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| vol 16, num 2 | May, 2019 |
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| Delaware Bankruptcy Court Extends Barton Doctrine to Trustees of Mass-Tort Litigation Trust |
| A Delaware Bankruptcy Court has held that litigants pursuing post-confirmation state law fraud claims against the trustees of a mass-tort litigation trust must first seek leave from the bankruptcy court that established the trust. In Smith v. Hilton (In re Swan Transportation Co.), the bankruptcy court had previously confirmed the debtor’s plan establishing a litigation trust to handle asbestos- and silica-related claims against one of the debtor’s subsidiaries. Under the plan, three trustees were appointed to administer claims against the trust. Over a decade after the plan was confirmed, three individuals filed claims against the
trust seeking recompense for alleged asbestos- and silica-related injuries. Two of the claims were disallowed on the grounds that the claimants had not suffered a “qualifying injury,” and the third claim was paid the distribution percentage established under the trust’s claim-resolution procedures. |
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| Ninth Circuit (Sort of) Splits from First Circuit to Hold that § 106(a)’s Waiver of Sovereign Immunity Extends to Emotional Distress Damages for Willful Stay Violations |
| In enacting § 106(a) of the Bankruptcy Code, Congress waived the government’s ability to assert the defense of sovereign immunity with respect to a variety of Bankruptcy Code provisions. Section 106(a) specifically authorizes the court to “issue against a governmental unit an order, process, or judgment under such sections or the Federal Rules of Bankruptcy Procedure, including an order or judgment awarding a money recovery, but not including an award of punitive damages,” with respect to certain specified sections of the Bankruptcy Code. Section 362, which is one of those specifically enumerated provisions in § 106, authorizes
the bankruptcy court to award “actual damages, including costs and attorneys’ fees, and, in appropriate circumstances, [] punitive damages.” At least in the Ninth Circuit, “actual damages” includes damages for emotional distress. So a court should be able to award emotional distress damages against the government, right? |
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| The Fifth Circuit Recognizes Broad Immunities for Trustees and Their Counsel |
| Trustees and their counsel can breathe easier in the Fifth Circuit. In a published, precedential opinion, the court joined several other circuits in affirming that bankruptcy trustees and their counsel are entitled to immunity for personal harms caused by actions that fall within the scope of their official duties. This “qualified immunity” joins the “absolute immunity” that the court’s precedent already recognized for “all actions taken pursuant to a court order.” In light of these protections, the court noted that “[o]nly ultra vires actions — actions that fall outside the scope of their duties as trustees — are
not entitled to immunity.” |
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| State Sovereign Immunity Bars Adversary Proceeding Concerning Tax Refunds |
| Before litigating an adversary proceeding or contested matter against a state or its agencies, plaintiffs would be wise to consider whether the state entity has a colorable sovereign immunity defense. In In re La Paloma Generating Co., Delaware Chief Bankruptcy Judge Christopher S. Sontchi determined that California’s sovereign immunity barred the liquidating trustee’s motion for a determination of tax liability — specifically the right to property tax refunds — under Bankruptcy Code § 505 against the California State Board of Equalization (SBE). |
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| Bankruptcy Litigation Committee Announces Leaders for 2019 |
| The Bankruptcy Litigation Committee is proud to announce our new leaders for 2019!
You can also visit the committee's homepage for more newsletter articles, relevant recordings and other committee information.
The committee is always eager to welcome new volunteers. Please contact any member of our leadership team to find out how you can get involved.
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Isley Markman Gostin
Communications Manager
WilmerHale
Washington, D.C. |
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Kesha Tanabe
Membership Relations Director
Tanabe Law
Minneapolis, Minn. |
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