Case Doc 5099 Filed 11/25/15 Entered 11/25/15 09:42:45 Desc Main Document Page 1 of 122

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1 Document Page 1 of 122 IN THE UNITED STATES BANKRUPTCY COURT FOR THE WESTERN DISTRICT OF NORTH CAROLINA Charlotte Division IN RE: GARLOCK SEALING TECHNOLOGIES LLC, et al., Debtors. 1 Case No. 10-BK Chapter 11 Jointly Administered DEBTORS AND FCR S BRIEF IN SUPPORT OF MOTION FOR PARTIAL SUMMARY JUDGMENT THAT SECTION 524(g) IS NOT EXCLUSIVE AND FCR HAS AUTHORITY TO VOTE RAYBURN COOPER & DURHAM, P.A. C. Richard Rayburn, Jr. (N.C. Bar No. 6357) Albert F. Durham (N.C. Bar No. 6600) John R. Miller, Jr. (N.C. Bar No ) 1200 Carillion, 227 West Trade Street Charlotte, NC Telephone: (704) Counsel to the Debtors Garlock Sealing Technologies, LLC, Garrison Litigation Management Group, Ltd., and The Anchor Packing Company ROBINSON, BRADSHAW & HINSON, P.A. Garland S. Cassada (N.C. Bar No ) Jonathan C. Krisko (N.C. Bar No ) Richard C. Worf (N.C. Bar No ) 101 North Tryon Street, Suite 1900 Charlotte, NC Telephone: (704) Special Corporate and Litigation Counsel to the Debtors Garlock Sealing Technologies LLC, Garrison Litigation Management Group, Ltd., and The Anchor Packing Company - Co-Counsel for the Debtors and Debtors-in-Possession - ORRICK, HERRINGTON & SUTCLIFFE LLP Jonathan P. Guy Gregory D. Beaman th Street, N.W. Washington, DC Telephone: (202) GRIER FURR & CRISP, P.A. A. Cotten Wright (N.C. Bar No ) Grier Furr & Crisp, PA 101 North Tryon Street, Suite 1240 Charlotte, NC Telephone: (704) Counsel for Joseph W. Grier, III, Future Asbestos Claimants Representative - Dated: November 20, The debtors in these jointly administered cases are Garlock Sealing Technologies LLC; Garrison Litigation Management Group, Ltd.; and The Anchor Packing Company.

2 Document Page 2 of 122 TABLE OF CONTENTS Page TABLE OF AUTHORITIES... iii INTRODUCTION... 1 STATEMENT OF FACTS... 4 ARGUMENT... 9 I. SECTION 524(G) IS NOT EXCLUSIVE AND DOES NOT PRECLUDE THE PLAN S RELIANCE ON GENERAL SOURCES OF INJUNCTIVE AUTHORITY UNDER THE CODE... 9 A. The Plan Relies On The Discharge Injunction And A Section 105(a) Injunction In Aid Of A Plan Settlement, Not A Section 524(g) Injunction... 9 B. Section 524(g) Authorizes A Supplemental Injunction Applicable To Non-Code Claims, Which The Plan Does Not Seek C. Congress Established By Statute That Section 524(g) Does Not Modify or Preclude The Injunctive Authority Upon Which The Plan Relies D. Legislative History Also Demonstrates That Congress Intended Section 524(g) To Be A Safe Harbor, Not An Exclusive Remedy E. The Combustion Engineering Case Upon Which The Committee Relies Failed To Take Note Of The Rule Of Construction And Its Legislative History F. An Exclusive 524(g) Would Hinder A Successful Reorganization In These Cases And Make The Committee Rather Than The Court The Arbiter Of Confirmation II. THE FCR HAS AUTHORITY TO VOTE ON BEHALF OF FUTURE CLAIMANTS A. Future Claimants, As Holders Of Claims Under The Code, Have A Right To Vote In These Cases B. The FCR Has Been Appointed To Appear On Behalf Of And Represent Future Claimants, And Thus Has Authority To Vote Their Claims i

3 Document Page 3 of 122 Page C. The Committee s Attempt To Disenfranchise Future Claimants Is Yet Another Bid For Preferential Treatment Of Current Claimants CONCLUSION ii

4 Document Page 4 of 122 TABLE OF AUTHORITIES Cases Am. Life League, Inc. v. Reno, 47 F.3d 642 (4th Cir. 1995) Amchem Products, Inc. v. Windsor, 521 U.S. 591(1997)... 5, 6, 27, 32 Appeal of Bolden v. Blue Cross & Blue Shield Assoc. Inc., 848 F.2d 201 (D.C. Cir. 1988) Armstrong v. Manzo, 380 U.S. 545 (1965) Aziz v. Alcolac, Inc., 658 F.3d 388 (4th Cir. 2011)... 14, 15, 16, 17 Citizens Council of Delaware Cty. v. Brinegar, 741 F.2d 584 (3d Cir. 1984) City of New York v. Train, 494 F.2d 1033 (D.C. Cir. 1974) CoStar Grp., Inc. v. LoopNet, Inc., 373 F.3d 544 (4th Cir. 2004) Dickinson v. Univ. of N. Carolina, 91 F. Supp. 3d 755 (M.D.N.C. 2015) Disabled in Action of Metro. New York v. Hammons, 202 F.3d 110 (2d Cir. 2000) Five Flags Pipe Line Co. v. Dep t of Transp., 854 F.2d 1438 (D.C. Cir. 1988) Funbus Sys., Inc. v. State of Cal. Pub. Utilities Comm n, 801 F.2d 1120 (9th Cir. 1986) Gentry v. Siegel, 668 F.3d 83 (4th Cir. 2012) Glenn v. Holder, 738 F. Supp. 2d 718 (E.D. Mich. 2010) Grady v. A.H. Robins Co., 839 F.2d 198 (4th Cir.1988)... 10, 12, 29 Hillman v. IRS, 263 F.3d 338 (4th Cir. 2001)... 14, 15, 16 In re 50-Off Stores, Inc., 231 B.R. 592 (Bankr. W.D. Tex. 1999)... 29, 33, 36 In re A.H. Robins Co., Inc., 88 B.R. 742 (E.D. Va. 1988)... 11, 34 In re A.H. Robins Co., Inc., 880 F.2d 694 (4th Cir. 1989) In re ACandS, Inc., 311 B.R. 36 (Bankr. D. Del. 2004) In re Amatex Corp., 755 F.2d 1034 (3d Cir. 1985) iii

5 Document Page 5 of 122 In re Combustion Eng g, 391 F.3d 190 (3d Cir. 2004)... 22, 27 In re Copy Crafters Quickprint, Inc., 92 B.R. 973 (Bankr. N.D.N.Y. 1988) In re Coral Petroleum, Inc., 60 B.R. 377 (Bankr. S.D. Tex. 1986) In re Forty-Eight Insulations, Inc., 58 B.R. 476 (Bankr. N.D. Ill. 1986) In re Garlock Sealing Technologies LLC, 504 B.R. 71 (Bankr. W.D.N.C. 2014)... 1 In re G-I Holdings, Inc., 292 B.R. 804 (Bankr. D.N.J. 2003)... 32, 35, 36 In re Grossman s Inc., 607 F.3d 114 (3d Cir. 2010)... 10, 28 In re Huckabee Auto. Co., 33 B.R. 141 (Bankr. M.D. Ga. 1981)... 29, 30 In re J.C. Householder Land Trust #1, 502 B.R. 602 (Bankr. M.D. Fla. 2013) In re Jeppson, 66 B.R. 269 (Bankr. D. Utah 1986) In re Johns-Manville Corp., 36 B.R. 743 (Bankr. S.D.N.Y. 1984)... 31, 33, 35 In re Johns-Manville Corp., 68 B.R. 618 (Bankr. S.D.N.Y. 1986)... 21, 32 In re Jones, 32 B.R. 951 (Bankr. D. Utah 1983) In re Kulakowski, 735 F.3d 1296 (11th Cir. 2013) In Re Lykes Bros. S.S. Co., 233 B.R. 497 (Bankr. M.D. Fla. 1997) In re Mortgage & Realty Trust, 125 B.R. 575 (Bankr. C.D. Cal. 1991) In re Piazza, 719 F.3d 1253 (11th Cir. 2013) In re UNR Indus., Inc., 71 B.R. 467 (Bankr. N.D. Ill. 1987)... 21, 22, 30, 34, 35 Insight Sys. Corp. v. United States, 110 Fed. Cl. 564 (2013)... 13, 16, 19 Kane v. Johns-Manville Corp., 843 F.2d 636 (2d Cir. 1988)... 26, 28, 32 Maniilaq Ass'n v. Burwell, 472 F. Supp. 3d 227 (D.D.C. 2014) N. Haven Bd. of Ed. v. Bell, 456 U.S. 512 (1982)... 19, 21 Ortiz v. Fibreboard Corp., 527 U.S. 815 (1999)... 5, 32 iv

6 Document Page 6 of 122 Piedmont Trust Bank v. Linkous (In re Linkous), 990 F.2d 160 (4th Cir. 1993) RadLAX Gateway Hotel, LLC v. Amalgamated Bank, 132 S. Ct (2012)... 16, 19 Sharp v. United States, 580 F.3d 1234 (Fed. Cir. 2009) State of Maryland v. Antonelli Creditors Liquidating Trust, 123 F.3d 777 (4th Cir. 1997) Travelers Ins. Co. v. Bryson Props. XVIII (In re Bryson Props., XVIII), 961 F.2d 496 (4th Cir. 1992) United States v. Enmons, 410 U.S. 396 (1973) United States v. Turkette, 452 U.S. 576 (1981) United States v. Vitek Supply Corp., 151 F.3d 580 (7th Cir. 1988) Universal Church v. Geltzer, 463 F.3d 218 (2d Cir. 2006)... 15, 25 Wahi v. Charleston Area Med. Ctr, Inc., 562 F.3d 599 (4th Cir. 2009) Watson v. Parker (In re Parker), 313 F.3d 1267 (10th Cir. 2002) Wilderness Soc. v. Morton, 479 F.2d 842 (D.C. Cir. 1973) Statutes 11 U.S.C. 101(5)(A)... 10, 11, U.S.C. 101(12) U.S.C. 342(a) U.S.C. 524(a)(2)... 9, U.S.C. 524(g)(2)(B)(ii)(IV)(bb)... 24, U.S.C. 524(g)(1)(B) U.S.C. 524(g)(4)(B)(i) U.S.C. 524(g)(5) U.S.C. 1125(b) v

7 Document Page 7 of U.S.C U.S.C (a)(3)... 1, 26, 27, U.S.C. 1129(a)(8)(A) U.S.C. 1141(d)(1)(A)... 9 Other Authorities 138 Cong. Rec. S passim 138 Cong. Rec. S Cong. Rec. H Cong. Rec. H Cong. Rec. S H.R. Rep. No , at 309 (1977) Marc C. Scarcella and Peter R. Kelso, A Reorganized Mess: The Current State of the Asbestos Bankruptcy Trust System, Mealey s Asbestos Bankruptcy Report (February 2015)... 6 Pub. L. No , 111(a) (Oct. 22, 1994)... 14, 15 vi

8 Document Page 8 of 122 INTRODUCTION Through this motion for partial summary judgment (the Motion ), Debtors and the Future Asbestos Claimants Representative (the FCR ), Mr. Joseph W. Grier, III, seek judgment as a matter of law with respect to two issues: (1) that section 524(g) of the Bankruptcy Code is not exclusive in this bankruptcy case, and does not preclude Debtors from relying on separate sources of authority under the Bankruptcy Code to obtain the injunctions sought in the Second Amended Plan of Reorganization (the Plan ), and (2) that the FCR, appointed to represent the interests of, appear on behalf of, and be a fiduciary to future claimants, 2 has authority to cast a ballot on behalf of those future claimants. Debtors Plan does not rely on section 524(g). Instead, Garlock and Garrison will be reorganized under the normal reorganization provisions, using the discharge injunction, which will bind both current and future asbestos claimants. There will also be an injunction entered under section 105(a) to enforce the Plan s settlement of derivative causes of action owned by the Debtors (the Parent Settlement Enforcement Injunction ). The Plan will set aside more than $357.5 million for current and future asbestos claimants, much more than the $125 million the Court found is sufficient to satisfy Garlock s legal responsibility for mesothelioma claims, the principal liability in these cases. In re Garlock Sealing Technologies LLC, 504 B.R. 71, 73 (Bankr. W.D.N.C. 2014) (the Estimation Opinion ). 3 Debtors will prove at the confirmation hearing that the Plan satisfies all the requirements of section 1129, including that the Plan has 2 Order Granting Debtors Motion for Appointment of Joseph W. Grier, III as Future Asbestos Claimants Representative (Docket No. 512) ( Appointment Order ) 2. 3 The parties have recently stipulated that, for purposes of the confirmation hearing on the Plan, Debtors liability for present and future claims based on diseases other than mesothelioma is 17.65% of $125 million, or $22 million. 1

9 Document Page 9 of 122 been proposed in good faith, is feasible, and if any impaired class rejects the Plan that the Plan is fair and equitable to such class. 4 The Committee contends that the Plan is unconfirmable as a matter of law because Debtors can reorganize and exit bankruptcy only by means of section 524(g). The Committee contends that section 524(g) is the specific remedy Congress provided for resolving bankruptcy cases involving asbestos claims, and relies principally on the well-settled maxim that specific statutory provisions prevail over more general ones. 5 The Committee argues that if Debtors could rely on the discharge injunction and a section 105(a) injunction in aid of a settlement, it would render section 524(g) meaningless and superfluous. 6 The Committee is wrong. Congress intended section 524(g) to be a safe harbor, not an exclusive remedy. Safe harbors by definition do not impact general sources of authority they coexist with such authority. And Congress made its intention clear through a contemporaneous Rule of Construction expressly applicable to section 524(g) providing that it must not be interpreted to abridge any other authority the court has to issue injunctions in connection with a plan of reorganization. Section 524(g) is an option for debtors to use, but not one they are required to invoke. The Committee mistakenly seeks to turn a safe harbor into an impenetrable barrier to confirmation. To be sure, Debtors do not seek summary judgment as to their entitlement to entry of the discharge injunction and Parent Settlement Enforcement Injunction. That will be the subject of the confirmation hearing. Rather, Debtors and the FCR seek a ruling that 524(g) is not exclusive, which will make clear that, if Debtors prove at confirmation that the Plan meets the requirements 4 11 U.S.C. 1129(a)(3), (a)(11), (b)(1). 5 Objections of the Official Committee of Asbestos Personal Injury Claimants to Confirmation of the Debtors Second Amended Plan (Docket No. 4885) ( Committee Objection ) at Id. at 75. 2

10 Document Page 10 of 122 of section 1129 and that the Parent Settlement should be approved, they are entitled to the injunctions sought by the Plan. Debtors and the FCR also seek partial summary judgment with respect to the FCR s authority to vote on behalf of future claimants. The Committee seeks to disenfranchise future claimants by providing that the only person who could vote their claims the FCR lacks authority to do so. But future claimants hold claims and are entitled to vote under the plain terms of the Code. The representative whom this Court appointed to appear for and be a fiduciary to them has the authority to protect their interests by exercising that right to vote. This Motion, in addition to moving the Plan towards confirmation, will materially advance the prospects of a consensual resolution of these cases. The Committee insists that because section 524(g) is exclusive and the FCR cannot vote, no Plan can be confirmed without an affirmative vote by 75% of current asbestos claimants. The Committee thus claims for its constituency a unilateral, unassailable veto over any plan in these cases even a plan that is completely fair, pays asbestos claims in full, and meets all other requirements under section In essence, in the Committee s view, the Court s limited role in this case is to consider reorganization plans acceptable to the Committee. And the FCR is nothing more than a friend of the court, who can provide advice and input but cannot take any real action. Future claimants must rely solely on lawyers for current claimants to protect their interests, even though current claimants are inherently adverse to future claimants. The Committee though representing considerably less of the estimated mesothelioma liability than the FCR does, see Estimation Opinion at 97 claims the final word on whether a plan can be confirmed, and the other parties and the Court have no choice but to concede to the Committee s demands. Not a landscape conducive to negotiations. 3

11 Document Page 11 of 122 Fortunately, as shown in detail below, the Committee s view is not the law. Congress carefully crafted the Code to ensure that bankruptcy courts have the power necessary to approve reorganizations that address the complexities and circumstances of each case. By making clear that no party has a veto, and that future claimants have equal standing with current claimants in the confirmation process, the rulings sought in this Motion will also provide the appropriate framework for negotiations toward a consensual plan as the confirmation hearing approaches. STATEMENT OF FACTS Partial summary judgment is proper if there is no genuine dispute as to any material fact and Debtors are entitled to judgment as a matter of law. Fed. R. Bankr. P. 9014, The facts relevant to this Motion are undisputed. The Plan resulted from a full year of negotiations that took place after the Court found that $125 million is a reasonable and reliable estimate of Garlock s liability for present and future mesothelioma claims. Estimation Opinion at 73. These negotiations occurred among the Debtors, Coltec Industries, Inc. (the parent of Garlock and Garrison), the Committee, and the FCR. The Committee is a committee of current asbestos personal injury claimants, represented by plaintiff law firms. 7 By contrast, the Court appointed Mr. Grier in 2010, shortly after commencement of these cases, to protect the rights of persons who may, subsequent to confirmation of the Debtors plans of reorganization, hold Future Asbestos Claims, defined as claims based on, arising out of, or related to asbestos-related injury, disease or death that has not manifested, become evident, or been diagnosed as of the date an order is entered confirming a plan of reorganization in these cases. 8 The scope of his charge is to represent the interests of, appear on behalf of, and be a fiduciary to the future claimants. 9 7 Amended Order Appointing Official Committee of Asbestos Personal Injury Claimants (Docket No. 260). 8 Appointment Order 2. 9 Id. 4

12 Document Page 12 of 122 Future claimants require separate representation not only because the future claimants are necessarily absent and unknown (as they are persons who will manifest disease in the future), but also because their interests are profoundly adverse to those of current claimants. See Amchem Products, Inc. v. Windsor, 521 U.S. 591, 626 (1997); see also Ortiz v. Fibreboard Corp., 527 U.S. 815, 856 (1999). Current claimants (and their lawyers who receive contingency fees) want quick generous payments, even for claims of doubtful merit, while future claimants have an interest in protecting assets for the future. See Amchem, 521 U.S. at 626. These tensions were fully evident in the plan negotiations following the Estimation Opinion. 10 (attached as Ex. A)

13 Document Page 13 of ; Marc C. Scarcella and Peter R. Kelso, A Reorganized Mess: The Current State of the Asbestos Bankruptcy Trust System, Mealey s Asbestos Bankruptcy Report (February 2015) at (excerpts attached as Ex. B).

14 Document Page 14 of 122 Throughout 2014, Debtors engaged in repeated efforts to negotiate a consensual plan acceptable to all parties. 18 Instead, the FCR agreed to support Debtors Second Amended Plan. The FCR negotiated substantial increases in funding over both the $125 million in the Estimation Opinion and the funding contained in Debtors First Amended Plan. The Second Amended Plan provided that asbestos claimants would receive a Settlement Option and a Litigation Option. 21 The Settlement Option would be funded with $327.5 million, to be distributed according to claims resolution procedures ( CRP ) negotiated with the FCR. $30 million of this funding would come from Coltec, in partial consideration for a release by the Debtors of certain derivative claims (the Parent Settlement ). 22 The Litigation Option would be funded by the payments litigating claimants otherwise would have received from the Settlement Option, plus $30 million and $132 million (nominal) in contingent payments that would become available if necessary over time. In total, the $357.5 million in guaranteed funding in the Plan was $232.5 million greater than the mesothelioma estimation, and $82.5 million greater than the funding in Debtors First Amended Plan, plus the Plan provided for $132 million in contingent payments for litigation. 18 (attached as Ex. C). 19 (attached as Ex. D). 20 (attached as Ex. E). 21 See generally Plan In addition to this $30 million, Coltec also agreed to fund Anchor s costs of dissolution up to $500,000, EnPro (Coltec s ultimate parent) agreed to guarantee all deferred contributions to the Settlement Facility and Litigation Fund by the Reorganized Debtors, and Coltec and its affiliates agreed to subordinate their interests in shared insurance to the Reorganized Debtors obligations to make deferred contributions to the Settlement Facility and Litigation Fund. Plan

15 Document Page 15 of 122 Equally important to the FCR, the Plan s CRP addressed his major substantive concerns about distribution procedures. The CRP contain criteria requiring demonstrable contact with activities that could release asbestos fibers from gaskets or packing. 23 They have real medical criteria for non-mesothelioma diseases, to ensure only non-mesothelioma claimants with legitimate diagnoses receive payments, and thereby prevent dilution of funds intended for mesothelioma claimants. 24 And the CRP do not discriminate among claimants based on the identity of their lawyers, providing that [i]n no event shall the valuation of any Claimant s Claim depend on the identity of the Claimant s attorney. 25 To reorganize Garlock and Garrison, the Plan does not seek a supplemental injunction under section 524(g). Indeed, it does not refer to or rely upon section 524(g) at all. Instead, the Plan relies on the ordinary discharge injunction to reorganize Garlock and Garrison. 26 It also contains a Parent Settlement Enforcement Injunction to enforce the Parent Settlement, and that injunction also does not invoke or rely on section 524(g). 27 On April 10, 2015, the Court entered its Order Approving Disclosure Statement and Establishing Asbestos Claims Bar Date and Procedures for Solicitation (the Solicitation Order ) (Docket No. 4542), thereby approving Debtors Disclosure Statement concerning the Plan and approving solicitation and voting procedures. The Solicitation Order ordered service of the Class 5 ballot on the FCR, but left open the question of whether the FCR has the legal authority or 23 CRP 4.5(c)(1) (requiring performance by the Injured Party himself of one of the following workplace activities that the Bankruptcy Court has found have the potential to release asbestos fibers: (a) removal of Garlock asbestos gaskets that required scraping or brushing, (b) cutting individual gaskets from Garlock asbestos sheet material, or (c) cutting or removal of Garlock asbestos packing, or else proximity to someone performing these activities). 24 CRP Appendix I, II. 25 CRP Plan Plan

16 Document Page 16 of 122 capacity to cast a ballot on behalf of Future Claimants. Id. 15. The FCR cast a ballot on behalf of Future Claimants to accept the Plan on July 1, On October 6, 2015, the Committee filed its Objections to Confirmation of the Debtors Second Amended Plan (Docket No. 4885). Among many other objections, the Committee argued that the Plan is unconfirmable because section 524(g) is exclusive and the Plan does not rely on section 524(g), and also asserted that the FCR does not have authority to vote on behalf of future claimants. ARGUMENT I. SECTION 524(G) IS NOT EXCLUSIVE AND DOES NOT PRECLUDE THE PLAN S RELIANCE ON GENERAL SOURCES OF INJUNCTIVE AUTHORITY UNDER THE CODE The Plan relies on the discharge injunction and Parent Settlement Enforcement Injunction, not the supplemental injunction provided in section 524(g). The Committee argues that this is impermissible because section 524(g) is the specific means provided by Congress for resolving bankruptcy cases involving asbestos claims, and therefore trumps and precludes more general remedies available under the Bankruptcy Code. The Committee is incorrect. Congress expressly provided that section 524(g) does not modify any other authority the Court has to enter injunctions in connection with an order confirming a plan, and made clear that section 524(g) is a safe harbor, not an exclusive remedy. Section 524(g) does not prevent Debtors from proving that the Plan is confirmable under other sources of authority. A. The Plan Relies On The Discharge Injunction And A Section 105(a) Injunction In Aid Of A Plan Settlement, Not A Section 524(g) Injunction The Plan does not seek a section 524(g) injunction, but rather relies on injunctions founded on entirely different sources of authority under the Code. First, the Plan seeks a discharge injunction which, like all discharge injunctions, relies on sections 1141 and 524(a). See 9

17 Document Page 17 of U.S.C. 1141(d)(1)(A) (confirmation of plan discharges debt that arose before date of confirmation), 11 U.S.C. 524(a)(2) (discharge operates as an injunction against the commencement or continuation of an action, the employment of process, or an act, to collect, recover or offset any such debt as a personal liability of the debtor ), 11 U.S.C. 101(12) (defining debt as liability on a claim ); 11 U.S.C. 101(5) (defining claim ). The discharge will bind both current and future claimants because future claimants hold claims within the meaning of the Code that are subject to discharge. See id.; Grady v. A.H. Robins Co., 839 F.2d 198, (4th Cir.1988) (tort claims based on pre-petition debtor conduct are Code claims even if disease manifests post-petition); In re Grossman s Inc., 607 F.3d 114, 125 (3d Cir. 2010) (noting that asbestos claims based on pre-petition exposure are Code claims under Fourth Circuit conduct test and can be discharged if future claimants receive due process); see also infra Part II.A. To be bound, current and future claimants must also receive due process, a universal requirement for claimants to be bound by bankruptcy court orders, regardless of statutory authority. See State of Maryland v. Antonelli Creditors Liquidating Trust, 123 F.3d 777, 783 (4th Cir. 1997). Second, the Parent Settlement Enforcement Injunction relies upon section 105(a) in aid of section Section 105(a) authorizes the Court to issue any order, process, or judgment that is necessary or appropriate to carry out the provisions of this title. The Parent Settlement settles certain derivative claims and Chapter 5 actions against Coltec and other Released Parties that are owned by the Debtors and thus are property of the estate. The Parent Settlement will be approved as a provision of the Plan pursuant to section 1123(b)(3) as set forth in the order of confirmation and will be binding on creditors pursuant to section The Plan provides for the Parent Settlement Enforcement Injunction to issue under section 105(a) to enforce the binding effect of 10

18 Document Page 18 of 122 the Parent Settlement through section 1141, and prevent creditors from asserting claims that were settled under the Plan. There is ample precedent in the Fourth Circuit for resolving a mass tort bankruptcy case using the general reorganization provisions of the Code. The debtor in the landmark case of In re A.H. Robins faced hundreds of thousands of tort claims alleging injury from the intrauterine device known as Dalkon Shield, including future claims held by individuals who had not yet manifested an injury. See In re A.H. Robins Co., Inc., 88 B.R. 742, 744, 747 (E.D. Va. 1988) (noting appointment of FCR). After the court estimated the tort claims, the parties (including the FCR) negotiated a plan of reorganization that established a trust to pay claimants the full value of their claims. Id. at 747, 751. The debtor reorganized by means of the discharge injunction, and certain third parties were protected using injunctions entered under section 105(a). See id. at 752 (finding that all claims based on pre-petition insertion of Dalkon Shield were dischargeable); id. at 751 (third party injunctions); see also In re A.H. Robins Co., Inc., 880 F.2d 694, (4th Cir. 1989) (describing third-party injunctions). The plan obviously did not rely on section 524(g), which had not then been enacted. For purposes of this Motion, what matters is that the Plan does not rely on section 524(g) for entry of either injunction. Debtors will prove their entitlement to that injunctive relief at confirmation. B. Section 524(g) Authorizes A Supplemental Injunction Applicable To Non- Code Claims, Which The Plan Does Not Seek The Plan does not seek the separate supplemental injunction referenced in section 524(g). Section 524(g) permits a court to enter an injunction to supplement the injunctive effect of a discharge under this section. The 524(g) injunction supplement[s] the discharge injunction because it may enjoin not just the Code claims ordinarily affected by a discharge injunction, 11

19 Document Page 19 of 122 see 11 U.S.C. 524(a), but also demands, defined as a demand for payment... present or future, that (A) was not a claim during the proceedings leading to the confirmation of a plan of reorganization; (B) arises out of the same or similar conduct or events that gave rise to the claims addressed by the injunction issued under paragraph (1); and (C) pursuant to the plan, is to be paid by a trust described in paragraph (2)(B)(i). 11 U.S.C. 524(g)(5) (emphasis added). The supplemental injunction may enjoin entities from taking legal action for the purpose of directly or indirectly collecting, recovering, or receiving payment or recovery with respect to any claim or demand that seeks recovery for asbestosrelated damages, and is to be paid instead by a trust. 11 U.S.C. 524(g)(1)(B), (g)(2)(b)(i) (emphasis added). The very title of this section when enacted Supplemental Injunctions recognized that it supplements other sources of injunctive authority under the Code, including the discharge injunction. See Pub. L. No , 111(a) (Oct. 22, 1994). The Plan does not seek this supplemental protection because it does not seek to enjoin any demand that was not a claim during the proceedings leading to the confirmation of a plan of reorganization. Rather, the Plan seeks only to enjoin Code claims, including future claims that are claims under the Code. See Grady, 839 F.2d at The Plan does not attempt to extend any further than that. For example, it does not purport to enjoin claims based on postpetition exposure to asbestos, which would not be Code claims but could be enjoined by a section 524(g) supplemental injunction. Section 524(g) is, quite simply, both irrelevant and inapplicable to confirmation of Debtors Plan. C. Congress Established By Statute That Section 524(g) Does Not Modify or Preclude The Injunctive Authority Upon Which The Plan Relies Though the Plan does not seek a 524(g) injunction, the Committee argues that the Plan cannot be confirmed because it allegedly seeks the same relief provided by 524(g), and that 12

20 Document Page 20 of 122 relief cannot be obtained without complying with section 524(g) s requirements. 28 As explained above, however, the Plan does not seek the same relief provided by section 524(g), as it would not enjoin any demands, only Code claims that bankruptcy courts have long had authority to discharge. See supra Part I.A. Accordingly, the premise of the Committee s argument is simply incorrect. Setting aside this fundamental problem with the Committee s section 524(g) argument, the Committee s argument for exclusivity fails on the merits. The Committee relies almost entirely on the general/specific canon of statutory construction: the commonplace of statutory construction that the specific governs the general. RadLAX Gateway Hotel, LLC v. Amalgamated Bank, 132 S. Ct. 2065, 2070 (2012). 29 This canon avoids... the superfluity of a specific provision that is swallowed by the general one, violating the cardinal rule that, if possible, effect shall be given to every clause and part of a statute. Id. at 2071 (quotation omitted). The Committee asserts that permitting Debtors to rely on general sources of injunctive authority would swallow 524(g) and render it meaningless. 30 But [a]lthough specific statutory provisions often trump more general ones, this presumption is not an absolute rule, and the canon is overcome by textual indications that point in the other direction. In re Piazza, 719 F.3d 1253, 1267 (11th Cir. 2013) (quoting RadLAX Gateway Hotel, 132 S. Ct. at 2072 (internal quotation omitted)); In re Kulakowski, 735 F.3d 1296, (11th Cir. 2013); Insight Sys. Corp. v. United States, 110 Fed. Cl. 564, 578 (2013). Congress gave just such a textual indication with respect to section 524(g). When it adopted section 524(g), Congress simultaneously enacted a Rule of Construction providing 28 Committee Objection at Id. at Id. 13

21 Document Page 21 of 122 that section 524(g) was not to be read to abridge the court s existing authority to issue injunctions in connection with a confirmation order: RULE OF CONSTRUCTION. Nothing in subsection (a) [i.e., section 524(g)] or in the amendments made by subsection (a), shall be construed to modify, impair, or supersede any other authority the court has to issue injunctions in connection with an order confirming a plan of reorganization. Pub. L. No , 111(b) (Oct. 22, 1994). This Rule was enacted specifically in connection with section 524(g) what would become 524(g) was subsection (a), and the Rule of Construction was subsection (b). The Rule of Construction establishes that Congress did not intend for 524(g) to alter in any way a bankruptcy court s existing authority to issue injunctions in connection with a confirmation order. The goal of all statutory interpretation is to ascertain and implement the intent of Congress. Aziz v. Alcolac, Inc., 658 F.3d 388, 392 (4th Cir. 2011). The general rule is that unless there is some ambiguity in the language of a statute, a court s analysis must end with the statute s plain language (the Plain Meaning Rule). Hillman v. I.R.S., 263 F.3d 338, 342 (4th Cir. 2001). The Rule of Construction is unambiguous. It provides that section 524(g) must not be construed as implicitly abridging any other authority the bankruptcy court has to enter injunctions under the Bankruptcy Code. The Rule s coverage is broad: 524(g) is not to be construed to modify, impair, or supersede any other authority the court has to issue injunctions in connection with an order confirming a plan of reorganization. And the scope of what the Rule prohibits is broad as well: 524(g) is not to be read to modify, impair, or supersede any authority to issue injunctions under the Code. Nor does the Rule of Construction limit itself to non-asbestos cases, as the Committee suggests in its Plan objection. The Rule preserves any other authority to issue injunctions in connection with a confirmation order, without exception, eliminating any inference that 524(g) modifies such authority sub silentio. 14

22 Document Page 22 of 122 The discharge injunction and Parent Settlement Enforcement Injunction sought in the Plan rely on other authority the court has to issue injunctions in connection with an order confirming a plan of reorganization. The discharge injunction relies on sections 524(a) and 1141, and the Parent Settlement Enforcement Injunction relies on section 105(a) in aid of section The Rule of Construction expressly preserves these sources of authority. To accept the Committee s argument that 524(g) impliedly restricts those sources of authority would be to contravene the express will of Congress as stated in the Rule of Construction. Congress s intention expressed in the Rule of Construction prevails against the general/specific canon the Committee relies on, which like other interpretative canons is no more than an aid to construction that comes into play only when there is some uncertainty as to the meaning of a particular clause. Insight Sys. Corp., 110 Fed. Cl. at 579 (quoting United States v. Turkette, 452 U.S. 576, 581 (1981), internal quotation omitted). Congress left no such uncertainty here. It made clear that 524(g) was not to be read to abridge any other authority the court has to issue injunctions. Analysis of the Committee s argument should end there. See Aziz, 658 F.3d at 401 ( The parties present contradictory views regarding the TVPA s legislative history. However, because the statutory text is clear, we do not address these arguments. ); Hillman, 263 F.3d at Courts routinely give effect to rules of construction enacted by Congress, because they are guides to Congress s intent, and make further resort to any other tools of statutory construction unnecessary. See, e.g., Universal Church v. Geltzer, 463 F.3d 218, 223 (2d Cir. 2006) (enforcing Bankruptcy Code s general Rules of Construction); Aziz, 658 F.3d at (enforcing Dictionary Act, which provides general rules for construction of Acts of Congress); Am. Life League, Inc. v. Reno, 47 F.3d 642, 646, 649, 654 (4th Cir. 1995) (enforcing rules of construction in Religious Freedom Restoration Act and Access Act); United States v. Vitek Supply Corp., 151 F.3d 580, 585 (7th Cir. 1988) (finding that exclusive remedy language in Federal Debt Collection Procedures Act did not apply because separate portion of statute preserved all procedures for recovering a debt available under other federal law); Five Flags Pipe Line Co. v. Dep t of Transp., 854 F.2d 1438, 1440 (D.C. Cir. 1988) (enforcing rule of construction applicable to entire United States Code and Statutes at Large); Glenn v. Holder, 738 F. Supp. 2d 718, (E.D. Mich. 2010) aff d, 690 F.3d 417 (6th Cir. 2012) (giving effect to Rules of Construction in Hate Crimes Act); Maniilaq Ass n v. Burwell, 472 F. Supp. 3d 227, (D.D.C. 2014) (enforcing rule 15

23 Document Page 23 of 122 D. Legislative History Also Demonstrates That Congress Intended Section 524(g) To Be A Safe Harbor, Not An Exclusive Remedy The legislative history of the Rule of Construction further demonstrates why the Committee s invocation of the general/specific canon is incorrect. The canon does not apply when the specific provision in question creates a so-called safe harbor, because then the specific provision embraced within a general one is not superfluous, as a safe harbor by definition preserves the general authority it coexists with. RadLAX Gateway Hotel, 132 S. Ct. at 2072; see also Insight Sys. Corp., 110 Fed. Cl. at 578. The legislative history of 524(g) makes clear that Congress intended it to be a safe harbor, not an exclusive remedy, and thus the general/specific canon does not apply. The first version of the Rule of Construction was proposed by North Carolina Senator Terry Sanford in The full Senate was considering the first version of section 524(g), which was materially similar in structure to the statute ultimately enacted in 1994 and, like that statute, was sponsored by Senator Heflin. Senator Sanford proposed an amendment that was substantially the same as (and if anything less broadly worded than) the ultimate Rule of Construction: Nothing in the subsection (g) shall affect the court s existing authority to issue an injunction pursuant to an order approving a plan of reorganization. 138 Cong. Rec. S8335. A colloquy between Senator Sanford the sponsor of the rule of construction and Senator Heflin the sponsor of 524(g) then confirmed that section 524(g) was intended to be nothing more than a safe harbor: Mr. SANFORD. Mr. President, I offer an amendment to section 206 [i.e. the section containing the draft of 524(g)]. Section 206 was drafted to solve a specific problem in a case involving mass tort litigation claims. My concern is that this of construction in Indian Self-Determination and Education Assistance Act); Dickinson v. Univ. of N. Carolina, 91 F. Supp. 3d 755, (M.D.N.C. 2015) (enforcing rules of construction added by Congress to Americans With Disabilities Act to override previous judicial interpretations of that Act). 16

24 Document Page 24 of 122 particular solution may preclude others which may work just as well, and I just want to make sure that does not happen. We all know that the Bankruptcy Court is faced with resolving very difficult issues. In fact, because of its virtually unlimited jurisdiction and because insolvency is not a requirement for filing bankruptcy, the Bankruptcy Court is more and more often becoming the forum where large, complex cases often involving social issues are being handled. We are seeing large judgments, mass tort claims, pension shortages, labor disputes, and a host of other problems being played out in the Bankruptcy Court. We in Congress must make it clear to the bankruptcy bench that they have the widest degree of latitude in crafting responsible reorganizations that fit the specific needs of each case. The amendment that I am proposing does just that. It does not prejudice those who wish to utilize the specialized trust arrangements laid out in section 206. It simply clarifies the fact that this is not the only alternative, that other companies in similar situations are not bound to that single resolution, and that the parties and the courts may continue to use their imagination and skill to look at the facts and circumstances in each case to determine what is in the best interests of all parties. There are those who will contend that the court could do that anyway without this amendment. I do not disagree with them, but few of us can guess what any judge under particular circumstances will do. Judges are different. Some place great weight on congressional intent. Others rely exclusively upon a strict construction of the wording of the statute. Some will follow the lead of others while some will chart their own course. Therefore, this amendment is offered simply to avoid the possibility of any confusion in the court s possible interpretation of this statute. I have been contacted by several companies who are concerned that a court s narrow reading of section 206 as drafted could be detrimental both to companies currently in bankruptcy and companies not in bankruptcy. I hope that my colleagues will recognize that this is not intended to be a controversial amendment. In fact, I cannot imagine any disagreement. It is simply a clarification of what the law is, so that we will not be back here in a few years trying to fix something we broke. Mr. President, I thank the distinguished Senator from Alabama for his work on the omnibus bankruptcy reform bill and engage in a colloquy regarding section 206 of the bankruptcy bill. Mr. HEFLIN. I will gladly engage in a colloquy with the Senator from North Carolina. Mr. SANFORD. It is my understanding that the purpose of section 206 is to set out circumstances in which a bankruptcy judge can issue permanent injunctive relief in addition to its existing authority under section 524 with respect to tort claims against the debtor in certain circumstances where the debtor establishes a trust to be used to compensate both past and future claimants. 17

25 Document Page 25 of 122 Mr. HEFLIN. The Senator from North Carolina is correct. Mr. SANFORD. I understand that this provision will be of particular assistance to a company currently in a bankruptcy proceeding which anticipates a plan of reorganization, in certain circumstances, in which the court can grant supplemental permanent injunctive relief against the debtor which creates a trust for those to whom it is or may be liable. Mr. HEFLIN. The Senator from North Carolina is correct. Mr. SANFORD. Among my constituents is a North Carolina company which is also in chapter 11 facing similar mass tort liability claims as Johns-Manville which used the procedure in section 206. This company has advised me that it has proposed a plan of reorganization using a different strategy for compensating those to whom it is or may be liable which would not fit within the language of section 206. If this section were strictly interpreted by its judge, the result would be catastrophic to this company s efforts to reorganize. I just want to be sure that when the chairman prepared this section, it was his intent and interpretation that section 206 not provide an exclusive remedy. Mr. HEFLIN. The Senator from North Carolina is correct. Mr. SANFORD. In other words, section 206 should in no way be interpreted to tie judges hands from issuing supplemental permanent injunctive relief in other cases involving current and future tort claims where appropriate. Therefore, section 206 is not the only alternative for handling cases involving mass tort claims so that other companies in similar situations are not bound to that single resolution and that the parties and the courts may continue to use their imagination and skill to look at the facts and circumstances in each case to determine what is in the best interests of all parties. Mr. HEFLIN. The Senator from North Carolina is correct. Section 206 is not intended to prohibit bankruptcy courts from issuing supplemental permanent injunctive relief as deemed necessary. Section 206 is not an exclusive remedy, though it is a safe harbor. Other courts may certainly craft other remedies in cases involving mass tort claim litigation. I appreciate the Senator raising this issue so that we could clarify the meaning of section 206 to prevent any future misunderstanding. Mr. SANFORD. I would like to thank the chairman for this important clarification. 138 Cong. Rec. S (emphasis added). The Senate passed Sen. Sanford s amendment, and the amendment was in the final version of the bankruptcy reform bill that the Senate unanimously passed later that day. Id.; 138 Cong. Rec. S8359, S

26 Document Page 26 of 122 This legislative history of the Rule of Construction decisively defeats the Committee s attempt to invoke the general/specific canon. 32 As the Supreme Court has stated, when a statute is a safe harbor as section 524(g) was intended to be the general/specific canon does not apply because the specific authority is not rendered superfluous by the preservation of more general authority that Congress intends. See RadLAX Gateway Hotel, 132 S. Ct. at 2072; see also Insight Sys. Corp., 110 Fed. Cl. at 578. Senator Sanford and Senator Heflin confirmed exactly this, that section 524(g) is not an exclusive remedy but is in fact a safe harbor. 138 Cong. Rec. S Section 524(g) is not the only alternative for handling cases involving mass tort claims, and other companies in similar situations are not bound to that single resolution, but instead the parties and the courts may continue to use their imagination and skill to look at the facts and circumstances in each case to determine what is in the best interests of all parties. Id. Bankruptcy courts continue to have the widest degree of latitude in crafting responsible reorganizations that fit the specific needs of each case. Id. The history is especially significant because it confirms that the principal sponsor of section 524(g), Senator Heflin, viewed it as a safe harbor and not an exclusive remedy. See N. Haven Bd. of Ed. v. Bell, 456 U.S. 512, (1982) (statements of sponsor are an authoritative guide to the statute s construction ); Disabled 32 Though the House did not adopt section 524(g) in 1992, Congress adopted it in 1994, again proposed by Senator Heflin, and with a materially identical (or, if anything, broader) Rule of Construction. The legislative history from 1992 is thus relevant to interpretation of the Rule of Construction ultimately enacted. See United States v. Enmons, 410 U.S. 396, 419 (1973) (relying on legislative history from previous Congress); Citizens Council of Delaware Cty. v. Brinegar, 741 F.2d 584, 596 (3d Cir. 1984) ( An interpretation given by a sponsor of predecessor legislation is to be given weight at least where the operative language was substantially carried forward into the enacted legislation ); Funbus Sys., Inc. v. State of Cal. Pub. Utilities Comm n, 801 F.2d 1120, 1128 (9th Cir. 1986); Sharp v. United States, 580 F.3d 1234, 1239 (Fed. Cir. 2009) (considering legislative history from previous Congress that considered language almost identical to the provision at issue); Appeal of Bolden, 848 F.2d 201, 209 n.4 (D.C. Cir. 1988); Wilderness Soc. v. Morton, 479 F.2d 842, 856 (D.C. Cir. 1973). 33 Safe harbors are, by definition, permissive and not mandatory. See, e.g., CoStar Grp., Inc. v. LoopNet, Inc., 373 F.3d 544, 552 (4th Cir. 2004) (safe harbor from copyright infringement liability does not preclude assertion of other defenses by defendants who do not qualify for safe harbor); Wahi v. Charleston Area Med. Ctr, Inc., 562 F.3d 599, (4th Cir. 2009) (argument that safe harbor immunity was exclusive fails under the plain language of the statute ). 19

27 Document Page 27 of 122 in Action of Metro. New York v. Hammons, 202 F.3d 110, 124 (2d Cir. 2000) (statements by sponsor or floor manager are among the most authoritative and reliable materials of legislative history ); City of New York v. Train, 494 F.2d 1033, 1039 (D.C. Cir. 1974). The colloquy between Senators Sanford and Heflin also dispenses with the Committee s strained reading of the Rule of Construction as applying to preserve general injunctive authority only in non-asbestos cases. 34 Senator Sanford made clear that the purpose of the Rule of Construction was to preserve remedies for companies facing similar mass tort liability claims as Johns-Manville, i.e., asbestos claims. 138 Cong. Rec. S ; see also id. (noting that other companies in similar situations are not bound to that single resolution ). The broad wording of the Rule accomplished his purpose, preserving all other injunctive authority in cases involving asbestos claims as well as all other kinds of cases. The House did not pass the Senate s version of the bankruptcy reform bill in 1992, but when the next Congress took it up and passed a bill containing 524(g), Congress also enacted the Rule of Construction, in a form if anything broader than Sen. Sanford s rule. See Rule of Construction (providing that section 524(g) should not be construed to modify, impair, or supersede any other authority the court has to issue injunctions in connection with an order confirming a plan of reorganization ). Representative Brooks, sponsor of the bill in the House, introduced a statement once again making clear that Congress intended the Rule to preserve all preexisting authority to issue injunctions in connection with a plan of reorganization under the Bankruptcy Code: Section 111 contains a rule of construction to make clear that the special rule being devised for the asbestos claim trust/injunction mechanism is not intended to alter any authority bankruptcy courts may already have to issue injunctions in connection with a plan or [sic] reorganization. Indeed, Johns- Manville and UNR firmly believe that the court in their cases had full authority to 34 See Committee Objection at

28 Document Page 28 of 122 approve the trust/injunction mechanism. And other debtors in other industries are reportedly beginning to experiment with similar mechanisms. The Committee expresses no opinion as to how much authority a bankruptcy court may generally have under its traditional equitable powers to issue an enforceable injunction of this kind. The Committee has decided to provide explicit authority in the asbestos area because of the singular cumulative magnitude of the claims involved. How the new statutory mechanism works in the asbestos area may help the Committee judge whether the concept should be extended into other areas. 140 Cong. Rec. H10766 (emphasis added). Representative Brooks s statements again supported the plain meaning of the Rule of Construction. He said that 524(g) is not intended to alter any authority bankruptcy courts may already have to issue injunctions in connection with a plan. Id. (emphasis added). Again, the effect of the Rule was not limited to non-asbestos cases. Rather, it preserved any existing authority and left it to the courts to decide how much authority a bankruptcy court may generally have under its traditional equitable powers to issue an enforceable injunction of this kind. Id. Congress enacted the safe harbor created by 524(g) to provide assurance that a bankruptcy court had authority to issue an injunction with respect to non-code claims ( demands ) as well as Code claims. In particular, Congress intended to bless retroactively the supplemental injunction entered in the Johns-Manville case. The Johns-Manville court declined to decide whether future claims were dischargeable claims or not, instead entering an injunction under section 105(a) that applied to future claims, regardless of their status under the Code. See In re Johns-Manville Corp., 68 B.R. 618, 628 (Bankr. S.D.N.Y. 1986) ( [W]hether these parties in interest [i.e. future claimants] have claims that are cognizable in a reorganization proceeding... is not an issue which needs to be determined in order to confirm this Plan. ). The injunction supplement[ed] the injunctive provisions of 524 of the Code, staying, restraining and enjoining asbestos-related actions regardless of whether they were Code claims or not. Id. at 624. The court did not rely on the discharge injunction to reach this result. See id.; In re UNR 21

29 Document Page 29 of 122 Indus., Inc., 71 B.R. 467, 474 n.15 (Bankr. N.D. Ill. 1987) (noting that Johns-Manville plan did not rely on discharge injunction). Subsequently, questions were raised about whether the bankruptcy court had authority to enter such an injunction that reached beyond Code claims, so Congress enacted section 524(g) at the request of Johns-Manville to provide retroactive and prospective statutory authority for an injunction that applied to demands as well as claims. Congress found that because of uncertainty regarding the court s authority to enter the Johns-Manville injunction, Johns- Manville s stock price had suffered, which in turn hurt the trust established to pay claimants because it held Johns-Manville stock as one of its principal assets. See 140 Cong. Rec. H10765 (statement introduced by Rep. Brooks) (noting lingering uncertainty in the financial community as to whether the [Johns-Manville] injunction can withstand all challenges, which had apparently made it more difficult for the company to meet its needs for capital and has depressed the value of its stock ); 140 Cong. Rec. S4523 (statement of Sen. Brown) ( Without a clear statement in the code of a court s authority to issue such injunctions, the financial markets tend to discount the securities of the reorganized debtor. This in turn diminishes the trust s assets and its resources to pay victims. The amendment is intended to eliminate that speculation so that the marketplace values the trust s assets fairly. ). Congress enacted 524(g) and its accompanying grandfather clause (524(h)) to provide certainty that the particular Johns-Manville 105(a) injunction was authorized by statute. Debtors Plan does not rely on the safe harbor created by 524(g), because it does not need to. The Plan only attempts to enjoin Code claims, and thus does not need a supplemental injunction to enjoin non-code demands. The Parent Settlement Enforcement Injunction also does not rely in any way on 524(g). The Rule of Construction and its legislative history demonstrate 22

30 Document Page 30 of 122 that 524(g) does not preclude Debtors from seeking to prove their entitlement to these injunctions. To the contrary, this Court still has the widest degree of latitude in crafting responsible reorganizations that fit the specific needs of this case. 138 Cong. Rec. S (Sen. Sanford). E. The Combustion Engineering Case Upon Which The Committee Relies Failed To Take Note Of The Rule Of Construction And Its Legislative History The only direct authority the Committee offers for its position is In re Combustion Engineering, Inc., 391 F.3d 190 (3d Cir. 2004). 35 Unlike Debtors Plan, the plan in that case attempted to obtain injunctions under section 105(a) protecting third parties from independent asbestos liability i.e., liability that was not derivative of the debtor s liability. The court held there was likely no bankruptcy jurisdiction over non-derivative claims against third parties. Id. at It went on, however, to conclude on the basis of the general/specific canon that section 524(g) precluded resort to the general injunctive authority found in section 105(a): Because 524(g) expressly contemplates the inclusion of third parties liability within the scope of a channeling injunction and sets out the specific requirements that must be met in order to permit inclusion the general powers of 105(a) cannot be used to achieve a result not contemplated by the more specific provisions of 524(g). Id. at ; see also id. at 237 n.49 (same, also invoking general/specific canon). Combustion Engineering is not applicable here because it dealt with the legally distinct question of whether a bankruptcy court may enjoin non-derivative asbestos personal injury claims against a third party. Here, the Plan does not purport to enjoin any non-derivative liability of third parties. Indeed, Combustion Engineering could have reached its result either by finding there was no bankruptcy jurisdiction over the independent claims against third parties, or by 35 Committee Objection at

31 Document Page 31 of 122 finding that section 105(a) (without any consideration of 524(g)) does not provide authority to enjoin such claims. But to the extent the Committee relies on the case for its statement about the effect of 524(g), the analysis fails for all the reasons noted above. The Rule of Construction and its legislative history demonstrate that section 524(g) does not support invocation of the general/specific canon to restrict independent sources of injunctive authority under the Code. Section 524(g) is not an exclusive remedy, but a safe harbor, see 138 Cong. Rec. S , which explains both why Congress enacted it and why it is not rendered meaningless by the court s more general authority to issue injunctions under the Code. Indeed, Combustion Engineering did not even cite, much less address, the Rule of Construction. It also did not cite the legislative history recounted above. The decision is therefore an unreliable and erroneous guide to Congress s intent in enacting section 524(g). See Universal Church, 463 F.3d at 225 n.3 (disregarding case that did not consider relevant rule of construction or legislative history). F. An Exclusive 524(g) Would Hinder A Successful Reorganization In These Cases And Make The Committee Rather Than The Court The Arbiter Of Confirmation Far from permitting the widest degree of latitude to craft a responsible reorganization in this case, as Congress intended, the Committee seeks to convert 524(g) into an exclusive remedy that gives its constituency a veto over any plan a right no other creditor constituency has in Chapter 11. The Committee claims that Debtors must rely on section 524(g), and argues that it requires obtaining a 75% affirmative vote of current claimants. 36 If this view were correct, the fairness and equity of the Plan would not matter only whether lawyers for current claimants 36 Debtors do not agree with and expressly dispute the Committee s interpretation of the voting requirement in 524(g), which does not refer to current claimants, but rather to the claimants whose claims are to be addressed by a trust. 11 U.S.C. 524(g)(2)(B)(ii)(IV)(bb). This language is broad enough to include future claimants, whose claims may be voted by the FCR, see infra. 24

32 Document Page 32 of 122 agree to it. They, not the Court, would ultimately decide whether a plan is confirmed. An exclusive 524(g) would disable the Court and parties from achieving an otherwise fair reorganization. The Committee s interpretation of 524(g) would also undermine the general policy of Chapter 11 to foster negotiated solutions, because a single constituency would hold veto power. See, e.g., In re Copy Crafters Quickprint, Inc., 92 B.R. 973, 979 (Bankr. N.D.N.Y. 1988) (noting policy of Chapter 11 towards fair settlement through a negotiation process between informed interested parties ); In re J.C. Householder Land Trust #1, 502 B.R. 602, (Bankr. M.D. Fla. 2013) (Chapter 11 encourages consensual negotiation and fair bargaining, Code thus attempts to balance the powers and limitations of debtors and creditors alike, and creditor should not be permitted to acquire blocking position that would mean it alone can now dictate the terms of any potential reorganization ). The possibility of non-consensual confirmation under 1129(b) is an essential driver of such negotiations. See In re Jones, 32 B.R. 951, 954 (Bankr. D. Utah 1983) (noting major purpose of 1129(b) as a bargaining club which dissidents on the one hand or plan proponents on the other may employ to reach agreement rather than face the trials and tribulations of a section 1129(b) proceeding ) (quotation omitted). Under the Committee s view of 524(g), there would be no negotiation the current claimants (more precisely, the plaintiff lawyers who represent them) could rest on ultimatums. The Committee s version of 524(g) could not be more different from the one Congress intended. Congress intended to create a safe harbor, not an exclusive remedy, and intended to ensure that the parties and the courts may continue to use their imagination and skill to look at the facts and circumstances in each case to determine what is in the best interests of all parties. 138 Cong. Rec. S (Sen. Sanford); see also id. (Sen. Heflin: Other courts may certainly 25

33 Document Page 33 of 122 craft other remedies in cases involving mass tort claim litigation. ). Congress intended not to alter parties ability to rely on general sources of injunctive authority in the Code, including those upon which Debtors rely in the Plan. The Committee s view that section 524(g) gives its constituency a veto would also dramatically magnify the power of current claimants as against future claimants. This result is equally inconsistent with Congressional intent. Section 524(g) displays above all a desire to protect future claimants. See, e.g., 11 U.S.C. 524(g)(2)(B)(ii)(V) (requiring procedures to ensure equal treatment of current and future claimants); 11 U.S.C. 524(g)(4)(B)(i) (requiring appointment of FCR). It would be inconsistent if Congress intended to empower current claimants at the expense of future claimants by giving current claimants a veto. Given the recognized conflicts between current and future claimants, that would be like letting the fox guard the henhouse. See, e.g., Kane v. Johns-Manville Corp., 843 F.2d 636, 644 (2d Cir

34 Document Page 34 of ) ( [W]e cannot depend on [a current claimant] sincerely to advance the interests of the future claimants. ). And indeed, in case after case, current claimant representatives have approved deals that were highly unfair to future claimants. See, e.g., In re Combustion Eng g, 391 F.3d at 242 (vacating plan confirmation in part because of discrimination against future claimants); In re ACandS, Inc., 311 B.R. 36, 42 (Bankr. D. Del. 2004) (denying confirmation of plan that discriminated between present and future claims); Amchem, 521 U.S. at (noting unfairness to future claimants in attempted class action settlement). Current claimants do not have a veto, because Congress did not intend for section 524(g) to exclude other solutions under the Code. The Plan can still be confirmed despite rejection by current claimants, so long as it is fair and equitable to them and otherwise satisfies the Code s requirements. 11 U.S.C All asbestos creditors have the same rights, the same protections, and the same negotiating leverage that creditors in any other reorganization case have. The FCR in particular, who represents creditors, has leverage to insist on and obtain reasonable means to protect his constituency s interests, and need not be held hostage to a potential veto by current claimants. II. THE FCR HAS AUTHORITY TO VOTE ON BEHALF OF FUTURE CLAIMANTS In addition to trying to obtain a veto by asking the Court to treat section 524(g) as exclusive, the Committee also seeks to enhance current claimants power by disenfranchising future claimants. The Committee argues that the FCR lacks authority to vote on behalf of future claimants meaning future claimants would not vote at all, since they have not manifested disease and cannot identify themselves. The Committee s position would deprive future claimants of one of the most important rights a creditor has in a bankruptcy case, once again tilting the balance of power toward current claimants, at the expense of future claimants. The 27

35 Document Page 35 of 122 Committee claims that current claimants should instead be trusted to protect the interests of future claimants, offering this as another reason why current claimants should have a veto. 38 But this defies the law and common sense. See Kane, 843 F.2d at 644. The Court appointed an FCR with real power to protect his constituency s interests, and that power includes the authority to vote their claims. A. Future Claimants, As Holders Of Claims Under The Code, Have A Right To Vote In These Cases The Code grants holders of impaired claims the right to vote to accept or reject a plan of reorganization. 11 U.S.C. 1126, 1129(a)(8)(A); Kane, 843 F.2d at 646 ( A plan of reorganization must either be accepted by each impaired class of claims or interests... or meet certain rigid requirements with respect to each non-accepting class. ). 39 For purposes of the Code, claim means a right to payment, whether or not such right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured, or unsecured. 11 U.S.C. 101(5)(A). In order to effectuate the Code s purpose of giving debtors a fresh start free from pre-discharge liability, Congress intended the Code s definition of claim to be the broadest possible,... contemplat[ing] that all legal obligations of the debtor, no matter how remote or contingent, will be able to dealt with in the bankruptcy case. H.R. Rep. No , at 309 (1977) (emphasis added). Reflecting the Code s inclusion of contingent rights to payment within the definition of claim and Congress expressed intention to define claim as broadly as possible, individuals whose exposures occurred pre-petition but whose injuries have yet to manifest at the time of 38 See Committee Objection at 61 ( [T]he 75% voting requirement also protects the interests of future claimants... ). 39 Debtors contend that Current GST Asbestos Claims and Future GST Asbestos Claims are not impaired, as that term is defined in Section 1124 of the Code, in which case neither current nor future claimants would have the right to vote. Here, Debtors seek judgment as a matter of law that the FCR is entitled to exercise whatever right to vote future claimants may possess. 28

36 Document Page 36 of 122 filing such as future claimants hold claims for purposes of the Code under settled Fourth Circuit law. Grady, 839 F.2d at ; see also Grossman s, 607 F.3d at 125 (noting that asbestos claims based on pre-petition exposure are Code claims under Fourth Circuit conduct test); Watson v. Parker (In re Parker), 313 F.3d 1267, (10th Cir. 2002). Indeed, the Court s order appointing the FCR recognized as much, stating that the FCR represents holders of claims based on, arising out of, or related to asbestos-related injury, disease, or death that has not manifested, become evident, or been diagnosed as of the date an order confirming a plan of reorganization in these cases. Appointment Order 2 (emphasis added). Accordingly, future claimants the individuals represented by the FCR are entitled to vote their claims if they are impaired. Claimants right to vote is important, and is grounded in the Due Process Clause s guarantee that parties facing deprivation of a property interest like discharge of a claim have an opportunity to be heard at a meaningful time and in a meaningful manner. Armstrong v. Manzo, 380 U.S. 545, 552 (1965); see also In re Coral Petroleum, Inc., 60 B.R. 377, 383 (Bankr. S.D. Tex. 1986) ( [T]he purpose of the voting requirements in the Code... is to protect the rights of legitimate creditors to determine the outcome of the plan. ). 40 In the context of a chapter 11 plan proposed for confirmation, [the opportunity to be heard at a meaningful time and in a meaningful manner ] means that the affected creditor ought to have the right to vote on the plan. In re 50-Off Stores, Inc., 231 B.R. 592, 595 (Bankr. W.D. Tex. 1999) (adding that depriving impaired creditors of the opportunity to vote on a plan of reorganization would be an unconstitutional deprivation of those creditors right to procedural due process ); In re Huckabee Auto. Co., 33 B.R. 141, 147 (Bankr. M.D. Ga. 1981) ( One of the basic rights of creditors which 40 The protections afforded by the Due Process Clause extend to creditors in bankruptcy. See, e.g., Piedmont Trust Bank v. Linkous (In re Linkous), 990 F.2d 160, (4th Cir. 1993). 29

37 Document Page 37 of 122 affords them protection, is their right to vote either to accept or reject the plan of reorganization. ). Impaired creditors right to vote also is a critical component of Chapter 11, which contemplates parties negotiat[ing], participat[ing] and protect[ing] their own interests through the development and implementation of the plan of reorganization. Huckabee, 33 B.R. at 147; see also In re Jeppson, 66 B.R. 269, 297 (Bankr. D. Utah 1986) ( The disclosure, solicitation and voting requirements of the Bankruptcy Code are a streamlined and highly simplified procedure for business reorganization. The opportunity for parties in interest to appear and effectively express a dissenting voice would be drastically diminished if these minimal creditor protections were ignored. (emphasis added)); see also supra Part I.F (explaining that goal of Chapter 11 is to facilitate development of a consensual plan through negotiation between informed and interested parties). Indeed, Congress and courts view the right of creditors to vote on a plan of reorganization as so critical to protecting creditors rights and the integrity of the reorganization process, that the Code and courts impose numerous restrictions on the solicitation and balloting process. See, e.g., 11 U.S.C. 342(a) (requiring court to provide notice as is appropriate of any order for relief ); 11 U.S.C. 1125(b) (requiring Debtors to provide holders of claims with adequate information, as determined by the court, regarding a plan before soliciting votes on the plan); Travelers Ins. Co. v. Bryson Props. XVIII (In re Bryson Props., XVIII), 961 F.2d 496, 502 (4th Cir. 1992) (explaining that although separate classification of similar claims [for voting purposes] may not be prohibited, it may not be undertaken for reasons independent of the debtor s motivation to secure the vote of an impaired, assenting class of claims. (internal quotation omitted)). 30

38 Document Page 38 of 122 Thus, to the extent the Court concludes that Classes 4 and 5 are impaired, future claimants have the same right to vote that current claimants have. That right is guaranteed by the explicit terms of the Bankruptcy Code and the Due Process Clause. B. The FCR Has Been Appointed To Appear On Behalf Of And Represent Future Claimants, And Thus Has Authority To Vote Their Claims The Court appointed the FCR to represent future claimants because they have not manifested injury, are unknown, and therefore cannot protect their own interests. See In re Johns-Manville Corp., 36 B.R. 743, 749 (Bankr. S.D.N.Y. 1984) (if future claimants are not represented, they will be denied all opportunity either to help design the ship that sails away from these reorganization proceedings with their cargo on board or to assert their interests during a pre-launching distribution ). The FCR is not a creature of 524(g), as the Committee would have it, but instead a well-recognized means of providing due process to future claimants who cannot identify themselves because they have not manifested disease. The court has authority to appoint an FCR to provide due process to future claimants under its inherent powers as well as section 105(a) and other Code sections. See, e.g., A.H. Robins, 88 B.R. at 744 (appointing FCR in non-asbestos case involving Dalkon Shield intrauterine device); In re Johns-Manville Corp., 36 B.R. at , 757 (affirming appointment of FCR because future claimants are indeed the central focus of the entire reorganization and the power to appoint such a representative is inherent in every court ), aff d 52 B.R. 940 (S.D.N.Y. 1985); UNR, 71 B.R. 467 at 477 (FCR appointed under section 105(a) powers); In re Amatex Corp., 755 F.2d 1034, 1041 (3d Cir. 1985) (appointing FCR in asbestos case before 524(g) enacted); In re Forty-Eight Insulations, Inc., 58 B.R. 476, 477 (Bankr. N.D. Ill. 1986) (appointing FCR under 105(a)). Even after 524(g) was enacted, courts have continued to recognize that a bankruptcy court s power to appoint an FCR comes from its inherent powers and section 105(a), not just 31

39 Document Page 39 of 122 section 524(g). See In re G-I Holdings, Inc., 292 B.R. 804, 814 (Bankr. D.N.J. 2003) (finding that appointment of FCR authorized by 105(a) as well as 524(g), and 524(g) did not restrict the scope of an FCR s authority). Indeed, in this case, Mr. Grier was appointed under 105(a), as well as 524(g). Appointment Order 2. Future claimants require separate representation not only because they are absent and unknown, but also because their interests are adverse to those of current claimants, with current claimants wanting quick and easy payment and future claimants concerned with preserving assets for the future. It is this conflict between current and future claimants that the Supreme Court cited as one basis for rejecting efforts to obtain the resolution of asbestos personal injury liabilities in the context of a non-bankruptcy class action settlement. See Amchem, 521 U.S. at 626; see also Ortiz v. Fibreboard Corp., 527 U.S. 815, 856 (1999); Kane, 843 F.2d at (court cannot depend on [current claimants] sincerely to advance the interests of the future claimants ); Amatex, 755 F.2d at 1043 (fundamental adversity between future claimants and current claimants requires separate representation); Johns-Manville, 36 B.R. at 749 n.3 (noting inherent adversity between current and future claimants, requiring separate representation). That conflict is resolved where future claimants have independent representation and their representative is fully enfranchised to appear on their behalf. Future claimants can be bound by a confirmation order (or the discharge injunction) only when they receive due process, and the appointment of an FCR is a component of providing that to them. See In re Johns-Manville Corp., 68 B.R. at (holding that publication notice and appointment of FCR who took active role in case provided due process to future claimants, permitting court to bind them to injunction). 32

40 Document Page 40 of 122 As a requirement of due process for future claimants, an FCR necessarily must have broad and unfettered authority to represent the interests of his constituency. Recognizing that, the Court defined Mr. Grier s authority in expansive terms, appointing him to represent the interests, appear on behalf of, and be a fiduciary to the holders of Future Asbestos Claims. Appointment Order 2. This broad grant of authority in the Appointment Order includes the authority to vote on behalf of the claimants the FCR was appointed to represent. The right to vote is one of the most fundamental ways a creditor protects his or her interests in a Chapter 11 case, and future claimants as Code claimants have this right. See In re 50-Off Stores, Inc., 231 B.R. at 595 (creditor s right to vote is component of procedural due process). An FCR who could not exercise this right would be unable to appear on behalf of his constituents to exercise one of their most important rights. The Committee s argument that the FCR cannot vote because the Appointment Order does not specifically mention voting is contradicted by the broad language of the grant, providing that the FCR is to represent, appear on behalf of, and serve as a fiduciary to future claimants. Demonstrating that it is perfectly appropriate for an FCR to vote, FCRs in many cases involving future tort claims have voted on behalf of their constituents. See, e.g., In Re Lykes Bros. S.S. Co., 233 B.R. 497, 504 (Bankr. M.D.F.L. 1997) (confirming plan in which FCR cast ballot on behalf of future claimants in favor of reorganization plan); In re The Roman Catholic Bishop of Stockton, Case No C-11, Order Authorizing Appointing a Legal Representative to Represent the Interests of Future Abuse Claimants and Minors, Dkt. # 263 (E.D. Cal. May 8, 2014) (attached as Ex. F) (authorizing FCR to file proofs of claim and ballots by or for future claimants); In re The Catholic Bishop of Spokane, Case No PCW11, Final Order Appointing a Legal Representative for Future Tort Claimants and Minors, Dkt. #

41 Document Page 41 of 122 (Bankr. E.D. Wash. June 17, 2005) (attached as Ex. G) (same); In re Am. W. Dev. Inc., Case No. BK-S MKN, Order Granting Debtor s Motion to Approve Stipulation between Debtor and Future Claims Representative Regarding Voting Eligibility, Dkt. # 605 (Bankr. D. Nev. Aug. 29, 2012) (attached as Ex. H) (approving stipulation granting FCR authority to vote on behalf of future claimants); In re Roman Catholic Church of the Diocese of Tucson, Case No bk JMM, Ballot Report and Certification of Acceptances and Rejections of Chapter 11 Plan for Debtor s Third Amended and Restated Plan of Reorganization dated May 25, 2005, Dkt. # 733 (Bankr. D. Ariz. July 8, 2005) (attached as Ex. I) (noting that FCR voted to accept plan on behalf of future claimants); In re Roman Catholic Archbishop of Portland in Oregon, Case No elp11, Order Appointing Future Claimants Representative, Dkt. # 723 (Bankr. D. Or. Dec. 20, 2004) (attached as Ex. J) (authorizing FCR to file proofs of claim and ballots by or for future claimants). Debtors are aware of no authority denying an FCR the right to vote on behalf of his or her constituency. The FCR s authority to vote is further supported by the analogous authority of class representatives to vote in bankruptcy cases. Named plaintiffs in class actions are permitted to file class proofs of claim, see Gentry v. Siegel, 668 F.3d 83, 90 (4th Cir. 2012), and if the class has been certified, may vote to approve a plan of reorganization on behalf of class members. See In re A.H. Robins Co., Inc., 88 B.R. at 744; In re Mortgage & Realty Trust, 125 B.R. 575, (Bankr. C.D. Cal. 1991). As with future claimants, [f]ull participation in a Chapter 11 plan confirmation includes voting for or against a plan of reorganization.... This voting normally is exercised through the class representatives and their counsel. Id. Like an FCR, class representatives do not have authority to vote granted expressly by absent and potentially unknown class members. Rather, like an FCR, class representatives are authorized, by operation 34

42 Document Page 42 of 122 of law, to bind persons in a representative capacity with respect to the matters within their purview, and thus may exercise the right to vote in a Chapter 11 case. The Committee also argues that the FCR cannot vote because future claimants have not authorized him to do so. But the FCR exists precisely because his constituents cannot be identified and cannot themselves exercise their rights or delegate to an agent as a matter of contract or agency law. See Johns-Manville, 36 B.R. at 745 (future claimants may be unaware of their entitlement to recourse against the debtor). No-one but the FCR can vote on behalf of unidentifiable future claimants. Requiring their explicit authorization before he can vote on their behalf would be tantamount to saying they get no vote. Not only would that be unfair, it contradicts the Code, which guarantees the voting rights of impaired claimants, including future claimants. Nor can current claimants be trusted to protect future claimants interests, since they are adverse. See, e.g., id. at 749. The Committee also argues that section 524(g) precludes the Court from authorizing the FCR to vote because it does not expressly provide that an FCR may vote to confirm a plan. As established above, however, the FCR is not a creature of 524(g), but rather a requirement of due process for future claimants, whose appointment is within the inherent and equitable authority of the bankruptcy court. UNR, 71 B.R. at 477; Johns-Manville Corp., 36 B.R. at 749. As the previous FCRs who have voted show, the court can authorize the FCR to vote, and has done so with the broad Appointment Order in this case. 41 The reference to appointment of the FCR in 41 The Committee s reliance on section 524(g) also is misplaced because the plain language of the statute does not bar a bankruptcy court from authorizing a legal representative to vote on future claimants behalf. Rather, the statute requires that a court appoint a legal representative without addressing what powers such a representative can exercise. At most, therefore, this provision illustrates that Congress believes appointing a legal representative for future claimants is essential to protecting such claimants interests. Accordingly, even if section 524(g) were relevant to this case which it is not the statute leaves it to the bankruptcy court s sound discretion to determine the scope of a legal representative s powers. See In re G-I Holdings, 292 B.R. at

43 Document Page 43 of 122 section 524(g)(4)(B)(i) is best understood as a condition for applicability of the safe harbor not a source of independent authority to appoint an FCR, much less a restriction on his powers. Courts have noted that section 524(g) does not define the scope of an FCR s charge. See G-I Holdings, 292 B.R. at 814. Finally, the Committee argues that the Appointment Order limits the FCR s powers to those of a creditor s committee, and because committees do not vote, the FCR should not either. But the Committee misreads the Appointment Order. The Appointment Order s general grant of authority is broad: the FCR is appointed to represent the interests of, appear on behalf of, and be a fiduciary to the holders of Future Asbestos Claims. 42 The Appointment Order also gives the FCR the powers and duties of a committee set forth in section 1103 of the Bankruptcy Code as are appropriate for a Future Asbestos Claimants Representative. 43 But these powers supplement the FCR s more general powers, and cannot be read to limit them. This clause of the order ensures that the FCR does not lack any powers of a committee, which would otherwise result in unequal treatment of current and future claimants, since current claimants have both their attorneys and a Committee. Because future claimants do not have their own attorneys, the FCR must serve not only as a committee but also as a broader fiduciary and representative who appears on behalf of future claimants something the Committee does not do on behalf of its constituency. 44 Ultimately, the Committee fails to explain any of the artificial restrictions it seeks to place on the FCR s authority, none of which are found in any source of law. Nor does it 42 Appointment Order Id If the Court decides that the Appointment Order should be clarified or amended to expressly authorize the FCR to vote on behalf of such future claimants, it is within this Court s discretion to do so. See UNR, 71 B.R. at 479 (holding that a bankruptcy court can alter or amend FCR s powers and responsibilities as circumstances might dictate ). 36

44 Document Page 44 of 122 reconcile the plain existence of future claimants statutory right to vote with the alleged lack of authority in the FCR to cast those votes. There is no basis for such a restriction. The Court has inherent authority to appoint an FCR and define his powers, and the necessity for the FCR to vote on behalf of future claimants who otherwise would have no voice is clear. The Committee s entire argument can only be read as a self-interested attempt to hobble the FCR. See Kane, 843 F.2d at 644. C. The Committee s Attempt To Disenfranchise Future Claimants Is Yet Another Bid For Preferential Treatment Of Current Claimants Of course, the FCR s authority to vote is not a mere abstract legal question in this case, but one with very real consequences. The Committee is arguing the FCR does not have authority to vote because if he does not, future claimants will not vote. They will lack a fundamental protection granted to creditors in a Chapter 11 case. They will not have the negotiating leverage that the vote provides for example, the ability to threaten rejection or alternatively provide an impaired accepting class permitting cramdown on another class. See 11 U.S.C. 1129(b), 1129(a)(10); 50-Off Stores, 231 B.R. at 595. All of this will redound to the benefit of current claimant representatives, enhancing their power to dictate the terms of a Plan that benefits their clients (and them) at the expense of future claimants. They will constitute the single class of voting asbestos claimants which, if impaired, would be the only impaired class, whose support Debtors would have to obtain. 37

45 Document Page 45 of 122 By contrast, if the FCR can vote, future claimants will receive their equal say in these cases. They will have the same right to vote that current claimants have, and the same ability to protect their interests. Current claimants would not suffer in the slightest. This Court will not confirm any plan that is not fair and equitable to current claimants, if they are impaired and reject. But current claimants and their representatives would not be able to run roughshod over the rights of future claimants, the largest creditor group, by exercising a veto right. CONCLUSION For the foregoing reasons, Debtors respectfully request that the Court enter partial summary judgment, finding as a matter of law that section 524(g) is not exclusive and does not preclude reliance on the general sources of injunctive authority in the Bankruptcy Code, and that the FCR has authority to vote on behalf of his constituents. 38

46 Document Page 46 of 122 This 20th day of November, Respectfully submitted, /s/ Garland S. Cassada Garland S. Cassada N.C. Bar No Jonathan C. Krisko N.C. Bar No Richard C. Worf, Jr. N.C. Bar No ROBINSON, BRADSHAW & HINSON, P.A. 101 North Tryon Street, Suite 1900 Charlotte, North Carolina Telephone: (704) Facsimile: (704) Special Corporate and Litigation Counsel to the Debtors Garlock Sealing Technologies LLC, Garrison Litigation Management Group, Ltd., and The Anchor Packing Company -and- C. Richard Rayburn, Jr. N.C. Bar No Albert F. Durham N.C. Bar No John R. Miller, Jr. N.C. Bar No RAYBURN COOPER & DURHAM, P.A Carillion, 227 West Trade Street Charlotte, NC Telephone: (704) Counsel to the Debtors Garlock Sealing Technologies, LLC, Garrison Litigation Management Group, Ltd., and The Anchor Packing Company 39

47 Document Page 47 of 122 Jonathan P. Guy Gregory D. Beaman ORRICK, HERRINGTON & SUTCLIFFE LLP th Street, N.W. Washington, DC Telephone: (202) and- A. Cotten Wright NC Bar No GRIER FURR & CRISP, P.A. 101 North Tryon Street, Suite 1240 Charlotte, NC Telephone: (704) Counsel for Joseph W. Grier, III, Future Asbestos Claimants Representative 40

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82 Case mkn Doc 605 Entered 08/29/12 11:31:30 Page 1 of 3 Document Page 82 of Entered on Docket August 29, FOX ROTHSCHILD LLP 3800 Howard Hughes Parkway, Suite 500 Las Vegas, Nevada (702) (702) (fax) BRETT A. AXELROD, ESQ. Nevada Bar No MICAELA RUSTIA MOORE, ESQ. Nevada Bar No FOX ROTHSCHILD LLP 3800 Howard Hughes Parkway. Suite 500 Las Vegas, Nevada Telephone: (702) Facsimile: (702) baxelrod@foxrothschild.com mmoore@foxrothschild.com Counsel for American West Development, Inc. In re AMERICAN WEST DEVELOPMENT, INC., a Nevada corporation, fdba Castlebay 1, Inc. fdba Development Management, Inc. fdba Fairmont 1, Inc. fdba Glen Eagles 3, Inc. fdba Heritage 1, Inc. fdba Inverness 5, Inc. fdba Kensington 1, Inc. fdba Kingsbridge 1, Inc. fdba Promontory Estates, LLC fdba Promontory Point 4, Inc. fdba Silverado Springs 1, Inc. fdba Silverado Springs 2, Inc. fdba Tradition, Inc. fdba Windsor 1, Inc. VG v1 08/23/12 UNITED STATES BANKRUPTCY COURT DISTRICT OF NEVADA Debtor. 1 Case No. BK-S MKN Chapter 11 ORDER GRANTING DEBTOR S MOTION TO APPROVE STIPULATION BETWEEN DEBTOR AND FUTURE CLAIMS REPRESENTATIVE REGARDING VOTING ELIGIBILITY AND TABULATION FOR PROOF OF CLAIM FILED BY FUTURE CLAIMS REPRESENTATIVE ON BEHALF OF HOLDERS OF CONSTRUCTION DEFECT CLAIMS CLASSIFIED IN CLASS 4 UNDER DEBTOR S PLAN OF REORGANIZATION WHO HAVE NOT FILED A PROOF OF CLAIM OR BALLOT REGARDING THE PLAN Hearing Date: August 23, 2012 Hearing Time: 10:00 a.m.