Opinion
Case No. 01-16034 (AJG) Jointly Administered.
March 24, 2006
APPEARANCES:
WEIL, GOTSHAL MANGES LLP Attorneys for Reorganized Debtors Houston, Texas,
BY: STEPHEN T. LODEN, ESQ.
WYATT TARRANT COMBS LLP Attorneys for LS Acquisition Co. LLC Lexington, Kentucky,
BY: MARY L. FULLINGTON, ESQ.
This matter having come before the Court on the Motion of LS Acquisition Co. LLC for Dismissal of Reorganized Debtors' Sixty-Seventh Omnibus Objection to Claim Number 15207 and Determination That Further Objection Is Barred, dated October 21, 2005 (Docket No. 27860) (the "Motion to Dismiss"), and the Court having considered in connection therewith the Sixty-Seventh Omnibus Objection filed in Aid of Confirmation of Joint Plan to Reclassify Proofs of Claim filed as Administrative and Priority Claims, dated November 16, 2004 (Docket No. 21988) (the "Omnibus Objection"), and the Response of Enron North America Corp. to Motion of LS Acquisition Co. LLC for Dismissal of Debtors' Sixty-Seventh Omnibus Objection and Supplemental Objection to Proof of Claim Number 15207 of Lodestar Energy, Inc. dated November 14, 2005 (Docket No. 28120) (the "Supplemental Objection"); and upon determining that the Court has jurisdiction to consider the Omnibus Objection, the Supplemental Objection, and the Motion to Dismiss and the relief requested therein; and due notice of the Omnibus Objection, the Supplemental Objection, and the Motion to Dismiss, and the hearings held thereon having been served to all parties entitled thereto in accordance with the Bankruptcy Rules and this Court's Second Amended Case Management Order; and for the reasons stated in the Court's March 16, 2006, decision, a copy of which is attached hereto and which was announced on the record during a properly noticed and convened hearing; it is hereby
ORDERED that the Supplemental Objection shall be, and hereby is, dismissed with prejudice; and it is further
ORDERED that the Omnibus Objection as to proof of claim number 15207 of Lodestar Energy, Inc. shall be and hereby is Granted to the extent it seeks the reclassification to a general, unsecured, non-priority claim of that portion of proof of claim number 15207 in the amount of $1,220,421.62 classified therein as an administrative, priority claim; and it is further
ORDERED that any further objection to proof of claim number 15207 of Lodestar Energy, Inc. is barred by the expiration of the March 14, 2005 deadline set forth in Section 21.1 of the Fifth Amended Joint Plan of the Affiliated Debtors; and it is further
ORDERED that proof of claim number 15207 of Lodestar Energy, Inc. shall be and hereby is allowed as a general unsecured, non-priority, claim in the Enron North America Corp. chapter 11 case in the amount of $6,115,275.15.
(Whereupon, the following is an excerpt from 03/16/2006 in In re Enron Corp., et al, Case No. 01-16034.)
JUDGE GONZALES: This is Judge Gonzalez. I will be reading a decision into the record regarding the issue as to the supplemental objection.
* * * *
Pursuant to Section 21.1 of the Fifth Amended Joint Plan of the Affiliated Debtors, the deadline for the Reorganized Debtors to file objections to Claims expired on March 14, 2005. On October 15, 2002, Lodestar Energy, Inc. ("Lodestar") timely filed Proof of Claim (Claim Number 15207) in the Enron North America Corp. ("ENA") Chapter 11 proceeding in the amount of $6,115,275.15. This proof of claim sought
1. $1,601,744.46 as unpaid invoices, of which $1,220,421.62 was filed as an administrative priority claim pursuant to 11 U.S.C. sections 546 (c) (2), 503, and 105, on the grounds that the claim was a valid Reclamation claim.
2. $197,852.00 based on coal committed to ENA but sold to others when ENA repudiated the coal supply contracts existing between Lodestar and ENA.
3. $4,315,648.69 in damages and/or lost revenue incurred as a result of ENA's repudiation of the Pre-Petition Coal Purchase Agreements.
On September 30, 2004, LS Acquisition Co., LLC ("LS"), the transferee of Lodestar's claim, filed an "Application for Allowance of Administrative Claim and for Order Authorizing and Directing Payment of Claim Pursuant to 11 U.S.C. sections 546(c) 2, 503, and 105" ("LS Application"). In the application, LS sought allowance and payment of the $1,220,421.62 Reclamation claim as an administrative claim.
On November 15, 2004 ENA filed its "Response to LS Acquisition Co. LLC's Application for Allowance of Administrative Expense Claim," contesting LS' Reclamation claim as invalid and not classifiable as an administrative claim.
On November 16, 2004 Enron filed their "Sixty-Seventh Omnibus Objection Filed in Aid of Confirmation of Joint Plan to Reclassify Proofs of Claim Filed as Administrative and Priority Claims." ("Omnibus Objection"). On page 13 of Exhibit B of the Omnibus Objection, the Debtors objected to the classification of the $1,220,421.62 claim as one of administrative priority and wanted it reclassified as a general unsecured claim. No objections were made to the remaining portion of LS's proof of claim.
The parties engaged in discovery pursuant to a Scheduling Order and LS determined that it would not be able to establish that Lodestar has a valid Reclamation claim. On September 9, 2005, LS filed a "Supplement of LS Acquisition Co. LLC to the Consolidated (1) Response and Objection of LS to Debtors' Sixty-Seventh Omnibus Objection Filed in Aid of Confirmation of Joint Plan to Reclassify Proofs of Claim Filed as Administration and Priority Claim, and (2) Application of LS Acquisition Co. LLC for Allowance of Administrative Claim and for Order Authorizing and Directing Payment of Claim Pursuant to 11 U.S.C. sections 546 (c) (2), 503, and 105." ("LS Supplement"). In the LS Supplement, LS conceded that they could not demonstrate that it had a valid Reclamation claim and withdrew the original September 30, 2004 Application.
Regarding the Extension Order at issue, on February 25, 2005, this Court, upon motion of the Reorganized Debtors, entered an "Order Extending Period to File Objections to Certain Claims." The order stated that "[W]ith respect to Claims that are subject to a pending Omnibus Objection, an adjourned individual claim, or a matter currently under advisement with the court by March 14, 2005, wherein the Reorganized Debtors' objection to such claim is initially or subsequently denied, the objection deadline is hereby extended to the latter of (i) sixty (60) days from the date on which this Court enters an order denying such Initial objection. . . ."
The Order also stated "[W]ith respect to Claims that are subject to a signed settlement agreement between the Reorganized Debtors and a claimant entered into on or before March 14, 2005, that the Court does not approve, the objection deadline is hereby extended to the latter of (i) sixty (60) days from the date on which this Court enters a final order approving a Rule 9019 motion seeking approval of the Settlement Agreement, (ii) sixty (60) days from the date that the Reorganized Debtors determine that the Settlement Agreement cannot close and (iii) sixty (60) days from the date on which any appellate court enters a final order from an appeal of the final order of this Court resolving such Rule 9019 Motion. . . ."
As indicated above, the time to object to claims, unless extended by the Extension Order, expired on March 14, 2005. On November 14, 2005, Enron filed a "Supplemental Objection to Proof of Claim Number 15207 of Lodestar Energy Inc." ("Supplemental Objection"). The Debtors claim the Settlement Objection is not time-barred because, pursuant to the Extension Order, the deadline to object to the Lodestar Claim is 60 days from which there is a final-nonappealable order. Enron claims that since no such order has been entered regarding the Sixty-Seventh Omnibus Objection, the deadline to object to Lodestar's Claim has not passed.
Debtors' interpretation is incorrect. The Extension Order must be examined in context. By the motion for the Extension Order, the Debtors were seeking to protect themselves from in fact not raising every conceivable basis for a claim to be disallowed in its objection, since often there may be a basis to disallow a claim without the need to expend resources to review each aspect of a particular claim. In the Extension Order there is a reference to an "Initial" objection. This supports the conclusion that a broader type of objection would likely be filed first, and then if overruled a more particularized objection would likely follow if appropriate. Therefore, the Extension Order, among other things, provides an opportunity for the Debtors to raise any additional objection for disallowance if the Initial objection were overruled. It does not provide for an extension under that provision of the order unless the Initial objection is overruled. The denial of the Initial objection is a condition precedent to the triggering of the extension under that provision of the order.
In its Omnibus Objection, Enron only objected to the Reclamation portion of the claim of Lodestar. There will never be a final-nonappealable order overruling the Reclamation claim since LS has conceded that they could not demonstrate that they have a valid Reclamation claim and withdrew the original September 30, 2004 Application on September 9, 2005. The Court will never rule on the objection to the Reclamation portion of Lodestar's claim because that claim is no longer before the Court. Enron's objection to the claim can never be "initially or subsequently denied." As stated above, the denial of the "Initial" objection is a condition precedent to the sixty-day extension period. Therefore, that provision of the Extension Order is not implicated. Enron was aware of the non-Reclamation portions of the claim in their initial Sixty-Seventh Omnibus Objection, but only raised an objection to the Reclamation portion of the claim.
Further, Enron's Supplemental Objection is also time-barred in that it does not fit within the provision regarding claims subject to a signed settlement agreement between the parties that was entered into before May 14, 2005 and which was not approved by the Court. There was no signed settlement agreement between Enron and LS entered into before March 14, 2005. The fact the parties were engaged in settlement discussions does not extend the time to object to claims, without more. Further, it appears from the record that any settlement discussions regarding the issues raised in the Supplemental Objection did not occur until after the March 14, 2005 deadline. Therefore, there is no basis to argue that the failure to file a timely objection was that the parties were engaged in discussions and there was any understanding that the deadline would be extended. At the time the deadline expired the only issue that the Debtors were disputing was the Reclamation portion of the claim.
Enron argues that the September 9, 2005 withdrawal of the Reclamation claim is the first time that there was a written filing in the Court's records indicating a capitulation on that claim and seems to equate that with an order overruling the Debtors' objection. This ignores the fact that the withdrawal of the Claim removes the sole objection to the Claim that was before the Court. Again, as stated before, the Extension Order can never become operative because there is no objection for the Court to deny. The Debtors were aware of all of Lodestar's claim and should have objected to the non-Reclamation portions before the original deadline, if they deemed it appropriate.
Regarding Debtors' argument that it is the position of the Court that there is strong preference to resolve disputes on the merits, that is true. However, that strong preference is a factor when weighing the equities of a particular situation. It cannot create an exception where one is not warranted under the plain language of the relevant order and where there are no other circumstances that would warrant such relief.
Therefore, based upon all of the foregoing, the Debtors' Supplemental Objection is overruled as untimely. Counsel for LS is to settle an order consistent with this Court's opinion.
* * * *
(Whereupon, a recess was taken.)
STATE OF NEW YORK ) : SS: COUNTY OF NEW YORK )
I, DEBORAH HUNTSMAN, a Shorthand Reporter and Notary Public within and for the State of New York, do hereby certify:
That the within is a true and accurate transcript of the Digitally Recorded Proceedings recorded on the 16th day of March, 2006.
I further certify that I am not related by blood or marriage to any of the parties and that I am not interested in the outcome of this matter.
IN WITNESS WHEREOF, I have hereunto set my hand this 18th day of March, 2006.
_______________________________ DEBORAH HUNTSMAN