515 B.R. 107
Bankr. D. Del.2014Background
- Debtors Longview Power LLC and Mepco operate a coal-fired power plant project with about $1.2 billion in debt under the Longview Credit Agreement, with Longview Lenders holding first-priority liens.
- First American issued the Title Insurance Policy to the Collateral Agent for the benefit of Longview Lenders, covering $825 million, with the Debtors not a party to the policy.
- Contractors asserted substantial mechanics’ liens on the Power Plant, claiming senior status to liens securing the Longview Credit Agreement; the Lenders dispute this priority.
- The Debtors proposed a plan of reorganization (Original Plan) involving debt-for-equity recovery and estimated mechanics’ liens at $0.00; later amended (Amended Plan) to structure proceeds from the Title Insurance Policy to cover remaining lien claims.
- A state court action by First American to determine coverage under the Title Insurance Policy arose in California; the bankruptcy court stayed that action to the extent related to the case, and First American later moved to determine core/non-core status and related relief.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the declaratory judgment on proceeds being estate property is core. | Plaintiffs contend the case is core as it affects plan feasibility and asset assignment. | First American argues the dispute concerns insurer rights and is non-core. | Proceeds-ownership issue is core. |
| Whether the declaratory judgment on coverage exists under the Title Insurance Policy is core or non-core. | Plaintiffs argue coverage determination is essential to plan feasibility and estate/assets. | First American contends coverage is a state-law insurer dispute, non-core. | Availability of coverage is non-core. |
| What framework governs core vs non-core status for this dispute under 28 U.S.C. § 157 and Halper? | Plaintiffs urge broad core‑status based on asset-centric plan feasibility. | First American urges limited core scope; many insurance disputes are non-core. | Proceeds issue core; coverage issue non-core; case aligns with Halper framework. |
Key Cases Cited
- Halper v. Halper, 164 F.3d 830 (3d Cir. 1999) (defines core vs non-core under § 157)
- In re Exide Technologies, 544 F.3d 196 (3d Cir. 2008) (core vs non-core with mixed claims)
- Stone & Webster, 367 B.R. 523 (Bankr.D.Del. 2007) (insurance disputes post-plea not automatically core)
- Reliance Holdings, 273 B.R. 374 (Bankr.E.D. Pa. 2002) (creditable to treat insurance assets under § 541)
- American Capital Equipment, 325 B.R. 372 (W.D. Pa. 2005) (coverage disputes may be core where plan feasibility hinges)
- Celotex Corp., 152 B.R. 667 (Bankr.M.D. Fla. 1993) (estate interests and coverage interplay with plan context)
- PRS Insurance Group, Inc., 445 B.R. 402 (Bankr. D. Del. 2011) (insurer disputes can be non-core when arising pre/post bankruptcy)
- In re Marcus Hook, 943 F.2d 261 (3d Cir. 1991) (illustrative framework for core/non-core analysis (cited concept))