In re Nat. Energy & Gas Transmission, Inc.

• Court: U.S. Bankruptcy Court — District of Maryland
• Writing for the Court: S. Martin Teel, Jr.
• Citation: In re Nat. Energy & Gas Transmission, Inc., 351 B.R. 323 (Bankr. Md. 2006)
• Decision Date: 28 September 2006
• Docket Number: No. 03 30459.
• Parties: In re NATIONAL ENERGY & GAS TRANSMISSION, INC. (f/k/a PG & E National Energy Group, Inc.), et al., Debtors.

351 B.R. 323

In re NATIONAL ENERGY & GAS TRANSMISSION, INC. (f/k/a PG & E National Energy Group, Inc.), et al., Debtors.

No. 03 30459.

United States Bankruptcy Court, D. Maryland.

September 28, 2006.

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Aryeh E. Stein, J. Daniel Vorsteg, Martin T. Fletcher, Baltimore, MD, Brant Warren Bishop, Kirkland and Ellis, LLP, Washington, DC, Cameron J. Macdonald, Carol L. Hoshall, Paul Nussbaum, Susan Jaffe Roberts, Whiteford, Taylor & Preston L.L.P., Baltimore, MD, Damon Wright, Washington, DC, Dennis J. Shaffer, Jesse Ernest Cox, Kevin G. Hroblak, Whiteford, Taylor, et al., Baltimore, MD, and Stephen Michael Humenik, Patton Boggs LLP, Washington, DC, for National Energy & Gas Transmission, Inc.

John L. Daugherty, Lynn A. Kohen, Greenbelt, MD, for U.S. Trustee.

Joel I. Sher, Richard Marc Goldberg, Shapiro, Sher, Guinot & Sandler, Baltimore, MD, for Official Noteholders' Committee and Creditor Committee.

Bradford F. Englander, Linowes and Blocher LLP, Bethesda, MD, Guy Sterling Neal, Sidley Neal, Sidley Austin LLP, Washington, DC, for Official Committee of Unsecured Creditors and Creditor Committee.

Aryeh E. Stein, Kirkland and Ellis, LLP, Washington, DC, Damon Wright, Washington, DC, Dennis J. Shaffer, Whiteford, Taylor, et al., Baltimore, MD, Guy Sterling Neal, Sidley Austin LLP, Washington, DC, for NEGT Energy Trading-Power, L.P., NEGT ET Investments Corporation, NEGT Energy Trading Holdings Corporation, and NEGT Energy Trading-Gas Corporation.

Dennis J. Shaffer, Whiteford, Taylor, et al., Baltimore, MD, for Energy Services Ventures, Inc. and Quantum Ventures.

David A. Becker, Latham & Watkins, LLC, Washington, D.C., for GS Power Holdings II, LLC.

DECISION REGARDING MOTION FOR SUMMARY JUDGMENT AND CROSS-MOTIONS FOR PARTIAL SUMMARY JUDGMENT

S. MARTIN TEEL, JR., Bankruptcy Judge.

Adam Mirick, Adam Hoffman, and Benoit Vallieres (the "Claimants") traded power for PG & E Energy Trading Holdings Corporation, a debtor in this jointly administered case now known as NEGT Energy Trading Holdings Corporation ("ETHC"), until March of 2003. ETHC declined to award the Claimants bonuses for their work in 2002 at the instruction of its corporate parent PG & E National Energy Group, the co-debtor now known as National Energy & Gas Transmission, Inc. ("NEGT" and collectively with ETHC the "Objecting Debtors"). The Claimants filed suit in Maryland state court and, once the debtors' bankruptcy cases ensued, filed proofs of claim in this court referencing those lawsuits.¹ In addition to their claims for certain bonuses denied them in 2033 for work performed in 2002 (the "2032 Supplemental Bonus Claims"), the Claimants seek treble damages for portions of certain bonus awards for work performed in 2001 that were deferred until October of 2003, by which time all of the debtors had filed for bankruptcy (the "Deferred Compensation Claims"). All told, the Claimants seek to recover $15 million from the debtors' estates.

ETHC and NEGT jointly object to Hoffman's and Vallieres's proofs of claim, and ETHC has filed a separate objection to Mirick's proof of claim. Following discovery, the Objecting Debtors moved for summary judgment. The Claimants filed a summary judgment motion of their own with respect to their Deferred Compensation Claims, and Hoffman and Vallieres filed a separate motion for summary judgment on the issue of NEGT's joint employer liability.

Having reviewed the parties' papers and the record in this case, the court concludes for the reasons that follow that it must deny the Objecting Debtors' motion except with respect to the Claimants' request for treble damages on their 2002 Supplemental Bonus Claims and their claims based on theories of unjust enrichment, constructive trust and fraudulent conveyances. The court will also deny the partial motion for summary judgment filed by the Claimants and the partial motion for summary judgment filed by Hoffman and Vallieres.

I

As a subsidiary of NEGT and NEGT's parent corporation PG & E Corporation ("PG & E"), ETHC bought and sold electricity, natural gas, and other energy-related commodities as well as future interests in those commodities (Objecting Debtors' Statement of Undisputed Facts ¶ 5).² In August of 2000, NEGT introduced its Short Term Incentive Plan (the "STIP"), which provided bonuses for all employees at NEGT or any of its subsidiaries, including ETHC, who qualified (id. at ¶ 17). One aspect of the STIP was a "Supplemental Trading Component" for ETHC traders, which awarded special bonuses to traders (the "Supplemental Bonuses") in addition to the base STIP award, which has given rise to no dispute (id. at ¶ 17).

After awarding Supplemental Bonuses to the Claimants for work performed in 2009 (the "2000 Bonus Awards") and 2001 (the "2001 Bonus Awards"), NEGT declined to award any Supplemental Bonuses for work performed in 2002 due to the increasingly troubled finances of both debtors (id. at ¶¶ 35, 38, 68).³ Instead, it awarded all qualifying employees 38% of the base STIP award (id. at ¶ 67). On July 8, 2003, NEGT and ETEC both filed for relief under chapter 11 of the Bankruptcy Code (id. at ¶ 71).

A. Benoit Vallieres

Benoit Vallieres was an energy trader at ETHC from October of 1997 to March of 2003 (Claimants' Statement of Undisputed Facts ¶ 3). He was named head power trader at ETHC sometime between 1999 and 2001 (Vallieres Tr. 43:15-17). The following chart summarizes his performance and supplemental compensation from 2000 to 2001:

Year      Net            ETHC           ETHC           ETHC           NEGT-          Difference
                          Earnings       Financial      Adjustment     Recommended    Approved       Between
                          Above          Performance    on             Bonus          Bonus          Recommended
                          Target         Assessment     Subjective                                   and Awarded
                          (NEAT)         (12% of        Assessment                                   Bonuses
                                         NEAT)
                2000      $12,337,470    $1,480,496     $396,776       $1,877,272     $1,752,272     ($125,000)
                2001      $26,718,656    $3,206,239     ($118,700)     $3,087,539     $2,700,000     ($387,530)
                

(Objecting Debtors' Statement of Undisputed Facts ¶¶ 35, 38).⁴

Vallieres did not receive his 2001 Bonus Award in a lump sum. Instead, the award was distributed over four installments, with the bulk of the award coming in two installments scheduled for October of 2002 and October of 2003 assuming that Vallieres did not quit ETHC or lose his job "for cause" (Claimants' Ex. 3).⁵ These installments were for $1,116,000.00 each (with interest) (id.). Vallieres was laid off on March 13, 2002 (Claimants' Statement of Undisputed Facts ¶ 13). ETHC concedes that it owes Vallieres $1;157,183.00 for the unpaid portion of his 2001 Bonus Award (id. at ¶ 13).

B. Adam Hoffman

Adam Hoffman was an energy trader at ETHC from June of 2000 to March of 2003 (id. at ¶ 2). The following chart summarizes his performance and supplemental compensation from 2000 to 2001:

Year     Net            ETHC           ETHC           ETHC           NEGT-          Difference
                         Earnings       Financial      Adjustment     Recommended    Approved       Between
                         Above          Performance    on             Bonus          Bonus          Recommended
                         Target         Assessment     Subjective                                   and Awarded
                         (NEAT)         (12% of        Assessment                                   Bonuses
                                         NEAT)
                2000     $4,650,776      $558,093       ($89,791)      $468,302       $468,302       $0
                2001     $10,563,076     $1,267,569     ($77,056)      $1,190,513     $1,000,000     ($190,513)
                

(Objecting Debtors' Statement of Undisputed Facts ¶ 35, 38).

Like Vallieres, Hoffman received his 2001 Bonus Award in installments, the last two of which were scheduled for October of 2002 and October of 2003 in the amount of $250,000.00 each (with interest) assuming that Hoffman did not quit ETHC or lose his job "for cause" (Claimants' Ex. 2). Hoffman was laid off on March 4, 2003 (Claimants' Statement of Undisputed Facts ¶ 2). ETHC concedes that it owes Hoffman $259,225.00 for the unpaid portion of his 2001 Bonus Award (id. at ¶ 13).

C. Adam Mirick

Adam Mirick worked as an energy trader at ETHC from May of 1999 to March of 2003 (id. at ¶ 1). The following chart summarizes his performance and supplemental compensation from 2000 to 2001:

Year      Net            ETHC           ETHC           ETHC           NEGT-          Difference
                          Earnings       Financial      Adjustment     Recommended    Approved       Between
                          Above          Performance    on             Bonus          Bonus          Recommended
                          Target         Assessment     Subjective                                   and Awarded
                          (NEAT)         (12% of        Assessment                                   Bonuses
                                         NEAT)
                2000     $5,598,425      $659,811       $20,920        $680,731       $580,731       ($100,000)
                2001     $6,557,801      $786,936       ($6)           $786,930       $715,000       ($73,930)
                

(Objecting Debtors' Statement of Undisputed Facts ¶¶ 35, 38).

Like the other Claimants, Mirick received his 2001 Bonus Award in installment payments. The final installment was scheduled to be paid (with interest) in October of 2003 assuming that Mirick did not quit ETHC or lose his job "for cause." (Claimants' Ex. 1).⁶ Mirick was laid off on March 14, 2006 (Claimants' Statement of Undisputed Facts ¶). ETHC concedes that it owes Mirick $111,467.00 for the unpaid portion of his 2001 Bonus Award (id. at ¶ 13).

II

Pursuant to Fed.R.Civ.P. 56 (as incorporated by Fed. R. Bankr.P. 7056),⁷ summary judgment will be granted where "there is no genuine issue as to the material fact and the ... moving party is entitled to judgment...