Holland v. High Power EnergyHolland v. High Power Energy
MEMORANDUM ORDER
This matter is pending before the court on the motion of defendant, Pratt Mining Company, to stay proceedings in the above-styled civil action, filed April 12, 1999.
I.
On December 5, 1984, Pratt Mining Company (“Pratt”) and Geupel Construction Company, Inc. (“Geupel”) formed a joint venture known as High Power Energy (“High Power”), for the purpose of pеrforming and completing a contract with Bethlehem Mines Corporation for the mining of certain coal reserves in Nicholas County, West Virginia. Geupel held a 75% ownership interest in High Power, while Pratt owned the remaining 25% interest in the joint venture. High Power, as the operating entity charged with completing the mine contrаct, was a signatory to the National Bituminous Coal Wage Agreement. Pursuant to that agreement, High Power provided health benefits for its retirees and their eligible dependents until it ceased operations in October, 1997.
. It appears that several disputes ensued between Pratt and Geupel during 1996 and, in an effort tо settle those disputes, the parties entered into a “Settlement Agreement and Release of Claims” on January 15, 1997, pursuant to which Geupel and High Power agreed to indemnify Pratt for liability imposed upon Pratt in connection with High Power’s operations. 1 Specifically, Geupel and High Power agreed to indemnify аnd hold Pratt harmless from the following:
[A]ll obligations, duties, claims or liabilities arising from, related to, or in any way connected with the Joint Venture, whether past, present, or future.... This indemnification and hold harmless shall extend to obligations of every kind and nature, whether contingent, disputed or unliquidated which have resulted or will result in the futurе from the Joint Venture and its operations including claims or demands resulting from future governmental laws or actions.
{See Pratt’s Motion to Stay Proceedings, Exh. A, ¶ 2).
On November 10, 1997, pursuant to the Coal Industry Retiree Health Benefit Act of 1992 (the “Coal Act”), 26 U.S.C.A. §§ 9701-9722, the Trustees of the United Mine Workers 1992 Benefit Plan (the “1992 Benefit Plan”) filed this action against High Power, Geupel, and Pratt, seeking reimbursement of monies expend
Recovery is also sought against Pratt and Geupel on the ground that they are “related persons” to High Power, as that term is defined by § 9701(c)(2)(A) of the Coal Act. In particular, the Trustees contend that Pratt and Geupel are joint ven-turers with High Power and thus they are related persons to High Power, a signatory operator, within the meaning of § 9701(c)(2)(A)(iii), which provides, along with (i) and (ii), as follows:
(2) Related persons.—
(A) In general. — A person shall be considered to be a related person to a signatory operator if that person is—
(i) a member of the controlled group of corporations (within the meaning of section 52(a)) which includes each signatory operator;
(ii) a trade or business which is under common сontrol (as determined under section 52(b)) with such signatory operator; or
(iii) any other person who is identified as having a partnership interest or joint venture with a signatory operator in a business within the coal industry, but only if such business employed eligible beneficiaries, except that this clause shall not apply to a person whose only interest is as a limited partner.
26 U.S.C.A. § 9701(e)(2)(A)(i)-(iii).
On December 23, 1998, the Trustees filed involuntary Chapter 11 bankruptcy petitions against Geupel and High Power in the United States Bankruptcy Court for the Southern District of Ohio. Pursuant to the automatic stay provision of the Bankruptcy Code, 11 U.S.C.A. § 362, all claims of the Trustees against Gеupel and High Power in this action have been stayed pending resolution of the underlying Chapter 11 cases. (See Notice of Bankruptcy Stay filed December 29, 1998). On April 12, 1999, Pratt moved this court for a stay of the proceedings against it pursuant to 11 U.S.C.A. § 362 and the general equitable powers of the court.
The Trustees oppose Pratt’s motion on three grounds. First, the Trustees contend that this court is without jurisdiction to determine whether a stay under § 362 applies to the Trustees’ claim against Pratt. Second, the Trustees maintain that Pratt, as a non-debtor codefendant, is not entitled to the benefit of a stay pursuant to § 362 and that this action should proceed against Pratt notwithstanding the bankruptcy filings of Geupel and High Power. Lastly, the Trustees argue that there is no basis for the court to impose a discretionary stay under the court’s general equity powers.
II.
The court first notes that it continues to have jurisdiction over this action inasmuch as the automatic stay prоvisions of 11 U.S.C.A. § 362 merely suspend proceedings and do not divest the district court of subject matter jurisdiction.
David v. Hooker, Ltd.,
III.
The court next determines whether § 362, which provides for an automatic stay upon the filing of a bankruptcy petition under Chapters 7, 11 and 13 of the Code, applies to stay proceedings in this action as against Pratt. Section 362(a)(1) imposes an automatic stay upon any judicial proceeding “commenced or [that] could have been commenced against the debtor” at the time of the filing of the bankruptcy proceeding. 11 U.S.C.A. § 362(a)(1). As a general proposition, the stay imposed under § 362(a)(1) applies only to bar proceedings against the debtor, and does not apply to actions against non-debtor third parties or codefendants of the debtor.
See Williford v. Armstrong World Indus., Inc.,
There is a line of authority which holds, however, that the scope of the stay under § 362(a)(1) may, under certain circumstances, be expanded to include non-dеbtor third parties or codefendants of the debtor. The leading case adopting that view is
A.H. Robins Co., Inc. v. Piccinin,
According to the Fourth Circuit, unusual circumstances arise “when there is such identity between the debtor and the [non-debtor codefendant] that the debtor may
In recognizing the “unusual circumstance” exception to the general rule that a stay under § 362(a)(1) applies only to debtors and not to third party codefendants, the Fourth Circuit noted that this exception does not apply to the situation “where the third party defendant [is] ‘independently liable’ as, for example, where the debtor and another are joint tortfeasors.”
Robins,
Pratt maintains that the circumstances of this case are identical to those described by the Fourth Circuit in Robins as being sufficiently unusual to warrant application of § 362(a)(1) to stay all proceedings by the Trustees against Pratt pending resolution of the bankruptcy cases of Geupel and High Power. The court rejects Pratt’s argument for two reasons.
First, should this case be allowed to proceed against Pratt, and should Pratt be found to bе a related person to High Power pursuant to the Coal Act, any liability of Pratt to the Trustees would be independent and primary, and not derivative of, the liability of High Power. The Coal Act specifically provides that related persons are jointly and severally liable with the last signatory operator for hеalth benefits to all eligible beneficiaries.
See
26 U.S.C.A. §§ 9711(c), 9712(d)(4).
Robins
is not to the contrary inasmuch as the Fourth Circuit limited its “unusual circumstance” exception to exclude cases, like this one, in which the non-debtor third party would be independently liable to the creditor.
Second, the present case does not approach the “unusual circumstances” present in
Robins.
In
Robins,
the Chapter 11 debtor in possession sought a preliminary injunction to restrain the prosecution of products liability actions pending in various state and federal courts throughout the United States against Robins, the manufacturer of the Daikon Shield, its insurer, and certain officеrs of Robins. The number of suits filed was approximately five thousand and the cost of defending these suits had risen into the millions of dollars.
Stated simply, unusual circumstances are not present in this case. Indeed, the only similarity between this case and Robins is the fact that Pratt may be entitled to indemnification from High Power and Geu-pel in the event it is found liable to the Trustees. Notwithstanding the indemnification agreement between the parties, it cannot be said that the interests of High Power, Geupel and Pratt are closely intertwined in the sense contemplated by the Robins court merely by virtue of that agreement. As a potential joint tortfeasor under the Coal Act, Pratt is a real party in interest in this action. Accordingly, the court agrees with the Trustees and finds that the circumstances of the present case do not warrant aрplication of § 362(a)(1) to stay the Trustees’ action against Pratt.
The court is also not persuaded to stay this action against Pratt on the basis of the court’s general equitable powers. While it is clear that. 28 U.S.C.A. § 1334 grants the “inherent power of courts under their general equity powers and in the efficient management of their dockets to grant relief’ by staying a third-party suit,
Williford,
Pratt has failed to make the necessary showing here. Pratt maintains that the requested stay will not prejudice the Trustees, whereas allowing this case to proceed against Pratt during the pendency of the bankruptcy cases of Geupel and High Power is contrary to the interests of judicial economy. The court concludes, however, that the balancing of competing interests of the Trustees and Pratt weighs in favor of permitting this action to proceed against Pratt. The 1992 Benefit Plan has provided health benefits to High Power’s eligible bеneficiaries since October, 1997, without any payment by High Power, Pratt or Geupel for the resulting premiums. The Trustees have a legitimate interest in the prompt resolution of their claim against Pratt. The risk that judicial resources may be sacrificed does not outweigh the hardship to the Trustees in having to defer proсeedings against Pratt until the bankruptcy proceedings of High Power and Geupel are resolved. It would be unjust for the Trustees to be delayed in recovering any monies rightfully due the Trustees from Pratt, an entity engaged in the historically risky business of coal mining, until a time when Pratt may not be financially sound.
Moreover, any liability of Pratt tо the Trustees under the Coal Act arose before the indemnification agreement was reached. It would be inequitable to permit Pratt to delay the Trustees by invoking a shield it created, with the agreement of the debtors High Power and Geupel, after any such liability arose. A stay under these circumstances would bе unfair to the Trustees.
IV.
For the foregoing reasons, it is ORDERED that Pratt’s motion to 'stay proceedings be, and it hereby is, denied.
Notes
. The Settlement Agreement and Release of Claims, attached as Exhibit A to Pratt's motion to stay proceedings, indicates that, at the time the agreement was executed, the parties were еngaged in an arbitration proceeding in Cincinnati, Ohio, captioned Geupel Construction Co., Inc. v. Pratt Mining Co., Case No. 52-198-00032-96, and in a civil action in the Circuit Court of Nicholas County, West Virginia, styled Pratt Mining Co. v. Geupel Construction Co., Inc., Civil Action No. 96-P-6.
. As aptly explained in
Bidermann Indus. U.S.A., Inc. v. Zelnik (In re Bidermann),