PRECEDENTIAL

UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

______

Nos. 12-2923 and 12-3143

______

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

Anderson Memorial Hospital,

Appellant

______

On Appeal from the United States District Court

for the District of Delaware

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

District Judge: Honorable Ronald L. Buckwalter

______

Argued June 17, 2013

Before: AMBRO, FISHER and JORDAN, Circuit Judges.

(Filed: September 4, 2013)

Christopher D. Loizides, Esq.

Loizides & Associates

1225 King Street

Suite 800

Wilmington, DE 19801
2

David L. Rosendorf, Esq. 

Kozyak Tropin & Throckmorton

2525 Ponce De Leon Boulevard

9th Floor

Miami, FL 33134

Daniel A. Speights, Esq.

Speights & Runyan

200 Jackson Avenue East

P.O. Box 685

Hampton, SC 29924-0000 

Counsel for Appellant, Anderson

Memorial Hospital

John Donley, Esq. (Argued)

Lisa G. Esayian, Esq.

Adam C. Paul, Esq.

Kirkland & Ellis

300 North LaSalle Street

Chicago, IL 60654

Laura D. Jones, Esq.

Kathleen P. Makowski, Esq.

James E. O'Neill, III, Esq.

Pachulski Stang Ziehl & Jones

919 North Market Street

P.O. Box 8705, 17th Floor

Wilmington, DE 19801

Christopher Landau, Esq.
3

Kirkland & Ellis

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

Washington, DC 20005

Counsel for W.R. Grace, Official

Committee of Equity Security Holders,

David T. Austern and Garlock

Sealing Technologies, LLC

Roger J. Higgins, Esq.

Suite 2800

111 East Wacker Drive

Chicago, IL 60601

Counsel for W.R. Grace, Official

Committee of Equity Security Holders,

David T. Austern, Garlock Sealing

Technologies, LLC and John M. Thomas

Andrew N. Rosenberg, Esq. (Argued)

Paul, Weiss, Rifkind, Wharton & Garrison

1285 Avenue of the Americas

New York, NY 10019

 Counsel for David T. Austern,

 Her Majesty Queen of Canada

Kevin J. Mangan, Esq.

Francis A. Monaco, Jr., Esq.

Matthew P. Ward, Esq.

Womble, Carlyle, Sandridge & Rice

222 Delaware Avenue, Suite 1501
4

Wilmington, DE 19801

Counsel for Her Majesty Queen

of Canada, Official Committee

of Equity Security Holders,

David T. Austern, CNA Financial

Corp. Loews and State of Montana

Philip Bentley, Esq.

Kramer, Levin, Naftalis & Frankel

1177 Avenue of the Americas

New York, NY 10036

Counsel for Official Committee

of Equity Security Holders,

David T. Austern and

John M. Thomas

Garland S. Cassada, Esq.

Susan M. Huber, Esq.

Richard C. Worf, Jr., Esq.

Robinson Bradshaw & Hinson

101 North Tryon Street, Suite 1900

Charlotte, NC 28246

Brett D. Fallon, Esq.

Morris James

500 Delaware Avenue ,Suite 1500

Wilmington, DE 19081

Counsel for Official Committee

Equity Security Holders,

David T. Austern and Garlock

Sealing Technologies, LLC
5

Teresa K.D. Currier, Esq.

Saul Ewing

222 Delaware Avenue

P.O. Box 1266, Suite 1200

Wilmington, DE 19899

Counsel for Official Committee

of Equity Security Holders and

David T. Austern

Roger L. Frankel, Esq.

Orrick, Herrington & Sutcliffe

1152 15th Street, N.W.

Columbia Center

Washington, DC 20005

Richard H. Wyron, Esq.

Orrick, Herrington & Sutcliffe

1152 15th Street, N.W.

Columbia Center

Washington, DC 20005

Counsel for David T. Austern

Alan B. Rich, Esq. (Argued)

Suite 4244

1201 Elm Street

Dallas, TX 75270

Counsel for Property Damage 

Future Claims Representative

Elizabeth M. DeCristofaro, Esq.
6

Ford, Marrin, Esposito, Witmeyer & Gleser

88 Pine Street

23rd Floor, Wall Street Plaza

New York, NY 10005

Michael S. Giannotto, Esq.

Frederick C. Schafrick, Esq.

Goodwin Procter

901 New York Avenue, N.W.

Suite 900 East

Washington, DC 20001

Counsel for Continental Casualty Co.

Elisa Alcabes, Esq.

Mary Beth Forshaw, Esq.

Andrew T. Frankel, Esq.

Simpson, Thacher & Bartlett

425 Lexington Avenue

New York, NY 10017

Neal J. Levitsky, Esq.

Seth A. Niederman, Esq.

Fox Rothschild

919 North Market Street

Citizens Bank Center, Suite 1300

Wilmington, DE 19801

Counsel for Travelers Casualty

& Surety Co.

Mark T. Hurford, Esq.

Campbell & Levine
7

222 Delaware Avenue, Suite 1620

Wilmington, DE 19801

Peter V. Lockwood, Esq.

Caplin & Drysdale

Suite 1100

One Thomas Circle, N.W.

Washington, DC 20005

Counsel for Official Committee of

Asbestos Personal Injury Claimants

Edward C. Toole, Jr., Esq.

Pepper Hamilton

18th & Arch Streets

3000 Two Logan Square

Philadelphia, PA 19103 

Counsel for BNSF Railway Co.

Matthew S. Owen, Esq.

Ashley C. Parrish, Esq.

Carolyn M. Sweeney, Esq.

King & Spalding

1700 Pennsylvania Avenue, N.W.

Suite 200

Washington, DC 20006

Thaddeus D. Wilson, Esq.

King & Spalding

1180 Peachtree Street

Atlanta, GA 30309

Counsel for Proposed Amicus
8

Imperial Tobacco Canada Ltd.

______

OPINION OF THE COURT

______

FISHER, Circuit Judge.

Anderson Memorial Hospital (“AMH”) first filed suit 

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

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

property damage caused by asbestos-containing products that 

Grace had manufactured. Before the resolution of that 

litigation, Grace filed a petition for Chapter 11 protection. 

The Bankruptcy Court supervised nearly a decade of related 

litigation. Most property damage claims against Grace had 

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

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

damage claims against Grace to that trust for payment. 

AMH, however, did not settle. The Bankruptcy Court 

confirmed Grace’s reorganization, including a trust and 

channeling injunction, over AMH’s objections. The District 

Court affirmed.

AMH appeals from the orders confirming Grace’s 

Chapter 11 Plan and approving the trust and channeling 

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

 

1 Appellee Grace consists of sixty-two related 

corporate entities. For ease of reference, the debtors are 

collectively referred to hereinafter as “Grace.”
9

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

handling overwhelming asbestos-related liabilities in the 

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

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

that the Plan was proposed in good faith pursuant to 

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

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

we will affirm the judgment of the District Court.

I.

One aspect of Grace’s business is extracting natural 

resources, refining them, and converting them into 

manufactured materials used for building construction and 

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

hundreds of asbestos-related lawsuits filed by building 

owners seeking redress for the costs involved in removing 

Grace products.

AMH owns a hospital complex in Anderson, South 

Carolina, that used Grace products in its construction. In 

1992, AMH filed a class action lawsuit against Grace seeking 

compensation for asbestos-related property damage in South 

Carolina state court. The South Carolina court struck out-ofstate class members from the AMH complaint—a decision 

that was not immediately appealable under South Carolina 

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

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

amended its complaint to exclude non-South Carolina 

buildings and to include damage caused by all kinds of 

asbestos-containing surfacing material produced by Grace. 

The South Carolina Circuit Court conditionally certified this 
10

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

700193. Grace sought Chapter 11 protection two months 

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

action had issued to class members.

Early in the Chapter 11 proceedings, Grace sought to 

establish a bar date for property damage claims and a process 

for handling related litigation. In April 2001, personal injury 

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

appointed. The Bankruptcy Court requested proposals in 

May 2001 for case management plans and the scheduling of 

the asbestos-related claims.

After the March 31, 2003 deadline for filing claims 

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

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

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

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

 

2

In addition to traditional PD claims, Grace also faced 

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

from a loose-fill attic insulation manufactured by Grace that 

allegedly contained asbestos. The ZAI litigation included a 

“science trial” (where court-appointed counsel represented 

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

Bankruptcy Court ruling that, although ZAI did contain some 

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

decision, the Bankruptcy Court approved a settlement 

(negotiated in September 2008) that would allow future US 

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

part of Class 7B.
11

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

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

filed an individual proof of claim for each of the potential 

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

Grace asserts that approximately 2,000 of the individual 

claims were filed without any authority from the purported 

claimant.

Grace filed a Notice of Intent to Object to the PD 

claims, and some claimants then came forward to object that 

AMH’s counsel had filed claims in their names without 

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

The number of PD claims was ultimately reduced from more 

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

claims improperly filed on behalf of class claimants and 

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

withdrew approximately 550 additional claims for various 

other reasons. The parties litigated some additional claims in 

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

disallowed those claims, a ruling that the District Court and 

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

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

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

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

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

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

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

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

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

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

4234339, *2 (D. Del. Sept. 4, 2008), interlocutory appeal 
12

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

14, 2009).

Throughout the Chapter 11 process, various parties 

engaged in settlement negotiations. In fall 2004, an initial 

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

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

but the parties did not reach a settlement.

In fall 2006, Grace began to litigate the remaining PD 

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

disallowed, or settled (contingent on the confirmation of a 

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

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

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

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

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

approved.

With the consent of the committee of asbestos PD 

claimants, Plan Proponents obtained the appointment of 

Judge Alexander Sanders as a representative of future PD 

claimants. Plan Proponents negotiated with Judge Sanders 

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

traditional PD claims. Successive drafts of the Plan were 

circulated to all counsel, and comments were invited. AMH 

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

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

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

future claims representative, and the PI lead negotiator—all 

without PD participation.
13

The Plan was filed on February 27, 2009 and 

subsequently amended several times. With respect to the 

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

making up Class 7A, it provides:

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

Holder of an Asbestos PD Claim in Class 7A 

that is Allowed as of the effective date pursuant 

to a PD Settlement Agreement, or other 

stipulation, order, or agreement, shall be paid 

the Allowed Amount of its Allowed Asbestos 

PD Claim in Cash in full by the Asbestos PD 

Trust as and when due, without any deduction, 

proration, reduction, setoff or discount, pursuant 

to the terms of the respective PD Settlement 

Agreements, or other stipulation, order, or 

agreement, and the terms of the Asbestos PD 

Trust Agreement (which Asbestos PD Trust 

shall be deemed by this Plan, the Confirmation 

Order, and the Asbestos PD Trust Agreement to 

have assumed the obligations of such PD 

Settlement Agreements). Unresolved Asbestos 

PD Claims shall be paid pursuant to the 

following procedures:

(A) In connection with confirmation of the Plan, 

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

case management order]; and

(B) Allowed Unresolved Asbestos PD Claims 

shall be paid in full, in Cash, by the Asbestos 
14

PD Trust pursuant to the terms of the Asbestos 

PD Trust Agreement.

(C) All Allowed Asbestos PD Claims in Class 

7A shall be paid in full by the Asbestos PD 

Trust solely from the Asbestos PD Trust Assets 

that are designated for Class 7A Claims.

(D) The inclusion of Demands as Asbestos PD 

Claims in Class 7A and any reference to 

Demands related to Asbestos PD Claims in 

Class 7A in the Plan does not constitute an 

admission by the Debtors and the other Plan 

Proponents that an Entity which did not have an 

allowable Asbestos PD Claim in Class 7A 

against the Debtors as of the effective date 

could assert a valid claim against the Asbestos 

PD Trust contemplated under the Plan, and all 

rights and defenses to the allowance of such a 

claim by the Asbestos PD Trust are expressly 

reserved pursuant to the Plan.”

Joint Appendix (“JA”) at 200078-79.

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

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

pay allowed PD claims. Reorganized Grace will have an 

ongoing obligation to fund the PD Trust for all traditional PD 

claims allowed in the future.

Approximately 98.99 percent of Class 7A voted to 

accept the Plan. JA at 201376. AMH challenged the 
15

confirmation of the Plan. At the confirmation hearing, the 

Bankruptcy Court heard evidence on, among other things, the 

issue of good faith. AMH suggests that Grace essentially put 

on no evidence to support the conclusion that the Plan was 

filed in good faith and instead asserted that good faith could 

be determined based on the documents themselves. Grace’s 

assistant general counsel, Richard Finke, was eventually 

called to testify, but the Bankruptcy Court concluded that if 

he were allowed to give testimony on Grace’s intentions 

throughout the Chapter 11 proceeding, the confirmation

hearing would have to be continued to allow for discovery on 

the negotiating process. The Plan Proponents did not then 

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

proffer that did not delve into Plan Proponents’ subjective 

intent.

The Bankruptcy Court also heard evidence on the 

Plan’s compliance with the statutory requirements for 

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

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

significant future demands. Plan Proponents offered the 

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

Martin analyzed future events that might trigger additional 

property damage demands. She testified that Grace was 

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

amount and timing of those demands could not be 

determined. The Bankruptcy Court credited her testimony.

Additionally, investment banker Pamela Zilly testified 

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

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

reasonable projections, management initiatives, and proposed 
16

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

Although Grace’s internal projections valued future PD 

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

performance and financial track record would give the 

reorganized company the ability to satisfy up to $1.6 billion 

in asbestos PD liabilities over 25 years if necessary.

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

District Court affirmed the Confirmation Orders on appeal. 

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

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

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

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

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

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

timely appeal of the District Court’s affirmance of the 

Confirmation Orders and of its denial of its motion for relief 

followed.

II.

The Bankruptcy Court had jurisdiction over this case 

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

Court had appellate jurisdiction over the Bankruptcy Court 

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

 

3 Grace has established a reserve account in this 

amount to cover future PD claims and any defense costs 

associated with litigating those claims after the Plan’s 

effective date. The record does not indicate how Grace 

arrived at its $37.3 million projection.
17

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

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

its factual findings for clear error, and its exercise of 

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

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

III.

AMH appeals from the District Court’s affirmance of 

the Bankruptcy Court orders confirming Grace’s Chapter 11 

Plan of reorganization and approving a trust and channeling 

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

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

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

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

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

objections fails, and we will affirm the District Court.

A.

Section 524(g) provides a mechanism that allows 

companies to handle overwhelming present and future 

asbestos liability through a trust created in conjunction with a 

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

Demanding Due Process: The Constitutionality of the § 524 

Channeling Injunction and Trust Mechanisms That 

Effectively Discharge Asbestos Claims in Chapter 11 

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

AMH argues that the reorganization plan does not comply 

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

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

to be subject to future PD demands, (2) Grace did not 
18

demonstrate that the plan’s procedures were necessary to deal 

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

procedures treat similar claims differently. For the reasons 

discussed below, none of these arguments succeeds.

1.

An asbestos manufacturer may be entitled to use 

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

substantial future demands for payment arising out of the 

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

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

AMH contends that Grace faces no future property damage 

demands.

“Claim,” as described elsewhere in the Bankruptcy 

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

reduced to judgment, liquidated, unliquidated, fixed, 

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

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

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

payment, present or future, that—

(A) was not a claim during the proceedings 

leading to the confirmation of a plan of 

reorganization;

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

events that gave rise to the claims addressed by 

the injunction issued under paragraph (1); and

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

described in paragraph (2)(B)(i).”
19

§ 524(g)(5) (emphasis added).

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

are mutually exclusive because a demand “was not a claim 

during the proceedings leading to the confirmation of a plan 

of reorganization” and could be either dealt with in the 

ordinary course of the bankruptcy or not discharged at all. 

AMH contends that, although future demands are easily 

cognizable in the personal injury context, PD claims cannot

result in future demands, because any buildings that contain 

asbestos already contain the material.

AMH concedes that future PD demands existed under 

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

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

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

Future PD claims could have existed if any potential claim 

from already-installed asbestos products had not, under 

various state laws, met the accrual requirements at the time 

potential claimants were notified of the bankruptcy. Under 

the “mutual exclusivity” theory AMH proposes, these 

unaccrued actions were not “claims” and therefore could meet 

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

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

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

the confirmation hearing) should not control for several 

reasons.

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

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

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

individual is exposed pre-petition to a product or other 
20

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

payment’ under the Bankruptcy Code.” Grossman’s 

explicitly overrules Frenville.

4

 Id. at 121.

Second, AMH sees no basis in the evidence for the 

required finding that Grace is likely to be subject to 

substantial future demands, particularly when, in AMH’s 

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

the idea that Grace was likely to be subject to substantial 

future PD demands, is best understood as using the term 

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

was not offering an opinion about the technical difference 

between a claim and a demand within the meaning of 

§ 524(g).5

 

4 AMH asked the District Court to reconsider its 

affirmance of the confirmation order in light of Wright v. 

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

District Court declined, finding this new development in the 

law insufficient to create the extraordinary circumstances 

required for relief under Federal Rule of Civil Procedure 

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

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

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

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

process, cannot discharge the claims of property owners who 

would have held claims under the Frenville standard, but not 

under Grossman’s. Because Frenville then controlled, AMH 

argues that Grace did not attempt to notify potential PD 

claimants who at the time of the bar date notice might have 
21

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

error that would justify disturbing the factual conclusion that 

there are property damage claimants who will seek redress in 

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

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

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

 

had impacted property but whose claims had not yet accrued 

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

discharged, the claim holders are entitled to participation in 

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

this line of argument advances AMH’s contention that Grace 

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

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

process implications of discharging a claim are entirely 

separate from the question of whether future demands—

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

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

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

could it, as it participated extensively throughout the 

bankruptcy proceeding and had the opportunity to vote. 

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

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

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

quotation marks omitted), AMH lacks standing to raise that 

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

third-party standing are particularly relevant to appellate 

standing in bankruptcy proceedings” because “[b]ankruptcy 

proceedings regularly involve numerous parties, each of 

whom might find it personally expedient to assert the rights 

of another party”).”
22

testimony sufficiently supported the claim that Grace will be 

subject to future demands and that AMH failed to provide 

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

so. The Bankruptcy Court credited this expert testimony, 

noting the distinction between the existence of the demands 

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

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

Second, we conclude that property damage future 

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

assertion that Grossman’s eliminated the category of future 

holders of demands, as Grossman’s concerned the definition 

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

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

“emerge free and clear of the entire universe of asbestos 

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

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

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

(Sen. Heflin)).6

The Bankruptcy Court handled a similar statutory 

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

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

 

6 We place no importance on AMH’s claims that 

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

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

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

demands rather than their existence. Even if we were to 

interpret the transcript as an admission, Grace’s subjective 

belief should not change our statutory interpretation here.
23

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

that a literal application of the term would produce results at 

odds with the legislature’s intent. Responding to the 

suggestion that claim and demand are mutually exclusive, the 

court stated that

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

future’ demand for payment, and given the 

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

Court cannot fathom a situation where an 

individual could hold a ‘present’ demand for 

payment that is not technically a ‘claim’ under 

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

as mutually exclusive], the qualifier, ‘present or 

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

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

construction that courts should construe 

statutory language to avoid interpretations that 

would render any phrase superfluous.’”

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

Flintkote concluded that the position the creditor advanced 

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

contravened congressional intent. In the Bankruptcy Court’s 

description, because asbestos-related illnesses have a long 

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

mechanism in order to protect the due process rights of 

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

might not manifest injury until a time when all available 

compensation had been paid out to people who got sick faster. 
24

Section 524, therefore, improves equality of treatment among 

claimants. Id. at 124-25.

The Bankruptcy Court explained that, “because 

asbestos production in this country largely ceased many 

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

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

substantial future demands” under the creditor’s proposed 

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

would therefore prevent many debtors from qualifying for the 

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

the statute by removing the protections for ‘exposed yet 

unimpaired’ asbestos creditors and depriving them of just 

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

123. Thus, the Bankruptcy Court affirmed in Flintkote its 

earlier conclusion in this case that “future demand holders are 

those who have been exposed to asbestos but whose disease 

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

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

(Bankr. D. Del. 2011).

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

PD demand has some intuitive appeal. After all, asbestos 

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

be damaged by asbestos already contains it. As a policy 

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

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

damage has occurred and those harmed can be notified, the 

ordinary claims process could arguably meet Congress’s 

objectives of promoting equal treatment of claimants and 

allowing manufacturers to handle asbestos liability in an 
25

orderly and streamlined process.

7

 This supports AMH’s 

statutory interpretation, which emphasizes the “not a claim” 

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

assigned in Frenville and then Grossman’s interpretations of 

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

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

exposure clearly makes the property damage cases “claims” 

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

covered by the trust.

Ultimately, however, AMH’s arguments must fail. 

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

cover property damage, so an interpretation that makes such 

trusts impossible cannot be consistent with congressional 

intent. Furthermore, as the Bankruptcy Court demonstrated, 

AMH’s “mutual exclusivity” theory would effectively read 

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

reasons, we affirm the District Court’s conclusion that 

 

7 AMH states in its brief that only one other asbestos 

trust for property damage has been created and that it was 

established by the same bankruptcy judge handling this case. 

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

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

created property damage trusts. For example, a property 

damage trust was used in the Manville case that led Congress 

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

B.R. 618 (Bankr. S.D.N.Y. 1986). Additionally, an EaglePicher Property Damage Trust compensated owners of 

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

Inc., 203 B.R. 256, 279-82 (Bankr. S.D. Ohio 1996).
26

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

ascertained) how many entities and individuals were affected 

by these products, the precise quantity of asbestos-laden 

products that were sold, which buildings the products were 

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

percentage of these entities that have successfully removed 

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

significant chance that future property damage claims will be 

asserted against Grace by property damage claimants.” In re 

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

2.

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

unnecessary to equitably handle claims and future demands. 

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

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

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

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

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

the payment of funds by reorganized Grace, inserted 

primarily if not exclusively to obtain the benefits of the § 

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

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

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

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

AMH contends that employing trust mechanisms under these 

circumstances is merely a pretext for directing litigation back 

to the Bankruptcy Court, effectively allowing Grace to forumshop and avoid defending its case in front of a jury.
27

Furthermore, AMH finds a “fundamental illogic” in 

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

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

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

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

Sherry, From Free-Fall to Free-For-All: The Rise of PrePackaged Asbestos Bankruptcies, 12 Am. Bankr. Inst. 

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

provided no evidence that the pursuit of PD claims outside 

the Plan procedures would threaten the Plan when Grace has 

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

are resolved.

AMH's argument underestimates the importance of 

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

future asbestos liabilities. Outstanding, unresolved asbestos 

liability can make it extremely difficult for certain entities to 

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

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

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

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

of future asbestos claimants, as together they provide a level 

of certainty calculated to position Grace to compensate future 

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

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

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

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

3.

Finally, AMH argues that the trust procedures are not 

fair and equitable because similar present claims and future 

demands will not be paid “in substantially the same manner.” 
28

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

duplicates AMH’s broader claims of unequal treatment under 

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

considered together in the following Part, which concludes 

that the equality requirement has been satisfied. We 

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

524(g).

B.

“Equality of distribution among creditors is a central 

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

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

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

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

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

interest agrees to a less favorable treatment of such particular 

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

adoption of procedures that “provide reasonable assurance 

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

present claims and future demands that involve similar claims 

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

should not have been confirmed because it treats AMH 

substantially differently than other similarly situated creditors 

by denying AMH the opportunity to litigate in its chosen state 

forum, outside the jurisdiction of the Bankruptcy Court. 

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

Court found that the Bankruptcy Court had properly 

concluded that the Plan met these equality requirements. In 

re W.R. Grace & Co., 475 B.R. 34, 124 (D. Del. 2012).
29

The District Court adopted the test that equal treatment 

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

must receive equal value for their claims and must pay the 

same degree of consideration for their distribution under the 

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

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

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

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

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

members of a common class are required to tender more 

valuable consideration—be it their claim against specific 

property of the debtor or some other cognizable chose in 

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

AOV, 792 F.2d at 1152.

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

remanded for further record development where a two-trust 

structure could have potentially favored claimants to one trust 

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

concerns about certain pre-petition settlements that led to the 

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

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

 

8

That is not to say that members of a class must 

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

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

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

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

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

claimants in a class must simply have the same opportunity 

for recovery. Id.
30

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

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

concluded that the creation of stub claims may have the result 

of artificially gerrymandering classes called upon to vote on a 

plan, adding claimants to the class who have already received 

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

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

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

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

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

the plan put governmental subrogation claims together into a 

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

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

Different procedural protections applied to different 

government units; the Canadian government entered into a 

settlement that allowed it to gain notice before payments were 

made to beneficiaries so that Canada could determine if a 

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

that this procedural guarantee, given only to Canada, meant 

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

Here, the District Court found that the Plan satisfied 

both prongs of the equal treatment test outlined in Quigley

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

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

more than other class members by losing its forum option was 

incorrect, because everyone who filed a proof of claim 

submitted to the Bankruptcy Court’s jurisdiction—a necessity 

in order to maintain uniformity in treatment of claims in this 

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

Bankruptcy Court were a true disadvantage, AMH voluntarily 
31

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

(1990) (holding that Creditors submit themselves to the 

Bankruptcy Court’s jurisdiction by submitting a proof of 

claim).

Here, AMH argues that the Joint Plan disadvantages it 

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

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

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

resolve their property damage claims before the Bankruptcy 

Court. Future claimants may litigate their claims before a

district court, potentially before juries.

AMH suggests that the District Court erred because 

there are no similarly situated creditors left,9because other 

asbestos claimants have either reached a settlement that will 

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

alternative resolution procedures with lowered proof 

thresholds, or were permitted to litigate in their chosen 

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

required to litigate its claims in order to be entitled to 

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

 

9 As evidence that the CMO and Plan were not 

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

CMO was proposed in December 2008, all 37 asbestos PD 

claimants remaining at that time were subject to the 

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

applied to 57 unresolved PD claims. Since that time, 

“virtually all” PD claimants besides AMH have settled. 

Grace Br. at 8.
32

nearly a decade before this bankruptcy case was 

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

District Court’s finding that it submitted to the Bankruptcy 

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

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

repeated representations by Grace that pre-existing claims 

would be permitted to return to the tort system for 

resolution.”10 AMH Br. at 47.

No claims under Class 7A will be handled via 

alternative dispute resolution or lower proof thresholds; if 

AMH is comparing itself to the US ZAI claimants, the 

distinction is immaterial because those claimants are part of 

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

future PD claimants represented by Judge Sanders, any 

difference between AMH and future claimants as to forum is 

meant to allay Seventh Amendment concerns and is not 

prejudicial.

Ultimately, the only relevant comparison here is 

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

 

10 AMH claims that Grace represented that AMH’s and 

similar claims would be “permitted to return to the tort 

system.” Grace responds that those filings merely state that 

“Grace will identify pending cases that could continue to be 

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

‘representation’ that, after being extensively litigated in the 

Bankruptcy Court, AMH’s voluntarily filed class claim could 

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

at 600935 ¶2, 600972, 601007).
33

claimants represented by Judge Sanders.11 The only 

inequality AMH has identified is the ongoing jurisdiction of 

the Bankruptcy Court over AMH’s claims, which prevents 

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

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

the Bankruptcy Court; future claimants will not have 

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

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

a claim against a bankruptcy estate the creditor triggers the 

process of allowance and disallowance of claims, thereby 

 

11 AMH does not argue that it should not have been 

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

seems to believe it has conflicting interests. Moreover, AMH 

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

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

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

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

The record shows that Judge Sanders was stating that he had 

negotiated the right for future PD claimants, who have not 

submitted themselves to the jurisdiction of the Bankruptcy 

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

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

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

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

asked to assume that AMH claims must remain in Bankruptcy 

Court, Judge Sanders responded to a somewhat 

incomprehensible non-question from AMH counsel with “My 

clients got a better deal than yours.” AMHA at 700606-10.
34

subjecting himself to the bankruptcy court’s equitable 

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

Future PD claimants cannot be bound to the 

jurisdiction of the Bankruptcy Court in this way because they 

have not submitted proofs of claim granting the Bankruptcy 

Court jurisdiction and have not necessarily surrendered their 

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

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

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

most reasonable inference from their persistence on this issue 

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

Carolina state jury. AMH has not explained how being bound 

by the decision of the Bankruptcy Court leads directly to 

disadvantage in recovery, because to do so would lay bare 

assumptions about the fairness and adequacy of the 

Bankruptcy Court’s proceedings that it cannot support. We 

conclude, therefore, that the Plan treats AMH sufficiently 

equally to other members of the same class to meet the 

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

to conclude that binding AMH to the jurisdiction of the 

Bankruptcy Court represented “less favorable” treatment of 

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

such particular claim or interest” by submitting itself to the 

Bankruptcy Court’s jurisdiction via its proof of claim.

C.

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

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

important point of inquiry is the plan itself and whether such 

a plan will fairly achieve a result consistent with the 
35

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

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

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

quotation marks omitted). Those objectives and purposes 

include “preserving going concerns and maximizing property

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

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

liquidation and distribution of the bankruptcy estate to its 

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

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

citations and quotation marks omitted). Good faith presents 

mixed questions of law and fact; we review legal 

determinations de novo and factual determinations for clear 

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

Cir. 2000).

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

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

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

intentions and with a basis for expecting that reorganization 

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

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

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

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

first factor had been satisfied because the Plan preserved 

Grace as a going concern in the face of overwhelming 

asbestos liability and, given the probability of forthcoming 

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

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

Second, the District Court described the requirements of 

honesty, good intentions, and a reasonable expectation of 
36

success as assurances that “the Bankruptcy Code’s careful 

balancing of interests is not undermined by petitioners whose 

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

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

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

that nothing about the case suggested ulterior motives or 

dishonesty, particularly in light of the arms-length 

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

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

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

fundamental unfairness, and concluded that the Plan was not 

fundamentally unfair.

AMH asserts that the Plan fails to meet the good faith 

requirement for procedural and substantive reasons. First, 

AMH implies that Grace had the burden of proof in 

demonstrating “good faith negotiations with AMH with 

respect to the procedures imposed on the holders of 

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

asserts substantive unfairness because the Plan provides 

preferential treatment to certain “favored” constituencies. 

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

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

shows that AMH is suffering from the kind of disparity that 
37

raised questions meriting remand in Combustion

Engineering.

12

We reject AMH’s arguments for several reasons. 

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

clearly erred in its factual conclusion that the Plan resulted 

from “years of litigation and extensive arms-length 

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

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

the overwhelming vote by creditors in favor of the plan 

bolster this conclusion. We reject AMH’s implication that 

Grace’s failure to negotiate directly with AMH undercuts the 

overall Plan’s fundamental fairness, particularly when AMH 

declined to provide comments on drafts of the Plan when they 

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

 

12 Before us, AMH abandoned the argument it made to 

the District Court that the Plan fails the good faith 

requirement because Grace “repeatedly stymied” AMH’s 

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

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

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

that a plan was not proposed in good faith when the 

proponents had repeatedly avoided making necessary 

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

of transactions suggested that some disclosures had been 

manipulated, and voting creditors did not receive information 

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

Court correctly concluded that no comparable behavior had 

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

Del. 2012).
38

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

Furthermore, as the District Court emphasized, the 

Bankruptcy Court participated extensively in the settlement 

process and had an opportunity to observe the parties’ 

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

Second, we repeat our conclusion that AMH did not 

suffer from unfair inequality and note that a creditor’s 

disagreement about the handling of its claim does not 

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

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

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

that the creditors would have proposed does not make the 

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

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

majority rule and routinely leave a minority of creditors 

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

AMH’s allowed claims in full.

Third, we reject AMH’s contention that direct 

testimony from Grace’s negotiators was required to 

demonstrate Grace’s honesty and good intentions in 

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

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

purposes contrary to the Code’s objectives, is routinely 

established by circumstantial evidence. A negative inference 

should not be drawn against Grace merely because it chose to 

protect the privacy of attorney-client communications. For a 

variety of privilege and evidentiary reasons, divining the 

subjective intent of a corporate actor through the testimony of 

the negotiators and other key people will often prove 

problematic and less than enlightening. In any event, it 
39

would be an extraordinary circumstance where an objectively 

fair plan must be set aside because of mere suspicions 

concerning the subjective intent of the parties.

Furthermore, the Plan has little in common with 

reorganization schemes that have been rejected for want of 

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

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

faith means the plan was “proposed with honesty, good 

intentions and a basis for expecting that a reorganization can 

be effected with results consistent with the objectives and 

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

important feature being an inquiry into the fundamental 

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

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

been drafted primarily for the benefit of a pre-petition 

committee and memorialized a pre-petition settlement to the 

detriment of other claimants. Id.

Similarly, in Combustion Engineering we concluded 

that the use of stub claims potentially constituted “artificial 

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

about whether the plan fulfilled the good faith requirement. 

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

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

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

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

the proposed plan created an incentive for the debtor, a 

defunct business, to sabotage its own defense; severely 

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

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

– instead withdrawing money from it. 688 F.3d at 159-61.
40

In this case, Grace has demonstrated that the Plan is 

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

was not “proposed with honesty and good intentions and with 

a basis for expecting that reorganization can be effected.” 

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

affirm the District Court’s conclusion that the Plan was 

proposed in good faith.

D.

Grace had the burden of demonstrating that 

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

liquidation, or the need for further financial reorganization, of 

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

unless such liquidation or reorganization is proposed in the 

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

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

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

was not feasible where funding source was “speculative at 

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

context of ongoing litigation and will find a plan not feasible 

if it “hinges on future litigation that is uncertain and 

speculative, because success in such cases is only possible, 

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

(finding plan not feasible where its only source of funding 

was proceeds from highly speculative litigation winnings). 

The District Court agreed with the Bankruptcy Court’s factual 

conclusion—based on expert testimony, financial reports, 

estimates of Grace’s future earning capacity, current 

economic conditions, and Grace’s capital structure and 

earning power—that Grace had established a reasonable 
41

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

at 115.

AMH contends that Grace cannot meet its burden 

without establishing the amount of liability the Plan will need 

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

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

million reserve for PD liabilities and performed no 

independent analysis of the liabilities of the PD trust.13 

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

AMH argues, Zilly’s testimony that a reorganized Grace 

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

“proves nothing” because that figure has not been 

substantiated and because the Plan does not allow Grace to 

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

fund that PD trust every six months in the amount of 

unresolved PD claims and future PD demands that were 

allowed during the preceding term. Finally, AMH argues that 

Grace’s feasibility analysis did not account for the possibility 

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

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

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

 

13 AMH offers a one-sentence argument that we should 

reject Zilly’s testimony because “expert testimony based on 

assumptions that are not supported by the record should have 

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

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

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

expert relied on information that was proven by the record to 

be false.
42

for possibility of large judgment against debtor in case on 

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

None of these arguments leads us to conclude that the 

District Court clearly erred in affirming the Bankruptcy 

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

As the District Court noted, Grace needed only to 

demonstrate a reasonable likelihood of success, not an 

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

testimony, remains uncontradicted. AMH has produced no 

evidence supportive of its objection.15 AMH has offered no 

 

14 Additionally, AMH contends that Plan proponents 

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

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

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

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

owners who have a Grace asbestos product in their property 

but whose state law claims have not yet accrued are claim 

holders whose cases cannot be channeled to the PD trust, 

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

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

discussed above, we have rejected this reasoning.

15 AMH points to the testimony of a KPMG accountant 

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

asbestos PD liability. Because the report was outdated and 

contemporaneously rejected by Grace, the Bankruptcy and 

District Courts concluded that the report did not accurately 

reflect the current information about outstanding PD liability. 

AMH has offered no compelling reason why we should find 

this factual conclusion to be clearly erroneous.
43

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

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

a separate appeal—and that event appears sufficiently 

unlikely to block the conclusion that the Plan is reasonably 

likely to succeed.

We acknowledge that Grace has offered us little 

insight into the methodology used to arrive at the conclusion 

that $37.3 million provides an adequate reserve for the PD 

liability payments. But the scale of related claims16 satisfies 

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

not refuted) has a reasonable likelihood of providing for all 

claims. We therefore affirm the conclusion that the Plan is 

feasible.

IV.

For the reasons discussed above, AMH has failed to 

demonstrate that the Plan should not have been confirmed. 

We will affirm the District Court’s holding.

 

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

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

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

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

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

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

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

private commercial building owners in the United States for 

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

million.” Id. at 67 n.12.