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Keywords

contractbreach of contracttortmotionfiduciarytrustbankruptcyfiduciary dutybad faithbreach of fiduciary dutycommon lawmotion to dismiss
contractbreach of contracttortliabilitymotionfiduciarytrustbankruptcypartnershipfiduciary dutybad faithbreach of fiduciary dutycommon law

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In re Houston Regional Sports Network, L.P., 547 B.R. 717

Facts

In 2003, the Houston Regional Sports Network, L.P. (the Debtor) was formed to produce and distribute content related to Houston's sports teams. Comcast acquired a stake in the Debtor in 2010, and various agreements were established between Comcast and the Debtor. The trustee alleged that Comcast acted in bad faith to drive down the Debtor's value, ultimately leading to an involuntary bankruptcy petition filed by Comcast and its affiliates in 2013. The trustee claimed that Comcast's actions were aimed at acquiring the Debtor's assets at a reduced price.

In 2003, the Astros and Rockets formed Houston Regional Sports Network, L.P. (“the Debtor”), a Delaware limited partnership, in order to produce and distribute content relating to Houston's sports teams, including the Houston Astros, the Houston Rockets, and the Houston Dynamo, a Major League Soccer franchise. (ECF No. 1 at 11). The Debtor originally consisted of two limited partners, Rockets Partner, L.P. (“Rockets Partner”) and Houston McLane Company, LLC (“Houston McLane”), representing the Astros. Id. The general partner was Houston Regional Sports Network, LLC, a Delaware limited liability company comprised of two members: JTA Sports, Inc. (“Rockets Member”) and Houston McLane. (ECF No. 1 at 12). In 2010, Houston McLane transferred its limited partnership interest in the Debtor to McLane HRSN LP Holdings, LLC (“Astros Partner”) and its membership interest in the general partner to McLane HRSN GP Holdings, LLC (“Astros Member”). Id.

Issue

Did Comcast and its affiliates engage in fraudulent conduct that harmed the Debtor and its stakeholders, warranting the claims brought by the trustee?

The motion is granted in part and denied in part.

Rule

The court applied principles of common law fraud, tortious interference, and breach of contract, evaluating whether the trustee's claims were plausible based on the facts presented.

The Bankruptcy Court, Marvin Isgur, held that: 1 trustee was not collaterally estopped from asserting claims by prior order of bankruptcy court refusing to dismiss involuntary petition filed by company as allegedly filed in bad faith; 2 trustee stated common law fraud claim that was plausible on its face; 3 trustee did not state fraudulent nondisclosure claim; 4 notice of intent not to submit stalking horse bid, as official document filed in bankruptcy case, was privileged and insufficient to support business disparagement claim; 5 trustee stated tortious interference claim that was plausible on its face, though debtor ultimately sold assets, albeit at lesser price, to same potential purchaser; 6 trustee did not state plausible breach of fiduciary duty claim; 7 trustee stated plausible breach of contract claim, but only based on nonperformance of single provision of services agreement; and 8 cause of action for aiding and abetting a fraud would, as predicted by bankruptcy court in Texas, be recognized under Texas law.

Analysis

The court found that the trustee's allegations of common law fraud and tortious interference were plausible, as they suggested that Comcast acted with the intent to harm the Debtor's value for its own benefit. The court also noted that the trustee's claims regarding the breach of contract were limited to specific provisions, while other claims, such as fraudulent nondisclosure and breach of fiduciary duty, were dismissed for lack of sufficient grounds.

The Bankruptcy Court, Marvin Isgur, held that: 1 trustee was not collaterally estopped from asserting claims by prior order of bankruptcy court refusing to dismiss involuntary petition filed by company as allegedly filed in bad faith; 2 trustee stated common law fraud claim that was plausible on its face; 3 trustee did not state fraudulent nondisclosure claim; 4 notice of intent not to submit stalking horse bid, as official document filed in bankruptcy case, was privileged and insufficient to support business disparagement claim; 5 trustee stated tortious interference claim that was plausible on its face, though debtor ultimately sold assets, albeit at lesser price, to same potential purchaser; 6 trustee did not state plausible breach of fiduciary duty claim; 7 trustee stated plausible breach of contract claim, but only based on nonperformance of single provision of services agreement; and 8 cause of action for aiding and abetting a fraud would, as predicted by bankruptcy court in Texas, be recognized under Texas law.

Conclusion

The court granted the motion to dismiss in part and denied it in part, allowing certain claims to proceed while dismissing others. The ruling indicated that the trustee had a viable case against Comcast for some of the alleged misconduct.

The motion is granted in part and denied in part.

Who won?

The trustee prevailed in part, as the court allowed several claims to proceed, indicating that there was sufficient basis for the allegations of fraud and tortious interference against Comcast.

The motion is granted in part and denied in part.

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