Beyond Structured Settlements: ELNY Appeal - Injunction 2

Eighteen Executive Life of New York (ELNY) structured settlement shortfall payees (shortfall payees), as Objectors and Appellants, have challenged the Order of Liquidation and Approval of the ELNY Restructuring Agreement approved by Judge John M. Galasso on April 16, 2012 by filing an appeal with the Appellate Division of the Supreme Court of the State of New York, Second Department,

In prior blog posts, S2KM:

• Summarized the ELNY shortfall payees' preliminary appellate brief:
  
• Provided additional due process analysis (ELNY Due Process Issue);
• Featured analysis of the ELNY Immunity Issue by New York attorney Peter Bickford.
• Summarized arguments in the appellate briefs filed by the Superintendent and NOLHGA, as a non-party respondent, as well as the reply brief filed by the ELNY shortfall payees:

This S2KM blog post summarizes the injunction arguments in the Superintendent's brief and the ELNY shortfall payees' reply brief. NOLHGA's appellate brief was limited to due process issues.

Superintendent

• The Supreme Court properly granted and continued its prior injunctions prohibiting lawsuits against the Superintendent.
• The Supreme Court had jurisdiction to continue and to grant the injunctions.
• New York Insurance Law Section 7419(b) grants trial courts broad discretion to issue anti-suit injunctions during liquidation and rehabilitation proceedings.
• Section 7419(b) does not preclude courts from enjoining claims seeking to hold the Superintendent personally liable for malfeasance or breach of fiduciary duty.
• The ELNY shortfall payees' challenge to the injunctions was not properly preserved in the Supreme Court.
• The injunctions protecting the Superintendent and his agents were first issued in 1991 as part of the ELNY rehabilitation order.
• The ELNY shortfall payees failed to appeal the 1991 and 1992 ELNY orders containing the injunction against the Superintendent and his agents.
• Because those injunctions are final and non-appealable, the shortfall payees are precluded from seeking to overturn those injunctions now.
• The proper avenue for ELNY shortfall payees to challenge the scope of the injunctions is to file a motion to modify with the Supreme Court.
• The shortfall payees never objected to the scope of the injunctions during the ELNY liquidation hearing nor demonstrated that the interests of justice required modification.
• Because the shortfall payees did not seek modification below, their attempt to raise this issue for the first time on appeal is not appropriate.
• The Supreme Court did not abuse its discretion by issuing and continuing its prior injunctions.
• The shortfall payees' assertions are based upon the false premise that the Superintendent and his agents were acting in their individual capacities in the ELNY rehabilitation.
• The ELNY shortfall payees are now asking the Appellate Court to allow ELNY policyholders and creditors to file lawsuits against the Superintendent outside of the receivership court and process.
• This request by the ELNY shortfall payees is directly contrary to the public interest in the single management of a liquidation that New York insurance law is intended to protect.

ELNY Shortfall Payees

• The Supreme Court lacked jurisdiction and statutory authority to permanently enjoin claims against the Superintendent in his personal capacity.
• Without addressing common law, the Superintendent's sole argument supporting subject matter jurisdiction is that New York Insurance Law authorizes the injunction.
• The ELNY shortfall payees agree that, if Section 7419 does authorize an injunction against personal-capacity claims, then the Supreme Court possessed subject matter jurisdiction.
• As a threshold issue, however, the Superintendent argues that the standard for reviewing the injunction order should be "abuse of discretion". That is incorrect.
• The dispositive issue on appeal is statutory interpretation. Can the words "prevents interference with the superintendent" authorize the injunction of claims against the Superintendent in his personal capacity?
• The Supreme Court's exercise of discretion becomes an issue only if the New York statute authorizes such an injunction.
• Section 7419 of the New York Insurance Law does not authorize permanent injunctions against personal-capacity claims.
• The Superintendent claims the statutory reference to injunctions as "the court deems necessary to prevent interference with the superintendent or the proceeding" insulates the Superintendent from liability for his own personal conduct.
• This interpretation is inconsistent with the Insurance Law and requires the Appellate Court to read the words "interferance with the superintendent" in isolation, ignoring all other words in Article 74.
• None of the cases cited by the Superintendent support the proposition that Section 7419 authorizes an injunction against personal-capacity claims - as opposed to official-capacity claims.
• The words and the distinction are taken directly from multiple New York appellate cases, and they are dispositive.
• Even if Article 74 authorized an injunction, it would be an abuse of discretion for Judge Galasso to use that authority to ban claims for which the Superintendent is not immune.
• Because New York law limits the immunity granted to private receivers, it is an abuse of discretion to grant unrestricted immunity in the guise of a blanket injunction.
• The Superintendent's claim that the ELNY shortfall payees are seeking an "unfettered right for all policy holders and creditors of ELNY to commence actions against the [Superintendent] outside of the receivership court" is incorrect.
• The ELNY shortfall payees merely ask that the scope of the injunction be consistent with New York law.
• The shortfall payees could not have appealed the original 1991 ELNY rehabilitation order. They lacked standing because they had not incurred any loss of benefits in 1991.
• Their basis for seeking appellate relief only occurred once Judge Galasso entered the ELNY liquidation order and injunction causing their loss of property.

For S2KM's complete and continuing ELNY reporting, plus copies of the shortfall payees' appellate briefs and an Executive Life timeline, see the structured settlement wiki.

Source: http://s2kmblog.typepad.com/rethinking_structured_set/2012/09/elny-appeal-injunction-2.html

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