Jul 25, 2012

Third Circuit Rejects Bankruptcy Plan

In re: American Capital Equipment Inc. and Skinner Engine Company, Inc., (United States Court of Appeals for the Third Circuit, Docket No. 10-2239 and 10-2240).

The Third Circuit Court of Appeals recently affirmed the decisions of the United States District and Bankruptcy Courts of the Western District of Pennsylvania, which each held that a bankruptcy plan by a now defunct debtor was patently unconfirmable. The Court rejected the plan which was based on a procedure whereby asbestos claimants who used the dispute resolution process set forth in the plan to resolve their claims would give twenty percent of the proceeds from the insurance policies to the Debtor, who would use those proceeds to pay its creditors, specifically, its attorneys.

Ford Marrin served as coverage counsel for CNA in opposing the plan, along with the debtor’s other insurers. The Third Circuit agreed with CNA and the other insurers that the debtor could not effectuate a confirmable plan and that the lower courts properly converted the Chapter 11 bankruptcy to Chapter 7.

Andrew I. Mandelbaum served as coverage counsel for CNA.