516 B.R. 282
Bankr. D. Del.2014Background
- Longview Power, LLC seeks insurance coverage implications under a title policy issued by First American for the Longview Power Project.
- The policy insures the Collateral Agent for the benefit of Longview lenders under the Longview Credit Agreement; the Debtors are not direct insureds.
- Mechanics’ liens by contractors (Kvaerner, Siemens, Foster Wheeler) assert senior claims to liens on the Power Plant, challenging lien priority.
- Debtors proposed an Amended Plan with an Assignment of Policy proceeds to satisfy senior liens and determine coverage, subject to a policy-coverage determination.
- First American filed actions in California to determine coverage; the bankruptcy court granted stay relief for arbitration and related proceedings were stayed.
- The adversary proceeding seeks a declaratory judgment on policy proceeds and coverage, with core/non-core status already determined.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Subject matter jurisdiction over coverage claim | Lineview asserts related-to jurisdiction exists and Is proper. | First American claims no related-to jurisdiction; proceeding is between non-debtors. | Court has related-to jurisdiction over the coverage claim. |
| Standing to pursue coverage claim | Debtors are real parties in interest via assignment and plan, with rights to proceeds. | Debtors lack policy rights; only proceeds assigned, not policy. | Longview has standing due to partial assignment of policy proceeds. |
| Ripeness of declaratory judgment action | Declaratory relief is ripe to define rights before loss and plan confirmation. | Ripeness requires a loss and plan-specific determinations; not ripe yet. | Action is ripe; declaratory relief appropriate to determine policy coverage. |
| Effect of 28 U.S.C. § 1359 | §1359 does not apply to bankruptcy; no collusion shown. | Assignment may constitute collusive manufacturing of jurisdiction; §1359 governs. | §1359 does not defeat jurisdiction; insufficient evidence of collusion at this stage. |
| Abstention | California Action not properly commenced; abstention unwarranted. | California Action can timely adjudicate; abstention appropriate. | Abstention denied; California Action not properly commenced and cannot be timely adjudicated. |
Key Cases Cited
- Pacor, Inc. v. Higgins, 743 F.2d 984 (3d Cir. 1984) (related-to jurisdiction under the Pacor test)
- In re Combustion Engineering, 391 F.3d 190 (3d Cir. 2004) (limits on related-to jurisdiction for non-debtor protections)
- In re W.R. Grace & Co., 591 F.3d 164 (3d Cir. 2009) (courts may define limits on broad Pacor jurisdiction)
- In re Trans World Airlines, Inc., 278 B.R. 42 (Bankr. D. Del. 2002) (abstention analysis and related considerations)
- In re Maislin Indus., 66 B.R. 614 (E.D. Mich. 1986) (jurisdiction principles in bankruptcy proceedings)