571 B.R. 650
Bankr. D. Del.2017Background
- Maxus Energy Corp. and affiliates filed Chapter 11 on June 17, 2016; Occidental (a creditor) removed a pending New Jersey environmental lawsuit and sought transfer to this Court.
- The Removed Claims included: (a) YPF Claims (Occidental v. YPF, alter-ego theory), (b) OCC Claims (Occidental’s alter-ego claims against Repsol), and (c) Repsol’s counterclaim under New Jersey Spill Act.
- Repsol moved to remand the OCC Claims and its counterclaim to New Jersey; this Court granted remand and Occidental moved for clarification or reconsideration.
- Central legal question: whether the OCC Claims are property of the Debtors’ bankruptcy estates under 11 U.S.C. § 541, which affects standing and abstention/remand analysis.
- The Court applied Third Circuit precedent (In re Emoral) and Delaware law to hold (1) claims based on alter-ego/successor theories can be estate property if they existed at filing and the debtor could have asserted them under state law, and (2) the claims are “general” (not particularized).
- The Court denied Occidental’s motion for clarification/reconsideration, finding no clear error, manifest injustice, or controlling-law disregard.
Issues
| Issue | Plaintiff's Argument (Occidental) | Defendant's Argument (Debtors/Repsol) | Held |
|---|---|---|---|
| Whether the OCC Claims are property of the bankruptcy estate under § 541 | Emoral requires a two-part test: (1) claim existed at filing and debtor could have asserted it under state law, and (2) the claim must be general; Occidental argues debtor could not necessarily "self-pierce" under Delaware law so first prong fails | Debtors argue Emoral includes both debtor-owned causes of action and general creditor causes of action; here both prongs are satisfied | Held: Applying Emoral’s two-part test, the Court found the OCC Claims were estate property (existed at filing, debtor could have asserted them under Delaware law, and they are general) |
| Whether Delaware law permits a wholly-owned subsidiary (debtor) to "self-pierce" and assert alter-ego claims | Occidental contends Delaware law is unsettled and may not permit a wholly-owned subsidiary to pierce its own veil absent special circumstances | Debtors (and Court) argue Delaware authorities predict a subsidiary can self-pierce; fiduciary duties to a subsidiary arise at insolvency, supporting standing | Held: Court concluded under Delaware law a wholly-owned subsidiary can assert alter-ego claims (especially where insolvency/fiduciary duty to creditors is alleged), satisfying the first Emoral prong |
| Whether Occidental’s harm is particularized (creditor-only) or general (benefits all creditors) | Occidental emphasizes the OCC Claims arise from an indemnity only Occidental can invoke, suggesting particularized injury | Debtors argue the alter-ego theory and potential recovery would inure to the bankruptcy estate and all creditors, making the claims general | Held: Court treated the OCC Claims as general (theory of liability is generally available and recovery benefits all creditors) |
| Whether reconsideration/clarification is warranted under Rule 59(e) | Occidental argues the court overlooked briefing, lacked oral argument, and misapplied law — warrants reconsideration/clarification | Debtors contend the court correctly applied Third Circuit precedent and no manifest injustice or clear error exists | Held: Motion denied — no intervening change in law, new evidence, or clear error/manifest injustice to justify relief under Rule 59(e) |
Key Cases Cited
- In re Emoral, 740 F.3d 875 (3d Cir. 2014) (framework for when successor/alter-ego claims against non-debtors constitute estate property)
- In re Maxus Energy Corporation, 560 B.R. 111 (Bankr. D. Del. 2016) (this Court’s prior opinion remanding certain claims and the subject of the reconsideration motion)
- In re Buildings by Jamie, Inc., 230 B.R. 36 (Bankr. D.N.J. 1998) (alter-ego causes of action can be generalized estate claims benefiting all creditors)
- Phar-Mor, Inc. v. Coopers & Lybrand, 22 F.3d 1228 (3d Cir. 1994) (discusses classification of actions as non-core/related and treatment of alter-ego claims)
- Bd. of Trustees of Teamsters Local 863 Pension Fund v. Foodtown, Inc., 296 F.3d 164 (3d Cir. 2002) (standing and estate-claim principles cited regarding creditor assertions of estate property)