Law.com Subscribers SAVE 30%
Call 855-808-4530 or email [email protected] to receive your discount on a new subscription.
Court Allows Nonconsensual Releases of Third-Party Claims to Be Included In Settlement Agreement
An interesting and challenging aspect of legal practice is adapting to statutory and decisional law changes. While many bankruptcy issues reach the U.S. Supreme Court that do not result in significant changes to bankruptcy law practice, over the past 30 years, several have had a massive impact, or at least the potential to do so. One such case was the much-anticipated decision in Harrington v. Purdue Pharma, 603 U.S. 204 (2024), where a divided Supreme Court held that Chapter 11 plans of reorganization could not impose releases of claims against third-party nondebtors without the consent of affected claim holders.
The bankruptcy bar and courts are now attempting to determine the breadth and depth of the Purdue ruling both as to what constitutes consent under a plan of reorganization and whether Purdue applies to other bankruptcy proceedings, including a sale of assets under section 363 of the Bankruptcy Code, free and clear of claims, and approval of settlements under Federal Rule of Bankruptcy Procedure 9019, which approvals often contain injunctions in favor of third party purchasers of assets.
The U.S. Bankruptcy Court for the Eastern District of Virginia recently faced these issues in In re Hopeman Brothers, (Case No. 24-32428-KLP). In an opinion issued on Jan. 24, 2025, on a motion for a stay pending appeal of the court’s decision that a Bankruptcy Code Section 363 sale by an insured debtor of certain insurance policies in connection with a settlement agreement between the debtor and insurers could include nonconsensual releases of third-party claims against the insurers, the court denied a motion for a stay pending appeal, holding that there was not a likelihood of success on the merits of the appeal of the court’s decision.
As Part of the Settlement, the Debtor Sought to Purchase Its Insurance Policies Back from the Insurers
According to the opinion, before the debtor ceased operations back in the 1980s, it contracted with shipbuilders to outfit the interiors of ships. For decades after terminating this business, the debtor continued its corporate existence to address personal injury, asbestos-related claims. As of June 2024, 2,700 such claims remained unresolved. As is usually the case, the debtor carried insurance policies that it maintained provided coverage for the claims. While the coverage periods had ended in 1984, the insurers continued partially to reimburse the debtor for its defense costs and liability payments made to asbestos claimants to resolve the claims.
In July 2024, the debtor filed a motion that requested Bankruptcy Court approval of a settlement agreement with some but not all of its insurers. As is typically the case in asbestos bankruptcy cases, pursuant to the agreement, the insurers would pay the debtor a set sum and the debtor would establish a trust to distribute the funds to holders of asbestos claims. Once the insurers made the payment, they would be released and discharged from all claims related to the policies and the asbestos claimants would be enjoined from asserting claims against the insurers. As part of the settlement, the policies would be deemed “sold” back to the debtor pursuant to Section 363 of the Bankruptcy Code, free and clear of claims, and then terminated by the debtors, the practical effect being it was as if the policies had never been issued.
The motion to approve the settlement agreement was opposed by the Office of the U.S. Trustee, certain individuals, and Huntington Ingalls Industries, Inc. (HII). According to the opinion, HII may have held future potential contribution claims against the Debtor under state law related to the asbestos claims. After an evidentiary hearing, the court overruled the objections and approved the settlement agreement. HII appealed the ruling and filed a separate motion for a stay pending the appeal. The opinion sets forth the court’s decision denying the requested stay.
This premium content is locked for Entertainment Law & Finance subscribers only
ENJOY UNLIMITED ACCESS TO THE SINGLE SOURCE OF OBJECTIVE LEGAL ANALYSIS, PRACTICAL INSIGHTS, AND NEWS IN ENTERTAINMENT LAW.
- Stay current on the latest information, rulings, regulations, and trends
- Includes practical, must-have information on copyrights, royalties, AI, and more
- Tap into expert guidance from top entertainment lawyers and experts
Already a have an account? Sign In Now Log In Now
For enterprise-wide or corporate acess, please contact Customer Service at [email protected] or 877-256-2473
The Article 8 Opt In
The Article 8 opt-in election adds an additional layer of complexity to the already labyrinthine rules governing perfection of security interests under the UCC. A lender that is unaware of the nuances created by the opt in (may find its security interest vulnerable to being primed by another party that has taken steps to perfect in a superior manner under the circumstances.
Major Differences In UK, U.S. Copyright Laws
This article highlights how copyright law in the United Kingdom differs from U.S. copyright law, and points out differences that may be crucial to entertainment and media businesses familiar with U.S law that are interested in operating in the United Kingdom or under UK law. The article also briefly addresses contrasts in UK and U.S. trademark law.
Beach Boys Songs Written Decades Ago Triggered Current Quarrel With Lawyers
There's current litigation in the ongoing Beach Boys litigation saga. A lawsuit filed in 2019 against Nevada residents Mike Love and his wife Jacquelyne in the U.S. District Court for the District of Nevada that alleges inaccurate payment by the Loves under the retainer agreement and seeks $84.5 million in damages.
Strategy vs. Tactics: Two Sides of a Difficult Coin
With each successive large-scale cyber attack, it is slowly becoming clear that ransomware attacks are targeting the critical infrastructure of the most powerful country on the planet. Understanding the strategy, and tactics of our opponents, as well as the strategy and the tactics we implement as a response are vital to victory.
Transfer Tax Implications on Real Property Leases
The real property transfer tax does not apply to all leases, and understanding the tax rules of the applicable jurisdiction can allow parties to plan ahead to avoid unnecessary tax liability.