Inmet Mining, LLC v. Blackjewel Liquidation Tr. (In re Inmet Mining, LLC)
| Docket Number | 23-70113,Adv. 23-7002 |
| Decision Date | 24 August 2023 |
| Parties | IN RE INMET MINING, LLC PLAINTIFF v. BLACKJEWEL LIQUIDATION TRUST, ET AL. DEFENDANTS INMET MINING, LLC PLAINTIFF |
| Court | U.S. Bankruptcy Court — Eastern District of Kentucky |
The Defendant Blackjewel Liquidation Trust (the "Trust") answered the original Complaint and asserted claims against new parties, including Black Mountain Marketing and Sales LP ("BMMS") and Javelin Global Commodities (US) LLP ("Javelin"). [ECF No. 24.] BMMS and Javelin moved for dismissal of the claims against them. [ECF No. 71.] The issues were briefed and a hearing was held on August 17, 2023. [ECF Nos. 78, 80, 81.] The motion to dismiss is granted.
In September 2019, the Plaintiff Inmet Mining, LLC acquired its mining operations from Blackjewel LLC and affiliates ("Blackjewel"), who were debtors in a chapter 11 proceeding in the United States Bankruptcy Court for the Southern District of West Virginia. In re Blackjewel LLC, Case No. 19-30289 (Bankr. S.D. W.Va.). The Plaintiff's affiliate, Kopper Glo Mining, LLC ("Kopper Glo"), submitted the successful bid. Id., ECF No. 1096. The Plaintiff acquired the assets as Kopper Glo's designee.
The sale was documented in three agreements executed on September 7, 2019 (collectively the "Sale Agreements"):
Id. The payments required by the Base Royalty Agreement and Employee Royalty Agreement were part of the consideration for the purchased assets. Id.
The Trust is the successor to Blackjewel. [ECF No. 24 at ¶ 15.]
The Plaintiff filed a chapter 11 petition on April 5, 2023. [Case No. 23-70113, ECF No. 1.] Soon thereafter, the Plaintiff established a procedure to sell its assets pursuant to 11 U.S.C. § 363 and § 365 on an expedited basis. [Id., ECF Nos. 161, 361.]
The Base Royalty Agreement contained language that suggested the royalty would run with the land.[1] The Plaintiff believed a royalty that runs with the land would impair the value of its assets at a sale, so it initiated this adversary proceeding against the Trust and Defendant LR-Revelation Holdings, L.P. ("Lime Rock"), which was the assignee of the first two payments required by the Base Royalty Agreement. [ECF No. 1.] The Complaint contains one count, a request for a declaratory judgment that the covenant in the Base Royalty Agreement does not run with the land. [Id.] The Plaintiff was granted summary judgment on this count on July 7, 2023. [ECF Nos. 69-70.].
The Trust answered the Complaint on June 2, 2023. [ECF No. 24.] The Trust also asserted counterclaims against the Plaintiff and additional claims against new parties:
[Id]
Lime Rock also answered the Complaint on June 2 and counterclaimed against the Plaintiff for breach of the Sale Agreements. [ECF No. 25.] The Plaintiff answered the counterclaims on June 23, 2023. [ECF No. 45-46.] Kopper Glo did not answer or otherwise respond. BMMS and Javelin moved to dismiss the Trust's claims against them. [ECF Nos. 71, 78, 80.]
BMMS provided secured credit to the Plaintiff prior to the petition date and provided debtor-in-possession financing after the bankruptcy filing. [Case No. 20-50133, ECF Nos. 112, 241, 349, 535.]
The proposed DIP financing and the right of BMMS to credit bid in the bankruptcy sale were heavily contested by the Official Committee of Unsecured Creditors, whose position was supported by the United States Trustee. The negotiations resulted in a settlement between the Plaintiff, the Committee, and BMMS that allowed entry of a final DIP financing order and approval of the sale of the Kentucky assets to BMMS. [Id., ECF Nos. 535 ("Final DIP Financing Order"), 536 ("Sale Order"), and 538 ("Settlement Order"); see also id., ECF No. 525, 527 ().]
The Final DIP Financing Order finally approved post-petition financing of $22,200,000.00. [Id., ECF No. 535 at 2, ¶¶(1)-(2).] The Plaintiff also stipulated that it owed prepetition obligations to BMMS of at least $104,443,360.34. [Id. at ¶¶ D(c) ($29,754,314.77) and D(d)($74,689,045.57).] The Sale Order allowed BMMS to apply $55,000,000.00 of its aggregate claim to its successful credit bid for the Plaintiff's Kentucky assets, leaving a balance due of $49,443,360.34. [Id., ECF No. 536 at ¶ R.] The terms of settlement attached to the Settlement Order included the following release:
Following the closing of the BMMS Purchase and the Virginia Sale and the Parties' performance of their respective obligations set forth herein, (a) BMMS and Javelin shall release all remaining claims, liens and interests against the bankruptcy estate and (b) the bankruptcy estate will release its claims against BMMS and Javelin.
The sale of the Virginia assets closed on July 25, 2023, and the sale of the Kentucky assets to Bluegrass Energy, LLC, the designee of BMMS, closed on July 28, 2023. [Id., ECF No. 580.] Therefore, the Plaintiff has no further obligation to BMMS related to the financing or otherwise. [See also ECF No. 81 ().]
BMMS and Javelin move to dismiss Trust Counts II-V pursuant Civil Rule 12(b)(6) for failure to state a claim upon which relief can be granted. Fed.R.Civ.P. 12(b)(6) (incorporated by Fed.R.Bankr.P. 7012). A complaint must allege "enough facts to state a claim to relief that is plausible on its face." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). Whether a complaint satisfies this requirement and survives a Civil Rule 12(b)(6) motion is based on a review of the well-pled factual allegations. Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). Allegations are accepted as true, and all reasonable inferences are drawn in the movant's favor. Id.
A lack of subject matter jurisdiction is also grounds for dismissal. Fed.R.Civ.P. 12(b)(1). BMMS and Javelin do not rely on Civil Rule 12(b)(1) for dismissal but question the bankruptcy court's jurisdiction in their reply. [ECF No. 80.] A court must first decide whether it has subject matter jurisdiction over the claims before determining whether a complaint fails to state a claim upon which relief can be granted. Trokie v. U.S. Bank Trust N.A. (In re Trokie), 590 B.R. 663, 675 (Bankr. M.D. Pa. 2018); see also Sicherman v. Crosby (In re Rivera), 379 B.R. 728, 730-731 (Bankr.N.D.Ohio 2007) ().
Trust Count II and Trust Count III are dismissed as to BMMS and Javelin pursuant to Civil Rule 12(b)(1) for lack of jurisdiction. Trust Count IV is a remedy related to Trust Count III and is also dismissed as to BMMS and Javelin under Civil Rule 12(b)(1). Trust Count V is dismissed for failure to state a claim under Civil Rule 12(b)(6).
Trust Count II for tortious interference and Trust Count III for unjust enrichment against BMMS and Javelin are dismissed because the bankruptcy court does not have jurisdiction to decide these state law claims under 28 U.S.C. § 1334. Bankruptcy court jurisdiction exists if the claims are at least "related to" the Plaintiff's bankruptcy. Geise v. Lexington Coal Co. (In re HNRC Dissolution Company), 761 Fed.Appx. 553, 559 (6th Cir. 2019) ). There is "related to" jurisdiction if the "outcome of the proceeding could conceivably 'alter the debtor's rights, liabilities, options, or freedom of action (either positively or negatively)'" or "otherwise impact 'the handling and administration of the bankrupt estate.'" Id. at 560 ).
The tortious interference and unjust enrichment claims against BMMS and Javelin are state law claims asserted against two non-debtor parties. These causes of action do not arise from the Base Royalty Agreement at issue in the Plaintiff's declaratory judgment...
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