2014 Decisions

Opinions of the United

States Court of Appeals

for the Third Circuit

6-17-2014

In Re: G-I Holdings Inc

Precedential or Non-Precedential: Precedential

Docket No. 13-3335

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PRECEDENTIAL

UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

______

Nos. 13-3335 and 13-3336

______

IN RE: G-I HOLDINGS, INC., 

formerly known as GAF Corporation,

 Debtor

UNITED STATES GYPSUM COMPANY,

 Appellant No. 13-3335

QUIGLEY COMPANY, INC.,

 Appellant No. 13-3336

______

On Appeal from United States District Court 

for the District of New Jersey

(D. N.J. No. 2-12-cv-6933)

District Judge: Dennis M. Cavanaugh

______

Argued April 8, 2014
2

Before: FISHER and SCIRICA, Circuit Judges, and 

MARIANI,* District Judge.

(Filed: June 17, 2014)

Rachel S. Bloomekatz, Esq. ARGUED

Jones Day

Suite 600

325 John H. McConnell Boulevard

P.O. Box 165017

Columbus, OH 43215

Brad B. Erens, Esq.

Brian J. Murray, Esq.

Jones Day

77 West Wacker Drive

Suite 3500

Chicago, IL 60601

Counsel for Appellant United States Gypsum Co.

John P. DiIorio, Esq.

Shapiro Croland

411 Hackensack Avenue

Hackensack, NJ 07601

 

*

The Honorable Robert D. Mariani, District Judge for 

the United States District Court for the Middle District of 

Pennsylvania, sitting by designation.
3

Stephen D. Hoffman, I, Esq. ARGUED

Wilk Auslander

1515 Broadway

43rd Floor

New York, NY 10036

Counsel for Appellant Quigley Co. Inc.

Mark E. Hall, Esq.

Dennis J. O'Grady, Esq.

Riker, Danzig, Scherer, Hyland & Perretti

One Speedwell Avenue

Headquarters Plaza

Morristown, NJ 07962

Andrew J. Rossman, Esq. ARGUED

Scott C. Shelley, Esq.

Jacob J. Waldman, Esq.

Quinn, Emanuel, Urquhart & Sullivan

51 Madison Avenue

22nd Floor

New York, NY 10010

Counsel for Appellees

______

OPINION OF THE COURT

______
4

FISHER, Circuit Judge.

Due to the rising number of asbestos-related personal 

injury lawsuits filed in the 1980s, a group of producers of 

asbestos and asbestos-containing products (“Members” or 

“Participating Producers”) joined together and formed the 

Center for Claims Resolution (the “Center”) to administer 

asbestos personal injury claims on behalf of the Members. 

The Members negotiated and signed the Producer Agreement 

Concerning Center for Claims Resolution (the “Producer 

Agreement”), which established and set forth the mechanics 

of the Center and the obligations of the Members. Appellants 

United States Gypsum Company (“U.S. Gypsum”) and 

Quigley Company, Inc. (“Quigley”) and the predecessor-ininterest of Appellee G-I Holdings, Inc. (“G-I”) were among 

the roughly twenty asbestos producers who signed the 

Producer Agreement, thereby becoming Members of the 

Center.

After G-I failed to pay its contractually-calculated 

share due to pay out personal injury settlements and cover 

Center expenses, U.S. Gypsum and Quigley were obligated to 

pay additional sums to cover G-I’s payment obligations. G-I 

filed for bankruptcy and the Center, U.S. Gypsum, and 

Quigley each filed a proof of claim in the Bankruptcy Court 

seeking to recover for G-I’s nonpayment under the Producer 

Agreement. The Center eventually settled its claim with G-I. 

Although arising in the context of a bankruptcy 

proceeding, this case concerns claims for breach of contract 

under Delaware law. We are asked to decide whether, under 

the Producer Agreement, U.S. Gypsum and Quigley 

(together, the “Former Members”) may maintain a breach of 

contract action against G-I. We hold that the Producer 

Agreement permits the Former Members to pursue a breach 

of contract action against G-I for its failure to pay 
5

contractually-obligated sums due to the Center, in light of the 

Former Members’ payment of G-I’s share. We therefore 

vacate the District Court’s order affirming the Bankruptcy 

Court’s grant of summary judgment in G-I’s favor.

I.

A.

Facing a growing number of asbestos-related personal 

injury lawsuits, a group of producers of asbestos and 

asbestos-containing products joined together to form the 

Center in order to more effectively defend against and resolve 

the lawsuits. The Center was incorporated as a non-profit, 

non-stock Delaware corporation in September 1988 to 

“administer and arrange for the evaluation, settlement, 

payment, and defense of asbestos-related bodily injury 

claims.” (A-684).

The Producer Agreement sets forth the Members’

purposes in entering the agreement and establishing the 

Center. The Members stated that they “believe it is important 

to establish an organization that will, on behalf of all 

Participating Producers, resolve meritorious asbestos-related 

claims in a fair and expeditious manner and, where necessary, 

defend asbestos-related claims efficiently and economically.” 

(A-715). They also sought to “enter into a constructive 

relationship with one another and to resolve any cross or 

counter claims that they may have against each other.” (Id.). 

The Center was governed by a five-person Board of 

Directors. A producer became a Member of the Center by 

signing the Producer Agreement, and membership could be 

terminated by a Member’s written notice, by a Member’s 

bankruptcy, or by resolution of the Board of Directors. 

However, even after termination of membership, the former 

Member would “continue to have and to honor all of the 

obligations incurred by it [under the Producer Agreement] or 
6

on its behalf as a member prior to the effective date of its 

membership termination.” (A-720).

The Producer Agreement designates the Center as each 

Member’s “sole agent to 

administer and arrange on its behalf for the evaluation, 

settlement, payment or defense of all asbestos-related claims 

against such Participating Producer.” (A-721). The Producer 

Agreement defines “asbestos-related claims” as “claims or 

lawsuits against any Participating Producers or the Center . . . 

seeking monetary relief . . . for bodily injury, sickness, 

disease or death, alleged to have been caused in whole or in 

part by any asbestos or asbestos-containing product.” (A716). After settling or otherwise resolving claims on behalf 

of the Members, the Center would bill and collect each 

Member’s allocated share of liability payments and expenses 

based upon a formula set forth in an attachment to the 

Producer Agreement.

If a Member failed to pay its share of liability 

payments or expenses in a timely manner, the Producer 

Agreement provides that “the Center’s Board of Directors 

may direct the Center to institute an ADR on behalf of the 

Center’s Participating Producers against such Participating 

Producer to enforce payment of such obligations.” (A-731-

32). With respect to claims between Members, the Producer 

Agreement provides that “[s]o long as it is a member of the 

Center each Participating Producer shall forego with respect 

to asbestos-related claims for contribution or indemnity (other 

than for contribution or indemnity assumed under written 

agreement) against all other Participating Producers that are 

members of the Center.” (A-730-31). 

Finally, the Producer Agreement sets forth that it is 

“not intended to confer any rights or benefits upon any other 

persons” aside from Members, the Center, and some of the 
7

Members’ insurers. (A-727). Other than the Center, a 

signatory Member, or a Member’s insurer, “[n]o person . . . 

shall have any legally enforceable rights under the 

Agreement.” (Id.). “All rights of action for any breach of 

this Agreement by any signatory hereto are hereby reserved to 

the Center, Participating Producers and to Supporting Insurers 

that are paying unallocated expenses incurred by the Center.” 

(Id.).

G-I is the successor-in-interest to GAF Corporation, 

which was named in a large number of asbestos-related 

lawsuits. G-I’s membership in the Center was terminated by 

the Center’s Board of Directors after the Board determined 

that G-I had breached the Producer Agreement by failing to 

pay its share of settlements and expenses. G-I’s termination 

was effective January 17, 2000. Shortly after the termination 

of G-I’s membership, the Center notified G-I that it owed the 

Center almost $300 million and commenced an ADR for 

payment. The ADR was stayed once G-I filed for bankruptcy

in January of 2001. The Center sought additional payments 

from the remaining Members to satisfy G-I’s share of 

settlements and expenses.

U.S. Gypsum and Quigley were Members of the 

Center at the same time as G-I. On February 1, 2001, Quigley 

withdrew from the Center, thereby terminating its 

membership. On June 25, 2001, U.S. Gypsum filed for 

Chapter 11 bankruptcy, which terminated its membership. 

U.S. Gypsum and Quigley assert that they made payments to 

the Center to cover the shortfall caused by G-I’s failure to 

pay.

B.

G-I filed for Chapter 11 bankruptcy on January 5, 

2001. The Bankruptcy Court fixed October 15, 2008 as the 

date by which all proofs of claim against any interest in the 
8

debtor had to be filed. On October 9, 2008, the Center filed a 

proof of claim alleging that G-I was liable to the Center for a 

total of $254.7 million due to its breach of the Producer 

Agreement.1 The Center alleged that it paid out $29.5 million 

to asbestos claimants on G-I’s behalf before it stopped paying 

out G-I’s share of the settlements to asbestos claimants. It 

also asserted that G-I owed it $2.6 million for G-I’s share of 

the Center’s expenses. Finally, the Center claimed damages 

for settlement agreements that asbestos claimants had voided 

after G-I’s membership terminated. Although the Center had 

not paid out any of these settlements, it claimed that G-I owed 

it $222.6 million as damages for the settlements that would 

not have been voided but for G-I’s breach. In its proof of 

claim, the Center did not state whether it had sought 

reimbursement from the remaining Members of the Center for 

the $29.5 million it paid on G-I’s behalf.

Both of the Former Members filed a separate proof of 

claim seeking to recover sums paid to the Center to cover G-

 

1

The amount of the Center’s claim as of the date of GI’s bankruptcy filing differs from the amount of the claim as 

of the date of filing the proof of claim. See A-775 (“As of 

January 6, 2001 (the “Petition Date”), the [Center] had a 

claim against G-I Holdings, Inc. (the “Debtor”) in the 

aggregate principal amount of $299,510,764 plus interest and 

attorneys’ fees. As of the date of the filing of this Proof of 

Claim, the [Center] has a claim against the Debtor in the 

aggregate principal amount of $254,705,373 plus interest, 

fees, and expenses.”). The Center had sought the $299.5 

million figure from G-I shortly after its membership 

terminated. We use the $254.7 million figure because that is 

the amount stated as presently owed in the proof of claim that 

G-I and the Center eventually settled.
9

I’s obligations. U.S. Gypsum filed its proof of claim on 

October 15, 2008, asserting a breach of contract claim. U.S. 

Gypsum maintained that in November 2000, the Center 

sought reimbursement from the remaining Members of the 

Center, including U.S. Gypsum, for the Center’s payment of 

$30 million to asbestos claimants on G-I’s behalf. U.S. 

Gypsum paid roughly $6.3 million to the Center to reimburse

the Center for the payments made on G-I’s behalf. Quigley 

filed a proof of claim on October 13, 2008 seeking 

unliquidated damages for G-I’s breach of the Producer 

Agreement. G-I filed objections to the proofs of claim.

The Center and G-I settled the Center’s claim against 

G-I seeking $254.7 million for a cash payment of $9.9 

million. On September 4, 2009, G-I moved for approval of 

the Settlement Agreement in the Bankruptcy Court. The 

Former Members objected to the settlement and sought 

clarification that the Settlement Agreement would not affect 

or release their claims against G-I. The Bankruptcy Court 

added language to the Order approving the Settlement 

Agreement, which was entered on September 24, 2009, 

providing that the Settlement Agreement was “binding on all 

entities asserting claims against G-I that derive from [the 

Center] or depend upon [the Center’s] rights.” (A-476). 

However, “[f]or the avoidance of doubt, nothing in this Order 

or the [] Settlement Agreement shall release, prejudice, 

compromise or otherwise affect the claims, if any, that 

Former Members . . . have or may have against the G-I Plan 

Parties . . . .” (Id.).

The District Court and Bankruptcy Court approved GI’s Eighth Amended Joint Plan of Reorganization on 

November 12, 2009. In the Eighth Amended Plan, G-I 

maintained that the Former Members’ claims were derivative 

of the Center’s settled claim, and should therefore be 
10

considered settled. But the Plan set forth that to the extent 

that the Former Members’ claims would be allowed, they 

would receive cash equal to 8.6% of the allowed claim 

amount. 

G-I filed for summary judgment on the Former 

Members’ claims on July 15, 2010. After briefing, the 

Bankruptcy Court issued an opinion on August 13, 2012 

granting the motion for summary judgment in G-I’s favor. 

The Bankruptcy Court concluded that the Center was 

authorized to resolve G-I’s breach by nonpayment, and the 

Producer Agreement barred the Former Members from 

pursuing claims, including for breach of contract, against G-I. 

The Bankruptcy Court also determined that the Former 

Members’ claims were derivative of the Center’s claim, 

which provided an additional reason that Former Members 

could not maintain their claims against G-I. 

U.S. Gypsum and Quigley appealed to the District 

Court, which affirmed the Bankruptcy Court’s decision on 

June 26, 2013. The District Court agreed with the 

Bankruptcy Court that the Former Members were 

contractually barred from pursuing an independent breach of 

contract action against G-I, reasoning that the Producer 

Agreement sought to avoid all litigation between Members. 

The District Court explained that, when read in the context of 

Section X’s title (“Third-Party Rights”) and the rest of the 

Producer Agreement, language reserving rights of action for 

breach to the Members did not create a right to bring breach 

of contract claims. It also concluded that the section 

permitting the Center to bring an ADR for a Member’s failure 

to pay did not “leav[e] open the option for independent 

members to bypass the sole authority of the [Center] to 

remedy [the breach] on their own.” (A-7). The District Court 

did not reach the issue of whether the Former Members’ 
11

claims were direct or derivative. U.S. Gypsum and Quigley 

both filed a timely notice of appeal.

II.

The Bankruptcy Court had jurisdiction over this core 

matter in G-I’s bankruptcy proceeding pursuant to 28 U.S.C. 

§ 1334(b) and 28 U.S.C. § 157. The Former Members timely 

appealed the Bankruptcy Court’s final order to the District 

Court, which exercised its jurisdiction under 28 U.S.C. 

§ 158(a)(1) and Bankruptcy Rule 8001(a). We have 

jurisdiction to review the District Court’s final order under 28 

U.S.C. § 158(d)(1) and 28 U.S.C. § 1291.

“We review a district court’s grant of summary 

judgment de novo, applying the same standard the district 

court applied.” Viera v. Life Ins. Co. of N. Am., 642 F.3d 407, 

413 (3d Cir. 2011). “We also review the legal interpretation 

of contractual language de novo.” Id. 

Summary judgment is proper “if the movant shows 

that there is no genuine dispute as to any material fact and the 

movant is entitled to judgment as a matter of law.” Fed. R. 

Civ. P. 56(a). “An issue is genuine only if there is a sufficient 

evidentiary basis on which a reasonable jury could find for 

the non-moving party, and a factual dispute is material only if 

it might affect the outcome of the suit under governing law.” 

Kaucher v. Cnty. of Bucks, 455 F.3d 418, 423 (3d Cir. 2006) 

(citing Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 

(1986)). In conducting our review, we view the record in the 

light most favorable to the non-moving party and draw all 

reasonable inferences in that party’s favor. Bowers v. Nat’l 

Collegiate Athletic Ass’n, 475 F.3d 524, 535 (3d Cir. 2007). 

A motion for summary judgment is properly denied if “a fairminded jury could return a verdict for the plaintiff on the 

evidence presented.” Anderson, 477 U.S. at 252.

III.
12

The Former Members argue that the District Court 

erred in holding that the Producer Agreement bars them from 

pursuing a breach of contract claim against G-I. They also 

urge us not to adopt the Bankruptcy Court’s conclusions that 

the Former Members’ claims are derivative of the Center’s 

claim and that allowing Former Members’ claims would lead 

to a double recovery. We will address each issue in turn.

A.

In determining whether the Former Members may 

maintain a breach of contract action against G-I under the 

Producer Agreement, we must heed the guidance of the 

Delaware courts2and “give priority to the parties’ intentions 

as reflected in the four corners of the agreement.” GMG 

Capital Invs., LLC v. Athenian Venture Partners I, L.P., 36 

A.3d 776, 779 (Del. 2012). “In upholding the intentions of 

the parties, a court must construe the agreement as a whole, 

giving effect to all provisions therein.” E.I. du Pont de 

Nemours & Co., Inc. v. Shell Oil Co., 498 A.2d 1108, 1113 

(Del. 1985). A court should interpret the contract “in such a 

way as to not render any of its provisions illusory or 

meaningless.” Sonitrol Holding Co. v. Marceau 

Investissements, 607 A.2d 1177, 1183 (Del. 1992). “[C]lear 

and unambiguous terms” in a contract are interpreted 

according to their ordinary meaning. GMG Capital Invs., 36 

A.3d at 780. However, “the meaning which arises from a 

particular portion of an agreement cannot control the meaning 

of the entire agreement where such inference runs counter to 

the agreement’s overall scheme or plan.” E.I. du Pont de 

Nemours, 498 A.2d at 1113.

 

2

The parties agree that the law of the state of 

Delaware governs the Producer Agreement. 
13

We also must keep in mind the elements that a plaintiff 

must prove for breach of contract. For a successful breach of 

contract claim, a party must prove: “1) a contractual 

obligation; 2) a breach of that obligation by the defendant; 

and 3) a resulting damage to the plaintiff.” H-M Wexford 

LLC v. Encorp, Inc., 832 A.2d 129, 140 (Del. Ch. 2003). 

With these principles in mind, we turn to the terms of 

the Producer Agreement. We will first address the language 

that is most relevant to Former Members’ ability to sue G-I 

for its breach by nonpayment, which is found in Section X. 

We will then address whether allowing Former Members to 

bring a breach of contract action under Section X is consistent 

with the purpose of the Producer Agreement and with its 

other provisions and overall scheme.

The third sentence of Section X provides: “All rights 

of action for any breach of this Agreement by any signatory 

hereto are hereby reserved to the Center, Participating 

Producers and to Supporting Insurers . . . .” (A-727). G-I and 

Former Members were signatories to the Agreement and 

Participating Producers at the time of G-I’s alleged breach. 

For the purposes of this appeal, we will assume that G-I did 

breach the Producer Agreement by failing to make required 

payments.3 If this case involved only G-I’s nonpayment of its 

 

3

The District Court ruled on summary judgment that 

the Agreement barred Former Members from bringing a 

breach of contract action against G-I as a matter of law. It did 

not reach the merits of the breach of contract claim – i.e. 

whether G-I failed to make required payments and thereby 

breached the Producer Agreement. G-I disputes the breach; 

however, as Former Members are the non-moving parties, we 

will construe the facts in their favor and assume G-I’s breach 

through nonpayment.
14

obligations to the Center, the Former Members would be 

unable to maintain a breach of contract action against G-I 

because they would not yet have suffered damages. But once 

the Former Members were required to make additional 

payments to cover the shortfall caused by G-I’s nonpayment, 

they suffered damages and accrued a cause of action for 

breach of contract. Section X reserves the right of the Former 

Members – Participating Producers at the time of G-I’s 

breach – to maintain an action for breach of the Producer 

Agreement against G-I – a signatory.

Section X makes explicit a basic contract law 

principle. “It is axiomatic that either party to an agreement 

may enforce its terms for breach thereof.” Triple C Railcar 

Serv., Inc. v. City of Wilmington, 630 A.2d 629, 633 (Del. 

1993) (citing Richard A. Lord, Williston on Contracts, § 1:1 

(4th ed. 1990)). Section X expands the universe of entities 

that may bring a breach of contract action under the Producer 

Agreement beyond the Members (who were the only 

signatories to the Producer Agreement) to include the Center 

and some of the Members’ insurers. It was not necessary for 

the Producer Agreement to acknowledge the Members’ 

ability to sue for breach because such an ability is inherent in 

contract law. But because the Producer Agreement does 

clearly provide for such a suit, we should not lightly overlook 

Section X as it is the most relevant provision to the issue at 

hand. 

G-I argues – and both the Bankruptcy and District 

Courts agreed – that this language merely limits third party 

rights under the Producer Agreement. Section X is titled 

“Third-Party Rights.” But we will not discount the plain 

language of the third sentence of that section merely because 

of the title. A court “may examine the [contract] heading ‘as 

additional evidence tending to support the contract’s 
15

substantive provisions.’” Fulkerson v. MHC Operating Ltd., 

01C-07-020, 2002 WL 32067510, at *5 (Del Super. Ct. Sept. 

24, 2002) (emphasis added) (quoting Cantor Fitzgerald, L.P. 

v. Cantor, 724 A.2d 571, 582 n.35 (Del. Ch. 1998)). The title 

of a section cannot contradict or rewrite the plain language of 

the contractual provisions within that section. “Contract 

headings do not constitute controlling evidence of a contract’s 

substantive meaning.” Id. 

G-I also relies upon the other provisions in Section X 

to write off the third sentence. The first two sentences of 

Section X make it clear that the Producer Agreement does not 

confer rights or benefits upon third parties, and that the only 

entities with legally enforceable rights under the Agreement 

are the Center, signatories to the Producer Agreement, and 

certain insurers. G-I would read the third sentence to merely 

reiterate what the first two already make express – that 

unnamed parties are prevented from enforcing the contract. 4 

But this reading would drain the third sentence of meaning 

and would “render a provision or term” – i.e., the language 

reserving rights of action for breach of contract –

“meaningless or illusory.” Osborn ex rel. Osborn v. Kemp, 

991 A.2d 1153, 1159 (Del. 2010) (internal quotation marks 

 

4 G-I also takes a different tack by arguing that even if 

the third sentence can be read as allowing Participating 

Producers to bring breach of contract actions, it need not be 

read to allow actions for nonpayment, and instead should be 

read as reserving the right to remedy breaches other than for 

nonpayment. But this runs counter to the plain language of 

the provision, which specifically reserves “all” rights to bring 

actions for “any” breach of the Agreement. (A-727). These 

words imply that actions for breach due to nonpayment are 

included.
16

omitted). This would violate the rule of contract 

interpretation that we must “give each provision and term 

effect, so as not to render any part of the contract mere 

surplusage.” Id. (internal quotation marks omitted) (quoting 

Kuhn Constr., Inc. v. Diamond State Port Corp., 990 A.2d 

393, 396-97 (Del. 2010)). We therefore decline G-I’s 

invitation to read the third sentence of Section X as a 

reiteration of or further clarification on the preclusion of third 

party rights under the Producer Agreement. Unless the 

language of Section X regarding breach of contract actions is 

irreconcilably inconsistent with the Producer Agreement’s 

purpose, other provisions, or overall contractual scheme, we 

should give effect to the “clear and unambiguous” language 

reserving the Former Members’ right to bring a breach of 

contract action against G-I. GMG Capital Invs., 36 A.3d at 

780. 

We believe that the plain language of Section X is 

perfectly consistent with the overall purpose of the Producer 

Agreement. We consider the purpose of the Producer 

Agreement because we must “give priority to the parties’ 

intentions,” id. at 779, and because we do not allow the 

meaning of a particular provision in an agreement to control 

the meaning of the agreement as a whole where that meaning 

“runs counter to the agreement’s overall scheme or plan.” 

E.I. du Pont de Nemours, 498 A.2d at 1113.

The introductory statements to the Producer 

Agreement set forth its purposes. One statement provides 

that the Members “desire to enter into a constructive 

relationship with one another and to resolve any cross or 

counter claims that they may have against each other.” (A715). The courts below relied in part upon this statement in 

concluding that the purpose of the Producer Agreement was 

to prevent “internecine” litigation – i.e. all litigation 
17

occurring between Members. (A-5, A-51). This goes too far 

and assumes intent to avoid a lawsuit such as this one where 

no such intent was expressed. The Producer Agreement 

states that the Members sought to resolve cross and 

counterclaims that they might have against one another. 

Cross and counterclaims refer to claims that Members could 

have against one another in the thousands of asbestos-related 

personal injury lawsuits that were the main concern of the 

Producer Agreement. The words crossclaim and 

counterclaim presume the existence of an underlying claim 

already being litigated. See Black’s Law Dict. 433 (9th ed. 

2009) (defining crossclaim as “[a] claim asserted between 

codefendants or coplaintiffs in a case and that relates to the 

subject of the original claim or counterclaim”); Black’s Law 

Dict. 402 (9th ed. 2009) (defining counterclaim as “[a] claim 

for relief asserted against an opposing party after an original 

claim has been made”). If the Members sought to avoid all 

litigation – as the courts below concluded – they could have 

drafted the Producer Agreement to provide that they sought to 

resolve any claims that they might have against each other, 

instead of any cross or counterclaims. “[C]ourts should be 

most chary about implying a contractual protection when the 

contract could easily have been drafted to expressly provide 

for it.” Allied Capital Corp. v. GC-Sun Holdings, L.P., 910 

A.2d 1020, 1035 (Del. Ch. 2006).

Unlike the courts below, we cannot say that allowing 

Former Members to pursue a breach of contract action against 

G-I for its nonpayment is inconsistent with the overall 

purpose of the Producer Agreement. The Producer 

Agreement sought to avoid litigation over the allocation of 

liability in the thousands of asbestos-related personal injury 

suits that inspired the creation of the Center in the first place. 

The desire to resolve these cross and counterclaims says 
18

nothing about the type of claim here – a claim among 

Members for breach of contract, unrelated to any individual 

asbestos-related claim. The expansive reading of purpose 

endorsed by the courts below – preventing internecine 

litigation – colored their analysis of the entire Producer 

Agreement, leading them to conclude that the Former 

Members’ suit against G-I was barred. We will not adopt 

such a broad interpretation and instead conclude that the 

Former Members’ right to bring a breach of contract action is 

consistent with the purpose of the Producer Agreement.

We turn now to consider whether allowing the Former 

Members to sue G-I for its breach under Section X is 

consistent with the other provisions of the Producer 

Agreement. “In upholding the intentions of the parties, a 

court must construe the agreement as a whole, giving effect to 

all provisions therein.” E.I. du Pont de Nemours, 498 A.2d at 

1113. If a meaning that arises from one portion of the 

agreement conflicts with the agreement’s “overall scheme or 

plan,” it cannot control. Id. In interpreting the entire 

agreement, “[s]pecific language in a contract controls over 

general language, and where specific and general provisions 

conflict, the specific provision ordinarily qualifies the 

meaning of the general one.” DCV Holdings, Inc. v. 

ConAgra, Inc., 889 A.2d 954, 961 (Del. 2005). Section X is a 

general provision, broadly setting forth the right to bring a 

breach of contract action. If this provision conflicts with a 

more specific provision elsewhere in the Producer Agreement 

or with its overall scheme or plan, we should not allow 

Section X to control.

We turn first to Section IV’s designation of the Center 

as the Members’ “sole agent.” By signing the agreement, 

“each Participating Producer hereby designates the Center as 

its sole agent to administer and arrange on its behalf for the 
19

evaluation, settlement, payment or defense of all asbestosrelated claims against such Participating Producer.” (A-720-

21). This provision does not conflict with Former Members’ 

ability to bring a breach of contract claim against G-I, 

because the Center’s role as “sole agent” applies only to 

“asbestos-related claims.” “Asbestos-related claims” are 

specifically defined in the Producer Agreement as lawsuits 

against Participating Producers or the Center “seeking 

monetary relief . . . for bodily injury, sickness, disease or 

death, alleged to have been caused in whole or in part by any 

asbestos or asbestos-containing product.” (A-716). The 

Former Members’ claims are breach of contract claims made 

by one party to an agreement against another party seeking 

remuneration for the breaching party’s failure to pay its 

contractually-allocated share of payments to settle asbestosrelated claims. Their claims are not themselves “asbestosrelated claims.” Allowing the Former Members to sue G-I for 

its nonpayment does not interfere with the Center’s role as 

“sole agent” for the purposes of administering and settling 

these asbestos personal injury claims. 

Next we turn to the first paragraph of Section XIV 

(“Section XIV.1”), which provides that during its 

membership, “each Participating Producer shall forego with 

respect to asbestos-related claims for contribution or 

indemnity (other than for contribution or indemnity assumed 

under written agreement) against all other Participating 

Producers that are members of the Center.” (A-730-31). 

Like the “sole agent” provision in Section IV discussed 

above, because Section XIV.1 qualifies its application to 

“asbestos-related claims” only, it does not conflict with 

Section X. In limiting suits for contribution and indemnity in 

asbestos personal injury lawsuits, this provision implements 

the Producer Agreement’s stated purpose of resolving cross 
20

and counterclaims among the Members. Asbestos-related 

claims for contribution or indemnity seek to reapportion 

damages based upon each tortfeasor’s proportionate share of 

liability in the underlying personal injury lawsuits. See e.g., 

Black’s Law Dict. 378 (9th ed. 2009) (defining contribution 

as “[o]ne tortfeasor’s right to collect from joint tortfeasors 

when – and to the extent that – the tortfeasor has paid more 

than his or her proportionate share to the injured party, the 

shares being determined as percentages of causal fault”). The 

Former Members’ breach of contract actions seek to recover a 

set amount of money that they paid to cover G-I’s obligation 

as calculated under a contractual formula. These claims are 

not based upon G-I’s share of the “fault” in the asbestos 

personal injury actions; rather, they are based upon the 

Producer Agreement. We cannot read Section XIV.1, which 

limits suits for contribution and indemnity for asbestosrelated claims, as being in conflict with the Former Members’ 

ability to bring suit for breach of the Producer Agreement 

under Section X.

Finally, we turn to the fourth paragraph of Section 

XIV (“Section XIV.4”), which addresses a Member’s 

nonpayment. This section provides: “In the event that any 

Participating Producer’s percentage shares of liability 

payments or allocated expenses are not paid in a timely 

manner, the Center’s Board of Directors may direct the 

Center to institute an ADR on behalf of the Center’s 

Participating Producers against such Participating Producer to 

enforce payment of such obligations.” (A-731-32). Allowing 

Former Members to maintain their breach of contract actions 

against G-I does not conflict with this provision for several 

reasons. Most notably, Section XIV.4 provides that in the 

event of nonpayment, the Center’s Board may direct the 

Center to institute an ADR. This language is permissive, not 
21

mandatory or exclusive. Language in Section IV clearly 

articulates the Center’s “exclusive authority” and role as the 

Members’ “sole agent” in administering asbestos-related 

claims brought against Members. The drafting parties 

therefore knew how to draft a provision giving the Center 

“sole” or “exclusive” authority. In concluding that the Center 

had the exclusive right to bring an action for G-I’s 

nonpayment, the courts below changed “may” into 

“exclusively has the authority to.” We will not read 

“exclusive authority” into the contract “when the contract 

could easily have been drafted to expressly provide for it.” 

Allied Capital Corp., 910 A.2d at 1035. 

Consideration of the third element of a breach of 

contract claim – damages – is the key to understanding why 

the Former Members’ right to pursue a breach of contract 

action is consistent with Section XIV.4. The Former 

Members suffered damages once they were required to make 

additional payments to cover the shortfall caused by G-I’s 

breach. Before the Former Members were required to cover 

the shortfall, the harm G-I caused fell upon the Center, as the 

Center was unable to collect payments and therefore fulfill its 

settlement obligations to asbestos plaintiffs. In such a 

situation, the Center would rely upon Section XIV.4 to 

enforce the nonpaying Member’s obligations. But once the 

other Members paid G-I’s share, the harm to the Center was 

remedied – the Center fulfilled its obligations to asbestos 

plaintiffs – and became a harm to the Members who paid 

more than their share due under the Producer Agreement. 

Sections X and XIV.4 are particularly consistent with one 

another when viewed in light of the timing considerations 

outlined above. Section XIV.4 allows the Center to “enforce 

payment” before the Center has required others to cover the 

breaching signatory’s share, when the Center is responsible 
22

for the money due to asbestos plaintiffs. Section X allows 

Members to bring a breach of contract action after the Center 

has required them to cover and pay the breaching signatory’s 

share, when the Center has fulfilled its obligations to asbestos 

plaintiffs and the damage caused by the breach has shifted 

onto those Members.

5

 

5

If the Center were to bring and carry through to 

judgment an ADR on behalf of all Members harmed by one 

Member’s breach, it is possible that Section XIV.4 would 

foreclose those Members’ ability to sue under Section X even 

if the non-breaching Members had covered and paid the 

breaching Member’s share. Under these circumstances, the 

Center would have recovered on behalf of all Members who 

covered and paid, and their right to recovery would be 

foreclosed as their injury would have been remedied by the 

Center, acting on their behalf. Since the Center would have 

obtained this recovery, perhaps adjustments would be made to 

these Members’ future obligations to the Center. 

But that is not what happened here. While the Center 

did institute an ADR in 2000, that ADR was stayed after G-I 

declared bankruptcy. Ultimately, the Center resolved its own 

claims and claims on behalf of present members of the Center 

in 2009 through a settlement approved by the Bankruptcy 

Court. As further discussed below, this settlement did not 

include Former Members’ claims – it explicitly stated that the 

settlement covered only the Center’s claims and the claims of 

eight listed “Members,” not including U.S. Gypsum or 

Quigley. Therefore, the Center’s ADR right under Section 

XIV.4 and the Former Members’ right to bring a breach of 

contract action under Section X do not conflict under the 

events that have transpired here.
23

We therefore conclude that the Former Members’ right 

to bring a breach of contract action for G-I’s nonpayment 

under Section X does not conflict with “the agreement’s 

overall scheme or plan.” E.I. du Pont de Nemours, 498 A.2d 

at 1113. Indeed, reading the Producer Agreement to allow 

such an action when one Member pays another Member’s 

share is the only way to give all of its provisions meaning. 

The way that the courts below read the Producer Agreement 

renders meaningless the third sentence in Section X, writes 

out the qualifying phrase “with respect to asbestos-related 

claims” in Section XIV.1, and turns “may” into “exclusively 

has the authority to” in Section XIV.4. We eschew their 

reading in favor of one that “gives effect to every term of the 

instrument.” Council of Dorset Condo. Apartments v. 

Gordon, 801 A.2d 1, 7 (Del. 2002). We will therefore vacate 

the District Court’s order affirming the Bankruptcy Court’s 

order granting summary judgment to G-I, as the Producer 

Agreement allows Former Members to pursue a breach of 

contract action against G-I.

B.

We will briefly address the argument that the Former 

Members cannot pursue their breach of contract action 

against G-I because their claims are not direct claims, but are 

instead derivative of the Center’s claim. The District Court 

did not reach this argument, but the Bankruptcy Court did, 

holding in the alternative that even if the Producer Agreement 

did not prevent the Former Members’ claims, they were 

barred due to their derivative nature.

Generally, if a cause of action belongs to a 

corporation, only the corporation may bring that action. 

Under some circumstances, a shareholder may bring a 

“derivative” claim on behalf of a corporation for harm done 

to the corporation with recovery going to the corporation. 
24

Tooley v. Donaldson, Lufkin & Jenrette, 845 A.2d 1031, 1036 

(Del. 2004). When a shareholder is injured in a way that 

affects his or her legal rights as a shareholder, however, the 

shareholder retains the right to bring a “direct” claim, with 

recovery going directly to shareholders. Id. The Supreme 

Court of Delaware has set forth a standard – the Tooley

standard – to use in determining whether a shareholder’s 

claim is direct or derivative. The inquiry “turn[s] solely on 

the following questions: (1) who suffered the alleged harm 

(the corporation or the suing stockholders, individually); and 

(2) who would receive the benefit of any recovery or other 

remedy (the corporation or the stockholders, individually)?” 

Id. at 1033.

We can see no reason why the direct/derivative inquiry 

should apply in this situation. Under the case law, the 

distinction applies to claims brought by shareholders in a 

corporation. See id. (“We set forth in this Opinion the law to 

be applied henceforth in determining whether a stockholder’s 

claim is derivative or direct.”). G-I and the Former Members 

were not shareholders or investors in the Center, which, as a 

non-profit, non-stock corporation, has no shareholders. G-I 

has not brought to light any cases bearing any similarity to the 

situation here. Cases applying the distinction elsewhere in 

corporate and partnership law – such as to limited 

partnerships and LLCs – are inapplicable, as the Center’s 

structure and relationship with its Members is not similar to 

those corporate forms. See, e.g., Metro. Life Ins. Co. v. 

Tremont Grp. Holdings, Inc., No. 7092, 2012 WL 6632681, 

at *9 (Del. Ch. Dec. 20, 2012) (holding that claims brought 

by partners and investors in a limited partnership were 

derivative where the injury was suffered by the limited 

partnership); Matthew v. Laudamiel, No. 5957, 2012 WL 

605589, at *21 (Del. Ch. Feb. 21, 2012) (holding that claims 
25

brought by LLC members were still derivative even after the 

dissolution of the LLC).

The Former Members and G-I are in contractual 

privity with one another but not with the Center via the 

Producer Agreement. It seems illogical to inquire whether 

one contract signatory’s breach of contract claim against 

another signatory is derivative of a non-signatory’s claim. 

While the Center was granted rights under the Producer 

Agreement, this does not make the Former Members’ claims 

derivative. Once the Former Members were required to make 

additional payments to cover the shortfall in amounts due to 

asbestos plaintiffs caused by G-I’s nonpayment, the Former 

Members suffered damages and had a straightforward breach 

of contract claim.

Even if we were to consider whether the Former 

Members’ claims are derivative or direct under the Tooley

rubric, it is clear that their claims are direct. As to the first 

question, the Former Members, not the Center, suffered the 

harm caused by G-I’s breach. The Former Members, and any 

other Members who were required to pay additional amounts 

to cover for G-I’s nonpayment, suffered a harm when they 

paid amounts beyond what was contractually required. The 

Center, on the other hand, suffered no harm once it required 

the other Members to cover for G-I’s nonpayment and made 

the payments due to asbestos plaintiffs. As to the second 

question, the Former Members would receive the benefit of 

any recovery in the breach of contract action between two 

signatories to the contract. The Bankruptcy Court erred in 

concluding that the Former Members’ claims are derivative of 

the Center’s claim, and we conclude that this issue does not 

present a barrier to the Former Members’ actions for breach 

of contract against G-I.

C.
26

The Bankruptcy Court further concluded that 

permitting the Former Members to recover on claims that the 

Center had already asserted and resolved under the Settlement 

Agreement would allow “an impermissible double recovery” 

against G-I. (A-70). The District Court declined to reach this 

issue. G-I asserts that it “understood the [Center’s]

Settlement Agreement to govern all [Center]-related claims, 

and the payment amount was the exclusive source of recovery 

for such claims.” (G-I Br., at 39). But such a belief is in 

direct conflict with the explicit terms of both the Order and 

the Settlement Agreement. We reject G-I’s argument and the 

Bankruptcy Court’s conclusion for several reasons. 

The Order approving the Settlement Agreement 

between the Center and G-I provided: “For the avoidance of 

doubt, nothing in this Order or the [Center’s] Settlement 

Agreement shall release, prejudice, compromise or otherwise 

affect the claims, if any, that Former Members . . . have or 

may have against the G-I Plan Parties.” (A-476). This 

language clearly reserves the Former Members’ right to bring 

a breach of contract action and suggests that the Settlement 

Agreement did not cover the Former Members’ claims.

Indeed, the terms of the Settlement Agreement itself 

show that the Former Members’ claims were not a part of the 

Center’s settlement recovery. The Settlement Agreement

provides that the settlement payment that G-I pays to the 

Center represents “G-I’s entire liability to the [Center] for its 

share of liability payments and allocated expenses under the 

terms of the Producer Agreement and Attachment A thereto.” 

(A-428) (emphasis added). The Settlement Agreement states 

that upon the Center’s receipt of the settlement payment, the 

Center and “the Members” release all claims and causes of 

action that they had or may have against G-I, including claims 

for any alleged breach of the Producer Agreement. (A-430). 
27

The Settlement Agreement defines “Members” as “the 

present members of [the Center],” listing eight companies 

specifically. (A-423). The Former Members are not included 

in the eight companies listed as “Members” under the 

Settlement Agreement, nor were they “present members of 

[the Center]” on the date of the Settlement Agreement. 

The Center had its own claim for damages based upon 

the settlement agreements worth $222 million that were 

voided due to G-I’s breach. And the Former Members were 

not the only Members of the Center required to pay additional 

sums to cover G-I’s share of asbestos settlements. To the 

extent that some of these companies are still Members of the 

Center, the Center could bring these claims against G-I on 

their behalf. Under the terms of the Settlement Agreement 

and the Order approving it, these were the claims that the 

Settlement Agreement resolved, not the Former Members’ 

claims. 

Further, the issue of “impermissible double recovery” 

goes to apportionment of liability, not to the Former 

Members’ right to bring a cause of action under the Producer 

Agreement. G-I seems to recognize this point, by arguing 

that the Center’s agreement to indemnify G-I against the

Former Members’ breach of contract claims, memorialized in 

the Settlement Agreement, has no bearing on the construction 

of the Producer Agreement. While we maintain that the 

Former Members’ claims were not included in the Settlement 

Agreement, even if they were, this would not affect our 

reading of the Former Members’ ability to bring a breach of 

contract action against G-I, because the terms of a settlement 

agreement to which the Former Members were not parties 

cannot change the construction of the Producer Agreement. 

In conclusion, we are not concerned, as the Bankruptcy Court 

was, that allowing the Former Members to assert breach of 
28

contract claims against G-I would lead to an impermissible 

double recovery. The Center’s recovery for its own claims 

and claims it brought on behalf of present Members of the 

Center have no bearing on the Former Members’ claims, 

particularly when they were explicitly excluded from the 

Settlement Agreement between the Center and G-I.

IV.

For the foregoing reasons, we vacate the District 

Court’s order affirming the Bankruptcy Court’s grant of 

summary judgment in G-I’s favor and remand to the District 

Court. The District Court should vacate its opinion and 

remand to the Bankruptcy Court for further proceedings 

consistent with this opinion. We have determined that the 

Producer Agreement does not prohibit the Former Members’ 

breach of contract actions against G-I. The merits of the 

Former Members’ claims – whether G-I breached the 

Producer Agreement, whether they can show damages, and 

whether G-I has any valid defenses – are not before this Court

and we make no comment on their likelihood of success. On 

remand, the Bankruptcy Court may allow discovery and 

additional summary judgment motions on the merits of these

claims or proceed to trial.