- Case Type:
- Case Status:
- No. 17-30077 (5th Circuit, Oct 27,2017) Published
- Circuit Court affirmed the district court’s judgment that the Trustee failed to state a plausible claim upon which relief can be granted. It also held that the district court did not abuse its discretion in partially denying the Trustee leave to amend the Second Amended Complaint.
- Procedural context:
- On August 17, 2012, ATP voluntarily filed for Chapter 11 bankruptcy protection in the Southern District of Texas. ATP’s case was converted to a Chapter 7 proceeding on June 26, 2014. Rodney Tow was appointed Trustee for ATP’s estate. The Trustee filed suit on behalf of ATP’s estate against ATP’s Officers and Directors. The case was initially assigned to the Bankruptcy Court for the Southern District of Texas, but it was transferred to the U.S. District Court for the Southern District of Texas on June 29, 2015. Pursuant to a joint stipulation and order, the Trustee filed his First Amended Complaint. The case was subsequently transferred to the U.S. District Court for the Eastern District of Louisiana. The Officers filed a 12(b)(6) motion to dismiss the First Amended Complaint. The Directors did the same. In response, the Trustee timely sought and received leave to amend. He then filed the Second Amended Complaint, which included a number of claims pertinent to this appeal.3 The Officers and Directors then filed 12(b)(6) motions to dismiss the Second Amended Complaint. The district court granted the 12(b)(6) motions to dismiss. However, the Trustee in his opposition to the motions sought leave to amend. The district court granted leave to amend as to two claims and denied leave to amend as to the others, finding that amendment was largely futile. The Trustee then filed his Third Amended Complaint which raised only the fraudulent transfer claim against a few Officers. The Officers filed another 12(b)(6) motion to dismiss. The district court granted the motion. The district court then entered a final judgment dismissing the Trustee’s claims with prejudice. The Trustee then timely appealed.
- Following the 2010 Deepwater Horizon drilling rig explosion and oil spill—and resulting moratoria on new and existing deepwater drilling in the Gulf of Mexico—ATP began experiencing difficulties servicing its debt and paying expenses. After the oil spill, ATP made substantial investments in several capital projects. The first project involved a contract for constructing a floating production platform in ATP’s Cheviot Field in the North Sea. The second project involved efforts to obtain drilling licenses in the Eastern Mediterranean Sea for two ATP subsidiaries. Ultimately, ATP did not weather the storm of disruption caused by the Deepwater Horizon accident and resulting drilling moratoria. New regulations on deepwater well decommissioning forced ATP to incur unanticipated costs. The Trustee alleges that ATP, struggling to pay these costs, incurred $120 million in liability to the Bureau of Ocean Energy Management; the Bureau eventually stripped ATP of its ability to operate in the Gulf of Mexico. Prior to declaring bankruptcy, ATP took a number of steps to generate cash to pay “past due obligations,” including selling investors “net profits increases” and “overriding royalty interests.” The Trustee alleges that these efforts generated cash, but they dramatically encumbered ATP’s ability to profit in the future from its in-ground hydrocarbon assets. The Trustee also asserts that ATP entered unfavorable vendor contracts that caused the company to incur additional costs with little countervailing benefit. The Trustee contends that while ATP struggled to maintain profitability, ATP paid substantial cash bonuses to certain Officers. By summer 2012, ATP was considering bankruptcy. Prior to filing for bankruptcy, ATP’s Board of Directors approved payment of a special dividend for Series B stock holders. The announced dividend amounted to $1.99 per Series B share and resulted in an authorized payment of $7 million. According to the Trustee, this payout occurred despite the fact that ATP’s attorneys advised the corporation that the dividend would be improper under the federal Bankruptcy Code and Texas law.
- REAVLEY, PRADO, and GRAVES, Circuit Judges
Schnitzel, Inc. v. Sorensen
Summarizing by Bradley Pearce
2699 in the system
7 Being Processed