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  • Writer's pictureKirk Hartley

Chapter 11 Release and Order Did Not Protect Corporate Directors Against Tort and Contribution Claim

Another court has imposed limits on the scope of releases and a chapter 11 order purporting to broadly cover future claims. The new ruling arises after a major explosion of 21 tanks at a fueling facility in Puerto Rico. The explosion resulted in many injuries, and the company filing a chapter 11 petition. The story is reported in full in a July 9, 2014 article by LAW360.

The issues arose in a case known as In re: Caribbean Petroleum Corp., # 1:10-bk-12553, (D. Del. Bkr). The opinion, by Judge Gross, held that the release to the former directors, and the chapter 11 order, did not protect corporate officers against tort claims against them personally as directors of the entity. The allegations included veil piercing and alter ego claims. In short, the judge held that the claims are not property of the estate and instead are claims unique to the tort plaintiffs. Of special note for asbestos litigation co-defendants, the court ruled the same way on contribution claims asserted by a co-defendant.

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