2021-01-22_GENERAL DOCUMENTS - C2010088

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Case 1 20-bk-12043 Doc 573 Filed 01/13/21 Entered 01/13/21 11 03 53 Desc Main Document Page 41 of 44 Case 1 20-bk-12043 Doc 573 Filed OIJ13/21 Entered 01/13/2111 03 53 Desc Main Document Page 42 of 44 of voting on a chapter 1 I plan In re Augie/Res ivo Balang Cc , 860 F 2d 515, 518 (2d Cir 1988), see also In re Baket & Gent, Fin Sens , Inc, 974 F 2d 712, 720 (6th Ca 1992) (noting that substantive consolidation should he used when warranted by the circumstances of the case and when it is in the best interest of the unsecured creditors), In re Creduots Sen, Corp , 195 B R 680, 688-89 (Bankr S D Ohio 1996) In deciding whether to consolidate, a number of earlier cases relied on the presence or absence of certain "elements" that are similar to factors relevant to piercing the corporate veil under applicable state law See. a g. In re Gu jco Im• Corp , 593 F 2d 921 (10th Cir 1979) More recent cases, however, while not ignoring these elements, have applied a less mechanical approach Thus, for example, the Second Circuit, in In re Augie/Resbvo, concluded that the extensive list of elements and factors frequently cited and relied upon by other courts in determining the propriety of substantive consolidation are "merely variants on two critical factors," namely, "(1) whether creditors dealtwith the entities as a single economic unit and'did not rely on their separate identity in extending credit, ' or (2) whether the affairs of the debtors are so entangled that consolidation will benefit all creditors " 860 F.2d at 518 (citations omitted) The Eleventh Circuit, in £astgroup Properties v Southern Motel Assn, Ltd, 935 F 2d 245 (l lth Cir. 1991), viewed those elements and factors "as examples of information that may be useful to courts charged with deciding whether there is a substantial identity between the entities to be consolidated and whether consolidation is necessary to avoid some harm or to realize some benefit" Id at 250 Under the £astgroup test, a proponent of substantive consolidation must show that there is substantial identity between the entities to be consolidated and that consolidation is necessary to avoid some harm or realize some benefit 41 Case 1 20-bk-12043 Doc 573 Filed OIJ13121 Entered 01/13/21 11 03,53 Desc Main Document Page 43 of 44 causes of action against the Debtors' insiders and thud parties), may span multiple Debtors Consolidation avoids the material expense and delay of trying to address those issues. In short, the benefit of substantive consolidation to the vast majority of creditors far outweighs any practical harm —although none, to date, has been suggested Even if any creditors in Class 5 claimed to have relied on the credit of an individual Debtor entity (no creditor has argued this), that number would be miniscule compared to the number of creditors that did not so rely Consequently, the Proponents believe that substantive consolidation is warranted in light of the critena established by the courts in ruling on the propriety of substantive consolidation in other cases VIL CONCLUSION For the foregoing reasons, the Court should (i) confirm the Plan and (it) grant the Proponents such other and further relief as is Just and proper B. Factual Basis for Substantive Consolidation of the Debtors' Estates The facts and circumstances surrounding the historical business operations of the Debtors support substantive consolidation in these chapter 11 cases Rhino GP LLC is the general partner of Rhino Resource Partners LP, which directly or indirectly owns all of the other filing entities Rhino and its subsidiary Debtors had common officers and directors, shared key employees and outside professionals, including, but not limited to. Rhino employees who performed human resources, legal, and risk management services for the benefit of all the Debtors and accounting firms, law firms and consultants who rendered services to all of the Debtors, and maintained common insurance policies which cover all the filing entitles All of the entities also shared physical space and office equipment The Debtors' cash management system was effectively centralized and was constructed to provide a substantially unified system for all of the Debtors, the system allowed for an integrated method for accounting for revenues and expenses to be collected and paid While some of the subsidiary Debtors maintained their own deposit accounts, all of the cash was funneled through the same master account This allowed Rhino to have overall corporate control of funds and the ability to manage the Debtors' various business lines Furthermore, as set forth above, all obligations to the Lenders were secured by all assets of each subsidiary Debtor, and the total valuation of the Debtors was less than the amount of such obligations Moreover, the main remaining assets of the Debtors consist of (a) cash "carved out' as part of a resolution with Lenders in connection with the Debtors' asset sales, and (b) causes of action against thud parties With respect to (a), there is no natural allocation of that cash between the Debtors, and it could be very costly to litigate which Estates should receive particular amounts The same is We of causes of action, as the claims most likely to bring material recoveries for creditors under the Plan (i e, 42 Case 1 20-bk-12043 Doc 573 Filed OV13121 Entered 01/13/2111,03*53 Desc Main Document Page 44 of 44 Dated. January 13, 2021 Respectfully submitted, FROST BROWN TODD LLC AlDounlasL Lutz Douglas L Lutz A Webb 3300 Great Amerman Tower 301 East Fourth Street Cincinnati, Ohio 45202 Tel (513) 651-6800 Fax (513)651-6981 E-ni dlutz@tbdaw corn awebb@fbtlaw cam ATTORNEYS FOR DEBTORS AND DEBTORS IN -POSSESSION -and- FOLEY & LARDNER LLP Is/Geoffrey S Goodman (admitted pro hac vice) Matthew L Lee (admitted pro ban vice) 321 North Clark Street, Suite 2800 Chicago, Illinois 60654 Telephone (312)832-4500 Email ggoodman@foley com mdlee@foley corn -and- BARBER LAW PLLC Is/T Kent Bather T Kent Barber 2200 Burros Drive Lexington, KY 40513 Telephone (859) 296-4372 kbarber@barberlawky com COUNSEL FOR THE OFFICIAL COMMITTEE OF UNSECURED CREDITORS OF HOPEDALE MINING LLC, ET AL 43 44