IN THE UNITED STATES BANKRUPTCY COURT FOR THE NORTHERN DISTRICT OF ALABAMA SOUTHERN DIVISION

Transcription

1 Case TOM Doc 40 Filed 2/07/8 Entered 2/07/8 7:06:56 Desc Main Document Page of 5 IN THE UNITED STATES BANKRUPTCY COURT FOR THE NORTHERN DISTRICT OF ALABAMA SOUTHERN DIVISION In re: MISSION COAL COMPANY, LLC, et al., Debtors. Chapter Case No TOM (Jointly Administered) BLUESTONE COAL CORPORATION AND DOUBLE-BONUS MINING COMPANY S MOTION FOR RELIEF FROM THE AUTOMATIC STAY COME NOW Bluestone Coal Corporation ( Bluestone ) and Double-Bonus Mining Company ( DBMC ), by and through undersigned counsel, and move the Court for relief from the automatic stay. In support hereof, Bluestone and DBMC respectfully show the Court as follows: Introduction Bluestone and DBMC are the plaintiffs in certain litigation against several of the Debtors and other non-debtor entities (Case No. 2:6-cv , in the U.S. District Court for the Southern District of West Virginia, Charleston Division) (the Litigation ). On October 3, 208 (after two days of court-supervised settlement negotiations), the parties agreed to settle the Litigation, and the terms of the settlement were read into the Court record by the affected parties and their insurers. In pertinent part, in consideration of Bluestone and DBMC s promise to release their claims, Debtor Pinnacle Mining Company, LLC ( Pinnacle ) agreed to pay in three installments totaling $4,000,000 to Bluestone/DBMC and certain other non-debtor entities (including several insurance carriers on whose policies Pinnacle qualified as an additional insured) agreed to pay a cumulative total of $8,60,000 to Bluestone/DBMC. The $4,000,000

2 Case TOM Doc 40 Filed 2/07/8 Entered 2/07/8 7:06:56 Desc Main Document Page 2 of 5 owed to Bluestone/DBMC by Pinnacle is not at issue in this Motion. Rather, in this Motion, Bluestone and DBMC simply seek an order granting relief from the automatic stay to permit Bluestone/DBMC to accept the non-debtor entities payments totaling $8,60,000 and to consummate the settlement of the Litigation with the non-debtor parties and their insurers. Therefore, out of an abundance of caution, Bluestone and DBMC ask the Court to enter an order granting Bluestone and DBMC relief from the automatic stay enabling Bluestone and DBMC to their collect the payments owed by non-debtor entities (totaling $8,60,000) in settlement of the Litigation and to otherwise consummate the settlement with these non-debtor entities. Background. On October 4, 208 (the Petition Date ), each Debtor filed a voluntary petition for reorganization under Chapter of the Bankruptcy Code. 2. Prior to the Petition Date, in July 206, Bluestone and DBMC commenced the Litigation against some of the Debtors and several other non-debtor entities. 3. The Litigation was based upon a March 205 incident in which DBMC s coal mine in Wyoming County, West Virginia was flooded with water, causing damages to Bluestone and DBMC (who owned the mining rights and some of the equipment located in the mine at the time it flooded). It was alleged in the Litigation that the defendants (including some of the Debtors) had caused the flooding and were, therefore, responsible for the damages incurred by Bluestone and DBMC. At the time of the incident Pinnacle was a wholly owned subsidiary of Cliffs Natural Resources, Inc. ( Cliffs ) and, therefore, qualified as an additional insured under Cliffs insurance policies. Bluestone was the mine owner and permit holder, while DBMC had been designated as the mine operator and was the actual employer and coal producing entity. Both entities were wholly owned subsidiaries of Bluestone Industries, Inc

3 Case TOM Doc 40 Filed 2/07/8 Entered 2/07/8 7:06:56 Desc Main Document Page 3 of 5 4. Another non-debtor defendant, Target Drilling, Inc. ( Target Drilling ), the contract driller for Pinnacle, had several policies that were implicated in the incident. 5. On October 2 3, 208, the United States District Court for the Southern District of West Virginia that had been overseeing the Litigation held a mandatory Settlement Conference and, during this conference, the parties and their insurance carrier representatives agreed to settle the Litigation. This agreement was read into the record in open court. A transcript of the hearing at which the settlement was read is attached hereto as Exhibit A. 6. The settlement of the Litigation was somewhat complex, as it involved multiple levels of primary and excess insurance coverage. The essential terms of the settlement were as follows: (a) (b) (c) (d) (e) (f) Debtor Pinnacle and Debtor Seneca Coal Resources, Inc. ( Seneca ) agreed to transfer to Bluestone all property or leasehold interests in the Pocahontas No. 4 coal seam located in Wyoming and McDowell Counties in West Virginia. Debtor Pinnacle agreed to pay a total of $4,000,000, with $,000,000 to be paid at the time of settlement, $,000,000 to be paid by March 3, 209, and $2,000,000 to be paid by June 30, 209. Debtor Seneca agreed to guarantee the payments owed by Pinnacle under the settlement agreement as described in Paragraph 5(b), above. Non-debtor Cliffs and its non-debtor insurance carrier National Union Fire Insurance Company of Pittsburgh (AIG) agreed to pay $3,900,000. The ACE Indemnity Insurance Company, which had issued an excess insurance policy to Cliffs, agreed to pay $3,000,000. Multiple other non-debtor insurance carriers agreed to pay, on account of policies that required that Pinnacle be insured under policies issued to Target Drilling, Inc., agreed to make payments totaling $,260, Bluestone and DBMC intend to file claims in this bankruptcy proceeding pertaining to the obligations described in Paragraphs 5(a), 5(b) and 5(c), above. Those obligations are not at issue in this Motion

4 Case TOM Doc 40 Filed 2/07/8 Entered 2/07/8 7:06:56 Desc Main Document Page 4 of 5 8. This Motion pertains only to the payments made the subject of Paragraphs 5(d), 5(e), and 5(f), above (the Non-Debtor Settlement Proceeds ). Bluestone and DBMC merely seek the relief requested in the Motion to provide assurance to the relevant non-debtor entities that they are not prohibited by the automatic stay or other bankruptcy law from making the payments contemplated under the pre-petition settlement agreement. Argument 9. The Non-Debtor Settlement Proceeds are owed to Bluestone and DBMC by nondebtor entities. Those payments are to be made from a co-defendant or insurance policy proceeds to which no Debtor has a cognizable claim. Likewise, no other party has a cognizable claim to those proceeds there is no other party who has a claim premised upon the flooding made the subject of the Litigation. 0. The Non-Debtor Settlement Proceeds are, therefore, not property of any bankruptcy estate.. Accordingly, Bluestone and DBMC are entitled to relief from the automatic stay to allow them to collect those payments and to consummate the settlement of the Litigation (except to the extent of any obligations owed by Pinnacle and Seneca). WHEREFORE, Bluestone and DBMC respectfully requests that this Court enter an Order: A. Granting Bluestone and DBMC relief from the automatic stay to collect the Non- Debtor Settlement Proceeds (which payments total $8,60,000); and B. Granting such other and further relief as the Court may deem just and proper

5 Case TOM Doc 40 Filed 2/07/8 Entered 2/07/8 7:06:56 Desc Main Document Page 5 of 5 Submitted on this 7th day of December 208. /s/ Russell Rutherford Richard P. Carmody Russell Rutherford Adams and Reese LLP Attorneys for Bluestone Coal Corporation and Double-Bonus Mining Company 90 6th Avenue North, Suite 3000 Birmingham, Alabama Telephone: (205) Facsimile: (205) russell.rutherford@arlaw.com CERTIFICATE OF SERVICE I hereby certify that, on this 7th day of December 208, the foregoing was filed and served via the Court s electronic case filing and noticing system to all parties registered to receive electronic notice in this matter. /s/ Russell Rutherford OF COUNSEL

6 IN THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF WEST VIRGINIA AT CHARLESTON x : BLUESTONE COAL CORPORATION, : a West Virginia Corporation; : and : DOUBLE-BONUS MINING COMPANY, : A West Virginia Corporation, : Civil Action No. 2:6-cv Plaintiffs, : : v. : : Date: October 3, 208 PINNACLE MINING COMPANY, LLC.,: a Delaware Corporation; : and TARGET DRILLING, INC., a : Pennsylvania Corporation; : SENECA COAL RESOURCES, : LLC, a Delaware Limited : Liability Company; : SENECA NORTH AMERICAN COAL, : LLC, (SNAC), a Delaware : Limited Liability Company; : CLIFFS NATURAL RESOURCES, : INC., an Ohio Corporation; : TAM INTERNATIONAL, INC., a : Delaware Corporation; and : C&J Well Services, Inc., a : foreign corporation licensed : to do business in : West Virginia under the trade : name of C&J Energy Services, : : Defendants. : x TRANSCRIPT OF SETTLEMENT CONFERENCE HELD BEFORE THE HONORABLE THOMAS E. JOHNSTON, CHIEF JUDGE UNITED STATES DISTRICT COURT IN CHARLESTON, WEST VIRGINIA Ayme A. Cochran, RMR, CRR (304) Case TOM Doc 40- Filed 2/07/8 Entered 2/07/8 7:06:56 Desc Exhibit A - transcript from Oct 3 hearing Page of 9

7 2 APPEARANCES: For the Plaintiffs: For the Defendants: R. SCOTT LONG, ESQ. DAVID F. NELSON, ESQ. Hendrickson & Long P. O. Box 070 Charleston, WV JOSHUA A. BERMAN, ESQ. White & Case 22 Avenue of the Americas New York, NY DOUGLAS C. LASOTA, ESQ. Marshall Dennehey Warner Coleman & Goggin Suite Grant Street Pittsburgh, PA 529 DENNIS R. ROSE, ESQ. Hahn Loeser & Parks Suite Public Square Cleveland, OH 444 JOHN L. MACCORKLE, ESQ. MacCorkle & Lavender P. O. Box 3283 Charleston, WV MARK E. GUSTAFSON, ESQ. White & Case Suite South Flower Street Los Angeles, CA 9007 MARC E. WILLIAMS, ESQ. Nelson Mullins Riley & Scarborough P. O. Box 856 Huntington, WV STEVEN GRUBBS, ESQ. Sheehy, Ware & Pappas 909 Fannin St., Ste Houston, TX 7700 Ayme A. Cochran, RMR, CRR (304) Case TOM Doc 40- Filed 2/07/8 Entered 2/07/8 7:06:56 Desc Exhibit A - transcript from Oct 3 hearing Page 2 of 9

8 3 DAN WORKER, ESQ. Lewis Brisbois 550 West Adams Street Suite 300 Chicago, IL 6066 LOUIS A. BOVE', ESQ. Bodell Bove' 845 Walnut St. #00 Philadelphia, PA 903 DEBRA T. VARNER, ESQ. McNeer Highland McMunn & Varner 400 W Main Street Clarksburg, WV 2630 SARAH A. WALLING, ESQ. Jenkins Fenstermaker, PLLC 325 Eighth Street Huntington, WV CHARLES A. HAFNER, ESQ. Nicolaides Fink Thorpe Michaelides Sullivan 0 South Wacker Drive Floor 2 Chicago, IL LOUIS C. LONG, ESQ. Thomas Thomas & Hafer 525 William Penn Place Suite 3750 Pittsburgh, PA 529 JOHN FIXTER, ESQ. In-House Counsel: GEORGE B. MICKUM GARY BROADBENT Court Reporter: Ayme Cochran, RMR, CRR Proceedings recorded by mechanical stenography; transcript produced by computer. Ayme A. Cochran, RMR, CRR (304) Case TOM Doc 40- Filed 2/07/8 Entered 2/07/8 7:06:56 Desc Exhibit A - transcript from Oct 3 hearing Page 3 of 9

9 PROCEEDINGS had before The Honorable Thomas E. Johnston, Chief Judge, United States District Court, Southern District of West Virginia, in Charleston, West Virginia, on October 3, 208, as follows: THE COURT: All right. This is a continuation of the brief proceeding we had yesterday morning in Bluestone versus Pinnacle and others. I am pleased to place on the record the fact that, after much hard work on the part of everybody, we have arrived at a settlement. And who will be placing -- spreading the settlement terms upon the record? Have you all talked about that? MR. NELSON: No, sir. MR. BERMAN: I -- THE COURT: I'm looking at Mr. Berman. MR. BERMAN: Yes, Your Honor. I think that would be me. I will try to recite it all accurately. THE COURT: Well, and -- MR. BERMAN: But -- THE COURT: Everybody else will have the opportunity to make any additions or corrections. MR. BERMAN: Okay. In that event, Judge, in exchange for full releases in both directions, the defendants have agreed to pay -- to make an aggregate payment with some components to be paid over time, as I will Ayme A. Cochran, RMR, CRR (304) Case TOM Doc 40- Filed 2/07/8 Entered 2/07/8 7:06:56 Desc Exhibit A - transcript from Oct 3 hearing Page 4 of 9

10 describe, of $2.5 million dollars to Plaintiff Bluestone, as well as to convey certain rights in an area approximate to the Pinnacle mine known as the "four seam". If we need a further description on the record, I will have to ask my client to do that. For its part, Pinnacle will be paying $ million dollars at the time the settlement documentation is executed; an additional $ million dollars on March 3st, 209; and a final $2 million dollars on June 30th of 209. It's my understanding that our co-defendant, Cliffs, will be making a payment simultaneous with the execution of the relevant documentation of $ million dollars. It's likewise my understanding that the Zurich insurer will be making a payment of $ million dollars, which is its policy limit; that AIG will be making a payment of approximately $2.9 million -- I think it's $ well, I don't have the number in front of me, which is the balance of its policy; and that Chubb will be making a payment of $3 million dollars coincident with the execution of the relevant releases in the various directions; and, finally, that Arch will be making a payment, also coincident with the execution of the relevant documentation, of $250, I believe that summarizes the terms of the settlement that we've arrived at. THE COURT: There was also $0, from Great Ayme A. Cochran, RMR, CRR (304) Case TOM Doc 40- Filed 2/07/8 Entered 2/07/8 7:06:56 Desc Exhibit A - transcript from Oct 3 hearing Page 5 of 9

11 6 Midwest MR. BERMAN: My apologies. Thank you, Judge. THE COURT: All right. Does anybody have any -- does Bluestone have any additions or corrections? MR. LONG: The only thing occurs to me, Your Honor, I believe there was, I think, an agreement by Seneca Resources to guarantee the Pinnacle portion. MR. BERMAN: That's right. THE COURT: All right. Does Cliffs have anything to add or -- MR. ROSE: Yes, Your Honor. One is that it was represented that the payments would be commensurate with the signing. The settlement payment will be made not when the documents are signed but within a period of time after the settlement documents are signed, just 30 days, but there can be some other time period. MR. BERMAN: Whatever we negotiate, which will be in good faith and consistent with general commercial practice. MR. ROSE: And I also just want to make it clear that nothing in this settlement affects the claims that Cliffs has asserted in the Delaware litigation or that Seneca has asserted in the Delaware litigation. This settlement has nothing to do with Delaware and does not impact any of those claims. Cliffs is reserving its right Ayme A. Cochran, RMR, CRR (304) Case TOM Doc 40- Filed 2/07/8 Entered 2/07/8 7:06:56 Desc Exhibit A - transcript from Oct 3 hearing Page 6 of 9

12 to recover any amounts relating to this litigation in that litigation. MR. NELSON: Your Honor, just as clarification, Mr. Berman, when he was describing the portion of the settlement having to do with the conveyance of the four seam rights, I note that he indicated "certain rights". We understand the agreement was for all rights that are possessed by the client to the four seam that would be transferred. MR. BERMAN: All rights possessed by my client. There are certain other rights relative. We're not the owner of the land. MR. NELSON: Right. Correct. MR. BERMAN: But we will convey all rights. MR. NELSON: All rights you have regarding the four seam? MR. BERMAN: Right. MR. NELSON: Correct. GOVERNOR JUSTICE: May I say -- may I say something, Judge Johnston? THE COURT: Certainly. GOVERNOR JUSTICE: No, I just -- the -- we all -- we all feel like that the four seam is sterilized completely, but we don't know that, but, you know, we -- we agreed, I thought what we agreed to, and I want everyone Ayme A. Cochran, RMR, CRR (304) Case TOM Doc 40- Filed 2/07/8 Entered 2/07/8 7:06:56 Desc Exhibit A - transcript from Oct 3 hearing Page 7 of 9

13 here to know, you know, I've been at this a long time. I don't have a rabbit up my sleeve or anything like that. I don't know anything about the four seam whatsoever except that -- just what I've been told. But, at some point in time, there could very well be something that is worth something. That's what we negotiated. And it's just that we understand NRP owns the four seam and leases the four seam to Pinnacle, or whomever that body may be, and we also understand that, surely, the mine can't be carried on and jeopardize any of the -- anything that goes on there with the mine. We got all that, and we understand all that. But the way it was read into in the beginning was, it would be a partial release to a partial of the four seam. It needs to be all the four seam that they have, period, but I understand they can't do anything, the NRP. THE COURT: I think that's consistent with everyone's understanding. All right. Anybody else here have anything to -- anything to add or contradict what the parties have already indicated under the settlement? Everybody is on the same page? If not, speak now, or forever hold your peace subject, of course, to preparation of documents. All right. Very well. Once again, I want to thank everyone. I know it's Ayme A. Cochran, RMR, CRR (304) Case TOM Doc 40- Filed 2/07/8 Entered 2/07/8 7:06:56 Desc Exhibit A - transcript from Oct 3 hearing Page 8 of 9

14 been a long couple of days, but I want to thank everyone for their participation and good faith work on getting this case resolved. I will -- one last thing. I will, as is my standard practice in any case that has settled before me, enter a standard dismissal order today which will allow for reopening of the case within 90 days if the wheels come off. Thank you very much. For those of you who are traveling, safe travels. (Proceedings concluded at :59 p.m., October 3, 208.) CERTIFICATION: I, Ayme A. Cochran, Official Court Reporter, certify that the foregoing is a correct transcript from the record of proceedings in the matter of Bluestone Coal Corp., et al., Plaintiffs v. Pinnacle Mining Company, et al., Defendants, Civil Action No. 2:6-cv-06098, as reported on October 3, s/ayme A. Cochran, RMR, CRR October 8, Ayme A. Cochran, RMR, CRR DATE Ayme A. Cochran, RMR, CRR (304) Case TOM Doc 40- Filed 2/07/8 Entered 2/07/8 7:06:56 Desc Exhibit A - transcript from Oct 3 hearing Page 9 of 9