Thomas Riley, Jr. v. Mutual Insurance Co Ltd ( 2020 )

NOT PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
______________
No. 19-1321
______________
THOMAS A. RILEY, JR.,
Appellant
v.
MUTUAL INSURANCE COMPANY LIMITED
______________
Appeal from the United States District Court
for the Eastern District of Pennsylvania
(D.C. No. 2-17-cv-00489)
District Judge: Hon. Paul S. Diamond
______________
Submitted Under Third Circuit L.A.R. 34.1(a)
October 4, 2019
______________
Before: SHWARTZ, SCIRICA, and FUENTES, Circuit Judges.
(Opinion filed: February 19, 2020)
______________
OPINION
______________
FUENTES, Circuit Judge.

This disposition is not an opinion of the full Court and, pursuant to I.O.P. 5.7,
does not constitute binding precedent.
Appellant, Thomas A. Riley, asserts breach of contract and bad faith claims
against Appellee Mutual Insurance Company Limited (“Mutual”) as a third-party
claimant. Riley filed the present case after Mutual declined to cover a default judgment
that Riley obtained against Journal Register East, a media company purportedly insured
by Mutual during the relevant period. The District Court held that Riley lacked standing
to sue Mutual and granted Mutual’s motion for summary judgment. For the following
reasons we affirm.
I.
This appeal arises out of a defamation suit filed in 2012 by Riley against Journal
Register East and the Philadelphia Inquirer in the Philadelphia Court of Common Pleas.1
At the time Riley filed his suit, Journal Register East’s corporate parent, Journal Register
Company, had an insurance contract with Mutual which provided coverage to Journal
Register Company and its subsidiaries (the “Indemnity Agreement”).2 The Indemnity
Agreement covered a variety of claims including those for libel, slander, and defamation.
While Riley’s defamation suit was ongoing, Journal Register East filed for
bankruptcy. As a result, all claims against Journal Register East were automatically
stayed, including Riley’s defamation proceeding. The Bankruptcy Court established a
1
In that defamation suit, Riley alleged that Journal Register East and the Philadelphia
Inquirer defamed him by publishing false reports that, as former Vice Chairman of the
Pennsylvania Convention Center, he had improperly directed hundreds of thousands of
dollars in fees to his law firm.
2
App. 5a; 1352a.
2
Liquidating Trust, overseen by a Liquidating Trustee, and confirmed a Liquidation Plan
for Journal Register East on October 15, 2013.
Riley obtained counsel, Janet Charlton, to secure a release from the bankruptcy
stay. Counsel for the Liquidating Trustee, Kenneth Enos, and Charlton drafted a
stipulation entitled, “Stipulation and Order Between The Liquidating Trustee And
Thomas A. Riley, Jr., Modifying The Automatic Stay Solely For The Limited Purpose Of
Allowing Plaintiff To Proceed Against Non-Debtor Third Parties And Recover Available
Insurance Proceeds” (the “Stipulation”).3 The final draft of the Stipulation was executed
by the parties and entered by the Bankruptcy Court on January 7, 2014. Mutual was
neither a party to, nor aware of, the Stipulation at the time it was entered by the
Bankruptcy Court and asserts that it learned of the Stipulation when Riley moved to lift
the litigation stay to proceed with his case against the defendants.
After Mutual was notified of the Stipulation, Mutual and the Liquidating Trustee
began to debate who bore the obligation to defend against Riley’s claim. Mutual wrote to
the Liquidating Trustee stating that, under the Indemnity Agreement, Journal Register
East had the duty to defend itself against claims like those brought by Riley, and
demanding that the Liquidating Trustee fulfill the obligations of Journal Register East by
undertaking the defense. In response, the Liquidating Trustee informed Mutual and
Journal Register East that, in light of the Stipulation in which Riley waived his right to
pursue the collection of any judgment against Journal Register East, it would not be
3
App. 1828a-1833a.
3
defending the Riley action. In that communication, counsel for the Liquidating Trustee
stated that “[g]iven the posture of these cases and the terms of the stipulation . . . the
Debtors do not believe that they have an interest in the lawsuit and even a default
judgment against them would not result in any liability for the estates.”4 Mutual
repeatedly requested that the Liquidating Trustee undertake the defense, warning that a
failure to do so would be a material breach of the Indemnity Agreement.
The common pleas court allowed counsel for Journal Register East to withdraw
from Riley’s action. Eventually, Riley moved for entry of a default judgment against
Journal Register East. At that point, Mutual contacted Enos, counsel for the Liquidating
Trustee, and reiterated its position that “the continuing failure and refusal of the
Liquidating Trustee to defend the Riley litigation is a breach of the terms and conditions
of the Policy resulting in the denial of coverage and disclaiming of any further obligation
to the Debtor or to the Estate.”5 Ultimately, neither Mutual, the Liquidating Trustee, nor
Journal Register East defended against Riley’s defamation claim.
Riley obtained a default judgment against Journal Register East, and the court
awarded Riley $1.5 million in damages. Riley then submitted the damages award to
Mutual as a claim for payment of $1.5 million under the Indemnity Agreement. When
Mutual refused to pay, Riley filed the present suit against Mutual in the Philadelphia
Court of Common Pleas arguing that he has standing to sue Mutual as an “assignee” of
4
App. 1871a-1872a; 1876a.
5
App. 1935a.
4
the Indemnity Agreement.6 Mutual then removed the action to federal court and
answered the complaint with a counterclaim.7 Mutual subsequently moved for summary
judgment, which the District Court granted in January 2019 holding that Riley did not
have standing to bring suit.
II.8
A.
Riley argues that he has standing as an assignee of the Indemnity Agreement
between Mutual and Journal Register East. Specifically, Riley states that the Stipulation
releasing him from the bankruptcy stay effected an assignment of rights.
Judgment creditors, such as Riley, have standing to sue their tortfeasor’s insurance
company where they have obtained an assignment of rights under the tortfeasor’s
insurance policy.9 Under Pennsylvania law, both equitable10 and legal11 assignments are
6
App. 66a.
7
After removal to federal court, Riley filed a motion to compel documents relating to
Mutual’s ability to assist with and control Journal Register East’s defense of the
defamation lawsuit. The District Court denied that motion.
8
The District Court had jurisdiction under 28 U.S.C. §§ 1332 and 1441. We have
jurisdiction under 28 U.S.C. § 1291. This Court’s review of the District Court’s grant of
summary judgment is plenary. Alexander v. National Fire Ins. Of Hartford, 454 F.3d
214, 219 n. 4 (3d Cir. 2006).
9
Gray v. Nationwide Mut. Ins. Co., 223 A.2d 8, 11 (Pa. 1966).
10
An equitable assignment is “any order, writing, or act by the assignor which makes an
absolute appropriation of a chose in action or fund to the use of the assignee with the
intention to transfer a present interest, although not amounting to a legal assignment.”
Melnick v. Pa. Co. for Banking & Trusts, 119 A.2d 825, 826 (Pa. 1956).
11
A legal assignment is defined as “a transfer or setting over of property, or of some right
or interest therein, from one person to another, and unless in some way qualified, it is
properly the transfer of one whole interest in an estate, chattel, or other thing.” In re
Purman’s Estate, 56 A.2d 86, 88 (Pa. 1948).
5
only valid where the assignor had the present intent to transfer or divest themselves of a
right or interest.12 In this case, after assessing the purported assignor’s intent, the District
Court concluded that no assignment had taken place.13 Riley argues that the District
Court erred in its conclusion. We disagree.
First, Riley questions the District Court’s conclusion that the plain language of the
Stipulation does not reflect an assignment because it does not contain “words typically
found in an assignment.”14 Riley notes that “[u]nder Pennsylvania law, no words of art
are required to constitute an assignment; any words that fairly indicate an intention to
make the assignee []the owner of a claim are sufficient.”15 Although Riley is correct that
no magic words need be invoked, his argument misses the mark. Critically, the
Stipulation at issue is not simply missing words of art, it is missing any words that “fairly
indicate” assignment.
The Stipulation states that its purpose is to modify the litigation stay to allow Riley
to proceed with his lawsuit to a final judgment and to recover and collect from any non-
Debtor third parties or under any insurance policies. The relevant text states:
12
See Melnick, 119 A.2d at 826 (discussing the intent necessary for legal and equitable
assignments).
13
App. 7a-13a. The District Court also concluded that an assignment would not have
been legal under the Bankruptcy Code. Because we conclude, based on the plain
language of the Stipulation and testimony of the individuals involved, that no reasonable
juror could conclude that the purported assignor, Enos, intended the Stipulation to effect
an assignment of rights, we do not address whether an assignment would have been legal
under the Bankruptcy Code.
14
Appellant’s Br. 23.
15
Id. (citing In re Poole, 2015 Bankr. LEXIS 3044, at *17 (Bankr. W.D. Pa. Sept. 9,
2015)).
6
The Automatic Stay shall be modified for the sole purpose of: (a) permitting
the Action to continue to final judgment or resolution of claims against the
Debtors, (b) liquidating the claims of Riley (if any); and (c) permitting Riley
to recover and collect from any non-Debtor third parties or under any
insurance policies; provided, however, that (i) no action may be taken by
Riley to execute on, or otherwise attempt to collect any judgment from the
assets of the Debtors’ estates except as against non-debtor third parties or
under any insurance policies, (ii) no action may be taken by Riley to execute
on or otherwise attempt to collect any judgment from assets of the Debtors;
and (iii) no action shall be taken with respect to any of the Debtors’ director
and officer insurance coverage.16
Notably, the Stipulation does not use the terms “authorize,” “assign,” “convey,” or
“transfer,” words frequently used to manifest an intent to assign rights.17 Furthermore,
neither Mutual nor the Indemnity Agreement between Mutual and Journal Register
Company are specifically mentioned in the Stipulation and the Stipulation provides that it
shall not “impact, affect, determine, release, waive, modify, limit, or expand” insurance
coverage or “alter any insurance carrier’s existing indemnity payment obligations.”18
In support of his position that the language above effects an assignment, Riley
cites an unpublished 2014 case from the Middle District of Pennsylvania, Hrobuchak v.
Federal Insurance Company, in which a court held that a liquidation plan constituted an
assignment where it “authorized” class representatives to pursue declaratory relief against
the debtor’s insurance carrier.19 He argues that, similar to Hrobuchak, the Stipulation
was clear that it contemplated authorizing Riley to pursue a judgment that was to be
16
App. 1831a.
17
App. 1828a-1833a; e.g., W. United Life Assur. Co. v. Hayden, 64 F.3d 833, 838 (3d
Cir. 1995).
18
App. 1831a.
19
No. 10-0481, 2013 WL 2291875, at *9 (M.D. Pa. May 24, 2013).
7
satisfied only by the Policy’s insurance proceeds.20 Riley’s argument, however,
overlooks a critical difference in context between Riley’s Stipulation and the liquidation
plan interpreted in Hrobuchak. In Hrobuchak, the parties expressly authorized the
judgment creditors to pursue a declaratory judgment against the insurer to determine
coverage.21 In the present case, the Stipulation included no express authorization of a
declaratory judgment but merely modified a stay to allow Riley’s case, in which he still
needed to prove liability, to proceed.
Riley also argues that a holding contrary to Hrobuchak would lead to an irrational
result because the parties understood that Riley was giving up his rights to pursue his
claim against Journal Register East in order to collect on Journal Register East’s
insurance. He argues that “if [Mutual’s argument] were accepted, it would mean that
Enos transferred an empty promise, allowing Riley the ability to pursue his claim against
[Journal Register East], obtain a judgment, and then come away with no recourse against
the policy.”22 However, as noted by the District Court, this argument “ignores . . . [that
Riley] has standing to institute a garnishment proceeding against [Mutual]” and chose not
to proceed on such a basis.23
Second, in addition to the lack of evidence in the plain language of the Stipulation
that an assignment was intended, the sworn witness testimony does not show that Enos,
the purported assignor, intended to assign the Indemnity Agreement to Riley. In fact,
20
Appellant’s Reply Br. 2.
21
2013 WL 2291875, at *9.
22
Appellant’s Reply Br. 4.
23
App. 13a.
8
Enos repeatedly testified that that he did not intend to assign insurance rights under the
Stipulation calling such an assignment a “legal impossibility” and stating, “I did not ever
intend to assign the - - it was never my belief that the insurance policy or indemnification
rights or anything was being assumed and assigned.”24 He also testified that if he had
intended an assignment he would have “included language such that, you know, policy X
is – or rights under policy X are hereby assumed by the debtors and assigned to Mr.
Riley, it would have said something about the cure amount involved . . . and . . . various
other bells and whistles . . .”25 In the face of this decisive testimony, Riley argues that
Enos only disclaims an assignment under § 365 of the Bankruptcy Code and leaves open
the possibility that an assignment “could be valid under other operation of law.”26 Such a
characterization misrepresents Enos’ testimony, in which Enos repeatedly stated, without
qualification, that he did not intend an assignment. Thus, there is simply no evidence that
the purported assignor, Enos, intended the Stipulation to effect an assignment.
Based on the Stipulation’s plain language and the testimony in this case we
conclude that there is no genuine issue of material fact as to whether the Stipulation was
an assignment of rights under the Indemnity Agreement. On this basis, the District Court
appropriately granted summary judgment.
24
App. 1393a-1394a; 1418a-1419a.
25
App. 1429a:21-24–1430a:1-20.
26
Reply Br. 5.
9
B.
In the alternative, Riley argues that even if he is not an assignee he has standing to
bring his claims under Pennsylvania’s Direct Action Statute, which allows an injured
person to bring suit directly against an insurance company to recover proceeds under a
third-party’s insurance policy if that third-party has declared bankruptcy.27 The District
Court concluded that that Riley had waived any claim of standing under 40 P.S. § 117
because he did not reference § 117 in his Complaint or plead facts supporting the
required elements of the statute.
On appeal, Riley fails to address the District Court’s conclusion that he waived
any possible claim of standing under § 117. Federal Rule of Appellate Procedure
28(a)(9) requires that an appellant’s brief contain “appellant’s contentions and the
reasons for them, with citations to the authorities and parts of the record on which the
appellant relies.”28 Where an appellant fails to comply with Rule 28(a)(9) by providing
argument on a particular issue, that issue is normally considered abandoned or waived
and need not be addressed by the court of appeals.29 In this case, Riley failed to address
the District Court’s holding that he waived any possible claim of standing under § 117.
Therefore, we conclude that Riley abandoned any argument that he did not waive his
claim. For that reason, we affirm the District Court’s holding that Riley waived any
27
40 P.S. § 117.
28
Collins v. Boyd, 541 F. App'x 197, 203 (3d Cir. 2013)
29
Kost v. Kozakiewicz, 1 F.3d 176, 182 (3d Cir.1993).
10
claim for relief under § 117 and conclude that Riley lacks standing to pursue his claims
against Mutual. 30
III.
For the reasons stated above, we will affirm the District Court’s order entering
judgment in Mutual’s favor.
30
Because we conclude that Riley does not have standing to sue Mutual, we do not reach
the following legal issues: (1) whether Mutual owes liability under the Indemnity
Agreement; (2) whether the District Court correctly denied Riley’s motion to compel the
production of policies or manuals that “permit or require” Mutual to “associate with and
control [Journal Register East’s] defense”; and (3) whether Mutual committed bad faith
in denying coverage.
11