UNITED STATES COURT OF APPEALS FOR THE SIXTH CIRCUIT

┐ IN RE: HNRC DISSOLUTION CO., │ Debtor. │ ___________________________________________ > No. 20-5396 │ ALLIANCE WOR PROPERTIES, LLC, │ Appellant, │ │ v. │ │ │ ILLINOIS METHANE, LLC, │ Appellee. │ ┘

Appeal from the United States District Court for the Eastern District of Kentucky at Ashland; No. 0:18-cv-00073—Henry R. Wilhoit, Jr., District Judge.

United States Bankruptcy Court for the Eastern District of Kentucky at Ashland; No. 02-bk-14261—Tracey N. Wise, Judge.

Argued: April 22, 2021

Decided and Filed: July 12, 2021

Before: GIBBONS, COOK, and LARSEN, Circuit Judges. _________________

COUNSEL ARGUED: Thomas C. Scherer, DENTONS BINGHAM GREENEBAUM LLP, Indianapolis, Indiana, for Appellant. James L. Van Winkle, ILLINOIS METHANE, LLC, McLeansboro, Illinois, for Appellee. ON BRIEF: Thomas C. Scherer, DENTONS BINGHAM GREENEBAUM LLP, Indianapolis, Indiana, Christopher B. Madden, DENTONS BINGHAM GREENEBAUM LLP, Louisville, Kentucky, for Appellant. James L. Van Winkle, ILLINOIS METHANE, LLC, McLeansboro, Illinois, Elizabeth Lee Thompson, Katie M. Glass, STITES & HARBISON PLLC, Lexington, Kentucky, for Appellee. No. 20-5396 In re HNRC Dissolution Co. Page 2

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OPINION _________________

LARSEN, Circuit Judge. In 1998, the Old Ben Coal Company (Old Ben) conveyed its rights to the methane gas in various coal reserves to the appellee in this case, Illinois Methane, LLC (Methane). As part of that $2.6 million transaction, Old Ben agreed to a “Delay Rental Obligation” that required the owner of the coal estate to pay rent to Methane while it mined the coal in areas that Methane had not yet exploited. A deed memorializing this conveyance (and setting forth the Delay Rental Obligation) was then recorded with the county treasurer.

A few years later, Old Ben filed for bankruptcy protection. As part of the proceedings, Old Ben purported to sell its coal interests “free and clear of any and all Encumbrances” to the Lexington Coal Company, a buyer who stands in privity with the appellant, Alliance WOR Properties, LLC (Alliance). Old Ben did not, however, notify Methane prior to the bankruptcy sale. It merely circulated notice by publication in several newspapers.

Alliance’s predecessor-in-interest later sought a permit to mine coal; and Methane eventually sought to collect the amount due under the Delay Rental Obligation in Illinois state court. Alliance responded by filing in the bankruptcy court a motion to enjoin the state-court lawsuit, arguing that Old Ben’s “free and clear” sale had extinguished Methane’s interest in the land. This was the first time Methane had learned of the bankruptcy proceedings.

The bankruptcy court held that Old Ben’s publication notice had been insufficient to satisfy due