2007 Judge Ferguson - Opinions
Judge Kathryn C. Ferguson -- Opinions signed in 2007
PROCEDURAL POSTURE: Debtors and an unsecured creditors committee (committee) moved for summary judgment that a plan of reorganization proposed by an insurer for debtors was unconfirmable as a matter of law. At issue, inter alia, was whether the insurer was an interested party under 11 U.S.C.S. § 1121(c) and whether the plan as proposed by the insurer violated the Combustion Engineering rule.
OVERVIEW: After an insurer proposed a plan providing for classification of certain claims and injunctions, debtors and the committee sought summary judgment that the plan was unconfirmable. They also challenged the insurer's right to propose a plan. The court held that the insurer was an "interested party" per 11 U.S.C.S. § 1121(c) and had the right to propose a plan. However, the proposed plan was unconfirmable. First, noting that the term "protected party" used in the proposed plan included non-debtors like debtors' insurers, it held that the channeling of asbestos liability of non-debtors violated Combustion Engineering. Second, though 11 U.S.C.S. § 524(g) was not the only recourse where asbestos was involved, the explicit safeguards in 11 U.S.C.S. § 524(g) could not be sidestepped by use of 11 U.S.C.S. § 105. Third, it held that the proposed plan's claims classification scheme was improper in that it created a separate class for insurer claims instead of including them with other unsecured claims as required and that factual issues relating to feasibility precluded summary judgment. Finally, it rejected requests to reinstate exclusivity on a finding that it had no authority to do so.
OUTCOME: The court held that the insurer was an interested party under 11 U.S.C.S § 1121(c) but found that its plan was unconfirmable as a matter of law to the extent that it extended a channeling injunction to non-debtors and separately classified unsecured insurer claims. It also denied summary judgment on the issue of the plan's feasibility. It also held that it had no authority to reinstate the exclusivity period.
CORE TERMS: asbestos, injunction, summary judgment, insurer, exclusivity, classification, confirmation, claimants, matter of law, channeling, plan of reorganization, unconfirmable, non-debtor, holder, feasibility, non-moving, separately, reinstate, expired, funded, unsecured claims, issue of material fact, reorganization, recovering, classified, disputed, classify, genuine, insurance claims, genuine issue
PROCEDURAL POSTURE: Bankruptcy debtors proposed a Chapter 11 plan of reorganization which provided for a channeling trust under 11 U.S.C.S. § 524(g) and for various contributions by the debtors to the plan depending upon whether certain secured creditors voted to accept the plan. Insurers of the debtors, with regard to asbestos claims, moved for summary judgment of denial of plan confirmation.
OVERVIEW: The insurers contended that the debtors' plan failed to satisfy the requirements of § 524(g) that the trust be adequately funded, that creditors in the same class be treated substantially the same, and that trust assets be used solely to pay claims. The bankruptcy court held that the debtors' plan could not be confirmed. The plan did not satisfy funding requirements since there was no plausible scenario in which the trust would be able to convert shares in the debtors when such shares were still valuable. Further, the plan improperly classified asbestos personal injury claims in separate classes which received different treatment, even though all of the claims were similar tort claims. Nonetheless, factual issues remained concerning whether the debtors' contributions to the trust, consisting primarily of insurance proceeds, were sufficiently substantial to render the plan fair and equitable. Also, it was unclear whether the court had the authority to approve questionable and expansive release and exculpation provisions relating to non-debtors, and it appeared improper for the plan to provide for a loan to the reorganized debtors from the trust.
OUTCOME: The insurers' motions for summary judgment were granted in part and denied in part, and the debtors' plan was held to be not confirmable as a matter of law.
CORE TERMS: claimant's, asbestos, settlement, reorganization, summary judgment, confirmation, exculpation, insurer, injunction, equitable, pre-petition, security interest, contingency, non-debtor, funding, classification, stock, avoidance, voting, matter of law, collateral, negotiation, causes of action, personal injury, convenience, consensual, holder, common stock, settlement agreement, similarly situated.
PROCEDURAL POSTURE: Plaintiff Chapter 7 trustee filed an adversary proceeding against defendant debtor (wife), seeking a judgment finding that debts the wife owed were nondischargeable under 11 U.S.C.S. § 523(a)(2) and (a)(4). The trustee filed a motion for summary judgment on his claim that the debts were nondischargeable under § 523(a)(2).
OVERVIEW: The wife's husband owned a corporation which declared bankruptcy, and a Chapter 7 trustee was appointed to manage the corporation's bankruptcy estate. The trustee filed an adversary proceeding in that case, alleging that funds were wrongfully diverted from the corporation to the husband and wife for their personal use, and the husband and wife entered into a settlement agreement which required them to pay the trustee $ 515,000. After the wife declared bankruptcy, the trustee filed an adversary proceeding against her, claiming that debts she owed were nondischargeable under 11 U.S.C.S. § 523(a)(2) and (a)(4). The court found that the trustee was not entitled to summary judgment on his claim that the wife's debts were nondischargeable under § 523(a)(2). The court rejected the trustee's argument that the wife's debts were nondischargeable under § 523(a)(2) because she benefitted from fraud committed by her husband, and it denied the trustee's motion for summary judgment because the trustee had not presented evidence showing that the wife had any knowledge of or role in her husband's illegal activities.
OUTCOME: The court denied the trustee's motion for summary judgment.
CORE TERMS: summary judgment, fraudulent scheme, bankruptcy case, settlement, benefitted, issue of material fact, adversary proceeding, settlement agreement, liabilities arising, nondischargeability, unfortunate, involvement, expansive, diverted, vacations, excepted, genuine, honest, oral argument