In re O.W. Bunker Holding N. Am. Inc.

• Decision Date: 19 August 2019
• Docket Number: CASE No. 14-51720 (JAM)
• Citation: 606 B.R. 513
• Parties: IN RE: O.W. BUNKER HOLDING NORTH AMERICA INC., et al., Debtors.
• Court: U.S. Bankruptcy Court — District of Connecticut

606 B.R. 513

IN RE: O.W. BUNKER HOLDING NORTH AMERICA INC., et al., Debtors.

CASE No. 14-51720 (JAM)

United States Bankruptcy Court, D. Connecticut.

Signed August 19, 2019

J. Stephen Simms, Esq., Simms Showers, LLP, 201 International Circle, Baltimore, Maryland 21030, Attorney for Dolphin Marine Fuels LLC

Michael R. Enright, Esq., Patrick M. Birney, Esq., Robinson & Cole LLP, 280 Trumbull Street, Hartford, CT 06103, Natalie D. Ramsey, Esq., Davis Lee Wright, Esq., Robinson & Cole LLP, 1000 N. West Street, Wilmington, DE 19801, Attorneys for the O.W. Bunker USA Inc. Liquidating Trust and O.W. Bunker USA

MEMORANDUM OF DECISION GRANTING DOLPHIN'S MOTION FOR SUMMARY JUDGMENT AND DENYING OWB USA TRUST'S MOTION FOR SUMMARY JUDGMENT

Julie A. Manning, Chief United States Bankruptcy Judge

I. Introduction

On November 13, 2014, O.W. Bunker Holding North America Inc. ("OWB Holding"), O.W. Bunker North America Inc. ("OWB NA"), and O.W. Bunker USA, Inc.¹ ("OWB USA"), filed petitions for relief under Chapter 11 of the Bankruptcy Code. At the time of the filing of the petitions, OWB NA and OWB USA conducted the United States operations of an international group of global marine fuel companies (collectively, the "OW Bunker Group"), which provided fuel oil (the "bunkers" or "bunker fuel"), to marine vessels. See Debtors' Joint Disclosure Statement With Respect to Debtors' Liquidation Plans (ECF No. 1018).

On December 15, 2015, the Court entered an Order Confirming the Debtors' First Modified Liquidation Plans (ECF No. 1279), and Kelly Beaudin Stapleton was appointed as the Liquidating Trustee of the O.W. Bunker North America Inc. Liquidating Trust (the "OWB USA Trust"). On August 6, 2015, Dolphin Marine Fuels, LLC ("Dolphin"), filed a Request for Allowance and Reimbursement of 11 U.S.C. § 503(b)(9) Administrative Expense (the "Dolphin 503(b)(9) Request," ECF No. 775), asserting an administrative expense claim of $87,165.30² against OWB USA pursuant to 11 U.S.C. § 503(b)(9).³ On August 20, 2015, the Debtors objected to Dolphin's 503(b)(9) Request (the "OWB USA Objection to Dolphin," ECF No. 827).

Dolphin's administrative expense claim is the subject of two motions for summary judgment: the first filed by Dolphin⁴ and the second filed by OWB USA Trust.⁵ Dolphin claims that it is entitled, as a matter of law, to an allowed administrative expense claim for delivery of bunker fuel to the marine vessel defined below (the "Vessel"). The OWB USA Trust objects to Dolphin's assertion, and claims, as a matter of law, that the Debtors did not receive the bunker fuel and therefore Dolphin's administrative expense claim should be recharacterized as a general unsecured claim. Dolphin and the OWB USA Trust submitted an extensive joint stipulation of facts with respect to the Motions for Summary Judgment.⁶ Dolphin and the OWB USA Trust assert that the only disputed issue to be decided is whether the bunker fuel was "received by" OWB USA.

The purchase and delivery of the bunker fuel was accomplished through multiple parties and governed by several contracts. When the Vessel ordered a bunker fuel, OWB USA ultimately fulfilled that order by contracting with Dolphin to deliver the bunker fuel to the Vessel. In the contract between the OW Bunker Group and the Vessel, the OW Bunker Group was the "Seller" and the Vessel was the "Buyer."⁷ In the contract between Dolphin and OWB USA, Dolphin was the "Seller" and OWB USA was the "Buyer."⁸

The parties have not presented, and the Court has not found, controlling case law specifically addressing the issue of "receipt" by a debtor in circumstances such as those presented in this case. The Motions for Summary Judgment focus on the issues of transfer of title, risk of loss, and delivery of the bunker fuel at the Vessel flange to determine whether OWB USA "received" the bunker fuel. However, addressing those issues does not answer the question of whether Dolphin is entitled to an administrative expense claim. The Court must instead focus on the case law addressing the definition of "receipt" under section 503(b)(9) and the contract between the OW Bunker Group and the Vessel in order to determine whether OWB USA "received" the bunker fuel.

II. Undisputed Facts

The OW Bunker Group Transaction with the Vessel and the Dolphin Transaction with the Vessel ⁹

The parties agree that Dolphin delivered bunker fuel to one vessel pursuant to its contract with OWB USA. Dolphin and OWB USA also agree that the bunker fuel supplied by Dolphin constituted "goods" within the meaning of § 503(b)(9). Dolphin and OWB USA further agree that the delivery of bunker fuel occurred within the twenty day period before the petition date and that OWB USA never had physical possession of the bunker fuel that is the subject of Dolphin's alleged administrative expense claim. The facts surrounding the delivery of the bunker fuel to the Vessel, along with the amount of Dolphin's alleged administrative expense claim, are detailed below.

The "Shengking" – Alleged claim for $82,165.30

On or about October 25, 2014, China Navigation Co. PTE Ltd. ("China Navigation"), initially ordered bunker fuel from O.W. Bunker Far East (S) Pte Ltd ("OW Singapore"), which then ordered from OWB USA.¹⁰ On October 17, 2014, OWB USA entered into a contract pursuant to which Dolphin agreed to supply bunker fuel to the Shengking.¹¹ On October 26, 2014, Dolphin delivered the bunker fuel to the Shengking.¹² On October 27, 2014, Dolphin sent an invoice to OWB USA in the ordinary course of their businesses.¹³

III. Discussion

A. Summary Judgment Standard

Federal Rule of Civil Procedure 56(a) is made applicable to these proceedings by Federal Rule of Bankruptcy Procedure 7056. Rule 56 directs that "[t]he court shall grant summary judgment if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Bankr. P. 7056 ; Fed. R. Civ. P. 56(a). The "mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment; the requirement is that there be no genuine issue of material fact." Anderson v. Liberty Lobby, Inc. , 477 U.S. 242, 247–48, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986) (emphasis in original). "Upon consideration of a motion for summary judgment, ‘the judge's function ... is not to weigh the evidence and determine the truth of the matter but to determine whether there is a genuine issue for trial.’ " Parris v. Delaney (In re Delaney) , 504 B.R. 738, 746 (Bankr. D. Conn. 2014) (quoting Anderson , 477 U.S. at 249, 106 S.Ct. 2505 ). "[T]he court ‘cannot try issues of fact; it can only determine whether there are issues to be tried.’ " Mex. Constr. & Paving v. Thompson (In re Thompson) , 511 B.R. 20, 24 (Bankr. D. Conn. 2014) (quoting Flaherty v. Lang , 199 F.3d 607, 615 (2d Cir. 1999) ).

At the summary judgment stage, the moving party must show there are no material issues of fact, and the court must consider all facts in the light most favorable to the non-moving party when making this determination. Conn. Ironworkers Emp'rs Ass'n v. New England Reg'l Council of Carpenters , 869 F.3d 92, 98–99 (2d Cir. 2017), cert. denied , ––– U.S. ––––, 138 S. Ct. 1547, 200 L.Ed.2d 740 (2018) (citing Eastman Kodak Co. v. Image Tech. Servs., Inc. , 504 U.S. 451, 456, 112 S.Ct. 2072, 119 L.Ed.2d 265 (1992) ; Gemmink v. Jay Peak Inc. , 807 F.3d 46, 48 (2d Cir. 2015) ). Once the moving party has met its burden, the "party opposing summary judgment ... must set forth ‘specific facts’ demonstrating that there is ‘a genuine issue for trial.’ "

Official Comm. of Unsecured Creditors of Affinity Health Care Mgmt., Inc. v. Wellner (In re Affinity Health Care Mgmt., Inc.) , 499 B.R. 246, 251 (Bankr. D. Conn. 2013) (quoting Wright v. Goord , 554 F.3d 255, 266 (2d Cir. 2009) ).

B. "Received by the Debtor" under 11 U.S.C. § 503(b)(9)

An administrative expense claim arises out of a transaction between a creditor and a debtor, and "only to the extent that the consideration supporting the claimant's right to payment was both supplied to and beneficial to the debtor[ ] in the operation of the business." Trs. of Amalgamated Ins. Fund v. McFarlin's, Inc. , 789 F.2d 98, 101 (2d Cir. 1986) (internal quotation marks omitted). "Because the presumption in bankruptcy cases is that the debtor's limited resources will be equally distributed among his creditors, statutory priorities are narrowly construed," and the party requesting an administrative expense has the burden of proving its entitlement to it. Supplee v. Bethlehem Steel Corp. (In re Bethlehem Steel Corp.) , 479 F.3d 167, 172 (2d Cir. 2007) (internal quotation marks omitted). A review of the existing case law, including the law relied upon by the parties, demonstrates that determining whether the bunker fuel was "received by the debtor" is complicated. As the parties acknowledge, the term "received" is not defined in the Bankruptcy Code. Courts have looked to the Uniform Commercial Code (the "UCC"), and the interpretation of "receipt" with respect to reclamation rights recognized in section 546(c) of the Bankruptcy Code, to define "receipt" under section 503(b)(9). Therefore, to determine whether OWB USA "received" the goods as a matter of law, several provisions of the UCC, case law concerning the meaning of "received by the debtor" in section 503(b)(9), and the contract between the OW Bunker Group and the Vessel must be analyzed.

1. The Uniform Commercial Code

The UCC defines "receipt" with respect to goods as "taking physical possession of them." UCC § 2-103(1)(c). Despite what appears to be a clear definition of "receipt," courts have been asked to address what constitutes "possession." Comment 2 to § 2-103 expands on the definition of "receipt" by explaining that

‘Receipt’ must be distinguished from delivery particularly in regard to the problems arising out of shipment of goods, whether or not the contract

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