Blue Cross of Western Pennsylvania v. LTV Steel Co. (In re Chateaugay Corp.)
Appellant Blue Cross of Western Pennsylvania (BCWP) appealed a Bankruptcy Court decision that denied its request for relief from an automatic stay in the Chapter 11 bankruptcy of LTV Steel Company, Inc. BCWP, an insurance provider for LTV Steel's former constituent companies (J&L and Republic), sought to set off a $2.88 million refund it owed LTV/J&L against over $3 million in unreimbursed claims it paid as a participant in a national syndication arrangement for LTV/Republic. The Bankruptcy Court found no mutuality between BCWP and LTV Steel to permit the set-off under 11 U.S.C. § 553(a). BCWP argued for third-party beneficiary status and equitable principles. The District Court affirmed the denial, ruling that BCWP was not a third-party beneficiary and that allowing the set-off would create an inequitable preference for BCWP over other creditors.