In re Flintkote Co.
486 B.R. 99
Bankr. D. Del.2012Background
- Flintkote Company and Flintkote Mines Limited filed amended joint Plan of Reorganization under Chapter 11, creating a §524(g) asbestos trust to cover current and future claims.
- The Plan transfers substantial assets—stock of reorganized Flintkote, cash, trust proceeds, insurance recoveries, and related rights—to the Trust to fund asbestos claims.
- Mines’ assets and liabilities are colocated under a single trust structure due to overlapping asbestos liability and shared insurance assets.
- Imperial Tobacco Canada Limited objects to confirmation on several grounds, including standing, §524(g) viability, and post-confirmation business prospects.
- The court reopened record to consider profitability of Flintkote’s real estate and other post-confirmation business lines, and to resolve ITCAN’s alter ego stand-alone challenges.
- The court ultimately confirms the Plan, finds it satisfies §1129 and §524(g), and approves the §524(g) injunction, after addressing ITCAN’s standing and alter ego abandonment concerns.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Standing to object to confirmation | ITCAN claims creditor/party-in-interest status under §1109(b) because of potential contribution/indemnity claims and CERCLA liens. | Plan proponents contend ITCAN’s alleged claims are not presently liquid or sufficiently imminent; no actual injury in fact. | ITCAN lacks constitutional and statutory standing; objection overruled on this basis. |
| Substantial future demands under §524(g) | Grossman’s dictates that claims arise pre-petition and post-petition demands preclude channeling; ITCAN asserts no substantial future demands exist. | Congress intended future demands holders (exposed yet unimpaired) to be protected; §524(g) requires a going concern to fund the trust. | The court adopts a broad reading of future demands; Flintkote is likely to face substantial future demands and qualifies for §524(g) protection. |
| Abandonment of alter ego claim | Plan proponents may abandon estate-held alter ego claims to avoid impairing individual creditors’ rights. | ITCAN argues abandonment cannot occur where alter ego claim is non-existent or not properly estate property. | Abandonment permitted; alters no impairment to ITCAN; ITCAN’s objection overruled. |
| Viability of Flintkote post-confirmation business and feasibility | Real estate and consulting/trust services provide ongoing business and funding to satisfy §524(g)(2)(B)(ii) and §1129(a)(11). | ITCAN contends real estate venture and ancillary services are insufficient; plan not feasible. | Feasible; court finds real estate and other post-confirmation activities provide sufficient ongoing income to fund the trust. |
| Going concern requirement and 1141 discharge | §524(g)(2)(B)(i)(II) funding and ongoing business imply a viable going concern; §1141 discharge available if post-confirmation business exists. | No explicit ongoing pre-petition business requirement; challenge to discharge viability remains. | The plan satisfies going concern and discharge criteria; confirmation and injunction affirmed. |
Key Cases Cited
- In re Global Indus. Techs., Inc., 645 F.3d 201 (3d Cir. 2011) (standing requirements for plan objections under Article III and §1109(b))
- In re W.R. Grace & Co., 446 B.R. 96 (Bankr.D.Del.2011) (future demands holders defined by exposure and possible damages; §524(g) aims to protect unknown claimants)
- In re W.R. Grace & Co., 475 B.R. 34 (D. Del. 2012) (affirmed viability of §524(g) channeling and funding mechanisms)
- Combustion Eng’g, Inc. v. G. (In re Combustion Engineering), 391 F.3d 190 (3d Cir. 2004) (outline of §524(g) funding and channeling requirements; ongoing business considerations)
- Grossman’s, Inc. v. In re (In re Grossman’s Inc.), 607 F.3d 114 (3d Cir. 2010) (holding on timing of claim filings post-Frenville; impact on standing)
- Wright v. Owens Corning, 679 F.3d 101 (3d Cir. 2012) (extends Grossman’s to consider pre-confirmation exposure as giving rise to claims for §524(g) purposes)
- In re Plant Insulation Co., 469 B.R. 843 (Bankr.N.D. Cal. 2012) (case approving post-petition business arrangements under §524(g))
- St. Paul Fire & Marine Ins. Co. v. PepsiCo, Inc., 884 F.2d 68 (2d Cir. 1989) (abandonment and standing principles in alter ego context)