In re W.R. Grace & Co.

In re W.R. Grace & Co., Case No. 12-2807 (3d Cir. July 24, 2013) (unpublished)
Co-defendant in asbestos-related litigation lacked standing to object to confirmation of Chapter 11 plan because objector failed to show a specific, identifiable injury that would result from plan confirmation. Allegations of possible future injury are not sufficient to satisfy Article III requirements for standing.
Procedural context:
Appeal from the U.S. District Court for the District of Delaware, affirming the bankruptcy court's order overruling objections due to lack of standing.
W.R. Grace ("Grace") manufactured and sold products and materials containing asbestos. In 2001, Grace filed a voluntary Chapter 11 petition due, in large part, to its involvement in over 65,000 personal injury lawsuits alleging harm from asbestos exposure. After almost 8 years in bankruptcy, Grace and several creditors committees filed a joint plan of reorganization, which established two trusts -- a personal injury trust and a property damage trust -- that will assume all of Grace's current and future asbestos liabilities. The plan includes an injunction under 11 U.S.C. § 524(g) which channels all asbestos-related claims against Grace (and certain others) to the trusts. Under the trust, personal injury claimants will receive between 25% and 35% of the liquidated value of their claims. Garlock is a manufacturer of engineered industrial products, and it formerly used some of Grace's asbestos-containing materials in its products. Garlock was a co-defendant with Grace in thousands of personal injury suits in the decades before Grace's bankruptcy filing. Garlock asserted that, because of the prospect of joint liability with Grace, it has contribution rights against Grace and setoff rights against plaintiffs that recover from Grace. Garlock did not file a proof of claim in Grace's bankruptcy case, and there was no evidence that Garlock has ever asserted such rights in the past. Garlock objected to confirmation of the plan. Garlock argued that it had standing to object because "there will undoubtedly be" future asbestos-related cases brought against it and Grace jointly, which will give rise to contribution and setoff rights which will not be fully satisfied because the trust will pay only 25% to 35% of the value of such claims, thereby harming Garlock. The Third Circuit Court of Appeals affirmed the decisions of the bankruptcy court and district court that any harm to Garlock was too speculative to satisfy Article III's requirements for standing. Garlock failed to demonstrate that future personal injury cases were imminent or impending. Garlock has itself filed for Chapter 11 bankruptcy, and claims against Garlock also will be enjoined under 11 U.S.C. § 524(g). Despite thousands of prior cases in which Garlock and Grace were co-defendants, Garlock had never previously asserted contribution or setoff rights prior to Grace's bankruptcy case, nor has it done so during the decade since Grace filed its bankruptcy case. Thus, any injury to Garlock was too speculative to confer standing upon Garlock.
Ambro, Fisher and Jordan, Circuit Judges. [Written by Jordan]

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