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Keywords

lawsuittortliabilitybankruptcychapter 11 bankruptcy

liabilitymotiontrustbankruptcy

Related Cases

In re Grumman Olson Industries, Inc., 445 B.R. 243, 54 Bankr.Ct.Dec. 102

Facts

Grumman Olson Industries, Inc. filed for Chapter 11 bankruptcy on December 9, 2002, and subsequently sold its assets to Morgan Olson LLC on July 1, 2003, under a Sale Order that included provisions to protect Morgan from successor liability. The Fredericos were injured in an accident involving a truck manufactured by Grumman prior to the sale and later sued Morgan, claiming it was liable as a successor. Morgan initiated an adversary proceeding seeking a declaration that it was not liable for the Fredericos' claims based on the Sale Order.

The Fredericos alleged, inter alia, that the FedEx truck involved in the accident was manufactured, designed and/or sold by Grumman in 1994, and was defective for several reasons.

Issue

Whether the Sale Order exonerated Morgan Olson LLC from successor liability for claims arising from products manufactured by Grumman Olson Industries, Inc. prior to the sale.

Whether the Sale Order exonerated Morgan from liability to the Fredericos.

Rule

The Bankruptcy Code § 363(f) allows the sale of a debtor's assets free and clear of any interests, and courts have interpreted this to include in personam relief that exonerates a buyer from successor liability for tort claims.

Section 363(f) of the Bankruptcy Code authorizes the trustee in certain circumstances to sell the estate's interest in property 'free and clear of any interest in such property of an entity other than the estate.'

Analysis

The court analyzed the Sale Order and determined that it provided Morgan with in personam relief from successor liability for claims arising from the debtor's pre-sale conduct. The Fredericos' claims were based on injuries that occurred after the sale, and the court found that they did not hold claims against the debtor at the time of the bankruptcy sale. The court emphasized that the Sale Order did not grant Morgan immunity from future claims based on its conduct after the sale.

The resolution of the dispute between Morgan and the Fredericos rests, in the first instance, on the rights created under the Sale Order.

Conclusion

The court concluded that the Sale Order did not affect the Fredericos' rights to sue Morgan Olson LLC, and therefore, Morgan was not exonerated from liability for the claims asserted by the Fredericos.

Accordingly, the Court concludes that the Sale Order does not affect their rights to sue Morgan.

Who won?

The Fredericos prevailed in the case because the court ruled that the Sale Order did not protect Morgan from liability for their claims, allowing them to proceed with their lawsuit against Morgan.

The Fredericos' motion is granted, Morgan's motion is denied, and the complaint is dismissed.

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