Coffeyville Resources, LLC v. GAF Holdings, LLC et al

1 Although Raynor failed to identify either a statutory or precedential basis for the
dismissal motion, one direct reference to ripeness was buried in his lengthy (and unnecessary)
dissertation on the merits of the action. The Court, as well as the Plaintiff in its response,
interpret Raynor’s motion as one under Fed. R. Civ. P. 12(b)(1) (applicable to bankruptcy
proceedings under Fed. R. Bank. P. 7012) challenging the Court’s jurisdiction.
IN THE UNITED STATES BANKRUPTCY COURT
FOR THE WESTERN DISTRICT OF MISSOURI
In re: 	)
)
FARMLAND INDUSTRIES, INC., et al., 	) 	Case No. 02-50557
)
Debtors. 	)
)
)
COFFEYVILLE RESOURCES, LLC., 	)
)
Plaintiff, 	)
)
v. 	) 	Adversary No. 05-4029
)
GAF HOLDINGS, INC., et al., 	)
)
Defendants. 	)
MEMORANDUM OPINION
This matter comes before the Court on motions to dismiss filed by Defendants John P.
Raynor (“Raynor”), Coleman R. Ferguson (“Ferguson”), Pete Gotcher (“Gotcher”), and GAF
Holdings, LLC (“GAF”). Raynor’s motion seeks a dismissal on grounds that the Court lacks subject
matter jurisdiction in this matter because it is not yet ripe for adjudication.1 GAF’s motion contends
that the Court lacks jurisdiction because this matter is not sufficiently related to the underlying
bankruptcy proceeding. Ferguson’s and Gotcher’s motions simply incorporate by reference the
arguments advanced in Raynor’s and GAF’s motions. The Plaintiff, Coffeyville Resources, LLC
(“CRLLC”) maintains that the matter is ripe and the Bankruptcy Court has inherent and statutory
jurisdiction in this matter.
Upon review of the pleadings and relevant law, the Court will dismiss this adversary
proceeding.
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2 See Titus v. Sullivan, 4 F.3d 590, 593 (8th Cir. 1993); Osborn v. United States, 918 F.2d
724, 729 n. 6 (8th Cir. 1990).
3 Sullivan, 4 F.3d at 593 (citing Eaton v. Dorchester Dev., Inc., 692 F.2d 727, 731-32
(11th Cir.1982)); Osborn, 918 F.2d at 729 n. 6.
4 Farmland Industries, Inc., et al.
2
I. STANDARD OF REVIEW
Under Rule 12(b)(1), a defendant may challenge a plaintiff's complaint either on its face or
on the factual truthfulness of its averments.2 The Court interprets the Defendants’ motions as facial
challenges to jurisdiction. In a facial challenge to jurisdiction, the Court reviews only the pleadings,
presumes that all of the factual allegations concerning jurisdiction in the complaint are true, and will
not dismiss the claims unless the plaintiff fails to allege an essential element for subject matter
jurisdiction.3
III. BACKGROUND
The following facts culled from the Plaintiff’s complaint are presumed to be true:
1. 	On May 31, 2002, the Debtors 4 filed a voluntary petition for relief under chapter 11 of the
Bankruptcy Code.
2. 	On September 25, 2003, the Debtors and CRLLC entered into an asset sale and purchase
agreement ("Agreement") in which CRLLC agreed to purchase all of the assets associated
with the operations of the Debtors’ petroleum refinery and fertilizer complex in Coffeyville,
Kansas (“Coffeyville Assets”). On the same day, the Debtors filed a motion seeking Court
approval to sell the Coffeyville Assets to CRLLC ("Sale Motion").
3. 	On October 7, 2003, the Court held a hearing on bidding procedures under the Sale Motion,
and on October 10, 2003, the Court entered an order ("Sale Procedures Order") (1)
approving the auction and bid procedures for the sale of the Coffeyville Assets; (2)
approving a break-up fee; and (3) approving the form and manner of notice.
4. 	None of the Defendants objected to the proposed sale procedures, and none of them appealed
the Sale Procedures Order.
5. 	The Sale Procedures Order is a final order.
6. 	On October 28, 2003, Mid-Continent Refinery LLC ("Mid-Continent") (of which Defendant
Raynor was a member) filed an emergency motion ("Mid-Continent Motion") to extend the
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competing bid deadline, continue the auction date, and continue the sale hearing date.
7. 	On October 31, 2003, after a hearing, the Court denied the Mid-Continent Motion. In doing
so, the Court found, based in part on Raynor’s testimony, that Mid-Continent had "ample
knowledge" of the potential sale of the Coffeyville Assets to CRLLC.
8. 	Thereafter, GAF submitted a bid which the Debtors determined was not "qualified." GAF
took no action to contest the Debtors' decision.
9. 	The 	Debtors 	did 	not 	receive 	any 	qualified 	bids, 	other 	than 	Pegasus' 	(CRLLC’s)
"stalking-horse" bid, and accordingly, there was no auction.
10. 	The Court entered an order ("Sale Order") on November 14, 2003, authorizing, inter alia,
the sale of the Coffeyville Assets to CRLLC.
11. 	In the Sale Order, the Court found that CRLLC was a good faith purchaser of the Coffeyville
Assets.
12. 	None of the Defendants objected to the Sale Order, and none of them appealed the Sale
Order.
13. 	The Sale Order is a final order.
14. 	On February 2, 2004, GAF filed a motion, pursuant to Federal Rule of Civil Procedure 60(b),
requesting relief from the Sale Order ("GAF's Rule 60(b) Motion").
15. 	In GAF's Rule 60(b) Motion, GAF argued that the Coffeyville Assets should be placed back
on the market for potential bidders based on allegations that a member of the Debtors' senior
management had a conflict of interest which impermissibly influenced the bidding and price
of the Coffeyville Assets.
16. 	The Court held a hearing on GAF's Rule 60(b) Motion on February 11, 2004.
17. 	At the close of GAF's presentation of evidence at the February 11, 2004 hearing on GAF's
Rule 60(b) Motion, the Court denied GAF's motion on the Debtors' motion for judgment as
a matter of law.
18. 	Thereafter, on February 19, 2004, the Court issued a Memorandum Opinion and Order (the
"60(b) Order") memorializing the Court's oral ruling.
19. 	Among other things, the Court found that GAF's Rule 60(b) Motion failed because the
allegations it raised were based on facts that could have been discovered in the exercise of
due diligence before the Court entered the Sale Order.
20. 	The Court also found that GAF failed to present clear and convincing evidence that the
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5 After filing this adversary, CRLLC filed a S-1 registration on or about February 11,
2005.
4
Debtors engaged in fraud, misrepresentation, or other misconduct that impermissibly
influenced the auction and bid procedures such that the Court should stay the Sale Order.
21. 	GAF did not appeal or in any way challenge the 60(b) Order that denied GAF's Rule 60(b)
Motion.
22. 	The 60(b) Order is a Final Order.
23. 	On March 3, 2004, the Debtors and CRLLC closed the purchase of the Coffeyville Assets.
24. 	On February 1, 2005, the Defendants threatened CRLLC and others with litigation.
25. 	In a one-page letter dated February 1, 2005, Raynor, an attorney, wrote that "I have been and
still am involved with" GAF's attempted acquisition of the Coffeyville Assets.
26. 	Raynor's letter continues that "GAF is in the process of finalizing terms to engage a firm to
institute proceedings against CRLLC, Pegasus, and others to seek damages for tortious
behavior that deprived GAF from acquiring the Coffeyville Assets.”
27. 	Raynor's letter concludes with: "Call if you're interested in exploring settlement before the
firm is retained and litigation is commenced. Time is of the essence."
28. 	On February 3, 2005, Raynor, on behalf of himself, his law firm (Raynor, Rensch & Pfeiffer)
and GAF, informed CRLLC by letter that the Defendants' causes of action would be based
on allegations of intentional interference with contract or prospective contractual relations
and civil conspiracy.
29. 	Raynor told CRLLC ‘s counsel by telephone that GAF would commence a law suit in state
court against CRLLC.
30. 	At the time CRLLC filed its petition, it was in the process of preparing an S-1 registration
statement for a potential public stock offering.5
31. 	In connection with such issuance, CRLLC prepared disclosures to comply with its disclosure
obligations.
32. 	At the time CRLLC filed its petition and argued for a preliminary injunction, it maintained
that the threat of this litigation, which would have to be disclosed by CRLLC, would, at the
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6 Notably, the S-1 registration does not appear to contain a reference to the threatened
litigation. This omission is curious in light of CRLLC’s asseverations in its pleadings and at the
temporary injunction hearing that such a disclosure was mandatory and one of central reasons
why it was entitled to relief in this case.
7 Diagnostic Unit Inmate Council v. Films Inc., 88 F.3d 651, 652 (8th Cir.1996) (quoting
Maryland Casualty Co. v. Pacific Coal & Oil Co., 312 U.S. 270, 273, 61 S.Ct. 510, 512, 85
L.Ed. 826 (1941)).
5
very least, delay, if not completely jeopardize, this offering. 6
33. 	Defendants were aware of CRLLC's potential public offering.
IV. DISCUSSION
In this case, the Plaintiff claims that the Defendants’ threats of litigation give rise to a
controversy ripe for adjudication under the Declaratory Judgment Act, 28 U.S.C. § 2201, and that
the bankruptcy court, in particular, may exercise jurisdiction over this declaratory judgment action
based on the bankruptcy court’s inherent jurisdiction to interpret its own orders and its jurisdiction
over core bankruptcy matters pursuant to 28 U.S.C. § 1334(b). Because the Court finds that the
matter does not present a justiciable case or controversy, it does not need to address the alleged
bases for bankruptcy court jurisdiction.
The Declaratory Judgment Act authorizes a federal court to "declare the rights and other
legal relations of any interested party" in a "case of actual controversy." 28 U.S.C. § 2201. An
actual controversy is "a substantial controversy, between parties having adverse legal interests, of
sufficient immediacy and reality to warrant the issuance of a declaratory judgment." 7 In this case,
the Plaintiff maintains that the Defendants’ threats of litigation create an actual controversy because
those threats call into question the validity and effect of the Sale Order, and the Plaintiff suggests
several cases in which courts have found that threats of litigation create a justiciable controversy.
The Court is not oblivious to the Plaintiff’s pleas and does, indeed, find the Defendants’
obvious and unabashed attempt to extract a settlement from the Plaintiff on the eve of a public
offering questionable at best. However, this Court takes a narrower view of what constitutes an
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8 None of which constitutes mandatory precedent.
9 Emphasis added.
10 Notwithstanding the Court’s ruling at this juncture, if and when the Defendants file a
lawsuit, a ripe controversy might exist under the Anti-Injunction Act (28 U.S.C. § 2283),
assuming that the lawsuit actually impinges on the validity of the Sale Order. That cannot be
known until the lawsuit (if any) is filed.
11 Century Indemnity Co. v. McGillacuty's, Inc., 820 F.2d 269, 270 (8th Cir.1987) (citing
Green v. Mansour, 474 U.S. 64, 72, 106 S.Ct. 423, 428, 88 L.Ed.2d 371 (1985)).
12 Alsager v. Dist. Court of Polk County, Iowa, 518 F.2d 1160, 1162 (8th Cir. 1975).
13 Glover v. State Farm Fire and Cas. Co., 984 F.2d 259, 261 (8th Cir. 1993)
6
immediate and real threat than the cases cited by the Plaintiff, 8 especially in light of the extremely
broad relief requested – enjoining the Defendants from commencing “any action seeking damages
or any other form of relief in any jurisdiction based on claims allegedly arising from CRLLC’s
purchase of the Coffeyville Assets from the Debtors;”9 the difficulty in crafting an injunction which
would conclusively prevent harassment by the Defendants, inasmuch as they adamantly maintain
that their (yet to be filed) claims for damages against non-debtor parties are not barred or affected
in any way by the Sale Order; and this Court’s belief that a state court is fully capable of protecting
the sanctity of the Sale Order and protecting the Plaintiff’s rights under that order.10
Moreover, the decision to exercise jurisdiction under the Declaratory Judgment Act is within
the Court’s discretion.11 Factors considered in determining whether to exercise jurisdiction under
the Declaratory Judgment Act include whether the declaratory judgment will serve a useful purpose
in clarifying and settling the legal dispute at issue; whether it will afford relief from the uncertainty,
insecurity, and controversy giving rise to the proceedings; 12 and whether an adequate alternative
remedy exists. 13
All of these factors weigh against the Court’s exercise of jurisdiction here. 	First, the
declaratory judgment will not clarify the dispute because, as discussed above, until the Defendants
file a lawsuit the Court is not convinced that a discernable dispute exists. Second, it is unlikely that
the declaratory judgment in favor of the Plaintiff would afford relief from any uncertainty or
insecurity because the Plaintiff’s complaint does not ask for a declaration that the specific threats
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or allegations made by the Defendants are in conflict with the Sale Order, and without such a
determination, the Defendants are likely to continue to argue that the threatened actions for damages
do not impinge on the Sale Order. Third, even if the claims threatened are, in fact, barred by the
Sale Order, as stated above, the Plaintiff can adequately defend itself in state (or federal) court.
In sum, the Court dismisses this adversary proceeding on the basis that the Court lacks
subject matter jurisdiction because the matter is not yet ripe for adjudication, and on the alternative
basis that it is within the Court’s sound discretion not to exercise jurisdiction under the
circumstances presented.
V. CONCLUSION
Therefore, for the reasons stated above, the Court will dismiss this adversary proceeding.
A separate order will be entered pursuant to Fed. R. Bankr. P. 9021.
ENTERED this 7 th day of April 2005.
/s/ Jerry W. Venters
HONORABLE JERRY W. VENTERS
UNITED STATES BANKRUPTCY JUDGE
A copy of the foregoing was mailed
conventionally or electronically to:
Geoffrey L. Harrison
David C. Stover
John P. Raynor
Thomas R. Califano
John Watt
Laurence M. Frazen
Coleman Ferguson
Pete Gotcher
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