Daniels-Head & Associates, In re

• Decision Date: 15 June 1987
• Docket Number: DANIELS-HEAD,No. 85-2066,85-2066
• Citation: 819 F.2d 914
• Parties: Bankr. L. Rep. P 71,852 In re:& ASSOCIATES dba Head Insurance, Inc. dba Opthalmic Group Plans Insurance Agency, Inc., Debtor. & ASSOCIATES dba Head Insurance, Inc. dba Opthalmic Group Plans Insurance Agency, Inc., Plaintiff-Appellant, v. WILLIAM M. MERCER, INC., Smith-Sternau Organization Inc., and Marsh & McLennan Inc., Defendants-Appellees.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 914

819 F.2d 914

Bankr. L. Rep. P 71,852

In re: DANIELS-HEAD & ASSOCIATES dba Head Insurance, Inc.

dba Opthalmic Group Plans Insurance Agency, Inc., Debtor.

DANIELS-HEAD & ASSOCIATES dba Head Insurance, Inc. dba

Opthalmic Group Plans Insurance Agency, Inc., Plaintiff-Appellant, v. WILLIAM M. MERCER, INC., Smith-Sternau Organization Inc., and Marsh & McLennan Inc., Defendants-Appellees.

No. 85-2066.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted March 13, 1986.

Decided June 15, 1987.

Vernon E. Leverty and Victor M. Perri, Reno, Nevada, and William L. Holland, Portsmouth, Ohio, for plaintiff-appellant.

John M. Aramburu and Richard Horton, M. Kristina Pickering, Reno, Nev., for defendants-appellees.

Appeal from the United States District Court for the District of Nevada.

Before GOODWIN and BRUNETTI, Circuit Judges, and STOTLER, ^* District Judge.

BRUNETTI, Circuit Judge:

Daniels-Head and Associates ("Daniels-Head") appeals a district court judgment affirming a bankruptcy court's decision in favor of appellees. Daniels-Head contends appellee Marsh & McLennan, Inc. was unjustly enriched as a result of obtaining administrative records in which Daniels-Head had a property interest. Appellant also contends that Marsh & McLennan intentionally interfered in appellant's contractual relationship with the American Optometric Association ("AOA"). We disagree and affirm.

I BACKGROUND

Daniels-Head, an Ohio corporation doing business in Nevada, entered into an agreement in 1954 with the AOA to act as insurance broker for and administrator of certain AOA group insurance plans. Initially, Continental Casualty Company of Chicago ("Continental") was the insurance carrier for the AOA.

In 1976, Daniels-Head transferred the AOA's group health insurance program from Continental to the New York Life Insurance Company ("N.Y. Life") and entered into a brokerage commission agreement with N.Y. Life. Daniels-Head received a fifteen percent commission on the premium values of all the policies sold during the first year of the agreement and a five percent commission on all renewals. Daniels-Head entered into a second contract with N.Y. Life to provide administrative services under the policies issued by N.Y. Life to the AOA. Pursuant to this agreement, Daniels-Head collected the premiums from AOA for N.Y. Life. The agreement required the appellant to deposit the premiums collected in a separate trust account.

In December 1979, Daniels-Head failed to remit to N.Y. Life between $900,000 and $1,200,000 in premiums it had collected from the AOA. On February 5, 1980, representatives of Daniels-Head, the AOA, and N.Y. Life met to resolve Daniels-Head's delinquent remittance problem. The parties entered into a "depository agreement" which expressly required Daniels-Head to deposit in a separate trust In January 1980, William Head, Chairman of the Board of Daniels-Head, entered into negotiations with Calvin Wessman, Director of appellee William M. Mercer, Inc. ("Mercer"), a subsidiary of appellee Marsh & McLennan, for the sale and purchase of Daniels-Head. On January 9, 1980, Mr. Wessman requested certain information from Mr. Head to evaluate the purchase of Daniels-Head. In a letter to Mr. Head, Mr. Wessman stated that the material received from Mr. Head would be "held in the strictest of confidence but in no way can our receipt of [the information] preclude [the company] from the ordinary pursuit of our business now or in the future." The letter also stated that Mercer and Marsh & McLennan would not "intentionally use any such materials to gain an advantage."

account the premiums collected from the AOA.

On February 15, 1980, N.Y. Life terminated its service agreement with Daniels-Head because Daniels-Head had failed to remit the premium due on the AOA major medical plan and because Daniels-Head failed to deposit premium contributions into a separate trust account. On March 12, 1980, N.Y. Life terminated Daniels-Head's broker's contract. Later that month, Mr. Wessman informed Mr. Head that Marsh & McLennan was no longer interested in purchasing Daniels-Head.

On June 19, 1980, appellee Smith-Sternau Organization, Inc. ("Smith-Sternau"), a subsidiary of appellee Mercer, along with several other companies, submitted a proposal to the AOA to become the broker for and administrator of certain group insurance plans offered to members of the AOA. N.Y. Life and Marsh & McLennan entered into a service agreement which provided that Marsh & McLennan would act as administrator of the insurance policies sold by N.Y. Life to the AOA. As a result of the agreement, Marsh & McLennan received from N.Y. Life the administrative records concerning the group insurance policies that N.Y. Life had sold to the AOA. These records were previously in the custody of Daniels-Head. N.Y. Life had obtained copies of the records on March 7, 1980, pursuant to a preliminary injunction granted by the United States District Court for the Southern District of Ohio.

On February 22, 1980, Daniels-Head filed a complaint against N.Y. Life in Ohio state court contending, inter alia, that N.Y. Life's termination of its service agreement with Daniels-Head was a breach of contract. The action was removed to United States district court in Ohio, and N.Y. Life filed a counterclaim against Daniels-Head on March 5, 1980.

On March 9, 1981, Daniels-Head filed a voluntary bankruptcy petition in the United States Bankruptcy Court for the District of Nevada under Chapter 11 of the former Bankruptcy Code (11 U.S.C. Sec. 1101 et seq.). Subsequently, Daniels-Head commenced an adversary proceeding against appellees alleging principally breach of contract, unjust enrichment, and intentional interference with a contractual relationship. Daniels-Head and N.Y. Life settled prior to the scheduled trial date in bankruptcy court. N.Y. Life is no longer a party to this action.

On June 24, 1983, the United States Bankruptcy Court for the District of Nevada, entered judgment in favor of appellees Marsh & McLennan, Mercer, and Smith-Sternau. Daniels-Head timely appealed to the United States District Court for the District of Nevada. The district court entered an order on April 16, 1985, affirming the bankruptcy court's decision. The appellant filed a timely appeal to this court on May 14, 1985, pursuant to 28 U.S.C. Secs. 1291 and 158(d).

II APPLICABLE LAW

The present case was pending in bankruptcy court when the Supreme Court rendered its decision in Northern Pipeline Construction Co. v. Marathon Pipe Line Co., 458 U.S. 50, 102 S.Ct. 2858, 73 L.Ed.2d 598 (1982) ("Marathon"), removing jurisdiction from the bankruptcy courts. During the interim period between the effective date of Marathon, December 24, 1982, and July 10, 1984, when Congress responded to While the present case was pending before the district court, the President signed the 1984 Act into law. Section 122(a) of the Act provides that it would "take effect" on the date of enactment. Section 122(b) lists exceptions dealing with mandatory abstention and jury trials in which the Act would not apply to pending cases. As this court stated in Piombo Corp. v. Castlerock Properties (In re Castlerock Properties), 781 F.2d 159, 161 (1986), "the implication is that the balance of the act does apply to cases pending on July 10, 1984." Therefore, we will apply the 1984 Act to the present case. See Rubin v. Belo Broadcasting Corp., (In re Rubin), 769 F.2d 611, 615 n. 4 (9th Cir.1985); Creasy v. Coleman Furniture Corp., 763 F.2d 656, 659-60 (4th Cir.1985); In re Amatex Corp., 755 F.2d 1034, 1037 (3d Cir.1985); Carlton v. Baww, Inc., 751 F.2d 781, 787 n. 6 (5th Cir.1985).

                Marathon by enacting the Bankruptcy Amendments and Federal Judgeship Act of 1984 ("1984 Act"), the Judicial Council of the United States approved an Emergency Rule to guide district courts in adjudicating title 11 claims.  The United States District Court for the District of Nevada adopted the Rule on December 22, 1982 as Local Rule 118.  Consequently, the Emergency Rule applied to the bankruptcy court's proceedings.   See Global Western Development Corp. v. Northern Orange County Credit Service, Inc., 759 F.2d 724, 725 (9th Cir.1985) (Marathon decision applies to cases pending in bankruptcy court on December 24, 1982)
                

III DISCUSSION

A. District Court's Standard of Review

The parties disagree as to the proper standard by which the district court reviews bankruptcy court decisions. The district court acknowledged that this is an area of some confusion under the 1984 Act and chose to apply a "clearly erroneous" standard to the bankruptcy court's findings of fact and de novo review of the conclusions of law. The district court added that its findings and conclusions would have been the same had it reviewed the bankruptcy court's findings of fact de novo.

Appellant argues that section 104(a) of the 1984 Act, 28 U.S.C. Sec. 157, requires de novo review of both the bankruptcy court's findings of fact and conclusions of law. Appellees, on the other hand, contend that the 1984 Act does not apply to bankruptcy court judgments issued prior to the Act's effective date. Bankruptcy Rule 8013, appellees argue, requires district court review under the "clearly erroneous" standard.

The proper standard of review to be applied by the district court is a question of law. We review de novo all questions of law. United States v. McConney, 728 F.2d 1195, 1201 (9th Cir.) (en banc), cert. denied, 469 U.S. 824, 105 S.Ct. 101, 83 L.Ed.2d 46 (1984). As discussed above, the 1984 Act applies to the district court's proceedings. Therefore, to determine the proper standard of review, we must first examine the Act's jurisdictional grants to the bankruptcy and district courts.

The Marathon decision invalidated 28 U.S.C. Sec. 1471 and its broad jurisdictional grant to the bankruptcy courts. 458 U.S. 50, 87, 102 S.Ct. 2858, 2880, 73 L.Ed.2d 598. The Supreme Court held that ...