United States District Court, D. Delaware
In re SemCrude, L.P., et al., Reorganized Debtors.
J. Aron & Company, Defendant. New Dominion, LLC, Plaintiff, Adv. No. 11-51774
PROPOSED FINDINGS OF FACT AND CONCLUSIONS OF LAW
PURSUANT TO 28 U.S.C. § 157(C)(1) AND FED. R. BANKR. P.
9033(A) Related to Adv. Docket Nos. 97, 143, 144, 146, 147,
Brendan Linehan Shannon Chief United States Bankruptcy Judge
the Court is the Motion for Partial Summary Judgment (the
“Partial MSJ”) filed by New Dominion, LLC
(“ND”) and the Renewed Motion for Summary
Judgment (the “MSJ”) filed by J. Aron &
Company (“J. Aron”). The parties are more than
familiar with the complex background of this bankruptcy case
and family of adversary proceedings. As relevant here, ND
sold oil to SemCrude who promptly sold that oil to third
parties. ND was not paid in full for the oil it sold to
SemCrude between June 1 and July 1, 2008. ND argues that
SemCrude (or one of its affiliates) sold at least some of
that oil to J. Aron, and ND asserts a security interest and
lien on the proceeds thereof under Oklahoma law. ND commenced
this litigation to foreclose upon its asserted lien. By J.
Aron's MSJ, J. Aron seeks a ruling from this Court that
it purchased oil from the Debtors free and clear of any liens
or other rights of ND. As set forth in detail below, the
Court finds that ND sold its oil to SemCrude pursuant to
standard industry terms that provide a warranty that the oil
was sold free and clear of all liens, claims and
encumbrances. Accordingly, ND waived its right to assert any
lien in the oil it sold. The Court will therefore recommend
that J. Aron's MSJ be granted.
22, 2008 (the “Petition Date”), SemGroup, L.P.
and certain direct and indirect subsidiaries (collectively,
“SemCrude” or the “Debtors”) each
filed voluntary petitions for relief under Chapter 11 of the
Bankruptcy Code (the “Code”). By Order dated
October 28, 2009 (the “Confirmation Order”),
Court confirmed the Debtors' Fourth Amended Joint Plan of
Affiliated Debtors (the “Plan”). The Plan and the
Confirmation Order expressly preserved certain claims and
causes of action and provided for this Court's retention
of jurisdiction over those claims, including ND's claims
currently before the Court in this adversary
the Petition Date, the Debtors' business involved
purchasing oil and gas from upstream producers, like ND
(collectively, the “Producers”) and selling it to
downstream purchasers, like J. Aron (collectively, the
“Downstream Purchasers”). After the bankruptcy
filing, many Producers were owed millions of dollars for oil
and gas delivered to the Debtors in the weeks leading up to
the filing. ND claimed that it was not paid in full
for more than 22, 000 barrels of oil, worth roughly $2.75
million, that it provided to SemCrude between June 1 and July
1, 2008. Each of ND's contracts with SemCrude
governing the oil sales expressly incorporated the Conoco
General Provisions, which include a warranty that the oil was
delivered “free from all…liens [and]
purchased over 24 million barrels of oil from SemCrude,
priced at approximately $324 million, for delivery in
Cushing, Oklahoma and El Dorado, Kansas in June
2008. On July 21, 2008, the day before
SemCrude filed its bankruptcy petition, J. Aron exercised
netting rights under its ISDA Master Agreement to set off
$435 million of oil purchased from SemCrude against
approximately $345 million in SemCrude's oil derivatives
after the Petition Date, ND, an Oklahoma-based company, filed
liens under the Oklahoma Oil and Gas Owners' Lien Act,
Okla. Stat. Ann. tit. 52, §§ 548.1-548.6 (the
“Oklahoma Oil & Gas Lien Act”). This statute
granted Producers like ND “a lien upon the oil or gas
severed [from its wells], or the proceeds of sale if such oil
or gas has been sold, to the extent of [its] interest
until” full payment is received. Okla. Stat. Ann. tit.
52, § 548.2. On August 4, 2008, ND notified J. Aron that
it had filed liens on the proceeds of its oil allegedly held
by J. Aron.
filed suit in Oklahoma state court asserting a single count
against J. Aron to foreclose on the alleged statutory
lien. The matter was eventually transferred to
the District of Delaware, and then referred to this Court.
record reflects that ND was paid in full for oil delivered
between July 2, 2008 and July 21, 2008 pursuant to the
administrative priority provisions of 11 U.S.C. §
503(b)(9). Additionally, ND was paid approximately 13% of its
sales to SemCrude from June 1, 2008 to July 1, 2008 through a
settlement agreement with the Debtors and the secured
lenders. The issue before the Court at this
stage, therefore, is whether ND possesses lien rights that it
can assert against J. Aron to recover on the portion of its
claim that was not paid by the Debtors.
JURISDICTION & VENUE
Court has jurisdiction over this matter pursuant to 28 U.S.C.
§ 1334(b), with the Court determining that this matter
is “related to” the Debtors' Chapter 11
cases. Venue is proper in this Court and in this District
pursuant to 28 U.S.C. §§ 1408, 1409. These
adversary proceedings constitute non-core proceedings under
28 U.S.C. § 157(c)(1). See Arrow Oil & Gas, Inc.
v. J. Aron & Co. (In re SemCrude, L.P.), 442 B.R.
258, 271 (Bankr. D. Del. 2010). As such, and in accordance
with Fed.R.Bankr.P. 9033(a), the Court herewith files its
proposed findings of fact and conclusions of law.
SUMMARY JUDGMENT STANDARD
judgment is proper where, viewing the evidence in the light
most favorable to the non-moving party and drawing all
inferences in favor of that party, there is no genuine
dispute of material fact and the moving party is entitled to
judgment as a matter of law. Fed.R.Civ.P. 56(a); Celotex
v. Catrett, 477 U.S. 317, 322-23 (1986). Any doubt must
be resolved in favor of the non-moving party. Anderson v.
Liberty Lobby, Inc., 477 U.S. 242, 255 (1986).
movant bears the initial burden of establishing the absence
of a genuine issue of material fact. Celotex, 477
U.S. at 323. Once the moving party carries its burden, the
opposing party must go beyond the pleadings and identify
specific facts showing more than a “mere existence of a
scintilla of evidence” that a genuine dispute of
material fact exists. Anderson, 477 U.S. at 252;
see also Matsushita Elec. Indus. Co., v. Zenith
Radio Corp., 475 U.S. 574, 586 (1986) (stating that the
opposing party “must do more than simply show that
there is some metaphysical doubt as to the material
ruling on cross-motions for summary judgment, the Court's
analysis does not change. “Each party still bears the
initial burden of establishing a lack of genuine issues of
material fact.” Liquidating Trust of U.S. Wireless
Corp. v. Huffman (In re U.S. Wireless Corp.), 386 B.R.
556, 560 (Bankr. D. Del. 2008). Each motion must be
considered independently, and “both motions will be
denied if any genuine issues of material fact exist.”
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