Blackjewel, committee object to creditors’ case conversion motion

By Sarah Lizee

Olympia, Wash., Dec. 11 – Blackjewel, LLC objected to a motion filed by a group of its creditors to convert its Chapter 11 cases to Chapter 7, according to a Thursday filing in the U.S. Bankruptcy Court for the Southern District of West Virginia.

The objecting creditor group includes Black Diamond Insurance Group, LLC, Clearwater Investment Holdings, LLC, Forrest Machine, LLC, Jeffery A. Hoops, Lexington Coal Royalty Co., LLC, Triple H Aviation, LLC, Triple H Real Estate, LLC and Walls & Associates, PLLC, as previously reported.

“The timing and circumstances of the motion to convert reveal it to be a self-serving, transparent and last-ditch litigation tactic by the debtors’ former president and chief executive officer, Jeffery A. Hoops, and entities associated with, owned by or controlled by Hoops,” the company said.

Blackjewel claims Hoops seeks to derail confirmation of the plan and shift responsibility to an “under-resourced” Chapter 7 trustee to pursue current and future litigation targeting Hoops and many of the Hoops entities for misconduct that materially damaged the debtors and ultimately necessitated the filing of the Chapter 11 cases.

The company said it has already commenced litigation against some of the Hoops parties seeking tens of millions of dollars in damages and intends to file additional complaints in the future.

“Under these circumstances, it is not surprising that the Hoops parties prefer conversion to Chapter 7 over confirmation of the debtors’ proposed plan,” the company said.

“The Hoops parties have a choice of taking their chances with a Chapter 7 trustee or defending against the certainty of litigation pursuant to a plan that plainly states that recoveries for creditors are dependent on amounts recovered from the Hoops parties.”

The official committee of unsecured creditors filed a joinder to the company’s objection on Thursday, saying it believes the plan provides the most viable opportunity to maximize recovery for the benefit of the debtors’ estates.

U.S. trustee objection

Also on Thursday, Region 4 U.S. trustee John P. Fitzgerald, III objected to the company’s disclosure statement and plan.

Fitzgerald said that while he supports a plan of liquidation, some provisions are inconsistent with the Bankruptcy Code.

The U.S. trustee said it had communicated with the debtor’s counsel in which a number of objections were informally raised. While the debtor’s counsel has responded to most of those objections, there are two provisions on which the U.S. trustee and the debtor could not reach an agreement.

Specifically, the plan contemplates a process whereby holders of some priority claims and administrative claimants are deemed to consent to treatment of their claim simply by abstaining from returning an election ballot or failing to object to the amended plan.

Also, the plan contemplates the payment of certain professionals before other administrative claimants.

Blackjewel’s Chapter 11 plan of liquidation and related disclosure statement hearing has been scheduled for Dec. 17, as previously reported.

Blackjewel is a Milton, W.Va.-based coal producer. The company filed bankruptcy on July 1, 2019 under Chapter 11 case number 19-30289.

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