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Tide Natural Gas Storage I, L.P. and Tide Natural Gas Storage Ii, L.P v. Falcon Gas Storage Company

May 4, 2012

TIDE NATURAL GAS STORAGE I, L.P. AND TIDE NATURAL GAS STORAGE II, L.P., PLAINTIFFS/COUNTERCLAIM DEFENDANTS,
v.
FALCON GAS STORAGE COMPANY, INC.; DEFENDANT/COUNTERCLAIM AND CROSS-CLAIM PLAINTIFF,
ARCAPITA BANK B.S.C.; AND ARCAPITA, INC.; DEFENDANTS,
AND
HSBC BANK USA, NATIONAL ASSOCIATION, DEFENDANT/CROSS-CLAIM DEFENDANT.



The opinion of the court was delivered by: Kimba M. Wood, U.S.D.J.:

Opinion & Order

Pursuant to Rule 60 of the Federal Rules of Civil Procedure and Local Rule 6.3, Defendants Falcon Gas Storage Company, Inc. ("Falcon"), Arcapita Bank, B.S.C.(c) and Arcapita, Inc. ("Arcapita") (collectively, "Defendants") move for reconsideration of the portion of this Court's September 28, 2011 Order that: (1) denied Defendants' partial summary judgment motion for a declaratory judgment ordering the escrowed funds to be disbursed to Falcon; and (2) denied Defendants' partial summary judgment dismissing Plaintiffs Tide Natural Gas Storage I, L.P. and Tide Natural Gas Storage II, L.P.'s (collectively, "Tide") request for a permanent injunction restraining the disbursement of escrowed funds. Tide Natural Gas Storage I, L.P. v. Falcon Gas Storage Co., Inc. (the "September 28, 2011 Order"), 10 CV 5821, 2011 WL 4526517 (S.D.N.Y. Sept. 28, 2011).

For the reasons stated below, the motion for reconsideration is denied.

BACKGROUND

I.The Underlying Dispute

On March 15, 2010, Tide and Falcon entered into a Purchase Agreement, whereby Falcon agreed to sell its entire interest in Nortex Gas Storage Company, LLC ("Nortex") to Tide for $515 million. (Compl. ¶¶ 12-13.) Two days before the closing of the deal, a group of minority shareholders filed lawsuits in Texas courts (collectively, the "Hopper Litigation"), in an attempt to stop the transaction from closing. (Plaintiff's Response to Defendants' Statement of Undisputed and Material Facts Pursuant to Rule 56.1 ("Pl.'s 56.1 Resp.") ¶ 15.) The Hopper Litigation plaintiffs also filed notices of lis pendens, in connection with their lawsuits. (Id. ¶ 18.)

Consequently, the parties agreed to place $70 million of the purchase price into an escrow account (the "Escrow Account") with HSBC Bank USA, National Association ("HSBC") as protection against any expenses or liability Tide might incur as a result of the Hopper Litigation. (Id. ¶¶ 24, 36.) On April 1, 2010, the parties executed an Amended Purchase Agreement in tandem with an Escrow Agreement: Section 3.7(a) of the Amended Purchase Agreement governs the disbursement of the monies escrowed with HSBC. Section 3.7(a) provides that Tide and Falcon "shall deliver to [HSBC] joint instructions to disburse the balance of the Escrowed Amount" upon the occurrence of either one of the following two conditions:

(i) a final non-appealable order of each court of competent jurisdiction with respect to the Hopper Claim or

(ii) (A) an agreed dismissal with prejudice of the Hopper Claim . . . , (B) a complete release by all of the Participants under the Hopper Claim . . . , and (C) the final non-appealable release or expungement of the Lis Pendens . . . . (Declaration of Jeremiah J. Anderson, dated Aug. 31, 2010, Ex. B, Amended Purchase Agreement § 3.7(a).) On April 1, 2010, with the above-mentioned agreements in place, the Nortex transaction closed. (Pl.'s 56.1 Resp. ¶ 35.)

On July 27, 2010, Falcon and the Hopper Litigation plaintiffs reached a settlement, pursuant to which the Hopper Litigation plaintiffs filed nonsuits in each of the courts in which their actions were pending. (Id. ¶ 39.) Subsequently, the Court in Eastland County entered an order expunging the notices of lis pendens. (Id. ¶¶ 40, 42.)

Tide filed the instant action against Falcon and Arcapita on August 2, 2010. (Dkt. No. 1.)

II.Procedural History

Tide's complaint contains four causes of action arising out of alleged misstatements made by Defendants in connection with the Nortex sale. Tide alleges: (1) fraudulent misrepresentation; (2) breach of warranty; (3) breach of contract; and (4) violation of Section 10 and Rule 10b-5 of the Securities Exchange Act of 1934. (Compl. ¶¶ 10-11.) In addition, Tide seeks a permanent injunction preventing Falcon and HSBC from disbursing any funds from the Escrow Account, except pursuant to Section 3.7 of the Amended Purchase Agreement.

Defendants answered Tide's complaint, and Falcon filed a Counterclaim and Cross-claim, seeking, inter alia, a declaratory judgment ordering the ...


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