Boy Scouts of America and Delaware BSA LLC v. Lujan Claimants et al.
The Third Circuit majority upheld nondebtor, nonconsensual releases because they were part of a sale, making the appeal statutorily moot under Section 363(m).
- Rochelle Quick Take
View Rochelle Summary- Case Type:
- Business
- Case Status:
- Affirmed in part and Reversed in part
- Citation:
- 23-1664 (3rd Circuit, May 13,2025) Published
- Tag(s):
- Ruling:
- Section 363(m) of the Bankruptcy Code precludes judicial review of “nonconsensual third-party releases” authorized under the confirmed plan, as the insurance policy buyback was integral to the Plan.
- Procedural context:
- Four groups of appellants appeal the United States District Court for the District of Delaware's decision affirming the Bankruptcy Court’s confirmation order. The Lujan and Dumas & Vaughn (D&V) Claimants, representing 140 abuse victims, sought to reverse the confirmation order and invalidate the plan, arguing that the nonconsensual third-party releases are impermissible under the Bankruptcy Code. The Certain Insurers and Allianz Insurers appealed certain other provisions of the Plan to preserve their rights and defenses under their insurance policies.
- Facts:
- The Pan, confirmed by the Bankruptcy Court, includes the creation of a Settlement Trust funded by the sale of certain assets and contributions from BSA and other non-debtors to pay abuse claimants. The plan also includes nonconsensual third-party releases, which release claims against non-debtors without the claimants' consent. The United States Court of Appeals for the Third Circuit dismissed the Lujan and D&V Claimants' appeals as statutorily moot under 11 U.S.C. § 363(m), which protects good-faith purchasers of estate assets from reversal or modification on appeal if the sale was not stayed, finding the nonconsensual third-party releases integral to the insurance policy buyback,. The Court held that, "without assurance that a § 363(b) sale is final, potential purchasers of estate assets would be chilled from dealing with the debtor, causing assets to languish idly while the bankruptcy progresses, all the while hemorrhaging value and undermining the very purpose § 363(b) aims to serve." The Third Circuit dismissed Certain Insurers' appeals finding that their rights and defenses under their insurance policies were adequately preserved by the plan and confirmation order., but found that the judgment reduction clause in the confirmation order impermissibly released the Allianz Insurers' claims without their consent, in violation of the Supreme Court's decision in Purdue Pharma L.P. v. Harrington. The court reversed the District Court's judgment regarding the Allianz Insurers' claims and remanded for further proceedings to modify the judgment reduction clause.
- Judge(s):
- KRAUSE, SCIRICA and RENDELL