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Judge Kevin J. Carey Declines to Alter or Amend Prior Judge Fitzgerald Decision Denying Class Certification for Asbestos Property Damage Claimants

By Charlene D. Davis

On August 25, 2016, Judge Kevin J. Carey of the Unites States Bankruptcy Court for the District of Delaware (the “Court”) issued an opinion and order in In re W.R. Grace & Co., et al. denying without prejudice a motion (the “Motion”) by Anderson Memorial Hospital (“AMH”) to alter or amend a May 2008 decision (the “2008 Decision”) by Judge Judith K. Fitzgerald (since retired). The 2008 Decision denied a motion by AMH for class certification for asbestos property damage claimants. The Court also ordered AMH and the reorganized debtors (“Grace”) to mediate disputes related to AMH’s individual property damage claim.

Grace filed voluntary Chapter 11 petitions in 2001. The following year, Judge Fitzgerald issued an order setting a bar date for filing asbestos property damage claims (“Asbestos PD Claims”). AMH timely filed an individual Asbestos PD Claim and two class proofs of claim for building owners whose buildings were contaminated with asbestos. In October 2005, AMH filed a Motion for Class Certification, which Judge Fitzgerald denied in the 2008 Decision; ruling that AMH’s putative class failed to satisfy the numerosity and superiority requirements for Rule 23. AMH sought leave to appeal to the District Court, which was denied. It also appealed the decision to the Third Circuit which declined to review the District Court’s decision. In January 2011, Judge Fitzgerald confirmed Grace’s plan (the “Confirmation Order”). The Confirmation Order was affirmed by the District Court and the Third Circuit on appeal. The confirmed plan (the “Plan”) became effective in February 2014.

AMH filed the Motion seeking to alter or amend the 2008 Decision and discovery on the numerosity of the putative class. The Court conducted two hearings on the Motion and considered briefs submitted by the parties. In that context, AMH sought to broaden its putative class to include Asbestos PD Claims that were not filed as a result of excusable neglect.  The Court concluded that there were two issues for determination: (1) whether the Plan and the Case Management Order for Class 7A Asbestos PD Claimants (the “PDCMO”) attached to the Plan barred AMH from having the 2008 Decision reconsidered and (2) whether AMH satisfied the legal standard for reconsideration.

The Court first considered the provisions of the Plan and the PDCMO.  The Plan incorporated by reference all exhibits in the Exhibit Book, which included the PDCMO as Exhibit 25.  Section I of the PDCMO addresses claims reconciliation procedures for Asbestos PD Claims filed before the bar date, requiring that AMH’s class claims remain inactive unless and until a final non appealable order is entered with respect to its individual claim. Section II addresses claims reconciliation procedures for claims filed after the bar date, providing that class action claims shall not be permitted for post-bar-date claims. Based on these provisions, the Court found that the PDCMO was an integral part of the Plan and as a consequence, AMH could not presently seek class certification nor could it pursue class claim for Asbestos PD claims that were not filed prior to the bar date.

The Court then concluded that AMH had not offered sufficient evidence or reason to alter or amend the 2008 Decision which would require (1) an intervening change of controlling law; (2) the availability of new evidence or (3) the need to correct clear error of law or to present manifest injustice. It found that AMH’s first three arguments had already been considered and rejected by Judge Fitzgerald, the District Court and/or the Third Circuit, and did not serve as a basis for reconsideration. AMH’s fourth argument—that circumstances have changed since Plan confirmation—was addressed by the Court. AMH argued that Judge Fitzgerald’s prior concern that class certification would needlessly prolong the case no longer exists. The Court concluded that the 2008 Decision was based on Judge Fitzgerald’s determinations that the numerosity and superiority provisions of Rule 23 had not been satisfied, not on concerns about delay. Thus the change in circumstances did not justify reconsideration.

A copy of Judge Carey’s opinion is available here.

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