Source: https://www.abi.org/member-resources/blog/frenville-overruled-claims-arise-upon-exposure-in-the-third-circuit
Timestamp: 2019-04-24 13:53:46+00:00

Document:
In Jeld-Wen, Inc. v. Van Brunt (In re Grossman’s Inc.), the Third Circuit applied a new test for determining when a “claim” arises under the Bankruptcy Code. Specifically, the Third Circuit held that a “claim” arises when an individual is exposed to a product or conduct that causes injury, and not when the injury is manifested. Grossman’s involved asbestos-related tort claims. The Third Circuit held that even though claimants’ injury did not manifest itself until after bankruptcy, the claim arose pre-petition when claimant was exposed to asbestos. In Grossman’s the Third Circuit reconsidered and overruled its previous “accrual” test in Avellino & Bienes v. M. Frenville Co. (In re M. Frenville Co.).
Under the Frenville test, a “claim” arose upon accrual of the underlying state law cause of action. In Grossman’s, the Third Circuit decided that the Frenville approach was too restrictive and did “not account for the fact that a ‘claim’ can exist under the Code before a right to payment exists under state law.” In reinterpreting when a “claim” arises in Grossman’s, the Third Circuit considered the possible impact on dischargeability of the claim by looking at section 1141(d)(1)(A) of the Code. Under this provision, confirmation of a reorganization plan “discharges the debtor from any debt that arose before the date of such confirmation . . . . ”  Thus, under the Third Circuit’s new test, “a prerequisite for recognizing a ‘claim’ is that the claimant’s exposure to a product giving rise to the ‘claim’ occurs pre-petition, even though the injury manifests after the reorganization.” This pre-petition exposure to a product causing injury gives rise to a “claim.” The Third Circuit also expressed concerns that discharging a claim that has not yet manifested itself would violate due process. Therefore, the Third Circuit remanded the proceeding to address those concerns.
Other circuits have adopted their own tests, which are similar to the Third Circuit’s new test. For instance, the Fourth Circuit employs a conduct test wherein a “claim” arises upon performance of conduct giving rise to liability. In contrast, the Eleventh Circuit espouses a pre-petition relationship test wherein a “claim” arises due to a debtor’s tortious conduct pre-petition.
Thus, the practical implications from Grossman’s will likely involve decisions from the Third Circuit that are now similar to those that have been coming from the other circuits. Further, since the Third Circuit overruled its past precedent, it remains to be seen exactly what will constitute a “claim” under the Grossman’s analysis. Since Grossman’s was remanded for a determination on the due process question, the standard of what constitutes sufficient due process remains to be set. Once the due process determination has been made, a more accurate depiction of the test in the Third Circuit can be realized.
 607 F.3d 114 (3d Cir. 2010).
 Id. See 11 U.S.C. § 101(5) (2006).
 11 U.S.C. § 1141(d)(1)(A) (2006).
 In re Grossman’s, 607 F.3d at 125.
 See, e.g., Grady v. A.H. Robins Co., 839 F.2d 198, 199 (4th Cir. 1988).
 See, e.g., Epstein v. Official Comm. of Unsecured Creditors, of the Estate of Piper Aircraft Corp. (In re Piper Aircraft, Corp.), 58 F.3d 1573, 1576 (11th Cir. 1995).
 See In re Grossman’s, 607 F.3d at 122.

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