In Re: W.R. Grace & Co v.

PRECEDENTIAL

UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

______

Nos. 12-2923 and 12-3143

______

In Re: WR Grace & Co., et al., Debtors

Anderson Memorial Hospital,

Appellant

______

On Appeal from the United States District Court

for the District of Delaware

(D.C. No. 1-11-cv-00199)

District Judge: Honorable Ronald L. Buckwalter

______

Argued June 17, 2013

Before: AMBRO, FISHER and JORDAN, Circuit Judges.

(Filed: September 4, 2013)

Christopher D. Loizides, Esq.

Loizides & Associates

1225 King Street

Suite 800

Wilmington, DE 19801

David L. Rosendorf, Esq.

Kozyak Tropin & Throckmorton

2525 Ponce De Leon Boulevard

9th Floor

Miami, FL 33134

Daniel A. Speights, Esq.

Speights & Runyan

200 Jackson Avenue East

P.O. Box 685

Hampton, SC 29924-0000

Counsel for Appellant, Anderson

Memorial Hospital

John Donley, Esq. (Argued)

Lisa G. Esayian, Esq.

Adam C. Paul, Esq.

Kirkland & Ellis

300 North LaSalle Street

Chicago, IL 60654

Laura D. Jones, Esq.

Kathleen P. Makowski, Esq.

James E. O'Neill, III, Esq.

Pachulski Stang Ziehl & Jones

919 North Market Street

P.O. Box 8705, 17th Floor

Wilmington, DE 19801

Christopher Landau, Esq.

2

Kirkland & Ellis

655 15th Street, N.W., Suite 1200

Washington, DC 20005

Counsel for W.R. Grace, Official

Committee of Equity Security Holders,

David T. Austern and Garlock

Sealing Technologies, LLC

Roger J. Higgins, Esq.

Suite 2800

111 East Wacker Drive

Chicago, IL 60601

Counsel for W.R. Grace, Official

Committee of Equity Security Holders,

David T. Austern, Garlock Sealing

Technologies, LLC and John M. Thomas

Andrew N. Rosenberg, Esq. (Argued)

Paul, Weiss, Rifkind, Wharton & Garrison

1285 Avenue of the Americas

New York, NY 10019

Counsel for David T. Austern,

Her Majesty Queen of Canada

Kevin J. Mangan, Esq.

Francis A. Monaco, Jr., Esq.

Matthew P. Ward, Esq.

Womble, Carlyle, Sandridge & Rice

222 Delaware Avenue, Suite 1501

3

Wilmington, DE 19801

Counsel for Her Majesty Queen

of Canada, Official Committee

of Equity Security Holders,

David T. Austern, CNA Financial

Corp. Loews and State of Montana

Philip Bentley, Esq.

Kramer, Levin, Naftalis & Frankel

1177 Avenue of the Americas

New York, NY 10036

Counsel for Official Committee

of Equity Security Holders,

David T. Austern and

John M. Thomas

Garland S. Cassada, Esq.

Susan M. Huber, Esq.

Richard C. Worf, Jr., Esq.

Robinson Bradshaw & Hinson

101 North Tryon Street, Suite 1900

Charlotte, NC 28246

Brett D. Fallon, Esq.

Morris James

500 Delaware Avenue ,Suite 1500

Wilmington, DE 19081

Counsel for Official Committee

Equity Security Holders,

David T. Austern and Garlock

Sealing Technologies, LLC

4

Teresa K.D. Currier, Esq.

Saul Ewing

222 Delaware Avenue

P.O. Box 1266, Suite 1200

Wilmington, DE 19899

Counsel for Official Committee

of Equity Security Holders and

David T. Austern

Roger L. Frankel, Esq.

Orrick, Herrington & Sutcliffe

1152 15th Street, N.W.

Columbia Center

Washington, DC 20005

Richard H. Wyron, Esq.

Orrick, Herrington & Sutcliffe

1152 15th Street, N.W.

Columbia Center

Washington, DC 20005

Counsel for David T. Austern

Alan B. Rich, Esq. (Argued)

Suite 4244

1201 Elm Street

Dallas, TX 75270

Counsel for Property Damage

Future Claims Representative

Elizabeth M. DeCristofaro, Esq.

5

Ford, Marrin, Esposito, Witmeyer & Gleser

88 Pine Street

23rd Floor, Wall Street Plaza

New York, NY 10005

Michael S. Giannotto, Esq.

Frederick C. Schafrick, Esq.

Goodwin Procter

901 New York Avenue, N.W.

Suite 900 East

Washington, DC 20001

Counsel for Continental Casualty Co.

Elisa Alcabes, Esq.

Mary Beth Forshaw, Esq.

Andrew T. Frankel, Esq.

Simpson, Thacher & Bartlett

425 Lexington Avenue

New York, NY 10017

Neal J. Levitsky, Esq.

Seth A. Niederman, Esq.

Fox Rothschild

919 North Market Street

Citizens Bank Center, Suite 1300

Wilmington, DE 19801

Counsel for Travelers Casualty

& Surety Co.

Mark T. Hurford, Esq.

Campbell & Levine

6

222 Delaware Avenue, Suite 1620

Wilmington, DE 19801

Peter V. Lockwood, Esq.

Caplin & Drysdale

Suite 1100

One Thomas Circle, N.W.

Washington, DC 20005

Counsel for Official Committee of

Asbestos Personal Injury Claimants

Edward C. Toole, Jr., Esq.

Pepper Hamilton

18th & Arch Streets

3000 Two Logan Square

Philadelphia, PA 19103

Counsel for BNSF Railway Co.

Matthew S. Owen, Esq.

Ashley C. Parrish, Esq.

Carolyn M. Sweeney, Esq.

King & Spalding

1700 Pennsylvania Avenue, N.W.

Suite 200

Washington, DC 20006

Thaddeus D. Wilson, Esq.

King & Spalding

1180 Peachtree Street

Atlanta, GA 30309

Counsel for Proposed Amicus

7

Imperial Tobacco Canada Ltd.

______

OPINION OF THE COURT

______

FISHER, Circuit Judge.

Anderson Memorial Hospital (“AMH”) first filed suit

against W.R. Grace and its affiliates (“Grace”)1 in South

Carolina state court in 1992, seeking class-wide redress for

property damage caused by asbestos-containing products that

Grace had manufactured. Before the resolution of that

litigation, Grace filed a petition for Chapter 11 protection.

The Bankruptcy Court supervised nearly a decade of related

litigation. Most property damage claims against Grace had

been settled by 2010, contingent on the approval of an 11

U.S.C. § 524(g) trust and an injunction channeling property

damage claims against Grace to that trust for payment.

AMH, however, did not settle. The Bankruptcy Court

confirmed Grace’s reorganization, including a trust and

channeling injunction, over AMH’s objections. The District

Court affirmed.

AMH appeals from the orders confirming Grace’s

Chapter 11 Plan and approving the trust and channeling

injunction. AMH argues that (A) the Plan does not meet the

1

Appellee Grace consists of sixty-two related

corporate entities. For ease of reference, the debtors are

collectively referred to hereinafter as “Grace.”

8

requirements of § 524(g), which provides a mechanism for

handling overwhelming asbestos-related liabilities in the

Chapter 11 process, (B) the Plan fails to provide equal

treatment pursuant to § 1123(a)(4), (C) Grace has not shown

that the Plan was proposed in good faith pursuant to

§ 1129(a)(3), and (D) Grace has not shown that the Plan is

feasible pursuant to § 1129(a)(11). On each of these issues,

we will affirm the judgment of the District Court.

I.

One aspect of Grace’s business is extracting natural

resources, refining them, and converting them into

manufactured materials used for building construction and

insulation. Since the 1980s, Grace has defended itself against

hundreds of asbestos-related lawsuits filed by building

owners seeking redress for the costs involved in removing

Grace products.

AMH owns a hospital complex in Anderson, South

Carolina, that used Grace products in its construction. In

1992, AMH filed a class action lawsuit against Grace seeking

compensation for asbestos-related property damage in South

Carolina state court. The South Carolina court struck out-of-

state class members from the AMH complaint—a decision

that was not immediately appealable under South Carolina

law. Anderson Memorial Hosp. v. W.R. Grace & Co., 1994

WL 1744074 (S.C. Ct. Com. Pl. Aug, 8, 1994). AMH

amended its complaint to exclude non-South Carolina

buildings and to include damage caused by all kinds of

asbestos-containing surfacing material produced by Grace.

The South Carolina Circuit Court conditionally certified this

9

class in February 2001. AMH Appendix (“AMHA”) at

700193. Grace sought Chapter 11 protection two months

later on April 2, 2001, before notice of the South Carolina

action had issued to class members.

Early in the Chapter 11 proceedings, Grace sought to

establish a bar date for property damage claims and a process

for handling related litigation. In April 2001, personal injury

(“PI”) and property damage (“PD”) committees were

appointed. The Bankruptcy Court requested proposals in

May 2001 for case management plans and the scheduling of

the asbestos-related claims.

After the March 31, 2003 deadline for filing claims

was established, more than 4,000 traditional PD claims were

filed. 2 Speights & Runyan (“S&R”), counsel for AMH, filed

three proofs of claim, including a worldwide class claim, a

statewide class claim, and an individual claim. S&R attached

2

In addition to traditional PD claims, Grace also faced

Zonolite Attic Insulation (“ZAI”) claims based on damages

from a loose-fill attic insulation manufactured by Grace that

allegedly contained asbestos. The ZAI litigation included a

“science trial” (where court-appointed counsel represented

the individual claimants, at Grace’s expense) and a

Bankruptcy Court ruling that, although ZAI did contain some

asbestos, it did not pose an unreasonable risk. After this

decision, the Bankruptcy Court approved a settlement

(negotiated in September 2008) that would allow future US

ZAI PD claims to be channeled to the Asbestos PD Trust as

part of Class 7B.

10

a list of 3,000 putative claimants (including 121 South

Carolina claimants) to its worldwide class claim. S&R also

filed an individual proof of claim for each of the potential

class members it could identify through Grace’s sales records.

Grace asserts that approximately 2,000 of the individual

claims were filed without any authority from the purported

claimant.

Grace filed a Notice of Intent to Object to the PD

claims, and some claimants then came forward to object that

AMH’s counsel had filed claims in their names without

authorization. Grace asked S&R to withdraw these claims.

The number of PD claims was ultimately reduced from more

than 4,000 to 1,670, in part because S&R withdrew 586

claims improperly filed on behalf of class claimants and

1,500 claims that lacked an evidentiary basis. S&R also

withdrew approximately 550 additional claims for various

other reasons. The parties litigated some additional claims in

which S&R’s authority was questioned; the Bankruptcy Court

disallowed those claims, a ruling that the District Court and

this Court later affirmed. In re W.R. Grace & Co., 366 B.R.

302 (Bankr. D. Del. 2007), aff’d, Mission Towers v. W.R.

Grace & Co., 2007 WL 4333817 (D. Del. Dec. 6, 2007),

aff’d, In re W.R. Grace & Co., 13 F. App’x 134 (3d Cir.

2009). In response to these objections, AMH moved for class

certification. That motion was denied on May 29, 2008, and

the District Court declined to give leave to appeal—a ruling

we declined to review on an interlocutory basis. In re W.R.

Grace & Co., 389 B.R. 373, 380 (Bankr. D. Del. 2008), leave

to appeal denied, In re W.R. Grace & Co., 2008 WL

4234339, *2 (D. Del. Sept. 4, 2008), interlocutory appeal

11

denied, In re W.R. Grace & Co., No. 08-4829 (3d Cir. Dec.

14, 2009).

Throughout the Chapter 11 process, various parties

engaged in settlement negotiations. In fall 2004, an initial

settlement effort including S&R failed. In 2006, the late

District Judge Samuel Pointer led a mediation including S&R,

but the parties did not reach a settlement.

In fall 2006, Grace began to litigate the remaining PD

claims. All but 90 of these claims had been withdrawn,

disallowed, or settled (contingent on the confirmation of a

§ 524(g) plan) by February 2009. By the time the District

Court issued its opinion in 2012, Grace had settled a total of

407 PD claims (including 119 PD claims S&R agreed to

settle) for approximately $150.8 million to be paid in full on

the Plan’s effective date, assuming a § 524(g) trust is

approved.

With the consent of the committee of asbestos PD

claimants, Plan Proponents obtained the appointment of

Judge Alexander Sanders as a representative of future PD

claimants. Plan Proponents negotiated with Judge Sanders

and came to an agreement regarding the Plan’s treatment of

traditional PD claims. Successive drafts of the Plan were

circulated to all counsel, and comments were invited. AMH

did not provide comments. AMH, for its part, asserts that the

Plan was actually the result of a deal negotiated in April 2008

by Grace, the Equity Committee, the PI Committee, the PI

future claims representative, and the PI lead negotiator—all

without PD participation.

12

The Plan was filed on February 27, 2009 and

subsequently amended several times. With respect to the

present and future traditional (non-ZAI) asbestos PD claims

making up Class 7A, it provides:

“(i) Treatment of Claims in Class 7A. Each

Holder of an Asbestos PD Claim in Class 7A

that is Allowed as of the effective date pursuant

to a PD Settlement Agreement, or other

stipulation, order, or agreement, shall be paid

the Allowed Amount of its Allowed Asbestos

PD Claim in Cash in full by the Asbestos PD

Trust as and when due, without any deduction,

proration, reduction, setoff or discount, pursuant

to the terms of the respective PD Settlement

Agreements, or other stipulation, order, or

agreement, and the terms of the Asbestos PD

Trust Agreement (which Asbestos PD Trust

shall be deemed by this Plan, the Confirmation

Order, and the Asbestos PD Trust Agreement to

have assumed the obligations of such PD

Settlement Agreements). Unresolved Asbestos

PD Claims shall be paid pursuant to the

following procedures:

(A) In connection with confirmation of the Plan,

the Court shall enter the Class 7A CMO [i.e.,

case management order]; and

(B) Allowed Unresolved Asbestos PD Claims

shall be paid in full, in Cash, by the Asbestos

13

PD Trust pursuant to the terms of the Asbestos

PD Trust Agreement.

(C) All Allowed Asbestos PD Claims in Class

7A shall be paid in full by the Asbestos PD

Trust solely from the Asbestos PD Trust Assets

that are designated for Class 7A Claims.

(D) The inclusion of Demands as Asbestos PD

Claims in Class 7A and any reference to

Demands related to Asbestos PD Claims in

Class 7A in the Plan does not constitute an

admission by the Debtors and the other Plan

Proponents that an Entity which did not have an

allowable Asbestos PD Claim in Class 7A

against the Debtors as of the effective date

could assert a valid claim against the Asbestos

PD Trust contemplated under the Plan, and all

rights and defenses to the allowance of such a

claim by the Asbestos PD Trust are expressly

reserved pursuant to the Plan.”

Joint Appendix (“JA”) at 200078-79.

Following the Plan’s effective date, the PD trust will

be funded with the amount of cash specified in the Plan to

pay allowed PD claims. Reorganized Grace will have an

ongoing obligation to fund the PD Trust for all traditional PD

claims allowed in the future.

Approximately 98.99 percent of Class 7A voted to

accept the Plan. JA at 201376. AMH challenged the

14

confirmation of the Plan. At the confirmation hearing, the

Bankruptcy Court heard evidence on, among other things, the

issue of good faith. AMH suggests that Grace essentially put

on no evidence to support the conclusion that the Plan was

filed in good faith and instead asserted that good faith could

be determined based on the documents themselves. Grace’s

assistant general counsel, Richard Finke, was eventually

called to testify, but the Bankruptcy Court concluded that if

he were allowed to give testimony on Grace’s intentions

throughout the Chapter 11 proceeding, the confirmation

hearing would have to be continued to allow for discovery on

the negotiating process. The Plan Proponents did not then

offer Finke’s testimony but instead offered the pre-negotiated

proffer that did not delve into Plan Proponents’ subjective

intent.

The Bankruptcy Court also heard evidence on the

Plan’s compliance with the statutory requirements for

channeling asbestos claims to a trust. A § 524(g) injunction

is only appropriate where the debtor is likely to be subject to

significant future demands. Plan Proponents offered the

testimony of economist Dr. Denise Martin on this issue. Dr.

Martin analyzed future events that might trigger additional

property damage demands. She testified that Grace was

likely to be subject to substantial future demands, but that the

amount and timing of those demands could not be

determined. The Bankruptcy Court credited her testimony.

Additionally, investment banker Pamela Zilly testified

as an expert on the feasibility of the Plan, concluding that the

Plan is feasible “in light of Grace’s historical performance,

reasonable projections, management initiatives, and proposed

15

exit financing.” Grace Br. at 17; see also JA at 201747.

Although Grace’s internal projections valued future PD

liabilities at $37.3 million,3 Zilly testified that Grace’s

performance and financial track record would give the

reorganized company the ability to satisfy up to $1.6 billion

in asbestos PD liabilities over 25 years if necessary.

Over AMH’s objections, the Plan was confirmed. The

District Court affirmed the Confirmation Orders on appeal.

In re Grace & Co., 475 B.R. 34 (D. Del. 2012), superseding

In re W.R. Grace & Co., 468 B.R. 81 (D. Del. 2012). In light

of our decision in Wright v. Owens Corning, 679 F.3d 101

(3d Cir. 2012), AMH asked the District Court to reconsider

its opinion. The District Court declined on July 23, 2012. In

re W.R. Grace & Co., 476 B.R. 114 (D. Del. 2012). AMH’s

timely appeal of the District Court’s affirmance of the

Confirmation Orders and of its denial of its motion for relief

followed.

II.

The Bankruptcy Court had jurisdiction over this case

pursuant to 28 U.S.C. §§ 157(a) and 1334(b), and the District

Court had appellate jurisdiction over the Bankruptcy Court

decision under 28 U.S.C. §§ 158(a) and 1334(b). We have

3

Grace has established a reserve account in this

amount to cover future PD claims and any defense costs

associated with litigating those claims after the Plan’s

effective date. The record does not indicate how Grace

arrived at its $37.3 million projection.

16

jurisdiction over this appeal pursuant to 28 U.S.C. § 1291.

“We review the District Court’s conclusions of law de novo,

its factual findings for clear error, and its exercise of

discretion for abuse thereof.” In re Combustion Eng’g, Inc.,

391 F.3d 190, 214 n.19 (3d Cir. 2004).

III.

AMH appeals from the District Court’s affirmance of

the Bankruptcy Court orders confirming Grace’s Chapter 11

Plan of reorganization and approving a trust and channeling

injunction under 11 U.S.C. § 524(g). AMH argues that (A)

the Plan does not meet the requirements of § 524(g), (B) the

Plan fails to provide equal treatment, (C) Grace has failed to

demonstrate that the Plan was proposed in good faith, and (D)

Grace has not shown that the Plan is feasible. Each of these

objections fails, and we will affirm the District Court.

A.

Section 524(g) provides a mechanism that allows

companies to handle overwhelming present and future

asbestos liability through a trust created in conjunction with a

Chapter 11 bankruptcy plan. See Katherine M. Anand, Note,

Demanding Due Process: The Constitutionality of the § 524

Channeling Injunction and Trust Mechanisms That

Effectively Discharge Asbestos Claims in Chapter 11

Reorganization, 80 Notre Dame L. Rev. 1187, 1192 (2005).

AMH argues that the reorganization plan does not comply

with the statutory requirements for a § 524(g) injunction and

trust because (1) Grace did not demonstrate that it was likely

to be subject to future PD demands, (2) Grace did not

17

demonstrate that the plan’s procedures were necessary to deal

equitably with claims and future demands, and (3) the

procedures treat similar claims differently. For the reasons

discussed below, none of these arguments succeeds.

1.

An asbestos manufacturer may be entitled to use

§ 524(g)’s trust mechanism if it “is likely to be subject to

substantial future demands for payment arising out of the

same or similar conduct or events that gave rise to the claims

that are addressed by the injunction.” § 524(g)(2)(B)(ii)(I).

AMH contends that Grace faces no future property damage

demands.

“Claim,” as described elsewhere in the Bankruptcy

Code, means a “right to payment, whether or not such right is

reduced to judgment, liquidated, unliquidated, fixed,

contingent, matured, unmatured, disputed, undisputed, legal,

equitable, secured, or unsecured.” 11 U.S.C. § 101(5).

Section 524(g)(5) defines “demand” as a “demand for

payment, present or future, that—

(A) was not a claim during the proceedings

leading to the confirmation of a plan of

reorganization;

(B) arises out of the same or similar conduct or

events that gave rise to the claims addressed by

the injunction issued under paragraph (1); and

(C) pursuant to the plan, is to be paid by a trust

described in paragraph (2)(B)(i).”

18

§ 524(g)(5) (emphasis added).

In AMH’s reading of the statute, claims and demands

are mutually exclusive because a demand “was not a claim

during the proceedings leading to the confirmation of a plan

of reorganization” and could be either dealt with in the

ordinary course of the bankruptcy or not discharged at all.

AMH contends that, although future demands are easily

cognizable in the personal injury context, PD claims cannot

result in future demands, because any buildings that contain

asbestos already contain the material.

AMH concedes that future PD demands existed under

the definition of “claim” set out in Matter of M. Frenville Co.,

744 F.2d 332 (3d Cir. 1984). There, we held that a claim

arises when the underlying state-law cause of action accrues.

Future PD claims could have existed if any potential claim

from already-installed asbestos products had not, under

various state laws, met the accrual requirements at the time

potential claimants were notified of the bankruptcy. Under

the “mutual exclusivity” theory AMH proposes, these

unaccrued actions were not “claims” and therefore could meet

the “demand” definition of “not a claim before the bankruptcy

court.” Nonetheless, AMH argues that Frenville (which was

the law of this Circuit at the time of the bar date notice and

the confirmation hearing) should not control for several

reasons.

First, AMH argues that In re Grossman’s Inc., 607

F.3d 114, 125 (3d Cir. 2010) (en banc), supersedes Frenville

on this issue by holding that “a ‘claim’ arises when an

individual is exposed pre-petition to a product or other

19

conduct giving rise to an injury, which underlies a ‘right to

payment’ under the Bankruptcy Code.” Grossman’s

4

explicitly overrules Frenville. Id. at 121.

Second, AMH sees no basis in the evidence for the

required finding that Grace is likely to be subject to

substantial future demands, particularly when, in AMH’s

view, the testimony of Dr. Martin, Grace’s sole witness for

the idea that Grace was likely to be subject to substantial

future PD demands, is best understood as using the term

“demand” in the colloquial sense, as she explicitly stated she

was not offering an opinion about the technical difference

between a claim and a demand within the meaning of

§ 524(g).5

4

AMH asked the District Court to reconsider its

affirmance of the confirmation order in light of Wright v.

Owens Corning, 679 F.3d 101, 108 (3d Cir. 2012). The

District Court declined, finding this new development in the

law insufficient to create the extraordinary circumstances

required for relief under Federal Rule of Civil Procedure

60(b). It also declined to intervene because AMH could seek

the same relief as part of this appeal. In re W.R. Grace &

Co., 476 B.R. 114, 122 (D. Del. 2012).

5

AMH also argues that the Plan, as a matter of due

process, cannot discharge the claims of property owners who

would have held claims under the Frenville standard, but not

under Grossman’s. Because Frenville then controlled, AMH

argues that Grace did not attempt to notify potential PD

claimants who at the time of the bar date notice might have

20

Each of these objections fails. First, we find no clear

error that would justify disturbing the factual conclusion that

there are property damage claimants who will seek redress in

the future. Dr. Martin testified, “The claims will be made.

Yes, it’s my opinion that there will be substantial –

substantial claims will be made.” JA at 201784-85. Expert

had impacted property but whose claims had not yet accrued

under state law. AMH contends that, if these claims are to be

discharged, the claim holders are entitled to participation in

the process, including voting on the Plan. We do not see how

this line of argument advances AMH’s contention that Grace

is not likely to face future property damage demands. Indeed,

it seems to be wholly unrelated to that argument, as the due

process implications of discharging a claim are entirely

separate from the question of whether future demands—

which, by AMH’s reading, are by definition not claims—are

likely to be brought. In any event, AMH does not contend

that its due process rights have been violated by the Plan, nor

could it, as it participated extensively throughout the

bankruptcy proceeding and had the opportunity to vote.

Therefore, as “litigants in federal court are [generally] barred

from asserting the constitutional rights of others,” In re PWS

Holding Corp., 228 F.3d 224, 248 (3d Cir. 2000) (internal

quotation marks omitted), AMH lacks standing to raise that

argument in this appeal. See id. (explaining that “limits on

third-party standing are particularly relevant to appellate

standing in bankruptcy proceedings” because “[b]ankruptcy

proceedings regularly involve numerous parties, each of

whom might find it personally expedient to assert the rights

of another party”).”

21

testimony sufficiently supported the claim that Grace will be

subject to future demands and that AMH failed to provide

evidence to the contrary, though it had the opportunity to do

so. The Bankruptcy Court credited this expert testimony,

noting the distinction between the existence of the demands

and whether they will ultimately be allowed. In re W.R.

Grace & Co., 446 B.R. 96, 144 (Bankr. D. Del. 2011).

Second, we conclude that property damage future

claims can exist as a matter of law. We reject AMH’s

assertion that Grossman’s eliminated the category of future

holders of demands, as Grossman’s concerned the definition

of claims and expressly stated that the plan at issue was not a

§ 524(g) plan. Congressional intent to allow a debtor to

“emerge free and clear of the entire universe of asbestos

liabilities,” as evidenced by the statute’s reference to present

and future demands, underscores this point. Grace Br. at 24

(citing 140 Cong. Rec. at 14461, S514462 (October 6, 1994)

(Sen. Heflin)).6

The Bankruptcy Court handled a similar statutory

construction argument in In re Flintkote Co., 486 B.R. 99,

124 (Bankr. D. Del. 2012). The Flintkote court concluded

6

We place no importance on AMH’s claims that

Grace’s counsel expressed a belief that there are no future PD

claims. See AMHA at 700559-662. In the discussion AMH

quotes, counsel appears to be referring to the merits of future

demands rather than their existence. Even if we were to

interpret the transcript as an admission, Grace’s subjective

belief should not change our statutory interpretation here.

22

that the reference to demands in § 524(g) was ambiguous and

that a literal application of the term would produce results at

odds with the legislature’s intent. Responding to the

suggestion that claim and demand are mutually exclusive, the

court stated that

“‘demand’ in § 524(g)(5) describes a ‘present or

future’ demand for payment, and given the

expansive definition of ‘claim’ in § 101(5), the

Court cannot fathom a situation where an

individual could hold a ‘present’ demand for

payment that is not technically a ‘claim’ under

§ 101(5). Thus [if demand and claim are treated

as mutually exclusive], the qualifier, ‘present or

future [demand],’ in § 524(g)(5) is superfluous,

and ‘[i]t is a well known canon of statutory

construction that courts should construe

statutory language to avoid interpretations that

would render any phrase superfluous.’”

Flintkote, 486 B.R. at 124 (citation omitted). Additionally,

Flintkote concluded that the position the creditor advanced

there (which parallels AMH’s) would produce a result that

contravened congressional intent. In the Bankruptcy Court’s

description, because asbestos-related illnesses have a long

latency period, Congress created the § 524(g) trust

mechanism in order to protect the due process rights of

people who had been exposed but not yet affected, and who

might not manifest injury until a time when all available

compensation had been paid out to people who got sick faster.

23

Section 524, therefore, improves equality of treatment among

claimants. Id. at 124-25.

The Bankruptcy Court explained that, “because

asbestos production in this country largely ceased many

decades ago,” id. at 125, it may be difficult, if not impossible,

for a debtor to demonstrate it will “likely be subject to

substantial future demands” under the creditor’s proposed

interpretation of “claim” and “demand.” That interpretation

would therefore prevent many debtors from qualifying for the

protection of § 524(g), which would “defeat[] the purpose of

the statute by removing the protections for ‘exposed yet

unimpaired’ asbestos creditors and depriving them of just

compensation for their future injuries and illnesses.” Id. at

123. Thus, the Bankruptcy Court affirmed in Flintkote its

earlier conclusion in this case that “future demand holders are

those who have been exposed to asbestos but whose disease

or other injury, sufficient to prove damages, has not yet

manifested.” In re W.R. Grace, 446 B.R. 96, 130 n.58

(Bankr. D. Del. 2011).

AMH’s argument that there is no such thing as a future

PD demand has some intuitive appeal. After all, asbestos

installation has long-since ceased, so every building that will

be damaged by asbestos already contains it. As a policy

matter, the rationale for the § 524(g) trust mechanism is less

clear here than in the personal injury context; if all property

damage has occurred and those harmed can be notified, the

ordinary claims process could arguably meet Congress’s

objectives of promoting equal treatment of claimants and

allowing manufacturers to handle asbestos liability in an

24

orderly and streamlined process.7 This supports AMH’s

statutory interpretation, which emphasizes the “not a claim”

language, giving “claim” in § 524(g) the same meaning it was

assigned in Frenville and then Grossman’s interpretations of

the word claim in § 101(5). As AMH describes property

damage, if we applied the Grossman’s test, the pre-petition

exposure clearly makes the property damage cases “claims”

that AMH’s reading of § 524(g) excludes from the “demands”

covered by the trust.

Ultimately, however, AMH’s arguments must fail.

Section 524(g) explicitly states that the asbestos trusts can

cover property damage, so an interpretation that makes such

trusts impossible cannot be consistent with congressional

intent. Furthermore, as the Bankruptcy Court demonstrated,

AMH’s “mutual exclusivity” theory would effectively read

the category of present demands out of the statute. For these

reasons, we affirm the District Court’s conclusion that

7

AMH states in its brief that only one other asbestos

trust for property damage has been created and that it was

established by the same bankruptcy judge handling this case.

See In re United States Mineral Prods. Co., 2005 WL

5887219 (Bankr. D. Del. 2005). In fact, other courts have

created property damage trusts. For example, a property

damage trust was used in the Manville case that led Congress

to draft § 524(g). See Matter of Johns-Manville Corp., 68

B.R. 618 (Bankr. S.D.N.Y. 1986). Additionally, an Eagle-

Picher Property Damage Trust compensated owners of

buildings containing asbestos. See In re Eagle-Picher Indus.,

Inc., 203 B.R. 256, 279-82 (Bankr. S.D. Ohio 1996).

25

because “[i]t still remains unknown (and may never be

ascertained) how many entities and individuals were affected

by these products, the precise quantity of asbestos-laden

products that were sold, which buildings the products were

used in and how much was used per building, or the

percentage of these entities that have successfully removed

the asbestos products from their buildings,” “there remains a

significant chance that future property damage claims will be

asserted against Grace by property damage claimants.” In re

W.R. Grace Co., 475 B.R. 34, 101 (D. Del. 2012).

2.

Next, AMH argues that a trust under § 524(g) is

unnecessary to equitably handle claims and future demands.

See § 524(g)(2)(B)(ii)(III) (“pursuit of such demands outside

the procedures prescribed by such plan [must be] likely to

threaten the plan’s purpose to deal equitably with claims and

future demands”). According to AMH, § 524(g)’s procedures

were not required because the “trust” is “simply a conduit for

the payment of funds by reorganized Grace, inserted

primarily if not exclusively to obtain the benefits of the §

524(g) injunction.” AMH Br. at 38. Under the Plan, the PD

Trust will be funded on the Plan’s effective date with

sufficient funds to pay the settled PD claims; if additional PD

claims are later allowed, Grace will further fund the Trust.

AMH contends that employing trust mechanisms under these

circumstances is merely a pretext for directing litigation back

to the Bankruptcy Court, effectively allowing Grace to forum-

shop and avoid defending its case in front of a jury.

26

Furthermore, AMH finds a “fundamental illogic” in

“extending § 524(g) to claims that are supposedly

‘unimpaired’ under the Plan” because there is no purpose to a

trust, in AMH’s view, if claims are to be paid at 100 percent

of their value. AMH Br. at 39 (citing Barliant, Karcazes &

Sherry, From Free-Fall to Free-For-All: The Rise of Pre-

Packaged Asbestos Bankruptcies, 12 Am. Bankr. Inst.

L. Rev. 441, 453 (Winter 2004)). AMH contends that Grace

provided no evidence that the pursuit of PD claims outside

the Plan procedures would threaten the Plan when Grace has

stated its intention to pay 100 percent of PD claims as they

are resolved.

AMH's argument underestimates the importance of

creating a mechanism to resolve all of Grace's present and

future asbestos liabilities. Outstanding, unresolved asbestos

liability can make it extremely difficult for certain entities to

amass operating capital, which can hinder a debtor's chances

of long-term survival and, in turn, prevent equitable

resolution of future asbestos claims. For that reason, both the

PI trust and the PD trust are necessary to protect the interests

of future asbestos claimants, as together they provide a level

of certainty calculated to position Grace to compensate future

claimants. See Combustion Eng’g, 391 F.3d at 234

(explaining that § 524(g) seeks to provide “an ‘evergreen’

source of funding to pay future claims” by allowing a debtor

to emerge from Chapter 11 “cleansed of asbestos liability”).

3.

Finally, AMH argues that the trust procedures are not

fair and equitable because similar present claims and future

demands will not be paid “in substantially the same manner.”

27

§ 524(g)(2)(B)(ii)(V), (g)(4)(B)(ii). Because this argument

duplicates AMH’s broader claims of unequal treatment under

both § 524(g) and § 1123(a)(4), these arguments are

considered together in the following Part, which concludes

that the equality requirement has been satisfied. We

conclude, therefore, that the plan meets the requirements of §

524(g).

B.

“Equality of distribution among creditors is a central

policy of the Bankruptcy Code.” Begier v. IRS, 496 U.S. 53,

58 (1990). Two Code provisions relevant in this case

mandate some form of equality. Section 1123(a)(4) requires

a plan to “provide the same treatment” for each claim or

interest in a class “unless the holder of a particular claim or

interest agrees to a less favorable treatment of such particular

claim or interest.” Section 524(g)(2)(B)(ii)(V) requires the

adoption of procedures that “provide reasonable assurance

that the trust will value, and be in a financial position to pay,

present claims and future demands that involve similar claims

in substantially the same manner.” AMH argues that the Plan

should not have been confirmed because it treats AMH

substantially differently than other similarly situated creditors

by denying AMH the opportunity to litigate in its chosen state

forum, outside the jurisdiction of the Bankruptcy Court.

Considering the Plan as an “integrated whole,” the District

Court found that the Bankruptcy Court had properly

concluded that the Plan met these equality requirements. In

re W.R. Grace & Co., 475 B.R. 34, 124 (D. Del. 2012).

28

The District Court adopted the test that equal treatment

under § 1123(a)(4) requires that “all creditors in a given class

must receive equal value for their claims and must pay the

same degree of consideration for their distribution under the

trust.” W.R. Grace & Co., 475 B.R. at 140 (citing In re

Quigley Co., Inc., 377 B.R. 110, 116 (Bankr. S.D.N.Y. 2007)

(citing In re AOV Indus., Inc., 792 F.2d 1140, 1152 (D.C. Cir.

1986))). The reasoning of the Court of Appeals for the D.C.

Circuit persuades us that “[i]t is disparate treatment when

members of a common class are required to tender more

valuable consideration—be it their claim against specific

property of the debtor or some other cognizable chose in

action—in exchange for the same percentage of recovery.”8

AOV, 792 F.2d at 1152.

In Combustion Engineering, 391 F.3d at 239, we

remanded for further record development where a two-trust

structure could have potentially favored claimants to one trust

over claimants to the other. The record then before us raised

concerns about certain pre-petition settlements that led to the

creation of a $400 million trust for the payment of claims. Id.

at 240-42. Creditors who drew on the trust retained a “stub

8

That is not to say that members of a class must

receive the same amount of money for their claims. See In re

Joint E. & S. Dist. Asbestos Litig., 982 F.2d 721, 749 (2d Cir.

1992) (“Without question, the ‘same treatment’ standard of

section 1123(a)(4) does not require that all claimants within a

class receive the same amount of money.”). Rather, the

claimants in a class must simply have the same opportunity

for recovery. Id.

29

claim” that allowed them to vote on the bankruptcy plan,

which included a § 524(g) injunction. Id. at 201. We

concluded that the creation of stub claims may have the result

of artificially gerrymandering classes called upon to vote on a

plan, adding claimants to the class who have already received

more than they would have under the plan and thus have little

incentive to scrutinize it before voting. Id. at 243-44.

AMH urges us to follow In re Dow Corning Corp.,

280 F.3d 648, 660 (6th Cir. 2002), for the proposition that

§ 1123(a)(4) requires equality in procedural treatment. There,

the plan put governmental subrogation claims together into a

class and would pay those claims in full in order to satisfy

§ 1129(b)(2)(B)’s “cram down” requirements. Id. at 659.

Different procedural protections applied to different

government units; the Canadian government entered into a

settlement that allowed it to gain notice before payments were

made to beneficiaries so that Canada could determine if a

subrogation claim existed. Id. at 660. The Sixth Circuit held

that this procedural guarantee, given only to Canada, meant

that the United States did not receive equal treatment. Id.

Here, the District Court found that the Plan satisfied

both prongs of the equal treatment test outlined in Quigley

and AOV. W.R. Grace & Co., 475 B.R. at 140. The District

Court concluded that AMH’s assertion that it was giving up

more than other class members by losing its forum option was

incorrect, because everyone who filed a proof of claim

submitted to the Bankruptcy Court’s jurisdiction—a necessity

in order to maintain uniformity in treatment of claims in this

highly technical area of law. Id. Even if litigating before the

Bankruptcy Court were a true disadvantage, AMH voluntarily

30

submitted to it. See Langenkamp v. Culp, 498 U.S. 42, 45

(1990) (holding that Creditors submit themselves to the

Bankruptcy Court’s jurisdiction by submitting a proof of

claim).

Here, AMH argues that the Joint Plan disadvantages it

as compared to other Class 7A creditors because it is the only

claimant that has been denied the right to pursue its case in its

chosen forum. Under the Plan, all current PD claimants must

resolve their property damage claims before the Bankruptcy

Court. Future claimants may litigate their claims before a

district court, potentially before juries.

AMH suggests that the District Court erred because

there are no similarly situated creditors left,9 because other

asbestos claimants have either reached a settlement that will

be paid on the Plan’s effective date, were subject to

alternative resolution procedures with lowered proof

thresholds, or were permitted to litigate in their chosen

forums. AMH says that it is the only claimant that “is

required to litigate its claims in order to be entitled to

payment, but is precluded from doing so in the forum it chose

9

As evidence that the CMO and Plan were not

designed to single out AMH, Grace notes that when the PD

CMO was proposed in December 2008, all 37 asbestos PD

claimants remaining at that time were subject to the

procedures. When the CMO was revised in February 2009, it

applied to 57 unresolved PD claims. Since that time,

“virtually all” PD claimants besides AMH have settled.

Grace Br. at 8.

31

nearly a decade before this bankruptcy case was

commenced.” AMH Br. at 46. Finally, AMH objects to the

District Court’s finding that it submitted to the Bankruptcy

Court’s jurisdiction because it had to file a proof of claim in

order to protect its rights and “did so against the backdrop of

repeated representations by Grace that pre-existing claims

would be permitted to return to the tort system for

resolution.”10 AMH Br. at 47.

No claims under Class 7A will be handled via

alternative dispute resolution or lower proof thresholds; if

AMH is comparing itself to the US ZAI claimants, the

distinction is immaterial because those claimants are part of

Class 7B. Regarding the other members of Class 7A, the

future PD claimants represented by Judge Sanders, any

difference between AMH and future claimants as to forum is

meant to allay Seventh Amendment concerns and is not

prejudicial.

Ultimately, the only relevant comparison here is

between AMH and other members of Class 7A, the future PD

10

AMH claims that Grace represented that AMH’s and

similar claims would be “permitted to return to the tort

system.” Grace responds that those filings merely state that

“Grace will identify pending cases that could continue to be

litigated in other courts . . . ” and “[t]hat is in no way a

‘representation’ that, after being extensively litigated in the

Bankruptcy Court, AMH’s voluntarily filed class claim could

returned to state court.” See Grace Br. at 10 n.6 (citing PPA

at 600935 ¶2, 600972, 601007).

32

claimants represented by Judge Sanders.11 The only

inequality AMH has identified is the ongoing jurisdiction of

the Bankruptcy Court over AMH’s claims, which prevents

AMH from returning to the state court system in order to try

its claims before a jury. AMH submitted to the jurisdiction of

the Bankruptcy Court; future claimants will not have

submitted, and thus will be free to file their cases in federal

district courts. See Langenkamp, 498 U.S. at 44 (“[B]y filing

a claim against a bankruptcy estate the creditor triggers the

process of allowance and disallowance of claims, thereby

11

AMH does not argue that it should not have been

placed in a class with the future claimants, with whom AMH

seems to believe it has conflicting interests. Moreover, AMH

makes much of the fact that Judge Sanders described this as a

“better deal” negotiated for the future claimants. In fact, this

statement tells us very little; the exchange did not even elicit

from Judge Sanders why he thought this was a better deal.

The record shows that Judge Sanders was stating that he had

negotiated the right for future PD claimants, who have not

submitted themselves to the jurisdiction of the Bankruptcy

Court, to seek redress in any district court with jurisdiction—

a solution he thought “better” and “more fair” than requiring

all of those future cases to be filed in the District Court of

Delaware. In the next part of the questioning, having been

asked to assume that AMH claims must remain in Bankruptcy

Court, Judge Sanders responded to a somewhat

incomprehensible non-question from AMH counsel with “My

clients got a better deal than yours.” AMHA at 700606-10.

33

subjecting himself to the bankruptcy court’s equitable

power.”) (citations and internal quotation marks omitted).

Future PD claimants cannot be bound to the

jurisdiction of the Bankruptcy Court in this way because they

have not submitted proofs of claim granting the Bankruptcy

Court jurisdiction and have not necessarily surrendered their

rights to a jury trial. AMH insinuates that it is a matter of

convenience (i.e., future claimants can choose a district court

that is closer to the property and witnesses needed), but the

most reasonable inference from their persistence on this issue

is that it believes it is likely to recover more from a South

Carolina state jury. AMH has not explained how being bound

by the decision of the Bankruptcy Court leads directly to

disadvantage in recovery, because to do so would lay bare

assumptions about the fairness and adequacy of the

Bankruptcy Court’s proceedings that it cannot support. We

conclude, therefore, that the Plan treats AMH sufficiently

equally to other members of the same class to meet the

requirements of §§ 524(g) and 1123(a)(4). Even if we were

to conclude that binding AMH to the jurisdiction of the

Bankruptcy Court represented “less favorable” treatment of

its claim, AMH “agree[d] to a less favorable treatment of

such particular claim or interest” by submitting itself to the

Bankruptcy Court’s jurisdiction via its proof of claim.

C.

Under § 1129(a)(3), courts may only confirm

reorganization plans proposed in good faith. “[T]he

important point of inquiry is the plan itself and whether such

a plan will fairly achieve a result consistent with the

34

objectives and purposes of the Bankruptcy Code.” In re Am.

Capital Equip., LLC, 688 F.3d 145, 156 (3d Cir. 2012)

(quoting In re Combustion Eng’g, 391 F.3d at 247) (internal

quotation marks omitted). Those objectives and purposes

include “preserving going concerns and maximizing property

available to satisfy creditors,” “giving debtors a fresh start in

life,” “discourag[ing] debtor misconduct,” “the expeditious

liquidation and distribution of the bankruptcy estate to its

creditors,” and “achieving fundamental fairness and justice.”

Am. Capital Equip., LLC, 688 F.3d at 156-57 (internal

citations and quotation marks omitted). Good faith presents

mixed questions of law and fact; we review legal

determinations de novo and factual determinations for clear

error. In re PWS Holding Corp., 228 F.3d 224, 242-43 (3d

Cir. 2000).

In the view of the District Court, a good faith plan “(1)

fosters a result consistent with the [Bankruptcy] Code’s

objectives; (2) has been proposed with honesty and good

intentions and with a basis for expecting that reorganization

can be effected; and (3) [exhibited] a fundamental fairness in

dealing with the creditors.” W.R. Grace & Co., 475 B.R. at

88 (citing Genesis Health Ventures, Inc., 266 B.R. 591, 609

(Bankr. D. Del. 2001)). The District Court concluded that the

first factor had been satisfied because the Plan preserved

Grace as a going concern in the face of overwhelming

asbestos liability and, given the probability of forthcoming

future claimants, gave Grace a better chance of being able to

satisfy those claims. W.R. Grace & Co., 475 B.R. at 87-88.

Second, the District Court described the requirements of

honesty, good intentions, and a reasonable expectation of

35

success as assurances that “the Bankruptcy Code’s careful

balancing of interests is not undermined by petitioners whose

aims are antithetical to the basic purposes of bankruptcy.” Id.

at 88 (quoting In re Integrated Telecom Express, Inc., 384

F.3d 108, 119 (3d Cir. 2004)). The District Court concluded

that nothing about the case suggested ulterior motives or

dishonesty, particularly in light of the arms-length

negotiations that led to the development of the Plan. W.R.

Grace & Co., 475 B.R. at 89. Third, the District Court again

addressed AMH’s equality arguments, recast as a claim of

fundamental unfairness, and concluded that the Plan was not

fundamentally unfair.

AMH asserts that the Plan fails to meet the good faith

requirement for procedural and substantive reasons. First,

AMH implies that Grace had the burden of proof in

demonstrating “good faith negotiations with AMH with

respect to the procedures imposed on the holders of

unresolved PD claims.” AMH Br. at 50. Second, AMH

asserts substantive unfairness because the Plan provides

preferential treatment to certain “favored” constituencies.

According to AMH, Judge Sanders’s testimony that he was

able to secure a “better deal” for the future PD claimants

shows that AMH is suffering from the kind of disparity that

36

raised questions meriting remand in Combustion

Engineering.12

We reject AMH’s arguments for several reasons.

First, we find no support for the idea that the District Court

clearly erred in its factual conclusion that the Plan resulted

from “years of litigation and extensive arms-length

negotiations.” W.R. Grace & Co., 475 B.R. at 89. The

settlements of virtually all of the non-AMH PD claims and

the overwhelming vote by creditors in favor of the plan

bolster this conclusion. We reject AMH’s implication that

Grace’s failure to negotiate directly with AMH undercuts the

overall Plan’s fundamental fairness, particularly when AMH

declined to provide comments on drafts of the Plan when they

were circulated during the negotiation process. See, e.g., PPA

12

Before us, AMH abandoned the argument it made to

the District Court that the Plan fails the good faith

requirement because Grace “repeatedly stymied” AMH’s

efforts to take discovery on the good faith issue. In any

event, this argument lacks merit. In In re Frascella Enter.,

Inc., 360 B.R. 435 (Bankr. E.D. Pa. 2007), the court found

that a plan was not proposed in good faith when the

proponents had repeatedly avoided making necessary

disclosures until forced to by the court. The debtor’s history

of transactions suggested that some disclosures had been

manipulated, and voting creditors did not receive information

about the plan until the day before the vote. The District

Court correctly concluded that no comparable behavior had

occurred here. In re W.R. Grace & Co., 475 B.R. 34, 89 (D.

Del. 2012).

37

at 600774-90, 601400-02, 601403-05, 601475-571.

Furthermore, as the District Court emphasized, the

Bankruptcy Court participated extensively in the settlement

process and had an opportunity to observe the parties’

conduct. W.R. Grace & Co., 475 B.R. at 90.

Second, we repeat our conclusion that AMH did not

suffer from unfair inequality and note that a creditor’s

disagreement about the handling of its claim does not

necessarily evince bad faith by the Plan’s proponents. See,

e.g., In re Barnes, 309 B.R. 888, 893 (Bankr. N.D. Tex. 2004)

(“[T]he fact that a plan proposed by a debtor is not the one

that the creditors would have proposed does not make the

plan one that has not been filed in good faith.”) (citations

omitted). On the contrary, Chapter 11 reorganizations rest on

majority rule and routinely leave a minority of creditors

dissatisfied. We note again that the Plan is designed to pay

AMH’s allowed claims in full.

Third, we reject AMH’s contention that direct

testimony from Grace’s negotiators was required to

demonstrate Grace’s honesty and good intentions in

proposing the Plan. Subjective intent, to the extent that it is

one factor in determining that a Plan is not being used for

purposes contrary to the Code’s objectives, is routinely

established by circumstantial evidence. A negative inference

should not be drawn against Grace merely because it chose to

protect the privacy of attorney-client communications. For a

variety of privilege and evidentiary reasons, divining the

subjective intent of a corporate actor through the testimony of

the negotiators and other key people will often prove

problematic and less than enlightening. In any event, it

38

would be an extraordinary circumstance where an objectively

fair plan must be set aside because of mere suspicions

concerning the subjective intent of the parties.

Furthermore, the Plan has little in common with

reorganization schemes that have been rejected for want of

good faith. In In re ACandS, Inc., 311 B.R. 36, 43 (Bankr. D.

Del. 2004), the bankruptcy court adopted the view that good

faith means the plan was “proposed with honesty, good

intentions and a basis for expecting that a reorganization can

be effected with results consistent with the objectives and

purposes of the Bankruptcy Code. . . . with the most

important feature being an inquiry into the fundamental

fairness of the plan.” There, the bankruptcy court found that

the plan had not been proposed in good faith because it had

been drafted primarily for the benefit of a pre-petition

committee and memorialized a pre-petition settlement to the

detriment of other claimants. Id.

Similarly, in Combustion Engineering we concluded

that the use of stub claims potentially constituted “artificial

impairment” under § 1129(a)(10) leading to serious doubt

about whether the plan fulfilled the good faith requirement.

391 F.3d at 243. We remanded for further consideration of

the issue in light of good faith. Id. at 261. Again, in In re

Am. Capital Equip., LLC, applying the aforementioned good

faith standard, we held that the plan lacked good faith because

the proposed plan created an incentive for the debtor, a

defunct business, to sabotage its own defense; severely

limited insurers’ procedural rights; and unlike a § 524(g)

trust, created a fund in which the debtor made no contribution

– instead withdrawing money from it. 688 F.3d at 159-61.

39

In this case, Grace has demonstrated that the Plan is

fair, and AMH has provided no real argument that the Plan

was not “proposed with honesty and good intentions and with

a basis for expecting that reorganization can be effected.”

W.R. Grace & Co., 475 B.R. at 87-88. For these reasons, we

affirm the District Court’s conclusion that the Plan was

proposed in good faith.

D.

Grace had the burden of demonstrating that

“[c]onfirmation of the plan is not likely to be followed by the

liquidation, or the need for further financial reorganization, of

the debtor or any successor to the debtor under the plan,

unless such liquidation or reorganization is proposed in the

plan.” § 1129(a)(11). Success need not be guaranteed, but

must be reasonably likely. Am. Capital Equip., LLC, 688

F.3d at 156; see also Quigley, 437 B.R. at 142 (holding plan

was not feasible where funding source was “speculative at

best and visionary at worst”). We consider feasibility in the

context of ongoing litigation and will find a plan not feasible

if it “hinges on future litigation that is uncertain and

speculative, because success in such cases is only possible,

not reasonably likely.” Am. Capital Equip., 688 F.3d at 156

(finding plan not feasible where its only source of funding

was proceeds from highly speculative litigation winnings).

The District Court agreed with the Bankruptcy Court’s factual

conclusion—based on expert testimony, financial reports,

estimates of Grace’s future earning capacity, current

economic conditions, and Grace’s capital structure and

earning power—that Grace had established a reasonable

40

likelihood of the Plan’s success. W.R. Grace & Co., 475 B.R.

at 115.

AMH contends that Grace cannot meet its burden

without establishing the amount of liability the Plan will need

to satisfy in the future. According to AMH, Grace’s

feasibility expert relied only on Grace’s creation of a $37.7

million reserve for PD liabilities and performed no

independent analysis of the liabilities of the PD trust.13

Without a clear picture of the trust’s estimated liabilities,

AMH argues, Zilly’s testimony that a reorganized Grace

would be able to fund as much as $1.6 billion over 25 years

“proves nothing” because that figure has not been

substantiated and because the Plan does not allow Grace to

spread out its liabilities over 25 years, as Grace is required to

fund that PD trust every six months in the amount of

unresolved PD claims and future PD demands that were

allowed during the preceding term. Finally, AMH argues that

Grace’s feasibility analysis did not account for the possibility

that AMH class claims might be allowed. See In re Harbin,

486 F.3d 510, 517-19 (9th Cir. 2007) (finding clear error

under § 1129(a)(11) when Bankruptcy Court failed to account

13

AMH offers a one-sentence argument that we should

reject Zilly’s testimony because “expert testimony based on

assumptions that are not supported by the record should have

been excluded.” AMH Br. at 52 (citing Elcock v. Kmart

Corp., 233 F.3d 734, 756 (3d Cir. 2000)). In fact, Elcock

does not support AMH’s point because, in that case, the

expert relied on information that was proven by the record to

be false.

41

for possibility of large judgment against debtor in case on

appeal at time of confirmation in its feasibility analysis).14

None of these arguments leads us to conclude that the

District Court clearly erred in affirming the Bankruptcy

Court’s factual conclusion that the Plan would likely succeed.

As the District Court noted, Grace needed only to

demonstrate a reasonable likelihood of success, not an

absolute certainty. Grace’s evidence, including Zilly’s

testimony, remains uncontradicted. AMH has produced no

evidence supportive of its objection.15 AMH has offered no

14

Additionally, AMH contends that Plan proponents

did not “re-evaluate the adequacy of notice after the change in

law announced by Grossman’s, and now confirmed to be

retroactive in effect by Owens Corning.” AMH Br. at 56.

Because under AMH’s reading of Grossman’s, property

owners who have a Grace asbestos product in their property

but whose state law claims have not yet accrued are claim

holders whose cases cannot be channeled to the PD trust,

AMH believes that the Plan will be threatened by the need to

make non-trust payments it has not provided for. Id. As

discussed above, we have rejected this reasoning.

15

AMH points to the testimony of a KPMG accountant

hired by Grace in 1995 who estimated the size of Grace’s

asbestos PD liability. Because the report was outdated and

contemporaneously rejected by Grace, the Bankruptcy and

District Courts concluded that the report did not accurately

reflect the current information about outstanding PD liability.

AMH has offered no compelling reason why we should find

this factual conclusion to be clearly erroneous.

42

estimate of the size of its class claim, which could possibly be

allowed to proceed if we were to reverse the District Court in

a separate appeal—and that event appears sufficiently

unlikely to block the conclusion that the Plan is reasonably

likely to succeed.

We acknowledge that Grace has offered us little

insight into the methodology used to arrive at the conclusion

that $37.3 million provides an adequate reserve for the PD

liability payments. But the scale of related claims16 satisfies

us that $1.6 billion in possible funding (an amount AMH has

not refuted) has a reasonable likelihood of providing for all

claims. We therefore affirm the conclusion that the Plan is

feasible.

IV.

For the reasons discussed above, AMH has failed to

demonstrate that the Plan should not have been confirmed.

We will affirm the District Court’s holding.

16

As of June 2012, Grace had settled 407 claims for a

total of $147 million, leading to an average payout of

approximately $361,179 per claim. W.R. Grace & Co., 475

B.R. at 67. Those claims included “(1) California State

University and University of California for $1.4 million; (2)

Pacific Freeholds Ltd., Inc. for $9,043,375; (3) various

hospitals and healthcare facilities for $576,250; (4) several

private commercial building owners in the United States for

$16 million; and (5) building owners in Canada for $2.5

million.” Id. at 67 n.12.

43