Pettry v. Patriot Coal Corp. (In re Patriot Coal Corp.)

511 B.R. 563
CourtUnited States Bankruptcy Appellate Panel for the Eighth Circuit
DecidedJune 5, 2014
DocketBAP No. 14-6005
StatusPublished
Cited by3 cases

This text of 511 B.R. 563 (Pettry v. Patriot Coal Corp. (In re Patriot Coal Corp.)) is published on Counsel Stack Legal Research, covering United States Bankruptcy Appellate Panel for the Eighth Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Pettry v. Patriot Coal Corp. (In re Patriot Coal Corp.), 511 B.R. 563 (bap8 2014).

Opinion

SALADINO, Bankruptcy Judge.

This is an appeal by certain claimants (“Pettry Claimants”) arising from an order of the bankruptcy court1 filed February 11, 2014, denying a motion for reconsideration of a November 8, 2013, order sustaining the Debtor’s seventeenth omnibus objection to claims. For the reasons that follow, we affirm.

Factual Background

On March 28, 2002, the Pettry Claimants filed a putative class action against Eastern Associated Coal, LLC, f/k/a Eastern Associated Coal Corporation, and other chemical manufacturers and coal plants in the Circuit Court of Boone County, West Virginia. The suit was filed on behalf of coal plant workers and their spouses seeking money damages and equitable relief after enduring harms from exposure to chemicals used in the coal plants. The case was subsequently transferred to the Circuit Court of Marshall County, West Virginia, because a similar case was pending in that county. For reasons that are not entirely clear, the litigation progressed slowly over the next ten years.

On July 9, 2012, Patriot Coal Corporation and numerous affiliated entities, including Eastern Associated Coal, LLC filed voluntary petitions for relief under Chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court for the Southern District of New York.2 Venue of the bankruptcy cases was subsequently transferred to the United States Bankruptcy Court for the Eastern District of Missouri. Soon after the bankruptcy filing, the jointly administered Debtors filed a notice in the West Virginia litigation, alerting the state court of the pending bankruptcy cases. As a result of that notice, the West Virginia court issued a notice of intent to proceed with the Pettry Claimants’ litigation “relative to all parties and all causes of action, with the exception of any which may relate to Defendant, Patriot Coal Corp. and its affiliated companies.” On December 14, 2012, the Pettry Claimants timely filed proofs of claim in the Debtors’ bankruptcy cases based on the West Virginia litigation.3

[565]*565On January 11, 2013, the West Virginia court entered its “Order Granting Defendants’ Motions for Summary Judgment and Dismissing All Remaining Claims with Prejudice.” Pursuant to that order, the West Virginia court granted summary judgment in favor of the defendants other than the Debtors and dismissed the Pettry Claimants’ causes of action against the Debtors, with prejudice, as a “sanction for the dilatory manner in which [the Pettry Claimant’s] claims were prosecuted.” The Pettry Claimants sought reconsideration, which the state court denied. On May 22, 2013, the Pettry Claimants filed a notice of appeal with the West Virginia Supreme Court of Appeals.4

On September 20, 2013, Debtors filed an omnibus objection to the Pettry Claimants’ proofs of claim asserting the preclusive effect of the West Virginia state court judgment dismissing the litigation. The Pettry Claimants resisted the omnibus objection for several reasons, including the primary argument they make in this appeal — that the state court dismissal order was in violation of the automatic stay of 11 U.S.C. § 362(a) and is void. On November 8, 2013, after a hearing on the matter, the bankruptcy court issued an order sustaining the Debtors’ omnibus objection.

The Pettry Claimants did not appeal the bankruptcy court’s order of November 8, 2013. Instead, on December 16, 2013, after the time for appeal had expired, the Pettry Claimants filed a motion for reconsideration pursuant to 11 U.S.C. § 502(j) and Rule 3008 stating that “the equities of the matters at issue warrant the court’s further consideration.” The Pettry Claimants again argued that the state court action should still exist because the state court’s dismissal order was void as a violation of the automatic stay.

After a hearing on January 28, 2014, the bankruptcy court issued its order (filed February 11, 2014) denying the motion for reconsideration. The court held that the Pettry Claimants had not shown cause for reconsideration and that such a motion may not be used as a substitute for a timely appeal. The Pettry Claimants then filed this appeal. Accordingly, the order on appeal is the bankruptcy court’s February 11, 2014, order denying the Pettry Claimants motion for reconsideration pursuant to § 502(j) and Rule 3008, not the bankruptcy court’s November 8, 2013, order sustaining the objection to claims, nor, of course, the state court’s order dismissing the litigation.

Standard of Review

Abuse of discretion is the appropriate standard to review a bankruptcy court’s decision under 11 U.S.C. § 502(j). Halverson v. Estate of Cameron (In re Mathiason), 16 F.3d 234, 239 (8th Cir.1994) (citing Colley v. Nat’l Bank of Texas (In re Colley), 814 F.2d 1008, 1010 (5th Cir.1987) and Employment Sec. Div. v. W.F. Hurley, Inc. (In re W.F. Hurley, Inc.), 612 F.2d 392 (8th Cir.1980), cert. denied, 484 U.S. 898, 108 S.Ct. 234, 98 L.Ed.2d 193 (1987)). An abuse of discretion will only be found if the bankruptcy court fails to apply the proper legal standards or bases its judgment on clearly erroneous factual findings. Barger v. Hayes County Non-Stock Co-op (In re Barger), 219 B.R. 238, 243 (8th Cir. BAP 1998).

Discussion

The Pettry Claimants sought reconsideration of the bankruptcy court’s November 8, 2013, order under 11 U.S.C. § 502(j), which provides that “[a] claim that has been allowed or disallowed may [566]*566be reconsidered for cause. A reconsidered claim may be allowed or disallowed according to the equities of the case.” See also Fed. R. Bankr.P. 3008. However, while a bankruptcy court has the power to reconsider the allowance or disallowance of a claim for cause by virtue of § 502(j) and Bankruptcy Rule 3008, the court’s discretion should not encourage parties to avoid the usual rules for finality of contested matters. Colley, 814 F.2d at 1010.

We interpret Rule 9024 to provide that, when a proof of claim has in fact been litigated between parties to a bankruptcy proceeding, the litigants must seek reconsideration of the bankruptcy court’s determination pursuant to the usual Rule 60 standards if they elect not to pursue a timely appeal of the original order allowing or disallowing the claim.

Id. See also W.F. Hurley, Inc., 612 F.2d at 396.

An order denying relief under Rule 60(b) is a final order that may be appealed. Sanders v. Clemco Indus.,

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Cite This Page — Counsel Stack

Bluebook (online)
511 B.R. 563, Counsel Stack Legal Research, https://law.counselstack.com/opinion/pettry-v-patriot-coal-corp-in-re-patriot-coal-corp-bap8-2014.