In re Global Industrial Technologies, Inc., 645 F.3d 201 (3d Cir. 2011), cert. denied, No. 11-280 (2011).

On November 7, 2011, the U.S. Supreme Court denied certiorari of the Third Circuit decision in the Global Industrial Technologies bankruptcy that granted the debtors’ insurers standing to challenge provisions of the bankruptcy plan establishing a trust to deal with silica-related claims.

Tara Lattomus of Eckert Seamans prepared this overview.

The Third Circuit held that the insurers had bankruptcy standing to object to the plan because of the questionable circumstances leading to the creation of the trust and the claims themselves. In order to obtain confirmation of the plan, the debtors were required to establish that without the trust, the silica claims would jeopardize their reorganization. In order to gain the necessary support of silica claimants, the debtors obtained a list of silica claimants from another bankruptcy proceeding and solicited their counsel. As a result, the number of silica claims exploded from 169 prior to plan solicitation to over 4,600 following the solicitation. The Third Circuit concluded that this dramatic increase in silica claims plus allegations of collusion, was enough to constitute a tangible injury to the insurers and therefore, standing.

A summary of the underlying case is available here. A link to the Third Circuit decision is available here.