# Future Representatives v. Bestwall LLC

> District Court, W.D. North Carolina · January 6, 2022

URL: https://www.frixlaw.com/law-library/cases/10257951

## Case

- **Court:** District Court, W.D. North Carolina
- **Decided:** January 6, 2022
- **Opinion:** 100trialcourt
- **Cited by:** 0 later opinions in the Frix Law Library

## Citator (automated)

- No negative treatment found by the automated citator. That is not the same as a confirmation that the case is good law; read the citing cases.
- Full citator and citing cases: https://www.frixlaw.com/law-library/cases/10257951

## How later opinions describe it (automated extraction)

- concluding injunction order which was in effect an extension of the automatic stay was final, appealable order
- concluding injunction order preventing party from prosecuting an action in Hong Kong a final, appealable order

## Opinion text

UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF NORTH CAROLINA
CHARLOTTE DIVISION
3:20-cv-105-RJC

In re: )
)
BESTWALL LLC, )
)
Debtor. )
______________________________________) ORDER
)
FUTURE CLAIMANTS )
REPRESENTATIVES, et al. )
)
Appellants, )
)
v. )
)
BESTWALL LLC and GEORGIA- )
PACIFIC LLC, )
)
Appellees.

THIS MATTER comes before the Court on an appeal of the Bankruptcy Court’s
Memorandum Opinion and Order Granting the Debtor’s Request for Preliminary Injunctive Relief
(Doc. No. 1-1); the Bankruptcy Court’s Order Granting in Part, Denying in Part Motion of the
Official Committee of Asbestos Claimants to Reconsider and Amend the Memorandum Opinion
(Doc. No. 1-2) (together the “Bankruptcy Court’s Orders” or the “Orders”); Appellants’ Motion
for Leave to Appeal the Injunction Order (the “Motion for Leave”) (Doc. No. 2); and Appellees’
Responses to the Motion for Leave to Appeal (Doc. Nos. 3 & 4).1 The Court has reviewed the
record on appeal, briefing, and applicable law. For the reasons stated herein, the Motion for Leave
to Appeal the Injunction Order (Doc. No. 2) is DENIED as moot and the Bankruptcy Court’s

1 The Bankruptcy Court’s Orders, factual background, and issues are the same for case numbers
3:20-cv-103-RJC and 3:20-cv-105-RJC. Therefore, the Court addresses all arguments for each
appeal herein. This Order mirrors the Order entered in case 3:20-cv-103-RJC.
Orders are AFFIRMED.
I. BACKGROUND

A. The Debtor

The Debtor Bestwall LLC (the “Debtor”) was formed on July 31, 2017, as a result of a
corporate restructuring of Georgia-Pacific LLC. (Adversary Proceeding No. 17-03105, Doc. No.
104 ¶¶ 31-32). Prior to July 2017, the Debtor’s predecessor underwent various corporate changes
from its inception in 1927, eventually resulting in the Georgia-Pacific LLC, a wholly-owned
subsidiary of Georgia-Pacific Holdings, LLC (from its inception in 1927 to July 31, 2017 referred
to herein as “Old GP”). (Id. ¶ 5).
In 1965, Old GP acquired Bestwall Gypsum Company. (Id. ¶ 12). Bestwall Gypsum
Company manufactured certain asbestos-containing products, principally joint compound, which
Old GP continued to manufacture and sell following the acquisition. (Id. ¶¶ 22-23). Old GP had
a decades-long history of asbestos litigation derived from its acquisition of Bestwall Gypsum
Company and its asbestos-containing products. (Id. ¶¶ 22-30).
As a result of the asbestos litigation, on July 31, 2017, Old GP underwent a corporate
restructuring in which Old GP ceased to exist and two new entities were created. (Id. ¶¶ 31-32).
The restructuring occurred by way of a series of transactions that included Old GP converting to a
Texas limited liability company. (Id. ¶ 14). Then, Old GP effected a divisional merger under a
Texas merger statute which allows a single Texas entity to “merge” into two or more entities. See
Tex. Bus. Org. Code § 1.002(55)(A). The divisional merger was accomplished by way of a Plan
of Merger. (Id. ¶¶ 6, 14). Pursuant to the Plan of Merger, the Old GP ceased to exist and two new
entities were created, each a direct wholly owned subsidiary of Georgia-Pacific Holdings, LLC, as

follows:
(1) A limited liability company which ultimately became Bestwall LLC, the Debtor, that
received certain assets and liabilities of Old GP, including (a) Old GP’s asbestos
liabilities;2 and (b) certain other assets, including three bank accounts with
approximately $32 million in cash, all contracts of Old GP related to its asbestos-related
litigation, real estate in Mt. Holly, North Carolina, and all equity interests in a non-
debtor projected to generate annual cash flow of $18 million starting in 2019, and
valued at approximately $145 million. (Id. ¶¶ 14-16).

(2) Georgia-Pacific LLC which received all other assets and liabilities of Old GP (the
“New GP”). (Id. ¶¶ 14-15).

The Debtor also agreed to indemnify New GP for any losses it suffers relating to the Debtor’s
asbestos liabilities. (Id. ¶ 45).
Relevant here, the Debtor entered into the following additional agreements. The Debtor
became payee to a Funding Agreement with New GP, under which the Debtor is entitled, to the
extent its assets are insufficient, to funding for all costs and expenses the Debtor incurs in the
normal course of its business and the funding of a section 524(g) asbestos trust. (Id. ¶ 17). The
Debtor and New GP entered into a Services Agreement pursuant to which the Debtor will receive
corporate and administrative services from New GP, including legal, accounting, tax, human
resources, information technology, and risk management. (Id. ¶ 18). They also entered into a
secondment agreement by which New GP assigned to the Debtor on a full-time basis certain of its
employees, including the Debtor’s Chief Legal Officer. (Id. ¶ 19). The seconded employees have
institutional and historical knowledge of the litigation stemming from Debtor’s asbestos-related
liabilities. (Id.). Under the secondment agreement, the Debtor pays New GP a percentage of a fee
based on the percentage of that employees’ time the Debtor needs each month. (Id.).
As of September 30, 2017, there were approximately 64,000 asbestos-related claims
pending against the Debtor, including approximately 22,000 that were being actively litigated and

2 With the exception of asbestos liabilities for which the exclusive remedy is provided under a
workers’ compensation statute or similar law. (Adv. Proc. Doc. No. 104 ¶ 15).
approximately 13,300 claims pending on inactive dockets, with thousands more anticipated in the
future. (Id. ¶ 23).
B. The Bankruptcy Case

Thereafter, on November 2, 2017, the Debtor filed a Chapter 11 bankruptcy case in this
District for the purpose of resolving the asbestos-related claims against it by way of a trust under
section 524(g) of the Bankruptcy Code. (Bankruptcy Case No. 17-31795, Doc. Nos. 1 & 12 at 8).
The Bankruptcy Court approved the appointment of an Official Committee of Asbestos Claimants
to represent asbestos claimants’ interests (the “Committee”) and Sander L. Esserman as Legal
Representative for future asbestos claimants’ interests (the “Future Claimants Representative”)
(together, the “Appellants”). (Bankr. Doc. Nos. 97 & 278).
C. The Bankruptcy Adversary Proceeding

On the same day the bankruptcy petition was filed, the Debtor filed an adversary
proceeding against plaintiffs and prospective plaintiffs in asbestos-related actions against certain
affiliated non-debtors (the “Adversary Proceeding”). (Adv. Proc. Doc. No. 1 ¶¶ 12-13). In the
Adversary Proceeding, and through a related motion (the “Motion for Injunction”), the Debtor
sought to enjoin pursuant to section 105(a) of the Bankruptcy Code, the continuation or
commencement of any action seeking to hold the following parties liable for any asbestos-related
claims (the “Asbestos-Related Claims”): (1) the Old GP, (b) the New GP, or (c) certain non-debtor
affiliates of the New GP and the Debtor (together, the “Non-Debtor Protected Parties”). (Adv.
Proc. Doc. Nos. 1 & 2). Alternatively, the Debtor sought a declaration that the automatic stay
applied to prohibit the commencement or continuation of asbestos related actions against the Non-
Debtor Protected Parties. Id. The Appellants opposed the Motion for Injunction and the relief the
Debtor sought in the Adversary Proceeding. (Adv. Proc. Doc. Nos. 47, 49, 110, 118). New GP
successfully intervened in the Adversary Proceeding. (Adv. Proc. Doc. No. 156). Through a series
of agreed orders, the Bankruptcy Court temporarily enjoined the asbestos-related claims pending
further ruling on the Motion for Injunction. (Adv. Proc. Doc. Nos. 30, 32-33, 36, 41, 91, 125, 136,
141, 152, 157, 160, & 162).
Following hearings on the Motion for Injunction, the Bankruptcy Court ultimately granted
it. (Doc. No. 1-1). The Bankruptcy Court’s Memorandum Opinion and Order Granting the
Debtor’s Request for Preliminary Injunctive Relief (1) concluded that it had “related to” subject
matter jurisdiction under 28 U.S.C. § 1334(b) to issue the injunction; and (2) granted the Motion
for Injunction, enjoining pursuant to section 105 of the Bankruptcy Code the Adversary

Proceeding Defendants from filing or continuing to prosecute Asbestos-Related Claims against the
Non-Debtor Protected Parties (the “Order Granting Injunction”). (Doc. No. 1-1).
The Committee filed a motion to reconsider the Order Granting Injunction asking the
Bankruptcy Court to vacate portions of the order addressing the Committee’s preemption and due
process arguments, and to clarify that the Order did not address whether New GP qualified for
relief under section 524(g) of the Bankruptcy Code. (Adv. Proc. Doc. No. 166). In the Bankruptcy
Court’s Order Granting in Part, Denying in Part Motion of the Official Committee of Asbestos
Claimants to Reconsider and Amend the Memorandum Opinion, it denied the request to vacate its
conclusions regarding due process and preemption, but clarified that the Order Granting Injunction
did not address whether New GP is entitled to relief under section 524(g) of the Bankruptcy Code

(the “Reconsideration Order”). (Doc. No. 1-2).
Appellants appealed arguing the Bankruptcy Court did not have jurisdiction to enter the
Orders and the Debtor failed to meet its burden establishing the elements necessary for a
preliminary injunction. (Doc. No. 6).
II. STANDARD OF REVIEW

This Court has jurisdiction over “final judgments, orders, and decrees . . . and with leave
of court, from interlocutory orders and decrees, of bankruptcy judges . . . .” 28 U.S.C. § 158(a).
The Fourth Circuit generally applies two standards of review for bankruptcy appeals: “The
Bankruptcy Court’s conclusions of law are reviewed de novo and its findings of fact are reviewed
for clear error.” Campbell v. Hanover Ins. Co., 457 B.R. 452, 456 (W.D.N.C. 2011); In re Lee,
461 Fed. App’x at 231. “Typically, mixed questions of law and fact are also reviewed de novo.”
Suntrust Bank v. Den-Mark Const., Inc., 406 B.R. 683, 686 (E.D.N.C. 2009); see In re Litton, 330
F.3d 636, 642 (4th Cir. 2003). The question of whether a bankruptcy court has subject matter
jurisdiction is a question of law reviewed de novo. In re Kirkland, 600 F.3d 310, 314 (4th Cir.
2010); In re Celotex Corp., 124 F.3d 619, 625 (4th Cir. 1997). A bankruptcy court’s decision to
grant injunctive relief is reviewed for abuse of discretion. A.H. Robins Co., Inc. v. Piccinin, 788
F.2d 994, 1008 (4th Cir. 1986) (“Certainly, the district court did not commit an abuse of discretion
in granting the injunction herein.”); Centro Tepeyac v. Montgomery Cnty., 722 F.3d 184, 188 (4th
Cir. 2013). An abuse of discretion may occur if a court applies the incorrect legal standard, rested
its decision on “a clearly erroneous finding of a material fact,” or “misapprehended the law with
respect to underlying issues in litigation.” Id.

III. DISCUSSION

A. Appellants’ Motion for Leave to Appeal the Bankruptcy Court’s Orders is moot.

As an initial matter, Appellants filed a Motion for Leave to Appeal the Bankruptcy Court’s
Orders, first arguing that the Orders are final, appealable orders, and even if not, asking the Court
to exercise discretion to hear the appeal pursuant to 28 U.S.C. § 158(a)(2)-(3). (Doc. No. 2).
Appellees do not dispute that the Bankruptcy Court’s Orders are final, appealable orders. (Doc.
No. 3 at 2; Doc. No. 4 at 1). The Court agrees that the Bankruptcy Court’s Preliminary Injunction
Orders are final, appealable orders over which this Court has jurisdiction to hear the appeal.
Courts take a pragmatic view of finality in the bankruptcy context, such that “orders in
bankruptcy cases may be immediately appealed if they finally dispose of discrete disputes within
the larger case.” In re Computer Learning Centers, Inc., 407 F.3d 656, 660 (4th Cir. 2005) (citation
omitted). Adversary proceedings are considered discrete disputes. First Owners’ Ass’n of Forty
Six Hundred v. Gordon Props., LLC, 470 B.R. 364, 369 (E.D. Va. 2012). An order granting or
denying relief from the automatic stay is a final, appealable order. Ritzen Group, Inc. v. Jackson

Masonry, LLC, 140 S. Ct. 582, 586 (2020); In re Lee, 461 Fed. App’x 227, 231 (4th Cir. 2012).
Similarly, courts have found that other similar injunction orders constitute final, appealable orders.
Fung Retailing Ltd. V. Toys R Us, Inc., 593 B.R. 724, 731 (E.D. Va. 2018) (concluding injunction
order preventing party from prosecuting an action in Hong Kong a final, appealable order); In re
Excel Innovations, Inc., 502 F.3d 1086, 1092 (9th Cir. 2007) (concluding injunction order which
was in effect an extension of the automatic stay was final, appealable order). Where a bankruptcy
court issues a preliminary injunction but contemplates no further hearings apart from the outcome
of the reorganization then the injunction order is a final, appealable order. In re Excel Innovations,
502 F.3d at 1092-93; In re Ionosphere Clubs, Inc., 139 B.R. 772, 778 (S.D.N.Y.1992).
Here, the Debtor filed the Adversary Proceeding seeking to enjoin the commencement or

continuation of asbestos-related claims against the Non-Debtor Protected Parties. The Court
granted the relief requested by the Debtor. Appellees concede “[t]here is nothing left to adjudicate
in that proceeding.” Therefore, the Court concludes the Bankruptcy Court’s Orders are final,
appealable orders and Appellants’ Motion for Leave to Appeal the Bankruptcy Court’s Orders is
moot.
B. Future Claimants Representative has standing to appeal the Bankruptcy Court’s
Orders.

Next, the Debtor argues the Future Claimants Representative does not have standing to
appeal the Bankruptcy Court’s Orders because the future claimants do not hold claims enjoined by
the Bankruptcy Court’s Orders. Standing to appeal an order from a bankruptcy court requires the
appellant to be “a person aggrieved by the bankruptcy order” which means the person is “directly
and adversely affected pecuniarily.” In re Urban Broadcasting Corp., 401 F.3d 236, 243-44 (4th
Cir. 2005). “An order that diminishes one’s property, increases one’s burdens, or detrimentally
affects one’s rights has a direct and adverse pecuniary effect for bankruptcy standing purposes.”
In re Smoky Mountain Country Club Prop. Owners’ Association, Inc., 622 B.R. 653, 657
(W.D.N.C. 2020). Additionally, standing to appeal as a party aggrieved may arise from a party’s
official duty to enforce the bankruptcy law in the public interest. In re Clark, 927 F.2d 793, 796
(4th Cir. 1991). Courts have also held that committees appointed pursuant to 11 U.S.C. § 1103,
serve a “watchdog” function and enjoy unique rights and responsibilities, including the ability to
appeal orders that run afoul of those rights and responsibilities. In re Western Pacific Airlines,
Inc., 219 B.R. 575, 577-78 (D. Colo. 1998).
Here, the Court concludes the Future Claimants Representative has standing to appeal the
Bankruptcy Court’s Orders. The Bankruptcy Court’s Order broadly defines Bestwall Asbestos
Claims as “any asbestos-related claims against the Debtor, including all former claims against [the
Old GP] related in any way to asbestos or asbestos-containing materials, except for asbestos-
related claims for which the exclusive remedy is provided under workers’ compensation statutes
and similar laws.” (Doc. No. 1-1). The Future Claimants Representative represents the interests
of future claimants, which, at the time of the Bankruptcy Courts Orders, were future claimants but,

based on the definition of Bestwall Asbestos Claims, may later become claimants during the
pendency of the injunction. If so, they will be enjoined from seeking a remedy for their asbestos-
related claims through the usual channels against the Non-Debtor Protected Parties. This is a direct
and adverse effect on the future claimants pecuniary interests. While the Future Claimants
Representative is not the directly affected party, it represents the interest of the future claimants,
which by definition cannot defend their own interests. To conclude the Future Claimants
Representative does not have standing to appeal the Bankruptcy Court’s Orders would defeat the
purpose of the Future Claimants Representative’s role. Therefore, the Court concludes the Future
Claimants Representative has standing to appeal the Orders.

C. The Bankruptcy Court has subject matter jurisdiction to grant the preliminary
injunction.

Pursuant to 28 U.S.C. § 1334, district courts have “original and exclusive” jurisdiction over
all cases under the Title 11, and “original but not exclusive” jurisdiction over all civil proceedings
arising under, arising in, or related to cases under Title 11. District courts are authorized to refer
these cases to bankruptcy judges in their district. 28 U.S.C. § 157(a). In this District, all such
cases have been referred to the bankruptcy judges in the District. See In re Standing Order of
Reference re: Title 11, 3:14-mc-44 (W.D.N.C. Apr. 14, 2014).
A case “arising in” Title 11 is one that is “not based on any right expressly created by Title
11, but nevertheless, would have no existence outside of the bankruptcy.” Valley Historic Ltd.
Partnership v. Bank of New York, 486 F.3d 831, 835 (4th Cir. 2007) (quotations omitted).
“Therefore, a controversy arises in Title 11 when it would have no practical existence but for the
bankruptcy.” Id. A case is “related to” a case under Title 11 when “the outcome of that proceeding
could conceivably have any effect on the estate being administered in bankruptcy.” Valley Historic
Ltd. Partnership v. Bank of New York, 486 F.3d 831, 836 (4th Cir. 2007) (citations and quotations
omitted); In re Celotex Corp., 124 F.3d 619, 625-26 (4th Cir. 1997). Therefore, “[a]n action is
related to bankruptcy if the outcome could alter the debtor’s rights, liabilities, options or freedom
of action (either positively or negatively) and which in any way impacts upon the handling and
administration of the bankruptcy estate. In re Celotex Corp., 124 F.3d 619, 625-26 (quoting Pacor,
Inc. v. Higgins, 743 F.2d 984, 994 (3d Cir. 1984). This test does not require with any certainty or
likelihood that the proceeding could conceivably have an effect on the bankruptcy estate, the
possibility itself is sufficient. Id. at 626.
The Bankruptcy Court’s Order Granting Injunction concluded it had “related to”
jurisdiction under 28 U.S.C. § 1334. The Bankruptcy Court determined that failing to grant the

Debtor’s requested relief could conceivably have an effect on its bankruptcy estate in the following
ways: (1) it would defeat the purpose of section 524(g) and the Debtor’s Chapter 11 reorganization
which was filed to address in one forum all potential asbestos claims against the Debtor and third
parties alleged to be liable for asbestos claims against the Debtor; (2) it would distract the Debtor’s
personnel and impair the ability of Debtor to pursue a plan of reorganization because the personnel
who play key roles in the Debtor’s reorganization efforts, such as its Chief Legal Officer, would
also be responsible for managing and directing the activities in defense of lawsuits against the
Non-Debtor Protected Parties; and (3) the Debtor has indemnity obligations, contractually and also
possibly under common law, that would make judgments against New GP tantamount to
judgments against the Debtor and deplete the assets available to fund a section 524(g) trust.

Here, at a minimum, the Bankruptcy Court had related to jurisdiction because determining
whether or not to grant the injunctive relief requested in the Adversary Proceeding could
conceivably have an effect on the Debtor’s bankruptcy estate. The Debtor admits it filed the
bankruptcy case to address the overwhelming asbestos litigation in one forum through a section
524(g). A decision on whether to grant an injunction to the Non-Debtor Protected Parties could
defeat the entire purpose of the Debtor’s reorganization. For example, if an injunction was not
granted and litigation continued to be filed in a multitude of different fora against the Non-Debtor
Protected Parties for the same asbestos related claims that the Debtor is liable for then the Debtor
would be unable to address all the asbestos-related claims in one forum, which could impact the
number and amounts of claims addressed through a potential section 524(g) trust. Thus, the
decision whether to grant the injunction could conceivably affect the Debtor’s assets and liabilities.
Moreover, the Debtor could decide that without the injunction, reorganization would not
be possible or effective and attempt to dismiss or convert its bankruptcy case, which, if granted,
could conceivably have an impact on the Debtor’s estate. The Appellants argue that exercising

jurisdiction here defeats the purpose of a section 524(g) trust because they believe the Non-Debtor
Protected Parties should file bankruptcy in order to avail themselves to the protections of the
injunctive relief requested. However, this appears to be a more proper argument for addressing
the merits of the Adversary Proceeding and/or a section 524(g) rather than the Court’s
consideration for subject matter jurisdiction which only requires a conceivable effect on Debtor’s
rights, liabilities, or options.
Additionally, if a preliminary injunction were not granted, Debtor’s personnel who are
responsible for assisting with its reorganization could be distracted with managing the voluminous
litigation against the Non-Debtor Protected Parties in various different forums. Appellants argue
that the Debtor’s personnel are seconded and therefore New GP can simply “find replacements”

for the Debtor “in its over 30,000 employees.” (Doc. No. 6 at 30). This argument misses the mark.
The fact that the Debtor’s personnel could be so consumed with litigation against the Non-Debtor
Protected Parties that it would need to find replacement personnel, who then would have to spend
time understanding a complicated reorganization, is exactly the type of situation that could
conceivably have an effect on the administration of the bankruptcy case.
Last, the Appellants argue there is not subject matter jurisdiction because the indemnity
provision was an attempt to impermissibly create jurisdiction and that the provision is circular
because ultimately it requires New GP to fund indemnity payments. Since the Court finds related
to subject matter jurisdiction exists for the reasons stated above, the indemnity provision is not
necessary for related to subject matter jurisdiction. Nevertheless, the Court will address
Appellants’ arguments. First, the Court is not convinced the indemnity provision was an attempt
to create jurisdiction and Appellants have not pointed to evidence rather than their opinions or
assumptions for such a conclusion. Indemnity provisions are common provisions in contractual
agreements for a multitude of valid reasons other than to create jurisdiction. Appellants arguments

otherwise are unavailing to the Court. Next, the Bankruptcy Court did not err in concluding the
Funding Agreement acts only as a backstop and requires New GP to provide funds to an asbestos
trust only to the extent the Debtor’s own assets are insufficient such that it could impact the
bankruptcy estate. The Funding Agreement requires the Debtor to exhaust its own assets before
any funding becomes applicable, which could affect the way in which the bankruptcy estate is
ultimately administered including how a section 524(g) trust is funded and paid. While the
Appellants argue these provisions result in ultimately the same pot of money being pushed around
between New GP and the Debtor, the payment of indemnification claims could have real time
effects on how the Debtor’s bankruptcy estate and how a section 524(g) trust is ultimately funded
and administered.3

3 The Bankruptcy Court’s Order did not consider whether it has “arising in” subject matter
jurisdiction; however, Appellees argue the Bankruptcy Court also has arising in jurisdiction. Since
the Court concludes the Bankruptcy Court clearly, at a minimum, had related to jurisdiction it is
not necessary for the Court to analyze in depth whether arising in jurisdiction exists. However,
the Court notes that courts in this Circuit find arising in jurisdiction exists when considering
whether to grant an injunction under section 105(a), because a section 105 injunction arises only
in bankruptcy cases, would have no existence outside of bankruptcy, any such injunction only lasts
during the pendency of the bankruptcy case, and is available only because of the equitable powers
given to the Bankruptcy Court only under the Bankruptcy Code. In re Brier Creek Corp. Center
Associates Ltd., 486 B.R. 681, 685 (E.D.N.C. 2013); In re DBMP LLC, No. 20-03004, 2021 WL
D. The Bankruptcy Court did not abuse its discretion in granting the preliminary
injunction.

The Bankruptcy Court’s Orders concluded the Debtor met the requirements necessary to
issue an injunction and enjoined the Adversary Proceeding Defendants from filing or continuing
to prosecute any Asbestos-Related Claims against the Non-Debtor Protected Parties on any theory.
(Doc. No. 1-1). Since the Bankruptcy Court granted the injunction pursuant to section 105 of the
Bankruptcy Code, it did not consider the Debtor’s alternative request for declaratory relief that the
automatic stay extended to the Non-Debtor Protected Parties. (Id.).
Pursuant to 11 U.S.C. § 105(a), the bankruptcy court “may issue any order, process, or
judgment that is necessary or appropriate to carry out the provisions” of the Bankruptcy Code.
This section “empowers the bankruptcy court to enjoin parties other than the bankrupt from
commencing or continuing litigation” and to stay related third-party litigation against non-debtors.
A.H. Robbins Co., Inc. v. Piccinin, 788 F.2d 994, 1002-03 (4th Cir. 1986) (quotations omitted);
Willis v. Celotex Corp., 978 F.2d 146, 149 (4th Cir. 1992); Kreisler v. Gold, 478 F.3d 209, 215
(4th Cir. 2007). Under section 105(a), bankruptcy courts may stay an action against a third party
“when the court finds ‘that failure to enjoin would effect [sic] the bankruptcy estate and would
adversely or detrimentally influence and pressure the debtor through the third party’” or when it
would otherwise “have an adverse impact on the Debtor’s ability to formulate a Chapter 11 plan.”
Willis, 978 F.2d at 149 (quoting Piccinin, 788 F.2d at 1003).
When considering whether to issue an injunction pursuant to section 105(a), courts in the
Fourth Circuit apply the four-part test for preliminary injunctions, tailored as needed for
bankruptcy cases. Piccinin, 788 F.2d 994 at 1008-09; In re Chicora Life Center, LC, 553 B.R. 61,

3552350, at *19 (Bankr. W.D.N.C. Aug. 11, 2021).
64 (D.S.C. 2016). Thus, the relevant test for determining whether to grant an injunction pursuant
to section 105(a) is: (1) likelihood of success on the merits; (2) irreparable harm in the absence of
an injunction; (3) the balance of equities; and (4) whether an injunction is in the public interest. In
re Litchfield Co. of S.C. Ltd. P’ship, 135 B.R. 797, 805 (W.D.N.C. 1992); In re Chicora Life
Center, LC, 553 B.R. 61, 64 (D.S.C. 2016). Each part of the test must separately be considered
and satisfied in order for courts to issue an injunction. Pashby v. Delia, 709 F.3d 307 (4th Cir.
2013).
Appellants make a host of different arguments as to why Debtor failed to prove each of

the four-part test. Appellants largely attempt to ask this Court to replace the Bankruptcy Court’s
judgment with its own judgment and decide the matter differently, by arguing a variety of reasons
why the Bankruptcy Court’s reasoning was incorrect. The Bankruptcy Court did not rest its
decision on an incorrect legal standard, a clearly erroneous finding of a material fact, or
misapprehend the law with respect to underlying issues in litigation. The Court concludes the
Bankruptcy Court did not abuse its discretion when analyzing the four-factors and ultimately
issuing the injunction.
1. Likelihood of Success on the Merits

In the bankruptcy context, courts interpret the success on the merits factor to require the
debtor to show it has a reasonable likelihood of successful reorganization. Chicora, 553 B.R. at
66; Brier Creek, 486 B.R. at 696; Litchfield, 135 B.R. at 807 (“This test is satisfied by showing
that there is a probability of successfully effectuating a plan of reorganization.”). When concluding
the Debtor met this factor, the Bankruptcy Court looked to the Debtor’s approximately $145
million in assets, plus the Debtor’s ability to draw from the Funding Agreement as needed to fund
a section 524(g) trust and pay any administrative costs of the bankruptcy case. First, the Future
Claimants Representative argues the Bankruptcy Court applied the incorrect legal standard when
evaluating this factor because the Bankruptcy Court stated that the Debtor had a realistic possibility
of reorganization, rather than a reasonable likelihood of a successful reorganization. While the
Bankruptcy Court’s Order Granting Injunction stated the Debtor has a realistic possibility of
reorganization, the Future Claimants Representative parses the Bankruptcy Court’s words to argue
it applied the incorrect legal standard. The Bankruptcy Court’s analysis clearly articulated and
applied the correct legal standard when analyzing this factor. When analyzing this factor the
Bankruptcy Court looked to the Debtor’s assets and resources for a successful reorganization and
noted “there is no reason . . . to conclude at this point that the Debtor does not have the ability to

fully fund a section 524(g) trust, as well as the administrative costs of its Chapter 11.” (Doc. No.
1-1).
Appellants also make various arguments contradicting the Bankruptcy Court’s reasoning,
which the Court finds unavailing and do not convince the Court that the Bankruptcy Court abused
its discretion. Here, the Debtor has significant assets on its own and also has contractual rights
under the Funding Agreement by which the Bankruptcy Court reasonably concluded the Debtor
has a reasonable likelihood of successful reorganization. The Funding Agreement is not so
unreliable or “illusory” that the Court can conclude the Bankruptcy Court, which is intimately
familiar with the Debtor’s Bankruptcy Case and reorganization efforts, abused its discretion in
determining the Debtor has a reasonable likelihood of successful reorganization.

2. Irreparable Harm

The Bankruptcy Court concluded that the failure to enjoin litigation against the Non-Debtor
Protected Parties would irreparably harm the Debtor because of its indemnification obligations,
diversion of key personnel, concerns with res judicata and collateral estoppel, and causing certain
evidentiary concerns that the Debtor would be forced to litigate. Appellants argue the Bankruptcy
Court was incorrect for various reasons including that the Funding Agreement is circular, Debtor
can obtain additional personnel if needed, and New GP has sufficient funds to defend any litigation
if an injunction is not granted such that any concerns or effects on the Debtor would be sufficiently
addressed by the Non-Debtor Protected Parties. These arguments do not present any grounds
sufficient for the Court to conclude the Bankruptcy Court abused its discretion rather than ask the
Court to replace the Bankruptcy Court’s judgment with its own. Nor do they convince the Court.
The Court agrees with the Bankruptcy Court that the Debtor would be irreparably harmed if the
injunction was not granted and litigation against the Non-Debtor Parties continued in numerous
courts across the country, with potentially lasting consequences on the Debtor’s ability to defend

itself, its potential liability, and its efforts to effectively reorganize.
3. Balance of the Equities

The Bankruptcy Court concluded the entire purpose of the Debtor’s Chapter 11 bankruptcy
case would be defeated if the litigation in other forums continued against the Non-Debtor Protected
Parties and a section 524(g) trust will provide all claimants with an efficient means to equitably
resolve their claims. The Bankruptcy Court did not abuse its discretion when balancing the equities
among the various interests, and Appellants arguments otherwise are unavailing. While the Court
is sympathetic to the human needs of the claimants noted by Appellants, there are numerous other
relevant factors, which the Bankruptcy Court considered and weighed. The Court agrees, by
enjoining the litigation to allow the Debtor an opportunity to successfully reorganize through a
section 524(g) trust, if ultimately successful, the claims potentially can be resolved for all current
and future claimants.
4. Public Interest

Finally, the Bankruptcy Court did not abuse its discretion in concluding the public interest
is served by allowing a successful reorganization. Appellants ask this Court to “look honestly and
skeptically at the actions” of the Debtor to the “real public health and societal costs.” Again, the
Court does not find that the Bankruptcy Court abused its discretion when applying this factor.
Allowing for a successful reorganization serves the public interest because it would allow for the
resolution of thousands of asbestos-related claims in a fair and efficient manner through a section
524(g) trust. This would ensure claimants, present and future, are treated fair and equitably, result
in consistency among claimants, and promote judicial economy. Additionally, while the
Appellants downplay the importance of successful reorganizations, the ability for entities to have
the opportunity to successfully reorganize is an important public interest.

IV. CONCLUSION
IT IS, THEREFORE, ORDERED that:
1. Appellant Future Claimants Representative’s Motion for Leave to Appeal, (Doc. No.
2), is DENIED as moot; and
2. The Bankruptcy Court’s Preliminary Injunction Orders are AFFIRMED.
3. The Clerk of Court is directed to close this case.

Signed: January 6, 2022

Robert J. Conrad, Jr. ed,
United States District Judge “ee

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Source: Frix Law Library, https://www.frixlaw.com/law-library/cases/10257951. Public record. Not legal advice.