A federal district court in Houston has followed the recommendation of U.S. Bankruptcy Judge David Jones to dismiss all remaining litigation between French bank Natixis Funding Corp. and GenOn Mid-Atlantic over a $130 million credit arrangement gone south for two coal-fired power plants in Maryland.
After a hearing held last Tuesday before U.S. District Judge Keith Ellison, the judge denied objections made by the plaintiff, Natixis, regarding Judge Jones’ report and recommendation from June, which suggested tossing out $75 million in claims that Natxis sought in the litigation.
Natixis’ objections to the underlying ruling were filed under seal, but lawyers for the bank pledged an appeal of Judge Ellison’s ruling.
Haynes and Boone partner Mark Trachtenberg, one of Natixis’ lawyers, told The Texas Lawbook that his side is “very disappointed in the district court’s decision” and that the bank’s legal team is “confident that our client’s position will be vindicated on appeal” to the U.S. Court of Appeals for the Fifth Circuit.
Lawyers for GenMa at Kirkland & Ellis were not available to comment.
The dispute originates from a January 2017 credit support agreement the parties entered in which GenMa paid Natixis $130 million to obtain $130 million in letters of credit to support GenMa’s lease obligations for the two power plants. Although the governing document limited the exposure credit draws to the cash payment amount, the letters of credit issued by Natixis failed to include this cap, Judge Jones’ report and recommendation said.
GenMa’s lessors eventually drew $174 million, which led to a series of lawsuits across the country.
In this dispute, which Natixis originally filed in New York State court, the bank alleged GenMa breached the payment agreement and the implied covenant of good faith and fair dealing. GenMa removed the lawsuit to Houston federal court, where Judge Jones was handling the Chapter 11 reorganization of GenMa’s parent companies. After a trial in the bankruptcy court, the debtors reached a settlement resolving nearly identical claims to those brought by Natixis in this current suit.
Judge Jones’ June 15 report and recommendation, which Judge Ellison adopted last week, said Natixis’ claims should be dismissed and that GenMa should prevail on its summary judgment arguments about breach of warranty and indemnification.
The Kirkland team representing GenMa was led by partner Ravi Subramanian Shankar and associate Cassandra Fenton of the firm’s Chicago office.
In addition to Trachtenberg, the Haynes and Boone team representing Natixis included Houston partner Charles Beckham, Jr. and Houston associate Natasha Breaux.