Case KJC Doc 15 Filed 06/26/15 Page 1 of 6 IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE. Joint Administration Requested

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1 Case KJC Doc 15 Filed 06/26/15 Page 1 of 6 IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE In re: Citadel Energy Holdings, LLC, et al. 1 Case No: KJC Chapter 11 Debtors. Joint Administration Requested EMERGENCY MOTION BY DEBTORS TO ENFORCE AUTOMATIC STAY AND TO ASSESS SANCTIONS AND COSTS AGAINST DREW EVANS AND PAPERCLOUD, INC. FOR VIOLATING THE AUTOMATIC STAY The above-captioned debtors and debtors-in-possession (the Debtors ), by their undersigned counsel, hereby move (the Motion ) this Court for entry of an order, the proposed form of which is attached hereto, pursuant to sections 105(a) and 362 of title 11 of the United States Code, 11 U.S.C (as amended, the Bankruptcy Code ) enforcing the automatic stay of section 362 of the Bankruptcy Code. In support of this Motion, the Debtors respectfully represent as follows: Jurisdiction, Venue and Predicates for Relief 1. The Court has jurisdiction over this matter pursuant to 28 U.S.C. 1334(b) and the Amended Standing Order of Reference from the United States District Court for the District of Delaware, dated February 29, Venue is proper pursuant to 28 U.S.C and This matter is a core proceeding within the meaning of 28 U.S.C. 157(b)(2). 1 The Debtors and the last four digits of their respective taxpayer identification numbers are as follows: Citadel Energy Services, LLC (7762); Pembroke Fields, LLC (0341); Citadel Watford City Disposal Partners, LP (1520); Citadel Energy SWD Holdings, LLC (5266); Citadel Energy Holdings, LLC (5061). The Debtors' address is rd Ave. SW, Watford City, North Dakota

2 Case KJC Doc 15 Filed 06/26/15 Page 2 of 6 2. The statutory predicates for the relief requested herein are sections 105(a) and 362 of the Bankruptcy Code. Background 3. On June 19, 2015 (the Petition Date ), each of the Debtors filed with the Court a voluntary petition for relief under chapter 11 of the Bankruptcy Code, commencing the above-captioned chapter 11 cases. The Debtors continue to operate their businesses and manage their property as debtors-in-possession pursuant to sections 1107(a) and 1108 of the Bankruptcy Code. 4. No creditors committee has been appointed in these cases. No trustee or examiner has been appointed. A motion to jointly administer these cases has been filed contemporaneously with this Motion. 5. The Debtors electronic mail services and website ( Electronic Accounts ) are managed, but not hosted, by PaperCloud, Inc., a California corporation ( PaperCloud ). Mr. Drew Evans ( Evans ) is the director of PaperCloud and personally manages the Debtors Electronic Accounts. Evans holds the administrative password (the Password ) for the Debtors Electronic Accounts and through the Password maintains control of the same. 6. The Electronic Accounts are necessary for the day-to-day operation of the Debtors businesses. They serve as the primary means of communication between the Debtors and their clients and vendors. They also contain information necessary for the administration of the Debtors businesses such as accounts receivables information. 7. Before the Petition Date, believing that PaperCloud s services were not necessary and that Evans close association with Stanton Dotson, the former officer who had looted the Debtors, was problematic, the Debtors sought to terminate PaperCloud s 2

3 Case KJC Doc 15 Filed 06/26/15 Page 3 of 6 services and requested that Evans turnover the Password and control of the Debtors Electronic Accounts. 8. Evans and PaperCloud refused to turn over the Password unless and until they were paid sums that Evans and PaperCloud claimed are due. Debtors and PaperCloud have no written agreement regarding the provision of services by PaperCloud. PaperCloud had used the Debtors debit card to pay third party hosting services for expenses related to the electronic mail services. No invoices have come due since the Petition Date. 9. On June 26, 2015, one week after the Petition Date, Debtors discovered that all access to their Electronic Accounts had been terminated. Debtors expect that this will have an immediate negative impact on their business and the bankruptcy estates. 10. Evans and PaperCloud have been informed of the Debtors bankruptcy filing. See Letter to Drew Evans attached hereto as Exhibit A. Relief Requested 11. By this Motion, the Debtors request that the Court enter an Order pursuant to 105(a) of the Bankruptcy Code and rule 9020 of the Federal Rules of Bankruptcy Procedure (the Bankruptcy Rules ): (1) issue an order requiring that Evans and PaperCloud immediately restore the Debtors access to their Electronic Accounts and turn over the Password; (2) issue an order requiring Evans and PaperCloud show cause why they should not be held in civil contempt for violation of the automatic stay; and (3) assessing appropriate sanctions for civil contempt. Basis for Relief Requested. 12. Upon the filing of a voluntary bankruptcy petition, section 362(a) of the Bankruptcy Code provides for a stay of all collections actions against the debtor, including but not limited to: 3

4 Case KJC Doc 15 Filed 06/26/15 Page 4 of 6 (3) any act to obtain possession of property of the estate or of property from the estate or to exercise control over property of the estate; (6) any act to collect, assess, or recover a claim against the debtor that arose before the commencement of the case under this title. 11 U.S.C. 362(a). 13. The Electronic Accounts are property of the Debtors and the actions of Evans and PaperCloud in terminating access to them is an exercise of control over property of the estate in violation of the automatic stay. 14. The actions of PaperCloud and Evans are also actions to collect a disputed, prepetition claim against the Debtors in violation of the automatic stay. 15. By (i) terminating access to the Electronic Accounts with knowledge of the bankruptcy filing; and (ii) refusing to restore access to the Electronic Accounts upon demand, PaperCloud and Evans, who directed PaperCloud s actions, are in violation of the automatic stay and in willful contempt of this court. 16. Section 105 provides bankruptcy courts with broad authority and discretion to enforce the provisions of the Bankruptcy Code either under specific statutory, or equitable common law, principles. The purpose of section 105(a) is to assure the bankruptcy courts [sic] power to take whatever action is appropriate or necessary in aid of the exercise of their jurisdiction. 2 Collier on Bankruptcy [1] at (15th rev. ed. 2006). This Court has the power to conduct civil contempt proceedings and issue orders in accordance with those proceedings pursuant to section 105 of the Bankruptcy Code. Placid Refining Co. v. Terrebonne Fuel & Lube, Inc. (In re Terrebonne Fuel & Lube, Inc.), 108 F.3d 609, 613 (5th Cir. 1997); see also Joubert v. Abn Amro Mortgage 4

5 Case KJC Doc 15 Filed 06/26/15 Page 5 of 6 Group (In re Joubert), 411 F.3d 452, 455 (3d 2005) (discussing the contempt power under section 105(a)). 17. A willful violation of the stay does not require a specific intent to violate the automatic stay. It is sufficient that the creditor knew of the automatic stay and that the creditor s actions were intentional. Cuffee v. Atl. Bus. & Comty. Dev. Corp. (In re Atl. Bus. & Comty. Dev. Corp.), 901 F.2d 325, 329 (3rd Cir. 1990). 18. Here, at the very least, Evans and PaperCloud have continued to deny access to the Electronic Accounts with knowledge of the automatic stay. They are therefore in willful violation of the automatic stay. Notice 19. Notice of this Motion has been provided to: (a) the U.S. Trustee and (b) the creditors holding the 30 largest unsecured claims against the Debtors estates, as identified in the Debtor s chapter 11 petition, (c) PaperCloud, Inc. and (d) Drew Evans. The Debtors submit that no other or further notice need be provided. No Prior Request 20. No prior motion for the relief requested herein has been made to this or any other court. WHEREFORE, the Debtors respectfully requests that the Court (a) enter an order substantially in the form annexed hereto, granting the relief requested herein, and (b) grant to the Debtors such other and further relief as the Court may deem proper. 5

6 Case KJC Doc 15 Filed 06/26/15 Page 6 of 6 Dated: June 26, 2015 Wilmington, Delaware GELLERT SCALI BUSENKELL & BROWN, LLC /s/ Michael Busenkell Michael Busenkell (No. 3933) Ronald S. Gellert (No. 4259) Emily K. Devan (No. 6104) 913 N. Market St., 10 th Floor Wilmington, Delaware Phone: (302) Facsimile: (302) mbusenkell@gsbblaw.com Proposed Attorneys for Debtors and Debtors-in-Possession 6

7 Case KJC Doc 15-1 Filed 06/26/15 Page 1 of 2 EXHIBIT A

8 Case KJC Doc 15-1 Filed 06/26/15 Page 2 of 2

9 Case KJC Doc 15-2 Filed 06/26/15 Page 1 of 2 IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE In re: Citadel Energy Holdings, LLC, et al. 1 Case No: KJC Chapter 11 Debtors. Joint Administration Requested ORDER ENFORCING THE AUTOMATIC STAY AND REQUIRING THAT DREW EVANS AND PAPERCLOUD, INC. SHOW CAUSE WHY THEY SHOULD NOT BE SANCTIONED FOR VIOLATING THE AUTOMATIC STAY Upon the motion (the Motion ) 2 of the above-captioned debtors and debtors-inpossession (the Debtors ) for entry of an order pursuant to sections 105(a) and 362(a), of the Bankruptcy Code, (i) directing PaperClound and Evans to restore Debtors access to their Electronic Accounts; (ii) directing that PaperCloud and Evans show cause why they should not be sanctioned for violation; and (iii) entering sanctions for civil contempt, the Court finds that (a) it has jurisdiction over the matters raised in the Motion pursuant to 28 U.S.C. 157 and 1334(b); (b) this is a core proceeding pursuant to 28 U.S.C. 157(b)(2); (c) the relief requested in the Motion is in the best interest of the Debtors, their estates and their creditors; (d) proper and adequate notice of the Motion and the hearing thereon has been given and that no other or further notice is necessary; and the record herein after 1 The Debtors and the last four digits of their respective taxpayer identification numbers are as follows: Citadel Energy Services, LLC (7762); Pembroke Fields, LLC (0341); Citadel Watford City Disposal Partners, LP (1520); Citadel Energy SWD Holdings, LLC (5266); Citadel Energy Holdings, LLC (5061). The Debtors' mailing address is P.O. Box 2127, Watford City, North Dakota Unless otherwise defined herein, all capitalized terms shall have the meaning ascribed to them in the Motion.

10 Case KJC Doc 15-2 Filed 06/26/15 Page 2 of 2 due deliberation thereon, good and sufficient cause exists for the granting of the relief as set forth herein. Therefore, IT IS HEREBY ORDERED THAT: 1. The Motion is GRANTED. 2. Within 24 hours of the entry to this Order, Drew Evans and PaperCloud, Inc. are directed to restore the Debtors access to their Electronic Accounts. 3. Evans and PaperCloud, Inc. shall show cause why they should not be sanctioned for willful violation of the automatic stay of section 362 of the Bankruptcy Code and hearing will be held on, 2015 at :.m. to address the issue of contempt and sanctions. 4. The Court retains jurisdiction with respect to all matters related to the interpretation and implementation of this Order. Dated:, 2015 Wilmington, Delaware UNITED STATES BANKRUPTCY JUDGE 2

11 Case KJC Doc 15-3 Filed 06/26/15 Page 1 of 5 IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE In re: Citadel Energy Holdings, LLC, et al. 3 Case No: KJC Chapter 11 Debtors. Joint Administration Requested CERTIFICATION OF SERVICE The undersigned certifies that on June 26, 2015 a copy of the foregoing Motion by Debtors to Enforce Automatic Stay and to Assess Sanctions and Costs Against Drew Evans and PaperCloud, Inc. for Violating the Automatic Stay has been electronically filed using the Court s CM/ECF system, served upon the persons set forth below via FedEx overnight shipping and electronic mail, and served via First Class Mail according to the attached service list. VIA FEDEX AND ELECTRONIC MAIL Drew Evans PaperCloud, Inc. 340 S. Lemon Avenue Suite 1209 Los Angeles, CA drew.evans@mac.com VIA FEDEX PaperCloud, Inc. Laura Evans, Registered Agent 3204 Vickers Drive Glendale, CA The Debtors and the last four digits of their respective taxpayer identification numbers are as follows: Citadel Energy Services, LLC (7762); Pembroke Fields, LLC (0341); Citadel Watford City Disposal Partners, LP (1520); Citadel Energy SWD Holdings, LLC (5266); Citadel Energy Holdings, LLC (5061). The Debtors' address is rd Ave. SW, Watford City, North Dakota

12 Case KJC Doc 15-3 Filed 06/26/15 Page 2 of 5 Dated: June 26, 2015 Wilmington, Delaware GELLERT SCALI BUSENKELL & BROWN, LLC /s/ Michael Busenkell Michael Busenkell (No. 3933) Ronald S. Gellert (No. 4259) Emily K. Devan (No. 6104) 913 N. Market St., 10 th Floor Wilmington, Delaware Phone: (302) Facsimile: (302) mbusenkell@gsbblaw.com Proposed Attorneys for Debtors and Debtors-in-Possession 4

13 Case KJC Doc 15-3 Filed 06/26/15 Page 3 of 5 ABSORBENT AND SAFETY SOLUTIONS PO Box Baton Rouge, LA BENZ OIL CO th Ave SE Killdeer, ND BLUE STAR CAPITAL Thistlebridge Drive Rockville, MD BPS X Ave SW Killdeer, ND DAVID CHO 417 S. Hill St. Suite 1234 Los Angeles, CA E AND I GLOBAL ENERGY Ash Avenue Brainerd, MN Ford Credit PO Box Detroit, MD INNOVA 82 Sansovino Ladera Ranch, CA K&R ROUSTABOUT P.O. Box 210 Killdeer, ND K&R WELL SERVICE PO Box 210 Killdeer, ND LAKE VIEW SVS LLC 5801 Lake Shore Est. Lot 3D Beulah, ND LUND OIL th Avenue NE Watford City, ND MI SWACO PO Box Dallas, TX MID STATE SUPPLY COMPANY, INC. NW 6275 PO BOX 1450 Minneapolis, MN 55485

14 Case KJC Doc 15-3 Filed 06/26/15 Page 4 of 5 MOBILE DATA 1263 W High Street Dickinson, ND NABORS COMPLETION PO BOX Dallas, TX NORTHERN INDUSTRIAL COATING 4123 W. Villard Street Dickinson, ND NOV 7909 Parkwood Circle Dr. Houston, TX PLAINS ENERGY th Street West Suite 2 Williston, ND R&R OILFIELD SERVICES nd Ave Mound City, SD SNI COMPANIES PO Box Hollwood, FL STINSON LEONARD 811 East Interstate Avenue Bismark, ND T&E 221 Niehenke Street Williston, ND TARPON 9164 Marshall Place Westminster, CO TROTTER CONSTRUCTION PO Box 206 Grassy Butte, ND TROY GOULD 1801 Century Park East Suite 1600 Los Angeles, CA UNITED OILFIELD SERVICES 160 Main Street PO BOX 256 Lambert, MT WYOMING CASING SERVICE PO Box 1153 Dickinson, ND 5860

15 Case KJC Doc 15-3 Filed 06/26/15 Page 5 of 5 Linda J Casey Office of United States Trustee 844 King Street Suite 2207 Wilmington, DE JON REUBEN CPA Hawthorne BLVD Suite 290 Torrence, CA SENTRY CRANE PO Box Eugene, OR Reservation Telephone Cooperative 107 MAIN ST S PO Box 68 Parshall ND Montana-Dakota Utilities Company 2220 E BISMARCK EXPY RM 212 PO Box 5600 Bismarck, ND 58504