Intertek United States, Inc. v. Caribbean Petroleum Corp (In re Caribbean Petroleum Corp.), 13-4415
| Decision Date | 18 September 2014 |
| Docket Number | No. 13-4415,13-4415 |
| Parties | IN RE: CARIBBEAN PETROLEUM CORP., ET AL., Debtors INTERTEK USA, INC., Appellant v. CARIBBEAN PETROLEUM CORP; FTI CONSULTING, INC., as Liquidation Trustee of Caribbean Petroleum Liquidation Trust |
| Court | U.S. Court of Appeals — Third Circuit |
NOT PRECEDENTIAL
On Appeal from the United States District Court for the District of Delaware
(D.C. Civil Action Nos. 13-cv-00466/13-cv-00717/13-cv-00732/13-cv-00733)
Submitted under Third Circuit LAR 34.1(a)
September 8, 2014
Before: RENDELL, GREENAWAY, JR. and KRAUSE, Circuit Judges.
The central issue in this appeal by Intertek USA, Inc. ("Intertek") is whether the plain language of two orders of the Bankruptcy Court gives priority to tort claimants above other general unsecured creditors in the distribution of certain insurance proceeds in the bankruptcy of Caribbean Petroleum Corporation. Intertek contends that, because Puerto Rican law gives tort claimants the right to file a direct action against the insurer, and because one of the Bankruptcy Court's orders indicated that their claims would "survive" and be "channeled" to the proceeds of the policies, the tort claimants are entitled to be paid first from those proceeds, before other unsecured creditors. Because this argument comes too late, and because we agree with the District Court that the orders in question unambiguously provide for pro rata distribution to all holders of general unsecured claims, including tort claims, we affirm.
Because we write primarily for the parties, we set forth only those facts and procedural history relevant to our conclusion.
Caribbean Petroleum Corporation, Caribbean Petroleum Refining, L.P., and Gulf Petroleum Refining (Puerto Rico) Corporation (collectively "the Debtors") operated a petroleum refinery business based in Bayamón, Puerto Rico. In October 2009, a massive explosion occurred at the Bayamón facility. Class action complaints were filed againstthe Debtors soon thereafter, with approximately 4,000 claimants seeking up to $500 million in damages. Intertek, as an alleged joint tortfeasor, was named as a co-defendant with the Debtors in some of those tort actions and brought claims for contribution and indemnity against the Debtors. Because Puerto Rico provides tort victims a statutory right of direct action against the insured's carrier, Chartis Insurance Company ("Chartis"), which had issued both general liability and umbrella liability insurance policies to the Debtors (the "Chartis Policies"), was named as a co-defendant in certain actions.
The explosion and resultant lawsuits forced the Debtors to file for relief under Chapter 11 of the Bankruptcy Code, 11 U.S.C. § 1101 et seq. In those proceedings, the Debtors, along with the Unsecured Creditors' Committee and Banco Popular de Puerto Rico ("BPPR"), entered into a settlement (the "BPPR Settlement") that contemplated a plan-based allocation of BPPR's collateral to fund distributions to the holders of administrative expense claims, priority claims, and general unsecured claims. As part of that settlement, the Debtors also filed a proposed liquidation plan that was eventually confirmed as amended (the "Plan"), and BPPR agreed to allocate, pursuant to the Plan and Plan Supplement, the proceeds of any settlements concerning the Debtors' Liability Insurance Policies (defined to include the Chartis Policies) to fund distributions to the holders of general unsecured claims, including tort claims.
Pursuant to the Plan, Caribbean Petroleum Liquidation Trust was established, consisting of the Debtors' assets, and FTI Consulting, Inc. was appointed as liquidation trustee ("the Trustee").
In the face of these mass tort claims, Chartis disputed the scope and extent of its obligations under the Chartis Policies. Thus, while negotiating the BPPR Settlement and as contemplated by the Plan, the Debtors also negotiated with Chartis a resolution of those disputes. Those efforts eventually led to a settlement in which Chartis agreed to buy back the Chartis Policies from the Debtors for $24 million (the "Chartis Proceeds"), which constituted all or nearly all of the remaining coverage under the Chartis Policies. The Debtors then filed a motion (the "Buyback Motion") seeking the Bankruptcy Court's approval for the Debtors to enter into that settlement.
According to the Buyback Motion, the proposed settlement would resolve the coverage disputes between Chartis and the Debtors, would "guarantee[] the payment of approximately $24 million to the Debtors' estates," J.A. 341, would "fund distributions to the holders of allowed general unsecured claims, including Tort Claims,"1 subject to theterms of the Plan, J.A. 332, and would permanently bar both pending and future claims under the Chartis Policies against Chartis itself. To accomplish these objectives, the order entered by the Bankruptcy Court that granted the Buyback Motion (the "Buyback Order") provided in paragraph 7 that "[a]ll claims and interests that were, could have been or may in the future be asserted under or against the Chartis Policies shall survive, and be channeled solely and exclusively to the proceeds of such sale as may be held by the Debtors or any Successor, which shall be distributed solely in accordance with the Plan or further order of the [Bankruptcy] Court." J.A. 1217.
On May 9, 2011, the same date it entered the Buyback Order, the Bankruptcy Court also entered an order confirming the Plan. Among other things, the Plan provided that holders of General Unsecured Claims, defined in a way to include Tort Claims, would receive a pro rata share of the Chartis Proceeds "to the extent that proceeds of the Liability Insurance Policies are received by the Debtors or the Liquidation Trust, as applicable, pursuant to a settlement with any of the insurers under any of the Liability Insurance Policies, and subject in all respects to Section 6.2(c)(iv) of the Plan with respect to the Chartis Liability Proceeds, the proceeds of the Liability Insurance Policiesreceived by the Debtors and the Liquidation Trustee, as applicable, pursuant to such settlement."2 J.A. 968-69.
Intertek was served with notice of the Buyback Motion and the Buyback Order, and with notice of the Plan and disclosure statement associated with the Plan, but filed no objections, did not seek to be heard at the relevant hearings and did not appeal or contest the orders themselves. Accordingly, the Buyback Order became final on May 23, 2011, and the Plan took effect on June 3, 2011.
In October 2012, Intertek filed in the Bankruptcy Court the motion and adversary complaint that are the subject of this appeal. Those filings purported not to attack the Buyback Order and Plan Confirmation Order, which, of course, had become final a year and a half earlier, but rather argued that those documents by their terms provided tort claimants with a priority interest over other unsecured general creditors in the Chartis Proceeds and therefore sought to "enforce" that interpretation of the Buyback Order and Plan.
The Bankruptcy Court denied the motion, finding that the Plan provided for the Chartis Proceeds to be distributed on a pro rata basis to all general unsecured creditors, and dismissed the adversary complaint on the stipulation of the parties. On appeal, theDistrict Court affirmed those orders, rejecting certain newly-raised arguments as waived and concluding that Intertek's arguments constituted a time-barred collateral attack on the Plan itself, that the terms of the Buyback Order and Plan were unambiguous as to the rights of tort claimants, and that, even if there were ambiguity, the Bankruptcy Court's interpretation of those orders was not unreasonable. Intertek filed a timely notice of appeal.3
The District Court had jurisdiction pursuant to 28 U.S.C. § 158(a)(1). We have jurisdiction under 28 U.S.C. § 158(d) and 28 U.S.C. § 1291.
We review de novo whether a Bankruptcy Court's order is ambiguous. In re Shenango Grp. Inc., 501 F.3d 338, 346 (3d Cir. 2007). Our review of an appeal from an order granting a motion to dismiss is plenary. In re Pers. & Bus. Ins. Agency, 334 F.3d 239, 242 (3d Cir. 2003).
We start from the unremarkable premise that "where the plain terms of a court order unambiguously apply, . . . they are entitled to their effect." Travelers Indem. Co. v. Bailey, 557 U.S. 137, 150 (2009); accord Shenango, 591 F.3d at 346. From there,however, we must grapple with the remarkably different meaning ascribed by Intertek to the very same language found to be plain and unambiguous by both the District Court and Bankruptcy Court.
Intertek's argument appears to be that the language of the Buyback Order and Plan must be read against the backdrop of Puerto Rico's direct action statute, which gave tort victims, at the moment of the explosion, the right to bring claims directly against Chartis.4 Given that right, according to Intertek, tort victims had a vested interest in Chartis' payment of loss even before the bankruptcy, and the statement in paragraph 7 of the Buyback Order—that claims that could have brought against the Chartis Policies "shall survive, and be channeled solely and exclusively to the proceeds of such sale as may be held by the Debtors or any Successor, which shall be distributed solely in accordance with the Plan or further order of the Court," J.A. 1217,—unambiguously endows tort claimants with an exclusive right to distribution of the Chartis Proceeds. Intertek posits that this language, consistent with the intent of the direct action statute, removes those proceeds from the bankruptcy estate, places them into a separate fund, and renders them...
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