Wallen v. Tauren Exploration, Inc. (In re Cubic Energy, Inc.)

603 B.R. 743
CourtUnited States Bankruptcy Court, D. Delaware
DecidedJuly 2, 2019
DocketCase No.: 15-12500 (CSS) (Jointly Administered); Adv. Proc. No.: 18-50698 (CSS); Adv. Docket No.: 12
StatusPublished
Cited by1 cases

This text of 603 B.R. 743 (Wallen v. Tauren Exploration, Inc. (In re Cubic Energy, Inc.)) 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
Wallen v. Tauren Exploration, Inc. (In re Cubic Energy, Inc.), 603 B.R. 743 (Del. 2019).

Opinion

Sontchi, C.J.

*746INTRODUCTION

The oil and gas industry has long been a magnet for adventurers and businesses hoping to ride the wave of an oil boom. Sadly for some, their aspirations did not pan out and their ventures succumbed to the industry's boom-or-bust cycle. Before the Court is a motion related to successive bankruptcies stemming from such events.

A reorganized debtor's purported representative and former CEO are suing the liquidating trust of debtor's erstwhile equity holder and business partner. They allege that a release in the debtor's plan of reorganization bars the claims that the liquidating trust is pursuing against them in the Northern District of Texas. The liquidating trust asserts that the matter is not ripe and moves to dismiss on Rule 12(b)(1) and Rule 12(b)(6) grounds. It writes that the matter is not ripe because the complaint is asking for an advisory opinion and further insists that a final order is required before any court can rule on the complaint. In the alternative, the trust also moves for permissive abstention and venue transfer to the Northern District of Texas.

Typically, ripeness is a question of justiciability and appropriate for resolution under 12(b)(1). But when it is intertwined with substantive issues, 12(b)(6) applies. Because here the question of whether a final order's absence precludes ripeness is entangled with the issue of whether a final order is necessary, the Court proceeds with 12(b)(6). It finds that the complaint has put forth a plausible case for relief. To the extent that ripeness arguments may stand separately, the Court holds that the complaint satisfies this Circuit's ripeness test. Moreover, the Court finds that the interests of justice do not counsel it to abstain from or transfer a matter about the interpretation of its own plan. It accordingly denies the motion in its entirety.

JURISDICTION & VENUE

This Court has jurisdiction over this matter pursuant to 28 U.S.C. §§ 157 and 1334. Venue is proper in this district pursuant to 28 U.S.C. §§ 1408 and 1409. This is a core proceeding pursuant to 28 U.S.C. § 157(b)(2)

PROCEDURAL BACKGROUND

Before the Court is a motion ("Motion") to dismiss, abstain, or transfer the venue of a complaint affecting two bankruptcies, one in Texas and one in Delaware.

*747On December 11, 2015, Cubic Energy, Inc. ("Cubic Energy") filed for Chapter 11 in this Court. On February 17, 2016, this Court issued an order approving debtor Cubic Energy's third amended plan of reorganization ("Cubic Order" and "Cubic Plan" or "Plan").2 To facilitate the restructuring, the Plan included a release ("Release") and injunctions barring releasing parties ("Releasing Parties") from suing other parties ("Released Parties").3 This Release did not apply to claims related to fraud, gross negligence, or willful misconduct.4 Soon thereafter, Tauren Exploration, Inc. ("Tauren"), Cubic Energy's prepetition equity holder, filed a voluntary Chapter 11 on June 3, 2016 for which a plan was confirmed March 24, 2017.5 Tauren was controlled by Calvin A. Wallen, III ("Wallen"), who also owned Fossil Operating, Inc. ("Fossil"). In May 2017, Wallen and Fossil moved for this Court to interpret the Release to bar Tauren's trustee from filing certain suits against them ("Enforcement Motion")6 . The Court denied the Enforcement Motion, explaining that no litigation was ongoing and interpreting the Release would constitute an impermissible advisory opinion. Ruling on the Enforcement Motion would not invalidate a clause, order a party to do something, or otherwise resolve the parties' litigation.7 Since that motion, crucial events involving Wallen and Fossil have occurred. A Tauren representative initiated adversary proceedings against Wallen and Fossil in Tauren's own bankruptcy case. Tauren's liquidating trust Tauren Exploration, Inc. Liquidating Trust ("Liquidating Trust") filed three adversary actions against Wallen (including one also against Fossil) ("Tauren Litigation").8 And Gloria's Ranch, LLC's ("Gloria's Ranch") - a Tauren lessor - adversary proceeding ("Gloria's Ranch Litigation") against Wallen in Tauren's bankruptcy has been amended to designate Tauren's trustee - suing on the Liquidating Trust's behalf - as plaintiff.9 (Collectively with the Tauren Litigation, "Texas Adversary Proceedings".) Arguing that circumstances have changed and their case is ripe, Wallen and Fossil (collectively "Plaintiffs") once again ask this Court to interpret its Cubic Order and Cubic Plan. This time, they point to the ongoing Texas litigation involving themselves and Tauren and the Liquidating Trust ("Defendants"). Plaintiffs contend that the injunction and Release in the Cubic Plan and the Cubic Order bar certain counts in the Texas Adversary Proceedings and ask the Court to hold the same.10 The allegedly barred counts assert claims for constructive fraudulent transfers, avoidance of preference transfers, and veil-piercing for fraud.11 These claims are made under both Bankruptcy and state law and appear to concern *748Wallen's activities from 2009 to 2016 and Fossil's activities from 2015 to 2016.12

Accordingly, Plaintiffs' complaint ("Complaint") demands declaratory and injunctive relief. Defendants respond that the Release requires the issuance of a final order determining that certain acts constitute willful misconduct, gross negligence, or fraud before the Complaint can be brought. And they note that no such order exists here. Moreover, they argue that a ruling would constitute an impermissible advisory opinion.

Defendants thus contend that the Complaint is not ripe and Delaware is not the appropriate place for this dispute. As such, they move to 1) dismiss the complaint for lack of subject matter jurisdiction under Fed. R. Civ. P. 12(b)(1) and for failure to state a claim under Fed. R. Civ. P. 12(b)(6), 2) transfer the venue to Texas, 3) have the Court abstain from ruling on the issues pending before the Texas Bankruptcy Court.

STATEMENT OF FACTS

Before their finances went awry and their relationship soured, Tauren and Cubic Energy were business partners.

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Bluebook (online)
603 B.R. 743, Counsel Stack Legal Research, https://law.counselstack.com/opinion/wallen-v-tauren-exploration-inc-in-re-cubic-energy-inc-deb-2019.