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June 23, 2005.

In re ENRON CORP., et al., Reorganized Debtors. UPSTREAM ENERGY SERVICES, as Agent for Certain Texas Gas Producers, Appellant,

The opinion of the court was delivered by: VICTOR MARRERO, District Judge


On November 9, 2004, Upstream Energy Services ("Upstream"), appearing as an agent for certain Texas gas producers ("Texas Producers"), appealed the Order of the United States Bankruptcy Court for the Southern District of New York (the "Bankruptcy Court") entered on July 15, 2004 (the "Confirmation Order") as a part of the Chapter 11 bankruptcy proceedings of appellees Enron Corp. and certain of its affiliated reorganized debtor entities (collectively, "Enron") confirming the Supplemental Modified Fifth Amended Joint Plan of Affiliated Debtors Pursuant to Chapter 11 of the United States Bankruptcy Code, and Related Relief (the "Plan"). Enron filed a Motion to Dismiss Upstream's appeal as moot on January 19, 2005, which was joined by appellees The Official Committee of Unsecured Creditors of Enron Corp., et al. (collectively, the "Creditors' Committee") on January 20, 2005.

On May 20, 2005, the parties informed the Court that they agreed that the majority of issues raised by Upstream in its appeal were moot, and that the sole issue remaining in this action was the enforceability of the exculpation provision contained in Section 42.7 of the Plan (the "Exculpation Provision"). (Joint Letter from Weil, Gotshal & Manges LLP to the Court, dated May 20, 2005 ("May 20 Letter"), at 2.) Because the Court finds that Upstream's appeal as to this provision is also moot, the Court dismisses Upstream's appeal in its entirety.


  The Chapter 11 bankruptcy of Enron was one of the largest in history, and most of the facts of those proceedings are irrelevant to the appeal at hand. Therefore, only facts necessary for the resolution of the present dispute are recited herein.

  A. UPSTREAM'S CLAIM AGAINST ENRON*fn1 In October 2001, Upstream entered into a series of agreements with Enron North America Corp. ("ENA") for the delivery of natural gas to ENA in November 2001. Upstream Security I, 302 B.R. at 457. In entering these agreements, Upstream acted as an agent for the undisclosed and heretofore unidentified Texas Producers.*fn2 Id. at 461. ENA received the gas, but, by reason of its having filed for bankruptcy in December 2001, was unable to pay for the shipments when the obligations became due. Upstream filed a Proof of Claim in the ENA bankruptcy in July 2002 as an agent for the Texas Producers,*fn3 which Upstream claims were undisclosed principals that held title to the gas delivered under the October agreements. Upstream Security II, 312 B.R. at 29. B. ENRON'S CHAPTER 11 PROCEEDINGS

  The Enron debtors, which at the time comprised approximately 180 affiliated debtor entities, each filed for Chapter 11 bankruptcy beginning on December 2, 2001 in the United States Bankruptcy Court for the Southern District of New York.*fn4 All of the affiliated debtor entities' Chapter 11 cases were consolidated for administrative purposes before Judge Arthur J. Gonzalez. (Findings of Fact and Conclusions of Law Confirming the Plan, dated July 15, 2004 (the "Findings Opinion" or "Findings Op.") at 7, included as Appendix Item 11 to Appellees' Mem.)

  After approximately two years of negotiations between Enron, the Creditors' Committee and the ENA Examiner,*fn5 the negotiating parties agreed upon the Plan. (Id. at 39.) A total of ninety-nine objections to the Plan were filed by creditors. (Id. at 2-3.) Upstream filed several objections to the Plan, including an objection specifically concerning the Exculpation Provision. (See id. at 155-61.) The Bankruptcy Court permitted the objecting parties to collect discovery concerning the Plan, a process in which Upstream did not participate.*fn6 (Id. at 16-19; Decl. of Brian S. Rosen in Support of Appellees' Motion to Dismiss Upstream's Appeal ("Rosen Decl.") ¶ 8, attached as Ex. B to Appellees' Mem.)

  The Plan was presented to the creditors for a vote, and all of the non-insider, impaired classes entitled to vote on the Plan voted in favor of accepting the Plan. (Findings Op. at 30.) The Bankruptcy Court subsequently held a nine-day confirmation hearing (the "Confirmation Hearing"), including the presentation of exhibits and witnesses for direct and cross-examination. The parties that had objected to the Plan failed to present any witnesses at the Hearing. (Id. at 2-5.) Upstream participated in the cross-examination of the debtors' proffered witnesses, including questioning on the subject of the Exculpation Provision. (See, e.g., June 3, 2004 Confirmation Hearing Tr. ("Hearing Tr.") at 167-72, included as Appendix Item 17 to Appellees' Mem.)

  On July 15, 2004, the Bankruptcy Court entered the Confirmation Order confirming the Plan, finding that it was fair and equitable and within the range of reasonable litigation outcomes, and disposed of all outstanding objections to the Plan, including those of Upstream. (See Confirmation Order at 2-3, included as Appendix Item 12 to Appellees' Mem.; Findings Op. at 109, 152-62.) The Plan became effective on November 17, 2004, and Enron emerged from Chapter 11 bankruptcy. (Rosen Decl. ¶ 11.) Since the issuance of this Order, both Upstream and Enron agree that the Plan has been substantially consummated. (See May 20 Letter at 1-2.) Upstream nonetheless argues that the Exculpation Provision should be struck from the Plan.


  Section 42.7 of the Plan states, in pertinent part, that
[n]one of the Debtors, the Reorganized Debtors, the Creditors' Committee, the Employee Committee, the ENA Examiner . . ., the Indenture Trustees, and any of their respective directors, officers, employees, members, attorneys, consultants, advisors and agents (acting in such capacity), shall have or incur any liability to any Entity for any act taken or omitted to be taken in connection with and subsequent to the commencement of the Chapter 11 Cases, the formulation, preparation, dissemination, implementation, confirmation or approval of the Plan or any compromises or settlements contained therein . . .; provided, however, that the foregoing provisions of this Section 42.7 shall not affect the liability of . . . any Entity that otherwise would result from any such act or omission to the extent that such act or omission is determined in a Final Order to have constituted gross negligence or willful misconduct, including, without limitation, fraud and criminal misconduct. . . .
(Plan at 113-14, attached as Ex. A to the Confirmation Order, included as Appendix Item 12 to Appellees' Mem.)

  Upstream did not participate in the discovery process preceding the Confirmation Hearing to ferret out potential claims that might be affected by the Exculpation Provision. (Rosen Decl. ¶ 8; see Findings Op. at 17 (noting that "[n]one of the Creditors that filed objections to confirmation of the Plan after March 3, 2004 sought discovery or requested reconsideration of the Confirmation Discovery Procedures Order.").) Although Upstream questioned at least one witness about the Provision, the examination consisted of a brief series of questions concerning the witness's knowledge of any causes of action that might lie against any of the exculpated Plan professionals. (See Hearing Tr. at 167-172.)

  In the Bankruptcy Court's Findings Opinion, Judge Gonzalez addressed the Exculpation Provision. (See Findings Op. at 99-101, 145-46, 156.) The Court noted that Enron was unaware of any valid cause of action that would be waived as a result of this provision and that no party offered evidence of any claim, but also acknowledged that Enron never investigated whether there existed ...

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