In re Co.

• Decision Date: 28 March 2011
• Docket Number: No. 09–10023 (REG).,09–10023 (REG).
• Citation: 445 B.R. 277
• Parties: In re LYONDELL CHEMICAL COMPANY, et al., Debtors.
• Court: U.S. Bankruptcy Court — Southern District of New York

445 B.R. 277

In re LYONDELL CHEMICAL COMPANY, et al., Debtors.

No. 09–10023 (REG).

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

March 28, 2011.

Cadwalader, Wickersham & Taft, LLP, By: Andrew M. Troop, Esq., David Leamon, Esq., Peter Friedman, Esq. (argued), Christopher R. Mirick, Esq., New York, NY, Counsel to the Debtors.Simpson, Thacher & Bartlett, LLP, By: Linda H. Martin, Esq. (argued), New York, NY, for UBS Securities.Lackey Hershman, LLP, By: Deborah Deitsch–Perez, Esq. (argued), Dallas, TX, for Highland Capital Management.

BENCH DECISION ¹ ON REORGANIZED DEBTORS' MOTION FOR ORDER ENFORCING CHAPTER 11 PLAN WITH RESPECT TO LAWSUIT BROUGHT BY HIGHLAND CAPITAL MANAGEMENT LP

ROBERT E. GERBER, Bankruptcy Judge.

In this contested matter in the jointly administered chapter 11 cases of Lyondell Chemical Company and its affiliates, the Debtors—joined by UBS Securities, LLC (“UBS”), the agent on Lyondell's exit financing facility, discussed below—move for an order enforcing provisions of the Debtors' now confirmed chapter 11 plan (“Plan”) and related confirmation order (“Confirmation Order”). They bring their motion to address a lawsuit brought by hedge fund Highland Capital Management (“Highland”) in New York state court asserting claims against the Debtors and UBS arising from Highland's failure to be included in the syndicate that provided the financing (“Exit Financing”) for the reorganized Debtors' Plan and future working capital needs.

The Debtors and UBS call my attention to the provisions of the Plan and Confirmation Order providing this Court with exclusive jurisdiction to determine (among other things) rights as to exculpation for allegedly wrongful activity—including activity in connection with Lyondell's Exit Financing—and ask me to rule that any claims as to such allegedly wrongful activity must be brought in this Court, and not state court.

The Debtors further ask me to rule that because Highland failed to assert any claims for the allegedly wrongful conduct before the Debtors' administrative expense bar date, Highland's claims against them now are barred.

Finally, the Debtors and UBS ask me to rule that the claims against the Debtors and UBS cannot survive in light of the exculpation provisions in the Plan and “good faith” findings that I made when the Plan was confirmed.

The motion will be granted in part and denied in part. I will enforce the Confirmation Order and the Plan in accordance with the provisions of each, exercising my exclusive jurisdiction to do so. Thus Highland's state court lawsuit will be stayed, effective immediately. It is to be dismissed when the order implementing this decision becomes final and nonappealable.

Highland's claim against Lyondell is held to be barred under the Administrative Claim Bar Date Order, discussed below, and as a consequence, discharged.

The claims against UBS will be heard in this Court, not in state court, where I will determine, in accordance with the provisions of the Plan and Confirmation Order, whether any of the exceptions to exculpation provided for under § 11.7 of the Plan apply. But I cannot agree with the contention that my earlier “good faith” finding is dispositive of the issues presented here.

My Findings of Fact and Conclusions of Law in connection with this determination follow.

Findings of Fact ²

1. Background

On March 10, 2010, the Debtors filed an amended Plan and accompanying disclosure statement. As stated in those documents, a requirement for the Plan's success was the Debtors' ability to obtain a facility (“Exit Facility”) for financing the reorganized Debtors' Plan and working capital needs.³

2. Plan and Confirmation Order Provisions

Various sections of the Plan and Confirmation Order are relevant here, with respect to the continuing jurisdiction of the Bankruptcy Court, exculpation, and administrative expense claims.

(a) Continuing Jurisdiction

With respect to jurisdiction to address future disputes, Plan § 12.1 provides, in relevant part:

The Bankruptcy Court shall retain exclusive jurisdiction over all matters arising under, arising out of, or related to, the Chapter 11 Cases and the Plan pursuant to, and for the purposes of, sections 105(a) and 1142 of the Bankruptcy Code and for, among other things, the following purposes:

...

(c) To hear and determine any timely objections to, or requests for estimation of, Claims or Administrative Expenses, including, without limitation, any objections to the classification of any Administrative Expense, Claim or Equity Interest, and to allow or disallow any Disputed Administrative Expense or Disputed Claim, in whole or in part;

...

(g) To issue such orders as may be appropriate in aid of implementation and execution of the Plan, to the extent authorized by section 1142 of the Bankruptcy Code;

...

( l ) To hear and determine disputes or issues arising in connection with the interpretation, implementation, or enforcement of the Plan, the Confirmation Order, any transactions or payments contemplated hereby, any agreement, Instrument, or other document governing or relating to any of the foregoing, or any settlement approved by the Bankruptcy Court;

...

( o) To hear and determine all disputes involving the existence, scope, and nature of the discharges, injunctions and releases granted under the Plan, the Confirmation Order, or the Bankruptcy Code;

...

(r) to issue injunctions and effect any other actions that may be necessary or desirable to restrain interference by any Person with the consummation or implementation of the Plan;

(s) To hear and determine any other matter related to the Plan and not inconsistent with the provisions of the Bankruptcy Code; ...

Then, provisions of the Confirmation Order, like portions of the Plan quoted above, are potentially relevant to this controversy. Confirmation Order Finding KK,⁴ captioned “Retention of Jurisdiction,” addresses the Bankruptcy Court's retention of jurisdiction, consistent with Plan § 12.1, discussed above. It provides:

The Bankruptcy Court may properly retain jurisdiction over the matters set forth in Section 12.1 of the Plan and section 1142 of the Bankruptcy Code.And Confirmation Order ¶ 48, again captioned “Retention of Jurisdiction,” provides:

Except as otherwise set forth herein, this Court may properly, and upon the Effective Date shall retain jurisdiction over the matters arising in and under, and related to, the Chapter 11 Cases, as set forth in Article XII of the Plan and section 1142 of the Bankruptcy Code.

Providing an exception to the retention of jurisdiction in Confirmation Order ¶ 48, just described, Confirmation Order ¶ 22 provides:

22. Notwithstanding anything to the contrary in this Confirmation Order or the Plan, the Bankruptcy Court's retention of jurisdiction shall not govern the enforcement of the Exit Facility Documents executed in connection with the Exit Facility or any liens, rights or remedies related thereto except to the extent that the Confirmation Order has been vacated or reversed, but instead, such enforcement shall be governed as set forth in the Exit Facility Documents. ⁵

(b) Exculpation

Next, with respect to exculpation, Plan § 11.7, captioned “Exculpation,” provides (in a huge mass of single-spaced unformatted text running on for nearly a page),⁶ here in drastically shortened form:

As of the Confirmation Date, the Debtors and their directors, officers, employees, financial advisors, attorneys, and other professionals and agents shall be deemed to have solicited acceptances of this Plan in good faith and in compliance with the applicable provisions of the Bankruptcy Code. The Debtors, the Reorganized Debtors, ... lenders under the Exit Facility (and the agents and arrangers under the Exit Facility) ... and their respective principals, members, managers, officers, directors, employees and agents (including any attorneys, financial advisors, and other professionals retained by such Persons) shall not have or incur any liability to any holder of any Claim or Equity Interest or any other Person for any act or omission taken or not taken in good faith in connection with, or arising out of, the Chapter 11 Cases, the Disclosure Statement, the Plan, ... the Exit Financing, the solicitation of votes for and the pursuit of confirmation of the Plan, the offer and issuance of any securities under the Plan, the Rights Offering under the Plan, the consummation of the Plan, including, without limitation, the steps taken to effectuate the transactions described in Section 5.4, or the administration of the Plan or the property to be distributed under the Plan, except for acts or omissions constituting willful misconduct or gross negligence or bad faith as determined by a Final Order; and in all respects such parties shall be entitled to rely upon the advice of counsel with respect to their duties and responsibilities under the Plan....

(c) Administrative Expense Claims

With respect to the discharge of administrative claims, Plan §§ 11.4 and 11.5 discharge the Debtors and Reorganized Debtors (to the fullest extent permitted by section 1141 of the Code) from any liabilities that arose prior to the confirmation date; enjoin prosecution of such claims; and provide for a continuation of the automatic stay.

Plan § 2.1 provides that all requests for payment of an administrative expense must be filed and served prior to the administrative expense bar date, and that all requests for payment of an administrative expense that are not filed by the bar date shall be “disallowed automatically.”

Then, Confirmation Order ¶ 35, in a decretal paragraph captioned “Injunction,” provides (once more in lengthy text that here is drastically shortened):

(a) Except to the extent otherwise expressly provided in this Order, in the Plan ... all consideration distributed under the Plan shall be as a restructuring and not a refinancing, and in exchange for, and in complete satisfaction, release, discharge and settlement of...