571 B.R. 80
Bankr. S.D.N.Y.2017Background
- MF Global’s plan administrator and assignee (Plaintiffs) sued Allied World (Bermuda insurer) to recover E&O policy proceeds after a global MDL settlement; Allied World is sole remaining defendant.
- The AWAC E&O Policy (May 31, 2011–May 31, 2012) contains a broad arbitration clause requiring “any and all disputes arising under or relating to this policy” to be arbitrated in Hamilton, Bermuda.
- During parallel proceedings, Bermuda insurers obtained ex parte anti-suit injunctions in Bermuda; this Court enjoined and found contempt and Barton Doctrine violations, and required Allied World to post a $15 million bond under New York law before pressing arbitration.
- Plaintiffs contend the bankruptcy plan, prior bankruptcy orders (including the global settlement approval and SAA/9019/confirmation orders), and the need to interpret those orders make the dispute a core bankruptcy matter inappropriate for arbitration.
- Allied World contends the dispute is a pre-petition contract coverage dispute, non-core, and covered by the mandatory Bermuda arbitration clause; it does not challenge the validity of assignments.
- The Court concluded the arbitration clause is binding and broad, the dispute is non-core (or at least does not implicate bankruptcy policy sufficiently to refuse arbitration), compelled arbitration in Bermuda, and stayed (not dismissed) the adversary proceeding pending arbitration; periodic status reports were ordered.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether parties agreed to arbitrate | Arbitration clause was not mandatory as to assignees/insureds; Plan superseded arbitration | AWAC policy’s Section IX mandates arbitration for "any and all disputes" and binds "any person or entity deriving rights through or asserting rights on behalf of" the Named Insured | Court: Agreement to arbitrate exists and binds Plaintiffs as assignees |
| Scope of arbitration clause | Clause ambiguous; Plaintiffs read some language as permissive | Clause is broad: "any and all disputes arising under or relating to this policy" — arbitrability presumed | Court: Clause is broad; arbitrability presumed and covers these claims |
| Whether Bankruptcy law/Congress precludes arbitration (core vs non-core) | Plaintiffs: Dispute is core because it affects estate assets and requires interpretation/enforcement of prior bankruptcy orders (SAA, 9019, Plan) | Allied World: Pre-petition contract dispute; any interactions with prior orders are tangential; arbitration does not undermine bankruptcy policy | Court: Dispute is non-core / procedurally core and arbitration does not seriously jeopardize Bankruptcy Code objectives; arbitration compelled |
| Remedy and case disposition pending arbitration | Plaintiffs: Concern about losing ability to enforce sanctions/fees and recover from bond if case dismissed | Allied World: Sought arbitration; bond already posted per New York law | Court: Granted motion to compel arbitration and STAYED (not dismissed) the adversary proceeding pending Bermuda arbitration; ordered joint status reports every 60 days |
Key Cases Cited
- Burns v. New York Life Ins. Co., 202 F.3d 616 (2d Cir.) (FAA requires enforcement of arbitration agreements)
- Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, 473 U.S. 614 (U.S.) (court’s first task is to determine whether parties agreed to arbitrate)
- Moses H. Cone Mem’l Hosp. v. Mercury Constr. Corp., 460 U.S. 1 (U.S.) (strong federal policy favoring arbitration)
- U.S. Lines, Inc. v. Am. Steamship Owners Mut. Prot. & Indem. Ass’n, 197 F.3d 631 (2d Cir.) (analysis of core/non-core and when arbitration may be refused for Bankruptcy Code interests)
- JLM Indus., Inc. v. Stolt-Nielsen S.A., 387 F.3d 163 (2d Cir.) (broad arbitration clauses covering "any and all differences" support presumption of arbitrability)