MEMORANDUM OPINION OVERRULING OBJECTIONS TO THE AMENDED JOINT PLAN OF REORGANIZATION, CONFIRMING PLAN AND RECOMMENDING THE AFFIRMATION OF CONFIRMATION AND OF THE § 524(g)
Introduction
Before the Court is the confirmation of The Flintkote Company (“Flintkote”) and Flintkote Mines Limited’s (“Mines,” and collectively with Flintkote, the “Debtors”) Amended Joint Plan of Reorganization (as modified November 16, 2011), docketed at Doc. No. 6336
Background
From 1917 until 1987, Flintkote was primarily in the business of manufacturing, processing, and distributing building materials.
Mines was founded in 1945 as a Canadian subsidiary of Flintkote. Mines operated an asbestos mining facility as Flint-kote’s subsidiary until 1971, when it was sold. From its founding until 1980, when it ceased major operations, Mines engaged in mining and brokering raw asbestos.
Asbestos-related lawsuits were filed against Flintkote beginning in the early 1970s
The Plan
The key component of the Plan is the creation of a § 524(g) trust, which will assume all liability for current and future
The Trust will use these assets to pay holders of Asbestos Personal Injury Claims in accordance with the “Asbestos Personal Injury Trust Agreement” (the “Trust Agreement”) and the “Asbestos Personal Injury Trust Distribution Procedures” (the “TDP”). The Trust Agreement and TDP provide for the valuation and payment of asbestos personal injury claims. Plan § 4.1.2.
The Trust will serve as a liquidating trust for Mines, which is not seeking a discharge under § 1141 or protection under § 524(g). Id. As noted above, Mines ceased major operations in 1980 and, as of Flintkote’s petition date in 2004, had ceased all operations.
Holders of secured, administrative, and priority claims will be paid in full under the Plan.
The Plan is designed to be “insurance neutral,” and provides that all Asbestos Insurance Actions and related claims and causes of action are preserved for the benefit of the Trust. See Plan § 11.7. Nothing in the Plan limits in any way the ability of any Asbestos Insurance Company to assert any available coverage defenses.
The Vote
The Debtors solicited votes on the Original Amended Plan from the holders of Claims and Equity Interests in Classes 5 (Unsecured Claims Against Flintkote), 6 (Unsecured Claims Against Mines), 7 (Flintkote Asbestos Personal Injury Claims), and 8 (Mines Asbestos Personal Injury Claims), (together, the “Voting Classes”).
Because the first plan could not encompass a § 524(g) injunction, the Plan Proponents made certain changes to the Original Amended Plan and the TDP in an attempt to acquire the necessary super-majority of votes from Class 7. The Plan Proponents filed new versions of the Plan on June 22, 2009, and July 20, 2009, along with the Supplemental Disclosure Document Regarding Amended Joint Plan of Reorganization (“Supplemental Disclosure Document”), at Doc. No. 4327, as further modified on July 20, 2009, at Doc. No. 4392. This Court approved the Supplemental Disclosure Document and on July 31, 2009, ordered the Plan Proponents to re-solicit votes from Classes 7 and 8.
Flintkote’s Post-Confirmation Operations
Flintkote intends to pursue what it alleges are five separate business lines
Real Estate
Flintkote’s real estate operations consist of owning and managing the leasing of six “quick-service restaurant properties,” which Flintkote purchased with portions of its recovered insurance assets, upon Court approval, during the course of the bankruptcy proceedings. All of these properties are leased under triple-net leases through 2023 with quick-service restaurant operators such as McDonald’s USA and Carrols Corporation.
Consulting and Executive Management Services
Flintkote has a contract with Plant Insulation Company (“Plant”), which is itself subject to a confirmed plan in bankruptcy, to provide consulting and executive management services. The bankruptcy court presiding over Plant’s bankruptcy case approved the renegotiation of the executive consulting agreement between Flintkote and Plant. Plant paid Flintkote $968,000 for consulting and executive management services as of October 31, 2011, and Flint-kote is eligible to receive a $1 million dollar success fee upon Plant’s successful emergence from bankruptcy. On March 15, 2012, Plant’s § 524(g) plan was confirmed by Bankruptcy Judge Thomas Carlson. See In re Plant Insulation Co.,
Claims Processing
The Plan contemplates that Flintkote will provide claims management services to the Trust created under its Plan pursuant to a Trust Services Agreement,
Trust Services
Under the Trust Services Agreement, Flintkote will also provide services to the Trust beginning on the effective date. Flintkote will assist with trust management and control, dispute and litigation management, accounting and financial services, insurance recovery, and records and logistics services. These activities will also be provided by Flintkote at cost, which will save the Trust from having to pay market rates to third party vendors. Flintkote is pursuing other clients for these services, but, as of yet, none has been retained.
Dividend Recovery Litigation
Post-confirmation, Flintkote will continue to manage the Dividend Recovery Litigation (“DRL”) against ITCAN in the California Superior Court. The DRL will be described in greater detail below, but it suffices to say here that Flintkote is pursuing damage claims against ITCAN for fraudulent conveyance, wrongful dividend, breach of fiduciary duty, recission and other related theories, arising in connection with ITCAN’s alleged hostile takeover of Flintkote. Flintkote will be entitled to retain 2% of any net recovery from the DRL to fund its ongoing business operations. The remaining 98% will be transferred to the Trust. Under the Plan, the Trust will fund all of Flintkote’s expenses related to the DRL and may join Flintkote as co-plaintiff.
Standing
The issue of whether ITCAN has standing to raise its objections has been extensively briefed by the parties. We will address the standing issue before turning to the merits of ITCAN’s objections. “To object to the confirmation of a reorganization plan in bankruptcy court, a party must, in the first instance, meet the requirements for standing that litigants in all federal cases face under Article III of the Constitution.” In re Global Indust. Techs., Inc.,
Parties in interest also have standing to object to confirmation of a plan under § 1109(b), which states: “[a] party in interest, including the debtor, the trustee, a creditor’s committee, an equity security holders’ committee, a creditor, an equity security holder, or any indenture trustee, may raise and may appear and be heard on any issue in a case under this chapter.” The court in GIT defined a “party in interest” as “anyone who has a legally protected interest that could be affected by a bankruptcy proceeding”
ITCAN argues first that it is a creditor, and thus by definition a “party in interest” with standing to object to confirmation. Secondly, ITCAN argues that even if it is not a creditor of the estate it is still a “party in interest” because the Plan impairs various rights and defenses it has with respect to both Flintkote and individual asbestos plaintiffs in the DRL. A summary of the DRL will be helpful before turning to the merits of ITCAN’s standing arguments.
The DRL
In April of 2006, two years into bankruptcy, Flintkote along with Marlene Hopkins, Michelle Hopkins, and Michael Hopkins (the “Hopkins Plaintiffs”)
The Plan Proponents also sought a declaration that ITCAN was Flintkote’s alter
On January 6, 2012, Judge Richard Kramer of the Superior Court issued an official Statement of Decision in the DRL, holding that the Plan Proponents lacked standing to pursue alter ego relief against ITCAN (the “California Decision”).
The Plan Proponents elected not to appeal the California Decision
In summary, the Plan Proponents will continue to pursue, post-confirmation, their pending claims in the DRL other than the alter ego claim. The alter ego claim will not be pursued against ITCAN post-confirmation by the Plan Proponents, but the question remains whether the Plan Proponents can formally abandon it in the Plan when it has already been determined that Flintkote lacks standing to assert that claim under California law.
ITCAN’s Alleged Creditor Standing
We now turn to ITCAN’s arguments that it has standing to object to confirmation. ITCAN argues that it is a “party in interest” because it is a “creditor,” which is an express category of parties in interest under § 1109(b). ITCAN asserts creditor status based upon: (i) an alleged claim for contribution and indemnity against
Prior to the decision in Jeld-Wen, Inc. v. Van Brunt (In re Grossman’s Inc.),
ITCAN cites to the recent decision in Wright v. Owens Coming,
The Court of Appeals reasoned that, by the time Grossman’s was decided, “the bar date had passed, the Confirmation Order had been entered, and the Confirmation Date had occurred, each of which affected the Plaintiffs’ newfound claim status without an opportunity for them to be heard. Due process affords a re-do in these special situations to be sime all claimants have equal rights.” Id. at 108. However, the situation facing ITCAN is inapposite to the situation facing the plaintiffs in Wright. In Wright, the plaintiffs were unknown and had no idea at the time of Owens Coming’s bankruptcy that they had any right of payment against the debtor. In this case, ITCAN has been fully involved in the Debtors’ bankruptcy case since 2006, and did not seek to file a late proof of claim until four years after the DRL was commenced, despite this Court’s announcement to ITCAN in 2008 that this Court’s view is that Frenville did not excuse ITCAN from filing its contingent claim. Flintkote suggests that ITCAN strategically chose not to file a proof of claim because it wanted to avoid submitting to the jurisdiction of this Court. Regardless of whether that is the case, the fact remains that this is not a “special situation” where ITCAN was an unknown claimant who was unaware of the fact that Flintkote is in bankruptcy or that ITCAN might eventually be liable as Flintkote’s alter ego with respect to Flintkote’s asbestos liability. ITCAN has always held a contingent claim with respect to its alter ego contribution theory, and nothing in Frenville states that the law prohibits it from filing that claim.
Furthermore, a belief that filing a proof of claim would be futile,
To the extent that ITCAN may have a claim in the future against Flint-kote related to alter ego liability, that claim is speculative and cannot confer “party in interest” standing to object to plan confirmation. As noted above, the
Whether or not all these events will come to pass at some time in the future is entirely speculative. Thus, the alleged injury is simply not “actual and imminent.” In addition, ITCAN has denied throughout this entire bankruptcy case that it is Flint-kote’s alter ego. Moreover, ITCAN has stated several times that even if it is found to be Flintkote’s alter ego, it will not pay anything to asbestos victims because, as a Canadian company with its assets in Canada, no judgment would be enforceable against it.
In ITCAN’s motion to file a late proof of claim based upon an alter ego contribution and indemnity theory, ITCAN also sought leave to file late proofs of claim with respect to two claims under the Comprehensive Environmental Response, Compensation, and Liability Act, 42 U.S.C.
The Court granted ITCAN leave to file the CERCLA claim for contribution and indemnity related to cleanup costs under § 502(e)(1)(B), which provides that claims for reimbursement or contribution of an entity that is liable with the debtor on or has secured the claim of a creditor shall be disallowed to the extent that “such claim ... is contingent as of the time of allowance or disallowance of such claim.” As ITCAN’s claim was contingent, the Court disallowed the claim.
As to the claim for attorneys’ fees under § 107 of CERCLA, the Court granted IT-CAN leave to file an out-of-time proof of claim, though the Order granting leave deemed that claim disputed and provided that the claim would be adjudicated as long as the Debtors objected to the proof of claim. The Debtors did object to the proof of claim, the claim was adjudicated, and the Court ultimately disallowed the claim on the grounds that attorneys’ fees incurred in “identifying” Flintkote to the New York Department of Environmental Conservation (N.Y. DEC), when Flintkote was already known to NYDEC as a potentially responsible party, were not recoverable under § 107. In disallowing the § 107 CERCLA claim, the Court held that IT-CAN did “not have standing to object to the plan of reorganization on the basis of that claim.”
Impairment of Rights/Defenses
Although ITCAN is not a creditor, that does not preclude a finding that it is a “party in interest” with standing to object to Plan confirmation under § 1109(b). IT-CAN contends it is a “party in interest” regardless of whether it is a creditor because the Plan impairs its rights in several ways, which will be described in greater detail below.
ITCAN points to the recent decision in GIT as a basis for its argument that it has broad, “party in interest” standing. Before addressing ITCAN’s arguments in this regard, a brief background on GIT will be helpful.
In GIT, the Court of Appeals reversed the district court’s affirmance of this Court’s holding that a group of insurers of silica claims did not have standing to object to plan confirmation, and its affir-mance of this Court’s confirmation of the debtors’ § 524(g) plan. In 1998, GIT acquired a company, A.P. Green Industries, Inc. (“APG”), which, until the mid 1970s, had manufactured various refractory products, many including asbestos, resulting in massive asbestos liability and ultimately forcing APG and GIT (and other related
The GIT plan called for the creation of two trusts, one for asbestos claims and one for silica claims. Both trusts were to be funded through insurance, either through cash from insurance policy settlements or by assigning certain insurance policies to the trusts. It was the silica trust that drew insurers’ objections to confirmation. The plan was designed to be “insurance neutral,” in the vein of Combustion Engineering, as to the insurers whose policies were assigned to the trusts, so that all contractual rights and coverage defenses would be fully preserved. We held that certain non-creditor insurers lacked standing to object to confirmation. We reasoned, inter alia, that any harm these insurers faced was speculative, because the relevant insurers had been required to pay nothing toward the liability as of that time. We also rejected the argument that the insurers were harmed by the assignment of the policies to the trusts in contravention of the anti-assignment provisions written in the policies, because those provisions were made null and void by virtue of the bankruptcy and other state law. The insurers’ ability to raise defenses was preserved to coverage litigation should it ever occur. The District Court affirmed our holding with respect to standing and affirmed confirmation of the plan.
The Court of Appeals reversed, reasoning that insurance neutrality “is a meaningful concept where, as in Combustion Engineering, a plan does not materially alter the quantum of liability that the insurers would be called to absorb.”
Turning back to the present case, ITCAN argues that, like the objecting insurers in GIT, it has a legally protected interest that is adversely affected by the Plan such that ITCAN has standing to object to confirmation. We disagree. First, GIT addressed a silica trust formed pursuant to § 105, not an asbestos trust
ITCAN advances several other arguments as to how the Plan allegedly affects its rights and defenses with respect to asbestos liability which are sometimes based on a misapprehension of the Plan and, sometimes, are simply incorrect. For example, ITCAN argues that the Plan “threatens to impose asbestos tort liability on ITCAN and compromise ITCAN’s ability to defend itself against that liability.” Opposition Brief, at 44. First, nothing in the Plan imposes tort liability on ITCAN. Any liability of ITCAN’s, as may be determined in suits pending in other courts, is the result of its own pre-petition conduct. Regardless of whether or not this Plan is confirmed, individual asbestos victims may still bring alter ego claims against ITCAN in the tort system. Section 524(g) does not protect non-debtor entities unless, pursuant to § 524(g)(4), such entities qualify and contribute to the funding of the trust, which ITCAN elected not to do in this case. The Plan itself does not increase ITCAN’s tort liability in any way.
Secondly, while ITCAN argues that it will not have “Flintkote’s defenses available to it, as the Plan transfers to the proposed Trust the ability to assert and waive Flintkote’s defenses in its discretion,”
Flintkote’s Abandonment of its Alter Ego Claim
As noted above, Judge Kramer determined in the California Decision that the individual Hopkins Plaintiffs could bring an alter ego claim against ITCAN, but under California law, Flintkote could not.
ITCAN objects to Flintkote’s purported abandonment of its alter ego claim. In ITCAN’s view, Flintkote’s alter ego claim against ITCAN is non-existent by virtue of the California Decision. ITCAN contends that only property of the estate can be abandoned under § 554, and because Flinktote’s alter ego claim cannot be property of the estate if it does not exist, Flintkote cannot abandon the alter ego claim. ITCAN argues that even if Flint-kote’s alter ego claim constitutes property of the estate, it can be abandoned only to Reorganized Flintkote, not to individual creditors. ITCAN argues that the California Decision created res judicata and collateral estoppel defenses that are impaired by Flintkote’s purported abandonment. ITCAN asserts it is impaired by the abandonment to the extent such abandonment bolsters the alter ego claims held by individual plaintiffs.
Section 554(a) provides that “[a]f-ter notice and a hearing, the trustee may abandon any property of the estate that is burdensome to the estate or that is of inconsequential value and benefit to the estate.” § 554(a). What constitutes “property of the estate” is generally determined by state law. Butner v. United States,
The Plan Proponents point out that there is a great deal of ambiguity regarding whether an alter ego claim or remedy constitutes property of the estate. First, “alter ego” is sometimes treated not as a cause of action or claim, but rather as an equitable remedy.
The Plan Proponents argue that it is precisely this ambiguity that makes abandonment appropriate here. The Plan Proponents do not seek any rulings on the merits of ITCAN-related alter ego claims or any of ITCAN’s defenses to such claims. The Plan Proponents seek only to make clear in the Plan that to the extent either of the Debtors’ estates hold ITCAN-related alter ego claims, it is the Debtors’ intention to abandon those claims to avoid potentially impairing the interests of creditors. The Plan Proponents assert that any alter ego claim can be abandoned without a determination of whether it is an estate asset, if abandoning the claim will prevent undue prejudice or confusion as to who has standing to bring the claim. In support, the Plan Proponents cite In re de Hertogh,
We agree with the Plan Proponents that abandonment of the alter ego claim, to the extent the estate holds one, is appropriate in this instance in order to avoid potentially impairing the interests of individual plaintiffs. ITCAN argued in the California Superior Court, and Judge Kramer specifically held, that the Hopkins Plaintiffs, but not Flintkote, have standing to pursue alter ego relief against ITCAN.
Furthermore, a fair reading of the California Decision indicates that while Flint-kote cannot currently bring an alter ego claim against ITCAN, that does not necessarily mean that such a claim does not exist. The California decision provides that “[a]s of now, Flintkote has no present, liquidated, and precisely framed claim against [ITCAN].”
The parties also disagree on the effect of abandonment. Section 554 does not specify to whom property may be abandoned. ITCAN contends that property of the estate that is abandoned by the trustee or debtor-in-possession may only be abandoned to the debtor. The Plan Proponents take the position that the abandoned property does not necessarily go back to the debtor, but rather to whomever has a possessory interest in the property. We note that the Plan does not attempt to abandon the claim to anyone in particular, nor do the Plan Proponents seek a determination as to whom the claim should be abandoned.
We agree that “abandonment is to the person having the possessory interest in the property.” White v. Coon (In re Purco, Inc.),
As ITCAN’s objections to Plan confirmation with respect to the DRL have revolved around the alter ego aspect, now that Flintkote has elected not to continue to pursue the alter ego claim against IT-CAN, the Court finds that the Plan does not adversely impact ITCAN and is not a basis for “party in interest” standing. The Court finds no basis on which to sustain
Shared Insurance
ITCAN also objects that its rights are impaired by the Plan because Flint-kote shares certain insurance assets with ITCAN’s subsidiary, Genstar. ITCAN claims that once a plan is confirmed, the TDP accompanying the Plan will allow the Trust to deplete the insurance coverage. We find the TDP is not the source of insurance depletion. First, the shared insurance assets have always been available to either Genstar or Flintkote on a first-come, first-served basis, which will continue to be the case post-confirmation. Thus, shared insurance will be used in that fashion to pay Flintkote’s asbestos liabilities and Genstar’s insured liabilities regardless of whether Flintkote’s Plan is confirmed. Flintkote’s “Asbestos Insurance Actions” are being transferred to the Trust under the Plan, but “without prejudice to the rights of any co-insureds.” Plan § 11.7 Section 12.3.2(b) of the Plan makes clear that it preserves “the rights of any co-insured of the Debtors (x) with respect to any Asbestos Insurance Policy or Asbestos Insurance Settlement Agreement or against any Asbestos Insurance Company and (y) as specified under any Final Order of the Bankruptcy Court approving an Asbestos Insurance Settlement Agreement.” Thus, the Court finds that any injury caused by depletion of shared insurance assets is not traceable to the Plan but is the result of the sequence in which insurance claims have been and will be made, processed, and paid under the terms of the policies.
For these reasons, ITCAN has not shown an injury caused by the Plan for which this Court can provide a remedy. Thus, ITCAN is without “party in interest” standing.
ITCAN’s Objections to Confírmation
Despite ITCAN’s lack of standing, the Court has fully considered ITCAN’s objections to confirmation. The Court agrees with ITCAN that the Court has an affirmative duty to determine whether each provision of § 1129 is satisfied, regardless of the absence of valid confirmation objections. In re Lernout & Hauspie Speech Prods., N.V.,
ITCAN objects to Plan confirmation on two principal grounds. First, ITCAN argues that the Plan is not confirmable because under Jeld-Wen, Inc. v. Van Brunt (In re Grossman’s Inc.),
I. Flintkote cannot show that it is likely to be subject to “substantial future demands” as required by § 524(g)(2)(B)(ii).
ITCAN’s § 524(g)(2)(B)(ii) objection stems from the decision in Grossman’s,
Before we turn to the statutory text, we note that this argument was rejected by this Court in our recent decision in In re W.R. Grace, where we held that “future demand holders are those who have been exposed to asbestos but whose disease or other injury, sufficient to prove damages, has not yet manifested.”
“A court’s primary purpose in statutory interpretation is to discern legislative intent.” Morgan v. Gay,
With respect to § 524(g)(5), we find the statute to be ambiguous and that its literal application produces a result that cannot be reconciled with the intent of its drafters. The statute states that “[i]n this subsection, the term ‘demand’ is a “demand for payment, present or future that — (A) was not a claim during the proceedings leading to the confirmation of a plan of reorganization.” Section 524(g)(5)(A). The term “claim” is not qualified in any way, so presumably “claim” is intended to be governed by its definition in § 101(5), which provides:
(5) The term “claim” means—
(A) right to payment, whether or not such right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured, or unsecured; or
(B) right to an equitable remedy for breach of performance if such breach gives rise to a right to payment, whether or not such right to an equitable remedy is reduced to judgment, fixed, contingent, matured, unma-tured, disputed, undisputed, secured, or unsecured.
Furthermore, as ITCAN contends, it appears from a literal reading of § 524(g)(5) that the terms “claim” and “demand” are meant to be mutually exclusive. However, the definition of “demand” in § 524(g)(5) describes a “present or future” demand for payment, and given the expansive definition of “claim” in § 101(5), the Court cannot fathom a situation where an individual could hold a “present” demand for payment that is not technically a “claim” under § 101(5). Thus, if construed as IT-CAN suggests, the qualifier, “present or future [demand],” in § 524(g)(5) is superfluous, and “[i]t is a well known canon of statutory construction that courts should construe statutory language to avoid interpretations that would render any phrase superfluous.” United States v. Cooper,
ITCAN’s literal interpretation of § 524(g)(5) produces a “result demonstrably at odds with the intentions of its drafters.” Ron Pair,
Because asbestos production in this country largely ceased many decades ago, the number of individuals who will face first-time, post-petition or post-confírmation exposure will be negligible for almost every debtor facing asbestos liability. Under ITCAN’s interpretation of § 524(g)(5), the result of that fact is that no debtor would qualify for protection under § 524(g). No § 524(g) injunctions could ever issue because the requirement that the “actual amounts, numbers, and timing of such future demands cannot be determined” could never be met. Instead, knowing that all those who manifest injury in the future were nonetheless exposed preconfirmation and thus have claims under § 101(5), the court would likely always be in a position of finding that there would be no future demands that were not “claim[s] during the proceedings leading to the confirmation of a plan of reorganization.” See § 524(g)(5)(A).
Moreover, because ITCAN’s interpretation of § 524(g)(5) frustrates the statute’s purpose of protecting the due process rights of exposed yet unimpaired creditors, ITCAN’s interpretation runs contrary to the Bankruptcy Code as a whole, which strives to treat similarly situated creditors equitably. Thus, we find, as we did in W.R. Grace, that for purposes of § 524(g), “future demand holders are those who have been exposed to asbestos but whose disease or other injury, sufficient to prove damages, has not yet manifested.” In re W.R. Grace,
Further complicating matters is the fact that courts, including this Court, have inartfully used the words “claim” and “demand” interchangeably in the § 524(g) context. This has added to the confusion arising from the apparent conflict between the definition of “demand” in § 524(g) and the definition of “claim” in § 101(5). For instance, in Combustion Engineering, the Court of Appeals described the requirement of § 524(g) that a debtor must be likely to be subject to “substantial future demands” as follows:
To qualify for [protections under § 524(g) ], a court must find that the debtor has been named in an action for damages allegedly caused by asbestos, that the debtor is likely to be subject to substantial demands for payment in the future arising out of the same or similar conduct, that the amounts and timing of such future claims are uncertain, and that permitting the pursuit of such claims outside the trust mechanism would threaten the plan’s attempts to deal equitably with current and future demands. 11 U.S.C. §§ 524(g)(2)(B)(i)(I), (ii)(I-III). The trust itself must also satisfy certain standards under § 524(g) in order to qualify for the issuance of a channeling injunction directing all future claims to the trust: the trust must assume the liabilities of the debtor for current and future claims and must be funded at least in part by the ■ securities of the debtor; the trust must either own, or be entitled to own, the majority of the voting shares of the debtor, its parent, or its subsidiary; the trust must use its assets to pay future claims and demands; and the trust must provide for mechanisms ensuring its ability to value and pay present and future claimants in substantially the same manner.
Combustion Engineering,
Ultimately, what Congress was attempting to do with § 524(g) was to ensure that everyone unfortunate enough to contract asbestos-related illnesses as a result of exposure to a bankruptcy debtor’s products, thereby becoming entitled to compensation from that debtor, be subject to substantially the same treatment in bankruptcy. § 524(g)(2)(B)(ii)(V). Thus, Congress decided that whether one is currently a victim of such an illness or whether one will not fall ill for many more years, for bankruptcy-related purposes, a victim’s compensation should not depend on how quickly he or she manifests illness. Section 524(g) channels all claims of this nature, present or future, to an asbestos personal injury trust. To that end, we are proceeding in this case in the same manner as we have in all other § 524(g) cases that have come before this Court, and as all courts that have confirmed § 524(g) plans across the country have proceeded.
Thus, notwithstanding any inartful language in § 524(g)(5), it is clear to this Court that the intent of § 524(g)(2)(B)(ii) is simply that, to qualify for a § 524(g) channeling injunction, there must be, among other things, a likelihood that a substantial number of people, who are not yet able to prove damages from an asbestos-related disease, will eventually demand payment from the debtor as compensation for asbestos-related illnesses contracted through exposure to the debt- or’s products. Whether referred to as “future demand holders” or “future claimants,” the bottom line is that without a channeling injunction in place and an FCR appointed to protect their interests, by the time their injuries manifest there will be a high probability that the debtor will lack funds to provide them with just compensation. ITCAN’s interpretation of the requirements of § 524(g) would all but ensure that most if not all people holding future demands would receive no compensation for their injuries, because, with asbestos production largely ending decades ago, it is nearly impossible for an asbestos debtor to demonstrate that a substantial number of people have been exposed to the debtor’s asbestos products subsequent to the confirmation of their plan of reorganization.
Having rejected ITCAN’s narrow interpretation of “demand” in the context of § 524(g), the Court finds that, based on the long latency periods of asbestos-related diseases and the substantial number of asbestos personal injury claims lodged against Flintkote pre-petition, along with
Notice/Solicitation
Based on its interpretation of Grossman’s, ITCAN objects that Flintkote did not adequately provide notice and solicit votes from the “exposed but unimpaired creditors” as required under 11 U.S.C. §§ 342(a), 1125, and 1126.
II. Flintkote cannot qualify for protection under § 524(g) because it does not operate a “viable, going concern business.”
The heart of ITCAN’s confirmation objections centers on Flintkote’s planned post-confirmation business activity, which implicates a number of issues: whether there is an “ongoing business” requirement implicit in § 524(g); if there is an
A. The “ongoing business” requirement
There are several indications that § 524(g) requires the debtor to engage in business post-confirmation. First, § 524(g)(1)(A) states that a bankruptcy court may issue a channeling injunction “to supplement the injunctive effect of a discharge under this section.” It follows then that there must be a discharge for the channeling injunction to “supplement.” Whether a corporate debtor receives a discharge is governed by § 1141(d), which states, as relevant here, that a debtor will not receive a discharge upon confirmation if “the debtor does not engage in business after consummation of the plan” and “the debtor would be denied a discharge under section 727(a) of this title if the case were a case under chapter 7 of this title.”
The Court of Appeals in Combustion Engineering stated, in dicta, that the “implication of [§ 524(g)(2)(B)(i)(II) ] is that the reorganized debtor must be a going concern, such that it is able to make future payments into the trust to provide an ‘evergreen’ funding source for future asbestos claimants.” Combustion Engineering,
The Plan Proponents argue that § 524(g) contains no “ongoing business requirement,” and even if it does, Flintkote’s business activities are more than sufficient to satisfy any such requirement. The Plan Proponents cite to In re Quigley Co.,
Combustion Engineering itself contains language suggesting that while § 524(g)(2)(B)(i)(II) may imply that the debtor must be a “going concern” in order to meet its funding requirements, in certain situations the funding requirements may be met in other ways. Combustion Engineering,
B. Only debtors continuing viable, pre-petition businesses can qualify for § 524(g)
ITCAN contends that the requirements of § 524(g)(2)(B)(i)(II) can only be satisfied by a debtor continuing a viable, pre-petition business post-confirmation, because § 524(g) was intended only to protect otherwise successful companies from the threat of crippling asbestos liability. In support of its position, ITCAN relies heavily on the legislative history behind § 524(g), and particularly the following statement made during the congressional debates describing the proposed amendment of § 524 to add subsection (g):
In plain English, this means that when an asbestos-producing company goes into bankruptcy and is faced with present and future asbestos-related claims, the bankruptcy court can set up a trust to pay the victims. The underlying company funds the trust with securities and the company remains viable. Thus, the company continues to generate assets to pay claims today and into the future. In essence, the reorganized company becomes the goose that laid the golden egg by remaining a viable operation and maximizing the trust’s assets to pay claims.81
ITCAN argues that in this case, there is no “goose that lays the golden egg” worth saving because Flintkote is not continuing its pre-petition business, and it is improper, and against the spirit of § 524(g), for Flintkote to establish new business lines while in bankruptcy to satisfy § 524(g).
As noted supra, the language of the statute is the starting point for any exercise in statutory construction. Hughes Aircraft Co. v. Jacobson,
Moreover, § 524(g)(2)(B) includes several other express requirements to qualify for a § 524(g) injunction. To name a few, the trust must assume the liabilities of a debtor “which at the time of entry of the order for relief has been named as a defendant in personal injury, wrongful death, or property-damage actions seeking recovery for damages allegedly caused by the presence of, or exposure to, asbestos or asbestos-containing products;”
In light of the many express requirements laid out in § 524(g), the Court finds that had Congress intended § 524(g) to require a debtor to operate a viable, ongoing, pre-petition business, it would have included statutory language to that effect in § 524(g)(2)(B). However, such a specification is plainly absent, and thus the Court should not consider legislative history or statutory purpose in the face of unambiguous statutory language. Alli v. Decker,
ITCAN cites two cases in support of its argument that a debtor must be continuing a prepetition business in order to qualify for protection under § 524(g): Grausz v. Sampson (In re Grausz),
S. Canaan Cellular applied Grausz’s holding to corporate debtors. However, in S. Canaan Cellular, there was a strong possibility that the debtors’ partnership interests in their pre-petition businesses would be liquidated pursuant to their joint plan. Were those interests sold, “the debtors would not be engaging in their prepetition business, which was to act as general and limited partners of SCCCC, LP” and thus the debtors would not be “entitled to receive a bankruptcy discharge” inasmuch as “a corporate or partnership debtor that is both liquidating and discontinuing its business does not receive a discharge when its plan is confirmed.” S. Canaan Cellular,
Neither Grausz nor S. Canaan Cellular control. Neither case can be said to impose a requirement in § 524(g) that a reorganized debtor forever engage in a particular pre-petition business, as § 524(g) is not implicated in either case. The business activity in those two cases is analyzed under the § 1141(d) standard. Even applying the § 1141(d) standard here, the cases are not on point. Unlike those debtors, Flintkote is not liquidating its business; it is reorganizing its business to pursue other ventures. Further, there is no requirement under § 1141(d) that a debtor continue the same business lines and activities as it engaged in pre-petition. The requirement under the statute, in order to receive a discharge, is simply to “engage in business after consummation of the plan.” § 1141(d)(3)(B).
While preserving the going concern value of a viable business may be one of the means to achieve the goals of § 524(g), the point of engaging in business is to provide an evergreen source of funds for the trust. This will ensure that in the face of long latency periods for asbestos-
The Court finds that Flintkote’s business activity is sufficient to satisfy any “ongoing business” requirement that may be imposed by § 524(g). As will be explained in greater detail in the next section, Flintkote now owns and leases real estate, and currently manages six properties,
Flintkote is also currently under agreement to provide consulting and executive management services to Plant. The contract with Plant has been renegotiated and approved by the bankruptcy court in In re Plant Insulation Co. (the “Amended Plant Agreement”).
Assuming § 524(g)(2)(B)(i)(II) requires a “going concern,” the Court finds that Flintkote’s real estate business and its consulting and executive management services business satisfy that requirement. Having met the “ongoing business” or “going concern” requirement of § 524(g) by virtue of its real estate and consulting and executive management services businesses, the Court expresses no opinion on whether two of Flintkote’s three other purported business lines, claims processing and trust services, constitute “businesses” sufficient to satisfy an “ongoing business” or “going concern” requirement for purposes of § 524(g). That said, we note that we do not consider Flintkote’s effort in simply pursuing or managing a lawsuit (i.e., the DRL) in pursuit of an asset to be a going concern business.
Furthermore, having found that Flint-kote will “engage in business after consummation' of the plan” sufficient to be entitled to discharge under § 1141(d), the Court assumes without deciding and need not determine whether Flintkote is liquidating “substantially all of the property of the estate.” See § 1141(d)(3)(A).
Proñtábility
Upon ITCAN’s oral motion at the confirmation hearing on October 25, 2010, to deny confirmation as a matter of law based on a failure of Flintkote to satisfy its burden of proof as to the profitability
After a period of discovery, the confirmation hearing continued on September 12, 13, and 19, 2011. The Court heard extensive testimony from several witnesses regarding the performance and projection of profitability of Flintkote’s real estate business. The Plan Proponents presented as fact witnesses the Debtors’ CEO and President, David Gordon, and Donald F. Oliver, the Debtors’ Controller. Flintkote also presented Daniel T. Gary, a Certified Public Accountant (“CPA”) with KPMG LLP, to provide expert testimony in support of confirmation. ITCAN presented expert witnesses Craig P. Casey, a CPA with Grant Thornton LLP, and Boris One-fater, a CPA with Constellation Investment Corporation. The parties introduced numerous documentary exhibits, affidavits, and various other evidence.
The Plan Proponents’ Evidence
In January 2011, the Debtors submitted the P & L and the pro formas (together, the “Schedules”) to demonstrate the profitability of the real estate business. The substance of the schedules is summarized by the following chart:
[[Image here]]
At the direction of Mr. Gary, Flintkote utilized segment accounting under ASC-280
In accordance with ASC-280, Flintkote presented its real estate business earnings before income taxes, non-recurring costs, and reorganization-related expenses. Mr. Gary testified that excluding income taxes from the profitability presentation was reasonable because: (1) including income taxes is not a common practice in segment accounting, (2) Flintkote had no income taxes to allocate because it did not pay income tax for any of the years comprising the historical period, 2008-2010, (3) without historical income taxes any allocation of future income taxes would be hypothetical and speculative, creating more inaccuracy and uncertainty in the schedules.
Similarly, we agree with Mr. Gary that reorganization-related costs, such as legal fees incurred in connection with motions to purchase real estate, should not be included in the presentation of future real estate business earnings. Post-confirmation, Flintkote will not be required to incur these expenses, and therefore their exclusion from the presentation of earnings creates a more accurate picture of what the true expenses of the business will be going forward.
The significant recurring costs for the real estate business are compensation, travel, and administrative costs such as rent, directors and officers’ insurance (“D & 0 insurance”), and the costs of support staff. As for the compensation and administrative costs, Flintkote allocated them by dividing the number of workdays Mr. Gordon spent conducting real estate business by the number of total available workdays.
The other significant recurring cost is Mr. Gordon’s travel expense. Local travel expenses, such as lodging, meals, and rental cars, were specifically identified by reviewing Mr. Gordon’s credit card bills and other receipts, then allocated in proportion to the amount of real estate business conducted on that particular trip.
Based on the evidence presented by the Plan Proponents, the bottom line for Flint-kote is that, assuming it is able to acquire seven additional properties, Flintkote’s real estate business will generate rental income in excess of $1.3 million in the third year, post-effective date. Flintkote will earn $1,071 million in both annual EBIT and annual EBITN in the third year, post-effective date and beyond, as none of Flintkote’s triple-net leases expire before 2023.
ITCAN’s Objections Regarding Profit-abilitg
ITCAN objects that the Plan is not feasible under § 1129(a)(ll), and does not qualify under the going concern requirement of Section 524(g) because Flintkote’s businesses, when viewed as a whole, show that Flintkote is not a profitable company. ITCAN also maintains that even when the real estate business is considered alone, that segment of Flintkote’s business is not currently and will never be profitable, and thus the Plan remains infeasible.
Section 1129(a)(ll) states that a plan can be confirmed, inter alia, when confirmation “is not likely to be followed by the liquidation, or the need for further financial reorganization, of the debtor....” § 1129(a)(ll). The debtor must prove the feasibility of its plan by a preponderance of the evidence. In re W.R. Grace & Co.,
ITCAN objects that Flintkote did not provide any evidence of profitability as to any of its business lines other than the real estate business, and that if all of Flint-kote’s businesses are considered, the company as a whole is not profitable. ITCAN maintains that “to understand and assess the viability of Flintkote, a reasonably prudent investor would want to understand all costs associated with the business — in other words, to understand a slice of the pie, one needs to understand the whole pie.”
Flintkote argues that it is misleading to compare company-wide expenses to revenue solely from the real estate business, because a large portion of that $16 million in expenses has produced over $175 million in insurance recoveries during the same three year period.
Moreover, in reopening the record, the Court did not require Flintkote to provide financial information on every aspect of its company. Rather, the record was reopened on January 7, 2011, “for the limited purpose of allowing (a) the Plan Proponents to introduce evidence relating to the profitability or loss of the Debtors’ real property management business.” See Order Reopening Record on Confirmation and Setting Deadlines Related Thereto, Doc. No. 5602. We limited the reopening of the record to the real estate business because, at the time, the Court viewed this as Flintkote’s only business line that could satisfy an “ongoing business” requirement within § 524(g)(2)(B)(i)(II).
ITCAN next argues that the Plan is not feasible because Flintkote relies too heavily on the Trust for the funding of its businesses. Under the Trust Services
In In re Quigley Co.,
As the Plan Proponents point out, however, there are crucial differences between Quigley’s post-confirmation business and that of Flintkote. The most obvious difference is that Flintkote has substantially more business operations and opportunities than Quigley, which only performed claims processing services. Quigley,
ITCAN contends that if the Trust were to terminate the Trust Services Agreement, and Flintkote were forced to cover its own administrative costs and overhead, Flintkote could never be profitable. However, the Court finds there is no evidence to. suggest that the Trust will terminate the Trust Services Agreement. The Court credits the testimony of Mr. McMonagle, the FCR, that Flintkote’s employees are experienced in processing claims and performing various other administrative functions and as such the employees will provide valuable services to the Trust.
The P & L and Pro Forma Schedules
As to the real estate business itself, ITCAN disputes Flintkote’s presentation of profitability, arguing that the historical P & L is flawed which renders the pro forma projections flawed and inaccurate.
ITCAN contends first that Flintkote’s presentation of profitability does not comport with any recognized financial methodology. ITCAN’s expert, Craig P. Casey, testified that in his opinion, Mr. Gary selectively applied portions of ASC-280 and SAB Topic 1-B in order to show that the real estate business makes a profit.
Next, ITCAN contends that even when only the real estate business is considered, Flintkote severely understated or omitted real estate-related expenses attributable to that segment of its business in an effort to show a profit. Mr. Casey calculated that the minimum quantifiable amount of these errors and omissions for the historical period is $484,000, which when compared to Flintkote’s reported net profit in that period of roughly $86,000, makes Flintkote unprofitable during the historical period.
The Court notes that nearly 70% of the $484,000 identified by Mr. Casey as the “minimum quantifiable errors” relate to legal fees associated with seeking Court approval for real estate purchases and fees associated with the creation of the Court-ordered business plan.
ITCAN also objects to Flintkote’s omission of federal income taxes from its presentation of earnings. Mr. Casey contends that $34,000 in income tax expenses should have been allocated to the real estate business over the historical period.
Next, ITCAN contends that Flintkote understated Mr. Gordon’s time (and thus, his compensation) spent working on real estate matters in order to allocate a smaller portion of his salary to the real estate business. The Plan Proponents concede that Mr. Gordon’s time is the primary driver of expenses for the real estate business. As noted above, Flintkote allocated 8.3% of Mr. Gordon’s compensation to the real estate business based on Mr. Gordon’s estimation that he utilized 56 work days for it during the historical period. ITCAN contends that Mr. Gordon
The court finds that Flintkote reasonably allocated Mr. Gordon’s time. Because it was impossible, as Mr. Gordon testified, to account for every moment Mr. Gordon spent on real estate matters while traveling, Flintkote established a minimum one-half day increment for allocation purposes. The one-half day increment was specifically chosen to over-allocate Mr. Gordon’s time to real estate business on days in which he might have a single, hour-long meeting related to real estate.
Even if the allocation of Mr. Gordon’s compensation to real estate is understated to some degree, which, assuming arguendo is the case, the Court finds that given that Flintkote’s projected earnings from Year 3 of the pro forma period and beyond exceed $1 million, Mr. Casey’s adjustments do not substantially alter the picture of profitabil
ITCAN also objects that Mr. Gordon’s travel expenses incurred in connection with the real estate business have been materially understated by Flintkote. IT-CAN suggests that Flintkote made over 259 errors related to omitted or under-allocated travel expenses, including omitting altogether four specific trips during which real estate business was conducted. Mr. Casey opined that the “minimum quantifiable impact” of these errors and omissions total close to $25,000 over the historical period and approximately $43,000 over the pro forma period.
Based on the evidence presented, the Court finds that the Plan is feasible under § 1129(a)(ll). Flintkote’s Plan is far from “visionary or speculative.” In re Aleris Intern., Inc.,
In the short term, Flintkote is obligated to pay approximately $200,000 in allowed general unsecured claims. See Confirmation Ex. 74. Flintkote is also reserving $5.5 million from the $37.6 million in cash it will retain to pay costs such as professional fees, reorganization bonuses, environmental settlements, and deferred retention payments. Id. Another $6 million will be reserved for any potential environmental liability that may remain unresolved upon the effective date. Id. The $37.6 million retained by Flintkote will be more than sufficient to cover these short-term Plan obligations.
With respect to long term obligations under the Plan, Flintkote must perform under the Trust Services Agreement and its employment contracts. We find that it will be able to do so. There is no evidence that the Trust will terminate the Trust Services Agreement. We credit the testimony of the FCR that there is no reason that the Trust would not continue to use Flintkote for its claims processing as long as it performed well.
The Trust is also obligated to fund the DRL, for which it will receive 98% of any net recovery. Furthermore, Flintkote has established that its real estate business will produce a steady stream of income post-confirmation. Thus, the Court finds that Plan confirmation is “not likely to be followed by the liquidation, or the need for further financial reorganization” of Flint-kote. § 1129(a)(ll).
ITCAN has attempted to show that Flintkote’s picture of historical profitability is less than accurate and, as a result, Flintkote’s future projections based on the same historical' data must necessarily be inaccurate as well. The Court agrees that errors were made and that Flintkote’s historical data, upon which it makes its projections, are not 100% accurate. However, these inaccuracies are not dispositive of
Conclusion
All objections not addressed herein having been previously resolved, and the Court finding no merit to those addressed herein, the Court will confirm the Plan, issue the § 524(g) injunction, and recommend that the District Court affirm the confirmation of the Plan and the § 524(g) injunction. Additional uncontested Findings of Fact and Conclusions of Law and an Order Confirming the Amended Joint Plan of Reorganization will be separately issued.
Notes
. This Memorandum Opinion constitutes this Court’s findings of fact and conclusions of law with respect to the unresolved objections to confirmation.
. We shall use "Doc. No.” as an abbreviation for "Docket Number” in citing to the record. Unless otherwise specified, all citations to a docket number shall be to Bankruptcy Case No. 04-11300.
. Previous versions of the Plan were filed on September 9, 2008, at Doc. No. 3628 (the "Original Amended Plan”), June 22, 2009, at Doc. No. 4328 (the "6/22/09 Plan”), July 20, 2009, at Doc. No. 4393 (the "7/20/09 Plan”), August 5, 2010, at Doc. No. 5220 (the "8/5/10 Plan”), and August 30, 2011, at Doc. No. 6122 (the "8/30/11 Plan").
. The Debtors have filed several supplements to the Plan containing additional information and certain exhibits to the Plan. See Plan Supplement to Amended Joint Plan of Reorganization in Respect of The Flintkote Company and Flintkote Mines Limited on November 18, 2008, (the "Plan Supplement”), Doc. No. 3826, as amended on September 24, 2009, (the “First Amended Plan Supplement”), Doc. No. 4547; July 21, 2010, (the "Second Amended Plan Supplement"), Doc. No. 5183; September 16, 2010, (the "Third Amended Plan Supplement”), Doc. No. 5317; May 11, 2011, (the "Fourth Amended Plan Supplement”), Doc. No. 5873; September 23, 2011, (the "Fifth Amended Plan Supplement”), Doc. No. 6207; February 10, 2012, (the "Sixth Amended Plan Supplement”), Doc. No. 6580; and March 19, 2012, (the "Seventh Amended Plan Supplement”). These Supplements reflect amendments or additions to Plan exhibits and Plan-related materials with the following exceptions. Exhibit A to the Fourth Amended Plan Supplement contains the Amended and Restated Executive Consulting Agreement, dated January 11, 2011, (the "Amended Plant Agreement”) between Plant Insulation Company ("Plant”) and Flintkote. This Amended Plant Agreement superceded and replaced Flintkote's previous agreement with Plant, which was filed as Exhibit F to the Supplemental Disclosure Document Regarding Amended Joint Plan of Reorganization (As Modified), Doc. No. 4327. Also, the First and Second Amended Plan Supplements contained only lists of Settling Asbestos Insurance Companies, which were replaced by an updated list contained in the Fifth Amended Plan Supplement, and thus the First and Second Amended Plan Supplements have been superceded in their entirety.
. The transcripts for the confirmation hearings can be found at the following docket entries: Doc. No. 5454 (October 25, 2010); No. 5455 (October 26, 2010); Doc. No. 6190 (September 12, 2011); Doc. No. 6195 (September 13, 2011); and Doc. No. 6206 (September 19, 2011).
. Owens-Illinois, Inc. ("Owens”) objected to Plan confirmation on November 6, 2008. Doc. No. 3772. However, Owens did not seek any discovery in respect of its objections,
. The Court’s jurisdiction was not at issue. The Court has jurisdiction pursuant to 28 U.S.C. § 157 and § 1334 over this core proceeding. See 28 U.S.C. § 157(b)(2). Each Debtor is qualified to be a debtor under 11 U.S.C. § 109. Venue is proper under 28 U.S.C. § 1408.
. All citations to statutes in this Memorandum Opinion are to the Bankruptcy Code, Title 11 of the United States Code, unless otherwise specified.
. Affidavit of David J. Gordon in Support of First Day Motions (the "First Day Affidavit"), Doc. No. 2, ¶ 8; Disclosure Statement Regarding Amended Joint Plan of Reorganization in Respect of The Flintkote Company and Flintkote Mines Limited ("Disclosure Statement”), Doc. No. 3629, at 10.
. Disclosure Statement, at 10.
. Id. at 21-22.
. First Day Affidavit, V 21.
. Disclosure Statement, at 23-24.
. Capitalized terms and phrases used but not otherwise defined herein shall have the meanings given to them in the Plan.
. First Day Affidavit, ¶ 18.
. See Plan §§ 2.1, 2.2, 3.2.1-3.2.4.
. The insurance neutrality provisions of the Plan in § 11.8.1 apply to every Asbestos Insurance Company except for Certain London Market Companies ("LMC”). The Plan contains special provisions applicable only to LMC, which are essentially the same insurance neutrality provisions that were approved by the Court of Appeals in In re Combustion Engineering, Inc.,
.Votes were solicited pursuant to the Order (I) Approving Disclosure Statement Regarding Amended Joint Plan of Reorganization, (II) Setting Date of Confirmation Hearing with Respect to Amended Joint Plan of Reorganization, and (III) Establishing Objection Procedures for Amended Joint Plan of Reorganization (the "Disclosure Statement Order”), Doc. No. 3601, and the Order: (I) Establishing Procedures For Solicitation and Tabulation of Votes to Accept or Reject Joint Plan of Reorganization; (II) Approving Form of Ballots; (III) Approving Form and Scope of Notice of the Plan and Confirmation Hearing; (IV) Establishing Record Date for Voting Purposes Only; and (V) Setting Certain Deadlines (the "First Solicitation Procedures Order”), Doc. No. 3615.
. On May 5, 2004, the Court approved the Debtors’ retention of the Garden City Group, Inc., as the noticing, claims and balloting agent. See Doc. No. 25.
. Class 6 did not contain any qualifying members, and thus no votes were cast in Class 6 (Unsecured Claims Against Mines).
. See Order Approving (I) Scope of Resolici-tation for Amended Joint Plan of Reorganization (As Modified); (II) Supplemental Voting Procedures; (III) Forms of Ballots and Master Ballots; (IV) Form and Manner of Notice; and (V) Establishing Certain Deadlines (the "Supplemental Solicitation Procedures Order”), Doc. No. 4427.
. Although we refer to Flintkote's five separate "business” lines, as discussed, infra, not all of Flintkote’s purported businesses are necessarily sufficient, standing alone, to satisfy § 1141(d).
. Carrols Corporation is Burger King Corporation’s largest franchisee. See Hr’g Tr. 128:17-20, Oct. 25, 2010 (Gordon).
. The Court notes that we state the facts as they existed at the time of trial. Since then, this Court has authorized the purchase of additional real property parcels (See Doc. Nos. 6868, 6920), but that fact has no bearing on this Opinion and is not considered by this Court in making its ruling.
. Hr’g Tr. 50:20-56:14, October 25, 2010 (Gordon).
. On. October 9, 2012, the U.S. District Court for the Northern District of California affirmed confirmation of Plant’s plan of reorganization. See Civil Case No. 3:12-cv-01887-RS, Doc. No. 110 (N.D.Cal. Oct. 9, 2012). That decision has been appealed to the Ninth Circuit Court of Appeals. See id., Doc. No. 142, 144, 147.
. See Doc. No. 5317, Ex. A.
. GIT,
. GIT,
. The Hopkins Plaintiffs are the legal heirs of Norman Hopkins, who died of mesothelio-ma in 2005 allegedly as a result of exposure to asbestos containing products manufactured or distributed by ITCAN as Flintkote’s alter ego. See Second Amended Complaint, at 2, ¶ 1, Doc. No. 6386, Ex. D.
.See Order Approving Certain Joint Prosecution Agreement in Connection with the Dividend Recovery Litigation, Doc. No. 1479.
. See Debtors' Motion For Order Approving Certain Joint Prosecution Agreements and Annulling the Automatic Stay in Connection with the Dividend Recovery Litigation, Doc. No. 1433, ¶¶ 13-15.
. Hopkins et al. v. Plant Insulation Co., Case No. CGC-06-450944, Statement of Decision on Whether Flintkote Can Pursue Its Alter Ego Declaratory Relief Claim Against Imperial — filed January 6, 2012. Judge Kramer’s initial ruling on this issue came in a tentative decision on October 5, 2011.
. California Decision, at 4.
. See discussion of abandonment of Flint-kote's alter ego claim, infra.
. See Order Granting in Part and Denying in Part Imperial Tobacco Canada Limited's Amended Motion for Leave to File Out-of-Time Proof of Claim, Doc. No. 5425.
. Id.
.Wright was issued subsequent to the completion of briefing and arguments regarding confirmation. ITCAN filed a Notice of Subsequent Authority, Doc. No. 6804, directing the Court’s attention to the case. The Court takes notice of Wright and analyzes ITCAN’s arguments in light of the holdings in that case.
. In re LAN Assocs. XIV, L.P.,
. Mich. Self-Insurers' Sec. Fund v. DPH Holdings, Corp. (In re DPH Holdings, Corp.),
. In Pioneer Inv. Servs. v. Brunswick Assocs. Ltd. P’ship,
.ITCAN appealed the District Court’s ruling to the Court of Appeals for the Third Circuit. See Notice of Appeal to the United States Court of Appeals for the Third Circuit, Case No. 1: 11 -cv-00063-LPS, Doc. No. 26.
. As noted above, Flintkote lacks standing to seek alter ego relief against ITCAN, so whether ITCAN is adjudicated to be Flintkote’s alter ego will depend, in the first instance, on an individual plaintiff, such as the Hopkins plaintiffs, bringing a successful claim.
. See Notice of Motion and Memorandum in Support of Defendant Imperial Tobacco Canada Limited to Dismiss for Lack of Personal Jurisdiction or in the Alternative to Abstain,” Case No. 06-03051-MHP (N.D. Cal, June 19, 2006), Doc. No. 62, at 1:4-6 ("Even if the plaintiffs were successful ... it will be a waste of time for the Court and all parties involved because this 'success' is apt to result in nothing more than a worthless paper judgment against [ITCAN].”). See also Notice of Motion And Memorandum In Support Of Defendant Imperial Tobacco Canada Limited (’’ITCAN”) To Re-Notice Its Motion To Dismiss For Lack Of Personal Jurisdiction Or To Abstain Filed While This Action Was Pending On Removal In The United States District Court For The Northern District of California (Civil Action No. C 06-03051-MHP) Before Remand To This Court, filed in the Superior Court of California, County of San Francisco, Case No. CGC 06 450994, at 3 ("[ITCAN] is a Canadian company with substantially all of its assets in Canada and the Canadian courts will not recognize any judgment that might be rendered against [ITCAN] on the plaintiffs’ claims in this action.”).
. See Lumpkin v. Envirodyne Indus.,
. See § 509(b)(2); Rubenstein v. Ball Bros. Inc., (In re New England Fish Co.),
. The Court also denied ITCAN leave to file a late proof of claim on behalf of the New York Department of Environmental Conservation (“NYDEC”). See Doc. No. 5425.
. See Order Sustaining Debtors’ Objection to Claim No. 2262 Filed By Imperial Tobacco Canada Limited and Overruling ITCAN's Objection to Plan Confirmation, Doc. No. 6227. This order is on appeal in the District Court of Delaware. See Civil Case No. 1:11— cv01299-LPS (D.Del. Dec. 29, 2011).
. The appellate court’s rationale apparently failed to consider the fact that the insurers' liabilities were fixed as of the date injuries were incurred that were covered by the policies. Nothing in the bankruptcy case could affect the "quantum of liability” when that concept is measured by the number of injuries and damages owed due to coverage under the policies, the periods of coverage for which were all pre-petition. Moreover, nothing in the policies imposed any duty on the objecting insurers to investigate any claims that were not presented to it. How many claims ultimately would have been submitted to and paid by the trust, then presented to the objecting insurers, was and is entirely speculative. GIT,
. Opposition Brief, at 44.
. See Opposition Brief, at 44.
. See Plan § 11.4.
. Id.
. Plan Proponents' Motion for Order Finding that Modifications to the Amended Joint Plan of Reorganization of the Flintkote Company and Flintkote Mines Limited (As Modified August 30, 2011) Do Not Materially and Adversely Affect Voting Creditors, Doc. No. 6386.
. See S.I. Acquisition, Inc. v. Eastway Delivery Serv., Inc. (In re S.I. Acquisition, Inc.),
. See California Decision, at 4.
. Compare Tsai v. Bldgs. By Jamie, Inc. (In re Bldgs. By Jamie, Inc.),
.California Decision, at 2.
. See Imperial Tobacco Canada Limited’s Post-Argument Brief Regarding the Debtors’ Proposed Abandonment of the ITCAN-Relat-ed Claims, Doc. No. 6760, at 5.
. California Decision, at 3.
. "Exposed yet unimpaired creditors” as used in this Opinion refers to those who have been exposed to the Debtors’ asbestos products pre-confirmation but have yet to manifest any symptoms of asbestos-related illness.
. The holding in Grossman’s thus abandoned the much-criticized "accrual test” from Fren-ville, which provided that a claim arose in bankruptcy when the underlying state law cause of action accrued. Frenville,
. As discussed supra, since ITCAN filed its objection, the holding in Grossman’s was extended by Wright v. Owens Corning,
. Section 524(g)(2)(B)(ii)(I)-(II) requires that the debtor likely be "subject to substantial future demands for payment arising out of the same or similar conduct or events that gave rise to the claims that are addressed by the injunction” and that "the actual amounts, numbers, and timing of such future demands cannot be determined.”
. In re W.R. Grace & Co.,
. Future demands for payment are based on "claims” that are unliquidated, possibly disputed, and held by unidentified individuals who may not know that they hold claims in the first place. Whether such a claim will be disputed cannot be known until, at a minimum, the individual who holds the claim is identified and asserts an injury allegedly caused by a debtor. Indeed, these claims are contingent on manifestation of an injury. Thus, the claims are always subject to estimation for § 524(g) purposes.
. See Quigley Co., Inc. v. Law Offices of Peter G. Angelos (In re Quigley Co., Inc.),
. ITCAN has argued that, based on Gross-man’s, the FCR, James J. McMonagle, no longer represents the interests of the exposed yet unimpaired. In ITCAN’s view, all those exposed to asbestos pre-petition are represented by the ACC, and the FCR represents only those exposed post-petition. But even Wright, which restated and expanded the holding in Grossman’s, recognized that "in some bankruptcy proceedings a future claims representative is appointed to represent and protect the interests of persons with future unknown claims.... Indeed, future claims representatives have been appointed by courts notwithstanding their conclusion that those unknown persons did not hold 'claims' under the Bankruptcy Code.” Wright,
.We note that in § 524(g) cases, estimates of "future demands” are based largely on the known, pre-petition exposed population, even though, in ITCAN's view, those individuals cannot possibly have "future demands” having been exposed pre-confirmation. This estimation method is used even in circuits in which the law provides that upon exposure to asbestos, an individual holds a "claim" (in accord with the law in the Third Circuit by virtue of Grossman's). See, e.g., Fifth Amended and Restated Disclosure Statement with Respect to Quigley Company, Inc. Fourth Amended and Restated Plan of Reorganization Under Chapter 11 of the Bankruptcy Code, Case No. 04-15739-SMB, Doc. No. 1124, Ex. I, at 1. (Bankr.S.D.N.Y. June 7, 2007) (“To estimate potential future claims, experts begin with a projection of the exposed population.”); Second Amended Disclosure Statement Under 11 U.S.C. § 1125 in Support of Plan of Reorganization of Porter Hayden Company, Case No. 02-54152-RAG, Doc. No.
. We are cognizant of the Supreme Court's admonition in Lamie v. U.S. Trustee,
.As we noted in W.R. Grace, the court in Grossman’s recognized that the purpose of § 524(g) is to protect the due process rights of future claimants or future demand holders, and did not in any way suggest that because individuals exposed to asbestos pre-petition have ''claims” under § 101(5), a company with asbestos liability cannot qualify for § 524(g) unless it can show substantial post-petition exposure. W.R. Grace,
. In re W.R. Grace & Co.,
. Flintkote does not attempt to prove that such victims exist in this case.
. As of the petition date, there were over 157,000 asbestos claims pending against Flintkote.
. Hr’g Tr. 24:19-22, Apr. 22, 2008 (J. Fitzgerald).
. Hr’g Tr. 53:17-24, Oct. 26, 2010 (McMo-nagle).
.Section 342(a) requires generally that notice be given of an order for relief, but that requirement is imposed on the bankruptcy clerk. Thus, § 342(a) is not implicated in the voting solicitation process.
.Opposition Brief, at 15.
. Section 1129 states that a plan can be confirmed only if, inter alia, "[Confirmation of the Plan is not likely to be followed by the liquidation, or the need for further financial reorganization, of the debtor....'' § 1129(a)(l 1).
. Section 1141(d)(3)(C) is always satisfied for corporate debtors, as they cannot receive discharges in chapter 7. See § 727(a)(1). Thus, to be denied a discharge, Flintkote must be liquidating substantially all of its assets and not engaging in business post-confirmation. Here, assuming, arguendo, that Flint-kote is liquidating substantially all of its assets through the transfer to the trust, Flintkote can receive a discharge only if it engages in business post-confirmation. As noted, supra, Mines is liquidating and is not seeking a discharge.
. See 140 Cong. Rec. S4523 (April 20, 1994) (stmt. Sen. Brown).
.See § 524(g)(2)(B)(i)(I).
. See S 524(g)(2)(B)(i)(III).
. See § 524(g)(2)(B)(i)(IV).
. See § 524(g)(2)(B)(ii)(I).
. See § 524(g)(2)(B)(ii)(II).
. See § 524(g)(2)(B)(ii)(III).
. More specifically, a debtor will not receive a discharge upon plan confirmation if it does not engage in business upon consummation of the plan, and is liquidating all or substantially all property of the estate, and would be denied a discharge under § 727(a) if the case were in Chapter 7. See § 1141(d); supra note 80.
. ITCAN objects that the Plan does not provide for Reorganized Flintkote to pay any dividends to the Trust, and therefore that the Plan does not satisfy the funding requirements of § 524(g)(2)(B)(i)(II). However, there is no need for such a provision in the Plan because the Trust will own 100% of Reorganized Flintkote, and therefore the Trust may declare dividends.
. See Fireman's Fund Ins. Co. v. Plant Insulation Co. (In re Plant Insulation Co.),
. See Disclosure Statement, at 3.
. Hr’g Tr. 201:22-202:3, Sept. 12, 2011 (Gordon); see supra note 24.
. Id. at 203:11-12.
. See the Profit and Loss Statement ("P & L”), at Notice of Filing Pursuant to Court's Order Reopening Record on Confirmation and Setting Deadlines Related Thereto, Doc. No. 5622.
. See Hr’g Tr. 166:11-167:9, Sept 19, 2011 (Gordon); Hr’g Tr. 209:8-10, Sept. 12, 2011 (Gordon); Hr’g Tr. 204:24-205:18, Sept. 12, 2011 (Gordon).
. See Hr'g Tr. 167:13-169:6, Sept. 19, 2011 (Gordon).
. See Hr’g Tr. 140:19-141:8, Oct. 25, 2010 (Gordon).
. See Hr’g Tr. 200:3-5, Sept. 12, 2011 (Gordon).
. Id. at 170:19-171:22.
. Id. at 166:18-167:5.
. See In re Plant Insulation Co., Case No. 09-31347-TC (Bankr.N.D.Cal. Feb. 11, 2011), Order Granting Debtor’s Motion for Order Authorizing the Debtor to Assume Executive Agreement with the Flintkote Company, As Amended, at Case No. 09-31347, Doc. No. 1012.
. See Amended and Restated Executive Consulting Agreement (the "Amended Plant Agreement”), at § 2(a)-(c), at Notice of Filing Fourth Amendment to Plan Supplement to Amended Joint Plan of Reorganization (As Modified), Doc. No. 5873, Ex. A.
. See Monthly Operating Report for Period Ending October 30, 2011, Doc. No. 6343, at 2.
. “Profitability,” as used in this Opinion, is a short-hand expression for the ability of the Debtors to make “future payments, including dividends,” to the Trust as required by § 524(g)(2)(B)(i)(II).
. The inquiry into profitability was limited to the real estate business.
. § 1129(a)(ll).
.See Plan Proponents’ Post-Trial Brief in Support of Confirmation of the Amended Joint Plan of Reorganization in Respect of the Flintkote Company and Flintkote Mines Limited, Doc. No. 6442, at 15. “EBIT” are earnings before income taxes are deducted. "EBITN” are earnings before both income taxes and non-recurring items are deducted.
. Accounting Standards Codification Topic 280 (ASC-280) is a recognized methodology for breaking down larger businesses into segments. Hr'g Tr. 50:18-20, Sept. 13, 2011 (Gary). ASC-280 provides management with discretion in presenting the most meaningful measure of profit of a particular segment by excluding certain expenses such as income taxes, expenses not allocated to the particular segment, and various non-recurring charges. Id. at 50:18-25-51:1-15.
. Staff Accounting Bulletin Topic 1-B (SAB Topic 1-B) is a cost allocation guidance issued by the SEC which acknowledges that cost allocation is "often necessary to present a business on a carve-out basis.” Hr’g Tr. 52:3-5, Sept. 13, 2011 (Gary). SAB Topic 1-B specifies that whenever possible, expenses should be specifically identified and tracked to a business. Id. at 52:10-13. When it is not possible to specifically identify expenses, a reasonable allocation method should be used. Id., at 53:23-25.
. See Hr'g Tr. 88:19-20, Sept. 13, 2011 (Gary).
. See Hr'g Tr. 65:1-7, Sept. 12, 2011 (Oliver).
. Id. at 66:7-16, Sept. 12, 2011 (Oliver); Hr’g Tr. 238:2-5 (Gordon); id., at 232:20-233:6.
. See Hr'g Tr. 92:9-11, Sept. 13, 2011 (Gary).
. Id. at 61:19-22.
. Hr'g Tr. 76:10-77:15, Sept. 13, 2011 (Gary).
. id. at 59:13-18.
. Hr’g Tr. 64:11-14, Sept. 12, 2011 (Oliver).
. Id. at 64:14-17.
. Hr’g Tr. 59:4-22, Sept. 13, 2011 (Gary).
. Hr’g Tr. 90:23-92:17, Sept. 12, 2011 (Oliver).
. Hr'g Tr. 31:6-13, Sept. 19, 2011 (Casey) ("[Tjhere is a reality that [the estimate of Flintkote’s legal fees], in part, could be driven by ITCAN and constantly objecting and driving up that cost in a way that was maybe ... that would greatly impact that number. So, I didn’t want it to be a circular reference in the analysis.”).
. Hr’g Tr. 63:4-6, Sept. 13, 2011 (Gary).
. Hr’g Tr. 199:20-200:11, Sept. 12, 2011 (Gordon).
. Hr’g Tr. 69:21-70:7, Sept. 12, 2011 (Oliver).
. Id. at 73:23-74:9.
. Hr’g Tr. 80:12-19, Sept. 13, 2011 (Gary).
. Hr’g Tr. 75:3-9, Sept. 12, 2011 (Oliver).
. Id. at 85:14-16.
. Id. at 85:18-20.
. Id. at 85: 20-25; 86:6-18.
. Id. at 78:6-9.
. Id. at 75:23; 76:4-12.
. Id. at 78:19-21.
. Id. at 78:19-79:2
. Hr’g Tr. 63:13-16, Sept. 13, 2011 (Gary).
. See Debtors’ Motion for Order Pursuant to 11 U.S.C. § 363 Authorizing Purchase and Leaseback of Real Property Parcels in Raleigh, NC, Akron, OH, and Wooster, OH, Doc. No. 3363, ¶ 20; Hr’g Tr. 133:20, Oct. 25, 2010 (Gordon); id., at 135:20-21; id. at 138:14-16.
. See supra note 23.
. See Declaration of David J. Gordon in Support of Debtors' Motion for an Order Pursuant to 11 U.S.C. § 363 Authorizing Purchase and Leaseback of Real Property in Jacksonville, FL, Doc. No. 5974-5, ¶ 2.
. Hr’g Tr. 68:24-69:12, Sept. 13, 2011 (Gary).
. See Brief of Imperial Tobacco Canada Limited in Opposition to Confirmation of the Amended Joint Plan of Reorganization (As Modified November 16, 2011) In Respect of the Flintkote Company and Flintkote Mines Limited, Doc. No. 6441, at 20 (emphasis in original).
. See Trial Demonstratives of Craig P. Casey, Sept. 13, 2011, at 10.
. See Orders approving various insurance settlements at Doc. No. 3000, filed Jan. 25, 2008 (approving $500,000 settlement); Doc. No. 3062, filed Feb. 25, 2008 (approving $7,291,550 settlement); Doc. No. 3156, filed Mar. 18, 2008 (approving $5,371,673 settlement); Doc. No. 3371, filed June 18, 2008 (approving $613,575.08 settlement); Doc. No. 3504, filed July 28, 2008 (approving $429,357.11 settlement); Doc. No. 4052, filed Feb. 23, 2009 (approving settlement with initial payment of $1,880,752.61); Doc. No. 4053, filed Feb. 23, 2009 (approving settlement with initial payment of $3,152,029.95); Doc. No. 4545, filed Sept. 24, 2009 (approving $11 million settlement); Doc. No. 5173, filed July 14, 2010 (approving $150 million settlement); and Doc. No. 5274, filed Aug. 31, 2010 (approving settlement for CAN $3,796,723).
. Hr’g Tr. 158:6-13, Oct. 25, 2010 (Gordon).
.We opined at the confirmation hearing on October 26, 2010, that the consulting and executive management services business could also potentially satisfy Combustion Engineering’s purported “ongoing business” requirement, but for the fact that, at the time, Flintkote was no longer being paid by Plant for its services. See Hr'g Tr. 109:10-17, Oct. 26, 2010 (J. Fitzgerald). As of this writing, Flintkote’s contract with Plant to provide consulting and executive management services has been renegotiated and approved by Plant's bankruptcy court. See In re Plant Insulation Co., Case No. 09-31347-TC (Bankr.N.D.Cal. Feb. 11, 2011), Order Granting Debtor's Motion for Order Authorizing the Debtor to Assume Executive Agreement with the Flintkote Company, Doc. No. 1012. The confirmation order in Plant was recently affirmed by the U.S. District Court for the Northern District of California. See Civil Case No. 3:12-cv-01887-RS, Doc. No. 110 (N.D.Cal. Oct. 9, 2012). Thus, it, too, satisfies the business continuity criterion.
. See Trust Services Agreement, Doc. No. 5317, Ex. A, at § 4.1, 6.1.
. See Id. at § 2.4.1
. See Plan § 4.6.
. Opposition Brief, at 23.
. See supra, note 24.
. Hr’g Tr. 62:2-24; 63:7-20; 64:6-17, Oct. 26, 2010 (McMonagle).
. Id. at 64:20-25.
. Hr’g Tr. 237:5-8, Sept. 12, 2011 (Gordon).
. Hr’g Tr. 227:10-13, Sept. 13, 2011 (Casey).
. Hr’g Tr. 65:6-25; 70:22-71:14, Sept. 13, 2011 (Gary).
. Id. at 214:9-23.
. Hr’g Tr. 26:15-27:3, Sept. 19, 2011 (Casey).
. Id. at 31:6-13.
. Hr’g Tr. 16:20-17:5, Sept. 19, 2011 (Casey).
. Hr’g Tr. 132:23-133:5, Sept. 19, 2011 (Gary).
. Hr’g Tr. 76:16-19, Sept. 13, 2011 (Gary); Hr’g Tr. 93:4-5, Sept. 12, 2011 (Oliver).
. Hr’g Tr. 77:3-15, Sept. 13, 2011 (Gary) ("[T]here are a variety of things you need to determine in order to present a meaningful estimate of taxes: the tax structure, the tax attributes that survive, that carry with the real estate company. A tax structure could yield a rate ... anywhere from zero to 40 percent ... When I’m looking at a spectrum that wide and I don’t have a basis for a point that’s more likely than not, I'd rather disclose the fact that it’s not presented.”).
.Gary Rebuttal Report, at 12-13.
. Gordon Depo. Tr. 107:3-6, Aug. 11, 2010.
. Id. at 107:19-24.
. Hr’g Tr. 35:11-24, Sept. 19, 2011 (Casey).
. Hr’g Tr. 69:25-70:7, Sept. 12, 2011 (Oliver).
. Hr’g Tr. 80:12-19, Sept. 13, 2011 (Gary).
. Hr’g Tr. 74:7-9, Sept. 12, 2011 (Oliver).
. Id. at 73:25-74:1.
. Hr’g Tr. 81:12-15, Sept. 13, 2011 (Gary).
. Id. at 81:22-82:12.
. Id. at 243:21-24 (Casey).
.ITCAN argues that when Mr. Gordon's compensation allocation is adjusted upward, so too must be the allocation of administrative and other overhead expenses, because those allocations are driven by Mr. Gordon’s time. Mr. Casey included an extra $24,000 in Flint-kote’s allocation of administrative and other overhead expenses to the real estate business. Again, the Court finds that this adjustment does not affect the Court’s determination that the real estate business has a reasonable likelihood of continuing operations and making a profit post-confirmation.
. ITCAN Ex. 279, at 31.
. Hr’g Tr. 87:16-88:4, Sept. 13, 2011 (Gary).
. Id. at 88:6-9.
. Hr’g Tr. 100:19-104:23, Sept. 13, 2011 (Oliver).
. Id. at 104:20-106:17.
. Hr'g Tr. 72:3-16, Sept. 13, 2011 (Gary).
. See Doc. No. 2721, Ex. A; Doc. No. 4330; and Doc. No. 5317, Attachment 1.
. See Plan § 9.2.2; Hr'g Tr. 219:24-220:2, Sept. 12, 2011 (Gordon).
. Hr'g Tr. 220:4-7, Sept. 12, 2011 (Gordon).
. Hr'g Tr. 62:2-24, 63:7-20; 64:6-17, Oct. 26, 2010 (McMonagle).
. Id. at 62:2-16.
. See Trust Services Agreement, Doc. No. 5317, Attachment 1 §§ 4.1, 6.1
. In re Duval Manor Assocs.,
. The Plan Proponents cite, among others, In re Schoeneberg,