A federal bankruptcy judge in Houston has determined that while a litigation trustee’s $4.65 million settlement demand is reasonable, the court cannot compel Relm Insurance Ltd. to fund the within-limits settlement.
The ruling from U.S. Bankruptcy Judge Marvin Isgur this week came in a case where Tribolet Advisors, as plan administrator and litigation trustee of the Mining Project Wind Down Holdings Litigation Trust, had asked the court for an order that would compel Relm to fund the settlement under a directors’ and officers’ liability insurance policy.
“Tribolet’s $4.65 million settlement demand was reasonable. Relm’s refusal to consent to the within-limits demand was wrongful,” he wrote in the 15-page opinion. “Because the specific remedy sought by Tribolet exceeds the scope of available remedies under the law, Tribolet’s motion is denied.”
According to court documents, Compute North Holdings was a Bitcoin mining company that also operated crypto mining data centers and acquired modular crypto mining containers. The company filed for Chapter 11 bankruptcy in Sept. 2022, its plan was confirmed in February 2023, and the Mining Project Wind Down Litigation Trust was subsequently established, with Tribolet appointed as administrator and trustee.
Tribolet, in April 2023 began marketing Compute North’s remaining assets, namely 62 crypto mining containers, visited the yard where they were stored, “and learned that the containers were damaged beyond normal wear and tear.”
Tibolet filed this adversary complaint in July 2024, seeking to freeze distribution of insurance proceeds from the D&O policies in a related fraud and conspiracy lawsuit that was filed in November 2022 until it resolved the D&O claims in the estate.
Alleging the directors and officers were responsible for failing to maintain the containers, which were stored in Granbury, Texas, and Greenville, North Carolina, Tibolet filed a D&O adversary action in December 2024, according to court documents. In March, Tribolet made an oral settlement demand of $5.5 million to resolve the estate’s claims.
“Relm did not communicate that demand to the D&O Defendants,” Judge Isgur wrote.
Tribolet’s second settlement demand came July 21 for $4.65 million, which Relm declined the same month.
On July 31 Tribolet asked the court, via an emergency motion, to declare its settlement demand was reasonable and that Relm unreasonably withheld consent. Relm had argued that the policy at-issue only covered post-petition wrongful acts and that the alleged wrongful acts that formed the basis of this suit occurred pre-petition.
“Relm’s position is wrong,” Judge Isgur wrote, explaining the policy “plainly provide[s] coverage.”
Judge Isgur wrote that under applicable case law, liability on the insurer in this case “applies retrospectively, either post settlement or post judgment,” neither of which has occurred yet.
“The Court cannot compel Relm, the nonconsenting insurer, to accept a reasonable settlement demand,” Judge Isgur wrote. “Accordingly, Tribolet’s emergency motion to compel is denied. Relm will be exposed to limitless potential liability for both defense costs and indemnity if it fails to pay the settlement amount.”
“That is a risk that it is free to take under applicable law.”
Plan administrator Tribolet Advisors is represented by Charles R. Gibbs, Kristin K. Going, Darren Azman, Stacy A, Lutkus, Jessica Griffith, Natalie Rowles and Christopher J. Whalen of McDermott Will & Schulte and Robin Cohen, Cindy Jordano, Orrie Levy and Evan Jaffe of Cohen Ziffer Frenchman & McKenna.
Relm is represented by Bennett Fisher and Minyao Wang of Lewis Brisbois Bisgaard & Smith and Tony L. Draper and Kevin G. Mikulaninec of Walker Wilcox Matousek.
The case number is 24-03144.