Dow Corning Corp. v. Claimants' Advisory Committee (In re Settlement Facility Dow Corning Trust)

Summarized by J. Debbeler , Bricker Graydon LLP
11 years 1 month ago

Citation:

File Name:15a0080n.06; Sixth Circuit Court of Appeals Case No. 14-1090

Tag(s):

Ruling:

The Sixth Circuit reversed the district court's judgment with respect to its rulings that (1) "adequate assurance" is the proper standard for assessing the availability of funds under Section 7.03 of the Settlement and Fund Distribution Agreement (SFA) and (2) that the SFA grants it the discretion to ignore otherwise competent reports and testimony challenging the methodologies of Analysis Research Planning Corp. (ARPC). The Sixth Circuit remanded the case back to the district court.

Procedural context:

in 1999 the Bankruptcy Court for the Eastern District of Michigan confirmed a plan of reorganization (Plan) of Dow Corning Corp. (Dow). The Dow Plan established a settlement fund to pay known and future tort claimants. The SFA permitted early payment to lower-priority creditors (Priority Payments) subject to district-court determination that such payments would not jeopardize future payments to higher-priority creditors. The SFA Finance Committee and the Claimants Advisory Committee (CAC) requested the district court approve certain Priority Payments, which it did. Dow and its shareholders appealed the district court's determination.

Facts:

The SFA established four categories of payments. The SFA Finance Committee is responsible for the Settlement Facility. The SFA Finance Committee requested the distribution of the Priority Payments based on an analysis completed by ARPC. Dow disagreed with the requested distribution arguing that the standard should be that the ability to make the higher-priority payments must be "virtually guaranteed" before the Priority Payments could be made. ARPC and the SFA Finance Committee argued there was "adequate assurance" that the higher-priority payments would be made. Dow offered evidence to the district court that undermined the position of ARPC, which the district court declined to review. The Plan was reviewed under New York contract principles and the Sixth Circuit reviewed the district court's interpretations de novo. The SFA guaranteed the appellants the opportunity to be heard and that meant the evidence offered by Dow should have been considered.

Judge(s):

Circuit Judges Boggs and Cook; and District Court Judge Quist, by designation

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