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$159,581. In December 2001, five weeks after the Judgment was entered, J-N was sold to Water Services Company of Indiana, Inc. ("WSCI") for $475,000. Rose and Underwood agreed to indemnify WSCI for any and all liabilities arising out of Mercantile's lawsuit and J-N then gave $275,000 to both Rose and Underwood. In 2002, Mercantile moved for proceedings supplemental to enforce the Judgment. In February 2003, Mercantile moved for leave to amend its complaint and add a cause of action under the Indiana Crime Victim's Compensation Act (the "CVCA"), which was granted. The trial judge ended up entering a judgment in favor of Mercantile for $542,435.49 in treble damages and $162,730 in attorneys' fees. This judgment was appealed. During the appeal, the debtor filed chapter 11 and Mercantile filed an adversary proceeding objecting to the debtor's discharge in 2006. In June 2007, the Indiana Supreme Court reversed the appellate court and held that Mercantile's CVCA claim was procedurally improper. After that ruling, on November 12, 2007, Mercantile filed an amended complaint to determine the debtor's dischargeability in the debtor's case. The bankruptcy court dismissed the amended complaint and reasoned that the CVCA claim had never been properly commenced within the two-year statute of limitations. The district court affirmed. But, in May 2009, the Indiana Court of Appeals issued a decision saying that the CVCA claim was commenced within the statute of limitations period. Mercantile appeals the bankruptcy court's dismissal of the amended complaint.
Issue: Whether the bankruptcy court erred in dismissing the adversary complaint.
Rule: "[T]he CVCA allows a person who suffers pecuniary loss as a result of certain property crimes to seek treble damages and attorneys' fees. Because a claim under the CVCA is primarily penal in nature, a two-year statute of limitations applies."
Holding: Reversed. The CVCA claim was commenced within the statute of limitations period.
Reasoning: Although the Indiana Supreme Court said that the original CVCA claim was procedurally improper and that the trial court should not have granted Mercantile's motion to add the CVCA claim, the court also said that "Mercantile 'may continue to pursue its CVCA claim through transfer to a new cause number or some other means.'" Ultimately, the court agreed with the ruling of the Indiana Court of Appeals that "the CVCA claim was properly commenced within the statute of limitations when Mercantile amended its complaint. This most recent Indiana Court of Appeals decision, which the Indiana Supreme Court declined to reconsider, is the final word that Mercantile's CVCA claim did not 'evaporate into the ether' when the Indiana Supreme Court ruled later that it was improvidently filed during a proceeding supplemental."
Facts: G-I Holdings, Inc. ("GI") bought D&O insurance from Reliance Insurance Company ("Reliance") for the period of time between July 1999 through July 2002. The policy (the "Policy") included an 'interrelated wrongful acts' clause under which the filing dates for all lawsuits filed arising from the same wrongful acts would be the date of the first such suit that was filed. The coverage cap was $15 million. GI paid its premiums. However, soon after GI bought the Policy, Reliance had some financial problems and, in the summer of 2000, Hartford Fire Insurance Company ("Hartford") took over claims administration for certain of Reliance's claims. Hartford also assumed some of Reliance's liabilities and reinsured others. GI ended up splitting the Policy between Reliance and Hartford: it amended the original Policy (the "Amended Policy") so that Reliance covered GI up until July 15, 2000 and Hartford took over thereafter and issued a new policy (the "Hartford Policy") to GI for the remaining period under the original Policy (July 15, 2000 through July 1, 2002). The Hartford Policy was identical to the Reliance Policy. There was a combined cap of $15 million and Reliance gave Hartford its share of the premium GI had paid. In 1997, GI was facing a lot of asbestos litigation and distributed to Heyman, one of its D&Os, the stock of a profitable subsidiary, after which GI was sued for fraudulent conveyance. The first of the fraudulent conveyance lawsuits was filed in January 3, 2000 (the "Nettles action"), which falls within the Amended Policy timeframe; the remaining two lawsuits were filed on September 19, 2000 and September 17, 2001 (the "Later Lawsuits"). Reliance was eventually put into liquidation. GI agreed to pursue coverage from Reliance in that
©2010 Leif M. Clark
