On July 19, 2017, the U.S. Court of Appeals for the Third Circuit (the “Court”) issued an opinion, upholding a district court’s ruling that downstream purchasers took oil purchased from a bankrupt intermediary, SemGroup L.P. (collectively with its affiliates including SemCrude L.P.), free and clear of the oil producers’ purported liens.

Background and the Bankruptcy Court Decision -

In a fact setting that is typical for an interstate transaction: oil was produced by a collection of producers and then purchased by a midstream company, SemGroup. Thereafter, SemGroup transported and/or stored the oil and, at the same time, commingled the producers’ oil with oil purchased from a multitude of other producers. SemGroup then sold the oil to a downstream buyer. The downstream buyer would buy for value, in the ordinary course, and without information regarding the source of the underlying production and without communicating with the producers.