Noble Energy, Inc. v. Conocophillips Company
532 S.W.3d 771
Tex.2017Background
- In 1994 Conoco and Alma exchanged oil-and-gas interests under an Exchange Agreement that included mutual, broad indemnities that “survive ... the transfer of the Assets.”
- Conoco’s recorded assignments to Alma referenced and made the transfers subject to the Exchange Agreement and its indemnity provisions.
- Alma filed Chapter 11 in 1999; after a court-approved auction Alma entered an APA to sell assets to Noble, which purchased the leases (including those from Conoco) but the Exchange Agreement was not listed on APA exhibits or disclosed in bankruptcy.
- The confirmed Plan and confirmation Order provided that executory contracts not specifically rejected would be assumed and assigned to Noble unless timely rejected; the Order approved the Plan and APA and stated Noble had provided adequate assurance of future performance.
- After closing, Noble performed under the Exchange Agreement on two post-bankruptcy claims but refused to indemnify Conoco for a 2010 suit; Conoco sued Noble for breach to recover a $63 million settlement.
- Trial court granted summary judgment for Noble; the court of appeals reversed, holding the Exchange Agreement was executory and was assumed and assigned to Noble; this Court affirmed.
Issues
| Issue | Conoco's Argument | Noble's Argument | Held |
|---|---|---|---|
| Was the Exchange Agreement an executory contract at Alma’s bankruptcy filing? | The indemnity obligations were ongoing and material; failure to perform by either party would be a material breach — thus executory. | The essence was a one-time property swap; indemnities were ancillary and post-closing contingencies do not make it executory. | Executory — mutual indemnities were significant, contingent, and continued to give rise to reciprocal unperformed obligations. |
| Did Alma assume and assign the Exchange Agreement to Noble under the APA/Plan/Order? | Plan/Order and APA language (assume-unless-rejected and catchall provisions) plus Noble’s post-closing conduct show Alma assumed and assigned the contract to Noble. | The Exchange Agreement was undisclosed and not expressly assumed per §365; general plan boilerplate cannot effect assumption/assignment without court consideration and adequate assurance. | Assumed and assigned — Plan/Order/APA language (and Noble’s constructive notice and conduct) resulted in assumption and assignment to Noble. |
| Did Noble only assume post-closing liabilities (so indemnity would not be assumed)? | Claim did not accrue until Conoco’s liability became fixed (settlement), which occurred post-closing; thus indemnity arose after closing and was assumed under APA §8.03. | Indemnity obligation was created pre-closing and thus was a pre-closing liability Noble did not agree to assume. | Indemnity claim accrued when Conoco’s liability became fixed (settlement), i.e., post-closing, so Noble assumed it under §8.03. |
| Was the bankruptcy court’s confirmation/order effective under §365 despite non-disclosure of the Exchange Agreement? | §365 does not require the court to conduct independent investigation; parties relied on plain terms and confirmation order; Noble had constructive notice via chain of title. | Undisclosed executory contracts cannot be assumed/assigned via general plan language; failure to disclose prevents the court from approving assumption and adequate assurance under §365. | Confirmation/Order and Plan language were effective here; constructive notice and Noble’s involvement meant assumption/assignment complied with the governing documents and law. |
Key Cases Cited
- NLRB v. Bildisco & Bildisco, 465 U.S. 513 (1984) (discusses executory-contract concept in bankruptcy)
- In re Interstate Bakeries Corp., 751 F.3d 955 (8th Cir. 2014) (sale-with-license case discussing whether ancillary licenses are executory)
- In re Exide Techs., 607 F.3d 957 (3d Cir. 2010) (trademark-license case treating license obligations as minor and not executory)
- In re O'Connor (Stumpf v. McGee), 258 F.3d 392 (5th Cir. 2001) (held undisclosed executory contract could not be assumed by implication under certain plans)
- In re Mirant Corp., 440 F.3d 238 (5th Cir. 2006) (assumption must precede assignment under §365(f)(2))
- In re Allegheny Health, Educ. & Research Found., 383 F.3d 169 (3d Cir. 2004) (asset purchaser’s obligation limited to post-closing liabilities under purchase agreement)