MEMORANDUM OPINION IN SUPPORT OF CERTIFICATION OF A DIRECT APPEAL TO THE FIFTH CIRCUIT COURT OF APPEALS

CRAIG A. GARGOTTA, Bankruptcy Judge.

This Memorandum Opinion is issued in support of a Certification of a Direct Appeal to the United States Court of Appeals for the Fifth Circuit.

STATUTORY AND RULE AUTHORITY

This certification is made pursuant to 28 U.S.C. § 158(d)(2).1 This certification is governed by Fed. R. Bankr. P. 8006.2

FACTS AND LAW ESTABLISHING THIS COURT'S AUTHORITY

Under Rule 8006, the matter that is the subject of a direct appeal is "pending" in the Bankruptcy Court for 30 days after the effective date under Rule 8002 of the first notice of appeal of the order for which direct review is sought. The Court finds as follows:

On March 7, 2019, the Court issued its Memorandum Opinion Granting, In Part and Denying, In Part Agent's Motion for Summary Judgment and Alternative Motion for Partial Summary Judgment (ECF No. 114)3 ("Memorandum Opinion") and its accompanying Order Granting, In Part and Denying, In Part Agent's Motion for Summary Judgment and Alternative Motion for Partial Summary Judgment (ECF No. 113) (collectively, the "Summary Judgment Rulings"). On March 21, 2019, a Notice of Appeal (ECF No. 118) and Motion for Leave to Appeal (ECF No. 119) were filed by the following producers who are defendants in this case: U.S. Energy Development Corporation; Ageron Energy, LLC; Petroedge Energy IV, LLC; Teal Natural Resources, LLC; Crimson Energy Partners IV, LLC; Viceroy Petroleum, LP; RLU Operating, LLC; Dewbre Petroleum Corporation; Jerry C. Dewbre, Trustee; American Shoreline Inc.; Texpata Pipeline Company; Aurora Resources Corporation; AWP Operating Co.; Texron Operating LLC; Magnum Producing, LP; Magnum Engineering Company; Magnum Operating LLC; Rock Resources, Inc.; Killam Oil Co., Ltd.; and Energy Reserves Group, LLC (collectively referred to hereinafter as "Producers").4 The Notice of Appeal was timely filed under Rule 8002(a)(1), and March 21, 2019 is the "effective" date of the Notice of Appeal under Rule 8002(a). Producers' Notice of Appeal and Motion for Leave to Appeal were transmitted to the United States District Court for the Western District of Texas ("District Court") and assigned Case No. 19-cv-00301.

This Court held a status hearing on March 27, 2019 at which the Court requested the Parties' positions on certifying certain questions of law discussed in the Summary Judgment Rulings to the United States Court of Appeals for the Fifth Circuit ("Fifth Circuit"). At the status hearing, the Court permitted the Parties to submit optional briefing regarding their positions on direct certification of questions of law addressed by the Summary Judgment Rulings.

After the status hearing, plaintiff Deutsche Bank Trust Company Americas, Agent ("Agent") filed Agent's Response to Producer Group Defendants' Motion for Leave to Appeal; Alternatively, Motion for Leave to Cross-Appeal (Case No. 19-cv-00301, ECF No. 2) on April 3, 2019 with the District Court that opposed Producers' request for leave to appeal and argued, in the alternative, that Agent should be allowed to cross-appeal the Summary Judgment Rulings if Producers' Motion for Leave to Appeal is granted. On April 5, 2019, this Court entered an Order Granting Agent's Motion to Extend Time to Appeal (ECF No. 126) permitting an extension of time under Rule 8002(d)(1) for Agent to file a notice of appeal to cross-appeal the Summary Judgment Rulings. On April 9, 2019, this Court entered an Order Granting Debtor's Joinder to Agent's Motion to Extend Time to File a Notice of Appeal (ECF No. 126), which also granted Debtor an extension of time to file a notice of appeal under Rule 8002(d)(1). Producers filed Producer Group Defendants' Statement of Issues and Designation of Record on Appeal on April 4, 2019 (ECF No. 123). Agent filed Agent's Statement of Issues on Appeal and Designation of Additional Items to be Included in the Record on Appeal Regarding Notice of Appeal at Docket Number 119 (ECF No. 131).

On April 16, 2019, Producers filed their Advisory and Statement of Producer Group Defendants in Support of the Court's Certification of Direct Appeal to the United States Court of Appeals for the Fifth Circuit (ECF No. 132) ("Producers' Advisory in Support of Direct Appeal"). Producers' Advisory in Support of Direct Appeal asserts that certain questions of law discussed in the Summary Judgment Rulings meet the standards for direct appeal under 28 U.S.C. § 158(b). Producers' Advisory in Support of Direct Appeal apparently "supports" certification but does not request certification. On April 16, 2019, Agent filed Agent's Memorandum of Law Regarding Timing of Certification of Direct Appeal (ECF No. 133) ("Agent's Memorandum on Certification"). Agent's Memorandum on Certification contends that the Summary Judgment Rulings do not constitute a final, appealable judgment because they do not dispose of all claims brought in the adversary proceeding. Agent contends that certification would be premature under § 158(a) because the District Court has not granted Producers' Motion for Leave to Appeal. As such, Agent does not support a certification for direct appeal. On April 16, 2019, debtor First River Energy, LLC ("Debtor" or "First River") filed Debtor's Statement Regarding Timing of Certification of Direct Appeal (ECF No. 134) ("Debtor's Statement"). Debtor's Statement concurred with the Court's position that April 21, 2019 is the deadline for the Court to certify the appeal.5

JURISDICTION AND CERTIFICATION OF INTERLOCUTORY ORDERS FOR DIRECT APPEAL TO THE CIRCUIT COURT OF APPEALS

A. Jurisdiction

Under Rule 8006(e), a court may sua sponte certify a direct appeal to the court of appeals on its own motion set forth in a separate document. To properly certify a direct appeal, a court must serve its certification, along with an opinion or memorandum that contains the information required by Rule 8006(f)(2)(A)-(D), on the parties to the appeal in the manner required by Rule 8003(c)(1).

For a court to have jurisdiction to certify a direct appeal, the matter must be "pending" in that court. Fed. R. Bankr. P. 8006(d). For the purposes of Rule 8006, "a matter remains pending in the bankruptcy court for 30 days after the effective date under Rule 8002 of the first notice of appeal from the judgment, order, or decree for which direct review is sought." Fed. R. Bankr. P. 8006(B). "A matter is pending in the district court . . . thereafter." Id.

In the present case, Producers filed their Notice of Appeal and Motion for Leave to Appeal on March 21, 2019, and both documents were docketed on March 21, 2019. (ECF Nos. 118, 119). The matters at issue in the appeal remain pending in the bankruptcy court for thirty days after March 21, 2019. Fed. R. Bankr. P. 8006(b). Here, the thirtieth day is Saturday, April 20, 2019. Under Rule 9006, if a time period specified in the Federal Rules of Bankruptcy Procedure is stated in days, "the period continues to run until the end of the next day that is not a Saturday, Sunday, or legal holiday." As such, for the purpose of retaining jurisdiction under Rule 8006(b), the Court finds that this matter is "pending" in the bankruptcy court through Monday, April 22, 2019.

B. Certification of Interlocutory Orders for Direct Appeal to the Circuit Court of Appeals

Under Rule 8006(a), a certification of a bankruptcy court order for direct review in a court of appeals under § 158(d)(2) is effective when: "(1) the certification has been filed; (2) a timely appeal has been taken under Rule 8003 or 8004; and (3) the notice of appeal has become effective under Rule 8002." Rule 8004(a), which explains how to appeal an interlocutory order of a bankruptcy court filed under § 158(a)(3), requires that the party appealing file a notice of appeal and a motion for leave to appeal with the bankruptcy clerk. Under § 158(a)(3), district courts have jurisdiction to hear appeals of interlocutory orders with leave of court.

The Court agrees with Agent that the Summary Judgment Rulings did not dispose of all claims brought in the adversary proceeding. Therefore, the Summary Judgment Rulings constitute an interlocutory order. Pursuant to Rule 8004, a party may request leave to appeal an interlocutory order of a bankruptcy court by filing a notice of appeal and a motion for leave to appeal with the bankruptcy court. Under § 158(d)(2), courts of appeals are granted "jurisdiction of appeals described in the first sentence of subsection (a) [of section 158], which covers appeals from both final and interlocutory orders." 10 Collier on Bankruptcy ¶ 8004.11 (16th ed. 2019). If the bankruptcy court certifies a direct appeal of an interlocutory order entered by that court, and the circuit court of appeals authorizes the direct appeal, then the requirement to receive leave to appeal an interlocutory order provided under § 158(a)(3) is satisfied. Id. (citing Fed. R. Bankr. P. 8004(e)).

Agent's Memorandum on Certification asserts that there is "no appealable order to certify for direct appeal because the district court has not yet ruled on the motion for leave to appeal." (Agent's Memorandum on Certification, ECF No. 133). Producers complied with Rule 8004, timely filing their Notice of Appeal and Motion for Leave to Appeal with the bankruptcy court on March 21, 2019. (ECF Nos. 118, 119). As such, this Court finds that if the Fifth Circuit authorizes this Court's certification for direct appeal, then the leave requirement for appeal of an interlocutory order described under 28 U.S.C. § 158(a)(3) is satisfied.

INFORMATION REQUIRED BY FED. R. BANKR. P. 8006(F)(2)(A)-(D)

Rule 8006(e)(1), which allows a court to certify a direct appeal on its own motion, requires this Court to include the information required by Rule 8006(f)(2)(A)-(D). This information includes the facts necessary to understand the question presented on appeal, the question presented on appeal, the relief sought, and the reasons for the direct appeal as discussed in 28 U.S.C. § 158(d)(2)(A)(i)-(iii).

A. The Facts Necessary to Understand the Question Presented (Rule 8006(f)(2)(A))

On January 12, 2018, Debtor filed a voluntary petition for relief under chapter 11 of the Bankruptcy Code. Pre-petition, Debtor provided midstream transportation services to the oil and gas industry across the United States. Debtor purchased and marketed domestic crude oil and condensate directly from upstream producers. After purchasing oil from upstream producers, Debtor re-sold and delivered aggregated oil to third-party downstream purchasers through trucks and pipeline. Debtor entered into pre-petition agreements with Producers ("Producer Agreements") to purchase oil and gas from wells situated in Texas and Oklahoma. The majority of the upstream producers produced oil and gas in the state of Texas (referred to hereinafter as "Texas Producers"). Pursuant to the Producer Agreements, Debtor purchased and took possession of oil and gas purchased in one month and paid for it in the following month.

On July 23, 2015, Debtor entered into a credit agreement, guarantee agreement, and security agreement with Agent. The security agreement granted Agent a continuing security interest in substantially all of Debtor's assets. Agent executed UCC-1 financing statements with the Delaware Department of State on July 23, 2015 that covered "all assets of Debtor, wherever located, whether now owned and existing or hereafter acquired or coming into existence, together with all proceeds thereof." (Agent's App'x to MSJ, Pt. 3, ECF No. 90-4).

In November and December 2017, Debtor defaulted on making payments due under its credit agreement with Agent. When Debtor filed for bankruptcy on January 12, 2018, Debtor had not paid Producers for oil and gas produced in December 2017. Agent and Producers both assert that they have a first priority, perfected lien on the Debtor's collateral as follows: Debtor's accounts receivable owed from downstream purchasers for oil sold; cash and cash equivalents; financial assets; and inventory. Agent initiated this adversary proceeding as a declaratory judgment action to determine extent, validity, and priority of liens in the collateral.

In its Motion for Summary Judgment, Agent argued that, pursuant to the conflict-of-law provision found in Title 6, Section 9-301 of the Delaware Code, Delaware law applies to determine perfection and priority of security interests in Debtor's goods, inventory, accounts, and proceeds. In response, Texas Producers asserted, in relevant part, that they hold an automatically-perfected purchase money security interest ("PMSI") in oil and gas produced in Texas and sold to Debtor in December 2017, along with proceeds thereof, pursuant to a non-standard provision found in Section 9.343 of the Texas Business and Commerce Code. The Court determined that pursuant to Section 9-301 of the Uniform Commercial Code ("UCC"), which is the same in Delaware and Texas, Delaware law controls as to the priority and perfection of liens on proceeds from sale of oil and gas production from Texas wells.

B. The Questions Presented on Appeal (Rule 8006(f)(2)(B))

Agent argues that because Debtor was organized in Delaware, Delaware law determines perfection and priority. Specifically, Agent cites to Section 9-301 of the UCC ("UCC § 9-301"), which provides "while a debtor is located6 in a jurisdiction, the local law of that jurisdiction governs perfection, the effect of perfection or nonperfection, and the priority of a security interest in collateral." Del. Code Ann. tit. 6, § 9-301(1) (West 2019); Tex. Bus. & Com. Code Ann. § 9.301(1) (West 2017). Under Delaware law, a security interest in goods, inventory, accounts, and proceeds arises by filing a UCC-1 financing statement with the Delaware Department of State. Del. Code. Ann. tit., § 9-310(a). Because Agent was the first party to file a UCC-1 financing statement in Delaware on substantially all of Debtor's collateral, Agent asserted, and the Court agreed, that Agent's security interest primes liens asserted by Producers.

Producers argue that they have an automatically-arising PMSI in Debtor's oil, gas, and proceeds thereof for oil produced in Texas that arises under a non-standard provision of Texas's adopted version of the UCC located at Section 9.343 of the Texas Business and Commerce Code ("Texas § 9.343"). Producers contend that their PMSI primes any security interest held by Agent. Section 9.343(a) of the Texas Business and Commerce Code provides a security interest in favor of interest owners, as secured parties, to secure the obligations of the first purchaser of oil and gas production, as debtor, to pay the purchase price. Producers contend that Texas § 9.343 determines perfection and priority of liens for oil produced in Texas, not UCC § 9-301.

C. The Relief Sought (Rule 8006(f)(2)(C))

Producers seek the District Court's determination that this Court erred in determining that Delaware law (and the Delaware UCC) governed the perfection and priority of liens between the Producers and Agent. (ECF No. 123). Producers also seek the District Court's determination that this Court erred in determining that Texas § 9.343 does not provide a lien to the Producers that is superior to that of Agent. (Id.)

D. Reasons Why Direct Appeal Should Be Allowed, Including Circumstances Specified in 28 U.S.C. § 158(d)(2)(A)(i)-(iii)

This Court may authorize a direct appeal to the Fifth Circuit if it certifies that:

28 U.SC. § 158(d)(2)(A)(i)-(iii). "If any of the four conditions precedent are met, the bankruptcy court shall make the certification per § 158(d)(2)(B)(ii)." In re Adkins, 517 B.R. 698, 699 (Bankr. N.D. Tex. 2014).

Pursuant to § 158(d)(2)(A)(i), the first issue is whether this Court's Summary Judgment Rulings involve a question of law as to which there is no controlling decision of the court of appeals for the circuit or of the Supreme Court of the United States, or whether the order involves a matter of public importance. First, this Court certifies that the questions presented on appeal are questions of law to which there is there is no controlling decision of the Fifth Circuit or the United States Supreme Court.7 Second, resolution of the legal issues presented is of public importance. In its Summary Judgment Rulings, the Court determined that UCC § 9-301, which deals with conflicts of law, required the Court to apply Delaware law, not Texas law, to determine perfection and priority of liens among Agent and Texas Producers because the Debtor is an LLC organized under Delaware law. The Fifth Circuit's determination of whether the choice of law provision in UCC § 9-301 trumps Texas § 9.343 is a matter of public importance for the Texas Producers in this case, and for producers of oil and gas in Texas generally, particularly in circumstances where Texas producers provide oil and gas to debtors that are organized outside of Texas.

The next issue under § 158(d)(2)(A)(ii) is whether this case involves resolution of conflicting decisions. Here, there are no conflicting decisions. As such, this subsection does not justify certification.

The final issue under § 158(d)(2)(iii) is whether an immediate appeal would materially advance the process of the case. An immediate appeal would advance the outcome of Debtor's bankruptcy case. In its bankruptcy case, Debtor has a defined set of assets that are eligible for distribution among creditors. The adversary proceeding here between Agent and Producers serves as a declaratory judgment action to determine extent, validity, and priority of liens in substantially all of those assets. Determination of the questions of law posed in this Memorandum Opinion will provide Debtor with the finality necessary to ascertain whether Agent or Texas Producers have a perfected, first priority lien on Debtor's assets.

COPIES OF ORDER AND MEMORANDA

Attached as "Exhibit A" is the Court's Memorandum Opinion Granting, In Part and Denying, In Part Agent's Motion for Summary Judgment and Alternative Motion for Partial Summary Judgment (ECF No. 114).

Attached as "Exhibit B" is the Court's Order Granting, In Part and Denying, In Part Agent's Motion for Summary Judgment and Alternative Motion for Partial Summary Judgment (ECF No. 113).

Attached as "Exhibit C" is Producers' Notice of Appeal (ECF No. 119).

Attached as "Exhibit D" is Producer Group Defendants' Motion for Leave to Appeal (ECF No. 120).

SEPARATE CERTIFICATION

As required by Rule 8006(f)(5), a separate document contains this Court's certification. Service on the parties under Rule 8003(c)(1) will occur upon entry of the certification and this Memorandum Opinion on the docket.

IT IS HEREBY ADJUDGED and DECREED that the below described is SO ORDERED.

PLAINTIFF'S MOTION FOR SUMMARY JUDGMENT AND ALTERNATIVE MOTION FOR PARTIAL SUMMARY JUDGMENT

Pursuant to Rule 56 of the Federal Rules of Civil Procedure, as incorporated by the Federal Rules of Bankruptcy Procedure and Local Rules of the United States Bankruptcy Court for the Western District of Texas, Deutsche Bank Trust Company Americas, as administrative agent (collectively, the "Agent" or "Plaintiff"),1 seeks summary judgment on all claims (or alternatively partial summary judgment on certain claims) asserted in its Complaint to Determine the Validity Priority and Extent of Liens and Security Interests [Dkt. 1] and denying all affirmative defenses, and counterclaims asserted in (a) Defendants' Original Answer and Counterclaim [Dkt. 50], (b) Defendants' Amended Answer and First Amended Counterclaim [Dkt. 70],2 (c) Intervenor RADCO Operations, LP's Original Answer and Original Counterclaims Against Plaintiff [Dkt. ____] and (d) Intervenor RHEACO, Ltd.'s Original Answer and Original Counterclaims Against Plaintiff [Dkt. ____] (collectively, the "Answer/Counterclaim")3 Collectively, the parties filing the Answer/Counterclaim shall be called the "Producers."4

I.

INTRODUCTION AND SUMMARY OF THE RELIEF SOUGHT

The Complaint seeks to determine the validity, extent, and relative priority of the liens of the Agent and Lenders versus the purported liens of the Producers (and of other parties who will be bound by the Court's decision) in Debtor's accounts receivable and cash in the Debtor's deposit accounts.5

In July 2015, the Debtor, a Delaware limited liability company,6 was organized and capitalized with assets and businesses acquired through financing provided by the Lenders under the Credit Agreement.7 The financing was secured by security interests and liens granted to the Agent for the benefit of the Lenders on virtually all the Debtor's assets, including inventory, accounts, deposit accounts, cash, and proceeds.8 The Agent and Lenders perfected their security interests and liens in 2015 by executing, filing, and maintaining UCC-1 financing statements, notices, mortgages, deposit account control agreements, and other authenticated instruments to preserve and police their collateral interests.9 Perfection of the liens and security interests was continuously effective from either 2015 or the date on which the Debtor acquired its interest in the relevant collateral through the January 12, 2018 Petition Date10 and during the entire course of the Debtor's bankruptcy case.11

At all relevant times, Debtor was in the business of purchasing oil on credit from Producers, and re-selling that oil to various "Customers,"12 also on credit.13

The Producers expressly warranted that the oil they sold was "free and clear of all liens."14 Each month, Debtor purchased and took deliveries from multiple producers, and by agreement became obligated to pay the Producers on the 20th day of the month following the purchase.15 Similarly, Debtor re-sold and delivered aggregated oil to multiple Customers in the ordinary course of business, with the Customers payments to Debtor due on the 20th day of the month following the sale.16

As of December 31, 2017, following deterioration of its business, the Debtor ceased purchasing and selling oil,17 with $27.6 million in accounts receivable and $1.19 million in deposit accounts, but only an immaterial amount of oil inventory.18

On January 12, 2018 (the "Petition Date"), the Debtor filed the above-captioned Chapter 11 case.19 As of the Petition Date, the Debtor had not paid the Producers for any oil Debtor had purchased during the month of December 2017.20 Similarly, as of the Petition Date, no Customer had paid for any of the oil purchased from the Debtor during December 2017.21

The Producers have claimed security interests in the Debtor's accounts receivable and deposit accounts, based primarily, if not entirely, upon the automatically-perfected purchase money security interest provisions of Texas Business & Commerce Code § 9.343 ("Tex. UCC 9.343"). In addition, some, but not all, of the Producers filed UCC-1 financing statements in Delaware in January 2018, just prior to the Petition Date.22 The Producers took no other action to perfect or police their alleged security interests, including making no attempt to establish control over Debtor's depositary accounts.

Based on the applicable law and facts as set forth herein and in the Appendix of Facts filed contemporaneously with this Motion, the Agent is entitled to summary judgment that (a) the Agent and Lenders have valid, perfected first-priority liens on the accounts receivable, deposit accounts, and inventory of the Debtor, (b) the Producers have no liens on those assets, or alternatively, even if the Producers had liens, the Agent's and Lenders' liens have priority, (c) the Producers' affirmative defenses are without merit, and (d) the Producers should be denied recovery under their counterclaims.

II.

JURISDICTION AND CORE MATTERS

This Court has subject matter jurisdiction over this proceeding pursuant to 28 U.S.C. § 1334(b) as a proceeding arising in, arising under, or related to the above-captioned chapter 11 bankruptcy case.

This proceeding is a core proceeding within the meaning of 28 U.S.C. §§ 157(b)(2). In the event that this proceeding is determined to be a non-core proceeding, pursuant to 28 U.S.C. § 157(c)(2), the Agent consents to entry of final orders or judgment by the bankruptcy judge, subject to review of such final orders or judgment under 28 U.S.C. § 158.

III.

SUPPORT FOR THIS MOTION

The Agent refers to the following contemporaneously filed documents:

IV.

LEGEND

Capitalized terms not otherwise defined herein are as defined in the Appendix of Facts.

The "Debtor" herein is the above-captioned debtor First River Energy, LLC, which was known as First River Midstream, LLC prior to its name change on September 27, 2016.23

Citations to the Uniform Commercial Code Official Text ("UCC') will be "UCC 0-000." The New York version of the UCC is found at N.Y. U.C.C. Law § 1-101 (McKinney) et. seq. and will be cited as "NY UCC 0-000." The Delaware version of the UCC is found at 6 Del.C. § 1-101 et seq. and will be cited as "Del. UCC 0-000." The Texas version of the UCC is found at Tex. Bus. & Com. Code § 1.101 et. seq. and will be cited as "Tex. UCC 0.000."

The terms "accounts," "deposit accounts," "goods," "inventory," and "proceeds" have the meanings ascribed to them in the UCC. "Accounts" include a right to payment of a monetary obligation, whether or not earned by performance, for property that has been or is to be sold. NY UCC 9-102(a)(2); Del. UCC 9-102(a)(2); Tex. UCC 9.102(a)(2). "Deposit account" includes a demand, time, savings, passbook, or similar account maintained with a bank. NY UCC 9-102(a)(29); Del. UCC 9-102(a)(29); Tex. UCC 9.102(a)(29). Goods" means all things that are movable when a security interest attaches. NY UCC 9-102(a)(44); Del. UCC 9-102(a)(44); Tex. UCC 9.102(a)(44). "Inventory" includes goods, other than farm products, that are held by a person for sale or lease or to be furnished under a contract of service. NY UCC 9-102(a)(48); Del. UCC 9-102(a)(48); Tex. UCC 9.102(a)(48). "Proceeds" include whatever is acquired upon the sale or other disposition of collateral and whatever is collected on, or distributed on account of, collateral or whatever is collected on, or distributed on account of, collateral. NY UCC 9-102(a)(64); Del. UCC 9-102(a)(64); Tex. UCC 9.102(a)(65).

Herein, the term "interest owner" has the meaning ascribed to it under Tex. UCC 9.343(r)(2).

V.

FACTS NOT SUBJECT TO GENUINE DISPUTE

A. The Debtor's Business

The Debtor was in the business of buying and selling domestic crude oil and transporting oil through a combination of trucks or pipeline.24 Typically, the Debtor bought oil from sellers pursuant to terms which included transfer of title by the sellers to Debtor, free and clear of liens pursuant to express waivers provided,25 on delivery to the Debtor and payment on the 20th day of the month after the month in which delivery was made.26 The Debtor typically immediately re-sold and delivered the oil to its own Customers pursuant to terms that included Customer payment on the 20th day of the month after the month in which the delivery was made.27 Thus, both the purchases of oil inventory by the Debtor and the Debtor's re-sale of that inventory to Customers was on credit.28 As of the Petition Date, the Debtor held no significant amounts of oil as inventory,29 but was owed about $27.6 million in accounts receivable by Customers.30

B. The Debtor Grants Liens to the Agent on Behalf of the Lenders and the Agent Perfects the Liens

Beginning in July of 2015, the Debtor's parent company began borrowing sums from the Lenders pursuant to the Credit Agreement.31 Pursuant to the July 23, 2015 Guarantee Agreement, the Debtor guaranteed the Debtor's parent's obligations under the Credit Agreement.32 Approximately $60 million of such borrowings were used to capitalize Debtor and acquire assets and businesses operated by the Debtor.

Pursuant to the July 23, 2015 Security Agreement, the Debtor granted a security interest in Collateral33 to the Agent for the benefit of Lenders to secure the Obligations under the Credit Agreement and the Guarantee Agreement.34 The "Collateral" of the Debtor includes all accounts, all deposit accounts, all inventory, and all other goods, wherever located, in which any Grantor now has or hereafter acquires any right, title or interest, and proceeds.35 The security interests under the Security Agreement granted to the Agent shall be called the "Bank Liens" and the Collateral under the Security Agreement granted to the Agent shall be called the "Bank Collateral." Beginning on July 23, 2015 through the Petition Date and thereafter by order of this Court, the Bank Liens on the Bank Collateral under the Security Agreement were continuously perfected by financing statements, amendments to financing statements, deposit account control agreements, and other authenticated instruments.36

C. Producer Allegations

The Producers allege that, during the Pre-Petition period, the Producers sold oil to the Debtor, which the Debtor re-sold to Customers, and that the Producers were not paid for such oil sales. Producers claim the oil was sold to the Debtor as a "first purchaser" and they are entitled to a lien on the oil and proceeds pursuant to Tex. UCC 9.343.37 The Debtor ceased its purchase and sale of oil operations on or about December 31, 2017, save and except for certain purchases and sales of oil of approximately $20,000 in January 2018 prior to the Petition Date.38

Beginning on January 4, 2018 and ending January 11, 2018, after the oil had been sold by the Debtor, the Producers (except for Viceroy, American Shoreline, Aurora, RADCO, and RHEACO) filed UCC-1 financing statements with the Secretary of State of Delaware.39

The Producers also claim that the January 4, 2018 application of $4.5 million of Debtor's cash in deposit accounts to the Debtor's Obligations under the Loan Documents constituted a conversion of Producers' interest in those deposit accounts. This allegation is presumably also based on the Producers' claims that their claimed liens on deposit accounts have priority under Tex. UCC 9.343.

D. The Petition Date Collateral

As of the Petition Date, among other assets, the Debtor held the following assets, which were all Bank Collateral:

In the Post-Petition period, as of June, 2018, the Debtor has collected all of the outstanding accounts receivable.44

E. The Agent's Secured Claim

Prior to the Petition Date, the Debtor authorized payments to the Agent for application to accrued interest, principal, and expenses in accordance with the Loan Documents, including a principal payment of $4,500,000 on January 4, 2018 deducted from funds over which the Agent held dominion.45 Accordingly, as of the Petition Date, the Agent was owed $13,478,557.92.46 The Agent is oversecured, and as such is entitled to post-petition interest and reasonable fees, costs, and charges (including legal fees and expenses of the Agent and the Lenders) pursuant to 11 U.S.C. § 506(b). Pursuant to the Pay Order,47 on April 10, 2018, the Agent was paid its pre-Petition claim plus certain post-petition interest and charges totaling $14,692,556.85 (subject to disgorgement to the extent that such funds are determined to be subordinate to perfected liens held by producers and royalty interest holders).48 Accordingly, the Agent's claim is at least $14,692,556.85, plus the Agent's and Lenders' attorneys' fees and expenses, the recovery for which is preserved under 11 U.S.C. § 506(b). The Agent's claim is secured by the Bank Collateral, which includes the $27.6 million49 in accounts receivable, the deposit accounts, the inventory, and the proceeds of the foregoing.50

VI.

STANDARDS FOR SUMMARY JUDGMENT

Summary judgment is properly regarded not as a procedural shortcut, but as an integral part of the Federal Rules. Celotex Corp. v. Catrett, 477 U.S. 317, 327 (1986). It secures the just, speedy and inexpensive determination of every action by assessing the proof to see if there is a genuine issue for trial, and isolating and disposing of factually unsupported claims or defenses. See Celotex, 477 U.S. at 327; Professional Managers, Inc. v. Fawer, Brian, Hardy & Zatzkis, 799 F.2d 218, 222-23 (5th Cir. 1986).

Federal Rule of Civil Procedure 56 applies to this adversary proceeding. Fed. R. Bankr. P. 7056. The court "shall grant summary judgment if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a). A party asserting that a fact cannot be disputed must support the assertion by, among other things, citing to particular parts of materials in the record, including depositions, documents, electronically stored information, affidavits or declarations, stipulations, admissions, interrogatory answers, or other materials. See Fed. R. Civ. P. 56(c)(1). In this regard, the Agent submits as summary judgment evidence the items cited in and attached to the accompanying Appendix of Facts. In addition, the Court may also consider for summary judgment purposes materials in the record that are not cited. Fed. R. Civ. P. 56(c)(3).

The "mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment; the requirement is that there be no genuine issue of material fact." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48 (1986). To establish genuineness, the opponent of a summary judgment must "do more than simply show there is some metaphysical doubt as to the material facts." Matsushita Electric Industrial Co. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986). If the evidence submitted by the nonmoving party is merely colorable or is not significantly probative, summary judgment may be granted because, where the record taken as a whole could not lead a rational trier of fact to find for the non-moving party, there is no "genuine" issue for trial. Hawking v. Ford Motor Credit Co., 210 F.3d 540, 545 (5th Cir. 2000).

If the court does not grant all the relief requested by the motion, it may enter an order stating any material fact (including an item of damages or other relief) that is not genuinely in dispute and treating the fact as established in the case. Fed. R. Civ. P. 56(g). Accordingly, to the extent that this motion for summary judgment is not granted in full, the Agent seeks partial summary judgment under Fed. R. Civ. P. 56(g).

VII.

RELEVANT TIME TO DETERMINE VALIDITY, EXTENT AND PRIORITY OF LIENS

Valid liens existing at the time of the commencement of a bankruptcy proceeding are preserved. Isaacs v. Hobbs Tie & Timber Co., 282 U.S. 734, 738, (1931). The secured status of creditors is generally regarded as fixed at the petition date. Matter of Pernie Bailey Drilling Co., Inc., 993 F.2d 67, 69 n.10, n.12 (5th Cir. 1993); see also In re Bond Enterprises, Inc., 54 B.R. 366, 369 (Bankr. D.N.M. 1985)(critical time for determining the respective rights of a debtor and its creditors is the date of the filing of a petition in bankruptcy); In re Argubright, 532 B.R. 888, 893-94 (Bankr. W.D. Tex. 2015)(same); In re Wilkinson, No. 10-62223, 2012 WL 1192780, at *4 (Bankr. N.D.N.Y. Apr. 10, 2012)(same); see also In re SemCrude, L.P., 407 B.R. 112, 137 (Bankr. D. Del. 2009)(analyzing lien priority with respect to the collateral as of the petition date).

As of the Petition Date, the Debtor had approximately $27.6 million in accounts receivable owed by Customers, approximately $1.19 million in cash deposit accounts, and an insignificant amount of oil inventory on hand.51 This is the property that the Agent and Lenders assert is the Bank Collateral and that is the subject of this lien priority dispute among the Agent and the Producers.

I.

MOTION FOR SUMMARY JUDGMENT THAT PRODUCERS HAVE WAIVED ANY LIENS

A. The Conoco Phillips General Provisions Created A Waiver Of Any Producer Lien Rights

Regardless of the UCC lien perfection and priority issues discussed below, the Producers are not entitled to assert a security interest in the oil that they allegedly sold to the Debtor (or any proceeds thereof) because they expressly waived their liens.52 The Texas Supreme Court has held that statutory liens may be contractually waived. Solar Applications Eng., Inc. v. T.A. Operating Corp., 327 S.W.3d 104, 112 (Tex. 2010) (stating that statutory and constitutional lien rights may be waived). Likewise, contractual liens may be waived. First Interstate Bank of Arizona, N.A. v. Interfund Corp., 924 F.2d 588, 595 (5th Cir. 1991) (Under Texas law, waiver is a valid defense to an action to enforce a security interest). In this situation, any purported lien rights the Producers allege under Tex. UCC 9.343 in such oil and proceeds thereof were in fact waived when the Producers entered into the contracts with the Debtor.

Specifically, the agreements53 that governed the Debtor's oil purchases from the Producers generally contain the following language:

The Conoco Phillips General Provisions dated 1993 (the "Conoco Phillips General Provisions") contain a number of provisions, including the following:

(emphasis added).

The courts in the SemCrude litigation considered this exact provision and specifically found that this portion of the Conoco Phillips General Provisions was so clear and unambiguous that it was appropriate to grant summary judgment and rule that, as a matter of law, any purported lien under Tex. UCC 9.343 was waived by producers that entered into contracts that incorporated the Conoco Phillips General Provisions. See New Dominion, LLC v. J. Aron & Co. (In re: SemCrude, L.P.), 2018 WL 481862, at *4 (Bankr. D. Del. Jan. 17, 2018) ("Any right that [the producer] may have had to assert a lien in its oil was waived when the oil was sold under the express warranty embodied in the Conoco General Provisions."); J. Aron & Co. v. SemCrude, L.P. (In re: SemCrude, L.P.), 504 B.R. 39, 60, n.66 (Bankr. Del. 2013) ("[A]ny Producers who sold oil under an express warranty that the oil was free of all liens and encumbrances have effectively waived any statutory security interest in the oil sold.").

In affirming the ruling that the Conoco Phillips General Provisions created a waiver of any statutory lien rights which may exist under Tex. UCC 9.343, the Third Circuit explained why it is necessary for oil to be sold free and clear of any liens and encumbrances:

Arrow Oil & Gas, Inc. v. J. Aron & Co. (In re SemCrude L.P.), 864 F.3d 280, 300-01 (3rd Cir. 2017)(emphasis added).

Given the clear and unambiguous language of the Conoco Phillips General Provisions, there is no genuine issue of fact that the Producers, who incorporated this language in their contracts with the Debtor, waived any statutory liens under Tex. UCC 9.343. The Agent therefore requests that this Court rule as a matter of law that the Producers do not have a lien on the oil that they sold the Debtor and that any claims that the Producers may have in this bankruptcy case are unsecured.

II.

MOTION FOR SUMMARY JUDGMENT THAT THE BANK LIENS HAVE PRIORITY OVER THE ALLEGED PRODUCER LIENS

Assuming arguendo that the Producers did not waive their liens, the Agent's liens have priority over the Producers' liens.

A. Attachment of the Agent's Security Interests to the Bank Collateral

1. There is a Valid Security Agreement Creating a Security Interest in the Bank Collateral

New York law applies to the Loan Documents.56 There is a Security Agreement57 as defined by the New York UCC providing for a security interest in favor of the Agent for the benefit of the Lenders in substantially all of the Debtor's assets.58 The Security Agreement secures performance of an obligation, namely, the Credit Agreement.59 The Security Agreement is enforceable because (1) value was given by the Lenders (approximately $60 million in loans over the course of the relationship, with over $14 million owed as of the Petition Date);60 (2) the Debtor61 has rights62 in the Bank Collateral; and (3) the Debtor has authenticated63 the Security Agreement that provides a description of the Bank Collateral.64 The description of collateral in a security agreement is sufficient if it reasonably identifies the collateral, which includes identification by types of collateral defined by the UCC.65 The Obligations66 that are secured by the Security Agreement are described in the Credit Agreement and associated Loan Documents,67 in the Agent's Proof of Claim,68 and in the cited filings in this bankruptcy case. A proof of claim executed and filed in accordance with the bankruptcy rules constitutes prima facie evidence of the validity and amount of that claim. Fed. R. Bankr. P. 3001(f). A proof of claim filed under 11 U.S.C. § 501 is deemed allowed, unless a party in interest objects. 11 U.S.C. § 502(a). No objection has been timely filed to the Agent's Proof of Claim. Other than in this adversary proceeding, no Challenge (as described in the Final Cash Collateral Order69) to the Agent's claim has been timely filed, and the Challenge Period Termination Date under the Final Cash Collateral Order has passed.70 Even the Challenges raised in this adversary proceeding by the Producers do not challenge the validity or amount of the Agent's claim, and the Producers make no specific Challenge to the validity, or perfection of the Agent's liens, only to the priority of the Agent's liens.71

2. The Bank Collateral includes Goods, Inventory, Accounts, Proceeds, and Deposit Accounts

The Bank Collateral includes goods.72 "Goods" means all things that are movable when a security interest attaches.73 Oil, being movable, fits the definition of goods. See also MBank Abilene, N.A. v. Westwood Energy, Inc., 723 S.W.2d 246, 253 (Tex. App. 1986)(extracted oil are goods).

The Bank Collateral also includes inventory.74 "Inventory" includes goods, other than farm products, that are held by a person for sale or lease or to be furnished under a contract of service.75 The Debtor held the oil for re-sale to its Customers, so inventory was created to which the Bank Liens attached.

The Bank Collateral also includes accounts.76 "Accounts" include a right to payment of a monetary obligation, whether or not earned by performance, for property that has been or is to be sold.77

The Bank Collateral also includes proceeds.78 "Proceeds" include whatever is acquired upon the sale or other disposition of collateral and whatever is collected on, or distributed on account of, collateral.79 In addition, a security interest in collateral automatically attaches to proceeds.80 Accordingly, the $27.6 million in Customer accounts81 as of the Petition Date are both the Bank Collateral and the proceeds of the Bank Collateral.

The Bank Collateral and the proceeds of the Bank Collateral also includes deposit accounts.82 "Deposit account" includes a demand, time, savings, passbook, or similar account maintained with a bank.83

Thus, the security interests of the Agent continued in the Bank Collateral in all of its forms and remained so as of the Petition Date. The Bank Collateral is identifiable and traceable as described in the Debtor's Schedules and in the Pay Order.

B. Perfection and Priority of the Agent's Security Interests in the Bank Collateral

1. Apply UCC 9-301 To Determine The Applicable Law Of Perfection And Priority

As shown below, the state conflicts of law rules should be used, and the specific conflicts of law rule used by the states is Restatement (Second) of Conflicts of Laws § 6(1), requires the application of UCC 9-301, which is the same in Delaware as in Texas. Under UCC 9-301, Delaware law applies to perfection and priority of the Bank Liens vis a vis the alleged Producer liens. In re Diabetes Am., Inc., 2012 WL 6694074, at *4-5 (Bankr. S.D. Tex. Dec. 21, 2012).

Both Delaware84 and Texas use the Restatement (Second) Conflict of Laws for conflicts of laws. In re SemCrude, L.P., 407 B.R. 112, 134 (Bankr. D. Del. 2009) (in resolving choice of law questions, Delaware courts apply the Restatement (Second) of the Law Conflict of Laws, citing Travelers Indem. Co. v. Lake, 594 A.2d 38, 46-47 (Del. 1991)); Reddy Ice Corp. v. Travelers Lloyds Ins. Co., 145 S.W.3d 337, 340 (Tex. App. 2004)("absent a statutory directive" Texas courts must look at most significant relationship, citing Restatement (Second) of Conflicts of Laws); Maxus Exploration Co. v. Moran Bros., Inc., 817 S.W.2d 50, 53 (Tex. 1991)(citing Restatement (Second) of Conflicts of Laws).

Restatement (Second) Conflict of Laws § 6(1) provides: "[a] court, subject to constitutional restrictions, will follow a statutory directive of its own state on choice of law. An analysis of "factors relevant to the choice of the applicable rule of law" is only applied "[w]hen there is no such directive." Restatement (Second) Conflict of Laws § 6(2).

The Official Comment to § 6(1) states "[a]n example of a statute directed to choice of law is the Uniform Commercial Code." Official Comment to Restatement (Second) of Conflicts of Laws § 6(1). The statutory directive on choice of law is UCC-9-301, which is the same in Delaware as in Texas. SemCrude, 407 B.R. at 134 (9-301 is "is precisely such a statutory directive"); see also Woods-Tucker Leasing Corp. of Georgia v. Hutcheson-Ingram Dev. Co., 642 F.2d 744, 748-49 (5th Cir. 1981)(we find that Texas, by its adoption of the UCC, has provided a choice of law rule). In fact, the statutory directive for the choice of law under UCC 9-301 is so strong that parties cannot agree otherwise. See Tex. UCC 1.301(b) and Del. UCC 1-301(c)(7)(law governing perfection, the effect of perfection or nonperfection, and the priority of security interests and agricultural liens cannot be varied by agreement).

2. Perfection Is Governed By The Local Law Of The Jurisdiction Where The Debtor Is "Located," Which Is Its State Of Organization (Delaware).

Both Delaware and Texas choice of law rules for perfection of the security interests on all collateral (other than deposit accounts) are found in Del. UCC 9-301(1) and Tex. UCC 9.301(1), which are the same. Each state's legislature further provided that while a debtor is located in a jurisdiction, the local law of that jurisdiction governs perfection85 and that a registered organization that is organized under the law of a state is located86 in that state.87 The Debtor is a limited liability company organized under the laws of Delaware.88 Accordingly, as mandated by the legislatures of both Texas and Delaware, the Delaware laws of perfection apply. In re Diabetes Am., Inc., 2012 WL 6694074, at *4-5 (Bankr. S.D. Tex. Dec. 21, 2012)(Delaware law is the law governing perfection where the debtor is a Delaware entity); Del. UCC 9-301(1); Tex. UCC 9.301(1); Del. UCC 9-307(e); Tex. UCC 9.307(e).

C. The Agent's Liens Were Perfected; the Producers' Liens Were Not

1. Must Perfect Security Interest In Inventory, Accounts Receivable, And Their Proceeds With A Central Delaware Filing

Under Delaware law, the only way to perfect a security interest in the collateral consisting of inventory, accounts receivable, and their proceeds is to file a financing statement with the Delaware Department of State. SemCrude, 407 B.R. at 136; Del. UCC 9-308(a) (security interest is perfected if it has attached and the applicable requirements for perfection in Del. UCC 9-301 through 9-316 have been met); Del. UCC 9-310(a)(with inapplicable exceptions, financing statements must be filed to perfect all security interests); Del. UCC 9-501(a)(2)(file financing statements with the Secretary of State);89 see also In re Diabetes Am., Inc., 2012 WL 6694074, at *5 (Bankr. S.D. Tex. Dec. 21, 2012)(for perfection in Delaware, creditor was required to file a financing statement with the Delaware Secretary of State's office, citing Del. UCC 9-501(a)).

Accordingly, the Agent's security interest in inventory, accounts receivable, and their proceeds was perfected by the filing of financing statements and amendments with the Delaware Department of State UCC Filing Section.90 The filing of the Agent's financing statements was authorized by the Debtor because the Bank Collateral was described in the Security Agreement.91 Del. UCC 9-509(a)(1), (b)(1).

2. The Agent's Security Interest In Proceeds Is Automatically Perfected

In addition, a perfected security interest in collateral is automatically perfected as to proceeds. Del. UCC 9-315(c). Accordingly, the Agent's security interest in the proceeds of inventory and accounts receivable is automatically perfected.

3. The Agent's Liens on Deposit Accounts Are Perfected by Control

As discussed below, the Agent's liens on deposit accounts are perfected by control.

4. Automatic Perfection Under Tex. UCC 9.343 Does Not Apply

In contrast, the automatic perfection provisions of Tex. UCC 9.343 do not apply because Delaware law governs the issue of perfection. In re Diabetes Am., Inc., 2012 WL 6694074, at *4 (Bankr. S.D. Tex. Dec. 21, 2012)(even if UCC 9-301(3)(C) governs the effect of perfection on non-possessory security interests in goods, the law governing perfection (here, Delaware law) remains unchanged). "Instead, oil and gas producers seeking to perfect a security interest under Delaware law are left to do so via Article 9's traditional methods of perfection." SemCrude, 407 B.R. at 132.

5. Producers Have No Valid Perfection of Their Claimed Liens

The Producers do not have perfected liens in any assets of the Debtor. Producers Viceroy, Aurora, American Shoreline, RADCO, and RHEACO did not file financing statements in Delaware,92 so their claimed liens are unperfected in any event. Any financing statements filed in Texas would be ineffective for perfection. In re Diabetes Am., Inc., 2012 WL 6694074, at *5 (Bankr. S.D. Tex. Dec. 21, 2012)(creditor filed a financing statement in Texas who should have filed in Delaware was unperfected).

With respect to the remaining Producers who filed financing statements in Delaware in the few days before the bankruptcy,93 the Debtor did not authorize the filing of any financing statements by an authenticated record, such as a security agreement describing the collateral. Del. UCC 9.509(a)(1), (b)(1). Not only do the Producers lack affirmative authorization by the Debtor, but such filings were in breach of the Producers' express warranty waiving any liens with respect to oil sold to Debtor.94 Accordingly, the Producer financing statements are ineffective to perfect any claimed liens. Del. UCC 9.510(a)(unauthorized financing statement is ineffective).

As to the deposit accounts, as discussed below, the Producers' claimed liens on deposit accounts are unperfected because the Producers never established control over such deposit accounts.

D. The Agent's Liens Have Priority Over Any Unperfected or Subsequently Perfected Security Interests in the Same Collateral Under Applicable Law

Both Delaware and Texas have adopted identical choice of law rules designating the law of the location of the Debtor to govern priority of security interests.95 The pertinent exceptions are as follows: while goods are located in a jurisdiction, the local law of that jurisdiction governs priority of a nonpossessory security interest in such goods96 and the local law of a bank's jurisdiction governs the priority of a security interest in a deposit account maintained with that bank.97

The Bank Liens on the Bank Collateral, including the proceeds of the Bank Collateral, have priority over any liens of conflicting security interests in the same collateral that are either unperfected or were perfected after the perfection of the Bank Liens under the "first-to-file-or-perfect" rule. Del. UCC 9-322(a)(1); Tex. UCC 9.322(a)(1). None of the Producers filed any financing statements with respect to security interests against the Debtor prior in time to the financing statements filed by Agent with respect to the Bank Collateral.98 Viceroy, Aurora, American Shoreline, RADCO, and RHEACO did not file any financing statements in Delaware. So under the priority rules of Delaware or Texas, the attempted perfection by the Producers through their January 2018 financing statements, more than 2 ½ years after the Agent filed its financing statements, comes too late to defeat the priority of the Agent's liens.

E. The Agent's Security Interests Have Priority Over The Producers' Claimed 9.343 Security Interests

1. Even If Tex. UCC 9.343 Priority Rules Apply, The Agent's Liens Still Have Priority

By its terms, Tex. UCC 9.343 provides for a security interest in favor of interest owners, as secured parties, to secure the obligations of the first purchaser of oil and gas production, as debtor, to pay the purchase price. Tex. UCC 9.343(a). Under Tex. UCC 9.343, the security interest exists in oil and gas production, and also in the identifiable proceeds of that production owned by, received by, or due to the first purchaser. Tex. UCC 9.343(c). Assuming arguendo that the Producers can meet their burden to establish all the elements of a Tex. UCC 9.343 security interest, the Agent's perfected security interests in the Debtor's accounts receivable, proceeds, and deposit accounts still has priority of the Producers' liens by virtue of the limitations of Tex. UCC 9.343(f).

2. Tex. UCC 9.343(F)(1) Incorporates The PMSI Priority Rules Of Tex. UCC 9.324

Tex. UCC 9.343(f)(1) provides that the security interests and all liens created by Tex. UCC 9.343 have a purchase money security interest ("PMSI") priority, limited by the PMSI provisions of Tex. UCC 9.324:

Tex. UCC 9.343(f)(1) specifically refers to the PMSI provisions of Tex. UCC 9.324 to determine the priority of a Tex. UCC 9.343 lien. UCC 9.324 is essentially99 the same in Texas as in Delaware.

3. The Producers Have A Lower Priority In Inventory and Identifiable Cash Proceeds Because Of Lack Of Perfection And Late Perfection

The oil held for re-sale100 by the Debtor was inventory. Accordingly, under Tex. UCC 9.324, a PMSI in inventory and in the "identifiable cash proceeds" of such inventory has priority over a conflicting security interest in the same inventory and its identifiable cash proceeds only under certain circumstances, none of which are applicable in this case. Tex. UCC 9.324(b).

First, the PMSI in inventory must be perfected. Tex. UCC 9.324(b)("a perfected purchase-money security interest in inventory has priority over a conflicting security interest in the same inventory"). As shown above, the PMSI cannot be perfected by the automatic perfection of Tex. UCC 9.343(b) because Delaware law applies to perfection of inventory, which required a financing statement to be filed with the Delaware Department of State. With respect to the financing statements some Producers filed with the Delaware Department of State, there is no perfection because those financing statements were not authorized by the Debtor. Del. UCC 9.509(a)(1), (b)(1); Del. UCC 9.510(a).

Second, assuming arguendo that the Producers' Delaware financing statements perfected their liens on the inventory, the perfection comes too late under Tex. UCC 9.324(b)(1) to give the Producers priority over the Agent's security interests and liens. A PMSI must be perfected when the debtor receives possession of the inventory. Tex. UCC 9.324(b)(1)("the purchase-money security interest is perfected when the debtor receives possession of the inventory"); see also UCC 9-324 Official Comment 4 ("[t]o achieve priority, the purchase-money security interest must be perfected when the debtor receives possession of the inventory"). The Debtor received the inventory no later than December 31, 2017.101 Each of the financing statements were filed in January of 2018102 after the Debtor received the inventory.103

Third, even if the PMSI party can meet the prerequisites of a PMSI on inventory, the PMSI priority is limited to the inventory itself and "identifiable cash proceeds." Tex. UCC 9.324(b)(PMSI "also has priority in identifiable cash proceeds of the inventory to the extent the identifiable cash proceeds are received on or before the delivery of the inventory to a buyer"). The Debtor held an insignificant amount of inventory on the Petition Date. As to the identifiable cash proceeds of such inventory, there is no PMSI priority. To have identifiable cash proceeds, the proceeds must be "cash proceeds," defined as "proceeds that are money, checks, deposit accounts, or the like"104 and must have been received by the Debtor before Debtor delivered the oil to its Customer.105 It is undisputed that the sales of oil from the Producers to the Debtor and from the Debtor to the Customers were on open account, and no cash proceeds were received by anyone on or before delivery to a buyer.106 Thus, there were no "identifiable cash proceeds" received by the Debtor on or before delivery of any inventory to a buyer.

4. The Producers Have A Lower Priority In Accounts Because There Is No PMSI Priority Over Accounts

Even if the Producers are deemed to have a PMSI via Tex. UCC 9.343(f)(1), the Producers' PMSI priority does not extend to the accounts, namely, the $27.6 million in accounts receivable107 from Customers. First, "accounts" are not "cash proceeds" because they are not "proceeds that are money, checks, deposit accounts, or the like," so they are not "identifiable cash proceeds.108 UCC 9-324 Official Comment 9 Example 1 (accounts are not cash proceeds). Second, accounts resulting from the sale of inventory are specifically excluded from the protections of a PMSI. MBank Alamo Nat. Ass'n v. Raytheon Co., 886 F.2d 1449, 1453 (5th Cir. 1989)(interpreting the predecessor to 9.324); see also UCC 9-324 Official Comment 8 ("the purchase-money priority in inventory does not carry over into proceeds consisting of accounts"). UCC 9-324 Official Comment 9 Example 1 states this concisely:

As stated in the above Example 1, with respect to accounts, "Rather, the first-to-file-or-perfect rule of Section 9-322(a)(1) applies." The Agent's liens, being filed and perfected first (2 ½ years prior to the filing by the Producers), have priority under Tex. UCC 9.322 (a)(1) and Del UCC 9-322(a)(1).

5. Tex. UCC 9.343 Does Not Necessarily Displace The Limits On PMSI Priority

Tex. UCC 9.343(p) provides that "the rights of any person claiming under a security interest or lien created by this section are governed by the other provisions of [Texas' version of Article 9] except to the extent that this section necessarily displaces those provisions." The SemCrude Court addressed and rejected the argument of producer lien claimants that Tex. UCC 9.343 "necessarily displaces" the limits on a PMSI priority under Tex. UCC 9.324. SemCrude, 407 B.R. at 128. The SemCrude Court distinguished between the lien granted by Tex. UCC 9.343 generally and the priority of that lien as limited by Tex. UCC 9.343(f)(1). The SemCrude court noted that:

Relying on the Official Comment to Tex. UCC 9.343, the SemCrude court stated:

Accordingly, by the Texas Legislature's express reference to Tex. UCC 9.324, Tex. UCC 9.343 could not have been intended to displace Tex. UCC 9.324.

F. The Agent Has First Lien on Deposit Accounts

The Debtor maintained deposit accounts at JPMorgan Chase Bank.109 For the reasons stated below, the Agent at all times had a first priority lien on the Debtor's deposit accounts.

1. Choice of Law for Perfection and Priority: New York

Each of New York, Texas and Delaware have adopted an identical choice of law rule (at NY UCC 9-304, Tex. UCC 9-304 and Del. UCC 9-304) selecting the "local law of a bank's jurisdiction" to govern perfection or non-perfection, and the priority of a security interest in a deposit account maintained with that bank. Each state similarly identified the "bank's jurisdiction" as the choice of law of a particular jurisdiction in the parties' agreement. Here, New York law would apply to perfection and priority with respect to deposit accounts.110

2. Perfection of Deposit Accounts by Control

The Agent's liens on the Debtor's deposit accounts are perfected as proceeds of its collateral, but also perfected as original collateral by "control" through a deposit account control agreement. A security interest in deposit accounts as original collateral may be perfected only by control of the collateral. NY UCC 9-312(b)(1).111 Control of a deposit account may be accomplished under a deposit account control agreement, which is an authenticated record that the depositary bank will comply with instructions originated by the secured party directing disposition of the funds. See NY UCC 9-314(a);112 NY UCC 9-104(a)(2).113

There is a Blocked Account Control Agreement114 among the Debtor, JPMorgan Chase Bank, and Deutsche Bank dated July 23, 2015 (as amended pursuant to that certain Amendment No. 1 to Blocked Account Control Agreement115 between Debtor, JPMorgan Chase Bank, and Deutsche Bank dated January 31, 2017, the "Blocked Account Agreement") that establishes control in order to perfect the Agent's liens, over the Debtor's bank accounts at these banks with the Collateral Agent, as required by the Uniform Commercial Code. The Blocked Account Agreement is governed by New York law.116

With respect to the deposit accounts at JPMorgan Chase Bank, the Agent had control, and therefore perfection of its liens, via the Blocked Account Control Agreement, as amended. NY UCC 9-314(a); NY UCC 9-104(a)(2).

It is undisputed that Producers did not enter into any agreement with the Debtor's depositary bank, or otherwise establish control over the Debtor's deposit accounts. Nor did the Producers otherwise attempt to perfect a lien on any of Debtor's deposit accounts under New York law or otherwise.

As a result, the Producers held no security interest in, much less held a security interest with priority over the Bank Liens, in the cash in Debtor's deposit accounts any time. The Agent prevails under the "first to file or perfect" rule.

III.

"NO EVIDENCE" MOTIONS FOR SUMMARY JUDGMENT

In a summary judgment proceeding, where the non-movant bears the burden of proof at trial, the movant may merely point to an absence of evidence, thus shifting to the non-movant the burden of demonstrating by competent summary judgment proof that there is an issue of material fact warranting trial. Lindsey v. Sears Roebuck & Co., 16 F.3d 616, 618 (5th Cir. 1994); see also Krowell v. Univ. of Incarnate Word, No. 5:15-CV-638-RP, 2017 WL 1052613, at *2 (W.D. Tex. Mar. 20, 2017)(moving party may also meet its burden by simply pointing to an absence of evidence to support the nonmoving party's case). The Producers have the burden to establish their claims and liens against the Bank Collateral, their affirmative defenses, and claim for conversion. Kenneth D. Eichner, P.C. v. Dominguez, No. 14-16-00192-CV, 2017 WL 2561334, at *4 (Tex. App. June 13, 2017). However, there is an absence of evidence in the record to support any of their claims and defenses. Accordingly, the Agent hereby moves for summary judgment (a) that the Producers have no liens on the Bank Collateral in that there is an absence of proof of all of the elements establishing the extent, validity, and priority of Producers' alleged liens on any of the Bank Collateral under Tex. UCC 9.343 or otherwise, (b) that there is an absence of proof of all the elements of the Producers' affirmative defenses of estoppel, unclean hands, and waiver, and (b) that there is an absence of proof of all the elements establishing a cause of action for conversion arising out of the Agent's assertion of dominion over the Debtor's cash in deposit accounts.

A. No Facts Exist to Support the Affirmative Defenses of Estoppel, Unclean Hands or Waiver Asserted Against the Agent

Certain of the Producers have attempted to allege affirmative defenses of estoppel, unclean hands, and waiver with respect to the Agent's claims. Dkt. 70 at ¶¶ 63, 64, 65. The Producers' pleading merely lists the defenses without stating any facts in support and accordingly, as plead, should be stricken under Fed. R. Civ. P. 12(f) (as adopted by Fed. R. Bankr. P. 7012(b)). Moreover, because affirmative defenses are subject to the same pleading requirements as a complaint, the Producers must plead enough facts to state a claim to relief that is plausible on its face. Woodfield v. Bowman, 193 F.3d 354, 362 (5th Cir. 1999); Bell Atl. Corp. v. Twombly, 550 U.S. 544, 547 (2007). A pleading that offers labels and conclusions or a formulaic recitation of the elements of a cause of action will not do, nor does a complaint suffice if it tenders naked assertions devoid of further factual enhancement. Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009).

Here, the Producers have not identified the elements of the defenses and have not pled any facts in support of those elements. Without any pleadings or factual support for the defenses, a "no evidence" summary judgment in favor of the Agent is appropriate.

B. Producers Claim for Conversion Fails as a Matter of Law

1. The Counterclaim Producers Fail to State a Claim for Conversion

The Amended Answer and Counterclaim filed by certain Producers ("Counterclaim Producers")117 add counterclaims for conversion of money on deposit in Debtor's bank accounts, based on allegations that (a) the Counterclaim Producers, under either Tex. UCC 9.343 or Oklahoma Statutes §§52-549 et seq., have a "first priority perfected security interest, as secured parties, to secure the obligations of Debtor as the `first purchaser' of oil and gas production, as debtor to pay the purchase price." Adv. 18-05015 Dkt. 70 at ¶74; and (b) "In December 2017 and/or January 2018, Deutsche and Lenders (1) exercised cash dominion over FRE and (2) swept substantially all of the funds held by the Debtor, including the amounts that represented proceeds from FRE's sale of oil, gas and condensate, on which the Defendants held first and priority liens." Adv. 18-05015 Dkt. 70 at ¶75. The Counterclaim Producers further add a counterclaim for conversion of money on deposit in Debtor's bank accounts, based on allegations that (a) certain Producers, under either Tex. UCC 9.343 or Oklahoma Statutes §§52-549 et seq., have a "first priority perfected security interest, as secured parties, to secure the obligations of FRE as the `first purchaser' of oil and gas production, as debtor to pay the purchase price." Adv. 18-05015 Dkt. 70 at ¶74; and (b) "In December 2017 and/or January 2018, Deutsche and Lenders (1) exercised cash dominion over FRE and (2) swept substantially all of the funds held by the Debtor, including the amounts that represented proceeds from FRE's sale of oil, gas and condensate, on which the Defendants held first and priority liens." Adv. 18-05015 Dkt. 70 at ¶75. The Counterclaim Producers further allege:

Based on those allegations, the Counterclaim Producers seek actual and exemplary damages for conversion. Adv. 18-05015 Dkt. 70 at ¶¶ 85(b). Such allegations, however, fail to state a claim for conversion under Texas law and fail to meet the pleading standards of Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009); and Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007).

Under Texas law,118 a claim for conversion is defined as "the wrongful exercise of dominion and control over another's property in denial of or inconsistent with his rights." Bandy v. First State Bank, 835 S.W.2d 609, 622 (Tex. 1992) (quoting Tripp Village Joint Venture v. MBank Lincoln Centre, N.A., 774 S.W.2d 746, 750 (Tex. App.-Dallas 1989, writ denied)). A conversion claim has four essential elements: (i) the plaintiff owned, possessed, or had the right to possess property; (ii) the defendant unlawfully and without authorization assumed and exercised control over the property to the exclusion of, or inconsistent with, the plaintiff's rights as an owner; (iii) the plaintiff demanded return of the property; and (iv) the defendant refused to return the property. Grand Champion Film Production, L.L.C. v. Cinemark USA, Inc., 257 S.W.3d 478, 485 (Tex. App.-Dallas 2008, no pet.).

To satisfy the first element, claimants — such as the Counterclaim Producers — who did not actually own or possess the allegedly converted property must show a "right of immediate possession," else their claim for conversion necessarily fails. U.S. v. Boardwalk Motor Sports, Ltd., 692 F.3d 378, 381 (5th Cir. 2012) (applying Texas law) (emphasis added). This requirement is strictly enforced. Id. at 382. For example, in Boardwalk Motor Sports, the Fifth Circuit held that even a valid lien did not endow the plaintiff with the requisite degree of ownership because the lien was not self-effectuating and did not provide the plaintiff with "an immediate right of possession." Id. at 383. Here, the Counterclaim Producers claim their alleged liens solely under Tex. UCC 9.343 or Oklahoma Statutes §§52-549 et seq., however neither statute (even if applicable, which Agent denies) is self-effectuating and neither purports to provide the Counterclaim Producers with an immediate right of possession.

Moreover, claims for conversion of money under Texas law must meet certain requirements in addition to those set forth above. Boardwalk Motor Sports, 692 F.3d at 381. In particular:

Id.; see also Entm't Merch. Tech., L.L.C. v. Houchin, 720 F.Supp.2d 792, 799 (N.D. Tex. 2010) (applying Texas law). For this reason, Texas courts traditionally have denied conversion claims aimed at banks that took possession of deposits. See Houston Nat. Bank v. Biber, 613 S.W.2d 771 (Tex. App.-Houston [14th Dist.] 1981, writ ref'd n.r.e.) ("A suit for conversion will not lie where a debtor-creditor relationship is created by deposit of a check to the depositor's account, because when deposited the money becomes the property of the bank."); Smith v. Burns, 107 S.W.2d 397 (Tex. App.-Eastland 1937).

The property alleged to have been converted is money in deposit accounts. The Counterclaim Producers have not, and cannot, allege that money (1) was delivered to the deposit accounts for safe keeping; (2) was intended to be kept segregated; (3) is substantially in the form in which it is received or an intact fund; and (4) was not the subject of a title claim by the keeper.

Moreover, the Counterclaim Producers have not, and cannot, allege that they owned, possessed, or had the immediate right to possess the money in deposit accounts. While the Counterclaim Producers claim liens on "oil" pursuant to Tex. UCC §9.343 and/or Oklahoma Statutes §52-549, they do not allege that they have liens on the money in deposit accounts, and they do not allege that the statutes that would entitle them to a lien on such money in deposit accounts, much less the right to "immediately possess" the money in deposit accounts. The Counterclaim Producers do not, and cannot, allege that the Agent "unlawfully and without authorization assumed and exercised control over the property." In fact, certain Producers allege that the Agent held a "second lien position" on the money in deposit accounts; although the Agent actually has the first lien position, the Counterclaim Producers' admission of the Agent's lien on the deposit accounts precludes any finding that the Agent acted unlawfully or without authorization.

The Counterclaim Producers also do not, and cannot, allege that they demanded return of the money in deposit accounts or that the Agent refused to return the money in deposit accounts.119

Thus the Counterclaim Producers have not only failed to plead a plausible claim for conversion, their admitted absolute reliance on Tex. UCC 9.343 and Oklahoma Statutes §§52-549 et seq., conclusively establishes that a claim for conversion is not available to them under Texas law.

Finally, to support their claim for exemplary damages, the Counterclaim Producers allege that the Agent acted "with specific intent to cause substantial injury or harm to" the Counterclaim Producers. This is a conclusory allegation with no supporting facts and it wholly fails to meet the standards of Twombly and Iqbal.

For the foregoing reasons, the Counterclaim Producers counterclaim for conversion should be dismissed on the merits for failure to state a claim.

Based on the foregoing (a) Motion For Summary Judgment That Producers Have Waived Any Liens, (b) the Motion For Summary Judgment That The Bank Liens Have Priority Over The Alleged Producer Liens, the Agent had a superior right to the deposit accounts that were allegedly converted. There can be no conversion when one takes only what one is entitled to receive, and a defendant with a superior right to the property cannot be guilty of conversion. Enduro Oil Co. v. Par. & Ellison, 834 S.W.2d 547, 549 (Tex. App. 1992), writ denied (Nov. 18, 1992). The Agent had the superior right to the deposit accounts that are the subject of the conversion claim because the Agent has the prior lien on those deposit accounts and the Producers had no lien on those deposit accounts, and no perfected liens on the deposit accounts if a producer lien existed.

IV.

PRAYER

WHEREFORE, PREMISES CONSIDERED, the Agent prays that the Court enter the proposed Order Granting Plaintiff Agent's Motion For Summary Judgment submitted herewith; alternatively, that the Court grant partial summary judgment, and for such other and further relief as the Court deems just.

ORDER GRANTING PLAINTIFF'S MOTION FOR SUMMARY JUDGMENT AND ALTERNATIVE MOTION FOR PARTIAL SUMMARY JUDGMENT

This Court has considered the Plaintiff's Motion for Summary Judgment and Alternative Motion for Partial Summary Judgment (the "Motion"), and finds that that there is no genuine dispute as to any material fact and that Plaintiff is entitled to judgment as a matter of law for the reasons stated in the Motion.

This Court will set a hearing in the issue of recovery of attorneys' fees in connection with this matter.

ORDER GRANTING, IN PART, AND DENYING, IN PART, AGENT'S MOTION FOR SUMMARY JUDGMENT AND ALTERNATIVE MOTION FOR PARTIAL SUMMARY JUDGMENT (ECF NO. 89)

Came on for consideration Deutsche Bank Trust Company Americas, Agent's Motion for Summary Judgment and Alternative Motion for Partial Summary Judgment (ECF No. 89) ("Motion for Summary Judgment"), Agent's Appendix of Facts in Support of Motion for Summary Judgment and Agent's Supplement to: Motion for Summary Judgment and Alternative Motion for Partial Summary Judgment (ECF Nos. 90, 96), RADCO Operations, LP and RHEACO, LTD.'s Response to Agent's Motion for Summary Judgment and Alternative Motion for Partial Summary Judgment (ECF No. 103), Producer Group's Response to Agent's Motion for Partial Summary Judgment or Alternatively, Motion for Partial Summary Judgment (ECF No. 105), and Agent's Amended Reply to: (1) RADCO Operations, LP and RHEACO, LTD.'s Response to Motion for Summary Judgment and Alternative Motion for Partial Summary Judgment; and (2) Producer Group's Response to Motion for Partial Summary Judgment and Alternative Motion for Partial Summary Judgment (ECF No. 110).

Upon consideration thereof, the Court finds that Agent's Motion for Summary Judgment and Alternative Motion for Partial Summary Judgment (ECF No. 89) is GRANTED, IN PART and DENIED, IN PART as follows:

IT IS ORDERED that Agent has a valid, perfected security interest on First River Energy, LLC's ("Debtor") goods, inventory, accounts, and proceeds that has priority over liens alleged by Texas Producers;

It is FURTHER ORDERED that Agent has a valid, perfected, first-priority security interest in Debtor's deposit accounts at JPMorgan Chase Bank, N.A. located in the state of New York;

It is FURTHER ORDERED that, to the extent Oklahoma Producers can produce evidence demonstrating extent and amount of sums owed by Debtor for its pre-petition purchase of oil and gas, Oklahoma Producers have a first-priority, automatically arising statutory lien under Okla. Stat. Ann. tit. 52, § 549.1 et seq.;

It is FURTHER ORDERED that the Court strikes Producers' affirmative defenses of waiver, estoppel, and unclean hands;

It is FURTHER ORDERED that Texas Producers' counterclaim for conversion fails as a matter of law and is therefore DISMISSED;

It is FURTHER ORDERED that Oklahoma Producers may replead their counterclaim for conversion within twenty-one (21) days from the date of entry of this Order; and

All other relief not specifically granted herein is DENIED.

NOTICE OF APPEAL

Defendants U.S. Energy Development Corporation, Ageron Energy, LLC, Petroedge Energy IV, LLC, Teal Natural Resources, LLC, Crimson Energy Partners IV, LLC, Viceroy Petroleum LP, RLU Operating, LLC, Dewbre Petroleum Corporation, Jerry C. Dewbre, Trustee, American Shoreline, Inc., Texpata Pipeline Company, Aurora Resources Corporation, AWP Operating Co., Texron Operating LLC, Energy Reserves Group, LLC, Magnum Producing, LP, Magnum Engineering Company, Magnum Operating, LLC, Rock Resources, Inc. and Killam Oil Co., Ltd. (collectively "Appellants") file this Notice of Appeal pursuant to 28 U.S.C. § 158(a) to the United States District Court for the Western District of Texas, San Antonio Division, from the following order of the Bankruptcy Court:

Names of Appellants:

U.S. Energy Development Corporation, Ageron Energy, LLC, Petroedge Energy IV, LLC, Teal Natural Resources, LLC, Crimson Energy Partners IV, LLC, Viceroy Petroleum LP, RLU Operating, LLC, Dewbre Petroleum Corporation, Jerry C. Dewbre, Trustee, American Shoreline, Inc., Texpata Pipeline Company, Aurora Resources Corporation, AWP Operating Co., Texron Operating LLC, Energy Reserves Group, LLC, Magnum Producing, LP, Magnum Engineering Company, Magnum Operating, LLC, Rock Resources, Inc. and Killam Oil Co., Ltd.

Position in Adversary Proceeding:

Defendants/Counter-Plaintiffs.

Order Appealed from and Date:

Order Granting in Part and Denying in Part Agent's Motion for Summary Judgment and Alternative Motion for Partial Summary Judgment [Dkt. 113] entered March 7, 2019, a copy of which is attached as Exhibit A.

The parties to the appeal, and their counsel:

EXHIBIT A

IT IS HEREBY ADJUDGED and DECREED that the below described is SO ORDERED.

Dated: March 07, 2019

ORDER GRANTING, IN PART, AND DENYING, IN PART, AGENT'S MOTION FOR SUMMARY JUDGMENT AND ALTERNATIVE MOTION FOR PARTIAL SUMMARY JUDGMENT (ECF NO. 89)

Came on for consideration Deutsche Bank Trust Company Americas, Agent's Motion for Summary Judgment and Alternative Motion for Partial Summary Judgment (ECF No. 89) ("Motion for Summary Judgment"), Agent's Appendix of Facts in Support of Motion for Summary Judgment and Agent's Supplement to: Motion for Summary Judgment and Alternative Motion for Partial Summary Judgment (ECF Nos. 90, 96), RADCO Operations, LP and RHEACO, LTD.'s Response to Agent's Motion for Summary Judgment and Alternative Motion for Partial Summary Judgment (ECF No. 103), Producer Group's Response to Agent's Motion for Partial Summary Judgment or Alternatively, Motion for Partial Summary Judgment (ECF No. 105), and Agent's Amended Reply to: (1) RADCO Operations, LP and RHEACO, LTD.'s Response to Motion for Summary Judgment and Alternative Motion for Partial Summary Judgment; and (2) Producer Group's Response to Motion for Partial Summary Judgment and Alternative Motion for Partial Summary Judgment (ECF No. 110).

Upon consideration thereof, the Court finds that Agent's Motion for Summary Judgment and Alternative Motion for Partial Summary Judgment (ECF No. 89) is GRANTED, IN PART and DENIED, IN PART as follows:

IT IS ORDERED that Agent has a valid, perfected security interest on First River Energy, LLC's ("Debtor") goods, inventory, accounts, and proceeds that has priority over liens alleged by Texas Producers;

It is FURTHER ORDERED that Agent has a valid, perfected, first-priority security interest in Debtor's deposit accounts at JPMorgan Chase Bank, N.A. located in the state of New York;

It is FURTHER ORDERED that, to the extent Oklahoma Producers can produce evidence demonstrating extent and amount of sums owed by Debtor for its pre-petition purchase of oil and gas, Oklahoma Producers have a first-priority, automatically arising statutory lien under Okla. Stat. Ann. tit. 52, § 549.1 et seq.;

It is FURTHER ORDERED that the Court strikes Producers' affirmative defenses of waiver, estoppel, and unclean hands;

It is FURTHER ORDERED that Texas Producers' counterclaim for conversion fails as a matter of law and is therefore DISMISSED;

It is FURTHER ORDERED that Oklahoma Producers may replead their counterclaim for conversion within twenty-one (21) days from the date of entry of this Order; and

All other relief not specifically granted herein is DENIED.

NOTICE OF APPEAL

Defendants U.S. Energy Development Corporation, Ageron Energy, LLC, Petroedge Energy IV, LLC, Teal Natural Resources, LLC, Crimson Energy Partners IV, LLC, Viceroy Petroleum LP, RLU Operating, LLC, Dewbre Petroleum Corporation, Jerry C. Dewbre, Trustee, American Shoreline, Inc., Texpata Pipeline Company, Aurora Resources Corporation, AWP Operating Co., Texron Operating LLC, Energy Reserves Group, LLC, Magnum Producing, LP, Magnum Engineering Company, Magnum Operating, LLC, Rock Resources, Inc. and Killam Oil Co., Ltd. (collectively "Appellants") file this Notice of Appeal pursuant to 28 U.S.C. § 158(a) to the United States District Court for the Western District of Texas, San Antonio Division, from the following order of the Bankruptcy Court:

Names of Appellants:

U.S. Energy Development Corporation, Ageron Energy, LLC, Petroedge Energy IV, LLC, Teal Natural Resources, LLC, Crimson Energy Partners IV, LLC, Viceroy Petroleum LP, RLU Operating, LLC, Dewbre Petroleum Corporation, Jerry C. Dewbre, Trustee, American Shoreline, Inc., Texpata Pipeline Company, Aurora Resources Corporation, AWP Operating Co., Texron Operating LLC, Energy Reserves Group, LLC, Magnum Producing, LP, Magnum Engineering Company, Magnum Operating, LLC, Rock Resources, Inc. and Killam Oil Co., Ltd.

Position in Adversary Proceeding:

Defendants/Counter-Plaintiffs.

Order Appealed from and Date:

Order Granting in Part and Denying in Part Agent's Motion for Summary Judgment and Alternative Motion for Partial Summary Judgment [Dkt. 113] entered March 7, 2019, a copy of which is attached as Exhibit A.

The parties to the appeal, and their counsel:

EXHIBIT A

IT IS HEREBY ADJUDGED and DECREED that the below described is SO ORDERED.

Dated: March 07, 2019

ORDER GRANTING, IN PART, AND DENYING, IN PART, AGENT'S MOTION FOR SUMMARY JUDGMENT AND ALTERNATIVE MOTION FOR PARTIAL SUMMARY JUDGMENT (ECF NO. 89)

Came on for consideration Deutsche Bank Trust Company Americas, Agent's Motion for Summary Judgment and Alternative Motion for Partial Summary Judgment (ECF No. 89) ("Motion for Summary Judgment"), Agent's Appendix of Facts in Support of Motion for Summary Judgment and Agent's Supplement to: Motion for Summary Judgment and Alternative Motion for Partial Summary Judgment (ECF Nos. 90, 96), RADCO Operations, LP and RHEACO, LTD.'s Response to Agent's Motion for Summary Judgment and Alternative Motion for Partial Summary Judgment (ECF No. 103), Producer Group's Response to Agent's Motion for Partial Summary Judgment or Alternatively, Motion for Partial Summary Judgment (ECF No. 105), and Agent's Amended Reply to: (1) RADCO Operations, LP and RHEACO, LTD.'s Response to Motion for Summary Judgment and Alternative Motion for Partial Summary Judgment; and (2) Producer Group's Response to Motion for Partial Summary Judgment and Alternative Motion for Partial Summary Judgment (ECF No. 110).

Upon consideration thereof, the Court finds that Agent's Motion for Summary Judgment and Alternative Motion for Partial Summary Judgment (ECF No. 89) is GRANTED, IN PART and DENIED, IN PART as follows:

IT IS ORDERED that Agent has a valid, perfected security interest on First River Energy, LLC's ("Debtor") goods, inventory, accounts, and proceeds that has priority over liens alleged by Texas Producers;

It is FURTHER ORDERED that Agent has a valid, perfected, first-priority security interest in Debtor's deposit accounts at JPMorgan Chase Bank, N.A. located in the state of New York;

It is FURTHER ORDERED that, to the extent Oklahoma Producers can produce evidence demonstrating extent and amount of sums owed by Debtor for its pre-petition purchase of oil and gas, Oklahoma Producers have a first-priority, automatically arising statutory lien under Okla. Stat. Ann. tit. 52, § 549.1 et seq.;

It is FURTHER ORDERED that the Court strikes Producers' affirmative defenses of waiver, estoppel, and unclean hands;

It is FURTHER ORDERED that Texas Producers' counterclaim for conversion fails as a matter of law and is therefore DISMISSED;

It is FURTHER ORDERED that Oklahoma Producers may replead their counterclaim for conversion within twenty-one (21) days from the date of entry of this Order; and

All other relief not specifically granted herein is DENIED.

PRODUCER GROUP DEFENDANTS' MOTION FOR LEAVE TO APPEAL

Defendants U.S. Energy Development Corporation, Ageron Energy, LLC, Petroedge Energy IV, LLC, Teal Natural Resources, LLC, Crimson Energy Partners IV, LLC, Viceroy Petroleum LP, RLU Operating, LLC, Dewbre Petroleum Corporation, Jerry C. Dewbre, Trustee, American Shoreline, Inc., Texpata Pipeline Company, Aurora Resources Corporation, AWP Operating Co., Texron Operating LLC, Energy Reserves Group, LLC, Magnum Producing, LP, Magnum Engineering Company, Magnum Operating, LLC, Rock Resources, Inc. and Killam Oil Co., Ltd. (collectively "Producer Group" or "Appellants"), file this Motion for Leave to Appeal (the "Motion"), pursuant to 28 U.S.C. 158(a)(3) and Federal Rule of Bankruptcy Procedure 8004 (the "Bankruptcy Rules"), for entry of an order granting the Producer Group's request for interlocutory appeal, and would show the Court as follows:

1. On March 7, 2019, the United States Bankruptcy Court for the Western District of Texas (the "Bankruptcy Court") entered the Order Granting, in Part, and Denying, in Part, Agent's Motion for Summary Judgment and Alternative Motion for Partial Summary Judgment (ECF No. 89) [Dkt. 113] (the "Order"), a copy of which is attached hereto as Exhibit A, in theZ` above-styled Adversary Proceeding.

STATEMENT OF FACTS

2. On July 27, 2018, Plaintiff filed its Motion for Summary Judgment in the case. The Producer Group filed a response on August 22, 2018 and Plaintiff's replied on August 29, 2018. The Bankruptcy Court entered the Order on March 7, 2019, along with an accompanying Memorandum Opinion [Dkt. 114], a copy of which is attached as Exhibit B.

3. Prior to the date on which First River Energy, LLC ("FRE") filed for bankruptcy, the Producer Group sold crude oil and condensate to FRE. All such business dealings between Defendant and FRE involved the sale of oil and condensate produced in Texas and Oklahoma and sold to FRE in Texas and Oklahoma. Pursuant to the agreements between the Producer Group and FRE, FRE would "purchase" and take possession of the oil and condensate purchased in one month, and pay for it the following month. Pursuant to UCC § 9.343 and/or Oklahoma Statutes § 52-549 et seq. (collectively the "Statutes"), the Producer Group contends that they have a first priority perfected security interest, as a secured party, to secure the obligations of FRE as the "first purchaser" of oil and gas production, as debtor, to pay the purchase price.

4. In December 2017 and/or January 2018, Deutsche Bank Trust Company Americas, as agent for certain lenders (the "Bank") (1) exercised cash dominion over FRE and (2) swept substantially all of the funds held by the Debtor, including the amounts that represented proceeds from FRE's sale of oil, gas and condensate, on which the Producer Group held first and priority liens. The Bank asserts that it has a first priority lien based upon its UCC-1 financing statement filed in Delaware (where FRE is incorporated) and its deposit account control agreement relating to FRE's bank accounts.

5. This action involves competing claims to the proceeds of production. The Bank claims that its liens granted by the Debtor are superior to the liens on these proceeds held by the Producer Group under Texas and Oklahoma law. The Bankruptcy Court, relying on a Delaware bankruptcy court opinion in Arrow Oil & Gas, Inc. v. SemCrude, L.P. (In re SemCrude, L.P.), 407 B.R. 112 (Bankr. D. Del. 2009), found that Delaware law controls as to the priority and perfection of liens on proceeds from the sale of production from Texas wells, but that Oklahoma law applies to the priority and perfection of liens on proceeds from the sale of production from Oklahoma wells. The Bankruptcy Court also found that the Producer Group had not waived its rights to assert that it had a first lien on such proceeds. The Bankruptcy Court left for determination whether the members of the Producer Group that had proceeds from Oklahoma production could state a claim for conversion, and provided leave to amend on or before March 28, 2019.

STATEMENT OF QUESTIONS TO BE PRESENTED BY THE APPEAL

6. Though Appellants have not yet filed a Statement of Issues on Appeal, the issues will be directed at whether the Bankruptcy Court erred in determining that the Delaware UCC, which does not contain a provision similar to § 9.343, controls the perfection and priority of liens in the proceeds from the sales of the Producer Group's production as to production from Texas wells. The issues will further involve a determination of whether § 9.301 of the Texas UCC and Delaware UCC require application of Delaware law in the determination of the relative priorities' of the parties' asserted liens. Appellants will also appeal the Bankruptcy Court's decision to strike their affirmative defenses, based upon the clear precedent in this District concerning the specificity required for pleading affirmative defenses.

STATEMENT OF RELIEF SOUGHT

7. Appellants seek leave to pursue an interlocutory appeal of the Order. Though the Order did not dispose of all of the claims (leaving the determination of the producers' conversion claim under Oklahoma law relating to production from Oklahoma wells for a later date), all of the other issues involved in the case have been determined. The Producer Group (as Appellants) also seek an order staying the balance of this adversary case while the appeal is pending.1

REASONS WHY THE APPEAL SHOULD BE GRANTED

8. District courts have jurisdiction to consider appeals from interlocutory orders issued by bankruptcy courts. 28 U.S.C. § 158(a). "The decision to grant or deny leave to appeal a bankruptcy court's interlocutory order is committed to the district court's discretion." In re O'Conner, 258 F.3d 392, 399-400 (5th Cir. 2001). When determining whether to grant a motion for interlocutory appeal, courts within the Fifth Circuit have generally applied the standard provided by 28 U.S.C. § 1292(b) for interlocutory appeals from district court orders. In re Ichinose, 946 F.2d 1169, 1177 (5th Cir. 1991). Under 28 U.S.C. § 1292(b), leave to appeal should be granted when: "(1) a controlling issue of law is involved; (2) the question is one where there is substantial ground for difference of opinion; and (3) an immediate appeal will materially advance the ultimate termination of the litigation." Froiland v. Smart-Fill Management Grp, Inc., 2018 WL 6220126, *1 (W.D. Tex. Oct. 3, 2018) (citing Ichinose).

9. This case meets the standards for interlocutory appeal. There is no controlling precedent on these issues in the Fifth Circuit (and, in fact, no prior opinions from courts in the 5th Circuit), and given the lack of case law outside the Third Circuit (and the extensive debate on this issue) there is certainly a substantial ground for difference of opinion. The issue presented is primarily a legal issue on the interpretation of the Texas versus Delaware UCC. Finally, an immediate appeal will allow this primary issue to be decided before the parties expend further attorneys' fees litigating the remaining issue on the conversion count. If the Producer Group prevails on appeal, the issues would then have to be re-litigated with respect to the conversion claims as to Texas proceeds. An appeal to the Fifth Circuit is inevitable in this case, regardless of who prevailed before the Bankruptcy Court. Appellants submit that the Delaware bankruptcy court fundamentally misinterpreted Texas law and, by adopting the same reasoning, the Bankruptcy Court did as well.

WHEREFORE, based on the foregoing, the Producer Group requests the Court grant its Motion, and that they have such other and further relief to which they may show themselves justly entitled.

EXHIBIT A

IT IS HEREBY ADJUDGED and DECREED that the below described is SO ORDERED.

Dated: March 07, 2019.

ORDER GRANTING. IN PART. AND DENYING. IN PART. AGENT'S MOTION FOR SUMMARY JUDGMENT AND ALTERNATIVE MOTION FOR PARTIAL SUMMARY JUDGMENT (EOF NO. 89)

Came on for consideration Deutsche Bank Trust Company Americas, Agent's Motion for Summary Judgment and Alternative Motion for Partial Summary Judgment (ECF No. 89) ("Motion for Summary Judgment"), Agent's Appendix of Facts in Support of Motion for Summary Judgment and Agent's Supplement to: Motion for Summary Judgment and Alternative Motion for Partial Summary Judgment (ECF Nos. 90, 96), RADCO Operations, LP and RHEACO, LTD.'s Response to Agent's Motion for Summary Judgment and Alternative Motion for Partial Summary Judgment (ECF No. 103), Producer Group's Response to Agent's Motion for Partial Summary Judgment or Alternatively, Motion for Partial Summary Judgment (ECF No. 105), and Agent's Amended Reply to: (1) RADCO Operations, LP and RHEACO, LTD.'s Response to Motion for Summary Judgment and Alternative Motion for Partial Summary Judgment; and (2) Producer Group's Response to Motion for Partial Summary Judgment and Alternative Motion for Partial Summary Judgment (ECF No. 110).

Upon consideration thereof, the Court finds that Agent's Motion for Summary Judgment and Alternative Motion for Partial Summary Judgment (ECF No. 89) is GRANTED, IN PART and DENIED, IN PART as follows:

IT IS ORDERED that Agent has a valid, perfected security interest on First River Energy, LLC's ("Debtor") goods, inventory, accounts, and proceeds that has priority over liens alleged by Texas Producers;

It is FURTHER ORDERED that Agent has a valid, perfected, first-priority security interest in Debtor's deposit accounts at JPMorgan Chase Bank, N.A. located in the state of New York;

It is FURTHER ORDERED that, to the extent Oklahoma Producers can produce evidence demonstrating extent and amount of sums owed by Debtor for its pre-petition purchase of oil and gas, Oklahoma Producers have a first-priority, automatically arising statutory lien under Okla. Stat. Ann. tit. 52, § 549.1 et seq.;

It is FURTHER ORDERED that the Court strikes Producers' affirmative defenses of waiver, estoppel, and unclean hands;

It is FURTHER ORDERED that Texas Producers' counterclaim for conversion fails as a matter of law and is therefore DISMISSED;

It is FURTHER ORDERED that Oklahoma Producers may replead their counterclaim for conversion within twenty-one (21) days from the date of entry of this Order; and

All other relief not specifically granted herein is DENIED.

EXHIBIT B

IT IS HEREBY ADJUDGED and DECREED that the below described is SO ORDERED.

Dated: March 07, 2019.

MEMORANDUM OPINION GRANTING. IN PART AND DENYING. IN PART AGENT'S MOTION FOR SUMMARY JUDGMENT AND ALTERNATIVE MOTION FOR PARTIAL SUMMARY JUDGMENT (ECF NO. 89)

Came on for consideration Agent's Motion for Summary Judgment and Alternative Motion for Partial Summary Judgment1 (ECF No. 89) ("Motion for Summary Judgment"), Agent's Appendix of Facts in Support of Motion for Summary Judgment and Agent's Supplement to: Motion for Summary Judgment and Alternative Motion for Partial Summary Judgment (ECF Nos. 90, 96) ("Agent's Appendix"), RADCO Operations, LP and RHEACO, LTD.'s Response to Agent's Motion for Summary Judgment and Alternative Motion for Partial Summary Judgment (ECF No. 103) ("Intervenors' Response"), Producer Group's Response to Agent's Motion for Partial Summary Judgment or Alternatively, Motion for Partial Summary Judgment (ECF No. 105) ("Producers' Response"), and Agent's Amended Reply to: (1) RADCO Operations, LP and RHEACO, LTD.'s Response to Motion for Summary Judgment and Alternative Motion for Partial Summary Judgment; and (2) Producer Group's Response to Motion for Partial Summary Judgment and Alternative Motion for Partial Summary Judgment (ECF No. 110) ("Agent's Reply"). This Court took the matter under advisement. For the reasons stated herein, the Court finds that Agent's Motion for Summary Judgment is GRANTED, IN PART and DENIED, IN PART.

Jurisdiction

As an initial matter, the Court finds that it has jurisdiction over this proceeding under 28 U.S.C. §§ 1334 and 157(a) and (b)(1). This matter is a core proceeding under 28 U.S.C. §§ 157(b)(2)(A), (B), (K), and (O). All parties have filed a Statement Regarding Consent that consents to the Court's entry of final orders and final judgment. (ECF Nos. 57, 62, 63). This matter is within the Court's jurisdiction and authority pursuant to the Supreme Court's ruling in Wellness Int'l Network, Ltd. v. Sharif (In re Sharif), 135 S.Ct. 1932 (2015).

Factual Background

On January 12, 2018 ("Petition Date"), First River Energy, LLC ("Debtor" or "First River") filed a voluntary petition for relief under chapter 11 of the Bankruptcy Code in the United States Bankruptcy Court for the District of Delaware (the "Delaware Bankruptcy Court"). On January 17, 2018, the Delaware Bankruptcy Court transferred venue of this case sua sponte to the United States Bankruptcy Court for the Western District of Texas, San Antonio Division. Debtor continues to operate its business and manage its property as a debtor-in-possession pursuant to 11 U.S.C. §§ 1107(a) and 1108.

Based on the Court's review of the facts and exhibits presented in the moving papers, along with the documents included in Agent's Appendix, the Court finds following undisputed facts.

A. General Business Operations

Prior to the Petition Date, Debtor provided midstream transportation services to the oil and gas industry across the southwestern United States and Great Plains. As a midstream service provider, Debtor purchased and marketed domestic crude oil and condensate directly from upstream producers. After purchasing oil from upstream producers, Debtor re-sold and delivered aggregated oil to third-party downstream purchasers through a combination of trucks and pipeline.

B. Debtor's Relationship with Producers

Pre-petition, Debtor entered into agreements with a number of upstream oil and gas producers to purchase oil and gas from wells situated in Texas and Oklahoma. The following upstream producers are defendants in the numbered adversary proceeding: U.S. Energy Development Corporation; Ageron Energy, LLC; Petroedge Energy IV, LLC; Teal Natural Resources, LLC; Crimson Energy Partners IV, LLC; Viceroy Petroleum, LP; RLU Operating, LLC; Dewbre Petroleum Corporation; Jerry C. Dewbre, Trustee; American Shoreline Inc.; Texpata Pipeline Company; Aurora Resources Corporation; AWP Operating Co.; Texron Operating LLC; Magnum Producing, LP; Magnum Engineering Company; Magnum Operating LLC; Rock Resources, Inc.; Killam Oil Co., Ltd.; and Energy Reserves Group, LLC (collectively referred to hereinafter as "Producers"). Generally, the terms of Producers' sale of oil to Debtor were delineated in purchase contracts ("Producer Agreements") entered into by Debtor and Producers individually. Pursuant to the Producer Agreements, Producers produced and delivered oil and gas to Debtor, who, in turn, would pay Producers on the twentieth day of the month following delivery.

During the relevant period (from December 1 through December 31, 2017), Producers sold Debtor oil and gas produced from wells located in Texas and Oklahoma. Under the terms of the Producer Agreements, Debtor was required to pay Producers for oil and gas provided in December 2017 on January 20, 2018. Debtor discontinued business operations on or about December 31, 2018. Debtor filed for chapter 11 bankruptcy protection on January 12, 2018.

As of the Petition Date, Debtor had not paid Producers for oil and gas provided in December 2017. Seeking payment from Debtor for unpaid invoices for December 2017 oil and gas sales, certain members of the Producers group2 filed proofs of claim in Debtor's bankruptcy case asserting claims for amounts owed secured by Debtor's oil, gas, and proceeds thereof under Tex. Bus. & Com. Code Ann. § 9.343 ("Texas § 9.343"). Producer U.S. Energy Development Corporation filed a proof of claim in Debtor's bankruptcy case for amounts owed secured by Debtor's oil, gas, and proceeds thereof under Texas § 9.343 and Okl. Stat. Ann. tit. 52, § 549. Proof of Claim of U.S. Energy Dev. Corp., Case No. 18-50085 (Claim No. 251-1).

C. Debtor's Relationship with Intervenors

RADCO Operations, LP ("RADCO") and RHEACO, Ltd. ("RHEACO") (collectively referred to hereinafter as "Intervenors"), who also produced and sold oil products to Debtor pre-petition, are intervening parties in this matter. Intervenors produced oil and gas in the state of Texas. On or about April 24, 2012, RADCO entered into a Crude Oil Purchase Agreement with O.G.O Marketing, LLC, a Texas limited liability company ("RADCO Purchase Agreement"). Intervenors' Response, Ex. A (ECF No. 103). Pursuant to the RADCO Purchase Agreement, RADCO produced and sold crude oil and condensate to Debtor. RHEACO was unable to produce a copy of a purchase contract with O.G.O. Marketing, LLC, but asserts in Intervenor's Response that it entered into an agreement similar to the RADCO Purchase Agreement. Like RADCO, RHEACO produced and sold oil and gas to Debtor.

In September 2013, O.G.O. Marketing, LLC changed its name to Texas Gathering Company, LLC and continued as a Texas limited liability company. Intervenors' Response, Ex. B (ECF No. 103). RADCO continued conducting business with Texas Gathering Company, LLC under the RADCO Purchase Agreement. On or about July 23, 2015, Texas Gathering Company, LLC was acquired by Debtor in this case, First River. First River is a Delaware limited liability company.

RADCO and RHEACO continued to produce crude oil in Texas and sell it to Debtor through December 2017. Pursuant to the RADCO Purchase Agreement, payment for crude oil sold and delivered was to be made by wire transfer on the twenty-third day of the month following the month of delivery. Intervenors' Response, Ex. A (ECF No. 103). Debtor would have been required to pay Producers for oil and gas provided in December 2017 on January 23, 2018. Debtor, however, filed for bankruptcy on January 12, 2018, which is before payment of December 2017 invoices became due to Intervenors. As of the Petition Date, Debtor had not paid Intervenors for oil provided in December 2017.

D. Pre-Petition Loan Documents

On July 23, 2015, a credit agreement (the "Credit Agreement") was entered into under the laws of the state of Delaware by and among (i) First River Energy, LLC as borrower; (ii) Deutsche Bank AG New York Branch as collateral agent and as a Lender, Issuing Lender, Swing Line Lender ("Lender"); (iii) Deutsche Bank Trust Company Americas as Administrative Agent ("Agent"); and (iv) several banks and other financial institutions or entities as lenders. Agent's App'x, Pt. 1 (ECF No. 90-2). To guarantee payment of the Credit Agreement, Debtor entered into a guarantee agreement ("Guarantee Agreement") with Agent and Lender on July 23, 2015, under which Debtor assumed its role as a guarantor for debt issued under the Credit Agreement. Agent's App'x, Pt. 2 (ECF No. 90-3). On July 23, 2015, Debtor entered into a security agreement ("Security Agreement") with Agent and Lender. Agent's App'x, Pts. 2, 3 (ECF No. 90-3, 90-4). The terms of the Security Agreement granted Agent a continuing security interest ("Bank Security Interest") in substantially all of Debtor's assets, including:

Agent's App'x, Pt. 3 (ECF No. 90-4). To perfect the Bank Security Interest, Agent executed UCC-1 financing statements with the Delaware Department of State on July 23, 2015 that covered "all assets of Debtor, wherever located, whether now owned and existing or hereafter acquired or coming into existence, together with all proceeds thereof." Agent's App'x, Pt. 9 (ECF No. 90-8). Agent filed amendments to the UCC-1 financing statements in Delaware that caused its Bank Security Interest to remain continuously effective since July 23, 2015. Agent's App'x, Pt. 9 (ECF No. 90-8).

E. Deposit Account Control Agreement

Debtor's Schedule A/B demonstrates that Debtor maintained deposit accounts at JPMorgan Chase Bank, N.A. ("JPMorgan Chase") and at Deutsche Bank. Schedule A/B: Assets-Real and Personal Property, Case No. 18-50085, (ECF No. 191). On July 23, 2015, Debtor, JPMorgan Chase (as depositary), and Agent (as secured party) entered into a Blocked Account Control Agreement (the "Blocked Account Control Agreement") in which Agent was granted a security interest in all of Debtor's funds on deposit in accounts at JPMorgan Chase. Agent's App'x, Pt. 5 (ECF No. 90-4). The Blocked Account Control Agreement indicates that its terms "shall be governed by and construed in accordance with the laws of the State of New York" because "the State of New York is the jurisdiction of [JPMorgan Chase] as [depositary for purposes of [s]ection 9-304(b) of the Uniform Commercial Code." Agent's App'x, Pt. 5, ¶ 11 (ECF No. 90-4).

Debtor, JPMorgan Chase, and Agent entered into Amendment No. 1 to the Blocked Account Control Agreement ("Amendment No. 1") on January 31, 2017. Agent's App'x, Pt. 6 (ECF No. 90-5). The terms of Amendment No. 1 deleted two accounts from the initial Blocked Account Control Agreement and amended Debtor's company name from First River Midstream, LLC to First River Energy, LLC. Otherwise, the terms of the Blocked Account Control Agreement, including the New York choice-of-law provision, remain unchanged. Agent's App'x, Pt. 6 (ECF No. 90-5).

F. Events Leading to Bankruptcy

In November and December 2017, Debtor defaulted on making payments due under the terms of the Credit Agreement. On or about December 31, 2017, Debtor discontinued nearly all of its transactions involving the purchase and sale of oil,3 including those with Producers, Intervenors, and downstream purchasers. When Debtor filed for bankruptcy on January 12, 2018, Debtor had not paid Producers and Intervenors for any oil and gas purchases made in December 2017. Likewise, downstream purchasers had not paid Debtor for any oil and gas purchased from Debtor in December 2017.

G. Producer Claims Procedure Orders

Agent, Producers, and Intervenors each allege that they have a properly perfected, first priority security interest in Debtor's oil and gas production, deposit accounts, and resulting proceeds, including accounts receivable. To avoid a multiplicity of legal actions and have all claims to such collateral heard in one action, Debtor filed an Expedited Motion to Establish Procedures for the Resolution of Claims and Liens Against Estate Property in the bankruptcy case (Case No. 18-50085, ECF No. 331). After a hearing on March 28,2018, the Court entered an Order Granting Expedited Motion to Establish Procedures for the Resolution of Claims and Liens Against Estate Property (Case No. 18-50085, ECF No. 413) (the "Claims Procedure Order").

The Claims Procedure Order establishes that this adversary proceeding serves as a declaratory judgment action to determine the extent, validity, and priority of liens and other interests in "any or all of the [oil products allegedly purchased by Debtor prior to the Petition Date] and/or its proceeds, including accounts receivable,4 cash, or cash deposit proceeds from the Debtor's sale of [oil]." (Case No. 18-50085, ECF No. 413). The Claims Procedure Order further determines that this adversary proceeding shall be the "sole and exclusive method of litigating conflicting claims" regarding "any legal or equitable claims to ownership, entitlement, recovery or lien rights including, without limitation, perfection and priority of such lien rights" in oil products and proceeds, including accounts receivable, cash, or cash deposit proceeds from Debtor's sale of oil and gas. (Case No. 18-50085, ECF No. 413).

The Parties' Contentions

Agent has filed its Motion for Summary Judgment, which asserts that Agent is entitled to summary judgment that: (a) Agent and Lenders have valid, perfected first-priority liens on Debtor's accounts receivable, deposit accounts and inventory, (b) Producers have no liens on Debtor's accounts receivable, deposit accounts and inventory, or alternatively, even if Producers had liens, liens held by Agent and Lenders have priority, (c) Producers' affirmative defenses are without merit, and (d) Producers should be denied recovery under their counterclaims. Motion for Summary Judgment, (ECF No. 89).

Agent asserts that, as of the Petition Date, Debtor had the following assets eligible for distribution among the parties: (a) $27,613,066.81 in accounts receivable owed from downstream purchasers for oil sold;5 (b) cash, cash equivalents, and financial assets of $1,190,256.00; and (c) inventory with a scheduled value of $1,894,701.79 and a "lower of cost or market value" of $150,000. Debtor's July 2018 Monthly Operating Report, Case No. 18-50085 (ECF No. 629), see also Agent's App'x, Pt. 16 (ECF No. 90-15).

A. Agent's Contentions

In its Motion for Summary Judgment, Agent argues first that Producers waived any right they had to assert a security interest in goods, inventory, accounts, and proceeds under Texas § 9.343 because the Producer Contracts included Conoco Phillips General Provisions6 language. Agent also argues in its Reply that the RADCO Purchase Agreement contained waiver language similar to the Conoco Phillips General Provisions that resulted in Intervenors waiving their right to assert a security interest in goods, inventory, accounts, and proceeds under Texas § 9.343.

Alternatively, Agent claims that there is a conflict of law between Delaware and Texas law regarding perfection and priority of security interests in Debtor's goods, inventory, accounts, and proceeds. Agent uses Restatement (Second) Conflict of Laws § 6(1) to argue that the laws of the state of Delaware govern perfection of security interests on Debtor's goods, inventory, accounts, and proceeds pursuant to the choice-of-law provisions in the Uniform Commercial Code ("UCC"). See Del. Code Ann. tit. 6, § 9-301 (West 2018); see also Tex. Bus. & Com. Code Ann. § 9.301. Agent argues that because it was the first creditor to file a financing statement with the Delaware Department of State, its security interest in substantially all of Debtor's assets primes any security interest alleged by Producers and Intervenors in the same collateral. Moreover, Agent argues that Producers and Intervenors hold unsecured claims to the extent that they did not file financing statements with the Delaware Department of State.

In the alternative, Agent asserts that even if Producers and Intervenors can establish that Texas § 9.343 applies, Agent's perfected security interests in Debtor's accounts receivable, proceeds and deposit accounts have priority over Producers and Intervenors' liens by virtue of the limitations of Tex. Bus. & Com. Code Ann. § 9.343(f). Specifically, Agent asserts that the oil held by Producers for resale was inventory, and Producers and Intervenors did not perfect their PMSI in inventory properly under Delaware law, which requires a financing statement to be filed with the Delaware Department of State. Agent argues next that even if Producers and Intervenors have a PMSI in inventory, that PMSI is limited to the inventory itself and identifiable cash proceeds but does not extend to accounts receivable. See Tex. Bus. & Com. Code Ann. § 3.324(b).

Agent asserts that it has a first lien on Debtor's deposit account located at JPMorgan Chase in New York because it has properly perfected its security interest through control. See N.Y. U.C.C. § 9-312(b)(1) (McKinney 2019). Specifically, Agent asserts that its Blocked Account Control Agreement with Debtor and JPMorgan Chase serves as an authenticated record that accomplishes control as required by New York law. See N.Y. U.C.C. § 9-314.

Agent also asserts that affirmative defenses raised in the Answers/Counterclaims are meritless because no facts were pled to support the affirmative defenses of estoppel, unclean hands, or waiver that were asserted against the Agent. Finally, Agent contends that Producers' counterclaim for conversion fails as a matter of law.

Agent filed a proof of claim in the bankruptcy case that asserts a secured claim for "money loaned" in the amount of $13,478,557.92.7 Proof of Claim of Deutsche Bank Trust Company Americas, Case No. 18-50085 (Claim No. 226-1). Agent asserts that its claim is oversecured because collateral valued at $27.6 million is available for payment of Agent's claim. Furthermore, Agent argues that it is entitled to post-petition interest and reasonable fees, costs, and charges, including payment of the legal fees and expenses for Agent and Lenders pursuant to 11 U.S.C. § 506(b).

B. Producers' Contentions

Producers' Response argues that reference to the Conoco Phillips General Provisions in the Producer Agreements did not result in waiver of Producers' ability to assert a security interest in oil, gas, and proceeds thereof because: (1) on its face, the language of the Conoco Phillips General Provisions does not waive any lien as to the proceeds received from sale of oil delivered to Debtor; (2) Producers did not provide warranty representation to any other party than the downstream purchaser; and (3) there was not privity of contract between Producers and Agent, nor between Agent and downstream purchasers.

Producers contend next that they hold an automatically-perfected purchase money security interest ("PMSI") in all oil and gas produced in Texas and sold to Debtors during December 2017, along with proceeds thereof, pursuant to Texas § 9.343. Producers also contend that certain of the Producers sold oil and gas production in Oklahoma during December 2017, and that those Producers hold a first, prior, and automatically perfected lien pursuant to Okla. Stat. Ann. tit. 52, § 549.1 (the "Oklahoma Lien Act"). Producers argue that lien rights automatically arising under Texas § 9.343 and the Oklahoma Lien Act result in a PMSI that primes any security interest held by Agent.

In addition, Producers argue that, to the extent there is a conflict of law, the laws of Texas and Oklahoma control resolution of whether Producers' security interests are superior to Agent's UCC Article 9 security interests. Producers contend that the Court should use Restatement (Second) Conflict of Laws § 251(1) and federal common law to evaluate choice-of-law issues on a "case-by-case basis with deference to the state that has the most significant contacts and relationships over the affairs of [Debtor.]" Producers' Response, p. 11 (ECF No. 105).

Producers' Response included a list of the proofs of claim filed by individual Producers in Debtor's bankruptcy case, which provided the claim number and the amount of claim asserted. Producers' Response, Ex. A (ECF No. 105).

C. Intervenors' Contentions

Intervenors assert that they also hold an automatically-perfected PMSI in all oil and gas sold to Debtor during December 2017, along with proceeds thereof, pursuant to Texas § 9.343. Intervenors further argue that conflict-of-law provisions found in title 6, section 9-301 of the Delaware Code ("Delaware § 9-301") and section 9.301 of the Texas Business and Commerce Code ("Texas § 9.301") are inapplicable because the language of section 9.343(p) of the Texas Business and Commerce Code provides that "[t]he rights of any person claiming a security interest or lien created by this section are governed by the other provisions of this chapter except to the extent that this section necessarily displaces those provisions." (emphasis added).

Additionally, Intervenors argue that Agent waived the ability to claim that Texas § 9.343 did not create a lien in favor of Producers and Intervenors because: (1) terms of the Credit Agreement between Agent and Debtor noted that "First Purchaser Liens" under Texas § 9.343 would be eliminated from Debtor's borrowing base, and (2) the Credit Agreement expressly permitted a lien arising under Texas § 9.343 to exist on Debtor's property, assets, or revenues. Intervenors also contend that estoppel by deed and estoppel by record preclude Agent from taking a position contrary to terms found in the Credit Agreement. Finally, Intervenors argue that Agent has introduced no evidence showing that Debtor's purchase of product from Intervenors was subject to the Conoco Phillips General Provisions.

RADCO asserts that, as of the Petition Date, Debtor owed $292,513.27 for oil sold to Debtor under the RADCO Purchase Agreement. Intervenors Response, ECF No. 103. RHEACO asserts that it is owed $292,519.27 for oil sold to Debtor pre-petition and $18,562.66 in royalty payments for the same products sold to Debtor. Id. Radley Corporation, an affiliate of RADCO, alleges that Debtor owes $6,977.38 in royalties for products it sold to Debtor. Id.

Legal Standard

Summary judgment is appropriate "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed. R. Civ. P. 56(c); Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). Bankruptcy Rule 7056 applies Rule 56(c) of the Federal Rules of Civil Procedure to adversary proceedings. If summary judgment is appropriate, the Court may resolve the case as a matter of law. Celotex Corp., 477 U.S. at 323; Blackwell v. Barton, 34 F.3d 298, 301 (5th Cir. 1994). The Fifth Circuit has stated "[t]he standard of review is not merely whether there is a sufficient factual dispute to permit the case to go forward, but whether a rational trier of fact could find for the non-moving party based upon evidence before the court." James v. Sadler, 909 F.2d 834, 837 (5th Cir. 1990) (citing Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986)).

To the extent that the non-moving party asserts the existence of factual disputes, the evidence offered by the non-moving party to support those factual contentions must be of sufficient quality so that a rational fact finder might, at trial, find in favor of the non-moving party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249-50 (1986) ("[a]dverse party's response . . . must set forth specific facts showing that there is a genuine issue for trial."). If the record "taken as a whole, could not lead a rational trier of fact to find for the non-moving party, then there is no genuine issue for trial." LeMaire v. Louisiana, 480 F.3d 383, 390 (5th Cir. 2007).

In determining whether a genuine issue of material fact exists, the nonmoving party must respond to a proper motion for summary judgment with specific facts demonstrating that such genuine issue exists. "[A] genuine issue of material fact is not raised by mere conclusory allegations or bald assertions unsupported by specific facts." Leon Chocron Publicidad Y Editoria, S.A. v. Jimmy Swaggart Ministries, 990 F.2d 1253 (5th Cir. 1993) (citation omitted). The Court must view all evidence in the light most favorable to the non-moving party. Crawford v. Formosa Plastics Corp. La., 234 F.3d 899, 902 (5th Cir. 2000). If summary judgment is appropriate, the Court may resolve the case as a matter of law. Celotex Corp., 477 U.S. at 323.

IN RE SEMCRUDE, L.P.

In 2009, the Delaware Bankruptcy Court issued its opinion in Arrow Oil & Gas, Inc. v. SemCrude, L.P. (In re SemCrude, L.P.), 407 B.R. 112 (Bankr. D. Del. 2009). The debtors in SemCrude, purchased various energy products from producers, including oil and gas, and then resold those products to other entities. Id. at 119. In the months before filing for bankruptcy, the debtors purchased oil and gas from producers located in Texas. Id. at 122. The debtors sold the oil and gas from the Texas producers to downstream purchasers but failed to remit payment to the Texas producers before filing for chapter 11 bankruptcy. Id. The Texas producers alleged that they held automatically perfected PMSIs in all oil and gas sold to the debtors and any resulting proceeds under Texas § 9.343. Id. at 124. Meanwhile, a pre-petition lender asserted that it held secured claims against the debtors, and that perfection and priority of security interests claimed by the Texas producers were not governed by Texas § 9.343. Id. The lender argued that, pursuant to the law governing perfection and priority of security interests found in Article 9 of the UCC, the debtors' places of incorporation8 determined perfection and priority of security interests alleged by the Texas producers and lender. Id. The lender contended that if the Texas producers did not perfect their security interests in oil, gas, and proceeds thereof based on the UCC requirements of the state where the debtors were incorporated, then the Texas producers had unperfected security interests subordinate to the lender's security interests.9 Id.

The court held, in relevant part, that Delaware's choice of law rules regarding perfection and priority of security interests governed. Id. at 130. Relying on § 9-301 of the UCC, which is the same in Delaware and Texas, the court determined that the law of the location of the debtor determined perfection of the producer's security interests in oil, gas, proceeds thereof, and accounts receivable. Id. at 133-34. Because the debtors were incorporated in Delaware and Oklahoma, the laws of those states (depending on where the debtor incorporated) applied when determining perfection and priority of UCC security interests alleged by the Texas producers and the lender. Id. at 132-38. To establish perfection of claimed security interests, the Texas producers and the lender were required to properly file a financing statement in the appropriate state. Id. 137-38. As of the date of this Memorandum Opinion, the SemCrude opinion is the sole opinion analyzing whether Texas § 9.343 applies in disputes regarding perfection and priority among lenders and Texas producers of oil and gas when the debtor is incorporated outside of Texas.

Legal Analysis

A. Conoco Phillips General Provisions and Contractual Waiver Language

As an initial matter, Agent argues that, regardless of lien perfection and priority issues, Producers cannot assert a security interest in Debtor's goods, inventory, accounts, proceeds, and deposit accounts under Texas § 9.343 because the Conoco Phillips General Provisions that are incorporated by reference into certain of the Producer Agreements provide for express waiver of Producers' liens. The Producer Agreements, which are contracts between Debtor and certain of the Producers,10 include the following language:

The Conoco Phillips General Provisions include several provisions, including the following:

Agent asserts that the Delaware Bankruptcy Court in SemCrude determined that producers of oil and gas who entered into contracts containing Conoco Phillips General Provisions waived any lien that could have arisen under Texas § 9.343. To support its argument, Agent cites to two cases: New Dominion, LLC v. J. Aron & Co. (In re SemCrude, L.P.), No. 08-11525, 2018 WL 481862 (Bankr. D. Del. Jan. 17, 2018) and J. Aron & Co. v. SemCrude, L.P. (In re SemCrude, L.P.), 504 B.R. 39 (Bankr. D. Del. 2013).

In New Dominion, LLC v. J. Aron & Co. (In re SemCrude, L.P.), upstream producer New Dominion, LLC ("ND") sold oil to SemCrude, a midstream service provider. 2018 WL 481862 at *1. SemCrude then sold oil to third-party downstream purchasers, including J. Aron & Company ("J. Aron"). Id. After SemCrude filed for bankruptcy, ND and other upstream producers were owed millions of dollars for oil and gas delivered to SemCrude pre-petition. Id. To recover unpaid funds for oil and gas sold to SemCrude, ND, an Oklahoma-based company, filed liens under Okla. Stat. Ann. tit. 52, §§ 548.1-548.6.11 Id. ND then filed suit against J. Aron to foreclose on the alleged statutory liens. Id. at *2. J. Aron contended that ND could not assert lien rights against its proceeds from sales of oil because: (1) ND sold oil to SemCrude under an express warranty, and (2) SemCrude sold oil to J. Aron under an identical express warranty. Id. at *3. J. Aron also argued that ND could not demonstrate that J. Aron ever received any of ND's oil from SemCrude. Id. The Delaware Bankruptcy Court held that ND, an upstream producer, waived its right to assert a lien in its oil against J. Aron, a downstream purchaser, when the oil was sold under the warranty provided by the Conoco Phillips General Provisions. Id. at *4.

In J. Aron & Co. v. SemCrude, L.P. (In re SemCrude, L.P.), the Delaware Bankruptcy Court held that downstream purchaser J. Aron purchased oil and gas from midstream producer SemCrude free and clear of any liens of upstream producers who originally sold the product to SemCrude because the downstream purchasers were both "buyers for value" under UCC §9-317 and "buyers in the ordinary course" under UCC § 9-320. 504 B.R. at 43, aff'd, 864 F.3d 280 (3d Cir. 2017). In dicta, the Delaware Bankruptcy Court noted that the Conoco Phillips General Provisions incorporated in the contracts between SemCrude and the downstream purchasers served as an "express [warranty] that the product was not subject to any security interests." Id. at 60.

Producers contend that the Conoco Phillips General Provisions in certain of the Producer Agreements with Debtor are nothing more than a warranty to purchasers that oil in the hands of the purchasers is not subject to the Producers' liens. Next, Producers argue that even if the Conoco Phillips General Provisions in certain of the Producer Agreements serve as a warranty preventing Producers from asserting a lien to secure the purchase price of the oil and gas, then Producers could still assert a lien as to the proceeds received from the sale of the oil delivered to Debtor. Producers also argue that the Conoco Phillips General Provisions provided a warranty only to downstream purchasers, not to Agent or Lenders, (emphasis added). Finally, Producers assert that there is no privity between Producers and Agent, nor between Agent and downstream purchasers.

Intervenor argues that Agent failed to produce evidence showing that Debtor's purchase of product from Intervenors was subject to the Conoco Phillips General Provisions. Intervenors state that the RADCO Purchase Agreement does not contain any of the language cited by Agent that results in the alleged waiver of claims. In Agents' Reply, Agent asserts that while the RADCO Agreement does not contain a reference to the Conoco Phillips General Provisions, it contains clear waiver language:

Agent's Reply to Response, p. 15 (ECF No. 109) (emphasis in original). According to Agent, this language waives Intervenors' ability to assert security interests in Debtor's goods, inventory, accounts proceeds, and deposit accounts.

The Court finds that incorporation of the Conoco Phillips General Provisions in certain of the Producer Agreements did not cause Producers to waive their ability to assert a lien or security interest in oil and gas and proceeds thereof under Texas § 9.343. Likewise, the Court finds that the warranty language in the RADCO Agreement did not serve as a waiver. Contrary to Agent's assertions, the Delaware Bankruptcy Court's findings in New Dominion, LLC v. J. Aron & Co. and J. Aron & Co. v. SemCrude, L.P. are inapposite on the issue of whether the incorporation of the Conoco Phillips General Provisions in certain Producer Agreements serves as a waiver of certain Producers' rights to assert a lien in oil and gas and proceeds thereof under Texas § 9.343.

New Dominion, LLC v. J. Aron & Co. and J. Aron & Co. v. SemCrude, L.P. are factually distinct from the facts in the present case in that they address the relevant rights between an upstream producer and downstream purchaser as it relates to oil and gas sold to and by a midstream producer. In the present matter, the Court is assessing the relative rights between a lender and an upstream producer as it relates to oil and gas sold by Debtor, a midstream provider. Stated differently, in New Dominion, LLC v. J. Aron & Co. and J. Aron & Co. v. SemCrude, L.P., the upstream producers were seeking to enforce their rights against the downstream purchaser; here, Agent is seeking to enforce its rights against an upstream producer. Therefore, the Court concludes that the Conoco Phillips General Provisions do not cause Producers and Intervenors to waive their rights to assert a lien under Texas § 9.343.

B. Conflict of Law Dispute Between Agent, Producers, and Intervenors Regarding Perfection and Priority of Security Interests in Goods, Inventory, Accounts, Proceeds and Deposit Accounts

Agent's next argument is that conflict of law issues exist in the present matter. Agent assets that conflict of law disputes should be resolved through application of the Restatement (Second) of the Law Conflict of Laws (hereinafter "Restatement"). Agent asserts that § 6(1) of the Restatement requires the Court to apply UCC § 9-301, which is the same in Delaware and Texas, to determine priority and perfection of security interests being alleged in Debtor's goods, inventory, accounts, and proceeds. Under UCC § 9-301, "while a debtor is located in a jurisdiction, the local law of that jurisdiction governs perfection, the effect of perfection or nonperfection, and the priority of a security interest in collateral." Del. Code Ann. tit. 6, § 9-301(1); Tex. Bus. & Com. Code Ann. § 9.301(1). Agent argues that because Debtor is organized under the laws of Delaware, Delaware law governs perfection. In Delaware, perfection of a security interest in goods, inventory, accounts, and proceeds arises by filing a UCC-1 financing statement with the Delaware Department of State. Del. Code Ann. tit. 6, § 9-310(a). Because Agent was the first to file UCC-1 financing statements in Delaware on substantially all of Debtor's collateral, Agent contends that its security interest primes liens asserted by Producers and Intervenors.

In response, Producers and Intervenors argue that they have an automatically arising PMSI in Debtor's oil, gas and proceeds thereof for oil produced in Texas under the plain language of Texas § 9.343. Producers and Intervenors argue that section 9.343(p) of the Texas Business and Commerce Code12 prevents Agent from relying on UCC § 9-301 to determine the law governing perfection and priority of security interests held by Producers in Texas. Producers also contend that they have a first, prior and automatically perfected lien in Debtor's oil, gas, and proceeds thereof for oil produced in Oklahoma under the Oklahoma Lien Act.

Producers argue that to the extent there is a conflict of law, the Courts are not in complete agreement with addressing conflicts of law in bankruptcy. Citing to Vanston Bondholders Prot. Comm. v. Green, 30 F.3d 1578, 1581-82 (1946), Producers propose that the Court use a federal independent judgment test to evaluate choice of law issues on a case-by-case basis with deference to the state that has the most significant contacts and relationships over the affairs of Debtor. Producers also advocate that the Court must apply Restatement § 251 (1) to assess the "local law of the state that has the most significant relationship to the parties, the chattel, and the security interest" to make its determination on the validity and extent of its security interest in oil, gas, and proceeds thereof.

In the present dispute, the Court must determine: (1) which state law(s) govern perfection of security interests, and (2) if the security interests are properly perfected, priority among the perfected security interests. An overview of each relevant state's law is provided below.

1. Texas Business & Commerce Code

Producers and Intervenors argue that, to the extent they produced oil and gas in Texas and sold oil to Debtor in Texas, their security interests in Debtor's oil, gas and proceeds thereof arise under Texas § 9.343 and result in a PMSI that primes any security interests held by Agent. Texas § 9.343, which is a non-uniform amendment to Texas's version of the UCC states in part:

Tex. Bus. & Com. Code Ann. § 9.343(a). An "interest owner" is defined as a "person owning an entire or fractional interest of any kind or nature in oil or gas production at the time of severance, or a person who has an express, implied, or constructive right to receive a monetary payment determined by the value of oil or gas production or by the amount of production." Tex. Bus. & Com. Code Ann. § 9.343(r)(2). A "first purchaser" is defined, in relevant part, as "the first person that purchases oil or gas production from an operator or interest owner after the production is severed." Tex. Bus. & Com. Code Ann. § 9.343(r)(3). An "operator" is a "person engaged in the business of severing oil or gas production from the ground, whether for the person alone, only for other persons, or for the person and others." Tex. Bus. & Com. Code Ann. § 9.343(r)(4).

Texas § 9.343 gives rise to a "security interest" that is "perfected automatically without the filing of a financing statement." Tex. Bus. & Com. Code Ann. § 9.343(b). Automatic perfection occurs "if the interest of the secured party is evidenced by a deed, mineral deed, reservation in either, oil or gas lease, assignment or any other such record recorded in the real property records of a county clerk, that record is effective as a filed financing statement for the purposes of this chapter." Id. Moreover, section 9.343(d) of the Texas Business and Commerce Code creates a "lien that secures the rights of any person who would be entitled to a security interest under [section 9.343(a)] except for lack of any adoption of a security agreement by the first purchaser or lack of possession or record required by [section 9.203] for the security interest to be enforceable." Tex. Bus. & Comm. Code Ann. § 9.343(d).

The "security interest" that arises in favor of interest owners under Texas § 9.343 exists in: (i) oil and gas production in the possession of the first purchaser, and (ii) identifiable proceeds of that production owned by, received by, or due to the first purchaser. Tex. Bus. & Com. Code Ann. § 9.343(c)(1). Interest owners' security interests in identifiable proceeds exist for "an unlimited time if: (A) the proceeds are oil or gas production, inventory of raw, refined, or manufactured oil or gas production . . .; (B) the proceeds are accounts, chattel paper, instruments, documents, or payment intangibles; or (C) the proceeds are cash proceeds, as defined in [section 9.102] . . . ." Tex. Bus. & Com. Code Ann. § 9.343(c)(1)(A). Security interests created by Texas § 9.343 have the following priorities over other Chapter 9 security interests:

Tex. Bus. & Com. Code Ann. § 9.343(f).

On the issue of priority, section 9.322 of the Texas Business and Commerce Code states, "[conflicting perfected security interests . . . rank according to priority in time of filing or perfection. Priority dates from the earlier of the time of a filing covering the collateral is first made or the security interest is . . . first perfected." Tex. Bus. &. Com. Code Ann. § 9.322(a)(1).

2. Oklahoma Law

Oklahoma Producers argue that to the extent oil and gas was produced in Oklahoma and sold to Debtor in December 2017, Oklahoma Producers are entitled to a statutory lien in Debtor's oil, gas, and proceeds thereof that takes priority over any other lien, whether arising by contract, law, equity, or otherwise. The Oklahoma Lien Act14 is a statutory lien provision that arises under Oklahoma state law. "To secure the obligations of a first purchaser15 to pay the sales price, each interest owner16 is granted an oil and gas lien to the extent of the interest owner's interest in oil and gas rights." Okla. Stat. Ann. tit. 52, § 549.3. "Oil and gas rights" are defined in the Oil and Gas Owners' Lien Act of 2010 as follows:

Okla. Stat. Ann. tit. 52, § 549.2. An oil and gas lien "exists in and attaches immediately to all oil and gas on the effective date of this act; continues uninterrupted and without lapse in all oil and gas upon severance; and continues uninterrupted and without lapse in and to all proceeds." Okla. Stat. Ann. tit. 52, § 549.3. Moreover, "an oil and gas lien exists until the interest owner or representative first entitled to receive the sales price has received the sales price. Id. In Oklahoma, an oil and gas lien "exists as part of and incident to the ownership of oil and gas rights and is perfected automatically without the need to file a financing statement or any other type of documentation." Okla. Stat. Ann. tit. 52, § 549.4. "Except for a permitted lien,17 an oil and gas lien is a lien that takes priority over any other lien, whether arising by contract, law, equity or otherwise, or any security interest." Okla. Stat. Ann. tit. 52, § 549.7. Comment 1 title 52, section 549.7 of the Oklahoma Statutes & Court Rules states that "an interest owner's oil and gas lien takes priority over any other lien or any security interest. . . [creating] an automatic super-priority without any public notice by a filing or possession." Okla. Stat. Ann. tit. 52 § 549.7 cmt. 1.

3. Delaware Law

Agent argues that, pursuant to Delaware § 9-301, Delaware law applies to determine perfection and priority of security interests in Debtor's goods, inventory, accounts, and proceeds. Unlike in Texas, Delaware's version of UCC Article 9 does not contain a non-standard provision providing for automatic perfection of a security interest to producers of oil and gas. Likewise, Delaware's version of UCC Article 9 does not contain any statutory lien provisions similar to those arising under the Oklahoma Lien Act that determine the lien rights of producers of oil and gas.

Agent also argues that, pursuant to Delaware § 9-304(a), New York law applies to determine perfection and priority of security interests in Debtor's deposit accounts.

a. Perfection of Goods, Inventory, Accounts, Proceeds

Under Delaware law, perfection of a security interest in inventory, accounts, and proceeds is achieved by filing a financing statement with the Delaware Department of State. See Del. Code Ann. tit. 6, § 9-310(a) (providing that "a financing statement must be filed to perfect all security interests" except otherwise stated in the exceptions, which are not relevant here); see also Del. Code Ann. tit. 6, § 9-501 (providing that if Delaware law governs perfection of a security interest, "the office in which to file a financing statement to perfect the security interest is . . . the office of the Secretary of State). A perfected security interest in collateral attaches to "any identifiable proceeds of collateral" and "is a perfected security interest if the interest in the original collateral was perfected." Del. Code Ann. tit. 6, §§ 9-315(a)(2), (c). Delaware follows the first-to-file-or-perfect rule, meaning that "conflicting perfected security interests . . . rank according to priority in time of filing or perfection." Del. Code Ann. tit. 6, § 9-322(a)(1). "Priority dates from the earlier of the time a filing covering the collateral is first made or the security interest . . . is first perfected." Id.

b. Perfection of Deposit Accounts

Delaware law provides that perfection, the effect of perfection, and priority of a security interest in a deposit account is governed by local law of the bank's jurisdiction. Del. Code Ann. tit. 6, § 9-304(a). Agent argues that its security interest in Debtor's deposit accounts was perfected by control. A bank's jurisdiction is determined by "an agreement between the bank and its customer governing the deposit account [that] expressly provides that the agreement is governed by the law of a particular jurisdiction." Del. Code Ann. tit. 6, § 9-304(b)(1). If an agreement does not expressly provide that that the agreement is governed by the law of a particular jurisdiction, then the law governing perfection is based on "an agreement between the bank and its customer governing the deposit account [that] expressly provides that the agreement is governed by the law of a particular jurisdiction." Del. Code Ann. tit. 6, § 9-304(b)(2).

4. Conflict of Law Between Agent and Oklahoma Producers

Producers who produced oil and gas in Oklahoma and sold it to Debtor (hereinafter referred to as "Oklahoma Producers") argue that the Oklahoma Lien Act causes them to have a first, prior and automatically perfected lien in Debtor's oil and gas and proceeds thereof based on amounts due for oil produced in Oklahoma and sold to Debtor. The Declaration of Deborah Kryak notes that "less than $1 million of oil produced and delivered in Oklahoma was purchased by Debtor in December 2017" and that "the Oklahoma oil was primarily delivered to customers in Oklahoma" Agent's App'x, Pt. 16 (ECF No. 90-15).

The Oklahoma Lien Act states that an "oil and gas lien" exists "to the extent of the owner's interest in oil and gas rights . . . and shall exist as part of and incident to the ownership of oil and gas rights." Okla. Stat. Ann. tit. 52, § 549.3(A). Comment 2 to title 52, section 549.3(A) of the Oklahoma Statutes & Court Rules provides that the Oklahoma Lien Act "makes it clear that the interest owner's oil and gas lien created by the Lien Act is not a UCC Article 9 security interest but rather arises as part of a real estate interest of the interest owner in the materials." Okla. Stat. Ann. tit. 52, § 549.3(A), cmt. a. Moreover, comment a notes that "the governing law is the law of the state where the well is located. . . [to avoid] application of the UCC Article 9 choice of law rules for personal property." Id. (citations omitted). The Oklahoma Lien Act also provides that no interest owner shall be "required, as a condition or term of an agreement to sell or otherwise, . . . to agree to any provision that would apply the law of any state other than the State of Oklahoma insofar as the same relates to rights under this act, and any such purported waiver . . . shall be void as a matter of public policy in this state." Okla. Stat. Ann. tit. 52, § 549.9.

Under the Oklahoma Lien Act, an interest owner's lien "exists in and attaches immediately to all oil and gas on the effective date of this act." Okla. Stat. Ann. tit. 52, § 549.3(B)(1). An interest owner's lien also "continues uninterrupted and without lapse in all oil and gas upon and after severance" and "continues uninterrupted and without lapse in and to all proceeds." Okla. Stat. Ann. tit. 52, §§ 549.3(B)(2), (3). The Oklahoma Lien Act provides that an oil and gas lien "takes priority over any other lien, whether arising by contract, law, equity, or otherwise, or any security interest." Okla. Stat. Ann. tit. 52, § 549.7. Rights granted to interest owners under the Oklahoma Lien Act "are to be liberally construed" to "afford the interest owner the most comprehensive protection" to receive the sales price from a purchaser. Okla. Stat. Ann. tit. 52, § 549.12(A).

As of the date of this Opinion, the Court is unaware of an opinion by any court that interprets and applies the Oklahoma Lien Act to determine lien perfection and priority among a pool of competing creditors that includes producers of oil and gas in Oklahoma.18 In Gaskins v. Texon, LP, the Oklahoma Court of Appeals analyzed whether a downstream purchaser had a duty under Oklahoma's Production Revenue Standards Act to hold revenue or proceeds in an implied trust for the benefit of the legal owner. 321 P.3d 985, 987 (Okla. Civ. App. 2013). The Gaskins court noted in dicta that the Oklahoma Legislature repealed the existing Lien Act of 1988 and enacted Oklahoma Lien Act in 2010 "in response to the [SemCrude] litigation." Id. at 990 (citing Okla. Stat. Ann. tit. 52, § 549.1, cmt. 10) (noting that the Oklahoma Lien Act was "designed to remedy some of the deficiencies perceived to be present in the [pjrior [a]ct as well as to address some of the issues that emerged in the SemGroup litigation"). The Gaskins court provided "the purpose of the statute was to give Oklahoma producers and royalty owners a first-priority lien to secure payment for their interest in oil and gas sold to a first purchaser." Id. The Gaskins court further stated:

Id. at 991 (citing There's A New Act in Town: How the Oklahoma Oil and Gas Owners' Lien Act of 2010 Strengthens the Position of Oklahoma Interest Owners, 65 Okla. L.Rev. 133 (2012)).

The Court notes that Oklahoma Producers did not provide evidence demonstrating their interest in "oil and gas rights." See Okla. Stat. Ann. tit. 52, § 549.2(9). To the extent Oklahoma Producers can demonstrate that they have "oil and gas rights" subject to an oil and gas lien under the Oklahoma Lien Act, the Court finds that Oklahoma law applies to determine the perfection and priority of Oklahoma Producers' interests in oil, gas, and proceeds thereof for oil produced in Oklahoma and sold to Debtors in December 2017. See Okla. Stat. Ann. tit. 52, § 549.3. As such, the Court denies Agent's summary judgment as to Oklahoma Producers.

5. Conflict of Law Between Agent, Texas Producers, and Intervenors

Next, the parties contend that the Court must determine the law that governs perfection and priority of security interests in Debtor's accounts receivable, inventory, proceeds, and deposit accounts among Agent, Texas Producers, and Intervenors. Agent argues that UCC § 9-301, which is the same in Delaware as in Texas, determines perfection and priority. Texas Producers and Intervenors contend that Texas § 9.343, a non-standard provision incorporated into the Texas Business & Commerce Code's adoption of the UCC, determines perfection and priority. The Delaware Code does not contain a non-standard provision similar to Texas § 9.343.

When a conflict of law issue arises in a bankruptcy case, the Court is faced with the unsettled question of which choice-of-law rules should be applied. See Tow v. Raflzadeh (In re Cyrus II Partnership), 413 B.R. 609, 613 (Bankr. S.D. Tex. 2008). Traditionally, federal courts with diversity jurisdiction apply the "forum state's conflicts-of-law rules to determine what law governs state-law claims." Bailey v. Shell W. E&P, Inc., 609 F.3d 710, 722 (5th Cir. 2010) (citing Klaxon v. Stentor Elec. Mfg. Co., 313 U.S. 487, 496 (1941)). Bankruptcy courts, however, "sit in federal question jurisdiction and not diversity jurisdiction" and thus are not bound by the Supreme Court's determination in Klaxon that the forum state's conflict-of-law rules apply. See Tow, 413 B.R. at 613. The Bankruptcy Code does not provide a method for resolving conflicts of law. Fishback Nursery, Inc. v. PNC Bank, N.A., Case No. 3-16-CV-03267, 2017 WL 6497802 at *3 (N.D. Tex. Dec. 19, 2017).

Texas Producers argue that, to the extent there is a conflict of law, the Court should apply the federal independent judgment test expressed in Vanston Bondholders Protective Comm. v. Green, 329 U.S. 156 (1946). Specifically, Texas Producers urge the Court to look to Restatement §§ 6(2) and 251(1) to evaluate choice of law issues on a case-by-case basis with deference to the state that has the most significant contacts and relationships over the affairs of Debtor. Producers' Response, p. 11 (ECF No. 105) (citing Vanston, 329 U.S. at 162). Restatement § 251 states:

Restatement (Second) Conflict of Laws § 251(1). Texas Producers also cite to comment e of Restatement § 251(1), which provides that "greater weight will be given to the location of the chattel, or group of chattels, at the time the security interest attached than to any other contact." Id. Texas Producers argue that Texas law should apply because their security interests are created by state law and granted in oil and gas located and produced in Texas.

Agent argues that in determining how to resolve conflicts of law, the Court should apply the Restatement because both Delaware and Texas resolve choice-of-law issues through an analysis under the Restatement. See Travelers Indent. Co. v. Lake, 594 A.2d 38, 46-47 (Del. 1991); see also Reddy Ice Corp. v. Travelers Lloyds Ins. Co., 145 S.W.2d 337, 340 (Tex. App.-Houston 2004, no pet.). Agent contends that Restatement § 6(1) is the applicable Restatement provision to determine the issues here. The Court notes that the "most significant relationship" test discussed in Restatement § 251 is guided by the choice-of-law principles stated in Restatement § 6, which provides that:

Restatement (Second) of Conflict of Laws § 6. According to Agent, Restatement § 6(1) Restatement applies because UCC § 9-301, which is the same in Delaware and Texas, is the relevant statutory directive on choice of law that the Court must follow to determine perfection and priority of security interests in goods, inventory, accounts, and proceeds.

The Fifth Circuit has not determined whether bankruptcy courts should exercise federal choice-of-law principles or the forum state's choice-of-law rules. MC Asset Recovery LLC v. Commerzbank A.G. etal (In re Mirant Corp.), 675 F.3d 530, 536 (5th Cir. 2012); see also Woods-Tucker Leasing Corp. of GA v. Hutcheson-Ingram Dev. Co., 642 F.2d 744, 749 (5th Cir. 1981). Moreover, the Fifth Circuit has avoided determining which choice-of-law principles to apply in bankruptcy cases if federal and forum-state choice-of-law rules produce the same result. Woods-Tucker, 642 F.2d at 748 (stating that the Supreme Court and the Fifth Circuit have "taken care to avoid resolving [the] question" of whether a bankruptcy court must apply the choice of law rules of the forum state or exercise its independent judgment) (citing Fahs v. Martin, 22 F.2d 387, 396-97 (5th Cir. 1955)). The federal choice-of-law rule consists of the `"independent judgment test,' which is a multi-factor contacts analysis that applies the law of the state with the most significant relationship to the transaction at issue." ECN Capital (Aviation) Corp. v. Airbus Helicopters SAS (In re CHC Grp. Ltd.), Case No. 16-3151-BJH, 2017 WL 1380514 at *19 (Bankr. N.D. Tex. Mar. 28, 2017); citing MC Asset Recovery, 675 F.3d at 536. Meanwhile, the forum state here, Texas, applies the Restatement to decide choice-of-law issues.19 ECN Capital, 2017 WL 1380514 at *19.

In the present case, to the extent there is a "threshold question of whether the federal or forum (Texas) law applies," the Court finds that it is not necessary to make that determination. Woods-Tucker, 642 F.2d at 748. Both Texas and Delaware have adopted the UCC, which is regarded as "the federal law of commerce regarding transactions including secured transactions." Id. at 749 (citing In re King-Porter Company, 446 F.2d 722, 732 (5th Cir. 1971). As such, the Court looks to the UCC as the relevant law governing perfection and priority of security interests in the collateral at issue here, which is all personal property. See Davidson Oil County Supply v. Klockner, Inc., 908 F.2d 1238, 1248 (5th Cir. 1990) (stating that because the UCC governed the case, the choice of law provisions contained in the UCC "must be applied").

To "promotje] certainty and predictability in commercial transactions," Article 9 of the UCC was revised in 2001 to include UCC § 9-301. See In re SemCrude, 407 B.R. at 136 (citing Shell Oil v. URN, Inc., 144 S.W .3d 429, 435 (Tex. 2004) (citations omitted)). Texas § 9.301 and Delaware § 9-301 have adopted UCC § 9-301 uniformly. Texas § 9.301 and Delaware § 9-301 both provide that "while a debtor is located in a jurisdiction, the local law of that jurisdiction governs perfection, the effect of perfection or nonperfection, and the priority of a security interest in collateral." Tex. Bus. & Com. Code Ann. § 9.301(1); Del. Code Ann. tit. 6 § 9-301(1). The location of a registered organization is defined in UCC § 9-307(e), which provides "a registered organization that is organized under the law of the state is located in that state." Del. Code Ann. tit. 6 § 9-307(e); Tex. Bus. & Com. Code Ann. § 9.307(e).

Here, the parties do not dispute that the Debtor is organized under the laws of Delaware. As such, regardless of whether Texas § 9.301 or Delaware § 9-301 applies, performing the analysis under each state's law results in the same outcome—because Debtor is organized under the laws of Delaware, Debtor is "located" in Delaware for the purposes of determining perfection of security interests in collateral, including goods, inventory, accounts, and proceeds. Therefore, the Court finds that Delaware's UCC governs perfection, effect of perfection or nonperfection, and the priority of security interest in collateral, which includes goods, inventory, accounts, and proceeds. See Del. Code Ann. tit. 6 § 9-301.

Texas Producers and Intervenors contend that Agent's reliance on UCC § 9-301 is misplaced, given that § 9.343(p) of the Texas Business & Commerce Code provides that "[t]he rights of any person claiming a security interest or lien created by [Texas's Article 9] are governed by the other provisions of this chapter except to the extent that this section necessarily displaces those provisions." (emphasis added). Intervenors argue that it would be "absurd" if non-Texas entities could rely upon UCC § 9-301 to eliminate all provisions of Texas § 9.343.

When construing any statute, including the UCC, "the statute must be read as a whole." In re Condor Ins. Ltd., 601 F.3d 319, 321 (5th Cir. 2010). Specifically, the Fifth Circuit has determined that "it is a `cardinal rule that a statute is to be read as a whole,' in order not to render portions of it inconsistent or devoid of meaning.'" In re Glenn, 900 F.3d 187, 190 (5th Cir. 2018) (citations omitted); see also Antonin Scalia & Bryan A. Garner, Reading Law: The Interpretation of Legal Texts 180 (2012) (Under the harmonious-reading canon, "[t]he provisions of a text should be interpreted in a way that renders them compatible, not contradictory."). There is no language or provision in Texas § 9.343 expressly displaces or defeats Texas § 9.301. Likewise, there is no language or provision in Texas § 9.301 that excepts security interests and liens granted under Texas § 9.343 from being subject to its terms. Therefore, the Court refuses to apply the vague language of Texas Business and Commerce Code § 9.343(p) in such a broad manner that it would nullify the UCC law governing perfection and priority found earlier in the Texas Business and Commerce Code at Texas § 9.301. The Court is not tasked with the role of legislating, nor is it within the Court's province to posit or infer that the Texas Legislature intended for Texas § 9.343 to trump Texas § 9.301. Rather, the Court reads the plain language of Texas § 9.301 and Texas § 9.343 harmoniously because there is no other statutory language dictating otherwise.

Texas Producers also cite to Official Comment 7 to Delaware § 9-320 which states in the context of a discussion of Delaware § 9-320(d) that:

Del. Code Ann. tit. 6 § 9-320(s) official cmt. ¶ 7 (emphasis added). Texas Producers argue that the "other legislation" referred to in Official Comment 7 is Texas § 9.343.

The Court finds Comment 7 to be unpersuasive for a number of reasons. First, an official comment to statutory text is not binding law. Next, Comment 7 accompanies title 6, section 9-320 of the Delaware Code, which concerns the rights of a buyer in the ordinary course of business taking free of a security interest in certain instances. Section 9-320 is not a choice of law provision. Moreover, the existence of a non-binding comment stating that a "uniform solution" to protect oil and gas interests is "[left] to other legislation" does not require the Court to infer that the non-standard provision found in Texas § 9.343 unseats the law regarding perfection and priority at Texas § 9.301 when the explicit language of the statute does not provide for such an outcome.

Intervenors further contend that Agent is barred by waiver and estoppel by deed from claiming that Texas § 9.343 did not create a lien in favor of Intervenors and Texas Producers. Specifically, Intervenors cite to two sections in the Credit Agreement entered into by Debtor and Agent. See Agent's App'x, Pt. 2 (ECF No. 90-1). The first section identified that provisions of Texas § 9.343 would create a "First Purchaser Lien"20 that would eliminate any amounts associated with that lien from Debtor's "Borrowing Base.21" Id. The second section provided that a lien under Texas § 9.343 would exist as a permitted lien on the Debtor's property, assets or revenues, whether owned at the time or thereafter acquired. Id. Intervenors argue that entering into the Credit Agreement with those terms caused Agent to "waive its right to assert that Texas § 9.343 can never create a lien against Debtor." Intervenors' Response, pp. 6-7 (ECF No. 103).

The Court disagrees with Intervenors that the two provisions cited from Agent's Credit Agreement caused Agent to either (i) waive its priority over or (ii) subordinate its priority over a security interest asserted under Texas § 9.343. Waiver is "the intentional relinquishment of a known right or intentional conduct that is inconsistent with asserting that right." Teal Trading and Dev. LP v. Champee Springs Ranches Prop. Owners Ass'n, 534 S.W.3d 558, 584 (Tex. App.-San Antonio 2017, pet. filed). Waiver is a "question of fact" which requires the court to "examine the acts, words or conduct of the parties, and it must be `unequivocally manifested' that it is the intent of the party to no longer assert the right." Enterprise-Laredo Assoc. v. Hachars, Inc., 839 S.W .2d 822, 835-36 (Tex. App.-San Antonio 1992). The Court reviewed the Credit Agreement to evaluate the intent of the parties. Section 8.3 of the Credit Agreement provides:

Agent's App'x, Pt. 2 (ECF No. 90-1). The Court finds that the language at issue in the Credit Agreement did not result in Agent waiving its right to assert that it has priority over any security interests that arise under Texas § 9.343 because, as demonstrated by section 4.1.4 of the Credit Agreement above, Agent's Credit Agreement did not "unequivocally manifest" its intention to waive its lien rights or to subordinate its priority. See Agent's App'x, Pt. 2 (ECF No. 90-1) (stating "nothing herein shall be deemed to constitute an agreement to subordinate any of the Liens of the Collateral Agent"); see also Enterprise-Laredo, 839 S.W .2d at 835-36.

For the reasons stated above, the Court will apply UCC § 9-301, which is the same in Delaware as it is in Texas, to determine perfection and priority of security interests claimed by Agent, Texas Producers, and Intervenors.

6. Perfection and Priority of Security Interests Alleged by Agent, Texas Producers, and Intervenors

a. Perfection and Priority of Security Interests in Goods, Inventory, Accounts, and Proceeds

Under Delaware and Texas law, UCC § 9-301 determines which states' substantive laws govern perfection and priority of security interests in personal property. Tex. Bus. & Com. Code Ann. § 9.301(1); Del. Code Ann. tit. 6 § 9-301(1). The location of a registered organization is the state in which the entity is organized. Del. Code Ann. tit. 6 § 9-307(e); Tex. Bus. & Com. Code Ann. § 9.307(e). Here, Debtor is organized in Delaware, so Delaware law applies.

Under Delaware law, Agent, Texas Producers and Intervenors were required to file a financing statement with the Delaware Department of State to perfect their security interests in goods, inventory, accounts, and proceeds. Del. Code. Ann. tit 6. § 9-310(a) (providing that, subject to exceptions provided in Del Code Ann. tit § § 9-310(b) and 9-312(b), "a financing statement must be filed to perfect all security interests and agricultural liens"). Based on the evidence provided in the Motion for Summary Judgment, Agent has shown that it perfected its security interest in goods, inventory, accounts, and proceeds by filing UCC-1 financing statements with the Delaware Department of State on July 23, 2015 ("July 2015 Financing Statements"). Agent's App'x, Pt. 10 (ECF No. 90-9). Agent has also demonstrated that it filed the proper amendments to the July 2015 Financing Statements, which caused its security interests to remain continuously effective since July 23, 2015. Id. All Producers except Viceroy, RHEACO, and RADCO filed financing statements with the Delaware Department of State on various dates in January 2017. Plaintiff's Supplement, Pt. 2 (ECF No. 96-2). Producers and Intervenors' Responses do not discredit the validity of the July 2015 Financing Statements and amendments thereto.

Delaware law abides by the first-to-file-or-perfect rule, which causes "conflicting perfected security interests . . . [to] rank according to priority in time of filling or perfection." Del. Code Ann. tit. 6, § 9-322(a)(1). "Priority dates from the earlier of the time a filing covering the collateral is first made or the security interest . . . is first perfected." Id. Agent's July 2015 Financing Statements were filed before any of the Producers filed a UCC-1 financing statement in Delaware. Therefore, the Court finds, as a matter of law, that Agent's security interest in goods, inventory, accounts, and proceeds primes any alleged security interest held by the Producers and Intervenors because the Agent's July 2015 Financing Statements were filed first.

b. Perfection and Priority of Deposit Accounts

Cash proceeds of oil and gas produced by Texas Producers and Intervenors held by Debtor in deposit accounts as of the Petition Date are perfected subject to the "local law of [the] bank's jurisdiction." Del. Code. Ann. tit 6. § 9-304(a). "If an agreement between the bank and the debtor governing the deposit account expressly provides that a particular jurisdiction is the bank's jurisdiction for purposes of this part, this Article, or the [UCC], that jurisdiction is the bank's jurisdiction." Del. Code. Ann. tit. 6 § 9-304(b)(1). Debtor, Agent and JPMorgan Chase (as depositary), entered into the Blocked Account Control Agreement, which provides that New York law is JPMorgan Chase's jurisdiction. None of the parties dispute the validity of the Deposit Account Control Agreement. Therefore, the Court finds as a matter of law that perfection of security interests in Debtor's deposit accounts at JPMorgan Chase is governed by New York law.

Under New York law, Agent's liens on Debtor's deposit accounts as original collateral are perfected by control of the collateral. N.Y. U.C.C. § 9-312(b)(1). Control of a deposit account can be achieved through a deposit account control agreement, which is "an authenticated record that the bank will comply with instructions originated by the secured party directing disposition of the funds in the deposit account without further consent of the debtor." N.Y. U.C.C. § 9-104(a)(2); see N.Y. U.C.C. § 9-314(a). The Court finds that the Blocked Account Control Agreement establishes Agent's control over Debtor's deposit accounts at JPMorgan Chase. Producers and Intervenors do not argue that they entered into an agreement with Debtor's depository bank, nor do Producers and Intervenors contend that they attempted to establish control over Debtor's deposit accounts. As such, the Court finds as a matter of law that Agent holds a first priority security interest in Debtor's deposit accounts.

C. Purchase-Money Security Interest Held by Producers

Agent's Motion for Summary Judgment argues that even if Texas Producers can meet their burden to establish all elements of a security interest under Texas § 9.343, Agent's perfected security interests in Debtor's goods, inventory, accounts, proceeds, and deposit accounts still have priority over Texas Producers' liens by virtue of Tex. Bus. & Com. Code Ann. § 9.343(f). Because the Court found that Delaware law applies to determine perfection and priority of Texas Producers and Intervenors' security interests, the Court did not evaluate the merits of this legal argument made under Texas law.

D. Affirmative Defenses

Producers assert the following affirmative defenses in their original answer:

Answers/Counterclaims, (ECF No. 50 ¶¶ 63, 64). Additionally, Producers assert the following counterclaims:

Answers/Counterclaims, (ECF No. 50, ¶¶ 76, 80). Defendant Energy Reserves Group, LLC filed its Joinder to Producers' Original Answer and Counterclaim. (ECF No. 51). Agent filed its Reply to Producers' Counterclaim. (ECF No. 55). Thereafter, Debtor filed its answer to Agent's Complaint, stating that the Court needs to determine the extent, validity, and priority of liens between Agent and Producers (ECF No. 61).

RADCO and RHEACO filed their Motion to Intervene in this Adversary Proceeding (ECF No. 66), which was granted on July 24, 2018 (ECF No. 85). Intervenors joined in the adversary proceeding as defendants seeking the same relief that Producers assert. Thereafter, Producers filed their First Amended Answer and First Amended Counterclaim (ECF No. 70). In their First Amended Answer and First Amended Counterclaim, Producers added the following affirmative defense: Agent's claims are barred by the doctrine of waiver. (ECF No. 70, ¶ 65). Producers also added a counterclaim for conversion, stating the following:

(ECF No. 70, ¶¶ 83, 84).22

Agent filed its Reply to Defendants' Amended Answer and Plaintiffs Answer to Amended Counterclaim, Including Motions Under Fed. R. Bankr. P. 7012(f) to Strike Affirmative Defenses and Under Fed. R. Bankr. P. 7012(b)(6) to Dismiss Counterclaim for Conversion. ("Motion to Strike") (ECF No. 91). Agent's Motion to Strike alleges that when affirmative defenses are insufficiently plead, courts apply the same pleading standards as applied with respect to a complaint under Fed. R. Civ. P. Rule 12(b)(6). Woodfield v. Bowman, 193 F.3d at 362; Cabin Foods, LLC v. Rich Prod. Corp., No. EP-11-CV-318-KC, 2012 WL 433115, at *1 (W.D. Tex. Feb. 8, 2012). Agent's Motion to Strike also argues that Producers' pleadings list the affirmative defenses without stating any facts in support and accordingly, as plead, should be stricken under Fed. R. Civ. P. 12(f) (as adopted by Fed. R. Bankr. P. 7012(b)). (ECF No. 91). Agent argues that because affirmative defenses are subject to the same pleading requirements as a complaint, Producers must plead enough facts to state a claim to relief that is plausible on its face. Woodfield v. Bowman, 193 F.3d 354, 362 (5th Cir. 1999); Bell All. Corp. v. Twombly, 550 U.S. 544, 547 (2007). Flere, Agent alleges that Producers and Intervenors have not identified the elements of the defenses and have not pled any facts in support of those elements. Further, Agent argues that, because Producers and Intervenors have offered no proof or evidence in support of its affirmative defenses and counterclaims, that the Court should treat Producers and Intervenors' lack of proof and evidence as a "no evidence" summary judgment and render judgment in favor of Agent.

The court in Cabin Foods found that "a Rule 12(f) motion to strike a defense is proper when the defense is insufficient as a matter of law." 2012 WL 433115 at *1 Further, the court observed that "motions to strike are disfavored and are granted only when the defense fails as a matter of law or fact, the defense is completely unrelated to the claims at issue, or the maintenance of the defense would prejudice the movant." Id. (citation omitted).

Agent contends that Producers' pleading, which does no more than state the names of the affirmative defenses, is not enough to meet the pleading standards established by the Supreme Court in Twombly or Iqbal or to provide fair notice to Agent. E.E.O.C. v. Courtesy Bldg. Servs., Inc., No. 3:10-CV-1911-D, 2011 WL 208408, at *5 (N.D. Tex. Jan. 21, 2011) ("Courtesy's assertions of `waiver, release, estoppel, or unclean hands' are not accompanied by any factual allegations giving notice of the nature of the defense."); Software Publishers Ass'n v. Scott & Scott, LLP, No. CIV.A. 306CV0949-G, 2007 WL 2325585, at *2 (N.D. Tex. Aug. 15, 2007) (defendants' bald assertions that the plaintiffs claims are barred, in whole or in part, by the doctrines of waiver, estoppel, and unclean hands do not provide fair notice of the defenses).

Producers filed their Response to Agent's Motion to Strike Defenses and Motion to Dismiss Counterclaim for Conversion. (ECF No. 104).23 Though Producers concede that certain courts have applied the Iqbal and Twombly heightened pleading standards to affirmative defenses, Producers argue that the district courts in the Western District of Texas have consistently held that notice of pleading of affirmative defenses is sufficient and that the Iqbal and Twombly standards do not apply to affirmative defenses. See, e.g., BCOWW Holdings, LLC v. Collins, No. 17-CA-00379, 2017 WL 4082626 at *4-6 (W.D. Tex. Sept. 15, 2017); Dyson v. Stuart Petroleum Testers, Inc., No. 1-15-CV-282, 2015 WL 4935527 at *3 (W.D. Tex. Aug. 18, 2015); Deaf Interpreter Serv., Inc. v. Webbco Enter., LLC, Case No. 13-CV-867, 2014 WL 12489609 at *3 (W.D. Tex. June 30, 2014) (applying a "notice" standard to affirmative defenses as opposed to using a plausibility standard under Iqbal and Twombly).

Producers also argue that a "no-evidence" motion for summary judgment is a creation of Texas state court, and is not available (and is procedurally improper) in federal court. 360 Mortgage Group, LLC v. Homebridge Fin. Serv., No. 14-CA-00847, 2016 WL 900577 at *2, n.2. (W.D. Tex. Mar. 2, 2016); Trautmann v. Cogema Mining, Inc., No. 5:04-cv-117, 2007 WL 1577652, at *3 (S.D. Tex. May 30, 2007); Mallory v. Lease Supervisors, No. 7T6-CV-248, 2017 WL 5147095 at *1 (W.D. Tex. Aug. 28, 2017). (ECF No. 105, ^ 35). In Mallory, the district court stated:

2017 WL 5147095 at *1. As to the burden shifting frame work in Rule 56, the district court stated in Trauimann that

2007 WL 1577652 at *3 (citing Russ v. Int'l Paper Co., 943 F.2d 589, 592 (5th Cir. 1991) (emphasis in original).

Producers also argue that the issue of waiver and estoppel are fact issues that require this Court to make a factual determination, and, as such cannot be decided as a matter of law. Producers state that waiver is an intentional relinquishment of a known right or conduct inconsistent with that right. Teal Trading, 534 S.W.3d at 584. Producers note that estoppel is a defense which precludes a party from taking positions inconsistent with or contrary to prior positions. In re Marriage Stroud, 376 S.W.3d 346, 356 (Tex. App.-Dallas 2012, pet. denied); XTO Energy Inc. v. Nikolai, 357 S.W.3d 47, 56 (Tex. App.-Fort Worth 2011, pet. denied).

As an initial matter, the Court agrees with Producers that a "no evidence" motion for summary judgment is a Texas state court procedural motion that has no application to federal court. As noted herein, the Western District of Texas District Courts have declined to apply "no evidence" summary judgment motions to federal practice and require the moving party to put on sufficient evidence in support of its claims.

In addition, the parties acknowledge that the Fifth Circuit has not expressly applied the Twombly and Iqbal plausibility standards to affirmative defenses. In the absence of further guidance from the Fifth Circuit, the Court finds that Fed. R. Civ. P. 8(c) only requires a fair notice standard of pleading. BCOWW Holdings, 2017 WL 4082686 at *4-6 (W.D. Tex. Sept. 15, 2017). That said, Producers must still advise the Court and Agent of the factual basis of its affirmative defenses. This adversary proceeding seeks a determination of the extent, priority, and validity of liens. The Court cannot discern how the affirmative defenses of estoppel and unclean hands rebut a request for a declaratory judgment action where Producers and Intervenors concede the validity and extent of the Agent's liens. Producers provide no basis for what kind of estoppel applies nor do Producers state the nature of the Agent's unclean hands. As such, the Court finds that Agent's Motion to Strike the affirmative defenses of estoppel and unclean hands should be granted. As to the issue of waiver, because the Court has found that under Delaware law that the Agent has a first priority lien in Debtor's goods, inventory, accounts, proceeds, and deposit accounts as to Texas Producers, the affirmative defense of waiver can no longer apply. Therefore, the Court also strikes Producer's affirmative defense of waiver.

E. Counterclaim of Conversion

Agent argues that Producers have failed to provide any evidence in support of their counterclaim for conversion. Motion for Summary Judgment, p. 31 (ECF No. 89).24 As such, Agent asks that the Court grant summary judgment in its favor on the absence of proof of Producers' establishing the elements of conversion.

In their Amended Answer to Complaint, Producers allege a counterclaim for conversion of money on deposit in Agent's bank accounts, based on two allegations. The first allegation is that Producers, under either Texas § 9.343 or the Oklahoma Lien Act have a "first priority perfected security interest, as secured parties, to secure the obligations of Debtor as the `first purchaser' of oil and gas production," Producers' Amended Answer to Complaint, (ECF No. 70, ¶ 74). The second allegation is that "in December 2017 and/or January 2018, Deutsche and Lenders (1) exercised cash dominion over [First River] and (2) swept substantially all of the funds held by the Debtor, including the amounts that represented proceeds from [First River's] sale of oil, gas and condensate, on which the Producers held first and priority liens." Id. at ¶ 75. Producers further allege:

(ECF Nos. 70, ¶¶ 83 and 84).

Agent asserts that a claim for conversion is defined as "the wrongful exercise of dominion and control over another's property in denial of or inconsistent with his rights." Bandy v. First State Bank, 835 S.W.2d 609, 622 (Tex. 1992) (quoting Tripp Village Joint Venture v. M. Bank Lincoln Centre, N.A., 774 S.W.2d 746, 750 (Tex. App.-Dallas 1989, writ denied)). Agent notes that a conversion claim has four essential elements: (i) the plaintiff owned, possessed, or had the right to possess property; (ii) the defendant unlawfully and without authorization assumed and exercised control over the property to the exclusion of, or inconsistent with, the plaintiffs rights as an owner; (iii) the plaintiff demanded return of the property; and (iv) the defendant refused to return the property. Grand Champion Film Production, L.L.C. v. Cinemark USA, Inc., 257 S.W.3d 478, 485 (Tex. App.-Dallas 2008, no pet.) (citation omitted).

Agent argues that Producers must show a "right of immediate possession," or their claim for conversion fails. United States v. Boardwalk Motor Sports, Ltd., 692 F.3d 378, 381 (5th Cir. 2012) (applying Texas law). Agent contends that claims for conversion of money under Texas law must meet certain requirements in addition to those set forth above, in particular:

Id. Agent states that the property alleged to have been converted is money in deposit accounts. Agent posits that Producers have not, and cannot, allege that money: (1) was delivered to the deposit accounts for safe keeping; (2) was intended to be kept segregated; (3) is substantially in the form in which it is received or an intact fund; and (4) was not the subject of a title claim by the keeper.

Agent argues that while the Producers and Intervenors claim liens on "oil" pursuant to Texas § 9.343 and/or the Oklahoma Lien Act, Producers do not allege that they have liens on the money in deposit accounts, and they do not allege that the statutes that would entitle them to a lien on such money in deposit accounts, much less the right to "immediately possess" the money in deposit accounts. Moreover, Agent maintains that Producers do not, and cannot, allege that Agent "unlawfully and without authorization assumed and exercised control over the property." Agent notes that some of the Producers allege that Agent held a "second lien position" on the money in deposit accounts; although Agent contends that it has a first lien position, and Producers' admission of the Agent's lien on the deposit accounts precludes any finding that the Agent acted unlawfully or without authorization. Further, Agent states that Producers do not allege that Producers demanded return of the money in deposit accounts or that Agent refused to return the money in deposit accounts. Finally, Agent argues that Producers have not only failed to plead a plausible claim for conversion, their reliance on Texas § 9.343 and the Oklahoma Lien Act conclusively establishes that a claim for conversion is not available to Producers under Texas law.

Producers state that a cause of action for conversion of a secured party's collateral is available to Producers in this adversary proceeding. See Trustmark Nat'l Bank v. Tegeler (In re Tegeler), 586 B.R. 598, 693 (Bankr. S.D. Tex. 2018) (applying conversion to a dischargeability determination under § 523(a)(6)). Producers argue that the conversion counterclaim specifically asserts that Producers had a first and prior security interest in the funds being held by the Debtor, representing proceeds of the sale. Producers argue that Agent would be liable to Producers for conversion of the collateral wrongfully ceased by Agent, should the Court rule in Producers' favor. Moreover, Producer states that, cash proceeds from a sale of collateral are subject to the security interest in the collateral itself, and the secured parties are entitled to recover cash proceeds from any unauthorized subsequent transferees. ITT Commercial Fin. Corp. v. Bank of the West, 166 F.3d 295, 305 (5th Cir. 1999).

The Court has found that: (i) Agent has a first lien on the proceeds of production of oil produced in Texas, and (ii) Agent has a first lien on Debtor's deposit accounts at JPMorgan Chase in New York. As noted herein, Agent's security interest primes the Texas Producers' alleged security interest under Delaware law. As such, there is no conversion of the Texas Producers' collateral because the collateral is subject to the Agent's superior security interest. That said, the Court also found that under the Oklahoma Lien Act, Oklahoma Producers have a security interest that is superior to that of the Agent's for oil and gas and proceeds thereof of oil produced in Oklahoma. Therefore, there is a question of fact as to the extent of Oklahoma Producers' security interest in any cash proceeds from the production of the oil in Oklahoma. The Court agrees with Agent that Producers' counterclaim as plead is deficient because there are no underlying allegations to support a claim for conversion. Now that the Court has determined that Oklahoma Producers have a superior security interest in the cash proceeds from Oklahoma production, the Court will allow Oklahoma Producers to replead their counterclaim for conversion. Further, the Court will grant Oklahoma Producers' counterclaim for a declaratory judgment on the proceeds from the production of oil from Oklahoma. After the Court determines the extent and amount of Oklahoma Producers' security interest in the Oklahoma proceeds, Oklahoma Producers may file their motion for attorney's fees.

Conclusion

For the foregoing reasons, IT IS THEREFORE ORDERED that Agent's Motion for Summary Judgment and Alternative Motion for Partial Summary Judgment (ECF No. 89) is GRANTED, IN PART and DENIED, IN PART. The Court will issue an Order consistent with this Memorandum Opinion.

ORDER GRANTING PRODUCER GROUP DEFENDANTS' MOTION FOR LEAVE TO APPEAL

CAME ON FOR CONSIDERATION Defendants U.S. Energy Development Corporation, Ageron Energy, LLC, Petroedge Energy IV, LLC, Teal Natural Resources, LLC, Crimson Energy Partners IV, LLC, Viceroy Petroleum LP, RLU Operating, LLC, Dewbre Petroleum Corporation, Jerry C. Dewbre, Trustee, American Shoreline, Inc., Texpata Pipeline Company, Aurora Resources Corporation, AWP Operating Co., Texron Operating LLC, Energy Reserves Group, LLC, Magnum Producing, LP, Magnum Engineering Company, Magnum Operating, LLC, Rock Resources, Inc. and Killam Oil Co., Ltd. (collectively "Producer Group" or "Appellants"), Motion for Leave to Appeal (the "Motion"), pursuant to 28 U.S.C. 158(a)(3) and Federal Rule of Bankruptcy Procedure 8004 (the "Bankruptcy Rules. And the Court, having review the Motion, has decided it is meritorious. IT IS THEREFORE:

ORDERED that the Motion is GRANTED; and it is further

ORDERED that the balance of the adversary proceeding still pending before the Bankruptcy Court is stayed pending the outcome of this appeal.

IT IS HEREBY ADJUDGED and DECREED that the below described is SO ORDERED.

Dated: March 07, 2019.

ORDER GRANTING, IN PART, AND DENYING, IN PART, AGENT'S MOTION FOR SUMMARY JUDGMENT AND ALTERNATIVE MOTION FOR PARTIAL SUMMARY JUDGMENT (ECF NO. 89)

Came on for consideration Deutsche Bank Trust Company Americas, Agent's Motion for Summary Judgment and Alternative Motion for Partial Summary Judgment (ECF No. 89) ("Motion for Summary Judgment"), Agent's Appendix of Facts in Support of Motion for Summary Judgment and Agent's Supplement to: Motion for Summary Judgment and Alternative Motion for Partial Summary Judgment (ECF Nos. 90, 96), RADCO Operations, LP and RHEACO, LTD.'s Response to Agent's Motion for Summary Judgment and Alternative Motion for Partial Summary Judgment (ECF No. 103), Producer Group's Response to Agent's Motion for Partial Summary Judgment or Alternatively, Motion for Partial Summary Judgment (ECF No. 105), and Agent's Amended Reply to: (1) RADCO Operations, LP and RHEACO, LTD.'s Response to Motion for Summary Judgment and Alternative Motion for Partial Summary Judgment; and (2) Producer Group's Response to Motion for Partial Summary Judgment and Alternative Motion for Partial Summary Judgment (ECF No. 110).

Upon consideration thereof, the Court finds that Agent's Motion for Summary Judgment and Alternative Motion for Partial Summary Judgment (ECF No. 89) is GRANTED, IN PART and DENIED, IN PART as follows:

IT IS ORDERED that Agent has a valid, perfected security interest on First River Energy, LLC's ("Debtor") goods, inventory, accounts, and proceeds that has priority over liens alleged by Texas Producers;

It is FURTHER ORDERED that Agent has a valid, perfected, first-priority security interest in Debtor's deposit accounts at JPMorgan Chase Bank, N.A. located in the state of New York;

It is FURTHER ORDERED that, to the extent Oklahoma Producers can produce evidence demonstrating extent and amount of sums owed by Debtor for its pre-petition purchase of oil and gas, Oklahoma Producers have a first-priority, automatically arising statutory lien under Okla. Stat. Ann. tit. 52, § 549.1 et seq.;

It is FURTHER ORDERED that the Court strikes Producers' affirmative defenses of waiver, estoppel, and unclean hands;

It is FURTHER ORDERED that Texas Producers' counterclaim for conversion fails as a matter of law and is therefore DISMISSED;

It is FURTHER ORDERED that Oklahoma Producers may replead their counterclaim for conversion within twenty-one (21) days from the date of entry of this Order; and

All other relief not specifically granted herein is DENIED.

IT IS HEREBY ADJUDGED and DECREED that the below described is SO ORDERED.

Dated: March 7, 2019.

MEMORANDUM OPINION GRANTING, IN PART AND DENYING, IN PART AGENT'S MOTION FOR SUMMARY JUDGMENT AND ALTERNATIVE MOTION FOR PARTIAL SUMMARY JUDGMENT (ECF NO. 89)

Came on for consideration Agent's Motion for Summary Judgment and Alternative Motion for Partial Summary Judgment1 (ECF No. 89) ("Motion for Summary Judgment"), Agent's Appendix of Facts in Support of Motion for Summary Judgment and Agent's Supplement to: Motion for Summary Judgment and Alternative Motion for Partial Summary Judgment (ECF Nos. 90, 96) ("Agent's Appendix"), RADCO Operations, LP and RHEACO, LTD.'s Response to Agent's Motion for Summary Judgment and Alternative Motion for Partial Summary Judgment (ECF No. 103) ("Intervenors' Response"), Producer Group's Response to Agent's Motion for Partial Summary Judgment or Alternatively, Motion for Partial Summary Judgment (ECF No. 105) ("Producers' Response"), and Agent's Amended Reply to: (1) RADCO Operations, LP and RHEACO, LTD.'s Response to Motion for Summary Judgment and Alternative Motion for Partial Summary Judgment and ( ) Producer Group's Response to Motion for Partial Summary Judgment and Alternative Motion for Partial Summary Judgment (ECF No. 110) ("Agent's Reply"). This Court took the matter under advisement. For the reasons stated herein, the Court finds that Agent's Motion for Summary Judgment is GRANTED, IN PART and DENIED, IN PART.

JURISDICTION

As an initial matter, the Court finds that it has jurisdiction over this proceeding under 28 U.S.C. §§ 1334 and 157(a) and (b)(1). This matter is a core proceeding under 28 U.S.C. §§ 157(b)(2)(A), (B), (K), and (O). All parties have filed a Statement Regarding Consent that consents to the Court's entry of final orders and final judgment. (ECF Nos. 57, 62, 63). This matter is within the Court's Jurisdiction and authority pursuant to the Supreme Court's ruling in Wellness Int'l Network, Ltd. v. Sharif (In re Sharif), 135 S.Ct. 1932 (2015).

FACTUAL BACKGROUND

On January 12, 2018 ("Petition Date"), First River Energy, LLC ("Debtor" or "First River") filed a voluntary petition for relief under chapter 11 of the Bankruptcy Code in the United States Bankruptcy Court for the District of Delaware (the "Delaware Bankruptcy Court"). On January 17, 2018, the Delaware Bankruptcy Court transferred venue of this case sua sponte to the United States Bankruptcy Court for the Western District of Texas, San Antonio Division. Debtor continues to operate its business and manage its property as a debtor-in-possession pursuant to 11 U.S.C. §§ 1107(a) and 1108.

Based on the Court's review of the facts and exhibits presented in the moving papers, along with the documents included in Agent's Appendix, the Court finds following undisputed facts.

A. General Business Operations

Prior to the Petition Date, Debtor provided midstream transportation services to the oil and gas industry across the southwestern United States and Great Plains. As a midstream service provider, Debtor purchased and marketed domestic crude oil and condensate directly from upstream producers. After purchasing oil from upstream producers, Debtor re-sold and delivered aggregated oil to third-party downstream purchasers through a combination of trucks and pipeline.

B. Debtor's Relationship with Producers

Pre-petition, Debtor entered into agreements with a number of upstream oil and gas producers to purchase oil and gas from wells situated in Texas and Oklahoma. The following upstream producers are defendants in the numbered adversary proceeding: U.S. Energy Development Corporation; Ageron Energy, LLC; Petroedge Energy IV, LLC; Teal Natural Resources, LLC; Crimson Energy Partners IV, LLC; Viceroy Petroleum, LP; RLU Operating, LLC; Dewbre Petroleum Corporation; Jerry C. Dewbre, Trustee; American Shoreline Inc.; Texpata Pipeline Company; Aurora Resources Corporation; AWP Operating Co.; Texron Operating LLC; Magnum Producing, LP; Magnum Engineering Company; Magnum Operating LLC; Rock Resources, Inc.; Killam Oil Co., Ltd.; and Energy Reserves Group, LLC (collectively referred to hereinafter as "Producers"). Generally, the terms of Producers' sale of oil to Debtor were delineated in purchase contracts ("Producer Agreements") entered into by Debtor and Producers individually. Pursuant to the Producer Agreements, Producers produced and delivered oil and gas to Debtor, who, in turn, would pay Producers on the twentieth day of the month following delivery.

During the relevant period (from December 1 through December 31, 2017), Producers sold Debtor oil and gas produced from wells located in Texas and Oklahoma. Under the terms of the Producer Agreements, Debtor was required to pay Producers for oil and gas provided in December 2017 on January 20, 2018. Debtor discontinued business operations on or about December 31, 2018. Debtor filed for chapter 11 bankruptcy protection on January 12, 2018.

As of the Petition Date, Debtor had not paid Producers for oil and gas provided in December 2017. Seeking payment from Debtor for unpaid invoices for December 2017 oil and gas sales, certain members of the Producers group2 filed proofs of claim in Debtor's bankruptcy case asserting claims for amounts owed secured by Debtor's oil, gas, and proceeds thereof under Tex. Bus. & Com. Code Ann. § 9.343 ("Texas § 9.343"). Producer U.S. Energy Development Corporation filed a proof of claim in Debtor's bankruptcy case for amounts owed secured by Debtor's oil, gas, and proceeds thereof under Texas § 9.343 and Okl. Stat. Ann. tit. 52, § 549. Proof of Claim of U.S. Energy Dev. Corp., Case No. 18-50085 (Claim No. 251-1).

C. Debtor's Relationship with Intervenors

RADCO Operations, LP ("RADCO") and RHEACO, Ltd. ("RHEACO") (collectively referred to hereinafter as "Intervenors"), who also produced and sold oil products to Debtor pre-petition, are intervening parties in this matter. Intervenors produced oil and gas in the state of Texas. On or about April 24, 2012, RADCO entered into a Crude Oil Purchase Agreement with O.G.O Marketing, LLC, a Texas limited liability company ("RADCO Purchase Agreement"). Intervenors' Response, Ex. A (ECF No. 103). Pursuant to the RADCO Purchase Agreement, RADCO produced and sold crude oil and condensate to Debtor. RHEACO was unable to produce a copy of a purchase contract with O.G.O. Marketing, LLC, but asserts in Intervenor's Response that it entered into an agreement similar to the RADCO Purchase Agreement. Like RADCO, RHEACO produced and sold oil and gas to Debtor.

In September 2013, O.G.O. Marketing, LLC changed its name to Texas Gathering Company, LLC and continued as a Texas limited liability company. Intervenors' Response, Ex. B (ECF No. 103). RADCO continued conducting business with Texas Gathering Company, LLC under the RADCO Purchase Agreement. On or about July 23, 2015, Texas Gathering Company, LLC was acquired by Debtor in this case, First River. First River is a Delaware limited liability company.

RADCO and RHEACO continued to produce crude oil in Texas and sell it to Debtor through December 2017. Pursuant to the RADCO Purchase Agreement, payment for crude oil sold and delivered was to be made by wire transfer on the twenty-third day of the month following the month of delivery. Intervenors' Response, Ex. A (ECF No. 103). Debtor would have been required to pay Producers for oil and gas provided in December 2017 on January 23, 2018. Debtor, however, filed for bankruptcy on January 12, 2018, which is before payment of December 2017 invoices became due to Intervenors. As of the Petition Date, Debtor had not paid Intervenors for oil provided in December 2017.

D. Pre-Petition Loan Documents

On July 3, 015, a credit agreement (the "Credit Agreement") was entered into under the laws of the state of Delaware by and among (i) First River Energy, LLC as borrower; (ii) Deutsche Bank AG New York Branch as collateral agent and as a Lender, Issuing Lender, Swing Line Lender ("Lender"); (iii) Deutsche Bank Trust Company Americas as Administrative Agent ("Agent"); and (iv) several banks and other financial institutions or entities as lenders. Agent's App'x, Pt. 1 (ECF No. 90-2). To guarantee payment of the Credit Agreement, Debtor entered into a guarantee agreement ("Guarantee Agreement") with Agent and Lender on July 23, 2015, under which Debtor assumed its role as a guarantor for debt issued under the Credit Agreement. Agent's App'x, Pt. 2 (ECF No. 90-3). On July 23, 2015, Debtor entered into a security agreement ("Security Agreement") with Agent and Lender. Agent's App'x, Pts. 2, 3 (ECF No. 90-3, 90-4). The terms of the Security Agreement granted Agent a continuing security interest ("Bank Security Interest") in substantially all of Debtor's assets, including:

Agent's App'x, Pt. 3 (ECF No. 90-4). To perfect the Bank Security Interest, Agent executed UCC-1 financing statements with the Delaware Department of State on July 23, 2015 that covered "all assets of Debtor, wherever located, whether now owned and existing or hereafter acquired or coming into existence, together with all proceeds thereof." Agent's App'x, Pt. 9 (ECF No. 90-8). Agent filed amendments to the UCC-1 financing statements in Delaware that caused its Bank Security Interest to remain continuously effective since July 23, 2015. Agent's App'x, Pt. 9 (ECF No. 90-8).

E. Deposit Account Control Agreement

Debtor's Schedule A B demonstrates that Debtor maintained deposit accounts at JPMorgan Chase Bank, N.A. ("JPMorgan Chase") and at Deutsche Bank. Schedule A/B: Assets-Real and Personal Property, Case No. 18-50085, (ECF No. 191). On July 23, 2015, Debtor, JPMorgan Chase (as depositary), and Agent (as secured party) entered into a Blocked Account Control Agreement (the "Blocked Account Control Agreement") in which Agent was granted a security interest in all of Debtor's funds on deposit in accounts at JPMorgan Chase. Agent's App'x, Pt. 5 (ECF No. 90-4). The Blocked Account Control Agreement indicates that its terms "shall be governed by and construed in accordance with the laws of the State of New York" because "the State of New York is the jurisdiction of [JPMorgan Chase] as [d]epositary for purposes of [s]ection 9-30 (b) of the Uniform Commercial Code." Agent's App'x, Pt. 5, ¶ 11 (ECF No. 90-4).

Debtor, JPMorgan Chase, and Agent entered into Amendment No. 1 to the Blocked Account Control Agreement ("Amendment No. 1") on January 31, 2017. Agent's App'x, Pt. 6 (ECF No. 90-5). The terms of Amendment No. 1 deleted two accounts from the initial Blocked Account Control Agreement and amended Debtor's company name from First River Midstream, LLC to First River Energy, LLC. Otherwise, the terms of the Blocked Account Control Agreement, including the New York choice-of-law provision, remain unchanged. Agent's App'x, Pt. 6 (ECF No. 90-5).

F. Events Leading to Bankruptcy

In November and December 2017, Debtor defaulted on making payments due under the terms of the Credit Agreement. On or about December 31, 2017, Debtor discontinued nearly all of its transactions involving the purchase and sale of oil,3 including those with Producers, Intervenors, and downstream purchasers. When Debtor filed for bankruptcy on January 12, 2018, Debtor had not paid Producers and Intervenors for any oil and gas purchases made in December 2017. Likewise, downstream purchasers had not paid Debtor for any oil and gas purchased from Debtor in December 2017.

G. Producer Claims Procedure Orders

Agent, Producers, and Intervenors each allege that they have a properly perfected, first priority security interest in Debtor's oil and gas production, deposit accounts, and resulting proceeds, including accounts receivable. To avoid a multiplicity of legal actions and have all claims to such collateral heard in one action, Debtor filed an Expedited Motion to Establish Procedures for the Resolution of Claims and Liens Against Estate Property in the bankruptcy case (Case No. 18-50085, ECF No. 331). After a hearing on March 28, 2018, the Court entered an Order Granting Expedited Motion to Establish Procedures for the Resolution of Claims and Liens Against Estate Property (Case No. 18-500 5, ECF No. 13) (the "Claims Procedure Order").

The Claims Procedure Order establishes that this adversary proceeding serves as a declaratory judgment action to determine the extent, validity, and priority of liens and other interests in "any or all of the oil products allegedly purchased by Debtor prior to the Petition Date and/or its proceeds, including accounts receivable,4 cash, or cash deposit proceeds from the Debtor's sale of oil." (Case No. 1-50085, ECF No. 413). The Claims Procedure Order further determines that this adversary proceeding shall be the "sole and exclusive method of litigating conflicting claims" regarding "any legal or equitable claims to ownership, entitlement, recovery or lien rights including, without limitation, perfection and priority of such lien rights" in oil products and proceeds, including accounts receivable, cash, or cash deposit proceeds from Debtor's sale of oil and gas. (Case No. 1-50085, ECF No. 413).

THE PARTIES' CONTENTIONS

Agent has filed its Motion for Summary Judgment, which asserts that Agent is entitled to summary judgment that: (a) Agent and Lenders have valid, perfected first-priority liens on Debtor's accounts receivable, deposit accounts and inventory, (b) Producers have no liens on Debtor's accounts receivable, deposit accounts and inventory, or alternatively, even if Producers had liens, liens held by Agent and Lenders have priority, (c) Producers' affirmative defenses are without merit, and (d) Producers should be denied recovery under their counterclaims. Motion for Summary Judgment, (ECF No. 89).

Agent asserts that, as of the Petition Date, Debtor had the following assets eligible for distribution among the parties: (a) $27,613,066.81 in accounts receivable owed from downstream purchasers for oil sold;5 (b) cash, cash equivalents, and financial assets of $1,190,256.00; and (c) inventory with a scheduled value of 1,894,01.9 and a "lower of cost or market value" of $150,000. Debtor's July 2018 Monthly Operating Report, Case No. 18-50085 (ECF No. 629), see also Agent's App'x, Pt. 16 (ECF No. 90-15).

A. Agent's Contentions

In its Motion for Summary Judgment, Agent argues first that Producers waived any right they had to assert a security interest in goods, inventory, accounts, and proceeds under Texas § 9.343 because the Producer Contracts included Conoco Phillips General Provisions6 language. Agent also argues in its Reply that the RADCO Purchase Agreement contained waiver language similar to the Conoco Phillips General Provisions that resulted in Intervenors waiving their right to assert a security interest in goods, inventory, accounts, and proceeds under Texas § 9.343.

Alternatively, Agent claims that there is a conflict of law between Delaware and Texas law regarding perfection and priority of security interests in Debtor's goods, inventory, accounts, and proceeds. Agent uses Restatement (Second) Conflict of Laws § 6(1) to argue that the laws of the state of Delaware govern perfection of security interests on Debtor's goods, inventory, accounts, and proceeds pursuant to the choice-of-law provisions in the Uniform Commercial Code ("UCC"). See Del. Code Ann. tit. 6, § 9-301 (West 2018); see also Tex. Bus. & Com. Code Ann. § 9.301. Agent argues that because it was the first creditor to file a financing statement with the Delaware Department of State, its security interest in substantially all of Debtor's assets primes any security interest alleged by Producers and Intervenors in the same collateral. Moreover, Agent argues that Producers and Intervenors hold unsecured claims to the extent that they did not file financing statements with the Delaware Department of State.

In the alternative, Agent asserts that even if Producers and Intervenors can establish that Texas § 9.343 applies, Agent's perfected security interests in Debtor's accounts receivable, proceeds and deposit accounts have priority over Producers and Intervenors' liens by virtue of the limitations of Tex. Bus. & Com. Code Ann. § 9.343(f). Specifically, Agent asserts that the oil held by Producers for resale was inventory, and Producers and Intervenors did not perfect their PMSI in inventory properly under Delaware law, which requires a financing statement to be filed with the Delaware Department of State. Agent argues next that even if Producers and Intervenors have a PMSI in inventory, that PMSI is limited to the inventory itself and identifiable cash proceeds but does not extend to accounts receivable. See Tex. Bus. & Com. Code Ann. § 3.324(b).

Agent asserts that it has a first lien on Debtor's deposit account located at JPMorgan Chase in New York because it has properly perfected its security interest through control. See N.Y. U.C.C. § 9-312(b)(1) (McKinney 2019). Specifically, Agent asserts that its Blocked Account Control Agreement with Debtor and JPMorgan Chase serves as an authenticated record that accomplishes control as required by New York law. See >N.Y. U.C.C. § 9-314.

Agent also asserts that affirmative defenses raised in the Answers/Counterclaims are meritless because no facts were pled to support the affirmative defenses of estoppel, unclean hands, or waiver that were asserted against the Agent. Finally, Agent contends that Producers' counterclaim for conversion fails as a matter of law.

Agent filed a proof of claim in the bankruptcy case that asserts a secured claim for "money loaned" in the amount of 13,4 8,55.92.7 Proof of Claim of Deutsche Bank Trust Company Americas, Case No. 18-50085 (Claim No. 226-1). Agent asserts that its claim is oversecured because collateral valued at $27.6 million is available for payment of Agent's claim. Furthermore, Agent argues that it is entitled to post-petition interest and reasonable fees, costs, and charges, including payment of the legal fees and expenses for Agent and Lenders pursuant to 11 U.S.C. § 506(b).

B. Producers' Contentions

Producers' Response argues that reference to the Conoco Phillips General Provisions in the Producer Agreements did not result in waiver of Producers' ability to assert a security interest in oil, gas, and proceeds thereof because: (1) on its face, the language of the Conoco Phillips General Provisions does not waive any lien as to the proceeds received from sale of oil delivered to Debtor; (2) Producers did not provide warranty representation to any other party than the downstream purchaser; and (3) there was not privity of contract between Producers and Agent, nor between Agent and downstream purchasers.

Producers contend next that they hold an automatically-perfected purchase money security interest ("PMSI") in all oil and gas produced in Texas and sold to Debtors during December 2017, along with proceeds thereof, pursuant to Texas § 9.343. Producers also contend that certain of the Producers sold oil and gas production in Oklahoma during December 2017, and that those Producers hold a first, prior, and automatically perfected lien pursuant to Okla. Stat. Ann. tit. 52, § 549.1 (the "Oklahoma Lien Act"). Producers argue that lien rights automatically arising under Texas § 9.343 and the Oklahoma Lien Act result in a PMSI that primes any security interest held by Agent.

In addition, Producers argue that, to the extent there is a conflict of law, the laws of Texas and Oklahoma control resolution of whether Producers' security interests are superior to Agent's UCC Article 9 security interests. Producers contend that the Court should use Restatement (Second) Conflict of Laws § 251(1) and federal common law to evaluate choice-of-law issues on a "case-by-case basis with deference to the state that has the most significant contacts and relationships over the affairs of Debtor." Producers' Response, p. 11 (ECF No. 105).

Producers' Response included a list of the proofs of claim filed by individual Producers in Debtor's bankruptcy case, which provided the claim number and the amount of claim asserted. Producers' Response, Ex. A (ECF No. 105).

C. Intervenors' Contentions

Intervenors assert that they also hold an automatically-perfected PMSI in all oil and gas sold to Debtor during December 2017, along with proceeds thereof, pursuant to Texas § 9.343. Intervenors further argue that conflict-of-law provisions found in title 6, section 9-301 of the Delaware Code ("Delaware § 9-301") and section 9.301 of the Texas Business and Commerce Code ("Texas § 9.301") are inapplicable because the language of section 9.343(p) of the Texas Business and Commerce Code provides that "[t]he rights of any person claiming a security interest or lien created by this section are governed by the other provisions of this chapter except to the extent that this section necessarily displaces those provisions." (emphasis added).

Additionally, Intervenors argue that Agent waived the ability to claim that Texas § 9.343 did not create a lien in favor of Producers and Intervenors because: (1) terms of the Credit Agreement between Agent and Debtor noted that "First Purchaser Liens" under Texas § 9.343 would be eliminated from Debtor's borrowing base, and (2) the Credit Agreement expressly permitted a lien arising under Texas § 9.343 to exist on Debtor's property, assets, or revenues. Intervenors also contend that estoppel by deed and estoppel by record preclude Agent from taking a position contrary to terms found in the Credit Agreement. Finally, Intervenors argue that Agent has introduced no evidence showing that Debtor's purchase of product from Intervenors was subject to the Conoco Phillips General Provisions.

RADCO asserts that, as of the Petition Date, Debtor owed $292,513.27 for oil sold to Debtor under the RADCO Purchase Agreement. Intervenors Response, ECF No. 103. RHEACO asserts that it is owed $292,519.27 for oil sold to Debtor pre-petition and $18,562.66 in royalty payments for the same products sold to Debtor.Id. Radley Corporation, an affiliate of RADCO, alleges that Debtor owes $6,977.38 in royalties for products it sold to Debtor. Id.

LEGAL STANDARD

Summary Judgment is appropriate "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed. R. Civ. P. 56(c); Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). Bankruptcy Rule 7056 applies Rule 56(c) of the Federal Rules of Civil Procedure to adversary proceedings. If summary judgment is appropriate, the Court may resolve the case as a matter of law. Celotex Corp., 477 U.S. at 323; Blackwell v. Barton, 34 F.3d 298, 301 (5th Cir. 1994). The Fifth Circuit has stated "the standard of review is not merely whether there is a sufficient factual dispute to permit the case to go forward, but whether a rational trier of fact could find for the non-moving party based upon evidence before the court." James v. Sadler, 909 F.2d 834, 837 (5th Cir. 1990) (citing Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986)).

To the extent that the non-moving party asserts the existence of factual disputes, the evidence offered by the non-moving party to support those factual contentions must be of sufficient quality so that a rational fact finder might, at trial, find in favor of the non-moving party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249-50 (1986) ("[a]dverse party's response . . . must set forth specific facts showing that there is a genuine issue for trial."). If the record "taken as a whole, could not lead a rational trier of fact to find for the non-moving party, then there is no genuine issue for trial." LeMaire v. Louisiana, 480 F.3d 383, 390 (5th Cir. 2007).

In determining whether a genuine issue of material fact exists, the nonmoving party must respond to a proper motion for summary judgment with specific facts demonstrating that such genuine issue exists. "A genuine issue of material fact is not raised by mere conclusory allegations or bald assertions unsupported by specific facts." Leon Chocron Publicidad Y Editoria, S.A. v. Jimmy Swaggart Ministries, 990 F.2d 1253 (5th Cir. 1993) (citation omitted). The Court must view all evidence in the light most favorable to the non-moving party. Crawford v. Formosa Plastics Corp. La., 234 F.3d 899, 902 (5th Cir. 2000). If summary judgment is appropriate, the Court may resolve the case as a matter of law. Celotex Corp., 477 U.S. at 323.

IN RE SEMCRUDE, L.P.

In 2009, the Delaware Bankruptcy Court issued its opinion in Arrow Oil & Gas, Inc. v. SemCrude, L.P. (In re SemCrude, L.P.), 407 B.R. 112 (Bankr. D. Del. 2009). The debtors in SemCrude, purchased various energy products from producers, including oil and gas, and then resold those products to other entities. Id. at 119. In the months before filing for bankruptcy, the debtors purchased oil and gas from producers located in Texas. Id. at 122. The debtors sold the oil and gas from the Texas producers to downstream purchasers but failed to remit payment to the Texas producers before filing for chapter 11 bankruptcy. Id. The Texas producers alleged that they held automatically perfected PMSIs in all oil and gas sold to the debtors and any resulting proceeds under Texas § 9.343. Id. at 124. Meanwhile, a pre-petition lender asserted that it held secured claims against the debtors, and that perfection and priority of security interests claimed by the Texas producers were not governed by Texas § 9.343. Id. The lender argued that, pursuant to the law governing perfection and priority of security interests found in Article 9 of the UCC, the debtors' places of incorporation8 determined perfection and priority of security interests alleged by the Texas producers and lender. Id. The lender contended that if the Texas producers did not perfect their security interests in oil, gas, and proceeds thereof based on the UCC requirements of the state where the debtors were incorporated, then the Texas producers had unperfected security interests subordinate to the lender's security interests.9 Id.

The court held, in relevant part, that Delaware's choice of law rules regarding perfection and priority of security interests governed. Id. at 130. Relying on § 9-301 of the UCC, which is the same in Delaware and Texas, the court determined that the law of the location of the debtor determined perfection of the producer's security interests in oil, gas, proceeds thereof, and accounts receivable. Id. at 133-34. Because the debtors were incorporated in Delaware and Oklahoma, the laws of those states (depending on where the debtor incorporated) applied when determining perfection and priority of UCC security interests alleged by the Texas producers and the lender. Id. at 132-38. To establish perfection of claimed security interests, the Texas producers and the lender were required to properly file a financing statement in the appropriate state. Id. 137-38. As of the date of this Memorandum Opinion, the SemCrude opinion is the sole opinion analyzing whether Texas § 9.343 applies in disputes regarding perfection and priority among lenders and Texas producers of oil and gas when the debtor is incorporated outside of Texas.

LEGAL ANALYSIS

A. Conoco Phillips General Provisions and Contractual Waiver Language

As an initial matter, Agent argues that, regardless of lien perfection and priority issues, Producers cannot assert a security interest in Debtor's goods, inventory, accounts, proceeds, and deposit accounts under Texas § 9.343 because the Conoco Phillips General Provisions that are incorporated by reference into certain of the Producer Agreements provide for express waiver of Producers' liens. The Producer Agreements, which are contracts between Debtor and certain of the Producers,10 include the following language:

The Conoco Phillips General Provisions include several provisions, including the following:

Agent asserts that the Delaware Bankruptcy Court in SemCrude determined that producers of oil and gas who entered into contracts containing Conoco Phillips General Provisions waived any lien that could have arisen under Texas § 9.343. To support its argument, Agent cites to two cases: New Dominion, LLC v. J. Aron & Co. (In re SemCrude, L.P.), No. 08-11525, 2018 WL 481862 (Bankr. D. Del. Jan. 17, 2018) and J. Aron & Co. v. SemCrude, L.P. (In re SemCrude, L.P.), 504 B.R. 39 (Bankr. D. Del. 2013).

In New Dominion, LLC v. J. Aron & Co. (In re SemCrude, L.P.), upstream producer New Dominion, LLC ("ND") sold oil to SemCrude, a midstream service provider. 2018 WL 481862 at *1. SemCrude then sold oil to third-party downstream purchasers, including J. Aron & Company ("J. Aron"). Id. After SemCrude filed for bankruptcy, ND and other upstream producers were owed millions of dollars for oil and gas delivered to SemCrude pre-petition. Id. To recover unpaid funds for oil and gas sold to SemCrude, ND, an Oklahoma-based company, filed liens under Okla. Stat. Ann. tit. 52, §§ 548.1 548.6.11 Id. ND then filed suit against J. Aron to foreclose on the alleged statutory liens. Id. at *2. J. Aron contended that ND could not assert lien rights against its proceeds from sales of oil because: (1) ND sold oil to SemCrude under an express warranty, and (2) SemCrude sold oil to J. Aron under an identical express warranty. Id. at *3. J. Aron also argued that ND could not demonstrate that J. Aron ever received any of ND's oil from SemCrude. Id. The Delaware Bankruptcy Court held that ND, an upstream producer, waived its right to assert a lien in its oil against J. Aron, a downstream purchaser, when the oil was sold under the warranty provided by the Conoco Phillips General Provisions. Id. at *4.

In J. Aron & Co. v. SemCrude, L.P. (In re SemCrude, L.P.), the Delaware Bankruptcy Court held that downstream purchaser J. Aron purchased oil and gas from midstream producer SemCrude free and clear of any liens of upstream producers who originally sold the product to SemCrude because the downstream purchasers were both "buyers for value" under UCC § 9-317 and "buyers in the ordinary course" under UCC § 9-320. 504 B.R. at 43, aff'd, 864 F.3d 280 (3d Cir. 2017). In dicta, the Delaware Bankruptcy Court noted that the Conoco Phillips General Provisions incorporated in the contracts between SemCrude and the downstream purchasers served as an "express [warranty] that the product was not subject to any security interests." Id. at 60.

Producers contend that the Conoco Phillips General Provisions in certain of the Producer Agreements with Debtor are nothing more than a warranty to purchasers that oil in the hands of the purchasers is not subject to the Producers' liens. Next, Producers argue that even if the Conoco Phillips General Provisions in certain of the Producer Agreements serve as a warranty preventing Producers from asserting a lien to secure the purchase price of the oil and gas, then Producers could still assert a lien as to the proceeds received from the sale of the oil delivered to Debtor. Producers also argue that the Conoco Phillips General Provisions provided a warranty only to downstream purchasers, not to Agent or Lenders. (emphasis added). Finally, Producers assert that there is no privity between Producers and Agent, nor between Agent and downstream purchasers.

Intervenor argues that Agent failed to produce evidence showing that Debtor's purchase of product from Intervenors was subject to the Conoco Phillips General Provisions. Intervenors state that the RADCO Purchase Agreement does not contain any of the language cited by Agent that results in the alleged waiver of claims. In Agents' Reply, Agent asserts that while the RADCO Agreement does not contain a reference to the Conoco Phillips General Provisions, it contains clear waiver language:

Agent's Reply to Response, p. 15 (ECF No. 109) (emphasis in original). According to Agent, this language waives Intervenors' ability to assert security interests in Debtor's goods, inventory, accounts proceeds, and deposit accounts.

The Court finds that incorporation of the Conoco Phillips General Provisions in certain of the Producer Agreements did not cause Producers to waive their ability to assert a lien or security interest in oil and gas and proceeds thereof under Texas § 9.343. Likewise, the Court finds that the warranty language in the RADCO Agreement did not serve as a waiver. Contrary to Agent's assertions, the Delaware Bankruptcy Court's findings in New Dominion, LLC v. J. Aron & Co. and J. Aron & Co. v. SemCrude, L.P. are inapposite on the issue of whether the incorporation of the Conoco Phillips General Provisions in certain Producer Agreements serves as a waiver of certain Producers' rights to assert a lien in oil and gas and proceeds thereof under Texas § 9.343.

New Dominion, LLC v. J. Aron & Co. and J. Aron & Co. v. SemCrude, L.P. are factually distinct from the facts in the present case in that they address the relevant rights between an upstream producer and downstream purchaser as it relates to oil and gas sold to and by a midstream producer. In the present matter, the Court is assessing the relative rights between a lender and an upstream producer as it relates to oil and gas sold by Debtor, a midstream provider. Stated differently, in New Dominion, LLC v. J. Aron & Co. and J. Aron & Co. v. SemCrude, L.P., the upstream producers were seeking to enforce their rights against the downstream purchaser; here, Agent is seeking to enforce its rights against an upstream producer. Therefore, the Court concludes that the Conoco Phillips General Provisions do not cause Producers and Intervenors to waive their rights to assert a lien under Texas § 9.343.

B. Conflict of Law Dispute Between Agent, Producers, and Intervenors Regarding Perfection and Priority of Security Interests in Goods, Inventory, Accounts, Proceeds and Deposit Accounts

Agent's next argument is that conflict of law issues exist in the present matter. Agent assets that conflict of law disputes should be resolved through application of the Restatement (Second) of the Law Conflict of Laws (hereinafter "Restatement"). Agent asserts that § 6(1) of the Restatement requires the Court to apply UCC § 9-301, which is the same in Delaware and Texas, to determine priority and perfection of security interests being alleged in Debtor's goods, inventory, accounts, and proceeds. Under UCC § 9-301, "while a debtor is located in a jurisdiction, the local law of that jurisdiction governs perfection, the effect of perfection or nonperfection, and the priority of a security interest in collateral." Del. Code Ann. tit. 6, § 9-301(1); Tex. Bus. & Com. Code Ann. § 9.301(1). Agent argues that because Debtor is organized under the laws of Delaware, Delaware law governs perfection. In Delaware, perfection of a security interest in goods, inventory, accounts, and proceeds arises by filing a UCC-1 financing statement with the Delaware Department of State. Del. Code Ann. tit. 6, § 9-310(a). Because Agent was the first to file UCC-1 financing statements in Delaware on substantially all of Debtor's collateral, Agent contends that its security interest primes liens asserted by Producers and Intervenors.

In response, Producers and Intervenors argue that they have an automatically arising PMSI in Debtor's oil, gas and proceeds thereof for oil produced in Texas under the plain language of Texas § 9.343. Producers and Intervenors argue that section 9.343(p) of the Texas Business and Commerce Code12 prevents Agent from relying on UCC § 9-301 to determine the law governing perfection and priority of security interests held by Producers in Texas. Producers also contend that they have a first, prior and automatically perfected lien in Debtor's oil, gas, and proceeds thereof for oil produced in Oklahoma under the Oklahoma Lien Act.

Producers argue that to the extent there is a conflict of law, the Courts are not in complete agreement with addressing conflicts of law in bankruptcy. Citing to Vanston Bondholders Prot. Comm. v. Green, 30 F.3d 1578, 1581-82 (1946), Producers propose that the Court use a federal independent judgment test to evaluate choice of law issues on a case-by-case basis with deference to the state that has the most significant contacts and relationships over the affairs of Debtor. Producers also advocate that the Court must apply Restatement § 251(1) to assess the "local law of the state that has the most significant relationship to the parties, the chattel, and the security interest" to make its determination on the validity and extent of its security interest in oil, gas, and proceeds thereof.

In the present dispute, the Court must determine: (1) which state law(s) govern perfection of security interests, and (2) if the security interests are properly perfected, priority among the perfected security interests. An overview of each relevant state's law is provided below.

1. Texas Business & Commerce Code

Producers and Intervenors argue that, to the extent they produced oil and gas in Texas and sold oil to Debtor in Texas, their security interests in Debtor's oil, gas and proceeds thereof arise under Texas § 9.343 and result in a PMSI that primes any security interests held by Agent. Texas § 9.343, which is a non-uniform amendment to Texas's version of the UCC states in part:

Tex. Bus. & Com. Code Ann. § 9.343(a). An "interest owner" is defined as a "person owning an entire or fractional interest of any kind or nature in oil or gas production at the time of severance, or a person who has an express, implied, or constructive right to receive a monetary payment determined by the value of oil or gas production or by the amount of production." Tex. Bus. & Com. Code Ann. § 9.343(r)(2). A "first purchaser" is defined, in relevant part, as "the first person that purchases oil or gas production from an operator or interest owner after the production is severed." Tex. Bus. & Com. Code Ann. § 9.343(r)(3). An "operator" is a "person engaged in the business of severing oil or gas production from the ground, whether for the person alone, only for other persons, or for the person and others." Tex. Bus. & Com. Code Ann. § 9.343(r)(4).

Texas § 9.343 gives rise to a "security interest" that is "perfected automatically without the filing of a financing statement." Tex. Bus. & Com. Code Ann. § 9.343(b). Automatic perfection occurs "if the interest of the secured party is evidenced by a deed, mineral deed, reservation in either, oil or gas lease, assignment or any other such record recorded in the real property records of a county clerk, that record is effective as a filed financing statement for the purposes of this chapter." Id. Moreover, section 9.343(d) of the Texas Business and Commerce Code creates a "lien that secures the rights of any person who would be entitled to a security interest under [section 9.343(a)] except for lack of any adoption of a security agreement by the first purchaser or lack of possession or record required by [section 9.203] for the security interest to be enforceable." Tex. Bus. & Comm. Code Ann. § 9.343(d).

The "security interest" that arises in favor of interest owners under Texas § 9.343 exists in: (i) oil and gas production in the possession of the first purchaser, and (ii) identifiable proceeds of that production owned by, received by, or due to the first purchaser. Tex. Bus. & Com. Code Ann. § 9.343(c)(1). Interest owners' security interests in identifiable proceeds exist for "an unlimited time if: (A) the proceeds are oil or gas production, inventory of raw, refined, or manufactured oil or gas production . . .; (B) the proceeds are accounts, chattel paper, instruments, documents, or payment intangibles; or (C) the proceeds are cash proceeds, as defined in [section 9.102] . . . ." Tex. Bus. & Com. Code Ann. § 9.343(c)(1)(A). Security interests created by Texas § 9.343 have the following priorities over other Chapter 9 security interests:

Tex. Bus. & Com. Code Ann. § 9.343(f).

On the issue of priority, section 9.322 of the Texas Business and Commerce Code states, "[conflicting perfected security interests . . . rank according to priority in time of filing or perfection. Priority dates from the earlier of the time of a filing covering the collateral is first made or the security interest is . . . first perfected." Tex. Bus. &. Com. Code Ann. § 9.322(a)(1).

2. Oklahoma Law

Oklahoma Producers argue that to the extent oil and gas was produced in Oklahoma and sold to Debtor in December 2017, Oklahoma Producers are entitled to a statutory lien in Debtor's oil, gas, and proceeds thereof that takes priority over any other lien, whether arising by contract, law, equity, or otherwise. The Oklahoma Lien Act14 is a statutory lien provision that arises under Oklahoma state law. "To secure the obligations of a first purchaser15 to pay the sales price, each interest owner16 is granted an oil and gas lien to the extent of the interest owner's interest in oil and gas rights." Okla. Stat. Ann. tit. 52, § 549.3. "Oil and gas rights" are defined in the Oil and Gas Owners' Lien Act of 2010 as follows:

Okla. Stat. Ann. tit. 52, § 549.2. An oil and gas lien "exists in and attaches immediately to all oil and gas on the effective date of this act; continues uninterrupted and without lapse in all oil and gas upon severance; and continues uninterrupted and without lapse in and to all proceeds." Okla. Stat. Ann. tit. 52, § 549.3. Moreover, "an oil and gas lien exists until the interest owner or representative first entitled to receive the sales price has received the sales price. Id. In Oklahoma, an oil and gas lien "exists as part of and incident to the ownership of oil and gas rights and is perfected automatically without the need to file a financing statement or any other type of documentation." Okla. Stat. Ann. tit. 52, § 549.4. "Except for a permitted lien,17 an oil and gas lien is a lien that takes priority over any other lien, whether arising by contract, law, equity or otherwise, or any security interest." Okla. Stat. Ann. tit. 52, § 549.7. Comment 1 title 52, section 549.7 of the Oklahoma Statutes & Court Rules states that "an interest owner's oil and gas lien takes priority over any other lien or any security interest . . . [creating] an automatic super-priority without any public notice by a filing or possession." Okla. Stat. Ann. tit. 52 § 549.7 cmt. 1.

3. Delaware Law

Agent argues that, pursuant to Delaware § 9-301, Delaware law applies to determine perfection and priority of security interests in Debtor's goods, inventory, accounts, and proceeds. Unlike in Texas, Delaware's version of UCC Article 9 does not contain a non-standard provision providing for automatic perfection of a security interest to producers of oil and gas. Likewise, Delaware's version of UCC Article 9 does not contain any statutory lien provisions similar to those arising under the Oklahoma Lien Act that determine the lien rights of producers of oil and gas.

Agent also argues that, pursuant to Delaware § 9-304(a), New York law applies to determine perfection and priority of security interests in Debtor's deposit accounts.

a. Perfection of Goods, Inventory, Accounts, Proceeds

Under Delaware law, perfection of a security interest in inventory, accounts, and proceeds is achieved by filing a financing statement with the Delaware Department of State. See Del. Code Ann. tit. 6, § 9-310(a) (providing that "a financing statement must be filed to perfect all security interests" except otherwise stated in the exceptions, which are not relevant here); see also Del. Code Ann. tit. 6, § 9-501 (providing that if Delaware law governs perfection of a security interest, "the office in which to file a financing statement to perfect the security interest is . . . the office of the Secretary of State). A perfected security interest in collateral attaches to "any identifiable proceeds of collateral" and "is a perfected security interest if the interest in the original collateral was perfected." Del. Code Ann. tit. 6, §§ 9-315(a)(2), (c). Delaware follows the first-to-file-or-perfect rule, meaning that "conflicting perfected security interests . . . rank according to priority in time of filing or perfection." Del. Code Ann. tit. 6, § 9-322(a)(1). "Priority dates from the earlier of the time a filing covering the collateral is first made or the security interest ... is first perfected." Id.

b. Perfection of Deposit Accounts

Delaware law provides that perfection, the effect of perfection, and priority of a security interest in a deposit account is governed by local law of the bank's jurisdiction. Del. Code Ann. tit. 6, § 9-304(a). Agent argues that its security interest in Debtor's deposit accounts was perfected by control. A bank's jurisdiction is determined by "an agreement between the bank and its customer governing the deposit account [that] expressly provides that the agreement is governed by the law of a particular jurisdiction." Del. Code Ann. tit. 6, § 9-304(b)(1). If an agreement does not expressly provide that that the agreement is governed by the law of a particular jurisdiction, then the law governing perfection is based on "an agreement between the bank and its customer governing the deposit account [that] expressly provides that the agreement is governed by the law of a particular jurisdiction." Del. Code Ann. tit. 6, § 9-304(b)(2).

4. Conflict of Law Between Agent and Oklahoma Producers

Producers who produced oil and gas in Oklahoma and sold it to Debtor (hereinafter referred to as "Oklahoma Producers") argue that the Oklahoma Lien Act causes them to have a first, prior and automatically perfected lien in Debtor's oil and gas and proceeds thereof based on amounts due for oil produced in Oklahoma and sold to Debtor. The Declaration of Deborah Kryak notes that "less than $1 million of oil produced and delivered in Oklahoma was purchased by Debtor in December 2017" and that "the Oklahoma oil was primarily delivered to customers in Oklahoma." Agent's App'x, Pt. 16 (ECF No. 90-15).

The Oklahoma Lien Act states that an "oil and gas lien" exists "to the extent of the owner's interest in oil and gas rights . . . and shall exist as part of and incident to the ownership of oil and gas rights." Okla. Stat. Ann. tit. 52, § 549.3(A). Comment 2 to title 52, section 549.3(A) of the Oklahoma Statutes & Court Rules provides that the Oklahoma Lien Act "makes it clear that the interest owner's oil and gas lien created by the Lien Act is not a UCC Article 9 security interest but rather arises as part of a real estate interest of the interest owner in the materials." Okla. Stat. Ann. tit. 52, § 549.3(A), cmt. a. Moreover, comment a notes that "the governing law is the law of the state where the well is located. . . [to avoid] application of the UCC Article 9 choice of law rules for personal property." Id. (citations omitted). The Oklahoma Lien Act also provides that no interest owner shall be "required, as a condition or term of an agreement to sell or otherwise, . . . to agree to any provision that would apply the law of any state other than the State of Oklahoma insofar as the same relates to rights under this act, and any such purported waiver . . . shall be void as a matter of public policy in this state." Okla. Stat. Ann. tit. 52, § 549.9.

Under the Oklahoma Lien Act, an interest owner's lien "exists in and attaches immediately to all oil and gas on the effective date of this act." Okla. Stat. Ann. tit. 52, § 549.3(B)(1). An interest owner's lien also "continues uninterrupted and without lapse in all oil and gas upon and after severance" and "continues uninterrupted and without lapse in and to all proceeds." Okla. Stat. Ann. tit. 52, §§ 549.3(B)(2), (3). The Oklahoma Lien Act provides that an oil and gas lien "takes priority over any other lien, whether arising by contract, law, equity, or otherwise, or any security interest." Okla. Stat. Ann. tit. 52, § 549.7. Rights granted to interest owners under the Oklahoma Lien Act "are to be liberally construed" to "afford the interest owner the most comprehensive protection" to receive the sales price from a purchaser. Okla. Stat. Ann. tit. 52, § 549.12(A).

As of the date of this Opinion, the Court is unaware of an opinion by any court that interprets and applies the Oklahoma Lien Act to determine lien perfection and priority among a pool of competing creditors that includes producers of oil and gas in Oklahoma.18 In Gaskins v. Texon, LP, the Oklahoma Court of Appeals analyzed whether a downstream purchaser had a duty under Oklahoma's Production Revenue Standards Act to hold revenue or proceeds in an implied trust for the benefit of the legal owner. 321 P.3d 985, 987 (Okla. Civ. App. 2013). The Gaskins court noted in dicta that the Oklahoma Legislature repealed the existing Lien Act of 1988 and enacted Oklahoma Lien Act in 2010 "in response to the [SemCrude] litigation." Id. at 990 (citing Okla. Stat. Ann. tit. 52, § 549.1, cmt. 10) (noting that the Oklahoma Lien Act was "designed to remedy some of the deficiencies perceived to be present in the [p]rior [a]ct as well as to address some of the issues that emerged in the SemGroup litigation"). The Gaskins court provided "the purpose of the statute was to give Oklahoma producers and royalty owners a first-priority lien to secure payment for their interest in oil and gas sold to a first purchaser." Id. The Gaskins court further stated:

Id. at 991 (citing There's A New Act in Town: How the Oklahoma Oil and Gas Owners' Lien Act of 2010 Strengthens the Position of Oklahoma Interest Owners, 65 Okla. L.Rev. 133 (2012)).

The Court notes that Oklahoma Producers did not provide evidence demonstrating their interest in "oil and gas rights." See Okla. Stat. Ann. tit. 52, § 549.2(9). To the extent Oklahoma Producers can demonstrate that they have "oil and gas rights" subject to an oil and gas lien under the Oklahoma Lien Act, the Court finds that Oklahoma law applies to determine the perfection and priority of Oklahoma Producers' interests in oil, gas, and proceeds thereof for oil produced in Oklahoma and sold to Debtors in December 2017. See Okla. Stat. Ann. tit. 52, § 549.3. As such, the Court denies Agent's summary judgment as to Oklahoma Producers.

5. Conflict of Law Between Agent, Texas Producers, and Intervenors

Next, the parties contend that the Court must determine the law that governs perfection and priority of security interests in Debtor's accounts receivable, inventory, proceeds, and deposit accounts among Agent, Texas Producers, and Intervenors. Agent argues that UCC § 9-301, which is the same in Delaware as in Texas, determines perfection and priority. Texas Producers and Intervenors contend that Texas § 9.343, a non-standard provision incorporated into the Texas Business & Commerce Code's adoption of the UCC, determines perfection and priority. The Delaware Code does not contain a non-standard provision similar to Texas § 9.343.

When a conflict of law issue arises in a bankruptcy case, the Court is faced with the unsettled question of which choice-of-law rules should be applied. See Tow v. Raflzadeh (In re Cyrus II Partnership), 413 B.R. 609, 613 (Bankr. S.D. Tex. 2008). Traditionally, federal courts with diversity jurisdiction apply the "forum state's conflicts-of-law rules to determine what law governs state-law claims." Bailey v. Shell W. E&P, Inc., 609 F.3d 710, 722 (5th Cir. 2010) (citing Klaxon v. Stentor Elec. Mfg. Co., 313 U.S. 487, 496 (1941)). Bankruptcy courts, however, "sit in federal question jurisdiction and not diversity jurisdiction" and thus are not bound by the Supreme Court's determination in Klaxon that the forum state's conflict-of-law rules apply. See Tow, 413 B.R. at 613. The Bankruptcy Code does not provide a method for resolving conflicts of law. Fishback Nursery, Inc. v. PNC Bank, N.A., Case No. 3-16-CV-03267, 2017 WL 6497802 at *3 (N.D. Tex. Dec. 19, 2017).

Texas Producers argue that, to the extent there is a conflict of law, the Court should apply the federal independent judgment test expressed in Vanston Bondholders Protective Comm. v. Green, 329 U.S. 156 (1946). Specifically, Texas Producers urge the Court to look to Restatement §§ 6(2) and 251(1) to evaluate choice of law issues on a case-by-case basis with deference to the state that has the most significant contacts and relationships over the affairs of Debtor. Producers' Response, p. 11 (ECF No. 105) (citing Vanston, 329 U.S. at 162). Restatement § 251 states:

Restatement (Second) Conflict of Laws § 251(1). Texas Producers also cite to comment e of Restatement § 251(1), which provides that "greater weight will be given to the location of the chattel, or group of chattels, at the time the security interest attached than to any other contact." Id. Texas Producers argue that Texas law should apply because their security interests are created by state law and granted in oil and gas located and produced in Texas.

Agent argues that in determining how to resolve conflicts of law, the Court should apply the Restatement because both Delaware and Texas resolve choice-of-law issues through an analysis under the Restatement. See Travelers Indent. Co. v. Lake, 594 A.2d 38, 46-47 (Del. 1991); see also Reddy Ice Corp. v. Travelers Lloyds Ins. Co., 145 S.W .2d 337, 340 (Tex. App.-Houston 2004, no pet.). Agent contends that Restatement § 6(1) is the applicable Restatement provision to determine the issues here. The Court notes that the "most significant relationship" test discussed in Restatement § 251 is guided by the choice-of-law principles stated in Restatement § 6, which provides that:

Restatement (Second) of Conflict of Laws § 6. According to Agent, Restatement § 6(1) Restatement applies because UCC § 9-301, which is the same in Delaware and Texas, is the relevant statutory directive on choice of law that the Court must follow to determine perfection and priority of security interests in goods, inventory, accounts, and proceeds.

The Fifth Circuit has not determined whether bankruptcy courts should exercise federal choice-of-law principles or the forum state's choice-of-law rules. MC Asset Recovery LLC v. Commerzbank A.G. et al (In re Mirant Corp.), 675 F.3d 530, 536 (5th Cir. 2012); see also Woods-Tucker Leasing Corp. of GA v. Hutcheson-Ingram Dev. Co., 642 F.2d 744, 749 (5th Cir. 1981). Moreover, the Fifth Circuit has avoided determining which choice-of-law principles to apply in bankruptcy cases if federal and forum-state choice-of-law rules produce the same result. Woods-Tucker, 642 F.2d at 748 (stating that the Supreme Court and the Fifth Circuit have "taken care to avoid resolving [the] question" of whether a bankruptcy court must apply the choice of law rules of the forum state or exercise its independent judgment) (citing Fahs v. Martin, 22 F.2d 387, 396-97 (5th Cir. 1955)). The federal choice-of-law rule consists of the `"independent judgment test,' which is a multi-factor contacts analysis that applies the law of the state with the most significant relationship to the transaction at issue." ECN Capital (Aviation) Corp. v. Airbus Helicopters SAS (In re CHC Grp. Ltd.), Case No. 16-3151-BJH, 2017 WL 1380514 at *19 (Bankr. N.D. Tex. Mar. 28, 2017); citing MC Asset Recovery, 675 F.3d at 536. Meanwhile, the forum state here, Texas, applies the Restatement to decide choice-of-law issues.19 ECN Capital, 2017 WL 1380514 at *19.

In the present case, to the extent there is a "threshold question of whether the federal or forum (Texas) law applies," the Court finds that it is not necessary to make that determination. Woods-Tucker, 642 F.2d at 748. Both Texas and Delaware have adopted the UCC, which is regarded as "the federal law of commerce regarding transactions including secured transactions." Id. at 749 (citing In re King-Porter Company, 446 F.2d 722, 732 (5th Cir. 1971). As such, the Court looks to the UCC as the relevant law governing perfection and priority of security interests in the collateral at issue here, which is all personal property. See Davidson Oil County Supply v. Klockner, Inc., 908 F.2d 1238, 1248 (5th Cir. 1990) (stating that because the UCC governed the case, the choice of law provisions contained in the UCC "must be applied").

To "promot[e] certainty and predictability in commercial transactions," Article 9 of the UCC was revised in 2001 to include UCC § 9-301. See In re SemCrude, 407 B.R. at 136 (citing Shell Oil v. URN, Inc., 144 S.W.3d 429, 435 (Tex. 2004) (citations omitted)). Texas § 9.301 and Delaware § 9-301 have adopted UCC § 9-301 uniformly. Texas § 9.301 and Delaware § 9-301 both provide that "while a debtor is located in a jurisdiction, the local law of that jurisdiction governs perfection, the effect of perfection or nonperfection, and the priority of a security interest in collateral." Tex. Bus. & Com. Code Ann. § 9.301(1); Del. Code Ann. tit. 6 § 9-301(1). The location of a registered organization is defined in UCC § 9-307(e), which provides "a registered organization that is organized under the law of the state is located in that state." Del. Code Ann. tit. 6 § 9-307(e); Tex. Bus. & Com. Code Ann. § 9.307(e).

Here, the parties do not dispute that the Debtor is organized under the laws of Delaware. As such, regardless of whether Texas § 9.301 or Delaware § 9-301 applies, performing the analysis under each state's law results in the same outcome—because Debtor is organized under the laws of Delaware, Debtor is "located" in Delaware for the purposes of determining perfection of security interests in collateral, including goods, inventory, accounts, and proceeds. Therefore, the Court finds that Delaware's UCC governs perfection, effect of perfection or nonperfection, and the priority of security interest in collateral, which includes goods, inventory, accounts, and proceeds. See Del. Code Ann. tit. 6 § 9-301.

Texas Producers and Intervenors contend that Agent's reliance on UCC § 9-301 is misplaced, given that § 9.343(p) of the Texas Business & Commerce Code provides that "[t]he rights of any person claiming a security interest or lien created by [Texas's Article 9] are governed by the other provisions of this chapter except to the extent that this section necessarily displaces those provisions." (emphasis added). Intervenors argue that it would be "absurd" if non-Texas entities could rely upon UCC § 9-301 to eliminate all provisions of Texas § 9.343.

When construing any statute, including the UCC, "the statute must be read as a whole." In re Condor Ins. Ltd., 601 F.3d 319, 321 (5th Cir. 2010). Specifically, the Fifth Circuit has determined that "it is a `cardinal rule that a statute is to be read as a whole,' in order not to render portions of it inconsistent or devoid of meaning.'" In re Glenn, 900 F.3d 187, 190 (5th Cir. 2018) (citations omitted); see also Antonin Scalia & Bryan A. Garner, Reading Law: The Interpretation of Legal Texts 180 (2012) (Under the harmonious-reading canon, "[t]he provisions of a text should be interpreted in a way that renders them compatible, not contradictory."). There is no language or provision in Texas § 9.343 expressly displaces or defeats Texas § 9.301. Likewise, there is no language or provision in Texas § 9.301 that excepts security interests and liens granted under Texas § 9.343 from being subject to its terms. Therefore, the Court refuses to apply the vague language of Texas Business and Commerce Code § 9.343(p) in such a broad manner that it would nullify the UCC law governing perfection and priority found earlier in the Texas Business and Commerce Code at Texas § 9.301. The Court is not tasked with the role of legislating, nor is it within the Court's province to posit or infer that the Texas Legislature intended for Texas § 9.343 to trump Texas § 9.301. Rather, the Court reads the plain language of Texas § 9.301 and Texas § 9.343 harmoniously because there is no other statutory language dictating otherwise.

Texas Producers also cite to Official Comment 7 to Delaware § 9-320 which states in the context of a discussion of Delaware § 9-320(d) that:

Del. Code Ann. tit. 6 § 9-320(s) official cmt. ¶ 7 (emphasis added). Texas Producers argue that the "other legislation" referred to in Official Comment 7 is Texas § 9.343.

The Court finds Comment 7 to be unpersuasive for a number of reasons. First, an official comment to statutory text is not binding law. Next, Comment 7 accompanies title 6, section 9-320 of the Delaware Code, which concerns the rights of a buyer in the ordinary course of business taking free of a security interest in certain instances. Section 9-320 is not a choice of law provision. Moreover, the existence of a non-binding comment stating that a "uniform solution" to protect oil and gas interests is "[left] to other legislation" does not require the Court to infer that the non-standard provision found in Texas § 9.343 unseats the law regarding perfection and priority at Texas § 9.301 when the explicit language of the statute does not provide for such an outcome.

Intervenors further contend that Agent is barred by waiver and estoppel by deed from claiming that Texas § 9.343 did not create a lien in favor of Intervenors and Texas Producers. Specifically, Intervenors cite to two sections in the Credit Agreement entered into by Debtor and Agent. See Agent's App'x, Pt. 2 (ECF No. 90-1). The first section identified that provisions of Texas § 9.343 would create a "First Purchaser Lien"20 that would eliminate any amounts associated with that lien from Debtor's "Borrowing Base.21" Id. The second section provided that a lien under Texas § 9.343 would exist as a permitted lien on the Debtor's property, assets or revenues, whether owned at the time or thereafter acquired. Id. Intervenors argue that entering into the Credit Agreement with those terms caused Agent to "waive its right to assert that Texas § 9.343 can never create a lien against Debtor." Intervenors' Response, pp. 6-7 (ECF No. 103).

The Court disagrees with Intervenors that the two provisions cited from Agent's Credit Agreement caused Agent to either (i) waive its priority over or (ii) subordinate its priority over a security interest asserted under Texas § 9.343. Waiver is "the intentional relinquishment of a known right or intentional conduct that is inconsistent with asserting that right." Teal Trading and Dev. LP v. Champee Springs Ranches Prop. Owners Ass'n, 534 S.W.3d 558, 584 (Tex. App.-San Antonio 2017, pet. filed). Waiver is a "question of fact" which requires the court to "examine the acts, words or conduct of the parties, and it must be `unequivocally manifested' that it is the intent of the party to no longer assert the right." Enterprise-Laredo Assoc, v. Hachars, Inc., 839 S.W.2d 822, 835-36 (Tex. App.-San Antonio 1992). The Court reviewed the Credit Agreement to evaluate the intent of the parties. Section 8.3 of the Credit Agreement provides:

Agent's App'x, Pt. 2 (ECF No. 90-1). The Court finds that the language at issue in the Credit Agreement did not result in Agent waiving its right to assert that it has priority over any security interests that arise under Texas § 9.343 because, as demonstrated by section 4.1.4 of the Credit Agreement above, Agent's Credit Agreement did not "unequivocally manifest" its intention to waive its lien rights or to subordinate its priority. See Agent's App'x, Pt. 2 (ECF No. 90-1) (stating "nothing herein shall be deemed to constitute an agreement to subordinate any of the Liens of the Collateral Agent"); see also Enterprise-Laredo, 839 S.W.2d at 835-36.

For the reasons stated above, the Court will apply UCC § 9-301, which is the same in Delaware as it is in Texas, to determine perfection and priority of security interests claimed by Agent, Texas Producers, and Intervenors.

6. Perfection and Priority of Security Interests Alleged by Agent, Texas Producers, and Intervenors

a. Perfection and Priority of Security Interests in Goods, Inventory, Accounts, and Proceeds

Under Delaware and Texas law, UCC § 9-301 determines which states' substantive laws govern perfection and priority of security interests in personal property. Tex. Bus. & Com. Code Ann. § 9.301(1); Del. Code Ann. tit. 6 § 9-301(1). The location of a registered organization is the state in which the entity is organized. Del. Code Ann. tit. 6 § 9-307(e); Tex. Bus. & Com. Code Ann. § 9.307(e). Here, Debtor is organized in Delaware, so Delaware law applies.

Under Delaware law, Agent, Texas Producers and Intervenors were required to file a financing statement with the Delaware Department of State to perfect their security interests in goods, inventory, accounts, and proceeds. Del. Code. Ann. tit 6. § 9-310(a) (providing that, subject to exceptions provided in Del Code Ann. tit § § 9-310(b) and 9-312(b), "a financing statement must be filed to perfect all security interests and agricultural liens"). Based on the evidence provided in the Motion for Summary Judgment, Agent has shown that it perfected its security interest in goods, inventory, accounts, and proceeds by filing UCC-1 financing statements with the Delaware Department of State on July 23, 2015 ("July 2015 Financing Statements"). Agent's App'x, Pt. 10 (ECF No. 90-9). Agent has also demonstrated that it filed the proper amendments to the July 2015 Financing Statements, which caused its security interests to remain continuously effective since July 23, 2015. Id. All Producers except Viceroy, RHEACO, and RADCO filed financing statements with the Delaware Department of State on various dates in January 2017. Plaintiff's Supplement, Pt. 2 (ECF No. 96-2). Producers and Intervenors' Responses do not discredit the validity of the July 2015 Financing Statements and amendments thereto.

Delaware law abides by the first-to-file-or-perfect rule, which causes "conflicting perfected security interests . .. [to] rank according to priority in time of filling or perfection." Del. Code Ann. tit. 6, § 9-322(a)(1). "Priority dates from the earlier of the time a filing covering the collateral is first made or the security interest ... is first perfected." Id. Agent's July 2015 Financing Statements were filed before any of the Producers filed a UCC-1 financing statement in Delaware. Therefore, the Court finds, as a matter of law, that Agent's security interest in goods, inventory, accounts, and proceeds primes any alleged security interest held by the Producers and Intervenors because the Agent's July 2015 Financing Statements were filed first.

b. Perfection and Priority of Deposit Accounts

Cash proceeds of oil and gas produced by Texas Producers and Intervenors held by Debtor in deposit accounts as of the Petition Date are perfected subject to the "local law of [the] bank's jurisdiction." Del. Code. Ann. tit 6. § 9-304(a). "If an agreement between the bank and the debtor governing the deposit account expressly provides that a particular jurisdiction is the bank's jurisdiction for purposes of this part, this Article, or the [UCC], that jurisdiction is the bank's jurisdiction." Del. Code. Ann. tit. 6 § 9-304(b)(1). Debtor, Agent and JPMorgan Chase (as depositary), entered into the Blocked Account Control Agreement, which provides that New York law is JPMorgan Chase's jurisdiction. None of the parties dispute the validity of the Deposit Account Control Agreement. Therefore, the Court finds as a matter of law that perfection of security interests in Debtor's deposit accounts at JPMorgan Chase is governed by New York law.

Under New York law, Agent's liens on Debtor's deposit accounts as original collateral are perfected by control of the collateral. N.Y. U.C.C. § 9-312(b)(1). Control of a deposit account can be achieved through a deposit account control agreement, which is "an authenticated record that the bank will comply with instructions originated by the secured party directing disposition of the funds in the deposit account without further consent of the debtor." N.Y. U.C.C. § 9-104(a)(2); see N.Y.U.C.C. § 9-314(a). The Court finds that the Blocked Account Control Agreement establishes Agent's control over Debtor's deposit accounts at JPMorgan Chase. Producers and Intervenors do not argue that they entered into an agreement with Debtor's depository bank, nor do Producers and Intervenors contend that they attempted to establish control over Debtor's deposit accounts. As such, the Court finds as a matter of law that Agent holds a first priority security interest in Debtor's deposit accounts.

C. Purchase-Money Security Interest Held by Producers

Agent's Motion for Summary Judgment argues that even if Texas Producers can meet their burden to establish all elements of a security interest under Texas § 9.343, Agent's perfected security interests in Debtor's goods, inventory, accounts, proceeds, and deposit accounts still have priority over Texas Producers' liens by virtue of Tex. Bus. & Com. Code Ann. § 9.343(f). Because the Court found that Delaware law applies to determine perfection and priority of Texas Producers and Intervenors' security interests, the Court did not evaluate the merits of this legal argument made under Texas law.

D. Affirmative Defenses

Producers assert the following affirmative defenses in their original answer:

Answers/Counterclaims, (ECF No. 50 ¶¶ 63, 64). Additionally, Producers assert the following counterclaims:

Answers/Counterclaims, (ECF No. 50, ¶¶ 76, 80). Defendant Energy Reserves Group, LLC filed its Joinder to Producers' Original Answer and Counterclaim. (ECF No. 51). Agent filed its Reply to Producers' Counterclaim. (ECF No. 55). Thereafter, Debtor filed its answer to Agent's Complaint, stating that the Court needs to determine the extent, validity, and priority of liens between Agent and Producers (ECF No. 61).

RADCO and RHEACO filed their Motion to Intervene in this Adversary Proceeding (ECF No. 66), which was granted on July 24, 2018 (ECF No. 85). Intervenors joined in the adversary proceeding as defendants seeking the same relief that Producers assert. Thereafter, Producers filed their First Amended Answer and First Amended Counterclaim (ECF No. 70). In their First Amended Answer and First Amended Counterclaim, Producers added the following affirmative defense: Agent's claims are barred by the doctrine of waiver. (ECF No. 70, ¶ 65). Producers also added a counterclaim for conversion, stating the following:

(ECF No. 70, ¶¶ 83, 84).22

Agent filed its Reply to Defendants' Amended Answer and Plaintiffs Answer to Amended Counterclaim, Including Motions Under Fed. R. Bankr. P. 7012(f) to Strike Affirmative Defenses and Under Fed. R. Bankr. P. 7012(b)(6) to Dismiss Counterclaim for Conversion. ("Motion to Strike") (ECF No. 91). Agent's Motion to Strike alleges that when affirmative defenses are insufficiently plead, courts apply the same pleading standards as applied with respect to a complaint under Fed. R. Civ. P. Rule 12(b)(6). Woodfield v. Bowman, 193 F.3d at 362; Cabin Foods, LLC v. Rich Prod. Corp., No. EP-11-CV-318-KC, 2012 WL 433115, at *1 (W.D. Tex. Feb. 8, 2012). Agent's Motion to Strike also argues that Producers' pleadings list the affirmative defenses without stating any facts in support and accordingly, as plead, should be stricken under Fed. R. Civ. P. 12(f) (as adopted by Fed. R. Bankr. P. 7012(b)). (ECF No. 91). Agent argues that because affirmative defenses are subject to the same pleading requirements as a complaint, Producers must plead enough facts to state a claim to relief that is plausible on its face. Woodfield v. Bowman, 193 F.3d 354, 362 (5th Cir. 1999); Bell All. Corp. v. Twombly, 550 U.S. 544, 547 (2007). Flere, Agent alleges that Producers and Intervenors have not identified the elements of the defenses and have not pled any facts in support of those elements. Further, Agent argues that, because Producers and Intervenors have offered no proof or evidence in support of its affirmative defenses and counterclaims, that the Court should treat Producers and Intervenors' lack of proof and evidence as a "no evidence" summary judgment and render judgment in favor of Agent.

The court in Cabin Foods found that "a Rule 12(f) motion to strike a defense is proper when the defense is insufficient as a matter of law." 2012 WL 433115 at *1 Further, the court observed that "motions to strike are disfavored and are granted only when the defense fails as a matter of law or fact, the defense is completely unrelated to the claims at issue, or the maintenance of the defense would prejudice the movant." Id. (citation omitted).

Agent contends that Producers' pleading, which does no more than state the names of the affirmative defenses, is not enough to meet the pleading standards established by the Supreme Court in Twombly or Iqbal or to provide fair notice to Agent. E.E.O.C. v. Courtesy Bldg. Servs., Inc., No. 3:10-CV-1911-D, 2011 WL 208408, at *5 (N.D. Tex. Jan. 21, 2011) ("Courtesy's assertions of `waiver, release, estoppel, or unclean hands' are not accompanied by any factual allegations giving notice of the nature of the defense."); Software Publishers Ass'n v. Scott & Scott, LLP, No. CIV.A. 306CV0949-G, 2007 WL 2325585, at *2 (N.D. Tex. Aug. 15, 2007) (defendants' bald assertions that the plaintiffs claims are barred, in whole or in part, by the doctrines of waiver, estoppel, and unclean hands do not provide fair notice of the defenses).

Producers filed their Response to Agent's Motion to Strike Defenses and Motion to Dismiss Counterclaim for Conversion. (ECF No. 104).23 Though Producers concede that certain courts have applied the Iqbal and Twombly heightened pleading standards to affirmative defenses, Producers argue that the district courts in the Western District of Texas have consistently held that notice of pleading of affirmative defenses is sufficient and that the Iqbal and Twombly standards do not apply to affirmative defenses. See, e.g., BCOWW Holdings, LLC v. Collins, No. 17-CA-00379, 2017 WL 4082626 at *4-6 (W.D. Tex. Sept. 15, 2017); Dyson v. Stuart Petroleum Testers, Inc., No. 1-15-CV-282, 2015 WL 4935527 at *3 (W.D. Tex. Aug. 18, 2015); Deaf Interpreter Serv., Inc. v. Webbco Enter., LLC, Case No. 13-CV-867, 2014 WL 12489609 at *3 (W.D. Tex. June 30, 2014) (applying a "notice" standard to affirmative defenses as opposed to using a plausibility standard under Iqbal and Twombly).

Producers also argue that a "no-evidence" motion for summary judgment is a creation of Texas state court, and is not available (and is procedurally improper) in federal court. 360 Mortgage Group, LLC v. Homebridge Fin. Serv., No. 14-CA-00847, 2016 WL 900577 at *2, n.2. (W.D. Tex. Mar. 2, 2016); Trautmann v. Cogema Mining, Inc., No. 5:04-cv-117, 2007 WL 1577652, at *3 (S.D. Tex. May 30, 2007); Mallory v. Lease Supervisors, No. 7:16-CV-248, 2017 WL 5147095 at *1 (W.D. Tex. Aug. 28, 2017). (ECF No. 105, ¶ 35). In Mallory, the district court stated:

2017 WL 5147095 at *1. As to the burden shifting frame work in Rule 56, the district court stated in Trauimann that

2007 WL 1577652 at *3 (citing Russ v. Int'l Paper Co., 943 F.2d 589, 592 (5th Cir. 1991) (emphasis in original).

Producers also argue that the issue of waiver and estoppel are fact issues that require this Court to make a factual determination, and, as such cannot be decided as a matter of law. Producers state that waiver is an intentional relinquishment of a known right or conduct inconsistent with that right. Teal Trading, 534 S.W.3d at 584. Producers note that estoppel is a defense which precludes a party from taking positions inconsistent with or contrary to prior positions. In re Marriage Stroud, 376 S.W.3d 346, 356 (Tex. App.-Dallas 2012, pet. denied); XTO Energy Inc. v. Nikolai, 357 S.W.3d 47, 56 (Tex. App.-Fort Worth 2011, pet. denied).

As an initial matter, the Court agrees with Producers that a "no evidence" motion for summary judgment is a Texas state court procedural motion that has no application to federal court. As noted herein, the Western District of Texas District Courts have declined to apply "no evidence" summary judgment motions to federal practice and require the moving party to put on sufficient evidence in support of its claims.

In addition, the parties acknowledge that the Fifth Circuit has not expressly applied the Twombly and Iqbal plausibility standards to affirmative defenses. In the absence of further guidance from the Fifth Circuit, the Court finds that Fed. R. Civ. P. 8(c) only requires a fair notice standard of pleading. BCOWW Holdings, 2017 WL 4082686 at *4-6 (W.D. Tex. Sept. 15, 2017). That said, Producers must still advise the Court and Agent of the factual basis of its affirmative defenses. This adversary proceeding seeks a determination of the extent, priority, and validity of liens. The Court cannot discern how the affirmative defenses of estoppel and unclean hands rebut a request for a declaratory judgment action where Producers and Intervenors concede the validity and extent of the Agent's liens. Producers provide no basis for what kind of estoppel applies nor do Producers state the nature of the Agent's unclean hands. As such, the Court finds that Agent's Motion to Strike the affirmative defenses of estoppel and unclean hands should be granted. As to the issue of waiver, because the Court has found that under Delaware law that the Agent has a first priority lien in Debtor's goods, inventory, accounts, proceeds, and deposit accounts as to Texas Producers, the affirmative defense of waiver can no longer apply. Therefore, the Court also strikes Producer's affirmative defense of waiver.

E. Counterclaim of Conversion

Agent argues that Producers have failed to provide any evidence in support of their counterclaim for conversion. Motion for Summary Judgment, p. 31 (ECF No. 89).24 As such, Agent asks that the Court grant summary judgment in its favor on the absence of proof of Producers' establishing the elements of conversion.

In their Amended Answer to Complaint, Producers allege a counterclaim for conversion of money on deposit in Agent's bank accounts, based on two allegations. The first allegation is that Producers, under either Texas § 9.343 or the Oklahoma Lien Act have a "first priority perfected security interest, as secured parties, to secure the obligations of Debtor as the `first purchaser' of oil and gas production," Producers' Amended Answer to Complaint, (ECF No. 70, ¶ 74). The second allegation is that "in December 2017 and/or January 2018, Deutsche and Lenders (1) exercised cash dominion over [First River] and (2) swept substantially all of the funds held by the Debtor, including the amounts that represented proceeds from [First River's] sale of oil, gas and condensate, on which the Producers held first and priority liens." Id. at ¶ 75. Producers further allege:

(ECF Nos. 70, ¶¶ 83 and 84).

Agent asserts that a claim for conversion is defined as "the wrongful exercise of dominion and control over another's property in denial of or inconsistent with his rights." Bandy v. First State Bank, 835 S.W.2d 609, 622 (Tex. 1992) (quoting Tripp Village Joint Venture v. MBank Lincoln Centre, N.A., 774 S.W.2d 746, 750 (Tex. App.-Dallas 1989, writ denied)). Agent notes that a conversion claim has four essential elements: (i) the plaintiff owned, possessed, or had the right to possess property; (ii) the defendant unlawfully and without authorization assumed and exercised control over the property to the exclusion of, or inconsistent with, the plaintiff's rights as an owner; (iii) the plaintiff demanded return of the property; and (iv) the defendant refused to return the property. Grand Champion Film Production, L.L.C. v. Cinemark USA, Inc., 257 S.W.3d 478, 485 (Tex. App.-Dallas 2008, no pet.) (citation omitted).

Agent argues that Producers must show a "right of immediate possession," or their claim for conversion fails. United States v. Boardwalk Motor Sports, Ltd., 692 F.3d 378, 381 (5th Cir. 2012) (applying Texas law). Agent contends that claims for conversion of money under Texas law must meet certain requirements in addition to those set forth above, in particular:

Id. Agent states that the property alleged to have been converted is money in deposit accounts. Agent posits that Producers have not, and cannot, allege that money: (1) was delivered to the deposit accounts for safe keeping; (2) was intended to be kept segregated; (3) is substantially in the form in which it is received or an intact fund; and (4) was not the subject of a title claim by the keeper.

Agent argues that while the Producers and Intervenors claim liens on "oil" pursuant to Texas § 9.343 and/or the Oklahoma Lien Act, Producers do not allege that they have liens on the money in deposit accounts, and they do not allege that the statutes that would entitle them to a lien on such money in deposit accounts, much less the right to "immediately possess" the money in deposit accounts. Moreover, Agent maintains that Producers do not, and cannot, allege that Agent "unlawfully and without authorization assumed and exercised control over the property." Agent notes that some of the Producers allege that Agent held a "second lien position" on the money in deposit accounts; although Agent contends that it has a first lien position, and Producers' admission of the Agent's lien on the deposit accounts precludes any finding that the Agent acted unlawfully or without authorization. Further, Agent states that Producers do not allege that Producers demanded return of the money in deposit accounts or that Agent refused to return the money in deposit accounts. Finally, Agent argues that Producers have not only failed to plead a plausible claim for conversion, their reliance on Texas § 9.343 and the Oklahoma Lien Act conclusively establishes that a claim for conversion is not available to Producers under Texas law.

Producers state that a cause of action for conversion of a secured party's collateral is available to Producers in this adversary proceeding. See Trustmark Nat'l Bank v. Tegeler (In re Tegeler), 586 B.R. 598, 693 (Bankr. S.D. Tex. 2018) (applying conversion to a dischargeability determination under § 523(a)(6)). Producers argue that the conversion counterclaim specifically asserts that Producers had a first and prior security interest in the funds being held by the Debtor, representing proceeds of the sale. Producers argue that Agent would be liable to Producers for conversion of the collateral wrongfully ceased by Agent, should the Court rule in Producers' favor. Moreover, Producer states that, cash proceeds from a sale of collateral are subject to the security interest in the collateral itself, and the secured parties are entitled to recover cash proceeds from any unauthorized subsequent transferees. ITT Commercial Fin. Corp. v. Bank of the West, 166 F.3d 295, 305 (5th Cir. 1999).

The Court has found that: (i) Agent has a first lien on the proceeds of production of oil produced in Texas, and (ii) Agent has a first lien on Debtor's deposit accounts at JPMorgan Chase in New York. As noted herein, Agent's security interest primes the Texas Producers' alleged security interest under Delaware law. As such, there is no conversion of the Texas Producers' collateral because the collateral is subject to the Agent's superior security interest. That said, the Court also found that under the Oklahoma Lien Act, Oklahoma Producers have a security interest that is superior to that of the Agent's for oil and gas and proceeds thereof of oil produced in Oklahoma. Therefore, there is a question of fact as to the extent of Oklahoma Producers' security interest in any cash proceeds from the production of the oil in Oklahoma. The Court agrees with Agent that Producers' counterclaim as plead is deficient because there are no underlying allegations to support a claim for conversion. Now that the Court has determined that Oklahoma Producers have a superior security interest in the cash proceeds from Oklahoma production, the Court will allow Oklahoma Producers to replead their counterclaim for conversion. Further, the Court will grant Oklahoma Producers' counterclaim for a declaratory judgment on the proceeds from the production of oil from Oklahoma. After the Court determines the extent and amount of Oklahoma Producers' security interest in the Oklahoma proceeds, Oklahoma Producers may file their motion for attorney's fees.

CONCLUSION

For the foregoing reasons, IT IS THEREFORE ORDERED that Agent's Motion for Summary Judgment and Alternative Motion for Partial Summary Judgment (ECF No. 89) is GRANTED, IN PART and DENIED, IN PART. The Court will issue an Order consistent with this Memorandum Opinion.

TRANSMISSION OF NOTICE OF APPEAL TO DISTRICT COURT

TO THE CLERK, UNITED STATES DISTRICT COURT, WESTERN DISTRICT OF TEXAS: Pursuant to Fed. R. Bankr. P. 8003(d), the Bankruptcy Clerk has transmitted the Notice of Appeal filed in Adversary Proceeding No.: 18 05015-cag. A subsequent transmittal shall be made once the record on appeal is complete pursuant to Fed. R. Bankr. P. 8010(b). The Notice of Appeal, filed by Defendants U.S. Energy Development Corporation, AWP Operating Co., Ageron Energy, LLC, et al., relates to:

CM/ECF Doc. 113 entered 3/7/2019 — Order Granting, In Part, And Denying In Part, [89] Motion For Summary Judgment and Alternative Motion for Partial Summary Judgment Filed by Steve A. Peirce for Plaintiff Deutsche Bank Trust Company Americas, Agent.

CM/ECF Doc. 114 entered 3/7/2019 — Judge's Memorandum/Opinion

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