Adelphia Communications Corporation v. U.S. Specialty Insurance Company

UNITED STATES BANKRUPTCY COURT FOR PUBLICATION

SOUTHERN DISTRICT OF NEW YORK

---------------------------------------------------------------x

In re: Chapter 11

ADELPHIA COMMUNICATIONS CORP., et al. Case No. 02-41729 (SHL)

Debtors. (Jointly Administered)

---------------------------------------------------------------x

ADELPHIA COMMUNICATIONS CORP. and

QUEST TURNAROUND ADVISORS, LLC,

Plaintiffs,

vs.

Adv. Pro. No. 19-01027 (SHL)

U.S. SPECIALTY INSURANCE COMPANY,

Defendant.

---------------------------------------------------------------x

MEMORANDUM OF DECISION

A P P E A R A N C E S:

MASINI, VICKERS, RUKSAKIATI & HADSELL, P.C.

Counsel for Adelphia Communications Corp. and Quest Turnaround Advisors, LLC

By: Thomas A. Vickers, Esq.

150 S. Wacker Drive, 24th Floor

Chicago, Illinois 60606

WOLLMUTH MAHER & DEUTSCH LLP

Counsel for Adelphia Communications Corp. and Quest Turnaround Advisors, LLC

By: Paul R. DeFilippo, Esq.

Lyndon M. Tretter, Esq.

500 Fifth Avenue

New York, New York 10010

CLYDE & CO US LLP

Counsel for U.S. Specialty Insurance Company

By: Scott Schwartz, Esq.

405 Lexington Avenue, 16th Floor

New York, New York 10174

-and-

By: Douglas M. Mangel, Esq.

1775 Pennsylvania Avenue, N.W., Suite 400

Washington, D.C. 20006

SEAN H. LANE

UNITED STATES BANKRUPTCY JUDGE

Before the Court are cross-motions for summary judgment filed in the above-captioned

adversary proceeding by Adelphia Communications Corp. (“Adelphia”) and Quest Turnaround

Advisors, LLC (“Quest,” and together with Adelphia, the “Plaintiffs”) on the one hand, and by

U.S. Specialty Insurance Company (“U.S. Specialty” or the “Defendant”) on the other. See

Plaintiffs’ Combined Mot. and Supp. Mem. Pursuant to Local Bankruptcy Rule 7056-1, for Entry

of an Order (A) Granting Plaintiffs Summ. J. on Count I of their Compl. (Declaratory J.) (Adv.

Proc. No. 19-01027, Doc. 1, Filed 02/20/19); and (B) Granting Plaintiffs Summ. J. as to Liability

on Count II of their Compl. (Breach of Contract) (Adv. Proc. No. 19-01027, Doc. 1, Filed

02/20/19) [ECF No. 25]1 (the “Plaintiffs’ SJM”); Mem. Of Law in Supp. of Defendant U.S.

Specialty Insurance Company’s Cross Mot. for Summ. J. [ECF No. 26] (“U.S. Specialty SJM”).

Adelphia and Quest seek coverage under an insurance policy issued by U.S. Specialty for certain

defense fees, costs and expenses incurred in Adelphia’s bankruptcy proceeding. U.S. Specialty

argues that coverage is precluded by a fee exclusion contained in that policy.2 For the reasons

set forth below, the Court grants the Plaintiffs’ SJM and denies the U.S. Specialty SJM.

1 Unless otherwise indicated, references in this Decision to docket entries on the Case

Management/Electronic Case Files (“CM/ECF”) system are to Adversary Proceeding No. 19-01027.

2 Per this Court’s Amended Scheduling and Pre-Trial Order, dated August 22, 2019 [ECF No. 20], the issues

have been bifurcated between coverage and damages. The Plaintiffs therefore seek summary judgment on Count 1

of their Complaint and partial summary judgment as to liability only on Court II of their Complaint. See Plaintiffs’

SJM at 1.

BACKGROUND

The material facts set forth in this Decision are not in dispute. See generally Joint

Statement of Undisputed and Material Facts [ECF No. 24] (the “SUF”). In June 2002, Adelphia

and its affiliated debtors filed a voluntary petition for relief under Chapter 11 of the Bankruptcy

Code. See Case No. 02-41729 [ECF No. 1]. Some 15 years ago, the Court confirmed the Fifth

Amended Joint Chapter 11 Plan for Adelphia Communications Corporation and Certain of its

Affiliated Debtors (the “Plan”). See SUF ¶ 1. The Plan became effective shortly thereafter. See

SUF ¶ 2.

The Plan dissolved Adelphia’s Board of Directors and vested the rights, powers and

executive authority of the Board in a new fiduciary known as the “Plan Administrator.” See SUF

¶ 2. After confirmation, Quest and Adelphia executed a Plan Administrator Agreement (the

“Plan Administrator Agreement”) that retained Quest as the Plan Administrator. See SUF ¶ 3;

see also Plan Administrator Agreement, attached as Exhibit A to the SUF.3 The Plan

Administrator Agreement obligates Adelphia to indemnify Quest for any expenses that Quest

incurs in a proceeding relating to the Plan Administrator Agreement, including issues dealing

with Quest’s role as the Plan Administrator. See SUF ¶ 6 (citing Plan Administrator Agreement,

Section 4.7(b)).4

3 The SUF states that the Plan Administrator Agreement was entered into on February 12, 2017. See SUF ¶

3. But as the Plan Administrator Agreement is dated February 12, 2007, see Plan Administrator Agreement at

Preamble, the Court assumes the 2017 date is a typographical error.

4 That section of the Plan Administrator Agreement provides that:

[a]s a material part of the consideration for the Plan Administrator to furnish its services under this

Agreement, in the event that any Quest Person becomes involved in any capacity in any claim,

suit, action, proceeding, or investigation (including, without limitation, any shareholder or

derivative action or arbitration proceeding) . . . in connection with any matter in any way relating

to this Agreement or arising out of the matters contemplated by this Agreement (including, but not

limited to, Quest’s role as Plan Administrator or the role of any Quest Person as a Governor,

officer or director of any Debtor), the Debtors (to the extent services are not services for the

Contingent Value Vehicle described in the immediately succeeding parenthetical) and the

In early 2007, U.S. Specialty began insuring Quest in its capacity as Plan Administrator

under a series of insurance policies. See SUF ¶¶ 7-8. The policy currently at issue is the

Directors, Officers and Organization Liability Insurance Policy No. 14-MGU-10-A20695 (the

“Policy”),5 which was initially issued for the period from January 5, 2010 to January 5, 2012 and

was subsequently extended to “TBD plus 6 (six) years.” SUF ¶¶ 7-9 (citing Policy at

Declarations and quoting Policy at Endorsement No. 42).6 Under the Policy, Quest qualifies as an

Original Insured Organization7 and Adelphia is listed as an Additional Insured Organization.

See SUF ¶¶ 13-14; Policy, Endorsement No. 15, Section 1. The Policy defines an Insured

Organization as “the Original Insured Organizations, but solely in their capacity as Plan

Administrator for [Adelphia]. Insured Organization will also include the Additional Insured

Organizations . . . .” Policy at Endorsement No. 15, Section 2. The Policy also provides for

coverage if Adelphia is obliged to indemnify Quest under the Plan Administrator Agreement. See

Policy at Endorsement No. 15, Section (4); see also SUF ¶ 11.8

Contingent Value Vehicle (to the extent services are Administrative Services or other services

being performed for the Contingent Value Vehicle pursuant to a written request therefor by the

CVV Trustees) agree to indemnify, defend and hold each such Quest Person harmless to the

fullest extent permitted by law, from and against any losses, claims, damages, liabilities and

expenses in connection with any matter in any way relating to this Agreement or arising out of the

matters contemplated by this Agreement (including, but not limited to, Quest's role as Plan

Administrator or the role of any Quest Person as a Governor, officer or director of any Debtor),

except to the extent that it shall be determined by a court of competent jurisdiction in a judgment

that has become final in that it is no longer subject to appeal or other review that such losses,

claims, damages, liabilities and/or expenses resulted primarily from the willful misconduct, gross

negligence, bad faith, or fraud of that Quest Person.

Plan Administrator Agreement, Section 4.7(b).

5 A copy of the Policy is attached as Exhibit B to the SUF.

6 The Policy is the second renewal of the policy first issued on January 5, 2007. See SUF ¶ 8.

7 Terms defined in the Policy are in boldface type in this Decision.

8 Endorsement No. 15 of the Policy states that “if [Adelphia] is required to pay Loss to satisfy its indemnity

obligations to an Insured Organization . . . pursuant to Section 4.7 . . . of the [Plan Administrator Agreement], this

Policy will afford coverage for such Loss, subject always to this Policy’s terms and conditions (including those set

forth in this endorsement).” Policy at Endorsement No. 15, Section (4).

The basic coverage grant of the Policy provides that U.S. Specialty “will pay to or on

behalf of the Insured Organization [any] Loss arising from Claims first made against it during

the Policy Period . . . for Wrongful Acts.” Policy at Insuring Agreement (B); see also SUF ¶ 10.

Under the Policy, a Loss includes Defense Costs, which are the “reasonable legal fees, costs and

expenses, consented to by the Insurer . . . resulting from the investigation, adjustment, defense or

appeal of a Claim against an Insured.” Policy at Definitions (C) and (J). A Wrongful Act

includes a Professional Services Wrongful Act, which means “any actual or alleged act, error,

misstatement, misleading statement, omission or breach of duty committed or allegedly

committed in rendering or failing to render Professional Services.” Policy at Endorsement No.

15; see also SUF ¶ 18. Professional Services are, in turn, defined as “those services that the Plan

Administrator is obligated to perform pursuant to the [Plan Administrator Agreement].” Policy

at Endorsement No. 15, Section 1; see also SUF ¶ 19. A Claim includes, among other things,

“(1) any oral or written demand, including any demand for non-monetary relief, [and] (2) any

civil proceeding commenced by service of a complaint or similar pleading.” Policy at Definition

(B); see also SUF ¶ 16. As applied to the current dispute then, the Policy provides coverage to

Quest for legal fees and costs for a claim made against it for an alleged breach of duty in its

providing of services as Plan Administrator.

Endorsement No. 15 excludes from coverage “any payment of Loss in connection with a

Claim arising out of, based upon or attributable to any fee or other compensation due or allegedly

due in return for any service provided pursuant to the [Plan Administrator Agreement].”9 Policy

at Endorsement No. 15, Section 5 (the “Fee Exclusion”); see also SUF ¶ 12.

9 The base form of the Policy excludes coverage for any “Loss in connection with a Claim . . . for any actual

or alleged breach of contract or agreement. . . .”, thereby eliminating coverage for breach of contract claims. Policy

at Exclusion (P). But Endorsement No. 15 amends this breach of contract exclusion so that it “will not apply to

Claims for Professional Services Wrongful Acts.” Policy at Endorsement No. 15, Section (7).

In February 2018, creditor Solus Alternative Asset Management, L.P. (“Solus”) filed a

motion in Adelphia’s bankruptcy proceeding seeking, among other things, removal of Quest as

Plan Administrator for cause (the “Original Motion”). See SUF ¶ 22. The Original Motion was

subsequently amended in June 2018 (the “Amended Motion” and together with the Original

Motion, the “Solus Motions”)10 by Solus and ACC Claims Holdings, LLC (together, the

“Movants”). See SUF ¶ 26. Adelphia and Quest opposed the relief requested by the Movants and

the Court held an evidentiary hearing on the Amended Motion in October 2018. See SUF ¶¶ 23,

27, 30-31. Adelphia, Quest and the Movants ultimately settled the disputes raised in the Solus

Motions and in June 2019, the Court entered the Order Approving and “So-Ordering” Stipulation

and Overruling Objection. See SUF ¶ 32. Pursuant to this settlement, the Solus Motions were

resolved, the Plan Administration Agreement was terminated and a new party was appointed as

Plan Administrator. See Stipulation and Consent Order With Respect to (A) Motion of Solus

Alternative Asset Management LP and ACC Claims Holdings LLC, (B) Second Amendment to

Plan Administrator Agreement, and (C) Appointment of Successor Administrator, attached as

Exhibit P to the SUF [ECF No. 24-16].

Plaintiffs Adelphia and Quest now seek coverage under the Policy for the fees, costs and

expenses they incurred in defending the Solus Motions. Defendant U.S. Specialty acknowledges

that fees incurred in defense of the Solus Motions meet the coverage grant under the Policy,11 but

10 Copies of the Original Motion and the Amended Motion are attached as Exhibits F and J, respectively, to

the SUF.

11 The parties agree that the Original Motion and the Amended Motion constitute a single Claim for

Wrongful Acts against Quest under the terms of the Policy. See SUF ¶ 33 (citing Policy at Definitions (B) and (U)

and Condition (C)). They also agree that the Original Motion and Amended Motion constitute a single Claim for

Professional Services Wrongful Acts against Quest. See SUF ¶ 33 (citing Policy at Definitions (B) and (U), as

amended by Endorsement No. 15, and Condition (C)). Similarly, the parties agree that as a result of the Claim

asserted against Quest by the Movants, Quest incurred fees, costs, and expenses. See SUF ¶ 35. Nor does U.S.

Specialty dispute that Adelphia indemnified Quest pursuant to Section 4.7 of the Plan Administrator Agreement for

argues that the Fee Exclusion precludes coverage because—it claims—the Solus Motions related

to the fees owed to Quest. See SUF ¶ 36. The Plaintiffs counter that the Fee Exclusion is

inapplicable because it applies to a “fee or other compensation due or allegedly due,” whereas the

Solus Motions sought termination of Quest as Plan Administrator and related to fees that were

already paid to Quest. Policy at Endorsement No. 15, Section 5 (emphasis added); see SUF ¶ 37.

DISCUSSION

A. Legal Standards

1. Summary Judgment

Federal Rule of Civil Procedure 56, made applicable by Rule 7056 of the Federal Rules

of Bankruptcy Procedure, governs the granting of summary judgment. “[S]ummary judgment is

proper ‘if the pleadings, depositions, answers to interrogatories, and admissions on file, together

with the affidavits, if any, show that there is no genuine issue as to any material fact and that the

[movant] is entitled to a judgment as a matter of law.’” Celotex Corp. v. Catrett, 477 U.S. 317,

322 (1986) (quoting Fed. R. Civ. P. 56). If the “the record taken as a whole could not lead a

rational trier of fact to find for the non-moving party, there is no ‘genuine issue for trial.’”

Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986) (quoting First Nat’l

Bank of Ariz. v. Cities Serv. Co., 391 U.S. 253, 288 (1968)).

“A fact is material when it might affect the outcome of the suit under governing law.”

McCarthy v. Dun & Bradstreet Corp., 482 F.3d 184, 202 (2d Cir. 2007). But “the mere

existence of some alleged factual dispute between the parties will not defeat an otherwise

properly supported motion for summary judgment . . . .” Anderson v. Liberty Lobby, Inc., 477

some portion of the fees, costs, and expenses that Quest incurred as a result of the Claim asserted against it by the

Movants. See SUF ¶ 35.

U.S. 242, 247–48 (1986). “The Court may also grant some but not all of the relief requested in a

summary judgment motion if it finds disputed issues of fact as to some of the issues presented.”

In re Residential Capital, LLC, 533 B.R. 379, 395 (Bankr. S.D.N.Y. 2015) (citing Fed. R. Civ. P.

56(g)).

“The party seeking summary judgment bears the burden of establishing that no genuine

issue of material fact exists and that the undisputed facts establish [the movant’s] right to

judgment as a matter of law.” Rodriguez v. City of New York, 72 F.3d 1051, 1060–61 (2d Cir.

1995). The showing necessary to satisfy this initial burden depends on which side bears the

burden of proof on a particular issue at trial. See Read Prop. Grp. LLC v. Hamilton Ins. Co.,

2018 WL 1582291, at *5 (E.D.N.Y. Mar. 30, 2018). When the movant has the burden of proof

at trial, its own submissions in support of the motion must entitle it to judgment as a matter of

law. See Albee Tomato, Inc. v. A.B. Shalom Produce Corp., 155 F.3d 612, 618 (2d Cir. 1998).

When the burden of proof falls on the nonmoving party, it is generally sufficient for the movant

to point to a lack of evidence on an essential element of the nonmovant's claim. See Cordiano v.

Metacon Gun Club, Inc., 575 F.3d 199, 204 (2d Cir. 2009). To avoid summary judgment, the

nonmoving party must then come forward with evidence sufficient to raise a genuine issue of

fact for trial. See id.

“In deciding whether material factual issues exist, all ambiguities must be resolved and

all reasonable inferences must be drawn in favor of the nonmoving party.” In re Ampal-Am.

Israel Corp., 2015 WL 5176395, at *10 (Bankr. S.D.N.Y. Sept. 2, 2015) (citing Matsushita, 475

U.S. at 587). But “the nonmoving party may not rely on conclusory allegations or

unsubstantiated speculation[,]” Fujitsu Ltd. v. Fed. Express Corp., 247 F.3d 423, 428 (2d Cir.

2001), and “only disputes over facts that might affect the outcome of the suit under the

governing law will properly preclude the entry of summary judgment.” Anderson, 477 U.S. at

248.

“When cross motions for summary judgment are made, the standard is the same as that

for individual motions.” United Indus. Corp. v. IFTE plc, 293 F. Supp. 2d 296, 299 (S.D.N.Y.

2003). “The court must consider each motion independently of the other and, when evaluating

each, the court must consider the facts in the light most favorable to the non-moving party.” Id.

“Moreover, even when both parties move for summary judgment, asserting the absence of any

genuine issues of material fact, a court need not enter judgment for either party.” Morales v.

Quintel Entm’t, Inc., 249 F.3d 115, 121 (2d Cir. 2001). “Rather, each party's motion must be

examined on its own merits, and in each case all reasonable inferences must be drawn against the

party whose motion is under consideration.” Id.

2. Choice of Law

The Policy does not identify the law that governs its interpretation and, therefore, the

Court must determine which state law to apply. Bankruptcy courts generally apply the choice of

law principles of the forum state. See Bianco v. Erkins (In re Gaston & Snow), 243 F.3d 599,

601-02 (2d Cir. 2001) (“[B]ankruptcy courts confronting state law claims that do not implicate

federal policy concerns should apply the choice of law rules of the forum state.”); see also Statek

Corp. v. Dev. Specialists, Inc. (In re Coudert Bros. LLP), 673 F.3d 180, 186-87 (2d Cir. 2012).

Thus, the Court looks to the choice of law rules of New York, the forum state in this case.

Under New York law, “the first question to resolve in determining whether to undertake a

choice of law analysis is whether there is an actual conflict of laws.” Curley v. AMR Corp., 153

F.3d 5, 12 (2d Cir. 1998) (citing Allstate Ins. Co. v. Stolarz, 81 N.Y.2d 219, 223 (1993)). An

actual conflict will be found to exist where “the applicable law from each jurisdiction [that might

apply] provides different substantive rules” that are “relevant to the issue at hand . . . and must

have a significant possible effect on the outcome of the trial.” Fin. One Pub. Co. v. Lehman

Bros. Special Fin., Inc., 414 F.3d 325, 331 (2d Cir. 2005) (internal citations and quotations

omitted). If no actual conflict exists, then a choice of law analysis is unnecessary. See IBM v.

Liberty Mut. Ins. Co., 363 F.3d 137, 143 (2d Cir. 2004) (“Choice of law does not matter,

however, unless the laws of the competing jurisdictions are actually in conflict. . . . In the

absence of substantive difference, however, a New York court will dispense with choice of law

analysis; and if New York law is among the relevant choices, New York courts are free to apply

it.”); Curley, 153 F.3d at 12; Excess Ins. Co. v. Factory Mut. Ins. Co., 769 N.Y.S.2d 487, 489

(App. Div., 1st Dep’t 2003) (“If no conflict exists, then the court should apply the law of the

forum state in which the action is being heard.”). All parties agree that either the law of

Colorado or of New York would apply in these circumstances and that there is no material

conflict between the laws of these states.12 See Plaintiffs’ SJM at 5; U.S. Specialty SJM at 11

n.4. As a choice of law analysis is unnecessary, the Court will look primarily to New York law

for this Decision, with references to Colorado law where helpful.

3. Insurance Contract Interpretation

Insurance policies are normally construed using the same principles that apply to general

contract interpretation. See Castle Oil Corp. v ACE Am. Ins. Co., 26 N.Y.S.3d 783, 786 (App.

Div., 2d Dep’t 2016) (internal citation omitted); Am. Family Mut. Ins. Co. v. Hansen, 375 P.3d

115, 120 (Colo. 2016) (“An insurance contract is subject to the general rules of contract

interpretation.”) (internal citation omitted). When interpreting an insurance policy, therefore,

12 The Policy, which does not contain a choice of law provision, was issued to Quest c/o Adelphia at

Adelphia’s offices in Colorado and Adelphia’s bankruptcy case is pending in New York. See Plaintiffs’ SJM at 5;

U.S. Specialty SJM at 11 n.4.

“[u]nambiguous provisions must be given their plain and ordinary meaning.” Castle Oil, 26

N.Y.S.3d at 786 (internal citations omitted); see also Alexander & Alexander Servs., Inc. v.

These Certain Underwriters at Lloyds, London, 136 F.3d 82, 86 (2d Cir. 1998); State Farm Mut.

Auto. Ins. Co. v. Stein, 940 P.2d 384, 387 (Colo. 1997) (“[I]n the absence of ambiguity, an

insurance policy must be given effect according to the plain and ordinary meaning of its terms.”)

(internal citation omitted). A policy “should be read as a whole, and every part will be

interpreted with reference to the whole; and if possible it will be so interpreted as to give effect

to its general purpose.” Ins. Co. of N.Y. v. Cent. Mut. Ins. Co., 850 N.Y.S.2d 56, 58 (2008)

(internal citation and quotation omitted); see also Cyprus Amax Minerals Co. v. Lexington Ins.

Co., 74 P.3d 294, 299 (Colo. 2003) (“Courts should read the provisions of the policy as a whole,

rather than reading them in isolation.”); Bohrer v. Church Mut. Ins. Co., 965 P.2d 1258, 1262

(Colo. 1998) (“We should avoid disrupting the parties’ settled expectations and the purposes for

coverage as expressed or implied in the insurance policy.”). A “court should not read a contract

so as to render any terms, phrase, or provision meaningless or superfluous.” Givati v. Air

Techniques, Inc., 960 N.Y.S.2d 196, 198 (App. Div., 2d Dep’t 2013) (internal citations omitted);

see also Sachs v. Am. Family Mut. Ins. Co., 251 P.3d 543, 546 (Colo. App. 2010) (“[W]e

construe the policy so that all provisions are harmonious and none is rendered meaningless.”).

Additionally, “the court ‘may not write into a contract conditions the parties did not insert

by adding or excising terms under the guise of construction, nor may it construe the language in

such a way as would distort the contract’s apparent meaning.’” Georgitsi Realty, LLC v. Penn-

Star Ins. Co., 702 F.3d 152, 155 (2d Cir. 2012) (quoting In re Matco-Norca, Inc., 802 N.Y.S.2d

707, 709 (App. Div., 2d Dep’t 2005)); see also Cyprus Amax Minerals, 74 P.3d at 299 (“In

undertaking the interpretation of an insurance contract, courts should be wary of rewriting

provisions, and should give the words contained in the contract their plain and ordinary meaning,

unless contrary intent is evidenced in the policy . . . Courts may neither add provisions to extend

coverage beyond that contracted for, nor delete them to limit coverage.”) (internal citations and

quotations omitted).

The language of the insuring provisions in an insurance policy generally “should be

broadly interpreted, with any doubts as to coverage resolved in favor of the insured.” Berman v.

Gen. Accident Ins. Co. of Am., 671 N.Y.S.2d 619, 623 (Sup. Ct., N.Y. Cty. 1998); see also

Farmers All. Mut. Ins. Co. v. Ho, 68 P.3d 546, 550 (Colo. App. 2002) (“Coverage provisions in

an insurance contract are to be liberally construed in favor of the insured to provide the broadest

possible coverage. . . . Thus, when an insurer seeks to restrict coverage, the limitation must be

clearly expressed. . . . In the absence of such a clear expression of limitation, or if the policy

provisions are inconsistent or ambiguous, the insurance contract must be construed in favor of

coverage and against limitations.”) (internal citations and quotations omitted).

Not surprisingly then, any “[e]xclusions to coverage must be strictly construed and read

narrowly, with any ambiguity construed against the insurer.” Lancer Indem. Co. v. JKH Realty

Grp., LLC, 7 N.Y.S.3d 492, 494 (App. Div., 2d Dep’t 2015) (internal citations omitted); see also

Frontier Insulation Contractors v. Merchs. Mut. Ins. Co., 91 N.Y.2d 169, 175 (1997) (“To be

relieved of its duty to defend on the basis of a policy exclusion, the insurer bears the heavy

burden of demonstrating that the allegations of the complaint cast the pleadings wholly within

that exclusion, that the exclusion is subject to no other reasonable interpretation, and that there is

no possible factual or legal basis upon which the insurer may eventually be held obligated to

indemnify the insured under any policy provision.”); O’Connor v. Proprietors Ins. Co., 696 P.2d

282, 284 (Colo. 1985) (“[E]xclusions in an insurance policy must be strictly construed against

the insurer, and a forfeiture of coverage based on technical violations is a result not favored in

the law.”) (internal citations omitted); Colo. Intergovernmental Risk Sharing Agency v.

Northfield Ins. Co., 207 P.3d 839, 842 (Colo. App. 2008) (“[T]he insurer bears the burden of

proving that a particular loss falls within an exclusion in the contract.”).

Thus, “[t]o negate coverage by virtue of an exclusion, an insurer must establish that the

exclusion is stated in clear and unmistakable language, is subject to no other reasonable

interpretation, and applies in the particular case.” Lancer Indem., 7 N.Y.S.3d at 494 (internal

citations and quotations omitted); see also Nicholls v. Zurich Am. Ins. Group, 244 F. Supp.2d

1144, 1156 (D. Colo. 2003); Cragg v. Allstate Indem. Corp., 17 N.Y.3d 118, 122 (2011);

Renfandt v. N.Y. Life Ins. Co., 419 P.3d 576, 580 (Colo. 2018) (“[W]hen seeking to avoid

coverage based on a policy exclusion, the insurer must establish that the exclusion applies in the

case, and that the exclusion is not subject to any other reasonable interpretation.”) (internal

citation omitted). Exclusions or exceptions from coverage “are not to be extended by

interpretation or implication, but are to be accorded a strict and narrow construction.” Pioneer

Tower Owners Ass’n v. State Farm Fire & Cas. Co., 12 N.Y.3d 302, 307 (2009) (internal

citations and quotations omitted); see also J & S Enters., Inc. v. Cont’l Cas. Co., 825 P.2d 1020,

1023 (Colo. App. 1991) (“[I]f exclusions are inserted in order to limit the general liability

insurance coverage, such exclusions are to be strictly construed against the insurer . . . . Only if

exclusions, when viewed as a whole, unambiguously and unequivocally negate coverage are they

interpreted in the insurer’s favor.”) (internal citations omitted).

B. Defendant’s Arguments Regarding Interpretation of Insurance Exclusions

As a threshold matter, the Defendant asserts that the normal rules regarding the

interpretation of insurance exclusions should be altered. The Defendant notes that the Fee

Exclusion was added to the Policy under Endorsement No. 15 and contending that it was the

result of negotiations between U.S. Specialty and Quest’s insurance broker. See U.S. Specialty

SJM at 12. The Defendant argues that the Fee Exclusion should therefore “be given greater

weight than other provisions that appear in the basic policy form.” Id. But the Court disagrees.

There is no evidence in the record that the Fee Exclusion itself was requested or co-drafted by

the Plaintiffs’ insurance broker. The Defendant cites to three email exchanges between U.S.

Specialty and Willis—the Plaintiffs’ insurance broker— but none of these emails reference the

Fee Exclusion. See Exhibits C, D and E to SUF. Rather, they appear to contain initial drafts

provided by Nancy Middelear, U.S. Specialty’s underwriting attorney, as well as inquiries by

Ms. Middelear regarding policy inceptions dates and identities of insured persons and

organizations, along with responses to those inquiries by Willis. Id. Standing alone, these

emails do not provide a basis for upending the normal rules for interpretation of the Fee

Exclusion here.

Nor does the legal authority cited by the Defendant support its position on this issue. The

Defendant cites to the Restatement of Contracts which states that “[i]n the interpretation of a

promise or agreement or a term thereof, the following standards of preference are generally

applicable . . . (d) separately negotiated or added terms are given greater weight than

standardized terms or other terms not separately negotiated.” Restatement (Second) Contracts §

203(d). The Defendant also cites to Moshiko, Inc. v. Seiger & Smith, Inc., 529 N.Y.S.2d 284,

288-89 (App. Div., 1st Dep’t 1988), arguing that the case enforced policy language as written

where requested by the broker on the insured’s behalf. But once again, the Court lacks evidence

of the Fee Exclusion being separately requested or negotiated. Moreover, Moshiko did not give

“greater weight” to a policy exclusion or set out a new rule of insurance contract interpretation.

Rather, the appellate court in Moshiko found that the trial court below had rewritten the terms of

the policy; the appellate court instead applied the language of the policy as written, which the

court found was “clear on its face.” Id. at 287. In any event, the Court’s job here is to interpret

the language of the Fee Exclusion itself given that all parties agree that the Policy otherwise

provides coverage. And as explained below, the Court concludes that the plain language of the

Fee Exclusion does not apply here, meaning that the result would be the same regardless of

whether the Fee Exclusion is given greater weight or regardless of which party has the burden of

proof.

The Defendant also seeks to distinguish certain of the cases cited by the Plaintiffs to

support the burden being placed on the insurer to establish the applicability of a policy exclusion.

See Def.’s Mem. Of Law in Opp. to Pls.’ Mot. for Summ. J. at 4-5 [ECF No. 28] (“U.S. Specialty

Opposition”). Specifically, the Defendant argues that the coverage in the cases cited by the

Plaintiffs relate to an insurers duty to defend, whereas the Policy at issue here is different

because it does not involve a duty to defend but rather a reimbursement of covered defense costs.

See id. (citing Policy at Conditions (D)(1), (2); Apt. Inv. & Mgmt. Co. v. Nutmeg Ins. Co., 593

F.2d 1188 (10th Cir. 2010); Frontier Insulation Contrs. v. Merchants Mut. Ins. Co., 91, N.Y.2d

169) (1997)). The Defendant argues that coverage obligations under a duty to defend policy are

more expansive than under a duty to reimburse under an indemnification clause, and therefore

the heightened burden cited by the Plaintiffs is inapplicable here where the only question is

whether a claim is actually covered.

But New York case law does not appear to differentiate between duty to defend and duty

to reimburse cases when addressing the standard for reviewing policy exclusions. See, e.g.,

Millenium Partners, L.P. v. Select Ins. Co., 882 N.Y.S.2d 849, 853 (Sup. Ct. N.Y. Cty. 2009)

(discussing exclusion standard in case involving reimbursement of defense costs). The cases

cited by the Defendant in support of its argument do not address where the burden lies when

interpreting an insurance policy exclusion; these cases instead concern the showing necessary to

trigger a duty to reimburse defense costs. See Petroterminal de Panama, S.A. v. Houston Cas.

Co., 114 F. Supp. 3d 152, 158 (S.D.N.Y. 2015) (“[U]nder policies containing a duty to reimburse

defense costs but not a duty to defend, the Insurers have a duty to reimburse defense costs for

claims that are established to be covered through judgment and settlement, and not for claims

only potentially falling within the policy’s coverage.”) (internal citations and quotations

omitted); Farmington Cas. Co. v. United Educators Ins. Risk Retention Grp., Inc., 117 F. Supp.

2d 1022, 1027 (D. Colo. 1999). But the question of whether a duty to reimburse defense costs

has been triggered is not at issue in this case. The parties do not dispute whether coverage exists

for such defense costs under the insuring clause of the Policy; the Defendant itself acknowledges

that “[t]he sole issue to be decided on these cross motions is whether the Fee Exclusion bars

coverage for [the claim].” U.S. Specialty SJM at 12; see supra note 12.13

13 The Defendant also cites to Beazley Ins. Co, Inc. v. ACE Am. Ins. Co., 197 F. Supp. 3d 616 (S.D.N.Y.

2016), which states that the burden on the insurer to establish the applicability of a policy exclusion is

merely a specific, heightened application of contra proferentem, the principle by which

ambiguities in an insurance contract are construed against the insurer. . . . And contra proferentem

does not come into play unless this court first determines that the contract is, in fact, ambiguous. . .

.

Id. at 623 (citing Sea Ins. Co. v. Westchester Fire Ins. Co., 51 F.3d 22, 26 n.4 (2d Cir. 1995); Hugo Boss Fashions,

Inc. v. Fed. Ins. Co., 252 F.3d 608, 616 (2d Cir. 2001)).

But there are several problems with the Defendant’s reliance on Beazley. First, this quoted language is

dicta, as the court’s decision in Beazley turned on the meaning of the terms “customer” or “client,” which the Court

determined by reference to federal securities law.

Second, the Defendant neglects language in the same paragraph of Beazley that undercuts its argument.

That language states, in no uncertain terms, that “[u]nder well-settled New York law, ‘whenever an insurer wishes to

exclude certain coverage from its policy obligations, it must do so in clear and unmistakable language.’” Id. (citing

Pioneer Tower Owners Ass’n v. State Farm Fire & Cas. Co., 12 N.Y.3d 302, 307 (2009)).

C. The Applicability of the Fee Exclusion

Turning to the meaning of the Fee Exclusion itself, the Plaintiffs assert that the Defendant

has not met its burden to establish that the Fee Exclusion bars coverage of the defense fees, costs

and expenses incurred by the Plaintiffs in defending against the Solus Motions. The Court

agrees.

The language of the Fee Exclusion provides in relevant part:

[t]he Insurer will not be liable to make any payment of Loss in connection with a

Claim arising out of, based upon or attributable to any fee or other compensation

due or allegedly due in return for any service provided pursuant to the [Plan

Administrator Agreement].

Policy at Endorsement No. 15, Section 5 (emphasis added). The Plaintiffs correctly note that the

clause “due or allegedly due for . . . services provided” adds a temporal limitation to the Fee

Exclusion, such that the Fee Exclusion applies only to unpaid claims for fees “due or allegedly

due” to Quest for services “provided” by Quest under the Plan Administrator Agreement. The

Solus Motions here sought removal of Quest as Plan Administrator for cause and based on

Third, Beazley cites to Westchester Fire and Hugo Boss, see id., and neither of these cases stands for the

proposition that an insurer does not have the burden of establishing that an exclusion applies. Quite the opposite.

The Second Circuit explicitly stated in Westchester Fire that “an insurer must establish that [an] exclusion is stated

in clear and unmistakable language, is subject to no other reasonable interpretation, and applies in the particular

case.” Westchester Fire, 51 F.3d at 26 (emphasis added) (internal citations and quotations omitted). It further

explained:

We cannot accept the district court's conclusion that the contra proferentem principle, which

provides that where there is ambiguity as to the existence of coverage, doubt must be resolved in

favor of the insured and against the insurer, . . . does not apply because this dispute lies between

two insurers. . . . The district court’s conclusion that contra proferentem does not apply is at odds

with its conclusion (with which we agree) that the Seaboard Surety test applies. The Seaboard

Surety rule, construing exclusions against the insurer unless they are stated in ‘clear and

unmistakable’ language, is merely a specific, heightened application of contra proferentem. . . .

No authorities cited by the parties convince us that the New York Court of Appeals would find the

Seaboard Surety rule inapplicable to this dispute over construction of a homeowner's policy.

Westchester Fire, 51 F.3d at 26 n.4. Hugo Boss simply examines whether a phrase within the language of a policy

exclusion is ambiguous and notes that, if it is, contra proferentem applies. Hugo Boss, 252 F.3d at 616-17. In sum,

neither Westchester Fire nor Hugo Boss supports the notion that the burden of establishing the exclusion here should

not be on the insurer invoking the exclusion.

compensation previously paid to Quest, not compensation “due or allegedly due” for services

provided under the Plan Administrator Agreement.

The Plaintiffs’ interpretation is supported by Chubb Custom Ins. Co. v. Grange Mut. Cas.

Co., 2011 U.S. Dist. LEXIS 111583 (S.D. Ohio 2011), which also examined a policy exclusion

that contained the same phrase “due or allegedly due.” That policy provided for the insurer

Chubb to indemnify Grange for losses that arose from Grange’s performance as an insurance

company conducting claims handling and adjusting. See id. That policy contained a benefits

due exclusion that excluded coverage

for any amounts which constitute benefits, coverage or amounts due or allegedly

due, including any amount which constitutes interest thereon, from the Insureds

as:

i. an insurer or reinsurer under any policy or contract or treaty of insurance,

reinsurance, suretyship, annuity or endowment; or

ii. an administrator under any employee welfare benefit plan[.]

Id. at *8. Grange sought coverage under the policy for settlement payments, defense fees, and

expenses it incurred in two class action lawsuits where Grange allegedly had paid its insureds

less than they were entitled to recover on their claims. See id. at *10-*12. Chubb argued that

coverage for these settlement amounts and defense fees was precluded by the benefits due

exclusion.

The court in Grange Mutual held that the exclusion did not preclude coverage. It noted

that under the language of the exclusion, “the amounts sought must be ‘due or allegedly due’ for

the exclusion to apply.” Id. at *31. In examining the meaning of the phrase “due or allegedly

due”, the court referred to Black’s Law Dictionary which defined “due” in part as “owing or

payable; constituting a debt” and provided the following example of the word’s usage: “the tax

refund is due from the IRS.” Id. at *31 (quoting Black’s Law Dictionary 9th Ed. 2009)).

Black’s Law in turn defined the word “debt” in part as a “[l]iability on a claim; a specific sum of

money due by agreement or otherwise[.]” Id; accord Emplrs. Mut. Cas. Co. v. Brant Lake

Sanitary Dist., 2019 U.S. Dist. LEXIS 22549, at *17 (D. S.D. Feb. 12, 2019) (looking to Black’s

Law Dictionary for interpretation of the word “due” in policy exclusion, with Black’s Law

stating that “[t]he word ‘due’ means ‘[o]wing or payable,’ while the word ‘owing’ simply means

‘yet to be paid.’”) (quoting Black's Law Dictionary, 10th ed. 2014).

The court in Grange Mutual ultimately held that Chubb had “not demonstrated that the

plaintiffs in the [class actions against Grange] were seeking ‘any amounts which constitute

benefits, coverage or amounts due or allegedly due’ from Grange as their insurer.” Id. at *35. In

reaching this conclusion, the court noted that “the settlement class members had already settled

their . . . claims with Grange, and therefore no amounts were ‘due’ or ‘allegedly due.’” Id. at

*34-*35.

Similar to the circumstances in Grange Mutual, the plain language of the Fee Exclusion

here applies to fees or other compensation “due or allegedly due in return for any service

provided.” Policy at Endorsement No. 15, Section 5 (emphasis added). Reading the language of

the Fee Exclusion strictly and narrowly, as required by applicable case law, the Court agrees

with the Plaintiffs that the Fee Exclusion imposes a temporal limitation. Like Grange Mutual,

the allegations in the Solus Motions did not involve fees or compensation “owing or payable” to

Quest. Indeed, the primary focus of the Solus Motions—and the hearings on those motions—

was the request for removal of Quest as Plan Administrator for cause. Fees or compensation

arrangements were addressed by the Solus Motions primarily in connection with the request to

remove Quest. As a secondary matter, the discussion of fees in the Solus Motions did not relate

to fees owed but rather to fees that had already been paid to Quest or Quest’s request for a

possible future fee arrangement for work not yet performed. See, e.g., Amended Motion at 1, 3,

11-13 (seeking removal of Quest as Plan Administrator for cause, including Quest having

previously overpaid itself in breach of the Plan Administrator Agreement and Quest having

demanded supplemental compensation in order to monetize estate tax credit); Original Motion at

1-4 (objecting to reasonableness of Plan Administrator’s new fee arrangement, specifically to

fees to be earned in the event that Adelphia enters into a transaction for the sale of its net

operating losses and noting that “[t]o the best of Solus’ knowledge, no NOL Transaction is even

reasonably in prospect”); Original Motion at 1, 5-6, 15 (requesting accounting of fees paid and

hours expended by Quest to determine whether Quest previously received compensation in

violation of the Plan Administrator Agreement and stating that any excess compensation should

be repaid to the estates); see also Amended Motion at 14-15 (seeking appointment of successor

to Quest and that such successor act as a quasi-examiner to examine, among other things,

whether Quest should be required to return prior fee payments to the estate). None of these fall

within the Fee Exclusion.

The Defendant argues that a present dispute regarding fees existed, specifically whether

Quest was entitled to receive additional fees to monetize estate assets. See U.S. Specialty SJM at

18-19. But it is clear that the allegations were based on future work that Quest might perform

and were not related to fees “due or allegedly due in return for any service provided.” Policy at

Endorsement No. 15, Section 5 (emphasis added); see Amended Motion at ¶¶ 4, 32 (noting that

Quest requested additional fees to monetize a tax refund). No services had been provided with

respect to the monetization of those assets and as a result, no fees could have been due or

allegedly due for those future services.

In its argument, the Defendant focuses on the lead-in phrase “arising out of, based upon

or attributable to” that precedes the limiting language of “due or allegedly due” in the Fee

Exclusion. Quoted in full, the relevant language provides:

[t]he Insurer will not be liable to make any payment of Loss in connection with a

Claim arising out of, based upon or attributable to any fee or other compensation

due or allegedly due in return for any service provided pursuant to the [Plan

Administrator Agreement].

Policy at Endorsement No. 15, Section 5 (emphasis added). The Defendant contends that this

language requires a broad application of the Fee Exclusion, arguing that that the phrase “arising

out of” in the insurance context is “ordinarily understood to mean originating from, incident to,

or having connection with.” U.S. Specialty SJM at 13 (quoting Maroney v. New York Cent. Mut.

Fire Ins. Co., 5 N.Y.3d 467, 472 (2005). U.S. Specialty notes that the language “requires only

that there be some causal relationship between the injury and the risk for which coverage is

provided or excluded.” Id. (quoting Nat. Organics, Inc. v. OneBeacon Am. Ins. Co., 959

N.Y.S.2d 204, 208 (App. Div., 2d Dep’t 2013)). Thus, the Defendant contends that “a broadly

framed fee exclusion will bar coverage when the primary harms alleged or relief sought share

some causal relationship with a dispute over fees” and argues that the relief requested in the

Solus Motions contains the necessary causal relationship to fees such that the “arising out of”

language of the Fee Exclusion bars coverage. Id. at 15.

But the cases relied on by the Defendant for this result are distinguishable. They deal

with much more “broadly framed” exclusions that relate generally to all fees, in contrast to the

Fee Exclusion here that is more narrowly tailored only to fees that are “due or allegedly due for

services provided. . . .” See U.S. Specialty SJM at 13-14 (relying, inter alia, on BancorpSouth,

Inc. v. Fed. Ins. Co., 873 F.3d 582, 584-85 (7th Cir. 2017) (holding under Mississippi law that

insurer had no obligation to defend or indemnify insured in lawsuit asserting claims for overdraft

fees due to policy exclusion for “any [c]laim . . . based upon, arising from, or in consequence of

any fees or charges.”) (emphasis added); First Community Bancshares v. St. Paul Mercury Ins.

Co., 593 Fed. App’x 286, 288 (5th Cir. 2014) (holding that fee-dispute exclusion relating to

claims “based upon, arising out of or attributable to any dispute involving fees or charges for an

Insured’s services” did not negate insurer’s duty to defend class action lawsuits brought against

insured because “at least some allegations potentially fall outside of the exclusion and within

coverage”) (emphasis added); Continental Casualty Co. v. Ramsey, 2017 U.S. Dist. LEXIS

29550, at *3-*4, *35 (E.D. Tex. Feb. 11, 2017) (finding fee exclusion relating to claims “based

upon, directly or indirectly arising out of, or in any way involving . . . a dispute over fees,

commissions or charges, including, without limitation the structure of fees or excessive fees . . .”

was inapplicable to insurer’s duty to defend lawsuit against insured because “at least some of the

factual allegations” in the complaint “do not necessarily bear a causal relationship to fees”)

(emphasis added)).

In contrast to these cases, the Fee Exclusion in this case contains clear language that

narrows its applicability only to fees “due or allegedly due” and the Defendant’s position

impermissibly reads this language out of the Policy. See Givati, 960 N.Y.S.2d at 198 (a “court

should not read a contract so as to render any terms, phrase, or provision meaningless or

superfluous.”); Georgitsi Realty, 702 F.3d at 155 (a court “may not . . . excis[e] terms [of a

contract] under the guise of construction, nor may it construe the language in such a way as

would distort the contract’s apparent meaning.’”); see also Sachs, 251 P.3d at 546 (“[W]e

construe the policy so that all provisions are harmonious and none is rendered meaningless.”). If

the Defendant wished to exclude a broader range of fees from coverage, it should have drafted a

clause that did so. See, e.g., Taylor v. United States Cas. Co., 269 N.Y. 360, 363 (1936) (“If the

insurance company desired the exclusion clause to cover not only a case where the driver is

under the age fixed by law but also a case where the terms of the license are violated, it should

have so specified.”).

This conclusion is confirmed by the facts underlying the Solus Motions. In short, there is

no causal relationship between the allegations in the Solus Motions and the activities that the Fee

Exclusion seeks to exclude from coverage. The allegations raised in the Solus Motions focus

primarily on the removal of Quest for improper conduct. This contrasts with the Bancorp case

relied upon by the Defendant. In Bancorp, the insured pointed to several paragraphs in the

complaint that did not mention overdraft fees, but the court noted that other sections tied the

allegations in those paragraphs directly to overdraft fees covered by the exclusion. 873 F.3d at

586-87. The court observed that “individual allegations cannot be read in a vacuum, and instead,

must be read in the context of the entire complaint.” Id. at 586. The court found that “the

overdraft fees in the [complaint] were not an additional harm among many” but rather “the

central and only harm” and constituted the “essence” of the complaint. Id. at 587.14

14 While the Court looks at the pleadings to determine the scope of the issues in the Solus Motions, the result

here is borne out by the witness testimony at the hearings on the Solus Motions, which focused on actions taken, or

not taken by Quest, and whether these actions conflicted with Quest’s fiduciary duty on behalf of all creditors. See,

e.g., Hr’g Tr. 24:10-12 (Oct. 15, 2018) [Case No. 02-41729, ECF No. 14738] (“Solus submits that the conduct

displayed in connection with the May 15 and May 21 meetings is not consistent with the fiduciary obligations of

Quest.”); id. at 25:8:15 (“There was a threat to harm the estates, and that threat is a breach of the duty of loyalty.

Under New York law, the duty of loyalty requires the director to subordinate their interests to the company. That

did not happen here. There is also a harm to the bankruptcy process. It relies on the ability of fiduciaries to be

trusted with estate assets and to refrain from insisting on fees as a precondition to maximizing value.”); id. at 25:16-

26:2 (“[T]he record will support the two forms of relief that Solus is . . . requesting. First, there is cause to remove

the plan administrator and appoint a successor. There’s a failure to comply with the terms of the plan administrator

agreement. There’s a breach of fiduciary duty to harm the estates, unless fees are agreed to. There’s the ultimate

disclosure of the success fee in a way that’s inconsistent with transparency afforded in the bankruptcy process. And

there’s a need to install an independent fiduciary that’s focused on monetizing assets and not on fees.”); see id. at

161 (testimony regarding what took place at meetings between Quest and Solus); see id. at 166 (same); see id. at

246:19-247:17 (same); Hr’g Tr. 196:8-15 (Oct. 25, 2018) [Case No. 02-41729, ECF No. 14740] (“Q. It’s not [sic]

question, Mr. Blauner, but why do you think that Quest should no longer serve as plan administrator? A. I own

close to 45 percent of the claims. When I say I, Solus. These guys can’t be the stewards of that investment. I have

a duty to my investors to make sure that my fiduciaries act with loyalty and with care. And I’m trying to fulfill that

by having these folks replaced by a plan administrator with integrity.”).

As for Continental Casualty, another case cited by the Defendant, the court actually held

against the insurer, finding that the fee exclusion did not preclude the insurer’s duty to defend

against a lawsuit because the necessary causal relationship did not exist. See 2017 U.S. Dist.

LEXIS 29550, at *35-*36. The court stated that “at least some of the factual allegations in the . .

. complaint do not necessarily bear a causal relationship to fees.” Id. at *35. Importantly, the

court noted that “the relief sought in the [action] is not only the return of fees, but also an

injunction removing Defendants from the Plan and permanently enjoining Defendants from

acting as a fiduciary or service provider . . . .” Id. at *36. As the Solus Motions sought relief far

beyond the issue of fees, the Continental Casualty case actually supports the Plaintiffs here. The

same is true for the First Community case, where the court also ruled against the insurer. In that

case, the court found that the factual allegations in the class action complaint against the insured

did not necessarily bear a causal relationship to fees. See 593 Fed. App’x at 290. The court

stated that the “charging of fees was not the practice that caused the harm, even if First

Community’s actions were motivated by a desire to obtain more fees . . . Instead, fees were an

additional harm caused by the policies and practices of which the [class action] plaintiffs

complain.” Id. The court concluded that “at least some of the allegations in the underlying

petitions are not excluded by the fee-dispute exclusion” and the insurance company had a duty to

defend First Community under the applicable policy. Id.

To the extent that the hearings addressed fees, it was for those that were already paid. See, e.g., Hr’g Tr.

180 (Oct. 15, 2018) (testimony regarding work performed and compensation paid); Hr’g Tr. 195:13-19 (Oct. 25,

2018) (“[W]hat I told him was if an accounting showed that they had an obligation to return funds to the estate

because they had not complied with our contractual obligations that they would never work again; i.e., if the

accounting showed that they had stolen money from the estate, taken money from the estate, that they would never

work again which is pretty obvious.”).

CONCLUSION

For the reasons stated above, the Plaintiffs’ SJM is granted and U.S. Specialty’s SJM is

denied. The Plaintiffs should settle an order on five days’ notice. The proposed order must be

submitted by filing a notice of the proposed order on the Case Management/Electronic Case

Filing docket, with a copy of the proposed order attached as an exhibit to the notice. A copy of

the notice and proposed order shall also be served upon opposing counsel.

Dated: New York, New York

March 17, 2022

/s/ Sean H. Lane

UNITED STATES BANKRUPTCY JUDGE