Opinion
Case No. 19-56885 Adv. Pro. No. 20-2036
07-14-2020
In re: MURRAY ENERGY HOLDINGS CO., et al., Debtors. CONSOL Energy Inc., Plaintiff, v. Murray Energy Holdings Co., et al., Defendants.
Chapter 11 Jointly Administered OPINION AND ORDER GRANTING IN PART AND DENYING IN PART MOTION TO DISMISS AMENDED COMPLAINT (DOC. 6)
I. Introduction
In this adversary proceeding, CONSOL Energy Inc. seeks relief against Murray Energy Holdings Co. and its affiliated debtors and debtors in possession (collectively, the "Debtors"). The Debtors intend to assume and assign a subset of their agreements with CONSOL and reject the rest. CONSOL contends that the agreements constitute a single integrated agreement and that the Debtors therefore must either assume and assign all of the agreements or reject them all. In addition, CONSOL argues that it has interests in real property under certain of the agreements that cannot be eliminated through rejection. It also asserts claims for breach of contract. The Debtors argue that an adversary proceeding is not the proper procedural vehicle for some of CONSOL's claims, and they seek to dismiss the entire adversary proceeding for failure to state a claim upon which relief can be granted. For the reasons explained below, the Debtors' request for dismissal is granted in part and denied in part.
II. Jurisdiction and Constitutional Authority
The Court has jurisdiction to hear and determine this matter under 28 U.S.C. § 1334(b) and the general order of reference entered in this district in accordance with 28 U.S.C. § 157(a). This is a core proceeding. 28 U.S.C. § 157(b)(2)(A) & (O). There is no constitutional impediment to the entry of this opinion and order because "both before and after Stern v. Marshall, it is clear that the bankruptcy court may handle all pretrial proceedings, including the entry of an interlocutory order dismissing fewer than all of the claims in an adversary complaint[.]" O'Toole v. McTaggart (In re Trinsum Grp., Inc.), 467 B.R. 734, 738 (Bankr. S.D.N.Y. 2012).
III. Procedural History
The Debtors filed voluntary petitions for relief under Chapter 11 of the Bankruptcy Code on October 29, 2019 (the "Petition Date"). After CONSOL commenced this adversary proceeding and brought an amended complaint (the "Amended Complaint") (Doc. 4), the Debtors filed a motion to dismiss (the "Motion to Dismiss") (Doc. 6). CONSOL filed an objection (the "Objection") (Doc. 13) and the Debtors a reply (the "Reply") (Doc. 15).
IV. Background
In 1959, Consolidation Coal Company entered into a lease (the "Tetrick Lease") with various parties (the "Tetrick Lessors") under which the Tetrick Lessors leased certain seams of coal to Consolidation Coal and granted it "mining rights and privileges appurtenant to said leased coal, and incident to the ownership thereof." Am. Compl. ¶¶ 56, 65. The term of the Tetrick Lease (20 years) would be automatically renewed and extended "so long as may be necessary to mine and remove all the merchantable or practicably and economically minable coal herein leased." Id. ¶ 66. In exchange for the conveyance and mining rights described in the Tetrick Lease, Consolidation Coal agreed to pay the Tetrick Lessors rent for the net acreage of leased coal and royalties for mined coal. Id. ¶ 67.
In 1989, Consolidation Coal assigned its leasehold interest "in a certain area of coal subject to the Tetrick Lease" (the "Tetrick Southern Assignment") to Reserve Coal Properties Company. Id. ¶ 57. Consolidation Coal retained that portion of the Tetrick Lease that was not included in the Tetrick Southern Assignment. Id. ¶ 58. In 2013, Reserve was merged with and into CNX RCPC LLC, and CNX assigned the Tetrick Southern Assignment to CCC RCPC LLC, which, along with Consolidation Coal and subsidiaries of Consolidation Coal (the "Consolidation Coal Debtors"), are debtors in these Chapter 11 cases. Id. ¶ 59.
Also in 2013, Murray Energy Corporation and one of its subsidiaries, Ohio Valley Resources, Inc., entered into a stock purchase agreement (the "Purchase Agreement") (Ex. A to the Am. Compl.) under which Ohio Valley would purchase 100% of the shares of common stock of Consolidation Coal, which at that time was a CONSOL subsidiary. Consolidation Coal's business as of the closing was to be the "Mining Transferred Business" and the "Related Transferred Business" (collectively, the "Consolidation Coal Business"). Am. Compl. ¶¶ 1-2, 25, 28-30.
Throughout this opinion, citations to alphabetically designated exhibits will refer to the exhibits to the Amended Complaint.
The Mining Transferred Business included: (1) the Blacksville Mine; (2) the Loveridge Mine; (3) the McElroy Mine; (4) Mine 84; (5) the Robinson Run Mine; (6) the Shoemaker Mine; (7) the Rend Lake Mine; (8) the Keystone Coal Mining Company Mines; (9) the Tetrick South Reserves; and (10) the Legacy Areas and AMD Sites. Am. Compl. 29 & n.5.
The Related Transferred Business included: (1) the Reverse Osmosis Facilities and Plant Complex; (2) the River Division; (3) the Monongah Office in Marion County, West Virginia; and (4) the Ohio Valley Operations Office in Marshall County, West Virginia. Am. Compl. 29 & n.6.
The parties also entered into several other agreements that the Purchase Agreement denominated the Ancillary Agreements. The Ancillary Agreements were the Cooperation and Safety Agreement, the Escrow Agreement and Escrow Release Letter, the AMD Services Agreement, the Master Salaried Employee and Employee Benefit Agreement, the CNX Marine Shipping Agreement, the Eighty Four Mining Company Lease Agreement, the Surface Use Agreement, the Transition Services Agreement, and both the Overriding Royalty Agreement and the Second Overriding Royalty Agreement (collectively, the "Overriding Royalty Agreements") (Exs. E & F to the Am. Compl.). Id. ¶ 34.
As of the time of the closing, the Consolidation Coal Debtors owned interests in the deeds, or controlled the leasehold interests in the leases, set forth in Exhibit D to the Overriding Royalty Agreements (the "Other Interests"). Id. ¶ 60. As additional consideration for the Purchase Agreement, the Consolidation Coal Debtors agreed to grant CONSOL an overriding royalty interest in, and to pay CONSOL annual minimum payments for, coal that was subject to the Tetrick Lease and the Other Interests and that was located in an area outside the boundaries of the Robinson Run Mine. Id. ¶ 61.
The Overriding Royalty Agreements stated that they were "being entered into in connection with the transactions contemplated by" the Purchase Agreement and that the overriding royalties were being granted "as additional consideration for the Purchase Agreement." Id.; Overriding Royalty Agreements at 1-2. The Consolidation Coal Debtors acknowledged in the Overriding Royalty Agreements that they held a leasehold interest in the coal that is subject to the Tetrick Lease and that they also held the Other Interests. Am. Compl. ¶ 102.
By the Overriding Royalty Agreements, the Consolidation Coal Debtors agreed to "grant, convey and assign an overriding royalty interest in the coal within" the land subject to the Tetrick Lease and the Other Interests. Id. ¶ 71. The Overriding Royalty Agreements granted an overriding royalty in the unmined coal itself and also obligated the Consolidation Coal Debtors to make payments to CONSOL for the coal they actually mined and removed or sold. Id. ¶ 73. Paragraph 5(b) of each Overriding Royalty Agreement provided that it "constitutes a covenant running with all the land" that is subject to the overriding royalty interests. Id. ¶ 72.
The Purchase Agreement provided for the parties' delivery of executed counterparts of the Overriding Royalty Agreements and the other Ancillary Agreements at closing. Ex. A at 17-18. It also stated that the Purchase Agreement, the Ancillary Agreements and a Confidentiality Agreement together "constitute[d] the entire agreement of the parties [to the Purchase Agreement] with respect to the subject matter hereof and thereof and supersede all prior agreements and undertakings, both written and oral, between the parties hereto with respect to the subject matter hereof and thereof." Id. at 64.
The transactions contemplated by the Purchase Agreement closed on December 5, 2013. Am. Compl. ¶ 27. That same day, the parties entered into a Closing Letter Agreement (Ex. L). Id. ¶ 35. The purpose of the Closing Letter Agreement was "to effect the transactions contemplated by the [Purchase Agreement]" and to "clarify the treatment of certain contracts." Am. Compl. ¶ 36. The Closing Letter Agreement incorporated Article XI of the Purchase Agreement. Ex. L at 9. The agreements that are the subject of the Closing Letter Agreement were the Coal Sale Agreements, the Coal Handling Processing Agreement, the Virginia Coalfield Credit Agreement, the Emission Rights Project Development Agreement, the Buchanan Letter of Credit Agreement, the Finance Equipment Lease, the Transferred Mine Vehicle Leases and certain software licenses. Am. Compl. ¶¶ 37-45.
The parties also entered into a Closing Land Letter Agreement (Ex. N) to "supplement and revise" the Purchase Agreement. Id. ¶¶ 46-47. The Closing Land Letter Agreement stated that "the terms and conditions of the [Purchase Agreement] shall apply and are incorporated" into the Closing Land Letter Agreement. Id. ¶ 48. The Closing Land Letter Agreement also provided that the "Closing Deliveries by the Seller" under Section 2.04 of the Purchase Agreement and the "Closing Deliveries by the Purchaser" under Section 2.05 would include the Surface Use Agreement, the Cooperation and Safety Agreement, the Overriding Royalty Agreements, the Office Facilities Lease Agreements, the Substation and Power Line Agreement, and the Substation and Power Line Rights-of-Way. Ex. N at 2-3; Am. Compl. ¶ 49-50. The Closing Land Letter Agreement further provided for the assignment and conveyance of "certain parts of the Tetrick South Reserves (which includes the Tetrick Lease)" to CCC RCPC LLC and CCC Land Resources LLC, which are two of the Consolidation Coal Debtors (Case Nos. 19-56956 & 19-56953). Ex. N at 3-4.
The Court will refer to the Purchase Agreement, the Ancillary Agreements, the Closing Letter Agreement, the Closing Land Letter Agreement, and the agreements that are the subject of the Closing Letter Agreement and the Closing Land Letter Agreement as the "Agreements."
The Debtors concede that the Purchase Agreement, the Closing Letter Agreement, and the Closing Land Letter Agreement constitute a single, integrated contract, Reply at 3, but they contest CONSOL's allegation that the other Agreements form part of that integrated contract. They also intend to assume some of the Agreements while at the same time rejecting others and proposing neither assumption nor rejection for certain Agreements that have expired.
The Agreements that the Debtors intend to reject (the "Proposed Rejected Agreements") are: the Purchase Agreement (Ex. A); the Overriding Royalty Agreements (Exs. E & F); the Closing Letter Agreement (Ex. L) and the Coal Handling Processing Agreement referenced in it; the Closing Land Letter Agreement (Ex. N); the Office Facilities Lease Agreement for property in Sesser, Illinois (the "Illinois Office Lease") (Ex. O); the Confidentiality Agreement (Ex. T); and the Eighty Four Mining Company Lease Agreement (Ex. U). Mot. to Dismiss, Ex. 1.
The Agreements that the Debtors are not currently proposing to assume or reject are identified as "Expired" or "Unknown" on Exhibit 1 to the Motion to Dismiss (the "Expired or Unspecified Agreements"). The Expired or Unspecified Agreements include the Coal Sales Agreements listed on Exhibit 3(a)(ii) of the Closing Letter Agreement, which CONSOL designated as Exhibit M to the Amended Complaint. The Expired or Unspecified Agreements also include the Escrow Agreement (Ex. C), the Escrow Release Letter (Ex. D), the AMD Services Agreement (Ex. G), the Master Salaried Employee and Employee Benefits Agreement (Ex. H), the CNX Marine Shipping Agreement (Ex. I), the Transition Services Agreement (Ex. K), the Transition Agreement Regarding Workers' Compensation Claims (Ex. S), and the Surety Bond Agreement in Support of Consent Order & Agreement (Ex. Z). In addition, the Expired or Unspecified Agreements include the Agreements referenced in the Closing Letter Agreement, none of which are attached as exhibits to the Amended Complaint—the Virginia Coalfield Credit Agreement, the Emission Rights Project Development Agreement, the Buchanan Letter of Credit, the Finance Equipment Lease, the Transferred Mine Vehicle Leases, and the following software licenses: the Microsoft Software Licenses, the SAP Software Licenses, the Gas Monitoring Software Licenses, and the Belt Vision and Wireless Vibration Software Licenses (collectively, the "Software Licenses"). Mot. to Dismiss, Ex. 1.
The Debtors contend that they are not parties to the Coal Sales Agreements identified on Exhibit M because those Agreements were not assigned to the Debtors but rather were retained by CONSOL. According to the Debtors, CONSOL instead must have intended to identify the Coal Sales Agreements listed on Exhibit 3(a)(iii) of the Closing Letter Agreement, which is attached to the Motion to Dismiss at page 16 of Exhibit 4. See Mot. to Dismiss at 9 n.9.
The Agreements that the Debtors intend to assume and assign (the "Proposed Assumed Agreements") are the Cooperation and Safety Agreement (Ex. B), the Surface Use Agreement (Ex. J), the Office Facilities Lease Agreement for property in Morgantown, West Virginia (the "West Virginia Office Lease") (Ex. P), the Substation and Power Line Agreement (Ex. Q), the Substation and Power Line Rights-of-Way (Ex. R), the Wastewater Treatment Cost Sharing Agreement (Ex. V), the Amendment to Wastewater Treatment Cost Sharing Agreement (Ex. W), the McMillian Partial Assignment (Ex. X), and the Partial Assignment of Powerline Right of Way (Ex. Y). Mot. to Dismiss, Ex. 1.
The Amended Complaint includes four counts. In Count I, CONSOL requests a declaratory judgment that the Agreements constitute a single integrated contract that the Debtors must either assume and assign or reject in its entirety. Am. Compl. ¶¶ 83-97. In Count II, it seeks a declaratory judgment that the Overriding Royalty Agreements gave rise to real property interests that run with the land. Id. ¶¶ 98-114. In Count III, it alleges that the Debtors' failure to pay amounts due under the Overriding Royalty Agreements constitutes a breach of those agreements and the Purchase Agreement. Id. ¶¶ 115-18. And in Count IV, CONSOL alleges that the failure to assign it a lease denominated the Mid-Allegheny Lease constituted a breach of the Purchase Agreement and the Closing Land Letter Agreement. Id. ¶¶ 119-24.
The Debtors argue that the pertinent provisions of the Agreements support dismissal of the entire adversary proceeding for failure to state a claim upon which relief can be granted. They also contend that an adversary proceeding is not the proper procedural vehicle for CONSOL to obtain the relief sought in Counts I, III and IV.
V. Legal Analysis
A. Standards Governing Motions to Dismiss
When deciding a motion to dismiss for failure to state a claim upon which relief can be granted under Civil Rule 12(b)(6), "[c]ourts must accept as true the factual allegations pleaded in the complaint." DBI Invs., LLC v. Blavin, 617 F. App'x 374, 380 (6th Cir. 2015). That said, "the tenet that a court must accept as true all of the allegations contained in a complaint is inapplicable to legal conclusions," and "[t]hreadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice." Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). Rather, "[t]o survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to 'state a claim to relief that is plausible on its face.'" Id. (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). "In determining whether to grant a Rule 12(b)(6) motion, the court primarily considers the allegations in the complaint, although matters of public record, orders, items appearing in the record of the case, and exhibits attached to the complaint, also may be taken into account." Nieman v. NLO, Inc., 108 F.3d 1546, 1554 (6th Cir. 1997) (quoting 5A Charles A. Wright & Arthur R. Miller, Fed. Prac. & Proc. § 1357 (2d ed. 1990)). In addition, "[i]f referred to in a complaint and central to the claim, documents attached to a motion to dismiss form part of the pleadings." Armengau v. Cline, 7 F. App'x 336, 344 (6th Cir. 2001). "The defendant has the burden of showing that the plaintiff has failed to state a claim for relief." Directv, Inc. v. Treesh, 487 F.3d 471, 476 (6th Cir. 2007).
B. Count I
In Count I, CONSOL requests a declaratory judgment that the Agreements together comprise a single integrated contract and that all of the Agreements must therefore either be assumed and assigned or all of them rejected. Am. Compl. ¶¶ 83-97. Opposing the requested relief, the Debtors argue that "CONSOL's unitary contract theory fails as a matter of law; the . . . [A]greements cannot possibly be integrated into one cohesive whole, and the parties [to the Agreements] would not have countenanced such a result." Mot. to Dismiss at 32. Thus, the central dispute between the parties is over whether the Proposed Rejected Agreements and the Expired or Unspecified Agreements form a single integrated contract with the Proposed Assumed Agreements.
The Bankruptcy Code provides no guiding principles for determining when multiple agreements constitute a single integrated agreement for purposes of assumption or rejection. "Where the Code does not specifically address an issue that arises in bankruptcy, 'the bankruptcy court looks to state law, to the extent that it does not conflict with the [B]ankruptcy [C]ode.'" Reinhardt v. Vanderbilt Mortg. & Fin., Inc. (In re Reinhardt), 563 F.3d 558, 563 (6th Cir. 2009) (quoting Giant Eagle, Inc. v. Phar-Mor, Inc., 528 F.3d 455, 459 (6th Cir. 2008)).
The Agreements are governed by the laws of various states. The Purchase Agreement and the Escrow Agreement are governed by Delaware law. Ex. A at 65; Ex. C at 11-12. The Closing Letter Agreement incorporates Article XI of the Purchase Agreement, which includes the Purchase Agreement's governing law provision, so Delaware law governs the Closing Letter Agreement. Ex. L at 9. Similarly, given that the Closing Land Letter Agreement incorporates the terms of the Purchase Agreement, Ex. N at 10, and does not contain its own governing law provision, Delaware law also governs the Closing Land Letter Agreement. West Virginia law expressly governs the Cooperation and Safety Agreement (Ex. B at 38), the Overriding Royalty Agreements (Ex. E at 6 & Ex. F at 5), the Surface Use Agreement (Ex. J at 14), the West Virginia Office Lease (Ex. P at 4), the Substation and Power Line Agreement (Ex. Q at 4), and the partial Assignment of Powerline Right of Way (Ex. Y at 5). While the agreement denominated the Substation and Power Line Rights-of-Way (Ex. R) does not include a governing law provision, the right of way it grants is over land in West Virginia (id. at 1), so the law of West Virginia would apply to it as well. See Hardesty v. Fairmont Supply Co., 14 S.E.2d 436, 438 (W. Va. 1941) ("The alienation and transfer of real estate is governed by the law of the state in which the land is located." (citing Olmsted v. Olmsted, 216 U.S. 386 (1910))). Likewise, the McMillian Partial Assignment assigned rights in land in West Virginia (Ex. X at 1), so West Virginia law is the governing law. Id. Pennsylvania law governs the Wastewater Treatment Cost Sharing Agreement (Ex. V at 10) and the Amendment to Wastewater Treatment Cost Sharing Agreement, to which the terms of the Wastewater Treatment Cost Sharing Agreement are applicable (Ex. W at 2). The Illinois Office Lease (Ex. O at 4) is governed by Illinois law. Although the other Agreements are either silent regarding the governing law or cannot be reviewed because they were not attached to the Amended Complaint, CONSOL does not identify the law of any states other than Delaware, West Virginia, Pennsylvania and Illinois as the law governing the Agreements, Obj. at 20, so the Court's analysis will apply the law of those states.
Applying this governing law, the Court concludes that CONSOL's integration claim is not plausible on its face for several reasons. First, under the law of Delaware that governs the Purchase Agreement, "[p]rovisions in one agreement are not read into another agreement unless the wording of the agreement evidences the parties' intent to incorporate terms from another agreement," Wiggs v. Summit Midstream Partners, LLC, No. CIV.A. 7801-VCN, 2013 WL 1286180, at *6 (Del. Ch. Mar. 28, 2013), and there is no textual evidence suggesting that the parties intended to incorporate the terms of the Purchase Agreement (or the other Proposed Rejected Agreements or the Expired or Unspecified Agreements) into the Proposed Assumed Agreements. The lack of any language providing for such incorporation stands in stark contrast to the inclusion of a provision in the Closing Land Letter Agreement stating that "the terms and conditions of the [Purchase Agreement] shall apply and are incorporated" into the Closing Land Letter Agreement. Ex. N at 10. It also contrasts with the language of the Closing Letter Agreement that expressly incorporates Article XI of the Purchase Agreement. Ex. L at 9. The parties obviously knew how to incorporate the terms of one agreement into another, and they did so by incorporating the terms of the Purchase Agreement into the Closing Letter Agreement and the Closing Land Letter Agreement. The parties, however, did not include language incorporating the terms of the Purchase Agreement, the other Proposed Rejected Agreements, or the Expired or Unspecified Agreements into any of the Proposed Assumed Agreements.
The second reason that CONSOL does not have a plausible contract-integration claim is that the Proposed Assumed Agreements do not have the same subject matter as the Proposed Rejected Agreements or the Expired or Unspecified Agreements. Under the law of each relevant jurisdiction, a central factor in determining whether multiple agreements constitute a single agreement is the existence of a common subject matter. See TD Auto Fin. LLC v. Reynolds, 842 S.E.2d 783, 790 (W. Va. 2020) ("[O]ur rule provides that contemporaneously executed agreements between the same parties and relating to the same subject matter may be construed together as part of one contract or transaction."); Fiat N. Am. LLC v. UAW Retiree Med. Benefits Tr., No. CV 7903VCP, 2013 WL 3963684, at *8 n.62 (Del. Ch. July 30, 2013) (citing 11 Richard A. Lord, Williston on Contracts § 30:26, at 239-42 (4th ed. 1999), for the proposition that "instruments executed at the same time, by the same contracting parties, for the same purpose, and in the course of the same transaction will be considered and construed together as one contract or instrument"); Hous. Mortg. Corp. v. Allied Const. Inc., 97 A.2d 802, 805 (Pa. 1953) ("A contract may be contained in several instruments. These if made at the same time, in relation to the same subject-matter, may be read together as one instrument[.]" (quoting Peterson v. Miller Rubber Co. of N.Y., 24 F.2d 59, 62 (8th Cir. 1928))); Kelsey v. Clausen, 100 N.E. 984, 986 (Ill. 1913) ("These two instruments, being executed between the same parties and relating to the same subject-matter, are to be read and construed as constituting a single transaction."). The fact that multiple agreements have related subject matters is not sufficient to support a finding that they together form a single unitary contract. Wiggs, 2013 WL 1286180 at *6 (holding that agreements with "related subject matters" were "separate agreements, each specifying separate rights and duties" because the agreements evidenced no intent to "incorporate terms from another agreement"); McDaniel v. Kleiss, 503 S.E.2d 840, 847 (W. Va. 1998) ("While the release agreement is related to the insurance policy, it does not address the same subject matter such that it must be read together with the policy as if they are one contract." (emphasis added)).
The Proposed Assumed Agreements do not have the same subject matter as the Proposed Rejected Agreements or the Expired or Unspecified Agreements. Starting with the subject matter of the Proposed Rejected Agreements, the Purchase Agreement's subject matter was the sale of the stock of Consolidation Coal for the purpose of transferring the Consolidation Coal Business to Ohio Valley. The Closing Letter Agreement and the Closing Land Letter Agreement dealt with the transactions that needed to be undertaken to effectuate the sale of the stock and the transfer of the Consolidation Coal Business, including the treatment of certain of the Agreements and the delivery of other Agreements at the closing, and the subject matter of the Overriding Royalty Agreements was the provision of royalty payments to CONSOL. Taken together, the subject matter of those Agreements was the sale of the stock of Consolidation Coal, the transfer of the Consolidation Coal Business, and the payment of the purchase price, including by means of ongoing payments under the Overriding Royalty Agreements. As noted by CONSOL in its description set forth in the Objection, the subject matter of the Confidentiality Agreement was the "sharing [of] information between CONSOL and the Debtors related to litigation involving [Consolidation Coal] and its subsidiaries operating in Pennsylvania." Obj. at 10. Other Proposed Rejected Agreements have as their subject matter provisions governing either the payment of the purchase price or the conduct of a specific aspect of the operation of the Debtors' and CONSOL's business going forward. The subject matter of the Coal Handling Processing Agreement was the allocation of funds received by CONSOL from a coal processing facility in Pennsylvania, id. at 7; the subject matter of the Illinois Office Lease was the "[l]ease [of] office space in Illinois," id. at 19; and the subject matter of the Eighty Four Mining Company Lease Agreement was the "[l]ease [of] property in Pennsylvania from an affiliate of CONSOL to a subsidiary of [Consolidation Coal]," id. at 5.
Turning to the Expired or Unspecified Agreements, the subject matter of each was either the sale of the stock of Consolidation Coal and the transfer of the Consolidation Coal Business, the payment of the purchase price, or else a discrete aspect of the parties' business going forward. The subject matter of each Expired or Unspecified Agreement is set forth in the chart below:
| Expired or Unspecified Agreement | Subject Matter |
|---|---|
| Coal Sales Agreements | The "continued sale of coal by CONSOL andDebtor facilities." Id. at 7. |
| Escrow Agreement | The "deposit of funds into escrow." Id. at 4. |
| AMD Services Agreement | The operation by CONSOL of "waterfacilities in West Virginia for [ConsolidationCoal] and [the provision of] water services to[Consolidation Coal]." Id. |
| Master Salaried Employee and EmployeeBenefits Agreement | The "terms of employment and benefits forcertain employees transferred to the Debtors."Id. at 5. |
| CNX Marine Shipping Agreement | The "protection/transportation capacity atCONSOL's coal terminal in Baltimore." Id. |
| Transition Services Agreement | "Services from CONSOL to [ConsolidationCoal] in connection with the transfer" of the"[Consolidation Coal] Business." Id. |
| Transition Agreement Regarding Workers'Compensation Claims | The "responsibility for workers'compensation claim by [Consolidation Coal]employees to the Debtors." Id. at 8. |
| Surety Bond Agreement in Support ofConsent Order & Agreement | The provision of a "surety bond in favor ofthe Pennsylvania Department ofEnvironmental Protection." Id. at 10. |
| Virginia Coalfield Credit Agreement | The "allocat[ion] of future coalfield creditpayments to CONSOL and the Debtors." Id.at 7. |
| Emission Rights Project DevelopmentAgreement | The "allocat[ion] [of] future expensereimbursements for development costs andelectric power related to property in WestVirginia." Id. |
| Buchanan Letter of Credit | The "[t]ransfer [of] a letter of credit posted byTLT-Babcock in favor of [ConsolidationCoal] to an affiliate of CONSOL." Id. |
| Finance Equipment Lease | The "apportion[ment] [of] future leasepayments between CONSOL and the Debtorson account of an equipment lease." Id. at 8. |
| Transferred Mine Vehicle Leases | The "apportion[ment] [of] lease advancepayments between CONSOL and the Debtorson account of certain vehicle leases." Id. |
|---|---|
| Software Licenses | The "[t]ransfer [of] certain software licensesfrom CONSOL to the Debtors." Id. |
By contrast, the subject matter of each of the Proposed Assumed Agreements was not the sale of the stock of Consolidation Coal, the transfer of the Consolidation Coal Business, or the payment of the purchase price. Nor does the subject matter of any of the Proposed Assumed Agreements relate to the same aspect of the operation of the Debtors' and CONSOL's business going forward that was the subject of any Proposed Rejected Agreement or Expired or Unspecified Agreement. The subject matter of each Proposed Assumed Agreement is identified in the chart below.
| Proposed Assumed Agreement | Subject Matter |
|---|---|
| Cooperation and Safety Agreement | "Safety objectives" as to properties used inthe [Consolidation Coal] Business and"operational compliance with all applicablepermits, agreements, and laws." Obj. at 4. |
| Surface Use Agreement | "The Debtors' and CONSOL's access to anduse of certain of their properties in WestVirginia." Id. at 5. |
| Substation and Power Line Agreement | The "sharing of electrical supply equipmentand services at sites in West Virginia betweenCONSOL and the Debtors." Id. at 9. |
| Substation and Power Line Rights-of-Way | "A permanent right of way for [ConsolidationCoal] on certain lands in West Virginia heldby CONSOL." Id. |
| West Virginia Office Lease | The "[l]ease [of] office space in WestVirginia." Id. |
| McMillian Partial Assignment | The "[a]ssign[ment] [of a] portion of the leasecovering West Virginia land from CONSOLto the Debtors." Id. at 10. |
| Wastewater Treatment Cost SharingAgreement, as amended by the Amendmentto Wastewater Treatment Cost SharingAgreement | "The continued provision of wastewatertreatment services by CONSOL to theDebtors' AMD Plant in Pennsylvania and . . .appropriate cost sharing arrangementsbetween CONSOL and the Debtors." Id. |
|---|
As shown above, the subject matter of each of the Proposed Assumed Agreements was an aspect of the operation of the business of the Debtors and CONSOL going forward that was different from the aspects of the business that were the subject matters of the Proposed Rejected Agreements and the Expired or Unspecified Agreements. The Debtors and CONSOL entered into the Proposed Assumed Agreements because they would be continuing to operate in the coal industry in some of the same regions of West Virginia and Pennsylvania after the closing of the Purchase Agreement. But there is nothing in the Agreements indicating that the parties intended the Proposed Assumed Agreements to be integrated into a single agreement with other Agreements dealing with separate operational subject matters. Nor is there anything in the Agreements supporting CONSOL's contention that the parties intended the Proposed Assumed Agreements, which had specific operational purposes for years in the future, to be integrated as a single agreement with the Purchase Agreement and other Agreements that effectuated the sale of stock and the transfer of the Consolidation Coal Business.
If CONSOL's position were correct that the Agreements all constitute a single agreement, then the breach of any one of the Agreements would constitute a breach of all the others despite the fact that there is no indication in any of the Agreements that the parties intended that result. For example, under CONSOL's view of the world, a breach of the West Virginia Office Lease would be a breach of the Illinois Office Lease even though the leases provide no such thing. See Ex. O at 3 (providing for termination of the Illinois Office Lease for failure to "remedy a material breach or default of this Agreement," which is defined as the Illinois Office Lease); Ex. P at 3 (providing for termination of West Virginia Office Lease for failure to "remedy a material breach or default of this Agreement," which is defined as the West Virginia Office Lease). As an additional example, another Proposed Assumed Agreement, the Wastewater Treatment Coal Sharing Agreement, which was entered into about a year after the Purchase Agreement, Ex. V at 1, provides for the continued provision of wastewater treatment services by CONSOL to the Debtors' AMD Plant in Pennsylvania and cost sharing arrangements between CONSOL and the Debtors. There is nothing in the Wastewater Treatment Coal Sharing Agreement suggesting that its breach would constitute a breach of the Purchase Agreement or the other Proposed Rejected Agreements, yet by CONSOL's reckoning it would.
Indeed, accepting CONSOL's position would in effect insert cross-default provisions in all of the Agreements, making a default under any one of them a default under all of them. And there is simply nothing in any of the Agreements suggesting that the parties intended this result. The Debtors' proposal to assume and assign the Proposed Assumed Agreements therefore does not require them to also assume and assign the Proposed Rejected Agreements or the Expired or Unspecified Agreements. See In re Comdisco, Inc., 270 B.R. 909, 911-12 (Bankr. N.D. Ill. 2001) (holding that a debtor may reject one agreement without rejecting another where a plain "[r]eading [of] the documents as a whole" demonstrates that "the parties did not intend that the breach of [one agreement] would constitute the breach of the [other]").
What is more, CONSOL's position is based on the improbable notion that a series of agreements executed over the course of many years—with certain of them executed well before the parties' entry into Purchase Agreement and others long after—were intended by the parties to be a single agreement. For example, the Coal Sales Agreements—both the ones identified on Exhibit M and those identified on Exhibit 4 to the Motion to Dismiss—were executed up to three years before the Purchase Agreement. Ex. M; Mot. to Dismiss, Ex. 4 at 16. The Wastewater Treatment Coal Sharing Agreement was entered into about a year after the Purchase Agreement, Ex. V at 1, and the McMillian Partial Assignment and the Partial Assignment of Powerline Right of Way more than a year after the Purchase Agreement, Ex. X at 1; Ex. Y at 1. And the law is clear that agreements having different subject matters that were executed remotely in time from one another do not constitute a single agreement. See TD Auto Fin., 842 S.E.2d at 791 ("[W]hile the credit application may have been a common precursor to [the] vehicle purchase [agreement] . . . the completely different subject matter of the two documents and lack of contemporaneous execution—which also demonstrates their distinct purposes—are insufficient to view them as part of a single transaction.").
In sum, nothing in the Agreements indicates that the parties intended that they constitute one agreement. And because the intent of the parties as expressed in the Agreements is controlling, see, e.g., Faith United Methodist Church & Cemetery of Terra Alta v. Morgan, 745 S.E.2d 461, 481 (W. Va. 2013); Paul v. Deloitte & Touche, LLP, 974 A.2d 140, 145 (Del. 2009), that should be the end of the matter.
Despite the foregoing, CONSOL makes two arguments for why the Agreements constitute a single agreement, neither of which carries the day. It first contends that all of the Agreements were part of an integrated transaction. Obj. at 13-16. But as just explained, that is simply not true. CONSOL's reliance on Ashall Homes Limited v. ROK Entertainment Group Inc., 992 A.2d 1239 (Del. Ch. 2010), thus is misplaced. In that case, the agreements that were found to constitute a single agreement—a share subscription agreement and a sale agreement—were "two agreements [that] accomplished the first and second steps in the three-step transformation of" one company into another. Id. at 1251. While the Purchase Agreement, the Closing Letter Agreement, and the Closing Land Letter Agreement provided the steps necessary to transfer the shares of Consolidation Coal to Ohio Valley, none of the Proposed Assumed Agreements effectuated this stock transfer.
CONSOL's second argument relies on the principle that "all agreements evidencing and governing a complex business transaction form a single, integrated contract." Obj. at 13. But this is true only if the agreements have the same subject matter. McDaniel, 503 S.E.2d at 846; Fiat, 2013 WL 3963684, at *8; Hous. Mortg. Corp., 97 A.2d at 805. And as shown above, neither the Proposed Rejected Agreements nor the Expired and Unspecified Agreements have the same subject matter as the Proposed Assumed Agreements. Moreover, CONSOL's contention that the parties would not have entered into the Agreements but for their entry into all of them, Obj. at 16, also is not accurate given that the parties entered into some of the Agreements long before the Purchase Agreement was executed. And even if it were true, the fact that one agreement would not have been entered into but for another agreement does not on its own mean that the two agreements constitute a single integrated contract. In McDaniel, the West Virginia high court acknowledged "the relationship between the two documents" at issue and even noted that "absent the existence of the [one], there would have been no reason for [the other]," yet concluded that "this fact alone [was] insufficient upon which to find that the two documents are so closely related that they become a single contract" given that they did not have the same subject matter. McDaniel, 503 S.E.2d at 847.
CONSOL also relies on the provision of the Purchase Agreement stating that it, along with the Ancillary Agreements and a Confidentiality Agreement, together "constitute[d] the entire agreement of the parties [to the Purchase Agreement] with respect to the subject matter hereof and thereof and supersede all prior agreements and undertakings, both written and oral, between the parties hereto with respect to the subject matter hereof and thereof." Obj. at 5. But as explained above, the Purchase Agreement and the Proposed Assumed Agreements that are Ancillary Agreements do not have the same subject matters. And nothing about the "entire agreement" provision of the Purchase Agreement changes that conclusion, because the language "subject matter hereof and thereof" could quite naturally be read to mean that the Purchase Agreement and the Ancillary Agreements are the only agreements between the parties with respect to the subject matter of the Purchase Agreement and the separate subject matter of the Ancillary Agreements. This is in contrast to cases on which CONSOL relies in which the entire agreement provision made clear that the referenced agreements had the same subject matter. In Huron Consulting Services, LLC v. Physiotherapy Holdings, Inc. (In re Physiotherapy Holdings, Inc.), 538 B.R. 225 (D. Del. 2015), the district court held that a master agreement and license agreement were integrated for two reasons: (1) the integration clause of the master agreement stated that it, together with the license agreement and certain other agreements, constituted the parties' entire agreement as to the subject matter of the agreements, which was the services to be performed by Huron; and (2) the terms and conditions of the master agreement were "incorporated into [the license agreement] by this reference." Id. at 234-35. And in H & S Ventures, the asset purchase agreement at issue provided that "[a]ny reference herein to this Agreement shall be deemed to include the schedules hereto," and the schedules included a form of the limited liability operating agreement. H & S Ventures, Inc. v. RM Techtronics, LLC, No. CV N15C-11-082 JRJ, 2017 WL 237623, at *1 (Del. Super. Ct. Jan. 18, 2017). Here, only two of the Agreements—the Closing Letter Agreement and the Closing Land Letter Agreement—incorporate the Purchase Agreement by reference. Because none of the Proposed Assumed Agreements do so, cases such as Physiotherapy and H & S Ventures are inapposite.
Furthermore, entire agreement provisions that do not incorporate other agreements by reference are intended to trigger the application of the parol evidence rule, not to establish that multiple contracts constitute a single agreement. See Hall v. Edgewood Partners Ins. Ctr., Inc., 878 F.3d 524, 528 (6th Cir. 2017) (holding that "entire agreement" provision was "just an integration clause" and noting that "[t]he purpose of an integration clause . . . [is] to prevent either party from relying upon statements or representations made during negotiations that were not included in the final agreement" (quoting Coal Res., Inc. v. Gulf & W. Indus., Inc., 756 F.2d 443, 447 (6th Cir. 1985))); Comdisco, 270 B.R. at 911 ("The integration clause . . . means only that nothing outside the named documents constitutes any part of the parties' agreements. It does not express an intent that a breach of a single [contract] would constitute a ground to terminate the entire relationship.").
On top of that, the entire agreement provisions of the Proposed Assumed Agreements do not even mention the Purchase Agreement or the other Proposed Rejected Agreements. The Cooperation and Safety Agreement states that "[t]his agreement and the exhibits and schedules hereto, and the water easements, surface easement and licenses collectively constitute the entire agreement among the parties." Ex. B at 38. The Surface Use Agreement provides that "[t]his agreement and the exhibits and schedules hereto and the easements collectively constitute the entire agreement among the parties pertaining to the subject matter hereof." Ex. J at 13. The Substation and Power Line Agreement states that "[t]his Agreement includes all the agreements and understandings of the Parties, and no representations, oral or written, have been made that modify, add to, or change the terms hereof." Ex. Q at 4. The Substation and Power Line Rights-of-Way provides that "[t]his Agreement includes all the agreements and stipulations between the parties." Ex. R at 4. The Wastewater Treatment Cost Sharing Agreement provides that "[t]his Agreement constitutes the entire agreement among the parties with respect to subject matter hereof and thereof," Ex. V at 11, and the Amendment to Wastewater Treatment Cost Sharing Agreement keeps that provision in force, Ex. W at 2. And the McMillian Partial Assignment states that "this Assignment contains all of the agreements and understandings of the Parties in regard to the subject matter hereof." Ex. X at 6. In short, nothing in the entire agreement provisions of the Proposed Assumed Agreements suggests that those contracts are integrated with the other Agreements.
For all these reasons, the Debtors have carried their burden of showing that Count I fails to state a claim for relief. Count I accordingly is dismissed with prejudice for failure to state a claim upon which relief can be granted.
C. Count II
In Count II, CONSOL seeks a declaratory judgment that the Overriding Royalty Agreements encumber the Consolidation Coal Debtors' interests in the coal not yet mined or removed from the land that is subject to the Tetrick Lease and the Other Interests and that the Overriding Royalty Agreements constitute real property interests that run with the land. Am. Compl. ¶¶ 112-14. The Debtors contend that a covenant to make overriding royalty payments from unmined coal is not a real property interest for two reasons: (1) no West Virginia court has held that overriding royalties in coal are interests in real property; and (2) West Virginia statutory law expressly provides for overriding royalties in oil and natural gas but not coal. Mot. to Dismiss at 24-26. Neither argument is well taken.
As the Debtors concede, id. at 25, no West Virginia court has even addressed whether an overriding royalty interest in unmined coal constitutes a real property interest, so the fact that no West Virginia court has held that it does is of no moment. And the fact that the West Virginia legislature has enacted a statute mentioning overriding royalty interests in oil and natural gas but not coal also is of no significance. The statutory provision on which the Debtors rely is W. Va. Code § 37B-1-3. Mot. at 25. This statute is part of West Virginia's Cotenancy Modernization and Majority Protection Act. W. Va. Code § 37B-1-1 (Westlaw 2018). By the Act, the West Virginia legislature sought to "[f]oster, encourage and promote exploration for and development, production, and conservation of oil, natural gas and their constituents." W. Va. Code § 37B-1-2(1). The Act does not address the creation or treatment of overriding royalty interests but instead deals with the consent rights of certain parties with royalty interests in oil and natural gas. W. Va. Code § 37B-1-4. It "allow[s] development of the oil and gas within a particular mineral tract owned by seven or more co-tenants once the operator obtains consent of at least three-fourths of the executive interest in that tract." John Kevin West & Alana Valle Tanoury, The Law of Co-Tenancy in the Appalachian Basin, 39 E. Min. L. Found. § 7.02, 2018 WL 7636388 (June 2018). The statute's reference to overriding royalties excludes holders of those royalties from being the type of royalty owners whose consent to drilling must be obtained, but it does not address whether overriding royalty interests in oil and gas constitute interests in real property. W. Va. Code § 37B-1-3. Thus, as CONSOL explained in its Objection—in a passage the Debtors failed to respond to in their Reply—the West Virginia legislature has not legislated whether overriding royalties in oil, gas, or coal are real property interests. Instead, that issue is "determined by the 'facts of each case' and left to the 'best judgment' of the courts." Obj. at 27.
The Supreme Court of Appeals of West Virginia, however, has stated in dicta (in a case involving oil and gas) that an interest in the coal underlying the surface is an interest in real property. See Faith United Methodist, 745 S.E.2d at 468 ("The owner of a fee simple title may sever the land into separate surface and mineral estates in a number of ways. The owner may convey to another ownership in a particular mineral underlying the tract (such as all of the coal, oil, gas, uranium, silver, or limestone), a seam of one mineral, or all of the minerals, while retaining the surface of the tract. Or, the owner may convey the surface only. . . . 'When the fee severance is completed, separate and distinct estates are created, each being a fee simple estate in land, having all the incidents and attributes of such an estate. . . . Each estate may be conveyed and dealt with as any other fee simple, and estates therein of less quality may be created, such as estates for years, estates for life, and determinable fee estates[.]'" (quoting Carlos B. Masterson, Adverse Possession and the Severed Mineral Estate, 25 Tex. L. Rev. 139, 142 (1946)) (footnotes omitted)).
In the end, there is no merit to either of the Debtors' arguments for why overriding royalty interests in unmined coal are not real property interests under West Virginia law. And the Debtors concede that several other states' common law holds that overriding royalty interests in unmined coal constitute real property interests. Mot. at 26 n.23. Thus, CONSOL has stated a plausible claim that the Overriding Royalty Agreements are real property interests.
The Court will consider certifying to the Supreme Court of Appeals of West Virginia under the Uniform Certification of Questions of Law Act, W. Va. Code §§ 51-1A-1 to -13, the question of whether overriding royalty interests in unmined coal are real property interests under West Virginia law. For the reasons explained below, if that court were to rule that overriding royalty interests in unmined coal are real property interests under West Virginia law, then it almost certainly would be the case that such overriding royalty interests granted by the Overriding Royalty Agreements run with the land.
The next question is whether CONSOL has a plausible claim that its right to receive royalty payments runs with the land. Paragraph 5(b) of each Overriding Royalty Agreement states that the covenant to make royalty payments runs with the land. West Virginia law, however, provides that "if a covenant is not, in nature and kind, a real covenant, the mere declaration of the parties that it shall run with the land will not make it a real covenant, though so stated in the document." Hurxthal v. St. Lawrence Boom & Lumber Co., 44 S.E. 520, 522 (W. Va. 1903). The Court therefore must examine whether CONSOL has a plausible claim that the Overriding Royalty Agreements give rise to interests in real property that run with the land.
Two of the four requirements for a covenant to run with the land under West Virginia law are that the parties intended that the covenant do so and that the covenant was reduced to writing. McIntosh v. Vail, 28 S.E.2d 607, 610 (W. Va. 1943). There is no dispute here that the covenants to make royalty payments were in writing (in the form of the Overriding Royalty Agreements) or that the parties intended (as expressed in Paragraph 5(b) of those agreements) that the covenants run with the land.
The other two requirements for a covenant to run with the land are that it touch and concern the land and that privity of estate exists between the parties. Id. In order for a covenant to touch and concern the land, "it must respect the thing granted, and the act covenanted must concern the estate conveyed." Kimble v. Wetzel Nat. Gas Co., 61 S.E.2d 728, 731 (W. Va. 1950) (quoting Tennant v. Tennant, 70 S.E. 851, 851 (W. Va. 1911)). There appears to be no dispute about that here. Privity of estate exists if the covenant is "contained in a grant thereof, or of some estate therein." Hurxthal, 44 S.E. at 522. This means that there must have been a conveyance between the parties to the covenant of an interest in the property that is the subject of the covenant. See id. ("It is true that this covenant has one element of a covenant real in the fact that it benefits the estate of the covenantee, the mill property; but it lacks another material element—privity in estate—as the company conveyed no interest in the mill, but merely made a personal obligation on the company touching the mill."). In support of the existence of privity of estate, CONSOL argues that each Overriding Royalty Agreement is "by definition . . . the sort of instrument that creates the privity necessary to establish a real covenant." Obj. at 26. In response, the Debtors contend that the Overriding Royalty Agreements contained only the covenant, not the conveyance that would give rise to privity of estate. Mot. at 27-28. In other words, according to the Debtors, privity of estate between the Debtors and CONSOL is lacking because the Debtors obtained their interests in the property that is the subject of the Tetrick Lease and the Other Interests by means of the Purchase Agreement or other related documents, not through the Overriding Royalty Agreements. Reply at 11.
Accepting the Debtors' position would require the Court to assume that the grant of an overriding royalty interest in unmined coal is not the conveyance of an interest in real property. But the Court cannot make that assumption because, as explained above, CONSOL has a plausible claim that an overriding royalty interest in unmined coal constitutes an interest in real property. And if the grant of an overriding royalty interest in unmined coal conveys an interest in real property, then the Overriding Royalty Agreements themselves would, as CONSOL argues, constitute the grant of an interest in real property, satisfying the requirement that the covenant be "contained in a grant thereof, or of some estate therein." Hurxthal, 44 S.E. at 522.
Because CONSOL has stated a plausible claim that the Overriding Royalty Agreements contain covenants that constitute real property interests running with the land, the Motion to Dismiss is DENIED as to Count II.
D. Count III
In Count III, CONSOL alleges that the Debtors' failure to pay certain amounts due under the Overriding Royalty Agreements after the Petition Date constitutes a breach of those agreements and the Purchase Agreement. Am. Compl. ¶¶ 115-18. According to CONSOL, by failing to make those payments, the Debtors are "jeopardizing their ability" to assume and assign the Purchase Agreement of which the Overriding Royalty Agreements "are one part." Id. ¶ 118. The Debtors, however, intend to reject both the Purchase Agreement and the Overriding Royalty Agreements, and the Court already concluded that those agreements are not integrated with the Proposed Assumed Agreements, meaning that CONSOL's integration argument would not prevent the rejection of the Purchase Agreement and the Overriding Royalty Agreements. And any claim arising from the rejection of the Purchase Agreement and the Overriding Royalty Agreements would constitute a prepetition claim that would properly be addressed in the claims reconciliation process, not in an adversary proceeding. See Evergreen Solar, Inc. v. Barclays PLC (In re Lehman Bros. Holdings, Inc.), No. 08-01633, 2011 WL 722582, at *7 (Bankr. S.D.N.Y. 2011) (dismissing a claim for breach of contract because the claim should have been asserted "in accordance with the claims allowance process, and not by means of an adversary proceeding"); Galitz v. Edghill (In re Edghill), 113 B.R. 783, 784 (Bankr. S.D. Fla. 1990) ("Because the creditor's cause of action is predicated on a pre-petition contract claim, this Court finds that the creditor is precluded from recovering damages via this adversary proceeding."); Healy/Mellon-Stuart Co. v. Coastal Grp., Inc. (In re Coastal Grp., Inc.), 100 B.R. 177, 178 (Bankr. D. Del. 1989) (granting motion to dismiss prepetition breach of contract claim because the claim was not properly brought as an adversary proceeding).
CONSOL argues that an adversary proceeding is an appropriate means to assert its claim set forth in Count III because its claim for amounts coming due under the Overriding Royalty Agreement after the Petition Date constitutes an administrative expense claim. Obj. at 30. But CONSOL's assertion that it has an administrative expense claim can be properly addressed in the context of a request for payment of an administrative expense claim in the Debtors' main bankruptcy case rather than in this adversary proceeding. See Pillar Capital Holdings, LLC v. Williams (In re Living Hope Sw. Med. Servs., LLC), No. 4:11-CV-04043, 2012 WL 1078345, at *5 (W.D. Ark. Mar. 30, 2012) (holding that "the bankruptcy court did not err in refusing to allow [the claimant] to adjudicate its administrative-expense claim in an adversary proceeding"), aff'd, 509 F. App'x 578 (8th Cir. 2013); In re Englewood Cmty. Hosp. Corp., 117 B.R. 352, 359 (Bankr. N.D. Ill. 1990) (holding that a request for payment of an administrative expense claim is "procedurally sufficient to be decided as a contested matter" rather than in an adversary proceeding). Indeed, administrative expense claims typically are adjudicated only upon notice to all parties in interest, which service of the summons in this adversary proceeding did not provide. See Bergquist v. Anderson-Greenwood Aviation Corp. (In re Bellanca Aircraft Corp.), 56 B.R. 339, 400 (Bankr. D. Minn. 1985) (dismissing claim for administrative expense made in adversary proceeding "without prejudice to the filing of an appropriate motion for administrative expense priority in the main case" because the request required notice to other parties in interest), aff'd, 850 F.2d 1275 (8th Cir. 1988); Colandrea v. Colandrea (In re Colandrea), 17 B.R. 568, 583 (Bankr. D. Md. 1982) (holding that the assertion of a request for payment of an administrative expense claim "in the context of this adversary proceeding is improper" because "[s]uch an allowance can only occur after 'notice and a hearing' affording all creditors and interested parties to make such objections as they may have").
CONSOL also contends that it is entitled to adequate protection on account of the Overriding Royalty Agreements. Obj. at 31. It did not, however, assert that claim in the Amended Complaint. In addition, its request for adequate protection is the subject of the Motion of CONSOL RCPC LLC for an Order (I) Compelling Payment of the Amounts Due Under Overriding Royalty Agreements as Adequate Protection, or, in the Alternative, (II) Granting Relief from the Automatic Stay, Doc. 910 in Case No. 19-56885 (the "Motion to Compel"). The parties have adjourned the hearing on the Motion to Compel to the confirmation hearing, which is to be scheduled after the Debtors file amended plan documents, Doc. 1727 (Notice of Agenda) at 2.
For all these reasons, the Motion to Dismiss is GRANTED as to Count III without prejudice to any rights CONSOL has to prosecute the Motion to Compel and without prejudice to any rights it has to assert the claims set forth in Count III in connection with the claims reconciliation process and as part of a request for payment of an administrative expense claim.
E. Count IV
In Count IV, CONSOL alleges that the failure to assign the Mid-Allegheny Lease to CONSOL constituted a breach of the Purchase Agreement and the Closing Land Letter Agreement. The Debtors intend to reject the Purchase Agreement and the Closing Land Letter Agreement, and any claim arising from the rejection would constitute a prepetition claim that would properly be addressed in the claims allowance process rather than in this adversary proceeding. Evergreen, 2011 WL 722582, at *7-8; Edghill, 113 B.R. at 784; Coastal Grp., 100 B.R. at 178. The Motion to Dismiss accordingly is GRANTED as to Count IV. Count IV is dismissed without prejudice to any rights CONSOL has to assert the claims set forth in Count IV in connection with the claims reconciliation process or in an otherwise appropriate manner.
VI. Conclusion
For all these reasons, the Court GRANTS the Motion to Dismiss in part and DENIES it in part. The Motion to Dismiss is GRANTED as to Count I, Count III, and Count IV and is DENIED as to Count II. Count I is DISMISSED with prejudice, and Count III and Count IV are DISMISSED without prejudice.
IT IS SO ORDERED.
This document has been electronically entered in the records of the United States Bankruptcy Court for the Southern District of Ohio.
IT IS SO ORDERED.
/s/ _________
John E. Hoffman, Jr.
United States Bankruptcy Judge
Dated: July 14, 2020
Copies to: Attorneys for the Plaintiff (electronically) Attorneys for the Defendants (electronically)