In re Energy Coal S.P.A.

582 B.R. 619

IN RE: ENERGY COAL S.P.A., Foreign Debtor.

Case No. 15–12048 (LSS)

United States Bankruptcy Court, D. Delaware.

Signed January 2, 2018

Victoria A. Guilfoyle, Josef W. Mintz, Blank Rome LLP, Alan Michael Root, Archer & Greiner P.C., Wilmington, DE, Michael B. Schaedle, Blank Rome LLP, Philadelphia, PA, for Debtor.

MEMORANDUM REGARDING RECOGNITION MOTION

LAURIE SELBER SILVERSTEIN, UNITED STATES BANKRUPTCY JUDGE

Before the Court is the Final Report and Motion of Augusto Ascheri, Foreign Representative of Energy Coal, S.P.A. for Entry of an Order Pursuant to 11 U.S.C. §§ 105(a), 350, 1507, 1509, 1517, 1521, and 1525 (I) Recognizing and Giving Full Force and Effect to Homologation Order Entered in Furtherance of the Company's Italian Debt Restructuring Plan; and (II) Authorizing Procedure to Close the Above–Captioned Chapter 15 Case ("Recognition Motion")¹ and the objections and responses filed thereto by MacEachern Energy LLC ("MELLC") and Christina MacEachern (collectively, "Objectors").² The Court held an evidentiary hearing on May 11, 2017 ("Hearing"), heard argument, and took the matter under advisement. Having reviewed the matter,³ the Court FINDS and CONCLUDES as follows.

1. On April 13, 2015, Energy Coal, S.p.A. filed an application for Concordato Preventivo under the Italian Insolvency Law ("IIL") in the Tribunale di Genova, Sezione Fallimentare ("Genova Bankruptcy Court").⁴ On April 16, 2015, the Genova Bankruptcy Court entered an order commencing the Concordato Preventivo.⁵ The Genova Bankruptcy Court appointed Auguso Ascheri ("Foreign Representative") as the foreign representative of Energy Coal.

2. On October 2, 2015, the Foreign Representative filed a verified petition under chapter 15 of the United States Bankruptcy Code together with a motion seeking, among other things, recognition of the Concordato Preventivo as a foreign main proceeding and a stay of litigation pending in any United States court.⁶ After the consensual resolution of objections filed by certain litigation parties, and the granting of certain provisional relief, on November 12, 2015, the Court entered an unopposed order recognizing the Corcordato Preventivo as a foreign main proceeding and granting certain additional relief.⁷

3. While the chapter 15 case remained relatively silent thereafter, the Foreign Representative took steps in the Genova Bankruptcy Court to obtain approval of a composition proposal and plan in the Concordato Preventivo.

4. On October 10, 2015, Energy Coal submitted an initial version of a debt restructuring plan to the Genova Bankruptcy Court.⁸ The plan was later amended on December 31, 2015.⁹ By decree entered on February 26, 2016, the Genova Bankruptcy Court declared Energy Coal's Concordato procedure "open" and scheduled a hearing for creditors to solicit acceptances ("Adunanza dei Creditori") of the amended plan ("Plan").¹⁰ The Andunanza dei Creditori took place on June 1, 2016.¹¹

5. After the Andunanza dei Creditiori and the requisite solicitation period, Energy Coal's creditors approved the Plan, with approximately 87% of the company's creditors accepting the Plan.¹²

6. The Genova Bankruptcy Court held a hearing on September 28, 2016, to consider whether to enter an order of homologation for the Concordato Preventivo. No creditors opposed the Plan. On October 3, 2016, the Genova Bankruptcy Court entered the Homologation Order approving the Plan.¹³

7. Emerging from the Concordato Preventivo, Energy Coal remains a going concern. It will remain in the same business, focused on trading commodities, and will continue to source certain product from the United States.¹⁴

8. Under the Plan, Energy Coal will use the revenue of its ongoing operations to fund payments to creditors.¹⁵ The Plan provides that all administrative expenses and claims of secured creditors are to be paid in full.¹⁶ Unsecured creditors are divided into five classes with treatment as specified in the Plan, which generally provides for payment of 1% to 7% of the approved claim amount depending on the class in which the claim falls, plus certain additional consideration if Energy Coal's balance sheet reflects a "Distributable Surplus" as defined in the Plan.¹⁷

9. Under the IIL, the entry of the Homologation Order serves to discharge Energy Coal from claims identified in the Plan and the order has the force of an injunction enforcing the discharge and the restructuring contained in the Plan.¹⁸

10. On January 30, 2017, the Foreign Representative filed the Recognition Motion in this case. By the Recognition Motion, the Foreign Representative seeks recognition of the Homologation Order entered in the Italian Concordato and procedures to close the chapter 15 case. In furtherance of the Homologation Order, the Foreign Representative also seeks an injunction enjoining creditors within the territorial United States from seeking judgments in the United States against Energy Coal or its property and from executing on its assets in the United States to collect on a debt owed by Energy Coal.¹⁹

The Objectors' Claims

11. In January, 1999, Christopher MacEachern was engaged by Energy Coal as an independent contractor to source petroleum coke supply.²⁰ Thereafter, MELLC and Energy Coal executed that certain Memorandum of Operating Agreement dated May 11, 2005, as amended.²¹ Further, Christine MacEachern and Energy Coal executed that certain Independent Contractor Agreement made effective as of October 1, 2007 (together with the Memorandum of Operating Agreement, as both were amended and extended, the "Agreements").²² Collectively, Objectors sourced petroleum coke supply for Energy Coal, managed Energy Coal's related logistics in the United States, and provided various administrative and other services to Energy Coal.²³ These services continued for a time during the Concordato Preventivo and the chapter 15 case.²⁴

12. On December 21, 2015, the Foreign Representative sent official notice of termination of both Agreements effective March 31, 2016.²⁵

13. Objectors assert that they are owed money under each of the Agreements, and that such sums are entitled to payment in full under the Plan.²⁶ They assert they never received notice of the Concordato Preventivo or any applicable deadlines.²⁷ Objectors further assert that even if they had received notice of the deadlines they were not in a position to file a claim in the Concordato Preventivo because the orders in this chapter 15 case prevented them from participating in the Concordato Preventivo and/or from liquidating their claims.²⁸

14. Energy Coal's books and records reflect that Christina MacEachern may be owed amounts from Energy Coal, subject to various defenses, counterclaims and setoff rights.²⁹ Energy Coal's books and records reflect that MELLC is not owed amounts from the company, but rather is a net debtor to Energy Coal.³⁰ Energy Coal (and/or the Foreign Representative) has recognized communications from Objectors as timely assertions of claims in the Concordato Preventivo proceedings.³¹

15. Ms. Barbara Gambaro testified on behalf of the Foreign Representative. She is an attorney licensed and in good standing to practice in Italy, is a 2004 graduate of the University of Genova Law School, and was admitted to the bar of the general court of appeal on December 4, 2008.³² Ms. Gambaro is a senior associate with Cristoffanini & Associates, which was retained by Energy Coal to represent it in the Italian Concordato proceedings.³³ The main focus of her practice is commercial bankruptcy and corporate insolvency law.³⁴

16. Ms. Gambaro testified that Objectors' claim (if any) against Energy Coal is treated as a Class 5 unsecured claim under the Plan, but that notwithstanding that categorization, out of an abundance of caution, Energy Coal has reserved funds in the Plan to pay Objectors' claims in the event that they are allowed in whole or in part with a classification other than unsecured.³⁵ In this regard, the Plan provides for an increase in the risk provision for a sum amount to approximately €2.2 million, with a cash absorption of €1 million on account of Objectors' claims.³⁶ She further testified that, notwithstanding the classification of Objectors' claims as class 5 general unsecured claims, Objectors are able to challenge that classification before the Genova Bankruptcy Court, which can order an appropriate remedy.³⁷

The Parties' Positions

17. Objectors do not object to this Court's recognition of the Plan and the Homologation Order, but do object to the requested discretionary relief in the form of the injunction. Objectors argue that they should not be enjoined from proceeding with their claims against Energy Coal in the United States, specifically in Florida, and they should not be precluded by the Plan in their ability to seek a 100% recovery. In particular, Objectors argue that the Agreements provide that they are governed by Florida law and that venue of any litigation regarding disputes under the contracts must proceed in the state of Florida. Objectors believe, therefore, that all of their disputes with Energy Coal—including both the liquidation of their claims and any dispute over priority and distribution—should be determined by a Florida court. They also object to the extent that MELLC's claims against Energy Coal would receive only the 7% payout under the Plan, but Energy Coal's claims against MELLC would be paid 100% on the dollar (i.e. an evisceration of setoff rights).³⁸

18. Objectors also deny receiving notice of the Concordato Preventive, any notices of applicable deadlines, including notice of the Andunanza dei Creditori, or a ballot. They contend that the evidence provided by the Foreign Representative of notice to Objectors shows only that such notices were sent, but does not evidence actual receipt. Objectors further contend that they have been precluded by the Recognition Order entered in this case and the stay of proceedings against Energy Coal from liquidating their claims...