Summary:
The District Court affirmed a Bankruptcy Court decision denying appellants' request to lift the automatic stay on their asbestos-related claims against DBMP LLC. The appellants, representing asbestos claimants, sought to pursue claims in state court, but the Bankruptcy Court denied the motion, applying the In re Robbins factors to assess whether to lift the stay. The Bankruptcy Court determined that lifting the stay would likely harm the bankruptcy estate, hinder reorganization, and disrupt judicial economy by potentially leading thousands of similar claims back to state court. The District Court reviewed the Bankruptcy Court’s analysis and agreed there was no abuse of discretion.
Appellants argued that DBMP’s bankruptcy filing was in bad faith, necessitating a lift of the stay under Carolin v. Miller. However, the court found Carolin did not compel the Bankruptcy Court to lift the stay based on bad faith alone and that both subjective bad faith and objective futility were required for such a finding, which the Bankruptcy Court did not establish. The District Court concluded that the Bankruptcy Court had correctly balanced the Robbins factors and committed no error of law, thereby denying the appeal and affirming the stay.
Commentary:
This same Carolin standard for dismissal/lifting of the stay, which requires both bad faith and objective futility, applies in not just Chapter 11 cases, but also Chapter 13. Objective futility is more than mere infeasibility.
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