Opinion ID: 4777078
Heading Depth: 3
Heading Rank: 1

Heading: Effect of the Settlement Order

Text: Again, the relevant provision of the Settlement Order provides: . . . nothing in this Order or the Stipulation shall waive, estop, or otherwise limit the rights of any party claiming an interest in the Tax Refund, including but not limited to, the estate, the Insurance Company of the State of Pennsylvania, BMO Harris Bank N.A., or any other party claiming an interest in the Tax Refund, and the parties reserve any and all rights and arguments they had regarding the ownership of, or their interest in [the] Tax Refund prior to the entry of this Order. A277. ICSP argues that it was subrogated to the United States’ setoff rights to the extent that ICSP had made payments, that the above-quoted language reserved those rights, and that absolutely “nothing” the United States did in the Settlement Stipulation (i.e., the waiver) could alter those rights. Appellant’s Br. 31. However, the Settlement Order does not define the nature of the rights that ICSP reserved. Rather, ICSP reserved “any and all rights and arguments,” if any, “regarding the 26 ownership of, or [its] interest in [the] Tax Refund prior to the entry of this Order.” A277. As discussed above, prior to the entry of the Settlement Order, ICSP had not made payment in full to the United States. Thus, at the time that ICSP reserved its subrogation rights, those rights were subordinate to the United States’ ability to use the setoff rights to settle its remaining and superior claim. The Settlement Order did not transform or redefine the nature of ICSP’s subordinate rights. Again, those subordinate rights were extinguished once the United States waived them, which ICSP consented to rather than pressing its objection. ICSP argues that this interpretation of the Settlement Order renders it “meaningless” or worthless for ICSP. Appellant’s Br. 35. Yet BMO would have at least an equally strong argument that the Settlement Order and Settlement Stipulation would be worthless for the Trustee (and BMO) if we were to determine that the United States’ waiver did not extinguish ICSP’s rights. As BMO argues, “the Settlement Stipulation was built around the setoff release,” and the “Trustee would not have released the estates’ REA claims against the United States, or agreed to the allowance of the DOD Claim, in the absence of the setoff release.” Appellee’s Br. 25. In point of fact, the Settlement Order was not worthless for ICSP, as ICSP obtained at least two clear benefits. First, ICSP effectively preserved its subrogation arguments (including the argument that ICSP had made payment in full). BMO has not attempted to preclude ICSP from arguing its ownership of the Tax Refund on the basis of waiver or estoppel. Second, the Settlement Order ensured that the United States would relinquish the $5.5 million Tax Refund into 27 escrow (rather than attempting to set off the Tax Refund against the United States’ own losses acknowledged in the Settlement Stipulation). This at least guaranteed that ICSP would get a bite at the $5.5 million apple.