Lancer Insurance Co. v. Guru Global Logistic, LLC (In re Guru Global Logistic, LLC)
557 B.R. 842
Bankr. W.D. Pa.2016Background
- Debtor Guru Global Logistic, LLC lost a $5.465M jury verdict (now > $6M with interest) to the McConnells; Guru appealed to the Pennsylvania Superior Court before filing bankruptcy on Jan 28, 2015, which stayed the appeal.
- Lancer Insurance (insurer) moved to compel the chapter 7 Trustee either to abandon the pre-petition appeal to Guru or to prosecute it; Trustee opposed, having earlier moved to dismiss the appeal with prejudice and later agreed by stipulation to stay the appeal "until further application by the Trustee."
- Trustee believes preserving control of the appeal and keeping it stayed protects the estate’s principal asset: a bad-faith claim against Lancer; she fears an insurer-driven appeal/trial outcome could impair that claim.
- Lancer separately seeks relief from the bankruptcy stay to pursue its pre-petition declaratory-judgment action in federal court (the Lancer Action); the Court previously denied a similar stay motion without prejudice and Lancer relies on the remand of the Trustee Action to state court as a changed circumstance.
- The Court held oral argument, allowed parties to request an evidentiary hearing (none did), and denied both Lancer motions: (1) to force abandonment or prosecution of the appeal, and (2) for relief from the automatic stay to pursue the Lancer Action.
Issues
| Issue | Lancer's Argument | Trustee's Argument | Held |
|---|---|---|---|
| Whether the court should order Trustee to abandon the pre-petition appeal under 11 U.S.C. § 554(b)/§ 551(b) | Appeal is burdensome or of inconsequential value to estate; abandonment would allow progress and eliminate expense | Appeal is an intangible, unstressing asset; Trustee reasonably believes keeping the appeal/stay protects the estate's bad-faith claim | Denied — Lancer failed to prove burden or inconsequential value; Court defers to Trustee’s business judgment and the prior stipulation giving Trustee control over the stay |
| Whether the court should order Trustee to prosecute the appeal | Proceeding could produce JNOV or reversal benefitting the estate by eliminating McConnells’ claim | Trustee reasonably chose to keep appeal stayed to protect bad-faith claim and weigh risks; speculative benefits do not overcome her judgment | Denied — Court will not substitute its judgment; no unreasonable decision shown and stipulation bars compelling prosecution |
| Whether to grant relief from automatic stay so Lancer can pursue its federal declaratory action (Lancer Action) | Remand of the Trustee Action to state court deprives Lancer of likely jury trial there; loss of jury right and first-filed status favor lifting stay | Many procedural hurdles make a jury trial unlikely; Trustee Action in state court is an adequate forum; granting relief would be inefficient and prejudicial to estate administration | Denied — loss of jury is only slight weight; probability of obtaining jury is remote; Trustee Action is adequate forum; balance of harms favors continuing stay |
| Relevance of the “first-filed rule” to compel litigation in Lancer Action | Lancer Action was filed earlier in federal court, so it should be preferred forum | Trustee Action (now in state court) and prudential considerations make federal-first-filed rule inapplicable | Denied/applicable: first-filed doctrine inapplicable across federal/state lines; state forum prudentially appropriate |
Key Cases Cited
- In re Winsted Memorial Hospital, 249 B.R. 588 (Bankr. D. Conn. 2000) (burden of proof to compel trustee-initiated abandonment)
- In re Slack, 290 B.R. 282 (D.N.J. 2003) (defer to trustee business judgment where made in good faith and on reasonable basis)
- In re Chan, 355 B.R. 494 (Bankr. E.D. Pa. 2006) (loss of jury trial is a relevant but nonconclusive factor in stay-relief analysis)
- Langenkamp v. Culp, 498 U.S. 42 (1990) (filing a proof of claim may waive Seventh Amendment jury-right in matters integral to claim allowance)
- E.E.O.C. v. Univ. of Pennsylvania, 850 F.2d 969 (3d Cir. 1988) (articulation of first-filed doctrine in federal concurrent-jurisdiction context)