing Rule 59); accord Griffin Indus., 72 F.Supp.2d at 368 (discussing motions for reargument).

B. The Trustee's Motion

The Trustee seeks reargument of the determination that the debtor committed an anticipatory breach when the Court approved its application to sell substantially all of its assets to Asia Netcom Corporation Limited ("ANC") on January 29, 2003. He makes two arguments. First, other sources of telecommunications capacity existed. Hence, even after the sale to ANC, the debtor could have tapped into the available capacity, and used it to fulfill its obligations to 360networks. Consequently, the debtor's ability to perform presented a material factual dispute. (Trustee's Memorandum of Law in Support of Motion for Reconsideration [etc.], dated July 8, 2005, at 5-7)(ECF Doc. # 645.) Second, the anticipatory breach could not have occurred until the sale closed on March 10, 2003, because until that point, the possibility existed that it would not close. (Id., at 7-9.)

The Trustee never argued the first point during the earlier motions, much less offered evidence to support it. The second argument evokes Yogi Berra's observation that "it ain't over `til it's over." In other words, until the sale was consummated, it was possible that it might not be consummated. If it was not consummated, the debtor would have continued to own or control the telecommunications capacity needed to perform the Guaranty.

The Opinion dealt with the legal effect of a later contract to sell the same property needed to perform an existing contract:

As noted, an anticipatory repudiation occurs when the obligor commits a voluntary and affirmative act that makes it "actually or apparently impossible for him to perform." RESTATEMENT (SECOND) OF CONTRACTS § 250, cmt. c. This includes situations in which the obligor transfers or contracts to transfer the specific property that is the subject of the earlier contract, CALAMARI & PERILLO, § 12-4, at 525-26; see James v. Burchell, 82 N.Y. 108, 114 (1880)(seller repudiated contract to sell real property by conveying property to third party); RESTATEMENT (SECOND) OF CONTRACTS § 250, illus. 5 (1981) (seller repudiated contract to sell real property by entering into a subsequent contract to sell the same property to a third party), or more generally, enters into a second contract before the time of performance arrives that "puts it out of his power to keep his contract." Computer Possibilities, Unlimited, Inc. v. Mobil Oil Corp., 747 N.Y.S.2d 468, 475 (N.Y.App.Div.2002) (quoting Union Ins. Co. v. Central Trust Co., 52 N.E. 671, 674 (N.Y.1899)), leave to appeal denied, [100 N.Y.2d 504, 762 N.Y.S.2d 874,] 793 N.E.2d 411 (N.Y.2003); accord Goodman Mfg. Co., L.P. v. Raytheon Co., No. 98 Civ. 2774(LAP), 1999 WL 681382, at *8 (S.D.N.Y. Aug.31, 1999); see RESTATEMENT (SECOND) OF CONTRACTS § 251, illus. 1 (a party that contracts to allow a performer to use a concert hall on a specific future date repudiates that agreement by entering into a contract with a third party prior to the time for performance to use the concert hall on the same date); see also 22A N.Y. JUR.2D, CONTRACTS § 447, at 134-35 (1996).

326 B.R. at 255-56 (emphasis added). The Trustee's current argument is simply a rehash of the same argument that the Trustee made unsuccessfully in opposition to 360networks' earlier cross-motion.

In fact, the Trustee's second contention is essentially a criticism of the doctrine of anticipatory repudiation. A person who, through word or deed, indicates his unwillingness to perform in the future can always change his mind prior to the time that performance is due. Similarly, a person who commits a voluntary act that renders performance impossible may, in many instances, be able to undo the act. The law nevertheless implies an anticipatory breach in these circumstances. In the absence of prejudice, the breaching party may be able to retract his act of anticipatory repudiation. RESTATEMENT (SECOND) OF CONTRACTS § 256(1)(1979); see N.Y.U.C.C. § 2-611(1). Here, however, the debtor did not retract its repudiation or state its intention to perform the Guaranty.

Having failed to show that the Court overlooked something, made a clear error or committed a manifest injustice, the Trustee's motion for reargument is denied.

C. 360networks' Motion

360networks' motion for reargument makes several points. First, it generally repeats its earlier arguments, with some new variations, about the evidence and the inferences that should be drawn from that evidence. In the process it makes a new argument regarding the significance of the ANC sale motion. Second, it maintains that the requirement to show that it was "ready, willing and able" to perform its own obligations should not apply. Third, it questions the propriety of making Rule 56(d) findings, and as a corollary, states that neither party moved on the issue of adequate assurance of future performance, and the Rule 56(d) order should not have included any "findings" on this subject. While the first two arguments do not warrant reconsideration, the propriety of the Rule 56(d) order is worth another look.

1. The Evidence of Anticipatory Repudiation

As discussed fully in the Opinion, an obligee asserting an anticipatory repudiation must show a "positive and unequivocal" statement by the obligor of an intention not to perform. Opinion, 326 B.R. at 249. Alternatively, the obligee must show that the obligor committed "a voluntary and affirmative act that makes it `actually or apparently impossible for him to perform.'" Id. at 254 (quoting RESTATEMENT (SECOND) OF CONTRACTS § 250 cmt. c (1979)). If the statement or act falls short of these standards, or if the...