In re Murray Energy Holdings

Case Type:
Case Status:
21-8014 (6th Circuit, Jun 03,2022) Published
Finding that the U.S. Bankruptcy Court for the Southern District of Ohio (BC) did not abuse its discretion in denying the motion for reconsideration filed by one creditor, Penn Line Service, Inc. (Penn Line), in one order, and that Penn Line did not appeal the original order denying its administrative expense or the order sustaining the objection of Murray Energy Holdings Co. and related entities (DRs) in jointly administered cases to Penn Line's filed priority claims under section 503(b)(9), the Bankruptcy Appellate Panel of the Sixth Circuit (BAP) affirmed the BC's every edict.
Procedural context:
Penn Line filed six proofs of claim seeking an administrative expense priority related to services provided to the DRs in jointly administered bankruptcy cases. The DRs objected to Penn Line’s proofs of claim (Objection to Claims), asserting that “[t]he reclassified amounts are on account of labor and service charges listed on the claim which do not constitute a good under section 503(b)(9) and goods listed on the claim which were received outside of the proscribed 20-day receipt period under section 503(b)(9) thus not entitled to administrative priority.” Penn Line responded with its Response and Opposition to Debtors’ Sixth Omnibus Objection to Certain Incorrectly Filed Priority Claims after which Penn Line filed an Application for Allowance of Administrative Expense Claims (Administrative Expense Application). Penn Line did not request a hearing at the time of filing either pleading. Several months later, Drivetrain, LLC, the Plan Administrator (Plan Administrator), responded in opposition to Penn Line’s Claims Objection Response and Administrative Expense Application, resulting in the scheduling of a hearing on both contested matters. At the hearing, held on March 18, 2021 (Hearing), Penn Line made a limited presentation. It offered no witnesses. Instead, Penn Line restated its primary argument that it was a critical vendor based on a theory of “implied assumption" and then raised a new argument: that the work for which it filed its proofs of claim was performed post-petition. Penn Line did not request that the Hearing be continued or seek additional time to conduct discovery. At the conclusion of this colloquy, the BC both ruled that the “implied assumption” theory is not a valid basis for allowing an administrative expense claim and rejected Penn Line’s new argument. Orders followed. On April 16, 2021, the BC issued one order granting the DRs' objection to Penn Line's claims and a second denying with prejudice the Administrative Expense Application. Ten days later, Penn Line filed its motion for reconsideration. At the end of the hearing on this motion, during which it heard arguments from Penn Line's counsel and the Plan Administrator, the BC denied this motion for three reasons: (1) there was no manifest error of fact or law to allow relief under rule 59 of the Federals Rule of Civil Procedure (Rule individually, and Rules collectively); (2) the information in the affidavit added to substantiate the motion for reconsideration did not constitute newly discovered evidence as required by Rule 60; and (3) its previous legal determination that the doctrine of implied assumption was inapplicable was correct. The BC subsequently memorialized this three-part bench ruling in an order dated June 1, 2021, but entered on June 2, 2021. Penn Line timely appealed, Critically, the Notice of Appeal identified the judgment, order, or decree appealed from as the BC's reconsideration order, the only diktat actually attached to the Notice of Appeal. As the BAP explained, however, the docket text for the Notice of Appeal, completed by Penn Line’s counsel when filing the latter document, did identify through ECF links the BC's two prior orders regarding the claims objection and administrative expenses.
The federal Coal Act requires certain coal companies and their affiliates, referred to as last signatory operators, to provide health and retiree benefits to retired employees (and their spouses and dependents) through individual employer plans (IEPs) funded and administered by current or former coal operators and created the so-called "1992 Plan" to provide benefits for eligibility retirees who do not receive benefits through such an EIP, supplemented by a statutory security requirement. Consistent with this statute, the DRs, the company founded in 1988 by coal magnate Robert E. Murray among them, provided healthcare and retiree benefits to about 2,200 retired employees and their spouses and dependents (the Beneficiaries who receive the Benefits) under their EIP (Murray IEP). In 2019, the Benefits cost DRs about $23 million. By April 2020, however, the DRs were obliged to spend $60,000-$65,000 per day on Benefits for the Beneficiaries, as certain DRs posted a $22.5 million letter of credit, and maintained an escrow account holding about $530,000, as security for the 1992 Plan. To deal with these sundry financial pressures, the DRs filed chapter 11 petitions on October 29, 2019, having negotiated prepetition agreements to finance their cases and position their assets for prompt post-petition sale. At the time, the DRs had $2.7 billion in funded debt and more than $8 billion in legacy liability obligations due to pension and benefit plans among miners. Among the largest unsecured creditors listed in the DRs' petition was Penn Line, which was then owed $4.2 million. Much later, on September 16, 2020, to be precise, the DRs' chapter 11 plan became effective.
Suzanne H. Bauknight; James L. Croom; and Alan C. Stout

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