In re HNRC Dissolution Co., CASE NO. 02-14261
| Decision Date | 11 June 2018 |
| Docket Number | CASE NO. 02-14261 |
| Parties | IN RE HNRC DISSOLUTION CO. f/k/a HORIZON NATURAL RESOURCES CO., et al. DEBTOR |
| Court | U.S. Bankruptcy Court — Eastern District of Kentucky |
JOINTLY ADMINISTERED
This matter is before the Court on Alliance WOR Properties, LLC's Motion for Enforcement of Sale Order and Confirmation Order [ECF No. 8541 ("Enforcement Motion")] and Illinois Methane, LLC's Motion for Determination of Jurisdiction, to Abstain, and to Dismiss Contested Matter [ECF Nos. 8542 & 8553 (collectively, "Jurisdiction Motion")2].Illinois Methane, LLC ("Methane") filed a Response [ECF No. 8543] to the Enforcement Motion and Alliance WOR Properties, LLC ("Alliance") filed a Reply [ECF No. 8551]. Alliance also filed Responses to Methane's Jurisdiction Motion [ECF Nos. 8552 & 8559].
A final hearing was held on March 28, 2018, and the matter was taken under submission. For the reasons stated herein, the Court finds it has subject matter and personal jurisdiction to decide whether Methane received notice of the Sale and Confirmation Orders (as defined herein) sufficient to satisfy constitutional due process and will exercise that jurisdiction. Further, the Court finds Alliance did not meet its burden to prove Methane was an unknown party to Debtor Old Ben Coal Company and its affiliates; and thus, publication notice of the sale and confirmation process did not satisfy constitutional due process as to Methane. Alliance's Enforcement Motion will be denied.
Old Ben Coal Company ("Old Ben") and 160 affiliates (collectively, "Debtors") filed voluntary chapter 11 petitions in November 2002. The individual bankruptcy cases were jointly administered under the lead case styled In re Horizon Natural Resources Company et al., Case No. 02-14261 ("Bankruptcy").
In 2004, Debtors sold substantially all of their assets pursuant to a court-approved auction process. As part of this process, Old Ben sold its interest in a coal reserve located in Hamilton County, Illinois ("Reserve") to LCC Illinois, LLC (a/k/a Lexington Coal). Following some intermediate transfers, Alliance acquired the Reserve in September 2011.
On May 8, 2017, Methane filed suit against Alliance and others in an Illinois state court, seeking to collect based on an interest in the coalbed methane gas rights in the Reserve. Methane alleges that on June 12, 1998, several years prior to the Bankruptcy, Old Ben conveyed all of thecoalbed methane gas rights in the Reserve to Methane via deed ("Old Ben Deed") while retaining the coal rights. According to Methane, the Old Ben Deed provides that Old Ben will pay Methane a "delay rental" obligation if Old Ben's coal mining activities make the Reserve unavailable for methane gas production. Methane's rights under the Old Ben Deed are collectively referred to herein as its "Interest." The parties disagree as to the nature of the Interest; however, they agree the Interest derives solely from the Old Ben Deed. Methane seeks to enforce and collect on its Interest through the state court litigation.
On September 15, 2017, Alliance moved to reopen the Bankruptcy to allow it to file the Enforcement Motion seeking interpretation and enforcement of two orders: (1) Order Pursuant to 11 U.S.C. §§ 105(a), 362, 363, 365, 1123, and 1146(c) and Fed. R. Bankr. P. 2002, 6004, 6006 and 9014: (A) Approving Asset Purchase Agreements, (B) Authorizing Sale of Substantially All Assets Free and Clear of All Liens, Claims, Interests and Other Encumbrances, and (C) Authorizing Assumption and Assignment of Certain Agreements [ECF No. 4085] ("Sale Order") and (2) Findings of Fact, Conclusions of Law and Order Confirming the Debtors' Third Amended Joint Liquidating Plan under Chapter 11 of the Bankruptcy Code [ECF No. 4089] ("Confirmation Order"). The Bankruptcy was reopened on December 19, 2017.
Alliance filed the Enforcement Motion on January 22, 2018. Alliance contends it acquired the Reserve free and clear of any liens, claims, interests, or encumbrances pursuant to § 363(f)3 and without liability for Methane's Interest. Alliance asks the Court to enjoin Methane's claims against it because Methane's Interest was extinguished by entry of the Saleand Confirmation Orders. Methane opposes the requested relief and filed the Jurisdiction Motion contending the Court lacks subject matter and personal jurisdiction over a dispute between two non-debtor parties involving state law property rights. However, Methane further argues that if jurisdiction exists, the Court must abstain because state law issues predominate. Finally, Methane contends its Interest was not extinguished by the sale and confirmation process because the publication notice of the Sale and Confirmation Orders does not satisfy constitutional due process as to Methane.
Following extensive briefing and a preliminary telephonic hearing held on March 19, 2018, the scope of the final hearing was limited to three threshold issues: (1) jurisdiction; (2) abstention; and (3) due process.4 At the final hearing, the parties were provided an opportunity to present evidence on these issues. Alliance chose to stand on its papers. Methane introduced the Affidavit of George S. DeMier [ECF No. 8533] ("DeMier Affidavit") and it was admitted without objection. Methane further moved to introduce 22 exhibits [ECF Nos. 8560, 8570, 8571] (collectively, "Methane Exhibits"), which are admitted by separate order. The Court heard the arguments of counsel and took the Motions under submission.
Bankruptcy courts are courts of limited jurisdiction. In addition to jurisdiction over a bankruptcy case, a bankruptcy court may exercise jurisdiction over a proceeding that: (1) arises under title 11; (2) arises in title 11; or (3) is related to a case under title 11. 28 U.S.C. § 1334.The first category, proceedings arising under title 11, describes the proceedings from which a claim is made under a provision of title 11. The second category, proceedings arising in title 11, are those administrative matters that are not based on any right expressly created by title 11 but would not exist outside of the bankruptcy. The third category, proceedings related to a case under title 11, refers to a proceeding where the outcome of that proceeding could conceivably have any effect on the estate being administered in bankruptcy. Hughes-Bechtol, Inc. v. Constr. Mgmt., Inc. (In re Hughes-Bechtol, Inc.), 132 B.R. 339, 342 (Bankr. S.D. Ohio 1991).
A bankruptcy court has "arising in" jurisdiction to interpret and enforce its own sale and confirmation orders. See Travelers Indem. Co. v. Bailey, 557 U.S. 137, 151 (2009); Harper v. Oversight Committee (In re Conco, Inc.), 855 F.3d 703, 711 (6th Cir. 2017); In re Gawker Media, LLC, 581 B.R. 754, 760 (Bankr. S.D.N.Y. 2017); In re Motors Liquidation Co., 514 B.R. 377, 380 (Bankr. S.D.N.Y. 2014). The determination of the rights created or extinguished under a sale or confirmation order is a core matter pursuant to 28 U.S.C. § 157(b). Olson v. Frederico (In re Grumman Olson Indus., Inc.), 445 B.R. 243, 248 (Bankr. S.D.N.Y. 2011); Quesenberry v. Chrysler Group LLC, Civil No. 12-48-ART, 2012 WL 3109431, at *4 (E.D. Ky. July 31, 2012).
Methane argues that the Court lacks "related to" jurisdiction because resolution of the dispute will have no conceivable effect on the administration of the bankruptcy estate. See Michigan Emp't Sec. Comm'n v Wolverine Radio Co., Inc. (In re Wolverine Radio Co.), 930 F.2d 1132, 1141 (6th Cir. 1991) (citing Wood v. Wood (In re Wood), 825 F.2d 90, 93 (5th Cir. 1987)); Spradlin v. Pikeville Energy Grp., LLC, Civil No. 12-111-ART, 2012 WL 6706188, *6 (E.D. Ky. Dec. 26, 2012). This argument misses the point. The Court has "arising in" jurisdiction and that is sufficient to adjudicate the limited issue before the Court. See In re Motors Liquidation Co., 514 B.R. at 381 ( ). See also Legal Xtranet, Inc. v. AT&T Mgmt. Serv., L.P. (In re Legal Xtranet, Inc.), 453 B.R. 699, 705 n.1 (Bankr. W.D. Tex. 2011); Simmons v. Johnson, Curney & Fields, P.C. (In re Simmons), 205 B.R. 834, 843 (Bankr. W.D. Tex. 1997) ().
In sum, this Court has subject matter jurisdiction to interpret and enforce its Sale and Confirmation Orders. These are core matters pursuant to 28 U.S.C. § 157(b)(2)(A), (L), (N), (O) and this Court may enter final orders as to the issues raised herein.
Methane next argues that the Court lacks personal jurisdiction. The requirements for personal jurisdiction are found in Bankruptcy Rule 7004(f), which provides:
If the exercise of jurisdiction is consistent with the Constitution and laws of the United States, serving a summons or filing a waiver of service in accordance with this rule or the subdivisions of Rule 4 F.R.Civ.P. made applicable by these rules is effective to establish personal jurisdiction over the person of any defendant with respect to a case under the Code or a civil proceeding arising under the Code, or arising in or related to a case under the Code.
FED. R. BANKR. P. 7004(f). Therefore, the Court has personal jurisdiction over Methane if: (1) the Court has subject matter jurisdiction; (2) Methane received proper service according to Bankruptcy Rule 7004; and (3) the exercise of such jurisdiction is consistent with the Fifth...
To continue reading
Request your trial