504 B.R. 39
Bankr. D. Del.2013Background
- Debtors SemGroup and affiliates filed Chapter 11; eight-state producers sought liens on oil and gas sold pre-petition.
- Downstream Purchasers bought oil from Debtors and seek to be free and clear of producers’ liens under U.C.C. defenses.
- Court established omnibus procedures, allowed producers to pursue lien rights, and later certified trials on threshold issues.
- Motions for summary judgment centered on BFV (9-317) and BIOC (9-320) defenses and related waiver/recoupment theories.
- Discovery spanned extensive tracing of oil, netting arrangements, and knowledge of liens, culminating in ripe summary-judgment posture for Downstream Purchasers.
- Court ultimately held Downstream Purchasers are BFV and BIOC purchasers, defeating producer liens; tort claims and PRSA claims largely dismissed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Downstream Purchasers are BFV purchasers under §9-317 | BFV applies; producers didn’t perfect; value given; no knowledge | Producers contest BFV applicability; liens unperfected; knowledge proven by circumstantial facts | Yes; BFV applies; liens unperfected; no knowledge proven |
| Whether Downstream Purchasers are BIOC purchasers under §9-320 | BIOC defenses should prevent recovery | Sales not in ordinary course or lacking new value; knowledge issue | Yes; BIOC applies; purchases made in ordinary course with new value |
| Whether Downstream Purchasers acted with actual knowledge of liens | Evidence shows knowledge via lien statutes and identities | Actual knowledge not proven; express warranties negate knowledge | No genuine issue; lack of knowledge; warranties negate knowledge |
| Whether netting arrangements create ‘new value’ for BIOC | Netting is not new value; cross-product netting undermines BIOC | Netting creates new value via increased receivables and cash flows | Yes; netting constitutes new value for BIOC |
| Whether waiver by producers defeats BFV/BIOC defenses | Waivers alleged under contracts | Waiver is fact-intensive; some contracts lack waiver language | Not fatal to BFV/BIOC; warranties and industry practice support defense |
Key Cases Cited
- Mull Drilling Co. v. SemCrude, L.P., 407 B.R. 82 (Bankr.D.Del.2009) (BFV/BIO C analysis in earlier stage)
- Arrow Oil & Gas, Inc. v. SemCrude, L.P., 407 B.R. 112 (Bankr.D.Del.2009) (Lien priority and perfection; BFV context)
- Samson Res. Co. v. SemCrude, L.P., 407 B.R. 140 (Bankr.D.Del.2009) (State-law liens subordinate to Banks’ security interest)