Opinion ID: 2778690
Heading Depth: 2
Heading Rank: 2

Heading: The T&N Reorganization Plan

Text: To explain the pertinent terms of T&N's reorganization Plan, we focus first on its creation of the Trust. A personal injury trust is a special tool authorized by Congress for dealing with the long latency period of mesothelioma. See 11 U.S.C. 2 T&N does not concede that its non-asbestos liability was discharged on the Plan's effective date, rather than November 8, 2007, when the bankruptcy court entered its order confirming T&N's reorganization Plan. However, we need not pick between these two dates as the correct answer is irrelevant to this appeal. -6- § 524(g); In re Federal-Mogul Global Inc., 684 F.3d 355, 357-59 (3d Cir. 2012). A trust allows a reorganizing asbestos manufacturer to wash its hands of further asbestos liability by, in addition to satisfying other statutory requirements, assigning all liability for asbestos claims to the trust and conveying at least fifty percent of its equity (or the right to acquire that equity) to the trust. Id. § 524(g)(2)(B). Customarily, or so the parties tell us, a reorganizing company also assigns any applicable insurance policies to the trust. See, e.g., In re Federal-Mogul, 684 F.3d at 366-67, 382. Upon plan confirmation, the reorganized manufacturer receives a discharge of all liability for the claims. 11 U.S.C. §§ 944(b)(1), 1141(d). Current and future claimants then proceed solely against the trust. Id. § 524(g)(1)(B). Here, we are told, two impediments to this customary course loomed. First, a £500 million liability policy owned by T&N (the Hercules Policy) could not be assigned to the Trust under controlling United Kingdom law. Second, no proceeds under the Hercules Policy could be reached until T&N satisfied a self-insured retention (basically, a deductible) of £690 million.3 In order to try to get around these impediments, the Plan adopted an arrangement that the parties tell us is in some significant respects unusual. We briefly summarize that 3 In a 2004 disclosure statement, T&N indicated it had already paid claims totaling £387 million. -7- arrangement, albeit ignoring for a moment any twists created by statute of limitations issues. First, although confirmation of a reorganization plan typically discharges the reorganized company's liability, 11 U.S.C. § 1141(d)(1), see also United States v. White, 466 F.3d 1241, 1245 (11th Cir. 2006), Plan § 4.5.6 instead provides that the liability of the so-called Hercules-Protected Entities, including T&N, would continue in full for asbestos claims until the Hercules Policy is exhausted (the Hercules Policy Expiry Date).4 4 The Plan provisions read, in relevant part, as follows: 4.5.6. Limited Recourse to assets of Reorganized Hercules-Protected Entities. On and from the Effective Date until discharge and release under Section 4.5.20 of the Plan, any liability of the Reorganized Hercules-Protected Entities for Asbestos Personal Injury Claims . . . shall continue in full . . . . 4.5.20. Discharge of liability for Debtor HPE Asbestos Claims . . . (a) From and after the Hercules Policy Expiry Date, (i) the Trust will assume sole and exclusive liability for all remaining Asbestos Personal Injury Claims (whether then existing or at any time in the future coming into existence) against the Reorganized Hercules-Protected Entities . . . ; (ii) the Reorganized Hercules-Protected Entities shall automatically and without further order of court be discharged and released from any and all liability with -8- Second, the Plan precludes the claimants themselves from actually bringing any asbestos claims against T&N. Plan § 4.5.7(a). Rather, the Plan assigns all of the asbestos claims to the Trust, which is then allowed to sue T&N as agent for the claimants. Plan § 4.5.8(a). The Plan allows such claims to proceed in the ordinary course to judgment or settlement. Plan § 4.5.8(f)(ii). The Plan also provides that when the Trust brings such claims, T&N refers the Trust to its insurers, who control the defense. Plan § 4.5.8.(f)(i). Hence, the Trust brings this action as agent for Barraford against T&N, whose defense is managed by its insurers. Third, to the extent that the Trust prevails in a claim against T&N, its recovery initially takes the form of a reduction in a £338 million payment obligation to T&N under a twenty-year stock subscription agreement. Plan §§ 4.5.5, 4.5.10(a)(i). (This agreement is, in part, how the Trust acquired the fifty percent equity in the reorganized company required by the Bankruptcy Code.5) When the self-insured retention is satisfied, the Trust respect to Asbestos Personal Injury Claims (whether then existing or at any time in the future coming into existence . . . ). 5 On the Plan's effective date, T&N's parent company issued to the Trust 50.1 million shares of Class B Common Stock, 57.5% of which would be distributed pursuant to the subscription agreement. Plan §§ 8.3.4, 4.5.5. The Plan also provided for the immediate sale to an investor of an option on the shares that the Trust -9- may seek recovery directly from the Hercules Policy. Plan §§ 4.5.3, 4.5.10(a)(iv). Upon the Hercules Policy Expiry Date--essentially, the date on which the self-insured retention is met and the £500 million policy is exhausted--T&N will be discharged and released from all asbestos liabilities. Plan § 4.5.20(a)(ii). Fourth, the Trust's net assets are used to pay those claimants who successfully pursue an administrative claim through a process defined in the Trust Distribution Procedures. Plan §§ 4.5.1, 4.5.2. As best we can tell, under these procedures, Barraford's recovery from the Trust is not contingent on the Trust's recovery from T&N. At the same time, all claimants, including Barraford, presumably have an interest in the Trust's ability to prevail on enough claims so as to eliminate the Trust's debt to T&N and exhaust the Hercules Policy.6 The parties' briefs substantially share this characterization of the Plan. Where they differ is on the question of when the Trust needed to have brought asbestos claims against T&N that would have been stale but for the automatic stay. The Trust argues that the intent of the Plan was to preserve all asbestos claims for as long as it takes to exhaust the Hercules received outright. Plan § 8.3.6. 6 The parties' briefs are sparing, at best, in describing exactly how the administrative claim process works and exactly what the practical ramifications of this litigation will be. -10- Policy. T&N argues that the Plan contains nothing that would extend applicable limitations periods, so claims had to be filed before their limitations periods expired or, if that period expired during the bankruptcy proceedings, then within thirty days of notice of the Plan's effective date. We are told by counsel for the Trust that there may be thousands of claims that the Trust did not file in time to qualify as timely under T&N's reading of the Plan.7