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Longacre Master Fund, Ltd., Longacre Capital Partners (Qp) L.P v. Ats Automation Tooling Systems Inc

September 14, 2012


Appeal from an order of the United States District Court for the Southern District of New York (Robert W. Sweet, Judge).


Longacre Master Fund, Ltd. v. ATS Automation Tooling Systems Inc.


Rulings by summary order do not have precedential effect. Citation to a summary order filed on or after January 1, 2007, is permitted and is governed by Federal Rule of Appellate Procedure 32.1 and this Court's Local Rule 32.1.1. When citing a summary order in a document filed with this Court, a party must cite either the Federal Appendix or an electronic database (with the notation "summary order"). A party citing a summary order must serve a copy of it on any party not represented by counsel.

At a stated term of the United States Court of Appeals for the Second Circuit, held at the Daniel Patrick Moynihan United States Courthouse, 500 Pearl Street, in the City of New York, on the 14th day of September, two thousand and twelve.


UPON DUE CONSIDERATION WHEREOF, IT IS HEREBY ORDERED, ADJUDGED, AND DECREED that the judgment of the District Court is VACATED with respect to Counts One, Six, and Seven, and the cause is REMANDED for further proceedings.

This case involves a bankruptcy claim nominally worth about $2 million that defendant- appellee ATS Automation Tooling Systems Inc. ("ATS") sold to plaintiffs-appellants Longacre Master Fund, Ltd. and Longacre Capital Partners (QP) L.P. (collectively, "Longacre"). Longacre purchased the claim in 2006 for nearly its full nominal value, but following the financial crisis of 2008, the debtor--Delphi Automotive Systems ("Delphi")--was unable to pay the full amount. In this suit, Longacre claims a contractual right to several years' interest on the purchase price based on an objection that Delphi filed against the claim during the bankruptcy proceedings. We assume the parties' familiarity with the facts and procedural history of this case, both of which are briefly summarized below and recounted in greater detail in the District Court's opinion. See Longacre Master Fund, Ltd. v. ATS Automation Tooling Sys. Inc., 456 B.R. 633 (S.D.N.Y. 2011).


After Delphi filed for bankruptcy protection under Chapter 11 of the Bankruptcy Code, the Bankruptcy Court (Robert D. Drain, Judge) set a deadline of February 3, 2010, for Delphi to file objections to any outstanding claims. On the final day, Delphi filed an "Omnibus Claims Objection" stating that it was "objecting to" all preference-related claims (including the claim at issue here) pending the resolution of various preference actions that Delphi had initiated regarding those claims. The objection expressed Delphi's desire "[t]o preserve [its] rights under section 502(d) of the Bankruptcy Code" and specifically sought to (a) "object to each Preference-Related Claim pending the conclusion of the Avoidance Action related to such Claim," and (b) obtain "entry of an order preserving the Reorganized Debtors' objection to the Preference-Related Claims . . . ." The

Bankruptcy Court recognized the objection without opposition in an order dated April 5, 2010, providing that "[Delphi's] Objection to each Preference-Related Claim . . . is hereby deemed preserved pending the conclusion of the Avoidance Action relating to such Preference-Related Claim . . . ."

On May 14, 2010, ATS filed a motion to dismiss Delphi's preference action. On July 22, 2010, the Bankruptcy Court granted the motion, dismissing the complaint without prejudice to Delphi moving for leave to amend by September 7, 2010, because Delphi had failed to plead facts sufficient to state a claim. Delphi moved to amend its complaint on September 7, 2010, but the parties settled in early February 2011 prior to any ruling on the motion. On March 30, 2011, Delphi withdrew its Omnibus Objection. The Bankruptcy Court then dismissed the preference complaint with prejudice on March 31, 2011.

In this separate suit, brought in the Supreme Court of New York but later removed to the District Court under the Court's diversity jurisdiction, Longacre argues that Delphi's 2010 objection and ATS's failure to fully resolve that objection within 180 days triggered an obligation under the purchase agreement that ATS refund the purchase amount, with interest, pending resolution of the objection. Longacre acknowledges that it would have had to later return the refunded purchase amount to ATS once the objection was resolved. In this suit, however, Longacre seeks to recover the interest due on that amount from the date of the agreement (December 14, 2006) to the date the claim was fully resolved (March 30, 2011).

Longacre's complaint alleged seven causes of action for breach of contract and indemnification, but this appeal involves only Counts One, Six, and Seven. Count One alleged that Delphi's objection constituted an impairment under Paragraph 7 of the purchase agreement. That paragraph provides that a claim is impaired when "all or any part of the Claim is . . . objected to . . . for any reason whatsoever, pursuant to an order of the Bankruptcy Court." Count Six alleged that ATS breached its warranty in Paragraph 4 that "to the best ...

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