Opinion

UNITED STATES BANKRUPTCY COURT

DISTRICT OF DELAWARE

CRAIG T. GOLDBLATT jae) 824 N. MARKET STREET

JUDGE a WILMINGTON, DELAWARE

Fe (302) 252-3832

□□ allie

January 28, 2026

VIA CM/ECF

Re: Lighthouse Resources Inc. v. Atlantic Specialty Ins. Co.

Adv. Proc. No. 24-50144

Dear Counsel:

Lighthouse Resources is involved in the oil and gas business, including coal

mining.! In 2014, Lighthouse Resources obtained surety bonds from Atlantic

Specialty, which insured Lighthouse Resources’ obligations to honor state and federal

regulations governing the reclamation of mines, which is essentially the

rehabilitation of land after coal mining activities have stopped.

In 2020, Lighthouse Resources along with various affiliates filed chapter 11

bankruptcy cases. This Court confirmed a plan of reorganization in 2021.2 That plan

incorporated a series of agreements under which a post-bankruptcy trust would

conduct the reclamation work that needed to be done on various former coal mines.

1 Lighthouse Resources Inc. is referred to as “Lighthouse Resources.” For purposes of this

motion for leave to amend a counterclaim, the Court assumes the truth of the factual

allegations set forth in the proposed amended counterclaim. See D.I. 123-1.

2 In re Lighthouse Resources Inc., Bankr. D. Del. No. 20-13056, D.I. 435.

January 28, 2026

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The work would be financed, in part, by the sureties (including Atlantic Specialty)

releasing collateral that the had posted to secure the bonds.

Atlantic Specialty contends that Lighthouse Resources has failed to meet its

obligation to oversee the work of the reclamation trust in performing the reclamation.

Atlantic Specialty contends that this may leave it facing exposure to the regulators

for whose benefit it issued the surety bonds. Atlantic Specialty therefore sent a

termination notice indicating that it would not release its pro rata share of the

collateral to the “sinking fund” that pays for the reclamation work. Lighthouse

Resources responded by initiating this adversary proceeding alleging that Atlantic

Specialty breached the parties’ agreements by failing to release the collateral.3

Atlantic Specialty counterclaimed against Lighthouse Resources and also filed

a third-party complaint against Black Butte, a non-debtor affiliate of Lighthouse

Resources. The counterclaim and third-party claim asserted, among other things,

claims for breach of contract and in quantum meruit.4 Lighthouse Resources and

Black Butte each moved to dismiss.5 In July 2025, this Court granted those motions.

In a bench ruling delivered on July 1, 2025, the Court explained that the language of

the relevant agreements did not condition Atlantic Specialty’s obligation to release

collateral on Lighthouse Resources’ achieving specific milestones towards the

3 D.I. 1.

4 D.I. 18, 19. Black Butte Coal Company is referred to as “Black Butte.”

5 D.I. 24, 41.

January 28, 2026

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completion of the reclamation work. “Language like that would certainly have been

simple enough to write, and in the absence of such language in the contract, the Court

will decline Atlantic [Specialty’s] invitation to have the Court imply terms that

sophisticated parties, represented by very capable counsel, did not themselves

include.”6

Upon the conclusion of the Court’s reading of the bench ruling counsel for

Atlantic Specialty asked whether the dismissal of the counterclaim would be with or

without prejudice.7 When a Court enters a final judgment dismissing a complaint in

its entirety, it is important that the Court explain whether the dismissal is with or

without prejudice. If the order is in fact a final and appealable order, a plaintiff that

does not appeal the dismissal but instead seeks leave to amend may risk missing the

deadline to appeal the original dismissal. The Third Circuit has thus made clear that

when a trial court dismisses a complaint in its entirety, it should either state that the

dismissal is with prejudice or else specify a period of time within which the plaintiff

may move for leave to amend.8

That problem, however, arises only when the order in question would

otherwise be a final and appealable order. An order dismissing a counterclaim, but

that leaves in place the plaintiff’s claims in the original lawsuit, is not a final and

6 July 1, 2025 Hr’g Tr. at 11 (minor transcription errors corrected). See also D.I. 97 (order

dismissing counterclaims).

7 Id. at 18.

8 Borelli v. City of Reading, 532 F.2d 950, 951 n.1 (3d Cir. 1976).

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appealable order. The issue addressed by the Third Circuit in Borelli therefore is not

implicated.9 For that reason, there is no need to declare in advance whether or not a

motion dismissing some but not all of the claims in a lawsuit is with or without

prejudice. Rather, if a party moves for leave to amend a counterclaim that the court

otherwise dismissed, the court can see whether that motion is opposed and decide

whether to grant leave to amend based on the arguments presented by the parties,

rather than prejudging the question whether the dismissal is “with prejudice.”

The Court sought to explain this point in response to counsel’s question at the

July 1 hearing, noting that the order need not indicate “whether it’s with or without

prejudice. The ... [counterclaims] are dismissed and we’ll deal with a motion for leave

to amend if one is filed.”10 Atlantic Specialty nevertheless sought leave to clarify the

order.11 Following the issuance of “preliminary observations” in which the Court set

out the point described above about the reasons why an order dismissing some but

not all of the counts in a lawsuit need not state whether it is “with prejudice,” the

Court denied the motion to clarify.12

Atlantic Specialty now seeks leave to amend the counterclaim against

Lighthouse Resources and third-party claim against Black Butte, again alleging

breach of contract and now alleging a breach of the implied covenant of good faith

9 See Diaz v. FCA US LLC, 134 F.4th 715, 720-722 (3d Cir. 2025).

10 July 1, 2025 Hr’g Tr. at 18.

11 D.I. 101.

12 D.I. 114, 125.

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and fair dealing.13 For the reasons set forth below, Atlantic Specialty’s motion for

leave to amend will be denied.

I. Atlantic Specialty need not file a motion to alter or amend, since a

judgment has not been entered.

Lighthouse Resources argues that the motion for leave to amend should be

denied because Atlantic Specialty must first ask the Court, under Bankruptcy Rule

9023, to set aside its earlier order dismissing the counterclaim.14 But that is

incorrect. The premise of a motion for leave to amend a complaint is that the new

complaint will solve the problems identified in the Court’s earlier order dismissing

the complaint. Nothing in a motion for leave to amend implies that the prior order

dismissing the earlier form of complaint was incorrect or needs to be reconsidered.

Perhaps unsurprisingly, the caselaw on which Lighthouse Resources relies in support

of this argument did not involve Rule 15 motions for leave to amend.15 The Court

accordingly rejects the claim that a court must reconsider a prior order dismissing a

complaint before entertaining a Rule 15 motion for leave to amend.

II. Atlantic Specialty’s motion for leave to amend will be denied as futile.

Under Federal Rule of Civil Procedure 15, leave to amend should be “freely

give[n] … when justice so requires.”16 As settled caselaw makes clear, this boils down

13 D.I. 123.

14 D.I. 126 at 8-9.

15 See In re Catholic Diocese of Wilmington, Inc., 437 B.R. 488 (Bankr. D. Del. 2010); In re

Energy Future Holdings Corp., 575 B.R. 616 (Bankr. D. Del. 2017).

16 Fed. R. Civ. P. 15(a)(2) (made applicable by Fed. R. Bankr. P. 7015).

January 28, 2026

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to the point that leave to amend should generally be granted unless it is either

inequitable to give the plaintiff a further chance to plead their claim, or doing so

would be “futile” – which essentially means that the proposed amended complaint

would not survive a motion to dismiss.17 More specifically, the analysis looks at four

circumstances: (1) any undue delay, (2) any unfair prejudice to the nonmoving party,

(3) any improper purpose, and (4) the futility of the amendment.18 The Court rejects

Lighthouse Resources’ arguments about delay, prejudice, and improper purpose. It

will deny the motion, however, on the ground that amendment would be futile.

A. There is no showing that Atlantic Specialty has unduly delayed

the assertion of its amended complaint.

Undue delay in seeking leave to amend is grounds for denying leave.19 “The

passage of time, without more, does not require that a motion to amend a complaint

be denied; however, at some point, the delay will become ‘undue.’”20 In analyzing

undue delay (and the related bad faith) courts in this circuit look to the movant’s

“motives for not amending their complaint to assert this claim earlier.”21

17 See Grayson v. Mayview State Hosp., 293 F.3d 103, 108 (3d Cir. 2002) (citing Foman v.

Davis, 371 U.S. 178, 182 (1962)).

18 See Grayson, 293 F.3d at 108 (citing Foman, 371 U.S. at 182).

19 See Adams v. Gould Inc., 739 F.2d 858, 868 (3d Cir. 1984).

20 Id.

21 Id.

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Here, Lighthouse Resources simply asserts that Atlantic Specialty

“unjustifi[ably] delay[ed]” in filing the motion for leave.22 Lighthouse Resources

contends that this delay “reveals Atlantic’s bad faith motive – to continue to delay

this action now that Lighthouse has amended its Complaint and Atlantic realizes it

no longer has the leverage of counterclaims.”23 That speculation, however, falls far

short of being evidence of bad faith. Indeed, there is no serious suggestion that

Atlantic Specialty did not move with reasonable diligence, after the dismissal of its

counterclaim, to seek leave to amend. Accordingly, there is no ground to deny the

motion for leave on account of delay.

B. There is no showing of unfair prejudice.

If granting leave to amend will cause “substantial or undue” prejudice to the

non-moving party, the motion for leave will be denied.24 The Third Circuit has noted

certain circumstances that can counsel in favor of finding of prejudice – “additional

discovery, cost, and preparation to defend against new facts or new theories.”25 But

not all incremental cost will provide a basis for a finding of “prejudice.” It is only

when the cost or prejudice is “undue” that a motion for leave to amend should be

denied on this basis.26

22 D.I. 126 at 15.

23 Id.

24 Cureton v. National Collegiate Athletic Ass’n, 252 F.3d 267, 273 (3d Cir. 2001).

25 Id. (analyzing past cases and determining what rose to the level necessary for undue

prejudice).

26 In re Fleming Companies, Inc., 323 B.R. 144, 147-148 (Bankr. D. Del. 2005).

January 28, 2026

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Put another way, the non-moving party “is required to demonstrate that its

ability to present its case would be seriously impaired were amendment allowed.”27

This has been recognized repeatedly by the Third Circuit. In Adams v. Gould Inc.,

for example, the Court refused to find undue prejudice where no new facts or

additional discovery were required.28 On the other hand, in Cornell & Co., Inc. v.

Occupational Safety and Health Review Commission, where the proposed amendment

changed the legal and factual basis of the claim and prevented the non-moving party

from presenting a defense, the court found the requisite substantial prejudice to deny

leave.29 This caselaw makes clear that not every increase in litigation costs is

sufficient – there must be an unfair burden that materially affects the non-moving

party’s ability to present its case.30

Here, Lighthouse Resources claims that granting leave would “force

Lighthouse to re-litigate issues that have already been decided in Lighthouse’s favor

by this Court” and would “grant Atlantic a do-over.”31 In Lighthouse Resources’ view,

this “substantially prejudice[s]” Lighthouse by “forc[ing]” it to “spend time and

resources rehashing already-decided issues.”32

27 Dole v. Arco Chemical Co., 921 F.2d 484, 488 (3d Cir. 1990).

28 739 F.2d 858, 868 (3d Cir. 1984)

29 573 F.2d 820, 821-824 (3d Cir. 1978).

30 Compare Adams, 739 F.2d at 869 (finding no unfair prejudice, despite the non-moving party

asserting “additional counsel fees”) with Cornell, 573 F.2d at 823-824.

31 D.I. 126.

32 Id.

January 28, 2026

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This argument, however, reflects the same misapprehension discussed above,

in Part I, about the difference between a motion for reconsideration and a motion for

leave to amend the complaint. The point of a motion for leave to amend following the

dismissal of an initial complaint is to make new factual allegations that satisfy the

legal standard articulated by the court in dismissing the earlier complaint. It is not

a means to seek reconsideration of matters already decided. Accordingly, permitting

Atlantic Specialty the opportunity to amend would not unfairly prejudice Lighthouse

Resources.

C. There is no basis for a finding of an improper purpose.

If leave is sought for an improper purpose, the motion for leave may be

denied.33 Improper purposes include those designed “to harass, cause unnecessary

delay, or needlessly increase the cost of litigation.”34 As stated above, Lighthouse

Resources contends that Atlantic Specialty has both caused an “unjustified delay”

and will cause Lighthouse Resources to “spend time and resources rehashing already-

decided issues.”35 Those arguments are unpersuasive. The Court thus rejects the

contention that the motion was filed for an improper purpose.

33 See Grayson, 293 F.3d at 108 (citing Foman, 371 U.S. at 182).

34 See Fed. R. Bankr. P. 9011(b)(1).

35 D.I. 126 at 14.

January 28, 2026

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D. Leave to amend will be denied as futile.

If a proposed amendment would be futile, meaning that, as amended, the

complaint would still fail to state a claim upon which relief can be granted, a motion

for leave will be denied.36 The standard for evaluating futility is the same as the one

courts employ in evaluating a Rule 12(b)(6) motion to dismiss. That is, “taking all

pleaded allegations as true and viewing them in a light most favorable to the [party

opposing the motion to dismiss],” does the complaint “state a claim upon which relief

can be granted.”37 Where the claims before the Court are principally breach of

contract claims and the contract provisions are unambiguous, the role of the Court is

simply to give effect to the language of the agreements.38 “[I]f the relevant contract

provisions are unambiguous and plaintiff has no claim under them, then the claim

should be dismissed.”39

Here, even when taking all factual allegations in the proposed amended

counterclaim as true and viewing them in the light most favorable to Atlantic

Specialty, the counterclaim fails to state a claim upon which relief can be granted.

Atlantic Specialty asserts that the operative agreements (the trust agreement, the

36 Great W. Mining & Min. Co. v. Fox Rothschild LLP, 615 F.3d 159, 175 (3d Cir. 2010)

(citation omitted).

37 See Winer Family Trust v. Queen, 503 F.3d 319 (3d Cir. 2007); Fed. R. Civ. P. 12(b)(6) (made

applicable by Fed. R. Bankr. P. 7012).

38 Axiom Inv. Advisors, LLC by and through Gildor Management, LLC v. Deutsche Bank AG,

234 F. Supp. 3d 526, 533-534 (S.D.N.Y. 2017).

39 Id.

January 28, 2026

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sinking fund agreement, and the indemnity agreement) impose obligations on

Lighthouse Resources that Lighthouse Resources is alleged to have violated.40 At

bottom, Atlantic Specialty’s claims boil down to a complaint that Lighthouse

Resources has failed to implement the reclamation plan successfully. In view of the

language of the agreements, however, the amended complaint still fails to state a

claim.

1. The breach of contract claim against Lighthouse

Resources is futile.

In asserting a claim for breach of contract, the proposed amended counterclaim

makes three specific contentions regarding alleged breaches by Lighthouse

Resources. None is sufficient to state a claim under the contracts as written.

First, Atlantic Specialty contends that Lighthouse Resources has breached the

agreements in connection with its oversight of the mine reclamation efforts. Atlantic

Specialty contends that the operative agreements “contractually bind Lighthouse to

Atlantic, among others, in order for Lighthouse to successfully implement the Decker

Reclamation Plan and ultimately fulfill the reclamation efforts at the Decker Mine.”41

To support this, Atlantic cites §§ 1.1, 2.2, 2.3, and 6.3 of the trust agreement, and

article IV of the confirmed plan. Atlantic Specialty is correct that these provisions

contemplate that Lighthouse Resources will be responsible for the oversight of the

40 D.I. 123 ¶¶ 42-73.

41 Id. ¶ 42.

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reclamation project. But as the Court noted in its bench ruling, nothing in the general

language of these provisions establishes a specific, enforceable duty to take the

specific actions that Atlantic Specialty alleges were required. The parties could

certainly have established contractual benchmarks and imposed liability for the

failure to achieve them. In view of the parties’ decision not to include such obligations

in their written agreement, it would be improper for the Court to impose them.

Second, Atlantic Specialty alleges that Lighthouse Resources “failed to acquire

the necessary funding from Black Butte as set forth in the [sinking fund

agreement].”42 But nothing in the sinking fund agreement (or any of the operative

agreements) requires Lighthouse to obtain funding from Black Butte. Sections 2.2(b)

and 6.3(d)(2) of the trust agreement do contemplate contributions from Black Butte.

They do so, however, only by stating that if Black Butte makes distributions to KCP

(one of the reorganized debtors), a portion of that contribution must go to the sinking

fund. These sections thus only regulate the use of the funds once distributed by Black

Butte. They do not impose affirmative obligations on Lighthouse Resources to secure

those distributions or guarantee that such distributions will occur.

Third, Atlantic Specialty contends that the Lighthouse Resources “knowingly

emerged from bankruptcy … with a Plan that did not include over $9.3 million in

necessary costs to achieve the approved reclamation plans therein.”43 Atlantic

42 Id. ¶ 64.

43 Id. ¶ 48.

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Specialty asserts that it “detrimentally relied on Lighthouse’s representations in its

Plan and Initial Budget” when entering into the operative agreements.44 But nothing

in the operative agreements condition Atlantic Specialty’s obligation to release

collateral on Lighthouse Resources’ budget performance. Section 6.3 of the trust

agreement and § 2.3 of the sinking fund agreement state that Atlantic Specialty shall

release its pro rata share of the reclamation board’s approved budget “in advance for

the upcoming year.” These provisions require, on the board’s approval of a budget,

Atlantic Specialty to release collateral. Nothing in any of the operative agreements

conditions Atlantic Specialty’s obligation to release collateral on Lighthouse

Resources meeting any milestone, staying within budget, or making some specified

level of progress towards the completion of the reclamation project.

Finally, Atlantic Specialty contends that Lighthouse Resources has failed to

comply with the law, namely the Montana Surface and Underground Mining

Reclamation Act.45 Atlantic Specialty cites to article IV.I of the plan to contend that

Lighthouse Resources was “tasked with ensuring compliance with laws pertaining to

various reclamation licenses and permits required to complete reclamation efforts

contemplated in the Plan.” And while this article of the plan does indeed contain a

provision stating that all parties shall comply with the law, nothing in the proposed

amended complaint ties the alleged violations – notice of which came six months after

44 Id. ¶ 54.

45 D.I. 123 ¶¶ 65-73.

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Atlantic Specialty’s termination notice – to any concrete harm allegedly suffered by

Atlantic Specialty.46

Moreover, the Montana Department of Environmental Quality’s notice

indicates that the “nature and gravity of the violation was minor” and that there was

no “pattern of violation.”47 The state agency therefore waived the imposition of any

civil penalty. Accordingly, even accepting the allegations of the proposed amended

complaint as true, in the context of the applicable documents there is no suggestion

that the alleged technical violation of the state regulation – one that the regulators

themselves described as minor – gives rise to an actionable claim by Atlantic

Specialty against Lighthouse Resources for violation of the terms of the confirmed

plan or other agreements. The proposed amended complaint thus fails to state a basis

upon which relief can be granted.

2. The claim against Lighthouse Resources for violation of

the implied duty of good faith and fair dealing is futile.

Finally, Atlantic Specialty adds in its amended complaint a new count –

alleging that Lighthouse Resources breached the implied covenant of good faith and

fair dealing. Delaware law is well settled on issues such as this – “it is not the proper

role of a court to rewrite or supply omitted provisions to a written agreement.”48 As

46 Id. ¶ 74; D.I. 126-2 (stating the notice of noncompliance was issued on January 29, 2025).

47 D.I. 126-2. At argument on the amended motion, both parties agreed that this notice could

properly be considered in connection with the present motion.

48 Cincinnati SMSA Ltd. Pshp. v. Cincinnati Bell Cellular Sys. Co., 708 A.2d 989, 992 (Del.

1998).

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such, under the implied covenant of good faith and fair dealing, “[e]xisting contract

terms control … such that implied good faith cannot be used to circumvent the

parties’ bargain, or to create a free-floating duty ... unattached to the underlying legal

document.”49 This implied covenant applies only in a “narrow context” and courts

only impose the implied covenant in “rare” cases.50 The covenant applies “[o]nly when

it is clear from the writing that the contracting parties would have agreed to proscribe

the act later complained of had they thought to negotiate with respect to that

matter.”51

Here, Atlantic Specialty asks the Court to do precisely what has been carefully

warned against – rewrite or supply omitted provisions to a carefully written contract

among sophisticated parties. As the Court previously noted, language requiring

Lighthouse Resources to achieve particular milestones by specified points in time

would have been simple enough to include in the operative agreements. The parties

did not, however, include such language. The Court accordingly must not rewrite the

parties’ agreement. The claim fails to state a basis upon which relief can be granted.

3. The claims against Black Butte are futile.

Atlantic Specialty’s theory of Black Butte’s breach depends on

provisions – namely § 2.2(b) of the sinking fund agreement and § 6.3 of the trust

49 Dunlap v. State Farm Fire and Cas. Co., 878 A.2d 434, 441 (Del. 2005) (citations omitted).

50 Cincinnati, 708 A.2d at 992; Dunlap, 878 A.2d at 441.

51 Dunlap, 878 A.2d at 442 (internal quotation omitted).

Lighthouse Resources Inc. v. Atlantic Specialty Ins. Co.,

Adv. Proc. No. 24-50144

January 28, 2026

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agreement — describing how Black Butte might contribute funds and how those funds

would subsequently be allocated. As explained above, however, none of these

provisions imposes an obligation on Black Butte to make any distributions at all. As

a result, Atlantic Specialty has not identified a specific contractual provision that

Black Butte is alleged to have breached. Nor has Atlantic Specialty alleged facts

sufficient to trigger a right to proceed under the indemnity framework. The claim

accordingly fails to state a basis upon which relief can be granted.

Conclusion

For the foregoing reasons, Atlantic Specialty’s motion for leave to amend will

be denied as futile. The Court will issue an order so providing.

Sincerely,

Craig T. Goldblatt

United States Bankruptcy Judge