Richard S. Lauter, Not Individually But Solely of the Gas-Mart United States, Inc. v. Citgo Petroleum Corp., CIVIL ACTION NO. H-17-2028
| Decision Date | 08 February 2018 |
| Docket Number | CIVIL ACTION NO. H-17-2028 |
| Parties | RICHARD S. LAUTER, not individually but solely as Creditor Trustee of the Gas-Mart USA, Inc. Creditor Trust, Plaintiff, v. CITGO PETROLEUM CORPORATION, Defendant. |
| Court | U.S. District Court — Southern District of Texas |
On June 30, 2017, plaintiff, Richard S. Lauter, as Creditor Trustee of the Gas-Mart USA, Inc. Creditor Trust, filed a Complaint (Docket Entry No. 1), against defendant, Citgo Petroleum Corporation ("Citgo"), asserting claims for breach of contract (Count I), violation of the automatic stay pursuant to 11 U.S.C. § 362 (Count II), and avoidance of preferential transfer pursuant to 11 U.S.C. § 547 (Count III). Pending before the court are Citgo Petroleum Corporation's Motion to Dismiss or in the Alternative for Summary Judgment as to Counts I and II and for Summary Judgment as to Count III (Docket Entry No. 14), plaintiff's Request for Oral Argument (Docket Entry No. 37), plaintiff's Motion for Leave to File Supplemental Authority in Support of Plaintiff's Response to Defendant's Motion to Dismiss (Docket Entry No. 38), and plaintiff's Motion for Leave to File Supplemental Authority in Support of Plaintiff's Response to Defendant's Motion to Dismiss (Docket Entry No. 41). For the reasons stated below, Citgo's motion to dismiss Counts I and II will be granted, Citgo's motion for summary judgment on Count III will be granted, plaintiff's motion for oral argument will be denied, plaintiff's two motions for leave to file supplemental authority will be granted, and this action will be dismissed.
On or about September 10, 2013, Gas-Mart USA ("Gas-Mart" or "Debtor") and Citgo entered into a Marketer Franchise Agreement ("Agreement").2 Paragraph 5 of the Agreement governing "Terms of Payment" provided that in order to maintain a credit limit Gas-Mart could be required to furnish Citgo security agreements or other collateral.3 Subsequently, Gas-Mart obtained a Surety Bond in the amount of $1,500,000.00 from Fidelity and Deposit Company of Maryland ("Surety").4 On or about June 9, 2015, Gas-Mart made a payment of $68,185.69 to Citgo on certain outstanding invoices.5
On July 2, 2015 (the "Petition Date"), four Gas-Mart debtor corporations each filed separate voluntary petitions with the Bankruptcy Court seeking relief under Chapter 11 of the Bankruptcy Code in the United States Bankruptcy Court for the Western District of Missouri (Case No. 15-41915-abf11). On October 6, 2016, Fuel Service Mart, Inc. filed a separate voluntary petition for relief under Chapter 11. By orders of the Bankruptcy Court entered on July 7, 2015, and on November 25, 2015, the Bankruptcy cases were jointly administered.6
On the Petition Date Citgo held $221,190.12 in Gas-Mart credit card receipts pursuant to the terms of the Agreement, and Gas-Mart moved for authorization to pay Citgo as a critical vendor.7 On July 28, 2015, the Bankruptcy Court entered an order granting the motion.8
On or about August 6, 2015, Gas-Mart, the Surety, and Citgo entered into a Vendor Agreement governing their continued commercial relationship.9 Pursuant to the Vendor Agreement the Surety agreed to make a payment to Citgo under the Surety Bond. Citgo contends that the Surety agreed to pay $756,391.18 pursuant to the Surety Bond, and in fact did make a payment pursuant to the bond.10 Plaintiff acknowledges that the Surety agreed to make a payment to Citgo pursuant to the Surety Bond, but says it does not know the specific amounts that the Surety agreed to pay or, in fact, did pay pursuant to the Surety Bond.11 On June 10, 2016, the Surety filed a Proof of Interim Administrative Claim in Gas-Mart's bankruptcy proceeding for $558,097.49.12
In January and February of 2016, Gas-Mart sold substantially all of its assets.13
On March 10, 2016, Gas-Mart filed Debtors' First Omnibus Motion to Reject Executory Contracts ("Rejection Motion"), which included a request to reject the Agreement with Citgo.14 On April 5, 2016, the Bankruptcy Court entered its Order Granting Debtors' First Omnibus Motion to Reject Executory Contracts ("Rejection Order"), which provided that Gas-Mart's executory contracts were all rejected as of March 10, 2016.15
On July 21, 2016, the Creditors' Committee filed its Initial Plan and Disclosure Statement.16 On September 21, 2016, the Bankruptcy Court confirmed the First Amended Plan of Liquidation (the "Plan"), which called for creation of a creditor trust, appointment of a creditor trustee, and execution of a creditor trust agreement.17 Pursuant to Article II of the Gas-Mart USA, Inc. Creditor Trust Agreement, plaintiff was appointed as Trustee of the Creditor Trust.18
On or about March 11, 2016, Citgo brought suit in the Judicial District Court of Harris County, Texas, against the Surety to recover certain amounts due from Gas-Mart, and on April 7, 2016, the Surety removed the lawsuit to the United States District Court for the Southern District of Texas, Case No. 4:16-cv-00952 ("Surety Litigation").19 In the Surety Litigation, Citgo alleged that after entering into the Vendor Agreement, Gas-Mart breached its agreements with Citgo by inter alia failing to pay for fuel purchases, store remodeling, and branding costs.20 On November 1, 2016, the court granted the Surety's motion for summary judgment and denied Citgo's cross-motion for summary judgment, upon finding that store remodeling and branding costs were not included in the obligations covered by the Surety Bond, and that on April 6, 2017 (after the filing of the Surety Litigation), the Surety paid Citgo $35,367.31 for Gas-Mart's post-Vendor Agreement failure to pay for fuel.21 On April 6, 2017, the court entered a Final Judgment disposing of all claims and counterclaims in the Surety Litigation.22
On June 30, 2017, plaintiff initiated this action by filing his Complaint (Docket Entry No. 1) alleging three causes of action: Count I for breach of contract, Count II for violation of the automatic stay pursuant to 11 U.S.C. § 362, and Count III for avoidance of preferential transfer pursuant to 11 U.S.C. § 547. Each of plaintiff's claims are premised on allegations that after the Petition Date Citgo engaged in actions that caused Gas-Mart's reorganization to fail.23
Citgo argues that Count I for breach of contract and Count II for violation of the automatic stay are subject to dismissal because plaintiff lacks standing to pursue these claims that were not adequately preserved in Gas-Mart's confirmed plan as required by well-established Fifth Circuit law applying 11 U.S.C. § 1123.24 Alternatively, Citgo argues that plaintiff's stay violation claim is barred by laches, and that plaintiff lacks standing to pursue the breach of contract claim because (1) Gas-Mart rejected the Agreement pursuant to 11 U.S.C. § 365(g) and is thus deemed to have breached the Agreement as of the Petition Date thereby relieving Citgo of its duty to perform, (2) the Surety paid the Surety Bond securing Gas-Mart's performance thereby subrogating to the Surety any breach of contract claim that Gas-Mart may have had against Citgo, and (3) res judicata resulting from the Surety Litigation between Citgo and the Surety bars the plaintiff's breach of contract claim.25
Citgo's argument that plaintiff lacks standing to pursue the claims asserted in Counts I and II raises issues that the Fifth Circuit has characterized as jurisdictional. See Dynasty Oil and Gas, LLC v. Citizens Bank (In re United Operating, LLC), 540 F.3d 351, 354 (5th Cir. 2008) (); Spicer v. Laguna Madre Oil & Gas II, L.L.C. (In re Texas Wyoming Drilling, Inc.), 647 F.3d 547, 550 (5th Cir. 2011) (). Although Citgo has moved for dismissal under Rule 12(b)(6) for failure to state a claim for which relief may be granted, motions to dismiss for lack of standing and, therefore, for lack jurisdiction are governed by Rule 12(b)(1). See Rossco Holdings, Inc. v. McConnell, Civil Action No. 4:14-cv-374-0, 2014 WL 11460917, * 2 (N.D. Tex. July 23, 2014) (), aff'd 613 Fed. App'x 302 (5th Cir. June 1, 2015) (per curiam), cert. denied, 136 S. Ct. 339 (2015); Adler v. Walker (In re Gulf States Long Term Acute Care of Covington, L.L.C.), Civil Action No. 11-1659, 2012 WL 710924, * 2 (E.D. La. March 5, 2012) (), aff'd, 614 F. App'x 714 (5th Cir. 2015) (per curiam).
"Lack of subject matter jurisdiction may be found in any one of three instances: (1) the complaint alone; (2) the complaint supplemented by undisputed facts evidenced in the record; or (3) the complaint supplemented by undisputed facts plus the court's resolution of disputed facts." Ramming v. United States, 281 F.3d 158, 161 (5th Cir. 2001) (per curiam), cert. denied sub nom. Cloud v. United States, 122 S. Ct. 2665 (2002). Rule 12(b)(1) challenges to subject matter jurisdiction come in two forms: "facial" attacks and "factual" attacks. See Paterson v. Weinberger, 644 F.2d 521, 523 (5th Cir. 1981). A facial attack consists of a Rule 12(b)(1) motion unaccompanied by supporting evidence that challenges the court's jurisdiction based solely on the pleadings. Id. A factual attack challenges the existence of subject matter jurisdiction irrespective of the pleadings, and matters outside the...
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