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In re Falcon V, LLC

In re Falcon V, LLC

United States Bankruptcy Court for the Middle District of Louisiana

September 22, 2020, Decided

CASE NO. 19-10547, CHAPTER 11

Opinion

 [*258]  MEMORANDUM OPINION

Falcon V, L.L.C., and its affiliated debtors1 (collectively "Falcon V" or "Debtors") engage in oil and gas exploration and development and operate and provide services  [*259]  for oil and gas properties.2 They filed chapter 11 in May 2019.

Argonaut Insurance Company ("Argonaut") provided performance bonds to fulfil Debtors' obligations under numerous oil and gas leases, carrying premiums Debtors obtained expedited permission to pay early in the reorganization.3 The jointly administered Debtors promptly proposed a plan that was confirmed, after amendments, in October 2019.4 Argonaut filed proofs of claim but did not object to confirmation of the plan; indeed, it did not make an appearance in the case until more than six months after confirmation.

Six months after confirmation, Argonaut demanded that reorganized Falcon V provide additional collateral to maintain the surety bonds Argonaut had posted prepetition.5 Falcon V refused, prompting Argonaut to move essentially for declaratory relief relating to the confirmed chapter 11 plan.6

Argonaut contends that the agreement instituting the surety bond program was an executory [**2]  contract deemed assumed through the confirmed plan. Falcon V responds7 that the surety bond program was not an executory contract; and that even if it were, it was not assumable. It also argues that Argonaut's claims were discharged on confirmation and that its request for additional collateral violates the discharge injunction.

Neither party disputes the relevant material facts.

After an evidentiary hearing, the parties sought time to negotiate and later agreed to try to resolve their differences through mediation. When those efforts proved unsuccessful, they renewed their request for a ruling.

This memorandum opinion explains why Argonaut's motion fails.

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620 B.R. 256 *; 2020 Bankr. LEXIS 2490 **

IN RE: FALCON V, L.L.C., ET AL., DEBTORS

Subsequent History: Request denied by Argonaut Ins. Co. v. Falcon V, L.L.C., 2021 U.S. Dist. LEXIS 48454, 2021 WL 966878 (M.D. La., Mar. 15, 2021)

Affirmed by Argonaut Ins. Co. v. Falcon V, L.L.C., 2021 U.S. Dist. LEXIS 188686, 2021 WL 4486336 (M.D. La., Sept. 29, 2021)

CORE TERMS

executory contract, surety bond, confirmed, bonds, accommodation, secured claim, contingent, contracts, reimbursement, indemnity agreement, obligations, collateral, obligees, Surety, disclosure statement, guarantor, leases, executory, recited, argues, proof of claim, counterparty, reorganized, injunction, courts

Bankruptcy Law, Administrative Powers, Executory Contracts & Unexpired Leases, Assignments, Rejections, Powers to Assume & Reject, Unexpired Leases, Executory Contracts, Business & Corporate Compliance, Contracts Law, Types of Contracts, Breach, Active Breach, Material Breach, Guaranty Contracts, Civil Procedure, Bonds, Sureties, Liability, Public Contracts Law, Bids & Formation, Subcontractors & Subcontracts, Surety Bonds, Alternative Dispute Resolution, Arbitration, Arbitrability, Contract Conditions & Provisions, Arbitration Clauses, Procedural Matters, Unassumable Contracts, Governments, Legislation, Interpretation, Types of Claims, Secured Claims & Liens, Avoidance & Survival, Business & Corporate Law, Agency Relationships, Duties & Liabilities, Indemnity, Automatic Stay, Violations of Stay, Contempt Actions, Sanctions, Contempt, Civil Contempt, Remedies, Injunctions, Contempt, Discharge & Dischargeability, Effect of Discharge, Protection of Debtors