NOT PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
___________
No. 13-4415
___________
IN RE: CARIBBEAN PETROLEUM CORP., ET AL.,
Debtors
INTERTEK USA, INC.,
Appellant
v.
CARIBBEAN PETROLEUM CORP; FTI CONSULTING, INC.,
as Liquidation Trustee of Caribbean Petroleum Liquidation Trust
____________________________________
On Appeal from the United States District Court
for the District of Delaware
(D.C. Civil Action Nos. 13-cv-00466/13-cv-00717/
13-cv-00732/13-cv-00733)
District Judge: Honorable Leonard P. Stark
____________________________________
Submitted under Third Circuit LAR 34.1(a)
September 8, 2014
Before: RENDELL, GREENAWAY, JR. and KRAUSE, Circuit Judges.
(Opinion filed: September 18, 2014)
OPINION
KRAUSE, Circuit Judge.
The central issue in this appeal by Intertek USA, Inc. (“Intertek”) is whether the
plain language of two orders of the Bankruptcy Court gives priority to tort claimants
above other general unsecured creditors in the distribution of certain insurance proceeds
in the bankruptcy of Caribbean Petroleum Corporation. Intertek contends that, because
Puerto Rican law gives tort claimants the right to file a direct action against the insurer,
and because one of the Bankruptcy Court’s orders indicated that their claims would
“survive” and be “channeled” to the proceeds of the policies, the tort claimants are
entitled to be paid first from those proceeds, before other unsecured creditors. Because
this argument comes too late, and because we agree with the District Court that the orders
in question unambiguously provide for pro rata distribution to all holders of general
unsecured claims, including tort claims, we affirm.
I. Facts and Procedural History
Because we write primarily for the parties, we set forth only those facts and
procedural history relevant to our conclusion.
A. The Debtors and the Event Causing Insolvency
Caribbean Petroleum Corporation, Caribbean Petroleum Refining, L.P., and Gulf
Petroleum Refining (Puerto Rico) Corporation (collectively “the Debtors”) operated a
petroleum refinery business based in Bayamón, Puerto Rico. In October 2009, a massive
explosion occurred at the Bayamón facility. Class action complaints were filed against
2
the Debtors soon thereafter, with approximately 4,000 claimants seeking up to $500
million in damages. Intertek, as an alleged joint tortfeasor, was named as a co-defendant
with the Debtors in some of those tort actions and brought claims for contribution and
indemnity against the Debtors. Because Puerto Rico provides tort victims a statutory
right of direct action against the insured’s carrier, Chartis Insurance Company
(“Chartis”), which had issued both general liability and umbrella liability insurance
policies to the Debtors (the “Chartis Policies”), was named as a co-defendant in certain
actions.
The explosion and resultant lawsuits forced the Debtors to file for relief under
Chapter 11 of the Bankruptcy Code, 11 U.S.C. § 1101 et seq. In those proceedings, the
Debtors, along with the Unsecured Creditors’ Committee and Banco Popular de Puerto
Rico (“BPPR”), entered into a settlement (the “BPPR Settlement”) that contemplated a
plan-based allocation of BPPR’s collateral to fund distributions to the holders of
administrative expense claims, priority claims, and general unsecured claims. As part of
that settlement, the Debtors also filed a proposed liquidation plan that was eventually
confirmed as amended (the “Plan”), and BPPR agreed to allocate, pursuant to the Plan
and Plan Supplement, the proceeds of any settlements concerning the Debtors’ Liability
Insurance Policies (defined to include the Chartis Policies) to fund distributions to the
holders of general unsecured claims, including tort claims.
3
Pursuant to the Plan, Caribbean Petroleum Liquidation Trust was established,
consisting of the Debtors’ assets, and FTI Consulting, Inc. was appointed as liquidation
trustee (“the Trustee”).
B. The Liability Insurance Proceeds
In the face of these mass tort claims, Chartis disputed the scope and extent of its
obligations under the Chartis Policies. Thus, while negotiating the BPPR Settlement and
as contemplated by the Plan, the Debtors also negotiated with Chartis a resolution of
those disputes. Those efforts eventually led to a settlement in which Chartis agreed to
buy back the Chartis Policies from the Debtors for $24 million (the “Chartis Proceeds”),
which constituted all or nearly all of the remaining coverage under the Chartis Policies.
The Debtors then filed a motion (the “Buyback Motion”) seeking the Bankruptcy Court’s
approval for the Debtors to enter into that settlement.
According to the Buyback Motion, the proposed settlement would resolve the
coverage disputes between Chartis and the Debtors, would “guarantee[] the payment of
approximately $24 million to the Debtors’ estates,” J.A. 341, would “fund distributions to
the holders of allowed general unsecured claims, including Tort Claims,”1 subject to the
1
“Tort Claim” is defined in the Plan to mean:
(a) any Claim asserted against any of the Debtors that is predicated upon
alleged damages incurred on account of negligence or other equivalent tort
legal theory in connection with the explosions that occurred at Caribbean
Petroleum Refining L.P.’s facilities in October 2009 or (b) any Claim
asserted against any of the Debtors for contribution or indemnity related to
4
terms of the Plan, J.A. 332, and would permanently bar both pending and future claims
under the Chartis Policies against Chartis itself. To accomplish these objectives, the
order entered by the Bankruptcy Court that granted the Buyback Motion (the “Buyback
Order”) provided in paragraph 7 that “[a]ll claims and interests that were, could have
been or may in the future be asserted under or against the Chartis Policies shall survive,
and be channeled solely and exclusively to the proceeds of such sale as may be held by
the Debtors or any Successor, which shall be distributed solely in accordance with the
Plan or further order of the [Bankruptcy] Court.” J.A. 1217.
On May 9, 2011, the same date it entered the Buyback Order, the Bankruptcy
Court also entered an order confirming the Plan. Among other things, the Plan provided
that holders of General Unsecured Claims, defined in a way to include Tort Claims,
would receive a pro rata share of the Chartis Proceeds “to the extent that proceeds of the
Liability Insurance Policies are received by the Debtors or the Liquidation Trust, as
applicable, pursuant to a settlement with any of the insurers under any of the Liability
Insurance Policies, and subject in all respects to Section 6.2(c)(iv) of the Plan with
respect to the Chartis Liability Proceeds, the proceeds of the Liability Insurance Policies
the explosions that occurred at Caribbean Petroleum Refining L.P.’s
facilities in October 2009.
J.A. 959.
5
received by the Debtors and the Liquidation Trustee, as applicable, pursuant to such
settlement.”2 J.A. 968-69.
Intertek was served with notice of the Buyback Motion and the Buyback Order,
and with notice of the Plan and disclosure statement associated with the Plan, but filed no
objections, did not seek to be heard at the relevant hearings and did not appeal or contest
the orders themselves. Accordingly, the Buyback Order became final on May 23, 2011,
and the Plan took effect on June 3, 2011.
C. The Post-Confirmation Dispute
In October 2012, Intertek filed in the Bankruptcy Court the motion and adversary
complaint that are the subject of this appeal. Those filings purported not to attack the
Buyback Order and Plan Confirmation Order, which, of course, had become final a year
and a half earlier, but rather argued that those documents by their terms provided tort
claimants with a priority interest over other unsecured general creditors in the Chartis
Proceeds and therefore sought to “enforce” that interpretation of the Buyback Order and
Plan.
The Bankruptcy Court denied the motion, finding that the Plan provided for the
Chartis Proceeds to be distributed on a pro rata basis to all general unsecured creditors,
and dismissed the adversary complaint on the stipulation of the parties. On appeal, the
2
Section 5.5(a) provides for deduction of costs and expenses in connection with
the administration of distributions to the holders of Allowed General Unsecured Claims,
including “the allowance and administration of General Unsecured Claims (including
Tort Claims).” J.A. 969. Section 6.2(c)(iv) specifically designates the first $3.9 million
6
District Court affirmed those orders, rejecting certain newly-raised arguments as waived
and concluding that Intertek’s arguments constituted a time-barred collateral attack on the
Plan itself, that the terms of the Buyback Order and Plan were unambiguous as to the
rights of tort claimants, and that, even if there were ambiguity, the Bankruptcy Court’s
interpretation of those orders was not unreasonable. Intertek filed a timely notice of
appeal.3
II. Jurisdiction and Standard of Review
The District Court had jurisdiction pursuant to 28 U.S.C. § 158(a)(1). We have
jurisdiction under 28 U.S.C. § 158(d) and 28 U.S.C. § 1291.
We review de novo whether a Bankruptcy Court’s order is ambiguous. In re
Shenango Grp. Inc., 501 F.3d 338, 346 (3d Cir. 2007). Our review of an appeal from an
order granting a motion to dismiss is plenary. In re Pers. & Bus. Ins. Agency, 334 F.3d
239, 242 (3d Cir. 2003).
A. The Plain Meaning of the Bankruptcy Orders
We start from the unremarkable premise that “where the plain terms of a court
order unambiguously apply, . . . they are entitled to their effect.” Travelers Indem. Co. v.
Bailey, 557 U.S. 137, 150 (2009); accord Shenango, 591 F.3d at 346. From there,
of the Chartis Proceeds to be used to satisfy Allowed Administrative Expense Claims.
3
Under separate filing, Intertek also appealed an order of the District Court that
affirmed the Bankruptcy Court’s disallowance of certain proofs of claim filed by Intertek.
On May 6, 2014, we affirmed that order in a not precedential opinion. In re Caribbean
Petrol. Corp., C.A. No. 13-2326, --- F. App’x. ----, 2014 WL 1778050 (3d Cir. May 6,
2014) (“In re Caribbean I”).
7
however, we must grapple with the remarkably different meaning ascribed by Intertek to
the very same language found to be plain and unambiguous by both the District Court
and Bankruptcy Court.
Intertek’s argument appears to be that the language of the Buyback Order and Plan
must be read against the backdrop of Puerto Rico’s direct action statute, which gave tort
victims, at the moment of the explosion, the right to bring claims directly against
Chartis.4 Given that right, according to Intertek, tort victims had a vested interest in
Chartis’ payment of loss even before the bankruptcy, and the statement in paragraph 7 of
the Buyback Order—that claims that could have brought against the Chartis Policies
“shall survive, and be channeled solely and exclusively to the proceeds of such sale as
may be held by the Debtors or any Successor, which shall be distributed solely in
accordance with the Plan or further order of the Court,” J.A. 1217,—unambiguously
endows tort claimants with an exclusive right to distribution of the Chartis Proceeds.
Intertek posits that this language, consistent with the intent of the direct action statute,
removes those proceeds from the bankruptcy estate, places them into a separate fund, and
renders them unavailable for distribution to other general unsecured creditors under the
Plan until the interests of Tort Claim holders have been satisfied.
4
Puerto Rico’s direct action statute provides that a tortfeasor’s insurance carrier
“shall become liable whenever a loss covered by the policy occurs, and payment of such
loss by the insurer to the extent of its liability therefor under the policy shall not depend
upon payment by the insured of or upon any final judgment against him arising out of
such occurrence, nor shall it depend upon said judgment.” 26 L.P.R.A. § 2001.
8
In an attempt to explain how this alleged “plain meaning” can be reconciled with
the direction in paragraph 7 that the interests “be distributed solely in accordance with the
Plan,” and the language in section 5.5(a) of the Plan itself that appears on its face to
provide for pro rata distribution of the Chartis Proceeds to all General Unsecured
Creditors, Intertek observes that the pro rata distribution applies only “to the extent that
proceeds of the Liability Insurance Policies are received by the Debtors or the
Liquidation Trust, as applicable, pursuant to a settlement with any of the insurers under
any of the Liability Insurance Policies.” J.A. 968. Because, in Intertek’s view, the
settlement embodied in the Buyback Order unambiguously excludes the Chartis Proceeds
from the estate and the Plan provides for pro rata distribution “as applicable, pursuant to
[the] settlement,” id., the two documents read together can mean only that holders of Tort
Claims have a priority right to the Chartis Proceeds and that only after full satisfaction of
those interests (through an unspecified priority claims process for distribution of those
proceeds from the Liquidation Trust) would any surplusage be distributed pro rata to
non-tort General Unsecured Creditors.
We cannot accept this tortured reading of the relevant documents. Paragraph 7 of
the Buyback Order provides by its plain terms that claims then pending or that could have
been brought under the Chartis Policies were not extinguished by that order (which
otherwise enjoined and barred all claims against the Chartis Policies or Chartis with
respect to those policies) and that such claims shall be directed instead to the Chartis
Proceeds, which shall be “distributed solely in accordance with the Plan or further order
9
of the Court.” J.A. 1217. Section 5.5(a) of the Plan, in turn, states clearly and simply
that all holders of General Unsecured Claims, including Tort Claims, are entitled to a pro
rata distribution of the Chartis Proceeds, and is devoid of any language suggesting that
holders of Tort Claims are entitled to different recovery than other members of the same
class or are to be treated as a separate sub-class. Instead, the reference in that section to
“proceeds . . . received by the Debtors or the Liquidation Trust, as applicable, pursuant to
a settlement,” J.A. 968, by its plain terms describes the anticipated source of those
proceeds, including the settlement with Chartis that was approved in the Buyback Order
on the same date the Plan was confirmed. If section 5.5(a) provides for priority
distribution to Tort Claim holders, it would—like the $3.9 million expressly set aside
from the Chartis Proceeds for administrative expenses—be referenced within the four
corners of the Plan or explained by further order of the Bankruptcy Court. No such
language exists and no such order was issued.
Moreover, language elsewhere in the relevant documents leaves no room for
ambiguity as to the plain meaning of paragraph 7 and section 5.5(a). The Buyback
Motion, for example, to which the Buyback Order specifically refers, states that the
settlement “guarantee[s] the payment of approximately $24 million to the Debtors’
estates,” J.A. 341, not to a separate fund. The Buyback Order is in accord. J.A. 1217
(“Chartis shall pay to the Debtors . . . the Purchase Amount in accordance with the
Agreement.”). The Buyback Motion repeatedly confirms that once acquired by the
Debtors, the Proceeds shall “provide a valuable and certain source of recovery for the
10
economic stakeholders in these chapter 11 cases – and in particular, the holders of
allowed general unsecured claims.” J.A. 329; see also J.A. 332 (noting that BPPR has
agreed to allocate Liability Insurance Proceeds “to fund distributions to the holders of
allowed general unsecured claims, including Tort Claims,” subject to the terms of the
Plan). According to Intertek, however, this “guarantee[d]” and “certain” source of
recovery for general unsecured claims, J.A. 329, 341, should be understood as a
“remainder interest” that, it concedes, “is unlikely to occur,” Appellant’s Br. 25. This is
untenable and renders otherwise clear terms of the documents not only ambiguous, but
meaningless.
In sum, while sharing liability insurance proceeds with other unsecured creditors
may be unpalatable for Tort Claim holders and, if timely raised, arguably implicated
public policy concerns in light of Puerto Rico’s direct action statute, that is what the
Buyback Order and Plan unambiguously provided. Nothing in either document remotely
suggests otherwise, and Intertek failed to object to either in a timely manner.
Consequently, the Bankruptcy Court properly carried out unambiguous orders according
to their plain meaning. See Shenango, 501 F.3d 338 at 346.
B. Intertek’s Arguments as to the Bankruptcy Court’s Jurisdiction
Notwithstanding the plain language of the Buyback Order and Plan, Intertek
asserts that the Bankruptcy Court’s interpretation must be rejected as unreasonable
because it would exceed the Bankruptcy Court’s jurisdiction. Specifically, Intertek
contends that, because tort claimants’ right to the proceeds of the Chartis Policy vested
11
upon the occurrence of the loss under Puerto Rico’s direct action statute, the Chartis
Proceeds were never part of the estate and the Buyback Order and Plan cannot reasonably
be interpreted to enable the Bankruptcy Court to reach non-debtor property. This
argument does not change our conclusion.
First, we review a Bankruptcy Court’s interpretation of its own order for abuse of
discretion only where the language of that order is ambiguous. Shenango, 501 F.3d at
346. In this case, however, having conducted a de novo review and determined that the
plain language of the relevant orders is unambiguous, we have no need to review the
reasonableness of the Bankruptcy Court’s interpretation. Id.
In any event, the time for Intertek to challenge the jurisdiction of the Bankruptcy
Court over the Chartis Proceeds has long passed. Once a plan has been confirmed, a
court will declare that a “judgment is void because of a jurisdictional defect . . . only for
the exceptional case in which the court that rendered judgment lacked even an ‘arguable
basis’ for jurisdiction.” United Student Aid Funds, Inc. v. Espinosa, 559 U.S. 260, 271
(2010) (quoting Nemaizer v. Baker, 793 F.2d 58, 65 (2d Cir. 1986)); see also Travelers
Indem. Co., 557 U.S. at 153 (“So long as [claimants] or those in privity with them were
parties to [the debtor’s] bankruptcy proceeding, and were given a fair chance to challenge
the Bankruptcy Court’s subject-matter jurisdiction, they cannot challenge it now by
resisting enforcement of the [Court’s earlier] Orders.”); In re Lazy Days’ RV Ctr. Inc.,
724 F.3d 418, 422 (3d Cir. 2013) (“[W]e note that the question of whether the
Bankruptcy Court had jurisdiction to confirm the reorganization plan that included the
12
Settlement Agreement in the first place is not before us, as no party challenged the
Bankruptcy Court’s jurisdiction over that proceeding.”).
The Bankruptcy Court here had more than an arguable basis for jurisdiction. In
our Circuit, “[i]t has long been the rule . . . that insurance policies are considered part of
the property of a bankruptcy estate.” ACandS, Inc. v. Travelers Cas. & Sur. Co., 435
F.3d 252, 260 (3d Cir. 2006) (citing Estate of Lellock v. Prudential Ins. Co. of Am., 811
F.2d 186, 189 (3d Cir. 1987)). With limited exceptions, so are the rights to insurance
proceeds. See In re Nutraquest, Inc., 434 F.3d 639, 647 n.4 (3d Cir. 2006) (citations
omitted).5 Accordingly, there is no reason for us to void the judgment on jurisdictional
grounds. See Espinosa, 559 U.S. at 271.
If anything, Intertek’s attack on the Bankruptcy Court’s jurisdiction lays bare the
illogic of its own position: Intertek’s insistence that the Plan contemplates a separate,
priority claims process for distribution of the Liquidation Trust to holders of Tort Claims
assumes the Bankruptcy Court had jurisdiction to authorize such a process in the first
5
Intertek argues for such an exception in the context of direct action statutes,
citing to cases from the Fifth Circuit that address Louisiana’s direct action statute and that
hold liability insurance proceeds are not part of the bankruptcy estate. See Appellants’
Br. at 24 (citing In re Babcock & Wilcox. Co, 69 F. App’x 659 (5th Cir. 2003) (per
curiam); Landry v. Exxon Pipeline Co., 260 B.R. 769, 800 (Bankr. M.D. La. 2001)
(examining Louisiana’s analogous direct action statute)). However, even within the
context of Louisiana law, the Fifth Circuit has noted a general exception where, as here,
“a mass tort action where hundreds or thousands of claims against the debtor’s insurer
might exhaust insurance proceeds and thus threaten the debtor’s estate over and above
limits of liability insurance policies.” Sosebee v. Steadfast Ins. Co., 701 F.3d 1012, 1023
(5th Cir. 2012) (citing MacArthur Co. v. Johns-Manville Corp., 837 F.2d 89, 92 (2d Cir.
1988); In re Edgeworth, 993 F.2d 51, 55-56 (5th Cir. 1993)).
13
place. Instead, as the District Court observed, what Intertek is contesting at its core is the
fairness to those Tort Claim holders of the Buyback Order and the Plan—a challenge that
comes far too late.
C. Remaining Arguments
We are unswayed by Intertek’s remaining arguments. Contending that ambiguity
in the Plan rendered notice deficient, Intertek alleges it was deprived of due process.
Such an argument was already rejected once by our Court, see In re Caribbean I, 2014
WL 1778050 at *5, and our holding today reinforces that, even assuming the claim was
not waived below, it is meritless: Intertek was served with the Buyback Motion,
Buyback Order and Plan, which unambiguously announced the specifics of the
distribution; it had ample opportunity to object and be heard; and it chose not to do so in
the time-frame allotted. See Espinosa, 559 U.S. at 272 (holding that where claimant was
served with “actual notice of the filing and contents of [a debtor’s] plan,” due process
was “more than satisfied”); Chemetron Corp. v. Jones, 72 F.3d 341, 346 (3d Cir. 1995)
(“Due process requires notice that is reasonably calculated to reach all interested parties,
reasonably conveys all the required information, and permits a reasonable time for a
response.”) (internal quotation marks omitted).
Next, Intertek argues that dismissal of its adversary complaint was premature
because, among other things, the Bankruptcy Court relied on extrinsic evidence—the
Buyback Motion—in reaching its decision. This argument, too, is unpersuasive. The
Bankruptcy Court dismissed Intertek’s complaint on consent, based on Intertek’s own
14
stipulation that “the legal holdings in the [Bankruptcy Court’s] Memorandum Opinion
are dispositive of Intertek’s claims in the Intertek Complaint.” Stip. Regarding Dismissal
of Intertek USA, Inc.’s Compl., J.A. at 6429. Intertek can hardly now object to the
dismissal it procured as premature. Regardless, it has long been the rule of our Circuit
that when a complaint relies on indisputably authentic documents and public records,
examination of those documents and records is proper when considering a motion to
dismiss. See Pension Benefit Guar. Corp. v. White Consol. Indus., Inc., 998 F.2d 1192,
1196 (3d Cir. 1993); see also Sands v. McCormick, 502 F.3d 263, 268 (3d Cir. 2007)
(noting that “judicial proceedings constitute public records”). Thus, to the extent that
consideration of the Buyback Motion, a public record quoted in the Complaint, entered at
all into the Bankruptcy Court’s decision to dismiss the Complaint, there was no error.
Finally, Intertek asserts that the Bankruptcy Court’s interpretation of the Plan and
Buyback Order constitutes an impermissible release of tort claimants’ interests in the
Chartis Proceeds because the release is not clear and the tort claimants did not vote in
favor of the Plan or receive full payment on their claims; that the Bankruptcy Court’s
interpretation of the Buyback Order and Plan violates § 1141 of the Bankruptcy Code
because the Plan seeks liquidation rather than reorganization; and, that the Buyback
Order and Plan effectuate an improper discharge of Intertek’s interests in the Chartis
Proceeds because its claim for indemnification and contribution arose post-petition. We
decline to address the substance of these arguments because they were not raised before
both the Bankruptcy Court and the District Court, and therefore are waived. See In re
15
Ins. Brokerage Antitrust Litig., 579 F.3d 241, 261-62 (3d Cir. 2009); Buncher Co. v.
Official Comm. of Unsecured Creditors of GenFarm Ltd. P’ship IV, 229 F.3d 245, 253
(3d Cir. 2000); In re Trans World Airlines, Inc., 145 F.3d 124, 131-33 (3d Cir. 1998).
*****
We conclude that the bankruptcy documents at issue are unambiguous and were
effectuated according to their plain meaning. We therefore affirm the judgment of the
District Court.
16