UNITED STATES BANKRUPTCY COURT
HNRC DISSOLUTION CO., f/k/a
Horizon Natural Resources
Company, et al. CASE NO. 02-14261
MEMORANDUM OPINION AND ORDER
This matter is before the court on the Motion for Reconsideration Pursuant to Rule 3008, or in the Alternative, to Alter or Amend Judgment, or for Relief From Judgment Pursuant to Rules 7052, 9023 and 9024 (“the Motion for Reconsideration”) filed by the UMWA 1974 Pension Plan and its Trustees (“the Plan”). Lexington Coal Company, LLC (“Lexington Coal”) has filed an Objection to the Motion for Reconsideration. The judgment in question is this court’s Memorandum Opinion entered on November 5, 2005, denying the 1974 Plan’s administrative expense claim for withdrawal liability. The court determined that the Plan had not demonstrated that withdrawal liability, the withdrawn employer’s allocable share of a multiemployer pension plan’s unfunded vested benefits, constituted a direct and substantial benefit to the Debtors’ estates. Based on that determination, the court ruled that the Plan’s amended claim for withdrawal liability was “not allowable as an administrative claim and should be reclassified as an unsecured claim subject to any further valid objections.” (Memo. Op., p. 10).
The Plan bases its Motion for Reconsideration on its contention that the court’s conclusion was based on mistakes of both fact and law, focusing on the court’s observation that the amount of withdrawal liability decreased during the Chapter 11 proceedings. Specifically, the Plan argues that the decrease in the stated amount of the Debtors’ withdrawal liability, from $146,307,051.13 to $138,354,090.00, did not represent a “paydown” of the Debtors’ pension obligations, but only a change in the actuarial method employed by the Plan.
To explain the change in actuarial method, the Plan attaches a Declaration of Dale R. Stover (“the Stover Declaration”) and a November 12, 2004 letter from Mercer Human Resources Consulting (“Mercer”) to the Motion for Reconsideration. Mercer apparently recommended the change in assumptions in calculating withdrawal liability based on its opinion that the original assumptions were indefensible, unduly high, and not standard in the industry. As set out above, the change in assumptions reduced the net withdrawal liability by approximately $7 million during the administration of the case. The Plan asserts that an increase or decrease in the amount of withdrawal liability is not indicative of value or lack thereof to the estate.
As this court stated in its opinion, withdrawal liability “may have accumulated over many years and is clearly dependent, among other things, upon the success of the investments as administered by the trustees of the fund and contributions by other employers.” (Memo. Op., p. 6). Another factor is the underlying assumptions used to calculate the liability. The Stover Declaration and the Mercer letter regarding the changes in assumptions demonstrate that withdrawal liability decreased during the Chapter 11 proceeding; they do not support the conclusion that withdrawal liability arises from some direct and substantial benefit to the Debtors’ estates. As the court pointed out, a claimant must demonstrate this direct and substantial benefit in order to satisfy the requirements set out in In re Sunarhauserman, Inc., 126 F.3d 811, 816 (6th Cir. 1997).
The Plan’s failure to address the issue of direct and substantial benefit to the estate bespeaks a certain misunderstanding of the concept of an administrative expense claim. In fact, the Plan’s arguments have consistently appeared to be based on the assumption that transactions with the Debtors only have to be shown to be post-petition in order to qualify as administrative expenses. To the contrary, the Plan must establish that the unfunded vested benefits it claims as an administrative expense arose because of a direct and substantial benefit to the estate. As previously stated, the fact that vested benefits were unfunded during the period under consideration is attributable in some significant part to other factors including poor investment performance.
The court has considered the Plan’s arguments, and finds nothing in them that convinces the court that it made a mistake, either of fact or law. The Plan has not established that its claim is entitled to administrative priority, and its Motion for Reconsideration is not well taken. The court therefore hereby ORDERS that the Motion for Reconsideration Pursuant to Rule 3008, or in the Alternative, to Alter or Amend Judgment, or for Relief From Judgment Pursuant to Rules 7052, 9023 and 9024 filed by the UMWA 1974 Pension Plan and its Trustees is overruled.
Marilyn L. Baker, Esq.
Barbara E. Locklin, Esq.
Rex Dunn, Esq.
Gregory R. Schaaf, Esq.