PRECEDENTIAL

UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

_____________

Nos. 12-1521/2904

_____________

In Re: W.R. Grace & Co., et al., Debtors

 Her Majesty the Queen in Right of Canada,

 Appellant in 12-1521

 The State of Montana,

 Appellant in 12-2904

_______________

On Appeal from the United States District Court

for the District of Delaware

(D.C. No. 11-cv-199)

District Judge: Hon. Ronald L. Buckwalter

_______________

Argued

June 17, 2013

Before: AMBRO, FISHER and JORDAN, Circuit Judges.

(Filed: September 4, 2013)

_______________
2

Jacqueline Dais-Visca

Senior Counsel

Ontario Regional Office

130 King Street West - #3400

Toronto, Ontario M5X1K6

Kevin J. Mangan

Francis A. Monaco, Jr. [ARGUED]

Matthew P. Ward

Womble, Carlyle, Sandridge & Rice

222 Delaware Avenue - #1501

Wilmington, DE 19801

 Counsel for Appellant her Majesty the Queen

 In Right of Canada by the Attorney General of Canada

Kevin J. Mangan

Francis A. Monaco, Jr. [ARGUED]

Matthew P. Ward

Womble, Carlyle, Sandridge & Rice

222 Delaware Avenue - #1501

Wilmington, DE 19801

 Counsel for Appellant State of Montana

John Donley [ARGUED]

Lisa G. Esayian

Adam C. Paul

Kirkland & Ellis

300 N. LaSalle Street

Chicago, IL 60654
3

Roger J. Higgins

111 E. Wacker Drive - #2800

Chicago, IL 60601

Laura D. Jones

Kathleen P. Makowski

James E. O’Neill, III

Pachulski Stang Ziehl & Jones

919 N. Market Street – 17th Fl.

Wilmington, DE 19801

Christopher Landau

Kirkland & Ellis

655 15th Street NW - #1200

Washington, DC 20005

 Counsel for Appellee W.R. Grace & Co.

Mark T. Hurford

Campbell & Levine

222 Delaware Avenue - #1620

Wilmington, DE 19801

Peter V. Lockwood [ARGUED]

Caplin & Drysdale

One Thomas Circle, NW - #1100

Washington, DC 20005

 Counsel for Appellee Official Committee of Asbestos 

 Personal Injury
4

Elisa Alcabes

Simpson, Thacher & Bartlett

425 Lexington Avenue

New York, NY 10017

Robert J. Dehney

Morris, Nichols, Arsht & Tunnell

1201 North Market Street

P.O. Box 1347

Wilmington, DE 19899

Mary Beth Forshaw

Simpson, Thacher & Bartlett

425 Lexington Avenue

New York, NY 10017

Andrew T. Frankel

Simpson, Thacher & Bartlett

425 Lexington Avenue

New York, NY 10017

Neal J. Levitsky

Fox Rothschild

919 North Market Street

Citizens Bank Center

Suite 1300

Wilmington, DE 19801
5

Seth A. Niederman

Fox Rothschild

919 North Market Street

Citizens Bank Center

Suite 1300

Wilmington, DE 19801

Counsel for Appellee Travelers Casualty & Surety Co

Roger L. Frankel [ARGUED]

Orrick, Herrington & Sutcliffe

1152 15th Street, N.W.

Columbia Center

Washington, DC 20005

Counsel for Appellee David T. Austern, Asbestos PI Future 

Claimants Representative

Mark M. Maloney

Thaddeus D. Wilson

King Spalding LLP

1180 Peachtree Street, NE

Atlanta, GA 30309

Ashley C. Parrish

Matthew S. Owen

Carolyn M. Sweeney

King & Spalding LLP

1700 Pennsylvania Avenue, NW

Washington, DC 20006

 Counsel for Amicus Curiae Imperial Tobacco Canada

 Limited

_______________
6

OPINION OF THE COURT

_______________

JORDAN, Circuit Judge.

The State of Montana (“Montana”) and Her Majesty 

Queen Elizabeth II in Right of Canada (“the Crown”)1appeal 

the June 11, 2012 order2of the United States District Court 

for the District of Delaware affirming the Bankruptcy Court’s 

confirmation of the plan of reorganization of W.R. Grace & 

Co, et al. (“Grace”).3 We conclude that the District Court 

 

1 Although other courts of appeals have referred to the 

Queen by the territory over which she is sovereign, see, e.g., 

Her Majesty the Queen in Right of Ontario v. EPA, 912 F.2d 

1525, 1529 (D.C. Cir. 1990) (referring to “Her Majesty the 

Queen in Right of Ontario” as “Ontario”), for consistency’s 

sake we adopt the term used by her counsel and the District 

Court, and further adopt the District Court’s convention of 

referring to the sovereign as “it.”

2

 The District Court first issued an order affirming the 

Bankruptcy Court’s confirmation decision on January 30, 

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

2012). At the request of the parties, the Court subsequently 

addressed an additional issue not relevant to this appeal and, 

on June 11, 2012, it issued an amended and superseding 

opinion and order. See In re W.R. Grace & Co., 475 B.R. 34 

(D. Del. 2012). Montana and the Crown appealed both 

orders, but the earlier order has since been withdrawn. 

3

 For simplicity, we refer to the appellee-debtors 

collectively and in the singular as “Grace,” as the District 
7

correctly denied Montana’s and the Crown’s objections to 

plan confirmation, and we will accordingly affirm. 

I. Background

A. The Grace Bankruptcy

This appeal arises from Grace’s ongoing efforts to 

reorganize under Chapter 11 of the Bankruptcy Code, 11 

U.S.C. § 1101, et seq., in a manner that resolves all of its 

present and future asbestos liabilities. The company, which 

has manufactured and sold specialty chemicals and 

construction materials for more than a century, began facing 

asbestos-related lawsuits in the 1970s. Those lawsuits were 

based on alleged harm caused by a number of Grace’s 

products and activities, including its operation of a 

vermiculite mine in Libby, Montana. Grace operated the 

mine from 1963 to 1990, and during that period the mining 

process released asbestos-containing dust into the atmosphere

and allegedly sickened hundreds of area residents. Grace also 

had to confront many property damage lawsuits, including 

claims seeking recovery for the removal of asbestoscontaining products from homes and businesses. 

As a result of Grace’s production of asbestoscontaining materials, Montana and the Crown have been 

subject to asbestos-related lawsuits due to their alleged failure 

to warn their citizens of the risks posed by Grace’s products 

 

Court did. See In re W.R. Grace & Co., 475 B.R. at 63 n.3. 

Grace actually consists of 62 separate entities. See In re W.R. 

Grace & Co., 446 B.R. 96, 102 n.2 (Bankr. D. Del. 2011) 

(listing those entities).
8

and activities. Montana was named as a defendant in 

approximately 210 cases in Montana state courts, based on 

allegations that Montana officials failed to warn people in the 

vicinity of the vermiculite mine that they were at risk of 

asbestos exposure. Some of the cases also involved claims

that Montana aided and abetted Grace’s allegedly unlawful 

activities. In 2004, the Montana Supreme Court held that the 

state had a duty to warn residents of “workplace conditions 

known to be hazardous to health,” but the court did not 

resolve whether Montana had breached that duty. Orr v. 

State, 106 P.3d 100, 110, 118 (Mont. 2004). The state settled 

all of those cases for $43 million in 2011. As for the Crown, 

it has been named as a defendant in several failure-to-warn 

class action lawsuits involving property damage and personal 

injury claims arising from the use of “Zonolite Attic 

Insulation” (“ZAI”), a Grace insulation product that contains 

trace amounts of asbestos. The Crown further asserts that 

there may be future asbestos claims against it. Because of 

their exposure to asbestos liability, Montana and the Crown 

contend that they are entitled to contribution and

indemnification from Grace.4 

By 2001, the number of asbestos-related lawsuits

against Grace had grown to 65,000, which threatened the 

company’s financial viability and prompted it to file for 

Chapter 11 protection. Grace hoped that it could use § 524(g) 

of the Bankruptcy Code, 11 U.S.C. § 524(g), to establish a 

means for resolving the thousands of present and future 

 

4

 The Crown also claims to have direct property 

damage claims against Grace due to “costs incurred to seal 

attics and otherwise remediate ZAI installed in homes on 

military bases in Canada.” (Crown Opening Br. at 14.) 
9

asbestos-related claims against the company. That provision, 

discussed in depth herein, allows a company like Grace to set 

up a trust that will assume its asbestos liabilities. The statute 

likewise authorizes an injunction to channel all asbestosrelated claims to such a trust. See 11 U.S.C. § 524(g)(1)(A), 

(2)(B). Section 524(g) thus allows companies to emerge from 

bankruptcy free of asbestos liability, but only if the particular

channeling injunction in the case satisfies certain 

prerequisites, including that it be “fair and equitable” to 

future claimants. See id. § 524(g)(4)(B)(ii). 

It took Grace and its creditors’ committees seven years 

of contentious negotiations and litigation to reach an 

agreement regarding the basic structure of the company’s 

reorganization. The litigation included a protracted dispute 

over estate assets, which focused on Grace’s transfer of 

billions of dollars to two former affiliates, as well as 

numerous disagreements with Grace’s insurance providers. 

Those disputes eventually settled, resulting in the allocation 

of more than 1.5 billion dollars to a proposed § 524(g) trust. 

Grace also worked to resolve disputes with the nearly 

130,000 claimants who brought pre-petition asbestos personal 

injury and property damage claims. The company 

successfully settled with the vast majority of claimants 

bringing what came to be called “traditional” property 

damage claims – i.e., claims that do not involve ZAI – and it 

reached global agreements addressing the resolution of 

present and future ZAI property damage claims. With regard 

to the personal injury claims, Grace and the claimants 

engaged in extended negotiations over the estimated value of 

Grace’s personal injury liabilities and the corresponding 

amount needed to adequately fund a § 524(g) trust. In April 
10

2008, the Bankruptcy Court held an “estimation trial” to 

resolve those questions. At that trial, representatives for the 

personal injury claimants, which included the personal injury 

creditors’ committee (the “PI Committee”) and a courtappointed future claimants’ representative, presented expert 

testimony that estimated Grace’s liability to be somewhere 

between 6.3 and 7.4 billion dollars. Grace’s experts, on the 

other hand, put the company’s liability at 468 million dollars. 

Given that disparity, the parties opted for settlement and 

agreed to a term sheet that created the essential structure of a 

joint plan. 

B. The Joint Plan

Soon after that settlement in April 2008, Grace, the PI 

Committee, the future claimants’ representative, and the 

equity committee proposed a Joint Plan of Reorganization 

(the “Plan” or the “Joint Plan”),

5

the central pillars of which

are two trusts – a personal injury trust and a property damage 

trust – that will assume all of Grace’s current and future 

asbestos liabilities. The Joint Plan also provides for a 

§ 524(g) channeling injunction, which will send all asbestosrelated claims against Grace (and certain protected third 

parties), including future claims, to the trusts, allowing the 

protected parties to be “unconditionally, irrevocably and fully 

released” from “any and all Asbestos-Related Claims.” (J.A. 

at 200117.) As its name suggests, the personal injury trust 

will assume all of Grace’s direct and indirect asbestos 

 

5

 The Joint Plan was initially filed on September 19, 

2008, and a “finalized” version was filed on February 27, 

2009. The Plan continued to undergo modifications, 

however, through December 23, 2010. 
11

personal injury liabilities.6 It is funded by the 1.5 billion 

dollars obtained through settlements with Grace’s insurers 

and former affiliates, by an initial payment from Grace of 450 

million dollars, by a warrant to acquire 10 million shares of 

Grace common stock at 17 dollars a share, and by deferred 

cash payments from Grace of 100 to 110 million dollars per 

year through 2033.

7

 In total, those funding sources will 

provide more than 3 billion dollars to the trust. The property 

damage trust will likewise assume all of the protected parties’ 

direct and indirect property damage liabilities, including ZAI 

property damage claims, and it is funded by an initial 

payment of 180 million dollars, and a subsequent payment of 

 

6

 Specifically, the personal injury trust will “assume 

the liabilities of the Debtors with respect to all Asbestos 

[Personal Injury] Claims,” and will “process, liquidate, pay 

and satisfy all Asbestos [Personal Injury] Claims in 

accordance ... with [the] Plan.” (J.A. at 200092.) The Plan’s 

definition of an Asbestos Personal Injury Claim includes any 

claim against Grace that, “directly or indirectly,” is “based 

on, arising out of, resulting from, or attributable to ... death, 

wrongful death, personal or bodily injury ..., sickness, 

disease, loss of consortium, survivorship, medical monitoring, 

or other personal injuries,” and “the presence of or exposure 

at any time to” Grace’s asbestos products or production. (J.A. 

at 200041.) It therefore includes personal injury claims 

arising from ZAI. 

7

 The deferred payments to the trust are secured by a 

majority of Grace’s common stock. 
12

30 million dollars.

8

 Some of that money will then be 

transferred to a special fund that will be used to compensate

Canadian ZAI property damage claimants. 

In addition to being separately funded, the two trusts

proposed by the Joint Plan have separate mechanisms for 

resolving claims. Claims brought against the personal injury 

trust are to be resolved in accordance with the personal injury 

trust agreement and the “trust distribution procedures,” or 

“TDPs.” The TDPs establish two primary methods by which 

claims will be assessed, valued, and paid. Under an 

“expedited review” process, claims will be categorized and 

assigned a set amount of recovery according to a schedule of 

eight asbestos-related disease levels, some of which require 

demonstration of certain medical or exposure criteria. 

Claimants who do not meet those criteria, or who “seek to 

establish a liquidated value for the claim that is greater than 

its Scheduled Value,” will also have the option of utilizing an

individual review process, which could involve arbitration or 

litigation of their claims. (J.A. at 200293.) Both the 

expedited review and the individual review will result in a 

determination of the liquidated value of a claim. Claimants

will not be paid the full liquidated value, however. Rather, 

each claimant will recover a certain percentage of the 

liquidated value of his or her claim – a “Payment Percentage” 

– in order to ensure that there is money left for future

claimants to receive comparable recoveries. The TDPs set 

the initial Payment Percentage at between 25% and 35%, 

meaning that personal injury claimants should receive 

 

8

 Subject to certain conditions, reorganized Grace is 

also obliged to make additional future payments to the trust if 

needed to satisfy future demands. 
13

somewhere between 25% and 35% of the liquidated value of 

their claims. That percentage may “be adjusted upwards or 

downwards from time to time ... to reflect then-current 

estimates of the [personal injury] [t]rust’s assets and its 

liabilities, as well as [the] then-estimated value of thenpending and future claims.” (J.A. at 200296.) All claims are 

also limited to a “maximum value” based on the relevant 

disease level, unless the claim qualifies as an “extraordinary 

claim,”

9

in which case it is capped at the “maximum 

extraordinary value” for such claims. Claims will be paid on 

a “first-in, first-out” basis, which means that a claimant can 

recover from the trust as soon as the value of the claim is 

established. The trust will be administered by designated 

trustees, in consultation with a Trust Advisory Committee and 

the future claimants’ representative. 

The property damage trust resolves claims somewhat 

differently. Under the agreement governing that trust, all 

allowable “traditional” property damage claims will be paid 

in full, and there is no expedited process for determining the 

value of a claim. ZAI property damage claims brought by 

United States residents will also be paid from the property 

damage trust, but they will be resolved in accordance with 

procedures that closely resemble the personal injury TDPs. 

 

9

 An “extraordinary claim” is a claim held by someone 

“whose exposure to asbestos ... occurred predominately as a 

result of working in a manufacturing facility of Grace ... or 

... was at least 75% the result of exposure to asbestos or an 

asbestos-containing product or to conduct for which Grace 

has legal responsibility, and in either case there is little 

likelihood of a substantial recovery elsewhere.” (J.A. at 

200323.) 
14

Canadian ZAI property damage claimants will be paid 

pursuant to a settlement agreement reached by representatives 

of those claimants and Grace.

In addition to establishing the two § 524(g) trusts, the 

Joint Plan divides claimants into eleven classes, one of which 

is further divided into two subclasses.10 Relevant here, Class 

6 includes all asbestos personal injury claims (including 

Canadian and U.S. ZAI personal injury claims), Class 7A 

includes traditional asbestos property damage claims, Class 

7B includes U.S. ZAI property damage claims, and Class 8 

includes Canadian ZAI property damage claims.11 Like the 

 

10

 Both Montana and the Crown filed proofs of claim 

against Grace during its bankruptcy case. 

11

 The full list of classes provided for in the Joint Plan 

is as follows:

Class 1: Priority Claims

Class 2: Secured Claims

Class 3: Employee Benefit Claims

Class 4: Workers’ Compensation 

Claims

Class 5: Intercompany Claims

Class 6: Asbestos Personal Injury 

Claims

Class 7A: Asbestos Property 

Damage Claims, excluding United 

States ZAI Claims

Class 7B: United States ZAI 

Claims

Class 8: Canadian ZAI Claims
15

trusts, those classes do not distinguish between direct and 

indirect claims, and so Montana’s claims for indemnification 

and contribution are classified in Class 6 alongside claims 

brought directly by people allegedly harmed by Grace’s 

activities. The Crown’s claims fall into two different classes; 

any claims arising from personal injury ZAI suits are grouped 

in Class 6, whereas all direct and indirect ZAI property 

damage claims are in Class 8. Both of those classes are 

considered to be “impaired classes,” as is Class 7B, because 

claimants in those classes will not be able to recover the full 

value of their liquidated claims. All of the claims in Classes 

6, 7, and 8 are subject to the channeling injunction provided 

for in the Joint Plan. 

C. Procedural History

Following the submission of the Joint Plan, the 

bankruptcy trustees solicited votes from members of the 

impaired classes and the classes whose claims would be 

channeled to the trusts. Each of the classes of channeled 

claims easily cleared the hurdle of a 75 percent vote in favor 

of the Plan, as is required by § 524(g), see 11 U.S.C. 

§ 524(g)(2)(B)(ii)(IV)(bb) (providing that a class of claimants 

“whose claims are to be addressed by a trust” must “vote[], 

by at least 75 percent of those voting, in favor of the plan”), 

 

Class 9: General Unsecured 

Claims

Class 10: Equity Interests in the 

Parent

Class 11: Equity Interests in 

Debtors Other Than the Parent
16

and the only other class that the Joint Plan considers to be 

“impaired” (Class 11 – the equity holders) also voted for the 

Plan.12 The Bankruptcy Court then held a sixteen-day 

confirmation hearing, which began on September 8, 2009. 

During that hearing, numerous parties, including Montana 

and the Crown, objected to confirmation of the Joint Plan on 

the basis that it did not comply with the requirements of the 

Bankruptcy Code. In particular, Montana and the Crown 

argued that their claims could not properly be considered in 

Class 6, that they were improperly subject to the channeling 

injunction, and that they were treated unfairly under the Plan. 

After the Bankruptcy Court heard testimony and 

argument from both the Plan proponents and the objectors, 

the Plan was amended to address many of the objections. The 

Court then entered a confirmation order on January 31, 2011,

and overruled the remaining objections, including the 

objections of Montana and the Crown. In re W.R. Grace & 

Co., 446 B.R. 96, 102-03 (Bankr. D. Del. 2011).13 On appeal, 

the District Court affirmed the Bankruptcy Court’s order, 

 

12

 Another class of creditors – bank lenders in the 

“general unsecured creditors” class – also claim to be 

impaired, and did not vote in favor of the Joint Plan. Their 

objections to the Plan are the subject of a different appeal. 

13

 On February 15, 2011, the Bankruptcy Court issued 

an order clarifying the January 31, 2011 order and 

memorandum opinion, which made “clear that the Joint Plan 

as modified is confirmed” and requested “that the District 

Court issue and affirm the Confirmation Order ... including, 

without limitation, the injunction pursuant to § 524(g)(3).” 

(J.A. at 100081.) 
17

accepting as “reasonable” the inclusion of Montana’s and the 

Crown’s claims in classes with direct asbestos claims, In re 

W.R. Grace & Co., 475 B.R. 34, 110 (D. Del. 2012), and 

concluding that their claims “are properly enjoined and 

channeled to the trust,” id. at 111, and that “the record is 

devoid of any evidence indicating disparate treatment” of 

their claims, id. at 136. The Court therefore held that the 

Bankruptcy Court had properly overruled Montana’s and the 

Crown’s objections to plan confirmation. This timely appeal 

followed. 

II. Discussion14

Montana and the Crown both argue on appeal that the 

Bankruptcy Court and the District Court erred in confirming 

 

14

 The Bankruptcy Court had jurisdiction pursuant to 

28 U.S.C. §§ 157(a) and 1334(b). The District Court had 

appellate jurisdiction over the Bankruptcy Court’s decision 

under 28 U.S.C. § 158(a). We have jurisdiction over this 

appeal pursuant to 28 U.S.C. §§ 158(d) and 1291. We 

exercise “plenary review of an order from a district court 

sitting as an appellate court in review of a bankruptcy court.” 

In re Exide Techs., 607 F.3d 957, 961-62 (3d Cir. 2010). 

Under that standard, “[w]e 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). Under the clearly erroneous standard, we must uphold 

the Bankruptcy Court’s factual findings unless we are “left 

with the definite and firm conviction that a mistake has been 

committed.” In re CellNet Data Sys., Inc., 327 F.3d 242, 244 

(3d Cir. 2003) (internal quotation marks omitted). 
18

Grace’s Joint Plan of Reorganization because the Plan fails to 

comply with the applicable provisions of the Bankruptcy 

Code. See 11 U.S.C. § 1129(a)(1) (“The court shall confirm a 

plan only if ... [t]he plan complies with the applicable 

provisions of this title.”). Although they raise many specific 

objections, which we discuss infra, Montana and the Crown 

have three fundamental complaints about the Plan: (1) it 

wrongly channels their claims to the § 524(g) trusts; (2) it

discriminates against their claims for indemnification and 

contribution;

15 and (3) it is not “fair and equitable” to future 

claimants. We address each of those contentions in turn, and 

conclude that each was rightly rejected. 

A. The Channeling Injunction

Montana and the Crown attempt to escape the scope of 

the channeling injunction by invoking two different 

provisions of the Bankruptcy Code. First, they say that § 

524(g) does not encompass their claims against Grace. They 

argue that they lack “claims” or “demands” as those terms are

used in § 524(g), and that that provision does not permit the 

channeling of the particular kind of claims they do have, 

namely claims for indemnification or contribution. Second, 

they contend that § 1122 should prevent their claims from 

being placed in the same class as direct personal injury 

claims. Both arguments do not persuade us, as § 524(g) 

broadly encompasses all asbestos-related actions against the 

 

15

 The Crown raises two independent arguments in 

this regard, contending that the Plan grants preferential 

treatment to U.S. claims and impermissibly prevents indirect 

claimants from qualifying for “extraordinary claim” status. 

We address those claims in Section II.B, infra.
19

debtor, including claims for indemnification and contribution, 

and because such claims are sufficiently similar to direct 

personal injury claims that they can be classified together 

under § 1122. 

1. Section 524(g)

As we have explained on previous occasions, § 524(g) 

“provides a special form of supplemental injunctive relief for 

an insolvent debtor facing the unique problems and 

complexities associated with asbestos liability.” In re 

Combustion Eng’g, 391 F.3d 190, 234 (3d Cir. 2004); see 

also In re Federal-Mogul Global, Inc., 684 F.3d 355, 362 (3d 

Cir. 2012) (describing § 524(g) as a “quasi-administrative 

process” for resolving a company’s asbestos liabilities). 

Modeled after the “creative solution” to asbestos liability 

developed during the bankruptcy of the Johns-Manville 

Corporation, Federal-Mogul, 684 F.3d at 359 (internal 

quotation marks omitted), § 524(g) permits all asbestosrelated claims against the debtor to be channeled to a trust, 

and thus it “relieves the debtor of the uncertainty of future 

asbestos liabilities,” Combustion Eng’g, 391 F.3d at 234. See 

also H.R. Rep. No. 103-835, at 40 (1994) (explaining that 

§ 524(g) “is modeled on the trust-injunction in the JohnsManville case”).16

 By removing that uncertainty and 

 

16

 The Johns-Manville Corporation was formerly the 

world’s largest miner of asbestos, and it filed for bankruptcy 

in 1982. Kane v. Johns-Manville Corp, 843 F.2d 636, 639 

(2d Cir. 1988). Its plan of reorganization pioneered the use of 

a trust and a channeling injunction to equitably resolve the 

company’s asbestos liabilities. Id. at 690; see also In re 

Federal-Mogul Global Inc., 684 F.3d 355, 359 (3d Cir. 2012) 
20

allowing the debtor to emerge from bankruptcy free of all 

asbestos liability, § 524(g) facilitates the company’s ongoing 

viability, which in turn provides the trust “with an ‘evergreen’ 

source of funding to pay future claims.” Combustion Eng’g, 

391 F.3d at 234. In order to qualify for that relief, however, a 

debtor must satisfy certain prerequisites designed to ensure 

that future asbestos claimants will be treated fairly. FederalMogul, 684 F.3d at 359 n.9; see also 11 U.S.C. § 524(g)(2). 

The statute thus furthers two goals: ensuring the equitable 

resolution of present and future asbestos claims, and 

“enabling corporations saddled with asbestos liability to 

obtain the ‘fresh start’ promised by bankruptcy.” FederalMogul, 684 F.3d at 359. 

At issue in this case is the proper scope of a § 524(g) 

channeling injunction. Montana and the Crown argue that, 

under § 524(g), their legal efforts to obtain indemnification 

and contribution cannot be channeled to a trust. They say the 

statute “only enjoins ‘claims’ or ‘demands,’” and that their 

particular claims – what they like to call “requests” – do not 

fall within the definition of either term. (Montana Opening 

 

(“The primary bankruptcy innovation for addressing mass tort 

liability has been the post-confirmation trust, which first 

appeared in the bankruptcy proceedings of the JohnsManville Corporation ... .”). The Johns-Manville plan 

significantly underestimated the number of claims that would 

be filed, however, and the trust rapidly became insolvent. In 

re Joint E. & S. Dist. Asbestos Litig., 78 F.3d 764, 769 (2d 

Cir. 1996). As a result, subsequent litigation produced a 

settlement agreement that imposed new trust distribution 

procedures intended to preserve value for future claimants. 

Id. at 770-71. 
21

Br. at 26.) They further indicate that, even if they do hold 

“claims” or “demands” within the meaning of § 524(g), those 

claims are not the sort that can be channeled to a trust. They 

assert that § 524(g) permits a channeling injunction to extend 

only to personal injury, wrongful death, and property damage 

actions, not to their claims for indemnification and 

contribution, which are “of a different nature” because they 

arise from Montana’s and the Crown’s alleged failures to 

warn their citizens of the dangers of Grace’s activities.17 

(Montana Opening Br. at 25.) Grace responds that both 

arguments misunderstand the text, history, and purpose of 

§ 524(g), which is designed to permit all asbestos-related 

actions against the debtor – both direct and indirect – to be 

channeled to a trust, including actions for contribution and 

indemnification.

To determine whether the scope of § 524(g) 

encompasses “requests” like those that Montana and the 

Crown plan to make, we look first to the text of that 

provision. Section 524(g) allows a court “to enjoin entities 

from taking legal action for the purpose of directly or 

indirectly collecting, recovering, or receiving payment or 

recovery with respect to any claim or demand that, under a 

plan of reorganization, is to be paid in whole or in part by a 

trust described in [§ 524(g)(2)(B)(i)] ... .” 11 U.S.C. 

§ 524(g)(1)(B). Put more simply, “any claim or demand” that 

 

17

 In their briefing, Montana and the Crown make 

those arguments in reverse order. We address them in the 

order here because it seems more logical to consider whether 

Montana and the Crown have claims at all before determining 

if the substance of those claims is proper. 
22

will be paid by a § 524(g) trust cannot, because of the 

§ 524(g) injunction, be brought against the debtor. 

That brings us to the question of what constitutes a 

“claim or demand.” The Bankruptcy Code defines a “claim” 

using the “broadest available definition,” FCC v. NextWave 

Pers. Commc’ns Inc., 537 U.S. 293, 302 (2003) (internal 

quotation marks omitted), which provides that a “claim” is a 

“right to payment, whether or not such right is reduced to 

judgment, liquidated, unliquidated, fixed, contingent, 

matured, unmatured, disputed, legal, equitable, secured, or 

unsecured,” 11 U.S.C. § 101(5)(A). Section 524(g) takes that 

definition and expands it even further, including within the 

sweep of the channeling injunction not only “claims” but also 

“demands.” Id. § 524(g)(1)(B). A “demand” is then defined 

as a “demand for payment, present or future” that “was not a 

claim during the proceedings leading to the confirmation of a 

plan of reorganization” but “arises out of the same or similar 

conduct or events that gave rise to the claims addressed by the 

injunction.” Id. § 524(g)(5). A § 524(g) channeling 

injunction can therefore include any right to or demand for 

payment that arises from the debtor’s underlying asbestos 

liabilities, regardless of when that right or demand arises, 

whether it was raised during the bankruptcy proceeding or is 

contingent on a future event.

Despite the breadth of those definitions, Montana and 

the Crown contend that their particular “requests” for 

contribution and indemnification somehow fall outside of the 

channeling injunction’s scope. They say that their “requests” 

cannot be considered “claims” because claims for 

contribution and indemnification do not technically arise until 

a judgment or settlement has been paid, and at the time of 
23

Grace’s bankruptcy petition no such judgments had been 

entered against either Montana or the Crown. Their 

“requests” are also not “demands,” they explain, because 

those requests are not personal injury, wrongful death, or 

property damage claims, and thus they did not “aris[e] out of 

the same or similar conduct” as the claims subject to the 

injunction. See id. § 524(g)(5)(B). 

While those arguments reflect some creativity, they are 

ultimately unpersuasive. Montana’s and the Crown’s 

assertion that a “claim” arises when it fully accrues is based 

on the now-rejected reasoning of Avellino & Bienes v. M. 

Frenville Co. (In re Frenville), 744 F.2d 332, 335-36 (3d Cir. 

1984), which we explicitly overruled in In re Grossman’s, 

Inc., 607 F.3d 114 (3d Cir. 2010) (en banc). See Grossman’s, 

607 F.3d at 121 (holding that the “accrual test” previously 

established in Frenville “should be and now is overruled”).18 

The law in this Circuit now is that “a claim arises when an 

 

18 In re Frenville held that “a ‘claim,’ as that term is 

defined by the Bankruptcy Code, arises when the underlying 

state law cause of action accrues.” Grossman’s, 607 F.3d at 

118 (citing In re Frenville, 744 F.2d at 337). That approach 

to determining when a claim arises was uniformly criticized 

as incompatible with the broad definition of “claim” in the 

Bankruptcy Code, id. at 120, and in Grossman’s we rejected

it in favor of the rule that “a ‘claim’ arises when an individual 

is exposed pre-petition to a product or other conduct giving 

rise to an injury, which underlies a ‘right to payment’ under 

the Bankruptcy Code,” id. at 125. Two years later, in Wright 

v. Owens Corning, we expanded that holding to include 

conduct that occurs post-petition but pre-confirmation. 679 

F.3d 101, 106-07 (3d Cir. 2012). 
24

individual is exposed pre-confirmation to a product or other 

conduct giving rise to an injury that underlies a ‘right to 

payment’ under the Code.” Wright v. Owens Corning, 679 

F.3d 101, 107 (3d Cir. 2012) (emphasis omitted). A “claim” 

can therefore exist “before a right to payment exists under 

state law.” Grossman’s, 607 F.3d at 121. Regardless of 

when Montana and the Crown may have had judgments 

entered against them,

19 the material fact is that Grace’s 

asbestos-related activities underlie any rights to 

indemnification and contribution that they can assert. Grace’s 

relevant activities all occurred long before its bankruptcy 

filing, and thus, to the extent that Montana and the Crown 

have “claims,” those claims arose before confirmation of the 

Joint Plan.

For largely the same reason, Montana’s and the 

Crown’s argument regarding “demands” also fails. Although 

they claim that requests for contribution and indemnification 

do not “aris[e] from” the same conduct as personal injury or 

property damage claims, that argument ignores the underlying 

basis for such requests: Grace’s alleged asbestos liability. 

Any action that Montana and the Crown say they have against 

Grace arises from the same events as do all the other claims 

and demands covered by the channeling injunction, namely 

Grace’s production of asbestos-containing materials. 

Therefore, if Montana and the Crown have requests for 

 

19 Montana says that, “with the exception of one 

complaint, [it] was not named as a defendant in any ... State 

Court Actions until after the Petition Date.” (Montana 

Opening Br. at 10.) It appears, however, to have settled all of 

the state court claims against it prior to confirmation of the 

Joint Plan. 
25

payment that were not “claims” during the bankruptcy 

proceeding, those requests would meet the definition of 

“demand” in § 524(g). See 11 U.S.C. § 524(g)(5). 

More fundamentally, the arguments made by Montana 

and the Crown are based on a misunderstanding of the 

purpose of § 524(g). By arguing that they have “requests” for 

payment from Grace that cannot be called “claims” or 

“demands,” Montana and the Crown suggest that those terms 

constitute discreet categories, and that some asbestos-related 

actions fall into neither category and thus cannot be subject to 

§ 524(g). The text and history of § 524(g) tell us just the

opposite. As for the text, § 524(g)’s definition of “demand” 

overlaps to some degree with the Bankruptcy Code’s 

definition of “claim” – a “demand” could be a request for 

payment that was not raised during the bankruptcy 

proceeding, which also fits the Code’s definition of a “claim.” 

Furthermore, by taking the already broad definition of 

“claim” and expanding it to include all other “demands for 

payment” that arise from the same conduct, § 524(g) evinces 

an intent to include all potential asbestos-related liability of a

debtor, regardless of when such liability arose. See 11 U.S.C. 

§ 524(g)(1)(B), (5). 

That intent is also reflected in the history and purpose 

of the provision. Congress enacted § 524(g) in part because 

of the long latency period of many asbestos-related diseases, 

which, in cases like this, typically creates a large pool of 

future claimants whose disease has not yet manifested. See 

H.R. Rep. No. 103-835, at 40 (1994) (noting that “[a]sbestosrelated disease has a long latency period” of “up to 30 years 

or more”). Congress was concerned about those claimants for 

two reasons – they lack the ability to protect their own 
26

interests during the bankruptcy proceeding, and they create 

tremendous uncertainty for companies in Grace’s position, 

which can hinder a company’s financial rebound and limit 

available recovery for all asbestos victims. See id.

(explaining that future claimants “do not have their own 

voice” and that “lingering uncertainty” can “undermine[] the 

‘fresh start’ objectives of bankruptcy and the goals of the trust 

arrangement”); see also In re Flintkote Co., 486 B.R. 99, 124 

(Bankr. D. Del. 2012) (“In part because of long latency 

periods of certain asbestos-related illnesses, Congress enacted 

§ 524(g) to protect the due process rights of the exposed yet 

unimpaired.”). 

Section 524(g) addresses those concerns by imposing 

requirements to protect the rights of future claimants, and 

then, if those requirements are met, channeling all present and 

future asbestos-related liability to a trust funded by the 

debtor. Congress wanted to cover the whole set, and it did. 

The distinction, to the extent there is one, between a “claim” 

and a “demand” is therefore unimportant to the scope of the 

channeling injunction; the relevant question is instead 

whether an action seeks recovery that stems from the debtor’s 

asbestos-related liabilities. If it does, then it falls somewhere 

within the broad category of “any claim or demand,” and can 

be subject to a channeling injunction.

Montana and the Crown dispute the breadth of that 

interpretation, arguing that, for due process reasons, their 

requests cannot be channeled to a trust. They cite our recent 

decision in Wright v. Owens Corning, see supra note 18, 

which concluded that due process prevents some claims from 

being discharged by reorganization plans that were proposed 

and confirmed during the Frenville era. 679 F.3d at 107-09. 
27

Because the law during those bankruptcies was that claims

arise when they accrue, some potential claimants might have 

received notice of a bankruptcy but failed to file a claim 

because they understood that their claims had not yet 

“arisen.” Id. at 108. Therefore, although claims against a 

debtor are generally discharged by plan confirmation, such 

claimants lacked adequate notice for their claims to have been 

discharged without violating due process. 

But Owens Corning is inapposite, because the 

bankruptcy plan at issue in that case did not involve a 

§ 524(g) trust and channeling injunction. Although 

Montana’s and the Crown’s claims against Grace will be 

discharged, § 524(g) sends those claims, along with all other 

asbestos-related claims and demands, to a trust. Montana and 

the Crown will therefore have an opportunity to litigate their 

claims and potentially obtain relief, which means that the due 

process concern in Owens Corning – that claimants would 

lose any opportunity for relief without first receiving proper 

notice – is not implicated. Rather, the potential due process 

issue associated with channeling claims to a trust is the 

fairness of forcing future claimants, many of whom might 

have had no notice at all of the bankruptcy, to bring their 

claims against a trust rather than against the debtor directly. 

That concern is addressed by the proper application of 

§ 524(g). As we explained in Combustion Engineering, and 

again in Grossman’s, § 524(g) includes a number of 

requirements that “are specifically tailored to protect the due 

process rights of future claimants,” such as the “fair and 

equitable” provision and the mandatory seventy-five percent 

approval requirement. Combustion Eng’g, 391 F.3d at 234 

n.45 (citing, inter alia, 11 U.S.C. § 524(g)(4)(B)(ii), 

(g)(2)(B)(ii)(IV)(bb)); see also Grossman’s, 607 F.3d at 127 
28

(“By enacting § 524(g), Congress took account of the due 

process implications of discharging future claims of 

individuals whose injuries were not manifest at the time of 

the bankruptcy petition.”). Therefore, as long as a court 

correctly determines that § 524(g)’s requirements are 

satisfied, present and future claims can be channeled to a 

§ 524(g) trust without violating due process.

20

 

Montana’s and the Crown’s next argument is that their 

claims for indemnification and contribution are substantively 

different from Grace’s other asbestos-related liabilities, and 

thus cannot be channeled to the trust for that reason. They 

base that contention on § 524(g)(2)(B)(i), which explains that 

the purpose of a trust “is to assume the liabilities of a debtor 

 

20

 Montana and the Crown also contend that, under 

Owens Corning, they cannot be considered to have “claims.” 

They base that contention on Owens Corning’s discussion of 

the lingering effect of our overruled Frenville decision. See 

Owens Corning, 679 F.3d at 109 (explaining that Frenville

must continue to define when certain claims can be 

discharged, for the due process reasons discussed above). But 

that discussion does not help their case, because in Owens 

Corning we did not hold that Frenville continues to define 

when a claim arises – we held only that “[t]he shadow of 

Frenville” prevents some claims from being discharged. Id. 

Indeed, the opinion explicitly separates those two issues, 

concluding that an individual did hold a claim during the 

bankruptcy, but that the claim could not be discharged 

without violating due process. Id. at 107. Montana’s and the 

Crown’s contention that they do not even hold claims is 

therefore flatly contradicted by both Grossman’s and Owens 

Corning. 
29

which ... has been named as a defendant in personal injury, 

wrongful death, or property-damage actions seeking recovery 

for damages allegedly caused by the presence of, or exposure 

to, asbestos or asbestos-containing products.” 11 U.S.C. 

§ 524(g)(2)(B)(i)(I). Montana and the Crown assert that, 

because of that language, only asbestos-related personal 

injury, wrongful death, and property damage actions can be 

subject to the channeling injunction.

The argument fails, however, since § 524(g) expressly 

states that a court can “enjoin entities from taking legal action 

for the purpose of directly or indirectly collecting” on a claim 

or demand that is to be paid by a trust. Id. § 524(g)(1)(B)

(emphasis added). Although they are each being sued under a 

failure-to-warn theory of liability, Montana and the Crown

concede that they only have claims against Grace because the 

plaintiffs bringing the failure-to-warn lawsuits were allegedly 

harmed by Grace’s asbestos-related products and operations. 

In other words, behind each failure-to-warn suit against 

Montana and the Crown is a plaintiff with a personal injury, 

wrongful death, or property damage claim against Grace. 

More precisely, there must be such a plaintiff in order for 

Montana and the Crown to have a basis for their claims at all. 

Montana’s and the Crown’s actions against Grace therefore 

are brought “for the purpose of ... indirectly ... receiving 

payment or recovery” for asbestos-related personal injury and 

property damage claims against the debtor, and thus are

subject to the § 524(g) channeling injunction under the plain 

language of that statute. See 11 U.S.C. § 524(g)(1)(B), 

(2)(B). 

That interpretation is consistent with the purpose of 

§ 524(g). As noted above, the statute was modeled on the 
30

trust established in the Johns-Manville bankruptcy, which 

subjected all asbestos-related claims, including 

“indemnification or contribution liabilities or obligations” of 

the debtor, to a channeling injunction. (Plan Proponents App. 

at 602040 (the Manville Corporation Second Amended 

Restated Plan of Reorganization, at 2).) Inclusion of such 

liabilities in the injunction is also a matter of practicality, 

because one of the primary goals of § 524(g) is to allow a 

debtor to “emerge[] from bankruptcy free and clear” of 

asbestos liability, and thus enable the debtor to “grow[] the 

pie available to victims” (provided, of course, that asbestos 

claimants’ interests are adequately protected). 140 Cong. 

Rec. S4521-01 (daily ed.) (Apr. 20, 1994) (statement of Sen. 

Brown). If the reorganized debtor could still be exposed to 

indirect asbestos claims for indemnification and contribution, 

lingering uncertainty regarding the scope of that liability 

would threaten the debtor’s recovery and hinder Congress’s 

objective of providing “an ‘evergreen’ source of funding to 

pay future claims.” Combustion Eng’g, 391 F.3d at 234.

Finally, the narrow interpretation of § 524(g) advanced 

by Montana and the Crown is unsupported by any caselaw 

and would effectively rewrite the provision. Montana and the 

Crown offer no explanation for § 524(g)’s explicit inclusion 

of actions that “indirectly” seek recovery on asbestos-related 

claims. Instead, they simply ignore that language and assert

that § 524(g) addresses only direct personal injury, wrongful 

death, and property damage actions. But we are not free to

ignore an express provision of the statute, as it is our “judicial 

duty to give faithful meaning to the language Congress 

adopted.” United States v. Bornstein, 423 U.S. 303, 309 

(1976). It is a mystery what Congress could have meant by 

an action that “indirectly” seeks recovery if it did not mean to 
31

include an action seeking indemnification or contribution. 

Little wonder, then, that courts have consistently upheld the 

channeling of such claims to § 524(g) trusts. See, e.g., In re 

Armstrong World Indus., Inc., 348 B.R. 136, 168-69 (D. Del. 

2006) (“Because Indirect PI Trust Claims ... relate to direct 

Asbestos Personal Injury Claims, they are appropriately 

channeled to the Asbestos PI Trust and have historically been 

channeled to trusts established in connection with asbestos 

related chapter 11 cases.”); In re Pittsburgh Corning Corp., 

453 B.R. 570, 582 (Bankr. W.D. Pa. 2011) (concluding that 

“an entity that may pay a future demand holder and thereby 

acquire an indirect claim” against the debtor has “interests 

that are no different from any other Indirect Claimant’s 

interests,” and the entity’s claims can thus be channeled to a 

§ 524(g) trust); In re Celotex Corp., 204 B.R. 586, 622 

(Bankr. M.D. Fla. 1996) (enjoining any claim or demand 

“asserting or accomplishing any setoff, right of subrogation, 

indemnity, contribution or recoupment of any kind” against 

the debtor). 

We therefore conclude that the Bankruptcy Court and 

the District Court correctly held that Montana’s and the 

Crown’s claims for indemnification and contribution are

subject to the channeling injunction included in the Joint 

Plan. Section 524(g) gives courts the express authority to 

“enjoin entities from taking legal action for the purpose of 

directly or indirectly ... recovering ... with respect to any 

claim or demand that ... is to be paid ... by a [§ 524(g)] 

trust,” 11 U.S.C. § 524(g)(1)(B), which is precisely the type 

of action that Montana and the Crown each wish to take 

against reorganized Grace. The channeling injunction thus

properly encompasses their claims, and their arguments to the 

contrary were rightly rejected.
32

2. Section 1122

Having decided that § 524(g) permits a channeling 

injunction to extend to the claims asserted by Montana and 

the Crown, we can readily dispense with the argument that 

those claims were improperly placed in Class 6, which 

includes all asbestos personal injury claims.

21

 Under § 1122 

of the Bankruptcy Code, “a plan may place a claim or an 

interest in a particular class only if such claim or interest is 

substantially similar to the other claims or interests of such 

class.” 11 U.S.C. § 1122(a). To determine whether claims 

are “substantially similar,” the proper focus is on “the legal 

character of the claim as it relates to the assets of the debtor.” 

In re AOV Indus., Inc., 792 F.2d 1140, 1150 (D.C. Cir. 1986) 

(emphasis omitted); see also In re Tribune Co., 476 B.R. 843, 

855 (Bankr. D. Del. 2012) (concluding that the phrase 

“substantially similar” reflects “the legal attributes of the 

claims, not who holds them” (internal quotation marks 

omitted); In re Quigley Co., 377 B.R. 110, 116 (Bankr. 

S.D.N.Y. 2007) (“Claims are similar if they have 

substantially similar rights to the debtor’s assets.” (emphasis 

and internal quotation marks omitted)). The Bankruptcy 

Court has “broad discretion” to decide if a plan satisfies that 

requirement, and we will uphold a plan’s classification 

scheme so long as it is “reasonable” and does not “arbitrarily 

designate classes.” In the Matter of Jersey City Med. Ctr., 

817 F.2d 1055, 1061 (3d Cir. 1987) (internal quotation marks 

 

21

 Although some of the Crown’s claims are classified 

in Class 8 (Canadian ZAI Claims), see supra Section I.B, it 

only challenges the classification of its indirect personal 

injury claims in Class 6 (Asbestos Personal Injury Claims). 
33

omitted); see also John Hancock Mut. Life Ins. Co. v. Route 

37 Bus. Park Assocs., 987 F.2d 154, 158 (3d Cir. 1993) 

(interpreting § 1122(a) to bar the debtor from “arbitrarily” 

designating classes or doing so in a manner that “would not 

serve any legitimate purpose”). 

Here, Montana and the Crown identify only one 

difference in “legal effect against the debtor’s assets” 

between their claims and the other claims in Class 6: their 

claims “are not subject (or should not be subject) to an 

injunction imposed pursuant to Bankruptcy Code section 

524(g).” (Montana Opening Br. at 43.) That argument fails, 

because, for all of the reasons already discussed, their claims 

certainly are subject to the channeling injunction. Moreover, 

as the District Court observed, “[b]oth direct and indirect 

claims under the Plan exhibit a similar effect on Grace’s 

bankruptcy estate – they seek recovery from the trust for 

actions related to Grace’s asbestos liability.” In re W.R. 

Grace & Co., 475 B.R. at 110. Although Montana and the 

Crown must first be held liable for failure to warn before they 

can bring a claim against the trust, that makes no difference to 

Grace, as its liability for such a claim depends solely on its 

asbestos-related activities. The Joint Plan therefore 

reasonably classified claims for indemnification and 

contribution together with direct personal injury claims.

B. Disparate Treatment of Creditors
34

We turn next to the contention that the Joint Plan 

should not have been confirmed because the TDPs22may 

result in disparate treatment among claims within the same 

class. As Montana and the Crown correctly note, “equality of 

distribution among creditors is a central policy of the 

Bankruptcy Code” that is furthered by several different Code 

provisions. In re Combustion Eng’g, 391 F.3d at 239 

(quoting Bergier v. IRS, 496 U.S. 53, 58 (1990) (internal 

quotation marks omitted). Relevant here, § 1123(a)(4)

requires that a plan “provide the same treatment for each 

claim or interest of a particular class,” 11 U.S.C. 

§ 1123(a)(4),23 and § 524(g) mandates that “present claims 

and future demands that involve similar claims” be paid “in 

substantially the same manner,” id. § 524(g)(2)(B)(ii)(V). 

Together, the two provisions ensure that claims in a class that 

will be channeled to a § 524(g) trust receive the same 

treatment, regardless of when they are brought. In 

determining whether a plan provides for the same treatment 

of claimants in a class, “we consider the bankruptcy scheme 

as an integrated whole.” In re Combustion Eng’g, 391 F.3d at 

241.

Although “neither the Code nor the legislative history 

precisely defines the standards of equal treatment,” In re AOV 

 

22

 The TDPs, as earlier noted, see supra Section I.B, 

are the trust distribution procedures for the personal injury 

trust established in the Joint Plan.

23

 Section 1123 permits disparate treatment when “the 

holder of a particular claim or interest agrees to ... less 

favorable treatment,” but neither Montana nor the Crown has 

done so here. 11 U.S.C. § 1123(a)(4). 
35

Indus., Inc., 792 F.2d at 1152, courts have interpreted the 

“same treatment” requirement to mean that all claimants in a 

class must have “the same opportunity” for recovery. In re 

Dana Corp., 412 B.R. 53, 62 (S.D.N.Y. 2008); see also In re 

Cent. Med. Ctr., Inc., 122 B.R. 568, 575 (Bankr. E.D. Mo. 

1990) (concluding that a plan that “subjects all members of 

the same class to the same process for claim payment” is 

“sufficient to satisfy the requirements of Section 

1123(a)(4)”). For example, the United States Court of 

Appeals for the Second Circuit has held that “[a]sbestos 

health claimants would receive the ‘same treatment’ if they 

all were permitted to present their claims to a jury and were 

all paid whatever amounts the jury awarded, until funds were 

no longer available.” In re Joint E. & S. Dist. Asbestos Litig., 

982 F.2d 721, 749 (2d Cir. 1992), opinion modified on 

rehearing, 993 F.2d 7 (2d Cir. 1993). What matters, then, is 

not that claimants recover the same amount but that they have 

equal opportunity to recover on their claims. See id.

(“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.”) 

Courts are also in agreement that § 1123(a)(4) “does 

not require precise equality, only approximate equality.” In 

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

2007); see also In re Multiut Corp., 449 B.R. 323, 334 

(Bankr. N.D. Ill. 2011) (same). Certain procedural 

differences, such as a “delay in receipt of distributions” for 

some claims, “do[] not alone constitute unequal treatment.” 

In re New Power Co., 438 F.3d 1113, 1122-23 (11th Cir. 

2006); see also In re Multiut, 449 B.R. at 337 (same). In fact, 

§ 524(g) “clearly envisions that asbestos claims will be paid 

periodically as they accrue and as they are allowed,” since it
36

requires courts to ensure that there will be sufficient funds 

available for both future demands and present claims to 

receive similar treatment. In re W. Asbestos Co., 313 B.R. 

832, 842-43 (Bankr. N.D. Cal. 2003). Therefore, differences 

in the timing of distributions and other procedural variations

that have a legitimate basis do not generally violate 

§ 1123(a)(4) unless they produce a substantive difference in a 

claimant’s opportunity to recover. See In re New Power Co., 

438 F.3d at 1122-23 (concluding that a plan provision did not 

violate § 1123(a)(4) in part because it was “procedural rather 

than substantive”); cf. In re Dow Corning Corp., 280 F.3d 

648, 660 (6th Cir. 2002) (holding that a difference in the 

procedural protections offered to certain claimants violated 

§ 1123(a)(4) because some claimants were “accorded far 

more effective recovery rights” than others). 

Under that standard, none of the provisions of the 

TDPs that Montana and the Crown complain of amounts to 

disparate treatment of creditors. Montana and the Crown first 

take issue with a provision that allows indirect claims to be 

considered “presumptively valid” only if, among other things, 

“the Indirect Claimant has paid all or a portion of a liability or 

obligation that the PI Trust had to the Direct Claimant.” 

(Montana Opening Br. at 47 (quoting J.A. at 200326) 

(internal quotation marks omitted).) They say that such a 

requirement may provide no payout for indirect claims, and is 

therefore discriminatory. But the only indirect claims that 

will not be paid based on that provision are those for which 

Grace has no underlying liability. As the District Court 

rightly said, there is no “legal authority that requires a debtor 

to reimburse third parties for wrongs for which the debtor is 

not responsible,” and thus a bar on such recovery cannot be 
37

said to constitute disparate treatment. In re W.R. Grace & 

Co., 475 B.R. at 136. 

Montana and the Crown next complain that the “firstin, first-out” mechanism for processing and paying claims 

discriminates against indirect claims. Citing testimony from 

the future claimants’ representative that “there is a 

possibility” that the trust may have insufficient funds to pay 

future claims, they argue that, because claims for 

indemnification and contribution depend on another judgment 

first being obtained, their claims will likely be brought later 

than direct asbestos claims and thus will be less likely to 

obtain recovery. (Montana Opening Br. at 51 (quoting J.A. at 

201664A) (internal quotation marks omitted).) They say that 

the only fair method for resolving claims against the trust is

“for no distributions to be made until all” indemnification and 

contribution claims have arisen and been asserted. (Id. at 52.) 

There are significant problems with that argument. 

First, although there may be a “possibility” that the trust will 

have insufficient funds to compensate future claimants, the 

Joint Plan endeavors to make that scenario as unlikely as 

possible. To that end, it funds the personal injury trust with 

the amount agreed to by the PI Committee and the future 

claimants’ representative, it limits recoveries using the 

“Payment Percentage” (which is specifically designed to 

ensure that present and future claimants receive equivalent 

amounts), and it allows the Payment Percentage to be 

modified as needed to permit future recoveries.24 Second, the 

 

24

 As discussed earlier, see supra Section I.B, the 

“Payment Percentage” limits each claimant’s recovery to a 

certain percentage of the liquidated value of his or her claim, 
38

“first-in, first-out” payment process is a common feature of 

§ 524(g) trusts, see In re Federal-Mogul, 684 F.3d at 360 

n.12, and it treats all claims identically, resolving both direct 

and indirect claims in the order that they are received. 

Although it may be true that indirect claims will generally 

recover later under that process because they require the 

additional step of a judgment being entered against the 

claimant, the “delayed receipt of distributions to members of 

a class whose claims remain disputed does not, in and of 

itself, violate § 1123(a)(4).” In re New Power Co., 438 F.3d 

at 1122. Finally, it would be wholly unreasonable to require 

asbestos victims – many of whom have already waited 

through twelve years of bankruptcy – to continue to wait 

indefinitely until all indirect claims accrue before they can

recover from the trust. Cf. In re W. Asbestos Co., 313 B.R. at 

842 (“It is not necessary to make liquidated claims wait for 

payment until all disputed and unliquidated claims have been 

resolved.”). Rather, by requiring courts to ensure that future 

demands will be treated fairly, § 524(g) specifically 

acknowledges that some claims against a trust may recover 

earlier than others. See 11 U.S.C. § 524(g)(2)(B)(ii)(V) 

(requiring that the court ensure that the trust will “operate 

through mechanisms ... 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”). We therefore agree with 

the District Court that the “first-in, first-out” mechanism does 

not violate § 1123(a)(4) or § 524(g).

 

in order to ensure that funds will be available for future

claims. 
39

Montana and the Crown also assert that the TDPs are 

discriminatory because they impose additional restrictions on 

indirect claims. Specifically, the complaints are that indirect 

claimants cannot recover attorneys’ fees; that, in order to 

have a presumptively valid claim, an indirect claimant must 

secure a release of liability against the trust from the direct 

claimant; and that personal injury claims are limited by the

“maximum value” provision of the TDPs. The District Court 

properly rejected the argument that any of those features 

make the TDPs unfair. Montana and the Crown have not 

demonstrated a right to attorneys’ fees under their local tort 

regimes, and there is therefore no reason why they should 

expect to recover attorneys’ fees from the trust. There is also 

nothing discriminatory about requiring an indirect claimant to 

obtain a release from the direct claimant whose claims 

provide the basis for seeking indemnification or contribution. 

That requirement has the legitimate objective of ensuring that 

an indirect claimant has satisfied a liability of the debtors, and 

it would not make sense to extend it to direct claims. In any 

event, the release provision does not limit a claimant’s 

opportunity for recovery, as indirect claimants who are unable 

to obtain a release can still pursue their claims through the 

individual review process.25 As for the “maximum value” 

 

25

 The release of liability is only required for indirect 

claimants seeking expedited review of their claims. The 

TDPs expressly state that, “[i]f an Indirect Claimant cannot 

meet the presumptive requirements” necessary for expedited 

review, “including the requirement that the Indirect Claimant 

provide the [personal injury] [t]rust with a full release of the 

Direct Claimant’s claim, the Indirect Claimant may request 

that the [personal injury] [t]rust review the ... [c]laim 

individually.” (J.A. at 200326.) 
40

provision, that requirement applies with equal force to direct 

and indirect claims, and therefore does not result in disparate 

treatment of claims. 

Finally, the Crown independently argues that the TDPs 

are discriminatory both because Canadian property damage 

claimants will allegedly receive inferior recovery to U.S. 

property damage claimants, and because the Crown cannot 

qualify for “extraordinary claim” treatment. The first of those 

contentions seems to be based on the amount allocated to the 

Canadian ZAI property damage claims fund, which is 

significantly less than the amount being allocated for U.S. 

property damage claims. But, as the District Court correctly 

noted, Canadian and U.S. property damage claimants are 

classified in separate classes, operate under separate tort 

regimes, and reached separate settlement agreements. See In 

re W.R. Grace & Co., 475 B.R. at 138-39. There is therefore 

no reason to expect that they would receive the same dollar 

amount in recovery, and, more importantly, § 1123(a)(4) does 

not demand that they receive equal treatment, as it requires 

only that a plan “provide the same treatment for each claim or 

interest of a particular class.” 11 U.S.C. § 1123(a)(4) 

(emphasis added). Moreover, it is unclear whether the 

Crown’s assertion that Canadian claimants will receive less 

than their U.S. counterparts is even factually accurate, as the 

Crown provides no information on the estimated number of 

Canadian property damage claims, so there is no way to 

conclude that the available funds are unduly limited.

As for the “extraordinary claim” provision, it is 

designed to provide a remedy for certain individuals harmed 

by Grace who have “little likelihood of a substantial recovery 

elsewhere.” (J.A. at 200323.) The Crown is therefore correct 
41

that the provision treats certain claims differently than others, 

but it does so based on the claimant’s particular factual 

situation, in much the same way that the expedited review 

process treats claims differently based on the particular 

disease at issue. The Crown does not contest that such 

substantive distinctions among claims are valid bases for 

potential differences in the amount of recovery, nor does it 

argue that the individualized review process will value its 

claims at less than they would be worth under the tort system. 

Therefore, it has not shown that the “extraordinary claim” 

provision unfairly limits its opportunity for recovery. 

In sum, the District Court rightly determined that the 

Joint Plan satisfies the equal treatment provisions of 

§ 1123(a)(4) and § 524(g). Although there may, at the 

margins, be some differences in recovery for direct and 

indirect claims, those differences do not amount to disparate 

treatment of creditors. 

C. “Fair and Equitable” to Future Claimants

Montana’s and the Crown’s final contention is that the 

Joint Plan violates the “fair and equitable” provision of 

§ 524(g). That provision requires that, before confirming a 

plan involving a § 524(g) trust, a court must determine that 

the proposed channeling injunction is “fair and equitable with 

respect to the persons that might subsequently assert ... 

demands” against the trust “in light of the benefits provided 

... to such trust on behalf of [the] debtor.” 11 U.S.C. 

§ 524(g)(4)(B)(ii).26 In other words, the provision requires a

 

26

 Although it uses similar language, the § 524(g) “fair 

and equitable” provision is separate from the “fair and 
42

reviewing court to consider whether, given the funds 

available in a trust, it is “fair and equitable” to channel future 

demands to that trust. 

Although no court of appeals has yet interpreted what 

“fair and equitable” means in that context, other courts seem 

to agree that one way to evaluate the equities is to consider 

the amount being contributed to the trust in comparison to the 

liability exposure of the protected parties. See, e.g., In re 

Plant Insulation Co., 485 B.R. 203, 227 (N.D. Cal. 2012) 

(“[T]he analysis appropriately focuses on the relationship 

between the contributions of protected entities to the Trust, 

and the benefits received by the same under the terms of the 

channeling injunction.”); In re Congoleum Corp., 362 B.R. 

167, 180 (Bankr. D.N.J. 2007) (“A review of the case law 

suggests that finding that an injunction is fair and equitable is 

closely tied to the value being contributed to the plan.”). 

Given the substantial benefit provided by the channeling 

injunction, courts have held that the protected parties’ 

contribution to the trust must be sufficient to justify that 

extraordinary form of relief. See In re Quigley Co., 437 B.R. 

at 133; In re Plant Insulation Co., 485 B.R. at 227 

(considering whether the protected parties provided the trust 

 

equitable” provision of 11 U.S.C. § 1129(b), which provides 

that the court can confirm a plan over the objection of an 

impaired and dissenting class of creditors if it is “fair and 

equitable ... with respect to each class of claims or interests 

that is impaired under, and has not accepted, the plan.” 11 

U.S.C. § 1129(b)(1). Because Montana and the Crown are in 

classes that overwhelmingly accepted Grace’s Joint Plan, they 

do not challenge plan confirmation under § 1129(b), and it is 

not at issue in this appeal. 
43

“with sufficient benefits to justify the injunctive relief 

provided to them, from the perspective of future asbestos 

injury claimants”). Under that standard, channeling

injunctions have generally been considered “fair and 

equitable” to future claimants when the trust contribution that 

will be available to those claimants bears some relationship to

the estimated value to the debtor of enjoining their claims. In 

re Quigley Co., 437 B.R. at 140 (denying plan confirmation 

because future demand holders would receive only about 

$147 million, whereas the value to the debtor of enjoining 

their claims was $613 million); see also In re G-I Holdings 

Inc., 420 B.R. 216, 276 (D.N.J. 2009) (concluding that the 

“substantial contributions provided” to the trust made it fair to 

future claimants).

Montana and the Crown do not suggest that the 

amount being contributed to the personal injury and property 

damage trusts is out of sensible proportion to the liability 

exposure of the protected parties.

27 Rather, they contend that 

 

27

 Because Montana and the Crown do not take issue 

with the size of the trust contribution, we need not determine 

in this case when an imbalance between the liability exposure 

and the amount being contributed to a trust prevents an 

injunction from being “fair and equitable” under § 524(g). 

We note, however, that the trust contribution does not have to 

be equal to the projected liability in order for the injunction to 

be fair to future claimants. Although the statutory language at 

issue focuses on the funds available to pay future claims, 

§ 524(g) does not require that those claims be paid in full. 

Rather, it requires that future claims be paid “in substantially 

the same manner” as present claims. 11 U.S.C. 

§ 524(g)(2)(B)(ii)(V). In many cases, the trust may be funded 
44

the TDPs are “unfair and inequitable” because they “lack 

certainty regarding the amount of distributions and the 

procedure for distributions” (Montana Opening Br. at 56), 

and because the Trust Advisory Committee includes 

“attorneys for underlying asbestos claimholders,” which they 

say is unfair to indirect claimants (id. at 57). We are 

unconvinced that those allegations are even relevant to the 

question of whether the channeling injunction is fair and 

equitable under § 524(g). As Grace points out, 

§ 524(g)(4)(B)(ii) “is not a catch-all provision” for objecting 

to plan provisions (Grace Br. at 78); rather, it specifically 

addresses whether it is fair to enjoin future claims against the 

debtor in light of the amount being contributed to the trust. 

But even if Montana’s and the Crown’s allegations of 

 

in an amount that, as here, only allows present and future 

claimants to recover a portion of the value of their claims. 

See Federal-Mogul, 684 F.3d at 360 n.12 (“[F]ew trusts pay 

the full value of submitted claims; current payment 

percentages range widely, but the median is 25%, with most 

trusts paying between ten and forty-six percent of a claim’s 

liquidated value.”). But that alone does not mean that the 

injunction is unfair or inequitable, since, without such a 

limitation, the debtor may be forced to liquidate and be 

unable to pay future claims at all. For that reason, courts look 

for a relationship between the protected parties’ contribution 

to the trust and the benefit they are receiving from the 

injunction, and do not require the trust contribution to be 

equal to the estimated value of future claims. We leave for 

another day the question of how to determine whether the 

benefit of an injunction outweighs the value committed to the 

trust to a degree that channeling future claims would be unfair 

to future claimants. 
45

unfairness were relevant to the statutory inquiry, they are 

baseless. Although they complain that the TDPs do not 

precisely determine the amount of future recoveries, that 

uncertainty is unavoidable, as it is impossible to calculate 

precisely how many future demands will be brought or how 

much those claimants will be entitled to recover. One cannot 

even have a § 524(g) trust unless “the actual amounts, 

numbers, and timing of such future demands cannot be 

determined.” 11 U.S.C. § 524(g)(2)(B)(ii)(II). As for their 

complaint regarding the Trust Advisory Committee members, 

that committee exercises only limited control over trust 

distributions, and Montana and the Crown have pointed to no

evidence suggesting that the committee has or will engage in 

improper conduct. There therefore was no error in the 

District Court’s determination that the channeling injunction 

is fair and equitable to future claimants under § 524(g). 

III. Conclusion

For the foregoing reasons, we conclude that the 

District Court correctly affirmed the Bankruptcy Court’s 

order overruling the objections of Montana and the Crown to 

Grace’s Joint Plan, and we will affirm the Court’s order to 

that effect.