Settlement of D and O Claims With Policy Proceeds Not Stayed by Corporate Bankruptcy

Kevin LaCroix of The D & O Diary  has an excellent post here about a decision of June 8 by Judge Kevin Gross of the U.S. Bankruptcy Court for the District of Delaware that denied the trustee’s efforts to use the automatic stay to block  the settlement of a class action against directors and officers of the bankrupt company based on the  Court’s conclusion that the proceeds of the policy that would be used for the class action settlement were not property of the corporate bankruptcy estate (as opposed to the policy itself which is often seen as an asset of  the corporation’s bankruptcy estate.)  Kevin LaCroix’s post of June 17 has a thorough discussion of the details of the case and an analysis of the "wasting" policy, with helpful links to the opinion and  collateral sources. This is an excellent treatment of the overlap between bankruptcy and corporate law on this issue–which is not treated uniformly by the various federal circuits. Hat tip to Adam Savett of Securities Litigation Watch.

UPDATE: See further analysis here by Bob Eisenbach of the Business Bankruptcy Blog.