In re Summit Metals, Inc.

Summarized by Gregory Donilon , Stevens & Lee, PC
13 years 11 months ago

Citation:

No. 11-2112 (3d Cir. (Del.) Apr. 17, 2012)

Tag(s):

Ruling:

The United States Court of Appeals for the Third Circuit affirmed the decision of the United States District Court for the District of Delaware affirming an oral opinion and order issued by the United States Bankruptcy Court for the District of Delaware approving a settlement between a chapter 11 trustee and a third party under 11 U.S.C. § 105(a) and Rule 9019 of the Federal Rules of Bankruptcy Procedure. The Third Circuit concluded that the Bankruptcy Court did not abuse its discretion in approving the settlement where the Bankruptcy Court, having extensive familiarity with the case, properly considered and addressed each of the factors set forth in In re Martin, 91 F.3d 389 (3d Cir. 1996) for evaluating a proposed settlement with a debtor after full briefing and argument by the parties. [NOT PRECEDENTIAL]

Procedural context:

Appeal to the United States Court of Appeals for the Third Circuit from decision of the United States District Court for the District of Delaware denying appeal and affirming oral opinion and order issued by the United States Bankruptcy Court for the District of Delaware approving a settlement between a chapter 11 trustee and a third party under 11 U.S.C. § 105(a) and Rule 9019 of the Federal Rules of Bankruptcy Procedure.

Facts:

On December 30, 1998, Summit Metals, Inc. (the “debtor”) filed a voluntary chapter 11 petition. The debtor had no operations or assets other than potential claims against a third party and various entities owned by or affiliated with the third party. In 1999, the official committee of unsecured creditors commenced litigation against the third party and various entities and obtained judgment in favor of the debtor in an amount in excess of $40,000,000. In November 2004, Appellee was appointed as chapter 11 trustee and, following confirmation of a liquidating plan in August 2007, became the liquidating trustee. Over a period of several years, the trustee and the debtor undertook substantial efforts to determine whether the judgment could be collected, including discovery, engagement of collection professionals, and attempts to hire collection counsel to represent creditors on a contingency fee basis and to sell or assign the judgment. Following the Third Circuit’s denial on appeal of the third party’s motion for relief from the judgment under Rule 60(b) of the Federal Rules of Civil Procedure, the trustee and the third party engaged in negotiations and reached a settlement under which the third party agreed to pay to the estate $100,000 in full and final satisfaction of the judgment. In March 2009, the Bankruptcy Court issued an oral opinion and order granting the trustee’s Bankruptcy Rule 9019 Motion and approving the settlement over the objections lodged by Appellant. Appellant appealed from the Bankruptcy Court’s order and the District Court affirmed. This appeal of the District Court’s decision followed.

Judge(s):

FISHER and GREENAWAY, JR., Circuit Judges, and JONES, District Judge, sitting by designation

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