In re UNR Industries, Inc.
| Decision Date | 16 September 1997 |
| Docket Number | 82B9851.,Bankruptcy No. 82B9841 thru 82B9845,82B9849,82B9847 |
| Citation | 212 BR 295 |
| Parties | In re UNR INDUSTRIES, INC., Debtor. |
| Court | U.S. Bankruptcy Court — Northern District of Illinois |
Robert D. Nachman, Chicago, IL, for Movant or Plaintiff.
Richard Smolev, Chicago, IL, for Respondent or Defendant.
These proceedings are before the Court in connection with the Motion of the Class 4 Disbursing Agent ("Disbursing Agent") for an Order Requiring the UNR Asbestos-Disease Claims Trust ("Trust") to Turn Over Proceeds of Stock. The parties' dispute concerns whether the Debtors' Consolidated Plan of Reorganization ("Plan") requires reallocation of only shares of stock or shares of stock plus dividends and interest earned on those dividends. The Court ordered an evidentiary hearing to be held, after finding that the Plan is ambiguous. An evidentiary hearing was held. After considering the arguments and evidence before it, and for the reasons stated herein, the Court hereby finds that Plan provisions for reallocation of Creditor Stock includes shares of stock plus dividends, but does not require the payment of interest earned on those dividends.
The Court issues its Findings of Fact ("Findings") and Conclusions of Law ("Conclusions") in accordance with Fed.R.Civ.P. 52(a) made applicable to these proceedings by Fed. R. Bankr.P. 7052(a). To the degree (if any) that the Findings as stated may be regarded as conclusions of law, they shall also be regarded as Conclusions. In the same way, to the degree that matters asserted as Conclusions may be thought of as findings of facts, they shall be regarded as Findings. See Miller v. Fenton, 474 U.S. 104, 113-14, 106 S.Ct. 445, 451-52, 88 L.Ed.2d 405 (1985).
The Court has jurisdiction to entertain this matter pursuant to 28 U.S.C. § 1334 by reference from the United States District Court for the Northern District of Illinois under General Rule 2.33(A). This matter constitutes a core proceeding under 28 U.S.C. § 157(b)(2)(A) and (O).
On July 29, 1982, UNR Industries, Inc. and ten of its affiliates filed voluntary petitions under Chapter 11 of the United States Bankruptcy Code ("Code"). On June 2, 1989, a Plan of Reorganization dated March 14, 1989 ("Plan"), which was proposed by UNR INDUSTRIES, INC., UNARCO INDUSTRIES, INC., UNR, INC., UNR-ROHN, INC. (Alabama), UNR-ROHN, INC. (Indiana), JOBAL TUBE CO., INC., UNR PRODUCTS, INC., and FOLDING CARRIER CORP. (collectively referred to herein as "Debtors") was confirmed by the Honorable David Coar of the United States Bankruptcy Court for the Northern District of Illinois.
Since the inception of the case, it was envisioned by the Debtors that the case would culminate in a plan of reorganization in which the debts would be capitalized, with the unsecured creditor bodies receiving equity interests in the reorganized entity as their recovery under the plan. It was envisioned by the Debtors that a certain percentage of the equity would be given to Debtors' pre-confirmation shareholders and the remaining percentage would be given to various classes of Debtors' unsecured creditors.
To this end, the Debtors negotiated with various claimants including the Official Committee of Asbestos Related Plaintiffs ("Plaintiffs' Committee"), the Official Unsecured Creditors' Committee ("OUCC"), and Kevin M. Forde, the Legal Representative of those people who would manifest asbestos-related injuries after the confirmation of the Plan ("Future Claimants"). The claims and interest in the Plan were divided into the following six classes: 1) Priority Claims; 2) Workmens' Compensation Claims; 3) Secured Claims, as defined in Section 506 of the Code, asserted against the Debtor; 4) Unsecured Trade Claims and Other Unsecured claims; 5) Asbestos-Disease Claims; and 6) The interest of equity security holders of UNR Industries, Inc. Also included in Class 4 were the Asbestos-Property claims. The Asbestos-Property Claims were commonly referred to as "rip-out" claims. The Asbestos-Property claims represent claims to remove insulation manufactured with asbestos from buildings.
In the negotiations, Debtors were represented by the law firm of Schwartz, Cooper, Kolb & Gaynor. Malcolm M. Gaynor ("Gaynor") and Richard M. Bendix, Jr. ("Bendix"), principals of the firm of Schwartz, Cooper, Kolb, & Gaynor, worked extensively on the case. Gaynor was the drafter of the Plan while Bendix described himself as the "scrivener" of the Plan. J. William Cuncannan and Sarah Stegemoeller ("Stegemoeller"), among others, of the law firm of Defrees & Fiske, represented the Plaintiffs' Committee, whose constituency were included as part of Class 5 in the Plan. As noted, Kevin M. Forde was appointed Legal Representative of the Future Claimants ("Legal Representative"). Their claims were also included in Class 5 under the Plan. Also, Mr. Forde was represented by Mary Anne Mason ("Mason"). Prior to confirmation of the Plan, Neal Wolf ("Wolf") represented the OUCC. The claims of Wolf's constituency, namely trade claims and certain other unsecured claims other than Asbestos-Disease claims were included in Class 4 of the Plan. After confirmation of the Plan, Wolf was named Disbursing Agent for Class 4 creditor claims.
The Debtors did not conduct separate negotiations with the Plaintiffs' Committee, the Legal Representative, and the OUCC over the percentage of equity to be granted to their respective constituencies. Instead, the Debtors told the Plaintiffs' Committee, OUCC, and the Legal Representative to negotiate among themselves as to how to divide the equity that would be available to unsecured creditors (as opposed to Debtors' pre-confirmation shareholders). Once that agreement was reached, the Debtors proposed to negotiate how much of the total equity would be allotted to unsecured creditors and how much would be allotted to the shareholders.
William L. Norton, Jr.1 was appointed Examiner to help facilitate agreement among different groups regarding a plan of reorganization. In this role, Mr. Norton asked different creditor groups for their views of a possible plan. Wolf detailed the position of the OUCC to Mr. Norton in a letter and Statement of Position dated May 12, 1987 (Exhibit 3). The letter speaks of the relative distribution between what became Class 5 claims and Class 4 claims as a 2.27 to 1 ratio, with Class 5 getting the 2.27, with the added provision that any distribution to asbestos-property damage claims would reduce distribution to Class 5 and Class 4 in the same 2.27 to 1 relationship.
Originally there were to be no Asbestos-Property claims. Nevertheless some claims were filed in a substantial amount. Gaynor testified that after these claims were filed, when the parties studied the current draft of the Plan, it was decided that valid Asbestos-Property claims would "fall into Class 4, . . . and obviously that was not fair." Gaynor further testified that Wolf informed him that negotiations between the Plaintiffs Committee, the OUCC, and the Future claimants had taken place and an accommodation had been reached by these parties. Gaynor testified he was informed by Wolf that these parties "wanted the burden of the rip out claims to fall between the Class 4 and Class 5 claimants in the same ratio, the 2.27 to 1," that they had agreed to with respect to the division of the total claims.
In a letter dated September 29, 1987, Stegemoeller confirmed her understanding of the agreements which then existed between the Plaintiffs' Committee and the OUCC as to the treatment of property damage claims. She stated: "Any stock distribution, dividend or other consideration to be issued to such Asbestos-Property claimants shall reduce the distribution to be paid to the Plaintiffs' Committee, the legal representative for putative asbestos-related claimants and the Unsecured Creditors' Committee OUCC in accordance with the ratio 2.27 for the Plaintiffs' Committee and legal representative to 1 for the OUCC." Stegemoeller's testified that her understanding of the 2.27 to 1 ratio was that the Ratio would apply to the relative distribution of the assets of UNR or the stock of UNR, depending on how that was ultimately divided in the Plan. At the time the Plan was drafted, she believed that it was still "somewhat up in the air" about what would ultimately be received by the parties.
In August of 1988, the Debtors' attorneys were preparing a new disclosure statement as well as an amendment to the Plan. At this time, Gaynor realized that it would not possible to determine the amount of all Class 4 claims prior to confirmation of the Plan. The Debtors' attorneys raised this timing issue in a letter to the attorneys for the Plaintiffs' Committee and the Legal Representative, among others, a copy of which was sent to Wolf, in which Gaynor stated:
In preparing the disclosure material, it became apparent to us that it will be impossible at the Effective Date to determine the portion of Creditor Stock to be issued to the holders of Class 4 claims and to Asbestos Health Claimants. That determination cannot be made until the aggregate Allowed Amount of all Class 4 claims becomes known. Therefore, to give effect to the provisions of the Plan allowing sale of the Creditor Stock by Trustees for the benefit of creditors, we have made the enclosed modifications to the Plan.
With the letter a new draft of the plan was enclosed. This draft contained, for the first time, Paragraph G of Article IV ("Paragraph IVG") in close to its final form. This is the paragraph that sets up the mechanism of issuing shares of Creditor Stock to the Trustees which are subject to reallocation to the Class 4 Disbursing Agent when the amount of all Class 4 claims is known ("Reallocation Mechanism").
This draft also contains a revised version of the definition of Creditor Stock. Creditor Stock is defined in that...
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