Empire Petroleum Corp. Chairman Philippe Mulacek filed a Chapter 11 petition Thursday, pausing enforcement efforts against him over a more than $210 million judgment in a long-running Texas federal court fight with Swiss financier Carlo Civelli.
The oil executive, also a founder of Exxon-acquired InterOil, said in his bankruptcy petition that he has more than $500 million in assets and more than $100 million in liabilities, with the Civelli judgment the largest debt. Other debts include a $5 million Bank of Singapore guarantee, a $3.8 million personal credit line, $1 million in legal services to Yetter Coleman LLP and $500,000 in legal services to Boies Schiller Flexner LLP — firms that were part of his legal team in the Civelli case.
On Monday, Civelli began collection efforts against Mulacek and his family by asking the court to appoint a receiver and cited nonexempt assets such as his ExxonMobil and Empire Petroleum stocks, 1,800 acres in New Mexico and a Singapore Condominium. Assets belonging to other members of the Mulacek family were also mentioned.
To pause collection efforts while the judgment was in appeal, Mulacek tried to post a supersedeas bond at $25 million instead of bonding the full judgment, arguing that Texas law can cap the bond at $25 million. The bid was rejected in March by the Texas federal judge who entered the judgment, and in April, Mulacek asked the Fifth Circuit to review the bond cap decision. The oil executive requested that a decision be made before the stay on enforcement of the judgment expired on May 25, but the Fifth Circuit has yet to file a ruling.
"Phil Mulacek had no choice but to declare bankruptcy to avoid a value destructive fire sale of his assets by Civelli while the merits appeal of the $210 million judgment against him and his family pends in this Court," Mulacek's counsel in the appellate proceedings, Allyson N. Ho of Gibson Dunn & Crutcher LLP, told the Fifth Circuit via letter Thursday.
"This development, made necessary so that Phil Mulacek could appeal a highly disputed nuclear judgment without turning over his assets (here, to a non-U.S. claimant), is exactly what the Texas bond cap was enacted to prevent," Ho continued, adding that the Mulaceks will ask the bankruptcy court on an expedited basis to lift the stay on the appeal at hand.
The $210 million judgment stems from a 2017 suit in which Civelli said he had entered into a series of informal agreements with Mulacek to finance oil and gas ventures. The agreements, which Civelli later said Mulacek failed to abide by, included loans tied to InterOil shares, profit-sharing from asset sales and cost-sharing on joint projects. A jury in December found in favor of Civelli, leading to the March judgment.
"Mr. Civelli should be fully paid regardless of the bankruptcy," Civelli's counsel, Richard A. Schwartz of Munsch Hardt Kopf & Harr PC, told Law360 in a statement, adding that Mulacek's assets exceed his liabilities, as noted in the bankruptcy petition, and that the other Mulacek family members have assets subject to execution of the judgment.
Counsel for Mulacek did not immediately provide comment Thursday.
The U.S. Trustee's Office is represented by Vianey Garza.
Mulacek is represented by Jennifer Hardy, Brett H. Miller, Donald Burke, Shelley C. Chapman and Stuart R. Lombardi of Willkie Farr Gallagher LLP in the bankruptcy proceedings and by Allyson N. Ho, Elizabeth A. Kiernan, Arjun Ogale, Robert Frey and Jessica J. Kinnamon of Gibson Dunn & Crutcher LLP, R. Paul Yetter, Reagan W. Simpson, Justin S. Rowinsky and David J. Gutierrez of Yetter Coleman LLP, Katherine Zhang, David A. Barrett, Eric Yang, Jeffrey P. Waldron Jr., Jenny H. Kim, John Zach, Lauren M. Goldman, Lindsey Ruff, Michael M. Fay, Valecia Battle and Virginia Su of Boies Schiller Flexner LLP, and Warren Harris of Bracewell LLP in the federal court proceedings.
Civelli is represented by Richard A. Schwartz and Michael A. Harvey of Munsch Hardt Kopf & Harr PC, Michael B. Martin of Martin Walton Law Firm, and Andrew B. Bender and Sharon McCally of Andrews Myers PC.
To read more, click here.