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Margaret Kinney v. HSBC Bank USA

Summarizing by Lars Fuller

Continental Insurance Co. v. Thorpe Insulation Co. (In re Thorpe Insulation Co.)

No. 10-55744; D.C. No. 2:08-cv-07862-DSF; 12 Cal. Daily Op. Serv. 939; 2012 WL 255231
The Ninth Circuit Court of Appeals affirmed the District Court which had affirmed the Bankruptcy Court. The Bankruptcy Court had the discretion to decline to enforce the otherwise applicable arbitration provision because the arbitration would conflict with the purposes of the Bankruptcy Code. The Bankruptcy Court did not abuse its discretion in not extending discovery before conducting a hearing where a claim could be resolved as a matter of law and the party requesting an extension had not diligently pursued discovery. To the extent any provisions of the settlement agreement between the Debtor and the Claimant prohibited the Debtor from acquiring claims and assigning them to a trust under §524(g), those provisions of the settlement agreement are void as it is against public policy for a debtor to waive prepetition protections of the Bankruptcy Code.
Procedural context:
Appeal from District Court’s affirming of the Bankruptcy Court’s Orders denying the Insurer’s motion to compel arbitration and disallowing the Insurer’s claim.
The Debtor distributed and installed asbestos-containing products. The Debtor entered into a pre-bankruptcy settlement agreement with one of its Insurers. The settlement agreement released the Debtor’s claims against the Insurer, but did not refer to claims of asbestos claimants or claims of other insurers. The settlement agreement also contained an arbitration provision for all disputes, an Assignment Warranty provision that may have prevented the Debtor from acquiring and assigning certain claims, and an Establishment Warranty that may have prevented the Debtor from collaborating with asbestos claimants to structure and confirm a §524(g) plan.
Gould and Schroeder, Circuit Judges and Seeborg, District Judge, Northern District of California, sitting by designation

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