Nu Ride Inc. v. Certain Underwriters at Lloyds, London Subscribed

IN THE UNITED STATES BANKRUPTCY COURT

FOR THE DISTRICT OF DELAWARE

In re: ) Ch. 11

)

Nu Ride Inc., et al., )

) Case No. 23-10831 (MFW)

Reorganized Debtors. )

) (Jointly Administered)

)

)

Nu Ride Inc., ) Adv. No. 24-50179 (MFW)

)

Plaintiffs, )

)

v. )

)

Certain Underwriters )

at Lloyd’s, London Subscribed )

to Policy No. B1230FC19215A20 )

) Related Adv. Docs 1, 24, 25,

Defendants. ) 26, 27, 28

MEMORANDUM OPINION1

Before the Court is the Motion of Certain Underwriters at

Lloyd’s, London (the “Defendants”) to Dismiss the Complaint filed

by Nu Ride, Inc. (the “Reorganized Debtor”) for lack of subject

matter jurisdiction. For the reasons stated below, the Court

will grant the Motion.

I. BACKGROUND

Lordstown Motors Corp. and its affiliates (collectively the

“Debtors”) were manufacturers of a line of electric vehicle (EV)

1 The Court is not required to state findings of fact or

conclusions of law pursuant to Rule 7052(a)(3) of the Federal

Rules of Bankruptcy Procedure.

trucks. In 2021, multiple lawsuits were filed by shareholders

against the Debtors and their former directors and officers

alleging claims of stock manipulation, breach of fiduciary duty

in stock sales, misrepresentation, and depreciation of stock

(collectively, “the Securities Lawsuits”).2 Additionally, the

U.S. Securities and Exchange Commission (“SEC”) and the U.S.

Department of Justice (“DOJ”) commenced investigations of the

Debtors (collectively, the “Investigations”) regarding statements

and representations made by the Debtors in their SEC filings.

On June 27, 2023, the Debtors filed petitions under chapter

11 of the Bankruptcy Code. On March 6, 2024, the Court confirmed

the Debtors’ Third Modified First Amended Plan of

Reorganization.3 On March 14, 2024, the Plan became effective.4

On October 25, 2024, the Reorganized Debtor filed a

complaint (the “Complaint”) against the Defendants seeking a

declaratory judgment that the Defendants are obligated to provide

2 In re Lordstown Motors Corp. Securities Litigation, No.

4:21-cv-00616 (N.D. Ohio) (the “Ohio Securities Class Action”);

Thai v. Burns et al., No. 4:21-cv-01267 (N.D. Ohio) (the “Ohio

Derivative Action”); In re Lordstown Motors Corp. Stockholder

Derivative Litigation, No. 1:21-cv-00604-SB (D. Del.) (the

“Delaware Derivative Action”); and In re Lordstown Motors Corp.

Stockholder Derivative Litigation, C.A. No. 2021-1049-LWW (Del.

Ch. Ct.) (the “Delaware Chancery Derivative Action”).

3 D.I. 1069. References to the docket in the main bankruptcy

case are to “D.I. #,” while references to the docket in the

adversary proceeding are to “Adv. D.I.#.”

4 Adv. D.I. 1 ¶ 18.

2

defense coverage and fees and costs incurred by the Debtors and

the Reorganized Debtor in connection with the Securities Lawsuits

and the Investigations under a directors and officers liability

insurance policy (the “Policy”) covering the period from October

23, 2020, to October 23, 2022.5 The Reorganized Debtor contends

that the Defendants denied coverage on the basis that the conduct

underlying the Securities Lawsuits and Investigations either

occurred, related back to, or was interrelated with conduct that

occurred on dates prior to a Retroactive Date contained in the

Policy Exclusion and are thus outside the Policy’s coverage

period.6 The Reorganized Debtor asserts that the alleged conduct

underlying the Securities Lawsuits and Investigations took place

during the applicable coverage period and is not subject to the

Retroactive Date Exclusion.7

On December 20, 2024, the Defendants filed a Motion to

Dismiss the Complaint on the basis that the Court lacks subject

matter jurisdiction over the coverage dispute with the

Reorganized Debtor because it is neither core nor related to the

estate.8 On January 3, 2025, the Reorganized Debtor filed a

5 Adv. D.I. 1 ¶¶ 1, 25.

6 Id. at ¶ 4.

7 Id. at ¶¶ 37-42.

8 Adv. D.I. 24, 25. Four days earlier, on December 16, 2024,

the Defendants had filed an action in the New York State Supreme

Court for a declaratory judgment that the Policy does not cover

3

response contending that the Court does have jurisdiction to

decide the Complaint. On January 10, 2025, the Defendants filed

a reply. The matter has been fully briefed9 and is ripe for

decision.

II. JURISDICTION

Although the Defendants contest the jurisdiction of the

Court to hear this case, the Court does have jurisdiction to

determine whether it has subject matter jurisdiction.10

Therefore, the Court has jurisdiction to address the merits of

the Motion to Dismiss.

III. STANDARD OF REVIEW

A. Rule 12(b)(1)

Rule 12(b)(1) of the Federal Rules of Civil Procedure

provides that a federal court may dismiss a complaint for lack of

subject matter jurisdiction. Such a motion to dismiss challenges

the losses alleged by the Reorganized Debtor. Adv. D.I. 25 at 4.

9 Adv. D.I. 25, 27, 28, 29.

10 Chicot Cnty. Drainage Dist. v. Baxter State Bank, 308 U.S.

371, 376–77 (1940) (holding that a federal court has authority to

determine whether it has subject matter jurisdiction over a

dispute before it). See also BWI Liquidating Corp. v. City of

Rialto (In re BWI Liquidating Corp.), 437 B.R. 160, 163 (Bankr.

D. Del. 2010) (holding that “[t]he Court has jurisdiction to

determine whether it has subject matter jurisdiction over this

adversary proceeding.”).

4

the power of the federal court to hear a claim or case.11 The

issue can be raised in any manner, including on motion of one of

the parties or by the court sua sponte.12

“If a court lacks subject matter jurisdiction, it is

generally barred from taking any action that goes to the merits

of the case.”13 A court may consider the issue of its subject

matter jurisdiction at any time and must dismiss an action if it

determines that it lacks subject matter jurisdiction.14

Motions under Rule 12(b)(1) can challenge subject matter

jurisdiction through either a facial or a factual attack. A

“facial attack” contests the sufficiency of the pleadings.15 In

such a case, the court must accept as true all well-pled factual

allegations, viewing them in the light most favorable to the

party asserting jurisdiction.16 Here, the Defendants raise only

11 See, e.g., Democracy Rising PA v. Celluci, 603 F. Supp. 2d

780, 788 (M.D. Pa. 2009).

12 See, e.g., Enterprise Bank v. Eltech, Inc. (In re Eltech,

Inc.), 313 B.R. 659, 662 (Bankr. W.D. Pa. 2004).

13 Shortt v. Richlands Mall Assocs., Inc., 922 F.2d 836, at *4

(4th Cir. 1990).

14 Fed. R. Civ. P. 12(h)(3). See, e.g., Seagate Tech. (US)

Holdings, Inc. v. Global Kato HG, LLC (In re Solyndra, LLC),

Bankr. No. 11-12799, Adv. No. 15-50268, 2015 WL 6125246, at *2

(Bankr. D. Del. Oct. 16, 2015).

15 See, e.g., Taliaferro v. Darby Twp. Zoning Bd., 458 F.3d

181, 188 (3d Cir. 2006).

16 See, e.g., In re Kaiser Group Int’l, Inc., 399 F.3d 558, 561

(3d Cir. 2005).

5

a facial attack.

The party invoking the federal court’s jurisdiction bears

the burden of establishing that the court has jurisdiction.17 A

motion to dismiss for want of subject matter jurisdiction will be

granted only if it appears beyond doubt that the plaintiff can

prove no set of facts in support of its claim of jurisdiction

which would entitle it to relief.18

B. Bankruptcy Court Jurisdiction

A bankruptcy court’s jurisdiction extends to four categories

of matters: (1) cases under title 11, (2) proceedings arising

under title 11, (3) proceedings arising in a case under title 11,

and (4) proceedings related to a case under title 11.19

The first three categories are referred to as ‘core’

matters,20 while matters only “related to” a bankruptcy case are

non-core.21 “Related to” jurisdiction grants the bankruptcy

court the power to hear cases that are not core matters but only

17 See, e.g., Solyndra, 2015 WL 6125246, at *2.

18 See, e.g., Calhoun v. United States, 475 F. Supp. 1, 2–3

(S.D. Cal. 1977).

19 Washington Mut., Inc. v. XL Specialty Ins. (In re Wash.

Mut., Inc.), Bankr. No. 08-12229, Adv. No. 12-50422, 2012 WL

4755209, at *2 (Bankr. D. Del. Oct. 4, 2012) (citing In re Marcus

Hook Dev. Park, Inc., 943 F.2d 261, 264 (3d Cir. 1991)).

20 BWI, 437 B.R. at 163–64.

21 Id. at 164. See also In re Resorts Int’l, Inc., 372 F.3d

154, 162 (3d Cir. 2004).

6

when there is a sufficient nexus between the related proceeding

and the bankruptcy case.22

“The test for ‘related to’ jurisdiction is whether the

‘outcome of that proceeding could conceivably have any effect on

the estate being administered in bankruptcy.’”23 After

confirmation of a chapter 11 plan, however, the test for the

bankruptcy court's ”related to” jurisdiction is more stringent.24

“Since there is no longer a bankruptcy estate that can be

affected post-confirmation, the bankruptcy court will only

exercise jurisdiction where a claim has ‘a close nexus to the

bankruptcy plan or proceeding’ and the matter at issue ‘affects

the interpretation, implementation, consummation, execution, or

administration of a confirmed plan or incorporated litigation

trust agreement.’”25

22 See, e.g., In re Pacor, Inc., 743 F.2d 984, 994 (3d Cir.

1984) (“The jurisdiction of the bankruptcy courts to hear cases

related to bankruptcy is not without limit, however, and there is

a statutory, and eventually constitutional, limitation to the

power of a bankruptcy court. For subject matter jurisdiction to

exist, therefore, there must be some nexus between the ‘related’

civil proceeding and the title 11 case.”).

23 BWI, 437 B.R. at 164 (quoting In re Exide Techs., 544 F.3d

196, 205–06 (3d Cir. 2008)).

24 AstroPower Liquidating Trust v. Xantrex Tech, Inc. (In re

AstroPower Liquidating Trust), 335 B.R. 309, 323 (Bankr. D. Del.

2005) (citing Resorts, 372 F.3d at 164–67).

25 BWI, 437 B.R. at 164 (quoting Resorts, 372 F.3d at 168–69).

7

IV. DISCUSSION

The Defendants argue that, because the Debtors’ Plan has

been confirmed, the Court only has jurisdiction to hear matters

necessary for the administration of the remaining estate. They

contend that the Reorganized Debtor’s coverage action is not a

core matter nor even a “related to” matter because it has no

close nexus to the remaining administration of the estate.

Therefore, the Defendants argue that the Court lacks jurisdiction

over the Reorganized Debtor’s Complaint.26

The Reorganized Debtor disagrees, contending (1) that the

Court expressly retained jurisdiction over this action pursuant

to provisions of the Plan and Confirmation Order and (2) that the

coverage action has a close nexus to the estate and creditors

because it is critical to any recovery by creditors under the

Plan.

A. Express Retention of Jurisdiction

The Defendants argue that the Confirmation Order’s retention

of jurisdiction provision alone is insufficient to confer

jurisdiction of this adversary proceeding on the Court.

Specifically, they contend that paragraph 101 of the Confirmation

Order is merely a general jurisdiction retention provision.27

26 Id.

27 Paragraph 101 of the Confirmation Order provides, in part:

The Bankruptcy Court shall retain jurisdiction with

respect to all matters arising from or related to the

8

For a Plan to establish “related to” jurisdiction, they argue, it

must describe with specificity the causes of actions to be

retained and prosecuted in the bankruptcy court.28

The Reorganized Debtor argues that the Defendants overlook

the language in the Plan, which it contends describes the

retained causes of action in sufficient detail. The Reorganized

Debtor cites multiple Plan sections which provide for retention

of jurisdiction over insurance-related actions among other causes

of action.29 Further, the Reorganized Debtor notes that actions

implementation of this Confirmation order and all

matters arising in and under, and related to, these

Chapter 11 Cases, as set forth in Article XI of the

Plan, or pursuant to section 1142 of the Bankruptcy

Code . . . .

D.I. 106 ¶ 101.

28 See BWI, 437 B.R. at 166 (holding that to retain post-

confirmation “related to” jurisdiction, a plan must specifically

describe a cause of action and that a plan’s “broad” retention of

jurisdiction which does not specifically identify the action is

insufficient to show it has a close nexus to the bankruptcy

proceeding). See also The Fairchild Liquidating Corp. v. State

of New York (In re The Fairchild Corp.), 452 B.R. 525, 532

(Bankr. D. Del. 2011) (holding the plan’s “broad general

retention of jurisdiction provision” insufficient to confer

“related to” jurisdiction where it did not reference the specific

claims or properties at issue).

29 Plan at Art. XII.10, 27:

On and after the Effective Date, the Bankruptcy Court

shall retain and have jurisdiction . . . To hear and

determine any rights, Claims or Causes of Action,

including without limitation Claims or Causes of Action

identified on the Schedule of Retained Causes of

Action, held by, transferred to or accruing to the

Post-Effective Date Debtors pursuant to the Bankruptcy

Code, including any settlement or compromise thereof

[and] . . . To adjudicate any adversary proceedings

9

based on insurance policies are explicitly listed on the Schedule

of Retained Causes of Action.30 Accordingly, the Reorganized

Debtor argues that the Plan’s retention of jurisdiction provision

is evidence of the close nexus between its Complaint and the

pending before the Bankruptcy Court on or after the

Petition Date or any other disputes relating to any

Retained Cause of Action that the Post-Effective Date

Debtors may bring thereafter. (Emphasis added).

D.I. 1066.

Plan, Art. I.A.160 states that Retained Causes of Action

include:

any Cause of Action based in whole or in part upon any

and all insurance contracts, insurance policies, . . .

and similar agreements to which any Debtor or Post-

Effective Date Debtor has any rights whatsoever,

including the Insurance Policies.

Id.

30 The Schedule of Retained Causes of Action contained in the

Debtors’ Second Supplemental Plan Supplement for Third Modified

First Amended Joint Chapter 11 Plan includes:

The Debtors expressly reserve all Causes of Action

based in whole or in part upon any and all insurance

contracts, insurance policies, occurrence and claims

made policies, occurrence and claims made contracts,

and similar agreements to which any Debtor or Post-

Effective Date Debtor is or was a party or pursuant to

which any Debtor or Post-Effective Date Debtor has any

rights whatsoever, regardless of whether such contract

or policy is specifically identified in the Plan, this

Plan Supplement, or any amendments thereto, including,

Causes of Action against current or former insurance

carriers, reinsurance carriers, insurance brokers,

underwriters, occurrence carriers, third-party claims

administrators, or surety bond issuers relating to

coverage, indemnification, subrogation, contribution,

reimbursement, overpayment of premiums and fees, breach

of contract, or any other matters.

D.I. 1042-4 (emphasis added).

10

bankruptcy case to confer “related to” jurisdiction.31

The Defendants contend, however, that even where a Plan

specifically retains certain causes of action, that alone is not

enough to establish “related to” jurisdiction.32 Rather, the

Defendants argue that the Plan must treat the specific cause of

action as an essential feature in order for it to be sufficiently

related to the case for the Bankruptcy Court to have jurisdiction

over it.33 They assert that this requirement is not met here

because there is no indication that creditors considered the

31 See Wash. Mut., 2012 WL 4755209, at *4 (holding that a

“sufficiently close nexus” requires that the plan specifically

describe the underlying cause of action and expressly retain

jurisdiction to liquidate the claim for creditors’ benefit)

(citing AstroPower, 335 B.R. at 325). See also EXDS, Inc. v. CB

Richard Ellis, Inc. (In re EXDS, Inc.), 352 B.R. 731, 735 (Bankr.

D. Del. 2006), abrogated on other grounds by In re Seven Fields

Dev. Corp., 505 F.3d 237 (3d Cir. 2007) (noting that while a

plan’s preservation of jurisdiction provision does not by itself

confer jurisdiction, it is one factor that “can provide proof of

a close nexus between the claims at issue and the bankruptcy

case”).

32 Wash. Mut., 2012 WL 4755209, at *5 (granting a motion to

dismiss for lack of subject matter jurisdiction and noting that

even when a plan clearly and unambiguously reserves jurisdiction

for a specific cause of action, the Court will not have post-

confirmation jurisdiction unless a substantial nexus is

established”).

33 See Shandler v. DLJ Merchant Banking, Inc. (In re Insilco

Techs., Inc.), 330 B.R. 512, 525-26 (Bankr. D. Del. 2005), aff’d,

394 B.R. 747 (D. Del. 2008) (holding that while the claims in the

Amended Complaint fell within the broad definition of claims

retained by the Creditor Trust, “[i]f the litigation is truly so

critical to the Plan’s implementation, it would have been more

specifically described in the Disclosure Statement and Plan so

that creditors could have considered its effect when deciding

whether to vote in favor of the Plan.”).

11

effects of this insurance coverage action when voting on the

Plan. In support, the Defendants note that this insurance action

is not mentioned in the litigation trust agreement, the Plan does

not mandate that the action be brought (but only preserves it),

the Policy was assumed only for the benefit of the Reorganized

Debtor (not creditors), and the Disclosure Statement warned

creditors that the Defendants had denied coverage under the

Policy.

The Court finds that the Plan’s Schedule of Retained Causes

of Action does generally include the Reorganized Debtor’s

Complaint as one of its “Claims Related to Insurance Policies.”34

However, neither the Plan’s Retention of Jurisdiction provisions

nor the Schedule of Retained Causes of Action explicitly

reference this cause of action (perhaps because the lawsuit had

not been filed at the time).

Even if this lawsuit was explicitly described in the Plan

and Disclosure Statement, however, that alone does not confer

post-confirmation jurisdiction on this Court absent evidence that

it has a substantial nexus to the Plan and estate.35 The

34 See supra note 30.

35 See, e.g., Resorts, 372 F.3d at 169 (holding that ““[w]here

a court lacks subject matter jurisdiction over a dispute, the

parties cannot create it by agreement even in a plan of

reorganization.”); BWI, 437 B.R. at 166 (“Plan provisions that

purport to preserve the bankruptcy court’s jurisdiction are not

alone sufficient to establish post-confirmation jurisdiction;

instead the court must determine whether a matter affects the

12

language of the Plan retaining jurisdiction over all retained

claims cited by the Reorganized Debtor does not alone establish

such a nexus.36 Accordingly, without more, the Plan’s express

retention of jurisdiction is insufficient to confer jurisdiction

on this Court over this particular adversary action.

B. Close Nexus

The Defendants contend that this adversary proceeding does

not fall within “related to” jurisdiction because the insurance

coverage dispute does not have a close nexus to the bankruptcy

Plan or proceeding.37

First, they argue that there is nothing in the Plan or

Confirmation Order requiring that the Reorganized Debtor

prosecute this (or any) insurance coverage action. The Plan

merely retains those causes of action.

interpretation, implementation, consummation, execution, or

administration of a confirmed plan.”) (internal citations

omitted).

36 See Insilco, 330 B.R. at 525.

37 Logan v. Westchester Fire Ins. Co. (In re PRS Ins. Grp.,

Inc.), 445 B.R. 402, 405 (Bankr. D. Del. 2011) (quoting Resorts,

372 F.3d at 168–69) (holding that the trustee’s action against

insurers was a non-core proceeding and that “[p]ost-confirmation,

the bankruptcy court may only exercise [related to] jurisdiction

where a claim has ‘a close nexus to the bankruptcy plan or

proceeding’ and the matter at issue ‘affects the interpretation,

implementation, consummation, execution, or administration of a

confirmed plan or incorporated litigation trust agreement.’. . .

The mere potential to increase the assets of a post-confirmation

trust is insufficient to establish the required ‘close nexus.’”).

13

Second, while the Defendants concede that the insurance

coverage action may indirectly increase creditors’ recoveries,

they argue that this is insufficient alone to confer “related to”

jurisdiction.38

Further, the Defendants argue that this adversary action

will not result in a greater recovery for the creditors. The

Reorganized Debtor’s Complaint only seeks reimbursement of

defense costs for the benefit of the Reorganized Debtor and its

officers and directors; it does not seek recovery of any amounts

for third-party creditors.39 The Defendants contend that this

case is thus distinguishable from cases where courts have found

“related to” jurisdiction post-confirmation.40

38 See Wash. Mut., 2012 WL 4755209, at *3 (“[I]f the mere

possibility of a gain or loss of trust assets sufficed to confer

bankruptcy court jurisdiction, any lawsuit involving a continuing

trust would fall under the ‘related to’ grant. Such a result

would widen the scope of bankruptcy court jurisdiction beyond

what Congress intended. . . .”) (quoting Resorts, 372 F.3d at

170).

39 See, e.g., Adv. D.I. 1 ¶ 14 (“Underwriters’ refusal [to

provide coverage] compelled [the Debtors] to undertake and pay

the defense of the Lawsuits and the costs of responding to the

investigations, inquiries and demands at its own expense and the

litigation fees and costs will continue to be incurred.”), ¶ 17

(“[The Reorganized Debtor] accordingly requests that judgment be

entered in its favor, granting a declaration that it is entitled

to reimbursement of the fees and costs for the defense of the

Lawsuits and responding to the investigations, inquiries and

demands.”), ¶ 36 (“Here, a declaration is sought for defense

costs.”), p. 16 (“UNDERWRITERS’ REFUSAL TO PAY DEFENSE COSTS.”).

40 See Michaels v. World Color Press, Inc. (In re LGI, Inc.),

322 B.R. 95, 102-04 (Bankr. D.N.J. 2005) (retaining jurisdiction

where the Plan defined the cause of action as an asset intended

14

The Reorganized Debtor responds that the Court has “related

to” jurisdiction over this action for several reasons. First, it

argues that the recoveries under the Plan for creditors and

shareholders were premised, in large part, on recoveries under

the insurance policies. This, the Reorganized Debtor contends,

is evidenced by the fact that (1) the preservation of insurance

was a condition precedent to the Plan’s effectiveness,41 (2) the

Plan distributions are to be funded in part by the insurance

proceeds,42 and (3) the Reorganized Debtor’s ability to challenge

to be distributed to creditors); AstroPower, 335 B.R. at 323-25

(retaining jurisdiction where the Plan expressly retained

jurisdiction to liquidate the underlying claims for creditors’

benefit). The Defendants acknowledge that holders of Class 10

claims are entitled to a portion of certain litigation proceeds,

which may include proceeds from the instant insurance coverage

action. However, the Defendants argue that this relationship is

narrow and insufficient to establish “related to” jurisdiction

over the case.

41 Plan, Art. X.B.8.:

The Effective Date of the Plan shall not occur unless

and until . . . all appropriate notices shall have been

given and all other appropriate actions shall have been

taken to preserve all applicable Insurance Policies,

including any ‘tail policy[.]’

D.I. 1066.

42 Plan, Art. V.C.:

The Post-Effective Date Debtors shall fund

Distributions to Holders of Claims and Interests from

all Assets (including, without limitation, Cash

generated by or that constitutes the proceeds of assets

acquired by the Post-Effective Date Debtors after the

Effective Date), which include, but are not limited to

. . . (iii) proceeds from Retained Causes of Action and

(iv) insurance proceeds received by the Post-Effective

Date Debtors.

D.I. 1066 (emphasis added).

15

the Defendants’ denial of coverage was expressly enumerated as a

Retained Cause of Action under the Plan.43

Further, the Reorganized Debtor argues that this action will

directly affect creditors’ recoveries. First, it argues that the

Plan limits recoveries on account of any indemnification

obligations of the Reorganized Debtor (i.e., to its Directors and

Officers) to available insurance.44 Second, the Reorganized

Debtor argues that the Plan obligates claim holders to exhaust

remedies with respect to applicable insurance policies before

their claims are paid by the estate.45 Third, the Reorganized

43 See supra note 30.

44 Plan, Art. V.M.:

Indemnification Obligations . . . any obligations of

the Debtors . . . to indemnify, reimburse, or limit the

liability of any Person . . . shall survive

confirmation of the Plan . . . provided, however, that,

except as otherwise set forth herein or in a Final

Order of the Bankruptcy Court, all monetary obligations

of any kind or nature whatsoever under this Article V.M

shall be limited solely to available insurance coverage

and neither the Post-Effective Date Debtors nor any of

their respective assets shall be liable for any such

obligations in any manner whatsoever.

D.I. 1066 (emphasis added).

45 Plan, Art. V.V.:

Unless the Post-Effective Date Debtors agree or the

Bankruptcy Court orders otherwise, no distributions

under the Plan shall be made on account of any Allowed

Section 510(b) Claim, Allowed RIDE Section 510(b)

Claim, or on account of any other Allowed Claim or

Interest that is payable (to the extent it is payable)

pursuant to one of the Debtors’ Insurance Policies,

until the Holder of such Allowed Claim or Interest has

exhausted all remedies with respect to the applicable

Insurance Policy, if any.

16

Debtor argues that the promise of insurance recoveries induced

certain parties to settle during the Plan negotiations, led to

the withdrawal of certain claims against the estate, and provided

a path to confirmation. Lastly, the Reorganized Debtor asserts

that the outcome of this action may sizably increase creditors’

recoveries.

The Reorganized Debtor argues that this case is similar to

those cases finding post-confirmation “related to”

jurisdiction.46 Specifically, the Reorganized Debtor argues that

the insurance coverage actions are linked to the Debtor’s pre-

petition losses, the insurance coverage actions were identified

as substantial possible sources of recovery for stakeholders

under the Plan, and the causes of action were entrusted by the

Plan to the Reorganized Debtor to prosecute for the benefit of

creditors and shareholders.

The Court disagrees with the Reorganized Debtor’s argument

because it does not find a sufficiently close nexus between the

claims in this adversary action and the Plan. For example, the

D.I. 1066.

46 See AstroPower, 335 B.R. at 323-25 (finding that there was

“related to” jurisdiction and denying a motion to dismiss for

lack of subject matter jurisdiction where the claims at issue

were linked to the debtor’s pre-petition losses and entrusted to

the plaintiff through the Plan for creditors’ benefit); LGI, 322

B.R. at 104 (finding a “close nexus” sufficient to exercise

jurisdiction where the claims at issues were “both logically

linked to the Debtor’s pre-petition losses, and entrusted to the

Plaintiff via the Plan for the benefit of creditors.”).

17

claims at issue do not affect “the interpretation,

implementation, consummation, execution, or administration” of

the Plan.47 Instead, the claims are simply a means by which some

creditors may get an additional recovery, which alone is an

insufficient nexus.48

Furthermore, although the Court finds that the claims

asserted in the Reorganized Debtor’s Complaint fit within the

general description of Retained Claims Related to Insurance

Policies, the evidence does not support a finding that this

lawsuit is the lynchpin of the Debtors’ Plan. Instead, this

action is only one dispute among numerous other insurance-related

matters that are retained in the Plan.49 This general reference

to Claims Related to Insurance Policies is in sharp contrast to

the list of other Retained Causes of Action which go into much

greater detail (including names of adversaries and some

description of the Debtors’ claims).50 Further, the Claims

Related to Insurance Policies are only one of eight categories of

47 BWI, 437 B.R. at 164 (quoting Resorts, 372 F.3d at 168–69).

48 Resorts, 372 F.3d at 170 (“The malpractice action could

result in an increase in the Litigation Trust’s finite assets.

But the potential to increase assets of the Litigation Trust and

its [creditor] beneficiaries does not necessarily create a close

nexus sufficient to confer ‘related to’ bankruptcy court

jurisdiction post-confirmation.”).

49 See supra note 30.

50 See D.I. 1042-4 at 1-4.

18

generally described retained claims, in addition to the

specifically identified causes of action.51 If this lawsuit were

so crucial to the Debtors’ Plan, it would have been given a more

prominent place and description in the Plan and Disclosure

Statement.52

Because the Court finds that there is no close nexus between

the claims in the Complaint and the Plan, the Court concludes

that it has no subject matter jurisdiction over this coverage

action.

It is important to note that the Court’s conclusion in no

way affects the Reorganized Debtor’s (or creditors’) right to

recover defense costs (or other proceeds) which may be due under

the insurance policies. It simply means that any action for a

determination of insurance coverage is properly decided by

another court.53

51 Id. at 4-6.

52 Insilco, 330 B.R. at 525 (“If the litigation is truly so

critical to the Plan’s implementation, it would have been more

specifically described in the Disclosure Statement and Plan so

that creditors could have considered its effect when deciding

whether to vote in favor of the Plan.”).

53 As noted, the Defendants have brought an action in New York

addressing the same subject matter as this adversary. Notably,

the Policies provide that New York law governs their

interpretation. Adv. D.I. 1, Ex. A at p. 3. See, e.g., Wash.

Mut., 2012 WL 4755209, at *4 (“Further, the Plan and Confirmation

Order can be interpreted by other courts of competent

jurisdiction. ‘[S]tate courts are qualified to interpret the

language of bankruptcy plans and orders and routinely engage in

such interpretation.’”). See also, Icco v. Sunbrite Cleaners,

19

CONCLUSION

For the forgoing reasons, the Court will grant the Motion to

Dismiss filed by the Defendants.

An appropriate Order is attached.

Dated: June 5, 2025 BY THE COURT:

Mary F. Walrath

United States Bankruptcy Judge

Inc. (In re Sunbrite Cleaners, Inc.), 284 B.R. 336, 342 (N.D.N.Y.

2002) (“Because contract interpretation is an issue of state law

. . . the state courts are perfectly well-suited to interpret the

First Amended Plan.”); In re Landreth Lumber Co., 393 B.R. 200,

205 (Bankr. S.D. Ill. 2008) (“[T]he state court had concurrent

jurisdiction to interpret a provision of the confirmed plan as a

matter of contract law ... .”); Kmart Creditor Trust v. Conaway

(In re Kmart Corp.), 307 B.R. 586, 596 (Bankr. E.D. Mich. 2004).

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