United States District Court, D. Delaware
In re GREENFIELD ENERGY SERVICES, INC., et al., Debtors.
MICHAEL B. MORENO, et al, Defendants. ALAN D. HALPERIN, AS TRUSTEE OF THE GFES LIQUIDATION TRUST, Plaintiff, Misc. No. 16-208 (LPS)
LEONARD P. STARK, UNITED STATES DISTRICT COURT.
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) 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.
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)
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)
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.
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)
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)
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).
Controlling Question of Law
'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