In re Special Metals Corp., Bankruptcy No. 02-10335.

• Decision Date: 29 September 2004
• Docket Number: Bankruptcy No. 02-10336.,Bankruptcy No. 02-10338.,Bankruptcy No. 02-10337.,Bankruptcy No. 02-10335.,Adversary No. 03-1025.
• Citation: 317 B.R. 326
• Parties: In re SPECIAL METALS CORPORATION, Inco Alloys International, d/b/a Huntington Alloys, Special Metals Domestic Sales Corp., and A-1 Wire Tech, Inc., Debtors. Century Indemnity Company, Plaintiff, v. Special Metals Corporation, Defendant.
• Court: U.S. Bankruptcy Court — Eastern District of Kentucky

317 B.R. 326

In re SPECIAL METALS CORPORATION, Inco Alloys International, d/b/a Huntington Alloys, Special Metals Domestic Sales Corp., and A-1 Wire Tech, Inc., Debtors.

Century Indemnity Company, Plaintiff, v. Special Metals Corporation, Defendant.

Bankruptcy No. 02-10335.

Bankruptcy No. 02-10336.

Bankruptcy No. 02-10337.

Bankruptcy No. 02-10338.

Adversary No. 03-1025.

United States Bankruptcy Court, E.D. Kentucky, Ashland Division.

September 29, 2004.

Gregory R. Schaaf, Lexington, KY, for defendant.

W. Thomas Bunch, II, Lexington, KY, Leonard P. Goldberger, Philadelphia, PA, for plaintiff.

MEMORANDUM OPINION

This matter is before the court on the defendant Debtors' Motion for Judgment on the Pleadings. The Plaintiff has filed a Response and the Debtors have filed a Reply. While only Special Metals Corporation is named in the caption of this proceeding as defendant, the Plaintiff's Complaint and Amended Complaint for Declaratory Judgment identify all the Debtors as defendants and they will be collectively referred to herein as "the Debtors." This court has jurisdiction of this matter pursuant to 28 U.S.C. § 1334(b). The Plaintiff has alleged that this is a non-core proceeding pursuant to 28 U.S.C. § 157(c), and it has not consented to the entry of final orders or judgments by this court. As set out below, however, this is a core proceeding. Further, having reviewed the record and the pleadings and having considered the arguments of counsel, the court will grant judgment on the pleadings to the Debtors.

1. Procedural history

The Debtors filed their jointly administered Chapter 11 cases on March 27, 2002. They filed their Second Amended Joint Plan of Reorganization Dated August 7, 2003 ("the Plan"), and their Second Amended Disclosure Statement Dated August 7, 2003 ("the Disclosure Statement") which was approved by order entered on August 11, 2003. The Order Confirming the Plan ("the Confirmation Order") was entered on September 29, 2003.

The Plaintiff and other insurers of the Debtors ("the Insurers") objected to the Disclosure Statement and the Plan, specifically Article 9.9 of the Plan which provides:

The discharge and release of the Debtors as provided in this Plan shall not diminish or impair the enforceability of any Insurance Policies that may cover Claims against any Debtor or any other Person. The Debtors will continue to comply with their non-monetary duties and obligations under the Insurance Policies. The Insurers will continue to be responsible for Insurance Claims, including, without limitation, future claims, in accordance with the terms of the Insurance Policies and the requirements of state and other applicable law, notwithstanding the discharge and release of the Debtors' monetary obligations which may otherwise be required under the Insurance Policies. Any claim of the Insurers against the Debtors for retrospective premiums, self-insured retentions, deductible payments, or any other monetary obligations with respect to Insurance Policies issued prior to the Filing Date or with respect to coverage of Insurance Claims shall constitute Class 6A general unsecured claims if otherwise Allowed.

Plan Art. 9.9. The Insurers reserved their objections to the Plan by insisting that the Debtors include the following provision in the Disclosure Statement:

It is the Insurers' contention that to the extent that the Plan is not insurance neutral, the Plan, if confirmed, may cause the Insurance Policies to be breached and otherwise void any coverage available under such Insurance Policies. As the Insurers do not believe that the Plan, as drafted, is insurance neutral, the Insurers have reserved all of their rights and their remedies including, but not limited to, commencing a declaratory judgment action to decide the coverage issues in a court of competent jurisdiction — either in state or federal district court — as the Insurers contend that these coverage issues are non-core issues and not subject to this Court's jurisdiction.

Disclosure Statement at 74-75.

Each of the Insurers filed an objection to the Plan. The Plaintiff's specific objection was that the Debtors' treatment of the insurance policies in the Plan voided otherwise available insurance coverage. In its Objections of Century Indemnity Company to Confirmation of Debtors' Second Amended Joint Plan of Reorganization Dated August 7, 2003 ("Plaintiff's Objection") the Plaintiff alleged that the Plan was not feasible because its treatment of the insurance policies would void any otherwise available insurance coverage, and because the proposed releases and injunctions contained in the Plan would materially impair its contractual rights.

As set out above, the Plan was confirmed by order entered on September 29, 2003. The Plaintiff and the other Insurers filed an appeal from the Confirmation Order on October 7, 2003. The Plan became effective on November 26, 2003. On December 15, 2003, the Debtors filed their Motion to Dismiss the Appeal because substantial consummation of the Plan rendered the appeal moot. The Insurers filed a response. The District Court dismissed the appeal as moot in Century Indemn. Co., et al. v. Special Metals Corp., et al., No. 03-207 (E.D.Ky. March 9, 2004).

The Plaintiff filed this proceeding on September 28, 2003, the day before the entry of the Confirmation Order. The proceeding was stayed by agreement during the pendency of the appeal. Following dismissal of the appeal, the Plaintiff filed an Amended Complaint on May 18, 2004, and the Debtors filed an Amended Answer on June 2, 2004. The Debtors filed their Motion for Judgment on the Pleadings on July 2, 2004.

2. Standard for judgment on the pleadings

A motion for judgment on the pleadings is made pursuant to Rule 12(c) of the Federal Rules of Civil Procedure, made applicable herein by Rule 7012(b) of the Federal Rules of Bankruptcy Procedure, which allows a party to so move after the pleadings are closed. A motion for judgment on the pleadings is subject to the same standard as a Rule 12(b)(6) motion to dismiss. United States v. Wood, 925 F.2d 1580, 1581 (7th Cir.1991). The court is generally not to look beyond the pleadings, but may consider documents incorporated by reference into the pleadings, even if those documents are not attached to the pleadings. Id. at 1582.

Further,

[j]udgment on the pleadings will be granted only if the movant clearly establishes that no material issue of fact remains to be resolved and that he is entitled to judgment as a matter of law.... In making this determination, all well-plead factual allegations in the complaint must be taken as true and all inferences must be drawn in the light most favorable to the non-moving party ..., but unsupported or sweeping legal conclusions are not accepted[.] The issue is not whether a plaintiff will ultimately prevail but whether the claimant is entitled to offer evidence to support its claims.

Roberson v. Cityscape Corp., et al. (In re Roberson), 262 B.R. 312, 318 (Bankr.E.D.Pa.2001)(internal quotations and citations omitted).

As numerous judicial opinions make clear, a Rule 12(c) motion is designed to provide a means of disposing of cases when the material facts are not in dispute between the parties and a judgment on the merits can be achieved by focusing on the content of the competing pleadings, exhibits thereto, matters incorporated by reference in the pleadings, whatever is central or integral to the claim for relief or defense, and any facts of which the district court will take judicial notice.

5C Charles Alan Wright & Arthur R. Miller, Federal Practice and Procedure § 1367 (3d ed.2004).

3. Discussion

A. Res judicata

The Debtors contend that the relief requested by the Plaintiff in this proceeding has been previously determined by this court by its confirmation of the Plan, including Article 9.9 dealing with insurance coverage. The court's decision was upheld on appeal. In support of their contention the Debtors cite § 1141(a) of the Bankruptcy Code which provides in pertinent part that "the provisions of a confirmed plan bind the debtor ... and any creditor ... [of] the debtor, whether or not the claim or interest of such creditor ... is impaired under the plan and whether or not such creditor... has accepted the plan." 11 U.S.C. § 1141(a). The law in the Sixth Circuit is that "confirmation of a plan of reorganization by the bankruptcy court has the effect of a judgment by the district court and res judicata principles bar re-litigation of any issues raised or that could have been raised in the confirmation proceedings." Still v. Rossville Bank (In re Chattanooga Wholesale Antiques, Inc.), 930 F.2d 458, 463 (6th Cir.1991).

The Debtors point out that the Plan addressed the treatment of the Insurers, including the Plaintiff, that the Plaintiff objected to its treatment under the Plan, and that this court overruled the Plaintiff's objections and confirmed the Plan. On appeal, the District Court held that the success of the Plan would be affected if it granted the relief sought by the Insurers. See Century Indemn. Co., et al. v. Special Metals Corp., et al., No. 03-207, slip op. at 17. In dismissing the appeals, the District Court observed that the Insurers had the opportunity before the bankruptcy court to object to the Plan and "its specific provisions they did not like." Id. at 17-18. The District Court found that the Insurers' objections were without merit. Id. at 18.

The Plaintiff argues that the relief it seeks in this proceeding is not precluded by the Confirmation Order because the issues raised here are not the same as those raised in its Objections. It further maintains that these issues could not have been litigated in the context of the confirmation hearing. Finally, it argues that its Objections were never finally determined on the merits, and that it reserved this cause of action in its Objections, in the Disclosure Statement and at the Confirmation Hearing....