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Federal judge rules summary judgment "inappropriate" on both sides of trade claim conversion suit

By Nicholas Malfitano | Feb 11, 2016

U.S. District Court for the Eastern District of Pennsylvania

PHILADELPHIA – A federal court has denied motions for summary judgment on both sides of a lawsuit alleging conversion of bankruptcy trade claims.

Elias Family Management Company (EFMC) alleges defendants APS Capital Corporation, American Physicians Service Group, Inc., and Proassurance Corporation (collectively, APS) “unlawfully retained proceeds from bankruptcy trade claims that were owned by EFMC."

However, APS contends that a settlement agreement between the parties relating to litigation in Texas released APS from its obligation to distribute the proceeds to EFMC.

EFMC is the successor in interest to Wholesale Realtors Supply Company (Wholesale), a group directed by Gabriel Elias who dealt with investments worth millions of dollars in assets, with APS as one of their brokers. In 2008, when Elias began to show signs of dementia, his family transferred his assets, including those invested with APS, to a trust company, and eventually put them under the control of EFMC.

When reviewing Elias’ assets, the family believed APS had been taking advantage of its long-standing relationship with him and his diminished mental capacity, selling him investments that were “highly risky and speculative.” In December 2009, the Elias family filed suit against APS in Texas state court.

During the course of case discovery and arbitration, documents pertaining to bankruptcy trade claims sold from APS to Wholesale were exchanged. On July 7, 2011 the parties entered into a settlement agreement, stipulating APS would pay the Elias family a lump sum in exchange for a release of claims – with trade claims being the type specifically at issue in the suit.

“Trade claims are essentially rights to payouts from bankruptcy estates,” Judge Gene E.K. Pratter of the U.S. District Court for the Eastern District of Pennsylvania said.

Pratter noted 12 trade claims had distributions received by APS between the time of the settlement agreement and the instant litigation, with no notice of transfer filed with the bankruptcy court. These claims amounted to $2,550,000 and 191,000 shares of Delta Airlines stock, which have since been sold by APS.

When EFMC learned of this and demanded APS give them the distributions on the 12 claims, APS refused and cited the settlement agreement as its rationale to retain them – leading EFMC to file suit. Both sides later requested summary judgment in this matter, each in their own favor.

Pratter said since APS and the prior action have “substantial connection” to Texas, it was necessary for Texas state law to apply to the agreement’s interpretation and determine the ambiguity of the agreement, if any.

“Both parties argue that the settlement agreement unambiguously provides as they deem it to be, in their opposing preference,” Pratter said.

Pratter explained APS points to the definition of “claims” which includes the language, “asserted or unasserted, liquidated or unliquidated, accrued or unaccrued, mature or not yet mature” and “arising at any time”.

On the other hand, EFMC argues the agreement “limits the express waiver of all claims which exist as of the date this agreement is fully executed.” Meaning EFMC believes the conversion claims, which did not exist until the distributions were received by APS, were not released as part of the settlement agreement.

However, Pratter found that neither side’s “irreconcilable” arguments resolved the issue at hand.

“Neither Wholesale’s nor APS’s interpretation as to the settlement agreement’s effect on Wholesale’s claims are unreasonable,” Pratter said. “In giving effect to the entire agreement and assuming that the parties intended both clauses to have some effect, as the Court must, the Court concludes that the settlement agreement is ambiguous as to whether Wholesale’s conversion claims asserted in this case were released by the settlement agreement.”

“Consequently, summary judgment for either party is inappropriate at this time because a fact issue remains for the jury to resolve after evaluating the testimony of the witnesses with knowledge of the issues,” Pratter said.

The plaintiff is represented by Kevin Michael Kelly and Brian P. Flaherty of Cozen O’Connor, in Philadelphia.

The defendants are represented by Christie A. Mathis and Samuel W. Cooper of Paul Hastings in Houston, Texas and Louis W. Fryman, Melissa A. Anderson and Patricia M. Hamill of Conrad O’Brien, in Philadelphia.

U.S. District Court for the Eastern District of Pennsylvania case 2:14-cv-05058

From the Pennsylvania Record: Reach Courts Reporter Nicholas Malfitano at

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