In re Professional Insurance Management, Civ. No. 01-3211 (JBS) (D. N.J. 11/30/2001)

Decision Date30 November 2001
Docket NumberCiv. No. 01-3211 (JBS).,[Civ. No. 98-3617 (JBS)].,Civ. No. 01-3246 (JBS).,[Bankr. No. 94-13602; Adversary Nos. 94-1325 and 96-1410].
CourtU.S. District Court — District of New Jersey

United States District Court, D. New Jersey.

Filed: November 30, 2001.


Samuel Mandel, Esquire, Moorestown, New Jersey, and Michael A. Zindler, Esquire TEICH, GROH, FROST & ZINDLER, Trenton, New Jersey, Attorneys for Debtor/Plaintiff-Appellee Professional Insurance Management

Charles X. Gormally, Esquire Carl J. Soranno, Esquire BRACH, EICHLER, ROSENBERG, SILVER, BERNSTEIN, HAMMER & GLADSTONE, P.C., Roseland, New Jersey, Attorneys for Defendant-Appellant, Ohio Casualty Group of Insurance Companies, et al.

James S. Rothschild, Jr., Esquire RIKER, DANZIG, SCHERER, HYLAND & PERETTI, L.L.P. One Speedwell Avenue Morristown, New Jersey, Attorneys for Defendant-Appellant, Harleysville Mutual Insurance Company, et al.

John J. Farmer, Jr., Attorney General of New Jersey Raymond R. Chance, III, Deputy Attorney General Department of Law and Public Safety Division of Law, Trenton, New Jersey, Attorneys for Amicus Curiae Commissioner of Banking and Insurance.


SIMANDLE, District Judge:


After seven years of litigation among these parties, these two appeals are again before the Court by appellants seeking review of an Opinion and Order of the Bankruptcy Court which refused their request to stay trial in an adversary proceeding and to refer an aspect of the parties' dispute to the New Jersey Department of Banking and Insurance [DOBI]. These appeals require this Court to revisit the New Jersey doctrine of primary jurisdiction to determine whether, in light of the recent decision in R.J. Gaydos, Inc. v. National Consumer Insurance Co., 168 N.J. 255 (2001), the Bankruptcy Court must again refer an issue to DOBI for a full investigation and administrative determination whether defendants/appellants have violated relevant New Jersey automobile insurance statutes in terminating plaintiff as their agent.

This Court has jurisdiction under 28 U.S.C. § 158(a)(3) with respect to the interlocutory appeal of a controlling question of law,1 and under 28 U.S.C. § 158(c)(2) with respect to the denial of injunctive relief of a stay of trial.


Professional Insurance Management ["PIM"], a debtor in bankruptcy, was an insurance agency operating under insurance agency contracts with various insurers, including the Ohio Casualty Group of Insurance Companies ["Ohio Casualty"] and Harleysville Mutual Insurance Company ["Harleysville"]. In an adversary proceeding in the Bankruptcy Court, PIM has alleged that Ohio Casualty and Harleysville have breached the implied covenant of good faith and fair dealing by terminating PIM after PIM allegedly refused their demands to violate the Fair Automobile Insurance Reform Act ("FAIRA"), N.J.S.A. 17:33B-1, et seq. PIM alleges, among other things, that these carriers terminated PIM when it refused to acquiesce to their violations of the insurance laws, such as the "take all comers" provision of FAIRA, N.J.S.A. 17:33B-15(b).

This Court previously recognized that the investigation of a carrier's FAIRA violation in connection with such a claim lies within the primary jurisdiction of the Commissioner of Banking and Insurance. In the Opinion and Order of March 2, 1999, in Civ. No. 98-3617 (JBS), the Court, applying New Jersey precedents including Campione v. Adamar of New Jersey, Inc., 155 N.J. 245, 306-307 (1998), found that the Commissioner did not have exclusive jurisdiction over PIM's FAIRA-related claims and that the Bankruptcy Court retains jurisdiction over the cause of action, but that deference to the Commissioner's primary jurisdiction was required with respect to issues such as the interpretation of the "take all comers" provision and the definition of "withdrawal." Id., slip op. at 15-17. Such primary jurisdiction was held not to limit the Bankruptcy Court's jurisdiction over the subject matter of plaintiff's claims, but it "counsels the court to defer ultimate resolution of claims until the underlying issues within those claims within the special knowledge of the administrative body have been resolved." Id. slip op. at 17. Without repeating the analysis here, this Court found that these issues required resolution by the Commissioner in the context of the highly regulated environment of automobile insurance law in New Jersey, finding that all the pertinent factors identified by the New Jersey Supreme Court in Campione were likewise present here, namely: (1) FAIRA established a pervasive regulatory scheme to govern the automobile insurance industry, pursuant to which the Commissioner has exclusive jurisdiction to "investigate, adjudicate and punish" FAIRA violations; see In re Professional Ins. Mgmt., 139 F.3d 1122, 1127 (3d Cir. 1997); (2) there was a need to preserve the proper relationship between the Courts and the Commissioner, who was currently investigating Harleysville, Ohio Casualty, and PIM for various infractions; (3) the issues underlying PIM's claims — whether defendants/appellants violated the "take all comers" provisions and whether they withdrew from the market — were uniquely within the expertise of the Commissioner of Banking and Insurance under New Jersey's comprehensive no-fault automobile insurance regulatory scheme; and (4) there is a risk of inconsistent rulings as to the duties imposed by the "take all comers" regulations and statute if the Commissioner did not have the first opportunity to investigate the facts and apply the regulatory law. Id., slip op. at 20-22.

Accordingly, on March 2, 1999, this Court remanded the case to the Bankruptcy Court, instructing the parties to cooperate in fashioning an appropriate administrative complaint to invoke and facilitate the Commissioner's primary jurisdiction upon these issues while the Bankruptcy Court would defer hearing the underlying claims.

The parties did so, through the considerable coordinating efforts of the Bankruptcy Court, and with the cooperation of a Deputy Attorney General representing the Commissioner. In June of 1999, PIM filed a declaratory judgment with the Department of Banking and Insurance under the Administrative Procedure Act pursuant to N.J.S.A. 52:14B-8, et. seq. The declaratory judgment complaint named the Ohio Casualty Group and the Harleysville Group as defendants.2 Ohio Casualty filed a counterclaim to the declaratory judgment action, and, other than a letter from the Commissioner acknowledging receipt of the complaint on July 14, 1999, there was no communication from DOBI, no request for information, and no schedule set for an administrative hearing or briefing.

When almost a year went by in this administrative limbo, this Court, on May 25, 2000, granted PIM's motion to vacate the Court's March 2, 1999 and Order regarding the Commissioner's primary jurisdiction, ordering that the PIM declaratory judgment complaint be withdrawn from the Commissioner, together with Ohio Casualty's counterclaim, and that the matter be restored to the Bankruptcy Court's docket. See In re Professional Ins. Mgt., Debtor, Civ. No. 98-3617 (JBS) (Opinion and Order vacating in part this Court's March 2, 1999 Opinion and Order filed May 25, 2000).3

Ohio Casualty filed a motion for reconsideration of the two orders of May 25, 2000, and this Court denied reconsideration in its Order filed July 31, 2000. In the Memorandum Opinion Upon Reconsideration Motion (filed July 31, 2000), the Court reaffirmed that withdrawal of the reference was appropriate procedurally, and that the March 2, 1999 Order was properly vacated. That conclusion rested upon the demonstrable inactivity by the Commissioner during the year's time in which this Court and the Bankruptcy Court had deferred the matter, together with the Opinion of the Appellate Division in the Gaydos case, which had been decided on June 12, 2000. R. J. Gaydos Agency, Inc. v. National Consumer Ins. Co., 331 N. J. Super. 458 (App. Div. 2000). The Appellate Division declined to defer to the Commissioner's primary jurisdiction in a nearly identical context in which the Chancery Division adjudicated an automobile insurance agency termination case wherein the terminated agent claimed that the carrier had committed FAIRA violations. The Chancery Division had repeatedly requested the intervention of the Commissioner, but the Department failed to participate. The Gaydos litigation had been "protracted", and the Appellate Division wrote that it was "persuaded that the interests of justice and fairness to the parties militate in favor of a prompt disposition of the question presented." Id. at 474. The Appellate Division chose to interpret FAIRA's "take all comers" requirement, noting that "in the final analysis the interpretation of a statute is a judicial function, particularly where, as here, the plaintiff has sought the remedy of monetary damages." Id.4

After this Court denied reconsideration on July 31, 2000, the parties followed the Court's directive in withdrawing their claims and counterclaims, and the matter was restored to the Bankruptcy Court for further proceedings in Adversary Nos. 94- 1325 and 96-1410. When these withdrawals of the administrative actions were completed, this Court entered a further Order (filed August 22, 2000), which re-referred all remaining matters in these adversary actions to the Bankruptcy Court for further proceedings.

Meanwhile, the case was prepared for trial before the Honorable Judith H. Wizmur, U.S. Bankruptcy Judge, which was scheduled to begin on Tuesday, July 10, 2001. Just 12 days before that, on June 28, 2001, the...

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