In re Murray Energy Holdings Co.

• Decision Date: 03 June 2022
• Docket Number: 21-8014
• Citation: 640 B.R. 558
• Parties: IN RE: MURRAY ENERGY HOLDINGS CO., Debtor.
• Court: U.S. Bankruptcy Appellate Panel, Sixth Circuit

640 B.R. 558

IN RE: MURRAY ENERGY HOLDINGS CO., Debtor.

No. 21-8014

United States Bankruptcy Appellate Panel of the Sixth Circuit.

Decided and Filed: June 3, 2022

ON BRIEF: Scott A. Norcross, KOHRMAN JACKSON & KRANTZ, Cleveland, Ohio, for Appellant.

Travis M. Bayer, DINSMORE & SHOHL LLP, Cincinnati, Ohio, Kara Hammond Coyle, Shane M. Reil, YOUNG CONAWAY STARGATT & TAYLOR, LLP, Wilmington, Delaware, for Appellee.

Before: BAUKNIGHT, CROOM, and STOUT, Bankruptcy Appellate Panel Judges.

SUZANNE H. BAUKNIGHT, Bankruptcy Appellate Panel Judge.

In this appeal, creditor Penn Line Service, Inc. ("Penn Line") argues that the bankruptcy court abused its discretion when it denied Penn Line's application for an administrative expense claim and related motion for reconsideration and sustained Debtor's objection to Penn Line's proofs of claim without allowing Penn Line an opportunity to conduct discovery or hold an evidentiary hearing.

Because the Panel finds that the bankruptcy court did not abuse its discretion in denying Penn Line's motion for reconsideration, and Penn Line did not appeal the original order denying its administrative expense or the order sustaining the objection to claims, the Panel AFFIRMS the judgment of the bankruptcy court.

ISSUE ON APPEAL

The sole issue¹ in this appeal is whether the Bankruptcy Court properly applied the relevant standards in rendering its findings and conclusions and issuing its Order Denying Penn Line Service, Inc.’s Motion to Reconsider Orders Dated April 16, 2021, Entered April 19, 2021, Denying Penn Line Service, Inc.’s Application for Allowance of Administrative Expense Claims, and Granting Debtor's Sixth Omnibus Objection to Certain Incorrectly Filed Priority Claims.

JURISDICTION AND STANDARD OF REVIEW

Because the United States District Court for the Southern District of Ohio has authorized appeals to the Panel and no party has timely elected to have this appeal heard by the district court, the Bankruptcy Appellate Panel of the Sixth Circuit has jurisdiction to decide this appeal. 28 U.S.C. § 158(b)(6), (c)(1). Pursuant to 28 U.S.C. § 158(a)(1), final orders of the bankruptcy court may be appealed as of right. "Orders in bankruptcy cases qualify as ‘final’ when they definitively dispose of discrete disputes within the overarching bankruptcy case." Ritzen Grp., Inc. v. Jackson Masonry, LLC , ––– U.S. ––––, 140 S. Ct. 582, 586, 205 L.Ed.2d 419 (2020) (citing Bullard v. Blue Hills Bank , 575 U.S. 496, 501, 135 S. Ct. 1686, 191 L.Ed.2d 621 (2015) ). "An order denying an application for an administrative expense is a final order ... [and] is reviewed for an abuse of discretion." In re Appalachian Fuels, LLC , 493 B.R. 1, 6 (B.A.P. 6th Cir. 2013) (citing UMW 1974 Plan & Tr. v. Lexington Coal Co . (In re HNRC Dissolution Co .), 396 B.R. 461, 465 (B.A.P. 6th Cir. 2008) (holding an order denying an application for an administrative expense is a final order because it resolves the issue and leaves nothing else for the bankruptcy court to do)). Likewise, a bankruptcy court "order sustaining an objection to a creditor's claim is a final order." In re Bowers , 506 B.R. 249, 251 (B.A.P. 6th Cir. 2013) (citation omitted), aff'd , 759 F.3d 621 (6th Cir. 2014). An order denying a motion under Federal Rule of Civil Procedure ² 60(b) is also a final order that is reviewed on appeal for an abuse of discretion. Blue Diamond Coal Co. v. Trs. of UMWA Combined Benefit Fund , 249 F.3d 519, 524 (6th Cir. 2001).

"An abuse of discretion occurs only when the [trial] court relies upon clearly erroneous findings of fact or when it improperly applies the law or uses an erroneous legal standard." In re Appalachian Fuels, LLC , 493 B.R. at 6 (quoting Kaye v. Agripool, SRL (In re Murray, Inc .), 392 B.R. 288 (B.A.P. 6th Cir. 2008) ). "The question is not how the reviewing court would have ruled, but rather whether a reasonable person could agree with the bankruptcy court's decision; if reasonable persons could differ as to the issue, then there is no abuse of discretion." Id. (quoting Barlow v. M.J. Waterman & Assocs., Inc . (In re M.J. Waterman & Assocs., Inc .), 227 F.3d 604, 608 (6th Cir. 2000) ).

FACTS

Penn Line filed six proofs of claim seeking an administrative expense priority related to services provided to specific debtors in jointly administered bankruptcy cases.³ Debtors objected to Penn Line's proofs of claim ("Objection to Claims"), asserting that "[t]he reclassified amounts are on account of labor and service charges listed on the claim which do not constitute a good under section 503(b)(9) and goods listed on the claim which were received outside of the proscribed 20-day receipt period under section 503(b)(9) thus not entitled to administrative priority." (In re Murray Energy Holdings Co. , Bankr. Case No. 2:19-bk-56885, ECF No. 1903-1 at 12.⁴ ) Penn Line filed its Response and Opposition to Debtors’ Sixth Omnibus Objection to Certain Incorrectly Filed Priority Claims [Doc. 1903 and 1904] ("Claims Objection Response"), after which Penn Line filed an Application for Allowance of Administrative Expense Claims ("Administrative Expense Application"). Penn Line did not request a hearing at the time of filing either pleading. Several months later, Drivetrain, LLC, the Plan Administrator ("Plan Administrator"), responded in opposition to Penn Line's Claims Objection Response and Administrative Expense Application, resulting in the scheduling of a hearing on both contested matters six days later, on March 18, 2021 (the "March 18 Hearing").

To prepare for the March 18 Hearing, a member of the bankruptcy judge's chambers staff contacted counsel for Penn Line on March 17, 2021, asking whether Penn Line intended to present witnesses at the March 18 Hearing. Penn Line's counsel informed chambers that no witnesses would testify and that Penn Line intended only to present legal argument.⁵ Penn Line offered no witnesses at the March 18 Hearing, instead restating its primary argument that it was a critical vendor based on a theory of "implied assumption." Penn Line also acknowledged that it was raising a new argument: that perhaps the work for which it filed its proofs of claim was performed postpetition. Penn Line did not request that the March 18 Hearing be continued or seek additional time to conduct discovery. At the conclusion of the March 18 Hearing, the bankruptcy court ruled that the "implied assumption" theory is not a valid basis for allowing an administrative expense claim. The court also rejected Penn Line's new argument that the work had been performed postpetition.

The bankruptcy court then entered two orders dated April 16, 2021⁶ : (1) a Supplemental Order granting the Objection to Claims ("Claims Objection Order"), which sustained the debtors’ objections to Penn Line's claims and reclassified the priority status of those claims (ECF No. 2645); and (2) an Order denying with prejudice Penn Line's Administrative Expense Application ("Administrative Expense Order") (ECF No. 2646). Ten days later, Penn Line filed a motion to reconsider both the Claims Objection Order and the Administrative Expense Order ("Motion for Reconsideration"). (ECF No. 2655.)

In support of its Motion to Reconsider, Penn Line first argued, under Federal Rules of Bankruptcy Procedure ⁷ 8002(b) and 9024 and Rule 60(b), that the bankruptcy court erred by "mistake or inadvertence" when it "ignore[ed] Penn Line's attempt to conduct discovery and present additional evidence [at the March 18 hearing], and ... premature[ly] enter[ed] a dispositive order, despite no dispositive motion being filed ... [rather than] simply allowing Penn Line to conduct discovery and engage in an evidentiary hearing at a future date once discovery [was] completed." (Id . ¶ 10.) Penn Line also asserted that additional evidence had been discovered and attached an affidavit of its Vice President, Sam Liston ("Liston Affidavit"). (Id . ¶ 14.) Additionally, Penn Line argued that the notice of hearing on the Objection to Claims, which expressly stated that the March 18 Hearing was not an evidentiary hearing, conflicted with the Third Amended Order Implementing Certain Notice and Case Management Procedures [Related to Docket Nos. 22, 113, 764, and 1103] that the bankruptcy court had entered on February 9, 2021 ("Case Management Order"). (ECF No. 2517.) Penn Line asserted that although the Case Management Order advised that "[e]very hearing is presumed to be an evidentiary hearing at which witnesses may testify," the Notice of Amended Agenda for Telephonic Hearing on Matters Scheduled for March 18, 2021 (ECF No. 2621), filed two days before that hearing, did not "clearly denote that the matter was scheduled as an evidentiary hearing." (ECF No. 2655 ¶¶ 16, 18-19.) Penn Line also argued that it was "suggested [during the March 17, 2021 telephone call from chambers asking whether Penn Line would present any witnesses at the March 18 Hearing] that while the Court would treat the March 18, 2021 hearing as an opportunity to present evidence, the Court would allow for further evidence to be introduced as needed." (Id . ¶ 20.) Penn Line next argued that six days’ notice of the March 18 Hearing was "insufficient time to complete any sort of discovery and line up evidence and witnesses." (Id . ¶ 23.) Finally, Penn Line argued that the bankruptcy court improperly concluded that there were no material facts and treated the March 18 Hearing "as an almost dispositive summary judgment motion [when] no motion for summary judgment" had been filed and that, in any event, it was "premature for the Court to determine the merits at th[at] stage, and the parties should [have] been permitted a limited time to complete discovery, have an evidentiary hearing," and then be allowed to file any necessary briefs and dispositive motions. (Id . ¶¶ 29-30.)

The bankruptcy court heard the Motion for Reconsideration on May 20, 2021 ("May 20 Hearing"), at which Penn Line's counsel conceded that he had not...