2008 Chapter 11 Open Forum: Year In Review

confirmation order. The district court reversed without addressing claim classification, but instead holding that the plan was infeasible because, according to the court's interpretation of state law, the debtor did not have the right to continue developing the condominium project because the dissenting homeowners had not consented to an extension of the debtor's rights. The First Circuit reversed the district court, holding that the district court misinterpreted the provisions of the state law. The dissenting homeowners, according to the First Circuit, constructively consented to the debtor's development rights when the association voted to support the plan, and when the homeowners recorded their deeds. With the matter of feasibility out of the way, the court of appeals quickly noted that the bankruptcy court did not commit error by confirming the plan which paid the class containing the dissenters' purchased claims in full. Said the court of appeals, once the dissenting creditors were fully protected (as to their $400 purchased claims), they had no legitimate grounds to object.

• In re Quigley Co., 383 B.R. 19 (Bankr. S.D.N.Y. Feb. 2008) (Bernstein, J.)
• Asbestos victims living in "Tort Reform States" nevertheless hold a "claim" and are entitled to vote on the plan. After resolving various issues with the disclosure statements,⁴² the debtor submitted a proposed master ballot form to be used by asbestos victims (or their attorneys). An ad hoc committee of asbestos victims objected to the proposed ballot, arguing that it should request additional information to determine whether the claimants live in Tort Reform States. ⁴³ In so arguing, the ad hoc committee contended that these victims did not hold a claim that would be enforceable in those states and so should not be entitled to vote on the plan. The bankruptcy court rejected this argument for two reasons. First, the definition of a "claim" under the Bankruptcy Code does not require the cause of action to be presently enforceable. See 11 U.S.C. SS 101(5)&(12). This reason alone was sufficient to overrule the ad hoc committee's objection. Second, as the court explained in dicta, the applicable tort reform statutes did not truly affect the asbestos victims' substantive rights, but instead, were analogous to case management orders in that they merely control the flood of litigation by giving preference to more serious claims and dismissing those claims deemed less serious (without prejudice to refiling once the manifestations become more serious).
• In re Quigley Co., 377 B.R. 110 (Bankr. S.D.N.Y. Oct. 2007) (Bernstein, J.)

The ability of some class members to look to third parties for payment did not mandate separate classification. In this case, several claimants objected to disclosure statements, arguing that the statements described an unconfirmable plan. The plan (as described by the disclosure statements) classified all asbestos claimants into a single class. Some of those claimants had entered into pre-petition settlement agreements with the debtor's former parent company, a non-debtor entity. Under the pre-petition settlement agreements, the non-debtor parent paid half of the each claim up front, with an agreement to pay the remainder upon

42

See In re Quigley Co., 377 B.R. 110 (Bankr. S.D.N.Y. Oct. 2007), infra.

⁴³ The four "Tort Reform States" include Texas, Florida, Georgia, and Ohio.