403 F.3d 164 (4th Cir. 2005), 04-1586, In re White Mountain Mining Co., L.L.C.

Docket Nº:04-1586.
Citation:403 F.3d 164
Party Name:In Re: WHITE MOUNTAIN MINING COMPANY, L.L.C., Debtor. Joseph C. Phillips, Plaintiff-Appellee, and Mowbray, L.L.C., Defendant-Appellee, and White Mountain Mining Company, L.L.C., a West Virginia Limited Liability Company, Reorganized Debtor-Appellee, v. Congelton, L.L.C., Defendant-Appellant, and United States Trustee, Party in Interest. Alliance Co
Case Date:April 01, 2005
Court:United States Courts of Appeals, Court of Appeals for the Fourth Circuit
 
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403 F.3d 164 (4th Cir. 2005)

In Re: WHITE MOUNTAIN MINING COMPANY, L.L.C., Debtor.

Joseph C. Phillips, Plaintiff-Appellee,

and

Mowbray, L.L.C., Defendant-Appellee,

and

White Mountain Mining Company, L.L.C., a West Virginia Limited Liability Company, Reorganized Debtor-Appellee,

v.

Congelton, L.L.C., Defendant-Appellant,

and

United States Trustee, Party in Interest.

Alliance Consulting,Incorporated; Alpha Engineering Services; Comer Electric Inc.; Unsecured Creditors' Committee, Members of Creditors' Committee: Gary Hartsog (Alpha Engineering Services); James Billings (H & W Mine Supply, Incorporated); Larry Dye (Atlas Belt Service); Carl Campbell (A & C Equipment & Supply); Les Monk (Monk Mining Supply, Incorporated); Cindy Whitehead (POHL Corporation); David A. Walls (Classic Conveyor Company); Gregory Bailey (Frontier Management, L.L.C.); Joe Parris (Atlas Belt Service), Creditors.

No. 04-1586.

United States Court of Appeals, Fourth Circuit

April 1, 2005.

Argued: Nov. 30, 2004

Page 165

ARGUED:

Eugene D. Gulland, Covington & Burling, Washington, D.C., for Appellant.

John Joseph Nesius, Spilman, Thomas & Battle, P.L.L.C., Charleston, West Virginia; John Allen Rollins, Lewis,

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Glasser, Casey & Rollins, P.L.L.C. , Charleston, West Virginia, for Appellees.

ON BRIEF:

Kara L. Cunningham, Steptoe & Johnson, P.L.L.C., Charleston, West Virginia; Michael St. Patrick Baxter, Dennis B. Auerbach, Michael L. Rosenthal, Covington & Burling, Washington, D.C., for Appellant.

Michael G. Sullivan, Columbia, South Carolina, for Appellees Joseph C. Phillips and Mowbray, L.L.C.

Before WIDENER, MICHAEL, and MOTZ, Circuit Judges.

Affirmed by published opinion. Judge MICHAEL wrote the opinion, in which Judge WIDENER and Judge MOTZ joined.

OPINION

MICHAEL, Circuit Judge:

A core issue in an adversary proceeding in this chapter 11 bankruptcy case was also an issue in an international arbitration to be conducted in England. The bankruptcy court denied a motion to compel arbitration, refused to stay the adversary proceeding, and enjoined participation in the arbitration, all because the arbitration would have seriously interfered with the debtor's efforts to reorganize. We, like the district court, affirm.

I.

White Mountain Mining Company, L.L.C. (White Mountain), a limited liability company organized under the laws of Florida, was engaged in the coal mining business in southern West Virginia. As of December 31, 2000, White Mountain was owned by Joseph C. Phillips, a West Virginia coal operator, and Arquebuse Trust, a private trust wholly owned by Phillips. In January 2001 Phillips and Arquebuse Trust sold a fifty percent interest in White Mountain to White Trust, a foreign investment trust, for $7.5 million. The parties executed three documents in connection with the sale: a Sale Agreement between the two sellers and the buyer; an Operating Agreement between White Mountain, White Trust, and Arquebuse Trust to govern White Mountain's operations; and a letter dated January 19, 2001 (the January 2001 Letter), signed by White Trust and White Mountain to clarify certain matters prior to the closing. Following the sale White Trust assigned its one-half interest in White Mountain to Congelton, L.L.C., a West Virginia limited liability company; Phillips and Arquebuse Trust assigned their one-half interest in White Mountain to Mowbray, L.L.C., a company wholly owned by Phillips.

The Operating Agreement and the Sale Agreement contain arbitration clauses. The Operating Agreement requires that "each claim, dispute or controversy of whatever nature, arising out of, in connection with, or in relation to the interpretation, performance or breach of this Agreement (or any other agreement contemplated by or related to this Agreement) ... shall be settled, at the request of any party to this Agreement, by final and binding arbitration conducted in the City of London, United Kingdom ... in accordance with the Commercial Arbitration Rules then in effect of the International Arbitration Association." J.A. 298-99. The Sale Agreement provides that disputes will be resolved "in accordance with the Arbitration provisions of the Operating Agreement as if set out herein." J.A. 262. Phillips is a party to the Sale Agreement, so he is bound by the arbitration provisions.

The agreements aside, White Mountain--with Phillips in charge--began operations at an underground mine in May 2001. Unfavorable geological conditions, which led to major roof falls, made mining

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extremely difficult. The mine was forced to shut down in November 2001. Between January 2001 and June 2002 Phillips advanced over $10.6 million of his own money to White Mountain, which was used to meet expenses. Congelton was warned that without "additional funds [or] outside financing ... the company [would] have no choice, but to pursue the protection of federal bankruptcy." J.A. 307.

Congelton took the position that Phillips had misrepresented White Mountain's prospects and financial condition in order to induce White Trust to buy one-half of the company. In addition, Congelton maintained that Phillips was obligated under the Sale Agreement to...

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