CASE NO. 03-40258-H3-11.United States Bankruptcy Court, S.D. Texas, Houston Division.
July 18, 2007
MEMORANDUM OPINION
LETITIA CLARK, Bankruptcy Judge
The court has held a trial on Texas Petrochemicals, L.P.’s objections to the claims of Armin Abbassi, Brent Abernathy, William Aguilar, Delton H. Baird, Sharon Barak, Troy D. Barnett, Carl Barosh, Billie Boettcher, Harold Bordeau, David Brock, Larry D. Burrow, J.D. Campbell, Johnny Chism, Byron Coffman, Gregory Cox, Granville Crawford, Daniel G. Curlee, John Dawson, Sr., George Defee, Tony Dial, Franklin Dyess, Morris Dowdy, Terry R. Edge, Richard Edwards, Reba Ellis, Christopher Enochs, Robert P. Ferguson, Michael W. Fielding, John Foster, Tim Friese, Sylvia Frias, Buddy J. Garner, Douglas Golden, Charles H. Gundelach, Russ Hall, Kenneth Hart, Jerry Hashaw, Alan Heald, Donald Heath, Lon Hebert, Shirley D. Hill, Michael C. Hoffart, Jimmy Holden, Johnny Hues, Thomas John, Stephen Dean Johnson, Larry Lee, Jo Ann Liggins, Gordon Lohmeyer, Walter Marvin, Bobby McCann, Clifford E. Molder, Susan Monn, Charles Noack, Chris Owens, Michael Patton, Julia Perez, William E. Portice, Curtis Revils, Melvin Robertson, Gerald Scott, Michael Shuptar, James
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Sims, Harold Stanberry, Robert Tabuena, Donald Toombs, Thuy Tran, John Umlang, Gilbert Valdez, Donald W. Watson, Jerry Watson, Charles White, Elaine Wolfe-Rannells, Dewey Wright, John Wright, Craig Zoch and Richard Zottarelle (Docket Nos. 1283, 1286, and 1306).[1] Claimants John Dawson, Walter Marvin, and Donald Watson appeared and presented argument, but did not present a case in chief.[2] Texas Petrochemicals L.P. appeared and presented evidence. The following are the Findings of Fact and Conclusions of Law of the court. A separate Judgment will be entered disallowing the claims. To the extent any of the Findings of Fact are considered Conclusions of Law, they are adopted as such. To the extent any of the Conclusions of Law are considered Findings of Fact, they are adopted as such.
Findings of Fact
On July 20, 2003, Texas Petrochemicals, LP, (“TPLP”) Texas Petrochemical Holdings Inc., (“TPHI”) TPC Holdings Corp., (“TPCHC”) Petrochemical Partnership Holdings, Inc. (“PPHI”) and Texas Butylene Chemical Corporation (“TBCC”), (collectively, “Debtors”) filed voluntary petitions under Chapter 11 of the
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Bankruptcy Code. The cases were jointly administered and were treated as a complex Chapter 11 case by orders entered July 21, 2003.
TPLP’s Chapter 11 plan of reorganization was confirmed, by order entered April 22, 2004 (Docket No. 1231).
On April 27, 2004, TPLP filed an omnibus objection to “proofs of claim filed by ESOP interest holders.” In the objection, TPLP asserts that each of 161 claims filed in the TPLP case should be disallowed because each is founded upon the claimant’s equity interest in TPHI, acquired as part of TPLP’s Employee Stock Ownership Plan (“ESOP”), and thus does not give rise to a claim owed by TPLP. (Docket No. 1306). TPLP concurrently objected to the claims of Donald Watson (Docket No. 1283) and Robert Tabuena (Docket No. 1286) on the same grounds.
The court previously denied three motions for summary judgment and one motion for default judgment filed by TPLP as to the instant claim objections, on grounds the affidavit submitted by TPLP was insufficient to shift the burden of proof to the claimants. (Docket Nos. 2258, 2448, 2476).
At the trial on the instant claim objections, Christopher Artzer, the Vice President and General Counsel of TPLP, testified that the ESOP was organized by TPCHC, and employees of TPLP were eligible to participate. He testified that the ESOP held shares in TPHI, which was not a publicly
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traded stock. He testified that TPCHC appointed a committee to administer the ESOP. He testified that TPLP was a “participating employer” but it was not the employer under the ESOP. He testified that the ESOP was created as a trust, with a separate trustee appointed to hold the stock of TPHI in trust for the benefit of the participants. He testified that U.S. Bank served as trustee, and operated at the direction of the administrative committee. He testified that the only obligation to pay funds into the ESOP was that of TPCHC. He testified that, under Section 7.5 of the ESOP, the trustee is to make distributions from the trust. He testified that the ESOP specifies when payments are to be made from the trust. He testified that payments were to be made as soon as administratively feasible after the last day of the ESOP plan year. He testified that the ESOP plan year ended each year on June 30. He testified that the source of funds for distributions under the ESOP plan would have been the liquidation of TPHI stock. He testified that nothing in the ESOP obligated TPLP to purchase the TPHI stock.
Donald Watson argued that, because his employment was terminated on June 13, 2003, he feels that he is owed the amount shown on his June 30, 2002 ESOP statement.
John Dawson argued that, because a distribution was made to an employee who was terminated two months before Dawson was terminated, he is entitled to a distribution from the ESOP.
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Walter Marvin argued that TPLP violated its fiduciary duty by not protecting the ESOP program.
Conclusions of Law
The filing of an objection to claim initiates a contested matter. In re Simmons, 765 F.2d 547 (5th Cir. 1985).
A proof of claim is prima facie evidence of the validity and the amount of the claim. Bankruptcy Rule 3001(f). The objector has the initial burden of presenting enough evidence to overcome the prima facie effect of the proof of claim. If the objector successfully presents enough evidence to overcome the prima facie effect of the proof of claim, then the claimant must prove the validity of the claim. In re O’Connor, 153 F.3d 258 (5th Cir. 1998).
In the instant case, the testimony of Artzer regarding the operation of the ESOP plan is sufficient evidence to shift the burden of persuasion to the claimants. Specifically, Artzer testified that the ESOP plan was organized by TPCHC, administered by a private trustee directed by an administrative committee appointed by TPCHC, and that TPLP did not administer the ESOP plan. This evidence is sufficient to shift the burden of persuasion as to the contentions of the claimants either that TPLP is liable to make distributions under the ESOP, or that TPLP breached a fiduciary duty to the claimants.
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In the instant case, none of the claimants as to whose claims the instant trial was conducted presented evidence sufficient to support a conclusion that TPLP is liable to them, on any theory. The court concludes that the claimants have failed to meet their ultimate burden of proof, and thus their claims should be disallowed.
Based on the foregoing, a separate Judgment will be entered denying the claims.