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IN
THE
UNITED STATES
DISTRICT
COURT FORTHE WESTERN
DISTRICT
OF
PENNSYLVANIA
SKINNER ENGINE
COMPANY
t
ET AL.
t
Appellants
Civil
Action
No.
09-0886
v.
ALLIANZ
GLOBAL
RISK
U.S.
Bankruptcy
No.
01-23987
INSURANCE
CO.
ET
AL.,
Appellees.
MEMORANDUM
Gary
L.
Lancaster,
March
29,
2010
Chief
Judge.
The
parties
are
familiar
wi
th
the
general
background
of
this
case
and
it
need
not
be
detailed
here.
We
need
onlynote
that
the
appellants
have
appealed
from
an
order
of the
bankruptcy
court,
dated
May
26
t
2009,
in
which
the
bankruptcy
court:
(1)
found
that
the Disclosure
Statement
for
the
Fifth
Plan
described
a
facially
unconfirmable
plani
and
(2)
converted
the case,
filed
under
Chapter
11t
to
a
Chapter
7
bankruptcy
case.
This appealfollowed.
The
standard
of
review
on
appeal
from
a
bankruptcy
court order
is
that
conclusions
of
law
are
subject
to
review,
while
findings
of
fact
may
not
be
set
aside unless
they
are
clearly
erroneous.
Mellon
Bank,
N.A.
v.
MetroCommunications,
Inc.,
945
F.2d
635,
641-42
(3d
Cir.
1991).
A
bankruptcy
court's
determination
whether
a
Chapter
11
Plan
is
feasible
is
"subject
to
the
clearly
erroneous
standard
of
review.
/I
CoreStates
Bank,
N.
A.
v.
Uni
ted
Chemical
Technologies,
Case 2:09-cv-00886-GLL Document 85 Filed 03/29/10 Page 1 of 7
Inc.,
202
B.R. 33,
45(B.D.
Pa.
1996)
(citing cases).
We
review
the
bankruptcy
court's
decision
to
convert
a
Chapter
11
case
to
a
Chapter
7
case
for
an abuse
of
discretion.
In
re
SGL
Carbon
Corp.,
200
F.3d
154,
159
(3d.
Cir.
1999);
In
re
Mazzocone,
180
B.R. 782,
785 (B.D.
Pa.
1995)
(citing
cases)
.
Under
no
standard
of
review
would
this
court reverse
the
bankruptcy
court's
disposition
of
this
case.
We
find
no
error,
let
alone
a
clear error,in
the
bankruptcy
court's
determination
that
the
Fifth
Plan
was
not
feasible.
And
we
find
no
abuse
of
discretion in
the
bankruptcy
court's
decision
to
convert
this
case
to
a
Chapter
7
liquidation.
As
an
initial
matter,
we
conclude
that
the
bankruptcy
court,
which
has
presided
over
the Debtor's
bankruptcycase
fornearly
nine
years,
as
well as
the
related
insurance
coverage
adversary
action,
was
in
possession
of
sufficient
evidence,
and
had
afforded the
parties
ample
opportunity
to
present
their
arguments
in
order
to
make
the necessary
determinations
on
each
issue
decided
in
the
May
26,
2009
memorandum.
Therefore,
we
reject
outright
any
challenge
to
the
bankruptcy
court's
order
from
a
procedural
standpoint.
In
its
May
26,
2009
order,
the
bankruptcy
court
found
that
the Disclosure
Statement
for
the
Fifth
Plan
described
a
facially
unconfirmable
plan
for
several
reasons.
Among
these
reasons
were
that
the
plan
reflected
in
the
disclosure
statement:
2
Case 2:09-cv-00886-GLL Document 85 Filed 03/29/10 Page 2 of 7
(1)
if
confirmed,
would
operate
to
breach
the
insurance
policies;
(2) was
not
a
reasonable
and
good
faith
settlement
under
Pennsylvania
law; and
(3)was
the
result
of
collusion
between
Debtor
and
the asbestos
claimants.
Although
not
necessary
to
its
decision,the
bankruptcy
court
also
identified
two
additionaldefects:
(1)
that
the
20%
surcharge
constituted
an
unlawfulassignment;
and
(2)
that
the
bankruptcy
court
lacked
jurisdictional
authority to
finally
liquidate
asbestos
claims.
We
find
no
clear error
in
any
of
these
decisions,
and
would
reach
the
same
ultimate
conclusion.In
so
concluding,
we
have
taken
note
of
the
unique
circumstances
of
this
case,
which
include,
among
other
things,
that:
(1)
this
case
has
been
pending
for
nine
years;
(2)
the
Debtor
sold
its
assets
more
than
seven
years
ago
to
a
third
party,
which
received
a
release
from
any
successor
liability;
(3)
the
Debtor
will
not
continue
in
business as
a
going
concern,
and
its
board
of
directors
would
be
comprised
of
one
director,
who
was
to
be
appointed
at
the
Confirmation Hearing;
(4) a
judgment
in
excess of
insurance
limits
posed
no
risk
to
theDebtor's
estate
or
a
reorganized debtor
under
the
circumstances;
(5)
apart
from
approximately
$70,000
in
cash,
the
Debtor
had
no
assets,
save
insurance
policies
and
legal actions;
(6)
the
only
way
forthe Debtor's
estate
to
acquire
any
additional
funds
was
to
convert
insurance
policies
to
Surcharge
Cash
through
the
relaxed
3
Case 2:09-cv-00886-GLL Document 85 Filed 03/29/10 Page 3 of 7
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