Consol Energy, Inc. v. Murray Energy Holdings Co. (In re Murray Energy Holdings Co.)
| Decision Date | 01 February 2021 |
| Docket Number | No. 20-8017,20-8017 |
| Citation | 624 B.R. 606 |
| Parties | IN RE: MURRAY ENERGY HOLDINGS CO., Debtor. Consol Energy, Inc., Appellant, v. Murray Energy Holdings Co., Official Committee of Retirees, United Mine Workers of America 1992 Benefit Plan, Ad Hoc Group of Superpriority Lenders, and Official Committee of Unsecured Creditors, Appellees. |
| Court | U.S. Bankruptcy Appellate Panel, Sixth Circuit |
COUNSEL ON BRIEFS: Catherine Steege, Melissa Root, JENNER & BLOCK LLP, Chicago, Illinois, for Appellant. Kim Martin Lewis, Alexandra S. Horwitz, DINSMORE & SHOHL LLP, Cincinnati, Ohio, Mark McKane, KIRKLAND & ELLIS LLP, New York, New York, Joseph M. Graham, KIRKLAND & ELLIS LLP, Chicago, Illinois, for Appellee Murray Energy Holdings Co. Michael Healey, HEALEY BLOCK LLC, Pittsburgh, Pennsylvania, Filiberto Agusti, Johanna Dennehy, STEPTOE & JOHNSON LLP, Washington, D.C., Michael Vatis, STEPTOE & JOHNSON LLP, New York, New York, for Appellees United Mine Workers of America 1992 Benefit Plan and Official Committee of Retirees.
Before: CROOM, DALES, and WISE, Bankruptcy Appellate Panel Judges.
CONSOL Energy, Inc. ("CONSOL") appeals from the bankruptcy court's order and subsequent memorandum opinion approving a settlement under Rule 9019(a)1 between Murray Energy Holdings Co. and its affiliated debtor entities (collectively, "Debtors"), the Official Committee of Retirees (the "Retiree Committee"), and the United Mine Workers of America 1992 Benefit Plan (the "1992 Plan"). (Mot. to Approve Compromise Under Rule 9019, ECF No. 1265 ().)2 CONSOL also appeals from the bankruptcy court's order granting Debtors' motion in limine excluding CONSOL's proposed witness testimony at the evidentiary hearing on the Settlement Motion. CONSOL lacks standing. Its appeal must be dismissed.
The Bankruptcy Appellate Panel of the Sixth Circuit has jurisdiction to decide this appeal. The United States District Court for the Southern District of Ohio has authorized appeals to the Panel, and no party timely elected to have the district court hear the appeal. 28 U.S.C. § 158(b)(6) and (c)(1).
CONSOL appeals the order entered on April 30, 2020, as amended on May 1, 2020, granting the Settlement Motion (Am. Order, ECF No. 1423 (the "Settlement Order")), and the subsequent memorandum opinion detailing the bankruptcy court's reasoning for approving the Settlement (Op. on Settlement Mot., ECF No. 1491-1; In re Murray Energy Holdings Co. , 615 B.R. 461 (Bankr. S.D. Ohio 2020) ().) A bankruptcy court's order approving a settlement is a final order under 28 U.S.C. § 158(a)(1). Miller v. Lim (In re Miller Parking Co., LLC ), 510 B.R. 123, 127 (E.D. Mich. 2014).
CONSOL also appeals the order entered on April 30, 2020, granting Debtors' motion in limine and barring testimony from CONSOL's witnesses at the hearing on the Settlement Motion . A ruling on a motion in limine is not a final order until such time as an order is entered resolving the contested matter to which the motion in limine related. Compare United States v. Yannott , 42 F.3d 999, 1007 (6th Cir. 1994) () with Kitchen v. Heyns , 802 F.3d 873, 875 (6th Cir. 2015) (). Upon entry of the Settlement Order, the MIL Order became final by merger.
Before reaching the merits, however, the Panel first must consider whether CONSOL has standing to pursue this appeal. Cohn v. Brown , 161 F. App'x 450, 454 (6th Cir. 2005) ; Warth v. Seldin , 422 U.S. 490, 517-518, 95 S. Ct. 2197, 45 L.Ed.2d 343 (1975) (). The Panel requested and received supplemental briefs on CONSOL's appellate standing as the Panel is "under an independent obligation to police [its] own jurisdiction." S.E.C. v. Basic Energy & Affiliated Res., Inc. , 273 F.3d 657, 665 (6th Cir. 2001).
The Coal Act requires certain coal companies and their affiliates, referred to as "last signatory operators," to provide health and retiree benefits to retired employees (and their spouses and dependents) through individual employer plans ("IEPs") funded and administered by current or former coal operators. 26 U.S.C. § 9711(a), (b). In addition, the Coal Act created the 1992 Plan to provide benefits for eligible retirees who do not receive benefits through a company's IEP. 26 U.S.C. § 9712(a), (b). Last signatory operators fund the 1992 Plan, in part, by paying monthly premiums. 26 U.S.C. § 9712(a)(3), (d)(1)(A). The Coal Act also requires last signatory operators to provide security to the 1992 Plan. 26 U.S.C. § 9712(d)(1)(B).
A CONSOL-related entity sold mining operations to Debtors in 2013. Under the Coal Act, if a company ceases operations, and the 1992 Plan assumes responsibility for that operator's IEP benefits, the 1992 Plan may assert that a prior employer of the terminated operator's employees must pay the benefits. See 26 U.S.C. §§ 9701(c)(4), 9711(a), (b), (c), 9712(d)(4).
Debtors operated a coal company and provided healthcare and retiree benefits to about 2,200 retired employees and their spouses and dependents (the "Beneficiaries" who receive the "Benefits") under their IEP (the "Murray IEP"). In 2019, the Benefits cost Debtors about $23 million; by April 2020, Debtors spent $60,000-$65,000 per day on Benefits for the Beneficiaries. In addition, certain Debtors posted a $22.5 million letter of credit, and maintained an escrow account holding about $530,000, as security for the 1992 Plan.
Debtors filed chapter 11 petitions on October 29, 2019. Before filing, Debtors negotiated agreements to finance the bankruptcy case and position the sale of Debtors' assets. Several agreements compelled Debtors to minimize their liabilities to the Beneficiaries and required Debtors to pursue relief under § 1114 should they fail to reach agreement to terminate or modify Debtors' obligation to pay the Benefits.
To begin a process leading to a § 363 sale of substantially all their assets, Debtors moved for and obtained entry of an order approving bidding procedures for the sale. This order provided that a stalking horse bidder would submit an initial bid for Debtors' assets and set out a competitive bidding process. After that process did not generate another qualified buyer, the stalking horse bid presented the sole viable path forward to sell the assets as a going concern to maximize value for Debtors' estates. The stalking horse bid contained specific terms requiring Debtors to consensually modify or reject the Benefits as a condition precedent to closing. It also required that a plan confirmation order expressly provide that the purchaser of Debtors' assets would not assume any obligation to pay the Benefits.
To address their Coal Act obligations, Debtors moved for an order under § 1114(d) requiring the United States Trustee to appoint a committee to represent Debtors' retirees in negotiations. After the bankruptcy court entered an agreed order granting that motion, the United States Trustee appointed a Retiree Committee.
Debtors and the Retiree Committee began discussions regarding the termination of Debtors' obligation to provide Benefits to the Beneficiaries in February 2020, and the parties later included the 1992 Plan in their negotiations. Ultimately, the parties agreed to the Settlement, reflected in a term sheet dated April 13, 2020, by which (i) Debtors would provide Benefits to the Beneficiaries until May 1, 2020, (ii) the parties would cooperate to transition the Beneficiaries from the Murray IEP to the 1992 Plan as of May 1 to assure no coverage gap, (iii) the 1992 Plan would receive $12.5 million from the posted security and Debtors would receive the remainder, and (iv) Debtors would cooperate in the 1992 Plan's efforts to hold CONSOL responsible as the last signatory operator under the Coal Act for those Beneficiaries who transferred to Debtors in 2013. (Settlement Order, Ex. 1.)
On April 14, 2020, Debtors filed the Settlement Motion seeking relief under Rule 9019. CONSOL filed the only objection, arguing, inter alia , that Debtors could not modify their Coal Act obligations without satisfying § 1114(g). CONSOL tendered five declarations to support its argument. Notably, CONSOL's objection reflected that it did not concede its liability for the Benefits under the Coal Act and contemplated further litigation to determine its obligations should the bankruptcy court grant the Settlement Motion:
By seeking approval under [Rule] 9019, the parties are improperly requesting that this Court bless the deal as having been negotiated in ‘good faith,’ which would prejudice CONSOL's rights and legal remedies in later proceedings. In the event the Coal Motion is approved and litigation proceeds against CONSOL after the conclusion of this case, CONSOL intends on raising any and all defenses, crossclaims and counterclaims available to it.
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