Kravitz v. Samson Energy Co. (In re Samson Res. Corp.)

590 B.R. 643
CourtUnited States Bankruptcy Court, D. Delaware
DecidedAugust 30, 2018
DocketCase No. 15-11934 (BLS) (Jointly Administered); Adv. Proc. No. 17-51524 (BLS)
StatusPublished
Cited by8 cases

This text of 590 B.R. 643 (Kravitz v. Samson Energy Co. (In re Samson Res. Corp.)) 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
Kravitz v. Samson Energy Co. (In re Samson Res. Corp.), 590 B.R. 643 (Del. 2018).

Opinion

BRENDAN LINEHAN SHANNON, UNITED STATES BANKRUPTCY JUDGE

The efficacy of releases in Chapter 11 plans has been a hot topic for many years. Barrels of ink have been spilt on the issue in judicial opinions, scholarly journals, trade publications and legal education conferences. Attention typically is focused on complex jurisdictional and constitutional concerns, as well as profound policy debates about the wisdom and fairness of providing broad releases of liability for *646non-debtor third parties under a confirmed Chapter 11 plan. Less often is consideration given to the simple practical questions attendant to any release: Who is being released? What claims or causes of action are being released? And finally, does the release language in a plan actually accomplish the intended result? This case concerns these latter questions.

The Debtors'2 confirmed Plan was the result of protracted and hard-fought negotiations between the Debtors and the Creditors' Committee, achieved only through the intense efforts of the parties and a judicial mediator. The record suggests that the Committee supported confirmation of the Plan largely in the expectation that the Trust to be created under the Plan would pursue litigation on a post-confirmation basis against individuals and entities related to the Schusterman family. The Schusterman family previously owned the Debtors' business and sold it in a 2011 leveraged buyout for over $7 billion. The Committee proposed to sue to recover billions of dollars from the Schustermans.

The Plan was confirmed in 2017, and the Confirmation Order has long been final. As described more fully below, the Plan contained broad releases. The universe of "Released Parties" is defined in a Plan provision that is a single sentence containing 332 words, over a dozen clauses, 38 commas and at least eight separate provisos. When this lawsuit was filed by the Trust against various Schusterman entities, certain defendants promptly sought summary judgment on the ground that they are each "Released Parties" under the Plan, and thus immune from suit here. The Trustee's response is that, given that this suit was the central feature that led the Committee to support the Plan, it is simply inconceivable that the Plan would operate to release some or all of these defendants. And yet, for the reasons that follow, this appears to be precisely what happened.

BACKGROUND

Before the Court is the Motion for Summary Judgment Based on Plan Release (the "Motion") filed by Stacy Family Trust, SFT (Delaware) Management, LLC ("SFTDM"), ST 2008 (Delaware) Management, LLC ("ST 2008"), Schusterman 2008 Delaware Trust, Stacy Family Delaware Trust, Samson Exploration, LLC ("Samson Exploration"), Samson Offshore, LLC ("Samson Offshore"), and Samson Energy Company, LLC ("Samson Energy") (collectively, the "Moving Defendants") [Docket No. 46]. By the Motion, the Moving Defendants assert that they fall within the scope of the releases granted by the Debtors to third parties under the confirmed Plan. Samson Settlement Trust (the "Trust"), Plaintiff herein, opposes the Motion [Docket No. 64]. For the reasons stated below, the Court will grant the Motion as to certain Moving Defendants and deny the Motion as to the balance of the Moving Defendants.

On September 16, 2015 (the "Petition Date"), Samson Resources Corporation and its affiliates (collectively, the "Debtors") filed for chapter 11 relief. The Debtors' Global Settlement Plan of Reorganization (the "Plan") [Docket No. 2009] was confirmed by Order dated February 13, 2017 [Docket No. 2019], and the Plan became effective on March 1, 2017 (the "Effective Date"). Pursuant to the Plan, the Trust was created on the Effective Date and was funded with cash as well as certain estate causes of action to prosecute on a post-confirmation basis.

i. The 2011 Transaction

Over three years before the Petition Date, the Debtors were acquired through a *647stock sale transaction (the "LBO") that forms the basis of this lawsuit. In 2011, a consortium of investors led by KKR Group (the "Sponsors") acquired 100% of the outstanding common stock of Samson Investment Company from the Charles and Lynn Schusterman Family Foundation, SFTDM, and ST 2008 (collectively, the "Selling Shareholders") for approximately $7.2 billion. The transaction, which resulted in the acquisition of substantially all of the Debtors' onshore domestic assets, closed in December of 2011. Certain of the Debtors' offshore operations and Gulf of Mexico assets remained with the Selling Shareholders. The LBO was financed in part by the issuance of over $3.25 billion in new debt by the Debtors. As part of the transaction, the Selling Shareholders received over $6 billion in cash and approximately $180 million in Preferred Stock of the Debtors. In the years following the LBO, the Debtors' financial condition significantly deteriorated leading up to the Petition Date in September 2015.

ii. Post-Confirmation Litigation

Post-confirmation, the Trustee filed his complaint for recovery of fraudulent transfers against the Moving Defendants (the "Complaint") [Adv. Docket No. 3]. The Complaint alleges in part that the LBO left the Debtors insolvent and without the capital necessary to survive. It is the Trustee's theory that certain actions by the Moving Defendants and other defendants during the 2011 transaction ultimately precipitated the Debtors' 2015 bankruptcy filing. Accordingly, the Trustee alleges that certain monies transferred under the LBO are recoverable as constructively fraudulent conveyances.3

At this early stage of the proceedings, the Moving Defendants assert that they each fit within the definition of "Released Party" under the Debtors' confirmed Plan, and thus cannot be sued by the Trustee. The Motion has been fully briefed and argued, and is ripe for disposition.

JURISDICTION AND VENUE

The Court has jurisdiction over this matter under 28 U.S.C. §§ 1334 and 157(b)(1). Venue is proper in this Court pursuant to 28 U.S.C. §§ 1408 and 1409. Consideration of the Motion constitutes a core proceeding under 28 U.S.C. § 157(b)(2)(A), (F) and (O).

DISCUSSION

I. The Parties' Positions

The Moving Defendants' primary argument is that they are beneficiaries under the release contemplated by the Plan (the "Plan Release") and are therefore protected from suit. Specifically, they note that the Plan defines "Released Parties" to include current and former affiliates and those affiliates' current and former shareholders. The Plan operated to release and discharge any and all estate causes of action against Released Parties.

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Bluebook (online)
590 B.R. 643, Counsel Stack Legal Research, https://law.counselstack.com/opinion/kravitz-v-samson-energy-co-in-re-samson-res-corp-deb-2018.