Insolvency and Restructuring Update
Johns-Manville Corporation

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In an important decision published last week, the United States Court of Appeals for the Second Circuit reversed orders by both the Bankruptcy Court and the District Court approving settlements that enjoined lawsuits by various class-action plaintiffs against one of the primary liability insurers of the debtor. The Second Circuit firmly reiterated that non-debtor releases in plans of reorganization or other bankruptcy orders are permissible only in exceptional circumstances, and that a non-debtor's "financial contribution to a debtor's estate" is not a sufficient basis for providing it with releases. The Court also ruled that the Bankruptcy Court was without jurisdiction to order the release or injunction of third-party claims whose prosecution would not impact the debtor's estate.

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