In Re Federal-Mogul Global Inc.
2012 U.S. App. LEXIS 8814
| 3rd Cir. | 2012Background
- Federal-Mogul Global and affiliates filed Chapter 11 to resolve asbestos liability through a §524(g) personal-injury trust, seeking to transfer insurance rights to the trust.
- Insurers objected, arguing the plan violated anti-assignment provisions in their policies and thus failed to comply with nonbankruptcy law.
- Bankruptcy court and district court held that §1123(a)(5) preempts such anti-assignment provisions, enabling transfer to the §524(g) trust; plan confirmed.
- The issue on appeal was the scope of §1123(a) preemption, including whether private insurance contracts are within its reach.
- The Third Circuit affirmed, holding §1123(a)(5)(B) preempts anti-assignment provisions to the extent they bar transfer to a §524(g) trust, and that the preemption is broad, including private contracts.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Does §1123(a)(5)(B) preempt anti-assignment provisions? | Insurers contend not preempted by §1123(a)(5). | Federal-Mogul argues §1123(a)(5) preempts state anti-assignment provisions. | Yes; preemption applies to anti-assignment provisions. |
| Is §1123(a) preemption limited to financial-condition laws or does it reach private contracts? | Insurers urge a narrow reading limited to financial-condition laws. | Federal-Mogul advocates broad preemption including private contracts. | Preemption is broad and includes private contracts. |
| Should §1123(a) preemption be read in pari materia with §1142 or be limited by legislative history? | Insurers rely on pari materia or historical practice to limit scope. | Federal-Mogul contends plain text controls and history supports broad preemption. | Plain text governs; scope not limited by pari materia or thin history. |
Key Cases Cited
- Combustion Eng’g, Inc. v. G. Thern, Ltd., 391 F.3d 190 (3d Cir. 2004) (preemption of anti-assignment provisions under §1123(a))
- Pacific Gas & Elec. Co. v. Cal. ex rel. Cal. Dep’t of Toxic Substances Control, 350 F.3d 932 (9th Cir. 2003) (discussed reading §1123(a) in pari materia; financial-condition scope)
- In re FCX, Inc., 853 F.2d 1149 (4th Cir. 1988) (treats §1123(a) preemption of contractual provisions)
- In re Global Indus. Techs., Inc., 645 F.3d 201 (3d Cir. 2011) (en banc discussion on insurer standing and trust dynamics)
- In re Thorpe Insulation Co., 671 F.3d 980 (9th Cir. 2012) (preemption of anti-assignment provisions by §1123(a) and §524(g))
- Cohen v. de la Cruz, 523 U.S. 213 (1988) (textual interpretation governs when legislative history is thin)