In Re Chemtura Corp.
448 B.R. 635
Bankr. S.D.N.Y.2011Background
- Chemtura seeks to estimate Oildale Energy LLC's claim in Chemtura's Chapter 11 case for reserve purposes.
- Oildale asserts a roughly $16.26 million unsecured claim based on alleged Cogeneration Agreement shortfalls and related costs.
- The Cogeneration Agreement and related Ground Lease chain dates to Witco (Chemtura predecessor) and involved multiple assignments and bankruptcies from 1997 onward.
- In 2002, Oildale and Golden Bear settled disputes, including waivers and releases affecting Witco's obligations.
- Witco's successor Crompton (and later Chemtura) challenged the claim on discharge and statute-of-limitations grounds, prompting substantial estimation analysis.
- Judge Gerber ultimately declines to fully allow the claim, but orders a 30% reserve reflecting appellate reversal risk.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Did Witco remain an obligor or become a surety after the 1997 assignment? | Oildale contends Witco remained a principal obligor. | Chemtura argues Witco became a surety upon assignment and was not released unless consented. | Witco remained a surety after assignment. |
| Did the Oildale-Golden Bear Settlement discharge Witco and its successors from Cogeneration obligations? | Oildale argues the settlement released Witco from liability. | Chemtura argues the settlement materially altered the obligation, releasing Witco as to those claims. | Settlement released Witco and its successors from those obligations. |
| When did the statute of limitations begin for Oildale's claims against Crompton/Chemtura? | Oildale contends limitations began later or didn't run due to disputed repudiation. | Chemtura contends accrual began at Golden Bear's rejection or at Crompton's repudiation in August 2001. | Limitations began in August 2001 upon Crompton's repudiation, making later claims time-barred. |
| Did Crompton's August 2001 Letter constitute a repudiation of Cogeneration obligations? | Oildale maintains the letter did not repudiate obligations clearly enough to trigger accrual. | Chemtura argues the letter was a clear repudiation terminating performance. | Crompton's August 2001 Letter constituted repudiation, triggering accrual. |
| What discounting framework should govern the damages estimate (spot vs futures; risk-free vs risk-adjusted rate)? | Oildale supports futures-based pricing with a risk-adjusted rate reflecting nonperformance risk. | Chemtura urges spot pricing and either a risk-free or overly low rate. | Futures pricing is appropriate; a risk-adjusted rate reflecting the contract's original risk is required; exact rate to be agreed. |
Key Cases Cited
- Fox v. Dehn, 42 Cal.App.3d 165 (Cal. Ct. App. 1974) (repudiation after partial breach makes statute start at repudiation)
- Gold Mining & Water Co. v. Swinerton, 23 Cal.2d 19 (Cal. 1949) (total vs anticipatory breach; repudiation timing governs accrual)
- Minidoka Irrigation Dist. v. Dept. of the Interior, 154 F.3d 924 (9th Cir. 1998) (repudiation and installment-contract considerations for tolling)
- Minidoka II, 406 F.3d 567 (9th Cir. 2005) (clarifies repudiation exception and installment contract analysis)
- Alaska Laborers Fund v. Campbell, 812 F.2d 512 (9th Cir. 1987) (contract with continuing performance; repudiation affects accrual)
- Ormesa Geothermal v. Teachers Insurance & Annuity Ass'n, 791 F. Supp. 401 (S.D.N.Y. 1991) (discount rate should reflect investment risk related to the alternative investment)
- Ralph Lauren Womenswear, Inc. v. Am. Express Co., 197 B.R. 771 (S.D.N.Y. 1996) (estimation methodology for claim values and related considerations)