BARRY S. SCHERMER, Bankruptcy Judge.
This matter comes before me on the motion of Reorganized Peabody Energy Corporation (PEC)
On April 13, 2016, PEC and 153 of its affiliates (Debtors) filed petitions for relief under Chapter 11 of the Bankruptcy Code. On March 17, 2017, I entered an order confirming (Confirmation Order) the Debtors' second amended Chapter 11 plan (Plan). The Plan became effective on April 3, 2017 (Effective Date).
Less than four months after the Effective Date, the County of San Mateo; the City of Imperial Beach; and the County of Marin (Plaintiffs) filed three separate but nearly identical complaints (Complaints) in California state courts against "Peabody Energy Corp." and numerous major members of the fossil fuel industry.
The voluminous Complaints (ranging from 263 to 267 paragraphs before the prayer for relief) name nearly forty defendants and mention PEC in only four numbered paragraphs. They allege that the Defendants are responsible for greenhouse gas emissions between 1965 and 2015. See, e.g., San Mateo Complaint, ¶ 75 ("Defendants, through their extraction, promotion, marketing, and sale of their fossil fuel products, caused approximately 20% of global fossil fuel product-related CO
In the rare instances that PEC is mentioned specifically, the Complaints focus on PEC's conduct of exporting coal pre-Effective Date and allege that PEC continues exporting coal from California. They state that PEC "does and has done substantial fossil fuel product-related business in California, including exporting substantial volumes of coal through coal shipping terminals in California, particularly from the ports of Long Beach (Los Angeles County), Stockton (San Joaquin County), Richmond (Contra Costa County), and San Francisco." Complaints ¶ 22(b). And they allege that between 1997 and 2003, PEC "exported coal . . . through the Los Angeles Export Terminal. . . ." Id., ¶ 22. In addition, the Plaintiffs complain that in 1991 PEC engaged in "a national climate change science denial campaign" and that PEC was "linked to . . . groups that undermine the scientific bases linking Defendants' fossil fuel products to climate change and sea level rise. . . ." Complaints, ¶¶ 118, 138; see also Complaints, ¶ 39. The Complaints also include allegations that PEC "continues to export coal out of California ports." Complaints, ¶ 22.
The Plaintiffs assert eight causes of action (Causes of Action, and as they pertain to PEC, PEC Causes of Action) against "Peabody Energy Corp." and the other defendants: (1) one count (First Cause of Action) for public nuisance on behalf of the People of the State of California; and (2) seven counts on behalf of either the County of San Mateo, the City of Imperial Beach, California or the County of Marin, for:
See San Mateo Complaint, ¶¶ 179-267; Imperial Beach Complaint, ¶¶ 176-264, Marin Complaint, ¶¶ 180-268.
There is one prayer for relief section in each Complaint, asking for the following relief for all Causes of Action "1. Compensatory damages in an amount according to proof; 2. Equitable relief to abate the nuisances complained of herein; 3. Reasonable attorneys' fees pursuant to California Code of Civil Procedure 1021.5 or otherwise; 4. Punitive damages; 5. Disgorgement of profits; 6. Costs of suit; and 7. For such and other relief as the court may deem proper." San Mateo Complaint, p. 98, Imperial Beach Complaint, p. 95, Marin Complaint, p. 99. In addition, the Complaints include statements concerning requested relief in the separate counts. Overall, the Plaintiffs state that they "seek[ ] to ensure that the parties responsible for sea level rise
The interpretation of certain provisions of the Plan and Confirmation Order form the focus of the dispute before me, and I set forth below several relevant provisions of these documents.
Plan, § V.E.2.a; Confirmation Order, ¶ 29 (emphasis added).
Plan, § V.E.2.b; Confirmation Order, ¶ 29 (emphasis added).
Confirmation Order, ¶ 30 (emphasis added).
Plan, § V.E.3.a; Confirmation Order, ¶ 22 (emphasis added).
This dispute concerns clarifying language added to the Debtors' Plan and Confirmation Order (and disclosed through the Debtors' disclosure statement) which was the subject of significant negotiations between the Debtors, the U.S. Environmental Protection Agency (EPA), the Department of the Interior, other governmental entities and many Indian Nations as part of a settlement in connection with the plan confirmation process (EPA Settlement). Section V.E.6.a.i of the Plan and Paragraph 24 of the Confirmation Order, providing the language added in connection with the EPA Settlement, are set forth in my detail in my discussion below.
Section I.A.46 of the Plan defines the term "Claim" as "a claim, as defined in section 101(5) of the Bankruptcy Code, against a Debtor or its Estate." Plan, § I.A.46. Section 101(5) of the Bankruptcy Code defines "claim" as:
11 U.S.C. § 101(5) (emphasis added).
The definition of "Environmental Law" in § I.A.92 of the Plan is set forth in my discussion below.
Section I.A.144 of the Plan defines Liabilities as:
Plan, § I.A.144 (emphasis added).
Section I.A.193 of the Plan defines "Reorganized Debtors" as:
Plan, § I.A.193 (emphasis added).
I have jurisdiction over this matter pursuant to 28 U.S.C. §§ 1334(b), 157(b)(2)(B), my interpretation of my Confirmation Order, and Local Rule 9.01(B) of the United States District Court for the Eastern District of Missouri. The parties have not contested my authority to enter a final order in this dispute.
The Plaintiffs have not established that they had, in the first instance, any basis for a claim (pre-Effective Date or post-Effective Date). The only factual allegations in the Complaints specifically identifying PEC are that: PEC exported coal from terminals or ports in Los Angeles County, San Joaquin County, Contra Costa County, and San Francisco, County (and the allegation that PEC continues to export coal from California terminals); and was a member of trade organizations which, according to the Plaintiffs, deny climate change. Interestingly, none of the counties from which PEC allegedly exported coal are plaintiffs in the Complaints pending in California. Equally noteworthy, it is undisputed that PEC is not a self bond guarantor, owner, lessee, permittee, or operator of any real estate in California, and it is conceded that PEC has no mining operations in California.
Nevertheless, assuming that claims exist, I analyze whether those claims have been discharged or instead fall within the exceptions to discharge set forth in the Plan and Confirmation Order. See also 11 U.S.C. § 1141(d)(1)(A) ("Except as otherwise provided . . . in the order confirming the plan, the confirmation of a plan . . . discharges the debtor from any debt that arose before the date of such confirmation, . . . whether or not . . . a proof of the claim based on such debt is filed. . . .").
I begin my analysis with the possible pre-Effective Date claims.
Because the Plaintiffs chose not to file proofs of claims, the analysis could stop here and I could rule in PEC's favor. Notwithstanding six references in each Complaint referring to the period between 1965 and 2015, the Plaintiffs contend that they also asserted post-Effective Date claims against a Reorganized Debtor. I agree with PEC that the Complaints do not set forth post-Effective Date claims and instead concern only pre-Effective Date (and pre-petition) conduct and harm as they do not include factual allegations to support anything further.
Assuming that the Plaintiffs were allowed to proceed with their PEC Causes of Action notwithstanding the bar dates, I also examine whether: (1) the PEC Causes of Action fall within the EPA Settlement; and (2) the First Cause of Action in each Complaint sets forth a discharged "Claim." The plain terms of the Plan and Confirmation Order reveal that the Plaintiffs may not pursue their PEC Causes of Action.
The EPA Settlement language was added to the Disclosure Statement and Confirmed Plan provide assurances that post-Effective Date the EPA and other governmental bodies and several Indian Nations could still enforce environmental laws and regulations relating to ongoing
Section V.E.6.a.i.A of the Plan (Section A) states that nothing in the Plan or Confirmation Order:
Reorganized Debtors' claims, defenses or Causes of Action related thereto under applicable Environmental Law are likewise preserved; Plan, § V.E.6.a.i.A; Confirmation Order, ¶ 24. This provision does not apply to the PEC Causes of Action because: (1) the alleged liability, obligation to, claim, or cause of action by the Plaintiffs does not arise under "Environmental Law"; and (2) the alleged liability of the Reorganized Debtor does not attach because the Reorganized Debtors are the "self bond guarantor, owner, lessee, permittee or operator of real property or a mining operation after the Effective Date." (i.e., because of their relationship to land post-emergence).
The Plan defines "Environmental Law" as:
Plan, § I.A.92 (emphasis added).
The First, Second and Fifth Causes of Action (for public and private nuisance) in the Complaints are brought under the California Nuisance Statute, and for the First Causes of Action, the related Public Nuisance Enabling Statute (both defined below in the separate discussion of the First Causes of Action). The Plaintiffs believe these Causes of Action qualify as Environmental Laws because they are statutory.
The California nuisance actions do not fit within the definition of Environmental Law because that definition would include a statute, regulation or ordinance only if it "concern[s] pollution or protection of the environment, or environmental impacts on human health and safety." Plan, § I.A.92. The Plan clause requiring a link to "pollution or protection of the environment, or environmental impacts on human health and safety" is informed by the list of specific federal statutes that follow it and relate to the physical environment upon which PEC mines. Id. The definition of Environmental Law also requires that any state or local statute, regulation or ordinance that is not included with those specifically listed be the "equivalents of the foregoing." Id. For a cause of action to fit within the definition of Environmental Law, it must be similar to the other statutes listed in the definition. See Black's Law Dictionary (10th ed. 2014) (defining ejusdem generis, "[a] canon of construction holding that when a general word or phrase follows a list of specifics, the general word or phrase will be interpreted to include only items of the same class as those listed."). The California state public nuisance statute covers a broad range of matters, only a small portion of which concern the environment. To allow such a statute to qualify as an Environmental Law would unreasonably expand the Plan's environmental exceptions from discharge.
The Plaintiffs argue for a broader construction of the definition of Environmental Law. For example, they believe that the inclusion of the federal statutes listed in the definition were not meant to limit the otherwise broad definition of Environmental Law and they point to the use of the word "including" before the listed items and the definition of the term "including" in the Plan to mean "including without limitation." See Plan at § I.B.1(h). The Debtors agree that the term "including" is not limiting. However, they appropriately point out that the definition of Environmental Law may include statutes and regulations other than the federal statutes that are specifically listed in that definition as long as those other statutes or regulations are within the scope of the listed statutes. This does not mean that any statute that may only slightly apply to environmental matters (such as the California Nuisance Statute) will qualify under the definition of Environmental Law.
The Third, Fourth, Sixth, Seventh and Eighth Causes of Action in the Complaints (for failure to warn, design defect, negligence and trespass) fail because they do not meet the requirement of the Environmental Law definition that they are brought under a "federal, state and local statute, regulation and ordinance." Instead, they are brought by the Plaintiffs based on common law.
The basis for the Plaintiffs' claim that the Third, Fourth, Sixth, Seventh and Eighth Causes of Action fit within the definition of Environmental Law is that, although they are brought under the common law, they are the equivalents of California's and other states' statutory tort laws that themselves fit within the definition of Environmental Law. The Plaintiffs look to the last clause of the definition (i.e., "and any state or local equivalents of the foregoing."). Plan, § I.A.92.
The Plaintiffs believe that their state common law Causes of Action suffice because the initial phrase in the definition, "all federal, state and local statutes, regulations and ordinances concerning pollution or protection of the environment, or environmental impacts on human health and safety" is the antecedent to the last phrase in the definition, "and any state or local equivalents of the foregoing." Plan, § I.A.92 (emphasis added). I disagree. The list of specific federal statutes set forth in the Environmental Law definition should be read as the antecedent to the phrase "and any state or local equivalents of the foregoing" in that definition, so state common law equivalents of a state statute meeting the definition of Environmental Law would not suffice. Id. If the provision were read as the Plaintiffs suggest (i.e., so the last phrase was read to mean that any common law equivalent of an otherwise qualifying state statute would suffice), the terms "state and local" would not be necessary in the initial phrase of the definition (i.e., it would read "all federal,
I also view the EPA Settlement provisions in light of the fact that they were added as a part of a settlement with the EPA. If I read the initial phrase in the Environmental Law definition as the Plaintiffs request, states would be allowed to rely on common law but the federal government would not be allowed to rely on common law because the word "federal" does not appear in the last clause of the definition (i.e., it would read "all
Even if state common law actions could fit within the Environmental Law definition provided they were the equivalent of an otherwise qualifying state statute, the Plaintiffs have not established that the statutes they cite from California and other states are equivalent to the Plaintiffs' common law tort causes of action. For example, the Plaintiffs cite to a California statute concerning negligence and intentional acts while furnishing alcoholic beverages to minors, which is clearly inapplicable. See Cal. Civ. Code § 1714. The Plaintiffs also have not shown that the statutes that they cite (even if they were the equivalents of common law causes of action) are Environmental Laws because each of the Plaintiffs' cited statutes, like the California statute concerning negligence and intentional acts while furnishing alcoholic beverages to minors, is unduly broad. Reading those statutes to be Environmental Laws would unreasonably expand the environmental exceptions from discharge and effectively read the term "environment" out of the definition. See Corley, 556 U.S. at 314.
The common law causes of action asserted by the Plaintiffs in the Third, Fourth, Sixth, Seventh and Eighth Causes of Action also fail for the independent reasons that they do not in the first instance "concern[ ] pollution or protection of the environment, or environmental impacts on human health and safety" and are not "equivalents" under the Environmental Law definition. This is true for the reasons I stated above concerning the First, Second and Fifth Causes of Action. Plan, § I.A.92.
As stated above, the term "Environmental Law" is defined to mean laws like the examples set forth in that definition. The specific laws set forth in the Environmental Law definition create obligations based on an entity's present relationship to the land. See, e.g., Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C. §§ 9601 et. seq.; In re CMC Heartland Partners, 966 F.2d 1143, 1146 (7th Cir. 1992) ("CERCLA creates a claim running with the land [that] depend[s] not at all on the debtor's actions before or during the reorganization."). It follows that, based on the Environmental Law definition and the additional language in Section A, the liabilities retained under the EPA Settlement provisions are liabilities based on a Reorganized Debtor's relationship to the land post-emergence, not its pre-petition conduct generally.
The allegations in the Complaints are not based on the Reorganized Debtors' real property or mining operation (i.e., relationship to the land). The factual allegations in the Complaints concerning PEC allege the pre-petition exporting of coal through California shipping terminals and membership in organizations that the Plaintiffs characterize as climate change deniers, with only general assertions that PEC continues to ship coal from California terminals. It is not sufficient for purposes of Section A that the PEC Causes of Action merely relate to coal. The necessary connection to post-Effective Date relationship to land is absent. This is no surprise since the actions are brought in California and Plaintiffs have not alleged that PEC has any real property or mining operations in California.
Section V.E.6.a.i.B of the Plan and paragraph 24 of the Confirmation Order (Section B) state that nothing in the Plan or Confirmation Order:
For the reasons stated above in my discussion of Plan Section A, the Causes of Action in the Complaints are not brought under an Environmental Law, as that term is defined in the Plan. See Plan, § I.A.92.
Although the Plan and Confirmation Order do not define the phrase "police or regulatory law," Bankruptcy Code § 362(b)(4), providing an exception to the automatic stay for a governmental unit's actions to enforce its "police and regulatory" powers, includes similar language and guides my interpretation here. See 11 U.S.C. § 362(a)(4). This exception is limited. An action brought to obtain a pecuniary advantage over other creditors is not an exercise of police powers. See United States v. Commonwealth Cos., Inc. (In re Commonwealth Cos., Inc.), 913 F.2d 518, 523 (8th Cir. 1990) ("[A]s a general matter, § 362(b)(4) does not include governmental actions that would result in a pecuniary advantage to the government vis à vis other creditors of the debtor's estate."); State of Missouri v. U.S. Bankr. Ct. for the E.D. of Ark., 647 F.2d 768, 776 (8th Cir. 1981) (an action "primarily relate[d] to the protection of the pecuniary interest in the debtors' property" is not an exercise of police powers.).
The Plaintiffs argue that their PEC Causes of Action are actions focused on protection of the environment and the health, welfare and safety of the Plaintiffs' residents and taxpayers, and that they are not actions to gain a pecuniary advantage just because they include an incidental request for damages.
The clear purpose of the PEC Causes of Action is for the Plaintiffs to obtain a pecuniary advantage. This is apparent from the allegations in the Complaints, the prayers for relief, and from the Plaintiffs' own characterizations of their PEC Causes of Action. The specific relief requested from PEC concerns only PEC's alleged conduct of exporting coal from California terminals and membership in trade organizations, all pre-petition, with only conclusory allegations that PEC continues offensive conduct. It is unclear how the transporting of coal poses a safety concern. The Complaints seek damages and the disgorgement of all profits looking backward from the last fifty years, with only an incidental request for forward looking relief. Consistent with their allegations and requests for damages is the Plaintiffs' statement of the purposes underlying the Causes of Action: "The Governmental Plaintiffs filed the Complaints in order to ensure that the Defendants, as opposed to the Governmental Plaintiffs and their residents and taxpayers, bear the
The Plaintiffs assert that governmental entities regularly use tort law to assert their police powers and that is what they are doing in the Complaints. The Plaintiffs have not shown that
The Plaintiffs argue that each of the PEC Causes of Action is a "claim . . . that, . .. . arises from the mining operation of any Reorganized Debtor" as set forth in Section B because the coal that allegedly impacted the climate came from mines that are now owned by the Reorganized Debtors. This contention is based upon the Plaintiffs' reference to the term "of" in that clause as being synonymous with ownership, so the provision would be satisfied as long as the claim arises to any extent from a mining operation that is now owned by any Reorganized Debtor. The Plaintiffs believe that it is irrelevant whether the claim arose pre-Effective Date or post-Effective Date and that the "claim . . . that, . . . . arises from the mining operation of any Reorganized Debtor" language was intended to preserve pre-existing claims. I disagree.
Like with Section A, the PEC Cases of Action, which concern the exporting of coal and the participation in trade organizations, show why Section B does not apply. The Plaintiffs do not allege that PEC had mining operations in California, as is required by Section B. Instead, they make the attenuated allegation that because PEC mined coal in other states, such operations caused harmful environmental effects in California. This does not change the reality that the only factual allegation of activity by PEC in California concerning the coal was the exporting of it.
In addition, the PEC Causes of Action do not fall within Section B because the language of that section was intended to apply to post-Effective Date claims, but the factual allegations in the Complaints concern only pre-Effective Date conduct by PEC, with no more than vague references to post-Effective Date claims.
The presence of the defined term "Reorganized Debtor" as used in the phrase "claim . . . that, . . . . arises from the mining operation of any Reorganized Debtor" shows why the Section B carve-out does not apply to pre-Effective Date claims. Recall that the Plan defines "Reorganized Debtors" as
The language of Section A also provides context to interpret the meaning of Section B. It states that the liability, obligation, claim or cause of action preserved by that provision may be "based in whole or in part on acts or omissions prior to the Effective Date" within the specific limitations set forth in Section A (i.e, that it is a liability, obligation, claim or cause of action that an applicable Environmental Law imposes on a "Reorganized Debtor in its capacity as the self bond guarantor, owner, lessee, permittee or operator of real property or a mining operation after the Effective Date."). Plan, § V.E.6.a.i.A. The language in Section A concerning claims based on acts or omissions prior to the Effective Date is absent from Section B, which further proves that Section B does not carve out any pre-Effective Date claims. See Corley v. U.S., 556 U.S. at 314.
The Plaintiffs argue that Section B would not be necessary if the Debtors had intended for that provision to apply prospectively to post-Effective Date claims because the post-Effective Date claims were not otherwise discharged in bankruptcy. I disagree. An important policy in Chapter 11 is to encourage consensual reorganizations. As stated, the focus of the negotiations concerning the EPA Settlement provisions was to ensure that the Reorganized Debtors honored their obligations concerning the land post-emergence, such as reclamation obligations. And as PEC pointed out, it is not uncommon for parties to include "comfort" language in Chapter 11 plans in an effort to encourage consensual reorganizations and to avoid disputes concerning the meaning of proposed plan language.
The Plaintiffs contend that, regardless of whether the EPA Settlement applies, the First Cause of Action in each Complaint is not barred by the Plan discharge and injunction because it does not set forth a "Claim" or a "Liability" as those terms are defined in the Bankruptcy Code and the Plan (and as set forth above). The discharge and injunction provisions discharge the Debtors from all Claims or other Liabilities arising on or before the Effective Date. The Plaintiffs argue that the definitions of Claim and Liability are focused solely on monetary (as opposed to equitable) obligations but the First Causes of Action seek only equitable relief.
Recall the definition of "Claim," which includes a "right to payment, . . ." and a
According to the Plaintiffs, since the First Cause of Action in each Complaint is brought in the name of the People of the State of California, it is only entitled to seek equitable relief and cannot form the basis for a Claim. They state that the California Public Nuisance Enabling Statute (defined below) "does not allow for the recovery of monetary damages and does not allow the [ ] Plaintiffs to mitigate the damage themselves and recover costs from the defendants. . . ." Amended Objection at ¶33.
California has a general nuisance statute (California Nuisance Statute), a portion of which pertains to public nuisances. See generally CAL. CIV. CODE §§ 3479, et seq.; see, e.g., CAL CIV. CODE § 3480. California nuisance law generally allows for the recovery of damages. See CAL. CIV. P. CODE § 731 ("An action may be brought by any person whose property is injuriously affected, or whose personal enjoyment is lessened by a nuisance, . . ., and by the judgment in that action the nuisance may be
CAL. CIV. PROC. CODE § 731 (emphasis added).
I disagree with the Plaintiffs' contention that they do not assert a Claim in the First Causes of Action. The Plaintiffs themselves included specific language in the First Causes of Action asking for monetary damages. They allege that "Defendants' conduct . . ., justif[ies] an award of
In addition, each Complaint includes a Second Cause of Action which is brought by the individual county or city on its own behalf for public nuisance. It is undisputed that the Second Causes of Action seek damages. But the real party-in-interest in the First Causes of Action and the Second Causes of Action in each Complaint is the same, the county or city (i.e., County of San Mateo, City of Imperial Beach or County of Marin). See, e.g., California v. M&P Investments, 213 F.Supp.2d 1208, 1215 (E.D. Cal. 2002) (plaintiff in an action brought under California Public Nuisance Enabling Statute was "the city which the city attorney represents."), aff'd in part and appeal dsm. in part, 46 Fed. Appx. 876 (9th Cir. 2002); CAL. CIV. PROC. CODE § 731. In the Plaintiffs' own words, "Although the [First Cause of A]ction is technically brought `in the name of the people,' the party bringing the action — and again, the only party authorized to bring the action — is the city or county." Amended Objection at ¶ 12 (emphasis in original). Plaintiffs do not contend that they lack the ability to recover money damages generally under the California Nuisance Statute (such as under their Second Causes of Action). It would put form over substance to say that while the same party-in-interest brings the First and Second Causes of Action in each Complaint (and the statutory scheme as a whole allows that party-in-interest to seek injunctive relief or money damages for the alleged nuisance), the First Causes of Action would not be "Claims" as that term is defined in the Bankruptcy Code and the Plan simply because each of the First Causes of Action is brought on behalf of the People of the State of California.
Because the Plaintiffs chose not to participate in PEC's bankruptcy (including their decision not to file a claim), any pre-petition or pre-Effective Date claim they may have had was discharged. Plaintiffs' asserted claims against the Reorganized Debtors do not fall within the exceptions to the discharge of the EPA provisions. Accordingly, the Motion of Reorganized Peabody Energy Corporation for Entry of an Order Enforcing the Discharge and Inunction Set Forth in the Confirmation Order and Plan is granted in that: (1) the Plaintiffs are enjoined from prosecuting the PEC Causes of Action; and (2) the Plaintiffs shall promptly dismiss the PEC Causes of Action with prejudice.