On August 2, 2024, the U.S. Bankruptcy Court for the Southern District of Florida (“Bankruptcy Court”) entered an amended order confirming the second amended plan of liquidation proposed by the Bird Global, Inc. and their affiliate debtors on a final basis.
Prior to their bankruptcy filings, the Debtors operated a short-term scooter rental business in 350 cities throughout the United States.
The Debtors filed their bankruptcy cases on December 20, 2023 under Chapter 11 of the Bankruptcy Code with the intention of selling their assets to a stalking horse bidder.
The Debtors suffered revenue losses when ridership took a nosedive during the pandemic in 2020. The Debtors managed to go public during 2021, but the public company was delisted by the New York Stock Exchange in September 2023 after it failed to meet market capitalization requirements.
The Debtors’ plan of liquidation provides for the creation of a tort claims trust, which is to be funded by settlements with its insurers. The Debtors were subject to tort claims resulting from personal injuries and deaths while riding Bird scooters. The prosecution and arbitration of those claims were stayed by the bankruptcy filings.
Although many tort claimants sought relief from the automatic stay to pursue their claims to the extent of available insurance coverage, the Bankruptcy Court denied every motion for relief from stay due to proposed plan provisions creating the tort claims trust and pending negotiations with insurers to fund that trust.
Prior to the hearing to approve the plan on a final basis, Judge Lopez-Castro invited briefing on the impact of the Supreme Court’s decision in Purdue Pharma, which was issued after the Bankruptcy Court granted provisional approval of Bird’s plan of liquidation.
Numerous tort claimants argued that the channeling injunction and bar order contemplated by the plan and settlements with the insurers constituted the type of impermissible third-party releases prohibited by Purdue Pharma.
Relying on the Matter of Munford, Inc., 97 F.3d 449 (11th Cir. 1996) (“Munford”), which the Bankruptcy Court implicitly presumes was not overturned by operation of the Purdue Pharma opinion, the Bankruptcy Court assessed the validity of the channeling injunction and bar order under the Munford factors, which are: (1) “the interrelatedness of the claims that the bar order precludes”; (2) “the likelihood of the non-settling defendants to prevail on the barred claim”; (3) “the complexity of the litigation”; and (4) “the likelihood of depletion of the resources of the settling defendants.” Id. at 455.
Applying the Munford factors, the Bankruptcy Court found
the Tort Claims, whether asserted directly against the Debtors and/or the Municipalities, are clearly interrelated. As the Court has recognized throughout these Chapter 11 Cases, a Tort Claim against a Municipality, whether or not the Debtors are joined, is effectively a Tort Claim against the Debtors because there is an obligation by the Debtors to indemnify the Municipalities pursuant to the permits to operate in the applicable Municipalities. Moreover, both Tort Claims against the Debtors and against the Municipalities share the same insurance coverage, as named insureds or beneficiaries, such that a Tort Claim against a Municipality or the Debtors share coverage in a similar fund to the extent of available insurance. Related to this issue is the fact that the Debtors do not have the funds necessary to satisfy the self-insured retention obligations on their insurance policies (“SIR”). Also, the Claims of the Municipalities against the Debtors for indemnification are interrelated with the arbitration and indemnification obligations that are owed by each scooter rider to the Debtors and the Municipalities pursuant to the Bird and/or Spin terms of use agreed to by a rider when such rider chooses to ride a Bird or Spin scooter.
The Bankruptcy Court’s reasoning appeared, in part, to be predicated on testimony that the $19.2 million to be realized from the insurance settlements and used to fund the tort claims trust was believed to be sufficient to satisfy the claims of the tort claimants at their “likely settlement value” based on historical claims data for hundreds of claims made against the Debtors and settled between 2018 and 2023.
While the Bankruptcy Court perceived the Debtors’ indemnification obligations to municipalities as sufficiently “interrelated” to justify the channeling injunction and bar order, the Supreme Court rejected the third-party nonconsensual release in Purdue Pharma notwithstanding that Purdue Pharma was subject to a 2004 indemnification agreement with the Sackler family.
Several creditors have appealed from the amended confirmation order and moved for a stay of the order pending appeal to the United States District Court for the Southern District of Florida.
On August 12, 2024, the Bankruptcy Court denied an emergency motion seeking a stay of the amended confirmation order pending appeal, finding that movants were unable to demonstrate a likelihood of success on the merits in light of the findings of fact and conclusions of law reflected in the amended confirmation order after extensive briefing and multiple hearings. A copy of the order denying a stay can be found here.