W.Va. Highlands Conservancy v. ERP Envtl. Fund
| Decision Date | 02 March 2023 |
| Docket Number | Civil Action 3:11-0115 |
| Parties | WEST VIRGINIA HIGHLANDS CONSERVANCY, INC., and SIERRA CLUB, Plaintiffs, v. ERP ENVIRONMENTAL FUND, INC. and RECEIVERSHIP ESTATE OF ERP ENVIRONMENTAL FUND, INC., Defendants. |
| Court | U.S. District Court — Southern District of West Virginia |
Pending before the Court are two cross-motions: Plaintiffs' Motion to Enforce the Second Modified Consent Decree, ECF No 256, and Defendant's Motion to Resolve Dispute Under the Second Modified Consent Decree, ECF No. 258. For the reasons below, the Court GRANTS IN PART Plaintiffs' Motion, ECF No. 256, and DENIES IN PART Defendant's Motion, ECF No. 258.
These Motions center on whether the Second Modified Consent Decree (Consent Decree) between the parties permits Defendant Special Receiver to transfer permits and execute coal mining subleases at Chestnut Oak Surface Mine (Chestnut Oak). Lodged on October 7, 2016, the Consent Decree prohibits “Surface Mining at any location formerly owned or operated by Patriot Coal or one of [its] subsidiaries, except that Surface Mining which is necessary and incidental to reclamation.” Second Modified Consent Decree at paragraph 63, ECF No. 105. While the Consent Decree allows Defendant to acquire permits for existing surface mines acquisitions remain subject to the limitations in paragraph 63. Id. ¶ 54. Special Receiver became subject to the Consent Decree as a successor-in-interest to ERP in 2020, pursuant to an appointment by the Kanawha County Circuit Court and the Business Court Division. Complaint Ward v. ERP Env't Fund, Inc., No. 20-C-282 (Kan. Co. Cir. Ct); Preliminary Injunction and Order Preliminarily Appointing a Special Receiver for Defendant's Property, Assets, and Operations (Dec 22, 2020).
This is the second dispute that has arisen between the parties of late. In the first dispute, Defendant Special Receiver obtained authorization from Kanawha County Circuit Court to enter into a reclamation services agreement-one that would allow a contractor to mine coal at Buck Fork Surface Mine and use excess spoil to reclaim another site, Hewitt Creek Surface Mine. Mem. Op. and Order at 5, ECF No. 253. Defendant argued the reclamation services agreement was permissible under the Consent Decree because it constituted surface mining necessary and incidental to reclamation. Mot. for Referral of Dispute Under Second Modified Consent Decree, ECF No. 243. In support, Defendant noted that not only does state law require reclaiming highwall areas, but also that the reclamation services contract would allow for no-cost reclamation at the site. Id. at 5-6. Ultimately, however, the Court agreed with Plaintiffs that mining at Buck Fork was merely convenient for-rather than necessary and incidental to-reclamation at Hewitt Creek. Mem. Op. and Order, ECF No. 253.On October 5, 2022, the Court issued a memorandum opinion and order finding that Defendant had authorized mining at Buck Fork beyond that which was “necessary and incidental to reclamation,” in violation of the Consent Decree. Id. at 14. While the Court did not hold Defendant in contempt for this violation, it ordered Defendant to cease any plans to conduct surface mining at Buck Fork Surface Mine. Id.
Shortly thereafter, on October 24, 2022, the Special Receiver sought authorization from the Kanawha County Circuit Court to transfer mining permit S503308 and execute coal subleases at Chestnut Oak. Mot. of Receiver for Entry of Order Auth. Receiver to Enter into Permit Transfer Agreement at 1, ECF No. 256-1. Chestnut Oak was mined by a Patriot Coal subsidiary, Hobet Mining LLC, from roughly 2011 until 2016. Mem. in Supp. of Def.'s Mot. to Resolve Dispute Under the Second Modified Consent Decree at 3, ECF No. 259; Mem. in Supp. of Pls.' Mot. to Enforce the Second Modified Consent Decree at 5, ECF No. 257. According to Special Receiver, however, the site is currently unreclaimed, contains thousands of feet of open highwall, and is subject to a notice of violation from the WVDEP for failure to reclaim. Mot. of Receiver for Entry of Order Auth. Receiver to Enter into Permit Transfer Agreement ¶ 1, ECF No. 256-1.
In return for the transfer, Special Receiver seeks no more than $100,000 and an overriding royalty of 2% or greater on any coal mined at the site. Id. ¶ 3. Special Receiver argues this transfer would be in the estate's best interest-the estate lacks the resources and ability to reclaim the site, and the transaction would offload reclamation liabilities at Chestnut Oak and offset reclamation costs at other ERP permit sites. Id. ¶¶ 5, 7. In its motion in the Kanawha Circuit Court, Special Receiver also requested that a third-party acquiring the permit and subleases not be subject to “any of ERP's preexisting agreements of contracts, nor shall the third-party's property be subject to any of the preexisting liens, encumbrances, or claims against ERP's property.” Id. ¶ 9.
The Kanawha County Circuit Court granted ERP's motion on November 16, 2022, though it noted that “nothing in this Order should be construed to modify or otherwise affect the terms or conditions of the Second Modified Consent Decree, or its applicability or enforceability.” Order Granting Mot. of Receiver for Entry of Order Auth. Receiver to Enter into Permit Transfer Agreement at 3, ECF No. 256-2. After the parties unsuccessfully attempted to resolve the dispute, the instant Motions followed. Mem. in Supp. of Pls.' Mot. to Enforce the Second Modified Consent Decree at 4, ECF No. 257; Mem. in Supp. of Def.'s Mot. to Resolve Dispute Under the Second Modified Consent Decree at 4, ECF No. 259.
This proposed plan raises two issues under the Consent Decree: 1) whether the prohibition on surface mining in paragraph 63 is binding upon a third-party permit transferees, and 2) whether the proposed mining plan at Chestnut Oak is “necessary and incidental” to reclamation. As to the first issue, Plaintiffs argue that the Consent Decree is binding on any subsequent permit transferees, because the Decree binds “[ERP] and any of its respective successors and/or assigns.” Mem. in Supp. of Pls.' Mot. to Enforce the Second Modified Consent Decree at 6, ECF No. 257 (quoting Second Modified Consent Decree ¶ 24, ECF No. 105); see also Second Modified Consent Decree ¶ 25, ECF No. 105 () They contend that though the Consent Decree does not define “successor and assigns,” any contemplated permit transferees would fall under the definition provided in the state and federal Surface Mining Control and Reclamation Act (SMRA) and the West Virginia Surface Coal Mining and Reclamation Act (WVSCMRA). Mem. in Supp. of Pls.' Mot. to Enforce the Second Modified Consent Decree at 6, ECF No. 257. Finally, Plaintiff point to Federal Rule of Civil Procedure 65(d)(2) for the proposition that the injunction is binding on any permit transferee as a person acting in concert with Special Receiver. Id. at 7.
Defendant responds that any non-party accepting transfer of the Chestnut Oak permit would not be bound by the Consent Decree-he alleges the permit does not constitute a “Facility” and, even so, the Consent Decree only requires transferees of facilities to abide by a set of provisions that do not include paragraph 63. Mem. in Supp. of Def.'s Mot. to Resolve Dispute Under the Second Modified Consent Decree at 5-10, ECF No. 259. Furthermore, Special Receiver argues that any third-party transferees would not constitute a “successor and/or assign” under contract law or as construed in light of the overall Consent Decree, meaning that the Consent Decree is not binding on them. Id. at 11-12.
As to the second issue-whether the proposed surface mining at Chestnut Oak is necessary and incidental to reclamation-Plaintiffs allege that the proposed mining is not permissible under the Consent Decree because it has a primary impetus to generate revenue. Mem. in Supp. of Pls.' Mot. to Enforce the Second Modified Consent Decree at 10, ECF No. 257. Defendant, in turn, responds that even if paragraph 63 did apply to a third-party transferee, there is still no danger of violating the Consent Decree because the proposed surface mining is necessary and incidental to reclamation. Mem. in Supp. of Def.'s Mot. to Resolve Dispute Under the Second Modified Consent Decree at 13, ECF No. 259. At this stage in proceedings, the Court still has questions of fact as to the contents of permit revisions at the site and, ultimately, whether any proposed surface mining would be constrained to that which is necessary and incidental to reclamation. Because it lacks the information necessary to determine the outcome of this issue, the Court defers disposition on this issue pending an evidentiary hearing.
The Court has equitable authority to enforce the Consent Decree. “It has long been recognized the courts are vested with inherent power to modify injunctions they have issued.” Thompson v. U.S. Dep't of Hous. & Urban Dev., 404 F.3d 821, 825 (4th Cir. 2005). This authority extends to consent decrees, which operate the same as injunctions in that they regulate future conduct. Id.; see also Frew v. Hawkins, 540 U.S 431, 440 (2004) ( ). It does not matter that the Consent Decree was lodged more than six years ago: “so long as the injunction endures, the district court's enforcement authority can always be reawakened.” Brewster v. Dukakis, 3 F.3d 488 491 (1st Cir. 1993) (...
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