Case 16-10790-KJC Doc 818 Filed 11/09/16 Page 1 of 10 UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE In re: ABEINSA HOLDING INC., et al., Debtors. 1 Chapter 11 Case No. 16-10790 (KJC) (Jointly Administered) Hearing Date: November 16, 2016 at 10:00 a.m. (ET) Obj. Deadline: November 9, 2016 at 4:00 p.m. (ET) DEBTORS OBJECTION TO MOTION OF LEF INGENIEROS AUDING INTRAESA, LLC FOR RELIEF FROM THE AUTOMATIC STAY PURSUANT TO 11 U.S.C. 362 [D.I. 657] The above-captioned debtors and debtors in possession (the Debtors ) hereby object (the Objection ) to Motion of LEF Ingenieros Auding Intraesa, LLC for Relief from the Automatic Stay Pursuant to 11 U.S.C. 362 [D.I. 657] (the Motion ). In support of the Objection, the Debtors respectfully represent as follows: PRELIMINARY STATEMENT 1. By the Motion, and only weeks before the Confirmation Hearing, LEF Ingenieros Auding Intraesa, LLC ( LEF ) seeks relief from the automatic stay of section 362 of title 11 of the United States Code (the Bankruptcy Code ) to elevate itself above all other prepetition creditors and prosecute to final judgement and enforce any such judgment against debtor Abener 1 The Debtors in these chapter 11 cases, together with the last four digits of each Debtor s federal tax identification number, are as follows: Abeinsa Holding Inc. (9489); Abeinsa EPC LLC (1176); Abencor USA, LLC (0184); Abener Construction Services, LLC (0495); Abener North America Construction, LP (5989); Abengoa Solar LLC (6696); Inabensa USA, LLC (2747); Nicsa Industrial Supplies LLC (9076); Teyma Construction USA, LLC (0362); Abeinsa Abener Teyma General Partnership (2513); Abener Teyma Mojave General Partnership (2353); Abener Teyma Hugoton General Partnership (7769); Abener Teyma Inabensa Mount Signal Joint Venture (9634); Teyma USA & Abener Engineering and Construction Services General Partnership (6534); Abengoa US Holding, LLC (6871); Abengoa US, LLC (9573); Abengoa US Operations, LLC (1268); Abengoa Bioenergy Biomass of Kansas, LLC (1119); Abengoa Bioenergy Hybrid of Kansas, LLC (9711); Abengoa Bioenergy Technology Holding, LLC (7434); Abengoa Bioenergy New Technologies, LLC (8466). The chapter 11 case of Abengoa Bioenergy Biomass of Kansas, LLC, Case No. 16-10876, pending before the United States Bankruptcy Court for the District of Delaware (the Court ) is stayed pending further order of the Court. EAST\94284699.1
Case 16-10790-KJC Doc 818 Filed 11/09/16 Page 2 of 10 Teyma Mojave General Partnership (the Debtor ) and its non-debtor affiliate, Mojave Solar LLC. LEF has failed to meet its burden of proof and thus, the Motion should be denied. 2. No cause exists to lift the automatic stay to permit LEF to prosecute litigation and enforce any judgment against the Debtor, outside of the claims process in its bankruptcy case. First, the cost and effort required for the Debtor to defend itself in this litigation will prejudice the Debtor, its affiliated debtors and their estates. Second, LEF has failed to demonstrate how it would be prejudiced if the automatic stay remains in place, or that any prejudice it might suffer would far outweigh the prejudice to the Debtor and its affiliated debtors. The Court approved the Debtors Disclosure Statement Pursuant to Section 1125 of the Bankruptcy Code [D.I. 746] and scheduled a confirmation hearing for December 6, 2016. The Debtor is weeks away from a confirmed plan. LEF has not shown any reason why its claim cannot be resolved through the processes contemplated under the plan, through the normal claims resolution process that will cover thousands of other claims or through an arbitration overseen by a litigation trustee appointed in connection with the plan of reorganization. Third, LEF s request for relief from stay does not pass the first two Rexene factors, thus the Court does not need to consider probability of success on the merits. LEF thus has failed to meet the legal standard for relief from stay. STATEMENT OF FACTS 3. Prior to the Petition Dates (defined below), the Debtor, a general contractor, and Mojave Solar, a property owner, entered into a Turnkey Engineering, Procurement and Construction Contract (the EPC Contract ) for the Debtor to build a 250 MW concentrating solar power plant on a property near Harper Lake in San Bernardino County, California (the Mojave Project ). The EPC Contract required the Debtor to build a water treatment plant on 2
Case 16-10790-KJC Doc 818 Filed 11/09/16 Page 3 of 10 premises for Mojave Solar. Accordingly, the Debtor sought out subcontractors and selected LEF to design and supply the equipment for a water treatment plant (the Water Treatment Plant ) for Mojave Solar at the Mojave Project. 4. On July 12, 2012, the Debtor and LEF entered into a Water Treatment Plant Contract, Contract No. 0020P-4500265142 Mojave Solar Power Plant Project, San Bernardino County, California with LEF (the WTP Contract ). On April 26, 2013, the Debtor and LEF entered into a complementary contract called the Water Treatment Plant Wells SDI Reduction Contract, Contract No. 0020.1P-4500402039 Mojave Solar Power Plant Project, San Bernardino County, California (the MMF Contract ). The WTP and MMF Contracts include arbitration provisions, in violation of which LEF seeks relief from stay to pursue rights in state court. To the best of the Debtor s knowledge, there is no privity of contract between Mojave Solar and LEF. 5. LEF s design and late supply of the equipment for the Water Treatment Plant resulted in certain damages to the Mojave Project. As a result, on September 14, 2015, the Debtor commenced an arbitration before the International Chamber of Commerce International Court of Arbitration (the Arbitration ) seeking approximately $6,850,000 for breach of contract and liquidated damages, and withheld payments to LEF. LEF counterclaimed, seeking approximately $6,200,000 in payments due. 6. On January 20, 2016, LEF filed a complaint commencing a declaratory judgment action in the Superior Court of the State of California for the County of San Bernardino (the Action ) against the Debtor and Abengoa Yield PLLC ( Abengoa Yield ) for ownership and possession of the Water Treatment Plant installed at the Mojave Project for Mojave Solar. LEF seeks relief from stay to pursue the Action. The Debtor s position is that, as Mojave Solar is the 3
Case 16-10790-KJC Doc 818 Filed 11/09/16 Page 4 of 10 owner of the Mojave Project, all the equipment and property, including that which is related to the Water Treatment Plant located at the Mojave Project belongs to Mojave Solar. Nevertheless, LEF is pursuing a theory by which it is entitled to ownership of the Mojave Plant and the Water Treatment Plant despite the language of the WTP Contract and MMF Contract because the Debtor withheld payment from LEF. 2 7. On March 29, 2016, the Debtor and its affiliated debtors filed voluntary petitions for relief under chapter 11 of the Bankruptcy Code, commencing the above-captioned cases. On April 6, April 7 and June 12, 2016 (collectively with March 29, 2016, the Petition Dates and each a Petition Date ) additional affiliated entities filed voluntary petitions for relief under chapter 11 of the Bankruptcy Code. The Debtors cases are jointly administered for procedural purposes. 8. On October 24, 2016, the Debtor and its affiliated debtors filed the Debtors First Amended Plans of Reorganization and Liquidation (the Plan ) and the Debtors Disclosure Statement Pursuant to Section 1125 of the Bankruptcy Code (the Disclosure Statement ). The Plan contemplates the reorganization of the Debtor as well as the establishment of a litigation trust, which will be controlled and operated by the Committee, to resolve all litigation-related claims against the Debtor and its debtor affiliates. The Court approved the Disclosure Statement on October 31, 2016 [D.I. 746]. As of the date hereof, the Debtor and its affiliated debtors have commenced solicitation on the Plan and the Court scheduled a confirmation hearing for December 6, 2016. The Debtor expects that the Plan will be approved and confirmed within a month. 2 The Debtor does not purport to know or understand LEF s case theory in the Action. However, to the Debtor s knowledge, there is no contract between Mojave Solar and LEF. To the extent LEF is attempting to claim ownership or possession of the Mojave Project under a theory that the Debtor owns any part of the Mojave Project, this dispute would be a core bankruptcy issue to be decided by this Court under section 541 of the Bankruptcy Code, further reason the automatic stay should not be lifted to allow LEF to litigate in state court. 4
Case 16-10790-KJC Doc 818 Filed 11/09/16 Page 5 of 10 9. On May 24, 2016, LEF filed a Notice of Appearance and Request for Notices and Documents in the above-captioned bankruptcy cases. LEF subsequently amended its complaint in the Action removing Abengoa Yield as a defendant and substituting it for Mojave Solar. This substitution occurred as a result of a representation that Mojave Solar, and not Abengoa Yield, was the owner of the Mojave Project. On September 6, 2016, LEF filed a second amended complaint (the Second Amended Complaint ), in violation of the automatic stay. Upon service of the Second Amended Complaint, the Debtor sent a letter to LEF stating that the Second Amended Complaint was filed in violation of the automatic stay. LEF subsequently filed the Motion to ratify its prior, willful violation of the automatic stay. The Debtor and LEF have engaged in negotiations to resolve the Motion consensually but have been able to do so. Yesterday, LEF amended the Motion to allow LEF to name the Debtor in the action and prosecute the Action against the Debtor should the Debtor intervene, respond or otherwise participate in the Action. 10. As set forth above, the Plan proposes a mechanism to resolve billions of dollars in litigation and other claims against the Debtors. Upon the effective date of the Plan, the Debtor have proposed that their ultimate parent company will fund a litigation trust, which the Committee will control and operate, to liquidate the litigation claims against the Debtors. LEF should not be granted leave to recover ahead of the Debtor s creditors through this Motion. For the reasons set forth below, LEF s Motion should be denied. OBJECTION I. LEF Has Not Carried Its Burden to Show Cause for Relief from the Automatic Stay 11. The automatic stay operates as an injunction against: the commencement or continuation, including the issuance or employment of process, of a judicial, administrative, or other action or proceeding against the 5
Case 16-10790-KJC Doc 818 Filed 11/09/16 Page 6 of 10 debtor that was or could have been commenced before the commencement of the case under this title 11 U.S.C. 362(a)(1). The automatic stay is one of the most fundamental protections afforded a debtor in bankruptcy. Charan Trading Corp. v. Uni-Marts, LLC (In re Uni-Marts, LLC), 399 B.R. 400, 418 (Bankr. D. Del. 2009). It is designed to give a debtor breathing room from its creditors, to protect the debtor from an uncontrolled scramble for its assets in various uncoordinated proceedings in different courts, to preclude one creditor from pursuing a remedy to the disadvantage of other creditors, and to provide the debtor and its executives with reasonable respite from pre-petition litigation, during which they may have the opportunity to formulate a plan of reorganization. Gillman v. Cont l Airlines, Inc. (In re Cont l Airlines, Inc.), 177 B.R. 475, 479 (D. Del. 1993) (citing A.H. Robins Co. v. Piccinin, 788 F.2d 994, 998 (4th Cir. 1986)). 12. Section 362(d)(1) of the Bankruptcy Code requires that a party seeking to lift the automatic stay show cause for such relief. As the movant, LEF has the burden of showing that cause exists to grant relief from the automatic stay. In re Tribune Co., 418 B.R. 116, 127 (Bankr. D. Del. 2009). Where the moving party fails to satisfy its burden to show that cause exists, the Court is compelled to deny the motion. See In re Aleris Int l, Inc., 456 B.R. 35, 48 (Bankr. D. Del. 2011). 13. In determining whether cause exists for granting relief from the automatic stay, a court should look at the totality of the circumstances. In re Wilson, 116 F.3d 87, 90 (3d Cir. 1997). Whether cause exists is a decision within the sound discretion of the bankruptcy court, and one that must be determined on a case-by-case basis. See e.g., In re SCO Grp., Inc., 395 B.R. 852, 856 (Bankr. D. Del. 2007); Izzarelli v. Rexene Prods. Co. (In re Rexene Prods. Co.), 6
Case 16-10790-KJC Doc 818 Filed 11/09/16 Page 7 of 10 141 B.R. 574, 576 (Bankr. D. Del. 1992) (citing In re Fernstrom Storage & Van Co., 938 F.2d 731, 735 (7th Cir. 1991)). 14. In determining whether the stay should be lifted, this Court generally looks at the following three factors as set forth in In re Rexene Prods. Co.: (1) the likely harm or prejudice to the debtor and the estate that will result if the stay is modified to permit litigation against the debtor in another court, (2) whether maintaining the stay will result in hardship to the movant that considerably outweighs the hardship to the debtor if the stay were modified, and (3) whether the movant is likely to succeed on the merits in the litigation if the stay is lifted. See In re Rexene Products Co., 141 B.R. at 576. See also In re Spansion, Inc., 418 B.R. 84, 97 (Bankr. D. Del. 2009), vacated on other grounds; Samsung Elecs. Co. v. Ad Hoc Consortium of Floating Rate Noteholders, No. 09-0835 et al., No. 09-0836 (RBK), 2010 WL 2636115 (D. Del. June 29, 2010). None of the Rexene factors have been satisfied here. A. Granting Relief from Stay Would Prejudice the Debtor and Its Estates 15. LEF s contention that granting relief from stay would result in only minor prejudice to the Debtor, its debtor affiliates and their estates is incorrect. As set forth in the Motion and the proposed order attached to the Motion, LEF wants to prosecute the Action against the Debtor to settlement or final judgement and to enforce any such settlement or final judgement against Mojave Solar and the Debtor. (See Motion at pp. 1, 9 and Exh. A.) 3 If LEF is granted leave to do so, the estates and the Debtors themselves will suffer more than minor prejudice. 16. If LEF s Motion is granted, the Debtor will be required to spend time, resources and estate funds to participate and defend itself in the Action. The Action would require 3 LEF is also participating in the ICC arbitration described above, which may be another forum in which to resolve the dispute upon confirmation of the Plan. 7
Case 16-10790-KJC Doc 818 Filed 11/09/16 Page 8 of 10 attention and would inappropriately consume the already limited resources of the Debtor and its debtor-affiliates during a critical time in the bankruptcy cases. The Debtor is party to a management services agreement in which debtor Abeinsa EPC LLC provides legal and other services on its behalf. Should the automatic stay be lifted, debtor Abeinsa EPC LLC will also be compelled to use estate resources to defend the Debtor in the Action. Further, the Debtor and its affiliated debtors have proposed a plan of reorganization which contemplates substantive consolidation. Thus, forcing the Debtor to waste limited estate resources to participate and defend itself in the Action will negatively affect the recoveries of all creditors of the EPC Reorganizing Group. 4 B. The Hardship, if Any, Suffered by LEF Does Not Considerably Outweigh the Hardship to the Debtors 17. The potential harm to the Debtor and its estate that would result if LEF were granted relief from stay is significant, because the Debtor and its debtor-affiliates would incur litigation expenses and would be forced to spend estate resources defending themselves. LEF cannot prevail under the second Rexene factor as its harm must considerably outweigh that of the Debtors. Spansion, 418 B.R. at 97. In its Motion, LEF claims that it is harmed by being unable to pursue the only avenue available to it through which to protect its property rights to the Water Treatment Plant... for an undetermined period of time during the pendency of the Debtor s bankruptcy cases. See Motion at 19. In fact, LEF would experience no harm in delay during the pendency of the Debtor s bankruptcy case. The Debtors filed the Debtors First Amended Plans of Reorganization and Liquidation and the Debtors Disclosure Statement 4 Under the Debtors First Amended Plans of Reorganization and Liquidation, the EPC Reorganizing Group includes debtors Abeinsa Holding Inc.; Abeinsa EPC LLC; Abeinsa Abener Teyma General Partnership; Abener Construction Services, LLC: Abener North America Construction LP; Abener Teyma Hugoton General Partnership; Abengoa Bioenergy New Technologies, LLC; Abengoa US, LLC; Abengoa US Holding, LLC; Abengoa US Operations, LLC; Teyma Construction USA, LLC and Teyma USA & Abener Engineering and Construction Services General Partnership. 8
Case 16-10790-KJC Doc 818 Filed 11/09/16 Page 9 of 10 Pursuant to Section 1125 of the Bankruptcy Code, have commenced solicitation on the Plan and are moving towards a confirmation hearing scheduled for December 6, 2016. There is no current threat nor has LEF asserted any potential threat to its alleged property rights in the Water Treatment Plant. Delay does not outweigh the substantial harm to the Debtors estates. LEF is an unsecured creditor, and therefore is in no worse position than every other creditor in the above-captioned chapter 11 cases. 18. As set forth above, if the Court were to grant LEF s Motion, the Debtor and Abeinsa EPC LLC will be required to expend estate resources in participating and defending the Debtor in the Action. Here, the automatic stay simply fulfills its intended purpose of preventing a chaotic and uncontrolled scramble for the debtor s assets in a variety of uncoordinated proceedings in different courts. In re Holtkamp, 669 F.2d 505, 508 (7th Cir. 1982). Alternatively, if this Court were to grant LEF relief from stay to pursue its claims against the Debtors, the resulting harm to the Debtor-Contractors would greatly outweigh any harm to LEF. C. The Court Does Not Need to Consider Probability of Success on the Merits 19. Because LEF has failed to establish cause to justify modifying the automatic stay under the standards discussed above, the probability of success on the merits of the Action has little or no significance in determining whether the automatic stay should be modified. See Am. Airlines, Inc. v. Cont l Airlines, Inc. (In re Cont l Airlines, Inc.), 152 B.R. 420, 426 (D. Del. 1993) (noting that the probability of success should only be weighed after determining that the balance of hardships weighed in favor of the movant). [REMAINDER OF PAGE LEFT INTENTIONALLY BLANK] 9
Case 16-10790-KJC Doc 818 Filed 11/09/16 Page 10 of 10 WHEREFORE, the Debtors respectfully request that the Court deny the Motion in its entirety and grant the Debtors such other and further relief as is just and proper. Dated: November 9, 2016 Wilmington, Delaware Respectfully submitted, DLA PIPER LLP (US) By: /s/ R. Craig Martin R. Craig Martin (DE 005032) 1201 North Market Street, Suite 2100 Wilmington, Delaware 19801 Telephone: (302) 468-5700 Facsimile: (302) 394-2341 craig.martin@dlapiper.com Richard A. Chesley (admitted pro hac vice) 203 North LaSalle Street, Suite 1900 Chicago, Illinois 60601 Telephone: (312) 369-4000 Facsimile: (312) 236-7516 richard.chesley@dlapiper.com Counsel to Debtors and Debtors in Possession 10