In Re: SemCrude LP et al

Filing 26

MEMORANDUM ORDER denying 21 MOTION for Reconsideration re 20 Memorandum and Order Appellee Thomas L. Kivisto's Motion for Rehearing. Signed by Judge Sue L. Robinson on 3/12/2013. (nmfn)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF DELAWARE

In re:
SEMCRUDE L.P., ET AL.,

) Chapter 11
) Bk. No. 08-11525 (BLS)
)
)

Debtors.
_________________________ )

)
COTTONWOOD PARTNERSHIP, LLP, )
ET AL.,
)
)
Appellants,
)
)
v.
) Civ. No. 11-1174-SLR
)
THOMAS L. KIVISTO, ET AL.,
)
)
)
Appellees.

MEMORANDUM ORDER
. At Wilmington, this

~ day of March, 2013;

IT IS ORDERED, for the reasons discussed below, that appellee Thomas L.
Kivisto's ("Kivisto's") motion for rehearing (D.I. 21) is denied:
1. Background. On July 22, 2008, SemGroup L.P. and its affiliated debtors
(collectively, "SemGroup") filed a chapter 11 petition in the United States Bankruptcy
Court for the District of Delaware ("bankruptcy court"). (B.D. 1 1) On October 28, 2009,
the bankruptcy court entered an order {"confirmation order'') confirming debtors' fourth
amended joint plan ("confirmed plan") of affiliated debtors pursuant to chapter 11 of the
Bankruptcy Code, which established a litigation trust ("the Trust") to pursue and settle
claims of SemGroup. {D.I. 10 at CW 641J 40, CW 12721J 11.1, CW 12931J 20.7) On
1

References the bankruptcy court docket.

February 17, 2009, an appointed committee of the debtors' unsecured creditors ("the
Committee")2 filed suit in bankruptcy court against Kivisto, former CEO of SemGroup
L.P., and certain other parties. (/d. at CW 776-838)
2. On December 22, 2010, Cottonwood Partnership, L.L.P.; Dunbar Family
Parnership, L.P.; Rosen Family, L.L.C.; Warren F. Kruger; Katherine A. Kruger; David
S. Kruger; and Kathryn E. Shelley (collectively, "appellants") filed suit against Kivisto,
PriceWaterhouseCoopers LLC ("PWC"), and John Does 1-25 in the Tulsa County
District Court in Oklahoma (the "Oklahoma litigation"). (/d. at CW 430-60) Each
appellant formerly held limited partnership units in SemGroup. On the theory that the
defendants in the Oklahoma litigation owed duties to appellants individually, appellants
sought monetary damages from PWC for professional negligence and violation of the
Oklahoma Accountancy Act, and from Kivisto for negligent misrepresentation, fraud,
and breach of fiduciary duty. (/d.)
3. On May 4, 2011, Kivisto filed an emergency motion ("motion to enjoin") in the
bankruptcy court to enforce the provisions of the order confirming the debtors' fourth
amended joint plan and to enforce the provisions of the confirmed plan and other relief.
(/d. at CW 1-363) The Trust and SemGroup joined Kivisto in the motion to enjoin. (/d.

at CW 364-68) The Trust averred that the claims asserted by appellants are derivative
claims that belong to the Trust and, pursuant to the confirmed plan and confirmation
order, cannot not be brought by any other party. (!d.) The bankruptcy court entered an

2

On December 16, 2009, after the confirmed plan became effective, the
bankruptcy court entered an order approving the substitution of the Trust for the
Committee as plaintiff. (D.I. 1-1 at 2; D.l. 18 at TKA 96)
2

opinion and order dated October 7, 2011, granting the motion to enjoin. (0.1. 1-1; 0.1.
1-2) The bankruptcy court found that it has subject matter jurisdiction, the matter is a
core proceeding, and the claims in appellants' Oklahoma litigation are derivative causes
of action alleging injury to SemGroup in its corporate capacity. (0.1. 1-1) Appellants
filed their notice of appeal from the bankruptcy court's opinion and order on October 21,
2011. (0.1. 1)
4. On November 15, 2012, this court issued a memorandum order that, inter
alia, affirmed the finding by the bankruptcy court that appellants' claims against PWC
are derivative and reversed and remanded the bankruptcy court's finding that
appellants' claims against Kivisto are derivative. (0.1. 20)
5. Standard of review on motion for rehearing. Rule 8015 of the Federal
Rules of Bankruptcy Procedure authorizes motions for rehearing filed within 10 days
after the entry of a bankruptcy court judgment. While the Third Circuit has not
definitively articulated a standard for when rehearing under Rule 8015 should be
granted, this court has adopted the standard used to evaluate motions for
reconsideration. See In reNew Century TRS Holdings, Inc., Civ. No. 08-546, 2009 WL
1833875, at *1 (D. Del. June 26, 2009). The purpose of a motion for reconsideration is
to "correct manifest errors of law or fact or to present newly discovered evidence."
Max's Seafood Cafe v. Quinteros, 176 F.3d 669, 677 (3d Cir. 1999). Accordingly, a
motion for rehearing should only be granted if: "(1) the court has patently
misunderstood a party; (2) the court has made a decision outside the adversarial issues
presented ... by the parties; (3) the court has made an error not of reasoning but of
apprehension; or (4) there has been a controlling or significant change in the law or

3

facts since the submission of the issue to the Court." See In re New Century TRS

Holdings, Inc., 2009 WL 1833875, at *1 (internal quotation marks omitted).
6. Discussion. Relevant to the instant motion, this court's memorandum order
reversed and remanded the bankruptcy court's finding that the fraud, negligent
misrepresentation, and fiduciary duty claims against Kivisto are derivative. (0.1. 20 at
12-14) In his motion for rehearing, Kivisto points to the bankruptcy court's conclusion
that "the injury suffered by the Oklahoma Plaintiffs is no different from the injury
suffered by SemCrude as a result of Kivisto's wrongful conduct. Indeed, the Oklahoma
Plaintiffs' alleged loss of capital went hand-in-hand with the titanic losses that
SemCrude suffered in the run-up to its bankruptcy filing." In re SemCrude, L.P., Civ.
No. 08-11525,2011 WL 4711891, at *7 (Bank. Del. Oct. 7, 2011). Kivisto asserts that
the bankruptcy court's conclusion was a factual finding and does not present a mixed
question of law and fact. As such, he asserts that this court erred in evaluating the
injury under a plenary standard rather than a clearly erroneous standard. (0.1. 21 at 34)
7. "Whether an action is characterized as direct or derivative is a question of
state law," in this case Oklahoma law. In re Touch Am. Holdings, Inc., 401 B.R. 107,
121 n.26 (Bank. Del. 2009). The Third Circuit has "exercise[d) plenary review of [a]
court's choice and interpretation of legal precepts and its application of those precepts
to the historical facts." Mellon Bank, N.A. v. Metro Commc'ns, Inc., 945 F.2d 635, 642
(3d Cir. 1991) (citation omitted) (internal quotation marks omitted). In Mellon Bank,
although the trial court made a factual finding regarding when an office was relocated,

4

the Third Circuit found that "the ultimate determination of when and what constituted a
relocation of the chief executive offices of a corporationO is a conclusion of law or, at
least, a mixed question of law and fact." Mellon Bank, 945 F.2d at 641-42 (citation
omitted). Similarly, the bankruptcy court's determinations of the direct or derivative
nature of appellants' asserted claims were at least mixed questions of law and fact,
justifying the exercise of plenary review. The only factual evidence on which the
bankruptcy court based its conclusions were the allegations found in appellants'
complaint in the Oklahoma litigation. (See 0.1. 1-1 at 12-13) This court found that the
bankruptcy court did not properly consider, or take into account. all of appellants'
allegations, such as allegations that Kivisto made fraudulent and negligent
misrepresentations to them personally or that Kivisto owed them a distinct fiduciary
duty, under Oklahoma law, due in part to the length and nature of Kivisto's relationship
with them. 3 (See 0.1. 20 at 12-14) In that regard, the court reversed and remanded for
further proceedings consistent with the memorandum order.
8. Therefore, the court is not persuaded that a motion for rehearing is necessary
to correct manifest errors of law or fact. Kivisto has failed to demonstrate any of the
grounds to warrant a rehearing of the court's November 15, 2012 memorandum order.
Kivisto merely reasserts arguments that were already made in his briefing on appeal
and that the court considered in its memorandum order. (See 0.1. 17 at 8-10, 12-15;

0.1. 20)

3

The court notes that its memorandum order does not preclude the possibility
that some of appellants' allegations against Kivisto do indeed constitute derivative
claims.

5

9. Conclusion. For the reasons discussed above, Kivisto's motion (0.1. 21) is
denied.

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