Official Committee of Unsecured Creditors of Appalachian Fuels, LLC v. Energy Coal Resources, Inc. (In re Appalachian Fuels, LLC)

472 B.R. 731, 2012 WL 1344984, 2012 U.S. Dist. LEXIS 54410
CourtDistrict Court, E.D. Kentucky
DecidedApril 18, 2012
DocketCivil Action Nos. 0:11-CV-128, 0:11-CV-129, 0:11-CV-130, 0:11-CV-131, 0:11-CV-132, 0:11-CV-133, 0:11-CV-134, 0:11-CV-135, 0:11-CV-136; Adversary No. 11-01041
StatusPublished
Cited by23 cases

This text of 472 B.R. 731 (Official Committee of Unsecured Creditors of Appalachian Fuels, LLC v. Energy Coal Resources, Inc. (In re Appalachian Fuels, LLC)) is published on Counsel Stack Legal Research, covering District Court, E.D. Kentucky primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Official Committee of Unsecured Creditors of Appalachian Fuels, LLC v. Energy Coal Resources, Inc. (In re Appalachian Fuels, LLC), 472 B.R. 731, 2012 WL 1344984, 2012 U.S. Dist. LEXIS 54410 (E.D. Ky. 2012).

Opinion

MEMORANDUM OPINION AND ORDER

DAVID L. BUNNING, District Judge.

I. INTRODUCTION

This bankruptcy adversary proceeding comes before the Court on several Defendants’ and Plaintiffs motions to withdraw the reference to the United States Bank[734]*734ruptcy Court for the Eastern District of Kentucky. On June 11, 2009, several creditors filed an Involuntary Petition against Debtor Appalachian Fuels, LLC (“the Debtor”) under Chapter 7 of the United States Bankruptcy Code. (09-10343; Doc. # 1). Thereafter, some of the Debtor’s affiliates filed Chapter 11 petitions. On June 29, 2009, the Bankruptcy Court converted the Debtor’s Chapter 7 bankruptcy to a Chapter 11. (09-10343; Doc. # 144). On July 14, 2009, the Court appointed the Official Committee of Unsecured Creditors of Appalachian Fuels, LLC (“the Committee”) 1 (09-10343; Doc. # 194). On July 17, 2009, the Court ordered that the Debt- or’s Chapter 11 bankruptcy be jointly administered with the bankruptcies of its affiliates.2

On June 22, 2011, the Committee filed its Complaint, commencing the above-captioned adversary proceeding. (11-1041; Doc. # 1). On August 19, 2011, the Committee filed its First Amended Complaint. (11-1041; Doc. #20). The Amended Complaint asserts 107 separate causes of action against 37 different defendants. (Id.).

This matter is currently before the Court on Defendant Business Aircraft Leasing, Inc.’s (BALI) Motion to Withdraw the Reference (11-128; Doc. # 1), Defendants Bruce Addington, Erik Ad-dington, EBA Development LLC, and Horsepower Leasing, LLC’s Motion to Withdraw the Reference (11-129; Doc. # 1), Defendants Machinery Sales and Service, LLC, John C. Smith, and Jeffrey Muncy’s Motion to Withdraw the Reference (11-130; Doc. # 1), Defendants Energy Coal Resources, Inc. (ECR), Illinois Fuel Company, Inc., and Stephen Adding-ton’s Motion to Withdraw the Reference (11-131; Doc. # 1), Defendants Robert Addington, Frank Bennett, Julie Hudson, David Jones, Mark Garrett Smith, and Gregory Stumbo’s Motion to Withdraw the Reference (11-132; Doc. # 1), Defendants Larry Addington, Addington Aviation, LLC, Addington Land Company, Appalachian Machinery, Inc. (AMI), Big Sandy Properties, LLC, Carbon Fuels Illinois, LLC, Larry Austin Dickerson, Midwestern Biofuels, LLC, Pyramid Island Development, Inc., Kathryn Reid, and Task Trucking, Inc.’s Motion to Withdraw the Reference (11-133; Doc. # 1), Plaintiff Official Committee of Unsecured Creditors’ Conditional Motion to Withdraw the Reference (11-134; Doc. # 1), Defendant Jet Support Services, Inc.’s Motion to Withdraw the Reference (11-135; Doc. # 1), and Defendant Tri-State Airport Authority’s Motion to Withdraw the Reference (11-136; Doc. # 1). The motions have been fully briefed, and oral argument was held on April 11, 2012 in Covington. The matter is now ripe for review. For the reasons stated herein, the moving parties’ motions to withdraw the reference are hereby DENIED.

II. FACTUAL AND PROCEDURAL BACKGROUND

The Committee commenced this adversary proceeding to (1) avoid and recover funds that were allegedly fraudulently or preferentially transferred to the Defen[735]*735dants; (2) recover damages arising out of Defendants’ corporate waste, breaches of fiduciary duty, civil conspiracy, unjust enrichment, and aid and abetment of other Defendants in doing the same; and (3) recover damages arising from the legal malpractice and conflicted representation committed by Appalachian Fuels’ attorneys.3 (11-1041; Doc. #20, ¶ 1). The Committee alleges that Appalachian Fuels was reduced to an “insolvent husk” as the result of self-dealing by brothers Larry and Stephen Addington (along with other family members and friends) who “surreptitiously used Appalachian Fuels to generate funds and acquire assets that they then transferred to themselves and numerous corporate alter egos,” referred to in the Amended Complaint as “Insiders.” (Id. at 2). For several years, the Insiders forced Appalachian Fuels to enter into several transactions that benefitted themselves at the expense of Appalachian Fuels and its creditors. (Id. at 3). These transactions shifted valuable assets to the Insiders while leaving any associated liabilities with Appalachian Fuels. (Id). This continued even after Appalachian Fuels became insolvent and had been forced into bankruptcy. (Id). Thus, the Insiders actually intended to and did remove assets from the reach of creditors for their own benefit. (Id).

Defendants ECR, Illinois Fuel, Stephen-Addington, Larry Addington, Addington Land, AMI, Big Sandy, and Task Trucking have each filed proofs of claims against the Debtor’s estate in the underlying bankruptcy action. Plaintiffs final claim in the Amended Complaint is an objection to these proofs of claim. Pursuant to 11 U.S.C. § 502(d), Plaintiff requests that the Court disallow Defendants’ proofs of claim against the Debtor’s estate. The remaining Defendants did not file proofs of claim.

On October 19, 2011, the parties entered into a stipulation to designate which of the claims asserted by the Committee are core and which are non-core.4 This stipulation was signed by the bankruptcy judge and filed on October 20, 2011. (11-1041; Doc. #20). The stipulation specifically notes that all parties entered the stipulation “with the explicit understanding that they are not endorsing the designation of any other Defendant.” (Id. at 2 n. 4). Furthermore, it states that “each Defendant takes no position as to whether any other Defendant’s designation of claims as core or non-core are correct.” (Id. at 3).

With the exception of Defendant Mason’s First Set of Interrogatories and Requests for Production of Documents (11-1041; Doc. # 52), discovery has not yet commenced in the adversary proceeding. Currently pending before the Bankruptcy [736]*736Court are six motions to dismiss. (11-1041; Docs. # 53, 58, 61, 64, 68, 130). However, on February 3, 2012, the Bankruptcy Court ordered that all matters in the adversary proceeding be stayed pending disposition of the motions to withdraw the reference presently before this Court. (11— 1041; Doc. # 172).

III. ANALYSIS

District courts have original and exclusive jurisdiction over “all cases under title 11.” 28 U.S.C. § 1334(a). District courts also have original but not exclusive jurisdiction over all civil proceedings “arising under title 11” or “arising in or related to cases under title 11.” § 1334(b). Proceedings that arise in a bankruptcy case or under title 11 are deemed “core proceedings,” while those that are otherwise related to a case under title 11 are considered “non-core proceedings.” Stern v. Marshall, 564 U.S. -, 131 S.Ct. 2594, 2605, 180 L.Ed.2d 475 (2011) (citing 28 U.S.C. § 157(b), (c)). A district court may refer any or all actions within its bankruptcy jurisdiction to the bankruptcy judges for that district. 28 U.S.C. § 157(a).

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Cite This Page — Counsel Stack

Bluebook (online)
472 B.R. 731, 2012 WL 1344984, 2012 U.S. Dist. LEXIS 54410, Counsel Stack Legal Research, https://law.counselstack.com/opinion/official-committee-of-unsecured-creditors-of-appalachian-fuels-llc-v-kyed-2012.