World Fuel Services, Inc. v. Reorganized Debtors Erickson Helicopters, Inc.

• Court: U.S. District Court — Northern District of Texas
• Writing for the Court: Ada Brown, UNITED STATES DISTRICT JUDGE
• Citation: World Fuel Services, Inc. v. Reorganized Debtors Erickson Helicopters, Inc., 592 F.Supp.3d 563 (N.D. Tex. 2022)
• Decision Date: 21 March 2022
• Docket Number: CIVIL ACTION NO. 3:21-cv-00506-E
• Parties: WORLD FUEL SERVICES, INC., Appellant, v. REORGANIZED DEBTORS ERICKSON HELICOPTERS, INC., et al., Appellees.

592 F.Supp.3d 563

WORLD FUEL SERVICES, INC., Appellant,

v.REORGANIZED DEBTORS ERICKSON HELICOPTERS, INC., et al., Appellees.

CIVIL ACTION NO. 3:21-cv-00506-E

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

Signed March 21, 2022

Patricia B. Tomasco, Devin Burke van der Hahn, Quinn Emanuel Urquhart & Sullivan, Houston, TX, Eric D. Winston, Quinn Emanuel Urquhart & Sullivan LLP, Los Angeles, CA, for Appellant.

Charles M. Jones, II, Andrew Wade Guthrie, Ian T. Peck, Haynes & Boone LLP, Dallas, TX, Christopher M. Huck, Goldfarb & Huck Roth Riojas PLLC, Seattle, WA, Kenric D. Kattner, Kourtney Pickens Lyda, Haynes & Boone LLP, Houston, TX, for Appellee Erickson Helicopters Inc.

Charles M. Jones, II, Ian T. Peck, Haynes & Boone LLP, Dallas, TX, Kenric D. Kattner, Kourtney Pickens Lyda, Haynes & Boone LLP, Houston, TX, for Appellee Evergreen Helicopters International Inc.

Kendall Kelly Hayden, Cozen O'Connor, Dallas, TX, Eric D. Freed, Pro Hac Vice, Eric L. Scherling, Cozen O'Connor PC, Philadelphia, PA, for Appellee Allied World Assurance Company.

MEMORANDUM OPINION AND ORDER

Ada Brown, UNITED STATES DISTRICT JUDGE

Appellant World Fuel Services, Inc. appeals a Bankruptcy Court order denying allowance of its claim against debtor Erickson Helicopters, Inc. At issue is whether the Bankruptcy Court's determination that it was inequitable to allow the informal proof of claim was an abuse of discretion. The Court has carefully reviewed the parties’ briefing, the appellate record, and the applicable law. Finding that the Bankruptcy Court did not abuse its discretion in balancing the equities, the Court affirms the Bankruptcy Court order.

BACKGROUND

The case arises out of seven Chapter 11 bankruptcy cases filed by Erickson Helicopters, Inc. ("Erickson Helicopters") and related aviation service entities. The other debtors are Erickson Incorporated—the parent company of Erickson Helicopters, Evergreen Helicopters International, Inc., EAC Acquisition Corporation, Erickson Transport, Inc., Evergreen Equity, Inc., and Evergreen Unmanned Systems, Inc. The Bankruptcy Court ordered the joint administration of the cases under the case number for Erickson Incorporated. Nevertheless, the debtors were to maintain a separate claims register for each Chapter 11 case.

At the time Erickson Helicopters and the affiliated entities filed for bankruptcy, Appellant World Fuel Services and Erickson Helicopters were involved in litigation in Oregon. Appellant claimed it was owed money for jet fuel it supplied to a company formerly affiliated with Erickson Helicopters and that Erickson Helicopters was obligated to pay pursuant to a guaranty agreement. Appellant filed suit in 2016 in federal court in Oregon ("the Oregon litigation"). The only defendant was Erickson Helicopters, "formerly known as Evergreen Helicopters, Inc." Appellant later moved for summary judgment, and Erickson Helicopters sought leave to amend its answer to assert counterclaims. In November 2016, before any ruling on these pending motions, the Oregon litigation was stayed when Erickson Helicopters and its affiliates commenced the Chapter 11 cases.

Appellant filed a notice of appearance in the bankruptcy cases. The Bankruptcy Court set a deadline of March 20, 2017, for creditors to file a proof of claim. Appellant timely filed a proof of claim that listed Evergreen Helicopters International as the debtor and Erickson Incorporated as an additional debtor. The proof of claim was filed in the Evergreen Helicopters bankruptcy case, and the case number referenced is 16-34392, the Evergreen Helicopters case number. The proof of claim was not filed in the Erickson Helicopters case or the lead case of Erickson Incorporated. The amount of the claim is $14,546,621.92. Several documents were attached to the proof of claim, including a copy of the guaranty agreement which included the name of Erickson Helicopters’ prior entity and the complaint against Erickson Helicopters in the Oregon litigation, which did not involve Evergreen International or Erickson Incorporated.

The confirmation hearing took place on the date after the deadline to file a proof of claim, and on March 22, 2017, the Bankruptcy Court confirmed the Debtors’ Second Amended Joint Plan of Reorganization, which became effective on April 28, 2017. Under the Plan, the Erickson Litigation Trust was formed. The litigation trustee was given the exclusive right to object to proofs of claim. The Plan required any objections to claims to be filed within 180 days of the effective date of the Plan. The Plan stated that a claim is allowable under the Bankruptcy Code for which a proof of claim was timely filed and as to which no objection or other challenge to allowance thereof has been filed, or if an objection or challenge has been timely filed, such claim is allowed by final order. Appellant's claim was classified as a Class 6, General Unsecured Claim, meaning Appellant was entitled to receive its pro rata share of the litigation trust's interests. The Plan further provided that no distributions shall be made on account of an allowed claim that is payable pursuant to an Erickson Helicopter insurance policy until the holder of such a claim has exhausted all remedies pursuant to the policy.

The trustee filed an objection that disputed Appellant's proof of claim, stating it was "subject to litigation." The trustee later withdrew his objection and the Bankruptcy Court approved the withdrawal of the objection.

In April 2018, Appellant filed a Motion for Relief from the Automatic Stay asking the Bankruptcy Court to lift the stay so it could continue to pursue its claims in the Oregon litigation. Appellant sought to proceed with the litigation only with respect to available insurance. The Bankruptcy Court issued a Lift Stay Order that permitted Appellant to prosecute or otherwise resolve the Oregon litigation on the merits, but only allowed it to recover any judgment from the proceeds of an Erickson Helicopters’ insurance policy.

The Oregon court reactivated the Oregon litigation and eventually denied Appellant's motion for summary judgment and permitted Erickson Helicopters to amend its answer to assert counterclaims. Erickson Helicopters asserted counterclaims for breach of contract, fraudulent and negligent inducement and misrepresentation, and violation of the Florida Deceptive and Unfair Trade Practices Act. In answer to the counterclaims, Appellant argued that Erickson Helicopters was barred by Bankruptcy Court order from bringing counterclaims against it. It argued the merits of its guaranty claims had already been decided in the Chapter 11 cases.

After its summary judgment motion was denied in the Oregon litigation, on May 19, 2020, Appellant filed with the Bankruptcy Court a Motion to Enforce Second Amended Joint Plan of Reorganization. Appellant made what it later called a "scrivener's error" and referred in the motion to Evergreen Helicopters International as the debtor, not Erickson Helicopters, Inc. Appellant sought to bar litigation of the merits of the proof of claim in the Oregon litigation, arguing the Plan precluded the defendant from raising substantive contractual defenses to Appellant's claims. In September 2020, the Bankruptcy Court ruled that the proof of claim was allowed and "EHI" was enjoined from asserting any defenses in the Oregon litigation that may have been resolved as part of the allowance of the claims.

Erickson Helicopters, together with its insurance company Allied World Assurance Company and Evergreen Helicopters, moved to vacate the order because Appellant's motion named Evergreen Helicopters, who was not a party to the Oregon litigation, not Erickson Helicopters. The movants asked the Bankruptcy Court to clarify that Appellant has no allowed claim against Erickson Helicopters because it never filed a proof of claim against that entity. The Bankruptcy Court vacated its earlier order and asked for briefing on Appellant's arguments as they relate to Erickson Helicopters.

Appellant then filed a "Corrected Renewed Motion to Confirm Allowance of Claim Against Erickson Helicopters, Inc., Enforce Second Amended Joint Plan of Reorganization, Order Resolving Objections to World Fuel Services, Inc.’s Proof of Claim, and Order Granting Relief from the Discharge Injunction" ("Motion to Enforce"). The Bankruptcy Court's order denying the Motion to Enforce is the subject of this appeal. In its Motion to Enforce, Appellant argued that its informal proof of claim was an allowed claim and the terms of the Plan prevented Erickson Helicopters from acting as anything more than a nominal defendant in the Oregon litigation. The trustee did not oppose the Motion to Enforce.

The Bankruptcy Court heard arguments on the Motion to Enforce on January 21, 2021. It issued an oral ruling on February 3, 2021, and issued its written order denying the...