Whitebox Relative Value Partners, LP v. Transocean Ltd., Transocean ( 2022 )

21-84-cv
Whitebox Relative Value Partners, LP et al. v. Transocean Ltd., Transocean Inc.
UNITED STATES COURT OF APPEALS
FOR THE SECOND CIRCUIT
SUMMARY ORDER
RULINGS BY SUMMARY ORDER DO NOT HAVE PRECEDENTIAL EFFECT. CITATION TO A SUMMARY
ORDER FILED ON OR AFTER JANUARY 1, 2007, IS PERMITTED AND IS GOVERNED BY FEDERAL RULE OF
APPELLATE PROCEDURE 32.1 AND THIS COURT’S LOCAL RULE 32.1.1. WHEN CITING A SUMMARY ORDER
IN A DOCUMENT FILED WITH THIS COURT, A PARTY MUST CITE EITHER THE FEDERAL APPENDIX OR AN
ELECTRONIC DATABASE (WITH THE NOTATION “SUMMARY ORDER”). A PARTY CITING A SUMMARY
ORDER MUST SERVE A COPY OF IT ON ANY PARTY NOT REPRESENTED BY COUNSEL.
At a stated term of the United States Court of Appeals for the Second Circuit, held at the
Thurgood Marshall United States Courthouse, 40 Foley Square, in the City of New York, on the
1st day of February, two thousand twenty-two.
PRESENT: DENNIS JACOBS,
REENA RAGGI,
WILLIAM J. NARDINI,
Circuit Judges.
_____________________________________
WHITEBOX RELATIVE VALUE PARTNERS,
LP, WHITEBOX GT FUND, LP, WHITEBOX
MULTI-STRATEGY PARTNERS, LP,
PANDORA SELECT PARTNERS, LP,
Plaintiffs-Counter-Defendants-Appellants,
v. 21-84-cv
TRANSOCEAN LTD., TRANSOCEAN INC.,
Defendants-Counter-Claimants-Appellees.
_____________________________________
For Plaintiffs-Counter-Defendants-Appellants: ANDREW M. LEBLANC (Dennis F. Dunne, Tyson
Lomazow, Jed M. Schwartz, Brett P. Lowe, on
the brief), Milbank LLP, New York, NY, and
Washington, DC.
For Defendants-Counter-Claimants-Appellees: GLENN M. KURTZ (Gregory M. Starner, Joshua
D. Weedman, Jennifer M. Thomas, Catherine E.
Stetson, on the brief), White & Case LLP, New
York, NY, and Hogan Lovells US LLP,
Washington, DC.
On appeal from the United States District Court for the Southern District of New York
(George B. Daniels, J.).
UPON DUE CONSIDERATION, IT IS HEREBY ORDERED, ADJUDGED, AND
DECREED that the appeal is DISMISSED as moot, the judgment of the district court entered on
January 7, 2021, is VACATED, and the case is REMANDED to the district court with
instructions to dismiss Appellants’ claims and Appellees’ counterclaims as moot.
Plaintiffs-Counter-Defendants-Appellants (“Whitebox”) brought this action alleging that
Defendants-Counter-Claimants-Appellees (“Transocean”) violated Sections 14(e) and 20(a) of the
Securities Exchange Act of 1934 by deliberately misstating and withholding material facts—
including Transocean’s alleged default under an indenture governing notes maturing in 2027 (the
“2027 Indenture”)—in connection with Transocean’s internal reorganization and associated
exchange transaction. 1 Transocean filed counterclaims against Whitebox seeking, among other
relief, a declaratory judgment that Transocean had not defaulted under the 2027 Indenture and that
Whitebox’s notice of default was invalid. Transocean and Whitebox filed cross motions for
summary judgment on the counterclaims. The district court granted Transocean’s motion, denied
Whitebox’s, and ordered declaratory judgment in favor of Transocean on the counterclaims.
Whitebox then filed a conditional stipulation of dismissal of the securities claims to the effect that
Whitebox can reassert those claims only if Whitebox succeeds in obtaining a reversal of the district
court’s declaratory judgment on appeal. 2 The district court entered judgment on January 7, 2021.
Whitebox timely appealed. 3
“We review de novo the award of summary judgment, constru[ing] the evidence in the light
most favorable to the [nonmoving party] and drawing all reasonable inferences and resolving all
ambiguities in [its] favor.” Jaffer v. Hirji, 887 F.3d 111, 114 (2d Cir. 2018) (internal quotation
marks omitted) (alterations in original).
Whitebox and Transocean do not dispute the material facts regarding the exchange
transaction at issue. The sole issue on appeal is whether Transocean was permitted to execute the
1
Appellants hold notes issued pursuant to the 2027 Indenture.
2
The parties’ stipulation dismissing Whitebox’s securities claims against Transocean did
so “without prejudice to Whitebox reasserting them if, but only if, Whitebox successfully obtains
a reversal on appeal” of the district court’s order granting declaratory judgment in favor of
Transocean. Special App’x at 18. But if the district court’s order is “affirmed on appeal,
Whitebox’s [s]ecurities [c]laims shall be deemed dismissed with prejudice.” Id.3
The judgment is final and appealable even though the securities claims may be reasserted
under certain, limited circumstances. See Purdy v. Zeldes, 337 F.3d 253, 258 (2d Cir. 2003).
2
exchange transaction as it did or whether, as Whitebox argues, Transocean defaulted as to certain
terms of the 2027 Indenture. Specifically, Whitebox argues that Transocean defaulted under
Section 11.03 of the 2027 Indenture when, in connection with the exchange transaction,
Transocean created three new intermediate holding company subsidiaries without providing
certain guarantees and, in so doing, improperly subordinated notes issued under the 2027 Indenture
to the newly issued debt. We need not reach the merits of this question, however, because we
hold that the appeal is moot.
On December 1, 2020, before the district court ruled on the parties’ cross motions for
summary judgment and entered declaratory judgment, Transocean filed a letter in which it
indicated that it had “elected to implement certain internal reorganization transactions to resolve
the allegations in [Whitebox’s notice of default] that were completed [the day prior].” App’x at
1773. As a result of these additional transactions, “the recently-created [intermediate holding
companies] which were the subject of the [notice of default] ha[d] been eliminated,” thus restoring
the seniority of the notes issued pursuant to the 2027 Indenture and curing the alleged default. Id.As a result, the dispute as to whether Transocean defaulted under the 2027 Indenture is “no longer
live and the parties lack a legally cognizable interest in the outcome of this appeal.” Hassoun v.
Searls, 976 F.3d 121, 130 (2d Cir. 2020) (internal quotation marks omitted) (quoting Powell v.
McCormack, 395 U.S. 486, 496 (1969)).
To be sure, Transocean’s curative actions—taken before the district court rendered its
judgment in favor of Transocean—did not, at the time, deprive the district court of subject matter
jurisdiction over the dispute involving those transactions because the district court still had pending
before it (1) Whitebox’s securities law claims and (2) Transocean’s request for an injunction to
compel Whitebox to withdraw its notice of default. But neither of those claims are before us and
thus do not, on their own, present a live case or controversy under Article III of the Constitution.
Indeed, Whitebox dismissed the securities claims voluntarily for the purpose of expediting
appellate review of the district court’s disposition of Transocean’s counterclaims. And
Transocean did not cross appeal the district court’s order declining to enjoin Whitebox. See
Already, LLC v. Nike, Inc., 568 U.S. 85, 91 (2013) (“A case becomes moot—and therefore no
longer a ‘Case’ or ‘Controversy’ for purposes of Article III—when the issues presented are no
longer ‘live’ or the parties lack a legally cognizable interest in the outcome.” (internal quotation
marks omitted)); id. at 90–91 (“[A]n actual controversy must exist not only at the time the
complaint is filed, but through all stages of the litigation.” (internal quotation marks omitted)).
Further, as the parties agreed at oral argument, the potential for Whitebox’s securities claims to be
revived on condition of reversal of the district court’s declaratory judgment does not alone render
the contested issue of default no longer moot. See id. at 91 (“No matter how vehemently the
parties continue to dispute the lawfulness of the conduct that precipitated the lawsuit, the case is
moot if the dispute is no longer embedded in any actual controversy about the plaintiffs’ particular
legal rights.” (internal quotation marks omitted)). That Transocean indicated at oral argument
that it had no intention of repeating the challenged action—even though it prevailed in the court
below—only reinforces our conclusion that the appeal before us is moot.
3
When a case becomes moot on appeal, “[t]he established practice . . . in the federal system
. . . is to reverse or vacate the judgment below and remand with a direction to dismiss.” Arizonans
for Off. Eng. v. Arizona, 520 U.S. 43, 71 (1997) (quoting United States v. Munsingwear, Inc., 340
U.S. 36, 39 (1950)). “The reason for this is . . . to avoid giving preclusive effect to a judgment
never reviewed by an appellate court.” New York City Employees’ Ret. Sys. v. Dole Food Co.,
969 F.2d 1430, 1435 (2d Cir. 1992). “To determine whether vacatur is appropriate, we must look
at the equities of the individual case.” Hassoun, 976 F.3d at 130 (internal quotation marks
omitted) (citing U.S. Bancorp Mortg. Co. v. Bonner Mall P’ship, 513 U.S. 18, 26 (1994)).
Vacatur “is generally appropriate where mootness arises through ‘happenstance,’ or the unilateral
action of the party prevailing below . . . .” Hassoun, 976 F.3d at 131 (quoting Kerkhof v. MCI
WorldCom, Inc., 282 F.3d 44, 53–54 (1st Cir. 2002)). “[T]he touchstone of our analysis” is “[t]he
appellant’s fault in causing mootness.” FDIC v. Regency Sav. Bank, F.S.B., 271 F.3d 75, 77 (2d
Cir. 2001). “If the appellant has taken action depriving us of continuing jurisdiction over the case,
under circumstances that suggest an intention to do so, the appellant is deemed to have forfeited
the benefit of the equitable remedy of vacatur of the judgment of the lower court.” Id. But if the
“appeal [is] ‘frustrated by the vagaries of circumstance,’” Hassoun, 976 F.3d at 131 (quoting U.S.
Bancorp Mortg. Co., 513 U.S. at 25), vacatur remains appropriate, id. at 133.
Here, the record presents no indication (and neither party suggests) that Transocean sought
to deliberately evade judicial review to preserve a favorable judgment. See Azar v. Garza, 138 S.
Ct. 1790, 1792 (2018). Indeed, Transocean could not have done so because its curative actions
as to the alleged default were taken before the district court ruled on the cross motions for summary
judgment. To the contrary, Transocean argued in the court below that its decision to cure the
alleged default did not moot the case and that it undertook the curative actions to prevent any loss
of access to Transocean’s substantial credit facilities (unrelated to the parties’ dispute), which
provide Transocean with “accessible capital to support its business operations and capital
requirements.” App’x at 1772. And although Transocean’s cure may have initiated the sequence
of events that resulted in this case becoming moot, it was not that action alone that caused “the
parties [to] lack a legally cognizable interest in the outcome” of this case. Already, LLC, 568 U.S.
at 91. Instead, this appeal has been “frustrated by the vagaries of circumstance,” Hassoun, 976
F.3d at 131, within the meaning of “happenstance” under Munsingwear because of events
subsequent to Transocean’s cure, including the district court’s declaratory judgment in favor of
Transocean, Whitebox’s voluntary dismissal of the securities claims, and Transocean’s decision
to not cross appeal the district court’s refusal to enjoin Whitebox, see Munsingwear, Inc., 340 U.S.
at 40; Hassoun, 976 F.3d at 132. Accordingly, we vacate the district court’s judgment.
4
Accordingly, the appeal is DISMISSED as moot, the judgment of the district court entered
on January 7, 2021, is VACATED, and the case is REMANDED to the district court with
instructions to dismiss Appellants’ claims and Appellees’ counterclaims as moot.
FOR THE COURT:
Catherine O’Hagan Wolfe, Clerk of Court
5