Ben Cooper, Inc. v. Insurance Co. of Pennsylvania (In re Ben Cooper, Inc.)

896 F.2d 1394
CourtCourt of Appeals for the Second Circuit
DecidedFebruary 7, 1990
DocketNo. 486, Docket 89-5026
StatusPublished
Cited by25 cases

This text of 896 F.2d 1394 (Ben Cooper, Inc. v. Insurance Co. of Pennsylvania (In re Ben Cooper, Inc.)) is published on Counsel Stack Legal Research, covering Court of Appeals for the Second Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Ben Cooper, Inc. v. Insurance Co. of Pennsylvania (In re Ben Cooper, Inc.), 896 F.2d 1394 (2d Cir. 1990).

Opinion

TIMBERS, Circuit Judge:

Appellant Ben Cooper, Inc. (“Cooper”) appeals from an oral decision from the bench on July 11, 1989, in the Southern District of New York, Louis L. Stanton, District Judge. The district court reversed an order of the bankruptcy court, Cornelius Blackshear, Bankruptcy Judge, filed on June 15, 1989. The bankruptcy court held that the adversary proceeding filed by Cooper against appellees Insurance Company of the State of Pennsylvania (“ICSP”), Kal-vin-Miller International, Inc. (“KM”) and Kerwick & Curran, Inc. (“K & C”) was “core” within the meaning of 28 U.S.C. § 157(b)(2) (1988). It retained jurisdiction. The district court disagreed, holding that the adversary proceeding was merely “related” to Cooper’s underlying Chapter 11 petition, and withdrew the reference to the bankruptcy court. The district court also held that withdrawal was required because appellees were entitled to a jury trial on at least some of their affirmative defenses and on some of Cooper’s claims. The district court then abstained from addressing the merits of Cooper’s claims in favor of ongoing proceedings based on the same operative facts, commenced by ICSP in New York Supreme Court, New York County. Cooper timely appealed to this Court.

On appeal, Cooper asserts that the proceeding is core and that appellees are not entitled to a jury trial. Appellees, in turn, assert that the proceeding is non-core and that their jury demand should be honored. For the reasons stated below, we hold that the proceeding is core, and therefore we reverse the district court. We also hold that appellees are entitled to a jury trial, and that such trial should be in the bankruptcy court. We therefore remand the case to the bankruptcy court.

We reach our determination of the issue of core jurisdiction in light of In re Manville Forest Products Corp., 896 F.2d 1384 (2 Cir.1990), also decided today, and assume familiarity with that opinion.

I.

We summarize only those facts and prior proceedings believed necessary to an understanding of the issues raised on appeal.

Cooper is a toy and costume manufacturer and importer. Facing economic difficulties, it filed a voluntary petition for reorganization under Chapter 11 of the Bankruptcy Code in April 1988. Pursuant to that petition, Cooper submitted a reorganization plan under which, among other things, it covenanted to “keep all of its respective properties adequately insured at all times with responsible insurance carriers against loss or damage by fire and other hazards.”

Acting to fulfill its responsibility under the plan (which was finally confirmed by the bankruptcy court on April 4, 1989), Cooper retained KM, an insurance broker, to obtain coverage for its various facilities. KM enlisted K & C, another broker, to assist in finding coverage for Cooper. In October 1988 the brokers procured from ICSP a standard commercial property insurance policy for one of Cooper’s facilities, located in Georgia. Appellees do not dispute that they were aware of Cooper's Chapter 11 status.

On January 6, 1989, the Georgia facility was hit by fire, resulting in damage that, Cooper claimed, totaled over $2 million. After an extended investigation, ICSP determined that it was not liable for the loss because of alleged misrepresentations and [1397]*1397omissions by Cooper in the policy application; specifically, that Cooper failed to disclose in its application that the facility was used for manufacturing rather than as a warehouse. Moreover, ICSP determined that Cooper exaggerated its loss in the fire when it submitted its claim. That dispute underlies the instant appeal but is not before us directly. We express no view as to its proper disposition.

On April 18, 1989, ICSP formally can-celled its policy with Cooper. That same day, ICSP commenced an action in the New York Supreme Court, New York County. Its complaint alleged three causes of action: (1) that the policy was void ab initio due to the misrepresentations in Cooper’s application; (2) that it was not liable for the fire loss because of those misrepresentations; and (3) that it was not liable under the policy because of Cooper’s exaggerated claim of loss. Cooper sought and, on May 9, received from the bankruptcy court a stay of the state court action and a preliminary injunction requiring ICSP to maintain the policy.

Almost simultaneously, Cooper commenced, in the bankruptcy court, the adversary proceeding that is the subject of the instant appeal. Cooper’s complaint contained three counts. The first, against ICSP, requested a declaration that the policy remained in effect, a declaration that ICSP was liable for all losses sustained in the fire, and punitive damages from ICSP of $5 million. The second count, against KM, alleged negligent conduct in obtaining the policy, and requested, if ICSP were found not liable under the policy, that KM be held responsible for the fire and consequential losses. The third count, against K & C, essentially mirrored the second. ICSP’s answer set forth five affirmative defenses. Three of them repeated, almost to the word, the three causes of action in ICSP’s state court complaint.

Appellees opposed the bankruptcy court’s jurisdiction over the adversary proceeding, and moved the district court for withdrawal of the reference. They also moved to have the state court stay and the preliminary injunction lifted. Rather than rule on the merits of the motion, the district court, Hon. John M. Walker, remanded the case to the bankruptcy court on May 31 for a determination of the question whether the claims in the proceeding were core.

On June 15 the bankruptcy court entered an order holding that the proceeding was core, and retained jurisdiction. • It relied primarily on § 157(b)(2)(A) (estate administration) and secondarily on § 157(b)(2)(L) (confirmation of plans).

Appellees then moved in the district court to reverse that order. The court did so in an oral ruling dated July 11, holding that, while the statutory provisions were relevant to the adversary proceeding, the statutory provisions were not sufficiently broad to render the proceeding core. Moreover, the court held that appellees were entitled to a jury trial on at least some of the issues raised. The court also granted the ancillary relief appellees sought: withdrawal of the reference to the bankruptcy court, abstaining from exercising its own jurisdiction, and lifting the stay of the state court proceedings. This appeal followed.

On appeal, the parties agree that the primary issues are (1) whether the adversary proceeding is core, and (2) whether appellees are entitled to a jury trial, as they have demanded. Cooper does not raise the other issues on which the district court ruled — the decisions to lift the state court stay and to abstain from exercising jurisdiction.

II.

We turn first to the question whether the adversary proceeding is core within the meaning of 28 U.S.C. § 157(b)(2) (1988). As a question of law, we review de novo the district court’s determination that the proceeding is non-core. Brunner v. New York State Higher Ed. Servs.,

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Bluebook (online)
896 F.2d 1394, Counsel Stack Legal Research, https://law.counselstack.com/opinion/ben-cooper-inc-v-insurance-co-of-pennsylvania-in-re-ben-cooper-inc-ca2-1990.