In re Murray Energy Holdings Co.

654 B.R. 279

IN RE: MURRAY ENERGY HOLDINGS CO., et al., Debtors.

Case No. 19-56885

(Jointly Administered)

United States Bankruptcy Court, S.D. Ohio, Western Division

Signed September 29, 2023

Brenda K. Bowers, Tiffany Strelow Cobb, Columbus, OH, Benjamin Butterfield, Todd Goren, Jennifer Marines, Lorenzo Marinuzzi, Erica Richards, Allison B. Selick, Morrison & Foerster LLP, New York, NY, Melissa S. Giberson, Thomas Loeb, Vorys, Sater, Seymour and Pease LLP, Columbus, OH, for Creditor Committee.

Roma N. Desai, Bernstein Shur Sawyer & Nelson PA, Portland, ME, for Special Counsel.

Jeremy Shane Flannery, Benjamin A. Sales, Office of the United States Trustee, Columbus, OH, Monica V. Kindt, Cincinnati, OH, for U.S. Trustee.

Scott Alan Norcross, Kohrman Jackson & Krantz, Cleveland, OH, for Respondent.

MEMORANDUM OPINION AND ORDER (A) GRANTING IN PART AND DENYING IN PART PLAN ADMINISTRATOR'S MOTION FOR SUMMARY JUDGMENT SUSTAINING THE FIRST OMNIBUS OBJECTION TO CERTAIN MECHANIC'S LIEN CLAIMS OF ANDERSON EXCAVATING, LLC (Doc. 2393) and (B) GRANTING IN PART AND DENYING IN PART ANDERSON'S CROSS-MOTION FOR SUMMARY JUDGMENT (Doc. 2420)

John E. Hoffman, Jr., United States Bankruptcy Judge

I. Introduction

Murray Energy Holdings Co. and its affiliated debtors and debtors in possession ("Debtors") initiated this contested matter by filing an objection ("Objection") (Doc. 1749) to the mechanic's lien claims of Anderson Excavating, LLC ("Anderson"). The plan administrator appointed under the Debtors' confirmed Chapter 11 plan ("Plan Administrator") then filed its motion for summary judgment on the claim objection ("Motion") (Doc. 2402). Anderson filed a response to the Objection ("Response") (Doc. 1836) as well as a cross-motion for summary judgment ("Cross-Motion") (Doc. 2420) and amended cross-motion ("Amended Cross-Motion") (Doc. 2486). The Plan Administrator filed responses in opposition to the Cross-Motion and Amended Cross-Motion (Docs. 2459 and 2518), and a motion to strike the Amended Cross-Motion. (Doc. 2510). For the reasons stated below, the Plan Administrator's Motion is granted in part and denied in part, and Anderson's Cross-Motion and Amended Cross-Motion are granted in part and denied in part.

II. Jurisdiction and Constitutional Authority

The Court has jurisdiction to hear and determine this matter under 28 U.S.C. § 1334(b) and the general order of reference entered in this district in accordance with 28 U.S.C. § 157(a). An action seeking the allowance or disallowance of claims against the estate is a core proceeding, see 28 U.S.C. § 157(b)(2)(B), as is the determination of the validity, extent, or priority of liens, see 28 U.S.C. § 157(b)(2)(K). "To the extent [a] matter involves a determination of the validity, extent and priority of liens on property of the estate and claims against such property, the matter 'would necessarily be resolved in the claims allowance process,' " BMO Harris Bank, N.A. v. Vista Mktg. Grp., Ltd. (In re Vista Mktg. Grp., Ltd.), 548 B.R. 502, 512 (Bankr. N.D. Ill. 2016) (quoting Stern v. Marshall, 564 U.S. 462, 499, 131 S.Ct. 2594, 180 L.Ed.2d 475 (2011)), and a bankruptcy court therefore would have the constitutional authority to finally adjudicate it. See Waldman v. Stone, 698 F.3d 910, 919 (6th Cir. 2012) ("When a debtor . . . seeks disallowance of a creditor's claim against the estate . . . the bankruptcy court's authority is at its constitutional maximum."); Black Diamond Comm. Fin. L.L.C. v. Murray Energy Corp. (In re Murray Energy Holdings Co.), 616 B.R. 84, 87 (Bankr. S.D. Ohio 2020) ("[B]ankruptcy courts have the constitutional authority to enter final orders adjudicating the validity and priority of liens on property of the estate."). The Court accordingly has the constitutional authority to finally adjudicate this contested matter.

III. Background

Anderson, a supplier of services, materials and equipment for some of the Debtors' mining operations, filed mechanic's liens in West Virginia and Pennsylvania to secure payment of money owed by the Debtors.¹ Resp., Doc. 1836 at 3. Mechanic's liens are "statutory lien[s] secured by real or personal property, often for goods or services supplied in connection with improving, repairing or maintaining the property." In re Murray Energy Holdings Co., 639 B.R. 463, 467 (Bankr. S.D. Ohio 2022) ("WV-Eligibility Opinion"). Anderson then filed proofs of claim based upon its mechanic's liens: Claim Nos. 1280, 1283, 1284, 1289, 1285, 1286 and 1300.² Each proof of claim was accompanied by a number of invoices supporting the mechanic's lien.

This is not the first time the Court has considered Anderson's claims. The Court previously issued its WV-Eligibility Opinion, which addressed the secured status of Anderson's claims and those of other creditors that asserted secured claims based on their West Virginia's mechanic's liens. See WV-Eligibility Op., 639 B.R. at 463. In the WV-Eligibility Opinion, the Court addressed whether Anderson and other mechanic's lien claimants were eligible to file mechanic's liens under West Virginia's laborer's lien statute, W.Va. Code § 38-2-31 (West 2023) ("Section 31"), or were required to file their mechanic's liens under West Virginia's contractor's lien statute, W.Va. Code § 38-2-1, which they did not do.

The Court granted partial summary judgment to Anderson and the other mechanic's lienholders on the eligibility issue, holding they had a right to file mechanic's liens under the laborer's lien statute. WV-Eligibility Op., 639 B.R. at 490. But the Court also held that Section 31 provides priority to a lienholder only "to the extent and value of one month's . . . work or labor," and another West Virginia statute, W. Va. Code § 38-2-33 ("Section 33"), requires mechanic's lienholders to show in their notices of lien the one-month amounts for which they claim priority.³ Id. at 485-87. The Court found that, with one exception (Claim No. 1280), Anderson's mechanic's liens had not properly shown the one-month amounts, and thus deferred a ruling as to what portion of Anderson's claim had priority status vis-à-vis later filed liens until Anderson had the opportunity to comply the Court's directives set forth in the WV-Eligibility Opinion. Id. at 489-90.

Ordinarily, when a bankruptcy court uses the phrase "priority status," it does so to denote that a particular unsecured claim or expense is entitled to priority in payment under § 507 of the Bankruptcy Code. See 11 U.S.C. § 507. Here, however, the Court uses the phrase priority status to refer to the priority that Section 31 grants a mechanic's lienholder over a later-filed lien to the extent of one month's work or labor. And when the Court finds that all or part of an amount on an Anderson invoice is entitled to priority status, that amount may be included in calculating the allowed amount of Anderson's related secured claims.

Under the WV-Eligibility Opinion, Claim No. 1280 was allowed in full as a secured claim with priority over any later lien because the invoices attached to the proof of claim and the related notice of lien are all for work that occurred within a one-month span. Id. at 487. As for five of Anderson's claims—Claim Nos. 1283, 1284, 1285, 1288 and 1300—the WV-Eligibility Opinion noted that each was accompanied by multiple invoices for work done over several months and directed Anderson to "determine which month's work it wishe[d] to claim as priority for each Notice of Lien within [the] claims and [ ] calculate the total of that month's work." The WV-Eligibility Opinion further directed Anderson to "provide the calculations and the resulting claimed amounts to [the Plan Administrator.]" Id. at 488. The seventh claim, Claim No. 1286, was accompanied by a single invoice that covered a period of more than one month. As to that claim, the WV-Eligibility Opinion directed Anderson to "document the amount of work performed within whichever one-month period it wishes to claim as priority . . . calculate the amount due for that work . . . and provide the documentation, calculation and priority amount claimed to [the Plan Administrator.]" Id. The WV-Eligibility Opinion provided that the Plan Administrator could object to Anderson's submissions, after which the Court would determine whether Anderson had complied with Section 33. Id.

Anderson filed its Notice by Anderson Excavating, LLC with Respect to Claims 1283, 1284, 1285, 1286, 1288 and 1300 Pursuant to the Court's Memorandum Opinion and Order Dated March 31, 2022 ("Priority Notice") (Doc. 2935), accompanied by Exhibits A (one-month calculation summaries) and B (invoices) (Docs. 2935-1 and 2935-2). The Plan Administrator responded with the Plan Administrator's Objection to Anderson Excavating's LLC's Notice ("Priority Objection") (Doc. 2955). The Priority Objection included an Exhibit A, Doc. 2955-1, that contained six tables listing all the invoices pertaining to each claim and highlighting those that are for work done outside the one-month period, or in one instance, failed to include a date range.

Although not authorized by the WV-Eligibility Opinion, Anderson filed a Response to the Priority Objection ("Priority Objection Response") (Doc. 2965) with an attached declaration of an Anderson project engineer (Doc. 2965-1) and an additional exhibit containing work logs and supplementary details that changed its one-month calculations for Claim Nos. 1283, 1285, 1286 and 1288 as well as the one-month dates for Claim No. 1286 (Doc. 2965-2). The Plan Administrator then filed a second objection ("Second Priority Objection") (Doc. 2972), arguing that the Court should disregard the unauthorized Priority Objection Response.

IV. Summary Judgment Standard

Under Federal Rule of Civil Procedure 56, made applicable here by Rule 7056 of the Federal Rules of Bankruptcy Procedure, a court "shall grant summary judgment if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a...