IN RE: ATP Oil & Gas Corporation, No. 2:2015cv03141 - Document 71 (E.D. La. 2016)

Court Description: ORDER AND REASONS granting 49 Motion to Dismiss for Failure to State a Claim; granting 53 Motion to Dismiss. Although the Court finds that, as a general matter, amendment is unwarranted, the Court grants the Trustee leave to amend his complaint within twenty-one (21) days of this order to better allege the two sets of claims outlined in Section IV of this order. The Trustee may not reassert any causes of action or claims except as specifically permitted by Section IV.. Signed by Judge Sarah S. Vance on 4/29/16. (jjs)

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IN RE: ATP Oil & Gas Corporation Doc. 71 UNITED STATES DISTRICT COURT EASTERN DISTRICT OF LOUISIANA RODNEY TOW, TRUSTEE CIVIL ACTION VERSUS NO: 15-3141 T. PAUL BULMAHN, ET AL. SECTION: R ORD ER AN D REASON S Rodney Tow, the Chapter 7 bankruptcy trustee for ATP Oil and Gas Corporation, sues defendants--form er officers and directors of ATP--for breaches of fiduciary duty, fraudulent transfer, civil conspiracy, and aiding and abetting breaches of fiduciary duty. The Officer Defendants and Director Defendants each m ove to dism iss the Trustee's com plaint for failure to state a claim .1 For the following reasons, the Court grants both m otions. I. BACKGROU N D A. Partie s Rodney Tow is the Chapter 7 Trustee for ATP Oil and Gas Corporation. ATP was incorporated under Texas law in 1991. Before filing for bankruptcy in August 20 12, ATP engaged in the acquisition, developm ent, and production of oil and natural gas properties in the Gulf of Mexico and other locations.2 The Trustee sued eighteen defendants, m ost of whom are form er officers or directors of ATP. The "Director Defendants" are Burt A. Adam s, Arthur H. Dilly, Brent M. 1 R. Docs. 49, 53. 2 R. Doc. 41 at 2. Dockets.Justia.com Longnecker, Robert J . Karow, Gerard J . Swonke, Chris A. Brisack, George R. Edwards, and Walter Wendlandt. Six Director Defendants--Dilly, Edwards, Karow, Longnecker, Swonke, and Wendlandt--served on the Audit Com m ittee for ATP's Board of Directors.3 Three Director Defendants--Adam s, Brisack, and Wendlandt--served on the Com pensation Com m ittee.4 • The "Officer Defendants" are: T. Paul Bulm ahn, form er Chief Executive Officer an Chairm an of ATP's d Board of Directors; • Leland Tate, form er President of ATP; • Albert L. Reese, J r., form er Chief Financial Offic er; • George R. Morris, form er Chief Operating Officer; • Keith R. Godwin, form er Chief Accounting Officer; • Pauline van der Sm an-Archer, form erVice President of Adm inistration; • Isabel Plum e, form er Chief Com pliance Officer andCorporate Secretary; • Robert M. Shivers III, form er Vice President of Pr jects; and o • G. Ross Frazer, form er Vice President of Engineerin g. The final defendant is J ohn Tschirhart, form er General Counsel of ATP.5 In Count Four of the Second Am ended Com plaint--erroneously labeled "Cause of Action Five"--the 3 Id. at 28. 4 Id. at 30 . 5 Id. at 5. 2 Trustee alleges legal m alpractice against Tschirhart.6 The Trustee has since dism issed all claim s against Tschirhart with prejudice.7 B. Factu al Backgro u n d On May 20 , 20 10 , the Deepwater Horizon drilling rig exploded and sank in the Gulf of Mexico, creating "one of the m ost pervasive and devastating environm ental disasters in the history of the United States."8 In response, the federal governm ent issued m oratoria on new and existing deepwater drilling in the Gulf of Mexico.9 Although the m oratoria were eventually lifted, the Governm ent instituted new rules and regulations that delayed the resum ption of drilling and increased the cost of decom m issioning deepwater wells.10 The Trustee alleges these developm ents deferred or elim inated m any of ATP's stream s of revenue and increased its costs of operation.11 As a result, ATP experienced im m ediate difficulties servicing its debt and paying expenses. 12 The Trustee alleges that "as early as May 20 10 , ATP began to have problem s with liquidity . . . and entered the zone of insolvency."13 6 Id. at 32. 7 R. Doc. 70 . 8 R. Doc. 41 at 6. 9 Id. at 7. 10 Id. at 7, 14. 11 Id. 12 Id. 13 Id. at 7. 3 Following the BP Oil Spill, ATP invested substantial sum s in several capital projects. The first involved ATP's Cheviot Field in the North Sea. In late 20 0 8, ATP contracted for the construction of a floating production platform , the "Octabuoy," which was to be deployed at the Cheviot Field upon com pletion in 20 14.14 The Trustee alleges that although initial estim ates indicated that the Cheviot Field contained $ 70 2.5 m illion in proven undeveloped reserves and $ 1,120 .1 m illion in probable undeveloped reserves, these estim ates were decreased between J anuary 1 and J une 30 , 20 12.15 The new figures suggested that the field contained only $ 25.5 m illion in proven undeveloped reserves and $ 538.8 m illion in probable undeveloped reserves.16 Nonetheless, the Trustee alleges, som etim e in 20 12 ATP provided $ 80 m illion in funding to an ATP subsidiary in connection with the Cheviot Field project.17 The second project involved ATP's efforts to obtain drilling licenses in the Eastern Mediterranean Sea for two ATP subsidiaries.18 According to the Trustee, in or around J une 20 11, ATP provided funding for ATP East Med Num ber 1 B.V. ("ATP-EM-1") to purchase a share of three licenses off the coast of Israel.19 The Trustee alleges that "it was estim ated that ATP would need to spend $ 250 m illion on those licenses before production."20 He 14 Id. at 9. 15 Id. at 10 . 16 Id. 17 Id. 18 Id. at 12. 19 Id. 20 Id. 4 further alleges that although ATP-EM-1 successfully acquired a share of all three licenses, the Israeli governm ent seized ATP's interest in two of the licenses because "it was discovered that they were held in violation of Israeli law."21 As to the second ATP subsidiary, ATP East Med Num ber 2 B.V. ("ATP-EM-2"), the Trustee alleges that ATP funded the subsidiary's bids on unspecified "work" in the Eastern Mediterranean.22 He further contends that although "m illions of dollars were spent," ATP-EM-2 was unable to obtain any drilling licenses.23 The final investm ent involved a project nam ed "Clipper."24 The Trustee alleges that although ATP initially stated that Clipper would cost $ 120 m illion to com plete, the cost "ballooned m ere m onths later to over $ 20 0 m illion."25 The Trustee gives no additional details on Clipper. Ultim ately, ATP proved unable to survive the disruptions caused by the BP Oil Spill and drilling m oratoria. Part of the Governm ent's response to the oil spill was to prom ulgate new regulations on the decom m issioning of deepwater wells.26 As a result of these regulations, ATP incurred decom m issioning costs earlier than the com pany originally anticipated.27 The Trustee alleges that because ATP was unable to pay these costs, the 21 Id. 22 Id. 23 Id. 24 Id. at 13. 25 Id. 26 Id. at 14. 27 Id. 5 com pany incurred $ 120 m illion in liability to the Bureau of Ocean Energy Managem ent (BOEM).28 Eventually, BOEM stripped ATP of its ability to operate in the Gulf of Mexico.29 At som e point before it declared bankruptcy, ATP began selling investors net profits increases ("NPIs") and overriding royalty interests ("ORRIs") to generate cash to pay "past due obligations."30 The Trustee alleges that although these transactions generated large am ounts of cash for ATP--approxim ately $ 60 0 m illion--they "crippl[ed]" the com pany's ability to profit from its in-ground hydrocarbon assets in the future.31 According to the Trustee, ATP's reserves becam e so encumbered that when the company filed for bankruptcy they could be sold only for de m inim is value. 32 While ATP struggled with drilling m oratoria, new regulatory requirem ents, and decreasing liquidity, the com pany entered unfavorable vendor contracts that further im peded its ability to rem ain a going concern. Several contracts involved Bluewater Industries ("BWI"), which ATP retained to perform various services.33 According to the Trustee, the contracts between ATP and BWI were "com pletely one-sided in BWI's favor."34 Allegedly, the BWI contracts required ATP to bear costs resulting from overruns and delays 28 Id. at 15. 29 Id. at 14. 30 Id. at 15. 31 Id. at 15-16. 32 Id. at 16. 33 Id. 34 Id. at 17. 6 attributable to BWI, which caused ATP to incur costs with little countervailing benefit.35 The other unfavorable contract involved Nabors Offshore Corporation, which leased a drilling rig to ATP from March 20 10 through J uly 20 12 at a rate of $ 10 0 ,0 0 0 per day.36 The Trustee contends that ATP used the drilling rig not for drilling but for services that could have been perform ed through less expensive m eans.37 The Trustee's theory is that although ATP's arrangem ents with BWI and Nabors were unfavorable, "these contracts were entered into at the direction of Defendant Bulm ahn to benefit his friends."38 According to the Trustee, "exorbitant" bonuses paid to certain Officer Defendants further im peded ATP's survival.39 The Trustee contends that defendants Bulm ahn, Tate, Morris, Reese, and Godwin obtained a total of over $ 9 m illion in cash and $ 3.5 m illion in stock bonuses during the years 20 10 and 20 11.40 During this tim e period, ATP was allegedly "in the zone of insolvency and [] desperate for cash to fund its operations."41 By the sum m er of 20 12, ATP was considering bankruptcy.42 Before the com pany filed for bankruptcy protection, however, ATP's Board of Directors approved paym ent of 35 Id. 36 Id. 37 Id. 38 Id. 39 Id. at 20 . 40 Id. 41 Id. at 21. 42 Id. at 18. 7 a special dividend for holders of Series B stock.43 The dividend, which was announced on or about J uly 2, 20 12, am ounted to $ 1.99 per Series B share and resulted in a total paym ent of $ 7 m illion.44 According to the Trustee, "ATP was advised by its attorneys" that the dividend would be im proper under the federal Bankruptcy Code and Texas law. 45 The Trustee contends that ATP nonetheless paid the dividend because CEO Bulm ahn "dem and[ed]" paym ent "to benefit preferred investors" of ATP.46 On August 17, 20 12, ATP filed a voluntary petition for relief under Chapter 11 of the Bankruptcy Code in the Southern District of Texas.47 ATP's case was converted to a Chapter 7 proceeding on J une 26, 20 14, and Tow was appointed Trustee for ATP's estate. 48 C. Th is Law s u it The Trustee filed suit on behalf of ATP's estate against ATP's officers and directors in the Southern District of Texas. Initially, the case was assigned to the Bankruptcy Court for the Southern District of Texas. On J une 29, 20 15, J udge Gray Miller withdrew the bankruptcy reference and transferred the case to the District Court for the Southern District 43 Id. 44 Id. 45 Id. 46 Id. The Second Am ended Com plaint also charges ATP's General Counsel Tshirhart and the Officer Defendants with failing to notify ATP's investors of legal action initiated against ATP by the Departm ent of the Interior's Bureau of Safety and Environm ental Enforcem ent. Id. at 19-20 . But the Trustee has since dism issed his claim s against Tshirhart with prejudice, as well as all claim s against all defendants based on allegations that defendants failed to adequately inform ATP's insurers of any claim against the com pany. R. Doc. 70 . 47 Id. at 5. 48 Id. 8 of Texas.49 Defendants then m oved to transfer the case under the first-to-file rule, arguing that the Trustee's com plaint substantially overlapped with securities class actions that were being litigated before this Court.50 J udge Miller granted the m otion on J uly 28, 20 15 and transferred the Trustee's lawsuit to this Court.51 On J uly 27, 20 15, the Trustee filed a four-count First Am ended Com plaint, alleging breach of fiduciary duty, fraudulent transfer, and civil conspiracy on the part of the Director Defendants and Officer Defendants, as well as legal m alpractice on the part of ATP's form er General Counsel, Tschirhart.52 On Septem ber 24, 20 15, the Trustee am ended his pleadings and filed a Second Am ended Com plaint.53 In his Second Am ended Com plaint, the Trustee again asserts four causes of action. In Count One, the Trustee alleges that the Officer Defendants and Director Defendants owed fiduciary duties to ATP, which extended to ATP's creditors when the corporation entered the "zone of insolvency" in May 20 10 . He further alleges that each of the Officer Defendants breached those duties as follows: 49 R. Doc. 3. 50 R. Doc. 6. In the Fifth Circuit, the first-to-file rule is a discretionary doctrine, which provides that "when related cases are pending before two federal courts, the court in which the case was last filed m ay refuse to hear it if the issues raised by the cases substantially overlap." Cade Co. v. W hataburger of Alice, Inc., 174 F.3d 599, 60 3 (5th Cir. 1999). 51 R. Doc. 9. 52 R. Doc. 8. 53 R. Doc. 41. 9 • They "failed to recognize and accept the reality ofthe [BP Oil Spill]" and failed to take actions to account for the spill's foreseeable effects on ATP"s finances and business.54 • They "failed to appropriately adjust ATP's busines practices to respond to s the im pending insolvency."55 Instead, they "continued to recklessly spend ATP's m oney as if the Oil Spill had never occurred."56 • They "spent ATP's m oney onlong term projects the com pany could no longer afford," such as Clipper, the developm ent of the com pany's Cheviot Field in the North Sea, and the acquisition of licenses to drill in the Eastern Mediterranean Sea.57 • They failed to consider the risks and consequences of these and other transactions and neglected "obvious available alternative transactions or courses of action" that would not have unduly jeopardized ATP's financial viability.58 • They failed to establish a reserve offunds to pay increased decom m issioning costs that resulted, naturally and foreseeably, from the governm ent's response to the BP Oil Spill.59 • They over-m onetized ATP's in-ground hydrocarbon ass ts to pay "past-due e 60 obligations." • They "allowed them selves to be controlled by [CEO Bulm ahn] . . . and acquiesced to his desires and interests rather than exercising their own business judgm ent for the good of ATP."61 54 R. Doc. 41 at 7. 55 Id. 56 Id. at 8. 57 Id. at 9-14. 58 Id. at 22. 59 Id. at 14. 60 Id. at 23. 61 Id. at 28. 10 • They authorized one-sided contracts wih ATP's vendors that were designed t "to benefit [Bulm ahn's] friends" at ATP's expense.62 • While ATP's bankruptcy was "pending," they authori ed paym ent of a z preferred stock divided that "benefit[ted] preferred investors to the detriment of ATP and its creditors."63 • Four Officer Defendants--Bulm ahn, Tate, Morris, Re ese, and Godwin-64 accepted "undeserved exorbitant bonuses." As for the Director Defendants, the Trustee alleges that they committed the following breaches of fiduciary duty: • They failed to exercise any oversi ht or supervision over the capital g investm ents, financing arrangem ents, vendor contracts, and other transactions authorized by the Officer Defendants.65 • They failed to either investigate th consequences of those transactions or e consider alternative courses of actions.66 • They "allowed them selves to be contro lled by . . . Defendant Bulm ahn, and acquiesced to his desires and interests rather than exercising their own business judgm ent for the good of ATP."67 • As to the Audit Com m ittee m em bers, they "fail[ed] to ensure that ATP had an adequate system of internal controls in place to ensure ATP's profitability and long-term viability."68 62 Id. at 17. 63 Id. at 19. 64 Id. at 24-27. 65 Id. at 27. 66 Id. at 27-28. 67 Id. at 28. 68 Id. at 29. 11 • As to the Com pensation Com m ittee m em bers, they awa rded exorbitant 69 bonuses to ATP's m anagem ent in 20 10 and 20 11. In Count Two of the Second Am ended Com plaint--m islabeled "Cause of Action Three"--the Trustee seeks to void and recover cash and stock bonuses paid to Officer Defendants Bulm ahn, Tate, Reese, Morris, and Godwin as constructively fraudulent transfers under Section 24.0 0 5 of the Texas Business and Com m erce Code and Section 548(a)(1) of the Bankruptcy Code.70 In Count Three--m islabeled "Cause of Action Four"--the Trustee alleges that each defendant conspired with and/ or aided and abetted the other defendants in breaching their fiduciary duties and allowing the distribution of fraudulent transfers.71 Finally, in Count Four--again, m isnum bered in the Second Am ended Com plaint--the Trustee alleges that defendant Tschirhart com m itted legal m alpractice by failing to notify ATP's insurer of a claim against the com pany and by failing to advise the Officer Defendants and Director Defendants on other legal m atters.72 The Trustee has since dism issed his claim s against Defendant Tschirhart with prejudice.73 The Officer Defendants and Director Defendants each m ove to dism iss the Trustee's claim s under Federal Rule of Civil Procedure 12(b)(6).74 The Officer Defendants argue that 69 Id. at 30 . 70 Id. 71 Id. at 31-32, 72 Id. at 32. 73 R. Doc. 70 . 74 R. Docs. 49, 53. 12 the Trustee's breach of fiduciary duty allegations are conclusory and fail to allege facts that plausibly overcom e the protections of Texas's business judgm ent rule. They further contend that the Trustee's allegation that the Officer Defendants breached their duties to ATP by increasing ATP's debt and depleting its cash reserves is, in reality, a "deepening insolvency" claim , which is not recognized under Texas law. Finally, the Officer Defendants argue that the Trustee's fraudulent transfer claim s fail to m eet the heightened pleading requirem ents of Federal Rule of Civil Procedure 9(b) and that the Trustee's civil conspiracy and aiding and abetting allegations fail for lack of an underlying breach of fiduciary duty. The Director Defendants argue that the Trustee's breach of fiduciary allegations fail because they are conclusory and provide no factual allegations as to the conduct of any particular director. They also contend that they are shielded from liability by both Texas's business judgm ent rule and an exculpatory provision in ATP's corporate charter. According to the Director Defendants, the Trustee's allegations fail to plausibly allege a fiduciary duty claim that does not fall within the am bit of these lim itations on their liability. As to the Trustee's allegations that the Director Defendants breached their fiduciary duties through their lapses in oversight of ATP's operations, the Director Defendants contend that the duty of oversight does not exist under Texas law and that, in any event, the Trustee's allegations are conclusory and insufficient. Finally, the Officer Defendants contend that the Trustee fails to plead essential elem ents of his civil conspiracy and aiding and abetting claim s. II. LEGAL STAN D ARD To survive a Rule 12(b)(6) m otion to dism iss, the plaintiff m ust plead enough facts "to state a claim to relief that is plausible on its face." Ashcroft v. Iqbal, 556 U.S. 662, 678 13 (20 0 9) (quoting Bell Atl. Corp. v. Tw om bly , 550 U.S. 544, 570 (20 0 7)). A claim is facially plausible when the plaintiff pleads facts that allow the court to "draw the reasonable inference that the defendant is liable for the m isconduct alleged." Id. at 678. A court m ust accept all well-pleaded facts as true and m ust draw all reasonable inferences in favor of the plaintiff. Lorm and v. U.S. Unw ired, Inc., 565 F.3d 228, 239 (5th Cir. 20 0 9); Baker v. Putnal, 75 F.3d 190 , 196 (5th Cir. 1996). A legally sufficient com plaint m ust establish m ore than a "sheer possibility" that the plaintiff's claim is true. Iqbal, 556 U.S. at 678. It need not contain detailed factual allegations, but it m ust go beyond labels, legal conclusions, or form ulaic recitations of the elem ents of a cause of action. Id. In other words, the face of the com plaint m ust contain enough factual m atter to raise a reasonable expectation that discovery will reveal evidence of each elem ent of the plaintiff's claim . Lorm and, 565 F.3d at 257. If there are insufficient factual allegations to raise a right to relief above the speculative level, or if it is apparent from the face of the com plaint that there is an insuperable bar to relief, the claim m ust be dism issed. Tw om bly , 550 U.S. at 555. III. D ISCU SSION A. Bre ach o f Fid u ciary D u ty Claim s Count One of the Second Am ended Com plaint alleges that the Officer Defendants and Director Defendants breached their fiduciary duties to ATP and its creditors through their participation in various transactions and decisions following the BP Oil Spill. 14 Because ATP is incorporated in Texas, all parties agree that Texas law governs the Trustee's breach of fiduciary claim s.75 Before analyzing the relevant state-law principles, however, the Court notes its own obligation in interpreting and applying Texas law. When adjudicating claim s for which state law provides the rules of decision, a federal court m ust apply the law as interpreted by the state's highest court. See F.D.I.C. v. Abraham , 137 F.3d 264, 267-68 (5th Cir. 1998); Sam uels v. Doctors Hosp., Inc., 588 F.2d 485, 488 (5th Cir. 1979). When there is no ruling by the state's highest court, the federal court m ust m ake an "Erie guess" as to how the state's highest court would decide the issue. Martin K. Eby Const. Co. v. Dallas Area Rapid Transit, 369 F.3d 464, 468 (5th Cir. 20 0 4) (citing May o v. Hartford Life Ins. Co., 354 F.3d 40 0 , 40 6 (5th Cir. 20 0 4)). In m aking its Erie guess, a federal court is "em phatically not perm itted to do m erely what [it] think[s] best; it m ust do what [it] thinks the [state] Suprem e Court would deem best." Jackson v. Johns– Manville Sales Corp., 781 F.2d 394, 397 (5th Cir. 1986); see also Galindo v. Precision Am . Corp., 754 75 Because this case was filed in the Southern District of Texas and then transferred to this Court under the "first-to-file" rule, it is unclear under Fifth Circuit law whether Texas or Louisiana choice-of-law principles apply. See, e.g., David v. Signal Int'l, LLC, No. 0 8-1220 , 20 15 WL 360 3944, at *1 (E.D. La. J une 4, 20 15) (acknowledging lack of Fifth Circuit precedent on whether Van Dusen rule, which provides that when a diversity case is transferred under 28 U.S.C. § 140 4(a), the transferee court m ust apply law of state from which the case was transferred, applies to transfers under the "first-to-file" rule). The Court need not resolve this issue. Under either state's choice-of-law rules, Texas law governs the Trustee's breach of fiduciary duty claim s against the ATP's form er officers and directors. See Torch Liquidating Trust ex rel. Bridge Assocs. LLC. v. Stockstill, 561 F.3d 377. 386 (5th Cir. 20 0 9) ("Under Louisiana law, the law of the place where the corporation was incorporated governs disputes regarding the relationship between the officers, directors, and shareholders and the officers' and directors' fiduciary duties."); ASARCO LLC v. Am ericas Min. Corp., 382 B.R. 49, 69 (S.D. Tex. 20 0 7) ("Federal courts sitting in Texas m ust apply the law of the state of incorporation when a corporation's internal affairs are im plicated."). 15 F.2d 1212, 1217 (5th Cir. 1985) ("[I]t is not for us to adopt innovative theories of recovery or defense for Texas law, but sim ply to apply that law as it currently exists."). Under Texas law, to state a claim for breach of fiduciary duty, a plaintiff m ust allege three elem ents: "(1) a fiduciary relationship between the plaintiff and defendant; (2) the defendant m ust have breached his fiduciary duty to the plaintiff; and (3) the defendant's breach m ust result in injury to the plaintiff or benefit to the defendant." N avigant Consulting, Inc. v. W ilkinson, 50 8 F.3d 277, 283 (5th Cir. 20 0 7) (quoting Jones v. Blum e, 196 S.W.3d 440 , 447 (Tex.App.--Dallas 20 0 6)). Officers and directors stand in a fiduciary relationship with their corporation. See Gen. Dy nam ics v. Torres, 915 S.W.2d 45, 49 (Tex. App.--El Paso 1995) (citing International Bankers Life Ins. Co. v. Hollow ay , 368 S.W.2d 567, 576 (Tex. 1963)). This relationship gives rise to three broad fiduciary duties: the duty of care, the duty of loyalty, and the duty of obedience. See Gearhart Indus., Inc. v. Sm ith Int'l, Inc., 741 F.2d 70 7, 719 (5th Cir. 1984). The Trustee alleges that the Officer Defendants and Director Defendants breached their fiduciary duties to ATP and its creditors through their m ism anagem ent of ATP. He further alleges that defendants' actions depleted ATP's cash reserves and precipitated its dem ise, causing the com pany and its creditors to sustain hundreds of m illions of dollars in dam ages. The Second Am ended Com plaint, however, does not tie specific allegations of m isconduct to the individual fiduciary duties recognized under Texas law. In other words, the Trustee does not identify which of the acts and/ or om issions challenged in the Second Am ended Com plaint constitute a breach of the duty of care, which are breaches of loyalty, and which im plicate the duty of obedience. Instead, Count One of the Second Am ended Com plaint alleges generally that the Officer Defendants and Director Defendants breached 16 their fiduciary duties by authorizing and/ or ratifying various corporate actions negligently, grossly negligently, recklessly, and/ or in bad faith. 76 For ease of analysis, the Trustee's allegations can be grouped into six general areas or categories of m isconduct. These categories are as follows: A. The Officer Defendants authorized and the Director Defendants ratified expenditures and capital investm ents that ATP could not afford, hastening ATP's dem ise. Defendants failed to m eaningfully evaluate these investments, ignored available analyses on their viability, and, after authorizing the investm ents, grossly m ism anaged them and failed to control costs. B. Defendants failed to establish a reserve of funds to m eet known decom m issioning obligations, which caused ATP to incur liability to BOEM and to lose its ability to operate in the Gulf of Mexico. C. Defendant Bulm ahn caused ATP to enter one-sided vendor contracts intended to benefit his friends at ATP's detrim ent. The rem aining defendants acquiesced to his dem ands. D. Officer Defendants Bulm ahn, Tate, Morris, Reese, and Godwin, accepted "exorbitant" bonuses. The Director Defendants on the Com pensation Com m ittee awarded these bonuses despite ATP's poor perform ance during the relevant period. E. The Officer Defendants authorized and the Director Defendants ratified the sale of ORRIs and NPIs on ATP's in-ground hydrocarbon assets. F. Defendant Bulm ahn caused ATP to issue a preferred stock divided on J uly 2, 20 12, which benefitted ATP's preferred investors at the expense of ATP and its creditors. The rem aining defendants acquiesced to his dem ands. The Officer Defendants assert two prim ary argum ents for dism issing these breach of fiduciary duty claim s. First, the Officer Defendants argue that the Second Am ended Com plaint alleges harm only to ATP's creditors, not to ATP, and therefore does not actually 76 See e.g., id. at 6 ("The Officers and Outside Directors each intentionally, recklessly, negligently, willfully, m aliciously, in bad faith, and with conscious disregard and/ or with gross negligence breached their fiduciary duties to ATP."). 17 assert claim s on ATP's behalf. Second, the Officer Defendants argue that the allegations concerning their involvem ent in the challenged transactions are overly broad and conclusory and therefore fail to overcom e Texas's business judgm ent rule. The Director Defendants raise a sim ilar argum ent with respect to the business judgm ent rule. The Director Defendants also contend that an exculpatory provision within ATP's certificate of form ation shields them from liability for the alleged m isconduct. 1. H arm to ATP o r to ATP's Cre d ito rs Ordinarily, corporate officers and directors owe fiduciary duties to the corporation itself, not to the corporation's creditors. See Floy d v. Hefner, No. CIV.A. H-0 3-5693, 20 0 6 WL 2844245, at *27-28 (S.D. Tex. Sept. 29, 20 0 6) (quoting Fagan v. La Gloria Oil & Gas Co., 494 S.W.2d 624, 628 (Tex. Civ. App.--Houston [14th Dist.] 1973)); Aerotek, Inc. v . Revenue Cy cle Mgm t., Inc., No. CIV.A. 0 8-4638, 20 12 WL 860 373, at *8 (E.D. La. Mar. 13, 20 12) ("Courts in this circuit recognize that corporate officers generally do not owe a fiduciary duty to creditors of the corporation."). As the Fifth Circuit held in Conw ay v. Bonner, officers and directors of Texas corporations owe fiduciary duties only to their corporation and not its creditors "so long as it continues to be a going concern, conducting its business in the ordinary way, without som e positive act of insolvency, such as the filing of a bill to adm inister its assets, or the m aking of a general assignm ent." 10 0 F.2d 786, 787 (5th Cir. 1939). Stated differently, "Texas law does not im pose fiduciary duties in favor of creditors on the directors of an insolvent, but still operating, corporation." Floy d, 20 0 6 WL 2844245, at *10 (rejecting argum ent that directors owe fiduciary duties directly to creditors when a corporation enters the zone of insolvency); see also In re Ritz, 459 B.R. 623, 634 18 (Bankr. S.D. Tex. 20 11), aff'd, 513 B.R. 510 (S.D. Tex. 20 14), aff'd, 787 F.3d 312 (5th Cir. 20 15) (sam e).77 Here, every instance of alleged m isconduct identified in the Second Am ended Com plaint occurred before ATP ceased operations. At the tim e of each of the transactions challenged by the Trustee, ATP rem ained in business. Accordingly, the Trustee's allegation that the Officer Defendants and Director Defendants owed a "fiduciary duty to consider the interest of ATP's creditors"78 lacks factual or legal support. The Trustee resists this conclusion by citing Carrieri v. Jobs.com Inc., 393 F.3d 50 8 (5th Cir. 20 0 4). There, the Fifth Circuit stated in a footnote that "[o]fficers and directors that are aware that the corporation is insolvent, or within the 'zone of insolvency' . . . have expanded fiduciary duties to include the creditors of the corporation." Id. at 534, n. 24. Citing his allegation that ATP entered the zone of insolvency in May 20 10 , the Trustee contends that the Officer Defendants and Director Defendants were required to consider the interests of ATP's creditors in m aking their post-BP Oil Spill decisions. The Southern District of Texas considered, and rejected, an identical argum ent in Floy d, 20 0 6 WL 2844245, at *11-17. There, the court noted that the Carrieri footnote contradicts the Fifth Circuit's earlier opinion in Conw ay , which held that directors owe no fiduciary duties to the corporation's creditors "so long as [the corporation] continues to be a going concern. . . ." Id. at *10 -11 (citing Conw ay , 10 0 F.2d at 787). The court concluded 77 There is a narrow exception to this rule, known as the "trust fund doctrine," under which directors of a corporation that is insolvent and has ceased operations m ay owe fiduciary-like duties to the corporation's creditors. See Fagan, 494 S.W.2d at 628. The Trustee has not argued, however, that this doctrine applies to his claim s on behalf of ATP. 78 R. Doc. 41 at 9. 19 that "[t]o the extent that Carrieri contradicts Conw ay , Carrieri has no precedential value because 'where two previous holdings or lines of precedent conflict, the earlier opinion controls and is the binding precedent in the circuit.'" Id. (citing Soc'y of Separationists, Inc. v. Herm an, 939 F.2d 120 7, 1211 (5th Cir. 1991)). Next, the court considered the footnote's role in the context of the Carrieri opinion as a whole. It concluded that because the footnote's fiduciary duty discussion "could have been deleted without seriously im pairing the analytical foundations of the holding," the discussion was dicta and not binding precedent. Id. at *12 (citing Gochicoa v. Johnson, 238 F.3d 278, 286, n. 11 (5th Cir. 20 0 0 )). Finally, the court conducted an exhaustive analysis of state court and federal decisions outside of Conw ay and Carrieri. Based on this analysis, the court rejected the principle that the officers or directors of a still-functioning corporation in the zone of insolvency owe its creditors fiduciary duties under Texas law. Id. at *11-16. Other courts have reached the sam e conclusion. See, e.g., Ritz, 459 B.R. at 634 ("The Carrieri statem ent is not binding on this Court for two reasons: (1) the statem ent in Carrieri is dicta, and, as such, is not binding; and (2) even if Carrieri does contradict Conw ay , Carrieri has no precedential value. . . ."). The Court finds this analysis persuasive. Contrary to the Trustee's assertion, the Officer Defendants and Director Defendants owed no fiduciary duties to ATP's creditors during tim es relevant to the Second Am ended Com plaint. Conw ay , 10 0 F.2d at 787. Accordingly, the acts and om issions challenged by the Trustee are actionable only if the Trustee establishes both (1) that the responsible Officer Defendant or Director Defendant breached a fiduciary duty owed to ATP and (2) that ATP (not just its creditors) suffered dam ages as a result. Floy d, 20 0 6 WL 2844245, at *24. To the extent the Trustee grounds 20 his claim s of officer and director liability in allegations that defendants breached duties owed to ATP's creditors or engaged in conduct that harm ed ATP's creditors alone, his claim s m ust be dism issed. See Torch Liquidating Trust ex rel. Bridge Assocs. L.L.C. v. Stockstill, 561 F.3d 377, 390 (5th Cir. 20 0 9) (finding bankruptcy trustee failed to allege breach of fiduciary duty claim on behalf of corporation when com plaint "allege[d] no actual, quantifiable dam ages suffered by [the corporation,]" as opposed to creditors). The Officer Defendants argue that this principle is dispositive of all of the Trustee's breach of fiduciary duty claim s because the Trustee plausibly alleges injury only to ATP's creditors. In support, the Officer Defendants cite several allegations in the Second Am ended Com plaint that contain direct or indirect references to ATP's creditors.79 This argum ent fails. That these and other allegations suggest injuries to ATP's creditors does not invalidate the Trustee's claim s. The transactions the Trustee challenges could have harm ed ATP while causing indirect harm to creditors as well. This is particularly true given the Trustee's allegation that ATP was insolvent or nearly insolvent at all relevant tim es. See Kay e v. Lone Star Fund V (U.S.), L.P., 453 B.R. 645, 676 (N.D. Tex. 20 11) ("[I]t is difficult to im agine that a transaction could harm an insolvent com pany without harm ing its creditors."). Thus, the m ere presence of the term "creditor" in the Second Am ended Com plaint does not transform claim s on behalf of ATP into im perm issible direct creditor claim s. The Second Am ended Com plaint is replete with allegations that defendant's 79 See, e.g., R. Doc. 41 at 23 ("The Officers m ade decisions and authorized or ratified transactions that resulted in claim s that exacerbated existing stretched obligations to creditors."); id. at 24 ("The Officers' grossly negligent acts and om issions dem onstrate a want of care and a conscious indifference to the rights, safety, and welfare of ATP and its creditors."). 21 decisions dam aged the corporation. 8 0 Viewed in the light m ost favorable to the Trustee, m ost of these allegations suffice to dem onstrate harm to the corporation. Two categories of allegations, however, do not pass m uster. The first, identified as category "E" above, concerns defendants' efforts to increase ATP's liquidity by leveraging the com pany's in-ground hydrocarbon assets. The Trustee alleges that after the BP Oil Spill, defendants sold "purported" NPIs and ORRIs to investors.81 Ultim ately these sales generated approxim ately $ 60 0 million in cash, which ATP allegedly used to pay unspecified "past due obligations."82 The Trustee alleges that although defendants structured these transactions as NPIs and ORRIs, they were actually loans.83 He further alleges that "this disguised financing was done to evade the requirem ents of a credit agreem ent ATP entered with Credit Suisse after the Oil Spill," which lim ited ATP's authority to borrow m oney.84 According to the Second Am ended Com plaint, "[t]he burden placed on these assets by Defendants was so great that they could only be sold for de m inim is value when ATP filed for bankruptcy."85 These allegations suggest that certain individuals within ATP deceived 80 See, e.g., id. at 11 ("The Officers and Outside Directors decision to recklessly and intentionally ignore the financial position of ATP and the expenditures on Cheviot and the Octabuoy caused significant dam ages of over $ 80 m illion, and led to its eventual bankruptcy."); id. at 14 ("Because defendants failed to have a plan to pay these [decom m issioning] costs, BOEM stripped ATP of its ability to operate in the Gulf of Mexico."). 81 R. Doc. 41 at 15. 82 Id. 83 Id. 84 Id. at 15-16. 85 Id. at 16. 22 Credit Suisse. Read broadly, they could also suggest that these individuals acted preferentially by increasing ATP's liquidity and then using the cash to pay off certain obligees--i.e., entities holding "past due obligations"--instead of others, ultim ately leaving the unpaid creditors with insufficient assets in ATP's bankruptcy estate to satisfy their unpaid debts. The Trustee's allegations contain no such indication of harm to ATP. While the Second Am ended Com plaint does allege that the NPI and ORRI sales "cannibalized" ATP's assets and "crippled" ATP's ability to m ake future profits, the Trustee pleads no factual m aterial to support these vague, conclusory assertions.86 He does not plead facts dem onstrating, for instance, that the term s of the NPI and ORRI sales were unfair to ATP or that the com pany did not receive reasonable value in exchange for the encum brances placed on its assets. Although a com plaint need not contain detailed factual allegations, it m ust go beyond labels and recitation of the elem ents of a cause of action. Iqbal, 556 U.S. at 678. The unadorned assertion that the NPIs and ORRIs "cannibalized" ATP's assets does not satisfy this standard. The second category, identified as category "F" above, concerns ATP's issuing a preferred stock dividend on or about J uly 2, 20 12. According to the Second Am ended Com plaint, defendants authorized and/ or ratified this dividend paym ent at a tim e when "ATP was contem plating filing its Chapter 11 bankruptcy case."87 The Trustee alleges that ATP was "on the verge of filing bankruptcy" and that its bankruptcy was "pending" at the 86 Id. 87 Id. at 18. 23 tim e of the dividend paym ent.88 The Trustee further alleges that defendants proceeded with the dividend paym ent even though "ATP was advised by its attorneys" that it would be im proper under Sections 24.0 0 5 and 24.0 0 9 of the Texas Business and Com m erce Code-provisions that address transactions that are fraudulent to a com pany's creditors.89 Again, these allegations suggest that ATP's creditors m ay have been harm ed by distributions that ATP m ade in its last days as a going concern. But the Trustee does not plead any facts tending to show that the eleventh hour dividend paym ent, m ade on the eve of ATP's bankruptcy filing, harm ed the corporation itself. The conclusory allegation that the eleventh hour paym ent "harm [ed] ATP,"90 offered without any explanation or elaboration, is insufficient. In sum , with respect to the NPI and ORRI sales, as well as the special dividend paym ent, the Trustee's allegations of harm to ATP are "naked assertion devoid of further factual enhancem ent." Iqbal, 556 U.S. at 678. Thus, the Second Am ended Com plaint fails to state a plausible breach of fiduciary duty claim with respect to those transactions. To the extent the Trustee alleges that defendants breached their fiduciary duties to ATP by either authorizing or ratifying the NPI and ORRI sales or proceeding with the J une 2, 20 12 special dividend paym ent, his claim s are dism issed. 2. Fid u ciary D u ty Alle gatio n s --Ap p licable Law Next, the Court considers the sufficiency of the Trustee's rem aining breach of fiduciary duty claim s against the Officer Defendants and the Director Defendants. The 88 Id. at 18-19. 89 Id. at 18. 90 Id. at 19. 24 Second Am ended Com plaint alleges that all defendants breached their fiduciary duties to ATP by authorizing and/ or ratifying the transactions described in categories "A" through "F" above. It further alleges that defendants took these actions negligently, grossly negligent, recklessly, and/ or in bad faith. Both groups of defendants argue that the Second Am ended Com plaint relies on labels and conclusions and fails to state facts sufficient to overcom e Texas's business judgm ent rule. The Director Defendants also argue that they are entitled to dism issal of all claim s against them because the facts alleged in the Second Amended Com plaint dem onstrate that they are shielded from liability under an exculpatory provision within ATP's certificate of form ation. As noted, the fiduciary relationship between officers and directors and their corporations gives rise to three broad fiduciary duties: the duty of care, the duty of loyalty, and the duty of obedience. See Gearhart, 741 F.2d at 719. The Court discusses each duty before turning to the Trustee's allegations. A. The Duty of Care and the Business Judgm ent Rule The duty of care requires officers and directors to act with diligence and prudence in m anaging a corporation's affairs. Id. at 720 . An officer or director "m ust handle his corporate duties with such care as 'an ordinarily prudent m an would use under sim ilar circum stances.'" Id. (quoting McCollum v. Dollar, 213 S.W. 259 (Tex. Com m 'n App. 1919)). Breach of this duty can expose an officer or director to personal liability. Id. In Texas, however, officers and directors are generally protected "from liability for acts that are within the honest exercise of their business judgm ent and discretion." Sneed v. W ebre, 465 S.W.3d 169, 173 (Tex. 20 15). This principle, known as the business judgm ent rule, is a substantive rule of law that requires a plaintiff seeking dam ages against an officer or 25 director to plead and prove facts sufficient to avoid its reach. Gearhart, 741 F.2d at 721; F.D.I.C. v. Benson, 867 F. Supp. 512, 523 (S.D. Tex. 1994). Accordingly, to state a claim for breach of the fiduciary duty of care, the plaintiff m ust plead facts that, if true, would overcom e the business judgm ent rule's protections. Benson, 867 F. Supp. at 523; Resolution Trust Corp. v. Holm es, No. CIV. A. H-92-0 753, 1992 WL 533256, at *5-6 (S.D. Tex. Aug. 7, 1992). Although the parties do not dispute these basic principles, they disagree on the scope of the business judgm ent rule under Texas law. As discussed m ore fully below, m uch of the Trustee's com plaint centers on allegations that the Officer Defendants and Director Defendants were grossly negligent or reckless in their alleged failure "to recognize and accept the reality of the [BP Oil Spill]" and to address ATP's deteriorating financial position. Defendants argue that these allegations fail to state a breach of fiduciary duty claim because, under Texas' business judgm ent rule, a disinterested officer or director cannot be held liable for breach of care unless their conduct involved fraud or ultra vires actions. The Trustee argues that the business judgm ent does not protect officers or directors whose acts or om issions rise to the level of gross negligence, which Texas law defines as "entire want of care." Burk Roy alty Co. v. W alls, 616 S.W.2d 911, 920 (Tex. 1981). The sem inal case on the Texas business judgm ent rule is Cates v. Sparkm an, 11 S.W. 846 (Tex. 1889). There, a stockholder sued the directors of a corporation, claim ing that their actions caused the corporation's stock to depreciate. Id. The Texas Suprem e Court affirm ed dism issal of the stockholders' suit. Id. The court reasoned that a corporate fiduciary's negligence does not warrant judicial intervention, provided the negligent acts were "within the exercise of [the fiduciary's] discretion and judgm ent in the developm ent 26 or prosecution of the enterprise in which [corporate] interests are involved." Id. at 622. Thus, Texas courts will not interfere with the officers' or directors' control of the corporation based on allegations of m ism anagem ent, neglect, or abuse of discretion, "however unwise or inexpedient [the fiduciary's] acts m ight be." Id. By contrast, an officer's or director's breach of duty that would authorize judicial interference "is that which is characterized by ultra vires, fraudulent, and injurious practices, abuse of power, and oppression on the part of the com pany or its controlling agency clearly subversive of the rights of the m inority, or of a shareholder, and which, without such interference, would leave the latter rem ediless." Id. The Fifth Circuit elaborated on these principles in Gearhart, 741 F.2d 70 7. Finding that Texas courts had engaged in little "specific discussion of the param eters of due care," the Fifth Circuit conducted an extensive analysis of the duty of care and the business judgm ent rule under Texas law. Id. at 720 -21. After reviewing Cates and intervening Texas state court decisions, the Fifth Circuit concluded that Texas courts "will not im pose liability upon a noninterested corporate director unless the challenged action is ultra vires or is tainted by fraud. . . . Such is the business judgm ent rule in Texas." Id. at 721. Applying this rule, the Fifth Circuit found that the plaintiff failed to establish a breach of fiduciary duty by corporate directors who authorized a transaction because the plaintiff failed to dem onstrate either an ultra vires act or fraud in connection with the deal. Id. at 723. Because Texas's business judgm ent rule, as interpreted by the Fifth Circuit in Gearhart, requires a plaintiff to dem onstrate a personal interest, ultra vires act, or fraud, the rule precludes liability for officers or directors who are m erely negligent or grossly negligent in the exercise of their discretion. See Floy d, 20 0 6 WL 2844245, at *27-28 (concluding that 27 under Gearhart's interpretation of Texas law, directors cannot be held liable for grossly negligent breach of care). Nonetheless, in the years since Gearhart, a number of federal district courts in Texas have held that Texas's business judgm ent rule protections do not extend to officers or directors who are grossly negligent in their corporate duties. See In re Life Partners Holdings, Inc., No. DR-11-CV-43-AM, 20 15 WL 852310 3, at *10 (W.D. Tex. Nov. 9, 20 15) (collecting cases); F.D.I.C. v. Schreiner, 892 F.Supp. 869, 880 -82 (W.D. Tex. 1995); Benson, 867 F. Supp. at 523 (collecting cases). Other courts have held, consistent with Gearhart, that gross negligence claim s are not cognizable against corporate officers and directors under Texas law. See Floy d, 20 0 6 WL 2844245, at *27-28 (holding that Texas' business judgment rule protected directors of an oil and gas com pany from gross negligence claim s and distinguishing contrary cases as lim ited to banking directors, who are held to a higher standard of care than the directors of other corporations); Holm es, 1992 WL 533256, at *4-6 (S.D. Tex. Aug. 7, 1992) (dism issing fiduciary duty claim s because plaintiff failed to allege "(1) that the conduct of the directors com plained of was either ultra vires or fraudulent or (2) that the directors had a personal interest in the transactions"). Still others have noted the divide without taking an affirm ative position. See TTT Hope, Inc. v. Hill, No. CIV.A. H-0 7-3373, 20 0 8 WL 4155465, at *9-10 (S.D. Tex. Sept. 2, 20 0 8). In sum , Texas law is unsettled. The Texas Suprem e Court has not directly addressed whether a corporate officer or director m ay be held liable for gross negligence. See Life Partners, 20 15 WL 852310 3, at *7 (noting that "it rem ains unclear whether liability will attach for gross negligence" under Texas' business judgm ent rule); TTT Hope, 20 0 8 WL 4155465, at *9 ("The Texas Suprem e Court has not directly addressed the issue of director 28 liability for gross negligence."). And the federal courts that have weighed in have taken different positions. Ordinarily, a federal district court faced with an unsettled question of state law, m ust m ake an Erie guess as to how the state's highest court would decide the issue. In re Millette, 186 F.3d 638, 641 (5th Cir. 1999). Once the circuit court addresses the issue, however, the analysis changes. "A district court sitting in diversity is generally bound by the state law interpretations of its circuit court." Cornelius v. Philip Morris Inc., No. CIV.A.3:99-CV-2125G, 20 0 0 WL 233292, at *1 (N.D. Tex. Feb. 29, 20 0 0 ) (citing Batts v. Tow – Motor Forklift Co., 66 F.3d 743, 747 (5th Cir. 1995)). Thus, the Fifth Circuit's "interpretation of [state] law is binding on the district court, unless a subsequent state court decision or statutory am endm ent renders [its] prior decision clearly wrong." Batts, 66 F.3d at 747; cf. Ford v. Cim arron Ins. Co., 230 F.3d 828, 832 (5th Cir. 20 0 0 ) (citing the sim ilar rule that "a prior panel's interpretation of state law has binding precedential effect on other panels of [the Fifth Circuit] absent a subsequent state court decision or am endm ent rendering our prior decision clearly wrong.") Under this principle, the Court is bound by Gearhart's interpretation of Texas law. In Gearhart, the Fifth Circuit addressed the precise issue involved in this case: the scope of the protections afforded by Texas' business judgm ent rule. The Trustee has not cited-and this Court has not found--a single Texas state court decision holding the Fifth Circuit's business judgm ent rule analysis to be clearly wrong.91 To the contrary, two Texas 91 In a recent case, the Texas Suprem e Court held that Texas' business judgm ent rule does not deprive a shareholder of a closely held corporation of standing to bring a shareholder derivative lawsuit. Sneed, 465 S.W.3d at 181. But while the court quoted the general standard for court intervention that the Texas Suprem e Court articulated in 29 interm ediate appellate courts have cited with approval Gearhart's conclusion that "in Texas, courts will not im pose liability upon a non-interested director unless the challenged action is ultra vires or is tainted by fraud." See Cam pbell v. W alker, No. 14-96-0 1425-CV, 20 0 0 WL 19143, at *11-13 (Tex. App.--Houston [14th Dist.] J an. 13, 20 0 0 ) (finding no breach of fiduciary duty by director because plaintiff produced no evidence of fraudulent or ultra v ires conduct); Batey v. Droluk, No. 0 1-12-0 10 58-CV, 20 14 WL 140 8115, at *13 (Tex. App.--Houston [14th Dist.] Apr. 10 , 20 14) (sam e). Moreover, numerous Texas courts-including the state's suprem e court--have em braced other, related aspects of Gearhart's fiduciary duty analysis. See, e.g., Ritchie v. Rupe, 443 S.W.3d 856, 868 (Tex. 20 14), reh'g denied (Oct. 24, 20 14) (citing Gearhart's description of the fiduciary duties owed by corporate directors); Loy v. Harter, 128 S.W.3d 397, 40 8 (Tex. App.--Texarkana 20 0 4) (citing Gearhart's analysis of the standard for "interested" transactions). Consistent with Gearhart, the Court finds that Texas law shields officers and directors from liability for negligent or grossly negligent conduct. To show that defendants' acts or om issions constituted a breach of the duty of care not protected by the business judgm ent rule, the Trustee m ust plead and prove either (1) that defendants had a personal interest in the transactions com plained of, or (2) that the defendants' conduct was either ultra vires or fraudulent. See Gearhart, 741 F.2d at 721; Holm es, 1992 WL 533256, at *6.92 Cates in 1889--and the Fifth Circuit interpreted in Gearhart in 1984--it provided no additional guidance on whether Texas law perm its claim s for grossly negligent breach of fiduciary duty. 92 In addition, Texas law perm its a corporation to elim inate or lim it a directors' liability for certain types of actions. Although the Director Defendants assert that ATP's Certificate of Form ation includes an exculpatory provision, the parties dispute whether the Court m ay consider the provision in ruling on defendants' Rule 12 m otions to dism iss. The Court need not resolve this issue because, as explained in this order, the 30 B. The Duty of Loy alty "The duty of loyalty dictates that a corporate officer or director m ust act in good faith and m ust not allow his or her personal interest to prevail over the interest of the corporation." Loy , 128 S.W.3d at 40 7; see also Gearhart, 741 F.2d at 719. In Texas, a breach of the duty of loyalty is usually established by showing that the corporate officer or director engaged in an "interested" transaction. See Gearhart, 741 F.2d at 719; Roth v. Mim s, 298 B.R. 272, 288 (N.D. Tex. 20 0 3). In Gearhart, the Fifth Circuit held that a fiduciary is interested in a transaction if he or she: (1) personally profits from a transaction by dealing with the corporation or usurps a corporate opportunity; (2) buys or sells assets of the corporation; (3) transacts business in his or her director's capacity with a second corporation of which he or she is also a director or significantly financially associated; or (4) transacts business in his or her director's capacity with a fam ily m em ber. Gearhart, 741 F.2d at 719-20 ; see also Gam e Sy s., Inc. v. Forbes Hutton Leasing, Inc., No. 0 2-0 9-0 0 0 51-CV, 20 11 WL 2119672, at *5 n.22 (Tex. App.--Forth Worth May 26, 20 11) (sam e); Loy , 128 S.W.3d at 40 8 (sam e). The parties do not dispute these principles. Their disagreem ent is on whether officer or director liability can attach in the absence of an "interested" transaction. The Director Defendants argue that a claim for breach of the duty of loyalty requires an allegation that an officer or director had a personal interest in the challenged transaction.93 The Trustee Second Am ended Com plaint fails to state a plausible claim for m onetary dam ages against any Director Defendant. 93 R. Doc. 49-1 at 10 . 31 argues that a fiduciary can breach his or her duty of loyalty without engaging in self-dealing, such as when he or she is totally beholden to another officer or director. 94 Contrary to the Director Defendants' assertion, the duty of loyalty is m ore than just a prohibition on self-dealing transactions. It also requires fiduciaries to exercise "an extrem e m easure of candor, unselfishness, and good faith" towards their corporation. Loy , 128 S.W.3d at 40 7 (citing Hollow ay , 368 S.W.2d at 577). An officer or director m ay be held liable for breach of loyalty if he or she fails to act in good faith and "with an intent to confer a benefit on the corporation." Gearhart, 741 F.2d at 720 (citing Hollow ay , 368 S.W.2d at 576); see also Life Partners, 20 15 WL 852310 3, at *12 (noting that "even a director who acts with no eye to self-enrichm ent can breach his duty of loyalty, if he fails to satisfy its other subsidiary elem ent" of good faith). As relevant to this lawsuit, courts have identified two situations in which an absence of good faith can give rise to a claim against an officer or director for breach of the duty of loyalty. First, an officer or director m ay be liable if he or she lacked independence to objectively consider whether a challenged transaction was in the best interests of the corporation. See Floy d v. Hefner, 556 F. Supp. 2d 617, 649 (S.D. Tex. 20 0 8). In Floy d, three directors participated in a transaction to finance a project by taking m ortgages on the com pany's assets and warrants on its stock. Id. Other directors did not participate, but the plaintiff produced sum m ary judgm ent evidence dem onstrating that the non-participants were beholden to the interested directors. Id. at 649-50 . The court denied the nonparticipating directors' m otion for sum m ary judgm ent, reasoning that "although lack of 94 R. Doc. 54 at 14. 32 independence does not directly align with any of the m arkers of interestedness identified in the Gearhart decision, a reasonable jury could conclude that the non-participating Directors did not act in good faith and facilitated the interested actions of the participating Directors." Id. The Court finds this analysis persuasive. Like the court in Floy d, the Court finds that Texas courts would hold an officer or director liable for engaging in a transaction in which he or she lacked independence to exercise independent business judgm ent. Texas courts have not articulated the standard of liability for claim s of this nature. I n m aking Erie guesses on unsettled issues of state law, federal courts m ay "refer to rules in other states that Texas courts m ight look to." Herrm ann Holdings Ltd. v. Lucent Techs. Inc., 30 2 F.3d 552, 558 (5th Cir. 20 0 2). Delaware occupies a unique position as "the Mother Court of corporate law," Kam en v. Kem per Fin. Serv., Inc., 90 8 F.2d 1338, 1343 (7th Cir. 1990 ), and Texas courts consider Delaware decisional law persuasive in resolving unsettled issues of Texas corporate law. See In re Aguilar, 344 S.W. 3d 41, 47 (Tex App.--El Paso 20 11). Accordingly, the Court will apply the Delaware fram ework. See Life Partners, 20 15 WL 852310 3, at *11 (using Delaware law to inform Erie guess on director oversight liability under Texas law); In re Conex Holdings, LLC, 514 B.R. 40 5, 412 (Bankr. D. Del. 20 14) 33 (noting that federal courts "m ay look to Delaware for guidance [on corporate law issues] . . . absent any conflicts with Texas law"). In Delaware, as in Texas, a plaintiff m ay establish a breach of the duty of loyalty by showing that an officer or director lacked independence to consider whether the challenged decision or action was in the corporation's best interest. See Orm an v. Cullm an, 794 A.2d 5, 22 (Del. Ch. 20 0 2). An officer or director lacks independence if his or her decision is based on extraneous considerations or influences, rather than the corporate m erits of the decision or action. Id. at 24. "Such extraneous considerations or influences m ay exist when the challenged director is controlled by another." Id. To establish such control, a plaintiff m ust show that "the directors are beholden to [the controlling person] or so under their influence that their discretion would be sterilized." Id. at 24. (internal quotations om itted). The second situation in which a lack of good faith can give rise to a breach of loyalty claim is when a fiduciary "abdicate[s] his responsibility and fail[s] to exercise any judgm ent." See e.g., Life Partners, 20 15 WL 852310 3, at *10 (collecting cases). As the Texas Suprem e Court has held, the business judgm ent rule applies only to officer and director conduct that is "within the exercise of their discretion and judgm ent. . . ." Sneed, 465 S.W.3d at 178 (quoting Cates, 11 S.W. at 849). This em phasis on an exercise of decision-m aking--an affirm ative discretionary act--suggests that an intentional failure to act in the face of a known duty to act constitutes an actionable breach of fiduciary duty. A 34 num ber of federal district courts in Texas have reached this conclusion, holding that Texas courts would im pose liability on an officer or director who fails com pletely to engage with corporate affairs. See e.g., Life Partners, 20 15 WL 852310 3, at *10 (collecting cases); Roth, 298 B.R. at 283 (collecting cases).95 This Court reaches the sam e conclusion. Consistent with nearly every federal court in Texas to have considered the issue, the Court finds that an officer or director who totally abdicates his or her corporate responsibilities can be liable for breach of fiduciary duty under Texas law. As with claim s involving a lack of independence, however, courts have not developed an exact standard of liability for abdication under Texas law. Rather, courts have described the standard in general term s, such as "a com plete abdication of duty," Benson, 867 F. Supp. at 521, or "an obvious and prolonged failure to exercise oversight or supervision," Roth, 298 B.R. at 283, with little additional discussion. The Court again looks to Delaware law for guidance. See Aguilar, 344 S.W. 3d at 47. Under Delaware law, a corporate fiduciary breaches his fiduciary duty of loyalty when he "intentionally fails to act in the face of a known duty to act, dem onstrating a conscious disregard for his duties." In re W alt Disney Co. Derivative Litig., 90 6 A.2d 27, 95 Many of these courts have characterized this principle as an exception to the business judgm ent rule, suggesting that abdication m ay constitute a breach of the duty of care. See e.g., Roth, 298 B.R. at 283. At least one court, however, has held that because a conscious disregard for one's corporate responsibilities entails bad faith, abdication or oversight-based fiduciary claim s are best conceptualized as breaches of the duty of loyalty under Texas law. See Life Partners, 20 15 WL 852310 3. A sim ilar principle prevails under Delaware law, which Texas courts consider persuasive precedent. See Stone ex. rel. Am South Bancorporation v. Ritter, 911 A.2d 362, 370 (Del. 20 0 6) ("[B]ecause a showing of bad faith conduct . . . is essential to establish director oversight liability, the fiduciary duty violated by that conduct is the duty of loyalty). Finding the bad faith analysis m ore persuasive, the Court has addressed the issue of abdication under the duty of loyalty. 35 67 (Del. 20 0 6). This principle generally arises in so-called Carem ark claim s, which are claim s predicated on a board's failure to exercise corporate oversight. See Stone ex. rel. Am South Bancorporation v. Ritter, 911 A.2d 362, 369 (Del. 20 0 6) (stating that the "Carem ark standard for so-called 'oversight' liability draws heavily upon the concept of director failure to act in good faith"). In Stone v. Ritter, the Delaware Suprem e Court held that the necessary conditions predicate for a Carem ark claim are as follows: (a) the directors utterly failed to im plem ent any reporting or inform ation system or controls; or (b) having im plem ented such a system or controls, consciously failed to m onitor or oversee its operations thus disabling them selves from being inform ed of risks or problem s requiring their attention. In either case, im position of liability requires a showing that the directors knew that they w ere not discharging their fiduciary obligations. Id. at 370 (em phasis added). Im portantly, "there is a vast difference between an inadequate or flawed effort to carry out fiduciary duties and a conscious disregard for those duties." Ly ondell Chem . Co. v. Ry an, 970 A.2d 235, 243 (Del. 20 0 9). To prevail on a claim for a conscious failure to m onitor, a plaintiff m ust plead facts "suggesting that the board knew that internal controls were inadequate, that the inadequacies could leave room for illegal or m aterially harm ful behavior, and that the board chose to do nothing about the control deficiencies that it knew existed." Desim one v. Barrow s, 924 A.2d 90 8, 940 (Del. Ch. 20 0 7); see also In re Massey Energy Co., C.A. No. 5430 – VCS, 20 11 WL 2176479, *22 (Del. Ch. May 31, 20 11) (noting that Carem ark requires plaintiffs to show "that a director acted inconsistent with his fiduciary duties and, m ost im portantly, that the director knew he was so acting"). In pleading knowledge, a plaintiff m ay "identify 'red flags,' obvious and problem atic occurrences, that 36 support an inference that the [] directors knew that there were m aterial weaknesses in [the corporation's] internal controls and failed to correct such weaknesses." Rich ex rel. Fuqi Int'l, Inc. v. Yu Kw ai Chong, 66 A.3d 963, 983 (Del. Ch. 20 13). In sum , the duty of loyalty dictates that an officer or director m ust avoid interested transactions and exercise good faith towards his or her corporation. See Loy , 128 S.W.3d at 40 7. To state a plausible claim for breach of this duty, the Trustee m ust plead, for each Officer Defendant and Director Defendant, that the defendant: (1) was interested in a challenged transaction; (2) lacked independence to objectively consider whether a challenged transaction was in ATP's best interests; or (3) intentionally failed to act in the face of a known duty to act, dem onstrating a conscious disregard for his or her duties. C. The Duty of Obedience The final fiduciary duty is the duty of obedience. This duty requires officers and directors to "avoid com m itting ultra vires acts, i.e., acts beyond the scope of the powers of a corporation as defined by its charter or the laws of the state of incorporation." Gearhart, 741 F.2d at 719. Though an ultra vires act m ay be voidable under Texas law, an officer or director is not personally liable for breach of the duty of obedience unless the action in question also violates a statute or public policy. Id. Moreover, as a num ber of federal district courts in Texas have held, an officer or director cannot be held liable for alleged unlawful actions by corporate em ployees unless the officer or directors knew of the illegality at the tim e of the challenged action. See Life Partners, 20 15 WL 852310 3, at *16; Resolution Trust Corp. v. Norris, 830 F. Supp. 351, 357 (S.D. Tex. 1993); Benson, 867 F. Supp. at 522. 37 With these principles in m ind, the Court turns to the allegations in the Second Am ended Com plaint. 3. Fid u ciary D u ty Alle gatio n s --Ap p licatio n The Second Am ended Com plaint alleges num erous breaches of fiduciary duty by the Officer Defendants and Director Defendants. As noted, the allegations in the Second Am ended Com plaint can be grouped into six categories. Two categories center on claim s that defendants (1) authorized and/ or ratifyied the sale of ORRIs and NPIs on ATP's assets and (2) issued a special dividend on Series B shares on the eve of ATP's bankruptcy. The Court has already found that these allegations fail to state a plausible breach of fiduciary duty claim because the Second Am ended Com plaint does not plead facts suggesting that these transactions harm ed ATP, as opposed to its creditors. 96 The Officer Defendants and Director Defendants argue that the Trustee's rem aining allegations fail because they do not sufficiently identify the conduct of particular defendants and instead rely on conclusory allegations that defendants collectively "authorized" and/ or "ratified" each of the challenged decisions. The Trustee argues that his allegations provide fair notice to each defendant of his or her alleged wrongdoing and should therefore withstand defendants' m otions to dism iss. With few exceptions, the Second Am ended Com plaint directs its allegations not towards individuals, but towards the Officer Defendants or Director Defendants as groups. Rather than identifying specific actions that individual defendants took (or failed to take) with respect to specific transactions, the Second Am ended Com plaint rests largely on 96 See Section III.A.1 above. 38 allegations of collective wrongdoing by all eighteen nam ed defendants. For instance, with respect to ATP's post-BP Oil Spill investm ents in the Cheviot Field in the North Sea, the Trustee alleges that "the Officers continued to authorize and the Outside Directors continued to ratify funding m onies to ATP Oil & Gas (UK) Lim ited [] in connection with Cheviot and Octabuoy at a tim e when they knew or should have known that Cheviot was not econom ically viable. . . ."97 As to another capital project, Clipper, the Trustee alleges that "[t]he Officers and Directors abdicated their duties and responsibilities to fully inform them selves of the proposed Clipper expenditures."98 Sim ilar allegations are sprinkled throughout the Second Am ended Com plaint.99 This pleading structure--lum ping all defendants into loosely-defined groups and asserting identical allegations as to each, without distinction--m akes its difficult to discern which defendants are allegedly responsible for which of the challenged actions. That four of the Officer Defendants--Pauline van der Sm an-Archer, Isabel Plum e, Robert M. Shivers III, and G. Ross Frazer--are scarcely m entioned in the Second Am ended Com plaint outside of an initial listing of the parties m agnifies this difficulty. As the Seventh Circuit has noted, "liability is personal." Bank of Am ., N .A. v. Knight, 725 F.3d 815, 818 (7th Cir. 20 13). Because the notice pleading requirem ents of the Federal Rules of Civil Procedure entitle "each defendant . . . to know what he or she did that is asserted to be wrongful," allegations 97 R. Doc. 41 at 9. 98 Id. at 13. 99 See, e.g., id. at 14 ("The Officers authorized and the Outside Directors ratified this failure of ATP to have no m oney in reserve to pay these [decom m issioning] costs after the Oil Spill."); id. at 16 ("The Officers authorized and the Outside Directors ratified ATP's contract with [BWI] . . . even though it was known or should have been known that BWI was unable and unqualified to properly perform the work."). 39 based on a "theory of collective responsibility" cannot withstand a m otion to dism iss. Id. (affirm ing dism issal of com plaint alleging that "officers and the KE Board caused and perm itted" the com pany to m ake unsecured loans and incur substantial expenses despite their awareness of the com pany's liquidity crisis). Here, other than stating their nam es and job titles, the Second Am ended Com plaint does not provide a single allegation of fact specific to defendants Sm an-Archer, Plum e, Shivers, and Frazer. Nor does the Trustee plead a factual basis for the allegation that these defendants share collective responsibility for the challenged decisions. Indeed, that contention is im plausible based on the defendants' titles. There is no basis in the Second Am ended Com plaint to connect defendant Frazer, ATP's Vice President of Engineering, with "authorizing" the sale of interests in oil and gas assets (ORRIs and NPIs) or defendant Plum e, ATP's Corporate Secretary, with "authorizing" ATP's failure to control costs at Clipper. For these reasons, the Trustee's vague, non-specific allegations against defendants Sm an-Archer, Plum e, Shivers, and Frazer fail to m eet the pleading requirem ents of Federal Rule of Civil Procedure 8(a). The Trustee's claim s against these four Officer Defendants are dism issed in their entirety. See Conex Holdings, 514 B.R. at 414 (dism issing breach of fiduciary duty claim s when plaintiff "lum p[ed] all of the Individual Defendants together as 'Officers and Directors'" and failed to provide "any specific facts as to which transactions a particular defendant authorized"); Zola H. v. Sny der, No. 12-140 73, 20 13 WL 4718343, at *7 (E.D. Mich. Sept. 3, 20 13) (dism issing com plaint that lumped defendants together and failed "to im pute concrete acts to specific litigants"); Petri v. Kestrel Oil & Gas Properties, L.P., No. CIV.A. H-0 9-3994, 20 11 WL 2181316, at *7 (S.D. Tex. J une 3, 20 11) ("[T]he rem aining claim s against all Defendants here are not adequately pleaded under . . . 40 Tw om bly and Iqbal and their progeny. Defendants have requested and are entitled to a m ore definite statem ent to provide them with adequate notice of the claim s against them , as well as factual pleading distinguishing plausible claim s against each Defendant individually .). Moreover, this dism issal is with prejudice. The Trustee has had three opportunities to plead claim s against defendants Sman-Archer, Plume, Shivers, and Frazer, and this woefully deficient third effort dem onstrates that further leave to am end is not warranted. As to the rem aining Officer Defendants and the Director Defendants, the Court considers the sufficiency of the Trustee's allegations with respect to each set of challenged transactions and decisions. A. ATP's Post-Deepw ater Horizon Capital Investm ents Much of the Second Am ended Com plaint centers on allegations that defendants m ism anaged ATP following the BP Oil Spill by pursuing long-term capital investm ents that the cash-strapped com pany could not afford. According to the Trustee, that the BP Oil Spill ushered in a "new reality" for oil and gas com panies operating in the Gulf of Mexico, which included governm ent drilling m oratoria and new regulations that increased the cost to operate. As a result of these developm ents, ATP allegedly began having "problem s with liquidity" as early as May 20 10 --an allegation that is difficult to conceive since the BP Oil Spill did not occur until May 20 , a m ere eleven days before the end of the m onth. From May 20 10 forward, ATP was allegedly insolvent or nearly insolvent , and its financial condition deteriorated further over tim e. The Trustee contends that defendants should have responded to this situation by "tighten[ing] ATP's belt" and m aking--unspecified-"strategic adjustm ents." Instead, defendants authorized and/ or ratified new investm ents 41 in projects ATP could no longer afford, thereby hastening the company's demise. According to the Trustee, defendants failed to inform them selves about these transactions and their likely effect on ATP's financial position. And, having initiated the investm ents, defendants allegedly m ism anaged them by failing to control costs and allowing expenses to spiral out of control.10 0 As a result, ATP allegedly sustained hundreds of m illions of dollars in dam ages. The Second Am ended Com plaint takes issue with three projects in particular: (1) ATP's efforts to develop the Cheviot Field in the North Sea; (2) ATP's attem pts to obtain drilling licenses for two ATP subsidiaries in the Eastern Mediterranean Sea; and (3) ATP's attem pt to com plete a project that the Second Am ended Com plaint refers to as "Clipper." With respect to the Cheviot Field, the Trustee alleges that in late 20 0 8, ATP contracted for construction of the Octabuoy production platform , which was to be com pleted and deployed at the Cheviot Field in 20 14. According to the Trustee, "by late 20 11, it was estim ated that it would take approxim ately $ 1 billion to generate production from Cheviot, including $ 30 0 m illion to com plete the Octabuoy." The Trustee alleges that "between J anuary 1, 20 12 and J une 30 , 20 12," ATP significantly reduced its estim ates of the value of the Cheviot Field's reserves. Nonetheless, the Trustee alleges, the Officer Defendants authorized and the Director Defendants ratified a paym ent of $ 80 m illion "in connection with the Octabuoy and Cheviot projects" som etim e "in 20 12." According to the Trustee, "ATP was not in a financial position to fund that type of long term project" at the tim e of the 20 12 paym ent.10 1 10 0 Id. at 6-9. 10 1 Id. at 9-11. 42 As for the Eastern Mediterranean Sea, the Trustee takes issue with defendants' decision to fund projects by two ATP subsidiaries, ATP-EM-1 and ATP-EM-2. According to the Trustee, in or around J une 20 11, the Officer Defendants authorized and the Director Defendants ratified funding for ATP-EM-1 to purchase a share of three licenses off the coast of Israel. The Trustee alleges that "it was estim ated that ATP would need to spend $ 250 m illion on those licenses before production." Ultim ately, the Trustee claim s, the Israeli governm ent seized ATP's interest in two of the ATP-EM-1 licenses because "they were held in violation of Israeli law." With respect to ATP-EM-2, the Trustee alleges that defendants authorized and/ or ratified funding for the subsidiary to bid on unspecified "work." The Trustee further alleges--without elaboration or explanation--that "m illions of dollars were wastefully spent, and no licenses were ever obtained."10 2 As for the final project, described only as "Clipper," the Second Am ended Com plaint provides scant allegations of fact. The Trustee alleges that "[a]s of August 20 12, ATP stated that the cost of com pleting Clipper would be $ 120 m illion" but that "the cost[s] . . . ballooned m ere m onths later to over $ 20 0 m illion. . . ." Given the tim e fram e, the $ 20 0 m illion dollar estim ate would have been m ade m onths after ATP filed its Chapter 11 bankruptcy petition on August 17, 20 12. The Second Am ended Com plaint does not explain what Clipper was, m uch less plead facts to support its claim that "reckless m ism anagem ent" caused Clipper's estim ated com pletion costs to increase in the m onths following ATP's bankruptcy filing.10 3 10 2 Id. at 12-13. 10 3 Id. at 13-14. 43 These allegations fail to state a plausible claim for breach of the duties of obedience, care, or loyalty against any defendant. As noted, the duty of obedience requires a corporate officer or director to avoid com m itting ultra vires or unlawful acts. Though the Second Am ended Com plaint alleges that the challenged investm ents were poorly conceived and m ism anaged, it does not plead facts suggesting knowing violations of the law. See Life Partners, 20 15 WL 852310 3, at *16; Norris, 830 F. Supp. at 357. The Trustee argues that the Israeli governm ent's seizure of ATP's share of drilling licenses held by ATP-EM-1 dem onstrates violations of Israeli law. But the Second Am ended Com plaint does not allege that any defendant authorized or ratified a corporate action knowing the m ove would be unlawful. Instead, it vaguely alleges that "eventually . . . it was discovered" that an ATP subsidiary held licenses "in violation of Israeli law."10 4 Without a plausible allegation that a particular defendant took an affirm ative step to further ATP's actions, knowing at the time that the actions were unlawful, the Trustee fails to state a claim for breach of the duty of obedience. See Benson, 867 F. Supp. at 522. With respect to the duty of care, the Trustee's allegations fail to overcom e the business judgm ent rule. The Second Am ended Com plaint is peppered with claim s that defendants were negligent, grossly negligent, or reckless in pursuing investm ents in the Cheviot Field, the Eastern Mediterranean Sea, and Clipper and in failing to control the associated costs. As noted, however, such claim s are not cognizable under Texas law. To state a claim for breach of the duty of care not protected by the business judgm ent rule, the Trustee m ust plead and prove either (1) that a particular defendant had a personal interest 10 4 Id. at 12. 44 in the transactions com plained of, or (2) that the defendants' conduct was either ultra vires or fraudulent. See Gearhart, 741 F.2d at 721; Holm es, 1992 WL 533256, at *6. The Trustee does not allege that any defendant was personally interested in any transaction involving the Cheviot Field, the Eastern Mediterranean projects, or Clipper. There is no claim that any defendant profited from these projects, bought or sold corporate assets, or transacted business related to these business ventures with either a fam ily m em ber or a corporation with which he or she was significantly financially associated. Cf. Gearhart, 741 F.2d at 719. Nor do the Trustee's allegations invoke the other exceptions to the business judgm ent rule. Although the Trustee contends that it was unwise for defendants to have continued to invest in long-term capital projects in light of ATP's financial position, he does not allege that any defendant pursued those investments through fraudulent or ultra vires m eans. Thus, the Second Am ended Com plaint fails to state a cognizable duty of care claim relating to the Cheviot Field, the Eastern Mediterranean Sea, or Clipper. See Cates 11 S.W. at 849 (noting that Texas courts do not interfere in suits alleging "m ere m ism anagem ent or neglect of . . . corporate affairs," regardless of how "unwise or inexpedient such acts m ight be"). Moreover, even if gross negligence claim s were cognizable under Texas's business judgm ent rule, the Second Am ended Com plaint fails to plausibly allege gross negligence by any Officer Defendant or Director Defendant in connection with ATP's capital investm ents. Texas law defines "gross negligence as "that entire want of care which would raise the belief that the act or om ission com plained of was the result of a conscious indifference to the right or welfare of the person or persons to be affected by it." Burk Roy alty Co. v. W alls, 616 S.W.2d 911, 920 (Tex. 1981) (quoting Missouri Pacific Ry . v. Shuford, 10 S.W. 40 8, 411 45 (Tex. 1888)). "The test for gross negligence contains both an objective and a subjective com ponent." W al-Mart Stores, Inc. v. Alexander, 868 S.W.2d 322, 326 (Tex. 1993). Objectively, "the act or om ission m ust involve an extrem e degree of risk, considering the probability and m agnitude of the potential harm to others." W eaver v. Kellogg, 216 B.R. 563, 584 (S.D. Tex. 1997) (quoting Transportation Ins. Co. v. Moriel, 879 S.W.2d 10 (Tex. 1994)). Subjectively, the actor m ust have actual awareness of the risk, "but nevertheless proceed in conscious indifference to the rights, safety, or welfare of others." Id. Here, the Trustee has not alleged facts tending to show that any particular defendant acted with conscious indifference to an unacceptably high risk of harm . With respect to certain capital investm ents, the Trustee rests his claim s entirely on labels and legal conclusions, which he applies to all eighteen defendants without distinction. For instance, the Trustee contends that an investm ent that he identifies only as the "Clipper project" provides "an[] exam ple of Defendants' gross negligence and reckless overspending."10 5 But although the Trustee alleges that Clipper's completion costs "ballooned" in late 20 12 and early 20 13 "due to Defendants' reckless m ism anagem ent,"10 6 he does not plead any facts to explain or support this assertion. The Court therefore cannot discern a factual basis for the Trustee's claim that the Officer Defendants and Director Defendants collectively pursued Clipper in a grossly negligent m anner. Although the Trustee provides m ore details about the Cheviot Field and the Eastern Mediterranean Sea, the facts alleged do not support a gross negligence claim . According to the Trustee, the Officer Defendants authorized and the Director Defendants ratified a 10 5 Id. at 13. 10 6 Id. 46 paym ent of $ 80 m illion to an ATP subsidiary in connection with the Cheviot Field "in 20 12."10 7 The Trustee contends that this payment was ill-advised because "between J anuary 1, 20 12 and J une 30 , 20 12," ATP significantly reduced its estim ates of the value of the Cheviot Field's reserves, such that the Cheviot Field was no longer an econom ically viable investm ent.10 8 Significantly, the Second Am ended Com plaint does not identify who com pleted either the initial or the revised reserve value estim ates. Nor is there any allegation that any Officer Defendant or Director Defendant saw the revised estim ates before authorizing and/ or ratifying the challenged payment sometime "in 20 12." Moreover, it is not clear from the Second Am ended Claim whether ATP even had discretion to refuse the $ 80 m illion paym ent without incurring substantial legal liabilities. According to the Trustee, ATP m ade the paym ent "in connection with the Octabuoy," a floating production platform that ATP intended to deploy to the Cheviot Field.10 9 The Trustee alleges that ATP contracted with a Chinese shipyard to construct the Octabuoy in late 20 0 8, several years before the challenged $ 80 paym ent, and that the production platform was not scheduled to be com pleted until 20 14. Thus, it appears from the face of the pleadings that ATP could not have refused to m ake a paym ent for the Octabuoy's ongoing construction without breaching its contract with the Chinese shipyard--and the Trustee provides no allegation to the contrary. The Trustee's allegations concerning the Eastern Mediterranean Sea projects share a sim ilar deficiency. The Second Am ended Com plaint alleges that "it was estim ated that 10 7 Id. at 10 . 10 8 Id. 10 9 Id. 47 ATP would need to spend $ 250 m illion" to generate production from several Eastern Mediterranean Sea licenses--m oney that ATP did not have and could not hope to acquire.110 But it does not identify who prepared these estim ates. And there is no allegation of fact indicating that any particular defendant knew about the estim ates, or of ATP's inability to fund the necessary investm ents, when he or she caused ATP to bid on the licenses. Absent a plausible allegation that a particular defendant caused ATP to invest in Clipper, the Cheviot Field, or the Eastern Mediterranean Sea knowing at the tim e that the investm ents were not viable, the Trustee fails to state a claim for grossly negligent conduct. Turning to the final fiduciary duty, the duty of loyalty, the Trustee does not allege self-dealing in connection with ATP's post-BP Oil Spill investm ents. Instead, his loyaltybased claim s rest on allegations that defendants pursued those investm ents in bad faith and without regard for ATP's interests. This claim takes two specific form s. First, with respect to each investm ent, the Second Am ended Com plaint alleges that defendants collectively "acquiesced to the dem ands of Defendant Bulm ahn, putting their loyalty to him over their loyalty to ATP."111 Unadorned by supporting factual allegations, this assertion cannot support a plausible inference that any defendant was beholden to Bulm ahn or so under Bulm ahn's influence that their discretion was sterilized. See In re Soporex, Inc., 463 B.R. 344, 380 (Bankr. N.D. Tex. 20 11) ("While the Trustee does allege that the Outside Directors 'rubber stam ped' the decision to enter into the Carecentric agreem ent, that conclusory statem ent is unsupported by any factual content and thus does not m eet a plausibility 110 Id. at 12. 111 Id. at 11, 13, 14. 48 standard."). While the Second Am ended Com plaint does contend that the Director Defendants had "longstanding business and personal relationships with each other and Defendant Bulm ahn,"112 these contentions--leveled against all eight directors, without distinction or elaboration--are likewise too vague to plausibly allege an actionable lack of independence by any Director Defendant. See MCG Capital Corp. v. Maginn, No. CIV.A. 4521-CC, 20 10 WL 1782271, at *20 (Del. Ch. May 5, 20 10 ) ('Stand-alone allegations of long-standing professional or personal relationships are insufficient to dem onstrate that a director is beholden to the person with whom he or she has that relationship."). Second, the Trustee alleges that each defendant abdicated responsibilities that he or she owed to ATP with respect to the Cheviot Field, Eastern Mediterranean Sea, and Clipper projects. Here, the Trustee's prim ary claim is that defendants failed to im plem ent system s of oversight or supervision of ATP's finances following the BP Oil Spill. He further alleges that the Officer Defendants and the Director Defendants did not adequately inform them selves on how ATP's post-BP Oil Spill capital investments would im pact the com pany's financial health. According to the Trustee, these oversight failures prevented ATP from controlling its capital expenditures and adopting a plan to address its deteriorating financial position.113 While the legal foundation for these claim s is unclear, the Court construes the Trustee's allegations as attem pting to assert a Carem ark-style oversight liability claim against the Officer Defendants and the Director Defendants based on their alleged failure to m onitor risks associated with ATP's business. 112 Id. at 8, 9, 11, 13. 113 Id. at 11. 49 As an initial m atter, Texas state courts have not adopted Carem ark-style oversight liability as a m atter of Texas law. Although Texas courts consider Delaware law persuasive precedent, even Delaware lacks clarity on whether, and under what circum stances, an officer or director can be held liable for failure to m onitor business risks, as opposed to legal risk. See Asbestos W orkers Local 42Pension Fund v. Bam m ann, No. CV 9772-VCG, 20 15 WL 2455469, at *14 (Del. Ch. May 21, 20 15), aff'd sub nom ., 132 A.3d 749 (Del. 20 16) (interpreting Delaware law). Initially, Carem ark claim s resulted from the failure of a board to m onitor to oversee em ployee m isconduct or legal violations. See In re Citigroup Inc. S'holder Derivative Litig., 964 A.2d 10 6, 123 (Del. Ch. 20 0 9). In Carem ark itself, plaintiffs alleged that the director defendants failed to m onitor em ployees who were engaged in unlawful sales tactics. 698 A.2d at 959. Recently, plaintiffs have attem pted to expand Carem ark from a duty to m onitor illegal conduct to a duty to m onitor "business risk." See In re Think3, Inc., 529 B.R. 147, 179 (Bankr. W.D. Tex. 20 15); Citigroup, 964 A.2d at 124. In Citigroup, plaintiffs sued Citigroup's director for failing to m onitor the business risk posed by the subprim e m ortgage crisis. 964 A.2d at 122-23. Plaintiffs alleged that the directors ignored m arket-based "red flags" respecting the im pending crisis in the housing m arket and thus failed to protect Citigroup's involvem ent in the subprim e m ortgage m arket. Id. The Delaware Chancery Court found that plaintiffs at m ost alleged that the directors m ade "bad business decisions" and that the presence of negative signs in the housing m arket was insufficient to show bad faith. Id. at 130 . As to the efficacy of asserting claim s involving business risk under the Carem ark doctrine, the court reasoned that 50 [w]hile it m ay be tem pting to say that directors have the sam e duties to m onitor and oversee business risk, im posing Carem ark-ty pe duties on directors to m onitor business risk is fundam entally different. Citigroup was in the business of taking on and m anaging investm ent and other business risks. To im pose oversight liability on directors for failure to m onitor "excessive" risk would involve courts in conducting hindsight evaluations of decisions at the heart of the business judgm ent of directors. Id. at 131. At least one court has interpreted Citigroup as lim iting Carem ark claim s to m onitoring illegal conduct, see Soporex, 463 B.R. at 379-80 , while one Delaware Chancery Court opinion suggests in a footnote that there m ay be an actionable duty to m onitor business risk but that a claim for breach of that duty would be "form idably difficult to prove." In re Goldm an Sachs Grp., Inc. S'holder Litig., No. CIV.A. 5215-VCG, 20 11 WL 482610 4, at *22 n. 217 (Del. Ch. Oct. 12, 20 11). Based on the foregoing, the Court will not assum e that Texas courts would adopt a Carem ark-style breach of fiduciary duty claim for failure to m onitor business risks under the facts of this case. Like Citigroup, ATP's core business involved significant risk. Whereas Citigroup engaged in taking on and m anaging financial investm ents, Citigroup, 964 A.2d at 131, ATP's business involved acquiring, developing, and producing oil and gas properties. See Floy d, 20 0 6 WL 2844245, at *28 (noting the "speculative" nature of an oil and gas business "devoted to exploring possible deposits of oil"). Thus, to im pose oversight liability on ATP's officers and directors for failure to m onitor "business risks" would require the type of hindsight evaluations of business decisions that are particularly disfavored under Texas law. See Cates 11 S.W. at 849 (noting that Texas courts do not interfere in suits alleging "m ere m ism anagem ent or neglect of . . . corporate affairs," regardless of how "unwise or inexpedient such acts m ight be"). For this reason, the Court finds that the 51 Trustee's Carem ark-style claim for failure to m onitor risks associated with ATP's post-BP Oil Spill investm ents fail as a m atter of law.114 At bottom , for all its conclusory allegations of bad faith and "abdication," the Second Am ended Com plaint actually challenges the wisdom of defendants' strategy of continuing to invest in ATP's oil and gas properties following the BP Oil Spill rather than "tighten[ing] ATP's belt" and making "strategic adjustm ents."115 Other than identifying that ATP's capital investm ents proved unsuccessful, the Second Am ended Com plaint pleads no facts suggesting that any defendant acted in conscious disregard of a known duty to act. While it is true that ATP ultim ately filed for bankruptcy, "[b]usiness failure is an ever-present risk." Trenw ick Am . Litig. Trust v. Ernst & Young, L.L.P., 90 6 A.2d 168, 193 (Del. Ch. 20 0 6), aff'd sub nom ., 931 A.2d 438 (Del. 20 0 7). That a strategy turned out poorly is insufficient to create an inference that its failure resulted from a grossly deficient level of effort or disloyal m otives on the part of the corporation's officers and directors. Id.; see also Torch Liquidating Trust ex rel. Bridge Associates, LLC v. Stockstill, No. CIV.A. 0 7-133, 20 0 8 WL 696233, at *8 (E.D. La. Mar. 13, 20 0 8), aff'd sub nom ., 561 F.3d 377 (5th Cir. 20 0 9) (finding no breach of fiduciary duty when a com pany decided "to undertake 114 Even if failure to m onitor business risk could support a Carem ark-style action under Texas law, the Trustee's "abdication" allegations are conclusory and unsupported by factual content. The Trustee does vaguely allege that defendants collectively engaged in an "obvious and prolonged failure to exercise any oversight or supervision of ATP's expenditures." But this conclusion is not supported by factual pleadings tending to show either that ATP's m onitoring system s were inadequate or that any particular defendant was aware of the inadequacy yet failed to take corrective action. See Soporex, 463 B.R. at 384 (dism issing oversight claim s when alleged "red flags" did not support claim that directors consciously disregarded their duties). 115 R. Doc. 41 at 7. 52 significant debt and expand its fleet and take other action which ultim ately proved unsuccessful in keeping the com pany solvent"). Absent supporting factual allegations, the Trustee's conclusory assertion that defendants collectively abdicated their duties and pursued ATP's post-BP Oil Spill strategy in bad faith fail to state a plausible claim against any defendant. For these reasons, the Second Am ended Com plaint's allegations concerning ATP's investm ents in the Cheviot Field, the Eastern Mediterranean projects, and Clipper fail to state a breach of fiduciary duty claim against any Officer Defendant or Director Defendant. All such claim s are therefore dism issed. B. Decom m issioning Obligations The Trustee's second set of allegations concerns ATP's failure to set side funds to pay decom m issioning obligations associated with its deepwater drilling in the Gulf of Mexico. The Trustee alleges that after the BP Oil Spill "new foreseeable regulations increased the costs of decom m issioning obligations." The Trustee further alleges that as a result of "the im pacts of the Oil Spill and the foreseeable governm ent response," ATP was forced to incur decom m issioning obligations earlier than anticipated. According to the Trustee, "[d]efendants failed to provide a plan to address" these obligations. As a result, ATP was unable to m ake required paym ents, which caused the com pany to sustain $ 120 m illion in liability to BOEM and lose its ability to operate in the Gulf of Mexico. 116 As with ATP's capital investm ents, these allegations are insufficient to state a plausible breach of fiduciary duty claim against any Officer Defendant or Director 116 Id. at 14-15. 53 Defendant. As an initial m atter, the allegation that the governm ent's response to the BP Oil Spill was "foreseeable" is conclusory. The Second Am ended Com plaint is devoid of factual pleadings dem onstrating that ATP's m anagem ent knew or should have known that regulatory changes would accelerate the tim etable incurring for decom m issioning costs-m uch less that anyone at ATP should have foreseen when ATP would have to pay to decom m ission wells and how m uch the com pany would have to pay under the "new foreseeable regulations." Even if the Trustee could overcom e this deficiency, his claim s fail under the duty of obedience because he does not allege that any defendant acted knowing at the tim e that his or her conduct violated existing law. See Life Partners, 20 15 Wl 852320 13, at *16 (noting that a breach of obedience claim requires plaintiff to dem onstrate that the corporate defendant approved an illegal corporate action with actual knowledge of its illegality). Instead, the Trustee's contention is that the Officer Defendants and Director Defendants breached their fiduciary duties by failing to anticipate "new foreseeable regulations" and to set aside m oney in advance that ATP could have used to pay increased decom m issioning on an accelerated schedule.117 With respect to the duty of care, the Second Am ended Com plaint fails to plead facts sufficient to overcom e the business judgm ent rule. The Trustee does not allege that any defendant was interested in a relevant transaction. And there is no claim that defendants' failure to respond to "foreseeable" regulatory changes involved ultra vires conduct or fraud. Rather, the Second Am ended Com plaint contends that "[a] prudent operator holds m oney 117 Id. at 14. 54 in reserve to account for the statutory responsibility to pay the costs of decom m issioning wells," and that by failing to anticipate regulatory changes affecting the am ount and tim ing of such costs, defendants fell short of this standard.118 These allegations sound in sim ple negligence, not bad faith or even gross negligence, and Texas's business judgm ent rule precludes officer or director liability for negligent conduct. See Cates, 11 S.W. at 849. To the extent the Trustee's allegation that defendants failed to "exercise[] oversight and supervision"119 of ATP's decom m issioning obligations attem pts to state a Carem arkstyle oversight liability claim , that claim fails as a m atter of law for reasons outlined in the previous section of this order. The Second Am ended Com plaint attem pts to im pose liability on defendants for failing to anticipate and plan for "foreseeable" changes in decom m issioning regulations. But the possibility that new regulations will increase the costs of operating is an ever-present business risk that faces every oil and gas com pany operating in the Gulf of Mexico. As noted, the Court will not assum e that Texas courts would adopt a Carem ark-style breach of fiduciary duty claim for failure to monitor business risks. The Trustee's Carem ark claim s therefore fail as a m atter of law. Moreover, even if the facts of this case could support a Carem ark-style oversight liability action, the Trustee's "abdication" allegations are conclusory. Although the Trustee alleges that the Officer Defendants and Director Defendants collectively "ignored the legal obligations of ATP,"120 he does not identify any specific defect in ATP's monitoring 118 Id. 119 Id. at 15. 120 Id. at 14. 55 procedures. The Trustee does not allege, for instance that defendants failed to m aintain proper financial records or to track ATP's capital expenditures and liabilities. Nor does he claim that the Director Defendants failed to hold board m eetings. See Think 3, 529 B.R. at 180 -81 (finding that trustee stated plausible Carem ark claim based on allegations that director defendants did not track a large and growing tax liability, failed to hold regular m eetings, failed to consult a tax planning expert, and never m aintained audited financial statem ents). In addition, the Trustee does not identify any "red flags" or other facts tending to show that any defendant knew that ATP's internal controls were inadequate and that the inadequacies could leave room for m aterially harm ful behavior. See Desim one, 924 A.2d at 940 ; see also Soporex, 463 B.R. at 384 (dism issing oversight claim s when alleged "red flags" did not support claim that directors consciously disregarded their duties). Accordingly, the Second Am ended Com plaint's allegations concerning ATP's decom m issioning obligations fail to state a breach of fiduciary duty claim against any defendant. The Court therefore grants defendants' m otions to dism iss all breach of fiduciary claim s grounded in these allegations. C. Vendor Contracts w ith BW I and Nabors The Trustee's next set of allegations centers on contracts between ATP and two of its vendors. The Trustee alleges that ATP's CEO, Bulm ahn, lobbied for ATP to award contracts to two com panies, BWI and Nabors. According to the Trustee, the contracts 56 between ATP and BWI were "com pletely one-sided in BWI's favor." Allegedly, the BWI contracts required ATP to bear costs resulting from overruns and delays attributable to BWI, which caused ATP to incur costs with little countervailing benefit. The Officer Defendants allegedly awarded these contracts without soliciting com peting bids, and did so even though defendants allegedly knew or should have known BWI was unqualified to perform the contract services. As for Nabors, the Trustee alleges that ATP leased a drilling rig from the com pany from March 20 10 through J uly 20 12 at a rate of $ 10 0 ,0 0 0 per day. According to the Second Am ended Com plaint, ATP used the drilling rig not for drilling but for services that could have been perform ed through less expensive m eans. The Trustee alleges that although the BWI and Nabors contracts were unfavorable, they were "entered into at the direction of Defendant [CEO] Bulm ahn to benefit his friends." As a result, ATP allegedly sustained substantial financial harm .121 These contentions are also insufficient to state a claim against any defendant for breach of fiduciary duty. Beginning with the duty of obedience, the Second Am ended Com plaint contains no allegation of unlawful or ultra vires conduct in connection with the BWI and Nabors contracts. As for the duty of care, the Second Am ended Com plaint does not allege fraud on the part of any Officer Defendant or Director Defendant. Nor does the Trustee allege that any defendant was interested in the vendor contracts, such that Texas's business judgm ent rule would not apply. As noted, an officer or directors is "interested" in a transaction under Texas law if he or she: (1) m akes a personal profit from a transaction by dealing with the corporation or usurps a corporate opportunity; (2) buys or sells assets 121 Id. at 16-18. 57 of the corporation; (3) transacts business in his director's capacity with a second corporation of which he is also a director or significantly financially associated; or (4) transacts business in his director's capacity with a fam ily m em ber. Gearhart, 741 F.2d at 719-20 ; Gam e Sy s., Inc., 20 11 WL 2119672, at *5 n.22; Loy , 128 S.W.3d at 40 8. Here, although the Second Am ended Com plaint contends that Bulm ahn helped "friends," there is no allegation that Bulm ahn or any other defendant personally profited from the BWI or Nabors contracts or otherwise engaged in prohibited self-dealing. Turning to the duty of loyalty, the Second Am ended Com plaint fails to plausibly allege a claim for bad faith breach of duty against Bulm ahn, the rem aining Officer Defendants, or the Director Defendants. As an initial m atter, there are no factual allegations to support the Second Am ended Com plaint's conclusion that defendants collectively knew or should have known that NBI was unqualified to perform the contracted-for services. Again, such a claim is facially im plausible given the wide variation in defendants' titles, roles, and responsibilities within the corporation. Moreover, although the Trustee faults defendants for awarding BWI contracts for "various projects" without soliciting com peting bids, the Second Am ended Com plaint does not specify the types of projects at issue. Nor does it allege facts suggesting that the decision to award contracts of this nature without a com petitive bidding process was contrary to either ATP policy or prevailing industry practice--m uch less that the absence of bidding dem onstrates bad faith on the part of any particular defendant. The sam e is true of the Trustee's allegations concerning the allocation of cost overrun risks in the BWI contracts and how ATP used the drilling rig leased from Nabors. Setting aside the conclusory assertions that the BWI contracts were "com pletely one-sided in BWI's favor" and that the work perform ed by the 58 drilling rig "could have been provided via other vastly less expensive m eans," the Trustee has pleaded no facts dem onstrating that the term s of the vendor contracts were unfair to ATP or that defendants authorized and/ or ratified the contracts in bad faith. As to the allegation that Bulm ahn acted disloyally by benefitting"friends" at ATP's expense, the Trustee is correct that a breach of loyalty claim does not necessarily require an "interested" transaction. See Life Partners, 20 15 WL 852310 3, at *12 (noting that "even a director who acts with no eye to self-enrichm ent can breach his duty of loyalty, if he fails to satisfy its other subsidiary elem ent" of good faith). But aside from conclusory assertion that Bulm ahn intended to benefit unspecified "friends," the Trustee does not plead any facts tending to show that Bulm ahn acted disloyally and with the intent to injure ATP's long-term value. Indeed, ATP's Schedule 14A Proxy Statem ent, filed with the Securities and Exchange Com m ission on April 29, 20 10 , dem onstrates that Defendant Bulm ahn was ATP's m ajority shareholder, owning approxim ately 11.75% of the ATP's shares.122 Absent factual pleadings tending to show that Bulm ahn nonetheless sought to enrich his friends at the com pany's expense, the Trustee's conclusory assertions fail to state a plausible breach of loyalty claim . Finally, as to the claim that the rem aining defendants acted disloyally by allowing them selves to be controlled by Bulm ahn, the allegation that "[t]he Officers and Outside 122 R. Doc. 31-2. The Court takes judicial notice of this docum ent under Federal Rule of Evidence 20 1 because it is a public record filed with the SEC and not subject to reasonable dispute. See Norris v. Hearst Trust, 50 0 F.3d 454, 461 (5th Cir. 20 0 7) ("[I]t is clearly proper in deciding a 12(b)(6) m otion to take judicial notice of m atters of public record); In re Com puter Scis. Corp. Derivative Litig., 244 F.R.D., 580 , 587 (C.D. Cal. 20 0 7) (taking judicial notice of Schedule 14A proxy statem ents). The Court's consideration of this docum ent does not covert defendants' Rule 12 m otions into m otions for sum m ary judgm ent. Davis v. Bay less, 70 F.3d 367, 372 n. 3 (5th Cir. 1995). 59 Directors . . . sim ply rubber-stam ped Defendant Bulm ahn's decision"123 is conclusory and cannot support a plausible inference that any defendant was so under Bulm ahn's influence that their discretion was sterilized. See Soporex, Inc., 463 B.R. at 380 . For these reasons, the Second Am ended Com plaint's allegations concerning vendor contracts fail to state a breach of fiduciary duty claim against any defendant. All breach of fiduciary duty claim s concerning vendor contracts are therefore dism issed. D. Cash and Stock Bonuses The Trustee's next set of allegations concerns cash and stock bonuses paid to Officer Defendants Bulm ahn, Tate, Morris, Reese, and Godwin in 20 10 and 20 11. According to the Second Am ended Com plaint, these bonuses were valued at over $ 9 m illion in cash and $ 3.5 m illion in stock. The Trustee alleges that these am ounts were "exorbitant" and that the Officer Defendants breached their fiduciary duties by accepting them at a tim e when ATP was in the zone of insolvency and in need of cash. He further alleges that the Director Defendants, particularly the Director Defendants on the Com pensation Com m ittee, awarded these bonuses in bad faith and without due regard to ATP's poor perform ance during the relevant tim e periods.124 These allegations fail to state a plausible breach of fiduciary duty claim against any defendant. A corporate fiduciary does not breach his or her duty of loyalty m erely by receiving (or awarding) com pensation for corporate services; som e additional allegation of wrongdoing is required. See Torch Liquidating Trust, 20 0 8 WL 696233, at *9 ("[T]he 123 R. Doc. 41 at 17. 124 Id. at 20 -21, 29-30 . 60 argum ent that by accepting m onetary com pensation for doing their job and as well as other benefits the Defendants engaged in self-dealing, is meritless."). While the Second Amended Com plaint contends that the Officer Defendants' bonuses were "exorbitant," it lacks factual allegations to support this conclusion. The Second Am ended Com plaint does not allege, for instance, that defendants' com pensation was higher than at sim ilarly-sized public com panies in the oil and gas industry. Rather, it m erely provides a chart containing each defendants nam e, the am ount of compensation received, and the conclusory allegation that the am ount was "not com m iserate with [the defendants'] perform ance."125 This is inadequate. See Iqbal, 556 U.S. at 678 (noting that a com plaint m ust go beyond labels, legal conclusions, or form ulaic recitations of the elem ents of a cause of action). Because the Second Am ended Com plaint does not plead any facts from which the Court can infer that the bonuses were unfair, the breach of fiduciary duty claim s based on the bonuses are dism issed as to all defendants.126 The Trustee's allegation that the Director Defendants "allowed them selves to be controlled by . . . Bulm ahn"127 in their com pensation decisions does not change this result. As noted, the bare assertion that defendants were collectively under Bulmahn's sway cannot support a reasonable inference that any particular defendant was beholden to Bulm ahn or 125 Id. at 20 . 126 The Trustee's citation to In re Gen. Hom es Corp., 199 B.R. 148 (S.D. Tex. 1996), is inapposite. There, the court observed that corporate directors engaged in "pure self-dealing" by substantially increasing their salaries and severance pay as officers during the pendency of reorganization. Id. at 151. Here, by contrast, the Trustee has pleaded no facts suggesting that defendan ts' sought increased pay or bonuses prior to ATP's bankruptcy. 127 R. Doc. 41 at 28. 61 so under his influence that his or her discretion was sterilized. See Soporex, 463 B.R. at 380 . Such an inference requires factual allegations, which the Second Am ended Com plaint fails to provide. 4. Co n clu s io n To recap, the Court resolves defendants' m otions to dism iss the Trustee's breach of fiduciary duty claim s as follows: • Defendants owed no duty to consider or protect the interests of ATP's creditors at any relevant tim e. Because the Trustee's claim s that defendants (1) sold ORRIs and NPIs to pay "past due obligations" and (2) authorized a special dividend paym ent while ATP's bankruptcy was "pending" fail to plausibly allege an injury to ATP, as opposed to its creditors, those claim s are dism issed as to all defendants. • The Second Am ended Com plaint fails to plead any fa specific to Officer cts Defendants Sman-Archer, Plum, Shivers, and Frazer. All claims against those defendants are therefore dism issed. • With respect to ATP's investm ents in the Cheviot F ield, the Eastern Mediterranean Sea, and Clipper, the Second Am ended Com plaint fails to plead facts tending to show that any defendant breached their fiduciary duties of obedience, care, or loyalty to ATP. All breach of fiduciary duty claim s based on these transactions are therefore dism issed. • With respect to ATP's contracts wih BWI and Nabors, the Second Am ended t Com plaint fails to plead facts dem onstrating that any defendant breached their fiduciary duty of obedience, care, or loyalty to ATP. Thus, all breach of fiduciary duty claim s based on vendor contracts are dism issed. • As to bonuses paid to Officer Defendan Bulm ahn, Tate, Morris, Reese, and ts Godwin, the Second Am ended Com plaint contains only vague, conclusory allegations of m isconduct. All breach of fiduciary duty claim s based on these transactions are dism issed. Having resolved defendants' m otions to dism iss the Trustee's breach of fiduciary duty claim s, the Court turns to the rem aining causes of action in the Second Am ended Com plaint. 62 B. Frau d u le n t Tran s fe r Claim s In Count Two of the Second Am ended Com plaint, the Trustee seeks to avoid cash and stock bonuses paid to certain Officer Defendant in 20 10 and 20 11 as fraudulent conveyances under the Texas Uniform Fraudulent Transfer Act ("TUFTA") and Section 548(a)(1) of the Bankruptcy Code. Under TUFTA, a bankruptcy trustee m ay avoid a debtor's transfers that defraud the estate's creditors. Tex. Bus. & Com . Code § 24.0 0 8(a)(1); see also Spring St. Partners– IV, L.P. v. Lam , 730 F.3d 427, 437 (5th Cir. 20 13). Fraudulent transfers are divided into two types: actual fraudulent transfers, § 24.0 0 8(a)(1), and constructive fraudulent transfers, § 24.0 0 5(a)(2) and § 24.0 0 6. Here, the Second Am ended Com plaint alleges only constructive fraud under Section 24.0 0 5 of TUFTA.128 Section 24.0 0 5 provides that a transfer is constructively fraudulent if the debtor m ade the transfer: without receiving a reasonably equivalent value in exchange for the transfer or obligation, and the debtor: (A) was engaged or was about to engage in a business or a transaction for which the rem aining assets of the debtor were unreasonably sm all in relation to the business or transaction. . . . Tex. Bus. & Com .Code § 24.0 0 5(a). Sim ilarly, under Section 548(a)(1) of Bankruptcy Code, a bankruptcy trustee m ay avoid a transfer that was m ade within two years before the date the bankruptcy petition was 128 Although the Second Am ended Com plaint does not expressly invoke either theory of recovery under TUFTA, the Trustee's opposition to the Director Defendants' m otion to dism iss construes his claim s under TUFTA's constructive fraud provision. R. Doc. 55 at 29. 63 filed if the debtor "received less than a reasonably equivalent value in exchange for such transfer or obligation" and either: was insolvent on the date that such transfer was m ade or such obligation was incurred, or becam e insolvent as a result of such transfer or obligation; was engaged in business or a transaction, or was about to engage in business or a transaction, for which any property rem aining with the debtor was an unreasonably sm all capital; intended to incur, or believed that the debtor would incur, debts that would be beyond the debtor's ability to pay as such debts m atured; or m ade such transfer to or for the benefit of an insider, or incurred such obligation to or for the benefit of an insider, under an em ploym ent contract and not in the ordinary course of business. 11 U.S.C. § 548(a)(1)(B). Thus, to prevail on a constructive fraud claim under this provision, a plaintiff m ust plead and prove that: "(1) the debtor transferred an interest in property, (2) the transfer of that interest occurred within two years prior to the filing of the bankruptcy petition, (3) the debtor was insolvent on the date of the transfer or becam e insolvent as a result thereof, and (4) the debtor received less than reasonably equivalent value in exchange for such transfer." In re Inspirations Im ports, Inc., No. 3:13-CV-4331-D, 20 14 WL 1410 243, at *2 (N.D. Tex. Apr. 3, 20 14) (citing In re GW I PCS 1 Inc., 230 F.3d 788, 80 5 (5th Cir. 20 0 0 )). The parties argue over whether constructive fraudulent transfer claim s m ust com ply with the heightened pleading requirem ents of Federal Rule of Civil Procedure 9(b). The Court need not resolve this dispute. Because the Second Am ended Com plaint sets forth little m ore than a "formulaic recitation of the elem ents" of the relevant statutory provisions, the Trustee fails to satisfy the general pleading standards of Rule 8(a). Tw om bly , 550 U.S. at 555. Although the Trustee alleges that he "is entitled to avoid and recover the following transfers m ade when ATP had unreasonably sm all capital and for which no reasonably 64 equivalent value was given,"129 the Second Amended Complaint contains no factual m aterial to support this assertion of value. Instead, it m erely provides the nam es of the recipient defendants, a year, and the am ount of the cash and stock bonuses received. Absent additional allegations of fact, the Trustee's constructive fraudulent transfer claim s cannot withstand the Officer Defendants' m otion to dism iss. See Scouler & Co., LLC v. Schw artz, No. 11-CV-0 6377 NC, 20 12 WL 150 2762, at *6 (N.D. Cal. Apr. 23, 20 12) (finding allegation that "Asyst failed to receive reasonably equivalent value in exchange for this ill-advised bonus, which cam e at a tim e when [Asyst's form er CEO] had failed to preserve the Com pany's financial position" insufficient to state constructive fraudulent transfer claim ); In re Hy drogen, L.L.C., 431 B.R. 337, 353 (Bankr. S.D.N.Y. 20 10 ) (dism issing constructive fraudulent transfer claim in light of "a com plete absence of facts supporting the allegation that the Debtor received less than reasonably equivalent value"). C. Civil Co n s p iracy / Aid in g an d Abe ttin g Claim s Count Three of the Second Am ended Com plaint asserts claim s against each of the Officer Defendants and Director Defendants for conspiring to breach fiduciary duties and to m ake constructively fraudulent distributions. Count Three also alleges that each defendant aided and abetted the breaches of fiduciary duty and fraudulent distributions of other defendants. The Court addresses each allegation in turn. 1. Co n s p iracy "A civil conspiracy is a com bination of two or m ore persons to accom plish an unlawful purpose or to accom plish a lawful purpose by unlawful m eans." Goldstein v. 129 Id. at 31. 65 Mortenson, 113 S.W.3d 769, 778– 79 (Tex.App.-Austin 20 0 3, no pet.) (citing Massey v. Arm co Steel Co., 652 S.W.2d 932, 934 (Tex. 1983)). To establish a civil conspiracy, a plaintiff m ust plead and prove the following elem ents: "(1) two or m ore persons; (2) an object to be accom plished; (3) a m eeting of the m inds on the object or course of action; (4) one or m ore unlawful, overt acts; and (5) dam ages as the proxim ate result." Floy d, 556 F. Supp. 2d at 656 (citing Juhl v. Airington, 936 S.W.2d 640 , 644 (Tex. 1996)). "Once a conspiracy is proven, each co-conspirator 'is responsible for all acts done by any of the conspirators in furtherance of the unlawful com bination.'" Carroll v. Tim m ers Chevrolet, 592 S.W.2d 922, 926 (Tex. 1979). At a m inim um , the Second Am ended Com plaint alleges no facts from which the Court can infer the existence of an essential elem ent, a m eeting of the m inds. While the Trustee levels nearly all of his allegations of m isconduct against the Officer Defendants or Director Defendants as groups, he does not allege--even conclusorily--that any defendant reached an agreem ent with any other defendant to com m it unlawful acts. The Second Am ended Com plaint's sole conspiracy allegation is that defendants "conspired, aided and abetted, and acted in concert with one another in breaching the fiduciary duties owed by Defendants" and in "allowing the distribution of . . . fraudulent transfers."130 This is insufficient to state a plausible claim for relief, and the Trustee's conspiracy claim s m ust be dism issed. The Trustee's civil conspiracy claim s fail for the additional reason that the Second Am ended Com plaint does not plead facts dem onstrating an exception to the intracorporate 130 Id. at 31. 66 conspiracy doctrine. A civil conspiracy requires two or m ore persons or entities. Because the acts of corporate agents are attributable to the corporation itself, a corporation lacks the m ultiplicity of actors required to form a conspiracy. See Hilliard v. Ferguson, 30 F.3d 649, 653 (5th Cir. 1994) (noting that a "corporation cannot conspire with itself any m ore than a private individual can" and "the acts of the agent are the acts of the corporation"); Crouch v. Trinque, 262 S.W.3d 417, 426 (Tex. App.--Eastland 20 0 8) (noting the general rule that a corporation and its em ployees "constitute a single entity, which cannot conspire with itself"). As the Trustee correctly notes, there are exceptions to the intracorporate conspiracy doctrine, such as "when the alleged conspirators have an independent stake in achieving the object of the conspiracy" and "whe[n] the alleged conspirators are acting for their own personal purposes." See Collins v. Bauer, No. 3:11-CV-0 0 887-B, 20 12 WL 4430 10 , at *7 (N.D. Tex. J an. 23, 20 12). But the Second Am ended Com plaint fails to plead facts tending to show that any exception applies to any agreem ent reached by the Officer Defendants and/ or the Director Defendants. Accordingly, the intracorporate conspiracy doctrine bars the Trustee's civil conspiracy claim s against all defendants. Id. at *8. Finally, conspiracy to com m it a constructive fraudulent transfer is not an actionable claim under either Texas or federal law. As the Texas Suprem e Court has noted, an individual cannot conspire to be negligent. Juhl v. Airington, 936 S.W.2d 640 , 644 (Tex. 1996). This is "[b]ecause negligence by definition is not an intentional wrong[,]" and a "civil conspiracy requires specific intent to agree to accom plish an unlawful purpose or to accom plish a lawful purpose by unlawful m eans." Id. Sim ilarly, because constructive fraud requires no intent to deceive, a defendant cannot conspire to perm it a constructive fraudulent transfer. See Nippert v. Jackson, 860 F. Supp. 2d 554, 568 (M.D. Tenn. 20 12) 67 (noting that "conspiracy to com m it constructive fraud is a legal im possibility"). Thus, the Trustee's conspiracy to com m it fraudulent transfer claim s fail as a m atter of law. 2. Aid in g an d Abe ttin g In Texas, "[w]hen a third party knowingly participates in the breach of a fiduciary duty, the third party becom es a joint tortfeasor and is liable as such." Kastner v. Jenkens & Gilchrist, P.C., 231 S.W.3d 571, 580 (Tex. App.--Dallas 20 0 7) (citing Kinzbach Tool Co. v . Corbett– W allace Corp., 160 S.W.2d 50 9, 513– 14 (Tex. 1942)). A claim for knowing participation in a breach of fiduciary duty con tains three elem ents: "(1) the existence of a fiduciary relationship; (2) that the third party knew of the fiduciary relationship; and (3) that the third party was aware that it was participating in the breach of that fiduciary relationship." Meadow s v. Hartford Life Ins. Co., 492 F.3d 634, 639 (5th Cir. 20 0 7). To state an aiding and abetting claim , a plaintiff m ust therefore establish som e underlying breach of fiduciary duty. See Ernst & Young, L.L.P. v. Pac. Mut. Life Ins. Co., 51 S.W.3d 573, 583 (Tex. 20 0 1). As noted, the Second Am ended Com plaint fails to plausibly allege a breach of fiduciary duty claim against any Officer Defendant or Director Defendant. Thus, the Trustee's aiding and abetting claim s are dism issed. In addition, the Trustee's attem pt to state a claim for aiding and abetting fraudulent transfers fails as a m atter of law. While the parties have not cited--and the Court has not found--Texas case law on the issue, a num ber of courts have held that "aiding and abetting a fraudulent transfer is not a valid claim under state or federal law." In re Am . Bus. Fin. Servs., Inc., 457 B.R. 314, 324 (Bankr. D. Del. 20 11) (collecting cases); see also Mack v. New ton, 737 F.2d 1343, 1357 (5th Cir. 1984) ("[T]he general rule under the Bankruptcy Act is that one who did not actually receive any of the property fraudulently transferred (or any 68 part of a 'preference') will not be liable for its value, even though he m ay have participated or conspired in the m aking of the fraudulent transfer (or preference)."); Baker O'N eal Holdings, Inc. v . Ernst & Young LLP, No. 1:0 3-CV-0 132-DFH, 20 0 4 WL 771230 , at *14 (S.D. Ind. Mar. 24, 20 0 4) ("Accessory liability for fraudulent transfers cannot be supported by either the Bankruptcy Code or the [Indiana Fraudulent Transfer Act]."). The Court reaches the sam e conclusion. Accordingly, the Trustee's aiding and abetting fraudulent transfer claim s fail as a m atter of law. IV. LEAVE TO AMEN D The Trustee requests leave to am end his com plaint to better allege his causes of action. Federal Rule of Civil Procedure 15(a)(2) instructs that the Court should "freely give" leave to am end "when justice so requires." Fed.R.Civ.P. 15(a)(2); Leal v. McHugh, 731 F.3d 40 5, 417 (5th Cir. 20 13). Leave to am end, however, is not granted autom atically. See Davis v. United States, 961 F.2d 53, 57 (5th Cir. 1991); Addington v. Farm er's Elevator Mut. Ins. Co., 650 F.2d 663, 666 (5th Cir. 1981). The decision whether to grant leave to am end lies within the discretion of the court. See Fom an v. Davis, 371 U.S. 178, 182 (1962). "Am ong the acceptable justifications for denying leave to am end are . . . repeated failure to cure deficiencies by prior am endm ent . . . and the futility of am endm ent." Jam ieson By and Through Jam ieson v. Shaw , 772 F.2d 120 5, 120 8 (5th Cir. 1985). To begin, the Court notes that several of the Trustee's claim s fail as a m atter of law. Am ong these are all of the Trustee's breach of fiduciary duty claim s of prem ised on allegations that defendants acted negligently, grossly negligently, or recklessly in the exercise of corporate duties. Such claim s are barred by Texas's business judgm ent rule, so 69 further pursuit would be futile. The sam e is true of the Trustee's Carem ark-style oversight liability claim s, which seek to hold defendants liable for alleged failures to m onitor risks associated with ATP's business, as well as his claim s for conspiracy to com m it constructive fraudulent transfers and aiding and abetting fraudulent transfers. Because the Court finds that Texas courts would not recognize any of these theories of liability, these claim s also fail as a m atter of law, m aking am endm ent futile. Accordingly, all claim s involving negligence, gross negligence, recklessness, oversight liability, conspiracy to com m it constructive fraudulent transfer, and aiding and abetting fraudulent transfer are dism issed with prejudice. See U.S. ex rel. Steury v. Cardinal Health, Inc., 625 F.3d 262, 271 (5th Cir. 20 10 ) (holding that denial of leave to am end m ay be appropriate when am endm ent would be futile). Turning to the Trustee's remaining claims, the Court finds that--with two exceptions, delineated below--the Trustee "[is] not m aking progress toward an acceptable com plaint," m aking further leave to am end unwarranted. Bank of Am ., N .A. v. Knight, 725 F.3d 815, 819 (7th Cir. 20 13). The Trustee has had three opportunities to plead his breach of fiduciary duty, fraudulent transfer, and secondary liability claim s in this case. Most recently, the Trustee requested and received leave to file his Second Am ended Com plaint after the Officer Defendants and the Director Defendants had both m oved to dism iss under Federal Rule of Civil Procedure 12(b)(6). Thus, the Trustee drafted his live pleadings with the benefit of two sets of briefings challenging his earlier effort. Nonetheless, the Trustee continues to rely alm ost exclusively on vague, conclusory allegations of wrongdoing, which he levels at all eighteen defendants without distinction. The deficiencies of this third effort are particularly striking given that, as the trustee of ATP's estate, the Trustee has "am ple 70 access to [ATP's] books and records." Id. For these reasons, the Court finds that, as a general m atter, further leave to am end is not warranted in this case. See id. ("[I]n court, as in baseball, three strikes and you're out."); see also J acquez v. Procunier, 80 1 F.2d 789, 792 (5th Cir. 1986) ("At som e point a court m ust decide that a plaintiff has had fair opportunity to m ake his case; if, after that tim e, a cause of action has not been established, the court should finally dism iss the suit."). The Court will, however, perm it the Trustee to am end his pleadings to better allege two specific causes of action. First, the Trustee m ay am end his claim that Officer Defendant Bulm ahn breached his fiduciary duty of loyalty by causing ATP to enter unfavorable contracts with BWI and Nabors to benefit "friends" at the corporation's expense. The Trustee m ay also am end his related claim s that the other defendants (with the exception of Officer Defendants Sm an-Archer, Plum e, Shivers, and Frazer) acquiesced in and/ or aided and abetted Bulm ahn's awarding of unfavorable vendor contracts in breach of his fiduciary duty of loyalty. Second, the Trustee m ay am end his constructive fraudulent transfer claim s, in which he seeks to void and recover cash and stock bonuses paid to Officer Defendants Bulm ahn, Tate, Reese, Morris, and Godwin under Section 24.0 0 5 of the Texas Business and Com m erce Code and Section 548(a)(1) of the Bankruptcy Code. The Court perm its these am endm ents because despite the general deficiency of the Second Am ended Com plaint, the Trustee's allegations indicate that am endm ent m ight not be futile with respect to these two sets of claim s. For these reasons, the Court grants the Trustee leave to am end his com plaint within twenty-one (21) days of this order with respect to the claim s identified in the previous 71 paragraph. The Trustee m ay not continue to pursue any of the rem aining claim s in his Second Am ended Com plaint. IV. CON CLU SION For the foregoing reasons, the Court GRANTS the Director Defendants' m otion to dism iss and GRANTS the Officer Defendants' m otion to dism iss. Although the Court finds that, as a general m atter, am endm ent is unwarranted, the Court grants the Trustee leave to am end his com plaint within twenty-one (21) days of this order to better allege the two sets of claim s outlined in Section IV of this order. The Trustee m ay not reassert any causes of action or claim s except as specifically perm itted by Section IV. 29th New Orleans, Louisiana, this _ _ _ _ day of April, 20 16. ________________________________ SARAH S. VANCE UNITED STATES DISTRICT J UDGE 72

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