In re Energy Future Holdings Corp.

• Decision Date: 07 January 2015
• Docket Number: Case No. 14–10979 CSS Jointly Administered
• Citation: 522 B.R. 520
• Parties: In re Energy Future Holdings Corp., et al., Debtors.
• Court: U.S. Bankruptcy Court — District of Delaware

522 B.R. 520

In re Energy Future Holdings Corp., et al., Debtors.

Case No. 14–10979 CSS Jointly Administered

United States Bankruptcy Court, D. Delaware.

Signed January 7, 2015

Iskender H. Catto, McDermott Will & Emery LLP, Richard M. Cieri, Stephen E. Hessler, Edward O. Sassower, Brian Schartz, James H.M. Sprayregen, Kirkland & Ellis LLP, Michael A. Rosenthal, Gibson Dunn & Crutcher LLP, New York, NY, Mark D. Collins, Daniel J. DeFranceschi, Jason M. Madron, William A. Romanowicz, Tyler D. Semmelman, Richards, Layton & Finger, P.A., Shannon J. Dougherty, David M. Klauder, O'Kelly Ernst & Bielli, LLC, Thomas F. Driscoll, III, Bifferato LLC, Wilmington, DE, David R. Dempsey, Bridget K. O'Connor, Bryan M. Stephany, Kirkland & Ellis LLP, Washington, DC, Michael P. Esser, Mark E. McKane, Esq., Kirkland & Ellis LP, San Francisco, CA, P. Stephen Gidiere, III, Jeremy L. Retherford, W. Clark Watson, Balch & Bingham LLP, Birmingham, AL, Jeremy L. Graves, Gibson Dunn & Crutcher LLP, Denver, CO, William Guerrieri, Chad J. Husnick, Marc Kieselstein, Todd F. Maynes, Andrew McGaan, William T. Pruitt, Tyler D. Semmelman, Anthony V. Sexton, Kirkland & Ellis LLP, Jeff J. Marwil, Mark K. Thomas, Peter Jonathon Young, Proskauer Rose LLP, Chicago, IL, Michael L. Raiff, Gibson Dunn & Crutcher LLP, Dallas, TX, for Debtor.

Jamie Lynne Edmonson, Daniel A. O'Brien, Venable LLP, Joseph H. Huston, Jr., Stevens & Lee, Wilmington, DE, Richard B. Levin, Cravath, Swaine & Moore LLP, New York, NY, for Special Counsel.

Richard L. Schepacarter, Office of the United, States Trustee, Wilmington, DE, Andrea Beth Schwartz, U.S. Department of Justice—Office of the U.S. Trustee, for U.S. Trustee.

Chapter 11

Re: Docket No. 1682

OPINION

Christopher S. Sontchi, United States Bankruptcy Court

Before the Court is a Bar Date Motion (as defined below) through which the above-captioned debtors and debtors in possession (the “Debtors”) request the Court to establish a bar date for claims of unknown persons that have yet to manifest any sign of illness from exposure to asbestos (“Unmanifested Claimants” and “Unmanifested Claims”).¹ The Unmanifested Claimants were (allegedly) exposed to asbestos at one of the Debtors' facilities prior to the petition date, yet, as of the date hereof, do not know, even with appropriate due diligence, that they will become ill, due to the potential for a long latency period between asbestos exposure and illness. The Debtors have requested that a bar date be established for these Unmanifested Claims. As set forth in detail, infra, the Court will establish a bar date for all prepetition claims, including Unmanifested Claims.

JURISDICTION

This Court has jurisdiction over this matter pursuant to 28 U.S.C. sections 157 and 1334. Venue is proper in this District pursuant to 28 U.S.C. sections 1408 and 1409. This is a core proceeding pursuant to 28 U.S.C. section 157(b)(2). The Court has the judicial authority to enter a final order.

STATEMENT OF FACTS

A. Procedural History

On April 29, 2014, each of the Debtors filed a voluntary petition with the court under Chapter 11 of the Bankruptcy Code. The Debtors are operating their businesses and managing their properties as debtors in possession pursuant to sections 1107(a) and 1108 of the Bankruptcy Code.

On July 23, 2014, the Debtors filed a motion seeking a bar date for prepetition claims (the “Bar Date Motion”).² Thereafter, certain asbestos personal injury law firms filed an objection to the Bar Date Motion.³ The Debtors filed a reply to the PI Law Firm's Objection in which the Debtors modified its bar date request, thus narrowing the issues to those discussed below. At a hearing on August 13, 2014, the Court heard the Bar Date Motion. At the conclusion of the hearing, the Court approved the Bar Date Motion as it related to non-asbestos claims and continued the Bar Date Motion (solely as it related to asbestos claims) to a hearing scheduled for September 16, 2014.⁴ Thereafter, the Court authorized additional briefing, which was filed on September 9, 2014.⁵ Shortly before the September 16th hearing, the Office of the United States Trustee announced that it would solicit asbestos claimants to determine whether an asbestos claims committee should be formed.⁶ In light of the potential for the formation of an asbestos committee, the Court granted a final continuance of this matter. Thereafter, on October 27, 2014, the United States Trustee formed a statutory committee of unsecured creditors whereon two of the five members are asbestos claimants (the “E-side Committee”).⁷ The Court heard argument solely as it related to the establishment of a bar date for unmanifested asbestos claims on the continued date of October 28, 2014. Thereafter, the Court took this matter under advisement. To date, neither the E-side Committee nor the T-side Committee have submitted any position papers with regard to the issue raised herein. The only pending objection is that of the PI Law Firms.

B. Factual History Related to Bar Date Motion and Asbestos Claims

According to the PI Law Firms, both nuclear and electric power generation produces extreme amounts of heat. The presence of this heat necessitates the installment of insulation throughout power plants including in the walls, wires, pipes, boilers and generators. As such, historically, power plants were depositories of asbestos and asbestos-laden materials and products. In addition to its presence throughout the plant and equipment, workers responsible for building and maintaining the plants and equipment would wear insulated clothing or gear to do their jobs. For years, these pants, coats, aprons, mitts and masks contained asbestos. Asbestos exposure was virtually unavoidable in power plants built prior to 1980. EECI, one of the Debtors, was at one time known as Ebasco, which was at various times affiliated with Boise Cascade, Halliburton and Raytheon Corporation (all of which have had asbestos-related personal injury liability).

The Debtors scheduled 392 asbestos-related cases against the Debtors, including approximately 121 cases being defended (20 of which are related to the Debtors' electricity generation activities) and approximately 270 cases where the Debtors have rejected indemnification demands. The Debtors believe that litigation and settlement expenses incurred in connection with asbestos claims against the Debtors are not material. The Debtors estimate that their asbestos expenses average up to $3 million annually.⁸ The Debtors further believe that their restructuring is unlikely to be driven by asbestos claims or result in a channeling injunction under section 524(g) of the Bankruptcy Code. The Debtors assert that the purported asbestos claims against the Debtors, like all of the Debtors' liabilities, reflect a point of due diligence for parties participating in the ongoing marketing process of EFH Corp. Thus, the Debtors and potential bidders seek to use the tools available in the Bankruptcy Code to gather information regarding their outstanding liabilities and to bar all “claims” that are not properly and timely filed.

The Debtors filed the Bar Date Motion seeking to establish October 27, 2014, as the “General Bar Date” in these cases for all claims;⁹ as the hearing on the asbestos bar date was scheduled on October 28, 2014, the Debtors are seeking authority to establish such date in the future. The PI Law Firms object to any bar date that would apply to Unmanifested Claims. The PI Law Firms advance two main arguments: (i) because asbestos-related injuries may not be diagnosed for up to 50 years after exposure, publication notice does not satisfy the requirements of due process for an entire class of claimants that are so unknown as to be unknown even to themselves ; and (ii) asbestos liabilities are best (and, indeed, must be) addressed through the creation of an asbestos personal injury trust.

LEGAL DISCUSSION

A. The PI Law Firms Lack Standing to Object to the Bar Date Motion

Section 1109(b)¹⁰ allows a creditor to be heard on any issue in a bankruptcy case. It does not, however, change the general principle of standing that a party may assert only its own legal interests and not the interests of another.¹¹ The Third Circuit has described a party-in-interest as “ ‘anyone who has a legally protected interest that could be affected by a bankruptcy proceeding.’ ”¹²

This ruling is limited to Unmanifested Claims. The PI Law Firms do not represent any Unmanifested Claimants nor do the PI Law Firms have a legally protected interest independent of their potential, future clients.¹³ While the Unmanifested Claimants would have standing to object to the bar date at issue herein;¹⁴ the Court finds that the PI Law Firms do not have standing to raise an objection to the Bar Date Motion.

Although the PI Law Firms do not have standing to object to the Bar Date Motion and, thus, there is no pending objection to the motion, given the due process concerns in play, the Court, in exercising its independent review, will consider the PI Law Firms' arguments in determining whether to establish a bar date for Unmanifested Claims.

B. Why Establish a Bar Date?

Bankruptcy Rule 3003(c)(3) provides:

Time for Filing. The court shall fix and for cause shown may extend time within which proofs of claim or interest may be filed. Notwithstanding the expiration of such time, a proof of claim may be filed to the extent and under the conditions stated in Rule 3002(c)(2), (c)(3), and (c)(4).¹⁵

“A bar date serves the important purpose of enabling the parties to a bankruptcy case to identify with reasonable promptness the identity of those making claims against the bankruptcy estate, and the general amount of the claims, a necessary step in achieving the goal of successful reorganization. It is akin to a statute of limitations, and must be strictly observed.”¹⁶ This rule “contributes to one of the main purposes of bankruptcy law, securing, within a limited time, the prompt and effectual administration...