Document Page 1 of 6 UNITED STATES BANKRUPTCY COURT FOR THE EASTERN DISTRICT OF VIRGINIA RICHMOND DIVISION ) In re: ) Chapter 11 ) Alpha Natural Resources, Inc., et al., ) Case No. 15-33896 (KRH) ) Debtors. ) (Jointly Administered) ) LIMITED OBJECTION OF APPALACHIAN POWER COMPANY d/b/a AMERICAN ELECRIC POWER TO NOTICE OF (A) POTENTIAL ASSUMPTION AND ASSIGNMENT OF EXECUTORY CONTRACTS AND UNEXPIRED LEASES AND (B) CURE AMOUNTS Appalachian Power Company d/b/a American Electric Power (referred to herein as AEP ), by counsel, hereby files this limited objection to the Notice of (A) Potential Assumption and Assignment of Executory Contracts and Unexpired Leases and (B) Cure Amounts (the Notice )(Docket No. 987), and sets forth the following: Facts Procedural Facts 1. On August 3, 2015 (the Petition Date ), the Debtors commenced their cases under Chapter 11 of title 11 of the United States Code (the Bankruptcy Code ) that are now pending with this Court. The Debtors continue to operate their businesses and manage their properties as debtors in possession pursuant to Bankruptcy Code sections 1107(a) and 1108. Russell R. Johnson III V.S.B. No. 31468 John M. Craig V.S.B. No. 32977 Law Firm of Russell R. Johnson III, PLC 2258 Wheatlands Drive Manakin-Sabot, Virginia 23103 (804) 749-8861 Telephone (804) 749-8862 Facsimile Counsel for Appalachian Power Company d/b/a American Electric Power
Document Page 2 of 6 2. The Debtors chapter 11 bankruptcy cases are being jointly administered. The Bid Procedures Order 3. On November 6, 2015, the Court entered the Order (I) Approving Bidding and Sale Procedures For Certain Mining Properties and Related Assets, (II) Approving the Form and Manner of Notice of the Related Assumption and Assignment of Executory Contracts and Unexpired Leases and (III) Scheduling An Auction and Sale Hearing (the Bid Procedures Order )(Docket No. 855). 4. The Court-approved Bidding Procedures For the Sale of Certain of the Debtors Mining Assets (the Bid Procedures ) provides: Any Sale Transaction will be on an as is, where is basis and without representations or warranties of any kind by the Debtors, their agents or the Debtors chapter 11 estates, except and solely to the extent expressly set forth in the final APA and Sale Order approved by the Bankruptcy Court. * * * [T]he Debtors will seek authority to sell all of their right, title and interest in and to the Assets free and clear of all liens, claims (as such term is defined in section 101(5) of the Bankruptcy Code), interests and encumbrances (collectively, Liens ) to extent permitted by law, with any Liens to attach to the proceeds of the Sale Transaction as provided in the final Sale Order. The Debtors Note that, through the sale approval process, parties in interest may assert that some obligations are not subject to a free and clear order. Bid Procedures at 13. 5. The Bid Procedures Order sets forth the following sales timetable: (i) deadline to submit a Qualified Bid - January 20, 2016; (ii) an Auction, if necessary, shall take place on January 27, 2016; and (iii) the initial Sale Hearing shall take place on February 9, 2016. Bid Procedures Order at 4, 5 and 7. 2
Document Page 3 of 6 The Notice 6. The Bid Procedures Order provides that the Debtors shall file a schedule of cure obligations (the Cure Schedule ) for executory contracts that the Debtors have identified as potential assumed and assigned agreements. However, the Bid Procedures Order also provides that the inclusion of any document in the Cure Schedule does not constitute, and is not deemed to be, a determination or admission by the Debtors or any Successful Bidder that such document is an executory contract or unexpired lease within the meaning of the Bankruptcy Code. Bid Procedures Order at 17. 7. Pursuant to Paragraph 17 of the Bid Procedures Order, the Debtors filed the Notice on November 23, 2015. 8. Exhibit A to the Notice listed executory contracts and unexpired leases that the Debtors assert they may seek to assume and assign to a Successful Bidder. Set forth in Exhibit A are the following two right-of-way/easements belonging to AEP that the Debtors list as potential executory contracts that the Debtors may assume and assign to a Successful Bidder: a. An AEP right-of-way agreement relating to Debtor Knox Creek Coal Corporation s operations in Virginia (the AEP Knox Creek Easement ); and b. An AEP right-of-way agreement/easement relating to Debtor Rockspring Development, Inc. s operations in West Virginia (the AEP Rockspring Easement ) (the AEP Know Creek Easement and AEP Rockspring Easement collectively, the AEP Easements ). 3
Document Page 4 of 6 Discussion A. The AEP Easements Cannot Be Assumed and Assigned By the Debtors To Successful Bidder(s) As Executory Contracts. State law determines property right in the bankruptcy process. In re Plascencia, 354 B.R. 774, 778 (E.D. Va., 2006), citing Butner v. United States, 440 U.S. 48, 99 S.Ct. 914, 59 L.Ed.2d 136 (1979); UCA, L.L.C., d/b/a Adelphia Communications v. Lansdowne Community Development, LLC, 215 F.Supp.2d 742, 752 (E.D. Va. 2002) (Easement rights in real property are created by state law.); Deakins v. Tackett, 2006 WL 771931 at page 1 (S.D. W.Va. 2006) (The nature and existence of a debtor s right to property is determined by looking at state law.). Under both Virginia and West Virginia Law, a purchaser with notice of covenants that run with the land, takes the property subject to such interest. Restaurant Associates, L.L.C. v. The Meadowbrook Mall Company Limited Partnership, 2007 WL 951849 at page 4 (N.D. W.Va. 2007); U.S. v. Blackman, 270 Va. 68, 77, 613 S.E.2d 442, 446 (Va. 2005) (An easement appurtenant runs with the land, with benefit conveyed by or the duty owed under the easement passing with the ownership of the land to which it is appurtenant.). As such, a bankruptcy court order authorizing the sale of a debtor s property free and clear of all liens would have no impact on restrictions of record that run with the land, such as easements. See Koepp v. Holland, 688 F.Supp.2d 65, 92 (N.D.N.Y. 2010), citing In re Oyster Bay Cove, Ltd., 196 B.R. 251, 254 (E.D.N.Y. 1996). In Oyster Bay, the Bankruptcy Court for the Eastern District of New York held: As the Bankruptcy Court correctly points out, a sale free and clear of liens and other interests has no impact on restrictions of record that run with the land. Free and clear should be interpreted as speaking of interests against the property, such as liens or mortgages, which now attach to the proceeds of the sale. Therefore, the order to sell free and clear has no affect on the dedication of the 4
Document Page 5 of 6 road and the storm drain, which are easements that run with the land. Clearly, 11 U.S.C.A. 363(f) FN7 and Bankruptcy Rule 6004, which refer to the sale of land free and clear from these interests, are not intended to sever easements and other non-monetary property interests that are created by substantive State law. Indeed, absent the consent of the owner of the easement or the easement being in bona fide dispute, the Bankruptcy Code does not even allow the Bankruptcy Court to authorize a sale of the property free and clear of an easement. Id. at 255. [A]bsent the consent of the owner of the easement or the easement being in bona fide dispute, the Bankruptcy Code does not even allow the Bankruptcy Court to authorize a sale of the property free and clear of an easement. City of New York v. Nat l R.R. Passenger Corp., 2008 WL 5169636, at *8 (E.D.N.Y. 2008), citing In re Oyster Bay Cove, 196 B.R. at 255-56. The AEP Easements are property rights belonging to AEP that run with the land, and cannot be extinguished by any Order of the Bankruptcy Court. Accordingly, even if the AEP Easements were held by the Bankruptcy Court to be executory contracts that could be assumed and assigned by the Debtors, which they are not, any supposed assignment and assumption and subsequent Bankruptcy Court Order would have no impact upon the validity of the AEP Easements. WHEREFORE, AEP respectfully request that this Court enter an order: 1. Providing that the AEP Easements are not executory contracts that can be assumed and assigned by the Debtors to a Successful Bidder(s); 2. Providing that the applicable real property upon which the AEP Easements lie cannot be sold free and clear of the AEP Easements; and 3. Providing such other and further relief as the Court deems just and appropriate. 5
Document Page 6 of 6 Dated: January 7, 2016 /s/ John M. Craig Russell R. Johnson III, V.S.B. No. 31468 John M. Craig, V.S.B. No. 32977 Law Firm of Russell R. Johnson III, PLC 2258 Wheatlands Drive Manakin-Sabot, Virginia 23103 Telephone: (804) 749-8861 Facsimile: (804) 749-8862 Email: russj4478@aol.com Counsel for Appalachian Power Company d/b/a American Electric Power CERTIFICATE OF SERVICE I hereby certify that on January 7, 2016, I caused a true copy of the foregoing Limited Objection to be served via the Court s electronic case filing system (CM/ECF) to all parties registered to receive such notice in the above-captioned case. /s/ John M. Craig John M. Craig 6