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In re C.W. Mining Co.

United States Court of Appeals, Tenth Circuit

January 22, 2014

In re C.W. MINING COMPANY, doing business as Co-Op Mining Company, Debtor. Kenneth A. Rushton, Trustee, Plaintiff-Appellee, ANR Company, Inc.; Hiawatha Coal Company, Inc.; Charles Reynolds; C.O.P. Coal Development Company; Standard Industries, Inc.; ABM, Inc.; World Enterprises; Security Funding, Inc.; Fidelity Funding, Inc.; and P.P.M.C., Inc., Defendants-Appellants, and Rhino Energy LLC; Castle Valley Mining LLC, Interested Parties-Appellees.

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Laura J. Fuller, Law Offices of Laura J. Fuller, Salt Lake City, UT, for Appellant ANR Company, Inc. in Case No. 12-4091.

Peter W. Guyon, Salt Lake City, UT, for Appellant Hiawatha Coal Company, Inc. in Case Nos. 12-4102 and 12-4144.

Russell S. Walker (David R. Williams and Anthony M. Grover with him on the briefs), Woodbury & Kesler, P.C., Salt Lake City, UT, for Appellant Charles Reynolds in Case No. 12-4106.

David L. Pinkston (Kim R. Wilson and P. Matthew Cox with him on the briefs), Snow Christensen & Martineau, Salt Lake City, UT, for Appellant C.O.P. Coal Development Company in Case Nos. 12-4112 and 12-4132.

George B. Hofmann, Parsons Kinghorn Harris, A Professional Corporation, Salt Lake City, UT (William F. Dobbs, Jr., and William C. Ballard, Jackson Kelly PLLC, Charleston, WV, with him on the briefs for Appellees Castle Valley Mining, LLC and Rhino Energy, LLC), and James C. Swindler (Michael N. Zundel with him on the briefs), Prince, Yeates & Geldzahler, Salt Lake City, UT, for Appellee Kenneth A. Rushton, Trustee in Case Nos. 12-4091, 12-4102, 12-4106, 12-4112, 12-4132, and 12-4144.

Before TYMKOVICH, BRORBY, and MURPHY, Circuit Judges.

TYMKOVICH, Circuit Judge.

These appeals arise from a Chapter 7 asset sale for the liquidating bankruptcy estate of C.W. Mining Co., a former coal mining operation in Emery County, Utah. The four appellants did business with C.W. Mining before its involuntary bankruptcy. They now claim various assets that the bankruptcy trustee, Kenneth A. Rushton, sold to an unrelated entity, Rhino Energy LLC.

Standing in the way of the appellants' claims is one of the Bankruptcy Code's mooting provisions, 11 U.S.C. § 363(m).[1] Under this statute, we can grant the appellants no relief that would affect the validity of Rushton's sale to Rhino. The question then for each appellant is whether any relief can be granted that would not affect

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the sale's validity. The district court, which first addressed these appeals from the bankruptcy court, answered that question in the negative and thus dismissed the appeals as moot.

As we further explain below, we DISMISS Rhino and its wholly owned subsidiary, Castle Valley Mining LLC, from these appeals, and exercising jurisdiction under 28 U.S.C. § 158(d)(1), we AFFIRM Nos. 12-4091, 12-4102, 12-4112, 12-4132, and 12-4144, and we REVERSE No. 12-4106.

In summary, we dismiss Rhino and Castle Valley from all appeals because no appeal seeks any relief affecting either entity.

As against the remaining appellee, Rushton, we agree with the district court that ANR Co.'s appeal (No. 12-4091), COP Coal Development Co.'s first appeal (No. 12-4112), and Hiawatha Coal Co.'s first appeal (No. 12-4102) are moot. By raising only those claims that affect the sale order, ANR and COP waived any relief besides that which would violate § 363(m). And Hiawatha failed to contest Rushton's arguments showing that no theories of relief are available except those that affect the sale order. Accordingly, we affirm those appeals.

We also affirm the district court's judgment in COP's second appeal (No. 12-4132) and Hiawatha's second appeal (No. 12-4144) because both appeals seek only to protect COP and Hiawatha's first appeals from waiver for failing to appeal the sale order itself. But because we do not find any waiver for that reason, we cannot offer relief in either appeal and thus find both moot as well.

That said, in Charles Reynolds's appeal (No. 12-4106), Reynolds has consistently raised a statutory claim for relief that does not affect the validity of the sale, and the district court mistakenly relied on an unpublished opinion to decide otherwise. Accordingly, we reverse his appeal and remand it to the district court for proceedings consistent with this opinion.

I. Background

Before it was forced into bankruptcy, C.W. Mining mined coal on land belonging to two related entities, COP and ANR. C.W. Mining had the exclusive right to mine coal on COP and ANR's property per leases C.W. Mining had with both. [2]

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Hiawatha also mined coal, but on a much smaller scale than C.W. Mining. Originally, Hiawatha had been in charge of operations at ANR's mine, but after Hiawatha ran into trouble with mining regulatory agencies, Hiawatha and ANR jointly agreed to pass control of the operations to C.W. Mining.

Of the two mines, only COP's mine, the Bear Canyon mine in Emery County, Utah, was active. Charles Reynolds ran C.W. Mining's coal mining operations there. He and his family, including ten children, lived in a house connected to the mine's major operations center (the " scale house" ). COP owned the scale house, but because the scale house was under C.W. Mining's exclusive control per its mining contract with COP, Reynolds lived at the home with C.W. Mining's permission.

A. The Bankruptcy

C.W. Mining's bankruptcy arose from a breach of contract action brought by Aquila, Inc., which claimed that C.W. Mining failed to deliver coal as contracted. In 2007, Aquila obtained a favorable judgment for $24.8 million. See C.O.P. Coal Dev. Co. v. C.W. Mining Co. (In re C.W. Mining Co.), 641 F.3d 1235, 1236 (10th Cir.2011). After the judgment, C.W. Mining and COP attempted to terminate their mining contract. But before they could do so, Aquila (along with two other C.W. Mining creditors) filed an involuntary Chapter 11 bankruptcy petition against C.W. Mining in January 2008.

After the petition was filed, C.W. Mining tried to transfer all of its operations to Hiawatha in June 2008. COP and ANR then entered into postpetition agreements with Hiawatha to mine coal in C.W. Mining's stead. Hiawatha, in turn, used only C.W. Mining's existing mining operations and even, at times, C.W. Mining's name.

In September 2008, the bankruptcy court granted Aquila's petition to keep C.W. Mining in involuntary bankruptcy. Two months later, in November 2008, the bankruptcy court converted the case into a Chapter 7 bankruptcy. This changed the bankruptcy from one of reorganization (where C.W. Mining would continue to exist after the bankruptcy) to one of liquidation (where all of C.W. Mining's assets would be sold to provide its creditors with as much relief as possible). In that same month, Rushton was appointed the C.W. Mining bankruptcy estate's trustee.

B. The Adversary Proceedings

Rushton filed several adversary proceedings in bankruptcy court to recover C.W. Mining's assets, including its coal mining operation at the Bear Canyon mine, its scale house at the mine (which Reynolds was occupying at the time), and its contracts with ANR and COP (which both had attempted to transfer to Hiawatha). After several evidentiary hearings, the bankruptcy court ordered all assets to be returned to the estate. ANR, Hiawatha, Reynolds, and COP each appealed to the district court.

While their appeals were pending in the district court, Rushton sold the Bear Canyon mining operations, scale house, and mining contracts to another mining company, Rhino, for $15 million. Rushton and Rhino relied on the bankruptcy court's prior rulings that established the estate's ownership of the mining operations, scale house, and mining contracts. After reviewing the sale, the bankruptcy court issued an order finding that Rhino was a

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good faith purchaser and entitled to the protection of § 363(m). None of the appellants moved to stay the sale order, and the sale closed in August 2010— months after the district court appeals were filed. On August 25, 2010, Rhino took possession and transferred the mining operation to its wholly owned subsidiary, Castle Valley, which promptly began mining.

After the sale closed, Rushton and Rhino moved to dismiss as moot the various appeals still pending in district court, citing § 363(m) mootness and, in the alternative, equitable mootness. The district court agreed with both mootness rationales and dismissed the underlying appeals. ANR, Hiawatha, Reynolds, and COP now appeal the district court's mootness decisions to this court.

We provide additional background information as relevant to each claim.

II. Analysis

The appellants challenge the district court's determination that their bankruptcy appeals are both statutorily and equitably moot. We review de novo the district court's decision that a bankruptcy appeal is statutorily moot. Search Market Direct, Inc. v. Jubber (In re Paige), 584 F.3d 1327, 1334 (10th Cir.2009). Thus, we review de novo whether the appellants have no possibility of relief under § 363(m)[3] (" § 363(m) mootness" for short). See id. at 1336-37. The district court's determination that these appeals are equitably moot is normally reviewed for abuse of discretion. In re Paige, 584 F.3d at 1335.

We begin our analysis with § 363(m) mootness. We first dismiss the appeals against Rhino and Castle Valley, as no appellant is seeking any relief that would affect those appellees. Then we address the remaining appeals against Rushton. We ultimately affirm the district court's dismissal on § 363(m) mootness for every appellant except Reynolds. Thus, we need not address equitable mootness for those appeals. And because Rushton conceded that equitable mootness did not apply to Reynolds's live claim, as we discuss below, we need not address equitable mootness for Reynolds's appeal either. Finally, we ...

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