In re LTV Steel Co., Inc., No. 00-43866.

Decision Date02 July 2001
Docket NumberNo. 00-43866.
Citation264 BR 455
PartiesIn re LTV STEEL COMPANY, INC., et al., Debtors.
CourtU.S. Bankruptcy Court — Northern District of Ohio

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Richard M. Cieri, Richard Werder, Kathleen B. Burke, Jones, Day, Reavis & Pogue, Cleveland, OH.

Jeffrey B. Ellman, Jones, Day, Reavis & Pogue, Columbus, OH.

Michael J. Vanselow, Asst. Attorney General, St. Paul, MN.

Clinton E. Cutler, Fredrickson Byron, P.A., Minneapolis, MN.

Paul M. Singer, Reed Smith LLP, Pittsburgh, PA.

James G. McLean, Manon McDonough & Lucas, P.C., Pittsburgh, PA.

Lisa G. Beckerman, Robert Stark, Akin, Gump, Strauss, Hauer & Feld, L.L.P., New York City.

Donald M. Robiner, U.S. Trustee, Cleveland, OH.

MEMORANDUM OPINION

WILLIAM T. BODOH, Chief Judge.

This cause is before the Court on the motion of LTV Steel Company, Inc. and LTV Steel Mining Company ("LTV") seeking enforcement of the automatic stay and related injunctive relief. LTV's motion seeks relief against the following individuals: Matthew G. Smith, Commissioner of Revenue of the State of Minnesota ("Smith" or "Commissioner"), George K. Hoyum, Director, Special Taxes Division, Minnesota Department of Revenue ("Hoyum"), Donald H. Walsh, Manager, Minerals Tax Office, Minnesota Department of Revenue ("Walsh") and Lynn C. Willenbring, Director, Minnesota Collection Enterprise, Minnesota Department of Revenue ("Willenbring") (collectively referred to as "Respondents"). LTV seeks an order finding that Respondents violated the automatic stay by filing tax liens on LTV's property, declaring the liens to be of no force and effect, ordering Respondents to remove the liens and enjoining Respondents from taking any further collection efforts against LTV. LTV also seeks an ancillary award of its costs and attorneys' fees pursuant to 11 U.S.C. § 362(h). Respondents have asserted various defenses, chief among which is that the Eleventh Amendment of the United States Constitution prohibits LTV from obtaining the requested relief. A hearing was held on this matter on April 10, 2001. Kathleen B. Burke, Esq. appeared on behalf of LTV. Michael J. Vanselow, Esq. and Clinton E. Cutler, Esq. appeared on behalf of Respondents. This is a core proceeding over which the Court has jurisdiction pursuant to 28 U.S.C. § 157(b)(2)(A) and (O). The following constitutes the Court's findings of fact and conclusions of law pursuant to FED. R. BANKR. P. 7052.

DISCUSSION
A. Facts

This taxing problem requires the Court to wrestle with several complex issues. There is no real dispute over the facts of this case. LTV is one of the largest manufacturers of wholly-integrated steel products in the United States. One of the assets owned by LTV is a taconite mine and related facilities located in Cook, Lake and St. Louis counties in Minnesota.1 LTV and 47 of its subsidiaries filed voluntary petitions for relief under Chapter 11 of Title 11, United States Code, on December 29, 2000. The taconite mine and its related facilities became part of LTV's bankruptcy estate when the petitions were filed. See 11 U.S.C. § 541.

In May 2000, prior to filing its petition for relief, LTV announced that it was going to cease operations at the taconite mine and close the facility in the summer of 2001. This schedule was accelerated by the filing of LTV's petition, however, and LTV ceased operations at the mine on January 5, 2001. LTV has also initiated procedures to close the mining facility.

The present controversy stems from post-petition actions taken by Respondents to collect what is referred to as the Minnesota taconite production tax. This tax is imposed by the State of Minnesota upon "taconite and iron sulphides, sic and upon the mining and quarrying thereof, and upon the production of iron ore concentrate therefrom, and upon the concentrate so produced. . . ." MINN. STAT. ANN. § 298.24(1)(a) (West 2000). This tax is calculated on the average tons of taconite produced during the current calendar year and the two previous years. MINN. STAT. ANN. § 298.24(1)(d) (West 2000). The tax for any given tax year is to be assessed by the Commissioner by February 15 of the following year, and the tax assessed must be paid by February 24. MINN. STAT. ANN. § 298.27 (West 2000). Assessed taxes are to be paid directly to six local counties and the Minnesota Iron Range Resources and Rehabilitation Board. Id.

Respondents are officials of the Minnesota Department of Revenue ("Department"), which is a taxing agency of the State of Minnesota. On January 9, 2001, Hoyum mailed to LTV an official order of the Commissioner that established LTV's tax liability for the 2000 tax year. This order stated that LTV's 2000 tax liability equaled Fourteen Million Eight Hundred Eighty-Five Thousand Dollars ($14,885,000.00). (LTV's Memorandum to Enforce Stay, Exhibit 1.) On January 10, 2001, Willenbring mailed a document to LTV entitled "Notice and Demand for Immediate Payment and Jeopardy Collection." (LTV's Memorandum to Enforce Stay, Exhibit 2.) The notice was in regard to LTV's taconite production tax liability for the year 2000, and stated that:

The tax liability shown above has not been paid. Pursuant to the provisions of Minnesota Statute § 270.70, Subdivision 2, the Commissioner of Revenue has reason to believe that collection of this liability is in jeopardy.
Therefore, payment of $14,885,000.00 is demanded. If this amount is not remitted immediately, collection action will be initiated with no further notice to you. This may include levying upon your bank account or other property.

Id.

Apparently, the Department interpreted the phrase "immediate payment" quite literally, for on January 10, 2001, the same day that Willenbring mailed the notice of jeopardy assessment to LTV, a Department agent filed tax liens against LTV's property in Cook, Lake and St. Louis counties. Minnesota law provides that any tax imposed by the Department becomes a lien upon all of a taxpayer's property, and the lien is perfected by filing a notice of lien in the office of the county recorder of the county in which the taxpayer's real property is located. MINN. STAT. ANN. § 270.69 (West 2000).

On January 12, 2001, a Department officer mailed a letter to LTV which explained that "because of the taxpayer's bankruptcy proceedings, the Department determined there was a substantially reduced possibility of ever collecting the taxpayer's $14,885,000.00 taconite production tax liability unless liens were filed as quickly as possible." (LTV's Memorandum to Enforce Stay, Exhibit 3.) On February 9, 2001, LTV's tax liability for the year 2000 was adjusted to Fourteen Million Eight Hundred Eighty-Nine Thousand Seven Hundred Thirty-Seven Dollars ($14,889,737.00). (LTV's Memorandum to Enforce Stay, Exhibit 4.)

Not content with attempting to collect the tax due for the year 2000, Hoyum dispatched another order to LTV on January 23, 2001. This order established LTV's taconite production tax liability at Ten Million Ninety-Nine Thousand Seven Hundred Thirty-Nine Dollars ($10,099,739.00) for the 2001 tax year, and Five Million Three Hundred Twenty-Three Thousand Eight Hundred Fifty Dollars ($5,323,850.00) for the 2002 tax year. (LTV's Memorandum to Enforce Stay, Exhibit 8.) These taxes were assessed despite the fact that LTV engaged in taconite mining activities for a grand total of five days in the 2001 tax year.

True to form, on January 23, 2001, a Department agent mailed to LTV a notice of jeopardy assessment and demand for immediate payment of the 2001 and 2002 taxes. (LTV's Memorandum to Enforce Stay, Exhibit 9.) On January 24, 2001, the Department filed tax liens covering these unpaid taxes in Cook, Lake and St. Louis counties. (LTV's Memorandum to Enforce Stay, Exhibit 10.) Neither Respondents nor the Department appear to have taken any further actions to collect any unpaid tax liabilities from LTV.

Not surprisingly, LTV strongly objects to Respondents' attempts to collect these taxes. LTV has initiated two separate administrative appeals to the Commissioner challenging the two jeopardy collection notices and the perfection of the various tax liens. That action is still pending.

LTV contends that Respondents' acts of mailing the jeopardy collection notices and perfecting the tax liens on LTV's property constituted willful violations of the automatic stay imposed by 11 U.S.C. § 362(a). LTV asserts that these violations were willful because Respondents were aware that LTV had filed for bankruptcy at the time they took these actions. LTV seeks an order requiring Respondents to remove the liens filed against LTV's property, declaring the liens to be of no force and effect and enjoining Respondents from taking any further collection actions against LTV. LTV also seeks an award of costs and attorneys' fees pursuant to § 362(h).

Respondents have voiced several responses to LTV's arguments. First, Respondents argue that the Eleventh Amendment bars LTV's motion in its entirety because the State of Minnesota has not waived its sovereign immunity in this proceeding. Second, Respondents assert that the Court should abstain from hearing this motion because it presents complex and novel issues of state law that will be decided in LTV's appeal to the Commissioner. Third, Respondents contend that LTV's motion should be denied because it should have been filed as an adversary proceeding and not as a contested matter. Fourth, Respondents argue that the mailing of the collection notices and filing of the tax liens did not violate the automatic stay because they fall within the exceptions to the stay found in 11 U.S.C. § 362(b)(9)(D) and (18). Finally, Respondents assert that LTV is not entitled to an award of costs and attorneys' fees because § 362(h) applies only to individuals and not corporations.

B. Issues

As the issues before the Court are numerous and complex, we shall first consider the procedural issues raised by...

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