U.S. Court docket of Appeals Holds That Local weather Change Tort Claims are Dischargeable in Chapter | Holland & Knight LLP

On May 6, 2020, the U.S. Court of Appeals for the eighth circuit ruled the case of In re Peabody Energy Corporation, 958 F.3d 717 (8th Cir.), In an obvious first impression case that the state is required by law and by statute Customary tort claims against climate change are to be filed in bankruptcy and in this case have actually been dismissed, which confirms the decisions of the lower courts

The case concerns Peabody Energy Corporation (PEC), which successfully emerged from Chapter 11 bankruptcy with a confirmed restructuring plan effective April 3, 2017. A few months later, on July 17, 2017, she was sued along with nearly 40 other defendants in the fossil fuel industry in California, believing the defendants were responsible for the greenhouse gas emissions that led to an increase between 1965 and 2015 sea ​​level and property damage. A number of pleas based on common law theories were raised in the complaints, including claims of strict liability – failure to comply, strict liability – design flaws, negligence, negligence – failure to comply, transgression, private harassment and two statutory claims for public harassment under the California Public Harassment Facilitation Act (Cal. Civ. Proc. Code Section 731) for violating the California Public Harassment Act (Cal. Civ. Proc. Code Section 3480). The requested relief included damages, fair relief, punitive damages, legal fees, lost profits and litigation costs.

When faced with a motion from reorganized debtor PEC seeking an order to enforce the exemption and cease and desist clauses of the Chapter 11 plan filed in bankruptcy court, they attempted to seek an exemption from the relief on ongoing liabilities or obligations under the petition to a government entity under applicable environmental law. Plaintiffs argued that the lawsuits should not be dismissed because 1) they alleged the acts were not yet completed and 2) the purpose of the lawsuits was to ensure that the defendants bore the burden of the foreseeable environmental damage caused by is and is increasingly causing the defendant’s products.

All three courts found these arguments inaccurate for several reasons. On the basis of a text analysis, the bankruptcy court came to the conclusion that state customary law and statutory claims do not fall under the definition of environmental laws contained in the plan. This definition included “all federal, state, and local laws, rules and regulations relating to pollution or environmental protection or environmental effects on human health and safety, including [ten federal statutes] and all state or local equivalents of the foregoing: “In particular, although the theories were alleged to address alleged environmental damage, they were inconsistent with environmental laws and would inappropriately expand the environmental exemptions from the introduction to effectively read the term” environment ” Next, the bankruptcy court found, referring to the so-called money interest rule, which was developed under the provisions of the Insolvency Act on automatic residence, that the claims were not placed under a police or official law and were only intended to win back money, namely damages and Disgorgement of profits worth 50 years. The appeals court agreed:

The bankruptcy court noted that in interpreting this provision, our court ruled that the government will not do so if the government’s actions “result in an economic benefit to the government or its citizens over third parties in relation to the debtor’s estate would “exercise his police or administrative powers. It acts as a creditor. 2

It did not matter that the allegation was based on California law providing just relief, or that the public benefit was made on behalf of the people of the State of California. All three courts found that the plaintiffs’ decision not to participate in PEC’s bankruptcy or to file a lawsuit, despite prior notice, dismissed any preliminary motion or pre-confirmation suit.


1In re Peabody Energy Corp., 2017 WL 4843724 (Bankr. ED Mo. 2017), aff’d, 599 BR 610 (ED Mo. 2019)

2 958 F.3d at 723

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