Solus Alt. Asset Mgmt. LP v. Delphi Auto. PLC (In re DPH Holdings Corp.)

553 B.R. 20

In re: DPH Holdings Corp., et al., Reorganized Debtors.

Solus Alternative Asset Management LP, Angelo Gordon & Co. L.P., Longhorn Credit Funding, LLC, Nextpoint Credit Strategies Fund, Gov Re, Ltd, Ultra Master Ltd, Sola Ltd, Solus Opportunities Fund 1 LP, Solus Opportunities Fund 2 LP, Solus Recovery Fund III Master LP, AG Super Fund International Partners, L.P., and Botticelli LLC, Plaintiffs

v.Delphi Automotive PLC and: Delphi Automotive LLP, DefendantsandDPH Holdings Corp., Nominal, Defendant.

Case No. 05–44481RDD Jointly Administered

Adv. Pro. No. 14–02445RDD

United States Bankruptcy Court, S.D. New York.

Signed May 13, 2016

QUINN EMANUEL URQUHART & SULLIVAN LLP, by James Tecce, Esq., for the Plaintiffs

FRIEDMAN KAPLAN SEILER & ADELMAN LLP, by Edward A. Friedman, Esq. for the Defendants

MEMORANDUM OF DECISION ON PLAINTIFFS' AND DEFENDANTS' MOTIONS FOR SUMMARY JUDGMENT

Hon. Robert D. Drain, United States Bankruptcy Judge

The plaintiffs in this adversary proceeding seek a declaration that they—and by inference other similarly situated general unsecured creditors—are entitled under § 5.3 of the confirmed and consummated First Amended Joint Plan of Reorganization, dated July 30, 2009 [Dkt. No. 18707] (the “Plan”) of the debtors herein (the “Debtors”) to the “General Unsecured MDA Distribution.” The condition triggering the right to be paid that distribution is highlighted in the definition quoted below:

“General Unsecured MDA Distribution” means, if and to the extent Company Buyer makes distributions to its members in accordance with the Company Buyer Operating Agreement, as described in section 3.2.3 of the Master Disposition Agreement, in excess of $7.2 billion, an amount equal to $32.50 for every $67.50 so distributed in excess of $7.2 billion; provided, however, that in no event shall the General MDA Distribution exceed $300,000,000 in the aggregate.

Plan § 1.102 (emphasis added).

The parties agree that if the March 31, 2011 redemptions of General Motors Company's (“GM”) Class A membership interests and PBGC's Class C membership interests (together, the “GM/PBGC Redemptions”) by the successors to the “Company Buyer” which purchased the “Company Acquired Assets” of the Debtors under the Plan and the Master Disposition Agreement, dated as of July 30, 2009 (the “MDA”),¹ are to be counted toward satisfying the foregoing condition, the right to the General Unsecured MDA Distribution under Plan §§ 1.102 and 5.3 is owed in the full amount of $300 million.²

The Defendants, who are the successors to the “Company Buyer,”³ contend that the GM/PBGC Redemptions were not the kind of distributions to the Company Buyer's members contemplated by the definition of “General Unsecured MDA Distribution.” Essentially, the Defendants contend that only distributions made by the Company Buyer to its members in specified percentages satisfy the condition to the general unsecured creditors' right to receive the General Unsecured MDA Distribution. Under this interpretation, because the GM/PBGC Redemptions were not made along with distributions to the Company Buyer's other members in the specified percentages, the triggering event has not occurred. Instead, they argue, the GM/PBGC Redemptions fall under a different provision of the operative documents referred to in the Plan's definition of the General Unsecured MDA Distribution.

Before the Court are the parties' respective motions for summary judgment under Fed. R. Bankr.P. 7056 pertaining to the foregoing issue.⁴ Both motions are premised on the asserted plain meaning of the relevant documents; no parol evidence has been offered. After considering the relevant provisions and the parties' arguments, however, the Court concludes that consideration of such evidence is warranted and, accordingly, that both motions should be denied. This memorandum of decision states the reasons for that conclusion.

Jurisdiction

The Court has jurisdiction over the summary judgment motions pursuant to 28 U.S.C. §§ 157(a) -(b) and 1334(b) and the broad reservation of post-confirmation jurisdiction in Art. XIII of the Plan and ¶ 56 of the Court's Order, dated July 30, 2009, approving confirmation of the Plan [Dkt. No. 18707] (the “Confirmation Order”).⁵ The parties' dispute arises in the Debtors' chapter 11 cases regarding the proper interpretation and enforcement of a distribution provision in the Plan, documents incorporated therein and the Confirmation Order; and the Plaintiffs seek an order under 11 U.S.C. § 1142 enforcing the Plan and Confirmation Order. Thus, for purposes of 28 U.S.C. § 1334(b) this dispute arises in a bankruptcy case and under the Bankruptcy Code and bears a close nexus to the Plan, which reserves jurisdiction in this Court to decide such issues. It therefore satisfies even the narrowest test applied in the Second Circuit for the bankruptcy courts' exercise of post-confirmation subject matter jurisdiction. Cohen v. CDR Creances S.A.S. (In re Euro–American Lodging Corp.), 549 Fed.Appx. 52, 54 (2d Cir.2014) ; Ace Am. Ins. Co. v. DPH Holdings. Corp. (In re DPH Holdings. Corp.), 448 Fed.Appx. 134, 137 (2d Cir.2011), cert. denied, ––– U.S. ––––, 133 S.Ct. 51, 183 L.Ed.2d 677 (2012) ; SP Special Opportunities, LLC v. LightSquared, Inc. (In re LightSquared, Inc.), 539 B.R. 232, 240–42 (S.D.N.Y.2015).

Summary Judgment Standard

Fed. R. Bankr.P. 7056 incorporates Fed.R.Civ.P. 56, which provides that the Court shall grant summary judgment if the movant establishes that there is no genuine dispute as to any material fact and it is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(a). The movant bears the initial burden of satisfying the material elements of its claim or defense. Vt. Teddy Bear Co. v. 1–800 BEARGRAM Co., 373 F.3d 241, 244 (2d Cir.2004). Upon such a showing, the nonmoving party must provide evidence of a genuine issue of material fact to defeat the motion. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 585–86, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986). Subject to exceptions not here applicable, Fed.R.Civ.P. 56(c)(1) provides that a party asserting that a fact cannot be, or is, genuinely disputed must support the assertion by citing to particular parts of the record or by showing that the record does not establish the absence, or presence, as the case may be, of a genuine dispute.

Facts are material if they “might affect the outcome of the suit under the governing law[.]” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). The motion may not be defeated by conclusory, self-serving or unsupported allegations, by simply raising metaphysical doubts about a material fact, or by identifying immaterial disputed facts. Id. at 247–48, 106 S.Ct. 2505 ; Matsushita Elec., 475 U.S. at 586, 106 S.Ct. 1348 ; Weinstock v. Columbia Univ., 224 F.3d 33, 41 (2d Cir.2000), cert. denied, 540 U.S. 811, 124 S.Ct. 53, 157 L.Ed.2d 24 (2003). Once evidence of a material disputed fact is identified, however, the Court may not weigh the evidence or make credibility assessments but, rather, must view it in the light most favorable to the party opposing summary judgment and draw all reasonable inferences in favor of that party. Amnesty Am. v. Town of W. Hartford, 361 F.3d 113, 122 (2d Cir.2004). “If there is any evidence in the record from any source from which a reasonable inference in the [non-moving party's] favor may be drawn, the moving party simply cannot obtain a summary judgment.” Binder & Binder PC v. Barnhart, 481 F.3d 141, 148 (2d Cir.2007) (alteration in original).

It is well recognized that “[i]f a claim or defense is predicated on a written, integrated contract, the case may be particularly suited for resolution by summary judgment. The interpretation of an unambiguous contract, and the initial determination of whether the contract is or is not ambiguous, are considered pure questions of law.” 11 James Wm. Moore et al., Moore's Federal Practice ¶ 56.25[1][a] (3d ed.2015); see also Am. Home. Assur. Co. v. Hapag Lloyd Container Lin i e, GmbH, 446 F.3d 313, 316 (2d Cir.2006).

Contract Interpretation

As noted, both pending motions are premised on the asserted plain meaning of the relevant contracts, starting with Plan §§ 1.102 and 5.03 and including the agreements referenced therein—the MDA and the Amended and Restated Operating Agreement (the “Operating Agreement”)⁶ of DIP Holdco 3, LLC (the “Company Buyer”), to which the Defendants are successors. Confirmed chapter 11 plans are construed as contracts under the governing state's law (in this case the law of New York, where the Plan, the MDA and the Operating Agreement were negotiated).⁷

In re Dynegy Inc., 486 B.R. 585, 590 (Bankr.S.D.N.Y.2013) ; In re Std. Beef Co., 2011 Bankr LEXIS 2016, at *17–18 (Bankr. D. Conn. May 23, 2011); Breeden v. Bennett (In re Bennett Funding Group, Inc.), 220 B.R. 743, 758 (Bankr.N.D.N.Y.1997). For purposes of interpreting a confirmed chapter 11 plan, “all documents which were confirmed together to form the contact are added to the plan itself.” In re WorldCom, Inc., 352 B.R. 369, 377 (Bankr.S.D.N.Y.2006) (internal citations and quotations omitted). Thus, the agreements referred to in the relevant Plan provisions—the MDA and the Operating Agreement—are part of the contract set forth in the Plan and need to be construed with it as a whole. The Court-approved disclosure statement for a chapter 11 plan also may be considered conjunctively with the plan, at least where the disclosure statement may be relied on for purposes of claim and issue preclusion. Id. ; see also Goldin Assocs., L.L.C. v. Donaldson, Lufkin & Jenrette Sec. Corp., 2004 WL 1119652, at *3–4, 2004 U.S. Dist. LEXIS 9153, at *14–17 (S.D.N.Y. May 20, 2004).

Under New York law (and federal law—if one were to apply it instead of the law of New York⁸ —because the relevant principles are the same):⁹

When interpreting a contact, our primary objective is to give effect to the intent of the parties as

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