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In re: DIANN MARIE CATES

Summarizing by Lars Fuller

In re Energy Future Holdings Corp.

Appeals court says that using a trust for future asbestos claims rather than a bar order would be cheaper and avoid unnecessary litigation.

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Case Type:
Business
Case Status:
Affirmed
Citation:
19-1430 (3rd Circuit, Mar 18,2020) Published
Tag(s):
Ruling:
The Third Circuit affirmed the Bankruptcy Court's ruling confirming Debtors' plan that did not include a 524(g) trust for latent asbestos claims, holding that applying Rule 3003(c)(3) complies with due process. The Third Circuit also ruled the case was ripe, timely appealed, and, partially, not moot under 11 U.S.C. § 363(m). To the extent the appeal would invalidate the discharge of all latent claims, the appeal would affect the validity of a sale approved by the plan and was moot. However, the purchaser agreed to a fair post-confirmation process, so a review of that process was not be moot.
Procedural context:
The Bankruptcy Court issued claim bar orders that included a $2 million process to notify latent claimants of the need to file claims before the bar date. The Bankruptcy Court subsequently confirmed a Chapter 11 plan that included a sale of the Debtors'. Plaintiff attorneys objected to the bar date orders and latent asbestos claimants that had missed the bar date objected to confirmation of the plan. The Bankruptcy Court overruled the objections holding that Bankruptcy Rule 3003(c)(3) provides sufficient protection and due process for latent claim holders that missed the bar date, and that a trust under 11 U.S.C. § 524(g) was not necessary. The creditors appealed confirmation of the plan and entry of the bar date orders. The District Court dismissed the appeal as moot under 11 U.S.C. § 363(m) because the confirmation order was, in effect, the approval of a sale.
Facts:
Debtors were a corporate conglomerate that included entities with substantial asbestos claims. Debtors filed bankruptcy and, to avoid massive tax liabilities, determined that the best path forward was to sell the Debtors through a chapter 11 plan as a merged entity. The purchaser, concerned about asbestos liability, and the Debtors decided to not create a trust under 11 U.S.C. § 524(g) for latent asbestos liabilities, but instead requested entry of bar orders with a $2 million process for the notification of potential latent claim holders. The Bankruptcy Court granted the request over the objection of plaintiff lawyers. The Bankruptcy Court subsequently confirmed a Chapter 11 plan that sold the Debtors and resulted in the discharge of all late-filed and unfiled latent claims. The Bankruptcy Court overruled creditor objections to the plan, holding that Bankruptcy Rule 3003(c)(3) provided sufficient protection and due process to any latent claimants that did not receive sufficient notice. The purchaser agreed to implementation of a fair process to determine allowance of late claims under Rule 3003(c)(3).
Judge(s):
KRAUSE and MATEY (Circuit Judges) and ALEJANDRO (District Judge sitting by designation)

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