22-Year-Old Bankruptcy Discharge Doesn’t Bar New Injury Claims

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By Daniel Gill

A 1995 order discharging all existing claims against a Chapter 11 debtor didn’t bar a series of complaints filed against that debtor in 2015, a Florida bankruptcy judge ruled Nov. 7.

The complaints were for injuries resulting from pollutants expelled by the debtor foundry company since as early as 1911, but unknown to the claimants—and the debtor—at the time the bankruptcy discharge was entered, according to the opinion of Judge K. Rodney May, U.S. Bankruptcy Judge for the Middle District of Florida ( U.S. Pipe & Foundry Co. v. Adams (In re U.S. Pipe & Foundry Co.) , 2017 BL 401861, Bankr. M.D. Fla., No. 8:17-ap-0032-KRM, 11/7/17 ).

United States Pipe & Foundry Company LLC filed a Chapter 11 reorganization case in 1989. The court confirmed a plan of reorganization in 1995 which provided that the company’s assets would re-vest in the debtor “free and clear of all claims,” and that all claims against the debtor, “whether accrued before, on or after the Filing Date,” would be discharged.

In 2015, a group of plaintiffs filed 24 complaints against the company in Alabama state court, alleging damages resulting from the release of toxic chemicals from the company’s plant discovered years after the bankruptcy case.

The claims were not barred, the court here held.

Epstein v. Official Comm. of Unsecured Creditors, of Estate of Piper Aircraft Corp. (In re Piper Aircraft, Corp.) controlled the outcome of the case, although the parties differed on their interpretations of the facts. The court also looked at some of the asbestos bankruptcy cases in reaching its conclusion that the claims were not barred.

Piper , an Eleventh Circuit case, requires a relationship between a debtor’s conduct and an “identifiable claimant,” the court said.

That implies the “further requirement” that during the bankruptcy, either the debtor is able to identify a class of potential future injury claimants, or future injury claimants know of the potential impact of a bankruptcy discharge on their future claims, it said.

Here, neither the debtor nor any potential claimants were aware during the bankruptcy case of any harm having been caused by the release of the toxic chemicals.

Because the claimants didn’t have claims prior to the confirmation order, those claims were not discharged in 1995, the court said.

U.S. Pipe and Foundry Co. was represented by Daniel R. Fogarty, Tampa, Fla. The injury claimants were represented by Jon C. Conlin and Andrew Jones, Birmingham, Ala.

To contact the reporter on this story: Daniel Gill in Washington at dgill@bna.com

To contact the editor responsible for this story: Jay Horowitz at JHorowitz@bna.com

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