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In re Peabody Energy Corp.

United States District Court, E.D. Missouri, Eastern Division

March 26, 2019

In Re PEABODY ENERGY CORPORATION, et al., Reorganized Debtors,
v.
PEABODY ENERGY CORPORATION, et al., Reorganized Debtors-Appellees. DMS CONTRACTING, INC., Creditor-Appellant,

          MEMORANDUM AND ORDER OF REMAND

          RONNIE L. WHITE, UNITED STATES DISTRICT JUDGE.

         This matter is before the Court on Creditor-Appellant DMS Contracting, Inc.'s Appeal from the bankruptcy court's Order Granting Reorganized Debtors-Appellees Peabody Energy Corporation, et al.'s Motion for Attorneys' Fees and Expenses and the bankruptcy court's entry of Judgment awarding such fees and expenses against DMS Contracting, Inc. ("DMS") (ECF No. 14).

         Background[1]

         In April, 2015, Creditor-Appellant DMS entered into an Agreement Between Owner and Design-Builder ("Contract") with Peabody Gateway North Mining, LLC ("Gateway"). Gateway operates an underground mine in Coulterville, Illinois. As the coal is mined, it is loaded onto a conveyer, which takes the coal to a preparation plant where the coal is washed to remove non-coal refuse. Gateway disposes of the fine and course refuse in large cells created by building earthen embankments that cordon off an area. In 2015, Gateway sought bids to expand the existing refuse disposal site and selected DMS to build a new refuse disposal cell ("Cell 5"). The Contract dated April 23, 2015 provided that DMS would be compensated on a unit of work basis and not on a time and material basis, as well as the amount of compensation not to exceed $5, 986 million. Under the Contract, DMS also agreed to fully complete the work by October 15, 2015. Any claims for adjustments to the sum and time under the Contract could only be made in limited circumstances. In early 2016, Gateway became concerned about delays in the Cell 5 project, which DMS attributed to some risks out of DMS's control which created increases in time and costs, for which DMS sought additional compensation. DMS completed Cell 5 in July 2016.

         On April 13, 2016, Peabody Gateway North Mining, LLC and Peabody Energy Corporation (collectively "Peabody") filed Voluntary Petitions for Bankruptcy under Chapter 11 of the United States Bankruptcy Code and the cases were procedurally consolidated. On August 19, 2016, DMS filed an administrative claim against Peabody for services performed after the Petition date allegedly due to unforeseen conditions at the construction site. The bankruptcy court disallowed DMS's claim on May 18, 2017, after which DMS filed a motion for rehearing. The bankruptcy court granted the motion for rehearing, but on October 12, 2017, the bankruptcy court held that DMS waived its claim under the terms of the Contract and thus DMS's claim was disallowed.

         On November 16, 2017, 35 days after the bankruptcy court's order, Peabody filed a Motion for Attorneys' Fees and Expenses ("motion for fees") seeking an award of its attorneys' fees and expenses incurred in defending the DMS Claim pursuant to the terms of the Contract.[2] Following a hearing on the motion for fees, the bankruptcy court entered an Order and Judgment granting the motion and awarding attorneys' fees and expenses to Peabody and against DMS in the amount of $433, 102.78. (Bk. 16-42529 ECF Nos. 3668 and 3669) On January 12, 2018, DMS filed an appeal from the Order and Judgment in the United States District Court for the Eastern District of Missouri. The parties also requested oral argument, which the Court finds is not warranted in this matter.

         Standard of Review

         The Court has jurisdiction over this bankruptcy appeal pursuant to 28 U.S.C. § 158(a)(1). On appeal, "the district court reviews the bankruptcy court's legal conclusions de novo and its findings of fact for clear error." In re Tasic, No. 4:13CV00474 ERW, 2013 WL 2425130, at *4 (E.D. Mo. June 4, 2013) (citing In re O'Brien, 351 F.3d 832, 836 (8th Cir. 2003)). "Under this standard, [the court's] review focuses upon whether there was a failure to apply the proper legal standard or whether the findings of fact are clearly erroneous." In re Carter, 502 B.R. 333, 335 (B.A.P. 8th Cir. 2013) (citation omitted). De novo review of a bankruptcy court's legal conclusions also applies to the interpretation of state law. In re Dittmaier, 806 F.3d 987, 989 (8th Cir. 2015) (citation omitted).

         Further, the Court reviews issues committed to the bankruptcy court's discretion for an abuse of that discretion. In re Tasic, 2013 WL 2425130, at *4. (citing In re Zahn, 526 F.3d 1140, 1142 (8th Cir. 2008)). "An abuse of discretion occurs when the bankruptcy court fails to apply the proper legal standard or bases its order on findings of fact that are clearly erroneous." Id. (citation omitted).

         Discussion

         Creditor-Appellant DMS raises five points on appeal: 1) the bankruptcy court erred in finding Peabody's motion for fees timely and unbarred despite Peabody's failure to comply with the 14-day requirement of Fed.R.Civ.P. 54; 2) the bankruptcy court erred in finding Peabody's motion for fees timely and unbarred under Missouri state law despite Peabody's failure to plead or request fees during the DMS claim proceedings; 3) the bankruptcy court erred in determining that Peabody was not required to assume or reject the executory contract to preserve recovery of a benefit thereunder; 4) the bankruptcy court erred in determining that the fee provision in the contract was enforceable against DMS post-confirmation despite its rejection; and 5) the bankruptcy court abused its discretion in determining that Peabody's fees were reasonable despite Peabody's failure to itemize the time entries to reflect work exclusively pertaining to the DMS claim. Upon careful consideration of the briefs and the relevant documents from the bankruptcy proceedings, the Court will reverse the bankruptcy court's Order and Judgment and remand the case for further proceedings.

         DMS asserts that the bankruptcy court clearly erred in finding Peabody's motion for fees timely because Peabody failed to file the motion within 14 days as required by Rule 54 of the Federal Rules of Civil Procedure. Rule 54 provides, "[a] claim for attorney's fees and related nontaxable expenses must be made by motion unless substantive law requires those fees to be proved at trial as an element of damages." Fed.R.Civ.P. 54(d)(2)(A). Further, "the motion must be filed no later than 14 days after the entry of judgment" unless otherwise provided by statute or court order. Fed.R.Civ.P. 54(d)(2)(B)(i).

         DMS contends that Peabody's motion was filed more than 14 days after the bankruptcy court's final order on DMS's claim and was therefore untimely under Rule 54. Peabody, on the other hand, asserts that Missouri substantive law applies, which treats attorneys' fees sought pursuant to a contract as an element of damages. Thus, Peabody argues that Rule 54's time limits do not apply, and the motion for fees was timely. DMS responds that the exception to Rule 54 does not apply here because Peabody's fees were incurred during the litigation of DMS' claim and not prior to initiating the contested hearing. In addition, even if Rule 54's exception did apply, Peabody failed to petition for its fees in accordance with the requirements of applicable substantive law.

         During the hearing on Peabody's motion for attorneys' fees, the bankruptcy court stated that it was not convinced that Rule 54's 14-day requirement applied and instead adopted the case authority cited in Peabody's reply brief to its motion for fees, document number 3651. (Bk. 16-42529 ECF No. 3666 pp. 31-33) The bankruptcy ...


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