Paradigm Air Carriers, Inc. v. Partners (In re Partners), Bankruptcy No. 10–43400–DML–11.

CourtUnited States Bankruptcy Courts. Fifth Circuit. U.S. Bankruptcy Court — Northern District of Texas
Writing for the CourtSTACEY G.C. JERNIGAN
Citation521 B.R. 134
PartiesIn re TEXAS RANGERS BASEBALL PARTNERS, Debtor. Paradigm Air Carriers, Inc., et al., Plaintiffs/Counter–Defendants, v. Texas Rangers Baseball Partners, Defendant/Counter–Plaintiff.
Docket NumberAdversary No. 11–04017–SGJ.,Bankruptcy No. 10–43400–DML–11.
Decision Date10 October 2014

521 B.R. 134

Paradigm Air Carriers, Inc., et al., Plaintiffs/Counter–Defendants,
Texas Rangers Baseball Partners, Defendant/Counter–Plaintiff.

Bankruptcy No. 10–43400–DML–11.
Adversary No. 11–04017–SGJ.

United States Bankruptcy Court, N.D. Texas, Dallas Division.

Signed Oct. 10, 2014

Motion granted.

Recognized as Unconstitutional

28 U.S.C.A. § 157(b)(2)(C)

[521 B.R. 137]

Phil C. Appenzeller, Jr., Munsch, Hardt, Kopf & Harr, P.C., Jeffrey R. Fine, Dykema Gossett PLLC, Darren P. Nicholson, Richard A. Sayles, Robert L. Sayles, Sayles Werbner, Dallas, TX, for Plaintiffs/Counter–Defendants.

Isaac Joseph Brown, Munsch Hardt Kopf & Harr, PC, Dallas, TX, for Defendant/Counter–Plaintiff.
Will S. Snyder, Sayles Werbner, Dallas, TX, for Plaintiffs/Counter–Defendants and Defendant/Counter–Plaintiff.

[521 B.R. 138]

STACEY G.C. JERNIGAN, Bankruptcy Judge.


The above-referenced adversary proceeding (the “Adversary Proceeding”) has arisen in the much-followed Chapter 11 bankruptcy case of the Texas Rangers Baseball Partners (“TRBP” or the “Former Debtor” or the “Defendant”), filed May 24, 2010.1 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 entity that purchased the Rangers during the Chapter 11 bankruptcy case, which was known as Rangers Baseball Express LLC (“Baseball Express”), decided near the time of the bankruptcy court's approval of its acquisition of the team, that it did not wish to utilize the Boeing 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 “Plaintiff”), by complete surprise. Paradigm thought, based on earlier communications and agreements that TRBP asked Paradigm to bless, that the new owner of the Rangers would use the aircraft for several years (specifically, through the year 2017 baseball season). In fact, Paradigm thought that certain agreements involving the aircraft would be assumed and assigned (in their pre-bankruptcy versions) to the new owner as part of the bankruptcy case.2 After the dust settled, so to speak ( i.e., after realizing, post-sale and post-plan confirmation, that the aircraft agreements were not going to be honored by the new owner), Paradigm filed a $29.385 million proof of claim in the TRBP bankruptcy case, for Paradigm's alleged damages, and also filed this Adversary Proceeding—both of which have required 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 In the Adversary Proceeding, Paradigm has asserted multiple breach of contract claims against TRBP and also seeks declaratory relief.

[521 B.R. 139]

A. Earlier Motions for Summary Judgment and Rule 12(b)(6) Motion and the Court's July 2013 Memorandum Opinion

On July 10, 2013, this court issued a Memorandum Opinion and Order [DE # 190 in the Adversary Proceeding] (the “July 2013 Memorandum Opinion”) that narrowed the issues slightly in this Adversary Proceeding. The July 2013 Memorandum Opinion ruled on: (a) earlier cross motions for summary judgment filed by Plaintiff Paradigm and Defendant TRBP (the “First Round of Motions for Summary Judgment”), pertaining to the breach of contract claims asserted by Plaintiff Paradigm; and (b) a motion to dismiss (the “Rule 12(b)(6) Motion”) filed by Paradigm and HSG, pertaining to TRBP's fraudulent transfer claim asserted against Paradigm (as a counterclaim) and HSG (as a third-party claim).

1. The First Round of Motions for Summary Judgment

The First Round of Motions for Summary Judgment specifically concerned two breach of contract claims ( i.e., counts 1 and 2) that were asserted in Paradigm's First Amended Complaint [DE # 11] (the “First Amended Complaint”) against TRBP. Paradigm contended that the Defendant, TRBP, 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) a 2007 Aircraft Charter Agreement (“Agreement # 1—the 2007 Charter Agreement”) between Paradigm and HSG; and (2) a Shared Charter Services Agreement (“Agreement # 2—the SCSA”) executed by and between HSG and TRBP, and expressly consented to by Paradigm, on May 23, 2010 ( which happened to be the night before TRBP filed for bankruptcy ). Whether or not TRBP had breached contractual obligations it may have owed to Paradigm under these two agreements turned not only upon the 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 (“Agreement # 3—the Amendment to the SCSA”), executed by and between HSG and TRBP, without the consent of Paradigm—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 the execution 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 owner, and was also the “Effective Date” of such confirmed plan.

2. Ruling on the First Round of Motions for Summary Judgment, in the July 2013 Memorandum Opinion

After considering the First Round of Motions for Summary Judgment, the court ultimately decided in its July 2013 Memorandum Opinion that: (a) while Paradigm did not have a viable breach of contract claim against TRBP as to Agreement # 1—the 2007 Charter Agreement 4 (in other words, Paradigm was denied summary judgment on Count 1 and TRBP was granted summary judgment on Count 1), (b) Paradigm was, in fact, a third-party beneficiary of Agreement # 2—the SCSA,5 and that TRBP had breached its obligations under Agreement # 2—the SCSA, to the detriment of Paradigm, as a

[521 B.R. 140]

result of executing Agreement # 3—the Amendment to the SCSA without Paradigm's consent. As a result, the court held that Agreement # 3—the Amendment to the SCSA, was invalid. Moreover, TRBP had further breached its obligations under Agreement # 2—the SCSA by not making the required payments to Paradigm since the fall of 2010. In other words, summary judgment was granted to Paradigm and denied to TRBP on Count 2. The court also held that further proceedings would be necessary to determine the potential amount of the allowable claim of Paradigm for TRBP's breach of Agreement # 2—the SCSA.

3. The Rule 12(b)(6) Motion

Second, the July 2013 Memorandum Opinion addressed the Rule 12(b)(6) Motion—which specifically dealt with an Original Third Party Complaint Against HSG and Counterclaim Against Paradigm [DE # 151] (the “Avoidance Complaint” or the “Counterclaim”) filed by TRBP within the Adversary Proceeding. To elaborate, TRBP separately filed within the Adversary Proceeding a third-party complaint against HSG (which has now been dismissed) 6 and a counterclaim against Paradigm, seeking to avoid as an actual fraudulent transfer Agreement # 2—the SCSA (again, this was the agreement that obligated TRBP to pay aircraft charter payments to Paradigm through year 2017, and was executed the day before TRBP filed bankruptcy ). Specifically, TRBP argued that if Agreement # 2—the SCSA was ruled valid and enforceable by Paradigm (as third-party beneficiary) and HSG (as counter-party)—and was deemed not amended by Agreement # 3—the Amendment to SCSA—then TRBP should nevertheless be able to avoid Agreement # 2—the SCSA as a fraudulent transfer, as it was entered into with actual intent to defraud, hinder or delay TRBP's creditors and might be avoidable under section 548(c) of the Bankruptcy Code. Paradigm and HSG, in their Rule 12(b)(6) Motion, 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 lacked 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—the SCSA; and (b) TRBP's Counterclaim failed 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.

4. Ruling on the Rule 12(b)(6) Motion, in the July 2013 Memorandum Opinion

The court ultimately denied Paradigm's and HSG's Rule 12(b)(6) Motion in its July 2013 Memorandum Opinion and held that TRBP had both constitutional standing and properly pled all the required elements of section 548(a)(1)(A) of the Bankruptcy Code. Accordingly, TRBP could go forward on the Avoidance Complaint/Counterclaim.

B. Paradigm's Second Motion for Summary Judgment Now Before the Court

Paradigm has now, with court permission, filed a Second Motion for Summary Judgment, requesting summary judgment on TRBP's Counterclaim, which, if granted, would eliminate the Counterclaim and permit Paradigm to recover on its previously ruled upon breach of contract claim.

[521 B.R. 141]

In this Second Motion for Summary Judgment, Paradigm asserts that TRBP's Counterclaim fails as a matter of law because: (1) TRBP's Disclosure Statement did not properly preserve TRBP's standing and judicially estops it from pursuing any section 548 avoidance actions; (2) a post-confirmation,...

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