Free Bankruptcy Appeal - District Court of Delaware - Delaware

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THE UNITED STATES BANUPTCY COURT FOR THE DISTRICT OF DELAWAR
In re:
)
)
Chapter 11

W. R. GRACE & CO., et ai.,l

Debtors.

) ) ) )
) ) ) ) ) ) ) ) ) ) )

Case No. 01-1139 (JKF) (Jointly Administered)

W. R. GRACE & CO., et ai.,
Plaintiffs,
v.

Adversary

No. A-01-771

Re: Bankptcy Docket Nos. 419, 420,
483, 484

MAGART CHAKRIN, et ai., and
JOHN DOES 1-1000,
Defendants.

NOTICE OF APPEAL
The Debtors, W. R. Grace & Co. et al. ("Grace" or "Debtors") pursuant to 28 U.S.C. §
158(a)(3), Fed. R. Ban. P. 8002, and Del.Bank.LR 8001-1, hereby appeal from the following:
The Debtors consist of the following 62 entities: W. R. Grace & Co. (f/k/a Grace Specialty Chemicals, Inc.), W. R. Grace & Co.-Conn., A-I Bit & Tool Co., Inc., Alewife Boston Ltd., Alewife Land Corporation, Amicon, Inc., CB Biomedical, Inc. (f/ka Circe Biomedical, Inc.), CCHP, Inc., Coalgrace, Inc., Coalgrace II, Inc., Creative Food 'N Fun Company, Darex Puerto Rico, Inc., Del Taco Restaurants, Inc., Dewey and Almy, LLC (f/a Dewey and Almy Company), Ecarg, Inc., Five Alewife Boston Ltd., G C Limited Parers I, Inc. (f/a Grace Cocoa Limited Parters I, Inc.), G C Management, Inc. (f/k/a Grace Cocoa Management, Inc.), GEC

Management Corporation, GN Holdings, Inc., GPC Thomasvile Corp., Gloucester New Communties Company, Inc., Grace A-B Inc., Grace A-B II Inc., Grace Chemical Company of Cuba, Grace Culinar
Systems, Inc., Grace Driling Company, Grace Energy Corporation, Grace Environmental, Inc., Grace Europe, Inc., Grace H-G Inc., Grace H-G II Inc., Grace Hotel Services Corporation, Grace International Holdings, Inc.

(f/a Dearborn International Holdings, Inc.), Grace Offshore Company, Grace PAR Corporation, Grace
Petroleum Libya Incorporated, Grace Tarpon Investors, Inc., Grace Ventues Corp., Grace Washington, Inc., W. R. Grace Capital Corporation, W. R. Grace Land Corporation, Gracoal, Inc., Gracoal II, Inc., Guanica-Caribe Land Development Corporation, Hanover Square Corporation, Homco International, Inc., Kootenai Development Company, L B Realty, Inc., Litigation Management, Inc. (f/k/a GHSC Holding, Inc., Grace NH,

Inc., Asbestos Management, Inc.), Monolith Enterprises, Incorporated, Monroe Street, Inc., MR Holdigs Corp. (f/a Nestor-BNA Holdings Corporation), MR Intermedco, Inc. (f/k/a Nestor-BNA, Inc.), MR Staffing Systems, Inc. (f/k/a British Nursing Association, Inc.), Remedium Group, Inc. (f/a Environmental Liability Management, Inc., E&C Liquidating Corp., Emerson & Cumng, Inc.), Southern Oil, Resin &
Fiberglass, Inc., Water Street Corporation, Axial Basin Ranch Company, CC Parers (f/a Cross Countr Staffng), Hayden-Gulch West Coal Company, H-G Coal Company.

DOCS_DE:

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1. Order, dated April 13, 2007, entered by the Court April 16, 2007, Denying

Debtors' Motion to Expand the Preliminary Injunction to Include Actions Against the State of
Montana, (Docket No. 4201;

2. Memorandum Opinion, dated April 13, 2007, entered by the Court April 16,
2007, Denying Debtors' Motion to Expand the Preliminary Injunction to Include Actions
Against the State of

Montana, (Docket No. 419);

3. Order, dated March 27,2008, entered by the Court March 31, 2008, Denying the

Motion for Reconsideration of Court's Opinion and Order Denying Debtors' Motion for
Expansion of Preliminary Injunction Entered April

16, 2007, (Docket No. 484);

4. Memorandum Opinion dated March 27, 2008, entered by the Court March 31,
2008, Denying the Motion for Reconsideration of Court's Opinion and Order Denying Debtors'
Motion for Expansion of Preliminary Injunction Entered April

16, 2007, (Docket No. 483).

The names of all parties to the appeal and the names, addresses, and telephone numbers

of their respective attorneys are listed below. Copies of the orders appealed from are attached
hereto:

Party
Libby Claimants

Counsel of Record

Daniel C. Cohn Chrstopher M. Candon

COHN & WHITESELL LLP
101 Arch Street Boston, MA 02110
Telephone: 617/951-2505

Facsimile: 617/951-0679
and

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Adam G. Landis (No. 3407) Kerr Mumford (No. 4186) LANDIS RATH & COBB LLP 919 Market Street, Suite 600 P.O. Box 2087 Wilmington, DE 19801
Telephone: (302) 467-4400

Facsimile: (302) 467-4450
State of Montana

Francis A. Monaco, Jr., Esq. Kevin J. Mangan, Esq.

WOMBLE CARLYLE SANDRIGE &
RICE, PLLC
222 Delaware Avenue, Suite 1501 Wilmington, DE 19801
Telephone: 302/252-4361

Official Committee of Asbestos Personal Injury Claimants

Marla Rosoff

Eskin, Esq.

Mark T. Hurford, Esq.

CAMPBELL & LEVINE, LLC
800 King Street, 3rd Floor Wilmington, DE 1801
Telephone: 302/426-1900

Elihu Inselbuch, Esq. CAPLIN & DRYSDALE, CHARTERED 375 Park Avenue, 35th Floor New York, NY 10152
Telephone: 212/319-7125

Peter Van N Lockwood, Esq. Nathan D. Finch, Esq.

CAPLIN & DRYSDALE, CHARTERED
One Thomas Circle, N.W. Washington, DC 20005
Telephone: 202/862-5000

W. R. Grace & Co.

David M. Bernick, Esq.
Janet S. Baer, Esq.

Salvatore Bianca, Esq.

KIRKAND & ELLIS
200 E. Randolph Drive
Chicago,IL 60601 Telephone: 312/861-2000

Facsimile: 312/861-2200
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and

PACHULSKI STANG ZIEHL & JONES

~W JL. _
Laura Davis Jones (Bar No. 2436)
James E. O'Neil (Bar No. 4042)

Timothy P. Cairns (Bar No. 4228) 919 North Market Street, 17th Floor P.O. Box 8705 Wilmington, Delaware 19899-8705 (Courier 19801) Telephone: (302) 652-4100 Facsimile: (302) 652-4400

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ORDERS APPEALED FROM

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IN THE UNITED STATES BANKRUPTCY COURT

FOR DISTRICT OF DELAWAR

IN RE: (
( ( ( ( (

W.R. GRACE & CO., et aI., (

Bankptcy No. 01-01139 (JK)
Jointly Administered
Chapter 11

Debtor(s). (
W.R. GRACE & CO., et aI., (

Adversary

No. A-01-771

-against- (
( (

Plaintiffs. ((

Related to Doc. No. 359

MARGART CHAKRIN, (
ROBERT H. LOCKE, JACKIE (

ELLISON, MACIA ELLISON, ( CARYYOUPEE, RUPPLEK. (

PERRY, THE STATE OF (
MICHIGAN, ALICE SMOKLER, (

HOME SAVIGS TERMITE (
CONTROL, GLORIA MUOZ, (
EXXON MOBILE CORPORATION ( ET AL., AND JOHN DOES 1- 1000, (

Defendants. (

( (

ORDER DENYING DEBTORS' MOTION TO EXPAND THE PRELIMINARY INJUNCTION TO INCLUDE ACTIONS AGAINST THE STATE OF MONTANA
AND NOW, this 13th day of April, 2007, for the reasons expressed in the foregoing

Memorandum Opinion, it is ORDERED, ADJUDGED, and DECREED that the Debtors'
Motion to Expand Their Prelimnary Injunction to Include Actions Against the State of Montana,

13

Dat~
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seeking to include one hundred and twenty (120) actions curently pending against the State of

Montana before various st~te cours (the "State Cour Actions"), is DENIED.
Debtors shall immediately serve a copy of this Opinion and Order on all parties in
interest and file a certificate of service forthwith.

United States Bankptcy Judge

lri~nr...~i4~~~ dith K. Fitzgerald ... .. .. jmd

Dated: 4/13/2007 16:37:52

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IN RE: (
(

IN THE UNITED STATES BANKRUPTCY COURT FOR DISTRICT OF DELAWARE

W.R. GRACE & CO., et aI., (

Bankptcy

No. 01-01139 (JK)

Debtor(s). ((
( ( (

Jointly Administered
Chapter 11

Adversary No. 01-771

W.R. GRACE & CO., et aI., (

-against- (
(
(

Plaintiffs. ((

Related to Doc. No. 359

MARGARET CHAKARIAN, (
ROBERT H. LOCKE, JACKIE ( ELLISON, MARCIA ELLISON, ( CARY YOUPEE, RUPPLE K. (

PERRY, THE STATE OF (
MICHIGAN, ALICE SMOKLER, (

HOME SAVINGS TERMITE (
CONTROL, GLORIA MUNOZ, (
EXXON MOBILE CORPORATION ( ET AL., AND JOHN DOES 1-1000, (

Defendants. (

( (

MEMORADUM OPINION!
The matter before the Court is the Debtors' Motion to Expand Their Preliminary
Injunction to Include Actions Against the State of

Montana (the "Expansion Motion"),2 which

i This Memorandum Opinion constitutes our findings of fact and conclusions of

law.

2 Doc. No. 359.
1

Dat~ Docket#~

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seeks to add within the scope of

the preliminary injunction 1203 actions currently pending

against the State of

Montana in Montana state courts (the "State Court Actions").4 The State of

Montana has fied a proof of claim in an unliquidated amount asserting

indemnification/contribution from Debtors relating to the State Cour Actions. The preliminary
injunction was issued in this adversary to prevent the fiing or continued prosecution of actions
against third parties that arise from alleged exposure to asbestos indirectly or directly caused by

Debtors.s The claimants involved in the State Court Actions ("Montana Plaintiffs") fied an
objection to the Expansion Motion.6 The Offcial Committee of

Unsecured Creditors submitted

ajoinder7 to the Expansion Motion and the State of

Montana fied a response stating it did not

object to the relief sought unless the relief affects certain of its rights.8

with respect to 97 pending State Court Actions. As of January 30, 2006, Debtors asserted that the number of State Court Actions has grown to 120. Debtors' Motion to Dismiss Appeal, Doc. No. 383, at 2. The actual number of plaintiffs or actions has not been identified in any pleading.
3 Debtors' motion, as filed, sought relief 4 Several months prior to the fiing of the Expansion Motion, the State of

Montana fied a

motion for relief from the automatic stay in order to join Debtors as third-part defendants to the
State Cour Actions. Motion of State Of Montana For Relief From the Automatic Stay,

Bankptcy No. 01-01139, Doc. No. 8582. The court's decision regarding the motion for relief from the automatic stay wil be entered as a separate opinion and corresponding order.
5 Order Granting Modified Preliminary Injunction, Adversary No. 01-771, Doc. No. 87.
6 Opposition of

Libby Claimants to Debtors' Motion to Expand the Preliminary
Montana, Adversary No. 01-771, Doc. No.

Injunction to Include Actions Against the State of

363.
7 Joinder of the Offcial Committee of

Expand Their Preliminary Injunction to Include Action Against the State of

Unsecured Creditors in the Debtors' Motion to Montana, Adversary

No. 01-771, Doc. No. 359.

8 Response to Debtors' Motion to Expand Preliminary Injunction to Include Actions
Against the State of Montana, Adversary No. 01-771, Doc. No. 362, at 1, 2. "Montana does not
( continued...)

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On April 2, 2001 (the "Petition Date"), Debtors fied a voluntary petition for relief

under

Chapter 11 of

the United States Bankrptcy Code. Soon after, the United States Trustee

appointed the Propert Damage Committee, the Offcial Committee of Asbestos Personal Injury
Claimants, the Offcial Committee of Unsecured Creditors, and the Official Committee of

Equity

Holders. Debtors continue in possession of their propert and the management of their
businesses as debtors-in-possession pursuant to § § 1107 and 1108 of the Bankrptcy Code.

The preliminary injunction at issue in this proceeding was entered on May 3, 2001,

barrng the prosecution of currently pending actions against various affiiated entities and third
parties whose purported liability was solely derivative of

Debtors. Adversary No. 01-771, Doc.

No.

32. On January 22,2002, the court entered an order modifying the preliminary injunction to

include certain additional affliates and to reinstate the bar against the commencement of new

actions against affliates arising from alleged exposure to asbestos whether indirectly or directly
caused by Debtors.9 On February 4,2002, certain Montana Plaintiffs attempted to modify the
injunction in order to pursue an alleged direct cause of action claim against Maryland Casualty

Company ("MCC"), one of Debtors' insurers.1o This court denied the motions and was affrmed

\...continued)

the motion does not effect reorganization of the Debtors relating to the (sic) Montana's rights to: (a) object to any plan of treatment of Montana under such a plan; (b) preserve its contribution and/or indemnification claims it may have against Debtors relating to the Montana action; (c) take all such actions as Montana shall determine appropriate in order to preserve any claims or causes of actions it may have relating to the Montana actions; and (d) continue to seek relief from the automatic stay in the event the Motion is denied."
object to the relief requested in the Motion to Expand Injunction if

9 Adversary No. 01-771, Doc. No. 87, Order Granting Modified Preliminary Injunction.
10 Named plaintiffs involved in the State Court Actions were also previously involved in

the claims against MCC and Montana Vermiculite Company.
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by the u.s. Circuit Court of Appeals for the Third Circuit. In re W.R. Grace & Co. (Gerard v.
W.R. Grace & Co.), 115 Fed. Appx. 565 (3d Cir. 2004). The Montana Plaintiffs next attempted
to pursue their asbestos personal injury claims arising out of

Debtors' mining operations in

Libby, Montana, by commencing suit against Montana Vermiculite Company ("MVC"), the
former owners of Debtors' mining operations.) i This court amended the injunction to stay the
actions against MVC on February 25,2005.12

The various State Cour Actions relate to claims arising from the mining and processing
of vermiculite containing asbestos within the State of

Montana. Most plaintiffs allege periods of
the

employment with Debtors and/or their predecessors from 1947 through 1993. At least 21 of

120 State Court Actions were filed first only against Debtors and were amended, after Debtors
fied bankruptcy, to include the State of

Montana. The others were filed against the State of

Montana after Debtors were in bankptcy, at which time actions in state court against Debtors
were precluded by the automatic stay. The Montana Plaintiffs assert the same cause of action

(negligence in failing to take suffcient action to protect and to warn the plaintiffs about alleged
asbestos hazards) against both Debtors and the State of

Montana.

According to one of

the State Court Actions, Orr v. State of Montana, 106 P.3d 100 (Mt.

2004), Montana's State Board of

Health ("BOH") inspected the Libby mine on a regular basis

beginning in 1956.

ii See Motion to Expand the Preliminary Injunction to Include Actions Against Montana Vermiculite Company, Adversary No. 01-771, Doc. No. 153.
12 Amended Order Granting Motion to Expand Preliminary Injunction Actions Against

Montana Vermiculite Company, Adversary No. 01-771, Doc. No. 358.
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During each State inspection between 1956 and 1974, the State inspectors found unsanitary and unhealthful conditions. The State notified Zonolitel3, and later Grace, of the dangerous conditions after each inspection, explaining the seriousness of asbestosis and its likely fatal outcome, but did not inform the Mine workers, including the Miners, of the dangers. With the exception of identifying the hazardous conditions and telling the Mine's owner/managers to correct the problems, the State took no steps to ensure that the Mine's owners/managers responded in a manner that provided a safe working environment.
106 P.3d at 104. In the Nineteenth Judicial District Court of

Montana (Lincoln County), the

State of Montana obtained dismissal of the Orr claim on the basis that the State did not owe a

duty to the plaintiffs. On appeal, the Supreme Cour of Montana reversed the trial court's
dismissal, concluding that the State had a legal duty to the Libby Mine workers,14 and remanded
the case for determination of whether the State of

Montana breached that duty.

Debtors assert that the motion to include Montana within the injunction in this case
should be granted because the State of Montana and Debtors share an identity of

interest such

that a suit against the nondebtor is essentially a suit against the Debtors and the State Court
Actions will have an adverse impact on the Debtors' ability to accomplish reorganization.

IS The

Montana Plaintiffs make two arguments against including the State in the injunction: (1) the
court lacks subject matter jurisdiction to enjoin their separate and independent tort claims against
the State of

Montana because the State Actions are not related to the bankptcy within the

13 The Zonolite Company was acquired by W.R Grace in 1963.
14 "We conclude that the State had a statutory duty under (numerous Montana Statutes) to

protect the safety and health of the Miners by warning them of known dangers associated with their workplace." Orr, 106 P.3d at 111.
15 These two factors, identity of interest and adverse impact, are part of the "unusual
circumstances" test articulated in Matter ofZale Corp., 62 F.3d 746, 761 (5th Cir. 1995), for
determination of B.R. 572 (Bankr. E.D. Pa. 2005), and Matter of

whether a §105(a) injunction is proper. See also In re Prussia Associates, 322 Rickel Home Centers, Inc., 199 B.R. 498, 501

(Bankr. D. DeL. 1996).

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meaning of28 U.S.C. §1334(b), and (2) the Expansion Motion fails to establish grounds for
entry of an injunction against a third-part litigant under the stringent standards established by

case law.

The U.S. Court of Appeals for the Fifth Circuit explained that: Subject matter jurisdiction and power (under § 105 of the Bankrptcy Code J are separate
prerequisites to the court's capacity to act. Subject matter jurisdiction is the court's

authority to entertain an action between the parties before it. Power under Section 105 is the scope and forms of relief the court may order in an action in which it has jurisdiction.
Matter ofZale Corp., 62 F.3d 746, 751 (5th Cir. 1995) (citing In re American Hardwoods, Inc.
(American Hardwoods, Inc. v. Deutsche Credit Corp.), 885 F.2d 621,624 (9th Cir. 1989)).
While aspects of

the § 105(a) analysis may be relevant to "related-to" jurisdiction, the two

inquiries are analytically distinct. In re Combustion Engineering, Inc., 391 F.3d 190, 224-25 (3d
Cir.2004). Section 105(a) "does not provide an independent source of

federal subject matter

jurisdiction." Id. at 225. Therefore, this court must establish subject matter jurisdiction before

considering the merits of a § 105(a) injunction.

Section 1334(b) provides that". . . the district cours shall have original but not exclusive

jurisdiction of all civil proceedings arising under title II, or arising in or related to cases under
title 1 1." 28 U.S.c. §1334(b). Section 157(a) of title 28 of

the United States Code permits the

district court to refer "any or all proceedings arising under title 11 or arising in or related to a

case under title 11 . . . to the bankrptcy judges for the district." Celotex Corp. v. Edwards, 514
U.S. 300, 307 (1995).

The generally accepted test for determining whether a bankrptcy court has subject

matter jurisdiction over litigation between nondebtor third parties is whether "the outcome of
that proceeding could conceivably have any effect on the estate being administered in
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bankrptcy." Pacor, Inc. v. Higgins, 743 F.2d 984,994 (3d Cir. 1984). However, as exhibited

by Pacor itself, application of

this test has proven to be most difficult with cases involving

indemnification and contribution.
In Pacor, John and Louise Higgins initially brought suit against Pac

or, a distributor of

chemical supplies, in Pennsylvania state court, seeking damages allegedly caused by Mr.

Higgins' work-related exposure to asbestos supplied by Pacor. Pacor, in turn, filed a third part
complaint impleading the Johns-Manville Corporation, which soon after fied a chapter 11

bankrptcy petition. In determining whether the bankrptcy cour had subject matter
jurisdiction, the U.S. Court of Appeals for the Third Circuit held that the primary action between
the third parties, Higgins and Pacor, would have no effect on the bankrptcy estate.

At best, it is a mere precursor to the potential third part claim for indemnification by Pacor against Manvile. . . . Even if the Higgins-Pacor dispute is resolved in favor of Higgins (thereby keeping open the possibility of a third part claim), Manvile would stil be able to relitigate any issue, or adopt any position, in response to a subsequent claim by
Pacor. Thus, the bankrptcy estate could not be affected in any way until the Pacor-

Manvile third part action is actually brought and tried.
Id. at 995. The court held that a bare claim of common law indemnity was not enough to

establish jurisdiction; any effect on the estate is indirect and contingent on intervening litigation.

"( A)ny judgment received by the plaintiff. . . could not itself result in even a contingent claim

against Manvile, since Pacor would stil be obligated to bring an entirely separate proceeding to
receive indemnification." Id. That is, the outcome of the action itself

would have no effect on

the estate and a separate indemnification action would be required before an effect could be
established.

On the other hand, the u.s. Court of Appeals for the Sixth Circuit adopted a different interpretation ofthe Pacor test. In In re Dow Corning Corp., 86 F.3d 482 (6th Cir. 1996), the
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Court of Appeals found related-to jurisdiction for a mass tort claim against the shareholders of a
chapter 11 debtor because of the possibility of indemnity or contribution claims against the

debtor from the shareholders. The court glossed over the rationale and the ultimate outcome of
the Pacor opinion, looking to the word "conceivable" and stating that:

A key word in (the) test is 'conceivable.' Certainty, or even likelihood, is not a requirement. Bankptcy jurisdiction wil exist so long as it is possible that a proceeding may impact on 'the debtor's rights, liabilities, options, or freedom of action' or the 'handling and administration of the bankrpt estate. '
Id. at 491 (quoting In re Marcus Hook Dev. Park, Inc., 943 F.2d 261,264 (3d Cir. 1991)). The

court held that the possibility of indemnity or contribution claims alone was suffcient to satisfy

the Pacor test.
In In re Federal-Mogul Global, Inc., 300 F.3d 368 (3d Cir. 2002), cert. denied sub nom.
DaimlerChrysler v. Offcial Committee of Asbestos Claimants, 537 U.S. 1148 (2003), the Court
of Appeals for the Third Circuit rejected an argument based on the decision of the Sixth Circuit

in In re Dow Corning, stating that focusing on the word "conceivable" ignores the precise
holding of Pacor. "The test articulated in Pacor for whether a lawsuit could 'conceivably' have
an effect on the bankrptcy proceeding inquires whether the allegedly related lawsuit would
affect the bankptcy proceeding without the intervention of

yet another lawsuit." Id at 382.

The bankrptcy court accurately reiterated the holding of Pacor stating that jurisdiction exists
where "the potential impact on the debtor's estate would have been direct with no intervening
adjudication or joinder of issue necessary for judgment against the non-debtor to affect assets,
re-prioritize creditors and thwart the bankrptcy court's administration of

the estate." In re

Federal-Mogul Global, Inc., 282 B.R. 301,307 (Bank. D. DeL. 2002), quoting Celotex Corp. v.
Edwards, 514 U.S. 300, 308 (1995). In Federal-Mogul, jurisdiction in the bankrptcy of

the

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debtor, an automobile parts supplier, was sought for the third part action between personal
injury claimants and the automobile companies (including the "Big Three" Auto Makers) who

used debtors' asbestos-containing automobile products in their own products. Following its
decision in Pacor, the court held that related-to jurisdiction was lacking because it would take
the intervention of

yet another lawsuit before the defendants would have indemnity claims

against Federal-MoguL. 282 B.R. at 306. To the extent that the Third Circuit and Sixth Circuit
cases conflict regarding the application of

the Pacor rule to indemnification/contribution claims,

this court must follow the case law of the Third Circuit.
The position claims in the State Court Actions is nearly identical to the claims in Pacor
and Federal-Mogul. Before any effect on Debtors can be realized, the State of

Montana must

first be found liable in state court and then pursue its claim for indemnification in bankptcy

cour. While the cour in Orr v. State of Montana, supra, found that a duty existed on behalf of
the State, the case was remanded for determination of whether the State of Montana breached
that duty. Ifbreach is not found, indemnification/contribution is not possible. If

breach is found,

the Montana Plaintiffs "would stil be obligated to bring an entirely separate proceeding to
receive indemnification." Pacor, 743 F.2d at 995. Montana law prohibits the State of

Montana

from litigating or establishing a factual basis (i.e., percentage of comparative fault) against
Debtors for either contribution or indemnity during the course of the State Court Actions. 16 See

Mont. Code Ann. §27-1-703 (1997), and Plumb v. Forth Judicial Dist. Court, 927 P.2d 1011
(Mont. 1996) (entry of

findings against non-part violates substantive due process). Ajudgment

16 This court is not asked to, and does not, express an opinion as to the merits of a

possible indemnification/contribution claim that might be brought against the estate by the State of Montana ifit is found liable based upon the State's independent duty to third parties.
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against the State of Montana wil not bind Debtors. An intervening adjudication is necessary to
affect the estate.

The bankrptcy court in Federal-Mogul noted that the decisions in Celotex Corp. v.
Edwards, 514 U.S. 300 (1995), In re A.H Robins Co., Inc., 828 F.2d 1023 (4th Cir. 1987), cert.

denied, 485 U.S. 969 (1988), and Halper v. Halper, 164 F.3d 830 (3d Cir. 1999), followed the

Third Circuit's interpretation of Pacor and the results could be "explained at least in part by the
recognition that they each involved propert or rights belonging to the estate." 282 B.R. at 307.

Celotex involved the debtor's cash collateral, A.H Robins concerned insurance proceeds, and
Halper addressed a guarantee which was available as a creditor's alternative source of

recovery.

Id. The rulings in each of these third part cases would have had a direct effect on the estate.
This distinction can also be applied to reject Debtors' assertion that the inclusion in the
injunction of the claims against MCC and MVC supports the expansion of

the injunction to the

State of

Montana Actions. MCC was a workers compensation insurer for Debtors and a ruling

against MCC would have had a direct impact on the estate. This court in the MVC litigation
explained that:
In this case, if there is a judgment against MVC which resulted in damages for asbestosrelated injuries, the Montana Plaintiffs would look to Royal with respect to the insurance policies and Debtor's indemnity obligations under their settlement with Royal would be triggered. The indemnity between Debtors and Royal is contractual; in Pacor a common law indemnity claim existed and was held to be an insuffcient basis for "related to" jurisdiction.

In re W.R. Grace & Co. (W.R. Grace & Co. v. Chakarian), 315 B.R. 353,359 (Bank. D. DeL.

2004). Similarly, inA.H Robbins Co., Inc. v. Piccinin, 788 F.2d 994 (4th Cir. 1986), cert. denied
479 U.S. 876 (1986), an injunction was proper because the indemnification rights were absolute;

a judgment against the co-defendant indemnitee would effectively bind the debtor. Here,
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however, as in Pacor and Federal-Mogul, the State Court Actions wil not be binding on the
estate and wil not have a direct impact on the estate without additional intervening adjudication.
Additionally, in Orr, it is the actions of the State of

Montana, not Debtors, which are the whether, assuming the State had the

basis of

the claims. The question in Orr became one of

information, it had an independent responsibility to distribute or act upon the information for the

benefit of the plaintiffs in the litigation. "(T)he State had discretion to determine what
information to gather, but once that information was gathered, it had no discretion about whether

to distribute it." Orr, 106 P.3d at 108.
Based on the discussion above, related-to subject matter jurisdiction does not exist for the

purpose of expanding the injunction to include the State Court Actions. Without a finding of
such jurisdiction, it is unnecessary to conduct an analysis of

whether an injunction under §105(a)

is appropriate. Although, as this represents the Montana Plaintiffs third attempt to pursue these
claims, we suspect that this may be yet another effort at an end run around the automatic stay, in
this situation, the Supreme Court of

Montana has articulated a cause of action separate and apart

from the conduct of

Debtors. The motion to expand the preliminary injunction to include the

State of

Montana wil be denied. We note, however, that the automatic stay remains in effect as

to the Debtors and their propert, including their products, and nothing in this Opinion and Order

authorizes relief from the stay as to any allegation, cause of action, etc., against the Debtors'

estates, the Debtors, or those parties protected by the preliminary injunction, or against propert

of the estate or propert of the Debtors.
An appropriate order wil be issued.

11

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DATE: April 13, 2007

Jß(ith K. Fitzgerald. imd
United States Bankrptcy Judge

~'Kd-~~

12

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IN THE UNITED STATES BANUPTCY COURT
FOR THE DISTRICT OIl' OELA WARE

INRE:
W.R. GRACE & CO., et a/.,
Debtor(s),

( (

(
(
Bankruptcy

No. 01-01139 (JKF)

(
(
(

Jointly Administered
Chapter 11

(

(

W.R. GRACE & CO., et al.,
Plaintiffs.

-against-

( ( ( ( ( (

Aùversary No. A-O 1-771

MARGARET CHAKARIAN, et a/., and
JOHN DOES i -I 000,

( ( (
(

Related to Doc. No. 426, 427, 419, 420, 466

Dßfendants.

(

(

ORDlîR DENYING MOTIONS TO RECONSlD.ER
AND NOW, this 27th day of

March, 2008, for the reasons expressed in the foregoing

Memorandum Opinion, it is ORDERED, ADJUDGED, and DECREED that the Motion for
Reconsideration ofCoiirts Opinion and Order Denying Debtors' Motion for Expansion of

Preliminary Injunction Entereù April 16,2007, fied on behalf of

State of Montana, Doc. No.

426, and Debtors' Motion to Alter and Amend the Court's Order Denying Its Request to Expand
the Preliminary Injunction to Include Actions Agaínst the State of

Montana, Doc. No. 427,

which ask the court to reverse its Order Denying Debtors' Motion to Expand the Preliminary
Injunction to Include Actions Against the State of

Montana, Doc. No. 420, and Memorandum

DatA 5J:ll/0i

Docket # ll8q_

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Opinion, Doc. No. 419, both signed 011 April 13,2007 and entered on the docket on April J 6,

2007, are llENlKD.

~~~

udith K. Fitzgerald ~ jmd

United States Bankruptcy Judge

cc David M. Bernick

Janel S. Baer Kirkland & Ellis LLP
200 East Randolph Drive
Chicago, IL 6060 I

Laura Davis Jones

James E. O'Neil Pachulski Stang Ziehl & Jones
919 North Market Street, 17th Floor

PO Box 8705 Wilmington, DE 19899-8705

Adam G. Landis Kerri K. Mumford 919 Market Street, Suite 600 PO Box 2087 Wilmington, DE J 980 I
Daniel C. Cohn Christopher M. Candon Cohn Whitesell & Goldberg LLP io J Arch Street Boston, MA 02 J 10

Mark R. Hurford Marla R. Eskin Campbell & Levine, LLC 800 N. King Street, Suite 300 Wilmington, DE J 980 l
Elihu Insclbuch

Caplin & Drysdale, Chartered
375 Park Avenue, 35th Floor

2

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New York, NY 10152-3500
Petèr Van N. Rockwood
Nathan D. Finch

Caplin & Drysdale, Chartered One Thomas Circle, N.W. Washington, DC 20005 Evelyn J. Meltzer Pepper Hamilton LLP
Hercules Plaza, Suite 5100

1313 Market Street
PO Box 1709

Wilmington, DE 19899-1709
Edward C. Toole, Jr. Anne Mark Aaron son Thomas A. Spratt, Jr. Pepper Hamilton LLP 3000 Two Logan Square
18th & Arch Streets Philadelphia, P A 19103

Edward H. Rosenthal Rosenthal, Monhait, & Goddess, P.A. 919 Market Streot, Suite 1401 Wilmington, Of: 19899-1070

Daniel M. Glosband Brian H. Mukherjee Goodwin Procter LLP Exchange Place Boston, MA 02109

Elizabeth DeCristofaro Ford Marrin Esposito Witneyer & GIeser, L.L.P.
Wall Street Plaza, 23'd Floor

New York, NY 10005-1875
Ian Connor Biftcrato Garvan F. McDaniel 800 North King Street, Pirst Ploor Wilmington, DE ) 9801
3

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Carl J. Pemicone Wilson, Elser, Moskowitz, Edelman & Dicker LLP
J 50 East 4200 Street
New

York, NY 10017-5639

Jeffrey C. Wisler Marc J. Phillìps

Connolly Bove Lodge & Hulz LLP The Nemours ßuilding 1007 North Orange Street PO Box 2207 Wilmington, DE 19899
Francis J. Monaco, Jr. Kevin J. Mangan
Monzack and Monaco, P.A. 1201 N. Orange Street, Suite 400

Wilmington, DE J 980 i
Roger Frankel Richard H. Wyron

Arrack Harrington & Sutc1iffee LLP 3050 K Street, NW Washington, DC 20007

John C. Phillips Philips, Goldman & Spence, P.A. 1200 North Broom Strèet Wilmington, DE 19806
Philip Bentley Kramer I,evin Naftlis & Frankel LLP
J 177 Avenue of

the Americas

New York, NY i 0036

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Scott Haena ßilzÎn Sumberg Dunn Baena Price & Axelrodí LLP First Union Financial Center 200 South Biscayne Blvd., Suite 2500 Miami, FL 33131
Lewis Kroger

Stroock & Stroock & Lavan LLP
i 80 Maiden Lane

New York, NY 10038-4982
Mark Shclnitz W.R. Grace & Co. 7500 Grace Drive Columbia, MD 21044
Ellen W. Slíghts

Assistant U.S. Attorney The Nemours Building
1 007 Orange Street, Suite 700

PO Box 2046 Wilmington, DE 19899

Steven Kortanek Klehr, Harrison, Harvey, Branzburg & Ellers, LLP 919 North Market Street, Suite 1000 Wilmington, DE i 980 i

Teresa K. D. Currier Buchanan Ingersoll & Rooney PC
The Brandywine Building
1000 West Street, Suite 1410

Wilmington, DE J 980 i

Michael R. Laslowski Duane, Morris & Heckscher LLP 1100 North Market Street, Suite 1200 Wilmington, DE 19801-1246

5

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U.S. Trustee

844 King Street Suite 2313 Wilmington, DE 19801

6

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IN THE UNITED STATES BANKRUPTCY COURT

FOR DISTRICT OF DELAWAR
(

INRE:
W.R. GRACE & CO., et al.,
Debtor(s).

(
(

( (

Bankruptcy No. 01-01139 (JKF) Jointly Administered
Chapter 11

( (
(
(

W.R. GRACE & CO., el at.,

(
( ( (

Plaintíts.
-against-

(

MARGARET CHAKARIAN, el al., and JOHN DOES 1-1000,
Defendants.

( (
(

Adversary No. A-O 1- 771

Related to Doc. No. 426, 427, 419, 420, 466

(
( ( (

MEMORADUM OPINION'
The matters before the court are the (1) Debtors' Motion to Alter and Amend the Court's Order Denying Its Request to Expand the Preliminary Injunction to Include Actions Against the
State ofMoniana2 and (2) Motion for Rcconsideratìon of

Court's Opinion and Order Denying

Debtors' Motion for Expansion of

Preliminary Injunction Entered April 16,20073 (collectively,

'The court's jurisdiction was not at issue. This Memorandum Opinion constitutes our findings uf fact and conclusions of law.
iDoc. No. 427, filed on April 26, 2007.
'Doc. No. 426, filed on April

26, 2007.

DatA Lt IllI I () Î

Docket =I JJ~?

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the "Motions to Reconsider"). We note that our Memorandum Opinion and Order, 366 B.R. 295

(Bankr.D.Del. 2007V are dated April 13,2007, but were docketed on April 16,2007; hence the
reference in the Motion for Reconsideration. We wil refer to our opinion and order by reference
to the April 13 date and/or to the Bankruptcy Reporter cite. The Motions to Reconsider ask the
coiirt to reverSe its April 13 Memorandum Opinion and Order,5 docketed on April 16, 2007,

which denied Debtors' mution6 to expand the preliminary injunction to include actions against

the State of Montana ("State Court Actions"). The Offcial Committee of Asbestos PersonalInjury (sic) Claimants ("ACe") and the claimants involved in the State Court Actions ("Montana
Plaintiffs,,)7 both filed objections to the Motions to Reconsidcr.8

BACKGROUND

40n the adversary docket the Memorandum Opinion is at Doc. No. 419 and the Order is
at Doc. No. 420.

sOrder Denying Debtors' Motion to Expand the Preliminary Injunction to Include
Actions Against the State of

Montana, Doc. No. 420. Memorandum Opinion, Doc. No. 419. See

In re W.R. Grace & Co., 366 B.R. 295 (Bankr.D.Del. 2007).

6Debtors' Motion to Expand Their Preliminary Injunction to rnclude Actions Against the
State of

Montana, Doc. No. 359.

1The Montana Plaintiffs also call themselves "Libby Claimants." See, for example, Doc.

No. 442 designated as fied by Libby Claimants. However, the document fied at Doc. No. 442 is titled and refers to "Montana Plaintiís." Doc. No. 442 refers to Doc. No. 363, footnote i ur which refers to Doc. No. 4807 in the main case, Bankr. No. 01-1139. Doc. No. 4807 is a 2019 statement listing the Libby/Mllltana claimants by name. We refer to them herein as "Montana
Plaintiff.'l."

80pposition ofthe Oftcial Commiltee of Asbestos Personal-Injury (sic) Claimants to the
Debtors' and the State of Montana's Motions to Reconsider the Court's Decision Denying a Stay of l.itigation Against Montana, Doc. No. 443; Objection to Motions filed By Debtors and State

to Include Actions Againsi the State of

otMontana to Reconsider Order Denying Debtors' Motion to Expand the Preliminary Injunction Montana, Doc_ No. 442.
2

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On April 2, 200 I (the "Petition Date"), Debtors fied a voluntary petition for relief under
Chapter 1 i of

the United States Hankruptcy Code. On the same date, Debtors filed this

adversary proceeding. Soon after, the United States Trustee appointed the Propert Damage
Committee, the Otrcial Committee of

Asbestos Personal Injury Claimants, the Oftcial

Committee of

Unsecured Creditors, and the Offcial Committee of

Equity Holders. Debtors

continue in possession of

their property and the management ottheir businesses as debtors-in-

possession pursuant to sections I 107 and 1 J 08 of the Bankruptcy Code.

The original preliminary injunction in this adversary proceeding was signed on May 3,
2001,9 barring the prosecution of

then pending actions against various entities affliated with

Debtors and certain third parties whose purported liabiliy was solely derivative of W.R. Grace.
On January 22, 2002, thc court entered an order modifying the preliminary injunction to include
certin additional aftìliates and to reinstate the bat against the commencement of

new actions

against affilates arising trom alleged exposure to asbestos whether indirectly or directly cause
by W.R. Grace.1U On February 4,2002, certain Montana Plaintiffs attempted to modifY the

injunction in order to pursuc a prepetition state court suit based on an alleged direct cause of
action against Maryland Casualty Company clMCC"), one.ofW.R. Grace's insurers. i

i This court

\lThe order was docketed On May 6, 2001. See Doc. No. 32.
IOSee Doc. No. 87, Order Granting Modified Preliminary Injunction.

ilSee Doc. No. 85. The pleading is captioned and docketed as a motion to intervene tìled
Carol Gerard but sought clarification otthe scope of the injunction or, alternatively, a modification of the injunction sO the proposed intervenor could obtain documents for use in her Maryland state court action. Named plaintiffs involved in the State Court Actions were also previously involved in the claims against Maryland Casualty Company, Doc. Nos. 109, 135, 154, and Montana Vermiculite Company, Doc. Nos. 298, 299i in this adversary. See Doc. Nos. 109, 135,154 (MCC); Doc. Nos. 298,299 (MVC). on behalf of

3

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denied the attempt to modify, Doc. Nos. i 09, 133, which was ultimately upheld by the U.S.

Circuit Court of Appeals for the Third Circuit. In re W.R. Grace & Co. (Gerard. et al. v. WR.
Grace & Co., el at.), 115 Fed.Appx. 565 (3d Cir. 2004). The Montana Plaintiffs next attempted
to pursue their asbestos personal injury claims a.dsing out of W.R. Grace's Libby mining

operations by pursuing a prepetition suit against Montana Vermiculite Company C'MVC"), the
former owners otcertain assets one of

the Debtors purchased in 1963. See Doc. No. 153,

Debtors' Motion to Expand the Preliminary Injunction to Include Actions AgaInst (MVq. This
court amended the injunction to stay the actions against MVC on February 25,2005.12

On August 22, 2005, Debtors filed a Motion to Expand Their Preliminar Injunction to
Include Actions Against thc Statc of Montana (the "Injunction Motion"),13 seek.ing to expand the

preliminary injunction to include the State Court Actions tìled postpetition against the State of

Montana tor, among other things, negligence in railng to warn about the risks of asbestos at the
Debtors' workplace and mine in Libby, Montaa. The Montana Plaintiffs filed an objection to
the Injunction Motion.J4 The Oftcial Committee of

Unsecured Creditors submitted ajoinderls to

12Adv. No. 01~771 at Doc. No. 358. The order was docketed on February 28, 2005.
13Doe. No. 359.

140ppositîon of Libby Claimants to Debtors' Motion to Expand the Preliminary
Injunction to Include Actions Against the State of

Montana, Adversary No. 01-771, Doc. No.

363.
15Joindcr of

the OftcIal Committee of Unsecured Creditors in the Debtors' Motion to
Montana. Advcrsary

Expand 'fheir Preliminary Injunction to Include Action Against the State of

No. 01~771, Doc. No. 361.

4

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the Injunction Motion and the State of Montana filed a response stating it did not object to the
relief sought unless the relief affected certain of its rights.16

On December 19,2005, the court held a hearing on the Injunction Motion. On April 13,
2007, thc court issued a Memorandum Opinion and Order denying Debtors' Injunction Motion

("the April 13 Memorandum Opinion and Order"), finding ihat "related-to subject matter

jurisdiction (did) not exist for the purpose of expanding the injunction to include the State Court
ActionS,"17 The Debtors and the State of M~mtana subsequently filed the Motions to Reconsider

now before us and the ACC and Montana Plaintits t1ed objectìons thereto.)R

IbResponse to Debtors' Motion to Expand Preliminary Injunction to 'Include Actions
object to the relief

Montana, Adversary No. 01 -771, Doc. No. 362, at 1- 2 ("Montana does not the motion does not effect reorganization oCthe Debtors relating to the rsicJ Montana's rights to: (a) object to any plan of treatment of Montana under slIch a plan; (b) preserve its contribution and/or indemnification claims it may have against l)ebtors relating to the Montana actions; (c) take 0\11 such actions as Montana shall determine appropriate in order to preserve any claims or causes of actÎons it may
Against the State of requested in the Motion to Expand Injunction if have relating to the Montana actions; and (d) continue to seek relief

from the automatic stay ín

the event the Motion is denied").
17()OC. Nos, 419, 420, III re W.R Grace & Co., et aI. (WR. Grace & Co., et al. V.
Chakarian, et al), 366 H.R. 295 (Hankr.D.Del. 2007).
J8Debtors' Motion to Alter and Amend the Coures Order Denying Its Request to Expand
the Preliminary Injunction to Include Actions Against the State of of

Montana, Doc. No. 427; State Montana's Motion for Reconsideration ofCourts Opinion and Order Denying Debtors'

MoHon for Expansion otPrclíminary Injunction, Doc. No. 426. The Montana PlaÎntiffs'

opposition is docketed as being fied by "Libby Claimants" and appears on the docket as
Ob.iection to Motions Filed By Debtors and State of Montana to Reconsider Order Denying

Debtors' Motion to Expand the Preliminary Injunction to Include Actions Against the State of Montana." The document itself is captioned as "Opposition of Montaa ClaÎmants to Motions. .
." Doc. No. 442. The ACe's objection is docketed and titled as Opposition of

the Otlcial

Committee of Asbestos Personal-Injury (sic) Claimants to the Debtors' and the State of Montana's Motions to Reconsider the Court's Decision Denying a Stay of Litigation Against
Montana. Doc. Nù. 443.
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i i

On May 21, 2007, thís court held a heating on the Motions to Reconsider. I? At the

hearing, the court took the Motions to Reconsider under advisement and orally entered a
temporary stay pending its ruling on the motions. The court entered its wrítten order on August
29, 2007 ("Stay Order").20

The Montana Plaintitr's thereafter appealed the entry of the Stay Order to the United

States Dístrict Court for the District ofDdawareY The Debtors and the State of Montana filed

Motions to Dismiss the Appeal and corresponding briefs.22 The Montana Plaintiffs fied
opposition to the m~)tions to disiiiss.23 On January 22,2008, the District Court entered a
Memorandum and Order granting the Debtors' and State of

Montana's motions to dismiss the

appcal.24

DISCUSSION

19See Transcript of 5/2112007, Baiikr. No. 01 ~ 1139, Doc. No. 15948.
lODoc. No. 466. This order Îs docketed as an amended order and refers to Burlington

Northern Santa Fc Railway compàny ("BNSF") and an order entered at Doc. No. 453. BNSF is the subject or a separate penùing matter which the court also has under advisement. See. e,g.. Doc. Nos. 453, 459,461,462,463. We do not address BNSF issues here.
21Doc. No. 467, Notice úr Appeal; Civil Action No. 07-609.

22Civil Action No. 07-609, Doc. Nos. 6-10, 14.

23Civil Action No. 07-609, Doc. Nos. II, 12.
21Civil Action No. 07-609, Doc. No. 15~ Adv. Doc. Nos. 474-476. The District Court's

Memorandum is published on Westlaw as Libby Claimants v. WR. Grace & Co., 2008 WL
2053 i 0 (D.

DeL., Jan. 22, 2008).

6

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The Motions to Reconsider were brought pursuant to Fed.R.Cìv.P. 59(e),25 incorporated
into bankruptcy proceedings by Fed.R.Bankr.P. 9023.26 Pursuant to fed. R. Civ. P. 59(e), a

judgment may be altered or amended only when the party seeking reconsideration shows: (I)
there has been an intervening change in the controlling law; (2) there is newly discovered
evidence which was not available to the moving party at the Hme of judgment; or (3) there is a

need 10 correct a legal or factual error which has resulted in manifest injustice. Max:y Seafood
Cap ex rei. Lou-Ann, Inc. v. Quinteros, 176 F.3d 669, 677 (3d Cir. i

999)(cíting North River Ins.

Co. v. CIGNA Reinsurance Co., 52 F.3d 1194, 1218 (3d Cir. 1995)).

In their Motions to Reconsider, Debtors and the Slate or Montana allege that there is a

clear need to correct a legal error which resulted in the injustice of denying the Debtors' request
to expand the preliminary injunction. Debtors argue that the COurt "(o)verlooked binding
precedent,,27 established in

In re W.N. Grace & Co. (Gerard, et al. v. W.R. Grace & Co., el al.),

i i 5 Fcd.Appx. 565 (3d Cir. 2004), and should Correct the elTor by expanding the injunction to

include the State of Montana. The State of Montana agreed.28 Debtors argue, and the Statc of
Montana concLlrred,29 as they did in the initial pleadings, that the circumstances ofMCC in

2S"(e) Motion to Alter or Amend Judgment. Any motion to alter or amend ajudgment

shall be filed 110 later than 10 days after entr ofthc judgment." Fcd.R.Civ.P.59(c).
26Fed.R.Bankr.)_ 9023 provides that red.R.Civ.P. 59 applies in bankruptcy cases except

as provided in Fed.R.ßankr.P. 3008 regarding claims allowance.
27Doc. No. 427, at 2.
28Doc. No. 426.

29Doc. No. 427 at 2; Doc. No. 426 at 4.
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Gerard are "essentially identìcalto those present with the State ofMontana,,30 and, therefore, the
court should have followed its earlier decision3! and should have ruled that the injunction also
covers suits against the State of

Montana. However, this court did not "overlook" the Gerard

case. Indeed, this court expressly cited Gerard2 and distinguished it on its facts.33
In the April 13 Memorandum Opinion, we ruled that related.to subject inatter jurisdiction
did 110t exist for the purpose of expanding the injunction to include the State Court Actions:14
The generally accepted test tor determining whether a bankruptcy C~lLirt has subject matter
jurisdiction over litigation between nondcbtor third parties is whether Itthe outcome of

that

proceeding could conceivably have any effect on the estate being administered in bankruptcy.1t

racor, Inc. v. Higgins, 743 F.2d 984, 994 (3d Cir. 1984). See also In re Federal~Mogul Global,

Inc., 300 F.3d 368, 387 (3d Cir. 2002), cert. denied sub nom. DaimlerChrysler v. qffcial
Committee o/Asbestos ClaÎmants, 537 U.S. 1148 (2003). In Pamr and Federal-Mogul, the

Court of Appeals for the Third Circuit found that related-to jurisdiction was lacking because

30Id. at 2; Doc. No. 426 at 4 ("The present case is identical to Gerard").

.'1In Gerard, the Court of Appeals for the Third Circuit vacated the District Court's order

vacating this court's order. The result was that claims against MCC remained subject to the the preliminary injunction, inasmuch as claims against MCC were based on its role as Debtors' workers compensation carrier and its work with Debtors on a dust control system tor Debtors' míne in Libby, Montana.
protection of

'U366 B.R. at 298.

33366 B.R. at 301 -02.

34366 8.R, at 302. Subject matter jurisdiction and power or the Bankruptcy C(Jde are

separate prerequisites to the court's capacity 10 acl againslthird-party nondebtors, such as the
State of

Montana. See Malter ojZale Corp._ 62 F.3d 746, 751 (5th Cir. 1995) (citing In re

American Hardwood.., Inc. (American Hardwoody, Inc. V. Deutsche Credit Corp.), 885 F.2d 621, 624 Wh Cir. 1989)).
8

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there could be no direct effect on the estate without intervening lìtigation. Pacor, 743 F.2d at
995 (Higgins was not a creditor, had filed no claim against the debtor, and, therefore, any

judgment would have no effect on the estate); Federal-Mogul, 300 F.3d at 386 (appeal barred

because basis for district court's remand was lack ofrelated-io jurisdiciion).
In Federal-Mogul, at the bankruptcy eollrt level, the court distinguished three cases in which courts have found jurisdiction because, although the issues involved third parties, the

rulings would have a direct effect on the estates. In re Federal-Mogul Global, Inc., 282 B.R.
301,307 (Bankr.D.Del. 2002).33 Those three cases were Celotex Corp. v. Edwards, 514 U.S.
300 (1995); In re A ,H. Robinr¡ Co., Inc., 828 F.ld 1023 (4th CÎr. l 987), cert. denied sub nom.
Oherg v. Aetna Cas. and Sur. Co.,

485 U.S. 969 (1988); and Halper v. Halper, 164 ~'.3d 830 (3d

Cir. i 999). This court's April 13 Memorandum Opinion explained that the suits against MCC
and against MVC were both similar to the claims at issue in Celotex, A. H. Robins Co., and
Halper because of

their potential to directly affect the estate without separate întervening

liigation. 366 B.R. at 301-02. While the April 13 Memorandum Opinion did not go into
signítleant detail regarding the circumstances otthc suits against MCC in Gerard, Gerardwas
clearly grouped with Celotex, A.H. Robins Co., and Halper as a case in which the claims at issue
could have a "direct effect on the estate."36

3sMandamus denied by In re Federal-Mogul Global, Inc., 300 F.3d 368 (3rd Cír. 2002),
cerro deniedsub nom. Daim/erChrys/tl Corp. V. Official COmmifee of Asbestos Claimants, 537 U.S. 1) 48 (2003).

36366 H.K at 301.
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On the other hand, we found the State Court Actions to be similar to those claims in

Pacor and Federal-Mogul because there could be no direct effect on the estate without
intervening adjudìcatíon.

Before any eftcct on Debtors can be realized, the State of

Montana must first be found liable in state court and then pursue its claim
for indemnification in bankruptcy court. While the court in Orr v.

State of Montana, supra, found that a duty existed on behalf of

the

State, the case was remanded for determínation otwhether the State of Montana breached that duty. Ifbreach is not found,
indemnification/contribution is not possible. Ifbreach is found, Montana Plaintift's "would stil be obligated to bring an entirely

separate proceeding to receive indemnification." Pacor, 743 F.2d at 995. Montana law prohibits the State of Montana from litigating or establishing a factual basis (i.e., percentage of comparative fault) against Debtors for either contrîbution or indemnity during the course of the State Court Actions. See Mont. Ann. §27-1-703 (1997), and Plumb v. Fourth .Judicial Dist. Court. 927 P.2d 1011 (Mont. 1996) (entry oftìndings against non-party violates substantive due process). A judgment against the State of Montana wil not bind Debtors. An intervening adjudication is necessary to
aITect the estate.

366 B.R. at 301. Allegations ()fcommon law indemnification against Debtors in Pacor,
Federal-Mogul, and this court's April 13,2007, decision regarding the State otMontaa were

fimnd to be an insufficient basis for related-to jurisdiction because there could be no direct etlect

on the bankrptcy estae without intervening adjudication. In contrast, MCC in Gerard asserted
contractual indemnity rights which could have a direct impact on the estate.37 Debtors and MCC,

a workers' compensation insurer tòr the Debtors, had entered into a settlement agreement

whereby "Grace agreed to . . . indcl1ltiry MCC against any future asbestos-related claims fied

J7See Doc. No. 100, Objection to Motion orCaro! Gerard to Clarify the Scope ofthe
Preliminary Injunction or, in the Alternative, to Modify the Preliminary Injunction Filed by (MCC).
10

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against MCC tnat arose out of alleged liabìlty on the part ofGraco." Gerard, et al. v. W.R.
Grace & Co., et aI., i 15 Fed. Appx. 565, 566 (3d Cir. 2004).
As explained above, this court distingu,shed the MCC claims in Gerard

from the State of

Montana claims. Nothing in the record before uS indicates an error of law or fact that resulted in
manifest injustice occasioned by

our April 13 Memorandum Opinion. Therefore, the Debtors

and the State of

Montana failed to show grounds under fed.R.ßankr.P. 9023 upon whích this

court could base a decision granting the Motions to Reconsider.

The court also notes that the Motions to Reconsider presented arguments nearly identical

to those in the initial pleadings requesting expansion orthe injunction. Motions to alter or
amend ajudgment are not intended to permit a "rehash lot) arguments already briefcd."38

It should also be noted that the Montana Plaintiffs submitted a letter to this court,
pursuant to DeL. Bankr. L.R. 7007-1 (b)/9 callng to the court's attention and briefly discussing

the opinion ofthe Court or Appeals for the Second Circuit in In re .Johns-Manvile Corp.
(Travelers Casualty and Sureiy Co., et al. v_ Chubb Indemnity Insurance Co., et al., _ F.3d

J8 Inline Connection Corp. v. AOL Time Warner, Inc.. 395 f .Supp. 2d 115, 117 (ODe!.
'I, lne.. v. Kerr Mfg. Co.. 42 f.Supp. 2d 385, 419 (D.De!.), appeal dismÎssed215 F.3d 1348 (1999)). See also Bharnagar v. Surrendra Overseas Ltd., 52 F.3d 1220,
2005)(quoting Dentsply 1m

1231, 1232 (3d Cir. 1995)(motions to alter or amend do not provide litigants with an opportunity for a "second bite at the apple").
J9The Local RullZ provides:

Citation ofSubseoiient Authorities. No additional brief.." affdavits Or other papers in support of or in opposition to the motion shall be
filed without príor approval of

the Court, except that a party may

call to the Court's attention and brìetly discuss pertinent cases decided atter a party's final brief is tied or after oral argument.
11

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_,2008 Wi. 399010 (2d Cir., Feb. 15,2008).40 Debtors and the State of Montana both
rCfipondcd to the Rul~ 7007-1

(b) filing from the Montana Plaintiffi;.41 The .Jolin.v~Manvile

opinion is not dispositive of

the Motions to Reconsider. The facts are distinguishable from those

currently before this court. In the present case, Debtors sought to expand the prelimínary
ínjunction preconfìrmation to protect assets ortheir eslates. The expansion of

the injunction in

Johns-Manvile was sought postconfinnation by an insurer to protect it from statutory and
Common Jaw claims based upon an alleged independent duty owed to plaintiffs in those actions.

Although the "independent duty" theory in Johns-Manvile is similar to that lodged againfit the
State of

Montana here, the basis for the injunction is different. Travelers conceded that the
Manville's

compensation sought tor its alleged tortious conduct was n(it related to proceeds of

policies. !d. at *7. Furthermore, the plaintiffs did not rely on Manvile's insurance policies nor
seek to recover insurance proceeds for recovery. ¡d. In Slim, there was no effect on the!J of

the Manvíle estate by the actions against Travelers, a nondebtor insurer) and the bankruptcy
court had no subject matter jurisdiction to enjoin the type of

suits at issue, postconfirmation,

againsl Travelers. ¡d. at '" 11. Likewise the Court of Appeals opined that were this a §524(g)

matter, it would taU outside the parameters ofthal provision because the claims in question were

nonderivative and had no effect on the estate's res. /d. at I J. This case is in the preconfirmution

stage. It is Ilore in line with the f'acor situation in that, as previously stated, ifthc State Court

4°Letter from Daniel C. Cohn, Esquire to the Honorable Judith K. Fitzgerald Re:

lrijunetion Pleadings, Doc. No. 478.

Letter to Judge Fitzgerald re: Manvile Opinion Filed by W.R. Grace & Co., et a\., Doc. No. 479; Letter to Judge Fitzgerald rc: Manvile Opinion Filed by State of Montana) Doc. No. 480.
12

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Actions were lo have an drect on Debtors' estates there would have to be ajudgim:nt against the
State of Montana which would then have to pursiie its claims against Debtors in this bankruptcy

case. The only similarity between Johns-Manvile and the matter before us is the fact that the
underlying state court litigation relies upon theories of liability that require proof of

tortious

conduCl by a third parly (the Stale) and damages that can be assessed against that third party

without a direct impact on the Debtors' estates.

For the reasons stated herein, the Motions to Reconsider wil be denied and the court's

prior order will remain in eftèct. An appropriate order wil be issued.

DATE: March~, 2008.

~~~

udith K. Fitzgerald jmd

United States Bankruptcy Judge

cc: David M. Bernick

Janet S. ßaer Kirkland & Ells LLP 200 East Randolph lJrive
Chicago, IL 60601

Laura Davis Jones James E. O'Neil Pachulski Stang Ziehl & Jones
919 North Market Street, J 7th Floor PO Box 8705 Wilmington, DE 19899-8705
Adam G. Landís Kerri K. Mumtord 919 Market Street, Suite 600 PO Box 2087 Wilmington, DE 19801

Daniel C. Cohn Christopher M. Candon Cohn Whitesell & Goldberg LLP
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I 0 I Arch Street

Boston, MA 02110
Mark R. Hurrord
Marla R. Eskin

Campbell & Levine, LLC 800 N. King Street, Suite 300 Wilmington, DE 19801

Elihu lnselbuch Caplin & Drysdale, Chattered
375 Park Avenue, 35th Floor

New York, NY 10152-3500
Peter Van N_ Rockwood
Nathan D. Fínch

Caplin & Drysdale, Chartered
One Thomas Circle, N. W.

Washington, DC 20005
Evelyn J. Meltzer Pepper I lamilton LLP
Hercules Plaza, Suite 5100

1313 Market Street
PO Box 1709

Wilmington, DE 19899-1709

Edward C Toole, Jr. Anne Marie Aaron son Thoinas A. Spratt, Jr. Pepper Hamilton LLP 3000 Two Logan Square
1811i & Arch Streets

Philadelphia, PA 19103
Edward B. Rosenthal Rosenthal, Monhait, & Goddess, P.A. 919 Markel Street, Suite 1401 Wilmington, DE 19899-1070
Daniel M. Glosband
Brian I i. Mukherjee

Goodwin Procter LLP Exchange Place
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Boston, MA 02109
Elizabeth DeCristofaro

Ford Marrin Esposito Witncycr & Gieser, L.L.P.
Wall Street Plaia, 23'd Floor

New York, NY 10005-1875
Ian Connor Biftcrato Garvan F. McDaniel 800 North King Street, First Floor Wilmington, DE 19801
Carl J. Pernicone Wilson, Elser, Moskowitz, Edelman & Dickcr LLP
150 East 42nd Street

NcwYork,NY 10017~S639
Jeffrey C. Wisler

Marc J. Philips Connolly Bove Lodge & Hutz LLP
The Nemours Bui Iding

1007 North Orange Street PO Box 2207 Wilmington, DE 19899

lrancis J. Monaco, Jr. Kevin J. Mangan Monzack and Monaco, P.A.
1201 N. Orange Streett Suite 400

Wilmington, DE 19801

is

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Roger Frankel Richard H. Wyron

Arrack Harrington & Sutelíftce LLP 3050 K Street, NW Washington, DC 20007
John C. Philips

Philips, Goldman & Spence, P.A. 1200 North Broom Street Wilmington, DE 19806
Philip ßentley Kramer Levin Naftalis & Frankel LLP
1 i 77 A venue ofthe Americas

New York, NY 10036
Scou Baena Bilzin Suniberg Dunn Baena Price & Axelrodi LLP FIrst Union Financial Center 200 South Biscayne Blvd., Suite 2500
Miami, FL 33131
Lewis Kroger

Stroock & Stroock & Lavan LLP i 80 Maiden Lane New York, NY l0038-4982
Mark Shelnitz W.R. Grace & Co. 7500 Grace Drive Columbia, MD 21044
Ellen W. Slights
Assistant U.S. Attorney

The Nemours Building l007 Orange Street, Suite 700
PO ßox 2046

Wilmington, DE 19899

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Steven Kortanek Klehr, Harison, Harvey, Branzburg & Ellers, LLP 919 North Market Street, Suite 1000

Wilmington, DE 19801
Teresa K. D. Currier Buchanan Ingersoll & Rooney PC The Brandywine Building
1000 West Street, Suite 1410

Wilmington, DE 19801
Michael R. Lastowskì

Duane, Morris & Hceksehcr LLP i 100 North Market Street, Suite 1200 Wilmington, DE 19801-1246
U.s. Trustee

844 King Street Suite 2313 Wilmington, DE 19801

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UNITED STATES BANKRUPTCY COURT DISTRICT OF DELAWARE APPEAL TRANSMITTAL SHEET
01-771 Case Number: _____________________ BK AP If AP, related BK Case Number: ______________________ 01-1139

Title of Order Appealed: Order Denying Motion to Reconsider and Memorandum Opinion ____________________________________________________________________________________ Docket Number: _________ 484/483 Date Entered: __________________ 3/31/08 Item Transmitted: Notice of Appeal Amended Notice of Appeal Docket Number: _________ 495 Motion for Leave to Appeal Cross Appeal 4/11/08 Date Filed: _____________________

*Appe