In Re Dow Corning Corp.

OPINION RELATING TO APPEALS FROM AND MOTIONS REGARDING THE BANKRUPTCY COURT’S NOVEMBER 30, 1999 CONFIRMATION ORDER

HOOD, District Judge.

I.

INTRODUCTION

On May 15, 1995, the Debtor Dow Corning Corporation (“Dow Corning” or “the Debtor”) filed a voluntary petition for relief under chapter 11 of the Bankruptcy Code. The Debtor submitted two plans of reorganization before negotiating with various parties, including the Official Committee of Tort Claimants (the “Tort Claimants’ Committee”). On November 8, 1998, the Debtor and the Tort Claimants’ Committee (the “Proponents”) submitted a Joint Plan of Reorganization, amended on February 4, 1999. The Bankruptcy Court held hearings on the confirmation of the Amended Joint Plan over the course of several weeks, commencing on June 28, 1999, with closing arguments heard on July 30, 1999. Testimonies were taken and evidence submitted during the hear

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ings. Numerous briefs and documents were filed by many parties in support of or in opposition to the confirmation of the Amended Joint Plan, including post-hearing briefs.

The Bankruptcy Court entered its Findings of Fact and Conclusions of Law and Order Confirming the Amended Joint Plan on November 30, 1999. The Bankruptcy Court also entered various opinions on this date. The Bankruptcy Court indicated that subsequent opinions would be entered in the future and on December 21, 1999, the Bankruptcy Court entered an opinion on the release and injunction issue, the best-interests-of creditors test, feasibility and whether the plan complies with other provisions of the Bankruptcy Code. In all, seven separate opinions were entered relative to the November 30, 1999 Confirmation Order.

1

Not all of the parties or all of the issues in the opinions were appealed. The Court will address the opinions appealed from below.

The following parties filed appeals and/or motions relating to the Confirmation Order which are currently before the Court:

2

Case No. Date filed with Bankruptcy Court Appellant/Movant

99-CV-73941 August 9, 1999 Certain Foreign Claimants

99-CV-74218 August 25, 1999 Korean Claimants

99-CV-75380 November 5, 1999 United States of America

99-CV-75799 December 1, 1999 United States of America

99-CV-75922 December 9, 1999 Physician Claimants

99-CV-75923 December 8,1999 New Zealand Claimants

99-CV-75924 December 9,1999 Class Five Nevada Claimants

99-CV-75925 December 9, 1999 Class Five Texas Children Claimants represented by the Lacy firm

99-CV-75927 December 9, 1999 Australian Claimants

99-CV-75929 December 10, 1999 Certain Foreign Claimants represented by the Shainwald firm

99-CV-75930 December 8,1999 Official Committee of Physician Creditors

99-CV-75958 December 10, 1999 Helene D. Schroeder,

pro se

99-CV-75959 December 10, 1999 Sue Olexa,

pro se

99-CV-75960 December 10, 1999 Marti Jacobs,

pro se

99-CV-76007 December 13, 1999 Beatrix Shishido,

pro se

99-CV-76008 December 13, 1999 Karen L. Hustead

99-CV-76009 December 13, 1999 Pamela Dowd,

pro se

and Maribeth West,

pro se

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99-CV-7606B December 16, 1999 Class Five Pennsylvania Claimants, Pennsylvania Coordinated Silicone Breast Implant Litigation

99-CV-76214 Dow Chemical December 29, 1999

99-CV-76215 Corning, Inc. December 29, 1999

00-CV-70029 Dow Corning and Official Committee of Tort Claimants December 30, 1999

00-CV-70076 Rita Altig, et al. December 30, 1999

00-CV-70176 Hartford Accident & Indemnity Co., et al. January 10, 2000

00-CV-70177 Lloyds of London, et al. January 10, 2000

00-CV-70178 Korean Claimants January 10, 2000

00-CV-70179 Dow Corning and Official Committee of Tort Claimants’ Motion to Withdraw the Reference January 6, 2000

00-CV-70337 Dow Chemical January 19, 2000

00-CV-70338 Corning, Inc. January 19, 2000

The general issues on appeal include: the classification and treatment of claims; the injunction and release; the cap on punitive damages; whether the proposed plan is fair; and the United States’ motion to compel. This Court entered an order consolidating the briefing schedule of all the appeals relating to the Confirmation Order entered by the Bankruptcy Court. On April 12 and 13, 2000, the Court held hearings on the appeals, allowing counsel representing the appellants and appellees,

pro se

individuals and other interested parties to present arguments. Some parties filed supplemental briefs after the hearings. For the reasons set forth below, the Court AFFIRMS the Bankruptcy Court’s November 30, 1999 Confirmation Order and REVERSES in part its December 21, 1999 Opinion on the Injunction and Release issue as it relates to the November 30,1999 Order.

II.

BACKGROUND

In 1943, The Dow Chemical Company (“Dow Chemical”) and Corning Glass Works (now Corning, Incorporated (“Corning, Inc.”)), formed Dow Corning Corporation for the purpose of developing and producing products based on silicone chemistry. Today, Dow Holdings, Inc. (a wholly owned subsidiary of Dow Chemical) and Corning, Inc. are the sole shareholders of the Debtor, each owning 50% of the Debtor’s common stock.

See generally In re Dow Corning Corp.,

187 B.R. 919 (E.D.Mich.1995),

rev’d in part,

103 F.3d 129 (6th Cir.1996) and

In re Dow Corning Corp.,

211 B.R. 545, 550 (Bankr.E.D.Mich.1997).

The Debtor and its subsidiaries produce thousands of silicone-based products both for non-medical and medical uses. In the early 1960s, Drs. Thomas Cronin and Frank Gerow, plastic surgeons, developed the idea of placing silicone gel inside a sealed packet which would be surgically implanted inside a woman’s breasts and collaborated with the Debtor to create what is now known as a silicone-gel breast implant.

In re Dow Corning Corp.,

211 B.R. at 550 . The Debtor introduced silicone-gel breast implants to the market in 1964.

Id.

There were problems with the breast implants, including leakage and rupture.

Id.

As a result of various complaints, inserts were placed in the packages warning recipients of the potential non-pathogenic side effects.

Id.

at 551 . The Debtor did not face significant legal actions during this time period because of the warnings in the packets.

Id.

Reports in the 1980s suggested that silicone gel may cause systemic disease in humans.

Id.

Women began filing lawsuits during this period alleging that silicone gel caused an auto-immune connective tissue disease such as lupus, Scleroderma or rheumatoid arthritis.

Id.

Later on, suits were filed alleging symptoms such as

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aches and pains, fatigue, insomnia, memory loss and headaches.

Id.

After a successful suit against the Debtor in 1984, the Debtor modified its package inserts acknowledging that there were “reports of suspected immunological responses to silicone mammary implants” and that “convincing evidence does not exist to support a causal relationship between exposure to silicone materials and the acquisition or exacerbation of a variety of rheumatic and connective tissue disorders.”

Id.

(citation omitted)

The Debtor ceased marketing the silicone gel for breast implantation in March of 1992. Two months later, the Food and Drug Administration (“FDA”) ordered that implants containing the gel be taken off the market.

Id.

After the implants were withdrawn from the market, lawsuits against breast implant manufacturers dramatically increased with more than 3,000 suits filed against the Debtor in 1992, followed by 8,000 and 7,000 new cases in 1993 and 1994, respectively.

Id.

Lawsuits were also filed in Canada against the Debtor.

Id.

In 1992, the Judicial Panel on Multidis-trict Litigation consolidated all the breast implant litigation brought in federal courts for administration of pre-trial matters pursuant to 28 U.S.C. § 1407 .

In re Silicone Gel Breast Implants Prods. Liab. Litig.,

793 F.Supp. 1098 (Jud.Pan.Mult.Lit.1992). MDL-926 was assigned to the Honorable Sam C. Pointer, Jr. of the Northern District of Aabama.

3

Efforts were made to achieve a global settlement in the MDL-926 which led to a proposed $4,225,070,000 global settlement which was approved by Judge Pointer in 1994.

Lindsey v. Dow Corning Corp. (In re Silicone Gel Breast Implant Prods. Liab. Litig.),

No. CV 92-P-10000-S, Civ. A. No. CV94-P-11558-S, 1994 WL 578353 , at *1 (N.D.Ala. Sept.1, 1994). The Debtor had agreed to contribute $2.02 billion to the global settlement. Approximately 440,000 women filed claims with the global settlement fund in 1995, many more than were anticipated by the parties. Based on the number of claims filed, the claimants would have received only a small percentage of what was previously promised. Some estimated that the defendant manufacturers would have had to jointly contribute another $24 billion to the settlement fund to pay all the claimants the amount promised.

In re Dow Corning Corp.,

211 B.R. at 552 . More than 15,000 class members chose to opt out of the proposed settlement to preserve their right to pursue individual trials.

Id.

The global settlement fell apart in 1995.

The Debtor, faced with approximately 90 state trials in breast implant suits in 1995 with overlapping dates, believed that it would be financially and logistically impossible to defend itself.

Id.

In 1994 alone, the Debtor claimed it incurred more than $200 million in litigation costs.

Id.

The Debtor also faced a number of lawsuits involving nonbreast implant medical products.

Id.

at 553 . As a result of its legal predicament, the Debtor filed chapter 11 bankruptcy on May 15, 1995. At that time, the Debtor was a defendant in over 19,000 individual silicone-gel breast implant class actions, 45 putative silicone-gel breast implant class actions, and 470 lawsuits involving nonbreast implant medical products at the time it filed its petition.

Id.

Immediately after filing for bankruptcy, the Debtor sought to transfer all of the breast implant actions to the Eastern District of Michigan, including actions against its two shareholders, Dow Chemical and Coming, Inc. Other breast implant manufacturers, including Medical Engineering Corporation/Bristol-Myers Squibb, Minnesota Mining and Manufacturing Company and Baxter Healthcare Corp. and Baxter International, Inc. also requested that the cases against them be transferred to this Court. This Court granted the Debtor’s request as to the claims against the Debtor

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but denied the transfer relating to the claims against the Debtor’s shareholders and the non-Debtor breast implant manufacturers.

See In re Dow Corning Corp.

187 B.R. at 931 -32 and

Memorandum Opinion and Order on the Non-Debtors’ Motion to Transfer,

Case No. 95-CV-72397-DT (E.D.Mich. Sept. 12, 1995). The Sixth Circuit reversed this Court holding that the Court had jurisdiction over the Debtor’s shareholders and the non-Debtor breast implant manufacturers and remanding the matter in order that this Court analyze the transfers under abstention principles.

See Lindsey v. O’Brien, Tanski, Tanzer and Young Health Care Providers of Connecticut (In re Dow Corning Corp.),

86 F.3d 482, 493-94 (6th Cir.1996). On remand, this Court declined to exercise jurisdiction over the Debtor’s shareholders and the non-Debtor breast implant manufacturers based on abstention principles.

See In re Dow Corning Corp.,

No. 95-CV-72397-DT, 1996 WL 511646 (E.D.Mich. July 30, 1996). On a Writ of Mandamus motion, the Sixth Circuit reversed this Court’s ruling only with respect to the Debtor’s shareholders.

See Lindsey v. Dow Chemical Co. (In re Dow Corning Corp.),

113 F.3d 565 (6th Cir.1997). This Court thereafter entered an Order Transferring all breast implant claims against Dow Chemical and Corning, Inc. to the Eastern District of Michigan.

See Order Transferring Breast Implant Cases,

Case No. 95-CV-72397-DT (E.D.Mich. May 13, 1997). To date, there are approximately 14,795 breast implant cases against Dow Chemical and Corning, Inc. filed before this Court. The transferred cases before this Court against Dow Chemical and Corning, Inc. are currently held in abeyance pending the outcome of the Debtor’s bankruptcy action.

The Debtor has since proceeded with its bankruptcy action. The United States Trustee appointed various committees, including the Official Committee of Tort Claimants which represented the interests of the thousands of personal injury claimants before the Bankruptcy Court. The other committees appointed by the United States Trustee included the Official Committee for the Commercial Claimants and the Official Committee for the Physician Claimants. The Debtor proposed two plans of reorganizations which were vigorously opposed by the Tort Claimants’ Committee. This Court and the Bankruptcy Court, appointed a Mediator, Professor Francis E. McGovern, to assist in the negotiation of a consensual Plan between the Debtor, the Bankruptcy Committees, the United States Trustee, Dow Chemical and Corning, Inc.

See Order Appointing Mediator,

Case No. 97-CV-00001-DT (E.D.Mich. Nov. 11, 1997). The Debtor thereafter began to seriously negotiate with the various Committees, especially the Tort Claimants’ Committee, which resulted in the proposed Amended Joint Plan filed by the Debtor and the Tort Claimants’ Committee, which is currently before the Court for review.

The Court will address the following issues below: the appealability of the December 21, 1999 Opinion; the release and injunction decision addressed in the December 21, 1999 Opinion; the parties’ specific arguments relating to the release and injunction; classification, treatment, fairness standards, and the best-interest-of creditors test; each parties’ specific arguments relating to the classification, treatment, fairness, and the best-interest-of creditors test; the United States’ appeal from the order addressing its motion to compel; the Case Management Order; and motions to intervene and/or file

ami-cus

briefs.

III.

JURISDICTION AND STANDARD OF REVIEW

The district court has jurisdiction over appeals from final orders of the bankruptcy court in core proceedings. 28 U.S.C. §§ 157 (b)(1) and 158(a)(1). The confirmation of a plan is a core proceeding. 28 U.S.C. § 157 (b)(2)(L). A bankruptcy court’s findings of fact are reviewed under

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a clearly erroneous standard, while its conclusions of law are reviewed

de novo. Mapother & Mapother, P.S.C. v. Cooper (In re Downs),

103 F.3d 472, 476-77 (6th Cir.1996); Bankr.R. 8013. Where a bankruptcy court’s determination involves a mixed question of fact and law, the district court “must break it down into its constituent parts and apply the appropriate standard of review for each part.”

Wesbanco Bank Barnesville v. Rafoth (In re Baker & Getty Fin. Servs., Inc.),

106 F.3d 1255 , 1259 (6th Cir.1997)

(citing Investors Credit Corp. v. Batie (In re Batie),

995 F.2d 85, 88 (6th Cir.1993)).

IY.

MOTIONS TO INTERVENE AND/OR TO FILE AMICUS BRIEF

The Pennsylvania Physicians and Hospitals filed a Motion to Intervene in the appeal of the Class 5 Pennsylvania Claimants. Uneeda Laitinen,

pro se,

an implant claimant, also filed a Motion to Intervene in the appeals of the Dow Corning Plan for Reorganization. The Washington Legal Foundation filed a Motion to File Brief as

amicus curiae

in support of the Proponents’ position regarding the Bankruptcy Court’s December 21,1999 Opinion.

The parties seeking intervention cite Fed.R.Civ.P. 24 as authority to intervene in the appeals. Rule 24 allows intervention as of right or by permission in an “action” before the district court.

See

Fed.R.Civ.P. 24(a) and (b). “Action” is defined as a “[cjivil action ... commenced by filing a complaint with the court.” Fed.R.Civ.P. 2 and 3.

In the Motions to Intervene before this Court, the parties seek intervention in “appeals” filed by certain parties from the Bankruptcy Court. The parties are not seeking to intervene in “actions” currently before the Court which were filed by way of a “complaint” but are seeking to intervene in “appeals” filed in this Court. The parties seeking to intervene have not cited any authority nor has this Court found any such authority, which would allow this Court, sitting as an appellate court, acting under the jurisdiction conferred to district courts by 28 U.S.C. § 158 (a) to allow intervention. Bankruptcy Rules 8001 and 8002 set forth the manner in which a party may file an appeal from a bankruptcy court’s order. If any party does not follow the rules regarding filing appeals from bankruptcy court orders, the Court does not have jurisdiction over that party on appeal under 28 U.S.C. § 158 (a). “If a timely notice of appeal is not filed, no appeal may be taken later.”

See

Committee Note, Bankr.R. 8002. The parties seeking to intervene in the appeals have not shown that this Court has the authority to allow non-parties to the appeal to intervene on appeal. The Court’s interpretation of Fed.R.Civ.P. 24 is not authority for this Court to allow parties to intervene on appeal. Rule 24 applies to an original civil action filed before this Court by way of a complaint and not by way of a bankruptcy appeal. The Court will not allow the Pennsylvania Physicians and Pennsylvania Hospitals and Uneeda Laitinen to intervene on appeal. The Court, however, will consider the briefs as motions to file an

amicus curiae

brief.

Appellate courts have allowed briefs of an

amicus curiae.

The Federal Rules of Appellate Procedure 29 sets forth the manner in which an

amicus curiae

brief may be filed.

Amicus curiae

briefs may be filed only by leave of court or by consent of the parties stated in the brief. Fed.R.App.P. 29(a). The motion to file an

amicus curiae

brief must be accompanied by the proposed brief and state the movant’s interest

and

the reason why an amicus brief is desirable and why the matters asserted are relevant to the disposition of the case. Fed.R.App.P. 29(b).

The Pennsylvania Physicians and Hospitals’ brief states that their interest in the appeals stem from the Bankruptcy Court’s December 21, 1999 Opinion regarding the release and injunctive issues. They state that neither the Proponents nor

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any other party have addressed their concerns that the December 21, 1999 Opinion may affect the physicians and hospitals’ rights under the Amended Joint Plan. The Pennsylvania Physicians and Hospitals argue that their brief is therefore desirable and relevant to the disposition of the case. The Court finds that the Pennsylvania Physicians and Hospitals’ brief addresses issues affecting the rights of the physicians and hospitals which no other party has raised before this Court with respect to the December 21, 1999 Opinion. The Pennsylvania Physicians and Hospitals’ brief will be allowed as an

amicus curiae

brief.

Uneeda Laitinen’s Motion for Intervention, received by the Clerk’s Office on April 12, 2000, is essentially a concurrence with the arguments Appellant Marti Jacobs has brought before the Court. Laitinen, as a claimant in the bankruptcy proceeding, does have an interest in the appeals before the Court. Although not particularly helpful to the Court, to the extent that Laitinen seeks to place on the record her concurrence with Jacobs’ position on appeal, the Court will allow Laiti-nen to so state on the record by allowing her “Motion for Intervention” to be filed as an

amicus curiae

brief.

The Washington Legal Foundation states that its interest in the appeals before the Court are twofold: 1) it has an interest in opposing the proliferation of product-liability class actions as a threat to free enterprise and prosperity; and 2) that the rule of law be upheld involving in bankruptcy laws. The Washington Legal Foundation believes that their brief would assist the Court and its views are relevant to the appeals. The Tort Claimants’ Committee responded to the Washington Legal Foundation’s motion stating that it has no objection if the Court wishes to accept the proposed

amicus curiae

brief but the Tort Claimants’ Committee makes it clear that it only agrees with the Washington Legal Foundation’s conclusion and not the basis for the conclusion. The Nevada Claimants oppose the Washington Legal Foundation’s brief because they claim the brief would not assist the Court but merely advocates for the Shareholders. The Court will allow the Washington Legal Foundation’s brief as an

amicus curiae

because it does have an interest in the appeals and the brief is relevant to the issues before the Court on appeal.

V.

UNTIMELY NOTICE OF APPEAL

In its January 24, 2000 Scheduling Order regarding the appeals, the Court allowed parties to file motions to dismiss any pending appeal. Other than the motion to dismiss filed by the United States, no other motions were filed to dismiss any pending appeal. Other than the United States’ motion to dismiss addressed by the Court above, the issue of whether certain parties filed timely Notices of Appeal was not argued vigorously by any party. Because filing a notice of appeal is jurisdictional, the Court will determine whether a party’s filing of the notice of appeal was timely.

Bankruptcy Rule 8002(a) provides that a “notice of appeal shall be filed with the clerk within 10 days of the date of the entry of the judgment, order, or decree appealed from.” Generally, a bankruptcy judge may extend the time for filing the notice of appeal if the request is made by a written motion and filed before the time for filing a notice of appeal has expired. Bankr.R. 8002(c)(1) and (2). However, the bankruptcy judge cannot extend the time for filing a notice of appeal if the order confirms a plan. Bankr.R. 8002(c)(1)(F). The 10 day period of time begins to run the day after the entry of the order and includes intermediate weekends and legal holidays. Bankr.R. 9006(a). The last day of the period is also included, unless it is a weekend day or a legal holiday.

Id.

As the rule is jurisdictional, failure to file a timely notice requires an appeal be dismissed for lack of jurisdiction.

Walker v. Bank of Cadiz (In re LBL Sports Ctr., Inc.),

684 F.2d 410, 412 (6th Cir.1982). The rule has been strictly construed, requiring strict

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compliance with its terms.

Hotel Syracuse, Inc. v. City of Syracuse Indus. Dev. Agency (In re Hotel Syracuse, Inc.),

154 B.R. 13, 15 (N.D.N.Y.1993). The notice of appeal itself is not a request for an extension under Rule 8002 since a request must be made by motion.

See Pryor v. Marshall,

711 F.2d 63, 64-65 (6th Cir.1983) (holding Fed.R.App.P. 4(a)(5) requires an appellant to file a timely motion requesting an extension of time).

4

Delays due to the mail are not grounds for excusable neglect.

See In re LBL Sports Center, Inc.,

684 F.2d at 412 . The Sixth Circuit has noted that although a person proceeding

pro se

may not fully understand the rules or procedure, he or she is still required to comply with the rules and that a

pro se

status does not exempt a person from complying with the rules.

See Jourdan v. Jabe,

951 F.2d 108, 110 (6th Cir.1991).

A review of the record before the Court and the Bankruptcy Court, indicates that Notices of Appeal listed below were not timely filed, therefore, the Court has no jurisdiction over those appeals. A party seeking an appeal from the November 30, 1999 Confirmation Order must have filed a notice of appeal before the Bankruptcy Court on or before December 10, 1999. A notice of appeal from the December 21, 1999 Opinion must have been filed on or before January 3, 2000 (the New Year holiday, January 1, a Saturday, was observed on December 31, 1999). The following appeals were untimely filed and will be dismissed for lack of jurisdiction:

Case No. Date filed with Bankruptcy Court Appellant

99-CV-76007 December 13, 1999 Beatrix Shishido,

pro se

99-CV-76008 December 13, 1999 Karen L. Hustead,

pro se

99-CV-76009 December 13, 1999 Pamela Dowd,

pro se

and Maribeth West,

pro se

99-CV-76063 December 16, 1999 Class Five Pennsylvania Claimants, Pennsylvania Coordinated Silicone Breast Implant Litigation

0-CV-70076 December 30, 1999 Rita Altig, et al.

0-CV-70176 January 10, 2000 Hartford Accident & Indemnity Co., et al.

00-CV-70177 January 10, 2000 Lloyds of London, et al.

Appellants Shishido, Hustead, Dowd and West, the Class Five Pennsylvania Claimants, and the Altig Claimants filed their notices of appeal from the November 30, 1999 Confirmation Order beyond the 10 day appeal time period of December 10, 1999. Although the Altig Claimants’ Notice of Appeal indicates they were appealing from the Bankruptcy Court’s December 21, 1999 Opinion, the substance of their appeal goes to the issues addressed in the November 30, 1999 Confirmation Order and not to the issues raised in the December 21,1999 Opinion which modified the November 30,1999 Confirmation — specifically the release and injunction provisions issues. The Altig Claimants do not appeal the Bankruptcy Court’s opinion on the release and injunction provisions raised in its December 21, 1999 Opinion. The Altig Claimants have not argued that the balance of the Bankruptcy Court’s December 21, 1999 Opinion modified its November 30, 1999 Confirmation Order. The Insurers notices of appeal from the December 21, 1999 Opinion regarding the release and injunction provisions were also filed beyond the 10 day appeal time period

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which expired on January 4, 2000. Because the briefs on appeal submitted by the parties address issues that have been raised by other parties who filed timely appeals, the Court will consider the briefs submitted as

amicus curiae

briefs.

VI.

APPEALABILITY OF THE DECEMBER 21,1999 OPINION

A.

Parties filing Appeals and Motions regarding the December 21, 1999 Opinion

The Shareholders, Dow Chemical and Corning, Inc., and the Proponents, the Debtor and the Tort Claimants’ Committee, filed separate appeals from the December 21, 1999 Opinion seeking review of the Bankruptcy Court’s release and injunction opinion. A Motion to Vacate the December 21, 1999 Opinion and a Motion to Withdraw the Reference were also filed by the Proponents relating to the injunction issue. The Shareholders filed a document before the Bankruptcy Court entitled “Notice of Shareholders of Failure to Satisfy Condition” which was stricken by the Bankruptcy Court. The Shareholders filed an appeal of the Bankruptcy Court’s Order striking the Notice. Certain insurance companies also filed an appeal from the December 21, 1999 Opinion. A Motion to Dismiss the appeals relating to the December 21, 1999 Opinion was filed by the United States of America (“United States”).

B.

United States’ Motion to Dismiss Appeal

1.

Background of the December 21, 1999 Opinion

The United States filed a Motion to Dismiss the Appeals relating to the December 21, 1999 Opinion of the Bankruptcy Court addressing the Release and Injunction provisions of the Joint Plan because the Notices of Appeals were filed more than ten days after the November 30, 1999 Confirmation Order. The United States, joined by several parties (the “Plan Opponents”), argue that any appeal from the November 30, 1999 Confirmation Order should have been filed within ten days from that date, as opposed to ten days from December 21, 1999, the date the Opinion was issued on the Release and Injunction provisions. The Proponents, Shareholders and the Settling Insurers argue that their Appeals are timely because the December 21, 1999 Opinion changed the November 30, 1999 Confirmation Order as to the release and injunction issues.

The Joint Plan provides that “All Persons who have held, hold or may hold Products Liability Claims, whether known or unknown, shall be deemed to have forever waived and released all such rights or claims against the Released Parties.” Joint Plan, § 8.3. The released parties include the “Shareholders” and the “Proponents”. The Joint Plan further provides that “all Persons who have held, hold, or may hold Released Claims, whether known or unknown ... shall be permanently enjoined” from pursuing those claims against the Released Parties. Joint Plan, § 8.4.

In response to the Amended Joint Plan, several claimants vehemently argued that the injunction provision violated the Bankruptcy Code. According to the Proponents and Shareholders, the crux of the debate centered around whether a release that applied to all claimants was legal. Even though there was disagreement over the validity of the injunction provisions, the Proponents argue that all parties involved agreed that the scope of the provision was to release the Shareholders and Proponents from all product liability claims, regardless of whether the claimants voted for or against the Joint Plan or did not vote at all. In support of this assertion, the Proponents and Shareholders cite excerpts from filings made by the Nevada objectors, the Australian complainants, and the Official Committee of Unsecured Creditors which reference the injunction provision as applying to “all” tort claimants and the resulting lack of options.

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The Proponents and Shareholders believe that the release and injunction sections of the Joint Plan make it clear that they are released from any and all products liability claims. This means that anyone with a claim relating to an implant or any of the other claims being released, will not be able to sue or continue suit against any of the released parties, including Dow Corning, Dow Chemical, Corning Inc. and the Settling Insurers.

The Bankruptcy Court’s Confirmation Order stated that “[t]he Plan, including its attached and incorporated separate agreements, compromises, settlements, and assumptions and rejections of executory contacts and unexpired leases, is confirmed.”

Order Confirming Amended Joint Plan of Reorganization as Modified,

p. 1. The Confirmation Order does not specifically address the release and injunction provisions at issue. The Findings of Fact and Conclusions of Law state the following:

21. The Settling Physicians, the Settling Insurers, Corning, Inc. and The Dow Chemical Company will all make important contributions to the reorganization as part of a confirmed Plan.

22. The release and injunction provisions with respect to the Settling Physicians, Settling Insurers, Corning, Inc. and The Dow Chemical Company are essential to reorganization pursuant to this Plan.

23. A large majority of the creditors impacted by the release and injunction provisions approved the Plan.

24. There is a close connection between the claims of the Settling Physicians, the Settling Insurers, Corning, Inc. and the Dow Chemical Company on the one hand and the claims against the Debtor on the other hand.

25. The Plan provides for the payment of all of the claims affected by the release and injunction provisions of the Plan.

November SO, 1999 Findings of Fact and Conclusions of Law Regarding Confirmation of the Joint Plan of Reorganization,

p. 5. The Conclusions of Law state:

D. The Plan complies with the applicable provisions of title 11 United States Code. 11 U.S.C. § 1129 (a)(1).

See

separate opinion to be issued later with respect to this issue.

Id.

The Proponents and Shareholders argue that the findings set forth in ¶¶ 21-25 are precisely the factors that courts have held may in certain circumstances warrant approval of plans of reorganization containing release and injunction provisions that bar claims against non-debtors by all claimants, regardless of how or whether they voted on confirmation.

See November SO, 1999 Findings of Fact,

¶¶ 21-25. The United States agrees with the Proponents and Shareholders in this regard and maintains that the November 30, 1999 Confirmation Order was in fact an approval of the reorganization plan. As a result of the November 30, 1999 Confirmation Order, a number of claimants who had voted against the Joint Plan, including the United States, promptly filed Notices of Appeal.

On December 21, 1999, the Bankruptcy Court issued an opinion which was described as “the last in a series of opinions serving to supplement and explain the findings and conclusions previously submitted.”

In re Dow Corning Corp. (Opinion on Best-Interests-of-Creditors Test),

244 B.R. at 726. Contained within this opinion was a discussion regarding the Joint Plan’s release and injunction provisions. The Bankruptcy Court opined that those provisions apply only to claimants who voted in favor of confirmation, but not to claimants who voted against the Joint Plan or who did not vote at all. In essence, the Bankruptcy Court reasoned that it lacked the power to release claims held by non-voters or objectors. The Bankruptcy Court also noted that since the release and injunctive provisions were only

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applicable to those claimants who voted in favor of the Plan, there was no need for an injunction. According to the Bankruptcy Court, the creditors that voted for the Plan agreed to relinquish their claims against the released parties, and as a result, the Proponents would not suffer irreparable harm.

Id.

at 745-46.

The Proponents and the Shareholders filed notices of appeal within (10) days of the December 21, 1999 Opinion asserting that the Opinion significantly altered the previous judgment entered by the court. The United States moved to dismiss the appeals, arguing that (1) the Proponents and Shareholders failed to appeal within ten days of the November 30 Confirmation Order, and (2) the December 21 Opinion is not independently appealable.

2.

Finality of the December 21, 1999 Opinion

This Court has jurisdiction to hear appeals “from final judgments, orders and decrees” entered by bankruptcy courts. 28 U.S.C. § 158 (a). The time limit to pursue an appeal in a bankruptcy case is more accelerated than that applicable to generic non-bankruptcy civil cases. Specifically, Rule 8002(a) of the Bankruptcy Rules states that “[t]he notice of appeal shall be filed with the clerk within 10 days of the date of the entry of the judgment, order or decree appealed from.”

The Proponents and Shareholders argue that they filed a notice of appeal from the December 21 opinion as well as from the November 30 Confirmation Order to the extent that it was amended or modified by the December 21 Opinion. It is undisputed that the Proponents failed to appeal within the required ten days of the November 30, 1999 Order, but did file a Notice of Appeal within the ten days after the December 21 Opinion was issued. The question is whether the December 21 Opinion satisfies the requirement for a final judgment as outlined in 28 U.S.C. § 158 (a). the Court finds the Opinion is a final order and this Court has jurisdiction to hear the Proponents and Shareholders’ appeal pursuant to Bankruptcy Rule 8002 and 28 U.S.C. § 158 (a).

The Supreme Court has promulgated a test for determining when parties should be allowed to appeal an order entered subsequent to a court’s final judgment. The Supreme Court wrote:

[T]he mere fact that a judgment previously entered has been reentered or revised in an immaterial way does not toll the time within which review must be sought. Only when the lower court changes matters of substance or resolves a genuine ambiguity, in a judgment previously rendered should the period within which an appeal must be taken or a petition for certiorari filed begin to run anew. The test is a practical one. The question is whether the lower court, in its second order, has disturbed or revised legal rights and obligations which, by its prior judgment, had been plainly and properly settled with finality.

Federal Trade Commission v. Minneapolis-Honeywell Regulator Co.,

344 U.S. 206 , 73 S.Ct. 245 , 97 L.Ed. 245 (1952). The Supreme Court also indicated that the question of whether the time for petitioning for appeal should be enlarged “cannot turn on the adjective which the court below chose to use in the caption of its second judgment.”

Id.

at 212 , 73 S.Ct. 245 .

This test was adopted by the Sixth Circuit in

Green v. Nevers,

196 F.3d 627 (6th Cir.1999) and

Cuyahoga Valley Railway Company v. Tracy,

6 F.3d 389 (6th Cir.1993). In

Green ,

a plaintiff attempted to appeal an order that was entered subsequent to a court’s final decree. The Sixth Circuit reasoned that the second order merely amended the first order by correcting “a minor technical error” and therefore did not toll the time for filing a notice of appeal.

Green,

196 F.3d at 631 . In accordance with the

Minneapolis-Honeywell

case, the Sixth Circuit concluded that be

*470

cause there were no substantive changes or resolution of genuine ambiguity, the second order did not restart the time for appeal.

Id.

Similarly in

Tracy,

the Sixth Circuit determined that the defendants’ attempt to appeal from a subsequent order which it contended modified certain aspects of the original order was untimely. The defendants argued that because the second order modified certain aspects of the court’s first order, every item in the first order was subject to appeal. The issue that the defendants sought for review was not altered or even mentioned in the second court order. The

Tracy

court held that “the relevant case law in no way suggests that once one issue has been modified, all of the issues from the original order are fair game for appeal.”

Tracy,

6 F.3d at 395. The district court’s later modification of the first order was completely unrelated to the issue the defendants disputed and therefore did not alter the state of repose.

Id.

The Sixth Circuit has also determined that “[A] decision is final for purposes of appeal if an appeal is the only method of obtaining review.”

United States v. Lee,

786 F.2d 951 (9th Cir.1986).

Here, the December 21 Opinion revised the November 30 Confirmation Order in a material way. The Bankruptcy Court specifically stated in its December 21, 1999 Opinion that Claimants who voted against the Joint Plan or who did not vote at all, are not deemed to have released the non-debtors and could still bring suit against the Proponents and the Shareholders. For the first time, the Bankruptcy Court articulated the scope and effect of the release and injunction on all of the parties. The November 30 Confirmation Order did not elaborate on or explain interpret these provisions. The Bankruptcy Court simply stated that “the Plan, including its attached and incorporated separate agreements, compromises, settlements, and assumptions and rejections of executory contracts and unexpired leases [was] confirmed.”

November 30, 1999 Confirmation Order,

p. 1. The Findings of Fact and Conclusions of Law issued on the same date, reference the provisions, but fail to detail the ramifications they have on the parties. The Findings of Fact, in ¶¶ 21-25, address factors that courts have articulated to support the imposition of releases and injunctions. The Conclusions of Law do not address the injunction and release issues but merely state that “[t]he Plan complies with the applicable provisions of title 11 United States Code. 11 U.S.C. § 1129 (a)(1).

See

separate opinion to be issued later with respect to this issue.”

November 30, 1999 Findings of Fact,

¶ D. Nowhere in the Bankruptcy Court’s November 30, 1999 Findings of Fact and Conclusions of Law nor the November 30, 1999 Confirmation Order does it expressly state that the release and injunction provisions only apply to those who approved the Plan.

The December 21 Opinion revised the scope of the injunction/release provisions and made these provisions applicable only to those parties who voted in favor of the confirmation plan. If this Court accepts the United States’ argument and concludes that the November 30 Confirmation Order was the Bankruptcy Court’s final decree, then the entire plan, as written, was confirmed on that date. The release and injunction provisions would then apply to

“all

Persons who have held, hold, or may hold Products Liability Claims whether known or unknown.” Joint Plan, § 8.3 (italics added). Since, this was clearly not the Bankruptcy Court’s interpretation when the November 30 Confirmation Order was entered, the subsequent December 21 Opinion changed the legal rights and obligations of the parties, as written under the Joint Plan.

The Proponents seek review of the subject matter that was substantially altered by the December 21 Opinion. As noted in

Tracy,

an appeal may be barred if the parties seek review of an entire order simply because one provision has been altered by a subsequent judgment. In the instant

*471

case however, the Proponents seek review of the only significant change in the December 21 Opinion, specifically, Section IV of the Opinion — the applicability and scope of the release/injunction provisions.

If this Court denies the Proponents’ review of their appeal, there will be no alternative means for them to seek review of the December 21 Opinion. Based on

Lee ,

the opinion qualifies the as a final decision for purposes of appeal. In accordance with

Minneapolis-Honeytuell

and

Lee ,

the December 21 Opinion is appeal-able. The December 21 Opinion materially altered the November 30 Confirmation Order, and the Proponents have no other way to assert their objections except through appeal. Since the Bankruptcy Court did not specifically address the injunction and release issues either in its Findings of Fact and Conclusions of Law or in the November 30 Confirmation Order, the Proponents reasonably believed that the reorganization plan had been confirmed as written, and all issues had been settled with finality. The Appellants who objected to the Plan also reasonably believed that the injunction and release provisions had been confirmed by the Bankruptcy court’s November 30 Confirmation Order as evidenced by their own timely appeals of the confirmation of those provisions.

As indicated above, this Court has jurisdiction to hear appeals “from final judgments, orders, and decrees” entered by bankruptcy courts. 28 U.S.C. § 158 (a). The Sixth Circuit has adopted the Supreme Court’s definition of a final order as one that “ends the litigation on the merits and leaves nothing for the court to do but execute the judgment.”

Whittington v. Milby,

928 F.2d 188, 191 (6th Cir.1991) (quoting

Catlin v. United States,

324 U.S. 229, 233 , 65 S.Ct. 631 , 89 L.Ed. 911 (1945)). This Circuit has also emphasized that the requirement of finality is to be given a practical rather than a technical construction.

Id.

(citing

Eisen v. Carlisle & Jac-quelin,

417 U.S. 156, 171 , 94 S.Ct. 2140 , 40 L.Ed.2d 732 (1974)).

In cases of marginal finality, the Sixth Circuit has adopted what has become known as the

Gillespie

doctrine.

Vause v. Capital Poly Bag, Inc.,

886 F.2d 794, 797 (1989). In certain close cases where finality cannot be conclusively resolved, the court has determined that the “danger of denying justice by delay outweighs the inconvenience and costs of piecemeal review, particularly when the questions on appeal are fundamental to the further outcome of the case.”

Id.

(quoting

Gillespie v. United States Steel Corp.,

379 U.S. 148 , 85 S.Ct. 308 , 13 L.Ed.2d 199 (1964)). The

Gillespie

doctrine, therefore, “permits the courts of appeals to decide the merits in cases of marginal finality where the course of litigation would be impeded, rather than advanced, by dismissing the appeal.”

Id.

The Proponents contend that the Bankruptcy Court’s statement on January 10, 2000 that the December 21 Opinion “did not amend, modify or otherwise change the order confirming the plan” does not establish that the December 21 Opinion did not modify the November 30 Confirmation Order. Nor should it matter that the December 21 ruling is labeled an “opinion” instead of an “order.” In support of this contention, the Proponents quote the Ninth Circuit which has stated that:

[f]or purposes of determining appealability of an order, “the trial judge’s characterization of his own action cannot control the classification of the action.” The court should instead focus on the effect of the ruling rather than the label placed on it.

Lee,

786 F.2d at 955 (quoting

United States v. Scott,

437 U.S. 82, 96 , 98 S.Ct. 2187 , 57 L.Ed.2d 65 (1978)) (other citations omitted). The Proponents also cite

American Motors Corp. v. FTC,

601 F.2d 1329 , 1331 n. 2 (6th Cir.1979) and

United States v. Battisti,

486 F.2d 961, 967 (6th Cir.1973), which stand for the proposition that appealability of an order depends on its

*472

substantial effect versus the label attached to it.

The argument asserted by the Proponents has been upheld in the Seventh and Third Circuits. In

Charles v. Daley,

799 F.2d 343 (7th Cir.1986), a district court entered an award of attorney fees in favor of the plaintiff on October 1, 1984. The order awarded fees but did not stipulate which defendants would be responsible for payment. The accompanying opinion said that the “defendants” would pay, but it referred to three intervenor-defendants as intervenors. One reading of the order made the intervening defendants jointly and severally liable for the $200,000 attorney fee award. Another reading of the order did not make them liable at all. The intervenors requested clarification and modification of the order and filed a timely motion to suspend the finality of the judgment until the court ruled on their motion. On April 22, 1985, the district court denied their motion for clarification and modification and entered another order indicating that the plaintiffs fees and costs would be borne equally by the defendants. The district court’s April 22 order both denied the intervenors motion and amended the original judgment entered on October 1, 1984.

The

Daley

court applied the holding of

Minneapolis-Honeywell

and concluded that there was a genuine ambiguity in the court’s original order dated October 1, 1984. The subsequent April 22 order not only dispelled the ambiguity but also made substantive changes. By dividing liability among the groups of defendants, and making the intervenors jointly and severally liable for the plaintiffs attorney fees and costs, the April 22 order became a new order, affording the aggrieved parties time to seek alteration or appeal.

Daley,

799 F.2d at 348 . The

Daley

court noted that “the sort of alteration that restarts all periods of time is one that changes matters of substance, or resolves a genuine ambiguity, in a judgment previously rendered.”

Id.

(quoting

Minneapolis-Honeywell,

344 U.S. at 211 , 73 S.Ct. 245 ). The Third Circuit has also determined that “an order substantively changing a judgment, constitutes a new judgment with its own time for appeal at least where the change is the subject matter to be reviewed.”

Keith v. Truck Stops Corporation of America,

909 F.2d 743, 746 (3rd Cir.1990).

Applying the rationale of the Ninth, Seventh and Third Circuits to the case at bar, the December 21 Opinion is appealable. A trial court judge’s characterization of the rulings he/she enters is of no moment. It is the effect of these rulings which determines their appealability. The December 21 Opinion clarified and substantively changed the applicability of the release and injunction provisions.

Applying the

Whittington

holding to the case at bar, it is practical to interpret the December 21 Opinion as the Bankruptcy Court’s final order on the release and injunction issues. As indicated in

Whittington ,

an order is not final unless all issues have been addressed and resolved. It is clear that this requirement was not satisfied until the Bankruptcy Court issued the December 21 Opinion on the release and injunction issues. Since all parties placed significant importance on the release and injunction provisions, it is impractical to interpret the November 30 Order as final when key components to the reorganization plan were changed by the December 21 Opinion.

The

Gillespie

doctrine directs that any issue that is fundamental to the future outcome of a case should meet the finality requirement and should be appealable. There is no question that this is a fundamental issue that has the potential of seriously affecting the Proponents and/or Shareholders in the future. Applying the

Gillespie

doctrine to the facts of the instant case it is clear that the requirement of finality has been met, and the Proponents and Shareholders will be allowed to appeal the December 21 Opinion.

*473

3.

Notice/Due Process

The Proponents and Shareholders contend that it would violate due process if they were barred from appealing the December 21 ruling when they filed notices of appeal within 10 days of the Bankruptcy Court’s announcement of notification. According to the Proponents, “[a]n elementary and fundamental requirement of due process in any proceeding which is to be accorded finality is notice reasonably calculated, under all the circumstances, to apprise interested parties of the pendency of the action and afford them an opportunity to present their objections.”

Mullane v. Central Hanover Bank & Trust Co.,

339 U.S. 306, 314 , 70 S.Ct. 652 , 94 L.Ed. 865 (1950). The notice must also be of such nature “to reasonably convey the required information and afford a reasonable time for those interested to make their appearance.”

Id.

Applying the

Mullane

holding, the Sixth Circuit has also determined that the failure to give adequate notice is violative of procedural due process.

Verba v. Ohio Casualty Insurance Co.,

851 F.2d 811, 815 (6th Cir.1988).

When the Bankruptcy Court issued its Findings of Fact and Conclusions of Law on November 30, the court indicated that several of its findings would be more fully explained in a subsequent separate opinion. There was no indication however, that the language confirming the release and injunction provisions would be interpreted other than as intended by the Proponents. The parties reasonably concluded that the Bankruptcy Court had adopted these provisions as written in the Joint Plan. This is evidenced by the actions of the parties following the issuance of the November 30 Confirmation Order. The Nevada Claimants specifically stated that the basis of their appeal centered around the permanent injunction provision. The United States also questioned the injunction provision and whether the bankruptcy court erred in confirming a Plan which releases entities from the claims of all parties and enjoins all parties from all actions against the Released Parties for future claims. The Proponents, along with the Plan Opponents, thought that the release and injunction provisions, as written in the Joint Plan, required “all” claimants to release the Debtor, the Shareholders and the Settling Insurers. Not until the issuance of the December 21 Opinion did the parties become aware of the Bankruptcy Court’s reasoning. The Bankruptcy Court’s interpretation of the release and injunction provisions altered the plain language of the reorganization plan from

“all

persons who have held, hold, or may hold Released Claims, whether known or unknown” to make the provisions applicable only to “those persons who accepted the plan.”

Best-Interests Opinion,

244 B.R. at 745.

Upon review of the November 30 Confirmation Order and Findings of Fact and Conclusions of Law, there is no indication that the court intended to interpret the release and injunction provision as the Bankruptcy Court finally did in its December 21 Opinion. The Proponents had no formal notice of the Bankruptcy Court’s reasoning or intentions with regard to the release/injunction provisions. Once the December 21 Opinion was issued, putting the Proponents on notice of the court’s final holding, a timely appeal was filed. As noted in

Mullane,

because the Proponents were not given notice of the applicability of the November 30 Confirmation Order, it would be a violation of due process to deny them an opportunity to present their objections to the December 21 Opinion.

4.

Conclusion

The December 21 Opinion qualifies as a final judgment which gives this Court jurisdiction to hear the Proponents’ for appeal. The November 30 Confirmation Order stated that the amended reorganization plan had been confirmed in its entirety. From this statement, there is no indication that the Bankruptcy Court planned by its subsequent opinions to in

*474

terpret any of the Plan’s provisions differently from the plain language of the Plan. As a result, the Proponents were not given notice of their need to appeal until after the Bankruptcy Court issued the December 21 Opinion which substantially altered the applicability of the release and injunction provisions. It would be violative of procedural due process to deny the Proponents the only opportunity they have in which to address their objections to the modifications contained within the December 21 Opinion. The December 21 Opinion falls within the definition of a final order. It was a clear articulation by the Bankruptcy Court of its holding regarding the release and injunction provisions.

C.

Proponents’ Motion to Withdraw the Reference

Alternatively, the Proponents have filed a Motion to Withdraw the Reference should the Court decide not to consider their appeal on the merits. 28 U.S.C. § 157 (d) provides that “[t]he district court may withdraw, in whole or in part, any case or proceeding referred under this section, on its own motion or on timely motion of any party, for cause shown.” “Cause” is not defined. In order to determine “cause,”

The district court should consider the goals of promoting uniformity in bankruptcy administration, reducing forum shopping and confusion, fostering the economical use of the debtors’ and creditors’ resources, and expediting the bankruptcy process.

Holland America Ins. Co. v. Succession of Roy,

777 F.2d 992, 999 (5th Cir.1985). Although not explicitly required for withdrawal

sua sponte,

it has been held by some courts that after a core proceeding is finally disposed of by the bankruptcy court, a district court must proceed under its appellate jurisdiction as opposed to utilizing its original jurisdiction by withdrawing the reference.

In re Pruitt,

910 F.2d 1160, 1168 (3rd Cir.1990). Once core proceedings become final, withdrawing the reference would be without cause.

Id.; Carlton v. Baww, Inc.,

751 F.2d 781, 788, n. 10 (5th Cir.1985). The Seventh Circuit has stated:

The timing of the court’s withdrawal of the reference here, even if not improper, seems to be in conflict with the statutory objectives of utilizing the expertise of bankruptcy judges, reducing forum shopping and preserving the appellate processes provided by the Bankruptcy Act.

In the Matter of Powelson,

878 F.2d 976, 983 (7th Cir.1989). Although the statute does not expressly forbid the withdrawal of reference after a final order has been entered, such withdrawal appears to violate the intent of Congress as reflected in the statutory scheme taken as a whole.

Id.

at 983-84 . Congress has established a structure within the bankruptcy court system which allows for the district courts to supervise the bankruptcy courts in two different capacities: first, withdrawal of the reference and the reinstatement of the district court’s original jurisdiction under 28 U.S.C. § 158 (d) and second, through the appellate process in 28 U.S.C. § 157 (a). “[Allowing the withdrawal of the reference to occur at any time, and especially after the appeal process has begun, would seriously disturb the statutory objective of ‘preserving the appellate processes provided by the Bankruptcy Act.’ ”

In re Pruitt,

910 F.2d at 1169 (concurring opinion),

citing Powelson,

878 F.2d at 983 . Although the precise issue has not been addressed by the Sixth Circuit, the Sixth Circuit has stated that short circuiting the orderly procedure for the administration of bankruptcy stays without recognizing the legal effect of the bankruptcy stay to a case before the trial court is not favored.

NLT Computer Servs. Corp. v. Capital Computer Sys., Inc.,

755 F.2d 1253 , 1258 (6th Cir.1985).

A final confirmation order has been entered in this matter. The Court will not on this occasion withdraw the reference at

*475

this late stage based on the statutory scheme as a whole. The Court will not exercise both its original and appellate jurisdiction to review the issues raised in the same order.

VII.

RELEASE AND INJUNCTION PROVISIONS

A.

Sections 8.3 and 8.4 of the Joint Plan

Section 1129(a) sets forth 13 requirements for confirmation of the plan. One of those requirements is found in 11 U.S.C. § 1129 (a)(1) which provides that a plan cannot be confirmed unless it “complies with the applicable provisions of [the Bankruptcy Code].” The Bankruptcy Court has the authority to approve reorganization plans, including any provision “not inconsistent with the applicable provisions of [the Code].” 11 U.S.C. § 1123 (b)(6).

Section 8.3 of the Plan (the “release provision”) provides that personal-injury claims against various parties are deemed waived and released upon the effective date of the confirmation of the Plan. Section 8.4 (the “injunction provision”) provides that holders of the claims are enjoined from commencing or continuing any action seeking to enforce their claims against the Released Parties, including the Debtor-Affiliated Parties (the Debtor, the Reorganized Debtor, the Joint Ventures and Subsidiaries, and their respective Representatives), the Shareholder-Affiliated Parties (the Shareholders and their past and present Affiliates and their Representatives), the Settling Insurers, the Settling Physicians, and the Settling Health Care Providers. Amended Joint Plan, §§ 8.3, 8.4.

In its opinion issued on December 21, 1999, the Bankruptcy Court, explained its Findings of Fact as to the release and injunction provisions. The Bankruptcy Court concluded that the release and injunction provisions are consistent with the Bankruptcy Code.

Best-Interests Opinion,

244 B.R. at 740. However, the Bankruptcy Court interpreted the provisions to apply only to those persons who voted in favor of the Plan based on non-bankruptcy law, in particular the

Grupo

Mexicano

5

case. The Bankruptcy Court found that §§ 8.3 and 8.4 are permissible and that the Plan can be confirmed by applying §§ 8.3 and 8.4 only to those creditors who voted to accept the Plan. The Bankruptcy Court concluded that §§ 8.3 and 8.4 are appropriate provisions and not inconsistent with the Code when applied in this way.

Best-Interests Opinion,

244 B.R. at 745. The Bankruptcy Court noted that if the terms of the Plan were plain and construed to include “all persons” holding claims of the type described in the provisions, then the court would have no choice but to deny confirmation of the Plan. 244 B.R. at 745.

Prior to the issuance of the December 21, 1999 Opinion appeals were filed from the November 30, 1999 Confirmation Order on the release and injunction issues by certain personal injury claimants arguing that the release and injunction provisions releasing, in particular, the Shareholders, are improper. After the Bankruptcy Court’s issuance of its December 21, 1999 Opinion, the Proponents and the Shareholders filed appeals on the release and injunction portion of that Opinion claiming that the Bankruptcy Court’s interpretation of the release and injunction provisions as binding only on those who voted to accept the Plan.

There is no dispute that the Debtor is discharged and, essentially released, from the various claims against it. The Court will address below the state of the law on the release and injunction issues, as it applies to non-debtors, whether the Bankruptcy Court erred in its interpretation of the release and injunction provisions, and each party’s arguments as to whether the

*476

release and injunction provisions are proper.

B.

Jurisdiction!Authority

The release and injunction provisions of the Plan are construed a non-debtor discharge. The starting place for analysis of non-debtor discharge is whether the bankruptcy court has jurisdiction under 28 U.S.C. § 1334 (b).

Matter of Zale Corp. (Feld v. Zale Corp.),

62 F.3d 746, 751 (5th Cir.1995). Generally, bankruptcy jurisdiction is not conferred for the convenience of those not in bankruptcy.

In re Pacor, Inc. v. Higgins,

743 F.2d 984, 996 (3rd Cir.1984),

rev’d on other grounds, Things Remembered, Inc. v. Petrarca,

516 U.S. 124, 134-35 , 116 S.Ct. 494 , 133 L.Ed.2d 461 (1995). Unless the parties involved are the debtor and the creditors, or the bankruptcy court has “related to” jurisdiction over certain parties, the bankruptcy court has no jurisdiction to enter orders pertaining to parties who are not related to the bankruptcy action.

The Released Parties under §§ 8.3 and 8.4 of the Plan include, the Settling Physicians, the Settling Health Care Providers, the Debtor-Affiliated Parties, the Shareholder-Affiliated Parties, and the Settling Insurers. Amended Joint Plan, § 8.3. In this case, the Sixth Circuit has ruled that § 1334(b) “related to” jurisdiction exists over the actions pending against the Shareholders, Dow Chemical and Corning, Inc.

In re Dow Corning Corp. (Lindsey I),

86 F.3d 482, 494 (6th Cir.1996). The Sixth Circuit has also ruled that § 1334(b) jurisdiction covers the joint insurance policies between the Debtor and the Shareholders.

Id.

at 495. This Court also has § 1334(b) jurisdiction over the Settling Physicians and the Settling Health Care Providers because they have claims against the Debtor for indemnification and/or contribution and some physicians have direct tort claims against the Debtor arising from the Debtor’s misrepresentations in the marketing, sale, and provision of breast implants and other products for use in a Physician Claimant’s medical practice.

The next consideration is whether the bankruptcy court has the authority to enter the particular kind of relief sought— a non-debtor discharge.

American Hardwoods, Inc. v. Deutsche Credit Corp.,

885 F.2d 621, 624 (9th Cir.1989). While a bankruptcy court may have subject matter jurisdiction to hear a dispute between non-debtors, it may lack the authority to enter a particular type of relief.

In re Arrowmill Development Corp.,

211 B.R. 497, 503 (Bankr.D.N.J.1997).

C.

Dischargelll U.S.C. § 524(e)

In bankruptcy, a discharge is an involuntary release by operation of law of asserted and non-asserted claims by a creditor against an entity who has filed a petition under the bankruptcy code and who has abided by its rules.

In re Arrowmill,

211 B.R. at 504. Upon confirmation of a plan, a Chapter 11 debtor receives a discharge of its debts which arose before confirmation. 11 U.S.C. § 1141 (d)(1). 11 U.S.C. § 524 (e) limits the scope of the discharge. A “discharge of a debt of the debtor does not affect the liability of any other entity on, or the property of any other entity, for such debt.” 11 U.S.C. § 524 (e). The circuit courts are divided over the issue of non-debtor discharge— whether a party, other than a debtor, may receive a discharge of a debt in the context of the debtor’s bankruptcy action. Three lines of cases have been identified emerging from the various decisions.

In re Arrowmill,

211 B.R. at 504.

The first line of cases holds that the bankruptcy court has the authority to confirm reorganization plans which discharge non-debtors even if there are objecting creditors.

Monarch Life Ins. Co. v. Ropes & Gray (In re Monarch Capital Corp.),

173 B.R. 31 (D.Mass.1994),

aff'd,

65 F.3d 973, 980 (1st Cir.1995);

MacArthur Co. v. Johns-Manville Corp. (In re Johns-Manville Corp.),

837 F.2d 89, 93 (2d Cir.1988);

Securities and Exchange Comm’n v. Drex-

*477

el Burnham Lambert Group, Inc. (In re Drexel Burnham Lambert Group, Inc.),

960 F.2d 285, 293 (2nd Cir.1992);

Menard-Sanford v. Mabey (In re A.H. Robins Co., Inc.),

880 F.2d 694 (4th Cir.1989);

Republic Supply Co. v. Shoaf,

815 F.2d 1046, 1053 (5th Cir.1987); and

Matter of Munford, Inc. (Munford v. Munford, Inc.),

97 F.3d 449, 454 (11th Cir.1996).

The second line of cases holds that the bankruptcy court does not have the authority to discharge or release a non-debtor.

In re Zale Corp.,

62 F.3d at 756 (5th Cir.);

Hall v. Nat’l Gypsum Co.,

105 F.3d 225, 229 (5th Cir.1997);

Zerand-Bernal Group, Inc. v. Cox,

23 F.3d 159, 163 (7th Cir.1994);

In re American Hardwoods,

885 F.2d at 626 (9th Cir.);

Resorts Int’l, Inc. v. Lowenschuss (In re Lowenschuss),

67 F.3d 1394, 1402 (9th Cir.1995); and

In re Western Real Estate Fund, Inc. (Landsing Diversified Properties-II v. First Nat’l Bank and Trust Co. of Tulsa),

922 F.2d 592, 602 (10th Cir.1990),

modified sub nom., Abel v. West,

932 F.2d 898 (10th Cir.1991).

The third line of cases holds that bankruptcy courts may discharge or release non-debtors from their debts only if the affected creditors consent.

In re AOV Indus., Inc.,

792 F.2d 1140, 1145-46 (D.C.Cir.1986); and

Matter of Specialty Equip. Co., Inc.,

3 F.3d 1043, 1047 (7th Cir.1993) (disavowing its prior case,

Union Carbide Corp. v. Newboles,

686 F.2d 593 (7th Cir.1982), which prohibited non-debtor releases.).

The Third Circuit recently addressed the validity of non-debtor releases although it declined to establish a rule regarding the conditions under which non-debtor releases and permanent injunctions are appropriate or permissible.

In re Continental Airlines (Gillman v. Continental Airlines),

203 F.3d 203, 214 (3rd Cir.2000). The Third Circuit ruled that under any of the tests recognized by various courts, the non-debtor release provision before that court could not pass muster.

Id.

The Third Circuit recognized the following factors required of non-consensual releases: 1) fairness; 2) necessity to the reorganization; and 3) specific factual findings to support the conclusions.

Id.

Although the Third Circuit noted that several of the bankruptcy courts in its circuit have stated that non-debtor releases are permissible only if consensual, at least with respect to direct (as opposed to derivative) claims, the Third Circuit noted that none of these cases involved the mass litigation found in

Robins, Manville, or Drexel. Id.,

n. 11.

The Sixth Circuit has not ruled upon the issue of whether a bankruptcy court has the authority to grant a post-confirmation permanent injunction for the benefit of non-debtor third parties although it has discussed preliminary injunction issues relating to bankruptcies.

In re Richard Potasky Jeweler, Inc. (Greenblatt v. Richard Potasky Jeweler, Inc.),

222 B.R. 816 , 824 n. 14 (S.D.Ohio 1998).

The underlying reason for the differing views among the circuits stems from the interpretation of §§ 524(e) and 105(a). Some courts have ruled that § 524(e) has a preclusive effect over the bankruptcy court’s broad equitable powers found in § 105(a). Section 524(e) states that the discharge of the debtor’s debt does not affect the liability of any other entity for such debt. On its face, § 524(e) does not set forth a per se rule prohibiting permanent injunctions as to non-debtors.

In re Potasky Jeweler,

222 B.R. at 824 . However, some courts have ruled that § 524(e) prohibits permanent injunctions as to non-debtors, referencing § 524(e)’s predecessors, §§16 and 22(b) of the Bankruptcy Act of 1898, which included mandatory language prohibiting the release of certain parties.

In re American Hardwoods, Inc.,

885 F.2d at 625 . The current language found in § 524(e) contains no explicit reference to third party non-debtors.

In re Potasky Jeweler,

222 B.R. at 825 . The conclusion by some courts is that the interplay between § 105 and § 524(e) barring third party injunctions is

*478

unwarranted, based on the plain language of both statutes.

Id.

When interpreting the provisions of the Code, a court should be guided by the plain meaning of the statute.

See Pioneer Inv. Serv. Co. v. Brunswick Assoc. Ltd. Partnership,

507 U.S. 380, 387-89 , 113 S.Ct. 1489 , 123 L.Ed.2d 74 (1993). When the plain meaning of a statute is clear, the court’s inquiry is at an end.

United States v. Ron Pair Enter., Inc.,

489 U.S. 235, 240-42 , 109 S.Ct. 1026 , 103 L.Ed.2d 290 (1989). A court should interpret the Code in a manner that avoids a conflict between its various sections.

Id.

at 245-47 , 109 S.Ct. 1026 . Based on the current language of § 524(e), since it does not expressly prohibit third-party injunctions and given that Congress decided to exclude the mandatory language found in the predecessor of § 524(e) which expressly prohibited the release of certain parties, § 524(e) is not a source of authority prohibiting third-party injunctions.

D.

Equitable Power 111 U.S.C. § 105 (a)

The bankruptcy court’s equitable powers are derived from 11 U.S.C. § 105 (a) which provides, “[t]he court may issue any order, process, or judgment that is necessary or appropriate to carry out the provisions of this title.” The plain meaning of § 105(a) authorizes the bankruptcy court to enter only orders that are necessary to carry out the other provisions of the Code.

Wasserman v. Immormino (In re Granger Garage, Inc.),

921 F.2d 74, 77 (6th Cir.1990). “Whatever equitable powers remain in the bankruptcy courts must and can only be exercised within the confines of the Bankruptcy Code.”

Norwest Bank Worthington v. Ahlers,

485 U.S. 197, 206 , 108 S.Ct. 963 , 99 L.Ed.2d 169 (1988). Section 105, standing alone, cannot serve as a source of authority for granting a permanent injunction.

In re Potasky,

222 B.R. at 825 . “In the context of chapter 11 proceedings, the key to granting a permanent injunction ‘has been whether the injunction requested was necessary or appropriate to carry out the discharge provisions of [§ 1141].’ ”

Id., citing

2 Collier on Bankruptcy ¶ 105.03[2] [b] [ii], at 105-43 (15th ed. rev.1996) (internal quotations omitted).

Section 1141 only allows the discharge of property belonging to the debt- or’s estate in a plan of reorganization, “after confirmation of a plan, the property dealt with by the plan is free and clear of all claims and interests of creditors.... ” 11 U.S.C. § 1141 (a). Section 1141 is a source of authority for a permanent injunction pursuant to § 105(a), if the injunction has a direct and immediate connection to the property contained in or the administration of the debtor’s plan of reorganization.

In re Potasky,

222 B.R. at 826 ;

Zale Corp.,

62 F.3d at 760-61 . “To the extent that property is within the bankruptcy court’s jurisdiction, section 105 permanent injunctions would seem to [be] ‘necessary and appropriate’ to ensure the effectiveness of the discharge of section 1141.”

In re Potasky,

222 B.R. at 826 ,

citing

2 Collier on Bankruptcy § 105.03[2][b][ii][A] at 105-45 n. 84 (15th ed. rev.1996).

Section 1123(b)(3) is another source of authority for a bankruptcy court to exercise the equitable powers found in § 105(a).

In re Potasky,

222 B.R. at 826, n. 16 . Section 1123(b)(3) states that a plan of reorganization may provide for “the settlement or adjustment of any claim or interest belonging to the debtor or to the estate.” 11 U.S.C. § 1123 (b)(3). An injunction must promote what is “necessary and appropriate” to “carry out the provisions of section 1123(b)(3).

In re Potasky,

222 B.R. at 826, n. 16 ,

citing

2 Collier on Bankruptcy ¶ 105.03[2][b][ii][C], at 105-46 n. 90 (15th ed. rev.1996).

A third source of authority for a bankruptcy court to exercise equitable power is found in 11 U.S.C. § 1123 (b)(6) which allows a plan to “include any other appropriate provision not inconsistent with the applicable provisions of this title.”

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Section 105(a), along with § 1123(b)(6) provide the bankruptcy courts with broad authority to approve plans of reorganization that include provisions affecting creditors’ rights to recover against non-debtors, if the provisions are necessary to carry out the plan.

Energy Resources,

495 U.S. at 549, 110 S.Ct. 2139 . The Supreme Court also noted that the bankruptcy court had authority under § 1129(a)(11) to assure itself that the reorganization would succeed.

Id.

E.

Unusual Circumstances Test

The Third Circuit noted in

In re Continental Airlines,

that there are cases which involve mass litigation as in

Robins, Man-mile, or Drexel

in which injunctions have been ordered by the court in the bankruptcy context. These cases are characterized as “unusual circumstances cases.”

In re Potasky,

222 B.R. at 826 . The district court in

In re Potasky

noted:

Those courts holding that under ‘unusual circumstances’ a bankruptcy court may grant a permanent injunction to relieve third party non-debtors from liability are not at odds with this principle. In the cases adopting the unusual circumstances test, the courts have noted that the following circumstances justified the granting of a permanent injunction:

(1) That the suit against the non-debtor was, in essence, a suit against the debtor or will deplete assets of the estate;

(2) The non-debtor contributed substantial assets to-the debtor’s estate as part of the debtor’s plan of reorganization; and

(3) The injunction is essential to reorganization. Without the injunction the entire reorganization plan would unravel.

Id.

Other nonessential factors which show that an injunction against non-debtors provided for by a plan is fair, include: 1) that a substantial majority of the creditors agreed to the injunction, specifically, the impacted class of creditors; 2) the plan for reorganization provided for full payment of the creditor’s claims; and 3) the injunction affected only a small percentage of the claimants.

Id.,

n. 18. The Third Circuit noted the following factors, “[t]he hallmarks of permissible non-consensual releases-fairness, necessity to the reorganization, and specific findings to support these conclusions

...” In re Continental,

203 F.3d at 214 .

As noted by the district court in

In re Potasky,

In those cases where the courts found that unusual circumstances were present, the injunctions served either to marshal assets of the debtor’s estate or to channel the claims of creditors to assets of that estate. The existence of these assets, however, depended upon the action of a third party non-debtor. By permanently enjoining suits against these third party non-debtors, the courts created a legal environment that enabled the non-debtor to take the necessary steps which would lead to the creation of assets for the debtor’s estate.

222 B.R. at 826-27 . Section 524(e) did not preclude those courts from granting an injunction, nor did the granting of the injunction fall outside of the discharge provisions of § 1141 because the courts were dealing with the property of the debtor’s estate.

Id.

F.

Bankruptcy Court’s December 21, 1999 Opinion

The Bankruptcy Court expressly found that “neither § 524(e) nor § 524(g) precludes a court from granting non-debtor discharges.”

Best-Interests Opinion,

244 B.R. at 740. The Bankruptcy Court concluded that “§§ 8.3 and 8.4 are not inconsistent with the Code even if they apply to creditors who did not accept the Plan.”

Id.

However, the Bankruptcy Court found that based on other “non-bankruptcy law,” the release and injunction provisions are inappropriate as to non-accepting creditors.

Id.

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The Court agrees with the Bankruptcy-Court that the release and injunction provisions are not inconsistent with the Code, even if they apply to creditors who did not accept the Plan. Based on the discussion above, § 524(e) does not limit the Bankruptcy Court’s equitable powers under § 105(a) to issue permanent injunctions to non-accepting creditors. 11 U.S.C. §§ 1141 (a), 1123(b)(3), 1123(b)(6) and 1129(a)(11) are sources of authority from which the Bankruptcy Court can exercise its equitable powers under § 105(a) to issue permanent injunctions. Based on the above discussion, there is sufficient authority in the Code to justify the court’s issuance of an injunction. The Bankruptcy Court went beyond the Bankruptcy Code to find that it had no authority to issue an injunction against those who did not accept the Plan. The Bankruptcy Court cites

Grupo Mexicano de Desarrollo v. Alliance Bond Fund, Inc.,

527 U.S. 308 , 119 S.Ct. 1961 , 144 L.Ed.2d 319 (1999), to support its conclusion that based on non-bankruptcy law, the release provision could not apply to those creditors who did not vote in favor of the Plan. A preliminary injunction was issued by the district court in

Grupo Mexicano

enjoining the dissipation or transfer of the defendant’s assets pending adjudication of the plaintiffs claim for the amount on the notes at issue. The Supreme Court found that the injunction was improper based on the “well-established general rule that a judgment establishing the debt was necessary before a court of equity would interfere with the debtor’s use of his property.”

Id.

at 321 , 119 S.Ct. 1961 . The Supreme Court in its decision found that a district court did not have the authority to issue a preliminary injunction which affected a debtor’s property without a judgment establishing the debt, outside of a bankruptcy action.

Id.

The Supreme Court found that equity “is confined within the broad boundaries of traditional equitable relief,” but that equity would not permit “a type of relief that has never been available before.”

Id.

at 322 , 119 S.Ct. 1961 . Because no judgment had been entered against the defendant to establish the debt, the district court’s issuance of the preliminary injunction enjoining defendant from transferring certain assets was beyond its equitable authority.

The Supreme Court noted that in addition to general equitable powers under the Judiciary Act of 1789, a district court had injunctive authority under certain statutes — the statute authorizing issuance of tax injunctions in the

Grupo Mexicano

case.

Id.

at 326 , 119 S.Ct. 1961 . The Bankruptcy Court in this case, as noted above, had various statutory authorities to issue a permanent injunction under the Bankruptcy Code. This Court is cognizant that the Supreme Court has stated that even if consistent with the Code, a bankruptcy court order might be inappropriate if it conflicted with another law that should have been taken into consideration in the exercise of the court’s discretion.

Energy Resources,

495 U.S. at 550 , 110 S.Ct. 2139 . In

Energy Resources ,

the Supreme Court discussed a possible conflicting IRS statute, finding that the statute “plainly does not require us to hold that the orders at issue here, otherwise wholly consistent with a bankruptcy court’s authority under the Bankruptcy Code, were nonetheless improvident.”

Id.

at 551, 110 S.Ct. 2139 . The Supreme Court found that the bankruptcy court did not transgress any limitation on its broad power under the Code.

Id.

Here, other than the United States, no party has identified a possible conflicting statute outside the Bankruptcy Code which may limit the Bankruptcy Court’s powers under the Code.

The Bankruptcy Court’s conclusion that it has no authority to issue a non-consensual permanent injunction of non-debtor parties is reversed. There is sufficient statutory authority under the Bankruptcy Code to issue a permanent injunction in favor of non-debtor parties and the

Grupo Americano

case does not prohibit the Bankruptcy Court from issuing such an injunction. As noted above, in addition to § 105, courts have recognized §§ 1141,

*481

1123(b)(3), 1123(b)(6) and 1129(a)(11) as statutory authorities for the Bankruptcy Court to issue injunctions in favor of non-debtor parties based on non-consensual releases.

The Bankruptcy Court’s findings of fact support a finding in favor of an injunction and are not clearly erroneous The Bankruptcy Court found that: 1) the Settling Physicians, the Settling Insurers, and the Shareholders will make important contributions to the reorganization; 2) the release and injunction provisions are essential to the reorganization pursuant to the Plan; 3) a large majority of the creditors impacted by the release and injunction provisions approved the Plan; 4) there is a close connection between the claims of the non-debtors and the claims against the Debtor; and 5) the Plan provides for the payment of all of the claims affected by the release and injunction provisions of the Plan. These findings support injunctive relief based on statutory authority under the Code and the “unusual circumstance” case criteria. The evidence presented at the confirmation hearing supports the Bankruptcy Court’s findings.

There is no dispute that this case “is one of the world’s largest mass tort litigations, and the threatened consequences of the thousands of product liability claims arising from its manufacture and sale of silicone breast implants and silicone gel, [is the reason] Dow Corning filed a petition for reorganization

...” In re Dow Corning,

86 F.3d at 485 . “The potential for Dow Coming’s being held liable to the nondebtors in claims for contribution and indemnification, or vice versa, suffices to establish a conceivable impact on the estate in bankruptcy. Claims for indemnification and contribution, whether asserted against or by Dow Corning, obviously would affect the size of the estate and the length of time the bankruptcy proceedings will be pending, as well as Dow Coming’s ability to resolve its liabilities and proceed with reorganization.”

Id.

at 494 . Pursuant to the Sixth Circuit’s mandate, all the claims against the Shareholders were transferred to this District. To date, there are approximately 14,795 cases filed with this Court against the Shareholders. The cost to defend these number of cases by the Shareholders would have a substantial affect on the insurance policies shared with the Debtor.

Id.

at 494-95 . Any indemnification and contribution sought by the Shareholders against the Debtor relating to the manufacture of the breast implants would also substantially affect the Debtor’s estate. The bankruptcy action before this Court is an unusual case. The Bankruptcy Court erred in its conclusion of law that the bankruptcy court has no authority, statutory or otherwise, to issue a non-consensual permanent injunction in favor of non-debtor parties.

G.

The Parties’Arguments

1.

Proponents’Arguments

The Proponents (the Debtor and the TCC) argue that the December 21, 1999 Opinion is contrary to the plain meaning of the Joint Plan. The Joint Plan states that the release and injunction apply to “all Persons who have held, hold, or may hold Products Liability Claims, whether known or unknown.” Joint Plan, § 8.3. There is no ambiguity in the Plan language according to the Proponents, therefore, the Bankruptcy Court’s interpretation that the release only applied to “some” persons was wrong. All the parties, understood that the release and injunction provisions were non-consensual. Only the Bankruptcy Court read otherwise. The Amended Joint Disclosure Statement, approved by the Bankruptcy Court, and sent to all Claimants with the Joint Plan, made clear that under § 8.3 of the Joint Plan, “the Shareholders [and other Released Parties] ... will be released from any and all Products Liability Claims.... This means that anyone with a Claim relating to a Breast Implant or any of the other Claims being released will not be able to sue any of the Released Parties, including Dow Corning, Dow Chemical, Corning and the Settling

*482

Insurers.” D.Ct.R. 19, Tab 2 at 89. The Personal Injury Claimants also received a Special Note stating: “The Plan also provides that no further suits for claims based on the manufacture of silicone products may be brought against Dow Corning or its shareholders — Dow Chemical and Corning Incorporated.”

Id.,

Tab 3 at 2.

The Proponents agree with the Bankruptcy Court’s ruling that the release and injunction provisions in §§ 8.3 and 8.4 of the Joint Plan “are not inconsistent with the Code.” The Proponents point out that the Bankruptcy Court, in addition to its equitable powers in § 105(a), failed to look to § 1123(b)(6) as a source of power for the approval of the Joint Plan’s release and injunction provisions. The Proponents claim that the Bankruptcy Court did not follow the Supreme Court’s holding in

Energy Resources .

The Supreme Court held that the statutory directives found in §§ 105(a) and 1123(b)(6) give the Bankruptcy Courts, as courts of equity, broad authority to modify creditor-debtor relationships. 495 U.S. at 549 , 110 S.Ct. 2139 .

The Proponents further argue that the Bankruptcy Court failed to address the Sixth Circuit’s views concerning the importance of resolving the Claims against the Shareholders together with the Claims against the Debtor. The Sixth Circuit found that the claims for indemnification and contribution against or by Dow Corning and the overwhelming number of cases asserted against Dow Corning and the Shareholders would have an affect on the size of the bankruptcy estate, the length of time the bankruptcy proceedings will be pending, and the assets in the joint insurance held by Dow Corning and the Shareholders.

In re Dow Corning,

86 F.3d at 495 .

The Proponents contend that the Bankruptcy Court’s finding that the release and injunction provisions are contrary to non-bankruptcy law is in error. In any event, the Proponents argue that the non-bankruptcy law cited by the Bankruptcy Court supports the Bankruptcy Court’s equitable authority to order the full release of all Claims. In

Grupo Mexicano,

the Supreme Court stated that the limitations on the power to award injunctive relief does not apply to a court if a specific statute allows such power. The Bankruptcy Court’s power emanates not from the general equitable jurisdiction but from two sections of the Bankruptcy Code, § 1123(b)(6) and § 105(a). The Proponents argue that the release and injunction provision serve the public’s interest because the Joint Plan will permit the prompt and efficient resolution of tens of thousands of outstanding Tort Claims, provide for the adjudication and payment of all Claims that are not settled, and allow the Debtor to continue in business.

For the reasons set forth above, the Court finds that the release and injunction provisions are proper in this case.

2.

Nevada Claimants

The Nevada Claimants timely filed an appeal from the Bankruptcy Court’s November 30, 1999 Confirmation Order. The Nevada Claimants filed briefs taking two positions on the release and injunction issue: 1) that any injunction enjoining tort claimants who enter the Plan’s Settlement Facility to release non-debtor third-parties, is not fair and is not the law; and 2) even with the proviso that non-accepting tort claimants can choose to enter the Litigation Facility the third party release is not justified. The Nevada claimants agree with the Bankruptcy Court’s December 21, 1999 Best Interest of Creditors Opinion that the release required as a condition to receiving settlement funds does not apply to claimants who did not vote for the plan; the release provision of the Plan is not part of the Bankruptcy Court’s authority in equity; Section 105(a) is not authority for the Bankruptcy Court’s injunctive powers; and the injunction provision violates 11 U.S.C. § 524 (e).

As discussed above, the Bankruptcy Court does have authority under § 105(a)

*483

and various sections of the Bankruptcy Code to issue an injunction in favor of third-party non-debtors, especially in an unusual circumstances case such as exists in this bankruptcy. The Plan provides for claims against the Debtor and the non-debtors to be channeled to the Litigation Facility if the claimants choose not to enter into the Settlement Facility. The release and injunction provisions do not apply to claimants who choose to bring their claims against the Debtor and the non-debtors via the Litigation Facility. Contributions of assets, including insurance proceeds, meet the index of good faith and in this instance justify the release and injunction as to the Shareholders and the Settling Insurers.

Manville,

837 F.2d at 91 .

3.Class 5 Texas Children/Lacy Claimants

The Lacy Appellants in their response state that if the December 21st opinion of the Bankruptcy Court is stricken, the Bankruptcy Court erred in permanently enjoining the children claimants from prosecuting future claims against Dow Chemical, a non-party. The Lacy Appellants agree with the Bankruptcy Court’s December 21 Opinion that the release does not apply to claimants who did not vote for the plan.

Under the Plan, the Shareholders have agreed to fund the Plan in the amount of $2.35 billion (NPV) of their equity. 7/2/99 Tr., pp. 36, 44. The Shareholders agreed to the Joint Plan even though their equity in Dow Corning would be depleted by as much as $2.35 billion in exchange for the Shareholders’ rights to make claims against the insurance policies shared with Dow Corning. 6/28/99 Tr., pp. 158-59; 7/14/99 Tr., pp. 29-30, 94; 7/2/99 Tr., p. 40; 7/14/99 Tr., p. 34.

The record supports the Bankruptcy Court’s findings that the Shareholders and the Settling Insurers “will all make important contributions to the reorganization as part of a confirmed Plan” and that the release and injunction provisions “are essential to the reorganization pursuant to this Plan.” 11/30/99 Findings of Fact, ¶¶ 21-22. Cases have held that contributions of assets, including insurance proceeds, meet the index of good faith and, in this instance, justify the release and injunction as to the Shareholders and the Settling Insurers, even though claimants did not vote in favor of the Joint Plan.

Manville,

837 F.2d at 91 ;

In re Drexel Burnham,

960 F.2d at 293 .

4.

Marti Jacobs

Jacobs claims that the third-party releases should only be required of claimants in the Settlement Facility after the Plan is modified by the Plan Proponents. Jacobs agrees with the Bankruptcy Court that, at a minimum, those who voted against the Plan cannot be deemed to have released Dow Chemical. Jacobs argues that the release should be based on whether a claimant opts out of the Settlement Facility.

Modification of a Plan may be made by the proponent of a plan or the reorganized debtor at any time before confirmation. 11 U.S.C. § 1127 (a) and (b). In this case, the Joint Plan has been confirmed by the Bankruptcy Court. Unless the Bankruptcy Court’s Confirmation Order is reversed by this court or a court above, the Joint Plan stands as confirmed. The third-party release and injunction provisions cannot be changed as confirmed. For the reasons set forth above, there is sufficient authority under the Code and case law to support releases and injunctions in favor of the Shareholders in this bankruptcy action.

5.

Australian Claimants

The Australian Claimants argue that the Debtor’s affiliates have made no contributions to the funds or other consideration to the settlement. The Australian Claimants agree with the Bankruptcy Court that §§ 8.3 and 8.4 bind only those claimants who voted in favor of confirmation of the

*484

Joint Plan. The Australian Claimants argue that the Plan does not meet the factors set forth in the

Robins

case.

The record below indicates that the Shareholders and the Debtor’s affiliates have made significant contributions to fund the Joint Plan. The evidence at the confirmation hearing showed that the funding provided under the Joint Plan was “on a consolidated basis of Dow Corning Corporation and all of its subsidiary companies.” 7/14/99 Tr., p. 102. Sections 8.3 and 8.4 bind all claimants whether they voted in favor of or against the confirmation of the Join Plan, as discussed above.

In

In re Robins,

a release and permanent injunction in favor of third-party non-debtors were approved by the bankruptcy court based on the following factors: 1) that the chapter 11 petition was triggered by a mass tort; 2) claimants alleged that certain third party non-debtors were liable; 3) the release was essential to the reorganization; 4) the plan had overwhelming support from the constituency affected by the release; 5) a capped fund was established to pay tort claims; and, 6) the funds set aside for the tort claimants were to pay the claims in full.

In re Robins,

880 F.2d at 698-702 .

The objecting parties have failed to show that the Bankruptcy Court clearly erred in its findings of fact as to the release and injunction provisions. The Plan in this case meets all the factors set forth in

Robins.

There is no dispute that the Debtor filed the chapter 11 petition based on the thousands of breast implant claims against it.

In re Dow Corning,

86 F.3d at 485-86 . Claimants in this case allege that the Shareholders are also liable to them. The Bankruptcy Court found that there is a close connection between the claims against the third-party non-debtors and the claims against the Debtor. 11/30/99, Findings of Fact, ¶ 24. The Bankruptcy Court also found that the release was essential to the reorganization and that the third-parties made important contributions to the reorganization of the Plan. 11/30/99 Findings of Fact, ¶¶ 21-22. The Bankruptcy Court further found that a large majority of the creditors impacted by the release and injunction provisions approved the Plan. 11/30/99 Findings of Fact, ¶ 23. The Bankruptcy Court determined that the Plan provides for the payment of all of the claims affected by the release and injunction provisions of the Plan. 11/30/99 Findings of Fact, ¶ 25. In its Best Interest of Creditors Opinion, the Bankruptcy Court concluded that based on the evidence presented at the confirmation hearing, the funding of the Litigation Facility was adequate.

Best-Interests Opinion,

244 B.R. at 730, 731. The testimony of Tommy Jacks, a plaintiffs personal injury lawyer and a member of the Official Committee of Tort Claimants, was that the $400,000,000.00 net present value funding of the Litigation Facility was adequate to satisfy the non-settling claims in full. 244 B.R. at 730. Mr. Frederick C. Dunbar further testified that, based on a scientific approach in the calculation of whether the Litigation Facility was adequately funded, 7,513 people would choose the Litigation Facility. 244 B.R. at 731. The total nominal legal costs to resolve the breast implant and other claims and the administrative costs resolving these claims would be about $157.6 million, with a net present value of about $83 million.

Id.

Mr. Dunbar concluded that the $400 million net present value funding of the Litigation Facility is almost five times that necessary to satisfy all the claims channeled to the Litigation Facility.

Id.

The Bankruptcy Court found that even the witness called by the objecting claimants, Mr. John C. Thornton, corroborated Mr. Dunbar’s conclusions.

Id.

6.

Helene D. Schroeder

Ms. Schroeder, a claimant with a silicon gel chin implant, objects to the release as it applies to any claims against the attorneys representing the Tort Claimants’ Committee. Schroeder agrees with the Bankruptcy Court’s December 21, 1999

*485

Opinion limiting the release to those who voted in favor of the Plan. Schroeder claims that a Bankruptcy Court has no jurisdiction to alter the rights of creditors to collect debts from third parties and that the bankruptcy court only has jurisdiction over the Debtor and its property.

The Bankruptcy Court’s December 21, 1999 Opinion did not address the issue of whether the release and injunction provisions found in §§ 8.3 and 8.4 applied to claims against the attorneys representing the Tort Claimants’ Committee. The release provision applicable to the various committees is found in § 8.10 of the Joint Plan which states:

Upon the Effective Date, the Tort Committee, the Commercial Committee, the Physicians Committee, and each of their respective members, representatives and professionals, and all other professionals retained in the Case pursuant to § 327 of the Bankruptcy Code shall be deemed released from all claims and causes of action relating to the bankruptcy estate of Dow Corning or that have been or could be asserted by any party in interest in the Case of any Person acting on behalf of such party in interest.

Amended Joint Plan, § 8.10, p. 30.

The bankruptcy court has the power to approve the releases and issue an injunction with respect to the trustee, temporary receivers and creditors’ committees for matters in connection with the chapter 11 case.

In re Drexel Burnham, Lambert Group, Inc.,

138 B.R. 723, 753 (Bankr.S.D.N.Y.1992). Section 1103(e) of the Code grants to official creditors committees broad authority in formulating a plan for reorganization and performing “such other services as are in the interest of those represented.” 11 U.S.C. § 1103 (c). There is an implication that the Code grants committee representatives fiduciary duty to the committee’s constituents.

In re Mesta Mach. Co.,

67 B.R. 151, 156 (Bankr.W.D.Pa.1986). The fiduciary duty “extends to the class as a whole, not to its individual members.”

In re Drexel Burnham,

138 B.R. at 722 . At the same time, § 1103(c) gives rise to “an implicit grant of limited immunity.”

Id.

at 722

(quoting In re Tucker Freight Lines, Inc.,

62 B.R. 213, 216 (Bankr.W.D.Mich.1986)). The qualified immunity “corresponds to, and is intended to further, the Committee’s statutory duties and powers.”

Pan Am Corp. v. Delta Air Lines, Inc.,

175 B.R. 438, 514 (S.D.N.Y.1994). Such immunity applies to conduct within the scope of the authority conferred to the committee either by statute or the bankruptcy court.

Id.

To overcome this immunity, the party alleging breach of fiduciary duty must prove that the committee engaged in willful misconduct or “ultra vires” activity.

Id.

A claim that the committee members have acted outside the scope of their duties must first be brought to the Bankruptcy Court. Schroeder claims that the Tort Claimants Committee engaged in willful misconduct because they did not represent the interest of all personal injury claimants. Schroeder argues that the Committee only represented the interest of the breast implant claimants and not the non-breast implant claimants. There is nothing on the record which indicates that the Bankruptcy Court has had an opportunity to review such a claim. In any event, Schroeder has not presented sufficient evidence that the Tort Claimants Committee engaged in willful misconduct or conducted ultra vires activity.

Inasmuch as Schroeder is claiming that the Bankruptcy Court does not have the authority to approve the release provision pertaining to the Tort Claimants Committee representatives, this Court has found that the Bankruptcy Court does have such an authority. Sections 1102 and 1103 authorize the United States trustee to appoint various committees. Any expenses and salaries to committee members are borne by the Debtor. Any claims against the Tort Claimants Committee may give rise to indemnification or contri

*486

bution claims by the Committee against the Debtor’s estate. The Debtor’s assets would then be implicated. Based on the analysis previously made, the Bankruptcy Court has the authority to approve the Joint Plan which contains a release and injunction in favor of the Tort Claimants’ Committee under 11 U.S.C. § 105 (a) and §§ 1141(a), 1123(b)(3), 1123(b)(6) and 1129.

7.

United States

a.

Claims against the Debtor

The Government agrees with the Bankruptcy Court’s December 21 Opinion rejecting the Joint Plan’s release and injunc-tive provisions as to the United States’ Claims under the Medicare Secondary Payer Statute, 42 U.S.C. § 1395y and the Medical Care Recovery Act, 42 U.S.C. § 2651 , against non-debtor third parties. The United States argues that 11 U.S.C. §§ 105 and 1123(b)(6) confer no substantive rights at all. The Bankruptcy Court lacks the power to release or enjoin creditor claims against non-debtors and that only creditors consenting to the release and injunction could be bound by the provisions.

The United States claims that

Energy Resources

supports the United States’ argument more than the Proponents’ arguments. This Court’s analysis of the

Energy Resources

case establishes that the Supreme Court recognizes the bankruptcy court’s broad authority to modify creditor-debtor relationships under §§ 105(a), 1123(b)(5) and 1129.

Energy Resources,

495 U.S. at 549 , 110 S.Ct. 2139 . This Court’s reading of

Energy Resources

differs from the United States’ reading of the case. In

Energy Resources ,

the Supreme Court concluded that the statute cited by the IRS, by its terms, does not protect against the bankruptcy court’s authority under the Code to designate where tax payments may come from.

The United States argues that the Supreme Court’s decision in

Callaway v. Benton,

336 U.S. 132 , 69 S.Ct. 435 , 93 L.Ed. 553 (1949) is on point and favors the affirmance of the December 21 Opinion. In the

Callaway

case, the Supreme Court disapproved the permanent injunction of a suit by a shareholder stating that the bankruptcy statute does not give the bankruptcy court the right to require acceptance by a lessor not in reorganization of an offer for the purchase of its property. 336 U.S. at 136-41 , 69 S.Ct. 435 . The Court held that third-party claims are beyond the control of the bankruptcy court and cannot be enjoined, even if doing so is “essential” to the Debtor’s reorganization. The United States’ position that the

Calla-way

case is on point is to no avail given that the basis of the Supreme Court’s holding that the bankruptcy court lacked the power to permanently enjoin actions against non-debtors has since been changed. At the time, the

Callaway

decision was based on the bankruptcy court’s “exclusive and nondelegable control over the administration of an estate in its possession” and “exclusive jurisdiction of the debtor and its property wherever located.” 336 U.S. at 142 , 69 S.Ct. 435 . The Supreme Court noted that, “[t]here can be no question, however, that Congress did not give the bankruptcy court exclusive jurisdiction over all controversies that in some way affect the debtor’s estate.”

Id.

Since

Callaway ,

28 U.S.C. § 1334 (b) has been expanded to give the bankruptcy courts jurisdiction over cases “arising in or related to cases under title 11.” The Sixth Circuit has held that the Congressional intent was “to grant comprehensive jurisdiction to the bankruptcy courts so that they might deal efficiently and expeditiously with all matters connected with the bankruptcy estate.”

In re Dow Corning,

86 F.3d at 489 ,

citing Celotex Corp. v. Edwards,

514 U.S. 300, 308 , 115 S.Ct. 1493 , 131 L.Ed.2d 403 (1995). Proceedings “related to” a bankruptcy proceeding include “suits between third parties which have an effect on the bankruptcy estate.” 514 U.S. at 308, n. 5 , 115 S.Ct. 1493 . “[A] finding of definite liability of [an] estate as a condition precedent to holding an action

*487

related to a bankruptcy proceeding” is not required. 86 F.3d at 491 . The United States further argues that the Fourth Circuit’s A.

H. Robins

decision is wrong and is distinguishable in any event. As to the

Robins

case, the Court finds that it is applicable to this case and the factors have been met, as noted above.

Based on the above discussion, the Bankruptcy Court has jurisdiction over the claims against the third-parties in this case and to issue an injunction in this matter,

b.

Settling Insurers

With respect to the Settling Insurers, the United States argues that vacating the Bankruptcy Court’s December 21, 1999 Opinion would destroy the United States’ statutory rights against the Settling Insurers which were explicitly preserved by the Bankruptcy Court’s orders authorizing the settlements between the Debtor and the Settling Insurers. The Approval Orders entered by the Bankruptcy Court contained the following language:

Notwithstanding any provision of the Settlement Agreement or any other provisions of this Order, nothing in the Settlement Agreement or this Order shall limit any rights of the United States or its agencies against the Insurers, Dow Corning, or the Settlement Funds. Moreover, notwithstanding any provision of the Settlement Agreement or any other provision of this Order, nothing in the Settlement Agreement shall release the Insurers or Dow Corning from any obligations they may have under federal statutes and regulations, including but not limited to obligations that have arisen or may arise under the Medicare Secondary Payer Statute, 42 U.S.C. § 1395y, and its implementing regulations, 42 CFR 411. The United States and its agencies do not consent to the jurisdiction of this Court beyond any waiver of sovereign immunity.

August 11, 1995 Approval Order, ¶ 13A; March 25,1996 Approval Order, ¶ 11. The United States claims that the December 21, 1999 Opinion, as it stands, preserves its rights against the Settling Insurers as stated in the Approval Orders. Vacating the December 21, 1999 Opinion would destroy the language of the Approval Orders preserving the United States’ rights against the Settling Insurers.

The Approval Orders do state that “[njotwithstanding any provision of the Settlement Agreement or any other provisions of this Order, nothing

in the Settlement Agreement or this Order

shall limit any rights of the United States or its agencies against the Insurers.” August 11, 1995 Approval Order, ¶ 13A; March 25, 1996 Approval Order, ¶ 11 (emphasis added). However, the Approval Orders do not protect the United States’ rights from subsequent orders to be entered by the Bankruptcy Court, including the Bankruptcy Court’s Confirmation Order or any subsequent orders relating to the merits of the United States’ claims. It is noted that the Bankruptcy Court’s December 21, 1999 Opinion does not specifically address the issue raised by the United States on the release and injunction issue as it relates to the Settling Insurers. Because the contributions of assets, including insurance proceeds, meet the index of good faith, the release and injunction as to the Settling Insurers is appropriate.

Manville,

837 F.2d at 91 .

The Sixth Circuit noted the importance of the joint insurance held by the Debtor and its Shareholders:

Dow Corning, Dow Chemical and Corning Incorporated are co-insured under various insurance policies, which together provide over $1 billion in coverage. Dow Coming’s interest in the policies is one of the largest assets of its bankruptcy estate. In addition, Dow Corning recently entered into ten new insurance settlements under which the estate will receive, if approved by the bankruptcy court, approximately $350 to $450 million in cash. Most of these settlement involve policies under which

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Dew Chemical or Corning Incorporated is a co-insured.

Dow Corning, Dow Chemical, and Corning Incorporated claim that the district court’s order, by allowing thousands of claims to proceed separately against Dow Chemical and Corning Incorporated, will diminish the value of this major bankruptcy asset to the extent that settlements, judgment and defense costs incurred by the shareholders will exhaust policy limits otherwise available to Dow Corning, its creditors, and individuals asserting claims in the bankruptcy proceedings....

In re Dow Corning Corp.,

86 F.3d at 494 . Any release and injunction must apply not only to the Shareholders but to the Settling Insurers as well. Based on the analysis previously made, the release and injunction provisions apply to the United States’ claims against the Settling Insurers, as well as the Shareholders.

8.

Pennsylvania Class 5 Claimants

The Pennsylvania Class 5 Claimants argue that based on cases from the Ninth and Tenth Circuit, the non-debtor releases are not sufficient as a matter of law. The cases that have upheld the non-debtor releases show that there was consideration to the debtor. The Pennsylvania Class 5 Claimants object to the releases as they pertain to Settling Physicians and Health Care Providers. The Pennsylvania Class 5 Claimants argue that the release and injunction provisions do not meet the five prongs set forth in the

Robins

case. First, the Pennsylvania Class 5 Claimants’ tort claims will not be paid in full because they are required to release all doctors. Second, there was no overwhelming approval of the Plan because there was no overwhelming support of the Plan by the Pennsylvania Class 5 Claimants. Third, there is no substantial contribution as to the surgeons, doctors and healthcare providers under the Plan. Fourth, the release, as to the physicians and healthcare providers, is not necessary to the Debtor’s reorganization. Finally, there is no close connection between the claimants’ claims versus the healthcare providers and the Debtor. There is no identity interest as to the healthcare providers.

In response to the Pennsylvania Class 5 Claimants, the Class 12 Physicians and Class 13 Health Care Providers (“Settling Physicians and Health Care Providers”) seek to intervene in the appeals because they claim that no one represents their interests and they are not part of any Committee. They argue that while the Plan seems to “deem” Released Claims as to the Settling Physicians and Settling Health Care Providers as occurring on the Effective Date of the Plan, these claims are in reality not released until a Claimant affirmatively elects to become a “Settling Personal Injury Claimant,” and the physician and/or health care provider affirmatively elects to become a “Settling Physician” or “Settling Health Care Provider.” This two-tier mechanism provides that the Settling Physicians and Settling Health Care Providers obtain releases and injunctions that are expressly, inherently consensual, unlike the releases afforded to the Debtor-Affiliated and Shareholder-Affiliated Parties. The Settling Physicians and Health Care Providers argue that the December 21, 1999 Opinion, if it applies, only applies to those non-consensual releases/injunctions ' affecting the Debtor-Affiliated and Shareholder-Affiliated Parties, but not to Settling Physicians or Settling Health Care Providers. The Plan provides no election process to a Claimant prior to releasing claims against the Debt- or-Affiliated and Shareholder Affiliated Parties, whereas, a Claimant must first elect to become a “Settling Personal Injury Claimant” and the physician/healthcare provider affirmatively elects to become a “Settling Physician” or “Settling Health Care Provider.” The Class 12 Physicians and Class 13 Healthcare Providers seek a ruling that the December 21, 1999 Opinion does not apply to their situation because the release and injunction provisions as

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they apply to the Settling Physicians and Healthcare Providers are consensual in nature because of the two-tier election mechanism under the Plan.

The Court notes that the December 21, 1999 Opinion states that other released parties under §§ 8.3 and 8.4 “include ... health-care providers in Classes 12 and 13

who settle their respective claims against the Debtor.” Best-Interests Opinion,

244 B.R. at 736 (emphasis added). The Proponents of the Plan do not address this issue in their briefs. The Court will consider the Class 12 Physicians and Class 13 Healthcare’s Motion to Intervene as Motion to file an Amicus Curiae brief given that this matter is on appeal from the Bankruptcy Court and intervention is not procedurally proper on appeal as noted above.

Specifically, as it relates to the Class 12 Physicians and Class 13 Healthcare Providers, § 8.3 states:

Except as otherwise expressly provided in this Plan and in this section 8.3, in consideration of ... (d)

the release of Claims against the Debtor-Affiliated Parties by the Settling Physicians and Settling Health Care Providers,

on the Effective Date ... (ii) all Persons who hold or may have held Personal Injury Claims shall be deemed to have forever waived and released all such rights or Claims, whether based upon tort or contract or otherwise, that they heretofore, now or hereafter possess or may possess against the Settling Physicians (except for Malpractice Claims) or the Settling Health Care Providers (except for Malpractice Claims) ...

%

# ‡ # ‡ 5]c

This section 8.3 shall not operate as a release or waiver of any Malpractice Claim held against a Settling Physician or a Settling Health Care Provider by a Settling Personal Injury Claimant. Malpractice Claims, if any, asserted by Settling Personal Injury Claimants shall be resolved in the courts where actions based on such Claims have been (or may be) filed. Moreover, this section 8.3 shall not operate as a release or waiver in favor of the Settling Physicians and the Settling Health Care Providers of the rights or Claims of Non-Settling Personal Injury Claimants. Such rights and Claims shall be preserved, subject to section 8.6 of this Plan. This Section 8.3 shall not operate as a release or waiver of those Claims preserved under the Domestic Health Insurer Settlement Agreement.

§ 8.3, Amended Joint Plan of Reorganization (emphasis added). Section 8.5 of the Amended Plan provides for the channeling of the claims by

“Non^Settling Personal Injury Claimants against the Settling Physicians and the Settling Health Care Providers (other than Malpractice Claims).”

“Non-Settling Personal Injury Claimants” are “those Personal Injury Claimants (other than Claimants in Classes 6A, 6B, 6C and 6D) who are not Settling Personal Injury Claimants.” § 1.110, Amended Joint Plan of Reorganization. “Settling Personal Injury Claimants” are those “Personal Injury Claimants (other than Claimants in Classes 6A, 6B, 6C and 6D) who elect to settle their Claims under the terms of the Settlement Facility, together with those Personal Injury Claimants who do not timely return an Election Form.” § 1.161, Amended Joint Plan of Reorganization. “Settling Health Care Providers” are those “who timely elect to settle their Claims against the Debtor” and “Settling Physicians” are those “who timely elect to settle their Claims against the Debtor.” §§ 1.159 and 1.162, Amended Joint Plan of Reorganization.

Based on the express language of the Plan, it is clear that any “release” of claims against the Physicians and the Healthcare Providers do not include malpractice claims. Section 8.3 clearly states that malpractice claims against the Physicians and Healthcare Providers are not deemed released under the Plan. Additionally, § 8.3

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provides that in order for § 8.3 to apply, the Physicians and Healthcare Providers must first become “Settling Physicians” and “Settling Health Care Providers.” In order to do that, the Settling Physicians and Settling Health Care Providers must “release” their “Claims” against the Debt- or and its affiliates by timely electing to settle their Claims against the Debtor and its affiliates. §§ 8.3(d), 1.159 and 1.162, Amended Joint Plan of Reorganization.

Section 8.3 does not automatically release the Physicians and Healthcare Providers. A Personal Injury Claimant must first elect to settle her Claims against the Debtor. A Physician and/or Healthcare Provider must also elect to settle their Claims against the Debtor. Otherwise, § 8.3 does not apply. The consideration under § 8.3 as it applies to the Physicians and Healthcare Providers is that they must release their Claims against the Debtor in order for § 8.3 to apply to the Claims by the Personal Injury Claimants against the Physicians and Healthcare Providers. As argued by the Class 12 Physicians and Class 13 Healthcare Providers, in order for the release provision to apply, a two-step process is involved: the Personally Injury Claimant must elect to settle their Claims against the Debtor and the Class 12 Physicians and Class 13 Healthcare Providers must also elect to settle their Claims against the Debtor. If the Personal Injury Claimant chooses not to settle their Claims with the Debtor, then those Claims are dealt with pursuant to the Litigation Facility Agreement. If the Physicians or Healthcare Providers choose not to settle their Claims against the Debtor, then, even if the Personal Injury Claimants elect to settle their Claims with the Debtor, the Claims against the Physicians or Healthcare Providers are resolved in the Litigation Facility. If the Personal Injury Claimants do not elect to settle them Claims with the Debtor, but the Physicians or Healthcare Providers elect to settle their Claims against the Debtor, then the Claims against the Physicians or Healthcare Providers are not deemed released but are channeled to the Litigation Facility under § 8.5.

The Court finds that the Release provision only applies to Personal Injury Claimants and Physicians and/or Healthcare Providers when both elect to become settling parties. A voluntary and consensual release is not a discharge in bankruptcy and does not run afoul with the Bankruptcy Code.

See In re Arrowmill,

211 B.R. at 506. If the Personal Injury Claimants elect to settle their claims against the Debtor, their Claims would be paid in full because any malpractice claims against the Physicians and/or Healthcare Providers, whether they have elected to settle or not, are not deemed released under § 8.3. Any Personal Injury Claimant is allowed to pursue malpractice claims against a physician where the cause of action was or is to be filed based on the express language of § 8.3.

Although the Pennsylvania Class 5 Claimants argue that

within

the Pennsylvania Class 5 Claimants, there was no overwhelming approval of the Plan, the Bankruptcy Court’s finding that “a large majority of the creditors impacted by the release and injunction provisions approved the Plan” is supported by the record and is not a clearly erroneous finding. The Bankruptcy Court’s finding that the “important contributions to the reorganization” are made by the Settling Physicians is also supported by the record. The Settling Physicians and the Settling Healthcare Providers release of their Claims against the Debtor, if they so elect, is an important contribution and consideration to the reorganization. Any release by the Settling Physicians and the Settling Healthcare Providers would contribute to the Estate of the Debtor. The Bankruptcy Court’s finding that the Release, as to the Physicians and Healthcare Providers, are “essential” to the reorganization of the Plan is not clearly erroneous and is supported by the record. The Bankruptcy

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Court’s finding that there is a “close connection” between the claims of the Physicians and the Healthcare Providers on the one hand and the claims against the Debt- or on the other hand is also supported by the record and is not clearly erroneous. The Claims by the Physicians and the Healthcare Providers against the Debtor involve the Debtor’s misrepresentations about the breast implants and/or raw materials in its marketing to the Physicians and Healthcare Providers. The Claims by the Personal Injury Claimants against the Debtor involve its misrepresentations and the manufacture of the breast implants and or raw materials to the Claimants. The Claims are closely connected. The Release provision, as it applies to the Class 5 Pennsylvania Claimants and the Settling Physicians and Settling Healthcare Providers also meets the best interest of creditors test.

9.

Settling Insurers

Certain Underwriters at Lloyd’s, London and Certain London Market Insurance Companies (“London Market Insurers”), join in the arguments of the Proponents and the Hartford Insurers. The Bankruptcy Court entered an order approving the settlement between the Debtor and the London Market Insurers. The London Market Insurers claim that the releases contained in the Joint Plan were a key element of the consideration that the London Market Insurers received in exchange for their settlement payments to the Debt- or. The London Market Insurers contend that if the December 21 Opinion stands, it would be an impermissible modification of the London Market Insurers’ settlement and the settlement would be a nullity. The insurance issue was a hotly contested litigation in the Wayne County Circuit Court, State of Michigan. After lengthy hearings before the Bankruptcy Court, the settlement was approved between the London Market Insurers and the Debtors. The effectiveness of the settlement was expressly conditioned upon the entry of an approval order containing releases of the London Market Insurers effective against non-parties to the bankruptcy case. The money provided by the London Market Insurers and the other Settling Insurers has formed the bedrock of the Plan of Reorganization. Any modification of the settlement by the December 21, 1999 Opinion should be vacated.

On August 11, 1995, the Bankruptcy Court entered an order approving a compromise between the Debtor and Hartford Accident and Indemnity Company, Hartford Fire Insurance Company, Nutmeg Insurance Company, First State Insurance Company, First State Underwriters of New England Reinsurance Corp. and Twin City Fire Insurance Company (the “Hartford Insurers”). The Hartford Insurers also join in and incorporate by reference the arguments made by the Proponents and the London Market Insurers. The Hartford Insurers argue that they have been previously released by the Approval Order of the Bankruptcy Court. The releases granted to the Hartford Insurers were the key consideration received by the Hartford Insurers in exchange for $107,500,000.00 paid to the Debtor. To the extent that the December 21, 1999 Opinion is interpreted to modify the releases previously granted to the Hartford Insurers, such a purported modification is a nullity because the Bankruptcy Court lacked jurisdiction to modify a previously approved settlement agreement.

Mallory v. Eyrich,

922 F.2d 1273, 1279 (6th Cir.1991) (a district court possesses no discretion to alter the terms of a settlement agreement).

The Approval Orders and various Settlement Agreements between the Debtor and the Settling Insurers apply because the Release provision specifically addresses those Settlement Agreements between the Settling Insurers and the Debtor. In particular, § 8.3 state:

Except as otherwise expressly provided in this Plan in this section 8.3, in consideration of ... (c) the undertakings of the Settling Insurers

pursuant to their

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respective settlements with the Debtor,

... (i) all Persons who have held, hold, or may hold Products Liability Claims, whether known or unknown, shall be deemed to have forever waived and release all such rights or Claims, whether based upon tort or contract or otherwise, that they heretofore, now or hereafter possess or may possess against ... the Settling Insurers.

§ 8.3 Joint Amended Plan of Reorganization. The Settling Insurers and the Debt- or have voluntarily agreed to the releases, with the approval of the Bankruptcy Court. Voluntary and consensual releases are not a discharge in bankruptcy and do not run afoul with the Bankruptcy Code.

See In re Arrowmill,

211 B.R. at 506. Additionally, for the reasons set forth previously, the release and injunction provisions apply to the Settling Insurers.

H.

In re: Telectronics Case

The Nevada Claimants and the Class 5 Texas Children Claimants filed supplemental briefs calling the Court’s attention to the Sixth Circuit’s recent decision in

In re Telectronics Pacing Systems, Inc.,

221 F.3d 870 (6th Cir.2000). Specifically, the Claimants argue that this Court should find that the Shareholders in this case should not be released based on the Sixth Circuit’s ruling in

In re Telectronics

that in a limited fund class action settlement, a parent corporation should not be released as part of the settlement because the class members would have no recourse against the parent companies. The Proponents filed a response to the Nevada and Class 5 Texas Children Claimants’ supplemental briefs arguing that the Sixth Circuit’s reasoning in

In re Telectronics

on the release issue does not apply in this bankruptcy action where the bankruptcy plan in this case was overwhelmingly approved by the creditors and all claimants will be paid in full under the plan.

In re Telectronics,

a multi-district litigation proceeding in the Southern District of Ohio, involved a products liability class-action litigation brought on behalf of individuals implanted with the Telectronics Accufix Atrial “J” pacemaker lead.

In re Telectronics,

221 F.3d at 874-75 . Defendant TPLC manufactured and distributed the leads in the United States between 1988 and 1994.

Id.

Defendant Telectronics Pacing Systems, a holding company, is the sole owner of Defendant TPLC.

Id.

Defendant Nucleus, Ltd., a holding company and an Australian company, owned Defendants TPLC and Telectronics Pacing Systems.

Id.

Defendant Pacific Dunlop, Ltd., also an Australian company, purchased Nucleus in 1988 becoming the beneficial owner of Defendants TPLC and Telectronics Pacing Systems.

Id.

Defendants Nucleus and Pacific Dunlop were alleged to be liable to the plaintiffs on the ground that they are alter egos or agents of their subsidiaries, Defendants TPLC and Telectronics Pacing Systems.

Id.

Fed.R.Civ.P. 23(b)(1)(B) is used in a class action proceeding in cases where there is only a “limited fund” from which claims are aggregated against.

Id.

at 876-77 . The district court, after a fairness hearing required by Fed.R.Civ.P. 23(e), approved the settlement and certified the class as a mandatory, non-opt-out class under Fed.R.Civ.P. 23(b)(1)(B).

Id.

at 875-76 . The district court certified the non-opt-out class because it found that there was a “limited fund” from which the injured plaintiffs could be paid. In finding a “limited fund,” the district court only determined the assets of the subsidiary, TPLC, and not the assets of Nucleus or Pacific Dunlop, its parent companies.

Id.

The district court found that the assets of the Australian companies should not be included in determining the total assets available to the settlement fund because: 1) it believed that the court was unlikely to obtain jurisdiction over the Australian companies; 2) the time and costs of litigation against a foreign defendant made litigation infeasible; and 3) the jury in the summary trial had not found the two Australian companies liable.

Id.

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The district court determined the assets of TPLC to be about $78 million, which were divided into four funds, including a $47 million Patient Benefit Fund to compensate the class action members, an Operating Fund of $20 million, a $7 million Litigation Fund to go toward non-lead-related litigation, and a Reserve Fund of $4 million to pay expenses in other unrelated litigation.

Id.

Pacific Dunlop agreed to contribute an additional $10 million to the Patient Benefit Fund, raising that fund to $57 million.

Id.

As part of the Rule 28(b)(1)(B) class action settlement, the Australian parent companies were released from liability.

Id.

at 878-79 . Several objectors filed appeals from the district court’s approval of the settlement.

On appeal, the Sixth Circuit applied the Supreme Court’s decision in

Ortiz v. Fibreboard Corp.,

527 U.S. 815 , 119 S.Ct. 2295 , 144 L.Ed.2d 715 (1999). In the

Ortiz

case, the Supreme Court held that one of the characteristics of a Rule 23(b)(1)(B) “limited fund” class action settlement is that, “the totals of the aggregated liquidated claims and the fund available for satisfying them, set definitely at their máximums, demonstrate the inadequacy of the fund to pay all the claims.” 119 S.Ct. at 2311. In

In re Telectronics,

there was no dispute that TPLC, standing alone, did not have the necessary assets to cover the expected liability.

In re Telectronics,

221 F.3d at 878-79 . The objectors argued that the case was not a true “limited fund” case because the assets of the Australian parent companies were not included. They further argued that the Australian parent companies’ assets should not be excluded from the calculation of the “fund available” under Rule 23(b)(1)(B) because they were solvent companies and could be potentially liable.

Id.

The Sixth Circuit reversed the approval of the class action settlement under Fed.R.Civ.P. 23(b)(1)(B) because it found that the district court’s finding that there were limited assets available to the defendants to fund the class action payments was not supported by the record. The two Australian companies appear not to have limited funds and are able to bear the expense of litigation and pay damages.

Id.

Because the district court believed that TPLC would not settle without the release of the two parent companies, the district court approved the settlement.

Id.

The district court concluded that the loss of the settlement constituted a “risk” within the meaning of Rule 23(b)(1)(B) sufficient to allow the settlement to go forward.

Id.

The Sixth Circuit found that the “risk” of losing the settlement was not sufficient to support a finding that the fund was limited because risk is always inherent in litigation.

Id.

at 880 . The Sixth Circuit also found that the district court’s finding that it may not be able to exercise personal jurisdiction over the Australian companies conflicted with the district court’s earlier finding in its order denying the motion to dismiss the Australian defendants for lack of personal jurisdiction. In that opinion, the district court found that the Australian companies exercised a great deal of control over TPLC, including monthly reviews of the subsidiaries’ reports and providing strategic planning and advice to the subsidiaries.

Id.

at 878-79 . The Sixth Circuit concluded that the district court confused the ability of plaintiffs to prevail on the merits against the Australian companies with the ability to pay a judgment, which are two separate issues.

Id.

at 879-80 . But for the settlement, the Sixth Circuit found that there would be no limited fund because the class members could pursue their claims against the Australian companies, along with TPLC.

Id.

at 879-80 . The Sixth Circuit then noted that it could not approve a settlement release of parent companies from all liability because it would leave class members with no recourse against the parent companies.

Id.

at 879-80 .

The scenario before the Sixth Circuit in the

In re Telectronics

case substantially differs from the case before this Court. The

Telectronics

case is a Rule 23(b)(1)(B)

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limited fund class settlement case. The instant case is a bankruptcy action. The Sixth Circuit in

In re Telectronics

clearly distinguished the case before it from a bankruptcy action by noting that this country has a comprehensive bankruptcy scheme and bankruptcy requires vigorous examination of various expenses.

Id.

at 880 . The Sixth Circuit noted that a large mass tort action or other litigation will put a company into bankruptcy but that a district court’s discharge of a parent company’s debt in advance of bankruptcy would usurp the bankruptcy scheme through settlement.

Id.

The Sixth Circuit did not make a blanket rule that the release of a parent company was improper in all cases, including in a bankruptcy action. The Sixth Circuit found that the release was improper in

In re Telectronics

was because in a class action suit, unless there are sufficient facts to show that there are limited funds from the assets of “all” defendants, a Rule 28(b)(1)(B) class action settlement is improper. The Sixth Circuit found that the district court did not make sufficient findings as to the parent companies’ assets, including the court’s failure to undertake an independent risk analysis on whether the insurance policy coverage was sufficient.

Id.

at 879-80 . The Sixth Circuit further found that because it appeared that the parent companies may have sufficient assets to pay the cost of litigation and compensate any injuries and that the district court may be able to exercise personal jurisdiction over the parent companies, the district court’s finding that there was a “limited fund” from which the class action members could be paid from was not supported by the record.

Id.

at 879-80 . The Sixth Circuit’s main concern was that the class members had no recourse, at all, against the parent companies, who may have sufficient assets to pay any damages, if the parent companies were released under the settlement agreement. Here, the claimants under the Amended Joint Plan will only release the Shareholders if they choose to settle their claims with the Settlement Facility. The Claimants in this bankruptcy action, have a recourse against the Shareholders should they choose to litigate their claims in the Litigation Facility. Any claims litigated in the Litigation Facility would be paid in full. The evidence before the bankruptcy court shows that the cap imposed on the Litigation Facility is more than sufficient to cover any successful claims against the Litigation Facility. The Sixth Circuit’s due process concerns regarding the parent companies in

In re Telectronics

are not present under the Amended Joint Plan. The Sixth Circuit’s decision in

In re Telectronics

does not apply to the bankruptcy action before this Court.

I.

Conclusion re Release and Injunction Provisions

Reviewing

de novo

the Bankruptcy Court’s legal conclusion expressed in its December 21, 1999 Opinion that it had no jurisdiction to issue an injunction, for the reasons set forth above, the Court finds that the Bankruptcy Court erred in its conclusion. However, under a clearly erroneous standard, the Bankruptcy Court did not clearly err in its findings of fact regarding the release and injunction provisions in its November 80, 1999 Findings of Fact and Conclusions of Law because the findings were supported by the record before the Bankruptcy Court. The Court reverses the Bankruptcy Court’s legal conclusion regarding the release and injunction provisions expressed in its December 21, 1999 Opinion, for the reasons set forth above. The Court affirms the Findings of Fact and Conclusions of Law and the Bankruptcy Court’s November 30, 1999 Confirmation Order.

VIII.

CLASSIFICATION, TREATMENT, FAIRNESS AND BEST INTEREST

A. Background

Various parties have filed appeals from the Bankruptcy Court’s Confirmation Order and Amended Opinions on the classifi

*495

cation and treatment of claims, the fairness of the Amended Joint Plan and whether the Amended Joint Plan is in the best interest of creditors. There are 33 classes and subclasses under the Amended Joint Plan.

6

The appeals before this Court based on classification, good faith, treatment, and the best interest of creditor test involve the following classes: Class 5 Domestic Breast Implant Claims; Class 6.1 Foreign Breast Implant Claims; Class 6.2 Foreign Breast Implant Claims; Class 9 Domestic Other Products Personal Injury Claims; Class 12 Physician Claims; and Class 15 Government Payor Claims. Many arguments presented by the parties are the same for each issue. The Court will generally address the applicable law as to each issue and then address each parties’ arguments in the following order: the Domestic Claimants, the Foreign Claimants, the Class 9 Domestic Other Products Claimants, the Class 12 Physician Claimants and the Class 15 United States’ Claims.

B.

Standard

1.

Classiftcation/ 11 U.S.C. § 1122 (a)

11 U.S.C. § 1122 (a) provides that “a plan may place a claim or an interest in a particular class only if such claim or interest is substantially similar to the other claims or interests of such class.” “Substantially similar” has been defined as “similar in legal nature, character or effect.”

In re Dow Corning Corp. (Classification and Treatment Op.),

244 B.R. at 644. The claims need not be identical.

Id.

at 655; 7 Collier on Bankruptcy ¶ 1122.03[3][a], There is no requirement that claims be classified according to their values.

In re Resorts Int’l, Inc.,

145 B.R. 412, 448 (Bankr.D.N.J.1990). Although § 1122(a) speaks only to the types of claims that can be classified together, the Sixth Circuit has held that substantially similar claims may be classified separately unless the classification is used to line up votes in favor of the plan, or if a shareholder and creditors who are not intimately connected with the enterprise are placed together, or where a breach of fiduciary obligation or unfair dealings are at issue.

In re U.S. Truck Co.,

800 F.2d 581, 586-88 (6th Cir.1986). The bankruptcy court has “broad discretion to determine proper classification according to the factual circumstances of each individual case.”

Id.

at 586 .

The Bankruptcy Court extensively analyzed the current state of the law on the classification issue stating that the Sixth Circuit has adopted a “legitimate reason” standard as to whether classification is proper.

Classification and Treatment Op.,

244 B.R. at 645,

citing Aetna Cas. & Surety Co. v. Clerk (In re Chateaugay Corp.),

89 F.3d 942 , 949 (2nd Cir.1996),

In re Stratford Assocs. Ltd. Partnership,

145 B.R. 689, 696 (Bankr.D.Kan.1992), and

In re Barakat,

99 F.3d 1520, 1526 (9th Cir.1996). The Bankruptcy Court believes that this standard is wrong as a matter of law but is bound by the Sixth Circuit precedent in

U.S. Truck. Classification and Treatment Op.,

244 B.R. at 651. The Bankruptcy Court suggests that the standard to be applied, based on the plan language of 11 U.S.C. § 1122 (a), is to ascertain only whether the claims within that class are substantially similar in character to each other.

Id.

Section 1122(a) should not be viewed as prohibiting a plan proponent from placing substantially similar claims in different classes regardless of whether it has proven a “legitimate reason” for doing so.

Id.

at 650 . Concerns as to whether a proposed plan is abusive of the bankruptcy process and whether the plan does not unfairly discriminate against and is fair and equitable to any class that rejects it are addressed through the good faith requirement under § 1129(a)(3), other provisions in § 1129(a) and the cram

*496

down provision in § 1129(b).

Id.

at 650-51.

Based on the statutory language found in both §§ 1122(a) and 1129, the Court agrees with the Bankruptcy Court’s analysis that the only inquiry a bankruptcy court is required to make under § 1122(a) is whether the claims within a class are substantially similar. If the claims are found to be substantially similar and objections are made as to whether the plan proponent submitted a plan in good faith-specifically that the classifications were made to gerrymander votes or in violation of fiduciary obligations, the inquiry should be made under § 1129(a)(3). If the claims are not found to be substantially similar then the plan cannot be confirmed. A plan proponent would still be required to submit proof, perhaps not as extensive as required by the “legitimate reason” standard, as to whether the claims are substantially similar, especially if objections are made that the claims in a class are not substantially similar.

This Court’s reading of

U.S. Truck

does not necessarily contradict the Bankruptcy Court’s analysis. The Sixth Circuit did not expressly hold that the plan proponent was required to show a “legitimate reason” as to why similar claims were classified separately. It appears that the Sixth Circuit’s main concern was that the classification of claims not to be used to gerrymander votes or that unfair dealing and breach of fiduciary obligations occurred in the classification of claims.

In re U.S. Truck,

800 F.2d at 586-87 . The Bankruptcy Court’s analysis does not contradict the Sixth Circuit’s concern in

U.S. Truck

that potential abuse could occur if there were not some limit on the plan proponent’s power to classify claims. The Sixth Circuit acknowledged the less restrictive language used by Congress in § 1122 but questioned whether Congress intended the plan proponent to have such broad power over classification.

Id.

at 586. If similar claims are placed in separate classes, the only restriction

U.S. Truck

places on the debtor’s broad power to classify claims is that the similar claims not be classified separately in order to obtain votes.

Id.

The first case cited by the Sixth Circuit in

U.S. Truck, First Nat’l Bank of Herkimer v. Poland Union,

109 F.2d 54 (2d Cir.1940), dealt with a class which contained shareholders and other creditors who were not so intimately connected with the enterprise. This classification guaranteed a vote in favor of the plan because the shareholders stood to profit from the plan. The second case cited was

American United Mut. Life Ins. Co. v. City of Avon Park,

311 U.S. 138 , 61 S.Ct. 157 , 85 L.Ed. 91 (1940). The plan in

American United

was not confirmed because it was not clear whether the agent soliciting the votes for the plan in the same class disclosed his interest in the plan. The agent administering the plan also held claims on which he would enjoy profit if the plan was confirmed. The Sixth Circuit in

U.S. Truck

approved the analysis of these two cases in affirming the district court’s finding that the “interests” of the Teamsters Committee “differed substantially” from the other creditors who were placed in a different class.

U.S. Truck,

800 F.2d at 587 . The Teamsters Committee objected to the plan because the Teamsters Committee believed its claims based on the collective bargaining agreement, which were placed in a separate class, should be classified in the same class with the secured claims.

In

U.S. Truck,

the real issue was whether the Teamsters Committee’s claim and the secured claims were properly classified separately based on the substantial similar standard under § 1129(a). Although the Sixth Circuit noted that there should be some restrictions on the debtor’s power to place similar claims in separate classes such as gerrymandering of votes, that issue was not before the court because the debtor admitted to the district court that it separated the classes in order to line up the votes in favor of the plan.

U.S. Truck,

800 F.2d at 586, n. 8 . Even with this admission, the Sixth Circuit did not reject

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the confirmation of the plan because it agreed with the district court that the claims were properly separately classified because the “interest” of the claimants were

not

substantially similar.

Id.

at 587 .

Based on

U.S. Truck

it appears that the inquiry regarding classification is whether the claims are substantially similar, as the Bankruptcy Court suggests the plain language of the statute provides. If similar claims are placed in separate classes the classes are properly constituted. Any good faith issues are resolved under § 1129(a)(3). The Sixth Circuit’s opinion also notes that by allowing similar claims to be classified in separate classes, a particular class “is still protected by the provisions of subsections (a) and (b), particularly the requirements of subsection (b) that the plan not discriminate unfairly and that it be fair and equitable.”

Id.

at 587.

Because the Bankruptcy Court has applied the higher “legitimate reason” standard to the parties’ objections, this Court’s inquiry will be whether the Bankruptcy Court’s finding as to the classifications issue was clearly erroneous, based on the Bankruptcy Court’s application of the “legitimate reason” standard even though

U.S. Truck

does not expressly hold that the “legitimate reason” standard is adopted in the Sixth Circuit.

2.

Within Class Treatmentlll U.S.C. § 1123(a)(4)

Section 1123(a)(4) applies to the treatment of claims within the same class. A plan is required to “provide the same treatment for each claim or interest of a particular class, unless the holder of a particular claim or interest agrees to a less favorable treatment of such particular claim or interest.” 11 U.S.C. § 1123 (a)(4). Section 1123(a)(4) “is not to be interpreted as requiring precise equality of treatment, but rather, some approximate measure [of equality].”

In re Resorts,

145 B.R. at 447. The appropriateness of whether a plan provides different treatment to claims which are legitimately classified in separate classes arises, if at all, only in the context of cram down under 11 U.S.C. § 1129 (b).

The Bankruptcy Court rejected the reasoning found in

In re AOV Indus., Inc.,

792 F.2d 1140 (D.C.Cir.1986) regarding within-class treatment under § 1123(a)(4). In

In re AOV,

the D.C. Circuit stated that inequality under § 1123(a)(4) includes a situation where there is payment of different percentage settlements to co-class members and that the “other side of the coin” is where there is unequal consideration tendered for the equal payment.

Id.

at 1152. Under the plan in

AOV,

the class at issue included all general unsecured creditors.

Id.

at 1150. The objecting party in the class possessed a direct claim against certain third parties whereas the remaining class members possessed only derivative claims against third parties.

Id.

at 1151. The D.C. Circuit held that because the party that had a direct claim gave up more consideration than the parties with only derivative claims under the settlement offer, the party with the direct claim was treated unequally.

Id.

at 1152—53.

This Court agrees with the Bankruptcy Court’s conclusion that the reasoning in

In re AOV

regarding equal treatment within a class should be rejected. The claims at issue in this case involve disputed and unliquidated claims. In the

In re AOV

case, the claims were undisputed and liquidated. Requiring a bankruptcy court to inquire as to the amount of consideration involved in each claim involving a disputed and unliquidated personal injury claim, especially in a mass tort situation, would be an unrealistic, unworkable and an unduly burdensome position for the bankruptcy court to be in. Settlement negotiations would not be effective under such a standard and the bankruptcy court would be placed in a situation where it would become involved in the negotiation process. The

In re AOV

case also failed to consider the second half of the language found in § 1123(a)(4) which expressly al

*498

lows for disparate treatment of a claim if the claimant “agrees to a less favorable treatment.” 11 U.S.C. § 1123 (a)(4). Agreeing to settle, instead of litigating a claim, would permit a claimant to be treated differently, such as giving up more valuable consideration, in exchange for the settlement offer. This treatment is allowed under § 1123(a)(4). The primary treatment under the Amended Joint Plan is the same for each tort claimant-to enter the Litigation Facility. The secondary treatment is to accept the settlement offer of the Settlement Facility. Based on the express language of § 1123(a)(4), under a

de novo

review, the Bankruptcy Court did not err in holding that a claimant who elects to settle under the Amended Joint Plan agrees to a less favorable treatment than the litigation option, and that this agreement complies with the second clause of § 1123(a)(4).

3.

Good Faith/ 11 U.S.C. § 1129 (a)(3)

A number of Appellants argue that the Plan was not proposed in good faith. 11 U.S.C. § 1129 (a)(3) provides:

(a) The court shall confirm a plan only if all of the following requirements are met:

******

(3) The plan has been proposed in good faith and not by any means forbidden by law.

A bankruptcy court’s finding that a debt- or’s plan is proposed in good faith is a finding of fact reviewed under the clearly erroneous standard.

In re Caldwell,

851 F.2d 852 , 858 (6th Cir.1988). The Sixth Circuit has addressed the good faith requirement relating to confirmation of a plan filed under chapters 12 and 13. The identical statutory language was considered. The Sixth Circuit held that good faith must be reviewed based on the totality of the circumstances. Good faith is defined by factual inquiry.

In re Laguna Assoc. Ltd. Partnership,

30 F.3d 734, 738 (6th Cir.1994),

quoting In re Okoreeh-Baah,

836 F.2d 1030, 1033 (6th Cir.1988). Pre-petition behavior is irrelevant.

Good Faith Opinion,

244 B.R. at 675. The focus is on the plan itself.

Id., In re Madison Hotel Assoc.,

749 F.2d 410, 425 (7th Cir.1984). Good faith may exist “when there is a reasonable likelihood that the plan will achieve a result consistent with the objectives and purposes of the Bankruptcy Code.”

In re Nikron, Inc.,

27 B.R. 773, 778 (Bankr.E.D.Mich.1983). A plan’s proposal must be: a) in good faith, and, b) not by a means forbidden by law.

In re Sovereign Group, 1984-21 Ltd.,

88 B.R. 325, 328 (Bankr.D.Colo.1988)

(citing

5 Collier on Bankruptcy ¶ 1129.02 (15th ed.1984));

In re Food City, Inc.,

110 B.R. 808, 811-12 (Bankr.W.D.Tex.1990).

The Bankruptcy Court noted that the term “good faith” is not defined in the Bankruptcy Code.

Good Faith Opinion,

244 B.R. at 675. The Bankruptcy Code referred to “good faith” as a “fuzzy” concept, intended to “allow courts to utilize their gut feelings about a plan’s effects.”

Id.

But the Bankruptcy Court did not exercise its “gut feelings” about the Plan. Only after a painstakingly careful review of the Plan did the Bankruptcy Court note concrete reasons for concluding the Plan was proposed in good faith. He noted that the Plan was proposed as a “legitimate effort to rehabilitate a solvent but financially distressed corporation” faced with massive pending and potential future tort claims against it.

Id.

at 676-77. Such rehabilitation he found to be an articulated goal of chapter 11.

Id.

at 677. He further found the use of chapter 11 to resolve mass tort litigation is not violative of the § 1129(a)(3) good faith requirement citing

In re Johns-Manville Corp.,

68 B.R. 618, 632 (Bankr.S.D.N.Y.1986).

Id.

The Bankruptcy Court further found that the process of negotiating the Joint Plan supported a finding that the Plan was proposed in good faith. He noted especially the persuasive testimonies of Tommy Jacks, Scott Gilbert, Ralph Knowles and Arthur Newman which referenced the “in

*499

tense arms-length negotiation” between the parties, the involvement of the Court’s experienced Special Master Francis McGovern and the input of qualified experts.

Id.

According to the Bankruptcy Court, the Plan effectively does what chapter 11 was designed to do. In this case, the Plan employs procedures that resolve the mass tort litigation, pay the Debtor’s creditors, allow the Debtor to remain a viable corporation able to provide a return for Shareholders, pay taxes and provide jobs.

Id.

Some Appellants have included an objection based on good faith in the arguments in support of their objections. The individual arguments that the Plan was not proposed in good faith are more fully addressed herein. Reviewing the Bankruptcy Court’s factual findings under a clearly erroneous standard, the Court finds that the Bankruptcy Court did not clearly err in finding that the Amended Joint Plan was proposed in good faith, as more specifically addressed below under each party’s arguments.

4.

Best Interest of Creditors Test/ 11 U.S.C. § 1129 (a)(7)

Objections were made based on § 1129(a)(7). One objection is that the disallowing punitive damages claims violates § 1129(a)(7). Another objection is that the cap on the litigation fund also violates § 1129(a)(7).

Section 1129(a)(7) requires that each claimant under a Chapter 11 plan of reorganization either accept the plan or “receive or retain under the plan ... property of a value, as of the effective date of the plan, that is not less than the amount that such holder would so receive or retain if the debtor were liquidated under chapter 7 of this title on such date.” 11 U.S.C. § 1129 (a) (7) (A) (ii). This provision is known as the best-interest-of-creditors test. This provision protects the interests of dissenters within a class by placing a floor on the bargain agreed to by the majority. Section 1129(a)(7)(A)(ii) ensures that the dissenting claimants receive in payment of their claims no less than they would receive if the debtor were liquidated under chapter 7.

To determine whether a plan is in the best interest of the creditors, a bankruptcy court must review the facts before it by a preponderance of the evidence.

In re Trevarrow Lanes, Inc.,

183 B.R. 475, 479 (Bankr.E.D.Mich.1995). The Court finds that under the clearly erroneous standard, the Bankruptcy Court’s factual findings on the best-interest-of-creditors issue was supported by the record and the Bankruptcy Court did not clearly err in its findings as more specifically set forth under the parties’ arguments below. The parties’ individual arguments regarding the best interests of creditors test are addressed herein.

C.

Parties’Arguments

1.

Class 5 Domestic Claimants

The Amended Joint Plan of Reorganization classified breast implant claimants into three classes: Class 5 (Domestic Claimants); Class 6.1 (Foreign Claimants from countries with common law legal systems and/or with GDPs at least 60% of that of the United States); and Class 6.2 (Foreign Claimants from countries who do not have a common law legal system and have GDPs less than 60% of that of the United States).

a.

Nevada Claimants

The Nevada Claimants consist of 45 claimants who objected to the proposed Amended Joint Plan. The Nevada Claimants agree that their claims are substantially similar with the other claimants in Class 5 as to their claims against the Debt- or. However, the Nevada Claimants argue that their claims are not substantially similar to the other claimants in Class 5 because the Nevada Claimants have a judgment against Dow Chemical giving them certain rights that the other claim

*500

ants do not have against Dow Chemical.

7

They argue that Dow Chemical is now collaterally estopped from relitigating the issue of liability in Nevada. The Nevada Claimants assert that their claims against Dow Chemical cannot be subjected to a

Daubert

hearing. They also maintain that their claim under the classification issue is closely tied to the non-debtor discharge and good faith issues. They argue that either their claims be classified separately or their claims must be treated differently in order to receive “equal treatment” because of their rights against Dow Chemical based on the judgment the Nevada Claimants have against Dow Chemical. The Nevada Claimants also argue that because they have asserted punitive damages, their claims are different from other claimants who do not have punitive damages claims. The Nevada Claimants further argue that the Litigation Fund Facility is underfunded, and, therefore is not fair.

The Bankruptcy Court found the Nevada Claimants’ collateral estoppel argument unpersuasive, noting that new scientific developments do not support the claimants’ position that silicon gel causes disease citing the Institute of Medicine Report and the MDL-926 Science Panel Report.

Classification and Treatment Op.,

244 B.R. at 655, n. 9. The Bankruptcy Court also found collateral estoppel was irrelevant to proper classification under § 1122(a) because the Plan classifies claims against the Debtor, not its Shareholders. 244 B.R. at 655. The Nevada Claimants acknowledge that in future breast implant trials involving Dow Chemical in Nevada Dow Chemical would be entitled to present new scientific evidence revealed since the

Mahlum

case was tried. Again, the Nevada Claimants also acknowledge that as to the Debtor, their claims are substantially similar to the other claimants in Class 5.

The Court agrees with the Bankruptcy Court’s conclusion that Dow Chemical would not be collaterally estopped from presenting new evidence in Nevada in future trials against Dow Chemical in light of the Nevada Claimants’ concession on that point. Under § 1122(a), it is the nature and character of the claims

against

the Debtor which must be reviewed and not against third-parties.

See AOV Indus.,

792 F.2d at 1150-51 (“the focus of the classification is the legal character of the claim as it relates to the assets of the debtor” and “[t]he existence of a claim against a third-party guarantor does not change the nature of a claim vis-a-vis the bankrupt estate and, therefore, is irrelevant to a determination of whether claims are ‘substantially similar’ for classification purposes.”). The Bankruptcy Court did not address the Nevada Claimants’ argument that Dow Chemical is collaterally estopped from relitigating its liability if the Nevada Claimants decide to elect litigation under the Joint Plan. However, the collateral estoppel issue may be addressed by way of a motion before the court handling the Nevada Claimants’ litigation under the Joint Plan should the Nevada Claimants elect to litigate.

Regarding the

Daubert

issue, claims proceeding against Dow Chemical by way of trial would be governed by the Federal Rules of Evidence, including Rule 702 addressing expert testimony.

Brooks v. American Broadcasting Companies,

999 F.2d 167, 173 (6th Cir.1993). The difference between state law evidentiary rules and federal law evidentiary rules under

Daubert

does not go to the question of how a claimant’s claim is classified or how a claim is treated within a class. It is the nature of the claim and not how evidentiary rules affect the claim that determines how a claim is to be classified.

AOV Indus.,

792 F.2d at 1150 . As to whether the claim is being treated fairly within the class, the inquiry is whether the claim is subject to the same process in satisfying the claim as the other claims within the class.

In re Central Medical Center, Inc.,

*501

122 B.R. 568, 575 (Bankr.E.D.Mo.1990). The evidentiary issues only come into play if the claimant chooses to litigate the claim and at such time those issues may be brought before the trial judge.

The Nevada Claimants’ argument that they should be treated differently within Class 5 because of their judgment against Dow Chemical is without merit. The primary treatment provided under the Plan for Claimants in Class 5 is the opportunity for a claimant to litigate the claim against the Litigation Facility.

Classification and Treatment Op.,

244 B.R. at 660. The secondary treatment is the settlement option.

Id.

at 669. Although settlements are strongly favored and encouraged by law, settlement is merely an option to litigation which the claimant may voluntarily elect.

See, e.g., Franks v. Kroger Co.,

670 F.2d 71, 72 (6th Cir.1982). There is no requirement that settlement offers be proportional within a class in light of the second clause in § 1123(a)(4) which provides that disparate treatment of a claim is permissible if the holder of that claim “agrees to a less favorable treatment.” 11 U.S.C. § 1123 (a)(4). The requirement under § 1123(a)(4) that all claims be treated equally is satisfied when the class members are subject “to the

same process

for claim satisfaction.”

In re Central Medical Center,

122 B.R. at 575 . Under a

de novo

review, the Bankruptcy Court did not clearly err in its conclusion that because the primary treatment provided under the Plan for Class 5 Claimants is the opportunity to elect litigation against the Litigation Facility the equal treatment requirement under § 1123(a)(4) has been met.

The Nevada Claimants contend that they should be treated differently within Class 5 because they are entitled to a claim of punitive damages claims. In its best-interest-of-creditors opinion, the Bankruptcy Court noted that under 11 U.S.C. § 726 (a), unsecured creditors are entitled to be paid not just the compensatory damages of their claim, but any exemplary, punitive or multiple damages, before equity is entitled to receive any distribution in a chapter 7 bankruptcy.

Best-Interests Opinion,

244 B.R. at 728.

8

Under the Joint Plan, the equity security holders will retain their shares in the reorganized debtor while creditors who might be entitled to punitive or multiple damages would receive nothing for those claims.

Id.

The Bankruptcy Court stated that a theoretical right to recovery is of no moment unless those creditors are actually entitled to such damages.

Id.

The Bankruptcy Court found that based on the evidence presented at the hearing, a chapter 7 trustee would not pay punitive damages if the claims were liquidated.

Id.

Based on the evidence presented at the hearing, the Bankruptcy Court’s finding regarding punitive damages is not clearly erroneous. At the onset, the Nevada Claimants’ punitive damages award was set aside.

See Dow Chemical Co. v. Mahlum,

114 Nev. 1468 , 970 P.2d 98 (1998). Mr. Arthur B. Newman, a senior managing director of The Blackstone Group, testified that in his opinion, in the aggregate, creditors would receive, under the Plan, no more than what creditors would receive in a chapter 7. (Conf.Hrg.Tr., 7/14//99, p. 99) Before any unsecured claims can be paid, they must first be liquidated in a chapter 7 case. The cost of liquidating hundreds of thousands of claims would be monumental.

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