Opinion ID: 1039768
Heading Depth: 2
Heading Rank: 2

Heading: The Joint Plan

Text: Soon after that settlement in April 2008, Grace, the PI Committee, the future claimants’ representative, and the equity committee proposed a Joint Plan of Reorganization (the “Plan” or the “Joint Plan”),5 the central pillars of which are two trusts – a personal injury trust and a property damage trust – that will assume all of Grace’s current and future asbestos liabilities. The Joint Plan also provides for a § 524(g) channeling injunction, which will send all asbestosrelated claims against Grace (and certain protected third parties), including future claims, to the trusts, allowing the protected parties to be “unconditionally, irrevocably and fully released” from “any and all Asbestos-Related Claims.” (J.A. at 200117.) As its name suggests, the personal injury trust will assume all of Grace’s direct and indirect asbestos 5 The Joint Plan was initially filed on September 19, 2008, and a “finalized” version was filed on February 27, 2009. The Plan continued to undergo modifications, however, through December 23, 2010. 10 personal injury liabilities.6 It is funded by the 1.5 billion dollars obtained through settlements with Grace’s insurers and former affiliates, by an initial payment from Grace of 450 million dollars, by a warrant to acquire 10 million shares of Grace common stock at 17 dollars a share, and by deferred cash payments from Grace of 100 to 110 million dollars per year through 2033.7 In total, those funding sources will provide more than 3 billion dollars to the trust. The property damage trust will likewise assume all of the protected parties’ direct and indirect property damage liabilities, including ZAI property damage claims, and it is funded by an initial payment of 180 million dollars, and a subsequent payment of 6 Specifically, the personal injury trust will “assume the liabilities of the Debtors with respect to all Asbestos [Personal Injury] Claims,” and will “process, liquidate, pay and satisfy all Asbestos [Personal Injury] Claims in accordance … with [the] Plan.” (J.A. at 200092.) The Plan’s definition of an Asbestos Personal Injury Claim includes any claim against Grace that, “directly or indirectly,” is “based on, arising out of, resulting from, or attributable to … death, wrongful death, personal or bodily injury …, sickness, disease, loss of consortium, survivorship, medical monitoring, or other personal injuries,” and “the presence of or exposure at any time to” Grace’s asbestos products or production. (J.A. at 200041.) It therefore includes personal injury claims arising from ZAI. 7 The deferred payments to the trust are secured by a majority of Grace’s common stock. 11 30 million dollars.8 Some of that money will then be transferred to a special fund that will be used to compensate Canadian ZAI property damage claimants. In addition to being separately funded, the two trusts proposed by the Joint Plan have separate mechanisms for resolving claims. Claims brought against the personal injury trust are to be resolved in accordance with the personal injury trust agreement and the “trust distribution procedures,” or “TDPs.” The TDPs establish two primary methods by which claims will be assessed, valued, and paid. Under an “expedited review” process, claims will be categorized and assigned a set amount of recovery according to a schedule of eight asbestos-related disease levels, some of which require demonstration of certain medical or exposure criteria. Claimants who do not meet those criteria, or who “seek to establish a liquidated value for the claim that is greater than its Scheduled Value,” will also have the option of utilizing an individual review process, which could involve arbitration or litigation of their claims. (J.A. at 200293.) Both the expedited review and the individual review will result in a determination of the liquidated value of a claim. Claimants will not be paid the full liquidated value, however. Rather, each claimant will recover a certain percentage of the liquidated value of his or her claim – a “Payment Percentage” – in order to ensure that there is money left for future claimants to receive comparable recoveries. The TDPs set the initial Payment Percentage at between 25% and 35%, meaning that personal injury claimants should receive 8 Subject to certain conditions, reorganized Grace is also obliged to make additional future payments to the trust if needed to satisfy future demands. 12 somewhere between 25% and 35% of the liquidated value of their claims. That percentage may “be adjusted upwards or downwards from time to time … to reflect then-current estimates of the [personal injury] [t]rust’s assets and its liabilities, as well as [the] then-estimated value of thenpending and future claims.” (J.A. at 200296.) All claims are also limited to a “maximum value” based on the relevant disease level, unless the claim qualifies as an “extraordinary claim,”9 in which case it is capped at the “maximum extraordinary value” for such claims. Claims will be paid on a “first-in, first-out” basis, which means that a claimant can recover from the trust as soon as the value of the claim is established. The trust will be administered by designated trustees, in consultation with a Trust Advisory Committee and the future claimants’ representative. The property damage trust resolves claims somewhat differently. Under the agreement governing that trust, all allowable “traditional” property damage claims will be paid in full, and there is no expedited process for determining the value of a claim. ZAI property damage claims brought by United States residents will also be paid from the property damage trust, but they will be resolved in accordance with procedures that closely resemble the personal injury TDPs. 9 An “extraordinary claim” is a claim held by someone “whose exposure to asbestos … occurred predominately as a result of working in a manufacturing facility of Grace … or … was at least 75% the result of exposure to asbestos or an asbestos-containing product or to conduct for which Grace has legal responsibility, and in either case there is little likelihood of a substantial recovery elsewhere.” (J.A. at 200323.) 13 Canadian ZAI property damage claimants will be paid pursuant to a settlement agreement reached by representatives of those claimants and Grace. In addition to establishing the two § 524(g) trusts, the Joint Plan divides claimants into eleven classes, one of which is further divided into two subclasses.10 Relevant here, Class 6 includes all asbestos personal injury claims (including Canadian and U.S. ZAI personal injury claims), Class 7A includes traditional asbestos property damage claims, Class 7B includes U.S. ZAI property damage claims, and Class 8 includes Canadian ZAI property damage claims.11 Like the 10 Both Montana and the Crown filed proofs of claim against Grace during its bankruptcy case. 11 The full list of classes provided for in the Joint Plan is as follows: Class 1: Priority Claims Class 2: Secured Claims Class 3: Employee Benefit Claims Class 4: Workers’ Compensation Claims Class 5: Intercompany Claims Class 6: Asbestos Personal Injury Claims Class 7A: Asbestos Property Damage Claims, excluding United States ZAI Claims Class 7B: United States ZAI Claims Class 8: Canadian ZAI Claims 14 trusts, those classes do not distinguish between direct and indirect claims, and so Montana’s claims for indemnification and contribution are classified in Class 6 alongside claims brought directly by people allegedly harmed by Grace’s activities. The Crown’s claims fall into two different classes; any claims arising from personal injury ZAI suits are grouped in Class 6, whereas all direct and indirect ZAI property damage claims are in Class 8. Both of those classes are considered to be “impaired classes,” as is Class 7B, because claimants in those classes will not be able to recover the full value of their liquidated claims. All of the claims in Classes 6, 7, and 8 are subject to the channeling injunction provided for in the Joint Plan.