Appliances and housewares company wins appeal challenging bankruptcy plan

Client(s) Appliances and housewares company

Jones Day secured an appellate victory for an appliances and housewares company and its Reorganized Debtor affiliates in the Southern District of Texas. In the underlying bankruptcy case filed by the client and its Debtor affiliates, the plan carved out an exception to the discharge to allow holders of certain product liability claims to name a Debtor as a nominal defendant in order to recover against certain third-party indemnitors and insurers in limited circumstances. One of those third-party indemnitors, a contract manufacturer, objected to the confirmation based on its assertion that it owed no indemnity obligations to the Debtors. The manufacturer contended that its indemnity obligations had been assigned away when the client assigned the parties' supply agreement during the bankruptcy. The bankruptcy court denied that objection and confirmed the plan.

In its decision affirming the bankruptcy court's order, the district court held that, notwithstanding the assignment of the supply agreement, the unassigned purchase orders entered under that agreement prepetition were separate, divisible contracts containing their own indemnity obligations.