case 10-31607 doc 4295 filed 01/09/15 entered 01/09/15 … · the motion seeks a bar date order...

DOC# 1501997v.4 1/9/2015 8:28 PM

UNITED STATES BANKRUPTCY COURT FOR THE WESTERN DISTRICT OF NORTH CAROLINA

Charlotte Division : In re: : Case No. 10-31607 : GARLOCK SEALING : Chapter 11 TECHNOLOGIES LLC, et al., : : Jointly Administered Debtors.1 : :

MEMORANDUM OF THE OFFICIAL COMMITTEE OF ASBESTOS PERSONAL INJURY CLAIMANTS IN OPPOSITION TO THE FUTURE

ASBESTOS CLAIMANTS’ REPRESENTATIVE’S MOTION FOR AN ASBESTOS CLAIMS BAR DATE AND RELATED RELIEF

CAPLIN & DRYSDALE, CHARTERED Trevor W. Swett III Leslie M. Kelleher Jeffrey A. Liesemer One Thomas Circle, N.W. Washington, DC 20005 Telephone: (202) 862-5000

Elihu Inselbuch 600 Lexington Avenue, 21st Floor New York, NY 10022 Telephone: (212) 379-6000

MOON WRIGHT & HOUSTON, PLLC Travis W. Moon Richard S. Wright 227 West Trade Street Suite 1800 Charlotte, NC 28202 Telephone: (704) 944-6560

Co-Counsel for the Official Committee of Asbestos Personal Injury Claimants

1 The Debtors are Garlock Sealing Technologies LLC (“GST”), Garrison Litigation Management Group, Ltd. (“Garrison” and together with GST, “Garlock”), and The Anchor Packing Company.

Case 10-31607 Doc 4295 Filed 01/09/15 Entered 01/09/15 20:38:49 Desc Main Document of 49

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TABLE OF CONTENTS TABLE OF AUTHORITIES ......................................................................................................... iii PRELIMINARY STATEMENT .....................................................................................................1 I. THE LAW DOES NOT REQUIRE A BAR DATE WHERE, AS IN THESE

CASES, IT WOULD NOT BE USEFUL ............................................................................6

A. This Court has already thoroughly considered a bar date for unliquidated asbestos claims and has wisely rejected the idea as unhelpful, impracticable, and not mandated by law ................................................7

B. Neither precedent nor the Bankruptcy Rules force this Court to adopt a bar date, especially since unliquidated asbestos claims will not be adjudicated before confirmation and voting will proceed by way of temporary allowance ..............................................................................................10

C. The Bankruptcy Rules and Official Form 10 do not call for tort

claimants to attach evidence to proofs of claim .....................................................17 II. A BAR DATE WOULD NOT MAKE ACCURATE FORECASTING

EASIER, BUT ON THE CONTRARY WOULD GENERATE UNCERTAINTIES AND ERRORS IN THE FORECASTS ............................................18

A. Future claims, not present ones, pose the greater challenge to

forecasting and the greater risk to the stability of a trust payment percentage ..............................................................................................................18

B. Bar dates alter claiming behavior in mass tort cases, magnifying the

expense of claims administration and making accurate forecasting even more difficult .................................................................................................22

III. THE PROPOSED BAR DATE WOULD BE ARBITRARY AND UNFAIR ..................27

A. The proposed bar date would inflict fatal prejudice on many potentially meritorious claims by affording insufficient time to investigate those claims and develop specific exposure evidence .........................29

B. The bar date proposal would have unconscionably harsh effects ...........................33

C. For Questionnaire respondents, the proposed bar date would be

absurdly redundant ..................................................................................................34


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D. The proposed bar date would usher in disputes over whether and when a health condition triggered a duty to file a proof of claim ...................................34

IV. THE PROPOSED ORDER, NOTICES, AND CUSTOMIZED CLAIM

FORM ARE DEEPLY FLAWED .....................................................................................36

A. The definition of “Asbestos Claim” is overbroad ..................................................36

B. Requiring claimants to identify the particular Debtor they hold claims against would be pointless, since GST and Garrison are co-liable and Anchor has no assets ..............................................................................................37

C. If Garlock is solvent, the proposed consequences for failing to timely

file a claim would be unlawful...............................................................................37 V. THE PROPOSED BAR DATE NOTICES FAIL THE TEST OF DUE

PROCESS ..........................................................................................................................39 CONCLUSION ..............................................................................................................................43


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TABLE OF AUTHORITIES

Page(s) CASES

A.H. Robins Co. v. Piccinin, 788 F.2d 994 (4th Cir. 1986) ...............................................................................................8, 23

In re A.H. Robins Co., 862 F.2d 1092 (4th Cir. 1988) ...........................................................................................10, 11

In re A.H. Robins Co., 880 F.2d 694 (4th Cir. 1989) .....................................................................................................8

In re Adelphia Commc'ns Corp., 368 B.R. 140 (Bankr. S.D.N.Y. 2007) .....................................................................................38

Amchem Prods., Inc. v. Windsor, 521 U.S. 591 (1997) ...........................................................................................................23, 40

In re Andrews, 394 B.R. 384 (Bankr. E.D.N.C. 2008) .....................................................................................17

In re Babbin, 164 B.R. 157 (Bankr. D. Colo. 1994) ......................................................................................38

In re Babcock & Wilcox Co., 2004 WL 4945985 (Bankr. E.D. La. Nov. 9, 2004) ................................................................12

Cafeteria Workers Union, Local 473 v. McElroy, 367 U.S. 886 (1961) .................................................................................................................39

Cal. Div. of Labor Standards Enforcement v. Dillingham Constr., N.A., Inc., 519 U.S. 316 (1997) .................................................................................................................36

Gentry v. Siegel, 668 F.3d 83 (4th Cir. 2012) ...............................................................................................17, 18

Jacksonville Airport, Inc. v. Michkeldel, Inc., 434 F.3d 729 (4th Cir. 2006) ...................................................................................................15

In re Johns-Manville Corp., 843 F.2d 636 (2d Cir. 1988).....................................................................................................16

Kitrosser v. CIT Grp./Factoring, Inc., 177 B.R. 458 (S.D.N.Y. 1995) .................................................................................................38

In re Lampe, 665 F.3d 506 (3d Cir. 2011).....................................................................................................17


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In re Lloyd E. Mitchell, Inc., 373 B.R. 416 (Bankr. D. Md. 2007) ........................................................................................16

Mathews v. Eldridge, 424 U.S. 319 (1976) .................................................................................................................39

Morrissey v. Brewer, 408 U.S. 471 (1972) .................................................................................................................39

Mullane v. Cent. Hanover Bank & Trust Co., 339 U.S. 306 (1950) .................................................................................................................42

Ortiz v. Fibreboard Corp., 527 U.S. 815 (1999) .................................................................................................................23

In re Quigley Co., 346 B.R. 647 (Bankr. S.D.N.Y. 2006) .................................................................................9, 15

In re Quigley Co., 383 B.R. 19 (Bankr. S.D.N.Y. 2008) .......................................................................................13

In re Ricks, 253 B.R. 734 (Bankr. M.D. La. 2000) .....................................................................................38

In re Stone Hedge Props., 191 B.R. 59 (Bankr. M.D. Pa. 1995) .......................................................................................14

In re USG Corp., 290 B.R. 223 (Bankr. D. Del. 2003) ..................................................................................11, 16

In re W.R. Grace & Co., 446 B.R. 96 (Bankr. D. Del. 2011) ..........................................................................................13

Walters v. Reno, 1996 WL 897662 (W.D. Wash. Mar. 13, 1996) ......................................................................42

In re Washington Mut. Inc., 442 B.R. 314 (Bankr. D. Del. 2011) ........................................................................................38

STATUTES AND RULES

11 U.S.C. § 524(g) ................................................................................................................. passim

11 U.S.C. § 726(a) ...................................................................................................................37, 38

11 U.S.C. § 1129(a) .......................................................................................................................37

11 U.S.C. § 1141(d) .......................................................................................................................38


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28 U.S.C. § 1411(a) .........................................................................................................................8

Fed. R. Bankr. P. 1001 ...................................................................................................................14

Fed. R. Bankr. P. 3001(a) ..............................................................................................................17

Fed. R. Bankr. P. 3001(c) ..............................................................................................................17

Fed. R. Bankr. P. 3003(c) ..............................................................................................................14

Fed. R. Bankr. P. 3018(a) ..................................................................................................13, 14, 15

OTHER AUTHORITIES

COLLIER ON BANKRUPTCY (Alan N. Resnick & Henry J. Sommer eds. 16th ed. 2013) ..................6

Richard B. Sobol, BENDING THE LAW: THE STORY OF THE DALKON SHIELD BANKRUPTCY (Univ. Chicago Press 1991) .....................................................................................................23

S. Todd Brown, How Long Is Forever This Time? The Broken Promise of Bankruptcy Trusts, 61 Buff. L. Rev. 537 (2013) .........................................................................3, 18, 19, 20


The Official Committee of Asbestos Personal Injury Claimants (the “Committee” or

“ACC”) respectfully submits this memorandum in opposition to the Future Asbestos Claimants’

Representative’s Motion for an Asbestos Claims Bar Date and Related Relief, dated November

26, 2014 [Dkt. No. 4247] (the “Motion”).2

PRELIMINARY STATEMENT The Motion seeks a bar date order that would require more than 100,000 individuals to

gather, prepare, and file complicated tort-claim materials at great expense even though no one

would read them for any purpose in connection with the proposed plan confirmation process.

Worse yet, it would extinguish the rights of those many worthy claimants, including asbestos

victims not yet represented by counsel, who would not be able to gather the materials required to

be filed within the time allowed. And, the mere requirement of these filings—which could not

and would not be evaluated to determine their individual merit—would prejudice the ability of

experts to make reasoned estimates of the present and future claims that will ultimately be

received, processed, and paid after confirmation, estimates that are essential for the confirmation

of any plan.

At the outset of these cases, after extensive briefing and six days of hearings (the “Case

Administration Hearings”), Judge Hodges rejected the Debtors’ request that he impose a bar

date for asbestos claims. The Debtors renewed their bar date motion twice, and Judge Hodges

denied the motion each time. He did so for good and substantive reasons, recognizing that, in the

unique circumstances of a bankruptcy driven by asbestos claims, a bar date would implicate the

due process rights of tens of thousands of individual claimants and delay the cases indefinitely.

2 See also Preliminary Objection of the Official Committee of Asbestos Personal Injury Claimants to the Future [Claimants’] Representative’s Motion for an Asbestos Bar Date and related relief, filed December 17, 2014 [Dkt. No. 4276].


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There is no reason for this Court to revisit or reverse those decisions. Indeed, in almost all

asbestos-driven bankruptcy cases, courts have declined to impose bar dates because they are

impracticable and unfair when the subject matter is not a fixed set of contractual or similar

claims to be allowed or disallowed as part of the bankruptcy process, but rather a continuous

stream of personal injury tort and wrongful death claims that are to be channeled to a trust for

settlement or “passed through” for litigation under constitutional and statutory guaranties of jury

trial rights unabridged by Chapter 11.

The Future Claimants’ Representative (“FCR”) joined with the ACC in opposing the

Debtors’ bar date motions. As his own submissions made clear at the time, the basis of the

FCR’s opposition was not mere prematurity (as he now re-characterizes it), but the fact that a bar

date would waste time and resources. Yet, in now making his own ill-considered bar date

request, the FCR ignores the lessons of the Claims Administration Hearings and parrots

arguments put forth earlier by the Debtors, which the Court considered and rejected. The

Debtors, in support, dust off the same arguments yet again.

The FCR does introduce a subject not aired before in these cases, which he cites as the

reason for switching sides on the bar date question: that is the subject of the payment percentage

of an eventual Garlock trust. The payment percentage is the portion of the liquidated value of

claims, present and future, that such a trust is projected to be able to pay. The Motion points to

the experience of trusts that have found it necessary to reduce their payment percentages and

articulates the goal of obtaining maximum certainty that an eventual Garlock trust will be able to

maintain the same payment percentage throughout the anticipated forty years of its operations, so

that the recovery available to the last claimant who comes forward decades from now will be the

same proportionally as that enjoyed by the first claimant on the queue. But the FCR does not


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and cannot forge a connection between that laudable goal and his new insistence on a bar date.

He relies on a single law review article3 for the idea that reductions in payment percentages are

attributable to underestimation of prepetition claims and claims arising during the bankruptcy

cases in which the trusts were created. On that premise he argues that the key to avoiding future

deterioration of the payment percentage for a Garlock trust is to force the filing of all “current”

claims in the Bankruptcy Court by imposing a bar date. But the article does not constitute

evidence, is not well informed on the workings of asbestos trusts, and in any event does not

support the FCR’s position. The article does not conclude that the problem of underestimation

lies with claims that arose before the trusts were established. It does not contain any suggestion

that a bar date would somehow ensure more accurate forecasts or provide greater assurance

against payment percentage reductions in the future. In actuality, it is future claims, not current

ones, that present the greatest difficulties for accurate forecasting. The FCR’s reliance on the

article is misplaced, and his facile assumptions are not only unproven but untrue.

A bar date will not make trust forecasts more reliable. Instead, as explained in the

accompanying declaration of Mark A. Peterson, Ph.D., the ACC’s claims consultant, a bar date

would induce the filing of undeveloped claims as well as claims that would otherwise never be

filed at all.4 This would create new uncertainties in the process of forecasting the number and

timing of claims and thereby introduce a higher degree of error into the forecasts while

increasing the costs of claims administration. A bar date would thus exert downward pressure on

3 Motion, Ex. A (S. Todd Brown, How Long Is Forever This Time? The Broken Promise of Bankruptcy Trusts, 61 Buff. L. Rev. 537 (2013)). 4 Declaration of Mark A. Peterson, Jan. 8, 2015, ¶ 13 (“Peterson Decl.”), annexed hereto as Exhibit 1.


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the payment percentage unfairly and at the expense of meritorious claims, both present and

future.

A bar date would also visit severe and unfair prejudice upon many asbestos victims.

Claims do not spring fully formed from the minds of those who contract asbestos-related

diseases. As Judge Hodges recognized in his estimation order, these diseases are characterized

by a long latency period, so that the asbestos exposures causing them typically took place

decades ago. Many persons who came into contact with asbestos were unaware at the time, and

few can remember (if they ever knew) what products accounted for those exposures when they

are diagnosed with asbestos-related illnesses many years later. Identifying those products and

the manufacturers responsible for them commonly involves a painstaking and time-consuming

investigation, culling historical records and evidence accumulated in past asbestos suits litigated

over a span of forty years, and searching out co-workers able to testify to what asbestos products

were used at sites where the claimant worked, so as to prove circumstantially the victim’s

inhalation of asbestos from specific sources. All this takes time—often lots of time. And the

effect of a bar date would be to cut back severely on the amount of time available for that work

under nonbankruptcy statutes of limitations, to the unfair detriment of persons whose claims

have been stayed for more than four and a half years while Garlock has enjoyed the protections

of the automatic stay. These realities are explained by Jonathan Ruckdeschel, a plaintiffs’

lawyer whose declaration is submitted herewith,5 as well as by evidence presented in the

estimation proceeding and in the Claims Administration Hearings.

5 Declaration of Jonathan Ruckdeschel, Jan. 8, 2015 (“Ruckdeschel Decl.”), annexed hereto as Exhibit 2.


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The expansive scope of the bar envisaged by the Motion would compound the inevitable

injustices that would result from any effort to superimpose an arbitrary line on a continuous

stream of claims. The difference between victims whose diseases “manifest” one day before the

proposed cutoff, who would thus be subjected to the bar, and victims whose diseases remain

latent until just after that cutoff, or until some indefinite future time, is insubstantial and cannot

justify burdening the former for the supposed benefit of the latter.6 Yet, the Motion fails even to

acknowledge, much less come to grips with, the very real hardships it would inflict on asbestos

victims. It merely assumes away the constitutional question of how notice consistent with due

process of law could possibly be given to persons not represented by counsel, and unknown to

Garlock or the FCR, who nevertheless would be “caught” by the proposed bar.

A facile approach pervades the Motion, one that risks misleading the Court on a range of

issues. A striking example is the FCR’s assumption that he is entitled to vote on behalf of all

unknown persons who will manifest, or are diagnosed with, asbestos diseases in the future. The

Motion puts forth this assumption without citation, as though it were based on black letter law.

But no future claimants’ representative has ever cast a ballot on a plan in any of the scores of

asbestos bankruptcies heretofore resolved, and no court has ever suggested that an FCR has an

authority to vote for constituents. Section 524(g) of the Bankruptcy Code, which embodies the

Bankruptcy Court’s authority to appoint a legal representative for the “futures” constituency,

provides no authority for such appointees to vote, and any attempt to tease out such authority by

implication would clash with the express terms of the statute.7 The Motion does not depend in

6 Ex. 2, ¶ 6 (Ruckdeschel Decl.). 7 The statute describes members of the “futures” constituency not as claimants, but as “persons that might subsequently assert demands” for asbestos injuries once a channeling injunction has taken effect. 11 U.S.C. § 524(g)(4)(B)(i). It defines a “demand” in contradistinction to “a (Footnote continued on next page.)


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any way on the FCR’s unsupported supposition that he has power to vote on a plan, so it is not

necessary for the Court to take up that issue at this stage. The Committee reserves all rights and

arguments on that matter for future determination, if and when necessary, while noting that the

more presently relevant propositions advanced in the Motion bear particular scrutiny since they

contradict the FCR’s earlier forceful opposition to a bar date.

I. THE LAW DOES NOT REQUIRE A BAR DATE WHERE, AS IN THESE CASES, IT WOULD NOT BE USEFUL.

In ordinary bankruptcy reorganizations, “[e]stablishment of a claims bar date serves the

dual interests of finality and debtor rehabilitation. Without a bar date, it would be impossible to

determine with any finality the obligations of the debtor.”8 But these purposes are irrelevant in

an asbestos bankruptcy, where claims to be addressed are not a fixed set, but an ongoing stream,

and no party is suggesting the impossible task of reducing that stream of claims to finality before

a plan is confirmed. Nor is a bar date relevant here for purposes of voting on a plan. Bankruptcy

courts in asbestos bankruptcies follow a path of temporary allowance for voting purposes, one

frequently taken in non-asbestos bankruptcies as well. This approach to voting obviates pre-

confirmation allowance or disallowance and avoids the imponderable administrative burdens and

delays of litigating tens of thousands of disputed tort claims to final resolution before the debtor

can reorganize.

(Footnote continued from previous page.) claim,” id. § 524(g)(5)(A), while conditioning the confirmation of any section 524(g) plan on the affirmative votes of at least 75% of the “claimants” who vote. Id. § 524(g)(2)(B)(ii)(IV)(bb). 8 9 COLLIER ON BANKRUPTCY ¶ 3003.03[4], at 3003–7-8 (Alan N. Resnick & Henry J. Sommer eds. 16th ed. 2013).


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A. This Court has already thoroughly considered a bar date for unliquidated asbestos claims and has wisely rejected the idea as unhelpful, impracticable, and not mandated by law.

Judge Hodges rejected requests by the Debtors for a general asbestos claims bar date

three times.9 He denied the Debtors’ original bar date request after extensive discovery,

exhaustive briefing, and a six-day hearing, during which more than 200 exhibits were introduced,

and during which the Court heard testimony from Dr. Mark Peterson, expert for the ACC, from

Dr. Charles Bates, expert for the Debtors, as well as from Elizabeth Graham King and Nathan

Shuck from Rust Consulting, the Debtors’ claims agent.10 After considering the arguments and

evidence, Judge Hodges concluded that a bar date would not be practical or useful in these cases.

He recognized that allowance proceedings would trigger the due process rights of individual

claimants,11 and embroil the parties and the Court in claims contests more numerous and

protracted than could possibly be administered consistently with efficient reorganization.12 He

9 See Order on Motion of the Official Committee of Asbestos Personal Injury Claimants for Entry of a Scheduling Order and Debtors’ Motion for Establishment of Asbestos Claims Bar Date, Etc., dated Dec. 9, 2010 [Dkt. No. 853] (denying Debtors’ motion to impose bar date and initiate allowance proceedings for asbestos claims); Order Denying the Second Amendment to Debtors’ Motion for (A) Establishment of Asbestos Claims Bar Date, (B) Approval of Asbestos Proof of Claim Form, (C) Approval of Form and Manner of Notice, (D) Estimation of Asbestos Claims, and (E) Approval of Initial Case Management Schedule, dated May 19, 2011 [Dkt. No. 1348] (same); Order for Estimation of Mesothelioma Claims, dated April 13, 2012 [Dkt. No. 2102] (same).

Ultimately, Judge Hodges imposed a bar date for settled asbestos claims only, which constitute a small fraction and discrete subset of the total claims. See Order on Debtors’ Motion to Establish Bar Date for Settled Asbestos Claims and Related Relief ¶ 4, at 2, dated July 9, 2014 [Dkt. No. 3854]. 10 The hearing took place on October 14, 15, 27, and 28, and November 18 and 19, 2010 [Dkt. Nos. 366, 634, 767, 768, 806, 807]. 11 See Hr’g Tr. 1295:16-18, Nov. 19, 2010 (“[T]he proof of claim process . . . runs the risk of creating due process rights that we might wish we had never created.”). 12 Hr’g Tr. 1295:18-23, Nov. 19, 2010 (“[E]ven if there was some wildly successful . . . effort at . . . eliminating the vast numbers of these claims, you could still end up with a thousand or (Footnote continued on next page.)


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therefore ordered the parties to proceed instead to estimation of the Debtors’ aggregate liability

for mesothelioma claims. The focus on mesothelioma claims reflected the agreement of the

parties, based on Garlock’s claims history, in recent years, that mesothelioma accounts for the

bulk of the Debtors’ asbestos liability. The scope of the estimation proceeding was subsequently

narrowed further to exclude claims against The Anchor Packing Company (“Anchor”), since

that Debtor is defunct and will not be reorganized.13 The FCR and the Debtors have provided no

good reason to call that decision into question now.

In large asbestos-driven bankruptcies such as these cases, there are typically tens of

thousands of asbestos personal injury and wrongful death claims pending on the petition date—

far too many resolve in the bankruptcy without delaying indefinitely resolution of the cases and

distribution to the creditors.14 And additional claims arise continuously as persons exposed to

asbestos-containing products succumb to long-latent asbestos-related diseases. Numerous

courts, therefore, have recognized that a bar date is impractical in such a case, given that the

(Footnote continued from previous page.) more jury trials pending before the district court which to-date hasn’t tried a civil case this year.”); see also A.H. Robins Co. v. Piccinin, 788 F.2d 994, 1013-14 (4th Cir. 1986) (“The interests of all the claimants and the public interest in a reasonable and fair reorganization combine in favor of . . . working out a mechanism acceptable to all the claimants for a dispute-resolution of their claims without burdening the estate with the tremendous expense of endless litigation and reducing if not exhausting, the assets available for paying those claims.”); In re A.H. Robins Co., 880 F.2d 694, 698-99 (4th Cir. 1989) (“In Piccinin, we stated that due to the large number of unliquidated claims that if each claim was tried the process itself would likely consume all the assets of the debtor. We suggested that the bankruptcy court arrive at a fair estimation of the value of all the claims.”) (internal citations omitted). 13 Order Granting Motion of the Official Committee of Asbestos Personal Injury Claimants for Order Clarifying Scope of Estimation to Exclude Claims Against Anchor and Derivative Claims Against Garlock Based on Anchor’s Liabilities, dated Oct. 30, 2012 [Dkt. No. 2587]. 14 If tort claims are to be adjudicated, each claimant has a right to jury trial notwithstanding the alleged tortfeasor’s bankruptcy. See 28 U.S.C. § 1411(a).


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claims will be submitted to and resolved by a post-confirmation settlement trust. As Chief

Bankruptcy Judge Bernstein of the Southern District of New York has stated:

[T]he filing of a one page proof of claim, see Official Form no. 10, with minimal information and an exorbitant or unliquidated demand is not helpful. The alternative, designing a claim form that calls for more detailed medical information about the nature and the severity of the claimant’s impairment, is cumbersome and best postponed for submission to the post-confirmation trust.

In re Quigley Co., 346 B.R. 647, 653 (Bankr. S.D.N.Y. 2006).

Accordingly, as the FCR noted in its opposition to the Debtors’ first bar date motion, in

most asbestos bankruptcies, “practical reasons” have led the courts to refrain from imposing bar

dates.15 See Quigley Co., 346 B.R. at 653 (noting the prohibitive “practical difficulties

involved”). Indeed, the overwhelming majority of asbestos bankruptcies have followed that

approach including, for example, In re Armstrong World Indus., Inc., No. 00-4471 (Bankr. D.

Del.); In re Combustion Eng’g, Inc., No. 03-10495 (Bankr. D. Del.); In re Congoleum Corp., No.

03-51524 (Bankr. D.N.J.); In re Federal-Mogul Global, Inc., No. 01-10578 (Bankr. D. Del.); In

re Global Indus. Techs., Inc., No. 02-21626 (Bankr. W.D. Pa.); In re N. Am. Refractories Co.,

No. 02-20198 (Bankr. W.D. Pa.); In re Owens Corning, No. 00-3837 (Bankr. D. Del.); In re

15 The Future Claimants’ Representative’s Omnibus Response to Debtors’ Bar Date Motion, ACC’s Scheduling Motion, Debtors’ Rust Consulting Motion, and Debtors’ 2019 Motion ¶ 6, at 3-4, dated Oct. 7, 2010 (“FCR Opp. to Debtors’ Bar Date Motion”) [Dkt. No. 582]:

Under a 524(g) plan of reorganization, as is true here, asbestos claims often number in the hundreds of thousands. Further, review, processing, and determination for eligibility for payment of such claims all takes place following the effective date of a confirmed plan pursuant to trust distribution procedures that are approved by the bankruptcy court. For practical reasons, therefore, most bankruptcy courts confronted with 524(g) asbestos cases have, for good cause, set a bar date much later in the case or decided not to fix a bar date at all. See, e.g., In re Quigley Co., 346 B.R. 647, 653 (Bankr. S.D.N.Y. 2006) (noting that detailed claim form is best postponed for submission to post-confirmation trust).


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Kaiser Aluminum Corp., No. 02-10429 (Bankr. D. Del.); In re Mid-Valley, Inc., No. 03-35592

(Bankr. W.D. Pa.); and In re JT Thorpe Inc., No. 02-14216 (Bankr. C.D. Cal.).

The FCR and Garlock are wrong in asserting that a bar date is required just because the

asbestos claims are disputed and unliquidated.16 Both of them now eschew any intention that

such claims be litigated before confirmation of a plan. If Garlock’s existing plan were

confirmed, claimants opting for settlement would have their claims channeled to a trust while

those choosing to litigate would proceed to trial against reorganized Garrison in nonbankruptcy

courts. The Motion does not explain how a bar date would enhance anyone’s ability to predict

which claims would be litigated and which ones tried, nor their resolution amounts. Nor is it at

all apparent why Garlock should receive the benefit of curtailing statutes of limitations―the

practical effect of a bar date―when confirmation is to occur before any claims are to be settled

or tried.

B. Neither precedent nor the Bankruptcy Rules force this Court to adopt a bar date, especially since unliquidated asbestos claims will not be adjudicated before confirmation and voting will proceed by way of temporary allowance.

As the many asbestos bankruptcies that have been conducted and concluded without bar

dates confirm, the Court has discretion to dispense with a bar date when, as here, it does not

serve a legitimate purpose. The FCR and Garlock miscite Fourth Circuit’s decision in In re A.H.

Robins Co., 862 F.2d 1092 (4th Cir. 1988). That decision neither holds nor implies that a bar

date is mandatory in an asbestos bankruptcy.17 Robins was not an asbestos bankruptcy, and the

opinion has nothing to do with whether a bar date and proof of claim form should be ordered

16 See Motion at 22; see also Debtors’ Response in Support of Future Asbestos Claimants’ Representative’s Motion for Asbestos Claims Bar Date at 5, dated Dec. 19, 2014 [Dkt. No. 4285] (“Garlock Resp.”). 17 See Motion at 22; Garlock Resp. at 5.


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when claims will be channeled to a trust or litigated after a plan is confirmed. Moreover, in the

context of the issue actually decided by the Fourth Circuit, the language cited by the FCR was

obiter dictum: the court of appeals did not have before it an appeal from the district court’s order

setting the bar date in the first instance. Rather, the appellate court was presented only with the

narrow question of whether, after a bar date had been set, certain claims that had not been filed in

a timely manner were properly disallowed by the district court.

In the thirty years since Robins was decided, plans of reorganization have been confirmed

in scores of asbestos bankruptcy cases without bar dates for asbestos claims. Garlock urges this

Court to ignore the lessons of those cases, asserting that all of those courts made a “mistake” by

not ordering bar dates (and, by implication, that Judge Hodges also erred in thrice denying

Garlock’s bar date requests).18 The FCR and Garlock urge this Court to follow instead the

examples of the USG, Grace, Babcock & Wilcox, and Specialty Products cases, in which

asbestos claims bar dates were set, though ultimately not enforced. But, as the FCR previously

recognized, bar dates in asbestos cases “have not proved to be a fruitful exercise.”19 In the few

such cases in which bar dates were ordered, they were either never actually implemented in the

first place (as in USG and Specialty Products), or else eventually were waived (as in Grace and

Babcock & Wilcox), and thus served only to waste the time and resources of the parties, the

estates, and the courts.

In USG, a bar date order was entered with respect to cancer claims only, so that the

debtor’s solvency could be determined. See In re USG Corp., 290 B.R. 223, 227 (Bankr. D. Del.

2003). However, the bar date was never imposed, as the debtor and the asbestos claimants

18 Garlock Resp. at 6. 19 FCR Opp. to Debtors’ Bar Date Motion at 4.


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committee filed a consensual plan, which was confirmed after an uncontested confirmation

hearing.20 Similarly, in Specialty Products, a bar date was ordered but never actually imposed,

as the debtors and the asbestos claimants committee agreed on a plan under Section 524(g).21

In Babcock & Wilcox, the district court initially decreed a bar date in contemplation of

pre-confirmation allowance proceedings but eventually recognized that the many tens of

thousands of claims submitted under the bar would have to be adjudicated individually―an

impossible task that the court ultimately refused to undertake.22 Faced with that reality, the

debtors ultimately negotiated a consensual plan of reorganization with the asbestos claimants

committee.23 The Debtors here no longer contemplate pre-confirmation allowance proceedings,

and the FCR likewise disclaims any intention to go down that path. Their citation of Babcock &

Wilcox is thus beside the point.

In Grace, a bar date was imposed as a means of implementing, for estimation purposes, a

questionnaire process as to personal injury claimants who had lawsuits pending as of the petition

date. Judge Hodges conducted an estimation in the Debtors’ cases without resorting to a bar

date, which makes Grace irrelevant as precedent for a bar date here. Ultimately, moreover, the 20 See Findings of Fact and Conclusions of Law Regarding Confirmation of the First Amended Joint Plan of Reorganization of USG Corporation and Its Debtor Subsidiaries, as Modified, In re USG Corp., No. 01-2094 (Bankr. D. Del. June 15, 2006) [Dkt. No. 11687]. 21 Order Confirming the Joint Plan of Reorganization of Specialty Products Holding Corp,, Bondex International, Inc., Republic Powdered Metals, Inc. and NMBFiL, Inc., as Modified, In re Specialty Products Holding Corp., No. 10-11780 (Bankr. D. Del. Dec. 10, 2014) [Dkt. No. 5261]; Findings of Fact and Conclusions of Law Regarding Confirmation of the Joint Plan of Reorganization of Specialty Products Holding Corp., Bondex International, Inc., Republic Powdered Metals, Inc. and NMBFiL, Inc., as Modified, In re Specialty Products Holding Corp., No. 10-11780 (Bankr. D. Del. Dec. 11, 2014) [Dkt. No. 5262]. 22 H’rg Tr. 14: 8-16, In re Babcock & Wilcox Co., No. 00-cv-558 (E.D. La. Jan. 25, 2002) (excerpt annexed hereto as Exhibit 3); see also id. 7:11-11:19. 23 See In re Babcock & Wilcox Co., 2004 WL 4945985 (Bankr. E.D. La. Nov. 9, 2004), vacated by 2005 WL 4982365 (E.D. La. Dec. 28, 2005).


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debtors and the asbestos claimants committee in Grace agreed on a Section 524(g) plan, and the

bar date—which had generated the filing of more than 100,000 asbestos-related personal injury

claims, at enormous cost—did not play any material role in the reorganization. Under Grace’s

reorganization plan, an asbestos personal injury claimant can receive a distribution from the

Section 524(g) trust regardless of whether he or she timely filed a proof of claim during the

bankruptcy.24 Thus, as the FCR stated in opposing the bar date request that Garlock propounded

on the model of Grace, the bar date there proved to be a huge “waste of resources.”25

Since no one pretends any longer that individual asbestos claims against Garlock will be

litigated to finality before a plan is confirmed, the usual purpose of a bar date has no bearing

here. Neither is a bar date needed to determine which claimants may vote. Temporary

allowance for voting purposes is common in Chapter 11 cases generally and provides the well-

established and efficient model for asbestos bankruptcies. See In re Quigley Co., 383 B.R. 19,

24 (Bankr. S.D.N.Y. 2008). The Bankruptcy Rules expressly permit temporary allowance for

voting purposes. See Fed. R. Bankr. P. 3018(a).26 Temporary allowance enables the holders of

contingent and disputed claims to cast their votes and have those votes counted, while avoiding

protracted disputes over the merits of those claims: “Since claims litigation is often drawn out,

thereby defeating one of the essential purposes of the Code, i.e., expedited and efficient

administration of the bankruptcy estate, [Bankruptcy Rule 3018] provide[s] that, for voting

24 In re W.R. Grace & Co., 446 B.R. 96 (Bankr. D. Del. 2011), amended by 2011 WL 832940 (Bankr. D. Del. Mar. 4, 2011). 25 FCR Opp. to Debtors’ Bar Date Motion ¶ 8, at 5. 26 See also Objection of the Official Committee of Asbestos Personal Injury Claimants to Debtors’ Motion for Entry of an Order Approving Solicitation and Confirmation Procedures and Schedule, dated August 14, 2014 (“ACC Solicitation Procedures Objections”) [Dkt. No. 3960].


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purposes only, the court can temporarily allow a claim in such an amount as the ‘court deems

proper.’” In re Stone Hedge Props., 191 B.R. 59, 63 (Bankr. M.D. Pa. 1995) (quoting Fed. R.

Bankr. P. 3018(a)) (emphasis added). Under this approach in asbestos bankruptcies, ballots are

treated as proofs of claim, the voting deadline functions as the only “bar date,” and Bankruptcy

Rule 3003(c) is satisfied to the extent that it applies.

Bankruptcy Rule 3003(c) provides that, when a court imposes a bar date, a creditor who

fails to file a proof of claim within the time prescribed “shall not be treated as a creditor with

respect to such claim for the purposes of voting and distribution” (Fed. R. Bankr. P. 3003(c)(2)),

unless relieved by the court. But the parties here expect that this Court will temporarily allow

asbestos claims for voting purposes, as even the Debtors’ solicitation procedures contemplate.

And no holders of unliquidated asbestos claims will receive a distribution from the estates, since

such claims will not be allowed or disallowed before confirmation. Instead, current claimants

will resolve their claims after confirmation in settlement with a trust or in litigation with

reorganized Garrison, just as future claimants will. It follows that Rule 3003(c) has no proper

application. That rule need not and should not be read as forcing upon the Court an utterly

wasteful and futile bar date process that would discriminate between similarly situated claimants

and undermine the fundamental policy of the Bankruptcy Code favoring prompt and efficient

reorganization. To the contrary, “[t]hese rules shall be construed to secure the just, speedy, and

inexpensive determination of every case and proceeding.” Fed. R. Bankr. P. 1001.

The Debtors’ professed concern that claimants holding “stale” claims for nonmalignant

diseases could threaten to block confirmation of any plan that does not compensate such claims

(see Garlock Resp. at 4) is easily addressed by weighting the claims that are temporarily allowed

for voting purposes, as contemplated by Bankruptcy Rule 3018(a). See Fed. R. Bankr. P.


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3018(a) (providing that “the court after notice and hearing may temporarily allow the claim . . .

in an amount which the court deems proper for the purpose of accepting or rejecting a plan”)

(emphasis added). In Quigley, for example, the court estimated asbestos personal injury claims

for voting purposes using the values contained in asbestos trust distribution procedures. This

approach “weigh[s] each vote based on the nature and impairment of each claimant’s injury . . . .

more accurately aligns the voting strength with the ultimate claim value . . . and prevents the

holders of relatively small claims from disenfranchising the more severely impaired who hold

larger claims.” In re Quigley Co., 346 B.R. 647, 654 (Bankr. S.D.N.Y. 2006). The Debtors have

themselves recognized this common-sense solution by proposing weighted votes. Under their

proposed voting procedures, current claims based on pleural mesothelioma would be voted in the

amount of $10,000, and current claims based on peritoneal mesothelioma, lung or laryngeal

cancer, or asbestosis, would be voted in the amount of $1.27

Although the Fourth Circuit has never decided an asbestos-related bankruptcy case, it has

specifically recognized temporary allowance for voting purposes as the alternative to a full

adjudication on the merits. See Jacksonville Airport, Inc. v. Michkeldel, Inc., 434 F.3d 729, 732

(4th Cir. 2006). And courts in numerous previous asbestos-related reorganizations have granted,

either expressly or impliedly, temporary allowance to all asbestos claims for voting purposes,

with no requirement that the claimants provide details or documentary evidence of their claims.28

27 Although these voting amounts are arbitrary, and substantially lower than the liquidated claim amounts entered against Garlock in the tort system, the Committee has not objected because the amounts are for voting on the Plan only, and not for determining distributions from the estates. The Committee has objected to the proposed voting procedures on many other grounds, including their disenfranchisement of claimants with asbestos-related diseases other than those specified by the Debtors. See ACC Solicitation Procedures Objections at 21, 23-26. 28 See, e.g., Order (I) Approving Disclosure Statement Regarding Plan of Reorganization; (II) Establishing Procedures for Solicitation and Tabulation of Votes on the Plan; (III) Approving the (Footnote continued on next page.)


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Any notion that asbestos claims should be reviewed for factual merit before voting is

impracticable, since fairness would dictate providing claimants with time and discovery for

claims preparation.29 This would entail significant delays and burden the parties and the Court.

See In re Johns-Manville Corp., 843 F.2d 636, 646 (2d Cir. 1988) (noting that valuing disputed

claims for voting purposes would delay reorganization proceedings for years); In re USG Corp.,

290 B.R. 223, 226 (Bankr. D. Del. 2003) (observing that litigating only 1% of debtor’s asbestos-

related liabilities for purposes of extrapolating results would require “unmanageable” litigation

of 1,900 individual claims). And since merits challenges to individual claims will not be

(Footnote continued from previous page.) Form of Ballots; (IV) Scheduling a Combined Hearing to Consider Confirmation of the Plan and Approval of Nine Related Insurance Settlement Agreements; (V) Approving Procedures for Notice of Hearing to Consider Confirmation of the Plan and Approval of the Insurance Settlement Agreements and for Filing Objections Thereto; and (VI) Granting Related Relief at 6-7, ¶ 12, In re Metex Mfg. Corp., No. 12-14554 (Bankr. S.D.N.Y. Feb. 25, 2014) [Dkt. No. 437]; Order (I) Establishing Procedures for Solicitation and Tabulation of Votes to Accept or Reject Amended Joint Plan of Reorganization; (II) Approving Forms of Ballots; (III) Approving Form and Scope of Notice of the Plan and Confirmation Hearing; (IV) Establishing a Record Date for Voting Purposes Only; and (V) Approving Retention of Voting Agent at 4, ¶ 5, In re Federal-Mogul Global, Inc., No. 01-10578 (Bankr. D. Del. Jun. 14, 2004) [Dkt. No. 5153]; Notice of Filing of Amended Proposed Confirmation and Solicitation Procedures for First Amended Joint Plan of Reorganization, Ex. B at 5-7, In re W.R. Grace & Co., No. 01-01139 (Bankr. D. Del. Feb. 27, 2009) [Dkt. No. 20864-2] (voting procedures). See also In re Lloyd E. Mitchell, Inc., 373 B.R. 416, 423 (Bankr. D. Md. 2007) (permitting asbestos claimants “to self-determine that they have a claim (i.e., essentially to allow the claim themselves for voting purposes) and, based on that determination, [making them eligible] to vote”).

Expert testimony regarding the common practice of temporarily allowing claims in asbestos bankruptcies was provided in the Garlock estimation hearing by James L. Patton. See Hr’g Tr. 3672-3719, Aug. 7, 2013 and Hr’g Tr. 3725-3792, Aug. 8, 2013. Mr. Patton, who has a long track record in asbestos mass-tort bankruptcy cases, has served as counsel to the future claimants’ representative in many of those cases and in conjunction with the § 524(g) trusts emerging from those bankruptcy cases. He has also served as the future claimants’ representative himself, and in one asbestos mass-tort bankruptcy as debtor’s counsel. Hr’g Tr. 3676:5-24; 3677:9-15, Aug. 7, 2013. 29 Judge Hodges has recognized that challenges to the merits of individual claims would trigger the claimants’ rights to due process proceedings. See Hr’g Tr. 1295:16-18, Nov. 19, 2010.


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entertained before a plan is confirmed, there is no point to the FCR’s proposal that proofs of

claim be filed, or that such filings should attach medical diagnoses and product exposure

evidence.

C. The Bankruptcy Rules and Official Form 10 do not call for tort claimants to attach evidence to proofs of claim.

Under the Bankruptcy Rules, Official Form 10 suffices for proofs of claim, and it does

not require evidentiary attachments for unliquidated tort claims.30 Proofs of claim need attach

“supporting information” only “when a claim, or an interest in property of the debtor securing

the claim, is based on a writing,” such as a contract claim. Fed. R. Bankr. P. 3001(c)(1)

(emphasis added).31 Tort claims are not “based on a writing.” Thus, the Third Circuit has

determined that there is no requirement to attach supporting documents to a proof of claim that is

based on “state law tort principles.” In re Lampe, 665 F.3d 506, 515 (3d Cir. 2011). The rule

calling for attachments “only applies when a writing created the purported obligation and is not

applicable merely because a document might play some role in establishing the claim.” Id. at

514 (emphasis added). Even if a bar date were otherwise appropriate, it would be improper to

force asbestos claimants to use a claim form more burdensome than Form 10, without

attachments. Only if and when the Court set out to adjudicate a claim’s validity, in a contested

matter triggered by the filing of a claim objection conforming to the rules, would there be any

occasion to require the claimant to furnish evidence. See Gentry v. Siegel, 668 F.3d 83, 92 (4th

Cir. 2012) (stating that “a ‘contested matter’ does not arise from a proof of claim until an 30 “A proof of claim is a written statement setting forth a creditor’s claim” that “shall conform substantially to the appropriate Official Form [10].” Fed. R. Bankr. P. 3001(a) (emphasis added). 31 See also In re Andrews, 394 B.R. 384, 389 (Bankr. E.D.N.C. 2008) (noting rule requiring attachment of supporting documents to proof of claim is limited to instances where claim is based on a writing).


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objection to the claim has been interposed”). Here, the Debtors have abandoned the idea of

holding pre-confirmation allowance proceedings, the FCR also eschews that notion, and Judge

Hodges has correctly recognized that allowance proceedings on the scale implied by the numbers

of asbestos claims in these Chapter 11 cases would be impossible.

II. A BAR DATE WOULD NOT MAKE ACCURATE FORECASTING EASIER, BUT ON THE CONTRARY WOULD GENERATE UNCERTAINTIES AND ERRORS IN THE FORECASTS.

The FCR is concerned that many asbestos trusts reduced their payment percentages

during the period 2010-2013. He infers, based on a law review article by Professor S. Todd

Brown,32 that these reductions came about because claims that had arisen before those trusts

were formed were not forecasted accurately. The Motion proceeds on the assumption that a more

accurate forecast would result if a bar date were forced upon all persons in whom asbestos-

related diseases manifest, become evident, or are diagnosed more than 180 days before entry of a

bar date order. The FCR’s explanation, however, of why some trusts reduced their payment

percentages is speculative and flawed. His demand for maximum assurance that an eventual

Garlock trust will never reduce its payment percentage is overblown, since the future is beyond

anyone’s ability to control, and a conservative claims forecast is the best protection trust

beneficiaries can reasonably expect. Most important, the FCR’s idea that imposing a bar date

will enhance the accuracy of a forecast is mistaken.

A. Future claims, not present ones, pose the greater challenge to forecasting and the greater risk to the stability of a trust payment percentage.

The Motion offers no evidence that the payment percentage reductions it points to

resulted from underestimation of pre-confirmation claims. Professor Brown’s article does not

32 Motion at 18 (citing S. Todd Brown, How Long Is Forever This Time? The Broken Promise of Bankruptcy Trusts, 61 Buff. L. Rev. 537 (2013) (hereinafter cited as “Brown”)).


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make that case, but rather faults the underestimation of trust claims in general, without regard to

whether it is claims arising during the bankruptcies or afterwards that have exceeded forecasts.33

His article, moreover, displays only superficial familiarity with the workings of trusts or with

forecasting. For example, he dismisses outright the financial crisis of recent years as an

influence on the reduction of payment percentages, even though these are a function not just of

the trusts’ liabilities, but also their assets and their current and projected earnings. He reasons

that the capital losses experienced in the stock market crash of 2008 were largely erased when

the stock market recovered, but he ignores that most trusts invest chiefly in fixed-income

securities, on which yields have remained at historically low levels ever since. The resulting

decline in the earning power of trust assets by 25% or more has a very material impact on the

projections that determine the trusts’ payment percentages, but Professor Brown ignores this. He

offers no quantitative analysis of what lies behind payment percentage reductions, and while

both he and the FCR cite to a document published by the UNR Trust explaining a 2011 reduction

in that trust’s payment percentage, neither even acknowledges the statement contained in that

document to the effect that the reduction was necessitated not only because of an unanticipated

increase in filings, but also because of “the historically weak investment performance due to the

current fixed income market.”34

Moreover, neither Professor Brown’s article nor the FCR’s Motion demonstrates that

unexpected numbers of trust claims must mean that forecasts failed to take accurate account of

claims that had already arisen when the trusts were formed, as distinct from then-future claims

33 See Brown, supra note 32, at 577. 34 See Letter from David E. Maxam, Exec. Director, UNR Asbestos-Disease Claims Trust, to Claimants’ Counsel (March 21, 2011).


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arising later. Both of them emphasize the UNR and C. E. Thurston cases,35 but these cases show

that future claims—those of the FCR’s own constituency—more probably account for the

downward pressure on payment percentages. The recent reduction in the UNR Trust’s payment

percentage that the Motion makes much of did not occur until some twenty-one years after that

trust was created.36 The C. E. Thurston & Sons Asbestos Trust began accepting claims on

November 16, 2006, and required all claims that arose during the bankruptcy to be filed within

three years of that initial claims filing date (absent a longer statute of limitations in a given

claimant’s state).37 With few exceptions, therefore, the bulk of all pre-confirmation claims

against C. E. Thurston were filed by November 16, 2009.38 The payment percentage for the C.

E. Thurston & Sons Asbestos Trust was not lowered to 25% until more than two and a half years

later, on May 10, 2012.39 It would thus appear that any unexpected filings necessitating a

payment percentage reduction were largely those of persons who, throughout the antecedent

bankruptcy, remained unknown “futures.”

35 See Brown, supra note 32, at 577 n.185; Motion at 20. 36 Motion at 14. UNARCO Industries filed for bankruptcy on July 29, 1982. Motion for Instructions at 9, In re UNR Indus., No. 82-09841 (Bankr. N.D. Ill. April 28, 2014) [Dkt. No. 615]. The UNR Asbestos-Disease Claims Trust was formed in February 1990. Id. The payment percentage change cited by the FCR here occurred on March 17, 2011. 37 C. E. Thurston & Sons, Inc. Asbestos Related Claims and Demands Trust Distribution Procedures Revision 1b, § 7.1(a)(2), at 13, dated Feb. 26, 2009, available at http://www.claimsres.com/documents/CET/C%20%20E%20%20Thurston%20TDP%20-%20Revision%201b.pdf (last visited Dec. 10, 2014). 38 Key Dates for C. E. Thurston & Sons, available at http://www.claimsres.com/ documents/CET/Key%20Dates.pdf (last visited Dec. 10, 2014). 39 C. E. Thurston & Sons Asbestos Trust Notice of Offer Resumption and New Payment Percentage – May 2012 (5), available at http://www.claimsres.com/documents/CET/Notice %20of%20Offer%20Resumption%20and%20New%20Payment%20Percentage%20-%20May%202012.pdf (last visited Dec. 10, 2014).


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Payment percentage calculations and forecasting are complex subjects, and the Motion

hinders any realistic understanding by glossing over those complexities in the FCR’s eagerness

to justify a bar date. As common sense would suggest, however, and as Dr. Peterson points out

in his declaration accompanying this memorandum, all forecasts contain uncertainties, but future

claims are more difficult to forecast accurately than existing ones, and the farther into the future

the forecast extends, the greater the risk of error.40 Future claiming behavior is shaped by

unforeseeable developments in law, in medicine, in the economy, and in social behavior. By

way of example, Dr. Peterson cites a well-known trend in the percentage of mesothelioma

victims who sought legal recourse. That percentage “grew exponentially” during the decade of

the 2000s. “With the benefit of hindsight, most experts in the field attribute that trend to the

onset of intensive advertising on television and the internet. But, standing in 1990, scant data

existed on which to base the prediction of such a trend; any analyst who ventured to do so would

have been indulging in rank speculation.”41 By comparison, “the number and timing of existing

claims, whether filed or unfiled, is the least uncertain of the many variables in a complete

forecast.”42 Existing claims also have much less impact on an overall forecast than future ones,

since the forecasts extend out several decades into the future.

40 Ex. 1, ¶ 4 (Peterson Decl.). 41 Id. ¶ 9. 42 Id. ¶ 8.


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B. Bar dates alter claiming behavior in mass tort cases, magnifying the expense of claims administration and making accurate forecasting even more difficult.

Dr. Peterson’s declaration explains that bar dates are counterproductive for accurate

forecasting because they have perverse effects on claiming behavior, a point he also addressed in

open court during the Claims Administration Hearings. He notes:

The comparative assurance with which current claims can be quantified is a function of the degree to which claiming patterns in the relevant past are stable and not affected by the abrupt introduction of factors stimulating or deterring, accelerating or retarding, the assertion of claims. It is vital to understand, then, that the imposition of a bar date would be an abrupt change disturbing the claiming patterns. The threat of permanent preclusion would have a powerful tendency to stimulate the filing of claims that might otherwise never be brought and to accelerate claims that otherwise would not be filed until a later time. In other words, the overall set of claims that would be filed under a bar date would constitute a different population than the claims an informed analysis would forecast as of the same date if the Debtors were still litigating in the tort system rather than resting under the protection of the automatic stay of bankruptcy.43

A bar date, then, would call forth a different population of claims than would be asserted if no

such artificial deadline were superimposed on claiming patterns—both accelerating claims that

would not otherwise be submitted until some future date and by stimulating protective claims

that would not otherwise be filed at all.44 And, far from making more accurate forecasts

possible, this phenomenon creates new uncertainties and, by disrupting historical claiming

patterns, diminishes the ability of forecasters to put boundaries around uncertainties by drawing

on historical claims data:

To the extent of that difference, the bar date would inject new and greater uncertainties into any forecast. It would also break the continuity between newly arising claims and those asserted in the recent past before the Debtors’

43 Id. ¶ 10; see also Hr’g Tr. 440:6-443:8, Oct. 15, 2010 (testimony of Dr. Mark A. Peterson) (excerpt annexed hereto as Exhibit 4). 44 See Ex. 2, ¶ 15 (Ruckdeschel Decl.) (discussing the impetus a bar date would create for the filing of protective claims).


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bankruptcy. And that discontinuity would render historical claims data less reliable as a basis for comparison and extrapolation. In other words, not only would the bar date multiply and magnify the uncertainties of forecasting, it would also compromise one of forecasters’ most powerful resources for putting bounds around uncertainties.45

The historical evidence the Court received in the Claims Administration Hearings confirms

that bar dates in mass tort bankruptcies are counterproductive.46 That evidence showed, for

example, that the bar date in the Robins case, a bankruptcy caused by tort claims involving

intrauterine contraceptive devices, a bar date stimulated an avalanche of claims. At the petition

date only 5,000 suits were pending against the debtor, and it was then thought that there were

“perhaps an equal number not filed.”47 As it turned out, though, more than 327,000 claims were

filed in response to the bar date.48 In 1993 and 1994, class action settlement notices in the

Georgine and Fibreboard cases led to vastly increased volumes of asbestos claims, especially

claims for nonmalignant conditions, an especially ironic result given the Supreme Court’s

ultimate rejection of the settlements.49

While stimulating claims that might not otherwise be filed, a bar date would also erect

unjustified barriers to some legitimate, though as yet undeveloped claims, if the proof of claim

form required the evidentiary attachments the FCR requests. Claimants who presently lack

45 Ex. 1, ¶ 11 (Peterson Decl.); see also Ex. 4, at 382:16-391:6; 440:6-443:8; 465:12-24; 471:2-472:12; 473:22-74:22 (testimony of Dr. Mark A. Peterson). 46 See Ex. 4, at 349:18-350:18; 382:16-384:6; 465:12-24; 471:2-472:12; 473:22-474:22 (testimony of Dr. Mark A. Peterson). 47 A.H. Robins Co., 788 F.2d at 1013. 48 See Richard B. Sobol, BENDING THE LAW: THE STORY OF THE DALKON SHIELD BANKRUPTCY 98 (Univ. Chicago Press 1991). 49 See Estimation Hr’g Tr. 3554-56, Aug. 7, 2013 (testimony of Joseph R. Rice); see also Amchem Prods., Inc. v. Windsor, 521 U.S. 591 (1997); Ortiz v. Fibreboard Corp., 527 U.S. 815 (1999).


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sufficient evidence of Garlock’s culpability may well be capable of developing such evidence if

the automatic stay were lifted and they were given sufficient time and discovery.50 Deprived of

that opportunity, however, claimants may be deterred from filing. Thus, it could not be assumed,

as the FCR and Garlock would have it, that any claim not filed in response to a bar date would

have no merit. This would further compromise the ability to forecast future claims against the

trust with reasonable accuracy.

Taken as a whole, then, imposing a bar date would force the Debtors’ estates or a trust to

absorb higher administrative costs to sort through a larger volume of claims in order to identify

and pay those that warrant settlement, litigate where settlement eludes them, and reject and

dismiss claims definitively lacking merit. It would confound forecasters by significantly

diminishing the utility of historical claims data as a resource for empirically deriving key

forecasting assumptions. And, while discouraging some deserving claimants from pursuing

recourse and catching others in a trap for the unwary, it would predictably result in the filing of

tens of thousands proofs of claim and evidentiary submissions―quite possibly more than

100,000 of them. These filings would come at enormous cost to current claimants but would

serve no purpose in the plan confirmation process. It would be pointless for anyone to scrutinize

their details as part of the Chapter 11 process, and any attempt to do so in earnest would generate

great expense for the estates while making it impossible to confirm a plan within any reasonable

period of time.

Garlock argues that the expense and burden of a bar date is justified to cull the large

number of long-dormant claims pending from the late 1990s or early 2000s for nonmalignant

50 See Ex. 2, ¶ 6 (Ruckdeschel Decl.).


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diseases.51 This is a very ill-considered notion. Garlock acknowledges, and the FCR and the

Committee agree, that the filing of nonmalignant claims waned dramatically after 2004, with

very few of those claims receiving payment since then. If that pattern is left undisturbed, there is

no reason to forecast that nonmalignant claims will be numerous enough or valuable enough to

“move the needle” on the payment percentage of an eventual Garlock trust. But imposing a bar

date would disturb that pattern and create strong incentives for risk-averse lawyers to submit

such claims rather than incurring potential responsibility to clients for allowing those claims to

be barred.

As attorney Jonathan Ruckdeschel has put it, “[f]aced with such a demand [i.e., a bar

date], cautious lawyers would find it imperative to submit claims for nonmalignant conditions on

behalf of clients who, in the absence of a bar date, would not file claims until their health

conditions trigger an actionable claim in the states where they reside, if ever.”52 Dr. Peterson has

elaborated as follows:

The difficulties created by a bar date would be particularly severe when it comes to nonmalignant claims. Garlock received such claims in vast numbers in the late 1990s, but they waned substantially commencing in 2003-2004. Between 2006 and the Petition Date, the numbers of new claims for nonmalignant diseases declined to the point of near immateriality. Yet, nonmalignant diseases continued to arise, and many courts made various provisions, such as creating inactive dockets and registries for them, that have safeguarded the legal rights of the persons diagnosed with such conditions without allocating trial time to them. A person relegated to such a docket or registry cannot expect a trial unless his or her asbestos-related disease becomes severe or unless the person comes to be diagnosed with a malignant disease recognized as characteristic of asbestos exposures. The statute of limitations will not run, however, against the person diagnosed with asbestosis or another asbestos-related nonmalignant disease who is placed on such a registry. Under the circumstances, persons with nonmalignant conditions and lawyers representing such persons may, understandably, feel constrained to submit a

51 Garlock Resp. at 3. 52 Ex. 2, ¶ 19 (Ruckdeschel Decl.).


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claim against Garlock if a bar date is imposed, when the same persons and lawyers would not do so in the absence of the preclusion threat implicit in such a bar date. If a bar date were imposed, then, Garlock would have to expect many more claims for nonmalignant conditions than its experience in the last five or six years before its bankruptcy would indicate.53

If the goal were to instigate a new surge in nonmalignant claims, imposing a bar date would be a

good idea. The Court and the parties here should not lose sight of the law of unintended

consequences, and they have no good reason to run the very real risk of perverse effects that a

bar date would entail.

Garlock points to the settled claims bar date as an example of “how a bar date can clear

out meritless claims.”54 But it has no evidence to support its surmise that the reason why claims

ostensibly settled prepetition were not filed as settled claims was to avoid scrutiny of the

settlements. There are other equally plausible explanations why some claims Garlock

recognized as arguably settled were not presented as settled claims under the bar, especially

considering that the claimants involved remain eligible to present their claims as unliquidated

ones in due course. For example, their lawyers may have determined that the documentation of

settlements in principle had not yet been perfected by the Petition Date, so that the putative

settlements would not be enforceable, or they and their clients may have preferred to proceed on

the basis of unliquidated claims, as they are entitled to do. Whatever the reasons might be, the

settled claims bar date addressed a small and discrete set of liquidated claims, and was aimed at

setting up contests as to the validity of their liquidation and the legal efficacy of the settlement

documentation. That is fundamentally different than the situation involving unliquidated claims,

which are more numerous by orders of magnitude, do not turn on contractual documents but

53 Ex. 1, ¶ 12 (Peterson Decl.). 54 Garlock Resp. at 5.


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rather on complicated medical and causation issues, and from the standpoint of any bar date

process present very different issues of fairness and efficiency.

Certainly no bar date is necessary to determine with reasonable accuracy the number of

current mesothelioma claims. Epidemiology and empirical data have reliably established the

incidence of mesothelioma. The rate at which victims of that disease brought suit against

Garlock in the past, and any trends in that rate, can be observed from Garlock’s own claims data,

while assumptions bearing on the number of as-yet unfiled existing mesothelioma claims can be

inferred by statistical analysis. Both the historical data and the analysis of Questionnaires

submitted in the estimation proceeding confirm the rate at which existing mesothelioma

claimants can likely establish exposure to Garlock’s asbestos-containing products under

circumstances likely to have resulted in the ingestion of asbestos fibers. As the Debtors, the

FCR, and the Committee all agree, it is mesothelioma claims that represent the lion’s share of

Garlock’s asbestos liability. There is little to gain by forcing those claimants to file proofs of

claim under a bar date, but the effort would inflict many costs and much delay, as shown above.

III. THE PROPOSED BAR DATE WOULD BE ARBITRARY AND UNFAIR.

The Motion seeks to impose a bar date on all persons having an asbestos-related disease

“that has manifested, become evident, or been diagnosed as of one hundred eighty (180) days

prior to entry of the” requested bar date order.55 Such persons would include those in whom

latent diseases developed over the course of many years, if not decades, but who first displayed

symptoms or received diagnoses postpetition. In addition, the Motion proposes that the Court

approve a customized claim form that would incorporate “part 5” of the Questionnaire issued by

the Debtors in the estimation proceeding. Misleadingly, the Motion states that part 5 “concerns

55 Motion, Ex. D, at 2, ¶ 2 (proposed order).


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exposure to Garlock’s products.”56 In fact, however, part 5 of the questionnaire was divided into

“Part 5A” and “Part 5B.” Part 5A called for claimants to identify “every site where claimant

alleges exposure to Garlock or Anchor product,” and for each site identified, provide (1) the site

name and address, (2) the type of exposure (e.g., occupational), (3) the nature of the exposure

(e.g., “Personally cut asbestos-containing gaskets”), (4) the “Occupation Code” applicable to the

claimant, (5) the applicable “Industry Code,” (6) the start and ending dates of the claimant’s

presence at the site, and (7) a list of the Garlock and Anchor asbestos-containing products that

the claimant was exposed to.57 Part 5B of the Questionnaire requested details of every alleged

exposure to products other than Garlock’s.58

With disease latencies spanning 30 to 40 years from the time of exposure, and with the

automatic stay in place blocking discovery against Garlock, it is unrealistic to expect many

claimants, especially those who became symptomatic postpetition, to have such fully developed

information available at their fingertips to substantiate Garlock exposures and, as to non-Garlock

exposures, any demand for evidence as part of proofs of claims would be gratuitous and

inordinately burdensome. Yet, the Motion would rule out claims by injured persons―including

those not yet represented by counsel―who, as of the bar date, do not happen to possess the

requested evidence, but who could obtain such evidence if given a realistic period of time in

which to do the full investigation and discovery required.59 This would be grossly unfair. It

would inflict very real hardship on one group of asbestos victims (the ACC’s constituents), in the 56 Motion at 24. 57 Order Authorizing the Debtors to Issue Questionnaire to Holders of Pending Mesothelioma Claims and Governing the Confidentiality of Information Provided in Responses at 19 of 41 (ECF pagination), dated June 21, 2011 [Dkt. No. 1390]. 58 See id. at 22 of 41 (ECF pagination). 59 Ex. 2, ¶ 6 (Ruckdeschel Decl.).


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supposed interest of another group of asbestos victims (the FCR’s constituents), when the only

difference between those two groups would be that the asbestos diseases afflicting the latter

would, by sheer fortuity of timing, still have been latent after the 180-day cutoff.

A. The proposed bar date would inflict fatal prejudice on many potentially meritorious claims by affording insufficient time to investigate those claims and develop specific exposure evidence.

The statutes of limitations of most states afford a potential plaintiff three years from the

diagnosis of his or her asbestos-related illness in which to file a complaint.60 Even that amount

of time can present challenges given that the process leading up to filing a lawsuit for asbestos-

induced injuries involves many steps: getting sick, eventually obtaining a diagnosis, learning of

a potential right to seek compensation, selecting and engaging counsel, and attempting to

determine what asbestos exposures the victim may have been subjected to and which companies

may bear responsibility for those exposures.61 These challenges are compounded in cases

involving victims of mesothelioma and other asbestos-related cancers, who, faced with the

diagnosis of an incurable disease and suffering from the excruciating effects of the cancer, toxic

chemotherapy regimens, or brutal, disfiguring surgeries, are typically focused on things other

than spending their final days in a lawsuit.62 Many die before engaging a lawyer.63 If they do

seek out a lawyer, quite often the victims are not in a physical condition or mental state to

participate effectively in the development of their claims.64 The requested bar date would cut

short the period of time afforded to these victims under nonbankruptcy statutes of limitations to

60 Id. ¶ 4. 61 Id. 62 Id. 63 Id. 64 Id.


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develop their claims. Indeed, in certain cases, the FCR is proposing to cut the period down to 23

days from the mailing of the bar date notice,65 which is utterly unrealistic.

Gathering the evidence necessary to substantiate a claim requires a great deal of

investigation and time. Even in cases of mesothelioma, a disease so closely tied to asbestos that

doctors regard its presence as proof of asbestos exposure, a successful tort claim against a

product manufacturer on an exposure theory depends on developing proof of contact with dust

from the manufacturer’s asbestos-containing products, which is usually shown by circumstantial

evidence. The first task of a lawyer for a mesothelioma claimant typically is to reconstruct the

victim’s work history so that possible sources of occupational exposure can be identified.66 Yet,

victims of mesothelioma often cannot recount their work experiences in a detailed or coherent

manner, or can only do so partially because of their deteriorated health.67 These challenges are

magnified when the lawyer is hired by the family of a victim who has already died or become

incapacitated; in those instances, the lawyer must reconstruct exposures from second-hand

reports, track down witnesses and relevant evidence from past cases, and try to put the pieces of

the puzzle together without the assistance of the injured victim.68 Given these difficulties, an

indispensible tool for identifying victims’ places of employment is Social Security records.69

But it usually takes months to obtain these records from the Social Security Administration.

Once those records are delivered, the next step is to identify sources of asbestos exposure and

develop the means of proving which companies made or distributed the asbestos-containing

65 Motion, Ex. D, ¶ 14, at 6. 66 Ex. 2, ¶ 8 (Ruckdeschel Decl.). 67 Id. 68 Id. 69 Id. ¶ 9.


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products involved or otherwise were responsible for them.70 In that regard, a key challenge is to

find workers who have knowledge of the relevant work experiences and job functions so that

their testimony can be connected to historical records to prove circumstantially which products

created the asbestos that contributed to the victim’s disease.71 The process of investigating and

gathering specific exposure evidence is time-consuming and painstaking. It is a process akin to

“piecing together a complicated mosaic,”72 which in many cases cannot be accomplished in days

or months.

The challenges of garnering solid exposure evidence are amply illustrated in the Hallman

and Millar cases, which are described in the accompanying declaration of Jonathan Ruckdeschel,

a Maryland plaintiffs’ attorney who has litigated approximately 100 mesothelioma cases in the

past 14 years.73 Eugene Hallman had been exposed to asbestos when he worked as a plumber’s

assistant and then as a building engineer and custodian in the public school system.74 Although

Mr. Hallman was lucid and capable of participating in the investigation and preparation of his

case during the initial stages of his lawsuit, his health suddenly and dramatically deteriorated, to

the point that he was confined to a hospital bed and fading in and out of lucidity by the time Mr.

Ruckdeschel attempted to have him deposed.75 The deposition was later ruled inadmissible

because of Mr. Hallman’s inability to coherently take the oath or respond to questions.76

70 Id. 71 Id. 72 Id. 73 Id. ¶¶ 11-12. 74 Id. ¶ 10. 75 Id. ¶ 11. 76 Id.


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Because of Mr. Hallman’s incapacity, his lawyers were forced to attempt to reconstruct his

exposure history by tracking down co-workers.77 Although his lawyers were unable to locate

any co-workers from Mr. Hallman’s days as a plumber’s assistant, they did track down co-

workers from the school system through an investigation that took two more years but resulted in

substantial settlements.78 In the case brought by the Estate of Glenn Millar, Mr. Millar, a former

sheet-metal worker, died before Mr. Ruckdeschel’s firm was engaged as counsel.79 As a result,

Mr. Ruckdeschel and his colleagues were unable to question Mr. Millar about his work and

exposures.80 It took more than a year of active investigation before they found a witness who

had worked alongside Mr. Millar and was able to provide detailed information about Mr.

Millar’s job functions and the asbestos-containing products he worked with and around.81 When

neither that witness nor any other evidence could connect Mr. Millar to their products, the

plaintiff voluntarily dismissed some of the initially-named defendants (including Garlock) from

the suit.82 Mr. Ruckdeschel and his team, however, eventually obtained compensation from

remaining defendants based on facts developed from the witness’s testimony and other

discovery.83

Had a short bar date applied in either Hallman or Millar, Mr. Ruckdeschel and his team

would not have been able to make the case against any defendant, and the victims would have

77 Id. 78 Id. 79 Id. ¶ 12. 80 Id. 81 Id. 82 Id. 83 Id.


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received no compensation.84 Nonbankruptcy statutes of limitation balance the need to provide

sufficient time for investigation and the need for finality in a reasonable way that attorneys are

accustomed to and rely upon.85 Imposing the bar date requested by the FCR would effectively

curtail these limitation periods, which would inevitably and unfairly exclude bona fide claims

simply because there would be insufficient time to marshal the necessary evidence.86

B. The bar date proposal would have unconscionably harsh effects.

Persons diagnosed with mesothelioma shortly before the 180-day reachback period of the

requested bar date order would, by accident of timing, be subject to the bar date.87 Many would

likely be unrepresented at the time of diagnosis and at least for some months thereafter.88 They

would have had no previous reason to concern themselves with Garlock, with potential claims, or

with any notices published in Garlock’s bankruptcy case.89 In these respects, they would closely

resemble the unknown persons the FCR is supposed to protect, but they would be treated

drastically differently from those future claimants, and also from current claimants who fell

outside the reachback period.90 Given the process of claim preparation described above, the

recently diagnosed persons would face severe and, in many cases, insurmountable obstacles to

the presentation of substantiated claims and the vindication of their rights.91

84 Id. ¶ 13. 85 Id. 86 Id. 87 Id. ¶ 14. 88 Id. 89 Id. 90 Id. 91 Id.


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C. For Questionnaire respondents, the proposed bar date would be absurdly redundant.

For different reasons, it would be unfair to require prepetition mesothelioma claimants

who answered Garlock’s estimation Questionnaire to file proofs of claims. If the bar date were

imposed on these claimants, they would have to endure the same exercise twice lest they forfeit

their claims. There is no point in forcing these claimants to provide the same information again

on the customized proofs of claim favored by the FCR. Moreover, because an eventual Garlock

trust will promulgate its own form for trust claims, these claimants must anticipate completing

yet another form to preserve their claims and have the chance of receiving a distribution from the

trust. By contrast, future claimants will only have to fill out the trust’s form. The burdens the

Motion would pile on current claimants are unjust and discriminatory.

D. The proposed bar date would usher in disputes over whether and when a health condition triggered a duty to file a proof of claim.

As noted, the proposed bar date would apply to claimants whose diseases became

“manifest” or “evident” 180 days prior to entry of the bar date order.92 Hence, the bar date

proposal would apply to individuals who had “manifested” symptoms of disease before the 180-

day cutoff but had not yet been diagnosed with an asbestos-related disease.93 Yet, the earliest

point at which mesothelioma can be said to “manifest” is not clear-cut, planting the seeds of

what would surely be many fact-specific disputes as to whether or not particular claimants had

an obligation to file a proof of claim by the bar date.

92 Motion, Ex. D, ¶ 2, at 2. 93 Ex. 2, ¶ 5 (Ruckdeschel Decl.).


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Most asbestos-related diseases, including cancers, involve the gradual onset of symptoms

and frequent difficulty in reaching a diagnosis, particularly in cases of mesothelioma.94 The

most common early symptoms experienced by individuals who are eventually diagnosed with

pleural mesothelioma are fatigue, shortness of breath, and an unproductive cough—not matters

that point instantly to this malignant and fatal illness.95 In mesothelioma victims, these

symptoms are ultimately determined to be the result of a pleural effusion compressing the lung,

but their condition is often mistaken in the first instance for pneumonia or a general infection.96

Even when fluid is eventually discovered and drained, a diagnosis of mesothelioma may still be

months away because initial analysis of the fluid often does not point to cancer.97

Persons suffering from asbestosis (i.e., bilateral fibrosis of the lungs caused by

asbestosis) would fare no better under the FCR’s vague terminology. The detection and

diagnosis of asbestosis is often a matter of dispute between qualified medical experts.98 It must

therefore be anticipated that numerous disputes would arise over whether a particular claim was

subject to the bar date. The costs of satellite litigation of this nature would quickly erode the

amount available to compensate victims.

94 Id. ¶ 3. 95 Id. ¶ 4 n.2. 96 Id. 97 Id. 98 Id. ¶ 17.


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IV. THE PROPOSED ORDER, NOTICES, AND CUSTOMIZED CLAIM FORM ARE DEEPLY FLAWED.

The order, notices, and claim form proposed in the Motion all reflect a perfunctory and

poorly thought-through approach to significant practical and legal problems. Without purporting

to be an exhaustive account, the following discussion highlights some of these problems.

A. The definition of “Asbestos Claim” is overbroad.

The definition of “Asbestos Claim” contained in the proposed order and proposed form

of notices is highly overbroad. As currently drafted, the term “Asbestos Claim” would

include―and thus make subject to the bar date―“any claim . . . for which any Debtor is alleged

to be liable . . . .”99 The words “any Debtor” include Anchor, a debtor in this case that has

virtually no assets. There is no reason to subject any asbestos claims against Anchor to a bar

date when the Debtors’ plan proposes to dissolve and wind up Anchor under North Carolina law

and projects that no creditor will recover anything from it.100

The definition of “Asbestos Claim” would also sweep in claims “arising out of or relating

to exposure to asbestos or contact with an asbestos-containing product.”101 The words “relating

to” would make this definition all but limitless “since, as many a curbstone philosopher has

observed, everything is related to everything else.” Cal. Div. of Labor Standards Enforcement v.

Dillingham Constr., N.A., Inc., 519 U.S. 316, 335 (1997). The proposed notices that would

accompany the order compound the problem by emphasizing that the bar date would apply “NO

99 Motion, Ex. D, ¶ 2 (proposed order) (emphasis added). 100 See Debtors’ First Amended Plan of Reorganization, § 2.1, at 19, dated May 29, 2014 [Dkt. No. 3708]. 101 Motion, Ex. D, ¶ 2 (proposed order) (emphasis added).


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MATTER HOW REMOTE OR CONTINGENT” a potential claim may be,102 this is a

prescription for calling down an avalanche.

B. Requiring claimants to identify the particular Debtor they hold claims against would be pointless, since GST and Garrison are co-liable and Anchor has no assets.

The proposed notices would advise claimants that “[a]ny person asserting an Asbestos

Claim against a Debtor . . . must identify on his or her proof of claim form the particular Debtor

against which the Asbestos Claim is asserted.”103 As noted above, no legitimate purpose would

be served in requiring claimants to specifically identify Anchor as allegedly liable, if Anchor is

to be dissolved outside of bankruptcy. As for GST and Garrison, their asbestos liabilities are co-

extensive. Thus, it would be pointless to expect anyone to say on a claim form whether they are

asserting claims against GST, Garrison, or both, since both would be co-liable in any case.

C. If Garlock is solvent, the proposed consequences for failing to timely file a claim would be unlawful.

The proposed order would purportedly “forever bar[ ], estop[ ], and enjoin[ ]” the holder

of any untimely filed claim “from . . . voting upon, or receiving distributions under, any plan or

plans of reorganization in these chapter 11 cases . . . .”104 Yet, if Garlock is solvent, as the

Debtors contend, the “best interests of creditors” test requires that “tardily filed” claims are not

barred, but only subordinated to timely filed claims. See 11 U.S.C. §§ 726(a)(2)(c) and (a)(3),

1129(a)(7)(A)(ii). “Because section 1129(a)(7) of the Bankruptcy Code requires that a chapter

11 plan of reorganization provide non-consenting impaired creditors, as of the effective date of

the such plan, with at least as much as they would receive in a hypothetical chapter 7 liquidation

102 Motion, Ex. B at 2. 103 Motion, Ex. B (proposed form of mailed notice). 104 Motion, Ex. D, ¶ 8, at 4.


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on such date, the requirements of section 726(a) are imported into a chapter 11 case.” In re

Adelphia Commc'ns Corp., 368 B.R. 140, 256 (Bankr. S.D.N.Y. 2007).105 “It is in section 726

that we find the consequences for the late filing of a proof of claim, and those consequences are

not disallowance of the claim but subordination of the payment of that claim to the payment of

all other allowed and timely filed claims.” In re Babbin, 164 B.R. 157, 161 (Bankr. D. Colo.

1994) (emphasis in original).106 Thus, at least one court has held in a Chapter 11 reorganization

that “[l]ate-filed claims are entitled to be paid (§ 726(a)(3)) after all timely claims have been paid

in full (§ 726(a)(2)), but before interest is paid on any claims (§ 726(a)(5)).” In re Washington

Mut. Inc., 442 B.R. 314, 357 n.44 (Bankr. D. Del. 2011). These principles apply here, and

counsel against embracing the language and approach of the FCR’s proposed order, particularly

in light of the Debtors’ position on Garlock’s solvency.

In addition, this language―especially the word “enjoined”―would effectively discharge

the Debtors from all untimely filed claims before the confirmation of any plan. This would run

afoul of the Bankruptcy Code’s plain language, which provides that Chapter 11 debtors are to

receive a discharge only when a plan of reorganization is confirmed. See 11 U.S.C.

§ 1141(d)(1).107

105 See also Kitrosser v. CIT Grp./Factoring, Inc., 177 B.R. 458, 469 (S.D.N.Y. 1995) (“Although the requirements of Chapter 7 are in general not applicable to Chapter 11 proceedings, see 11 U.S.C. § 103(b), Section 726 does apply through the requirements of Section 1129.”). 106 See also In re Ricks, 253 B.R. 734, 743 (Bankr. M.D. La. 2000) (“Under both § 726(a)(2)(C) and § 726(a)(3) late filed claims are allowed to participate in distribution of the debtor's estate, if the late filed claim is filed under § 501(a) . . . .”). 107 The proposed forms of notices would similarly advise claimants that untimely filed claims will be “barred and disallowed,” Motion, Ex. B, at 3, which is not appropriate for the reasons explained above. Additionally, the proposed forms of notice do not track the proposed order in describing the supposed consequences of failing to meet the bar date, which would greatly increase the likelihood of confusion if the order and the notices were ever issued.


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V. THE PROPOSED BAR DATE NOTICES FAIL THE TEST OF DUE PROCESS.

The FCR has not even bothered to address the very real issue of providing

constitutionally adequate notice of a bar date to the legions of injured persons whose claims he

would preclude. Instead, he glibly asserts that the notice program proposed by Garlock for its

voting procedures (the “Voting Notice Program”) would be “sufficiently robust for a bar date

notice.”108 But this assertion is facile and misleading. When the Voting Notice Program was

before this Court last December, the question was whether it would be adequate for purposes of

voting on and objecting to the Debtors’ proposed plan, not for purposes of a preclusive bar date.

Even if the Court finds that the Voting Notice Plan would provide adequate notice for purposes

of voting and plan objections, this would not establish the constitutional efficacy of that notice

for the altogether different purposes of the proposed bar date.

As the Supreme Court has instructed, the process that is due will vary with the rights that

are being affected: “[D]ue process is flexible and calls for such procedural protections as the

particular situation demands.” Morrissey v. Brewer, 408 U.S. 471, 481 (1972); see also Mathews

v. Eldridge, 424 U.S. 319, 334-35 (1976); Cafeteria Workers Union, Local 473 v. McElroy, 367

U.S. 886 (1961). Compared to a deadline for voting and making plan objections, the threatened

consequences of the bar date order proposed by the FCR would be severe, threatening permanent

claim preclusion. A bar date order would thus require much more “robust” notice than mere

solicitation procedures.

Indeed, no notice program could possibly provide reasonable assurance that all asbestos

claimants to whom the proposed bar date would apply would receive fair notice. In the context

of affirming the invalidation of a purported class action settlement of persons exposed to

108 See Motion at 24.


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asbestos who had not yet sued, the Supreme Court noted the significant “impediments to the

provision of adequate notice” to those who had been exposed to asbestos but did not yet have a

perceptible asbestos-related disease at the time of the settlement, and expressed grave doubt as to

whether “notice sufficient under the Constitution and Rule 23 could ever be given to legions so

unselfconscious and amorphous.” Amchem Prods., Inc. v. Windsor, 521 U.S. 591, 628 (1997).

Here, the FCR’s proposed bar date would apply to all persons whose asbestos-related

injury has “manifested, become evident, or been diagnosed” as of 180 days before the bar

date.109 To a considerable extent, however, such persons would differ little from the prospective

claimants in Amchem who had suffered asbestos exposures without yet having brought suit. Just

as persons in the “exposure-only” category “may not even know of their exposure” (521 U.S. at

628), many who “manifest” an illness would be unaware that the illness was caused by asbestos

exposure or that they were exposed to Garlock products. Indeed, as the Court pointed out in

Amchem, some of those potential claimants would be spouses or children of occupationally-

exposed decedents and would likely know little or nothing of that exposure. Id. And even if

they “fully appreciate the significance” of the bar date notice, persons with only ambiguous or

minor symptoms, like those without current afflictions, “may not have the information or

foresight needed to decide, intelligently, whether to stay in or opt out.” Id.

Moreover, those recently diagnosed with mesothelioma would be preoccupied with

medical matters, and putting their affairs in order for their families. They would not be focused

on legal claims.110 Indeed, many falling ill before the 180-day reachback period that would

trigger the filing obligation would not yet even have engaged counsel when the bar date loomed

109 Motion, Ex. D ¶ 2, at 2. 110 See Ex. 2, ¶ 7 (Ruckdeschel Decl.).


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up. Realistically, no publication notice could ever be reasonably calculated to reach such

persons.

This dilemma is one of the reasons why bar dates are generally avoided in asbestos

bankruptcies and by itself is ample cause to deny the Motion. Even if a bar date were

appropriate, however, the proposed forms of notice would be woefully deficient. They are

written in confusing “legalese,” rather than plain English that would help an unsophisticated

person understand whether action was necessary. For example, the proposed publication notice

is entitled “Notice of Bar Dates for Filing of Asbestos Proofs of Claim.”111 The average person

does not know what a “bar date” is, or a “proof of claim,” yet both terms are used throughout the

notices without definition. The notices do not include a simple pointed statement that claimants

who do not file by the bar date stand to lose any right ever to receive payment from Garlock.

While the notices state that the bar date applies to persons whose illnesses have “manifested” or

“become evident,” they provide the reader no guidance on the meaning of those terms. But those

terms are hardly self-defining. If the Motion were approved, many disputes would arise

regarding whether particular claimants’ illnesses had manifested or become evident before the

180-day reachback period defined by the Motion.

Nor do the FCR’s proposed forms of notice provide sufficient information regarding the

Debtors’ products and how they were used to alert potential claimants who are aware that they

have an asbestos-related illness but may not know whether they were exposed to the Debtors’

products. Nowhere in the notices is there any description at all of the kinds of products produced

and distributed by the Debtors―the words “gaskets” and “packing” do not even appear. Nor is

there any description of the kinds of industries in which those products were used, or the

111 Motion, Ex. C, at 1.


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occupations that would have most likely been exposed to the products. The notices are thus

plainly insufficient to alert potential claimants that the Debtors’ products may have contributed

to their asbestos-related injuries.

All things considered, the suggested bar date notices point up the profound flaws of the

Motion when tested against the mandates of due process. Those notices fall short of due process

because they could not reasonably be expected to “convey the required information” to persons

likely to be affected; they are not what someone “desirous of actually informing the absentee”

would adopt to accomplish that objective. Mullane v. Cent. Hanover Bank & Trust Co., 339

U.S. 306, 314-15 (1950).112 The FCR’s idea that the notices would dovetail neatly with the

Debtors’ solicitation procedures is wrong. On the contrary, the Debtors’ proposed form of notice

for voting expressly states that there is no need for any claimant to file a proof of claim unless

his claim was allegedly settled prepetition.113 The voting notice embodies the right idea on this

point. For all the reasons discussed above, this Court should adhere to its prior rulings rejecting

repeated requests to impose a bar date on unliquidated asbestos claims.

112 Before the Court could properly be satisfied with any such notices, it would have to consider highly specific issues beyond the scope of this memorandum. To mention one example, the forms proposed could not provide fair notice to potential claimants who do not speak English. See, e.g., Walters v. Reno, 1996 WL 897662, at *13 (W.D. Wash. Mar. 13, 1996) (holding that “the use of English-only forms in a context in which it is uncontestable that most respondents speak primarily or only Spanish is simply unacceptable, particularly where . . . the consequences are grave”). 113 Debtors’ Motion for an Order Approving Solicitation and Confirmation Procedures and Schedule, Ex. B, at B-2, dated June 24, 2014 [Dkt. No. 3802-2] (proposed voting procedures).


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CONCLUSION

The Motion should be denied.

Dated: January 9, 2015 Respectfully submitted,

CAPLIN & DRYSDALE, CHARTERED By: /s/ Trevor W. Swett III Trevor W. Swett III ([email protected]) Leslie M. Kelleher ([email protected]) Jeffrey A. Liesemer ([email protected]) One Thomas Circle, N.W. Washington, D.C. 20005 Telephone: (202) 862-5000 Elihu Inselbuch ([email protected]) 600 Lexington Avenue, 21st Floor New York, New York 10022 Telephone: (212) 379-6000 MOON WRIGHT & HOUSTON, PLLC By: /s/ Travis W. Moon Travis W. Moon ([email protected]) Richard S. Wright ([email protected]) 227 West Trade Street, Suite 1800 Charlotte, North Carolina 28202 Telephone: (704) 944-6560 Co-Counsel for the Official Committee of Asbestos Personal Injury Claimants


Case 10-31607 Doc 4295-1 Filed 01/09/15 Entered 01/09/15 20:38:49 Desc Exhibit 1 Page 1 of 12

case 10-31607 doc 4295 filed 01/09/15 entered 01/09/15 … · the motion seeks a bar date order...

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