551 B.R. 631
N.D. Ala.2016Background
- Walter Energy and affiliates filed Chapter 11 after market declines and sought to sell core Alabama mining assets under 11 U.S.C. § 363 to Coal Acquisition LLC (the stalking-horse purchaser).
- Coal Acquisition’s bid included a large credit bid and cash, conditioned on acquiring assets "free and clear" and not assuming Coal Act liabilities.
- Bankruptcy Court entered a Sale Order authorizing the sale free and clear of Coal Industry Retiree Health Benefit Act (Coal Act) premiums and finding the purchaser would not be a successor for Coal Act purposes.
- Appellants (Coal Act funds/claimants) appealed, arguing the Bankruptcy Court lacked jurisdiction under the Tax Anti-Injunction Act (Tax AIA) and that future Coal Act liabilities are not "interests in property" extinguishable under § 363(f).
- District court reviewed legal questions de novo, affirmed the Bankruptcy Court: (1) the Tax AIA did not bar the bankruptcy court’s jurisdiction; (2) Coal Act premiums constitute extinguishable "interests" under § 363(f); and (3) Coal Acquisition is not necessarily a successor in interest for Coal Act obligations.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Tax Anti-Injunction Act bars bankruptcy court from ordering sale free and clear of Coal Act payments | Tax AIA withdraws jurisdiction because Coal Act premiums are "taxes" and courts cannot enjoin tax assessment/collection | Coal Act assessments are labeled "premiums" and function like plan contributions; NFIB’s label-focused reasoning and Leckie exception mean Tax AIA does not bar pre-sale adjudication | Tax AIA does not preclude jurisdiction; court accepts Coal Act premiums are not within Tax AIA’s bar (and even if they were, Leckie exception applies) |
| Whether Coal Act future liabilities are "interests in property" under 11 U.S.C. § 363(f) | Coal Act obligations are not in rem property interests and thus cannot be extinguished by § 363(f) | § 363(f) should be read broadly to include obligations that flow from ownership, including Coal Act successor liability; § 363(f)(1) and (5) apply | Coal Act premiums are "interests" subject to extinguishment under § 363(f), particularly under subsections (1) and (5) |
| Whether § 363(f)(1) or (5) permit free-and-clear sale of assets vis-à-vis Coal Act claims | Appellants contend statutory scheme doesn’t allow stripping successor liability via § 363(f) | Bankruptcy court found no Coal Act prohibition on free-and-clear sale (f)(1); Coal Act liabilities are monetizable so (f)(5) applies | § 363(f)(1) and § 363(f)(5) provide authority to approve sale free and clear of Coal Act interests |
| Whether purchaser (Coal Acquisition) will be a successor in interest for Coal Act liabilities | Appellants assume asset purchaser will be successor and thus liable under Coal Act | Sale agreement and Bankruptcy Court order specify purchaser is not successor; traditional successor-liability rules do not automatically attach on asset purchase | Court affirms Bankruptcy Court may adjudicate and order purchaser not to be Coal Act successor; purchaser is not automatically successor-in-interest |
Key Cases Cited
- National Federation of Independent Business v. Sebelius, 567 U.S. 519 (2012) (labels Congress used inform application of Tax Anti‑Injunction Act)
- United Mine Workers of Am. 1992 Benefit Plan v. Leckie Smokeless Coal Co., 99 F.3d 573 (4th Cir. 1996) (bankruptcy court may adjudicate successor Coal Act liability pre‑sale; Tax AIA does not bar relief in that context)
- In re Trans World Airlines, Inc., 322 F.3d 283 (3d Cir. 2003) (broad reading of "interest in property" under § 363(f) to include obligations reducible to money)
- Begier v. Internal Revenue Service, 496 U.S. 53 (1990) (broad construction of "property of the estate" in bankruptcy)
- Mich. Empl. Sec. Comm’n v. Wolverine Radio Co., 930 F.2d 1132 (6th Cir. 1991) (supporting expansive interpretation of § 363(f) language)
- In re Chrysler LLC, 576 F.3d 108 (2d Cir. 2009) (court decisions approving broad application of § 363(f))