Motor Vehicle Casualty Co. v. Thorpe Insulation Co. (In Re Thorpe Insulation Co.)
677 F.3d 869
9th Cir.2012Background
- Thorpe and Pacific filed Chapter 11; plan §524(g) creates a trust to channel asbestos claims and enjoins actions against insurers.
- Plan funding relies on settlements with settling insurers totaling hundreds of millions to fund the trust.
- Plan is labeled insurance neutral but contains exceptions that preserve some defenses and allow direct actions against insurers.
- Non-settling insurers object to the plan, asserting standing and that the plan impermissibly alters their contractual rights and economics.
- Courts below held plan insurance neutral and that insurers lacked standing; court reverses on standing and preemption grounds and remands for evidentiary development.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Standing to challenge the plan | Appellants lack standing due to insurance neutrality | Plan is insurance neutral; Appellants lack stake | Plan not insurance neutral; Appellants had standing; remand for proof on merits. |
| Preemption of anti-assignment clauses | 541(c) preempts state anti-assignment provisions | Preemption not supported by Farmers Markets or other authorities | 541(c) preempts anti-assignment clauses; plan preempts state rights. |
| Mootness of the appeal | Appeal not equitably moot; remedies remain | Plan substantially consummated; equitable mootness doctrine applies | Not equitably moot; remand to permit equitable remedies. |
Key Cases Cited
- In re Combustion Eng'g, 391 F.3d 190 (3d Cir. 2004) (standing in 524(g) plans; insurance neutrality concepts)
- Hillsborough County v. Automated Medical Laboratories, 471 U.S. 707 (1985) (preemption framework; Supremacy Clause)
- Lujan v. Defenders of Wildlife, 504 U.S. 555 (1992) (Article III standing requirements)
- In re GIT, 645 F.3d 201 (3d Cir. 2011) (bankruptcy standing; broad party-in-interest scope)
- In re Amatex Corp., 755 F.2d 1034 (3d Cir. 1985) (standing and participation in reorganization cases)
- In re Farmers Markets, Inc., 792 F.2d 1400 (9th Cir. 1986) (541(c) preemption; transfer restrictions to estate)
- Crosby v. National Foreign Trade Council, 530 U.S. 363 (2000) (preemption analysis and obstacle to congressional objectives)
- Chae v. SLM Corp., 593 F.3d 936 (9th Cir. 2010) (interpretation of federal-state preemption in bankruptcy)