In re Allied Consol. Indus., Inc.
| Decision Date | 11 January 2019 |
| Docket Number | Case No. 16-40675 |
| Parties | In Re: Allied Consolidated Industries, Inc., Debtor. |
| Court | U.S. Bankruptcy Court — Northern District of Ohio |
The court incorporates by reference in this paragraph and adopts as the findings and analysis of this court the document set forth below. This document has been entered electronically in the record of the United States Bankruptcy Court for the Northern District of Ohio.
This cause comes before the court on Trustee John Lane's ("Trustee") Motion for Clarification of Plan Provision and Rights of Creditor Trustee. [Doc. #593]. Creditor United States Steel Corporation ("U.S. Steel") filed a Response in Support of Trustee's Motion [Doc. #600], and Reorganized Debtor Allied Consolidated Industries, Inc. ("Debtor" or "Reorganized Debtor") filed its own Response to the Trustee's Motion. [Doc. #601]. In his Motion, the Trustee seeks clarification regarding whether the Confirmed Plan of Reorganization ("Confirmed Plan") [Doc. #356] provided for the transfer of various rail rights to the Creditor Trust with the real property or, instead, that those rights are controlled by the Reorganized Debtor as part of the "Litigation Claims". [Id.].
The court has jurisdiction over the underlying Chapter 111 case pursuant to 28 U.S.C. §§1334, 157(a), and Local General Order 2012-7 of the United States District Court for the Northern District of Ohio. The Order Confirming Second Amended Joint Plan of Reorganization, as Modified, specifically provides that the bankruptcy court "shall retain jurisdiction over all matters arising from, or related to, this case and the Plan. . . ." [Doc. #378, p. 16]. Actions to clarify language in a confirmed plan are generally2 core proceedings that this court may hear and determine. 28 U.S.C. §157(b)(1) and (b)(2)(A), (L) and (O). See, In re Craig County Hospital Authority, 572 B.R. 340, 343 (Bankr. N.D. Okla. 2017); L.L. Murphrey Co. v. D.A.N. Joint Venture II, L.P. (In re L.L. Murphrey Co.), 2012 WL 1655761 at *2, 2012 Bankr. LEXIS 2110 at **7-8 . Further, the Sixth Circuit has held: "a confirmed plan is considered to be an order of the bankruptcy court; the bankruptcy court has the power to interpret such a plan." In re Conco, Inc., 855 F.3d 703, 711 (6th Cir. 2017)(citations omitted); In re Terex Corp., 984 F.2d 170, 172 (6th Cir. 1993); In re Dow Corning, Corp., 456 F.3d 668, 675-76 (6th Cir. 2006); and see generally, Travelers Indem. Co. v. Bailey, 557 U.S. 137, 151, 129 S.Ct. 2195, 2205, 174 L.Ed.2d 99 (2009)("Bankruptcy Court plainly had jurisdiction to interpret and enforce its own prior orders.").
Because the plain language of the Confirmed Plan unambiguously provides that all assets of the debtor, save for certain litigation claims, became property of the Creditor Trust as of the effective date of the Confirmed Plan, the court finds that the rail rights at issue are property of the Creditor Trust, not the Reorganized Debtor.
On April 13, 2016, Debtor Allied Consolidated Industries, Inc. and a number of its subsidiaries filed for Chapter 11 bankruptcy relief. Debtor filed a Motion to substantively consolidate the cases [Doc. #87]. The bankruptcy court granted that Motion on July 11, 2016. [Doc. ##122, 123]. Debtor filed a Second Amended Joint Plan of Reorganization3 on May 2,2017. [Doc. #356]. The court entered an Order Confirming Second Amended Joint Plan of Reorganization on June 19, 2017. [Doc. #378]. Relevant here, the Confirmed Plan provided for the creation of a Creditor Trust tasked with implementing the terms of the Plan for the benefit of creditors. [Doc. #356, p. 16].
Trustee filed his Motion for Clarification of Plan Provision and Rights of Creditor Trustee on November 12, 2018, arguing that clarification was needed so that he could be certain that various rail rights associated with the estate are property of the Creditor Trust. [Doc. #593]. Trustee asserts that clarification is needed in order for the Creditor Trust to negotiate for the sale of railway-affected property. [Id.]. His position is that the rail rights should be regarded as assets of the Creditor Trust, pursuant to the Confirmed Plan. [Id., p. 3]. This issue arises in the context of the negotiation of a sale of a parcel of land that the Creditor Trust has called the "Brown Beaver Parcel", which has been represented to be "under contract". [Doc. #593, p. 2].
In its Response in Support of Trustee's Motion, U.S. Steel argues that the Confirmed Plan clearly states that the rail rights at issue are property of the Creditor Trust. [Doc. #600, pp. 3-7]. U.S. Steel further argues that Reorganized Debtor's attempt to claim ownership of the rail rights is part of a series of actions intended to interfere with the Creditor Trust's liquidation of assets pursuant to the Confirmed Plan. [Id., pp. 7-10].
Reorganized Debtor filed its Response to Trustee's Motion, arguing that it believes it has "all right, title and interest in the rail rights and rail easement rights4 pursuant to Article VI of the Confirmed Plan." [Doc. #601, p. 1]. Reorganized Debtor also requested a hearing so that it could present testimony from its principal in support of its position. The court set the matter for hearing on December 10, 2018. [Doc. #597].
At the December 10th hearing, the parties presented their evidence and arguments to the court, including testimony from John R. Ramun, the principal of the Reorganized Debtor. While counsel for the Reorganized Debtor argued that the purpose of the Confirmed Plan was, in part, to balance the interests of creditors and the continued operations 5 of Reorganized Debtor, thetestimony of John R. Ramun was focused primarily on the language of the Plan and Disclosure Statement6, and not on why or how the retention of the rail rights would impact the Reorganized Debtor's post-confirmation operations. On cross-examination, when asked how the Trustee should go about marketing and selling the real estate without the rail rights, John R. Ramun essentially stated that the property should not be sold.7
At issue in this case is interpretation of a confirmed Chapter 11 plan of reorganization. "In interpreting a confirmed plan, courts use contract principles, since the plan is effectively a new contract between the debtor and its creditors." Conco, 855 F.3d at 711 (quoting Dow Corning, 456 F.3d at 676); see also, In re Beta Intern., Inc., 210 B.R. 279, 285 (Bankr. E.D. Mich. 1996)("Interpretation of a Chapter 11 plan is basically a matter of contractual interpretation.")(citation omitted); see also, 11 U.S.C. §1141(a). In applying those contract principles, federal courts look to state law, and because the Confirmed Plan expressly provides that "...the laws of the state of Ohio govern this Plan..." [Doc. #356, p. 22], the court finds that Ohio contract law governs this dispute. See, Conco, 855 F.3d at 711; Dow Corning, 456 F.3d at 676.
Federal courts applying state law must look to the "law of the state's highest court." Garden City Osteopathic Hosp. v. HBE Corp., 55 F.3d 1126, 1130 (6th Cir. 1995); see also, Brown v. Cassens Transport Co., 546 F.3d 347, 363 (6th Cir. 2008); Meridian Mut. Ins. Co. v. Kellman, 197 F.3d 1178, 1181 (6th Cir. 1999). As the Supreme Court of Ohio has stated:
When confronted with an issue of contract interpretation, [the court's] role is to give effect to the intent of the parties. We will examine the contract as a whole and presume that the intent of the parties is reflected in the language of the contract. In addition, [the court] will look to the plain and ordinary meaning of the language used in the contract unless another meaning is clearly apparent from the contents of the agreement. When the language of a written contract is clear, a court may look no further than the writing itself to find the intent of the parties. As a matter of law,a contract is unambiguous if it can be given a definite legal meaning.
Sunoco Inc. (R & M) v. Toledo Edison Co., 129 Ohio St.3d 397, 404, 953 N.E.2d 285, 292 (Ohio 2011)(quotation omitted); see also, Westfield Ins. Co. v. Galatis, 100 Ohio St.3d 216, 219, 797 N.E.2d 1256, 1261 (Ohio 2003); Hamilton Ins. Serv., Inc. v. Nationwide Ins. Cos., 86 Ohio St.3d 270, 273, 714 N.E.2d 898, 900-01 (Ohio 1999).
Here, the court finds that an application of Ohio's rules of contract interpretation to the Confirmed Plan weighs heavily in favor of the Trustee's argument that the rail rights at issue are property of the Creditor Trust. Section 8.2 of the Confirmed Plan expressly provides that "[t]he assets to be transferred to the Creditor Trust (the "Trust Assets") shall include all assets of the Debtor as of the Effective Date other than the Reorganized Debtor Assets...." [Doc. #356, p. 16]. Section 8.2 goes on to state that "In summary - upon confirmation the Creditor Trust assets shall receive all of the real and personal property of the Debtor, both tangible and intangible, except the Litigation Claims which shall remain with the Reorganized Debtor...." [Id., p. 18]. Section 6.1 of the Confirmed Plan defines "Litigation Claims" as "...various claims for breaches of contract, covenants, good faith, fair dealing, consequential and business damage claims..." and provides a list of such claims, at least two of which relate to "disputes over the use of railroad easements." [Id., pp. 13-14].
In applying Ohio's rules of contract interpretation, the court finds that the Confirmed Plan unambiguously states that all assets, other than the Litigation Claims, became property of the Creditor Trust as of the effective date of the Confirmed Plan. In other words, the court construes "all of the real and personal property of the Debtor, both tangible and intangible, except the Litigation Claims" [Doc. #356, p. 18] to mean what it says. The language describing...
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