Adelphia Commc'ns Corp. v. U.S. Specialty Ins. Co. (In re Adelphia Commc'ns Corp.)
| Decision Date | 27 May 2022 |
| Docket Number | Case No. 02-41729 (SHL) (Jointly Administered),Adv. Pro. No. 19-01027 (SHL) |
| Citation | 639 B.R. 657 |
| Parties | IN RE: ADELPHIA COMMUNICATIONS CORP., et al., Debtors. Adelphia Communications Corp. and Quest Turnaround Advisors, LLC, Plaintiffs, v. U.S. Specialty Insurance Company, Defendant. |
| Court | U.S. Bankruptcy Court — Southern District of New York |
MASINI, VICKERS, RUKSAKIATI & HADSELL, P.C., Counsel for Adelphia Communications Corp. and Quest Turnaround Advisors, LLC, By: Thomas A. Vickers, Esq., 150 S. Wacker Drive, 24th Floor, Chicago, Illinois 60606.
WOLLMUTH MAHER & DEUTSCH LLP, Counsel for Adelphia Communications Corp. and Quest Turnaround Advisors, LLC, By: Paul R. DeFilippo, Esq., Lyndon M. Tretter, Esq., 500 Fifth Avenue, New York, New York 10010.
CLYDE & CO US LLP, Counsel for U.S. Specialty Insurance Company, By: Scott Schwartz, Esq., 405 Lexington Avenue, 16th Floor, New York, New York 10174 -and- By: Douglas M. Mangel, Esq., Joseph A. Bailey III, Esq., 1775 Pennsylvania Avenue, N.W., Suite 400, Washington, D.C. 20006.
Before the Court is the motion of U.S. Specialty Insurance Company ("U.S. Specialty") for reconsideration or reargument [ECF No. 42] (the "Reconsideration Motion") of this Court's memorandum of decision dated March 17, 2022 [ECF No. 39] (the "Decision").1 The Decision granted the summary judgment motion of Adelphia Communications Corp. ("Adelphia") and Quest Turnaround Advisors, LLC ("Quest," and together with Adelphia, the "Plaintiffs") and denied the summary judgment motion of U.S. Specialty. See Plaintiffs’ Combined Mot. and Supp. Mem. Pursuant to Local Bankruptcy Rule 7056-1, for Entry of an Order (A) Granting Plaintiffs Summ. J. on Count I of their Compl. (Declaratory J.) (Adv. Proc. No. 19-01027, Doc. 1, Filed 02/20/19); and (B) Granting Plaintiffs Summ. J. as to Liability on Count II of their Compl. (Breach of Contract) (Adv. Proc. No. 19-01027, Doc. 1, Filed 02/20/19) [ECF No. 25] (the "Plaintiffs’ SJM"); Mem. Of Law in Supp. of Defendant U.S. Specialty Insurance Company's Cross Mot. for Summ. J. [ECF No. 26]. For the reasons set forth below, the Reconsideration Motion is denied.
While familiarity with the Decision is presumed, the Court will provide a brief summary of the background. See also In re Adelphia , 638 B.R. 506 (Bankr. S.D.N.Y. 2022). In June 2002, Adelphia and its affiliated debtors filed a voluntary petition for relief under Chapter 11 of the Bankruptcy Code. See Case No. 02-41729 [ECF No. 1]. The Court subsequently confirmed the Fifth Amended Joint Chapter 11 Plan for Adelphia Communications Corporation and Certain of its Affiliated Debtors (the "Plan") and the Plan became effective shortly thereafter. See Joint Statement of Undisputed and Material Facts ¶¶ 1-2 [ECF No. 24] (the "SUF"). The Plan dissolved Adelphia's Board of Directors and vested the rights, powers and executive authority of the Board in a new fiduciary known as the "Plan Administrator." See SUF ¶ 2. Quest and Adelphia executed an agreement that provided for the retention of Quest as the Plan Administrator (the "Plan Administrator Agreement"). See SUF ¶ 3; see also Plan Administrator Agreement, attached as Exhibit A to the SUF.
In 2017, U.S. Specialty began insuring Quest under the Policy2 in Quest's capacity as Plan Administrator. See SUF ¶¶ 7-8. The basic coverage grant of the Policy provides that U.S. Specialty "will pay to or on behalf of the Insured Organization [any] Loss arising from Claims first made against it during the Policy Period ... for Wrongful Acts ."3 Policy at Insuring Agreement (B); see also SUF ¶ 10. But Endorsement No. 15 of the Policy excludes from coverage "any payment of Loss in connection with a Claim arising out of, based upon or attributable to any fee or other compensation due or allegedly due in return for any service provided pursuant to the [Plan Administrator Agreement]." Policy at Endorsement No. 15, Section 5 (the "Fee Exclusion"); see also SUF ¶ 12.
In February 2018, creditor Solus Alternative Asset Management, L.P. ("Solus") filed a motion in Adelphia's bankruptcy proceeding seeking, among other things, removal of Quest as Plan Administrator for cause (the "Original Motion").4 See SUF ¶ 22. Adelphia and Quest opposed the relief requested by the Movants and the Court held an evidentiary hearing on the Amended Motion in October 2018. See SUF ¶¶ 23, 27, 30-31. Adelphia, Quest and the Movants ultimately entered into a settlement agreement resolving the disputes raised in the Solus Motions, terminating the Plan Administration Agreement and appointing a new Plan Administrator. See SUF ¶ 32; Stipulation and Consent Order With Respect to (A) Motion of Solus Alternative Asset Management LP and ACC Claims Holdings LLC, (B) Second Amendment to Plan Administrator Agreement, and (C) Appointment of Successor Administrator , attached as Exhibit P to the SUF [ECF No. 24-16]. Adelphia and Quest then sought coverage under the Policy for the fees, costs and expenses they incurred in defending the Solus Motions.
On summary judgment, U.S. Specialty argued that the Fee Exclusion precluded coverage because the Solus Motions related to fees owed to Quest. See SUF ¶ 36. The Plaintiffs countered that the Fee Exclusion was inapplicable because it applies to a "fee or other compensation due or allegedly due "—that is, fees that had not yet been paid—whereas the Solus Motions sought termination of Quest as Plan Administrator and related to fees that were already paid to Quest. Policy at Endorsement No. 15, Section 5 (emphasis added); see SUF ¶ 37.
In the Decision, the Court held that the language of the Fee Exclusion narrowed its applicability as a temporal matter to those fees that were "due or allegedly due in return of any services provided" and that the position taken by U.S. Specialty read this language out of the Policy. See Decision at 22-23. The Court noted that the fees discussed in the Solus Motions related to fee arrangements for work that had yet to be performed or fees that had already been paid. See id. at 17-21. Nothing in the Solus Motions related to fees that were "due or allegedly due." See id.
U.S. Specialty seeks reconsideration or reargument of the Decision under Rule 60(b) of the Federal Rules of Civil Procedure, Rule 9024 of the Federal Rules of Bankruptcy Procedure, and Local Bankruptcy Rule 9023-1.5 But when reconsideration is sought, two rules are often cited.
The first rule is Rule 59(e) of the Federal Rules of Civil Procedure, which authorizes the filing of a "motion to alter or amend a judgment." Fed. R. Civ. P. 59(e). The standard for granting a motion to alter or amend a judgment under Federal Rule 59(e) is "strict, and reconsideration will generally be denied ...." Analytical Surveys, Inc. v. Tonga Partners, L.P., 684 F.3d 36, 52 (2d Cir. 2012) (quoting Shrader v. CSX Transp., Inc., 70 F.3d 255, 257 (2d Cir. 1995) ). "A motion to amend the judgment will be granted only if the movant presents matters or controlling decisions which the court overlooked that might have materially influenced its earlier decision." In Design v. Lauren Knitwear Corp. , 1992 WL 42911, at *1 (S.D.N.Y. Feb. 24, 1992) (citing Morser v. AT & T Information Systems, 715 F. Supp. 516, 517 (S.D.N.Y. 1989) ; Travelers Insurance Co. v. Buffalo Reinsurance Co., 739 F. Supp. 209, 211 (S.D.N.Y. 1990) ).
Such a request for relief "is not a vehicle for relitigating old issues, presenting the case under new theories, securing a rehearing on the merits, or otherwise taking a ‘second bite at the apple.’ " Tonga Partners, 684 F.3d at 52 (quoting Sequa Corp. v. GBJ Corp., 156 F.3d 136, 144 (2d Cir. 1998) ). Nor is it "an opportunity for a party to ‘plug[ ] the gaps of a lost motion with additional matters.’ " Cruz v. Barnhart , 2006 WL 547681, at *1 (S.D.N.Y. Mar. 7, 2006) (quoting Carolco Pictures Inc. v. Sirota, 700 F. Supp. 169, 170 (S.D.N.Y. 1988) ). "Arguments raised for the first time on a motion for reconsideration are therefore untimely." Cruz , 2006 WL 547681, at *1 (citing Nat'l Union Fire Ins. Co. of Pittsburgh, PA. v. Stroh Cos., Inc., 265 F.3d 97, 115–16 (2d Cir. 2001) ). "[I]t is improper for the movant to present new material ‘because[,] by definition[,] material that has not been previously presented cannot have been previously "overlooked" by the court.’ " In Design , 1992 WL 42911, at *1 (quoting Consolidated Gold Fields, PLC v. Anglo Am. Corp. of South Africa Ltd., 713 F. Supp. 1457, 1476 (S.D.N.Y. 1989) ). Reconsideration is "an extraordinary remedy to be employed sparingly in the interests of finality and conservation of scarce judicial resources." In re Health Management Sys. Inc. Sec. Litig., 113 F. Supp. 2d 613, 614 (S.D.N.Y. 2000) (quoting Wendy's Int'l, Inc. v. Nu–Cape Construction, Inc., 169 F.R.D. 680, 685 (M.D. Fla. 1996) ). The burden rests with the movant. See In re Crozier Bros., Inc. , 60 B.R. 683, 688 (Bankr. S.D.N.Y. 1986).
The second rule is Rule 60(b) of the Federal Rules of Civil Procedure, which lists six grounds upon which a court may relieve a party from a final judgment, order or proceeding:
Fed. R. Civ. P. 60(b). The burden of proof on a Rule 60(b) motion is on the movant and is "properly granted only upon a showing of exceptional circumstances." United States v. Int'l Bhd. of Teamsters ,...
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