Free Bankruptcy Appeal - District Court of Delaware - Delaware

Case 1:08-mc-00090-RLB

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

R. GRACE & CO. et al.
Debtors.

Case No. 01- 01139 (JKF)

Jointly Administered

R. GRACE & CO.

et a!.

Plaintiffs

Adversary No. A- 01- 771

MARGARET CHAKARIAN
JOHN DOES 1- 1000

et a!.

and

Defendants.

Ref. No. 498

NOTICE OF APPEAL
Claimants injured by exposure to
' operations in Lincoln

County, Montana (the " Libby
1292(a)(l), or ,

Claimants

l pursuant to 28 U.

C. ~ 158(a)(l) or 28 U.S. c. ~
~ 158(a)(3),

alternatively, with leave of the District Court , 28 U.S. C.

2 and in

accordance with Fed. R. Bankr. P. 8002 , and Del. Bankr. L.R. 8001- , hereby appeal from the
Memorandum Opinion and Order
Against Burlington Northern and Sante Fe Railroad ,

by the

United States Bankruptcy Judge , entered on April 14 , 2008 (Docket No. 498) (the " Order

1 As identified in the

to Fed. R. Bankr. P. 2019 (Main Case Docket No.
time to time.

, as it may be amended and restated from

2 The Libby Claimants assert that the Order (defined herein) is
l58(a)(1) or 28 U. c. g 1292(a)(1). If

c. g

Claimants pursuant to 28 U.
appeal under 28 U.

c. g

C. g

, the Libby Claimants have filed a Motion for Leave to Appeal supporting the appeal of the Order on this alternative basis.
c. g 158(a)(3) is

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The names of all
telephone numbers of their respective attorneys are listed below.
hereto.

, addresses , and

Party
R. Grace & Co.

Counsel of Record
David M. Bernick , Esq. Janet S. Baer , Esq. KIRKLAND & ELLIS LLP 200 East Randolph Drive Chicago , Illinois 60601 (312) 861- 2000
Laura Davis Jones , Esq. James E. O' Neill , Esq. PACHULSKI STANG ZIEHL YOUNG JONES & WEINTRAUB 919 North Market Street , 16th Floor O. Box 8705 Wilmington , Delaware 19899 (302) 652- 4100

State of Montana

Francis A. Monaco , Jr. , Esq. Kevin J. Mangan , Esq. WOMBLE CARLYLE SANDRIDGE & RICE , PLLC 222 Delaware Avenue , Suite Wilmington , DE 19801 (302) 252- 4361

BNSF Railway Company

Evelyn J. Meltzer , Esq. PEPPER HAMIL TON LLP Hercules Plaza, Suite 5100 1313 Market Street O. Box 1709 Wilmington , DE 19899- 1709 (302) 777- 6500

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Edward C. Toole , Jr. , Esq. Anne Marie Aaronson , Esq.

PEPPER HAMILTON LLP 3000 Two Logan Square
18th & Arch

Philadelphia, PA 19103 (215) 981- 4000

Official Committee of Asbestos Personal Injury Claimants

Marla Rosoff Eskin , Esq. Mark T. Hurford, Esq. CAMPBELL & LEVINE , LLC 800 King Street , 3rd Floor Wilmington , DE 19801 (302) 426- 1900
Elihu Inselbuch , Esq. CAPLIN & DRYSDALE , CHARTERED 399 Park Avenue 2ih Floor N ew York , NY 10022 (212) 319- 7125

Peter Van N. Lockwood , Esq. Nathan D. Finch , Esq. CAPLIN & DRYSDALE , CHARTERED One Thomas Circle , N. W. Washington , D. C. 20005 (202) 862- 5000

Dated: April 24 , 2008

LANDIS RA TH & COBB LLP

farLA (No. 340 ) dam G. Landis

~t/

Kerri K. Mumford (No. 4186) 919 Market Street , Suite 600 O. Box 2087 Wilmington , DE Telephone: (302) 467- 4400 Facsimile: (302) 467- 4450
- and -

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Daniel C. Cohn Christopher M. Candon COHN WHITESELL & GOLDBERG LLP 101 Arch Street Boston , MA 02110 Telephone: (617) 951- 2505 Facsimile: (617) 951- 0679
Counsel for the Libby

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

R. GRACE & CO. et at.
Debtors.

Case No. 01- 01139 (JKF)

Jointly Administered

R. GRACE & CO. et at.

Plaintiffs

Adversary No. A- 01- 771

MARGARET CHAKARIAN et at. and
JOHN DOES 1- 1000

Defendants.

AFFIDAVIT OF SERVICE
STATE OF DELAWARE
) SS

NEW CASTLE COUNTY

Linda M. Rogers , being duly sworn according to law , deposes and says that she is employed by the law firm of Landis Rath & Cobb LLP , attorneys for the Libby Claimants in the above-referenced cases , and on the 24th day of April , 2008 , she caused a copy of the following:

NOTICE OF APPEAL
to be served upon the parties on the attached list via first class mail or in the manner as indicated.

Linda M. Rogers

SWORN TO AND SUBSCRIBED before me this

, 2008.

Notary Pu
Y A. ADAMS NOTARY PUBLIC STATE OF DELAWARE

My Commiss;in"". F'!r1h=iS March

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R. Grace & Co.,

et at.

v. Margaret Chakarian,

et at.,

and John Does 1- 1000
Adv. Pro. No. 01- 771
Service List

Mark Shelnitz R. Grace & Co.
7500 Grace Drive

Columbia , MD 21044 (Debtors and Debtors in Possession)

David M. Bernick , P.
Janet S. Baer , Esq.

HAND DELIVERY
Laura Davis Jones , Esq. James E. O' Neill , Esq. Pachulski Stang Ziehl & Jones LLP 919 North Market Street , 17th Floor O. Box 8705 Wilmington , DE 19899 (Counsel to Debtors and Debtors in Possession)

Lori Sinanyan , Esq. Kirkland & Ellis LLP 200 East Randolph Drive Chicago , IL (Counsel to W. R. Grace & Co. et al.

Lewis Kruger , Esq. Kenneth Pasquale , Esq. Stroock & Stroock & Lavan LLP 180 Maiden Lane New York, NY 10038- 4982 (Counsel to Official Committee of Unsecured Creditors)

HAND DELIVERY
Michael R. Lastowski , Esq. Richard W. Riley, Esq. Duane Morris LLP 1100 North Market Street , Suite 1200 Wilmington , DE 19801(Counsel to Official Committee of Unsecured CredItors)

1246

HAND DELIVERY
Michael B. Joseph , Esq. Ferry, Joseph & Pearce , P. 824 Market Street , Suite 904
O. Box 1351

Wilmington , DE 19899 (Counsel to Official Committee of Asbestos Property Damage Claimants)

Scott L. Baena , Esq. Bilzin Sumberg Baena Price & Axelrod LLP First Union Financial Center 200 South Biscayne Blvd. , Suite 2500 Miami , FL 33131 (Counsel to Official Committee of Asbestos Property Damage Claimants)

HAND DELIVERY
Esq. Mark T. Hurford , Esq. Campbell & Levine , LLC
Marla Rosoff Eskin ,

800 North King Street , Suite 300 Wilmington , DE 19801 (Counsel to the Official Committee of Asbestos Personal Injury Claimants)

Peter Van N. Lockwood , Esq. Nathan D. Finch , Esq. Caplin & Drysdale , Chartered One Thomas Circle , N. Washington , DC 20005 (Counsel to the Official Committee of Asbestos Personal Injury Claimants)

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Elihu Inselbuch ,

Esq.

HAND DELIVERY
Frank J. Perch , Esq. Office of the United States Trustee 844 King Street Suite 2311 Wilmington , DE 19801 (United States Trustee)

Caplin & Drysdale , Chartered 375 Park Avenue , 35th Floor New York , NY 10152- 3500 (Counsel to the Official Committee of Asbestos Personal Injury Claimants)

HAND DELIVERY
Teresa K. D. Currier ,

Esq.

Buchanan Ingersoll & Rooney PC 1000 West Street , Suite 1410 Wilmington , DE 19801 (Counsel to Equity Committee)

Philip Bentley, Esq. Thomas M. Mayer , Esq. Kramer Levin Naftalis & Frankel LLP 1177 Avenue of the Americas New York , NY 10036 (Counsel to Equity Committee)

John C. Phillips , Jr. , Esq. Phillips , Goldman & Spence , P. 1200 North Broom Street Wilmington , DE
(Counsel to David T. Austern , Future Claimants

Representative)

Richard H. Wyron , Esq. Orrick , Herrington & Sutcliffe , LLP 3050 K Street , NW Suite 300 Washington , DC 20007 (Counsel to David T. Austern , Future Claimants Representative)

HAND DELIVERY
Edward B. Rosenthal , Esq. Rosenthal , Monhait , & Goddess , P. 919 Market Street Mellon Bank Center , Suite 1401 Wilmington , DE (Counsel to Continental Casualty Company)

Brian H. Mukherjee , Esq. Goodwin Procter LLP Exchange Place Boston , MA 02109 (Counsel to CNA Financial Corporation)

HAND DELIVERY
Elizabeth DeCristofaro , Esq.

Ford Marrin Esposito Witmeyer & Gieser , L.L.P. Wall Street Plaza , 23rd Floor New York , NY 10005- 1875 (Counsel to Continental Casualty Company)

Ian Connor Bifferato , Esq. Garvan F. McDaniel , Esq. Chad J. Toms , Esq. Bifferato Gentilotti LLC 800 North King Street , First Floor Wilmington , DE (Counsel to Royal Indemnity Company)

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Carl J. Pernicone , Esq. Wilson , Elser , Moskowitz , Edelman & Dicker LLP
150 East 42nd Street

New York , NY 10017- 5639 (Counsel to Royal Indemnity Company)

Daniel C. Cohn , Esq. Cohn Whitesell & Goldberg LLP 101 Arch Street Boston , MA 02110 (Counsel to Libby Plaintiffs)

HAND DELIVERY
Evelyn J. Meltzer , Esq. Pepper Hamilton LLP Hercules Plaza , Suite 5100 13 13 Market Street
PO Box 1709

Edward C. Toole , Jr. , Esq.

Wilmington , DE 19899- 1709 (Counsel to BNSF Railway Company)

Anne Marie Aaronson , Esq. Pepper Hamilton LLP 3000 Two Logan Square 18th & Arch Streets Philadelphia , P A 19103 (Counsel to BNSF Railway Company)

HAND DELIVERY
Mark 1. Phillips , Esq. Jeffrey C. Wisler , Esq. Connolly Bove Lodge & Hutz LLP The Nemours Building 1007 N. Orange Street O. Box 2207 Wilmington , DE (Counsel to Maryland Casualty Company)

Edward J. Longosz , II , Esq. Laura G. Stover , Esq. Eckert Seamans Cherin & Mellott , LLC 1747 Pennsylvania Avenue , N. , Suite 1200 Washington , DC 20006 (Counsel to Maryland Casualty Company)

HAND DELIVERY
Steven M. Yoder , Esq. The Bayard Firm 222 Delaware Avenue , Suite 900
O. Box 25130 Wilmington , DE 19899
(Counsel to DIP Lender)

J. Douglas Bacon , Esq. Latham & Watkins LLP Sears Tower, Suite 5800 Chicago , IL 60606 (Counsel to DIP Lender)

HAND DELIVERY
David S. Rosenbloom , Esq. McDermott , Will & Emery 227 West Monroe Street Chicago , IL 60606- 5096 (Counsel to National Medical Care , Inc.

David E. Wilks , Esq. Buchanan Ingersoll PC The Nemours Building 1007 N. Orange Street , Suite 1110 Wilmington , DE (Counsel to Gamma Holding, NY)

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HAND DELIVERY
Kathleen M. Miller , Esq. Smith , Katzenstein & Furlow LLP The Corporate Plaza
800 Delaware Avenue

Gary Smolker

Wilmington , DE (Counsel to the Allen Plaintiffs)

Alice Smolker 4720 Lincoln Blvd. , Suite 280 Marina del Rey, CA 90292- 6977

HAND DELIVERY
Steven K. Kortanek , Esq. Klehr Harrison Harvey Branzburg & Ellers LLP 919 Market St. , Suite 1000 Wilmington , DE (Counsel to Carol Gerard)

Brian Parker , Esq. 36 South Charles Street
Charles Center South

Suite 2200 Baltimore , MD 21201 (Counsel to Carol Gerard)

HAND DELIVERY
Thomas D. Walsh , Esq.

McCarter & English , LLP 919 Market St. , Suite 1800 Wilmington , DE (Counsel to James and Julie Holland)

Michael S. Etkin , Esq. Lowenstein Sandler P. 65 Livingston Avenue Roseland , NJ 07068 (Counsel to Keri Evans)

David K. Foust , Esq.
3030 W. Grand Boulevard
10th Floor

HAND DELIVERY
Francis A. Monaco , Jr. , Esq. Kevin 1. Mangan , Esq. Womble Carlyle Sandridge & Rice , PLLC 222 Delaware Avenue , Ste. 1501 Wilmington , DE (Counsel to the State of Montana)

Detroit , MI 48202 (Counsel to the State of Michigan , Department of Corrections)

HAND DELIVERY
Mark D. Collins , Esq. Deborah E. Spivack , Esq.
Richards , Layton & Finger , P. One Rodney Square 920 N. King Street
O. Box 551

HAND DELIVERY
Bernard G. Conaway, Esq. Fox Rothschild LLP 919 Market Street , Suite 1300 Wilmington , DE (Counsel to the Lanier Law Firm Asbestos ClaImants)

Wilmington , DE 19899 (Counsel to The Chase Manhattan Bank)

Case 1:08-mc-00090-RLB
HAND DELIVERY
Daniel B. Butz , Esq. Gregory T. Donilon , Esq.

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William H. Sudell , Jr. , Esq. Morris , Nichols , Arsht & Tunnell
120 1 N.

O. Box 1347

Wilmington , DE 19899 (Counsel to The Scotts Co.

Robert J. Sidman , Esq. Tiffany Strelow Cobb , Esq. Vorys , Sater , Seymour and Pease LLP 52 East Gay Street O. Box 1008 Columbus , OH 43216 (Counsel to The Scotts Co.

HAND DELIVERY
Greenberg Traurig, LLP The Nemours Building 1007 North Orange Street , Suite 1200 Wilmington , DE (Counsel to ExxonMobile)

HAND DELIVERY
Ellen W. Slights Assistant U. S. Attorney The Nemours Building 1007 Orange Street , Suite 700 Wilmington , DE

Dale R. Cockrell , Esq.

Christensen , Moore , Cockrell , Cummings & Axelberg, P. O. Box 7370 Kalispell , MT 59904 (Counsel to the State of Montana)

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IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE
INRE:
R. GRACE & CO.
et aI.

Bankruptcy No. 01- 01139

(JKF)

Jointly Administered
Debtor(s).
Chapter 11

R. GRACE & CO. , et aI. Plaintiffs.
-againstAdversary No. A - 01- 771

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

Related to Doc. No. 398 , Motion for Preliminary Injunction to Include Actions Against

MEMORANDUM OPINION2
The matter before the Court is the Debtors ' Motion to Expand the Preliminary Injunction

to Include Actions Against Burlington Northern and Sante Fe Railroad (" BNSF" ) (the
Expansion Motion

3 which seeks to expand the relief granted by the preliminary injunction

1 The actual document is entitled " Debtors ' Motion to Expand the Preliminary Injunction
to Include Actions Against BNSF.
2 The court' s jurisdiction was not at issue. This Memorandum Opinion constitutes our

findings of fact and conclusions of law.
3 Doc. No. 398.

DKT. NO.

OT. FILE

I D ;iIJB

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(the "

Injunction ) to specifically include actions against Burlington Northern and Sante Fe

Railroad (" BNSF" ) for exposure of some kind to the Debtors ' former vermiculite mining

operations in Libby, Montana (the " Montana Actions Debtors filed the Expansion Motion in response to the Motion of BNSF for Clarification of the Scope of the Preliminary Injunction , or in the Alternative , for Relief from the Preliminary
Injunction (" BNSF Motion

4 BNSF filed a response to the Expansion Motion requesting that

4 BNSF' s motion is at Doc. No. 389. BNSF moved " (a) For a determination that the

preliminary injunction does not preclude discovery of the existence of asbestos-related liability insurance coverage with the Insurance Carriers , where BNSF is the named insured on policies purchased by the Debtors for BNSF' s benefit , or where BNSF is named as an additional insured on policies which also accord coverage to the Debtors; (b) In the alternative , for relief from the preliminary injunction to proceed with such discovery; and (c) for such other and further relief as is appropriate. " Doc. No. 389 at 2- 3. Responses were filed Claimants ' Statement concerning Motion ofBNSF Concerning Preliminary Injunction , Doc. No. 390); Continental Casualty Company (Objection of Continental Casualty Company to Motion of BNSF For Clarification of the Scope of the Preliminary Injunction , or in the Alternative , For Relief From the Preliminary Injunction , Doc. No. 391); Royal Indemnity Company (Royal Indemnity Company s Opposition to Motion ofBNSF for Clarification of the Scope of the Preliminary Injunction , or in the Alternative , for Relief From the Preliminary Injunction , Doc. No. 392); Maryland Casualty Company (Objection of Maryland Casualty Company to the Motion ofBNSF for Clarification of the Scope of the Preliminary Injunction , or in the Alternative , for Relief from the Preliminary Injunction , Doc. No. 393); and Debtors (Debtors Response to Motion ofBNSF for Clarification of the Scope of the Preliminary Injunction Cross Motion to Expand the Preliminary Injunction to Include Actions Against BNSF , Doc. No. 394). Royal Indemnity filed a Response to Debtors ' Response to Motion ofBNSF For Clarification of the Scope of the Preliminary Injunction and Cross Motion to Expand the Preliminary Injunction to Include Actions Against BNSF , Doc. No. 397. The court heard the BNSF Motion on April 2 , 2007 , and deferred it until May 2 , 2007 , pending a hearing on the Expansion Motion , Doc. No. 398. On June 11 2007 , this court entered an order granting the BNSF Motion to the following extent: " BNSF may seek discovery of independent asbestosrelated insurance coverage policies that are NOT: (i) policies that are property of the estates of the above-captioned debtors (" Debtors ); (ii) policies where any of the Debtors are insured; or (iii) polices where any of the Debtors have a claim to their proceeds. " Doc. No. 457. The June 2007 , Order addressed the BNSF Motion , but did not address Debtors ' Cross Motion , Doc. No. 394. A separate order regarding the Debtors ' Cross Motion was entered at Doc. No. 396. That order provided that a response to a motion could not include a request for affirmative relief (continued...

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the court deny the motion based on the argument that injunctive relief under 9105 of the
Bankruptcy Code is improper. 5 The Official Committee of Asbestos Personal- Injury Claimants

ACC" ) and the " (c)laimants injured by exposure to asbestos from Grace s operations in and

near Libby, Montana "

(the " Libby

Claimants

) also filed opposition to the Expansion Motion

arguing that the court lacks subject matter jurisdiction over the Montana Actions and that
injunctive relief under 9105 is not warranted.

Debtors filed a reply in support of their

Expansion Motion. 7 Maryland Casualty Company (" MMC" ), one of debtors ' insurers , also filed

a reply in support of the Expansion Motion. 8 The relevant history of this case is as follows.
On April 2 , 2001 (the " Petition Date ), Debtors filed a voluntary petition for relief under

Chapter 11 of the United States Bankruptcy Code. Soon after , the United States Trustee

continued) and that a separate motion was required. The Expansion Motion , Doc. No. 398 , was filed as a result of the order at Doc. No. 396 and is addressed herein.

5 Response ofBNSF to Debtors ' Motion to Expand the Preliminary Injunction to Include
Actions Against BNSF , Doc. No. 413.

6 Opposition of the Official Committee of Asbestos Personal- Injury Claimants to
Debtors ' Motion to Expand the Preliminary Injunction to Include Actions Against BNSF , Doc. No. 414; Opposition of Libby Claimants to Debtors ' Motion to Expand the Preliminary Injunction to Include Actions Against BNSF , Doc. No. 417 , at 1 (referring at n.1 to the Amended and Restated Verified Statement of Cohn Whitesell & Goldberg LLP and Landis Rath & Cobb LLP Pursuant to Fed. R.Bankr. P. 2019 filed in Case No. 01- 01139 , Doc. No. 13940 , as it may be amended and restated from time to time).

' Reply in Support of Their Motion to Expand the Preliminary Injunction to Include Actions Against BNSF , Doc. No. 432. Debtors filed Motion for Leave to File a Reply in Further Support of Their Motion to Expand Preliminary Injunction to Include Actions Against BNSF , Doc. No. 424 , and the court entered an Order Granting that motion at Doc. No. 431. (I)ncorporating the law of this case as established by this Court and the U. S. Court of Appeals for the Third Circuit in this Adversary Proceeding, and the arguments and authorities set forth in the Expansion Motion. " Doc. No. 422.
8"

7 Debtors

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appointed the Property Damage Committee, the Official Committee of Asbestos Personal Injury
Claimants , the Official Committee of Unsecured Creditors , and the Official Committee of Equity

Holders. Debtors continue in possession of their property and the management of their
businesses as debtors- in- possession pursuant to sections 1107 and 1108 of the Bankruptcy Code.

The preliminary injunction was obtained as follows: on the first day
11 cases ,

' chapter

April 2 , 2001 , the Debtors obtained a temporary restraining order9 against actions being

pursued against their nondebtor affiliates and certain third parties that arise from alleged

exposure to vermiculite ore indirectly or directly caused by the Debtors.
injunction was entered on April 25 , 2001
10

, 2001.

The preliminary injunction at issue in this proceeding was issued on May 3 , 2001

barring the prosecution of currently pending actions against various affiliated entities and third

parties whose purported liability was solely derivative ofW. R. Grace. After May 3 , 2001 , the
preliminary injunction was extended. 12 On January 22 , 2002 , the court entered an order

modifying the preliminary injunction to include certain additional affiliates and to reinstate the
bar against the commencement of new actions against affiliates arising from alleged exposure to
asbestos whether indirectly or directly cause by W. R. Grace. 13 On February 4 , 2002 , Carol
Gerard , a former resident of Libby, Montana , filed a motion to intervene in this adversary and

9 Doc. No.

10 Doc. No. 13.
11 Doc. No. 32.

12 Doc. No. 32.

13 Doc. No. 87 , Order Granting Modified Preliminary Injunction.

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sought modification of the injunction in order to pursue an alleged direct cause of action against
Maryland Casualty Company (" MCC" ), one of Debtors ' insurers.
This court denied the

request to modify, Doc. No. 109, and denied a motion to reconsider that order, Doc. No. 133
which was ultimately upheld by the U.S. Circuit Court of Appeals for the Third Circuit.

Gerard

V. W.R. Grace

Co. (In re W.R. Grace

Co.),

115 Fed. Appx. 565 (3d Cir. 2004).

Certain plaintiffs in a prepetition Montana state court suit next attempted to pursue their
asbestos personal injury claims arising out of Debtors ' Libby mining operations by including
Montana Vermiculite Company (" MVC" ) in their state court suit. MVC was a former owner of
assets one of the Debtors purchased in 1963. See

Doc. No. 153 ,

Debtors ' Motion to Expand the

Preliminary Injunction to Include Actions Against (MVC). This court amended the injunction to
stay the actions against MVC on February 25 , 2005. 15 On August 22 , 2005 , Debtors filed a

motion to expand the preliminary injunction to include actions filed against the State of Montana
for , among other things , negligence in failing to warn about the risks of asbestos at the Debtors

workplace and mine in Libby, Montana (the " State Court Actions

16 By Memorandum Opinion

Doc. No. 85. The pleading is See filed on behalf of Carol Gerard but sought clarification of the scope of the injunction or alternatively, a modification of the injunction so the proposed intervenor could obtain documents for use in her Maryland state court action. Ms. Gerard then filed a separate motion seeking clarification of the preliminary injunction or , in the alternative , to modify the preliminary injunction so she could pursue MCC. Doc. No. 86.
14

15 The order entered on February 25 , 2005 , at Doc. No. 358 amended an order entered

2004 , Doc. No. 299 , which was entered in conjunction a Memorandum Opinion of the same date, Doc. No. 298.
October 7

16 Doc. No. 359.

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and Order dated April 13 ,

2007 , this court denied the motionY

subject matter did not exist for the purpose of expanding the injunction to include the State Court Actions because the Supreme Court of Montana , in Orr v. State of Montana 106 P . 3d
100 ,

104

(Mt. 2004), provided a cause of action separate and apart from the conduct of Debtors and " the
State Court Actions will not be binding on the estate and will not have a direct impact on the estate without additional intervening adjudication. "18 The Debtors and the State of Montana subsequently filed motions for reconsideration (" Reconsideration Motions
). 19

On May 21 , 2007 , this court held a hearing on the Reconsideration Motions and the

Expansion Motion. At the hearing, the court took the Reconsideration Motions and the
Expansion Motion under advisement and orally entered a temporary stay pending its ruling on

the motions. On June 6 , 2007 , the court entered its written order with respect to BNSF. 2O The
17 Doc. Nos. 419 (Memorandum Opinion) and 420 (Order).
is published at 366 b4 295 (Bankr. Montana s motion for relief from stay. 2007).
18 WR. Grace Co. v. Chakarian (In re WR. Grace Co.),

DeI. 2007). On the same day this court denied the State of
See In re WR. Grace

Co. 2007 WL 1121970 (April

366 B.R. 295 , 302

(Bankr.D. DeI. 2007).
19 Debtors ' Motion to Alter and Amend the Court' s Order Denying Its Request to Expand the Preliminary Injunction to Include Actions Against the State of Montana , Doc. No.

427; State of Montana s Motion for Reconsideration of Court' s Opinion and Order Denying Debtors ' Motion for Expansion of Preliminary Injunction , Doc. No. 426. The Libby Claimants and the ACC filed Oppositions to the motions for reconsideration: Libby Claimants ' Objection to Motions Filed by Debtors and State of Montana to Reconsider Order Denying Debtors Motion to Expand the Preliminary Injunction to Include Actions Against the State of Montana Doc. No. 442 , and Opposition of the Official Committee of Asbestos Personal Injury Claimants to the Debtors ' and the State of Montana s Motions to Reconsider the Court' s Decision Denying a Stay of Litigation Against Montana , Doc. No. 443.
s Motion for Reconsideration was referred to in this order and both were addressed in an order entered on August 29 2007 , Doc. No. 466. The (continued...
20 Doc. No. 453.

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Libby Claimants

21 and

Motions to

Alter Stay Order ), BNSF filed ajoinde~3 to the Libby Claimants ' Motion , and Debtors 24 and

the State of Montana25

filed

, 2007 , a

hearing was held on the Motions to Alter Stay Order. The court ruled orally at the hearing 26 and
entered a written order27 on
2007 (" Stay Order ), holding that the temporary stay was

appropriate until the court ruled on the Reconsideration Motions and Expansion Motions. The
Libby Claimants thereafter appealed the entry of the Stay Order to the United States District
Court for the District of Delaware. 28 The Debtors filed a Motion to Dismiss the Appeal in which

the State of Montana joined and all parties filed corresponding
and BNSF filed opposition to the motions to dismiss. 3O
On January 22

2008 , the District Court

entered a Memorandum and Order granting the Debtors ' and State of Montana s motions to

continued)
appeal from the order at Doc. No. 466 was denied. See

Doc. No. 485.

21 Doc. No. 459.
22 Doc. No. 458.

23 Doc. No. 461. 24 Doc. No. 463.
25 Doc. No. 462.

26 Transcript of 7/23/2007 Hearing, Case No. 01- 01139 , Doc. No. 16445 , at 97:24- 98:2.
27 Doc. No. 466.

28 Doc. No. 467 , Civil Action No. 07- 609.

29 Civil Action No. 07- 609 , Doc. Nos. 7- 14. 30 Civil Action No. 07- 609 , Doc. Nos. 11 , 12 , and 13.

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dismiss. 31 On March 27 2008 , this court entered a memorandum opinion and order denying the

Reconsideration Motions.

The Montana Actions which Debtors request to be covered by the Injunction , include
approximately 113 asbestos-related personal injury suits involving over 600 plaintiffs filed

postpetition against BNSF relating to its rail transportation of vermiculite derived from the
Debtors ' former vermiculite ore mining operations in Libby, Montana.

were filed against BNSF postpetition. Approximately four were filed against BNSF prepetition.

Most of the prepetition actions were filed against Debtors. Only after Debtors filed bankruptcy
did the filings against BNSF increase dramatically.

The relationship between Debtors and BNSF had a long history. Between
1995 , BNSF and its predecessor entered into various agreements with the Debtors or their

predecessors (collectively, the " Agreements ) relating to the Debtors ' mining operations in
Libby, Montana. 34 Through these Agreements , BNSF granted Debtors permission to use certain

BNSF property or granted the right of way for the Debtors to conduct certain operations across
31 Civil Action No. 07- 609 , Doc. No. 15; Adv. 01- 771 , Doc. Nos. 474 475 476.

32 Memorandum Opinion , Doc. No. 483 (duplicate at Doc. No. 485).

Motion to Reconsider , Doc. No. 484.
33

~ 15. None of the suits filed postpetition name the Debtors as a party- defendant , inasmuch as the automatic stay was in place when the plaintiffs filed suit. Doc. No. 398 at 8 , ~ 16.
34 BNSF' s predecessor , The Great Northern Railway Company, and certain of the Debtors ' predecessors , The Zonolite Company or Universal Zonolite Insulation Company,

entered into various agreements between 1938 and 1956. The Zonolite Company assigned all of its rights , title , interest and equity in and to these several contracts to W. R. Grace & Co. in 1973. In 1974 , W. R. Grace & Co. and Burlington Northern , Inc. entered into yet another agreement. The final agreement between and among Burlington Northern , W. R. Grace & Co. Conn. , and the City of Libby was entered into in 1995. Doc. No. 398 , at 3 , n. 3.

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or on BNSF property. Under some of the agreements Debtors agreed to indemnify
hold it harmless for liability with respect to injury or death resulting from certain actions

associated with the loading and transport of ore from the mine using the BNSF railroad. Doc.

No. 398 at 3. Debtors also agreed to obtain insurance for

Id.35

Specifically,

the Debtors mined vermiculite ore from the Libby mine , which was then loaded by Debtors into

railroad cars which BNSF employees attached to BNSF trains. The trains transported the ore to
various places.

The majority of the plaintiffs in the Montana Actions fall into one of two categories: (1)
former railroad employees and (2) residents or former residents of the Libby area , including
former mine employees or members of their families (denominated in Debtors ' motion as
Community Claimants

37 As explained in the affidavit of Dr. Terry Spear , railroad workers

were exposed to " clouds of asbestos dust" from the railroad cars loaded with vermiculite ore and

residents of Libby were exposed when these dust clouds drifted into the community. 39 The Libby Claimants allege that BNSF was negligent because it failed to warn or protect its workers

35 There apparently is a dispute regarding whether BNSF is a named insured under some
policies but that issue need not be determined for purposes of the issue before us. See

Doc. No.

398 at 4 , n.4.

36 Doc. No. 398 at 3 , ~ 1.
37 Doc. No. 398 at 8 , ~ 17.

38 Doc. No. 417 , Exh. B. Dr. Spear is a
in Butte , Montana. He has done investigations , reviewed information , and testified regarding conditions in Libby, Montana.

39 Objection to Debtors ' Motion to Expand the Preliminary Injunction to Include Actions
Against BNSF , Doc. No. 417 at 4 , quoting Affidavit of Dr. Terry M. Spear , Exhibit B to Doc.

No. 417 , at ~ 28.

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and the Libby community and failed to use a number of standard measures to control the dust.

They contend that the railroad operations were a major factor in the widespread contamination in
the community of Libby, Montana.

Debtors shut down their Libby operations in 1990.

DISCUSSION

Jurisdiction
In their reply brief, Doc. No. 432 , Debtors argue that the court has related- to subject
matter jurisdiction under 28 U.S. C. 91334(b) to expand the injunction to include the Montana

Actions against BNSF and that Debtors are entitled to injunctive relief under

c. 9105(a).

In the briefs opposing the expansion of the injunction , the Libby Claimants , Doc. No. 418 , the
ACC , Doc. No. 414 , and BNSF , Doc. No. 413 , argue that the court does not have related-

subject matter jurisdiction and Debtors do not meet the requirements for a 91
In

Matter ofZale Corp. 62 F. 3d

746 (5th Cir. 1995), the Court

Circuit explained that:

Subject matter jurisdiction and power (under 9105 of the Bankruptcy Code) are separate prerequisites to the court' s capacity to act. Subject matter jurisdiction is s authority to entertain an action between the parties before it. Power under Section 105 is the scope and forms of relief the court may order in an action in which it has jurisdiction.
62 F. 3d
at 751 (citing

American Hardwoods, Inc. v. Deutsche Credit Corp. (In re American
885 F.2d 621 ,

Hardwoods, Inc.),

624 (9th Cir. 1989)).

40 Doc. No. 417.

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be relevant to the related- to jurisdiction inquiry, the two inquiries are analytically distinct.
Combustion Engineering, Inc. 391 F. 3d
190

In re
not

224 (3d Cir. 2004). Section 105(a) " does
Id.

provide an independent source of federal subject matter jurisdiction.

at 225. Therefore , this

court must establish subject matter jurisdiction before considering the merits of a 91
injunction.
Section 1334(b) of title 28 provides that " the district courts shall have original but not

exclusive jurisdiction of all civil proceedings arising under title 11 , or arising in or related to

cases under title 11." 28 U.

c. 91334(b). Section

refer " any or all cases. . . and proceedings arising under title

under title
The generally accepted test for determining whether a bankruptcy court has subject
matter jurisdiction over litigation between nondebtor third parties is whether " the outcome of that proceeding could conceivably have any effect on the estate being administered in
bankruptcy.
by Pacor

Pacor, Inc. v. Higgins

743 F. 2d 984 994 (3d Cir. 1984). However , as exhibited

itself, application of this test has proven to be difficult in cases involving

indemnification and contribution.
In

Pacor John and Louise Higgins initially brought suit against Pacor , a distributor of

chemical supplies , in Pennsylvania state court , seeking damages allegedly caused by Mr.
Higgins s work-related exposure to asbestos supplied by Pacor. Pacor , in turn , filed a third party

complaint impleading the Johns- Manville

Corporation ,

which soon after filed a chapter

bankruptcy petition. In determining whether the bankruptcy court had subject matter
jurisdiction , the Court of Appeals for the Third Circuit held that the primary action between the

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third parties , Higgins and Pacor , would have no effect on the Johns- Manville bankruptcy estate.

The court decided that:

At best , it is a mere precursor to the potential third party claim for indemnification by Pacor against Manville. . . . Even if the Higgins- Pacor dispute is resolved in favor of Higgins (thereby keeping open the possibility of a third party claim), Manville would still be able to relitigate any issue , or adopt any position , in response to a subsequent claim by Pacor. Thus , the bankruptcy estate could not be affected in any way until the Pacor- Manville third party action is actually brought and tried.
743 F.2d at 995. The court held that a bare claim of common law indemnity was not

establish jurisdiction; any effect on the estate is indirect and contingent on intervening litigation.
(A )ny judgment received by the

against Manville , since Pacor would still be obligated to bring an entirely separate proceeding to

receive indemnification.

Id.

That is , the outcome of the action between Pacor and Higgins

would have no effect on the bankruptcy estate of Johns- Manville and a separate indemnification
action would be required before an effect could be established.
The Court of Appeals for the Sixth Circuit adopted a different interpretation of the

Pacor

test.

In re Dow Corning Corp. 86 F. 3d 482 (6th Cir. 1996), a case

against shareholders of a chapter 11 debtor , the Sixth Circuit found related- to jurisdiction

because of the likelihood of indemnity or contribution claims against the debtor from the
shareholders , some which had been already been filed. The court found the significant part of
the test to be this:

A key word in (the) test is ' conceivable.' Certainty, or even likelihood , is not a requirement. Bankruptcy jurisdiction will exist so long as it is possible that a proceeding may impact on ' the debtor s rights , liabilities , options , or freedom of action ' or the handling and administration of the bankrupt estate.

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Id.

at 491 (quoting

In re Marcus Hook Dev. Park, Inc. 943 F . 2d

261 ,

264 (3d Cir.

possibility of indemnity or contribution claims alone was considered sufficient to satisfy the
Pacor

test under the circumstances of that case where the court found that the possibility of
Id.

contribution or indemnity liability was " far from attenuated.
Shortly after the In re Dow Corning

at 494.

decision , the district court , sitting as the bankruptcy

court having withdrawn the reference with respect to three motions , reiterated its understanding
of the decision of the Court of Appeals for the Third Circuit in Pacor in the case of

In re

Federal-Mogul Global, Inc. 282 B.R. 301 (Bankr.
Cir. 2002), cert. denied sub nom. DaimlerChrysler Corp.

DeI.),

mandamus denied

300 F. 3d 368 (3d

v.

Official Committee of Asbestos

Creditors 537 U. S. 1108 (2003), stating that " the broader principle is that (in cases cited) . . . the potential impact on the debtor s estate would have been direct with no intervening adjudication
or joinder of issue necessary against the non- debtor to affect assets , re- prioritize creditors and
thwart the bankruptcy court' s administration of the estate. "
282 B. R.
at 307. In

Federal-Mogul

jurisdiction in the bankruptcy of debtor automobile part supplier was sought for the third party
action between personal injury claimants and the automobile companies (including the " Big
Three " Auto Makers) who used asbestos-containing automobile products purchased from debtors
in their own products. Applying its decision in

Pacor the Court of Appeals , in denying

mandamus , held that related-to jurisdiction was lacking because it would take the intervention of

yet another lawsuit before the defendants would have indemnity claims against Federal-Mogul

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noting that in

Pacor

the outcome of the suit between the nondebtors " could not result ' in even a
300 F. 3d

contingent claim ' against the debtor. "
The district court in

at 382.

Federal-Mogul

noted that in

Celotex Corp. v. Edwards 514 U.S. 300
cert. denied,

(1995),

In re A.

H Robins Co. 828 F. 2d

1023

485 U. S.

969 (1988),

and

Halper v. Halper 164 F. 3d 830 (3d Cir. 1999), the decisions followed the Third Circuit's
Pacor

interpretation of

and the finding of jurisdiction in the three cases could be " explained at

least in part by the recognition that they each involved property or rights belonging to the
estate. "
282 B. R.
at 307. Celotex

involved the debtor s cash collateral

H Robins

concerned

insurance proceeds , and
alternative source of recovery.

Halper

addressed a guarantee which was available as a creditor
Id.

The rulings in each of these third party cases would have had

a direct effect on the estate.
This factual distinction between Pacor and

Celotex, A. H Robins

and

Halper

noted by

the court in

Federal-Mogul

is also evident in the decisions to include the claims against
Gerard v. WR. Grace Co. (In re WR. Grace

Maryland Casualty Company (" MCC"

Co.),

115 Fed. Appx. 565 (3d Cir. 2004), and Montana Vermiculite Company (" MVC" WR. Grace
Co. v. Chakarian (In re WR. Grace Co.),

315 B.R. 353 (Bankr.
in the

DeI. 2004),

reconsideration denied

2008 WL 868034 (March 27 , 2008), 42

41 The Court of Appeals noted that at the time of its decision denying mandamus , all

courts of appeals except those in the Second and Seventh Circuits had adopted the Third Circuit's Pacor test with little or no variation. 300 F. 3d at 381 , citing Celotex Corp. v. Edwards
514 U. S. 300 , 305- 09 (1995).

42 Doc. No. 485.

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a workers compensation insurer for Debtors and a ruling against MCC would have had a direct

impact on the estates. In the MVC litigation this court explained that:
In this case , ifthere is ajudgment against MVC which damages for asbestos related injuries , the Montana Plaintiffs(43 would look to Royal with respect to the insurance policies and Debtors ' indemnity obligations under their settlement with Royal
would be triggered. The indemnity
contractual; in Pacor a common law indemnity claim existed and was held to be an insufficient basis for " related to " jurisdiction.

315 B. R.

at 359. Similarly,

inA.

Robbins Co. ,

Inc. v. Piccinin 788 F. 2d 994

cert. denied

479 U.S. 876 (1986), an injunction was proper when suits against " indemnitees on

claims on which the indemnitees are entitled to indemnity by " debtor would result in " either a
binding judgment against the debtor. . .
" 788 F. 2d at 1008. 44

See for example Doc. No. 442 designated as filed by Libby Claimants. However , the document filed at Doc. No. 442 refers to " Montana Plaintiffs.
44 The position of the State Court Actions against the State of Montana in WR. Grace

43 The Libby Claimants also call themselves " Montana Plaintiffs.

Co. , et al. v. Chakarian, et al. (In re WR. Grace the other hand , was nearly identical to the claims in

Co.), Pacor

366 B.R. 295 (Bankr.
and

DeI. 2007), on

Federal-Mogul.

Before any effect on Debtors can be realized , the State of Montana must first be found liable in state court and then pursue its claim for indemnification in bankruptcy court. While the court in Orr v. State of Montana, supra found that a duty existed on behalf of the State , the case was remanded for determination of whether the State of Montana breached that duty.
indemnification/contribution is not possible.

Montana Plaintiffs " would still be obligated to bring an entirely separate proceeding to receive indemnification. Pacor 743 F.2d
at 995. Montana law prohibits the or establishing a factual basis (i. , percentage of comparative

fault) against Debtors for either contribution or indemnity during
the course of the State Court Actions. (1997), and Plumb v. See

Mont. Ann. 927-

703

Fourth Judicial Dist. Court

279 Mont. 363

(continued...

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The Montana Actions filed against BNSF are similar to the claims in

Celotex Corp. v.
828 F.2d 1023

Edwards 514 U. S. 300 (1995),

In re A.

H Robins Co. , Inc.

cert.

denied

485 U. S.

969 (1988), and

Halper v. Halper 164 F. 3d 830 (3d Cir. 1999), and the claims
Gerard v. WR. Grace

against Maryland Casualty Company (" MCC"
Co.),

Co. (In re WR.

115 Fed. Appx. 565 (3d Cir. 2004), and Montana Vermiculite Company (" MVC" WR.
Co. v. Chakarian (In re WR. Grace Co.),

Grace

315 B. R. 353 (Bankr.

DeI. 2004),

because property of the estates is implicated and , unlike the State Court Actions against the State
of Montana , could have a direct impact on the estates. BNSF asserts four avenues by which it

has indemnification rights against Debtors , at least three of which will directly impact the estates
if the Montana Actions filed against BNSF are permitted to proceed.

continued) 927 P . 2d 1011 (Mont. 1996) (entry of findings against non- party violates substantive due process). A judgment against the State of Montana will not bind Debtors. An intervening adjudication is necessary to affect the estate.

Orr it is the actions of the State of Montana , not Debtors , which are the basis of the claims. The question in Orr became one of whether , assuming the State had the information , it had an independent responsibility to distribute or act upon the information for the benefit of the plaintiffs in the litigation. " (T)he State had discretion to determine what information to gather , but once that information was gathered , it had no discretion about whether to distribute it." Orr 106 P. 3d at 108.
Additionally, in

Federal-Mogul the State Court Actions against the State of Montana were not binding on the estates and would not have a direct impact on the estates without additional intervening adjudication.
366 B. R. at 301- 02 (footnotes omitted). As in
Pacor and

Debtors do not acknowledge liability to BNSF under any of these circumstances. Debtors ' Reply in Support of Their Motion to Expand the Preliminary Injunction to Include Actions Against BNSF , Doc. No. 432 , at 4.

45 "

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These four avenues are contractual indemnification , policies on which BNSF claims to be
a named insured , separate insurance paid for by the Debtors , and common law indemnification.
This court need not discuss common law indemnification because the Court of Appeals in

Pacor

held that a common law indemnity claim in and of itself was an insufficient basis for relatedsubject matter jurisdiction.

Pacor

, Inc. v. Higgins,

743 F. 2d 984 (3d Cir. 1984).

BNSF has claimed contractual indemnification rights against the Debtors pursuant to
different agreements. 47 BNSF provided the Debtors with copies of 12 of the 15 agreements and

an index specifically identifying the relevant indemnification provisions in all
These agreements contain indemnities for actions including,

inter alia BNSF' s own negligence.

The existence of contractual indemnification rights was one of the reasons the court recognized
its jurisdiction in WR. Grace Co. v. Chakarian (In re WR. Grace Co.),

315 B.R. 353 ,

359

(Bankr.

Del. 2004).

In

Pacor the Court of Appeals for the Third Circuit distinguished the case Pacor, Inc. v. Higgins

before it from one in which there was a contractual indemnification right.

743 F. 2d 984 , 995- 6

(3d Cir. 1984).

BNSF has also alleged entitlement to defense and indemnification from the Insurers (1)
under certain policies which were settled by the Debtors , (2) under which the Debtors agreed to
indemnify and hold the Insurers harmless from any suits , and (3) where BNSF claims it is a
named insured.

46 Doc. No. 432 at 547 See

Doc. No. 432 at 4.

48 Doc. No. 432 at 5 , n. 11.
49 Doc. No. 432 at 5. In

its response to Debtors ' motion to expand the preliminary
(continued... )

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Another complication and indication of a direct impact on Debtors ' estates that will be
occasioned by the BNSF litigation concerns Debtors ' Insurers. Debtors settled some of their insurance policy issues with their Insurers , the terms of which include, as to some policies , an
obligation by Debtors to assume the defense or to indemnify the Insurers for the cost of defense.

Certain of the Insurers have notified Debtors that demands for defense by BNSF against certain

of the settled policies will trigger Debtors ' obligations. 5O
for defense in the Montana Actions 51 and
court litigation 52
the policies , any demand made by BNSF on the insurers to defend under one of the policies

triggers Debtors ' obligation to either assume the defense or indemnify the Insurers for any costs

with respect to the defense. 53 Additionally, Debtors allege that , even if the Debtors and BNSF do

not share the insurance , the Debtors ' estates are nonetheless impacted inasmuch as any separate

continued) injunction to include BNSF , BNSF asserts that " (underlying its Motion for Clarification Of the Scope Of The Preliminary Injunction. . . (Docket Insurance Carriers as to the extent of any available independent , collateral insurance coverage for liability that may be imposed on BNSF . . . . The insurance policies are different policies than those that are involved in the settlement agreement between the Debtors and the Insurance Carriers and that are currently subject to the preliminary injunction. " Doc. No. 413 at 2 , ~ 2. An order was entered on June 11 , 2007 , permitting BNSF to seek discovery of independent asbestosrelated insurance policies that were not property ofthe estates , not policies in which any of the Debtors is an insured , or policies in which any Debtor has a claim to proceeds. Doc. No. 457. Nonetheless , the issue before us with respect to the Expansion Motion involves Debtors ' conduct and products and , therefore , may involve insurance policies that are estate property.
50 Doc. No. 432 at 6. 51 Doc. No. 398 at 9.
52 Doc. No. 413 at 2 , ~ 2.
53 Doc. No. 432 at 6.

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insurance policies issued by the Insurers were purchased by the Debtors ' predecessors pursuant
to an indemnity agreement between Debtors ' predecessors and BNSF. 54 These two avenues

insurance indemnification and separate insurance paid for by the Debtors , further establish the

direct impact on the estates occasioned by the Montana Actions against BNSF.
Thus , the court has jurisdiction to consider whether to expand the preliminary
injunction.

It should also be noted that after the appeals of this court' s order (Doc. No. 466)

temporarily staying actions against the State of Montana and BNSF pending resolution of
various motions , including the one at bench , were dismissed , the Libby Claimants , Debtors , and

BNSF submitted letters to this court , pursuant to Del. Bankr. L.R. 7007- 1

(b),s6

court' s attention and briefly discussing the opinion of the Court of Appeals for the Second
Circuit in

In re Johns-Manville Corp. (Travelers Casualty and Surety Co. , et al. v.
et al. 517 F . 3d 52 (2d Cir. 2008). 57 The

Indemnity Insurance Co. ,

Johns-Manville

opinion is

54 Doc. No. 432 at 6 , n. 16.
115 Fed. Appx. 565 v. WR. Grace Co. (In re WR. Co.), See also Gerard (3d Cir. 2004) (Injunctive relief proceeding initiated by debtor in its own chapter assuredly related to and arose under the bankruptcy and may be a core proceeding).
567 - 8
55

56 The Local Rule provides:

Citation of Subsequent Authorities . No additional briefs , affidavits or other papers in support of or in opposition to the motion shall be filed without prior approval of the Court , except that a party may call to the Court' s attention and briefly discuss pertinent cases decided after a party s final brief is filed or after oral argument.
57 Letter from Daniel C. Cohn , Esquire to the Honorable Judith K. Fitzgerald Re:

Injunction Pleadings , Doc. No. 478; Letter to Judge Fitzgerald (from Debtors) regarding Manville Opinion , Doc. No. 479; Letter to Judge Fitzgerald regarding Manville Opinion from State of Maryland , Doc. No. 480.

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not dispositive of the Expansion Motions. The facts are distinguishable from those currently

before this court. In the present case , Debtors seek to expand the preliminary injunction
preconfirmation to protect assets of their estates. The expansion of the injunction in

Johns-

Manville

was sought postconfirmation by an insurer to protect it from statutory and common law

claims based upon an alleged independent duty owed to plaintiffs in those actions. Although the
independent duty" allegation in

Johns- Manville

is similar to that lodged against BNSF , the

basis for the injunction here is different. In

Johns-Manville the estate had been wound up

decades before the court considered the injunction. Travelers conceded that the compensation
sought for its alleged tortious conduct was not related to proceeds of Manville
63. Furthermore ,
proceeds for recovery. s policies. Id.

the plaintiffs did not rely on Manville s insurance policies or seek insurance
!d.

at 63- 64. In sum , there was no effect on the

res of the Manville estate

by the actions against Travelers , a nondebtor insurer , and the bankruptcy court had no subject

matter jurisdiction to enjoin the type of suits at issue , postconfirmation , against Travelers.
68. In the present case ,

!d.

the contractual indemnity agreements will involve a direct impact on

these pre confirmation estates by requiring Debtors to defend the actions
against BNSF as the result of the Montana Actions will have a direct effect on the res

of the

estates.

As stated , Debtors have established three separate ways in which the Debtors ' estates will

be directly affected if the Montana Actions continue to proceed against BNSF. For the reasons
discussed above , this court has related- to subject matter jurisdiction for the purpose of

considering whether to expand the injunction to include BNSF. We therefore , now turn to the
analysis of whether an injunction under 9105(a) is appropriate.

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Expansion of the In iunction

Two factors courts generally use to determine whether an injunction seeking to expand

the protections of the automatic stay to nondebtor parties under 9105(a) is appropriate are: (1)
whether the nondebtor and debtor share an identity of interest such that a suit against the nondebtor is essentially a suit against the debtor and (2) whether the third- party action will have
an adverse impact on the debtor
s ability to accomplish reorganization.

See , e. g., In re Prussia

Assoc. 322 B.R. 572 , 599 (Bankr.
(5th Cir.

Pa. 2005),

citing Matter ofZale Corp. 62 F. 3d 746 , 761

injunction).

See also Matter of Rickel Home Ctrs. , Inc.

199 B. R.

498 , 500- 01

(Bankr.

DeI.

1996)( discussing the same two

against nondebtors). This is often referred to as the " unusual circumstances " test.
Robins Co. ,

See In re A.

Inc. v. Piccinin 788 F. 2d 994 , 999 (4th Cir. 1986).

1. Identity of Interests

BNSF and the Debtors share an identity of interest as it is the Debtors ' operations and
conduct at the Libby mines that are at the core of the issues raised in the Montana Actions filed

against BNSF. Indeed , James Roberts , trial counsel for BNSF defending the Montana Actions
stated that " Grace s operations at Libby were a proximate cause of the individual Plaintiffs

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injuries 58"

and that "

BNSF anticipates that it may assert in excess of 1 000 indemnification

claims against Grace. ,,59

Moreover , the contractual indemnification agreements discussed above indicate an

identity of interest between BNSF and Debtors. The Court of Appeals for the Fourth Circuit
found the " identity of interest" test satisfied when the judgment against the third- party defendant
would in effect be a judgment or finding against the debtor.

H Robins Co. , Inc. v. Piccinin

788 F.2d 994
implicates such an " identity of interest." The court stated

(a)n illustration of (an identity of interest) situation would be a suit against a third-party who is entitled to absolute indemnity by the debtor on account of any judgment that might result against them
(sic)

in the case. To refuse application of the statutory stay in that

case would defeat the very purpose and intent of the statute.
Id. at 999.

See also In re Combustion Engineering, Inc. 391 F. 3d 190 (3d Cir. 2004).

The ACC and the Libby Claimants argue that the " unusual circumstances " test is not
satisfied with respect to BNSF because the allegation in the Montana Actions is that BNSF has

independent liability. No direct action statute has been asserted. BNSF' s liability is alleged to
arise from its dealings with Debtors , implicates Debtors ' insurance , and defense of the Montana

Actions by BNSF would require Debtors to defend those actions. Therefore the Montana
Actions will have a direct impact on Debtors ' estates. Furthermore , the Court of Appeals for the
Fourth Circuit in

In re A.

Robins Co. ,

Inc.

v.

Piccinin 788 F.2d 994

, or in the Motion ofBNSF for Clarification of the Alternative , for Relief from the Preliminary Injunction , Doc. 389 , Affidavit of James Roberts at

59 Id.

at 2.

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discussing applicability of 9362 to nondebtor co- defendants , held that a stay may be appropriate
where there are " unusual
circumstances "

which can exist " when there is such identity between

the debtor and the third- party defendant that the debtor may be said to be the real party defendant

and that a judgment against the third-party defendant will in effect be a judgment or finding
against the debtor. "
1995).
788 F. 2d
at 999.

Accord Matter ofZale Corp.

62 sf3d 746 , 761 (5th Cir.

2. Adverse Impact on Debtor s Ability to Accomplish Reoq:anization

Considering the three avenues through which the Montana Actions can directly affect the
Debtors ' estates , the adverse impact on Debtors is obvious. As mentioned above , it is

anticipated that BNSF may assert in excess of 1 000 indemnification claims against the Debtors

through contractual indemnification agreements 60 and
is named or additionally insured. 61 Additionally, because the Debtors ' Libby mine operations

and actions are at the core of the Montana Actions , allowing the Montana Actions to proceed

will require the Debtors to defend BNSF while , at the same time , defending their own products

60 Motion ofBNSF for Clarification of the Scope of the Preliminary Injunction , or in the
Alternative , for Relief from the Preliminary Injunction , Doc. 389 , Affidavit of James Roberts at , ~ 6. We acknowledge that the Court of Appeals for the Ninth Circuit recently discussed the In re assertion " of indemnity claims as distinguished from the right to recover an indemnity in , the court found that a bare Excel Innovations, Inc. 502 F . 3d 1086 allegation that a party would make a claim to indemnification would not be sufficient to support proof of irreparable harm to the debtor. Here , however , the record contains proof of fifteen insurance policies that have contractual indemnities. The parties may dispute the eventual liability of Debtors thereunder but , at this stage , in determining the balance of harm to the parties , there is clear documentation that Debtors will be subject to indemnity claims. That evidence , coupled with BNSF' s acknowledgment that it will make claims against those indemnities convinces this court that the balance of harm to Debtors outweighs any countervailing harm to the other parties in awaiting the outcome of the reorganization.
61 Doc. No. 389 , at 2-

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business operations , etc. , in essence , the very claims they filed bankruptcy to stop through the

auspices of the automatic stay. Such a diversion of
the chapter 11 cases by requiring the time and commitment of individuals intimately involved in the chapter 11 cases at this critical time , seven years into the case , when based on a settlement

with asbestos constituencies regarding the personal injury estimation and issues with respect to
property damage claims are in the process of being resolved , the parties are preparing to go

forward with disclosure and plan confirmation hearings. Because of the overlap of issues
relevant to the chapter 11 proceedings and the Montana Actions , Debtors ' participation would

also duplicate expenses and unnecessarily divert if not deplete the resources and assets of the
estates.

Traditional Standards for Injunctive Relief
The Libby Claimants ,

Doc. No. 417 , and the ACC , Doc. No. 414 , both asserted that the

Debtors must also meet the four traditional equitable factors for obtaining a preliminary
injunction , as a showing of an identity of interest and adverse impact alone is insufficient
No. 417 at 11, 18- 19; Doc. No. 414 at 2 , 16- 17. In support of this proposition the Libby

Claimants 62 and
2000), cert. denied

The Pitt News v. Fisher 215 F. 3d 354 , 365- 66 (3d Cir.
531 U. S. 1113 (2001), which lists the four factors as: (1) a substantial

likelihood that the movant will prevail on the merits; (2) a substantial threat that the movant will

suffer irreparable injury if the injunction is not granted; (3) the extent to which the enjoined

62 Doc. No. 417 at 12.
63 Doc. No. 414 at 16.

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party would suffer irreparable injury if the injunction is issued , and (4) public interest. Debtors
argued that because The Pitt News

is a first amendment opinion which does not involve chapter

11 debtors , it is not relevant to this matter. Debtors assert that the two factor test , which this

court applied in the past to expand the preliminary injunction to include
the appropriate standard.

65 is

Although the Debtors did not address the matter in their arguments , the court will address

the traditional standards for injunctive relief. In doing so , this court notes the decision of the
Court of Appeals for the Ninth Circuit in

In re Excel Innovations, Inc.

502 F . 3d 1086 , 1096 (9th

Cir. 2007), in which the court explained that in a bankruptcy case where the debtor seeks a
preliminary injunction to stay a proceeding where the debtor is not a party, the court must apply
the " usual preliminary injunction standard
id.

at 1096 , and " consider whether the debtor has a

reasonable likelihood of a successful reorganization , the relative hardship of the parties , and any
public interest concerns if relevant."

Id.

1. Likelihood of Success on the Merits
The ACC asserts that Debtors cannot prevail on the merits because BNSF will never be
entitled to a 9524(g) injunction on the basis of derivative liability. 66 That , however , is not the
test in a bankruptcy reorganization case.

See In re Excel Innovations, Inc. 502 F. 3d

1086 ,

1096

(9th Cir. 2007)(" a bankruptcy court must consider whether the debtor has a reasonable likelihood

of a successful reorganization ). Neither Libby Claimants nor the ACC addressed the
64 In re WR. Grace

Co. 315 B.R. 353 (Bankr.
Co. (In re WR. Grace

DeI. 2004).
Co.),

65 Gerard v. WR. Grace

115 Fed. Appx. 565 (3d Cir.

2004).

66 Doc. No. 414 at 16.

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likelihood of successful reorganization. However , the underlying objective of the request to
expand the preliminary injunction is to prevent the Montana Actions from negatively impacting
the Debtors ' reorganization. All the evidence before the court indicates that the parties are

working toward plan confirmation and a successful reorganization is likely. Nearly all the
property damage claims at issue in Grace have been addressed and , after approximately seven
days of trial with additional days reserved through June , 2008 ,
a settlement has

although yet to be finalized , regarding personal injury estimation. 67 Competing plans have been
filed68 and ,

with settlement of the personal injury estimation issue , the confirmation process is
no party is suggesting that the case should be

underway. Thus , despite seven years in chapter 11 ,

converted to chapter 7 or that reorganization is not likely.

2. Relative Hardship of the Parties.
The second and third factors of the traditional standards governing preliminary
injunctions are whether the debtor will suffer irreparable injury without the injunction and the
harm to others which will occur if the injunction is granted. In

the context of a bankruptcy

proceeding, the Court of Appeals for the Ninth Circuit in

In re Excel Innovations, Inc. 502 F.
relative hardship of the

1086 (9th Cir. 2007), addressed these

67 See

note 69 infra.

68 Debtors filed a plan and disclosure statement in 2004 (Doc. Nos. 6895 , 6896) and
amended same at Doc. Nos. 7559 , 7560. Exclusivity was terminated by order of July 26 , 2007 Doc. No. 16396. Thereafter the ACC and the Future Claimants ' Representative filed their competing plan in November of 2007 at Doc. No. 17306. No disclosure statement has been filed in connection with that plan.
69 A settlement was announced on April 7 , 2008 , between and among Debtors , the ACC

and the Future Claimants Representative (" FCR" ). The damage , and equity committees are in the process of reviewing the terms.

, property

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parties.

Id.

at 1096. This court will compare the

without the injunction against the potential harm to BNSF and the Libby Claimants if the

injunction is granted. Based on the analysis below , and as a matter of bankruptcy law , we
conclude that the relative hardship of the parties favors the Debtors.
A. Debtors

Allowing the Montana Actions to proceed could subject the Debtors to additional fixed

and liquidated indemnity claims. As stated earlier , the record indicates that BNSF has
contractual indemnification rights and is either a named or additional insured under Debtors

policies and the Montana Actions implicate Debtors ' conduct and product. Therefore , Debtors
have an obligation to defend , which creates an immediate effect on these estates , and face the

possibility of liability on the contractual indemnity. Any judgment against BNSF would create

an indemnity claim by BNSF against Debtors. The Montana Actions involve Debtors ' conduct
in using BNSF railroad cars and loading dock to transport Debtors ' asbestos product. Therefore by permitting the actions to proceed against BNSF , Debtors face substantial risk , should

judgments be entered against BNSF , of an immediate liquidated claim against Debtors.
Ifthe actions proceed against

, Debtors will not have an

opportunity to defend their conduct or products. Debtors have asserted that record taint and
collateral