Weisfelner v. Blavatnik (In re Lyondell Chem. Co.)

543 B.R. 400

In re: Lyondell Chemical Company, et. al., Debtors.

Edward S. Weisfelner, as Litigation Trustee of the LB Litigation Trust, Plaintiff,

v.Leonard Blavatnik, et al., Defendants.

No. 09–10023 (REG) (Jointly Administered)

Adversary Proceeding No. 09–01375 (REG)

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

Signed January 4, 2016

BROWN RUDNICK, LLP, Counsel for Edward S. Weisfelner, Litigation Trustee of the LB Litigation Trust, Seven Times Square, New York, New York 10036, By: Sigmund S. Wissner–Gross, Esq., May Orenstein, Esq. (argued), One Financial Center, Boston, Massachusetts 02111, By: Steven D. Pohl, Esq.

GOODWIN PROCTER, LLP, Attorneys for Defendant Diane Currier, Executor of the Estate of Richard Floor, Exchange Place, 53 State Street, Boston, Massachusetts 02109, By: James S. Dittmar, Esq. (argued), John O. Farley, Esq., Michael T. Jones, Esq. (argued)

DECISION AND ORDER ON TRUSTEE'S MOTION TO AMEND THE CAPTION, AND MOTION OF DIANE CURRIER, AS EXECUTOR OF THE ESTATE OF RICHARD FLOOR (DECEASED), TO DISMISS

ROBERT E. GERBER, UNITED STATES BANKRUPTCY JUDGE:

In late December 2007, Basell AF S.C.A. ("Basell "), a Luxembourg entity controlled by Leonard Blavatnik ("Blavatnik "), acquired Lyondell Chemical Company ("Lyondell "), a Delaware corporation headquartered in Houston—forming a new company after a merger (the "Merger "), LyondellBasell Industries AF S.C.A. (as used by the parties, "LBI ," or here, the "Resulting Company "),¹ Lyondell's parent—by means of a leveraged buyout ("LBO "). The LBO was 100% financed by debt, which, as is typical in LBOs, was secured not by the acquiring company's assets, but rather by the assets of the company to be acquired. Lyondell took on approximately $21 billion of secured indebtedness in the LBO, of which $12.5 billion was paid out to Lyondell stockholders.

In the first week of January 2009, less than 13 months later, a financially strapped Lyondell filed a petition for chapter 11 relief in this Court.² Lyondell's unsecured creditors then found themselves behind that $21 billion in secured debt, with Lyondell's assets effectively having been depleted by payments of $12.5 billion in loan proceeds to stockholders. Lyondell's assets were allegedly also depleted by payments incident to the LBO and the Merger—of approximately $575 million in transaction fees and expenses, and another $337 million in payments to Lyondell officers and employees in change of control payments and other management benefits.

Those events led to the filing of what are now five adversary proceedings—three against shareholder recipients of that $12.5 billion, one dealing with unrelated issues,³ and one other—this action, which was originally the first of the five—against Blavatnik and companies he controlled; Lyondell's officers and directors; and certain others.

In his Amended Complaint (the "Complaint ") in this adversary proceeding (brought, like the others, under the umbrella of the jointly administered chapter 11 cases of Lyondell, the Resulting Company and their affiliates (the "Debtors ")), Edward S. Weisfelner (the "Trustee "), the trustee of the LB Litigation Trust (one of two trusts formed to prosecute the Debtors' claims), asserts a total of 21 claims against the defendants in this action. The 21 claims variously charge breaches of fiduciary duty; the aiding and abetting of those alleged breaches; intentional and constructive fraudulent conveyances, unlawful dividends, and a host of additional bases for recovery under state law, the Bankruptcy Code, and the laws of Luxembourg, under which several of the Basell entities were organized.⁴ The Complaint also seeks to equitably subordinate defendants' claims that might otherwise be allowed.

The Trustee's complaint, in turn, engendered a large number of motions to dismiss. This is one of several opinions ruling on those motions.⁵

Here the Court considers the motion of Diane Currier ("Currier "), as Executor of the Estate of Richard Floor, to dismiss the claims asserted against the estate for whom she acts pursuant to Fed.R.Civ.P. 12(b)(2), 12(b)(6), and 25(a). The Trustee opposes Currier's motion to dismiss and moves, by separate motion, to amend the caption pursuant to Fed.R.Civ.P. 25(a), or in the alternative to extend the time for substitution pursuant to Fed.R.Civ.P. 6(b)(2).

The Court determines that the Trustee's motion to amend the caption was filed about 23 weeks late. But the Court further determines that the reasons underlying that—delays by Floor's probate court in docketing Currier's appointment; inaccurate information provided to the Trustee by the probate court; and the withholding of information as to Currier's appointment by counsel for Currier and Floor—provide more than sufficient basis for finding excusable neglect. The Trustee's motion to extend the time to amend the caption is granted, as is the Trustee's motion to amend the caption itself. Currier's motion to dismiss, to the extent based on failure by the Trustee to comply with Civil Rule 25(a), is denied.

The Court's Findings of Fact, Conclusions of Law, and bases for the exercise of its discretion on these motions follow.

Facts

The relevant facts, insofar as they relate to these motions, are undisputed. The original complaint in this adversary proceeding, dated July 22, 2009, named Floor as a defendant. Before the Merger, Floor was a representative of Basell AF GP S.à.r.l. (a parent of Basell), and became a representative of LBI LyondellBasell Industries AF GP S.à.r.l. (a parent of the Resulting Company) and a member of the supervisory board of the Resulting Company after the Merger.

Floor "died on or about February 18, 2010."⁶ On March 8, 2010, about three weeks later, the law firm representing Floor and Currier ("Floor–Currier Counsel ") served and filed a Suggestion of Death notifying the parties of Floor's death. By order dated April 9, 2010 (but as noted below, not docketed until July 23, 2010), of a Massachusetts probate court (the "Probate Court "), Currier was appointed Executor of Floor's Estate.⁷ Floor–Currier Counsel acknowledges that it learned that an executor had been appointed sometime before June 7, 2010⁸ —a date of significance for reasons appearing below.⁹

On or about June 10, 2010—a date after Floor–Currier Counsel knew that an executor had been appointed (but the Trustee's counsel did not)—a paralegal (the "Paralegal ") from the law firm representing the Trustee was asked to determine if an executor for Floor's estate had been appointed.¹⁰ The Paralegal contacted the Probate Court by phone "at least on July 1, 2010 and July 22," 2010 and was informed that Currier had not yet been appointed.¹¹

On July 2, 2010 (a date by which Floor–Currier Counsel knew that an executor had been appointed, but the Trustee's counsel did not), the Trustee circulated a draft amended complaint to counsel for defendants, including Floor–Currier Counsel, which draft replaced "Floor" with "The Legal Representative of the Estate of Richard Floor (deceased)."¹² Further drafts of the amended complaint, sent to the parties on July 9 and July 22, referenced Currier by name, but not as a defendant in the caption.¹³ On each of those July 9 and 22 dates, Floor–Currier Counsel, once again, knew that an executor had been appointed, but the Trustee's counsel did not.

Beginning on July 9 and throughout July 2010, drafts of an amended case management order were circulated among the parties listing "the Estate of Richard Floor" as a member of the "Basell D & O Defendant Group."¹⁴ On July 21, 2010, a law firm acting as liaison for the defendants told the Trustee by e-mail that all defendants listed in the amended case management order had agreed to its terms.¹⁵

On July 23, 2010, the Trustee filed the amended Complaint. Instead of naming as defendants Floor (who was known to be deceased) or Currier (who the Paralegal had been told, on July 1 and again on July 22, had not yet been appointed), the amended Complaint named as a defendant "The Legal Representative of the Estate of Richard Floor (deceased)."¹⁶ On August 2, 2010, the Paralegal learned from a colleague that Currier had been appointed executor for Floor's estate back on April 9, 2010, but that it "had not been docketed in the system until July 23, 2010."¹⁷

Obviously, what the Paralegal had been told by the Probate Court on July 1 and July 22 was incorrect, misleading, or both.

On September 24, 2010, Floor–Currier Counsel moved to dismiss the Amended Complaint pursuant to Fed.R.Civ.P. 12(b)(2), 12(b)(6), and 25(a). On October 26, 2010, Floor–Courier Counsel consented to a stipulation to further amend the case management order.¹⁸ On November 16, 2010, the Trustee filed a motion to substitute the executor Currier pursuant to Fed.R.Civ.P. 25(a), or in the alternative, to extend the time for substitution under Fed.R.Civ.P. 6(b)(2).

Discussion

I.The Applicable Rules and Caselaw

A. Civil Rule 25

Fed.R.Civ.P. 25, applicable in this adversary proceeding by Fed. R. Bankr.P. 7025, provides, in relevant part:

[i]f a party dies and the claim is not extinguished, the court may order substitution of the proper party. A motion for substitution may be made by any party or by the decedent's successor or representative. If the motion is not made within 90 days after service of a statement noting the death, the action by or against the decedent must be dismissed.¹⁹

But dismissal is not mandatory, despite the Rule's use of the word "shall," where the motion is made after the prescribed period.²⁰ "[T]he history of Rule 25 makes clear that the 90–day period was not intended to act as a bar to otherwise meritorious actions."²¹ And where there is a showing that failure to act within the 90–day period was the result of excusable neglect, the court has discretion to enlarge the substitution period.²²

As the Court's quotation of Fed.R.Civ.P. 25 makes clear, Civil Rule 25 is silent on what happens when—

• the plaintiff doesn't know who to name (or names the defendant's

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