In re: Peabody Energy Corporation. County of San Mateo, California; City of Imperial Beach, California; County of Marin, California, Appellants v. Peabody Energy Corporation, Appellee, Office of U.S. Trustee, U.S. Trustee
No. 18-3242
No. 19-1767
United States Court of Appeals For the Eighth Circuit
Submitted: March 10, 2020. Filed: May 6, 2020
Before GRUENDER, ARNOLD, and SHEPHERD, Circuit Judges.
Appeals from United States District Court for the Eastern District of Missouri - St. Louis
In April 2016, Peabody Energy Corporation filed for Chapter 11 bankruptcy. As part of the court-approved plan governing Peabody‘s reorganization, governmental entities with claims against Peabody had to file proof of their claims with the bankruptcy court1 by a certain date or the claims were barred. After that date came and went, Peabody emerged as a reorganized company.
A few months after Peabody was reorganized, three California municipalities (San Mateo County, Marin County, and the City of Imperial Beach) sued Peabody and more than thirty other energy companies for their alleged contributions to global warming. Each of these municipalities filed a separate though nearly identical lawsuit, all in California state courts, raising claims of strict liability and negligence for failing to warn, strict liability for a design defect, negligence, trespass, and private nuisance. They also brought two public-nuisance claims, one on behalf of the
The bankruptcy court agreed. It began with a review of the municipalities’ complaints, explaining that they focused on acts occurring from 1965 to 2015. The court noted, moreover, that the complaints mentioned Peabody sparingly, and, when they did, they alleged that Peabody had exported coal from California, continued to export coal from California, participated in “a national climate change science denial campaign” in 1991, and was linked to groups seeking to undermine the connection between the companies’ fossil fuel products and climate change. The bankruptcy court determined that the municipalities’ claims, which involved Peabody‘s pre-bankruptcy conduct save for the anodyne allegation that Peabody continues to export coal from California, were all discharged during Peabody‘s bankruptcy proceedings, and so it enjoined the municipalities from pursuing their claims against Peabody. The municipalities appealed the bankruptcy court‘s decision to the district court,2 which affirmed. See
The municipalities now appeal to our court. When a bankruptcy court‘s decision is appealed to the district court, that court acts as an appellate court by reviewing legal determinations de novo and factual findings for clear error. See Fix v. First State Bank of Roscoe, 559 F.3d 803, 808 (8th Cir. 2009). When the case comes to us, “[a]s the second court of appellate review, we conduct an independent review of the bankruptcy court‘s judgment applying the same standards of review as the district court.” Id.
Confirmation of a Chapter 11 reorganization plan discharges claims “[e]xcept as otherwise provided . . . in the plan,” see
As relevant, the first provision that the municipalities rely on exempts from discharge governmental claims brought “under any applicable Environmental Law to which any Reorganized Debtor is subject,” but the bankruptcy court held that the municipalities’ claims were not made under “Environmental Law” as the plan contemplates that phrase and so this carveout did not save the municipalities’ claims from discharge. The plan defined Environmental Law as “all federal, state and local statutes, regulations and ordinances concerning pollution or protection of the environment, or environmental impacts on human health and safety, including [ten federal statutes] and any state or local equivalents of the foregoing.” A sample of the federal statutes listed includes the Atomic Energy Act; the Clean Air Act; the Comprehensive Environmental Response, Compensation, and Liability Act;
The municipalities argue that their common-law claims against Peabody are “state or local equivalents” of “statutes, regulations and ordinances concerning pollution” and so forth because the municipalities raised these claims to protect the environment. But as the bankruptcy court explained, when the definition of Environmental Law mentioned “state or local equivalent[s],” it was talking about equivalents to the ten federal statutes listed, not equivalents to “statutes, regulations and ordinances concerning pollution.” We think this is a reasonable conclusion because we doubt the drafters of the definition would feel the need to clarify that the equivalents could be state or local when the part of the definition dealing with pollution already explicitly said that state and local laws could qualify. In other words, under the municipalities’ reading, the second mention of “state” and “local” would be superfluous, and so we don‘t see how that reading could comport with the parties’ intentions. And the municipalities have not demonstrated that their common-law claims are equivalent to the listed federal statutes.
We also think that if the drafters of this carveout had meant for it to include common-law claims they would have explicitly said so, or at a minimum would not have specifically limited Environmental Law to “statutes, regulations and ordinances.” The bankruptcy court‘s interpretation is at least a reasonable one, and so we cannot say that the bankruptcy court abused its discretion in concluding that the municipalities’ common-law claims did not fall within the plan‘s definition of Environmental Law.
The municipalities’ nuisance claims are a closer call because they rely on specific California statutes, bringing them at least arguably more in line with the plan‘s definition of Environmental Law. But unlike the federal statutes listed, nuisance claims have their roots in the common law and are often referred to as common-law claims, including in Missouri—the jurisdiction that Peabody calls home—whose laws may well have been the focus of the parties who drafted the carveout. See Smith v. ConocoPhillips Pipe Line Co., 801 F.3d 921, 926–27 (8th Cir. 2015). So we are not convinced that the incidental tethering of the nuisance claims here to statutes in a jurisdiction far from where Peabody‘s bankruptcy proceedings occurred was the kind of claim the drafters intended to carve out. And as the bankruptcy court noted, the federal statutes listed are designed to remedy particular environmental problems. In contrast, nuisance law, while it may be used to resolve an environmental problem, does not focus on particular environmental problems. In fact, a nuisance can be something with no effect whatsoever on the environment—like something “indecent or offensive to the senses” or the sale of illegal drugs. See
The municipalities emphasize that the plan, in a separate provision governing its interpretation, explained that when the plan used the word “including,” it meant “including without limitation,” and so the municipalities urge us not to dwell exclusively on the list of federal statutes in
A relevant portion of the second provision that the municipalities rely on for the survival of their claims exempts from discharge a governmental claim brought “under any applicable police or regulatory law.” The bankruptcy court held that the claims here were not brought under a police or regulatory law, drawing from a section of the bankruptcy code, see
The municipalities maintain on appeal that we should not review this aspect of the bankruptcy court‘s decision for an abuse of discretion because in this instance the court was interpreting a provision of the bankruptcy code, which raises a question of law that we would review de novo. See In re Archdiocese of Saint Paul & Minneapolis, 888 F.3d 944, 950 (8th Cir. 2018). We disagree. It is apparent to us that the bankruptcy court here was simply construing the terms of the plan, and, as it explained, thought that § 362 provided a helpful guide in that effort. We therefore think what we have before us is a question about the meaning of the plan, not the bankruptcy code, and so we review the bankruptcy court‘s holding for an abuse of discretion.
We see no abuse of discretion in the bankruptcy court‘s decision to draw on § 362, along with our court‘s interpretation of it, in determining the meaning of the plan. To the extent the municipalities are objecting to the way the bankruptcy court applied the pecuniary-purpose rule, we reject their contention. If the municipalities forced Peabody to disgorge its profits and recovered the damages they sought, they would diminish the value of the other creditors’ ownership stakes in the reorganized Peabody, redistributing the bankruptcy estate without ever having themselves participated in the bankruptcy proceedings.
In addition, the municipalities seek money as the victims of alleged torts, not
The municipalities also assert that, even if the plans did not exempt all their claims from discharge, Peabody‘s bankruptcy did not discharge their representative public-nuisance claim. Before addressing this argument, a brief survey of the relevant bankruptcy law is in order. Confirmation of a Chapter 11 plan for reorganization “discharges the debtor from any debt that arose before the date of such confirmation,” regardless of whether “proof of the claim based on such debt is filed” with the bankruptcy court.
The municipalities contend that the public-nuisance claim they assert on behalf of the people of California is not a claim under bankruptcy law because California law does not permit them to recover damages under that theory; they can obtain only an equitable decree ordering Peabody to abate the nuisance. As a result, the argument goes, they do not have a “right to payment” or an equitable remedy that “gives rise to a right to payment,” so Peabody‘s bankruptcy does not affect this claim in their complaint.
The difficulty with this argument is that, even though California law limits the recovery on this claim to equitable relief, that relief can include obligations to pay money. As one of the cases that the municipalities rely on most heavily explains, it is a “myth” that “equitable remedies are always orders to act or not to act, rather than to pay,” as “equity often orders payment[s]” that can be discharged in bankruptcy. See United States v. Apex Oil Co., 579 F.3d 734, 736 (7th Cir. 2009). In California, a party who commits a public nuisance can be ordered to pay into a fund, overseen by a receiver, to remedy or eliminate the hazard complained of rather than being ordered to clean up the nuisance themselves. See, e.g., People v. ConAgra Grocery Prods. Co., 227 Cal. Rptr. 3d 499, 569–70 (Cal. Ct. App. 2017). It does not matter that the municipalities do not request that Peabody be ordered to pay into an abatement fund. That a California court could order them is sufficient to make the claim dischargeable, see In re Torwico Elecs., Inc., 8 F.3d 146, 150 (3d Cir. 1993); In re Chateaugay Corp., 944 F.2d 997, 1008 (2d Cir. 1991), because that order would convert the requirement to abate a nuisance into an “obligation[] to pay money.” This case is therefore unlike other cases that the municipalities point to where the relevant equitable remedy was not convertible into a monetary obligation. See, e.g., Apex Oil, 579 F.3d at 736; Torwico, 8 F.3d at 150.
The municipalities point out that they would not receive the proceeds that a
We therefore disagree with the municipalities’ contention that, since their representative public-nuisance claim entitles them only to the equitable remedy of abatement, it is not dischargeable in bankruptcy.
The municipalities contend finally that they have asserted claims concerning Peabody‘s post-bankruptcy activities and that those claims should be allowed to proceed. But we agree with the bankruptcy court that all the claims in the complaint are directed at Peabody‘s pre-bankruptcy conduct, as the only allegation against Peabody involving its post-bankruptcy conduct was that it continues to export coal from California. That allegation is insufficient to raise a claim, and so we decline to hold that it somehow changes the character of the complaints as the municipalities maintain.
As a result, we affirm the judgment of the district court, and though it probably goes without saying, we necessarily also deny the municipalities’ request for a stay of the bankruptcy court‘s decision pending appeal.