USA Gymnastics v. Ace Am. Ins. Co. (In re USA Gymnastics)
| Citation | 624 B.R. 443 |
| Decision Date | 19 January 2021 |
| Docket Number | Case No. 18-9108-RLM-11,Adv. Pro. No. 19-50012 in 18-09108-RLM-11 |
| Parties | IN RE: USA GYMNASTICS, Debtor. USA Gymnastics, Plaintiff, v. ACE American Insurance Company f/k/a CIGNA Insurance Company, Great American Assurance Company, Liberty Insurance Underwriters Inc., National Casualty Company, TIG Insurance Company, Virginia Surety Company, Inc. f/k/a Combined Specialty Insurance Company, American Home Assurance Company, and Doe Insurers, Defendants. |
| Court | United States Bankruptcy Courts. Seventh Circuit. U.S. Bankruptcy Court — Southern District of Indiana |
Tonya J. Bond, Gregory Michael Gotwald, Christopher E. Kozak, George Plews, Plews Shadley Racher Braun LLP, Indianapolis, IN, Melissa M. Root, Catherine L. Steege, Jenner & Block LLP, Chicago, IL, for Plaintiff.
Nancy D. Adams, Mathilda S. McGee-Tubb, Laura B. Stephens, Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C., Boston, MA, George Calhoun, IV, Ifrah Law, Katherine Hance, Abigail W. Williams, Shipman & Goodwin LLP, Joshua D. Weinberg, Washington, DC, Jillian Dennehy, Heather Elizabeth Simpson, Kennedys CMK LLP, Basking Ridge, NJ, Sean T. Devenney, Scott Patrick Fisher, Drewry Simmons Vornehm, LLP, Carmel, IN, Karen M. Dixon, Michael M. Marick, Skarzynski Marick & Black LLP, Susan N. Gummow, Foran Glennon Palandech Ponzi & Rudloff PC, Kevin P. Kamraczewski, Law Offices of Kevin P. Kamraczewski, Robert Millner, Dentons US LLP, Chicago, IL, Eric D. Freed, Cozen O'Connor, Matthew A. Hamermesh, Bonnie M. Hoffman, Ronald Paltin Schiller, Hangley Aronchick Segal Pudlin & Schiller, Philadelphia, PA, Ronald David Kent, Susan Walker, Dentons US LLP, Los Angeles, CA, Carl N. Kunz, III, Morris James LLP, Wilmington, DE, Harley K. Means, Stephen Jay Peters, Kroger Gardis & Regas, LLP, James P. Moloy, Bose McKinney & Evans LLP, Ginny L. Peterson, Casey Ray Stafford, Kightlinger & Gray, LLP, Indianapolis, IN, Hans Pijls, Dinsmore & Shohl, LLP, Ann Arbor, MI, Jonathan Toren, Cozen O'Connor, Seattle, WA, for Defendants.
PROPOSED FINDINGS OF FACT AND CONCLUSIONS OF LAW ON USAG'S MOTION FOR PARTIAL SUMMARY JUDGMENT ON BANKRUTPCY COSTS
Pursuant to 28 U.S.C. § 157(c)(1), the Court now tenders its proposed findings and conclusions for de novo review by the district court. Wellness Int'l Network, Ltd. v. Sharif , 575 U.S. 665, 135 S. Ct. 1932, 1947, 191 L.Ed.2d 911 (2015).
This matter came before the Court on USAG's motion for partial summary judgment ("the Motion") against its five General Liability ("GL") insurers and one of its Directors & Officers ("D & O") insurers (collectively, the "Insurers").2 The Motion seeks an order compelling the Insurers to pay, as part of their duties to defend, the costs USAG has incurred in this bankruptcy case.
The Court provided the Insurers with an opportunity to take discovery, and the parties completed briefing. The Court heard oral argument on November 18, 2020. The Motion is ripe for decision. For the reasons stated below, the Court recommends that the district court DENY the Motion.
USA Gymnastics ("USAG") is the national governing body ("NGB") for gymnastics in the United States. As such, USAG is licensed to conduct certain events, including Olympic trials, and to use certain intellectual property, including the Olympic logo, in conjunction with those events. Beginning in 2017, hundreds of former and current athletes sued USAG for sexual abuse and acts of sexual misconduct perpetrated by Larry Nassar, a USAG volunteer. USAG provided notice to the GL Insurers, who agreed to defend under a reservation of rights. The GL Insurers agreed to USAG's choice of the law firm of Miller, Johnson, Snell & Cummiskey, PLC ("Miller Johnson") to defend the sexual abuse lawsuits. Miller Johnson's role was later expanded to that of coordinating USAG's defense on a national basis as the number of sexual abuse lawsuits grew. The GL Insurers have paid the fees of Miller Johnson incurred in defending USAG, as well as the fees of other defense counsel retained by USAG.
The United States Olympic and Paralympic Committee ("USOPC") is the federal statutorily created body that certifies NGB's for Olympic sports. The negative fallout from the sexual abuse lawsuits put USAG's NGB status in jeopardy. USAG replaced members of its Board of Directors and modified other internal operations in an attempt to restore the public's and USOPC's trust in USAG. USAG participated in four mediation sessions which did not result in settlement of the sexual abuse lawsuits. The USOPC filed a decertification complaint on November 5, 2018. USAG filed its chapter 11 case on December 5, 2018.
The prosecutions of the sexual abuse lawsuits have been stayed. A Tort Claimants' Committee comprised of the sexual abuse survivors was formed and is an active participant in this chapter 11. At USAG's request, the Court appointed mediators and a Future Claimants' Representative. After a stalemate was declared in the first extensive round of mediations, the court appointed another mediator and mediation continues. USAG also obtained a third party litigation stay where the survivors agreed to stay their lawsuits against USOPC and others. USAG moved the Court to establish a claims bar date and devised a comprehensive, detailed proof of claim form tailored to obtain information unique to sexual abuse claims. It has objected to a claim on the basis that it was procedurally improperly filed as a class claim and has objected to certain late-filed claims. USAG has filed its plan of reorganization which offers the sexual abuse survivors a choice between a "litigation option" and a "settlement option". USAG sought, and obtained, the input of the both the Tort Claimants Committee and the Insurers on several of these matters. The majority of the work in this case, however, has involved insurance coverage issues.
USAG has incurred substantial costs in this bankruptcy and has asked the GL Insurers to pay for those costs that have been incurred as well as bankruptcy costs going forward as part of their defense obligation under the policies. The GL Insurers have declined. Thus, USAG seeks a declaration that USAG's costs in maintaining this bankruptcy are covered defense costs under the GL Insurers' policies in a precise dollar amount, including fees incurred by USAG's bankruptcy counsel, the law firm of Jenner & Block ("Jenner"), as well as counsel fees for the Future Claimants' Representative and the Tort Claimants Committee.
A party is entitled to summary judgment where there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. The moving party bears the burden of proving the absence of a genuine issue of material fact and the non-moving party must affirmatively demonstrate the existence of a genuine issue of material fact requiring trial. Fed.R.Civ.P. (56(a); Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986) ; In Re Clark, 550 B.R. 429, 431 (Bankr. N.D. Ind. 2016) ). In evaluating summary judgment motions, courts must view the facts and draw reasonable inferences in the light most favorable to the non-moving party. Scott v. Harris, 550 U.S. 372, 378, 127 S.Ct. 1769, 167 L.Ed.2d 686 (2007) ; Perdomo v. Browner , 67 F.3d 140, 144 (7th Cir. 1995) (). Drawing all reasonable factual inferences in favor of the Insurers, the Court must determine whether they have presented "evidence of a genuine factual dispute" warranting a trial. Hedberg v. Ind. Bell Tel. Co. , 47 F.3d 928, 931 (7th Cir. 1995). The factual dispute must be material, one that "might affect the outcome of the suit under the governing law." Freese v. Honda Mfg. of Ind. , 1:18-cv-4016-JMS-MPB, 2020 WL 3473450 at *1 (S.D. Ind., June 25, 2020) (citing Hampton v. Ford Motor Co. , 561 F.3d 709, 713 (7th Cir. 2009) ). Factual disputes that are irrelevant to the legal question at issue will not be considered. Anderson v. Liberty Lobby, Inc. , 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). "Contract interpretation is a subject particularly suited to disposition by summary judgment" because the construction of a written contract is a question of law. Grun v. Pneumo Abex Corp. , 163 F.3d 411, 419-20 (7th Cir. 1998) ; Celadon Trucking Services, Inc. v. Wilmoth , 70 N.E.3d 833, 842 (Ind. Ct. App. 2017) ; Von Hor v. Doe , 867 N.E.2d 276, 278 (Ind. Ct. App. 2007).
The parties agree that Indiana substantive law governs the interpretation of the GL Policies for purposes of this Motion. USAG bears the burden to prove that the bankruptcy expenses it seeks to recover by this Motion fall within the scope of the GL Policies' insuring agreements. PSI Energy, Inc. v. Home Ins. Co. , 801 N.E.2d 705, 726-27 (Ind. Ct. App. 2004). Accordingly, USAG must show that all of the costs that it seeks constitute covered "defense costs" within the terms of the GL Policies.
As a federal court exercising diversity jurisdiction, this Court is required to follow the law as it is articulated by the Indiana Supreme Court. See Lexington Ins. Co. v. Rugg & Knopp, Inc. , 165 F.3d 1087, 1090 (7th Cir. 1999). If that Court has not spoken to the issue, the Court must predict how the Indiana Supreme Court would decide the question. Id. "[I]n the absence of prevailing authority from the state's highest court, federal courts ought to give great weight to the holdings of the state's intermediate appellate courts." Allstate Ins. Co. v. Menards, Inc. , 285 F.3d 630, 637 (7th Cir. 2002). Federal courts "ought to deviate from those holdings only when there are persuasive indications that the highest court of the state would decide the case differently." Id.
Under Indiana law, "[a]n insurer's duty to...
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