THOMAS H. FULTON, Bankruptcy Appellate Panel Judge.
The Liquidation Trustee in six jointly administered chapter 11 cases appeals an order of the bankruptcy court which dismissed his adversary complaint pursuant to Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim upon which relief can be granted.
The main issue presented by this appeal is whether the bankruptcy court erred in dismissing the Appellant's adversary complaint pursuant to Federal Rule of Civil Procedure 12(b)(6). The Appellant is the Liquidating Trustee for the Debtors. In his complaint, the Appellant sought a declaratory judgment that the Appellee, Michigan Trucking LLC, the purchaser of Debtors' assets, was liable to Debtors' insurer for deductibles billed after the asset sale, but related to accidents which occurred prior to the asset sale. The bankruptcy court held that the Appellant failed to state a claim for relief because the Appellee could not be held liable for deductibles which were related to accidents
For the reasons that follow, we affirm the bankruptcy court's May 6, 2011 order dismissing the Appellant's adversary complaint pursuant to Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim for relief.
The Bankruptcy Appellate Panel of the Sixth Circuit has jurisdiction to decide this appeal. The United States District Court for the Western District of Michigan has authorized appeals to the Panel and no party has timely elected to have this appeal heard by the district court. 28 U.S.C. § 158(b)(6), (c)(1). A final order of the bankruptcy court may be appealed as of right pursuant to 28 U.S.C. § 158(a)(1). For purposes of appeal, a final order "ends the litigation on the merits and leaves nothing for the court to do but execute the judgment." Midland Asphalt Corp. v. United States, 489 U.S. 794, 798, 109 S.Ct. 1494, 1497 (1989) (citations omitted). An order dismissing an adversary complaint under Federal Rule of Civil Procedure 12(b)(6) is a final, appealable order. Kaye v. Agripool, SRL (In re Murray, Inc.), 392 B.R. 288, 292 (B.A.P. 6th Cir. 2008).
A bankruptcy court's order dismissing a complaint for failure to state a claim under Federal Rule of Civil Procedure 12(b)(6) is reviewed de novo. "Under a de novo standard of review, the reviewing court decides an issue independently of, and without deference to, the trial court's determination." Menninger v. Accredited Home Lenders (In re Morgeson), 371 B.R. 798, 800 (B.A.P. 6th Cir. 2007) (citing Trenish v. Norwest Bank Minn., N.A. (In re Periandri), 266 B.R. 651, 653 (B.A.P. 6th Cir. 2001)).
Contract interpretation is a matter of law which is reviewed de novo. Bender v. Newell Window Furnishings, Inc., 681 F.3d 253, 259 (6th Cir. 2012); Rhone-Poulenc Basic Chems. Co. v. Am. Motorists Ins. Co., 616 A.2d 1192, 1195 (Del. 1992). The determination of whether a contract, or a term therein, is ambiguous is also a question of law reviewed de novo. Official Comm. of Unsecured Creditors v. Dow Corning Corp. (In re Dow Corning Corp.), 456 F.3d 668, 676 (6th Cir. 2006). Insurance policies are interpreted under principles of contract law. Upjohn Co. v. N.H. Ins. Co., 476 N.W.2d 392 (Mich. 1991).
Although a bankruptcy court's interpretation of its own orders is to be given "significant deference," the standard of review varies depending on the type of order being reviewed or the type of interpretation the bankruptcy court performed. Terex Corp. v. Metro. Life Ins. Co. (In re Terex Corp.), 984 F.2d 170, 172 (6th Cir. 1993). Interpretation of "an agreed order, like a consent decree, is in the nature of a contract, and the interpretation of its terms presents a question of contract interpretation" which is reviewed is de novo. City of Covington v. Covington Landing Ltd. P'ship, 71 F.3d 1221, 1227 (6th Cir. 1995). Despite this standard of review, some measure of deference is still given to the court's interpretation of its order because "few persons are in a better position to understand the meaning of a consent decree than the district judge who oversaw and approved it." Sault Ste. Marie Tribe of Chippewa Indians v. Engler, 146 F.3d 367, 372 (6th Cir. 1988) (citations omitted) (internal quotation marks omitted).
In contrast, a bankruptcy court's interpretation of orders in which it does "not rely on or interpret the Bankruptcy Code" is reviewed under an abuse of discretion standard. Terex Corp., 984 F.2d at 172. This standard of review applies to a bankruptcy court's interpretation of a confirmation order. Id.
On October 14, 2008, six related entities, Gainey Corporation, Gainey Transportation Services, Inc., Super Service, Inc., Freight Brokers of America, Inc., Lester Coggins Trucking, Inc., and Gainey Insurance Services, Inc. (collectively "Debtors") filed voluntary petitions for relief under chapter 11 of the Bankruptcy Code in the Western District of Michigan. Pursuant to an October 16, 2008 bankruptcy court order, the cases are being jointly administered.
The Debtors are privately held Michigan corporations which "primarily provide[d] nationwide over the road trucking, freight hauling, and related freight brokerage and logistics services" in the U.S. and Canada. (Disclosure Statement at § 3.1, Bankr. Case No. 08-09092, ECF No. 1507.) Collectively, the Debtors employed "approximately 1,700 people" and "operate[d] a total ongoing fleet of approximately 1,600 tractors and 3,200 trailers." (Id.) Given the nature of their operations, "the Debtors incur[red] claims on account of bodily injuries, property damages, and claims for worker's compensation suffered in connection with automobile accidents involving the Debtors' Rolling Stock and matters involving its employees." (Id. at § 3.4(d).) At all times pre- and post-petition, the Debtors maintained liability insurance with several different insurers to cover these claims. The Debtors administered the insurance claims themselves through Gainey Insurance Services, Inc.
On October 9, 2009, the Debtors filed a motion to sell substantially all of their assets in accordance with 11 U.S.C. § 363(f). The sale was to occur through use of a bidding process whereby potential purchasers would submit proposed asset purchase agreements. Any assets not purchased by the successful bidder would remain part of the Debtors' bankruptcy estates. In seeking authority to sell its assets, the Debtors sought to assume certain executory contracts and leases and then assign them to the purchaser.
The Debtors filed their First Amended Joint Plan of Reorganization on October 13, 2009, ("Plan"). As part of the plan confirmation process, a Liquidation Trust was established, and Barry P. Lefkowitz ("Appellant") was appointed as the Liquidation Trustee. Creation of the Liquidation Trust was provided for in the Plan, and the Plan incorporated by reference the Liquidation Trust Agreement ("Trust Agreement"). The Liquidation Trust was set up primarily to administer any assets not sold prior to confirmation, pursue causes of action and insider causes of action that were not sold, resolve any objections to claims and interests, wind down the Debtors' affairs, and "pay expenses of the Liquidation Trust, Claims and Interests arising under . . . the Plan, including distributions to all Administrative Expense Claims . . . ." (Plan at § 5.3(c), Bankr. Case No. 08-09092, ECF No. 1506.)
In addition to providing for the creation of the Liquidation Trust, the Plan also provided that certain assets would not be sold through the bidding process but would instead be transferred to the Liquidation Trust. These assets included, among other things, "the Excluded Cash." As defined by the Plan, the "Excluded Cash" consisted of
(Id. at § 1.45.). The Plan further provided that the Appellant was required to pay, from the $5,000,000.00 excluded cash, "[a]llowed Administrative Expense Claims representing liabilities incurred in the ordinary course of business by the Debtors postpetition, to the extent not already paid by the Debtors prior to the Effective Date, . . . in full." (Id. at § 2.2.)
The Plan incorporated the Trust Agreement by reference and specifically designated the Appellant as the Liquidation Trustee. The Trust Agreement recognized that the Plan contemplated creation of the Liquidation Trust and that the Trust Agreement was executed to facilitate implementation of the Liquidation Trust as contemplated under the Plan. Section 2.05 of the Trust Agreement stated that "[t]he Liquidation Trustee accepts the Trusts Assets and agrees to hold and administer the Trust Assets for the benefit of the Beneficiaries, subject to the terms and conditions of this Trust Agreement, the Plan and the Confirmation Order." (Id. at § 2.05.)
On November 2, 2009, Michigan Trucking Acquisition, LLC, ("Appellee") and the Debtors entered into an Asset Sale and Purchase Agreement ("APA") which provided for the sale of substantially all of the Debtors' assets to the Appellee for $77,800,000.00. The purchase included all contracts, other than those that had been rejected. The assumed contracts included insurance contracts covering bodily injuries and property damage that were in existence at the time of the closing of the sale. The assumed insurance contracts were for the policy year June 1, 2009 through May 31, 2010. The policies contained a "Deductible Liability Coverage Endorsement" which provided:
(Deductible Liability Coverage Endorsement at 2, Adv. Proc. No. 10-80483, ECF No. 21-5.) According to the Deductible Endorsement Schedule, the deductible was $10,000.00 per accident.
The Appellee's purchase of the Debtors' assets also included "all credits, prepaid expenses, etc." which included money the Debtors had given to the insurer to "be drawn down to satisfy, or partially satisfy the Debtors' obligations to pay the deductible amounts (or other permitted charges under the various insurance policies)." (Mem. Op. at 4-5, Adv. Pro. No. 10-80483, ECF No. 35; APA at § 2.1(a)(vii).) The APA also provided that the Appellee would provide claims service and administer all insurance claims following the closing of the sale.
Section 2.4 of the APA is entitled "Assumption of Assumed Liabilities: Exclusion of Excluded Liabilities." Subsection (a)(i) of that section provides:
(APA at § 2.4(a)(i), Adv. Proc. No. 10-80483, ECF No. 15-1) (emphasis added). The assumption of the assumed liabilities was to take effect upon the closing of the sale. Section 2.4(c) of the APA provided that
(Id. at § 2.4(c).) Neither "liabilities" nor "obligations" were defined in the APA.
The auction of the Debtors' assets was conducted on November 16, 2009, at which time the Appellee was deemed the successful bidder. The bankruptcy court entered an order approving the sale and the APA on November 19, 2009 ("Sale Order").
(Sale Order at ¶¶ 23 and 24, Bankr. Case No. 08-09092, ECF No. 1652.) Paragraph 28 of the Sale Order further provides that "[n]othing contained in any order of any type or kind entered in (i) this chapter 11 case or (ii) any related proceeding subsequent to entry of this Order shall conflict with or derogate from the provisions of the APA or the terms of this Order." (Id. at ¶ 28.) Paragraph 38 provided that "[t]o the extent there are any inconsistencies between the terms of this Order and the APA . . ., the terms of this Order shall control." (Id. at ¶ 38.) The sale of the Debtors' assets to the Appellee closed on December 22, 2009.
On December 31, 2009, the bankruptcy court entered an order confirming the Plan ("Confirmation Order"). The Confirmation Order referenced the sale of the Debtors' assets to the Appellee as well as the establishment and operation of the Liquidation Trust. Pursuant to ¶ 47 of the Confirmation Order, "the terms of the Plan and this Confirmation Order shall be deemed binding upon the Debtors, the Reorganized Debtor, the Liquidation Trust and Liquidation Trustee . . . ." (Id. at ¶ 47.)
On July 19, 2010, the Appellant, on behalf of the Liquidation Trust, filed an adversary proceeding against the Appellee seeking a declaratory judgment that the Appellee is required to reimburse the insurer for deductibles related to "auto liability or cargo liability claims, based on mishaps involving the Debtors' tractors or trailers" that occurred prior to the closing of the sale to the Appellee. (Resp. to Mot. to Dismiss at 4, Adv. Proc. No. 10-80483. ECF No. 21.) According to the Appellant's complaint, "none of the Obligations [to pay the deductible] was (i) asserted, known or in existence prior to the Closing [of the Sale to the Appellee], and/or (ii) reported on the open accounts payable listings of the Debtors (as of the date of Closing provided to the Liquidation Trustee by the Debtors." (Adv. Cplt. at ¶ 30, Adv. Proc. No. 10-80483, ECF No. 1.) The Appellant also alleged that any deductibles that became reimbursable after the sale was finalized were not obligations that arose prior to the closing of the sale. The Appellant sought an order requiring the Appellee to administer the liability claims and to pay the insurer the reimbursement obligation associated with the deductible endorsement. Lastly, the Appellant sought damages for the Appellee's alleged failure to administer the obligations as liability claims under the insurance contracts when they came due.
On August 18, 2010, the Appellee filed a motion to dismiss the adversary proceeding pursuant to Federal Rule of Civil Procedure 12(b)(6). The Appellee asserted that the APA and the Sale Order specifically provided that the Appellee would have no successor liability and would be responsible for contractual liabilities or obligations only to the extent such liabilities and obligations first arose and were related to periods subsequent to closing. Because the deductibles at issue were tied to accidents that occurred prior to the closing of the sale, the Appellee claimed that the deductibles arose out of pre-closing accidents for which the APA and the Sale Order specifically provided the Appellee was not liable. The Appellant filed a response to the Appellee's motion to dismiss on October 25, 2010.
The bankruptcy court conducted a hearing on the Appellee's motion to dismiss on November 16, 2010. On May 6, 2011, the bankruptcy court issued an opinion and order granting the Appellee's motion. In the opinion, the bankruptcy court framed the determining issue as follows:
(Mem. Op. at 2, Adv. Proc. No. 10-80483, ECF No. 35.) After examining the APA, the Sale Order, the Plan and the Confirmation Order, the bankruptcy court concluded that the Appellee's obligation to reimburse the insurer for the deductible arose when the tort or loss occurred. Consequently, the bankruptcy court determined that any deductibles that were related to pre-closing losses were pre-closing obligations for which the Appellee was not responsible under the terms of the APA and the Sale Order.
In making its determination, the bankruptcy court stated that it "is called upon to interpret its orders and determine when a claim `first arises,' when an `obligation' begins its existence, or when a `liability is created." (Mem. Op. at 16, Adv. Proc. No. 10-80483, ECF No. 35.) The bankruptcy court began its analysis by looking to the Bankruptcy Code to determine when a claim first arises within the meaning of the Plan, the Confirmation Order, and the Sale Order. After reviewing the definitions of "claim" and "debt" as set forth in 11 U.S.C. § 101, the bankruptcy court concluded that because "debt" is defined as "liability on a claim," "claim" and "debt" are coextensive terms. Accordingly, the court concluded that
(Mem. Op. at 15, Adv. Proc. No. 10-80483, ECF No. 35) (citing Sale Order at ¶ 24, APA §§ 2.4(a)(1) and (c), 5.1(a)(vii) and 10.2(b), and Plan §§ 1.3 and 2.2). The court also stated that "amount," "liability," "expense," or "obligation" are all synonyms for the term "debt". (Mem. Op. at 16, Adv. Proc. No. 10-80483, ECF No. 35.)
Relying on the decision of the U.S. Court of Appeals for the Third Circuit in Jeld-Wen, Inc. v. Van Brunt (In re Grossman's Inc.), 607 F.3d 114 (3d Cir. 2010), the bankruptcy court stated that "a `claim' can exist under the Code before a right to payment exists under state law." (Mem. Op. at 20, Adv. Proc. No. 10-80483, ECF No. 35.) Consequently the bankruptcy court determined that if a "claim" existed before the closing of the sale, any resulting obligation to reimburse the insurer for the deductible also existed before the sale closed. Conversely, if a "claim" did not exist until after the sale closed, then any resulting obligation to pay the deductible did not exist until that time either. Because all of the claims at issue in this case existed before the sale of the Debtors' assets to the Appellee was final, the bankruptcy court concluded that the Appellee was not obligated to "pay the related and coextensive debts, whether to the tort claimants or the insurance company for the deductible amounts." (Id. at 21.) In a footnote, the bankruptcy court also noted that the Appellee's obligation to administer the insurance claims did not obligate it to pay "related losses or deductible amounts out of its own pocket." (Id. at 21, n. 9.)
The bankruptcy court also determined that analyzing the issue under contract principles would "yield[] the same result." (Id. at 21.) Because a confirmed plan is a new contract between the debtor and its creditors, a court is required to interpret a confirmed plan "`under long-settled contract law principles.'" (Id.) (citing Official Comm. of Unsecured Creditors v. Dow Corning Corp. (In re Dow Corning, Corp.), 456 F.3d 668, 676 (6th Cir. 2006)). If there is no ambiguity in a confirmed plan, then a court must enforce it as written.
In interpreting the Plan in this particular case, the bankruptcy court stated that it was required to look to the Confirmation Order, the Plan, the Sale Order, and the APA because they were "all intertwined." (Mem. Op. at 21, Adv. Proc. No. 10-80483, ECF No. 35) (citing Wonderland Shopping Ctr. Venture Ltd. P'ship v. CDC Mortg. Capital, Inc., 274 F.3d 1085, 1092 (6th Cir. 2001)). If no ambiguity existed in any of those documents, then the court stated it was obligated to enforce it according to the terms. Because all of the relevant documents provided that the Appellee would only be responsible for liabilities or obligations that arose and were related to events occurring after the sale closed and because the documents also provided that the Appellee would not be liable for any claims against the Debtors which arose prior to the closing of the sale, the bankruptcy court determined that
(Mem. Op. at 22, Adv. Proc. No. 10-80483, ECF No. 35.)
The bankruptcy court also determined that the Appellant, as the Liquidation Trustee, was bound by the court's prior orders, the Plan, the Confirmation Order and the Trust Agreement. Because (1) the Plan created the Liquidation Trust, incorporated the Trust Agreement, and designated the Appellant as the Liquidation Trustee, (2) the Trust Agreement referenced the Plan, (3) the Plan contemplated the Sale Order which incorporated the APA, (4) the Confirmation Order acknowledged the Liquidation Trust and (5) § 2.05 of the Trust Agreement specifically stated that the Appellant would "hold and administer the Trust Assets . . . subject to the terms and conditions of this Trust Agreement, the Plan, and the Confirmation Order," the Appellant was bound by the terms of all the relevant documents and orders. Consequently, the bankruptcy court concluded that the Appellant was also bound by the court's interpretation of its prior orders.
Because the terms of the APA, the Sale Order, the Plan, and the Confirmation Order were unambiguous and because the Appellant was bound by the provisions in those documents, the bankruptcy court concluded that the Appellant's complaint failed to state a cognizable claim for relief. Accordingly, the bankruptcy court granted the Appellee's motion to dismiss the complaint pursuant to Federal Rule of Civil Procedure 12(b)(6).
The Appellant filed a timely notice of appeal of the bankruptcy court's opinion and order on May 19, 2012.
The issue before the Panel is whether the bankruptcy court erred in dismissing the Appellant's complaint on the grounds that the APA, the Sale Order, the Plan and the Confirmation Order established that the Appellee had no obligation to reimburse the insurer for deductibles related to accidents that occurred prior to the sale of the Debtors' assets to the Appellee.
Federal Rule of Civil Procedure 12(b)(6) permits a defendant to move for dismissal of a complaint prior to filing a responsive pleading.
In the face of a Rule 12(b)(6) motion, a complaint must be construed in the light most favorable to the plaintiff, the allegations of the complaint must be accepted as true, and all reasonable inferences must be drawn in favor of the plaintiff. Tam Travel, Inc. v. Delta Airlines, Inc. (In re Travel Agent Comm'n Antitrust Litig.), 583 F.3d 896, 903 (6th Cir. 2009). "`[T]o survive a motion to dismiss, the complaint must contain either direct or inferential allegations respecting all material elements to sustain a recovery under some viable legal theory.'" Id. (quoting Eidson v. State of Tenn. Dep't of Children's Servs., 510 F.3d 631, 634 (6th Cir. 2007)). The court need not, however, "accept as true legal conclusions or unwarranted factual inferences, and conclusory allegations or legal conclusions masquerading as factual allegation will not suffice." Id. (internal citations omitted) (internal quotation marks omitted.)
To determine whether the Appellant's complaint failed to state a plausible claim for relief, the Panel must determine if the bankruptcy court correctly concluded that the obligation to reimburse the insurer for any deductibles arises when the accident occurred, rather than when the deductible becomes payable under the Deductible Liability Endorsement.
In the APA, the Appellee agreed to assume liabilities and obligations under the insurance contracts, "but only to the extent such liabilities and obligations first arise and are related to periods subsequent to the closing." (APA at § 2.4(a)(i), Adv. Proc. No. 10-80483, ECF No. 15-1.) (emphasis added). The Deductible Liability Endorsement provides that if the insurer pays the deductible, "[the insured] must reimburse the [insurer] for the deductible or the part of the deductible [the insurer] paid." (Deductible Liability Endorsement at 2, Adv. Proc. No. 10-80483, ECF No. 21-5.)
Neither the APA nor the Sale Order defined when liabilities and obligations arose. Additionally, the copy of the insurance policy submitted by the Appellee in the main bankruptcy case did not define when liabilities or obligations arose. To answer the question of when the obligation to pay deductibles arose, the bankruptcy court analogized the terms "obligation" and "liability" to the terms "claim" and "debt." Under the Bankruptcy Code,
11 U.S.C. § 101(5) and (12). The Bankruptcy Court concluded that the insurer's right to payment was identical to a claim as defined by the Bankruptcy Code. Using that analysis the insurer's right to payment on its claim arose at the time the debt was created, which was at the time the accident occurred. Since the Appellee only assumed liability for liabilities and obligations which arose subsequent to the closing, the insurer's right to payment was from the Debtors not from the Appellee.
The Appellant raises several arguments as to why the bankruptcy court erred in holding that the Appellee had no liability to pay deductibles related to accidents which occurred prior to the sale of the Debtors' assets to the Appellee. The Panel will address each of the arguments below.
Section 16.1 of the APA contained a "choice of law" provision which required the APA to be construed using Delaware law. The Appellant argues that the bankruptcy court's failure to explicitly cite Delaware law resulted in an incorrect conclusion. While it is true that the bankruptcy court did not explicitly reference Delaware law, the Appellant's argument fails because the application of Delaware law results in the same conclusion reached by the bankruptcy court. Applying Delaware law, unambiguous contract terms are to be given their ordinary and plain meaning. Eagle Indus., Inc. v. DeVilbiss Health Care, Inc., 702 A.2d 1228, 1232 (Del. 1997). When terms are not defined within a contract, "[u]nder well-settled case law, Delaware courts look to dictionaries for assistance in determining the plain meaning of" undefined terms. Lorillard Tobacco Co. v. Am. Legacy Found., 903 A.2d 728, 738 (Del. 2006).
According to Black's Law Dictionary, "liability" is defined as
Black's Law Dictionary (9th ed. 2009). "Debt" in turn is defined as "liability on a claim; a specific sum of money due by agreement or otherwise." Id. "Claim" is defined as "[t]he assertion of an existing right; any right to payment or to an equitable remedy, even if contingent or provisional." Id. "Claim" can include a matured claim, an unliquidated claim, or a contingent claim. Id.
Id. The definition of "obligation" references "duty." As defined, "duty" means "[a] legal obligation that is owed or due to another and that needs to be satisfied; an obligation for which somebody else has a corresponding right." Id.
Using these definitions, under Delaware law, a party becomes liable to another party when the party first has a legal obligation to the other party. The Debtors' insurance contracts stated that the deductible to be paid by the insured was $10,000 per accident. The insurance policies further provided that in settling a claim related to an accident, the insurer could pay the deductible. The policy further states: "If this happens, you [the insured] must reimburse us for the deductible or the part of the deductible we [the insurer] paid." Deductible Liability Coverage Endorsement ¶ 2. Under the insurance contract, the Debtors became legally obligated to their insurers at the time the accident occurred because every accident gave the Debtors' insurer a right to collect the deductible either directly or after the insurer settled the claim. Under either Delaware law or general contract law, the insurer's right to collect deductibles related to accidents which occurred prior to the sale was from the Debtors. Since the conclusion reached by the bankruptcy court is the same regardless of whether Delaware law was cited, the bankruptcy court's ruling is not erroneous.
Paragraph 16 of the Sale Order states that after closing, "the Debtors shall be relieved, pursuant to section 365(k) of the Bankruptcy Code, from any further liability under the Assumed Contracts." Section 365(k) of the Bankruptcy Code provides that "[a]ssignment by the trustee to an entity of a contract or lease assumed under this section relieves the trustee and the estate from any liability for any breach of such contract or lease occurring after such assignment." 11 U.S.C. § 365(k). Section "365(k) relieves a debtor of liability for contractually created obligations only upon a complete assignment of rights and duties under the contract." 2 Norton Bankr. L. & Prac. 3d § 46.33 (2012). The Appellant's argument that 11 U.S.C. § 365(k) requires the Appellee to pay deductibles related to accidents which occurred prior to closing is only successful if the deductibles at issue in this case are liabilities arising after the assignment of the contract. For all the reasons set forth above, the bankruptcy court correctly ruled that the liability for the deductibles arose before the Debtors assigned the insurance contracts to the Appellee. To the extent that the insurer is owed deductibles for accidents prior to closing, the bankruptcy court did not err in holding that 11 U.S.C. § 365(k) was inapplicable. The Appellee is only liable for deductibles relating to accidents which occurred after Debtors assigned the insurance contracts to the Appellee.
Section C of the Deductible Liability Coverage Endorsement states "[t]o settle any claim or `suit' [the insurer] may pay all or any part of any deductible shown in the Schedule. If this happens, you must reimburse us for the deductible or the part of the deductible we paid." The Appellant argues, based on this language, that the insured has no obligation to the insurer until the insurer seeks reimbursement for a deductible the insurer paid in settling a claim. The Appellant's argument ignores the plain language of the section he quotes. The insurer may elect to pay the deductible to settle a claim. The claim exists at the time the accident occurs. The insured either pays the deductible prior to the settlement of the claim or after the settlement of the claim when the insurer seeks reimbursement, but clearly, the obligation to pay the deductible arises at the same time as the claim arises. The bankruptcy court did not err when it concluded that the insurance contract did not give the insurer a right to collect deductibles related to accidents which occurred prior to the sale from the Appellee.
The APA stated that the Appellee's purchase of the Debtors' assets included "all credits, prepaid expenses, etc." which included monies the Debtors had prepaid to the insurer to "be drawn down to satisfy, or partially satisfy the Debtors' obligations to pay the deductible amounts (or other permitted charges under the various insurance policies)." (Mem. Op. at 4-5, Adv. Pro. No. 10-80483, ECF No. 35; APA at § 2.1(a)(vii)..) The APA also provided that the Appellee would provide claims service and administer all insurance claims following the closing of the sale. While the Panel can only speculate as to the specific purpose of this language, as has been set forth previously, all of the documents at issue in this case firmly establish that the Appellee was not assuming obligations or liabilities related to pre-sale accidents or injuries. Additionally, in the paragraph describing the purchase of the prepaid expenses, there is no qualifying language stating that the deposits the Appellee was purchasing were to be used for any type of liability, let alone liabilities arising out of accidents which occurred prior to the asset sale. The prepaid expenses were also not designated as "excluded assets." Under both Michigan and Delaware law, a court cannot enforce an implied contractual obligation "when the express terms of the contract do not suggest" that the implied obligation was inadvertently omitted. Cincinnati SMSA Ltd. P'ship v. Cincinnati Bell Cellular Sys., Inc., No. C.A. 15388, 1997 WL 525873, *5 (Del. Ch. Aug. 13, 1997); Clark Bros. Sales Co. v. Dana Corp., 77 F.Supp. 837, 843 (E.D. Mich. 1999). Nor can a court enforce an implied contractual obligation when "the implied obligation sought to be enforced conflicts with the express terms" of the written contract. Cincinnati SMSA Ltd. P'ship, 1997 WL 525873 at *5; Scholz v. Montgomery Ward & Co., 468 N.W.2d 845, 849 (Mich. 1991).
The Appellant alleges that "it is appropriate to construe the language of one document with the language of another only in the absence of an indication of a contrary intention and only if the documents are contracts executed on the same date among the same parties that deal with related matters." (Appellant Br. at 47.) The cases cited by the Appellant, however, do not support this conclusion. In Simon v. Navellier Series Fund, No. 17734, 2000 WL 1597890 (Del. Ch. Oct. 19, 2000), the court recognized that "in construing the legal obligations created by [a] document, it is appropriate for the court to consider not only the language of that document but also the language of contracts among the same parties executed or amended as of the same date that deal with related matters." Id. at *7 (citing Crown Brooks Corp. v. Bookstop, Inc., CIV. A. No. 11255, 1990 WL 26166 (Del. Ch. Feb. 28, 1990)). The bankruptcy court in this case examined what it called "interrelated writings" including the Confirmation Order, the Plan, the Sale Order, and the APA, in making its determination that there is "nothing plausible" to support the Appellants's position that the Appellee is liable for liabilities or obligations that arose prior to the closing of the sale. Although not executed on the same day, all of these documents were relevant to the issue before the bankruptcy court.
Moreover, when considering a Rule 12(b)(6) motion to dismiss, "the court primarily considers the allegations in the complaint, although matters of public record, orders, items appearing in the record of the case, and exhibits attached to the complaint, also may be taken into account." Amini v. Oberlin College, 259 F.3d 493, 502 (6th Cir. 2001) (citation omitted). "[C]ourt filings and docket entries" are considered matters of public record which may be consulted in deciding a Rule 12(b)(6) motion. Taylor v. Javitch, Block & Rathbone, LLC, No. 1:12CV708, 2012 WL 2375494, *2 n.2 (N.D. Ohio June 22, 2012); Malin v. JPMorgan, No. 3:11-CV-554, 2012 WL 899946, *3 (E.D. Tenn. Mar. 12, 2012).
The Panel finds that none of the arguments raised by the Appellant demonstrate that the bankruptcy court erred in dismissing the Appellant's complaint for failure to state a claim.
For the reasons set forth herein, the Panel affirms the bankruptcy court's May 6, 2011 order dismissing the Appellant's complaint pursuant to Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim upon which relief can be granted.
