Opinion ID: 609176
Heading Depth: 2
Heading Rank: 1

Heading: Drexel Burnham Bankruptcy

Text: 4 The events surrounding Michael Milken and his employer Drexel Burnham are well-documented, widely known, and need not be repeated in detail. We recount only those facts essential to understanding the instant appeal. 5 In February 1990 Drexel Burnham filed a voluntary petition for Chapter 11 bankruptcy relief. Over 15,000 parties immediately filed claims against the estate, some 850 of which arose out of Drexel Burnham's actions in buying, selling, and underwriting securities. To encourage settlement of these claims the district court withdrew them from the bankruptcy court's jurisdiction pursuant to 28 U.S.C. § 157(d). In March 1991, after months of round-the-clock negotiations, the securities claimants reached a complex agreement with Drexel Burnham known as the Securities Litigation Claims Settlement Agreement (Drexel Burnham-SLC Agreement), which we approved in In re Drexel Burnham Lambert Group, Inc. (Drexel I), 960 F.2d 285, 293 (2d Cir.1992), cert. dismissed, --- U.S. ----, 113 S.Ct. 1070, 122 L.Ed.2d 497 (1993). Its provisions were incorporated in Drexel Burnham's bankruptcy reorganization plan. 6 For purposes of later discussion we mention two central elements of the Agreement: the so-called Pooling Arrangement and the Injunction-Release provisions. The Pooling Arrangement required that Drexel Burnham and a sub-class of its securities claimants pool their recovery from lawsuits brought by Drexel Burnham against its former directors and officers. See id. at 288-89. Among claims subject to such pooling were causes of action against Michael Milken and certain related parties. The Federal Deposit Insurance Company (FDIC), the Resolution Trust Company (RTC), and a law firm representing Drexel Burnham shareholders were named Pool Administrators, with responsibility for deciding how best to pursue or settle these claims. Drexel Burnham and the Pool Administrators are the appellees on this appeal. 7 The Injunction-Release provision stated that individuals settling with the Pool Administrators would be released from liability to all parties to the Drexel Burnham-SLC Agreement. Persons and entities benefiting from this release are referred to as Identified Settling Parties. This provision, which covers claims brought after May 3, 1991, was found in Drexel I to be a key component of the Drexel Burnham-SLC Agreement because it allows directors and officers to settle suits with Pool Administrators without fear that future suits will be filed by other Drexel Burnham-SLC parties. Id. at 293.