Judge Denise Cote
Debtor Residential Capital (ResCap) appealed a July 2012 order denying its motion under 11 USC §105 to enjoin the Federal Housing Finance Agency from pursuing litigation of certain nondebtor affiliates, the "Ally Defendants." In addition to ruling that 11 USC §362(a)'s automatic stay in bankruptcy did not apply to Ally Defendants, district court denied ResCap a discretionary stay under §105(a). Second Circuit remanded, in July 2013, noting that court had not considered if an action against Ally Defendants would have immediate adverse impacts on ResCap's estate, triggering §362(a)'s automatic stay. On remand district court, supplementing the record, adhered to its prior ruling. Although shared insurance policies qualified as part of ResCap's bankruptcy estate, its reorganization plan relinquished to Ally all rights and proceeds under the relevant policies. Nor did ResCap submit evidence of the Ally Defendants' likelihood of reaching the policies' $25 million self-insured threshold in defending the Ally action. ResCap's contractual duty to indemnify Ally Defendants was not likely to have an immediate adverse impact on its estate. Under ResCap's reorganization plan Ally agreed to release ResCap from all indemnification claims.
