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Pace v. American International Group

March 30, 2010

JOHN HERNY PACE AND BARON & BUDD, P.C., APPELLANTS,
v.
AMERICAN INTERNATIONAL GROUP, INC., APPELLEE.



The opinion of the court was delivered by: Judge David H. Coar

MEMORANDUM OPINION AND ORDER

Presently before this Court is the appeal of John Henry Pace and Baron & Budd, P.C. ("Pace" or "Appellants") from the Final Injunction and Order issued by the United States Bankruptcy Court, which granted summary judgment in favor of American International Group, Inc. ("AIG" or "Appellee"), denied summary judgment for Pace, and enjoined Pace's related suit against AIG in state court. This Court has jurisdiction over the instant appeal pursuant to 28 U.S.C. § 158(a). For the reasons stated below, the Bankruptcy Court's decision is AFFIRMED.

FACTUAL BACKGROUND

Setting the current dispute in motion, Pace initiated a lawsuit against AIG in Texas state court, alleging that AIG failed to pay Pace under the terms of a settlement agreement between the parties. The Texas trial court awarded summary judgment to Pace on October 26, 2006, and AIG timely appealed. Before the Texas court resolved this appeal, AIG filed an Original Complaint and Request for Injunctive Relief in this Court, alleging that Pace's state court suit was barred by a channeling injunction issued during bankruptcy proceedings for ARTRA Group, Inc. ("ARTRA"). The matter was referred to the Bankruptcy Court for the Northern District of Illinois, which had presided over the ARTRA bankruptcy and issued the channeling injunction in question. On November 27, 2007, the Bankruptcy Court entered a "Final Judgment of Injunction," granting summary judgment in favor of AIG, denying summary judgment for Pace, and enjoining the continuation of the Texas proceeding. Pace's appeal from this decision is now before the Court. Unless otherwise stated, the Court draws the following facts, which are not in dispute, from the Bankruptcy Court's Findings of Fact.

I. The Texas Action

On April 27, 2006, Pace, through his attorneys Baron & Budd, P.C., filed suit against AIG in Texas state court. See Pace v. American International Group, Inc., No. 06-2150-A (the "Texas Action"). In that action, Pace alleged the following:

 He suffers from asbestosis and filed suit for his injuries in Texas state court in 1999.  After the trial that ensued, a jury awarded a substantial verdict in Pace's favor, and, on March 22, 2002, the court entered a final judgment against the Synkoloid Company in the amount of $2,025,000.  On May 9, 2002, Pace entered into a written agreement resolving the final judgment for a total of $725,000 (the "Pace Settlement Agreement"). This agreement had four parties:

(1) Pace, (2) ARTRA (the entity responsible for the asbestos liabilities of Synkoloid and defendant against whom Pace's judgment was entered), (3) Kemper Insurance Company ("Kemper") (insurer for asbestos liabilities of ARTRA and Synkoloid), and (4) AIG (the ultimate parent corporation of at least one insurance company which insured the asbestos liabilities of ARTRA and Synkoloid).  The Pace Settlement Agreement required that, on or before June 7, 2002, the parties make payments in the following amounts to Pace: (1) $432,970.00 by AIG, (2) $94,322.50 by Kemper, and (3) $197,707.50 by ARTRA.  While Pace and Kemper performed all of their obligations under the Pace Settlement

Agreement, both ARTRA and AIG failed to make their required payments.

In his brief before this Court, Pace adds that the Pace Settlement Agreement included the following language:

The parties understand and agree that should ARTRA Group, Inc. fail to pay their portion of this settlement, Pace will not attempt to collect ARTRA Group, Inc.'s portion of this settlement directly from the insurers listed above in paragraph 2; provided, however, that nothing herein is intended to prevent or impede Pace from seeking to collect ARTRA Group, Inc.'s portion of the settlement from ARTRA Group itself, or from any other entity aside from the insurers listed in paragraph 2, regardless of from where the ultimate source of the funds for ARTRA Group, Inc.'s payment derives.

Pace also adds that, in compliance with the Pace Settlement Agreement, he executed a Full and Final Release of All Claims and Indemnity Agreement releasing ARTRA and its insurers for asbestos-related claims against Synkoloid.

II. The ARTRA Bankruptcy

On June 3, 2002, four days before ARTRA was required to render payment to Pace under the terms of the parties' settlement agreement, ARTRA filed a voluntary petition for reorganization under Chapter 11 of the Bankruptcy Code in the United States Bankruptcy Court for the Northern District of Illinois. On November 3, 2006, ARTRA and the Creditors' Committee in the ARTRA bankruptcy jointly filed a plan of reorganization (the "Plan"), which was modified on January 24, 2007. Baron & Budd served as a member of the Creditors' Committee, and Pace, who remained a creditor of ARTRA due to the amount owed to him under the 2002 Pace Settlement Agreement, voted for the Plan. On January 25, 2007, the Bankruptcy Court entered an "Order ...


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