Tow v. Bulmahn (In Re ATP Oil & Gas Corp.)
711 F. App'x 216
| 5th Cir. | 2017Background
- ATP Oil & Gas suffered financial distress after the 2010 Deepwater Horizon spill, incurred new regulatory costs, and ultimately filed Chapter 11 in 2012 (converted to Chapter 7 in 2014). Trustee Rodney Tow was appointed to pursue estate claims.
- Trustee alleged officers and outside directors authorized (a) preferred Series B dividend (~$7 million) shortly before bankruptcy and (b) substantial cash bonuses in 2010–2011, despite ATP’s precarious finances.
- Trustee claimed the dividend and bonuses breached fiduciary duties under Texas law, constituted fraudulent transfers under TUFTA, and that defendants conspired or aided and abetted breaches.
- Defendants moved to dismiss the Second Amended Complaint under Rule 12(b)(6); the district court dismissed most claims and granted only limited leave to amend; subsequent amendment and dismissal produced a final judgment for defendants.
- The Fifth Circuit affirmed: finding Trustee’s pleadings conclusory, lacking necessary factual specificity about which defendants did what and about ATP’s financial condition, and concluding many claims were barred as a matter of law (business judgment rule, futility of amendment).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Fiduciary-duty breach for preferred stock dividend | Dividend improperly paid as bankruptcy loomed; breached duties to creditors/estate | Trustee failed to identify who authorized payment or plead how corporation was harmed; business judgment rule protects decision | Dismissed: pleadings lacked specificity and failed to show harm to the corporation; no plausible fiduciary breach pleaded |
| Fiduciary-duty breach for cash bonuses | Bonuses were "exorbitant" and violated ATP policies while insolvent or near insolvency | Allegations conclusory; compensation decisions protected by business judgment rule; no metrics showing excessiveness | Dismissed: conclusory claims; no plausible showing that bonuses were excessive or breached duty |
| Fraudulent-transfer claim under TUFTA (bonuses) | Bonuses were transfers for less than reasonably equivalent value; ATP insolvent or undercapitalized at time | Trustee did not plead ATP’s financial condition or that value received was insufficient; mere bad business decisions insufficient | Dismissed: failed to plead insolvency or lack of reasonably equivalent value; allegations too conclusory |
| Civil conspiracy / aiding-and-abetting breaches | Officers and directors conspired or knowingly participated in breaches | No plausible allegations of a meeting of minds; underlying fiduciary-breach claims fail so accomplice claims fail | Dismissed: conspiracy needs plausible meeting of minds; aiding-and-abetting fails because no viable fiduciary-breach alleged |
| Leave to amend Second Amended Complaint | Trustee sought opportunity to cure pleading defects | District court argued many defects were incurable (futility), Trustee had multiple prior chances, and allegations remained vague | Affirmed: partial denial of leave not abuse of discretion—amendment would be futile and plaintiff had fair opportunity |
Key Cases Cited
- Ashcroft v. Iqbal, 556 U.S. 662 (pleading standard: plausible claim required)
- Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (antitrust pleading; plausibility standard)
- Navigant Consulting, Inc. v. Wilkinson, 508 F.3d 277 (elements of breach of fiduciary duty under Texas law)
- Gearhart Indus., Inc. v. Smith Int’l, Inc., 741 F.2d 707 (corporate fiduciary duties overview)
- Sneed v. Webre, 465 S.W.3d 169 (Texas business judgment rule protections for officers/directors)
- Wallace v. Tesoro Corp., 796 F.3d 468 (standard of review for Rule 12(b)(6) dismissal)
- Meadows v. Hartford Life Ins. Co., 492 F.3d 634 (elements for aiding and abetting a fiduciary breach)
- Massey v. Armco Steel Co., 652 S.W.2d 932 (elements of civil conspiracy under Texas law)
- Davis v. United States, 961 F.2d 53 (abuse-of-discretion review for denial of leave to amend)
- Jacquez v. Procunier, 801 F.2d 789 (courts may finally dismiss after fair opportunity to plead)
- Torch Liquidating Tr. ex rel. Bridge Assocs., LLC v. Stockstill, 561 F.3d 377 (compensation alone not per se self-dealing)