KEVIN J. CAREY, Bankruptcy Judge.
Before the Court is a motion by Rioglass Solar, Inc. ("Rioglass") for limited reconsideration or clarification of an Order of this Court entered on July 13, 2017 (the "Rioglass Motion").
On March 29, 2016, the Debtors, including Abener Teyma Mojave General Partnership ("ATMGP"), filed chapter 11 bankruptcy petitions in this Court.
One of the claims assigned to the Litigation Trust was a breach of contract claim asserted by ATMGP against Rioglass arising out of the parties' contract dated February 27, 2012, under which Rioglass agreed to supply ATMGP with solar reflectors for the construction of a thermo-solar power plant in San Bernardino County, California (the "Supply Contract"). The Supply Contract provided that "[a]ny Dispute[
On July 11, 2016 (which was post-petition, but pre-confirmation), ATMGP filed arbitration proceedings (the "Arbitration") against Rioglass before the International Chamber of Commerce ("ICC") asserting breach of contract claims under the Supply Agreement and claiming liquidated damages of $2.7 million arising from Rioglass's alleged late deliveries. The parties dispute, strongly, how to characterize the parties' interactions attempting to bring the Trust into the Arbitration after the Plan's Effective Date. The short version of this needless dispute is that the Trust asserted a right under the confirmed Plan and the Litigation Trust Agreement to be substituted in the Arbitration in the place of ATMGP, while Rioglass argued that the ICC Rules required the Trust to be added by joinder as another party to the Arbitration. As the filings escalated in the Arbitration, on May 2, 2017, ATMGP sent a letter to the Arbitration Tribunal seeking to withdraw its request for arbitration.
On May 8, 2017, Rioglass filed a second ICC arbitration proceeding (the "Second Arbitration Proceeding") against the Trust seeking, among other things, declarations that (i) the arbitration agreement was valid and binding on Rioglass and the Trust, (ii) Rioglass had not violated the Confirmation Order, Plan or the Litigation Trust Agreement, and (iii) Rioglass was not liable on the liquidated damages claim first asserted by ATMGP.
On May 30, 2017, the Reorganized Debtor and the Trustee filed a joint motion in this Court for entry of an Order (i) enforcing the terms of the Confirmation Order and Plan to compel Rioglass to consent to withdrawal of the Reorganized Debtor's arbitration action and cease prosecution of claims against the Reorganized Debtor, and (ii) for an award of (A) actual damages and (B) sanctions (the "Sanctions Motion").
At a hearing to consider the Sanctions Motion on June 27, 2017, I recommended that the parties attempt to amicably resolve this matter; the parties then discussed the matters on their own outside of the courtroom. The parties then appeared on the record and advised the Court that they had reached an agreement on the Sanctions Motion, although they needed to document it.
However, the parties were unsuccessful in their attempt to document their agreement. Instead, the parties agreed to submit competing proposed orders, accompanied by short letter briefs in support of their positions, and asked the Court to decide the matter without further hearing.
After reviewing the parties' submissions, I entered an Order on July 13, 2017 (the "July Settlement Order"), which combined portions of the proposed forms of order, providing in relevant part that: (1) "The [Trust] should be substituted as the sole claimant in ICC Case No. 22103 . . . and [Rioglass] shall be the sole respondent"; (2) ATMGP "shall withdraw as a claimant in and shall not in any respect be a party to the First Arbitration . . ."; (3) the Adversary Proceeding "shall be stayed pending the final resolution and determination of the First Arbitration, provided however that Rioglass may apply to lift such stay for the purpose of seeking discovery from ATMGP . . ." and (4) the [Second Arbitration] "shall promptly be withdrawn . . ." and "[s]ubject to paragraph 5 [sic] of this Order, each party shall bear its own costs and expenses, and no party shall seek or make any application for costs or damages, including attorneys' fees, in connection with the Second Arbitration."
Paragraph 4 of the July Order provides:
On July 27, 2017, Rioglass filed its Motion asking the Court to reconsider or clarify the July Order regarding three issues. The first issue asserts that portions of the July Order that reference paragraph 5, should, instead, reference paragraph 4. Second, Rioglass asks the Court to clarify that it may assert a damages claim against the Trust in the Arbitration arising from the Trust's filing of the Adversary Proceeding, which Rioglass argues breaches the agreement to arbitrate all Disputes. Third, Rioglass asks the Court to clarify that the July Order allows the Arbitration Tribunal to decide whether the Trust should be added to the Arbitration by substitution or joinder. Except for the paragraph number references, the Trust and ATMGP forcefully object to the relief requested in the Rioglass Motion. At a hearing to consider the Rioglass Motion, the parties presented oral argument and the matter was taken under advisement.
The Third Circuit has instructed that the purpose of a motion for reconsideration is to "correct manifest errors of law or fact or to present newly discovered evidence."
The first issue in this matter is easily resolved. The two references in the July Order to paragraph 5, which should refer to paragraph 4, are typographical errors that will be corrected in the form of Order entered on the Rioglass Motion.
The remaining issues provide an interesting conundrum arising out of the parties' inability to document the settlement they claimed to reach outside of Court at the hearing on June 27, 2017. As noted in the July Order, the parties thereafter submitted competing forms of Order to the Court, accompanied by letter briefs reflecting their continuing disagreements, and asked the Court to resolve the open issues without further hearing. The Trust argues that both parties agreed to be bound by the Court's determination with respect to the competing orders and, therefore, the Court should reject Rioglass's request for limited reconsideration or clarification as an attempt to reargue the issues. However, I cannot agree that Rioglass waived any right to seek reconsideration or clarification of — or even a right to appeal — the July Order when it agreed that the Court should decide the matter on the papers without further argument. Indeed, Rioglass's counsel made it plain that were I not to grant the relief requested, I would "imperil" the arbitration
The Rioglass Motion points out flaws in the July Order that I should clarify to prevent any manifest injustice that could result due to any confusion about my decision. There is no dispute that the Supply Agreement between ATMGP and Rioglass contained an arbitration provision. The Third Circuit has noted that the Federal Arbitration Act (the "FAA")
In their attempt at settlement, the parties agreed that they could apply to the Arbitration Tribunal for costs, including costs associated with the discontinued arbitration and the Adversary Proceeding.
Paragraph 4 of the July Order provides in pertinent part that the Trust or Rioglass:
As the parties could not reach agreement as to the meaning of "costs" and in light of the presumption in favor of arbitrability, I will revise the July Order to delete the exclusion of any claims for costs related to the Adversary Proceeding. Instead, if Rioglass asserts such a claim, the Arbitration Tribunal can decide whether a damage claim based upon responding to the Adversary Proceeding is appropriate or has any merit.
Rioglass similarly argues that the July Order should be clarified to note that use of the word "substituted" in paragraph 2 was not intended to dictate the appropriate filings and procedures that should be taken to change the parties in the Arbitration.
Section 1.3 of the Litigation Trust Agreement provides in pertinent part that:
Based upon this language, I purposefully used the term "substitution" in the July Order to describe the method of transition called for in the Litigation Trust Agreement, which is part of the confirmed Plan. And, apparently, the Arbitration Tribunal has already acquiesced.
For the foregoing reasons, the Rioglass Motion will be granted, in part, and denied, in part. An appropriate Order follows.