Author: David N. Crapo

Non-Settling Insurers Now Have a Seat at the Bankruptcy Table

Justice Sonia Sotomayor delivered the Supreme Court’s unanimous opinion1 in Truck Insurance Exchange v. Kaiser Gypsum Company, Inc., et al. (Case No. 22-1079) (“Kaiser Gypsum”). Reversing the opinion of the United States Court of Appeals for the Fourth Circuit in In re Kaiser Gypsum Co., Inc., 60 F.4th 73 (4th Cir. 2023), the Court held that, pursuant to section 1109(b) of the Bankruptcy Code, “[a]n insurer with financial responsibility for a bankruptcy claim is sufficiently concerned with, or affected by, the proceedings to be a ‘party in interest’ that can raise objections to a reorganization plan.” In doing so, the Court rejected, as “conceptually wrong” and making “little practical sense,” the “insurance neutrality” doctrine that denies insurers the status of parties in interest in confirmation-related matters if the proposed plan neither increases the insurer’s pre-petition obligations nor impairs its rights under the insurance policies it has issued to the debtors. Kaiser Gypsum is an asbestos mass tort Chapter 11 case. A plan of reorganization (“KG Plan”) was confirmed on September 12, 2021. The KG plan provided, inter alia, for uninsured claims to be administered by an asbestos claims trust (“KG Asbestos Trust”), while insured claims were to be resolved through the tort system and paid (less a small deductible) by the debtors’ primary liability insurer,...

Maximizing Bankruptcy Protection in Software and SaaS Agreements

In today’s digital age, cloud computing has lowered the barrier of entry into many marketplaces by providing network access to a shared pool of configurable computing resources. Cloud services allow business to forego upfront capital costs on servers, network infrastructure, and software allowing companies to focus on establishing and differentiating its business instead of worrying about its IT resources. Additionally, it is typically a “pay as you go” service meaning that businesses can scale up or down as needed in real time. However, entrusting a third-party as the sole source of the company’s network, software, and data storage functionality puts the company at risk of losing these services should the provider enter bankruptcy.

Are You an “Applicable Large Employer” Required to “Play or Pay” Under the ACA’s Employer Mandate and the IRS’ Proposed Shared Responsibility Regulations?

In addition to the controversial and much-litigated Individual Mandate, the Patient Protection and Affordable Care Act of 2010 (“ACA”) includes an equally controversial (though not quite as heavily litigated) “Employer Mandate.” The Employer Mandate can be found in new section 4980H of the Internal Revenue Code. Effective for plan years beginning in 2014, “applicable large employers” will face a choice. They must either (i) offer substantially all (at least 95%) of their full-time employees (employees working on average 30 or more hours per week) and their non-spousal dependants “affordable” health insurance providing “minimum essential coverage” and “minimum [actuarial] value” or face potential penalties. If such coverage is not offered penalties apply if any of their full-time employees qualify under the ACA for a premium tax credit or cost-sharing reduction in connection with the purchase of health insurance.

Covenants Not to Sue Are Licenses in Bankruptcy

The ongoing Kodak bankruptcy has engendered interest in understanding the role of IP-related licenses in bankruptcy. The recent decision in In re Spansion also merits consideration. There, following settlement of Spansion’s 2008 ITC patent infringement action against Samsung and Apple, Spansion and Apple entered into a letter agreement in February 2009 whereby Spansion agreed to dismiss its ITC action against Apple and promised to refrain from filing future actions relating to its asserted patents. In turn, Apple agreed to not disbar Spansion as a supplier and to consider Spansion for future products. In March 2009, Spansion filed for Chapter 11 bankruptcy in the Bankruptcy Court for the District of Delaware.