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In re Patriot Coal Corp.

United States Bankruptcy Appellate Panel of the Eighth Circuit

June 5, 2014

In re: Patriot Coal Corporation, also known as Eastern Coal Holding Company, Inc., also known as Patriot Coal Corporation Midwest, Debtor; Debra Pettry, Individually and as Executrix of the Estate of Denver Pettry; Franklin Stump; Marsha Stump; Alfred Price; Willa Price; Robert Scarbro; Theresa Scarbro; David Evans; Kathye Evans; Westley Fraley; Judy Fraley; Danny Gunnoe; Carol Gunnoe; Kermit Morris; Kathy Morris; A Class of Others Similarly Situated, Claimants - Appellants
v.
Patriot Coal Corporation, Debtor - Appellee

Submitted May 12, 2014

Appeal from United States Bankruptcy Court for the Eastern District of Missouri - St. Louis.

For Debra Pettry, Individually and as Executrix of the Estate of Denver Pettry, Franklin Stump, Marsha Stump, Alfred Price, Willa Price, Robert Scarbro, Theresa Scarbro, David Evans, Kathye Evans, Westley Fraley, Judy Fraley, Danny Gunnoe, Carol Gunnoe, Kermit Morris, Kathy Morris, A Class of Others Similarly Situated, Claimants - Appellants: Thomas Fiorino Basile, Trial Attorney, Law Office of Thomas F. Basile, Charleston, WV.

For Patriot Coal Corporation, Debtor - Appellee: Laura Uberti Hughes, Lloyd A. Palans, Brian C. Walsh, Bryan & Cave, Saint Louis, MO.

Before KRESSEL, SALADINO and SHODEEN, Bankruptcy Judges.

OPINION

Page 564

SALADINO, Bankruptcy Judge.

This is an appeal by certain claimants (" Pettry Claimants" ) arising from an order of the bankruptcy court[1] filed February 11, 2014, denying a motion for reconsideration of a November 8, 2013, order sustaining the Debtor's seventeenth omnibus objection to claims. For the reasons that follow, we affirm.

Factual Background

On March 28, 2002, the Pettry Claimants filed a putative class action against Eastern Associated Coal, LLC, f/k/a Eastern Associated Coal Corporation, and other chemical manufacturers and coal plants in the Circuit Court of Boone County, West Virginia. The suit was filed on behalf of coal plant workers and their spouses seeking money damages and equitable relief after enduring harms from exposure to chemicals used in the coal plants. The case was subsequently transferred to the Circuit Court of Marshall County, West Virginia, because a similar case was pending in that county. For reasons that are not entirely clear, the litigation progressed slowly over the next ten years.

On July 9, 2012, Patriot Coal Corporation and numerous affiliated entities, including Eastern Associated Coal, LLC filed voluntary petitions for relief under Chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court for the Southern District of New York.[2] Venue of the bankruptcy cases was subsequently transferred to the United States Bankruptcy Court for the Eastern District of Missouri. Soon after the bankruptcy filing, the jointly administered Debtors filed a notice in the West Virginia litigation, alerting the state court of the pending bankruptcy cases. As a result of that notice, the West Virginia court issued a notice of intent to proceed with the Pettry Claimants' litigation " relative to all parties and all causes of action, with the exception of any which may relate to Defendant, Patriot Coal Corp. and its affiliated companies." On December 14, 2012, the Pettry Claimants timely filed proofs of claim in the Debtors' bankruptcy cases based on the West Virginia litigation.[3]

Page 565

On January 11, 2013, the West Virginia court entered its " Order Granting Defendants' Motions for Summary Judgment and Dismissing All Remaining Claims with Prejudice." Pursuant to that order, the West Virginia court granted summary judgment in favor of the defendants other than the Debtors and dismissed the Pettry Claimants' causes of action against the Debtors, with prejudice, as a " sanction for the dilatory manner in which [the Pettry Claimant's] claims were prosecuted." The Pettry Claimants sought reconsideration, which the state court denied. On May 22, 2013, the Pettry Claimants filed a notice of appeal with the West Virginia Supreme Court of Appeals.[4]

On September 20, 2013, Debtors filed an omnibus objection to the Pettry Claimants' proofs of claim asserting the preclusive effect of the West Virginia state court judgment dismissing the litigation. The Pettry Claimants resisted the omnibus objection for several reasons, including the primary argument they make in this appeal -- that the state court dismissal order was in violation of the automatic stay of 11 U.S.C. ยง 362(a) and is void. On November ...


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