Recovery v. Commerzbank Ag

• Decision Date: 22 December 2010
• Docket Number: Action No. 4:06-CV-013-Y
• Citation: 441 B.R. 791
• Parties: MC ASSET RECOVERY, LLC v. COMMERZBANK AG, et al.
• Court: U.S. District Court — Northern District of Texas

441 B.R. 791

MC ASSET RECOVERY, LLC

v.COMMERZBANK AG, et al.

Action No. 4:06-CV-013-Y.

United States District Court,

N.D. Texas,

Fort Worth Division.

Dec. 22, 2010.

J. Robert Forshey, Jeff P. Prostok, Suzanne K. Rosen, Forshey & Prostok LLP, Fort Worth, TX, for MC Asset Recovery, LLC.

J. Mark Chevallier, McGuire Craddock & Strother PC, Dallas, TX, Hugh McDonald, SNR Denton US LLP, New York, NY, for Commerzbank AG, et al.

ORDER DENYING MOTION TO DISMISS BUT GRANTING CONVERTED MOTION FOR SUMMARY JUDGMENT

TERRY R. MEANS, District Judge.

Pending before the Court are the United States Bankruptcy Court's Proposed Findings of Fact and Conclusions of Law (doc. 46) ("findings and conclusions"), filed July 20, 2010. After reviewing the findings and conclusions, the parties' objections and responses, and conducting the mandated de-novo review, this Court accepts in part and rejects in part the findings and conclusions. See Fed. R. Bankr.P. 9033(d). Thus, this Court DENIES Defendants' Motion to Dismiss (Bankr.R. 2271) and GRANTS Defendants' converted Motion for Summary Judgment (Bankr.R. 5188).

I. BACKGROUND

This case has a long and tortured history in this Court as well as the bankruptcy court. Although the factual and procedural histories have been recounted multiple times in numerous orders, this Court believes that reciting the facts and procedures again would be helpful to the parties and to this Court as a reminder of the current posture of this case and the import of this order.

A. Factual Background

In December 2000, Mirant Asset Development and Procurement B.V. ("Mirant Europe"), an indirect, wholly-owned subsidiary of Mirant Corporation ("Mirant"), entered into an agreement with General Electric Company and General Electric International, Inc. (collectively, "GE"), for the manufacture and purchase of nine equipment packages to be used in power-generation facilities in Europe ("the master agreement"). Mirant executed a guaranty in favor of GE to secure Mirant Europe's obligations under the master agreement. European Power Island Procurement B.V. ("EPIP") was created to act as the owner of the power-generation facilities. Stichting European Power Island ("Stichting") was created to hold the corporate stock of EPIP.

Before making any payments under the master agreement with GE, Mirant Europe entered into a temporary off-balance-sheet financing transaction ("the bridge facility") with Westdeutsche LandesBank Girozentrale ("West LB"). The bridge facility was refinanced through another off-balance-sheet financing transaction, the € 1.1 billion power-generation-facilities acquisition. These facilities consisted of facility I (a revolving facility that was the source of funding for progress payments under the master agreement) and facility II. Facility II would be drawn against only (1) if facility I was fully drawn down or (2) to fund certain facility II early-funding events. Defendants Commerzbank AG, New York and Grand Cayman Branches; ABN AMRO, N.V.; IntesaBci, S.p.A.; ING Bank; Royal Bank of Scotland; Danske Bank A/S; Australia and New Zealand Banking Group, Limited; Barclay's Bank; and BNP Paribas acted as lenders with respect to facility I. Commerzbank AG, Grand Cayman Branch; ABN AMRO; IntesaBci; and Credit Lyonnais acted as investors with respect to facility I. Commerzbank, New York and Grand Cayman Branches, and ABN AMRO acted as lenders with respect to the facility II loan. Commerzbank, Grand Cayman Branch, and ABN AMRO acted as investors with respect to facility II.

On February 15, 2001, Mirant Europe and West LB entered into an owner-assignment-and-assumption agreement, assigning all of Mirant Europe's interest in the master agreement to West LB. On May 25, EPIP and West LB entered into a purchase-option-and-assumption agreement("the West LB assignment") assigning all of West LB's interest in the master agreement to EPIP. That same day, Mirant Europe, EPIP, Stichting, the lenders and investors in the facilities, and Commerzbank, New York Branch, as administrative agent, entered into a participation agreement to finance the construction of the power-generation facilities. As part of the participation agreement, Mirant executed and delivered a guaranty in favor of Commerzbank, New York Branch. Mirant unconditionally guaranteed to Commerzbank all amounts payable by Mirant Europe under the participation agreement and the West LB assignment.

On August 13, Commerzbank syndicated the financing. Thus, Mirant Europe; EPIP; Stitching; the lenders and investors in the facilities; Commerzbank, New York Branch, as lead arranger, book manager, and administrative agent; and ABN AMRO, as co-lead arranger and syndication agent, entered into an amended participation agreement. The amended participation agreement required Mirant Europe to acquire the power-generation facilities from EPIP for a purchase price equal to the amount outstanding under the facilities. Mirant's guaranty remained in effect for all amounts due under the amended participation agreement. Under the amended participation agreement, advances were made to EPIP as the owner of the power-generation facilities. Both the original participation agreement and the amended participation agreement contained a jury-trial waiver. The parties agree that New York law governs the interpretation of the participation agreements. (Bankr.R. 5.)

In 2003, Mirant Europe decided that it could not use the power-generation facilities. Before GE had completed construction, Mirant Europe bought back its rights in the master agreement from EPIP under the purchase option. Mirant Europe then ended further construction under the master agreement. Mirant, either directly or through certain subsidiaries, paid Defendants € 136,873,950 in connection with the power-generation facilities.

B. Procedural History

On July 14, 2003, Mirant filed a voluntary petition for Chapter 11 bankruptcy protection. On July 13, 2005, Mirant, as debtor-in-possession, filed a complaint in its underlying bankruptcy case against the entities involved in the master agreement, the participation agreements, and the guaranty, arguing that the payments made under these agreements were fraudulent transfers. ¹ On December 9, 2005, the bankruptcy court entered a confirmation order adopting a plan of reorganization, out of which emerged a reorganized Mirant ("New Mirant"). As part of the reorganization plan, plaintiff MC Asset Recovery ("MCAR") was formed as the litigation substitute to pursue the avoidance actions as successor to Mirant and as the representative of the Mirant debtors. See 11 U.S.C.A. § 1123(b)(3)(B) (West 2004). In the confirmation order, the bankruptcy court stated that "all Causes of Action, including Avoidance Actions ... shall, upon occurrence of the Effective Date, be transferred to, and be vested in, New Mirantfor the benefit of the Debtors and their Estates." (Bankr.R. 14805.) Defendants filed a jury demand and moved this Court to withdraw the automatic reference of MCAR's adversary proceeding to the bankruptcy court. See 28 U.S.C.A. § 157(d) (West 1993); N.D. Tex. Misc. Order 33.

On December 17, 2007, while the motion to withdraw the reference was still pending in this Court, Defendants filed a motion under Federal Rule 12(b), parts (1) and (6), respectively, to dismiss MCAR's complaint for lack of subject-matter jurisdiction and for failure to state an actionable claim. On December 19, 2008, the bankruptcy court converted part of Defendants' motion to dismiss into a motion for summary judgment. Specifically, because Defendants' choice-of-law issue required further discovery and the admission of proof outside the parties' pleadings, the bankruptcy court determined that this discrete portion of the dismissal motion should be treated as a motion for summary judgment. See Fed.R.Civ.P. 12(d).

On March 27, 2009, this Court concluded that MCAR could not enforce the jury-trial waiver against Defendants, but denied the motion to withdraw the reference without prejudice until the completion of all pretrial proceedings. The Court stated that, if no other party to the waiver provision asserted it, Defendant could again move for withdrawal of the reference, which this Court would grant.

At this point, the bankruptcy court turned to Defendants' motion to dismiss and motion for summary judgment. The bankruptcy court noted that the manner in which it addressed the motions was an important query: "[S]hould this court enter an order granting or denying the motion (and thus subject the parties to the appellate procedures set forth in 28 U.S.C. § 158), or should it submit proposed findings of fact and conclusions of law to the District Court?" Ultimately, the bankruptcy court concluded that proposed findings of fact and conclusions of law regarding the motions should be submitted to this Court under Bankruptcy Rule 9033. See Fed. R. Bankr.P. 9033. This conclusion is further supported by the fact that the parties stipulated that this adversary action is a non-core proceeding (Bankr.R. 1476),² which mandates proposed findings and conclusions. See id. 9033(a).

In its final analysis, the bankruptcy court recommended that this Court deny the motions. The bankruptcy court's findings and conclusions are centered around three main concepts:

1. Because all of Mirant's creditors were not paid in full, MCAR had standing to prosecute the adversary action under 11 U.S.C. § 544(b).

2. Because the Federal Debt Collection Procedures Act ("the FDCPA") does not apply, a conflict-of-law analysis shows that New York law and not Georgia law applies to MCAR's ability to avoid the guaranty to Defendants.

3. Under New York law, MCAR's amended complaint plausibly stated a claim of fraudulent transfer.

No party was completely satisfied with the findings and conclusions; thus, MCAR and Defendants filed objections and objection responses as provided by Bankruptcy Rule 9033(b). Based on these objections, this Court will review the findings and...