11 Debtor. 24
D. Del.2025Background
- 24 Hour Fitness Worldwide, Inc. and affiliates filed Chapter 11 bankruptcy following COVID-19-related business interruptions.
- Plaintiff (the reorganized debtor) brought an adversary proceeding against various insurers, seeking declaratory relief that its COVID-19 losses were covered under property and pollution liability insurance policies.
- Most claims against other insurers were settled, leaving the claim against Allied World National Assurance Company (the Pollution Policy) as the sole remaining issue.
- The Bankruptcy Court found the insurance case is a non-core proceeding, denied defendant's summary judgment, found material factual disputes, and set the claim as trial-ready.
- Defendant sought withdrawal of the reference to the District Court (to obtain a jury trial) and leave to appeal the interlocutory summary judgment denial; Plaintiff opposed withdrawal until appeal resolution and sought to combine liability and damages phases.
- The District Court denied interlocutory appeal but granted withdrawal of the reference, allowing the jury trial to proceed in District Court.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Should interlocutory appeal of summary judgment denial be granted? | No controlling issue of law; factual disputes about closure reasons. | Court ignored factual admissions proving closures were not solely due to COVID; plain meaning of policy terms not applied. | No: issues are factual, not legal; appeal not warranted. |
| Should reference be withdrawn to District Court for trial? | Not trial-ready while interlocutory appeal is pending; should consolidate phases before jury trial. | Ready for trial; right to jury trial on remaining issue in District Court. | Yes: Denied modification, reference withdrawn for jury trial. |
| Was the Bankruptcy Court correct in finding disputed facts for trial? | Evidence supports Plaintiff's version; material facts are unresolved. | Plaintiff admitted closure was due to government orders, so no dispute. | Factual dispute exists; must be decided at trial. |
| Is bifurcated schedule (liability-then-damages) still appropriate? | No, more efficient to consolidate; settlement changes case posture. | Parties agreed to bifurcation; reopening discovery would prejudice defendant. | Denied modification; parties to proceed on agreed schedule. |
Key Cases Cited
- Johnson v. Jones, 515 U.S. 304 (Interlocutory appeals are the exception, not the rule)
- Halper v. Halper, 164 F.3d 830 (Defines core vs. non-core proceedings in bankruptcy)
- Katz v. Carte Blanche Corp., 496 F.2d 747 (Standard for granting interlocutory appeal)
- In re Pruitt, 910 F.2d 1160 (Factors for withdrawal of reference in bankruptcy)