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. Mona co, 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

Fr ancis 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 606543 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

– 17 th Fl. Wilmington, DE 19801

Chris tophe r Landau

Kirkland & Ellis

655 15 th 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 & Dr ysdale One Thomas Circle, NW

- #1100 Washington, DC 20005 Counsel for Appellee Official Committee of Asbestos Personal Injury4 Elisa Alcabes Simpson, Thacher & Bartlett 425 Lexington Avenue New York, NY 10017

Robert J. Dehney

Mo rris, 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 198015 Seth A. Niederman

Fox Rothschild

919 North Market Street

Citizens Bank Center

Suite 1300 Wilmington, DE 19801 Counsel for Appellee Tra velers Casualty & Surety Co

Roger L. Frankel [ARGUED] Orrick, Herringto n & Sutcliffe 1152 15th Street, N.W.

Columbia Center Washington, DC 20005 Counsel for Appellee David T. Au ster n, Asbe stos 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”) 1 appea l

the June 11, 2012 order 2 of 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 Althou gh 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 Bankrupt cy 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

c ollectively and in the singular as “Grace,” as the District7 correctly de nied 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 chemic als 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

pr oducts and activities, including its operation of a

vermi culite m ine 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 lawsuit s, including claims seeking recovery for the removal of asbestos

containing products from home s and businesses.

As a result of Grace’s production of asbestos

containing materials, Montana and the Crown have been subject to asbestos

- related lawsuits due to their alleged failure

to wa rn 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 ac tivities. 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 cou rt 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 t he Crown

, it has been named as a defendant in several failure

- to

- warn cla ss 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

. T he Crown further asserts that there may be future asb estos 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 n umber of asbestos

- related lawsuits against Grace had grown to 65,000, which threatened the

compan y’s financial viability and prompted it to file for Chapte r 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 presen t 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

u p a trust that will assume its asbestos liabilities

. The statute

likewise authorizes an injunction to ch annel all asb estos

related 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 asb estos liability, but only if the particular channeling injunction in the case satisfies certain prerequi sites, 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 d isputes eventual ly settled, resulting in the allocation

of more than 1 .5 billio n 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 prope rty 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 resolutio n 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

Grac e’s personal injury liabilities and the corresponding

amount needed to adequately fund a § 524(g) trust. I n April10 2008, the Bankruptcy Court held an “estimati on trial” to resolve those questions . At that trial, representatives for the personal injury claimants, which included the personal injury
creditors’ com mittee (the “P I Committee”) and a court

appointed future claimants’ representati ve
, presen ted expert testimony that estimated Grace’s li ability to be somewhere

between 6.3 and 7.4 billion dollars . Grace’s experts, on the other hand, put t he company’s liability at 468 m illion 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 , Gra ce, the PI Committee, the future c laimants’ representative , and the equity committee proposed a Joint Plan of Reorganization (the “Plan ” or the “Joint Plan”)

, 5 t he 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 J oint Plan also provides for a § 524(g) channeling injunction, which will send all asbestos

related 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, t he personal injury trust
will assume all of Grace’s direct and indirect asbestos

5 The Joint Plan wa s 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 I t is funded by the 1.5 b illion

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 s hares of

Grace common stock at 17 dollars a share, and by deferred cash payments from Grace of 100 to 11 0 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 a ll of the protected parties’ direct and indirect property damage liabilities, including ZAI property damage claims, and it is f unded 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 I njury 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 trus t are secured by a majority of Grace’s common stock.12 30 million dollars

. 8 Some of that money will the n be

transferred to a special fund that will be used to compensate

Can adian ZAI property damage claimants

.

In addition to being separately funded, t he two trust s proposed by the Joint Plan have separate mechanisms for resolving claims. C laims brou ght 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 “exped ited review” process, claims will be categorized and assigned a set amount of recovery according to a schedule of eight asbestos

- related d isea se 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 the ir claims. (J.A. at 200293.) Both the expedited review and the individual review will result in a determination of the liquidated value o f a claim. C laimant s will not be paid the full liquidated value, however. Rather,

each claimant will recover a cert ain 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%,

me aning tha t 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 then

pending 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 “extr aordinary claim, ” 9 in which case it is capped at the “maximum extraordinary value” for such claims. C laims will be paid o n 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

establish ed

. The trust will be administered by designated trustees, in consultation with a Trust A dvisory Committee and the future claimants’ representative

.

The property damage trust resolv es claims somewhat differently . Under the agreement governing that tr ust , all

allowable “ traditional ” property damage claims wi ll 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 a ccordance 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 lega l responsibility, and in either case there is little likelihood of a substantial recovery elsewhere.” (J.A. at 200323.)14 Canadian ZAI property damage claim ant s will be paid
pursuant to a settlement agreement reached by rep resentatives

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 an d 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 Canadi an 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 Claims15 trusts, those classes do not distingu ish 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 c lasses; any claims arising from p ersonal injury ZAI suits are grouped in Class 6, whereas all direct and indirec t ZAI property damage claims are in Class 8. Both of those classes are

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

claimants i n those classes will not be able to recover the full

val ue 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 o f 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 ea sily cleared the hurdle of a 75 percent vote in favor

o f the Pla n, 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 Parent16 and the only o ther 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

Bankru ptcy 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 t he Bankruptcy Court heard testimony and
argument from both the Plan proponents and the objectors

, t he Plan was a mended to address many of the objections. T he

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 (Ba nkr. D. D el. 2011). 13 On appeal,

the District Court affirme d the Bankruptcy Court’s order,

12 A nother 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,

w ithout limitation, the injunction pursuant to § 524(g)(3).” (J.A. at 100081.)17 accepting as “reasonable” the inclusion of Montana ’s a nd the
Crown’s claims in classes with direct asbestos claims

, In re

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

, a nd 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 obj ections to plan confirmation . T his timely appeal

followed.

II. Discussion 14

Montana and the Crown both argue on appeal that the Bankruptcy Court and the Dis trict 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

und er 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, 24 4 (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 in demnification 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 e scape the scope of the channeling injunction by in voking two different provisions of the Bankruptcy Code. First, they say that § 524(g) does not encompass their claims against Grace. T hey

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 indemnifica tion or contribution . Second, they contend that § 1122 should prevent their claims from being placed in the sa me class as direct personal injury

claims. Both argumen ts do not persuade us, as § 524(g) broadly encompa sses 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 “ex traordinary 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 h ave 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

- adminis trative 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 omitt ed), § 524(g) permits all asbestos

related 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 Johns

Manville 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

v iability, 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. Federal

Mogul , 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.” Federal

Mogul , 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), the ir 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 bank ruptcy innovation for addressing mass tort liability has been the post

- confirmation trust, which first appeared in the bankruptcy proceedings of the Johns

Manville Corporation ... .”). The Johns

- Manville plan significantly underestimated the number of claim s 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

pro cedures 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 chan neling 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 failure s 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 pur pose 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, i ncluding 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 pl an 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) (i nternal 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,” 1 1 U.S.C. § 101(5)(A). Section 524(g) takes that definition and expands it even fur ther, including within the

sweep of the channel ing injunction not only “claims ” but also
“demands.” Id. § 524(g)(1)(B). A “demand” is then defined

as a “demand for paymen t, 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 d uring the bankruptcy proceedi ng 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 inde mnification do not technically arise until a judgment or settlement has been paid, and at the time of23 Grace’s bankruptcy petition no such judgments had been entered aga inst 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 c laims subject to the injunction. See i d. § 524(g)(5)(B).

While those arguments reflect som e 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 rea soning 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 “accr ual 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. O wens 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 ‘r ight 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 a nd the Crown may have had judgments

e ntered 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 acti viti es all oc curred long before its bankruptcy filing , and thus , to the extent that Montana and the Crown
have “cla ims ,” 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 tha t Montana and the Crown say they have against

Grace arise s 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 ha ve requests for

19 Montana says that, “with the exception of one complaint, [it] was not named as a defendant in any ... Stat e 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 o n a misunderstand ing 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

definiti on of “claim”

– a “demand” could be a request for payment that was not raised during the bank ruptcy proceeding, which also fits the Code’s definition of a “claim.” Furthermore, by taking the already broad definitio n 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

de btor, regardless of when such liability arose

. See 11 U.S.C. § 524(g)(1)(B), (5).

That intent is al so 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 h as not yet manifested. See H.R. Rep. No. 103

- 835, at 40 (1994) (noting that “[a]sbestos

related 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 prote ct their own26 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 th at future claimants “do not have their own voice” and that “lingering uncertainty” can “undermine[] the ‘fresh start’ objective s of bankruptcy and the goals of the trust

arrangemen t”) ; 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 tho se concerns by imposing requirements to protect the rights of future claimants, and then, if those requirements are met, channeling all present and

future asbes tos

- 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 i s 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 fa lls 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 t o 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.3 d 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 ina pposite , becau se 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 o pportunity for relief with out first receiving proper

notice

– is not implicated. Rather, the potential due process

issue associated wit h 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 bri ng 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 12728 ( “B y 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), whi ch explains that the purpose of a trust “is to assume the liabilities of a debtor

20 Montana and the Crown also contend that, under

Owe ns 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 de fine 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 v iolating 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 expo sure to, asbestos or asbestos

- con taining products.” 11 U.S.C. § 524(g)(2)(B)(i) (I) . Montan a 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 chan neling 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 collecti n g ” on a claim

or demand that is to be paid by a trust. Id. § 52 4(g)(1)(B) (emphasis added)

. Although they are each being sued under a

failure

- to

- warn theory of liabi lity, 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 d amage claim against Grace.

M ore precisely, ther e 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

- rel ated 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 interpretatio n is consistent with the p urpose of § 524(g). As noted above, the statute was modeled on the30 trust established in the Johns

- Manville bankruptcy , which subjected all asbestos

- related claims, including “indemnification or contribution liabilities or obligat ions” of the debtor, to a channeling injunction. (Plan Pr oponents 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 o ne of the primary goals of § 524(g) is to allow a debtor to “emerge[] from bankruptcy free a nd clear” of asbestos liability, and thus enable the debtor to “grow[] the pie available to victims” (provided, of course, that asbestos
claimants’ interests are ad equately 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 regardi ng the sco pe of that liability

w ould threaten the debtor’s recovery and hinder Congress’s objective of providing “an ‘evergreen’ source of f unding 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 explana tion for § 524(g)’s explicit inclusion of actions that “indirectly” seek recovery on asbestos

- r elated

claims. I nstead

, they simply ignore that language and assert that § 524(g) addresses only direct personal injury, wrongful

d eath, and property damage actions . But we are not free to ignore an e xpr ess 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 to31 include an action seeking indemnification or contribution. Little wonder, then, that c ou rts 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 Indirec t Claimant’s interests,” and the entity’s c laims 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 t he Bankruptcy Court and

the District Court correctly held that Montana ’s and the
Crown’s claims for indemnifi cation 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 person al 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 deter mine 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 C o. , 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 satisfie s that requirement, and we will upho ld a pl an’s classification scheme so long as it is “reasonable” and do es 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 (Canad ian 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 identif y 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).” (Monta na Opening Br. at 43.) That argument fails, because, f

or 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 ex hibit a similar effect on Grace’s bankruptcy estate

– the y 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 w arn 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 Join t Plan therefore reasonably classified claims for indemnification and

cont ribution together with direct personal injury claims

.

B. Disparate Treatment of Creditors34 We turn next to the contention that the Joint Plan

should not have been confirmed because the TDPs 22 may result in disparate treatment among claims within the sa m e class. As Montana and the Crown correctly note, “equality of distribution among creditors is a centra l 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. IR S , 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 clai ms and future demands that involve similar claims” be paid “in substantially the same manner,” id. § 524(g)(2)(B)(ii)(V).

To gether, the two provisions ensure that claims in a class that

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

treatment, re gardless 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 no r 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 procedu res 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 115 2, courts have interpreted the

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

class must have “the same opportunity” for rec overy. 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
“suffic ient 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 clai ms to a jury and were all paid whatever amounts the jury award ed , 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). W hat matters

, then, is

not that clai mants 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.”)

C ourts 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 recei pt 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 acc rue and as they are allowed,” since it36 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 gener ally 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 (concl uding that a plan provision did not violate § 1123(a)(4) in part because it wa s “proce dural r ather 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 v iolated § 11 23(a)(4) because some claim ant s were “accorded far

more effective re covery 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 cla ims 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 t he Direct Claimant.” (Montana Opening Br. at 47 (quoting J.A. at 200326) (inter nal 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 underl ying 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 be37 said to constitute disparate treatment

. In re W.R. Grace &

Co. , 475 B.R. at 136.

Montana and the Crown n ext complain that the “first

in, first

- out” mechanism for processing and paying claims discriminates against indirect claims. Citing testimony from the future claimants’ repr esentative that “there is a possibility” that the trust may have in suffic ient funds to pay future claims, they argue that, b ecause claims for indemnification and contribution depend on another judgment

first being obtained, their claims will likely be brou ght later

than direct asbestos claims and thus will be less likely to

obtain recover y

. (Montana Opening Br. at 51 (quoting J.A. at 201664A) (internal quotation marks omitted).) They say that the only fair method for resolv ing 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 i nsufficient funds to compensate future claimants, th e Joint Plan endeavors to make that scenario as unlikely as possible. To that end, it funds the personal injury trust with

the a mount agreed to by the PI Committee and the future claimants’ representativ e , it limits recoverie s using the “Payment Percentage ” ( which is specifically designed to ensure that present and future claimants receive equiva lent

amounts ) , and it allows the Payment Percentage to be modified as needed to permit future recoveries. 24 Sec ond, 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.

Alth ough it may be true that indire ct claims will generally recover later under that process because they require the additional step of a judgment being entered against the claimant, the “delayed recei pt of distributions to members of

a class whose claims rem ain disputed does not, in and of itself, violate § 1123(a)(4).” In re New Power Co. , 438 F.3d at 1122. Finally, i t would be wholly unreasonable to require

asbestos victims

– many of whom have already waited through twelve years of bankruptcy

– to continu e 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 bee n 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 manne r”). 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

ind irec t claims. Specifically, the complaints are that indirect

claimants cann ot 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 perso na l 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’ fee s under their local tort regimes, and there is therefore no reason why t hey should expect to recover attorneys’ fees from the trust. T here is also nothing discriminatory about requiring an indirect claimant to

obtain a relea se from the direct claimant who se 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 claim s

. In any event, the release provision does not limit a claimant’s opportunity for recovery, as indirect claiman ts 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 provisi on, that requirement a pplies 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

contenti on s seems to be based on the amount allocated to the Canadian ZAI pr operty 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 a nd U.S. property damage claimant s are classified in separate classes, operate und er 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) d oes 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, i t is unclear whether the
Crown’s assertio n 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 ar e 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 correct41 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 wor th 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 provisi ons of § 1123 (a)(4) and § 524(g) . Although there may , at the margins, be some d ifferences in recovery for direct and indirect claims, those differences do not amount to disparate

treatment of creditors.

C. “Fair and Equitable” to Future Claimants

Mo ntana ’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, be fore 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 asse rt ... 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 p rovision requires a

26 Although it uses similar language, the § 524(g) “fair and equitable” provision is separate from the “fair and42 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 n o court of appeals has yet interpret ed what “fair and equitable” means in that context, other courts seem

to agree that one way to e valuate the equities is to consider

the amount being contributed to the trust in comparison to the

l iability 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 t he substantial benefit provided by the channeling injunction, cou rts 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 pa rties 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 overwhel mingly 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 perspectiv e of future asbestos injury claimants”)

. Under that standard, channeling injunction s have generally been considered “fair and equitabl e” t o 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 futu re 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 protect ed 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 pr ojected 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 t hat 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 funded44 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

“ attorne ys 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) . A s Grace points out

, § 524(g)(4)(B)(ii) “is not a catch

- all provision” for objecting to plan provisions (Grace Br. at 78); r ather, it specifically

addresses whether it is fair to enjoin future claims against the

debtor in light of the amount being contribut ed to the trust.

But even if Montana ’s and the Crown’s allega tions 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 liquid ated 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 b etween 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 unavoid able, 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 futur e 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 t hat 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. Conclus ion

For the foregoing reasons, we c onclude that the

District Court correctly affirmed the Bankruptcy Court’s order overruling the objections of Mo ntana and the Crown to
Grace’s Jo int Plan, and w e will affirm the Court’s order to
that effect.