Everest Brief - 3rd Cir - Pitt-Corning

Case No. 14-4329

IN THE UNITED STATES COURT OF APPEALS FOR THE THIRD CIRCUIT

______________________________

IN RE: PITTSBURGH CORNING CORPORATION

MT. McKINLEY INSURANCE COMPANY and EVEREST REINSURANCE COMPANY,

Appellants,

v.

PITTSBURGH CORNING CORPORATION, et al., Appellees.

______________________________

Appeal from an Order entered by the United States District Court for the Western District of Pennsylvania

BRIEF OF APPELLANTS

James R. Walker Buchanan Ingersoll & Rooney 301 Grant Street, 20th Floor Pittsburgh, Pennsylvania 15219 Telephone: (412) 562-8800 Facsimile: (412) 562-1041 [email protected] Fred L. Alvarez Walker Wilcox Matousek LLP One North Franklin, Suite 3200 Chicago, Illinois 60606 Telephone: (312) 244-6700 Facsimile: (312) 244-6800 [email protected]

Tony L. Draper Charles B. Walther Walker Wilcox Matousek LLP 1001 McKinney St., Suite 2000 Houston, Texas 77002 Telephone: (713) 654-8001 Facsimile: (713) 343-6571 [email protected] [email protected]

Attorneys for Mt. McKinley Insurance Company and Everest Reinsurance Company

Case: 14-4329 Document: 003111911958 Page: 1 Date Filed: 03/23/2015

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CORPORATE DISCLOSURE STATEMENT AND STATEMENT OF FINANCIAL INTEREST

Pursuant to Fed. R. App. P. 26.1, Mt. McKinley Insurance Company and

Everest Reinsurance Company make the following disclosure:

1) For non-governmental corporate parties, please list all parent

corporations:

Mt. McKinley Insurance Company and Everest Reinsurance Co., Inc. are

100% owned by Everest Reinsurance Holdings, Inc. Everest Underwriting Group

(Ireland) Limited owns 100% of Everest Reinsurance Holdings, Inc. Everest Re

Group, Ltd. owns 100% of Everest Underwriting Group (Ireland) Limited.

2) For non-governmental corporate parties, please list all publicly held

companies that hold 10% or more of the party’s stock:

Everest Re Group, Ltd.

3) If there is a publicly held corporation which is not a party to the

proceeding before this Court but which has a financial interest in the outcome of

the proceeding, please identify all such parties and specify the nature of the

financial interest or interests:

PPG Industries, Inc. and Corning Incorporated each own 50% of Pittsburgh

Corning Corporation.

Dated: March 23, 2015 /s/ James R. Walker James R. Walker


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TABLE OF CONTENTS

PRELIMINARY STATEMENT ............................................................................... 1

JURISDICTIONAL STATEMENT .......................................................................... 3

STATEMENT OF THE ISSUES............................................................................... 4

STATEMENT OF RELATED CASES AND PROCEEDINGS .............................. 5

STATEMENT OF THE CASE .................................................................................. 7

STANDARD OF REVIEW .....................................................................................13

SUMMARY OF ARGUMENT ...............................................................................13

ARGUMENT ...........................................................................................................17

1. The lower court’s standing ruling is error as a matter of law. ............17

a. The Plan harms Mt. McKinley by impairing its contractual rights. .........................................................................................18

b. Mt. McKinley is harmed by coverage-related findings not required by the Bankruptcy Code. ............................................24

c. The Plan and TDP harm Mt. McKinley by inflating the Plan Supporters’ liabilities and increasing Mt. McKinley’s risk and exposure beyond what exists outside the Plan. ..................25

d. The Plan harms Mt. McKinley by including hundreds of non-debtors within the scope of the Injunction. .......................27

e. The lower court erred in denying Mt. McKinley’s right to oppose confirmation of a Plan under § 1129. ...........................30

2. The lower court erred in confirming a Plan that does not comply with §§ 524(g) and 1129 of the Bankruptcy Code. .............................31

a. Mt. McKinley was improperly denied deposition discovery. ..41

b. Mt. McKinley was improperly denied written discovery. ........43

c. Mt. McKinley was improperly denied discovery into how the Plan is intended to operate. .................................................45

d. The lower court’s ex post facto exclusion of evidence of voting fraud infecting the Plan process renders the record before the Court incomplete......................................................49

e. The record below is otherwise incomplete. ..............................61


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f. The lower court erred in allowing the Plan Parties to supplement the record after the June 2010 confirmation hearing. ......................................................................................63

g. The record is also incomplete because the lower court erred in denying Mt. McKinley the opportunity to present evidence of additional fraud in this case. ..................................68

3. The Plan encourages and pays fraudulent and invalid claims. ...........69

a. The Plan includes Trust Distribution Procedures that encourage filing and payment of non-compensable claims. .....70

b. The last decade has seen an increasing and overwhelming trend in States and courts to not pay unimpaired claimants. ....74

1) Tort Reform ....................................................................77

2) Time-barred Claims ........................................................78

c. The broad releases in the Plan impermissibly expand the scope of the Injunction to include non-derivative liabilities of non-debtors. ..........................................................................80

CONCLUSION ........................................................................................................82

CERTIFICATION OF ADMISSION TO BAR ......................................................83

CERTIFICATION OF COMPLIANCE WITH FEDERAL RULE OF APPELLATE PROCEDURE 32(a) AND LOCAL RULE 31.1 .............................84

CERTIFICATE OF SERVICE ................................................................................85


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TABLE OF AUTHORITIES Cases

AlliedSignal, Inc. v. Ott, 785 N.E.2d 1068 (Ind. 2003) ........................................................................76

Bernier v. Raymark Indus., Inc., 516 A.2d 534 (Me. 1986) .............................................................................76

Bowerman v. United Illuminating, 1998 WL 910271 (Conn.Super.Ct. 1998) ....................................................76

Bowman v. Wilson, 672 F.2d 1145 (3d Cir.1982) ........................................................................18

Burns v. Jaquays Mining Corp., 752 P.2d 28 (Ariz.App. 1987), rev. dismissed, 781 P.2d 1373 (Ariz. 1989) ..........................................................................76

Carnegie Mellon Univ. v. Marvell Tech. Grp., Ltd., 2014 WL 183212 (W.D.Pa. 2014) ................................................................56

Danvers Motor Co., Inc. v. Ford Motor Co., 432 F.3d 286 (3d Cir. 2005) .........................................................................17

Ford Motor Co. v. Miller, 260 S.W.3d 515 (Tex.App.-Houston (14th Dist.)( 2008) ..............................76

Government of The Virgin Islands v. Archibald, 987 F.2d 180 (3d Cir.1993) ..........................................................................56

Great Am. Indem. Co. v. Rose, 242 F.2d 269 (5th Cir. 1957) .........................................................................61

Howell v. Celotex Corp., 904 F.2d 3 (3d Cir. 1990) .............................................................................75

In re Abbotts Dairies of Pennsylvania, Inc., 788 F.2d 143 (3d Cir.1986) ................................................................... 31, 32

In re ACandS, Inc., 2011 WL 3471243 (Bankr. D.Del. 2011) .....................................................22

In re ACandS, Inc., 2011 WL 744913 (Bankr. D.Del.2011) ........................................................22

In re Am. Capital Equip., LLC, 688 F.3d 145 (3d Cir. 2012) ................................................................36


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In re Asbestos Litig., 1994 WL 721763 (Del.Super.Ct. 1994) (unpublished), rev’d on other grounds, 670 A.2d 1339 (Del. 1995) ....................................76

In re Asbestos Products Liability Litigation (No. VI), MDL Docket No. 875, 2012 WL 3279208 (E.D.Pa. 2012), vacated in part 2012 WL 4171073 (E.D.Pa. 2012) .......................................75

In re City of Detroit, No. 13-53846, 2014 WL 7409724 (Bankr. E.D.Mich. 2014) ......................32

In re Combustion Eng’g, Inc., 391 F.3d 190 (3d Cir. 2004) ................................................................. passim

In re Garlock Sealing Technologies, LLC, 504 B.R. 71 (Bankr. W.D.N.C. 2014) .................................................. passim

In re Global Industrial Technologies, 645 F.3d 201 (3d Cir. 2011), cert. denied 132 S.Ct. 551 (2011) ......... passim

In re Greate Bay Hotel & Casino, Inc., 251 B.R. 213 (Bankr. D.N.J. 2000) ..............................................................70

In re Hawaii Federal Asbestos Cases, 734 F.Supp. 1563 (D.Haw. 1990) .......................................................... 75, 76

In re Integrated Telecom Express, Inc., 384 F.3d 108 (3d Cir. 2004) .........................................................................33

In re Madison Hotel Associates, 749 F.2d 410 (7th Cir. 1984) .................................................................. 31, 32

In re Massachusetts Asbestos Cases, 639 F.Supp. 1 (D.Mass 1985) .......................................................................76

In re Okoreeh–Baah, 836 F.2d 1030 (6th Cir.1988) ........................................................................32

In re Piper Aircraft Corp., 244 F.3d 1289 (11th Cir. 2001) .....................................................................32

In re Pittsburgh Corning Corporation, 260 Fed.Appx. 463 (3d Cir. 2008).................................................................. 6

In re Pittsburgh Corning Corporation, 417 B.R. 289 (Bankr. W.D.Pa. 2006) .......................................................8, 79

In re Pittsburgh Corning Corporation, 453 B.R. 570 (Bankr. W.D.Pa. 2011) .............................................. 10, 46, 54


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In re PPI Enterprises, Inc., 324 F.3d 197 (3d Cir. 2003) .........................................................................32

In re PWS Holding Corp., 228 F.3d 242 (3d Cir. 2000) .........................................................................36

In re Quigley Co., Inc., 437 B.R. 102 (Bankr. S.D.N.Y. 2010) .........................................................33

In re Silica Products Liability Litig., 398 F.Supp.2d 563 (S.D.Tex. 2005) ...................................................... 68, 69

In re Sovereign Grp., 1984-21 Ltd., 88 B.R. 325 (Bankr. D.Colo. 1988) ..............................................................36

In re Sylmar Plaza, L.P., 314 F.3d 1070 (9th Cir. 2002) .......................................................................32

In re Vill. at Camp Bowie I, L.P., 710 F.3d 239 (5th Cir. 2013) .........................................................................32

In re W.R. Grace & Co., 475 B.R. 34 (D. Del. 2012), aff’d, 729 F.3d 332 (3d Cir. 2013) ........... 32, 33

In re W.R. Grace & Co., 729 F.3d 332 (3d Cir. 2013) .........................................................................37

In re Western Asbestos Co., 416 B.R. 670 (N.D.Cal. 2009) aff’d sub nom. Renfrew v. Hartford Acc. & Indem. Co., 406 F.App’x 227 (9th Cir. 2010) ....................................................................21

Jurich v. John Crane, Inc., 824 N.E.2d 777 (Ind.App. 2005), transfer denied, 841 N.E.2d 179 (Ind. 2005) ..........................................................................77

Med. Protective Co. v. Bubenik, 594 F.3d 1047 (8th Cir. 2010) .......................................................................19

Metro-North Commuter R.R. Co. v. Buckley, 521 U.S. 424 (1997)......................................................................................77

Miller v. Armstrong World Indus., Inc., 817 P.2d 111 (Colo. 1991) ............................................................................76

Morse/Diesel, Inc. v. Fidelity and Deposit Company of Maryland, 122 F.R.D. 447 (S.D.N.Y.1988) ...................................................................35


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Owens-Illinois v. Armstrong, 591 A.2d 544 (Md.Ct.Spec.App. 1991), aff’d in part, rev’d in part on other grounds, 604 A.2d 47 (Md. 1992) .......76

Rowland v. California Men's Colony, Unit II Men's Advisory Council, 506 U.S. 194 (1993)......................................................................................20

Schweitzer v. Consolidated Rail Corp., 758 F.2d 936 (3d Cir. 1985) .........................................................................76

Simmons v. Pacor, Inc., 674 A.2d 232 (Pa. 1996) ........................................................................ 75, 77

Sippel Dev. Co., Inc. v. W. Sur. Co., 2007 WL 1115207 (W.D.Pa. 2007) ..............................................................35

Sopha v. Owens-Corning Fiberglas Corp., 601 N.W.2d 627 (Wis. 1999) .......................................................................77

Travelers Cas. & Sur. Co. of Am. v. Wells Fargo Bank N.A., 374 F.3d 521 (7th Cir. 2004) .........................................................................65

United States v. Gibbs, 739 F.2d 838 (3d Cir. 1984), cert. denied, 469 U.S. 1106 (1985) ....................................................... 55, 56

UNR Indus. v. Continental Cas. Co., 942 F.2d 1101 (7th Cir. 1991) .......................................................................26

Statutes

11 U.S.C. § 1109 ......................................................................................................30 11 U.S.C. § 1129 .............................................................................................. passim 11 U.S.C. § 524 ................................................................................................ passim 28 U.S.C. § 1291 ........................................................................................................ 4 28 U.S.C. § 1334 ........................................................................................................ 3 28 U.S.C. § 157 ......................................................................................................3, 4 28 U.S.C. § 158 .......................................................................................................... 4 Fla. Stat. Ann. §§ 774.201–.209 ..............................................................................78 Ga. Code Ann. §§ 51-14-1 to 51-14-13 ...................................................................78 H.B. 0153, 99th Sess. (Ill. 2013)..............................................................................22 H.B. 1150, Sess. 2013-2014 (Pa. 2013) ...................................................................22 H.B. 1400, 119th Sess. (Ind. 2015) ..........................................................................22


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H.B. 2034, 82d Leg. (Tex. 2011) .............................................................................22 H.B. 477, 2012 Leg., 38th Reg. Sess. (La. 2012) ....................................................22 Kan. Stat. Ann. §§ 60-4901 to 60-4911 ...................................................................78 Ohio Rev. Code §§ 2307.91–.96 ..............................................................................78 Ohio Rev. Code §§ 2307.951 to 2307.954 ..............................................................22 Ohio Rev. Code Ann. § 2307.92 ..............................................................................77 Okla. Stat. Ann. tit. 76, §§ 81-89 .............................................................................22 Okla. Stat. Tit. 76 §§ 60-71 ......................................................................................78 S. 281, Sess. 121, 2015-2016 (S.C. 2015) ...............................................................22 S.B. 1202, 82d Leg. (Tex. 2011)..............................................................................22 S.B. 43 & 56, 80th Leg., Reg. Sess. (W.Va. 2011) .................................................22 S.C. Code Ann. §§ 44-135-30 to 44-135-110 ..........................................................78 Tex. Civ. Prac. & Rem. Code §§ 90.001–.012 ........................................................78 Wis. Stat. Ann. § 802.025 ........................................................................................22 Other Authorities

5 Collier on Bankruptcy, ¶ 1129.02 (15th ed. 1984) ................................................36 7 Lawrence P. King, Collier on Bankruptcy, ¶ 1129.02[4] at p. 1129-22

[15th ed. 2006] ................................................................................................28 9A Alan Wright, et al., Fed. Prac. & Proc. Civ. § 2451 (3d ed.) ...........................20 David F. Binder, Hearsay Handbook § 46:1 (West 4th Ed.) ....................................65 H.R. 526, the Furthering Asbestos Claim Transparency (FACT) Act of 2015 .......22 Peggy L. Ableman, A Case Study from A Judicial Perspective: How Fairness

and Integrity in Asbestos Tort Litigation Can Be Undermined by Lack of Access to Bankruptcy Trust Claims, 88 Tul. L. Rev. 1185, 1196-97 (2014) ................................................................................................ 2

Rules

Federal Rule of Bankruptcy Procedure 2019 ............................................................. 5 Federal Rule of Civil Procedure 26 .................................................................. 35, 39 Federal Rule of Civil Procedure 60 ........................................................................... 6 Federal Rule of Evidence 103 ........................................................................... 55, 56


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Federal Rule of Evidence 1101 ................................................................................65 Federal Rule of Evidence 408 ..................................................................................35 Federal Rule of Evidence 801 ..................................................................................65 Local Appellate Rule 28.1 ......................................................................................... 5


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PRELIMINARY STATEMENT

Mt. McKinley Insurance Company and Everest Reinsurance Company

(collectively, “Mt. McKinley”) appeal confirmation of a Plan (defined infra)

structured to pay fraudulent and invalid asbestos claims of the Debtor and

hundreds of non-debtors through a massive trust controlled by some of the very

same lawyers that drove the Debtor into bankruptcy.

Mt. McKinley has long maintained that the plan development process that

yielded this Plan was the product of collusion and self-dealing among the Debtor,

its non-debtor parents and the asbestos plaintiffs’ bar. Despite Mt. McKinley’s

persistent efforts to shed light on this flawed process and obtain discovery needed

to present a full and complete evidentiary record in support of its objections,

necessary discovery was repeatedly denied. Even after evidence of fraud by law

firms1 submitting ballots in favor of the Plan was uncovered and admitted at trial,

discovery needed to present a full record was denied.

Time has proven Mt. McKinley right. It is increasingly clear that asbestos

lawyers are manipulating the separateness of bankruptcy and tort litigation to game

the system. They are able to do so because the asbestos plaintiffs’ bar dictates the

1 On the Second Amended Plan these firms voted claims valued under the TDP at more than $150 million. A similar breakdown was not provided by the claims agent for voting on the Third Amended Plan.


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procedures in mega asbestos cases like this to pay invalid claims largely in secret,

using confidentiality provisions like those in the Plan.

A former Delaware trial court judge who experienced this abuse firsthand

stated, “[t]he absence of transparency [between the tort system and bankruptcy

trust system] continues to create a loophole that allows claimants to present

contradictory theories of exposure and to manipulate causation evidence to fit the

specific defendants named in the complaint or who are left standing at trial.”2 The

reason is that “the trusts themselves have implemented procedures that prohibit the

sharing of information that is necessary to prevent these abuses from undermining

the truth-seeking process.” Id. at 1209. The asbestos plaintiffs’ bar made sure the

Plan continues this practice [see TDP § 6.5.].

Judge Ableman’s experience is far from isolated. The landmark decision in

In re Garlock Sealing Technologies, LLC, 504 B.R. 71, 84 (Bankr. W.D.N.C.

2014), sheds further light on these improper practices, including an example

involving this bankruptcy case. There, the Bankruptcy Court permitted Garlock to

take full discovery into 15 previously settled asbestos cases to assess whether

exposure evidence had been manipulated. The result was astounding. “Garlock

demonstrated that exposure evidence was withheld in each and every one of them.”

2 Peggy L. Ableman, A Case Study from A Judicial Perspective: How Fairness and Integrity in Asbestos Tort Litigation Can Be Undermined by Lack of Access to Bankruptcy Trust Claims, 88 Tul. L. Rev. 1185, 1196-97 (2014).


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Id. at 84 (emphasis original). In one case, “the same lawyers who represented to

the jury that there was no Unibestos insulation exposure had, seven months earlier,

filed a ballot in the Pittsburgh Corning bankruptcy that certified ‘under penalty of

perjury’ that the plaintiff had been exposed to Unibestos insulation.” Id. (emphasis

original).

The Plan was confirmed over Mt. McKinley’s objections. Mt. McKinley

demonstrated how the Plan harmed it, including in pending coverage cases where

PPG and Corning seek to recover from Mt. McKinley a portion of the

contributions they agreed to make under the Plan. Nonetheless, the lower court

held that Mt. McKinley lacked bankruptcy level standing to be heard and

dismissed its objections as moot, giving rise to this appeal.

JURISDICTIONAL STATEMENT

The district court had original jurisdiction over Debtor’s Chapter 11 case

under 28 U.S.C. § 1334(a); the case was referred to the bankruptcy court under 28

U.S.C. § 157(a). The bankruptcy court had jurisdiction over plan confirmation

proceedings under 28 U.S.C. § 1334(b).

On May 24, 2013, the bankruptcy court issued an order confirming the Plan.

Mt. McKinley filed a motion for reconsideration, which was granted in part and

denied in part on November 12, 2013. Mt. McKinley filed a notice of appeal on

November 25, 2013. The district court had jurisdiction over that appeal under 28


4

U.S.C. §§ 157(c)(1) and 158(a)(1). The district court also had jurisdiction under

11 U.S.C. § 524(g) because the Plan contains a channeling injunction under 11

U.S.C. § 524(g) (“Injunction”), which cannot take effect until “the order

confirming the plan of reorganization [is] issued or affirmed by the district court.”

11 U.S.C. § 524(g)(3)(A).

On September 30, 2014, the district court entered an order affirming the

bankruptcy court’s confirmation order and adopting the bankruptcy court’s

findings. [Dist. Dkt. 82.] Mt. McKinley filed a notice of appeal to this Court on

October 28, 2014.

The district court order is a final decision over which this Court has

jurisdiction pursuant to 28 U.S.C. §§ 158(d) and 1291.

STATEMENT OF THE ISSUES

1. Whether the lower court erred by denying Mt. McKinley bankruptcy

standing.3

2. Whether the lower court failed to review the Plan with a full

evidentiary record.4

3 Raised: T52, T54, T57; Dist. Dkt. 56 at pp. 56-59. Objected to: T53, Bk. Dkt. Nos. 8823 and 9009. Ruled on: T71:6111 (¶244) -6143(¶323) and T71:6170 (¶467) -6178 (¶486); Dist. Dkt. 82 at p. 32. 4 Raised: T57:5276, 5289-5290, 5292, 5300, 5302-03, 5305, 5308-09, 5327, and 5332-33; T43; T44; T243; Bk. Dkt. No. 9318; Dist. Dkt. 56 at pp. 10-36. Objected to: Bk. Dkt. Nos. 8842 and 9075. Ruled on: T71:6111 ( ¶244) -6143


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3. Whether the lower court erred in holding the Plan was proposed in

good faith as required by § 1129.5

4. Whether the Plan complies with § 524(g).6

5. Whether the lower court erred in confirming a Plan that creates

additional burdens and impairs Mt. McKinley’s rights under insurance policies

issued to non-debtors PPG and Corning.7

STATEMENT OF RELATED CASES AND PROCEEDINGS

In compliance with L.A.R. 28.1, Mt. McKinley states:

(i) This case has not been before this Court previously, except that a prior

appeal8 regarding access to Fed. Bankr. Rule of Civ. Proc. 2019

statements filed in this case was resolved by this Court in 2008. See

(¶323) and T71:6170 (¶467) -6178 (¶486), and T75; Dist. Dkt. 81 at pp. 10, 25, 26, 32. 5 Raised: T57:5276, 5307-5312, 5316; Dist. Dkt. 56 at pp. 10-36. Objected to: Bk. Dkt. No. 9009. Ruled on: Bk. Dkt. T71:6142 (¶320)-6143 (¶323), 6145 (¶ 334), 6163 (¶¶424-428); 6178 (¶486); Dist. Dkt. 81 at p. 32. 6 Raised: T57:5276, 5287-97, 5315-5320, 5330-32; Dist. Dkt. 56 at pp. 36-50. Objected to: Bk. Dkt. 9009. Ruled on: T71:6109 (¶234) -6143 (¶323); T71:6171 (¶467) -6178 (¶486); Dist. Dkt. 81 at p.32. 7 Raised: T57; Dist. Dkt. 56 at pp. 36-59. Objected to: Bk. Dkt. 9009. Ruled on T71:6111 (¶244) -6120 (¶267); T71:6171 (¶469) -6173 (¶470); Dist. Dkt. 81 at pp. 21-25, 30-32. 8 Certain Underwriters at Lloyds, London, et al. v. Pittsburgh Corning Corporation, et al., Appeals Dkt. No. 05-4781.


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In re Pittsburgh Corning Corporation, 260 Fed.Appx. 463 (3d Cir.

2008) (unreported). The present appeal does not involve any issue

regarding the grant or denial of access to Rule 2019 statements.

(ii) There are two separate coverage actions, filed shortly after this

bankruptcy was filed, in which PPG and Corning seek, inter alia,

coverage from Mt. McKinley for their trust contributions to be made

under the Plan. On May 23, 2000, PPG filed an adversary proceeding

against Mt. McKinley and other insurers styled PPG Industries, Inc. v.

Pittsburgh Corning Corporation, et al., Adv. No. 00-2201, in the

Bankruptcy Court for the Western District of Pennsylvania. This

proceeding is currently stayed. On July 3, 2002, Mt. McKinley

initiated a separate coverage action against Corning styled Mt.

McKinley Insurance Company, et al. v. Corning Incorporated, et al.,

Index No. 02-602454 (N.Y. Sup. Ct.). These actions remain pending.

(iii) Mt. McKinley is about to present a motion in the District Court below

seeking relief under Fed. R. Civ. Proc. 60(b) and 62.1 in connection

with the confirmation order. Mt. McKinley anticipates filing this

motion on or before March 27, 2015.

(iv) Mt. McKinley is not aware of any other case or proceeding that is any

way related, completed, pending or about to be presented before this


7

court or any other court or agency, state or federal.

STATEMENT OF THE CASE

PPG Industries, Inc. (“PPG”) and Corning Incorporated (“Corning”) each

own 50% of the debtor Pittsburgh Corning Corporation (“PCC”).9

Mt. McKinley issued a number of excess liability policies to PPG and

Corning, respectively, providing millions of dollars of potential insurance

coverage. Mt. McKinley’s participation in this bankruptcy is driven by the Plan

Supporters’ efforts to seek coverage from Mt. McKinley for their trust

contributions. Shortly after this bankruptcy was filed, PPG filed an adversary

proceeding10 against Mt. McKinley and other insurers seeking coverage for its

asbestos liabilities, including liabilities related to the Debtor. Corning similarly

seeks coverage for its trust contribution in state court in New York.11 These

actions remain pending.

9 PPG and Corning will be collectively referred to as “Plan Supporters.” 10 PPG Industries, Inc. v. Pittsburgh Corning Corporation, et al., Adv. No. 00-2201, pending in the Bankr. W.D.Pa., as filed in this case. T90. The case is currently stayed. 11 Mt. McKinley Insurance Company, et al. v. Corning Incorporated, et al., Index No. 602454/2002, Supreme Court of the State of New York, County of New York. T89.


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PCC filed its Chapter 11 petition on April 16, 2000 [T1]; a Joint Plan of

Reorganization on April 30, 2003 [T2]; a First Amended Plan of Reorganization on

August 18, 2003 [T4]; and a Second Amended Plan on November 20, 2003 [T5].

Mt. McKinley and other insurers, sought discovery on how the Second

Amended Plan was negotiated, including whether it was the product of collusion

among the Plan Parties.12 T7. At a February 19, 2004 hearing on a motion to

compel, the Bankruptcy Court refused to permit discovery on plan negotiations,

erroneously holding that evidence of collusion was irrelevant and that the payment

of invalid claims did not go the question of good faith. T8: 675 (L.23) - 680 (L.6).

This clear error prevented Mt. McKinley from taking critical discovery to prove at

confirmation the existence and extent of fraud and other improprieties that would

render the Plan unconfirmable.

Even without a full evidentiary record, after a confirmation hearing on May

3-7, 2004, the Bankruptcy Court denied confirmation of the Second Amended Plan

because it sought to channel the independent asbestos liabilities of PPG and

Corning, contrary to this Court’s decision in Combustion Engineering. In re

Pittsburgh Corning Corporation, 417 B.R. 289 (Bankr. W.D.Pa. 2006).

12 “Plan Proponents” means Debtor, Asbestos Claimants Committee and Future Claimants Representative. Plan Proponents and Plan Supporters will collectively be referred to as “Plan Parties.”


9

The Plan Parties filed a Third Amended Plan on August 8, 2008 [T16],

which was subsequently modified [T17, T18, 28, 29, 32 and 37]. The Bankruptcy

Court held a confirmation hearing on the modified Third Amended Plan on June 3,

4, 9 and 10, 2010. T71:6040.

On June 9, 2010, certain exhibits central to this appeal, including Garlock

Exhibit 203 [T100] and others like it, were admitted into evidence. These exhibits

show that certain law firms who submitted ballots verifying exposure to a PCC

asbestos product (Unibestos) under penalty of perjury, subsequently signed state

court discovery responses stating that some of those same claimants, after

investigation, lacked information necessary to admit or deny exposure to a PCC

asbestos product. T40:3191 (L.23)-3207 (L.24). After hearing extensive argument

on evidentiary objections, the Bankruptcy Court invited the parties to brief the

hearsay objection in their post-trial briefs and admitted those exhibits where the

discovery responses post-dated the ballot submission.

The following day, the Plan Parties stipulated that Garlock Exhibits 121,

132, 147, 165, 167, 174, 178, 203, 245, 327 and 356 [T93-T101, T105, T108,

herein “Garlock Exhibits”] fell within the court’s ruling on admissibility and raised

no new objections to this evidence. T41:3254 (LL.18-23). Those exhibits

evidence the improper conduct that had been at the heart of Mt. McKinley’s plan

objections. In post-trial briefing the Plan Parties raised for the first time new


10

evidentiary objections, including that the Garlock Exhibits were not properly

authenticated, not signed (in certain instances), and that they incorporated

objections and responses to other discovery. T42:3455 (n.49). The Plan Parties

failed to address the hearsay objection in their post-trial briefing. Id.

On June 16, 2011, the Bankruptcy Court denied confirmation of the

modified Third Amended Plan because the Injunction remained overbroad and the

Plan was not “insurance neutral.” In re Pittsburgh Corning Corporation, 453 B.R.

570 (Bankr. W.D.Pa. 2011). The Bankruptcy Court did not revisit the admission

of the Garlock Exhibits and instead assessed good faith under § 1129(a)(3) on a

record that included that evidence. Id. at 604-05.

Subsequently, Mt. McKinley filed a Motion for Reconsideration (T156) and,

based on this Court’s GIT13 decision, also filed a Motion for Case Management

Order (T43,T44) (the “CMO Motion”). The CMO Motion again sought critical

discovery to develop a full evidentiary record, including further discovery related

to the practices the Garlock Exhibits brought to light and evidence of collusion in

the plan process, all of which would test whether the Plan was proposed in “good

faith.” Such discovery had been repeatedly and erroneously denied. Mt.

13 In re Global Industrial Technologies, 645 F.3d 201 (3d Cir. 2011), cert. denied 132 S.Ct. 551 (2011) (“GIT”).


11

McKinley also sought the opportunity to supplement the evidentiary record

following completion of such additional discovery. T43:3475.

More than a year after confirmation of the modified Third Amended Plan

was denied, on August 17, 2012, the Plan Parties re-filed an earlier version of the

Plan, and thereafter made further amendments [T58 and T61], to arrive at the Plan

confirmed on May 24, 2013 [T71] (“Plan”). Though the Plan was materially

modified, no further confirmation hearing was held.

On May 16, 2013, the Bankruptcy Court issued its tentative confirmation

opinion. T64. Pursuant to court order, motions for reconsideration addressing

technical issues with the opinion, such as citations, were filed on May 21, 2013.

See T63:5661 (LL.4-20); T65, T66, and T67.

During the May 23, 2013 hearing on the limited-purpose motions for

reconsideration, the Bankruptcy Court ordered the Plan Supporters to file affidavits

demonstrating that none of the hundreds of non-debtor entities on Plan Exs. K and

L14 were limited partnerships, which cannot qualify for § 524(g) protection.

T76:6230 (L.7) – 6232 (L.7). The Plan Supporters filed defective affidavits on

May 24, 2013, and hours later the Bankruptcy Court issued its final opinion on

confirmation (“Bankruptcy Court Opinion”), the confirmation order, order on the 14 Plan Exs. K and L [T61:5591-5610] list the hundreds of non-debtor affiliates of Corning and PPG, respectively, slated to receive the protections of the Injunction. Many of these entities are not insureds under the Mt. McKinley policies.


12

motions for reconsideration of the interim ruling, order denying Mt. McKinley’s

2011 Motion for Reconsideration, and order denying Mt. McKinley’s CMO

Motion. T71-T75, respectively.

Despite having previously admitted the Garlock Exhibits at the 2010

confirmation hearing, the Bankruptcy Court re-examined the admission of these

exhibits showing improper conduct and excluded them on a number of bases,

including objections first raised in the Plan Parties’ post-trial brief.

Judge Fitzgerald retired one week later, and the case was reassigned to Judge

Agresti. On June 6, 2013, Mt. McKinley filed a motion for reconsideration. T77.

On November 12, 2013, the Bankruptcy Court entered its opinion and order

granting in part and denying in part Mt. McKinley’s motion for reconsideration.

T80, T81.

Mt. McKinley appealed to the District Court. The District Court treated the

Bankruptcy Court’s opinion on confirmation as a report and recommendation,

reviewing its factual findings de novo. The District Court held that Mt. McKinley

lacked bankruptcy standing and denied Mt. McKinley’s substantive objections as

moot. On September 30, 2014, the District Court entered its opinion and order on

confirmation, adopting, as supplemented by its contemporaneously issued opinion,

the Bankruptcy Court’s findings and conclusions. On October 29, 2014, Mt.

McKinley filed its notice of appeal to this Court.


13

STANDARD OF REVIEW

This Court “review[s] the District Court’s conclusions of law de novo, its

factual findings for clear error, and its exercise of discretion for abuse thereof.” In

re Combustion Eng’g, Inc., 391 F.3d 190, 214 (3d Cir. 2004).

The lower court’s decision regarding standing is a legal conclusion subject

to de novo review. GIT at 209.

SUMMARY OF ARGUMENT

This appeal centers on efforts by PPG and Corning, the two publicly-traded

parent companies that co-own PCC, to cleanse themselves and hundreds of their

affiliates of asbestos liability. PPG and Corning seek the protections of § 524(g)

without subjecting themselves or their affiliates to the rigors of the bankruptcy

process.

To achieve their goals they reached a deal whereby, in exchange for the

plaintiffs’ bar delivering the votes necessary to confirm the plan under § 524(g),

invalid claims would be paid under a veil of secrecy by a trust controlled the

asbestos plaintiffs’ bar. PPG and Corning, for their part, were willing to contribute

substantial sums to a trust so long as they and their hundreds of current or future

affiliates would be protected by the Injunction, and were allowed to structure the

Plan to facilitate recovery of their trust contributions from their insurers.


14

The lower court erred in holding that Mt. McKinley lacked standing to

object to the Plan. Mt. McKinley insured PPG and Corning, the non-debtor co-

owners of PCC, who are already suing Mt. McKinley to recover a portion of the

contributions they agreed to make under the Plan in exchange for § 524(g)

protection for themselves and hundreds of their affiliates. The Plan facilitates PPG

and Corning’s ability to do that, including by making claims information

confidential and requiring the trust to resist discovery of that information. This

harms Mt. McKinley because it requires Mt. McKinley to litigate with the trust to

get information that is critical to its rights and defenses and that it is contractually

entitled to under its policies. That burden is far more than a “trifle” injury, giving

Mt. McKinley standing to object to the Plan. GIT at 210.

The Plan harms Mt. McKinley and runs afoul of § 524(g) in other ways. It

extends the Injunction to hundreds of non-debtors, many of whom Mt. McKinley

does not insure. The evidence shows that most of these non-debtors have no

asbestos liabilities that can be channeled. For example, more than a hundred of the

PPG affiliates protected by the Injunction were acquired by PPG in a transaction

that occurred eight years after the Debtor filed its bankruptcy petition and more

than 35 years after the Debtor stopped producing Unibestos, the asbestos product

that led to its bankruptcy. This harms Mt. McKinley because it adds to Mt.


15

McKinley’s burden in assessing whether valid claims are being paid on behalf of a

covered entity.

Mt. McKinley was denied discovery regarding how this Plan was

negotiated—which is needed for a fully developed record—on the basis that it

lacked standing and that such discovery was irrelevant. The lower court erred

because the impairment of Mt. McKinley’s policy rights extends far beyond the

trifle required for bankruptcy level standing, and fraud and collusion in the

development of a plan is clearly relevant. Such discovery is at least relevant to the

good faith inquiry because collusive plans are not proposed in good faith as a

matter of law.

Moreover, denial of discovery is contrary to the holding in GIT. In GIT, this

Court held, inter alia, that insurers who demonstrated even a trifle of injury have

standing to pursue discovery and present the Bankruptcy Court with a full and

complete record in support of plan objections. Even though the GIT plan

contained so-called Combustion Engineering “neutrality” language purportedly

preserving insurers’ coverage defenses—as Appellees contend this Plan has—this

Court nevertheless held that insurers were entitled to discovery supporting their

allegations that the GIT plan was the product of collusion—because it paid invalid

and possibly fraudulent claims—so they could present their objections on a full

and complete record.


16

Not only was Mt. McKinley denied discovery necessary to present a full

record at confirmation concerning collusion, the Bankruptcy Court denied even the

limited discovery it had previously allowed. Prior to June 2010, the Bankruptcy

Court allowed limited discovery on how the Plan was intended to operate. But

from the June 2010 confirmation hearing until the May 2013 confirmation opinion,

numerous and substantial changes were made to the Plan with no discovery

allowed.

Further, it was error for the Bankruptcy Court, without a confirmation

hearing and nearly three years after the close of evidence, to sua sponte reconsider

the 2010 admission of exhibits showing clear fraud by claimants’ counsel who cast

thousands of votes on the Plan by master ballot, to exclude them from evidence.

At the same time, the Plan Parties were allowed to unilaterally supplement the

evidentiary record to cure fatal defects by tendering defective affidavits mere hours

before the Bankruptcy Court’s confirmation opinion was issued. These erroneous

rulings, which were adopted by the District Court, denied Mt. McKinley the ability

to present a full evidentiary record concerning the Plan, as required by binding

precedent, including GIT.

As set forth below, this Court should reverse because the Plan is fatally

flawed in numerous ways, including inter alia that it pays invalid and fraudulent

claims, was not proposed in good faith, contains an overbroad injunction that


17

impermissibly channels non-derivative liabilities, is not “insurance neutral,” and

was confirmed through an inherently flawed and collusive process in which Mt.

McKinley was denied even a pretense of due process.

ARGUMENT

1. The lower court’s standing ruling is error as a matter of law.

There are two types of standing: bankruptcy/trial level standing and

appellate standing. Only the first is implicated here. The lower court erroneously

held Mt. McKinley lacked bankruptcy level standing and denied Mt. McKinley’s

objections as moot. Dist. Dkt. 81 at 32. As demonstrated below, Mt. McKinley

satisfies the low bar for bankruptcy level standing by demonstrating more than a

trifle injury. Thus, remand is the appropriate remedy since the District Court has

not assessed Mt. McKinley’s objections on their merits.

This Court reviews the Bankruptcy Court’s assessment of Mt. McKinley’s

standing de novo. GIT, 645 F.3d at 209. Standing to object to a plan of

reorganization requires a party to (i) demonstrate an “injury in fact,” (ii) traceable

to the challenged action, that is (iii) “likely to be redressed by a favorable

decision.” GIT at 210, (internal cites omitted).

As to the first factor, this Court’s observation that “[i]njury-in-fact is not

Mount Everest” is apropos. Danvers Motor Co., Inc. v. Ford Motor Co., 432 F.3d

286, 294 (3d Cir. 2005), citing Bowman v. Wilson, 672 F.2d 1145, 1151 (3d


18

Cir.1982) (“The contours of the injury-in-fact requirement, while not precisely

defined, are very generous,” requiring only that claimant “allege [ ] some specific,

‘identifiable trifle’ of injury”). An increase in administrative burdens and costs is

plainly sufficient. In GIT, the insurers had standing because the GIT plan created

“an entirely new set of administrative costs, including the investigative burden of

finding any meritorious suits in the haystack of potentially fraudulent ones. Those

costs will be enormous, even if [the insurers] never pay a single dollar of

indemnity.” GIT at 214.

Mt. McKinley easily satisfies this threshold inquiry because the Plan harms

Mt. McKinley in a number of ways.

a. The Plan harms Mt. McKinley by impairing its contractual rights.

The Plan impairs Mt. McKinley’s contractual rights to its insureds’

assistance in resolving valid claims for the lowest possible amount, as well as their

cooperation in providing information about claims submitted for payment under

the terms and conditions of their policies. Indeed, the Plan actually erects new

barriers to obtaining claims information.

Under its policies, Mt. McKinley has the contractual right to the Plan

Supporters’ “fullest cooperation and assistance” in obtaining claims information.15

15 T132:7880, 7884 (Policy No. GMX 00516); accord, T132:7889, 7891 (GMX 00993, § V); T132:7856, 7876-77 (GMU 00036, § VII.D); T132:7903, 7908 (PMX 00203, § V); and T132:7894, 7895 (PMX 00038, § V); T131;7817.3


19

Such clauses unambiguously impose duties on the insured to assist its

insurer by providing relevant documents in its possession concerning allegedly

covered claims. See Med. Protective Co. v. Bubenik, 594 F.3d 1047, 1052 (8th Cir.

2010). Mt. McKinley put forward evidence of these rights pre-petition. For

example, PPG’s Rule 30(b)(6) witness testified that when PPG handled asbestos-

related claims in the tort system, PPG involved its insurers, cooperated with its

insurers in handling and defending the claims and sought the insurers’ input as

required by the terms of the underlying insurance policies. T134:8226-27 (p.155,

L.14-p.156, L.2).16 Similarly, Corning regularly consulted with its carriers pre-

petition regarding the defense of its claims.17 The Plan and TDP strip away these

rights by preventing Mt. McKinley from participating in the handling, defense and

settlement of asbestos-related claims being channeled to the trust. This framework

presents a significant change in the way such claims are handled and eviscerates

Mt. McKinley’s bargained-for rights under its policies, which, in turn, impairs Mt.

McKinley’s pecuniary interests and imposes significant new administrative

burdens.

(GMX 00670); T131:7782, 7786 (DXC DX 0262); and T130:7671, 7673 (DXC DX 1505). 16 This included providing Mt. McKinley information about claims without issuances of a subpoena. T134:8226-27 (p.155, L14-p.156, L2). 17 T11:1054 (LL.8-18) (Eggers); T13:1588-89 (p.170, L.4 – p171, L.11) (Black).


20

Instead of obtaining needed claims information from its insureds, who are

contractually obligated to provide it, the Plan creates significant barriers. Mt.

McKinley must seek claims information from the trust, who pursuant to TDP § 6.5

is required to treat claims information as confidential and resist efforts by parties

such as Mt. McKinley to obtain that information. T56:4948. To obtain documents

concerning the coverage claims at issue, Mt. McKinley will be required to take a

number of actions it was not required to take pre-petition, including, at least:

retaining counsel to seek claims information,18 filing a lawsuit,19 directing its

lawyer to issue and serve document subpoenas, including related service costs, and

then incurring fees and expenses compelling production of documents from the

third-party trust, which is obligated by the plain language of § 6.5 of the TDP to

forcefully resist discovery. These are substantial administrative burdens and costs

to obtain documents that the Plan Supporters were contractually obligated to

provide in support of their coverage claims upon mere request absent the

18 See Rowland v. California Men's Colony, Unit II Men's Advisory Council, 506 U.S. 194, 201-02, (1993) (“a corporation may appear in the federal courts only through licensed counsel”). 19 Subpoenas are discovery devices which, by their very nature require an enforcing authority. See e.g., 9A Alan Wright, et al., Fed. Prac. & Proc. Civ. § 2451 (3d ed.).


21

bankruptcy. In fact, this same provision has been used by other § 524(g) trusts to

resist production of information about claims submissions.20

For example, in five adversary proceedings filed in § 524(g) cases before the

Bankruptcy Court in Delaware,21 § 524(g) trusts, trust advisory committees, and

future claimants’ representatives filed complaints against a number of defendants,

including insurers, contending that § 6.5 in those cases insulated them from having

to comply with or even oppose such discovery. These five trusts took the position

that § 6.5 should be interpreted to permit discovery only of a single claimant and

then only in the context of an actual personal injury lawsuit – not coverage

litigation where such information is critical.22 These trusts sought to bar insurers

from obtaining information about multiple claimants and contended that

20 See also, In re Western Asbestos Co., 416 B.R. 670 (N.D.Cal. 2009) aff’d sub nom. Renfrew v. Hartford Acc. & Indem. Co., 406 F.App’x 227 (9th Cir. 2010) (despite audit provision in the settlement agreement approved in connection with confirmation, § 524(g) trust refused to disclose information supporting claims made to the trust embroiling the insurers in a lengthy and costly series of litigation and appeals). In a declaratory judgment action filed by the Brauer Supply Company 524(g) Asbestos Personal Injury Trust against insurers, the trust refused to produce almost all of its documents on the basis that information about asbestos claims paid by the trust were “confidential.” T52:4030-4054 and 4055-4082. 21 ACandS Asbestos Settlement Trust, et al. v. Hartford Accident Indemnity Co., et al., Adv. No. 10-53702 (In re ACandS, Inc.), Adv. No. 10-53721 (In re Specialty Products Holding Corp.), Adv. No. 10-53719 (In re Kaiser Aluminum Corp.), Adv. No. 10-53720 (In re Owens Corning), and Adv. No. 10-53712 (In re USG Corp.), U.S. Bankruptcy Court for the District of Delaware. T54:4757-4782. 22 T54:4773 at ¶¶ 50-51 and 4777, at ¶¶ 71-73.


22

production of such information was “antithetical to the spirit of the Trusts’

charge.” T54:4773 (¶ 51).

While each of these adversary complaints were ultimately dismissed,23

defending even meritless litigation creates costs which did not exist pre-petition

and, moreover, would not exist but for the structure of this Plan and the TDP. This

harm gives Mt. McKinley standing under GIT. 645 F.3d at 213-214. Indeed, as

Judge Abelman explained, and as the Garlock decision showed, the payment of

these claims in secrecy leads to fraud and payment of invalid claims, claims for

which Mt. McKinley is being asked by its policyholders to also pay.

Indeed, widespread abuse of similar confidentiality provisions has resulted

in a number of states enacting laws compelling asbestos claimants to disclose their

efforts to secure compensation through § 524(g) trusts, with additional legislation

proposed at the federal level.24

23 See T140, In re ACandS, Inc., 2011 WL 744913 (Bankr. D.Del.2011) (dismissing the complaint as to all plaintiffs but the ACandS Trust) and T141, In re ACandS, Inc., 2011 WL 3471243 (Bankr. D.Del. 2011) (dismissing the complaint as to ACandS). 24 See Ohio Rev. Code §§ 2307.951 to 2307.954; Okla. Stat. Ann. tit. 76, §§ 81-89; Wis. Stat. Ann. § 802.025. Similar legislation has been introduced in Illinois, Indiana, Louisiana, Pennsylvania, South Carolina, Texas, and West Virginia. H.B. 0153, 99th Sess. (Ill. 2013); H.B. 1400, 119th Sess. (Ind. 2015); H.B. 477, 2012 Leg., 38th Reg. Sess. (La. 2012); H.B. 1150, Sess. 2013-2014 (Pa. 2013); S. 281, Sess. 121, 2015-2016 (S.C. 2015); H.B. 2034, 82d Leg. (Tex. 2011); S.B. 1202, 82d Leg. (Tex. 2011); S.B. 43 & 56, 80th Leg., Reg. Sess. (W.Va. 2011). Similar legislation has been proposed at the federal level. See H.R. 526, the Furthering Asbestos Claim Transparency (FACT) Act of 2015.


23

Additionally, the evidence shows that instead of consulting with insurers, the

Plan provides that claims will be handled solely by the trust, which is required to

consult only with the Trust Advisory Committee (“TAC”), comprised of asbestos

plaintiffs’ lawyers, and the FCR “on the general implementation and

administration of the [A]sbestos PI Trust.”25 Unlike the Plan Supporters’ pre-

petition policy obligations, the trust will not consult with insurers and has

absolutely no duty and no incentive to cooperate with and assist Mt. McKinley.

T12:1352 (LL.1-11 (Fitzpatrick)). In fact, as shown above, the trust has a duty not

to cooperate with Mt. McKinley.

There is no evidence to support the Bankruptcy Court’s finding at ¶¶ 479

and 480 of the bankruptcy court’s opinion [T71:6177] that § 6.5 of the TDP is not

intended to and has no effect on Mt. McKinley’s contract rights. The Bankruptcy

Court erred in assuming the Confirmation rulings are without legal effect. To the

extent the Bankruptcy Court meant that Mt. McKinley is not harmed because it

may have a legal remedy for the impairment of its state law created contract right,

the Bankruptcy Court erred by conflating legal remedies. That Mt. McKinley may

also have a coverage defense based on the Plan Supporters’ agreement to abrogate

their contractual duties to cooperate with their insurers, does not mean the

Bankruptcy Code permits impairment of these property rights absent Mt. 25 T12:1351(LL.6-10) (Fitzpatrick). See also T12:1412 (LL.8-16) (Fitzpatrick).


24

McKinley’s consent. Indeed, the Bankruptcy Court’s findings are in conflict with

its prior acknowledgement that being free to assert a coverage defense is not the

same as being able to assert that defense unimpaired. T36:2597 (LL.15-19).

b. Mt. McKinley is harmed by coverage-related findings not required by the Bankruptcy Code.

The lower court erred in confirming a Plan that contains numerous findings

that the Plan Parties admitted were not necessary for confirmation but are intended

solely to facilitate recovery of the Plan Supporters’ respective trust contributions

from Mt. McKinley in pending coverage litigation. For example, the Plan contains

findings intended to establish the Plan Supporters’ liability for the asbestos claims

to be paid under the TDP and the reasonableness of their respective trust

contributions in satisfaction of those liabilities. These include, inter alia, findings

that the Debtor, PPG, and Corning are “liable” to holders of the channeled asbestos

claims and demands, and that the Plan is a “fair” and “reasonable” “settlement” of

that liability. See, e.g., T56:4852-54 (Plan §§ 8.1.15, 8.1.17, 8.1.22, 8.1.26,

8.1.32); T56:4920 (TDP § 1.1).

As developed infra, the lower court impermissibly denied discovery into the

negotiation and formulation of the Plan. T8:0632 (LL.9-20); Dist. Op. at 25-26.

Inquiry into whether the Plan Supporters’ contributions were “fair and reasonable,”

“reasonable settlements,” or made in “good faith” was precluded by the lower


25

court.26 This error resulted in the lower court making these findings on an

incomplete record.

c. The Plan and TDP harm Mt. McKinley by inflating the Plan Supporters’ liabilities and increasing Mt. McKinley’s risk and exposure beyond what exists outside the Plan.

The Plan allows payment of non-compensable and fraudulent claims. This

harms Mt. McKinley because the Plan Supporters will rely on the lower court’s

confirmation rulings to establish that such liabilities are valid when seeking

insurance coverage.

In coverage litigation, the Plan Supporters will argue that unimpaired

claimants have valid and reimbursable claims under the Plan, regardless of state

laws barring such claims, because the lower court approved the TDP as complying

with all the provisions of the Bankruptcy Code. To recover their trust

contributions, the Plan Supporters will need to establish that they are entitled to

coverage on a lump sum or claim-by-claim basis. Either way, they will rely on the

Plan, the TDP and the fact of confirmation to support their claims.

If Plan Supporters seek to recover their trust contributions on a lump sum

basis, they will use the TDP to substantiate their total aggregate contributions,

arguing that otherwise non-compensable claims are valid and reimbursable claims 26 See T6:0508-09 (¶10) (denying discovery into whether Corning was overpaying the Trust because “such discovery concerns an issue that is not relevant…[t]his Court need not and will not address that issue in connection with the plan confirmation process in this case.”). See also, T157.


26

under the Plan because they were paid pursuant to the Court-approved TDP, which

were found to be “reasonable,” “fair,” “equitable,” and otherwise in compliance

with all the provisions of the Bankruptcy Code.

Significantly, unlike other 524(g) plans, this Plan does not purport to

preclude the Plan Supporters from seeking a UNR result27—i.e., that confirmation

of the Plan is a judgment adjudicating the Plan Supporters’ aggregate liability, and

that the Plan Supporters’ contributions are “proper” and a legitimate basis to

exhaust underlying coverage and expose Mt. McKinley’s policies.28 The more

claims that are paid by the trust, the more “reasonable” their contributions appear

because the liabilities are inflated for insurance coverage purposes. Accordingly,

the lax claims criteria will be used in coverage litigation to improperly substantiate

the reasonableness of the Plan Supporters’ total contributions.

Alternatively, if the Plan Supporters seek to recover from Mt. McKinley on

a per-claim basis, they will rely on the TDP to substantiate their coverage claims,

arguing that such claims, valid or otherwise, were allowed and paid pursuant to

Court-approved procedures. Either way, the Plan and TDP harm Mt. McKinley by 27 E.g. UNR Indus. v. Continental Cas. Co., 942 F.2d 1101 (7th Cir. 1991), In re Federal Mogul Global, Inc., et al., case no. 01-10578, in the United States Bankruptcy Court for the District of Delaware and T H Agriculture & Nutrition, L.L.C., case no. 08-14692, in the United States Bankruptcy Court for the Southern District of New York. 28 The Bankruptcy Court promised insurers that the Plan would not allow for a UNR result. See T238:16718 (LL. 8-9) (“you’re not getting a UNR result here.”). Despite this promise, the Plan allows for this result.


27

giving Plan Supporters a decidedly unfair advantage in coverage litigation, and that

is contrary to the purposes and objectives of the Bankruptcy Code.

d. The Plan harms Mt. McKinley by including hundreds of non-debtors within the scope of the Injunction.

The Plan extends § 524(g) protection to hundreds of non-debtors affiliates of

the Plan Supporters, many, if not most, of whom Mt. McKinley does not insure

and many of whom likely do not have asbestos liability that can be channeled.

This harms Mt. McKinley because it imposes new administrative burdens and

associated costs to do something that the Plan Supporters were obligated to do in

the first instance: establish that a particular claim or liability is covered under the

terms and conditions of the policies—or to borrow from GIT, to find meritorious

claims in a haystack of potentially invalid ones.

Through the use of defined terms, the Plan impermissibly expands the scope

of the Injunction to include hundreds of non-debtors, only a few of which have any

connection with asbestos claims. See Plan Exhibits K and L [T61:5591-5610]

identifying hundreds such entities, including enormous entities – like Dow Corning

Corporation [T61:5593] with an adjusted net income of $613 million for 2011 on

sales of $6.43 billion.29 See also Plan Exhibit L identifying more than 200 such

entities identified by PPG [T61:5595-5610]. More than half of these were entities

29 This evidence was submitted to and considered by the lower court. See T59:5484 (¶417).


28

acquired by PPG from Bain Capital as part of the SigmaKalon transaction

completed in January 2008,30 nearly eight years after Debtor filed bankruptcy and

are, therefore unlikely to have derivative asbestos liability that can be channeled.

The Plan Parties, as proponents of the Plan, “[bore] the burdens of both

introduction of evidence and persuasion that each subsection of § 1129(a) has been

satisfied.” 7 Lawrence P. King, Collier on Bankruptcy, ¶ 1129.02[4] at p. 1129-22

[15th ed. 2006]. One of § 1129(a)’s requirements, of course, is that “[t]he plan

complies with the applicable provisions of this title.” 11 U.S.C. § 1129(a)(1).

The Plan Parties failed to meet their burden to prove it is fair and equitable

to include these hundreds of non-debtor affiliates as protected parties under the

Injunction “in light of the benefits” they provide to the trust and that such entities

have been alleged to have derivative liability. 11 U.S.C. § 524(g)(4)(A)(ii), (B)(ii).

Plan Supporters contend they are making contributions on behalf of these hundreds

of non-debtors but failed to specify what portion, if any, of the respective trust

contributions are being made on behalf of each of these entities. Without such

evidence the lower court erred in finding31 that the Plan complied with §

524(g)(4)(A)(ii) and (B)(ii).

30 T59:5462-5463 (¶321) and T59:5489-5566 (PPG’s Form 8-K/A filed 2/29/2008). 31 See, e.g. T71:6155-58 (¶¶378, 389) and T71:6169-70 (¶¶462, 463, 465), which findings were adopted by the District Court at Dist. Dkt. 82 at ¶4, p.2.


29

This is also harm that gives Mt. McKinley standing. As GIT recognized, an

increase in administrative costs and burdens affords Mt. McKinley standing, even

if Mt. McKinley never pays a single dollar of indemnity. GIT, 645 F.3d at 214.

Because the Plan fails to indicate what contributions are being made on behalf of

each of the Plan Supporters’ related entities, Mt. McKinley may never be able to

establish in coverage litigation what part, if any, of the contributions were made on

behalf of entities it did not insure. This impairs Mt. McKinley’s rights under its

policies and puts Mt. McKinley at risk of being required to pay claims that are not

covered under the Policies. These harms were set out in detail Mt. McKinley’s

briefing in the lower court. E.g., Dkt. 56 at 45-55. Thus, the District Court

committed clear error in finding that Mt. McKinley “offered no explanation” for

how the Plan alters its burdens. Dist. Op. at 31.

Moreover, although the Bankruptcy Court purported to assess Mt.

McKinley’s objections on the merits as an alternative basis for its ruling, the

District Court did not adopt that portion of the Bankruptcy Court’s opinion. Dist.

Op. at 12. Instead, upon concluding that Mt. McKinley lacked standing, the

District Court dismissed Mt. McKinley’s objections as moot and, therefore, did not

consider them on the merits. Id. at 32.

Accordingly, this Court should not assess Mt. McKinley’s objections on the

merits because: (i) doing so would be premature as those objections have not yet


30

been addressed below on the merits; and (ii) as in GIT, the lower court’s error

leaves this Court without a complete record from which to assess the merits of Mt.

McKinley’s objections, which should only be considered after Mt. McKinley has

been provided “a full opportunity to present evidence and argument.” GIT at 215.

Likewise, it is premature to address whether Mt. McKinley has appellate standing

because the lower court’s disposition on remand may alter the analysis. GIT at

215; see also, n.36.

The only issue properly before this Court is whether Mt. McKinley

demonstrated a trifle injury which would afford it bankruptcy standing to object to

the Plan. However, demonstrating how Mt. McKinley is harmed and, thus why the

lower court erred, requires a discussion of the harms caused by the Plan and the

impact of errors affecting the process.

e. The lower court erred in denying Mt. McKinley’s right to oppose confirmation of a Plan under § 1129.

Section 1109(b) provides that “[a] party in interest…may raise and may

appear and be heard on any issue in a case under this chapter.”

As discussed infra, the lower court denied Mt. McKinley discovery into Plan

negotiations on the erroneous basis that such issues could not impact insurers.

This is error because it misconstrues the good faith requirement and because it

impermissibly limited Mt. McKinley’s statutory right to object to the Plan as a

party in interest. Mt. McKinley has unquestionably demonstrated more than an


31

“identifiable trifle of injury” as required for party in interest standing. See GIT at

210.

The lower court denied Mt. McKinley the full rights of a party in interest to

oppose confirmation and committed reversible error by denying Mt. McKinley the

opportunity to take discovery to support its objections and to present evidence at a

supplemental confirmation hearing in support of those objections, including

evidence of collusion which did not arise until June 9, 2010.

2. The lower court erred in confirming a Plan that does not comply with §§ 524(g) and 1129 of the Bankruptcy Code.

The lower court’s error in denying Mt. McKinley standing was compounded

by other errors. Significantly, the lower court applied the wrong legal standard in

assessing whether the Plan was proposed in good faith as required by § 1129(a)(3),

erroneously concluding that evidence of collusion in the development of the Plan

was irrelevant.

Section 1129(a)(3) requires a plan to be “proposed in good faith and not by

any means forbidden by law.” Instead of assessing the “totality of the

circumstances,” as required in this Circuit, the lower court conducted a much more

narrow review.

This Court has adopted the Seventh Circuit’s definition of “good faith” set

out in In re Madison Hotel Associates, 749 F.2d 410, 425 (7th Cir. 1984). In re

Abbotts Dairies of Pennsylvania, Inc., 788 F.2d 143, 150 n.5 (3d Cir. 1986).


32

The Plan Parties argued below that this Court only partially adopted the

Madison Hotel standard, thus limiting its good faith inquiry to the plan language

and the objectives and purposes of the Bankruptcy Code. Dkt. 64 at 17 (“[i]n

nearly thirty years, the Third Circuit has never adopted Madison Hotel’s

‘confection’ analysis”). This narrow construction of Abbott Dairies is wrong.

In assessing good faith, “[t]he plan must be viewed in light of the totality of

the circumstances surrounding confection of the plan….” In re Madison Hotel,

749 F.2d at 425 (internal cites and quotes omitted); accord In re PPI Enterprises,

Inc., 324 F.3d 197, 211 (3d Cir. 2003), In re W.R. Grace & Co., 475 B.R. 34, 87

(D. Del. 2012), aff’d, 729 F.3d 332 (3d Cir. 2013), In re Sylmar Plaza, L.P., 314

F.3d 1070, 1074-75 (9th Cir. 2002), In re Vill. at Camp Bowie I, L.P., 710 F.3d 239,

247 (5th Cir. 2013), In re Piper Aircraft Corp., 244 F.3d 1289, 1300 (11th Cir.

2001). A recent decision from the Detroit bankruptcy describes the inquiry:

In one sense, the inquiry under § 1129(a)(3) is limited; in another sense it is broad. The Court’s focus must be on the plan itself. However, when considering the plan, courts consider the “totality of the circumstances,” and the court's own “common sense and judgment.” In re Okoreeh–Baah, 836 F.2d 1030, 1033 (6th Cir. 1988). It is thus an intensely fact-specific inquiry.

In re City of Detroit, No. 13-53846, 2014 WL 7409724, at *91 (Bankr. E.D.Mich.

2014). Indeed, a fact-specific inquiry is entirely consistent with this Court’s GIT

ruling requiring a more extensive review of the record.


33

The totality of the circumstances includes the negotiation process that yields

the plan. Indeed, “[s]ection 1129(a)(3) speaks more to the process of plan

development than to the content of the plan.” In re Quigley Co., Inc., 437 B.R.

102, 125 (Bankr. S.D.N.Y. 2010) (internal quotes and cite omitted).

In this Circuit, “[a]t its most fundamental level, the good faith requirement

ensures that the Bankruptcy Code’s careful balancing of interests is not

undermined by petitioners whose aims are antithetical to the basic purposes of

bankruptcy.” In re Integrated Telecom Express, Inc., 384 F.3d 108, 119 (3d Cir.

2004); see also In re W.R. Grace & Co., 475 B.R. at 88.

The lower court did not apply a “totality of the circumstances” test in

assessing good faith and denied discovery into the Plan negotiation process.

Instead, the lower court conducted a narrow review, limited to the language of the

Plan itself and evidence regarding the Debtor’s asbestos liabilities.32 Such a

limited review is insufficient as a matter of law.

Further, the lower court erred by assessing good faith under § 1129(a) on a

clearly deficient evidentiary record. That deficiency is unsurprising because Mt.

McKinley was denied critical discovery on the basis of standing and relevance.

Since the earliest days of this case, Mt. McKinley has raised concerns about

collusion in the formulation of the Plan and TDP, including collusion in the

32 T71:6145 (¶334), 6163 (¶¶424-428); Dist. Op. at 25-26.


34

development of overly lenient procedures to permit payment of invalid and

fraudulent claims in exchange for votes.33 Mt. McKinley and other insurers served

discovery requests to explore these concerns but no meaningful responses were

given. A motion to compel was filed. T7.

In response to that motion, the Bankruptcy Court refused to permit such

discovery, erroneously holding that, “whether or not there was collusion, I think, is

an irrelevancy as to somebody who isn’t injured by the outcome.” T8:677 (LL.3-

5); see also, Dist. Op. at p. 26, n.17 (“[t]he bankruptcy court was concerned about

the insurers’ standing to seek discovery about collusiveness.”).34 The Bankruptcy

Court reasoned, incorrectly, that “[p]roviding for invalid claims may go to the

issue of the standing to either object to ballots or object to claims, but I don’t know

how it goes to a bad faith issue under 1129…” T8:676 (LL.5-8).

33 See T178:11469-70. 34 The District Court’s observation that “standing was not the only reason” for the Bankruptcy Court’s denial of discovery into Plan negotiations since it “permitted discovery about issues of ‘good faith’ that did not delve into settlement negotiations,” emphasizes the Bankruptcy Court’s error. Mt. McKinley never asserted standing was the “only reason” it was denied discovery into Plan negotiations. Instead, Mt. McKinley devoted significant briefing to the Bankruptcy Court’s erroneous legal conclusions that its assessment of good faith under § 1129(a)(3) could be limited to the plan language alone and, therefore, that discovery into how the plan was negotiated was “an irrelevancy.” Dist. Dkt. 56 at 10-21.


35

The District Court likewise concluded that discovery into Plan negotiations

was irrelevant because it would not lead to admissible evidence. Dist. Op. at 25-

26. The District Court relied on Fed. R. Evid. 408 in holding that “discovery into

settlement negotiations was not warranted.” This is error because Rule 408 deals

with admissibility, not the scope of discovery which is governed by Fed. R. Civ.

Proc. 26. See Sippel Dev. Co., Inc. v. W. Sur. Co., 2007 WL 1115207 (W.D.Pa.

2007) citing, inter alia, Morse/Diesel, Inc. v. Fidelity and Deposit Company of

Maryland, 122 F.R.D. 447, 449 (S.D.N.Y.1988) (‘a party is not allowed to use

Rule 408 as a screen for curtailing his adversary’s rights of discovery’) (internal

citations omitted). Thus, the lower court erred in relying on Fed. R. Evid. 408 as a

basis for denying discovery into Plan negotiations.

According to the Bankruptcy Court, it did not “make any sense” that parties

who started off as adversaries would collude in the development of a plan. T8:674

(LL.11-17); see also, T8:674 (L.22) – 675 (L.11). Such a conclusion is error under

GIT where this Court reversed and remanded the case for more fulsome discovery

precisely because of the possibility of collusion among parties who were

previously adversaries. GIT at 214.

Similarly, the Bankruptcy Court rejected Mt. McKinley’s objection that the

Plan was not proposed in good faith because it was proposed primarily for the

benefit of plaintiffs’ attorneys and the Plan Supporters as a means to pay invalid


36

claims. T71:6143 (¶323). The Bankruptcy Court’s stated reasons for its decision

were: (i) the trust would be established to utilize the statutory framework

authorized by Congress in § 524(g) and (ii) the trust will be controlled by

“Trustees with fiduciary duties to Trust beneficiaries.” Id. (emphasis in original).

This reasoning is flawed, however, because it describes all § 524(g) plans and

means there can never be a collusive § 524(g) plan. In fact, the plans in GIT and

Am. Capital Equip. shared this same characteristic and failed to survive appellate

review.

Moreover, these rulings are error because, in this circuit, “collusive plans are

not in good faith and do not meet the good faith requirement of § 1129(a)(3).” In

re Am. Capital Equip., LLC, 688 F.3d 145, 158 (3d Cir. 2012), citing In re PWS

Holding Corp., 228 F.3d 242-43 (3d Cir. 2000) (proceeding with a good faith

analysis under § 1129(a)(3) where collusion was the only alleged basis for arguing

that the plan was not proposed in good faith). Both Am. Capital Equip. and GIT

involved § 524(g) plans. These cases make clear that § 524(g) does not trump §

1129(a)(3). “[T]he focus of 1129(a)(3) is upon the conduct manifested in

obtaining the confirmation votes of a plan of reorganization and not necessarily on

the substantive nature of the plan.” In re Sovereign Grp., 1984-21 Ltd., 88 B.R.

325, 328 (Bankr. D.Colo. 1988), citing 5 Collier on Bankruptcy, ¶ 1129.02 (15th

ed. 1984).


37

At the 2004 confirmation hearing, the debtor repeatedly attempted to

introduce evidence on the absence of collusion. T10:978 (L.9) – 982 (L.2).

Recognizing the unfairness of permitting the Debtor to put on evidence intended to

show the absence of collusion while relying on rulings denying insurers the

opportunity to test that assertion, the Bankruptcy Court refused to allow such

testimony. Rather than make its witness available for discovery on “good faith,”

the Debtor elected to abandon that line of questioning and instead relied solely on

the face of the Plan. Id. The Bankruptcy Court rejected a similar attempt by the

Plan Parties to submit evidence concerning negotiations at the June 2010

confirmation hearing when it refused to allow the FCR to testify about whether

there was “extensive give and take as part of [plan] negotiations.”35 The Plan

Parties again abandoned that effort. Id.

Thus, unlike W.R. Grace, where this Court affirmed the District Court’s

“factual conclusion that the Plan resulted from ‘years of litigation and extensive

arms-length negotiations,’”36 such evidence is absent here because, to avoid the

scrutiny that would have come with discovery, the Plan Parties made the strategic

35 T38:2732 (L.19) – 2734 (L.18). The Bankruptcy Court said, “I think I did not permit discovery into those issues, Mr. Harron [counsel for the FCR]. So, I’m not going to permit those areas to be inquired into.” T38:2734 (LL.1-3). 36 In re W.R. Grace & Co., 729 F.3d 332, 347 (3d Cir. 2013).


38

decision to present no evidence that the Plan was negotiated in good faith.37

Accordingly, the lower court conducted its good faith analysis without looking at

the totality of the circumstances, effectively with blinders on, seeing nothing of the

process that resulted in the Plan.

The Bankruptcy Court’s early discovery rulings became the Plan Parties’

touchstone to repeatedly stymie insurance carriers’ discovery efforts regarding the

various proposed plans, and those decisions left them unable to present evidence of

the Plan’s good faith. But the consistent denial of discovery is contrary to GIT. In

GIT, this Court held that insurers were entitled to have their objections addressed

on a fully developed record, including on issues of good faith and how and why the

plan was formulated and proposed, a right that was denied here. See GIT at 214-

215 & n.33. Equally important, the GIT Court ruled that even though the

bankruptcy court considered some of the issues and evidence presented by the

insurers, a more “searching review” of insurers’ objections was warranted on

remand. Id. at 215. In so ruling, this Court accepted the “logical proposition that a

party, granted standing and a full opportunity to participate, may add something

meaningful to the record on which the bankruptcy court is called to make a

decision.” Id. at n.33 (emphasis added). Like the insurers in GIT, Mt. McKinley

37 T10:978 (L.9) – 982 (L.2).


39

raised many meaningful and significant objections to the Plan, including

allegations going to the integrity of the bankruptcy process.38

Based on the Court’s decision in GIT, Mt. McKinley filed its CMO

Motion,39 seeking full discovery into areas previously foreclosed. T43, T44. Had

the CMO Motion been granted, Mt. McKinley would have had more than a year to

conduct discovery to review the “totality of the circumstances” on a fully

developed record before confirmation. Instead, the CMO Motion was held in

abeyance and ultimately denied based on standing on May 24, 2013, the day the

Bankruptcy Court issued its confirmation ruling. T75. For the reasons discussed

infra, this ruling was also error.

The District Court erred in finding that Mt. McKinley’s arguments for

discovery were based on “conjecture, and there is no evidence to implicate [sic]

that discovery would lead to admissible evidence.” Dist. Op. at 26. The scope of

discovery is determined by the allegations, not evidence. Fed. R. Civ. Proc.

26(b)(1). In the context of the motion to compel, those allegations were insurers’

objections to the Second Amended Plan which Mt. McKinley and other insurers

filed on January 23, 2004 [T178]. These preliminary objections, which included

38 See, e.g., T25:2228-2231 and T57:5307-5312. 39 Discovery in the bankruptcy case was governed by a series of case management orders issued through the years. See, e.g., T3, T6, T19, T24, T26, T27, T30, T33, and T79.


40

allegations that the Second Amended Plan was a product of collusion among the

Plan Parties [T178:11469-70], formed the basis for insurers’ arguments for

discovery at the February 19, 2004 hearing.

Even if evidence were necessary to justify discovery, which it is not, the

District Court still erred because Mt. McKinley presented evidence and not

conjecture. For example, insurers pointed to overly permissive trust distribution

procedures (“TDPs”) that allowed invalid and time-barred claims, including

approximately 104,000 time-barred Corning claims, and to Plan findings that

undermined coverage defenses. T8:676 (L.2) – 678 (L.7). When Mt. McKinley

asked the bankruptcy court in 2011 to reconsider its rulings denying discovery

based on GIT, Mt. McKinley again pointed, inter alia, to evidence that the Plan (i)

would pay invalid claims through the imposition of overly lenient TDPs; (ii)

lacked a mechanism for weeding out fraudulent claims; (iii) abrogated Mt.

McKinley’s policy rights by structuring the Plan to requiring Mt. McKinley to

obtain claims information from a hostile trust that is obligated to keep claims

information confidential; and (iv) contained findings that were unnecessary to

confirmation but were, based on testimony by the Plan Parties’ own witnesses,

intended to harm Mt. McKinley’s coverage defenses. See T44. And the more

recent Garlock evidence is even more compelling in requiring a more fully


41

developed record. Accordingly, the District Court erred in finding that Mt.

McKinley’s arguments for discovery were based solely on conjecture.

In GIT, the Court held that the Bankruptcy Court’s failure to afford insurers

standing and a full opportunity to present evidence and argument left the Court

with a deficient record. See GIT at 215. So too here, the Bankruptcy Court’s

erroneous rulings on standing impaired Mt. McKinley’s ability to take discovery.

As a result, the Court is left with a deficient record.

a. Mt. McKinley was improperly denied deposition discovery.

Mt. McKinley’s efforts to obtain critical evidence were frustrated by the

Plan Parties repeatedly instructing their witnesses not to answer questions based on

the Bankruptcy Court’s “plan negotiations” rulings. For example, PCC instructed

its General Counsel to not answer insurers’ questions regarding the nature, extent

and scope of plan negotiations in connection with whether the Plan was proposed

in good faith and questions regarding the non-debtor releases contained in the

Plan.40

Similarly, Corning’s 30(b)(6) witness was instructed not to answer questions

regarding why certain findings were put into the Plan, why “collateral estoppel”

language was added to certain findings in the Plan but not others, why Corning, a

non-debtor, wanted certain insurance reservations in the Plan, whether Corning

40 T133:8071 (p.195, L.16) – 8072 (p.196, L.19).


42

required releases for all of its affiliated entities as a condition to supporting the

Plan, and questions regarding the operation of the trust and TDP.41 Corning’s

witness was instructed, based on “plan negotiations” to not answer questions

regarding the extent to which asbestos-claimants’ attorneys may have pressured

Corning to become a Plan Supporter, whether Corning had input into the scheduled

values for claims under the TDP, whether plaintiff-attorney members of the ACC

used coercion or threats to exclude Corning from participating in drafting the TDP,

and whether the ACC members otherwise forced Corning to accept whatever terms

the ACC proposed.42

The depositions of PPG’s 30(b)(6) witness were no different. When Mt.

McKinley asked about PPG’s input in the procedures that the trust would use to

review and process claims—questions this Court found relevant in GIT —the

witness was instructed not to answer based on “plan negotiations.”43 When Mt.

McKinley inquired about the scope of non-debtor releases claimants who settle

their claims with the trust would have to sign,44 that inquiry was likewise blocked.

T134:8211 (p.137, LL.4-22).

41 T135:8257 (p.66, L.4 – p.67, L.6), 8259 (p.73, LL.6-13), 8260 (p.79, LL.12-15), 8304 (p.254, L.20 – p.255, L.7), 8307 (p.265, L.7 – p.266:5). 42 T136:8367 (p.56, L.14 – p.57, L.17), 8372 (p.76, L.18) – 8373 (p. 78, L.2). 43 T134:8223 (p.151, LL.16-22). 44 Specifically, this inquiry focused on the provisions of Schedule L to the PPG Trust Funding Agreement, which is entitled “Pittsburgh Corning Corporation


43

In short, the Plan Parties used the Bankruptcy Court’s discovery rulings to

prevent discovery needed to assess the “totality of the circumstances,” including

potential collusion, coercion and self-dealing in drafting and proposing the Plan—

issues clearly relevant to good faith under GIT.

b. Mt. McKinley was improperly denied written discovery.

The Plan Parties’ responses to written discovery fared no better. They

asserted “plan negotiation” and standing objections to nearly all written discovery.

The ACC asserted these objections in refusing to produce documents relating to

any investigation undertaken by it to determine whether the TDP Claim Criteria

were sufficient to ensure that only legally compensable claims are paid.45

Likewise, the ACC refused to produce documents concerning whether the

TDP were based on appropriate and accepted medical and legal standards or based

on historical costs of settling and resolving such claims.46 These, too, were proper

areas of inquiry under GIT. The Bankruptcy Court erred in denying this discovery,

and its rulings precluded Mt. McKinley from presenting its objections on a full and

complete record on these issues.

Asbestos Personal Injury Trust Release and Indemnity Agreement” and appears to require releases broader than described in the main release provisions of the Plan. T56:5119-5135. 45 T110:7086-7087 (Response to RFP No. 47). 46 T110:7087-7088 (Response to RFP No. 48).


44

The ACC also refused to respond to requests for admissions concerning

whether the TDP allow for payment of non-compensable claims, including claims

diagnosed by doctors that have been banned by other asbestos trusts.47 These are

issues this Court found relevant in GIT to whether a plan increases the quantum of

liability that insurers are called to bear. See GIT at 207-208.

The ACC and PPG were by no means alone in refusing to provide adequate

responses. None of the Plan Parties provided meaningful responses, asserting

standing and “plan negotiations” as a basis for their refusal to provide discovery.48

47 See T109 (responses to RFA Nos. 24, 27, 29, 31, 33, 35, 37, 39, 41, 42, 44, 46, and 48-71). See T44:3570-3575 (December 11, 2009 correspondence asserting standing as basis for refusing to respond to these discovery requests). 48 All of the Plan Parties objected to MMIC’s First Set of Discovery Requests based on the Bankruptcy Court’s prior ruling regarding plan negotiations. See Plan Parties’ responses to Requests for Admission [ACC (T109), FCR (T112), Debtor (T113), PPG (T114, T118)], Requests for Production [ACC (T110)] and Interrogatories [ACC (T111)] at General Obj. 4 (exemplar at T109:7019); Corning’s (T115:7214) responses to Requests for Admission at General Obj. “L.” These requests included numerous inquiries regarding the purpose and effect of Plan provisions and the TDP – including whether the TDP allowed for the payment of claims based on diagnoses of doctors banned by other asbestos trust. Likewise, the Plan Parties’ responses to MMIC’s Second Set of Discovery Requests were all subject to general objections based on the Bankruptcy Court’s ruling regarding Plan negotiations. See PPG’s, FCR’s, and Debtor’s (T119-T121, respectively) responses at General Obj. 4 (exemplar at T119:7335); ACC’s (T122:7386) responses at General Obj. 5; and Corning’s responses (T123:7408-7409, T124:7455) at General Obj. “Q.” Finally, the Plan Parties’ responses to MMIC’s Third Set of Discovery Requests were “subject to” a general objection based on the Bankruptcy Court’s prior ruling on Plan negotiations. See, Debtor’s responses (T125:7488) at General Obj. No. 4. The other Plan Proponents asserted similar objections. See, FCR’s (T126:7521, T129:7631), ACC’s (T127:7562), and PPG’s (T128:7599-7600) responses to MMIC’s Third Set of Discovery Requests at


45

Assessing the process that leads to the development of a plan is part and

parcel of the good faith inquiry under § 1129(a)(3) and fits squarely within the

required totality of the circumstances review. The lower court erred in concluding

the Plan complied with the good faith requirement of § 1129(a)(3) because it failed

to consider the totality of the circumstances. It was unable to do so because the

Bankruptcy Court’s erroneous discovery rulings prohibited the development of a

full and complete evidentiary record. The District Court likewise erred when it

affirmed these rulings.

c. Mt. McKinley was improperly denied discovery into how the Plan is intended to operate.

Moreover, the record is deficient because the erroneous rulings on standing

by the lower court impaired Mt. McKinley’s ability to take discovery into how the

Plan operates, further resulting in an incomplete record.

After the Bankruptcy Court denied confirmation of the Plan on June 16,

2011, the Plan was amended numerous times in an attempt to cure the defects

identified in the Bankruptcy Court’s opinion denying confirmation.49 Despite

numerous requests,50 the Bankruptcy Court precluded Mt. McKinley from taking

General Obj. 5. 49 T47, T50, T58, and T61. 50 See, e.g., T43 and T44; T49:3787,3790-3791 and T158:9840-9846; T45:3587 (L.18) – 3588 (L.9); T46:3621 (L.25) – 3625 (L.8); T48:3713 (LL.20-24), 3728 (L.16) – 3734 (L.17).


46

discovery regarding the Plan amendments, including how the amended Plan would

operate, on the basis of standing. T75.

This was error even under the Bankruptcy Court’s prior ruling that Mt.

McKinley and other insurers “at least” had standing to take discovery to determine

whether prior plans were or were not “insurance neutral.”51 In 2009, the

Bankruptcy Court ruled “the insurers have at least standing to get through

discovery” and that it was “pretty much a given” that they are “entitled to

discovery to determine how the plan is or isn’t insurance neutral.” Id.

While it was error to limit discovery to this narrow issue, the Bankruptcy

Court was plainly correct that Mt. McKinley “at least” had standing to test the Plan

to see whether it was in fact “insurance neutral.”52 Similar discovery taken in

preparation for the 2010 confirmation hearing yielded support for Mt. McKinley’s

plan objections,53 including admissions from PPG and Corning on how they would

use the Plan against Mt. McKinley notwithstanding the alleged “insurance

51 T23:2115 (L.19) – 2116 (L.3). 52 Whether a plan is “insurance neutral” is a question of law based on the effect of the entire plan and not magic words. The Court held that insurers were harmed by the GIT plan, even though it contained so-called “Combustion Engineering” neutrality language. GIT, 645 F.3d at 212. 53 See, e.g., In re Pittsburgh Corning Corporation, 453 B.R. at 584-589 (Mt. McKinley “has the necessary standing to prosecute its objections to the confirmation of the Modified Third Amended Plan in this court” based on, among other things, testimony obtained from Vincent Hatton who was unable to explain how the Plan’s so-called “insurance neutrality” provisions operated).


47

neutrality” provisions. On the basis of such evidence, confirmation of that plan

was denied.

Throughout this case, the Plan Parties contended that every plan put forward

was “insurance neutral.”54 In doing so, the Plan Parties relied continuously on a

shifting patchwork of provisions, including the § 11.17 “neutrality” language,

judgment reduction language, and so-called “collateral estoppel” language55

inserted into certain findings. They argued these provisions negated Mt.

McKinley’s objections to those findings despite the fact that, in many instances,

the Plan Parties freely admitted those findings were not required by the Bankruptcy

Code and that they still intended to use the Plan and rulings of the Bankruptcy

Court to their advantage in coverage litigation with Mt. McKinley.56

54 See T8:679, LL.7-17 (contending Second Amended Plan was insurance neutral); T38:2708 (LL.10-16) (contending both Second and Third Amended Plans were insurance neutral). 55 That language provided that: “This finding, however, shall not be binding and shall not have collateral estoppel effect on [insurers] in any coverage litigation regarding the insurance coverage obligations of the [insurers].” E.g., T35:2514-2515 at §§ 8.1.15, 8.1.17, 8.1.22, 8.1.26, 8.1.28, 8.1.32. 56 For example, in response to discovery requests issued in connection with the Plan, the Debtor admitted that “notwithstanding the Collateral Estoppel Language added to the proposed findings in Section 8.1 of the Plan, nothing in the Plan or Plan Documents precludes Plan Supporters from asserting that such findings should be persuasive or otherwise considered by [a] coverage court in any coverage litigation regarding the alleged insurance coverage obligations of any Insurer.” T121:7377, RFA No. 2. See also, Debtor’s (T121:7369-7370, 7377), ACC’s (T122:7389, 7396-7397), FCR’s (T120:7352, 7357-7358), and Corning’s (T123:7435-7436, T124:7478-7479, respectively) responses to Interrogatory No. 3


48

Although the Plan’s “insurance neutrality” provisions were again re-written,

there is no record evidence that the Plan Supporters’ intent to use the Plan in

coverage litigation against Mt. McKinley has changed. Therefore, the Bankruptcy

Court erred in refusing to allow any discovery following the 2010 confirmation

hearing given the significant Plan amendments. This refusal harmed Mt.

McKinley because it was not allowed discovery regarding whether the Plan had

finally been rendered “insurance neutral,” or, for that matter, discovery regarding

any of its other Plan objections. Even with severely restricted discovery regarding

the prior versions of the Plan, Mt. McKinley was twice successful in proving those

plans were unconfirmable.

This time, the Bankruptcy Court denied Mt. McKinley any meaningful

participation in the process leading to confirmation and refused to hold a full

evidentiary hearing. At the July 22, 2013 hearing on Mt. McKinley’s motion for

reconsideration, Judge Agresti, the Chief Bankruptcy Judge at the time, described

the period leading up to confirmation of the Plan as “a little bit truncated” and that

he was “pushing” Judge Fitzgerald to “get that thing gone…[g]et rid of it. I don’t

want to see it.” T78:6326 (LL.10-15).57 The need to finally confirm a Plan in this

and RFA No. 2. 57 See also, T80:6355 and n.5 (describing case as “dragging on for 13 years” and use of affidavits to supplement evidentiary record while “less than ideal,” under the circumstances appropriate because “Judge Fitzgerald was making every effort to rule on the Plan confirmation prior to her retirement.”).


49

15-year old case, however, should not have been accomplished at the cost of a

proper review of the Plan. The District Court did not address this error, concluding

it was moot as a result of Mt. McKinley’s lack of standing.

d. The lower court’s ex post facto exclusion of evidence of voting fraud infecting the Plan process renders the record before the Court incomplete.

The lower court erred in the ex post facto exclusion of exhibits clearly

evidencing fraudulent claims and conduct exposed based on the very limited

evidentiary record allowed in this case.58 This is the precisely the type of evidence

this Court found relevant in GIT and its exclusion renders the record here fatally

incomplete.

At the 2010 confirmation hearing, evidence came to light that law firms

voting thousands of claims in favor of the Plan had engaged in fraudulent conduct

in nearly a dozen instances by misrepresenting their clients’ exposure to PCC’s

asbestos product.59 The evidence consisted of discovery responses in which the

same law firms who submitted master ballots in this case certifying under penalty

of perjury that their clients had exposure to a Pittsburgh Corning asbestos product,

subsequently concealed such exposures in other litigation.60

58 T71:6105-6106 (¶¶ 225-226). 59 T93-T101, T105, T108. 60 T40:3191 (L.23) – 3192 (L.17).


50

For context, asbestos claimants voted on the Plan by individual and master

ballot.61 Master ballots, as the name implies, were submitted on behalf of many

asbestos claimants. Nearly all of the asbestos claimants voting on the Plan did so

by master ballot.62 The master ballot required a verification by the submitting

attorney, certifying under penalty of perjury his/her client’s exposure to a PCC

asbestos product as well as medical evidence of injury. T20:2028-2029. The

Garlock Exhibits showed that after making these representations to the Bankruptcy

Court and voting on the Plan,63 the very same law firms signed discovery

responses in “other litigation”64 stating that they lacked sufficient information to

admit or deny being exposed to PCC asbestos. In other words, these law firms

misrepresented their clients’ exposure to PCC asbestos so that they could

participate in the plan process in this case. For this reason, the District Court’s

61 T22 (order approving solicitation package and voting procedures on Third Amended Plan), T20 (application for voting procedures including copy of form of master ballot at T20:2026-2029). 62 128 master ballots were cast by firms on behalf of 419,092 asbestos claimants. Excluding duplicates and deficient claims, the Debtor’s balloting agent, Kathleen Logan, reported that 359,298 holders of Class 5, Channeled Asbestos PI Trust Claims, voted either for or against the Plan. T31:2465. 63 The Thornton & Naumes and Shepard Law Firm ballots are at T150 and T151, respectively. 64 See T71:6105-6106 (¶ 225) (emphasis original). It is not clear what the Bankruptcy Court intended by emphasizing “other,” as the fact that these responses were from other litigation does not make them inherently inadmissible as the Bankruptcy Court itself concluded when it admitted the exhibits.


51

conclusion that these exhibits showed that “eleven claimants may have supplied

misleading or false answers to requests for admission in other litigation subsequent

to filing ballots in this case” is error. See Dist. Op. at 27 (emphasis added).

Instead, these exhibits show two law firms voting claims in this case under false

pretenses. The lower court erred in reconsidering admission of the Garlock

Exhibits which evidence fraud and collusion in forging the Plan.

The lower court erred by suggesting that the impact of this fraud was

unimportant because it would have “no effect on the voting.” T71:6106 (n.20);

Dist. Op. at 27-28. The misrepresentations taint master ballots filed by two law

firms, representing 2,469 votes on claims valued under the TDP at more than

$150 million.65 Certainly, this evidence is material and merits further discovery on

remand. Mt. McKinley does not suggest that all these claims are fraudulent.

Presumably they are not; although no one knows, because further discovery after

this fraud was uncovered was precluded. The lower court erred in confirming the

Plan without considering what role these law firms played in the development of

the Plan, how widespread the problem of fraudulent voting really is, or why the

Plan Parties did nothing in the years following this explosive revelation at the 2010

confirmation hearing to investigate and eliminate such fraud in the process. These 65 See, e.g., T15:1831, showing that the firm of Thornton & Naumes LLP, alone voted $145,942,500 in PCC asbestos claims on the Second Amended Plan. The Law Offices of Michael C. Shepard voted another 82 claims totaling $8,780,000 in PCC asbestos claims [T15:1829].


52

exhibits are but a microcosm of the claims and ballots involved in the case, and

complete and thorough discovery is unquestionably warranted. Garlock

discovered this evidence through its involvement as a defendant in the tort system.

More than 100 other master ballots in this case, wherein more than 100 law firms

voted more than 400,000 asbestos claims, were not examined for similar fraudulent

activities because the lower court refused to allow such discovery.66

While the lower court decided to ignore this clear evidence of fraud, the

court in Garlock’s own bankruptcy allowed extensive discovery and found

pervasive inappropriate behavior by asbestos claimants’ counsel. Notably, the

Garlock bankruptcy judge described a California case in which Garlock suffered a

$9 million verdict where the same lawyer who represented to a California jury that 66 There is evidence such fraud exists. For example, a federal jury in West Virginia found Robert Peirce, Jr. and Louis Raimond, along with radiologist Ray Harron, liable of five counts of fraud and conspiracy under RICO in connection with phony asbestos claims. T86. Robert Peirce, Jr. filed a master ballot on behalf of 14,398 claimants in this case. T153. Garlock sued two other law firms – Shein Law Center, Ltd. and Waters & Kraus, LLP–which voted ballots in this case for among other things, RICO claims, common law fraud, and civil conspiracy. See T83, T84, T87, T88. These firms collectively voted another 1,349 claims in this case. T154, T155. These adversary complaints were filed the day before the bankruptcy court issued its opinion detailing the suppression of exposure evidence by unidentified law firms in In re Garlock Sealing Technologies, LLC. Moreover, in Garlock Sealing Technologies LLC, et al. v. Troy D. Chandler, et al., Adv. No. 12-AP-03137 (Bankr. W.D.N.C.), Garlock is suing the Williams Kherkher Hart Boundas LLP firm and three of its lawyers for fraud and conspiracy to commit fraud for knowingly and willfully concealing that they filed a claim in another § 524(g) trust. T85. The Williams Kherkher firm voted 14,862 claims in favor of the Plan. T152. The number and category of claims voted by the above law firms multiplied by the TDP values in the Plan total $348,906,450.


53

his client had no Unibestos exposure (PCC’s asbestos product), had “seven months

earlier filed a ballot in the Pittsburgh Corning bankruptcy that certified ‘under

penalty of perjury’ his client’s exposure to Unibestos insulation.”67 The Garlock

court cited numerous other examples of cases in which asbestos claimants in the

tort system suppressed exposure evidence and manipulated submissions to asbestos

trusts.68 The Garlock court recently unsealed the evidence supporting its decision.

According to media reports, that evidence shows several firms casting master

ballots in this case on behalf of thousands of claimants are engaged in this practice

of suppressing evidence.69 The true scope of such fraudulent activity in this case

will never be known without the discovery that was denied here.

67 In re Garlock Sealing Technologies, LLC, 504 B.R. 71. 68 “[W]hile it is not suppression of evidence for a plaintiff to be unable to identify exposures, it is suppression of evidence for a plaintiff to be unable to identify exposure in the tort case, but then later (and in some cases previously) to be able to identify it in Trust claims.” Id. (emphasis original). 69 See, e.g., http://legalnewsline.com/issues/asbestos/255113-255113 (discussing, inter alia, four cases pursued by Philadelphia’s Shein Law Center and referring to testimony by Benjamin Shein that “‘his firm has a practice of delaying Trust claims until after trial in order to prevent Trusts from being added to the verdict form’”) and http://legalnewsline.com/issues/asbestos/255371-garlock-not-given-key-evidence-in-case-that-resulted-in-24m-verdict-company-argued (discussing the Treggett case in which a Waters & Kraus lawyer argued to a California court that there was no evidence of exposure to PCC’s asbestos product shortly after filing a ballot in this case in which the same firm verified exposure as a basis for voting on a prior version of the Plan). This evidence is not part of the record in this appeal but forms the basis for a Rule 60(b) motion that will be filed with the District Court as described in the Statement of Related Cases and Proceedings.


54

Over vigorous objection,70 the Bankruptcy Court initially admitted the

Garlock Exhibits, holding that discovery responses in which “somebody submits a

ballot in this case that says that they have a claim against the debtor and the request

for admission is to the contrary” were clearly probative and admissible.71 The

Bankruptcy Court allowed the parties to submit post-trial briefs on the single issue

of whether the exhibits were hearsay and reserved the issues as to the weight.72

Eleven exhibits within the Bankruptcy Court’s ruling – Garlock Exhibits 121, 132,

147, 165, 167, 174, 178, 203, 245, 327, 356 [T93-T101, T105, T108]– were

admitted the following morning by stipulation of the parties.

Three years after the close of evidence and one confirmation opinion later,73

in its second opinion on the Modified Third Amended Plan, the Bankruptcy Court

70 T40:3192-3207. 71 T40:3206 (L.25) – 3207 (L.4). 72 T40:3206 (LL.21-23). 73 The Bankruptcy Court’s 2011 opinion denying confirmation of the Third Amended Plan did not reassess the admissibility of the Garlock Exhibits even though it addressed good faith under § 1129(a)(3). In re Pittsburgh Corning Corp., 453 B.R. at 605; see also, T71:6142 (¶ 320, n.38). Although the Bankruptcy Court found that the Plan was proposed in good faith, this ruling never became final and appealable because the Plan Parties elected to attempt to fix the plan’s problems rather than appeal. While Mt. McKinley disputes the prior findings, it is compelling that in so ruling the Bankruptcy Court did not “un-admit” the Garlock Exhibits even though that opinion was closer in time to the confirmation hearing at which these exhibits were admitted. At that time, the Bankruptcy Court saw no problem in assessing good faith on a record that included the Garlock Exhibits.


55

sua sponte reconsidered admission of these exhibits and excluded them from

evidence.74 In doing so, the Bankruptcy Court ignored clear evidence of fraud in

the process and committed error.

The record makes clear that these exhibits were admitted at the 2010

confirmation hearing subject only to post-trial briefing on the hearsay objection.

See T40:3202 (LL.14-17); 3203 (LL.13-22), 3204 (L.25) – 3205 (L.14), (emphasis

added); see also, 3206 (LL.21-25). While the Bankruptcy Court was open to

reconsidering a hearsay objection,75 there was no open-ended invitation to re-argue

other overruled evidentiary objections or to assert entirely new objections not

raised at trial. Even if the Bankruptcy Court intended this result, such a ruling

would separately constitute reversible error.76 The Plan Parties should not have

been allowed to make evidentiary objections they neglected to timely assert at the

only evidentiary hearing held on this Plan.

74 T71:6105-6107 (¶¶ 225-226). 75 See T40:3206 (LL.21-25) (inviting parties to brief “this issue,” referring to the hearsay objection just argued and admitting the exhibits over objection while reserving issues with respect to weight); T42:3455 (n.49) (no discussion of the hearsay objection). 76 Fed. R. Evid. 103(a) (“A party may claim error in a ruling to admit or exclude evidence only if the error affects a substantial right of the party and: (1) if the ruling admits evidence, a party, on the record: (A) timely objects…”). United States v. Gibbs, 739 F.2d 838, 849 (3d Cir. 1984), cert. denied, 469 U.S. 1106 (1985).


56

The Bankruptcy erred in sua sponte reconsidering these objections and in

considering objections not timely asserted. First, the Bankruptcy Court suggested

at ¶ 225, p. 69 of its opinion [T71:6105], that Garlock 167 may not have been

offered into evidence. To the contrary, it was offered with the others at the June 9,

2010 hearing. T40:3192 (L.14). In fact, the next day when the parties stipulated to

the list of exhibits that fell within the Bankruptcy Court’s ruling the prior day, this

exhibit was expressly identified and admitted. T41:3254 (L.18-24).

Moreover, the Bankruptcy Court erred in excluding the exhibits based on

lack of authentication. T71:6105 (¶ 225). This objection was not made at the time

the exhibits were offered and, therefore, was waived. Fed. R. Evid. 103(a)(1),(e).

See Carnegie Mellon Univ. v. Marvell Tech. Grp., Ltd., 2014 WL 183212, *19,

n.26 (W.D.Pa. 2014) [T139:8457-8458], citing FRE 103 and Government of The

Virgin Islands v. Archibald, 987 F.2d 180, 184 (3d Cir. 1993); see also, United

States v. Gibbs, 739 F.2d 838, 849 (3d Cir. 1984) (en banc). It was also error to

exclude the exhibits based on the lack of a signature by the plaintiff or plaintiff’s

personal representative “as required by the jurisdiction in which they were

provided.” T71:6105-6106 (¶ 225). This objection was not made at the time the

exhibits were offered and was waived.

Further, the Bankruptcy Court erred in excluding the exhibits based on the

lack of an offering witness. T71:6105 (¶ 225). This objection was made at trial,


57

but it was overruled when these exhibits were admitted. Moreover, standing alone,

this does not state a cognizable objection as the majority of exhibits admitted

during the June 2010 confirmation hearing came in without a sponsoring witness,

including numerous discovery responses.77 There was no basis for the Bankruptcy

Court sua sponte reconsidering this objection after these exhibits were admitted.

The Bankruptcy Court also erred in excluding the evidence based on the fact

that they were not offered as a random or representative sample. T71:6105 (¶225).

While true, this was not a basis on which to exclude the exhibits. The exhibits

stand on their own merits and show fraud on the part of two law firms that voted

thousands of claims in favor of the Plan. At the very least, the evidence requires a

more searching “totality of the circumstances” review and also supports a number

of Mt. McKinley’s other Plan objections, including the lack of good faith.

After Mt. McKinley objected to the ex post facto exclusion of these

previously admitted exhibits in the interim ruling on confirmation, the Bankruptcy

Court revised its ruling to suggest that it did not actually admit Garlock Exhibits

121, 132, 165, 174, 178, 203, and 245 [T93, T94, T96, T98-T101] because they

“were not signed by the plaintiff or plaintiff’s personal representative as required

by the jurisdiction in which they were provided.” T71:6105-6106. This ruling is

77 See, inter alia, discovery responses T109, T112-T115, T117-T129, and T159-T163 admitted without a sponsoring witness on June 9, 2010. T40:3223-3229, 3235-3236.


58

error as a matter of law and fact. The exhibits were signed. The relevant signature

is that of the attorney that submitted master ballots. Those ballots made statements

under oath, which were inconsistent with what the same firm stated in discovery in

the tort system with regard to this Debtor.78 In short, all eleven were signed by the

relevant persons – the attorneys voting master ballots in this case.

The ellipsis in the language quoted at footnote 19 of the Bankruptcy Court’s

opinion [T71:6106] omits significant clarifying language setting out what everyone

understood at the time:

COURT: The only ones I am admitting are those that have a different outcome in a request for admission signed and filed after the ballot in which somebody submits a ballot in this case that says that they have a claim against the debtor and the request for admission is to the contrary.

T40:3206 (L.25) – 3207 (L.7) (emphasis added). That omission is key because the

“somebody [who] submit[ted] a ballot” in each instance was an attorney

representing asbestos claimants in this case. See T150, T151 (master ballots by

two law firms).

78 What they say about the Debtor is the only relevant inquiry. Although the Bankruptcy Court seems to suggest at ¶ 226 of the Bankruptcy Opinion [T71:6106] that the exhibits are not relevant because they also contain references to other cases, this is error. The Bankruptcy Court summarily rejected this objection at the hearing, noting that it was irrelevant whether the responses admitted exposure to other bankruptcy companies. T40:3202 (L.24) – 3203 (L.10) (COURT: “[w]e are not talking about the others.”).


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The Bankruptcy Court’s admission of Garlock 203 [T100], which was the

specific exhibit examined at length at the June 9, 2010 hearing79 and one of the so-

called “unsigned” exhibits, is telling. After examining this specific document at

length, the Bankruptcy Court admitted it and those like it. The Bankruptcy Court

admitted these exhibits because it recognized there was “a problem” if attorneys

were making representations contrary to those made under oath on the ballots:

COURT: [The ballots] should be part of the record and so whether if, in fact, the folks voted and if also after their vote, which this particular document [Garlock 203] seems to be, they assert that they can’t yet say whether or not they have a claim, but they voted as though they do, there’s a problem.

T40:3202 (LL.3-7) (emphasis added). Neither the Bankruptcy Court, nor the Plan

Parties raised any concern at the hearing at which the Garlock Exhibits were

admitted. Instead, this objection was waived because it was raised for the first

time in the Plan Parties’ post-trial brief. T42:3455 (n.49).

Moreover, even if such an objection can be read into the Bankruptcy Court’s

June 9, 2010 ruling and then attributed to the Plan Parties, it was subsequently

waived when, the very next morning, the parties stipulated that the exhibits

complied with the Court’s ruling the day before, standing only on “objections that

were raised and argued yesterday.” T41:3253 (LL.15-17); T41:3254 (LL.9-12);

and T41:3254 (LL.21-23). The objections “raised and argued” unquestionably did

79 T40:3191 (L.23) – 3208 (L.15).


60

not include an objection that these exhibits were somehow incomplete because

they were signed only by the claimants’ attorney.

The Bankruptcy Court’s post-confirmation opinion on reconsideration

questioned Mt. McKinley’s right to object to the exclusion of these exhibits

because it was a “silent bystander at the confirmation hearing when the fate of the

Garlock Exhibits was being argued” and only “now contend[ing] that it was clear

error for them to be excluded.” T80:6360. Mt. McKinley had no reason to speak

up at confirmation because the exhibits were being offered by an aligned party and

were in fact admitted. When the exhibits were suddenly “un-admitted” three years

and one confirmation opinion after their admission, Mt. McKinley immediately

raised concerns. Mt. McKinley first learned about the ex post facto exclusion of

the previously-admitted evidence on May 16, 2013 when the Bankruptcy Court

issued its interim ruling on confirmation. T64:5737-5738 (¶¶ 225 and 226). Three

business days later, Mt. McKinley objected. T65.

These evidentiary rulings were adopted by the District Court which found

that “[t]he principal reason for the bankruptcy court’s decision to exclude the

evidence was hearsay.” Dist. Op. at 27. This too is error. The Bankruptcy Court

overruled the hearsay objection at the June 9, 2010 hearing, reasoning that parties

casting ballots in the case should not be permitted to file a pleading in another case

taking an inconsistent position. T40:3204 (L.21)-3205 (L.2). This initial ruling


61

was plainly correct. See Great Am. Indem. Co. v. Rose, 242 F.2d 269, 271 (5th Cir.

1957) (“[p]leadings in other cases are admissible to be considered with other

evidence against the pleader”).

There is no evidence supporting the District Court’s finding that the

“principal reason” for the Bankruptcy Court’s ex post facto exclusion of the

Garlock Exhibits was hearsay when that objection was overruled at the hearing and

abandoned in post-trial briefing by the Plan Parties.

For these reasons, the lower court erred in sua sponte revisiting the

admission of these exhibits three years and one confirmation opinion after they

were admitted as evidence.

e. The record below is otherwise incomplete.

The record before the Court is also incomplete because the lower court did

not conduct a confirmation hearing on the Plan but, instead, based its rulings on the

record developed at confirmation hearings held in 2004 and 2010 on prior versions

of the Plan.

In May 2004 and again in June 2010, the Bankruptcy Court held

confirmation hearings on the Second Amended Plan and the Third Amended Plan,

respectively. The Bankruptcy Court denied confirmation of both plans. After

confirmation of the Third Amended Plan was denied, the Plan Parties amended that

plan numerous times to arrive at the Plan ultimately confirmed. The Bankruptcy


62

Court did not hold another confirmation hearing before confirming the Plan,

despite Mt. McKinley’s pending CMO Motion, filed in 2011, seeking full

discovery and an evidentiary hearing. This was error.

This error harmed Mt. McKinley because it denied Mt. McKinley the

opportunity to make a full record about how the Plan harmed it. For example, after

confirmation was denied in 2011, the Plan’s confusing neutrality provisions were

again re-written. Up to that point, every time Mt. McKinley was allowed to take

discovery on “insurance neutrality,” Mt. McKinley was able to show, inter alia,

that Plan Supporters intended to use the Plan against Mt. McKinley in coverage

litigation, notwithstanding the Plan’s purported “insurance neutrality” provisions.

This resulted in the Bankruptcy Court denying confirmation of two prior plans.

Because no evidentiary hearing, or discovery, was ever conducted concerning the

re-written “insurance neutrality” provisions, the record before this Court is fatally

incomplete.

Similarly, because no confirmation hearing was held, no evidence was taken

concerning other changes to the Plan, including the scope of the injunction and the

last-minute deletion of a number of entities from Exhibits K and L to the Plan.80

T61:5591-5610. The District Court did not address this objection, erroneously

80 Mt. McKinley is not contending that it was denied an opportunity to put on evidence as to the operation of certain language it agreed to in the course of court-ordered negotiating sessions in which it participated.


63

concluding it was moot based on Mt. McKinley’s lack of standing. The lower

court’s decision on confirmation should be reversed and remanded.

f. The lower court erred in allowing the Plan Parties to supplement the record after the June 2010 confirmation hearing.

While the Bankruptcy Court failed to allow Mt. McKinley to develop a

complete evidentiary record, on the same day the Bankruptcy Court issued its

opinion on confirmation, the court allowed the Plan Parties to improperly

supplement the record by filing defective affidavits purporting to offer testimony

that the several hundred of the Plan Supporters’ affiliates identified on Plan

Exhibits K and L were not limited partnerships. T68, T69. Without providing an

opportunity to object to the defects in these affidavits or any opportunity to test the

assertions therein, the Bankruptcy Court incorporated them into the closed

evidentiary record and relied on them in its opinion issued hours later. See

T71:6151 (¶366). In admitting these exhibits into a closed evidentiary record, the

Bankruptcy Court erred. The District Court did not address this error but instead

adopted it in its confirmation ruling.

Mt. McKinley has long-raised objections that the scope of the injunction is

overbroad, including that it is improper to provide § 524(g) protection to hundreds

of non-debtor affiliates of the Plan Supporters that are not entitled to protection

under the Bankruptcy Code. See, e.g., T25:2246, T57:5330-5332, and T60:5569-

5571. The Bankruptcy Court agreed in part by finding that non-debtor affiliates


64

which did not fall within the Code’s definition of “affiliate” – specifically limited

partnerships – were not entitled to § 524(g) protection. T63:5646 (L.20) – 5647

(L.2). Subsequently, on May 15, 2013, the Plan Parties filed “technical

amendments” to the Plan that included revisions to Exhibits K and L, omitting

more than 15% of the entities previously identified. T61:5591-5610, T62:5613.

The Court’s interim confirmation ruling was issued the next day. T64.

The technical amendments, however, did nothing to clarify the scope of the

injunction and in fact caused further confusion. T65:5815-5817. Indeed,

Corning’s revised exhibit to the Plan, Exhibit K, continued to contain three entities

expressly identified previously as “(Partnerships)” with the exhibit merely being

revised to omit the parenthetical identifying them as such. Id., compare T56:5229,

5232 with T61:5591, 5594. PPG’s revised exhibit, Exhibit L [T61:5595-5610],

failed to omit a single one of the disqualified entities from the two tables in the

exhibit and, instead, added two additional tables with the entities that (allegedly)

actually qualify for 524(g) protection. At the May 23, 2013 hearing the

Bankruptcy Court asked counsel for PPG and Corning to represent the correctness

of the schedules and, then, in recognition of the deficiency of the evidentiary

record, asked the Plan Supporters to submit affidavits that none of the entities in

Exhibits K and L were limited partnerships. T76:6231 (L.4) – 6232 (L.7).


65

The next day, hours before the Bankruptcy Court entered its confirmation

ruling, the Plan Supporters each filed an affidavit stating that none of the entities

on Exhibits K and L are limited partnerships. T68, T69. Without any discovery to

test the assertions and underlying facts therein or opportunity object to evidentiary

defects, the Bankruptcy Court relied on these affidavits in its opinion issued hours

later. T71:6151 (¶366).

The affidavits were erroneously admitted nearly three years after the close of

evidence on the prior plan – there being no evidentiary hearing on the Plan actually

confirmed by the Bankruptcy Court on May 24, 2013 – when they were

inadmissible under the rules of evidence. The affidavits are hearsay and should

have been excluded under Fed. R. Evid. 801(c), and as hearsay within hearsay to

the extent they are based on information and belief. Fed. R. Evid. 801, Fed. R.

Evid. 1101, see also, David F. Binder, Hearsay Handbook § 46:1 (West 4th Ed.)

(“[a]n affidavit is written hearsay under oath. It is just as excludable as oral

hearsay not under oath”), citing, inter alia, Travelers Cas. & Sur. Co. of Am. v.

Wells Fargo Bank N.A., 374 F.3d 521, 524 (7th Cir. 2004).

The affidavits are not competent evidence because they are not based on

personal knowledge but, instead, on “information and belief.” The affidavits also

fail to set out what facts are relied upon for the conclusory certifications therein.

For example, the Gordon affidavit purports to “certify” that “none of the entities or


66

affiliates that appear on Tables 3 and 4 [of Exhibit L] are limited partnerships”

[T68:5887 (¶4)] without setting out any facts, whatsoever. Instead, it appears that

Mr. Gordon merely “oversaw” the preparation of the corrected Tables 3 and 4. He

may have managed the people who prepared the schedules, but there is no

evidence that he or anyone else reviewed the corporate records of the specific

entities.

At the other end of the spectrum, the Jolly affidavit fails to set out specific

facts and instead purports to be “based on all of the information that I have

received as the Corporate Secretary of Corning.” T69:5889 (¶4) (emphasis

added). Such a generalization is meaningless. Interpreted literally, it suggests the

conclusion at ¶ 4 is based on everything “received” by Ms. Jolly in her capacity as

corporate secretary, without any indication that anything was actually reviewed.

The witnesses purporting to testify were also never disclosed [T34] in

accordance with the case management order governing the prior confirmation

hearing [T33:2472 (¶3)], and Mt. McKinley was not allowed to depose these

witnesses to assess the foundation of their statements.

The Bankruptcy Court further erred in overruling Mt. McKinley’s motion

for reconsideration on this point by suggesting Mt. McKinley could have

conducted its own investigation of the representations made in the affidavits and

that its failure to do so indicated either that the affidavits are correct or that Mt.


67

McKinley is not concerned. T80:6356. In so finding, the Bankruptcy Court

incorrectly “assume[d] that the corporate/limited partnership status of the Asbestos

Protected Parties could be determined with little difficulty through on-line public

sources or private databases such as LEXIS or Westlaw.” Id. at n.6. This is error

because: (i) it reverses the burden to put forward admissible evidence in support of

a Plan – that burden lies with the Plan Parties, not Mt. McKinley; (ii) it assumes

the information is available on-line when for the most part it is not – the great

majority of these entities are foreign entities privately held by the Plan Supporters

about which information is not readily available; and (iii) it ignores the fact that

Mt. McKinley previously submitted evidence showing that many of these entities

cannot possibly qualify for § 524(g) protection, including that more than half of the

entities on Plan Ex. L were acquired by PPG in a 2008 transaction that occurred

nearly 8 years after the Debtor filed for bankruptcy protection and 35 years after

PCC stopped producing Unibestos. T59:5642-5643 (¶321); compare T59:5503-

5507 with T61:5595-5610.

The District Court adopted these erroneous rulings after its own de novo

review. The lower court erred in permitting the evidentiary record, closed

following the June 2010 confirmation hearing, to be selectively re-opened. The

result is an incomplete record.


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g. The record is also incomplete because the lower court erred in denying Mt. McKinley the opportunity to present evidence of additional fraud in this case.

The lower court erred in not allowing Mt. McKinley to develop and present

evidence (going to a lack of good faith) showing that nearly 3,000 asbestos

claimants with pre-petition claims against the Debtor were among those whose

fraudulent claims were dismissed in In re Silica Products Liability Litig., 398

F.Supp.2d 563, 622 (S.D.Tex. 2005). The District Court ignored this evidence of

fraud in its opinion. See Dist. Op. at 29-30 (erroneously suggesting that the only

evidence of fraud in this case is “eleven purportedly misleading or false answers to

discovery filed in other cases”).81 The result of these errors is that the lower court

assessed Mt. McKinley’s objections on an incomplete record and not the totality of

the circumstances.

The Bankruptcy Court erred in distinguishing the In re Silica Products

Liability Litig. decision on the basis that just because “a claimant’s silica claim

was dismissed…does not mean the claimant would not have an asbestos claim.”

T71:6142 (¶322) (emphasis original). This reasoning misses the import of the In

re Silica Products Liability decision: the “extreme improbability of persons having

81 The District Court committed error in finding that the discovery responses were false [Dist. Op. at 27]. This evidence shows ballots were cast under false pretense and that the law firms falsely swore that these claimants were exposed to PCC’s asbestos product as a basis for voting on the Plan. In any event, this evidence shows officers of the court using the bankruptcy process to engage in or conceal fraudulent activity. Thus, the District Court erred.


69

both silicosis and asbestosis,” is evidence of fraud. As that District Court found

“these diagnoses were driven by neither health nor justice: they were

manufactured for money.” In re Silica Products Liab. Litig., 398 F.Supp.2d at

635-36 (emphasis added).

The presence of overlap suggests further fraud in this case with respect to

which discovery has been precluded resulting in an insufficient evidentiary record.

This Court should reverse.

3. The Plan encourages and pays fraudulent and invalid claims.

The lower court erred in concluding that the Plan complied with § 1129(a)

because the Plan is designed to pay claims that are not compensable in the tort

system, including fraudulent and invalid claims. The Plan’s payment of non-

compensable claims harms Mt. McKinley because the claims paid by the trust form

the basis for PPG’s and Corning’s alleged right to recover their trust contributions

from Mt. McKinley.

While the TDP states in § 2.1 that the underlying Disease Levels and Claims

Criteria “have all been selected and derived…in light of the best available

information considering the settlement history of PCC and the rights such

claimants would have in the tort system absent the bankruptcy,” [T56:4920-4921]

as discussed below, the TDP would allow a greater recovery than that permissible

in the tort system.


70

a. The Plan includes Trust Distribution Procedures that encourage filing and payment of non-compensable claims.

Section 1129(a) requires that the TDP be reasonable, proposed in good faith

and not by any means forbidden by law. In re Greate Bay Hotel & Casino, Inc.,

251 B.R. 213, 221 (Bankr. D.N.J. 2000). The lower court erred in finding that the

Plan complied with § 1129(a), which cannot be met with respect to the TDP

because they were not proposed in good faith and permit payment of invalid and

fraudulent claims.

The plaintiffs’ bar through the ACC dictated the terms of the TDP and will

largely control the actions of the Asbestos PI Trust through the Trust Advisory

Committee or “TAC.”82 The evidence presented at trial demonstrates that the

TDP’s overly-lenient medical criteria and related provisions are intentionally

designed to facilitate and encourage payments to claimants without regard to

whether they actually have an asbestos-related disease or whether their claims are

valid and compensable in the tort system. Tens of thousands of unmeritorious,

invalid and/or fraudulent claims will be paid under the TDP, contrary to every

applicable provision and policy of the Bankruptcy Code and applicable non- 82 See, Asbestos PI Trust Agreement (Plan, Ex. A) at § 5.1 (initial members of TAC are named on signature page), T56:4914-4915; § 2.2(e) (requiring the Trustees to consult with the TAC on implementation and administration of the Trust) T56:4887; § 2.2(f) (requiring consent of TAC to change the Claims Payment Ratio, Disease Levels, Medical/Exposure Criteria, or the Payment Percentage, or to require that claimants provide additional kinds of medial or exposure evidence, etc.) T56:4887.


71

bankruptcy law. Moreover, the Plan lacks an effective mechanism for eliminating

fraudulent claims and the TDP discourage the Asbestos PI Trust from setting up an

effective mechanism. Under TDP § 7.2 [T56:4949], the trust may not investigate

or attempt to uncover invalid or fraudulent claims if the cost of doing so would

impair payments to valid claims. Because such efforts would always be costly, this

provision ensures that invalid claims will be paid by the trust and that no effective

investigation can ever be conducted.83 Considering the evidence of extensive

fraudulent conduct in this case, and the proliferation of similar conduct across the

country, the Plan should affirmatively require procedures to weed-out these claims.

The Plan Parties will be released from their asbestos liabilities under the

Plan, so they have no incentive to oppose payment of invalid and fraudulent

claims. They are making their respective monetary contributions to the trust and

washing their hands of the entire situation. Mt. McKinley is the only party-in-

interest with an incentive to raise these issues because PPG and Corning are

83 TDP § 5.8 is also deficient in that it provides that the Trust “may” develop methods for auditing claims and evidence and that the claimant and his attorney “may” be penalized if they are caught submitting fraudulent claims information. T56:4945. Section 5.8 is entirely permissive and provides no safeguards to ensure that invalid or fraudulent claims are identified and excluded from payment by the Trust. See, T133:7997 (p.105, LL.14-20) (Debtor’s general counsel, Rosalie Bell, testifying that § 5.8 requires the consent of the Trust Advisory Committee and the FCR to conduct such audits); also T133:7997 (p.106, L.6) – 7998 (p.106, L.18) (Debtor’s general counsel also testified she was not aware of anything in the Plan requiring Debtor’s consent to the development of methods for auditing the reliability of medical evidence as set forth in § 5.8).


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seeking recovery of their trust contributions from Mt. McKinley. See Plan

definitions of “Corning Trust Contribution Recovery Claims” and “PPG Coverage

Claim” at T56:4828, 4838, respectively.

As in GIT, the Plan Parties ceded to the demands of the asbestos-plaintiffs’

bar who, because they controlled the votes on the Plan and will control the trust

post-Effective Date, were allowed to dictate the terms of the TDP, which will

allow the plaintiffs’ bar to have their fraudulent and invalid claims compensated

through the Plan.

In addition to legally invalid claims, discussed below, the TDP encourage

and pay medically invalid claims. The evidence presented at the 2010

confirmation hearing demonstrates numerous improprieties in the TDP’s medical

criteria that are intentionally designed to compensate claimants who have no

medically recognized asbestos-related condition. For example, while every

medically and legally recognized asbestos-related disease is provided for in

Disease Levels II-VIII of the TDP, the TDP provides for payment of a catch-all

“Disease Level I.” T56:4934-4936 and T39:2904 (L.11) – 2905 (L.2). These

Level I claims require only (i) a diagnoses of Bilateral Asbestos-Related

Nonmalignant Disease, which can be caused by exposure to any number of non-

asbestos particles, and (ii) even the smallest alleged exposure to Unibestos.

T56:4934. In other words, this disease level is designed specifically to compensate


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claimants who cannot assert a medically or legally valid claim. Under Level I,

claimants who could not recover in the tort system, will nonetheless recover under

the TDP. There is no circumstance in which the Bankruptcy Code authorizes the

allowance and payment of claims that are not compensable under applicable law.

Other TDP categories also pay claims that are not medically recognizable.

All claims in Disease Levels I-III require a diagnosis of Bilateral Asbestos-Related

Nonmalignant Disease (“BARND”), which can be shown under the TDP by mere

“bilateral pleural plaque” or “bilateral pleural thickening” on a chest x-ray. Such

minimal evidence is medically insufficient to indicate an “asbestos-related”

disease. See T56:4933 (§ 5.3(a)(3)) & T56:4934 (n.4). BARND may also be

shown by the presence of interstitial fibrosis, id., which is caused by exposure to

numerous things other than asbestos, all of which can cause an x-ray to be

interpreted by a B-reader as 1/0 or higher on the ILO scale, suggesting asbestosis

when that disease is not present.84 In other words, the TDP’s medical criteria are

not based on accepted medical diagnostic standards for asbestos-related diseases,

but are designed to pay claimants who have no asbestos-related injury at all.

Further, while the TDP facially require a “diagnosis” of a particular disease,

the requirements fall far short of a medically acceptable diagnosis. Under TDP §

84 See T56:4933-4934 (TDP § 5.3(a)(3) & n.4); T41:3356 (L.14) – 3358 (L.12); T39:2938 (L.22) – 2939 (L.24) (two types of pleural thickening, only one of which can cause lung function decline).


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5.7(a)(1) [T56:4942], a physician need only find that a claimant’s condition is

“consistent with” or “compatible with” a particular disease, yet both Plan Parties’

and Mt. McKinley’s medical experts, Dr. Welch and Dr. Renn,85 testified that such

findings are not a diagnosis of disease.86 This significantly increases the number

of questionable, medically-invalid asbestos claims that will be accepted and paid

by the trust. These artificially inflated payments will be used by Plan Supporters to

substantiate their coverage claims against Mt. McKinley. Thus, the payment of

such claims will cause direct harm to Mt. McKinley. Moreover, the Plan’s

payment of invalid claims demonstrates that the lower court erred in finding that

the Plan complied with § 1129(a). The Court should reverse.

b. The last decade has seen an increasing and overwhelming trend in States and courts to not pay unimpaired claimants.

Further, the lower court erred in confirming the Plan under § 1129(a)

because the numerous intentional flaws in the TDP’s overly lenient medical criteria

were designed to facilitate payments to claimants who could not even maintain a

cause of action—much less recover on their purported claims—in the tort system.87

85 Plan Parties’ expert, Dr. Laura Welch (“Dr. Welch”) and Mt. McKinley’s expert, Dr. Joseph Renn (“Dr. Renn”). 86 Dr. Renn, testified that when a physician says that a person’s condition is “consistent with” or “compatible with” a particular disease, that is an equivocation. T39:2906 (L.5)-2907 (L5). Plan Parties’ expert, Dr. Welch testified similarly. T41:3381 (L.5) – 3382 (L.1), T:41:3383 (L.18) – 3384 (L.4). 87 Moreover, the Asbestos PI Trust Agreement (T56:4876-4915) authorizes the


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Many of the claimants who will be paid under the TDP have no physical

impairment and therefore have no cognizable claim for compensation under

applicable state tort law. See Simmons v. Pacor, Inc., 674 A.2d 232, 237 (Pa.

1996); In re Hawaii Federal Asbestos Cases, 734 F.Supp. 1563, 1567 (D.Haw.

1990), see also Howell v. Celotex Corp., 904 F.2d 3 (3d Cir. 1990) (applying

Pennsylvania law).

In In re Asbestos Products Liability Litigation (No. VI), MDL Docket No.

875, 2012 WL 3279208, *10 (E.D.Pa. 2012), vacated in part 2012 WL 4171073

(E.D.Pa. 2012) [T144], the court held that under maritime law “a seaman without

physical impairments resulting from asbestos exposure, including one who

manifests only pleural changes, has not suffered an ‘injury’ …and therefore has no

cognizable claim.” T144:8510 at *2. The court cited numerous jurisdictions

throughout the U.S. in which asymptomatic and unimpaired asbestos claims are

non-actionable and non-compensable. The court examined at length the general

trend in asbestos litigation around the country and concluded that “[a]ll signs in

this mature litigation point to the treatment of pleural plaques and pleural

thickening as non-cognizable, unless and until plaintiffs exhibit physical

impairments or malignancies.”88

Trustees to change the TDPs and all relevant claim criteria without court approval or oversight. T56:4887 (§§ 2.2(f)(ii) and (v)). 88 T144:8514-8515 (*7-8) (internal quotations and string cite omitted). The


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Other courts holding that mere pleural thickening, unaccompanied by

physical impairment, is not compensable include those in Arizona, Delaware,

Maine, and Maryland, federal courts for Hawaii and Massachusetts, and a Texas

court applying Michigan law.89 As the Supreme Judicial Court of Maine has

explained, “[t]here is generally no cause of action in tort until a plaintiff has

suffered an identifiable, compensable injury.” Bernier, 516 A.2d at 542. See

Bowerman v. United Illuminating, 1998 WL 910271 (Conn.Super.Ct. 1998)

(unpublished) [T138]. Still other courts, such as those in Colorado, Indiana, and

Wisconsin, have indicated that they would not recognize the claims of unimpaired

claimants.90 The Supreme Court of the United States, in the context of claims

court observed that the plaintiffs failed to cite “any cases where a plaintiff claiming asbestos exposure who was asymptomatic and unimpaired could maintain a claim under state law.” T144:8515 (*8) (emphasis added). Further, the court noted that “[a]llowing an asymptomatic plaintiff, such as one with only pleural changes, to collect damages, especially in a litigation as long-running as asbestos litigation, would be contrary to public policy.” Id., citing Schweitzer v. Consolidated Rail Corp., 758 F.2d 936, 942 (3d Cir. 1985). 89 See Burns v. Jaquays Mining Corp., 752 P.2d 28, 31 (Ariz.App. 1987), rev. dismissed, 781 P.2d 1373 (Ariz. 1989); In re Asbestos Litig., 1994 WL 721763 (Del.Super.Ct. 1994) (unpublished), rev’d on other grounds, 670 A.2d 1339 (Del. 1995); Bernier v. Raymark Indus., Inc., 516 A.2d 534, 543 (Me. 1986); Owens-Illinois v. Armstrong, 591 A.2d 544, 560-61 (Md.Ct.Spec.App. 1991), aff’d in part, rev’d in part on other grounds, 604 A.2d 47 (Md. 1992); In re Hawaii Federal Asbestos Cases, 734 F.Supp. at 1567; In re Massachusetts Asbestos Cases, 639 F.Supp. 1, 2-3 (D.Mass 1985); Ford Motor Co. v. Miller, 260 S.W.3d 515, 518 (Tex.App.-Houston (14th Dist.) 2008). 90 See Miller v. Armstrong World Indus., Inc., 817 P.2d 111, 113 (Colo. 1991); AlliedSignal, Inc. v. Ott, 785 N.E.2d 1068, 1075 (Ind. 2003); Jurich v. John Crane,


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under the Federal Employers’ Liability Act (“FELA”), affirmed that an asbestos-

exposed worker “cannot recover unless, and until, he manifests symptoms of a

disease.” Metro-North Commuter R.R. Co. v. Buckley, 521 U.S. 424, 427 (1997).

Such claims will, however, be paid under the TDP in this case.

The FCR—who acknowledged that fraudulent asbestos claims are a problem

because plaintiffs’ lawyers have manipulated evidence they produce in support of

claims—testified that claimants who could not recover in the tort system because

of (i) judicial decisions like Pacor (ii) tort reform, and (ii) deferred dockets, will

nonetheless be entitled to payment under the TDP.91 This is clearly inconsistent

with the purposes and objectives of the Bankruptcy Code and demonstrates a lack

of good faith.

1) Tort Reform

Over the last decade, state legislatures in many key “asbestos” jurisdictions

have enacted “medical criteria” laws requiring asbestos claimants to present

credible and objective medical evidence of physical impairment in order to bring

or proceed with a claim. E.g., Ohio Rev. Code Ann. § 2307.92. Ohio was the first

state to enact such legislation in 2004, followed by Texas and Florida in 2005,

Inc., 824 N.E.2d 777, 783 (Ind.App. 2005), transfer denied, 841 N.E.2d 179 (Ind.2005); Sopha v. Owens-Corning Fiberglas Corp., 601 N.W.2d 627, 641 (Wis. 1999). 91 T12:1345 (LL.7-25); T38:2750 (L.21) – 2751 (L.2); T38:2754 (LL.8-13); and T38:2751 (L.3) – 2753 (L.7).


78

Kansas and South Carolina in 2006, Georgia in 2007, and Oklahoma in 2009.92

The collusively-developed Plan and TDP disregard these tort reform measures by

allowing payment of unimpaired claims, thus significantly and artificially inflating

the Plan Supporters’ liabilities—they will be liable for far more claims in this

bankruptcy than they would have been in the tort system.

This permissive structure stands the bankruptcy process on its head, and it

harms Mt. McKinley because payment of these claims will form the basis for

PPG’s and Corning’s coverage claims against Mt. McKinley. Further, it

demonstrates that the Plan was not proposed in good faith and that the lower court

erred in confirming it.

2) Time-barred Claims

The TDP also inflate asbestos liabilities by compensating time-barred

claims. Specifically, TDP § 5.1(a)(2) [T56:4929-4930] impermissibly extends and

revives expired limitations periods for otherwise time-barred claims.93

92 See Ohio Rev. Code §§ 2307.91–.96; Tex. Civ. Prac. & Rem. Code §§ 90.001–.012; Fla. Stat. Ann. §§ 774.201–.209; Kan. Stat. Ann. §§ 60-4901 to 60-4911; S.C. Code Ann. §§ 44-135-30 to 44-135-110; Ga. Code Ann. §§ 51-14-1 to 51-14-13; and Okla. Stat. Tit. 76 §§ 60-71. 93 See, e.g. T9:815 (LL.11-23) (§ 5.1(a)(2) tolls the limitations period as of the filing of any asbestos-related claim against PCC, any PPG entity or any Corning entity with the effect that a claimant who had a time-barred claim might nevertheless be compensated by the Trust for Unibestos claims); T11:1077 (L.19) – 1078 (L.3) (the TDP do not require claimants to show that their claim is timely against each of the contributing parties, including Corning); T12:1398 (L.11) – 1399 (L.18) (FCR conducted no analysis as to how many Unibestos claims would


79

Undisputed evidence in this case shows that if the three-year statute of

limitations period found in many states was applied, “approximately 104,000

claims would be time barred as to Corning.”94 PCC’s general counsel, David Ellis,

confirmed that these claims may still be paid under the TDP. T9:815 (LL.11-23).

There is no basis in the Bankruptcy Code or other applicable law for reviving time-

barred claims in this manner, and this clearly evidences collusion and a lack of

good faith.

The Plan significantly inflates Plan Supporters’ liabilities far beyond their

pre-petition claims experience. For example, there were only 11,400 Unibestos

claims pending against Corning pre-petition, whereas more than 235,000 such

claims were pending against PCC. In re Pittsburgh Corning Corp., 417 B.R. at

296. And the last time Corning contributed to the settlement of a Unibestos claim

was almost 30 years ago—in the mid-1980s.95

In other words, in the pre-Plan world, Corning had minimal, if any,

Unibestos liabilities and had not paid to resolve any such claims for at least 15

years prior to the bankruptcy. Under the Plan, however, Corning obligated itself to

be time-barred as to Corning). 94 T13:1638 (LL.9-20) (insurer expert Clancy testifying that applying a 3-year limitations period, 104,000 claims would be time-barred as to Corning and applying a 6-year limitations period, approximately 26,000 claims would be time-barred as to Corning). 95 T14:1791-1792 (Stipulated Finding of Fact No. 263); T11:1069 (LL.15-22).


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pay hundreds of millions of dollars to “resolve” its alleged liability for the

hundreds of thousands of PCC asbestos claims being channeled to the trust. See,

e.g., T56:4853-4854 (Plan §§ 8.1.26 to 8.1.32). These massive, manufactured

liabilities are a product of the collusive plan process, and Mt. McKinley is harmed

because its potential coverage obligations may be similarly increased.

These numerous patent deficiencies in the TDP are further exacerbated by

the fact that the Trustees, FCR and TAC are expressly authorized to (1) “add to,

change or eliminate” any of the Claims Criteria, (2) allow and pay claims that do

“not meet the Medical/Exposure Criteria,” and (3) “amend, modify, delete, or add

to any provisions of” the TDP—all without any judicial review or oversight

whatsoever. T56:4933, 4952 (TDP §§ 5.3(a)(3) and 8.1). The lower court should

not have approved the TDP as being reasonable, fair or proposed in good faith

when key terms of the TDP may be changed post-confirmation at the whim of the

Trustees, FCR and TAC.

In summary, the lower court erred in approving the TDP in the face of

overwhelming evidence that legally and medically invalid claims will be paid and

that Plan Supporters liabilities are being materially inflated in the collusive process

that lead to confirmation. The Plan failed to meet the good faith requirement of §

1129(a).

c. The broad releases in the Plan impermissibly expand the scope of the Injunction to include non-derivative liabilities of non-debtors.


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The PPG and Corning Trust Funding Agreements require claimants to sign

blanket releases that impermissibly expand the scope of the Injunction. Article II.J

of the PPG TFA requires claimants to sign a release (Schedule L to the PPG TFA)

before receiving payment from the trust. T56:5025. That release expressly

releases PPG, the PPG Entities and the PPG Affiliated Parties and numerous other

undisclosed entities from all asbestos-related liabilities—not just channeled claims.

T56:5119-5135. Based on the separate definitions in the PPG TFA, the term

“Released Asbestos Claims” literally means any asbestos claim against any

Asbestos Protected Party, which is far broader than the permissible scope of §

524(g). Id. at 5131. The Corning TFA requires an identical release in favor of the

Corning entities. See T56:5162 (Art. III.H.2); T56:5197 (¶1); and 5210 (Ex. 4).

Such releases impermissibly expand the scope of § 524(g) by providing

releases in favor of non-debtor third parties for non-derivative liabilities in

contravention of this Court’s ruling in Combustion Engineering. In re Combustion

Engineering, Inc., 391 F.3d at 224, n. 33, and 312. The Bankruptcy Court twice

denied confirmation of the prior plans holding that the injunction provisions in the

body of the plan would impermissibly channel non-derivative liabilities in

contravention of § 524(g); yet these releases are broader still. Accordingly, the

lower court erred in confirming the Plan.


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CONCLUSION

WHEREFORE, for the foregoing reasons, the Court should reverse the

Confirmation Order and remand this matter for further proceedings at the

Bankruptcy Court.

DATED: March 23, 2015 Respectfully submitted,

BUCHANAN INGERSOLL & ROONEY

By: /s/ James R. Walker James R. Walker Pa. I.D. No. 42175 301 Grant St., 20th Floor Pittsburgh, Pennsylvania 15219 Telephone: (412) 562-8800 Telecopy: (412) 562-1041 Email: [email protected] Fred L. Alvarez Walker Wilcox Matousek LLP One North Franklin St., Suite 3200 Chicago, Illinois 60606 Telephone: (312) 244-6700 Telecopy: (312) 244-6800

Tony L. Draper Charles B. Walther Walker Wilcox Matousek LLP 1001 McKinney St., Suite 2000 Houston, Texas 77002 Telephone: (713) 654-8001 Telecopy: (713) 343-6571

ATTORNEYS FOR MT. MCKINLEY INSURANCE COMPANY AND EVEREST REINSURANCE COMPANY


83

CERTIFICATION OF ADMISSION TO BAR

I, James R. Walker, certify as follows:

“James R. Walker, Tony L. Draper, Fred L. Alvarez, and Charles B. Walther

are members in good standing of the bar of the United States Court of Appeals for

the Third Circuit.”

Pursuant to 28 U.S.C. § 1746, I certify under penalty of perjury that the

foregoing is true and correct.

Dated: March 23, 2015

/s/ James R. Walker James R. Walker


84

CERTIFICATION OF COMPLIANCE WITH FEDERAL RULE OF APPELLATE PROCEDURE 32(a) AND LOCAL RULE 31.1

Pursuant to Fed. R. App. P. 32(a)(7)(C), I certify the following:

This brief complies with the type-volume limitation of Rule 32(a)(7)(B) of

the Federal Rules of Appellate Procedure, as modified by this Court’s January 23,

2015 order because this brief contains 19,876 words, excluding the parts of the

brief exempted by Rule 32(a)(7)(B)(iii) of the Federal Rules of Appellate

Procedure.

This brief complies with the typeface requirements of Rule 32(a)(5) of the

Federal Rules of Appellate Procedure and the type style requirements of Rule

32(a)(6) of the Federal Rules of Appellate Procedure because this brief has been

prepared in a proportionally spaced typeface using the 2010 and 2013 versions of

Microsoft Word in 14 point Times New Roman font.

This brief complies with the electronic filing requirements of Local Rule

31.1(c) because the text of this electronic brief is identical to the text of the paper

copies, and the Vipre Virus Protection, version 3.1 has been run on the file

containing the electronic version of this brief and no viruses have been detected.

Dated: March 23, 2015

/s/ James R. Walker James R. Walker


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CERTIFICATE OF SERVICE

The undersigned certifies that a true and correct copy of the above and

foregoing motion was served on the parties identified on the attached service list

via electronic case filing, email and/or United States first class mail, postage

prepaid on March 23, 2015.

/s/James R. Walker James R. Walker

Counsel to Pittsburgh Corning Corporation David Ziegler, Esq. James J. Restivo Jr., Esq. Douglas E. Cameron, Esq. J. C. Martin, Esq. Sharon Ament Andrew J. Muha, Esq. Reed Smith LLP 225 Fifth Avenue, Suite 1200 Pittsburgh, PA 15222 Tel: 412-288-3026 Fax: 412-288-3063 [email protected] [email protected] [email protected] [email protected] [email protected] [email protected]

Rosalie J. Bell, Esq. Pittsburgh Corning Corporation 800 Presque Isle Drive Pittsburgh, PA 15239-2799 Tel: 724-733-3838 Fax: 724-387-3809 rose [email protected]


86

Counsel to Official Committee of Asbestos Creditors Peter Van N. Lockwood, Esq. Jeffrey A. Liesemer Caplin & Drysdale, Chartered One Thomas Circle N.W. Washington, DC 20005 Tel: 202 862 5000 Fax: 202-429-3301 [email protected] [email protected]

Douglas A. Campbell, Esq. David B. Salzman, Esq. Philip E. Milch, Esq. Campbell & Levine, LLC 1700 Grant Building Pittsburgh, PA 15219 Tel: 412-261-0310 Fax: 412 261-5066 [email protected] [email protected] [email protected]

Elihu Inselbuch, Esq. Rita C. Tobin, Esq. Caplin & Drysdale, Chartered 600 Lexington Avenue, 21st Floor New York, NY 10022-6000 Tel: 212-319-7125 Fax: 212-644-6755 [email protected] [email protected]

Counsel to Official Committee of Trade Creditors

David W. Lampl, Esq. Leech Tishman Fuscaldo & Lampl LLC Citizens Bank Building, 30th Floor 525 William Penn Place Pittsburgh, PA 15219 Tel: 412-261-1600 Fax: 412-227-5551 [email protected]


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Counsel to Shareholders

Counsel to PPG Industries, Inc. Peter J. Kalis, Esq. Neal R. Brendel, Esq. David A. Murdoch, Esq. David F. McGonigle, Esq. David M. Aceto, Esq. Michael Nelson, Esq. Kristen Serrao, Esq. K&L Gates LLP 210 Sixth Avenue Pittsburgh, PA 15222-2613 Tel: 412-355-6500 Fax: 412-355-6501 [email protected] [email protected] [email protected] [email protected] [email protected] [email protected] [email protected]

Counsel to Corning Incorporated

Kimberly Luff Wakim, Esq. William C. Price, Esq. Elizabeth L. Slaby, Esq. Clark Hill PLC One Oxford Centre, 14th Floor 301 Grant Street Pittsburgh, PA 15219 Tel: 412-394 7711 Fax: 412-394-2555 [email protected] [email protected] [email protected]

Cheryl A. Heller, Esq. Kevin T. Merriman, Esq. David M. Knapp, Esq. Ward Greenberg Heller & Reidy LLP 300 State Street Rochester, NY 14614 Tel: 585-454-0719 Fax: 585-231-1905 [email protected] [email protected] [email protected]


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Counsel to PNC Bank Office of the U.S. Trustee Brad B. Erens, Esq. Jones, Day, Reavis & Pogue 77 West Wacker Chicago, IL 60601 Tel: 312-269-4050 Fax: 312-782-8585 [email protected]

Norma L. Hildenbrand, Esq. 970 Liberty Center 1001 Liberty Avenue Pittsburgh, PA 15222 Tel: 412-644-4756 Fax: 412-644-4785 [email protected]

Legal Representative for Counsel to Legal Representative Future Claimants for Future Claimants Mr. Lawrence Fitzpatrick 100 American Metro Blvd., Suite 108 Hamilton, NJ 08619 Tel: 609-219-8862 Fax: 609-620-1466 [email protected]

Joel M. Helmrich, Esq. Dinsmore & Shohl LLP One Oxford Centre 301 Grant Street; Suite 2800 Pittsburgh, PA 15219 Tel: 412-288-5880 Fax: 412-281-5055 [email protected]

James L. Patton Jr., Esq. Edwin J. Harron, Esq. Sarah Beth A.R. Kohut, Esq. Young Conaway Stargatt & Taylor, LLP 1000 North King Street Wilmington, DE 19801 Tel: 302-571-6600 Fax: 302-571-1253 [email protected] [email protected] [email protected]


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Counsel to Certain Underwriters at Lloyd’s, London and Certain London Market Insurers

Russell W. Roten, Esq. Jeff D. Kahane, Esq. Duane Morris LLP 865 South Figueroa Street, Suite 3100 Los Angeles, CA 90071 Tel: 213-689-7400 Fax: 213-689-7401 [email protected] [email protected]

Michael A. Shiner, Esq. Tucker Arensberg, P.C. 1500 One PPG Place Pittsburgh, PA 15222 Tel: 412-594-5586 Fax: 412-594-5619 [email protected]
