"You can run, but you can't hide."
The Barton doctrine is a rule of law that says that if a Court has appointed a receiver, then you cannot sue that receiver without leave of that Court. The Barton doctrine extends to court-appointed officers in bankruptcy proceedings. Simple enough. It seems.
MF Global was a policyholder. It had many claims against it. MF Global filed for bankruptcy, the claims against MF Global were settled and a Bankruptcy Judge approved the settlement. MF Global's plan administrator, appointed by the Bankruptcy Court, participated in the settlements.
Rather than fund the settlements, of which it seems they may have been aware during settlement negotiations or at least they certainly became aware of the Bankruptcy Court's Order approving the settlements in any case, MF's E&O liability insurance carriers sought refuge in Bermuda. In Bermuda, they convinced a Bermuda judge to enjoin MF from suing them to pay for the settlements back in the U.S. and to order arbitration in Bermuda instead.
These are the absconding defendants:
- Allied World Assurance Company Ltd.;
- Iron–Starr Excess Agency Ltd.;
- Ironshore Insurance Ltd.; and
- Starr Insurance & Reinsurance Limited.
To say again, at the time the carriers filed their lawsuit in Bermuda, they were involved in MF Global's bankruptcy proceedings in the United States. They went to Bermuda anyway.
In fact, these carriers had already filed a motion in the Bankruptcy Court to compel arbitration. They successfully petitioned the Bermuda courts to prevent MF Global from responding to the arbitration motion in the United States, however.
The Bankruptcy Court, like MF Global, did not take kindly to what they surely thought of as forum shopping at best, and perhaps other things at worst. MF Global filed a motion in the Bankruptcy Court to hold the carriers responsible under the Barton doctrine.
The Bankruptcy Judge agreed with MF Global, holding that the carriers violated the Barton doctrine when the carriers filed their lawsuit in Bermuda to compel MF Global's plan administrator and the assignee of MF Global's rights under the policies, to arbitrate policy claims in this case. It bears repeating that the carriers did not even request leave to sue from the Bankruptcy Court, which is the Court that happens to have appointed MF Global's administrator.
Further, the Barton doctrine is not simply wielded as a sword, the Bankruptcy Judge held, in effect; it is also a protection against being sued, as in this case.
A case management conference is scheduled in the case for today. Will the carriers try again to go off to Bermuda? Stay tuned.
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