Plum Creek Timberlands, L.P. v. Yellow Poplar Lumber Company, Inc., et al. et al

Filing 397

OPINION and ORDER adding John M. Lamie, Trustee for Yellow Poplar Lumber Company as a party defendant; the trustee must file responsive pleadings within 14 days from the date of entry of this order; and directing the clerk to schedule a hearing on all pending motions. Signed by Judge James P. Jones on 8/24/15. (flc)

IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF VIRGINIA
ABINGDON DIVISION
PLUM CREEK TIMBERLANDS, L.P.,
ET AL.,
Plaintiffs,
v.
YELLOW POPLAR LUMBER
COMPANY, ET AL.,
Defendants.

IN RE YELLOW POPLAR LUMBER
COMPANY,
Debtor.

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Case No. 1:13CV00062

Case No. 1:15CV00037

OPINION AND ORDER
Francis H. Casola and Erin Boyd Ashwell, Woods Rogers PLC, Roanoke,
Virginia, Aaron B. Houchens, Stanley, Houchens & Griffith, Moneta, Virginia, and
T. Shea Cook, Richlands, Virginia, for Plaintiffs; Wade W. Massie and Seth
M.Land, Penn, Stuart & Eskridge, Abingdon, Virginia, for Defendants EQT
Production Company and Range Resources-Pine Mountain, Inc.; J. Scott Sexton,
Gregory D. Habeeb, Kathleen L. Wright, and Daniel R. Sullivan, Gentry Locke
Rakes & Moore LLP, Roanoke, Virginia, for Defendants Edwin F. Legard, Jr., et
al.; and John M. Lamie, Guardian ad Litem for Unknown Successors in Title to
Yellow Poplar Lumber Company, Inc.

On July 20, 2015, the United States District Court for the District of South
Carolina reopened the long-closed Yellow Poplar Lumber Company bankruptcy
case and transferred it to this court. Subsequent to the reopening of the bankruptcy
case, the parties were invited to recommend to the court the proper method of
selection and appointment of a trustee in the reopened case, as well as any other
procedures believed necessary for the prompt resolution of the underlying action. 1
Certain of the defendants have filed a joint response, recommending that
attorney John M. Lamie be appointed trustee for the Estate of Yellow Poplar.
Previously, this court appointed Mr. Lamie as guardian ad litem to represent the
unknown successors in title to Yellow Poplar Lumber Company, Inc. (“Yellow
Poplar”). (Order, Dec. 10, 2013, ECF No. 101.)
The plaintiffs, Plum Creek Timberlands. L.P., and Highland Resources, Inc.
(collectively “the plaintiffs” or “Plum Creek”), have objected to the defendants’
recommendation. The plaintiffs contend that, pursuant to the Bankruptcy Act and
the former Rules of Bankruptcy Procedure, Yellow Poplar’s creditors are entitled
to elect the trustee in a creditors’ meeting. Moreover, the plaintiffs contend that
Lamie is not qualified to serve as trustee because his role as guardian ad litem for
Yellow Poplar’s successors in title would create a conflict of interest.

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The

The nature of the underlying case has been discussed in a prior opinion of the
court, Plum Creek Timberlands, L.P. v. Yellow Poplar Lumber Co., No. 1:13CV00062,
2014 WL 1289776 (W.D. Va. Mar. 31, 2014), and will not be repeated here.
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plaintiffs propose that this court order that Yellow Poplar’s creditors convene a
creditors’ meeting to elect a trustee on behalf of the bankrupt estate, subject to
court approval and appointment.
Rather than the current bankruptcy rules, former Rule of Bankruptcy
Procedure 209(b) (1973) governs the procedure for appointing a trustee in this
reopened bankruptcy proceeding. Yellow Poplar’s bankruptcy proceeding was
commenced in 1927, under the Bankruptcy Act of 1898. The Bankruptcy Reform
Act of 1978, which established the modern Bankruptcy Code, instructs “that cases
commenced under the Bankruptcy Act are to continue as if the Bankruptcy Reform
Act had not been enacted.” In re Parr, 3 B.R. 692, 698 (Bankr. E.D.N.Y. 1980);
see also In re Dunning Bros. Co., 410 B.R. 877, 883 (Bankr. E.D. Cal. 2009)
(explaining that “cases under the former Bankruptcy Act are not subject to the
Bankruptcy Code”). Therefore, the “rights of the parties in connection with this
matter are governed by the law applicable as if the Bankruptcy Reform Act had not
been enacted.” In re Parr, 3 B.R. at 696.
There is another caveat, however. In 1973, a new set of Bankruptcy Rules
was promulgated that trumped the nonsubstantive provisions of the Bankruptcy
Act. Order Adopting Bankruptcy Rules, 411 U.S. 991 (1973); 28 U.S.C. § 2075
(1964) (“All laws in conflict with such [bankruptcy] rules shall be of no further
force or effect after such rules have taken effect.”). Therefore, in accordance with
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§ 2075, the 1973 Bankruptcy Rules must supersede any conflicting provisions of
the Bankruptcy Act.
As a result of these developments, “the Bankruptcy Act and, to the
maximum extent feasible, the former Bankruptcy Rules apply” to this reopened
bankruptcy proceeding. In re Dunning Bros., 410 B.R. at 883.
The former Rule of Bankruptcy Procedure 209 sets forth the procedure for
appointing a trustee on behalf of a bankrupt estate, and, as explained above,
supersedes the provisions of the Bankruptcy Act. Id. at 881. Rule 209 provides:
(a)

Election at First Meeting

The creditors of a bankrupt entitled to vote under Rules
207 and 208 shall elect a trustee at the first meeting,
subject to approval by the court and to the provisions of
this rule.
(b)

Appointment by the Court

Except as provided in Rule 211, the court shall appoint a
trustee if (1) the creditors do not elect a trustee; (2) the
trustee elected fails to qualify; (3) a vacancy occurs in the
office of trustee; or (4) a trustee is needed in a reopened
case. If an elected trustee is disapproved by the court for
ineligibility or other good cause, the court may appoint a
trustee.
Fed. R. Bankr. P. 209 (1973).
Plum Creek contends that, pursuant to Rule 209(a), Yellow Poplar’s
creditors have the right to appoint the trustee, subject to approval and appointment
of the court. Since Plum Creek is a successor in interest to W.M. Ritter, Yellow
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Poplar’s largest creditor, Plum Creek asserts that it has the right to participate the
election of the trustee.
Plum Creek’s reading, however, defies the plain language of Rule 209. Rule
209(a) provides that the creditors of a bankrupt shall elect a trustee “at the first
meeting. By contrast, section (b) of the Rule provides that “the court shall appoint
a trustee if . . . a trustee is needed in a reopened case.”

Thus, Rule 209

differentiates between the procedures for selecting a trustee during an initial
bankruptcy, and when a bankruptcy is reopened. This approach is confirmed by
the Notes of Advisory Committee on Rules, which states the Rule’s intent to
provide authority for the court to appoint a trustee without an election when
authorized by the Rules. See In re Eloise Curtis, Inc., 388 F.2d 416, 419 (2d Cir.
1967) (“While the principle of creditor control may justify acceding to the
creditors in the matter of a first choice, it constitutes no such compelling
consideration as to require that the person who ultimately serves as trustee must be
chosen by the creditors.”); see also In re Parr, 3 B.R. at 699 (holding that
“creditors are given the initial chance to elect a trustee: when the trustee elected
fails to qualify, for whatever reason, the bankruptcy court then appoints a trustee”).
Under Rule 209, the court’s authority to appoint a trustee without a creditors’
election includes the reopening of a bankruptcy.

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Plum Creek cites In re Dunning Bros., but that case does not support its
position. The court there clarified that “Bankruptcy Rule 209(b) specifies that the
court shall appoint a trustee if . . . a trustee is needed in a reopened case. Since
Rule 209(b) supersedes the statute, the creditor’s vote at the meeting of creditors to
appoint [the] trustee constituted, as a matter of law, a recommendation that the
court appoint him.”

410 B.R. at 881 (internal quotation marks and citation

omitted). In re Dunning Bros. held that any recommendation of creditors as to a
trustee in a reopened case would not be binding because the court retains the
authority to appoint the trustee. Therefore, In re Dunning Bros. confirmed that,
pursuant to Rule 209(b), the court must appoint the replacement trustee.
Additionally, Plum Creek contends that Mr. Lamie is not qualified to serve
as trustee, because he was previously appointed to serve as guardian ad litem for
the unknown successors in title to Yellow Poplar. Subsequent to his appointment,
Mr. Lamie moved to intervene in the litigation on behalf of the successors to
Yellow Poplar’s shareholders (ECF No. 343), and filed a response in opposition to
Plum Creek and Range Resources’ pending motions for summary judgment (ECF
No. 357). Plum Creek contends that Mr. Lamie cannot simultaneously represent
Yellow Poplar’s unknown successors and serve as a neutral trustee on behalf of the
bankrupt estate.

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While Plum Creek’s concerns have merit, I believe it is nonetheless
appropriate at this stage to appoint Mr. Lamie as trustee. In his capacity as
guardian ad litem, Mr. Lamie was appointed to represent the interests of all
unknown successors in title to Yellow Poplar, in order to ensure that all interested
parties are represented in this ongoing litigation.

The scope of Mr. Lamie’s

representation of Yellow Poplar’s successors is limited to the ownership issues and
does not include the distribution of any assets.

Therefore, at this point, Mr.

Lamie’s duty to maximize the recovery for the bankrupt estate is aligned with the
interests of Yellow Poplar’s shareholders and creditors. Importantly, given Mr.
Lamie’s familiarity with the complexities of this case, his appointment as trustee
will materially assist in expeditiously resolving this long-pending litigation, to the
benefit of all of the parties.

Should a conflict arise in the future, however, the

court may appoint a substitute trustee or take other action to ensure that any
conflict of interest is mitigated.
Accordingly, it is ORDERED as follows:
1. John M. Lamie is hereby appointed trustee for Yellow Poplar Lumber
Company in Case No. 1:15CV00037;
2. John M. Lamie, Trustee for Yellow Poplar Lumber Company, is hereby
added as a party defendant in Case No. 1:13CV00062;

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3. The trustee must file his responsive pleadings within 14 days from the
date of entry of this Order; and
4. The clerk shall schedule a hearing on all pending motions.
ENTER: August 24, 2015
/s/ James P. Jones
United States District Judge

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