In re C.P. Hall Co.
750 F.3d 659
| 7th Cir. | 2014Background
- Hall, debtor in bankruptcy, is a former asbestos distributor that ceased operations in the mid-1980s but remained in existence as a litigation shell.
- Thousands of asbestos claims were filed against Hall, which sought to shift costs to its liability insurers.
- Hall did not declare bankruptcy until 2011, initially under Chapter 11 and later converted to Chapter 7 with a trustee appointed.
- Integrity, an insurer that had already gone bankrupt, provided up to $10 million in coverage, but the policy’s coverage for Hall’s loss was disputed.
- The parties settled Hall’s claim against Integrity for $4.125 million, with bankruptcy court approval required for validity.
- Columbia Casualty Company, an excess insurer with up to $6 million coverage, objected to the settlement, arguing it would be harmed and that it should have a right to participate in the bankruptcy proceeding.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether a nonparty insurer has standing to object to a bankruptcy settlement. | Columbia asserts it has a stake in the assets and could be harmed by the settlement. | Hall (and the bankruptcy process) should not be burdened by insurers lacking direct creditor status. | Columbia lacks standing to object as a nonparty noncreditor. |
Key Cases Cited
- In re James Wilson Associates, 965 F.2d 160 (7th Cir.1992) (everyone with a claim to the res has a right to be heard before disposal of the res)
- In re South Beach Securities, Inc., 606 F.3d 366 (7th Cir.2010) (U.S. Trustee can be a party in interest)
- Lexmark Int'l, Inc. v. Static Control Components, Inc., 134 S. Ct. 1377 (U.S. 2014) (standing to sue requires a tangible injury that can be remedied)
- In re Global Industrial Technologies, Inc., 645 F.3d 201 (3d Cir.2011) (insurers may object if debtor’s plan threatens their rights in a way akin to control of claims)
- In re Thorpe Insulation Co., 677 F.3d 869 (9th Cir.2012) (insurers may object when bankruptcy plan alters contracts between insurer and debtor)
- Cult Awareness Network, Inc., 151 F.3d 605 (7th Cir.1998) (standing to object requires pecuniary interest in the estate)