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In re Peabody Energy Corp.

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

January 2, 2020

In re PEABODY ENERGY CORPORATION, et al., Debtors.
v.
PEABODY ENERGY CORPORATION, et al., Appellees. DMS CONTRACTING, INC., Appellant,

          MEMORANDUM AND ORDER

          STEPHEN R. CLARK UNITED STATES DISTRICT JUDGE.

         This matter comes before the Court on DMS Contracting, Inc.'s appeal of the Bankruptcy Court's award of attorneys' fees to Peabody Energy Corporation.[1] After reviewing the briefs and the record and conducting a hearing in this matter, the Court finds the Bankruptcy Court clearly erred in determining that Peabody's fee request was timely during the bankruptcy proceedings. As a result, the Court vacates the award of fees and expenses and remands the matter for further proceedings consistent with this order.

         I. BACKGROUND

         The Bankruptcy Court's record and orders clearly and extensively record the events underlying this appeal. An abbreviated version of events taken from those orders and the record before the Bankruptcy Court establishes the following:

         On April 23, 2015, DMS entered into a construction Agreement Between Owner and Design-Builder (the “Contract”) with Peabody Gateway North Mining, LLC (“Gateway North”). Bankr. Doc. 3500.[2] Gateway North operates an underground coal mine in Coulterville, Illinois. Id. DMS and Gateway North contracted to build a new refuse cell for waste disposal. Id. On April 13, 2016, Peabody, including Gateway North, filed for Chapter 11 bankruptcy. Bankr. Doc. 1. DMS completed construction of the cell in July 2016.

         On August 19, 2016, DMS filed proof of claim no. 6144 against Gateway, in the amount of $3, 467, 836.60, for services DMS claimed it performed after the petition date due to unforeseen conditions at the construction site. ECF Claim 23-1.[3] On December 27, 2016, Peabody first objected to the claim but then later withdrew its objection. Bankr. Docs. 1847, 2094. On March 17, 2017, the Bankruptcy Court confirmed Peabody's Chapter 11 plan, and it became effective on April 3, 2017. Bankr. Doc. 2763. On April 14, 2017, Peabody again objected to the DMS claim. Bankr. Doc. 2910. After briefing and a hearing on the claim, the Bankruptcy Court disallowed DMS's claim along with 105 other claims. Bankr. Doc. 3027.

         On July 7, 2017, the Bankruptcy Court granted DMS's motion to reconsider the claim. Bankr. Doc. 3225. After a limited scope evidentiary hearing on August 31, 2017, the Bankruptcy Court again disallowed DMS's claim on October 12, 2017. Bankr. Doc. 3501. Thirty-five days later, on November 16, 2017, Peabody filed a motion for attorneys' fees and expenses pursuant to a fee-shifting provision in the Contract. Bankr. Doc. 3557. Peabody did not seek, and the Bankruptcy Court did not grant, any extension of time to file its motion. After briefing and an evidentiary hearing held on January 9, 2018, the Bankruptcy Court granted the fee motion and awarded Peabody $433, 102.78 in attorneys' fees and expenses. Bankr. Docs. 3668, 3669. DMS appealed and this Court remanded for further development of the Bankruptcy Court's findings of fact and conclusions of law in support of the January 2018 Order and Judgment. See Case No. 4:18-cv-00306 RLW, 2019 WL 1367769 (E.D. Mo. Mar. 26, 2019). On April 11, 2019, the Bankruptcy Court made additional findings of fact and again awarded Peabody $433, 102.78 in fees and expenses. Bankr. Doc. 3871. DMS timely filed an appeal.

         II. JURISDICTION AND STANDARD

         This Court has jurisdiction over the appeal pursuant to 28 U.S.C. § 158(a)(1). “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). 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.

         III. DISCUSSION

         DMS raises four issues in its appeal: (1) whether the Bankruptcy Court erred in its application of federal and Missouri law in determining that Peabody's fee request was timely; (2) whether the Bankruptcy Court erred in determining that Peabody could not have sufficiently pleaded or provided notice of its request for fees in the DMS claim proceedings; (3) whether the Bankruptcy Court abused its discretion in determining that Peabody's fees and expenses were reasonable; (4) whether the Bankruptcy Court erred in determining that Peabody was not required to assume or reject the Contract at issue in the DMS claim; and (5) whether the Bankruptcy Court erred in determining that the fee provision in the Contract was enforceable against DMS post-confirmation if the Contract was rejected.

         A. Application of Federal Rule of Civil Procedure Rule 54(d)

         DMS argues that Federal Rule of Civil Procedure (“FRCP”) 54(d)(2) required Peabody to file its motion for attorneys' fees within 14 days of the entry of judgment unless Missouri law required those fees to be proved at trial as an element of damages. DMS states Peabody did not file its motion for attorneys' fees within fourteen days of the entry of judgment nor did it include a request for attorneys' fees in any pleading, as required by Missouri law. Therefore, according to DMS, Peabody filed an untimely request for attorneys' fees.

         The Bankruptcy Court held that Peabody was exempt from Rule 54's 14-day time period for filing a motion for attorneys' fees because Missouri law makes attorneys' fees sought pursuant to a contract an element of damages to be proven at trial. Bankr. Doc. 3870. Further, the Bankruptcy Court found that Peabody did not need to request attorneys' fees in a pleading because of the unique nature of the proceedings in Bankruptcy Court and that Peabody satisfied the ...


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