unsecured claims that are dischargeable upon confirmation of Mallinckrodt ' s Chapter 11 plan .
Sanofi appealed the bankruptcy court ' s ruling . On appeal to the district court , U . S . Circuit Judge Thomas L . Ambro of the U . S . Court of Appeals for the Third Circuit , sitting by designation , focused on two questions :
Are Sanofi ' s claims for post-petition royalties dischargeable in Mallinckrodt ' s bankruptcy because they were contingent claims that arose when the asset purchase agreement was executed preprepetition ; and
Alternatively , does Sanofi retain a property interest in the Acthar gel intellectual property requiring Mallinckrodt to pay royalties when it sells the Acthar gel post-petition and postconfirmation ?
In its analysis of the dischargeability issue , the district court began with a strict textual examination of the Bankruptcy Code , beginning with Section 1141 ( d )( 1 )( A ), which provides that a plan of reorganization " discharges the debtor from any debt that arose before the date of such confirmation ."[ 3 ]
The Bankruptcy Code defines " debt " as a " liability on a claim " and , in turn , a " claim " is defined therein as a " right to payment whether or not such right is reduced to judgment , liquidated , fixed , contingent , matured , unmatured , disputed , undisputed , legal , equitable , secured , or unsecured ."[ 4 ]
The district court concluded that the plain text of the Bankruptcy Code supported the conclusion that " a contingent right to payment arising before the date of a plan ' s confirmation may be discharged by that confirmation ."[ 5 ]
Despite the clarity of the statutory text , however , the district court also engaged in a survey of case law regarding the dischargeability of unliquidated or contingent future claims under the Bankruptcy Code .
Analogizing to case law involving injuries related to asbestos exposure , the district court first adopted an expansive view of dischargeability to include unliquidated future claims .[ 6 ] Applying this framework , the district court found Sanofi ' s royalty obligations to be clearly contingent , despite the fact that their contingent nature depended in part on Mallinckrodt ' s action or inaction .[ 7 ]
The district court then proceeded to analyze whether Sanofi ' s royalty claims arose at the time of the signing of the asset purchase agreement , or , alternatively , if and when the requisite Acthar gel intellectual property sales threshold was reached each year .
Looking to case law providing that claims for indemnity under an indemnification agreement arise at the time the agreement is signed , and not over time , the district court summarized its analysis by concluding that context is important .[ 8 ]
Here , the district court found the contextual application to be straightforward :
Sanofi ' s contingent claim for future royalties arose at the time of the sale of the Acthar Gel [ intellectual property ] under the asset purchase agreement . It is at that moment the parties fixed their rights against each other : Sanofi sold full title to the intellectual property , it received a right to future contingent payments in return , and having done so , it assumed the risk of Mallinckrodt ' s creditworthiness .[ 9 ]