Two courts in New York recently issued decisions concerning Allied World’s ongoing coverage dispute with MF Global Holdings Ltd. over the former’s bankruptcy. As previously reported on this blog, the Bankruptcy Court for the Southern District of New York, in a series of opinions, has found that Allied World and other re/insurers violated the Barton Doctrine by initiating suits in Bermuda which resulted in anti-suit injunctions, granted a preliminary injunction prohibiting the insurers from enforcing those injunctions, and ordered Allied World to post a $15 million bond as an unauthorized foreign insurer. Late last month, the Southern District of New York—with appellate jurisdiction over Bankruptcy Court decisions—denied Allied World’s motions seeking leave to appeal the court’s order granting a preliminary injunction, the contempt order for violating a prior temporary restraining order, and the Barton violation order. In another ruling last week, the Bankruptcy Court struck a $15 million bond posted in response to that court’s earlier order.
In part, the Southern District rejected Allied World’s argument it was entitled to an appeal as of right regarding the Barton order because, as an automatic stay, it was akin to a permanent injunction which qualifies as a final order subject to interlocutory review. The court found the Barton order was not an appealable final order. Although in certain circumstances a Barton violation order could constitute a final order, the court held that as a “practical matter” it was not final because the Bankruptcy Court intended to reconsider the propriety of the order imminently. Indeed, the parties had submitted additional briefing on the issue and an opinion on the matter was pending in the Bankruptcy Court at the time. Additionally, the court rejected Allied World’s alternative ground for appeal under the collateral order doctrine because it failed the doctrine’s third prong that the order at issue be effectively unreviewable.
Next, the court addressed Allied World’s motions for leave to appeal the preliminary injunction, contempt order, and Barton order. In regards to Allied World’s argument that the Bankruptcy Court lacked personal jurisdiction for the preliminary injunction and Barton order based upon insufficient service, the court found the record was incomplete on the service and thus interlocutory review was inappropriate. In regards to Allied World’s argument that the Bankruptcy Court applied the Barton doctrine in novel ways by extending the types of defendants covered and by applying it extraterritorially, the court noted the Barton order was hardly a “controlling issue of law” for the overarching litigation because proceedings in the matter would continue even if it were reversed. Additionally, the court concluded Allied World did not demonstrate any substantial ground for differences of opinion aside from mere conjecture on either supposedly novel application. In regards to Allied World’s argument for pendent jurisdiction over the contempt order, the court denied that motion because it had denied leave to appeal either of the other two orders.
The Bankruptcy Court also struck Allied World’s bond filed in response to the court’s June 12 order. After Allied World posted the bond, MF Global moved to strike the bond on the grounds that it inappropriately conditioned performance upon the exhaustion of any appeal filed by Allied World from a final judgment of the Bankruptcy Court. The court found that the statute requiring the bond imposed no such requirement for exhaustion of appeals and the statute’s trigger—a “final judgment”—includes final judgment of trial courts notwithstanding ongoing appeals. Further, the court found Allied World’s proposed modifications to the bond were likewise unacceptable, noting the only way Allied World could avoid or delay payment would be a stay of enforcement pending appeal and subsequent posting of a supersedeas bond. Allied World must now post a compliant $15 million bond by July 21, 2017.
