On October 30, 2017 the Southern District of New York rejected MF Global Holdings’ (“MF Global”) latest attempt to avoid a bankruptcy court order compelling it to submit to arbitration in Bermuda in its coverage dispute with Allied World Assurance Company (“Allied World”) regarding MF Global’s bankruptcy. The court denied MF Global’s motion seeking leave to appeal the bankruptcy court’s arbitration order and for a stay of the arbitration pending that appeal.
Allied World argued that 9 U.S.C. § 16(b) prohibits interlocutory appeals for orders compelling arbitration, and that the exception to the statute was not satisfied in this case. The listed exception, 28 U.S.C. § 1292(b), provides for district court certification of interlocutory orders for appeal to circuit courts but does not apply to appeals from bankruptcy courts to district courts under § 158(a). The court declined to accept that interpretation, instead concluding that § 16(b) was not intended to cover, and did not apply to, decisions of bankruptcy courts. Additionally, the court noted that accepting Allied World’s argument would lead to like cases being treated differently because cases in bankruptcy court could never obtain an interlocutory appeal while cases in which a district court declines to refer the matter to the bankruptcy court could obtain interlocutory appeal. Therefore, the court held, § 16(b) did not bar MF Global’s attempted appeal.
Nevertheless, the court found there were no “exceptional circumstances” justifying an interlocutory appeal of the bankruptcy court’s order. The proposed issue on appeal was whether a bankruptcy plan provision retaining jurisdiction over future and related disputes supersedes pre-bankruptcy arbitration rights, absent an express provision to that effect and when the adversary proceeding began after confirmation of the bankruptcy plan. The court found this issue to be a controlling question of law, even though a resolution on it would not terminate the case, because it would offer helpful guidance for future parties encountering the issue. It also found there was “substantial ground for difference of opinion” based on cases from other courts reaching conclusions contrary to that of the bankruptcy court. Interlocutory appeal was inappropriate, however, because reversal of the bankruptcy court on this issue would not, by itself, “materially advance the ultimate termination of the litigation” where the defendant made several independent arguments for why the jurisdiction provision should not be enforced that would each need to be addressed.
Because the court denied MF Global’s motion for leave to appeal, it also denied the motion to stay as moot.