In re: W.R. Grace & Co. et al.

Filing 245

MEMORANDUM OPINION re DI (213). Signed by Judge Ronald L. Buckwalter on 7/23/12. (bkb)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF DELAWARE
In re:

W.R. GRACE & CO., et. al.,

Debtors.

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CIVIL ACTION NO. 11-199 (Lead Case)
CIVIL ACTION NO. 11-200
CIVIL ACTION NO. 11-201
CIVIL ACTION NO. 11-202
CIVIL ACTION NO. 11-203
CIVIL ACTION NO. 11-207
CIVIL ACTION NO. 11-208
CIVIL ACTION NO. 09-644
CIVIL ACTION NO. 09-807
Procedurally Consolidated.

MEMORANDUM
BUCKWALTER, S. J.1

July 23, 2012

Currently pending before the Court is the Motion of Appellant Anderson Memorial Hospital
(“AMH”) for Relief from this Court’s Order and Memorandum Opinion Affirming Confirmation
Order. For the following reasons, the Motion is denied.
I.

FACTUAL AND PROCEDURAL BACKGROUND
The lengthy factual background of this case is one familiar to all relevant parties and the

Court. On April 2, 2001, Debtor W.R. Grace & Co. (“Grace” or “Debtor”) filed for Chapter 11
bankruptcy. At the time of the Debtor’s bankruptcy filing, Avellino & Bienes v. M. Frenville Co.,
(In re M. Frenville Co.), 744 F.2d 332 (3d Cir. 1984) (“Frenville”) provided the governing test in
the Third Circuit for when a claim arose under the Bankruptcy Code. The Frenville test dictated
that a claim arose when a right to payment accrued under state law. Id. at 337.
1

Senior United States District Judge for the Eastern District of Pennsylvania, sitting by
designation.

In 2002, Grace attempted to organize all the property damage claims brought against it, and
sought a centralized way to provide notice to all potential claimants. The result was the Summary
Bar Date Notice Program (“Bar Notice”), which was published in thousands of newspapers and
periodicals, and was estimated to reach 83% of adults nationwide. On April 22, 2002, the
Bankruptcy Court issued the Bar Date Order, requiring all property damage (“PD”) claimants to file
proofs of claims on or before March 31, 2003. On February 27, 2009, Grace filed its Joint Plan of
Reorganization (“Joint Plan”) before the Bankruptcy Court. On March 9, 2009, the Debtor’s
Disclosure Statement was approved and ballots were sent out to all claimants in the Class 7A
Asbestos PD Claims class, including Appellant AMH.

The Bankruptcy Court concluded its

confirmation hearings on the Joint Plan in December of 2009.
On June 2, 2010, the Third Circuit issued its precedential opinion in Jeld-Wen, Inc. v. Van
Brunt (In re Grossman’s, Inc.), 607 F.3d 114 (3d Cir. 2010) (“Grossman’s”), in which it overruled
the Frenville test and held that “a ‘claim’ arises when an individual is exposed pre-petition to a
product or other conduct giving rise to an injury, which underlies a ‘right to payment’ under the
Bankruptcy Code.” Id. at 125. In the context of asbestos litigation, this means that a plaintiff’s
claim arises at the time when he was first exposed to the asbestos-laden product. Id.
On January 31, 2011, the Bankruptcy Court issued its Memorandum Opinion and Order
confirming the Debtor’s Joint Plan. Several parties subsequently appealed to this Court. On
January 30, 2012, this Court entered its Memorandum Opinion and Order affirming the Bankruptcy
Court’s findings and confirming the Joint Plan in its entirety. In its Memorandum Opinion, this
Court overruled AMH’s objections to the Joint Plan, partly basing its holding on the Third Circuit’s
definition of a “claim” under Grossman’s. Since issuance of this Memorandum Opinion and Order,

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various parties have appealed to the Third Circuit. The deadline to file an appeal has now lapsed.2
Most recently, on May 18, 2012, the Court of Appeals issued its decision in Wright v. Owens
Corning, 679 F.3d 101 (3d Cir. 2012). Wright interprets and applies Grossman’s to a specific set
of facts. Appellant AMH presently contends that this Court’s prior Memorandum Opinion and
Order are no longer equitable in light of the Third Circuit’s decision in Wright.
On May 29, 2012, AMH filed the instant Motion for Relief from this Court’s Order and
Memorandum Opinion pursuant to Rule 60(b) of the Federal Rules of Civil Procedure. Grace
responded in opposition on June 18, 2012.3 AMH filed its Reply on June 28, 2012, and Grace
filed a Sur-Reply one day later on June 29, 2012.
II.

DISCUSSION
A.

The Grossman’s and Wright Decisions

In order to properly ascertain whether or not relief from this Court’s prior Opinion is
appropriate, a background of the law established by Grossman’s and Wright is necessary. In
Grossman’s, the plaintiff purchased asbestos-containing products for her home from Grossman’s,
a home improvement and lumber retailer, in 1977. Grossman’s, 607 F.3d 114, 117 (3d Cir.
2010). More than twenty years later, Grossman’s filed for Chapter 11 bankruptcy, at which time

Following issuance of this Court’s Memorandum Opinion and Order on January 30, 2012,
various parties filed motions to alter and amend the judgment. On June 11, 2012, the Court filed an
Amended Memorandum Opinion and Order which took into account the parties’ requested
amendments. None of the changes in the Amended Memorandum Opinion and Order, however, were
related to AMH. All parties relevant to the instant litigation had thirty days from the issuance of the
Amended Memorandum Opinion and Order to file their notices of appeal to the Third Circuit. This
deadline has now passed, prior to which several parties filed notices of appeal.
2

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Both the Debtor and the Legal Representative for Future Asbestos-Related Property Damage
Claimants and Holders of Demands (“Future Claims Representative”) filed Responses in Opposition.
For ease of reference, the Court collectively refers to the Debtor and the Future Claims Representative
hereinafter as “Debtor” or “Grace”.

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it had actual knowledge that it had engaged in the sale of asbestos-laden products.

Id.

Grossman’s Chapter 11 reorganization plan was confirmed in December of 1997.

Id.

Subsequently, in 2006, the plaintiff developed mesothelioma as a result of exposure to asbestos,
and filed suit against Grossman’s. Id. Applying the prior Frenville test, the bankruptcy court
found, and the district court affirmed, that the plaintiff did not have a claim against Grossman’s
bankruptcy estate because her symptoms did not manifest until nearly ten years after Grossman’s
had filed its bankruptcy petition. Id. at 118. On appeal, the Third Circuit overruled the lower
courts (as well as prior contradictory caselaw), and established that: “a ‘claim’ arises when an
individual is exposed pre-petition to a product or other conduct giving rise to an injury, which
underlies a ‘right to payment’ under the Bankruptcy Code.” Id. at 125. As applied to the
plaintiff, this meant that her claims against Grossman’s arose in 1977 when she was first exposed
to the asbestos. Id.
In Wright, the Third Circuit interpreted and applied its holding in Grossman’s to a putative
class of plaintiffs seeking damages related to roofing shingles. Wright, 679 F.3d 101 (3d Cir.
2012). In that case, two separate and unrelated plaintiffs installed shingles manufactured by
Owens Corning on their roofs. Id. at 103. One plaintiff installed the shingles in 1999, while the
other had installed them in 2005. Id. The shingles were subsequently determined to be defective
and both plaintiffs therefore filed warranty claims against Owens Corning in 2009. Id. In 2000,
however, Owens Corning had filed for Chapter 11 bankruptcy. Id. The debtor’s reorganization
plan was confirmed by the bankruptcy court in September of 2006. Id. At the time, the Frenville
test was still applicable law. Id. at 104. As such, the plaintiffs were precluded from filing proofs
of claims against the debtor and participating in the bankruptcy proceedings. Id. In light of the
Third Circuit’s decision in Grossman’s, however, the Wright plaintiffs requested the court to
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reassess its potential claims against Owens Corning. The Third Circuit ultimately extended the
reach of Grossman’s, holding that a “claim” arises in bankruptcy when an individual is exposed
pre-petition, as well as pre-plan confirmation, to the debtor’s defective product or other conduct
giving rise to injury that underlies a right to payment under the Bankruptcy Code. Id. at 107. The
Third Circuit then proceeded to apply its newly-expanded definition to the factual scenarios
presented by the two plaintiffs in Wright. Under Frenville, neither plaintiff held a claim against
Owens Corning until the defects in their shingles manifested in 2009. Under Grossman’s and
Wright, however, the plaintiffs held claims against the debtor in 1999 and 2005 when they first
installed the shingles on their roofs. Id. Because neither plaintiff would have understood that he
held a claim at the time of Owens Corning’s bankruptcy, the Third Circuit held that neither was
afforded adequate due process. Id. at 109.
B.

AMH’s Requested Relief Pursuant to Rule 60(b)

In light of the Third Circuit’s decisions in Grossman’s and Wright, AMH presently seeks
relief from the Court’s previous Memorandum Opinion and Order confirming the Joint Plan
pursuant to Rule 60(b) of the Federal Rules of Civil Procedure.4
As an initial matter, the Court notes that the procedural vehicle AMH utilizes to seek
relief—Federal Rule of Civil Procedure 60(b)—is generally inapplicable in appellate bankruptcy
proceedings. As noted by the court in Ben-Baruch v. Island Properties, 362 B.R. 565 (E.D.N.Y.
2007), “[a]ppeals of bankruptcy judgments to district courts are governed by Part VIII of the

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In its initial Motion for Relief, AMH cursorily states that it requests relief pursuant to
subsection (5) of Rule 60(b). (See AMH Mot. Relief 2.) Throughout the remainder of its Motion for
Relief and subsequent Reply, however, AMH makes no further reference to this subsection, and
instead appears to seek broader relief pursuant to Rule 60(b) overall. As such, given the lack of
clarity regarding the basis of Appellant’s Motion, the Court will, out of an abundance of caution,
consider AMH’s request under all relevant subsections of Rule 60(b).

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Federal Rules of Bankruptcy Procedure [and] . . . Part VIII does not incorporate Fed. R. Civ. P.
60.” Id. at 566. Although Bankruptcy Rule 9024 makes Civil Rule 60 applicable to cases arising
under the Bankruptcy Code, Rule 60 generally only applies to judgments or orders of the
bankruptcy court, and not to judgments or orders of a district court exercising appellate
jurisdiction in a bankruptcy case. Id. (citing Aycock v. Eaton (In re Eichelberger), 943 F.2d 536,
538 n.3 (5th Cir. 1991); Butler v. Merchs. Bank & Trust Co. (In re Butler), 2 F.3d 154, 155 (5th
Cir. 1993); In re Lisanti Foods, Inc., No. Civ.A.04-3868, 2006 WL 2927619, at *2 (D.N.J. Oct.
11, 2006); In re Brenner, No. Civ.A.89-8322, 1991 WL 239942, at *1–2 (E.D. Pa. Nov. 8, 1991);
In re Conn Aire, Inc., 91 B.R. 462, 462 n.2 (M.D. Tenn. 1988); In re Shiflett, No. Civ.A.87-719,
1988 WL 62508, at *1 (D. Md. June 9, 1988); English-Speaking Union v. Johnson, 353 F.3d
1013, 1019 (D.C. Cir. 2004)); see also In re Bli Farms P’ships, 465 F.3d 654, 657–58 (6th Cir.
2006). Given that this Court is presently exercising its appellate jurisdiction over the instant
litigation, it would appear that Rule 60(b) cannot serve as the basis for AMH’s present Motion. In
any event, given that both parties have fully briefed and argued their positions pursuant to Rule
60(b) and that AMH nonetheless fails to satisfy the requirements set forth by that Rule, the Court
will consider the parties’ arguments based on Rule 60(b) below.
Rule 60(b) of the Federal Rules of Civil Procedure provides that:
On motion and just terms, the court may relieve a party or its legal representative
from a final judgment, order, or proceeding for the following reasons:
(1) mistake, inadvertence, surprise, or excusable neglect; (2) newly discovered
evidence that, with reasonable diligence, could not have been discovered in time
to move for a new trial under Rule 59(b); (3) fraud (whether previously called
intrinsic or extrinsic), misrepresentation, or misconduct by an opposing party; (4)
the judgment is void; (5) the judgment has been satisfied, released or discharged;
it is based on an earlier judgment that has been reversed or vacated; or applying it
prospectively is no longer equitable; or (6) any other reason that justifies relief.

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Fed. R. Civ. P. 60(b). In the instant litigation, it is evident that only subsections (5) and (6) of
Rule 60(b) could potentially apply to the present circumstances, as none of the other subsections
are even remotely relevant.
In Horne v. Flores, 129 S. Ct. 2579 (2009), the Supreme Court recognized that Rule
60(b)(5) “provides a means by which a party can ask a court to modify or vacate a judgment or
order if a significant change in either factual conditions or in law renders continued enforcement
detrimental to the public interest.” Horne, 129 S. Ct. at 2593 (internal citations and quotation
marks omitted). Horne dealt with relief sought from an “institutional reform injunction”—i.e., a
public policy injunction aimed at changing the internal structure of a society—in the public
education context. In finding that Rule 60(b)(5) relief was appropriate, the Supreme Court noted
that “[i]njunctions of this sort bind state and local officials to the policy preferences of their
predecessors” and that significant public interests were at play because when “officials inherit
overbroad and outdated consent decrees that limit their ability to respond to the priorities and
concerns of their constituents, they are constrained in their ability to fulfill their duties as
democratically-elected officials.” Id. at 2594 (internal citations, quotations, and alterations of text
omitted).
In contrast to the institutional reform litigation presented in Horne, there is no comparable
public interest at risk here. To the contrary, it has been recognized that the public has a significant
interest in affording finality to bankruptcy judgments. More specifically, “[p]ublic policy weighs
in favor of facilitating quick and successful reorganizations of financially troubled companies.
This policy is furthered by the policy favoring finality of bankruptcy judgments. When investors
and other third parties can rely on a confirmed plan of reorganization and other bankruptcy
judgments, they have the footing and confidence they need to pursue investments and business
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arrangements with the reorganized debtor, all of which foster the debtor’s successful
reorganization.” In re Genesis Health Ventures, Inc., 280 B.R. 339, 346–47 (D. Del. 2002). As
such, the circumstances present here are insufficient to justify relief under Rule 60(b)(5).
The Court next considers whether relief is permissible under the catch-all provision of
Rule 60(b)(6), which provides that a court may grant such a motion “for any other reason that
justifies relief.” See Fed. R. Civ. P. 60(b)(6). The Third Circuit has recognized that relief under
this subsection “is available only in cases evidencing extraordinary circumstances.” Morris v.
Horn, 187 F.3d 333, 341 (3d Cir. 1999) (citing Martinez-McBean v. Gov’t of Virgin Islands, 562
F.2d 908, 911 (3d Cir. 1977); Stradley v. Cortez, 518 F.2d 488, 493 (3d Cir. 1975)). It is well
established that “[i]ntervening developments in the law by themselves rarely constitute the
extraordinary circumstances required for relief under Rule 60(b)(6).” Morris, 187 F.3d at 341
(citing Agostini v. Felton, 521 U.S. 203, 239 (1997)). The Third Circuit has likewise recognized
that the extraordinary circumstances standard established by Rule 60(b) is “a strict one” and that
such motions should be interpreted narrowly. See Inmates of Allegheny Cnty. Jail v. Wecht, 754
F.2d 120, 127 (3d Cir. 1985). The reasoning behind this strict interpretation is the strong societal
interest in the finality of judgments. See Mayberry v. Maroney, 558 F.2d 1159, 1163 (3d Cir.
1977).
In the instant case, AMH requests relief on the grounds that this Court’s prior
Memorandum Opinion “is no longer equitable in light of the new law established by the Wright
decision[.]” (AMH Mot. Relief 2.) The basis of AMH’s request, however, does not present a
“circumstance[ ] so exceptional that our overriding interest in the finality and repose of judgments
may properly be overcome.” Martinez-McBean, 562 F.2d at 913 (internal citation omitted).
Notably, unlike Grossman’s, Wright did not create “new law,” as AMH presently asserts. See
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Wright, 679 F.3d 101, 103 (3d Cir. 2012) (“This appeal concerns the application of our recent
decision in [Grossman’s][.]”) (emphasis added). Rather, Wright’s extension of the Grossman’s
rule is more akin to a “development in the law.” As noted above, however, the Third Circuit has
expressly recognized that “developments in the law by themselves” are insufficient to constitute
extraordinary circumstances warranting relief under Rule 60(b). Morris, 187 F.3d at 341 (citing
Agostini, 521 U.S. at 239); see also McCandless v. Vaughn, No. Civ.A.96-2310, 1999 WL
1197468, at *2 (E.D. Pa. Dec. 14, 1999), Allen v. Wydner, No. Civ.A.06-4299, 2008 WL
2412970, at *4 (E.D. Pa. June 10, 2008) (internal citations omitted).
Furthermore, the Supreme Court has likewise recognized that it is improper to grant relief
under Rule 60(b)(6) if the aggrieved party could have reasonably sought the same relief by means
of appeal. See Klapprott v. United States, 335 U.S. 601, 613–14 (1949); Ackermann v. United
States, 340 U.S. 193, 198 (1950)) (providing that it is a “‘well established principle that a motion
under Rule 60(b) may not be used as a substitute for appeal.’”); see also Martinez-McBean, 562
F.2d at 911 (quoting In re Imperial “400” Nat’l, Inc., 391 F.2d 163, 172 (3d Cir. 1968). The
reasoning behind this prohibition is that the “[f]iling a notice of appeal automatically transfers
jurisdiction from the district court to the appellate courts” so as to avoid issues related to
“concurrent jurisdiction.” Main Line Fed. Sav. & Loan Assoc. v. Tri-Kell, 721 F.2d 904, 906 (3d
Cir. 1983) (citing Hovey v. McDonald, 109 U.S. 150, 157 (1883)) (further citation omitted).
Although Rule 60(b) presents a limited exception to the automatic transfer of jurisdiction to an
appellate court, the Third Circuit has cabined this exception by making clear that:
While an appeal is pending, a district court . . . has the power both to entertain and
to deny a Rule 60(b) motion. If a district court is inclined to grant the motion or
intends to grant the motion . . . it should certify its inclination or its intention to
the appellate court which can then entertain a motion to remand the case. Once
remanded, the district court will have power to grant the motion, but not before.
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Venen v. Sweet, 758 F.2d 117, 123 (3d Cir. 1985) (internal citations omitted); see also Tri-Kell,
721 F.2d at 906 (same).
Here, AMH already filed its notice of appeal to the Third Circuit on July 10, 2012. (See
Bankr. No. 11-199, Doc. No. 235.) There is nothing in the record indicating that, on appeal,
AMH will be prevented from asserting its claims based on Wright. Indeed, AMH admits as much
in its Reply brief, stating that: “[w]hile [AMH’s] arguments can be raised on appeal, . . . there is
no sound reason why this Court should not avail itself of the opportunity to do so before the case
goes up on appeal.” (AMH Reply Br. 2) (emphasis in original). Contrary to AMH’s assertion,
however, there are sound reasons for this Court to deny its requested relief here. Notably, AMH
will have a full and fair opportunity to argue these issues on appeal. Further, Third Circuit
precedent dictates that this Court should decline to entertain such a Motion out of respect for the
finality of judgments in bankruptcy proceedings, so as to avoid the difficulties associated with
concurrent jurisdiction. See Martinez-McBean, 562 F.2d at 911; Imperial “400”, 391 F.2d at 172;
Venen, 758 F.2d at 123; Tri-Kell, 721 F.2d at 906; Mayberry, 558 F.2d at 1163. Moreover,
according to the Rule 60(b) motions procedure set forth by the Third Circuit in Venen and TriKell, at this point in time the Court only has the power “to entertain and to deny” a Rule 60(b)
motion. Venen, 758 F.2d at 122 (emphasis added); Tri-Kell, 721 F.2d at 906.

This Court

presently lacks the authority to grant AMH’s motion unless and until the Court of Appeals
entertains and grants a motion for remand on AMH’s behalf. See Venen, 758 F.2d at 123 (“[A]
district court . . . should certify its inclination or its intention [to grant a Rule 60(b) motion] to the
appellate court which then entertain a motion to remand. . . . Once remanded, the district court
will have the power to grant the motion, but not before.”). Given these considerations, the Court

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likewise declines to grant AMH’s Motion on these grounds.
Finally, the Court notes the speculative nature of AMH’s request for relief under Wright.
As discussed in detail above, Wright extended the reach of Grossman’s to include all post-petition
and pre-confirmation individuals that may potentially hold claims against the debtor. Wright, 679
F.3d at 107. As applied to the instant litigation, this means that any individual who was exposed
to Grace Asbestos prior to the Joint Plan’s confirmation by the Bankruptcy Court in January of
2011 potentially holds a claim against Grace. AMH does not, however, identify any such postpetition and pre-confirmation individual in the Grace bankruptcy who would be affected by the
Wright decision. To the contrary, AMH is a known claimant in this litigation that has already
filed its proofs of claims against the Debtor. As such, it cannot presently contend that Wright
somehow affects its rights here such that relief from this Court’s prior Memorandum Opinion
would be necessary. To the extent that AMH is attempting to assert the due process rights of other
unknown claimants under Wright, it lacks the standing to do so. See In re PWS Holding Corp.,
228 F.3d 224, 248 (3d Cir. 2000) (“Generally, litigants in federal court are barred from asserting
the constitutional rights of others.”) (internal citations and quotations omitted); In re Century
Glove, Inc., Nos. Civ.A.90-400 & 90-401, 1993 WL 239489, at *2 (D. Del. Feb. 10, 1993). If
and when any post-petition and pre-confirmation claimants are identified, then a court will
consider the merits of their claims under Wright and determine whether or not they hold claims.
This inquiry is simply too speculative at this point in time.5

The remainder of AMH’s arguments regarding the Joint Plan’s feasibility, its due process
rights, and the propriety of the 11 U.S.C. § 524(g) injunction and corresponding trust are all issues
that AMH previously raised before the Court prior to the issuance of the Memorandum Opinion and
Order. Indeed, AMH concedes as much: “[t]here is no doubt that [AMH] has raised some of these
arguments before.” (AMH Reply Br. 7.) Given that the Court has already addressed these issues, it
declines to do so again here. To the extent that AMH contends Wright somehow changes the Court’s
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For the foregoing reasons, AMH’s Motion for Relief from this Court’s Memorandum
Opinion and Order is denied. To allow otherwise would serve only to prolong and complicate an
immensely complex and drawn out bankruptcy appeal. At this point in time, Grace’s bankruptcy
is already docketed and pending review by the Third Circuit. There is nothing preventing AMH
from raising the concerns it presently asserts on appeal. Indeed, that is the more appropriate
forum to do so at this stage of the proceedings. As such, the chapter of Grace’s bankruptcy before
the District Court is now closed, and any further issues related to this Debtor’s reorganization
now properly lie before the Court of Appeals.
An appropriate Order follows.

findings related to these issues, such inquiries will be taken up on appeal by the Third Circuit.

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