Summary

In a 14 page opinion published June 7, 2011, Judge Carey ruled that publication of notice in only two newspapers was insufficient information to grant a motion to dismiss based on adequacy of notice. Judge Carey’s opinion is available here (the “Opinion”).

Background

The following commentary provides empirical evidence of how pronounced an impact the consolidation of asbestos cases has had upon the verdicts in the New York City Asbestos Litigation (‘‘NYCAL’’).1 The proliferation of case consolidations as the judicial response to burgeoning caseloads in NYCAL, with an emphasis on expediency and case management, has led to inequitable outcomes, which in turn have raised concerns over violations of defendant due process.

As we previewed last week, the U.S. Bankruptcy Court for the Southern District of New York recently handed General Motors (“New GM”) an enormous victory that may end up shielding the company from up to $10 billion in successor liability claims.

Parties to all legal proceedings - including bankruptcy proceedings - are entitled to Constitutionally protected due process rights, including reasonable notice and an opportunity to be heard. In the bankruptcy context, the debtor must give known creditors reasonable notice of certain critical events, including the sale of the debtor’s assets and the deadline to file claims against the debtor.

Judge Robert Gerber will be stepping down at the end of this year, ending a storied judicial career highlighted by his oversight of the 2009 chapter 11 case of General Motors Corporation (“Old GM”).

To paraphrase Samuel Johnson, publication notice is, quite often, the debtor’s “last refuge.” Yet it is frequently a necessary feature of the notices provided in bankruptcy cases. Debtors rarely possess an accurate method for notifying the many unidentifiable potential claimants. And so enters publication notice. Pursuant to well-settled law, publication notice – if sufficient – may satisfy the requirement to provide due process to unknown creditors in a bankruptcy proceeding.

Debtors must provide known creditors with actual notice of a claims bar date if they want the bar date to apply to those creditors. Such was the holding in In re Majorca Isles Master Association, Inc., Case No. 12-19056-AJC, Dkt. No. 222 (Bankr. S.D. Fla. March 27, 2014), where the bankruptcy court stated that when both a debtor and a creditor are “guilty in the handling of a claim and the [d]ebtor is aware of the creditor’s claim, then a tie goes to the creditor[,]” and the creditor’s claim will be allowed.

In re American Capital Equipment, LLC, 688 F.3d 145 (3d Cir. 2012)

CASE SNAPSHOT

Wright v. Owens Corning, 450 B.R. 541 (W.D. Pa. 2011), aff’d in part, rev’d in part, 2012 WL 1759992 (3rd Cir. Pa.) (May 18, 2012).

In 1984, the Third Circuit was the first court of appeals to examine the Bankruptcy Code’s new definition of “claim” in Avellino & Bienes v. M. Frenville Co. (In re M. Frenville Co.), 744 F.2d 332 (3d Cir. 1984). Focusing on the “right to payment” language in that definition, the court decided that a claim arises when a claimant’s right to payment accrues under applicable nonbankruptcy law. This “accrual” test was widely criticized by other circuit courts as contradicting the broad definition of “claim” envisioned by Congress and the Bankruptcy Code.