Murray Kentucky Energy, Inc. v. Ceralvo Holdings, LLC.

Case Type:
Case Status:
19-6038 (8th Circuit, Apr 23,2020) Published
BAP for 8th Cir. affirmed ruling of bankruptcy court (ED Missouri - St. Louis) denying asset purchasers' motion to enforce order confirming the debtors’ plan of reorganization and seeking to enjoin parties from asserting claims against asset purchasers that asset purchasers asserted were barred by confirmed plan. Bankruptcy court properly held that neither 11 U.S.C. §1141(d), Kentucky law, nor the language of the confirmed plan released asset purchasers from its contractual or contingent indemnity obligations after it assumed the liabilities.
Procedural context:
Asset purchasers filed motion with bankruptcy court to enforce confirmation order. Bankruptcy court (ED Missouri-St. Louis) denied motion and entered order holding that debtors were not liable for preconfirmation obligations and while plan released debtors from claims, it did not release asset purchasers. Asset purchasers appealed to BAP for 8th Circuit.
On November 1, 2017, Armstrong Energy, Inc., and certain of its affiliates filed petitions under Chapter 11 in the ED Missouri. Prior to filing their Chapter 11 petitions, the debtors subleased certain coal mines in Kentucky from certain lessors. The subleases were the subject of on-going litigation between third parties and the lessors. A lawsuit involving one sublease was filed pre-petition in federal district court in Kentucky (the “2011 Litigation”). A lawsuit concerning other subleases was filed pre-petition in Kentucky state court (the “2017 Litigation”), but that case was later dismissed. After the bankruptcy case was filed, the same plaintiffs from the 2017 Litigation, plus an additional party, filed litigation in Kentucky federal district court (the “2018 Litigation”). The subleases contained an indemnification provision requiring the debtors to fund, inter alia, the lessors’ litigation expenses. Prior to the petition date, the debtors complied with their indemnification obligations under the subleases by funding the lessors’ litigation expenses. Under the terms of the debtors’ third amended joint Chapter 11 plan, the debtors entered into a transaction agreement under which Appellants purchased substantially all of the debtors’ assets. On February 2, 2018, the bankruptcy court confirmed the plan and approved the transaction agreement.
Saladino, Nail, Sanberg

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