In re EB Holdings II, Inc.
| Decision Date | 06 July 2018 |
| Docket Number | Case No.: 17-12642-MKN |
| Citation | 591 B.R. 10 |
| Parties | IN RE: EB HOLDINGS II, INC., Alleged Debtor. |
| Court | U.S. Bankruptcy Court — District of Nevada |
Gregory E. Garman, Gabrielle A. Hamm, Garman Turner Gordon, Talitha B. Gray Kozlowski, GTG, LLP, Las Vegas, NV, for Alleged Debtor.
ORDER ON GLAS USA LLC'S MOTION PURSUANT TO 11 U.S.C. § 362(d) FOR RELIEF FROM THE AUTOMATIC STAY1
On June 26, 2018, the court heard argument regarding GLAS USA LLC's Motion Pursuant to 11 U.S.C. § 362(d) for Relief from the Automatic Stay ("362 Motion"). The appearances of counsel were noted on the record. After arguments were presented, the matter was taken under submission.
On May 18, 2017, the above-captioned involuntary Chapter 11 proceeding was commenced by the filing of an involuntary Chapter 11 petition ("Involuntary Petition") against alleged debtor EB Holdings II, Inc. ("EBH").2 The Involuntary Petition was filed on behalf of seven entities3 : (1) GLAS in its capacity as Administrative Agent on behalf of each of the "PIK Lenders," (2) GoldenTree Master Fund, Ltd. ("GoldenTree"), (3) Kneiff Tower SARL, (4) Mount Kellett Master Fund II-A, LP, (5) Grace Bay III Holdings S.a.r.l., (6) Arvo Investment Holdings S.a.r.l., and (7) Sound Point Montauk Fund, L.P. (collectively "Petitioning Creditors").
On June 27, 2017, the bankruptcy court entered an order approving a stipulation for relief from the automatic stay to permit all of the parties to two coordinated civil actions pending in the Eighth Judicial District Court, Clark County, Nevada ("Nevada State Court"),4 to continue with the litigation, as well as any appeals ("Stipulated RAS Order"). (ECF No. 97).
On July 6, 2017, a "Limited Statement of LEG Q LLC in Support of Involuntary Chapter 11 Petition under Section 303 of the Bankruptcy Code" ("LEG Statement") was filed by an entity described as LEG Q LLC ("LEG").5 (ECF No. 106).
On July 20, 2017, a hearing was conducted on EBH's motion to dismiss the involuntary proceeding, or, in the alternative, to abstain ("Dismissal Motion"). (ECF No. 73). After the hearing was concluded, the Dismissal Motion was taken under submission.
On August 17, 2017, a hearing was conducted on the motion for summary judgment ("Summary Judgment Motion") brought by GLAS. (ECF No. 80). After the hearing was concluded, the Summary Judgment Motion was taken under submission.
On August 22, 2017, the PIK Lender Group filed a Notice of Clarification of the Record in Connection with the Alleged Debtor's Representation Regarding the State of the State Court Litigation at the August 17, 2017 Hearing on the Motion for Summary Judgment filed by GLAS USA LLC ("Clarification Notice"). (ECF No. 181).
On August 30, 2017, EBH filed a response to the Clarification Notice. (ECF No. 187).
On August 30, 2017, GLAS filed a motion to reopen the record in connection with its Summary Judgment Motion. ("Motion to Reopen"). (ECF No. 188).
On August 30, 2017, GLAS filed an Ex Parte Application for Order Shortening Time to Hear Motion to Reopen the Record in Connection with GLAS USA LLC's Motion for Summary Judgment ("OST Request"). (ECF No. 190).
On August 31, 2017, EBH filed an opposition to the OST Request. (ECF No. 192).
On September 12, 2017, an order was entered striking the Clarification Notice and denying the OST Request. (ECF No. 193). The order also set a deadline for oppositions and replies to be filed in connection with the Motion to Reopen. Upon completion of the additional briefing, both the Dismissal Motion and Summary Judgment Motion were re-submitted for decision.
On December 15, 2017, a memorandum decision was entered on the Dismissal Motion ("Dismissal Decision"). (ECF No. 205). On the same date, a separate order was entered reflecting that decision ("Dismissal Order"). (ECF No. 206). For reasons set forth in the Dismissal Decision, the court denied the Dismissal Motion without prejudice, but granted EBH's alternative request to abstain under Section 305. The order specified that this involuntary proceeding is stayed "pending entry of a final judgment in the coordinated actions pending before the Eighth Judicial District Court, Clark County, Nevada, styled as Golden Tree Master Fund, Ltd., et al v. Howard Meyers, et al, Case No. A-16-742507-B, and EB Holdings II, Inc. v. Goldentree Master Fund Ltd., et al, Case No. A-16-745669-B." Dismissal Order at 1:23-28. The order also scheduled a status hearing to be conducted on May 9, 2018, and required status reports to be filed no later than May 7, 2018.6 Along with the Dismissal Decision and the Dismissal Order, a separate order was entered denying without prejudice the Summary Judgment Motion and Motion to Reopen ("Summary Judgment Order"). (ECF No. 209).
On December 27, 2017, GLAS filed a notice of appeal of the Dismissal Order along with a motion for leave to appeal. (ECF Nos. 214, 216). Both matters were referred to the Bankruptcy Appellate Panel for the Ninth Circuit ("BAP"). (ECF No. 218).
On January 10, 2018, EBH filed an opposition to the motion for leave to appeal. (ECF Nos. 229, 230).
On March 30, 2018, the BAP issued an order denying leave to appeal and dismissing the GLAS appeal of the Dismissal Order for lack of jurisdiction ("BAP Order"). On April 24, 2018, copies of the BAP Order were docketed in the bankruptcy court. (ECF Nos. 243, 244).
On May 15, 2018, status reports were filed on behalf of EBH (ECF No. 254), GLAS (ECF Nos. 255, 2567 ), and the PIK Lender Group (ECF Nos. 257, 258).8
On May 21, 2018, the instant 362 Motion was filed by GLAS, along with a request for judicial notice ("GLAS RJN").9 (ECF Nos. 261, 263). The motion was noticed to be heard on June 19, 2018. (ECF No. 268).10
On May 22, 2018, the status hearing required by the Dismissal Order was held.11
On June 8, 2018, EBH filed a limited opposition to the 362 Motion ("EBH Opposition"), accompanied by the Declaration of Gregory E. Garman and a request for judicial notice ("EBH RJN"). (ECF Nos. 273, 274, 275).
On June 13, 2018, an order was entered approving a stipulation to continue the hearing on the 362 Motion to June 26, 2018. (ECF No. 278).
On June 15, 2018, a joinder in the 362 Motion was filed on behalf of entities identified as Susquehanna Ireland Limited ("Susquehanna Ltd.") and NatWest Markets Plc ("Susquehanna Joinder"). (ECF No. 281).
On June 18, 2018, a reply in support of the 362 Motion was filed on behalf of GLAS ("GLAS Reply"). (ECF No. 282).
On June 22, 2018, an objection to the Susquehanna Joinder was filed on behalf of EBH. (ECF No. 284).
On June 25, 2018, EBH filed a Notice of (I) Entry of Stay Order and (II) Ruling of State Court ("Ruling Notice"). (ECF No. 285).12
On June 25, 2018, Susquehanna Ltd. filed a response to EBH's objection to its joinder ("Susquehanna Response"). (ECF No. 286).13
GLAS, along with the other Petitioning Creditors, triggered the automatic stay under Section 362(a) when it filed the Involuntary Petition.14 That action protected EBH because the automatic stay prevents, inter alia , the "commencement or continuation, including the issuance or employment of process, of a judicial, administrative, or other action or proceeding against the debtor that was or could have been commenced before the commencement of the case under this title, or to recover a claim against the debtor that arose before the commencement of the case under this title." 11 U.S.C. § 362(a)(1). Section 362(d) specifies that relief from the automatic stay may be in the form of an order "terminating, annulling, modifying, or conditioning" the stay.
GLAS now seeks relief from the automatic stay so that it "can adjudicate, in another permissible forum, the amounts owing to the Non-Party Lenders under the PIK Loan Agreement."15 362 Motion at 7:23-24.16 In its written reply and at the hearing, GLAS clarified that it only seeks relief from the automatic stay so that it can commence a breach of contract action on behalf of the Non-Party Lenders in the United States District Court for the Southern District of New York ("New York Federal Court").17
GLAS seeks relief from stay on the basis of "cause" pursuant to Section 362(d)(1). See 362 Motion at 7:22-23. Under Section 362(d)(1), "cause" may be established for the purpose of allowing litigation to go forward in another forum. For such a purpose, courts typically apply a multi-factor test in determining whether cause exists. See Sonnax Indus., Inc. v. Tri Component Prods. Corp. (In re Sonnax Indus., Inc.), 907 F.2d 1280 (2nd Cir. 1990). The Sonnax court listed the following:
(1) whether relief would result in a partial or complete resolution of the issues ; (2) lack of any connection with or interference with the bankruptcy case ; (3) whether the other proceeding involves the debtor as a fiduciary; (4) whether a specialized tribunal with the necessary expertise has been established to hear the cause of action; (5) whether the debtor's insurer has assumed full responsibility for defending it; (6) whether the action primarily involves third parties; (7) whether litigation in another forum would prejudice the interests of other creditors ; (8) whether the judgment claim arising from the other action is subject to equitable subordination; (9) whether movant's success in the other proceeding would result in a judicial lien avoidable by the debtor; (10) the interests of judicial economy and the expeditious and economical resolution of litigation ; (11) whether the parties are ready for trial in the other proceeding ; and (12) impact of the stay on the parties and the balance of harms .
907 F.2d at 1286, citing In re Curtis, 40 B.R. 795, 799-800 (Bankr. D. Utah 1984) (Emphasis added) ("Sonnax/Curtis Factors"). Of these twelve considerations, GLAS maintains that only Factors 1, 2, 7, 10, 11 and 12 are relevant and support its request for relief from stay. See 362 Motion at 9:1-16 & n.10.
EBH generally opposes allowing GLAS to sue...
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