County of San Mateo, California et al v. Peabody Energy Corp.

Filing 37

MEMORANDUM AND ORDER: I find that the bankruptcy court's determination that Appellants' First Causes of Action were claims was correct as a matter of law. I further find that the bankruptcy court did not abuse its discretion in ruling tha t Appellants remaining pre-petition or pre-Effective Date claims were discharged. As a result, the bankruptcy court's order enjoining Appellants from prosecuting the PEC causes of action and directing that Appellants promptly dismiss the PEC causes of action with prejudice is affirmed. Signed by District Judge Rodney W. Sippel on 3/29/19. (ARL)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MISSOURI
EASTERN DIVISION
In re:

)
)
PEABODY ENERGY CORP., et al., )
)
Reorganized Debtors,
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______________________________ )
)
COUNTY OF SAN MATEO,
)
CITY OF IMPERIAL BEACH,
)
COUNTY OF MARIN,
)
)
Appellants,
)
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v.
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PEABODY ENERGY CORP.,
)
)
Appellee.
)

Bankruptcy Case No. 16-42529-399

Case No. 4:17 CV 2886 RWS

MEMORANDUM AND ORDER
Appellants County of San Mateo, City of Imperial Beach, and County of
Marin (Appellants) filed this appeal seeking to overturn the bankruptcy court’s
order that they dismiss their lawsuits against the Reorganized Peabody Energy
Corporation (PEC). The Bankruptcy Court1 ordered that Appellants dismiss their
complaints against the Reorganized PEC on the grounds that the causes of action in
those complaints constituted dischargeable claims that Appellants failed to file

1

United States Bankruptcy Judge Barry S. Schermer.

before the deadline the bankruptcy court set. After a review of the briefs and the
record in this matter, I find that the bankruptcy court reached the correct legal
conclusion regarding the First Causes of Action in Appellants’ complaints and did
not abuse its discretion regarding the remaining causes of action. As a result, I will
affirm the bankruptcy court’s order.
I.

Background
Debtors Peabody Energy Corporation and its affiliates filed for Chapter 11

bankruptcy protection in 2016 in the United States Bankruptcy Court for the
Eastern District of Missouri. The bankruptcy court set October 11, 2016 as the
deadline for governmental units to assert claims that arose prepetition. On March
17, 2017, the bankruptcy court entered its order confirming PEC’s Plan of
Reorganization (Chapter 11 Plan). On April 3, 2017, the Chapter 11 Plan went
into effect and Reorganized PEC emerged from bankruptcy. The Chapter 11 Plan
established the deadline of May 3, 2017 for all creditors to assert claims against
PEC that arose between the filing of the bankruptcy petition and the Plan’s
effective date.
Appellants are three governmental entities in California. None of the
Appellants filed a claim in PEC’s bankruptcy proceeding. Instead, on July 17,
2017, shortly after PEC’s plan went into effect, Appellants each filed a separate,
nearly identical, lawsuit in three separate California state courts. The lawsuits
2

sought damages and injunctive relief from multiple fossil fuel industry defendants
for their role in contributing to global warming. PEC is a named defendant in
these three lawsuits. The complaints allege that the defendants are responsible for
greenhouse gas emissions between 1965 and 2015. The complaints seek
compensatory damages, equitable relief, punitive damages, attorneys’ fees,
disgorgement of profits, and cost of suit.
Each of Appellants’ eight causes of action is the same, and they are
presented in the same order across the three complaints: The First Cause of Action
in each complaint (“First Causes of Action”) brings a public nuisance action on
behalf of the People of the State of California. The remaining causes of action are
brought on behalf of the government entities themselves and are as follows:
(Second) Public Nuisance; (Third) Strict Liability—Failure to Warn; (Fourth)
Strict Liability—Design Defect; (Fifth) Private Nuisance; (Sixth) Negligence;
(Seventh) Negligence—Failure to Warn; (Eighth) Trespass. These lawsuits were
removed to federal court.
On August 28, 2017, Reorganized PEC filed a motion in the bankruptcy
court seeking an order enforcing the discharge and injunction provisions of its
Chapter 11 Plan. Specifically, PEC asked the bankruptcy court to enjoin
Appellants from prosecuting their causes of action against PEC and to require
Appellants to dismiss those actions with prejudice. The bankruptcy court found
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Appellants’ claims against PEC had been discharged in bankruptcy. The
bankruptcy court granted Reorganized PEC’s motion, enjoined Appellants from
prosecuting the PEC causes of action, and directed Appellants to dismiss the PEC
causes of action with prejudice. Appellants appealed the bankruptcy court’s
decision to this Court.
II.

Legal Standard
This court has jurisdiction over the appeal pursuant to 28 U.S.C. § 158(a)(1).

Appellants filed a timely notice of appeal.
“When a bankruptcy court's judgment is appealed to the district court, the
district court acts as an appellate court and reviews the bankruptcy court's legal
determinations de novo and findings of fact for clear error.” Fix v. First State Bank
of Roscoe, 559 F.3d 803, 808 (8th Cir. 2009) (internal quotation and citation
omitted). Issues committed to the bankruptcy court's discretion are reviewed for an
abuse of that discretion. In re Zahn, 526 F.3d 1140, 1142 (8th Cir. 2008). A
bankruptcy court’s interpretation of its own prior orders, including a confirmed
Chapter 11 plan, is committed to the discretion of the bankruptcy court and is
reviewed for abuse of discretion. See, e.g., In re Dial Bus. Forms, Inc., 341 F.3d
738, 744 (8th Cir. 2003). A bankruptcy court abuses its discretion when it fails to
apply the proper legal standard or if it bases its order on findings of fact that are
clearly erroneous. Id.
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III.

Discussion
Appellants raise four issues on appeal, which fall into two general

categories. The first issue requires me to determine whether Appellants’ First
Causes of Action, which sought relief under a statutory remedial provision that
only allowed them to seek abatement, raised claims that were discharged by the
Chapter 11 Plan and Confirmation Order. The remaining issues pertain to whether
Appellants’ causes of action were exempt from discharge under certain exceptions
included in the Chapter 11 Plan.
The Chapter 11 Plan contains provisions (“EPA Settlement Provisions”) that
clarify the extent to which Environmental Law claims and actions brought pursuant
to a government entity’s police powers are exempt from discharge under the Plan.
Those provisions came after “significant negotiations between the Debtors, the
U.S. Environmental Protection Agency, 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).” [Memorandum
Opinion, ECF Doc. No. 18-2, A0752, 0757] Appellants argue those provisions
apply to their claims and protect them from discharge.
a. Government Bar Date
As an initial matter, Appellants did not file a proof of claim before the
established deadline of October 11, 2016. [See Memorandum Opinion, ECF Doc.
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No. 18-2, A0752, 0759] They filed their complaints against PEC more than three
months after the Effective Date of the Reorganized PEC’s Chapter 11 Plan. The
complaints they filed allege that PEC’s activity between the years 1965-2015
contributed to climate change and has imposed significant costs on Appellants.
[See, e.g., Marin Complaint, Exhibit C, ECF Doc. No. 18-2, A0619, 0695]
Appellants “do not dispute that they received notice of the Debtors’
bankruptcy cases, and the other operative deadlines in the Debtors’ bankruptcy
cases.” [Memorandum Opinion, ECF Doc. No. 18-2, A0752, 0759] They contend
that they were not bound by the deadline for governmental units to file claims
because their complaints bring claims that were exempted from discharge under
PEC’s confirmed Chapter 11 Plan. I address those arguments more fully below in
Parts III(b) and (c). Because I find that Appellants’ causes of action were not
exempt, and because Appellants chose not to file a proof of claim before the
deadline, I also find that their claims were discharged under the Plan and
Confirmation Order.
b. Discharge of the First Causes of Action
I review de novo the question of whether Appellants’ First Causes of Action
constitute discharged claims under the PEC Chapter 11 Plan. In the First Causes of
Action, Appellants seek injunctive relief pursuant to California’s Public Nuisance

6

Enabling Statute. I find that Appellants’ First Causes of Action are claims that
were discharged under the Chapter 11 Plan.
The Bankruptcy Code defines the term “claim” as either a “right to
payment” or a “right to an equitable remedy for breach of performance if such
breach gives rise to a right to payment.” 11 U.S.C. § 101(5)(A, B). The Code’s
use of the phrase “right to payment” “is usually referring to a right to payment
recognized under state law.” Travelers Cas. & Sur. Co. of Am. v. Pac. Gas & Elec.
Co., 549 U.S. 443, 450–51 (2007). Under the Bankruptcy Code, a debtor’s breach
of a state statutory provision constitutes a breach of performance. Ohio v. Kovacs,
469 U.S. 274, 279 (1985) (“There is no indication in the language of the statute
that the right to performance cannot be a claim unless it arises from a contractual
arrangement.”).
Appellants argue that California’s Public Nuisance Enabling Statute only
enables them to seek injunctive relief, and they do not have a separate right to
payment as a result of PEC’s alleged conduct. Accordingly, they argue, their
request for injunctive relief is not a claim under the Bankruptcy Code.
While it may be the case that Appellants cannot seek damages under the
Public Nuisance Enabling Statute for actions they brought in the name of the
People of the State of California, the fact that Appellants can, and did, include a

7

separate cause of action for damages in their complaints is evidence that
Appellants’ First Causes of Action also constitute discharged Claims.
In their First Causes of Action, Appellants seek equitable relief under the
Public Nuisance Enabling Statute (Cal. Civ. Proc. Code § 731) for violation of
California’s public nuisance law (Cal. Civ. Code § 3480). Specifically, Appellants
ask the court to order Reorganized PEC to abate the nuisance they allegedly
caused. [See, e.g., Marin Complaint, Exhibit C, ECF Doc. No. 18-2, A0619, 070104] Next, in their Second Causes of Action, Appellants seek damages under the
California Civil Code, which defines public nuisance and provides remedies. [See,
e.g., Marin Complaint, Exhibit C, ECF Doc. No. 18-2, A0619, 0704; Cal. Civ.
Code §§ 3479-80; 3491]
The two causes of action arise from a breach of the same underlying statute,
Section 3479 of the California Civil Code, which describes actionable nuisances.
Next, Section 3480 defines when a nuisance under Section 3479 becomes a public
nuisance. Once a person or entity breaches Sections 3479 or 3480, injured
plaintiffs have a variety of remedies they can pursue. For example, individual
plaintiffs can sue under Section 3493 and are eligible to seek equitable and legal
relief. Those individuals may also sue under the Public Nuisance Enabling Statute
and seek equitable and legal relief. See Cal. Civ. Proc. Code § 731 (“An action
may be brought by any person whose property is injuriously affected, or whose
8

personal enjoyment is lessened by a nuisance, as defined in Section 3479 of the
Civil Code, and by the judgment in that action the nuisance may be enjoined or
abated as well as damages recovered therefor.”).
Governmental units also have legal and equitable remedies available to them
when a person or entity causes a public nuisance within their boundaries. They can
sue for equitable relief, damages, or criminal sanction under Section 3491 of the
California Civil Code, or they can sue for equitable relief under the Public
Nuisance Enabling Statute. See Cal. Civ. Proc. Code § 731 (“A civil action may
be brought in the name of the people of the State of California to abate a public
nuisance, as defined in Section 3480 of the Civil Code, by the district attorney or
county counsel of any county in which the nuisance exists, or by the city attorney
of any town or city in which the nuisance exists.”). A government plaintiff may
bring actions under the Public Nuisance Enabling Statute and the California
Nuisance Statute at the same time. See id. (“Each of those officers shall have
concurrent right to bring an action for a public nuisance existing within a town or
city.”).
Equitable and legal relief were both available to Appellants for PEC’s
alleged breach of the California nuisance statute. This means Appellants’
equitable claims arising from that breach were discharged by the confirmed

9

Chapter 11 Plan. Under the Bankruptcy code, claims are defined by what remedies
Appellants could have sought, not only the remedies Appellants actually sought.
Appellants contend that PEC’s alleged breach of the public nuisance statute
did not give rise to both equitable relief and damages, because the specific
statutory provision on which their First Causes of Action rely prohibits Appellants
from using it to obtain damages when they are suing on behalf of the People of the
State of California. They cite a number of California cases that make it clear that
when government plaintiffs sue on behalf of the People of the State of California,
they can only seek equitable relief. Appellants also cite cases from other circuits
that stand for the proposition that a plaintiff’s quest for equitable relief is not a
claim simply because the act that harmed the plaintiff gives rise to a separate cause
of action for damages under another statutory scheme. These cases are not on
point for the issue at hand. In this case, the same alleged breach of California’s
public nuisance statute did indeed give rise to both equitable relief and a right to
payment for these Appellants. Under the Bankruptcy Code, the equitable relief
they seek is therefore a claim. See 11. U.S.C. § 101(5)(B).
c. Discharge of the Remaining Causes of Action
The second, third, and fourth issues presented pertain to the bankruptcy
court’s ruling on the remaining causes of action in Appellants’ complaints. The
issues require me to determine whether Appellants’ causes of action were exempt
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from discharge under two EPA Settlement Provisions that prevent the discharge of
certain kinds of claims. The bankruptcy court interpreted the confirmed Chapter
11 Plan and ruled that Appellants’ claims do not meet the criteria set forth in the
EPA Settlement Provisions.
Appellants concede that I should review the second and fourth issues for
abuse of discretion, but they contend that I should review de novo the question of
whether the PEC causes of action constitute an exercise of their “police power.” I
disagree for the reasons described below in Part III(c)(ii)(1), and I review the
bankruptcy court’s analysis of the EPA Settlement Provisions for abuse of
discretion.
i. Section A of the EPA Settlement Provisions
The first category of claims exempt from discharge under the Chapter 11
Plan comprises specific claims that arise under “Environmental Law.” Those
claims include
any liability or any obligation to, or any claim or any cause of action by, a
Governmental Unit . . . under any applicable Environmental Law to which
any Reorganized Debtor is subject to the extent that it is the owner, lessee,
permittee, or operator of real property or a mining operation after the
Effective Date (. . . but only to the extent applicable Environmental Law
imposes such claim or cause of action on such 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).
Chapter 11 Plan § V.E.6.a.i.A, ECF No. 18-1, A0075, 0139-0140. The Plan
defines “Environmental Law” as “all federal, state, and local statutes, regulations,
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and ordinances concerning pollution or protection of the environment, or
environmental impacts on human health and safety,” lists specific examples of
federal environmental statutes, and also includes “any state or local equivalents of
the foregoing.” Plan § I.A.92, ECF No. 18-1, at A0088.
The bankruptcy court considered the Plan’s definition of “Environmental
Law” and the operation of that definition in the Environmental Law exception
provision of the plan in the context of their origin: they were added as a part of a
settlement with the EPA and other governmental entities. The bankruptcy court
reasonably found that neither Appellants’ statutory causes of action, nor those
based on common law, fit within the category of claims the Chapter 11 Plan
exempted from discharge.
1.

Statutory Causes of Action

Interpreting the Chapter 11 Plan, the bankruptcy court found that the
statutory California nuisance actions in Appellants’ First, Second, and Fifth Causes
of Action were not brought under Environmental Law and were therefore not
exempted from discharge on those grounds. The bankruptcy court’s interpretation
of “Environmental Law” was not an abuse of discretion.
While the list of environmental statutes the Chapter 11 Plan offered was not
exhaustive, it did provide important context for what the Plan meant by “applicable
Environmental Law.” As the bankruptcy court explained, “the Plan clause
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requiring a link to ‘pollution or protecting 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.” [Memorandum Opinion, ECF Doc. No. 18-2, A0752, 0762] It was
reasonable for the bankruptcy court to conclude that California’s general public
nuisance statute was not an Environmental Law, especially given the context that
the enumerated statutes provided.
California’s nuisance law defines a nuisance broadly. Under the law, a
nuisance is “anything which is injurious to health,” “an obstruction to the free use
of property,” or something that “unlawfully obstructs the free passage or use, in the
customary manner, or any navigable lake, or river . . . or any public park, square,
street, or highway.” Cal. Civ. Code § 3479. While certain environmental hazards
may also be nuisances, the nuisance statute is not itself an Environmental Law as
defined by the statute.
A case Appellants cite for another argument in their brief provides a helpful
illustration here. In People ex rel. Gow v. Mitchell Bros.' Santa Ana Theater, the
Santa Ana City Attorney “brought an action against the owners and operators of
the Mitchell Brothers' Santa Ana Theater to abate a public nuisance.” 114 Cal.
App. 3d 923, 926-27, rev'd on other grounds sub nom. California ex rel. Cooper v.
Mitchell Bros.' Santa Ana Theater, 454 U.S. 90 (1981). The public nuisance that
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required abating in Mitchell Bros.’ was not polluting the environment nor was it an
environmental impact on human health and safety. Rather, it was the theatre’s
display of “obscene” films. Id. The display of obscene films does not concern
“pollution or protection of the environment, or environmental impacts on human
health and safety,” especially as compared to the Clean Air Act, the Atomic
Energy Act, the Safe Drinking Water Act, or the Surface Mining Control and
Reclamation Act. Plan § I.A.92, ECF No. 18-1, at A0088.
The bankruptcy court did not abuse its discretion when it found that the
First, Second, and Fifth Causes of Action for statutory nuisance were not exempt
from discharge under Section A of the EPA Settlement provisions. Though
California’s nuisance statutes may sometimes be helpful tools for plaintiffs seeking
remedy for environmental hazards that have harmed them, the nuisance statutes do
not inherently “concern pollution or protection of the environment, or
environmental impacts on human health and safety” like the examples the Chapter
11 Plan enumerates. See id. (providing additional examples of statutes that meet
the definition of “Environmental Law”). To find otherwise would stretch the
definition of “Environmental Law” beyond the limits that the Plan sets.
2.

Common Law Causes of Action

The Third, Fourth, Sixth, Seventh, and Eighth Causes of Action in
Appellants’ complaint against PEC are brought under the common law.
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Appellants argue they meet the Plan’s carve-out for “equivalents” of “state and
local statutes, regulations, and ordinances concerning pollution or protection of the
environment, or environmental impacts on human health and safety.” The
bankruptcy court’s conclusion that the Third, Fourth, Sixth, Seventh, and Eighth
Causes of Action were discharged under the Chapter 11 Plan was not an abuse of
discretion.
Regarding these causes of action, the bankruptcy court engaged in a textual
analysis to show that the Chapter 11 Plan’s incorporation of the phrase “state or
local equivalents of the foregoing” referred to the enumerated environmental
statutes directly antecedent to the phrase. The bankruptcy court concluded that the
Plan’s exemption for actions brought under “Environmental Law” also exempts
actions brought under state or local equivalents of the specific environmental
statutes the Plan lists.
Appellants argue that the bankruptcy court incorrectly applied the last
antecedent rule to the Chapter 11 Plan. However, the bankruptcy court’s analysis
was reasonable and certainly not an abuse of discretion. Furthermore, the
bankruptcy court’s ruling explains that the last antecedent analysis, while helpful,
is not dispositive. Even if the phrase “state or local equivalent” referred to the
broader class of “all federal, state, and local statutes, regulations, and ordinances
concerning pollution or protection of the environment, or environmental impacts
15

on human health and safety,” the common law causes of action Appellants asserted
in their initial complaints would still not meet the definition. [Memorandum
Opinion, ECF Doc. No. 18-2, at A0764]
The common law causes of action assert claims for strict liability—failure to
warn, strict liability—design defect, negligence, negligence—failure to warn, and
trespass. These are plainly not the equivalent of statutes, regulations, and
ordinances concerning the environment. Like the statutory causes of action for
nuisance, these common-law equivalents may be sometimes used to remedy
environmental hazards, but they do not themselves concern the environment.
The statutes Appellants cite in their opening brief provide support for this
conclusion. For example, Appellants argue that Connecticut’s product liability
statute, which protects citizens from defective products, “concerns” or “relates to”
“environmental impacts on human health and safety.” [See Appellants’ Opening
Brief, ECF No. 18, at 37-38] They cite the Merriam-Webster Online Dictionary’s
definition of “environment” as “the circumstances, objects, or conditions by which
one is surrounded,” and argue that a products liability statute fits in with the
Chapter 11 Plan’s definition of “Environmental Law.” Id. at 37. However, it is the
Chapter 11 Plan’s definition of “Environmental Law,” and not Merriam-Webster’s
definition of “environment,” that determines whether these causes of action were
discharged. According to the bankruptcy court, the Plan’s definition did not
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contemplate exempting ordinary common law tort actions from discharge. The
bankruptcy court’s interpretation was correct. Section A of the EPA Settlement
Provisions does not save these common law claims from discharge.
3. Post-Effective Date Relationship to Real Property or
Mining Operation
The bankruptcy court’s determination that Appellants’ First, Second, and
Fifth Causes of Action did not fit within the scope of the plan’s definition of
“Environmental Law” is sufficient ground on which to order Appellants to dismiss
those causes of action with prejudice. However, the bankruptcy court also
assessed the clause in EPA Settlement Provision Section A that required that
environmental actions be brought against the Reorganized PEC “in its capacity as
the self bond guarantor, owner, lessee, permittee, or operator of real property or a
mining operation after the effective date.” § V.E.6.a.i.A. As the bankruptcy court
explained, this clause further supported the bankruptcy court’s determination that
Appellants’ causes of action were not brought under the “Environmental Law”
exception in Section A of the EPA Settlement Provisions. As the bankruptcy court
explained, environmental statutes like the ones it names when defining
“Environmental Law” “create obligations based on an entity’s present relationship
to the land.” [Memorandum Opinion, ECF Doc. No. 18-2, A0752, 0764]
The bankruptcy court explained that the Chapter 11 Plan included the
Environmental Law exception to make clear that the Reorganized PEC could not
17

avoid liability from claims that were based on its relationship to land after the
Plan’s Effective Date. It clarified that the Reorganized PEC could not argue that an
environmental claim based on the Reorganized PEC’s present relationship to the
land was discharged under the Chapter 11 Plan simply because the conduct that
gave rise to the claim occurred prior to the effective date. This essentially stated
what would have been true even if the Chapter 11 Plan had not included the
provision: certain environmental statutes impose liability on a current landowner or
operator based solely on current conditions on their land. For example, the
Comprehensive Environmental Response, Compensation and Liability Act
(CERCLA) “creates a claim running with the land that depends not at all on the
debtor’s actions before or during the reorganization.” [Memorandum Opinion,
ECF Doc. No. 18-2, at A0762 (quoting In re CMC Heartland Partners, 966 F.2d
1143, 1146 (7th Cir. 1992)]
By contrast, Appellants’ own arguments make clear that they seek remedies
from the Reorganized PEC due to PEC’s past actions, including the “intentional
promotion of [their products] with knowledge of the public health hazard.”
[Appellants’ Opening Brief, ECF No. 18, at 40] Appellants are attempting to sue
the Reorganized PEC based on the pre-Effective Date conduct of PEC, not based
on the Reorganized PEC’s present relationship to the land.

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ii. Section B of the EPA Settlement Provisions
Another type of claim exempt from discharge under the Chapter 11 Plan was
“any claim of a Governmental Unit . . . under any Environmental Law, or other
applicable police or regulatory law, in each case that, in accordance with the
Bankruptcy Code and bankruptcy law, arises from the mining operation of any
Reorganized Debtor.” Plan § V.E.6.a.i.B, ECF No. 18-1, at A0140. The
bankruptcy court’s analysis of this provision considered whether Appellants’
causes of action (1) were brought in accordance with their police powers, and (2)
arise from the Reorganized PEC’s mining operations. The bankruptcy court did
not abuse its discretion in finding that the causes of action were not brought
pursuant to Appellants’ police powers and that they did not arise from the mining
operations of the Reorganized PEC.
1. Police or Regulatory Law
The Parties dispute the standard of review that applies to the question of
whether Appellants were exercising their police powers when they sued the
Reorganized PEC. PEC urges me to follow the Eighth Circuit rule that a district
court reviews a bankruptcy court’s interpretation of a confirmed Chapter 11 Plan
for abuse of discretion. Appellants, on the other hand, cite a Second Circuit case,
In re Methyl Tertiary Butyl Ether (''MTBE'') Prod. Liab. Litig., for the proposition
that I should review the bankruptcy court’s evaluation of the so-called “police
19

power” exception de novo. 488 F.3d 112 (2d Cir. 2007). The case Appellants cite
is not controlling or on point here. In that case, the Second Circuit was reviewing
a district court’s interpretation of the term as it appeared in a statute. See Id. (“We
have never had occasion to define the parameters of a governmental unit's police or
regulatory power in the context of [28 U.S.C.] section 1452.”).
Though the bankruptcy court cites to the Bankruptcy Code’s “police and
regulatory” power exception to the automatic stay of actions against debtors, it
does so to “guide” its own interpretation of the confirmed Chapter 11 Plan in this
case. [Memorandum Opinion, ECF Doc. No. 18-2, A0752, 0766 (citing 11 U.S.C.
§ 362(b)(4))] The bankruptcy court then applies the pecuniary interest test as it
interprets the Chapter 11 Plan’s police power exemption. Id. Because the
bankruptcy court conducted its assessment of the meaning of “police or regulatory
law” in order to interpret the confirmed Chapter 11 Plan, I will review the
bankruptcy court’s findings for abuse of discretion.
As Appellants note, the bankruptcy court reached a different determination
than another court reached on the same issue. Last March, Judge Chhabria in the
Northern District of California found that Appellants’ causes of action—as alleged
against Chevron Corporation, another defendant in the suits—were “aimed at
protecting the public safety and welfare and brought on behalf of the public.” [See
Appellants’ Notice of Supplemental Authority, ECF Doc. No. 25, at 33 (alerting
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me to the Order Granting Motions to Remand, Cty. of San Mateo v. Chevron
Corp., 294 F. Supp. 3d 934, 939 (N.D. Cal. 2018))] Judge Chhabria concluded that
the lawsuits, as filed against defendant Chevron, were an exercise of Appellants’
police powers. Id.
Without commenting on the merits of the Chevron ruling Appellants cite, I
find that the bankruptcy court here did not abuse its discretion though it reached a
different conclusion than the Northern District of California District Court.
The bankruptcy court fully explained its finding that Appellants brought the
PEC causes of action in order to obtain a pecuniary advantage over other creditors
of the debtor’s estate. The bankruptcy court’s finding that Appellants sought to
obtain a pecuniary advantage meant that the actions were not brought pursuant to
their police powers. [See Memorandum Opinion, ECF Doc. No. 18-2, at A076667]
As evidence for its conclusion, the bankruptcy court cited Appellants’
Complaints, prayers for relief, and characterizations of their causes of action. The
bankruptcy court noted that Appellants seek “disgorgement of all profits looking
backward from the last fifty years.” [See Memorandum Opinion, ECF Doc. No.
18-2, at A0767] The court also quoted Appellants’ argument that they “filed the
Complaints in order to ensure that the Defendants, as opposed to the [Appellants]
and their residents and taxpayers, bear the costs and burdens of addressing the
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foreseeable harm . . . caused by the defendants’ products.” [See Memorandum
Opinion, ECF Doc. No. 18-2, at A0767 (citing Appellants’ Amended Objection,
ECF Doc. No. 18-2, A0730, 0732)] The bankruptcy court ultimately found that
Appellants had not shown that the tort actions they filed against PEC constitute an
exercise of Appellants’ police powers.
Appellants disagree with the bankruptcy court’s police power finding, but
they do not provide any substantive evidence or argument that the bankruptcy
court abused its discretion. They cite no “relevant factor” that the court failed to
cite, no “irrelevant factor” that got significant weight, and no “clear error in
weighing the relevant factors” in determining that their PEC causes of action were
not an exercise of their police or regulatory powers. See United States v.
Campbell, 410 F.3d 456, 464 (8th Cir. 2005) (discussing the abuse of discretion
standard). The other district and circuit case law that Appellants assert contradicts
the bankruptcy court’s finding is not binding on the bankruptcy court. The 8th
Circuit case law that Appellants cite simply adopts a United States Supreme Court
description of the police power. It is not contrary to the bankruptcy court’s
determination. See Frye v. Kansas City Missouri Police Dept., 375 F.3d 785,
791(8th Cir. 2004) (quoting Hill v. Colorado, 530 U.S. 703, 715 (2000)) (“It is a
traditional exercise of the State's ‘police powers to protect the health and safety of
their citizens.’”).
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Furthermore, even if the bankruptcy court abused its discretion in its
assessment that the PEC causes of action were not brought pursuant to a “police or
regulatory law,” the final result would not be different. This is because, in order to
be exempt, Appellants’ causes of action must “arise[] from the mining operation of
any Reorganized Debtor.” Plan § V.E.6.a.i.B, ECF No. 18-1, at A0140. The
causes of action did not arise from the Reorganized PEC’s mining operations.
2. Mining Operations of Reorganized Debtors
The bankruptcy court did not abuse its discretion when it found that
Appellants’ causes of action do not arise from the mining operations of the
Reorganized PEC. Appellants argue that, because coal once mined from the mines
that the Reorganized PEC now operates caused CO2 emissions that exacerbated the
effects of climate change, their claims arise from the mining operations of the
Reorganized PEC.
Appellants’ causes of action seek to impose liability on the Reorganized
PEC for the alleged conduct of the pre-effective date PEC. These are not the kinds
of claims that the EPA Settlement Provisions seek to preserve. As the bankruptcy
court explained, “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.”
[Memorandum Opinion, ECF Doc. No. 18-2, A0752, 0769]
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Appellants seek to use EPA Settlement Provision Section B to bring
conduct-based claims, rather than claims based on the Reorganized PEC’s
relationship to the land. They argue that the Section B provides an avenue for
claims that “arise from mining operations that the Reorganized Debtors own.”
[See Appellants’ Opening Brief, ECF No. 18, at 29] Appellants’ addition of the
word “own” is significant. It may well be the case (though I do not reach those
merits here) that the harm Appellants allege arises from previous mining
operations at the site the Reorganized PEC now owns or operates. But under the
Chapter 11 Plan the bankruptcy court interpreted, it is the Reorganized PEC’s
mining operations themselves, and not past mining activity at the Reorganized
PEC’s mine, that must give rise to Appellants’ alleged harm under Section B of the
EPA Settlement Provisions.
The bankruptcy court points to other persuasive evidence that supports its
position. For example, the provision is written in the present tense, indicating it
pertains only to present activity. In addition, Section B lacks any reference to
“claims based on acts or omissions prior to the Effective Date.” [Memorandum
Opinion, ECF Doc. No. 18-2, at A0768] Conversely, Section A, which in part was
meant to cover pre-Effective Date activity, contained language to that effect. The
absence in Section B of language referring to acts or omissions prior to the

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Effective Date further suggests that Section B is not meant to save claims
pertaining to pre-Effective Date activity.
IV.

Conclusion
I find that the bankruptcy court’s determination that Appellants’ First Causes

of Action were claims was correct as a matter of law. I further find that the
bankruptcy court did not abuse its discretion in ruling that Appellants’ remaining
pre-petition or pre-Effective Date claims were discharged.
As a result, the bankruptcy court’s order enjoining Appellants from
prosecuting the PEC causes of action and directing that Appellants promptly
dismiss the PEC causes of action with prejudice is affirmed.

_______________________________
RODNEY W. SIPPEL
UNITED STATES DISTRICT JUDGE
Dated this 29th day of March, 2019.

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