Jump to Navigation
Jump to Content

In re In re Forty-Eight Insulations, Inc.

ELR Citation: 27 ELR 21081
Nos. 96-3406, 115 F.3d 1294/(7th Cir., 06/09/1997)

The court affirms a district court decision denying a stay of a bankruptcy court order that approved an asbestos trust fund's interim distribution and the creation of a reserve to fund disputes over disallowed claims. The court first holds that it has jurisdiction under 28 U.S.C. §1292(a)(1), which provides for appellate jurisdiction over interlocutory district court orders pertaining to injunctions. The bankruptcy and district courts' refusal to stay the order had the effect of denying an injunction by denying the claimants' request to enjoin a substantial distribution from the trust balance while proceedings concerning rights to that balance continued. Further, if the proposed interim distribution is not stayed, and if the claimants are ultimately successful in proving their claims allowable under the debtor's liquidation plan, the balance of the trust will be so depleted that the claimants will have little hope of receiving the same payment as other initially allowed present claims. The court then holds that the plan provides the bankruptcy trustee with discretion to set the reserve amount. The plan does not require the trustee to allocate enough money in the reserve to cover all initially disallowed claims. The court then holds that the trustee did not abuse his discretion in setting the reserve at an amount insufficient to pay 100 percent of claimants' disputed claims. The record reveals that the trustee reasonably believed that the claimants' likelihood of eventually proving exposure to the debtor's asbestos was minute. Thus, claimants' failed to provide the strong showing of likelihood of success required for a stay to issue.

The court next rejects claimants' argument that the bankruptcy court's order violates their due process rights by allowing a distribution that leaves a reserve insufficient to pay its claimants should they ultimately prove exposure. The claimants failed to recognize the process they did receive or to tell the court why these processes were constitutionally deficient. The claimants' conclusory due process argument does not establish the strong showing of likelihood of success required to obtain a stay.

Counsel for Appellees
Terry J. Malik
Winston & Strawn
35 W. Wacker Dr., Chicago IL 60601
(312) 558-5600

Counsel for Appellants
Dion J. Sartorio
Tressler, Soderstrom, Maloney & Priess
Sears Tower
233 S. Wacker Dr., 22d Fl., Chicago IL 60606
(312) 627-4000

Before ESCHBACH, COFFEY, and DIANE P. WOOD, Circuit Judges.