Here’s a dilemma:
- Should bankruptcy be available as a tool for resolving mass tort cases of all types (like it already is in asbestos contexts)?
Here’s an illustration of the dilemma:
- many tort claimants in the Johnson & Johnson case DO NOT want bankruptcy involved; but
- many tort claimants in the Purdue Pharma case were BEGGING the courts to approve the bankruptcy plan.
How do we solve this dilemma?
On June 6, 2024, the United States Supreme Court issued its long-awaited ruling in Truck Insurance Exchange v. Kaiser Gypsum Co., Inc., et al.,1 nullifying the insurance neutrality test for insurer standing in bankruptcy proceedings and holding that insurance companies that may face liability for bankruptcy claims filed against a debtor are parties in interest under section 1109(b) of the Bankruptcy Code that are entitled to “be heard on any issue” in such debtor’s bankruptcy case.
On June 27, 2024, the United States Supreme Court issued its decision in Harrington v. Purdue Pharma LP, addressing the question of whether a company can use bankruptcy to resolve the liability of non-debtor third parties. The Supreme Court, in a 5-4 decision, held that the bankruptcy code does not authorize a release and an injunction that, as part of a plan of reorganization under Chapter 11, effectively seek to discharge the claims against a nondebtor without the consent of the affected claimants.
Last week, in a 5-to-4 decision in the case ofHarrington, United States Trustee, Region 2 v. Purdue Pharma L.P, et al., the U.S. Supreme Court struck down the ability of bankruptcy courts to order non-consensual third-party releases (i.e., claims held by non-debtors against non-debtor third parties) as part of a Chapter 11 plan.
Introduction
On April 9th , the Second Panel of the Superior Court of Justice (STJ) unanimously ruled a case law regarding Special Appeals 2.090.060, 2.090.066 and 2.100.114, which were heard by Justice Humberto Martins, for judgment by the repetitive rite.
The controversial issue, registered as Theme 1,250 in the STJ database, analyzed “whether an award of attorney's fees is due in the event of a claim being upheld in judicial reorganization and bankruptcy proceedings”.
The practice of conferring "derivative standing" on official creditors' committees or individual creditors to assert claims on behalf of a bankruptcy estate in cases where the debtor or a bankruptcy trustee is unwilling or unable to do so is well-established. However, until recently, Delaware bankruptcy courts have uniformly limited the practice in cases where applicable non-bankruptcy law provides that creditors do not have standing to bring claims on behalf of certain entities.
The phrase “Texas Two-Step,” as used in bankruptcy, is a legal expletive. Regardless of what the details of a Texas Two-Step might be, the phrase has become synonymous with:
- abusive behavior;
- bad faith conduct;
- a means for swindling creditors;
- the antithesis of “doing what’s right”;
- a tool for avoiding liability;
- etc., etc.
Describing a legal tactic as a “Texas Two-Step” is like calling that tactic a “#$&*#%R&” or “#*$&.” It’s a legal expletive that means “really, really bad.”
On April 23, 2024, the American Bankruptcy Institute’s Subchapter V Task Force issued its Final Report.
This article is the sixth in a series summarizing and condensing the Task Force’s Final Report into “a nutshell.” The subject of this article is:
- whether a Subchapter V trustee should act as a mediator.[Fn. 1]
Recommendation
This morning, the Supreme Court decided Truck Insurance Exchange v. Kaiser Gypsum Co., which clarifies that any party with a "direct financial stake in the outcome" of a reorganization has standing as a "party in interest" to object to a Chapter 11 plan. 11 U.S.C. 1109(b). Writing for a unanimous Court, Justice Sotomayor held that the debtor's insurer has standing to object even if the plan purports to preserve the insurer's legal rights and thus is said to be "insurance neutral."
The U.S. Supreme Court held last week in Truck Insurance Exchange v. Kaiser Gypsum Co. that an insurance company with financial responsibility for bankruptcy claims is a “party in interest” with the right to object to a Chapter 11 reorganization plan.
Section 1109(b) of the Bankruptcy Code provides: