![]() ![]() ![]() ![]() As such, the debtor’s only possible motive for seeking bankruptcy protection was to solely (and unfairly) benefit Hess by delaying the ongoing asbestos litigation and, ultimately, by limiting Hess’s exposure through a Section 524(g) channeling injunction or third-party release. Since the debtor had no ongoing business or assets, the committee reasoned that the debtor’s parent company, Hess, was really the “true target” of the plaintiffs’ asbestos exposure claims. The committee’s first argument-that the debtor filed its petition in bad faith-was largely premised on the committee’s view that the debtor did not seek bankruptcy protection for its own benefit. In support of this argument, the committee asserted that the bankruptcy case should be dismissed or converted as: the debtor filed its petition in bad faith, the debtor had no reasonable likelihood of rehabilitation, and the debtor failed to maintain adequate insurance coverage. In moving to dismiss, the committee’s main argument was that the bankruptcy filing was a bad faith filing and that the debtor was improperly using the bankruptcy process solely to cap its parent company’s asbestos liabilities. The proposed trust, which would be wholly funded by the debtor’s parent company, would be used to pay present and future asbestos claimants.įollowing the filing, the debtor’s Official Committee of Unsecured Creditors (the committee) moved to dismiss the debtor’s Chapter 11 case, or alternatively, to convert the case to a Chapter 7. ![]() Although HONX (the debtor) has yet to file a proposed plan of reorganization, it indicated that it is going to file a plan and, as part of the plan, seek to resolve its asbestos liabilities through the establishment of a Section 524(g) trust. In April 2022, in response to an influx of asbestos-related lawsuits, HONX filed a voluntary petition for bankruptcy relief under Chapter 11. Since the 1980s, more than 1,500 plaintiffs filed personal injury suits against HONX and its predecessors alleging that they were exposed to asbestos at HONX’s refinery. Backgroundįrom 1965 to 1998, HONX, Inc.-a wholly owned subsidiary of the Hess Corp.-operated a petroleum refinery on the island of St. Bankruptcy Court for the Southern District of Texas (the court) addressed whether a debtor that has no independent assets or ongoing business operations can reorganize under Chapter 11 in good faith. In a recent decision, In re HONX, No 22-90035 (Bankr. To read the full article, please visit Reuter’s website.Under Section 1112(b)(1) of the Bankruptcy Code (the code), a bankruptcy court may convert or dismiss a Chapter 11 case for “cause,” including, for example, when a debtor files a bankruptcy petition in bad faith. Bankruptcy Court's refusal to dismiss a Chapter 11 bankruptcy case, emphasizing that a violation of the Controlled Substances Act (CSA) does not automatically warrant dismissal, and considering the interests of innocent creditors and potential post-petition efforts to address violations. In this Reuter’s article authored by Loeb & Loeb Restructuring and Bankruptcy partners Schuyler Carroll and Bethany Simmons and associate Noah Weingarten, the writers analyze the U.S. See, e.g., In re: Way to Grow, Inc., 610 B.R. The Hacienda court's refusal to dismiss this marijuana industry case - on two separate occasions - and instead to confirm the Chapter 11 plan, represents a departure from the vast majority of bankruptcy court decisions, which reached the opposite result: dismissing bankruptcy cases based on perceived violations of federal drug laws alone. Bason) denied a motion to dismiss the Chapter 11 bankruptcy case despite finding that the marijuana-industry debtor was engaged in an ongoing, post-petition violation of the federal Controlled Substances Act (CSA). Bankruptcy Court for the Central District of California (Judge Neil W. ![]()
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