Arash, thanks for response. I do have auctex 14.0.6 installed via ELPA. 
I tried to reproce the problem starting from `emacs -Q` and it did not 
reproduce. With my default setup it's still happening with the following 
debug trace:

Debugger entered--Lisp error: (wrong-type-argument stringp nil)
   LaTeX-indent-level-count()
   LaTeX-indent-calculate-last(outer)
   LaTeX-indent-calculate(outer)
   LaTeX-indent-line()
   indent-according-to-mode()
   LaTeX-fill-region-as-para-do(3960 #<marker at 4117 in paper.tex> nil)
   LaTeX-fill-region-as-paragraph(3960 4117 nil)
   LaTeX-fill-paragraph(nil)
   fill-paragraph(nil t)
   funcall-interactively(fill-paragraph nil t)
   command-execute(fill-paragraph)

LaTeX-indent-level-count is defined `latex.el` from acutex package. Any 
thoughts what could be causing it and what I can try to diagnose it further?

Thanks!

Vadim