The Bankruptcy Code does not explicitly authorize the equitable remedy of "substantive consolidation"—i.e., treating the assets and liabilities of two or more related entities as if they belonged to a single, consolidated bankruptcy estate. However, it is well recognized that a bankruptcy court has the authority to order such relief under appropriate circumstances in the exercise of its broad equitable powers when each of the original entities are already debtors subject to the court's jurisdiction.

To shield bankruptcy trustees and certain other entities from litigation arising from actions taken in their official capacity, the "Barton doctrine"—now more than a century old—provides that such litigation may be commenced only with the authority of the appointing court. The doctrine has certain exceptions, one of which—the "ultra vires exception"—was recently examined by the U.S. Court of Appeals for the Fifth Circuit as an apparent matter of first impression.

Nine Point Energy Holdings, Inc. and its affiliates (collectively, "Nine Point" or "Nine Point debtors") constituted an oil and gas production and exploration company that sought to reorganize in chapter 11 through a going concern sale of substantially all of their assets. To maximize value, Nine Point sought to sell those assets free and clear of its midstream services contracts, which included provisions that prevented Nine Point from acquiring midstream services from anyone other than its counterparty, Caliber North Dakota, LLC ("Caliber").

Sabine Bankruptcy Judge Authorizes Rejection of Gas Gathering Agreements

In In re Sabine Oil & Gas Corp., 2016 BL 70494 (Bankr. S.D.N.Y. Mar. 8, 2016), Judge Shelley C. Chapman of the U.S. Bankruptcy Court for the Southern District of New York permitted Sabine Oil & Gas Corporation (“Sabine”) to reject three gas gathering and handling agreements with Nordheim Eagle Ford Gathering, LLC (“Nordheim”) and HPIP Gonzales Holdings, LLC (“HPIP”). All of the agreements are governed by Texas law.

On April 7, 2016, Quicksilver Resources Inc. ("Quicksilver") announced that it closed the sale of its U.S. assets for $245 million to BlueStone Natural Resources II ("BlueStone") in connection with Quicksilver's bankruptcy cases and pursuant to an Asset Purchase Agreement that was approved by Judge Laurie Selber Silverstein of the U.S. Bankruptcy Court for the District of Delaware in January 2016.

On Tuesday, March 8, 2016, U.S. Bankruptcy Judge Shelley C. Chapman in New York permitted Sabine Oil & Gas Corporation to reject three gas gathering and handling agreements with Nordheim Eagle Ford Gathering, LLC and HPIP Gonzales Holdings, LLC. All of the agreements are governed by Texas law.

The mainstream media have been trying to predict, on almost a daily basis, the causes of, and the winners and losers (mostly focused on the latter category) resulting from, the current volatility in oil and gas prices.

A recent bankruptcy court decision denying a royalty owner's motion for summary judgment is highly relevant to any investor that currently owns a term royalty interest or is considering such an investment. The United States Bankruptcy Court for the Southern District of Texas found in NGP Capital Resources Co. v. ATP Oil & Gas Corp. (In re ATP Oil & Gas Corp.), No. 12-3443, 2014 Bankr. LEXIS 33 (Bankr. S.D. Tex. Jan.