517 B.R. 508
Bankr. D. Del.2014Background
- Knight Hawk Coal and Avoca sold coal to NewPage Wisconsin under a Coal Supply Agreement prior to bankruptcy.
- Debtors filed Chapter 11 on September 7, 2011; Critical Vendor Order authorized pre-petition vendor payments on Customary Trade Terms.
- A Critical Vendor Agreement granted an administrative claim under § 503(b)(9) to the Defendants in exchange for continued performance under the Coal Supply Agreement.
- Plan confirmed December 14, 2012; NP Creditor Litigation Trust established to liquidate preference claims; Catchall Provision in Plan applied to assuming contracts not listed on Plan Schedules.
- Coal Supply Agreement was not listed on Plan Schedules; subsequent coal agreement (2013–2014) existed and governed post-petition relations; business continued after Confirmation Date but before contract expiration.
- Trustee contends the Coal Supply Agreement was not an executory contract and thus not assumable; Kiwi doctrine argued to bar avoidance of pre-petition transfers under a post-petitionly assumed contract.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Was the Coal Supply Agreement an executory contract? | Trustee contends no material unperformed obligations; not executory. | Defendants argue Coal Supply Agreement evidences ongoing reciprocal obligations and is executory. | Coal Supply Agreement is an executory contract. |
| Is the Coal Supply Agreement eligible for assumption under Article VIII Catchall? | Novation/ supersession by Critical Vendor Agreement means not eligible. | Critical Vendor Agreement did not supersede; it is separate and merely confirms terms. | Coal Supply Agreement was eligible for assumption; Catchall provision applies. |
| Does Kiwi bar avoidance of pre-petition transfers arising under an assumed contract? | Kiwi should limit avoiding transfers tied to an assumed contract. | Kiwi applies; trustee cannot avoid transfers under an assumed contract post-petition. | Trustee cannot recover under § 547 with respect to transfers under an assumed contract; summary judgment for Defendants. |
| Did the Subsequent Coal Supply Agreement affect the assumption analysis of the Coal Supply Agreement? | Subsequent agreement undermines the need to assume the earlier contract. | Subsequent agreement coexists; initial contract remained in effect through 2012 and was intended to be assumed. | Deliberations support continued compliance under Coal Supply Agreement through 2012; assumption valid. |
Key Cases Cited
- In re Kiwi Int'l Air Lines, Inc., 344 F.3d 311 (3d Cir. 2003) (Kiwi doctrine limits avoidance of pre-petition transfers under assumed contracts)
- Sharon Steel Corp. v. Nat'l Fuel Gas Distrib. Corp., 872 F.2d 36 (3d Cir. 1989) (reciprocal ongoing obligations under contracts indicate executory status)
- Carolina Fluid Handling Intermediate Holding Corp., 467 B.R. 743 (Bankr. D. Del. 2012) (supply agreements with ongoing obligations are executory and potentially assumable)
- Delta Mills, Inc. v. GMAC Comm. Fin., Inc., 404 B.R. 95 (Bankr. D. Del. 2009) (summary judgment standard; articulated framework for material facts)
- Kaye v. A.R.E. Distribution & Alpine Records, LLC (In re Value Music Concepts, Inc.), 329 B.R. 111 (Bankr. N.D. Ga. 2005) (settlement-type agreements may not be executory contracts)