In re Collins
| Decision Date | 19 July 2000 |
| Docket Number | No. 99 B 31891.,99 B 31891. |
| Citation | 250 BR 645 |
| Parties | In re Patrick J. COLLINS, Debtor. |
| Court | U.S. Bankruptcy Court — Northern District of Illinois |
COPYRIGHT MATERIAL OMITTED
COPYRIGHT MATERIAL OMITTED
COPYRIGHT MATERIAL OMITTED
Theodore W. Grippo, Jr., Pembroke & Brown, Park Ridge, IL, for Patrick J. Collins.
Leon E. Lindenbaum, Kurlander & Brisky, Ltd., Chicago, IL, for Lindenbaum Coffman.
This matter comes before the Court on the motion of the Society of Lloyd's ("Lloyd's") for sanctions against Patrick J. Collins ("Collins"), a debtor under Chapter 7 of the United States Bankruptcy Code, 11 U.S.C. § 101 et seq. (hereinafter the "Bankruptcy Code"), and his attorneys Whitman H. Brisky ("Brisky") and the firm Lindenbaum, Coffman, Kurlander & Brisky (the "Firm"). Following the dismissal of Collins' bankruptcy petition as a bad faith filing under 11 U.S.C. § 707(a), Lloyd's seeks an award of costs and attorneys fees, in the amount of $133,107.09, incurred by it in contesting Collins' bankruptcy case. In addition, Lloyd's seeks amounts equal to those paid to the Chapter 7 trustee (the "Trustee") and the Trustee's counsel, as well as those paid or owing to Brisky and the Firm. Lloyd's argues that by filing for bankruptcy, Collins has depleted the assets available to pay his debt to Lloyd's. Lloyd's moves for sanctions under 11 U.S.C. § 105(a) and under Federal Rule of Bankruptcy Procedure 9011. For the reasons that follow, the Court finds that sanctions should be imposed upon both Collins and his attorneys.
The Court has jurisdiction over this matter pursuant to 28 U.S.C. § 157(b)(1) and 28 U.S.C. § 1334. This matter arises both under title 11 and in a case under title 11. Venue lies under 28 U.S.C. § 1409.
Collins has been a life insurance agent for the past 34 years. He owns and operates his own agency. He has been successful in his business, accumulating assets worth more than $2.3 million.
This case arises entirely out of Collins' relationship with Lloyd's and his attempts to avoid the allegedly unwarranted consequences of that relationship. The many issues between Collins and Lloyd's are not before this Court, and this Court expresses no opinion about the merits of the claims of either side in their ongoing battle. However, that battle is the raison d'etre for the bankruptcy case and the many additional months of litigation it has created.
The Society of Lloyd's operates and regulates Lloyd's of London, the British insurance market that began as a marine insurer over 300 years ago and has now insured everything from Betty Grable's "million dollar legs" to natural disasters and asbestos disease. Unlike traditional American insurance companies, Lloyd's does not directly insure its customers solely with its assets, nor does it earn profits from premiums and pay claims for losses to insureds under its policies. Rather, through individuals known as Members' Agents, Lloyd's solicits individuals of substantial means to become Names or underwriters. Often, these Names form groups known as Syndicates to insure large risks. When an individual becomes a Lloyd's Name, that individual agrees to put his entire net worth at risk to meet the claims that may be made against him or his Syndicate. In exchange, the Names expect to profit from the premiums paid by the policy-holders and from investment of the Syndicate's capital. The obvious hope is that no policy holder will make a claim and that the Names will reap handsome profits from their investments.
Collins was a Lloyd's Name for the years 1988 through 1991. Collins has testified that he never made any profits on his investment in Lloyd's and that "all he ever did was send them money." (April 11, 2000 11:00 a.m. Transcript at 40:23-24) (hereinafter "Tr. 1"). Collins paid Lloyd's approximately $275,000 in underwriting losses during the years that he was a Name.
These losses resulted from Lloyd's reinsurance of claims such as those for asbestosis, natural disasters, and environmental damage, which may surface, in huge amounts, years after a Syndicate underwrites the policy. See The Society of Lloyd's v. Ashenden, No. 98 C 5335, 1999 WL 284775 at *1-4 (N.D.Ill. April 23, 1999) ("Ashenden II"); David McClintick, The Decline and Fall of Lloyd's of London, TIME INTERNATIONAL, February 21, 2000, at 32 (). In 1996, Lloyd's offered its investors a settlement proposal entitled "Reconstruction and Renewal" (the "R & R"). In the R & R, Lloyd's created a reinsurance company known as Equitas to assume responsibility for all pre-1993 liabilities. The Names were required to pay a premium for the Equitas reinsurance. Lloyd's also agreed to settle all outstanding pre-1993 liabilities for a reduced amount if the Names would waive all claims against it. Under English law, Lloyd's was able to accept the R & R on behalf of all the Names concerned and require the Names to pay instantly, even if they intended to sue to reject the R & R. Collins did not consent to the R & R and has not paid the Equitas premium or any other amounts owed to Lloyd's under the R & R. Collins alleges that the Equitas reinsurance is not sufficient to protect him and the other Names from potentially enormous claims arising from pre-1993 liabilities. However, no claims have actually been made.
Collins alleges that Lloyd's fraudulently induced him to become a Name and has attempted to sue Lloyd's or related entities in both the United States and England. The United States District Court for the Northern District of Illinois (the "District Court") dismissed his securities fraud suit for improper venue based on a forum selection clause in his contracts with Lloyd's. Ashenden et al. v. Lloyd's of London, No. 96 C 852, 1996 WL 717464 (N.D.Ill. December 9, 1996) ("Ashenden I"). An English court awarded Collins approximately £170,000 in suits against two Lloyd's Members Agents, but Lloyd's claimed the money for the benefit of policyholders pursuant to one of its by-laws. Collins has asked that the funds be applied to his debt to Lloyd's, but Lloyd's will not agree to do this. The disposition of the funds is the subject of litigation in England.
Collins is a member of a group that litigates against Lloyd's and related entities. He is also a member of a class action against Lloyd's and related entities including Citibank and the law firms LeBoeuf, Lamb, Greene & McCrae, Mendes & Mount, and Lord, Bissell & Brook. He has testified that other than the lawsuits discussed herein, he individually has no current pending litigation against Lloyd's.
Lloyd's has successfully sued Collins. On March 11, 1998, an English court entered a judgment against him in the amount of £271,856.76 (approximately $433,000) for amounts owed under the R & R (the "English Judgment"). Post-judgment interest has been accruing on the debt, so that it now amounts to approximately $525,000. In order to enforce its judgments, on April 22, 1999, Lloyd's filed for Registrations of Foreign Money Judgments (the "Registrations") in the District Court against Collins and sixteen other American Names against whom English judgments had been entered. Collins and several of his fellow Names attempted to resist the Registrations in The Society of Lloyd's v. Berkos et al., No. 99 C 2651.
On September 16, 1999, United States District Judge Harry D. Leinenweber entered an order setting October 29, 1999 as the ruling date in the Berkos case. On October 14, 1999, Collins filed his bankruptcy petition. On October 29, 1999, the District Court entered an order in Berkos recognizing the English judgments (the "Berkos Judgment"). Id. On November 16, 1999, the District Court entered final judgment against twelve other Berkos defendants. Those twelve filed a notice of appeal that same day. The appeal is currently pending in the United States Court of Appeals for the Seventh Circuit.
Collins testified that he first considered a bankruptcy filing following the April 23, 1999 decision in Ashenden II, which recognized English judgments against two other Lloyd's Names. Brisky advised him to file the bankruptcy petition either before the District Court announced its judgment in Berkos or after any appeal in Berkos. He filed just two weeks before the District Court's decision in Berkos because he anticipated losing and was anxious to "get it behind him" (Tr. 1 at 38:20) (hereinafter "Tr. 1"), to "end the nightmare" (Tr. 1 at 38:8), to "get finality" (Tr. 1 at 40:1-2), and to "get Lloyd's off his back" (Tr. 1 at 40:78). He wanted to "end all of the struggling" (Tr. 1 at 40:2) and to "go on with his life" (Tr. 1 at 40:4).
Lloyd's promptly moved to modify the automatic stay imposed by 11 U.S.C. § 362 so that the action in the District Court could proceed against Collins. Collins objected to the Lloyd's motion. On December 21, 1999, the Court modified the stay to allow Lloyd's to proceed in the Berkos case for a ruling on any pending motions and any appeal therefrom. The District Court entered judgment against Collins on February 8, 2000. Collins filed his notice of appeal on February 9, 2000.
On December 30, 1999, Lloyd's filed a motion to dismiss Collins' petition as a bad faith filing under 11 U.S.C. § 707(a). After trial on the merits, this Court entered a judgment finding that Collins filed the petition in bad faith and dismissing his case under § 707(a).
On May 4, 2000, following the dismissal of Collins' bankruptcy case, the District Court approved his supersedeas bond for the Berkos appeal in the amount of $300,000.
At the time of his bankruptcy filing, Collins had only three creditors: the Harris Bank ("Harris"), the Northern Trust Bank (the "Northern Trust"),...
To continue reading
Request your trial