Opinion ID: 3023854
Heading Depth: 3
Heading Rank: 1

Heading: Was Martin the proper standard to use in

Text: approving the settlement? Martin provided four criteria for a court to consider when faced with a proposed settlement: “(1) the probability of success in litigation; (2) the likely difficulties in collection; (3) the complexity of the litigation involved, and the expense, inconvenience and delay necessarily attending it; and (4) the paramount interest of the creditors.” Martin, 91 F.3d at 393. We followed TMT Trailer in listing these factors, id. (citing TMT Trailer, 390 U.S. at 424–25), and simply fleshed out its general requirement. Northwestern disputes the use of Martin. Its primary argument is that Martin is only useful when analyzing a settlement of a claim belonging to the debtor, not a claim against the debtor. We disagree. We did not hold in Martin that the factors were only to be used to scrutinize settlements of claims held by the debtor. In fact, Martin itself involved a settlement partially of claims against the debtor. The Martins contracted to sell their house to the Myerses, but the Myerses refused to go through with the purchase. Id. at 391. The Martins, who had been depending on the sale to go through, found themselves in dire financial straits and had to file a Chapter 7 bankruptcy petition. Id. Both parties filed contract suits in state court, the Martins for damages and the Myerses for specific performance. Id. The trustee’s 9 proposed settlement provided for the release of both actions. Id. Two other points are worth making here. First, the “Martin” factors have been around for a long time, far longer than Martin itself or even TMT Trailer. Second, there are several cases applying these four factors to settlements of claims against debtors. The Martin Court “t[ook its] cue” from TMT Trailer, id. at 393, but the origin of the four factors can be traced back to a 1929 Eighth Circuit case. Four considerations were listed in Drexel v. Loomis for scrutinizing a compromise in bankruptcy: “(a) The probability of success in the litigation; (b) the difficulties, if any, to be encountered in the matter of collection; (c) the complexity of the litigation involved, and the expense, inconvenience and delay necessarily attending it; (d) the paramount interest of the creditors and a proper deference to their reasonable views . . . .” 35 F.2d 800, 806 (8th Cir. 1929). Moreover, there are many cases that have applied the Drexel–TMT Trailer–Martin factors to settlements involving claims against debtors. See, e.g., Ars Brook, LLC v. Jalbert (In re ServiSense.com, Inc.), 382 F.3d 68, 70–72 (1st Cir. 2004); Rivercity v. Herpel (In re Jackson Brewing Co.), 624 F.2d 599, 601–02 (5th Cir. 1980); Bache & Co. v. Loeffler (In re Equity Funding Corp. of Am.), 519 F.2d 1274, 1275, 1277 (9th Cir. 1975); Am. W. Airlines, Inc. v. City of Phoenix (In re Am. W. Airlines, Inc.), 214 B.R. 382, 384, 386 (Bankr. D. Ariz. 1997); 10 Tindall v. Mavrode (In re Mavrode), 205 B.R. 716, 719, 721 (Bankr. D.N.J. 1997); Jacobson v. Robert Speece Props., Inc. (In re Speece), 159 B.R. 314, 316–17 (Bankr. E.D. Cal. 1993).