United States District Court, S.D. New York
OPINION AND ORDER
MF Global Holdings Limited ("MF Global"), as Plan
Administrator, and MF Global Assigned Assets LLC move for
leave to appeal an order from the bankruptcy court (Glenn,
J.) compelling arbitration and for a stay of the arbitration
proceedings pending a ruling on that appeal. Defendant Allied
World Assurance Company Limited ("Allied World")
opposes. For the reasons that follow, the Court denies the
Global, a holding company incorporated in Delaware, purchased
errors and omissions insurance policies for the period May
31, 2011 to May 31, 2012 from, among others, Allied World, a
company headquartered and incorporated in Bermuda. The policy
obligated Allied World to contribute up to $15 million in the
event of a covered loss. In October 2011, MF Global collapsed
and filed for bankruptcy, triggering a wave of lawsuits from
customers whose deposits it had misappropriated. These claims
were consolidated in a multi-district litigation before the
bankruptcy court, and a global settlement was reached.
Plaintiffs sought coverage under the errors and omissions
insurance policies, and every other provider has since
settled, with the vast majority paying the full policy limit.
Allied World, however, declines to pay, on the ground that
repayment of misappropriated funds is not a covered loss.
liquidation plan, which the bankruptcy court confirmed in
April 2013, provides that "the Bankruptcy Court shall
retain such jurisdiction over the Chapter 11 Cases on and
after the Effective Date to the full extent legally
permissible, including jurisdiction to . . . [a]d]udicate,
decide or resolve any motions, adversary proceedings,
contested or litigated matters and any other matters."
Bankr. Dkt., ECF No. 1382 ("Plan") at Art. XII.e.
On October 27, 2016, MF Global filed an adversary complaint
in the bankruptcy court against, among others, Allied World,
seeking these insurance payments. Complaint, Adv. Bankr.
Dkt., ECF No. 1.
underlying insurance contract, however, required any disputes
arising from the policy to be resolved by arbitration in
Bermuda. Complaint, Ex. B at 7, In re MF Glob. Holdings
Ltd., et al., No. 11-15059 (Bankr. S.D.N.Y)
("Bankr. Dkt."), ECF No. 1; Arbitration Order at
14-18 (holding that the arbitration clause covered the
instant dispute). Allied World has consistently, even if at
times a bit overzealously, sought to have the dispute
arbitrated in Bermuda pursuant to the pre-petition contract.
See Memorandum Opinion and Order Holding the Bermuda
Insurers in Contempt, Adv. Bankr. Dkt. ECF No. 67.
with this approach, Allied World filed a motion to compel
arbitration roughly a month after the complaint was filed in
this adversary proceeding. Adv. Bankr. Dkt., ECF No. 13. In
opposition, plaintiffs argued, among other things, that the
reservation of the bankruptcy court's jurisdiction in the
plan superseded the insurance policy's arbitration
clause. The bankruptcy court rejected this argument, holding
that, "[i]f the Debtors in this case wanted to attempt
to modify pre-petition contract rights to arbitrate disputes
that had not resulted in a pre-confirmation adversary
proceeding, at a minimum they should have said so
explicitly." Order Granting Plaintiffs' Motion for
Reconsideration but Denying Request to Modify Prior Decision
or to Stay Arbitration in Bermuda at 3, Adv. Bankr. Dkt., ECF
No. 202 ("Reconsideration Order"). Plaintiffs seek
leave to appeal that decision.
first argues that this appeal is barred by 9 U.S.C. §
16(b). Section 16(b) states:
(b) Except as otherwise provided in section 1292(b) of title
28, an appeal may not be taken from an interlocutory order-
(1) granting a stay of any action under section 3 of this
(2) directing arbitration to proceed under section 4 of this
(3) compelling arbitration under section 206 of this title;
(4) refusing to enjoin an arbitration that is subject to this
bankruptcy court's order is indisputably interlocutory,
and by its express terms it "compel[s] arbitration"
and "stays this adversary proceeding pending the outcome
of the Bermuda arbitration." Arbitration Order at 26.
Section 1292(b) permits district courts to certify
interlocutory orders for appeal to circuit courts. That
exception, however, does not apply to this appeal from a
bankruptcy court to a district court under 28 U.S.C. §
argue that Congress's enumeration of a single exception
suggests there are no others, so appeals under 158(a) are
barred. See Elcom Techs. Corp. v. Am. Dynasty Surplus
Lines Ins. Co., No. 98-13343SR, 2000 WL 1470217, at *7
n.6 (E.D. Pa. ...