In re Peabody Energy Corporation

Global warming claims were discharged even though the chapter 11 plan did not discharge claims under environmental laws.

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Case Type:
Case Status:
18-3242, 19-1767 (8th Circuit, May 06,2020) Published
The governmental entities' claims for damages for environmental damages, other than those recognized under environmental laws such as the Clean Water Act and CERCLA and state and local equivalents to federal environmental legislation, are subject to discharge in bankruptcy because the plan defined "Environmental Law" in reference to the federal legislation. Interpreting the plan, the term "Environmental Law" did not protect tort claims such as nuisance, even though such claims are brought by governmental units. Accordingly, the appellants' claims were determined to have been discharged.
Procedural context:
Following confirmation and exit from bankruptcy, Peabody Energy Corporation obtained a injunction from the bankruptcy court that had presided over its chapter 11 case. The injunction required three California municipalities to dismiss Peabody from state-court lawsuits for Peabody's alleged contributions to global warming. The bankruptcy court ruled that the appellants' claims were discharged by Peabody's plan, and enjoined the appellants from pursuing their claims against Peabody. The municipalities appealed to the district court, which affirmed. The municipalities appealed to the Eighth Circuit, and moved for a stay of the bankruptcy court's opinion pending appeal.
Peabody Energy Corporation filed under chapter 11 in April 2016. Peabody's plan included a bar date for governmental entities to file a proof of claim. After the bar date expired, Peabody emerged as a reorganized company. The closest dispute on appeal was whether the plan's defined term "Environmental Laws" included specific California statutes addressing nuisance claims. The appellants, three California municipalities, sued Peabody and more than 30 other companies for their alleged contributions to global warming in California state courts. The lawsuits included strict liability, and public-nuisance claims. Peabody returned to the bankruptcy court to enforce the discharge injunction and to require the appellants to dismiss their claims against Peabody.

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