296 F. Supp. 3d 662
S.D. Ill.2017Background
- MF Global purchased E&O insurance including a Bermuda arbitration clause; MF Global later filed bankruptcy after a 2011 collapse.
- MF Global (as Plan Administrator) sued Allied World in bankruptcy court seeking policy coverage; Allied World refused payment and moved to compel arbitration in Bermuda per the policy.
- The confirmed Chapter 11 plan preserved the bankruptcy court’s post-confirmation jurisdiction "to the full extent legally permissible" to adjudicate future disputes.
- The bankruptcy court compelled arbitration and stayed the adversary proceeding, rejecting MF Global’s argument that the plan’s reservation superseded the arbitration clause absent explicit language.
- MF Global sought leave to appeal the interlocutory arbitration order to the district court under 28 U.S.C. § 158(a); it also sought a stay of arbitration pending appeal.
- The district court denied leave to appeal (and denied the stay as moot), reasoning § 16(b) of the FAA did not bar the appeal but that interlocutory review was not warranted under § 1292(b) factors because other factbound defenses could render an interlocutory ruling pointless.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether FAA §16(b) bars an interlocutory appeal from a bankruptcy court to a district court | §16(b) shouldn’t apply to bankruptcy-court-to-district-court appeals because referrals leave Article III jurisdiction with the district court | §16(b) bars appeals from interlocutory orders compelling arbitration regardless of whether appeal is under §158(a) | Court: §16(b) does not bar this bankruptcy-to-district appeal because referrals do not divest parties of Article III review rights |
| Whether the plan’s post-confirmation jurisdiction reservation supersedes prepetition arbitration clause absent explicit modification | Plan reservation of jurisdiction supersedes arbitration clause and binds defendants after confirmation | Arbitration clause survives; plan did not explicitly abrogate arbitration rights | Court: The question is a controlling legal issue and courts are divided, but interlocutory appeal on this alone is not authorized here (denied on procedural grounds) |
| Whether interlocutory review is warranted under §1292(b) factors | Immediate review would resolve a pure legal question and provide guidance to similarly situated parties | Even if the legal question is controlling, multiple independent, factbound defenses remain that could make interlocutory review wasted effort | Court: Exceptional circumstances not shown; leave to appeal denied because other factual issues prevent materially advancing termination |
| Whether to stay arbitration pending appeal | Stay needed because appeal could prevent arbitration | Arbitration should proceed under contract absent successful appeal | Court: Stay denied as moot because leave to appeal denied |
Key Cases Cited
- Ernst & Young LLP v. Baker O'Neal Holdings, Inc., 304 F.3d 753 (7th Cir. 2002) (found plan provisions can supersede arbitration where defendant had notice and participated)
- Klinghoffer v. S.N.C. Achille Lauro Ed Altri, 921 F.2d 21 (2d Cir. 1990) (standard for exceptional circumstances under interlocutory review)
- Abbott Labs. v. Gardner, 387 U.S. 136 (1967) (statutes that remove Article III review should be narrowly construed)
- Oneida Indian Nation of New York State v. Oneida County, 622 F.2d 624 (2d Cir. 1980) (denying interlocutory review where later proceedings could destroy the premise of the certified question)
- Primavera Familienstifung v. Askin, 139 F. Supp. 2d 567 (S.D.N.Y. 2001) (discussing when a controlling legal question justifies interlocutory review)
- Wellness Int’l Network, Ltd. v. Sharif, 135 S. Ct. 1932 (2015) (bankruptcy courts’ authority in non-core proceedings and the role of consent)