United States v. Lincoln Gen. Ins. Co. , 2016 CIT 15 ( 2016 )

Slip Op. 16-15
UNITED STATES COURT OF INTERNATIONAL TRADE
UNITED STATES,
Plaintiff, Before: Timothy C. Stanceu, Chief Judge
v. Court Nos. 13-00084, 13-00085,
13-00086, 13-00087, 13-00088,
LINCOLN GENERAL INSURANCE 13-00089, 13-00090, 13-00091,
COMPANY, and 13-00092
Defendant.
OPINION AND ORDER
[Ordering stay of litigation in nine actions following liquidation of defendant by order of the
Commonwealth Court of Pennsylvania]
Dated: February 18, 2016
Beverly Farrell, Civil Division, U.S. Department of Justice, of New York, NY, argued
for plaintiff United States. With her on the brief were Amy Rubin, Assistant Director, and
Benjamin Mizer, Principal Deputy Assistant Attorney General. Of counsel on the brief were
Edward Maurer and Michael Heydrich, Office of Assistant Chief Counsel, U.S. Customs and
Border Protection.
T. Randolph Ferguson, Sandler Travis & Rosenberg, P.A., of San Francisco, CA, and
Frederick L. Ikenson, Blank Rome LLP, of Washington DC, for defendant Lincoln General
Insurance Co. (In Liquidation). With them on the brief was Kierstan L. Carlson, Blank Rome
LLP, of Washington DC.
Stanceu, Chief Judge: Plaintiff United States initiated the nine above-captioned actions to
recover from defendant Lincoln General Insurance Company (“Lincoln”) supplemental
antidumping duties and accrued interest claimed to be owing on various entries secured by
customs bonds. The entries at issue, which were made between May 1, 2002 and
October 31, 2002, covered imports into the United States of garlic from the People’s Republic
of China.
Court Nos. 13-00084, 13-00085, 13-00086, 13-00087,
13-00088, 13-00089, 13-00090, 13-00091, and 13-00092 Page 2
Before the court are plaintiff’s motions to stay the above-captioned actions in light of the
recent liquidation of Lincoln by order of the Commonwealth Court of Pennsylvania, issued
November 5, 2015 (“Liquidation Order”). Pl.’s Mot. to Stay 1 (Nov. 11, 2015), ECF No. 66
(“Pl.’s Mot.”); see also, id. at Attach. 1 (IN RE: Lincoln General Insurance Company In
Liquidation, No. 1 LIN 2015) (“Liquidation Order”).1 Defendant Lincoln General Insurance
Company (In Liquidation), successor in interest to Lincoln General Insurance Company
(collectively, “LGIC”), opposes the stays.2 Def.’s Resp. in Opp’n to Pl.’s Mot. to Stay
(Nov. 16, 2015), ECF No. 67 (“Def.’s Opp’n”). For the reasons discussed herein, the court will
grant plaintiff’s motions to stay these cases.
Under the terms of the Liquidation Order, LGIC is to be liquidated pursuant to Article V
of the Insurance Department Act of 1921 (the “Act”), 40 Pa. Stat. §§ 221.1–.63 (governing the
liquidation of insolvent insurers under Pennsylvania law). Liquidation Order 1. Plaintiff points
out that the Liquidation Order sets a deadline of July 6, 2016 for filing of proof of claims against
LGIC’s estate, adding that “[i]t will not be known until after all proofs of claims are received and
evaluated whether the estate will be in any position to make good on the Government’s
claims . . . .” Pl.’s Mot. 2; see also Liquidation Order ¶ 13; 40 Pa. Stat. §§ 221.37–.38.
Section 221.44 of the Act establishes the following classes of priority for claims against
an insolvent insurer:
1
Pursuant to the court’s April 3, 2014 order granting plaintiff’s consent motion for leave
to file single, representative submissions for the nine above-captioned actions, all citations to the
parties’ court filings are to the docket for Court No. 13-00084.
2
LGIC is under the control of Teresa D. Miller, Insurance Commissioner of the
Commonwealth of Pennsylvania, in her official capacity as Liquidator of LGIC. Liquidation
Order 1.
Court Nos. 13-00084, 13-00085, 13-00086, 13-00087,
13-00088, 13-00089, 13-00090, 13-00091, and 13-00092 Page 3
(a) administrative claims; (b) claims under policies of insurance;
(c) claims of the federal government; (d) certain debts due employees;
(e) the claims of general creditors, including simple contract creditors;
(f) claims for unearned premium or premium refunds; (g) claims of local
and state governments; and (h) all other claims.
Id. § 221.44. Section 221.44 further provides that “[e]very claim in each class shall be paid in
full or adequate funds retained for such payment before the members of the next class receive
any payment.” Id. In seeking the stays, plaintiff submits that LGIC’s estate may be partially or
entirely depleted of funds before reaching plaintiff’s creditor class. Plaintiff argues, further, that
continuing litigation of the nine pending actions at this time could further diminish the estate’s
limited assets, increasing the likelihood that plaintiff would be unable to collect on successful
claims, and that denying the requested stays could encumber both parties with unnecessary
litigation costs.
“[T]he power to stay proceedings is incidental to the power inherent in every court to
control the disposition of the causes on its docket with economy of time and effort for itself, for
counsel, and for litigants.” Landis v. North American Co., 299 U.S. 248, 254 (1936) (“Landis”).
The decision of when and how to stay a proceeding rests “within the sound discretion of the trial
court.” Cherokee Nation of Okla. v. United States, 124 F.3d 1413, 1416 (Fed. Cir. 1997)
(citations omitted). In making this decision, the court is to “weigh competing interests,”
including those of judicial economy and efficiency, “and maintain an even balance.” Landis,
299 U.S. at 257. Where a stay might damage another party, the moving party “must make out a
clear case of hardship or inequity in being required to go forward, if there is even a fair
possibility that the stay for which he prays will work damage to someone else.” Id. at 255.
Judicial economy and efficiency favor a stay of proceedings in the above-captioned
actions. According to the parties, the appointed liquidator of LGIC’s estate advised LGIC’s
Court Nos. 13-00084, 13-00085, 13-00086, 13-00087,
13-00088, 13-00089, 13-00090, 13-00091, and 13-00092 Page 4
counsel in writing that she would like to proceed with these actions. Pl.’s Mot. 1; Def’s Opp’n 7.
The reasons the liquidator wishes to continue litigation are not stated in the letter to LGIC’s
counsel. See Def. Lincoln Gen. Insurance Co.’s Post-Oral Argument Br. on Jurisdiction, Ex. 2,
Appx. B (Nov. 9, 2015), ECF No. 62 (liquidator’s November 9, 2015 letter).
A stay of the above-captioned actions pending the receipt and evaluation of submissions
in the statutory proof of claim process may avoid the needless adjudication of claims in the
pending cases. As plaintiff points out, some or all of these claims could be rendered moot by
creditor priority provisions and the limited assets of LGIC’s estate.
In opposing plaintiff’s motions, defendant argues that proceeding to litigate these cases at
this time “will not pointlessly deplete the assets of LGIC’s estate” because it “will aid the
Liquidator in determining the amount of assets available for distribution,” Def.’s Opp’n 10, as
well as “LGIC’s liability to the United States,” id. at 8. Defendant, however, does not state why
the requested stays would be prejudicial to it, and the court has no basis upon which to conclude
that any such prejudice would occur. The court concludes that the benefits to judicial economy
and efficiency occasioned by the requested stays outweigh any benefits that would result from
continuing to litigate these actions in the short term. See USCIT R. 1. Accordingly, the court is
granting plaintiff’s motions.
The court concludes, further, that prompt reporting by the parties concerning the status of
the proof of claim process is appropriate so that the court may review the need for any
continuation of the stays. For this reason, the court is ordering the parties to file a status report
on or before August 31, 2016.
Court Nos. 13-00084, 13-00085, 13-00086, 13-00087,
13-00088, 13-00089, 13-00090, 13-00091, and 13-00092 Page 5
ORDER
Upon consideration of plaintiff’s motions to stay, defendant’s response in opposition, and
all other papers and proceedings herein, and upon due deliberation, it is hereby
ORDERED that plaintiff’s motions to stay be, and hereby are, granted; it is further
ORDERED that the nine above-captioned actions are stayed; and it is further
ORDERED that the parties shall provide the court with a status report concerning the
proof of claim process pertaining to Lincoln General Insurance Company (In Liquidation) and
any related issues on or before August 31, 2016.
/s/ Timothy C. Stanceu
Timothy C. Stanceu
Chief Judge
Dated: February 18, 2016
New York, New York