UNPUBLISHED

UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

In Re: MOUNTAIN LAUREL RESOURCES

COMPANY, A CORPORATION,

Debtor.

MINE MANAGEMENT, INCORPORATED;

LEWIS R. LAW,

Plaintiffs-Appellants,

v.

ROY V. WOLFE, III,

Trustee - Appellee,

FEDERAL INSURANCE COMPANY;

FIREMAN'S FUND INSURANCE COMPANY;

AMERICAN EMPIRE SURPLUS LINES

INSURANCE COMPANY; CONTINENTAL

No. 99-1876

INSURANCE COMPANY; TWIN CITY FIRE

INSURANCE COMPANY; FIRST STATE

INSURANCE COMPANY; CAMDEN FIRE

INSURANCE ASSOCIATION; DIVISIONOF

ENVIRONMENTAL PROTECTIONOFTHE

WEST VIRGINIA DEPARTMENTOF

COMMERCE, LABORAND

ENVIRONMENTAL RESOURCES; TOWNOF

FAYETTEVILLE; CSX CORPORATION;

CSX MINERALS, INCORPORATED, CSX

TRANSPORTATION, INCORPORATED;

TRANSCONTINENTAL INSURANCE

COMPANY; FIDELITYAND CASUALTY

COMPANYOF NEW YORK; BUCKEYE

UNION INSURANCE COMPANY,

Parties in Interest-Appellees.
Appeal from the United States District Court

for the Southern District of West Virginia, at Beckley.

Robert C. Chambers, District Judge.

(CA-99-180-5, BK-93-50398,

AP-96-125)

Argued: January 27, 2000

Decided: April 3, 2000

Before NIEMEYER, Circuit Judge,

HAMILTON, Senior Circuit Judge, and

Frederic N. SMALKIN, United States District Judge

for the District of Maryland, sitting by designation.

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Affirmed by unpublished per curiam opinion.

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COUNSEL

ARGUED: Charles Edward Hurt, LEWIS LAW AND MINE MANAGEMENT, INC., Charleston, West Virginia, for Appellants. Stephen L. Thompson, BARTH, THOMPSON & GEORGE, Charleston,

West Virginia, for Appellees.

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Unpublished opinions are not binding precedent in this circuit. See

Local Rule 36(c).

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OPINION

PER CURIAM:

Mine Management, Inc. (MMI) and Lewis Law (Law) appeal from

the district court's dismissal of their appeal as equitably moot from

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a bankruptcy court order. In this appeal, MMI and Law assert that the

bankruptcy court lacked jurisdiction and authority to issue its order

and that the district court erred in its finding of equitable mootness.

For the reasons stated below, we hold that the bankruptcy court had

jurisdiction and authority to issue its order and that the district court

did not err in dismissing the case as equitably moot.

I

This appeal arises from a complex fifteen-year history of litigation

concerning the environmental cleanup of a 241-acre site in Fayette

County, West Virginia. Throughout the 1900s, the site, known as

"Summerlee," was used for the dumping of refuse (by-products from

coal processing). Prior to 1980, the site was owned by the New River

Company (New River), whose name was later changed to Mountain

Laurel Resources Company (Mountain Laurel).1 New River was

owned by Western Pocahontas Company, which was later purchased

by the CSX Corporation and its subsidiaries (collectively the CSX

entities). The dumping of refuse at Summerlee resulted in a refuse

pile that was approximately 100 feet of "gob" spread over a substantial area of the site. (J.A. 179). Because of the nature of the refuse,

as water percolated through the pile of gob, the water accumulated

contaminants known as acid mine drainage (AMD).

In 1977, Law formed MMI to engage in various coal-related business activities.2 As part of its activities, Mountain Laurel leased some

surface rights at Summerlee to MMI and Law who, in turn, assigned

those rights to Princess Cindy Mining Company for the purpose of

processing the gob, removing pond fines to blend with coal, and selling the coal refuse. In 1978, the State of West Virginia (the State)

required Mountain Laurel to install a treatment plant to treat and mitigate the AMD.

On April 1, 1980, Mountain Laurel sold a portion of the surface

rights of Summerlee to MMI. The sale included the preparation plant,

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1 Because New River and Mountain Laurel are essentially the same

company and represent the same interests, where appropriate this opinion

refers to them collectively as Mountain Laurel.

2 Law is the sole shareholder of MMI.

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a series of ponds, the gob pile, and a water treatment system.3 At the

time MMI purchased the site, the water treatment system was subject

to a National Pollution Discharge Elimination System (NPDES) permit obtained by New River.4 Despite repeated notice, however, neither MMI nor Law ever applied for an NPDES permit authorizing

discharges into Wolf and Arbuckle Creeks. Due to MMI and Law's

failure to operate the water treatment system effectively, AMD was

discharged from the collection pond into Wolf Creek, or from the second settling pond into Arbuckle Creek, on at least sixteen occasions

between March 1987 and November 15, 1991. MMI and Law were

indicted, tried before a jury, and convicted of violating the Clean

Water Act, 33 U.S.C.A. § 1319(c)(2). Law was sentenced to two

years in prison and MMI and Law were fined $80,000 each; both convictions were upheld on appeal by this court in United States v. Law,

979 F.2d 977 (4th Cir. 1992).

From 1984 to 1993, the State and the Town of Fayetteville, West

Virginia (the Town) filed a series of civil suits in the Circuit Court

of Fayette County (the state circuit court) against Mountain Laurel,

the CSX entities, MMI, and Law seeking: (1) injunctive relief to compel abatement of water contamination caused by the gob pile and (2)

damages arising from remedying the pollution.5 In response to these

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3 In the deed conveyed to MMI, a provision provided that MMI

assumed "any and all liability, present and future, . . . for all environmental and safety matters, including but not limited to, air pollution [and]

water pollution . . . arising out of the ownership or use of the property

conveyed, which includes all possible future claims that may be asserted

by . . . [State and Federal agencies]." (J.A. 12-13).

4 The water treatment system was designed to reduce the AMD content

of drainage from the gob pile. The system was comprised of a collection

pond near Wolf Creek, a pump, and piping that channeled the collected

water over a ridge and through a hopper, which dispensed soda ash briquettes to raise the pH of the water. Iron and manganese then precipitated out as the water flowed through two settling ponds before its

discharge into Arbuckle Creek.

5 The State's claim for damages was premised on its incurring

$2,100,000 in costs to remediate the site by lessening the percolation of

water through the gob pile and eliminating four ponds contaminated with

AMD that discharged into Wolf Creek. In addition, the State and the

Town sought prospective relief for the continuing costs of remediation.

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suits, MMI and Law filed and served third-party complaints seeking

indemnification from Mountain Laurel and the CSX entities. In addition to the indemnification claims, MMI and Law asserted claims of

fraud against Mountain Laurel and the CSX entities for fraudulently

conveying the Summerlee site which resulted in MMI incurring

extensive liability and Law being imprisoned.6 In 1995, the state circuit court entered a judgment in favor of the State against MMI and

Law as to their liability. The State, however, did not pursue a damages determination because of the settlement discussions in this case.

In 1993, Mountain Laurel filed a Chapter 11 petition for bankruptcy protection.7 At the time of the bankruptcy filing, Mountain

Laurel was still a defendant in the state court litigation between the

State, the Town, the CSX entities, MMI, and Law. Based on the state

court litigation, the State, the Town, MMI, and Law filed proofs of

claim against Mountain Laurel asserting rights to its bankruptcy

estate. In response to those claims against the estate, the Trustee, in

administering the bankruptcy estate, initiated an adversary proceeding

seeking a declaration of rights, under certain insurance policies, as to

Mountain Laurel's coverage and its right to recover its defense costs

in defending against the state court litigation. In the complaint, the

Trustee alleged that: (1) the bankruptcy court had jurisdiction under

28 U.S.C.A. §§ 157, 1334; and (2) the matter was a core proceeding

under 28 U.S.C.A. § 157(b)(2)(A)-(B), (E), (O).

The State and the Town, together with MMI and Law, jointly

moved to intervene in the adversary proceeding as plaintiffs against

the insurers; the bankruptcy court granted that motion. As plaintiffs,

the Trustee, the State, the Town, MMI, and Law sought to have the

bankruptcy court determine the insurers' liability and each party's

rights to the proceeds, if any, from the insurance policies. The insurers denied coverage based upon a variety of reasons.

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6 MMI and Law claim that Mountain Laurel made false statements and

engaged in other fraudulent conduct in order to prevent MMI and Law

from discovering the pollution problems at Summerlee. MMI and Law's

claims against the CSX entities are premised on the theory that the CSX

entities are the alter ego of Mountain Laurel

7 The bankruptcy was later converted to a Chapter 7 proceeding.

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Over the course of several months, the Trustee engaged in lengthy

and complex negotiations in an effort to resolve the various disputes

among the parties. Because of the inter-relationship between the

adversary proceeding, the bankruptcy claims, and the state court litigation, it was necessary to involve numerous parties not parties to the

bankruptcy proceeding. Although not involved in the bankruptcy case

or in the adversary proceeding but involved as defendants in the state

court litigation, the CSX entities voluntarily participated in the settlement discussions. Other parties, such as citizens groups of riparian

landowners along Wolf Creek and representatives of the National

Park Service and the Federal Office of Surface Mining were not

actual parties to any of the court proceedings or to the settlement

itself, but nevertheless participated in the settlement negotiations.

Despite invitations by the Trustee and admonitions by the bankruptcy

court to participate in settlement negotiations, MMI and Law refused

to participate. After several months, the Trustee was able to fashion

a proposed settlement and compromise that was acceptable to all parties except MMI and Law. MMI and Law refused to sign the settlement agreement.

Under the terms of the proposed settlement, the insurers and the

CSX entities were required to pay to the Environmental Claim Fund

of the estate the total sum of $850,000. Of this amount the estate

would retain $100,000 for reimbursement of the fees and costs it

expended in the state court litigation. These funds were also to be

available for payment of other claims and administrative expenses of

the estate. The remaining balance of $750,000 would be paid by the

estate to the State and the Town in full satisfaction of their environmental claims against the estate, Law, MMI, and the CSX entities.

In return for receiving distributions from the estate, the State and

the Town agreed to release MMI and Law from liability for the

State's costs in remediating Summerlee and the Town's claim for

damages to its water supply. In return for the insurers' payment of

funds to the estate, the State, the Town, Mountain Laurel/the Trustee,

MMI, and Law were to release the insurers from liability. Similarly,

in return for the CSX entities' contribution to the estate, the CSX entities and Mountain Laurel were to be released "from any and all duties,

liabilities, responsibilities, or obligations of every kind and nature,

known or unknown, past, present and future related to the Summerlee

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Site under or arising out of Mountain Laurel's and the CSX Entities'

interest or alleged interest in or arising out of the [insurance] Policies." (J.A. 201). Finally, the benefit the settlement agreement was to

provide to MMI and Law was relief from the judgment already

entered by the state circuit court in favor of the State for the costs of

remediating Summerlee. In addition, MMI and Law would be

released from similar claims of the Town and the indemnity claims

of the estate, as well as indemnity, contribution, and subrogation

claims of the insurers and the CSX entities who might be called upon

to satisfy the claims of the estate and then look to MMI and Law.

To ensure that no one interfered with the settlement agreement, the

bankruptcy court issued a permanent injunction prohibiting "any person from attempting to pursue any of the claims released by the terms

of the Settlement Agreement or from interfering, in any respect, with

the implementation of the terms of the Settlement Agreement." (J.A.

187). The injunction, therefore, enjoined MMI and Law from pursuing the state court litigation against Mountain Laurel and the CSX

entities.

The parties participating in the settlement agreement moved the

bankruptcy court to approve the settlement but MMI and Law

objected. On January 28, 1999, the bankruptcy court conducted an

evidentiary hearing on the motion and, on February 10, 1999, the

bankruptcy court issued an order (the settlement order) approving the

settlement agreement.

In response to MMI and Law's objections, the bankruptcy court

concluded that "the settlement provides for a distribution to MMI and

Law upon their Claim which exceeds that which they could be

expected to receive from the Trustee from the assets of the estate

upon a final distribution." (J.A. 185). With respect to MMI and Law's

fraud claims against Mountain Laurel, the bankruptcy court determined that those claims were still viable but that MMI and Law

would have to assert them against the estate in bankruptcy court if,

at a later time, it was determined that there were funds available for

distribution to general unsecured creditors.8

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8 The bankruptcy court's order does not make reference to the status of

MMI and Law's fraud claim against the CSX entities. However, the

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On February 12, 1999, MMI and Law filed a notice of appeal from

the bankruptcy court's order. In response to MMI and Law's notice

of appeal, on March 4, 1999, the State and the Town filed a motion

to dismiss the appeal on the grounds of legal and equitable mootness.

The State and the Town's motion to dismiss was originally filed with

the United States Bankruptcy Court for the Southern District of West

Virginia, but was forwarded later to the United States District Court

for the Southern District of West Virginia on March 5, 1999.

On May 17, 1999, the district court held a hearing on the State and

the Town's motion to dismiss the appeal on the grounds of legal and

equitable mootness. On June 7, 1999, the district court issued an order

granting the State and the Town's motion to dismiss, finding that

MMI and Law's appeal to the district court was equitably moot. The

district court concluded that reversing the settlement agreement and

order on appeal would "be manifestly unjust to both the parties and

the citizens who waited so long for the pollution in Wolfe [sic] Creek

to be rectified." (J.A. 289). The district court focused on MMI and

Law's failure to apply for a stay of the bankruptcy court's proceedings, which in turn permitted the bankruptcy court to allow distribution of the funds by the Trustee. In addition, the district court

concluded that if it reversed the portion of the settlement agreement

releasing the CSX entities from any claims MMI and Law had against

them, such a decision "undoubtedly would affect the substantial rights

of the CSX entities by subjecting them to additional litigation," and

that doing so would likely result in "unraveling the entire settlement

agreement." (J.A. 288).

Finally, the district court looked to the public interest in abating the

water pollution. The district court noted that, although the State had

performed some land remediation of Summerlee, the settlement proceeds were needed to conduct water remediation. It further noted that

the riparian landowners along Wolf Creek, and the citizens' drinking

water from Wolf Creek, had already endured fifteen years of litigation

waiting for a resolution. Based on this public interest, the CSX enti-

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court's interpretation of the settlement agreement as not affecting the viability of MMI and Law's fraud claims against Mountain Laurel appears

to indicate that MMI and Law's fraud claims against the CSX entities

may still be viable in the bankruptcy court.

 8
ties and the insurers' payment of the funds to the Trustee, the Trustee's disbursement of those funds to the State and the Town, and

issuance of the various releases, the district court concluded that the

appeal was equitably moot.

On June 17, 1999, MMI and Law noticed a timely appeal.

II

This court is presented with two issues: (1) whether the bankruptcy

court had jurisdiction and authority to enjoin, by way of enforcement

of the settlement agreement, MMI and Law from proceeding with

their suit against Mountain Laurel and the CSX entities in state court;

and (2) whether review of the merits of the settlement agreement is

now equitably moot because the agreement has been consummated.

We address these issues in turn.

A

MMI and Law argue that the bankruptcy court lacked jurisdiction

and authority to enjoin their state court litigation against the CSX

entities because: (1) the Trustee's adversary proceeding against the

insurers was a non-core proceeding in which the bankruptcy court

could only propose findings of fact and conclusions of law; and (2)

the injunction effectively discharges MMI and Law's claims against

a nondebtor third-party, i.e., the CSX entities. We disagree.

The United States district courts possess original jurisdiction over

"all civil proceedings arising under title 11, or arising in or related to

cases under title 11." 28 U.S.C.A. § 1334(b) (West 1994). "Each district court may provide that any or all cases under title 11 and any or

all proceedings arising under title 11 or arising in or related to a case

under title 11 shall be referred to the bankruptcy judges for the district." Id. § 157(a);9 see United States v. Wilson, 974 F.2d 514, 516

(4th Cir. 1992). Once jurisdiction is established under § 1334 and a

case has been referred to the bankruptcy court under § 157(a), the

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9 The United States' bankruptcy laws are codified in Title 11 of the

United States Code. See 11 U.S.C.A. §§ 101-1330 (1994).

 9
bankruptcy courts are granted authority to "hear and determine all

cases under title 11 and all core proceedings arising under title 11, or

arising in a case under title 11." 28 U.S.C.A.§ 157(b)(1) (emphasis

added); see Wilson, 974 F.2d at 516. With respect to non-core proceedings that are related to a case under Title 11, however, bankruptcy courts are limited to hearing the proceeding and submitting

proposed findings of fact and conclusions of law to the district court

for entry of a final order or judgment unless the parties consent otherwise. See 28 U.S.C.A. § 157(c)(1). In granting relief in cases properly

before it, the bankruptcy court is authorized to"issue any order, process, or judgment that is necessary or appropriate to carry out the provisions" of Title 11. 11 U.S.C.A. § 105(a) (West 1993).

The proceeding at issue in this appeal is the Trustee's claim against

Mountain Laurel's insurers for the Trustee's fees and costs in defending the estate against the claims resulting from the pollution problems

at Summerlee. The State, the Town, MMI, and Law intervened in the

Trustee's proceeding against the insurers as plaintiffs asserting, inter

alia: (1) that their claims were so related to the claim raised by the

Trustee that they form part of the same case or controversy; (2) that

intervention was necessary to secure their ability to protect their

respective interests; and (3) that the Trustee's claim was situated such

that, disposition of it absent allowing intervention, would have

impaired or impeded the State, the Town, MMI, and Law's ability to

protect their interests. The State, the Town, MMI, and Law sought to

have the bankruptcy court afford them relief by making the proceeds

of the policies available to satisfy their claims against Mountain Laurel, which were the same claims these parties asserted against Mountain Laurel in the state court litigation. It follows that the issues of

what amount the insurers owed, which claimants were entitled to a

portion of any proceeds awarded to the estate of Mountain Laurel, and

the merits of the state court litigation were squarely before the bankruptcy court. Accordingly, the Trustee's claim against Mountain Laurel's insurers is, at a minimum, related to a Title 11 case, and

therefore, jurisdiction was proper. See 28 U.S.C.A. § 1334(a); 1 Collier on Bankruptcy ¶¶ 3.01[4][c][ii]-[iv], at 3-23 to 3-29 (Matthew

Bender 1999).

With respect to the bankruptcy court's authority to hear and determine the Trustee's claims against Mountain Laurel's insurers, even if

 10
we accepted MMI and Law's argument that this proceeding was a

non-core proceeding, it is clear that MMI and Law consented to the

bankruptcy court's authority to determine the issues raised by the various claimants. See Canal Corp. v. Finnman (In re Johnson), 960 F.2d

396, 403 (4th Cir. 1992) ("Under § 157(c)(2) a bankruptcy court may

enter appropriate orders and judgments in non-core related matters

where such matters are referred by the district court and it has the

consent of all the parties." (footnote omitted)). By intervening in the

Trustee's adversary proceeding against the insurers, MMI and Law,

in effect, requested the bankruptcy court to determine the validity of

their claims and their rights to indemnification from Mountain Laurel

on the State's and the Town's claims against MMI and Law for remedying the pollution. See In re Johnson, 960 F.2d at 403 (holding that

a party impliedly consents to entry of judgment by the bankruptcy

court in a non-core proceeding where the party fails to object to the

bankruptcy court's treatment of the proceeding as core); see also M.A.

Baheth & Co. v. Schott (In re M.A. Baheth Constr. Co.), 118 F.3d

1082, 1084 (5th Cir. 1997) ("Furthermore, by failing to object to the

bankruptcy court's assumption of core jurisdiction, Baheth impliedly

consented to the court's entry of final judgment."). A determination

of the validity of MMI and Law's indemnification claims necessarily

requires the bankruptcy court to evaluate the merits of all the parties'

claims. Thus, the bankruptcy court had little choice but to exercise its

authority over the entire state court litigation, including MMI and

Law's alter ego claim against the CSX entities.

MMI and Law also argue that the bankruptcy court lacked the

authority under 11 U.S.C.A. § 105(a) to enjoin their suit against the

CSX entities because the CSX entities are nondebtor third-parties.

The bankruptcy court, however, has authority to"`enjoin parties other

than the bankrupt' from commencing or continuing litigation." A.H.

Robins Co. v. Piccinin (In re A.H. Robins Co.), 788 F.2d 994, 1002

(4th Cir. 1986). A.H. Robins makes clear that a bankruptcy court has

the authority under § 105(a) to enjoin suits against a third-party where

the third-party could seek indemnification from the estate or where a

judgment against the third-party may raise issues of collateral estoppel with respect to suits against the estate. See id. at 1005, 1008. In

this case, both of these circumstances are present, and the bankruptcy

court had authority to enjoin MMI and Law's claims against the parties to the settlement agreement.

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B

Having determined that the bankruptcy court (1) had jurisdiction

under 28 U.S.C.A. § 1334 over the Trustee's adversary proceeding

against the insurers, (2) had the authority under 28 U.S.C.A. § 157 to

determine the issues raised in the proceeding, and (3) had the authority under 11 U.S.C.A. § 105(a) to issue an injunction against alleged

third-party nondebtors, we turn to the issue of whether MMI and

Law's challenge to the merits of the bankruptcy court's settlement

order is equitably moot. Upon review of the briefs and the record, and

after consideration of oral arguments, we conclude that the district

court correctly held that MMI and Law's appeal from the bankruptcy

court's settlement order was equitably moot for the reasons stated in

its opinion. See Law v. Wolfe (In re Mountain Laurel Resources Co.),

Civ. A. No. 5:99-0180 (D. W. Va. June 9, 1999).

III

For the reasons stated above, the judgment of the district court is

affirmed.

AFFIRMED

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