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In re Greenfield Energy Services, Inc.

United States District Court, D. Delaware

December 21, 2017




         Movants Michael B. Moreno ("Moreno") and Turbine Generation Services, LLC ("TGS"), defendants in the above-captioned adversary proceeding ("Defendants"), move this Court (D.I. 1) ("Motion for Leave") for leave to file an interlocutory appeal with respect to the Bankruptcy Court's Opinion (Adv. D.I. 230)[1] and Order (Adv. D.I. 231), which denied Defendants' motion (Adv. D.I. 183) ("Third Party Motion") for leave to file a third-party complaint ("Proposed Complaint") against General Electric Company and GE Oil & Gas, Inc. (together, "GE") based on a lack of subject matter jurisdiction over the proposed claims. For the reasons stated below, the Court will deny the Motion for Leave.

         I. BACKGROUND

         On October 27, 2013 ("Petition Date"), Greenfield Energy Services, Inc. ("GFES") and certain of its affiliates (together, "Debtors") filed voluntary petitions for relief under chapter 11, of the Bankruptcy Code. On April 23, 2014, the Bankruptcy Court confirmed the Debtors' plan of liquidation. (B.D.I. 885) The plan provided for the creation of the GFES Liquidation Trust ("Trust"), governed by the terms of a Liquidation Trust Agreement. (B.D.I. 803) The Trust was vested with all of the Debtors' assets, including claims against third parties. On April 6, 2015, Alan D. Halperin, as Trustee of the GFES Liquidation Trust ("Trustee"), filed a complaint against the Defendants, asserting, inter alia, claims for breach of fiduciary duty. (Adv. D.I. 1) The complaint alleges that Moreno breached his fiduciary duty to GFES by causing GEFS's board of directors to waive the so-called "PowerGen" business opportunity or by causing GFES to fraudulently transfer PowerGen to TGS for little or no consideration. (See D.I. 1 at 1)

         On April 12, 2016, over a year after the complaint was filed, Defendants filed the Third Party Motion, seeking to assert certain claims against GE, including that GE aided and abetted any breach of fiduciary duty Moreno might have committed with regard to his position at GFES, by negotiating with Moreno to develop the PowerGen business, planning a joint venture regarding the same, and requiring Moreno to establish a new company owned primarily by entities he controlled (the "Aiding and Abetting Count"). (See Adv. D.I. 183, Ex. A. at ¶ 39-80) Defendants also sought contribution from GE under Delaware's Uniform Contribution Among Tortfeasors Law, 10 Del. C. § 6302 ("DUCATL"), for "any amount which Moreno or TGS may be required to pay" because GE allegedly aided and abetted Defendants in Defendants' breaches of their fiduciary duties (the "Contribution Count, " and together with the Aiding and Abetting Court, the "Proposed Claims"). (Adv. D.I. 183, Ex. A. at ¶ 92) Defendants did not address subject matter jurisdiction in the Third Party Motion. (Adv. D.I. 183) The Trustee did not object to the Third Party Motion and the Bankruptcy Court found it was timely filed. (B.D.I. 230 at 3-4) On reply, Defendants cited four cases and argued that the Bankruptcy Court had subject matter jurisdiction over the proposed third-party complaint because the Proposed Claims: (1) were important to the implementation of the Debtors' plan; (2) had been reserved in the Plan; and (3) would provide an alternate source of recovery. (See Adv. D.L 198 at ¶¶ 26-27)

         On July 11, 2016, following oral argument and GE's submission of supplemental briefing (Adv. D.I. 227), the Bankruptcy Court entered the Order and Opinion denying the Third Party Motion. In determining whether it had subject matter jurisdiction over the Proposed Claims, the Bankruptcy Court applied the post-confirmation test for "related to" subject matter jurisdiction set forth by the Third Circuit in In re Resorts International, Inc., 372 F.3d 154 (3d Cir. 2004), and concluded that the Proposed Claims did not bear a "close nexus" to the plan or bankruptcy proceedings. (See B.D.I. 230 at 4-9) "The Bankruptcy Court... held that the Defendants' state law claims against entities who have not even filed proofs of claim against the estate, and which will not produce any additional funds for the estate [J are unrelated to the Debtor's estate and the plan confirmed in the bankruptcy case." (D.I. 2 at 1) On July 25, 2016, Defendants filed the Motion for Leave to file an interlocutory appeal.


         Defendants argue that the issue presented on appeal - whether the Bankruptcy Court has subject matter jurisdiction over third-party contribution claims against GE - is a controlling question of law on which there are substantial grounds for difference of opinion. Defendants argue that "[w]hile the Bankruptcy Court stated the proper standard, its application was too rigid given subsequent rulings by the Third Circuit." (D.L 1 at 7) In their view, the proposed contribution claims against GE will provide an alternate source of recovery for the Trust, and the Third Circuit (plus at least one bankruptcy court in this District) has found subject matter jurisdiction over similar contribution and guaranty claims against non-debtor parties. (See Id. at 8-10) Defendants further argue that immediate appeal will materially advance the ultimate termination of litigation by potentially avoiding a second identical trial between the Defendants and GE and by bringing all potential resources into one proceeding. (Id. at 13-15) Finally, Defendants argue that exceptional circumstances exist because the Trustee has chosen not to bring these claims directly against GE. (Id. at 15-16)

         GE counters that Defendants failed to carry their burden of establishing that the Bankruptcy Court had subject matter jurisdiction over the Proposed Claims and, further, that the Motion for Leave raises arguments that were not raised below and, therefore, should not be considered on appeal. (See D.I. 2 at 7) According to GE, Defendants' argument that jurisdiction exists because the Proposed Claims, if successful, will somehow reduce the Trustee's liability to the Defendants, was raised for the first time in the Motion for Leave to appeal the Bankruptcy Court's Order. (Id. at 11) GE further contends that this argument ignores the reality that a contribution claim under DUCATL "would only allow the Defendants to recover from [GE] for sums that the Defendants paid to the Trustee." (Id. at 11 & n. 3) Moreover, the Bankruptcy Court properly applied the Resorts "close-nexus" standard, which applies to post-confirmation actions, and as to which there is no difference of opinion among the courts in this Circuit. (See Id. at 15-23) Finally, GE disagrees with the suggestion that permitting immediate appeal will advance the adversary proceeding, particularly as the Trustee is not a party to the Proposed Complaint. (See Id. at 28)


         The Court may, in its discretion, grant leave to parties in bankruptcy to appeal interlocutory orders. See 28 U.S.C. § 158(a)(3). In deciding whether an interlocutory order is appealable in the bankruptcy context, courts have typically borrowed the standard found in 28 U.S.C. § 1292(b), which governs interlocutory appeals from the district courts to the courts of appeal. See In re SemCrude, L.P., 407 B.R. 553, 556-57 (D. Del. 2009); In re Magic Rests., Inc., 202 B.R. 24, 25 (D. Del. 1996). Under section 1292(b), leave to file an interlocutory appeal may be granted when the order at issue: (1) involves a controlling question of law upon which there is (2) substantial ground for difference of opinion as to its correctness and, (3) if appealed immediately, the resolution may materially advance the ultimate termination of the litigation. See Katz v. Carte Blanche Corp., 496 F.2d 747, 754 (3d Cir. 1974). Leave may be denied for reasons apart from these specified criteria, including due to the state of the appellate docket or the desire to have a full record before considering the disputed legal issue. See id.; see also SemCrude, 407 B.R. at 557. Piecemeal litigation is generally disfavored by the Third Circuit. See In re White Beauty View, Inc., 841 F.2d 524, 526 (3d Cir. 1988). The party seeking leave to appeal an interlocutory order must establish that "exceptional circumstances justify a departure from the basic policy of postponing review until after the entry of final judgment." In re Del. and Hudson Ry. Co., 96 B.R. 469, 472-73 (D. Del. 1989), aff'd, 884 F.2d 1383 (3d Cir. 1989).


         A. Controlling Question of Law

         "A 'controlling question of law' includes every order which, 'if erroneous, would be reversible error on final appeal.'" Accenture Global Servs., GmbH v. Guidewire Software, Inc.,800 F.Supp.2d 613, 622 n.5 (D. Del. 2011) (quoting Katz, 496 F.2d at 755). Defendants argue that the issue presented on appeal will be "whether subject matter jurisdiction exists over the Defendants' third-party contribution claims against [GE] where the Bankruptcy Court has already [determined that] it has jurisdiction over [Trustee's] claims against Defendants and denying the [Third Party Motion] would result in a second identical trial between Defendants and [GE]." (D.I. 1 at 4) Subject matter jurisdiction presents a question of law that is determined on a claim by claim ...

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