     Case: 15-11297   Document: 00514014894   Page: 1   Date Filed: 06/01/2017




        IN THE UNITED STATES COURT OF APPEALS
                 FOR THE FIFTH CIRCUIT


                               No. 15-11297                    United States Court of Appeals
                                                                        Fifth Circuit

                                                                      FILED
IN RE: MIRANT CORPORATION                                          June 1, 2017
                                                                 Lyle W. Cayce
___________________________                                           Clerk

MC ASSET RECOVERY, L.L.C.,

             Appellant

v.

COMMERZBANK A.G.; BARCLAYS BANK, P.L.C.; BNP PARIBAS;
DANKSE BANK; ING BANK; ROYAL BANK OF SCOTLAND; ROYAL
BANK OF SCOTLAND N.V., formerly known as ABN AMRO Bank NV;
CREDIT AGRICOLE CORPORATE AND INVESTMENT BANK, formerly
known as Credit Lyonnais, formerly known as Calyon; INTESA SAN PAOLO,
formerly known as Banca Intesa; ROYAL BANK OF SCOTLAND GROUP,
P.L.C.; AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED;
STICHTING EUROPEAN POWER ISLAND; EUROPEAN POWER ISLAND
PROCUREMENT B.V.,

             Appellees




                Appeal from the United States District Court
                     for the Northern District of Texas
                           USDC No. 4:06-CV-13
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                                      No. 15-11297
Before STEWART, Chief Judge, and KING ∗ and DENNIS, Circuit Judges.
PER CURIAM: ∗∗
       This case is born of a long-running bankruptcy dispute relating to a
financing arrangement for a failed development project involving nine “power
islands.” The central issue relates to MC Asset Recovery, LLC (“MCAR”)’s
attempt to recover payments made by its parent, Mirant Corporation
(“Mirant”), to Commerzbank AG and syndicated lenders (Commerzbank and
the lenders, collectively, the “Lenders”) pursuant to a repayment guaranty (the
“Subject Guaranty”) issued in order to secure financing from those lenders. The
district court granted summary judgment for the Lenders and denied partial
summary judgment to MCAR. MCAR appeals both the grant and the denial.
We affirm.
                                             I.
       Mirant was an energy company headquartered in Georgia and operating
in North America, Europe, and Asia. It conducted business through
subsidiaries, including Mirant Asset Development and Procurement B.V.
(“MADP”), and Mirant Americas, Inc. (“MAI”). The dispute here centers on a
series of transactions involving Mirant and its subsidiaries between 2000 and
2001, all relating to construction and acquisition of power islands—massive
and expensive power-generating structures—to be deployed in Europe.
       Mirant formed MADP for the purpose of executing a Master Equipment
Purchase and Sale Agreement (“MPA”) with General Electric and its
international affiliate (collectively, “GE”) to secure up to nine power islands.



       ∗
         Judge King concurs in the judgment only.
       ∗∗
          Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5TH
CIR. R. 47.5.4.


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                                No. 15-11297
Mirant also executed an agreement guaranteeing MADP’s obligation to make
payments of the amounts due and payable under the MPA (the “Equipment
Guaranty”) for construction and delivery. Mirant sought to finance the
purchase and construction of these islands on an “off balance sheet basis,” and
in pursuit of this objective it entered into two successive financing
arrangements—one with Westdeutsche LandesBank Girozentrale (“WestLB”),
and one with the Lenders.
      The arrangement with WestLB was intended to serve as an intermediate
source of financing to make payments to GE while a longer term solution could
be found. In order to accomplish this intermediate goal, Mirant acted to bring
the MPA under the auspices of a preexisting financing arrangement between
WestLB and MAI—formalized by the C98 Agreement—that Mirant
guaranteed. To do so, WestLB, MAI, and MADP concluded the Owner
Assignment and Assumption Agreement (the “OAA agreement”) on February
15, 2001, which assigned MADP’s rights under the MPA to WestLB and
provided for WestLB to assume MADP’s payment obligations. It also provided
(with GE’s consent) that Mirant “shall be released from its obligations . . .
under the [Equipment Guaranty], provided, however, that the [Equipment
Guaranty] shall be deemed reinstated and in full force and effect upon any
assignment by [WestLB] of its interest in the [MPA] to [MADP or] an Affiliate
of [MADP].”
      That same day, WestLB, MAI, and MADP concluded an Addendum to
the C98 Agreement. Under the Addendum, MADP had until May 30, 2001, to
repurchase the rights recently assigned to WestLB (and thereby repay WestLB
for its payments to GE). Mirant also concluded a Reaffirmation of Guaranty
agreement through which it guaranteed the obligations of its subsidiaries to
WestLB (the “WestLB Guaranty”).


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                                      No. 15-11297
       Mirant then sought longer-term financing arrangements from the
Lenders. On May 25, 2001, WestLB, MAI, MADP, and European Power Island
Procurement B.V. (“EPIP”)—a newly formed special purpose limited-liability
company set up to act as the owner/assignee of the MPA—entered into a
Purchase Option Assignment and Assumption Agreement (the “POAA”).
Pursuant to that agreement, EPIP paid WestLB €23,479,231.25 1—the
purchase price under the C98 Addendum, representing WestLB’s previous
payments to GE, plus a financing charge—and obtained WestLB’s rights under
the MPA. The purchase price paid by EPIP and future payments to GE were
advanced pursuant to a Participation Agreement between certain of the
Lenders, EPIP, and MADP, executed the same day. 2 Under that agreement
and a related Procurement Agency Agreement between EPIP and MADP,
MADP was responsible for administering the acquisition and construction of
the power islands and, ultimately, repaying the Lenders by purchasing the
power islands from EPIP for an amount representing the funds advanced by
the Lenders, plus a financing charge. 3 Mirant issued the Subject Guaranty in
favor of the Lenders, under which Mirant guaranteed MADP’s payment
obligations under the loan documents. The ultimate goal of the project was to
place power islands at sites in Europe to attract “take-out” financing, by means



       1  $US 21,016,259.83. All Euro to US Dollar conversions were calculated using the
average exchange rate during the year 2001 which, according to authoritative sources, was
EUR/USD 0.89 (that is, EUR 1.00 bought USD 0.89). Canadian Forex, Yearly Average
Exchange Rates for Currencies, http://www.canadianforex.ca/forex-tools/historical-rate-
tools/yearly-average-rates (last visited May 30, 2017); Federal Reserve, Historical Rates for
the EU Euro, https://www.federalreserve.gov/releases/H10/Hist/dat00_eu.htm (last visited
May 30, 2017). The exchange rate at the time of this writing is roughly EUR/USD 1.12,
meaning EUR 1.00 buys USD 1.12.
        2 The Participation Agreement was subsequently amended in August 2001 to add the

remaining Lenders.
        3 To take advantage of then-existing financial accounting rules, MADP also had the

option to lease or remarket the power islands.

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                                    No. 15-11297
of which Mirant would repay the Lenders. It is the Subject Guaranty that
Mirant seeks to avoid in this lawsuit.
      Mirant’s plans for European expansion began to collapse less than a year
later, prompting Mirant and MADP ultimately to repurchase and cancel the
orders for all nine of the power islands. Pursuant to the loan documents and to
the Subject Guaranty, Mirant was forced to make four payments to the
Lenders totaling €136.9 million. 4 This sum represented the progress payments
on the power islands that the Lenders had already advanced as payments to
GE, plus a finance charge. Following these payments, Mirant and several
affiliates filed for Chapter 11 bankruptcy. The confirmed bankruptcy plan
provided for the creation of a special litigation entity, MCAR, which brought
this action in federal district court to avoid the Subject Guaranty and recover
the payments previously made to the Lenders as fraudulent transfers.
                                         II.
      After an earlier decision of this court determining that New York law
applies to this case, and after several years of discovery, the parties filed cross-
motions for summary judgment in early 2015. The crux of the dispute related
to whether fair consideration supported the Subject Guaranty. Under New
York law, obligations incurred by “a person who is or will be thereby rendered
insolvent [are] fraudulent as to creditors without regard to his actual intent if
the conveyance is made or the obligation is incurred without a fair
consideration.” N.Y. Debt. & Cred. § 273 (McKinney 2016). Fair consideration
is given for an obligation “[w]hen in exchange for such . . . obligation, as a fair
equivalent therefor, and in good faith, property is conveyed or an antecedent
debt is satisfied.” Id. § 272(a).




      4   $US 122,539,189.66
                                         5
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                                    No. 15-11297
      To avoid summary judgment, MCAR was required to adduce evidence
demonstrating that the Subject Guaranty and payments made thereunder
exceeded the amount of antecedent debt that was satisfied in the transaction
involving the Subject Guaranty. This would establish a lack of fair equivalency
in what was received for issuing the Subject Guaranty. 5
      On fair equivalency the parties did not dispute (1) the series of
transactions leading to the lawsuit in this case; or (2) that at least
€23,479,231.25 6 in antecedent debt—the termination amount that Mirant
guaranteed to WestLB and that EPIP paid to WestLB with financing obtained
from the Lenders—was satisfied. The dispute related to the extent of any
additional antecedent debt satisfied by the Subject Guaranty.
      MCAR argued that when the Subject Guaranty was executed, neither
Mirant nor any of its subsidiaries held existing liabilities to WestLB because,
under the OAA agreement, both Mirant and MADP were released from
existing obligations to GE under the MPA and the Equipment Guaranty. This
meant that Mirant’s assumption of €600 million 7 in so-called “new” liability
through the Subject Guaranty could not have satisfied an antecedent
obligation over and above the amount of the termination payment, because no
such obligation existed.
      The district court disagreed, and based on three findings, it ruled that
equivalent antecedent debt had in fact been satisfied. First, the court found
that EPIP was an “affiliate” of Mirant as defined in the C98 Agreement and




      5  The district court also evaluated the Lenders’ good faith in entering into the
transaction and held that MCAR had “wholly failed to present evidence suggestive of any
fraudulent scheme by Mirant and the lenders.”
       6 $US 21,016,259.83
       7 $US 537,059,998.51



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                                       No. 15-11297
incorporated by reference into the OAA agreement. 8 This was because MADP
and EPIP were in a partially reciprocal relationship of control that permitted
MADP to direct EPIP’s actions relating to acquisition of the power islands with
total freedom under the POAA—apart from an admonition to stay within the
agreed budget and not to terminate an order for an island without EPIP’s
consent. Second, because EPIP was an affiliate of Mirant, WestLB’s
assignment to EPIP of obligations under the MPA “reinstated” Mirant’s
obligations to GE under the Equipment Guaranty, pursuant to the
reinstatement provision discussed above. Third, the district court found that
no detailed calculation of the value given by and received in exchange for the
Subject Guaranty was necessary, as “the Subject Guaranty essentially
replaced the reinstated Equipment Guaranty,” allowing Mirant to “obtain[]
funds for MADP to use to pay the payments required under the agreement with
GE, thus reducing Mirant’s risk under the Equipment Guaranty euro for euro.”
In other words, Mirant substituted a guaranty to one entity for a guaranty to
another entity, and by means of that substitution received loaned capital that
could be used to meet obligations owed to the first entity—that is, to GE.
       On appeal MCAR challenges the district court’s fair equivalency ruling
on the grounds that: (1) EPIP was not an affiliate of MADP, and so the
Equipment Guaranty could not have been reinstated; (2) even if the Equipment
Guaranty was reinstated, there is no evidence that it was replaced by the
Subject Guaranty; (3) the district court failed to follow the proper formula in



       8 The C98 Agreement defined “affiliate” as “another Person that directly, or indirectly
through one or more intermediaries, Controls or is Controlled by or is under common Control
with the Person specified.” The agreement further defines “control” as “the possession,
directly or indirectly, of the power to direct or cause the direction of the management policies
of such Person, whether through the ownership of voting securities or by contract or
otherwise.”

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                                  No. 15-11297
measuring fair equivalency; (4) the Equipment Guaranty cannot qualify as
“antecedent” debt because it would have been reinstated at the same time that
the Subject Guaranty was issued, making the debt “contemporaneous” rather
than “antecedent”; and (5) the Lenders’ financing satisfied no more than
€23,479,231.25 9 worth of antecedent debt because only actually due legal
liability to pay for past events can qualify as “antecedent,” not agreed-upon
future liability. MCAR also challenges the district court’s ruling on the
Lenders’ good faith.
                                       III.
      “We review a district court’s grant of summary judgment de novo,
applying the same standards as the district court.” Antoine v. First Student,
Inc., 713 F.3d 824, 830 (5th Cir. 2013).
      Review of the record and applicable case law indicates that all three of
the key findings on which the district court relied are well supported. The
court’s conclusion that EPIP qualified as an “affiliate” of MADP under the
relevant agreements accords with the plain meaning of the language used in
those agreements and is based on key facts that are beyond dispute. The same
is true of the district court’s related conclusion that the Equipment Guaranty
was reinstated. Further, the district court’s determination as to the
replacement of one guaranty by the other—a process that this court
understands less as a literal proposition than as a functional one—is supported
by relevant statutory language establishing the validity of contingent debt, and
is not precluded by any requirement to apply a particular formula in these
circumstances.
      After considering the parties’ arguments as briefed on appeal, and after
reviewing the record, the applicable law, and the district court’s detailed and


      9   $US 21,016,259.83
                                        8
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                                  No. 15-11297
thorough judgment and reasoning, we AFFIRM the district court’s judgment
and adopt its analysis in full.




                                       9
