Pettry v. Patriot Coal Corp. (In re Patriot Coal Corp.)

No. 14-6005 (8th Cir. B.A.P. June 5, 2014)
The B.A.P. affirmed the bankruptcy court’s denial of claimant’s motion for reconsideration of an order sustaining debtor’s omnibus objection to claims.
Procedural context:
This appeal arose from the appeal of the bankruptcy court’s denial of appellants’ motion for reconsideration of an earlier bankruptcy court order sustaining the debtors’ omnibus claims objection and disallowing their claims against the estate. In particular, the B.A.P. emphasized that appellants had not appealed the order disallowing their claims, nor had they appealed the adverse state court judgment upon which the bankruptcy court’s order was based. Accordingly, the sole issue before the B.A.P. concerned the propriety of the bankruptcy court’s denial of appellant’s motion for reconsideration, which is reviewed only for abuse of discretion. Concluding that the appellants had raised no new issues of fact or law in their motion for reconsideration, nor put forth any other basis to warrant reconsideration, the BAP concluded that the bankruptcy court’s refusal to reconsider its prior order was warranted and affirmed.
This case presents a good example of the critical distinction between the appeal of a final order or judgment and the appeal of a court’s subsequent order denying a motion for reconsideration of that final order. Appellants were plaintiffs in a putative class action against the debtors (Patriot Coal) filed nearly 10 years before the bankruptcy in West Virginia state court. Upon the debtor’s bankruptcy filing, the state court administratively severed the debtors from the action, proceeding to trial on the remaining causes of action and, ultimately, dismissing plaintiffs’ claims against the nondebtor defendants with prejudice. In the bankruptcy case, the debtors objected to the appellants’ proofs of claim, asserting the preclusive effect of the West Virginia judgment dismissing the litigation. Following a contested hearing, the bankruptcy court sustained the objection and disallowed appellants’ claims. Rather than appeal the order sustaining the claim objection, however, appellants file a motion for reconsideration pursuant to 11 U.S.C. § 502(j) and FRBP 3008 after the deadline for appeals had passed, arguing the state court dismissal order was void as a violation of the automatic stay. The bankruptcy court denied the motion for reconsideration, following which the appellants appealed the order denying reconsideration.
Kressel, Saladino, and Shodeen.

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