Free Answering Brief in Opposition - District Court of Delaware - Delaware

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IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE
In re:
)
) ) ) ) )
Chapter 11

W. R. GRACE & CO., et ai.,
Debtors.

Case No. 01-01139 (JKF) Jointly Administered

W. R. GRACE & CO., et ai.
Plaintiffs,
v.

) )
) ) ) )

Adversary No. A-01-771

)

MARGARET CHAKARIAN, et ai., AND JOHN DOES 1-1000,
Defendants

)

) ) ) )

Related Adv. Proc. Docket No.: 511

OPPOSITION OF W.R. GRACE & CO. TO LIBBY CLAIMANTS' MOTION FOR LEAVE TO APPEAL ORDER ENJOINING ACTIONS AGAINST BNSF
The "Libby Claimants" once again seek to appeal an interlocutory order from the

Banptcy Court enjoining certain actions that have the potential to hinder the estate's orderly
emergence from Chapter 11, particularly at this critical moment where Grace is moving towards
plan confirmation and resolution of these Chapter 11 cases. The Libby Claimants' request to
appeal the Injunction Order should be denied. First, the Libby Claimants' tortred reading of

the relevant statutory provisions does not change the fact that preliminary injunctions issued by

the Bankptcy Court are not appealable as a matter of right. Second, an interlocutory appeal of
the injunction is not proper because the criteria for a proper interlocutory appeal have not been

met. The Libby Claimants have not demonstrated the existence of exceptional circumstances
sufficient to justify such an appeaL. There is no substantial ground for a difference of opinion as

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to a controlling question of law. Nor would the immediate appeal of the order materially
advance the ultimate termination ofthe bankrptcy case.
BACKGROUND
On April 2, 2001 (the "Petition Date"), the Debtors, W.R. Grace & Co. and its affiliated

companies (collectively, "Debtors" or "Grace"), filed their voluntary petitions for relief under

chapter 11 of the Bankptcy Code. On the same day, the Debtors also filed an adversary
complaint seeking to stay asbestos-related litigation against various affiliates of the Debtors and

third parties (the "Affiliated Entities") whose purported asbestos liability was derivative of the
Debtors' liability. i

A temporary restraining order was entered on the Petition Date enJoining the
commencement or prosecution of asbestos actions against the Affiliated Entities. On May 3,
2001, the Bankptcy Court issued a preliminary injunction barrng the prosecution of currently

pending actions against the Affiliated Entities. On January 22, 2002, the Court expanded the
scope of the preliminary injunction to include certain additional Affiliated Entities and to

reinstate the bar against commencement of new actions against Affiliated Entities arising from

alleged exposure to asbestos whether indirectly or directly caused by the Debtors (the
"Injunction").2

A. The Expansion of the Preliminary Injunction to Include BNSF.
Burlington Northern & Santa Fe Railroad ("BNSF") has been named as a defendant in
over 1 00 suits involving over 600 plaintiffs (collectively the "Libby Claimants") with personal

4/2/01 Verified CompI. for Declaratory Injunctive Relief (Adv. Pro. D.1. 1).
2

1/22/02 Order Granting Modified Preliminary Inj., (Adv. Pro. D.1. 87).

2
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injury claims alleging some kind of exposure to asbestos and involving the Debtors' former
Montana vermiculite ore mining operations (the "Montana Actions").

Between 1938 and 1995, BNSF and its predecessor entered into various agreements with

Grace and its predecessors (collectively, the "Agreements") relating to the Debtors' mining
operations in Libby, Montana. As part of the Agreements, BNSF granted permission to Grace to
use certain BNSF property or granted a right of way for the Debtors to conduct certain operations

across or on BNSF property. Grace mined vermiculite ore from the Libby mine, which was then

transported principally by raiL. BNSF employees attached loaded railroad cars carrying
vermiculite ore from the Libby mine to their trains and BNSF's trains carried the verminculite

ore to various destinations. Under certain of the Agreements, Grace agreed to indemnify and

hold BNSF harmless for any liability on account of injury or death of one or more persons
resulting from the construction, repair, maintenance or operating of the loading dock, conveyor
belt or bridge whether caused by the negligence of BNSF, its agents, employees or otherwise.

Grace also agreed to obtain insurance for BNSF. Grace obtained separate insurance
policies for BNSF with three of its insurance carrers -- Royal Indeniity Company, Maryland

Casualty Company and Continental Casualty Company (collectively, the "Insurers"). The
Debtors settled most of their insurance coverage claims with the Insurers prior to the Petition

Date. As part of those settlements, the Insurers paid Grace certain amounts in exchange for
Grace's agreement to indemnify and hold the Insurers harmless from any suits arising under the
settled policies in the future.

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On March 26, 2007, Grace filed a motion to expand the Preliminary Injunction to

encompass the Montana Actions.3 The Libby Claimants opposed that motion.4 On May 21,
2007 the Bankptcy Court heard arguments on the BNSF Injunction Motion. The Bankruptcy

Court indicated that while the Injunction Motions were under advisement, the status quo should
be maintained and the temporary stay previously entered on January 17, 2006 should effectively
be continued. On August 29,2007, the Bankptcy Court entered its Amended Order Regarding

Motions to Expand Preliminary Injunction (the "Stay Order"), which provided the following:

ORDERED that pending the Court's ruling on the Injunction Motions, all actions commenced against the State of Montana and/or BNSF that arise out of alleged exposure to asbestos indirectly or directly caused by the Debtors (the "Montana

Actions"), shall be temporarly stayed pending the Court's ruling on the
Injunction Motions.
(Adv. Pro. D.L 466). On April

11, 2008, the Bankptcy Court issued its memorandum opinion
5

expanding the injunction to cover the Montana Actions (the "Injunction Order").

The Libby Claimants are represented primarily by two firms, McGarvey, Heberling,

Sullivan & McGarvey and Lewis, Slovak and Kovavich. The lawsuits against BNSF are not the

Libby Claimants' first attempt to collect monies from third-paries as a result of injuries

allegedly caused by exposure to materials harvested from the Libby Mine. Indeed, it was the

Libby Claimants' effort to recover against Grace's insurer Maryland Casualty Company
("MCC") that lead directly to the Third Circuit's Gerard decision -- affirming the propriety of

the Bankptcy Court's injunction. See Gerard v. WR. Grace & Co., 115 Fed. Appx. 565 (3rd

3

3/26/07 Debtors' Mot. to Expand the Prelim. Inj. to Include Actions Against BNSF (Adv. Pro. D.1. 398).

4

4/13/07 Opp'n of Libby Claimants to Debtors' Mot. to Expand the Prelim. Inj. to Include Actions Against
BNSF (Adv. Pro. D.1. 417)

5

4/14/08 Mem. Op. (Adv. Pro. D.1.498).

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Cir. 2004). A similar attempt by the Libby Claimants to recover against the former owners of

the Libby mine, the Montana Vermiculite Company, were also enjoined by the Bankptcy
Court. WR. Grace & Co. v. Chakarian (In re WR. Grace & Co.), 315 B.R. 353 (Bank. D. DeL.

2004).

ARGUMENT
I. THE INJUNCTION ORDER IS NOT APPEALABLE AS OF RIGHT.

The Libby Claimants' attempt to circumvent 28 U.S.c. § 158(a)(3) by asserting that
"(tJhe Order is an injunction, and as such, is immediately reviewable by this Court pursuant to 28

U.S.C. § 158(a)(1) or 28 U.S.C.§ 1292(a)(I)'." Libby Claimants' Br. at 6 (emphasis added). The
Libby Claimants' jurisdictional analysis is flawed from the outset. First, Section 158(a), not

Section 1292(a)(1) governs appeals of bankptcy court orders to the district courts. Second,

injunctions are not final orders and, thus, may not be appealed as of right under Section
158(a)(I). The Injunction Order may be appealed only by leave of

this Court under § 158(a)(3).6

A. Appeals of Bankruptcy Court Orders to the District Courts Are Governed by
28 U.S.c. § 158(a).

This is now the third time that the Libby Claimants have argued to this Court that 28

U.S.C. § 1292(a)(1) grants them a right to appeal an order entered by the Bankptcy Court.

Once again, the Libby Claimants avoid discussing the clear text of Section 1292(a)(1). In
relevant statutory text not quoted by the Libby Claimants, 28 U.S.C. § 1292(a)(1) grants "the
6

The Libby Claimants' argument that orders regarding injunctions are appealable as of right is contradicted by

their objection to Grace's request for leave to appeal the Bankptcy Court's denial of Grace's request to expand the injunction to include the Libby Claimants' claims against the state of Montana (the "Montana
Injunction Denial Order"). See 4/21/08 Opposition of Libby Claimants to Motion of W.R. Grace for Leave to Appeal Order Denying Injunction, at 8-9 (Adv. Pro. D.1. 505). There, the Libby Claimants argue that the Montana Injunction Denial Order is interlocutory and can only be appealed by leave under Section 158(a)(3). See ¡d. The Libby Claimants cannot have it both ways. Either both the granting of injunctions and denials of injunctions are appealable as a matter of right or neither are. And of course neither are appealable as a matter of right for the reasons discussed above.

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courts of appeals" jurisdiction over certain appeals from "(iJnterlocutory orders of the district
courts of the United States." That is the beginning and the end of the matter: This Court, even
when sitting in an appellate capacity in bankruptcy, is not one of the "courts of appeals," and the
Bankptcy Court is not one of the "district courts of

the United States."

As this Court has recognized previously, its jurisdiction over the Libby Claimants'
appeals of expansions of

the injunction is governed not by 28 U.S.C. § 1292, but instead by 28

U.S.C. § 158:

MR. LANDAU: I do think that the first question before you really is, you know, what is your basis for hearing this appeal, and the other side has suggested that it's 1292, which is the basis -THE COURT: No, I don't agree with that at all.

MR. LANDAU: Okay
THE COURT: So, you don't have to argue that.

MR. LANDAU: Okay. Fair enough.
THE COURT: I don't read it --

MR. LANDAU: So, then we are really in the world of 158, and you do have
authority under 158(a)(3) to hear -- to exercise jurisdiction over interlocutory
( orders J .

THE COURT: Yes.
4/25/06 Hr'g Tr. (Dist. Crt. App. D.L 27J at 12:1-15; see also 28 U.S.C. § 158(a).7

7

See generally Connecticut Natl Bank v. Germain, 503 US. 249, 252 (1992) ("Bankptcy appeals are governed for the most part by § 158," except when taken from a district court to a court of appeals, in which case § 1292 also applies); In re Resorts lntl, Inc., 372 F.3d 154, i 60 (3d Cir. 2004) ("The District Court had jurisdiction to review the Bankptcy Court's order under 28 V.S.C. § 158. We (the court of appeals) have jurisdiction under
28 US.c. § 1292(b)."); Landon v. Hunt, 977 F.2d 829, 830 (3d Cir. 1992) ("The district court jurisdiction is
from 28 US.C. § 158(a). Our (court of

appeals) jurisdiction is from 28 US.C. § 158(d), and 28 US.c. §§ 1291

and 1292."); In re Pruitt, 910 F.2d 1160, 1164 (3d Cir. 1990) ("Appeals from orders of a bankptcy judge are

governed by 28 US.C. § 158(a).")

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Despite the Court's prior ruling, the Libby Claimants persist in arguing that whether you

look to § 1292 or § 158, the result is the same -- an injunction may be appealed as a matter of
right. Tellingly, however, § 158(a) does not contain a provision analogous to § 1292(a)(1),

which grants the courts of appeals jurisdiction over interlocutory appeals from district court
orders granting injunctions. Rather, with the exception of appeals from interlocutory orders

under § l121(d)-not applicable here-§ 158(a) grants district courts jurisdiction over
interlocutory orders of the bankruptcy courts only "with leave of the (districtJ court." See, e.g.,
In re Enron Corp., 316 B.R. 767, 770 (S.D.N.Y. 2004) ("This Court may not consider this appeal

unless (1 J the order being appealed from is final or (2J the Court grants leave to appeal an
interlocutory order."). In other words, there is no appeal as of right to the district court under § 158(a) from a bankptcy court order granting an injunction, whereas there is an appeal as of

right to the court of appeals under § 1292(a)(1) from a district court order granting an
injunction.8

The Libby Claimants base their contrary position entirely on two cases: (1) In re

Professional Insurance Management, 285 F.3d 268 (3d Cir. 2002), and (2) In re Reliance
Acceptance Group, Inc., 235 B.R. 548, 553 (D. Del 1999). Neither case provides any basis for
this Court to ignore the plain language of the relevant statutes.

Professional Insurance: The Third Circuit in Professional Insurance held that a
bankptcy court turnover order is final and hence appealable as of right. See 285 F.3d at 28082. In a footnote, the court then stated that "the District Court, sitting as an appellate court, was

authorized to hear the appeal from the Bankptcy Court as an appealable injunctive order under
8

See, e.g., In re Kassover, 343 F.3d 91,95 (2d Cir. 2003) ("Congress has expressly vested discretion in district courts to decline to hear (an) appeal" from a bankptcy court order granting an injunction); In re Quigley Co.,

323 B.R. 70,76-79 (S.D.N.Y. 2005) (denying leave to appeal an injunction under § 158(a)(3)).

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28 U.S.C. § l292(a)." Id. at 282 n.16. Because the Court had already concluded that the order

was final, that statement is manifestly dicta, and unsupported dicta at that: the Third Circuit

provided no authority for its startling and anti-textual suggestion that 28 U.S.C. § 1292(a)
independently governs appeals from bankruptcy courts to district courts. Under settled Third

Circuit law, of course, such unexamined dicta is not controlling.9 Indeed, to follow the dicta

from the footnote in Professional Insurance would be to reject the long line of Third Circuit
cases, noted above, recognizing that appeals from the bankptcy court to the district court are
governed by § l58( a), while bankptcy appeals from the district court to the court of appeals are
governed by §§ 158(d), 1291, and 1292.
Reliance Acceptance: The Delaware District Court in Reliance Acceptance, for its part,

began by acknowledging that "28 U.S.C. § 158(a) governs the (district) court's jurisdiction to
review orders of the bankptcy court." 235 B.R. at 553. The court then cited § 158(c)(2),
which provides that "(a)n appeal under subsection (a) ... of

this section shall be taken in the same

manner as appeals in civil proceedings generally are taken to the courts of appeals from the
district courts...." Id. The latter provision, the court suggested, implicitly incorporates

§ 1292(a) into § 158, apparently on the theory that the "manner" of taking an appeal from the

district court to the court of appeals includes the grounds for taking such an appeaL. That
suggestion, for which the court provided no support, is meritless. The "manner" for taking an
appeal refers to the procedures for taking an appeal, not the grounds for taking an appeaL. Were

the law otherwise, then § 158(a) would be superfluous because the bankruptcy statute would
9

See, e.g., Patel v. Sun Co., 141 F.3d 447,462 n.11 (3d Cir. 1998) ("As dictum, there are many reasons why we

should not give it weight here: (1) it may not have been as fully considered as it would have been if it were essential to the outcome; (2) sloughing it off in a new opinion wil not affect the analytic structure of the original opinion; and (3) the dictum may lack refinement because it was not honed through the fires of an
adversary presentation.").

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simply incorporate wholesale the grounds for appealability set forth in 28 U.S.C. §§ 1291 and
1292.10

For this reason, district courts look to 28 U.S.c. § 1292(b) for guidance in deciding

whether to grant leave to appeal an interlocutory order under 28 U.S.C. § 158(a)(3). See, e.g.,
Enron, 316 B.R. at 771; In re DeL. & Hudson Ry. Co., 96 B.R. 469, 473 (D. DeL. 1989).

Needless to say, such "guidance" would be unnecessary if § 1292 by its own terms

independently governed appeals from the bankptcy court to the district court. "It would make
little sense for the bankrptcy appeal statute to group preliminary injunctions with other
interlocutory orders but intend for 'leave to appeal' these injunctions to be granted as of right

simply because Section 1292 treats interlocutory injunctions differently from other interlocutory

orders." Quigley, 323 B.R. at 76-77. Indeed, where a district court declines, in the exercise of
its discretion, to hear an appeal of a bankptcy court order granting or denying an injunction,

that decision is not appealable to the court of appeals. See, e.g., Kassover, 343 F.3d at 93-96.
B. The Order Is Not a Final Order Appealable as of

Right Under 28 U.S.C. §

158(a)(1).

In a new twist, the Libby Claimants now argue that injunctions are final orders
appealable as of right under § 158(a)(1). To the extent that the single case relied upon by the
Libby Claimants for this proposition, In re Excel Innovations, Inc. 502 F.3d 1086, 1092 (9th Cir.

2007), can be interpreted as providing that injunctions are necessarily final orders, that case is
contrary to Third Circuit authority. As the Third Circuit has held, "(w)hether an order is 'final'

depends on its effect." Marcus v. Twp. of Abington, 38 F.3d 1367, 1370 (3d Cir. 1994). Here,
10 The Libby Claimants' reliance on In re Midstate Mortgage, 2006 WL 3308585 (D.N.J. Nov. 6, 2006) is
misplaced for the same reason. Midstate Mortgage simply echoes Reliance Acceptance's flawed logic in reaching the same conclusion.

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the Order did not resolve any issues in the Montana Actions, it only delays litigation until these

Chapter 11 cases are confirmed. The Third Circuit repeatedly has held that orders staying
litigation are not final appealable orders because they merely delay proceedings in the suit. See,

e.g., CTF Hotel Holdings, Inc. v. Marriott Intl, Inc., 381 F.3d 131 (3d Cir. 2004), Marcus, 38
F.3d at 1370; Schall v. Joyce, 885 F.2d 101, 104 (3d Cir. 1989); Cheyney State College Faculty
v. Hufttedler, 703 F.2d 732, 735 (3d Cir. 1983); see also Hoots v. Pennsylvania, 587 F.2d 1340,

1346-47 (3d Cir. 1978) (noting that mere delay does not render an order final for purposes of
appeal). While these cases are not bankptcy cases, the same reasoning applies here: The

Injunction Order is not final because the effect of

the order is merely the delay oflitigation.

II. THERE is NO BASIS TO GRANT AN APPEAL OF THIS INTERLOCUTORY ORDER.

Although the expansion of the injunction is interlocutory and not appealable as a matter

of right under 28 U.S.C. § 158(a)(I), district courts have discretion to grant parties leave to
appeal from "interlocutory orders and decrees." 28 U.S.C. § 158(a)(3). When determining

whether to grant leave to appeal an interlocutory order, courts within the Third Circuit employ
the standards set forth in 28 U.S.C. § 1292(b) governing interlocutory appeals from district
courts to the circuit courts of appeals. See In re Edison Bros. Stores, Inc., 1996 WL 363806, *3

(D. DeL. June 27, 1996). Interlocutory review is only proper where the appellant can
demonstrate two things:
· First, the appellant must demonstrate that there is a controlling question of law upon

which there is substantial grounds for difference of opinion and that an immediate appeal will advance the termination of the litigation. Id.ll
ii This test is traditionally articulated in three parts. See In re Edison Bros. Stores, 1996 WL 363806, *3 ("An interlocutory appeal wil be granted only when the order at issue (1) involves a controllng question oflaw as to
which there is (2) substantial ground for difference of opinion and (3) when an immediate appeal from the order
(Continued... )

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· Second, even if the above showing can be made, the appellant must establish
exceptional circumstances justifying a departure from the basic policy of postponing review until after entry of a final judgment. See id. ("Although the concept of finality

is accorded some measure of flexibility in the context of § 158(a)(1) appeals,
apparently the same standard does not apply in the context of § 158(a)(3)

interlocutory appeals. Thus, an appellant must establish that 'exceptional circumstances justify a departure from the basic policy of postponing review until after the entry of final judgment. "') (quoting In re DeL. & Hudson Ry. Co., 96 B.R.
469,472-73 (D. DeL. 1989)); Dal-Tile Intern., Inc. v. Color Tile, Inc., 203 B.R. 554,

557 (D. DeL. 1996) ("Additionally, a court wil entertain an appeal under section
1292(b) only when an appellant demonstrates that 'exceptional circumstances justify departre from the basic policy of postponing review until after the entry of final
judgment. ").

In this case, the Libby Claimants have failed to demonstrate that there are grounds for
interlocutory review. First, there is no substantial grounds for a difference of opinion as to any

controlling question of law. Second, the allowance of an immediate appeal would not aid, and

would in fact hinder, the ultimate termination of the bankptcy. Third, the Libby Claimants
have failed to demonstrate any exceptional circumstances that would justify the allowance of an
interlocutory appeal of the Injunction Order.
A. There Is No Substantial Grounds For A Difference Of Opinion As To A Controllng Question Of Law.

The Libby Claimants have identified two controllng questions of law for which they

contend that there are "substantial grounds for a difference of opinion from the Bankptcy
Court's holding in the (Injunction) Order." Libby Claimants' Br. at 25. The first is the

Bankptcy Court's finding that it had subject-matter jurisdiction over the Montana Actions.
The second is the Bankptcy Court's finding that the expansion of

the Injunction to include the

may materially advance the ultimate termnation of the litigation.") As there is no dispute that controlling
questions oflaw are involved, Grace will only address the two prongs of the test that are at issue (i. e., whether

there are substantial grounds for a difference of opinion and whether an immediate appeal wil materially
advance the ultimate termination of

the litigation.).

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Montana Action was proper. However, there is no substantial grounds for a difference of
opinion as to either issue.
1. Contractual Indemnifcation Agreements Give Rise To Related To

Jurisdiction And There Is No Disagreement About That Issue In The Third Circuit.
Controlling law in the Third Circuit is unequivocal that a bankptcy court may exercise
"related to" jurisdiction over a case involving a third party where there is a contractual indemnity

between the third party and the debtor. This was precisely the issue the Third Circuit addressed
in its Gerard decision. 12

In Gerard, the Libby Claimants requested that the Court's § 105 injunction be modified
to allow them to pursue an alleged direct cause of action against Grace's workers' compensation

carrer, MCC, for its role in the design of the dust control system for the Libby mine. The Third Circuit found that the Bankptcy Court's refusal to modify the injunction was proper for several
reasons. First, and foremost, as there were contractual indemnity provisions between MCC and

Grace, "the prospect of indemnification by Grace made inclusion of a stay of suits against MCC

appropriate." Gerard, 115 Fed. Appx. at 568. Second, in order for the case against MCC to
proceed, "discovery from Grace would be needed." Id. at 569. Third, "Grace's absence (from
the cases against MCq would disadvantage both MCC and Grace as a practical and legal
matter." Id.

The same rationale justifying the expansion of the injunction that applied in Gerard
applies here. First, Grace has multiple contractual obligations to indemnify BNSF. Thus, there

12 In the Montana Denial Order, the Bankptcy Court attempted to limit Gerard to instances where there is a
contractual indemnity obligation. Although the Bankptcy Court was in error on the issue (as the Debtors seek to demonstrate on appeal), even if such a distinction were appropriate, it would not apply here because this case involves a contractual indemnification, which clearly give rise to "related to" jurisdiction.

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is a significant "prospect of indemnification" based on the contracts between Grace and BNSF.
Second, in order for the case against BNSF to proceed, both the Libby Claimants and BNSF

would need to obtain discovery from Grace. Third, Grace's absence from the cases against
BNSF would disadvantage both Grace and BNSF as a practical and legal matter. See Mem. Op.
at 27-29 ("If

the actions proceed without Debtors, Debtors wil not have an opportunity to defend

their conduct or products... Additionally, forcing the Debtors to now participate in the Montana
Actions to prevent these adverse consequences (indemnity, collateral estoppel, and record taint)

wil encumber the estates with additional litigation burdens."). It is clear that Gerard, which
involved nearly identical factual circumstances, is law of the case and must be followed. See
Fagan v. City of Vineland, 22 F.3d 1283 (3rd Cir. 1994).13 And, critically, none of

the cases that

the Libby Claimants cite are to the contrary.

The Libby Claimants cite three cases in an effort to undermine Gerard's binding effect.
Two of

those cases, In re Federal-Mogul and In re Combustion Engineering simply do not apply

to this case, because in neither Federal Mogul nor Combustion Engineering was there a
contractual indemnification obligation between the third party and the debtor. And, the third

case cited by the Libby Claimants, Pacor, Inc. v. Higgings, 743 F.2d 984 (3rd Cir. 1984), is
perfectly consistent with Gerard.

13

The fact that the Third Circuit Opinion is marked as "Not precedential" does not make it any less relevant or controlling in this case. According to the Third Circuit's internal operating Procedure 5.3, an opinion marked as "not precedential" is so designated because it "appears to have value only to the trial court or the parties. . ." The "not precedential" designation is clearly not intended to suggest that the opinon is not "law of the case" in the precise case in which it was decided and where the court and the parties are the same. Moreover, the Libby Claimants' contention that there are different parties is a red herring. While it is true that the Libby Claimants

have chosen to pursue a different nominal defendant, the parties involved in seeking and contesting the expansion of the Injunction (i.e., the Libby Claimants and Grace) have participated each time this issue has come up relating to the various Montana actions brought by the Libby Claimants against, MCC, Montana
Vermiculite Company, the state of

Montana, and, now, BNSF.

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In Pacor, the Third Circuit found that the Bankruptcy Court did not have "related to"
jurisdiction where there was a potential common law indemnification claim against the Debtor but where there was neither a contractual indemnity between the third party and the debtor nor

was there a proof of claim filed against the debtor by the third party. See Pacor, 743 F.2d at
995-96 Indeed, the Pacor court expressly addressed the situation where there is a contractual
right of indemnification. Id. at 995. Under that scenario, the court acknowledged that because
an adverse judgment would necessarily affect the estate, the exercise of related-to jurisdiction

would be appropriate. Id. ("(I)t is clear that the action between the landlord and MacMilan
could and would affect the estate in bankruptcy. By virtue of

the indemnification agreement... a

judgment in favor of the landlord on the guarantee action would automatically result in
indeniification liability against Brentano's."). By admitting that the exercise of related-to
jurisdiction is proper where there is a contractual indemnification -- as is unquestionably the case

here -- Pacor is in complete harmony with Gerard and does not create substantial grounds for a
difference of opinion.
2. There Is No Disagreement Over The Law Controllng The Court's
Decision To Issue The Injunction.
With respect to the issue of whether the Bankptcy Court's expansion of

the Injunction

to include the Montana Actions was appropriate, the Libby Claimants do not contend that the

Court applied the incorrect legal standard or that there is any confusion or difference of opinion

as to the proper standard to be applied. Rather, the Libby Claimants argue that "the Bankptcy
Court wrongly concluded that the requirements for the issuance of an injunction were
established." Libby Claimants' Br. at 22. Thus, the Libby Claimants simply argue that the

Bankptcy Court incorrectly applied the standard for the issuance of a § 105 injunction to the
facts of this case. However, it is well established that errors in the application of the law to the
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facts of a case do not constitute "( s Jubstantial grounds for difference of opinion." See Berhend v.

Comcast Corp., 2007 WL 2702347, *2 (E.D. Pa. Sept. 11, 2007) (holding that "(sJubstantial
grounds for difference of opinion (on a controlling question of law J exist when there is genuine

doubt or conflicting precedent as to the correct legal standard") (quoting Glaberson v. Comcast
Corp., 2006 WL 3762028, *13 (E.D. Pa. Dec. 19,2006); Premick v. Dick's Sporting Goods, Inc.,

2007 WL 588992, *2 W.D. Pa. Feb. 20, 2007) ("District courts in this circuit have held that
although a question appears to be a controlling question of law, questions about a court's

application of facts of the case to established legal standards are not controllng questions of
law for purposes of section 1292(b ).") (emphasis added).
B. The Immediate Appeal Of The Injunction Wil Not Materially Advance The Ultimate Termiation Of Grace's Bankruptcy.

Nor have the Libby Claimants established that the immediate appeal of the injunction
wil materially advance the ultimate termination of the Bankptcy. See In re Edison Bros.

Stores, 1996 WL 363806, *3. Here, it is clear that allowing this appeal to go forward would not
materially advance the termination of the bankruptcy case. To the contrary, the Bankptcy

Court found that allowing the Montana Actions to proceed "would further delay the
reorganization process and implicate estate property." Mem. Opinion at 30. This would
particularly prejudice Grace at this critical juncture as it endeavors to formulate a consensual

plan of reorganization with an eye towards emerging from Chapter 11 in the first quarter of
2009. The Libby Claimants do not even attempt to argue otherwise -- nor could they. And their

failure to establish that the granting of the appeal wil foster the conclusion of the bankptcy is
dispositive of the issue before the Court.

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C. No Exceptional Circumstances Exist That Warrant An Immediate AppeaL.

As there is no substantial grounds for difference of opinion as to a controlling question of

law and the immediate appeal of the issue will not materially advance the termination of the

bankrptcy, the Court need go no further in denying the Libby Claimants' request for leave.
However, the Appeal also should be denied under 28 U.S.C. § 158 because the Libby Claimants
have not -- and cannot -- demonstrate that exceptional circumstances exist justifying an appeal of

the Injunction Order. The Libby Claimants argue that there are two exceptional circumstances
that warrant interlocutory review: 1) that the District Court failed to follow Third Circuit

precedent in finding that there was "related to" jurisdiction sufficient to justify extending the
preliminary injunction; and (2) that the Court erred in deciding the issue on its merits. Libby

Claimants' Br. at 12. However, it is clear that a mere allegation of error cannot constitute an
exceptional circumstance sufficient to warrant interlocutory review -- otherwise, each and every

decision of a lower court that a party disagreed with would be susceptible to appellate review.

See Vaughn v. Flowserve Corp., 2006 WL 3231417, *2 (D. N.J. Nov. 8,2006) ("A motion for
certification should not be granted merely because a party disagrees with the ruling of the (lower

court) judge.") (quoting Max Daetwyler Corp. v. Meyer, 575 F. Supp. 280, 282 (E.D. Pa.
1983)).14

The Libby Claimants concede that the only real prejudice they suffer for the granting of
the injunction is a delay in their prosecution of claims against BNSF. But, they also concede that
they will be able to pursue those claims once Grace's plan takes effect. See Libby Claimants'
14 The Libby Claimants' argument that "an appeal from an order granting a preliminary injunction inherently
represents an exceptional circumstance" (Libby Claimants' Br. at 12) is baseless. Rather than cite any

authority

for this novel proposition, the Libby Claimants cite to their own erroneous argument that such orders are appelable to this Court as of right. Although the Libby Claimants would like injunctions to be automatically
appealable to the district court, that simply is not what Section 158(a) provides

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Br. at 25-26. Further, they have not established any prejudice from the delay that rises to the
level of "exceptional circumstances." Indeed, every injunction or stay results in delay for the
party subject to the injunction or the stay and the fact of such delay is not sufficient to give rise
to a right of appeaL.

This argument simply underscores the fact that -- at this juncture, with the conclusion of

Grace's Chapter 11 cases only months away -- there is no material prejudice to the Libby
Claimants that would result from the denial of leave to appeaL. Once the Chapter 11 cases

conclude, the Montana Actions wil be allowed to proceed apace. Given the recent
developments that have set the stage for Grace to promptly move forward towards plan
confirmation and emerge from Chapter 11, the circumstances here present even less urgency than

the last two times the Libby Claimants unsuccessfully sought leave to appeaL. Moreover, the
continued litigation of this issue can only serve to undermine the development of a consensual
plan of reorganization.

CONCLUSION

Under the circumstances presented, an interlocutory appeal of the Court's decision to
grant the injunction is both unnecessary and improper, particularly at this stage of

the bankptcy

proceedings. There are no exceptional circumstances warranting such appellate review, nor are
there substantial grounds for a difference of opinion related to controlling questions of

law. And,

lastly, allowing the Libby Claimants' appeal wil not serve to expedite the conclusion of the
bankptcy litigation but, rather, would further delay it. Accordingly, the Debtors respectfully
request that this Court decline to grant the Libby Claimants' leave to appeal this interlocutory
order under

28 U.S.C. §158(a)(3).

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Dated: May 5, 2008
KIRKLAND & ELLIS LLP David M. Bernick, P.C.
Janet S. Baer

Salvatore F. Bianca 200 East Randolph Drive Chicago, Ilinois 60601
Telephone: (312) 861-2000

Facsimile: (312) 861-2200
- and -

PACFKI, STtNG, :OUNG&JONES

~fVi./ ~
Laura Davis Jones (Bar No. 2436) James E. O'Neill (Bar No. 4042) Timothy P. Cairns (Bar No. 4228) 919 North Market Street, 16th 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

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91 100-001IDOeS_DE: 137204. I