2009 Chapter 11 Recent Developments (Part I)

the Debtors business, it violates §§ 1122 and 1123(a)(4) and 1129 by improperly classifying certain claims that require equal treatment for being substantially similar. The Debtors principal's testimony at the first bankruptcy and in depositions is such that the court believes that the Plan defines trade creditor as a subset of what a trade creditor means in the marketplace. Moreover, the fact that there were protracted negotiations of the Plan's definition of 'trade creditor' is indicative that the commonplace meaning was not used. Also, the Debtors' SEC filings and bankruptcy schedules - both of which are used to inform the public - do not define the term; thus, a wider meaning of the term is appropriate. Lastly, to the extent the Plan proponents ask that the court approve the meaning of trade creditor in the Plan as a settlement, the court denies the request since the definition was not beneficial to the creditors excluded from the meaning of the term in the Plan - who were also excluded from the settlement negotiations - and thus is not fair and equitable as required by Rule 9019.

b. Standing to Object

In re Quigley Company, Inc., 391 B.R. 695 (Bankr. S.D.N.Y. 2008)

Facts: Quigley and Pfizer, Inc. ("Pfizer") are named as defendants in thousands of asbestos-related lawsuits and share the insurance that covers such lawsuits. Quigley's plan of reorganization channels the lawsuits into a trust, which is funded in part by an assignment of Quigley and Pfizer's insurance coverage (the "Insurance Rights"). Certain of the insurers (the "Insurers") are expected to object to the Plan and have served discovery requests on Quigley. Quigley asks for a ruling that the Insurers lack standing to object to the Plan (except for the consent to assignment issue) and are thus unable to participate in the confirmation proceedings (including serving discovery requests). The Plan preserves all of the Insurers' defenses to coverage except for the following: certain of the policies, by their terms, are unable to be assigned without the Insurer's consent and the plan forecloses on the Insurer's ability to defend coverage liability on the basis that the insurance policies were assigned (without consent) to the trust.

Issues:

(1) If the plan does not affect the Insurers' rights except with regard to the consent-to-assignment issue, do the Insurers' have standing to object to the plan on any other basis?

Rules:

(1)

Prudential standing requirement: "when a plaintiff has alleged injury sufficient to meet the 'case or controversy' requirement, this Court has held that the plaintiff generally must assert his own legal rights and interests, and cannot rest his claim to relief on the legal rights or interests of third parties." Section 1109 of the Bankruptcy Court, although broad, does not eliminate the requirement to demonstrate prudential standing, which is especially important in bankruptcy proceedings.

(2)

Section 1109 means "that anyone who has a legally protected interest that could be affected by a bankruptcy proceeding is entitled to assert that interest with respect to any issue to which it pertains... A 'party in interest' 'must still satisfy the general requirements of the standing doctrine.'"

Holding: "The Insurers' standing is limited to challenging the Plan provisions and raising the confirmation objections that directly affect their contractual rights and interests." Here, the rights that are affected relate only to the consent-to-assignment provisions of the Plan; the Insurers' discovery requests must therefore also be limited to inquests for which they have standing to assert. The court does not rule on any specific discovery request but merely lays out its rationale as to the Insurers' standing.

Reasoning: Standing should be determined on a case-by-case basis. Here, the Insurers interests are directly in conflict with creditors' interests. Moreover, the official representatives of the various