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Henderson v. Casciato-Northrup

United States District Court, W.D. Texas, Midland-Odessa Division
Jan 10, 2001
MO-00-CA-079 (W.D. Tex. Jan. 10, 2001)

Opinion

MO-00-CA-079

January 10, 2001


FINDINGS OF FACT AND CONCLUSIONS OF LAW IN SUPPORT OF THE COURT'S ORDER AUTHORIZING COMPROMISE OF CONTROVERSY


Before this court is the Joint Motion of Colin M. Henderson, Successor Trustee, and Janet S. Casciato-Northrup, Bankruptcy Trustee, to Withdraw the Reference, for Authority to Compromise Controversy in Civil Action No. MO-00-CA-079, Bankruptcy Adversary Proceeding No. 00-7003 and to Sever Claims. After due consideration of the terms of the settlement, the facts of the case, and the relevant law, the Court entered an Order Authorizing Compromise of Controversy on December 21, 2000. The Court now issues these findings of fact and conclusions of law, which state in greater detail the reasons for its decision to approve the settlement.

FACTS AND PROCEDURAL HISTORY A. Factual Background

In 1995, a group of physicians formed a group medical practice consisting of a formal network of primary care and specialty care physicians in the Permian Basin area. The group formed two corporate entities (collectively the "Debtor Entities") through which the group would operate. The first entity established was the Midland Odessa Medical Group, PLLC ("MOM Group"). The MOM Group was created to handle the professional aspects of the practice of medicine by the group. The second entity formed was Midland Odessa Medical Management, Inc. ("MOM Management"). MOM Management was created to handle the financial and business aspects of the group's medical practice. In 1996, both entities implemented the Midland Odessa Medical Group Employee Benefit Plan ("Employee Benefit Plan") and the Midland Odessa Midland Group Money Purchase Plan ("Money Purchase Plan") (collectively the "Pension Plans"). The Pension Plans were duly qualified under ERISA.

On January 23, 1998, MOM Group and MOM Management filed voluntary petitions under Chapter 7 of the Bankruptcy Code. Subsequently, Janet S. Casciato-Northrup (the "Bankruptcy Trustee") was appointed the Chapter 7 trustee for the two estates. Recognizing that a conflict of interests could arise from the Bankruptcy Trustee's obligations as trustee for the bankruptcy estates of the Debtor Entities and any duties that she may owe to the Pension Plans, this Court entered an order approving Colin M. Henderson as Successor Trustee to the Pension Plans on September 1, 1998.

An audit of the Pension Plans revealed several possible accounting irregularities in the administration of the Pension Plans including (1) commingling of assets of the individual Plans; (2) arbitrary allocation of the Employee Benefit Plan's contributions to certain doctors without regard to the formula and guidelines established for the Pension Plans; (3) the absence of accounting guidelines to accurately allocate the assets and earnings of the individual Plans to the appropriate Plan; and (4) improper segregation of investment accounts according to the classification of employee participants as doctors and non-doctors, in violation of the Pension Plans' guidelines. In Adversary Proceeding No. 98-7033, the Bankruptcy Trustee sought recovery against several individual defendants (the "Settling Defendants"), who served on the boards of MOM Group and/or MOM Management, for breach of their fiduciary duties to the two entities relating to the accounting irregularities, specifically the improper allocation of the Pension Plan assets to the Settling Defendants. A settlement of Adversary Proceeding 98-7033 was approved by the Bankruptcy Court on February 25, 2000. Under the settlement agreement, the Settling Defendants would be allowed to keep all pension and profit sharing monies already allocated to them. In addition the Debtors Entities waived their claims to the pension and profit sharing funds alleged misallocated to the Settling Defendants.

A later investigation by the Bankruptcy Trustee revealed that the Pension Plans had possibly been over funded. The Bankruptcy Trustee initiated Adversary Proceeding No. 00-7003 in the Bankruptcy Court of the Western District on January 21, 2000, seeking the turnover of the excess funds from the Pension Plans, exclusive of the amount contained in the accounts of the Settling Defendants. Henderson, as the successor trustee of the Pension Plans, was also named as a defendant. The Bankruptcy Trustee seeks the recovery of certain funds, which she alleges were fraudulently or improperly transferred to the Pension Plans by the Debtor Entities prior to the filing for bankruptcies. In the First Amended Complaint filed February 28, 2000, the Bankruptcy Trustee sought recovery of $154, 001 and $155, 204 as excess funds paid into the Money Purchase Plan and the Employee Benefit Plan, respectively.

B. The Claims brought by the Bankruptcy Trustee and by Henderson 1. Henderson's Claims

On June 20, 2000, Henderson, as Successor Trustee for the Pension Plans, filed his Original Complaint with this Court. Henderson asserts several claims based on alleged breaches of fiduciary duties owed to the Pension Plans by the Bankruptcy Trustee and various officers and directors of the Debtors Entities, in violation of 29 U.S.C. § 1104(a), 1106(a)(1).

Henderson argues that under the terms of the Pension Plans, the Debtor Entities were given the power to appoint administrators for each of the Pension Plans. Since the Debtor Entities failed to appoint administrators prior to the filing of the bankruptcy proceedings, the Bankruptcy Trustee, who stepped into the shoes of the Debtor Entities, became the administrator by default, owing fiduciary duties to the Pension Plans. According to Henderson, the Bankruptcy Trustee breached these fiduciary duties by, among other things: (a) bringing Adversary Proceeding No. 00-7003 against the Employee Benefit Plan; (b) using the Pension Plans' assets as a bargaining chip in the settlement of Adversary Proceeding 98-7033 for the benefit of the Debtor Entities, and not for the exclusive benefit of the participants; (c) failing to pursue causes of actions against the directors and officers who breached their fiduciary duties to the Pension Plans and releasing the Pension Plans' claims against the Settling Defendants for no consideration; and (d) failing and/or delaying to terminate the Pension Plans in order to use their assets to the benefit of the themselves and to the detriment of the participants. In addition, Henderson claims that by waiving all future claims to any funds in the Pension Plans accounts of the Settling Defendants, the Bankruptcy Trustee shifted the costs of recovering any excess funds to the remaining, non-settling Pension Plans beneficiaries.

2. The Bankruptcy Trustee's claims

The Bankruptcy Trustee's claims against Henderson and the Pension Plans center on allegedly fraudulent and avoidable payments made to the Pension Plans from the Debtor Entities. Specifically, the Bankruptcy Trustee asserts that certain excess funds transferred to the Pension Plans (1) were made while the Debtor Entities were insolvent and undercapitalized; (2) were made to or for the benefit of creditors; (3) were made within one year before the filing of the bankruptcy petitions for the benefit; (4) were made to or for the benefit of insiders; (5) were made to enable the insider creditors to receive more than such creditors would have received had the transfers not been made; and (6) were made with the actual intent to hinder, delay, or defraud other creditors. Based on these allegations, these transfers, totaling $309, 205, are arguably avoidable under 11 U.S.C. § 544, 547(b), 548 and TEX. BUS. COM. CODE ANN. § 24.005(a) (Vernon 1987).

C. The terms of the proposed Settlement Agreement

The Settlement Agreement involves the claims brought by Henderson against the Bankruptcy Trustee in MO-00-CA-079 and the claims asserted by the Bankruptcy Trustee against Henderson and the Pension Plans in Adversary Proceedings No. 00-7003. The relevant terms of the settlement are as follows:

(1) Henderson shall pay or cause to be paid to the Bankruptcy Trustee for the benefit of the Debtor Entities the sum of $92, 000. According to the Bankruptcy Trustee, this sum was overpaid to the Pension Plans and subsequently allocated to the Employee Benefits Plan. Specifically, the $92, 000 will be paid from the accounts of the Employee Benefit Plan individual participants that the Bankruptcy Trustee alleges received the fraudulent and/or preferential transfers. This payment is in consideration for the full settlement if all claims of any kind that the Bankruptcy Trustee could assert against Henderson.
(2) The Bankruptcy Trustee and Henderson shall execute full and complete mutual release and all pending claims and matters asserted by each of them against the other shall be dismissed with prejudice.
(3) The Bankruptcy Trustee shall not pursue the recovery of the approximately $154, 00 that allegedly was allocated improperly to the Money Purchase Plan for 1997. Henderson agrees to waive and release any and all claims against the Bankruptcy Trustee and the Debtor Entities for any amounts allegedly owed to the Pension Plans or the trustee, beneficiaries or participants of the Pension Plans.
(4) The Bankruptcy Trustee and Henderson retain the right to pursue any and all claims against the remaining defendants, in Adversary Proceeding No. 00-7003 and MO-00-CA-079, respectively.
(5) A payment from the Bankruptcy Cases will be made to Tyler Artz for reimbursement of his pro rata share of the settlement funds being the sum of $4,480.46.

1. Objections to the Settlement Agreement

No objections were raised by the creditors.

DISCUSSION A. Factors considered by the Court in approving a compromise and settlement

The Court derives its authority to approve compromise and settlements involving bankruptcy estates from FED. R. BANKR. P. 9019(a). See also 10 COLLIER ON BANKRUPTCY ¶ 9019.01 (Lawrence P. King ed., 15th ed., 2000) ("[T]he settlement must be approved by the court."). The court will approve a proposed a compromise settlement only if it is fair and equitable and in the best interest of the estate. Connecticut Gen. Life Ins. Co. v. United Cos. Fin. Corp. ( In re Foster Mortgage Corp.), 68 F.3d 914, 917 (5th Cir. 1995). The purpose for requiring the Court to approve a settlement agreement under Rule 9019(a) is to protect creditors of the debtor estate against improvident settlement that might be made by the trustee acting alone. See Continental Airlines, Inc. v. Airlines Pilots Ass'c, Int'l, 907 F.2d 1500, 1509 (5th Cir. 1990) (acknowledging the court's duty to protect the interests of the creditors in evaluating the fairness of a compromise settlement); In re Sobod, Inc., 25 F. Supp. 344, 345-46 (S.D.N.Y. 1938). When determining whether a compromise settlement is fair, equitable, and in the best interest of the estate and creditors, the court considers these three factors:

(1) the probability of success in the litigation, with due consideration of the uncertainty in fact and law,
(2) the complexity and likely duration of the litigation and any attendant expense, inconvenience and delay, and

(3) all other factors bearing on the wisdom of the compromise.

Id.; American Can Co., v. Herpel ( In re Jackson Brewing Co.), 624 F.2d 605, 607 (5th Cir. 1980). The court gives deliberate and comprehensive consideration to the factors, and makes its determination after careful evaluation of the relevant laws and facts and any objections made. In re Jackson Brewing, 624 F.2d at 608. Whether or not to approve a compromise settlement is within the sound discretion of the court. United States v. Aweco. Inc. ( In re Aweco. Inc.), 725 F.2d 293, 297 (5th Cir. 1984).

In undertaking this review required by FED. R. BANKR. P.9019(a), the central concern of this Court is protecting the bankruptcy estate for the benefit of the creditors. See Continental Airlines, 907 F.2d at 1509. As such, even if the terms of the settlement are unfair or disadvantageous to Henderson and the Pension Plans, the more important question for this Court, under Rule 9019(a), is whether the settlement is fair to the debtor estates.

B. Factor One: The probability of success in the litigation 1. Analysis of Henderson's claims

Henderson asserts that by failing to appoint an administrator for the Pension Plans, the Debtor Entities became the administrator by operation of the default provisions of Article 2.4 of the Pension Plans. See also 29 U.S.C. § 1002(16)(A)(ii) (naming the plan sponsor as the plan's administrator if an administrator is not otherwise designated). As the Plans' administrators, the Debtor Entities are also fiduciaries of the Pension Plans. 29 U.S.C. § 1002 (21)(A)(iii) (defining a plan fiduciary as a person who has "any discretionary authority . . . or responsibility in the administration of such plan"). Henderson's claims against the Bankruptcy Trustee are based on alleged violations by the Bankruptcy Trustee of the fiduciary duties enumerated in 29 U.S.C. § 1104(l)(1) and 29 U.S.C. § 1106(a)(1). Section 1104(a)(1) elucidates the scope of these fiduciary duties:

(1) a fiduciary shall discharge his duties with respect to a plan solely in the interest of the participants and beneficiaries and (A) for the exclusive purpose of: (i) providing benefits to participants and their beneficiaries; and (ii) defraying reasonable expenses of administering the plan.

In addition, in discharging his administrative duties, the fiduciary must act "with the care, skill, prudence, and diligence under the circumstances then prevailing that a prudent man acting in a like capacity and familiar with such matters would use in the conduct of an enterprise of a like character and with like aims." 29 U.S.C. § 1104(a)(1)(B).

a. Scope of fiduciary duties under ERISA

ERISA clearly contemplates that the plan administrator may have multiple roles in relation to the ERISA plan. Bussian v. RJR Nabisco, Inc., 223 F.3d 286, 295 (5th Cir. 2000); see also 29 U.S.C. § 1002(16)(A)(ii) (designating the plan sponsor as the plan administrator if an administrator is not otherwise designated). Under ERISA, fiduciary obligations do not attach to every action taken by an administrator that affects the beneficiaries. Rather, an administrator is a fiduciary "only to the extent" that he is acting in an administrative or managerial capacity in relation to the plan. Pegram v. Herdrich, 120 S.Ct. 2143, 2152 (2000). In fact, unlike a fiduciary at common law, under ERISA, a fiduciary may have financial interests adverse to the participants and beneficiaries of the ERISA plan and may take actions that directly harm the beneficiaries. Pegram, 120 S.Ct. at 2152. When employers wear "two hats" by serving as both an employer and the plan's administrator, they assume fiduciary status only when and to the extent that they function in their capacity as plan administrators, not when they conduct business that is not regulated by ERISA." Payonk v. HMV Indus., Inc., 883 F.2d 221, 225 (3rd Cir. 1988).

It can certainly be argued that the Bankruptcy Trustee took actions adverse or at least not for the exclusive purpose of providing benefits to the Pension Plans' participants and beneficiaries. But, as the United States Supreme Court recently made clear, the threshold question is not whether the actions of an administrator adversely affected a beneficiary's interest, but whether the actions were a business management decision or whether they were matters required as part of the administration and management of the plan. Pegram, 120 S.Ct. at 2152-53; Payonk, 883 F.2d at 225. An examination of Henderson's claims reveals that none of these acts falls within the ambit of the administration or management of the Pension Plans so as to incur fiduciary liability.

First, it is unclear if the Bankruptcy Trustee was actually a fiduciary of the Pension Plans at the time of the acts complained of by Henderson. 29 U.S.C. § 1103(a) provides for the naming of the trustee or trustees for the assets of an ERISA plan. Once this appointment is accepted, "the trustee or trustees shall have exclusive authority and discretion to manage and control the assets of the plan." 29 U.S.C. § 1103(a) (emphasis added). Therefore, after Henderson became the Successor Trustee of the Pension Plans on September 1, 1998, the Bankruptcy Trustee had no authority to control or to use the Pension Plans' assets and, therefore, could incur not liability for breach of fiduciary duty relating to any control or misuse of the Pension Plans' assets. Though the precise application of § 1103(a) to this suit is not entirely clear, it does suggests that any actions taken by the Bankruptcy Trustee after September 1, 1998, such as entering into settlement on February 25, 2000, were not taken in a fiduciary capacity, and, therefore, did not incur fiduciary liability.

Furthermore, even without considering the legal effect of § 1103(a), a cursory examination of Henderson's claims against the Bankruptcy Trustee brings the merit of those claims into substantial question.

b. Failing to fully prosecute the Pension Plans' claims against the Settling Defendants

Though a fiduciary has standing to bring suit under 29 U.S.C. § 1132(a)(2) for breach of fiduciary duty, a fiduciary is not obligated to pursue a legal remedy for injuries suffered by the plan. Rather, a fiduciary has discretion in deciding when, and if, to bring an action to enforce a plan's rights. Moore v. American Fed'n of Tele. and Radio Artists, 216 F.3d 1236, 1245 (11th Cir. 12000). At least one case addressing this issue has determined that a trustee or fiduciary does not breach his fiduciary duty merely by failing to bring suit on behalf of the plan. Alfarone v. Bernie Wolff Constr. Corp., 788 F.2d 76, 80 (2nd Cir. 1986) (finding that the employer-trustee's refusal to bring suit to recover contributions alleged due does not, by itself, constitute a breach of fiduciary duty under ERISA). The Eleventh Circuit has, however, acknowledged that a beneficiary may have a cause of action for breach of fiduciary duty against a trustee or fiduciary who unreasonably refuses to sue to recover delinquent contributions. Moore, 216 F.3d 1247. The Eleventh Circuit's ruling relied, in part, on the fact that beneficiaries themselves did not have standing to bring suit for delinquent contributions under 29 U.S.C. § 1132(g). Here, as evidenced by Henderson's claims against the remaining defendants, beneficiaries, and participants, the Pension Plans' trustee has standing to enforce claims against the Settling Defendants for breach of their fiduciary duties owed to the Pension Plans. They do not have to rely solely on Pension Plans' administrators — the Debtor Entities — to assert their claims and to ultimately gain recovery.

c. Delay in terminating the plan

The employer's decision to terminate a plan is "unconstrained by the fiduciary duties that ERISA imposes on plan administration." American Flint Glass Workers Union, AFL-CIO v. Beaumont Glass Co., 62 F.3d 574, (3rd Cir. 1995) (citation omitted). Since the decision to terminate does not incur fiduciary responsibility, the decision not to terminate a plan, even if made for the purpose of using the Plans' assets as leverage in settlement negotiations, is a business decision and it is not bound by fiduciary obligations. Cf. Bussian, 223 F.3d at 295 ("Because an employer may, consistent with ERISA's provisions, receive a plan's surplus upon termination, the fact that the employer terminates a plan specifically to gain access to that surplus is not a violation."). Therefore, this Court finds that there exists a low probability of success on Henderson's claim that the Bankruptcy Trustee breached a fiduciary duty by delaying the decision to terminate the Plans, even if that delay was made for the purpose of negotiating a better settlement.

d. Initiating Adversary Proceedings No. 00.7003 against the Pension Plans

Some detriment inured to the Pension Plans when the Bankruptcy Trustee sued and alleged that funds were fraudulently transferred and misallocated. Yet, the decision to bring suit against a plan to recover improperly allocated funds is a specie of business decision that does not violate § 1104(a)(1), even though it is clearly harmful to the plan and its participants and beneficiaries. See Payonk, 993 F.2d at 229 (holding that an employer's decision to terminate a plan, absent affirmative misrepresentations designed to mislead plan beneficiaries, did not incur liability for breach of fiduciary duties under 29 U.S.C. § 1104(a)(1) because it is a business decision outside the scope of ERISA liability); Bussian, 223 F.3d at 295 (holding that since an employer/administrator may terminate an overfunded plan without incurring liability for breach of fiduciary duty, it may also terminate a plan specifically to gain access to this surplus). The Court, therefore, finds that Henderson's claims based on these allegations are likely without merit.

e. Claims based on transactions prohibited by 29 U.S.C. § 1106

Henderson argues that by entering into the settlement agreement for Adversary Proceeding No. 98-7033, particularly by releasing the claims of the Plans against the Settling Defendants, the Bankruptcy Trustee engaged in a transaction prohibited by several provisions of 29 U.S.C. § 1106. 29 U.S.C. § 1106(a)(1)(A) (prohibiting a plan fiduciary from causing "the plan to engage in a transaction, if he knows or should know that such transaction constitutes a direct or indirect sale or exchange, or leasing, of any property between the plan and a party in interest"); 29 U.S.C. § 1106(a)(1)(D) (prohibiting a plan fiduciary from causing "the plan to engage in a transaction, if he knows or should know that such transaction constitutes a direct or indirect transfer to, or use by or for the benefit of, a party in interest, of any assets of the plan"); 29 U.S.C. § 1106(b)(1) ("A fiduciary with respect to a plan shall not deal with the assets of the plan in his own interest or for his own account."); 29 U.S.C. § 1106(b)(2) ("A fiduciary with respect to a plan shall not receive any consideration for his own personal account from any party dealing with such plan in connection with a transaction involving assets of the plan."). These claims would likely fail since at the time of the settlement, Henderson, as successor trustee, had exclusive authority and discretion to control the assets of the plan and the Bankruptcy Trustee could not exert any control over the assets of the Plans as contemplated by § 1106. By operation of 29 U.S.C. § 1103(a), the Bankruptcy Trustee simply was no longer a fiduciary of the Pension Plans at the time of the acts complained of by Henderson.

2. Analysis of the Bankruptcy Trustee's claims

The Bankruptcy Trustee appears to present valid claims against Henderson for the recovery of excess funds paid to the Pension Plans. See Prevue Products, Inc. v. Morton Shoe Cos. ( In re Morton Shoe Cos.), 24 B.R. 1003, 1005 (P. Mass. 1982) (recognizing that excess funds contributed by the debtor estate belong to the debtor estate). In addition, the Bankruptcy Trustee asserts cogent arguments for the avoidance of the transfers of excess funds made to the Pension Plans. Under 11 U.S.C. § 547(b), the trustee can avoid certain transfers made within a certain amount of time to the filing of the bankruptcy petition. Specifically, a trustee may avoid certain transfers of the debtor's property made up to a year before the filing of the bankruptcy petition that benefit the creditor, who is an insider at the time such transfer is made. 11 U.S.C. § 547(b). Section 548 also affords the trustee the power to avoid certain transactions made in fraud of the creditors. A similar power to avoid fraudulent transfers is provided by TEX. Bus. COM. CODE ANN. § 24.005(a)(1) ("A transfer made . . . by a debtor is fraudulent as to a creditor . . . if the debtor made the transfer . . . with actual intent to hinder, delay, or defraud any creditor of the debtor). The problem confronted by the Bankruptcy Trustee is in the expense necessary to litigate these claims and to achieve recovery, even if meritorious.

C. Factor Two: The complexity and likely duration of the litigation and attendant expenses

In a field of close equals, ERISA stands as one of the most complex, intricate, and dense regulatory statutes of the various federal regulatory schemes. As such, litigation asserting ERISA based claims tend to be complex both in terms of the facts and the law. Whether the facts underlying Henderson's claims support a cause of action under 29 U.S.C. § 1104 and/or 29 U.S.C. § 1106 against the Bankruptcy Trustee and Debtor Entities appears to be the most difficult dispute in that case. In the end, this appears to be a question of law that would nevertheless require extensive briefing and argument by the parties. While an initial review of the claims' merits suggests that Henderson does not have a high probability of success, it is still the case that resolution through litigation and appeal would involve substantial costs to the Debtor Entities.

This is even more true of the Bankruptcy Trustee's claims. Proving the elements necessary to obtain an avoidance under 11 U.S.C. § 544, 547(b), 548, is no simple feat. For example, 11 U.S.C. § 547(b) states that:

the trustee may avoid any transfer of an interest of the debtor property — (1) to or for the benefit of a creditor; (2) for or on account of an antecedent debt owed by the debtor before such transfer was made; (3) made while the debtor was insolvent; (4) made — (B) between ninety days and one year before the date of the filing of the petition, if such creditor at the time of such transfer was an insider; and (5) that enable such creditor to receive more than such creditor would receive if — (A) the case were a case under chapter 7 of this title; (B) the transfer had not been made; and (C) such creditor received payment of such debt that he extent provided by the provisions of this title.

The Bankruptcy Trustee would have to establish each and every one of these elements before avoidance under § 547(b) could occur. Danning v. Bozek ( In re Bullion Reserve of N. Am.), 836 F.2d 1214, 1217 (9th Cir. 1988), cert. denied, 486 U.S. 1056 (1988). Section 548(a)(1) similarly requires proof of many elements — including that debtor "made such transfer . . . with actual intent to hinder, delay, or defraud any entity to which the debtor was or became, on or after that such transfer was made" — before a transfer may be avoided by a bankruptcy trustee 11 U.S.C. § 548(a)(1)(A). As a fact intensive endeavor, proving actual intent is difficult and uncertain at best.

Though extensive financial auditing has already taken place, much more discovery is required to fully adjudicate the Bankruptcy Trustee's claims, even if valid. For instance, the depositions of experts alone present significant costs as does the actual time required for their trial testimony. Evidence presented at the hearing suggests that the costs of discovery alone could run to $80, 000. Additional costs to be considered are the attorney's fees and the opportunity cost of the time spent by the Bankruptcy Trustee in litigation that otherwise could be spent in preparing the assets of the Debtor Entities for distribution. In addition, as part of the settlement, Henderson agrees to waive the Pension Plans' claims for breach of fiduciary duty against the Bankruptcy Trustee. The settlement of these claims presents a significant cost savings to the Debtor Entities and their creditors. Though these claims appear to be of questionable merit, the costs of further litigation to dismiss them will cause the Debtor Entities to incur yet additional significant costs. Therefore, the Court finds that though the Bankruptcy Trustee will receive just under one-third of the amount originally sought (approximately $92, 000 of the some $309, 205 alleged over-funded to the Pension Plans), this is not outside the range of reasonable settlement given the likely cost associated with the litigation.

Various other factors counsel the Court to approve the Settlement Agreement. As the Bankruptcy Trustee observed, though she is confident of the outcome, there is always uncertainty as to the outcome of litigation and settlement eliminates this uncertainty. Also, the Court finds that the time delay attendant of further litigation weigh in favor of the settlement. Settlement significantly expedites the closing of the estates and the distribution of the assets to the creditors. Finally, and perhaps most importantly, there are no remaining objections from the creditors to this proposed settlement. In so much that the purpose of requiring a court to approve a settlement involving a bankruptcy estate is to protect the best interests of the creditors, the Court gives great deference to the absence of any objections from the creditors.

CONCLUSION

Given these considerations, the Court finds that the settlement of the Bankruptcy Trustee's claims under the terms proposed is fair and equitable, is not outside the range of reasonable settlements, and is, therefore, in the best interest of the debtor estates and their creditors.


Summaries of

Henderson v. Casciato-Northrup

United States District Court, W.D. Texas, Midland-Odessa Division
Jan 10, 2001
MO-00-CA-079 (W.D. Tex. Jan. 10, 2001)
Case details for

Henderson v. Casciato-Northrup

Case Details

Full title:COLIN M. HENDERSON, Successor Trustee, v. JANET S. CASCIATO-NORTHRUP, ANNE…

Court:United States District Court, W.D. Texas, Midland-Odessa Division

Date published: Jan 10, 2001

Citations

MO-00-CA-079 (W.D. Tex. Jan. 10, 2001)