445 B.R. 402
Bankr. D. Del.2011Background
- PRS Insurance Group and certain subsidiaries filed Chapter 11 on Jan 19, 2001; Sean C. Logan as Trustee for the case and related offshore affiliates including EGIC.
- On Mar 2, 2007, the Joint Debtors' Plan of Liquidation was confirmed (effective Aug 24, 2007).
- On Mar 16, 2010, the Trustee (on EGIC’s behalf) filed suit in the Northern District of Ohio against Westchester Fire Insurance Co. and ACE INA for breach of two reinsurance agreements and bad faith refusal to pay claims.
- The action was transferred to the District of Delaware on Oct 28, 2010.
- On Dec 12, 2010, the Trustee moved to refer the action to this Bankruptcy Court to determine if it is a core proceeding; the referral sought core-status determination only.
- The District Court directed this Court to determine whether the adversary constitutes a core proceeding under the Bankruptcy Code, and the Court held it is not core.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the adversary is a core proceeding under 28 U.S.C. § 157(b)(2)(E). | Plaintiff contends it is core as an order to turn over estate property. | Defendants argue it is not core; it involves state-law contract and insurance disputes. | Not core. |
| Whether the action arises under, arises in, or is related to the bankruptcy case under § 157. | |||
| Plaintiff argues it falls under core categories. | Defendants contend it arises under or in non-core contexts; related-to is unlikely. | Not core; arises under state law. | |
| Whether the action has a close nexus to the confirmed plan such that related-to jurisdiction applies. | The outcome could affect the liquidating trust. | Post-confirmation limits on 'related to' jurisdiction apply; nexus insufficient. | No sufficient nexus; not related-to. |
| Does the potential impact on the liquidating trust alter the core vs non-core determination? | Impact on estate size may influence core status. | Post-confirmation scope limits core/related-to reach. | No; impact on plan execution is not determinative of core status. |
Key Cases Cited
- In re Combustion Eng’g Inc., 391 F.3d 190 (3d Cir. 2004) (core/related-to framework for bankruptcy proceedings)
- In re Marcus Hook Dev. Park, Inc., 943 F.2d 261 (3d Cir. 1991) (defines 'arising under' and related concepts in bankruptcy context)
- In re Wolverine Radio Co., Inc., 930 F.2d 1132 (6th Cir. 1991) (explains distinctions among core, arising under, arising in)
- Pacor, Inc. v. Higgins, 743 F.2d 984 (3d Cir. 1984) (test for 'related to' jurisdiction)
- Resorts Int’l, Inc., 372 F.3d 154 (3d Cir. 2004) (limits on 'related to' jurisdiction post-confirmation)
- In re United States Brass Corp., 110 F.3d 1261 (7th Cir. 1997) (insurer disputes as non-core in many contexts)
- In re G-I Holdings, Inc., 278 B.R. 376 (Bankr. D.N.J. 2002) (insurance coverage disputes generally non-core)