Fortune Natural Resources Corp. v. United States Department of Interior

Case: 15-20151 Document: 00513278889 Page: 1 Date Filed: 11/19/2015
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
United States Court of Appeals
Fifth Circuit
No. 15-20151 FILED
November 19, 2015
Lyle W. Cayce
FORTUNE NATURAL RESOURCES CORPORATION,
Clerk
Appellant
v.
UNITED STATES DEPARTMENT OF INTERIOR; ATP OIL & GAS
CORPORATION,
Appellees
Appeal from the United States District Court
for the Southern District of Texas
Before STEWART, Chief Judge, and CLEMENT and ELROD, Circuit Judges.
EDITH BROWN CLEMENT, Circuit Judge:
Fortune Natural Resources Corporation (“Fortune”) owns a percentage
working interest in a lease with ATP Oil & Gas Corporation (“ATP”), who filed
for bankruptcy. 1 Fortune asserted a claim in ATP’s bankruptcy proceedings for
decommissioning costs related to the lease. ATP sought and received approval
from the bankruptcy court—over Fortune’s objection—to sell certain shelf and
deepwater assets. The Final Sale Order was not stayed, and the sale closed.
1 Black’s Law Dictionary defines working interest as “[t]he rights to the mineral
interest granted by an oil-and-gas lease, so called because the lessee acquires the right to
work on the leased property to search, develop, and produce oil and gas, as well as the
obligation to pay all costs.” (10th ed. 2014).
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No. 15-20151
Fortune appealed the Final Sale Order to the district court. The district court
dismissed the appeal, holding that Fortune lacked standing to appeal the
bankruptcy court’s ruling and that, in any event, the appeal was statutorily
moot. Fortune appeals this dismissal order contending that it has standing to
appeal and that the appeal is not moot. Because Fortune has failed to prove
that it was directly and adversely affected pecuniarily by the ruling of the
bankruptcy court, it lacks standing to appeal, and we AFFIRM.
I.
ATP, a former offshore oil and gas exploration and production operator
on the Outer Continental Shelf in the Gulf of Mexico, filed for bankruptcy relief
on August 17, 2012. Fortune owned a 12.5 percent working interest in a lease
that was considered one of ATP’s assets (the “Fortune Lease” or “Lease”).
Fortune and ATP were parties to a Joint Operating Agreement, which
mandated that any plugging and abandonment operations be accomplished by
ATP, as operator, with the costs, risk, and net proceeds, if any, to be shared by
co-lessees in proportion to their participating interests. The Fortune Lease
terminated on November 11, 2010. As a result, ATP was required to conduct
decommissioning operations on two wells, a platform, and a pipeline. Fortune
filed its proof of claim on January 28, 2013, in the amount of $3,385,300,
representing the portion of the decommissioning liability it would be forced to
cover in the event that ATP did not fulfill its decommissioning obligations
under the Joint Operating Agreement.
During the bankruptcy proceeding, ATP filed motions seeking
bankruptcy court approval of a sale of substantially all of its assets (the
“Sale”). 2 The United States Department of the Interior (“Interior”) objected to
2ATP, through two emergency motions, sought approval to sell its shelf assets and its
deepwater assets. Because ATP did not receive any qualifying bids on its shelf assets, it
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the Sale because it had not consented to it, and among other reasons, the Sale
would have left ATP incapable of performing its remaining decommissioning
obligations under federal law. Fortune also objected to the Sale, even though
the Fortune Lease was not part of the assets of the Sale. 3 Interior withdrew its
objection prior to the Sale following successful negotiations with Bennu Oil &
Gas, LLC (“Bennu”), the ultimate purchaser, after Bennu agreed to fund a
$44,255,000 trust (“Trust”) to be administered by the Bureau of Ocean Energy
Management (“BOEM”), an agency under the Interior, to address ATP’s
remaining decommissioning obligations. Initially, Fortune filed a limited
objection and reservation of rights with respect to the shelf sale in the event
that the shelf sale would not produce sufficient funds to cover the
decommissioning obligations under the Fortune Lease. Subsequently, Fortune
asserted an objection at the Interim Sale Hearing—after the shelf assets and
deepwater assets were combined into one Sale—when it realized that BOEM
planned to use the trust funds for leases where there were no co-liable parties,
i.e., not the Fortune Lease. Fortune argued that the proposed use of the sale
proceeds was contrary to the language contained in the Interim Sale Order and
proposed Final Sale Order, which Fortune believed required funding for the
Fortune Lease’s decommissioning costs. The bankruptcy court overruled
Fortune’s objection to the sale.
On October 17, 2013, the bankruptcy court entered a Final Sale Order
approving the sale of ATP’s assets to Bennu. The bankruptcy court’s Final Sale
Order was not stayed, and the Sale closed. On October 31, 2013, Fortune
appealed the Final Sale Order to the district court. Interior moved to
cancelled the auction for the shelf assets and added the shelf assets to the sale of the
deepwater assets.
3 The bankruptcy court approved the rejection of the Fortune Lease, along with other
leases, by order dated June 21, 2013.
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participate as appellee, and the district court granted its motion. The district
court issued an order dismissing Fortune’s appeal, holding that Fortune lacked
standing to appeal the bankruptcy court’s ruling and that, in any event, the
appeal was statutorily moot. Fortune appeals the dismissal order.
II.
This court reviews a district court’s dismissal for lack of standing de
novo. Joffroin v. Tufaro, 606 F.3d 235, 238 (5th Cir. 2010). “[T]he putative
appellant shoulders the burden of alleging facts sufficient to demonstrate that
it is a proper party to appeal.” Rohm & Hass Tex., Inc. v. Ortiz Bros. Insulation,
Inc., 32 F.3d 205, 208 (5th Cir. 1994). “In ruling on a motion to dismiss for want
of standing, both the trial and reviewing courts must accept as true all material
allegations of the complaint, and must construe the complaint in favor of the
complaining party.” Id. at 207 (quoting Warth v. Seldin, 422 U.S. 490, 501
(1975)). Furthermore, to determine whether a party has standing in
bankruptcy court, courts use the “person aggrieved” test. In re Coho Energy
Inc., 395 F.3d 198, 202 (5th Cir. 2004). “The ‘person aggrieved’ test is an even
more exacting standard than traditional constitutional standing.” Id. This test
“demands a higher causal nexus between act and injury; appellant must show
that he was directly and adversely affected pecuniarily by the order of the
bankruptcy court in order to have standing to appeal.” Id. at 203. (internal
quotation marks and citation omitted).
III.
Fortune argues that the district court erred because Fortune was directly
and adversely affected by the bankruptcy court’s Final Sale Order; therefore,
it has standing to appeal as a “person aggrieved.” Fortune argues that the
allocation of the Trust funds, as implemented, differs from the proposed
allocation contemplated in the Interim Sale Order and in earlier versions of
the proposed Final Sale Order. Fortune argues that prior versions covered
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decommissioning obligations such as those under the Fortune Lease, while the
Final Sale Order gave Interior full discretion to allocate the use of the Trust
funds. Fortune points to language in prior orders indicating that the funds
would be paid by the purchaser to BOEM “for the performance of
decommissioning obligations under any or all Federal Leases that do not
constitute Purchased Assets….” (emphasis added). Fortune interprets this
language as requiring funding for the Fortune Lease because it was not among
the Purchased Assets, and as precluding Interior from allocating funds to
decommission some, but not all, of the leases. Fortune’s construction ignores
the plain meaning of the words “any or.” 4 Such construction is unreasonable.
Even if Fortune proved that prior versions of the sale order called for a
different allocation of the Trust fund proceeds, it would still fail to show how
the bankruptcy court’s Final Sale Order directly and adversely affected it
pecuniarily. If Fortune could prove that absent the Final Sale Order it would
have received funds from the bankruptcy estate for its decommissioning
obligations, then it would have standing to appeal the Final Sale Order because
Fortune would satisfy the “person aggrieved” test. Under such a scenario,
Fortune could show that the order of the bankruptcy court directly and
adversely affected it pecuniarily. But because Fortune did not show that it
would have accessed any funds from the bankruptcy estate had the court not
approved the Sale, the Final Sale Order left Fortune in the same position (i.e.,
without any funds from ATP to assist in the decommissioning obligations for
the Fortune Lease).
Fortune’s argument concerning the merits—that the allocation of the
sale proceeds violated substantive bankruptcy law—is unavailing because
4The word “any” is commonly understood to mean “one, no matter what one” or “one
or more indiscriminately from all those of a kind.” Webster’s Third New Int’l Dictionary at 97.
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Fortune must first have standing before the merits can be addressed.
Additionally, Fortune’s argument that it meets the “person aggrieved”
standard because it has already received a letter from BOEM mandating that
it decommission its Lease misses the mark. Fortune’s payment of
decommissioning costs may show an injury, but it does not show that the
bankruptcy court’s order caused this injury. This court’s jurisprudence states
that the order of the bankruptcy court must directly and adversely affect the
appellant pecuniarily. See Coho, 395 F.3d at 203. Having failed to present
sufficient evidence to show that Fortune was directly and adversely affected
pecuniarily by the order of the bankruptcy court, Fortune does not meet the
“person aggrieved” test. Therefore, the district court properly ruled that
Fortune lacks standing. Because this court concludes that Fortune lacks
standing to appeal, we need not address the district court’s holding on
statutory mootness. AFFIRMED.
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