BOKF, N.A. v. JPMorgan Chase Bank, N.A. (In re MPM Silicones, LLC)
518 B.R. 740
Bankr. S.D.N.Y.2014Background
- Two Motions to Dismiss under Fed. R. Bankr. P. 7012 (12(c)) addressing largely identical Intercreditor Agreement (ICA) claims.
- ICA governs shared collateral between first/second priority lenders; NY law governs contract interpretation.
- Plaintiffs allege breaches of the ICA, seek declaratory and injunctive relief, and assert implied covenant claims.
- Defendants allegedly breached by: (i) supporting prepetition restructuring and cramdown against plaintiffs’ claims; (ii) supporting post-petition DIP financing with senior lien priority; (iii) retaining proceeds and stock under the plan; (iv) objections to make-whole payments and adequacy protections.
- Court previously ruled on confirmation and noted ICA’s context; consideration limited to facial pleadings and incorporated documents; applies plausibility standard to determine if claims survive.
- No final ruling on jurisdiction; this ruling addresses sufficiency of the pleaded ICA breaches and related relief.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether ICA §6.3 breaches survive Twombly/Iqbal pleading standards. | First/1.5 lien trustees allege defendants objected to or supported objections to adequate protection. | Defendants contend plaintiffs fail to plead specific actions under §6.3. | Dismissed for lack of non-conclusory factual pleading. |
| Whether ICA §3.1(c) prohibits defendants’ actions as unsecured creditors in objection/defense context. | Defendants allegedly violated §3.1(c) by opposing plaintiffs’ remedies in collateral. | Section 5.4 permits acting as unsecured creditors; §3.1(c) not violated by objections. | Dismissed; §3.1(c) not violated based on record and 5.4 context. |
| Whether defendants’ receipt of new stock under the plan triggers ICA §4.2 as proceeds. | Stock distributions are proceeds of Common Collateral. | Stock is not Common Collateral nor proceeds; not tied to remedies. | Dismissed; stock not proceeds under §4.2; plan mechanics support conclusion. |
| Whether the Backstop charge and ongoing fee reimbursements breach ICA §4.2 or constitute remedies. | Backstop payment and fees improperly treated as Common Collateral proceeds. | Possible separate unsecured obligations; not clearly tied to remedies. | Dismissed as to the $30 million Backstop charge; fees dismissed for lack of pleaded basis. |
Key Cases Cited
- Twombly v. Bell Atlantic Corp., 550 U.S. 544 (U.S. Supreme Court, 2007) (plausibility standard requires sufficient factual matter)
- Iqbal, 556 U.S. 662 (U.S. Supreme Court, 2009) (context-specific plausibility assessment)
- Koppel v. 4987 Corp., 167 F.3d 125 (2d Cir. 1999) (limits on conclusory allegations)
- L-7 Designs, Inc. v. Old Navy, LLC, 647 F.3d 419 (2d Cir. 2011) (two-step Twombly/Iqbal plausibility standard)
- Di Folco v. MSNBC Cable, LLC, 622 F.3d 104 (2d Cir. 2010) (court may consider incorporated documents; reliance on pleading terms)
- Papasan v. Allain, 478 U.S. 265 (U.S. Supreme Court, 1986) (general rule: courts may ignore legal conclusions)
- Ashcroft v. Iqbal, 556 U.S. 662 (U.S. Supreme Court, 2009) (reaffirmed plausibility standard)
- Greenfield v. Philles Records, Inc., 98 N.Y.2d 562 (N.Y. 2002) (contract interpretation under NY law; ambiguity standard)
- J. D’Addario & Co. Inc. v. Embassy Indus., Inc., 20 N.Y.3d 113 (N.Y. 2012) (clear/plain meaning controls if unambiguous)
- In re Boston Generating LLC, 440 B.R. 302 (Bankr.S.D.N.Y. 2010) (context of intercreditor rights; unsecured creditor protections)
- In re Erickson Retirement Communities LLC, 425 B.R. 309 (Bankr.N.D. Tex. 2010) (contrast on waiver and intercreditor scope)
- Beal Bank, S.S.B. v. Waters Edge Ltd. P’ship, 248 B.R. 668 (D. Mass. 2000) (treatment of equity transfer and liens not sale of collateral)