Sabine Lives On (and On): Bankruptcy Court Rejects Immediate Appeal to Second Circuit and Motion for Stay

Bryan Cave Leighton Paisner

Editor’s Note:  On June 16, 2016, The Bankruptcy Cave gave you our summary of the controversial Sabine decision.  At that time, post-hearing motions were pending.  As luck would have it (we at The Bankruptcy Cave should start wagering on college football, or who will win JoJo’s heart, with this luck!), just a few days later the drama continued with some important rulings on the timing of any final resolution of these important issues.  Here’s the skinny:

On June 15, 2016, Bankruptcy Judge Shelley Chapman of the Southern District of New York issued a follow on decision concerning rejection of certain midstream contracts in Sabine Oil & Gas Corporation’s (“Sabine”) Chapter 11 case.[i]  In its decision, the Court rejected Nordheim Eagle Ford Gathering, LLC’s (“Nordheim”) request for an immediate appeal to the Second Circuit Court of Appeals.  The Court also refused to stay enforcement of either its decision to allow Sabine to reject Nordheim’s gathering agreements with the Debtor or its final adversary decision where it found that Nordheim did not have an “interest running with the land.”

The Court rejected Nordheim’s argument that an immediate appeal was warranted under 28 U.S.C. § 158(d)(2)(A) because “the Rejection Decision addressed legal issues of first impression under Texas law which neither the Second Circuit nor the United States Supreme Court has previously addressed.”[ii]  The Court also determined that its previous orders did not “involve a matter of public importance” under 28 U.S.C. § 158(d)(2)(A)(i).[iii]  In both instances, Judge Chapman took the position that her rulings on Nordheim’s gathering agreements were limited.  The Court viewed its previous decisions as based on the facts of the case and established bankruptcy law, not the novel issues of Texas property law.[iv]  Finally, Judge Chapman premised her decision not to stay the case pending appeal on the basis that Nordheim would not suffer “irreparable harm” were the case to proceed, but Sabine would be harmed by a stay.[v]

Judge Chapman’s June 15th decision means that her previous rulings will not be on appellate review any time soon. While the June 15th decision attempts to downplay the influential value of those decisions, they will no doubt be cited by other producers in their attempts to shed onerous midstream arrangements. Sabine lives on.

[i] In re Sabine Oil & Gas Corp., No. 15-11835 (SCC), Docket. No. 1276 (Bankr. S.D.N.Y. June 15, 2016).

[ii] Id. at *7-*9.

[iii] Id. at *11.

[iv] Id. at *7-*9.

[v] Id. at *13-*14.

[View source.]

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Bryan Cave Leighton Paisner

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