New York House Authority v. G-I Holdings, Inc. (In re G-I Holdings Inc.)

No. 15-2164 (3d Cir. July 18, 2016) (Not Precedential)
District Court order affirmed. Governmental entity may not repackage its monetary claim as a claim for injunctive relief in order to avoid being bound by a confirmed plan. Distinguishes In re Torwico Elec., Inc., 8 F.3d 146 (3d Cir. 1993), in which the New Jersey Department of Environmental Protection and Energy (NJDEPE) issued an order requiring the debtor to submit a written plan explaining how it would close the seepage pit that was allegedly polluting local waterways. Torwico argued this was a "claim" that had been discharged because NJDEPE did not file a timely proof of claim. In Torwico, the Third Circuit disagreed, finding that the NJDEPE was not asserting a "right to payment," but invoking its right to force a debtor to comply with environmental laws by remedying an existing hazard. Here, the Authority cited no law requiring G-I Holdings to mitigate property damage resulting from its products or permitting the Authority to hold the Debtor liable for environmental harm caused by its products. The Authority is a housing corporation that has no authority to enforce environmental laws. Finally, the hazard from asbestos products arises upon its removal; if it remains undisturbed, there is no hazard. Thus, the state is not confronted with a polluter whose conduct necessitates immediate injunctive relief to stop ongoing pollution, as in Torwico. The injury is the additional cost associated with renovating apartments containing asbestos, which is a "claim" under the plan.
Procedural context:
On appeal from the U.S. District Court for the District of New Jersey
New York City Housing Authority constructs and maintains public housing for lower-income residents in New York City. G-I Holdings is the corporate successor to a manufacturer of housing products that contained asbestos. Facing close to 500,000 asbestos-related lawsuits, G-I filed a Chapter 11 bankruptcy petition in 2001. The Authority filed a proof of claim seeking nearly $500 million for property damage to its buildings. The proof of claim did not mention injunctive relief. The District Court confirmed G-I Holdings' plan in 2009. The plan disposed of all covered claims and enjoined claims against the reorganized debtor. Three years later, the Authority filed a complaint seeking an injunction directing G-I Holdings to remove asbestos from the Authority's buildings. The Authority argued that its request for an injunction was not a "claim" as defined by the plan and thus was not barred. The Authority further argued that, as a governmental entity, it had inherent regulatory power to compel remediation of environmental damage.
Smith (author), Roth, and Rendell

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