On January 4, 2016, the bankruptcy court ruled on defendants' motion to dismiss with respect to the breach of contract claim. See In re Lyondell Chem. Co., 544 B.R. 75 (Bankr. S.D.N.Y. 2016) (" Dismissal Opinion"). The bankruptcy court held that Section 9.05 was enforceable as to all damages other than restitution damages. Id. at 92.

Although it is not expressly provided for in the Bankruptcy Code, and the issue has not been addressed by the Second Circuit Court of Appeals, the overwhelming majority of courts to have considered the issue have concluded that bankruptcy courts, as courts of equity, are empowered to recharacterize a purported loan as an equity contribution when the true nature of the underlying transaction or transactions which form the basis for the purported claimant's rights against the bankruptcy estate is, in substance, a capital contribution. See , In re Alternate Fuels, Inc. , 789 F.3d 1139, 1146 (10th Cir. 2015) (“In re Alternate Fuels ”); In re SubMicron Sys. Corp. , 432 F.3d 448, 454–56 (3rd Cir. 2006) (“In re SubMicron ”); In re Dornier Aviation (N. Am.), Inc., 453 F.3d 225, 231 (4th Cir. 2006) (“Dornier Aviation ”); In re AutoStyle Plastics, Inc., 269 F.3d 726, 749 (6th Cir. 2001) (“In re AutoStyle ”);In re Sabine Oil & Gas Corp. , 547 B.R. 503, 566–67 (Bankr. S.D.N.Y. 2016) ; In re Lyondell Chem. Co. , 544 B.R. 75, 106 (Bankr. S.D.N.Y. 2016) (“In re Lyondell ”); In re BH S & B Holdings LLC , 420 B.R. 112, 157 (Bankr. S.D.N.Y. 2009) (“In re BH S & B ”); In re Rockville Orthopedic Associates, P.C. , 377 B.R. 438, 442 (Bankr. D. Conn. 2007) ; In reAdelphia Comm'n. Corp. , 365 B.R. 24, 73–74 (Bankr. S.D.N.Y. 2007) (“In re Adelphia ”). “When a corporation becomes bankrupt, the temptation to lay aside the garb of a stockholder, on one pretense or another, and to assume the role of a creditor, is very strong, and all attempts of that kind should be viewed with suspicion.” In re Arcapita Bank B.S.C.(c) , 508 B.R. at 818 (quoting Jezarian v. Raichle (In re Stirling Homex Corp.), 579 F.2d 206, 213 (2nd Cir. 1978) ).

The "ultimate exercise" in evaluating any recharacterization claim "is to ascertain the intent of the parties." Weisfelner v. Blavatnik (In re Lyondell Chem. Co.) , 544 B.R. 75, 103 (Bankr. S.D.N.Y. 2016). While "no one factor is controlling or decisive ... the court may dismiss a recharacterization claim if the plaintiff fails to plead facts that trigger the applicability of the AutoStyle factors, or a meaningful subset of them."

The "ultimate exercise" in evaluating any recharacterization claim "is to ascertain the intent of the parties." Weisfelner v. Blavatnik (In re Lyondell Chem. Co.), 544 B.R. 75, 103 (Bankr. S.D.N.Y. 2016). While "no one factor is controlling or decisive . . . the court may dismiss a recharacterization claim if the plaintiff fails to plead facts that trigger the applicability of the AutoStyle factors, or a meaningful subset of them."

In determining whether to recharacterize the Tranche B facility of the Prepetition Term Loan Agreement as equity, the Court considers the factors set out in Bayer Corp. v. MascoTech, Inc. (In re AutoStyle Plastics, Inc.) , 269 F.3d 726 (6th Cir.2001), along with the facts and circumstances surrounding the transaction. SeeAutoStyle Plastics , 269 F.3d at 750 ; In re Lyondell Chem. , 544 B.R. 75, 93 (Bankr.S.D.N.Y.2016). The AutoStyle factors are:

See, e.g. , Miller v. ANConnect, LLC(In re Our Alchemy, LLC) , No. 18-50633, 2019 WL 4447535, at *6–11 (Bankr. D. Del. Sept. 16, 2019) ; Spradlin v. Whitt (In re Licking River Mining, LLC) , 572 B.R. 812, 825 (Bankr. E.D. Ky. 2017) ; Weisfelner v. Blavatnik (In re Lyondell Chem. Co.) , 544 B.R. 75, 102–04 (Bankr. S.D.N.Y. 2016) ; Devices Liquidation Tr. v. Pinebridge Vantage Partners, L.P. (In re Pers. Commc'n Devices, LLC) , 528 B.R. 229, 237–39 (Bankr. E.D.N.Y. 2015) ; Official Comm. of Unsecured Creditors v. Highland Capital Mgmt. L.P. (In re Moll Indus., Inc.) , 454 B.R. 574, 581–85 (Bankr. D. Del. 2011) ; Official Comm. of Unsecured Creditors v. Bay Harbour Master Ltd. (In re BH S & B Holdings LLC) , 420 B.R. 112, 160 (Bankr. S.D.N.Y. 2009), aff'd as modified , 807 F. Supp. 2d 199 (S.D.N.Y. 2011) ; Adelphia Commc'ns Corp. v. Bank of Am., N.A. (In re Adelphia Commc'ns Corp.) , 365 B.R. 24, 74–75 (Bankr.

Ark II maintains that the Trustee has failed to plead facts sufficient to trigger the so-called ‘AutoStyle factors’ or ‘a meaningful subset of them.’ " (Motion to Dismiss ¶ 4 (citing Weisfelner v. Blavatnik (In re Lyondell Chem. Co.) , 544 B.R. 75, 94 (Bankr. S.D.N.Y. 2016).) In essence, Ark II contends that the January 2016 loan looks, walks and talks like a loan, not an equity infusion.

The claims of creditors who are "insiders" are closely scrutinized.Weisfelner v. Blavatnik (In re Lyondell Chem. Co.), 544 B.R. 75, 103 (Bankr. S.D.N.Y. 2014). Id. at 94.

In its Objection, the Committee also requests that the Court disallow the Intercompany Claim in its entirety under section 502(b)(1) by invoking the Court's broad equitable power to ensure that "fraud will not prevail." See Objection ¶ 53 (citing United States v. Energy Resources Co., 495 U.S. 545, 549 (1990) ("[B]ankruptcy courts, as courts of equity, have broad authority to modify creditor-debtor relationships")); In re Lyondell Chem. Co., 544 B.R. 75, 92-93 (Bankr. S.D.N.Y. 2016) (quoting Pepper v. Litton, 308 U.S. 295, 305 (1939) ("fraud will not prevail . . . substance will not give way to form . . .")). However, the Committee has not alleged fraud on the part of LATAM Finance or Peuco.

Judge Gerber previously held, with respect to the Trustee's breach of contract claim, that the Access Revolving Credit Agreement's limitation on damages provision is enforceable, and only restitutionary damages are available to the Trustee. Weisfelner v. Blavatnik (In re Lyondell Chem. Co.) , 544 B.R. 75, 92 (Bankr. S.D.N.Y. 2016) [hereinafter Lyondell I ] ("[T]he limitation on damage clause, even though the Court has found it enforceable, does not preclude recovery of restitution.") Although Judge Gerber found that the breach of contract claim survived the motion to dismiss, this Court must now consider the claim in the full light of trial after reviewing the full evidentiary record. 2. Legal Standard