In re Peabody Energy Corp.

San Mateo and Marin Counties and the City of Imperial Beach appealed the order of a federal bankruptcy court in Missouri enjoining them from pursuing their climate change lawsuits against the coal company Peabody Energy Corporation.

A federal bankruptcy court in Missouri enjoined San Mateo and Marin Counties and the City of Imperial Beach (the plaintiffs) from pursuing their climate change lawsuits against Peabody Energy Corporation (Peabody). The plaintiffs alleged that Peabody (and a number of other fossil fuel companies) caused greenhouse gas emissions that resulted in sea level rise and damage to their property. Peabody, a coal company, filed for bankruptcy in April 2016 and emerged from bankruptcy under a plan that became effective on April 3, 2017. As an initial matter, the bankruptcy court said the plaintiffs had not established any basis for a claim because the complaints’ only Peabody-specific allegations were that Peabody had exported coal from terminals or ports in several California counties and was a member of organizations that plaintiffs said denied climate change. The court further concluded, however, that even assuming claims did exist, the claims were pre-bankruptcy petition claims that had been discharged under the bankruptcy plan because the plaintiffs had not filed proofs of claim. The court determined, moreover, that even if the plaintiffs’ claims could be construed as post-effective date claims (i.e., claims concerning conduct and harm after Peabody emerged from bankruptcy), the claims did not fall within the scope of a settlement with the U.S. Environmental Protection Agency (EPA) and other governmental entities to allow continued enforcement of environmental laws related to ongoing mining operations. The bankruptcy court also rejected the plaintiffs’ argument that one of their nuisance claims did not constitute a “Claim” or “Liability” pursuant to the Bankruptcy Code and Peabody’s bankruptcy plan and therefore could not be discharged and enjoined.

San Mateo and Marin Counties and the City of Imperial Beach (the plaintiffs) opposed Peabody Energy Corporation’s (Peabody) motion in federal bankruptcy court in Missouri to enjoin them from pursuing their public nuisance and tort law claims against Peabody. The plaintiffs filed lawsuits in California state court, since removed to federal court, alleging that Peabody and other defendants’ release of greenhouse gases into the atmosphere made them responsible for sea level rise and other climate change impacts affecting their communities. Peabody argued that the discharge and injunction contained in its plan for reorganization barred the claims. The plaintiffs argued that multiple carve-outs in the injunction allowed them to proceed with their claims against Peabody. They contended that they were governmental plaintiffs exercising their police powers, that their statutory public nuisance cause of action did not constitute a “claim” subject to the injunction, and that their claims fell within a carve-out for governmental claims brought under “Environmental Law.”

On August 28, 2017, Peabody Energy Corporation (Peabody) asked the U.S. Bankruptcy Court for the Eastern District of Missouri to order San Mateo County, Marin County, and the City of Imperial Beach to dismiss complaints against Peabody filed in California Superior Court in July 2017. The Counties and City’s complaints sought relief from a number of fossil fuel companies, including Peabody, for alleged damage arising from climate change. Peabody—which emerged from bankruptcy in April 2017—argued that the complaints sought to “obliterate” Peabody’s “fresh start” by seeking damages and equitable relief based upon pre-bankruptcy petition conduct. Peabody asserted that the Counties and City’s claims were therefore discharged and enjoined pursuant to Peabody’s reorganization plan and the bankruptcy court’s confirmation order.