Free Response to Motion - District Court of Delaware - Delaware

Case 1:08-cv-00313-SLR

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IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF DELAWARE ) In re: ) ) 15375 MEMORIAL CORPORATION, et al., ) ) Debtors. ) ) ) BEPCO L.P., f/k/a ) Bass Enterprises Production Company, ) ) Appellant, ) ) v. ) ) 15375 MEMORIAL CORPORATION, et al., ) ) Appellees and Cross-Appellants. ) ) Chapter 11 Bankr. Case. No. 06-10859 (KG) (Jointly Administered)

Civil Action No. 08-313 (SLR) (Consolidation of civil actions 08-313, 314, 318, 319, 321, 322, 325 and 326)

JOINT RESPONSE OF THE DEBTORS AND THE GLOBALSANTAFE ENTITIES IN OPPOSITION TO EMERGENCY MOTION OF APPELLANT BEPCO, L.P., F/K/A BASS ENTERPRISES PRODUCTION COMPANY TO BYPASS APPELLATE MEDIATION AND MOTION TO STRIKE RELATED EXHIBITS Debtors and Debtors in Possession 15375 Memorial Corporation ("Memorial") and Santa Fe Minerals, Inc. ("Santa Fe")(collectively, "Debtors") and GlobalSantaFe Corporation, GlobalSantaFe Corporate Services, Inc., and Entities Holdings, Inc. (collectively "GlobalSantaFe Entities"), by and through their respective undersigned counsel, hereby submit this Joint Response in Opposition to Emergency Motion of Appellant BEPCO, L.P., f/k/a Bass Enterprises Production Company ("BEPCO") to Bypass Appellate Mediation ("Mediation Motion") and Motion to Strike Related Exhibits, and respectfully show the Court as follows:

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INTRODUCTION1 1. The initial notices of appeal commencing this appellate process were filed by

BEPCO on April 28, 2008. This appeal was docketed in this Court on May 27, 2008. 2. · · Since then, BEPCO has filed the following pleadings in this Court: Emergency Request for Certification for Direct Appeal to the United States Court of Appeals for the Third Circuit Pursuant to 28 U.S.C. § 158(d)(2) Motion of Appellant BEPCO, L.P., f/k/a Bass Enterprises Production Company (I) for Consideration of Supplemental Materials in Connection With Certification Request and (II) to Supplement Record on Appeal Motion of Appellant BEPCO, L.P., f/k/a Bass Enterprises Production Company for Leave to File a Reply in Support of its Emergency Request for Certification for Direct Appeal to the United States Court of Appeals for the Third Circuit Statement Relating to Motion of Appellant BEPCO, L.P., f/k/a Bass Enterprises Production Company for Leave to File a Reply in Support of its Emergency Request for Certification for Direct Appeal to the United States Court of Appeals for the Third Circuit Emergency Motion of Appellant BEPCO, L.P., f/k/a Bass Enterprises Production Company to Bypass Appellate Mediation Emergency Motion to Shorten Notice and Response Deadline with Respect to Emergency Motion of Appellant BEPCO, L.P., f/k/a Bass Enterprises Production Company to Bypass Appellate Mediation In addition to the foregoing, BEPCO even filed a limited opposition to the

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Debtors' Motion to Consolidate Appeals. 4. BEPCO's filings include several hundreds of pages of exhibits and attachments, a

number of which are not part of the record on appeal and were filed in violation of Federal Rule of Bankruptcy Procedure 8006, as set forth more fully in the GlobalSantaFe Entities' response [Docket No. 16] in opposition to the Motion of Appellant BEPCO, L.P., f/k/a Bass Enterprises

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BEPCO's arguments relating to the merits of matters currently pending in the Bankruptcy Court are not addressed herein; as they are matters which: (1) BEPCO has not yet filed objections to; and (2) are not before this Court.

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Production Company (I) for Consideration of Supplemental Materials in Connection With Certification Request and (II) to Supplement Record on Appeal ("Motion to Supplement").2 5. Moreover, BEPCO has seen fit to file strings of correspondence between counsel

and the Court appointed mediator in this matter, Mr. Kevin Brady; correspondence which are confidential pursuant to the express terms of this Court's July 26, 2004 Standing Order regarding mediation. Further, within the context of communicating with the current mediator, BEPCO also violates the confidentiality of a prior mediation by offering characterizations of those proceedings in the hope of casting a negative light on the Debtors and the GlobalSantaFe Entities and prejudicing the mediator against the Debtors and the GlobalSantaFe Entities. 6. BEPCO's violations of mediation confidentiality and non-stop filing of meritless

pleadings not only waste judicial resources, but are indicative of the pattern of harassment and unreasonableness that have delayed the Debtors' progress in their bankruptcy cases and caused the Debtors, and the GlobalSantaFe Entities, to incur significant legal costs. 7. In its most recent filings, BEPCO seeks to bypass this Court's mandatory

mediation process and shorten the Debtors' and GlobalSantaFe Entities' time to respond to its so-called "emergency motion." 8. In support of its Mediation Motion, BEPCO continues to contend that the Debtors

and the GlobalSantaFe Entities are "frustrating" BEPCO's right to appellate review, all the while failing to acknowledge that: · · These appeals were initiated in April, via BEPCO's filing of four Notices of Appeal; BEPCO waited almost two months to seek relief from this Court's mandatory mediation program; and

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On this date Debtors filed a joinder to the GlobalSantaFe Entities' Response to the Motion to Supplement.

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Any "frustration" of BEPCO's appellate rights is the result of BEPCO failing to seek a stay in the Bankruptcy Court. It is also worth noting that, while BEPCO contends that it is unclear whether this

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Court's mandatory mediation program was meant to apply to cases subject to certification directly to the Third Circuit, BEPCO fails to account for the fact that the Third Circuit, pursuant to Federal Rule of Appellate Procedure 33, has its own Appellate Mediation Program. Therefore, even if BEPCO were to succeed in avoiding mediation in these proceedings and were to succeed in its efforts to obtain direct review, it would still remain subject to possible mediation within the context of the Third Circuit's mediation program. 10. For these reasons, as set forth more fully below, Debtors and the GlobalSantaFe

Entities respectfully request that BEPCO's Mediation Motion be denied. 11. In addition, Debtors and the GlobalSantaFe Entities request that BEPCO's

Mediation Motion and related exhibits be stricken from the record because they: (1) contain confidential materials relating to the parties' previous mediation attempt; (2) contain correspondence as between the parties and the Court appointed mediator; and (3) contain materials and references outside of the appellate record before this Court. ARGUMENT 12. The Standing Order of this Court dated July 26, 2004 provides, in relevant part: bankruptcy cases shall be referred to the Appellate Mediation Panel to facilitate settlement or otherwise to assist in the expeditious handling of the appeal. The Clerk of this Court shall establish and manage the Appellate Mediation Panel. Mediations will be conducted by members of the Panel. In all cases, the Clerk will assign the matter to a mediator on a rotating basis. (emphasis added) 13. In its Mediation Motion, BEPCO provides no valid basis upon which this Court

should grant BEPCO relief from this Court's Standing Order and fails in its efforts to cast the 4
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Debtors and the GlobalSantaFe Entities as the ones who do not want to negotiate settlement in good faith. 14. The Debtors and the GlobalSantaFe Entities stand ready to proceed with

mediation and would welcome the opportunity to explore any and all settlement possibilities. 15. BEPCO, however, in an effort to avoid engaging in such a dialogue, prefers to

make baseless allegations of bad faith against the Debtors and the GlobalSantaFe Entities, relying on the continuing proceedings in the Debtors' bankruptcy cases as evidence of such bad faith. 16. According to BEPCO: . . . [T]hese appeals are particularly ill-suited to appellate mediation for several reasons. First . . . while these appeals are pending, the Debtors and GSF Entities have taken steps before the Bankruptcy Court in an effort to frustrate BEPCO's ability to obtain effective appellate review of the Bankruptcy Court's order denying BEPCO's motion to dismiss . . . (Mediation Motion at ¶ 12) 17. As previously noted to this Court, to the extent BEPCO's appeals are "frustrated"

or mooted, it is due entirely to BEPCO's own failure to obtain ­ or even request ­ a stay from the Bankruptcy Court, as required by Federal Rule of Bankruptcy Procedure 8005. 18. A party that fails to seek a stay in the bankruptcy court is not entitled to seek such

a stay from the appellate court. In re Zahn Farms, 206 B.R. 643 (B.A.P. 2d Cir. 1997). Therefore, BEPCO has waived any opportunity it may have had to seek a stay of the Debtors' bankruptcy proceedings and BEPCO's constant complaints regarding any possible "thwarting" of its ability to seek appellate review is of its own making and do not entitle it to any form of relief. See Matter of Manges, 29 F.3d 1034, cert. denied, 513 U.S. 1152 (stating that failure to

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seek or obtain a stay creates a risk that appellate review may be precluded on the ground of mootness). 19. In fact, even had BEPCO sought a stay from the Bankruptcy Court, the possibility

that an "appeal will be mooted" does not, by itself, "establish that [an appellant] will be injured by denying [a] stay." In re Dakota Rail, Inc., 111 B.R. at 821; see also In re Public Service Co. of New Hampshire, 116 B.R. at 350 (stating, with respect to the argument that the appellant's appeal will be moot if a stay is not granted: "all courts confronted with this argument hold it is not enough to show sufficient injury to appellants to warrant [a] stay."); In re Boca Del Rio Properties, Inc., 2006 WL 2459445 at *1 (S.D. Tex.) (rejecting debtor's assertion that it will suffer irreparable injury via the mooting of its appeal absent a stay where the debtor failed to show a likelihood of success on the merits of its appeal.). 20. In short, BEPCO's constant complaining regarding its need for immediate

appellate relief is legally irrelevant. 21. It should also be noted that, while BEPCO contends that the Debtors' progress in

its cases is being pursued in bad faith, the fact of the matter is that the Debtors' efforts at obtaining confirmation of a plan have been endorsed by the United States Trustee and approved by the Bankruptcy Court; facts that BEPCO conveniently omits. 22. In addition, while BEPCO argues that if the bankruptcy court proceedings

continue, it will be required to engage in significant briefing in the Bankruptcy Court; it has become evident in this appeal that BEPCO's counsel is more than capable of preparing briefs on a variety of topics at the proverbial "drop of a hat." 23. Further still, while BEPCO presents a long-winded analysis as to whether this

Court's Standing Order was meant to apply to appeals subject to possible certification to the 6
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Third Circuit, BEPCO fails to account for the fact that, even if certified, this appeal would still be subject to potential mediation, pursuant to the Third Circuit's Appellate Mediation Program.3 24. Therefore, because: (1) this Court's appellate mediation procedures are

mandatory; (2) the advancement of these cases in the Bankruptcy Court cannot support the granting of any relief in favor of BEPCO, particularly in light of BEPCO's failure to request and be granted a stay pending appeal; and (3) because, even if exempted from this Court's mediation program and certified for direct appeal, this case would remain subject to the Third Circuit's Appellate Mediation Program, Debtors and the GlobalSantaFe Entities respectfully request that BEPCO's Mediation Motion to denied. 25. In addition, Debtors and the GlobalSantaFe Entities request that BEPCO's

Mediation Motion and related exhibits be stricken from the record because to they reference confidential mediation communications and documents not in the record before this Court. MOTION TO STRIKE 26. Attached to BEPCO's Mediation Motion (as Exhibits D through I) are

confidential correspondence between the Court's appointed mediator, Mr. Kevin Brady, and the parties. 27. This Court's Standing Order on mediation provides, in relevant part: The mediator shall not disclose to anyone statements made or information developed during the mediation process. The attorneys and other persons
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Third Circuit Local Rule 33.1 provides: Appeals in civil cases . . . are referred to the Appellate Mediation Program to facilitate settlement or otherwise to assist in the expeditious handling of the appeal or petition. . . Mediations will be conducted by a senior judge of the court of appeals, a senior judge of a district court, the special master, or other person designated pursuant to Rule 48 F.R.A.P. . . . In all cases, however, the special master will determine which cases are appropriate for mediation and will assign the matter to a mediator.

With some limited exceptions, not applicable here, "All civil appeals and petitions . . . shall be eligible for referral to the Appellate Mediation Program." L.R. 33.2 (emphasis added).

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attending the mediation are likewise prohibited from disclosing statements made or information developed during the mediation process to anyone other than clients, principals or co-counsel, and then, only upon receiving due assurances that the recipients will honor the confidentiality of the information. Similarly, the parties are prohibited from using any information obtained as a result of the mediation process as a basis for any motion or argument to any court. The mediation proceedings shall be considered compromise negotiations under Rule 408 of the Federal Rules of Evidence. (emphasis added). 28. In its exhibits in support of its Mediation Motion, BEPCO not only violates the

confidentiality this Court has bestowed on the current mediation process, but the confidentiality of a prior mediation. 29. In In re Student Finance Corporation, 2007 WL 4643881 (D. Del.) (Slip Copy

attached as Exhibit A), the plaintiffs procured expert reports, which incorporated submissions made as part of a confidential mediation. In response, the defendants moved to have such reports stricken. 30. In granting the defendants' motion to strike, the court in Student Finance noted Id. at *1.

the "strong policy considerations favoring a confidential mediation process." Moreover, the court stated:

[T]here is a well-established judicial policy protecting the confidentiality of the settlement process. The judicial system encourages the resolution of disputes by mediation and settlement. It is axiomatic that the assurance of confidentiality for communications made during the course of settlement negotiations is a critical component of the process. Particularly, in the event that settlement discussions do not resolve the dispute, the parties must be able to litigate their claims in the courtroom without the pall-like presence of confidential negotiation statements influencing the arguments. . . . [T]he courts must remain blind to any confidential statements made during the course of settlement negotiations . . . Id. at *1 (emphasis added). 8
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31.

In this case, BEPCO has violated the well-established judicial policies set forth

above and attempted to use confidential information obtained in two mediation processes in order to obtain relief to which it is legally not entitled. 32. Therefore, because BEPCO's actions are in clear violation of this Court's

Standing Order and relevant case law, and BEPCO's Exhibits D through I should be stricken. 33. Similarly, BEPCO's use of the Bankruptcy Court's scheduling order and

references to proceedings subsequent to the entry of the order from which this appeal ensued is nothing more than an "end run" designed at skirting the clear prohibition against supplementing the appellate record before this Court. See In re Neshaminy Office Bldg. Associates, 62 B.R. 798, 802 (E.D. Pa. 1986) (stating: "Items not before the Bankruptcy Court and not considered by it in rendering its decision may not be included in the record."); In re MK Lombard Group, Ltd., 2005 WL 735993 (E.D. Pa. 2005) (citing Neshaminy with approval); see also The GlobalSantaFe Entities' Response in Opposition to Motion of Appellant BEPCO, L.P., f/k/a Bass Enterprises Production Company (I) for Consideration of Supplemental Materials in Connection With Certification Request and (II) to Supplement Record on Appeal. Therefore, BEPCO's entire Mediation Motion and remaining exhibits should be stricken in order delete such exhibits and references from the record. CONCLUSION 34. For the reasons set forth above, Debtors and the GlobalSantaFe Entities

respectfully request that BEPCO's Mediation Motion be denied in its entirety and that appropriate sanctions, including the striking of BEPCO's Mediation Motion and related exhibits, be levied against BEPCO for its violation of this Court's Standing Order, general judicial policy

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of mediation confidentiality and prohibition against supplementing the appellate record before this Court. Dated: Wilmington, Delaware June 23, 2008 Respectfully submitted, STEVENS & LEE, P.C. /s/ John D. Demmy___________ John D. Demmy (Bar No. 2802) 1105 North Market Street, 7th Floor Wilmington, DE 19801 Telephone: (302) 425-3308 Telecopier: (610) 371-8515 Email: [email protected] -andJohn C. Kilgannon 1818 Market Street, 29th Floor Philadelphia, PA 19103 Telephone: (215) 751-1943 Telecopier: (610) 371-7954 Email: [email protected] Attorneys For Debtors WOMBLE CARLYLE SANDRIDGE & RICE, PLLC __/s/ Francis A. Monaco, Jr.______________ Francis A. Monaco, Jr. (#2078) Kevin J. Mangan (#3810) 222 Delaware Avenue, Suite 1501 Wilmington, DE 19801 Tel. (302) 252-4361 -andPhilip G. Eisenberg Texas State Bar No. 24033923 Mark A. Chavez Texas State Bar No. 24036357 LOCKE LORD BISSELL & LIDDELL, LLP 3400 JPMorgan Chase Tower, 600 Travis Street Houston, Texas 77002 Tel. (713) 226-1200 Attorneys for the GlobalSantaFe Entities 10
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