Black Diamond Commercial Fin., LLC v. Va. Conservation Legacy Fund, Inc. (In re Patriot Coal Corp.), Case No. 15-32450-KLP
| Decision Date | 28 September 2018 |
| Docket Number | Adv. Proc. No. 16-03105-KLP,Case No. 15-32450-KLP |
| Court | U.S. Bankruptcy Court — Eastern District of Virginia |
| Parties | In re: Patriot Coal Corp., et al., Debtors. Black Diamond Commercial Finance, LLC, Plaintiff, v. Virginia Conservation Legacy Fund, Inc., and ERP Compliant Fuels, Inc., Defendants. Virginia Conservation Legacy Fund, Inc., and ERP Compliant Fuels, Inc., Counter-Claimants, v. Black Diamond Commercial Finance, LLC, Counter-Defendant. |
Jointly Administered
In October 2015, plaintiff Black Diamond Commercial Finance, LLC, ("Black Diamond") brought this action for breach of contract against defendants Virginia Conservation Legacy Fund, Inc., ("VCLF") and its affiliate, ERP Compliant Fuels, LLC, ("ERP") (collectively, also "VCLF" or "Defendants"), in New York state court.1 Black Diamond alleges that the Defendants breached the parties' contract in which Black Diamond agreed to provide VCLF with exclusive financing to be used for working capital and specified fees in connection with VCLF's purchase of certain assets from Patriot Coal Corporation and its affiliated corporations (collectively, "Patriot"), then debtors-in-possession in consolidated chapter 11 cases filed in this Court (In re Patriot Coal Corp., Case No. 15-32450-KLP, the "Patriot Cases").2 The Defendants filed a counterclaim, alleging that it was BlackDiamond that breached the contract, excusing the Defendants' performance thereunder and entitling them to damages.
This Court assumed control over this breach of contract action pursuant to an April 25, 2016, order transferring venue from the Bankruptcy Court for the Southern District of New York.3 The transfer order, when received by this Court, was accompanied by 139 documents containing 6,716 pages. The record has increased exponentially since that time.
Although the contract underlying the dispute is relatively uncomplicated and the operative facts generally straightforward, the parties have left no stone unturned while disagreeing over nearly every facet of the case. The litigation has been wrought with numerous protracted disputes over the proper forum, scheduling, discovery, and other pretrial matters,4 adding to the abundance of pleadings and exhibits filed in the case and eventually culminating with an eight-day trial that took place from June 4 through June 13, 2018.5
After completing the trial and parsing the transcript, the parties submitted proposed findings of fact and conclusions of law. Predictably, each party continues to assert that it acted appropriately while the other committed a breach entitling it to many millions of dollars in damages.
Having heard the arguments of the parties and having considered the evidence, the Court concludes that neither party violated the terms of the contract at issue and neither party is entitled to damages. Accordingly, the Court will dismiss both Black Diamond's complaint and VCLF's counterclaim. This Memorandum Opinion setting forth the Court's findings of fact and conclusions of law pursuant to Rule 52 of the Federal Rules of Civil Procedure6 provides the explanation for the Court's ruling.
This Court has subject matter jurisdiction over this adversary proceeding pursuant to 28 U.S.C. § 1334(b) and 28 U.S.C. § 157(a). See also Black Diamond Commercial Fin., LLC v. Va. Conservation Legacy Fund, Inc. (In re Patriot Coal Corp.), Adv. Pro. No. 16-03105-KLP, 2016 WL 5360950, at *2 n.4 (Bankr. E.D. Va. Sept. 23, 2016) (the "Remand Opinion"). The Court provided all parties with the opportunity, no later than November 14, 2016, to dispute the Court's ability to enter final orders and ordered that the failure to act would be "deemed to constitute consent to the entry of final orders by"this Court in this adversary proceeding. (Dkt. 44, ¶ 12) No party acted by the November 14 deadline. Therefore, the Court may enter a final order in this case, subject to review under 28 U.S.C § 158.7 See Wellness Int'l Network, Ltd. v. Sharif, 135 S. Ct. 1932, 1944-45 (2015).
No doubt after extensive negotiations and the exchange of numerous drafts, the parties have managed to agree to one page of stipulated facts (the "Uncontroverted Facts").8 The parties agree that the following is uncontroverted:
1. Black Diamond is a Delaware limited liability company that does business in Greenwich, Connecticut, and Lake Forest, Illinois.
2. VCLF is a Virginia nonstock corporation.
3. ERP is a Virginia limited liability company created for the purpose of consummating VCLF's acquisition of certain assets and assumption of certain liabilities from debtor Patriot Coal Corporation and affiliated debtors in the Patriot Cases.
4. On May 12, 2015, Patriot filed voluntary Chapter 11 petitions in the U.S. Bankruptcy Court for the Eastern District of Virginia, commencing the Patriot Cases.
5. On August 16, 2015, VCLF/ERP, Patriot, and certain Patriot subsidiaries executed an asset purchase agreement, pursuant to which VCLF/ERP would acquire certain assets from Patriot, including the Federal 2 Mine in West Virginia, and assume certain employee and environmental liabilities of Patriot.
6. On September 21, 2015, Black Diamond executed a commitment letter with VCLF/ERP (the "Commitment Letter"). (The Parties stipulated that a true and correct copy of the Commitment Letter was attached to the stipulations as Exhibit A.)
7. Stephen Deckoff, representing Black Diamond, and Thomas Clarke, representing VCLF/ERP, executed the Commitment Letter on September 21, 2015.
8. Black Diamond commenced a lawsuit against Defendants in the Supreme Court of the State of New York, County of New York, on October 26, 2015 (the "Lawsuit"). Black Diamond commenced the Lawsuit by a summary procedure that did not require the preparation of a complaint, but rather only a summons with notice. Black Diamond subsequently filed a complaint.
9. The Lawsuit was subsequently removed to the U.S. Bankruptcy Court for the Southern District of New York on November 12, 2015, andtransferred to the United States Bankruptcy Court for the Eastern District of Virginia on April 25, 2016.
10. VCLF/ERP closed a transaction with Patriot by which it acquired certain assets and assumed certain liabilities from Patriot on October 27, 2015.
Having adopted the Uncontroverted Facts and considered the evidence presented at trial, the Court makes the following findings of fact. Unless otherwise indicated, citations reference the trial transcripts by date, page, and line. Trial exhibits are identified by number. Docket entries refer to the docket of the adversary proceeding unless designated as having been docketed in the Patriot Cases.
The Patriot Cases were filed in this Court on May 12, 2015 (Uncontroverted Facts, ¶ 4). Patriot's proposed reorganization plan included selling its profitable working non-union mines and associated equipment, considered its "core" assets, to Blackhawk Mining, LLC, ("Blackhawk") and abandoning its "noncore assets" including non-working mines, unionized mines and nearly all of its environmental and workers' compensation liabilities. (Patriot Cases, Dkt. 200, ¶ 5)
Soon after the case was commenced, VCLF expressed an interest in acquiring Patriot's noncore assets, i.e., those that Blackhawk did not intend to purchase, including the Federal 2 Mine (a longwall thermal coal mine inMorgantown, West Virginia), and assuming over $400 million in environmental and employee-related Patriot liabilities. (Tr. 6/11, 279:17-24, 281:15-282:2). VCLF, a Virginia nonstock corporation, (Uncontroverted Facts ¶ 2) is a 501(c)(3) charitable organization that is registered as a land trust in the Commonwealth of Virginia. (Tr. 6/11, 276:22-25) Its purpose is to protect and conserve land. (Tr. 6/11, 276:25) VCLF had prior experience in supporting mining and energy companies with their environmental management and compliance. (Tr. 6/11, 277:4-14)
VCLF's proposal to purchase Patriot's noncore assets and assume environmental and employee-related Patriot liabilities was supported by the Environmental Protection Agency, the Department of Justice, the Department of the Interior and the United Mine Workers of America ("UMWA"). (Tr. 6/11, 282:13-283:5) As part of its planned acquisition, VCLF agreed that any recovery it might receive on its equity in these assets would be utilized toward environmental remediation. (Tr. 6/11, 287:19-288:9)
Thomas Clarke ("Clarke") is the chief executive officer of VCLF and is responsible for its day-to-day governance activities. He directs a management team that oversees land conservation and environmental management. (Tr. 6/11, 278:8-9, 10-15) In order to pursue VCLF's proposed transaction with Patriot, Clarke retained Pillsbury Winthrop Shaw Pittman, LLP, ("Pillsbury") as VCLF's legal counsel in May or June 2015 and TeneoRestructuring ("Teneo") as its investment banker a few weeks thereafter. (Tr. 6/11, 283:9-12, 283:23-284:9)
In July, 2015, Teneo introduced Clarke to Kenneth McCoy ("K. McCoy") and Jason McCoy ("J. McCoy"), who had extensive experience in the coal industry and would add credibility to VCLF's proposal. (Tr. 6/11, 284:10-285:17; Tr. 6/8, 149:10-150:7; Tr. 6/13, 64:19-66:11) On August 5, 2015, Clarke, K. McCoy and J. McCoy met and agreed to become partners to acquire and manage the Federal 2 Mine through ERP. (Tr. 6/8, 152:9-25)
ERP is jointly owned by VCLF and Iron Management, LLC ("Iron Management"). (Ex. 249) K. McCoy is the chief executive officer of ERP and is a member of Iron Management as well. (Tr. 6/13, 67:10-11; Ex. 249 at VCLF-00000006) J. McCoy is a senior vice-president of ERP and is also a member of Iron Management. (Tr. 6/8, 149:1-3; Ex. 249 at VCLF-00000006) Clarke is a managing member of ERP. (Ex. 249 at VCLF-00000006)
VCLF's purchase offer was accepted on August 16, 2015, when VCLF and ERP entered into...
To continue reading
Request your trial