In Re DPH Holdings Corp.

Opinion

13-3305-bk In re DPH Holdings Corp.

UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT

SUMMARY ORDER

1 RULINGS BY SUMMARY ORDER DO NOT HAVE PRECEDENTIAL EFFECT. CITATION TO A 2 SUMMARY ORDER FILED ON OR AFTER JANUARY 1, 2007, IS PERMITTED AND IS GOVERNED BY 3 FEDERAL RULE OF APPELLATE PROCEDURE 32.1 AND THIS COURT’S LOCAL RULE 32.1.1. WHEN 4 CITING A SUMMARY ORDER IN A DOCUMENT FILED WITH THIS COURT, A PARTY MUST CITE 5 EITHER THE FEDERAL APPENDIX OR AN ELECTRONIC DATABASE (WITH THE NOTATION 6 “SUMMARY ORDER”). A PARTY CITING A SUMMARY ORDER MUST SERVE A COPY OF IT ON ANY 7 PARTY NOT REPRESENTED BY COUNSEL. 8 9 At a stated term of the United States Court of Appeals for the Second Circuit, held at the 10 Thurgood Marshall United States Courthouse, 40 Foley Square, in the City of New York, on the 11 19th day of September, two thousand fourteen. 12 13 PRESENT: 14 15 DEBRA ANN LIVINGSTON, 16 CHRISTOPHER F. DRONEY, 17 18 Circuit Judges,

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19 ALISON J. NATHAN , 20 21 District Judge. 22 ______________________________________________

23 IN RE DPH HOLDINGS CORP.: 24 Debtor,

25 STATE OF MICHIGAN WORKERS’ COMPENSATION INSURANCE AGENCY, 26 STATE OF MICHIGAN FUNDS ADMINISTRATION, 27 28 Defendants-Appellants,

29 -v.- No. 13-3305-bk 30

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1 Alison J. Nathan, of the United States District Court for the Southern District of New York, 2 sitting by designation.

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1 ACE AMERICAN INSURANCE COMPANY, 2 PACIFIC EMPLOYERS INSURANCE COMPANY,

3 Plaintiffs-Appellees. 4 __________________________________________ 5 6 BILL SCHUETTE (Susan Przekop-Shaw, Dennis Jay Raterink, 7 on the brief), Office of the Attorney General of the State of 8 Michigan, for Defendants-Appellants.

9 ANTON METLITSKY, O’Melveny & Myers LLP, New York, 10 NY (on the brief), JONATHAN D. HACKER, O’Melveny & 11 Myers LLP, Washington, D.C., LEWIS R. OLSHIN, WENDY M. 12 SIMKULAK, Duane Morris LLP, Philadephia, PA, WILLIAM C. 13 HEUER, Duane Morris LLP, New York, NY, ROBERT G. 14 KAMENEC, Plunkett Cooney, P.C., Bloomfield Hills, MI, 15 MARTIN G. BUNIN, WILLIAM HAO, Alston & Bird LLP, New 16 York, NY, for Plaintiffs-Appellees.

17 UPON DUE CONSIDERATION, IT IS HEREBY ORDERED, ADJUDGED, AND 18 DECREED that the order of the District Court is AFFIRMED. 19 In 2005, Delphi Corporation (“Delphi”), now reorganized as DPH Holdings Corporation, 20 filed for bankruptcy in the United States Bankruptcy Court for the Southern District of New York. 21 During those proceedings, Plaintiffs-Appellees ACE American Insurance Company and Pacific 22 Employers Insurance Company (collectively, “the Insurers”) initiated this adversary action seeking, 23 inter alia, a declaration that their insurance policies with Delphi do not obligate them to assume 24 Delphi’s workers’ compensation liabilities arising from the company’s self-insured entities in 25 Michigan. After this Court affirmed the denial of a motion to dismiss, In re DPH Holdings Corp., 26 448 F. App’x 134 (2d Cir. 2011), Defendants-Appellants State of Michigan Funds Administration 27 and State of Michigan Workers’ Compensation Agency (collectively, “Michigan Defendants”) 28 answered the Insurers’ complaint and the parties cross-moved for summary judgment. The

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1 bankruptcy court (Drain, J.) granted summary judgment to the Insurers and entered a final judgment 2 in their favor. On August 1, 2013 the district court (Engelmayer, J.) affirmed that decision. This 3 appeal followed. We assume the parties’ familiarity with the underlying facts, the procedural history 4 of the case, and the issues on appeal. 5 The Michigan Defendants first challenge the bankruptcy court and district court decisions 6 that pursuant to the plain terms of the Insurers’ contracts with Delphi, these contracts do not provide 7 workers’ compensation coverage for Delphi or its self-insured subsidiaries in Michigan. “On appeal 8 from the district court’s review of a bankruptcy court decision, ‘we review the bankruptcy court 9 decision independently, accepting its factual findings unless clearly erroneous but reviewing its 10 conclusions of law de novo.’” In re Baker, 604 F.3d 727, 729 (2d Cir. 2010) (quoting In re Enron 11 Corp., 419 F.3d 115, 124 (2d Cir. 2005)). Because the Federal Rules of Bankruptcy Procedure 12 import the summary judgment standard of Federal Rule of Civil Procedure 56(a), Fed. R. Bankr. P. 13 7056, summary judgment is only appropriate if, “after construing the evidence in the light most 14 favorable to the non-moving party and drawing all reasonable inferences in its favor, . . . ‘there is 15 no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of 16 law.’” Silverman v. Teamsters Local 210 Affiliated Health & Ins. Fund, 2014 WL 3765933, at *6 17 (2d Cir. 2014) (quoting Fed. R. Civ. P. 56(a)). 18 We agree with the bankruptcy court that, by their plain meaning, the Insurers’ contracts do 19 not cover Delphi or its self-insured subsidiaries in Michigan. The “cardinal rule” of Michigan 20 contract law “is to ascertain the intentions of the parties.” City of Grosse Pointe Park v. Mich. Mun. 21 Liab. & Prop. Pool, 473 Mich. 188, 197 (2005). When the terms of a contract are unambiguous, the 22 contract is “not open to judicial construction and must be enforced as written.” Rory v. Cont’l Ins.

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1 Co., 473 Mich. 457, 468 (2005). See also Shay v. Aldrich, 487 Mich. 648, 650 (2010). In general, 2 “[i]nsurance policies are contracts and . . . are subject to the same contract construction principles 3 that apply to any other species of contract.” Titan Ins. Co. v. Hyten, 491 Mich. 547, 554 (2012) 4 (citation omitted). But “when a provision in an insurance policy is mandated by statute, the rights 5 and limitations of the coverage are governed by that statute.” Id. Under the Michigan Workers’ 6 Disability Compensation Act, “[e]very contract for insurance . . . shall be subject to the provisions 7 of this act and provisions inconsistent with this act are void.” Mich. Comp. Laws § 418.621(1). See 8 also New Amsterdam Cas. Co. v. Moss, 312 Mich. 459, 472 (1945). 9 The Insurers’ contracts with Delphi between 2000 and 2008 unambiguously limit coverage 10 in Michigan to identified Delphi entities that were not self-insured in the state. While these multi- 11 state contracts consistently list Delphi as “the insured” or the “named insured,” each state — 12 including Michigan — has a separate section that identifies particular Delphi entities as the insured 13 parties and estimates insurance premiums based on those entities. Each Michigan-specific section 14 identifies only Delphi entities that lacked self-insurance in the state. Every contract also contains 15 an explicit provision stating that the insurance policies cover all workplaces in states that have 16 separate information pages “unless you have other insurance or are self-insured for such 17 workplaces.” J.A. 644. The contracts between 2003 and 2008 even have an “exclusion 18 endorsement” that denies coverage to entities in Michigan that are covered by separate excess 19 policies issued to Delphi’s self-insured entities. J.A. 3154. The general references to Delphi do not 20 override the clear intent of these Michigan-specific sections and additional exclusions. See Kmart 21 Corp. v. Firemen’s Fund Ins. Co., 88 F. Supp. 2d 767, 774 (E.D. Mich. 2000) (“Michigan law 22 requires that where a specific contract clause is at odds with a general contract clause, the more

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1 specific clause will control.”); Klapp v. United Ins. Grp. Agency, Inc., 468 Mich. 459, 468 (2003) 2 (noting that courts should “avoid an interpretation that would render any part of the contract 3 surplusage or nugatory”). 4 We reject the Michigan Defendants’ argument that the inclusion of the “Michigan 5 Endorsement” in every contract overrides this clear and unambiguous language and extends 6 coverage to all of Delphi’s Michigan entities. By its terms, the “Michigan Endorsement” applies 7 only to the “insured employer.” See Mich. Comp. Laws § 418.621(4). In context, the plain meaning 8 of “insured employer” in these contracts is limited to those entities covered in the policies. Each 9 contract states that the Endorsement applies “only to the insurance provided by the policy.” J.A. 10 2748. As previously discussed, the policies cover particular Delphi entities in Michigan that lack 11 self-insurance, not all of Delphi’s Michigan entities. 12 Nothing in the Michigan Workers’ Disability Compensation Act is contrary to the 13 contractual provisions that state the parties’ agreement as to which Delphi-related entities are 14 provided coverage under the contracts, nor does the Act render the parties’ intent on this issue 15 irrelevant. The Insurers are not obligated to cover Delphi’s self-insured entities under Michigan law, 16 see Mich. Comp. Laws § 418.621(2), and the contracts here do not provide coverage to these 17 entities. As a result, the Insurers “only ask[] that [the court] not impose upon [them] obligations 18 which [they] never contracted to assume and which are not mandated by the statute.” McQueen v. 19 Great Markwestern Packing Co., 402 Mich. 321, 334 (1978). Because of that, and for the reasons 20 stated in the district court’s opinion, these insurance contracts neither conflict with the Workers’ 21 Disability Compensation Act nor upset Michigan’s system of workers’ compensation.

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1 The Michigan Defendants next contend that the Insurers’ suit violates its sovereign 2 immunity. We find this argument unpersuasive. This Court has already decided that, “[s]ince the 3 adversary proceeding here is an in rem proceeding (or, at least, is otherwise necessary to effectuate 4 the in rem jurisdiction of the Bankruptcy Court), it does not offend the Michigan Defendants’ 5 sovereign immunity.” In re DPH Holdings Corp., 448 F. App’x at 137 (citing Cent. Va. Comm. 6 Coll. v. Katz, 546 U.S. 356, 377 (2006)). The Michigan Defendants have not raised any arguments 7 that warrant reconsidering that decision. 8 Finally, we reject the Michigan Defendants’ argument that the district court should have 9 abstained from affirming the bankruptcy court’s decision as a matter of permissive abstention under 10 28 U.S.C. § 1334(c)(1) or mandatory abstention pursuant to Burford v. Sun Oil Co., 319 U.S. 315 11 (1943). First, this Court does not have jurisdiction to review the district court’s permissive 12 abstention decision. See 28 U.S.C. § 1334(d). Second, we detect no abuse of discretion in the 13 district court’s decision that Burford does not require abstention in this case. See Hartford Courant 14 Co. v. Pellegrino, 380 F.3d 83, 90 (2d Cir. 2004). 15 We have reviewed Appellants’ remaining arguments and find them to be without merit. 16 For the foregoing reasons, the judgment of the district court is AFFIRMED. 17

18 FOR THE COURT: 19 Catherine O’Hagan Wolfe, Clerk