In re Murray Energy Holdings Co.
| Decision Date | 31 March 2022 |
| Docket Number | Case No19-56885 (Jointly Administered) |
| Citation | 639 B.R. 463 |
| Parties | IN RE: MURRAY ENERGY HOLDINGS CO, et al., Debtors. |
| Court | U.S. Bankruptcy Court — Southern District of Ohio |
Melissa S. Giberson, Thomas Loeb, Vorys, Sater, Seymour and Pease LLP, Columbus, OH, Benjamin Butterfield, Todd Goren, Jennifer Marines, Lorenzo Marinuzzi, Erica Richards, Allison B. Selick, Morrison & Foerster LLP, New York, NY, Brenda K. Bowers, Tiffany Strelow Cobb, Columbus, OH, for Creditor Committee Official Committee of Unsecured Creditors.
Roma N. Desai, Bernstein Shur Sawyer & Nelson PA, Portland, ME, for Special Counsel Bernstein, Shur, Sawyer & Nelson, P.A.
Benjamin A. Sales, Office of the United States Trustee, Cincinnati, OH, Monica V. Kindt, John W. Peck Federal Building, Cincinnati, OH, Jeremy Shane Flannery, Office of the United States Trustee, Columbus, OH, for U.S. Trustee Asst US Trustee (Cin).
A mechanic's lien is a statutory lien secured by real or personal property, often for goods or services supplied in connection with improving, repairing or maintaining the property. Under what the parties call West Virginia's "Laborer's Lien Statute," the performance of services described in the statute affords a lien to "[e]very workman, laborer or other person" who performs the services. W.Va. Code § 38-2-31 (West 2022) ("Section 31"). In one way, the statute is broad—"person" under West Virginia law includes corporations and other business organizations. But in another way the statute is limited—it provides priority to a lienholder only "to the extent and value of one month's ... work or labor." Id . And it is argued here that the Laborer's Lien Statute is restricted in yet another way. Corporate entities, the argument goes, are eligible for a lien under the statute only if they have provided services of "an individual character."
Suppliers of services to debtors in the bankruptcy cases of Murray Energy Holdings Co. and its affiliated debtors and debtors in possession ("Debtors") filed notices of liens under Section 31 and proofs of claim based on those liens. The Debtors objected to the claims and moved for summary judgment. The claimants whose liens are at issue ("Claimants")1 filed responses, and replies have been filed either by the Debtors or by Drivetrain, LLC in its capacity as the plan administrator appointed by the Debtors’ Chapter 11 plan.2
The Debtors and Drivetrain contend (1) that the mechanic's liens should have been filed under what they call West Virginia's "Contractor's Lien Statute" ( W.Va. Code § 38-2-1 ) rather than the Laborer's Lien Statute because the Claimants’ services altered the Debtors’ real property; (2) that the Laborer's Lien Statute applies to corporate entities only if they provided services of "an individual character"; (3) that the Claimants did not provide services of an individual character; and (4) that the value of one month's work or labor that the Laborer's Lien Statute allows is required by West Virginia Code § 38-2-33 ("Section 33") to be separately set out as part of the notice of lien. The Claimants counter (1) that any alteration they made to the Debtors’ real property does not require them to file their liens under the Contractor's Lien Statute if they also qualify to file under the Laborer's Lien Statute; (2) that the Laborer's Lien Statute imposes no requirement that the services provided be of an individual character; (3) that the most recent version of W. Va. Code § 38-2-17 ("Section 17") abrogated the one-month limitation; and (4) that, even if the limitation remains in effect, the one-month amount may be determined through invoices or account statements attached to the notice of lien without being separately set out in the notice of lien.
The Court finds that, even if their services altered the Debtors’ real property, the Claimants need not file their liens under the Contractor's Lien Statute because a lienholder need not file under that statute if it also qualifies to file under the Laborer's Lien Statute, which all the Claimants do. The argument that a corporate entity must do work of an individual character to be entitled to a lien is unpersuasive because there is no such requirement in the Laborer's Lien Statute and the case on which Drivetrain relies in support of its position does not support reading such a requirement into the statute. Applying rules of statutory construction to current and prior versions of the West Virginia Code, the Court finds that Section 17 did not abrogate the one-month limitation.
And the Court rejects the argument that amounts claimed for the one-month priority under the Laborer's Lien Statute must be specifically set out as part of the notice of lien. To the contrary, the amounts may be determined through invoices or account statements attached to the notice of lien. For these reasons, the motions for summary judgment seeking to invalidate the Claimants’ liens based on ineligibility to file under the Laborer's Lien Statute are denied, as are the cross-motions for summary judgment seeking a ruling that Section 17 repealed by implication the limitation on priority set forth in the Laborer's Lien Statute. One Claimant separately set out its one-month amount, but other Claimants failed to do so. As to those Claimants, Drivetrain's motions for summary judgment are held in abeyance pending the outcome of the parties’ attempt to determine the amounts for which priority may be claimed.
The Court has jurisdiction to hear and determine this matter under 28 U.S.C. § 1334(b) and the general order of reference entered in this district in accordance with 28 U.S.C. § 157(a). The allowance or disallowance of claims against the estate is a core proceeding. 28 U.S.C. § 157(b)(2)(B). Because these disputes "stem[ ] from the bankruptcy itself," the Court also has the constitutional authority to enter a final order. Stern v. Marshall , 564 U.S. 462, 499, 131 S.Ct. 2594, 180 L.Ed.2d 475 (2011). See also Waldman v. Stone , 698 F.3d 910, 920 (6th Cir. 2012) ( .
The Claimants were manufacturers of components for custom-made conveyor structures, as well as suppliers of various services including mine maintenance labor, drilling, pumping, excavation, construction, trucking, soil modification and environmental work. They were, for the most part, long-time suppliers of services to the Debtors. Each of the Claimants filed several mechanic's liens under the Laborer's Lien Statute in the weeks before or shortly after the bankruptcy filing and later filed proofs of claim based on their liens.3
While the Debtors filed a joint plan of reorganization, that plan "constitutes a separate plan for each Debtor," Debtors’ Second Am. Joint Plan Pursuant to Chapter 11 of the Bankruptcy Code ("Plan") (Doc. 2082) at 6,4 and "the classification of Claims and Interests set forth in the Plan will apply separately to each of the Debtors." Disclosure Statement for the Debtors’ First Am. Joint Plan Pursuant to Chapter 11 of the Bankruptcy Code ("Disclosure Statement") (Doc. 1344-1 at 15). Secured claims under the Plan were classified as "Class 2 Other Secured Claims." Plan at 29, 30. And unless they agreed to less favorable treatment, Class 2 claimants were to receive, on the Effective Date, payment of their allowed secured claims in full in cash or such other treatment as would render their claims unimpaired. Id . at 30.
More than a dozen mechanic's lienholders objected to confirmation of the Plan. They argued that their liens were being released, and then possibly reinstated, which they said could allow the attachment of intervening liens. The mechanic's lienholders also argued that the Plan's injunction eliminated their in personam rights against the Debtors. The Debtors resolved these objections with most of the objectors by including a provision in the order confirming the Plan ("Confirmation Order") (Doc. 2135) stating:
Notwithstanding anything to the contrary in this Confirmation Order, the Plan, or the Stalking Horse APA, until a Disputed Other Secured Claim is Allowed or disallowed by Final Order or an agreement of the claimant with the Debtors (prior to the Effective Date) or the Stalking Horse Bidder (after the Effective Date), the lien or liens on property securing such Disputed Other Secured Claim shall remain on such property in the same priority that such lien or liens held prior to entry of the Confirmation Order. Notwithstanding the foregoing, the holder of a Disputed Other Secured Claim may not seek, and shall not have any rights, to enforce such lien or liens unless and until the corresponding Disputed Other Secured Claim is Allowed in an amount greater than zero. To the extent that an Other Secured Claim is Allowed and the Debtors (with the consent of the Stalking Horse Bidder) or the Plan Administrator, as applicable, elect for the holder of such Allowed Other Secured Claim to receive the treatment set forth in section III.B.2(b)(ii) of the Plan, (a) the lien or liens on property securing such Allowed Other Secured Claim shall remain on such property in the same priority that such lien or liens held prior to entry of the Confirmation Order, as established by order of the Bankruptcy Court (including an agreed order by and among the Debtors (with the consent of the Stalking Horse Bidder) or the Plan Administrator, as applicable, and the holder of such Allowed Other Secured Claim), and, to the extent the property subject to such liens constitutes an Acquired Asset, such liens shall constitute Permitted Encumbrances under the Stalking Horse APA and (b) notwithstanding anything to the contrary in this Confirmation Order or...
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