Newly Affirmed Bankruptcy Court Ruling Outlines Path to Bankruptcy Discharge for Mass Tort Claims
- The Southern District of New York has affirmed a bankruptcy court ruling confirming that mass tort claims may be discharged using a comprehensive noticing scheme, rather than a trust mechanism or future claims representative. This option may provide strong protection against certain tort claims without the expense and delay of the trust process.
- The rulings highlight the importance of developing a bar date noticing scheme that goes beyond national newspaper notice. In Chemtura, the debtor’s use of “site-specific” notices for unknown claimants was found to be “unusually thorough” and therefore was at least “reasonably calculated” to provide notice sufficient to meet constitutional due process requirements.
- Development of an enhanced noticing scheme that leverages what is known about unknown claimants – such as particular products and specific locations – can protect reorganized debtors by reinforcing the effectiveness of discharge.