In re: Specialty Products Holding Corp., et al.

Filing 25

MEMORANDUM. Signed by Judge Sue L. Robinson on 2/7/2014. (nmfn)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF DELAWARE

In re:
SPECIALTY PRODUCTS HOLDING CORP.,
etal.,
Debtors.

SPECIALTY PRODUCTS HOLDING CORP.,
et al.,
Appellants,
v.

OFFICIAL COMMITTEE OF ASBESTOS
PERSONAL INJURY CLAIMANTS and the
FUTURE CLAIMANTS' REPRESENTATIVE,
Appellees.

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) Bank. No. 10-11780-PJW
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) Civ. No. 13-1244-SLR
) Civ. No. 13-1245-SLR
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MEMORANDUM
At Wilmington this 7th day of February, 2014, having reviewed the materials
submitted in connection with appellants' motion for certification, 1 and having conferred
with counsel; I will grant the motion based on the following reasoning: 2
1. Background. A primary goal of the debtors' chapter 11 cases is to establish
a trust under 11 U.S.C. § 524(g) to fairly and efficiently address the debtors' present
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D.I. 7 in lead case, Civ. No. 13-1244. Hereafter, all references to the docket will
be to the docket in lead case, Civ. No. 13-1244, unless otherwise noted.
2

There is also pending a motion to dismiss the appeal filed by appellees in Misc.
No. 13-194-SLR. (D. I. 1) The court will consider such motion once the United States
Court of Appeals for the Third Circuit has made its certification determination.

and future asbestos claims. The amount appropriate to fund that trust is a function of
the extent of claims to be compensated, and that amount is determined through an
estimation pursuant to 11 U.S.C. § 502(c), which requires that a court in certain
circumstances "estimate[] for purposes of allowance ... any contingent or unliquidated
claim"- a claim being defined in 11 U.S.C. § 101(5)(A) as a "right to payment." In this
regard, and as described by appellants, rather than embrace appellants' methodology
(based on measuring a debtor's legal liability), the bankruptcy court at bar "measured
the debtors' likely asbestos settlement payments had they remained in state courts,"
coming to the conclusion that appellees' claims have a present value of $1.1 billion.
(D.I. 7 at 2)
2. Standard. Section 158(d)(2)(A) of title 28 of the United States Code
authorizes expedited access to the United States Courts of Appeal by allowing parties
to seek certification of appeals from the bankruptcy court. An appeal from an order
may be certified for direct appeal to the Court of Appeals when a district court
determines that any of the following circumstances exist:
(i) the judgment, order, or decree involves a question of law as to which
there is no controlling decision of the court of appeals for the circuit or
of the Supreme Court of the United States, or involves a matter of public
importance;
(ii) the judgment, order, or decree involves a question of law requiring
resolution of conflicting decisions; or
(iii) an immediate appeal from the judgment, order, or decree may
materially advance the progress of the case or proceeding in which
the appeal is taken.
28 U.S.C. § 158(d).

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3. Although there is controlling authority in the Third Circuit as to the estimation
process under 11 U.S.C. § 502(c), its guidance leaves much discretion to the
bankruptcy courts in their estimation decisions. For instance, in Bittner v. Borne
Chemical Co.. Inc., 691 F.2d 134 (3d Cir. 1982), the Court recognized that the

bankruptcy code and rules were
silent as to the manner in which contingent or unliquidated claims are to be
estimated. Despite the lack of express direction on the matter, we are
persuaded that Congress intended the procedure to be undertaken initially
by the bankruptcy judges, using whatever method is best suited to the
particular contingencies at issue. The principal consideration must be an
accommodation to the underlying purposes of the Code. It is conceivable
that in rare and unusual cases arbitration or even a jury trial on all or some
of the issues may be necessary to obtain a reasonably accurate evaluation
of the claims. . . . Such methods, however, usually will run counter to the
efficient administration of the bankrupt's estate and where there is sufficient
evidence on which to base a reasonable estimate of the claim, the bankruptcy
judge should determine the value. In so doing, the court is bound by the legal
rules which may govern the ultimate value of the claim. For instance, when
the claim is based on an alleged breach of contract, the court must estimate
its worth in accordance with accepted contract law. . . . However, there are
no other limitations on the court's authority to evaluate the claims save
those general principles which should inform all decisions made pursuant
to the Code.

/d. at 135-36. The Court found no error in estimating claims "according to their ultimate
merits rather than the present value of the probability that they would succeed in their
state court action." /d. at 136.
4. Analysis. There can be no dispute that asbestos litigation in general
represents immeasurable costs to the public- in terms of human suffering, burdening
the courts, and threatening the viability of many businesses. There also can be no
dispute that, at this point in time, the primary issue in the asbestos cases is money, that
is, the amount of recovery for those suffering from (or who may in the future suffer

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from) injuries relating to exposure to asbestos. Very few cases go to trial. The focus in
litigation is finding a dollar amount that can resolve the cases through agreement.
5. Contrary to appellees' arguments, then, I find that the issue of how best to
reach these settlement figures is a matter of great public importance which will
materially advance the progress of the litigation at bar. To be sure, there are other
tangential issues which may need to be resolved even after an estimation methodology
and/or value has been determined. However, even appellees recognize that having a
final determination as to value will promote the settlement process. (See, e.g., D. I. 14,
ex. B)
6. As noted above, I recognize that Third Circuit precedent gives the bankruptcy
courts wide-ranging discretion in making their estimation determinations, leaving the
district courts unhelpful at best, impotent at worst, in any attempts to promote the
resolution of these complex cases. Given that the Third Circuit has not directly
addressed the estimation process in the context of the asbestos litigation, it strikes me
that, consistent with 28 U.S.C. § 158(d), having appellate input earlier in the process
would go far in establishing needed guidance for the parties going forward.
7. Conclusion. For the reasons stated, appellants' motion for certification is
granted. An order shall issue.

United States

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istrict Judge