Case KJC Doc 4225 Filed 06/11/15 Page 1 of 12
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1 Case KJC Doc 4225 Filed 06/11/15 Page 1 of 12 IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE x : - In re: : Chapter 11 : EXIDE TECHNOLOGIES, : Case No (KJC) : Reorganized Debtor. 1 : Hrg. Date: July 1, 2015 at 10:00 a.m. (Eastern) : Obj. Due: June 12, 2015 at 4:00 p.m. (Eastern) RESPONSE OF RSR CORPORATION IN OPPOSITION TO THE REORGANIZED DEBTOR S (SUBSTANTIVE) NINETEENTH OMNIBUS OBJECTION TO CLAIMS RSR Corporation ( RSR ), by its undersigned counsel, makes the following response to the objections to RSR s Proof of Claim No (the Proof of Claim ). The Proof of Claim, which was filed in this Chapter 11 case on October 31, 2013, subsumes the claims of RSR against Exide Technologies ( Exide ) for contribution in respect of the costs of remediating environmental contamination at the Poly-Cycle Industries, Inc. site in Palmer, Texas (the Palmer Site). The Parties Agreements 1. The Palmer Site is located north of Palmer, Texas, and approximately 20 miles south of Dallas. From 1977 to 1983, Poly-Cycle Industries, Inc. used the site for the reclamation of plastic and hard rubber battery cases. During this period, RSR, Exide, and GNB Technologies, Inc. ( GNB ) each delivered battery casings to the site. Poly-Cycle Industries, Inc. abandoned the site in 1983, and was eventually liquidated in bankruptcy Thereafter, the
2 Case KJC Doc 4225 Filed 06/11/15 Page 2 of 12 TNRCC determined that the site was contaminated by lead, and identified RSR, Exide, and GNB as potentially responsible parties (collectively, the PRPs ). 2. RSR s claims arise under three interrelated agreements (the Agreements ), entered into by the PRPs in 1999: (i). The Settlement Agreement for Recoverable Past Costs Regarding the Poly-Cycle Industries, Inc. Proposed Superfund Site entered into by the PRPs and the TNRCC (the Settlement Agreement ), whereby the PRPs agreed (i) to reimburse the TNRCC for a portion of its recoverable past costs associated with the Site under the Texas Solid Waste Disposal Act, (ii) to apply to participate in the State s Voluntary Cleanup Program (the VCP ), and (iii), through the VCP, to remediate the Site by no later than June 1, (ii) The Texas Natural Resource Conservation Commission Voluntary Cleanup Agreement entered into by RSR, Exide, and GNB with the TNRCC in May and June, 1999, following the Palmer Site s admission to the VCP (the Voluntary Cleanup Agreement ). This Agreement set forth in detail the obligations and functions of each party in respect of the cleanup process. (iii) The Poly-Cycle Palmer Site VCP Group Participation Agreement entered into by Exide, GNB, and RSR in or before August, 1999 (the Participation Agreement ), in which the PRPs agreed to the following allocation of the cleanup costs: Exide %; GNB %; and RSR %. 1 1 These percentages do not equal 100%; rather, they total 102%. Exide and GNB s collective share totals %, leaving RSR with a % share as opposed to the % stated in the Participation Agreement. In the absence of other evidence as to the intent of the agreement, RSR contends that the combined shares of Exide and GNB remain Reorganized Debtor s obligation under the Participation Agreement.
3 Case KJC Doc 4225 Filed 06/11/15 Page 3 of The Agreements set the framework for Exide s, GNB s, and RSR s participation in the VCP. A copy of each Agreement is annexed to the Proof of Claim. 4. On September 29, 2000, shortly after the Agreements were entered into, Exide completed an acquisition of GNB, and assumed GNB s obligations under the Agreements. In the Participation Agreement, the parties fixed Exide s and GNB s aggregate share of the remediation costs at %. The First Bankruptcy Case 5. Exide filed a petition for relief under Chapter 11 of the Bankruptcy Code in this court (the Bankruptcy Court ) on April 15, 2002, thereby commencing a case under the Bankruptcy Code (the First Bankruptcy Case ). Immediately following the commencement of the First Bankruptcy Case, Exide stopped making any payments towards its contribution liabilities under the Agreements. The parties embarked on litigation to determine the nature and extent of those liabilities in the First Bankruptcy Case, but the litigation was not resolved before Exide emerged from bankruptcy under a confirmed Chapter 11 plan (the First Reorganization Plan ). 6. In the meantime, the TNRCC (now known as the Texas Commission on Environmental Quality) has not issued a Final Certificate of Completion for the Palmer Site. Pursuant to the Agreements, RSR continues to engage in maintenance and monitoring activities at the site, and Exide s unpaid contribution liability under the Agreements continues to grow.
4 Case KJC Doc 4225 Filed 06/11/15 Page 4 of 12 The Agreements Are Executory Contracts 7. The question in this case is whether Exide bound itself to perform its environmental cleanup obligations under the Agreements by assuming them pursuant to the First Reorganization Plan. As noted above, Exide commenced the First Bankruptcy Case by filling for relief under Chapter 11 of the Bankruptcy Code on April 15, It emerged from bankruptcy under a plan of reorganization confirmed by the Bankruptcy Court in April, During the intervening months, Exide presumably reviewed all of its contracts and applied its business judgment to determine which contracts to assume or reject as executory. Indeed, Exide filed numerous pleadings to reject executory contracts. See, e.g., Notice of Rejection of Leases, Doc. No Yet, Exide chose not to reject any of the Agreements, as none of them was ever subject to a rejection notice or similar pleading. 8. It is hard to imagine that this was an oversight on Exide s part. Each of the Agreements has all the defining earmarks of an executory contract, to wit, each party to the contract has substantial unperformed contractual obligations to the other parties. See National Labor Relations Board v. Bildisco and Bildisco, 465 U.S. 513, , n.6 (1984) (An executory contract is one on which performance remains due to some extent on both sides. ); In re Exide Technologies, 607 F.3d 957, 962 (3d Cir. 2010) ( With congressional intent in mind, this Court has adopted the following definition: An executory contract is a contract under which the obligation of both the bankrupt and the other party to the contract are so far underperformed that the failure of either to complete performance would constitute a material breach excusing the performance of the other. ) (citations omitted). 9. Courts in the Third Circuit have recognized that environmental remediation agreements among potentially responsible parties, such as the Agreements at issue here, can be
5 Case KJC Doc 4225 Filed 06/11/15 Page 5 of 12 found to be executory contracts. See, e.g., In re G-I Holdings, Inc., 308 B.R. 196 (Bankr. N.J. 2004); see also Order Authorizing Debtor to Reject Certain Site Participation Agreements, In re Kaiser Aluminum Corp., Case No (JKF) (Bankr. D. Del.). In Kaiser Aluminum, the Debtor sought rejection of its remediation agreements under 11 U.S.C The non-debtor parties to the remediation agreements objected, arguing, inter alia, that the agreements were not executory contracts subject to rejection. Judge Fitzgerald ultimately entered an order authorizing the debtors to reject the agreements under 11 U.S.C. 365, thus treating the agreements as executory contracts. 10. In light of these authorities, it is clear that the Agreements were executory contracts on the Petition Date, and remain executory today. For example, the Settlement Agreement imposes substantial ongoing obligations on RSR, Exide and the TNRCC. An explicit purpose of the Agreement is to allow the Site to be expeditiously remediated under the TNRCC s Voluntary Cleanup Program. RSR and Exide agree to remediate the Site and timely obtain a Certificate of Completion from the VCP. The TNRCC must administer the VCP, determine that the remediation has been completed, and, upon completion, issue the certificate. 11. Likewise, the Voluntary Cleanup Agreement clearly creates ongoing obligations on the part of RSR, Exide, and the TCEQ in respect of the remediation of the Palmer Site. Each party assumes specific duties under the supervision of the TNRCC, in accordance with the Voluntary Cleanup Program Application (the VCP Application ) submitted to and accepted by the TNRCC. For example, the Voluntary Cleanup Agreement requires the submission of monthly status reports by RSR and Exide, the designation of project managers by RSR and Exide on the one hand and the TNRCC on the other, and reimbursement of the TNRCC for all of its
6 Case KJC Doc 4225 Filed 06/11/15 Page 6 of 12 costs associated with implementation of this Agreement, including direct and indirect costs of overhead, salaries, equipment, and utilities, and legal, management, and support costs associated with the review of [Exide s and RSR s] work plans and reports and oversight of field activities. 12. Similarly, the Participation Agreement imposes ongoing obligations on the parties, including Exide and RSR, to participate in the voluntary cleanup of the Palmer Site. In section 2.2 to the Participation Agreement, the parties agreed that: The Members [including Exide and RSR] shall take all reasonably necessary actions to ensure that they comply with the TNRCC Work and to fund all costs arising in connection with their undertakings, duties, and obligations, including without limitation payment of Shared Costs as defined in Section The TCEQ (formerly the TNRCC) has not yet issued a Final Certificate of Completion pursuant to the VCP, and the remediation of the Palmer Site is ongoing. Accordingly, all three Agreements were executory contracts on the Petition Date, and remain executory today. The Agreements Were Assumed Pursuant to Exide s First Reorganization Plan 14. On April 21, 2004, the Court confirmed the first Reorganization Plan. Pursuant to the plan, all executory contracts and unexpired leases not rejected by Exide were deemed assumed in accordance with Sections 365 and 1123 of the Bankruptcy Code. See Reorganization Plan, Art. VI.A, Doc. No. 3919, Ex. A. The plan specified that the following contracts were not deemed assumed as executory: (1) contracts rejected by order of the Bankruptcy Court, (2) contracts subject to a motion to reject pending on the Effective Date, (3) contracts identified on a list to be included in the Plan Supplement, (4) contracts related to the purchase or other acquisition of Equity Interests, or (5) contracts rejected pursuant to the terms of the Reorganization Plan. Id.
7 Case KJC Doc 4225 Filed 06/11/15 Page 7 of None of the foregoing exceptions apply to the Agreements. The Agreements were all in effect on the Petition Date and were (1) never subject to an order authorizing rejection, (2) never listed on any pleadings seeking court approval of their rejection, (3) not included in any Plan Supplement, (4) not related to the purchase or acquisition of Equity Interests, and (5) not rejected pursuant to the terms of the First Reorganization Plan. Accordingly, Exide assumed each of the Agreements in accordance with the plan. 16. In furtherance of the VCP and its obligations under the Agreements, RSR has participated in the ongoing maintenance and cleanup of the Palmer Site. Since November 2002, RSR has incurred all costs associated therewith. Meanwhile, Exide has reneged on its remediation obligations and walked away from the Agreements, leaving RSR empty handed. The Reorganized Debtor s Objection to Claim in the First Bankruptcy 17. Seeking to enforce its rights under the Agreements, RSR filed a timely proof of claim in the First Bankruptcy Case, attaching a copy of each of the Agreements. In response, Exide filed a substantive objection to the claim (the Claims Objection ). The Claims Objection purported to amend and supersede an earlier objection (the Forty-Third Omnibus Substantive Objection to Claims, ) by which Exide sought to expunge all of RSR s claims. 18. In its superseding Claims Objection, Exide requested that RSR s claim be reduced and allowed as a general unsecured, non-priority claim classified as a Class P4-A claim under the First Reorganization Plan. The amount of this proposed allowed claim purportedly represents Exide s unreimbursed share of expenses incurred to date by RSR in the performance of its obligations under the Agreements. In sum, the Reorganized Debtor s contention was that RSR s claims should be treated as general unsecured, non-priority claims because Exide terminated the Agreements by withdrawing from one or more of them shortly after the filing of its Chapter 11 petition. Claims Objection at 3 Which Agreement or Agreements Exide withdrew from,
8 Case KJC Doc 4225 Filed 06/11/15 Page 8 of 12 how this withdrawal was effected, and what provision of any of the Agreements authorized the withdrawal was not explained.. Exide Never Effectively Withdrew from the Agreements 19. Exide has never directly confronted RSR s contention that Exide assumed the Agreements through the Reorganization Plan. However, in its Claims Objection, the Reorganized Debtor seemed to suggest that rejection of the Agreements was unnecessary because of Exide s withdrawal from one or more of the Agreements shortly after the filing of the Chapter 11 petition. This contention is baseless In the first place, no provision of the Settlement Agreement permits a party to withdraw from the Agreement. By suspending its contributions to the cost of remediating the Palmer Site, Exide breached the Settlement Agreement, but that breach did not excuse Exide from adhering to the requirements set forth in the Bankruptcy Code and its Reorganization Plan for rejecting the Agreement, or prevent it from assuming the Agreement through the Reorganization Plan. 21. By contrast, the Voluntary Cleanup Agreement lays out a very clear and precise path for withdrawing from the Agreement. However, that pathway is open only to the TNRCC and to the Applicant, which is clearly defined in the Agreement as the whole body of PRPs who are parties to the Agreement. To effectively withdraw form the Agreement, the PRP s who together constitute the Applicant must act as a collective. Withdrawal is not available to an individual PRP such as Exide, acting unilaterally. 22. In any event, Exide did not follow the pathway for withdrawal laid out in the Voluntary Cleanup Agreement. The relevant provisions are set forth in the Dispute Resolution section of the Agreement, and state as follows:
9 Case KJC Doc 4225 Filed 06/11/15 Page 9 of 12 [T]he executive director or the Applicant in its sole discretion may terminate the Agreement by giving 15 days advance written notice to the other. [I]f dispute resolution fails, and either or both parties exercise their right to withdraw from the Agreement by giving 15 days advance written notice to the other, only those costs incurred or obligated by the [TCEQ] before notice of termination of the Agreement are recoverable under the Agreement. 23. It is clear from these provisions that withdrawal from the Agreement can only be effectively accomplished by giving 15 days prior written notice to other parties to the Agreement. Elsewhere, under the heading Addresses for all Correspondence, the Voluntary Cleanup Agreement provides that all notifications submitted under this Agreement may be sent by certified mail, return receipt requested, hand-delivery, overnight mail, or by courier service to the stated address of each other party. An effective withdrawal from the Agreement by a party other than RSR would have required such advance written notice to RSR. No such notice was ever given to or received by RSR. Accordingly, Exide never effectively withdrew from the Voluntary Cleanup Agreement. 24. As noted above, the Participation Agreement provides a separate contractual basis for RSR s claims. Section 18 of the Participation Agreement provides that [a]ny Member may withdraw from the Group upon thirty (30) days written notice, except that the Member shall remain liable for Shared Costs assessed pursuant to this Agreement more than thirty (30) days notice prior to the date of withdrawal. At one point in its Claims Objection, Exide referred to its withdrawal from the participation agreement, id at 4, suggesting that the Participation Agreement is the prepetition agreement to perform a voluntary cleanup at the site which Exide claims it withdrew from on page 3 of the Claims Objection.. However, Exide never gave RSR a written withdrawal notice pursuant to Section 18. Moreover, even if Exide did withdraw from the
10 Case KJC Doc 4225 Filed 06/11/15 Page 10 of 12 Participation Agreement, it would still be bound to contribute its share of the remediation expenses pursuant to the Settlement Agreement and the Voluntary Cleanup Agreement. 25. The only thing that Exide pointed to as a notice of Exide s intentions with respect to the Agreements in the period immediately following the Petition Date is a letter dated July 1, 2012 to RSR from Walter James, an attorney who acted as collection and disbursing agent for remediation payments for the Palmer Site. The letter states in relevant part: On April 15, 2002, Exide filed for relief under Title 11 of Chapter 11 of the United States Code [sic].as a result of the above-referenced filing, Exide will no longer be taking an active role in any further action that needs to be taken at the Poly-Cycle Industries, Inc. Site in Palmer, Texas. This letter is not an effective notice of withdrawal from any of the Agreements. It was not sent in the manner required by the Voluntary Cleanup Agreement. It does not reference any of the Agreements, or specify a future effective e date of withdrawal. Exide s suspension of any active role in the remediation of the Palmer Site is tied not to any decision to withdraw from the Agreements, but to Exide s bankruptcy filing. In fact, the letter precisely describes the status of the Agreements as executory contracts in the limbo period after the Petition Date and before the effective date of their assumption or rejection. Mr. James might properly have written exactly the same letter if there were nothing whatsoever in any of the Agreements about a right of withdrawal. 26. The upshot is that Exide assumed all three Agreements pursuant to its first Reorganization Plan, and RSR s claim for reimbursement of Exide s share of remediation costs is a cure obligation that Exide should have paid in full pursuant to its first Reorganization Plan. Preservation of RSR s Claims 27. In its Motion for final Decree and Order, Pursuant to 11U.S.C 105(a) and 350(a) and Fed. R. Bankr. P. 3022(a) and Del. Bankr. L.R Closing Chapter 11 Case (the
11 Case KJC Doc 4225 Filed 06/11/15 Page 11 of 12 Motion for Final Decree ), Exide requested this Court to close the First Bankruptcy Case. Exide acknowledged that RSR s claims and not been resolved in the First Bankruptcy Case, and suggested that any disputes regarding the validity, extent, and priority of any claims of RSR against the Reorganized Debtor will be determined and resolved in connection with the 2013 Chapter 11 Case.This will promote an efficient resolution of these claims matters, without prejudicing any party s rights, arguments, or defenses. It was on this basis that the Court granted the Motion for Final Decree. Exide s Objections Are without Merit 28. Exide asserts three separate grounds for objecting to RSR s claims: (1) the claims were discharged in the First Bankruptcy; (2) there is no factual or legal basis for the claims; and (3) the claims are contingent claims for contribution. None of these grounds is meritorious. RSR has demonstrated the validity of its claims under executory contracts that Exide assumed under its First Reorganization Plan. Because the Agreements were assumed in the First Bankruptcy Case, the claims were not discharged in that case. Even if the Agreements were deemed rejected under the Exide s current reorganization plan, RSR would have a valid claim for rejection damages. The Proof of Claim shows that RSR has already expended substantial unreimbursed sums to cover Exide s unperformed obligations under the Agreements. To the extent of these expenditures. RSR s contribution claims are not contingent.
12 Case KJC Doc 4225 Filed 06/11/15 Page 12 of 12 WHEREFORE, RSR requests this court to overrule Exide s objections to RSR s claims. Respectfully submitted, /s/ George M. Cheever George M. Cheever (Pa. I.D. #18184) K&L GATES LLP K&L Gates Center 210 Sixth Avenue Pittsburgh, PA (412) (telephone) (412) (facsimile) June 11, 2015 Attorneys for RSR Corporation
13 Case KJC Doc Filed 06/11/15 Page 1 of 1 CERTIFICATE OF SERVICE I hereby certify that I am more than 19 years of age and that on June 11, 2015, I caused a copy of the Response of RSR Corporation in Opposition to the Reorganized Debtor s (Substantive) Nineteenth Omnibus Objection to Claims to be served via overnight delivery on each of the parties listed below. Office of the U.S. Trustee Attn: Mark Kenney 844 North King Street, Room 2207 Lockbox 35 Wilmington, DE Skadden, Arps Slate, Meagher & Flom LLC Attn: James J. Mazza, Jr. 155 N. Wacker Drive Chicago, IL Exide Technologies Attn: B. Holland Pritchard Deerfield Parkway Suite 100 Milton, GA Skadden, Arps Slate, Meagher & Flom LLC Attn: Louis S. Chiappetta 155 N. Wacker Drive Chicago, IL Peter S. Kravitz Province, Inc Canwood Street Suite 210 Agoura Hills, CA /s/ George M. Cheever George M. Cheever PI v1
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