Free Motion for Leave to File - District Court of Delaware - Delaware

Case 1:08-mc-00118-RLB

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IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF DELAWARE
)

ANDERSON MEMORIAL HOSPITAL, Appellants
v.

) )

Civil Action No. 1:08-mc-00118-RLB
Bankrptcy Case No. 01-01139 (JKF)

W. R. GRACE & Co., et al. Appellees

) ) ) ) )

AP No. 08-AP- 39
Re: Appeal D.1. 1, 2, 4, 6

DEBTORS' MOTION FOR LEA VE TO FILE SUR-REPLY IN OPPOSITION TO ANDERSON MEMORIAL HOSPITAL'S APPLICATION FOR APPEAL OF ORDER DENYING CLASS CERTIFICATION UNDER FED. R. BANKR. P. 7023
Pursuant to LR 7.1.2(b), appellee Debtors move this Court for leave to file a sur-reply, of
less than five pages in length, in opposition to Anderson Memorial Hospital's motion for leave to

appeal the bankrptcy court's order denying its motion for class certification. The sur-reply is
attached as Exhibit A hereto. A proposed order is attached as Exhibit B hereto.
1. On July 9,2008, Anderson filed a motion for leave to appeal the bankrptcy

court's order denying its motion for class certification. (D.!. 1) Debtors filed their response on

June 19, 2008. (D.!. 2)
2. On July 7,2008, Anderson moved for leave to file a reply in support of its
motion. (D.I. 4) The Court granted Anderson's motion on July 9,2008, and Anderson's reply

was deemed to be fied as of that date. (D.I. 6)
3. Anderson's reply is 20 pages in length, exclusive of exhibits. (D.I. 4 Exhibit A)
Contrary to LR 7 .1.3( c )(2), the reply includes new arguments which, if they are proper at all,

"should have been included in a full and fair opening brief."
4. Specifically, Anderson's reply includes new arguments regarding the finality of

the bankrptcy court's order denying class certification, the reasoning of the bankrptcy court in

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denying class certification, the nature of the proposed class, and the impact that an appeal would

have on plan negotiations. (Id.)
5. Debtors believe that the sur-reply attached as Exhibit A hereto would assist the

Court in addressing the arguments set forth in Anderson's reply and in deciding its motion for
leave to appeaL.

WHEREFORE, Debtors respectfully request that the Court enter an order in the form
attached as Exhibit B hereto granting leave to file a short sur-reply to address the new arguments
raised in Anderson's reply.
Dated: July 11, 2008

KIKLAND & ELLIS LLP
David M. Bernick Lisa G. Esayian Michael T. Dierkes 200 East Randolph Drive Chicago, llinois 60601
Telephone: (312) 861-2000

Facsimile: (312) 861-2200
and

P ACHUSKl STANG ZIEij & JONES LLP
a Davis Jones (Bar No. 2436)
J es E. O'Neil (Bar No. 4042)

'mothy Cairns (Bar No. 4228) 919 North Market Street, 17th Floor

P.O. Box 8705 Wilmington, Delaware 19899-8705 (Courier 19801)
Telephone: (302) 652-4100

Facsimile: (302) 652-4400
Co-Counsel for the Debtors and Debtors in Possession

2

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EXHIBIT A

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IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF DELAWARE
ANDERSON MEMORIAL HOSPITAL, Appellants
v.
) )

)
)

Civil Action No. 1:08-mc-00118-RLB
Bankrptcy Case No. 01-01139 (JKF)

) )
)

AP No. 08-AP- 39
Re: Appeal D.I. 1, 2, 4, 6

W. R. GRACE & Co., et al. Appellees

)

DEBTORS' SUR-REPLY IN OPPOSITION TO ANDERSON MEMORIAL'S APPLICA TION FOR APPEAL OF ORDER DENYING CLASS CERTIFICATION UNER FED. R. BANKR. P. 7023
Grace submits this less-than-5-page Sur-Reply to address only those new matters raised
by Anderson Memorial Hospital in its 20-page Reply.
I. The Bankruptcy Court's Denial of Class Certifcation is Not A Final Order.

The Bankrptcy Court's denial of class certification did not dispose of any property damage claims. It did not, as Anderson contends, "effectively termnate() the litigation and foreclose() any chance of presenting in this bankrptcy case a property damage claim for hundreds if not thousands of absent class members." Reply at 2. Those claimants had the
opportunity to file individual proofs of claim by the March 31, 2003 Bar Date. Some of them
did; some of them did not; and in the name of some of them, Anderson's counsel filed

unauthorized proofs of claim, leading to extensive litigation in the Bankrptcy Court and this
Court, 2007 WL 4333817 (D. DeL. Dec. 6, 2007), with the result that this Court refused to
unwind the Bar Date by allowing Anderson's counsel to fie the unauthorized claims. ¡d. at *6,

*8.1 As to the already-disposed-of or never-filed claims, the denial of class certification simply
1 The claimants' appeal is now pending in the Third Circuit. Mission Towers v. WR. Grace, No. 08-1044, United
States Court of Appeals for the Third Circuit.

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does not allow such claims to spring up from the dead and come back into this case. And, the
denial of class certification has no impact on the remaining approximately 170 unresolved

individual claims fied by Anderson's counsel, some of which are subject to settlements-inprinciple and some of which are subject to pending summary judgment motions to be decided by
the Bankrptcy Court.
II. The Bankruptcy Court's Statement Regarding The Timing of Anderson's Filng of

Its Class Proof of Claim is Not a Basis for Appeal.
Although Anderson devotes nine pages to a re-hash of varous statements by the

Bankrptcy Court and others in 2002 on the topic of whether, to what extent, and at what time
class proofs of claim would be permtted, none of this has anything to do with what the

Bankrptcy Court actually found in its opinion denying class certification.
First, regardless of what the Bankrptcy Court or any pary said in 2002, in its May 29,

2008 Memorandum Opinion, the Bankrptcy Court assumed, without deciding, that class proofs

of claim are allowed. Had the Bankrptcy Court wished to rule that class proofs of claim are not
permtted in bankrptcies, it could have. It did not.
Second, although the Bankrptcy Court remarked that Anderson sought certification two

years after the Bar Date and three years after the court ordered a motion to be filed, In re W R.
Grace, 2008 WL 2245811, *3 (Bankr. D. DeL. May 29,2008), these observations did not form

the basis of the rulings that Anderson (1) had not met Rule 23(a)'s numerosity requirements, and

(2) failed to satisfy Rule 23(b)'s requirements. Id. at *2, *3-*5, citations omitted. Thus, these
statements by the Bankrptcy Court are not a basis for appeaL.
III. Certification of a PD Class At This Late Date Would Impact Plan Negotiations.

Anderson argues that because Grace has reached an agreement with the Personal Injury

claimants and that Property Damage claims wil be paid 100%, it follows that "Grace can hardly

2

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claim that prosecution of this appeal would seriously interfere with plan negotiations." Reply

at

18. Exactly the opposite is true. Since 2005, there has been a intensive and successful several-

year process of dealing with the more than 4,000 property damage claims filed as of the Bar Date

on a claim-by-claim basis. As a result, there are now only approximately 170 pending PD

claims, of which approximately 100 are subject to settlements-in-principle. The results achieved
through this years-long process have been incorporated into plan negotiations and the new plan

that wil soon be proposed. Certification of a PD class would marginalize that effort by
purporting to create a class of unknown additional claimants. It is a naked attempt to seek to
undermine a meticulous process that has been highly successful and has substantially helped the
varous constituencies to reach the point of being able to propose a new plan.
iv. The ZAI Claims Have No Bearing on Anderson Class Issues.

Contrary to Anderson's assertions, ZAI claims are not within the definition of the
Anderson class. The class is limited to certain buildings that contain "asbestos-containing

surfacing materials."i ZAI is not "asbestos-containing" as that term is defined in EPA and

2 In its South Carolina case, Anderson's operative Second Amended Complaint sought a class of:

all persons, corporations, partnerships, unincorporated associations or other entities which own in whole or in part any building in South Carolina which contains asbestos-containing surfacing materials; these buildings have suffered or wil suffer asbestos contamination caused by the release of asbestos fibers from asbestos-containing surfacing materials manufactured, sold and/or distributed by defendants or for which Defendants are otherwise liable.
In this bankruptcy case:

Anderson seeks to certify an opt-out class action on behalf of itself and the class of other property owners whose buildings were, are or wil be contaminated with asbestos fibers released from asbestos-containing surfacing materials for which the Debtors are legally responsible including, but not limited to, those claims identified in Exhibit A. The class would explicitly exclude any building for which a property damage claim is curently pending in this bankruptcy not listed on
Exhibit A.

Anderson Class Certification Motion at 2 (Bank. Dkt. No. 10014, 10/21/05). While the class sought in this bankuptcy case includes non-South Carolina claimants, it explicitly excludes claimants represented by other counseL. (7/5/07 Bank Ct. Hrg. Tr. at 176)

3

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OSHA regulations because it does not contain 1 % or more asbestos.3 In addition, ZAI is not a

surfacing product as that term is used in the industry. ZAI was sold by Grace as a supplemental
insulation for unfinished attics of existing homes; it was typically poured on top of existing
insulation. Bankr. Ct. 12/14/06 Mem. Op. at 7, Bankr. Dkt. No. 14014.

Moreover, Anderson has provided no evidence and made no record that ZAI claims

should be par of its putative class. Again exactly the opposite is true. At the July 5,2007
Bankrptcy Court hearng on Anderson's class certification motion, Anderson's counsel

contended: "Your Honor, and I mention this only in passing, because I don't want to get crosswise with my friends that are representing the ZAI claimants, Anderson also represented -- also

had a ZAI component in its definition, and. . . I'm staying away from that while you all are

litigating right now." 7/5/07 Bankr. Ct. Hrg. Tr. at 39-40.

As this Court is well aware, the Bankrptcy Court found that the presence of ZAI in
homes does not create an unreasonable risk of harm. Dec. 14,2006 Mem. Op., Bankr. Dkt. No.
14014.4 This Court denied the ZAI Claimants' request for an immediate interlocutory appeal,

finding that the Bankrptcy Court's ZAI opinion did not involve exceptional circumstances or
any controlling question of law as to which there is a substantial ground for difference of

opinion. In re W.R. Grace, 2007 WL 1074094 (D. DeL. March 26, 2007). Since then, Grace has
engaged in substantial negotiations with certain U.S. and Canadian ZAI claimants' counsel,

mediated with them, and briefed and argued several motions they filed. In addition, Grace

3 Under EP A standards, materials containing less than one percent asbestos are not considered Asbestos

Containing Material ("ACM"). EPA, "National Emission Standards for Hazardous Air Pollutants," 40 C.F.R. 61 (April 5, 1984), and EP A, "Managing asbestos in place: A building owner's guide to operations and maintenance programs for asbestos-containing materials (Green Book)," EPA 20T-2003 (1990).
4 "The evidence in the case before us shows an absence of asbestos fibers (either dormant or airborne) in the living

areas of homes with ZAI attic insulation. Without evidence of the presence of asbestos fibers, the mere potential for contamination and release alone is insufficient, under Adams-Arapahoe and Perlmutter, to substantiate that there is any unreasonable risk of harm." ¡d. at 25.

4

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moved for a ZAI Proof of Claim Bar Date, which the Bankrptcy Court granted on June 17,

2008, setting October 31,2008 as the ZAI Claims Bar Date. Bankr. Dkt. No. 18934. Among the
multiple motions fied by ZAI Claimants is their Motion for an Order Recognizing and

Permtting Filng of a Washington State Class Proof of Claim, Bankr. Dkt. No. 18323, which is
set for hearing on July 22, 2008. Anderson and its counsel have played no role in any of this.

After presenting no evidence that ZAI claims are or should be par of an Anderson class,
having stated that it was "staying away" from ZAI claims, and having played no role in litigation
of ZAI issues, Anderson cannot now use ZAI claims as a basis for appeaL.

V. Conclusion

For the reasons stated in Grace's Brief in Opposition to Anderson's Application for
Leave to Appeal and in this Sur-Reply, Anderson's Application should be denied.

Dated: July 11,2008

KIKLAND & ELLIS LLP
David M. Bernick Lisa G. Esayian Michael T. Dierkes 200 East Randolph Drive Chicago, llinois 60601
Telephone: (312) 861-2000

Facsimile: (312) 861-2200
and

SKI lt~.

JONES LLP

La r Davis Jones (Bar No. 2436)
Ja es E. O'Neil (Bar No. 4042)

Timothy Cairns (Bar No. 4228)
919 North Market Street, 17th Floor

P.O. Box 8705 Wilmington, Delaware 19899-8705 (Courier 19801)
Telephone: (302) 652-4100

Facsimile: (302) 652-4400
Co-Counsel for the Debtors and Debtors in Possession

5

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EXHIBIT B

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IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF DELAWAR
ANDERSON MEMORIAL HOSPITAL, Appellants
v.
) ) )

Civil Action No. 1:08-mc-00118-RLB
Bankrptcy Case No. 01-01139 (JKF)

)
) ) )

AP No. 08-AP- 39

W. R. GRACE & Co., et al. Appellees

ORDER GRANTING DEBTORS' MOTION FOR LEA VE TO FILE SUR-REPLY IN OPPOSITION TO ANDERSON MEMORIAL HOSPITAL'S APPLICATION FOR APPEAL OF ORDER DENYING CLASS CERTIFICATION UNDER FED. R. BANKR. P. 7023
Upon consideration of the above-referenced motion (the "Motion for Leave to File SurReply"), it is hereby ORDERED that:
1. The Motion for Leave to File Sur-Reply is GRANTED.

2. Appellee Debtors are permtted to file the sur-reply attached as Exhibit A to their

Motion for Leave to File Sur-Reply.
3. Since the sur-reply was attached to Debtors' Motion for Leave to File Sur-Reply,

the sur-reply is deemed to have been filed simultaneously therewith, on July 11,2008.

DATED:

,2008
Honorable Ronald L. Buckwalter United States District Court Judge

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IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF DELAWARE
ANDERSON MEMORIAL HOSPITAL, Appellant
v.
) ) Civil Action No. 1:08-mc-00118-RLB ) ) Bankrptcy Case No. 01-01139 (JKF)

) AP No. 08-AP- 39

W. R. GRACE & Co., et al. Appellants

)
) Re: Appeal D.I. 1, 2, 4, 6

CERTIFCATE OF SERVICE tv
I, James E. O'Neil, hereby certfy that on the lL day of July, 2008, I caused a

copy of the following document to be served on the individuals on the attached service list(s) in
the manner indicated:

DEBTORS' MOTION FOR LEA VE TO FILE SUR-REPLY IN OPPOSITION TO ANDERSON MEMORIAL HOSPITAL'S APPLICA TION FOR APPEAL OF ORDER DENYING CLASS CERTIFICATION UNDER FED. R. BANKR. P. 7023.

. 4042)

DOCS_DE: 138749.1

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W. R. Grace Anderson Appeal Servce

List
Case No. 01-1139 (JKF) Doc. No. 138485 08 - Hand Delivery 12 - First Class Mail

(Counsel to Debtors and Debtors in Possession) Laura Davis Jones, Esquire James E. 0 'Neil, Esquire Pachulski Stang Ziehl & Jones LLP 919 North Market Street, 17th Floor P.O. Box 8705 Wilmington, DE 19899-8705
(Copy Service)
Parcels, Inc.

Hand Delivery (Counsel for The Chase Manhattan Bank) Mark D. Collins, Esquire Deborah E. Spivack, Esquire Richards, Layton & Finger, P.A. One Rodney Square P.O. Box 551

Wilmington, DE 19899
Hand Delivery
(Counsel for Property Damage Claimants)

Michael B. Joseph, Esquire
Ferr & Joseph, P.A.

824 Market Street, Suite 904 P.O. Box 1351 Wilmington, DE 19899
Hand Delivery (United States Trustee) David Klauder, Esquire Office of the United States Trustee 844 King Street, Room 2311

Vito i. DiMaio 10th & King Streets Wilmington, DE 19801
Hand Delivery

(Counsel to Offcial Committee of
Unsecured Creditors)

Wilmington, DE 19801
Hand Delivery (Equity Committee Counsel)

Michael R. Lastowski, Esquire Richard W. Riley, Esquire Duane, Morrs & Heckscher LLP 1100 North Market Street, Suite 1200 Wilmington, DE 19801-1246
Hand Delivery (Local Counsel to DIP Lender) Steven M. Yoder, Esquire The Bayard Firm 222 Delaware Avenue, Suite 900 P.O. Box 25130

Teresa K. D. Currer Buchanan Ingersoll & Rooney
1 000 West Street, Suite 1410

Wilmington, DE 19801
Hand Delivery (Counsel for Anderson Memorial Hospital) Chrstopher D. Loizides, Esquire
Loizides, P .A.

Wilmington, DE 19899
Hand Delivery (Local Counsel to Asbestos Claimants) Marla Eskin, Esquire Mark T. Hurford Campbell & Levine 800 North King Street, Suite 300 Wilmington, DE 19801

Legal Ars Building 1225 King Street, Suite 800 Wilmington, DE 19801

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First Class Mail
(Counsel to Debtor) David B. Bernick, P.C. Janet Baer, Esquire Kirkland & Ellis LLP 200 East Randolph Drive Chicago, IL 60601

First Class Mail
(Equity Committee Counsel) Philip Bentley, Esquire Douglas Mannal, Esquire Kramer Levin Naftalis & Frankel LLP 1177 Avenue of the Americas New York, NY 10036

First Class Mail
(W. R. Grace & Co.) Mark Shelniz W.R. Grace and Co. 7500 Grace Drive Columbia, MD 21044

First Class Mail Peter Van N. Lockwood, Esquire Julie W. Davis, Esquire Trevor W. Swett, III, Esquire Nathan D. Finch, Esquire Caplin & Drysdale, Chartered
One Thomas Circle, N.W. Washington, DC 20005

First Class Mail
(Offcial Committee of

Unsecured

Creditors)
Lewis Krger, Esquire

First Class Mail (Counsel to Offcial Committee of
Unsecured Creditors)

Kenneth Pasquale, Esquire Stroock & Stroock & Lavan LLP 180 Maiden Lane New York, NY 10038-4982

First Class Mail
(Official Committee of Personal Injury Claimants) Elihu Inselbuch, Esquire Rita Tobin, Esquire
Caplin & Drysdale, Charered
375 Park Avenue, 35th Floor

Wiliam S. Katchen, Esquire Duane Morrs LLP 744 Broad Street Suite 1200 Newark, NJ 07102-3889

First Class Mail
(Counsel to DIP Lender) J. Douglas Bacon, Esquire
Latham & Watkins

New York, NY 10152

Sears Tower, Suite 5800 Chicago, IL 60606

First Class Mail
(Official Committee of

First Class Mail
Property Damage
(Counsel for David T. Austern) Roger Frankel, Esquire Richard H. Wyron, Esquire Matthew W. Cheney, Esquire Orrck Herrngton & Sutcliffe LLP Columbia Center
1152 15th Street, N.W.

Claimants) Scott L. Baena, Esquire Member Bilzin Sumberg Dun Baena Price & Axelrod LLP First Union Financial Center 200 South Biscayne Blvd, Suite 2500 Miami, FL 33131

Washington, DC 20005-1706

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First Class Mail
(Counsel to David T. Austern, Future Claimant's Representative) Philips, Goldman & Spence, P.A. John C. Philips, Jr. 1200 North Broom Street Wilmington, DE 19806

First Class Mail
(Counsel for Anderson Memorial Hospital) Daniel A. Speights, Esquire Maron C. Fairey, Jr., Esquire Speights & Runyan 200 J ackson Avenue, East P.O. Box 685 Hampton, SC 29924