547 B.R. 588
Bankr. D. Del.2016Background
- Aetna issued retro-premium policies to Stone & Webster Engineering Corp. for 1979–1994; Travelers acquired Aetna’s P&C operations in 1996.
- S & W paid annual premium adjustments; 1996–97 and 1998 adjustments were disputed, resolved, and memorialized by a Promissory Note and Installment Payments.
- Travelers billed for the 1996–97 and 1998 adjustments; S & W signed the Promissory Note and made two Installment Payments before bankruptcy in 2000.
- S & W and Travelers’ bankruptcy estate litigated the 2001 and 2012 Claims, with the Trustee objecting to the amount and timing.
- The Plan transferred assets to SWE & C Liquidating Trust; Travelers’ 2012 Claim included pre-petition amount, 1999–2012 loss-based premium, and IBNR estimates.
- Court held evidentiary hearings; issues include whether transfers are avoidable under 502(d), 547, and related defenses.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Promissory Note/Installment Payments are avoidable transfers | Trustee: transfers are avoidable under 548/547 and disallowable under 502(d). | Travelers: transfers are for antecedent debt and ordinary course; not avoidable. | Transfers not avoidable; 502(d) disallowance not warranted. |
| Whether ordinary-course defense defeats 547(c)(2) for Installment Payments | Trustee argues payments were not ordinary course due to promissory-note structure. | Travelers proves debt incurred ordinarily, consistent transfers, and ordinary business terms. | Promissory Note/Installment Payments satisfied 547(c)(2) defenses; not avoidable. |
| Whether legality/illegality of Retro Agreements bars recovery | Retro Agreements illegal for lack of regulator-approved forms; seek illegality defense. | Estoppel/waiver and reliance on benefits; illegality absent; forms misfiled not fatal. | Illegality defense estopped; Retro Agreements enforceable. |
| Whether lack of endorsement renders Retro Agreements unenforceable | Endorsement failures render terms unenforceable per policy language. | Oral modification and performance evidence show implied modification. | Failure to endorse does not render enforceable retro terms unenforceable. |
| Whether timeliness and amendments to the 2012 Claim are proper | 2012 Claim timely as an amendment to a timely original claim; retro-premium amendments allowed. | Delay to amend is justified by proceedings; no new claim is asserted post-bar date. | 2012 Claim timely as an amendment; not barred. |
Key Cases Cited
- In re KB Toys Inc., 736 F.3d 247 (3d Cir.2013) (deferral of disallowance pending return of avoidable transfers)
- In re Asia Global Crossing, Ltd., 344 B.R. 247 (S.D.N.Y.2006) (defense of 502(d) and avoidance transfers)
- In re Molded Acoustical Prods., Inc., 18 F.3d 217 (3d Cir.1994) (ordinary course/industry terms framework under 547(c)(2))
- Deerfield Plastics Co., Inc., 404 Mass. 484 (Mass. 1989) (negligent claim handling burden-shifting framework)
- In re White Motor Corp., 59 B.R. 286 (Bankr.N.D.Ohio 1986) (retroactive claim amendments necessary due to actuarial estimates)
- Reliance Ins. Co. v. Woodward-Clyde Consultants, 243 F.App’x 674 (3d Cir.2007) (estoppel against illegality defense after benefit receipt)
- In re CVEO Corp., 320 B.R. 258 (Bankr.D.Del.2005) (fraudulent transfer standards similar between Code and MAss.)
- In re Opus East, LLC, 528 B.R. 30 (Bankr.D.Del.2015) (value includes satisfaction of antecedent debt)
- In re New Valley Corp., 181 F.3d 517 (3d Cir.1999) (unclean hands; equitable discretion)