Third Circuit disposition — 03-3392

PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
Nos. 03-3392, 03-3415, 03-3425, 03-3436,
03-3445, 03-3446, 03-3450, 03-3451, 03-3452,
03-3468, 03-3492, 03-3558
IN RE: COMBUSTION ENGINEERING, INC.
First State Insurance Company;
Hartford Accident and Indemnity Company,
Appellants at No.03-3392
(D.C. Civil Action No. 03-cv-00751)
Certain Cancer Claimants, being those individuals
identified on a Rule 2019 Disclosure filed in the
Bankruptcy Court for the District of Delaware
and creditors of Combustion Engineering, Inc.,
Appellants at No. 03-3415
(D.C. Civil Action No. 03-cv-00753)
Certain Underwriters at Lloyd's, London;
Certain London Market Companies,
Appellants at No. 03-3425
(D.C. Civil Action No. 03-cv-00745)

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2
Allstate Insurance Company, as successor-in-interest to
Northbrook Excess & Surplus Insurance Company,
formerly Northbrook Insurance Company,
Appellant at No. 03-3436
(D.C. Civil Action No. 03-cv-00752)
Allianz Insurance Company,
Appellant at No. 03-3445
(Bankruptcy Court No. 03-10495)
Everest Reinsurance Co., f/k/a Prudential Reinsurance Co.,
Appellant at No. 03-3446
(Bankruptcy Court No. 03-10495)
Century Indemnity Company (as successor to CCI
Insurance Company, successor to Insurance Company
of North America); Pacific Employers Insurance Company;
Central National Insurance Company of Omaha (solely with
respect to policies issued through its managing general agent,
Cravens, Dargan & Company, Pacific Coast),
Appellants at No. 03-3450
(D.C. Civil Action No. 03-cv-00744)
OneBeacon America Insurance Company,
f/k/a Commercial Union Insurance Company,
Appellant at No. 03-3451
(D.C. Civil Action No. 03-cv-00743)

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*Sitting by designation.
3
North River Insurance Company;
TIG Insurance Company, solely as successor by merger
to International Insurance Company,
Appellants at No. 03-3452
(D.C. Civil Action No. 03-cv-00742)
Certain Underwriters at Lloyd's, London;
Certain London Market Companies,
Appellants at No. 03-3468
(Bankruptcy Court No. 03-10495)
Everest Reinsurance Co., f/k/a Prudential Reinsurance Co.,
Appellant at No. 03-3492
(D.C. Civil Action No. 03-cv-00748)
Continental Casualty Company;
Transportation Insurance Company,
Appellants at No. 03-3558
(D.C. Civil Action No. 03-cv-00754)
On Appeal from the United States District Court
for the District of Delaware
(Honorable Alfred M . Wolin*)

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4
Argued June 3, 2004
Before: SCIRICA, Chief Judge,
AM BRO and FUENTES, Circuit Judges
(Filed: December 2, 2004)
SETH P. WAXMAN, ESQUIRE (ARGUED)
CRAIG GOLDBLATT, ESQUIRE
Wilmer, Cutler, Pickering, Hale & Dorr
2445 M Street, N.W.
Washington, D.C. 20037
MICHELLE K. McMAHON, ESQUIRE
Connolly Bove Lodge & Hutz LLP
The Nemours Building
1007 North Orange Street
P.O. Box 2207
Wilmington, Delaware 19899
Attorneys for Appellants,
First State Insurance Company;
Hartford Accident and Indemnity Company

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5
GREGORY M. HARVEY, ESQUIRE (ARGUED)
Montgomery, McCracken, Walker & Rhoads, LLP
123 South Broad Street
Philadelphia, Pennsylvania 19109
ELIZABETH WALL MAGNER, ESQUIRE
Energy Centre, Suite 1806
1100 Poydras Street
New Orleans, Louisiana 70163
Attorneys for Appellants,
Certain Cancer Claimants
JOSEPH L. RUBY, ESQUIRE (ARGUED)
Baach Robinson & Lewis PLLC
1201 F Street, N.W., Suite 500
Washington, D.C. 20004
Attorney for Appellants,
Certain Underwriters at Lloyd's, London;
Certain London Market Companies
JAMES S. YODER, ESQUIRE
834 North Market Street, Suite 902
Wilmington, Delaware 19801
Attorney for Appellants,
Allstate Insurance Company;
Allianz Insurance Company

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ELIT R. FELIX, II, ESQUIRE
Margolis Edelstein
The Curtis Center, 4th Floor
601Walnut Street
Philadelphia, Pennsylvania 19106
Attorney for Appellant,
Allianz Insurance Company
JOSEPH L. SCHWARTZ, ESQUIRE
Riker, Danzig, Scherer, Hyland & Perretti LLP
Headquarters Plaza
One Speedwell Avenue
Morristown, New Jersey 07962
NEIL B. GLASSMAN, ESQUIRE
The Bayard Firm
222 Delaware Avenue, Suite 900
P.O. Box 25130
Wilmington, Delaware 19899
Attorneys for Appellant,
Everest Reinsurance Co.,
f/k/a Prudential Reinsurance Co.
MARK D. PLEVIN, ESQUIRE (ARGUED)
Crowell & Moring LLP
1001 Pennsylvania Avenue, N.W.
Washington, D.C. 20004

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BRIAN L. KASPRZAK, ESQUIRE
Marks, O'Neill, O'Brien & Courtney, P.C.
913 North Market Street, Suite 800
Wilmington, Delaware 19801
Attorneys for Appellants,
Century Indemnity Company;
Pacific Employers Insurance Company;
Central National Insurance Company of Omaha;
OneBeacon America Insurance Company
f/k/a Commercial Union Insurance Company;
The North River Insurance Company;
TIG Insurance Company
KEVIN GROSS, ESQUIRE
Rosenthal, Monhait, Gross & Goddess, P.A.
919 Market Street, Suite 1401
P.O. Box 1070
Wilmington, Delaware 19801
MERRIL J. HIRSH, ESQUIRE
THOMAS T. LOCKE, ESQUIRE
ERIK M. PRITCHARD, ESQUIRE
Ross, Dixon & Bell, L.L.P.
2001 K Street, N.W., Suite 400
Washington, D.C. 20006

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8
MOHSIN N. KHAMBATI, ESQUIRE
STEPHANIE A. PETERSMARCK, ESQUIRE
McDermott Will & Emery
227 West Monroe Street, Suite 5200
Chicago, Illinois 60606
Attorneys for Appellants,
Continental Casualty Company;
Transportation Insurance Company
LAURA A. FOGGAN, ESQUIRE
Wiley Rein & Fielding LLP
1776 K Street, N.W.
Washington, D.C. 20006
Attorney for Amicus Curiae-Appellant,
Complex Insurance Claims Litigation Association
LAURA D. JONES, ESQUIRE
Pachulski, Stang, Ziehl, Young, Jones & Weintraub, P.C.
919 North Market Street, 16th Floor
P.O. Box 8705
Wilmington, Delaware 19801
Attorney for Appellee,
Combustion Engineering, Inc.

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9
DAVID M. BERNICK, ESQUIRE (ARGUED)
JOHN DONLEY, ESQUIRE
Kirkland & Ellis LLP
200 East Randolph Drive, Suite 6500
Chicago, Illinois 60601
THEODORE L. FREEDMAN, ESQUIRE
Kirkland & Ellis LLP
Citigroup Center
153 East 53rd Street
New York, New York 10022
CHRISTOPHER LANDAU, ESQUIRE
ERIC B. WOLFF, ESQUIRE
Kirkland & Ellis LLP
655 Fifteenth Street, N.W., Suite 1200
Washington, D.C. 20005
Attorneys for Appellee,
Asea Brown Boveri, Inc.
ELIHU INSELBUCH, ESQUIRE (ARGUED)
Caplin & Drysdale
399 Park Avenue, 27th Floor
New York, New York 10022

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JOSEPH D. FRANK, ESQUIRE
Neal Gerber & Eisenberg
Two North LaSalle Street, Suite 2200
Chicago, Illinois 60602
MICHAEL R. LASTOWSKI, ESQUIRE
Duane Morris LLP
1100 North Market Street, Suite 1200
Wilmington, Delaware 19801
Attorneys for Appellee,
The Official Committee of Unsecured Creditors
of Combustion Engineering, Inc.
ROGER L. FRANKEL, ESQUIRE (ARGUED)
Swidler Berlin Shereff Friedman, LLP
3000 K Street, N.W., Suite 300
Washington, D.C. 20007
JOHN C. PHILLIPS, JR., ESQUIRE
Phillips, Goldman & Spence, P.A.
Bank of Delaware Building
1200 North Broom Street
Wilmington, Delaware 19806
Attorneys for Appellee,
David T. Austern, Future Claimants' Representative

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11
TABLE OF CONTENTS
OPINION OF THE COURT . . . . . . . . . . . . . . . . . . . . . . . . 13
I. Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
A. Combustion Engineering’s
Asbestos-Induced Bankruptcy . . . . . . . . . . . . . . 15
B. Issues Presented on Appeal . . . . . . . . . . . . . . . . 18
II. Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
A. Combustion Engineering . . . . . . . . . . . . . . . . . . 20
B. The Master Settlement Agreement . . . . . . . . . . 24
C. The Pre-Pack Plan . . . . . . . . . . . . . . . . . . . . . . . 27
D. Plan Voting and Approval . . . . . . . . . . . . . . . . 32
E. The Bankruptcy Court Proceedings . . . . . . . . . 33
F. District Court Proceedings
and Plan Confirmation . . . . . . . . . . . . . . . . . . . 41
G. The Consolidated Appeals . . . . . . . . . . . . . . . . 46
III. Standing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
A. Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
B. Objecting Insurers and
London M arket Insurers . . . . . . . . . . . . . . . . . . 52
C. Indemnified Insurers . . . . . . . . . . . . . . . . . . . . . 63
D. Certain Cancer Claimants . . . . . . . . . . . . . . . . . 72

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12
IV. “Related to” Jurisdiction . . . . . . . . . . . . . . . . . . . . . 73
A. Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
B. Jurisdiction Over Independent Claims
Against Non-Debtors . . . . . . . . . . . . . . . . . . . . 82
1. Corporate Affiliation . . . . . . . . . . . . . . . . . . 82
2. Financial Contributions . . . . . . . . . . . . . . . . 83
3. Related Liability . . . . . . . . . . . . . . . . . . . . . 88
4. Shared Insurance . . . . . . . . . . . . . . . . . . . . . 93
V. Section 105(a) Equitable Injunction . . . . . . . . . . . . 97
A. The Requirements of Section 524(g)(4)(A) . . . 97
B. Section 105(a) . . . . . . . . . . . . . . . . . . . . . . . . . 101
VI. Two-Trust Structure . . . . . . . . . . . . . . . . . . . . . . . . 108
A. Discriminatory Treatment of Claims . . . . . . . 110
B. Creation of the “Stub Claims” . . . . . . . . . . . . 119
VII. Going Concern Requirement:
Section 524(g)(2)(b)(i)(II) . . . . . . . . . . . . . . . . . . . 134
VIII. Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 136

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1The Travelers Indemnity Company and certain affiliates and
Travelers Casualty and Surety Company f/k/a The Aetna
Casualty and Surety Company withdrew its appeal on June 2,
2004, following a settlement of its coverage with Combustion
Engineering. Likewise, appellant Evanston Insurance Company
settled its dispute with Combustion Engineering prior to oral
argument, and stipulated dismissal of its appeal on January 7,
2004.
2The District Court’s Confirmation Order, entered August 13,
2003, affirmed three separate recommendations of the
Bankruptcy Court: (1) Order Approving The Disclosure
Statement But Recommending Withholding Of Confirmation Of
The Plan Of Reorganization For Combustion Engineering For
Ten Days, In re Combustion Eng’g, 2003 Bankr. LEXIS 756
(Bankr. D. Del. June 23, 2003); (2) Findings Of Fact A nd
Conclusions Of Law Regarding Core Matters And Proposed
13
OPINION OF THE COURT
SCIRICA, Chief Judge.
This case involves twelve1 consolidated appeals from the
District Court’s order approving Combustion Engineering’s
bankruptcy Plan of Reorganization under 11 U.S.C. § 1101 et
seq.2 We will vacate and remand.

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Findings Of Fact And Conclusions Of Law Regarding Non-Core
Matters, In re Combustion Eng’g, 295 B.R. 459 (Bankr. D. Del.
June 23, 2003); and (3) Supplemental And Amendatory Order
Making Additional Findings And Recommending Confirmation
Of Plan Of Reorganization.
3See, e.g., Stephen J. Carroll et al., Asbestos Litigation Costs
and Compensation: An Interim Report (RAND 2002); Deborah
Hensler et al., Asbestos in the Courts: The Challenge of Mass
Toxic Torts (RAND 1985); James Kakalik et al., Costs of
Asbestos Litigation (RAND 1983).
14
I. Overview
For decades, the state and federal judicial systems have
struggled with an avalanche of asbestos lawsuits. For reasons
well known to observers, a just and efficient resolution of these
claims has often eluded our standard legal process – where an
injured person with a legitimate claim (where liability and injury
can be proven) obtains appropriate compensation without undue
cost and undue delay. See Fed. R. Civ. P. 1 (goal “to secure the
just, speedy and inexpensive determination of every action”).
The difficulties with asbestos litigation have been well
documented by RAND and others.3
Efforts to resolve the asbestos problem through global
settlement class actions under Fed. R. Civ. P. 23(b)(3) and
23(b)(1)(B) have so far been unsuccessful. See Amchem Prods.
v. Windsor, 521 U.S. 591 (1997) (affirming denial of class

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15
certification of nationwide settlement class of asbestos
claimants); Ortiz v. Fibreboard Corp., 527 U.S. 815 (1999)
(reversing grant of class certification in limited fund class action
under Fed. R. Civ. P. 23(b)(1)(B)). More than once, the
Supreme Court has called on Congress to enact legislation
creating a “national asbestos dispute-resolution scheme,” but
Congress has yet to act. Amchem, 521 U.S. at 598; Ortiz, 527
U.S. at 822.
For some time now, mounting asbestos liabilities have
pushed otherwise viable companies into bankruptcy. The
current appeal represents a major effort to extricate a debtor and
two non-debtor affiliates from asbestos liability through a pre-
packaged Chapter 11 bankruptcy reorganization that includes 11
U.S.C. §§ 524(g) and 105(a) “channeling injunctions” and a
post-confirmation trust fund for asbestos claimants. The Plan
has been presented as a pre-packaged Chapter 11 reorganization
plan, but it more closely resembles, in form and in substance, a
liquidation of the debtor with a post-confirmation trust funded
in part by non-debtors. Although pre-packaged bankruptcy may
yet provide debtors and claimants with a vehicle for the general
resolution of asbestos liability, we find the Combustion
Engineering Plan defective for the reasons set forth.
A. Combustion Engineering’s Asbestos-Induced
Bankruptcy
Combustion Engineering defended asbestos-related
litigation for nearly four decades until mounting personal injury

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4A pre-packaged (or “pre-pack”) bankruptcy allows a debtor
to obtain votes of its creditors on a plan of reorganization before
actually filing a petition for Chapter 11 relief. At the time the
debtor files for relief, it presents the bankruptcy court with a
plan of reorganization and a tally of creditors’ votes approving
the plan. To gain approval, the plan must receive (1) a majority
of votes by number by class and (2) two-thirds of votes
weighted by the amount of allowed claims for that class. 11
U.S.C. § 1126(c). In addition, if, as here, the plan contains a §
524(g) channeling injunction, it must be approved by 75% of the
debtor’s current asbestos claimants by number. See 11 U.S.C.
§ 524(g)(2)(B)(ii)(IV)(bb).
16
liabilities eventually brought the company to the brink of
insolvency. In the fall of 2002, Combustion Engineering and its
parent company, Asea Brown Boveri, Inc. (“U.S. ABB”),
attempted to resolve Combustion Engineering’s asbestos
problems, as well as those of two U.S. ABB affiliates, ABB
Lummus Global, Inc. and Basic, Inc., through a pre-packaged
Chapter 11 bankruptcy reorganization.4
To this end, Combustion Engineering contributed half of
its assets to a pre-petition trust (the “CE Settlement Trust”) to
pay asbestos claimants with pending lawsuits for part, but not
the entire amount, of their claims. The remaining, unpaid
portion of these claims, known as “stub claims,” provided pre-
petition trust participants with creditor status under the
Bankruptcy Code. Combustion Engineering then filed a pre-

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17
packaged bankruptcy Plan of Reorganization under Chapter 11.
The centerpiece of the Plan is an injunction in favor of
Combustion Engineering that channels all of its asbestos claims
to a post-confirmation trust (the “Asbestos PI Trust”) created
under § 524(g) of the Bankruptcy Code. The Plan also extends
this asbestos liability shield to the non-debtor affiliates Basic
and Lummus. Millions of dollars in cash and other assets have
been offered to the post-confirmation trust by Combustion
Engineering, Basic and Lummus, as well as their respective
parent companies, U.S. ABB and ABB Limited, to compensate
asbestos claimants and to cleanse the companies of asbestos
liability.
After considerable negotiation, the Plan won approval
from the majority of the asbestos claimants over the objections
of several insurers and certain persons suffering from asbestos-
related injuries. The Bankruptcy Court recommended
confirmation of the Plan, but made two significant
modifications. First, it added a “super-preemptory” provision to
protect the pre-petition rights of certain insurers. Second, it
reconfigured the § 524(g) injunction in favor of Basic and
Lummus as an equitable injunction under § 105(a).
The District Court adopted the Bankruptcy Court’s
findings of fact and conclusions of law and confirmed the Plan
with two changes. The District Court modified the language of
the “super-preemptory” provision and added a “neutrality”
provision purporting to protect the debtor’s and insurers’ pre-
petition rights under certain insurance policies.

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18
B. Issues Presented on Appeal
Although several difficult issues are presented on appeal,
three are paramount. First, on the facts of this case, does the
Bankruptcy Court have “related to” jurisdiction over the
derivative and non-derivative claims against the non-debtors
Basic and Lummus? Second, can a non-debtor that contributes
assets to a post-confirmation trust take advantage of § 105 of the
Bankruptcy Code to cleanse itself of non-derivative asbestos
liability? Third, did the two-trust structure and use of “stub
claims” in the voting process – which allowed certain asbestos
claimants who were paid as much as 95% of their claims pre-
petition to vote to confirm a Plan under which they appear to
receive a larger recovery than other asbestos claimants – comply
with the Bankruptcy Code? Also implicated are issues
involving appellate standing and the propriety of the voting
process.
We summarize our holding. On the appellate standing
issues, we conclude the Objecting Insurers and London Market
Insurers have limited standing – that is, they only have standing
to challenge the District Court’s modification of the super-
preemptory provision. On that issue, we will vacate the District
Court’s modification of the super-preemptory provision, and
reinstate paragraph 17 of the Plan as initially drafted by the
Bankruptcy Court. The Certain Cancer Claimants have standing
to challenge Plan confirmation, including the propriety of the
voting process, entry of the § 105(a) injunction in favor of

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19
Lummus (but not Basic), and issues relating to the validity of the
two-trust structure.
Based in part on the lack of factual findings in support of
“related to” subject matter jurisdiction, we will vacate the §
105(a) injunction in favor of non-debtors Basic and Lummus.
As the Plan’s proponents contend, and both the Bankruptcy
Court and District Court found, extending the injunction to
Basic and Lummus was essential to the Plan. As a practical
matter, therefore, vacating the § 105(a) injunction defeats the
proposed Plan of Reorganization. While we would normally
remand for additional fact finding on the issue of subject matter
jurisdiction, none is required here because the § 105(a)
injunction must be rejected on substantive grounds as well. On
the facts of this case, we hold the Bankruptcy Code precludes
the use of § 105(a) to extend a channeling injunction to non-
derivative third-party actions against a non-debtor.
With regard to the two-trust structure, we believe the pre-
petition payments to the CE Settlement Trust participants and
the use of stub claims to secure confirmation votes may violate
the Bankruptcy Code and the “equality among creditors”
principle that underlies it, requiring a remand to the District
Court for further development and review in considering any
revised reorganization proposal.

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5By the time its bankruptcy petition was filed, Combustion
Engineering had exhausted its primary insurance coverage for
20
II. Background
A. Combustion Engineering
The story of Combustion Engineering sounds a familiar
refrain in the asbestos world. From the 1930s through the
1960s, Combustion Engineering manufactured steam boilers
containing asbestos insulation. The company was first named
as a defendant in an asbestos-related lawsuit in the 1960s, and
its asbestos liability increased steadily over the next thirty years.
By the mid-1970s, Combustion Engineering was receiving a few
hundred asbestos-related claims per year. That number grew to
19,000 annual cases by 1990, and jumped again to over 79,000
cases by 2002.
Declining insurance reimbursements over the same
period exacerbated the financial strain on the company. Prior to
the mid-1990s, two-thirds of Combustion Engineering’s
asbestos liability was covered by insurance. By 2002, some of
the company’s insurers took the position that only one-third of
Combustion Engineering’s asbestos liab ilities were
reimbursable. As a result, between 1990 and 2002 Combustion
Engineering received only $517 million in insurance
reimbursements for $950 million in asbestos-related liabilities.
These factors left Combustion Engineering unable to meet its
asbestos obligations without significant capital infusions from
its parent corporation, U.S. ABB.5

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products liability or settled with its primary insurance carriers.
The Bankruptcy Court found that the pre-petition insurance
settlements with Combustion Engineering account for total
payments of $90.5 million, and further found there was
approximately $200 million in unexhausted excess insurance
policy limits, although certain excess insurance carriers dispute
coverage. In re Combustion Eng’g, 295 B.R. at 464.
21
U.S. ABB acquired Combustion Engineering in 1990 in
a leveraged buyout for $1.6 billion as part of a global acquisition
of power technology companies by its parent company, ABB
Limited, a diversified holding company of over 2,000 corporate
entities based in Zurich, Switzerland. Between May 2000 and
March 2002, U.S. ABB contributed $900 million in cash and
other assets toward Combustion Engineering’s asbestos
obligations. By late 2002, Combustion Engineering’s asbestos
liability began to threaten ABB Limited’s financial viability as
well. ABB Limited had borrowed heavily to finance an
aggressive global expansion during the 1990s. As these
acquisition costs came due, ABB Limited faced a $1.5 billion
debt repayment obligation in December 2002, followed by
another $2.1 billion repayment obligation in 2003. At the same
time, ABB Limited experienced falling demand in its core
businesses and a debt downgrade that reduced the
conglomerate’s historical sources of liquidity. Significant debt
obligations and Combustion Engineering’s rising asbestos
liabilities threatened ABB Limited’s survival. With the
conglomerate facing insolvency, ABB Limited’s lenders

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6As a Swiss Corporation, ABB Limited is not subject to the
United States bankruptcy laws. U.S. ABB, however, is
incorporated in the State of Delaware.
7We note that counsel for Certain Underwriters at Lloyd’s of
London claimed at oral argument that ABB sold its oil, gas and
petrochemical division earlier this year for $950 million, but
retained ownership of ABB Lummus Global. An ABB press
release indicates it sold the group in January 2004 to a private
equity consortium for $925 million, with potential deferred
consideration of an additional $50 million. ABB Lummus
Global was not included in the sale.
22
demanded immediate action and insisted that ABB take steps to
resolve Combustion Engineering’s asbestos liabilities before
extending additional credit. Some creditors threatened to
institute an involuntary bankruptcy against U.S. ABB.6
ABB Limited devised a divestment and restructuring
program to resolve this financial crisis. ABB Limited’s lenders
determined that certain businesses should be sold as part of the
restructuring program, including Lummus and the rest of the oil,
gas and petrochemical division of ABB, of which Lummus was
part. ABB’s lenders purportedly determined these units could
not be sold so long as Lummus carried asbestos liabilities.7
Therefore, ABB attempted to cleanse Lummus of asbestos-
related liabilities before putting the company up for sale. In
October 2002, Combustion Engineering and ABB began to

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8Mr. David Austern was appointed to act as future claims
representative for Combustion Engineering under 11 U.S.C. §
524(g)(4)(B)(i). There is conflicting evidence regarding Mr.
Austern’s role as representative for future Basic and Lummus
claimants. In a letter from M r. Austern to Lummus, dated April
10, 2003, Mr. Austern indicated he was asked to serve as futures
representative for Lummus and Basic. The record also
demonstrates that Mr. Austern conducted certain due diligence
regarding the proposed treatment of future Basic and Lummus
claims under the Plan. But Mr. Austern was not officially
appointed by the Bankruptcy Court to serve as futures
representative for Basic and Lummus claimants, and he testified
that as of January 19, 2003, there was no representative for
future Basic and Lummus claimants.
23
formulate a voluntary Chapter 11 pre-packaged bankruptcy
reorganization to cleanse not only Combustion Engineering, but
also Basic and Lummus, of asbestos liability once and for all.
C ombustion E n gi ne er in g an d AB B Lim ited
communicated with several key players in the world of asbestos
litigation to facilitate the design and implementation of a pre-
pack plan, including an attorney to serve as advisor on the
interests of current claimants, and the general counsel of the
Johns-Manville trust and president of the Claims Resolution
Management Corporation (which manages claims processing for
the Johns-Manville trust) to represent the interests of future
claimants.8

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24
By late October 2002, the parties had negotiated the basic
structure of a pre-packaged plan of reorganization. Combustion
Engineering would place half its assets into a pre-petition
settlement trust (the “CE Settlement Trust”) to pay Combustion
Engineering asbestos claimants who had claims in the legal
system. Subsequently, Combustion Engineering, ABB Limited
and several non-debtor subsidiaries of ABB Limited would
contribute assets to a post-confirmation bankruptcy trust (the
“Asbestos PI Trust”) created under § 524(g) of the Bankruptcy
Code. The pre-pack plan would release certain parties from
asbestos liability, including Combustion Engineering, Basic and
Lummus, by channeling asbestos claims against those entities to
the post-confirmation bankruptcy trust.
B. The Master Settlement Agreement
The parties funded and implemented the pre-petition CE
Settlement Trust through a Master Settlement Agreement on
November 22, 2002. To fund the trust, Combustion Engineering
contributed $5 million in cash, a promissory note in the principal
amount of approximately $100 million, and a $402 million loan
agreement between U.S. ABB as borrower and Combustion
Engineering as lender payable on demand. ABB Limited
guaranteed both the note and the loan. These contributions
comprised approximately half of Combustion Engineering’s
total assets.
The District Court found that participation in the CE
Settlement Trust was offered to all pre-petition claimants with

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9The Master Settlement Agreement was amended on January
29, 2003 to allow additional qualified claimants to enter the CE
Settlement Trust through February 20, 2003.
25
claims pending against Combustion Engineering as of
November 14, 2002.9 Participation was not expressly
conditioned upon a vote in favor of the pre-pack Plan, although
the Master Settlement Agreement provided that counsel for
participating claimants would recommend, consistent with their
ethical obligations, that each participating claimant accept the
pre-pack Plan of Reorganization. Non-participating Combustion
Engineering claimants were left to recover in the bankruptcy
proceeding.
The Master Settlement Agreement initially provided for
three categories of distribution from the CE Settlement Trust to
current Combustion Engineering asbestos personal injury
claimants, depending upon the status of their respective claims.
Category One included claimants who had reached a final
enforceable settlement with Combustion Engineering to be paid
prior to November 15, 2002. Given the advanced stage of their
respective settlement agreements, the Plan’s proponents
allegedly believed this group of claimants might force
Combustion Engineering into involuntary bankruptcy if not paid
immediately. Category One claimants were to receive 95% of
their settled claim value. Category Two included claimants who
also had satisfied all conditions and requirements for settlement
with Combustion Engineering, but had settlement payments due

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26
after November 14, 2002 and prior to March 1, 2003. Category
Two claimants were to receive 85% of their settled claim value.
Category Three provided a catch-all category for all otherwise
eligible Combustion Engineering personal injury claimants who
did not satisfy the requirements of Categories One or Two.
Category Three claimants were to receive an initial payment of
37.5% of their settled claim value upon submission of certain
required information, followed by a second payment not to
exceed an additional 37.5% (for a maximum recovery of 75%)
taken pro-rata from the CE Settlement Trust after all Category
One and Two claims had been paid at the applicable rates.
Late in the pre-pack negotiations, 25,000-30,000
additional claimants qualifying for payment under the Master
Settlement Agreement appeared. These claimants were
concentrated in jurisdictions with historically high asbestos
claims payment averages. Once these additional Combustion
Engineering claimants were factored in, it became clear the
existing pre-petition trust assets were insufficient to pay
participating claims under the original payment terms. ABB
Limited, therefore, agreed to contribute an additional $30
million in cash to the CE Settlement Trust to pay these newly
identified claimants – designated as Category Four claimants –
under the terms of a separate settlement agreement. The
Category Four claimants agreed to accept less than 37.5%
payment on their liquidated claim value, and to subordinate their
right to any second payment to the other settling claimants.

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10These enhancements included: (1) guarantees by ABB
subsidiaries as credit support for ABB Limited’s obligations
under the Plan; (2) assurances that the applicability of the §
524(g) injunction would be reevaluated if ABB Limited
27
In exchange for these payments, CE Settlement Trust
participants agreed to forbear the prosecution of claims against
Combustion Engineering outside of bankruptcy, but reserved the
right to pursue the remainder of their claims in bankruptcy.
These “stub claims” provided CE Settlement Trust participants
with creditor status in bankruptcy, which allowed them to vote
on the pre-pack Plan and share proportionally in the post-
confirmation trust.
C. The Pre-Pack Plan
Concurrent with the CE Settlement Trust negotiations,
the claimants’ representatives undertook a due diligence review
of Combustion Engineering and its affiliates. This included an
assessment of ABB Limited’s financial condition and an
examination of certain transactions between ABB entities and
Combustion Engineering for evidence, among other things, of
possible fraudulent transfers. In addition, the Combustion
Engineering future claimants’ representative, Mr. Austern,
retained several advisors to determine the value of available
insurance assets, the financial condition of ABB Limited, and its
ability to contribute to the Asbestos PI Trust. Following this
review, Mr. Austern insisted that ABB Limited augment its
financial contributions to the Plan.10 The Official Committee of

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defaulted on its obligations under the Plan; (3) limited consent
by ABB Limited to United States jurisdiction; (4) an additional
$100 million payment by ABB Limited between 2006-2011 with
$50 million of such payment contingent upon ABB Limited’s
EBIT (earnings before income tax) margins; (5) credit support
for all of ABB Limited’s $350 million contribution; (6)
modification of Combustion Engineering’s stock contribution to
a $20 million note convertible to 80% of Combustion
Engineering’s outstanding stock upon successful completion of
environmental remediation of certain Combustion Engineering
properties; (7) U.S. ABB assuming liability for remediating one
of Combustion Engineering’s environmental liability sites (with
the cost of remediation estimated at $100 million); (8) payment
by ABB Limited of $5 million in cash to the Asbestos PI Trust
upon the successful sale of Lummus; and (9) acceleration of
$250 million in payments from ABB Limited from five years to
three years.
28
Unsecured Creditors likewise demanded several modifications
to the trust distribution procedures. The parties settled on the
final terms in January 2003.
The centerpiece of the pre-pack Plan involved an
injunction in favor of debtor Combustion Engineering and non-
debtors Basic and Lummus, channeling all asbestos-related
claims against those companies to a single asbestos trust (the
“Asbestos PI Trust”) created under 11 U.S.C. § 524(g) and
prohibiting claims other than against the Asbestos PI Trust (the

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11The insurance-related contributions to the Asbestos PI Trust
are governed by an Insurance Assignment Agreement. Under
that agreement, Combustion Engineering, ABB Limited,
Lummus and Basic transferred to the Asbestos PI Trust their
respective rights to receive $94.5 million under various
insurance settlement agreements. The settlement proceeds
include pre-petition settlements negotiated between Combustion
Engineering and the Indemnified Insurers that released the
Indemnified Insurers from further obligations under their
respective policies. Under these so-called insurance “buy-
backs” Combustion Engineering was to receive a settlement
payment and the insurers were to be released of all costs and
burdens arising out of Combustion Engineering’s asbestos
liability. As part of the settlement agreements, Combustion
Engineering also agreed to indemnify the settling insurers for
costs and expenses incurred in defending suits involving
Combustion Engineering’s asbestos liability.
It is unclear from the record how the Bankruptcy Court
arrived at an estimate of $320 million for the insurance proceeds
29
“channeling injunction”). The parties agreed the post-
confirmation trust would be funded by contributions from
Combustion Engineering, ABB Limited, U.S. ABB, Lummus
and Basic. The Bankruptcy Court found that under the Plan
Combustion Engineering would contribute its rights to proceeds
under certain insurance policies and settlement agreements with
a face amount exceeding $320 million.11 It would also

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contributed by Combustion Engineering to the Asbestos PI
Trust. Combustion Engineering represents that its policies and
settlement agreements covering asbestos personal injury claims
are collectively worth between $242 and $294 million. The
actual coverage under policies with a face amount estimated at
$200 million has yet to be determined.
30
contribute $51 million in cash, future excess cash flows and a
$20 million secured note convertible into 80% of the equity of
the restructured entity. ABB Limited would contribute
30,298,913 shares of its common stock (with an estimated value
of $82 million), $250 million in cash from 2004 to 2006, and an
additional $100 million between 2006 and 2011, contingent in
part on its future financial performance. This commitment was
guaranteed by various ABB Limited affiliates. ABB Limited
also agreed to release all claims and interests in insurance
policies covering Combustion Engineering’s asbestos personal
injury claims. U.S. ABB agreed to indemnify all of Combustion
Engineering’s environmental liabilities (estimated at the time at
more than $100 million), to release its indemnification rights
against Combustion Engineering for asbestos claims asserted
after June 30, 1999, and to contribute a $5 million Limited
Carrier Indemnity. Contingent upon the sale of Lummus within
eighteen months of the effective date of the Plan, U.S. ABB
would make additional payments of $5 million to the Asbestos
PI Trust and $5 million to the pre-petition CE Settlement Trust.
In addition, U.S. ABB agreed to contribute almost $38 million,
deposited into a segregated account, to pay asbestos claims

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12Combustion Engineering and its primary insurers entered
into an agreement in 1983 under which Travelers Indemnity Co.
exclusively handled Combustion Engineering’s asbestos claims.
In 1989, Combustion Engineering and Travelers agreed
Combustion Engineering would remain solely responsible for
handling asbestos claims. Since that time, Combustion
Engineering has delegated claims handling responsibility to
CVCSC.
13Article 7.2.13 of the Plan gives the Asbestos PI Trust the
power to “initiate, prosecute, defend, settle, maintain,
administer, preserve, pursue and resolve all actions arising from
or related to the Asbestos Insurance Rights.” Although Article
7.4.2 enjoins all entities (except the Asbestos PI Trust and the
reorganized Combustion Engineering) from pursuing asbestos-
31
attributed solely to Basic and Lummus. Basic and Lummus
agreed to release and assign to the Asbestos PI Trust all of their
rights to proceeds under insurance policies covering asbestos
personal injury claims.
Distributions from the Asbestos PI Trust were governed
by trust distribution procedures similar to those historically used
by the Connecticut Valley Claims Service Company (“CVCSC”)
in servicing Combustion Engineering’s asbestos claims.12
Combustion Engineering and the Asbestos PI Trust were given
the exclusive right to determine whether to allow asbestos
claims under the trust distribution procedures.13 Under the pre-

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related claims against the qualifying insurers, the Trust retains
the right to “assign a cause of action against Asbestos Insurance
Entity to a holder of an Asbestos PI Trust Claim.”
32
pack Plan, participating insurers were therefore excluded from
the Asbestos PI Trust’s claims determination process.
D. Plan Voting and Approval
Solicitation for the pre-pack Plan began on or around
January 22, 2003, when documents including a Disclosure
Statement, the proposed Plan of Reorganization, a ballot, and
letters from the current creditors’ representative and futures’
representative were sent to approximately 350 asbestos
plaintiffs’ counsel. These solicitations, seeking approval of the
Plan, were extended to any firms representing plaintiffs with
claims against Combustion Engineering, Basic or Lummus. The
packages included both master and individual ballots. Master
ballots for multiple claim holders required the agent casting the
ballot to include a valid power of attorney, proxy, or other
written evidence of agency for every Asbestos PI Trust claim
holder identified on the ballot. CVCSC, Combustion
Engineering’s claims processing organization, or Trumbull
Associates, Combustion Engineering’s balloting agent, would
communicate with any law firm that submitted a master ballot
without a valid power of attorney.
Approximately 232,000 ballots were cast by the February
19, 2003 voting deadline, with 186,000 votes in favor of the

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14There is a factual discrepancy in the record on this point.
The Declaration of Wendy Cappola certifying the tabulation of
ballots states the total number of valid ballots as 115,787. This
declaration does not provide information on the total number of
valid accepting or rejecting votes. Combustion Engineering’s
confirmation hearing exhibit places the number of accepting
votes at 111,986, and the number of rejecting votes at 3,594.
These numbers add up to 115,580.
33
Plan and 46,000 votes against. More than 107,908 of these
ballots were not counted or were invalidated by Combustion
Engineering’s balloting agent because they were not
accompanied by a valid power of attorney. An additional 8,432
ballots were invalidated for other reasons. Of the resulting
115,787 valid ballots, 111,986 Combustion Engineering
claimants voted in favor of the Plan (approximately 97% of total
remaining claimants) while 3,594 voted against.14 Of the 8,017
pending Lummus personal injury claims, 1,846 voted in favor of
the Plan, and two voted against. Of the 3,715 pending Basic
personal injury claims, 206 Basic claimants voted in favor of the
Plan, and fourteen voted against. An estimated 99,000 of the
tabulated votes appear to have been “stub claim” votes cast by
CE Settlement Trust participants.
E. The Bankruptcy Court Proceedings
On February 17, 2003, Combustion Engineering filed a
voluntary petition for bankruptcy relief under Chapter 11 of the
Bankruptcy Code, along with a proposed Disclosure Statement

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34
and Plan of Reorganization, in the United States Bankruptcy
Court for the District of Delaware. On March 31, 2003, this
Court issued an order designating Judge Alfred M. Wolin as the
district court judge and providing that the parties “will have an
opportunity to be heard as to which aspects of the matter Judge
Wolin will hear in the District Court and which matters will
remain with . . . the Bankruptcy Court.”
On May 9, 2003, Judge Wolin entered an order referring
the case to the Bankruptcy Court. The order designated all
matters to be adjudicated as part of Plan confirmation, including
matters arising under 11 U.S.C. §§ 524(g) and 502(c), as non-
core matters subject to de novo review and final order by the
District Court.
The Bankruptcy Court conducted hearings on the
Disclosure Statement and the Plan between April and June of
2003. Various parties objected to the Disclosure Statement, the
Plan and the pre-pack solicitation procedures. Certain insurance
companies argued that Plan provisions assigning policy
proceeds to the Asbestos PI Trust violated existing policies
and/or settlement agreements with Combustion Engineering.
Other insurers who had negotiated pre-petition settlements with
Combustion Engineering (the “Indemnified Insurers”) objected
to the Plan on the ground that it impermissibly channeled
indemnities under the settlements to the post-confirmation trust
without providing sufficient funding to pay those indemnities.
As a result, the Indemnified Insurers argued they were entitled
to vote on Plan confirmation. The Certain Cancer Claimants

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15The Certain Cancer Claimants are 291 persons, or their
legal representatives if deceased, suffering from cancers caused
by exposure to asbestos contained in Combustion Engineering’s
products. All of the Certain Cancer Claimants are creditors of
Combustion Engineering under § 101(10) of the Bankruptcy
Code and are identified in a Bankruptcy Rule 2019 statement.
In addition, some of the Certain Cancer Claimants hold
independent claims against Lummus. Others still hold claims
against both Combustion Engineering and Lummus. There is no
indication in the record or the briefs of the parties that any of the
Certain Cancer Claimants hold independent claims against
Basic.
35
argued the Plan impaired their substantive rights to recover
through the tort system.15 The Bankruptcy Court allowed
discovery on these objections, which resulted in several
modifications to the proposed Plan and Disclosure Statement.
On June 23, 2003, the Bankruptcy Court entered findings
of fact and conclusions of law regarding core matters, and
proposed findings of fact and conclusions of law as to non-core
matters. In re Combustion Eng’g, 295 B.R. 459 (Bankr. D. Del.
2003). The Bankruptcy Court overruled all objections raised by
the insurers and Certain Cancer Claimants as to core matters,
and recommended the District Court overrule all remaining
objections as to non-core matters. Id. at 462. The Bankruptcy
Court found the trust distribution procedures provided the same
protocol as the CVCSC previously used to adjudicate and pay

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36
asbestos claims, and therefore did “not change whatever rights
the insurers had pre-petition regarding the payment of claims.”
Id. at 473. “Although the [trust distribution procedures] do not
provide for insurers to have a say in what claims are paid . . . the
insurers did not have such input pre-petition.” Id. But
recognizing the Plan should not modify the contractual rights of
insurers, the court added a provision to make clear the Plan did
not alter the contractual rights of insurers under any insurance
policy or settlement agreement. The super-preemptory provision
provided:
[N]otwithstanding anything to the contrary in this
Order, the Plan or any of the Plan Documents,
nothing in this Order, the Plan or any of the Plan
documents (including any other provision that
purports to be preemptory or supervening), shall
in anyway [sic] operate to, or have the effect of,
impairing the insurers’ legal, equitable or
contractual rights, if any, in any respect. The
rights of insurers shall be determined under the
Subject Insurance Policies or Subject Insurance
Settlement Agreements as applicable.
Id. at 494. The Bankruptcy Court explained, “the Plan has been
modified to make clear that nothing impairs [the insurers’]
rights.” Id. at 474 (emphasis in original). As a result, the
Bankruptcy Court concluded the Objecting Insurers did not have
a right to vote on Plan confirmation because the Plan expressly
stated that “the rights of insurers shall be determined under the

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37
subject insurance policies or subject insurance agreements as
applicable and nothing in the Plan is to affect that.” Id. The
court also found there was “no litigation pending that would
implicate the indemnities.” Id. at 475.
The Bankruptcy Court further determined the Plan
satisfied the confirmation requirements set forth in §§ 1129(a)
and 524(g) of the Bankruptcy Code. The Bankruptcy Court
noted that, as a practical matter, the Plan offered the only
feasible mechanism for ensuring Combustion Engineering’s
creditors would receive any recovery. Moreover, the court
found the purpose of negotiating the Master Settlement
Agreement and CE Settlement Trust was to “buy immediate
peace from thousands of asbestos lawsuits (pending and
potential) against Combustion Engineering so that Combustion
Engineering could file a prepackaged bankruptcy plan rather
than face a freefall bankruptcy.” Id. at 466. Contrary to the
objections of the Certain Cancer Claimants, the Bankruptcy
Court found that “[p]articipation in the [Master Settlement
Agreement] was offered to all pre-petition claimants,” and
participation “was not conditioned upon a favorable vote on the
proposed plan.” Id. at 468.
With respect to the Asbestos PI Trust, the Bankruptcy
Court concluded § 524(g)(4)(A)(ii) of the Code did not permit
the inclusion of independent claims against non-debtors Basic
and Lummus in the channeling injunction. But the Bankruptcy
Court granted precisely the same relief – that is, channeling
asbestos-related claims against Basic and Lummus to the

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38
Asbestos PI Trust – under § 105(a). Analyzing the factors
announced in In re Dow Corning Corp., 280 F.3d 648, 658 (6th
Cir. 2002) (“Dow Corning II”), the Bankruptcy Court
determined it was appropriate to enjoin the independent, non-
derivative claims against Basic and Lummus under § 105(a).
In Dow Corning II, the Court of Appeals for the Sixth
Circuit held that a bankruptcy court may permanently enjoin
third-party claims against a non-debtor if seven factors are met:
(1) there is an identity of interests between the
debtor and the third party, usually an indemnity
relationship, such that a suit against the nondebtor
is, in essence, a suit against the debtor or will
deplete the assets of the estate;
(2) the nondebtor has contributed substantial
assets to the reorganization;
(3) the injunction is essential to the
reorganization, namely, the reorganization hinges
on the debtor being free from indirect suits
against parties who would have indemnity or
contribution claims against the debtor;
(4) the impacted class, or classes, has
overwhelmingly voted to accept the plan;
(5) the plan provides a mechanism to pay all, or
substantially all, of the class or classes affected by
the injunction;

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39
(6) the plan provides an opportunity for those
claimants who choose not to settle to recover in
full[;] and . . .
(7) the bankruptcy court made a record of specific
factual findings that support its conclusions.
In re Combustion Eng’g, 295 B.R. at 483 (citing Dow Corning
II, 280 F.3d at 658).
The Bankruptcy Court concluded the injunction satisfied
Dow Corning II factors one, two, three, six and seven. On the
first factor, the court found Combustion Engineering shared an
“identity of interest” with non-debtors Basic and Lummus
because “ABB’s need to sell Lummus . . . instigated ABB’s
willingness to contribute to Combustion Engineering’s plan
funding.” Id. at 484. On factor two, the court found that Basic
and Lummus contributed to the Asbestos PI Trust their rights to
certain shared insurance policies. The court determined the
injunction satisfied factor three because it allowed ABB to
restructure its debt and contribute substantial assets to the post-
confirmation trust. The court found the injunction satisfied
factor six because the $38 million in assets segregated to pay
Basic’s and Lummus’ asbestos liabilities was “sufficient to
provide the opportunity to pay any non-accepting creditor.” Id.
But the Bankruptcy Court initially held the Plan did not
satisfy Dow Corning II factors four and five. The court
concluded it was unclear from the record “what, if any, effort
was made to identify, notify and solicit votes from creditors with

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40
claims only against Lummus and only against Basic; i.e., not
shared with Combustion Engineering.” Id. Likewise, the court
did not believe the Plan provided the requisite funding and
distribution processes to pay the direct creditors of Lummus and
Basic. Therefore, despite its approval of the Disclosure
Statement and Plan, as modified through June 4, 2003, the
Bankruptcy Court recommended the District Court withhold
confirmation for ten days to allow the Plan’s proponents to
provide additional information concerning the Basic and
Lummus claimants. Specifically, the Bankruptcy Court ordered
the Plan proponents to submit supplemental documentation
showing that Basic and Lummus creditors were provided
sufficient notification of the injunction, as well as establishing
the process by which these creditors would be paid and
identifying the source of funds.
On July 10, 2003, the Bankruptcy Court entered a
Supplemental and Amendatory Order Making Additional
Findings and Recommending Confirmation of the Plan of
Reorganization. In its supplemental order, the Bankruptcy Court
found, inter alia: the notice given to Lummus and Basic
creditors comported with due process “under the unique
circumstances of the case”; Basic claimants would receive more
than they would receive without the Plan and Lummus claimants
would receive at least as much as they would receive without the
Plan; and the trust distribution procedures establish a sufficient
method of paying Basic and Lummus claimants.

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41
F. District Court Proceedings and Plan Confirmation
In reviewing the Bankruptcy Court’s proposed Findings
of Fact and Conclusions of Law, the District Court
acknowledged the proposed Plan of Reorganization was not
without defect: “Today we consider for confirmation a pre-
packaged bankruptcy plan. The plan is not perfect, but then we
operate in an imperfect system and will substitute fairness and
the greatest good for the greatest number for perfection.” The
District Court recognized the Plan was “fragile,” and had to be
confirmed “promptly to preserve ABB’s economic viability.”
The District Court further explained that “[w]ere ABB to
become insolvent, the possibility that Combustion Engineering
could emerge as a reorganized debtor would be remote,” as
would the “prospect of a viable trust to pay persons suffering
from exposure to Combustion Engineering’s asbestos.”
In an unpublished oral opinion, the District Court rejected
or overruled objections to Plan confirmation. The District Court
concluded the insurers lacked standing to object to Plan
confirmation because their pecuniary interests were not “directly
and adversely affected” by the order of the Bankruptcy Court.
The court explained the super-preeemptory provision added by
the Bankruptcy Court made clear the insurers’ pre-petition rights
would not be altered by the Plan:
[T]he plan specifically provides that payment of
claims is subject to the rights of insurers under
their policies or other agreements. Should the

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42
insurers claim that this provision [i.e., the super-
preemptory provision] has been violated in the
course of the administration of the personal injury
trust, that will be the time to determine the rights
of insurers in an appropriate proceeding.
Nonetheless, on the motion of the Future Claimants
Representative and the Official Committee of Unsecured
Creditors, the District Court modified the super-preemptory
provision to state:
Notwithstanding anything to the contrary in this
Order, the Plan or any of the Plan Documents,
nothing in this Order, the Plan or any of the Plan
documents (including any other provision that
purports to be preemptory or supervening), shall
in any way operate to, or have the effect of,
impairing the insurers’ legal, equitable or
contractual rights, if any, in respect of any claims
(as defined in Section 101(5) of the Bankruptcy
Code). The rights of insurers shall be determined
under the Subject Insurance Policies or Subject
Insurance Settlement Agreements, as applicable,
and under applicable law.
(emphasis added to indicate changes). In addition, the District
Court supplemented the super-preemptory provision with the
following “neutrality provision”:

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43
Nothing in the Plan or in the Confirmation Order
shall preclude any Entity from asserting in any
proceeding any and all claims, defenses, rights or
causes of action that it has or may have under or
in connection with any Subject Insurance Policy
or any Subject Insurance Settlement Agreement.
Nothing in the Plan or the Confirmation Order
shall be deemed to waive any claims, defenses,
rights or causes of action that any Entity has or
may have under the provisions, terms, conditions,
defenses and/or exclusions contained in the
Subject Insurance Policies and the Subject
Insurance Settlement Agreements, including, but
not limited to, any and all such claims, defenses,
rights or causes of action based upon or arising
out of Asbestos PI Trust Claims that are
liquidated, resolved, discharged, channeled, or
paid in connection with the Plan.
The District Court provided no rationale for these modifications.
Proceeding to the substantive objections, the District
Court found the pre-petition trust payments did not induce CE
Settlement Trust participants to vote in favor of the Plan, and
rejected the argument that the pre-petition payments and
creation of the stub claims were intended to manufacture a
confirming vote. Instead, the District Court concluded that
Combustion Engineering created the stub claims because it had
“insufficient funds to pay the settlement trust claimants 100

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44
percent of their claims,” and that the purpose of such payments
was to provide Combustion Engineering “a little time, a
breathing space, while the pre-packaged plan was negotiated.”
Moreover, the court found the votes of the stub claims were not
invalid as a result of a Master Settlement Agreement provision
prohibiting CE Settlement Trust participants from pursuing their
stub claims outside of bankruptcy.
The District Court found the Plan satisfied all
requirements of 11 U.S.C. § 1129. Specifically, the District
Court found the Plan provided between two and three times
more assets than would a Chapter 7 liquidation, satisfying the
§1129(a)(7) “best interests of the creditors” test. In so holding,
the District Court rejected the argument that the pre-petition
transfer of assets to the CE Settlement Trust constituted a
voidable preference under § 547 of the Bankruptcy Code,
reasoning that this argument was “simply a restatement of the
argument already dispensed with by comparing the liquidation
value of the company with the value paid to claimants under the
plan.” The District Court also found the Plan had been proposed
in good faith under §1129(a)(3).
The District Court rejected all challenges to the § 524(g)
channeling injunction. The District Court found the contention
that the Plan violated § 524(g) by treating present and future
claimants differently was not supported by the record.
Specifically, it found that all present claimants were free to
participate in the Plan, and that the Asbestos PI Trust (from
which future claimants would be paid) and the CE Settlement

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45
Trust employed substantially the same claims handling
procedures. The court recognized that pre-petition settlement
participants might receive more for their claims than non-
participants, but reasoned this did not violate § 524(g) because
these persons “simply were not similarly situated.” The District
Court also found the reorganized Combustion Engineering
satisfied the “going concern” requirement of § 524(g) because
it would own and operate a real estate business after emerging
from bankruptcy. The court rejected the argument that §
524(g)(2)(B)(i)(II) required Combustion Engineering to pay
dividends, instead concluding § 524(g) merely required any
dividends the company in fact paid be included in future
payments to the Asbestos PI Trust. The court found the fact that
the Bankruptcy Court did not estimate the total value of all
asbestos claims did not defeat Plan confirmation, noting the Plan
did not prevent estimation of claims in the future, if feasible.
The District Court concluded the Bankruptcy Court
correctly analyzed the application of § 105(a) under Dow
Corning II and properly extended the channeling injunction to
non-debtors Basic and Lummus. In support of this conclusion,
the District Court found the non-debtors’ asbestos liability was,
in many cases, derivative of Combustion Engineering’s asbestos
liability, and the channeling injunction was integral to the Plan.
On the issue of jurisdiction over claimants with
independent claims against the non-debtors, the District Court
found the analysis of the § 105(a) injunction and the “related to”
jurisdiction inquiry “substantially overlap.” The court described

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16The appellant insurance companies include Allianz
Insurance Company, Allstate Insurance Company, Century
Indemnity Company, Continental Casualty Company and
Transportation Insurance Company, Certain Underwriters at
Lloyd’s London and Certain London Market Insurance
Companies, Evanston Insurance Company, Everest Reinsurance
Company, f/k/a Prudential Reinsurance Company, First State
Insurance Company, Hartford Accident and Indemnity
Company, North River Insurance Company and TIG Insurance
46
a “unity of interest” between Combustion Engineering and the
non-debtors that provided a basis for exercising “related to”
jurisdiction over the independent claims against the non-debtors:
Here we have corporate affiliates, shared
insurance, even joint operations at single sites
leading to the asbestos personal injury claims at
issue. The premises on which the plan is based
establish the extensive financial inter-dependence
between the entities.
Having dismissed all appeals and overruled all objections
to the Plan, the District Court affirmed and adopted the
Bankruptcy Court’s proposed findings of fact and conclusions
of law, and confirmed Combustion Engineering’s Plan of
Reorganization.
G. The Consolidated Appeals
Primary and excess insurers16 of Combustion

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Company, OneBeacon America Insurance Company, f/k/a
Commercial Union Insurance Company, and Travelers
Indemnity Company and Certain affiliates and Travelers
Casualty and Surety Company f/k/a The Aetna Casualty and
Surety Company. Evanston Insurance Company and Travelers
either settled or stipulated dismissal of their appeals before we
heard argument.
17Nos. 03-3392, 03-3414, 03-3425, 03-3436, 03-3437, 03-
3445, 03-3446, 03-3450, 03-3451, 03-3452, 03-3458, 03-3468,
03-3492.
18No. 03-3415.
19The Confirmation Order constitutes a final order of the
District Court under its original jurisdiction under 28 U.S.C. §§
157(c)(1) and 1334. Our jurisdiction is based on 28 U.S.C. §
47
Engineering, Lummus and Basic filed thirteen separate appeals
challenging aspects of the District Court’s confirmation order.17
The Certain Cancer Claimants filed a separate appeal.18
Appellant First State Insurance Company filed emergency
motions with this Court seeking a stay to prevent the possibility
that the appeal would become equitably moot if the Plan of
Reorganization were allowed to proceed. The parties entered a
stipulated “standstill agreement” to halt implementation of the
Plan pending appeal before we could rule on those motions. We
accepted the parties’ stipulation by order dated August 19, 2003.
We consolidated the appeals and heard oral argument.19

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1291. See In re PWS Holding Corp., 228 F.3d 224, 235 (3d Cir.
2000); In re Marvel Entm’t Group, Inc., 140 F.3d 463, 470 (3d
Cir. 1998). We review the District Court’s conclusions of law
de novo, its factual findings for clear error, and its exercise of
discretion for abuse thereof. Gillman v. Cont’l Airlines (In re
Cont’l Airlines), 203 F.3d 203, 208 (3d Cir. 2000).
20The “persons aggrieved” standard appeared originally in
section 39(c) of the Bankruptcy Act of 1898. See 11 U.S.C. §
67(c) (1976) (limiting appellate standing in bankruptcy cases to
“persons aggrieved by an order of a referee”). Although this
provision was eliminated in the 1978 amendments to the
48
III. Standing
A. Background
As a threshold matter, we must determine whether
appellants have standing to challenge confirmation of the Plan
of Reorganization. Bender v. Williamsport Area Sch. Dist., 475
U.S. 534, 546 n.8 (1986) (“The rules of standing, whether as
aspects of the Art. III case-or-controversy requirement or as
reflections of the prudential considerations defining and limiting
the role of the courts, are threshold determinants of the propriety
of judicial intervention.”) (citations omitted). Standing to
appeal in a bankruptcy case is limited to “persons aggrieved” by
an order of the bankruptcy court. Gen’l Motors Acceptance
Corp. v. Dykes (In re Dykes), 10 F.3d 184, 187 (3d Cir. 1993).
Originally set forth in the Bankruptcy Act of 1898,20 the

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Bankruptcy Code, federal courts retained the “persons
aggrieved” standard as a prudential standing limitation for
bankruptcy appeals. See Travelers Ins. Co. v. H.K. Porter Co.,
45 F.3d 737, 741 (3d Cir. 1995).
21This restrictive approach to bankruptcy appellate standing
contrasts with the broad right of participation in the early stages
of a bankruptcy proceeding. Under Bankruptcy Code § 1128(b),
any “party in interest” may object to plan confirmation during
the confirmation hearing. 11 U.S.C. § 1128(b). The Code
defines “party in interest” to include “the debtor, the trustee, a
creditors’ committee, an equity security holders’ committee, a
creditor, an equity security holder, or any indenture trustee.” Id.
§ 1109(b). This list is not exhaustive, however, id. § 102(3), (5),
and § 1109(b) has been construed to create a broad right of
participation in Chapter 11 cases. See In re Amatex Corp., 755
F.2d 1034, 1042 (3d Cir. 1985) (“[T]he predecessor provisions
of section 1109(b) of the Code constituted an effort to
encourage and promote greater participation in reorganization
cases. . . . [and] [s]ection 1109(b) continues in this tradition[.]”)
(citations omitted); In re PWS Holding Corp., 228 F.3d at 249
(Section 1109(b) “confers broad standing at the trial level”).
49
“persons aggrieved” test now exists as a prudential standing
requirement that limits bankruptcy appeals to persons “whose
rights or interests are ‘directly and adversely affected
pecuniarily’ by an order or decree of the bankruptcy court.”21 In
re Dykes, 10 F.3d at 187 (citing In re Fondiller, 702 F.2d

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50
441,443 (9th Cir. 1983)). “[P]erson[s] aggrieved” must show
the order of the bankruptcy court “diminishes their property,
increases their burdens, or impairs their rights.” In re PWS
Holding Corp., 228 F.3d at 249 (citing In re Dykes, 10 F.3d at
187). Whether someone is a person aggrieved is normally a
question of fact. In re Dykes, 10 F.3d at 188.
Appellate standing in the bankruptcy context is more
restrictive than Article III standing, which “need not be financial
and need only be ‘fairly traceable’ to the alleged illegal action.”
Travelers, 45 F.3d at 741 (citation omitted). This more stringent
appellate standing requirement rests on the “particularly acute”
need to limit appeals in bankruptcy proceedings, which often
involve a “myriad of parties . . . indirectly affected by every
bankruptcy court order[.]” Id. (citing Kane v. Johns-Manville
Corp., 843 F.2d 636, 642 (2d Cir. 1988)); see also In re Dupage
Boiler Works, Inc., 965 F.2d 296, 297 (7th Cir. 1992) (“The
‘person aggrieved’ test insures that bankruptcy proceedings are
not unreasonably delayed by protracted litigation by allowing
only those persons whose interests are directly affected by a
bankruptcy court order to appeal.”); In re Fondiller, 707 F.2d at
443 (“Efficient judicial administration requires that appellate
review [in bankruptcy proceedings] be limited to those persons
whose interests are directly affected.”). As such, we have
denied standing to parties involved in bankruptcy proceedings
“who, even though they may be exposed to some potential harm
incident to the bankruptcy court’s order, are not ‘directly
affected’ by that order.” Travelers, 45 F.3d at 741. Standing is

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22The Objecting Insurers include appellants Allianz Insurance
Company, Continental Casualty Company and Transportation
Insurance Company, Evanston Insurance Company, Everest
Reinsurance Co. f/k/a Prudential Reinsurance Co., First State
Insurance Company, Hartford Accident and Indemnity
Company, and North River Insurance Company and TIG
Insurance Company. Appellants North River Insurance
Company and TIG Insurance Company are situated somewhat
differently than the other Objecting Insurers. North River and
TIG International, as successor by merger to International
Insurance Company, are also plaintiffs in an adversary
proceeding pending in the Bankruptcy Court in which they
contend they have no further obligations under certain of their
insurance policies included in Debtor’s Plan of Reorganization.
In the event their positions are ultimately rejected in the
Bankruptcy Court, they join in the briefs of First State.
However, North River’s policies were issued only to non-debtor
51
not dispensed in gross, but rather is determined by the specific
claims presented. See Lewis v. Casey, 518 U.S. 343, 358 n.6
(1996); Int’l Primate Prot. League v. Adm’r of Tulane Educ.
Fund, 500 U.S. 72, 77 (1991).
There are four groups of appellants in this case whose
claims must be examined for purposes of appellate standing.
The first group consists of the Objecting Insurers – those
providing primary and excess insurance coverage to Combustion
Engineering.22 The second group consists of the London Market

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Basic. As such, North River contends its interests are also
similar to those of the London Market Insurers, and joins in the
London Market Insurers’ brief in the event its arguments to the
Bankruptcy Court are ultimately rejected.
23As noted, Appellant North River Insurance Company issued
insurance policies only to non-debtor Basic, and joins in the
London Market Insurers’ brief in the event its arguments
currently pending before the Bankruptcy Court are rejected.
52
Insurers – the insurers providing primary and excess insurance
coverage for non-debtors Basic and Lummus.23 The third group
is the Indemnified Insurers – insurance companies that entered
pre-petition settlement agreements with Combustion
Engineering to resolve contested coverage issues. Finally, the
Certain Cancer Claimants consist of 291 individuals (or, if
deceased, their legal representatives) who suffer from asbestos-
related injuries.
B. Objecting Insurers and London M arket Insurers
The Objecting Insurers and the London Market Insurers
raise several challenges to Plan confirmation on appeal. Our
task in assessing the appellate standing of the Objecting Insurers
and the London Market Insurers is informed by the “super-
preemptory” and “neutrality” provisions of the Plan.
The Bankruptcy Court added the “super-preemptory”
provision to the Plan in response to arguments by certain

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24Only classes of creditors that are “impaired” by the plan are
entitled to vote on plan confirmation. 11 U.S.C. § 1126(f).
“Impairment” is defined in § 1124, which provides in part:
. . . a class of claims or interests is impaired under
a plan unless, with respect to each claim or
interest of such class, the plan –
(1) leaves unaltered the legal, equitable,
and contractual rights to which such claim
or interest entitles the holder of such claim
or interest.
11 U.S.C. § 1124.
53
insurers that they were impermissibly excluded from the
confirmation vote.24 As originally drafted, the “super-
preemptory” provision provided that nothing in the Plan would
impair the insurers’ pre-petition rights under subject insurance
policies and settlements. As such, in addressing the insurers’
voting argument, the Bankruptcy Court emphasized the Plan had
been “modified to make clear that nothing impairs their rights.”
In re Combustion Eng’g, 295 B.R. at 474 (emphasis in original).
The Bankruptcy Court found the assignment of insurance
proceeds to the Asbestos PI Trust did not impair the rights of
insurers because the “rights of insurers shall be determined
under the subject insurance policies or subject insurance
settlement agreements as applicable and nothing in the Plan is
to affect that.” Id.
The District Court similarly concluded the insurers

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25As noted, the super-preemptory provision, as modified by
the District Court, provides:
[N]otwithstanding anything to the contrary in this
Order, the Plan or any of the Plan Documents,
nothing in this Order, the Plan or any of the Plan
documents (including any other provision that
purports to be preemptory or supervening), shall
in anyway operate to, or have the effect of,
impairing the insurers’ legal, equitable or
contractual rights, if any, in respect of any claims
(as defined by section 101(5) of the Bankruptcy
Code). The rights of insurers shall be determined
under the Subject Insurance Policies or Subject
Insurance Settlement Agreements, and under
applicable law (emphasis added to show District
54
lacked standing to appeal or object to Plan confirmation because
their “pecuniary interests [were] not ‘directly or adversely
affected’” by the Plan. The District Court reasoned the Plan did
not modify insurers’ rights by excluding them from the
determination of asbestos claims because “the plan specifically
provides that payment of claims is subject to the rights of the
insurers under their policies or other agreements.” However, on
the motions of the Official Committee of Unsecured Creditors
and Future Claimants’ Representatives, the District Court then
modified the super-preemptory provision to refer to the rights of
insurers, “if any, in respect of any claims (as defined by section
101(5) of the Bankruptcy Code).”25 The District Court also

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Court’s changes).
26As noted, the “neutrality” provision provides:
Nothing in the Plan or in the Confirmation Order
shall preclude any Entity from asserting in any
proceeding any and all claims, defenses, rights or
causes of action that it has or may have under or
in connection with any Subject Insurance Policy
or any Subject Insurance Settlement Agreement.
Nothing in the Plan or the Confirmation Order
shall be deemed to waive any claims, defenses,
rights or causes of action that any Entity has or
may have under the provisions, terms, conditions,
defenses and/or exclusions contained in the
Subject Insurance Policies and the Subject
Insurance Settlement Agreements, including, but
not limited to, any and all such claims, defenses,
rights or causes of action based upon or arising
out of Asbestos PI Trust Claims that are
liquidated, resolved, discharged, channeled, or
paid in connection with the Plan.
55
added the “neutrality” provision to provide reciprocal
protections for the debtor’s pre-petition rights under the subject
insurance policies.26
Among other things, the Objecting Insurers and London
Market Insurers contend the District Court’s modifications to

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56
the Plan altered their pre-petition contractual rights, thus
providing them with appellate standing as “parties in interest”
within the meaning of §§ 1128(b) and 1109(b) of the
Bankruptcy Code. As discussed, however, we apply a “persons
aggrieved” standard, not a “party in interest” standard, to
determine bankruptcy appellate standing. See In re Dykes, 10
F.3d at 187. Therefore, the Objecting Insurers and London
Market Insurers have standing to challenge a provision of the
Plan only if that provision “diminishes their property, increases
their burdens, or impairs their rights.” In re PWS Holding
Corp., 228 F.3d at 249 (quoting In re Dykes, 10 F.3d at 187).
Applying the “persons aggrieved” standard, we conclude the
Objecting Insurers and London Market Insurers have limited
appellate standing to challenge only the modification of the
super-preemptory provision but not the neutrality provision.
The super-preemptory provision drafted by the
Bankruptcy Court provides that nothing in the Plan “shall in
anyway [sic] operate to, or have the effect of, impairing
insurers’ legal, equitable or contractual rights, if any, in any
respect.” As both the Bankruptcy Court and District Court
recognized, this language broadly preserves insurers’ pre-
petition rights under the subject insurance policies and
settlements. The insurers are not obligated to pay amounts
exceeding their pre-existing policy limits. So long as claims are
paid in a manner consistent with the rights and conditions set
forth in the subject policies, the Objecting Insurers and London
Market Insurers are not “aggrieved” for purposes of bankruptcy

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57
appellate standing. The trust distribution procedures do not
permit insurers to participate in the payment of claims (the
Asbestos PI Trust trustee and claims reviewers evaluate them).
But, as the Bankruptcy Court found, the insurers did not have
this right pre-petition. In re Combustion Eng’g, 295 B.R. at 473
(“[T]he plan does not change whatever rights the insurers had
prepetition regarding payment of claims.”). Moreover, even
though insurers are excluded from claims processing (as they
were pre-petition), they may still dispute coverage under specific
policies, and may raise any of the same challenges or defenses
to the payment of claims available pre-petition. For these
reasons, we conclude the Plan as originally drafted does not
diminish the rights of insurers or increase their burdens under
the subject insurance policies and settlements.
The District Court modified the super-preemptory
provision to apply more narrowly to “the insurers’ legal,
equitable or contractual rights, if any, in respect of any claims
(as defined by section 101(5) of the Bankruptcy Code)”
(emphasis added). The Official Committee of Unsecured
Creditors argues the super-preemptory provision was initially
included in the Plan to make clear the “claims” of insurers were
unimpaired by the Plan, and thus not entitled to vote on the
Plan’s confirmation. According to the Official Committee, by
referring to “rights” instead of “claims,” the language in the
Bankruptcy Court’s order was “broader than the protection
meant to be afforded under section 1124.” The Official
Committee contends the District Court’s modification was

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58
necessary to track the applicable language in § 1124(1) referring
to “claims,” and not “rights.”
The Official Committee of Unsecured Creditors concedes
too much by noting the District Court’s modification narrowed
the protections originally afforded to insurers under the Plan.
We agree the District Court’s version more closely tracks the
“impairment” language of § 1124(1), and in that sense more
explicitly addresses the insurers’ voting argument. But for
purposes of standing, the question is not whether the Plan
impaired the claims of insurers, but whether it “diminishes their
property, increases their burdens, or impairs their rights.” In re
PWS Holding Corp., 228 F.3d at 249 (quoting In re Dykes, 10
F.3d at 187). As originally drafted, the super-preemptory
provision made clear that any pre-petition contractual rights
remained unaltered and that insurer claims were therefore
unimpaired for voting purposes. But by limiting the scope of the
super-preemptory provision only to “claims” and not to broader
“rights,” the District Court exposed the Objecting Insurers and
London Market Insurers to the possibility that other Plan
provisions could affect aspects of subject policies and settlement
agreements. As such, we conclude the Objecting Insurers and
London Market Insurers have standing to challenge this
modification. Although the District Court found that “all
substantive rights of the insurers were expressly preserved under
the Plan per the order of” the Bankruptcy Court, it nevertheless
altered the language of the provision in a manner the insurers
claim was adverse to their rights. We agree with the insurers on

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59
this point. To resolve this matter, we note that at oral argument
Combustion Engineering stated it would be amenable to
reinstating the super-preemptory provision as drafted by the
Bankruptcy Court. In this context, we will vacate the District
Court’s modification, restoring the provision as drafted by the
Bankruptcy Court.
In contrast to the super-preemptory provision, the
neutrality provision added by the District Court protects the pre-
petition rights and obligations of both the debtor and the insurers
under the Plan by preserving for “any Entity . . . any and all
claims, defenses, rights or causes of action” under subject
insurance policies and settlement agreements. Unlike the
modifications to the super-preemptory provision, which
provided limited protection to “claims,” the neutrality provision
applies broadly to all “claims, defenses, rights or causes of
action.” Therefore, the practical effect of the neutrality
provision is to extend the protections afforded to insurers under
the super-preemptory to include debtor Combustion
Engineering. Affirming the pre-petition contractual obligations
of the Objecting Insurers and London Market Insurers does not
impair their rights or increase their burdens under the subject
insurance policies. We conclude, therefore, the Objecting
Insurers and London Market Insurers have no appellate standing
to challenge the addition of the neutrality provision.
The London Market Insurers also contend the Plan
impairs their rights under the anti-assignment provisions of the
relevant insurance policies. With respect to the anti-assignment

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27Section 541 effectively preempts any contractual provision
that purports to limit or restrict the rights of a debtor to transfer
or assigns its interests in bankruptcy. 11 U.S.C. § 541(c)(1)
(“[A]n interest of the debtor in property becomes property of the
estate . . . notwithstanding any provision in an agreement,
transfer instrument, or applicable nonbankruptcy law – (A) that
restricts or conditions transfer of such interest by the debtor”).
The Bankruptcy Code expressly contemplates the inclusion of
debtor insurance policies in the bankruptcy estate. Section
1123(a)(5) provides:
Notwithstanding any otherwise applicable
nonbankruptcy law, a plan shall--
. . .
(5) provide adequate means for the plan’s
implementation, such as
. . .
(B) transfer of all or any part of property
of the estate to one or more entities,
whether organized before or after the
confirmation of such plan.
11 U.S.C. § 1123(a)(5).
60
provisions, we agree with the District Court that even if the
subject insurance policies purported to prohibit assignment of
Combustion Engineering’s insurance proceeds, these provisions
would not prevent the assignment of proceeds to the bankruptcy
estate.27 This is not the case, however, with respect to anti-
assignment provisions in the Basic and Lummus primary and

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61
excess insurance policies issued by the London Market Insurers
and North River Insurance. Section 541(c)(1) of the Bankruptcy
Code provides, in part:
Except as provided in paragraph (2) of this
subsection, an interest of the debtor in property
becomes property of the estate under subsection
(a)(1), (a)(2), or (a)(5) of this section
notwithstanding any provision in an agreement,
transfer instrument, or applicable nonbankruptcy
law – (A) that restricts or conditions transfer of
such interest by the debtor.
11 U.S.C. § 541(c)(1) (emphasis added). Put simply, § 541
prohibits restrictions on the interests of the debtor, which
includes the insurance policies held by Combustion Engineering.
It does not, however, place similar restrictions on the interests
of non-debtors. See 11 U.S.C. § 541(1)(a) (“The
commencement of a case under section 301, 302, or 303 of this
title creates an estate. Such estate is comprised of . . . all legal
or equitable interests of the debtor in property as of the
commencement of the case.”); see also Legislative Statement to
11 U.S.C. § 541(1)(a) (“As section 541(a)(1) clearly states, the
estate is comprised of all legal or equitable interests of the
debtor in property as of the commencement of the case. To the
extent such an interest is limited in the hands of the debtor, it is
equally limited in the hands of the estate except to the extent that
defenses which are personal against the debtor are not effective
against the estate.”). To the extent the subject insurance policies

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62
are jointly held by Combustion Engineering and a non-debtor,
in this case Basic or Lummus, the § 541 preemption of anti-
assignment provisions applies only to Com bustion
Engineering’s interest in the shared policies. Accordingly, the
London Market Insurers have appellate standing to challenge
any assignment of policy proceeds that violated anti-assignment
provisions in the excess and primary policies held by non-
debtors Basic and Lummus. That said, however, we are unable
to consider the merits of this issue because neither the
Bankruptcy Court nor the District Court made any findings of
fact regarding the terms or operation of anti-assignment
provisions in the Basic and Lummus policies. We would
ordinarily remand for additional fact finding on this issue, but,
as we discuss, that will be unnecessary because we vacate Plan
confirmation on other grounds.
In sum, the Objecting Insurers and London Market
Insurers have limited appellate standing to challenge the
operation of the super-preemptory provision as modified by the
District Court. The London Market Insurers also have standing
to challenge those aspects of the Bankruptcy Court’s order that
purport to violate anti-assignment provisions in the primary and
excess insurance policies of Basic and Lummus. The remaining
issues raised by the Objecting Insurers and London Market
Insurers do not directly and pecuniarily affect their rights under

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28As discussed, standing to challenge the super-preemptory
provision does not provide the Objecting Insurers or London
Market Insurers standing to challenge all aspects of Plan
confirmation. See Int’l Primate Prot. League, 500 U.S. at 77
(“[S]tanding is gauged by the specific common-law, statutory or
constitutional claims that a party presents”). We also note that
the issues raised in the Objecting Insurers’ appeal largely mirror
those raised by the Certain Cancer Claimants. We have
generally taken a restrictive view of third-party prudential
standing in the bankruptcy context. See In re PWS Holding
Corp., 228 F.3d at 248 (“Third-party standing is of special
concern in the bankruptcy context, where . . . one constituency
. . . seeks to disturb a plan of reorganization based on the rights
of third-parties[.] In this context . . . courts have often denied
standing as to any claim that asserts only third-party rights.”).
29The Indemnified Insurers include: Century Indemnity
Company (as successor to CCI Insurance Company, successor
63
the insurance policies and settlements.28 Therefore we will
dismiss the remaining challenges to Plan confirmation raised by
the Objecting Insurers and London Market Insurers for lack of
appellate standing.
C. Indemnified Insurers
The Indemnified Insurers include certain insurance
companies that entered into pre-petition settlement agreements
with Combustion Engineering.29 These settlement agreements

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to Insurance Company of North America); Pacific Employers
Insurance Company; Central National Insurance Company of
Omaha (solely with respect to policies issued through its
managing general agent, Cravens, Dargan & Company, Pacific
Coast); and OneBeacon America Insurance Company, f/k/a
Commercial Union Insurance Company.
30As they state in their brief, the Indemnified Insurers are not
the only insurers to have entered into pre-petition settlement
agreements that imposed indemnification obligations on
Combustion Engineering.
31See Wise v. Travelers Indem. Co., No. 01-C-599 (Cir. Ct. of
Berkeley County, W. Va. filed Oct. 25, 2001), and Cashman v.
Travelers Indem. Co., No. 02-2-56-H (Super. Ct. of Suffolk
County, Mass. filed May 9, 2002).
64
provided for payment to Combustion Engineering in exchange
for the full release of insurance policies and all claims under
such policies (including asbestos claims), and required
Combustion Engineering to indemnify the settling insurers for
related litigation costs and liabilities.30 Prior to the
commencement of the Combustion Engineering bankruptcy
proceedings, the Indemnified Insurers had been named in certain
class-action suits brought under state unfair claims handling
statutes in West Virginia and Massachusetts.31 In those cases,
a class of asbestos claimants who had settled claims against
Combustion Engineering asserted the Indemnified Insurers were

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65
responsible for the deficiency between the settlement paid by
Combustion Engineering and the amount they allegedly should
have recovered. Indemnified Insurers Century Indemnity
Company and One Beacon America Insurance Company, f/k/a
Commercial Union Insurance, each sought indemnification by
Combustion Engineering for expenses incurred in defending
those suits, including any resulting liability.
The Indemnified Insurers objected to the Plan of
Reorganization, arguing they were impermissibly excluded from
the confirmation vote. Following these objections, Combustion
Engineering modified the Plan to classify the indemnity claims
as either Class Three workers compensation claims, Class Four
general unsecured claims, or administrative claims – all of
which were considered unimpaired claims. Because unimpaired
claims are not entitled to vote on plan confirmation, see 11
U.S.C. § 1126(f), this modification rendered the Indemnified
Insurers’ voting objections moot.
The Indemnified Insurers then argued that,
notwithstanding this modification, Combustion Engineering had
not shown the $3 million set aside to pay the Class Three, Class
Four and administrative claims would be sufficient to pay their
indemnification claims in full. In response, Combustion
Engineering agreed to retain all of its current cash
(approximately $50 million) for payment of allowed Class
Three, Class Four and administrative claims, and U.S. ABB
guaranteed an additional $5 million for the payment of insurer
indemnities. Based on the understanding that these proposed

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66
modifications would be accepted, the Indemnified Insurers
withdrew their feasibility objection.
In its Proposed Findings of Fact and Conclusions of Law,
the Bankruptcy Court found the Indemnified Insurers’ voting
objection was moot because the Plan left “the insurers
unimpaired and, if and when their indemnity claims are allowed,
they will be paid 100 percent in either Class 3 or Class 4.” In re
Combustion Eng’g, 295 B.R. at 474. The Bankruptcy Court
noted that few insurers actually had indemnity agreements with
Combustion Engineering. Moreover, not only was there no
current litigation that would implicate the indemnity agreements,
it also was unlikely they would ever come into play. The
Bankruptcy Court found the state court lawsuits that allegedly
implicated the indemnities did not involve contractual
indemnities, but rather involved allegations of conspiracy among
insurance companies to commit unfair settlement practices
under state law. Based on these findings, the Bankruptcy Court
estimated the value of current indemnity claims at zero for
voting and Plan confirmation purposes:
The indemnities that Combustion Engineering
gave under the settlements with insurers are for
claims arising under the policies which were
released through the settlements. Those claims
are not at issue in Wise or Cashman. The
insurers’ argument seems to be that, nonetheless,
someone may raise the issue[,] thereby triggering
the indemnity. Of course, anyone can sue for

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67
anything. The question is, whether the plaintiff
can win, something which is improbable.
Therefore, the indemnities are valued at zero for
purposes of plan voting.
Id. at 479 n.32.
In addition, based upon the enhanced pool of assets
available to pay Combustion Engineering’s indemnity
obligations, the Bankruptcy Court found Combustion
Engineering had sufficient assets to pay the Class Three, Class
Four and administrative claims in full. In concluding the Plan
was “feasible,” the Bankruptcy Court seemed to suggest the
Indemnified Insurers still maintained a feasibility objection. See
id. at 475 (“The insurers contend that the Plan is not feasible in
that there will be insufficient funds to pay the indemnities,
which I have valued at zero.”). The Bankruptcy Court denied
the Indemnified Insurers’ subsequent request to strike these
rulings as moot. However, in its supplemental order, the
Bankruptcy Court made clear that its findings concerning the
scope of the insurers’ indemnity claims were made “solely for
the purpose of determining issues regarding voting or feasibility
of the Plan.”
The District Court adopted the findings of the
Bankruptcy Court with respect to the assertions that the
Indemnified Insurers had been denied the right to vote on the
Plan. The District Court overruled the objection, holding that the

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68
indemnity claims were unimpaired and unlikely to succeed, and
that the Indemnified Insurers lacked standing to raise objections.
The Indemnified Insurers now contend the rulings and
findings made by both courts regarding the estimation of
indemnity claims constitute impermissible advisory opinions.
Accordingly, the Indemnified Insurers request that we vacate the
rulings and factual findings made by the Bankruptcy Court and
District Court regarding the scope of Combustion Engineering’s
indemnity obligations.
In addressing the Indemnified Insurers’ appeal, we begin
with the threshold issue of bankruptcy appellate standing,
which, as mentioned, is limited to “persons aggrieved” by an
order of a bankruptcy court. Under this standard, the
Indemnified Insurers have standing to challenge the factual
findings related to the value of the indemnification claims only
if those findings “diminish[] their property, increase[] their
burdens, or impair[] their rights.” In re PWS Holding Corp.,
228 F.3d at 249 (quoting In re Dykes, 10 F.3d at 187). We do
not believe the Indemnified Insurers are aggrieved by the
valuation of the indemnity claims for the limited purpose of Plan
voting and confirmation.
The injury complained of here relates to the possibility
that a future court will mistakenly rely on the Bankruptcy
Court’s valuation of the indemnification claims as zero for
purposes of voting and Plan confirmation as a ruling on the
merits of those claims. We fail to see how this speculative event

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69
rises to the level of “direct and pecuniary” harm required for
bankruptcy appellate standing. The Bankruptcy Court made
clear the estimation of the value of the indemnity claims was
limited for purposes of plan confirmation. In re Combustion
Eng’g, 295 B.R. at 475 n.23. To make the point more explicit,
the Bankruptcy Court did not foreclose the possibility that future
litigation might alter its valuation of the indemnities: “In the
event that there is litigation that kicks the indemnities into play,
the merits of the claims will be addressed at that time.” Id. at
475. Based upon these clear limitations on the scope of its
findings, we believe a future court will understand the limited
relevance of the Bankruptcy Court’s estimations on the
operation of those indemnities and merits of any related claims.
Moreover, even assuming the findings of the Bankruptcy Court
and District Court on the valuation of the indemnities are moot,
no injury can result from those findings. A ruling or finding on
a moot issue can have no precedential or collateral estoppel
effect. It is well-settled that a “party may not appeal from a
judgment or decree in his favor, for the purpose of obtaining a
review of findings he deems erroneous which are not necessary
to support the decree.” Elec. Fittings Corp. v. Thomas & Betts
Co., 307 U.S. 241 (1939); see also In re Arthur Treacher’s
Franchise Litig., 689 F.2d 1137, 1149 n.16 (3d Cir. 1982).
The Indemnified Insurers rely on our opinion in New
Jersey v. Heldor Indus., Inc., 989 F.2d 702 (3d Cir. 1993), for
the proposition that a bankruptcy court has no authority to
render a decision on a moot issue, and that such rulings and any

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70
related findings of fact must be vacated. In Heldor, the New
Jersey Department of Environmental Protection (“DEP”)
objected to a debtor’s proposed settlement agreement relating to
the sale of certain assets in bankruptcy. The DEP contended the
settlement agreement did not set aside sufficient funds to
comply with a New Jersey environmental statute. After pressing
its argument in the settlement agreement hearing, but before the
bankruptcy judge issued its opinion, the DEP withdrew its
objection. Nearly one month later, the bankruptcy court issued
a memorandum opinion overruling DEP’s previously withdrawn
objection, and holding that various parts of the New Jersey
statute were unconstitutional as violating the Supremacy Clause
of U.S. Constitution Article VI and the Takings Clause of the
Fifth Amendment. The District Court affirmed, and we reversed
on appeal, vacating the bankruptcy court’s order as moot:
[N]o “case” or “controversy” existed between the
DEP and the Debtor by August 9, 1991 or, at the
latest, when the bankruptcy judge learned of the
withdrawal of DEP’s objection on August 28,
1991. After that withdrawal, the controversy
between DEP and the Debtor was moot, and the
September 6, 1991 memorandum necessarily
became an answer to a question not asked. The
memorandum was, therefore, in every sense
“advisory.”
Heldor, 989 F.2d at 707.

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71
We do not believe Heldor compels the remedy the
Indemnified Insurers seek here. Heldor involved a mootness
challenge to a Bankruptcy Court order that addressed the
constitutionality of a state statute despite withdrawal of the
relevant objection by the state agency charged with enforcing
the challenged statute. While acknowledging the withdrawal of
the objection in its order, the Bankruptcy Court explained that
it nevertheless reached the constitutional issue because of the
amount of time it had already expended in writing the opinion.
Id. at 705. Under those circumstances, we found it appropriate
to vacate the entire order of the Bankruptcy Court because it
purported to adjudicate a dispute between the debtor and the
DEP that no longer existed.
In this case, by contrast, several insurers raised feasibility
and voting objections during the Plan confirmation proceedings.
As such, these issues remained “live controversies” before the
Bankruptcy Court and District Court which had to be resolved
prior to Plan confirmation. The valuation determinations were
necessary to Plan confirmation, and both courts expressly
limited the preclusive effect of their estimates of the
indemnities. We see nothing here to confer standing on the
Indemnified Insurers as “persons aggrieved.”

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32As noted, the Certain Cancer Claimants are 291 persons, or
(if deceased) their legal representatives, suffering from cancers
allegedly caused by exposure to asbestos contained in
Combustion Engineering’s products. All of the Certain Cancer
Claimants are creditors under § 101(10) of the Bankruptcy Code
and are identified in a Bankruptcy Rule 2019 Statement. Some
of the Certain Cancer Claimants hold separate claims against
both Combustion Engineering and Lummus; none hold separate
or joint claims involving Basic.
72
D. Certain Cancer Claimants
Finally, we consider the bankruptcy appellate standing of
the Certain Cancer Claimants.32 The Plan proponents previously
challenged the Certain Cancer Claimants’s standing to object to
the use of § 105(a) to extend the channeling injunction to
discharge present and future claims against non-debtors. The
Bankruptcy Court sustained the standing of the Certain Cancer
Claimants to litigate this question as to non-debtor Lummus, but
found that they lacked standing to challenge the channeling
injunction as to non-debtor Basic. The District Court affirmed.
None of the Plan proponents – Combustion Engineering, ABB,
Future Claimants’ Representative or Official Committee of
Unsecured Creditors – contend the Certain Cancer Claimants
lack standing to appeal the confirmation order.
As creditors of the bankruptcy estate, the Certain Cancer
Claimants’ interests are directly and pecuniarily affected by the
order of the Bankruptcy Court. Therefore, the Certain Cancer

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33Nevertheless, because the District Court lacked jurisdiction
over non-derivative claims against Basic, and because we will
vacate confirmation of the Plan on substantive grounds, Basic’s
§ 105(a) channeling injunction is also invalid.
34The parties do not dispute that the District Court properly
exercised subject matter jurisdiction over the asbestos personal
injury claims against Combustion Engineering. We review de
novo whether the District Court had subject matter jurisdiction
over non-derivative third-party claims against non-debtors Basic
and Lummus. Bracken v. Matgouranis, 296 F.3d 160, 162 (3d
Cir. 2002).
73
Claimants have appellate standing to challenge Plan
confirmation, including the District Court’s grant of injunctive
relief under § 105(a) to non-debtor Lummus, the propriety of the
§ 524(g) injunction, and whether the Plan obtained a valid
confirming vote. However, because the Certain Cancer
Claimants do not hold any independent claims against non-
debtor Basic, we conclude they lack appellate standing to
challenge those issues as they relate to Basic.33
IV. “Related to” Jurisdiction
At issue is whether the District Court properly exercised
“related to” jurisdiction over the non-derivative asbestos claims
against non-debtors Basic and Lummus.34 Neither the
Bankruptcy Court nor the District Court made jurisdictional
findings in support of “related to” jurisdiction. The District

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35For example, record evidence of an indemnity obligation
under which a suit against a non-debtor automatically depletes
the assets of the debtor’s estate may be relevant to ascertaining
an “identity of interest” between the debtor and non-debtor and
also support “related to” jurisdiction. See, e.g., Dow Corning II,
280 F.3d at 658 (holding that a “bankruptcy court may enjoin a
non-consenting creditor’s claims against a non-debtor” where,
among other conditions, “[t]here is an identity of interests
between the debtor and the third party, usually an indemnity
74
Court concluded, however, that the Bankruptcy Court implicitly
made the requisite jurisdictional findings as part of its analysis
of the § 105(a) channeling injunction. As such, the District
Court exercised “related to” jurisdiction over the independent,
non-derivative claims based on a “unity of interest” between
Combustion Engineering, Basic and Lummus:
Here we have corporate affiliates, shared
insurance, even joint operations at single sites
leading to the asbestos personal injury claims at
issue. The premises on which the plan is based
establish the extensive financial inter-dependence
between the entities. The Court is satisfied that
there exists a unity of interest here to support
jurisdiction in this court over independent
asbestos claims against the non-debtors.
While aspects of the § 105(a) analysis may be relevant to
the “related to” jurisdiction inquiry,35 these inquiries are

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relationship, such that a suit against the non-debtor is, in
essence, a suit against the debtor or will deplete the assets of the
estate”). By contrast, other aspects of the § 105(a) inquiry – for
example, whether the injunction is essential to the
reorganization, or the non-debtor contributed substantial assets
to the reorganization – may have little or no bearing on the
threshold jurisdictional inquiry.
36Section 105 provides bankruptcy courts with powers of
equity similar to those granted to federal courts under the All
Writs Act, including writs of injunction. See H.R. Rep. No. 95-
595, at 316-17 (1977), reprinted in 1978 U.S.C.C.A.N. 5963,
6273-74 (“Section 105 is similar in effect to the All Writs
Statute, 28 U.S.C. § 1651 . . . . The section is repeated here for
sake of continuity from current law and ease of reference, and
to cover any powers traditionally exercised by a bankruptcy
court that are not encompassed by the All Writs Statute.”). The
All Writs Act provides that “all courts established by Act of
Congress may issue all writs necessary or appropriate in aid of
their respective jurisdictions.” 28 U.S.C. § 1651. See generally
Ralph Brubaker, Nondebtor Releases and Injunctions in Chapter
11, 72 Am. Bankr. L.J. 1, 15-16 (1998).
75
analytically distinct. Section 105(a) permits a bankruptcy court
to “issue any order, process or judgment that is necessary or
appropriate to carry out the provisions” of the Bankruptcy Code.
11 U.S.C. § 105(a).36 But as the statute makes clear, § 105 does
not provide an independent source of federal subject matter

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37Section 105(c) provides:
The ability of any district judge or other officer or
employee of a district court to exercise any of the
authority or responsibilities conferred upon the
court under this title shall be determined by
reference to the provisions relating to such judge,
officer, or employee set forth in [the Judicial
Code]. This subsection shall not be interpreted to
exclude bankruptcy judges . . . from its operation.
11 U.S.C. § 105(c).
76
jurisdiction.37 See also In re Johns-Manville Corp., 801 F.2d 60,
63 (2d Cir. 1986) (“Section 105(a) does not, however, broaden
the bankruptcy court’s jurisdiction, which must be established
separately[.]”). “Related to” jurisdiction must therefore exist
independently of any plan provision purporting to involve or
enjoin claims against non-debtors. In re Zale Corp., 62 F.3d
746, 756 (5th Cir. 1995). Although the Plan proponents argue
that it is efficacious to use § 105(a) to extend injunctive relief in
favor of non-debtors in order to create a “bigger pot” of assets
for all of the asbestos claimants, the exercise of bankruptcy
power must be grounded in statutory bankruptcy jurisdiction.
A. Overview
Federal bankruptcy jurisdiction is defined by 28 U.S.C.
§ 1334. Section 1334(b) confers upon the district courts
“original and exclusive jurisdiction of all cases under title 11,”
and “original but not exclusive jurisdiction of all civil

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38“[C]ases under Title 11,” as used in 28 U.S.C. § 1334(a),
“refers merely to the bankruptcy petition itself.” In re Marcus
Hook Dev. Park, Inc., 943 F.2d 261, 264 (3d Cir. 1991) (quoting
Matter of Wood, 825 F.2d 90, 92 (5th Cir. 1987)). The term
“proceeding,” on the other hand, as used in 28 U.S.C. § 1334(b),
77
proceedings arising under title 11, or arising in or related to
cases under title 11.” 28 U.S.C. § 1334(b). Section 157(a) of
the Bankruptcy Code permits district courts to refer most
matters to a bankruptcy court. See 28 U.S.C. §§ 157(a), 151.
This broad jurisdictional grant allows bankruptcy courts to “deal
efficiently and expeditiously with all matters connected with the
bankruptcy estate.” Celotex Corp. v. Edwards, 514 U.S. 300,
308 (1995) (quoting Pacor, Inc. v. Higgins, 743 F.2d 984, 994
(3d Cir. 1984)).
“Bankruptcy court jurisdiction potentially extends to four
types of title 11 matters: ‘(1) cases under title 11, (2)
proceeding[s] arising under title 11, (3) proceedings arising in
a case under title 11, and (4) proceedings related to a case under
title 11.’” Binder v. Price Waterhouse & Co., LLP (In re
Resorts Int’l, Inc.), 372 F.3d 154, 162 (3d Cir. 2004) (quoting
Torkelsen v. Maggio (In re Guild & Gallery Plus), 72 F.3d
1171, 1175 (3d Cir. 1996)). Cases under title 11, proceedings
arising under title 11, and proceedings arising in a case under
title 11 are referred to as “core” proceedings; whereas
proceedings “related to” a case under title 11 are referred to as
“non-core” proceedings.38 In re Resorts Int’l, Inc., 372 F.3d at

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refers “to the steps within the ‘case’ and to any subaction within
the case that may raise a disputed or litigated matter.” In re
Wolverine Radio Co., 930 F.2d 1132, 1141 n.14 (6th Cir. 1991)
(citing 2 Collier on Bankruptcy ¶ 301.03 (15th ed. 1990)). Put
differently, “anything that occurs within a case is a proceeding,”
see 1 Collier on Bankruptcy ¶ 3.01[4][b] at 3-19 (15th ed. rev.
2003) (quoting H.R. Rep. No. 595, 95th Cong., 1st Sess. 445
(1977)), including all “controversies, adversary proceedings,
contested matters, suits, actions or disputes.” Id. ¶ 3.01[3] at 3-
13.
39The Supreme Court has affirmed the Pacor test for “related
to” jurisdiction. Celotex, 514 U.S. at 308.
78
162 (citing 1 Collier on Bankruptcy, ¶ 3.02[2], at 3-35 (15th ed.
rev. 2003)). Proceedings “related to” a title 11 case include
causes of action owned by the debtor that become property of
the bankruptcy estate under 11 U.S.C. § 541(a), as well as suits
between third parties that conceivably may have an effect on the
bankruptcy estate. Celotex, 514 U.S. at 308 n.5. We focus our
attention on the latter type of proceeding.
Although not defined by statute, we set forth what has
become the seminal test for determining “related to” jurisdiction
over third-party claims in Pacor, Inc. v. Higgins, 743 F.2d 984
(3d Cir. 1984).39 In that case, John and Louise Higgins brought
suit in state court against Pacor, a chemical supplies distributor,
for injuries allegedly caused by exposure to asbestos contained

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79
in Pacor’s products. Pacor filed a third-party complaint
impleading Johns-Manville, the initial asbestos manufacturer.
Johns-Manville subsequently filed for Chapter 11 bankruptcy,
and the plaintiffs sought to remove their case to the bankruptcy
court where the Johns-Manville bankruptcy was proceeding.
The bankruptcy court denied removal, and we affirmed.
In evaluating the scope of “related to” bankruptcy
jurisdiction, we acknowledged that Congress intended to grant
bankruptcy courts broad authority to deal expeditiously with all
matters pertaining to the bankruptcy. But we also noted that this
power was not without limitation. In defining the appropriate
balance, we stated:
The usual articulation of the test for determining
whether a civil proceeding is related to
bankruptcy is whether the outcome of that
proceeding could conceivably have any effect on
the estate being administered in bankruptcy. . . .
An action is related to bankruptcy if the outcome
could alter the debtor’s rights, liabilities, options,
or freedom of action (either positively or
negatively) and which in any way impacts upon
the handling and administration of the bankrupt
estate.
Pacor, 743 F.2d at 994 (emphasis in original) (citations
omitted).

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80
Applying this test, we concluded “related to” jurisdiction
did not extend to the civil proceeding between non-debtors
Higgins and Pacor because, “[a]t best, [the lawsuit] is a mere
precursor to the potential third party claim for indemnification
by [defendant] against [the debtor].” Id. at 995. We noted that
other cases finding “related to” jurisdiction over actions
involving non-debtors involved contractual indemnity
obligations between the debtor and non-debtor that
automatically resulted in indemnification liability against the
debtor. Id. (citing cases). By contrast, we found that any
judgment against Pacor in the third-party action “could not itself
result in even a contingent claim against Manville, since Pacor
would still be obligated to bring an entirely separate proceeding
to receive indemnification.” Id. As such, we concluded that
because the debtor Johns-Manville could not be bound
automatically by the Higgins-Pacor action, that action was not
“related to” the debtor’s Chapter 11 case.
Recently we affirmed the validity of the Pacor test in In
re Federal-Mogul Global, Inc., 300 F.3d 368 (3d Cir. 2002). As
in the current case, Federal-Mogul involved an asbestos-related
bankruptcy. Thousands of individuals brought personal injury
claims in state courts seeking damages for asbestos exposure to
certain “friction products,” such as automobile brake pads.
Plaintiffs asserted claims against both manufacturers and
distributors of friction products, including Federal-Mogul, and
also against companies that made products containing friction

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81
products, in particular automobile manufacturers that used
asbestos-containing brake pads.
Federal-Mogul filed for reorganization under Chapter 11.
Thereafter, certain automobile manufacturers sought to remove
asbestos-related personal injury claims from state court to the
Federal-Mogul bankruptcy proceeding. The automobile
manufacturers asserted these claims were “related to” Federal-
Mogul’s bankruptcy because they had purchased and used
Federal-Mogul’s friction products and therefore would seek
indemnification or contribution from Federal-Mogul. The
District Court disagreed and denied removal for lack of subject
matter jurisdiction, reasoning that “related-to bankruptcy
jurisdiction [does] not extend to a dispute between non-debtors
unless that dispute, by itself, creates at least the logical
possibility that the estate will be affected.” In re Federal-Mogul
Global, Inc., 282 B.R. 301, 309 (D. Del. 2002).
On appeal, the automobile manufacturers again argued
the friction products claims were “related to” the Federal-Mogul
bankruptcy. Relying in part on Dow Corning I, the automobile
manufacturers asserted the potential indemnification and
contribution claims by the non-debtors against Federal-Mogul
provided a sufficient basis for “related to” jurisdiction over
claims against the non-debtors. 300 F.3d at 381 n.8 (citing
Lindsey v. O’Brien (In re Dow Corning Corp.), 86 F. 3d 482
(6th Cir. 1996) (“Dow Corning I”)). We disagreed, reiterating
that Pacor, and not Dow Corning I, provides the controlling
standard for assessing “related to” bankruptcy jurisdiction. Id.

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82
at 381. We also clarified that the potentially expansive language
in Pacor was subject to the limiting principles announced in that
case: “The test articulated in Pacor for whether a lawsuit could
‘conceivably’ have an effect on the bankruptcy proceeding
inquires whether the allegedly related lawsuit would affect the
bankruptcy without the intervention of yet another lawsuit.” Id.
at 382. Because the potential indemnification and contribution
claims against Federal-Mogul had not yet accrued and would
require another lawsuit before they could affect Federal-Mogul’s
bankruptcy estate, we concluded the district court correctly held
it lacked subject matter jurisdiction over the third-party friction
product claims.
With these principles in mind we turn to the question
whether the non-derivative asbestos claims against non-debtors
Basic and Lummus are sufficiently “related to” Combustion
Engineering’s Chapter 11 bankruptcy to give rise to federal
subject matter jurisdiction.
B. Jurisdiction Over Independent Claims
Against Non-Debtors
1. Corporate Affiliation
The “corporate affiliation” between Combustion
Engineering, Basic and Lummus identified by the District Court
cannot by itself provide a sufficient basis for exercising “related
to” jurisdiction. Any corporate relationship between
Combustion Engineering, Basic and Lummus derives from the
ABB holding company structure and a common parent that is

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83
not seeking bankruptcy protection. The record demonstrates
that Combustion Engineering, Basic and Lummus are
independent corporate entities, with separate and distinct
management and operations. Combustion Engineering does not
currently own or control non-debtors Basic and Lummus. A
corporate affiliation between lateral, peer companies in a
holding company structure, without more, cannot provide a
sufficient basis for exercising federal subject matter jurisdiction.
Such an affiliation could be relevant to the jurisdictional inquiry
if supported by factual findings demonstrating that a suit against
Basic or Lummus would deplete the estate or affect its
administration. But, as discussed in greater detail, neither the
Bankruptcy Court nor the District Court made such findings.
2. Financial Contributions
Combustion Engineering asserts the corporate
relationship between itself, ABB, Basic and Lummus gives rise
to “related to” jurisdiction because ABB’s significant financial
contributions to the Asbestos PI Trust hinged upon a channeling
injunction in favor of Lummus. For this reason, Combustion
Engineering argues the “entire plan is contingent on the
inclusion of claims against Lummus and Basic within the scope
of the channeling injunction. If the channeling injunction does
not extend to claims against Lummus and Basic, there is no
plan; it is that simple.”
The Bankruptcy Court found it was necessary for ABB
Limited to sell Lummus in order to contribute the 30 million

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84
plus shares of ABB Limited stock to the Plan, and the sale was
not possible while Lummus retained asbestos liability:
Without an injunction in favor of Basic and
Lummus, the shared insurance would not be
available to the Asbestos PI Trust, ABB would
not contribute and its subsidiaries would not
guarantee ABB’s contributions to the Plan and the
creditors would not receive the substantial
benefits ABB is providing.
In re Combustion Eng’g, 295 B.R. at 483. The District Court
likewise concluded that “absent the injunction [in favor of Basic
and Lummus,] ABB Limited would not be able to restructure its
debt and could not make necessary contributions to the plan.”
Although ABB Limited’s contributions to the Asbestos
PI Trust may depend on freeing Lummus and Basic of asbestos
liability, and these contributions may inure to the benefit of
certain Combustion Engineering asbestos claimants, these
factors alone do not provide a sufficient basis for exercising
subject matter jurisdiction. If that were true, a debtor could
create subject matter jurisdiction over any non-debtor third-party
by structuring a plan in such a way that it depended upon third-
party contributions. As we have made clear, “[s]ubject matter
jurisdiction cannot be conferred by consent of the parties.
Where a court lacks subject matter jurisdiction over a dispute,
the parties cannot create it by agreement even in a plan of
reorganization.” In re Resorts Int'l, Inc., 372 F.3d at 161

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85
(internal citations omitted). See also Ins. Corp. of Ireland, Ltd.
v. Compagnie des Bauxites de Guinee, 456 U.S. 694, 702 (1982)
(“[N]o action of the parties can confer subject-matter
jurisdiction upon a federal court.”). Although federal
bankruptcy jurisdiction is “deliberately expansive” and
“conspicuous for its breadth,” Morales v. TWA, Inc., 504 U.S.
374, 384 (1992) (citations omitted), it is not without limitation.
See Bd. of Governors of Fed. Reserve Sys. v. MCorp Fin., Inc.,
502 U.S. 32, 40 (1991) (noting Congress has vested the
bankruptcy courts with “limited authority”). As such, the
boundaries of bankruptcy jurisdiction cannot be extended simply
to facilitate a particular plan of reorganization, see In re Resorts
Int’l, Inc., 372 F.3d at 161 (“The source of the bankruptcy
court’s subject matter jurisdiction is neither the Bankruptcy
Code nor the express terms of the Plan. The source . . . is 28
U.S.C. §§ 1334 and 157.”), even if we perceive the plan to be in
the public interest. See In re Hechinger Inv. Co. of Del., Inc.,
335 F.3d 243, 256 (3d Cir. 2003) (“[I]t is not for us to substitute
our view of . . . policy for the legislation which has been passed
by Congress.”).
Nevertheless, the Plan proponents insist that any
unresolved asbestos liability of non-debtor Lummus impedes
Combustion Engineering’s ability to craft a plan that includes
contributions from ABB Limited. In this regard, Combustion
Engineering relies on our decision in CoreStates Bank, N.A. v.
Huls Am., Inc., 176 F.3d 187 (3d Cir. 1999), for the proposition
that if litigation against non-debtors prevents the debtor from

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86
crossing the finish-line and confirming a plan, then the effect on
the estate is immediate and fully sufficient to justify “related to”
jurisdiction. We do not read CoreStates so broadly.
CoreStates addressed the question of “related to”
jurisdiction over an inter-creditor dispute. Both CoreStates and
Huls America, Inc. had extended substantial credit to the debtor,
United Chemical Technologies, Inc. (“UCT”), and subsequently
entered into a subordination agreement to clarify their respective
rights to payment from UCT. Under the terms of the agreement,
UCT’s debts to Huls were subordinated to debts owed to
CoreStates. Huls further agreed it would not retain any payment
by UCT, including payments under a bankruptcy plan, until
UCT had paid off its indebtedness to CoreStates in full. After
UCT filed for bankruptcy, but before the plan was confirmed,
UCT paid $600,000 to Huls in satisfaction of its debt. Citing
their subordination agreement, CoreStates demanded Huls pay
this sum over to it, and objected to plan confirmation on the
ground that the proposed payment to Huls unfairly discriminated
among creditors. CoreStates then filed a suit in federal court,
alleging Huls was obligated under the subordination agreement
to turn over the $600,000 payment. The district court concluded
CoreStates’s claim was precluded because CoreStates could
have raised its claim in the bankruptcy proceeding along with its
objection, but failed to do so. We affirmed.
As a threshold matter, we found that a claim based on the
subordination agreement fell within the court’s “related to”
jurisdiction. Huls, a creditor of the estate, gave up a claim

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40Of course, the creditor status of third-party litigants in a
civil proceeding is not a prerequisite for establishing “related to”
jurisdiction.
87
against the debtor for over $3 million in exchange for an up-
front payment of $600,000 under the plan. We reasoned that
without this payment Huls “might not have consented to the
Plan” and “UCT might have had a much more difficult time
having the Plan confirmed.” Id. at 204. We found “related to”
jurisdiction because resolution of the subordination dispute
“conceivably would have impacted upon the debtor’s options in
crafting a plan that met with [one of the creditor’s] approval and
thereby affected the handling of the bankruptcy estate.” Id.
We believe CoreStates can be distinguished on its facts.
It does not support extending “related to” jurisdiction to non-
derivative claims against the non-debtors in this case.
CoreStates involved an inter-creditor dispute that directly
concerned assets of the debtor’s estate. As creditors, either
CoreStates or Huls had the ability to impede plan confirmation,
thereby affecting directly the administration of the bankruptcy
estate. By contrast, claimants with independent claims against
non-debtors Basic and Lummus are not creditors of Combustion
Engineering, and have no ability to affect directly plan
administration.40 Moreover, the matter at issue in CoreStates
purported to alter the priority of creditors in the bankruptcy
process, which would have had an obvious effect on the
administration of the bankruptcy estate. See Pacor, 743 F.2d at

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88
995-96 (dismissing claim for lack of “related to” jurisdiction,
noting, inter alia, that “[a]ny judgment obtained would thus
have no effect on the arrangement, standing, or priorities of
[debtor’s] creditors”). By contrast, the claims asserted against
Basic and Lummus would not alter the priority of Combustion
Engineering’s creditors.
Finally, and most importantly, CoreStates involved a
dispute regarding assets of the debtor’s bankruptcy estate. By
contrast, there are no record findings of fact demonstrating that
the independent, non-derivative claims against Basic and
Lummus involve assets of the bankruptcy estate. In fact, the
Plan currently provides that these claims will be paid from $38
million in assets contributed by ABB Limited, not Combustion
Engineering.
In sum, “related to” jurisdiction cannot be extended to the
independent claims against non-debtors Basic and Lummus
simply because contributions to the Plan by ABB Limited, itself
a non-debtor, purportedly depend on a channeling injunction in
their favor.
3. Related Liability
Combustion Engineering insists the Bankruptcy Court
properly exercised “related to” jurisdiction over the independent,
non-derivative claims against Basic and Lummus for the
additional reason that the bankruptcy estate could be affected by
future contribution or indemnification claims by a non-debtor.
Though Combustion Engineering does not cite to any statutory

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41Specifically, out of the 8,017 active Lummus claims, 7,446
also assert claims against Combustion Engineering.
89
indemnity obligations or express agreements that would
automatically give rise to indemnification obligations with
respect to Basic or Lummus, it nonetheless argues the factual
findings made by the courts support the possibility of
indemnification claims against it. The District Court described
a “unity of interest” between Combustion Engineering, Basic
and Lummus, based in part on “joint operations at single sites
leading to the asbestos personal injury claims at issue,” and
“extensive financial inter-dependence.” Furthermore, in
discussing the shared insurance policies, the District Court noted
that personal injury claims against the “non-debtors would
inevitably lead to indemnification claims over against their
former parent, Combustion Engineering.” There is also
evidence in the record indicating a large majority of Lummus
claimants have also asserted claims against Combustion
Engineering.41
We believe this factual record does not support “related
to” jurisdiction and is readily distinguishable from cases
exercising “related to” jurisdiction based on the possibility of
contribution or indemnification claims by third parties. For
example, in Dow Corning I the court found “related to”
jurisdiction based on the “identity” of interest created by shared
insurance policies and potential claims for contribution and
indemnification against Dow Corning by non-debtors. 86 F.3d

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90
482, 493 (6th Cir. 1996). In that case, the personal injury
liability of both the debtor and non-debtors was based on a
single product: silicone gel breast implants. Dow Corning
manufactured nearly 50% of all breast implants sold in the
market and supplied the silicone raw materials to all other
manufacturers. Id. at 485. In other words, every silicone breast
implant involved Dow Corning as either the primary
manufacturer or the supplier of the key product input. As one
court discussing the facts of Dow Corning I explained, “each of
the co-defendants was closely involved in using the same
material, originating with the debtor, to make the same, singular
product, sold to the same market and incurring substantially
similar injuries. This circumstance created a unity of identity
between the debtor and the co-defendants not present here.”
Arnold v. Garlock, Inc., 278 F.3d 426, 440 (5th Cir. 2002).
The theory of “related to” jurisdiction in Dow Corning I
was based on the near certainty that Dow Corning would be
directly or derivatively liable for any injury resulting from a
silicone breast implant because it either manufactured or
contributed key supplies to every breast implant on the market.
Other courts exercising “related to” jurisdiction over personal
injury claims against non-debtors based on the potential for
indemnification claims against the debtor have similarly
involved either express indemnification obligations not present
here, see A.H. Robins Co., Inc. v. Piccinin, 788 F.2d 994, 1007-
08 (4th Cir. 1986), or derivative liability, see MacArthur Co. v.
Johns-Manville, 837 F.2d 89, 92-93 (2d Cir. 1988).

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91
By contrast, the asbestos-related personal injury claims
asserted against Combustion Engineering, Basic and Lummus
arise from different products, involved different asbestos-
containing materials, and were sold to different markets. The
record demonstrates that asbestos-related claims against
Combustion Engineering arise from exposure to asbestos
insulation used in boilers manufactured by Combustion
Engineering for use in power plants and industrial facilities.
The asbestos claims against Lummus arise from exposure to
water heaters manufactured by Lummus that included asbestos-
containing gaskets. Basic’s asbestos liabilities arise from its
manufacture of an acoustical plaster containing asbestos. As
such, a review of the asbestos-related claims asserted against
Combustion Engineering, Basic and Lummus reveals little
evidence of derivative liability. Although a majority of the
active asbestos claims against Lummus also assert claims
against Combustion Engineering, only one Lummus claimant
has asserted that Combustion Engineering is derivatively liable
for Lummus’ asbestos liability. These distinct products and
customers do not establish a “unity of interest” between
Combustion Engineering and the non-debtors.
Moreover, we have rejected “related to” jurisdiction over
third-party claims involving asbestos or asbestos-containing
products supplied by the debtor when the third-party claim did
not directly result in liability for the debtor. For example, Pacor
involved a third-party personal injury suit against a non-debtor
for damages allegedly caused by asbestos supplied by the non-

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92
debtor but manufactured by the debtor. Even though the debtor,
Johns-Manville, manufactured the asbestos giving rise to the
third-party claim, we found no “related to” jurisdiction because
the “primary action” – i.e., the suit between the two non-debtors
– would not, itself, result in an indemnification claim against the
debtor. See Pacor, 743 F.2d at 995 (“[T]he primary action
between Higgins and Pacor would have no effect on the
Manville bankruptcy estate . . . . At best, it is a mere precursor
to the potential third party claim for indemnification.”).
Likewise, in Federal-Mogul we found no “related to”
jurisdiction over independent claims against the non-debtor
automobile manufacturers, even though the manufacturers’
products physically incorporated the debtor’s asbestos products.
300 F.3d at 382 (“[W]hether a lawsuit could ‘conceivably’ have
an effect on the bankruptcy proceeding inquires whether the
allegedly related lawsuit would affect the bankruptcy without
the intervention of yet another lawsuit.”). In both cases the
unity of exposure created by asbestos contained in a common
product was insufficient to give rise to “related to” jurisdiction
when the third-party claim would not directly result in liability
for the debtor.
At oral argument, Combustion Engineering suggested
that common production sites shared by Combustion
Engineering, Basic and Lummus were likely to give rise to
future indemnification claims. Neither the Bankruptcy Court
nor the District Court made any findings of fact on this issue. In
any event, we do not believe common production sites alone

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42The record states: “Lummus and Basic shared, at some
point, respectively, in the Combustion Engineering insurance
program” (testimony of Scott Gilbert); (“Q: Lummus is –
Lummus and Combustion Engineering have shared insurance
applicable to asbestos personal injury claims in certain periods
of time? A: Yes, they have.”) (testimony of John P. Brett);
(“Since 1990, both Lummus and Combustion Engineering were
insured under the ABB insurance program and were covered by
ABB insurance policies that extended to ABB companies.”)
(deposition of John P. Brett).
93
provide a sufficient basis for the kind of “unity of interest” that
could give rise to “related to” jurisdiction. Moreover, any
indemnification claims against Combustion Engineering
resulting from a shared production facility would require the
intervention of another lawsuit to affect the bankruptcy estate,
and thus cannot provide a basis for “related to” jurisdiction.
4. Shared Insurance
The record includes testimony that Combustion
Engineering, Basic and Lummus share certain insurance
coverage.42 Based on this testimony, the Bankruptcy Court
assumed that independent claims against Lummus and Basic
would reduce the insurance proceeds available to the estate. See
In re Combustion Eng’g, 295 B.R. at 483 (“Continued lawsuits
against Basic and Lummus may drain insurance so that it is not
available to fund [Combustion Engineering’s] Plan.”). The

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43Although there is testimony in the record that both
Combustion Engineering and Lummus were insured under an
ABB insurance program, the Bankruptcy Court made no
findings in this regard. Moreover, although the Bankruptcy
Court found that Combustion Engineering and Lummus shared
insurance for the period of 1963 to 1985, it did not make any
findings regarding the terms, scope or operation of those
policies.
94
District Court made the same assumption (“Insurance policies
for which Combustion Engineering, Lummus and/or Basic are
co-insureds would be drawn upon by Lummus and Basic
claimants, reducing the proceeds available for the personal
injury trust.”). The Plan proponents contend that certain
insurance policies Combustion Engineering shares with Basic
and Lummus operate as indemnification obligations, such that
asbestos-related personal injury claims against Basic and
Lummus would automatically deplete the insurance proceeds
available to Combustion Engineering and thus reduce the assets
available to the bankruptcy estate.
Neither the Bankruptcy Court nor the District Court made
factual findings regarding the terms, scope or coverage of the
allegedly shared insurance policies.43 Courts finding “related
to” jurisdiction over claims against non-debtors based in part on
shared insurance policies have relied not only on extensive
record findings regarding the terms and operation of the subject
policies, but also on additional evidence of automatic liability

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44Although we have said in certain situations that “related to”
jurisdiction may be determined by “speculating whether the
ultimate outcome of the litigation could conceivably affect the
bankrupt estate,” Copelin v. Spirco, Inc., 182 F.3d 174, 179 (3d
Cir. 1999), this determination must meet the requirements of
“related to” jurisdiction that we have set forth and also must be
supported by findings of fact and not merely the general
assertions of the plan proponents. Moreover, Copelin is not
95
against the debtor. For example, in A.H. Robins, 788 F.2d 994
(4th Cir. 1986), the Court of Appeals for the Fourth Circuit
found “related to” jurisdiction over non-debtor co-defendants
(directors and officers of the debtor) after finding they were
entitled to statutory indemnification and were co-insureds under
the policies. In reviewing the factual record, the court noted:
“The rights of [the non-debtor co-defendants] to indemnity and
their status as additional insureds under Robins’ insurance
policy are undisputed on the record. That there are thousands of
Dalkon Shield actions and claims pending is a fact established
in the record and the limited fund available under Robins’
insurance policy is recognized in the record.” Id. at 1008.
There are no comparable findings of fact in this case with
respect to Basic and Lummus, nor any findings on the operative
terms of the policies. Although the Plan proponents assured us
at oral argument that “[t]he shared insurance has one cap and
that all insureds are under the same cap,” we cannot rest the
exercise of subject matter jurisdiction on this assertion alone.44

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analogous. In Copelin, we held that the Bankruptcy Court had
“related to” jurisdiction over the debtor’s motion to enforce its
reorganization plan ahead of a state court judgment creditor’s
enforcement action. The debtor’s motion, though it involved the
enforcement of a state court judgment, had as its underlying
subject matter the rights and liabilities of the bankrupt estate,
and it was clear its outcome could conceivably affect the estate.
96
Agathos v. Starlite Motel, 60 F.3d 143, 151 (3d Cir. 1995)
(“[S]itting as an appellate court we are not in a position to make
findings of fact.”). Given Pacor and Federal-Mogul’s
constraints on related-to jurisdiction, the lack of indemnification
obligations (present in A.H. Robins), the lack of derivative
liability or unity of interest (present in Dow Corning I), the
minimal corporate affiliation of Combustion Engineering with
Lummus and Basic, and the indirect effects on the Plan, it is
doubtful whether shared insurance would be sufficient grounds
upon which to find related-to jurisdiction over independent
claims against Basic and Lummus.
Because there are insufficient findings of fact on the
current record to assess the matter, we would ordinarily remand
on the shared insurance issue. However, because we conclude
§ 105(a) does not permit the extension of a channeling
injunction to the non-derivative claims against non-debtors
Basic and Lummus, no further fact finding is required on this
point.

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97
V. Section 105(a) Equitable Injunction
The Bankruptcy Court entered a channeling injunction
under § 524(g) in favor of Combustion Engineering and also in
favor of Basic and Lummus for their derivative asbestos-related
claims. The court correctly found that § 524(g) did not
authorize a channeling injunction over the independent, non-
derivative third-party actions against non-debtors Basic and
Lummus. To extend the channeling injunction to include the
non-derivative claims against the non-debtors, the Bankruptcy
Court relied upon its equitable powers under § 105(a).
Based on the facts here, we do not believe that § 105(a)
can be employed to extend a channeling injunction to non-
debtors in an asbestos case where the requirements of § 524(g)
are not otherwise met. Because the injunctive action on
independent non-derivative claims against non-debtor third
parties in this case would violate § 524(g)(4)(A), would
improperly extend bankruptcy relief to non-debtors, and would
jeopardize the interests of future Basic and Lummus claimants,
we will vacate the § 105(a) injunction.
A. The Requirements of Section 524(g)(4)(A)
Section 524(g) provides a special form of supplemental
injunctive relief for an insolvent debtor facing the unique
problems and complexities associated with asbestos liability.
Channeling asbestos-related claims to a personal injury trust
relieves the debtor of the uncertainty of future asbestos
liabilities. This helps achieve the purpose of Chapter 11 by

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45There are many statutory prerequisites imposed by § 524(g).
To qualify for its protections, a court must find that the debtor
has been named in an action for damages allegedly caused by
asbestos, that the debtor is likely to be subject to substantial
demands for payment in the future arising out of the same or
similar conduct, that the amounts and timing of such future
claims are uncertain, and that permitting the pursuit of such
claims outside the trust mechanism would threaten the plan’s
attempts to deal equitably with current and future demands. 11
U.S.C. §§ 524(g)(2)(B)(i)(I), (ii)(I-III). The trust itself must
also satisfy certain standards under § 524(g) in order to qualify
for the issuance of a channeling injunction directing all future
claims to the trust: the trust must assume the liabilities of the
debtor for current and future claims and must be funded at least
in part by the securities of the debtor; the trust must either own,
98
facilitating the reorganization and rehabilitation of the debtor as
an economically viable entity. At the same time, the
rehabilitation process served by the channeling injunction
supports the equitable resolution of asbestos-related claims. In
theory, a debtor emerging from a Chapter 11 reorganization as
a going-concern cleansed of asbestos liability will provide the
asbestos personal injury trust with an “evergreen” source of
funding to pay future claims. This unique funding mechanism
makes it possible for future asbestos claimants to obtain
substantially similar recoveries as current claimants in a manner
consistent with due process. To achieve this relief, a debtor
must satisfy the prerequisites set forth in § 524(g)45 in addition

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or be entitled to own, the majority of the voting shares of the
debtor, its parent, or its subsidiary; the trust must use its assets
to pay future claims and demands; and the trust must provide for
mechanisms ensuring its ability to value and pay present and
future claimants in substantially the same manner. 11 U.S.C. §§
524(g)(2)(B)(i)(I)-(IV), (ii)(V).
Many of these requirements are specifically tailored to
protect the due process rights of future claimants. For example,
a court employing a § 524(g) channeling injunction must
determine that the injunction is “fair and equitable” to future
claimants, 11 U.S.C. § 524(g)(4)(B)(ii), and must appoint a
futures representative to represent their interests. 11 U.S.C. §
524(g)(4)(B)(I). The court must also determine that the plan
treats “present claims and future demands that involve similar
claims in substantially the same manner.” 11 U.S.C. §
524(g)(2)(B)(ii)(V). Finally, the statute requires that a 75%
super-majority of claimants whose claims are to be addressed by
the trust vote in favor of the plan. 11 U.S.C. §
524(g)(2)(B)(ii)(IV)(bb).
46The injunctive relief available under § 524(g) may only be
exercised “in connection with” an “order confirming a plan of
reorganization under Chapter 11.” 11 U.S.C. § 524(g)(1)(A).
99
to the standard plan confirmation requirements.46
Importantly for this case, § 524(g) limits the situations
where a channeling injunction may enjoin actions against third

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47We note this provision is consistent with the purposes
underlying § 524(g). The channeling injunction issued in the
Johns-Manville bankruptcy, after which § 524(g) was modeled,
see 140 Cong. Rec. H10752, H10765 (1994) (in codifying the
Manville “trust/injunction mechanism” in § 524(g), Congress set
forth “explicit requirements simulating those met in the
Manville case”), was limited to third-party actions against non-
debtors in which the liability alleged was derivative of the
debtor. See MacArthur Co. v. Johns-Manville, 837 F.2d at 92-
93 (2d Cir. 1988) (explaining that the channeling injunction
applied only to “third parties [who] seek to collect out of the
proceeds of Manville’s insurance policies on the basis of
Manville’s conduct”).
100
parties to those where a third party has derivative liability for the
claims against the debtor:
Notwithstanding the provisions of section 524(e),
such an injunction may bar any action directed
against a third party who is identifiable from the
terms of such injunction (by name or as part of an
identifiable group) and is alleged to be directly or
indirectly liable for the conduct of, claims against,
or demands on the debtor[.]
11 U.S.C. § 524(g)(4)(A)(ii).47 More specifically, the statute
identifies the four circumstances under which such third-party
liability will arise: “the third party’s ownership of a financial
interest in the debtor, a past or present affiliate of the debtor, or

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101
a predecessor in interest of the debtor,” 11 U.S.C. §
524(g)(4)(A)(ii)(I); “the third party’s involvement in the
management of the debtor or a predecessor in interest of the
debtor, or service as an officer, director or employee of the
debtor or a related party,” 11 U.S.C. § 524(g)(4)(A)(ii)(II); “the
third party’s provision of insurance to the debtor or a related
party,” 11 U.S.C. § 524(g)(4)(A)(ii)(III); or “the third party’s
involvement in a transaction changing the corporate structure,
or in a loan or other financial transaction affecting the financial
condition, of the debtor or a related party.” 11 U.S.C. §
524(g)(4)(A)(ii)(IV).
The Plan proponents do not contend that Basic and
Lummus are “liable for the conduct of, claims against, or
demands on” Combustion Engineering, as required by §
524(g)(4)(A)(ii). As the Bankruptcy Court correctly noted,
“[t]he Debtor owned [Basic and Lummus]; they did not own
Debtor.” In re Combustion Eng’g, 295 B .R. at 482 n.41.
Certain claims against Basic and Lummus allege independent
liability, wholly separate from any liability involving
Combustion Engineering. As the plain language of the statute
makes clear, § 524(g)(4)(A) does not permit the extension of a
channeling injunction to include these non-derivative third-party
actions.
B. Section 105(a)
Recognizing the limitations imposed by § 524(g), the

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102
Bankruptcy Court instead relied upon its equitable powers under
§ 105(a) to expand the scope of the channeling injunction.
Bankruptcy courts are “courts of equity, empowered to
invoke equitable principles to achieve fairness and justice in the
reorganization process.” Schwartz v. Aquatic Dev. Group, Inc.
(In re Aquatic Dev. Group, Inc.), 352 F.3d 671, 680-81 (2d Cir.
2003) (citation omitted); see also Local Loan Co. v. Hunt, 292
U.S. 234, 240 (1934) (“[C]ourts of bankruptcy are essentially
courts of equity, and their proceedings inherently proceedings in
equity.”). As courts of equity, bankruptcy courts “have broad
authority to modify creditor-debtor relationships.” United States
v. Energy Res. Co., 495 U.S. 545, 549 (1990); see also Official
Comm. of Unsecured Creditors of Cybergenics Corp. ex rel.
Cybergenics Corp. v. Chinery, 330 F.3d 548, 568 (3d Cir. 2003)
(en banc) (describing bankruptcy court’s equitable powers to
“craft flexible remedies that, while not expressly authorized by
the Code, effect the result the Code was designed to obtain”).
Section 105(a) of the Bankruptcy Code expressly
provides bankruptcy courts the equitable power to “issue any
order, process, or judgment that is necessary or appropriate to
carry out the provisions of this title.” 11 U.S.C. § 105(a). This
section has been construed to give a bankruptcy court “broad
authority” to provide equitable relief appropriate to assure the
orderly conduct of reorganization proceedings. Energy Res.
Co., 495 U.S. at 549 (“[Section 105(a) is] consistent with the
traditional understanding that bankruptcy courts, as courts of

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103
equity, have broad authority to modify creditor-debtor
relationships.”).
Nevertheless, the equitable powers authorized by §
105(a) are not without limitation, and courts have cautioned that
this section “does not ‘authorize the bankruptcy courts to create
substantive rights that are otherwise unavailable under
applicable law, or constitute a roving commission to do equity.’”
In re Aquatic Dev. Group, Inc., 352 F.3d at 680-81 (citation
omitted). Importantly for this case, § 105(a) does not “‘give the
court the power to create substantive rights that would otherwise
be unavailable under the Code.’” United States v. Pepperman,
976 F.2d 123, 131 (3d Cir. 1992) (quoting In re Morristown &
Erie R.R. Co., 885 F.2d 98, 100 (3d Cir. 1989)); see also In re
Barbieri, 199 F.3d 616, 620-21 (2d Cir. 1999) (warning the
“equitable powers emanating from § 105(a) . . . are not a license
for a court to disregard the clear language and meaning of the
bankruptcy statutes and rules”) (citations omitted).
The general grant of equitable power contained in §
105(a) cannot trump specific provisions of the Bankruptcy
Code, and must be exercised within the parameters of the Code
itself. See generally Norwest Bank Worthington v. Ahlers, 485
U.S. 197, 206 (1988) (“Whatever equitable powers remain in the
bankruptcy courts must and can only be exercised within the
confines of the Bankruptcy Code.”). When the Bankruptcy
Code provides a specified means for a debtor to obtain a specific
form of equitable relief, those standards and procedures must be
observed. See In re Fesco Plastics Corp., 996 F.2d 152, 154-55

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48Outside the context of § 524(g), § 524(e) provides statutory
authority for limiting the extension of bankruptcy relief to non-
debtors. See 11 U.S.C. § 524(e) (“[D]ischarge of a debt of the
debtor does not affect the liability of any other entity on, or the
property of any other entity for, such debt.”).
104
(7th Cir. 1993) (“[W]hen a specific Code section addresses an
issue, a court may not employ its equitable powers to achieve a
result not contemplated by the Code.”); Resorts Int’l v.
Lowenschuss (In re Lowenschuss), 67 F.3d 1394, 1402 (9th Cir.
1995) (“Section 105 does not authorize relief inconsistent with
more specific law”); In re Zale Corp., 62 F.3d at 760 (5th Cir.
1995) (“A § 105 injunction cannot alter another provision of the
[C]ode.”).
Here, the Bankruptcy Court relied upon § 105(a) to
achieve a result inconsistent with § 524(g)(4)(A). Although the
Bankruptcy Court has broad equitable authority to craft
remedies necessary to facilitate the reorganization of a debtor,
this power is cabined by the Code. Ahlers, 485 U.S. at 206. As
both the plain language of the statute and its legislative history
make clear, § 524(g) provides no specific authority to extend a
channeling injunction to include third-party actions against non-
debtors where the liability alleged is not derivative of the
debtor.48 Because § 524(g) expressly contemplates the inclusion
of third parties’ liability within the scope of a channeling
injunction – and sets out the specific requirements that must be

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49The well-settled maxim that specific statutory provisions
prevail over more general provisions supports our conclusion
that the explicit limitations and requirements set forth in §
524(g) preclude the use of § 105(a) to extend application of the
trust/injunction mechanism to the non-derivative claims against
non-debtors Basic and Lummus. See Varity Corp. v. Howe, 516
U.S. 489, 511 (1996) (interpreting the “the specific governs the
general” canon of statutory construction as “a warning against
applying a general provision when doing so would undermine
limitations created by a more specific provision”); see also Sea
Harvest Corp. v. Riviera Land Co., 868 F.2d 1077, 1080 (9th
Cir. 1989) (Section 105(a) “does not empower courts to issue
orders that defeat rather than carry out the explicit provisions of
the Bankruptcy Code[.] ”); see generally 2 Collier on
Bankruptcy, ¶ 105.04 at 105-15 n.5; In re Am. Hardwoods, Inc.,
885 F.2d 621, 625-26 (9th Cir. 1989) (“[S]ection 105 does not
authorize relief inconsistent with more specific law.”).
50The Plan proponents cite to several cases where § 105(a)
injunctions in favor of non-debtors were approved, including In
re Dow Corning Corp. (Dow Corning IV), 280 F.3d 648, 656
(6th Cir. 2002); In re Drexel Burnham Lambert Group, Inc., 960
F.2d 285, 292 (2d Cir. 1992); and In re A.H. Robins Co., 880
F.2d 694, 700-02 (4th Cir. 1986). But these cases are readily
105
met in order to permit inclusion49 – the general powers of §
105(a) cannot be used to achieve a result not contemplated by
the more specific provisions of § 524(g).50

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distinguishable, given that none involved either asbestos or §
524(g). Whatever may be the limits of § 105(a) in other
contexts, we hold only that § 105(a) cannot be used to achieve
a result not contemplated by the more specific provisions of §
524(g), which is the means Congress prescribed for channeling
the asbestos liability of a non-debtor.
106
It also bears noting that the practical effect of the §
105(a) injunction here is to extend bankruptcy relief to two non-
debtor companies outside of bankruptcy. While the § 105(a)
injunction may facilitate Combustion Engineering’s
reorganization by permitting significant contributions by ABB
Limited and its affiliates to the Asbestos PI Trust, it also allows
Basic and Lummus to cleanse themselves of non-derivative
asbestos liability without enduring the rigors of bankruptcy.
Despite their own asbestos-related liabilities, there is no
evidence that either Basic or Lummus need to reorganize under
Chapter 11. If they do, as U.S. companies facing asbestos
liabilities both Basic and Lummus could conceivably petition for
Chapter 11 reorganization and injunctive relief from those
liabilities under § 524(g). Although some asbestos claimants
here may benefit from an augmented fund, equity does not
permit non-debtor affiliated entities to secure the benefits of
Chapter 11 in contravention of the plain language of § 524(g).
In addition, the use of § 105(a) to enjoin and channel the
claims of future Basic and Lummus asbestos claimants may
jeopardize the rights of those claimants. The several

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51While it is clear that Lummus was solvent, there is a
discrepancy in the record regarding Basic. The Bankruptcy
Court made no explicit findings of fact on this point, but
commented in a footnote that Basic appears to be insolvent. See
107
prerequisites set forth in § 524(g) are designed to protect the
interests of future claimants whose claims are permanently
enjoined. Among these, the plan must be approved by a super-
majority of current claimants, and must provide substantially
similar treatment to present and future claimants. Furthermore,
the court must appoint a futures representative to act as fiduciary
for the interests of future claimants. See 11 U.S.C. §§
524(g)(2)(B)(ii)(IV)(bb), 524(g)(4)(B)(I), 524(g)(2)(B)(i)(V).
Neither court here made explicit findings whether the §
524(g) requirements were satisfied with respect to the
channeling injunction as applied to the independent, non-
derivative claims against Basic and Lummus. Nor did the
Bankruptcy Court formally appoint a separate representative to
act on behalf of future asbestos claimants asserting non-
derivative claims against Basic and Lummus. There is some
evidence in the record that Mr. Austern agreed to act in this
capacity while also serving as the Combustion Engineering
futures representative. See supra note 8. But the interests of the
future Basic and Lummus asbestos claimants are not necessarily
aligned with those of future Combustion Engineering asbestos
claimants. The future asbestos claimants of the non-debtors
might prefer having recourse against solvent entities51 rather

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In re Combustion Eng’g, 295 B.R. at 484 n.43. On the other
hand, Basic’s president testified that while Basic does not have
ongoing operations, it does have assets and sufficient funds to
pay its liabilities.
108
than being limited to proceeding against the Asbestos PI Trust,
a limited fund subject to depletion by current and future
Combustion Engineering asbestos claimants. As such, the
channeling injunction against these future asbestos claimants
may not have accorded them the requisite protections. We will
vacate the Basic and Lummus channeling injunction because §
105(a) under these facts cannot be used to circumvent the more
specific requirements of § 524(g).
VI. Two-Trust Structure
Eighty-seven days before filing its pre-pack bankruptcy,
Combustion Engineering transferred more than $400 million in
assets to the CE Settlement Trust to partially pay personal injury
claims of participating Combustion Engineering asbestos
claimants. At the time, the Plan proponents allegedly feared that
claimants with settlements pending or awaiting payment would
force Combustion Engineering into involuntary bankruptcy and
stymie its reorganization effort. See In re Combustion Eng’g,
295 B.R. at 467 n.9. Accordingly, payments from the CE
Settlement Trust were based upon the length of time a
claimant’s case had been pending. Claimants who had settled
with Combustion Engineering and were awaiting payment
received the greatest compensation (95% of the full liquidated

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109
value of their claim); claimants who had agreed to settlement or
a dispute resolution process, and whose payment was due at a
future date, received less (85%); a third, catch-all category of
claimants received an initial payment of 37.5%, with the
possibility, if sufficient funds remained, of later recovering up
to 75%; and a fourth group of claimants, who came into the
process late in the negotiations, agreed to a lesser sum. None of
the participating Combustion Engineering claimants received
full payment, and the remaining, unpaid portion of each claim
was treated as surviving for purposes of bankruptcy creditor
status. The surviving “stub claims” enabled CE Settlement
Trust participants to vote on the reorganization Plan.
The Bankruptcy Court determined that payments from the
CE Settlement Trust were designed “to compensate people who
already had claims in the tort system or on file with
[Combustion Engineering] and to provide [Combustion
Engineering] with a reprieve from litigation.” The District
Court likewise determined the purpose of the CE Settlement
Trust was to provide Combustion Engineering “a little time, a
breathing space, while the pre-packaged plan was negotiated.”
The court reasoned the CE Settlement Trust only partially paid
claims because “there were simply insufficient funds to pay the
settlement trust claimants 100 percent of their claims,” and not
because the settling parties sought to “gerrymander” the vote.
The District Court concluded that payments from the CE
Settlement Trust did not induce participants to vote in favor of
the Plan or otherwise manipulate the voting process.

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110
The Certain Cancer Claimants lodge two primary
objections to the two-trust structure. First, they contend it
violates the Bankruptcy Code’s “equality among creditors”
principle because the CE Settlement Trust participants
effectively receive greater compensation for their asbestos
claims than similarly situated non-participants. Second, the
Certain Cancer Claimants argue the funding of the CE
Settlement Trust and creation of the stub claims violate the Code
by “artificially impairing” the claims of participants in order to
effect an impermissible manipulation of the voting process.
A. Discriminatory Treatment of Claims
“Equality of distribution among creditors is a central
policy of the Bankruptcy Code.” Begier v. IRS, 496 U.S. 53, 58
(1990). The Certain Cancer Claimants contend the Plan violates
this principle, as well as the specific requirements of §§
524(g)(2)(B)(ii)(V) and 547(b), because the two-trust structure
provides the CE Settlement Trust participants with preferential
treatment over non-participant asbestos personal injury
claimants. The Plan proponents maintain this framework
complies with the literal terms of the Code. Nonetheless, we
believe the Combustion Engineering bankruptcy Plan may
impermissibly discriminate against certain asbestos personal
injury claimants. Because the record is inadequate to resolve the
issue, we will remand for additional fact-finding.
The Bankruptcy Code furthers the policy of “equality of
distribution among creditors” by requiring that a plan of

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111
reorganization provide similar treatment to similarly situated
claims. Several sections of the Code are designed to ensure
equality of distribution from the time the bankruptcy petition is
filed. Section 1122(a) provides that only “substantially similar”
claims may be classified together under a plan of reorganization.
Section 1123(a)(4) requires that a plan of reorganization
“provide the same treatment for each claim or interest of a
particular class.” And § 524(g) states that “present claims and
future demands that involve similar claims” must be paid “in
substantially the same manner.”
To complement these provisions, which address the
treatment of claims post-petition, § 547 operates to ensure that
equality among creditors is not undermined by transfers to
creditors in contemplation of bankruptcy. Section 547(b)
provides that a bankruptcy trustee may avoid any transfer by the
debtor:
(1) to or for the benefit of a creditor;
(2) for or on account of an antecedent debt owed
by the debtor before such transfer was made;
(3) made while the debtor was insolvent;
(4) made--
(A) on or within 90 days before the
date of the filing of the petition; . .
. and

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112
(5) that enables such creditor to receive more than
such creditor would receive if–
(A) the case were a case under
chapter 7 of this title; [and]
(B) the transfer had not been made . . .
11 U.S.C. § 547(b).
Section 547(b) furthers equality of distribution among
creditors by preventing the debtor from favoring one creditor or
group of creditors over others by transferring property shortly
before filing for bankruptcy. The Supreme Court has noted the
preference avoidance rule contained in § 547 serves an
important purpose in managing the debtor-creditor relationship:
A preference is a transfer that enables a creditor
to receive payment of a greater percentage of his
claim against the debtor than he would have
received if the transfer had not been made and he
had participated in the distribution of the assets of
the bankrupt estate . . . . [T]he preference
provisions facilitate the prime bankruptcy policy
of equality of distribution among creditors of the
debtor. Any creditor that received a greater
payment than others of his class is required to
disgorge so that all may share equally.
Union Bank v. Wolas, 502 U.S. 151, 160-61 (1991) (citing H. R.
Rep. No. 95-595 at 177-78 (1977)).

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52Appellants also argued the pre-petition payments violate
Delaware’s preference statute, 10 Del. Code § 7387. Neither the
District Court nor the Bankruptcy Court made findings with
respect to this claim. Therefore, we will remand on this issue.
113
Based on the record, we believe the pre-petition
payments to the CE Settlement Trust may constitute voidable
preferences.52 Eighty-seven days before filing for bankruptcy,
while the company was insolvent, Combustion Engineering
transferred payment for outstanding asbestos liability to a group
of CE Settlement Trust participants who received up to 95% of
their claim value – far more than they would have received in a
Chapter 7 liquidation had no transfer been made. This suggests
that the payments to the settlement trust satisfy at least four of
the five criteria under §547(b).
Prior to filing for bankruptcy, Combustion Engineering
transferred over $400 million, or approximately half of its
assets, to the CE Settlement Trust for the benefit of participating
asbestos claimants, who were then creditors of Combustion
Engineering. 11 U.S.C. § 547(b)(1). As such, partial payments
from the CE Settlement Trust constituted payments for
antecedent debts owed by the debtor. 11 U.S.C. § 547(b)(2).
Moreover, Combustion Engineering was insolvent when it
funded the pre-petition trust on November 22, 2002, and its
petition for voluntary Chapter 11 bankruptcy was filed on
February 17, 2003 – eighty-seven days after funding the CE

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53Ms. Zilly did not consider the approximately $400 million
contributed by Combustion Engineering to the CE Settlement
Trust in her Chapter 7 liquidation analysis because “it would be
very difficult to get those monies back and . . . . any sort of a
preference action would not be sustainable and would take an
extraordinary length of time and ultimately not recover value
under a liquidation recovery.” Whether or not this is the case,
Ms. Zilly’s analysis is not the correct one for determining
whether a transfer constitutes a voidable preference under §
114
Settlement Trust. 11 U.S.C. § 547(b)(3) and 11 U.S.C. §
547(b)(4).
The only remaining issue is whether the assets transferred
to the CE Settlement Trust entitled participants in that Trust to
receive more than they otherwise would have received in a
Chapter 7 liquidation. 11 U.S.C. § 547(b)(5). Crediting the
liquidation analysis conducted by Pamela Zilly, senior managing
director of the Blackstone Group, and testimony by Mr. Austern,
the Bankruptcy Court concluded the Plan would pay more to
future claimants than would be paid under a Chapter 7
bankruptcy or no bankruptcy at all. See In re Combustion
Eng’g, 295 B.R. at 488. Specifically, the Bankruptcy Court
found the assets available to Combustion Engineering in
Chapter 7 would be between $210 and $250 million, while
assets available under the Plan would be between $640 and $789
million as a result of the additional contributions by ABB
Limited and other non-debtors.53 Id. at 485-86. The District

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547(b).
115
Court likewise dismissed the argument that the pre-petition
transfer constituted a voidable preference:
[T]he allegation that the establishment of the
settlement trust was a voidable preference is
simply a restatement of the argument already
dispensed with by comparing the liquidation value
of the company with the value paid to claimants
under the plan. Without the settlement trust, there
would be no plan. It has already been established
that future claimants will fare better with the plan
than without it.
This analysis was incorrect as a matter of law because a
comparison of the funds available for future claimants is not the
proper inquiry. Section 547(b)(5) refers to transfers for the
“benefit of a creditor” that “enables such creditor to receive
more than such creditor would receive if (A) the case were a
case under chapter 7 of this title; (B) the transfer had not been
made; and (C) such creditor received payment of such debt to
the extent provided by the provisions of this title.” 11 U.S.C. §
547(b)(5). As this provision specifies, the relevant question is
whether the CE Settlement Trust participants – not the future
claimants – received more or less than they would have received
under Chapter 7 if the pre-petition payments had not been made.

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54Combustion Engineering’s assets were between $800
million and $1 billion prior to the pre-petition settlement. With
respect to Combustion Engineering’s outstanding asbestos
liability, the Certain Cancer Claimants’ expert, Dr. Timothy
Wyant, estimated it to be approximately $3.6 billion. The Plan
proponents contest the methodology employed by Dr. Wyant in
arriving at this figure, and the Bankruptcy Court did not credit
his testimony. But neither the Bankruptcy Court nor the District
Court adopted contrary findings. Assuming Dr. Wyant’s
estimate is correct, asbestos claimants would have recovered, at
most, an average of 28% ($1 billion in assets divided by $3.6
billion in liability) of their claim value in a Chapter 7
liquidation.
116
The record suggests that pre-petition settlement
participants received more for their asbestos claims than they
would have received in a Chapter 7 liquidation. The CE
Settlement Trust paid participants up to 95% of their claim
value, and, according to the Certain Cancer Claimants’ expert,
provided an average payout to participants of 59%. A Chapter
7 liquidation, in contrast, may have yielded an average payout
to asbestos claimants of significantly less, perhaps 28% of their
claim value.54 Were this disparity established as a matter of fact,
the CE Settlement Trust preferences would be voidable under §
547(b).
The pre-petition transfer in this case also implicates the
fundamental bankruptcy policy of “equality of distribution

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55Clarke v. Rogers, 228 U.S. 534, 548 (1913) (“Equality
between creditors is necessarily the ultimate aim of the
bankrupt[cy] law, and to obtain it we must regard the essential
nature of transactions[.]”). Only after analyzing the totality of
circumstances surrounding a reorganization plan can the court
exercise the “‘informed, independent judgment’ which is an
essential prerequisite for confirmation of a plan.” Am. United
Mut. Life Ins. Co. v. Avon Park, 311 U.S. 138, 146 (1940)
(internal citations omitted). “Where such investigation discloses
the existence of unfair dealing, a breach of fiduciary obligations,
profiting from a trust, special benefits for the reorganizers, or
the need for protection of investors against an inside few, or of
one class of investors from the encroachments of another, the
court has ample power to adjust the remedy to meet the need.”
Id.
56The record establishes that the CE Settlement Trust was a
necessary element of the overall reorganization Plan. The
parties entering the pre-petition settlement expressly
117
among creditors.” In this regard, we consider the bankruptcy
scheme as an integrated whole in order to evaluate whether Plan
confirmation is warranted.55 Viewing the Combustion
Engineering pre-pack bankruptcy as a whole, the record reveals
that it may lack the requisite equality of distribution among
creditors. The Plan, as it relates to asbestos claimants, consists
of two elements: the pre-petition CE Settlement Trust and the
post-petition Asbestos PI Trust.56 Under this interdependent,

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contemplated the subsequent reorganization; the settlement itself
provided that participating counsel “recommend to each
Participating Claimant the acceptance of a CE Plan of
Reorganization”; and the “stub claims” represent a direct link
between the pre-petition trust and the reorganization vote.
118
two-trust framework, the Certain Cancer Claimants, the future
asbestos claimants, and other non-parties to the pre-petition
settlement appear to receive a demonstrably unequal share of the
limited Combustion Engineering fund. The Certain Cancer
Claimants’ expert testified that while CE Settlement Trust
participants recover, on average, 59% of the liquidated value of
their claims, future claimants would recover 18% of the
liquidated value of their claims under the Asbestos PI Trust.
This disparity, if in fact it exists, is even more striking when
considering that Category One claimants in the CE Settlement
Trust received 95% of the liquidated value of their claims. But
neither the District Court nor the Bankruptcy Court made
findings with respect to the recovery of CE Settlement Trust
participants relative to non-participating asbestos claimants.
Additionally, there are two considerations here that are
absent in the ordinary commercial bankruptcy: the Plan’s
treatment of current asbestos claimants relative to future
asbestos claimants, and its treatment of malignant asbestos

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57See generally Ortiz, 527 U.S. at 854-55 (emphasizing that
a limited-fund asbestos settlement must provide for “equity
among members of the class” and “fairness of the distribution of
the fund among class members”). Though Ortiz was decided
under Fed. R. Civ. P. 23(b)(1)(B), the Court’s requirement of
fair treatment for all claimants – a principle at the core of equity
– also applies in the context of this case.
119
claimants relative to non-malignant asbestos claimants.57 The
Certain Cancer Claimants challenge the disparate treatment of
current and future asbestos claimants under the two-trust
structure, and also whether the most seriously injured asbestos
claimants received fair treatment under the Plan. Again, the
record is insufficient to rule on these contentions. Neither the
Bankruptcy Court nor the District Court evaluated the CE
Settlement Trust’s treatment of current, future, malignant and
non-malignant asbestos claimants, or evaluated the overall Plan
from the perspective of settlement participants versus non-
participants and malignant versus non-malignant asbestos
claimants. Even absent the Plan’s other defects, the two-trust
structure requires a remand for further findings on these issues.
B. Creation of the “Stub Claims”
The Certain Cancer Claimants contend the CE Settlement
Trust “artificially impaired” or contrived the stub claims in order

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58The Certain Cancer Claimants also argue the plan violates
the supermajority voting requirement set forth in 11 U.S.C. §
524(g)(2)(B)(ii)(IV)(bb). Their arguments in this regard largely
mirror the various challenges to Combustion Engineering’s
alleged manipulation of the voting process.
59A Chapter 11 plan of reorganization must satisfy all of the
requirements of § 1129(a). They are: (1) the plan’s compliance
with title 11, (2) the proponent’s compliance with title 11, (3)
the good faith proposal of the plan, (4) the disclosure of
payments, (5) the identification of management, (6) the
regulatory approval of rate changes, if applicable, (7) the “best
interest” test (i.e., each claim holder in an impaired class has
accepted the plan or will receive no less than would be received
in a Chapter 7 liquidation), (8) acceptance of the plan by each
impaired class, (9) treatment of administrative and priority
claims in accordance with § 1129(a)(9), (10) acceptance by at
least one impaired class of claimants, (11) the feasibility of the
plan (i.e., confirmation of the plan is not likely to be followed by
liquidation or further reorganization except as contemplated in
the plan), (12) the payment of bankruptcy fees, and (13) the
payment of retiree benefits.
120
to garner sufficient votes in favor of confirmation.58 As a
condition of plan confirmation,59 the court must find “at least
one class of claims that is impaired under the plan has accepted
the plan, determined without including any acceptance of the
plan by any insider.” 11 U.S.C. § 1129(a)(10). A claim is not

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60Some courts have concluded there is nothing in the plain
language of § 1129(a)(10) to prevent a debtor from “artificially”
impairing claims. See, e.g., In re Greate Bay Hotel & Casino,
Inc., 251 B.R. 213, 240 (Bankr. D.N.J. 2000) (“Under the
statutory scheme for the classification and treatment of claims,
a plan proponent may impair a class of claims. If an impaired
class accepts the plan, the requirement of section 1129(a)(10) is
satisfied.”); In re Duval Manor Assocs., 191 B.R. 622, 628
(Bankr. E.D. Pa. 1996) (concluding that “artificial impairment,
while perhaps philosophically not the better view, is
nevertheless clearly permitted under the plain meaning of the
statute”); see also L&J Anaheim Assocs., 995 F.2d 940, 943 (9th
Cir. 1993) (holding that § 1124 does not differentiate between
artificial and actual impairment of claims).
121
impaired if the plan “leaves unaltered the legal, equitable, and
contractual rights to which such claim or interest entitles the
holder of such claim or interest” or if the plan cures or
compensates for past default. 11 U.S.C. § 1124(1). “Artificial”
impairment occurs when a plan imposes an insignificant or de
minimis impairment on a class of claims to qualify those claims
as impaired under § 1124. The chief concern with such conduct
is that it potentially allows a debtor to manipulate the Chapter 11
confirmation process by engineering literal compliance with the
Code while avoiding opposition to reorganization by truly
impaired creditors. While there is nothing in either §§
1129(a)(10) or 1124 expressly prohibiting a debtor from
“artificially impairing” the claims of creditors,60 courts have

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61See, e.g., Windsor on the River Assocs. v. Balcor Real
Estate Fin. (In re Windsor on the River Assocs.), 7 F.3d 127,
132 (8th Cir. 1993) (“[F]or purposes of 11 U.S.C. §1129(a)(10),
a claim is not impaired if the alteration of rights in question
arises solely from the debtor’s exercise of discretion.”); Beal
Bank, S.S.B. v. Waters Edge L.P., 248 B.R. 668, 690-91 (D.
Mass. 2000) (concluding 1129(a)(10) is not satisfied unless
creditors’ rights are “legitimately impaired” for a proper
business purpose); In re Daly, 167 B.R. 734, 737 (Bankr. D.
Mass. 1994) (“A Debtor may not satisfy § 1129(a)(10) by
manufacturing an impaired class for the sole purpose of
satisfying § 1129(a)(10)[.]”); In re Lettick Typografic, Inc., 103
B.R. 32, 39 (Bankr. D. Conn. 1989) (“While the debtor may
have achieved literal compliance with § 1129(a)(10), this
engineered impairment so distorts the meaning and purpose of
that subsection that to permit it would reduce (a)(10) to a
nullity.”).
122
found this practice troubling.61
In the context of this asbestos-related bankruptcy, so do
we. Unlike the ordinary commercial bankruptcy, where stub
claims may be used to facilitate a workout plan in the overall
best interests of creditors, the use of stub claims in this case may
constitute “artificial impairment” under § 1129(a)(10).
“The purpose of [§ 1129(a)(10)] is ‘to provide some
indicia of support [for a plan of reorganization] by affected
creditors and prevent confirmation where such support is

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123
lacking.’” In re Windsor on the River Assocs., 7 F.3d at 131
(quoting In re Lettick Typographic, Inc., 103 B.R. at 38). As
such, § 1129(a)(10) requires that a plan of reorganization pass
muster in the opinion of creditors whose rights to repayment
from the debtor are implicated by the reorganization. By
providing impaired creditors the right to vote on confirmation,
the Bankruptcy Code ensures the terms of the reorganization are
monitored by those who have a financial stake in its outcome.
Bankruptcy provides a framework for the consensual and
cooperative reorganization of an insolvent debtor, and “stub
claims” negotiated pre-petition may play a role in this process.
But in this case, Combustion Engineering made a pre-
petition side arrangement with a privileged group of asbestos
claimants, who as a consequence represented a voting majority
despite holding, in many cases, only slightly impaired “stub
claims.” On the facts here, the monitoring function of §
1129(a)(10) may have been significantly weakened. See
generally John Hancock Mut. Life Ins. Co. v. Route 37 Bus.
Park Assocs., 987 F.2d 154, 158 (3d Cir. 1993) (stating §
1129(a)(10) “would be seriously undermined if a debtor could
gerrymander classes”). This type of manipulation is especially
problematic in the asbestos context, where a voting majority can
be made to consist of non-malignant claimants whose interests
may be adverse to those of claimants with more severe injuries.
See Stephen J. Carroll, et al., Asbestos Litigation Costs and
Compensation: An Interim Report 46 (RAND 2002) (reporting
that non-malignant claimants typically represent 80% to 90% of

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62There is evidence in the record that Combustion
Engineering’s asbestos liability profile mirrors nationwide
trends, and that a majority of Combustion Engineering claimants
suffer from non-malignant injuries. But the record does not
establish the precise breakdown, by disease category, of either
Combustion Engineering claimants as a whole or CE Settlement
Trust participants.
63The District Court concluded that non-participants in the
CE Settlement Trust (such as the Certain Cancer Claimants)
“simply were not similarly situated” to the settlement
participants by virtue of the different status of their claims. But
in determining whether asbestos claimants are “similarly
situated” for bankruptcy classification purposes, the relevant
124
outstanding asbestos claims); S. Elizabeth Gibson, Symposium
– Mass Torts: A Response to Professor Resnick: Will This
Vehicle Pass Inspection?, 148 U. Pa. L. Rev. 2095, 2112 (2000)
(“A distinct minority – for example, those tort claimants with
especially serious injuries and strong cases – might get outvoted
by a large number of holders of small claims who favor a quick
pay-out of relatively small amounts with little proof
required.”).62
Here, Combustion Engineering made pre-petition
payments to current asbestos claimants that exceeded any
recovery obtainable by other current asbestos claimants (such as
the Certain Cancer Claimants) in bankruptcy.63 As a result, the

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inquiry does not turn solely on the time the outstanding personal
injury claims were filed. The substance – or the “legal
character” – of the claims is also relevant. In re AOV Indus.
Inc., 792 F.2d 1140, 1150 (D.C. Cir. 1986).
125
CE Settlement Trust participants, many of whom received as
much as 95% of the full liquidated value of their claims pre-
petition, had little incentive to scrutinize the terms of the
proposed Plan. Rather, their incentive appears to have been
otherwise, given that the favorable pre-petition settlements were
conditioned, at least implicitly, on a subsequent vote in favor of
the Plan.
Furthermore, the Plan initially provided a release for all
avoidance and/or preference actions against participants in the
CE Settlement Trust. Although the release was subsequently
removed from the Plan, this did not occur until after the
solicitation and voting process was completed. Thus, when
participants in the pre-petition CE Settlement Trust voted on the
Plan, they possessed a significant financial incentive directly
opposed to nonparticipants, whose only recourse was to the
post-petition Asbestos PI Trust. This conflict was not
considered by either the Bankruptcy Court or the District Court.
In these circumstances, Combustion Engineering’s use of stub
claims may constitute “artificial impairment” in violation of §
1129(a)(10).

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64Minimal due process requirements extend to bankruptcy
proceedings. See Jones v. Chemetron Corp., 212 F.3d 199, 209
(3d Cir. 2000); Fogel v. Zell, 221 F.3d 955, 962 (7th Cir. 2000).
65See generally Geoffrey C. Hazard Jr., Symposium – Mass
Torts: The Futures Problem, 148 U. Pa. L. Rev. 1901 (2000).
126
The Combustion Engineering stub claims also implicate
due process.64 In the resolution of future asbestos liability,
under bankruptcy or otherwise, future claimants must be
adequately represented throughout the process. Amchem, 521
U.S. at 625-28; Ortiz, 527 U.S. at 856; 11 U.S.C. §
524(g)(4)(B)(I).65 Here, the first phase of the integrated, global
settlement – the establishment of the CE Settlement Trust –
included neither representation nor funding for future and other
non-participating claimants.
Had the future and other non-participating asbestos
claimants been adequately represented throughout the
reorganization process, including the CE Settlement Trust
negotiations, then perhaps the corresponding stub claims would
demonstrate the “indicia of support by affected creditors”
required under § 1129(a)(10). In re Windsor on the River
Assocs., 7 F.3d at 130-32. But they were not. Instead, as
discussed, a disfavored group of asbestos claimants, including
the future claimants and the Certain Cancer Claimants, were not
involved in the first phase of this integrated settlement. The
result was a Plan ratified by a majority of “stub votes” cast by

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66The Certain Cancer Claimants raise several additional (and
related) challenges to the voting process concerning the two-
trust structure. The Certain Cancer Claimants argue the stub
claim votes are not allowable because the Master Settlement
Agreement states that CE Settlement Trust participants “shall
not seek to recover from [Combustion Engineering] . . . any
amount of the Settlement Amount or other make any claims
against [Combustion Engineering] . . . or seek to recover against
[Combustion Engineering] . . . except that nothing herein shall
preclude filing a proof of claim in a [Combustion Engineering]
bankruptcy.” Because their claims are not enforceable against
the estate outside of bankruptcy, the Certain Cancer Claimants
argue, the stub claimants had no right to vote on Plan
confirmation.
The right to vote on plan confirmation belongs to holders
of those claims “allowed under section 502.” 11 U.S.C. §
127
the very claimants who obtained preferential treatment from the
debtor. As noted, an estimated 99,000 of the approximately
115,000 “valid” confirmation votes appear to have been stub
claim votes. Given this structural inadequacy, see Ortiz, 527
U.S. at 855-57, the Plan may have lacked the requisite “indicia
of support” among creditors. We recognize that stub claims are
often used in ordinary commercial bankruptcies without
generating the problems described here. But in this case, their
use is problematic. We will remand for further consideration of
“artificial impairment” under § 1129(a)(10).66

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1126(a). Under § 502(b)(1), however, a claim will not be
allowable if it “is unenforceable against the debtor, and property
of the debtor under any agreement[.]” 11 U.S.C. § 502(b)(1).
To determine whether claims are enforceable for bankruptcy
purposes, § 502 relies upon applicable non-bankruptcy law. See
4 Collier on Bankruptcy ¶ 502.03[2][b][ii] (15th rev. ed. 2003)
(“The validity and legality of claims is generally determined by
applicable non-bankruptcy law.”). A claim against the
bankruptcy estate, therefore, “will not be allowed in a
bankruptcy proceeding if the same claim would not be
enforceable against the debtor outside of bankruptcy.” United
States v. Sanford, 979 F.2d 1511, 1513 (11th Cir. 1992).
Ultimately, the effect of § 502 is to provide a bankruptcy trustee
with the same rights and defenses to claims as held by the debtor
prior to bankruptcy. See Collier ¶ 502.03[2][b][I]; see also 11
U.S.C. § 558 (making defenses available to debtor available to
the estate).
The Master Settlement Agreement accomplishes this by
affirming the validity of the stub claims in bankruptcy. See
Master Settlement Agreement § 5.02 (“Each Qualified Claimant
agrees . . . CE is liable for payment on the Settlement Amount”).
The Master Settlement Agreement provision mandating that CE
Settlement Trust participants enforce their stub claims in the
bankruptcy proceedings merely requires that the terms of the
agreement be recognized in bankruptcy. This does not violate
§ 502.
128

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The Certain Cancer Claimants also argue that requiring
a power of attorney to accompany each ballot violates the
Federal Bankruptcy Rules of Procedure. Fed. R. Bankr. P.
9010(c) provides “[t]he authority of any agent, attorney in fact,
or proxy to represent a creditor for any purpose other than the
execution and filing of a proof of claim or the acceptance or
rejection of a plan shall be evidenced by a power of attorney
conforming substantially to the appropriate Official Form.”
While Rule 9010(c) does not mandate a power of attorney to
accompany every ballot, neither does it prohibit a debtor from
requiring one. Here, the entire solicitation and voting process
was conducted through a small group of law firms who
collectively represented hundreds of thousands of individual
claimants. Where the voting process is managed almost entirely
by proxy, it is reasonable to require a valid power of attorney for
each ballot to ensure claimants are properly informed about the
plan and that their votes are valid.
67There are numerous “good faith” requirements associated
with the bankruptcy reorganization process. In addition to §
1129(a)(3), a court may “designate” (i.e., disqualify from
129
Additionally, the Certain Cancer Claimants contend that
the use of stub claims within a two-trust framework violates the
good faith requirement of the Bankruptcy Code. As a condition
of plan confirmation, a debtor must propose a plan of
reorganization “in good faith and not by any means forbidden by
law.”67 11 U.S.C. § 1129(a)(3). Courts and commentators have

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voting) the ballot of “any entity whose acceptance or rejection”
of the plan “was not in good faith, or was not solicited or
procured in good faith.” 11 U.S.C § 1126(e); see also Figter
Ltd. v. Teachers Ins. & Annuity Ass'n of Am. (In re Figter Ltd.),
118 F.3d 635, 638 (9th Cir. 1997). We have also recognized
good faith as a threshold requirement for filing a Chapter 11
bankruptcy petition. See NMSBPCSLDHB, L.P. v. Integrated
Telecom Express, Inc. (In re Integrated Telecom Express, Inc.),
384 F.3d 108, 112 (3d Cir. 2004) (holding bankruptcy petition
was not filed in good faith); In re SGL Carbon Corp., 200 F.3d
154, 167 n.19 (3d Cir. 1999) (“Although it is true the proposed
plan would be subject to a separate ‘good faith’ determination
by the bankruptcy court before it could implemented, see 11
U.S.C. § 1129(a)(3), that is only appropriate if the bankruptcy
petition properly belongs before the bankruptcy court. In a case,
such as this one, where a debtor attempts to abuse the
bankruptcy process, proceedings should end well before formal
consideration of the plan.”). We focus here on the statutory
good faith requirements. The District Court’s determinations of
fact on good faith are reviewed for clear error, In re PWS
Holding Corp., 228 F.3d at 242, while conclusions of law are
subject to plenary review. In re Gioioso, 979 F.2d 956, 959 (3d
Cir. 1992).
130
recognized the good faith requirement provides an additional
check on a debtor’s intentional impairment of claims. See In re
Greate Bay Hotel & Casino, Inc., 251 B.R. at 240 (“Of course,
the classification and treatment of classes of claims is always

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131
subject to the good faith requirements under § 1129(a)(3).”); see
also 7 Collier on Bankruptcy ¶ 1129.03[10], at 1129-62 (15th
ed. rev. 2000) (“Because the test of [§ 1129(a)(10)] is somewhat
mechanical on its face, and thus would not under a plain
meaning analysis permit of an inquiry into motive, courts have
indicated that attempts to manufacture artificially, or to
gerrymander, classes to obtain an accepting impaired non-
insider class raise questions of good faith.”). Although the Code
does not define “good faith” in the context of § 1129(a)(3), we
have stated that “[f]or purposes of determining good faith under
section 1129(a)(3) . . . the important point of inquiry is the plan
itself and whether such a plan will fairly achieve a result
consistent with the objectives and purposes of the Bankruptcy
Code.” In re PWS Holding Corp., 228 F.3d at 242 (citing In re
Abbotts Dairies of Pa., Inc., 788 F.2d 143, 150 n.5 (3d Cir.
1986)).
Both the Bankruptcy Court and District Court found the
Plan satisfied the good faith requirement of § 1129(a)(3). In
rejecting the proposition the Plan had been proposed in bad
faith, the District Court concluded “it cannot be seriously argued
that the good faith requirements of section 1129 would bar a
plan intended to pay victims and resolve crippling and uncertain
tort liabilities.” The District Court found Combustion
Engineering created the stub claims merely to purchase “a little
time, a breathing space,” and because “there were simply
insufficient funds to pay the settlement trust claimants 100
percent of their claims.”

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68The Certain Cancer Claimants also contend the pre-petition
payments to the CE Settlement Trust participants and creation
of the stub claims violate the good faith requirement of §
1126(e) because they amount to payments in exchange for votes
in favor of the plan. As noted (see supra note 67), under
§1126(e), a bankruptcy court may designate the vote of any
entity “whose acceptance or rejection of such plan was not in
good faith, or was not solicited or procured in good faith or in
accordance with the provisions” of the Bankruptcy Code. 11
U.S.C. § 1126(e); see also Century Glove, Inc. v. First Am.
Bank, 860 F.2d 94, 97 (3d Cir. 1988) (Section 1126(e) “grants
the bankruptcy court discretion to sanction any conduct that
taints the voting process, whether it violates a specific provision
or is in ‘bad faith.’”).
Section 1126(e) is often used to monitor the conduct of
creditors who seek to gain an untoward advantage over others in
the bankruptcy process. In interpreting the predecessor
132
The District Court also found the purported goal of the
Plan in paying asbestos claimants and definitively resolving the
asbestos liabilities of the debtor was consistent with the
objectives of the Bankruptcy Code. The Certain Cancer
Claimants contend the purpose of the two-trust framework was
to secure improperly the required confirmation votes from a
privileged group of claimants at the expense of the future and
other non-participating claimants. We will remand for further
consideration of good faith in light of the issues we have
identified with the two-trust structure.68

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provision to § 1126(e), § 203 of the Bankruptcy Act, the
Supreme Court noted:
Its purpose was to prevent creditors from
participating who ‘by the use of obstructive
tactics and hold-up techniques exact for
themselves undue advantages from the other
stockholders who are cooperating.’ Bad faith was
to be attributed to claimants who opposed a plan
for a time until they were ‘bought off’; those who
‘refused to vote in favor of a plan unless . . . .
given some particular preferential advantage.’
Young v. Higbee Co., 324 U.S. 204, 211 n.10 (1945) (citing
Revision of the Bankruptcy Act: Hearings Before the Committee
on the Judiciary of the House of Representatives, 75th Cong.,
1st Sess. on H.R. 6439, Serial 9, at 180-82). The Court
concluded § 203 was meant to apply to creditors “whose selfish
purpose was to obstruct a fair and feasible reorganization in the
hope that someone would pay them more than the ratable
equivalent of their proportionate part of the bankrupt assets.”
Id. at 211. See also In re Figter Ltd., 118 F.3d at 639 (“If a
person seeks to secure some untoward advantage over other
creditors for some ulterior motive, that will indicate bad faith.
But that does not mean that creditors are expected to approach
reorganization plan votes with a high degree of altruism[.]”)
(internal citation omitted).
This issue is also remanded for further consideration.
133

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69See 140 Cong. Rec. S4521-01, S4523 (Apr. 20, 1994)
(statement of Senator Heflin) (“[W]hen an asbestos-producing
company goes into bankruptcy and is faced with present and
future asbestos-related claims, the bankruptcy court can set up
a trust to pay the victims. The underlying company funds the
trust with securities and the company remains viable. Thus, the
company continues to generate assets to pay claims today and
into the future. In essence, the reorganized company becomes
the goose that lays the golden egg by remaining a viable
operation and maximizing the trust's assets to pay claims.”)
134
VII. Going Concern Requirement:
Section 524(g)(2)(B)(i)(II)
Section 524(g)(2)(B)(i)(II) provides that the asbestos
personal injury trust must be “funded in whole or in part by the
securities of 1 or more debtor involved in such plan and by the
obligation of such debtor or debtors to make future payments,
including dividends.” The implication of this requirement is
that the reorganized debtor must be a going concern, such that
it is able to make future payments into the trust to provide an
“evergreen” funding source for future asbestos claimants.69
Both the Bankruptcy Court and the District Court found the
reorganized Combustion Engineering would engage in business
operations after consummation of the Plan. The Bankruptcy
Court found Combustion Engineering “had a continuing real
estate business . . . . [and] is continuing in business post-
confirmation.” In re Combustion Eng’g, 295 B.R. at 485. The

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70But there are additional factors here. One is the significant
financial contributions to the Asbestos PI Trust by non-debtors
ABB Limited, Basic and Lummus. From the claimants’
perspective, it may make little economic difference whether the
source of future funds comes from the debtor or a third-party, so
long as a sufficient and reliable pool of assets remains available
to pay their claims.
Counterposed against this is the fact that the Asbestos PI
Trust is a closed fund, raising a possible concern should it hold
insufficient funds to pay all allowed claims against it.
135
District Court likewise overruled a challenge to the § 524(g)
channeling injunction after concluding “the reorganized
Combustion Engineering will have a real estate business in
which it will own and lease properties.”
The record demonstrates the following facts.
Combustion Engineering’s post-confirmation business
operations would be, at most, minimal. Combustion
Engineering would emerge from Chapter 11 with no employees,
no products or services, and in a cash neutral position. Its sole
business activity would relate to the ownership of an
environmentally contaminated piece of real estate in
Connecticut (a so-called “brown field”) and related lease
activities.70
Although it is debatable whether Combustion
Engineering could satisfy § 524(g)(2)(B)(i)(II), it does not
appear that the Certain Cancer Claimants raised this issue. They

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136
are the only parties, however, with standing to do so. While the
Objecting Insurers argue that § 524(g)(2)(B)(i)(II) is not
satisfied, they do not have standing to raise this matter.
Therefore, we need not address it.
VIII. Conclusion
For the foregoing reasons, we will vacate the order of the
District Court confirming Combustion Engineering’s Plan of
Reorganization and remand to the District Court for proceedings
consistent with this opinion.

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