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Dewitt Rehabilitation and Nursing Center, Inc v. Columbia Casualty Company

January 25, 2012

DEWITT REHABILITATION AND NURSING CENTER, INC., PLAINTIFF,
v.
COLUMBIA CASUALTY COMPANY, HUB INTERNATIONAL NE, LTD., LEWIS & CLARK LTC RISK RETENTION GROUP,
DEFENDANTS.



The opinion of the court was delivered by: Richard J. Holwell, District Judge:

MEMORANDUM OPINION AND ORDER

On September 29, 2011, defendant Columbia Casualty Company ("CCC") moved this Court (ECF docket no. [1]) to withdraw an adversary proceeding filed by DeWitt Rehabilitation and Nursing Center, Inc. ("DeWitt") in DeWitt's bankruptcy case 11-10253-ALG (Bankr. S.D.N.Y.) before the honorable Judge Allan Gropper. Co-defendants Lewis & Clark LTC Risk Retention Group ("L&C") and HUB International NE, Ltd. ("HUB") each cross-moved (ECF docket nos. [11], [17]) for the same relief. For the reasons below CCC's motion and HUB's and L&C's cross-motions are GRANTED.

Background

On or around May 5, 2010, Fermina Garcia allegedly fell and sustained injuries while a resident/patient at Dewitt's nursing home. (Plaintiff's Brief in Opposition to the Defendant's Motions to Withdraw the Reference ("DeWitt Mem.") at 3.) On May 23, 2011, a negligence action against DeWitt (hereinafter the "Garcia action") was commenced in New York County Supreme Court by her estate. (Id.) Because DeWitt had filed for Chapter 11 bankruptcy on January 25, 2011, the Garcia action was automatically stayed (Id. at 4.)

On August 17, 2011, DeWitt initiated an adversary proceeding in the bankruptcy court against its past liability carrier CCC, its present liability carrier L&C, and the successor of its insurance agent at the time of the fall HUB. (Id. at 4-5.) DeWitt seeks declaratory judgment as to who should indemnify DeWitt for claims arising from Ms. Garcia's fall.

Basic factual and contract disputes underlie DeWitt's adversary proceeding. DeWitt claims that it alerted its insurance agent Hirsch Wolf, now HUB, of Ms. Garcia's fall on April 9, 2010, (November 16, 2011 Declaration of Harvey Weinberg in Opposition to Defendant's Motion to Withdraw the Reference of the Adversary Proceeding ("Weinberg Dec.") Ex. 4), and therefore that CCC, its liability carrier from January 7, 2010 to January 7, 2011, must indemnify DeWitt in the Garcia action. (DeWitt Mem.at 5.) CCC claims it never learned of the incident until it received a fax from HUB on June 1, 2011, (September 29, 2011 Declaration of Lisa Sharon Shreiber in Support of Motion to Withdraw the Bankruptcy Reference ("Schreiber Dec.") at 2), and that its contractual liability policy with DeWitt precludes coverage for incidents reported outside the policy period. (Memorandum of Law in Support of Defendant Columbia Casualty Company's Motion to Withdraw the Reference of the Adversary Proceeding ("CCC Mem.") at 4-5.)

In a letter from HUB to CCC, HUB appears to concede that it did not initially report the incident to CCC because "it was just part of an Incident report stating that the claimant had a bump and redness on the knee." (See Weinberg Dec. Ex. 3.) Accordingly, in the adversary proceeding DeWitt also seeks indemnification from HUB for the Garcia action under a negligence claim. (DeWitt Mem. at 5.)

Finally, DeWitt alleges in the adversary proceeding that L&C must also indemnify DeWitt under a retroactivity clause in its present liability policy. Id. In response, L&C argues that its policy "does not apply to any claim that any insured knew about or could have reasonably discovered or foreseen prior to the first date continuous coverage was written" by L&C. (Memorandum of Law in Support of Defendant Lewis & Clark LTC Risk Retention Group's Motion to Withdraw the Reference of the Adversary Proceeding ("L&C Mem.") at 3.)

On September 29, 2011, CCC moved this Court to withdraw the adversary proceeding from the bankruptcy court. L&C and HUB cross-moved for the same relief on October 17 and 28, respectively. DeWitt filed opposition papers on November 16. CCC and L&C each replied on November 22, and HUB replied on November 23.

Standards

The procedure for withdrawing a reference is provided for by Federal Rule of Bankruptcy Procedure 5011(a) (1991), which states that "[a] motion for withdrawal of a case or proceeding shall be heard by a district judge." Withdrawal of the reference from a bankruptcy court is governed by 28 U.S.C. § 157(d) (2005), which provides, in relevant part, that a district court "may withdraw, in whole or in part, any case or proceeding referred under this section, on its own motion or on timely motion of any party, for cause shown."

Although section 157(d) does not define the term "cause," the Second Circuit has instructed district courts to consider whether the claim is core or non-core, whether it is legal or equitable, and whether issues of efficiency, prevention of forum shopping, and uniformity in the administration of bankruptcy law support withdrawal. Orion Pictures Corp. v. Showtime Networks, Inc. (In re Orion Pictures Corp.), 4 F.3d 1095, 1101 (2d Cir.1993), cert. denied, 511 U.S. 1026, 114 S.Ct. 1418, 128 L.Ed.2d 88 (1994). Of these, most important is whether the claim is core or non-core. In re Burger Boys, Inc., 94 F.3d 755, 762 (2d Cir. 1996).*fn1 However, any factor may have substantial importance in a given case, and none is dispositive. See Northwest Airlines Corp. v. City of Los Angeles (In re Northwest Airlines Corp.), 384 B.R. 51, 56 (S.D.N.Y. 2008).

"Decisions in the Second Circuit are not uniform on the question of whether the district court should, in the absence of an initial determination by the bankruptcy court, decide whether a proceeding is core or non-core." Id. A majority of courts hold that the district court can determine, in the first instance, whether a proceeding is core or non-core. Id.; Joseph DelGreco & Co. v. DLA Piper LLP, No. 10 CV 6422(NRB), 2011 WL 350281 (S.D.N.Y. Jan. 26, 2011) (finding that "the weight of authority in this Circuit supports the proposition that a district court may make this determination in the first instance") (collecting cases).

This Court adopts the majority view, as "Orion's clear language refutes [any] contention that the core/non-core determination must be made by a bankruptcy judge." V.W. Eimicke, Inc. v. Amlicke (In re VWE Group, Inc.), 359 B.R. 441, 447--48 (S.D.N.Y. 2007); see In re Orion Pictures Corp., 4 F.3d at 1101 ("A district court considering whether to withdraw the reference should first evaluate whether the claim is core or non-core, since it is upon this issue that questions of efficiency and uniformity will turn."); see also Distefano v. Law Offices of Barbara H. Katsos, P.C., No. 10--MC--0564 (JS), 2011 WL 2446318, at *3 (E.D.N.Y. June 15, ...


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