Pine Top Receivables of Illinois, LLC v Transfercom, Ltd.
2017 IL App (1st) 161781 (Ill. App., 2017)Words & Phrases
Collateral EstoppelTrial Judge
Raymond MitchellAppellate Judge
CunninghamHolding
Previous court's holding that assignment did not contain right to arbitrate collaterally estopped plaintiff from re-asserting a motion to compel arbitration.Fact Summary
In 1986, Pine Top Insurance Company (Pine Top) became insolvent and was placed into liquidation under the supervision of the circuit court of Cook County. A liquidator appointed by the court conducted an accounting and proceeded to demand payment from various entities that had entered into reinsurance contracts with Pine Top, seeking to recover amounts due under those contracts. Eventually, the liquidator sold Pine Top’s accounts receivable to plaintiff-appellant Pine Top Receivables of Illinois, LLC (PTR), an entity formed specifically for the purpose of accepting and collecting the receivables.
On September 24, 2015, PTR sued defendant-appellee Transfercom, Ltd. (Transfercom), in the circuit court of Cook County seeking to collect sums claimed due from Transfercom under a reinsurance contract. PTR’s complaint alleged that it was the assignee of accounts receivable from the liquidator and sought recovery for breach of contract and damages pursuant to section 155 of the Illinois Insurance Code (215 ILCS 5/155 (West 2014) (providing for the recovery of attorney fees)) based on Transfercom’s unreasonable and vexatious delay in asserting defenses to the liquidator’s claims against it. PTR did not attach to its complaint the assignment of Pine Top’s receivables from the liquidator.
Notwithstanding that it filed suit to collect the receivable, PTR sought to compel Transfercom to arbitrate the claim pursuant to the provisions of the reinsurance contract. Pursuant to Illinois Supreme Court Rule 307(a) (eff. Feb. 26, 2010), PTR appeals from an order of the circuit court of Cook County denying its motion to compel arbitration of its claims against Transfercom.
Transfercom was not the first reinsurer from whom PTR sought to collect. In 2012, PTR sued Banco de Seguros del Estado, a Uruguayan entity, in the federal district court for the Northern District of Illinois. PTR’s complaint sought to compel arbitration but alternativelysought recovery for breach of contract. The district court determined that PTR had no right to enforce the arbitration clause in the reinsurance contract because the assignment from the liquidator conveyed to PTR the right to collect the debt but did not convey all of the rights and duties under the reinsurance contract, including the ability to demand arbitration. Pine Top Receivables of Illinois, LLC v. Banco de Seguros del Estado, No. 12 C 6357, 2013 WL 2574596 at *2-*6 (N.D. Ill. June 11, 2013). Affirming, the Seventh Circuit Court of Appeals determined that although the assignment from the liquidator authorized PTR to “ ‘demand, sue for, compromise and recover’ ” the balance due the liquidator and to “do all things necessary or useful” to collect those debts, PTR was not thereby entitled to enforce Pine Top’s rights under the reinsurance agreements, including the right to demand arbitration. Pine Top Receivables of Illinois, LLC v.Banco de Seguros del Estado, 771 F.3d 980, 991-92 (7th Cir. 2014). The 7th Circuit reasoned:
“Not only is ‘demand arbitration’ not specifically included in the
transferred rights, it is of an entirely different character. Ownership
of a debt may imply the right to recover the debt absent some legal
impediment, but it does not imply the right to use a means not
otherwise established as a right under the law.”
The court also noted that the agreement between the liquidator and PTR did not transfer the policies themselves, specifically providing that the “ ‘assignment *** shall not *** be construed to be a novation or assignment’ ” of the reinsurance contracts.