561 B.R. 608
Bankr. S.D.N.Y.2016Background
- Plaintiffs (MF Global Plan Administrator and assignee MFGAA) sued four Bermuda-based excess E&O insurers in a New York bankruptcy adversary proceeding to recover $25 million under those policies after a global settlement and bar order in the MF Global chapter 11 cases.
- Plaintiffs served the Bermuda insurers by overnight courier under Fed. R. Bankr. P. 7004(f) and Article 10(a) of the Hague Convention; insurers concede receipt but argue service was improper under Bermuda domestic rules.
- Counsel for the Bermuda insurers obtained ex parte anti‑suit injunctions from a Bermuda court restraining Plaintiffs from prosecuting U.S. litigation and from seeking anti‑enforcement relief against the Bermuda arbitration clauses.
- The insurers then filed motions in the bankruptcy court to compel arbitration and to dismiss for lack of personal jurisdiction; Plaintiffs could not respond because of the Bermuda injunctions.
- The bankruptcy court found service effective and that it had personal and subject‑matter jurisdiction (at least prima facie), declined to hold the insurers in contempt, and entered a 14‑day temporary restraining order enjoining the insurers from enforcing the Bermuda Injunctive Orders against Plaintiffs or their counsel.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Was service on Bermuda insurers proper? | Service by overnight courier pursuant to Rule 7004(f) and Article 10(a) of Hague was proper. | Bermuda rules allegedly require personal service; Hague Convention/Having reserved rights defeats courier service. | Held: Service was proper under Article 10(a) (U.K. did not object to 10(a)); Fed. R. Bankr. P. 7004(f) applies. |
| Does the bankruptcy court have personal jurisdiction over Bermuda insurers? | Insurers marketed/underwrote risks in NY, policies governed by NY law, insured NY risks—prima facie minimum contacts exist. | Insurers are Bermudian, have no NY offices or registration; Walden/related authority require dismissal. | Held: Prima facie specific jurisdiction exists based on transacting business/insuring NY risks; arbitration clause does not negate jurisdiction. |
| Does the court have subject‑matter jurisdiction to adjudicate coverage/arbitrability? | Coverage dispute affects estate property, requires interpretation/enforcement of prior bankruptcy orders (Bar Order), implicating core bankruptcy jurisdiction. | Insurers argue claims are non‑core and therefore subject to arbitration and/or outside bankruptcy jurisdiction. | Held: Court concludes, based on complaint and affidavits, it has subject‑matter jurisdiction to interpret/enforce its orders; arbitrability is complex and requires full briefing. |
| Is injunctive relief (TRO) appropriate to prevent enforcement of Bermuda court anti‑suit orders? | Bermuda injunctions muzzled Plaintiffs and impeded Court's ability to adjudicate core issues; irreparable harm, equities and public policy favor relief. | Insurers argued comity and arbitration favor Bermuda proceedings; they would be harmed by interference. | Held: TRO granted—Bermuda insurers are enjoined from enforcing the Bermuda Injunctive Orders against Plaintiffs or their counsel for 14 days pending a preliminary injunction hearing. |
Key Cases Cited
- United States v. Nixon, 418 U.S. 683 (explaining the importance of full adversarial presentation)
- Pierson v. Ray, 386 U.S. 547 (judicial duty to decide cases within jurisdiction)
- Winter v. Natural Resources Defense Council, 555 U.S. 7 (four‑factor standard for preliminary injunctions)
- Daimler AG v. Bauman, 571 U.S. 117 (general vs. specific personal jurisdiction principles)
- Walden v. Fiore, 571 U.S. 277 (forum contacts must relate to the litigation)
- AT&T Mobility LLC v. Concepcion, 563 U.S. 333 (FAA preemption and federal policy favoring arbitration)
- Travelers Indem. Co. v. Bailey, 557 U.S. 137 (bankruptcy courts’ jurisdiction to interpret and enforce prior orders)
- In re U.S. Lines, Inc., 197 F.3d 631 (2d Cir.) (core vs. non‑core contract proceedings in bankruptcy)
- Royal & Sun All. Ins. Co. of Canada v. Century Int’l Arms, Inc., 466 F.3d 88 (parallel foreign proceedings do not automatically displace U.S. courts’ obligation to exercise jurisdiction)
- City of New York v. Exxon Corp., 932 F.2d 1020 (first‑filed rule and comity considerations)