This month’s issue of the JCR tackles the hot topic of mass tort bankruptcies. Many of today’s restructuring professionals weren’t practicing in the early 1980s when Congress and the courts began to grapple with mass tort bankruptcies
in the context of asbestos insolvencies. And yet, nearly 40 years later, there are still open questions as to how (and if) mass torts can be efficiently resolved through the bankruptcy process. This month’s contributors review some of the issues that practitioners are confronting today.
William Schumacher and Charles Fendrych of Milbank LLP survey the recent cases that have employed the “Texas-Two Step” and consider some of the potential advantages and disadvantages of using the Texas corporate law on divisive mergers. The authors note that Bankruptcy Courts, appellate courts, and even Congress are not yet certain what to make of this corporate restructuring technique.
Andrew Adessky of Richter and Alexander Bayus of Fasken Martineau DuMoulin LLP bring a Canadian perspective to the issue, examining the history of mass torts through the Canadian insolvency system and asking whether additional elements of the U.S. practice will migrate into Canadian practice. The authors note that Canadian courts have exercised broad discretion to fashion appropriate remedies in proceedings under the Companies’ Creditors Arrangement Act but have also used that discretion to refuse insolvency protection where the filing was intended to create a litigation advantage.
Daniel Simon of McDermott Will & Emery; Lindsey D. Simon, an assistant professor at the University of Georgia School of Law; and Travis Vandell of Stretto remind readers that solicitation and voting in mass tort cases are not purely administrative matters. The authors review a variety of approaches to noticing and solicitation employed in mass torts bankruptcies and conclude that a tailored process, with the nature of the claimants and the design of the plan in mind, is often crucial to the success of the process.
David Stern of ASK LLP advises restructuring professionals to think carefully about the treatment of insurers in restructuring plans because insurance neutrality is closely linked to standing. He cautions that only three circuits have directly addressed this issue, and they do not agree on how to assess whether a plan is insurance neutral.
Rachel Chesely of FTI Consulting Inc. discusses some practical tips for developing the messaging on mass tort insolvencies. She notes that while communications practice in insolvency is always challenging, mass torts insolvencies require additional and specialized messaging that provides context, expresses empathy for tort victims, and demonstrates how the bankruptcy process will address tort victims’ claims.
Finally, Metta Kurth of Culhane Meadows PLLC rounds out the issue with an incredibly timely topic, the U.S. Supreme Court’s reversal of the Chapter 11 fee increase for debtors in districts administered by the U.S. Trustee Program. After reviewing the key takeaways from Siegel v. Fitzgerald, she notes that the decision leaves open whether having both the U.S. Trustee Program and the Bankruptcy Administrator Program is itself a “constitutional infirmity.”