In re Sntl Corp.
| Decision Date | 23 June 2009 |
| Docket Number | No. 08-60001.,08-60001. |
| Citation | 571 F.3d 826 |
| Parties | In the Matter of SNTL CORPORATION; SN Insurance Services, Inc.; SNTL Holdings Corporation; SN Insurance Administrators, Inc.; Infonet Management, Debtors, SNTL Corporation; SN Insurance Services, Inc.; SNTL Holdings Corporation; SN Insurance Administrators, Inc.; Infonet Management, Appellants, v. Centre Insurance Company, Appellee. |
| Court | U.S. Court of Appeals — Ninth Circuit |
Appeal from the Ninth Circuit, Bankruptcy Appellate Panel, Klein, Montali, and Dunn, Bankruptcy Judges, Presiding. BAP No. CC-06-1350-MoDK.
Before CYNTHIA HOLCOMB HALL, ANDREW J. KLEINFELD and BARRY G. SILVERMAN, Circuit Judges.
The Bankruptcy Appellate Panel is AFFIRMED for the reasons stated in its opinion in this case sub nom. We adopt the BAP opinion, In re SNTL Corp., 380 B.R. 204 (9th Cir. BAP 2007), as our own and attach it as an appendix to this opinion. See Appendix, infra.
APPENDIX
In re: SNTL Corp.; SN Insurance Services, Inc.; SNTL Holdings Corp.; SN Insurance Administrators, Inc.; Infonet Management Systems, Inc.; Pacific Insurance Brokerage, Inc., Debtors.
Centre Insurance Company, SNTL Corp.; Appellant,
v.
SN Insurance Services, Inc.; SNTL Holdings Corp.; SN Insurance Administrators, Inc.; Infonet Management Systems, Inc.; Pacific Insurance Brokerage, Inc., Appellees.
Bk. Nos. SV 00-14099-GM, SV 00-14100-GM, SV 00-14101-GM, SV 00-14102-GM, SV 02-14236-GM, SV 02-14239-GM, (Jointly Administered)
Argued and Submitted on September 21, 2007 at Pasadena, California
Filed — December 19, 2007.
Appeal from the United States Bankruptcy Court for the Central District of California, Honorable Geraldine Mund, Bankruptcy Judge, Presiding.
Before: MONTALI, DUNN and KLEIN, Bankruptcy Judges.
In this complicated and high-stakes case, we apply a somewhat obscure doctrine that involves the intersection of insolvency law principles and guaranty law, illustrating the temporal nature of a release of a guarantor when a voidable preference is recovered from the obligee. We also will be one of the first courts to address a question left unanswered by the Supreme Court earlier this year: May an unsecured creditor include attorneys' fees incurred postpetition but arising from a prepetition contract as part of its unsecured claim?
Here a creditor contended that the debtor's previously released liability as a guarantor of an affiliate's obligation was revived when the creditor compromised a preference action against it. The bankruptcy court disagreed and entered summary judgment disallowing the creditor's multimillion dollar claim and denying the creditor's request for postpetition attorneys' fees and costs. The creditor appeals, and we REVERSE and REMAND.
On April 26, 2000 (the "petition date"), SNTL Corporation (formerly known as Superior National Insurance Group)1 and its non-insurer affiliates SN Insurance Services, Inc., SNTL Holdings Corporation (formerly known as Business Insurance Group, Inc.), and SN Insurance Administrators Inc. (collectively, "Debtors") each filed chapter 11 petitions2 for relief.
Pursuant to a confirmed joint plan of reorganization ("Plan"), an SNTL Litigation Trust ("Trust") was formed and an SNTL Litigation Trustee ("Trustee") was appointed. The Trustee was authorized to prosecute certain claims, rights and causes of actions and to oversee and initiate actions pertaining to the allowance and payment of claims, including objections to proofs of claims.
Appellant Centre Insurance Company ("Centre") filed a proof of claim in November 2000 asserting a claim in excess of $294,488,911 (including approximately $3 million in attorneys' fees but not including contingent and unliquidated amounts) and an amended proof of claim in March 2005 in the amount of $232,748,280.40. The Trustee filed an objection to Centre's claim arguing, inter alia, that Centre had released claims against SNIG prepetition, that the released claims could not be revived by postpetition events and that Centre, as an unsecured creditor, could not include in its claim attorneys' fees incurred postpetition.
The relationship of the parties, and the nature of the transactions summarized below, are complex and perhaps unique to the insurance and reinsurance industry. Reduced to their central elements, however, they can be summarized as follows: Debtor SNIG guaranteed the performance of its affiliates' obligations to Centre. Following default on these obligations, the parties reached an agreement whereby the affiliates paid Centre $163.4 million to satisfy an obligation of $180 million and Centre simultaneously released the guarantor (SNIG). Thereafter, in settlement of a preference action brought by the liquidator of the affiliate insurance companies, Centre returned a portion of the $163.4 million payment. Centre now seeks to recover the returned amount ($110 million) from the guarantor SNIG; Trustee asserts that SNIG's released liability cannot be revived.
More specifically, on December 18, 1998, SNIG sold its affiliate Business Insurance Company ("BICO") to Centre Solutions Holdings (Delaware Limited) ("Centre Solutions"); BICO became known as Centre. On the same day, Centre entered into certain reinsurance agreements (the "LPT and Quota Share Agreements") with insurance companies affiliated with SNIG: California Compensation Insurance Company ("CalComp") and Superior National Insurance Company ("SNIC"). SNIG guaranteed performance of one of these reinsurance agreements known as the "QSR Contract."
In addition, the parties also entered into fronting (service) agreements known as the Underwriting Management Agreement ("UMA") and the Claims Administration Services Agreement ("CSA"). SNIG also guaranteed performance of these agreements. The UMA, CSA, LPT and Quota Share Agreements are collectively referred to as the "Fronting Agreements."3 The Fronting Agreements provide for the recovery of all reasonable expenses, including attorney's fees, incurred in the enforcement of SNIG's guaranty.
The Fronting Agreements were breached in late 1999. On December 31, 1999, Centre entered into a Partial Commutation and Settlement Agreement ("PCSA") with CalComp, SNIC and SNIG. The PCSA modified the Fronting Agreements and provided for a partial release of the reinsurance obligations of SNIG, CalComp, SNIC and all of their parents and affiliates () up to $180 million (the "Release").4
In exchange for the Release, SNIG, CalComp and SNIC agreed to meet six conditions, including payment of a $163.4 million Partial Commutation Payment ("Payment") by CalComp and SNIC. Centre received the Payment; no evidence was introduced that any of the six conditions for the Release were unsatisfied. In its opening brief, Centre acknowledges that "the primary obligors and SN Holdings [SNIG] (the guarantor) were released from liability for up to $180 million" in exchange for the Payment. Appellant's Opening Brief at 13. Consequently, the Release in the PCSA became effective prepetition.
Article X of the PCSA provided that the Release could be revoked by Centre if the PCA or other payments made pursuant to the PCSA were found to be voidable or preferential transfers, stating in pertinent part:
In the event that any court of competent jurisdiction or governmental or regulatory authority asserting jurisdiction over the subject matter hereof or the parties hereto enters a final order, judgment, or other finding that: (i) the payment of all or any part of the $22,300,000, described above, or (ii) the payment by Reinsurers of all or any part of the [Payment] of $163,400,000, or (iii) any of the consideration described in the Recitals to this Agreement ... constitutes a voidable or preferential transfer, such payment constitutes an improper or disproportionate payment, or the payment is otherwise in violation of law or subject to a claim or [sic] preference, then [Centre] may in its sole discretion, in addition to any other remedy provided by law, equity, statute, or contract: (a) enforce this Agreement according to its express terms and conditions; or (b) declare this Agreement to be null and void in its entirety, and thereupon enforce the terms and conditions of the LPT and Quota Share Agreements as though this Agreement (including without limitation the releases and discharges set forth in Articles III and IV) had not been executed. ...
In March 2000, the Insurance Commissioner for the State of California (the "Commissioner") placed certain insurance companies affiliated with Debtors into conservation, followed by liquidation. In January 2002 (approximately fourteen months after the petition date), the Commissioner filed a complaint in state court against Centre and others, seeking in part the return of the Payment from Centre as an avoidable preference under state law preference provisions.
Centre subsequently agreed to settle that state court litigation, and on February 17, 2005, the state court entered an order approving a settlement agreement between the Commissioner and Centre () providing that the Commissioner's avoidance action would be dismissed in exchange for Centre's partial return (in the amount of $110 million) of the Payment. Paragraph F of the state court order indicated that the Commissioner sought to recover property transferred by the insurance companies to Centre and that the Commissioner had sought avoidance of such transfers.5
The order also provided...
To continue reading
Request your trial
-
In re Player's Poker Club, Inc.
......That the debt may be forgiven makes it no less a claim. See SNTL Corp. v. Ctr. Ins. Co. (In re SNTL Corp.) , 571 F.3d 826, 838 (9th Cir. 2009) ("The [Bankruptcy] Code utilizes this 'broadest possible definition' ......
-
United Artists Theatre Circuit, Inc. v. Reg'l Water Quality Control Bd.
...... of the court, giving deference to the determination of the agency appropriate to the circumstances of the agency action.’ " ( Yamaha Corp. of America v. State Bd. of Equalization (1998) 19 Cal.4th 1, 7–8, 78 Cal.Rptr.2d 1, 960 P.2d 1031.) "Unlike quasi-legislative rules, an ... can fairly or reasonably contemplate the claim’s existence even if a cause of action has not yet accrued under nonbankruptcy law." ( In re SNTL Corp. (9th Cir. 2009) 571 F.3d 826, 839.) UATC argues the Regional Board’s claim arose before the bankruptcy proceeding because "the Regional ......
-
In re South Side House Llc
......v. Shalala (In re Chateaugay Corp.), 53 F.3d 478, 497 (2d Cir.), cert. denied, 516 U.S. 913, 116 S.Ct. 298, 133 L.Ed.2d 204 (1995). A “contingent” claim ...at 508. See In re SNTL Corp., 571 F.3d 826, 843–44 (9th Cir.2009) (same). Collection costs may be recovered under New York law if they are provided for ......
-
In re 804 Cong., L. L.C.
......48 This amended brief is more than enough to put section 502 allowance in play under the Fifth Circuit's decision in Southland Corp. v. Kilgore & Kilgore (In re Southland Corp.) . 49 In Southland, the creditors argued that the debtor never properly objected to their claim for ...89 As the Ninth Circuit noted in SNTL Corp. v. Centre Insurance Co. (In re SNTL Corp.), 90 where Congress intended to provide an exception to the general allowance provisions of section ......
-
In Brief: Split Continues Over Unsecured Creditors' Right To Postpetition Attorney's Fees
...attorney's fees and costs as part of its allowed claim in a bankruptcy case. See SNTL Corp. v. Centre Ins. Co. (In re SNTL Corp.), 571 F.3d 826 (9th Cir. 2009) (discussing split and listing cases). The majority of courts to date have concluded that the answer to this question is For example......
-
Fee-Shifting in Bankruptcy.
...X proceeding cognizable as contractual right even though not within the 1898 Act's compensation provisions). (220) In re SNTL Corp., 571 F.3d 826, 829 (9th Cir. 2009) (affirming bankruptcy appellate panel opinion entered below and reported at 380 B.R. 204 (9th Cir. BAP 2007) and expressly a......
-
Three and a Half Rules for Tort Claims in (and out of) Chapter 11.
...F.3d 114, 121 (3d Cir. 2010). (75) In re Castellino Villas, A. K. F. LLC, 836 F.3d 1028, 1034 (9th Cir. 2016) (quoting In re STNL Corp., 571 F.3d 826, 839 (9th Cir. (76) See In re Grossman's Inc., 607 F.3d 114, 122 (3d Cir. 2010) ("The courts have generally divided into two groups on the de......
-
Rethinking the Principal-Agent Theory of Judging
...proceedings (and, indeed, even in cases that circuit court judges perceive to 99. Cf. SNTL Corp. v. Centre Ins. Co. ( In re SNTL Corp.), 571 F.3d 826, 829 (9th Cir. 2009) (per curiam) (“We adopt the BAP opinion as our own and attach it as an appendix to this opinion.” (citation omitted)); K......
-
Recovering Contractual Attorneys' Fees in Bankruptcy Litigation
...Travelers Cas. and Sur. Co. of America v. Pacific Gas and Elec. Co., 549 U.S. 443, 452 (2007) (emphasis added).21. In re SNTL Corp., 571 F.3d 826 (9th Cir. 2009).22. In re Mac-Go Corp., 541 B.R. 706 (Bankr. N.D. Cal. 2015).23. Id. at 715-16.24. In re Mac-Go Corporation, 2015 WL 1372717, at ......