Commercial Express, Inc.
ORDERED.
Dated: May 22, 2025
MEMORANDUM OPINION ON MOTIONS TO APPROVE SALE AGREEMENT AND RELATED SETTLEMENT AGREEMENT CONTINGENT UPON ENTRY OF BAR ORDERS
The issue before the Court is whether the United States Supreme Court decision in Harrington v. Purdue Pharma L. P., 603 U.S. 204, 144 S. Ct. 2071, 219 L. Ed. 2d 721 (2024), precludes the Court from approving a Chapter 7 Trustee‘s sale of an insurance policy and a related settlement agreement when both are contingent upon the entry of third-party bar orders. The parties advocating for approval of the bar orders argue that
I. SUMMARY OF THE INSTANT CASE, MUNFORD, AND PURDUE
The matters before the Court arise from the parties’ attempts to settle their disputes resulting from a tragic trucking accident. Their agreements implicate the law regarding bar orders pursuant to Munford and whether that law has been implicitly overruled by Purdue.
A. Summary of this Chapter 7 Case.
The Debtor filed this Chapter 7 case on April 11, 2023, approximately оne year after a trucking accident in Alabama that resulted in serious personal injuries to multiple victims and the death of a child. (Doc. No. 1; Doc. No. 129 at 15.) Mr. Arvind Mahendru was appointed as the Chapter 7 Trustee to administer the Debtor‘s estate (the “Estate“). Prepetition, the accident victims (or their families or other representatives) (collectively, the “Accident Plaintiffs“) sued the Debtor and others in three federal district court actions in Alabama (the “Alabama Actions“),2 each alleging the Debtor was at fault for the accident. (Doc. No. 129 at 2.) Suggestions of bankruptcy were filed in two of the three Alabama Actions.3
The Accident Plaintiffs timely filed proofs of claims totaling over $24 million.4 (Doc. No. 169 ¶ 5.) The Debtor valued its assets at $26,000 (Doc. No. 8 at 6), so the best source of recovery for the Accident Plaintiffs was the Debtor‘s insurance policies. The relevant policies are with Progressive Express Insurance Company (“Progressive“) and Fortegra Specialty Insurance Company (“Fortegra“). (Doc. No. 169 ¶¶ 6, 9.) Recovery under either policy, however, is far from certain.
The insurance coverage issues are highly contested. Greatly simplified, Progressive and Fortegra argue they are not obligated to defend or indemnify the Debtor for the accident.5 (Doc. No. 196 ¶¶ 10, 11.) On July 26, 2023, Fortegra sued the Chapter 7 Trustee, as Estate representative, and each of the Accident Plaintiffs in adversary proceeding 6:23-ap-81-TPG, seeking a declaratory judgment that it has no
1. The Estate and the Accident Plaintiffs settle.
On March 26, 2024, the Chapter 7 Trustee filed the first of two settlement motions pursuant to Rule 9019, this one between the Estate and the Accident Plaintiffs (the “Estate Settlement“). (Doc. No. 100.) The Estate Settlement previewed that the Chapter 7 Trustee and the Accident Plaintiffs also reached a settlement with Progressive that would be the subject of a second Rule 9019 motion. (Id. at 9.) The Estate Settlement was intertwined with the contemplated settlement with Progressive as the Estate Settlement contained an agreement between the Chapter 7 Trustee and the Accident Plaintiffs as to the division of proceeds from the Progressive policy. (Id.) The Estate agreed to convey to the Accident Plaintiffs all interests in any insurance policy of the Debtor connected to the accident (id. § 2(a)), and the Accident Plaintiffs would waive any right to payment on their claims from the Estate (id. at 10, § 2(b)(iii)). In exchange, the Estate would receive a sum certain from the settlement amount paid by Progressive, and a percentage from Fortegra or other insurers of the Debtor. (Id. at 9-10, § 2(b)(i) - (iii)). The Estate Settlement was appropriately noticed (Doc. Nos. 102, 104) and drew no objections.
2. The Estate, the Accident Plaintiffs, and Progressive reach a settlement, contingent upon Court approval of a bar order in favor of Progressive.
Several months later, on August 20, 2024, the Accident Plaintiffs, Progressive, and the Chapter 7 Trustee filed the anticipated second settlement motion pursuant to Rule 9019 which was contingent upon the Court‘s entry of a bar order protecting Progressive from future claims concerning the accident (the “Progressive Settlement“) (Doc. No. 129), and attaching a Pro Tanto Release (the “Release“) (Doc. No. 129 at 13-28) and a proposed bar order (id. at 30-32). The Progressive Settlement provided that, in exchange for a bar order, Progressive would pay $400,000 under an MCS-90 endorsement which, according to the Chapter 7 Trustee, represented the Estate‘s “best day” due to the differences in how courts treat MCS-90 endorsements.6 (Id. ¶¶ 16, 22.) Progressive agreed to waive any right to reimbursement from
The proposed bar order and Release are limited to liability for the accident. (Id. at 17, 18.) The Release was executed by each of the Accident Plaintiffs, Progressive, and the Chapter 7 Trustee and reflects the intent of the Accident Plaintiffs and the Chapter 7 Trustee to extinguish all claims against Progressive concerning the accident, while reserving and preserving claims against other defendants in the Underlying Actions, including Fortegra. (Id. at 13-28.) The requested bar order would enjoin Fortegra and all other insurers, persons, or entities from seeking recovery from Progressive in connection with the accident. (Id. at 31, ¶ 3.) Subsequently, Progressive agreed it would not pursue any claims against those barred from pursuing it. (Doc. No. 162 ¶ 1.)
3. Fortegra and the UST object to the bar order in the Progressive Settlement.
Fortegra objected to the Progressive Settlement, arguing that “the Court‘s ability to issue a Bar Order is in serious doubt” following Purdue (Doc. No. 146 ¶ 11), and that the proposed bar order in Prоgressive‘s favor was not fair and equitable under the considerations set forth in Munford (id. at 4-7). On October 29, 2024, the UST also objected7 to the proposed bar order because it would apply to third parties who did not participate in settlement negotiations, “including Ace Property and Casualty Insurance Company, Trisure Specialty Insurance Company, Kinsdale Insurance Company, [and] United National Insurance Company ... (collectively, the “Barred Third Parties“).” (Doc. No. 160 ¶ 9.) The UST argues this amounts to a nonconsensual bar order precluded by Purdue, which the UST asserts “undermine[d] Munford to the point of abrogation.” (Id.)
4. The Barred Third Parties were served with two notices of the Progressive Settlement and proposed bar order, the objection deadline, and hearing dates, and none objected to the Progressive Settlement.
The Chapter 7 Trustee served each of the Barred Third Parties (as defined by the UST) with the motion seeking approval of the Progressive Settlement.8 Additionally, the Barred Third Parties (among others) were served with the related notice of hearing for September 4, 2024. (Doc. No. 131 at 3-4.) At that hearing, and expressly because the Progressive Settlement required
5. The parties agree to a judicial settlement conference.
By the time of the hearing on the Progressive Settlement, the parties had narrowed any factual disputes, stipulating to certain facts and conditions (Doc. Nos. 162, 168, 169),10 generally obviating any need for a lengthy contested hearing. But with the Fortegra and UST objections (Doc. Nos. 146, 160) still pending and looming uncertainty concerning third-party bar orders following Purdue, the Chapter 7 Trustee requested and received an order directing the parties to participate in a judicial settlement conference (“JSC“) with another judge frоm the Middle District of Florida, the Honorable Jacob A. Brown. (Doc. Nos. 173, 175.)
The JSC proved productive and aided in narrowing the issues before the Court even further. The parties resolved all issues in the Fortegra Adversary and Fortegra‘s objection to the Progressive Settlement. (Doc. No. 180.) In addition, the Debtor and Fortegra agreed Fortegra would buy its policy back from the Estate conditioned, like the Progressive Settlement, upon a bar order. (Doc. No. 182 at 1.)
On January 31, 2025, the Chapter 7 Trustee filed a motion asking the Court to approve the sale pursuant to Rules 6004 and 9019, and §§ 105(a) and 363(f), with a bar order enjoining claims against Fortegra (the “Fortegra Sale Motion“). (Doc. No. 182.) In exchange for the bar order and in settlement of the Fortegra Adversary, Fortegra would purchase its policy from the Estate for $590,000 free and clear of any claims and interests. (Doc. No. 182-1 at 2-3.) Like the bar order requested by Progressive, the bar order in favor of Fortegra was also limited to claims related to the accident and applicable policy. (Doc. No. 182-2.)11 From the $590,000, the Estate
In sum, all issues among the Chapter 7 Trustee, the Accident Plaintiffs, Progressive, and Fortegra were resolved pending the Court‘s approval of the requested bar orders.12 Only the UST‘s objections remain unresolved. But the Chapter 7 Trustee and the UST filed a joint stipulation (Doc. No. 196) relating to the Progressive Agreement and the Fortegra Sale Motion in which the UST stipulated that it did not question the Chapter 7 Trustee‘s business judgment and agreed that the Justice Oaks13 factors were satisfied. (Doc. No. 196 ¶ 19.) In addition, the parties stipulated that both insurance policies constitute рroperty of the estate, that a bona fide dispute exists as to insurance coverage, that the proposed sale of the Fortegra policy is in good faith, and that any parties claiming interests in the Progressive policy or the Fortegra policy could be compelled to accept a money satisfaction of such interests. (Id. ¶¶ 21, 22, 23, 36.) As such, the parties agreed that the required elements for a free and clear sale set forth in § 363(f)(4) and (5) are met and that the good faith protections in § 363(m) should apply.
On February 26, 2025, the Court conducted a hearing on the Fortegra Sale Motion and to consider any remaining issues regarding the Progressive Settlement. (Doc. No. 198.) The Chapter 7 Trustee‘s exhibits were admitted without objection and the Court took judicial notice of the docket entries in this case and in the Fortegra Adversary. (Id.) Because the parties supplied factual stipulations supporting each applicable statutory requirement and following the Court‘s independent evaluation of the same, in addition to the absence of any objection by the Barred Third Parties, the Court granted the Fortegra Sale Motion and approved the Progressive Settlement with bar orders, overruling the UST‘s objections. (Doc. No. 203.)
6. The UST‘s objections to the bar orders in the instant case.
To be clear, the UST did not object to the Progressive Settlement (Doc. No. 160) or the Fortegra Sale Motion (Doc. No.
B. Munford
Evaluating the merits of the UST‘s arguments and any potential impact of Purdue on Munford and on the instant case requires an analysis of Munford and Purdue. In Munford, а Chapter 11 debtor filed an adversary proceeding asserting claims against multiple defendants regarding an unsuccessful leverage buy out, which the debtor blamed for its insolvency. Munford, 97 F.3d at 452. Liability was contested, but one defendant offered to settle for a sum certain (the “Settling Defendant“), conditioned “upon the bankruptcy court‘s issuance of a protective order permanently enjoining [other defendants who had not settled (the “Non-settling Defendants“)] from pursuing contribution or indemnity claims against it.” Id. The Debtor sought approval of the settlement under Rule 9019(a), and the bankruptcy court entered an order approving the settlement and permanently enjoining the Non-settling Defendants from asserting claims against the Settling Defendant pursuant to Civil Rule 1614 and §105(a), which the district court affirmed. Id.
In Munford, unlike here,15 the bankruptcy court‘s subject matter jurisdiction to grant injunctive relief concerning unasserted state law contribution and indemnity claims held by third parties was challenged, id. at 453, and much of the Eleventh Circuit‘s discussion in Munford focused on this issue. Because a bankruptcy court‘s “related to” jurisdiction supplied by
After analyzing if a bankruptcy court could enter a bar order against the Non-settling Defendants and concluding it could by virtue of
C. Purdue
The facts in Munford and Purdue are not like the facts here. In Purdue, the proposed claims to be barred arose from opioid addictions, constituting “one of the largest public health crises in this nation‘s history,” Purdue, 603 U.S. at 209, 144 S. Ct. at 2078, 219 L. Ed. 2d 721 (quoting In re Purdue Pharma L. P., 69 F.4th 45, 56 (2nd Cir. 2023)), estimated by the Department of Health and Human services to cost the country between $53 and $72 billion annually. Id. (citing In re Purdue Pharma L. P., 635 B.R. 26, 44 (S.D.N.Y. 2021)). “Between 1999 and 2019, approximately 247,000 people in the United States died from prescription-opioid overdoses.” Id. The Sackler family, which owned and controlled Purdue, was at the center of responsibility for this crisis. Id. at 209-10.
Recognizing they may be held accountable, and after a Purdue affiliate “pleaded guilty to a federal felony for misbranding OxyContin as ‘less addictive’ and ‘less subject to abuse ... than other pain medications[,]‘” Id. at 210 (quoting In re Purdue Pharma L. P., 635 B.R. at 48), the Sackler family siphoned off “approximately $11 billion, draining Purdue‘s total assets by 75% and leaving it in a ‘significantly weakened financial’ state.” Id. at 211 (citing Purdue, 69 F.4th at 59-71). “Thousands of civil lawsuits followed as individuals, families, and governments within and outside the United States sought damages from Purdue and the Sacklers for injuries allegedly caused by their deceptive marketing practices.” Id. (citing Purdue, 69 F.4th at 60). As the Supreme Court recognized, the claims were of a sort that could result in non-dischargeable debts for fraud or willful and malicious injury. Id. at 222 (citing
In the context of Purdue‘s Chapter 11 plan, the Sacklers sought an “injunction that would not just prevent suits against the company‘s officers and directors but would run in favor of hundreds, if not thousands, of Sackler family members and entities under their control.” Id. at 212. Thе Sacklers “proposed to end all . . . lawsuits without the consent of the opioid victims who brought them.” Id. When creditors were polled on the proposed plan, fewer than 20% eligible to participate did so, though most who did supported the plan. Id. “But ‘[t]housands of opioid victims voted against the plan too, and many pleaded with the bankruptcy court not to wipe out their claims against the Sacklers without their consent.‘” Id. (citing Purdue, 635 B.R. at 35).
After discussing the facts, the Supreme Court concluded that “the bankruptcy code does not authorize a release and injunction that, as part of a plan of reorganization under Chapter 11, effectively seeks to discharge16 claims against a nondebtor without
The Sacklers suggest that, if
11 U.S.C. § 1123(b) does not permit a bankruptcy court to release and enjoin claims against a nondebtor without the affected claimants’ consent, §105(a) does. That provision allows a bankruptcy court to “issue any order, process, or judgment that is necessary or appropriate to carry out the provisions of” the bankruptcy code. As the Second Circuit recognized, however, “§ 105(a) alone cannot justify” the imposition of nonconsensual third-party releases because it serves only to “carry out” authorities expressly conferred elsewhere in the code. Purdue concedes this point, as do several other plan proponents. Necessarily, then, our focus trains on § 1123(b)(6).
Id. (internal citations omitted).
Turning to § 1123(b), the Supreme Court noted the statute supplies a list of things a Chapter 11 plan may do.17 Id. at 216, 144 S. Ct. at 2081-82. The last subsection, § 1123(b)(6), provides that a plan may “include any other appropriate provision not inconsistent with the applicable provisions of this title.” The majority took issue with a broad interpretation of what could be accomplished using § 1123(b)(6), as advanced by the Sackler family and Purdue:
As the plan proponents see it, paragraph (6) allows a debtor to include in its plan, and a court to order, any term not ‘expressly forbid[den]’ by the bankruptcy code as long as a bankruptcy judge deems it ‘appropriate’ and consistent with the broad ‘purpose[s]’ of bankruptcy. And because the code does not expressly forbid a non-consensual nondebtor discharge, the reasoning goes, the bankruptcy court was free to authorize one here after finding it an ‘appropriate’ provision.
Id. at 217 (internal citations omitted).
The majority identified a problem with such a broad interpretation of § 1123(b)(6). “Paragraph (6) is a catchall phrase tacked on at the end of a long and detailed list of specific directions. When faced with a catchall phrase like that, courts do not necessarily afford it the broadest possible construction it can bear.” Id. (citing Epic Sys. Corp. v. Lewis, 584 U.S. 497, 512, 138 S. Ct. 1612, 1625, 200 L. Ed. 2d 889 (2018) (where “general term follows more specific terms in a list, the general term is usually understood to ‘embrace only objects similar in nature to those objects enumerated by the preceding specific words.‘” (quoting Circuit City Stores, Inc. v. Adams, 532 U.S. 105, 115, 121 S. Ct. 1302, 149 L. Ed. 2d 234 (2001)))).
Another concern identified by the majority was that the requested injunction sought “to extinguish claims against the Sacklers (i.e., nondebtor third parties) that belong to their victims. And precisely nothing in § 1123(b) suggests those claims can be bargained away without the consent of those affected, as if the claims were somehow Purdue‘s own property.” Id. at 220. Accordingly, § 1123(b)(6) would not be broadly construed to enjoin the victims’ claims without their consent.
II. APPLICATION OF PURDUE TO THE INSTANT CASE
Applying Purdue to the instant case, the Court determines that it does not prohibit the bar order sought in the Fortegra Sale Motion. Purdue did not address sales of estate property and did not involve injunctive relief necessary to a settlement involving estate property in a Chapter 7 case.
A. Purdue does not impact a bankruptcy court‘s authority to approve a bar order when necessary to facilitate a sale of estate prоperty pursuant to § 363(f)(4) and (5).
Purdue does not foreclose the relief sought in the Fortegra Sale Motion
[t]he interest of all the enjoined parties and nonparties, persons and entities, to the extent that they are specifically identified in the Motions and the notices of hearing, in the Progressive Policy or the Fortegra Policy is subject to bona fide dispute as to whether any persons or entities may assert a valid claim under the Progressive Policy or the Fortegra Policy.
(Doc. No. 196 ¶ 22). They further stipulated that “[a]ny parties or nonparties claiming interest in the Progressive Policy or the Fortegra Policy could be compelled to accept a money satisfaction of such interest.” (Id. ¶ 23). The record is devoid of evidence the Barred Third Parties have any claims or interests against either the Fortegra policy or Fortegra; the Court simply presumes they may merely due to the bar order request.
But the Barred Third Parties received sufficient notice that the sale was contingent upon a bar order precluding any future claims against Fortegra associated with the accident. (Doc. Nos. 130, 131, 140, 141.) They were on notice that their rights may be impacted but remained silent.19 Because they failed to object20 despite
The Court is not the first to determine bar orders are still permitted when necessary to a sale or settlement concerning property of the estate. At least three other bankruptcy courts concluded Purdue does not preclude them from entering injunctive relief in the form of a bar order when necessary to monetize a debtor‘s insurance policies. In re Hopeman Bros., Inc., 667 B.R. 101, 106 (Bankr. E.D. Va. 2025) (recognizing that “injunctions and releases have long accompanied ‘free and clear’ sales in bankruptcy“); In re Bird Global, Inc., No. 1:23-bk-20514-CLC (Bankr. S.D. Fla. Aug. 2, 2024) (approving bar order and channeling injunction related to insurance settlement agreements), order den. emergency mot. stay confirmation order pending appeal, No. 1:24-CV-23086-RAR, Doc. No. 35 (S.D. Fla. Aug. 21, 2024); Roman Cath. Diocese of Rockville Ctr., 665 B.R. 71, 88 (Bankr. S.D.N.Y. 2024) (noting courts routinely approve injunctive relief as part of a free and clear sale pursuant to § 363(f) without an adversary proceeding and approving settlement agreement with releases and injunctions, overruling United States Trustee‘s objection that Purdue precludes such relief). As such, and because Purdue did not concern § 363 sales of estate property, the Court is confident Purdue does not foreclose entry of a bar order when necessary to effectuate a sale of estate property free and clear of liens, claims, and encumbrances as requested here.22
B. Purdue does not impact a bankruptcy court‘s authority to approve injunctive relief in furtherance of a settlement involving estate property in a Chapter 7 case.
Unlike the Fortegra Sale Motion, the Progressive Settlement was not advanced as a § 363 sale.23 Rather, approval of the settlement and bar order was sought pursuant tо Munford, § 105(a), and Rule 9019. Based on the Supreme Court‘s acknowledgment in footnote 2 of Purdue that “‘§ 105(a) alone cannot justify’ the imposition of nonconsensual third-party releases because it serves only to ‘carry out’ authorities expressly conferred elsewhere in the code[,]” Purdue, 603 U.S. at 216 n.2, 144 S. Ct. at 2082 n.2, 219 L. Ed. 2d 721 (citing In re Purdue Pharma L. P., 69 F.4th at 73), the UST argues the related bar order cannot be approved.
In seeking approval of the Progressive Settlement with a bar order, the parties cited to only § 105(a) and no other relevant
A debtor‘s insurance policies are widely recognized as property of the debtor‘s estate.25 Here, the Chapter 7 Trustee fulfilled his duty to mоnetize the Debtor‘s insurance policies and sought approval of the related settlements and compromises pursuant to Munford, § 105(a), and Rule 9019. As relevant, Rule 9019(a) authorizes the Court to approve a settlement if notice is provided to all creditors, the United States trustee, the debtor, and any other entity the Court designates. As the UST notes, Rule 9019 is procedural and cannot “abridge, enlarge, or modify any substantive right.”
But
But the UST argues the Chapter 7 Trustee “must point to some Code provision that permits chapter 7 debtors, but not chapter 11 debtors, to impose nonconsensual27 releases of claims between non-debtors.” (Doc. No. 160 ¶ 22.) The UST makes this argument because Purdue was a Chapter 11 case involving § 1123(b)(6), which does not apply in this Chapter 7
But the UST‘s argument overlooks the plain language of § 105(a) giving a bankruptcy court the power to enter “any order . . . .” The language “any order” is broad but reined in by the phrase “necessary and appropriate to carry out the provisions of [the Code].”
Because the Court concludes § 105(a) operates in tandem with § 704(a) and merits entry of the requested bar orders, to whatever extent § 105(a) requires a statutory pairing, it has one here, distinct from Munford. And based on the silence in response to repeated notice of the proposed bar orders, the Court cannot conclude they are nonconsensual – yet another distinction, since Munford approved a bar order over objections. Nevertheless, presuming there may be a difference of opinion on the Court‘s conclusions, the Court will address the UST‘s argument that Munford is implicitly overruled, while expressly noting that only the Supreme Court or the Eleventh Circuit en banc can truly answer that question. See United States v. Isaac, No. 522CR117LCBHNJ1, 2023 WL 1415597, at *3 (N.D. Ala. Jan. 31, 2023) (“As is true for any published Eleventh Circuit decision, this Cоurt is powerless to overlook [that decision‘s] unequivocal instruction without subsequent direction from the Supreme Court (or the Eleventh Circuit en banc) either expressly overruling [that decision] or undermining it to the point of abrogation.“).
III. DID PURDUE IMPLICITLY OVERRULE MUNFORD?
To determine whether Purdue implicitly overruled Munford, the Court first analyzes the Eleventh Circuit‘s legal standard for examining whether its prior panel precedent is overruled. The Court must then determine whether Purdue is both clearly on point and clearly contrary to Munford. Next, the Court considers what happens if, in the event of an appeal, the Eleventh Circuit concludes Munford is not implicitly overruled. Finally, the Court reviews whether the instant case is distinguishable from Purdue.
A. Analysis of Eleventh Circuit‘s legal standard for examining whether its prior panel precedent is overruled.
To expressly abrogate or directly overrule precedential appellate court authority, a Supreme Court‘s “decision must have ‘actually overruled or conflicted with‘” the prior precedent of an Eleventh Circuit panel. United States v. Vega-Castillo, 540 F.3d 1235, 1237 (11th Cir. 2008) (quoting United States v. Marte, 356 F.3d 1336, 1344 (11th Cir. 2004)). “Even if the reasoning of an intervening [Supreme Court] decision is at odds with a prior appellate court decision, that does not provide the appellate court with a basis for departing from its prior decision.” Id. (citing Atl. Sounding Co. v. Townsend, 496 F.3d 1282, 1284 (11th Cir. 2007)). Rather, a circuit court, and all lower courts bound by the circuit precedent, will adhere to that precedent unless and until it is overruled by the circuit that issued the precedent en banc or by the Supreme Court. See Id. at 1238.
The UST does not suggest that Munford was expressly abrogated or directly overruled. Instead, the UST argues
B. Is Purdue “clearly on point” and “clearly contrary” to Munford?
Under the standard set forth by the Eleventh Circuit, evaluating the UST‘s implicit abrogation argument requires an analysis of whether Purdue is clearly on point and clearly contrary to Munford. The “clearly on point and clearly contrary” criteria are conjunctive; absent both, courts in the Eleventh Circuit may not disregard Munford. Kaley, 579 F.3d at 1255 (“In addition to being squarely on point, the doctrine of adherence to prior precedent also mandates that the intervening Supreme Court case actually abrogate or directly conflict with, as opposed to merely weaken, the holding of the prior panel.” (Emphasis added.)). The analysis is complicated because the language relied upon by the UST for the proposition that Munford is implicitly overruled (thus “clearly on point and clearly contrary” to Purdue) appeared only in a footnote containing no independent analysis from the Supreme Court.
Certainly, the Supreme Court‘s comments confirm § 105(a) alone cannot justify a nonconsensual third-party release. After all, the Supreme Court accepted the case “to resolve a longstanding and deeply entrenched disagreement between lower courts over the legality of nonconsensual third-party releases.” Purdue, 603 U.S. at 224 n.6, 144 S. Ct. at 2086 n.6, 219 L. Ed. 2d 721. So, the Supreme Court‘s statement about why it accepted the case is broad. But the Supreme Court‘s actual holding – that “the bankruptcy code does not authorize a release and injunction that, as part of a plan of reorganization under Chapter 11, effectively seeks to discharge claims against a nondebtor without the consent of affected claimants” – is not. Purdue, 603 U.S. at 227, 144 S. Ct. at 2088, 219 L. Ed. 2d 721. This holding is far narrower than the stated reason for accepting certiorari to begin with and is limited to the Chapter 11 plan context. And the Supreme Court stated it was confining itself to the question presented, id., which did not reference § 105(a).
Regardless, the Court is very mindful of the Supreme Court‘s conclusion that § 105(a) alone cannot support a nonconsensual third-party release. To the extent
The more difficult analysis28 concerns whether Purdue is clearly on point, necessitating a factual comparison. And of course, the facts in Purdue and in Munford are nothing alike. In Purdue, at issue was a plan that contained a nonconsensual “injunction that would not just prevent suits against [Purdue‘s] officers and directors but would run in favor of hundreds, if not thousands, of Sackler family members and entities under their control.” Purdue, 603 U.S. at 212, 144 S. Ct. at 2079, 219 L. Ed. 2d 721. The proposed injunction was so broad the Supreme Court repeatedly characterized it as a discharge, pointedly noting the nondischargeable nature of the claims at issue, and that the injunction would run in favor of those who aided in perpetuating the harm. The Supreme Court extensively analyzed § 1123(b)(6) and explained the limits on its construction.
None of this discussion seems clearly on point to Munford, in which § 1123(b)(6) was not at issue, nor did the injunction bar nondischargeable claims. In Munford, the Eleventh Circuit simply affirmed a decision to approve a settlement conditioned upon a bar order enjoining claims for contribution and indemnity where the bankruptcy court concluded the interests of those enjoined were sufficiently protected and that it had subject matter jurisdiction to do so. Because the Supreme Court cabined its decision in Purdue solely to the question presented, which arose in a Chapter 11 plan scenario involving entirely different facts, the Court is uncertain as to whether the Eleventh Circuit sitting en banc would extend Purdue‘s application to Munford when doing so would upend its prior precedent.
Indeed, the Eleventh Circuit has recognized the authority of bankruptcy and other courts to approve bar orders when integral to a settlement for decades. Apps v. Morrison (In re Superior Homes & Invs., LLC), 521 F. App‘x 895, 898 (11th Cir. 2013) (affirming district court‘s affirmance of bankruptcy court order approving Rule 9019 settlement with a bar order enjoining creditors’ state court litigation against non-debtor defendants in exchange for non-debtor defendants’ $800,000 payment to the estate; bar order was essential to protect against further costs of litigation and to preserve the settlement funds for the estate‘s benefit); Markland, LLC v. Leyva Capital (In re Centro Grp., LLC), No. 21-11364, 2021 WL 5158001, at *3 (11th Cir. 2021) (bar order is approрriate and integral to a settlement where the parties would not enter into a settlement agreement without it; bar order‘s purpose “is not to ensure success for a reorganized entity by eliminating liability against third parties but is instead to facilitate a settlement agreement.“); In re U.S. Oil & Gas Litig., 967 F.2d 489, 496 (11th Cir. 1992) (district court may issue a settlement bar order concerning claims for indemnity and contribution against a nonsettling defendant after it makes a reasoned determination that it is fair and equitable to do so.) Because Purdue does not seem clearly on point, the Court does not share the UST‘s confidence that the Eleventh Circuit would necessarily conclude that the Supreme Court‘s footnote acknowledgement of a conceded argument serves to obliterate decades of longstanding precedent.
C. What happens if, in the event of an appeal, the Eleventh Circuit concludes Munford is not implicitly overruled?
The UST hypothesizes that if Purdue is not construed to implicitly overrule Munford and Purdue had been filed in the Eleventh Circuit, it could have led to approval of a bar order under § 105(a) and Rule 9019, yielding an undesirable inconsistency among circuits given Purdue‘s conclusion that § 105(a) alone does not suffice. The Court notes again that the expressly stated reason the Supreme Court accepted certiorari was “to resolve a longstanding and deeply entrenched disagreement between lower courts over the legality of nonconsensual third-party releases.” Purdue, 603 U.S. at 224 n.6, 144 S. Ct. at 2086 n.6, 219 L. Ed. 2d 721. But the ultimate ruling seems far narrower than the Supreme Court‘s articulated goal. And the Court does not agree that a bar order would necessarily be approved in the Eleventh Circuit under the present facts in Purdue if, for some reason, the case had been filed here. The Supreme Court emphasized that the proposed relief in Purdue equated to a discharge of vast and widespread liability of a type that would be deemed nondischargeable under the Code, establishing a pathway for non-debtor tortfeasors to evade liability without filing for bankruptcy and complying with the Code‘s obligations. The expansive injunctive relief is far from a slam dunk.
D. The instant case is easily distinguished from Purdue.
Finally, critical distinctions between this case and Purdue should also not be overlooked. Unlike § 1123(b)(6), neither § 105(a) nor § 704(a) are “catchall” provisions tacked on to the end of statutory lists. These statutes are also dissimilar; § 1123(b) providеs for what a plan may do and obviously has no application in Chapter 7 cases, but § 105(a) provides for what a court may do. And § 704(a) directs what a Chapter 7 trustee must do. In addition, unlike what can be said of many of the would-be beneficiaries of the injunctive relief in Purdue, Progressive and Fortegra had no culpability or involvement in the cause of the harm here. They are not tortfeasors seeking to avoid liability for widespread addiction and death caused by their actions and product. They are simply insurance companies looking to buy their peace and resolve the issues involving them. Progressive and Fortegra are entitled to an assurance of protection from claims related to the accident in exchange for their significant financial contributions that directly benefit those who were harmed by the acts of others when the Justice Oaks factors merit this result. In re S & I Invs., 421 B.R. 569, 585 (Bankr. S.D. Fla. 2009) (“‘Defendants buy little peace through settlement unless they are assured that they will be protected . . . .‘” (quoting In re U.S. Oil & Gas Litig., 967 F.2d at 494)). And unlike Purdue, here
IV. CONCLUSION
The UST fails to convince the Court that Purdue implicitly overruled Munford. Even if it did, however, Purdue is so distinguishable from the instant case that it does not preclude the bar orders at issue here. A bar order protecting Fortegra is necessary to the sale of the Fortegra policy under § 363(f)(4) and (5) and is an appropriate use of the Court‘s powers pursuant to § 105(a), as is the bar order protecting Progressive when § 105(a) operates in tandem with § 704(a). The UST‘s objections are overruled, the Progressive Settlement (Doc. No. 129) is approved, and the Fortegra Sale Motion (Doc. No. 182) is granted.
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C. Andrew Roy is directed to serve a copy of this Memorandum Opinion on interested parties who are non-CM/ECF users and file a certificate of notice within 3 days of entry of the order.
Notes
(1) impair or leave unimpaired any class of claims, secured or unsecured, or of interests;
(2) . . . provide for the assumption, rejection, or assignment of any executory contract or unexpired lease of the debtor not previously rejected under [§ 365];
(3) provide for—
(A) the settlement or adjustment of any claim or interest belonging to the debtor or to the estate; or
(B) the retention and enforcement by the debtor, by the trustee, or by a representative of the estate appointed for such purpose, of any such claim or interest;
(4) provide for the sale of all or substantially all of the property of the estate, and the distribution of the proceeds of such sale among holders of claims or interests;
(5) modify the rights of holders of secured claims, other than a claim secured only by a security interest in real property that is the debtor‘s principal residence, or of holders of unsecured claims, or leave unaffected the rights of holders of any class of claims; and
(6) include any other appropriate provision not inconsistent with the applicable provisions of this title.