In Re Plant Insulation Co.
469 B.R. 843
Bankr. N.D. Cal.2012Background
- Plant Insulation, a long-time asbestos product distributor/installer, faced thousands of claims and exhausted insurance coverage; it transferred assets to Bayside in 2001 and ceased operations, triggering a plan to fund a 524(g) trust via a Plant–Bayside merger to satisfy ongoing-business requirements; settlements with some insurers conditioned on injunctions protecting Settling Insurers from contribution and asbestos claims; the plan provides two paths for claim payment: a 524(g) trust and tort-system actions; Bayside’s merger was designed to satisfy 524(g)’s ongoing-business requirement and enable a channeling injunction; the plan extended a deadline for settlements to maximize trust funding and distribute payments to present and future claimants.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether merger satisfies ongoing-business requirement of 524(g). | Plant/Bayside merger fulfills ongoing-business need. | Non-Settling Insurers contend merger lacks substance and is coercive. | Yes, merger satisfies ongoing-business requirement. |
| Whether barring Equitable Contribution Claims against Settling Insurers is permissible. | Plan promotes equal treatment and prompt payment through trust/injunction. | Constitutional/Equity concerns require compensation for barred claims. | Bar is permissible with adequate offsets (Judgment-Reduction and Trust-Payment Credits). |
| Whether the Judgment-Reduction and Trust-Payment Credits adequately compensate for lost contribution rights. | Credits provide equivalent value and reduce tort-system claims. | Credits are insufficient to fully compensate lost rights. | Credits are sufficient and appropriate under 524(g). |
| Is extension of the insurance-settlement deadline consistent with 524(g) goals? | Extension increases settlements funding the Trust and claimant relief. | Extension risks greater concentration of risk on Non-Settling Insurers. | Extension approved; benefits outweigh drawbacks. |
| Does best-interests-of-creditors require full payment of non-settling insurers’ equitable-contribution rights? | Creditors receive pro rata, via Trust funding and credits. | Non-settling insurers deserve value of lost rights. | Best-interests test satisfied; plan feasible and fair. |
Key Cases Cited
- Sylmar Plaza, L.P. v. 314 F.3d 1070, 11 F.3d 1070 (9th Cir. 2002) (good-faith analysis in Chapter 11 plans; totality of circumstances)
- In re Thorpe Insulation Co., 671 F.3d 1011 (9th Cir. 2012) (prompt payment policy; arbitration/review under 524(g))
- In re Western Asbestos Co., 313 B.R. 832 (Bankr.N.D. Cal. 2003) (role of 524(g) injunction protecting third-party insurers)
- Tech-Bilt, Inc. v. Woodward-Clyde & Assoc., 38 Cal.3d 488 (Cal. 1985) (good-faith settlement standard in contribution contexts (California law))
- In re Acequia, Inc., 787 F.2d 1352 (9th Cir. 1986) (feasibility/going-concern considerations in plan confirmation)