Opinion ID: 1038460
Heading Depth: 2
Heading Rank: 3

Heading: Injury to Third Parties

Text: Debtors also assert that a successful appeal will harm third parties. In particular they have identified four groups they claim would be adversely affected: (1) lenders; (2) equity investors; (3) customers and suppliers; and (4) creditor constituencies. Debtors’ Br. at 53–55. These groups entered into a variety of transactions and agreements in connection with the reorganization plan. Granting Appellants the relief they request, in Debtors’ view, would harm these third parties by upsetting their expectation that plan confirmation was final. We address each group in turn. We begin with the lenders, who provided exit financing for the Reorganized Debtors. According to Debtors, [t]he Exit Financing Participants and those other third party entities relying on the Exit Facility would be severely harmed should the Confirmation Order be reversed; if there is no longer a Confirmation Order, the new lenders under the Exit Facility would likely attempt to terminate the Exit Facility and the Reorganized Debtors would be unable to continue their business, which would likely lead to the inability of the Reorganized Debtors to repay the borrowed funds. Debtors’ Br. at 54. This argument is counterintuitive. Why would these lenders terminate the credit facility if doing so 20 would cause harm to themselves? Moreover, we have no evidence supporting the inference that they would take this action. Debtors’ rely on an affidavit by Robert Fitzgerald— the Chief Financial Officer of the Reorganized Debtors’ parent company, SemGroup Corporation (“SemGroup”)—to support this argument. Appellants’ App. at 627–28. That affidavit merely describes the credit facilities into which the Reorganized Debtors and the lenders entered. It says nothing about whether the lenders would seek to invalidate the loan agreements if Appellants are granted relief, let alone that they would have the legal right to do so. We are also not persuaded that the equity investors will be materially harmed. As discussed, the amounts of Appellants’ individual claims are relatively insignificant, and it is premature to assume that the putative class action will result in significantly greater financial exposure. Regardless of the potential amount, moreover, there is little reason to think that the Reorganized Debtors’ financial well-being— and thus the prospects of their equity investors—would be threatened by granting Appellants relief. SemGroup has emerged from bankruptcy in robust financial health. According to its public securities filings, in March 2012 (shortly before the District Court dismissed Appellants’ appeal as equitably moot), SemGroup had over $73 million in cash or cash equivalents, substantially more than the $50 million it was provided under the plan when it emerged from bankruptcy.10 It also had in excess of $140 million in 10 In their briefing, Debtors referred to this $50 million figure as “working capital,” which is commonly calculated as total current assets less total current liabilities. Following our request for clarification, they informed us that the $50 million figure actually refers to the cash or cash equivalents that, under the reorganization plan, SemGroup was permitted to 21 working capital.11 Moreover, as the Fitzgerald affidavit attests, the Reorganized Debtors have a variety of credit sources available to fund their operations. Appellants’ App. at 628–29. With this positive backdrop, it is not self-evident that Appellants’ claims pose any significant risk, and we have not been provided any testimony or other evidence to the contrary. Harm to the final two groups—the Reorganized Debtors’ customers and suppliers and the Debtors’ have on hand immediately following confirmation. Appellants’ Letter at 1 (Mar. 8, 2013). 11 These cash (or cash equivalent) and working capital figures are drawn from SemGroup’s Securities and Exchange Commission Quarterly Report for the period ended on March 31, 2012. SemGroup Corp., Quarterly Report (Form 10-Q) (May 9, 2012). We take judicial notice of this publicly filed report. See Fed. R. Evid. 201(c)(1); Fed. R. Evid. 201 advisory committee’s note (“In accord with the usual view, judicial notice may be taken at any stage of the proceedings, whether in the trial court or on appeal.”). Looking further out, SemGroup’s financial future appears likely to remain stable. According to its Securities and Exchange Commission Quarterly Report for the period ended on March 31, 2013, by that time SemGroup’s cash and cash equivalents exceeded $77 million and its working capital topped $142 million. SemGroup Corp., Quarterly Report (Form 10-Q) (May 9, 2013). And all this, of course, says nothing of liability insurance that the Reorganized Debtors may have to offset any future losses they do incur if Appellants ultimately win their adversary proceeding. 22 creditors—appears lacking as well. According to Debtors, the customers and suppliers will be hurt because the Reorganized Debtors have assumed a variety of executory contracts and unexpired leases in an attempt to solidify these business relationships. However, they have not explained why granting Appellants relief would require them now to reject those agreements. Debtors contend the creditor constituencies will be harmed because granting relief would destabilize a series of settlements they have made with those constituencies. But the only settlement identified by Debtors is the Producer Settlement, and (as discussed) it does not appear that settlement will be imperiled.