Emphasizing Administrative Finality, Court Will Not Require the Reissuance of Checks Not Cashed by Prescribed Deadlines

Essential Facts
Approximately 200 claimants located in Korea failed to cash their settlement checks within the mandatory 180-day period established by the terms of the $2 billion Dow Corning Settlement Trust (the “Settlement Trust”). This decision involved the fifth attempt by these creditors to obtain relief from the deadline.

Court Actions and Prior Litigation
In 1999, the Bankruptcy Court for the Eastern District of Michigan confirmed the reorganization plan and approved the Settlement Trust, which included the 180-day check-cashing requirement to avoid forfeiture of distributions. In March 2019, the district court, which also approved confirmation, then issued a series of orders that:

• Set June 3, 2019, as the final claims deadline;
• Established December 1, 2023, as the final distribution date; and
• Prohibited replacement of checks that were issued on or before December 3, 2018, but were not cashed before June 3, 2019.

The Korean claimants failed to cash their checks before June 3, 2019, and sought relief from the district court’s deadline. However, the district court refused to allow the late cashing or reissuance of checks, holding that the deadline was reasonable and essential for efficient administration of the settlement trust. The Korean claimants appealed to the Sixth Circuit.

Issues on Appeal
The Korean claimants challenged the Sixth Circuit’s decision on three grounds:

• Due Process: Whether electronic notice of check-cashing deadlines met constitutional due process standards
• Discrimination: Whether uniform deadlines unfairly impacted international claimants under bankruptcy law
• Discharge Exception: Whether prior communications created exceptions to standard deadlines.

Key Holdings
The Sixth Circuit focused on two essential points:

First, the 180-day check-cashing deadline is a binding term of the settlement trust, not a flexible guideline. While claimants had from March 2019 through October 2023 to seek judicial relief from this deadline, the court determined that extending time beyond the original 180-day negotiation period would undermine the settlement's administrative framework.

Second, electronic notice through the court's filing system meets constitutional standards for all claimants, including international ones. This ruling modernizes notice requirements for mass tort settlements.

Practical Implications
To assure that check cashing deadlines are enforced, Settlement Trust agreements should address four key areas:

• Clear deadlines for cashing settlement checks
• Electronic notification systems
• Procedures for international claimants
• Systems to track payment deadlines

Conclusion
The Sixth Circuit’s repeated rejection of challenges to settlement deadlines confirms that courts will uphold reasonable, well-documented procedures governing distributions and the consequences of compliance failure. Although refusing to permit claimants the ability to obtain a distribution based on an otherwise allowed mass tort claim may be perceived as somewhat draconian, particularly on individual claimants, the decision gives settlement administrators the certainty needed to manage large settlements efficiently.

The court’s support for electronic notifications and uniform deadlines is especially helpful for administrators managing international claims. Companies structuring settlements should use this guidance to include clear deadlines and modern notification methods in their trust agreements.