Lauter v. Citgo Petroleum Corporation

Filing 45

MEMORANDUM OPINION AND ORDER granting 14 MOTION to Dismiss Counts I and II and for Summary Judgment as to Count III; denying 37 MOTION for Request for Oral Argument Hearing; granting 38 MOTION to Supplement Motion for Leave to Fi le Supplemental Authority as to 27 Response in Opposition to Motion; and granting 41 MOTION for Leave to File SUPPLEMENTAL AUTHORITY IN SUPPORT OF PLAINTIFFS RESPONSE TO DEFENDANTS MOTION TO DISMISS. (Signed by Judge Sim Lake) Parties notified.(gclair, 4)

United States District Court
Southern District of Texas

ENTERED

IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF TEXAS
HOUSTON DIV ISION

February 08, 2018
David J. Bradley, Clerk

RICHARD S . LAUTER, not
individually but solely as

Creditor Trustee of the GasMart USA , Inc . Creditor Trust,
Plaintiffr
CIVIL ACTION NO . H-17-2028
CITGO PETROLEUM CORPORATION ,

Defendant .

MRMOQAHDUM OPINION AHn ORDER

On June 30, 2017, plaintiff, Richard S . Lauter , as Creditor
Trustee of the Gas-Mart USA , Inc . Creditor Trust, filed a Complaint

(
Docket

Entry

against

defendant,

Citgo

Corporation (
ncitgo'), asserting claims for breach
'
(
Count

Petroleum
contract

violation of the automatic stay pursuant

5 362 (
Count 11), and avoidance

preferential transfer pursuant

11 U.
S.C. 5 547 (
Count 111). Pending before the court are Citgo

Summary Judgment as to Counts I and 11 and for Summ ary Judgment as

Count III (
Docket Entry No.

plaintiff's Request

Argument (
Docket Entry

plaintiff's Motion
Support

Defendant's

Motion

plaintiff's Motion

Dismiss
L eav e

Support of Plaintiff's Response

Leave

Plaintiff's Response to

(
Docket

Entry

No.

and

Supplemental Authority
Defendant's M otion

Dism iss

(
Docket Entry
motion

reasons stated below, Citgo's

dism iss Counts

summary judgment
motion

and 11 will be granted, Citgo's motion

Count

will be granted, plaintiff's

oral argument will be denied , plaintiff's two motions

leave

supplemental authority will be granted , and

action will be dismissed .

Relevant Facts and Procedural Backcroundl

about September

2013, Gas-Mart USA ('
'Gas-Mart'
'

uDebtor') and Citgo entered into
'
(' (reement').2 Paragraph
'A y
'

Marketer Franchise Agreement

the Agreement governing nTerms

.

Payment' provided that in order to maintain a credit lim it Gas-Mart
'
could be required

furnish Citgo security agreements

other

collateral.3 Subsequently, Gas-Mart obtained a Surety Bond in the

amount of $1,500,000.00 from

l
The relevant facts are
No . 1, the Statem ent of
Corporation's Memorandum in
the Alternative for Summary

Fidelity and Deposit Company of

taken from the Complaint, Docket Entry
Material Facts in Citgo Petroleum
Support of Its Motion to Dism iss or in
Judgment as to Counts I and 11 and for

Summary Judgment as to Count III (
ucitgo's Memorandum'), Docket
'
Entry No . 15, pp . 7-14, %% 1-41, and the Response to Statement of
Material Facts and Statement of Additional Material Facts in
Plaintiff's Response to Defendant's Motion to Dism iss and

Memorandum of Authorities ('
'plaintiff's Response/
/), Docket Entry
No . 27, pp . 10-14, %% 1-50.
zcomplaint, Docket Entry No . 1, p . 4 :% 15-19; A greement,
Exhibit 1 to Citgo's Memorandum, Docket Entry No . 15-3 .

3 d.
1

% 5 ( ).
b

Maryland (
uSurety' ).4
'
payment

about June 9, 2015, Gas-Mart made

$68,185.69 to Citgo on certain outstanding invoicesx

On July 2, 2015 (
the npetition Date/),
'

Gas-Mart debtor

corporations each filed separate voluntary petitions with
Bankruptcy Court seeking relief under Chapter

of the Bankruptcy
Western District

Missouri (
Case No. 15-41915-abf11).

On October

2016, Fuel

Service Mart, Inc . filed a separate voluntary petition for relief
under Chapter

July

By orders of the Bankruptcy Court entered on

2015, and on November 25, 2015, the Ban kruptcy cases were

jointly administered.
6
On the Petition Date Citgo held $221,190.12 in Gas-Mart credit
card receipts pursuant to the terms of the Agreement, and Gas-Mart

moved

authorization

July 28, 2015,

Citgo as

critical vendorx

Bankruptcy Court entered an order granting

motion .8

4see Surety Bond included in Exhibit
Docket Entry No . 15-5, pp . 14-22 .

Citgo's Memorandum ,

s
complaint , Docket Entry No . 1, p . 13 % 66 . See also Citgo's
Memorandum , Docket Entry No . 15, p . 14 % 39; Plaintiff's Response ,
Docket Entry No. 27, p . 12 % 39.
6
complaint , Docket Entry No . 1, p . 3 %% 9-10, and 10 % 20 .
See also Citgo's Memorandum , Docket Entry No . 15, p . 7 % 47
Plaintiff's Response, Docket Entry No . 27, p . 10 % 4.
X
citgo 's Memorandum , Docket Entry No .
15, p .
Plaintiff's Response, Docket Entry No . 27, p . 10 % 5 .

7 % 5;
See also

Complaint, Docket Entry No. 1, p. 5 % 23 (
alleging that Citgo held
approximately $228,000.00 in credit card receipts).
8
critical Vendor Motion and

Order, Exhib it

2 to Citgo's

(
continued.- )

or about August 6, 2015, Gas-Mart, the Surety, and Citgo
entered

Vendor

Agreement

commercial relationshipx

Pursuant

Surety agreed

make

Citgo contends

payment

governing

their

continued

Vendor Agreement
Citgo under the Surety Bond.

the Surety agreed

to the Surety Bond, and in fact did make a paym ent pursuant to the
bond .l
o

Plaintiff acknowledges that the Surety agreed

paym ent to citgo pursuant to the surety Bond, but says

make
does not

know the specific amounts that the Surety agreed to pay

fact, did pay pursuant to the Surety Bondx l

on June

2016, the

Surety filed a Proof

bankruptcy proceeding for $558,097.49.1
2
January and February of 2016, Gas-Mart sold substantially
a sset s . 1
3

8t.- continued)
Memorandum , Docket Entry No . 15-4. See also Citgo 's Memorandum ,
Docket Entry No . l5, p . 7 % 6; Plaintiff's Response, Docket Entry
No . 27, p . 10 % 6 .
9
Citgo ,s Memorandum , Docket ' Entry No . 15, p . 8 % 7, and
Plaintiff's Response, Docket Entry No . 27, p . 10 % 7. Vendor
Agreement , Exhibit 3 to Citgo's Memorandum , Docket Entry No . 15-5 .

l
ocitgo's Memorandum , Docket Entry No .

%% 8,

H plaintiff's Response, Docket Entry No . 27, p . 10 %% 8 and 1O .
l
zExhibit 4

Citgo's Memorandum , Docket Entry No . 15-6.

Ocitgo's Memorandum, Docket Entry No. 15, p . 8 % 11 (
citing
Disclosure Statement, 5 V .A .S, Exhibit 7 to Citgo's Memorandum ,
Docket Entry No. 15-9, p. 21 of 117)7 Plaintiff's Response, Docket
Entry No . 27, p . 10 % 11.

On March

Motion

2016, Gas-Mart filed Debtors' First Omnibus

Reject Executory Contracts (
uRejection Motion/ which
/lr

included a request

reject the Agreement

Citgox 4

April

2016, the Bankruptcy Court entered its Order Granting Debtors'

First Omnibus Motion

Reject Executory Contracts (
nRejection

Order/
/), which provided that Gas-Mart's executory contracts were

rejected as
On July

March

2016.X
b

2016, the Creditors' Comm ittee filed its Initial

Plan and Disclosure Statementx 6

september

2016, the

Bankruptcy Court confirmed the First Am ended Plan of Liquidation

'P1an'), which called
A
'
appointment of

creation

creditor trustee, and execution

trust agreement .l Pursuant to Article
7

a creditor

the Gas-Mart USA ,

Mcitgo's Memorandum r Docket Entry No . 15, p . 8 % 12;
Plaintiffrs Response , Docket Entry No . 27 , p . 10 % 12 . See also

Rejection Motion, Exhibit 5 to Citgo's Memorandum, Docket Entry
No . 15-7 .

l citgo's Memorandum , Docket Entry No . 15, p . 9 % 14;
s
Plaintiff's Response, Docket Entry No . 27, p . 11 % 14 . See also

Rejection Order, Exhibit 6 to Citgo's Memorandum, Docket Entry
No. 15-8, p. 2 % 13 ('
'The Rejected Contracts are hereby rejected as
of March 1O, 2016.').
/
l citgo's Meporandum , Docket Entry No . 15, p . 9 % 17;
f
Plaintiff's Response, Docket Entry No . 27, p . 11 % 17 . See also
Disclosure Statement with Respect to First Amended Plan of
Liquidation Dated July 21, 2016, Exhibit 7 to Citgo's Memorandum ,
Docket Entry No. 15-9.
l citgo 's Memorandum , Docket Entry No . 15, p . 9 % 18, and
7
Plaintiff's Response, Docket Entry No. 27 , p . 11 % 18 . See also
Exhibit 8 to Citgo 's Memorandum , Docket Entry No . 15-10r pp . 1-25

(
continued- .)

Creditor Trust A greement, plaintiff was appointed as Trustee of the

creditor Trustx '
or about March 11, 2016, Citgo brought suit in the Judicial
District Court of Harris County, Texas, against

Surety

recover certain amounts due from Gas-Mart, and on April

2016,

the Surety removed the lawsuit to the United States District Court

for the Southern District of Texas, Case No. 4:16-cv-00952 (
usurety
Litigation/ g In the Surety Litigation, Citgo alleged that after
/lx
entering

into

the

Vendor

Agreement ,

Gas-Mart

agreements with Citgo by inter alia failing
Purchases, store remodeling, and branding costs .20

2016,

court granted

breached
pay

its
fuel

November

Surety's motion for summary judgment

and denied Citgo's cross-motion for summary judgment, upon finding
that store remodeling and branding costs were

included in the

U t.- continued)
of 97 (
Order: (
A) Confirming First Amended Plan of Liquidation
Dated July 21, 2016 and ( Approving Disclosure Statement with
B)
Respect to First Amended Plan of Liquidation Dated July 21, 2016

Pursuant to 11 U.S.C. 5 1125)7 pp . 26-59 of 97 (
Exhibit A, Modified
First Amended Plan of Liquidation Dated July 21, 2016), and pp . 6097 of 97 (
Exhibit B, Gas-Mart USA, Inc. Creditor Trust Agreement)
OCitgo's Memorandum, Docket Entry No . 15, p . 9 % 19;
Plaintiff's Response, Docket Entry No . 27, p . 11 % 19 . See also
Gas-Mart USA , Inc . Creditor Trust Agreement , Exhibit B to Exhibit
8 to Citgo's Memorandum , Docket Entry No. 15-10,
66 of 97.

lg
citgo's Memorandum , Docket Entry No . 15r p .
Plaintiff's Response, Docket Entry No . 27,
12 % 29.
M citgo's

Memorandum ,

Docket

Entry

No .

15, p .
Plaintiff's Response, Docket Entry No . 27, p . 12 % 30.

obligations covered by the Surety Bond, and that on April

(
after the filing of the Surety Litigation), the Surety paid Citgo
$35,367.31 for Gas-Mart's post-vendor Agreement failure to pay for
fue1.2
l
disposing

On April 6, 2017, the court entered
of

claims

Final Judgment

counterclaim s

the

Surety

Litigation .z
z

On June 30, 2017, plaintiff initiated this action by filing

Complaint (
Docket Entry No.
Count

breach

alleging three causes of action:

contract, Count

for violation
and Count

automatic stay pursuant

avoidance of preferential transfer pursuant

5

Each of plaintiff's claim s are premised on allegations that after
the Petition Date Citgo engaged in actions that caused Gas-Mart's
reorganization to fail .2
3

z citgo 's Mem orandum, Docket Entry No . 15, p .
l
% 31;
Plaintiff's Response, Docket Entry No. 27, p . 12 % 31. See also
Memorandum Opinion and Order, Exhibit 25 to Citgo's Memorandum ,

Docket Entry No. 15-27 (
Docket Entry No. 26 in Civil Action No. H16-0952).
2 citgo's Memorandum , Docket Entry No . 15, p . 13 % 332;
2
Plaintiff's Response, Docket Entry No. 27, p . 12 % 32 . See also
Final Judgment, Exhibit 10 to Citgo's Mem orandum , Docket Entry

No. 15-12 (
Docket Entry No. 31 in Civil Action No. H-16-0952).
Ocomplaint, Docket Entry No .

%% 48-49.

II . Motion to Dismiss Counts I and 11
Citgo argues that Count I for breach of contract and Count 11

for violation of the automatic stay

subject

dismissal

because plaintiff lacks standing to pursue these claims that were
not adequately preserved in Gas-Mart's confirmed plan as required
11 U .S .C .

by well-established

1 12 3 .2
4

Alternatively, Citgo argues that p laintiff's stay violation claim
barred by laches, and that plaintiff lacks standing
the breach

contract claim because

Agreement pursuant to 11

pursue

Gas-Mart rejected

5 365( and is thus deemed to have
g)

breached the Agreement as

the Petition Date thereby relieving

Citgo of its duty to perform, ( the Surety paid the Surety Bond
2)
securing Gas-Mart's performance thereby subrogating

the Surety

any breach of contract claim that Gas-Mart may have had against

Citgo, and

res judicata resulting from the Surety Litigation

between Citgo and the

Surety bars the plaintiff's breach

of

contract c1aim .2
5

24
citgo's Memorandum , Docket Entry No . 15, pp . 15-21 %% 44-57.
Citgo does not dispute that the avoidance of preferential transfer
c1aim asserted in Count III was adequately preserved . See id . at
20 n. 8 (
UCITGO notes that claims for preferences (
Count 111) are
identified and CITGO appears by name on a list of potential targets
for such claim s. CITGO does not assert that those claim s, to the
extent the Debtor held them , were not preserved . CITGO does not

admit any liability on such claims. This argument applies only to
Counts I and 11 for claims not preserved./).
/
25Id

22-29 %% 58-73 .

A.

Standard of Review
Citgo 's argum ent that plaintiff lacks standing to pursue the

claims asserted in Counts

and 11 raises issues that the Fifth

Circuit has characterized as jurisdictional. See Dvnastv Oil and
Gas, LLC v . Citizens Bank (In re United Operatina , LLC), 540 F .3d

2008)
requirement,

and

regardless whether

(
nstanding

obliged

jurisdictional
satisfied

ensure

parties address the matter.'); Sricer v.
'

Lacuna Madre Oil & Gas II, L .L .C . (In re Texas Wvom in? Drillinl,

Inc.),

F.3d

question of standing
adequacy

2011) (
characterizing the
assert post-confirmation claims based on

preservation

jurisdictional question)

language

plan

as

Although Citgo has moved for dismissal

under Rule l2 ( 6) for failure
b)(
may be granted , motions

therefore,

confirmed

state a claim for which relief

dismiss for lack of standing and,

lack jurisdiction are governed by Rule 12 (
b)

See Rossco Holdinas, Inc . v . Mcconnell, Civil Action No . 4:14-cv-

374-0, 2014 WL 11460917,
question

of

standing

Tex. July 23, 2014) (
nBecause the
implicates

jurisdiction, the court applies

court's

subject-matter

standards for a motion

dismiss pursuant to Rule 12 ( (
b) 1)./), aff'd 613 Fed . App'x 302
/

Cir. June

2015) (
per curiam ), cert. denied, 136

339

(
2015); Adler v. Walker ( re Gulf States Lona Term Acute Care of
In
Covinqton, L .L .C .I, Civil Action No . 11-1659, 2012 WL 710924,

(
E.D.

March

2012) (
analyzing motion

standing based on confirmed plan 's failure
post-confirmation

aff'd, 614

prosecution

dismiss

lack of

preserve claims for

jurisdictional challenge),

App'x 714

2015) (
per curiam ).

nLack of subject matter jurisdiction may be found in any one
of three instances:

the comp laint alone;

supplemented by undisputed

the comp laint

facts evidenced

record;

the complaint supplemented by undisputed facts plus the court's

resolution of disputed facts .' Ramminq v . United States, 281 F .3d
'

158,

(
5th Cir. 2001) (
per curiam), cert. denied sub nom . Cloud

v. United States, 122 S.

2665 (
2002). Rule l2 ( (1) challenges
b)
' facia l' att ac ks
'
'

and nfactual' attacks.
'

See Paterson v . Weinberaer, 644 F .2d 52 1r

1981). A facial attack consists
motion unaccompanied

a Rule 12 (
b)(1)

supporting evidence that challenges the

court's

Id . A factual

attack challenges the existence of subject matter jurisdiction
irrespective

pleadings, and matters outside the pleadings

such as testimony and affidavits may be considered .
Citgo's motion
motion
burden

accompanied

dism iss

lack

proof regarding

rests with the plaintiff.

jurisdictional grounds

Id .

Because

supporting evidence, Citgo's

standing

factual attack .

existence of jurisdiction always
Ramminq , 281 F.3d at 161 .

not on the merits. Id.

Dismissal on

B.

Analysis
Plan Documents Preserved the Breach of Contract Claim But
Not the Stav Violation Claim
parties do not dispute that the plan documents provided
estab lishment

creditor trust, appointment

plaintiff as trustee of the creditor trust authorized
causes of action, and transfer of
causes

action

pursue

the estate assets - including

the creditor trust upon confirmation of the

Plan . In dispute is whether the plan documents adequately reserved
the plaintiff's breach

contract and stay violation claim s.

Asserting that nFifth Circuit cases m ake clear, non-avoidance
claim s are properly preserved pursuant to
plan materials, at a minimum , identify
reserved ;

categories

1123 only when the
the nature of the claim s

potential

defendants,

and

the value of those claims E / f Citgo argues that the plan
,q/z

documents do

satisfy these requirementsx ?

A sserting that 'the proper
'

circuit

determ ined

which

determine the

Statement is
Circuit, the

apply

of the Eighth

confirmed

the

and

initially

was adequater' ' plaintiff argues that Harstad
'z

v. First American Bank, 39 F.3d 898 (
8th

2 Id . at 18
6

Plan

1994),

the

50 .

2 Id
7

at 18-20 %% 51-53 (
stay violation); 20-21 %% 54-57
(
breach of contract).
z
8plaintiff's Response, Docket Entry No .

% 56 .

controlling authority .zg Alternatively, plaintiff argues that 'even
'
under Fifth

E
he) prevails./'
/o

Circuit

citing Lovett v.

Cardinal Health , Inc . (In re Diabetes America , Inc .),

343

(
Bankr.

uimproperly

Tex.

2012),

inflates'
'

Fifth

plaintiff

argues

Circuit 's

that

Citgo

requirements

preserving claim s because the Fifth Circuit does not

require

identification of prospective defendants or the value of preserved
claim s.'l Attached

plaintiff's two motions for leave to submit

supplemental authority (
Docket Entry Nos. 38 and

are opinions

that plaintiff argues show that Citgo has misstated the Fifth
Circuit's requirements :

A SARCO , LLC v . Montana Resources, Inc .r

(
S.D. Tex. 2013)7 Tepoer v. Keefe Bruvette & Woods,
Incw

No. 3:11-CV-2087-L-BK, 2012 WL 4119490 ( .D.TeX. Sept. 19,
N

2012)7 THINK3 Litiqation Trust v. Zuccarello (In re THINK3I,
-

B. 147 (
R.
Bankr. W . Tex . 2015)7 and Nestlé Waters North America,
D.
Inc . v. Mountain Glacier LLC (In re Mountain Glacier LLC),

246 (
6th Cir.
these

opinions,

Because the
plaintiff's

supplemental authority

two

has read and considered
m otions

(
Docket Entry

granted .

2 . at %
9Id
3 . at %
OId
3 . at 18-19 1% 58-60 .
lId

leave

38 and

be

Applicable Law
Filing

case under the Bankruptcy Code creates a bankruptcy
generally comprised

estate that

'all legal
'

equitable

interests of the debtor in property as of the commencement of the

caser'
'

U . C.
S.

541(
a)

including causes

action.

Compton v . Anderson (In re MPF Holdings US, LLC),

2012), vacatina and remanding,
S.D.
TeX . 2011).

In Chapter

See

F .3d 449,

B. .
R

(
Bankr.

cases where the debtor assumes

debtor-in-possession status, the debtor typically has nmost of the
powers of a bankruptcy trustee, including the power

claims belonging
Oreratinq,

the estate.'
'

Id.

pursue

(
citing In re United

F.3d at 355 (
citing

1107)).

Upon

confirmation of the Chapter 11 plan , however, the bankruptcy estate
ceases
belonging

exist, and

ability

pursue

action

the estate ends unless the plan documents preserve
another party -

cause s

such as a liquidating or litigation trustee

U.S. 5 1123 ( 3).3
C.
b)(
2
F.3d at

causes

Id.

accordance with 11

See also In re United Operating,

('lf a debtor has not made an effective reservation,
'

debtor has no standing to pursue a claim that the estate owned

before it was dissolved .'
').
3
2This statute states : u . . . a plan may- . . . provide for .
.
the retention and enforcement by the debtor, by the trustee, or
by a representative of the estate appointed for such purpose, of

any . . . claim or interest E
belonging to the debtor or to the
estateq.' 11 U.S.C. 5 1123 ( (
'
b) 3).

(
1) Fifth Circuit Law Applies
Because Gas-Mart's bankruptcy case was filed and confirmed in
the Eighth Circuit, plaintiff argues that the applicable 1aw

that

Harstad,

the

F .3d at 898.3
3

Harstad, 39 F.3d at 898, reorganized debtors filed
confirmation action against
preferential

transfers .

defendant 's motion
lacked standing

The

post-

ban k seeking

recover allegedly

bankruptcy

granted

dism iss upon concluding that

the

debtors

pursue preference claims because the confirmed

plan did not preserve the ability

The district

affirm ed and the reorganized debtors appealed . In support of their
argument that they had standing because their plan preserved the
right to sue

preferential transfers, the reorganized debtors

cited the following excerpt from Article

of the confirm ed plan :

The Court will retain jurisdiction until this Plan has
been fully consummated for the following purposes: .

(Dqetermination of a11 causes of actions E
sic) between
Debtors and any other party, including but not limited to
any right of Debtors to recover assets pursuant to the
provisions of the Bankruptcy Code .

=
Id

902.

Rejecting

debtors' argument that

cited

language preserved their claim s, the Eighth Circuit explained that

A rticle X , captioned uContinuing Jurisdiction,' concerns
'

the ongoing jurisdiction of the Bankruptcy Court for
matters that arise after plan confirmation . Noting the

retention of the court's statutory jurisdiction to hear
post-confirmation matters is a far cry from reserving to
the debtors a right to bring post-confirmation claims to

H plaintiff's Response, Docket Entry No . 27 , p .

%%

recover preferences paid by the debtors but never
disclosed
by
them
during
the
pre-confirmation
proceedings. We hold that the above-quoted language is
not a retention of the claim at issue here-much less the
uspecific and unequivocal' retention that some courts
'
require .
=
Id

added). The court observed that
if the Harstads wished to retain the power to enforce

this claim pursuant to 5 1123 ( 3), it would have been
b)(
a simple matter to do so with straight-forward language

(
although not so easy to do without alerting their
creditors and the Bankruptcy Court to the possibility of

viable preference claims).
Id . The court explained :

We view 5 1123( 3) as, at least in part, a notice
b)(
provision .
Creditors have the right to know of any
potential causes of action that m ight enlarge the
estate-and that could be used to increase payment to the
creditors. Even if, as the Harstads claim , they gave
notice of such claim s by indicating in their disclosure
statement that the availab ility of such claim s was being
investigated, the creditors are entitled to know if the
debtors intend to pursue the preferences in post-

confirmation actions. Compliance with 5 1123( 3) gives
b)(
notice of that intent . Only then are creditors in a
position to seek a share of any such recoveries,
contingent though they may be, and to have the mechanics
of the preference-sharing spelled out in the plan .
Creditors are in no position to do so if they are not on
notice that the debtor retains the power to pursue
recovery .
=
Id

at 903 .
Because the Eighth Circuit held that the language

issue in

Harstad did not preserve the debtors' ability to pursue claims
following

confirmation

but,

instead , provided

for

continuing

jurisdiction of the bankruptcy court, that holding is inapposite as
address

requirements

for preserving

claims

under

5 1123(
b)

dicta

the extent

requirements,

Harstad suggests such

shows that the Eighth Circuit views 5 1123 (
b)(
3)

notice provision requiring language that will alert creditors
possibility

of

future

recovery,

and

believes

preservation language

that

Id . at

Plaintiff has not cited authority showing that the requirements
suggested by Harstad differ from the requirements applied by the
Fifth Circuit .
issue

Because the sem inal Fifth Circuit case

Harstad

support

of

its

conclusions

this
that

reservation of rights must be nspecific and unequivocalr' and that
'
a udebtor must put its creditors on notice of any claim it wishes
to pursue after confirmationr' In re United Oreratina ,
'

F.3d at

355, the court concludes that resolution of the standing issue now
before the court would be the same regardless of whether the 1aw of

the Eighth

the Fifth Circuit is applied .

plaintiff failed to offer

choice-of-law analysis,

concludes that the applicable 1aw
See Rossco Holdings,
Circuit 1aw
which a question

Moreover, since

that of the Fifth Circuit .

Fed . App'x

(
applying Fifth

action filed in the Western District of Texas
standing

assert post-confirmation claims

arose with respect to a bankruptcy case filed and confirmed in the
Ninth Circuit where plaintiff asserted that Ninth Circuit law

applied, but failed to brief the choice-of-law issue).

(
2) Fifth Circuit Law
The Fifth Circuit's requirements for preserving claims under

11 U. C. 5 1123 ( ( are explained
S.
b) 3)
540 F .3d at 351,

In re United Oreratinc,

In re Texas Wvomin? Drillinc, 647 F .3d at

and ( In re MPF Holdings, 701 F.3d at 449.
3)
In re United Oreratina involved
committee

efforts

creditors'

pursue pre-confirmation bankruptcy and common-law

claim s for fraud , breach of fiduciary duty, and negligence against
a court-appointed operator

the debtor's oi1 and gas properties

and the lender that sought the operator 's appointment .
351 .

The plan contained

blanket reservation

claim s arising under the Bankruptcy Code , and
reservation

F.3d at
and al1

more specific

claim s arising under identified sections

Bankruptcy Code . The plan did not , however, say anything about the
common law claim s that the creditors' committee filed against the
operator and the lender . The Fifth Circuit held that

E
nqeither the Plan's blanket reservation of uany and a1l
claims' arising under the Code , nor its specific
'
reservation of other types of claim s under various Code
provisions are sufficient to preserve the common-law

claims E
plaintiffq now brings for, ânter alia, fraud,
breach of fiduciary duty, and negligence .

Id. at 356. The court explained that ulfqor a debtor to preserve
a claim, the plan must expressly retain the right to pursue such

actions,' id. at 355 (
'
citation omitted), that ' tlhe reservation
'E
must be '
specific and unequivocal,'' id. (
'
quoting Harstad, 39 F.3d

902), and that ' iqf
'E

debtor has

made

effective

debtor has no standing to pursue a claim that

reservation ,

estate owned before

was dissolved .'
'

Id . The court exp lained

this rule as na logical consequence of the nature of a bankruptcy,
which

designed

administration

primarily

and

liabilities w ithin

Asecure

settlement

of

prompt,

debtor's

limited time,'' id w
'

that

effective

assets

and

needed because

' pqroper notice allows creditors to determine whether a proposed
U
plan resolves m atters satisfactorily before they

approve

=
Id

In re Texas Wvomin? Drilling involved a reorganized debtor who
filed post-confirmation avoidance actions against the debtor's
former shareholders seeking
debtor was insolvent .

recover dividends paid while

F .3d at

The plan provided

the

debtor to retain nEstate Actions,' defined to include nclaims under
'
Chapter

the Bankruptcy Code .'
'

Id .

The disclosure statement

provided more specifically that nEstate Actions' included nvarious
'
potential avoidable transfersr' id . , and also included
'
-

chart

--

outlining 'various claim s and causes of action the Debtor
Reorganized Debtor may pursue on behalf

Id.

the Debtor's Estate .r'
'

The chart identified as a potential defendant, uAg
vqarious

pre-petition shareholders of
'fraudulent

transfer

shareholders,' valuing
Id.

the

and

Debtor' who might be sued
recovery

claim s

dividends

approxim ately

paid
million .'
'

The defendants argued that the preservation language

plan documents failed the In re United Operatinq uspecific and
unequivocal'
'

test

because

failed

identify

potential

defendants individually . A fter first considering and deciding
disclosure

statements

determining whether
551, the

could

be

considered

for

purposes

of

claim had been adequately preserved, id .

Fifth Circuit held that

reorganized

debtor had

standing to pursue the avoidance actions because the plan documents
adequately preserved those claims.

Id . at 552 . The Fifth Circuit

explained that the plan documents were
unequivocal' to preserve the avoidance actions because
'

( nlike the plan in In re United O
ul
perating, which
contained only a blanket reservation of uany and a11
claim s,' TWD'S plan and disclosure statem ent revealed the
'
existence of the Avoidance A ctions, the possible amount
of recovery to which they would lead , the basis for the

actions (
namely, pre-petition dividends and transfers to
equity interest holders), and that the reorganized debtor
intended to pursue the claim s . The terms of TWD'S plan
and disclosure statement are far more specific than those
in Tn re United Op erating .

Jd at
-=
In re MFP Holdincs involved

litigation trustee seeking

pursue avoidance actions against vendors with whom the debtor had
contracts .

701 F.3d

When several

the vendors sought

dismissal either because the claims against them had been released

because recovery was barred by the debtor's assumption

their

contracts during bankruptcy, the bankruptcy court sua soonte raised
issue

whether

plan

satisfied

Fifth

Circuit's

nspecific and unequivocal' standard for preserving claims .
'

(
citing

748-55).

The bankruptcy court ultimately

dism issed the litigation trustee 's claim s for lack
Id .

The bankruptcy

based

standing .

decision

conclusion that an effective preservation of claim s must satisfy
three requirements :

individually identify the parties

sued post-confirmation,

set forth

state that each party will be sued, and

legal basis for the suit.

B. at 744-45)
R.

Id. at 452 (
citing 443

The bankruptcy court held that the plan was

sufficiently unequivocal because it only reserved avoidance actions
actions that

um ag

udo exist and will be prosecuted,' id. (
'
citing 443 B.R. at 749-50),
and because the plan contained ambiguous language that could be
read

have released som e

(
citing

the defendants being sued .

Id .

B.R. at 750-55). On appeal the Fifth Circuit vacated

the bankruptcy court's opinion explaining that the
requirements

preserving claim s identified by

court were not mandated

first
bankruptcy

In re United Oreratina .

Id . at 455 .

Observing that traditional rules of contract interpretation could
be used

guide

court's review

Circuit remanded the case

plan documents, the Fifth

determination of whether individual

defendants were ureleased in connection with or under the Plan or
by prior order of the Court .' Id . at 457 .
'
Citgo

cites

In

re United Operatinq, In

re

Texas Wvoming

Drillinc, and Jn re MRF Holdings and other Fifth Circuit opinions

applying
assertion
pursuant
identify

holdings
that

those three cases

'non-avoidance
'

claims

are

support
properly

1123 only when the plan materials,
the nature of the claims reserved,

of potential defendants,

(
iii) the value

preserved
a minimum,

the categories

those claims.'3
'l

But none of the opinions that Citgo cites has held either that the
standard for effectively preserving non-avoidance claim s differs
from the standard for preserving avoidance claims, or that

3 . at 18 % 50. See also Citgo Petroleum Corporation's Reply
4Id
in Support of Motion to Dism iss or, in the A lternative, for Summary
Judgment as to Counts I and II, and for Summary Judgment as to

Count III (
ucitgo's Reply'
'), Docket Entry No. 34, p . 13 % 18 ('
'ln
its Motion , CITGO describes- from seven different Fifth Circuit
opinions issued between 2008 and 2015-how the nspecific and
unequivocal' standard is more demanding for non-avoâdance claims
'

than avoidance claims.

See, e.g.r Motion %% 45-50./
/). The other

opinions that Citgo cites are : In re Gulf States, 614 F. App 'x at

719 (
holding that ul
tqhe Plan's reservation of 'E
alny and a11 other
claims and causes of action which may have been asserted by the
Debtor prior to the Effective Date' is exactly the sort of blanket
reservation that is insufficient to preserve the debtor's

standing'
'); Woolev v. Havnes & Boone, L. .
L P. (
In re SI
Restructurinc Inc.), 714 F.3d 860, 865 (
5th Cir. 2013) (
holding
that claims for breaches of fiduciary duties were not effectively

preserved because nE
njeither the Plan nor the disclosure statement
references specific state law claim s for fraud, breach of fiduciary
duty, or any other particular cause of action . Instead , the Plan

simply refers to a11 causes of action, known or unknown. . . g
squch
a blanket reservation is not

sufficient to put

creditors on

notice./); Rossco Holdinls, 613 F. App'x at 3O8 (
/
holding that
plaintiffs lacked standing to pursue m alpractice and negligent
misrepresentation claim s because they were not identified in the

confirmed plans); and The National Benevolent Association of the
Christian Church (Discirles of Christ) v . Weil, Gotshal & Manaes,

LLP, 333 F. App'x 822, 827-29 (
5th Cir. 2009) (
per curiam) (
holding
that ambiguity in plan language precluded finding that p lan
specifically and unequivocally preserved claim s for pre-petition

legal malpractice).

nspecific and unequivocal' standard requires something more than
'
the retention of claim s.

See In re Texas Wvominc Drillinc , 647
United Op erating focused

(
uWe observe that
exclusively on the retention

claim s.

never held that

intended defendants must be named in the p lan .
with approval

F .3d

355-56, the Fifth

Circuit cited In re Ice Cream Liquidation ,

with

approval

for

the

B .R .

holdings

reservation of Mpreference claims' was
'
claim s

did cite

Cream Litigation

ro

In re United Orerating,

2011),

But

that

categorical

sufficient to preserve

preferential transfers even though neither the plan nor

disclosure

statement

identified

specific

transfers,

transferees, or categories of transfers or transferees involved in

actions
was
333-34.

be brought post-confirmation, 319 B .R . at 337-38,
sufficient to preserve claims for turnover .
The

Id .

explained that the plan identified specific

sections of the Ban kruptcy Code under which preference claims would

be brought , but that neither the plan nor the disclosure statement

mentioned turnovers or 5 542 (
b),
governs turnovers .

section of the Bankruptcy Code
337-38.

See

also Crescent

Resources Litication Trust v . Burr (In re Crescent Resources, LLC ),

463 B.
R. 423, 433 (
Bankr. W.D. Tex . 2011) (
concluding that In re
Ice Cream Liguidation stands

nthe proposition that listing

causes of action by code section is A
specific and unequivocal./').
'

While the Fifth circuit has held that plan documents that identify
the

nature

defendants,

the

claims

reserved ,

value

categories

claim s satisfy

of

potential

'specific and
'

unequivocal' standard , see In re Texas Wvomin? Drillinq, 647 F .3d
'

at 552, the Fifth Circuit has not held, as Citgo contends,
information

always required to satisfy that standard .

Instead, the Fifth Circuit has emphasized that ' tqhough the degree
'l
of specificity involved

plan 's reservation of claim s

often vary, the reservation must ,
put Acreditors on notice of

m inimum , be specific enough

claim E
the debtorq wishes

pursue after confirmation .r' In re SI Restructurinq Inc ., 714 F .3d
'

at 864 (
quoting In re United Oreratina, 540 F.3d at 355). See also
In re Crescent Resources,

(
recognizing that because

nthere has been no binding case

define definitively what

court meant by E
uspecific and unequivocal'
')

courts have

attempted to determ ine if a reorganized debtor retained standing on

a case-by-case basisv).
Circuit's analyses of

A fter carefully

reviewing the Fifth

nspecific and unequivocal' standard, one
'

bankruptcy observed that

E
qquestions remain. Especially important for this case
is whether categorical identification of prospective
defendants is required .
Another unanswered question is how specifically the
retention language must describe the basis of recovery .
In re Diabetes, 485 B .R . at 346 .
issue

80th of these questions are

the action now before the court .

23

Application

the Law

the Facts

Plaintiff's breach of contract claim alleges that
The Agreement entered into by and between Gas-Mart
and Citgo was a valid and enforceable contract .

Citgo materially breached the Agreem ent in several
respects, including, but not lim ited
a.

by failing to m eet its obligation to supply
fuel to Gas-Mart for nearly two weeks from the
time that Gas-Mart filed for bankruptcy ,
desp ite the fact that it was fully secured
against any potential default by Gas-Mart ;
by
creating
unreasonable
and
arb itrary
restrictions on fuel allocation that caused
Gas-Mart to run out of fuel on multiple
occasions throughout its bankruptcy;
by failing and refusing to honor its ten-day
credit terms set forth in the Agreement
throughout Gas-Mart 's bankruptcy;
by failing and refusing to provide the
contractual 1% rebate to Gas-Mart for cash in
advance purchases of fuel;
by failing to properly credit and/or setoff
Gas-Mart's account for purchases made with
credit cards; and
by continuing to keep Gas-Mart 's credit card
receipts in breach of its agreement to resume
supp lying fuel in exchange for being permitted
to keep said receipts .3s

Plaintiff's stay violation claim alleges that by engaging in these
and other actions Citgo violated the automatic stay .3
6

Ocomplaint , Docket Entry No . 1, pp . 10-11 %% 51-52.

See also

id. at p. 4 % 17 (
defining uAgreement' as the September 10, 2013,
'
Marketer Franchise Agreement).
3 . at
6ld

% 60.
24

(1) The Plan Documents
Gas-Mart 's confirmed Plan contains a paragraph titled uVesting
of Assets' that states :
'

On

the

Effective

Date ,

the

Creditor

Trust

A ssets

(
including, without limitation , all Causes of Action)
will be transferred to and vest in the Creditor Trust and

be deemed contributed thereto, subject to the terms of
the Plan and Confirmation Order . M l Causes of Action
shall survive confim ation and the co= encement of
prosecution of Cau ses of A ction shall not be barred or

limited by any res judicata or estoppel , whether
judicial, equitable or otherwise, based upon, ïnter alia,
confirmation of the Plan or the extent to which the Plan,
Disclosure
Statem ent,
Schedules
of
Assets
and
Liabilities, or Statements of Financial Af fairs identify
any Causes of Action . The Creditor Tru stee 's right to

co= ence and prosecute Causes of Action (
including ,
without limitation , Avoidance Actions) shall not be
e ridged or materially altered in any manner by reasons
of confim ation of the Plan . Al1 property held in the
Creditor Trust for distribution pursuant to the Plan will
be held solely in trust for the holders of Allowed
Professional Fee Claims, Allowed Other Adm inistrative
Expense Claims, A llowed Priority Tax Claims, Allowed
Class IA-IE Claims , Allowed Class 2 .1A -2 .IL Claims and
A llowed Class 3A-3E Claip s and will not be deemed
P roperty of the Debtors .
.37
Section

nCauses of Action' to mean :
'

' Aqll claims and causes of action of the
'g
as of the Effective Date , whether arising under any contract , tort ,

the Bankruptcy Code,

other federal

state law

MModified First Amended Plan of Liquidation Dated July 21,
2016, Article VII, 5 7 .1.1, Exhibit A to Exhibit 8 to Citgo's

Memorandum, Docket Entry No. 15-10, pp . 48-49 of 97 (
emphasis
added)
3
8Id . at Article 1, 5 1 .1.15, p .

The Disclosure Statement lists 'Causes of Action' am ong assets
'
'
that

will either
Plan on the
Trust
accordance
A greem ent :

be used to fund payments to be made under the
Effective Date or transferred to the Creditor
. to fund distributions to Creditors in
with the Plan and the Creditor Trust

2.
Causes of Action . The Committee believes the
Creditor Trustee m ay be able to pursue Causes of Action
against several entities, including, without limitation,
those set forth on Exhibit B hereto and the list of
transfers disclosed in the Debtors' Statements of
Financial A ffairs. The categories of potential Causes of
Action include Avoidance Actions, other Claims against

Insiders, and E
oqther Claims. Each of these categories
is discussed in more detail below .
a .

Avoidance Actions .

b.

Other Ciaims Against Insiders .

c.
Other Claims . The Committee believes the
Creditor Trustee may be able to assert other Causes of
Action belonging to the Debtors and their Estates . Such

Causes of g
Alction would include, without limitation,
claim s for breach of contract, tort , the Bankrup tcy Code,
or other federal or state law .3
9
The list

potential defendants included in Exhib it B

the

Disclosure Statement includes the defendant in this action , Citgo .t
o

MDisclosure Statement, Ariicle VI. .2, Exhibit
A

Citgo's

Memorandum , Docket Entry No . 15-9, pp . 23-24 of 117 .
4 Exhibit B
o
115 of 117 .

Disclosure Statement, Docket Entry No .

(
2) The Plan Documents Preserve the Contract Claim
The court concludes that the plan documents are sufficiently

uspecific and unequivocal'
'

preserve to the plaintiff as trustee

the Gas-Mart Creditor Trust the right

pursue breach of

contract claims against Citgo because the p lan provides that

' oqn the Effective Date, the Creditor Trust Assets (
'E
including,
without limitation, al1 Causes of Action)

and vest in the Creditor Trustz '

be transferred

' aqll Causes of Action shall
'g

survive confirmation and the commencement of prosecution of Causes

of Action shall
estoppel,'
'

prosecute

be barred or limited by any res judâcata
nE
tqhe Creditor Trustee's right

Causes

of

Action

(including,

commence

without

limitation,

Avoidance Actions) shall not be abridged or materially altered in
any m anner by reasons

confirmation

Plan ,' because
'

Plan defines uCauses of Action' to mean: ' A qII claims and causes
'
'E
of action

the Debtors and their Estates

Date, whether arising under any contract ,

of the Effective

*;' and because
'

Disclosure Statement not only lists '
'Causes of Action' among assets
'
be transferred to the Creditor Trust
creditors, but also identifies three
action, one of which
of Action

fund distributions
categories of causes

uOther Claim s' defined to include nCauses
'

b reaeh of contract r'
'

includes

exhibit

(
Exhibit B) identifying potential defendants, including Citgo .
short,

plan documents are uspecific and unequivocal' because
'

they state

basis

recovery, i.e ., breach of contract , and

identify the defendant by name .

See In re M PF Holdinas, 701 F.3d

at 457 (
uln addition to
referenced in the Reorganization Plan identified each defendant
name .

Accordingly, we hold that the reservation language

the

Reorganization Plan was sufficiently specific and unequivocal under

United O
perating.'j.
'
sufficient

Citgo argues that the plan documents are

preserve plaintiff's breach of contract claim because ' pllaintiff
'E
has

claim

was preserved without identifying the categories
Ci4 im .X1
'
:
R
1

Citgo has not, however, cited any case in which a court has even
considered language purporting

reserve claim s for breach

contract much less a case holding that preservation

a contract

claim requires identification of categories of potential defendants
the value

the claims.l
z

Moreover, in response to Citgo's

argument plaintiff has submitted supplemental authority including
two cases from courts

this circuit that have considered

rejected analogous arguments with respect
contract claims, i .e ., Tepoer, 2012

the preservation

4119490

and In re

THINK3, 529 B .R . at

Ocitgo's Reply, Doeket Entry No . 34,

1 see
2

% 18 .

above (
describing the cases Citgo cites).

In Terrerr

4119490, at *4r

court held that uthe

Plan's categorical reference to and reservation of contract claims
sufficiently specific
claim .

reserve Plaintiff's contract

plan documents

identify any potential
categorically,

not

identify the value of any preserved claims . Id . at

Citing

defendant

either

individually

In re Texas Wvom in? Drilling, 647 F.3d

its observation

nTn re United Op erating focused exclusively on the retention
of claims .

*#' .( * a '
' (j
t
.

court reasoned that 'neither Tn re
'

Texas Wyoming Drilling nor Tn re United Op erating requires that
specific prospective defendant, potential amount
the claim basis be included
satisfy

the

specific

recovery,

plan or disclosure statement

unequivocal

standard

reserving

In In re TH INK3 the court held the nspecific

claims .' Id . at
'

and unequivocal' standard satisfied because the plan uspecifically
'
identified

type

claim

issue (
contract and debt) and

specifically named the defendant .'
'
Because

plan documents at issue specifically identify

contract claim s as a type of claim being reserved, and specifically

identify Citgo

potential defendant they are specific enough to

creditors on notice

the tru stee's intent

confirmation claims for breach of contract.
therefore

pursue post-

The court concludes

plan documents satisfy the Fifth Circuit 's

uspecific and unequivocal' standard for preserving contract claim s.
'

(
3) The Plan Documents Do Not Preserve the Stay
Violation Claim
The

court

sufficiently

concludes

that

uspecific and

plan

documents

unequivocal'
'

preserve

are

the

stay

Plan nor

the Disclosure Statement contain any reference
section

stay violations

Bankruptcy Code that

governs the automatic stay . In In re United OperatinG, 540 F .3d at

Fifth Circuit cited with
Liauidation, 319 B .R . at

approval

337-38,

In

re

Ice

Cream

its holdings

plan

documents that identified specific sections of the Bankruptcy Code

pursuant

which

preference

claim s

would

be

brought

were

sufficient to preserve preference claim s, but that because the plan
documents failed to reference turnover claims or the section of
Bankruptcy Code that governed such claims, turnover claim s had not
been preserved .

Because the plan documents

reference stay violations
satisfy

the

5

case

of the Bankruptcy Code, they

'
'specific

and

unequivocal' standard
'

preserving stay violation claims .

Asserting

that

' tlhe
'E

consideration of Section 1123
Citgo 's

motion

overarching

purpose

policy

notice r/o p laintiff argues that
'

dism iss

stay

violation

l
3plaintiff's Response, Docket Entry No . 27, p .

30

claim

should

nevertheless be denied because ' dlefendant had actual notice and
'E
knowledge of the claim E)
E
dqefendant

received

Plaintiff argues that
actual

notice

via

email

correspondence of the precise claims that are the subject
of Counts I and II. On July 14, 2015, approximately two
weeks after Plaintiff's Petition Date, Plaintiff's
counsel informed Defendant's counsel that nGas-Mart has
instructed my firm to start preparing papers to sue CITGO
for violating the automatic stay and its executory
contract/
'. A copy of this email is attached as Exhibit

4 . Furthermore, Defendant is not prejudiced in any way,
as Defendant explicitly preserved its defenses against
Gas-Mart in anticipation of this litigation in a postpetition Vendor Agreement . Had Defendant so desired,
with its knowledge of the potential claims against it, it
could have inserted a release in the post-petition Vendor
Agreement to obviate any liability .
Thus, because Defendant
notice of the claim s it argues
pursuant to Section 1123, its
ground should be denied . The

had actual knowledge and
were improperly preserved
Motion to Dism iss on this
prim ary considerations of

Section 1123, such as prejudice, surprise, and lack of

notice are completely lacking in the present situation .o

Citgo replies that plaintiff's argument uinvites the E
cqourt
ignore the Fifth Circuit case 1aw interpreting 5 1123

favor

apply g
ingq a new test .' 6 Citgo also argues that the email
'4
plaintiff subm its as nExhibit A .

is 50th inadmissible and

irrelevant .'4 Citgo argues that Exhibit A is inadmissible parole
'?
evidence

because

interpretation

the

plan

and

< .
4zd

4 . at %% 62-63.
5Id
46
citgo 's Reply , Docket Entry No .

4 Id . at 10 % l2.
7

pp . 17-18 %

disclosure

st atem en t

because

gover
ned by contract principlesz8 and

'irrelevant
'

evidences only that the Debtor believed that

potential claim against CITGO one year prior
not whether that claim was preserved

had a

confirmation-but

the Plan and Disclosure

Statement such that Plaintiff has standing to bring it .'49
'
Citgo's actual knowledge of
as a matter of law, not relevant

plaintiff has standing

the issue

whether

pursue that claim because standing

governed

the sufficiency of the retention language in the p lan

documents.

Although the Fifth Circuit

recognized notice

creditors as an important policy concern behind the '
'specific and
unequivocal' standard articulated
'

In re United Oreratina ,

F.3d at 355, plaintiff has not cited any case in which the Fifth
Circuit has considered actual notice

specific creditor as

relevant to whether claim s have been sufficiently preserved
post-confirmation prosecution .

Instead , 'the notice to creditors
'

that the E
Fifthq Circuit and other courts have considered critical
this regard is the general notice

a;; creditors, not merely

the actual notice of the defendant in the post-confirmation suit .'
'
ASARCO ,

at

Texas Wyom inq Drillina,

(
emphasis
F .3d

original).

See also In re

('
'The purpose of the rule

put 'creditors on notice of any claim E
the debtor) wishes

4 Id
8
49 d
I

pursue after confirmation' and enable

Acreditors to determine

whether a proposed plan resolves matters satisfactorily before they

vote to approve it.'') (
' quoting In re United Operatina,

355).

F.3d at

Asarco the bankruptcy court rejected

substantially

sim ilar

plaintiff's

explaining

argument
that

nunited

Operatin? and its progeny, which hold that blanket reservations of
claims

do

not

provide

standing

pursue

such

post-confirmation , apply even when actual notice

claim s

alleged and

creditors have been paid in fu1l .' 514 B .R . at 192 .
'

Plaintiff Lacks Standin? to Pursue the Claim for PostPetition Breaches of a Renected Contract
'
Citgo argues that plaintiff is barred from pursuing the breach

of contract claim because Gas-Mart elected

reject the Citgo

5 365(
g).5
0

Agreement pursuant

Asserting that

rejection constitutes a material breach deemed to have occurred the
s
oplaintiff's Complaint alleges breach of the September 1O,

2013, Agreement. See Docket Entry No. 1, p. 10 % 51 (
alleging that
nE
tqhe Agreement entered into by and between Gas-Mart and Citgo was
a valid and enforceable contract.'
'), % 52 (
alleging that 'Citgo
'
m aterially breached the Agreement in several respects, including,

but not limited to . . .r' and p. 4 % 17 (
'
defining the term
uAgreement' as
'

the

September

10,

Agreement.').
/

Any

contention

to

Plaintiff's Response

is

2013,

the

contradicted by

nMarketer

contrary

Franchise

suggested

the Complaint .

by
See

Plaintiff's Response, Docket Entry No . 27, p . 13 % 46 (
asserting
that uthe Vendor Agreement was signed post-petition by Citgo , which

independently creates the litigation claims against Citgo'). See
'
also Citgo's Reply, Docket Entry No. 34, pp. 20-21 % 30 (
arguing
against any contention either that the Vendor Agreement is a
standalone agreement or that the Complaint alleges breach of the

Vendor Agreement).

day before the Petition Date ,s and that
l
of contract 1aw

fundam ental principle

that when one party

contract commits

material breach of that contract, the other party is discharged
excused from further perform ance ,/b Citgo argues that Gas-Mart's
/z
prior material breach bars plaintiff's contract claim because
alleged breaches a11 occurred after the Petition Date .5
3
W ithout disputing that the breaches alleged in the Complaint
occurred after the Petition Date , plaintiff responds that

: 365 ( )
g

relieve Citgo

contractual obligations

pending Gas-Mart's decision to reject the contractx 4 Citing United
States of America on Behalf of the United States Postal Service v .
Dewev Freiaht Svstem , Inc w

F .3d

(
8th

1994),

plaintiff argues that nthe non-debtor counter party to an executory
contract is obligated to continue perform ing its obligations under
the contract pending

the

ultimate assumption, assignment ,

rejection of that contract by the debtor.'o Plaintiff argues that
'
(
dquring this time , Defendant was required to continue
performing its contractual obligations.
Defendant's
argument would effectively eliminate this requirement,

s citgo's Memorandum , Docket Entry No.
l

p . 26 %

5 (d . a t
2j
g

No .

5 . at 26-27 :%
3ld
p . 10 %% 51-52 .

See also Complaint, Docket Entry

pp . 21-23, %%
66.

5 . at 22 % 65
5Id

relieve non-debtors of their contractual obligations

before the contract was ultimately rejected, and alter
the substantive rights of the parties, a1l of which would

be contrary to the 1awX 6
Without disputing that non-debtor counter parties to executory
contracts are obligated to continue performing pending a debtor's

ultimate assumption or rejection of the contractr Citgo replies:
Plaintiff cites no case allowing a plaintiff to sue on a

rejected contract for alleged breaches after the petition
date .

Plaintiff provides no authority Einq support of

the proposition that the nfirst to breach rule' has no
'

application

in

the

context

on

5

365(
g), or, more

succinctly, that nbreach' does not m ean nbreach .rs7
'
'

After carefully reviewing 5 365 and Fifth Circuit 1aw applying
5 365, the court concludes that while b0th parties have correctly
cited cases applying 5

neither party has fully demonstrated

how that 1aw applies to the facts of this case .

For the reasons

stated below , the court concludes that Gas-Mart's Rejection of the

Citgo Agreement means that plaintiff lacks standing

pursue the

post-petition breaches.

Applicable Law
Section

of

Ban kruptcy Code provides that

trustee, subject to the court's approval, may assume or reject any
executory contract or unexpired lease of the debtor .'
'
'
,

$ 365 ( ).
a

term Mexecutory contract'
'

defined

5 Id . at 22-23 % 66.
6
s citgo's Reply, Docket Entry No .
7

% 28 .

Code,

the Fifth Circuit has recognized that Man agreement is

executory if at the time of the bankruptcy filing, the failure of
comp lete performance would constitute a material

either party

breach of the contract, thereby excusing the performance of the

other party .' Phoenix Exploration, Inc . v . Yaquinto (In re Murexco
'

Petroleum, Inc.), 15 F.3d 60, 62-63 (
5th Cir. 1994) (
per curiam ).
See also id . at
article by

('
AThe

a two-part

Professor Vern

San#ru tcy; Part
p

Countryman , Sxecutory

57 Minn .

Sxecutory Contracts

Contracts

Rev. 439, 458-62 (
1973), and

Sankrup tcy ; Part

57 Minn .

Rev .

(
1974).')) National Labor Relations Board v. Bildisco and Bildisco,
'
104 S.

1188, 1194 &

6 (
1984) ('g
' Tlhe legislative history

5 365(
a) indicates that Congress intended the term to mean a
contract
sides .'

'on which performance is due to some extent on b0th

H .R .ReP .

95-595,

(1977),

see

Rep.

95-989, p . 58 ( 77).').
19
'

The decision whether to assume or reject an executory contract
under

generally left

business judgment

bankruptcy estate . See Mirant Corp . v . Potom ac Electric Power Co .

( re Mirant Corp.), 378 F.3d 511, 524
In
estate elects

(5th

2004)

assume the executory contract ,

estate

takes on the burdens associated with the contract , agreeing to cure
any outstanding defaults, and comm itting to perform on

forward basis.

U.S. f 365 (
C.
5)

going-

See Texas Health snterrrises,

Inc. v . Lytle Nursing Home (In re Texas Hea1th Enterorises , Inc .),

App'x 122, 126 (
5th Cir. 2003). Once an executory contract
assumed,

365 (
f) authorizes

assignment.

See

U.S.C

5 365( 5 If the estate elects to reject the contract, the act of
f). 8

rejection is deemed to constitute a breach occurring the day before
the filing of the bankruptcy petition,
the non-debtor receives

U.S. 5 365 ( (
C.
g) 1),5 and
9

pre-petition claim for damages arising

58 pertinent part the statute provides:
1n
.

.

.

the trustee m ay assign such contract or lease

under paragraph ( of this subsection.
2)
The trustee may assign an executory contract
unexpired lease of the debtor only if--

(
A)

the trustee assumes such contract or lease in
accordance kith
section ; and

the

provisions

of

this

adequate assurance of future performance by
the assignee of such contract or lease is
provided, whether or not there has been a
default in such contract or lease .

11 U.S.C. 5 365(
f).
591n relevant part the statute provides :

(
g) . . . the rejection of an executory contract
unexpired lease of the debtor constitutes a breach
such contract or lease
if such contract or lease has not been assumed
under this section or under a plan confirmed
under chapter 9, 11, 12, or 13 of this title,
immediately before the date of the filing of
the petition;

11 U. C. 5 365 (
S.
g)

therefrom measured ( the usual case) by the terms of the contract
in

and applicable

5O2 ( 1). 0
g)( 6

affirmative declaration that

estate will

obligations

of

a

pre-petition

contract

Rejection is an
take

made

the

Rejection does not terminate the contract,
obligation

perform

the
debtor.

places

the contract outside of the bankruptcy

administration . Eastover Bank for Savinqs v . Sowashee Venture (In

re Austin Development Co.), 19 F.3d 1077, 1082-83 (
5th Cir.), cert.
denied sub nom . Sowashee Venture v . EB , Inc .,

(
1994).
In re Austin Development involved a lease on non-residential
real property;

issue was whether the debtor's failure to timely

assume or reject the lease which resulted in
terminated

lease thereby extinguishing

deemed rejection,
rights

third-

parties, e .a ., parties who had taken a sublease from the debtor or
a security interest in the debtor's lease interest .
After analyzing

365, its

Id . at 1080 .

statutory antecedents, and policy

6
0In relevant part the statute provides :

A claim arising from the rejection, under section 365 of
this title or under a plan under chapter 9, 11, 12, or 13
of this title, of an executory contract or unexpired
lease of the debtor that has not been assumed shall be

determined, and shall be allowed under subsection (
a),
(
b), or ( of this section or disallowed under section
c)
( or ( of this section, the same as if such claim had
d)
e)
arisen before the date of the filing of the petition .

11 U.S.C. f 502 ( 1).
g)(

considerations, the Fifth Circuit concluded that 'rejection, does
'
not effect

termination of that lease, or, consequently , an

implied forfeiture of the rights
=
Id

1083 .

reaching this conclusion the Fifth Circuit

reasoned that

E 365 derives from 5 70( of the former Bankruptcy
$)
b)
Act, a provision that broadly codified the common law
doctrine that allowed the trustee either to assume and
perform the debtor's leases or executory contracts or to

nreject' them if they were economically burdensome to the
'
estate . See

generally

Michael

T . Andrew ,

Sxecutory

Contracts ïn Bankru tcy; Understanding 'Rejectionr' 59 U
p
b
'
of Colo. L . Rev. 845, 874-81 and n. 136 (
1988).

This

court has held that the deemed rejection of a lease under
5 70( did not terminate the lease but merely placed the
b)
trustee's obligation to perform under the leasehold
outside of the bankruptcy administration without
destroying the leasehold estate . In re Garfinkle, 577

F.2d 901, 904 (
5th Cir. 1978).
F .3d at 1081.

Fifth Circuit also reasoned that

the terms rejection, breach and termination are used
differently, but not inconsistently or interchangeably .
.

.

Throughout 5 365, rejection refers to the debtor's

decision not to assume a burdensome lease or executory

contract.
lease

Section 365( states that rejection of a
g)

nconstitutes a

breach' except
'

as provided

in

subsections ( 2) and ( 2). Three circuits, including
h)(
i)(
this one, have held that this language does not mean that
the executory contract or lease has been term inated, but
only that a breach has been deemed to occur .
In re

Continental Airlines, 981 F.
2d 1450, 1459 (
5th Cir.
1993)(
uto assert that a contract effectively does not

exist as of the date of rejection is inconsistent with
deeming the same contract breached/
').
=
Id

1082 .

The Fifth Circuit exp lained that

E
tlhe decision to reject is thus correctly viewed only as
a 'power to breach ' the executory contract or lease . A s
'
'
one commentator put it,

E
wqhat

the

estate's

representative

is

rejecting is the contract or lease asset,
which conceivably could carry continuing
obligations with it into the estate on an

administrative

basis.

Rejection

simply

prevents the estate from unadvisedly stepping
into such liabilities . The liabilities are
not repudiated; to the contrary, as the

rejection-as-breach doctrine is designed to
insure, the

contract

or

lease

liabilities

remain in-tact after rejection and give the
non-debtor party a claim in the distribution
of the estate .

Id. (
quoting Andrew,
Bildisco, l04
contract

Colo.

at 1197

Rev.

883).

See also

(
nthe authority to reject an executory

vital

basic

purpose

a

Chapter

reorganization, because rejection can release the debtor's estate
from

burdensome

ob ligations

that

can

impede

successful

reorganization.').
'
Between the date

ban kruptcy petition

executory contract is assumed
contract continues
against the debtor.

filed

rejected under

exist, enforceable by
Dewey Freight ,

and

an

365(
a), the

debtor,

F .3d at 624 . See also In re

Gunter Hotel Associates, 96 B.R. 696, 7O0 (
Bankr. W.D.
TeX. 1988)

(' executory contract under Chapter 11 is not enforceable against
'an
the debtor party, but
prior to

debtor's assumption or

In re Mirant Coro w
(' ven
'e
assumption,

enforceable against the nondebtor party

a

3O3 B.R. 319, 328 (
Bankr. N .D. Tex. 2003)

contract

property

the

estate

until

debtor has rights under the contract which are

40

property

the estate and so are protected by the automatic stay

from actions of other parties');
'

Chick Smith Ford, Inc. v. Ford
515,

Motor Credit Co . (In re Chick Sm ith Ford , Inc.), 46

question is

(
Bankr. M .
D. Fla. 1985) ('g
' uqntil the contract

rejected

validly terminated

the Debtor

entitled

compel specific performance and require the E
creditorq to abide
the provisions of the contractEq.').
'

(
b) Application of the Law to the Facts
Neither party disputes that the Agreement plaintiff alleges
Citgo breached was an executory contract, that Citgo's alleged
breaches

occurred

Bankruptcy Court

after

the

Petition

Date,

or

entered a Rejection Order pursuant

that

the

which Gas-

Mart's Executory Contracts, including the Agreement w ith Citgo,

were rejected as of March 10, 2016. Pursuant to

5 365

and the Fifth Circuit's reasoning in In re Austin Develorment,

F.3d at 1077, the court concludes that Gas-Mart's rejection of the
Citgo Agreement

constituted a material breach that triggered

dischargeable, unsecured , pre-petition claim by Citgo against the
estate effective immediately before Gas-Mart's bankruptcy, and
relieved

b0th

estate

perform ance obligations .

and

Citgo

See id . at 1081-84 .

General Contractors, Incw 267 B.R. 773,
2001)

(
recognizing

that

In

re

Austin

from

post-petition

See also In re CVA

(
Bankr. W.D. Tex.
Development

held

that

nrejection has an important

appropriately narrow function:

relieves the estate and nondebtor parties from future performance
obligations

and,

accomplishing

breach ,

triggers

dischargeable, unsecured, pre-petition claim against the estate'
')

Rejection did not cut off the right of Gas-Mart's estate
its successor-in-interest to pursue claims based on pre-petition
breaches of the Agreement.

Tavlor (In re Tavlor ),

See e .a., Delichtful Music Ltd . v .

F.2d 102,

( Cir. 1990)
3d

extent that money is due the debtor for pre-petition services under
a personal services contract , the debtor's claim for those sums is
undoubtedly

an

asset

estate

which

passes

trustee/debtor-in-possession . And this is so regardless of whether
the trustee

later

affirms

otherwise, the issue

rejects the contract.

affirmance

Stated

rejection relates only

those aspects of the contract which remained unfulfilled as of the

date the petition was fi1ed.'); Williams v. Tomer (In re Tomer),
'
128 B. 746, 756 (
R.
Bankr. S.D. 111. 1991) (
nthe executed portions of
the contracts remain intact , and property rights acquired under the

contracts prior to filing became property of the estate despite the

trustee's rejection of unperformed obligations of the contracts),
aff'd, 147 B.R. 461 (
S.D. 111. 1992).
claim asserted in this action

But the breach of contract

not for pre-petition breaches .

While plaintiff correctly cites Dewev Freiqht for holding that

uE
alfter

debtor commences

Chapter

42

proceeding, but before

executory contracts are assumed or rejected under

365(
a), those

existence, enforceabie by tAe deb tor

contracts remain

against the debtorr' 31 F.3d at 624, relief for post-petition, pre'

rejection breaches

available from the bankruptcy court by an

order requiring specific performance or an injunction enforcing the
automatic stay .

See In re Mirant Corp w

at 328; In re

Chick Sm ith Ford, 46 B .R . at 519. See also In re Mirant Corr w 44O
238, 254-55

2006) (
affirming bankruptcy court's

orders directing non-debtor parties to comply with the automatic
stay after holding that non-debtor's unilateral termination of an

executory contract before debtor had elected
under

violated

assume

automatic stay).

reject

Before the Citgo

Agreement was rejected, remedies for the breaches about which the
plaintiff complains were thus available

Gas-Mart

from

the

bankruptcy court in the form of orders for specific performance or
violation

the automatic stay .

alleged breaches

the extent that Citgo 's

automatic stay,

the reasons

:

stated in 5 II.
B.1.( 3), above, the court has already concluded
b)(
that plaintiff lacks standing

pursue this claim because

ability to do so was not preserved in the plan documents .
Plaintiff has not cited and
authority allowing
such as

debtor's estate

this action

rejected contract.

an affirmative declaration by
43

found any

successor-in-interest

creditor tru stee p laintiff

claims for post-petition breaches

rejection

court has

pursue
Bec au se

debtor that the

obligations

a pre-petition contract

made by the debtor, Gas-Mart's rejection of the Citgo Agreement not
only

relieved

the

post-petition

estate

obligations, but also relieved the estate of
claims for post-petition breaches thereof.

performance

ability to assert
Moreover, pursuant

5 365 ( executory contracts must be assumed by the debtor before
f)

they can be assigned. Gas-Mart's rejection of the Citgo Agreement
therefore precluded the post-petition breaches from becom ing assets
of Gas-Mart's estate that could be assigned and transferred to the
creditor trust .

Accordingly , the court concludes that plaintiff

lacks standing to pursue the breach of contract claim asserted
this action .

C.

Plaintiff 's Request for a Oral A rgument
Plaintiff has requested oral argum ent on Citgo's motion

dismiss (
Docket Entry No. 37). The Court has discretion to grant
or deny a request for oral argument . See Rule 7.5A, Local Rules of
the United States District Court for the Southern District of Texas

('
'lf

party views oral argument as helpful

motion or response may include a request for

the parties will be notified by the clerk.').
'

the Court, the
If it is granted ,

Because the court

has been able to resolve Citgo's motion to dismiss on the pleadings
and briefs without the need for oral argument, plaintiff's request
for oral argument will be denied .

44

D.

Conclusions : Plaintiff Lacks Standing for Counts I and 11

For the reas6ns stated in
concludes

that

plaintiff

II.
B.1 ( 3), above, the court
b)(

lacks

standing

pursue

the

stay

Count 11 because the plan documents
not preserve the ability

pursue such claims post-confirmation .

the reasons stated

II.B.1( 2), above,
b)(

court

concludes that the plan documents did preserve the ability
pursue breach

contract claims post-confirmation ,

reasons stated in 5 II.B .
2, above, the court concludes that
plaintiff lacks standing
asserted

Count

breaches

pursue the breach of contract claim

because that claim alleges post-petition

Agreement that Gas-Mart rejected pursuant
365. Accordingly , Citgo's motion to dismiss Counts I and

for lack of standing will be granted and the plaintiff's claims
for breach

dismissed

contract and violation of the automatic stay

without

prejudice

for

lack

of

subject

matter

jurisdiction . Although Citgo also argues, in the alternative, that
plaintiff's breach of contract claim is subject

dismissal based

on res judicata and principles of subrogation, and that plaintiff's
stay violation claim is subject

dismissal based

laches,

because the court concludes that these claims should be dismissed
:

lack of subject matter
standing ,

court

lack
need

not

arguments.

45

address

these

alternative

111 . Motion for Summarv Judqment on Count III
Count

plaintiff seeks

avoid as

preferential

transfer, a payment of $68,185.69 that Gas-Mart made to Citgo on or
about June 9, 2015 .61 Citgo denies that this payment qualifies as
a preferential transfer, but for purposes
Citgo assumes that

the pending motion

prima facie elements

transfer claim have been established .

preferential

Citing 11

547(
b)

and asserting that after Gas-Mart made the payment

issue, Citgo provided almost $900,000.00 in new fuel deliveries
Gas-Mart that rem ained unpaid as of the Petition Date, Citgo argues

that

entitled to summary judgment on this claim based on the

SUYSOCUPDV DeW Vxiue Yefense .6
?

A.

Standard of Review

Summary judgment is authorized if the movant establishes that
there

entitles

no genuine dispute about any material fact and the

judgment. Fed. R. Civ .

material facts are

ugenuine'
'

reasonable jury could return

56 (
a)

the evidence
verdict

Anderson v . Libertv Lobbv , Inc w

Disputes about
such that

the nonmoving party .

2505, 2511 (
1986).

party moving for summary judgment umust A
demonstrate the absence of
a genuine issue of material fact,' but need not negate the elements

Gcomp laint, Docket Entry No .

pp . 13-14 %% 64-73 .

6 citgo's Memorandum , Docket Entry No .
z

29 %% 74-75 .

the nonmovant's case .'
'
1069,

Little v . Liauid Air Corr w

F.3d

1994) ( banc), (
en
quoting Celotex Corp . v .

(
5th

moving party

2548, 2553-54 (1986)).

Catrett,

meets this burden, Rule 56( requires the nonmovant
c)

beyond

the pleadings and show by affidavits, depositions, answers
interrogatories, adm issions on file, or other admissible evidence
that specific facts exist over which there

trial.

Id. (
citing Celotex, 106 S.

reviewing

the

inferences

evidence

nthe

court

must

genuine issue

at 2553-2554).
draw

favor of the nonmoving party, and

credibility determinations

reasonable
may

weigh the evidence .'
'

Sanderson Plumbinc Products Inc.,

make

Reeves v .

2097, 2110 (
2000)

Factual controversies are to be resolved in favor of the nonmovant,
50th parties have submitted evidence

only when

contradictory facts .' Little , 37 F .3d at 1075.
'

B.

Applicab le Law

Section 547( ( provides in pertinent part that
c) 4)
(
c)

The Trustee m ay

avoid

under this

section

transfer-

(
4) to ob for the benefit of a creditor, to the
extent that , after such transfer, such creditor gave new
value to or for the benefit of the debtor(
A) not secured by an otherwise unavoidable
security interest ; and

on account of which new value the debtor
did not make an otherwise unavoidable
transfer to or for the benefit of such
creditor .

11 U.S. 5 547( 4). In pertinent part 5 547 ( 2) defines nnew
C.
c)(
a)(
value' to mean nm oney or money 's worth in goods, services, or new
'

credit.

.' 11 U.S. 5 547 ( 2).
'
C.
a)(

Citing Leidenheimer Bakinc

Co ., LLC v . Sharr (In re SGSM Acauisition Co ., LLC ), 439 F .3d 233,

241 (
5th

2006), Citgo argues that this statutory language

creates three elem ents that must be proven in order to

assert the Msubsequent' new value defense:
'

(1) the

creditor must have extended new value to the debtor or on

debtor's behalf after receiving the preference; ( the
2)
new value must be unsecured; and ( the new value must
3)
remain unpaid after its transfer.6
3
Citgo argues that
a11 three elements are met . The alleged preferential
transfer was m ade on June 9, 2015 .
CITGO provided

additional fuel to Debtor valued at $891,613.99 from June
10, 2015 through July 1, 2015, a11 of which deliveries
were after the alleged transfer . See Statem ent of Facts

(
nSOF'), % 40. The first temporal element is satisfied.
'
The fuel sales were not secured by any collateral . A s of
the Petition Date, CITGO held Credit Card Receipts valued

at $221,190.12, assuming the Credit Card Receipts were

subject to setoff, the net unsecured claim of CITGO was
$670,423.87

as

substantially in

of

the

Petition

excess of the

Date,

an

amount

alleged preferential

payment of $68,185.69. See SOF, % 5. Thus, the second
element is met. A lthough CITGO had a bond in place with
the Surety, such financial arrangement is not a security
interest . .
Lastly, CITGO 'S net unsecured claim
remained due and payable as of the Petition Date,
satisfying the third element . See SOF, % 41 .64

Ocitgo's Memorandum , Docket Entry No . 15, p . 30 %

6 Id . at %
4

'
(
citation omitted).

As evidence that

provided fuel

Gas-Mart valued

$891,613.99 from June 10, 2015, through July

2015, CITGO cites

the affidavit of Citgo Senior Credit Manager, Karina Estrada-laimer
as well as invoices, Exhibit 11, and a summ ary thereof, Exhibit 12,
attached

Citgo's memorandum .6
s

evidence that Citgo held

Credit Card Receipts valued at $221,190.12 as of the Petition Date,
and that its net unpaid and unsecured claim as of that date was

$670,423.87 or more, Citgo cites
included in its Memorandum,6
f

5 of the Statement of Facts
which plaintiff has responded ,

'Admitted/uncontroverted.'f
'
'V
Citing

uobjects

Federal Rule

of

Procedure 56(
d), plaintiff

Defendant's motion

summary judgment, as

prem ature , raises issues of fact that require discovery , and

early in the proceeding for Plaintiff to properly respond .'f'
'
Then , without disputing that Citgo provided fuel to Gas-Mart valued
2015, through July

2015, or that as

OAffidavit of Citgo Petroleum Corporation in Support of Its
Motion to Dism iss or in the A lternative for Summary Judgment,

Docket Entry NQ . 15-1, % 7 (
nBetween June 9, 2015, and July 2,
2015, CITGO provided additional fuel in the amount of $891,613.99.
Group Exhibit 11 and Exhibit 12, 50th reflecting the value of the

fuel provided, are attached to the Memorandum . . .'); Exhibit 11,
'
Docket Entry No . 15-13, and Exhibit 12, Docket Entry No . 15-14 .
6 citgo's Memorandum , Docket Entry No .
6
id . at
% 5.
E
Xplaintiff's Response , Docket Entry No .

6 . at 16 %
8Id
49

30 %
10 %

(
citing

of the Petition Date, Citgo held an unpaid and unsecured claim

$670,423.87 or more, plaintiff argues that ' dqefendant has failed
'E
to satisfy

burden of proof

subsequent new value defense .' g A sserting that a creditor relying
/6
on the subsequent new value defense bears the burden of proof and
production , plaintiff argues that

E
dqefendant

has

not produce

sufficient

support this affirm ative defense .

evidence

to

Pursuant to Fed . R .

Civ. P. 56( 2), E
c)(
dlefendant has not produced any facts
or evidence in a form that would be admissib le at trial .

Accordingly, g
dqefendant's motion to dismiss Count 111,

or in the alternative for summary judgment, should be
deniedx o
Citgo replies that

Rule 56 requires that ' E )n affidavit or declaration used
'a
to support or oppose a motion must be m ade on personal
knowledge, set out facts that would be adm issible in
evidence, and show that the affiant or declarant is
competent to testify on the matters stated .' Fed . R .
'

Civ. P . 56 ( ( ). The Affidavit E
c) 4
of Karina EstradaJaimeq is made on personal knowledge and identifies that
the Invoices are true and correct copies of business
records for which the Affiant is the records custodian .
The Invoices are business records admissible under Fed .

R . Evid . 803 ( ) ( for the truth of the matter .
6 B)

Those

invoices identify the amount of fuel, the price of the

fue1 and their delivery date ( date after the alleged
a
Preferential transfer). l
7

6 Id . at
9

% 81 .

7 Id
0
7l
citgo's Reply , Docket

34, p . 23 % 34.

Application of the Law to the Undisputed Facts
A lthough this action is in an early stage
yet

file

an

answer and

controversy between

reflected

the

discovery

parties has a

has

begin , the

long history

the factual background set forth

Plaintiff's objection

Citgo's motion

which Citgo has

that

5

is

above .

summary judgment as

premature because it raises issues of fact that require discovery,
merit .

and reference to

56( is titled, 'When Facts Are Unavailable to the Nonmovant,' and
d)
A
'
pertinent part requires

party seeking relief thereunder

ushow gj by affidavit or declaration that, for specified reasons,
cannot present facts essential

56(
d).
declaration ,

Plaintiff has neither submitted an affidavit
presented any reasons why facts essential

justify its opposition
discovery .

Fed . R .

Citgo's motion are unavailable absent

Accordingly, plaintiff has failed

satisfy the

requirements for relief under Rule 56(
d)

Plaintiff also argues that Citgo's motion for summary judgment
should be denied because ug
dlefendant has not produced any facts or
evidence

Rule 56(
c)

'2
form that would be admissib le at tria1 .'7

Federal

provides that A aq party may object that the material
'g

cited to support or dispute

fact cannot be presented in

that would be admissible

H plaintiff's Response, Docket Entry

form
shown

27 %

that Citgo's evidence would not be admissible at trial.

For that

reason and because Citgo's evidence is admissible under Rule 803 (
6)

as business records, plaintiff's objection

evidence lacks

any basis in 1aw or fact .

district court may not grant summary judgment by default
simply because there

no substantive opposition

the motion .

The court may, however , accept as undisputed the movant's version

of the facts and grant

motion

summary judgment when the

movant has made a prima facie showing of entitlem ent

summary

judgment. John v. State of Louisiana (
Board of Trustees for State
Colleqes and Universities), 757 F.2d 698, 707-08 (
5th Cir. 1985).
See Everslev v. Mbank Dallas,

F.2d 172, 174 (
5th Cir. 1988)

(
holding that the court did not

granting a motion for

summary judgment when the movant's submittals make
showing of entitlement
Citgo 's version

judgment as

prima facie

matter of law). Because

facts as contained

affidavit of

Karina Estrada-laime and the business records attached thereto

establish that after Gas-Mart made the $68,185.69 payment alleged
to be preferential, Citgo provided Gas-Mart $891,613.19 of new fuel
for which Citgo had not received payment as

the Petition Date,

and because plaintiff has not submitted any evidence capable of
disputing Citgo's version of the facts, the

Citgo

entitled

judgment as

matter

preferential transfer claim alleged in Count

Complaint (
Docket Entry No.
52

concludes that
law

of plaintiff's

IV . Conclusions and Order
reasons stated

above, the court concludes

that Counts I and 11 are subject to dismissal without prejudice for
lack

subject matter jurisdiction because plaintiff lacks

standing

pursue the claims for breach of contract asserted

Count I and

stay asserted in Count

For the reasons stated in 5 111, above , the court concludes that

Citgo

entitled

summary judgment

preferential transfer asserted in Count
Petroleum Corporation's Motion

plaintiff's claim
Accordingly, Citgo

Dismiss Counts

and 11 and for

Summary Judgment as to Count III (Docket Entry No.

is GRANTED .7
3

For the reasons stated

5 II .
C, above, plaintiff's Request

Oral Argument (
Docket Entry No.
For the reasons stated in
Leave

DENIED .

II .B .1, plaintiff's Motion for

File Supplemental Authority

Support of Plaintiff's

Response to Defendant's Motion to Dismiss (
Docket Entry No. 38) is
R3
The court has allowed the parties extraordinary leeway in
subm itting lengthy briefs and other written materials in connection
with the pending motions . A s the length of this Mem orandum Opinion
and Order indicatesr the court has expended considerable time
reading these papers and performing a significant amount of
independent research to be as fully informed as possible when
addressing the parties' arguments. While, because of the sheer
volume of information presented, it is not impossib le that some
arguments were overlooked, the parties should assume that failure
to expressly address a particular argument in this Memorandum

Opinion and Order reflects the court's judgment that the argument
lacked sufficient merit to warrant discussion . Accordingly , the
court strongly discourages the parties from seeking reconsideration
based on arguments they have previously raised or that they could
have raised .

GRANTED , and plaintiff's Motion

Leave

File Supplemental

Authority in Support of Plaintiff's Response to Defendant's Motion

Dismiss (
Docket Entry No. 41) is GRANTED .
SIGNED at Houston , Texas, this 8th day of F

r ary, 2018 .

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SIM LAKE
UNITED STATES DISTRICT JUDGE