Nine Point Energy Holdings, Inc. v. Caliber Measurement Servs. LLC (In re Nine Point Energy Holdings, Inc.)
| Decision Date | 01 June 2021 |
| Docket Number | Adv. No. 21-50243,Case No. 21-10570 (MFW) |
| Parties | In re: NINE POINT ENERGY HOLDINGS, INC., et al., Debtors. NINE POINT ENERGY HOLDINGS, INC., and NINE POINT ENERGY, LLC Plaintiffs, v. CALIBER MEASUREMENT SERVICES LLC, CALIBER MIDSTREAM FRESH WATER PARTNERS LLC and CALIBER NORTH DAKOTA LLC, Defendants. |
| Court | U.S. Bankruptcy Court — District of Delaware |
Jointly Administered
Related Docs. 82, 83 6, 38, 58, 14, 54 , 69
MEMORANDUM OPINION IN SUPPORT OF ORAL RULINGS1The Court issues this written opinion pursuant to Local Bankruptcy Rule 8003-22 in support of its oral rulings granting the Debtors' Motions for Summary Judgment in the above adversary proceeding.
In October, 2012, Caliber North Dakota LLC, Caliber Midstream Fresh Water Partners LLC, and Caliber Measurement Services LLC (collectively "Caliber") and the Debtors' predecessor, Triangle USA Petroleum Corporation ("TUSA") entered into a Midstream Services Agreement and related agreements (collectively the "MSA"). Pursuant to the MSA, Caliber provided services to the Debtors including gathering, processing, and transportation of gas, oil, and water from the Debtors' gas and oil leases in North Dakota, in exchange for which the Debtors agreed to pay minimum monthly revenues to Caliber. On June 29, 2016, TUSA and its affiliates filed a chapter 11 case and on July 5, 2016, filed an adversary complaint against Caliber seeking clarification of the parties' rights under the MSA. (2016 Case D.I. 1 & 70.) Caliber filed a motion for relief from the stay to permit it to proceed with an already pending action in the North Dakota courts which dealt with the same issues raised in the Debtors' adversary complaint. (Id. at 353.) The Court granted Caliber's motion on November 22, 2016, and abstained from considering the Debtors' adversary complaint. (Id. at 436.) On the eve of a hearing on summary judgment in the North Dakota action, the parties settled their dispute. They filed a motion in the TUSA bankruptcy case seeking approval of a stipulation incorporating that settlement and resolving theparties' remaining disputes in the bankruptcy case, which was approved by the Bankruptcy Court. (Id. at 984 & 1007.)
On March 15, 2021, Nine Point Energy Holdings, Inc., and its affiliates (the "Debtors") filed voluntary petitions under chapter 11 of the Bankruptcy Code. On that same day, two of the Debtors filed an adversary complaint against Caliber seeking a declaratory judgment about the rights the parties had under the MSA. On March 16, 2021, the Debtors filed two Motions seeking summary judgment on Counts 2-5 of that Complaint. The Motions were opposed by Caliber and oral argument on both was held on May 4, 2021.3 At the conclusion of the hearing, the Court rendered a ruling on the record granting the Debtors' Motions. (Adv. D.I. 76.) Two written orders to that effect were entered on May 12, 2021. (Adv. D.I. 82 & 83.) On May 26, 2021, Caliber filed notices of appeal of those two orders. (Adv. D.I. 89 & 90.)
The Court has subject matter jurisdiction over this adversary proceeding, as it is a core proceeding dealing with the determination of the validity, priority, and extent of liens and interests in property of the estate and issues affecting theliquidation of assets of the estate. 28 U.S.C. §§ 1334(b), 157(b)(2)(K) & (O). Article III does not limit the Court's authority to enter final judgment on claims and counterclaims dealing with parties' interests in property of the estate. See, e.g., TSA Stores, Inc. v. MJ Soffe, LLC, 565 B.R. 292, 297 (Bankr. D. Del. 2017) () (quoting Stern v. Marshall, 564 U.S. 462, 564 (2011)). Therefore, the Court concludes that it had jurisdiction to hear this core proceeding and authority to enter final judgment on the Debtors' Motions for Summary Judgment.
Rule 7056 of the Federal Rules of Bankruptcy Procedure incorporates Rule 56(c) of the Federal Rules of Civil Procedure, which sets forth the applicable summary judgment standard. Fed. R. Bankr. P. 7056; Fed. R. Civ. P. 56(c). Summary judgment may be granted only "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. Civ. P. 56(a). See also Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986) ().Admissions in pleadings, affidavits, discovery, and disclosure materials on file, including all factual inferences derived therefrom, are viewed in the light most favorable to the nonmoving party. Id.
The Declaratory Judgment Act provides that "in a case of actual controversy within its jurisdiction, . . . any court of the United States, upon the filing of an appropriate pleading, may declare the rights and other legal relations of any interested party seeking such declaration, whether or not further relief is or could be sought." 28 U.S.C. § 2201 (2020).
In their First Motion for Summary Judgment, the Debtors sought a declaratory judgment on Counts 2 and 3 of their adversary complaint that the MSA did not contain any covenants or equitable servitudes that run with the land or convey any of the Debtors' real property interests to Caliber. The Court concluded that there were no disputed material facts relevant to the Motion (or to the Second Motion for Summary Judgment) as the parties' rights were articulated in the MSA which was not ambiguous and that the parties' dispute centered on the application of the law to those rights.
Caliber initially argued that judicial estoppel precludes the Debtors from arguing that the Dedications and Interestsgranted to Caliber in the MSA were not a covenant that runs with the land. It contended that this issue was judicially decided by the Court in the prior bankruptcy case when it approved the settlement agreement between the Debtors' predecessor and Caliber in which the Debtors' predecessor expressly agreed that the Interests and Dedications are covenants that run with the land.
The Court rejected this argument because judicial estoppel is generally not applicable to settlement agreements. Teledyne Inds., Inc. v. NLRB, 911 F.2d 1214, 1218-19 (6th Cir. 1990). That is because, in agreeing to a settlement, a party does not press a legal position on the merits to the court and, in approving a settlement, the court does not accept either party's position on the merits. Id.
The Teledyne court did note that judicial estoppel might apply where a bankruptcy court approves a settlement because of the court's independent obligation to assure that the settlement was fair and equitable to all creditors in the case. Id. (citing Reynolds v. Commissioner of Internal Revenue, 861 F.2d 469 (6th Cir. 1988)). However, the Court concluded that the instant case was distinguishable. At the time that the Bankruptcy Court approved the settlement between the Debtors' predecessor and Caliber in the prior bankruptcy case, the plan of reorganization had been confirmed and, therefore, the settlement only affected the interests of the parties to it. The Court made no specificfindings other than to approve the stipulation of the parties which resolved Caliber's proof of claim, the motion to reject Caliber's contracts, and Caliber's appeal of the confirmation order. Thus, that settlement was more akin to the typical settlement of a two-party dispute, rather than a settlement that impacted the myriad parties in a bankruptcy case. In seeking approval of the settlement, neither Caliber nor the Debtors' predecessor asked the Court to decide if the Dedications and Interests were covenants that run with the land and the Court never rendered a decision on the merits of that issue.
As a result, the Court concluded that judicial estoppel was not applicable and addressed the merits of the Debtors' Motions.
The parties agreed that the parties' rights under the MSA are governed by North Dakota law.
Under North Dakota law, "All covenants contained in a grant of an estate in real property, which are made for the direct benefit of the property or some part of it then in existence, run with the land." N.D. Cent. Code § 47-04-26. To be a covenant that runs with the land, the covenant must be contained in a grant of a Real Property Estate. Bull v. Beiseker, 113 N.W. 870 (1907). Real Property Estate is defined as (a) land, (b) what is affixed to land, (c) what is appurtenant or incidental to land, or (d) that which is immovable. Id. at § 47-01-03.
Further, to be a covenant that runs with the land, the covenant must touch and concern the occupation or enjoyment of real property thereby directly benefitting the Real Property Estate. N.D. Cent. Code § 47-04-26; Beeter v. Sawyer, 771 N.W.2d 282, 286 (N.D. 2009) ().
Finally, it is not enough that the parties call it a covenant that runs with the land. Beeter, 771 N.W.2d at 286.
Caliber argued that the parties stipulated in 2018 that the Dedications and Interests granted in the original MSA were covenants that run with the land.
The Court rejected that argument, because it is not enough that the parties call something a covenant that runs with the land. Beeter, 771 N.W.2d at 286. Rather, the provision must actually be a covenant that runs with the land under the contours of the North Dakota statute.
The Debtors argued that the Dedications and...
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