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violated the fair and equitable test in that it violated the absolute priority rule. The court noted that this was not a cramdown plan (all impaired classes had voted in favor of the plan), and thus, the fair and equitable test did not apply. Next, the court addressed Garlock's argument that the plan exposed Garlock to more than its fair share of liability. The court found that Garlock did not have standing to object to the debtor's plan. The court noted that Garlock had also filed for chapter 11, and thus all of Garlock's liabilities would also be channeled into an asbestos trust. Said the court: "Given its exit from the tort system and the filing of its own reorganization plan, Garlock will no longer be at risk of paying any joint and several jury verdicts, and therefore will have no reason to seek contribution or set-off from Grace or any other co-defendant....Thus, armed with the protective shield of its own asbestos trust and channeling injunction, Garlock has insulated itself from both its own liability, as well as any shared liability between it and Grace." Accordingly, the court found that Garlock had failed to show how it suffered any injury in fact required for Article III standing to object to the debtor's plan. The court also found that Garlock had not shown that it had "party in interest" standing under section 1109 of the Code. Next, the court overruled several insurers' objection that the debtor's plan violated the anti-assignment provisions of their insurance policies. The court found that section 1123(a)(5) of the Code preempted these anti-assignment provisions and that the transfer of the insurance rights and proceeds to the asbestos trust was proper. Ultimately, after addressing a couple other administrative issues, the court affirmed the bankruptcy court's recommendation that the debtor's plan be confirmed.
i. In re Bullard, F.3d, 2014 WL 1910868 (1st Cir. 2014).
Issue: Whether order denying confirmation of plan was a final order.
Holding: Order denying confirmation of plan was not final when case has not been dismissed and debtor remains free to propose an amended plan.
ii. Lindsey v. Pinnacle National Bank (In re Lindsey), 726 F.3d 857 (6th Cir. 2013)
Issue: Whether order denying confirmation of a proposed plan is a final, appealable order.
Holding: The Sixth Circuit held that an order denying confirmation is not a final, appealable order. The court joined the majority of circuits in so holding. It dismissed the minority view for, among other things, failure to take into account a debtor's option under § 158(d)(2)(A) to certify issues for appeal.
©2014 William L. Norton III
