562 B.R. 41
Bankr. S.D.N.Y.2017Background
- Plaintiffs (MFGH as Plan Administrator and MFGAA) sued four Bermuda insurers for $25 million under excess E&O policies after a global settlement and assignment of rights. The Global Settlement included a Bar Order barring non‑parties from pursuing claims related to payments made under certain insurance policies.
- The Bermuda insurers obtained ex parte anti‑suit injunctions from the Bermuda Commercial Court on Nov. 8, 2016 enjoining the Plaintiffs from prosecuting U.S. litigation and from seeking anti‑injunction relief, and sought further relief on Dec. 22, 2016 including an order compelling dismissal of the U.S. adversary proceeding.
- This Court entered a TRO on Dec. 21, 2016 enjoining the Bermuda insurers from taking any action to enforce specified provisions of the Bermuda Injunctive Orders (i.e., ordering Plaintiffs not to pursue U.S. litigation or to seek anti‑injunction relief), while allowing the Bermuda insurers to continue prosecuting their Bermuda case (but not enforcing those provisions).
- After the TRO, the Bermuda insurers filed a Skeleton Argument, affidavits, and argued in Bermuda seeking an order requiring Plaintiffs to dismiss the U.S. adversary proceeding; the Bermuda Court entered Dec. 22, 2016 orders granting leave to amend and mandating interlocutory dismissal within 28 days.
- This Court issued a Second Order to Show Cause why the Bermuda insurers should not be held in contempt for violating the TRO; after briefing and a Jan. 4, 2017 hearing, the Court found the insurers willfully violated the TRO and held them in contempt.
- Relief ordered: Bermuda insurers have seven days to vacate the Bermuda Injunctive Orders and the Dec. 22 orders or the Court will strike their pleadings and enter default; potential inquest and monetary sanctions to follow.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the Bermuda insurers violated the TRO by seeking Bermuda orders that would require dismissal of the U.S. adversary proceeding | The insurers’ pre‑TRO affidavits and later Bermuda filings show they sought orders tantamount to enforcement of the Bermuda Injunctive Orders and thus willfully violated the TRO | The insurers contend they merely prosecuted their pending Bermuda case and did not take action to enforce the Injunctive Orders; they claim compliance and no willfulness | Court held insurers willfully violated the TRO and were in contempt |
| Whether the TRO was sufficiently clear to permit contempt | TRO plainly enjoined any action to enforce specified provisions of the Bermuda Injunctive Orders; not a blanket prohibition on defending in Bermuda | Insurers argued TRO allowed normal prosecution of Bermuda proceedings | Court found TRO clear and unambiguous |
| Whether proof of noncompliance met clear and convincing standard | Plaintiffs point to affidavits, Skeleton Argument, and Bermuda hearing transcript showing insurers sought dismissal of U.S. case after TRO | Insurers argued they changed rationale at hearing (to enforcing arbitration) and lacked willfulness or damages | Court found clear and convincing evidence of noncompliance and that insurers did not reasonably attempt to comply |
| Appropriate remedies for contempt | Plaintiffs sought relief to vacate Bermuda orders, striking pleadings, default, damages and sanctions | Insurers urged against sanctions absent willfulness or harm and pointed to Plaintiff absence at Bermuda hearing | Court ordered seven‑day cure (vacate Bermuda orders) or striking of pleadings, entry of default, inquest on damages, and potential monetary sanctions |
Key Cases Cited
- Ex parte Robinson, 86 U.S. 505 (1874) (courts have inherent contempt power necessary to enforce orders)
- Shillitani v. United States, 384 U.S. 364 (1966) (contempt may punish refusal to comply with court orders)
- Spallone v. United States, 493 U.S. 265 (1990) (civil contempt enforces compliance with court orders)
- Int’l Union, United Mine Workers v. Bagwell, 512 U.S. 821 (1994) (contempt powers are essential to court authority)
- Roadway Express v. Piper, 447 U.S. 752 (1980) (contempt powers protect court dignity and administration of justice)
- In re Chateaugay Corp., 920 F.2d 183 (2d Cir. 1990) (bankruptcy courts possess contempt authority)
- King v. Allied Vision, 65 F.3d 1051 (2d Cir. 1995) (elements for civil contempt: clear order, clear and convincing proof of noncompliance, lack of diligent effort to comply)