AEP Energy Services Gas Holding Co. v. Bank of America, N.A.
626 F.3d 699
| 2d Cir. | 2010Background
- In 1997 Enron, Bank of America (BofA), and BONY created a Bammel Gas Trust to securitize storage gas from the Bammel Storage Facility.
- HPL and HPLR sold Storage Gas to the Trust; BONY as Trustee held a security interest in the gas via a Security Agreement.
- LeaseCo restructured the deal in 2001, substituting LeaseCo for HPL, with HPL using the gas under a long-term sublease and Quiet Enjoyment rights.
- Enron’s bankruptcy in 2001/2004 activated a Guaranty Default, giving the Trustee rights to access and withdraw gas if defaults persisted.
- Texas court orders and a 2004 Enron Settlement lifted stays and allowed settlement notices; New York court adjudicated claims as transferred, reducing AEP’s Declaratory Claims.
- The New York district court granted summary judgment on declaratory and related counterclaims, but not on the non-declaratory Tort/Contract claims, which remained in Texas.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the NY court had jurisdiction over Tort/Contract Claims | AEP argued TX court first-filed claims; NY lacked jurisdiction | BofA argued NY could adjudicate all claims under §1332 and §1404 | Abuse of discretion; NY lacked power to adjudicate those claims; remand to TX |
| Whether §2(e) of Consent was an estoppel or a misrepresentation | AEP asserts 2(e) is a misrepresentation inducing reliance | BofA contends 2(e) is an estoppel provision | Court treated 2(e) as estoppel, but affirmed on other grounds; remaining issues resolved in favor of BofA |
| Whether the 2001 Transaction preserved BofA’s security interest | Transaction subordinated BofA's rights to LeaseCo/HPL's use | Security Agreement preserved BofA’s security rights post-default | BofA’s security interest remained valid and superior after Enron bankruptcy |
| Whether the Enron Settlement Affects BofA’s rights | Settlement released Enron-related claims against BofA | Settlement only affects proceeds of gas sale, not security rights | Settlement did not extinguish BofA’s rights; allowed recovery limited to proceeds from gas sale |
| Whether the no-true-sale claim should have been allowed | No-true-sale theory could void the transaction | Claim was futile and prejudicial given late filing and discovery state | District court denial of motion to amend was not an abuse of discretion; no remand for no-true-sale claim |
Key Cases Cited
- Semmes Motors, Inc. v. Ford Motor Co., 429 F.2d 978 (2d Cir. 1970) (abstention and primacy of first-filed suits; stay preference)
- Fowler v. Ward, 287 F.2d 45 (2d Cir.1961) (first-filed suit priority and comity principles)
- Adam v. Jacobs, 950 F.2d 89 (2d Cir.1991) (abstention and avoidance of duplicative litigation; stay required)
- Wachovia Bank v. Schmidt, 546 U.S. 303 (U.S. 2006) (distinction between subject-matter jurisdiction and power to adjudicate)
- Verizon Md. Inc. v. Pub. Serv. Comm'n of Md., 535 U.S. 635 (U.S. 2002) (jurisdictional concepts and agency interpretations)