ELNY Appeal - Immunity 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':
  • Due process allegations (ELNY Appeal - Due Process 1);
  • Arguments against granting judicial immunity to the Superintendent of the New York State Department of Financial Services, as ELNY Receiver and Respondent, (Superintendent) (ELNY Appeal - Immunity 1)
  • Arguments against granting judicial injunctive protection to the Superintendent (ELNY Appeal - Injunction 1)
• Provided additional due process analysis (ELNY Due Process Issue);
• Featured analysis about the ELNY Immunity Issue by New York attorney Peter Bickford.
• Summarized due process arguments in the appellate briefs filed by the Superintendent and NOLHGA, as a non-party respondent, as well as the due process responses in the reply brief filed by the ELNY shortfall payees. (ELNY Appeal - Due Process 2)

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

Superintendent

• Judge Galasso's order properly recognized that receivers, like the Superintendent, have judicial immunity for actions undertaken pursuant to court orders and statutory duties.
• Doing so is consistent with the judicial immunity that attached in the 1992 ELNY Rehabilitation Plan Order and with various Court of Appeals’ decisions and common law holding that judicial immunity protects court-appointed receivers from personal liability when they act pursuant to the court’s charge.
• The Supreme Court has subject matter jurisdiction to determine whether actions by the Superintendent, as ELNY Receiver, fall within the scope of judicial immunity.
• The objecting ELNY shortfall payees do not cite a single case addressing subject matter jurisdiction in this context.
• An action against a former receiver may not be maintained unless the order of discharge is vacated and leave to prosecute an action is granted.
• Article 74 proceedings are exclusive in their operation and furnish a complete procedure for protecting the rights of all interested parties.
• The Supreme Court recognized in 1992 that the Superintendent, as ELNY's Receiver, and those working on his behalf were “discharged from any liability for their acts ... in the performance of their duties incident to the rehabilitation of ELNY”.
• Judge Galasso's recognition that the Superintendent has judicial immunity for actions he took as court-appointed ELNY Receiver is uncontroversial.
• Any attack by ELNY shortfall payees on the judicial immunity should be rejected as moot because their counsel conceded during the ELNY liquidation hearing that "any claims that my clients might have had against anyone have gone stale due to the passage of time.”
• Although the shortfall payees suggest the Superintendent should be personally liable for “overcompensating himself and his agents” or “investing ELNY assets in risky ventures” the Supreme Court earlier reviewed and approved the investment strategies contained in the ELNY Rehabilitation Plan Order.
• Efforts by the ELNY shortfall payees to insert a “care and prudence” requirement into the immunity recognized by the Supreme Court would be inconsistent with the recognition that receivers are immunized even for negligence.
• To fall outside judicial immunity, the Superintendent’s conduct would need to constitute ultra vires acts such as fraud or self-dealing actions.
• The notion that “waste” necessarily is ultra vires is unsupportable.
• The ELNY shortfall payees' argument that immunity is improper rests on false premises, namely that it somehow shields the Superintendent from personal liability for ultra vires actions that have nothing to do with ELNY’s rehabilitation, including whether he acted with bad faith for his own pecuniary interest.
• The ELNY shortfall payees' admission that the Superintendent is “entitled to assert immunity for conduct related to [his]receivership duties” demonstrates that their challenge to judicial immunity is not ripe because claims have not yet been filed against the Superintendent.
• Because any liability resulting from the Superintendent's official conduct is charged to the property of the ELNY estate, there is no property against which to seek relief once the property is transferred from the ELNY estate and the Superintendent could be inundated by lawsuits absent immunity.

ELNY Shortfall Payees

• The Supreme Court would possess subject matter jurisdiction to address claims against the Superintendent in his official capacity as ELNY Receiver.
• That is not true, however, of claims against the Superintendent "in his own shoes" and "against his own assets".
• By statute, the Superintendent's personal assets are not before the Supreme Court in rehabilitation and/or liquidation proceedings under New York Insurance Law Section 7404.
• This distinction is both critical and dispositive of the jurisdiction issue before the Court of Appeals.
• The Superintendent's appellate brief fails to acknowledge this basic distinction between official-capacity and personal-capacity claims.
• The Superintendent points out the ELNY shortfall payees do not cite a single case addressing subject matter jurisdiction in this context. That is correct. Neither does the Superintendent.
• The issue, therefore, appears to be one of first impression. In this case, however, determining whether a statute limits jurisdiction requires only a reading of the statute.
• One requirement for subject matter jurisdiction is the existence of a "justiciable" issue.
• The Superintendent argues the ELNY shortfall payees' challenge to judicial immunity is "not ripe" because claims have not yet been filed against the Superintendent.
• Assuming the Superintendent is correct that the shortfall payees' challenge is "not ripe", then there was no justiciable issue in the lower court either.
• As worded, the immunity provision in Judge Galasso's order exceeds the scope of immunity afforded to private court-appointed receivers.
• The Superintendent does not dispute that his status and role, as a receiver, are no different than any other court-appointed private receiver. (citing Matter of Dinallo v. DiNapoli)
• Having gone to considerable effort to secure that ruling in the Dinallo case for his benefit (avoiding audits by the State comptroller), the Superintendent must accept the consequences in the ELNY case.
• In other words, his status and role are no different than any other court-appointed private receiver.
• The only immunity issue for the Appellate Court to decide, therefore, is narrow: what is the immunity to which private receivers are entitled in New York?
• To the extent the wording of Judge Galasso's ELNY liquidation order exceeds that scope, it is erroneous.
• Where the objecting ELNY shortfall payees and the Superintendent disagree on the immunity issue is the "scope of that immunity"
• The correct standard is: "As a general rule, a receiver who acts in good faith and with appropriate care and prudence is immune from personal liability for losses."
• The Superintendent's brief ignores this settled rule and argues instead that he is automatically immune for all actions as ELNY Receiver unless the shortfall payees show his actions were "ultra vires" or in bad faith.
• Lacking authority for this proposition, the Superintendent suggests the ELNY shortfall payees "concede" it. They do not.
• Having unilaterally deemed himself immune from all but undefined "ultra vires" acts, the Superintendent then asks the Appellate Court to rule that any "waste" by the Superintendent of ELNY's assets would not be "ultra vires".
• The Superintendent, however, does not dispute that the ELNY 1992 Rehabilitation Order prohibited waste by anyone, including the Superintendent, as ELNY Receiver.
• The objecting ELNY payees recognize that acting pursuant to specific court authorization is a legitimate defense for the Superintendent.
• During the 20 plus year ELNY rehabilitation, however, the Superintendent chose not to seek court approval for most of his actions.
• Although the Superintendent argues that the 1992 ELNY Rehabilitation Order contained immunity language similar to what Judge Galasso approved, the presence of such language in an interim order does not make such language any more correct in a final order.
• The Superintendent also argues that judicial immunity should be available after the ELNY liquidation concludes and there is no property in the ELNY estate from which to seek relief.
• The ELNY shortfall payees agree. In personal capacity claims, however, no relief would be sought from the ELNY estate. Nor would such claims be chargeable against the ELNY estate.
• The Superintendent's arguments concerning the merits of potential claims against the Superintendent are baseless and not before the court.
• Whether such claims would ultimately prove baseless is for another day and another court.
• The Superintendent also argues that all unspecified future claims against the Superintendent are time-barred because counsel for some of the objecting ELNY shortfall payees stated during the ELNY liquidation hearing: "any claims my clients might have had against anyone have gone state due to the passage of time."
• That argument is incorrect. Counsel was referring to potential claims against third parties such as persons who recommended the purchase of an ELNY annuity.
• With respect to the Superintendent, the statute of limitations might not yet be running because no final order has been finalized triggering benefit cuts.

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.

Comments

[Anonymous]

Thank you for summarizing. Even the summary makes my head spin. Understanding ELNY and its complexity would not be the same without you!