In re Mid-Atlantic Resources Corp.

• Decision Date: 28 August 2002
• Docket Number: Adversary No. 00-0068.,Bankruptcy No. 99-50521.,No. Civ.A. 5:01-0699.,Civ.A. 5:01-0699.
• Citation: 283 B.R. 176
• Court: U.S. District Court — Southern District of West Virginia
• Parties: In re MID-ATLANTIC RESOURCES CORP., Debtor. William E. Abner, et al., Appellants, v. Mate Creek Loading, Inc., et al., Appellees.

283 B.R. 176

In re MID-ATLANTIC RESOURCES CORP., Debtor William E. Abner, et al., Appellants, v. Mate Creek Loading, Inc., et al., Appellees.

No. Civ.A. 5:01-0699.

Bankruptcy No. 99-50521.

Adversary No. 00-0068.

United States District Court, S.D. West Virginia.

August 28, 2002.

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

Stephen P. Hoyer, Hoyer, Hoyer, Smith & Miesner, Charleston, WV, for debtor.

Charles F. Donnelly, Donnelly, Carbone & Kettler, P.L.L.C., Charleston, WV, for appellants.

Cecil C. Varney, Williamson, WV, Julia A. Chincheck, Bowles, Rice, McDavid, Graff & Love, Charleston, WV, Arthur M. Standish, Steptoe & Johnson, Charleston, WV, William F. Dobbs, Jr., Jackson & Kelly, Charleston, WV, Bruce M. Jacobs, Spilman, Thomas & Battle, Charleston, WV, for appellees.

John A. Rollins, Lewis, Friedberg, Glasser, Casey & Rollins, Charleston, WV, Thomas H. Fluharty, Clarksburg, WV, for trustee.

MEMORANDUM OPINION AND ORDER

CHAMBERS, District Judge.

This case is an appeal of the bankruptcy court's Order of October 12, 2000, as amended on November 21, 2000, which denied a motion by Plaintiffs below and Appellants herein to remand their wage payment and collection action to the Circuit Court of Raleigh County, West Virginia. In their brief, Appellants assert the bankruptcy court erred because it did not have jurisdiction over their state action and the removal petition was procedurally and substantively infirm. American Metals & Coal International, Inc. (American), AMCI Resources, Inc. (AMCI), and Westmoreland Coal Company (Westmoreland), Pocahontas Land Corporation (Pocahontas), and Thomas H. Fluharty, Appellees herein, have responded to Appellants' appeal and assert the bankruptcy court's decision should be affirmed because the judge properly found Appellants' case was a "core" proceeding within the meaning of 28 U.S.C. § 157, there were no defects in the removal procedure, and the principles of abstention and equitable remand are unwarranted under the circumstances.¹ The Court disposes with oral argument because the facts and legal arguments are adequately presented in the briefs and in the record, and the decisional process would not be significantly aided by oral argument. See Fed.R.Bankr.P. 8012.² For the reasons set forth below, the Court AFFIRMS the decision of the bankruptcy court.

I. STANDARD OF REVIEW

In an appeal from a bankruptcy court, a district court may not set aside the bankruptcy judge's findings of fact unless those findings are clearly erroneous. Fed.R.Bankr.P. 8013;³ In re Bryson Prop., XVIII, 961 F.2d 496, 499 (4th Cir.1992); In re Johnson, 960 F.2d 396, 399 (4th Cir.1992). "`A finding is "clearly erroneous" when although there is evidence to support it, the reviewing court on the entire evidence is left with the definite and firm conviction that a mistake has been committed.'" Anderson v. City of Bessemer City, N.C., 470 U.S. 564, 573, 105 S.Ct. 1504, 84 L.Ed.2d 518 (1985) (quoting United States v. United States Gypsum Co., 333 U.S. 364, 395, 68 S.Ct. 525, 92 L.Ed. 746 (1948)). A bankruptcy court's conclusions of law are reviewed de novo. In re Johnson, 960 F.2d at 399. Mixed question of fact and law are typically reviewed de novo. Rinn v. First Union Nat. Bank of Md., 176 B.R. 401, 407 (D.Md.1995) ("Mixed questions of fact and law which contain `primarily a consideration of legal principles' are considered de novo." (quoting In re Ruti-Sweetwater, Inc., 836 F.2d 1263, 1266 (10th Cir.1988))); In re Grimm, 156 B.R. 958, 961 (E.D.Va.1993) (citing In re McWhorter, 887 F.2d 1564 (11th Cir.1989) (stating de novo review applies when there are mixed questions of law and fact in which legal issues prevail)).

II. FACTUAL AND PROCEDURAL HISTORY

According to Appellees, Mid-Atlantic Resources Corp. (Debtor) purchased certain real and personal property in 1997 from the bankruptcy trustee of Adventure Resources, Inc. Debtor's purchases included a coal preparation plant, mining equipment, conveyor systems, and leases of certain reserves collectively referred to as the "East Gulf Operations." Upon acquiring these assets, Debtor subcontracted with Rhino Mining, Inc. (Rhino), which, in turn, subcontracted with Island Fork Construction, Ltd. (Island Fork), to operate the "Josephine" and "Tommy Creek" mines at the East Golf Operations. Debtor also subcontracted with Mate Creek Loading, Inc. (Mate Creek) to operate a preparation plant and AMCI Coal Sales, Inc. (ACS) to broker Debtor's coal.

On August 12, 1999, Debtor filed for Chapter 11 bankruptcy. According to the bankruptcy court, when Debtor filed its bankruptcy petition, it had no working capital and no means "to obtain unsecured lines of credit from any source." Amended Order Denying Motion to Remand, at 3 (November 21, 2000) (citation in footnote omitted). Therefore, one of the first things done in that case was to submit a proposal for post-petition financing. Id. As part of financing scheme, ACS agreed to give Debtor a line of credit and advance it money for payment of sums due to Rhino and Mate Creek, which money primarily was used to pay wages. In exchange, ACS was given, inter alia, a first lien on receivables, equipment, and inventory. Id. at 3-4. In authorizing the post-petition financing arrangement, the bankruptcy court found the monetary advances were needed to prevent a strike by the Rhino and Mate Creek employees. Id. at 4 (citing In re: Mid-Atlantic Resources, Corp., Order Authorizing Debtor to Obtain Post-Petition Financing, at 3 September 9, 1999).

Mining and the related activities continued until on or about January 31, 2000, when Debtor, Rhino, Mate Creek, and Island Fork ceased all operations. Debtor's bankruptcy case was then converted into a proceeding under Chapter 7 of the Bankruptcy Code and Thomas Fluharty was appointed as the Interim Trustee.

On February 24, 2000, Appellants, who were employees of Rhino, Mate Creek, and Island Fork filed a mechanic's lien in the amount of $737,520.16 for unpaid wages, benefits, and payroll withholdings for union dues. According to Appellants, these three Defendants operated an integrated coal mining and processing operation in Raleigh County, West Virginia, as a joint venture with and/or contractors for American and AMCI. This operation ceased on or about January 31, 2000, when Rhino, Mate Creek, and Island Fork stopped doing business and laid-off its employees.

The bankruptcy court found that the lien Appellants filed attached the real and personal property of Rhino, Mate Creek, Island Fork, American, AMCI, Pocahontas, Piney Land Company (Piney), Westmoreland, Timothy McCoy, Richard K. Bailey, Larry McKinney, Robert Massey, and Amon Mahon (Defendants). Id. at 5.⁴ In addition to this general lien on the real and personal property of Defendants, the bankruptcy court found that Appellants also claimed a lien on all Defendants' interests in and to the two mines operated by Rhino and Island Fork for the Debtor and the East Golf preparation plant operated by Mate Creek for the Debtor. The lien extended to all Defendants' interests in fee, mineral, leasehold, or contract. Id. (citing Notice of Mechanic's Lien, at 7). The mechanic's lien does not, however, mention Debtor.

On March 3, 2000, Appellants filed suit against Defendants in the Circuit Court of Raleigh County, West Virginia, seeking to obtain $971,170.91 in alleged unpaid wages, fringe benefits, medical benefits, payroll deductions for union dues, and liquidated damages pursuant to common law and the West Virginia Wage Payment and Collection Act, West Virginia Code § 21-5-1 et seq. In the action, Appellants also sought to enforce their mechanic's lien and sought an injunction to prohibit the removal, sale, or disposition of any property or other assets from the preparation plant and mine sites. Appellants further requested a jury trial.

On April 13, 2000, American, AMCI, and Westmoreland (the Removing Defendants) filed a Notice of Removal of Appellants' action from state court to the bankruptcy court. In their Notice, the Removing Defendants allege original jurisdiction over Appellants' action exists by virtue of one or more claims arising under the Bankruptcy Code, 11 U.S.C. § 101 et seq., and the Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. § 1101 et seq.⁵ Notice of Removal, at 4. Specifically, the Removing Defendants claim Appellants' action seeks to enforce a mechanic's lien against property included in Debtor's bankruptcy estate and the action falls within the definition of a "core proceeding" pursuant to 28 U.S.C. § 157(b)(2). Id. at 4-5. Therefore, the Removing Defendants alleged removal was appropriate under 28 U.S.C. §§ 1441, 1446, and 1452 and Rule 9027 of the Federal Rules of Bankruptcy Procedure. Id. at 4.

On May 15, 2000, Appellants filed a motion to remand the case to the Circuit Court of Raleigh County. After the Removing Defendants filed a response and Appellants filed their reply, the bankruptcy court held an expedited hearing on June 23, 2000.⁶ Three days prior to the hearing, on June 20, 2000, Thomas H. Fluharty, the Chapter 7 Trustee for Debtor, filed a motion to intervene.⁷ Appellants objected to the Trustee's motion, but on August 18, 2000, the bankruptcy court entered an Order conditionally granting the Trustee's motion, giving the Trustee thirty days to file an Answer or other pleading as necessary to protect the estate's claim.

On October 12, 2000, the bankruptcy court entered an Order denying Appellants' motion to remand. Specifically, the bankruptcy court found the procedure used for removal was sufficient, the requirements for commencing an adversary proceeding under Rule 7003 of the Federal Rules of Bankruptcy Procedure were satisfied, and the adversary proceeding fell within the meaning of a "core proceeding." This Order was amended on November 21, 2000, to correct some of the factual findings and it also gave Pocahontas and the other Removing Defendants...