Devon Energy Production Company, L.P. v. Samson Exploration, LLC
3:16-cv-00437
| M.D. La. | Nov 22, 2016Background
- Samson Resources sold interests in property under a 1990 Purchase and Sale Agreement (1990 PSA); Devon later sought defense and indemnity under that PSA for third-party property-damage claims.
- In 2011 KKR acquired Samson Resources and transferred its interests/liabilities to Samson Exploration via a Stock Purchase Agreement (SPA); Devon was not informed at the time.
- Samson Resources filed Chapter 11 in Delaware in 2015; Devon filed a proof of claim in that bankruptcy.
- In May 2016 Devon filed a third-party demand in state court against Samson Exploration seeking defense/indemnity; the demand expressly disclaimed any claim against the debtor Samson Resources.
- Samson Exploration removed the third-party demand to federal court invoking bankruptcy jurisdiction; Devon moved to remand (or for abstention).
- The magistrate judge concluded the federal court lacked core bankruptcy jurisdiction over the action, found the §1334(c)(2) mandatory-abstention factors satisfied, and recommended remand to state court.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the third-party contract claim is a "core" proceeding under 28 U.S.C. § 1334(b) | Devon: claim is non-core because debtor (Samson Resources) is not a party and resolution won’t bind the debtor or affect the estate | Samson Exploration: claim is core because Devon filed a proof of claim in the bankruptcy and the dispute concerns obligations tied to the debtor | Held: non-core — a state-law contract action between non-debtors that could proceed in state court and will not affect the bankruptcy estate |
| Whether mandatory abstention under § 1334(c)(2) applies | Devon: all four mandatory-abstention requirements are met (state case commenced, non-core, no independent federal jurisdiction, can be timely adjudicated in state court) | Samson Exploration: mandatory abstention is precluded if proceeding is core; thus abstention not applicable | Held: mandatory abstention applies because proceeding is non-core, no independent federal jurisdiction exists, and state court can timely adjudicate |
| Whether permissive abstention or equitable remand should control (alternative relief) | Devon: permissive-abstention factors favor remand and equitable remand under § 1452(b) is appropriate if mandatory abstention did not apply | Samson Exploration: permissive abstention/equitable remand not applicable given bankruptcy ties and proof of claim | Held: court did not need to reach permissive abstention/equitable remand because mandatory abstention controlled and remand was recommended |
| Effect of SPA/solidary liability — whether adjudication requires binding determination of debtor’s obligations | Devon: alternatively argues Samson Exploration may be solidarily bound, so adjudication against Samson Exploration need not resolve debtor’s liability | Samson Exploration: SPA precludes transfer of third-party rights/obligations; not solidarily bound; issues implicate debtor-transfer questions | Held: factual dispute about transfer exists but irrelevant to jurisdictional analysis; judgment against non-debtor will not have res judicata effect on the debtor’s estate |
Key Cases Cited
- Matter of Wood, 825 F.2d 90 (5th Cir.) (distinguishes core vs. non-core and cautions against overly broad reading of §157(b) catch-alls)
- Pacor, Inc. v. Higgins, 743 F.2d 984 (3d Cir.) (definition of "related to" bankruptcy jurisdiction — conceivable effect on the estate)
- Matter of Gober, 100 F.3d 1195 (5th Cir.) (mandatory abstention applies only to non-core proceedings)
- Matter of Rupp & Bowman Co., 109 F.3d 237 (5th Cir.) (elements required for §1334(c)(2) mandatory abstention)
- In re Bass, 171 F.3d 1016 (5th Cir.) (bankruptcy jurisdiction requires effect on debtor's rights/estate)
- Chauvin v. Exxon Mobil Corp., 158 So.3d 761 (La.) (res judicata principles under Louisiana law)