The opinion of the court was delivered by: Joel A. Pisano United States District Judge
Presently before the Court is Debtors' motion for an Order Authorizing and Approving the Settlement and Policy Buyback Agreement and Release, as amended,*fn1 among the Congleum Entities, the Plan Trust, the ABI Entities, and the St. Paul Travelers Entities and Sale of Subject Policies (the "Travelers Settlement") pursuant to Federal Rule of Bankruptcy Procedure 9019, and Bankruptcy Code §§ 363 and 105(a). The Debtors' motion was granted and an Order was entered approving the Travelers Settlement for the reasons set forth below on February 19, 2010. Docket Entry No. 378.
The facts and procedural history of this protracted bankruptcy litigation are set forth in the Court's Opinion of August 17, 2009, affirming in part and denying in part the Bankruptcy Court's Order dismissing the Twelfth Amended Plan, and reversing and vacating the Bankruptcy Court's dismissal of the Debtor's bankruptcy cases. Therefore, the Court shall only recite the facts relevant to the resolution of the present motion.
Between 1972 and 1983, the St. Paul Travelers Entities issued eighteen policies to the Debtors that are subject to the Travelers Settlement. All of the St. Paul Travelers policies are at or above the third excess layer of coverage. The Debtors contend that the aggregate coverage provided by the eighteen St. Paul Travelers policies is between $100 and $150 million. The amount of coverage provided under the policies is contested by the St. Paul Travelers Entities. Further, the St. Paul Travelers Entities dispute the allocation of losses incurred during the policy periods.
On September 12, 2001, two of the Debtors' excess insurers, including the St. Paul Travelers Entities, filed an action styled Congoleum Corporation v. ACE American Insurance Company, et al., Docket No. MID-L-8908-01, in the Superior Court of New Jersey, Law Division, Middlesex County, seeking a declaration of their rights and obligations under the excess insurance policies for asbestos claims against the Debtors (the "Coverage Action"). Subsequently, the Debtors negotiated a settlement with the majority of the asbestos claimants which provided a global resolution of the Debtors' asbestos liability. (the "Claimant Agreement"). The Claimant Agreement was to be effectuated through the filing of a prepackaged bankruptcy. Payments under the Claimant Agreement would be made out of a trust funded by the Debtors' insurance proceeds. The excess insurers, including the St. Paul Travelers Entities, refused to pay claims settled by the Claimant Agreement.
On April 26, 2006, the Debtors and the St. Paul Travelers Entities entered into the Travelers Settlement. Under the terms of the settlement, the St. Paul Travelers Entities agreed to pay $25 million into the Plan Trust, over a period of 13 months, in full and final accord and satisfaction of all disputes between the Debtors and the St. Paul Travelers Entities. The Travelers Settlement also provided the St. Paul Travelers Entities with a channeling injunction under 11 U.S.C. § 524(g) for asbestos claims that may be asserted against the St. Paul Travelers Entities, and an injunction under 11 U.S.C. § 105(a) for any non-asbestos related claims that may be asserted against the St. Paul Travelers Entities. Under the terms of the settlement, the St. Paul Travelers Entities also agreed to stand down in the Coverage Action and were subsequently dismissed from that litigation. The St. Paul Travelers Entities retained the right under the Travelers Settlement to file a new coverage action in the event the Travelers Settlement is not approved, however. The other excess insurers continued to litigate the Coverage Action and in 2007, the state court rendered a decision in Phase I of that litigation, holding that the excess insurers have no obligation to provide insurance coverage for claims settled by the Claimant Agreement.
On May 3, 2006, the Debtors sought approval of the Travelers Settlement in the Bankruptcy Court. The Future Claimant's Representative ("FCR") objected to the settlement, asserting that the settlement was negotiated in bad faith and was unreasonable in light of the coverage limits under the policies. The Bankruptcy Court issued a written decision on May 11, 2007, in which it found that it was unable to determine whether the agreement was fair and equitable in light of the "unanswered questions" that existed at the time. The Bankruptcy Court did determine, however, that the Travelers Settlement was not negotiated in bad faith.*fn2 The Debtors appealed, and in an Opinion rendered by Judge Wolfson, this Court determined that the Bankruptcy Court erred in its application of the factors articulated by the Third Circuit in In re Martin, 91 F.3d 389 (3d Cir. 1996), and remanded the matter to the Bankruptcy Court for further consideration. Civil Action No. 07-2785 (FLW). The Bankruptcy Court did not take the matter up again prior to August 2009, at which time this Court withdrew the reference. Civil Action No. 09-1337 (JAP).
The Debtors have recently reached settlements with all but one of their excess insurers, and have also reached settlements with the New Jersey Property-Liability Insurance Guaranty Association and New Jersey Surplus Lines Insurance Guaranty Fund (the "Multi-Insurer Settlement"). Docket Entry No. 314. The Debtors are in the process of negotiating a settlement with the one remaining unsettled insurer. Motion Hearing Transcript ("Tr.") at 14:17-15:3. The FCR was active in negotiating the Multi-Insurer Settlement and did not object to entry of orders approving the settlement. Through the Multi-Insurer Settlement, the Debtors have resolved nearly all outstanding issues in the Coverage Action and have secured a source of funding for the Plan Trust. This Court approved the Multi-Insurer Settlement on February 19, 2010. Docket Entry No. 362-377.
The Debtors' motion seeking approval of the Travelers Settlement was heard on February 19, 2010. After hearing all interested parties, including the FCR, the Court entered an Order approving the Travelers Settlement.
Federal Rule of Bankruptcy Procedure 9019(a) provides that "the court may approve a compromise or settlement" upon twenty-one days notice to the creditors, the United States trustee, and the debtor. Fed. R. Bankr. P. 9019(a). Further, in order "[t]o minimize litigation and expedite the administration of a bankruptcy estate, '[c]ompromises are favored in bankruptcy.'" Martin, supra, 91 F.3d at 393 (quoting 9 Collier on Bankruptcy ¶ 9019.3 (15th ed. 1993)). The Court may approve a settlement that is "fair and equitable." Protective Comm. for Indep. Stockholders of TMT Trailer Ferry, Inc. v. Anderson, 390 U.S. 414, 424 (1968). When determining if a proposed settlement is "fair and equitable," the court is not required to delve into the many issues of fact and law that may be raised by the settlement, but instead should "canvass the issues" and determine ...