limited objection by virgin oil 6-12-13.pdf

7/28/2019 limited objection by virgin oil 6-12-13.pdf

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UNITED STATES BANKRUPTCY COURT

EASTERN DISTRICT OF LOUISIANA

IN RE: *

*

VIRGIN OFFSHORE USA, INC., * CASE NO. 11-13028

*

DEBTOR * CH. 11

*

***************************************

LIMITED OBJECTION AND RESERVATION OF RIGHTS BY THE VIRGIN OIL

COMPANY, INC. PLAN TRUST TO THE CONFIRMATION OF TRUSTEE’S FIRST

AMENDED CHAPTER 11 PLAN OF REORGANIZATION DATED MARCH 28, 2013

The Plan Trustee for The Virgin Oil Company, Inc. Plan Trust (the “Plan Trust ”),

appearing herein through undersigned counsel, hereby respectfully submits the following limited

objection (the “L imi ted Objection ”) to the confirmation of the First Amended Chapter 11 Plan of

Reorganization Dated March 28, 2013 (the “Plan ”) (Docket No. 402) filed herein by Gerald H.

Schiff, Chapter 11 Trustee (the “Trustee ”) for the bankruptcy estate of the Debtor, Virgin

Offshore U.S.A., Inc. (“Virgin Offshore ”). While the Plan Trust does not object to the treatment

contemplated for Class 4 (Equity Interests) in the Plan, Virgin Offshore’s stated reservation of

rights to propose and conduct a post-confirmation sale of co-owned property under section

363(h) of Title 11 of the United States Code (the “Bankruptcy Code ”) is not supported by

applicable law. The Plan Trust therefore objects to confirmation of the Plan insofar as it includes

such language, and requests that the Plan be confirmed, subject to the deletion of any stated

reservation of rights in favor of the reorganized Virgin Offshore to seek and obtain the approval

by this honorable Bankruptcy Court of a post-confirmation sale of co-owned property. If the

subject language is not deleted, the Plan should not be confirmed.

Case 11-13028 Doc 427 Filed 06/12/13 Entered 06/12/13 15:40:29 Main Document of 8



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BACKGROUND

The Plan Trust—by virtue of the vesting of assets pursuant to the confirmed plan in the

Virgin Oil Bankruptcy—is the 100% equity owner of Virgin Offshore and therefore is an interest

holder in this case. Additionally, the Plan Trust and Virgin Offshore each hold separable

interests in certain oil and gas properties (the “Subject Properties ”). These Subject Properties

were previously subject the confirmed plan in the bankruptcy case of Virgin Oil Co., Inc.

(“Virgin Oil ”), E.D.La. Bankr. Case No. 09-11899, and are specifically referenced in Virgin

Offshore’s Plan.

The Plan Trust’s objection to the Plan lies in the attempt by Virgin Offshore in both the

Plan1

and the First Amended Disclosure Statement2

(the “Disclosure Statement ”) (Docket No.

401) to reserve the right to seek and obtain approval of the Bankruptcy Court of the post-

confirmation sale of the Subject Properties (defined as the Existing Oil and Gas Interests in the

Plan) under section 363(h) of the Bankruptcy Code. Specifically, the Plan includes the following

language in a footnote to a subsection providing that distribution proceeds may be derived from

the sale of the Subject Properties:

Regarding the prospect of a sale or sales of the Existing Oil and Gas Assets, the

Trustee has received, entertained and investigated offers. However, as of the filingof this Plan, no offers have reached the level of completeness that warrantedseeking Bankruptcy Court approval. Reorganized Offshore shall continue to

investigate the market and pursue prospects for the sale of the Existing Oil & Gas

Assets and any proposed sale shall be subject to Bankruptcy Court approval.

Further, the Reorganized Offshore shall retain all rights of the Estate and theTrustee to seek and obtain Bankruptcy Court approval of a Section 363(h) joint

sale of the Existing Oil and Gas Assets to the extent such an offer would be made.

In the event that the Existing Oil & Gas Assets have not been transferred pursuant

to final approval by the Bankruptcy Court upon completion of the P&A Work,Reorganized Offshore shall submit a procedure for auctioning the Existing Oil &

1See Plan, at p. 26, fn. 1.

2 See Disclosure Statement, at p. 52, fn. 29.




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Gas Assets for final approval by the Bankruptcy Court to be commenced within

one hundred eighty (180) days after completion of the P&A Work.3

This provision (hereinafter, the “Retention Provision ”) recognizes that the contemplated

sale of the Subject Properties remains hypothetical at this point and that “no offers have reached

the level of completeness that warranted seeking Bankruptcy Court approval.”4

Furthermore, the

Plan Trust has not consented to or approved any contemplated joint sale of the Subject

Properties.5

Most importantly, as will be show below, the Retention Provision does not comply

with Title 11 of the Bankruptcy Code and should be stricken from the Plan, and if not stricken,

the Plan should not be confirmed.

LAW AND ANALYSIS

The Retention Provision is contrary to bankruptcy law and its inclusion renders the Plan

unconfirmable pursuant to 11 U.S.C. § 1129(a)(1). Plans must “compl[y] with the applicable

provisions of [title 11].” 11 U.S.C. § 1129(a)(1). The Retention Provision is contrary to

bankruptcy law insofar as post-confirmation relief under Section 363(h) is not available and not

3See Plan, at p. 26, fn. 1.

4 Id.5 Of course, if properly invoked during the course of the bankruptcy, 11 U.S.C. § 363(h) contemplates

the sale of jointly owned property subject to certain prerequisites. Given the lack of informationregarding any hypothetical sale, it is not possible for the Plan Trust to respond to the specific dictates

of Section 363(h), which provides as follows:

Notwithstanding subsection (f) of this section, the trustee may sell both the estate’sinterest, under subsection (b) or (c) of this section, and the interest of any co-owner in

property in which the debtor had, at the time of the commencement of the case, anundivided interest as a tenant in common, joint tenant, or tenant by the entirety, onlyif— (1) partition in kind of such property among the estate and such co-owners is

impracticable;(2) sale of the estate’s undivided interest in such property would realize significantlyless for the estate than sale of such property free of the interests of such co-owners;

(3) the benefit to the estate of a sale of such property free of the interests of co-ownersoutweighs the detriment, if any, to such co-owners; and

(4) such property is not used in the production, transmission, or distribution, for sale,of electric energy or of natural or synthetic gas for heat, light, or power.




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In Western Integrated Networks, the bankruptcy court rejected a debtor’s attempt to

retain power post-confirmation much like the Trustee attempts to do here.12

In that case, the

liquidating trustee sought to proceed pursuant to section 542(a) of the Bankruptcy Code post-

confirmation in order to recover property of the estate.13

The court noted that the trustee’s

powers under Section 542 are in part premised on authority and control over property in Section

363. 11 U.S.C. § 542. The court held that neither power extends post-confirmation. Holding

that the trustee lacked standing to bring claims under sections 542(a) and 544 of the Bankruptcy

Code and that no jurisdictional grounds existed to permit the trustee to maintain a post-

confirmation action under section 542, the court stated:

[U]pon confirmation and consummation of a plan the bankruptcy court's

jurisdiction ceases and the property of the estate revests in the reorganized

debtor. At that point, the property's relationship to the estate, and therefore

the bankruptcy court's jurisdiction over the property, ends.14

Therefore, the court did not have the power to grant that relief post-confirmation. Moreover, in

other situations, Bankruptcy courts have consistently held that there is no jurisdiction over

matters for which only a former debtor-in-possession had standing or that only affects property

that is no longer part of the estate.15

Thus, after plan confirmation, the Trustee will no longer

have the need or ability to proceed pursuant to Section 363 of the Bankruptcy Code.

12 In re W. Integrated Networks, LLC , 329 B.R. 334 (Bankr. D. Col. 2005).

13 Id. at 341.14 Id. at 337, 341 (internal citations omitted).15 See, e.g., In re Petty, 848 F.2d 654, 654-55 (5th Cir. 1988) (holding that bankruptcy court lacked

jurisdiction to grant a pending motion under 11 U.S.C. § 365 after bankruptcy case was dismissed); Inre W.R.M.J. Johnson Fruit Farm, Inc., 107 B.R. 18, 19 (Bankr. W.D.N.Y. 1989); In re Wood, 47 B.R.

774, 776 (Bankr. W.D. Wis. 1985) (“Courts have applied section 363 to transactions in chapter 11 proceedings only where plans have not yet been confirmed.”); In re Ala. Fuel Sales Co., 45 B.R. 365,368-69 (N.D. Ala. 1985) (holding that post-confirmation jurisdiction under 28 U.S.C. § 1334 does not

extend to the post-confirmation approval of sales or assignments of former estate property); In reLaRoche Indus., 312 B.R. 249, 257 (Bankr. D. Del. 2004) (“The fact that a proceeding is core is also

insufficient to confer subject matter jurisdiction on a bankruptcy court post-confirmation.”); Halas v.Papajcik, 199 B.R. 654, 657 (N.D. Ill. 1996) (collecting cases in, among others, the Fifth Circuit for




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Retention of Jurisdiction Post-Confirmation

Nor can the Trustee accomplish what is not authorized by law through use of a retention

provision. While a bankruptcy court's post-confirmation jurisdiction is determined in part by

reference to retention of jurisdiction provisions in the plan. As explained in In re Enron Corp.

Sec., Derivative & ERISA Litg .,16

a bankruptcy court may not expand its post-confirmation

jurisdiction through a retention of jurisdiction provision. A plan may not confer jurisdiction

absent statutory authority.17

“While a plan may not confer or expand subject matter jurisdiction,

some courts find a retention of jurisdiction in the plan to be a prerequisite to post-confirmation

jurisdiction. In other words, a plan which fails to retain subject matter jurisdiction may leave it

lacking, but a plan cannot create jurisdiction where it does not otherwise exist.”18

With respect

to the instant Plan, Virgin Offshore is attempting to reserve and retain the jurisdiction of the

Bankruptcy Court to review and approve a sale under Section 363 when such sale has not yet

been proposed or even conceptualized at the time of confirmation. The Plan Trust is aware of no

statutory or jurisprudential authority supporting the Retention Provision, and it should be

stricken prior to confirmation of the Plan.

Reservation of Rights

The Plan Trust specifically reserves the right to amend or supplement this Limited

Objection should the Plan be amended by Virgin Offshore subsequent to the filing of this

Limited Objection. Moreover, insofar as the Bankruptcy Court confirms the Plan inclusive of

the proposition that pending proceedings involving property of the estate are typically dismissedwhen property revests and the bankruptcy court loses jurisdiction).

16 In re Enron Corp. Sec., Derivative & ERISA Litg ., G-05-0012, 2005 WL 1745471, at *5 (S.D. Tex.July 25, 2005).

17 In re U.S. Brass Corp., 301 F.3d 296, 303 (5th Cir. 2002).18 In re Coho Energy, Inc., 309 B.R. at 220 n. 4; In re U.S. Brass, Corp., 301 F.3d at 303 (noting that

the plan contained a broad retention of jurisdiction provision); In re Encompass Services Corp., 337

B.R. 864, 874 (Bankr. S.D. Tex. 2006) aff'd, CIV.A. H-06-CV-0392, 2006 WL 1207743 (S.D. Tex.May 3, 2006).




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the Retention Provision, the Plan Trust specifically reserves any and all rights to appeal and/or

object to any potential request to sell the Subject Properties under Section 363(h) of the

Bankruptcy Code.

WHEREFORE, the above premises considered, the Plan Trust respectfully requests that

this Objection be deemed good and sufficient, and that this Court grants all other and further

relief to which the Plan Trust is entitled.

Respectfully submitted,

LUGENBUHL, WHEATON, PECK, /s/ Benjamin W. Kadden _ RANKIN & HUBBARD STEWART F. PECK (#10403)

CHRISTOPHER T. CAPLINGER (#25357)BENJAMIN W. KADDEN (#29927)

JOSEPH P. BRIGGETT (#33029)

601 Poydras Street, Suite 2775

New Orleans, LA 70130

Telephone: (504) 568-1990

Facsimile: (504) 310-9195

Email: [email protected]; [email protected]; [email protected]; [email protected]

Counsel for The Virgin Oil Company, Inc. PlanTrust

CERTIFICATE OF SERVICE

I hereby certify that a copy of the above and foregoing has been served upon the

following parties by electronic notice via the Court’s CM/ECF system on this 12th

day of June,2013:

• H. Kent Aguillard, [email protected]

• Brent B. Barriere, [email protected]

• Raymond A. Beyt, [email protected]• Frederick L. Bunol, [email protected], [email protected]

• Jeffrey Burmaster, [email protected]

• Jeffery D. Carruth, [email protected]

• Leo D. Congeni, [email protected]• Michael A. Crawford, [email protected]

• Albert J. Derbes, [email protected], [email protected]

• Carl Dore, [email protected], [email protected]

• Douglas S. Draper, [email protected], [email protected]

• Steven G. Durio, [email protected], [email protected]




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• Stanwood R. Duval, [email protected]

• J. David Forsyth, [email protected]• Tanya N. Garrison, [email protected]

• Robert C. Gravolet, [email protected], [email protected]• Thomas G. Gruenert, [email protected] [email protected]

• George B. Jurgens, [email protected], [email protected]

• Omer F. Kuebel, [email protected]

• Armistead M. Long, [email protected], [email protected]• Mark Mintz, [email protected], [email protected]

• Louis M. Phillips, [email protected]

• Patricia Williams Prewitt, [email protected]

• Jacque B. Pucheu, [email protected], [email protected]

• Ryan J. Richmond, [email protected]

• E. Kathleen Shahan, [email protected]

• Patrick M. Shelby, [email protected]• Thomas J. Smith, [email protected], [email protected], [email protected]• Office of the U.S. Trustee, [email protected]• Dennis J. Vidrine, [email protected]

• Arthur A. Vingiello, [email protected]

• David F. Waguespack, [email protected]

• Guy E. Wall, [email protected], [email protected]

• Kristin S. Wallis, [email protected], [email protected]

• Timothy A. York, [email protected]

/s/ Benjamin W. Kadden ___________


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