In Re: MF Global Holdings Ltd.
OPINION re: (4 in 1:17-cv-00742-RWS) MOTION for Leave to Appeal filed by Allied World Assurance Company, Ltd.: Defendants Allied World Assurance Co. Ltd. ("Allied World"), Iron-Starr Excess Agency Ltd., Ironshore Insurance Ltd., St arr Insurance & Reinsurance Ltd. (collectively, the "Iron-Starr Defendants" and, collectively with Allied World, the "Bermuda Insurers") have several motions presently before the Court. The Bermuda Insurers seek leave to appeal th e United States Bankruptcy Court for the Southern District of New York's (the "Bankruptcy Court") January 12, 2017, order granting a preliminary injunction for Plaintiffs MF Global Holdings, Ltd. ("MFGH"), MF Global Assigned Assets LLC ("MFGAA," collectively with MFGH, "Plaintiffs") and finding the Bermuda Insurers in contempt for violating the Bankruptcy Court's December 21, 2016, temporary restraining order. The Bermuda Insurers have also moved , either as of right or with leave of the Court, to appeal the Bankruptcy Court's January 23, 2017, order finding that the Bermuda Insurers violated the Barton doctrine and requiring that their Bermuda proceeding be terminated. For the foregoing reasons, the Allied World's motion to appeal as of right the Bankruptcy Court's Barton Order and motions for leave to appeal the Bankruptcy Court's Barton Order, preliminary injunction, and contempt order are denied. (Signed by Judge Robert W. Sweet on 6/28/2017) (jwh) Modified on 6/29/2017 (jwh).
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
MF GLOBAL HOLDINGS LTD., as Plan
Administrator, and MF GLOBAL ASSIGNED
1 7 Ci v. 7 4 2
17 Civ. 953
-againstALLIED WORLD ASSURANCE CO. LTD., IRONSTARR EXCESS AGENCY LTD., IRONSHORE INS.
LTD., STARR INS. & REINSURANCE LTD., and
FEDERAL INS. CO.,
A P P E A RA N C E S:
Attorneys for Plaintiffs
555 South Flower St., 50th Fl.
Los Angeles, CA 90071
Bruce Bennett, Esq.
2 50 Vesey St.
New York, NY 10281
Edward M. Joyce, Esq.
Jane Rue Wittstein, Esq.
Attorneys for Allied World Defendants
CRAVATH, SWAINE & MOORE LLP
825 Eighth Avenue
New York, NY 10019
Daniel Slifkin, Esq.
Omid H. Nasab, Esq.
WHITE AND WILLIAMS LLP
7 Times Square
New York, NY 10036
Erica Kerstein, Esq.
Attorneys for Iron-Starr Defendants
D'AMATO & LYNCH
Two World Financial Center
225 Libert y Street
New York, NY 10281
By: Mary Jo Barry, Esq.
Maryann Taylor, Esq.
Defendants Allied World Assurance Co. Ltd.
Iron-Starr Excess Agency Ltd., Ironshore Insurance
Ltd., Starr Insurance
"Iron-Starr Defendants" and, collectively with Allied World, the
"Bermuda Insurers") have several motions presently before the
Court. The Bermuda Insurers seek leave to appeal the United
States Bankruptcy Court for the Southern District of New York's
(the "Bankruptcy Court") January 12, 2017, order granting a
preliminary injunction for Plaintiffs MF Global Holdings, Ltd.
("MFGH"), MF Global Assigned Assets LLC ("MFGAA," collectively
with MFGH, "Plaintiffs") and finding the Bermuda Insurers in
contempt for violating the Bankruptcy Court's December 21, 2016,
temporary restraining order. The Bermuda Insurers have also
moved, either as of right or with leave of the Court, to appeal
the Bankruptcy Court's January 23, 2017, order finding that the
Bermuda Insurers violated the Barton doctrine and requiring that
their Bermuda proceeding be terminated.
Upon the findings and conclusions set forth below, each
motion is denied.
Background as to MFGH's chapter 11 bankruptcy and the
parties' prior dealings before the Bankruptcy Court, the Supreme
Court of Bermuda, Civil Jurisdiction (Commercial Court), and
this Court, have been described in previous opinions. See MF
Glob. Holdings Ltd. v. Allied World Assurance Co., No. 17 Civ.
106 (RWS), 2017 WL 548219, at *1-2 (S.D.N.Y. Feb. 10, 2017) ; In
re MF Glob. Holdings Ltd., 561 B.R. 608, 612
2016) . Familiarity is assumed.
On January 12, 2017 , the Bankruptcy Court converted its
previously-issued temporary restraining order ("TRO")
prohibiting the Bermuda Insurers from continuing to enforce an
Anti -Suit Injunction issued by the Bermuda Court into a
preliminary injunction. On the same day, the Bankruptcy Court
also found the Bermuda Insurers in contempt for violating the
On January 23, 20 17, the Bankruptcy Court issued an oral
ruling that found the Bermuda Insurers had violated the Barton
doctrine due to their instigation of proceedings in the Bermuda
Court without the Bankruptcy Court 's approval and issued a
written order directing the Bermuda Insurers to dismiss the
Bermuda proceedings. 1 On January 24, 2017, the Bankruptcy Court
entered an order clarifying that the Bermuda proceedings were to
be dismissed without prejudice. On January 31, 2017 , the
Bankruptcy Court issued a written opinion as to its Barton
doctrine decision (together with the January 23 rulings and
January 24 order , the "Barton Order") .
On January 31, 2017, the Bermuda Insurers sought leave to
appeal the preliminary injunction and contempt orders.
742, Dkt. 4; 17 Civ . 780, Dkt. 3 . ) On February 6, 2017 , the
Bermuda Insurers appealed the Barton Order.
(17 Civ. 953, Dkt.
1; 17 Civ. 993, Dkt. 1.)
The motion as to the preliminary injunction and contempt
order was heard and marked fully submitted on March 2, 2017. The
The Barton doctrine is federal common law derived from
Barton v. Barbour, 104 U.S. 126 (1881). The doctrine's principle
is that because "the court that appointed the trustee has a
strong interest in protecting him from unjustified personal
liability for acts taken within the scope of his official
duties," and so therefore a party must seek "leave of the
appointing court before a suit may go forward in another court
against the trustee." In re Lehal Realty Assocs., 101 F.3d 272,
2 76 (2d Cir . 1996).
motion as to the Barton order was heard and marked fully
submitted on April 19, 2017.
On May 24, 2017, the Iron-Starr Defendants wrote the Court
to request that their involvement as to these proceedings be
stayed in light of those parties having reached a settlement in
principal with Plaintffs, which the Court granted. 2 (17 Civ. 933,
District courts are vested with appellate jurisdiction over
bankruptc y courts if the bankruptcy court ruling is "final"
under 28 U.S.C.
158(1) (a) or "of the nature that renders it
appr opriate for interlocutory review" pursuant to
158(a) (3). In re AMR Corp., 490 B.R. 470,
(S.D.N.Y. 2013); see also In re Residential Capital, LLC, No. 14
Civ. 9711 (RJS), 2015 WL 5729702, at *2
(S.D.N.Y. Sept. 30,
Given their motion to stay, although the Iron-Starr
Defendants submitted joint motions and briefing with Allied
World, the instant decision only encompasses Allied World's nonstayed motions.
Within the conte x t of bankruptcy proceedings, whether an
order is "final" for purposes of appealing is "different" and
"more fle x ible than in ordinary civil litigation." In re Fugaz y
982 F.2d 769, 775 (2d Cir. 1992)
(quoting In re
Hooker Investments, Inc., 937 F.2d 833, 836 (2d Cir. 1991)).
Bankruptcy proceedings "often continue for long periods of time,
and discrete claims are often resolved at various times over the
course of the proceedings"; thus, a final order "need not
resolve all of the issues raised by the bankruptcy; but it must
completely resolve all of the issues pertaining to a discrete
claim, including issues as to the proper relief." Id. at 775-76
(collecting cases). "In all other respects, district courts
apply the same standards of finality [in a bankruptcy case] that
apply to an appeal under 28 U.S.C.
1291." In re
Residential Capital, 2015 WL 572970 2 , at *3 (quoting In re
937 F.2d at 775)
(internal quotation marks
If a bankruptcy court's order or decree is not final,
district court may still grant leave to hear the appeal pursuant
to 28 U.S.C.
158(a) (3). For such interlocutory orders, "[t]o
determine whether leave to appeal should be granted, district
courts appl y the standards prescribed in 28 U.S.C.
129 2 (b) ."
In re Anderson, 550 B.R. 228, 234
Kassover, 343 F.3d 91 (2d Cir. 2003)).
(citing In re
A district court may
exercise its discretion to grant leave to appeal when the order
at issue involves: "(1) a controlling question of law (2) as to
which there is a substantial ground for difference of opinion
and (3) that an immediate appeal from which may materially
advance the ultimate termination of the litigation."
(citing 28 U.S.C. § 1292(b)). Granting a permissive
interlocutory appeal is appropriate "where appellate review
might avoid protracted and expensive litigation."
Fed. Home Loan Mortg. Corp., 896 F. Supp. 1385, 1398 (S.D.N.Y.
However, "the party seeking an interlocutory appeal has
the burden of showing 'exceptional circumstances' to 'overcome
the general aversion to piecemeal litigation' and 'justify a
departure from the basic policy of postponing appellate review
until after the entry of a final judgment.'"
Koplik & Sons, Inc., 377 B.R. 69, 73-74
In re Perry H.
Klinghoffer v. S.N.C. Achille Lauro Ed Altri-Gestione Motonave,
921 F.2d 21, 24
(2d Cir. 1990)). "[E]ven where the three
legislative criteria of section§ 1292(b) appear to be met,
district courts retain 'unfettered discretion to deny
certification' if other factors counsel against it." Transp.
Workers Union of Arn., Local 100 v. NYC Transit Auth., 358 F.
Supp. 2d 347, 351 (S.D.N.Y. 2005)
(internal citations omitted).
Allied World's Motion To Appeal The Barton Order As Of Right Is
Allied World has moved to appeal the Bankruptcy Court's
Barton Order, contending it can appeal the order as of right
because the Barton Order is final as either the equivalent of a
permanent injunction or final injunction of temporary duration
or, in the alternative, is appealable under the collateral order
doctrine. For the reasons set forth below, these contentions are
1. The Barton Order Is Not A Final Order
Allied World contends that the Barton Order, which required
the Bermuda Insurers to dismiss the Bermuda Court proceeding
without prejudice, is an automatic stay that operates like a
permanent injunction prohibiting the Bermuda Insurers from
certain actions; as the Second Circuit has held that permanent
injunctions are final orders, Allied World argues, the Barton
Order should be viewed as such. Plaintiffs agree that the Barton
Order is akin to an automatic stay, but instead contend that
until Defendants have requested leave from the Bankruptcy Court
to file suit elsewhere , the Barton Order is not final.
In support of its view, Allied World points to two cases,
In re Chateaugay Corp., 880 F.2d 1509 (2d Cir. 1989), and In re
Lomas Fin. Corp. , 932 F.2d 147 (2d Cir. 1991), which it argues
are binding on this Court and require a decision in its favor.
However, these cases do not compel such an outcome.
In In re Chateaugay Corp., a plaintiff sought relief from
the Bankruptcy Code 's automatic stay provision, which was denied
by the bankruptcy court; on appeal, the Second Circuit reversed,
holding the lower court's decision appealable because "the
denial of relief from the automatic stay here is a final ,
appealable order." 880 F.2d at 151 2. The circuit court held that
even though the bankruptcy court had stated that it would
consider modifying its order after one year, holding out the
opportunity for future reconsideration at a later point when
"the consequences for the parties may be completely different"
was not enough to make an appeal not final.
Id. at 1513.
However, the circuit court noted that "a judge's statement of
intent to reconsider an issue in the relatively near future
might be significant in determining whether the order is final
or interlocutory." Id.
In re Lomas Fin. Corp. also addressed an appeal from a
bankruptcy court's automatic stay. There, a creditor appealed
the application of an automatic stay ordered by a bankruptcy
court that the court had termed a "preliminary injunction." 932
F.2d at 150. The Second Circuit noted that for the purpose of
it did not find it a "distinction of consequence"
whether the appeal was "from a denial of a motion to lift the
[or] an appeal from an order holding, inter
alia, that the automatic stay applies to the action." Id. at 152
n.2. Without concluding whether the bankruptcy court's order was
the court went on to state that the facts before it
suggested finality because the "record does not suggest that the
bankruptcy court contemplates further proceedings [on that
. in contrast to further proceedings concerning the
reorganization itself." Id. at 151.
These cases stand for the proposition that in certain
circumstances, a bankruptcy court's finding of a Barton
violation could constitute a final order. The cases also
demonstrate the fact-dependency of determining an order's
finality: a court's "focus should be on [an order's] effect and
whether, as a practical matter, it finally resolves a discrete
dispute." In re Quigley Co., Inc., No. M-47
356653, at *4
(S.D.N.Y. Jan. 27, 2010)
(RJH), 2010 WL
932 F.2d at 151 & n.2). When construed in light of these
attendant facts, the Bankruptcy Court's Barton Order is not
Viewed practically, the Bankruptcy Court has made it
"absolutely clear" that it intends to reconsider the parameters
of its Barton Order. In re Enron Corp., 316 B.R. 767, 770
(S.D.N.Y. 2004). In the Barton Order itself, the Bankruptcy
Court stated that it would hear and decide whether "the Bermuda
Insurers' motions to compel arbitration must be granted"-in
other words, whether to continue to apply Barton stricturesfollowing additional briefing.
(Adv. D.I. 99 at 19. 3 ) The
Bankruptcy Court's Case Management Order laid out a briefing
schedule and oral arguments that would take, and had taken,
place within three months of the Barton Order, with an opinion
from the Bankruptcy Court pending as of this writing.
All references to "Adv. D.I." are to the Bankruptcy Court's
docket for the Adversary Proceeding below, in 16-01 2 51-MG.
D.I. 122 at 4.) As there is "reason to believe that the
bankruptcy court contemplates additional proceedings as to the
applicability" of the Barton Order, it is properly viewed as not
In re Quigley Co., 676 F.3d at 51. 4
2. The Barton Order Is Not Appealable Under The Collateral
In the alternative, Allied World argues that the Barton
Order is appealable as of right under the collateral order
doctrine. As the collateral order doctrine does not extend over
the Barton Order, this argument fails.
The collateral order doctrine "is best understood not as an
exception to the 'final decision' rule
. but as a
'practical construction' of it." Digital Equip. Corp. v. Desktop
Direct, Inc., 511 U.S. 863, 867
(citation omitted). To
apply, the appealed order must: "(l) conclusively determine the
(2) resolve an important issue completely
separate from the merits of the underlying action; and (3) be
Allied World's contention that the Barton Order should be
appealable as of right because it is a "final injunction of
temporary duration" fails for the same reason. The Bankruptcy
Court has indicated its intent to consider "the merits" of
continuing its prohibitions pursuant to Barton. Lomas, 932 F.2d
effectively unreviewable from a final judgment." Lora v.
O'Heaney, 602 F.3d 106, 111 (2d Cir. 2010)
Librand v. Livesay, 437 U.S. 463, 468
(1978)). "All three of the
requirements for appeal under the collateral order doctrine must
be met; if any one is unsatisfied, the order is not immediately
appealable under this doctrine." Fischer v. N.Y. State Dep't of
Law, 812 F.3d 268, 274
(2d Cir. 2016). The "conditions for [a]
collateral order appeal [are] stringent." Digital Equip. Corp.,
551 U.S. at 868. Under the doctrine, the Supreme Court has found
"a small class of rulings" that apply, "emphasizing its modest
scope," Will v. Hallock, 546 U.S. 345, 349-50 (2006), which
include orders rejecting "absolute and qualified immunity of a
government official, Eleventh Amendment immunity of a state, or
the double jeopardy of a defendant." City of N.Y. v. Beretta
U.S.A. Corp., 234 F.R.D. 46, 52
546 U.S. at 350).
Allied World argues that the Barton Order is the
"Bankruptcy Court's final word" on personal jurisdiction and, by
forcing Allied World to litigate in the United States,
irretrievably harms its ability to arbitrate in Bermuda, which
together merit a collateral order.
(See Allied World's Mem. in
Supp. of Barton Order Appeal at 7-8, 17 Civ. 953, Dkt. 9.)
However, these arguments in the context of the collateral order
doctrine have been foreclosed by the Supreme Court. See Lauro
Lines S.R.L. v. Chasser, 490 U.S. 495 (1989)
denial of a motion to enforce a contractual forum selection
clause does not qualify for immediate appeal); Van Cauwenberghe
v. Biard, 486 U.S. 517 (1988)
(holding the same for lack of
jurisdiction argument). Because "[s]uch motions can be made in
virtually every case," to find otherwise would expand the
collateral order doctrine to "almost every pretrial or trial
order." Hallock, 546 U.S. at 351 (quoting Digital Equip. Corp.,
511 U.S. at 872-73.) While recognizing that the petitioner
seeking appellate review has the potential to be put through
"unnecessary trouble and expense, and the value of its
contractual right to an [contracted-for] forum will have been
diminished" if the lower court's decision is later reversed, the
"costs associated with unnecessary litigation [are not] enough
to warrant allowing the immediate appeal of a pretrial order."
Lauro Lines, 490 U.S. at 499. As the Barton Order can be
effectively reviewed on appeal from a final judgment, it fails
the third prong of the collateral order test, see id. at 501,
and the remaining two prongs need not be considered to deny
Allied World's motion, see Fischer, 812 F.3d at 277.
Allied World's Motion For Leave To Appeal The Preliminary
Injunction, Contempt Order, And Barton Order Is Denied
Allied World has also moved for leave to appeal the
Bankruptcy Court's preliminary injunction order, its contempt
order, and the Barton Order. As the argument undergirding the
preliminar y injunction and Barton Order motions are similar,
they will be considered together and, for the reasons below, all
three motions are denied.
To grant leave to appeal an interlocutory order, a district
court must find that the order involves (1) a controlling
question of law (2) as to which there is a substantial ground
for difference of opinion and (3) that an immediate appeal from
which may materially advance the ultimate termination of the
litigation. See 28 U.S.C. § 1292(b). "The movant bears the
burden of demonstrating that all three of the substantive
criteria are met." Hart v. Rick's Cabaret Int'l, Inc., 73 F.
Supp. 3d 382, 393 (S.D.N.Y. 2014)
(citation omitted). "The three
factors should be viewed together as the statutory language
equivalent of a direction to consider the probable gains and
losses of immediate appeal." Figueiredo Ferraz Consultoria E
Engenharia De Projeto Ltda. v. Republic of Peru, No. 08 Civ. 49 2
(WHP), 2009 WL 5177977, at *2 (S.D.N.Y. Dec. 15, 2009)
16 Charles Alan Wright & Arthur R. Miller, Federal Practice &
3930 (2d ed. 2009)) . Courts "have broad discretion
to deny certification even where the statutory criteria are
met." Century Pac., Inc. v. Hilton Hotels Corp., 574 F. Supp. 2d
369, 370 (S.D.N.Y. 2 008)
(quoting SPL Shipping Ltd. v. Gujarat
Cheminex Ltd., No. 06 Civ. 15375 (KMK), 2007 WL 1119753, at *l
(S.D.N.Y. Apr. 12, 2007)).
Allied World advances two main arguments in support of its
interlocutory appeals. For both the preliminary injunction and
Barton Order, Allied World contends that the Bankruptcy Court
lacked personal jurisdiction over it because of insufficient
service of process. 5 Specifically for its Barton Order motion,
Allied World also argues that the Bankruptcy Court applied a
novel application of the Barton doctrine when it did so
extraterritorially. As for its contempt order appeal, Allied
World argues that that the Court should grant leave under
pendent appellate jurisdiction.
On May 10, 2017, Allied World wrote the Court that it was
withdrawing its arguments that the Court "should hear the abovereferenced appeals and reverse on the ground that the Bankruptcy
Court lacked personal jurisdiction over Allied World for any
reason other than for insufficient service of process." (17 Civ.
742, Dkt. 14 at 2 .)
Allied World has persistently argued that it was improperly
served process in Bermuda and, therefore, the Bankruptcy Court
does not have personal jurisdiction over it.
Allied World has argued that the Hague Convention treaty, which
in part details how to serve process of legal documents from one
country to another, does not affirmatively authorize service by
mail in foreign countries, but rather merely allows it, see
Hague Service Convention art. X,
("Provided the State of
destination does not object, the present Convention shall not
. the freedom to send judicial documents, by
postal channels, directly to persons abroad."), a stance it
states has been strengthened by the Supreme Court's recent
decision in Water Splash, Inc. v. Menon, 137 S. Ct. 1504, 1513
("To be clear, this does not mean that the Convention
affirmatively authorizes service by mail
. In other words,
in cases governed by the Hague Service Convention, service by
mail is permissible if two conditions are met: first,
receiving state has not objected to service by mail; and second,
The Bermuda Insurers have conceded that they received
service of process through overnight courier, but argue that
they did not receive personal service, in violation of Bermudan
law. See In re MF Glob. Holdings Ltd., 561 B.R. 608, 618 (Bankr.
S.D.N.Y. 2016) .
service by mail is authorized under otherwise-applicable law.").
As each of the Bankruptcy Court's orders have been based on
personal jurisdiction, Allied World argues, this "improper
assertion" merits immediate appeal.
(Allied World's Mem. in
Supp. of Barton Order Appeal at 12.)
Given the present circumstances, this is incorrect. While
overturning the Bankruptcy Court's finding of personal
jurisdiction would end the participation of Allied World in the
bankruptcy proceeding - part of what would constitute a
"controlling issue of law," see Klingshoffer, 921 F.2d at 24
("[I]t is clear that a question of law is 'controlling' if
reversal of the district court's order would terminate the
action.") - Allied World has not sufficiently established that
the propriety of Plaintiffs' service of process is fit for
interlocutory review. A Section 1292(b) appeal requires "a
'pure' question of law that the reviewing court 'could decide
quickly and cleanly without having to study the record.'" In re
Worldcom, 2003 WL 21498904, at *10 (S.D.N.Y. June 30, 2003)
(quoting Ahrenholz v. Bd. of Trs. of Univ. of Ill., 219 F.3d
(7th Cir. 2 000)). The decision in Water Splash could
have an impact on what needs to be shown by Plaintiffs to
establish that process was properly served - such as, that
process was served in compliance with Bermudan law - but fulsome
evidence that such has occurred remains to be developed and
introduced by Plaintiff post-Water Splash, a process which has
been represented by Plaintiffs as on-going. 7 (See Pls.' Ltr dated
June 13, 2017 at 1-2, 17 Civ. 742, Dkt. 16 ("[Plaintiffs] will
soon address in the Bankruptcy Court the service issue
[Plaintiffs] may need to introduce evidence on Bermuda law to
show that service was proper because a courier delivered the
relevant documents to the principal place of business of
corporate defendants.").) Until the facts underlying the process
served on the Defendants in Bermuda are fully developed, it
makes little sense to certify an appeal that may turn on an
"incomplete record." Koehler v. Bank of Bermuda Ltd., 101 F.3d
863, 866 (2d Cir. 1996).
Exclusive to the Barton Order, Allied World also argues
that the Bankruptcy Court's order applied the Barton doctrine in
a novel fashion, either by extending protection over new types
The Bankruptcy Court has preliminarily held that ser v ice
was still proper even under Water Splash, though no arguments
have yet been heard on the issue before Judge Glenn because
discovery briefing on the topic has been scheduled by the
Bankruptcy Court to continue through July 31, 2017. See In re MF
Glob. Holdings Ltd., No. 11-15059 (MG), 2017 WL 2533353, at *2
n.8 (Bankr. S.D.N.Y. June 12, 20 17); (Adv. D.I. 122 at 5-6).
of defendant entities or applying the doctrine
extraterritorially; under either argument, Allied World contends
there is "an independent basis for leave to appeal."
World's Mem. in Supp. of Barton Order Appeal at 15.) Although
not specifically stated, Allied World's briefing citation
suggests its argument is that "reversal of the [Barton Order] as
to the enforceability of the forum selection clauses would
result in dismissal of this action in favor of the [Bermuda]
forum," which would make the matter a controlling issue of law.
In re Lloyd's Am. Trust Fund Litig., No.
96 Civ. 1262
1997 WL 458739, at *5 (S.D.N.Y. Aug. 12, 1997). These arguments
are also unavailing.
First, it is unestablished that reversing the Barton Order
constitutes a "controlling issue of law." Plaintiffs correctly
note that were the Barton Order reversed, a court - be it the
Bankruptcy Court or Bermudan court - would still need to judge
whether the underlying dispute is subject to arbitration, with
the instant proceeding continuing, unterminated, in the
Bankruptcy Court. This does not portend a "drastic decrease"
in the scope of the litigation and cautions away from an
interlocutory appeal. In re Anderson, 550 B.R. at 238
More importantly, Allied World has failed to show that
there exists a "substantial ground for difference of opinion" as
to the Bankruptcy Court's application of Barton. For there to be
a "substantial ground for difference of opinion," there must be
"substantial doubt," which exists where "(l) there is
conflicting authority on the issue, or (2) the issue is
particularly difficult and of first impression for the Second
Circuit." In re Anderson, 550 B.R. at 238
Records, LLC v. Vimeo, LLC,
972 F. Supp. 2d 537, 551
2013)). "Mere conjecture that courts would disagree on the issue
or that the court was incorrect in its holding is not enough,"
id., and "the mere presence of a disputed issue that is a
question of first impression, standing alone, is insufficient."
In re Flor, 79 F.3d 281, 284
(2d Cir. 1996).
Allied World claims the Bankruptcy Court's application of
Barton was novel in two respects. First, it contends that MFGH,
the Plan Administrator, and MFGAA, an assignee of the claims,
are not court-appointed officials and, therefore, not entitled
to Barton protection, since in the Second Circuit such
protection has historically only been extended to receivers and
trustees. This contention is foreclosed both by prior findings
and case law. For MFGH, this position runs directly counter to
previous ones taken by Allied World, where it has conceded the
(see Adv. D.I. 28 at 14 ("MFGH is a court-appointed
officer as Plan Administrator.")), as well as the repeated
finding of the Bankruptcy Court, see In re MF Glob. Holdings
Ltd., 562 B.R. at 876-77 & n.11 (finding MFGH "a court-appointed
entity tasked with marshaling and liquidating assets," a fact it
found conceded by the Bermudan Insurers, and MFGAA "created
pursuant to the terms and mechanisms of the Plan and the Sale
and Assumption Agreement") . 8
Furthermore, while the Bankruptcy Court properly noted that
the Second Circuit has not laid out a test to apply Barton "to
parties other than a receiver or trustee," In re MF Glob.
Allied World also points to a MFGH statement in a parallel
proceeding in which MFGH stated that it was not appointed by the
Bankruptcy Court. See MF Glob. Holdings Ltd. v.
PricewaterhouseCoopers LLP, No. 14 Civ. 2197 (VM), 2017 WL
663565, at *7 (S.D.N.Y. Feb. 3, 2017). What the parties in that
proceeding agreed to has little bearing on what the Bankruptcy
Court found in its proceeding or what had been previously
conceded to by these parties. See In re XO Commc'ns, Inc., 3 2 3
B.R. 330, 339 (Bankr. S.D.N.Y. 2005) ("[A] bankruptcy court's
findings of fact will be accepted unless, in the rare
circumstance, a reviewing court is 'left with the definite and
firm conviction that a mistake has been committed.'" (quoting In
re Schubert, 143 B.R. 337, 341 (S.D.N.Y. 1992)). Such conviction
is absent here and Allied World has offered nothing to suggest
Holdings Ltd., 562 B.R. at 875; see Vass v. Conron Bros., 59
F.2d 969, 971 (2d Cir. 1932), its well-reasoned analysis of
other circuits and recent district court cases in this circuit
demonstrate that the trajectory in the application of the Barton
doctrine is expanding beyond just receivers and trustees to
better assist bankruptcy courts to "centralize bankruptcy
litigation and keep a watchful eye on court-appointed officers."
Id. at 873 (quoting In re Yellowstone Mountain Club, LLC, 841
F.3d 1090, 1094
(9th Cir. 2016))
(internal quotation marks
omitted); see also id. at 873-75 (describing the evolving and
expanding scope of Barton protection). Even, arguendo, either
MFGH or MFGAA were not court-appointed, such reasoning would
provide Barton protection for MFGH and MFGAA. Allied World has
not put forward any case law to the contrary or reason, aside
than "mere conjecture," that the Second Circuit would disagree
with this broadly adopted broadening of the doctrine.
Second, Allied World argues that the Bankruptcy Court
raised a novel issue by applying the Barton doctrine
extraterritorially to proceedings in Bermuda, which Allied World
contends goes against the "presumption against
extraterritoriality," a "longstanding principle of American law
that legislation of Congress, unless a contrary intent appears,
is meant to apply only within the territorial jurisdiction of
the United States." In re Ampal-Am. Israel Corp., 562 B.R. 601,
605 (Bankr. S.D.N.Y. 2017)
499 U.S. 244, 248
(quoting EEOC v. Arabian Am. Oil Co.,
(additional citations omitted). To
start, given that the Barton doctrine is federal common law, not
statute-based, it is unclear that the presumption against
extraterritoriality has any application here. See Balintulo v.
Daimler AG, 727 F.3d 174, 191 (2d Cir. 2013)
(finding that "the
presumption against extraterritoriality applies to the statute"
(emphasis in original)). Moreover, as described above, Allied
World has not demonstrated a substantial ground for difference
of opinion on this point. Plaintiffs have put forward two cases,
one in this circuit and one outside and cited by the Bankruptcy
Court, which applied Barton extraterritorially. See Sec.
Investor Prot. Corp. v. Bernard L. Madoff Inv. Sec., LLC,
B.R. 106 (Bankr. S.D.N.Y. 2011), aff'd, 474 B.R. 76 (S.D.N.Y.
2012); ACE Insurance Co., Ltd. v. Smith (In re BCE West, L.P.),
2006 WL 8422206 (D. Ariz. Sept. 20, 2006) . 9 By contrast, Allied
World has presented, and the Court has been unable to find,
Insofar as both parties have discussed the Barton doctrine
as operating comparable to an automatic stay, the Court also
notes in passing that automatic stays following a filing of a
Chapter 11 petition are regularly applied extraterritorially.
See In re Soundview Elite, Ltd., 503 B.R. 571, 584 & n.29
(Bankr. S.D.N.Y. 2014) (collecting cases).
none. "[T]here is always the possibility for a difference of
opinion," which Allied World appears to possess, but that alone
does not establish the existence of conflicting authority or a
substantial ground for difference of opinion. In re Goldman
Sachs Grp., Inc. Sec. Litig., No. 10 Civ. 3461
5002090, at *3 (S.D.N.Y. Oct. 7, 2014)
(PAC), 2014 WL
(denying certification of
As none of Allied World's arguments demonstrate the
exceptional circumstances sufficient to merit leave to appeal
the Bankruptcy Court's preliminary injunction order or Barton
Order, those motions are denied. Consequently, as the
preliminary injunction does not merit leave for appeal the
reasons stated above, Allied World's motion to appeal the
Bankruptcy Court's contempt order under pendent appellate
jurisdiction is also denied. See Kaluczky v. City of White
Plains, 57 F.3d 202, 206 (2d Cir. 1995)
(holding that once an
appellate court has "jurisdiction over some questions on appeal
may [it] exercise its discretion to take pendent jurisdiction
over independent nonappealable, but related questions"
added) ) .
For the foregoing reasons, the Allied World's motion to
appeal as of right the Bankruptcy Court's Barton Order and
motions for leave to appeal the Bankruptcy Court's Barton Order,
preliminary injunction, and contempt order are denied.
It is so ordered.
New York, NY
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