THOMAS M. FLUHARTY, MARTIN P. SHEEHAN V. PHILADELPHIA INDEMNITY COMPANY; DAVID A. LEVINE
- Summarized by Danielle Scott , U.S. Bankruptcy Court, Southern District of West Virginia
- 11 months 4 weeks ago
- Case Type:
- Business
- Case Status:
- Affirmed
- Citation:
- 23-1349 (4th Circuit, Feb 26,2025) Published
- Tag(s):
-
- Ruling:
- The Fourth Circuit affirmed the district court's dismissal of the adversary proceeding against the Insurer for lack of standing. The Fourth Circuit held that: (1) the Geostellar Trustee lacked standing to seek a declaratory judgment against the Insurer under West Virginia law; (2) neither the Geostellar Trustee nor the Levine Trustee demonstrated an injury-in-fact under Article III, as any judgment collected would be limited to the insurance policy and Levine's debt to Geostellar was discharged; and (3) the policy proceeds were not property of the Levine estate.
- Procedural context:
- The Geostellar Trustee initiated an adversary proceeding against David Levine, former CEO of Geostellar, alleging that he intended to defraud the company. Mr. Levine and his wife filed for bankruptcy, and were discharged. The Geostellar Trustee along with the Levine Trustee initiated the instant adversary proceeding against the Insurer. The bankruptcy court granted the Insurer's motion to dismiss. The district court affirmed, and the Trustees appealed to the Fourth Circuit.
- Facts:
- Geostellar, Inc. filed for bankruptcy. Mr. Martin P. Sheehan ("Geostellar Trustee") initiated an adversary proceeding against David Levine, Geostellar's former CEO, alleging that Levine intended to defraud the company. Subsequently, Mr. Levine and his wife filed for bankruptcy and Mr. Thomas M. Fluharty ("Levine Trustee") was appointed. Prior to Geostellar's adversary proceeding, Geostellar purchased a D&O policy from Philadelphia Indemnity Company ("Insurer") which the Geostellar Trustee later extended. The Insurer provided Mr. Levine with a defense and considered him the insured under the policy. Due to the Levines' personal bankruptcy, the Geostellar Trustee requested relief from the automatic stay to the extent of the available insurance coverage. The Geostellar Trustee also did not object to the Levines' discharge. The bankruptcy court granted relief from the automatic stay. During mediation of Geostellar's adversary proceeding, the Insurer informed the Geostellar Trustee that, under the policy, Mr. Levine's consent was required for settlement. The Geostellar Trustee disagreed and asserted that the Levine Trustee's consent was required, not Levine's. Both Trustees initiated the instant adversary proceeding for a declaratory judgment that the right to consent to settlement under the policy is an asset of the Levine estate and that the Levine Trustee is the exclusive representative. The Insurer filed a motion to dismiss, which the bankruptcy court granted.
- Judge(s):
- King, Benjamin, Berner
ABI Membership is required to access the full summary. Please Sign In using your ABI Member credentials. Not a Member yet? Join ABI now - it is absolutely worth it!
