Case: 22-2003 Document: 118 Page: 1 Date Filed: 08/22/2022
`
`Nos. 22-2003, 22-2004, 22-2005, 22-2006, 22-2007,
`22-2008, 22-2009, 22-2010, 22-2011 (Consolidated)
`
`In the United States Court of Appeals
`for the Third Circuit
`________________________________
`
`IN RE LTL MANAGEMENT, LLC,
`
`Debtor,
`
`OFFICIAL COMMITTEE OF TALC CLAIMANTS,
`Appellant,
`
`
`Direct Appeal from the United States Bankruptcy Court for the
`District of New Jersey in Ch. 11 No. 21-30589
`and Adv. Pro No. 21-03032
`
`BRIEF FOR THE CHAMBER OF COMMERCE OF THE UNITED
`STATES OF AMERICA AND AMERICAN TORT REFORM
`ASSOCIATION AS AMICI CURIAE IN SUPPORT OF APPELLEE
`
`
`
`Jennifer B. Dickey
`Janet Galeria
`U.S. Chamber Litigation Center
`1615 H Street, NW
`Washington, DC 20062
`
`H. Sherman Joyce
`Lauren Sheets Jarrell
`American Tort Reform
`Association
`1101 Connecticut Ave NW
`Suite 400
`Washington, D.C. 20036
`
`Ilana H. Eisenstein
`DLA Piper LLP (US)
`One Liberty Place
`1650 Market Street, Suite 5000
`Philadelphia, PA 19103
`ilana.eisenstein@us.dlapiper.com
`T: (215) 656-3351
`F: (215) 606-3351
`
`R. Craig Martin
`DLA Piper LLP (US)
`1201 N. Market Street
`Suite 2100
`Wilmington, DE 19801
`craig.martin@us.dlapiper.com
`T: (302) 468-5700
`F: (302) 394-2341
`
`
`
`
`
`
`
`
`
`
`
`

`

`Case: 22-2003 Document: 118 Page: 2 Date Filed: 08/22/2022
`
`
`
`TABLE OF CONTENTS
`
`INTEREST OF AMICI CURIAE .............................................................................. 1
`
`SUMMARY OF ARGUMENT ................................................................................. 2
`
`ARGUMENT ............................................................................................................. 3
`
`I.
`
`COURTS HAVE RECOGNIZED THAT IT IS APPROPRIATE TO USE
`BANKRUPTCY TO ADDRESS MASS TORT LITIGATION CLAIMS. .... 3
`
`A.
`
`B.
`
`The Debtor’s Chapter 11 Filing Has a Recognized Bankruptcy
`Purpose. ................................................................................................. 3
`
`Bankruptcy Court Resolution of Mass-Tort Liabilities Has Been
`a Key Tool for U.S. Businesses Since the Bankruptcy Code Was
`Enacted in 1978. .................................................................................... 5
`
`C. Many of the Harms Surmised by the Claimants Can be Addressed
`by the Bankruptcy Code. ..................................................................... 10
`
`1.
`
`2.
`
`Section 524(g) ........................................................................... 10
`
`Section 105(a) ........................................................................... 15
`
`II.
`
`THE BANKRUPTCY COURT CORRECTLY DETERMINED LTL’S
`CHAPTER 11 FILING WAS NOT IN BAD FAITH. .................................. 15
`
`A.
`
`B.
`
`Insolvency is Imminent in the Context of a Mass Tort Case and
`Traditional Proof of Insolvency is Not Required. ............................... 17
`
`The Valid Use of State Divisional Merger Laws (the “Texas
`Two-Step”) is Not Evidence of Bad Faith .......................................... 21
`
`CONCLUSION ........................................................................................................ 23
`
`CERTIFICATE OF SERVICE ................................................................................ 26
`
`
`
`
`i
`
`

`

`Case: 22-2003 Document: 118 Page: 3 Date Filed: 08/22/2022
`
`TABLE OF AUTHORITIES
`
` Page(s)
`
`
`
`Cases
`
`In re 15375 Mem’l Corp. v. Bepco, L.P.,
`589 F.3d 605 (3d Cir. 2009) ........................................................................... 5, 16
`
`In re A.H. Robins Co., Inc.,
`88 B.R. 742 (E.D. Va. 1988), aff’d, 880 F.2d 694 (4th Cir. 1989) ...................... 7
`
`In re Aldrich Pump LLC,
`No. 20-30608 (JCW), 2021 WL 3729335 (Bankr. W.D.N.C. Aug. 23, 2021) .. 21
`
`In re Amatex Corp.,
`755 F.2d 1034 (3d Cir. 1985) ............................................................................... 4
`
`Amchem Prod., Inc. v. Windsor,
`521 U.S. 591 (1997) ............................................................................................ 20
`
`In re Babcock & Wilcox Co.,
`274 B.R. 230 (Bankr. E.D. La. 2002) ................................................................. 18
`
`In re Bestwall LLC,
`605 B.R. 43 (Bankr. W.D.N.C. 2019) ...................................................... 4, 17, 21
`
`In re Bestwall LLC,
`606 B.R. 243 (Bankr. W.D.N.C. 2019), aff’d, No. 3:20-CV-105-
`RJC, 2022 WL 68763 (W.D.N.C. Jan. 6, 2022) ................................................. 11
`
`In re Boy Scouts of Am. & Delaware BSA, LLC,
`No. 20-10343 (LSS), 2022 WL 3030138 (Bankr. D. Del. July 29,
`2022) ......................................................................................................... 8, 12, 19
`
`In Re Cath. Diocese of Wilmington, Inc.,
`432 B.R. 135 (Bankr. D. Del. 2010) ..................................................................... 8
`
`In re Combustion Eng’g, Inc.,
`391 F.3d 190 (3d Cir. 2004), as amended (Feb. 23, 2005) ................................ 13
`
`In re DBMP LLC,
`No. 20-30080, 2021 WL 3552350 (Bankr. W.D.N.C. Aug. 11, 2021) .............. 21
`
`ii
`
`

`

`Case: 22-2003 Document: 118 Page: 4 Date Filed: 08/22/2022
`
`
`
`In re Dow Corning Corp.,
`280 F.3d 648 (6th Cir. 2002) ................................................................................ 8
`
`In re Fed.-Mogul Glob. Inc.,
`684 F.3d 355 (3d Cir. 2012) ............................................................................... 11
`
`In re G-I Holdings Inc.,
`420 B.R. 216 (D.N.J. 2009) ................................................................................ 10
`
`In re Grossman’s Inc.,
`607 F.3d 114 (3d Cir. 2010) ............................................................................... 11
`
`In re Integrated Telecom Express, Inc.,
`384 F.3d 108 (3d Cir. 2004) ............................................................... 5, 15, 16, 17
`
`In re Johns-Manville Corp.,
`36 B.R. 727, 730-40 (Bankr. S.D.N.Y. 1984), leave to appeal
`denied 39 B.R. 234 (S.D.N.Y. 1984), mandamus denied, 749 F.2d
`3 (2d Cir. 1984) ..................................................................................... 4, 6, 16, 18
`
`Lexecon Inc. v. Milberg Weiss Bershad Hynes & Lerach,
`523 U.S. 26, 36 & n.1 (1998) ............................................................................. 20
`
`In re LTL Mgmt., LLC,
`637 B.R. 396 (Bankr. D.N.J. 2022) .............................................. 5, 12, 13, 14, 15
`
`In re LTL Mgmt. LLC,
`No. 21-30589 (Bankr. D.N.J. Dec. 22, 2021) ..................................................... 10
`
`In re Mallinckrodt PLC,
`639 B.R. 837 (Bankr. D. Del. 2022) ..................................................................... 9
`
`In re Marshall,
`721 F.3d 1032 (9th Cir. 2013) ............................................................................ 17
`
`Martin v. Wilks,
`490 U.S. 755 (1989) ............................................................................................ 19
`
`In re Montreal Maine & Atl. Ry., Ltd.,
`No. BR 13-10670, 2015 WL 7431192 (Bankr. D. Me. Oct. 9,
`2015), adopted, No. 1:15-MC-329-JDL, 2015 WL 7302223 (D.
`Me. Nov. 18, 2015) ............................................................................................... 9
`
`iii
`
`

`

`Case: 22-2003 Document: 118 Page: 5 Date Filed: 08/22/2022
`
`
`
`Ortiz v. Fibreboard Corp.,
`527 U.S. 815 (1999) ............................................................................................ 19
`
`In re PG & E Corp.,
`617 B.R. 671 (Bankr. N.D. Cal. 2020), appeal dismissed sub nom,
`McDonald v. PG&E Corp., No. 20-CV-04568-HSG, 2020 WL
`6684592 (N.D. Cal. Nov. 12, 2020), aff'd, No. 20-17366, 2022 WL
`1657452 (9th Cir. May 25, 2022), and appeal dismissed sub nom,
`Int'l Church of the Foursquare Gospel v. PG&E Corp., No. 20-
`CV-04569-HSG, 2020 WL 6684578 (N.D. Cal. Nov. 12, 2020) ......................... 9
`
`In re Piper Aircraft Corp.,
`603 B.R. 525, 525-26 (Bankr. S.D. Fla. 2019) ..................................................... 8
`
`In re Purdue Pharma L.P.,
`633 B.R. 53 (Bankr. S.D.N.Y.), vacated 635 B.R. 26 (S.D.N.Y.
`2021), certificate of appealability granted, No. 21 CV 7532 (CM),
`2022 WL 121393 (S.D.N.Y. Jan. 7, 2022) ........................................................... 8
`
`In re SGL Carbon Corp.,
`200 F.3d 154 (3d Cir. 1999) ................................................................. 4, 5, 15, 17
`
`In re USA Gymnastics,
`624 B.R. 443, 446 (Bankr. S.D. Ind. 2021), reconsideration
`denied, No. 18-09108-RLM-11, 2021 WL 8825479 (Bankr. S.D.
`Ind. Feb. 18, 2021) ................................................................................................ 8
`
`In re W.R. Grace & Co.,
`281 B.R. 852 (Bankr. D. Del. 2002) ................................................................... 18
`
`Rules and Statutes
`
`15 Pa. C.S. § 361 ...................................................................................................... 22
`
`11 U.S.C § 24(g) ...................................................................................................... 10
`
`11 U.S.C. §105(a) .......................................................................................... 7, 10, 15
`
`11 U.S.C. § 524(g) .................................................. 3, 4, 7, 10, 11, 13, 14, 15, 18, 22
`
`11 U.S.C. §1112(b) ........................................................................................ 6, 15, 23
`
`28 U.S.C. § 1404(a) ................................................................................................. 20
`
`iv
`
`

`

`Case: 22-2003 Document: 118 Page: 6 Date Filed: 08/22/2022
`
`
`
`28 U.S.C. § 1407 ...................................................................................................... 20
`
`Ariz. Rev. Stat. Ann. § 29-2601.............................................................................. 22
`
`Article I .................................................................................................................... 23
`
`Article III ...................................................................................................... 14, 22, 23
`
`Bankruptcy Code Chapter 11 ............ 1, 3, 4, 5, 6, 7, 9, 11, 12, 14, 15, 16, 17, 20, 22
`
`Del. Code Ann. tit. 6, § 18-217(b)-(c) ..................................................................... 22
`
`Fed. R. Civ. P. 23 ..................................................................................................... 19
`
`Other Authorities
`
`140 Cong. Rec. S14,461 (Sept. 12, 1994) (statement of Sen. Heflin) ..................... 14
`
`Alan N. Resnick, Bankruptcy as a Vehicle for Resolving Enterprise-
`Threatening Mass Tort Liability, 148 U. PA. L. REV. 2045, 2055
`(2000) .................................................................................................................... 4
`
`Bankruptcy Reform Act of 1994 ................................................................................ 7
`
`Curtis W. Huff, The New Texas Business Corporation Act Merger
`Provisions, 21 St. Mary's L.J. 109, 110 (1989) .................................................. 21
`
`Dietrich Knauth, Judge Appoints Kenneth Feinberg to Evaluate J&J
`Cancer Claims in Bankruptcy, Reuters (July 28, 2022) ..................................... 12
`
`NAT'L BANKR. REV. COMM'N, BANKRUPTCY: THE NEXT TWENTY
`YEARS, FINAL REPORT at 315 (1997) .................................................................... 7
`
`Sheldon S. Toll, Bankruptcy and Mass Torts: The Commission’s
`Proposal, 5 Am. Bankr. Inst. L. Rev. 363, 379 (1997) ........................................ 7
`
`U.S. Gov’t Accountability Office, Asbestos Injury Compensation: The
`Role and Administration of Asbestos Trusts (Sept. 2011) .................................. 11
`
`
`
`v
`
`

`

`Case: 22-2003 Document: 118 Page: 7 Date Filed: 08/22/2022
`
`
`
`
`
`INTEREST OF AMICI CURIAE1
`
`The Chamber of Commerce of the United States of America (the
`
`“Chamber”) is the world’s largest business federation. It represents 300,000 direct
`
`members and indirectly represents the interests of more than three million
`
`companies and professional organizations of every size, in each industry sector,
`
`and from every region of the country. An important function of the Chamber is to
`
`represent the interests of its members before Congress, the Executive Branch, and
`
`the courts. To that end, the Chamber regularly files amicus curiae briefs in cases,
`
`like this one, that raise issues of concern to the nation’s business community.
`
`The American Tort Reform Association (“ATRA”) is a broad-based coalition
`
`of businesses, corporations, municipalities, associations, and professional firms that
`
`have pooled their resources to promote reform of the civil justice system with the
`
`goal of ensuring fairness, balance, and predictability in civil litigation. For more
`
`than three decades, ATRA has filed amicus curiae briefs in cases involving
`
`important liability issues.
`
`
`
`Many of Amici’s members participate in bankruptcy proceedings in different
`
`capacities, including during plan confirmations under chapter 11. Therefore, Amici
`
`
`1
`No party or party’s counsel authored any part of this brief. No one, apart from
`Amici, their members, or their counsel, contributed money intended to fund the
`brief’s preparation or submission. All parties have consented to the filing of this
`brief.
`
`
`
`

`

`Case: 22-2003 Document: 118 Page: 8 Date Filed: 08/22/2022
`
`
`
`have a strong interest in the appropriate interpretation of bankruptcy court powers
`
`and the ability of businesses to address mass tort liabilities under U.S. bankruptcy
`
`law.
`
`SUMMARY OF ARGUMENT
`
`
`
`Complex mass tort bankruptcies often involve third parties, including debtor
`
`companies’ predecessors and successors in interest, suppliers, customers, and
`
`corporate affiliates. Compensation systems established through bankruptcy allow
`
`claimants to receive timely payments rather than having to pursue lengthy litigation
`
`against multiple defendants. The bankruptcy system has a long history of effectively
`
`managing the extraordinary costs and inefficiencies of mass tort litigation that may
`
`bankrupt a company. It maximizes the funds available to claimants and serves the
`
`U.S. economy in positive ways.
`
`The use of bankruptcy to address mass tort claims is a historically valid
`
`bankruptcy purpose, and the examples of resolution of major litigations in a prompt
`
`and efficient manner in bankruptcy are legion. The Official Committee of Talc
`
`Claimants (“Claimants”), therefore, is incorrect that contingent tort liability cannot
`
`be considered in determining whether a bankruptcy was filed in good faith, and the
`
`Court should reject Claimants’ contention that the bankruptcy system is inherently
`
`unfair to tort claimants; to the contrary, the bankruptcy system contains numerous
`
`safeguards that maximize the value for claimants and ensure fairness and efficiency.
`
`2
`
`

`

`Case: 22-2003 Document: 118 Page: 9 Date Filed: 08/22/2022
`
`
`
`This Court’s precedents demonstrate that whether a filing is in good faith or
`
`whether the ultimate plan is fair will depend on close examination of the particular
`
`facts and the value provided to creditor groups, not on the per se rules advanced by
`
`the Claimants. A debtor is not required to be insolvent to file for bankruptcy; rather,
`
`a debtor is encouraged by Congress to consider future claimant liabilities when
`
`analyzing its financial situation. And no bad faith should be inferred where a
`
`company uses applicable state corporate law to reorganize its affairs before using
`
`federal bankruptcy law to solve foreseeable financial distress. Doing so may be the
`
`best way for businesses to address such distress while continuing to contribute to
`
`society (i.e., through employment, payment of taxes, providing public equity for
`
`pension and retirement funds to own, and providing lifesaving and beneficial
`
`medical and consumer products that enhance societal well-being).
`
`ARGUMENT
`
`I.
`
`COURTS HAVE RECOGNIZED THAT IT IS APPROPRIATE TO
`USE BANKRUPTCY TO ADDRESS MASS TORT LITIGATION
`CLAIMS
`
`A. The Debtor’s Chapter 11 Filing Has a Recognized Bankruptcy
`Purpose
`
`One proper use of chapter 11 proceedings is to address present and future
`
`liabilities associated with mass tort claims. Congress and courts have consistently
`
`and uniformly acknowledged as much. See, e.g., 11 U.S.C. § 524(g)(2)(B)(ii)
`
`(setting out requirements for future, unknown liabilities in an asbestos trust under a
`
`3
`
`

`

`Case: 22-2003 Document: 118 Page: 10 Date Filed: 08/22/2022
`
`
`
`plan). This Court, for example, recognized that a bankruptcy case was filed in good
`
`faith where large judgments already had been entered and the “prospect loomed of
`
`tens of thousands of asbestos health-related suits over the course of 20-30 years.”
`
`See In re SGL Carbon Corp., 200 F.3d 154, 164 & n.15 (3d Cir. 1999) (citations
`
`omitted) (listing mass tort cases that were filed in good faith).
`
`Many solvent companies proactively have filed bankruptcy cases to address
`
`asbestos liabilities, and there is nothing improper or inappropriate about a business
`
`choosing to do so. This Court recognized “the drafters of the Bankruptcy Code
`
`understood the need for early access to bankruptcy relief to allow a debtor to
`
`rehabilitate its business before it is faced with a hopeless situation.” SGL Carbon,
`
`200 F.3d at 163 (citing Alan N. Resnick, Bankruptcy as a Vehicle for Resolving
`
`Enterprise-Threatening Mass Tort Liability, 148 U. PA. L. REV. 2045, 2055
`
`(2000)); In re Amatex Corp., 755 F.2d 1034, 1036 (3d Cir. 1985) (recognizing it was
`
`“[t]he potential liability . . . from the [asbestos] lawsuits and the associated defense
`
`costs [that] formed the basis of the company’s ‘insolvency’ for purposes of its
`
`chapter 11 petition”); In re Bestwall LLC, 605 B.R. 43, 49 (Bankr. W.D.N.C. 2019)
`
`(“Attempting to resolve asbestos claims through 11 U.S.C. § 524(g) is a valid
`
`reorganizational purpose, and filing for Chapter 11, especially in the context of an
`
`asbestos or mass tort case, need not be due to insolvency”); In re Johns–Manville
`
`Corp., 36 B.R. 727, 736–37 (Bankr. S.D.N.Y.1984) (observing a business “must not
`
`4
`
`

`

`Case: 22-2003 Document: 118 Page: 11 Date Filed: 08/22/2022
`
`
`
`be required to wait until its economic picture has deteriorated beyond salvation to
`
`file for reorganization”).
`
`The Debtor properly filed this case to address nearly 40,000 ovarian cancer
`
`and mesothelioma claims that the Debtor and its parent companies face in the tort
`
`system. A445 at ¶ 42. As the bankruptcy court below found, “[t]his chapter 11
`
`followed denial of review by the U.S. Supreme Court of a multi-billion-dollar award
`
`in the Ingham litigation, as well as other more recent verdicts for hundreds of
`
`millions of dollars.” In re LTL Mgmt., LLC, 637 B.R. 396, 417 (Bankr. D.N.J. 2022).
`
`It also followed the breakdown of a potential multi-billion-dollar global settlement
`
`in the Imerys bankruptcy. Id. at 417. Where a debtor’s contingent liabilities equate
`
`to billions of dollars, with no foreseeable end date, it is entirely consistent with the
`
`Bankruptcy Code and procedure to file for bankruptcy filing to address those
`
`liabilities. As such, this chapter 11 is a permissible, good faith filing under this
`
`Court’s decisions in SGL Carbon, 200 F.3d 154, In re Integrated Telecom Express,
`
`Inc., 384 F.3d 108, 118 (3d Cir. 2004), and In re 15375 Mem’l Corp. v. Bepco, L.P.,
`
`589 F.3d 605 (3d Cir. 2009).
`
`B.
`
`Bankruptcy Court Resolution of Mass-Tort Liabilities Has Been a
`Key Tool for U.S. Businesses Since the Bankruptcy Code Was
`Enacted in 1978
`
`The present Bankruptcy Code was enacted in 1978 and, since its adoption, has
`
`provided a useful statutory mechanism to address mass tort claims. The bankruptcy
`
`5
`
`

`

`Case: 22-2003 Document: 118 Page: 12 Date Filed: 08/22/2022
`
`
`
`process is able to address the needs of both tort claimants and the needs of a company
`
`subject to such claims, along with its employees, its shareholders, and the people
`
`who use its goods or services.
`
`The history of mass tort cases in bankruptcy began with the Johns-Manville
`
`Corporation, a company that manufactured numerous building products containing
`
`asbestos. As lawsuits mounted against Johns-Manville, the company filed for
`
`bankruptcy in 1982. During the bankruptcy, claimants filed numerous motions to
`
`dismiss under the “cause” requirement in section 1112(b), making various
`
`arguments similar to those made by the Claimants here regarding the good faith of
`
`the company that files bankruptcy to address prospective tort liability before it
`
`became insolvent. The bankruptcy court denied all of these motions on the theory
`
`that insolvency was no longer a requirement for a chapter 11 filing under the
`
`Bankruptcy Code and that a debtor need not wait to file a chapter 11 petition until
`
`the situation is dire. In re Johns-Manville Corp., 36 B.R. 727, 730-40 (Bankr.
`
`S.D.N.Y. 1984), leave to appeal denied 39 B.R. 234 (S.D.N.Y. 1984), mandamus
`
`denied, 749 F.2d 3 (2d Cir. 1984).2 Having survived these motions to dismiss, Johns-
`
`Manville went on to propose a plan that channeled all asbestos claims to a trust that
`
`
`2
`The Second Circuit held that the bankruptcy court’s order denying a motion
`to dismiss under 11 U.S.C. § 1112(b) was an interlocutory order because good faith
`was also an element that a mass-tort debtor would have to satisfy in a chapter 11
`plan.
`
`6
`
`

`

`Case: 22-2003 Document: 118 Page: 13 Date Filed: 08/22/2022
`
`
`
`was funded by dividends from the reorganized debtors and provided payments to
`
`those harmed by their products.
`
`As part of the Bankruptcy Reform Act of 1994, Congress enacted legislation,
`
`codified in 11 U.S.C. § 524(g), to deal with asbestos mass tort claims in chapter 11
`
`reorganizations. The bankruptcy system offers a structured system to manage
`
`multiple liabilities and has provided a forum for companies with massive liabilities
`
`to do so. Within a few years of the Act’s passage, “[a]t least 15 asbestos
`
`manufacturers, including UNR, Amatex, Johns-Manville, National Gypsum, Eagle-
`
`Picher, Celotex, and Raytech . . . organized or liquidated in attempts to address
`
`massive numbers of known and unknown asbestos claimants using Chapter 11 of the
`
`Bankruptcy Code.” Sheldon S. Toll, Bankruptcy and Mass Torts: The Commission’s
`
`Proposal, 5 Am. Bankr. Inst. L. Rev. 363, 379 (1997) (citing NAT’L BANKR. REV.
`
`COMM’N, BANKRUPTCY: THE NEXT TWENTY YEARS, FINAL REPORT at 315 (1997)).
`
`Congress has also recognized the need for a mechanism to deal with non-
`
`asbestos mass tort claims. Id. The 1994 asbestos amendments, therefore, do not
`
`preclude the use of bankruptcy to deal with other types of mass tort claims, and many
`
`other companies have, under 11 U.S.C. § 105(a), addressed mass tort liabilities in
`
`non-asbestos cases, for present and future claimants:
`
` Addressing liability associated with medical devices such as the Dalkon
`
`Shield and silicone breast implants. See In re A.H. Robins Co., Inc., 88
`
`7
`
`

`

`Case: 22-2003 Document: 118 Page: 14 Date Filed: 08/22/2022
`
`
`
`B.R. 742 (E.D. Va. 1988), aff’d, 880 F.2d 694, 19 (4th Cir. 1989); In re
`
`Dow Corning Corp., 280 F.3d 648 (6th Cir. 2002).
`
` Settling successor liability for defects in aircraft by allowing an OldCo
`
`aircraft debtor to sell its assets to a NewCo aircraft company by using a
`
`channeling injunction and the funding of a trust. See In re Piper Aircraft
`
`Corp., 603 B.R. 525, 525-26 (Bankr. S.D. Fla. 2019).
`
` Addressing sexual abuse cases. See In re USA Gymnastics, 624 B.R. 443,
`
`446 (Bankr. S.D. Ind. 2021), reconsideration denied, No. 18-09108-RLM-
`
`11, 2021 WL 8825479 (Bankr. S.D. Ind. Feb. 18, 2021) (hundreds of
`
`former and current athletes sued for sexual abuse by Larry Nassar, a USAG
`
`volunteer); In re Boy Scouts of Am. & Delaware BSA, LLC, No. 20-10343
`
`(LSS), 2022 WL 3030138 (Bankr. D. Del. July 29, 2022) (addressing over
`
`84,000 sexual abuse cases); In Re Cath. Diocese of Wilmington, Inc., 432
`
`B.R. 135 (Bankr. D. Del. 2010) (Debtor was named as a defendant in
`
`approximately 131 sexual abuse cases filed in the Delaware state courts,
`
`and, within the bankruptcy case, entered into a settlement with the abuse
`
`survivors).
`
` Addressing the opioid crisis. In re Purdue Pharma L.P., 633 B.R. 53
`
`(Bankr. S.D.N.Y.), vacated 635 B.R. 26 (S.D.N.Y. 2021), certificate of
`
`8
`
`

`

`Case: 22-2003 Document: 118 Page: 15 Date Filed: 08/22/2022
`
`
`
`appealability granted, No. 21 CV 7532 (CM), 2022 WL 121393 (S.D.N.Y.
`
`Jan. 7, 2022); In re Mallinckrodt PLC, 639 B.R. 837 (Bankr. D. Del. 2022).
`
` Addressing wildfires in California. In re PG & E Corp., 617 B.R. 671
`
`(Bankr. N.D. Cal. 2020), appeal dismissed sub nom, McDonald v. PG&E
`
`Corp., No. 20-CV-04568-HSG, 2020 WL 6684592 (N.D. Cal. Nov. 12,
`
`2020), aff’d, No. 20-17366, 2022 WL 1657452 (9th Cir. May 25, 2022),
`
`and appeal dismissed sub nom, Int’l Church of the Foursquare Gospel v.
`
`PG&E Corp., No. 20-CV-04569-HSG, 2020 WL 6684578 (N.D. Cal. Nov.
`
`12, 2020).
`
` Addressing a train crash in Maine. In re Montreal Maine & Atl. Ry., Ltd.,
`
`No. BR 13-10670, 2015 WL 7431192 (Bankr. D. Me. Oct. 9, 2015),
`
`adopted, No. 1:15-MC-329-JDL, 2015 WL 7302223 (D. Me. Nov. 18,
`
`2015).
`
`In short, for the last 40 years many companies have filed chapter 11 petitions
`
`to address mass tort liabilities in similar circumstances facing the Debtor here, and
`
`the courts consistently have permitted this practice. As a result of these bankruptcy
`
`filings, millions of people have received compensation for their claims, often in a
`
`prompt and efficient manner. In light of this history, it is implausible to suggest that
`
`filing a chapter 11 petition to address mass tort liability is indicative of bad faith.
`
`9
`
`

`

`Case: 22-2003 Document: 118 Page: 16 Date Filed: 08/22/2022
`
`
`
`C. Many of the Harms Surmised by the Claimants Can Be
`Addressed by the Bankruptcy Code
`
`The Bankruptcy Code provides mechanisms and standards for addressing the
`
`concerns raised by the Claimants regarding whether this bankruptcy will maximize
`
`value of the bankruptcy estate, ensure fairness among creditors, and avoid delays in
`
`recovery. The bankruptcy court evaluated the evidence adduced at the evidentiary
`
`hearing and credited Debtor’s intent to invoke §§ 105(a) and 524(g) to “ensure fair
`
`and equitable treatment of present and future mass tort claimants and provide a
`
`mutually acceptable global resolution of crippling mass tort litigation.” See Debtor’s
`
`Obj. to Mots. to Dismiss Chapter 11 Case, 25, ECF No. 956, at 25, In re LTL Mgmt.
`
`LLC, No. 21-30589 (Bankr. D.N.J. Dec. 22, 2021). The court considered all the
`
`relevant factors, including the procedural history, the structure and amount of
`
`funding agreements, and the means by which the bankruptcy process maximizes
`
`recovery to benefit claimants. The court’s determination that the Claimants’
`
`concerns could be adequately addressed through the bankruptcy process is
`
`substantiated by §§ 524(g) and 105(a).
`
`1.
`
`Section 524(g)
`
`Congress enacted 11 U.S.C § 24(g) specifically to resolve asbestos-related
`
`mass-tort claims. See In re G-I Holdings Inc., 420 B.R. 216, 270 (D.N.J. 2009)
`
`(“[T]he purpose of § 524(g) is to channel asbestos-related claims to a trust, which
`
`relieves the debtor of the uncertainty of future asbestos liabilities and helps achieve
`
`10
`
`

`

`Case: 22-2003 Document: 118 Page: 17 Date Filed: 08/22/2022
`
`
`
`the purposes of chapter 11 by facilitating the reorganization and rehabilitation of the
`
`debtor as an economically viable entity while providing for an equitable resolution
`
`of asbestos-related claims.”). More than 60 entities have filed bankruptcy and
`
`established such trusts. See U.S. Gov’t Accountability Office, Asbestos Injury
`
`Compensation: The Role and Administration of Asbestos Trusts, at 3 (Sept. 2011).
`
`Here, the Debtor intends to use § 524(g) to accelerate payments to talc claimants and
`
`their families and provide a global resolution of these talc-related claims.
`
`This Court and others have consistently recognized the benefits of resolving
`
`mass tort claims through the establishment of trusts under § 524(g). This Court
`
`noted “the trusts’ effectiveness in remedying some of the intractable pathologies of
`
`asbestos litigation, especially given the continued lack of a viable alternative
`
`providing a just and comprehensive resolution.” In re Fed.-Mogul Glob. Inc., 684
`
`F.3d 355, 362 (3d Cir. 2012); see also In re Bestwall LLC, 606 B.R. 243, 257 (Bankr.
`
`W.D.N.C. 2019), aff’d, No. 3:20-CV-105-RJC, 2022 WL 68763 (W.D.N.C. Jan. 6,
`
`2022) (“[A] § 524(g) trust will provide all claimants—including future claimants
`
`who have yet to institute litigation—with an efficient means through which to
`
`equitably resolve their claims.”). This Court has further acknowledged that the
`
`§ 524(g) trust was specifically tailored to protect the due process rights of future
`
`claimants and is perhaps the best vehicle for addressing these concerns. In re
`
`Grossman’s Inc., 607 F.3d 114, 127 (3d Cir. 2010).
`
`11
`
`

`

`Case: 22-2003 Document: 118 Page: 18 Date Filed: 08/22/2022
`
`
`
`In their brief, Claimants argue that recovery would be slowed due to the
`
`bankruptcy court’s claims estimation process, which it asserts would not be held
`
`until 2023, causing claimants to wait years to recover. See Claimants Brief
`
`(“Claimants Br.”) at 29. But the Debtor faces nearly 40,000 pending tort claims,
`
`with thousands more expected annually for decades to come. At the time of the
`
`bankruptcy filing, fewer than 50 trials had proceeded to verdict. LTL Mgmt., 637
`
`BR at 410. Given the pace of litigation and new lawsuit filings, there is no reason
`
`to disturb the bankruptcy court’s determination that resolution of the mass tort
`
`presented by this case will be more efficiently addressed in chapter 11. Further,
`
`formal estimation is not a requirement in a mass tort case as Trust Distribution
`
`Procedures often establish the process for claimants to establish the value of a claim
`
`and to receive payment once the negotiated parameters (which are frequently part of
`
`a mediated resolution) 3 are met. See, e.g., In re Boy Scouts of Am. & Delaware BSA,
`
`LLC, 2022 WL 3030138 (setting out the factual background of extensive mediation,
`
`including the development of trust distribution procedures).
`
`
`3
`In the case below, the Claimants wanted certain trials to proceed, and the
`Debtor proposed an estimation procedure. Rejecting both, the bankruptcy court
`appointed a noted mass tort damage expert to provide a report estimating the value
`of the claims. See Dietrich Knauth, Judge Appoints Kenneth Feinberg to Evaluate
`J&J Cancer Claims
`in Bankruptcy, Reuters
`(July
`28,
`2022),
`https://www.reuters.com/legal/litigation/judge-appoints-kenneth-feinberg-evaluate-
`jj-cancer-claims-bankruptcy-2022-07-28/.
`
`12
`
`

`

`Case: 22-2003 Document: 118 Page: 19 Date Filed: 08/22/2022
`
`
`
`A successful reorganization and implementation of a settlement trust pursuant
`
`to § 524(g) could dramatically reduce litigation costs, ensure balanced recoveries for
`
`both present and future talc claimants, and provide both a meaningful opportunity
`
`for justice as well as a timely recovery for claimants. Further, establishment of a
`
`trust would allow resolution of potentially crippling costs and financial drain
`
`associated with defending—over the next several decades—tens of thousands (if not
`
`hundreds of thousands) of talc-related claims with what could ultimately be a multi-
`
`billion-dollar exposure. LTL Mgmt., 637 BR at 427.
`
`Claimants further contend that these alleged “years of delay” will increase
`
`settlement pressure on talc claimants. Claimants Br. at 28. However, § 524(g)
`
`provides safeguards for this exact concern. Under § 524(g), the tort claimants must
`
`approve any plan employing a § 524(g) trust by a 75% super majority. See 11 U.S.C.
`
`§ 524(g). The approval process obviates many of Claimants’ policy concerns about
`
`the fairness and value of an eventual plan. Meanwhile, Claimants’ concerns that
`
`§ 524(g)’s super-majority requirement will result in undue delay is speculative and
`
`contrary to the judgment of Congress, which established this procedure to protect
`
`claiman