April 7, 2009
Oral Argument at the Supreme Court in Travelers Indemnity v. Bailey
On March 30, 2009, the Supreme Court heard oral argument in the sole bankruptcy case it has taken this term. The issue is the power of the bankruptcy court to "bar related lawsuits." The case results from the Johns Manville reorganization in 1986. Creditors of the estate were suing the insurance company. Its a pretty interesting transcript because the justices are completely confused. You can access the transcript of the oral argument here.
One exchange between appellant's counsel and Justice Stevens:
JUSTICE STEVENS: Mr. Ostrager, may I ask this question? I -- I was unable to find the complaints in the voluminous filings here. Do any of the plaintiffs' cases seek recovery from assets of the estate that would reduce the payments to creditors of Manville?
MR. OSTRAGER: Well, what -- the reason that this is so critical is that, as the -
JUSTICE STEVENS: Can you answer my question?
I guess he didn't read Scalia's book "The Art of Persuading Judges."
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I’m interested in the case for how it relates to successor liability injunctions appearing in 363 sale orders.
I read the transcripts, twice, and I did not think “the justices are completely confused”.
Most of the justices asked questions from both sides of the issue - exactly the questions that needed to be asked:
1) Why would an insurance company set up a trust fund to channel asbestos claims if the insurance company wasn’t held harmless against “direct actions”,
2) do the “direct action” lawsuit impair estate rights, interests, or property?
My guess is the court will fudge it by saying that direct action injunctions are within the jurisdiction of the bankruptcy court but outside the scope of its powers.
That is where I saw justice Breyer going.
Posted by: robert white | Apr 18, 2009 6:20:16 PM