Case No. 01-16034 (AJG) Jointly AdministeredUnited States Bankruptcy Court, S.D. New York.
April 1, 2004
Melanie Gray (admitted pro hac vice), John B. Strasburger (admittedpro hac vice), Martin J. Bienenstock, Peter Gruenberger, WEIL, GOTSHAL
MANGES LLP, New York, NY, for the Debtors
Martin J. Bienenstock, Peter Gruenberger, Melanie Gray (admitted pro hac vice), John B. Strasburger (admitted pro hac vice), John B. Strasburger (admitted pro hac vice), WEIL, GOTSHAL MANGES LLP., New York, NY, of Counsel for the Enron Entities
Richard E. Griffin, Paul Vrana, Houston, Texas, JACKSON WALKER L.L.P., of Counsel for the Reliant Entities
Craig Hiddleston, ENRON CANADA CORP., Houston, Texas, for Enron Canada Corp., President and Chief Executive Officer
FIRST SUPPLEMENTAL STIPULATION AND ORDER REGARDING STANDSTILL AGREEMENT BETWEEN ENRON AND RELIANT ENTITIES
ARTHUR GONZALEZ, Bankruptcy Judge
Enron North America Corp. (“ENA”), Enron Broadband Services, L.P. (“EBS”), Enron Corp. (“Enron”), ENA Upstream Company LLC (“ENAUPSCOM”), and Enron Power Marketing, Inc. (“EPMI”), as debtors and debtors in possession, and non-debtor Enron Canada Corp. (“ECC”) (collectively with the debtors the “Enron Entities”), and Reliant Energy Services, Inc. (“RES”), Reliant Resources, Inc. (“RRI”) and Reliant Energy Services Canada, Ltd. (“RESC”) (collectively, the “Reliant Entities”), by and through their respective counsel, hereby stipulate and agree as follows:
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RECITALS:
A. Prior to November 8, 2001, the Enron Entities and the Reliant Entities (collectively, the “Parties” and each individually a “Party”) entered into various master agreements (the “Underlying Master Agreements”).
B. On or about November 8, 2001, the Enron Entities and the Reliant Entities executed a master netting agreement (the “MNA”).
C. On December 2, 2001 (the “Petition Date”), four of the parties to the MNA ENA, EBS, ENAUPSCOM, and EPMI (collectively, the “Debtors”) filed voluntary petitions for relief under chapter 11 of Title 11 of the United States Code in the United States Bankruptcy Court, Southern District of New York (Case No. 01-16034, et. seq.). Each of the Debtors continues to be authorized to operate their business and to manage their property as a debtor in possession pursuant to sections 1107(a) and 1108 of the Bankruptcy Code. On or about February 25, 2002, RES filed a lawsuit in the United States District Court for the Southern District of Texas styled Reliant Energy Services, Inc. v. Enron Canada Corp., C.A. No. H02-0706 (the “Texas Lawsuit”). The Texas Lawsuit involves, among other things, the MNA and the Underlying Master Agreements. In response to RES’s motion for a preliminary injunction, ECC moved to dismiss the Amended Complaint. On March 22, 2002, The Honorable Melinda Harmon granted ECC’s motion to dismiss the Texas Lawsuit. RES appealed the District Court’s judgment to the United States Court of Appeals for the Fifth Circuit. On October 29, 2003, the Fifth Circuit vacated the District Court’s decision and remanded the case for further consideration. Reliant Energy Services, Inc. v. Enron Canada Corp., 2003 WL 22439846 (5th Cir. 2003). Accordingly, the Texas Lawsuit is once again before the District Court in Houston. On October 15, 2002, after the District Court’s ruling in the Texas Lawsuit, the Reliant Entities filed a total of eight proofs of claim in the Debtors’ bankruptcy cases. Each claim seeks amounts
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allegedly owing under the MNA and the Underlying Master Agreements. On January 31, 2003, the Enron Entities and Enron Corp. initiated an Adversary Proceeding in this Court-Enron Corp., et al. v. Reliant Energy Services, Inc., Adv. Pro. No. 03-02073 (the “Adversary Proceeding”). The Adversary Proceeding involves, among other things, the MNA and the Underlying Master Agreements. On April 28, 2003, the Reliant Entities responded in the Adversary Proceeding by asserting certain defenses and counterclaims of their own.
D. On November 24, 2003, the Enron Entities filed Debtors’ Motion Against Reliant Energy Services, Inc. to Enforce the Automatic Stay Under 11 U.S.C. § 362(a) or, in the lternative, to Enjoin Prosecution of Lawsuit Against Non-Debtor Affiliate Under 11 U.S.C. § 105 (the “Injunctive Action”). Pursuant to the Injunctive Action, the Debtors seek to enjoin RES from pursuing the Texas Lawsuit.
E. On November 25, 2003, ECC initiated a lawsuit in Canada —Enron Canada Corp. v. Reliant Energy Services Canada Ltd., and Reliant Resources, Inc.; Action No. 0301-18613, in the Court of Queen’s Bench of Alberta, Judicial District of Calgary (the “Canada Lawsuit”). The Canada Lawsuit involves one of the Underlying Master Agreements, a Master Form Gas Purchase/Sale Agreement dated September 15, 1999. The claims asserted by ECC in the Canada Lawsuit are contingent upon a final and binding determination that the MNA is not valid or enforceable against ECC.
F. On December 1, 2003, ENA initiated an Adversary Proceeding in this Court — Enron North America Corp. v. Bank of Montreal and Reliant Energy Services, Inc., Adv. Pro. No. 03-93634 (referring only to that part of ENA’s case against RES and not against Bank of Montreal, the “Avoidance Action”). The Avoidance Action involves, among other things, certain alleged setoffs effected by the Parties to the transaction described in the Avoidance Action.
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G. The Parties agree that the Texas Lawsuit, the Injunctive Action, the Adversary Proceeding, the Canada Lawsuit, the Avoidance Action and any additional actions related to the disputes between the Enron Entities and the Reliant Entities described herein (collectively, the “Enron-Reliant Litigation”) be abated until May 1, 2004, during which time the Parties will suspend the prosecution or defense of (or the appeal of any judgment or order in) any of the Enron-Reliant Litigation.
NOW THEREFORE, IT IS HEREBY STIPULATED AND AGREED AS FOLLOWS:
1. The parties hereby agree to suspend the prosecution or defense of (or the appeal of any judgment or order in) any of the Enron-Reliant Litigation until May 1, 2004, unless otherwise agreed. The time from the date this Stipulation and Order is submitted to the Court until May 1, 2004 shall be referred to as the “Suspension Period.” However, this agreement shall not preclude the Enron Entities from filing any necessary objections to the Reliant Entities’ Proofs of Claims during the Suspension Period nor shall it preclude (a) the Reliant Parties from filing any motions to file late proof(s) of claims, or (b) any of the Enron Parties from objecting to any such motion on any basis other than that such motion violates this Stipulation With respect to the Avoidance Action, nothing in this Agreement affects the rights of ENA and RES so as to preclude ENA from serving its Amended Complaint or RES from filing its answer or other responsive pleading. ENA agrees that should it choose to serve its Complaint in the Avoidance Action, RES shall have up to the thirtieth (30th) day following the expiration of the Suspension Period to file its answer or other responsive pleading in the Avoidance Action. With respect to the Canada Lawsuit, nothing in this Agreement affects the rights of ECC, RES and RRI so as to prevent the service or the application to effect service of the Statement of Claim or the fling of any Statement of Defense or Reply therein. ECC agrees that should it choose to serve its
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Statement of Claim upon RES or RRI in the Canada Lawsuit, EEC will also provide local counsel for RES and RRI, Mr. Geoff Baker, a courtesy copy of the Statement of Claim.
2. The Parties agree to present this Stipulation and Order to Judge Harmon along with a request that the United States District Court take no action on the Texas Lawsuit during the Suspension Period
3. During the Suspension Period, the Parties will continue the settlement dialog they have begun and may mediate the substantive disputes in the Enron-Reliant Litigation before Bankruptcy Judge Allan Gropper at a mutually agreeable time and consistent with the procedures set forth in the Bankruptcy Court’s Order Governing Mediation of Trading Cases entered on March 5, 2003.
4. On or after May 1, 2004, the Parties shall be at liberty to recommence the Enron-Reliant Litigation against each other subject to and within any applicable limitation periods governing such proceedings, provided however that the Suspension Period shall be excluded from the calculation of any applicable limitation periods or other deadlines between or among the Parties such that the applicable limitation periods or other deadlines will be extended by the number of days in the Suspension Period
5. The Reliant Entities shall have until May 15, 2004 to file their response to the Enron Entities’ papers in the Injunction Action. The Enron Entities agree that they will not request that a hearing go forward on their requested relief in the Injunctive Action (and will seek to continue any such hearing that may be set by the Court) prior to the Reliant Entities’ filing of their response to the Enron Entities’ papers in the Injunction Action. The Enron Entities agree that they will not request any action from the Court in the Canada Lawsuit until after the hearing on the Injunction Action, with the exception set forth in Paragraph 1. The Reliant Entities agree
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they will not request any action from the District Court in the Texas Lawsuit until after the hearing on the Injunction Action.
6. Each party agrees that it is estopped from raising or arguing in any manner that any limitation periods or other deadlines (applicable to the Enron-Reliant Litigation) have expired or continued to run during the Suspension Period and covenants not to advance such argument or any other argument based on laches or delay associated with the Suspension Period.
7. This Stipulation is made without prejudice and shall not operate as an admission of liability by any Party, and this Stipulation and Order shall not be offered or received in evidence in any proceedings as an admission of liability or wrongdoing of any nature on the part of any Party, nor shall it be offered or received in evidence in any matter for purposes other than the interpretation, enforcement and application of this Stipulation.
8. Except as expressly provided herein, this Stipulation is not intended to be and shall not be construed as a waiver of any procedural, substantive, or jurisdictional right, benefit, defense, claim or privilege which may otherwise accrue to any Party.
9. To facilitate execution, this Stipulation and Order may be executed in as many counterparts as may be convenient or required. It shall not be necessary that the signature and acknowledgment of, or on behalf of, each Party, or that the signature and acknowledgment of all persons required to bind any party, appear on each counterpart. All counterparts shall collectively constitute a single instrument. It shall not be necessary in making proof of this Stipulation and Order to produce or account for more than a single counterpart containing the respective signatures and acknowledgment of, or on behalf of, each of the parties hereto. Facsimile signatures shall be binding to the same effect as originals.
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10. This Stipulation, and all obligations thereunder, can be terminated for any reason by either party upon fifteen (15) days written notice to all counsel of record and signatories hereto as indicated in this Stipulation.
11. Except as provided herein, the parties reserve all of their rights, claims and defenses.