United States District Court, S.D. New York
WILMINGTON TRUST, NATIONAL ASSOCIATION, as Administrative Agent and Collateral Agent, Plaintiff,
THE ESTATE OF AUBREY K. MCCLENDON, deceased, THOMAS J. BLALOCK, in his capacity as Personal Representative of the Estate of Aubrey K. McClendon, deceased, and KATHLEN B. MCCLENDON, in her capacity as Special Administrator of the Estate of Aubrey K. McClendon, deceased, Defendants.
& WATKINS LLP New York, NY 10022 By: Blair G. Connelly,
Esq. Arthur F. Hoge, III, Esq. Attorneys for Plaintiff
PATTERSON BELKNAP WEBB & TYLER LLP By: James V. Masella,
III, Esq. Matthew E. Funk, Esq. CONNER & WINTERS, LLP
Jared D. Giddens, Esq. Bryan J. Wells, Esq. J. Dillon Curran,
Esq. KAPLAN RICE LLP Howard J. Kaplan, Esq. Joseph A. Matteo,
Esq. Attorneys for Defendants
W. SWEET, U.S.D.J.
action arises out of a personal guaranty (the
"Guaranty") that was executed by the late Aubrey K.
McClendon ("McClendon") to secure a $465 million
loan made to certain companies McClendon controlled. The
issues presented raise the always delicate and thorny issue
of jurisdiction between the federal and state courts.
J. Blalock, the Personal Representative of the Estate of
Aubrey K. McClendon ("Blalock" or the
"Personal Representative") has moved pursuant to
Federal Rules of Civil Procedure 12(b)(1) and 12(b)(6) to
dismiss the Complaint filed by Plaintiff Wilmington Trust,
National Association (the "Plaintiff" or
"Wilmington"). Kathleen B. McClendon, the Special
Administrator of the Estate of Aubrey K. McClendon
("Kathleen" or the "Special
Administrator" and, together with the Personal
Representative, the "Defendants"), has also moved
to dismiss Plaintiff s Complaint under Federal Rules of Civil
Procedure 12 (b) (1) and 12 (b) (6) .
upon the conclusions set forth below, the motions are granted
in part and denied in part.
Complaint sets forth the following facts, which are assumed
true for the purpose of the parties' motion to dismiss.
See Koch v. Christie's Int'l PLC, 699 F.3d
141, 145 (2d Cir. 2012) . As part of a motion to dismiss, a
"court may consider any-written instrument attached to
the complaint as an exhibit or incorporated in the complaint
by reference, as well as documents upon which the complaint
relies and which are integral to the complaint."
N.Y. Life Ins. Co. v. United States, 724 F.3d 256,
258 n.1 (2d Cir. 2013) (quoting Subaru Distribs. Corp. v.
Subaru of Am., Inc., 425 F.3d 119, 122 (2d Cir. 2005)).
instant dispute originates from a $465 million term loan made
by Wilmington and other lenders (the "Lenders") to
American Energy Partners Holdco, LLC ("Holdco") and
other entities controlled by McClendon (together, the
"Borrowers") in November 2014 (the "Credit
Agreement"). Compl. ¶¶ 1-2. Part of the terms
of the Credit Agreement included discussion of collateral to
be pledged by the Borrowers to the Lenders (the "Equity
Collateral"). See, e.g., Compl. Ex. B, §
5.2; id. Ex. C, § 5(b). Under the terms of the
Credit Agreement, Wilmington is the Lender's
Administrative and Collateral Agent. Compl. ¶ 7.
inducement to the Lenders to enter into the Credit Agreement,
McClendon executed the Guaranty to secure the loan. Compl.
¶¶ 2, 24; id. Exs. C, D. The Guaranty
contains several clauses relevant to the current motion.
3 of the Guaranty states that the Guaranty is a
"guaranty of payment and not merely of collection"
and that "Guarantor's [McClendon's] obligations
under this Guaranty shall be absolutely and
unconditional." Compl. Ex. C, § 3.
5 of the Guaranty contains certain negative covenants that
required McClendon, as Guarantor, to refrain from performing
certain actions (the "Negative Covenants"). These
Negative Covenants included, inter alia, that
McClendon would "not sell, transfer, assign or otherwise
dispose of, or dividend or otherwise distribute, whether
directly or indirectly, any of the Equity Interests in an
Credit Party, [or] any subsidiary . . ., " id.,
§ 5(g)(ii), and would "[n]ot amend or otherwise
modify, or cause any other Person to amend or otherwise
modify, any Organizational Documents of any Credit Party or
any subsidiary thereof . . ., in a manner adverse to the
rights and interests of [Wilmington] or the Lenders under the
Credit Documents . . ., " id., § 5(m)(i).
5(1) of the Guaranty required McClendon to provide Wilmington
financial information both at regular intervals and upon
request (the "Financial Information Covenants"),
which included: "within 75 days following the end of
each calendar quarter, signed unaudited financial
statements" of McClendon's; "within 15 days
following the filing thereof (but not later than October 31
of the year following such tax year), copies of the most
recently filed federal and state tax returns" that
McClendon filed; and "promptly upon the reasonable
request of [Wilmington], but in any event no later than
thirty (30) days after receipt of such request, such other
financial information regarding [McClendon] as so
requested." Id., § 5(1).
8 of the Guaranty contains an assignment clause, which
provides: "The Guaranty shall be binding upon Guarantor,
Guarantor's successors and assigns and Guarantor's
estate and legal representatives in the event of the death or
incapacity of Guarantor." Id., § 8.
13 of the Guaranty contains a choice of law provision, which
provides: "This Guaranty and the rights and obligations
of the parties (including, without limitation, any claims
sounding in contract law or tort law arising out of the
subject matter hereof and any determinations with respect to
post-judgment interest) shall be governed by, and shall be
construed and enforced in accordance with, the laws of the
state of New York." Id., § 13.
14 of the Guaranty contains a mandatory forum selection
clause, which provides:
All judicial proceedings brought against any party arising
out of or relating hereto or any other credit documents or
any of the obligations, shall be brought in any federal court
of the United States of America sitting in the borough of
Manhattan or, if that court does not have subject matter
jurisdiction, in any state court located in the City and
County of New York. By executing and delivering this
Guaranty, Guarantor, for itself and in connection with its
properties irrevocably (A) accepts generally and
unconditionally the exclusive (subject to Clause (E) below
[the Lenders' right to enforce judgments in any other
jurisdiction]) jurisdiction and venue of such courts ....
Id., § 14 (the "Forum Selection
The Probate Proceeding and Wilmington Claim Appeal
died in March 2016, which resulted in a default under the
terms of the Guaranty. Compl. ¶ 3; id. Ex. A,
§ 8.1(j). Following his death, McClendon's estate
(the "Estate") entered probate, and Blalock, a
former associate of McClendon, was appointed as the
Estate's Personal Representative. Id.
¶¶ 41-42; In the Matter of the Estate of Aubrey
K. McClendon, Deceased, No. PB-2016-342 (Okla. Cnty.
Dist. Ct.) (the "Probate Proceeding") .
2016, as part of the Probate Proceeding, Wilmington presented
to the Personal Representative a creditor claim against the
Estate based on the Guaranty in the amount of $464, 369,
418.22 plus interest accrued and accruing, costs, expenses,
and attorneys' fees. Compl. ¶ 43; see Okla.
Stat. tit. 58, § 331 (1988). On August 15, 2016, in the
Probate Proceeding, the Personal Representative partially
rejected Wilmington's creditor claim by accepting the
principal amount of Wilmington's claim "less the
value of certain collateral that was pledged to Wilmington in
connection with the Credit Agreement and that Wilmington
presently controls." Declaration of N. Martin Stringer
dated October 24, 2017 ("Stringer Decl.") Ex. 1, at
1; see Compl. ¶¶ 44-45.
September 28, 2016, Wilmington commenced an independent
action against the Personal Representative for wrongful
denial of its creditor claim under Oklahoma probate law in
Oklahoma County District Court (the "Wilmington Claim
Appeal"). Compl. ¶ 47; see Wilmington Trust,
National Association v. Blalock, No. CJ-2016-4974 (Okla.
Ctny. Dist. Ct.); Okla. Stat. tit. 58, § 339. On
September 29, Wilmington entered into a tolling agreement
with the Personal Representative (the "Tolling
Agreement"), under which Wilmington agreed to file the
Wilmington Claim Appeal "initially only in Oklahoma on
or before September 29, 2016, " but reserved all rights
to later file and pursue its Guaranty-related claims in New
York. Compl. ¶ 49/ see also Declaration of
Blair Connelly dated November 14, 2017 ("Connelly
Decl.") Ex. 2, at 1. Under the Tolling Agreement, the
Estate agreed not to assert that Wilmington was required to
file any claims in New York by September 29, 2016, or that
Wilmington had waived the Guaranty's Forum Selection
Clause in by not filing claims in New York by that date.
See Connelly Decl. Ex. 2, at 2.
The SCOOP Litigation
dispute with the Personal Representative as to the amount of
Wilmington's creditor claim under the Guaranty is not the
only dispute involving the Estate before the Court. Another
issue arises from the Estate's equity ownership of SCOOP
Energy Company Holdings, LLC ("SCOOP Holdings") and
SCOOP Energy Company, LLC ("SEC" and, together with
SCOOP Holdings, the "SCOOP Res"). Compl. ¶ 96.
The two issues, however, draw from the same repertory theatre
of involved actors.
November 10, 2016, Scott R. Mueller ("Mueller"), a
former associate of McClendon, commenced an action in
Oklahoma state court. Compl. ¶ 50; see Mueller v.
SCOOP Energy Company Holdings, LLC, No. CJ-2016-5774
(Okla. Cnty. Dist. Ct.) (the "SCOOP Litigation").
In the SCOOP Litigation, Mueller alleges that Blalock, in his
individual capacity, Ryan A. Turner, and he are entitled to
certain equity interests in, amongst other businesses, SCOOP
Holdings and SEC. Compl. ¶ 52; see Declaration
of James V. Masella, III, dated October 24, 2017
("Masella Decl.") Ex. 1.
result of Blalock's conflict of interest regarding the
Estate in the context of the SCOOP Litigation, the Oklahoma
probate court appointed McClendon's widow, Kathleen, as
Special Administrator of the Estate and authorized and
empowered her to, inter alia, "[a]ppear on
behalf of and represent the Estate in the SCOOP Litigation
and any related appeal, mediation or arbitration."
Compl. ¶ 53; see also id. ¶ 54; Masella
Decl. Ex. 2, at 4.
February 21, 2017, Wilmington's Motion to Intervene in
the SCOOP Litigation was denied. Masella Decl. Ex. 3. In June
and July 2017, Wilmington wrote the Special Administrator to
aver that any distribution of the Estate of its equity
interests in SCOOP Holdings or SEC to any plaintiff in the
SCOOP Litigation would, without Wilmington's consent,
violate the Guaranty's Negative Covenants. See
Compl. ¶¶ 59, 97.
Wilmington's Requests for Financial Information
May 2017, Wilmington has sent multiple letters to the
Personal Representative seeking financial information from
the Estate pursuant to the Financial Information Covenants.
See Compl. ¶ 61. Specifically, Wilmington has
requested, inter alia: copies of all tax returns
that have been filed by or on behalf of the Estate, along
with all associated schedules, forms, attachments, and other
supporting documentation; information and documents
pertaining to life insurance policies held by McClendon or on
McClendon's life; and an analysis of all liabilities of
McClendon and the Estate. Compl. ¶¶ 61-62; see
also Connelly Decl. Exs. 4-7. The Personal
Representative objected to certain of Wilmington's
requests unless Wilmington consented to particular
confidentiality agreements. Compl. ¶¶ 63-68;
see Connelly Decl. Exs. 8-10. Wilmington and the
Personal Representative ultimately entered into an omnibus
confidentiality agreement, although without conclusive
resolution as to any future requests by Wilmington for
financial information. See Compl. ¶ 66;
Pl.'s Omnibus Opp. to Defs.' Mots. ("Pl.'s
Opp.") at 13 n.9.
September 1, 2017, Plaintiff filed its Complaint, alleging
causes of action for: (1) Judgment on the Guaranty (the
"First Cause"); (2) Declaratory Judgment with
Respect to the Negative Covenants (the "Second
Cause"); (3) Declaratory Judgment with Respect to the
Financial Information Covenants (the "Third
Cause"); and (4) Specific Performance of the Financial
Information Covenants (the "Fourth Cause").
See Compl. ¶¶ 70-114; Dkt. No. 1.
October 24, 2017, Defendants filed their respective motions
to dismiss. Dkt. Nos. 17, 20. The instant motions were heard