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March 10, 2026 Get Citation Alerts Download PDF Add Note

In re: Sklar Exploration Company, LLC, et al.

United States Bankruptcy Court, D. Colorado

• Citations: None known
• Docket Number: 24-01274

• Precedential Status: Unknown Status

• Opinion

• Authorities (8)

• Cited By (0)

• Summaries (0)

• Similar Cases (15.7K)

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Trial Court Document

IN THE UNITED STATES BANKRUPTCY COURT

FOR THE DISTRICT OF COLORADO

The Honorable Michael E. Romero

In re: Case No. 20-12377 MER

Sklar Exploration Company, LLC, et al. Chapter 11

Jointly Administered

Debtors.

Thomas M. Kim, Creditor Trustee of the

Sklarco Creditor Trust, Adversary Pr. No. 24-1274 MER

Plaintiff,

v.

Sklar Exploration Co., LLC and Sklarco,

LLC.

Defendants.

 ORDER GRANTING MOTION TO DISMISS WITH LEAVE TO AMEND                

THIS MATTER comes before the Court on the Motion to Dismiss Second Claim 

for Relief (“Motion to Dismiss”) filed by the Defendants and Reorganized Debtors,
Sklar Exploration Company, LLC and Sklarco LLC (collectively “Debtors”), the
response filed by the Plaintiff, Tom Kim (“Kim”) as the Trustee of the Creditor Trust and
Debtors’ reply.1 The Motion to Dismiss seeks dismissal of one of the four breach of
contract claims asserted by Kim against the Debtors.

BACKGROUND

This dispute centers on provisions of the Second Amended and Restated Plan of
Reorganization (“Plan”) confirmed in the Debtors’ main bankruptcy case in 2021.2 The

1 ECF Nos. 77, 81, 82.

2 Case No. 20-12377, ECF No. 1251. Kim did not attach a copy of the Plan to his Amended Complaint
but quotes it extensively. Given that the Plan’s terms are central to this dispute and no party contests the
Plan’s authenticity, the Court will consider the terms of the Plan in deciding the Motion to Dismiss. Gee v.
Pacheco, 627 F.3d 1178, 1186 (10th Cir. 2010) (On a motion to dismiss, courts can consider:
(1) documents that the complaint incorporates by reference; (2) documents referred to in the complaint if
the documents are central to the plaintiff’s claim and the parties do not dispute the documents’
authenticity; and (3) matters of which a court may take judicial notice.).
Pthlea nC prerodvitiodre Ts rfuosr t.t h eA sa preploeivnatmnte tnot tohfis a d Cisrpeudtieto, rt hTeru Pslta. n K pimro visid tehse tahpapt othinet eDde Tbtroursst’e e of
primary secured creditor, East West Bank (“EWB”), has an allowed claim for $24 million
(“EWB Secured Claim”). The Plan further provides the Debtors will make certain
periodic payments on EWB’s Secured Claim and that the outstanding balance of the
Claim would be due and payable on the second anniversary of the Plan’s effective date
(or September 7, 2023). At that point, the Plan requires Debtors to pay the remaining
balance either “through sale of assets or refinance of the EWB Secured Claim.”3 Such
a sale or refinance is defined as a “Monetizing Event” by the Plan.4 Section 8.8 of the
Plan sets out how the Debtors must distribute the proceeds from a Monetizing Event.

The Trust is second in line to receive proceeds:

Upon occurrence of a Monetizing Event, the proceeds of such
Monetizing Event shall be distributed as follows:

a. First, to EWB up to $21 million, less any i) post-petition and
preconfirmation payments for principal, interest, or fees, but excluding
payments for attorney fees, and ii) all principal payments received post-
confirmation through the date of the Monetizing Event, and post-
confirmation principal payments, excluding any payments for attorney fees,
as satisfaction in full of the EWB Secured Claim;

b. Second, to the Creditor Trust up to the amount of $3 million flowing from
the agreed allocation of the EWB Secured Claim, in addition to the amounts
received from the sale of any assets in which the Creditor Trust has been
granted an interest;

c. Third, to the Creditor Trust and the Howard Trust in accordance with the
Creditor Trust Allocation and the Howard Sklar Trust Allocation, respectively
until the earlier of i) payment in full of the Creditor Trust Payment Obligation,
or ii) payment in full of all Allowed Class 6 and Class C Claims;

d. Fourth, all remaining funds, if any, to the Class 7 and Class D Interest
Holders.5

The Amended Complaint does not contain any factual allegations concerning the
Debtors’ post-confirmation efforts to sell assets or refinance the EWB Secured Claim.

Kim does not specifically allege a “Monetizing Event” occurred. Nevertheless, the

3 Plan § 5.1(d) (“The EWB Secured Claim shall become due and payable on the second anniversary of
the Effective Date of the Plan, which amount shall be paid through sale of assets or refinance of the EWB
Secured Claim.”).

4 Plan § 1.62 (“‘Monetizing Event’ means the occurrence of a refinancing of the EWB Secured Claim, a
sale by the Reorganized Debtors of all or substantially all of their respective assets, or a sale following a
foreclosure on collateral securing the EWB Secured Claim.”).

5 Plan § 8.8.

SDeecbotonrds Cbrlaeiamc hfoerd R§e 8li.e8f baylle fgaeilisn gth taot ,p aasys tuhme inCgre ad iMtoor nTertuizsitn $g3 E mveilnliot nd.i d occur, the
The Debtors’ Motion to Dismiss argues the Second Claim is deficient as a matter
of law because nothing in § 8.8 guarantees a payment of $3 million to the Creditor
Trust. Rather, Debtors characterize § 8.8 as a “waterfall provision” that allowed for
payment to the Creditor Trust only if sufficient funds were received from a Monetizing
Event to first pay EWB’s claim in full.

ANALYSIS

A. Standard of Review

In reviewing a motion to dismiss under Rule 12(b)(6), the Court must accept all
well-pled factual allegations in the complaint as true and construe the complaint in favor
of the plaintiff.6 “The court’s function on a Rule 12(b)(6) motion is not to weigh potential
evidence that the parties might present at trial, but to assess whether the plaintiff's
complaint alone is legally sufficient to state a claim for which relief may be granted.”7

“To survive a motion to dismiss, a complaint must contain sufficient factual matter,
accepted as true, to ‘state a claim to relief that is plausible on its face.’”8 The critical
question is, “assum[ing] the truth of all well-pleaded facts ... and draw[ing] all
reasonable inferences therefrom in the light most favorable to the plaintiffs,” whether the
complaint “‘raise[s] a right to relief above the speculative level.”9

B. Breach of Contract

The parties agree that Colorado law governs the interpretation of the Plan.10

Under Colorado law, to state a claim for breach of contract, Kim’s Amended Complaint
must allege facts that plausibly suggest the following elements: (1) the existence of a
contract; (2) performance by the plaintiff or some justification for nonperformance;
(3) failure to perform the contract by the defendant; and (4) resulting damages to the
plaintiff.11 Interpretation of a written contract and the determination of whether a

6 Ash Creek Mining v. Lujan, 969 F.2d 868, 870 (10th Cir. 1992).

7 Duran v. Carris, 238 F.3d 1268, (10th Cir. 2001) (quotation omitted).

8 Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007)).

9 Dias v. City & County of Denver, 567 F.3d 1169, 1178 (10th Cir. 2009) (quoting Twombly, 550 U.S. at
555).

10 Section 11.4 of the Plan provides that Colorado law governs the construction and implementation of the
Plan.

11 McAuliffe v. Vail Corp., 69 F.4th 1130, 1144 (10th Cir. 2023) (citing W. Distrib. Co. v. Diodosio, 841
P.2d 1053, 1058 (Colo. 1992)).

pisr ouvniasimonb iignu tohues caonndtr athcet ipsl aaimntbiffig fuaoilsu sto a sreta qteu eas ctiloanims obfa lsaewd. o n “ tIhf eth lea nugnudaegrley inogf tchoen tract
contract, a motion to dismiss should be granted.”13 However, ambiguous contract
language may not be resolved in a motion to dismiss.14

Not surprisingly, the parties take opposing positions on whether the Plan
contains ambiguities. The Debtors focus on § 8.8 and argue it is unambiguous and
there has been no breach. Kim argues at least two provisions of the Plan are
ambiguous, § 8.8 and the definition of Monetizing Event in § 1.62. Because of these
ambiguities, Kim argues the Court should deny the Motion to Dismiss.

The Court agrees that, in general, the structure of the waterfall in § 8.8 is not
ambiguous. What appears to be the bigger issue, however, is the meaning of the term
“refinance” or “refinancing” as used in the definition of Monetizing Event and the
provision specifying treatment of EWB’s Secured Claim.15 Specifically, the parties
appear to dispute whether a “refinance” required a full payment of the EWB Secured
Claim.16 This issue could be affected by § 8.13 of the Plan, which prohibits the Debtors
from settling or otherwise compromising the EWB Secured Claim.17

The Court cannot adequately delve into these issues because the Complaint is
completely devoid of any allegations about the occurrence of a Monetizing Event, the
amount of funds resulting from that Event, and how Debtors distributed those funds.

The parties’ briefs contain some discussion of post-confirmation events and the
Debtors’ alleged refinance of the EWB debt. The Court has also been made aware of
such events in other court hearings and pleadings on unrelated matters. However, the
Court is constrained from considering such information in determining the Motion to
Dismiss. Rather, the Court must test the sufficiency of the allegations within the four

12 McAuliffe, 69 F.4th at 1144.

13 McCollam v. Sunflower Bank, N.A., 598 F.Supp.3d 1104, 1109 (D. Colo. 2022).
14 Id. 15 Plan, §§ 1.62, 5.1(d). The Plan does not define the term “refinance.” Nor does the Bankruptcy Code.

Courts construing subsections 11 U.S.C. § 523 (a) have looked to the dictionary meaning. E.g. In re Kurz, 660 F.Supp.3d 1046, 1053 (D. Colo. 2023) (in construing § 523(a)(8), stating that “refinance is defined in
Black’s Law Dictionary as ‘an exchange of an old debt for a new debt, as by negotiating a different
interest rate or term or by repaying the existing loan with money acquired from a new loan.’”); In re
Biondo, 180 F.3d 126, 132 n. 5 (4th Cir.1999) (quoting Black’s Law Dictionary definition of “refinance” in
the context of construing § 523(a)(2)).

16 See, e.g.,

17 Plan, § 8.13 (“From and after the Effective Date, the Reorganized Debtors and the Creditor Trust shall
have the authority, in their discretion, to file, settle, compromise, withdraw, or litigate to judgment all
objections, if any, to Administrative Claims and Claims, except the EWB Secured Claim, which Claim is
Allowed under this Plan.”).

corners of the Amended Complaint after taking those allegations as true.'® Attempting
to add allegations in a response brief is insufficient.‘ As currently drafted, the Court
cannot determine whether Kim has adequately alleged elements 3 and 4 above—a
breach of the Plan by Debtors resulting in damages.
The Court will grant Kim leave to amend to add the missing facts discussed
above. Pursuant to Rule 15, leave to amend a complaint shall be freely given when
justice so requires.2° Although this Court has discretion to deny leave to amend, the
Court does not believe there are sufficient grounds for a denial in this case, such as
undue delay, bad faith, a dilatory motive, repeated failure to cure deficiencies, or undue
prejudice.?'
CONCLUSION
For the reasons set forth above, the Court hereby ORDERS as follows:
1. Debtors’ Motion to Dismiss is GRANTED as to the Second Claim for Relief;
and
2. Kim is granted leave to amend to address the deficiencies addressed above
and shall file an amended complaint on or before March 24, 2026.
Dated: March 10, 2026. BY THE COURT:
ME fh
Michael E. Romero,
United States ruptcy Court

18 Mobley v. McCormick, 40 F.3d 337, 340 (10th Cir. 1994).
19 Powell v. McDonough, 2023 WL 2743529, at *5 (D.N.M. Mar. 31, 2023).
20 Fed. R. Civ. P. 15(a)(2).
21 York ex rel. York v. Cherry Creek Sch. Dist. No. 5, 232 F.R.D. 648, 650 (D. Colo. 2005).