United States District Court, S.D. California
In Re SULLIVAN INTERNATIONAL GROUP, INC., Debtor.
CERTAIN UNDERWRITERS AT LLOYD'S, LONDON, subscribing to Professional Liability Insurance Policy No. B1216PRW167000, Appellees. CHRISTOPHER R. BARCLAY, Chapter 7 Trustee, Appellant,
William Q. Hayes, United States District Court.
matter before the Court is the Motion for Withdrawal of
Reference (ECF No. 1).
March 8, 2019, Plaintiff Christopher R. Barclay, Chapter 7
Trustee, (“Trustee”) initiated this proceeding in
the United States Bankruptcy Court for the Southern District
of California (“Bankruptcy Court”) by filing a
complaint against Defendant Brit UW Limited
(“Brit”) for (1) breach of contract and (2)
turnover of estate property. (Ex. A to Def.'s Motion for
Withdrawal of Reference, ECF No. 1 at 34, 42). Plaintiff
Trustee alleges that Defendant Brit breached a professional
liability insurance policy by refusing to provide coverage
for a claim by Plaintiff Trustee's against 3C Advisors
& Associates, Inc. (“3C”) and refusing to pay
Plaintiff Trustee the amount due on the 3C Judgment.
Id. at 42. Plaintiff Trustee alleges that he is
entitled to the turnover of $2, 386, 535.00 under the
insurance policy because the sum “is property of the
Debtor's bankruptcy estate that is in Defendant
[Brit's] possession” and “is matured, payable
on demand, or payable on order.” Id. at 43.
April 22, 2019, Defendant Brit filed a Motion to Withdraw the
Reference of the Adversary Proceeding. (Bankr. Court ECF No.
12). On May 9, 2019, Plaintiff Trustee filed an Opposition to
Defendant Brit's Motion to Withdraw the Reference.
(Bankr. Court ECF No. 17). On May 16, 2019, Defendant Brit
filed a Reply in Support of the Motion to Withdraw the
Reference. (Bankr. Court ECF No. 19).
29, 2019, the Clerk of the Bankruptcy Court referred and
transmitted the Motion for Withdrawal of Reference to this
Court. (ECF No. 1-2). On June 3, 2019, this Court issued a
Minute Order directing any Responses in Opposition to be
filed on or before July 8, 2019 and any Replies to be filed
on or before July 15, 2019. (ECF No. 2). On July 8, 2019,
Plaintiff Trustee filed an updated Response in Opposition.
(ECF No. 3). On July 15, 2019, Defendant Brit filed an
updated Reply. (ECF No. 4).
December 2014, the Debtor Sullivan International Group, Inc.
retained 3C as its financial advisor. Fewer than four months
later, 3C informed the Debtor that it was unsuccessful in
finding potential buyers for the Debtor's business and
other sources of capital financing. 3C advised the Debtor to
file for protection under Chapter 11 of the Bankruptcy Code.
On April 6, 2015, the Debtor commenced a bankruptcy case
under Chapter 11. (Bankr. Ct. Proc. No. 1).
5, 2015, the Debtor filed an ex parte application with the
Bankruptcy Court seeking authority to employ 3C as
Debtor's financial advisor in its bankruptcy case.
(Bankr. Ct. Proc. No. 82). On May 29, 2015, the Bankruptcy
Judge issued an Order approving of 3C's employment by
Debtor in its bankruptcy case. (Bankr. Ct. Proc. No. 158).
than three months later, Debtor's business collapsed. On
September 11, 2015, the Bankruptcy Judge issued an Order
converting the Debtor's case from Chapter 11 to Chapter
7. (Bankr. Ct. Proc. No. 472). On September 14, 2015,
Christopher R. Barclay was appointed as Chapter 7 Trustee of
the Debtor. (Bankr. Ct. Proc. No. 481).
February 16, 2017, Plaintiff Trustee initiated an adversary
proceeding in Bankruptcy Court against 3C alleging claims for
professional negligence, breach of fiduciary duty, and unjust
enrichment. (Bankr. Ct. Proc. No. 846). At the time Plaintiff
Trustee filed the lawsuit, 3C was insured under a policy
issued by Defendant Brit for the period of July 27, 2016 to
July 27, 2017. (Ex. B, ECF No 1 at 79; Barclay Decl. ¶
6, ECF No. 1-5 at 2). On February 21, 2017, 3C tendered
defense of the lawsuit to Defendant Brit after receipt of
Trustee's Summons and Complaint. On March 9, 2017,
Defendant Brit acknowledged the claim. On April 11, 2017,
Defendant Brit declined coverage for the lawsuit under the
8, 2018, Plaintiff Trustee and 3C entered into a Settlement
Agreement, in which 3C stipulated to entry of judgment in the
amount of $2, 386, 535. On December 14, 2018, the Bankruptcy
Court issued an Order approving the Settlement Agreement and
entering judgment in favor of Plaintiff Trustee and against
3C in the amount of $2, 386, 535.00. (Ex. B, ECF No. 1 at
73-74). On January 25, 2019, Defendant Brit requested that
Defendant Brit honor the insurance policy and provide
coverage for the judgment. On February 26, 2019, Defendant
Brit declined insurance coverage for the judgment.
March 8, 2019, Plaintiff Trustee initiated this proceeding by
filing a complaint against Defendant Brit in Bankruptcy
Court. (Ex. A to Def.'s Motion for Withdrawal of
Reference, ECF No. 1 at 34). On April 22, 2019, Defendant
Brit filed a Motion to Withdraw the Reference. (Bankr. Court
ECF No. 12). On May 29, 2019, the Clerk of the Bankruptcy
Court referred and transmitted Defendant Brit's Motion
for Withdrawal of Reference to this Court. (ECF No. 1-2).