New Cases - Week of June 15, 2009

New Cases For the Week of June 15, 2009 - June 19, 2009

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June 18, 2009
Case	Court	Holding

Travelers Indem. Co. v. Bailey (DBN Subscription Required)	S. Ct.	A bankruptcy court approved an insurance asbestos trust settlement in 1986. The settlement included an injunction barring all future claims "related to the insurance policies" against settling insurers. The settlement order became final. When, years later, plaintiffs filed claims against a settling insurer alleging "direct claims" based upon the insurer's own actions (as opposed to the insured's actions), the Court of Appeals erred in holding that 1986 bar order was ineffective to bar such claims because the bankruptcy court lacked subject matter jurisdiction to enter it. The order was final and could not be collaterally attacked on subject matter jurisdictional grounds. "Related to" is an expansive term which encompasses claims based upon the insured's actions, as well as "direct claims" against the insurer.
In re Warren (DBN Subscription Required)	9th Cir.	Although 11 USC 521(i)(1) requires that a case be dismissed automatically if the debtor has failed to file the financial information required by 11 USC 521(a)(1) within 45 days of the petition date, the bankruptcy court has discretion to waive this requirement through an order entered after the 45-day period has passed.
Bank of Am., N.A. v. Mukamai (DBN Subscription Required)	11th Cir.	In an appeal from the Bankruptcy Court's order voiding a payment made by the Debtor to Plaintiff as a preferential transfer, the order is affirmed where the payments, which were made from the Debtor's other credit card accounts for debt consolidation purposes, constituted "transfer[s] of an interest of the debtor in property" under 11 U.S.C. section 547(b).

June 16, 2009
Case	Court	Holding

In re Boyer
(DBN Subscription Required)

2nd Cir.

The bankruptcy court did not err in approving a compromise of constructive trust claims between the Chapter 7 debtors and the estate, even though a creditor was willing to pursue the claims itself and pay the estate marginally more than the settlement. The Court's evaluation of the propriety of an assignment of estate claims to a creditor is similar to the Court's assessment of a settlement. Specifically, the issue is whether the action is in the best interests of the estate. The Court did not err in accepting the trustee's informed judgment that settlement was preferable to a marginally higher recovery via assignment and continued litigation. Settlement would enable the trustee to conclude the bankruptcy case and would also avoid the creditor's continued pursuit of "useless litigation."

June 15, 2009
Case	Court	Holding

In re Lyondell Chemical Company
(DBN Subscription Required)

Bankr. SDNY

A non-bankruptcy lawsuit by a creditor against a non-bankrupt affiliate of the debtor which was allegedly co-liable under a pre-petition settlement agreement could not be stayed by the bankruptcy court.

Even if rights of subrogation would arise from collection from the affiliate, such rights would merely substitute one creditor (the original counterparty under the settlement agreement) for another (the affiliate) without increasing the liabilities of the debtor. Moreover, the fact that the bankruptcy court might be more efficient than a non-bankruptcy court because the bankruptcy court allowed testimony by affidavit, represented insufficient harm to the estate to justify a stay of the action against the affiliate.