National Gypsum Co v. NGC Stlmnt Trust, et al

REVISED, JULY 25, 2000
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
_______________
m 99-10758
_______________
IN THE MATTER OF:
NATIONAL GYPSUM COMPANY,
AND
AANCOR HOLDINGS, INC.,
Debtors.
THE NEW NATIONAL GYPSUM COMPANY,
Appellant,
VERSUS
THE NATIONAL GYPSUM COMPANY SETTLEMENT TRUST,
Appellee.
* * * * * * * * * * * * * * *

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_______________
m 99-10760
_______________
IN THE MATTER OF:
NATIONAL GYPSUM COMPANY,
Debtor.
NATIONAL GYPSUM COMPANY,
Appellant,
VERSUS
NGC SETTLEMENT TRUST
AND
THE ASBESTOS CLAIMS MANAGEMENT CORPORATION,
Appellees.
_________________________
Appeals from the United States District Court
for the Northern District of Texas
_________________________
July 18, 2000
Before REAVLEY, SMITH, and
EMILIO M. GARZA, Circuit Judges.
JERRY E. SMITH, Circuit Judge:
In 1993, the bankruptcy court entered an
order (the “Confirmation Order”) confirming
the joint chapter 11 plan of reorganization (the
“Plan”) of Aancor Holdings, Inc. (“Aancor”),
and its wholly-owned subsidiary, National
Gypsum Company (“Old-NGC”), and approv-
ing certain plan documents. As a result of the
bankruptcy reorganization, National Gypsum
Company (“New-NGC”) was created as a new
Delaware corporation. Four years later, the
NGC Settlement Trust (the “Trust”) and its

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subsidiary, formerly Old-NGC and now called
Asbestos Claims Management Corporation
(“ACMC”), filed this declaratory judgment ac-
tion in bankruptcy court, seeking a determina-
tion that, under the Plan, New-NGC was liable
for any unknown asbestos disease claims (the
“Unknown Claims”) arising from Old-NGC’s
torts and not resolved by the Trust.
Following an adversary hearing, the bank-
ruptcy court delivered a bench ruling in which
it concluded that under the Plan, New-NGC
was liable for Unknown Claims the Trust
could not satisfy. New-NGC appealed to the
district court, which affirmed. Concluding that
the Confirmation Order and other plan docu-
ments do not transfer liability for these Un-
known Claims from Old-NGC to New-NGC,
we reverse and remand.
I.
In October 1990, Old-NGC and Aancor
filed petitions, later consolidated, for relief un-
der chapter 11 of the Bankruptcy Code. Old-
NGC faced two key groups of creditors: Un-
secured bond and trade creditors that were
owed approximately $1.1 billion, and asbestos-
related claimants who had an estimated $127
million due for pending claims and projected
future disease claims of $695 million to $764
million.
The bankruptcy court appointed commit-
tees to represent the holders of the unsecured
bond and trade claims (the “BT Committee”)
and the asbestos claims (the “Asbestos Com-
mittee”) and a legal representative to represent
holders of Unknown Claims. After selling
some of its assets, Old-NGC retained two of
its subsidiary businesses: the Gold Bond Build-
ing Products division (“Gold Bond”), which
produces and sells gypsum and wallboard-
related products, and the Austin Company
(“Austin”), a design, engineering, and con-
struction firm. Old-NGC also retained insur-
ance coverage (“Insurance”) available to pay
some asbestos claims.
Old-NGC, the Asbestos Committee, and
the BT Committee agreed on how Old-NGC’s
assets would be used to pay commercial and
asbestos claims. Commercial creditors would
receive Gold Bond, and asbestos claimants
would receive Old-NGC and its assets, includ-
ing Austin, the Insurance, certain insurance-
related claims, and $10 million from New-
NGC. Under a draft plan of reorganization
(the “Draft Plan”), Aancor, the parent debtor,
would be merged into Old-NGC, with Old-
NGC as the surviving entity. Old-NGC was to
be renamed Asbestos Claims Management
Corporation, and two new entities were to be
created, the Trust and New-NGC. The Draft
Plan was approved by the necessary classes of
commercial creditors and both classes of as-
bestos creditors.
Under the Draft Plan, New-NGC, a new
Delaware corporation, would purchase from
Old-NGC the operating assets and business of
Gold Bond, including the name “National
Gypsum Company.” The commercial credi-
tors then would look to New-NGC, while the
asbestos claimants would look to the Trust.
Because under the Draft Plan the commer-
cial creditors would own New-NGC, worth
approximately $350 million, and because they
had, in return, agreed to extinguish over
$1 billion in claims against Old-NGC, the
commercial creditors also requested a perma-
nent injunction, in the Confirmation Order,
protecting New-NGC from future and Un-
known Claims, to maximize the value of New-
NGC’s securities in the public markets by
removing any taint from the possibility of

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asbestos-related liability. Thus, the Draft Plan
provided not only that the Trust would be
established and would assume sole responsibil-
ity for all asbestos claims, including Unknown
Claims, but also that the Confirmation Order
would contain a “channeling order and perma-
nent injunction” that would channel all asbes-
tos claims to the Trust and forever would bar
the assertion of any asbestos claims against
New-NGC.
The Draft Plan also provided for the forma-
tion of the Trust, which would retain Austin
(valued at approximately $125 million), the
Insurance (worth between $300 million and
$600 million, depending on how pending cov-
erage litigation was resolved), certain other
insurance-related claims, and a $10 million
cash payment from New-NGC. As a result,
the Draft Plan made it likely, but not a cer-
tainty, that the Trust assets would be sufficient
to pay all present and future asbestos diseases
claims, particularly if the settlement in the re-
lated litigation in Georgine v. Amchem Prod-
ucts, Inc., 83 F.3d 610 (3d Cir. 1996), were
approved.
This payment-in-full was to be accom-
plished through a joint defense facility, the
Center for Claims Resolution (“CCR”), estab-
lished in 1988 by Old-NGC and nineteen other
former asbestos companies. CCR set up an
administrative compensation system that, in
most cases, would replace judicial resolution
of asbestos claims; this facility was subject to
approval in the Georgine settlement.1 Regard-
less of the level of funding that ultimately
would be available for these claims, however,
the Trust was required to give all claims,
whether current or unknown, “substantially
equivalent” treatment.
If the then-pending Georgine settlement
were not approved, the Draft Plan included a
back-up option that required the Trust to
implement the “Alternate Asbestos Disease
Claims Resolution Facility” (the “Alternate
Facility”), which would provide for the ratable
distribution of Trust assets to all projected
asbestos claimants. A claimant would receive
a percentage of the liquidated value of his
claim, calculated by dividing the value of Trust
assets by the projected amount of all future
liabilities. The Alternate Facility was designed,
therefore, to preserve “sufficient resources to
pay future valid [asbestos claims] on a sub-
stantially equivalent basis.”
The Draft Plan was submitted to the bank-
ruptcy court for approval. The legal represen-
tative of the Unknown Claimants opposed the
provision for a permanent injunction, fearing
that New-NGC would not assume even non-
asbestos-related claims arising post-petition
and that, as a result, those obligations might
have to be born by Old-NGC or the Trust.
Following hearings on asbestos issues in
January 1993, the bankruptcy court decided
that it lacked jurisdiction to enjoin permanently
or to discharge Unknown Claims. It reasoned
that persons who had not yet suffered an injury
that was cognizable under applicable non-
bankruptcy law did not hold “claims” within
the meaning of section 101(5) of the Bank-
ruptcy Code. The court also concluded, how-
ever, that it did have the power to enter a tem-
porary injunction that would require Unknown
Claims first to be exhausted from the Trust be-
fore the claimants asserting them could pursue
remedies against any other person, including
1 See Amchem Products, Inc. v. Windsor, 521
U.S. 591, 599-605 (1997) (describing the CCR’s
system for settling and compensating asbestos-
related claims).

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New-NGC.
Because they were uncertain how to re-
draft the injunctive language, the parties in
February 1993 addressed to the bankruptcy
court the issue of the temporary injunction and
New-NGC’s potential liability for any Un-
known Claims. The court, however, was un-
willing to take a position on whether New-
NGC would be liable in the future for the
Unknown Claims, noting that this liability
should be decided according to non-bank-
ruptcy law and that New-NGC could defend
any future suits by claiming that it was not a
successor to the debtors’ liabilities.
As a consequence of the January 1993
decision and the February 1993 hearing, the
Draft Plan was modified to eliminate the per-
manent injunction against Unknown Claims,
though that injunction would be in effect
against current asbestos claims. In March
1993, Old-NGC proposed the Third Technical
Modifications to the Plan, which changed the
Draft Plan (1) by drawing a distinction be-
tween current claims and Unknown Claims to
exclude Unknown Claims from the discharge
and (2) by removing the permanent injunction
against Unknown Claims and replacing it with
the more limited “Channeling Order and Injunc-
tion.”
The BT Committee objected, arguing that
this was a substantial change from the Draft
Plan that would permit the Unknown Claims
to be litigated against New-NGC after reme-
dies against the Trust had been exhausted.
The bankruptcy court rejected this objection,
however, and approved the Third Technical
Modifications, reasoning that the changes to
the Draft Plan did “not adversely change the
treatment under the Plan of any [creditor].”
As approved, then, the Plan provided, in
pertinent part, that current asbestos claimants
were permanently enjoined from ever suing
any person other than the Trust, including
New-NGC. Unknown Claimants were neither
discharged nor permanently enjoined but were
“made beneficiaries of the [Trust] and, pending
exhaustion of the remedies of the [Trust] to re-
solve Unknown Claims, are enjoined” from
pursuing litigation against any person, includ-
ing New-NGC. This temporary injunction is
referred to throughout the Plan, Confirmation
Order, and briefs as the “Channeling Order.”
The modifications to the Plan did not alter
the previous Draft Plan’s section that provided
that New-NGC would not assume asbestos lia-
bilities of Old-NGC: “Upon consummation of
the Merger and this Plan, New-NGC shall per-
form all of the obligations of the Debtors un-
der this Plan (except for the obligations re-
garding the Asbestos Claims which shall be the
sole responsibility of the [Trust]).” “Asbestos
Claims” were defined to include both current
and Unknown Claims. Likewise, the Confir-
mation Order included a detailed description of
the Channeling Order and reiterated that
“New-NGC shall not be subject to the com-
mencement or continuation of litigation by any
person on or on account of Unknown Asbes-
tos Disease Claims pending exhaustion of the
remedy or remedies provided by the [Trust].”
Finally, the assets of Old-NGC were trans-
ferred to New-NGC pursuant to an asset pur-
chase agreement (the “APA”). The APA was
expressly approved by the bankruptcy court’s
Confirmation Order and provided that New-
NGC would not assume any asbestos-related
liabilities, including Unknown Claims. In July
1993, the Plan was substantially consummated,
and New-NGC issued to commercial creditors
its securities, which subsequently were traded

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in the public markets.
In May 1996, the Third Circuit set aside the
Georgine settlement, and the Supreme Court
affirmed that decision in Amchem, 521 U.S.
at 629. This led directly to the filing of the
present lawsuitSSthe Trust alleged that be-
cause it could no longer participate in the CCR
facility, its assets would be insufficient to pay
full tort values to all asbestos disease claim-
ants. The Trust, as a result, looked for alter-
nate funding for asbestos claimants and sought
a determination that “the Plan Documents indi-
cate New NGC has liability for the asbestos
liabilities of Old NGC.” Specifically, the Trust
contended that the bankruptcy court’s 1993
denial of the permanent injunction, the entry of
the Channeling Order, and the findings made in
support of those decisions indicated that New-
NGC was liable for the Unknown Claims.
The bankruptcy court agreed with the
Trust, stating that “the plan as confirmed by
order of this court implicitly imposes or main-
tains liability on New-NGC for asbestos dis-
ease non-Bankruptcy Code claims not dis-
charged by the confirmation order and not sat-
isfied by the Trust.” The court explained why
this result was only “implicit”:
By implicitly addressing this asbestos
liability, rather [than] explicitly doing so,
and by deferring the matter as provided
in the plan, the court enabled New NGC
to emerge in the marketplace post-con-
firmation as an effective entity, poised,
under the right market conditions to
prosper, and thereby benefit all the con-
stituencies.
In affirming the bankruptcy court, the dis-
trict court acknowledged that “[w]hen viewed
in isolation, certain provisions of the Confir-
mation Order, the Plan and the [APA] argu-
ably support the Appellant’s arguments that
New NGC emerged from the bankruptcy pro-
ceedings without any liability for unknown as-
bestos claims.” Nevertheless, the district court
concluded that those provisions should be read
in the context of the entire Plan, and it agreed
that implicit in the Confirmation Order was the
idea “that if the Trust had insufficient assets to
satisfy the unknown claims, those claimants
could look to New NGC.”
II.
New-NGC asserts that the Trust is not the
real party in interest and, in a related argu-
ment, that the Trust does not have standing to
seek the determination that New-NGC is liable
for Unknown Claims. First, New-NGC argues
that the real parties in interest are any potential
Unknown Claimants who first exhaust Trust
remedies without having their claims resolved,
then obtain a judicial termination of the Chan-
neling Order as to their claims, and finally
bring their claims against New-NGC in non-
bankruptcy courts based on applicable state
law. New-NGC points out that no such claim-
ants yet exist.
New-NGC asserts that the Trust has no
substantive rights of its own against New-
NGC, because the Plan and Confirmation Or-
der contemplate that the Trust retain liability
for all asbestos claims until its assets are ex-
hausted. Thus, New-NGC ressons that be-
cause the Trust has no rights under substantive
law against New-NGC, New-NGC cannot be
the real party in interest.2
2 See Farrell Constr. Co. v. Jefferson Parish,
La., 896 F.2d 136, 140 (5th Cir. 1990) (“[A] party
not possessing a right under substantive law is not
the real party in interest with respect to that right
(continued...)

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The Trust properly points out, however,
that the real party in interest is “not necessarily
the person who will ultimately benefit from the
recovery.” See Farrell, 896 F.2d at 140. Be-
cause the Plan charges the Trust with the on-
going duty of distributing the assets of the es-
tate to the asbestos creditors, the substantive
right the Trust seeks to be enforced is the right
to have the bankruptcy court interpret and
construe the Confirmation Order, Plan, and
plan documents regarding matters as to which
there is a substantial and immediate contro-
versy.
Without the bankruptcy court’s interpreta-
tion of the meaning of the Plan, the Trust will
be faced with a fiduciary dilemma, in that it
will be uncertain how to treat its beneficiaries,
the Unknown Claimants. This dilemma exists
because the trustees cannot know whether
these future claimants ultimately will have a
remedy against New-NGC, and, as a result,
the trustees cannot know, with any certainty,
whether the Trust must reduce the current
pro-rata distribution under the Alternate Facil-
ity.
Therefore, the Trust properly has brought
the current declaratory judgment action seek-
ing a determination of whether, under the Con-
firmation Order and Plan, it can count on
New-NGC to pay any of the Unknown Claims.
Accordingly, the Trust is a real party in inter-
est and has standing.
III.
A.
The parties dispute the standard of review
of the bankruptcy court’s interpretation of its
1993 Confirmation Order. New-NGC argues
that because the interpretation of a court order
is purely a question of law, our review must be
de novo.3
The Trust responds by arguing that a
court’s interpretation of its own order should
be entitled to deference if it is not plainly
contradicted by the Plan documents.4 The
Trust notes that the bankruptcy court presided
at the confirmation hearings, considered the
relevant factual and legal arguments, made
extensive findings and conclusions in connec-
tion with confirmation, and so developed a
comprehensive understanding of the Plan.
Thus, the Trust urges that a deferential stan-
dard is “eminently proper.”
The proper reconciliation of these two posi-
tions is that we should review de novo the
purely legal issuesSSe.g., the effect of the
documents on New-NGC’s liability for Un-
known ClaimsSSbut should defer to the bank-
ruptcy court’s reasonable resolution of any
ambiguities in those documents. Because
New-NGC is correct that the bankruptcy
court’s ultimate determination of the meaning
of the Plan and Confirmation Order is a legal
one, however, the documents must truly be
ambiguous, even in light of other documents in
the record, before we will defer.
B.
New-NGC argues that the district court
2(...continued)
and may not assert it.”).
3 See In re Schimmelpenninck, 183 F.3d 347,
354 (5th Cir. 1999) (holding that in reviewing a
bankruptcy court’s order, we should perform “the
same task as did the district court: review the
bankruptcy court’s findings of fact for clear error
and issues of law de novo”).
4 See County of Suffolk v. Stone & Webster
Eng’g Corp., 106 F.3d 1112, 1115 (2d Cir. 1997).

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erred in deciding that the Plan provided that
New-NGC would be held liable for any Un-
known Claims that are unresolved following
exhaustion of the Trust’s assets. New-NGC
asserts that rather than being liable under the
bankruptcy Plan, it should be liable only if an
asbestos claimant can overcome the additional
hurdle of proving successor liability under
applicable state law.
In adopting the Trust’s position on this is-
sue, the bankruptcy court admitted that there
are no express statements in the Plan or Con-
firmation Order that affirm New-NGC’s liabil-
ity. Nevertheless, the court found such liabil-
ity “implicit” in the Plan, reasoning that be-
cause it previously had rejected a permanent
injunction against Unknown Claims, “the only
reading that gives meaning to [the] findings of
fact and conclusions of law [is] that this plan
as confirmed by this court contemplated New
NGC liability for claims not paid by the Trust
and not otherwise discharged.”5
The district court affirmed because, as it ex-
plained, the Confirmation Order stated that
New NGC shall not be subject to the
commencement or continuation of litiga-
tion by any person on or on account of
Unknown Asbestos Claims pending ex-
haustion of the remedy or remedies pro-
vided by the [Trust]. The clear implica-
tion of this statement is that once the
[Trust] is exhausted, Unknown Claim-
ants may commence litigation against
[New-NGC].”
(Internal citations omitted.) In defending the
bankruptcy court’s and district court’s deci-
sion, the Trust also argues that we should view
New-NGC’s current position as an attempt to
relitigate the issues that were squarely pre-
sented to, and expressly rejected by, the bank-
ruptcy court in the 1993 Plan and confirmation
proceedings. The Trust points out that the
1993 order was never appealed and is, there-
fore, the law of the case.
But just because the Confirmation Order
and Plan are binding does not answer the more
difficult question of what those documents
mean. Our duty is to read the Plan documents
to determine what is the best interpretation of
the court’s intent with respect to New-NGC’s
liability for Unknown Claims. In this respect,
New-NGC correctly notes, as an initial matter,
that there are at least three positions the Plan
could have adopted: (1) New-NGC could be
immune from Unknown Claims; (2) New-NGC
could be liable for Unknown Claims that were
not resolved by the Trust, but only to the ex-
tent of state law successor liability; or
(3) New-NGC could have been liable for all
Unknown Claims once the Trust was
exhausted.
The bankruptcy court rejected the first of
these positions when it determined that it did
not have jurisdiction permanently to enjoin
Unknown Claimants from suits against New-
NGC. The bankruptcy court, district court,
and the Trust make an immediate leap from
the rejection of this first position to an
adoption of the third position as the one
“implicit” in the 1993 orders. This leap is
5 In addition to challenging the underlying inter-
pretation, New-NGC argues that it is never proper
for a bankruptcy court to make an “implicit” rul-
ing, particularly where that ruling conflicts with
other express statements in the Plan. While this
argument is thus styled as a separate ground for
reversal, it relies wholly on the conclusion that the
underlying interpretation is wrong. As a conse-
quence, we need not address it separately.

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apparent in the Trust’s argument that because
the commercial creditors’ BT Committee
opposed the Channeling Order and its
temporary injunction, they
knew that under the confirmed Plan
New-NGC would be liable for Unknown
AD Claims to the extent, if any, that the
Trust proved unable to resolve those
Claims. Indeed, they objected
(unsuccessfully) to NGC’s third
Technical Modifications on this very
ground, asserting that the modification
would subordinate the majority of the
claims currently held by NGC’s bond
and trade creditors to an undetermined
amount of asbestos liability.
The Trust’s conclusion does not flow in-
evitably, however, from the commercial
creditors’ objections. It is possible that these
creditors were objecting to the imposition on
New-NGC of any risk of liability, including the
(apparently) smaller risk of successor liability
under state law. Because the previous Draft
Plan would have provided New-NGC with ab-
solute immunity from all asbestos claims, ei-
ther the second or third interpretations would
represent a less desirable reorganization plan
for these creditors, and either would have mo-
tivated them to object.6 Thus, New-NGC ar-
gues that it was erroneous for the bankruptcy
court to treat the failure to create a permanent
injunction against future asbestos claims as the
equivalent of imposing liability for those claims
on New-NGC.
Likewise, the isolated statements pointed to
by both parties do little to resolve the
interpretive question. The Trust emphasizes a
statement contained in the transcript from the
January 1993 bankruptcy ruling that “Non-
Bankruptcy Code claimants must be able to
pursue their remedies in the future after the
exhaustion of the trust.” But once again,
either the second or third interpretation would
be consistent with this statement, for the court
could have intended that state-law successor
liability would be sufficient, or, alternatively,
the court could have been referring to an
immediate liability on exhaustion of the Trust.
Somewhat more informative are statements
New-NGC points to from the February 1993
hearing, wherein the court specifically
addressed the issue of New-NGC’s liability for
Unknown Claims should the Trust be
exhausted, noting:
The Court has already provided that if
these future claimants are [not] satisfied,
there is no permanent injunction and
then that triggers the dispute is new
NGC a successor, what liability is there
under whatever the applicable
corporate law would be. . . . My
concern is if you start getting into the
dispute on document drafting, you will
6 The dissent ignores this observation, thereby
reflecting same error as did the bankruptcy court,
the district court, and the Trust, stating that “[o]ver
the protest of Gypsum creditors who would own
the New-NGC the bankruptcy court refused to
protect it from future unknown claims.” Like the
Trust, however, the dissent assumes this conclusion
solely from the fact that the court rejected a
permanent injunction against Unknown Claims,
and it fails to point to any language in the approved
Plan or Confirmation Order that indicates that
(continued...)
6(...continued)
NewNGC, instead of accruing the more limited
form of state-law successor liability, would be
liable for all Unknown Claims once the Trust was
exhausted.

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be necessarily changing by corporate
document what the Court would
anticipate would just be whatever the
application is of the appropriate
jurisdiction statute. . . . My only
concern is if you’re not in dispute as to
what to put on any document with a
new entity, maybe that’s simply left
better to the application of whatever
governing law would be, nonbankruptcy
governing law, in the event that there’s
anything to fight about, in the event that
some claims in the future . . . they can
proceed with their rights, and new NGC
can defend and say we’re not a
successor.
(Emphasis added.) New-NGC asserts that
these discussions form the context for the final
version of the Plan, the Confirmation Order,
and the APA and that the bankruptcy court’s
comments reflect its understanding, at that
time, that even though there would be no
permanent injunction preventing Unknown
Claimants from seeking damages from New-
NGC if the Trust were exhausted, nevertheless
those claims against New-NGC would still
have to meet the requirements for state-law
successor liability.
The Trust downplays these comments, sug-
gesting they are merely part of a discussion
about what was then a completely speculative
and hypothetical event (the likelihood that the
Trust would ever be exhausted). It argues that
these statements cannot, as a matter of law,
substitute for what is in the Confirmation Or-
der and Plan. The Trust is correct that the
Plan and Confirmation Order form the basis of
the binding agreement between the debtors
and creditors, and any determination of the
extent of New-NGC’s liability for the
Unknown Claims must flow from those
documents. Nonetheless, where there is
ambiguity in the documents, and especially
where there is a dispute as to what the parties
understood them to mean, extrinsic evidence
such as this should inform our analysis.
That notwithstanding, the best indication of
the bankruptcy court’s intent with respect to
these Unknown Claims still can be found in the
documents themselves. First, and most
importantly, New-NGC points to the
Channeling Order, because it is the disputed
provision that represents the most significant
modification of the Draft Plan. The
Channeling Order provided as follows:
Channeling OrderSSUnknown Disease
Claims.
(1) Injunction and Channeling Order.
Pursuant to Section 6.5(b) of the Plan,
all Persons who have held, hold, or may
hold Unknown Asbestos Disease Claims
are made beneficiaries of the [Trust]
and, pending exhaustion of the remedies
of that Fund to resolve Unknown
Asbestos Disease Claims, are enjoined
(subject, however, to the provisions of
Section 10(b)(2) of this Order) on and
after the Confirmation Date from . . .
commencing or continuing in any
manner any action or other proceeding
of any kind with respect to such
Unknown Asbestos Disease Claim
against the Debtors, New NGC,
Reorganized NGC, or any of their
respective officers, directors, employees,
representatives, Affiliates or Subsidiaries
(other than Austin or its Subsidiaries),
the Insurance Companies, or any other
Person . . . .
(2) Limitations on Injunction and

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Channeling Order Regarding Asbestos
Disease Claims. Nothing contained in
Section 10(b)(1) of this Order, however,
shall preclude an Unknown Asbestos
Disease Claimant from pursuing his
rights, if any, under applicable non-
bankruptcy law against any Person who
may be liable to such Unknown
Asbestos Disease Claimant after
exhausting the remedy or remedies
provided by the [Trust].
(Emphasis added.)
New-NGC points to the quoted language
for its conclusion that Old-NGC’s tort liability
to non-Code claimants does not attach
automatically to New-NGC. Specifically,
New-NGC notes that section 10(b)(2) covers
any “Person,” not just New-NGC, and that the
rights of Unknown Claimants are limited to
“rights, if any, under applicable non-
bankruptcy law.” New-NGC argues that, as a
result, because the Trust must recognize that
no automatic liability arose against all
“Persons,”7 therefore the Trust must argue that
the Channeling Order somehow designated
that only New-NGC would automatically
succeed t o Old-NGC’s liabilities. But as the
plain language of that order reflects, nothing in
these provisions singles out New-NGC for
special treatment, and New-NGC instead is
dealt with in § 10(b)(2) the same as is any
other Person.
New-NGC correctly observes that,
consequently, the only sensible reading is that
all Persons, including New-NGC, were
exposed to the possibility that Unknown
Claimants might some day be allowed to
pursue a remedy against them if one existed
under applicable non-bankruptcy law. In
contrast, the Trust’s reading would lead to the
unlikely conclusion that the bankruptcy court
intended that all “Persons” would be
automatically liable if the Trust’s assets were
exhausted.
The next provision pointed to by New-
NGC is section 6 of the Confirmation Order,
which expressly approves the APA and orders
that the assets sold thereunder are to be
transferred to New-NGC “free and clear of all
Liens, Claims, Interests and other liabilities,
obligations, charges or encumbrances thereon
or thereagainst . . . to the maximum exten[t]
permitted by the Bankruptcy Code.” Because
New-NGC, a newly-created corporation, can-
not automatically succeed to the liability of
Old-NGC without some affirmative act
(whether explicit or implicit) of the bankruptcy
court, this provision further supports New-
NGC’s argument that the bankruptcy court
never intended to take such necessary action
to transfer liability.
In fact, the natural inference from this pro-
vision is that the court intended New-NGC to
assume only “Liens, Claims, Interests and
other liabilities” that were specifically assigned
or transferred in other parts of the
Confirmation Order; otherwise, New-NGC
would be “free and clear . . . to the maximum
extent permitted by the Bankruptcy Code.”
The plain language of the Confirmation Order
therefore refutes the bankruptcy court’s find-
ing of “implicit” liability.
As further support for its position, New-
NGC notes that section 5.2(d) of the Plan pro-
vides that New-NGC is not responsible for as-
bestos liabilities: “Upon consummation of the
7 Significantly, “Person” is defined broadly,
under the Plan, as “any individual, firm,
corporation, association, partnership, joint venture,
trust, or other entity.”

-- 11 of 22 --

12
Merger and this Plan, New-NGC shall perform
all of the obligations of the Debtors under this
Plan (except for the obligations regarding the
Asbestos Claims which shall be the sole
responsibility of the [Trust].” (Emphasis ad-
ded.) “Asbestos Claims” are defined in the
Plan to include both current and Unknown
Claims.
Finally, for textual support, New-NGC re-
lies on provisions of the APA, which were ap-
proved by the bankruptcy court in the
Confirmation Order. Section 2.1(b) of the
APA states that New-NGC will not have
liability for any asbestos claims (including
Unknown Claims): “Exclusions to
Assumptions. Notwithstanding anything
contained in this Section 2.1 to the contrary,
[New-NGC] shall not assume, covenant to
pay, perform, observe the terms of, satisfy
and/or discharge any liability or obligation of
[Old-NGC] to the extent such liability and
obligation: (i) relates to Asbestos Claims. . . .”
The APA adopted the definition of “Asbestos
Claims” in the Plan, and, as we have said, that
term includes Unknown Claims.
In challenging all these statements
supporting New-NGC’s position, the Trust
relies primarily on the same reasoning as did
the district court, which felt these statements
and provisions are taken out of context and do
not reflect a coherent reading of the
documents as a whole.8 As the court stated,
When viewed in isolation, certain
provisions of the Confirmation Order,
the Plan and the Asset Purchase
Agreement arguably support the
appellant’s arguments that New NGC
emerged from the bankruptcy
proceedings without any liability for
unknown asbestos claims. However, as
the bankruptcy court explained, “the
plan and its implementing documents
must be read coherently, giving meaning
to all its provisions and terms, but doing
so consistent with the confirmation
order, which governs. The plan and its
implementing documents cannot be read
to render any provision of the
confirmation order meaningless or
superfluous.”
(Internal quotations omitted.)
In so stating, the district court erred in at
least two respects. First, New-NGC does not
claim that it “emerged from the bankruptcy
proceedings without any liability for unknown
asbestos claims.” Although this was the first
of the three positions the bankruptcy court
could have taken, all sides acknowledge that
that option was expressly rejected when the
permanent injunction was denied. Instead,
New-NGC takes a more restrained position,
asserting that it emerged with a more limited
form of liability, state-law successor liability.
Second, the bankruptcy court’s and district
court’s desire to avoid “render[ing] any
provision of the confirmation order
meaningless or superfluous” is commendable,
but that interpretive tool leads to a conclusion
8 Notably, the dissent also offers no theory of
how or why we should ignore the plain language of
the Plan documents to reach the result desired by
the Trust. Instead, the dissent criticizes the
majority for having “chosen their own meaning of
the 1993 order,” but it does not tell us what is er-
roneous about our interpretations of the Channeling
(continued...)
8(...continued)
Order, section 6 of the Confirmation Order, section
5.2(d) of the Plan, or section 2.1(b) of the APA.

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13
opposite to the one those courts reached. To
reject the multiple statements advanced as
support by New-NGC as contrary to the
“implicit” meaning of the Confirmation Order
is to render those statements meaningless or
superfluous. In contrast, neither the Trust nor
the bankruptcy or district court has pointed to
language that would be superfluous under
New-NGC’s more modest reading of
successor liability.
The district court decided that New-NGC’s
theory would render the entire Channeling Or-
der meaningless, reasoning that “if New NGC
was not to have any liability for unknown
asbestos claims, the channeling order would
have been unnecessary.” But once again, this
logic is built on the faulty premise that New-
NGC is arguing for absolute immunity. As we
have shown, the rejection of the permanent in-
junction, followed by imposition of the
Channeling Order, is just as consistent with the
theory that the bankruptcy court wanted to
impose at least state-law successor liability on
New-NGC. Our textual analysis of the
Channeling Order demonstrates that the state-
law-successor-liability theory was the most
reasonable interpretation.
Similarly deficient is the district court’s
conclusion that because “the Confirmation Or-
der barred punitive damages by unknown as-
bestos claimants against New-NGC, [t]his in-
dicates that the order contemplated that New-
NGC would be liable for other types of
damages.” While this statement is correct, it
does nothing to undermine New-NGC’s state-
law-successor-liability theory; the bankruptcy
court simply may have been closing the door
to punitive damages even under the more lim-
ited form of non-bankruptcy-law liability.
On the other hand, the Trust may be correct
that the bankruptcy court’s bar on punitive
damages evinces an intent on the court’s part
to impose liability on New-NGC. That is, if
the court intended to leave all questions of
New-NGC’s liability to state-law successor
doctrine, it might seem odd that it would ex-
press any opinion on whether punitive dam-
ages could be recovered under state law.
But to the extent that this observation
about intent is correct, we should nevertheless
reject it as a matter of law. This is so because
once the bankruptcy court had determined that
Unknown Claims were not “claims” within the
meaning of § 101(5) of the Bankruptcy Code,
it no longer retained jurisdiction to limit
punitive damages awards in favor of these
claimants.9
New-NGC correctly notes that it is
inherently inconsistent for the bankruptcy
court to rule that it is without the power
permanently to enjoin Unknown Claims
because they do not fit within section 101(5),
but then to hold, nevertheless, that New-NGC
will be liable for those claims once the Trust is
exhausted. This impermissibly benefits
Unknown Claimants, who do not hold Code
claims, in relation to other non-Code creditors,
who would have to prevail under state-law
9 The dissent argues that this “is a curious re-
sponse to the obvious point that the bankruptcy
court is assuming the same liability of New-NGC
in the channeling facility, rather than contemplating
‘state-law’ litigation.” But the dissent misses the
point that the bankruptcy court could not impose
liability on New-NGC for Unknown Claims, which
were not properly within the bankruptcy system at
all. Thus, even if the bankruptcy court were not
contemplating “state-law” litigation, it did reason
that it had no jurisdiction over future claims, and,
accordingly, those claims should be handled
outside of bankruptcy.

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14
successor theories. Similarly, the district
court’s bar on punitive damages for Unknown
Claims impermissibly disadvantages Unknown
Claims relative to other non-Code creditors
who are free to pursue punitive damages.
Thus, we reject the argument that the punitive-
damages bar has any bearing on New-NGC’s
liability for Unknown Claims, which were
determined to be outside of the bankruptcy
court’s power to enjoin.
In a failed attempt at its own textual
analysis, the Trust argues that because the
court recognized that “[N]ew NGC may
transfer additional assets to the [T]rust in the
future,” therefore this right to add funds would
make sense only if New-NGC also has liability
for the Unknown Claims. New-NGC cogently
points out, however, that the right to add
funds is a recognition not that New-NGC
would retain liability for Unknown Claims, but
instead that it provides New-NGC an option to
shield itself even from successor liability.
If New-NGC determines that it would be
better off funding the Trust than defending
against future state-law asbestos claims,10 the
Plan affords it this option. The court’s
statement is consistent, therefore, with New-
NGC’s theory that the bankruptcy court
believed that New-NGC might want to retain
the ability to extend the temporary injunction
by continuing to fund the Trust.
Thus, the Trust and district court point to
no provisions of the Confirmation Order or the
Plan that lead to the conclusion that New-
NGC was necessarily to be liable for the
Unknown Claims should the Trust fail to
satisfy them. Neither attempts to argue for
alternative interpretations of the provisions set
forth by New-NGC; instead, they rely solely
on their theory that these are mere “isolated”
statements in the documents. New-NGC, on
the other hand, points to multiple statements in
the record, and numerous provisions in the
relevant documents, that are consistent only
with its position that it should not be liable to
the Unknown Claims unless they can establish
state-law successor liability.
Proper textual interpretation does not allow
us to ignore those statements or to adopt an
“implicit” meaning that would render all these
provisions meaningless, and we need not defer
to the bankruptcy court’s interpretation of this
unambiguous text. Nor does our interpretive
role require us to ignore other extrinsic
evidence, such as the bankruptcy court’s
discussion of non-bankruptcy law and
successor liability, that is consistent with the
text.
In light of the Plan and Confirmation Order,
then, it is unlikely that the bankruptcy court
intended that non-Code claimants, who may
have no right to recover against New-NGC
under applicable state law, nevertheless are en-
titled automatically to a Code remedy against
New-NGC. Thus, all of these sources lead to
the conclusion that, although the bankruptcy
court determined that it did not have the
power permanently to enjoin Unknown
Claimants from seeking recovery from New-
NGC on exhaustion of the Trust, the court did
not impose any certain liability on New-NGC.
C.
In the alternative, the Trust asserts that the
structure of Old-NGC’s reorganization Plan
makes New-NGC the de facto reorganized
10 For example, New-NGC may determine that
its expected costs of litigation exceed the amount of
funding needed to ensure continued viability of the
Trust.

-- 14 of 22 --

15
debtor. Relying on Lemelle v. Universal Mfg.
Corp., 18 F.3d 1268, 1274, 1278 (5th Cir.
1994), the Trust notes that, under bankruptcy
law, the reorganized debtor remains liable for
any debt that is not discharged under the plan.
Thus, the Trust explains that, in effect, the
rights and obligations of Old-NGC were
transferred to New-NGC, and, because the
Unknown Claims were not discharged by the
Plan, New-NGC will be liable for them on
exhaustion of the Trust.
As support, the Trust points to the
following evidence: (1) New-NGC was
capitalized with approximately $350 million of
assets of Old-NGC; (2) to receive favorable
tax treatment, New-NGC was required to
carry on the business of Old-NGC; (3) New-
NGC retained Old-NGC’s attorney-client
privilege, even as against Old-NGC and
ACMC; (4) Old-NGC’s management had
authority under the Plan to elect two of the
directors of New-NGC, and the remaining
directors were elected by the commercial
creditors; (5) New-NGC retained the
corporate name “National Gypsum Company”;
(6) New-NGC’s stock was not sold to
unrelated third parties in an arms-length
transaction, but instead was distributed to Old-
NGC’s commercial creditors, and the same
person executed the APA for both the buyer
and seller; and (7) the bankruptcy court stated
that New-NGC would carry on and preserve
the business of the debtor and that only those
assets given to the Trust would be liquidated.
While all this evidence is consistent with the
Trust’s theory that New-NGC is the
reorganized debtor following bankruptcy,
New-NGC points to its own evidence that
Old-NGC, not New-NGC, emerged from the
bankruptcy proceeding as “Reorganized NGC”
under the Plan. First, New-NGC cites the
plain language of the bankruptcy documents.
It notes that the Plan defined “Reorganized
NGC” as “NGC, on and after the Effective
Date, which entity shall be . . . the successor to
NGC for all purposes.” Thus, in a prior
appeal, we recognized that the Trust “became
the sole shareholder of the reorganized
National Gypsum (which, in turn, became
known as ‘Asbestos Claims Management
Corporation (ACMC)’.” Insurance Co. of N.
Am. v. NGC Settlement Trust (In re Nat’l
Gypsum Co.), 118 F.3d 1056, 1059 (5th Cir.
1997). In contrast, “New NGC” means “a
Delaware corporation to be formed pursuant
to this Plan, and which shall do business from
and after the Effective Date as ‘National
Gypsum Company.’”
Similarly, the Trust Agreement provides
that “[t]he purpose of the Trust is to assume
any and all liabilities of the Debtors” (emphasis
added), and the Channeling Order provides for
an injunction of actions against, among others,
“the Debtors, New NGC, [or] Reorganized
NGC,” suggesting that New-NGC and the re-
organized debtor are not the same entity under
the Plan. Thus, treating New-NGC as the re-
organized debtor is contrary to the plain
language of the documents.
New-NGC also points out that the Trust’s
reliance on Lemelle is misplaced and that that
decision actually supports New-NGC’s
contention that Old-NGC/ACMC remains the
reorganized debtor. In Lemelle, the debtor
corporation, Winston, sold its operating assets,
during bankruptcy, in two separate
transactions, leaving it with miscellaneous non-
operating assets. See Lemelle, 18 F.3d at
1270. Following the discharge, Winston
(through its successor) was sued for an act it
had committed before the bankruptcy. It
defended, arguing that it had not succeeded to

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16
any pre-bankruptcy liability, because it had not
retained the operating assets of the debtor, and
therefore it was liquidated. We rejected that
argument, concluding that Winston had not
been liquidated and that the liability was not
one that had been discharged in the Winston
bankruptcy. See id. at 1273.
In rejecting Winston’s argument that it had
been liquidated, we refused to apply the “de
facto liquidation” theory expressed in Erie
Lackawanna Ry. v. Henning, 803 F.2d 881
(6th Cir. 1986). Instead, we concluded that
the Sixth Circuit’s theorySSwhich provided, in
the “admittedly unique” situation of a railroad
debtor, that although the debtor “had gone
through reorganization in form, in substance it
had been liquidated”SSlacked applicability out-
side the Rail Act context. See Lemelle,
18 F.3d at 1273 n.3. The lack of a formal
liquidation in Lemelle, then, was dispositive of
Winston’s claim that a liquidation had
occurred. See id. at 1273.
Thus, far from supporting the Trust’s posi-
tion, Lemelle is an example of the original
debtor’s remaining liable for non-Code claims,
even where the operating assets were sold to
another party. Indeed, the sale of the
operating assets in Lemelle did not even
contain the same restrictive language found in
New-NGC’s sale agreement with the
commercial creditors.11 Consequently,
Lemelle teaches that, because the Trust cannot
establish that Old-NGC was formally
liquidated, therefore Old-NGC remains the
reorganized debtor following bankruptcy.
As we have pointed out, the APA provided
for a limited assumption of liabilities and ex-
pressly disavowed assumption of any current
or future asbestos claims. Moreover, Old-
NGC was no “empty shell” following
bankruptcy: It retained hundreds of millions of
dollars of assets, including the stock of the
Austin Company, and it is still paying asbestos
claims and suing insurance companies.
Nothing about these circumstances suggests
that the Trust and ACMC did not continue as
Old-NGC’s reorganized debtor.
The Trust makes much of the fact that the
sale of Gold Bond was to Old-NGC’s
commercial creditors; it argues that because
the sale was not an “arms-length” transaction,
we should not allow these creditors to escape
the conclusion that New-NGC is just a
reorganized form of the old debtor. New-
NGC cannot be a new corporation free from
Old-NGC’s non-discharged debts, the Trust
argues, because the commercial creditors paid
no new consideration for the operating assets.
Thus, by concluding that New-NGC is liable
only under a state-law successor theory, we
are shielding New-NGC’s new ownersSSwho
were Old-NGC’s old commercial credi-
torsSSfrom non-dischargeable liabilities. The
Trust warns that we are sanctioning a “ruse”
11 In Lemelle, we ultimately rejected the
argument that the party that had purchased Win-
ston’s operating assets was liable for the pre-
bankruptcy claims, because the terms of the pur-
chase agreement were not properly submitted by
Winston in response to summary judgment. See
Lemelle, 18 F.3d at 1274. Nevertheless, the pur-
chase language that did appear in the order was not
(continued...)
11(...continued)
as restrictive as that in the APA, see id., and the
underlying point remains true: The Trust’s theory
that non-Code claims were assumed automatically
by the purchaser of the debtor’s operating assets is
at least as doubtful in this case as it was in Le-
melle.

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17
and inviting future debtors to advocate
bankruptcy plans that incorporate this
strategy.12
Much of this rhetoric is dependent on the
underlying argument that New-NGC, and not
Old-NGC, is the reorganized debtor. But the
Trust offers no principled reason why the fact
that Gold Bond was purchased by Old-NGC’s
commercial creditors should outweigh all the
textual evidence that Old-NGC/ACMC is the
reorganized debtor under the Plan. It seems
that the Trust’s primary concerns seem to be
with bankruptcy policy and the implications for
future reorganization plans.
There is, however, good reason why we
would want to encourage these types of
reorganizations and to enforce the express
terms of the deal to which the parties have
agreed. All sides were adequately represented
during bankruptcy proceedings, and legal
representatives were appointed for current and
future asbestos claimants and for commercial
creditors and the company.13 Negotiations
were extensive, and the legal representative of
the Unknown Claimants successfully blocked
court approval of the Draft Plan, which
permanently would have enjoined even state-
law successor claims against New-NGC. Still,
despite this setback, the commercial creditors
were willing to give more in value to Old-
NGC for Gold Bond than were any other pur-
chasers, and we should be hesitant to change
the terms of the deal after the fact just because
subsequent developments in the Georgine
settlement have resulted in the Unknown
Claims’ being underfunded in the Trust.
This is not a case in which Old-NGC has
won approval of a plan to bail out its
shareholders, “forcing asbestos victims to
surrender their claims in exchange for a
meager” portion of the company’s assets. See
Flanagan, 90 F.3d at 993 (5th Cir. 1996)
(Smith, J., dissenting). Instead, Old-NGC’s
chapter 11 bankruptcy was motivated at least
as much by the $1.1 billion owed to bond and
trade creditors as by the $800 or $900 million
estimated liability for current and future
asbestos disease claims. The bankruptcy court
adopted a Plan whereby all the current and
future asbestos claims were expected to be
paid in full by the Trust , while the bond and
trade creditors received only $350 million in
assets in exchange for their $1.1 billion in
claims.14 This $750 million reduction in debt
12 In this way, the Trust seemingly hopes to
equate this with earlier warnings in other asbestos
litigation. For example, in Flanagan v. Ahearn (In
re Asbestos Litig.), 90 F.3d 963, 994 (5th Cir.
1996) (Smith, J., dissenting), vacated, 521 U.S.
1114 (1997), appeared the warning that “[t]he ma-
jority’s unequivocal approval of Fibreboard’s liti-
gation strategy undoubtedly will lead other
financially threatened companies throughout the
nation to utilize it as a road map for sheltering their
assets and improperly restricting the rights of their
present and future victims.” (Internal quotations
and punctuation omitted.)
13 This is in stark contrast to the facts of Flan-
agan, in which it was noted that, by removing the
settlement from the bankruptcy context, Fibreboard
(continued...)
13(...continued)
denied the class of asbestos claimants the right to
vote on the proposed settlement. See id. at 996
(Smith, J., dissenting).
14 Thus, because the bankruptcy court did not
foresee that the CCR would be disapproved and
the Trust would be insufficient to fund both current
and future asbestos claims, it is not, as the dissent
suggests, “incredible to believe that the bankruptcy
(continued...)

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18
w a s s u f f i c i e n t “ c o n s i d e r a t i on , ”
notwithstanding the Trust’s arguments to the
contrary.
Although the CCR ultimately was
disapproved, there is no reason to believe that
Unknown Claimants are now getting a worse
deal under the Alternate Facility than
commercial creditors originally received under
the Plan; there are, after all, hundreds of
millions of dollars in Insurance, Austin, and
other assets in the Trust. Consequently, none
of the Trust’s concerns about the implications
of shielding the bond and trade creditors from
more liability is especially compelling, and
those concerns certainly are insufficient to
overcome the plain language of the Plan
documents.
IV.
In the end, then, both of the Trust’s argu-
ments fail. First, notwithstanding the
bankruptcy and district courts’ findings to the
contrary, there is nothing “implicit” in the Plan
documents or other bankruptcy court orders
that provides that New-NGC will
automatically succeed to Old-NGC’s liability
for Unknown Claims. Instead, the express
terms of the Plan compel the opposite
conclusionSSi.e., that New-NGC will be liable
only under non-bankruptcy, state-law
successor liability. We see no reason to ignore
the plain meaning of these Plan documents.
Second, Old-NGC and New-NGC are not
the same entity. Under the Plan, Old-NGC
became ACMC, a subsidiary of the NGC
Settlement Trust. New-NGC was formed as a
new corporation created to purchase the assets
of Gold Bond for Old-NGC’s commercial
creditors. Pursuant to the Asset Purchase
Agreement, New-NGC did not assume liability
for asbestos claims, whether known or
unknown. In exchange, its shareholders
surrendered approximately $750 million in net
claims it held against Old-NGC, and it took
$350 million in assets “free and clear of all
liens. Thus, because there are no other
provisions in the Plan that allocated the
liabilities for asbestos claims from Old-NGC to
New-NGC, New-NGC cannot be considered
to have assumed those debts, and it is not the
reorganized debtor.
By contrast, the Trust documents expressly
contemplate that the Trust and its subsidiary,
Old-NGC/ACMC, assume liability for all as-
bestos claims. The Plan also expressly
provides that Old-NGC/ACMC is
“Reorganized NGC.” The Trust has not
presented any compelling evidence why we
should ignore the plain meaning of all these
14(...continued)
court would create this new operating company
with debtor assets, after holding that it had no au-
thority to extinguish unknown asbestos claims of
the debtor, and then leave it to state law governing
successor liability to resolve the future asbestos
liability of its mutant creation.” Rather, the
bankruptcy court simply entered a compromise
agreement whereby the largest group of creditors,
the commercial creditors, would receive something
of value in return for their $1.1 billion in debt,
while the asbestos claimants would receive
everything else.
Then, when subsequently it became apparent
that the Trust would be insufficient to fund
Unknown Claims, the bankruptcy court
unreasonably altered the meaning of the Plan
documents to hold that future asbestos claimants
could go after NewNGC. While this impulse may
have been noble, and perhaps even socially
desirable, the bankruptcy court cannot now ignore
the plain meaning of the documents that created
New-NGC as a separate operating company with
no liability as a reorganized debtor.

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19
documents, nor has it presented a plausible
argument that it is not the reorganized debtor
following bankruptcy.
Accordingly, the judgment of the district
court, affirming the order of the bankruptcy
court, is REVERSED and REMANDED to
the district court for further proceedings, as
appropriate.
ENDRECORD

-- 19 of 22 --

15 For example, see Ortiz v. Fibreboard Corp., 527 U.S. 815, 119 S. Ct. 2295 (1999). 1
REAVLEY, Circuit Judge, dissenting:
The majority have chosen their own meaning of the 1993 order of the bankruptcy court
by leaving future asbestos claimants to tort actions against Gypsum without recourse to the
claims resolution facility of the bankruptcy order. I would follow the bankruptcy court’s
own construction of its order and avoid adding to the delay and lawyer fees for asbestos
victims, a result that joins the ongoing judicial contribution to the asbestos debacle.15 I
dissent.
The 1993 order confirming the plan provided in section 9(b) that New-NGC “shall not be
subject to the commencement or continuation of litigation by any person on or on account
of Unknown Asbestos Disease Claims pending exhaustion of the remedy or remedies
provided by the NGC Asbestos Settlement Fund,” i.e., the fund administered by the Trust.
Again, in the “channeling order” that is section 10(b) of the confirmation order, all persons
holding an unknown asbestos claim are enjoined from suit against New-NGC “pending
exhaustion of the remedies of the” Trust settlement fund. If the court was not directing that,
if necessary, New-NGC assets followed Trust assets in the settlement facility, it was lifting
its injunction and allowing an entirely new track for the claimants who waited for the second
track to begin. While lawyers for the claimants could not count on better recoveries when
the track changed, because New-NGC had the option of adding assets to the Trust Fund, the
lawyer fees could be larger. This able bankruptcy judge would have recognized the vice of
that scheme and would have avoided it.

-- 20 of 22 --

21
When the financial creditors, who were to own New-NGC, objected to the court’s
channeling order for the reason that it “subordinates the majority of the claims currently held
by NGC’s bond and trade creditors to an undetermined amount of asbestos liability,” the
court rejected this objection. Over the protest of Gypsum creditors who would own the
New-NGC the bankruptcy court refused to protect it from future unknown claims but, as if
the bankruptcy court had not decided the matter, this majority opinion holds that the
bankruptcy court did not “transfer liability.” But then the majority relents and restrains the
transfer to the more limited “state-law successor liability.”
Then there is the provision of the order at section 9(c) that expressly bars punitive
damages by unknown claimants against New-NGC. The majority opinion dismisses this on
the ground that the bankruptcy court had no authority to limit those damage awards because
they were not “claims” within the meaning of the Bankruptcy Code. That is a curious
response to the obvious point that the bankruptcy court is assuming the same liability of
New-NGC in the channeling facility, rather than contemplating “state-law” litigation.
The bankruptcy court, in ruling in the pending adversary action, said: “With all due
respect to the learned and considered arguments of counsel, the only reading that gives
meaning to these findings of fact and conclusions of law are that this plan as confirmed by
this court contemplated new NGC liability for claims not paid by the Trust and not otherwise
discharged.” The district court followed the law and gave deference to the bankruptcy
court’s interpretation of its own confirmation order. See Farmland, Inc. v. Anel Eng’g

-- 21 of 22 --

16 693 F.2d 1140, 1146 (5th Cir. 1982) (quoting SEC v. Sloan, 535 F.2d 679, 681 (2d Cir. 1976)). 1
22
Indus., Inc.16 (“We see no basis for substituting our judgment for that of the district judge in
interpreting his own order.”). The bankruptcy judge will find demoralizing the majority
conclusions that he “never intended” or “wanted to impose” a channeling liability after
exhaustion of the Trust assets, or that the judge would reach this strange “state-law successor
liability” and then forget that he had so ruled. Actually, it is incredible to believe that the
bankruptcy court would create this new operating company with debtor assets, after holding
that it had no authority to extinguish unknown asbestos claims of the debtor, and then leave
it to state law governing successor liability to resolve the future asbestos liability of its
mutant creation, without leaving so much as a footnote in the controlling documents
suggesting such an intent. This appellate court should reject the incredible and stay with the
judgment of the bankruptcy court.

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