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United States Court of Appeals for the Third Circuit
July 29, 1999, Argued ; December 29, 1999, Filed
Nos. 99-5319 & 99-5382
[*156] OPINION OF THE COURT
SCIRICA, Circuit Judge.
The issue on appeal is whether, on the facts of this case, a Chapter 11 bankruptcy petition filed by a financially healthy company in the face of potentially significant civil antitrust liability complies with the requirements of the Bankruptcy Code. In this case, the Official Committee of Unsecured Creditors of SGL Carbon Corporation appeals the District Court's order denying its motion to dismiss SGL Carbon's Chapter 11 bankruptcy petition on bad faith grounds.
This case also presents the threshold issue whether we will adopt a "good faith" requirement for Chapter 11 petitions. We will. After undertaking the fact intensive analysis inherent in the good faith determination, we conclude that SGL Carbon's Chapter 11 petition lacks a valid reorganizational purpose and, therefore, lacks the requisite good faith. We will reverse.
SGL Carbon is a Delaware corporation that manufactures and sells graphite electrodes used in steel production. 2 In 1997, the United States Department of Justice commenced an investigation of alleged price-fixing by graphite electrode manufacturers, including the SGL Carbon Group. 3 [**3] Soon thereafter, various steel producers filed class action antitrust lawsuits in the United States District Court for the Eastern District of Pennsylvania against SGL [*157] Carbon and other graphite electrode manufacturers. The District Court consolidated the cases into a single class action and certified a class under Fed. R. Civ. P. 23(b)(3) consisting of all United States purchasers of graphite electrodes between 1992 and 1997. Many class members opted out of the class before the November 28, 1998 opt-out deadline and subsequently filed or threatened to file separate antitrust lawsuits. Since the class certification, six complaints have been filed in federal district court and one complaint has been filed in a Canadian court.
[**4] In June 1998, SGL Carbon's German parent SGL AG recorded a charge in Deutschmarks of approximately $ 240 million as its "best estimate" of the SGL Carbon Group's 4 potential liability in the criminal and civil antitrust litigation. 5
Full case includes Shepard's, Headnotes, Legal Analytics from Lex Machina, and more.
200 F.3d 154 *; 1999 U.S. App. LEXIS 34433 **; 1999-2 Trade Cas. (CCH) P72,739; 43 Collier Bankr. Cas. 2d (MB) 668; 35 Bankr. Ct. Dec. 116; Bankr. L. Rep. (CCH) P78,084
IN RE: SGL CARBON CORPORATION, Debtor. OFFICIAL COMMITTEE OF UNSECURED CREDITORS, Appellant at No. 99-5319 NUCOR CORPORATION; NUCOR-YAMATO STEEL COMPANY, Appellants at No. 99-5382
Subsequent History: [**1] Counsel Amended January 28, 2000.
Prior History: On Appeal from the United States District Court for the District of Delaware. D.C. Civil Action No. 98-cv-02779. (Honorable Joseph J. Farnan, Jr.).
Disposition: Reversed and remanded to the District Court to dismiss SGL Carbon's Chapter 11 petition.
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Bankruptcy Law, Judicial Review, Standards of Review, Abuse of Discretion, Civil Procedure, Appeals, Procedural Matters, General Overview, Clearly Erroneous Review, Clear Error Review, De Novo Review, De Novo Standard of Review, Bankruptcy, Conversion & Dismissal, Reorganizations, Lack of Good Faith, Business & Corporate Law, Management Duties & Liabilities, Fiduciary Duties, Duty of Good Faith & Loyalty, Joint Ventures, Defenses, Demurrers & Objections, Affirmative Defenses, Unclean Hands, Reorganizations, Eligibility, Discharge & Dischargeability, Contracts Law, Remedies, Equitable Relief