Case 11-20089 Document 1186 Filed in TXSB on 08/12/11 Page 1 of 9 UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF TEXAS CORPUS CHRISTI DIVISION In Re: Chapter 11 SEAHAWK DRILLING, INC. Case No. 11-20089 Debtor OPPOSITION TO DEBTORS OBJECTION SEEKING DISALLOWANCE OF THE PROOF OF CLAIM FILED BY ARENA OFFSHORE, LP (CLAIM NO. 448) NOW INTO COURT, through undersigned counsel, comes Arena Offshore, LP, who files this Opposition to Debtors Objection Seeking Disallowance of the Proof of Claim Filed by Arena Offshore, LP (Claim No. 448), and in support thereof does state as follows: I. JURISDICTION AND VENUE 1. This Court has jurisdiction over this matter pursuant to 28 U.S.C. 1334. This is a core proceeding pursuant to 28 U.S.C. 157(b). Venue of this matter is proper in this district and this division pursuant to 28 U.S.C. 1408 and 1409. II. BACKGROUND 2. On or about February 19, 2007, Pride Offshore, Inc. (n/k/a Seahawk Drilling) and Kevin Gros Offshore, LLC ( Kevin Gros Offshore ) were providing services to Arena in connection with oil and gas exploration on the Outer Continental Shelf at EC328B. 3. The services being provided by Pride Offshore to Arena were pursuant to the June 29, 2006 Offshore Daywork Drilling Contract US Platform ( Drilling Contract ), which Drilling Contract contained reciprocal defense and indemnity obligations. 4. On or about February 19, 2007, the services being provided to Arena by Kevin Gros Offshore were pursuant to the June 7, 2004 Master Time Charter Agreement executed {N2340183.1} 1
Case 11-20089 Document 1186 Filed in TXSB on 08/12/11 Page 2 of 9 between Arena and Kevin Gos Offshore ( Charter Agreement ), which also contained reciprocal defense and indemnity obligations. 5. On or about February 19, 2007, Joseph Lee Castille was employed and working for Pride Offshore in connection with the services Pride Offshore was providing to Arena pursuant to the Drilling Contract when he was injured on the deck of a vessel charted by Arena from Kevin Gos Offshore. 6. As a result of the injuries sustained in the accident of February 19, 2007, Joseph Lee Castille filed a complaint in the United States District Court for the Western District of Louisiana against Kevin Gos Offshore in the matter entitled, Castille v. Kevin Gos Offshore, LLC, bearing case no. 08-123. 7. Pursuant to the indemnity provisions of the Charter Agreement, Arena was obligated to defend and indemnify Kevin Gos Offshore for the claims asserted by Joseph Lee Castille, and demand was made by Kevin Gos Offshore against Arena for this defense/indemnity obligation on March 5, 2008. 8. Also on March 5, 2008, Arena tendered to Pride Offshore the Kevin Gos Offshore defense/indemnity demand pursuant to the defense/indemnity obligations under the Drilling Contract. The Drilling Contract, requires that Pride Offshore defend and indemnify Arena against all claims... causes of action of any kind... or amounts of any kind or character... attributable to any person... under any theory of... contract (including any claims which arise by reason of indemnification or assumption of liability contained in other contracts entered into between an indemnified party hereunder and their respective personnel and/or a Third Party... {N2340183.1} 2
Case 11-20089 Document 1186 Filed in TXSB on 08/12/11 Page 3 of 9 9. The claims of Joseph Lee Castille fall squarely within the defense and indemnity obligations of the Drilling Contract. 10. On March 11, 2008, Pride Offshore rejected Arena s tender in writing. 11. On December 8, 2009, Arena again sent a written demand to Pride Offshore (now known as Seahawk Drilling) demanding that Seahawk Drilling assume the defense and indemnity of Kevin Gos Offshore pursuant to the Drilling Contract. Arena advised Seahawak of a settlement conference scheduled for December 23, 2009 in which Arena, on behalf of Kevin Gos Offshore, would attempt to settle the claims of Joseph Lee Castille. 12. On December 16, 2009, Seahawk Drilling, again rejected Arena s defense and indemnity demand and refused to participate in the settlement conference. 13. On December 23, 2009, pursuant to a settlement conference, a settlement was reached with Joseph Lee Castille for $850,000, which amount was reasonable given John Castille s damages and was paid by Arena and its insurer. 14. On December 28, 2009, Arena against sent a letter to Seahawk urging them to pay the full amount of the settlement with Joseph Lee Castille, as well as full reimbursement of the legal expenses incurred in the defense of the Castille lawsuit pursuant to the defense/indemnity obligations of the Drilling Contract. This demand was again rejected by Seahawk on January 19, 2010. 15. On August 24, 2010, Arena and its insurer filed suit against Seahawk Drilling in the United States District Court for the Western District of Louisiana in a lawsuit entitled Arena Offshore, LP, et al v. Seahawk Drilling, Inc., and bearing case no. 10-1335. Trial {N2340183.1} 3
Case 11-20089 Document 1186 Filed in TXSB on 08/12/11 Page 4 of 9 on this matter was set for November 21, 2011 before United States Magistrate Judge Michael Hill. 16. However, on February 11, 2011, Seahawk Drilling, Inc. ( Seahawk ) and related entities (collectively, the Debtors ) filed voluntary petitions for relief under chapter 11 of title 11 of the United States Code (as amended, the Bankruptcy Code ). 17. On February 28, 2011, Seahawk, through counsel, notified the district court of the filing of the bankruptcy and the automatic stay. 18. On March 8, 2011, this Court entered an order setting a general bar date and procedures to file proofs of claim as April 22, 2011. 19. On June 28, 2011, Arena filed its proof of claim in the amount of $980,000.00. The claim is identified as Claim No. 448 on the Claims Register. III. THE CLAIM SHOULD BE ALLOWED UNDER THE DOCTRINE OF EXCUSABLE NEGLECT 20. The Supreme Court has set the standard for determining whether a creditor s failure to file a timely proof of claim was the result of excusable neglect in a chapter 11 case. In Pioneer Investment Services Co. v. Brunswick Assocs., the Supreme Court held that in evaluating whether neglect is excusable, a court must take into account all relevant circumstances surrounding the party s error. Pioneer Inv. Servs. Co. v. Brunswick Assocs. Ltd. P ship., 507 U.S. 380 (1993). The Court listed four factors that a court should consider: (1) the danger of prejudice to the debtor; (2) the length of the delay and its potential impact on judicial proceedings, (3) the reason for the delay, including whether it was within the reasonable control of the movant, and (4) whether the movant acted in good faith. Courts in this circuit have held that the Pioneer court factors are nonexclusive. See In re ASARCO, LLC, No. 05-21207, 2008 WL 4533733 (S.D. Tex. {N2340183.1} 4
Case 11-20089 Document 1186 Filed in TXSB on 08/12/11 Page 5 of 9 Oct. 3, 2008)( The four-factor test has a necessarily elastic quality, requiring the Court to look to the totality of the circumstances. )(quoting In re 50-Off Stores, Inc., 220 B.R. 897, 902 (Bankr. W.D. Tex. 1998)). Considering each of the Pioneer factors, in turn, shows that the late filed claim should be allowed under the doctrine of excusable neglect. A. The Danger of Prejudice to the Debtor 21. Under Pioneer, the central inquiry is whether the debtor will be prejudiced by the latefiled claim. In re Eagle Bus Mfg., Inc., 62 F.3d 730, 737 (5 th Cir. 1995). The Fifth Circuit has held that when a debtor s plan of reorganization has not been fully negotiated and confirmed before there was notice of a late filed claim, then prejudice to the debtor is necessarily lessened. See Id. at 737-38. Furthermore, a debtor s knowledge of the existence of a claim also lessens any prejudice that might be suffered by the Debtor in allowing the late filed claim. See Id. at 738. 22. In this case, the Debtor will not be prejudiced by the allowance of this late-filed claim. The Debtors knew of Arena s claim at the very beginning of this bankruptcy when the lawsuit against it was stayed pursuant to section 362 of the Bankruptcy Code. 23. No Fifth Circuit case has held that the Court should consider whether allowance of the late-filed claim would prejudice creditors. Regardless, in Eagle Bus, the Fifth Circuit, in dicta, held that creditors are not prejudiced when the claims are not known and expected at the time of balloting, and when the creditors, through their official representatives have not objected to the claims. Eagle Bus, 62 F.3d at 738. 24. In this case, the creditors are not materially prejudiced by the allowance of this claim. The creditors know about the claim and about the potential for the claim prior to balloting and confirmation. Further, the Unsecured Creditors Committee has not objected to the claim despite having the opportunity to do so. {N2340183.1} 5
Case 11-20089 Document 1186 Filed in TXSB on 08/12/11 Page 6 of 9 B. The Length of Delay and the Impact on Judicial Proceedings 25. The length of the delay is relatively short, just over two months. In determining how long is too long, courts should consider the degree to which the delay would disrupt the judicial proceedings. ASARCO, 2008 WL 4533733, at *3; In re Enron Corp., 419 F.3d 115, 129 (2d Cir. 2005); see also Linder v. Trump s Castle Assocs., 155 B.R. 102, 108 (D.N.J. 1993)( The degree to which prejudice and interference with judicial administration may increase as the tardiness of the claim increases will depend on the length on the time frame and complexity of the case. In some cases a claim that is six months late will create substantial prejudice and interference and in others it would create none. ). 26. Here, the delay was relatively could not have substantially prejudiced the Debtors, especially when the claim was known before it was filed. In Eagle Bus, the Fifth Circuit held that where the reorganization plan recognized litigation would continue beyond plan confirmation, it is difficult to glean how allowance of [the] claims would be disruptive of that process. Eagle Bus, 62 F.3d at 739. 27. Similarly, here the plan calls for what could be a protracted resolution process for personal injury claims. The plan contemplates that personal injury claims will be decided pursuant to a Procedures Order, which specifically contemplates that personal injury claims will be tried either by arbitrators or by continuing to litigation. As in Eagle Bus, in such a case, the delay will not adversely impact the effective administration of the case. 28. Furthermore, the plan calls for additional litigation to be continued post confirmation. In such an instance, it is difficult to glean how allowance of the claim would disrupt that process. {N2340183.1} 6
Case 11-20089 Document 1186 Filed in TXSB on 08/12/11 Page 7 of 9 C. The Reason for the Delay 29. The standard for determining whether a party s neglect of a deadline is excusable is a flexible one because it is rooted in equity. Eagle Bus, 62 F.3d at 739. Excusable neglect is not limited to errors caused by circumstances beyond the late filing party s control. 30. In Eagle Bus, the Fifth Circuit noted that when the failure to file is the result of simple neglect as opposed to gross or intentional neglect, the late filed claim should be allowed. Id. at 740. Here, Arena understandably believed that its position was protected by the lawsuit that it filed. As soon as it became apparent that the proof of claim was necessary, Arena filed the proof of claim. 31. In such a case, equity favors allowing the proof of claim to be filed. Pioneer, 507 U.S. at 395; Eagle Bus, 62 F.3d at 740. D. Good Faith 32. There is no indication that Arena or its attorneys acted in bad faith, and the Debtors have not argued such. Indeed, Arena has acted in good faith, by filing a proof of claim, as soon as it became evident that it needed to. 33. Under such circumstances, the late filed claimed should be allowed under the doctrine of excusable neglect. IV. THE CLAIM NOW HAS APPROPRIATE DOCUMENTATION 34. The Debtors request that this Court disallow Mr. Powell s claim because he failed to attach sufficient documentation to support the claim. The Federal Rules of Bankruptcy Procedure provide that a proof of claim must (1) be in writing, (2) make demand on the debtor s estate, (3) express the intent to hold the debtor liable for the debt, (4) be properly filed, and (5) be based upon facts which would allow, as a matter of equity, to have the document accepted as a proof of claim. See FED. R. BANKR. P. 3001; In re Armstrong, {N2340183.1} 7
Case 11-20089 Document 1186 Filed in TXSB on 08/12/11 Page 8 of 9 320 B.R. 97, 103-04 (Bankr. N.D. Tex. 2005). A proof of claim that is presented in a form that does not comply with the applicable rules is not prima facie valid. FED. R. BANKR. P. 3007(d)(6). 35. As the Debtors admit, a failure to fully comply with the bankruptcy rules simply means that the claim lacks prima facie validity, and not that the claim should be denied. In re Gulley, 400 B.R. 529, 540 (Bankr. N.D. Tex. 2009). 36. As explained by the Gulley court, If a debtor objects to a proof of claim for failure to attach supporting documentation, and the creditor fails to supply it thereafter, the court would expect the debtor to request that the claim be disallowed. However, the Gulley court continued, If the creditor supplies supporting documentation in response to the debtor's objection before the hearing on the objection, the court would expect the debtor to withdraw his claim objection. Id. The Debtors admit that the writing must show the type of evidentiary showing required in a complaint. 37. Attached to this opposition is Mr. Powell s lawsuit, which sets out the facts that give rise to this personal injury claim. Such complaint, by the Debtors own admission is sufficient documentation to provide prima facie validity of the Powell claim. Pursuant to the terms of the Gulley case, this Court should expect that the Debtor would withdraw this portion of its claim objection. V. WHETHER THE DEBTOR OWES LIABILITY SHOULD BE DETERMINED BY THE PROCEDURES ORDER 38. The Debtor further objects to the Arena Claim, stating that according to their books and records, they owe no liability to Arena. 39. The Federal Rules of Bankruptcy Procedure provide that a proof of claim must (1) be in writing, (2) make demand on the debtor s estate, (3) express the intent to hold the debtor {N2340183.1} 8
Case 11-20089 Document 1186 Filed in TXSB on 08/12/11 Page 9 of 9 liable for the debt, (4) be properly filed, and (5) be based upon facts which would allow, as a matter of equity, to have the document accepted as a proof of claim. See FED. R. BANKR. P. 3001; In re Armstrong, 320 B.R. 97, 103-04 (Bankr. N.D. Tex. 2005). A proof of claim filed according to the Federal Rules of Bankruptcy Procedure is prima facie valid. The burden is on the Debtors to prove that they have no liability. 40. A simple statement that the Claims Resolution Team has reviewed the books and records of the Debtors and determined that there is no liability is simply insufficient proof to show that the Debtors have no liability for the claim. 41. Arena has set forth sufficient facts to show that there is a claim, that the claim is valid. Under the Federal Rules of Bankruptcy Procedure, such a claim is allowed under the circumstances. WHEREFORE, after due proceedings are had, Arena requests that the Debtor s objection to his proof of claim be denied, and for all other relief to which he is entitled in law and equity. Respectfully submitted, this 12 th day of August, 2011. JONES, WALKER, WAECHTER, POITEVENT, CARRÉRE & DENÉGRE, L.L.P. /s/ Mark A. Mintz R. Patrick Vance (SD Tex. Bar # 30331) Mark Mintz (SD Tex. Bar # 1140193) 201 St. Charles Avenue, 49 th Floor New Orleans, Louisiana 70170 Telephone: 504/582-8000 Facsimile: 504/582-8011 pvance@joneswalker.com mmintz@joneswalker.com Counsel for Arena Offshore, LP {N2340183.1} 9
Case 11-20089 Document 1186-1 Filed in TXSB on 08/12/11 Page 1 of 9
Case 11-20089 Document 1186-1 Filed in TXSB on 08/12/11 Page 2 of 9
Case 11-20089 Document 1186-1 Filed in TXSB on 08/12/11 Page 3 of 9
Case 11-20089 Document 1186-1 Filed in TXSB on 08/12/11 Page 4 of 9
Case 11-20089 Document 1186-1 Filed in TXSB on 08/12/11 Page 5 of 9
Case 11-20089 Document 1186-1 Filed in TXSB on 08/12/11 Page 6 of 9
Case 11-20089 Document 1186-1 Filed in TXSB on 08/12/11 Page 7 of 9
Case 11-20089 Document 1186-1 Filed in TXSB on 08/12/11 Page 8 of 9
Case 11-20089 Document 1186-1 Filed in TXSB on 08/12/11 Page 9 of 9