The decision by the Third Circuit Court of Appeals overturning confirmation of a Chapter 11 plan in the Combustion Engineering (“CE”) bankruptcy case has significant consequences for mass tort bankruptcies, and especially for asbestos “pre-packaged” or “pre-pack” cases. While courts have traditionally given mass tort debtors some leeway and flexibility in applying the provisions of the Bankruptcy Code, this court was clearly troubled by the particular design of the CE pre-pack, a model that has been subsequently used in other asbestos pre-pack cases. In a lengthy and far-reaching opinion issued in December 2004, the Third Circuit’s ruling in the CE case may have fundamentally changed the strategy, negotiation dynamic, and structure of pre-pack asbestos bankruptcy cases.

Pre-Pack Asbestos Cases

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