CHARLES CASE, Bankruptcy Judge
I. INTRODUCTION
This is a dispute concerning the arbitrability of disputes under an insurance policy purchased by Debtor Boston Chicken, Inc. ("BCI") to insure its directors and officers ("DO's) from loss.
Defendant ACE Insurance Company, Ltd. ("ACE"), a Bermuda insurance company, issued a DO policy with an effective date of 1995; premiums were paid both pre- and post-petition. Two aspects of the policy are critical: first, it provided seventh layer excess coverage in an amount of $20 million under which the primary coverage and the five preceding layers of excess coverage needed to be exhausted prior to its layer being available and, second, the policy excluded claims by one insured against another insured.
Boston Chicken, Inc. and a number of affiliates commenced these Chapter 11 proceedings on October 5, 1998.
By order dated May 15, 2000, BCI's plan of reorganization was confirmed pursuant to which Gerald K. Smith was appointed Trustee for the estates of the debtors and charged with "monetizing" the Retained Assets, as defined in the Plan, including claims, causes of actions, and insurance policies not transferred to the buyer of the debtor's operational assets, including all insurance policies insuring the debtor's DO's. The Trustee thereafter commenced litigation against various parties, including the DO's. The Trustee settled with some but not all of the insured DO's and recovered policy limits from the primary carrier and the next four layers of excess coverage. In addition, the Trustee received an assignment of the settling DO's' claims against ACE. Throughout, ACE denied coverage, asserted it had no obligation to defend and took no action (such as filing a declaratory judgment suit) to determine the existence or extent of its liability.
One issue referenced in the pleadings but not relevant to the determination of this motion is that the immediately senior level of coverage was issued by Reliance, which is in insolvency proceedings itself.
On March 22, 2005, ACE, through its lawyers (and defendants herein) Conyers, Dill Pearman ("Conyers") filed an action in the Supreme Court of Bermuda against the Trustee and the settling DO's seeking an order enjoining the defendants from commencing or proceeding with any action or injunction against ACE and awarding them damages and their costs (the "Bermuda Action"). ACE obtained the injunction that same day, without notice to any of the defendants, notwithstanding the fact that counsel for Trustee and/or the settling DO's had been in contact with counsel for ACE over a period of years. ACE also sought to commence arbitration of all disputes in Bermuda.
The claims for damages and costs were subsequently stricken by ACE.
Thereafter, on April 18th, 2005, Trustee filed this action against ACE, Conyers and its United States coverage counsel, Bailey Cavalieri, LLC and Dan Bailey (jointly "Bailey"), seeking an injunction against proceeding with the Bermuda action, contempt, contract damages, a declaratory action and bad faith damages.
Defendants moved to dismiss this action on July 1, 2005, and, after briefing, oral argument was held on August 16, 2005. The Court has been advised that proceedings to set aside the Bermuda injunction are scheduled in Bermuda August 22 and 23, 2005.
II. THE ISSUES TO BE DECIDED
Defendants have moved to dismiss this case on the following grounds:
A. ACE
1. ACE asserts that the Court lacks personal jurisdiction over it and the matter in dispute does not involve
in rem jurisdiction.
2. ACE asserts that the Arbitration agreement is enforceable.
3. ACE denies that the
Barton Doctrine, requiring leave of the appointing Court before suit may be brought against a Court appointed trustee, does not apply to proceedings in Bermuda to enforce an arbitration agreement to which the Trustee is bound. Therefore, it is neither an impediment to the Bermuda action nor a basis for a contempt award against ACE.
4. The doctrine of comity requires this Court to defer to the Bermuda Court.
B. Bailey
1. Bailey asserts that an injunction may not be issued to prevent it from participating in the Bermuda Action in which it is not representing ACE.
2. Bailey asserts that the
Barton Doctrine does not apply and, even if it did, contempt does not lie against Bailey for any purported violation.
C. Conyers
1. Conyers asserts that the Court lacks personal jurisdiction over it.
2. Conyers adopts Bailey's arguments on the
Barton Doctrine.
The Trustee responds:
1. There is personal jurisdiction over all Defendants.
2. This Court has exclusive
in rem jurisdiction over property of the estates, which includes the policies at issue and their proceeds.
3. The defendants violated the
Barton Doctrine when they brought the Bermuda action without first seeking leave from this Court.
4. Contempt is the appropriate remedy for violation of
Barton.
5. Comity is either not applicable or should not be applied in this case.
6. By declaring that it will not provide coverage under any circumstances, ACE has repudiated the contract and therefore released the Trustee from any obligation to arbitrate.
III. ANALYSIS
A. Standard on a Motion to Dismiss
1. Personal Jurisdiction (Fed.R.Bankr.Proc. 7012(b)(2))
The Trustee has the burden of making a prima facie case that the defendants are personally subject to the jurisdiction of this Court. Data Disc, Inc. v. Systems Technology Assocs., Inc, 557 F.2d 1280 (9th Cir. 1977). If no such showing is made, the action must be dismissed, except insofar as the Trustee seeks in rem relief only.
2. Failure to State a Claim (Fed.R.Bankr.Proc. 7012(b)(6))
For the purposes of 7012(b)(6), the facts of the complaint, and all reasonable inferences, are taken as true. The defendant has the burden of showing that there are no facts that the Plaintiff may prove that would entitle it to relief under the theories alleged.
The Plaintiff has submitted detailed proposed findings of fact and conclusions of law. The Court declines to enter any of those dealing with the merits of the underlying dispute; the Plaintiff is not now in Court seeking affirmative relief. The issue presented is narrowly whether the complaint should be dismissed; therefore, the Court will only make such limited findings as are necessary to address the personal and in rem jurisdiction arguments.
B. Personal Jurisdiction
1. ACE
The appropriate initial inquiry is the extent of the Court's jurisdiction over the defendants.
For purposes of bankruptcy jurisdiction, it is necessary only to demonstrate that personal jurisdiction would exist in any state, rather than exclusively in the forum state, in this case Arizona. ACE asserts (supported by affidavit) that it: conducts no business in the United States, is incorporated in Bermuda, has offices only in Bermuda, sells insurance only in Bermuda through brokers based solely outside the United States, receives its premiums in Bermuda, does not advertise in the United States, chooses only forums to resolve cases outside of the United States, pays no United States taxes and is not regulated by any United States regulatory authority.
The starting point for any personal jurisdiction inquiry is the Supreme Court's extensive jurisprudence on the subject. In Int'l Shoe Co. v. State of Washington, 326 U.S. 310 (1945), the Supreme Court established the oft-cited principle that "due process requires only that in order to subject a defendant to a judgment in personam, if he be not present within the territory of the forum, he have certain minimum contacts with it such that the maintenance of the suit does not offend `traditional notions of fair play and substantial justice.'" McGee v. Int'l Life Ins. Co., 355 U.S. 220 (1957), applied this principle to the question of jurisdiction over the issuer of an insurance policy. McGee's deceased husband, a resident of California, purchased a life insurance policy from Empire, an Arizona insurance company. International, a Texas company, took over the obligations of Empire and mailed a certificate to the insured in California. The insured paid premiums to International in Texas. Neither Empire nor International ever had any offices or agents in California.
The Court held that it was sufficient for purposes of personal jurisdiction over International in California that the "contract was delivered in California, the premiums were mailed from there and the insured was a resident of that State when he died." 355 U.S. at 201.
In Calder v. Jones, 465 U.S. 783 (1984), a unanimous Supreme Court found personal jurisdiction in California over a Florida resident who generated a nationally published article that was "intentionally directed" at a California resident. There were no other California contacts.
A more recent refining of the doctrine came in Asahi Metal Industry Co. v. Superior Court of California, 480 U.S. 102 (1987). The issue was whether a California Court could exercise jurisdiction over a cross claim by a Taiwanese tire manufacture against a Japanese manufacturer of valve assemblies (incorporated in the finished tire product in Taiwan) for injuries resulting from an accident that occurred in California. The Court (with different majorities) answered "no" on two bases: first, that the mere fact that a product is introduced into the "stream of commerce" and may end up in a forum where the product's manufacturer has no other contacts is insufficient to be the "purposeful act" by the defendant required to submit himself to the jurisdiction of the forum; and, second, even if introduction into the stream of commerce were sufficient, in this case it would be "unfair" to invoke jurisdiction. Two lessons come out of Asahi — there must be some action by the party against whom jurisdiction is sought and imposition of jurisdiction, even if it meets the minimum standards test, must still pass muster under the notion of "fundamental fairness."
See Burger King Corp. v. Rudzewicz, 471 U.S. 462 (1985), World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286 (1980).
There are three Ninth Circuit cases worthy of note. In Haisten v. Grass Valley Medical Reimbursement, 784 F.2d 1392 (9th Cir. 1986), a specialized reimbursement fund was established in the Cayman Islands to provide malpractice insurance for a group of doctors in California. As the Court put it, the fund was "carefully and deliberately established to appear to be doing business only in the Cayman Islands." 784 F.2d at 1395. Because the business was aimed at California doctors, the Court found that the Fund had "purposely availed itself of the privilege of conducting activities in California," even though "no part of the transaction for insurance took place in the forum state."
Defendants suggest that the holding of Haisten is suspect because of the subsequent decision of the Supreme Court in Asahi. This is unconvincing. A year after Asahi, the Ninth Circuit decided McGlinchy v. Shell Chemical Co., 845 F.2d 802 (9th Cir. 1988), in which the Court found that personal jurisdiction did not exist. However, it cited the holding in Haisten approvingly noting that the present case completely lacked any activity by the defendant in the forum state and no "effects" of "purposeful" activity existed. Finally, Lake v. Lake, 817 F.2d 1416 (9th Cir. 1987), discusses the "purposeful availment" test at length and restates the Ninth Circuit's tri-partite test for specific personal jurisdiction: 1) the nonresident defendant must purposefully direct his activities [at] the forum state or residents thereof; 2) the claim must arise from the forum-related activities; and 3) exercise of jurisdiction must be reasonable.
In this case, the Trustee has filed an affidavit asserting that BCI paid all premiums by wire transfer to an account at Citibank in New York, that the policy covered only U.S. based operations (as BCI had no international operations), that all negotiations for the insurance were through a broker based in the U.S. (first RHH and thereafter AON), that coverage confirmations were provided and signed by the U.S. based brokers, and the policies were received by BCI in the United States.
Distilling the case law to its essence, the key test is whether a non-resident defendant has purposefully taken an action directed at, or with a likely effect on, the forum state and, if so, does invoking personal jurisdiction as to that defendant "comport with fair play and substantial justice." In this case, the answer to both questions is yes. This is not a "stream of commerce" case; there is nothing random or unintentional about ACE's having sold an United States company a $20 million insurance policy and collected over $1.8 million in premiums over five years to insure losses that could only arise in the United States. Further, it is not unreasonable for ACE to have to respond to claims brought in this forum by its insured. The law has been made in this area with cases on the edge; this is not one of them. Granted, ACE has taken care, like the defendant in Haisten, to keep its operations off-shore; however, it has not limited its activities to off-shore locations and therein lies the rub. Therefore, the motion to dismiss as to ACE for lack of personal jurisdiction will be denied.
2. Conyers
The analysis for Conyers is quite different. Here, the Trustee relies entirely upon the "effects" of actions taken by Conyers in Bermuda in commencing and prosecuting the Bermuda Action. Even assuming arguendo that there has been effects of Conyers' activities in the United States, the second prong must also be met — does it comport with "fair play and substantial justice" to "hale" Conyers into the United States Court. Lake set out the factors to be considered: (1) the burden on the defendant; (2) the existence of an alternative forum; (3) convenient and effective relief for the Plaintiff; (4) efficient resolution of the controversy; (6) purposeful interjection; and (7) conflicts with sovereignty. A weighing of these factors leads to the conclusion that jurisdiction over Conyers does not lie. Clearly there is a substantial burden for a Bermuda law firm to defend a suit in an American federal Court where its only activity is bringing an action in Bermuda. Most importantly, both "convenient and effective relief" and "efficient resolution of the controversy" are completely available without the presence of Conyers as a defendant. ACE is the target; Conyers is a distraction. Counsel for the Trustee admitted as much at oral argument. None of the other factors weighs on the other side. Where there is no general, ongoing relationship with the forum (as here), and "minimum contacts" jurisdiction is based on a single set of activities, the bar for a finding of "reasonableness" is raised. It has not been reached.
Therefore, Conyers' motion to dismiss will be granted.
C. In Rem Jurisdiction
Trustee also argues that this Court has exclusive in rem jurisdiction over the policy and its proceeds. ACE disagrees, stating that the complaint seeks personal relief against it.
The plan was confirmed on May 15, 2000. Pursuant to the plan, all assets not sold to the buyer of the restaurant operations and all assets acquired after confirmation became property of the estate to be administered by the Trustee pursuant to the Plan subject to the exclusive jurisdiction of this Court. Specifically included in such assets are the various DO policies held by the Debtor, including the ACE policy, and their proceeds. As such, this Court has in rem jurisdiction over the policies and their proceeds. The more interesting question is-what does that mean?
The legal question of whether, in the absence of an order to contrary, the proceeds of a DO policy where there is no separate entity coverage for the Company (here, the company appears to be covered only to the extent of its reimbursement obligations to its DO's) are property of the estate is unsettled at best. See, e.g., Allied Digital Technologies Corp, 306 B.R. 505 (Bankr. D. Del. 2004), Cf. Froomkin affidavit, p. 10. Nonetheless, in this case, the Trustee also holds by assignment the interests of the settling defendants which, under the terms of the plan, are unquestionably property of the estate.
ACE argues that this dispute is not about who owns the res but rather whether it has personal liability to the Trustee. This is only half true. The concept of in rem jurisdiction is a broad one and encompasses more than merely ownership; it also implicates rights to payment, priorities, enforceability and related issues. The recent Supreme Court case of Tennessee Student Assistance Corp. v. Hood, 541 U.S. 440 (2004) is the most recent illustration of the breadth of the in rem concept. In Hood, the Court held that a suit by a debtor against a state to determine the dischargeability of a student loan held by the state did not implicate the state's Eleventh Amendment sovereign immunity because it was in rem in nature. The Court reached this conclusion without ever clearly identifying the res at issue. Is it the debt owed? Is it the person of the debtor? Is it that the state is simply enjoined from collecting a debt rather than forced to pay one? How exactly is property of the estate implicated in a dischargeability action? To this reader, this issues are not clearly answered or addressed in Hood. The point is that Hood reinforces the strong presumption that bankruptcy remains primarily an in rem proceeding. That is particularly true where, as here, the focus is upon the fate of the proceeds of an insurance policy specifically identified as property of the estate. To the extent that this case implicates that policy and its proceeds, the Court has in rem jurisdiction and, under the plan and 28 U.S.C. § 1334(e), that jurisdiction is exclusive.
For a thorough discussion of Hood and its in rem roots, see Haines, Hood Immunizes Discharges from Sovereign Immunity Defense, 2004 No. 7 Norton Bankr. L. Adviser 1 (2004).
However, in rem jurisdiction does not extend to the bad faith claim asserted or to the damage claims for violation of Barton. In those causes of action, more is sought than a determination of rights in a res; rather, the Trustee seeks a judgment for personal liability beyond the boundaries of the res. For those claims, the Trustee must rely on in personam jurisdiction to proceed.
D. The Issue of Arbitrability Outside of Bankruptcy
The Trustee argues that ACE's declination of coverage amounts to a "repudiation" of the contract, thereby relieving BCI of the obligation to arbitrate under New York law and requiring the question to be decided in an United States Court. This issue will first be addressed outside the context of the bankruptcy specific arguments put forth by the Trustee.
The insurance contract states that the policy shall be construed and enforced in accordance with New York law except for the arbitration provision which shall be construed and enforced in accordance with. Bermuda law. Bermuda law expressly states that in a Bermuda arbitration a choice of law provision agreed to by the parties will be honored. Construing both of these provisions together, it is fair to say that Bermuda law on arbitration controls the process, the choice of the arbitrators and their powers, judicial review of any arbitral award, enforcement of any award, and the like, but that New York law controls the substantive rights of the parties under the policy.
Section 18 of the Bermuda Arbitration Act ("BAA") attached to the Froomkin affidavit.
This only partially answers the question, however, because the arbitration language is broad enough to grant the arbitrators the authority to decide all substantive questions of New York law. So, it would be consistent with the policy for the question of whether the carrier "repudiated" the policy by refusing to defend, as arguably required by New York law, to be decided by the arbitrators. However, does the BAA so empower the arbitrators? And likewise, is the right claimed by BCI to have that issue decided by a judge a substantive issue controlled by New York law?
Although broadly written, the BAA does not specifically address whether the arbitrators have the authority to determine the arbitrability of the dispute. It does provide for limited judicial review in Bermuda, upon consent of the parties or the arbitrator(s), either on an interlocutory basis or appeal after award, unless the parties have excluded that review under the agreement. This insurance contract does have such an "exclusion agreement", the upshot of which is that any award is final without judicial review of either legal or factual errors.
In short, the BAA provides a template for determining disputes where the Courts may or may not be involved, depending upon the choice of the parties. Here, the parties have opted to remove the Courts from the process (other than pre-arbitration matters) and leave all matters to be determined by the arbitrators. The contract clearly contemplates that whether a claim may be excluded from coverage (as with the "insured vs. insured" exclusion at issue here) is governed by New York law and is within the parameters of the arbitrators' authority to decide. These are clearly matters of substantive New York law. Similarly, the issue whether "repudiation" relieves a party of the obligation to arbitrate is logically likewise within the scope of the arbitrators' powers.
The Trustee's arguments to the contrary are not convincing. The Trustee's conclusion that he is entitled to submit the repudiation/arbitrability issue to a Court is based not on New York law but on federal law, the Federal Arbitration Act, 9 U.S.C. § 1 et seq. ("FAA"). While the Trustee relies on Mastrobuono v. Shearson Lehman Hutton, Inc, 514 U.S. 52 (1995), its holding is not helpful to the Trustee's position. There, the parties to a securities brokerage contract agreed that all disputes would be arbitrated under NASD rules but governed by New York law. NASD arbitrations were in turn subject to the standards of the FAA, the United States correspondent to the BAA. New York state law prohibited arbitrators from awarding punitive damages; the FAA allowed such awards. The arbitration resulted in an award of punitive damages and the respondent appealed. The Supreme Court held that the FAA trumped New York state law on the procedural issue of whether arbitrators were so authorized, and reversed. Applying the principle of Mastrobuono to this case, the BAA, not the FAA, is the statute that governs the arbitration agreement made by the parties. Therefore, Mastrobuono suggests that one should look to the BAA, not the FAA, for direction on the division of power between Courts and arbitrators and that law authorizes the parties, as they have done here, to agree that all disputes of whatever kind shall be referred to the arbitrators.
Indeed, even the Trustee's argument that the FAA contemplates that a Court, rather than the arbitrators, must address the repudiation question is unsupported by either the FAA or the authorities he cites. Section 4 of the FAA is directed at what a Court may do if presented with a refusal to arbitrate. The statutory inquiry is directed at the whether the agreement exists or whether it was induced by fraud, not at whether an acknowledged obligation to arbitrate may have been waived or abandoned. A good example of the distinction is Controlled Sanitation Corp. v. Dist. 128, 524 F.2d 1324 (3d Cir. 1975) where the Court held that the issue of whether one party had repudiated the an agreement to arbitrate was itself an issue for the arbitrator and not for the Court.
One of Trustee's key authorities on this point is contrary to the Trustee's position: "Defendants also argue that Letizia's proposed amendment to his complaint constituted a generalized claim that the Customer Agreement was fraudulently induced. Under Prima Paint Corp. v. Flood Conklin Mfg. Co., 388 U.S. 395, 403-04, 87 S.Ct. 1801, 1805-06, 18 L.Ed.2d 1270 (1967), these claims cannot be considered by a federal Court. Instead, they are treated as any other dispute under the contract and must be referred to arbitration. See also Schacht v. Beacon Ins. Co., 742 F.2d 386, 389-90 (7th Cir. 1984); Merrill Lynch, Pierce, Fenner Smith v. Haydu, 637 F.2d 391, 398 (5th Cir. 1981). Only a claim that the arbitration clause itself was independently induced by fraud can be brought before the Court under 9 U.S.C. § 4. " Letizia v, Prudential Bache Sec., Inc, 802 F.2d 1185, 1188 fn. 4 (9th Cir. 1986)"
There is, however, one final issue that needs to be addressed — the impact of the Convention of Recognition and Enforcement of Foreign Arbitral Awards, adopted by the United States in 9 U.S.C. § 201 et seq. Both sides embrace the Convention as vindicating their positions. The Trustee asserts that Section II requires that its repudiation argument must be decided by a Court — specifically this Court. Although not clearly articulated, the argument appears to be that, this Adversary Proceeding having been filed, this Court is "seized" of an action relating to a covered arbitration agreement and therefore, may, or indeed must, determine whether it is "null and void" or "inoperative." ACE counters the Convention requires the referral of the case to arbitration in any event.
Article II (3):"The Court of a Contracting State, when seized of an action in a matter in respect to which the parties have made an agreement within the meaning of this article, shall, at the request of one of the parties, refer the parties to arbitration, unless it finds that the said agreement is null and void, inoperative or incapable of being performed."
The focus and purpose of Section II of the Convention is analogous to Section 4 of the FAA; that is, it is Court's role to determine if an agreement to arbitrate exists (or whether it was induced by fraud or void ab initio), and, if so, to refer the matter to arbitration. Under both the statutory and the treaty scheme, it is not for the Court to interpret the parties' rights under the contract, including whether a pre-existing obligation to arbitrate has been abandoned or repudiated. Therefore, the Court concludes that the Trustee's repudiation argument lies within the arbitration clause.
Of course, this issue is complicated by the fact that there are two Courts in two different countries, each of which is "seized" of an action implicating a potentially arbitrable dispute. That implicates ACE's argument that comity requires deferral to Bermuda, a subject to which the Court will turn, after a discussion of the so-called Barton doctrine.
E. The Barton Doctrine
To recap, the Court has concluded that, outside of bankruptcy, the arbitration clause would should be enforced and that all issues, including policy exclusions, exhaustion of senior coverages, repudiation, and bad faith, would be within the scope of the arbitration proceeding. The bankruptcy proceeding does, however, require another layer of analysis and imposes another layer of complication. As previously concluded, this Court does have personal jurisdiction over ACE to consider the Trustee's claims and exclusive in rem jurisdiction of the res of the policies and their proceeds.
At the vortex of these seemingly contrary holdings is the Barton doctrine. It is well-established in American jurisprudence that a Court appointed Trustee may not be sued without leave of the appointing Court. Barton v. Barbour, 104 U.S. 126 (1881); In re DeLorean Motor Co., 991 F.2d 1236 (6th Cir. 1993); In re Baptist Medical Center, 80 B.R. 637 (Bankr. E.D.N.Y 1987); Leonard v. Vrooman, 383 F.2d 556 (9th Cir. 1967). None of the defendants seriously challenges this point of law; rather, they argue that it has either been superceded by 28 U.S.C. § 959(a) or that it applies only in cases where the complaint seeks money damages or that its application in this case would be impermissibly extraterritorial. Each of these will be addressed in order
Section 959(a) states: "Trustees . . . may be sued, without leave of the Court appointing, with respect to any of their acts or transaction in carrying on business in connection with [estate] property." The cases are in uniform agreement that this statute is limited to circumstances where a Trustee is "carrying on business" and does not create a Barton exception where the Trustee is administering, maintaining, and liquidating assets of the estate, including the commencement and prosecution of litigation concerning estate claims and assets. See, e.g., Muratore v. Darr, 375 F.3d 140 (1st Cir. 2004); In re DeLorean, supra; In re American Associated Systems, Inc., 373 F.Supp. 997 (E.D. Ky 1974). The primary purpose of the statute is to facilitate the ordinary give and take of commerce that occurs during reorganization proceedings and those liquidation proceedings where the Trustee is authorized to operate, and does operate, a business. It has no applicability here where the Trustee is engaged solely in collecting, monetizing and distributing assets of the estate.
Further, there is nothing limiting the application of Barton only to cases where only damages are sought. One of the primary purposes of the doctrine is to protect the exclusive in rem jurisdiction of the Court over property of the estate. This is accomplished by making the bankruptcy Court, in effect, a clearing house for all litigation concerning the estate and the Trustee. The doctrine does not bar suits, arbitrations or other proceedings. It merely requires leave of the appointing Court, sought in advance. In such a proceeding, the appointing Court should consider any conflicting considerations over what is the best place to determine a particular dispute after being fully informed on those issues by all parties.
As the DeLorean Court said:
"We think, therefore, that it is immaterial whether the suit is brought against him to recover specific property or to obtain judgment for a money demand. In either case leave should be first obtained."
991 F.2d at 1240.
In this case, in a very real way, the Bermuda Action is analogous to an action to "recover specific property" of the estate — the policy and its proceeds.
Finally, would application of the Barton doctrine be inappropriate in this case where the proceeding in question is in another country? The answer is no. All parties world wide take their litigants as they find them. The Trustee in this case is clothed in protections that derive from his appointment pursuant to the Plan and his role as an officer of the Court. He is not stripped of those protections when he is sued in another country; indeed, as part of the Bermuda Court's inquiry into its jurisdiction, the Trustee's capacity to be sued, absent leave of the appointing Court, must be considered. It is the conclusion of this Court that he lacks that capacity, as he has neither consented to suit nor has ACE received leave from this Court.
ACE argues that it is unaware of any case that has held Barton applicable to a suit to compel arbitration in a foreign country. While that may be true, it does not change the basic analysis. As noted, Barton springs from two sources; first, the quasi-immunity of the Trustee arising from his appointment by the Court and second, the in rem nature of bankruptcy proceeding. All parties to this case agree that in rem decisions are "good against the world." Because the property at issue is part of the bankruptcy estate, requiring compliance with Barton merely enforces this Court's exclusive jurisdiction over that property.
F. Bailey's Motion to Dismiss
Following this discussion of Barton, it is appropriate to address Bailey's motion to dismiss. Bailey's argument that Barton is inapplicable is without merit. Its other argument is that contempt is an inappropriate remedy because there is no specific Court order that has been allegedly violated. Numerous cases hold that contempt is the appropriate remedy for violation of Barton, comparing it to a violation of a stay. See, e.g., DeLorean, Baptist; In re Premier Sports Tours, 283 B.R. 600 (Bankr. M.D. Fla. 2002). Having conceded personal jurisdiction, and in light of this authority, Bailey's motion to dismiss is denied.
Bailey's other ground for dismissal is that it cannot be enjoined prosecuting a case it is not prosecuting. The record is clear that at least two Bailey lawyers have participated in the Bermuda Action without seeking leave under Barton. This count is therefore sufficiently pled to survive a motion to dismiss.
G. Comity
The final issue is whether comity requires deferral to the Bermuda Court. The Trustee is incorrect that comity is irrelevant because there is no parallel insolvency case pending. Comity issues may arise in all litigation, not solely bankruptcy cases. Here, there are two pending civil cases — this adversary proceeding (admittedly arising in a pending bankruptcy case) and the Bermuda Action, each of which addresses similar issues concerning the resolution of the parties' disputes concerning the ACE policy. Therefore, a brief analysis of considerations of comity is appropriate.
ACE's primary argument is that BCI consented to Bermuda jurisdiction and therefore this Court should defer. However, at this point in the proceedings, this Court may decline to defer solely based upon Barton and this Court's exclusive in rem jurisdiction over the policies and their proceeds. Indeed, unless and until Barton is satisfied, it is this Court's view that the Bermuda proceedings should defer to the proceedings here. As noted above, Barton exists not to create jurisdiction but to protect it. That jurisdiction is protected by the "leave" requirement. This Court could well conclude, after fully consideration of the parties' positions if and when leave is sought by ACE, that arbitration in Bermuda, as previously agreed to by ACE and BCI, is the appropriate method and venue for resolution of the coverage and related disputes. But we are not there yet and until we are, it is incumbent upon this Court to protect its jurisdiction as established under the Bankruptcy Code and the Plan of Reorganization confirmed over five years ago.
IV. CONCLUSION
For all the foregoing reasons:
1. ACE's Motion to Dismiss is denied;
2. Bailey's Motion to Dismiss is denied: and
3. Conyers' Motion to Dismiss is granted.
So ordered.