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Weisfelner v. Blavatnik (In re Lyondell Chem. Co.)

United States Bankruptcy Court for the Southern District of New York

April 21, 2017, Decided

Chapter 11, Case No. 09-10023 (CGM) (Jointly Administered), Adv. Pro. No. 09-01375 (MG), Adv. Pro. No. 11-01844 (MG)

Opinion

 [*61]  MEMORANDUM OPINION AND ORDER AFTER TRIAL

TABLE OF CONTENTS

I. Introduction

A. Blavatnik, the Companies, and the Merger

B. The Trustee Failed to Establish that Lyondell was Insolvent on Two Key

Dates

C. The Trustee Also Failed to Establish that an Actual Fraudulent Transfer

Occurred

D. The Bulk of the Trustee's Remaining Claims Fail

II. Procedural History

III. Jurisdiction and Venue

IV. Findings of Fact

A. Access and Leonard Blavatnik

B. Access Acquires Basell

C. Access's Early Interest in Merging Basell with a Refining Company

D. Access Acquires the Toehold Position and Enters into Negotiations with

Lyondell

E. Lyondell Produces the Refreshed Projections

F. Access [**2]  Offers $48 per Share for Lyondell

G. The Merger Agreement is Executed

H. Post-Execution, Pre-Closing Developments

I. The Merger/LBO Financing

J. The Merger Closes

K. Post-Closing at LBI

L. The Banks' Projections

M. Expert Testimony Regarding Lyondell's and CMAI's Projections

N. Expert Testimony Regarding Solvency

V. Legal Standards

A. Constructive Fraudulent Transfer

B. Intentional Fraudulent Transfer

C. Preference

D. Breach of Contract

E. Breach of Fiduciary Duties Under Luxembourg Law

VI. Discussion

A. Constructive Fraudulent Transfer

B. Intentional Fraudulent Transfer

C. Preference

D. Breach of Contract

E. Claims Under Luxembourg Law

VII. Conclusion

MARTIN GLENN

UNITED STATES BANKRUPTCY JUDGE

I. INTRODUCTION

Edward S. Weisfelner, as Litigation Trustee of the LB Litigation Trust1 (the  [*62]  "Trustee"), seeks to recover billions of dollars from Access,2 related entities, and employees, in this litigation on behalf of LyondellBasell creditors. The Trustee's claims arise out of the merger of Lyondell and Basell, orchestrated by Len Blavatnik's Access.

The parties narrowed the issues to be tried upon the submission of a joint pre-trial order. (ECF Doc. # 848.) The Trustee brings claims alleging: (i) actual fraudulent [**3]  transfer; (ii) constructive fraudulent transfer; (iii) avoidable preference; (iv) breach of contract; and (v) breach of fiduciary duty and tort claims under Luxembourg law, with aiding and abetting under Texas law. Opening arguments took place on October 17, 2016. At trial, direct testimony was offered, primarily by written declarations with in-court cross examination, but also through live witnesses and deposition designations. After trial, the Trustee and the Defendants submitted detailed proposed findings of fact and conclusions of law. (See ECF Doc. ## 906-09.) The Court heard closing arguments on February 2, 2017.

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567 B.R. 55 *; 2017 Bankr. LEXIS 1097 **

In re: LYONDELL CHEMICAL COMPANY, et al., Debtors.EDWARD S. WEISFELNER, AS LITIGATION TRUSTEE OF THE LB LITIGATION TRUST, Plaintiff, v. LEONARD BLAVATNIK, et al., Defendants.EDWARD S. WEISFELNER, AS LITIGATION TRUSTEE OF THE LB LITIGATION TRUST, Plaintiff, v. NAG INVESTMENTS LLC, Defendant.

Subsequent History: Affirmed by, in part, Vacated by, in part, Remanded by Weisfelner v. Blavatnik (In re Lyondell Chem. Co.), 2018 U.S. Dist. LEXIS 11806 (S.D.N.Y., Jan. 24, 2018)

Prior History: Weisfelner v. Blavatnik (In re Lyondell Chem. Co.), 558 B.R. 661, 2016 Bankr. LEXIS 3676 (Bankr. S.D.N.Y., Oct. 11, 2016)

CORE TERMS

projections, Merger, insolvency, billion, banks, financing, refreshed, liquidity, fraudulent transfer, Revolver, valuation, funds, refinery, cases, Supervisory, refining, parties, solvency, credible, de facto, Companies Act, financial condition, entity, fault, downside, Toehold, misconduct, Facilities, courts, petrochemical

Bankruptcy Law, Estate Property, Avoidance, Fraudulent Transfers, Evidence, Burdens of Proof, Allocation, Preponderance of Evidence, Types of Evidence, Testimony, Expert Witnesses, Fraudulent Transfers, Constructively Fraudulent Transfers, Prepetition Transfers, Preferential Transfers, Elements, Preferential Transfers, Business & Corporate Law, Shareholders, Shareholder Duties & Liabilities, Piercing the Corporate Veil, Elements, Debtor Insolvency, Business & Corporate Compliance, Breach, Breach of Contract Actions, Elements of Contract Claims, Contract Formation, Contracts Law, Contract Formation, Contract Conditions & Provisions, Contract Conditions & Provisions, Contracts Law, Contract Interpretation, Closely Held Corporations, Management Duties & Liabilities, Management Duties & Liabilities, Fiduciary Duties, Business Judgment Rule, Corporate Governance, Directors & Officers, Agency Relationships, Establishment, Remedies, Equitable Relief, Quantum Meruit, Restitution, Torts, Intentional Torts, Breach of Fiduciary Duty