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Coaldale Energy L.P. v. Lehigh Coal & Navigation Co. (In re Lehigh Coal & Navigation Co.)

United States Bankruptcy Court for the Middle District of Pennsylvania

June 12, 2009, Decided

CHAPTER ELEVEN, BANKRUPTCY NO.: 5-08-bk-51957

Opinion

[Nature of Proceeding: Motion for Relief from Stay (Doc. # 280)].

Coaldale Energy L.P., through its general partner Coaldale Energy, LLC, (collectively Coaldale), has filed for relief from the automatic stay pursuant to 11 U.S.C. § 362(d)(1) for cause to terminate certain contracts with the Debtor, Lehigh Coal & Navigation Company (Lehigh).

While a series of agreements have been entered into between the Coaldale and Lehigh entities, the agreement  [*2] central to the issue appears to be a certain Purchase and Services Agreement wherein 1,716,000 tons of coal silt was transferred from Lehigh to Coaldale for approximately $ 13,000,000. The silt sits on property owned by Lehigh and is covered by what is know as "overburden" necessitating removal prior to transfer. Implicated are issues of access to what is known as the Great Lakes Silt Dam as well as disposal of the rather significant overburden material. While this capsulizes the facts, in actuality, the Agreement is much more complex as is the relationship between the parties.

Lehigh is an entity solely owned by James J. Curran, Jr. It is possessed of 8000+ acres of land in Schuylkill County, Pennsylvania, holding vast coal reserves estimated to be worth values exceeding $ 100,000,000. Notwithstanding this rather significant asset, Lehigh found itself cash poor and in dire straits.

The Curran family members play a significant role in the development of the relationship between Lehigh and Coaldale. Testifying at trial was Caitlin Curran Hatch, daughter of James J. Curran Jr. and Lehigh's corporate counsel as well as a member of the board of directors. Also testifying were estranged children  [*3] of James J. Curran, Jr., i.e. Sean Curran, former president of Lehigh, and James J. Curran, III, a/k/a Jamie, a foreman and vice-president of operations. Both Sean and Jamie are allied with Coaldale.

Sean Curran had a falling out with his father and left the operation of Lehigh only to be summoned when Lehigh fell on hard times. It seems that Sean had the contacts and ability to secure financing when Lehigh could not do so on its own. It was through Sean's efforts that the Coaldale entities emerged on the scene as a so-called white knight to assist Lehigh in funding its operations. That funding came at a price, however. On April 17, 2006, Lehigh and Coaldale entered into a Management Agreement by which Coaldale was authorized to manage the Lehigh operations. The Management Agreement was in effect until rejected by this Court on October 1, 2008, over Coaldale's objection. On July 25, 2006, the parties entered into a Purchase and Services Agreement for the sale of the above referenced silt. The Agreement included a 15% "parallel interest" in favor of Lehigh. Exhibit D-1, Article I at P 1.3(a). The Agreement also included a Services provision wherein Lehigh would remove overburden and  [*4] process coal silt to provide a finished product. Lehigh was also appointed as a selling agent for Coaldale.

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2009 Bankr. LEXIS 1412 *; 2009 WL 1657096

IN RE: LEHIGH COAL & NAVIGATION COMPANY, DEBTOR COALDALE ENERGY L.P., MOVANT vs. LEHIGH COAL & NAVIGATION COMPANY, RESPONDENT

CORE TERMS

Silt, terminate, automatic stay, parties, Movant

Business & Corporate Compliance, Contracts Law, Standards of Performance, Discharge & Termination, Bankruptcy Law, Automatic Stay, Relief From Stay, Relief for Cause, Administrative Powers, Duration of Stay, General Overview