HDR Architecture, P.C. v. Maguire Grp. Holdings, No. 14–CIV–21851–BLOOM.

CourtUnited States District Courts. 11th Circuit. United States District Courts. 11th Circuit. Southern District of Florida
Writing for the CourtBETH BLOOM, District Judge.
Citation523 B.R. 879
PartiesHDR ARCHITECTURE, P.C., Appellant, v. MAGUIRE GROUP HOLDINGS, et al. and Chartis Specialty Insurance Company, Lexington Insurance Company and Certain Other Affiliates of Chartis Inc., Appellees. In re Maguire Group Holdings, Inc., et al., Debtors.
Docket NumberNo. 14–CIV–21851–BLOOM.,Bankruptcy No. 11–39347–BKC–RAM.
Decision Date24 December 2014

523 B.R. 879

MAGUIRE GROUP HOLDINGS, et al. and Chartis Specialty Insurance Company, Lexington Insurance Company and Certain Other Affiliates of Chartis Inc., Appellees.

In re Maguire Group Holdings, Inc., et al., Debtors.

No. 14–CIV–21851–BLOOM.
Bankruptcy No. 11–39347–BKC–RAM.

United States District Court, S.D. Florida.

Signed Dec. 24, 2014.

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Linda Morkan, Robert Barrack, Robinson & Cole LLP, Patrick M. Birney, Hartford, CT, Erica Karol Williams, Eugene P. Murphy, Robinson & Cole LLP, Sarasota, FL, for Appellant.

Christopher Andrew Jarvinen, Berger Singerman LLP, Miami, FL, for Appellee.

Kristopher Aungst, Esq., Tripp Scott, P.A., Fort Lauderdale, FL, James D. Gassenheimer, Esq., Christopher A. Jarvinen, Miami, FL, for Debtors.


BETH BLOOM, District Judge.

THIS CAUSE is before the Court upon the appeal by HDR Architecture, P.C. (“HDR” or “Appellant”). Appellant seeks review of a final order issued by the United States Bankruptcy Court for the Southern District of Florida (the “Bankruptcy Court”) dated April 1, 2014, denying Appellant's motion to reopen the underlying chapter 11 cases and to modify the discharge injunction. Bankr. ECF No. [846]; In re Maguire Grp. Holdings, Inc., 508 B.R. 504 (Bankr.S.D.Fla.2014) (the “Ruling”). The Court has considered Appellant's Initial Brief, ECF No. [22], Appellee's Brief of Maguire Group Holdings, et al. (the “Reorganized Debtors”), ECF No. [28], Appellee's Brief of Chartis Specialty Insurance Company and related parties (“Chartis”), ECF No. [27], Appellant's Reply Brief, ECF No. [33], and the record in this case. For the reasons that follow, the Ruling is reversed and remanded.


Pursuant to a prepetition agreement (the “HDR Agreement”) entered into in 1990 between HDR's predecessor-in-interest and Maguire Group, Inc. (“Maguire”, one of the Debtors), the parties provided architectural, design and related services at a public works project located in Niantic,

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Connecticut (the “York Project”). Maguire served as a sub-consultant to HDR at the York Project under the HDR Agreement. In the HDR Agreement, Maguire agreed to indemnify HDR for negligent acts, errors, and omissions attributable to Maguire and to maintain a professional liability insurance policy to protect HDR from liability arising out of Maguire's performance of professional services at the York Project.

In early 2008, the State of Connecticut (the “State”) commenced a prejudgment remedy (“PJR”) proceeding pursuant to Conn. Gen. State. § 52–278a, naming as defendants HDR, Maguire, and several other parties. Connecticut procedure allows a party to seek pre-suit judicial relief, such as an attachment on property, to secure the anticipated judgment. See Conn. Gen.Stat. § 52–278c. At the time the applicant initiates the PJR proceeding, it submits a proposed unsigned copy of the suit papers, but the civil action is not yet initiated. Id. It is not until after the PJR proceeding is completed that the applicant finalizes the suit papers, has them served, and returns them to court to officially commence the action. Conn. Gen.Stat. § 52–278j. The State's application for a PJR was subsequently granted. The proceedings were thereafter stayed for several years.

Chartis was Maguire's insurer under several insurance policies. As a result of the State's filing of the PJR proceeding in 2008, Maguire placed Chartis on notice of a potential claim against its then current professional liability policy (the “Chartis Policy”). The Chartis Policy is a “claims-made” architects and engineers professional liability and contractors pollution liability policy which contains no retroactive date limitation and was in effect from January 1, 2008 to January 1, 2009. The liability limits under the Chartis Policy are $3 million for each claim and $3 million in the aggregate.

On October 24, 2011, the Debtors filed for protection under chapter 11 of title 11 of the United States Code (the “Bankruptcy Code”). On April 12, 2012, the Debtors filed their Third Amended Plan of Reorganization under chapter 11 of the Bankruptcy Code, Bankr. ECF No. [300] (the “Plan”). The confirmation hearing on the Plan, as later amended, was held on July 11, 2012 (the “Confirmation Hearing”). At the conclusion of the hearing, the Bankruptcy Court ruled that the Plan would be confirmed, and on July 25, 2012, the Bankruptcy Court entered its order confirming the Plan, Bankr.ECF No. [701] (the “Confirmation Order”). The Confirmation Order and the Plan provide for the discharge of all prepetition claims against the Debtors and a broad injunction in favor of the reorganized Debtors. On August 28, 2012, the Debtors filed a notice indicating that the effective date of the Plan had occurred one day earlier. On May 1, 2013, the Debtors filed their Amended Final Report and Motion for Entry of Final Decree, Bankr. ECF No. [786], wherein they certified that the cases had been fully administered, described the Debtors actual payment and preparations for payment at the distribution rates provided in the Plan for all general unsecured claims, and represented that “[a]ll administrative claims and expenses have been paid in full, or appropriate arrangements have been made for the full payment thereof.” On May 6, 2013, the Bankruptcy Court entered the Final Decree and ordered the closing of the Debtors' chapter 11 cases. Bankr. ECF No. [788], [789]. The Final Decree provided that “all future payments under the plan of reorganization shall be disbursed in accordance with the plan.”

According to the Bankruptcy Court, two key settlements paved the way for plan

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confirmation. The Debtors negotiated a full and final settlement of their liability arising from or related to the York Project (and certain other projects on which the Debtors worked in Connecticut). Bankr. ECF No. [638] (the “Connecticut Settlement”). The Connecticut Settlement resolved over $14.4 million in claims asserted by the State against Maguire, including a claim for not less than $13 million related to the York Project. Under the terms of the settlement, the State was authorized to deduct up to ten percent of the invoiced amount both from future invoices submitted by the Debtors and from certain pending invoices, until such time as $97,889.86 was paid in full. The Connecticut Settlement explicitly provided that it had “no preclusive effect vis-à-vis third parties ... [i]n particular, with respect to [York Project claim], (i) the striking of the claim asserted by [the State] shall have no effect on the claims regarding the underlying matters against any non-debtor, third-party in any other proceedings outside of the Debtors' chapter 11 cases.” On July 17, 2014, the Bankruptcy Court approved the Connecticut Settlement, Bankr. ECF No. [686] (the “Connecticut Settlement Order”), which provided, among other things, that the State was precluded from recovering from the Debtors or reorganized Debtors on any existing claim, specifically including those claims related to the York Project.

The second key settlement, between the Debtors and Chartis, was reached at the Confirmation Hearing. After the Debtors submitted the Connecticut Settlement to the Bankruptcy Court for approval, Chartis filed an expedited application for payment of an administrative expense claim, Bankr. ECF No. [678] (the “Chartis Administrative Expense Motion”), based on Maguire's self-insured retention obligations to Chartis under various insurance policies. Chartis asserted that the Debtors had agreed to abide by their obligations under various policies issued by Chartis because of their ongoing need for insurance coverage during the pendency of their chapter 11 proceedings, and to treat their insurance policies as executory contracts and assume them under the Plan. Chartis interpreted the Connecticut Settlement as permitting the State to pursue its claims against the Debtors as a nominal party in order to access applicable insurance proceeds. See Bankr.Case. Hr'g Tr. Jul. 11, 2012, Bankr. Case. ECF No. [702] (“Confirmation Hr'g Tr.”). Chartis anticipated incurring attorney's fees in connection with potential claims covered by those policies that would trigger payment by Maguire of the $250,000 self-insured retention obligation on each of at least four separate claims. Both the Debtors and the Bankruptcy Court understood the Connecticut Settlement to preclude the State from asserting and being able to recover on any claims against the Debtors, or from the Debtors' insurers in their capacity as insurers of the Debtors on account of the claims submitted by the State against the Debtors. See Connecticut Settlement Order ¶ 4; Confirmation Hr'g Tr.

Chartis agreed to compromise its $1,000,000 administrative expense claim in an agreement that was memorialized and approved by the Bankruptcy Court, Bankr. ECF No. [692] (the “Chartis Settlement Order”). Under the Chartis Settlement Order, Chartis was granted an “administrative expense claim in an amount not to exceed $150,000” for “amounts that would have been payable by the Debtors, but for the Debtors' bankruptcy, under the terms and conditions of any insurance policy issued to the Debtors that was expired as of...

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