Tide Natural Gas Storage I, LP et al v. Falcon Gas Storage Company, Inc. et al
Filing
130
OPINION & ORDER re: 102 MOTION for Reconsideration re; 101 Memorandum & Opinion filed by Arcapita Bank B.S.C., Falcon Gas Storage Company, Inc., Arcapita, Inc. For the reasons stated above, Defendants' motion for reconsideration is DENIED. (Signed by Judge Kimba M. Wood on 5/4/2012) (lmb)
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
__________________________________________
TIDE NATURAL GAS STORAGE I, L.P. and
TIDE NATURAL GAS STORAGE II, L.P.,
Plaintiffs/Counterclaim
Defendants,
-against-
Opinion & Order
10 CV 5821
FALCON GAS STORAGE COMPANY, INC.;
Defendant/Counterclaim
and Crossclaim Plaintiff,
ARCAPITA BANK B.S.C.; and ARCAPITA,
INC.;
Defendants,
and HSBC BANK USA, NATIONAL
ASSOCIATION,
Defendant/Crossclaim
Defendant.
__________________________________________
KIMBA M. WOOD, U.S.D.J.:
Pursuant to Rule 60 of the Federal Rules of Civil Procedure and Local Rule 6.3,
Defendants Falcon Gas Storage Company, Inc. (“Falcon”), Arcapita Bank, B.S.C.(c) and
Arcapita, Inc. (“Arcapita”) (collectively, “Defendants”) move for reconsideration of the
portion of this Court’s September 28, 2011 Order that: (1) denied Defendants’ partial
summary judgment motion for a declaratory judgment ordering the escrowed funds to be
disbursed to Falcon; and (2) denied Defendants’ partial summary judgment dismissing
Plaintiffs Tide Natural Gas Storage I, L.P. and Tide Natural Gas Storage II, L.P.’s
(collectively, “Tide”) request for a permanent injunction restraining the disbursement of
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escrowed funds. Tide Natural Gas Storage I, L.P. v. Falcon Gas Storage Co., Inc. (the
“September 28, 2011 Order”), 10 CV 5821, 2011 WL 4526517 (S.D.N.Y. Sept. 28,
2011).
For the reasons stated below, the motion for reconsideration is denied.
BACKGROUND
I. The Underlying Dispute
On March 15, 2010, Tide and Falcon entered into a Purchase Agreement,
whereby Falcon agreed to sell its entire interest in Nortex Gas Storage Company, LLC
(“Nortex”) to Tide for $515 million. (Compl. ¶¶ 12-13.) Two days before the closing of
the deal, a group of minority shareholders filed lawsuits in Texas courts (collectively, the
“Hopper Litigation”), in an attempt to stop the transaction from closing. (Plaintiff’s
Response to Defendants’ Statement of Undisputed and Material Facts Pursuant to Rule
56.1 (“Pl.’s 56.1 Resp.”) ¶ 15.) The Hopper Litigation plaintiffs also filed notices of lis
pendens, in connection with their lawsuits. (Id. ¶ 18.)
Consequently, the parties agreed to place $70 million of the purchase price into an
escrow account (the “Escrow Account”) with HSBC Bank USA, National Association
(“HSBC”) as protection against any expenses or liability Tide might incur as a result of
the Hopper Litigation. (Id. ¶¶ 24, 36.) On April 1, 2010, the parties executed an Amended
Purchase Agreement in tandem with an Escrow Agreement: Section 3.7(a) of the
Amended Purchase Agreement governs the disbursement of the monies escrowed with
HSBC. Section 3.7(a) provides that Tide and Falcon “shall deliver to [HSBC] joint
instructions to disburse the balance of the Escrowed Amount” upon the occurrence of
either one of the following two conditions:
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(i)
a final non-appealable order of each court of competent
jurisdiction with respect to the Hopper Claim or
(ii)
(A) an agreed dismissal with prejudice of the Hopper Claim . . . ,
(B) a complete release by all of the Participants under the Hopper
Claim . . . , and
(C) the final non-appealable release or expungement of the Lis
Pendens . . . .
(Declaration of Jeremiah J. Anderson, dated Aug. 31, 2010, Ex. B, Amended Purchase
Agreement § 3.7(a).) On April 1, 2010, with the abovementioned agreements in place, the
Nortex transaction closed. (Pl.’s 56.1 Resp. ¶ 35.)
On July 27, 2010, Falcon and the Hopper Litigation plaintiffs reached a
settlement, pursuant to which the Hopper Litigation plaintiffs filed nonsuits in each of the
courts in which their actions were pending. (Id. ¶ 39.) Subsequently, the Court in
Eastland County entered an order expunging the notices of lis pendens. (Id. ¶¶ 40, 42.)
Tide filed the instant action against Falcon and Arcapita on August 2, 2010. (Dkt.
No. 1.)
II. Procedural History
Tide’s complaint contains four causes of action arising out of alleged
misstatements made by Defendants in connection with the Nortex sale. Tide alleges: (1)
fraudulent misrepresentation; (2) breach of warranty; (3) breach of contract; and (4)
violation of Section 10 and Rule 10b-5 of the Securities Exchange Act of 1934. (Compl.
¶¶ 10-11.) In addition, Tide seeks a permanent injunction preventing Falcon and HSBC
from disbursing any funds from the Escrow Account, except pursuant to Section 3.7 of
the Amended Purchase Agreement.
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Defendants answered Tide’s complaint, and Falcon filed a Counterclaim and
Crossclaim, seeking, inter alia, a declaratory judgment ordering the disbursement of the
funds in the Escrow Account.
Defendants Falcon and Arcapita, pursuant to Federal Rule of Procedure 12(c),
filed a motion for judgment on the pleadings to dismiss Claims I through IV of Tide’s
complaint. Defendants also moved for partial summary judgment on two claims: (1)
Falcon’s first cause of action of its Counterclaim and Crossclaim, requesting a judgment
declaring that HSBC must disburse the escrowed funds to Falcon; and (2) Tide’s request
for a permanent injunction restraining the disbursement of the escrow funds. In its
September 28, 2011 Order, the Court denied each of Defendants’ motions. Tide, 2011
WL 4526517, at *15.
DISCUSSION
I. Defendants’ Motion for Reconsideration
A. Legal Standard
Local Rule 6.3 provides that a party may submit a motion for reconsideration
“setting forth concisely the matters or controlling decisions which counsel believes the
court has overlooked.” Local R. 6.3. The “major grounds justifying reconsideration are an
intervening change of controlling law, the availability of new evidence, or the need to
correct a clear error or prevent manifest injustice.” United States v. Plugh, 648 F.3d 118,
123-24 (2d Cir. 2011) (quotation marks and citation omitted). Reconsideration may be
granted where the moving party can point to matters “that might reasonably be expected
to alter the conclusion reached by the court.” Shrader v. CSX Transp., Inc., 70 F.3d 255,
257 (2d Cir. 1995).
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A Court should not grant a motion for reconsideration in order to allow a party to
“advance new facts, issues or arguments not previously presented to the Court.” Williams
v. Smith, 02 CV 4558, 2009 WL 5103230 at *1 (S.D.N.Y. Dec. 23, 2009) (Cote, J.)
(quotation marks and citation omitted). Similarly, a “motion to reconsider should not be
granted where the moving party is solely attempting to relitigate an issue that already has
been decided.” Shrader, 70 F.3d at 257.
B. Discussion
The Defendants ask the Court to reconsider only the portion of its September 28,
2011 Order denying Defendants’ motion for partial summary judgment on: (1) Falcon
and Arcapita’s request for a declaratory judgment ordering the disbursement of the
escrowed funds; and (2) Tide’s request for a permanent injunction restraining the
escrowed funds. The Court considers each in turn.
Defendants argue that the Court has overlooked “the fact that the escrow was
created for a purpose entirely separate and unrelated to plaintiff’s fraud claims.”
(Memorandum of Law in Support of Defendants’ Motion for Reconsideration (“Defs.’
Mem.”) at 2.) However, the relatedness of the agreements was considered by this Court
in its September 28, 2011 Order. Tide, 2011 WL 4526517, at *13 (“Section 3 of the
Escrow Agreement, entitled ‘Distributions from the Escrow Account,’ states that the
Escrowed Amount ‘shall be . . . transferred only in accordance with Section 3.7 of the
[Amended Agreement].’”). Defendants seek to reargue the merits of this Court’s previous
decision, and present no controlling decisions or facts which the Court did not already
consider. Accordingly, the Court dismisses Defendants’ motion for reconsideration of
their request for a declaratory judgment.
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Even if Defendants had met the strict standard required for reconsideration, their
claim fails. The Amended Purchase Agreement and the Escrow Agreement are
interconnected. Each agreement was entered into in conjunction with the other, each
agreement references the other, and neither agreement can stand alone. It is true, as
Defendants point out, that the funds were placed in escrow as a response to the Hopper
Litigation. (Defs.’ Mem at 5.) Nevertheless, the conditions of the escrow release are
incorporated into the Purchase Agreement through the First Amendment to that
Agreement, entered into on April 1, 2010. The Escrow Agreement itself does not provide
instructions for the withdrawal and transfer of the escrowed funds, but refers to Section
3.7 of the Amended Purchase Agreement. Thus, the release of the escrowed funds is part
and parcel of the Amended Purchase Agreement. The agreements are interdependent—
neither would have been entered into without the other—and thus the distribution of the
funds in the Escrow Account is intertwined with Tide’s underlying fraud claims related to
the Amended Purchase Agreement.
Defendants’ contention that the parties had not contemplated an Escrow
Agreement at the time they entered into the original Purchase Agreement is not
persuasive, because the transaction itself was governed by the Amended Purchase
Agreement, not the original Purchase Agreement. Defendants clearly contemplated the
Escrow Agreement at the time they entered into the Amended Purchase Agreement
because the Amended Purchase Agreement governs the distribution of the escrowed
funds.
Defendants also argue that because Tide’s fraud claims arise out of breaches of
Sections 4.9 and 4.11 of the Amended Purchase Agreement, rather than Section 3.7,
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“Tide’s allegations of fraud have nothing to do with . . . the escrow.” (Defs.’ Mem. at 4.)
Tide, however, alleges fraud in the inducement of the entire Amended Purchase
Agreement. Because the terms of the Amended Purchase Agreement govern the
distribution of the escrowed funds, Tide’s remaining performance under Section 3.7 of
the Amended Purchase Agreement may be excused pending resolution of Tide’s claims
that the Amended Purchase Agreement was fraudulently induced.
Defendants also argue that “the escrow conditions have been met” and that
therefore “the escrow must be released.” (Defs. Mem. at 6.) In its September 28, 2011
Order, the Court also addressed this issue, finding that Tide had sufficiently alleged fraud
in the inducement of the Amended Purchase Agreement and recognizing the settled law
that a party may not compel performance of an agreement that was induced by fraud.
Tide, 2011 WL 4526517, at *14 (“Because Tide has come forward with evidence that
would allow a reasonable jury to find, by clear and convincing evidence, that each of the
elements of fraud has been satisfied, Falcon is not, at least at this juncture, entitled to the
declaratory relief it seeks.”).
Thus, even considering the request for a declaratory judgment on the merits, the
Court comes to the same conclusion, that it must be denied pending adjudication of
Tide’s claims that the whole Amended Purchase Agreement was fraudulently induced.
Defendants also ask this Court to reconsider its decision denying their motion for
summary judgment on Tide’s request for a permanent injunction restraining the escrowed
funds. The issue raised in Defendants’ motion was fully considered and decided by this
Court in its September 28, 2011 Order. Tide, 2011 WL 4526517, at *11 (“Unless and
until Tide moves for an injunction, Falcon’s and Arcapita’s motion for summary
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judgment is premature."). Tide's complaint has established viable claims under its first
four causes of action. If those claims are ultimately successful and Tide can establish
Defendants' liability, at that point Tide could request a permanent injunction. Chiste v.
Hotels. com L.P., 756 F. Supp. 2d 382, 407-08 (S.D.N.Y. 2010) (McMahon, J.).
Foreclosing that potential remedy at this preliminary stage would be premature.
Defendants have failed to identify any controlling decisions or data which would merit
reconsideration of this conclusion.
CONCLUSION
For the reasons stated above, Defendants' motion for reconsideration is DENIED.
SO ORDERED.
DATED:
New York, New York
May
2012
l~
m. t.JIh1:
KIMBA M. WOOD
United States District Judge
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