Arrow Oil & Gas, Inc. v. J. Aron & Co. (In re Semcrude, L.P.)

442 B.R. 258
CourtUnited States Bankruptcy Court, D. Delaware
DecidedDecember 13, 2010
DocketBankruptcy No. 08-11525 (BLS); Adversary Nos. 10-51825, 10-51797, 10-51828
StatusPublished
Cited by6 cases

This text of 442 B.R. 258 (Arrow Oil & Gas, Inc. v. J. Aron & Co. (In re Semcrude, L.P.)) is published on Counsel Stack Legal Research, covering United States Bankruptcy Court, D. Delaware primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Arrow Oil & Gas, Inc. v. J. Aron & Co. (In re Semcrude, L.P.), 442 B.R. 258 (Del. 2010).

Opinion

OPINION 1

BRENDAN LINEHAN SHANNON, Bankruptcy Judge.

Before the Court are three motions to abstain, retransfer, and remand. The motions have been filed by various producers of oil and gas (the “Producers”) who sold oil and gas to the Debtors shortly before they filed for bankruptcy protection in this Court. By the motions, the Producers ask this Court to retransfer and remand to state court three actions that have been removed and thereafter transferred to this District by federal judges in Oklahoma and Kansas and then referred to this Court, or alternatively, to abstain from hearing these actions in favor of the courts in which they were initially filed. Because the Court finds that it has “related-to” subject matter jurisdiction over the Producers’ claims against the Tender Parties2 and the Claim Parties, the Court will not retransfer and remand the actions that implicate these claims. The Court also finds that abstention does not apply to those actions, such that the claims against the Tender Parties and the Claim Parties will therefore be heard in this Court. However, the Court finds that it lacks “related-to” jurisdiction over the claims against the No-Claim Parties. Because the actions at bar against the Non-Tender Parties implicates the Producers’ claims against both the No-Claim Parties and the [264]*264Claim Parties, the Court will retain this action but dismiss the claims against the No-Claim Parties therein.3 Dismissal will be without prejudice to the plaintiffs’ right to prosecute such claims in the court in which this action was initially filed. The Court also finds that abstention is neither appropriate nor warranted with respect to these actions, such that they will therefore be heard in this Court.

I. INTRODUCTION

The motions presently before the Court relate to two separate groups of defendants, all of whom purchased oil and gas from the Debtors. The first two motions (collectively, the “Tender Parties Motions”) [Adv. No. 10-51825, Docket No. 4; and Adv. No. 10-51797, Docket No. 3] relate to the “Tender Parties,” so called because they tendered funds into the Debtors’ estates during the pendency of the Debtors’ consolidated bankruptcy cases on account of the amounts they owed the Debtors for the oil and gas that they purchased from the Debtors.4 The Tender Parties played an active role in the Debtors’ consolidated bankruptcy eases, and the Court has already considered and ruled upon its subject matter jurisdiction over the adversaries filed in the Court by the Tender Parties (the “Tender Adversaries”) against certain Producers,5 seeking a declaratory judgment that their prior tender has relieved them of any obligation to the Producers on account of the oil and gas they purchased from the Debtors. See ConocoPhillips Co. v. Semgroup, L.P. (In re SemCrude, L.P.), 428 B.R. 82, 100 (Bankr.D.Del.2010) (finding that the Court possesses “related-to” subject matter jurisdiction over the Tender Adversaries), appeal dismissed, Civ. Nos. 10-447, 10-448, 10-449, 10-450, 10-451, 10-452, 10-452, 10-453, 10-454, 10-455, 10-456, 10-457, 10-458, 10-459, 10-460, 10-460, 10-461, 10-462, 10-463, 10-464, 10-465, 10-466, 10-467, 10-468, 10-469 (SLR), 2010 WL 4537921, at *5-6 (D.Del. Oct.26, 2010). On July 30, 2010, the Court permitted the Tender Parties who had moved to amend their complaints in the Tender Adversaries to substitute the Producers not previously named as defendants for the “John Does 1 [265]*265to 1,000” placeholder.6 It is these and other Producers who are the plaintiffs in the three actions at bar. Through the Tender Parties Motions, the Producers ask the Court to find that it does not possess subject matter jurisdiction over the two actions by the Producers against the Tender Parties filed in and removed from Oklahoma and Kansas state courts, and subsequently transferred to this District and referred to this Court, or alternatively, to abstain from hearing these actions in favor of the courts in which they were originally filed.

The third motion (the “Non-Tender Parties Motion”) [Adv. No. 10-51828, Docket No. 4] relates to numerous other downstream purchasers who purchased oil and gas from the Debtors, but did not tender funds into the Debtors’ estates during the pendency of their consolidated bankruptcy cases, did not file lawsuits in this Court to determine their rights vis-a-vis the Producers, and did not otherwise take an active role in the Debtors’ consolidated bankruptcy cases (the “Non-Tender Parties,”7 and collectively with the Tender Parties, the “Downstream Purchasers”). Through the Non-Tender Parties Motion, the Producers ask the Court to find that it does not possess subject matter jurisdiction over the action by the Producers against the Non-Tender Parties filed in and removed from Oklahoma state court, and subsequently transferred to this District and referred to this Court, or alternatively, to abstain from hearing this action in favor of the court in which it was originally filed.

II. BACKGROUND

A. Factual Background8

The litigation originates from a series of transactions that are not in material dispute. The Producers own or operate oil and gas wells. In the summer of 2008, before the Debtors filed for chapter 11 protection on July 22, 2008 (the “Petition Date”), the Producers delivered millions of dollars worth of oil and gas to the Debtors. The Debtors then sold or transferred some of that oil and gas to the Downstream Purchasers. The Debtors did not pay the Producers for any of the oil and gas delivered in the seven weeks leading up to the Petition Date.

The Producers have asserted that, under various state laws, they have the legal right to seek payment directly from the Downstream Purchasers because they have not been paid for the oil and gas that they had delivered to the Debtors. In essence, the Producers contend that the transfer of “their” oil and gas from the [266]*266Debtors to the Downstream Purchasers occurred subject to the Producers’ state law lien claims and/or trust rights. The Downstream Purchasers, on the other hand, contend that they purchased the oil and gas from the Debtors free and clear of any liens, claims, and encumbrances.

B. Procedural Background

Though the Producers insist that the actions at bar are distinct from and unaffected by related disputes between the parties in these actions and those between similarly situated parties in various other proceedings before the Court during the pendency of the Debtors’ consolidated bankruptcy cases, a review of such disputes is necessary to understand the context in which the instant actions have arisen.9

During the Debtors’ consolidated bankruptcy cases, certain Producers from eight states sought declaratory judgments concerning their asserted lien claims and/or trust rights vis-a-vis the Debtors and the Debtors’ secured lenders. In an attempt to prevent a multiplicity of actions, to preserve the resources of the Debtors, and in the interest of judicial economy, the Debtors filed a motion for authorization to establish omnibus procedures for, inter alia, the resolution of the Producers’ rights and the priorities of their claims pursuant to 11 U.S.C.

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Bluebook (online)
442 B.R. 258, Counsel Stack Legal Research, https://law.counselstack.com/opinion/arrow-oil-gas-inc-v-j-aron-co-in-re-semcrude-lp-deb-2010.