In re US Lines v. Am. Steamship Mutual Ass'n
Decision Date | 01 November 1999 |
Docket Number | Docket No. 98-5029 |
Citation | 197 F.3d 631 |
Parties | (2nd Cir. 1999) In re UNITED STATES LINES, INC. and UNITED STATES LINES (S.A.) INC. F/K/A/ Moore McCormack Lines, Inc., Debtors, UNITED STATES LINES, INC. and UNITED STATES LINES (S.A.) INC., REORGANIZATION TRUST, Plaintiff-Appellee-Appellant, ASBESTOSIS CLAIMANTS, Plaintiff-Intervenor-Appellant, v. AMERICAN STEAMSHIP OWNERS MUTUAL PROTECTION AND INDEMNITY ASSOCIATION, INC., WEST OF ENGLAND OWNERS MUTUAL PROTECTION AND INDEMNITY ASSOCIATION, INC. and CONTINENTAL INSURANCE CORPORATION, THE UNITED KINGDOM MUTUAL STEAMSHIP ASSURANCE ASSOCIATION (Bermuda) LIMITED, ASSURANCEFORENINGEN SKULD, LIVERPOOL & LONDON MUTUAL STEAMSHIP PROTECTION AND INDEMNITY ASSOCIATION LIMITED, MARINE OFFICERS OF AMERICA CORP., and THE TRAVELERS INSURANCE COMPANY, Defendants-Appellants-Appellees. August Term 1998 |
Court | U.S. Court of Appeals — Second Circuit |
MORRIS STERN, Esq., (Maurice Hryshko, Esq.), STERN, DUBROW & MARCUS, Maplewood, NJ, for Plaintiff-Appellee-Appellant.
JOHN D. KIMBALL, Esq., (Jeremy J.O. Harwood), HEALY & BAILLIE, LLP, New York, NY, for Defendant-Appellant-Appellee U.K. Mutual S.S. Assurance Association (Bermuda) Ltd.
Richard H. Brown, Esq., Marshall P. Keating, Esq., Kirlin, Campbell & Keating, New York, NY, for Defendants-Appellants-Appellees American S.S. Owners Mutual Protection & Indemnity Assoc., Inc. & Liverpool & London Mutual S.S. P&I Assoc. Ltd.
Alexander F. Vitale, Esq., Freehill, Hogan & Mahar, New York, NY, for Defendant-Appellant-Appellee West of England Ship Owners Mut. Ins. Assoc. (Luxembourg).
George W. Sullivan, Esq., Lambos & Junge, New York, NY, for Defendant-Appellant-Appellee Assuranceforeningen Skuld.
Helen M. Benzie, Esq., Bigham Englar Jones & Houston, New York, NY for Defendants-Appellants-Appellees The Continental Ins. Co. & The Fulton Syndicate Survivors.
Nicholas Even, Esq., Simpson Thacher & Bartlett, New York, NY for Defendant-Appellant-Appellee The Travelers Ins. Co.
Alan Kellman, Esq., The Maritime Asbestos Legal Clinic, a Division of The Jaques Admiralty Law Firm, P.C., Detroit, MI, for Plaintiff-Intervenor-Appellee-Appellant.
Before: NEWMAN, WALKER, and CALABRESI, Circuit Judges.
The United States Lines, Inc. and United States Lines (S.A.) Inc. Reorganization Trust (the "Trust") sued in the Bankruptcy Court for the Southern District of New York (Francis G. Conrad, Bankruptcy Judge) seeking a declaratory judgment to establish the Trust's rights under various insurance contracts. The bankruptcy court held that the action was within its core jurisdiction and denied the defendants' motion to compel arbitration of the proceedings. The District Court for the Southern District of New York (Sidney H. Stein, District Judge), reversed and held that the insurance contract disputes were not core proceedings. After ordering arbitration to go forward, the district court certified its order for interlocutory appeal pursuant to 28 U.S.C. 1292(b). We now reverse and remand.
The facts pertinent to this appeal are fully set forth in the extensive opinions of the bankruptcy court, see United States Lines, Inc. v. American S.S. Owners Mut. Protection & Indem. Ass'n, 169 B.R. 804, 809-11 (Bankr. S.D.N.Y. 1994) ("U.S. Lines I"), and the district court, see United States Lines, Inc. v. American S.S. Owners Mut. Protection & Indem. Ass'n, 220 B.R. 5, 7-8 (S.D.N.Y. 1997) ("U.S. Lines II"). We assume familiarity with both, and will only summarize the pertinent facts here. On November 24, 1986, United States Lines, Inc. and United States Lines (S.A.) Inc., as debtors, filed a voluntary petition for bankruptcy relief under Chapter 11 of the Bankruptcy Code, 11 U.S.C. 101 et seq. The Trust is their successor-in-interest pursuant to a plan of reorganization that was confirmed by the bankruptcy court on May 16, 1989.
Among the creditors are some 12,000 employees who have filed more than 18,000 claims, most of which are for asbestos-related injuries sustained while sailing on different ships in debtors' fleet over four decades. Many additional claims are expected to mature in the future. The Trust asserts that these claims are covered by several Protection & Indemnity insurance policies (the "P&I policies") issued by four domestic and four foreign mutual insurance clubs ("the Clubs"). Generally, a single club insured the debtors' entire fleet for a particular year, but there were exceptions when certain ships where insured independently of fleet coverage by another club or under a different policy. All of the P&I policies were issued before the debtors petitioned for bankruptcy relief.
The proceeds of the P&I policies are the only funds potentially available to cover the above employees' personal injury claims. At the heart of each of the P&I policies is a pay-first provision by which the insurers' liability is not triggered until the insured pays the claim of the personal injury victim. The deductibles for each accident or occurrence vary among the different policies, ranging from $250 to $100,000.
On December 8, 1992, the Bankruptcy Court entered a stipulation of conditional settlement between the Trust and an initial group of 106 claimants, and on January 5, 1993, the Trust began this action as an adversarial proceeding in bankruptcy, pursuant to 28 U.S.C. 2201, seeking a declaratory judgment of the parties' respective rights under the various P&I policies. Nine of the ten counts in the complaint seek a declaration from the court of the Clubs' contractual obligations under the P&I policies in light of the stipulation of conditional settlement. The tenth claim seeks punitive damages for creating an "insurance maze."
The bankruptcy court held, inter alia, that the Trust's declaratory judgment action was "core," U.S. Lines I, 169 B.R. at 821, and thus could be tried to binding judgment in the bankruptcy court, and that the bankruptcy court had discretion to deny the motion to compel arbitration filed by the four foreign Clubs, see id. at 825. The district court, exercising appellate jurisdiction, reversed both determinations and, on November 26, 1997, entered an order remanding to the bankruptcy court for further proceedings. See U.S. Lines II, 220 B.R. at 11, 13. On March 4, 1998, the district court entered an order certifying its November 26, 1997 order for interlocutory appeal pursuant to 28 U.S.C. 1292(b), and we accepted the appeal.
At the outset, the Clubs argue that we only have jurisdiction to hear the question identified as controlling by the district court, namely its "determination that the adversary action in this case is not a 'core' proceeding pursuant to 28 U.S.C. 157(h)," see United States Lines, Inc. v. American S.S. Owners Mut. Protection & Indem. Ass'n., No. 85-civ. 3175 (S.D.N.Y. March 4, 1998), and not whether arbitration was properly ordered. We disagree.
The Supreme Court has held that under 28 U.S.C. 1292(b) appellate jurisdiction, "the appellate court may address any issue fairly included within the certified order because it is the order that is appealable, and not the controlling question identified by the district court." Yamaha Motor Corp., U.S.A. v. Calhoun, 516 U.S. 199, 205 (1996) (citation and quotation marks omitted); Isra Fruit Ltd. v. Agrexco Agric. Export Co., 804 F.2d 24, 25 (2d Cir. 1986). Because the district court's order determined whether the Trust's action was core and whether the bankruptcy court has discretion to stay arbitration, both issues are before us.
Appellees also argue, in the alternative, that pursuant to 9 U.S.C. 16(b) arbitrability may not be considered on this interlocutory appeal, because it is not independent of the core/non-core issue. That argument misconstrues the law. Appellees are correct that the arbitrability issue is "embedded" in the lawsuit seeking a declaration of coverage. The limited exception to the prohibition against interlocutory appeals of an order to arbitrate where the arbitrability issue is "independent" and not "embedded" is therefore unavailing. See Ermenegildo Zegna Corp. v. Zegna, S.p.A., 133 F.3d 177, 181 (2d Cir. 1998); Filanto, S.p.A. v. Chilewich Int'l Corp., 984 F.2d 58, 60 (2d Cir. 1993). But the issue may be properly considered by us for another reason. Section 16(b) only prohibits arbitrability from being considered in most interlocutory appeals "[e]xcept as otherwise provided in section 1292(b) of title 28." 9 U.S.C. 16(b). This appeal is before us by virtue of 28 U.S.C. 1292(b), and therefore the Arbitration Act does not prohibit us from determining the arbitration issue, even though it is not independent of the core/non-core issue.
We therefore have jurisdiction to determine both whether the proceedings are "core" and whether the bankruptcy court has discretion to enjoin arbitration. We will consider each in turn.
The Bankruptcy Code divides claims in bankruptcy proceedings into two principal categories: "core" and "non-core." See 28 U.S.C. 157. "Bankruptcy judges have the authority to 'hear and determine all . . . core proceedings arising under title 11 . . . and may enter appropriate orders and judgments, subject to review under section 158 of [title 28.]'" S.G. Phillips Constructors, Inc. v. City of Burlington (In re S.G. Phillips Constructors, Inc.), 45 F.3d 702, 704 (2d Cir. 1995) (quoting 28 U.S.C....
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