Opinion
05 Civ. 4248 (TPG).
April 2, 2008
OPINION
Plaintiffs in this action are AEP Energy Services Gas Holding Company, Houston Pipe Line Company LP, and HPL Resources Company LP (collectively referred to as "AEP"). Defendants are Bank of America ("BofA") and Bank of New York ("BONY").
On December 18, 2007, the court issued an opinion determining the amount of damages that BofA was entitled to as a result of the court's August 27 opinion, which held that BofA had a right to recover its security interest in the gas. In the December 18 opinion, the court awarded BofA damages amounting to "$347,325,000 plus prejudgment interest, less the costs — to be determined — of withdrawing the gas." The court held that damages should be based on the market value of the gas on the date of conversion, and that the appropriate conversion date was May 14, 2004. The court held that on May 14, "AEP converted the gas by refusing to turn it over to BofA when BofA requested it."
Plaintiffs have now brought this motion for reconsideration, and have limited the scope of their argument to whether the court correctly determined the date of conversion to be May 14, 2004. Despite not alerting the court to any alternative to the May 14 date in any of its numerous briefs and letters to the court, AEP now contends that the conversion could have occurred no later than July 22, 2002. Were the court to use this date to determine damages, damages would be at most $164.5 million.
The motion for reconsideration is denied.
The Timeliness of AEP's Motion and Argument
BofA contends that the motion for reconsideration is untimely because the court determined the date of conversion in its August 28 opinion, not in the December 18 opinion. The August 28 opinion states only that May 14 was the date on which BofA asked for the gas and AEP refused to return it — it does not specifically use the word "conversion". Because this statement leaves room for interpretation, this by itself is not sufficient reason to deny the motion.
However, this motion is the first time that AEP has objected to the May 14, 2004 conversion date. Until now, the court had no reason to know that the date of conversion was in dispute. AEP contends that because AEP has always disputed that a conversion occurred, it must reasonably be viewed as also having disputed that the conversion occurred on May 14, 2004. AEP also claims that until the December 18 opinion was issued, the court had not considered BofA's entitlement to damages to be based on conversion; thus, AEP argues it could not have raised this point of contention earlier.
These arguments are without merit. In the briefing process, parties often must — and do — argue in the alternative. AEP could very easily have claimed, without conceding that a conversion occurred, that "should the court find a conversion occurred — though AEP contends one did not — the conversion could have occurred no later than July 22, 2002." At no point did AEP make this argument.
BofA had informed the court and AEP, on numerous occasions leading up to the December 18 opinion, that BofA believed the appropriate date of conversion was May 14, 2004. BofA's damages expert testified to damages using this date. While AEP consistently argued that a conversion did not occur, not once did AEP contest the date suggested by BofA. When challenging BofA's expert's calculations, AEP's damages expert did not question the date, but merely disputed the gas's value by disputing the proposition that cushion and working gas molecules are indistinguishable. Because this date was cited on so many occasions, it should have come as no surprise to AEP that upon finding that a conversion occurred, the court determined that the conversion occurred on May 14, 2004.
If a party had a full opportunity to raise an argument but chose not to do so, the motion for reconsideration should be denied. This is precisely what occurred here. Regardless, the motion for reconsideration should be denied because May 14, 2004 is the correct date of conversion.
The Appropriate Date of Conversion
AEP's claim that the court should have used an earlier date of conversion rests on the following argument. Under Texas law, a cause of action for conversion accrues "upon the discovery of facts supporting the cause of action, or upon demand and refusal, whichever occurs first." Nelson v. Am. Nat'l Bank, 921 S.W.2d 411 (Tex.App. 1996). AEP suggests that BofA first demanded delivery of the gas pursuant to its security interest in the spring of 2002, approximately two years before the court's May 14 conversion date. When AEP refused to discuss return of the gas, BofA sued AEP in Texas state court on July 22, 2002 to enforce its security interest. Thus, AEP contends that the filing of that state court action was proof of a "demand" for the gas, and that the date of conversion could be, at the latest, the date that complaint was filed.
Despite any arguments now raised by AEP, May 14, 2004 is the proper date of conversion. AEP itself has consistently maintained that BofA had no legal right to demand or obtain custody of the gas until after the automatic stay in the Enron bankruptcy was lifted in 2004. In fact, AEP argued in Texas state court that BofA could not seek possession of the gas without violating the automatic stay, and the Texas Court of Appeals for the First District of Texas agreed with AEP and held just that.
Under Texas law, a plaintiff must prove that "at the time of conversion, he was the owner of the property, had legal possession of it or was entitled to possession." Whitaker v. Bank of El Paso, 850 S.W.2d 757, 760 (Tex.App. 1993). BofA was not entitled to the gas in 2002, because BofA could not have taken possession of the gas until it served a Settlement Notice on Enron. BofA could not serve this Settlement Notice until 2004 when the stay in the Enron bankruptcy was lifted. Therefore, because BofA was not entitled to the gas until these prerequisites were met, no valid demand for the gas — and thus no conversion — could have occurred in 2002 when the state court complaint was filed.
Because BofA was not entitled to the gas until 2004, a conversion could not have occurred before that year. May 14, 2004 was the first time after a conversion became possible that BofA formally demanded return of the gas. Thus, it is the appropriate date to use for a determination of damages.
Conclusion
For the above reasons, the motion for reconsideration is denied.
SO ORDERED