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UNITED STATES BANKRUPTCY COURT EASTERN DISTRICT OF LOUISIANA IN RE: * * VIRGIN OFFSHORE USA, INC., * * DEBTOR * * ***************************************

CASE NO. 11-13028 CH. 11

LIMITED OBJECTION AND RESERVATION OF RIGHTS BY THE VIRGIN OIL COMPANY, INC. PLAN TRUST TO THE CONFIRMATION OF TRUSTEES FIRST AMENDED CHAPTER 11 PLAN OF REORGANIZATION DATED MARCH 28, 2013 The Plan Trustee for The Virgin Oil Company, Inc. Plan Trust (the Plan Trust), appearing herein through undersigned counsel, hereby respectfully submits the following limited objection (the Limited Objection) to the confirmation of the First Amended Chapter 11 Plan of Reorganization Dated March 28, 2013 (the Plan) (Docket No. 402) filed herein by Gerald H. Schiff, Chapter 11 Trustee (the Trustee) for the bankruptcy estate of the Debtor, Virgin Offshore U.S.A., Inc. (Virgin Offshore). While the Plan Trust does not object to the treatment contemplated for Class 4 (Equity Interests) in the Plan, Virgin Offshores stated reservation of rights to propose and conduct a post-confirmation sale of co-owned property under section 363(h) of Title 11 of the United States Code (the Bankruptcy Code) is not supported by applicable law. The Plan Trust therefore objects to confirmation of the Plan insofar as it includes such language, and requests that the Plan be confirmed, subject to the deletion of any stated reservation of rights in favor of the reorganized Virgin Offshore to seek and obtain the approval by this honorable Bankruptcy Court of a post-confirmation sale of co-owned property. If the subject language is not deleted, the Plan should not be confirmed.

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BACKGROUND The Plan Trustby virtue of the vesting of assets pursuant to the confirmed plan in the Virgin Oil Bankruptcyis the 100% equity owner of Virgin Offshore and therefore is an interest holder in this case. Additionally, the Plan Trust and Virgin Offshore each hold separable interests in certain oil and gas properties (the Subject Properties). These Subject Properties were previously subject the confirmed plan in the bankruptcy case of Virgin Oil Co., Inc. (Virgin Oil), E.D.La. Bankr. Case No. 09-11899, and are specifically referenced in Virgin Offshores Plan. The Plan Trusts objection to the Plan lies in the attempt by Virgin Offshore in both the Plan1 and the First Amended Disclosure Statement2 (the Disclosure Statement) (Docket No. 401) to reserve the right to seek and obtain approval of the Bankruptcy Court of the postconfirmation sale of the Subject Properties (defined as the Existing Oil and Gas Interests in the Plan) under section 363(h) of the Bankruptcy Code. Specifically, the Plan includes the following language in a footnote to a subsection providing that distribution proceeds may be derived from the sale of the Subject Properties: Regarding the prospect of a sale or sales of the Existing Oil and Gas Assets, the Trustee has received, entertained and investigated offers. However, as of the filing of this Plan, no offers have reached the level of completeness that warranted seeking Bankruptcy Court approval. Reorganized Offshore shall continue to investigate the market and pursue prospects for the sale of the Existing Oil & Gas Assets and any proposed sale shall be subject to Bankruptcy Court approval. Further, the Reorganized Offshore shall retain all rights of the Estate and the Trustee to seek and obtain Bankruptcy Court approval of a Section 363(h) joint sale of the Existing Oil and Gas Assets to the extent such an offer would be made. In the event that the Existing Oil & Gas Assets have not been transferred pursuant to final approval by the Bankruptcy Court upon completion of the P&A Work, Reorganized Offshore shall submit a procedure for auctioning the Existing Oil &

1 2

See Plan, at p. 26, fn. 1. See Disclosure Statement, at p. 52, fn. 29.

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Gas Assets for final approval by the Bankruptcy Court to be commenced within one hundred eighty (180) days after completion of the P&A Work.3 This provision (hereinafter, the Retention Provision) recognizes that the contemplated sale of the Subject Properties remains hypothetical at this point and that no offers have reached the level of completeness that warranted seeking Bankruptcy Court approval.4 Furthermore, the Plan Trust has not consented to or approved any contemplated joint sale of the Subject Properties.5 Most importantly, as will be show below, the Retention Provision does not comply with Title 11 of the Bankruptcy Code and should be stricken from the Plan, and if not stricken, the Plan should not be confirmed. LAW AND ANALYSIS The Retention Provision is contrary to bankruptcy law and its inclusion renders the Plan unconfirmable pursuant to 11 U.S.C. 1129(a)(1). Plans must compl[y] with the applicable provisions of [title 11]. 11 U.S.C. 1129(a)(1). The Retention Provision is contrary to bankruptcy law insofar as post-confirmation relief under Section 363(h) is not available and not
3 4 5

See Plan, at p. 26, fn. 1. Id. Of course, if properly invoked during the course of the bankruptcy, 11 U.S.C. 363(h) contemplates the sale of jointly owned property subject to certain prerequisites. Given the lack of information regarding any hypothetical sale, it is not possible for the Plan Trust to respond to the specific dictates of Section 363(h), which provides as follows: Notwithstanding subsection (f) of this section, the trustee may sell both the estates interest, under subsection (b) or (c) of this section, and the interest of any co-owner in property in which the debtor had, at the time of the commencement of the case, an undivided interest as a tenant in common, joint tenant, or tenant by the entirety, only if (1) partition in kind of such property among the estate and such co-owners is impracticable; (2) sale of the estates undivided interest in such property would realize significantly less for the estate than sale of such property free of the interests of such co-owners; (3) the benefit to the estate of a sale of such property free of the interests of co-owners outweighs the detriment, if any, to such co-owners; and (4) such property is not used in the production, transmission, or distribution, for sale, of electric energy or of natural or synthetic gas for heat, light, or power.

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authorized by law. Moreover, neither a plan proponent nor a bankruptcy court can expand its jurisdiction post-confirmation by attempting to retain jurisdiction.6 Section 363 Is Not Available Post-Confirmation Confirmation of the Plan will categorically preclude the relief the Trustee seeks in the Retention Provision. Plan confirmation radically changes the relationship between an estate and parties in interest.7 Section 363 of the Bankruptcy Code may be used by a trustee and the bankruptcy court only during the pendency of a bankruptcy case and before confirmation.8 The cases which deal with [section 363] of the Bankruptcy Code are uniform with regard to the invocation of 11 U.S.C. 363 during the pendency of a case and prior to confirmation.9 Section 363(h) states that the trustee may seek relief pursuant to that provision. The term trustee does not include either a reorganized debtor or a trustee of a post-confirmation trust. When the Bankruptcy Code confers powers on the trustee, it does not simply confer such powers on any trustee, anywhere, anytimeSection 323 provides [t]he trustee in a case under this title is the representative of the estate.10 After confirmation, the estate ceases to exist, and the reorganized debtor or trustee loses that status conferred by Section 323 and/or Section 1107.11 After confirmation of the Plan, there will be no trustee in this case within the meaning of Section 363, and no one will have standing to invoke powers of Section 363 with respect to this estate (which will have ceased).

6 7

8 9 10 11

See Fn. 15 and 16, infra. In re W. Integrated Networks, LLC, 329 B.R. 334, 341 (Bankr. D. Col. 2005) (quoting 7 Collier on Bankruptcy 1129.01[1] (15th ed. 2004)). In re Golf, LLC, 322 B.R. 874, 877 (Bankr. D. Neb. 2004). Id. 11 U.S.C. 323. In re United Operating, LLC, 540 F.3d 351, 355 (5th Cir. 2008) (Upon confirmation of the plan, the estate ceased to exist, and Dynasty lost its status as a debtor in possession.).

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In Western Integrated Networks, the bankruptcy court rejected a debtors attempt to retain power post-confirmation much like the Trustee attempts to do here.12 In that case, the liquidating trustee sought to proceed pursuant to section 542(a) of the Bankruptcy Code postconfirmation in order to recover property of the estate.13 The court noted that the trustees powers under Section 542 are in part premised on authority and control over property in Section 363. 11 U.S.C. 542. The court held that neither power extends post-confirmation. Holding that the trustee lacked standing to bring claims under sections 542(a) and 544 of the Bankruptcy Code and that no jurisdictional grounds existed to permit the trustee to maintain a postconfirmation action under section 542, the court stated: [U]pon confirmation and consummation of a plan the bankruptcy court's jurisdiction ceases and the property of the estate revests in the reorganized debtor. At that point, the property's relationship to the estate, and therefore the bankruptcy court's jurisdiction over the property, ends.14 Therefore, the court did not have the power to grant that relief post-confirmation. Moreover, in other situations, Bankruptcy courts have consistently held that there is no jurisdiction over matters for which only a former debtor-in-possession had standing or that only affects property that is no longer part of the estate.15 Thus, after plan confirmation, the Trustee will no longer have the need or ability to proceed pursuant to Section 363 of the Bankruptcy Code.

12 13 14 15

In re W. Integrated Networks, LLC, 329 B.R. 334 (Bankr. D. Col. 2005). Id. at 341. Id. at 337, 341 (internal citations omitted). See, e.g., In re Petty, 848 F.2d 654, 654-55 (5th Cir. 1988) (holding that bankruptcy court lacked jurisdiction to grant a pending motion under 11 U.S.C. 365 after bankruptcy case was dismissed); In re W.R.M.J. Johnson Fruit Farm, Inc., 107 B.R. 18, 19 (Bankr. W.D.N.Y. 1989); In re Wood, 47 B.R. 774, 776 (Bankr. W.D. Wis. 1985) (Courts have applied section 363 to transactions in chapter 11 proceedings only where plans have not yet been confirmed.); In re Ala. Fuel Sales Co., 45 B.R. 365, 368-69 (N.D. Ala. 1985) (holding that post-confirmation jurisdiction under 28 U.S.C. 1334 does not extend to the post-confirmation approval of sales or assignments of former estate property); In re LaRoche Indus., 312 B.R. 249, 257 (Bankr. D. Del. 2004) (The fact that a proceeding is core is also insufficient to confer subject matter jurisdiction on a bankruptcy court post-confirmation.); Halas v. Papajcik, 199 B.R. 654, 657 (N.D. Ill. 1996) (collecting cases in, among others, the Fifth Circuit for

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Retention of Jurisdiction Post-Confirmation Nor can the Trustee accomplish what is not authorized by law through use of a retention provision. While a bankruptcy court's post-confirmation jurisdiction is determined in part by reference to retention of jurisdiction provisions in the plan. As explained in In re Enron Corp. Sec., Derivative & ERISA Litg.,16 a bankruptcy court may not expand its post-confirmation jurisdiction through a retention of jurisdiction provision. A plan may not confer jurisdiction

absent statutory authority.17 While a plan may not confer or expand subject matter jurisdiction, some courts find a retention of jurisdiction in the plan to be a prerequisite to post-confirmation jurisdiction. In other words, a plan which fails to retain subject matter jurisdiction may leave it lacking, but a plan cannot create jurisdiction where it does not otherwise exist.18 With respect to the instant Plan, Virgin Offshore is attempting to reserve and retain the jurisdiction of the Bankruptcy Court to review and approve a sale under Section 363 when such sale has not yet been proposed or even conceptualized at the time of confirmation. The Plan Trust is aware of no statutory or jurisprudential authority supporting the Retention Provision, and it should be stricken prior to confirmation of the Plan. Reservation of Rights The Plan Trust specifically reserves the right to amend or supplement this Limited Objection should the Plan be amended by Virgin Offshore subsequent to the filing of this Limited Objection. Moreover, insofar as the Bankruptcy Court confirms the Plan inclusive of
the proposition that pending proceedings involving property of the estate are typically dismissed when property revests and the bankruptcy court loses jurisdiction). In re Enron Corp. Sec., Derivative & ERISA Litg., G-05-0012, 2005 WL 1745471, at *5 (S.D. Tex. July 25, 2005). In re U.S. Brass Corp., 301 F.3d 296, 303 (5th Cir. 2002). In re Coho Energy, Inc., 309 B.R. at 220 n. 4; In re U.S. Brass, Corp., 301 F.3d at 303 (noting that the plan contained a broad retention of jurisdiction provision); In re Encompass Services Corp., 337 B.R. 864, 874 (Bankr. S.D. Tex. 2006) aff'd, CIV.A. H-06-CV-0392, 2006 WL 1207743 (S.D. Tex. May 3, 2006).

16

17 18

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the Retention Provision, the Plan Trust specifically reserves any and all rights to appeal and/or object to any potential request to sell the Subject Properties under Section 363(h) of the Bankruptcy Code. WHEREFORE, the above premises considered, the Plan Trust respectfully requests that this Objection be deemed good and sufficient, and that this Court grants all other and further relief to which the Plan Trust is entitled. Respectfully submitted, LUGENBUHL, WHEATON, PECK, RANKIN & HUBBARD /s/ Benjamin W. Kadden _ STEWART F. PECK (#10403) CHRISTOPHER T. CAPLINGER (#25357) BENJAMIN W. KADDEN (#29927) JOSEPH P. BRIGGETT (#33029) 601 Poydras Street, Suite 2775 New Orleans, LA 70130 Telephone: (504) 568-1990 Facsimile: (504) 310-9195 Email: speck@lawla.com; ccaplinger@lawla.com; bkadden@lawla.com; jbriggett@lawla.com Counsel for The Virgin Oil Company, Inc. Plan Trust

CERTIFICATE OF SERVICE I hereby certify that a copy of the above and foregoing has been served upon the following parties by electronic notice via the Courts CM/ECF system on this 12th day of June, 2013: H. Kent Aguillard, kaguillard@yhalaw.com Brent B. Barriere, barrier@phelps.com Raymond A. Beyt, rab@beytlaw.com Frederick L. Bunol, fbunol@derbeslaw.com, dharvey@derbeslaw.com Jeffrey Burmaster, jburmaster@kingkrebs.com Jeffery D. Carruth, jcarruth@wkpz.com Leo D. Congeni, leocongeni@bellsouth.net Michael A. Crawford, mike.crawford@taylorporter.com Albert J. Derbes, ajdiv@derbeslaw.com, jbourdeaux@derbeslaw.com Carl Dore, carldore@doremahone.com, lgraham@doremahoney.com Douglas S. Draper, dsd@hellerdraper.com, lcollins@hellerdraper.com Steven G. Durio, durio@dmsfirm.com, bsandoz@dmsfirm.com 7

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Stanwood R. Duval, stan@duvallawfirm.com J. David Forsyth, jdf@sessions-law.com Tanya N. Garrison, tgarrison@wkpz.com Robert C. Gravolet, Robert.Gravolet@usdoj.gov, Adaline.L.Patterson@usdoj.gov Thomas G. Gruenert, tgruenert@ggzlawfirm.com kkeeling@ggzlafirm.com George B. Jurgens, gjurgens@kingkrebs.com, gchristian@kingkrebs.com Omer F. Kuebel, nobankecf@lockeliddell.com Armistead M. Long, along@gordonarata.com, sroberts@gordonarata.com Mark Mintz, mmintz@joneswalker.com, sliberio@joneswalker.com Louis M. Phillips, lphillips@gordonarata.com Patricia Williams Prewitt, pwp@pattiprewittlaw.com Jacque B. Pucheu, jacque@pprlaw.com, jvienne@pprlaw.com Ryan J. Richmond, rrichmond@stewartrobbins.com E. Kathleen Shahan, Kathie.shahan@usdoj.gov Patrick M. Shelby, pshelby@gordonarata.com Thomas J. Smith, tsmith@gjtbs.com, crose@gjtbs.com, chickman@gjtbs.com Office of the U.S. Trustee, USTPRegion5.NR.ECF@usdoj.gov Dennis J. Vidrine, dennisv@vidrinelaw.com Arthur A. Vingiello, avingiello@steffeslaw.com David F. Waguespack, Waguespack@carverdarden.com Guy E. Wall, gwall@wallbulling.com, melon@wallbulling.com Kristin S. Wallis, kwallis@csj-law.com, lderry@csj-law.com Timothy A. York, tyork@qsclpc.com

/s/ Benjamin W. Kadden

___________