Paradigm Air Carriers, Inc. v. Texas Rangers Baseball Partners (In re Partners)

• Decision Date: 10 July 2013
• Docket Number: Adversary No. 11–4017–sgj.,Bankruptcy No. 10–43400–DML–11.
• Citation: 498 B.R. 679
• Parties: In re TEXAS RANGERS BASEBALL PARTNERS, Debtor. Paradigm Air Carriers, Inc. et al., Plaintiffs/Counter–Defendants, v. Texas Rangers Baseball Partners, Defendant/Counter–Plaintiff. Texas Rangers Baseball Partners, Third–Party Plaintiff, v. HSG Sports Group LLC, Third–Party Defendant.
• Court: U.S. Bankruptcy Court — Northern District of Texas

498 B.R. 679

In re TEXAS RANGERS BASEBALL PARTNERS, Debtor.

Paradigm Air Carriers, Inc. et al., Plaintiffs/Counter–Defendants,

v.Texas Rangers Baseball Partners, Defendant/Counter–Plaintiff.

Texas Rangers Baseball Partners, Third–Party Plaintiff,

v.HSG Sports Group LLC, Third–Party Defendant.

Bankruptcy No. 10–43400–DML–11.

Adversary No. 11–4017–sgj.

United States Bankruptcy Court,

N.D. Texas,

Dallas Division.

July 10, 2013.

Joseph J. Wielebinski, Munsch Hardt Kopf & Harr, P.C., Dallas, TX, for Defendant/Counter–Plaintiff, Texas Rangers Baseball Partners.

William S. Snyder, Sayles Werbner, P.C., Jeffrey R. Fine, Dykema Gossett PLLC, Dallas, TX, for Paradigm Air Carriers, Inc. d/b/a Paradigm Air Operators, Inc. and Sportsjet Air Operators, LLC.

John Gaither, Neligan Foley LLP, Dallas, TX, for HSG Sports Group LLC.

MEMORANDUM OPINION AND ORDER: (1) DENYING PARADIGM'S MOTION FOR SUMMARY JUDGMENT AND GRANTING TRBP'S MOTION FOR SUMMARY JUDGMENT AS TO COUNT 1 OF THE AMENDED COMPLAINT; (2) GRANTING PARADIGM'S MOTION FOR SUMMARY JUDGMENT AND DENYING TRBP'S MOTION FOR SUMMARY JUDGMENT AS TO COUNT 2 OF THE AMENDED COMPLAINT; AND (3) DENYING PARADIGM'S AND HSG'S MOTION TO DISMISS TRBP'S THIRD PARTY COMPLAINT AGAINST HSG AND COUNTERCLAIM AGAINST PARADIGM

STACEY G. JERNIGAN, Bankruptcy Judge.

I. INTRODUCTION

The above-referenced adversary proceeding (the “Adversary Proceeding”) has arisen in the much-followed Chapter 11 bankruptcy case, filed May 24, 2010, by the Texas Rangers Baseball Partners (“TRBP” or the “Former Debtor” or the “Defendant”).¹ The Adversary Proceeding involves a Boeing 757 aircraft that the Texas Rangers Baseball Club (the “Rangers”) and the Dallas Stars Hockey Club (the “Stars”)—both formerly under common ownership—previously used to fly their professional sports teams to out-of-town games. In short, the new owners of the Rangers, an entity known as Rangers Baseball Express LLC (“Baseball Express”), decided near the time of the bankruptcy court's approval of its acquisition of the team out of bankruptcy, that it did not wish to utilize the 757 aircraft going forward ( i.e., after the 2010 baseball season). This decision apparently caught the lessor of the aircraft, Paradigm Air Carriers and SportsJet Operators (collectively, “Paradigm” or the “Plaintiffs”), by complete surprise. Paradigm thought, based on earlier communications and agreements, that the new owners of the Rangers would use the aircraft through the year 2017 baseball season. Specifically, Paradigm thought that certain agreements involving the aircraft would be assumed and assigned (in their pre-bankruptcy versions) to the new owners as part of the bankruptcy case.² After the dust settled, so to speak, Paradigm filed a $29.385 million proof of claim in the TRBP bankruptcy case, for its alleged damages, and also filed this Adversary Proceeding—both of which require this court to interpret certain pre-and post-petition agreements involving (a) Paradigm, (b) TRBP, and (c) HSG Sports Group, LLC (“HSG”), the latter of which is the former indirect (ultimate) owner of TRBP.³

Now before this court are cross motions for summary judgment filed by Paradigm and TRBP as to counts 1 and 2 of Paradigm's First Amended Complaint [DE # 11] (the “First Amended Complaint”), along with a related motion to dismiss filed by Paradigm and HSG as to TRBP's Original Third Party Complaint Against HSG and Counterclaim Against Paradigm [DE # 151] in the Adversary Proceeding.

The Cross Motions for Summary Judgment. Specifically, the cross motions for summary judgment concern two breach of contract claims that are asserted in the First Amended Complaint by Paradigm against TRBP. Specifically, Paradigm contends that the Defendant, TRBP, has breached contractual obligations under two separate agreements that allegedly, collectively required TRBP to pay certain aircraft charter payments to Paradigm through the year 2017:

(1) Agreement # 1: a 2007 Aircraft Charter Agreement (the “2007 Charter Agreement” or “Agreement # 1”) between Paradigm and HSG; and

(2) Agreement # 2: a Shared Charter Services Agreement (“SCSA” or “Agreement # 2”) executed by HSG and TRBP on May 23, 2010 (the night before TRBP filed for bankruptcy).

Whether or not TRBP has breached contractual obligations it may have to Paradigm through year 2017 turns not only upon this court's interpretation of these two agreements, but also on the validity of yet a third document: a First Amendment to the SCSA, dated August 12, 2010 (the “Amendment to the SCSA” or the “Amendment” or “Agreement # 3”)—which third document purported to terminate, at the close of the 2010 baseball season, any obligation that TRBP might have had to pay aircraft charter payments to Paradigm through year 2017. Notably, the date of this third document (August 12, 2010) was one week after the bankruptcy court confirmed a plan of reorganization and sale of TRBP to the new owners, and was also the “Effective Date” of the confirmed plan.

Specifically, with regard to the cross motions for summary judgment the court refers to:

(1) Paradigm's Motion for Partial Summary Judgment and Brief in Support [DE 17 & 18] (collectively, “Paradigm's MSJ”);

(2) TRBPs' Response in Opposition to Paradigm Air Carriers and SportsJet Air Operators' Motion for Partial Summary Judgment and Brief in Support [DE 34 & 35];

(3) Reply Brief in Support of Plaintiffs' Motion for Partial Summary Judgment and the Notice of Supplemental Authority [DE 41 & 43];

(4) TRBP's Motion to Dismiss ⁴ First Amended Complaint or, Alternatively, for Summary Judgment and Brief in Support [DE # # 14 & 15] (collectively, “TRBP's MSJ”);

(5) Paradigm's Response to Defendant's Motion to Dismiss First Amended Complaint or, Alternatively, for Summary Judgment and Brief in Support [DE 37 & 38]; and

(6) Reply in Support of Motion to Dismiss First Amended Complaint or, Alternatively, for Summary Judgment [DE # 40].⁵

The court also refers to the following Appendices (all filed under seal) submitted by Paradigm and TRBP relating to the cross motions for summary judgment:

(1) Plaintiff's Appendix in Support of Their Motion for Partial Summary Judgment [DE # 30] (“Plaintiffs' Appendix”);

(2) Plaintiffs' Supplemental Appendix in Support of Their Cross Motions for Summary Judgment and Response to Rangers Baseball Express LLC's Motion to Dismiss [DE # 144] (Plaintiffs' “Supplemental Appendix”);

(3) Defendant's Appendix in Support of Its Motion to Dismiss First Amended Complaint or, Alternatively, for Summary Judgment [DE # 32] (“Defendant's Appendix”); and

(4) Defendant's Supplemental Appendix in Support of Its Motion to Dismiss First Amended Complaint or, Alternatively, for Summary Judgment and Response in Opposition to Plaintiffs' Motion for Partial Summary Judgment [DE # 36] (“Defendant's Supplemental Appendix”).

The Motion to Dismiss the Avoidance Complaint. TRBP (as a form of alternative relief) has separately filed a third-party complaint against HSG and a counterclaim against Paradigm (the “Avoidance Complaint”) in order to potentially avoid as a fraudulent transfer Agreement # 2 (again, Agreement # 2 was the agreement that may have obligated TRBP to pay aircraft charter payments to Paradigm through year 2017, and was executed the day before TRBP filed bankruptcy). Specifically, should this court determine that Agreement # 3 was invalid, unenforceable, or otherwise nonbinding on Paradigm, TRBP filed the Avoidance Complaint to avoid Agreement # 2 as a fraudulent transfer.⁶ Paradigm and HSG have each sought to dismiss the Avoidance Complaint, pursuant to Fed.R.Civ.P. 12(b)(6), as incorporated by Fed. R. Bankr.P. 7012, on the grounds that: (a) TRBP lacks constitutional standing to pursue any type of avoidance action, since TRBP paid unsecured creditors in full under its confirmed chapter 11 plan, and there would be no benefit to the estate to permit avoidance of Agreement # 2; and (b) TRBP's Counterclaim fails to adequately allege all of the elements required for a claim of “actual fraud” under 11 U.S.C. § 548(a)(1)(A) or to plead fraud with particularity as required under Fed. R. Civ. P. 9(b) as incorporated by Fed. R. Bankr.P. 7009.

With regard to the motion to dismiss, the court refers to:

(1) Plaintiffs' Motion to Dismiss and Brief in Support [DE 160 & 161] along with HSG's Motion to Dismiss and Joinder [DE # 173] (collectively, the “Motion to Dismiss”);

(2) TRBP's Response to Paradigm's Motion to Dismiss [DE # 175];

(3) Paradigm's Reply in Support of Motion to Dismiss [DE # 184]; and

(4) TRBP's Response to HSG's Motion to Dismiss and Joinder [DE 183].

For the reasons articulated below, the court is: (1) denying Paradigm's MSJ and granting TRBP's MSJ as to Count 1; (2) granting Paradigm's MSJ and denying TRBP's MSJ as to Count 2; and (3) Denying the Motion to Dismiss as to the Avoidance Complaint.

II. JURISDICTION

Bankruptcy subject matter jurisdiction exists in this Adversary Proceeding, pursuant to 28 U.S.C. § 1334(b). This bankruptcy court has authority to exercise bankruptcy subject matter jurisdiction, pursuant to 28 U.S.C. § 157(a) & (c) and the Standing Order of Reference of Bankruptcy Cases and Proceedings (Misc. Rule No. 33), for the Northern District of Texas, dated August 3, 1984. This is a core proceeding in which this court has statutory authority to issue final judgments, pursuant to at least 28 U.S.C. § 157(b)(2)(B), (C) and (H). However, in the event this bankruptcy court is found to lack Constitutional authority to issue this Memorandum Opinion and Order, this court submits this as a proposed ruling to the District Court.

Venue is proper in this district, pursuant to 28 U.S.C. § 1409(a), as TRBP's chapter 11 case was filed in this district.

III. THE CROSS MOTIONS FOR SUMMARY JUDGMENTA. Undisputed Facts⁷

1. Paradigm, TRBP, and the Dallas Stars Execute the Aircraft Charter Agreements in 2003.

In 2003, Paradigm first began providing air charter services to the Rangers and the ...