Official Comm. of Unsecured Creditors v. Cit Grp./Bus. Credit, Inc.
| Decision Date | 15 September 2011 |
| Docket Number | Case No. 08-11006 (BLS),Adv. No. 08-51903 |
| Parties | In re: JEVIC HOLDING CORPORATION, et al, Debtors. OFFICIAL COMMITTEE OF UNSECURED CREDITORS, on behalf of the bankruptcy estates of JEVIC HOLDING CORPORATION, et al., Plaintiff, v. THE CIT GROUP/BUSINESS CREDIT, INC., in its capacity as Agent, SUN CAPITAL PARTNERS IV, LP, SUN CAPITAL PARTNERS MANAGEMENT IV, LLC, and SUN CAPITAL PARTNERS, INC., Defendants. |
| Court | U.S. Bankruptcy Court — District of Delaware |
Related to Adv. Docket Nos. 5, 6, 9, 10, 29, 33, and 37
Robert J. Feinstein
John A. Morris
Beth E. Levine
PACHULSKI STANG ZIEHL &
JONES LLP
Counsel for the Official Committee of Unsecured Creditors
Stephen M. Miller
Erika F. Johnson
MORRIS JAMES LLP
Benjamin C. Ackerly
Robert S. Westermann
HUNTON & WILLIAMS LLP
Counsel for The CIT Group/Business Credit, Inc.
OPINION1Before the Court is a motion to dismiss (the "Motion") [Adv. Docket No. 5] filed by the CIT Group/Business Credit, Inc. ("CIT"). By the Motion, CIT seeks the dismissal of all claims in the complaint and objection to claims, as amended (the "Complaint") [Adv. Docket No. 17] filed by the Official Committee of Unsecured Creditors (the "Committee") of Jevic Holding Corporation ("Jevic") that initiated this adversary proceeding. Pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure, made applicable to adversary proceedings by Federal Rule of Bankruptcy Procedure 7012, CIT seeks to dismiss the Complaint with prejudice on the ground that the Committee has failed to state a claim upon which relief can be granted. For the following reasons, the Court will grant in part and deny in part the Motion.
On May 20, 2008 (the "Petition Date"), Jevic and various of its affiliates (collectively, the "Debtors") each filed voluntary petitions for relief under chapter 11 of title 11 of the United States Code (the "Bankruptcy Code") in the U.S. Bankruptcy Court for the District of Delaware. Founded in 1981, Jevic was a trucking company that provided regional and interregional transportation services across the United States and portions of Canada. In 2004, after years of profitability, Jevic began experiencing a prolonged financial downturn from which it never rebounded and which eventually led Jevic into bankruptcy.
Until 2006, Jevic was wholly owned by SCS Transportation, Inc. ("SCS"). Earlier that year, Jevic hired an investment banking firm to explore its financial and strategic alternatives.On June 30, 2006, Sun Capital Partners IV, LP ("Sun") purchased Jevic from SCS for $77.4 million (the "Acquisition").2 To finance the Acquisition, Sun obtained a $90 million loan (the "Acquisition Facility") from Bank of Montreal3 to cover the purchase price and transaction costs. The Acquisition Facility was evidenced by a demand note, secured by all assets of Jevic and JHC, and guaranteed by Sun.
Within a month of the Acquisition, Jevic entered into a credit agreement administered by CIT to refinance the Acquisition Facility (the "Refinancing Facility"). Under the Refinancing Facility, Jevic obtained a revolving line of credit in the amount of $85 million (the "Revolver") and a $16.2 million term loan (the "Term Loan"), for a total credit facility in the amount of $101.2 million. The Refinancing Facility was secured by a first lien on all of Jevic's assets including its accounts receivable and stock, but the Term Loan was separately secured by two specific real estate properties owned by Jevic (the "Properties"). The proceeds of the Refinancing Facility were used to pay off the Acquisition Facility and to finance the transaction costs and fees.
Jevic was almost immediately in default of various provisions of the Refinancing Facility. In exchange for relaxing certain covenants, CIT obtained from Jevic various concessions and required Jevic to market the Properties and, upon their sale, to apply the sale proceeds of the Properties toward the outstanding principal of the Term Loan. Accordingly, within several months of the Acquisition, Jevic sold the Properties for approximately $20 millionand delivered the proceeds to CIT. Jevic simultaneously entered into 20-year leases with the new owners of the Properties in order to continue to use the Properties for its ongoing business operations. The Committee refers to the sale of the Properties, the turnover of sale proceeds to CIT, and the execution of the leases in the aggregate as the "Sale-Leaseback." After the Sale-Leaseback, Jevic's obligations on the Refinancing Facility diminished: the Term Loan was paid in full and the Revolver was reduced to $55 million.
Notwithstanding these various transactions, Jevic's financial condition continued to deteriorate. Unable to meet its obligations under the Refinancing Facility, Jevic entered into a forbearance agreement with CIT, which was amended several times to extend the expiration date. The forbearance agreement finally expired without further extension on May 12, 2008. Eight days later, Jevic declared bankruptcy. Since the Petition Date, the Debtors have shut down their business operations and have liquidated their assets through a sale under 11 U.S.C. § 363.
As of the Petition Date, the Debtors' total liability on the Refinancing Facility was $50,417,204, and CIT has filed proofs of claim against the Debtors in this amount. Shortly after the Petition Date, the Court authorized the Debtors to obtain debtor-in-possession financing on a secured basis (the "DIP Financing Order") [Docket No. 118]. CIT is also the senior DIP financing agent. Under the terms of the DIP Financing Order, the Committee was granted standing to challenge the validity, enforceability, or priority of the Debtors' obligations, including the liens on Jevic's assets securing the Refinancing Facility.
On December 31, 2008, the Committee timely objected to CIT's claims under the Refinancing Facility by filing a joint objection and complaint to initiate this adversary proceeding. CIT filed a motion to dismiss, and thereafter, the Committee filed the amendedComplaint to add Sun and various of its affiliates (collectively, the "Sun Defendants") as defendants and allege various claims against the Sun Defendants based upon 11 U.S.C. §§ 510, 544, and 548 for their role in the same transactions already described in the Complaint.4 With the Court's permission, the Committee and CIT have each filed supplemental memoranda citing additional authority in support of their respective positions on the Motion.
This matter has been fully briefed and argued, and it is ripe for decision.
The Court has jurisdiction over this matter pursuant to 28 U.S.C. §§ 1334 and 157(a) and (b)(1). Venue is proper in this Court pursuant to 28 U.S.C. §§ 1408 and 1409. Consideration of this adversary proceeding constitutes a core proceeding under 28 U.S.C. § 157(b)(2)(A), (C), (F), (H), and (O).
A motion to dismiss for failure to state a claim upon which relief can be granted pursuant to Federal Rule of Civil Procedure 12(b)(6), made applicable to adversary proceedings by Federal Rule of Bankruptcy Procedure 7012(b), is aimed to test the sufficiency of the factual allegations in the plaintiff's complaint. Kost v. Kozakiewicz, 1 F.3d 176, 183 (3d Cir. 1993) (citations omitted). The chief inquiry when ruling on a motion to dismiss is "not whether a plaintiff will ultimately prevail but whether the claimant is entitled to offer evidence to support the claims." Scheuer v. Rhodes, 416 U.S. 232, 236 (1974), abrogated on other grounds by Harlow v. Fitzgerald, 457 U.S. 800 (1982). The movant carries the burden of demonstrating thatdismissal is appropriate. Paul v. Intel Corp. (In re Intel Corp. Microprocessor Anti-Trust Litig.), 496 F. Supp. 2d 404, 408 (D. Del. 2007).
In light of the U.S. Supreme Court's recent decisions in Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007) and Ashcroft v. Iqbal, 129 S. Ct. 1937 (2009), the Third Circuit Court of Appeals has instructed courts to conduct a two-part analysis when considering a motion to dismiss for failure to state a claim. Fowler v. UPMC Shadyside, 578 F.3d 203, 210 (3d Cir. 2009). First, the Court should separate the factual elements from the legal elements of a claim. Id. The court must assume the veracity of the factual allegations set forth in the complaint, draw all reasonable inferences from the facts alleged, and construe all allegations in the light most favorable to the plaintiff. Iqbal, 129 S.Ct. at 1949-50; Rea v. Federated Investors, 627 F.3d 937, 940 (3d Cir. 2010) (citation omitted). The credibility of the facts alleged by the plaintiff are not at issue in a motion to dismiss because "Rule 12(b)(6) does not countenance . . . dismissals based on a judge's disbelief of a complaint's factual allegations." Twombly, 550 U.S. at 556 (citations omitted).5 However, the presumption of truth does not extend to any conclusory statements of law because the Supreme Court has held that "on a motion to dismiss, courts 'are not bound to accept as true a legal conclusion couched as a factual allegation.'" Twombly, 550 U.S. at 555.6 The Court may therefore disregard any legal conclusions in the complaint. Fowler, 578 F.3d at 210-11.
Second, the Court must determine whether the factual allegations "are sufficient to show that the plaintiff 'has a plausible claim for relief.'" Id. at 211 (quoting Iqbal, 129 S.Ct. at 1950) (internal quotation marks omitted). But, the incorporation of only some factual allegations may not suffice at the pleading stage because the "[f]actual allegations must be enough to raise a right to relief above the speculative level." Twombly, 550 U.S. at 555.7 Considering the merits of a motion to dismiss is "a context-specific task that requires the reviewing court to draw on its judicial experience and common sense." Id. (citation omitted). But, where a complaint fails to plead "enough fact to raise a reasonable...
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