SPCP Group, LLC v. Eagle Rock Field Services, LP et al
Filing
20
MEMORANDUM OPINION AND ORDER re: 12 MOTION to Dismiss Pursuant to Rule 12(b)(6). filed by Eagle Rock Field Services, LP, Eagle Rock Operating, LP, Eagle Rock Pipeline GP, LLC. For the foregoing reasons, Defendants' motion to dismiss is GRANTED and Plaintiff's Complaint is dismissed. The Clerk of Court is instructed to enter judgment and terminate this case. (Signed by Judge Paul A. Crotty on 1/30/2013) (djc)
U.S.D.C. S.D.N.Y.
DOCUMENT
ELECTRONICALLY FILED
DOC #: _________________
DATE FILED: January 30, 2013
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
SPCP GROUP, LLC,
Plaintiff,
v.
EAGLE ROCK FIELD SERVICES, LP,
EAGLE ROCK OPERATING, LP, and
EAGLE ROCK PIPELINE GP, LLC,
Defendants.
12 Civ. 3610 (PAC)
MEMORANDUM OPINION
AND ORDER
HONORABLE PAUL A. CROTTY, United States District Judge:
This litigation is a dispute between sophisticated parties arising out of the sale of claims
in a corporate bankruptcy proceeding. Plaintiff SPCP Group, LLC (“Plaintiff” or “SPCP”) paid
approximately $3 million to Defendants Eagle Rock Field Services, LP (“ERFS”) and Eagle
Rock Operating, LP (“EROP”) (collectively, with their general partner Eagle Rock Pipeline GP,
LLC (“ERPG”), “Eagle Rock” or “Defendants”) for the rights to claims worth around $3.9
million. When these claims were ultimately reduced in the bankruptcy proceeding and Eagle
Rock refused SPCP’s demand to cover the shortfall, SPCP sued, asserting breach of the contracts
assigning the claims. At the core of this dispute is the meaning and scope of a carve-out
provision contained in the assignment contracts (the “Assignments”). On the basis of this
provision, Eagle Rock moves to dismiss SPCP’s complaint (the “Complaint,” ECF No. 1).
For the reasons stated below, Eagle Rock’s motion to dismiss is GRANTED.
BACKGROUND
A.
Facts1
1.
1
SemCrude’s Bankruptcy
The following facts are drawn from the allegations in the Complaint and are assumed to be true for the
purposes of the motion to dismiss. See McCall v. Chesapeake Energy Corp., 817 F. Supp. 2d 307, 310
(S.D.N.Y. 2011).
ERFS and EROP sell oil and gas products, including condensate. (Compl. ¶ 10.) On
July 22, 2008, SemCrude, a company to which Eagle Rock sold condensate, filed for bankruptcy
protection pursuant to Chapter 11 of the Bankruptcy Code, 11 U.S.C. § 101, et seq. (Id. ¶¶ 10–
13.) On January 28, 2009, ERFS and EROP filed proofs of claim for approximately $3.4 million
and $640,000 respectively, against SemCrude pursuant to Section 503(b)(9) of the Bankruptcy
Code, under which a creditor may file an administrative expense claim for the value of goods
delivered to a debtor in the twenty days prior to the filing of a Chapter 11 petition. (Id. ¶¶ 13–
14.) These claims are known as “twenty-day claims” and are given priority in the bankruptcy
process over general unsecured claims. (Id.) On July 17, 2009, SemCrude filed a Notice of
Filing of 503(b)(9) Notices, which identified ERFS and EROP’s claims. (Id. ¶ 15; see In re
SemCrude, L.P. et al., No. 08-11525 (BLS) (Bankr. D. Del.), ECF No. 4660, Ex. 3 at 9.)
The same day, the Delaware Bankruptcy Court overseeing SemCrude’s bankruptcy case
entered an order establishing the procedures for resolution of contested issues of law for all of
the twenty-day claims filed pursuant to 11 U.S.C. § 503(b)(9). (Compl. ¶ 17; see In re
SemCrude, L.P. et al., No. 08-11525, ECF No. 4645.) Pursuant to these procedures, on August
6, 2009, Bank of America (“BofA”), acting as administrative agent, filed its global objections to
the allowance of all the twenty-day claims identified on SemCrude’s 503(b)(9) notice, a blanket
objection to all of the twenty-day claims on the basis that each creditor be required to prove its
respective claim through individualized facts after the Bankruptcy Court determined the
threshold issues of law (the “8/6/09 Global Objections”). (Compl. ¶ 18; see In re SemCrude,
L.P. et al., No. 08-11525, ECF No. 5052.)
2
2.
The Assignments
On August 7, 2009, ERFS assigned its twenty-day claim for the amount of $3,298,892.08
to SPCP. (Compl. ¶ 19.) On August 11, 2009, EROP assigned its twenty-day claim for the
amount of $616,146.75 to Longacre Opportunity Fund, L.P. (“Longacre”), which subsequently
assigned the claim to SPCP, incorporating all of the terms set forth in the EROP-Longacre
assignment. (Id. ¶¶ 20–21.) Collectively, the Assignments constitute the contracts at issue in
this case. (See Compl. Exs. A–C.)
The Assignments each contained a clause wherein the “Seller . . . represents and warrants
that: (a) the Claim is a valid, liquidated and undisputed and non-contingent administrative claim
as defined in section 503(b)(9)” for “at least the amount of” $3,298,892.08 and $616,146.75,
respectively. (Compl. ¶¶ 22, 24; id. Ex. A § 4(a); id. Ex. B § 4(a); see id. Ex. C. § 2.) The Seller
representations and warranties continued, and provided that:
As such, . . . (n) except for the Objection filed by the Official Committee of
Unsecured Creditors to Allowance of All Scheduled and Filed Claims Pursuant to
Section 503(b)(9) of the Bankruptcy Code and Granting Related Relief [Docket
No. 2266] and the Objection to the Twenty Day Claims on Schedule E of Each of
the Debtor’s Schedules of Assets and Liabilities [Docket No. 2246] (collectively
and with any supplements or amendments the “Global 503(b)(9) Objections to
20 Day Claims”), no objection to the Claim has been filed or threatened[.] (Id. ¶
26; id. Ex. A § 4(n); id. Ex. B § 4(n) (emphasis added).)
In addition, the Assignments each contained a clause providing that:
In the event (a) a motion, complaint, application, plan of reorganization, or other
pleading (excluding the Global 503(b)(9) Objections to 20 Day Claims and any
Action with respect to the Disputed Administrative Claim) (an “Action”) is filed
in the Case seeking to reduce, offset, disallow, or subordinate under section 510
of the Bankruptcy Code, all or part of the Minimum Claim Amount or seeking to
treat the Claim less favorably than other administrative expense claims as defined
in section 503(b)(9) of the Code, including in the timing of payments or
distributions; . . . then “(a)” . . . shall be considered an “Impairment.” (Id. ¶ 25;
id. Ex. A § 7; id. Ex. B § 7 (emphasis added).)
3
In the event of an Impairment, the same clause of each Assignment provided that the
“Seller, at Buyer’s option and only upon Buyer’s demand, shall repurchase, within five (5)
business days of Buyer’s demand, only that portion of the Claim that is subject to the proposed
reduction, disallowance, setoff, or subordination,” together with other costs as set out in the
Assignment. (Id. ¶ 27; id. Ex. A § 7; id. Ex. B § 7.) Moreover, the Assignments stated that such
“demand by Buyer that Seller repurchase an Impaired Claim shall not be deemed an election of
remedies or any limitation on any other rights that Buyer may have hereunder or under
applicable law.” (Id. ¶ 28; id. Ex. A § 7; id. Ex. B § 7.) Furthermore, the Assignments
provided that “Seller agrees to indemnify Buyer from all losses, damages and liabilities, . . .
which result from Seller’s breach of any representation, warranty or covenant set forth herein, or
any Impairment of the Claim.” (Id. ¶ 29; id. Ex. A § 9; id. Ex. B § 9.)
3.
The Claimed Impairment
On October 14, 2009, after receiving supporting and opposition papers from BofA and
the claimholders, respectively, relating to the 8/6/09 Global Objections, the Bankruptcy Court
entered an order holding that the 11 U.S.C. § 503(b)(9) claimholders, including ERFS and
EROP, had established prima facie validity of their twenty-day claims, and providing BofA 120
days in which to file “individualized objections” to the pending twenty-day claims. (Id. ¶¶ 30–
31; see In re SemCrude, L.P. et al., No. 08-11525, ECF No. 6042.) BofA filed its “First
Substantive Objection to Other Twenty-Claims Against the Debtors” on February 11, 2010 (the
“2/11/10 Objections”), including objections to the claims of ERFS and EROP on the grounds
that SemCrude did not receive the condensate on which their claims were based. (Compl. ¶¶ 32–
33; see In re SemCrude, L.P. et al., No. 08-11525, ECF No. 7279-2 at 2.) SPCP asserts that the
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objections against the claims of ERFS and EROP contained within the 2/11/10 Objections
constitute an Impairment pursuant to Section 7 of the Assignments. (Compl. ¶¶ 34, 35.)
Ultimately, in May and June 2011, BofA, SemCrude, and SPCP entered into a settlement
agreement whereby SPCP received a cash payment and a general unsecured claim for the
twenty-day claims of ERFS and EROP that were assigned to SPCP. (Id. ¶¶ 36–38.) After this
settlement, there remained a shortfall between the payment SPCP received and the amount of the
claims that SPCP had purchased from Eagle Rock. (Id. ¶ 39.) Pursuant to Section 7 of the
Assignments, SPCP made a demand on Eagle Rock for payment of the repurchase amount of
$180,429.36 plus interest, attorneys’ fees, and costs. (Id. ¶ 40.) Eagle Rock refused SPCP’s
demand and SPCP brought this action. (Id. ¶ 42.)
B.
Defendants’ Arguments
Eagle Rock argues that the 2/11/10 Objections were supplements or amendments to the
prior objections BofA filed in the Bankruptcy Court, and thus, pursuant to Section 4(n) of the
Assignments, are excluded from the definition of “Impairment” under Section 7 of the
Assignments. Specifically, Eagle Rock argues that the language of the Assignments establishes
none of the limitations on this carve-out provision that SPCP proposes, and that the 2/11/10
Objections were merely an additional filing in an ongoing objections process in the Bankruptcy
Court proceedings, which the Bankruptcy Court and the parties had contemplated. With regard
to the Bankruptcy Court proceedings, Eagle Rock argues that the process of filing and objecting
to the twenty-day claims (including the 2/11/10 Global Objections) proceeded in an orderly
fashion established by the Bankruptcy Court and understood by the parties:
On September 15, 2008, the Bankruptcy Court issued an “Order Establishing
Procedures for the Resolution of Administrative Claims Asserted Pursuant to
Section 503(b)(9) of the Bankruptcy Code and Regarding Payments for PostPetition Purchases” requiring SemCrude to list its estimated twenty-day claim
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liabilities and providing thirty days for objections. (In re SemCrude, L.P. et al.,
No. 08-11525, ECF No. 1376.)
On October 20, 2008, SemCrude filed its list on Schedule E, identifying Eagle
Rock’s twenty-day claims. (In re SemCrude, L.P. et al., No. 08-11525, ECF No.
1805.)
On November 19, 2008, BofA filed objections to all of the twenty-day claims
listed on SemCrude’s Schedule E (the “11/19/2008 Global Objections”), arguing
that “each Twenty Day Claim must be resolved through the individualized claims
allowance process contemplated by the” September 15, 2008 order, and that “to
qualify for a section 503(b)(9) administrative expense, the goods must have been
. . . ‘received’ by a debtor within twenty days of the commencement of this case.”
(In re SemCrude, L.P. et al., No. 08-11525, ECF No. 2246 ¶¶ 6, 13.)
On July 17, 2009, the Bankruptcy Court entered an “Order Establishing
Procedures for the Resolution of Contested Issues of Law Related to the Twenty
Day Claims Under Section 503(b)(9),” which defined the term “Global 503(b)(9)
Objections to 20 Day Claims” to include the 11/19/2008 Global Objections filed
by BofA (and the Unsecured Creditors Committee (UCC)) “collectively and with
any supplements” despite the fact that neither BofA nor the UCC had yet filed any
supplements to the 11/19/2008 Global Objections, and which ordered BofA to file
a memorandum in support of the 11/19/2008 Global Objections. (In re
SemCrude, L.P. et al., No. 08-11525, ECF No. 4645 at 1–2.)
BofA then filed the 8/6/2009 Global Objections, which argued that “[i]individual
objections to each Twenty Day Claim should take place in the claims resolution
process . . . but in all events only after resolution of the [i]ssues of [l]aw,” and
noted that “the [Bankruptcy] Court has established a protocol to permit parties in
interest to brief and argue issues of law . . . [and i]t is contemplated . . . that factbased objections to particular Twenty Day Claims be deferred until after the Court
has ruled on the legal requirements for valid” Section 503(b)(9) claims. (In re
SemCrude, L.P. et al., No. 08-11525, ECF No. 5052 ¶¶ 10, 15.)
On August 7, 2009, BofA filed a memorandum of law in support of the
11/19/2008 Global Objections and the 8/6/2009 Global Objections, arguing that
the goods at issue needed to be “received” within twenty days of the bankruptcy
petition, and that “each Claimant is required to establish that either the applicable
Debtor or its bailee took actual, physical possession” of the goods subject to each
twenty-day claim. (In re SemCrude, L.P. et al., No. 08-11525, ECF No. 5105 at
9.)
On October 7, 2009, the Bankruptcy Court issued a memorandum ruling that the
twenty-day claimholders, including Eagle Rock, had met their prima facie burden
of proof of validity, and provided BofA “an opportunity to supplement is pending
objections . . . to the Twenty-Day Claims to raise ‘fact-specific’ objections.” In re
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SemCrude, 416 B.R. 399, 401 (Bankr. D. Del. 2009). In an Order dated October
14, 2009, the Bankruptcy Court adopted the October 7, 2009 rulings and set the
schedule for such briefing. (In re SemCrude, L.P. et al., No. 08-11525, ECF No.
6042.)
Pursuant to the Bankruptcy Court’s October 2009 rulings, BofA filed the 2/11/10
Objections, asserting fact-specific objections to Eagle Rock’s 503(b)(9) claims
that the goods were not received by SemCrude, and incorporating the arguments it
made in its August 7, 2009 memorandum of law. (In re SemCrude, L.P. et al.,
No. 08-11525, ECF Nos. 7277, 7279-2.)
Read in light of this procedural history, Eagle Rock argues that the phrase “any
supplements or amendments” in the Assignments’ definition of “Global 503(b)(9) Objections to
Twenty Day Claims” unambiguously anticipates and includes the 2/11/10 Objections. As such,
Eagle Rock argues that SPCP’s causes of action are precluded by the Assignments’ exclusion.
C.
Plaintiff’s Argument
SPCP asserts that the Bankruptcy Court’s October 2009 orders definitely resolved
BofA’s prior objections, and that the 2/11/10 Objections were entirely new, fact-specific
objections that were not supplements or amendments to the prior objections, and are thus not
excluded from the definition of what may constitute an “Impairment” under Section 7 of the
Assignments. In addition, SPCP argues that even if the 2/11/10 Objections are covered by the
exclusion of claims relating to “Impairments,” its indemnification and breach of representations
and warranties claims survive as independent claims, free of the Assignments’ exclusion.
ANALYSIS
I.
LEGAL STANDARDS
A.
Federal Rule of Civil Procedure 12(b)(6)
“To survive a motion to dismiss, a complaint must contain sufficient factual matter,
accepted as true, to ‘state a claim to relief that is plausible on its face.’” Ashcroft v. Iqbal, 556
U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). “A claim
7
has facial plausibility when the plaintiff pleads factual content that allows the court to draw the
reasonable inference that the defendant is liable for the misconduct alleged.” Id.
In considering a motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6),
the Court must accept a complaint’s well-pleaded factual allegations as true and draw all
reasonable inferences in the plaintiff’s favor. See Chambers v. Time Warner, Inc., 282 F.3d 147,
152 (2d Cir. 2002). The Court, however, need not accept as true “legal conclusions,
deductions[,] or opinions couched as factual allegations.” In re NYSE Specialists Sec. Litig.,
503 F.3d 89, 95 (2d Cir. 2007) (quotations omitted). Similarly, “[t]hreadbare recitals of the
elements of a cause of action, supported by mere conclusory statements, do not suffice.” Iqbal,
556 U.S. at 678. In addition, “[t]he [C]ourt need not accept as true an allegation that is
contradicted by documents on which the complaint relies.” Williams v. Citibank, N.A., 565 F.
Supp. 2d 523, 527 (S.D.N.Y. 2008) (citations omitted).
In deciding a 12(b)(6) motion, the Court may “properly consider ‘matters of which
judicial notice may be taken, or documents either in plaintiff[’s] possession or of which
plaintiff[] had knowledge and relied on in bringing suit.’” Halebian v. Berv, 644 F.3d 122, 130
n.7 (2d Cir. 2011) (quoting Chambers, 282 F.3d at 153). In particular, “[i]t is well established
that a district court may rely on matters of public record in deciding a motion to dismiss under
Rule 12(b)(6).” Pani v. Empire Blue Cross Blue Shield, 152 F.3d 67, 75 (2d Cir. 1998).
B.
New York Contract Law
Each Assignment at issue provides that: “This Assignment shall be governed by and
construed in accordance with the law of the State of New York, without giving effect to any
choice of law principles thereof.” (Compl. Ex. A § 11, id. Ex. B § 11, id. Ex. C. §13.)
8
“Under New York law, a contract ‘that is clear, complete, and subject to only one
reasonable interpretation must be enforced according to the plain meaning of the language
chosen by the contracting parties.’” Landmark Ventures, Inc. v. Wave Sys. Corp., No. 11 Civ.
8440 (PAC), 2012 WL 3822624, at *3 (S.D.N.Y. Sept. 4, 2012) (quoting Brad H. v. City of New
York, 951 N.E.2d 743, 746 (N.Y. 2011)). The threshold question of whether a contract is
ambiguous is a question of law for the Court. See Diesel Props S.r.L. v. Greystone Business
Credit II LLC, 631 F.3d 42, 51 (2d Cir. 2011) (applying New York law). Likewise, construction
of an unambiguous contract is a matter of law, which may be determined by the Court on a
motion to dismiss. See Beal Sav. Bank v. Sommer, 865 N.E.2d 1210, 1213 (N.Y. 2007).
“A contract is ambiguous if the provisions in controversy are reasonably or fairly
susceptible of different interpretations or may have two or more different meanings.” Banco
Espirito Santa, S.A. v. Concessionária do Rodoanel Oeste S.A., 951 N.Y.S.2d 19, 24 (1st Dep’t
2012) (quotations omitted); see also Eternity Global Master Fund Ltd. v. Morgan Guar. Trust Co.
of New York, 375 F.3d 168, 178 (2d Cir. 2004) (“Ambiguity exists where a contract term could
suggest more than one meaning when viewed objectively by a reasonably intelligent person who
has examined the context of the entire integrated agreement and who is cognizant of the customs,
practices, usages and terminology as generally understood in the particular trade or business.”
(internal quotation marks omitted)). “Ambiguity is determined by looking within the four
corners of the document, not to outside sources.” Lockheed Martin Corp. v. Retail Holdings,
N.V., 639 F.3d 63, 69 (2d Cir. 2011) (quotations omitted). A contract is not ambiguous merely
because the parties to a litigation disagree about its interpretation. See Coleman Co. Inc v.
Hlebanja, No. 96 Civ. 1288 (MBM), 1997 WL 13189, at *4 (S.D.N.Y. Jan. 15, 1997); Slattery
Skanska Inc. v. Am. Home Assurance Co., 885 N.Y.S.2d 264, 274 (1st Dep’t 2009). In addition,
9
“extrinsic and parol evidence is not admissible to create an ambiguity in a written agreement
which is complete and clear and unambiguous upon its face.” R/S Assoc. v. New York Job Dev.
Auth., 771 N.E.2d 240, 242 (N.Y. 2002) (quotations omitted).
The Court must construe a contract “so as to give full meaning and effect to the material
provisions,” and the Court’s “reading of the contract should not render any portion meaningless.”
Beal Sav. Bank, 865 N.E.2d at 1213 (internal citations omitted). The Court must avoid
interpreting a contract in a manner that would be “absurd, commercially unreasonable, or
contrary to the reasonable expectations of the parties.” Landmark Ventures, 2012 WL 3822624,
at *3 (quoting In re Lipper Holdings, LLC, 766 N.Y.S.2d 561, 561 (1st Dep’t 2003)).
Where a contract is ambiguous, dismissal on a 12(b)(6) motion is inappropriate. See
Bayerische Landesbank, New York Branch v. Aladdin Capital Mgmt. LLC, 692 F.3d 42, 56 (2d
Cir. 2012); Eternity Global Master Fund, 375 F.3d at 178.
II.
THE ASSIGNMENTS ARE UNAMBIGUOUS
A.
The Language of the Assignments
Eagle Rock argues that the term “any supplements or amendments” in the definition of
“Global 503(b)(9) Objections to 20 Day Claims” in the Assignments is unambiguous as a matter
of law and should be construed to include the 2/11/10 Objections that SPCP contends create an
Impairment on its claims. Under Eagle Rock’s reading, “any” means “all” or “every”
supplement without temporal limitation, and “supplement” means an addition or something that
completes. (Mem. of Law in Supp. at 14–15, ECF No. 14 (citing, inter alia, Zion v. Kurtz, 405
N.E.2d 681, 687 (N.Y. 1980) (“As we have held . . . the word ‘any’ means ‘all’ or ‘every’ and
imports no limitation.” (citations omitted)).) Eagle Rock argues this interpretation is in line with
the clear language of the Assignments and is supported by other language in the surrounding
10
provisions, which reference potential future objections. (Id. at 15–16.) As an example, Eagle
Rock notes that Section 4(n) provides that “no objection to the Claim has been filed or
threatened,” indicating that the parties intended the carve out to exclude future objections.
Similarly, Eagle Rock notes that Section 4(o) provides that “the Claim is not subject to any
defense, claim or right of setoff, reduction, impairment, avoidance, disallowance, subordination
or preference action . . . that have been or may be asserted.” Eagle Rock states that if a more
specific or temporal limitation was intended by this language, the parties would have included
language to this effect. (Id.)
SPCP contends that the phrase “any supplements or amendments” only covers objections
that were filed as of the date of the Assignments, or, at most, after the Assignments were
executed, but only if the subsequent objections did not add any new content or change the
11/19/2008 Global Objections or 8/6/2009 Global Objections. (Opp’n at 17–23, ECF No. 17.)
SPCP thus argues that the Assignments are ambiguous and dismissal unwarranted at this stage.
SPCP’s interpretation strains the language in the Assignments beyond its reasonable and
ordinary meaning. See Aetna Cas. & Sur. Co. v. Aniero Concrete Co., Inc., 404 F.3d 566, 598
(2d Cir. 2005); Franco Apparel Grp, Inc. v. Nat’l Liability & Fire Ins. Co., No. 10 Civ. 8205
(RJS), 2011 WL 2565287, at *3 (S.D.N.Y. June 28, 1011). While Eagle Rock’s interpretation is
rooted in the text of the Assignments, traditional common law and lay definitions, and the
context of surrounding provisions, SPCP’s limitation of “any supplements or amendments” to
those objections filed by the date of the Assignments—not to mention its position that
subsequent objections could be included, but only if they did not alter the 11/19/2008 Global
Objections or 8/6/2009 Global Objections—finds no support in the language of the Assignments.
Contract language is considered ambiguous if it is susceptible to more than one reading, but
11
SPCP’s mere say-so cannot create an ambiguity. Considering just the language of the
Assignments, the Court finds the plain meaning of “any supplements or amendments” in the
definition of “Global 503(b)(9) Objections to 20 Day Claims” to be unambiguous and not fairly
susceptible to SPCP’s interpretation.
B.
Bankruptcy Court Materials
Both parties also rely on materials filed and orders entered in the Bankruptcy Court
proceedings in an effort to provide context to the Assignments and establish whether the 2/11/10
Objections fall within the scope of the carve out for “Global 503(b)(9) Objections to 20 Day
Claims.”
“Courts routinely take judicial notice of documents filed in other courts . . . not for the
truth of the matters asserted in the other litigation, but rather to establish the fact of such
litigation and related filings.” Kramer v. Time Warner Inc., 937 F.2d 767, 774 (2d Cir. 1991).
“If the court takes judicial notice, it does so in order to determine what statements they
contained—but again not for the truth of the matters asserted.” Roth v. Jennings, 489 F.3d 499,
509 (2d Cir. 2007) (quotations and alterations omitted).
Eagle Rock argues that the orders and filings in the Bankruptcy Court show that the
2/11/10 Objections were the culmination of a process in which BofA objected to the twenty-day
claims in stages, and as such, should be considered a “supplement or amendment” to BofA’s
earlier objections. Specifically, Eagle Rock argues the 2/11/10 Objections—in which BofA
argued that SemCrude never received the condensate on which ERFS and EROP’s claims were
predicated (Compl. ¶ 33)—were merely another step in the Bankruptcy Court process that began
with the 11/19/2008 Global Objections that each twenty-day claim needed to be resolved through
an individualized process, including the argument that “to qualify for a section 503(b)(9)
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administrative expense, the goods must have been . . . ‘received’ by a debtor within twenty days
of the commencement of this case.” (In re SemCrude, L.P. et al., No. 08-11525, ECF No. 2246
¶¶ 6, 13.) Eagle Rock also notes that after SemCrude filed its list of 503(b)(9) claimants with the
Bankruptcy Court (noting ERFS and EROP’s claims), BofA filed the 8/6/09 Global Objections
and its memorandum of law in support (Compl. ¶ 18), in which BofA argued that “each Claimant
is required to establish that either the applicable Debtor or its bailee took actual, physical
possession of the oil or gas that is the subject of the Twenty Day Claim at issue.” (In re
SemCrude, L.P. et al., No. 08-11525, ECF No. 5105 at 9.) Eagle Rock finally highlights that the
2/11/10 Objections at the heart of this litigation were filed in response to the Bankruptcy Court’s
October 2009 orders, which held that ERFS and EROP met their prima facie burden, and gave
BofA “an opportunity to supplement its pending objections . . . to the Twenty-Day Claims to
raise ‘fact-specific’ objections to those Twenty-Day Claims.” In re SemCrude, 416 B.R. at 401.
(See Compl. ¶ 31.) BofA’s 2/11/10 Objections refer to and incorporate its earlier arguments in
the 11/19/2008 Global Objections and the 8/6/2009 Global Objections and memorandum of law
that the goods must have been “received” for the twenty-day claims to be valid, and provided
specific factual support for why ERFS and EROP’s claims did not qualify. (See In re SemCrude,
L.P. et al., No. 08-11525, ECF Nos. 7277 at 5–7, 7279.)
SPCP argues that the 2/11/10 Objections were not supplements or amendments to BofA’s
earlier objections because they constituted factual objections to individual claims and were not
blanket legal objections as asserted previously. (SPCP also relies on the rather flimsy argument
that because BofA denominated its 2/11/10 Objections its “First Substantive” objections, this
establishes that they do not constitute a supplement or amendment to the previously filed
objections.) However, SPCP’s position that the 2/11/10 Objections were “entirely new
13
objections” (Compl. ¶ 32) is contradicted by its argument that BofA’s two previous rounds of
objections were blanket legal objections designed “to preserve [BofA’s] right to challenge any
particular twenty-day claim until it decided to do so after conducting discovery.” (Opp’n at 20.)
SPCP’s concession that the prior objections were made in order to preserve later rights relating
to the same twenty-day claims belies SPCP’s assertion that the prior objections were not related
to the 2/11/10 Objections, and supports Eagle Rock’s position that they were merely the
culmination of the objection process set forth by the Bankruptcy Court and considered by the
parties when they entered into the Assignments. In addition, the fact that BofA, in the 2/11/10
Objections, explicitly referred to and incorporated the arguments made in the previous objections
further undermines SPCP’s argument that the objections are unrelated.
The materials filed in the Bankruptcy Court proceedings add further support to Eagle
Rock’s interpretation of the Assignment language. In light of these materials, and the plain
language of the Assignments, the Court finds that the Assignments are unambiguous and
construes the phrase “any supplements or amendments” in Section 4(n) in the definition of
Global 503(b)(9) Objections to 20 Day Claims to include the 2/11/10 Objections. Accordingly,
the 2/11/10 Objections cannot from the basis for an Impairment.
III.
THE SCOPE OF THE EXCLUSION
Having held that the Assignments are unambiguous and that the 2/11/10 Objections
cannot form the basis for an Impairment, the Court must address whether the language of Section
4(n) precludes each of SPCP’s causes of action here. Section 4 must be read in its entirety. The
general warranty language of Section 4(a) is expressly limited by the exception carved-out in
Section 4(n). If the Court is to “give full meaning and effect to the material provisions,” and
make sure that its “reading of the contract [does] not render any portion meaningless,” Beal Sav.
14
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