Chapter 11 Ruling Blocks Post-Bar Date Indemnification Claims

A Skadden paper explains that a June 2024 ruling in the Silicon Valley Bank Chapter 11 case, In re SVB Financial Group, determined that bar dates can extinguish indemnification and contribution rights, even when the underlying litigation arises after the bar date has passed.

The decision addressed late proofs of claim filed by Morgan Stanley and two former Boston Private executives, Christopher Cooper and Anthony DeChellis, after they were named in a 2024 securities class action tied to the 2021 merger between Silicon Valley Bank and Boston Private.

The court denied their motions, finding no excusable neglect under Bankruptcy Rule 9006(b)(1).

Silicon Valley Bank merged with Boston Private in 2021, triggering shareholder litigation over alleged securities violations. Although those lawsuits were dismissed or voluntarily resolved, the bank’s 2023 collapse led to its parent company filing for Chapter 11.

Before the August 11, 2023, bar date, several securities class actions were named Morgan Stanley, but not Cooper or DeChellis.

A new class action naming all three was filed seven months after the bar date. Each then filed late proofs of claim, asserting contingent indemnification and contribution rights, which the debtor and unsecured creditors opposed.

The judge ruled that a publication notice was sufficient for Cooper, who was deemed an “unknown” creditor, and that failure to provide actual notice did not excuse missing the deadline.

Applying the Second Circuit’s strict Pioneer analysis, the court found the claimants’ delay unjustified given their sophistication and prior involvement in related matters.

The decision emphasized the prejudice to the estate, the advanced stage of plan confirmation, and the claimants’ duty to investigate and file protective claims. Appeals were later settled after remand, allowing negotiated claims.

This ruling reinforces the need for creditors, especially directors, officers, and underwriters, to file protective proofs of claim in bankruptcy proceedings to preserve contingent rights.

It also shows that a publication notice can be deemed sufficient even if claims later materialize, shifting the responsibility to potentially affected parties to monitor cases and act before bar dates.