In re Fontainebleau Las Vegas Holdings, LLC, 09-21879-CIV.

• Decision Date: 26 August 2009
• Docket Number: No. 09-21879-CIV.,09-21879-CIV.
• Citation: 417 B.R. 651
• Parties: In re FONTAINEBLEAU LAS VEGAS HOLDINGS, LLC, et ah, Debtors. Fontainebleau Las Vegas, LLC, Plaintiff, v. Bank of America, N.A., et al., Defendants.
• Court: U.S. District Court — Southern District of Florida

417 B.R. 651

In re FONTAINEBLEAU LAS VEGAS HOLDINGS, LLC, et ah, Debtors.

Fontainebleau Las Vegas, LLC, Plaintiff, v. Bank of America, N.A., et al., Defendants.

No. 09-21879-CIV.

United States District Court, S.D. Florida.

August 26, 2009.

COPYRIGHT MATERIAL OMITTED

Jeffrey Ira Snyder, Scott Louis Baena, Bilzin Sumberg Baena Price & Axelrod, Miami, FL, David M. Friedman, Jed I. Bergman, Seth A. Moskowitz, Kasowitz Benson Torres & Friedman, New York, NY, for Plaintiff.

Craig Vincent Rasile, Kevin Michael Eckhardt, Hunton & Williams, Mark David Bloom, John Blair Hutton, III, Greenberg Traurig, Robert Gerald Fracasso, Jr., Shutts & Bowen, Harold Defore Moorefield, Jr., Stearns Weaver Miller Weissler Alhadeff & Sitterson, Miami, FL, Bradley J. Butwin, Daniel L. Cantor, Jonathan Rosenberg, William J. Sushon, O'Melveny & Myers LLP, David J. Woll, Justin S. Stern, Lisa H. Rubin, Thomas C. Rice Simpson Thacher & Bartlett LLP, Frederick D. Hyman, Jason I. Kirschner, Jean-Marie L. Atamian, Mayer Brown LLP, Anthony L. Paccione, Arthur S. Linker, Kenneth E. Noble, Katten Muchin Rosenman LLP, Aaron Rubinstein, W. Stewart Wallace, Kaye Scholer LLP, New York, NY, Arthur Halsey Rice, Rice Pugatch Robinson & Schiller, Fort Lauderdale, FL, Alvin S. Goldstein, Furr & Cohen, Boca Raton, FL, Peter J. Roberts, Shaw Gussis Fishman Flantz Wolfson & Towbin LLC, Chicago, IL, David Alan Rothstein, Lorenz Michel Pruss, Dimond Kaplan & Rothstein, Coconut Grove, FL, J. Michael Hennigan, Hennigan Bennett & Dorman LLP, Los Angeles, CA, for Defendants.

ORDER DENYING MOTION FOR PARTIAL SUMMARY JUDGMENT: DENYING MOTION FOR TURNOVER: GRANTING MOTION TO PERMIT DISCOVERY

ALAN S. GOLD, District Judge.

This CAUSE is before the Court on Plaintiffs Motion for Partial Summary Judgment on Liability With Respect to the March 2 Notice of Borrowing; (B) an Order Directing the Turnover of Funds to the Debtors' Estate; and (C) Expedited Filing and Consideration of this Motion (the "Motion"), filed on June 9, 2009 in the adversary proceeding ("AP") 09-01621-AJC before the United States Bankruptcy Court [AP DE 6].¹ The Motion is before me pursuant to my Order Granting Defendants' Motion for Withdrawal of Reference [DE 23] dated August 4, 2009. Prior to the withdrawal of reference, the Motion was fully briefed in the Bankruptcy Court and oral argument was heard by United States Bankruptcy Judge A. Jay Cristol on July 13, 2009² Oral argument was also held before me on Tuesday, August 18, 2009. I have considered the parties' respective positions after careful review of the pleadings, the case files, and the relevant law. For reasons that I address more fully below, I deny Plaintiffs Motion for Partial Summary Judgment and Order Directing the Turnover of Funds oft three grounds: (1) Defendants are legally correct in their interpretation of the Credit Agreement as a matter of law; (2) alternatively, Defendants' interpretation of the Credit Agreement is reasonable, warranting further discovery and extrinsic evidence; and (3) material issues of fact exist as to whether Defendants were excused from their obligations under the Credit Agreement.

I. Background

A. Undisputed Facts

In the Southern District of Florida, a party moving for summary judgment must submit a statement of undisputed facts. S.D. Fla. L.R. 7.5. If necessary, the non-moving party may file a concise statement of the material facts as to which it is contended there exists a genuine issue to be tried. Id. Each disputed and undisputed fact must be supported by specific evidence in the record, such as depositions, answers to interrogatories, admissions, and affidavits on file with the Court. Id. All facts set forth in the movant's statement which are supported by evidence in the record are deemed admitted unless controverted by the non-moving party. Id After careful review of Plaintiffs Statement of Undisputed Facts, the Defendants' Statement in Opposition, Plaintiffs Counterstatement, and the evidentiary materials offered by both sides, I find the following facts relevant to the disposition of Plaintiffs Motion to be undisputed:³

1. The Credit Agreement and Disbursement Agreement

On June 9, 2009, Plaintiff Fontainebleau Las Vegas, LLC ("Fontainebleau" or the "Borrower") and other affiliated entities filed a voluntary Chapter 11 petition in the United States Bankruptcy Court for the Southern District of Florida. On the same day, Fontainebleau commenced the instant adversary proceeding against Defendants, a group of banks with whom Fontainebleau had entered into a Credit Agreement ("Cr.Agr.") and Disbursement Agreement ("Disb.Agr.") on June 6, 2007 for loans to be used for the construction and development of a casino resort in Las Vegas, Nevada (the "Project"). Under the Credit Agreement and the Disbursement Agreement, a syndicate of lenders were to loan, contingent on a variety of conditions set forth in the parties' various agreements, funds under three credit facilities, the Term Loan, the Delay Draw Term Loan, and the Revolving Loan facilities. [Cr. Agr. § 2.1]. Each facility respectively provided for a total commitment of $700 million, $350 million, and $800 million, with the Revolving Loan facility permitted reborrowing.⁴ [Cr. Agr. § 1.1, pp. 22, 38, § 2.1(c)]. Defendants in this case are those banks that have agreed to lend money under the Revolving Loan facility (the "Revolver Banks").⁵ Bank of America, N.A., in addition to being one of the Revolver Banks, was the Administrative Agent for all loans made under the Credit Agreement and the Disbursement Agreement, among other loan documents. [Cr. Agr. p. 1, 26].

The Initial Term Loan of $700 million was funded in full upon execution of the Credit Agreement. [Freeman Aff. ¶ 11]. With respect to loans under the Delay Draw Term Loan and Revolving Loan facilities, the agreements provide for a twostep borrowing process. [Id. at ¶ 16]. First, per the Credit Agreement, the Borrower submits a Notice of Borrowing to the Administrative Agent. [Cr. Agr. § 2.4(a)]. Upon receipt of the Notice of Borrowing, the Administrative Agent is required to promptly notify "each Delay Draw Lender and/or Revolving Lender, as appropriate," that the Notice has been received. [Id. at § 2.4(b)]. After the respective lenders have been notified, they "will make the amount of its pro rata share of each borrowing available to Administrative Agent ... prior to 10:00 am on the Borrowing Date," which is typically the next business day. [Id.] "Upon satisfaction or waiver of the applicable conditions precedent specified in Section 2.1, the proceeds of the loans will be made available by the Administrative Agent, in like funds as received by Administrative Agent from the Lenders, not later than noon on the Borrowing Date." [Id. at § 2.4(c) ]. These loans are remitted to the Bank Proceeds Account. Id. As a second step, Fontainebleau is required to fulfill certain conditions set forth in the Disbursement Agreement, including the submission of ah "Advance Request" and the satisfaction of an "In-Balance Test," at which point the money is moved to various Funding and Payment Accounts for disbursement to Fontainebleau. [Id.; Disb. Agr. § 2.1.1, 2.2.1]

2. Borrowing of Loans Under the Agreements

As discussed above, the Initial Term Loan of $700 million was funded in full upon execution of the Credit Agreement. [Freeman Aff. ¶ 11}. On February 24, 2009, a $68 million loan was borrowed under the Revolving Loan facility. [Yu Aff. ¶ 17]. A further $13.5 million in letters of credit, also under the Revolving Loan facility, was also outstanding. [Id. at ¶ 17]. On March 2, 2009, Fontainebleau submitted a Notice, of Borrowing (the "March 2 Notice"). As confirmed at oral argument by Plaintiffs counsel, until the March 2 Notice, Fontainebleau had not borrowed any funds under the Delay Draw Term Loan. [DE 56 at 12]. The March 2 Notice, which was amended on March 3, 2009, sought to borrow all available loans under the Delay Draw. Term Loan and facilities, which consisted of $350 million under the Delay Draw Term Loan facility and $656.5 million Revolving Loan facility.⁶ [Freeman Aff. ¶¶ 29, 36, Ex. C, E]. This Notice, which sought a total of over $1 billion in loans, was denied by the Administrative Agent on March 3, 2009, based on its view that the Notice did not conform to the requirements of section 2.1(c)(iii) of the Credit Agreement. [Id., Ex. D]. Section 2.1(c)(iii) provides:

[U]nless the Total Delay Draw Commitments have been fully drawn, the aggregate outstanding principal amount of all Revolving Loans and Swing Line Loans shall not exceed $150,000,000.

A revised Notice of Borrowing submitted on March 9, 2009 (the "March 9 Notice") seeking only the $350 million under the Delay Draw Term Loan facility was approved by Administrative Agent, which on March 10, 2009 remitted $326.7 million under the Delay Draw facility to the Bank Proceeds Account.⁷ [Id. at ¶ 43, Ex. G]. The Delay Draw loan repaid the outstanding $68 million Revolving loan; per the Credit Agreement, "[t]he proceeds of each Delayed Draw Term Loan will be applied first to repay in full any then outstanding Revolving Loans and Swing Line Loans and second, to the extent of any excess, be credited to the Bank Proceeds Account". [Cr. Agr. § 2.1(b)(iii) ]. As a result of subsequent additional funding, the amount of loans made under the Delay Draw Term Loan facility ultimately came to $336.7 million. [Freeman Aff. ¶ 12].

The parties engaged in a series of correspondence and meetings in March and April 2009. On April 13, 2009, Fontainebleau sent a Notice to Bank of America, among others, informing Bank of America that "one or more events, occurrences or circumstances have occurred which reasonably could be expected to cause the In-Balance Test to fail to be satisfied..." [Yu Aff., Ex. 24]. Thereafter, the Revolver Banks terminated their commitments under the Credit Agreement on April 20, 2009 on the basis that "one or more...