December 2, 2021Articles

Will Energy Future Have the Energy for Future Claimants?

AIRA Journal, Vol. 34, No. 4

The tension between companies looking for a “fresh start” through bankruptcy and the due process concerns associated with discharging latent-asbestos claims took on a new twist when the U.S. Court of Appeals for the Third Circuit approved a plan of reorganization that purported to address the due process rights of future asbestos claimants without utilizing section 524(g) of the U.S. Bankruptcy Code.  As the only statutory path available for a debtor to receive a permanent discharge of asbestos liabilities, including for future claims, section 524(g) permits a debtor to obtain that reprieve by establishing and funding a post-bankruptcy settlement trust to which the liabilities are channeled for resolution.

In Energy Future Holdings Corporation, the Court of Appeals affirmed a confirmation order that permitted the debtor (“Energy Future”) to discharge latent asbestos claims3 without creating a litigation trust under section 524(g) of the Bankruptcy Code.