In re Maguire Grp. Holdings, Inc., Case No. 11–39347–BKC–RAM (Jointly Administered)
| Decision Date | 02 April 2014 |
| Docket Number | Case No. 11–39347–BKC–RAM (Jointly Administered) |
| Citation | 508 B.R. 504 |
| Parties | In re: Maguire Group Holdings, Inc. et al., Debtors. |
| Court | U.S. Bankruptcy Court — Southern District of Florida |
OPINION TEXT STARTS HERE
Christopher A. Jarvinen, Esq., Berger Singerman LLP, 1450 Brickell Avenue, Suite 1900, Miami, FL 33131, (Counsel for Reorganized Debtors).
Patrick Birney, Esq., Robinson & Cole, LLP, 280 Trumbull Street, Hartford, CT 06103–3597, (Counsel for HDR Architecture, P.C.).
John Eggum, Esq., Foran Glennon Palendech Ponzi & Rudloff PC, 222 N. LaSalle Street, Suite 1400, Chicago, IL 60601, (Counsel for Chartis).
The Debtors in these chapter 11 cases successfully reorganized under a plan confirmed in July 2012. HDR Architecture P.C. (“HDR”), a creditor whose claim was discharged, now seeks to reopen the cases to obtain an order modifying the discharge injunction. HDR wants to pursue a claim against the reorganized Debtors, but agrees to seek relief only against Chartis Specialty Insurance Company (“Chartis”), the insurer under a policy insuring HDR's claim. HDR is not seeking any relief against the reorganized Debtors directly. However, because the reorganized Debtors have an obligation to reimburse Chartis for monies Chartis will spend to defend HDR's claims, allowing HDR relief from the discharge injunction will impair the reorganized Debtors' fresh start. Therefore, HDR's motions will be denied.
On May 15, 2013, HDR Architecture P.C. (“HDR”) filed (i) [HDR's] Motion to Reopen Case for Actions Effecting the Discharge of the Debtor [DE # 792] (the “Motion to Reopen”) and (ii) the Motion to Amend the Plan Discharge Injunction to Allow [HDR] to Proceed with Litigation in the State of Connecticut Superior Court [DE # 793] (the “Motion to Modify Plan Discharge Injunction”). The Motion to Reopen seeks entry of an Order reopening the chapter 11 cases of Maguire Group Holdings, Inc. and its affiliated debtors (the “Debtors”) for the limited purpose of allowing HDR to prosecute the Motion to Modify Plan Discharge Injunction. The Motion to Modify Discharge Plan Injunction seeks to modify the plan discharge injunction (i) to allow HDR to bring claims (collectively, the “HDR Indemnification Claim”) against Debtor Maguire Group, Inc. (“Maguire”) in State of Connecticut v. Bacon Construction Company, Inc., et al., Case No. UWY–CV08–5014967–S (the “Bacon Action”), a Connecticut state court litigation, and (ii) to prosecute the HDR Indemnification Claim against Maguire through final judgment, without enforcing the final judgment against Maguire directly. By pursuing the HDR Indemnification Claim, HDR seeks to access the proceeds of a professional liability insurance policy maintained by Maguire with Chartis. The reorganized Debtors and Chartis oppose the relief sought by HDR in its motions.
The Bacon Action began on February 14, 2013 when the State of Connecticut filed a signed writ, summons, and complaint against HDR and a number of other defendants to recover damages resulting from alleged construction and design defects at the York Correctional Facility, a Connecticut public works project located in Niantic, Connecticut (the “York Project”). HDR and Maguire each provided architectural, design, and related services at the York Project, with Maguire acting as a sub-consultant of HDR.
The HDR Indemnification Claim arises under a March 1990 contract between Henningson, Durham & Richardson, Inc.1, and Maguire (the “Agreement”). In the 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. The particular policy that HDR seeks to access is a “claims-made” architects and engineers professional liability and contractors pollution liability policy (the “Chartis Policy”). The Chartis Policy, which contains no retroactive date limitation, 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. The reorganized Debtors acknowledge that the Chartis Policy provides Maguire with liability coverage for the HDR Indemnification Claim.
Although the Bacon Action was not filed until 2013, the State of Connecticut initiated a prejudgment remedy proceeding (the “PJR Proceeding”) in Connecticut state court against HDR, Maguire, and certain other defendants nearly five years earlier, on February 25, 2008. A copy of the Complaint is attached as Exhibit B to the reorganized Debtors' omnibus objection to the pending motions [DE# 802–2]. In the PJR Proceeding, the State of Connecticut asserted substantially the same claims as those now asserted in the Bacon Action. Therefore, as early as 2008, HDR was on notice that it might be liable to the State of Connecticut and therefore on notice of a potential indemnification claim against Maguire.
On October 24, 2011, the Debtors filed chapter 11 petitions. The Debtors' cases were jointly administered pursuant to an Order [DE # 24] entered one day later. On April 12, 2012, the Debtors filed their Third Amended Plan of Reorganization Under Chapter 11 of the Bankruptcy Code [DE # 300] (the “Plan”) and a related disclosure statement [DE # 299]. 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 Court ruled that the Plan would be confirmed and, on July 25, 2012, the Court entered its Order confirming the Plan (the “Confirmation Order”) [DE # 701]. 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 [DE # 720] indicating that the effective date of the Plan had occurred one day earlier. On May 6, 2013, the Court entered the Final Decree [DE # 788] and ordered the closing of the Debtors' chapter 11 cases.
It is undisputed that all of the HDR entities received timely notices of all relevant pleadings in these chapter 11 cases. Henningson, Durham and Richardson, Inc. (the predecessor in interest to HDR) and HDR Engineering, Inc., had allowed unsecured claims in Class 4 of the Plan and distributions were made on those claims under the Plan. HDR did not file a proof of claim asserting the claims in the HDR Indemnification Claim at issue here and HDR agrees that unless the discharge injunction is modified, the HDR Indemnification Claim has been discharged.
During the bankruptcy and prior to confirmation, the Debtors reached two key settlements—one with the State of Connecticut and one with Chartis—that paved the way for confirmation of the Plan. On June 29, 2012, the Debtors filed a motion [DE # 638] seeking approval of a settlement with the State of Connecticut to resolve Maguire's liability arising out of the alleged construction and design defects at the York Project (the “Connecticut Settlement Agreement”). The motion to approve the Connecticut Settlement Agreement was served on all creditors, including HDR, and approved in an Order entered on July 17, 2012 [DE # 686] (the “Connecticut Settlement Order”). No party sought relief from the Connecticut Settlement Order, and the Order became final and non-appealable. The Connecticut Settlement Order provided, among other things, that the State of Connecticut was precluded from recovering from the Debtors or the reorganized Debtors on any existing claim, specifically including those claims related to the York Project.
The second key settlement, between the Debtors and Chartis (the “Chartis Settlement Agreement”), was reached at the Confirmation Hearing. Among other things, the Chartis Settlement Agreement resolved the Debtors' disputed liability on a $1,000,000 administrative expense claim asserted by Chartis [DE # 678]. Chartis' claim was based on the Debtor's self-insured retention obligations to Chartis under various insurance policies. Chartis anticipated incurring attorney's fees in connection with potential claims that would trigger payment of the $250,000 self-insured retention on at least four separate claims. At the time of the Confirmation Hearing, Chartis' $1,000,000 administrative expense claim and its opposition to the proposed Plan posed a significant roadblock to the Plan's confirmation. Under the Chartis Settlement Agreement, 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' bankruptcies, under the terms of any insurance policy issued to the Debtors that had expired as of the petition date (a “Prior Policy”). The reorganized Debtors' obligation to pay amounts under the administrative expense claim provision arises only if Chartis incurs obligations attributable to a Prior Policy. Although called an administrative expense claim, the $150,000 obligation is better described as a contingent obligation of the reorganized Debtors.
At the Confirmation Hearing, Chartis' counsel stated that the Debtors had reported forty (40) claims that had “a potential for a claim” under one of the Prior Policies (the “Potential Insurance Claim Universe”) Transcript of July 11, 2013 Confirmation Hearing [DE# 702]. Under the Chartis Settlement Agreement, Chartis was permitted to elect one claim from the Potential Insurance Claim Universe under a single Prior Policy to receive ...
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