2009 D e c i sion s O p inion s of the U nit e d S t at e s C our t of Appe al s for the Third C ir c uit 3-11-2009 

# In Re: W R Gra ce C o P re c e de nt i al or N on-P re c e de nt i al : N on-P re c e de nt i al D ocke t N o . 08-1044

F o llow thi s and a dd it ion al works at : http://d i git alc ommon s .l a w . vi ll anova . e du/thirdc irc uit_2009

Thi s de c i sion i s brou ght t o you for f re e and ope n a c c e s s by the O p inion s of the U nit e d S t at e s C our t of Appe al s for the Third C irc uit at V i ll anova U nive r sity S choo l of L a

w Di git al Reposit ory

. It h as be e n a c c ept e d for inclusion in 2009 D e c i sion s by an authori z e d a dmini s tr at or of V i ll anova U nive r sity S choo l of L a

w Di git al Reposit ory

. F or more inform at ion, p le as e c ont a ct Be n j amin . C arl s on@l a

w . vi ll anova . e du . Re c omme nde d C it at ion " In Re: W R Gr a c e C o " (2009). 2009 D e cisio n s . P ape r 1754. http://d i git alc ommon s .l a

w . vi ll anova . e du/thirdc irc uit_2009/1754NOT P RE CE DE NT I AL U N I TED STA TES C O U RT O F A PPEA LS F O R T H E T H IR D C IR C U IT N o. 08- 1044 RE: W . R. GR AC E & CO . , ET AL, D EB TO RS. M I SSIO N T O W E R S, a/k/ a Foxr i dge Tow er s O ffi ce Bui l di ng; BE T HE S DA R E HAB I L I T AT I ON HOS P I T AL ; F I RS T T E NNE S S E E BA NK, f /k /a N a tio n a l B a n k B u ild in g ; F IR S T T E N N E S S E E B A N K , f/k /a Ha mi l t o n Na t i o n a l Ba n k ; W ASHI NGTON TOW NSHI P HEALT H CARE DI S T RI CT , f

/k / a Wa s h i n g t o n Ho s p i t a l ; NE W HANOVE R R E GI ONAL M E D IC A L C E N T E R , f/k a / N e w H a n o v e r M e m o ria l H o sp ital; FI RST HEA LTH M ON TGO M ERY M EM OR I AL H OSPI TAL, f/k/ a M ont gom eryM emori al H os pi t al ; PI E R R E L A C L E D E C E N T E R N O S. 1 and 2, f /k / a P i e rr e La c l e d e Bu i l d i n g s ; S T. J OSE P H' S HI LL I NFI RM ARY N U R S IN G H O M E ; I B M M E T R O E M P L O Y E E S F E D E R A L C R E D IT U N IO N , f /k / a M a n u f

a c tu r e r s Han o v e rTru s t ; PALO S COM M UN I TY H OSPI TAL, f /k /a P a lo s H o sp ital, IL ; S T M A R Y ' S M E D IC A L C E N T E R , f/k /a S t . M a ry ' s Ho s p i t a l ; F RI E NDL Y HOME NU RS I NG C AR E & RE HAB I L I T AT I ON, f /k / a De a f Ha r d o f He a r i n g & Sp e e c h I mp a i r e d Bu i l d i n g ; 9 9 F OUN DERS P L A Z A ; O N E ID A C O U N T Y O F F IC E B U IL D IN G ; M A N O R O A K T W O ; C A Y U G A C O U N T Y O FFICE B U I L D I N G , f/k/ a C ayuga C om panyO ffi ce Bui l di ng; S T . L UKE ' S HOS P I T AL ; S CH UYL E R H OS P I T AL ; S ANT A T E RE S A M E DI CA L OF F I CE BU I L DI NG; NE BR AS KA S KI L L E D NUR S I NG AND RE HAB I L I T AT I ON; VI RTU A H EALTH W EST J ERSEY H OSPI TAL V OO RH EES; TI TUSV I LLE AREA H O SPITA L , f/k/ a Ti tus vi l l e/ Farr el l H os pi t al ; H O T E L C A PT A I N C O O K T ow er#2; G U N D E R S E N L U T H E R A N M E D IC A L C E N T E R , f/ k/a Lac ross e Lu th e r a n Hos p i t a l Add i t i o n ; BA PTI ST HEALTH M EDI CA L CEN TER LI TTLE RO CK , f /k / a Ar k a n s a s Ba p t i s tM e d i c a l Ce n t e r ; AB BEV I LLE GEN ERA L HO SP I TAL, f /k / a Ab b e v i l l e Ho s p i t a l ; S T . ANT HONY' S RE GI ONAL HOS P I T AL A N D N U R S IN G H O M E , f/k /a S t. A n th o n y ' s H o sp ital a n d H o sp ital in Ca rr o l l , I A; F UL T ON C OUNT Y HE AL T H C E NT E R; OHI O S AVI NGS P L AZ A, f /k / a Pe n t o n & Pa r k Pl a z a I n v e s t me n tTo wer ; YW CA o f GR EATER DES M OI NES, f

/k / a YM CA Bui l d i n g ; SCOTTI SH RI TE CA THED RA L; FI R ST T E N N E SSE E B A N K - C O U R T T H O M A S C O M PU T E R C E N T E R , f/k/ a N at i onal2

B ank B ui l di ng; PA N D A PR I N T S, f/k/ a Lehi gh T i l e/ M arbl e W ar ehous e; M C K E N Z IE W IL L IA M E T T E M E D IC A L C E N T E R , f/k /a M c K e n z ie H o sp ital; KELLER B UI LDI NG , f /k / a ALB ERT K ELLER M EM OR I AL H OSPI TAL; VI RT UA WE S T J E RS E Y HOS P I T AL M AR L T ON, f / k / a Ga r d e n S t a t e Ho s p i t a l ; T HE H O M E P L A C E O F M O N D O V I H O S P IT A L , f/k /a B u f f a lo M e m o ria l H o sp ital; D O D G E C O U N T Y H O S P IT A L ; C A R S O N P IR IE S C O T T S T O R E # 5 3 7 , f/k /a S a k s F i f th Av e n u e ; HAR RY C. L E VY GAR DE NS - HOUS I NG AUT HOR I T Y OF THE C I TY O F LAS VEG AS; J OR DA N H OSPI TAL, I NC . ; UN I VER SI TY O F NEW E NGL AND- WES T BR OOK C OL L E GE , f / k / a We b b e rHo s p i t a l ; 1 1 9 9 S E I U, f/k/ a 310 W es t43r d St r eetB ui l di ng, A p p e llan ts

O n A p p ea l from the U n it ed S tat es D istri ct C o u rt

fo r th e D istri ct of

D elaw are ( D . C . N os . 07- cv- 00287- 00330) D i s tr i ctJ udge: H on. R onal d L . B uckw al t er

S u b m itted u n d er T h ir d circu itL A R 3 4 . 1 (a)

on D ece m ber12, 2008 B efor e: M cK E E , SM I T H and R O T H , C i r cui tJ udges

( O pi ni on fi l ed : M ar ch 11, 2009)

O P I N I O N

RO TH , C i r cui tJ udge: For ty - fourcl ai m ant s i n the bankrupt cypr ocee di ng of W . R . G r ace & C om pany ap p ea l th e jud g m en t of

the U n it ed S tat es D istri ct C o u rtfo r th e D istri ct of D elaw are3

aff i r m i ng the B ankrupt cyC our t ’ s O r derdi s al l ow i ng thei ras bes t os pr opertydamage c laim s a g a in st W .R . G ra c e , et. a l. (G ra c e ). F o r th e re a so n s d isc u ss e d b e lo w , w e w ill a f f i r m. B e c a u se th e f

a c ts a re w e ll k n o w n to th e p a rties , w e w ill d isc u ss th e m o n lyb rie f ly her e. G r ace fi l ed forC hapt er11 bankrupt cypr ot ect i on i n the U ni t ed St at es B ankrupt cy C o u rtfo r th e D istri ct of D elaw are o n A p ri l 2, 20 0 1 . In A p ri l 20 0 2 , the B an k rup tcyC o u rt ent er ed an or derthates t abl i s hed M ar ch 31, 2003 as the “ba rdat e”— the dat e byw hi ch pr oofs orcl ai m s m us tbe fi l ed. A ft erthe bardat e the l aw fi r m of Spei ght s & R uny an ( S& R ) neverthel es s fi l ed 2, 938 as bes t os pr opertydamage cl ai m s agai ns tG r ace . N one w er e per s onal l ys i gned bythe cl ai m ant s . I ns t ead, ei therD ani el Spei ght s orA m anda S tein m e y e r, b o th o f

S & R , sig n e d th e c laim s. T h is p ro m p ted th e B a n k ru p tcy C o u rt to or derS& R t o cat egor i ze a l l of i t s as bes t os pr opertydamage cl ai m s bas ed “upon the author i tybyw hi ch i thad fi l ed the cl ai m s . ” Forthe forty - fourcl ai m s ati s s ue her e, cl ai m ant s conce ded thattheyauthor i zed S& R t o br i ng thei rcl ai m s aft erthe bardat e. T he B ankrupt cyC our tthus ent er ed the O rde r disall o w ing an d ex p u n g ing the c lai m s. C lai m an ts ap p ea led, an d the D istri ct C o u rt a f f ir m e d . C la im a n ts n o w a p p e a l th e D is tr ic t C o u rt ’s O rd e r. T h e B a n k ru p tc yC o u rth a d ju ri s d ic tio n p u rs u a n t to 2 8 U .S .C . § § 1 5 7 a n d 1 3 3 4 . Th e Di s tr i c tCo u r ta p p r o p r i a t e l ye x e r c i s e d i t s a p p e l l a t e j u r i s d i c t i o n p u r s u a n tt o 2 8 U. S . C.4

§ 158( a) ( 1) . W e have j ur i s di ct i on pur s uantt o 28 U . S. C . § 1291. B eca us e the D i s tr i ct C our ts atas an appe l l at e courtr evi ew i ng a fi nal or derof the B ankrupt cyC our t , our re v ie w o f

its d e c is io n is p le n a ry. E . g. , I n r e O ’ B r i en Envt l . E ner

gy, I nc. , 188 F. 3d 116, 1 2 2 (3 d C ir . 1 9 9 9 ). Cl a i ma n t s f

i r s ta r g u e th a tth e Ba n k ru p t c yCo u r te rr e d i n d i s a l l o wi n g th e i rc l a i ms b e c a u se S & R h a d a u th o rityto f ile in d iv id u a l cla im s o n c laim a n ts’ b e h a lf b yv irtu e o f

its role a s class c o u n sel i n a S o u th C aro li n a c lass ac ti o n . W e re v iew the B an k rup tcyC o u rt ’s l egal det erm i nat i on de novo . In re M yers , 49 1 F . 3d 12 0, 12 5 (3d C i r. 20 07 ). C l ai m ants ’ a rg u m e n t f

a ils b e c a u se th e a u th o rityto a c t f o r a c las s p u rsu a n t to R u le 2 3 d o e s n o t im p ly a n ya u th o ri z a tio n to f

ile a p ro o f

o f c la im f o r a n in d iv id u a l in b a n k ru p tc yp ro c e e d in g s . See I n r e Standar d Metal

s C or p. , 8 1 7 F .2 d 6 2 5 , 6 3 1 n .1 0 (1 0 th C ir . 1 9 8 7 ), vaca t ed in part on othergr ounds , 8 3 9 F .2 d 1 3 8 3 (1 0 th C ir . 1 9 8 8 ). Cl a i ma n t s n e x ta r g u e th a tth e Ba n k ru p t c yCo u r te rr e d i n d i s a l l o wi n g th e i rc l a i ms beca us e ea ch cl ai m antr etr oact i vel yr at i fi ed S& R ’ s fi l i ngs aft erthe bardat e. W e r evi ew thi s l egal det erm i nat i on de novo . In re M yers , 491 F. 3d at125. R at i fi cat i on r es ul t s w hen a p ri n c ip a l a f

f ir m s a p re v io u s ly u n a u th o ri z e d a c t b yh e r a g e n t. In re Pa cker A ve. A ssocs. , 1 B . R . 286, 292 ( B ankr . E . D . Pa. 1979) . T he ef fec tof r at i fi cat i on i s t o gi ve the age ntthe author i tyt o per form the unauthor i zed a ctas of the t i m e the age ntper form ed the u n a u th o ri z e d a c t. Id . B ut the int erveni ng bar dat e vit i at es cl ai m ants ’ ar gu m ent because ra tif ic a tio n s a re d e e m e d in e f f e c tiv e in th e f

a c e o f a n in te rv e n in g d e a d lin e . See, e. g. , Fed.5

E l ect. C om m ’ n v. N

R A P ol i t i cal

V i ctor y Fund , 513 U . S. 88, 98 ( 1994) ( “[I ] ti s es s ent i al thatthe partyr at i fy i ng s houl d be abl e notonl yt o do thatactr at i fi ed atthe t i m e the ac t w as done, butal s o atthe t i m e the r at i fi cat i on w as m ade. ”) ( i nt ernal quot at i on m arks r emoved) ( emphasi s r emoved) . C l ai m ant s ’ att empt ed r at i fi cat i ons w er e thus i neff ect i ve ra tif ic a tio n s . Cl a i ma n t s f

i n a l l ya r g u e th a tth e Ba n k ru p t c yCo u r te rr e d i n d i s a l l o wi n g th e i rc l a i ms beca us e theys houl d have be en al l ow ed t o conductdi s coveryand pr es entevi dence that theyw er e “know n cr edi t or s ” w ho di d notr ece i ve ac tual not i ce of the bardat e. W e r evi ew th e B a n k ru p tc yC o u rt ’s d is c o v e ry ru lin g s f o r a b u s e o f

d is c re tio n . In re K iw i In ter n . A ir Li nes , I nc. , 344 F. 3d 311, 323 ( 3d C i r . 2003) . A n abus e of di s cr et i on occur s “i f a di s coveryrul i ng i s s een t o be a gr os s abus e of di s cr et i on r es ul t i ng i n fundament al unfai rnes s i n the tr i al of the ca s e. ” P ubl i c Loan C o. v. Fed. D epos i tI ns . C or p. , 803 F. 2d 8 2 , 8 6 (3 d C ir . 1 9 8 6 ) (i n te rn a l q u o ta tio n m a rk s o m itte d ). K n o w n cre d it o rs m u st be p rov ided w ith ac tual w ri tt en n o ti ce o f a d eb tor’s b a n k ru p tc yf

ilin g . C hem etr on C or

p. v. Jones , 7 2 F . 3 d 3 4 1 , 3 4 6 ( 3 d Ci r . 1 9 9 5 ) . A k n o wn cr edi t ori s one “w hos e i dent i tyi s ei therknow n or‘ r eas onabl yas cert ai nabl e bythe debt or . ’ ” Id . ( quot i ng Tul s a P r of’ lC ol l ect i on Ser v. , I nc. v. P ope , 485 U . S. 478, 490 ( 1988) . A cr edi t or ’ s i dent i ty“i s r eas onabl yas cert ai nabl e i f thatcr edi t orcan be i dent i fi ed thr ough r eas onabl ydi l i genteff or t s . ” Id . (i n te rn a l q u o ta tio n m a rk s a n d c ita tio n s o m itte d ). R e a s o n a b le d ilig e n c e d o e s n o t r e q u ir e im p ra c tic a b le a n d e x te n d e d s e a rc h e s . I d. T he6

r equi s i t e s ear ch fora know n cr edi t or , i ns t ead, us ual l yr equi r es onl ya ca r eful exami nat i on o f a d e b to r’ s b o o k s a n d re c o rd s . See i d. a t 3 4 7 . He r e , c l a i ma n t s a r g u e th a tth e i ri d e n t i t i e s we r e r e a s o n a b l ya s c e r t a i n a b l e f r o m a r evi ew of G r ace ’ s r ecor ds . ForG r ace t o not i fycl ai m ant s , i tw oul d have t o ( 1) conduct s ear ches forthous ands of bui l di ngs w her e G r ace as bes t os - cont ai ni ng pr oductw as in s ta lle d a n d (2 ) s e a rc h th o s e title re c o rd s to lo c a te th e c u rr e n t o w n e rs o f th o s e b u ild in g s . W e have hel d thatdebt or s ar e notr equi r ed t o conductt i t l e s ear ches t o l ocat e pr os pect i ve c la im a n ts b e c a u s e it is b e y o n d th e re a s o n a b ly as c e rt a in a b le s ta n d a rd . S e e id . at348. T he B a n k ru p tc yC o u rtth u s a c te d w e ll w ith in its d is c re tio n . T h e B a n k ru p t c y C o u r td i d n o te rri n d i s a l l o w i n g c l a i m a n t s ’ c l a i m s a s u n t i m e l y, and the D i s tr i ctC our tdi d noterri n aff i r m i ng the B ankrupt cyC our t ’ s deci s i on. Forthe re a s o n s s e t f

o rt h a b o v e , w e w ill a f

f ir m th e ju d g m e n t o f

th e D is tr ic t C o u rt .