Blogs

By: Brian Bergin
St. John’s Law Student
American Bankruptcy Institute Law Review Staff

            In a case of first impression, In re Marcal Paper Mills, Inc.,[1] the Third Circuit prorated the debtor’s pension fund withdrawal liability and gave administrative expense priority only to that portion related to the post-petition period. After filing its chapter 11 bankruptcy petition, Marcal Paper Mills, Inc. (“Marcal”) entered into a Memorandum of Understanding (the “MOU”) with certain unionized employees. The MOU required Marcal to continue making contributions to the union’s pension fund (the “Fund”) and required those unionized employees to continue working for Marcal. When Marcal sold its assets and terminated its distributing operation, Marcal’s ceased making contributions to the Fund.[2] The Fund filed an administrative claim against Marcal for $5,890,128 in withdrawal liability[3] on the basis of the Fund’s determination that Marcal had made a “complete withdrawal” [4] from the Fund under the meaning of Title IV of the Employee Retirement Income Security Act of 1974 (“ERISA”),[5] as amended by the Multiemployer Pension Plan Amendments Act of 1980 (“MPPAA”).[6]  After Marcal objected to its claim, the Fund amended its claim and sought administrative priority for only the portion of the withdrawal liability attributable to post-petition services provided by the unionized employees.[7]

Applying the “public policy” exception of Chapter 15, the Bankruptcy Court for the Southern District of New York refused to enforce a German bankruptcy order that would have allowed the foreign representative[1] access to a chapter 15 debtor’s emails stored in the United States in In re Toft.[2]  This case represents one of the first decisions to explore the outer boundaries of the public policy exception in section 1506 of the Bankruptcy Code. This chapter 15 proceeding was brought pursuant to a German case, the foreign main proceeding,[3] in which the foreign representative was granted a “Mail Interception Order” on an ex parte basis.  The German “Mail Interception Order,” which was also recognized by the English courts,[4] allowed the foreign representative to, among other things, intercept the debtor’s postal and electronic mail without giving notice to the debtor, Dr. Toft.[5]  The Bankruptcy Court refused to grant comity to the decision of the German Court because the relief sought was “manifestly contrary” to U.S. public policy.[6]

By: Michael A. Battema

St. John’s University Law Student

American Bankruptcy Institute Law Review Staff

The Third Circuit, in In re Global Industrial Technologies, Inc.,[1] recently held that insurance companies had standing to challenge the terms of the debtors’ proposed plan of reorganization (the “Plan”) because they had legally protected interests therein.[2]  In 2002, Global Industrial Technologies (“GIT”) and its subsidiary company, A.P. Green Industries, Inc., (“APG” and collectively the “debtors”), filed for chapter 11 protection in response to thousands of separate asbestos and silica-related personal injury claims filed against APG.[3]  In the Plan, the debtors sought to create two separate trusts that would assess and resolve the various claims against APG.[4]  Under the Plan’s terms, the trusts were to be funded by the proceeds of certain assigned insurance policies, which the debtors believed would fully cover all liabilities.[5]  Hartford Accident and Indemnity Company, First State Insurance Company, Twin City Fire Insurance Company, Century Indemnity Company, and Westchester Fire Insurance Company (collectively the “Insurers”) were among the insurers whose polices were assigned to the debtors’ silica-related trust.[6]  On November 14, 2007, the bankruptcy court confirmed the debtors’ Plan over the Insurers’ objections because the court determined that the Insurers lacked standing to object to the Plan.[7]