In re Asarco LLC

• Decision Date: 13 November 2009
• Docket Number: No. 05-21207.,No. 09-CV-177.,09-CV-177.,05-21207.
• Citation: 420 B.R. 314
• Parties: In re ASARCO LLC, et al., Debtors.
• Court: U.S. District Court — Southern District of Texas

420 B.R. 314

In re ASARCO LLC, et al., Debtors.

No. 09-CV-177.

No. 05-21207.

United States District Court, S.D. Texas, Corpus Christi Division.

November 13, 2009.

Heather J. Panko, Jacob Lee Newton, Sander L. Esserman, Steven A. Felsenthal, Stutzman Bromberg et al., Dallas, TX, for In re Official Committee of Asbestos Claimants.

Alan S. Tenenbaum, Eric D. Albert, U.S. Dept. of Justice, Washington, D.C., for In re United States.

Harlin C. Womble, Jr., Nathaniel Peter Holzer, Shelby A. Jordan, Jordan Hyden et al., Corpus Christi, TX, Jack L. Kinzie, James R. Prince, Judith W. Ross, Omar Jesus Alaniz, Samara Kline, Baker Botts LLP, Dallas, TX, Mary Millwood Gregory, Tony M. Davis, Baker Botts LLP, Houston, TX, for Debtor Asarco LLC, et al.

Charles A. Beckham, Jr., Christopher L. Castillo, Elizabeth Brooks Hamilton, Haynes and Boone, LLP, Houston, TX, Irene Bogdashevsky, Milbank, Twee, Hadley & McCloy, LLP, New York, NY, Robert Jay Moore, Milbank, Tweed, Hadley & McCloy, LLP, Los Angeles, CA, Trey Andrew Monsour Haynes & Boone LLP Dallas, TX, for Interested Party Asarco Incorporated, Americas Mining Corporation.

Derek J. Baker, Reed Smith et al., Philadelphia, PA, James C. McCarroll, Reed Smith LLP, New York, NY, Paul M. Singer, Reed Smith LLP, Pittsburgh, PA, Mark Allan Worden, Fulbright Jaworski LLP, Houston, TX, for Interested Party Official Committee of Unsecured Creditors of Asarco LLC.

MEMORANDUM OPINION, ORDER OF CONFIRMATION, AND INJUNCTION

ANDREW S. HANEN, District Judge.

                TABLE OF CONTENTS
                I. Introduction ....................................................................317
                 II. Case History ....................................................................319
                III. Confirmation History ............................................................319
                 IV. The Report and Recommendations from the Bankruptcy Court ........................321
                  V. Summary of Objections ...........................................................322
                 VI. Debtor's Plan v. Parent's Plan ..................................................323
                     A. Summary of the Plans .........................................................323
                        1. The Debtor's Plan .........................................................323
                        2. The Parent's Plan .........................................................325
                     B. Findings by the Bankruptcy Court .............................................326
                        1. Findings Regarding Confirmability of the Plans ............................326
                        2. Findings Regarding Which Plan Should be Confirmed Under
                             Section 1129(c) of the Bankruptcy Code ..................................326
                     C. Objections to the Bankruptcy Court's Findings ................................327
                        1. Objections to the Bankruptcy Court's Findings Regarding the Value
                            of the Debtor's Plan .....................................................328
                        2. Objections to the Bankruptcy Court's Findings Regarding
                            Confirmability of the Parent's Plan ......................................328
                        3. Objections to the Bankruptcy Court's Analysis Under Section
                            1129(c) ..................................................................329
                     D. Discussion ...................................................................329
                        1. The Value of the Debtor's Plan Is Not Greater Than the Value of
                           the Parent's Plan .........................................................329
                        2. The Parent's Plan is Confirmable ..........................................331
                        3. The Section 1129(c) Analysis Compels Configuration of the Parent's
                             Plan ....................................................................332
                           a. Type of Plan ...........................................................332
                           b. Treatment of Creditors and Equity ......................................333
                

                           c. Feasibility ............................................................334
                           d. Preferences of Creditors and Equity ....................................335
                           e. Synthesis of the Section 1129(c) Test ..................................338
                VII. Consideration of the Debtors' September 10th Plan ..............................338
                      A. The Bankruptcy Court's Findings and Recommendation ..........................338
                      B. Arguments of the Parties ....................................................340
                      C. Discussion ..................................................................340
                         1. The Procedure Proposed by the Parties and Adopted by the District
                              Court Does Not Provide for Plan Modification Following the
                              Bankruptcy Court's Recommendation ......................................341
                         2. The Bankruptcy Code Does Not Guarantee the Debtors an Absolute
                              Right to Modify Their Plan of Reorganization ...........................343
                      D. Even if the Debtor's September 10th Plan Were Considered, the
                          Parent's Plan Remains Superior Under the Section 1129(c) Analysis...........345
                VIII. Labor and Special Successorship Objections .....................................345
                      A. The Lack of a CBA Does Not Bar Confirmation of the Parent's Plan ............350
                      B. The SSC Does Not Apply Because Exigent Circumstances Exist ..................352
                      C. The Possibility of a Strike Does Not Make the Parent's Plan Infeasible ......354
                 IX. Objections of Governmental Entites ..............................................355
                  X. Clean Hands .....................................................................356
                 XI. Conclusion ......................................................................357
                XII. Order of Confirmation, Injunctions, and Matters Incident to
                Confirmation ..................................................................358
                     A. Treatment of Claims ..........................................................359
                     B. Section 524(g) Trust .........................................................361
                     C. Environmental Custodial Trusts ...............................................363
                     D. The Special Successorship Clause of the Collective Bargaining
                         Agreement ...................................................................364
                     E. Employee Benefit Plans and Other Benefits ....................................364
                     F. Preservation of Causes of Action .............................................365
                     G. Authorizations ...............................................................365
                     H. Consideration ................................................................367
                     I. Parent's Plan Administrator ..................................................368
                     J. Deemed Substantive Consolidation .............................................368
                     K. Other Implementation Provisions ..............................................369
                     L. Operations from Confirmation Date to Effective Date...........................371
                     M. Injunctions, Releases, and Discharge .........................................371
                     N. Plan Distributions ...........................................................386
                     O. Bar Date Provisions ..........................................................389
                     P. Disputed Claims ..............................................................390
                     Q. Objections to Parent's Plan ..................................................392
                     R. Miscellaneous ................................................................393
                XIII. Notice of Effective Date .......................................................398
                 XIV. Confirmation Order Exhibit 1 Schedule of Released Litigation ...................398
                

I. Introduction

This Court has before it the Report and Recommendation of the Bankruptcy Court as to the confirmation of the plan for reorganization in the bankruptcy case styled, In re ASARCO, LLC, et al. (Doc. Nos. 8, 22), as well as objections and replies to objections filed by the various parties affected by that Report and Recommendation. Also before the Court is an additional Report and Recommendation pertaining to the Debtor's Sixth Amended Joint Plan of Reorganization filed by the Debtor¹ on September 10, 2009 and the objections pertaining to it. (Doc. No. 55.)

The procedure by which these matters were initially before the Bankruptcy Court and by which this case is now back before this Court (i.e., the withdrawal of the bankruptcy reference and the referral back to the Bankruptcy Court for a Report and Recommendation) was conceived of and agreed upon by the parties, and finally submitted to both the Bankruptcy Court and this Court for approval. It was ultimately approved by both in a hearing presided over both by the Bankruptcy Judge and the undersigned. The main interests of the parties in involving the District Court and requesting this not altogether unique procedure were two-fold. It enabled the Bankruptcy Court—which has extensive knowledge of bankruptcy issues generally, this bankruptcy proceeding specifically, and the parties associated in various capacities with this proceeding—to decide the principal bankruptcy issues, including those related to which Plan should be confirmed, while at the same time allowing this District Court (with the jurisdiction to enter a § 524 channeling injunction) the ability to enter all final and necessary orders to complete the contemplated legal and jurisdictional requirements.

As noted above, this was the procedure conceived of and agreed upon by all parties. This Court (as well as the Bankruptcy Court) relied upon the representations of the parties in granting the motion adopting their request. (Doc. No. 7.)² All parties (especially the two proponents of reorganization plans under the Bankruptcy Code) emphasized to both the Bankruptcy Court and this Court the fact that the timing of the confirmation of one of the two...