Page 1 of 10 UNITED STATES DISTRICT COURT FOR THE

Transcription

Case 5:12-cv-00087-JPB Document 1
Filed 06/13/12 Page 1 of 10 PageID #: 1
UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF WEST VIRGINIA
MOUNTAIN STATE CARBON, LLC,
Plaintiff,
v.
CENTRAL WEST VIRGINIA
ENERGY COMPANY, et al.,
Defendants.
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)
) No. _______________
5:12-cv-87
)
(Bailey)
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NOTICE OF REMOVAL
TO THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF
WEST VIRGINIA, ALL PARTIES IN THE ABOVE-REFERENCED STATE COURT
CIVIL ACTION HEREBY REMOVED, AND THE CLERK OF THE CIRCUIT COURT
FOR BROOKE COUNTY, WEST VIRGINIA:
PLEASE TAKE NOTICE that in light of a recently filed bankruptcy case (see infra),
and pursuant to Rule 9027 of the Federal Rules of Bankruptcy Procedure and 28 U.S.C. § 1452
and 28 U.S.C. § 1334, Defendants Central West Virginia Energy Company (“Central West
Virginia”), Massey Energy Company (n/k/a Alpha Appalachia Holdings, Inc., or “Alpha”), and
Massey Coal Sales Company, Inc. (n/k/a Appalachia Coal Sales Company, Inc., or “Appalachia
Coal Sales”) (collectively, the “Defendants”), hereby remove to this Honorable Court the abovecaptioned State Court Action now pending in the Circuit Court for Brooke County, West
Virginia (“State Court”) under Civil Action Number 08-C-160 (“State Court Action”).
As grounds for removal, the Defendants state as follows:
BACKGROUND
1.
On May 31, 2012, the State Court Action was pending between Mountain State
Carbon, LLC (“Mountain State Carbon”) and Defendants.
Page 1 of 10
2.
On that same date, May 31, 2012, Debtors WP Steel Venture LLC; Metal Centers
LLC; RG Steel, LLC; RG Steel Railroad Holding, LLC; RG Steel Sparrows Point, LLC; RG
Steel Warren, LLC; RG Steel Wheeling, LLC; and RG Steel Wheeling Steel Group, LLC
(collectively, the “Debtors”), filed voluntary Chapter 11 bankruptcy petitions in the United States
Bankruptcy Court for the District of Delaware (the “Bankruptcy Court”).
3.
By order dated June 1, 2012, the Bankruptcy Court ordered the joint
administration of the cases under Case Number 12-11661 (the “Bankruptcy Case”).
4.
Mountain State Carbon is listed on the “Organizational Chart of Debtors” filed by
the Debtors in the Bankruptcy Case, which chart is attached hereto as Exhibit A. (See Ex. A.)
5.
Mountain State Carbon has already appeared in the Bankruptcy Case. On June 8,
2012, it filed its “Motion of Mountain State Carbon, LLC for Relief from the Automatic Stay to
Effectuate Set-Off of Debts Owed by [Debtor] RG Steel Wheeling, LLC” (hereafter, the
“Mountain State Carbon Bankruptcy Motion”). (See Ex. B attached hereto, Docket No. 154 in
the Bankruptcy Case.)
6.
Debtor RG Steel Wheeling, LLC (“RG Steel Wheeling”) is the 50% Owner and
Managing Member of Mountain State Carbon. Mountain State Carbon is thus a “joint venture”
between (i) Debtor RG Steel Wheeling, a 50% Owner and Managing Member of Mountain State
Carbon, and (ii) SNA Carbon, LLC (“SNA Carbon”) the other 50% Owner and Member of
Mountain State Carbon.
7.
At issue between Mountain State Carbon (which is 50% owned by Debtor RG
Steel Wheeling) and Central West Virginia in the State Court Action are questions of liability, as
well as alleged damage claims by Mountain State Carbon, of approximately $31.8 million
dollars. (See, e.g., Expert Report of Bryan F. DiLucente, attached as Exhibit C hereto.)
Page 2 of 10
8.
There is a pending lawsuit between Central West Virginia and Mountain State
Carbon in the United States District Court for the Southern District of West Virginia under Civil
Action Number 5:09-CV-00467 (the “Related Federal Action”). Specifically, in the Related
Federal Action, Central West Virginia has sued Mountain State Carbon, Debtor RG Steel
Wheeling (as successor in interest to Severstal Wheeling, Inc.) and two other entities related to
Severstal Wheeling, Inc., namely Severstal North America, Inc., and OAO Severstal
(collectively, “Severstal”). At issue in the Related Federal Action are damages claims by Central
West Virginia of approximately $31.5 million dollars.
9.
Through Debtor RG Steel Wheeling’s equity stake and other arrangements with
Mountain State Carbon, Debtor RG Steel Wheeling holds a right to purchase 50% of the coke
production at the Mountain State Carbon facility, which has in excess of one million tons of
metallurgical coke capacity, making it the third largest coke plant in the United States. Since
2006, more than $160 million has been invested in Mountain State Carbon to rebuild and
refurbish its coke production assets.
10.
On March 31, 2011, Debtor RG Steel Wheeling entered into a Secured
Promissory Note in favor of Severstal and related to Mountain State Carbon (the “Severstal
Note”). The principal amount of the Severstal Note is $100 million with a repayment deadline of
March 31, 2016.
11.
Pursuant to the Pledge Agreement (the “Pledge Agreement”), dated as of March
31, 2011 between Debtor RG Steel Wheeling and Severstal — Debtor RG Steel Wheeling’s
obligations under the Severstal Note are secured by, among other things, the equity interests held
by Debtor RG Steel Wheeling in Mountain State Carbon, a joint venture owned 50% by Debtor
RG Steel Wheeling and 50% by SNA Carbon.
Page 3 of 10
12.
As of the date of the filing of the Bankruptcy Case, Debtor RG Steel Wheeling’s
outstanding obligations under the Severstal Note were approximately $100.7 million.
13.
By virtue of Debtor RG Steel Wheeling’s status as the 50% owner and managing
member of Mountain State Carbon, and its pledge of its interest in Mountain State Carbon in
favor of the Severstal Note (which is a listed debt in the Bankruptcy Case), and the “alter ego”
allegations being made in the Related Federal Action against Debtor RG Steel Wheeling for its
mismanagement of Mountain State Carbon (which allegations are already at issue in the
Bankruptcy Case pursuant to the Mountain State Carbon Bankruptcy Motion), the State Court
Action is “related to” the Bankruptcy Case, as explained in detail below.
14.
Furthermore, in Civil Action Number 11-C-174, pending in Brooke County, West
Virginia, Mountain State Carbon and SNA Carbon petitioned for a temporary restraining order,
moved for a preliminary injunction, and filed an amended complaint against Debtor RG Steel
Wheeling, seeking, among other things, to prevent the shipment of coke from Mountain State
Carbon to Debtor RG Steel Wheeling or any of its affiliates (the “Mountain State Carbon
Management Control Litigation”). Prior to instituting the Mountain State Carbon Management
Control Litigation, Mountain State Carbon and SNA Carbon had asserted that Debtor RG Steel
Wheeling had defaulted under that certain Coke Supply Agreement dated as of September 25,
2005 (the “Coke Supply Agreement”) and had allegedly terminated the agreement. Debtor RG
Steel Wheeling has disputed whether the plaintiffs properly terminated the Coke Supply
Agreement under that certain Amended and Restated Limited Liability Company Agreement of
MSC dated as of September 29, 2005 (the “LLC Agreement”), and also contested the restraining
order and preliminary injunction sought in the Mountain State Carbon Management Control
Litigation.
Page 4 of 10
15.
A status conference regarding the Mountain State Carbon Management Control
Litigation was scheduled for May 31, 2012, but on that date, the voluntary petitions by Debtors
(including Debtor RG Steel Wheeling) were filed in the Bankruptcy Case. The West Virginia
Litigation has therefore been automatically stayed in favor of the Bankruptcy Case.
16.
In the Mountain State Carbon Bankruptcy Motion, Mountain State Carbon made
allegations of “alter ego” management (actually mismanagement) by Debtor RG Steel Wheeling
of the joint venture (Mountain State Carbon) similar to those made by Mountain State Carbon
and SNA Carbon in the Mountain State Carbon Management Control Litigation.
17.
These “alter ego” allegations include the following: “One feature of the
[Mountain State Carbon-RG Steel Wheeling] Agreements is that none of management or
operating employees at [Mountain State Carbon] is an employee of [Mountain State Carbon];
rather, [Debtor RG Steel Wheeling employs each person who works at [Mountain State Carbon]
and [Mountain State Carbon] reimburses [Debtor RG Steel Wheeling] for the actual costs of
employing those persons. Thus, the Coke Facilities [of Mountain State Carbon] are dependent on
[Debtor RG Steel Wheeling’s] employees to function and operate.” (See Ex. B, Docket No. 154
in the Bankruptcy Case, at 3, ¶ 5.) This “alter ego” mismanagement of Mountain State Carbon by
Debtor RG Steel Wheeling has allegedly resulted in a debt of over $24 million dollars owed by
Debtor RG Steel Wheeling to the joint venture (i.e., Mountain State Carbon). (Id. at 4, ¶ 6.)
18.
All of the foregoing matters should therefore be brought in front of, and managed
jointly by, the Bankruptcy Court.
REMOVAL JURISDICTION
19.
Pursuant to 28 U.S.C. § 1452, “[a] party may remove any claim or cause of action
in a civil action other than a proceeding before the United States Tax Court or a civil action by a
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governmental unit to enforce such governmental unit's police or regulatory power, to the district
court for the district where such civil action is pending, if such district court has jurisdiction of
such claim or cause of action under section 1334 of this title.” 28 U.S.C. § 1452(a).
20.
Section 1334 of Title 28 of the United States Code provides that district courts
have jurisdiction over “all civil proceedings arising under Title 11, or arising in or related to
cases under title 11.” 28 U.S.C. § 1334(b) (emphasis added). This federal question, based on the
“new development” of the filing of the Bankruptcy Case involving Debtor RG Steel Wheeling,
creates federal question jurisdiction.
21.
Bankruptcy courts have “related to” jurisdiction to hear a civil proceeding if “the
outcome of that proceeding could conceivably have any effect on the estate being administered
in bankruptcy.” Owens-Illinois, Inc. v. Rapid Am. Corp. (In re Celotex Corp.), 124 F.3d 619,
625 (4th Cir. 1997) (quoting Pacor, Inc. v. Higgins, 743 F.2d 984, 994 (3d Cir. 1984)) (emphasis
added); see also Valley Historic Ltd. P’ship v. Bank of N.Y., 486 F.3d 831 (4th Cir. 2007) (citing
and quoting Pacor, Inc., 743 F.2d at 994); A.H. Robins Co. v. Piccinin, 788 F.2d 994, 1002 n. 11
(4th Cir. 1986) (adopting the Pacor, Inc. test for the Fourth Circuit). “The proceeding need not
necessarily be against the debtor or the debtor's property. An action is related to bankruptcy if the
outcome could alter the debtor's rights, liabilities, options or freedom of action (either positively
or negatively) and which in any way impacts upon the handling and administration of the
bankruptcy estate.” Owens-Illinois, Inc., 124 F.3d at 626 (quoting Pacor, Inc., 743 F.2d at 994)
(emphasis added).
22.
The claims asserted in the State Court Action are subject to the Bankruptcy
Court’s “related to” jurisdiction for joint ventures under the test articulated in the Pacor, Inc.
case. See e.g., ML Media Partners, LP v. Century/ML Cable Venture, et al. (In re Adelphia
Page 6 of 10
Communications, Corp.), 285 B.R. 127, 138 (Bankr. S.D.N.Y. 2002) (finding “related to”
jurisdiction over litigation involving a “joint venture” where, as here, the debtor was a 50%
owner and member of the joint venture, because the outcome of the litigation could have an
effect on the debtor’s interest in the joint venture).
23.
Alter ego claims in themselves are sufficient to support a finding of “related to”
jurisdiction. See, e.g., Walter v. Freeway Foods, Inc. (In re Freeway Foods of Greensboro, Inc.),
449 B.R. 860, 885-87, (M.D.N.C. 2012) (finding “related to” jurisdiction over litigation
involving a debtor franchisee, its franchisor, and affiliates, and further denying abstention of all
state claims, including claims against the alter ego of the debtor); Tucker v. Thomas, No. 5:10CV-31, 2011 U.S. Dist. LEXIS 30988, at *24-*28 (N.D. W. Va. 2011) (finding that the court had
related to jurisdiction to a state case involving the alleged alter ego of the debtor).
24.
The “alter ego” allegations in the Mountain State Carbon Bankruptcy Motion and
the Mountain State Carbon Management Control Litigation establish that the State Court
Litigation, to which MSC is a party, is “related to” the Bankruptcy Case. See, e.g., Freeway
Foods of Greensboro, 449 B.R. at 885-87; Tucker, U.S. Dist. LEXIS 30988, at *24-*28.
26.
In addition, the claims in the State Court Action are sufficiently related to the
claims in the Related Federal Action in light of the “new development” (i.e., Debtor RG Steel
Wheeling’s Bankruptcy case) to support the Bankruptcy Court’s exercise of supplemental
jurisdiction over the claims in the State Court Action. See Sasson v. Sokoloff (In re Sasson), 424
F.3d 864, 869 (9th Cir. 2005), cert. denied, 547 U.S. 1206 (2006). 28 U.S.C. § 1367 provides
that “in any civil action of which the district courts have original jurisdiction, the district courts
shall have supplemental jurisdiction over all other claims that are so related to claims in the
action within such original jurisdiction that they form part of the same case or controversy under
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Article III of the United States Constitution.” 28 U.S.C. § 1367(a); see also United Mine
Workers v. Gibbs, 383 U.S. 715, 725 (1966) (ruling “state and federal claims must derive from a
common nucleus of operative fact”). Section 1367 further provides that “[s]uch supplemental
jurisdiction shall include claims that involve the joinder or intervention of additional parties.” Id.
27.
Moreover, “Article I, § 8, cl. 4, of the Constitution provides that Congress shall
have the power to establish ‘uniform Laws on the subject of Bankruptcies throughout the United
States.’” In re Tubular Techs., LLC, 348 B.R. 699, 713 (Bankr. D.S.C. 2006) (quoting U.S.
Const. art. I, § 8, cl. 4). “Pursuant to the laws enacted under [Article I, § 8, cl. 4, of the
Constitution], bankruptcy courts have ‘exclusive jurisdiction’ over the property of a debtor.” Id.
(citing Cent. Va. Cmty. College v. Katz, 546 U.S. 356, 363-64 (2006). The Supreme Court’s
broad interpretation of bankruptcy jurisdiction in Katz supports the proposition that “the
bankruptcy court’s ‘related to’ jurisdiction also includes the district court’s supplemental
jurisdiction pursuant to 28 U.S.C. § 1367.” In re Sasson, 424 F.3d at 869 (citation omitted).
PROCEDURE
28.
In accordance with Rule 9027(a)(1) of the Federal Rules of Bankruptcy
Procedure, and Rule 7 of the Federal Rules of Civil Procedure, attached as are copies of all the
process and pleadings from the State Court Action. (See “State Court Record”.) Because a
number of pleadings were filed under seal in the State Court Action, those pleadings are not
submitted herewith. The Defendants will file with this Court a Motion to file those documents
under seal so that a complete State Court Record will be before the Court.
29.
The Defendants have filed this Notice of Removal in a timely fashion pursuant to
Rule 9027.
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30.
A copy of the Notice of the Filing of a Notice of Removal to be filed with the
State Court is attached as Exhibit D. (See Ex. D.)
31.
As set forth in the attached certificate of service, all parties required to be served a
copy of this Notice of Removal pursuant to Rule 9027 of the Federal Rules of Bankruptcy
Procedure (the parties in the State Court Action) have been served.
NOTICE
NOW THEREFORE, all parties to the State Court Action pending in the State Court at
Case No. 08-C-160 are HEREBY NOTIFIED pursuant to Rule 9027(e) of the Federal Rules of
Bankruptcy Procedure as follows:
Removal of the State Court Action and all claims and causes of action therein was
effected upon the filing of a copy of this Notice of Removal with the Clerk of the Circuit Court
of Brooke County, West Virginia, pursuant to Rule 9027(c) of the Federal Rules of Bankruptcy
Procedure and to the United States District Court for the Northern District of West Virginia. The
parties to the State Court Action shall proceed no further unless and until the action is remanded
by this or another Court.
Page 9 of 10
Dated: June 13, 2012
Respectfully submitted,
ENERGY COMPANY, INC.
MASSEY ENERGY COMPANY
(n/k/a ALPHA APPALACHIA
HOLDINGS, INC.)
MASSEY COAL SALES
COMPANY, INC. (n/k/a
APPALACHIA COAL SALES
COMPANY, INC.)
By Counsel:
/s/ Brian A. Glasser
Brian A. Glasser (WVSB No. 6597)
Christopher S. Morris (WVSB No. 8004)
Athanasios Basdekis (WVSB No. 9832)
BAILEY & GLASSER, LLP
209 Capitol Street
Charleston, WV 25301
(304) 345-6555
(304) 342-1110 facsimile
[email protected]
[email protected]
[email protected]
Page 10 of 10
Case 5:12-cv-00087-JPB Document 1-1
IN THE CIRCUIT OF BROOKE COUNTY, WEST VIRGINIA
MOUNTAIN STATE CARBON, L.L.C.,
Plaintiff,
v.
Civil Action No. 08-C-160
Judge Ronald E. Wilson
CENTRAL WEST VIRGINIA ENERGY
CO., MASSEY ENERGY COMPANY,
INC. and MASSEY COAL SALES CO.
INC.,
Defendants.
NOTICE OF FILING OF NOTICE OF REMOVAL
Defendants Central West Virginia Energy Company (“Central West Virginia”), Massey
Energy Company (n/k/a Alpha Appalachia Holdings, Inc., or “Alpha”), and Massey Coal Sales
Company, Inc. (n/k/a Appalachia Coal Sales Company, Inc., or “Appalachia Coal Sales”)
(collectively, the “Defendants”), hereby give notice, pursuant to Rule 9027 of the Federal Rules
of Bankruptcy Procedure and 28 U.S.C. § 1452 and 28 U.S.C. § 1334, that on the 13th day of
June, 2012 they have filed a Notice of Removal of this case from the Circuit Court for Brooke
County, West Virginia, to the United States District Court for the Northern District of West
Virginia. The Notice of Removal is attached as Exhibit 1.
CENTRAL WEST VIRGINIA ENERGY
COMPANY
MASSEY ENERGY COMPANY, INC.
and MASSEY COAL SALES COMPANY, INC.
By Counsel
_________________________________________
Brian A. Glasser (WVSB No. 6597)
Christopher S. Morris (WVSB No. 8004)
Athanasios Basdekis (WVSB No. 9832)
BAILEY & GLASSER, LLP
209 Capitol Street
Charleston, WV 25301
(304) 345-6555
(304) 342-1110 facsimile
[email protected]
[email protected]
[email protected]
UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF WEST VIRGINIA
)
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5:12-cv-87
) No. _______________
(Bailey)
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MOUNTAIN STATE CARBON, LLC,
Plaintiff,
v.
ENERGY COMPANY, et al.,
Defendants.
CERTIFICATE OF SERVICE
I hereby certify that on this 13th day of June, 2012, I served a true and correct copy of the
foregoing “Notice of Removal,” with the exception of the State Court record, by overnight mail
upon the following:
David B. Fawcett, Esquire
James M. Doerfler, Esquire
Bruce E. Stanley, Esquire
Reed Smith LLP
225 Fifth Avenue, Suite 1200
Pittsburgh, PA 15222
David B. Cross, Esquire
David F. Cross, Esquire
727 Charles Street
Wellsburg, WV 26070
/s/ Brian A. Glasser

Page 1 of 10 UNITED STATES DISTRICT COURT FOR THE

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