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contract rights were preempted by state law. "The plan assigns Thorpe's insurance rights to the trust and excludes from Appellants' defenses any defense based upon violation of the anti- assignment clauses." The court found that "[h]ere Congress has expressly preempted Appellants' contract rights" noting that "[s]ection 541(c) provides that "an interest of the debtor in property becomes property of the estate ... notwithstanding any provision in an agreement, transfer instrument, or applicable nonbankruptcy law ... that restricts or conditions transfer of such interest by the debtor...." In addition to this finding of express preemption, the court also found implied preemption, stating that "enforcing the anti-assignment clauses would stand as 'an obstacle to the accomplishment and execution of the full purposes and objectives of Congress'" (i.e. as an obstacle to completion of a successful § 524(g) plan). The court reversed the judgment of the district court and remanded the case with instructions that the district court remand to the bankruptcy court to permit the insurers to "submit their proof on all issues they previously preserved."
iv. In re Plant Insulation Company, 469 B.R. 843 (Bankr. N.D. Cal. 2012)
Issue: 1) "Should the court confirm a plan in which a debtor that ceased doing business ten years ago attempts to satisfy the ongoing-business requirement of section 524(g) by merging with the company to which the debtor sold its operating assets?" 2) "May an injunction issued under section 524(g) cut off non-settling insurers' equitable contribution claims against settling insurers without providing full compensation for the barred claims?" 3) "Does the best-interest-of- creditors test require debtor to pay non-settling insurers the full value of their equitable contribution rights, because non-settling insurers would retain those rights in a case?"
Holding: The court confirmed the debtor's section 524(g) chapter 11 plan and overruled the various objections of the non-settling insurance companies. The court overruled the myriad objections lodged against the plan by the non-settling insurance companies in an extensive, 83 page opinion. The court first addressed the good faith argument, stating "I conclude that Congress had three purposes in enacting section 524(g): equal treatment of present and future asbestos claimants; preservation of going-concern value; and prompt payment of meritorious asbestos claims." The court found that all three of these purposes were satisfied in the debtor's plan. The court found, "[t]he section 524(g) trust proposed in the Plan provides for payment of all asbestos personal injury claims on a fully equal basis. Leaving claimants in the tort system, where it is undisputed that neither the insurance policies, or other assets of Plant are sufficient to pay all claims in full, does not provide for equal treatment of all present and future asbestos claims." The court further found that the fact that the debtor's plan was a liquidating plan did not support a finding that the plan was filed in bad faith, stating "the decisions upholding liquidating plans indicate that a plan need not satisfy all of the goals of chapter 11 [here, preserving the going concern value] to be in good faith." The court noted that the more pertinent question was "whether the proper use of section 524(g) is limited to cases in which there is going-concern value to preserve." The court concluded that nothing in section 524(g) required the debtor to be operating a business before confirmation. However, the court found that section 524(g) did require the operation of a business after confirmation. The court found that this requirement was
©2014 William L. Norton III
