In re HNRC Dissolution Co.

Giese claimed that HNRC paid royalties derived from coal mining into an escrow account. After buying the property on which the mining occurred, Giese sued, asserting a right to the escrowed royalties. Lexington Coal disputed Giese’s claim, arguing it purchased all cash and accounts of HNRC and HNRC’s parent company during a bankruptcy case involving those entities. Lexington had been a defendant in an interpleader action before the Bankruptcy Court to determine the rightful owner of the funds at issue. Giese’s state court action was removed to the Bankruptcy Court, which declined to abstain from adjudicating two counts of Giese’s Kentucky state court complaint and dismissed his complaint. The Bankruptcy Appellate Panel affirmed. Giese’s claims were inextricably intertwined with the bankruptcy case and would not exist but for the bankruptcy, so the Bankruptcy Court was right to adjudicate them. Sending two claims (breach of contract and royalty claims) to a court that cannot, under any circumstance, adjudicate the other related claims, would pose a great risk to important policy concerns. Upholding the dismissal, the court stated that an order confirming a plan of reorganization constitutes a final judgment in a bankruptcy proceeding, and res judicata bars relitigation of any issues that could have been raised during the confirmation proceeding. View "In re HNRC Dissolution Co." on Justia Law