In re Nicole Energy Services, Inc.
In re Nicole Energy Services, Inc.
Opinion of the Court
ORDER ON MOTIONS OF COLUMBIA GAS TRANSMISSION LLC FOR ORDERS DIRECTING ROBERT C. SANDERS AND FREDDIE L. FUL-SON TO APPEAR AND SHOW CAUSE WHY THEY SHOULD NOT BE HELD IN CIVIL CONTEMPT
This matter is before the Court on two motions filed by Columbia Gas Transmission LLC, f/k/a Columbia Gas Transmission Corporation (“TCO”), in the Chapter 11 case of Nicole Energy Services, Inc. (“Debtor” or “NES”): (1) a motion requesting that the Court enter an order directing Robert C. Sanders (“Sanders”) to “show cause why he should not be held in contempt of this Court” (“Sanders Motion”) (Doc. 650) at 1; and (2) a motion requesting that the Court likewise enter an order directing Freddie L. Fulson (“Fulson”) to “show cause why he [Fulson] should not be held in contempt of this Court” (“Fulson Motion”) (Doc. 651) at l.
TCO filed the Sanders Motion and the Fulson Motion (collectively, “Motions”) in
Fulson clearly has no right to assert the Ohio RICO Claims. He asserted a claim for damages “in his capacity as the 100% owner of NES and NGP[,]” Compl. ¶ 125, and a claim for damages “in his capacity as the 100% owner of NES.” Am. Compl. ¶ 108. As explained in the NGP Show Cause Order, the Ohio RICO Claims as they relate to harm allegedly done to NGP are, in their entirety, property of NGP’s bankruptcy estate. By the same reasoning, the Ohio RICO Claims as they relate to harm allegedly done to NES (“NES Ohio RICO Claims”) were in their entirety property of NES’s bankruptcy estate, and the NES Trustee had the exclusive right to assert those claims. Consistent with that right, as explained below, the NES Trustee, rather than abandoning the NES Ohio RICO Claims (as Sanders and Fulson assert), sold the NES Ohio RICO Claims to TCO.
By a motion for approval of the sale of assets (Doc. 286) (“Sale Motion”), the NES Trustee sought approval of the asset purchase agreement attached as Exhibit A to the Sale Motion (“APA”). The APA defined the assets to be sold to TCO (“Assets”) to include:
any and all claims, demands, and causes of action of NES against [the Columbia Entities] arising from the beginning of time to the date hereof, including, but not limited to, any claims of NES that are or could have been asserted by NES in the State Court Case and the Remanded Case....
APA § 1.01. The NES Ohio RICO Claims fall within the APA’s definition of Assets. The Court approved the Sale Motion, including the NES Trustee’s sale of the Assets to TCO. See Sale Order §§ 1-2. Ful-son accordingly has no right to assert the NES Ohio RICO Claims. Sanders and Fulson should know this, because they both were served with copies of the Sale Motion and the Sale Order, and participated in the lengthy hearing that culminated in the Sale Order. See Sale Mot. at 23-24; Certificate of Mailing of Sale Order (Doc. 465) at 2.
The Court, however, does not yet have a basis to hold Sanders and Fulson in contempt for filing the Complaints as they relate to NES. Sixth Circuit case law holds that “[a] litigant may be held in contempt if his adversary shows by clear and convincing evidence that he violate[d] a definite and specific order of the court requiring him to perform or refrain from performing a particular act or acts with knowledge of the court’s order.” N.L.R.B. v. Cincinnati Bronze, Inc., 829 F.2d 585, 591 (6th Cir. 1987) (internal quotation marks omitted). As a bankruptcy court held in passing upon a contempt motion made under factually similar circumstances:
[T]he Settlement Order authorized the [Chapter 7 trustee (“Trustee”) ] to terminate the 110 Beaver Street Trust and to substitute himself as sole plaintiff in ... the civil action. It further declared that upon termination of the trust, the Trustee shall have the sole and exclusive right to take those actions necessary to dismiss the civil action on behalf of all plaintiffs. The Trustee contends that the Respondents are in contempt of the Settlement Order because they opposed and continue to oppose the Trustee’s efforts in the Superior Court to substi*507 tute himself as sole plaintiff in the civil action and to dismiss the action.
The Court must deny the motion because the Settlement Order did not order the Respondents to do anything or to refrain from doing anything. Contempt requires an act that violates an order. Insofar as the Settlement Order did not enjoin them to act in any way, their actions, however otherwise wrongful and violative of rights of the bankruptcy estate, cannot constitute a contempt of the Settlement Order. Therefore, a separate order will enter denying the contempt motion.
In re 110 Beaver St. P’ship, No. 97-11104-RS, 2007 WL 2956361, at *1 (Bankr.D.Mass. Oct. 5, 2007). See also Volvo Const. Equip. Rents, Inc. v. NRL Rentals, LLC, No. 2:09-CV-32 JCM (LRL), 2010 WL 2757777, at *1 (D.Nev. July 12, 2010) (“Plaintiff concedes that the writ and subsequent expansions of the writ do not identify or expressly prohibit the complained conduct of the defendants.... Accordingly, defendants are not in contempt because there was no order specifically requiring them to do, or refrain from doing anything.”). Here, the Sale Order did not direct Sanders or Fulson to do anything or to refrain from doing anything.
Nor did the Final Decree contain a definite and specific order requiring Sanders and Fulson to refrain from filing the Complaints. The Final Decree enjoined the pursuit of actions “against [NES] or its property.” Final Decree ¶ 6. Following the entry of the Sale Order, the NES Ohio RICO Claims were no longer the property of NES. Put simply, the Complaints did not initiate actions against NES or its property; rather, they initiated actions against the Columbia Entities. The Sale Order or other order of the Court could have included an injunction that would have enjoined Sanders and Fulson from pursuing claims such as the NES Ohio RICO Claims. See, e.g., In re Hunt, 754 F.2d 1290, 1294 (5th Cir. 1985) (“Thus, under the Master Settlement Agreement, Hunt no longer has any rights in the Estate or any interest in the administration of the Estate. Even if the district court had not issued the injunction, Hunt could not assert his claims in state court because he has relinquished all of the alleged rights he seeks to protect. The injunction simply serves to coerce Hunt into obeying the terms of the Master Settlement Agreement, and together the injunction and the Agreement bar Hun’s federal and state court actions.”). But neither the Sale Order nor the Final Decree contained a definite and specific order of the Court requiring Sanders or Fulson to refrain from filing the Complaints. Thus, under the standard articulated by the Sixth Circuit in Cincinnati Bronze, the imposition of a contempt sanction against Sanders and/or Fulson would not be appropriate under the circumstances.
For the reasons stated above, the Motions are DENIED. Again, because the NES Ohio RICO Claims were sold to TCO, Sanders and Fulson had no right to file the Complaints, and the Complaints should be dismissed. Thus, the denial of the Motions is without prejudice to the refiling of a motion to show cause in the event that TCO and/or the NES Trustee obtain from the Court an order requiring Sanders and Fulson to refrain from continuing the action or filing other similar actions in the State Court.
IT IS SO ORDERED.
. The Court has jurisdiction to hear and determine this matter pursuant to 28 U.S.C. §§ 157 and 1334 and the general order of reference entered in this district. This is a core proceeding. See 28 U.S.C. § 157(b)(2).
. The Complaints are discussed in more detail in the Order Directing Freddie L. Fulson, James A. Lowe and Robert C. Sanders to Appear and Show Cause Why They Should Not Be Held in Civil Contempt, entered as Docket No. 137 in the Chapter 7 case of Nicole Gas Production, Ltd. ("NGP"), Case No. 09-52887 ("NGP Show Cause Order”). That discussion is incorporated herein by reference. A copy of the Complaint is attached as Exhibit 1 to the motion for an order to show cause filed by the Chapter 7 trustee in the NGP case, Doc. 119 in Case No. 09-52887. A copy of the Amended Complaint is attached as Exhibit B to TCO's motion to reopen NES's Chapter 11 case (Doc. 639).
. The discussion of the Ohio RICO Claims in this order should not be construed to suggest that the Court believes that the Ohio RICO Claims have any merit. Indeed, the suggestion that TCO’s entry into the APA violates the OCPA is itself a highly questionable proposition in view of the fact that, following notice to parties in interest and a lengthy evidentiary hearing, and after finding that ”[t]here was no fraud or collusion between the parties” to the APA, a federal court of competent jurisdiction approved the APA by way of a final, nonappealable order. In re Nicole Energy Servs., Inc., 385 B.R. 201, 236 (Bankr.S.D.Ohio 2008).
Reference
- Full Case Name
- In re NICOLE ENERGY SERVICES, INC., Debtor
- Status
- Published