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Mf Global Holdings Ltd. v. Allied World Assurance Co. Ltd.

United States District Court, S.D. New York

June 29, 2017

MF GLOBAL HOLDINGS LTD., as Plan Administrator, and MF GLOBAL ASSIGNED ASSETS LLC, Plaintiffs,
v.
ALLIED WORLD ASSURANCE CO. LTD., IRON-STARR EXCESS AGENCY LTD., IRONSHORE INS. LTD., STARR INS. & REINSURANCE LTD., and FEDERAL INS. CO., Defendants.

          JONES DAY, Bruce Bennett, Esq., Edward M. Joyce, Esq., Jane Rue Wittstein, Esq. Attorneys for Plaintiffs

          CRAVATH, SWAINE & MOORE LLP, Daniel Slifkin, Esq., Omid H. Nasab, Esq., WHITE AND WILLIAMS LLP, Erica Kerstein, Esq. Attorneys for Allied World Defendants

          D'AMATO & LYNCH, Mary Jo Barry, Esq., Maryann Taylor, Esq. Attorneys for Iron-Starr Defendants

          OPINION

          ROBERT W. SWEET, U.S.D.J.

         Defendants Allied World Assurance Co. Ltd. ("Allied World"), Iron-Starr Excess Agency Ltd., Ironshore Insurance Ltd., Starr Insurance & Reinsurance Ltd. (collectively, the "Iron-Starr Defendants" and, collectively with Allied World, the "Bermuda Insurers") have several motions presently before the Court. The Bermuda Insurers seek leave to appeal the United States Bankruptcy Court for the Southern District of New York's (the "Bankruptcy Court") January 12, 2017, order granting a preliminary injunction for Plaintiffs MF Global Holdings, Ltd. ("MFGH"), MF Global Assigned Assets LLC ("MFGAA, " collectively with MFGH, "Plaintiffs") and finding the Bermuda Insurers in contempt for violating the Bankruptcy Court's December 21, 2016, temporary restraining order. The Bermuda Insurers have also moved, either as of right or with leave of the Court, to appeal the Bankruptcy Court's January 23, 2017, order finding that the Bermuda Insurers violated the Barton doctrine and requiring that their Bermuda proceeding be terminated.

         Upon the findings and conclusions set forth below, each motion is denied.

         Prior Proceedings

         Background as to MFGH's chapter 11 bankruptcy and the parties' prior dealings before the Bankruptcy Court, the Supreme Court of Bermuda, Civil Jurisdiction (Commercial Court), and this Court, have been described in previous opinions. See MF Glob. Holdings Ltd. v. Allied World Assurance Co., No. 17 Civ. 106 (RWS), 2017 WL 548219, at *l-2 (S.D.N.Y. Feb. 10, 2017); In re MF Glob. Holdings Ltd., 561 B.R. 608, 612 (Bankr. S.D.N.Y. 2016). Familiarity is assumed.

         On January 12, 2017, the Bankruptcy Court converted its previously-issued temporary restraining order ("TRO") prohibiting the Bermuda Insurers from continuing to enforce an Anti-Suit Injunction issued by the Bermuda Court into a preliminary injunction. On the same day, the Bankruptcy Court also found the Bermuda Insurers in contempt for violating the TRO.

         On January 23, 2017, the Bankruptcy Court issued an oral ruling that found the Bermuda Insurers had violated the Barton doctrine due to their instigation of proceedings in the Bermuda Court without the Bankruptcy Court's approval and issued a written order directing the Bermuda Insurers to dismiss the Bermuda proceedings.[1] On January 24, 2017, the Bankruptcy Court entered an order clarifying that the Bermuda proceedings were to be dismissed without prejudice. On January 31, 2017, the Bankruptcy Court issued a written opinion as to its Barton doctrine decision (together with the January 23 rulings and January 24 order, the "Barton Order").

         On January 31, 2017, the Bermuda Insurers sought leave to appeal the preliminary injunction and contempt orders. (17 Civ. 742, Dkt. 4; 17 Civ. 780, Dkt. 3.) On February 6, 2017, the Bermuda Insurers appealed the Barton Order. (17 Civ. 953, Dkt. 1; 17 Civ. 993, Dkt. 1.)

         The motion as to the preliminary injunction and contempt order was heard and marked fully submitted on March 2, 2017. The motion as to the Barton order was heard and marked fully submitted on April 19, 2017.

         On May 24, 2017, the Iron-Starr Defendants wrote the Court to request that their involvement as to these proceedings be stayed in light of those parties having reached a settlement in principal with Plaintiffs, which the Court granted.[2] (17 Civ. 933, Dkt. 15.)

         Applicable Standards

         District courts are vested with appellate jurisdiction over bankruptcy courts if the bankruptcy court ruling is "final" under 28 U.S.C. § 158(1)(a) or "of the nature that renders it appropriate for interlocutory review" pursuant to 28 U.S.C. § 158(a)(3). In re AMR Corp., 490 B.R. 470, 475 (S.D.N.Y. 2013); see also In re Residential Capital, LLC, No. 14 Civ. 9711 (RJS), 2015 WL 5729702, at *2 (S.D.N.Y. Sept. 30, 2015) .

         Within the context of bankruptcy proceedings, whether an order is "final" for purposes of appealing is "different" and "more flexible than in ordinary civil litigation." In re Fugazy Exp., Inc., 982 F.2d 769, 775 (2d Cir. 1992) (quoting In re Hooker Investments, Inc., 937 F.2d 833, 836 (2d Cir. 1991)). Bankruptcy proceedings "often continue for long periods of time, and discrete claims are often resolved at various times over the course of the proceedings"; thus, a final order "need not resolve all of the issues raised by the bankruptcy; but it must completely resolve all of the issues pertaining to a discrete claim, including issues as to the proper relief." Id. at 775-76 (collecting cases). "In all other respects, district courts apply the same standards of finality [in a bankruptcy case] that . . . apply to an appeal under 28 U.S.C. § 1291." In re Residential Capital, 2015 WL 5729702, at *3 (quoting In re Fugazy Exp., 937 F.2d at 775) (internal quotation marks omitted).

         If a bankruptcy court's order or decree is not final, a district court may still grant leave to hear the appeal pursuant to 28 U.S.C. § 158(a)(3). For such interlocutory orders, "[t]o determine whether leave to appeal should be granted, district courts apply the standards prescribed in 28 U.S.C. § 1292(b)." In re Anderson, 550 B.R. 228, 234 (S.D.N.Y. 2016) (citing In re Kassover, 343 F.3d 91 (2d Cir. 2003)). A district court may exercise its discretion to grant leave to appeal when the order at issue involves: "(1) a controlling question of law (2) as to which there is a substantial ground for difference of opinion and (3) that an immediate appeal from which may materially advance the ultimate termination of the litigation." Id. (citing 28 U.S.C. § 1292(b)). Granting a permissive interlocutory appeal is appropriate "where appellate review might avoid protracted and expensive litigation." German v. Fed. Home Loan Mortg. Corp., 896 F.Supp. 1385, 1398 (S.D.N.Y. 1995). However, "the party seeking an interlocutory appeal has the burden of showing 'exceptional circumstances' to 'overcome the general aversion to piecemeal litigation' and 'justify a departure from the basic policy of postponing appellate review until after the entry of a final judgment.'" In re Perry H. Koplik & Sons, Inc., 377 B.R. 69, 73-74 (S.D.N.Y. 2007) (quoting Klinghoffer v. S. N.C. Achille Lauro Ed Altri-Gestione Motonave, 921 F.2d 21, 24 (2d Cir. 1990)). ...


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