Opinion
Case No. 01-16034 (AJG), Jointly Administered, Contested Matter.
June 13, 2005
CALPINE CORPORATION, By its attorneys, Gregory S. Smith (pro hac vice), Sutherland Asbill Brennan LLP, Washington, DC.
ENRON CORP., EPC ESTATE SERVICES, INC., By their attorneys, Andrew M. Troop (pro hac vice), Weil, Gotshal Manges LLP, Boston, Massachusetts.
STIPULATION AND ORDER RESOLVING CLAIMS OF CALPINE CORPORATION (CLAIM NOS. 4179, 12729, 12730 22162) AND SPECIFIED SUBCONTRACTOR CLAIMS
This Stipulation and Order (the "Stipulation"), dated as of May __, 2005, is made by and among (a) Enron Corp. ("Enron") and EPC Estate Services, Inc. (f/k/a National Energy Production Corp. ("NEPCO" and, together with Enron, the "Enron Parties")) and (b) Calpine Corporation, the successor in interest to Goldendale Energy, Inc. ("Goldendale" and, together with Calpine Corporation, "Calpine"). The Enron Parties and Calpine request that this Stipulation, which settles the claims of Calpine against the Enron Parties, be entered as an order of the Court.
I. RECITALS
A. Background
1. Calpine and NEPCO were parties to a certain Engineering, Procurement, and Construction Contract, dated February 13, 2001 (the "EPC Contract"). Pursuant to the EPC Contract, NEPCO was obligated to, among other things, design, procure equipment and construct a power generation facility in Goldendale, Washington (the "Project").
2. Pursuant to a Guaranty Agreement, dated and effective February 5, 2001 (the "Guaranty Agreement"), Enron guarantied NEPCO's obligations under the EPC Contract.
3. Effective November 30, 2001, Calpine cancelled the EPC Contract pursuant to section 16.2 thereof. Section 16.2.1 provides that "Calpine may terminate this [EPC Contract] for its own convenience at any time by written notice to [NEPCO]."
4. Enron filed a voluntary petition for relief under chapter 11 of the Bankruptcy Code on December 2, 2001. Subsequently, on May 20, 2002, NEPCO filed a voluntary chapter 11 petition.
5. On July 15, 2004 the Court entered an order confirming a chapter 11 plan (the "Plan") for the debtors, including the Enron Parties, in above-captioned chapter 11 cases (the "Chapter 11 Cases"). The Plan became effective on November 17, 2004.
B. Calpine's Claims
6. On September 11, 2002, Calpine filed a proof of claim (claim no. 4179) against NEPCO for $39,619,036.00 (plus attorneys' fees, costs and expenses) (the "Contract Claim"). The Contract Claim alleges that Calpine is entitled to recover from NEPCO under the EPC Contract the amount it allegedly paid NEPCO in excess of certain costs incurred by NEPCO plus NEPCO's markup. Specifically, the Contract Claim asserts that Calpine paid NEPCO $108,034,507, but because NEPCO allegedly failed to, among other things, sufficiently progress on the Project and pay certain subcontractors, NEPCO purportedly incurred only $63,712,847 in costs on the Project. The Contract Claim maintains that NEPCO therefore only was entitled to $68,415,471, representing the $63,712,847 it incurred in costs plus a $4,702,624 markup. The Contract Claim asserts that NEPCO is liable for $39,619,036, which is the difference between the $68,415,471 that Calpine asserts NEPCO earned and the $108,034,507 that Calpine paid NEPCO under the EPC Contract.
7. On October 15, 2002, Calpine filed a proof of claim (claim no. 12730) against Enron for $39,619,036.00 (plus attorneys' fees, costs and expenses) (the "Guaranty Claim"). The Guaranty Claim alleges that Enron is liable pursuant to the Guaranty Agreement for NEPCO's obligations under the EPC Contract, i.e. the Contract Claim.
8. On October 15, 2002, Calpine filed another proof of claim (claim no. 12729) against Enron for $39,619,036.00 (plus attorneys' fees, costs and expenses) (the "Enron Tort/Equity Claim"). On December 2, 2002, Calpine filed another proof of claim (claim no. 22162) against NEPCO also for $39,619,036.00 (plus attorneys' fees, costs and expenses) (the "NEPCO Tort/Equity Claim" and, together with the Enron Tort/Equity Claim, the "Tort/Equity Claims"). The Tort/Equity Claims allege that Enron, through its centralized cash management system, improperly swept the payments made by Calpine to NEPCO pursuant to the EPC Contract and that the alleged $39,619,036 overpayment to NEPCO is held by Enron, NEPCO and/or their affiliates in constructive trust or otherwise is owed to Calpine under theories of conversion, fraud unjust enrichment and other equitable principles.
C. The Subcontractor Claims and the Subrogation Claims
9. In connection with the Project, NEPCO utilized the services of many subcontractors. Between about June 19, 2002 and December 5, 2002, certain subcontractors filed proofs of claim for amounts allegedly owed by NEPCO for labor, services, materials, tools, equipment and/or rentals supplied in connection with the Project. Some, though not all, of these claims, purport to be secured by property at the Project.
10. Through a series of settlements and agreements with certain subcontractors (collectively, the "Subcontractors"), often entitled "Settlement Agreement and Release of All Claims" (collectively, the "Subcontractor Settlements"), Calpine paid the Subcontractors a sum certain (the "Settlement Payment") in exchange for (1) a release of all claims the subcontractors may have had against Calpine, including a release of liens, and (2) an assignment of all or part of the subcontractor's claim against NEPCO to Calpine. The following is a list of the proofs of claim that Calpine asserts have been assigned to it (collectively, the "Subcontractor Claims" and each a "Subcontractor Claim"): CLAIMANT CLAIM #
Certain subcontractors who received settlements from Calpine have already had their claims expunged in the Chapter 11 Cases. Specifically, claim nos. 21210, 21237, 21586, 21778, 22067 and 22226 have already been expunged. Accordingly, those claims are not included in the "Subcontractor Claims" that are to be expunged by this Stipulation. Moreover, Calpine in some instances did not obtain a complete assignment or transfer of such claims. Subcontractor Claims include only Calpine's interest in such claims.
BROOKLYN IRON WORKS 22227 CIVES CORP 21238 COAST CRANE EQUIPMENT CO 6255 DELPHI CONTROL SYSTEMS 2710 FISHER CONTROLS INTERNATIONAL 12503 GENERAL ELECTRIC COMPANY 2473 HOOD RIVER SAND AND GRAVEL 21934 INDUSTRIAL FABRICATION 21773 J H KELLY, LLC 3061 JOHNSTON PUMP 15259 LAMPSON INTERNATIONAL, LLC 5199 MATHESON PAINTING 2438 MULLEN CRANE AND TRANSPORT CO 21908 NEPCAN ENGINEERING LTD 22143 NORCO 6782 NORTH COAST ELECTRIC CO 6830 PACIFIC DETROIT DIESEL-ALLISON, INC. 22184 PACO PUMPS (PPC FLOW TECHNOLOGIES) 15261 PATTERSON PUMP CO 6153 PETROCHEM INSULATION INC 22214 PUGET SOUND PIPE AND SUPPLY 22185 RAMSAY-GERDING CONSTRUCTION CO. 21540 RED-D-ARC, INC. 2662 ROSEMOUNT, INC. 12377 SAFWAY STEEL PRODUCTS, INC 5853 SHAUGHNESSY CO 3891 SMITH MASONRY AND CONTRACTORS 21539 SULZER PUMPS (US) 19230 TRADESMEN INTERNATIONAL, INC 5541 WAHLCO INC. 12477 WESCO DISTRIBUTION INC. 6139, 21388 WYMAN-GORDON FORGINGS, INC. 15203
In the instances detailed in Attachment A, Calpine received a full assignment from the Subcontractor. In the instances detailed in Attachment B, Calpine obtained only a partial assignment from the subcontractor.
11. Calpine has also made payments to certain other subcontractors (the "Informal Settlement Subcontractors") to settle legal claims related to the Project, without entering into formal settlement agreements. Calpine has asserted subrogation rights in the claims filed by the Informal Settlement Subcontractors against NEPCO (collectively, the "Subrogation Claims"). Attachment C contains a list of the Subrogation Claims and the settlement payments made by Calpine to the Informal Settlement Subcontractors.
12. The Subcontractor Claims and the Subrogation Claims aggregate to approximately $8 million.
D. The Claim Objections and Responses
13. On November 12, 2004, the Enron Parties filed an objection to the Contract Claim, Guaranty Claim, Enron Tort/Equity Claim, Subcontractor Claims and Subrogation Claims (the "Claims Objection"), thereby commencing a contested matter between Calpine and the Enron Parties (the "Contested Matter"). The Enron Parties omitted the NEPCO Tort/Equity Claim in the Claims Objection. Accordingly, on March 11, 2005, the Enron Parties, together with the other debtors in the Chapter 11 Cases, filed the Reorganized Debtors' Ninety-First Omnibus Objection to Proofs of Claim, which objected to, among other things, the NEPCO Tort/Equity Claim (the "NEPCO Tort/Equity Claim Objection").
The Claims Objection originally omitted the Subcontractor Claim filed by Rosemount, Inc. (the "Rosemount Subcontractor Claim"). The Rosemount Subcontractor Claim was included subsequently in the Claims Objection pursuant to the Assented to Supplement to Objection of Enron Corp. and EPC Estate Services, Inc. to Claims of Calpine Corporation and Certain Subcontractors filed on January 7, 2005.
14. On January 31, 2005, Calpine filed its answer and response to the Claims Objection, and on March 29, 2005, Calpine filed a response to the NEPCO Tort/Equity Claim Objection.
E. The Discovery Stipulation
15. The Parties entered into a stipulation, dated March 30, 2005, which set forth a discovery schedule for the Contested Matter and consolidated the NEPCO Tort/Equity Claim Objection into the Contested Matter (the "Discovery Stipulation"). The Discovery Stipulation also required the Parties to meet on April 13, 2005 in a good faith attempt to settle the Contested Matter (the "Settlement Meeting").
16. The Discovery Stipulation was entered as an order of the Court on March 31, 2005.
F. Settlement Discussions
17. The Settlement Meeting took place at the offices of Calpine's counsel in Washington, DC. The parties vigorously debated the points of disagreement and litigation risks at the Settlement Meeting.
18. The Enron Parties maintain that because Calpine opted to terminate the EPC Contract under Section 16.2.1 for its own convenience, Calpine is not entitled to any recovery. Calpine disagrees with Enron's interpretation of the EPC Contract based on Section 16.2.2 of the EPC Contract, which provides that NEPCO was entitled to reasonable costs for work performed, plus a negotiated markup, as of the termination of the EPC Contract. Calpine therefore believes it is entitled to recover the alleged overpayment under the terms of the EPC Contract and equitable principles under Washington law.
19. Assuming Calpine's interpretation of the EPC Contract is correct, the Parties nonetheless would disagree on the amount of the alleged overpayment — with the Enron parties calculating such amount as approximately $32,716,000, while Calpine calculates its claim to be $39,631,257.
20. The Enron Parties assert that each Subcontractor Claim should be allowed in an amount no more than the lesser of the amount of the Subcontractor Claim or the Settlement Payment paid in respect thereof. The Enron Parties maintain that, notwithstanding the purported assignment of the Subcontractor Claims contained in the Subcontractor Settlements, Calpine is in fact a subrogee, not an assignee. Calpine, relying on the settlement and assignment documentation with the Subcontractors, disagrees and asserts that it has a claim for the full value of such Subcontractor Claims.
21. Based on consideration of attendant risks and potential expenses that Parties face, the Parties now desire to settle their disputes amicably and to fully resolve all matters between them.
II. AGREEMENT AND ORDER
A. The Tort/Equity Claims are disallowed in full for all purposes in the Chapter 11 Cases.
B. The Subcontractor Claims on Attachment A are disallowed in full for all purposes in the Chapter 11 Cases. The Subcontractor Claims on Attachment B are disallowed to the extent indicated. Further, the Subrogation Claims on Attachment C are disallowed to the extent of Calpine's subrogation rights indicated.
C. The Contract Claim is allowed against NEPCO as a class 67 claim under the Plan in the amount of $26 million. Any prior disallowance or expungement of the Contract Claim shall be without effect, and the terms of this Stipulation and Order shall control.
D. The Guaranty Claim is allowed against Enron as a class 185 claim under the Plan in the amount of $26 million.
E. All scheduled liabilities of the Enron Parties to Calpine arising from, related to or connected with the Project, EPC Contract, Guaranty Agreement, Subrogation Claims, Subcontractor Claims or Subcontractors Settlements are expunged, including, to the extent applicable, scheduled liability numbers 184867, 100017870, 100042830, 100042840, 100916200 and 100916210.
F. All scheduled liabilities of the Enron Parties to subcontractors or other parties arising from, related to or connected with the Project, EPC Contract, Guaranty Agreement, Subrogation Claims, Subcontractor Claims or Subcontractors Settlements are expunged to the extent Calpine is the successor in interest to such subcontractors or other parties, including, to the extent applicable, scheduled liability numbers 150757, 152417, 153039, 184867, 193826, 211038, 216658, 230369, 233533, 239788, 253361, 100381430, 100883760, 100883780, 100885100, 100887100, 100887110, 100887120, 100887700, 100887720, 100887740, 100889800, 100889980, 100889990, 100890810, 100890820, 100892420, 100892430, 100892560, 100892580, 100892620, 100892640, 100892650, 100892660, 100892680, 100893190, 100893210, 100894810, 100895770, 100895780, 100895790, 100895810, 100896010, 100896030, 100896040, 100897110, 100898920, 100899080, 100899250, 100899270, 100905320, 100905330, 100907520, 100907530, 100908540, 100908550, 100909190, 100909200, 100914050, 100914060, 100915650, 100915660, 100915670, 100915690, 100915710, 100918360, 100918370, 100918380, 100919070, 100919080, 100919090, 100919890, 100920820, 100920830, 100922360, 100922370, 100922380, 100924460, 100926630, 100926640, 100927310, 100927320, 100927930, 100927940, 100928850, 100928860, 100928910, 100929400, 100929780, 100929790, 100929800, 100931040, 100931050, 100931060, 100931540, 100931800, 100931810, 100931820, 100933260, 100933750, 100933770, 100933780, 100933790, 100933800, 100934520, 100935010, 100935020, 100936230, 100936380, 100936390, 100936400, 100938280, 100940880, 100940900, 100940910, 100940920, 100940930, 100940940, 100940950, 100940960 and 100940970.
G. Except as provided in paragraphs C and D above, Calpine and its predecessors, successors and assigns release, waive and relinquish any and all demands, causes of action, liabilities, debts, obligations, and claims (as that term is defined in 11 U.S.C. § 101(5)) no matter how arising, including by way of assignment or subrogation, of whatsoever kind and nature, character and description, whether in law or equity, presently asserted or unasserted, known or unknown, fixed, matured or contingent, liquidated or unliquidated, against Enron, NEPCO and/or their affiliates, any debtor or reorganized debtor in the Chapter 11 Cases, any of the foregoing entities' respective past, present and future officers, directors, partners, managers, employees, agents and servants, to the extent arising out of or relating to the Project, EPC Contract, Guaranty Agreement, Subrogation Claims, Subcontractor Claims or Subcontractor Settlements.
H. The Enron Parties waive and relinquish any and all demands, causes of action, liabilities, debts, obligations, and claims (as that term is defined in 11 U.S.C. § 101(5)) no matter how arising, including by way of assignment or subrogation, of whatsoever kind and nature, character and description, whether in law or equity, presently asserted or unasserted, known or unknown, fixed, matured or contingent, liquidated or unliquidated, against Calpine, their affiliates, or any of their respective past, present and future officers, directors, partners, managers, employees, agents and servants, to the extent arising out of or relating to the Project, EPC Contract, Guaranty Agreement, Subrogation Claims, Subcontractor Claims or Subcontractor Settlements.
I. Calpine represents that it is the owner of the Subcontractor Claims on Attachment A, Contract Claim, Guaranty Claim and Tort/Equity Claims and has full power and authority to compromise those claims as provided herein. Calpine represents that it has an ownership interest in the Subcontractor Claims to the extent indicated on Attachment B. Calpine represents that it has subrogation rights in the Subrogation Claims to the extent indicated on Attachment C.
So Ordered:
Attachment A Subcontractor Claims Assigned to Calpine in Their Entirety
Claimant Claim No.
Brooklyn Iron Works 22227 Cives Corp. 21238 Coast Crane Equip. Co. 6255 Delphi Control Systems 2710 Fisher Controls International 12503 General Electric Company 2473 Hood River Sand and Gravel 21934 Industrial Fabrication 21773 J H Kelly, LLC 3061 Johnston Pump 15259 Lampson International, LLC 5199 Matheson Painting 2438 Mullen Crane and Transport Co. 21908 Norco 6782 North Coast Electric Co. 6830 Pacific Detroit Diesel-Allison, Inc. 22184 Paco Pumps 15261 Patterson Pump Co. 6153 Petrochem Insulation Inc. 22214 Puget Sound Pipe and Supply 22185 Ramsay-Gerding Construction Co. 21540 Red-D-Arc, Inc. 2662 Rosemount, Inc. 12377 Safway Steel Products, Inc. 5853 Shaughnessy Co. 3891 Smith Masonry and Contractors 21539 Sulzer Pumps (US) Inc. 19230 Tradesmen International, Inc. 5541 Wahlco Inc. 12477 Wesco Distribution Inc. 6139, 21388
Attachment B Subcontractor Claims Partially Assigned to Calpine
Claimant Claim No. Principal Amount
Nepcan Engineering Ltd. 22143 $ 939,495.06 Wyman-Gordon Forgings, Inc. 15203 136,999.00
Attachment C Subrogation Claims
Claimant Claim No. Settlement Payment By Calpine to
Crestline Construction Company LLC 21776 $ 211,092.20 Stoner Electric, Inc. 4911 413,923.69