UNITED STATES BANKRUPTCY COURT WESTERN DISTRICT OF PENNSYLVANIA ...

UNITED STATES BANKRUPTCY COURT WESTERN DISTRICT OF PENNSYLVANIA ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) In re: MID-VALLEY, INC., et al., Debtors. MID-VALLEY, INC., et al., Movants, v. (NO RESPONDENT), Respondents. Case No. 03-35592 (JKF) Jointly Administered Chapter 11 Response Date: January 9, 2004 Hearing Date, Time & Place: January 13, 2004 at 2:30 p.m; 54th Floor, USX Tower Pittsburgh, PA 15219 Related to Docket Nos. 12, 29, and 58 [captions continued on next page] MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF INSURERS’ STANDING TO PARTICIPATE IN THIS CHAPTER 11 CASE ) ) ) Movants, ) ) v. ) ) MID-VALLEY, INC., et al., ) ) Respondents. ) ) ) HARTFORD ACCIDENT AND ) INDEMNITY COMPANY, FIRST ) STATE INSURANCE COMPANY, ) HARTFORD CASUALTY INSURANCE ) COMPANY, NEW ENGLAND ) INSURANCE COMPANY, AND TWIN ) CITY FIRE INSURANCE COMPANY, ) ) Movants, ) ) v. ) ) MID-VALLEY, INC., et al., ) ) Respondents. ) ) CERTAIN INSURERS, MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF INSURERS’ STANDING TO PARTICIPATE IN THIS CHAPTER 11 CASE Table of Contents Page INTRODUCTION .........................................................................................................................1 FACTUAL BACKGROUND ........................................................................................................6 A. B. C. Debtors’ “Global Settlement” With Current And Future Claimants..................................6 Insurers’ Rights To Participate In The Defense And Settlement Of Claims......................7 Plan Provisions Affecting Insurers......................................................................................9 ARGUMENT................................................................................................................................11 I. A. B. C. II. BANKRUPTCY STANDING IS PURPOSELY BROAD.............................................11 Bankruptcy Standing Is As Broad As The Constitution Permits......................................11 The Third Circuit Has Repeatedly Acknowledged The Breadth Of Standing Conferred By Section 1109(b) ...........................................................................................14 Standing Is Not The Merits And, At This Early Stage, Is Based On Insurers’ Good-Faith Allegations .....................................................................................................16 INSURERS HAVE STANDING BECAUSE THE BANKRUPTCY CASE, THE PLAN, AND THE TDPs THREATEN TO HARM THEIR FINANCIAL INTERESTS ..............................................................................................18 INSURERS ALSO HAVE STANDING TO VINDICATE THEIR CONTRACTUAL RIGHTS.............................................................................................21 INSURERS HAVE STANDING BECAUSE THE PLAN DIRECTLY AND EXPRESSLY SEEKS TO LIMIT INSURERS’ LEGAL AND CONTRACTUAL RIGHTS.............................................................................................22 INSURERS HAVE A PRACTICAL STAKE IN THIS BANKRUPTCY CASE BECAUSE OF THE MANNER IN WHICH DEBTORS’ PROPOSED PLAN IS LIKELY TO IMPAIR THEIR INTERESTS AND RIGHTS IN ANY COVERAGE DISPUTE ..................................................................................................24 INSURERS HAVE STANDING TO CHALLENGE THE CONSTITUTIONALITY OF THE BANKRUPTCY CODE AS DEBTORS PROPOSE THAT IT BE APPLIED ...............................................................................28 III. IV. V. VI. -i- VII. INSURERS HAVE STANDING AS CREDITORS AND BECAUSE THEIR CONTRIBUTION CLAIMS AGAINST SETTLING INSURERS MAY BE CUT OFF BY THE CHANNELING INJUNCTION ...................................................29 VIII. INSURERS HAVE ADDITIONAL BASES FOR STANDING...................................32 VIX. INSURERS’ PARTICIPATION WILL AID THE COURT IN MAKING THE CRITICAL DETERMINATIONS REQUIRED UNDER THE CODE......................33 CONCLUSION.............................................................................................................................35 - ii - TABLE OF AUTHORITIES CASES ACandS, Inc. v. Aetna Casualty & Surety Co., 764 F.2d 968 (3d Cir. 1985)..................................9, 41 In re Abijoe Realty Corp., 943 F.2d 121 (1st Cir. 1991).....................................................................29 In re Amatex Corp., 755 F.2d 1034 (3d Cir. 1985)...............................................................11, 14, 34 Amchem Products, Inc. v. Windsor, 521 U.S. 591 (1997).....................................................................35 Association of Data Processing Serv. Organizations, Inc. v. Camp, 397 U.S. 150 (1970)..........................16 Baker v. Carr, 369 U.S. 186 (1962)..................................................................................................12 In re Berkshire Foods, Inc., No. 01 B 26478, slip op. at 2 (Bankr. N.D. Ill. Dec. 10, 2003)..............13 In re C-Power Products, Inc., 230 B.R. 800 (Bankr. N.D. Tex. 1998).................................................12 Cella v. Togum Constructeur Ensemleier en Industrie Aliemantaire, 173 F.3d 909 (3d Cir. 1999) .....................................................................................................................32 In re Combustion Engineering, Inc., 295 B.R. 459................................................................................24 Eason v. Gen'l Motors Acceptance Corp., 490 F.2d 654 (7th Cir. 1973)...............................................17 Eichenholtz v. Brennan, 52 F.3d 478 (3d Cir. 1995) ..........................................................................31 FCC v. Sanders Brothers Radio Station, 309 U.S. 470 (1940)..............................................................17 Fair Housing Council of Suburban Phila. v. Montgomery Newspapers, 141 F.3d 71 (3d Cir. 1998)...........................................................................................12, 17 Friends of the Earth, Inc. v. Laidlaw Environmental Services (TOC), Inc., 528 U.S. 167 (2000)............................................................................................................12 In re Fuller-Austin Insulation Co., 1998 WL. 812388 (D. Del. Nov. 10, 1998) .................................25 Fuller-Austin Insulation Co. v. Fireman's Fund Insurance Co., 2002 WL. 31005090 (Cal. Super. Ct., Los Angeles Cty., Aug. 6, 2002), appeal pending............................................................26 In re G-I Holdings, Inc., 292 B.R. 804 (Bankr. D.N.J. 2003) ............................................................29 Gen'l Instrument Corp. of Delaware v. Nu-Tek Electrics & Manufacturing, Inc., 197 F.3d 83 (3d Cir. 1999).................................................................................................12 - iii - Gladstone Realtors v. Village of Bellwood, 441 U.S. 91 (1979)..............................................................12 Hartford Underwriters Insurance Co. v. Union Planters Bank, N.A., 530 U.S. 1 (2000).........................11 In re Hexcel Corp., 239 B.R. 564 (N.D. Cal. 1999)...........................................................................12 International Multifoods Corp. v. Commercial Union Insurance Co., 309 F.3d 76 (2d Cir. 2002) .........................................................................................................20, 31, 41 J.H. France Refractories Co. v. Allstate Insurance Co., 534 P a. 29, 626 A.2d 502 (1993)......................30 In re Johns-Manville Corp., 31 B.R. 965 (S.D.N.Y. 1983)..................................................................15 In re Justice Oaks II, Ltd., 898 F.2d 1544 (11th Cir. 1990)...............................................................29 In re Keck, Mahin & Cate, 241 B.R. 583 (Bankr. N.D. Ill. 1999)...............................................13, 22 Koppers Co. v. Aetna Casualty & Surety Co., 98 F.3d 1440 (3d Cir. 1996).........................................30 Lujan v. Defenders of Wildlife, 504 U.S. 555 (1992) .....................................................................12, 17 Lynch v. United States, 292 U.S. 571 (1934)......................................................................................14 In re Marcus Hook Development Park, Inc., 153 B.R. 693 (Bankr. W.D. Pa. 1993) ............................13 In re Marin Motor Oil, Inc., 689 F.2d 445 (3d Cir. 1982), cert. denied, 459 U.S. 1207 (1983)..........................................................................................................15 Merritt Commercial S&L, Inc. v. Guinee, 766 F.2d 850 (4th Cir. 1985) .............................................32 In re Morton, 298 B.R. 301 (B.A.P. 6th Cir. 2003).....................................................................13, 19 Olin Corp. v. Insurance Co. of North America, 221 F.3d 307 (2d Cir. 2000)........................................29 Owens-Illinois, Inc. v. United Insurance Co., 650 A.2d 974 (N.J. 1994)................................................29 In re PWS Holding Corp., 228 F.3d 224 (3d Cir. 2000)....................................................................16 Phar-Mor, Inc. v. Coopers & Lybrand, 22 F.3d 1228 (3d Cir. 1994)...................................................16 In re Record Club of America, 28 B.R. 996 (M.D. Pa. 1983) ..............................................................20 Schering Corp. v. FDA, 51 F.3d 390 (3d Cir. 1995)..........................................................................12 Sec. Insurance Co. of Hartford v. Lumbermens Mutual Casualty Co., 826 A.2d 107 (Conn. 2003)..........29 - iv - Singleton v. Wulff, 428 U.S. 106 (1976).............................................................................................13 In re Standard Insulations, Inc., 138 B.R. 947 (Bankr. W.D. Mo. 1992).......................................13, 19 Steel Co. v. Citizens For Better Environment, 523 U.S. 83 (1998).........................................................17 Sunds Defibrator AB v. Beloit Corp., 930 F.2d 564 (7th Cir. 1991)....................................................14 Sybron Transition Corp. v. Sec. Insurance Co. of Hartford, 258 F.3d 595 (7th Cir. 2001).......................29 In re TM Carlton House Partners Ltd., 110 B.R. 185 (Bankr. E.D. Pa. 1990)....................................20 Tenn. Electric Power Co. v. Tenn. Valley Authority , 306 U.S. 118 (1939).............................................14 Travelers Insurance Co. v. H.K. Porter, Inc., 45 F.3d 737 (3d Cir. 1995)..............................................16 In re Verdi, 241 B.R. 851 (E.D. Pa. 1999).................................................................................17, 34 Vermont Agency of National Resources v. U.S. ex rel. Stevens, 529 U.S. 765 (2000)...............................14 In re Virginia Mansions Apartments, Inc., 102 B.R. 444 (Bankr. W.D. Pa. 1989)...............................13 In re Visiting Nurse Association, 176 B.R. 748 (Bankr. E.D. Pa. 1995).............................................20 In re Western Asbestos, No. 02-26284T (Bankr. N.D. Cal. Oct. 31, 2003).......................................34 STATUTES 11 U.S.C. § 1109(b)..........................................................................................................................5 28 U.S.C. §§ 1452...........................................................................................................................32 Bankruptcy Code § 1109(b)................................................................................................... passim MISCELLANEOUS 7 Collier on Bankruptcy at 1109-40...............................................................................................12 3 Pierce, Admin. Law Treatise, ch. 16 (4th ed. 2002)....................................................................13 6 Stein, et al., Admin. Law, § 50.01 at 50-3 (2003)...................................................................16, 33 15 Couch on Ins. § 217:4 ...............................................................................................................30 -v- INTRODUCTION Bankruptcy Code § 1109(b) broadly authorizes any “party in interest” to “appear and be heard on any issue” in a Chapter 11 case. It is settled law in this Circuit that the term “party in interest” is to be construed broadly so as to extend standing to everyone having a “practical stake” in a bankruptcy case. As detailed below, the undersigned insurers (the “Insurers”) have that practical stake, for this bankruptcy case materially impairs, or threatens to impair, their financial, legal, and contractual interests. These are precisely the kinds of rights and interests that the courts have repeatedly held provide standing, and the mere assertion of such interests is sufficient to give Insurers standing to appear and be heard in this case.1 First, Insurers have a material financial interest in this bankruptcy case – a classic “pocketbook” interest that has always sufficed for standing in the federal courts. Debtors are asking this Court to approve the so-called “settlement” of billions of dollars of underlying asbestos and silica claims, and have made clear that they want Insurers to foot the bill. Insurers believe Debtors’ “settlement” would pay excessive amounts to claimants and, moreover, would pay claimants who under applicable law have no injury at all and/or no injury caused by Debtors’ asbestos/silica. Because Insurers are being called on to indemnify this “settlement,” they have standing to complain to this Court that it is too high and otherwise unjustified. The basic argument by Debtors to the contrary reflects a fundamental misunderstanding of the law of standing. Debtors claim that Insurers lack standing here because they might be able to raise some type of objection to Debtors’ proposed resolution of these 1 At this pleading stage of contested matters – matters in which Insurers have moved to dismiss the case and opposed certain first-day relief sought by Debtors – the issue is simply whether Insurers have asserted a stake in the controversy. They obviously have, and, just as on a motion to dismiss for failure to state a claim, Insurers’ allegations must be accepted as true. -1- claims in other proceedings involving coverage. But even if that is true, it does not change the fact that Insurers have a legally cognizable interest in ensuring, here and now, that this excessive “settlement” is not approved by this Court – for if it is not approved, Insurers will not be called on to indemnify it (Debtors having made clear that the “settlement” is conditioned on confirmation of a plan providing them with channeling injunctions). If an insurer has two possible ways of avoiding the effects of an inflated allowance of underlying tort claims, one in bankruptcy, and one in a coverage action, the insurer has standing to pursue that interest in both actions. In each forum, it may make the arguments appropriate to that forum. Indeed, it is well established that a party, such as an insurer, that may be asked to pay a claim against a debtor has standing to participate in the bankruptcy case, and in particular in the resolution of that underlying claim, even if that party may not ultimately be liable for such payment. Second, apart from their financial interest in seeing that Debtors’ inflated “settlement” is not approved by the Court, Insurers have standing because they have an ongoing contractual interest in this case to prevent a continuing breach of their insurance policies and other agreements. Insurers’ contracts grant them rights to participate in and/or control the defense and settlement of Debtors’ asbestos and silica claims. It is the essence of the Plan, however, that Debtors, and later the trustees of the asbestos and silica trusts, are entering into direct “settlements” with the claimants without permitting Insurers to participate in any way. Insurers have standing to assert their right to put a halt to that violation and to ask that this Court not endorse it.2 2 Insurers have a special interest in redressing ongoing violations of their contract rights. Specifically, they have an interest in asserting that the plan Debtors formulated in disregard of Insurers’ contractual rights to participate in the negotiations, and which perpetuates Debtors’ (continued. . .) -2- Again, Debtors’ argument that Insurers lack standing in this case, because Insurers might be able to allege a breach of contract defense in some other action, reflects a basic misunderstanding of standing. If there is an ongoing breach of a contract, one unquestionably has standing to go to court to try to prevent the continuing violation of that contractual right. Perhaps the party seeking to enforce the contract right ultimately will not obtain relief because it does not have the contract right it claims, or because there has been no breach. But none of that relates to the party’s standing to appear and make its arguments. Third, Insurers have standing because the Plan as proposed purports to directly limit their rights under their insurance policies. For example, the Plan would explicitly bar Insurers from asserting, in later coverage litigation, that anything in the Plan or in the negotiations with claimants leading up to it violates the insurance policies and vitiates coverage. The Plan’s so-called “super-preemptory” provision – touted by Debtors as fully protecting Insurers’ rights – is, in fact, anything but “insurance neutral.” It not only does not preserve Insurers’ ability to assert breach of contract defenses in a coverage action, it does the exact opposite: it purports to impair Insurers’ ability to assert such defenses. Insurers have standing to explain to the Court how such provisions impair their rights and to object to confirmation of a plan that does not protect those rights. Fourth, Insurers have a clear “practical stake” in the outcome of this case for another reason. Insurers will undoubtedly face arguments (as they have in other asbestos bankruptcies in which plan proponents have contended that insurers lacked standing) that (i) (…continued) practice of settling claims without insurer input, not be approved by this Court because such a plan is conceived in bad faith. -3- plan confirmation amounts to a “judgment” against Debtors in the entire amount of Debtors’ present and projected future liability, requiring Insurers immediately to reimburse the full amount of the “judgment,” including amounts to be paid to future claimants, and (ii) all, or virtually all, of Insurers’ rights under their policies, including their right to assume the defense of the underlying claims, are preempted by the Bankruptcy Code and eliminated by confirmation of the Plan. Indeed, Debtors’ parent company Halliburton has admitted as much, declaring that one of the benefits of this bankruptcy that the Plan will put Halliburton in “a position of strength with our insurance carriers.” Thus, as a practical matter, the Plan and this bankruptcy case plainly have a potential adverse impact on Insurers’ coverage defenses and obligations as they may be determined in subsequent actions. Insurers have standing to appear here to try to ameliorate those adverse effects. Fifth, regardless whether Insurers have standing under the broad provisions of the Code itself, they have standing to complain of unconstitutional action affecting their interests and pocketbooks. To the extent the Court construes the Code to allow these financially healthy Debtors to proceed as they propose, Congress overstepped its powers under the Bankruptcy Clause of Article I of the Constitution. Insurers, therefore, have standing to ask this Court to construe the Code not to violate the Constitution or to strike down the Bankruptcy Code, as applied to this case, as unconstitutional. Sixth, Debtors’ Plan threatens Insurers’ interests as creditors holding claims that would be impaired by the Plan. Some Insurers have claims directly against Debtors themselves. Some Insurers have contingent contribution claims against other insurers that the Plan purports to enjoin and channel to the trusts. As creditors, Insurers are explicitly granted broad standing under Code § 1109(b) to be heard on “any issue” in this case. Insurers separately have a right to -4- be heard concerning the propriety and scope of a proposed injunction that would channel their contribution claims to trusts that may not be able to pay such claims in full. Seventh, there are additional bases for Insurers’ standing, including the following: • Some Insurers are plaintiffs in a suit that has been automatically stayed by the commencement of this case, which Insurers contend has been filed in bad faith and should therefore be dismissed under Code § 1112(b); others are parties to coverage actions now arguably removable from state court solely because of this improper bankruptcy filing. Affected Insurers have standing to seek dismissal of this case. • Insurers who may settle during the bankruptcy case have a direct interest in ensuring that the FCR appointed in this case is free from conflicts, so that any channeling injunction benefiting them is protected against subsequent, collateral attack. Based on each of these grounds, amplified below, Insurers plainly have standing to appear and be heard “on any issue” in this bankruptcy. 11 U.S.C. § 1109(b). Insurers’ financial, legal and contractual rights are all put in jeopardy in this case. Even if there were any doubt about Insurers’ standing, several factors strongly counsel in favor of allowing them to participate. Because of the proposed overpayment of current claimants and the selection of the proposed FCR by Debtors and counsel for the current claimants – parties whose interests, the courts have recognized, conflict with those of future claimants – there is no other constituency in this case that is both able and likely to question the propriety and lawfulness of the proposed Plan, indeed of the Debtors’ filing for bankruptcy in the first place. Only Insurers, whose contract rights are being violated by Debtors’ efforts to resolve the underlying claims without Insurers’ participation, and who are being asked to pay the costs, have stepped forward to question what is going on. Insurers’ rights and interests are being fundamentally affected and, we submit, this Court will benefit by hearing from Insurers on the crucial issues that this extraordinary case raises. -5- FACTUAL BACKGROUND This bankruptcy affects Insurers’ financial, legal, and contractual interests in numerous and material ways. That impact is apparent on the face of the Plan and Disclosure Statement and from the language of Insurers’ policies. A. Debtors’ “Global Settlement” With Current And Future Claimants The cornerstone of Debtors’ pre-packaged bankruptcy plan is a so-called “global settlement” which Debtors negotiated with counsel for asbestos and silica claimants and the proposed FCR. Insurers were not permitted to participate in those negotiations. The Plan provides for the payment of $2.775 billion to resolve the claims of current claimants. By Insurers’ calculation, the per-claim amount is roughly 7.5 times higher than Debtors’ historical settlement costs.3 In other words, to achieve some collateral aim, Debtors are overpaying these claims. Moreover, the Plan provides for the payment of claims of persons who cannot even prove that they were exposed to Debtors’ asbestos or silica, and permits payment to persons who, though they may have been exposed to asbestos or silica (although not necessarily Debtors’), are not suffering from any illness. As to future claims, the Plan would implement “trust distribution proced ures” under which such claims would be reviewed, evaluated, and paid through an administrative, not judicial, process. The TDPs do not permit Insurers to participate in the evaluation and resolution of these claims. Insurers firmly believe that the TDPs will increase the number of claimants and the total amount paid to claimants, compared to the number and amount of such 3 Debtors’ historical average cost per claim is about $920 ($217 million divided by 236,000 claims). (See Halliburton SEC Form 10-Q (Sept. 30, 2003) at 18.) Under the Plan, however, Debtors’ per-claim costs have skyrocketed to almost $7,000 per claim ($2.775 billion divided among roughly 400,000 claimants, resulting in a per-claim payment of $6,937.50). -6- claims that could reasonably be expected under applicable law absent the Plan.4 B. Insurers’ Rights To Participate In The Defense And Settlement Of Claims Insurers have two kinds of contracts with Debtors: insurance policies and coverage-in-place agreements. Both types of agreements, binding on Debtors, give Insurers clear and specific rights to participate in the claim-settlement process. Those rights are at the core of the insurance relationship. In particular, but without limitation, the insurance policies grant Insurers the right to participate in the defense and settlement of claims, obligate Debtors to cooperate with Insurers in defending against claims, and state that any payments made by Debtors without Insurer consent are at Debtors’ own cost. Such provisions seek to ensure that Debtors cannot agree to settlements at Insurers’ expense without Insurers’ permission; otherwise, Debtors would be able to spend Insurers’ money without regard to, or concern for, Insurers’ interests.5 4 By way of example only: • The TDPs contain inadequate product exposure requirements. E.g., certain categories of claimants may qualify for payment even if the claimant was not involved in handling asbestos or working with or near others involved in handling asbestos. (Asbestos TDPs § 5.7(c), Silica TDPs § 4.7(c).). The Asbestos TDPs contain inadequate diagnostic requirements. E.g., the TDP matrix values make no distinction between smokers and non-smokers for purposes of recovery on lung cancer claims. (Asbestos TDPs, note 5.) Such claims of unimpaired persons are not compensable in bankruptcy. • • The Asbestos TDPs do not require a showing of impairment for Level I and Level II claims. 5 For example, one formulation, in certain policies at issue here, provides that the [insurance] company shall not be obligated to assume charge of the investigation, defense, or settlement of any claim or suit against the insured, but the company shall have the right and be given the opportunity to associate with the insured . . . in the investigation, defense or settlement of any claim or suit which, in the opinion of the company, involves or appears to reasonably likely to involve the company. If the company avails itself of such right and opportunity, the insured, its insurers, and the company shall cooperate in (continued. . .) -7- Similarly, the coverage-in-place agreements that some Insurers have entered into limit Debtors’ ability to settle claims at the insurer’s expense. For example, under one such agreement, the policyholder is given the right to settle some claims, but may settle “groups of claims numbering ten (10) or more in excess of” a specified dollar figure only with “the prior consent of [the insurer], such consent not to be unreasonably withheld.” (Gallu Decl., Exh. D at 3.) As set forth in the accompanying Declaration of Prof. George Priest, these provisions are a near-universal, central and material, element of commercial general liability insurance policies. They underscore the obvious: since Insurers will be asked to pay on the underlying claims, Insurers have a tangible, material interest both in the process that leads to settlement and in the terms of the settlement itself. It is rare to find that the law allows one person to have complete control over the disposition of another person’s money. If policyholders had carte blanche to settle claims against them using insurers’ money, claims likely would be settled at higher amounts than otherwise. But it is the premise of the insurance (…continued) such matters so as to effect a final determination thereof. The insured shall not make or agree to any settlement for an amount in excess of underlying insurance without the approval of the company. (Declaration of Christopher T. Gallu, Exh. A at 2 (emphasis added).) In addition, If claim is made or suit is brought against the Insured, the Insured shall immediately forward to the Company every demand, notice, summons or other process received by him or his representative. The Insured shall cooperate with the Company and, upon the Company’s request, assist in making settlements, in the conduct of suits. . . . The Insured shall not, except at his own cost, voluntarily make any payment, assume any obligation or incur any expense other than for first aid to others at the time of the accident. Id., Exh. C at 8 (emphasis added). These provisions make clear that only the insurer can decide whether to commit its funds to settle underlying claims. The policyholder cannot make that choice. -8- relationship that claims will be appropriately defended and settled. Indeed, an insurer’s interest in controlling settlement is greatest when the policyholder appears to be motivated in its settlement by considerations distinct from the simple desire to limit the amount paid out in settlement of the claims. When the policyholder is prompted by such extrinsic concerns – e.g., a desire to increase its parent company’s share price – it is unlikely that the policyholder’s settlements will be the best possible settlements from the insurer’s perspective. But whether such overpayment is likely or not, the insurer is still granted by its contract the prerogative to participate in settlement negotiations and to veto a fraudulent, excessive, unreasonable, or inappropriate settlement.6 Even though Insurers have these contractual rights to participate in the settlement process and object to (or block) proposed settlements, Debtors excluded Insurers from the discussions leading to the “global settlement” and Plan and now, by seeking to deny Insurers the right to be heard in this bankruptcy case, ask this Court to exclude Insurers from the process of plan confirmation and adoption/implementation of TDPs. C. Plan Provisions Affecting Insurers It is clear from the Plan that Debtors intend for Insurers to bear the cost of Debtors’ multi-billion dollar “settlement” with the underlying asbestos/silica claimants. If Debtors renounced any intention to seek coverage for these claims, then it might be true that Insurers would have no standing to participate in this bankruptcy. But Debtors have assuredly 6 The Third Circuit has recognized the significance of such contractual provisions. In ACandS, Inc. v. Aetna Cas. & Sur. Co., 764 F.2d 968 (3d Cir. 1985), it reversed a district court ruling that interfered with insurers’ contractual rights, explaining that where “the policy language explicitly gave the insurer ‘the right’ to defend ACandS in any suit in which the insurer had the ‘duty to defend,’” “[t]he district court was without power to abrogate this contract right.” Id. at 975. -9- not renounced any such intention. To the contrary, Debtors and their parent, Halliburton, have already accrued on their books $2.1 billion in “probable insurance recoveries” reflective of their intention to ask insurers to pay for these claims. (Discl. Stmt. at 104; Halliburton SEC Form 10-Q (Sept. 30, 2003) at 22).) The Plan further provides that, if Debtors’ insurance recoveries exceed $2.3 billion, up to $700 million will be paid to the asbestos trust. (Discl. Stmt. at 69.) Further, the Plan itself contains a long list of insurance policies under which Debtors intend to assert claims. (Plan Exh. 1.) Finally, the Disclosure Statement lists the various lawsuits in which Debtors are seeking coverage from Insurers for asbestos and silica claims. (Discl. Stmt. at 24-26.) Thus, the basic framework of the Plan contemplates a multi-billion dollar “settlement” that Insurers will be asked to pay, but about which Insurers will have no say. This “settlement,” in and of itself, plainly affects Insurers. Moreover, the Plan contains several other provisions that further impair Insurers’ interests because they would – indeed, their very purpose is to – prevent Insurers from successfully asserting defenses in coverage lawsuits. For example, Plan § 10.1 provides that “nothing [in the Plan] shall affect, limit, or otherwise impair any right of a Halliburton Entity against any Asbestos/Silica Insurance Company.” What this provision apparently means is that, to the extent any provision of the Plan or its incorporated “global settlement” violates the terms of Insurers’ policies or coverage-in-place agreements, Debtors purport to be insulated from any adverse consequences that would otherwise flow from their contractual breaches. In other words, not only are Insurers now being deprived of their contractual right to participate in the resolution of the underlying claims, but Debtors propose that Insurers would be barred from even raising Debtors’ breaches of contract in a subsequent lawsuit specifically addressing - 10 - coverage. ARGUMENT I. BANKRUPTCY STANDING IS PURPOSELY BROAD A. Bankruptcy Standing Is As Broad As The Constitution Permits An entity has a statutory right to be heard “on any issue” in a Chapter 11 case if it is a “party in interest” under Code § 1109(b). See, e.g., Code § 1112(b) (court may dismiss a Chapter 11 case “on request of a party in interest”); Code § 1128(b) (“[a] party in interest may object to confirmation of a plan”). Section 1109(b) contains an illustrative list of who is included within the meaning of the term “party in interest” in a Chapter 11 case: A party in interest, including the debtor, the trustee, a creditors’ committee, an equity security holders’ committee, a creditor, an equity security holder, or any indenture trustee, may raise and may appear and be heard on any issue in a case under this chapter. (Emphasis supplied.) As the Third Circuit emphasized in In re Amatex Corp., 755 F.2d 1034 (3d Cir. 1985), “[t]he term ‘party in interest’ is not limited by the small list of examples in § 1109(b).” Id. at 1042. Rather, a “party in interest” under Section 1109(b) includes anyone who “has a sufficient stake in the proceedings so as to require representation.” Id. See also Code § 102(3) (“In this title – . . . (3) ‘includes’ and ‘including’ are not limiting”). The Supreme Court has observed that the term “party in interest” in § 1109(b) employs “broad phrasing,” reflecting Congress’ intent that parties’ right to participate in bankruptcy cases should be “broadly available.” Hartford Underwriters Ins. Co. v. Union Planters Bank, N.A., 530 U.S. 1, 7 (2000). This is a matter of basic and long-standing congressional policy. As the Third Circuit noted in Amatex, “[t]he predecessor provisions of section 1109(b) of the Code constituted an effort to encourage and promote greater participation in reorganization cases,” and § 1109(b) “continues the pattern of permitting - 11 - interested parties in bankruptcy cases the absolute right to be heard and insure their fair representation.” Amatex, 755 F.2d at 1042. Thus, standing under § 1109(b) extends to all persons or entities with “a practical stake in the outcome of the proceedings.” Id. at 1041 (emphasis added). Section 1109(b) is “founded in fundamental notions of procedural due process,” In re Hexcel Corp., 239 B.R. 564, 571 (N.D. Cal. 1999), and, thus, the Code expands standing “to the full extent permitted by Article III.” In re C-Power Prods., Inc., 230 B.R. 800, 804 (Bankr. N.D. Tex. 1998). See also 7 Collier on Bankruptcy at 1109-40 to 1109-41 (15th ed. 2001). In turn, Article III requires merely that a party must have “such a personal stake in the outcome of the controversy as to ensure that concrete adverseness which sharpens the presentation of issues upon which the Court so largely depends.” Baker v. Carr, 369 U.S. 186, 204 (1962). To establish a “personal stake” sufficient for constitutional standing, a litigant must allege merely that: (i) it has suffered, or will suffer, an “injury in fact” to a judicially cognizable interest; (ii) the injury is fairly traceable to the challenged action; and (iii) a favorable decision will redress that injury. See Lujan v. Defenders of Wildlife, 504 U.S. 555, 560-61 (1992); Friends of the Earth, Inc. v. Laidlaw Envt’l Servs. (TOC), Inc., 528 U.S. 167, 180-81 (2000); Fair Housing Council of Suburban Phila. v. Montgomery Newspapers, 141 F.3d 71, 74 (3d Cir. 1998). The injury-in-fact requirement is not onerous. Standing exists if an entity can show even an “identifiable trifle” of injury. Gen’l Instrument Corp. of Delaware v. Nu-Tek Elecs. & Mfg., Inc., 197 F.3d 83, 87 (3d Cir. 1999). Such injury can be actual (i.e., already suffered) or merely threatened. Schering Corp. v. FDA, 51 F.3d 390, 395 (3d Cir. 1995). The injury may be threatened to any sort of legally cognizable interest – financial, legal (under common law or contract), or even (in the more controversial cases) intangible. See, e.g., - 12 - Gladstone Realtors v. Village of Bellwood, 441 U.S. 91 (1979) (injury to the ability to develop and maintain a stable racially integrated community). The most straightforward “injury” that one can allege is pocketbook injury: a party has standing to be heard to avoid financial injury (see generally 3 Pierce, Admin. Law Treatise, ch. 16 (4th ed. 2002)), and parties can come to court for redress of, or protection from, such injuries. See, e.g., Singleton v. Wulff, 428 U.S. 106, 113 (1976) (physician has standing to challenge state abortion statute because he may show economic injury resulting therefrom). The financial interests of potential indemnitors have long been recognized as “judicially cognizable.” See, e.g., In re Keck, Mahin & Cate, 241 B.R. 583, 596 (Bankr. N.D. Ill. 1999) (“While ALAS is not a creditor of the Debtor, it is a third party indemnitor with rights that might be affected by the bankruptcy”); In re Marcus Hook Dev. Park, Inc., 153 B.R. 693, 700 (Bankr. W.D. Pa. 1993) (title insurer which was not a creditor had a “sufficient stake” in the outcome of the case to be a party in interest because it might be required to satisfy a tax lien); In re Virginia Mansions Apartments, Inc., 102 B.R. 444, 445 (Bankr. W.D. Pa. 1989) (indemnitor has standing to contest a tax claim against debtor that would have to be indemnified by the indemnitor if the claim was allowed). Indeed, it is well-established that an insurer or other party that may be asked to pay a claim against a debtor has standing to participate in debtor’s bankruptcy case, and in particular in the resolution of that underlying claim, even if that party may dispute the obligation to pay. See In re Morton, 298 B.R. 301, 306 (B.A.P. 6th Cir. 2003) (a party “that may be liable to . . . the creditors” for debts “is a party in interest”); In re Standard Insulations, Inc., 138 B.R. 947, 950 (Bankr. W.D. Mo. 1992); In re Berkshire Foods, Inc., No. 01 B 26478, slip op. at 2 (Bankr. N.D. Ill. Dec. 10, 2003) (when debtor sought to have insurer pay creditor’s claim, insurer “was and is a party in interest”). - 13 - Parties are likewise entitled to come to court to enforce rights they have under contract. Legal rights under contract are, by definition, “judicially cognizable,” and the violation of such rights is “injury” within the meaning of the law. Thus, a claim of a right under contract law provides the necessary concrete interest for a party to appear in court to assert that right. See Tenn. Elec. Power Co. v. Tenn. Valley Auth., 306 U.S. 118, 137-38 (1939). Indeed, the courts have deemed “preposterous” the suggestion that a party alleging breach of contract, regardless of whether one actually occurred, does not have Article III standing. Sunds Defibrator AB v. Beloit Corp., 930 F.2d 564, 565-66 (7th Cir. 1991). Standing is found in “preventing the violation of a legally protected right,” Vermont Agency of Nat. Resources v. U.S. ex rel. Stevens, 529 U.S. 765, 772 (2000), and insurers have no less standing to assert their contract rights than does any other party that wishes to avoid a continuing breach of contract. After all, insurance policies, “being contracts, are property and create vested rights.” Lynch v. United States, 292 U.S. 571, 577 (1934). B. The Third Circuit H as Repeatedly Acknowledged The Breadth Of Standing Conferred By Section 1109(b) The Third Circuit has repeatedly given a broad interpretation to § 1109(b) in a variety of contexts which confirm the statute’s overriding purpose of permitting any legitimately interested party to participate in all aspects of the reorganization process. In Amatex, an asbestos bankruptcy that predated § 524(g), the Third Circuit held that “future claimants” had standing to participate in the case, even though it was questionable “[w]hether or not [they] have claims in the technical bankruptcy sense,” because they “clearly have a practical stake in the outcome of the proceedings.” 755 F.2d at 1041. The future claimants’ “practical stake” was that they “could be adversely affected if Amatex failed to rehabilitate itself and was liquidated,” since then Amatex would not be around to pay if and - 14 - when the future claimants actually could and did assert claims. Id. Although this interest was highly contingent – the potential future claimants might never have or assert claims – the court concluded that they were “sufficiently affected by the reorganization proceedings to require some voice in them” and were, therefore, “parties in interest” under § 1109(b). Id. at 1042. Amatex directly supports Insurers’ standing here. Even though the future claimants’ interest in debtor’s assets was so highly contingent that it was questionable whether they were “creditors” with “claims” (id. at 1041, 1043), by granting the future claimants standing the Third Circuit ensured that they would have an effective opportunity to protect whatever interests they had, without the court having to “prejudge” or determine their status or how their interests should be treated. Id. at 1043. In so ruling, the Court of Appeals emphasized that “none of the parties currently involved in the reorganization proceedings have interests similar to those of future claimants, and therefore future claimants require their own spokesperson.” Id. at 1042-43. The same is true here: no one in this case shares Insurers’ interests or will voice their concerns about this bankruptcy case and the proposed Plan, which will – just as the plan affected the future rights of the future claimants in Amatex – directly impact their future rights and obligations. See In re Johns-Manville Corp., 31 B.R. 965, 972 (S.D.N.Y. 1983) (insurer held to be a party in interest with standing to seek relief from the stay to pursue a declaratory judgment action on coverage issues, “since if CU cannot seek relief from the stay no one can do so on its behalf, we [are] reluctant to deny CU standing as a ‘party-in-interest’”). The Third Circuit has elsewhere emphasized that standing under § 1109(b) is to be broadly and liberally construed. In In re Marin Motor Oil, Inc., 689 F.2d 445 (3d Cir. 1982), cert. denied, 459 U.S. 1207 (1983), the court emphasized that a broad construction of § 1109(b) has constitutional underpinnings: - 15 - [T]he broad and absolute construction of section 1109(b) comports with the usual expectation of parties in interest that they will have a right to be heard, as parties in interest, by the tribunal adjudicating their interests. This expectation has its roots in notions of due process and fair play. . . . Id. at 457. And in Phar-Mor, Inc. v. Coopers & Lybrand , 22 F.3d 1228 (3d Cir. 1994), the Third Circuit observed that “interests of efficiency and fair play underlie” § 1109(b), which the court described as “an important counterweight to the power of the debtor-in-possession during reorganization” and “an important monitoring tool.” Id. at 1240. The significance of a determination that Insurers are “parties in interest” under § 1109 is clear from the Bankruptcy Code itself. Once it is established that an entity is a “party in interest,” that entity may – in the words of the statute – “be heard on any issue” in the Chapter 11 case (§ 1109(b)), and may object to confirmation of a plan (§ 1128(b)).7 C. Standing Is Not The Merits And, At This Early Stage, Is Based On Insurers’ Good-Faith Allegations “Questions of standing focus not on the merits of the case but on whether parties have the right to seek judicial review.” 6 Stein, et al., Admin. Law, § 50.01 at 50-3 (2003). Indeed, the Supreme Court emphasized this very point in Ass’n of Data Processing Serv. Orgs., Inc. v. Camp, 397 U.S. 150 (1970), in which it jettisoned a prior test for standing which depended on evaluation of merits issues. See id. at 153 (“The ‘legal interest’ test goes to the merits. The question of standing is different”). It is therefore essential to distinguish the issue 7 Standing to participate in bankruptcy court proceedings, broadly conferred upon any party with a practical stake to protect in the bankruptcy case, is quite different from standing to appeal from a bankruptcy court order. See In re PWS Holding Corp., 228 F.3d 224, 248-49 (3d Cir. 2000) (Code “confers broad standing at the trial [bankruptcy court] level” but more restrictive standing to appeal). Appeals from bankruptcy orders are limited to parties actually “aggrieved” by an order, Travelers Ins. Co. v. H.K. Porter, Inc., 45 F.3d 737, 741 (3d Cir. 1995), a requirement that is “more restrictive than . . . Article III.” Id. Appellate standing requires the party to be directly affected, and thus reaches only a subset of the parties permitted to participate in bankruptcy under § 1109(b). Id. - 16 - of standing from the decisions that the Court ultimately will render on the merits. Standing is concerned only with the right to be heard. The Bankruptcy Code creates a broad right to be heard – as broad as Article III permits. The “merits” of a controversy are different: the merits question goes to whether a party who has been heard has shown, on the facts and the law, that it has a meritorious argument and is entitled to relief.8 At the outset of a case – as here, where the Court is considering motions to dismiss and Debtors’ first-day motions – all a party must do to establish standing is allege (not prove) injury in fact, causation, and redressability. Lujan, 504 U.S. at 561 (“At the pleading stage, general factual allegations of injury resulting from the defendant’s conduct may suffice”); Steel Co. v. Citizens For Better Env’t, 523 U.S. 83, 104 (1998); Fair Housing Council of Suburban Phila., 141 F.3d at 75-76. Indeed, in the context of a commercial dispute, especially one involving contract rights, the mere fact that a party is seeking to participate and asserts that its interests is affected is entitled to great weight. Commercial parties ordinarily do not incur the expenses of litigation unless their financial, contractual, or legal rights are truly threatened. “The person suing for breach of contract or for a tort must satisfy the court that he has standing to bring such a suit, but in practice such suits are brought only by persons harmed by the supposed wrong, and his standing to sue is self-evident. It is only where the question is of a public nature that the interested bystander is likely to attempt suit.” Eason v. Gen’l Motors Acceptance Corp., 490 8 The classic illustration of the difference between “standing” and the “merits” is provided by FCC v. Sanders Bros. Radio Station, 309 U.S. 470, 477 (1940). There the Court held that appellees’ allegation of economic injury resulting from allowing another radio station to compete in appellees’ territory was sufficient to provide standing even though it was not even a relevant consideration in judging the merits of appellees’ claim. - 17 - F.2d 654, 657 n.10 (7th Cir. 1973). See also In re Verdi, 241 B.R. 851, 859 (E.D. Pa. 1999) (“[i]f a party believes itself affected by some event enough to take the trouble to raise it as an issue, it can usually be assumed that that party has a sufficient interest in the issue to be held to have standing to assert it”). II. INSURERS HAVE STANDING BECAUSE THE BANKRUPTCY CASE, THE PLAN, AND THE TDPs THREATEN TO HARM THEIR FINANCIAL INTERESTS The core interest being asserted here by Insurers is classically concrete: avoidance of money-injury. There can be no question about “standing” where, as here, a party seeks to protect its pocketbook. Insurers firmly believe that Debtors’ proposed “global settlement,” which is at the heart of this bankruptcy and the proposed Plan, would pay claimants too much based on standards that are too lax. Insurers’ financial interest is that Debtors have asked Insurers to pay the more than $3 billion cost of the settlement. As a result, Insurers face a direct – multi-billion dollar – threat to their pecuniary interests if the Plan is confirmed by this Court. Absent this bankruptcy and Court approval of the proposed “settlement,” there is no chance that Insurers would have to pay as much, or as soon, or indemnify payments to undeserving claimants. The reality of this impact puts Insurers’ “skin in the game” and gives them standing to be heard and to assert their pecuniary interests. They are, after all, “liability insurers,” and it is that very thing – liability on the underlying claims – that is being determined in this bankruptcy case. As discussed above, parties that may have to indemnify a claim are routinely held to have standing in disputes involving the claim, including with respect to motions to settle or otherwise resolve the claim. This is so even when the potential indemnitor retains defenses to indemnity that it could assert in a subsequent proceeding. - 18 - For example, in Standard Insulations, insurers were potentially liable for payments on asbestos claims that were to be liquidated through the bankruptcy case. The court found that the insurers had standing to participate in the bankruptcy case and to object to proposed claim allowance procedures (akin to the TDPs in this case) because “they had a sufficient stake in the proceeding so as to require representation” in that debtor was seeking to hold the insurers “responsible for payment of injury claims.” 138 B.R. at 950. Moreover, the court also held that the insurers had standing to object to the personal injury claims against the debtor under Code § 502(a), which permits any party in interest to object to the allowance of a claim. Id. The court made these determinations even though the insurers were disputing debtor’s claimed rights to coverage and were, indeed, “seeking summary judgment relieving them from liability for payment of claims.” Id. See also Morton, 298 B.R. at 306 (a husband who was merely potentially liable for his wife’s debts had standing to participate in the bankruptcy). These decisions put to rest the principal objection Debtors have raised regarding Insurers’ standing. As we understand it, Debtors contend that Insurers lack standing here because Insurers may have the opportunity to raise objections to Debtors’ resolution of the underlying claims in some subsequent coverage action, perhaps by way of a breach of contract defense. According to Debtors, this means Insurers cannot redress their financial interests or contractual rights in this bankruptcy case. But, as Standard Insulations, Morton, and numerous other cases demonstrate, Debtors are simply wrong as a matter of basic standing law. If an insurer has two possible ways of avoiding the effects of an inflated settlement, one in bankruptcy, and one in a coverage action, the insurer has standing to pursue that interest in both actions. In each forum, it may make the arguments appropriate to that forum. Here in the bankruptcy court, it may assert reasons why the bankruptcy process cannot sanction Debtors’ - 19 - settlement. If it prevails, then it will not have to indemnify the settlement. It will have vindicated its interests. Insurers might also have other forums in which they can attack the settlement – and they may have a different set of arguments to raise there. But that fact does not preclude Insurers from seeking to protect their interests here.9 Debtors simply miss the point in arguing that Insurers will avoid economic harm if they are able, in the future, successfully to assert coverage defenses. To have standing to be heard in this bankruptcy case, Insurers do not have to establish that it is certain they will have to indemnify Debtors if the Plan is confirmed and the claims are allowed. Just as the Bankruptcy Code treats a party with an uncertain – indeed, a contingent – right to payment as a creditor and thus as someone with standing (Code § 101(5)), so too a party that a debtor is asking to pay for billions of dollars in claims has standing to be heard on the allowance of those claims, even though its liability could be disputed in a later proceeding. Indeed, the courts have found standing for parties whose interests were far more contingent and uncertain.10 9 Insurers need not forego their right to raise issues here just because they may also have the right to raise the same or different issues elsewhere. That is like saying an insurer lacks standing to file a declaratory judgment action regarding coverage – notwithstanding how common such cases are – or a suit seeking cancellation of a policy because it may raise the same or similar issues in defense of a breach of contract action filed later by the policyholder. 10 See, e.g., In re Record Club of America, 28 B.R. 996, 998 (M.D. Pa. 1983) (party in litigation with debtor had standing to appeal plan confirmation because the litigation “might” create rights in that party against debtor, the plan “might” detrimentally affect those rights, and such a “possibility” is “sufficient to give [that party] standing”); In re TM Carlton House Partners Ltd., 110 B.R. 185, 190 & n.3 (Bankr. E.D. Pa. 1990) (party that sold its claim against debtor nevertheless had standing to challenge the plan because it asserted that it was defrauded into doing so and might have its claim restored; fact that party had alternative remedies in other courts is no basis to deny standing); In re Visiting Nurse Ass’n, 176 B.R. 748, 751 (Bankr. E.D. Pa. 1995) (debtor had standing to object to claim even though it was liquidating and all creditor claims would have to be satisfied in full before debtor could retain any property, since the court could not say “with certainty that the Debtor is not a party that will be economically affected by the determination of [the] claim”); Int’l Multifoods Corp. v. Commercial Union Ins. Co., 309 F.3d 76, 90 (2d Cir. 2002) (insurer had standing even though claim was contingent on subsequent indemnification litigation with a third party). - 20 - Insurers thus have the requisite “injury-in-fact” for standing, and causation also readily exists. This bankruptcy case threatens to cost them billions of dollars. And the other requirement for standing – that the harm may be redressed – is self-evident: if Debtors’ Plan is not confirmed (or if this bankruptcy case is dismissed), then the proposed “global settlement” will not be effectuated and Insurers will not have to indemnify grossly inflated claims. Insurers’ financial interest in not being exposed to billions of dollars in claims that Debtors have expressly stated they intend to make Insurers pay plainly gives them standing here. III. INSURERS ALSO HAVE STANDING TO VINDICATE THEIR CONTRACTUAL RIGHTS Similarly, Insurers have standing here because they seek to protect their contract rights. Debtors’ unilateral settlement of current claims and their decision, reached without Insurers’ input, to use the TDPs to resolve future claims would – if approved by this Court – fundamentally reshape the basic principles that define the insurer-policyholder relationship. Rights that are central to this relationship – such as the insurer’s right to approve settlements, its right to defend claims, and its right to insist that claims be liquidated in the tort system pursuant to ordinary legal rules – would, if the Plan is confirmed, not operate as contemplated when the policies were issued. Thus, because this bankruptcy would abrogate Insurers’ contractual rights and impose fundamental changes in the basic relationship between Debtors and Insurers, Insurers are parties in interest with standing to be heard in the bankruptcy case.11 11 Debtors seek to make much of the fact that they are not transferring their policies to the two trusts, but instead will be pursuing coverage themselves. But the fact that Debtors are not seeking to abrogate Insurers’ contractual rights in this one respect does not alter the fact that they are seeking to do so in a fundamental way: by denying Insurers any right to participate in the resolution of billions of dollars of underlying claims which they are nevertheless asking Insurers to pay. Moreover, the non-assignment of the policies does nothing to mitigate the economic harm the Plan and the so-called “global settlement” threaten to impose on Insurers. - 21 - These are precisely the types of interests that the courts have always recognized provide the requisite “practical stake” in the outcome of a dispute that qualifies for standing. Moreover, these injuries are readily redressed by this Court: if the Plan is not confirmed, the continuing violation of Insurers’ contractual rights through the approval of the “settlement” and the TDPs will be blunted. Again, the law of standing is clear: a party to a contract always has standing to seek to prevent an ongoing breach of that contract. In Keck, Mahin & Cate, for example, the court held that an insurer had standing to object to confirmation where it “allege[d] that the Plan will impair and substantially modify its rights under the professional liability policies it issued to the Debtor.” 241 B.R. at 596. While the insurer was not a creditor of the debtor, it was “a third party indemnitor with rights that might be affected by the bankruptcy.” Id. Under § 1109(b), the court noted, “anyone who has a legally protected interest that could be affected by the bankruptcy proceeding is entitled to assert that interest.” Id. The court held that insurance contract rights were “clearly” legally protected interests providing the insurer with standing to object to confirmation. Id. The same analysis fully applies in this case. IV. INSURERS HAVE STANDING BECAUSE THE PLAN DIRECTLY AND EXPRESSLY SEEKS TO LIMIT INSURERS’ LEGAL AND CONTRACTUAL RIGHTS Insurers also clearly have standing because the proposed Plan expressly seeks to curtail their rights under their policies. The Plan specifies that “nothing [therein] shall affect, limit, or otherwise impair any right of a Halliburton Entity against any Asbestos/Silica Insurance Company.” (Plan § 10.1 (emphasis added).) This provision seeks to protect Debtors by declaring that the Plan and the “global settlement” will not prevent any Halliburton Entity from obtaining coverage, nullifying in advance any argument that any Insurer may wish to make that - 22 - coverage is precluded by the violation of their contracts resulting from Debtors’ decision to exclude Insurers from the negotiations with claimants and Debtors’ agreement to pay inflated settlements. Thus, these provisions seek to deny Insurers perhaps their most basic contract right under the circumstances of this case: the right to contend that the Plan excuses them from performance under their insurance contracts because it is premised on a “global settlement” that was reached without the consent, approval, or even participation of Insurers. One cannot imagine a clearer effort to interfere with Insurers’ contractual rights – or a clearer reason why Insurers have a practical stake in this case. If a plan were confirmed with such a provision in it, Insurers would plainly be affected. They have standing to object to the confirmation of such a plan, to ensure that any confirmed plan (or any order entered in this bankruptcy case) does not strip them of their contractual and legal rights, and to make arguments regarding whether any so-called “super-preemptory” provision is actually sufficient to protect their rights. If Insurers are correct that the Plan is not “insurance-neutral,” then by definition the Plan adversely impacts Insurers, unquestionably giving them standing.12 12 As discussed below, Insurers question whether any “super-preemptory” provision could adequately protect their rights. But even if the “super-preemptory” provision proposed by Debtors truly preserved Insurers’ rights, Insurers would have standing. The issue to be addressed here is whether the bankruptcy case might affect Insurers’ interests – not whether this particular Plan does. After all, Debtors’ current Plan may be amended, superseded, or denied confirmation, in which case a different plan might be filed affecting Insurers’ interests in new and different ways. That a plan, confirmed at the end of the case, may include language that does more or less harm to Insurers’ interests is the reason why – viewed from the perspective of the beginning of a bankruptcy case – Insurers have standing to participate, not a reason why they lack it. - 23 - V. INSURERS HAVE A PRACTICAL STAKE IN THIS BANKRUPTCY CASE BECAUSE OF THE MANNER IN WHICH DEBTORS’ PROPOSED PLAN IS LIKELY TO IMPAIR THEIR INTERESTS AND RIGHTS IN ANY COVERAGE DISPUTE In addition to having standing based on their interests in opposing the enormous financial impact of the so-called “global settlement,” the continuing violation of their contractual rights, and the Plan provisions expressly denying them their most basic legal rights, Insurers have a further practical stake in the Plan and in this case that is sufficient to give them standing. Debtors ask this Court to issue a confirmation order that approves the “global settlement” pursuant to, and under the standards applicable to, Bankruptcy Rule 9019 (see Plan §§ 8.1(b)(xvii), 8.1(b)(xv), 9.8) so that they can argue to any coverage litigation judge or jury that this Court has already determined that the “global settlement” is fair, equitable, and reasonable. It will then be difficult, as a practical matter, for Insurers to turn around and persuade the trier of fact in that subsequent litigation that the settlement approved by this Court is so unfair and improper that it precludes any coverage obligation for the settlement at all. Indeed, precisely this scenario has unfolded in other cases, even where the debtor promised to not make such an argument and the bankruptcy court attempted, by inserting “super-preemptory” language in the confirmation order, to preclude the debtor from doing so. The threat to Insurers is unmistakable. Indeed, nothing would prevent Debtors from arguing in coverage litigation that this Court’s approval of the Plan absolves Debtors of any breach of the insurance contracts that they committed by not allowing Insurers to participate in the settlement process, either prepetition, in the context of Plan confirmation and Rule 9019 approval, or under the TDPs. In fact, as pointed out above, the Plan is designed to provide just such absolution. Debtors assert that their Plan is “insurance neutral” because it contains “super- 24 - preemptory” clauses. As discussed above, Debtors’ “super-preemptory” clauses are in fact demonstrably anti-insurer, not “insurance neutral.”13 But, in any event, there is strong reason, based on the history of other asbestos bankruptcy cases, to doubt whether any “superpreemptory” provision could alone adequately protect Insurers from the adverse impact of a case like this. Two examples will suffice to illustrate the fallacy in the notion that this Court could decline to honor the legal and contractual rights of Insurers in this bankruptcy case, prejudicing Insurers, because of the off-chance that Insurers might have their rights somehow vindicated by another court in a later proceeding. In the Fuller-Austin asbestos bankruptcy, debtor assured the district court, sitting in bankruptcy, that nothing in the bankruptcy case would bind the insurers in coverage litigation pending in state court. Based on this assurance, the district court ruled that the insurers lacked standing to object to the plan and confirmed the plan without considering the insurers’ 13 While one so-called “super-preemptory” provision that Debtors tout does state that the rights, “if any,” of any Insurer to assert any claim, counterclaim, or defense under an insurance policy are not affected by Debtors’ discharge and the release of the various Halliburton entities, it goes on to emasculate that supposed reservation of rights by stating that the discharge and release “shall neither diminish nor impair the rights” of Debtors under those policies. (Plan § 11.4.) Moreover, Debtors’ characterization of § 11.4 as ensuring “insurance neutrality” cannot be reconciled with the clear language of § 10.1, which seems to have the specific purpose of precluding Insurers from successfully asserting coverage defenses arising from, inter alia, the manner in which Debtors negotiated the “global settlement” and the Plan without permitting Insurers to be involved. In characterizing provisions of the Plan as “super-preemptory,” Debtors seek to suggest that such provisions are like those which this Court found sufficient in CE. The Plan language on which Debtors rely here is a far cry, however, from that in CE. The “super-preemptory” language in CE was intended to eliminate any impairment that the Plan or related documents might impose on the insurers (see In re Combustion Engineering, Inc., 295 B.R. 459, 494 (language of this Court’s “superpreemptory” provision), 474 (“the Plan has been modified to make clear that nothing impairs [the insurers’] rights”) (emphasis in original) (Bankr. D. Del. 2003); but Debtors’ so-called “superpreemptory” provision is designed to protect Debtors. Putting aside questions a bout the sufficiency of the clause in CE or the arguments subsequently made in the Third Circuit appeal to undercut the force of that clause, it is clear that the provisions cited by Debtors here do not have the same effect. - 25 - objections. In re Fuller-Austin Insulation Co., 1998 WL 812388 at *3 (D. Del. Nov. 10, 1998). In the subsequent coverage litigation, however, debtor made an about-face and argued that plan confirmation had made it liable to pay damages in the total amount of its aggregate present and future asbestos liability, and that the insurers were, as a result, liable to pay that entire amount. (See Statement of Decision as to Phase IB, Issues, 2, 7, and 9, Fuller-Austin Insulation Co. v. Fireman’s Fund Ins. Co., 2002 WL 31005090 at *5 (Cal. Super. Ct., Los Angeles Cty., Aug. 6, 2002), appeal pending). The coverage court agreed with debtor, even though the district court in the bankruptcy case had refused to permit the insurers to object to the plan on the ground that the plan was not to affect the insurers’ rights. Id. at *23, *26. Thus, insurers were deprived of the opportunity to be heard in either forum. The CE case is also instructive. Plan proponents in that case forcefully denied, in this Court, any intent to affect the rights of insurers and, at this Court’s insistence, added a “super-preemptory” provision to their plan. They further cited that provision on appeal to argue that the insurers’ rights were unaffected by the CE plan.14 Yet, in virtually the same breath, plan proponents told the Third Circuit that confirmation of the CE plan preempted all of the insurers’ contractual claims-handling defenses: “To the extent that Certain Insurers contend that the terms of their policies are violated because the policies give them the right to control the defense and settlement of claims notwithstanding the terms of the TDPs, those rights are preempted by Section 1123(a)(5) of the Code.” (ACC’s 3d Cir. Br. at 27.) What Fuller-Austin and CE demonstrate is that, although plan proponents may argue in bankruptcy court against insurer standing on the ground that the bankruptcies have no 14 See the September 25, 2003 Third Circuit briefs of CE and ABB (at 29), the FCR (at 14-20), and the ACC (at 30). - 26 - impact on the insurers because the insurers are free, post-bankruptcy, to raise all coverage defenses, and this somehow substitutes for allowing insurers to enforce their rights and protect their interests in the bankruptcy court itself, plan proponents nevertheless may assert contrary arguments later, and courts may later credit those contrary arguments. Because of this, a bankruptcy court simply cannot ignore rights directly and properly at issue now on the assumption that some protection or vindication might be available later in another forum. There is no reason to think this case will be any different. As noted, Debtors have included express language in their proposed Plan designed to deny Insurers their most fundamental right: to assert, as a defense to coverage, Debtors’ violation of Insurers’ contractual right to deny coverage for a “global settlement” reached without any Insurer involvement or approval. And, Debtors have candidly admitted, one of their principal goals in this bankruptcy is to “maximize” their “insurance asset” and put themselves in a “position of strength” against their insurers.15 In short, the notion that nothing in this bankruptcy case will affect Insurers is not borne out by the history of previous asbestos bankruptcy cases, or by the terms of the Plan Debtors propose in this very case. Insurers need to protect their rights and interests here and 15 The Plan’s adverse impact on Insurers is hardly an accident; Debtors designed the Plan to have just this effect. Halliburton has candidly acknowledged that this bankruptcy is designed to give it and Debtors a tactical advantage over Insurers in coverage litigation: [O]ur goal is to maximize the net present value of our insurance asset. We felt that the best way to do that was to enter into and conclude a global settlement that resulted in Halliburton having a strong enough balance sheet so that we didn’t have a gun to our head following the settlement. And so that we could negotiate from a position of strength with our insurance carriers. That is not a weakness of our transaction. That is a strength of our transaction. (Decl. of Leslie Epley, Dkt. No. 58, Exh. 2 at 34 (emphasis added).) - 27 - now. They have a “practical stake” in what is going on in this Court, and therefore have standing to be heard in this case.16 VI. INSURERS HAVE STANDING TO CHALLENGE THE CONSTITUTIONALITY OF THE BANKRUPTCY CODE AS DEBTORS PROPOSE THAT IT BE APPLIED As set forth above, Insurers clearly have standing under the Code to raise their objections and protect their interests. In addition, Insurers have standing as broad as Article III permits because of their arguments that this bankruptcy case must be dismissed, and the Plan cannot be confirmed, because the proposed use of the Code here – by debtors who are, inter alia, financially strong and admittedly able to pay all of their future asbestos liabilities in full – would, if permitted, render the Code unconstitutional as applied. (See Brief in Support of Certain Insurers’ Motion to Dismiss, Dkt. No. 58, at 37-43.) In this respect, Insurers’ standing is no different than that of any other litigant who seeks to challenge application of a statute as unconstitutional. 16 Many of Debtors’ arguments are actually Debtors’ merits theories, which have no place in the standing inquiry. For example, Debtors will argue that if Insurers believe confirmation of the Plan and approval of the “global settlement” and TDPs violate their contractual rights, Insurers have adequate non-bankruptcy remedies (i.e., the possible right to assert coverage defenses based on Debtors’ breaches of contract) and are not entitled to any relief here. Thus, Debtors argue, this Court should ignore their continuing violation of Insurers’ contractual rights and let Insurers try to establish a breach of contract defense somewhere else. But this is really a merits argument, since it explains why Debtors believe that Insurers are not entitled to prevail in this Court. Insurers have standing to present to the Court their views that, inter alia, the settlements are too high, violate Insurers’ ongoing contractual rights to negotiate or approve settlement, and the Plan should not be confirmed. By confusing their merits arguments with standing, Debtors engage in the same “circular reasoning” that led the Supreme Court in Camp to reject the “legal right”/“legal interest” test for standing. Moreover, Insurers clearly have standing to raise the full panoply of reasons why this Plan should not be confirmed – all of which reasons will, if credited, serve to shield the Insurers from paying these extravagant settlements and put an end to the continuing violation of their contractual rights. - 28 - VII. INSURERS HAVE STANDING AS CREDITORS AND BECAUSE THEIR CONTRIBUTION CLAIMS AGAINST SETTLING INSURERS MAY BE CUT OFF BY THE CHANNELING INJUNCTION Section 1109(b) expressly includes “creditors” within the list of entities who are “parties in interest” with broad participation rights. To the extent any of Insurers are or claim to be creditors, they indisputably have statutory standing. Moreover, because the Plan’s channeling injunction would channel to the trusts certain claims by Insurers against Debtors or others, Insurers have an interest in being heard regarding the propriety and scope of that injunction. A “creditor,” under the Code, is an “entity that has a claim against the debtor” that arose pre-petition. (Code § 101(10)(A).) A “claim” means “a right to payment, whether or not such right is . . . contingent [or] disputed. . . .” (Code § 101(5)(A).) Thus, an entity asserting a claim that is “contingent” or “disputed” is explicitly a “creditor” and, hence, a “party in interest” with standing under § 1109(b). See, e.g., In re Justice Oaks II, Ltd., 898 F.2d 1544, 1551 & n.5 (11th Cir. 1990) (guarantors of a loan to debtor “clearly were parties in interest” entitled to object to confirmation because they were holders of a claim, “albeit a contingent or unmatured claim”); In re Abijoe Realty Corp., 943 F.2d 121, 124-25 (1st Cir. 1991) (creditor was entitled to “party in interest” status even though its claim was disputed); In re G-I Holdings, Inc., 292 B.R. 804, 813 (Bankr. D.N.J. 2003) (“even a de minimis creditor may be entitled to the rights afforded by” § 1109(b)). Insurers are now aware of at three types of creditor claims that some or all of them can assert. Each of these claims is impaired under the Plan. First, to the extent one or more of Debtors’ insurers are insolvent, Debtors themselves may have an obligation either to contribute to non-settling insurers who pay more than their “fair share” of Debtors’ liability or to permit non-settling insurers to offset, against - 29 - their indemnification obligation, the amount owed by Debtors as contribution. 17 There could also be other causes for gaps in Debtors’ insurance coverage, creating direct liability on the part of Debtors (e.g., insufficient coverage for a certain year). However, Debtors seek to protect themselves from such claims and offsets by the channeling injunction; such claims and/or offsets are to be paid instead by the trusts. (Plan § 10.3(a)(i)(D). See also Discl. Stmt. ¶ 3.6(c)(i).) Contribution and indemnity claims against Debtors themselves are “Indirect Asbestos/Silica PI Trust Claims,” classified as impaired Class 4 claims. (Plan, § 4.2(d); Discl. Stmnt. Exhs. A -2, A11.) Every one of Insurers is therefore a contingent Class 4 creditor for this reason as well.18 Second, every Insurer who does not settle with Debtors potentially has an impaired Class 4 “Indirect Asbestos/Silica PI Trust Claim” to the extent that contribution claims against settling insurers are channeled to one of the trusts. The Plan provides (§ 10.3(b)) that an insurer who enters into a settlement with Debtors can receive the benefit of a channeling injunction. Absent bankruptcy, if judgment were entered in a coverage suit in Debtors’ favor against an insurer, that insurer would have the right to assert contribution claims against other, settling insurers who have not paid their “fair share” of the liability as determined under 17 See, e.g., Sec. Ins. Co. of Hartford v. Lumbermens Mut. Cas. Co., 826 A.2d 107 (Conn. 2003); Sybron Transition Corp. v. Sec. Ins. Co. of Hartford, 258 F.3d 595 (7th Cir. 2001); Olin Corp. v. Ins. Co. of North America, 221 F.3d 307 (2d Cir. 2000); Owens-Illinois, Inc. v. United Ins. Co., 650 A.2d 974, 987-88, 995 (N.J. 1994). 18 The way in which this claim is treated under the Plan highlights why Insurers must have standing to protect their interests because the Plan, on its face, affects Insurers’ rights. Absent the Plan, this right of contribution against Debtors would be a setoff against any claim that Debtors had for coverage (see, e.g. , Koppers Co. v. Aetna Cas. & Sur. Co., 98 F.3d 1440, 1453 (3d Cir. 1996) (“spiked” insurers are entitled to a judgment reduction equal to the “settling insurers’ apportioned shares”); the setoff would be a secured claim under § 506(a) of the Code. But the Plan appears to destroy the setoff by channeling the claim to the trusts, thereby eliminating the mutuality of parties that is the foundation of a setoff under Code § 553 (since Insurers’ claim would now be against one of the trusts, whereas their debts would be to Debtors). - 30 - applicable law.19 The Plan, however, would channel the non-settling insurer’s contribution claim to the trusts. (Plan, § 10.3(b)(i)(D). See also Discl. Stmt. ¶ 3.6(c)(ii); Exh. A, ¶¶ 39, 170.) Such “channeled” claims would appear to be impaired Class 4 claims under Plan § 4.2(d). Thus, every one of the Insurers is presently a contingent creditor with a potential Class 4 impaired claim. The mere prospect of such a channeling injunction cutting off Insurers’ contribution rights is sufficient to confer standing. See Eichenholtz v. Brennan, 52 F.3d 478, 482-83 (3d Cir. 1995) (non-settling defendants had standing to challenge partial settlement of class action that purported to strip them of contribution and indemnity rights); Int’l Multifoods, 309 F.3d at 89-90 (insurer’s potential right of action for contribution against second insurer conferred standing for first insurer to appeal grant of summary judgment for second insurer on policyholder’s claim for coverage). Third, at least one of the insurers, Century Indemnity Company, has filed a proof of claim against Harbison-Walker (“H-W”) in the H-W bankruptcy that, pursuant to the courtapproved insurance settlement between H-W and DII, may now comprise a claim against DII or, at a minimum, an offset against DII’s coverage claims. That proof of claim is based on fraudulent billings that H-W presented to Century under a policy issued to Dresser and under which DII now claims coverage. While Century has not finished assessing whether these claims 19 When multiple insurers have written policies protecting the same policyholder from the same claims, the law of contribution protects any one insurer from paying more than its fair share. See 15 Couch on Ins. § 217:4. That is, if one insurer is required to pay a claim that rightfully should have been allocated among several insurance policies, that insurer may later seek contribution from the other insurers to allocate fairly the liability under the policies. Id. See, e.g., J.H. France Refractories Co. v. Allstate Ins. Co., 534 Pa. 29, 41-42, 626 A.2d 502, 509 (1993) (adopting an allocation rule in the context of progressive asbestos-related disease under which a policyholder may “spike” all coverage into one policy year, but emphasizing that the “spiked” insurer may recover a share of the amounts it pays from other insurers under the doctrine of contribution). - 31 - may be asserted directly against DII in light of the H-W/DII settlement, at a minimum it appears that Century would be entitled to offset any amounts it owes DII under this policy against any amounts H-W owes to Century. This right of offset comprises a claim against Debtors that makes Century a creditor of these estates. See Merritt Commercial S&L, Inc. v. Guinee, 766 F.2d 850, 853-55 (4th Cir. 1985) (surety had right to intervene in adversary action in bankruptcy to argue amounts should be offset). VIII. INSURERS HAVE ADDITIONAL BASES FOR STANDING There are additional respects in which the very existence of this bankruptcy case adversely affects Insurers’ interests and gives them standing. For example: 1. The filing of this case has stayed, under Code § 362(a)(1), the New York state coverage lawsuit filed pre-petition by the ACE Companies. All parties to that litigation are therefore affected by Debtors’ bankruptcy filing and, thus, have standing to seek dismissal of this bankruptcy case under Code § 1112(b) or to seek relief from the stay under Code § 362(d). 2. Insurers also have a particular interest in contesting the appointment as FCR of someone they believe is inherently conflicted. Insurers who settle with Debtors would become eligible for protection under the channeling injunctions. If the FCR appointed by this Court is someone who is not beyond challenge or reproach, the injunctions are potentially vulnerable to collateral attack by future claimants. Thus, every Insurer has a direct financial and legal interest in seeing that a proper FCR is appointed. 3. Three of Debtors’ seven coverage actions are pending in state courts. If this bankruptcy is not dismissed, Debtors can seek to remove these cases to federal court by invoking 28 U.S.C. §§ 1452 and 1334(b). The potential for Debtors to sweep these cases out of - 32 - state court into federal court directly affects Insurers and provides Insurers standing to seek the dismissal of this improperly-filed bankruptcy case. See, e.g., Cella v. Togum Constructeur Ensemleier en Industrie Aliemantaire, 173 F.3d 909, 911-12 (3d Cir. 1999) (deprivation of a party’s “legitimate expectation of being able to litigate in a particular forum” confers standing). IX. INSURERS’ PARTICIPATION WILL AID THE COURT IN MAKING THE CRITICAL DETERMINATIONS REQUIRED UNDER THE CODE For the reasons stated above, Insurers more than amply satisfy the standard for standing under Article III, § 1109(b), and § 1128(b). This is not a close call. But, if there were doubts, the law requires that those doubts be resolved in favor of permitting Insurers to participate. At this early stage, “allegations of injury must be viewed in favor of the persons who seek standing.” 6 Stein, et al., Admin. Law § 50.01 at 50-24 to 50-25 (citations omitted). But it is also the right result for critically important, practical reasons. This is a truly extraordinary case with multi-billion dollar stakes for Insurers. Debtors here propose to channel not only all asbestos claims against them and their affiliates under § 524(g), but also all silica claims under § 105. And, more importantly, they propose to do so, using the Bankruptcy Code, even though, by their own admission, they are not only solvent today, but expect to be able to pay all of their future claims, including all asbestos and silica claims, in full indefinitely. Indeed, they readily acknowledge that they did not file this bankruptcy case to reorganize in any way, but rather to (i) boost the stock price of their parent company, Halliburton, and (ii) put themselves in a “position of strength” against their insurers. This case will raise many fundamental issues about the proper scope of § 524(g), § 105, and Chapter 11 itself, not the least of which will be whether a bankruptcy filed by such financially well-off Debtors, for purposes wholly divorced from the reorganization goals of Chapter 11, is in good faith. This Court will need to consider these issues in satisfying its independent duty to - 33 - determine, among other things, that the requirements of § 524(g) are met (see Code § 524(g)(2)(A), (3)(A)) and that the Plan has been proposed in good faith (see Code § 1129(a)(3)). If Insurers are denied standing and not permitted to be heard, no one will be around to raise and brief any of these issues from a critical vantage point. The current claimants and their lawyers have no objection precisely because they are to be paid 7.5 times what their claims have historically been worth. The future claimants, by definition, are not around to speak up for themselves, and the FCR selected and paid for by Debtors and the current claimants – parties whose interests are directly adverse to the future claimants – has made it clear that he will raise no concerns. One reason the Third Circuit in Amatex upheld the standing of future claimants, even before the enactment of § 524(g) and even though those claimants may well not have been creditors, was that it recognized that no one else in the case spoke for their interests, just as no one else shares Insurers’ interests here. But it also did so for another reason that is equally, indeed perhaps more, apt in this case: that the topic of dealing with mass torts in bankruptcy had provoked “extensive debate,” highlighting the difficulty of the issues involved and underscoring the “undesirability of rendering a decision without a full development of the issues.” 755 F.2d at 1043 n.9. In other words, the Third Circuit concluded that the bankruptcy judge would reach a more informed decision if the future claimants were allowed to present their views on the issues. Reaching a similar conclusion, the court in Western Asbestos, another asbestos bankruptcy case, recently permitted the insurers to participate because, among other things, they served a “useful function” in illuminating plan confirmation issues the court was obliged to address in any event. Memorandum of Decision Re Confirmation Legal Issues, In re Western Asbestos, No. 02-26284T at 19 (Bankr. N.D. Cal. Oct. 31, 2003). See also Verdi, 241 - 34 - B.R. at 859 (“We are very reluctant to allow standing to become a means to avoid deciding difficult substantive issues put before us”) (citation omitted). A case like this one cries out for broad participation by parties in interest on all sides of the issues.20 The Court’s decisions, we respectfully submit, can only benefit from hearing a variety of voices. CONCLUSION Insurers have, and should be granted, standing to participate in all issues in this bankruptcy case. DATED: January 5, 2004 Respectfully submitted, /s/ L. John Argento L. John Argento (Pa. I.D. #39342) Jason A. Archinaco (Pa. I.D. #76691) John W. Burns (Pa. I.D. 84269) DICKIE, MCCAMEY & CHILCOTE, P.C. Two PPG Place - Suite 400 Pittsburgh, Pennsylvania 15222 Telephone: (412) 392-5413 Facsimile: (412) 392-5367 Mark D. Plevin Clifton S. Elgarten Steven P. Rice Leslie A. Epley CROWELL & MORING LLP 1001 Pennsylvania Ave, N.W. Washington, D.C. 20004-2595 20 Debtors’ contested motion for appointment of Prof. Green as FCR provides a good example. It is true that Insurers are not future claimants, and do not represent future claimants. But nor do Debtors or counsel for the current claimants; indeed, the Supreme Court has recognized that these parties have interests that directly conflict with those of the future claimants. See, e.g., Amchem Prods., Inc. v. Windsor, 521 U.S. 591, 626 (1997). Unless this Court elects not to hear from anyone on the issue, on the ground that no one has “standing,” the only plausible course is to permit all parties in interest to be heard on the subject, while keeping in mind that none is or represents a future claimant, so as to obtain the benefit of the views and arguments of all parties in interest. - 35 - Telephone: (202) 624-2500 Facsimile: (202) 628-5116 Attorneys for Century Indemnity Company (as successor to both CCI Insurance Company (successor to Insurance Company of North America with respect to certain policies) and CIGNA Specialty Insurance Company (formerly California Union Insurance Company), Insurance Company of North America, ACE Property & Casualty Insurance Company (formerly CIGNA Property and Casualty Insurance Company, formerly Aetna Insurance Company), Central National Insurance Company of Omaha, Pacific Employers Insurance Company, St. Paul Mercury Insurance Company (only with respect to policies issued as an affiliated member company of AFIA, an unincorporated insurance association), U.S. Fire Insurance Company, OneBeacon America Insurance Company (formerly Commercial Union Insurance Company, formerly Employers Commercial Union Insurance Company, formerly Employers Surplus Lines Insurance Company and The Employers Liability Assurance Corporation), Seaton Insurance Company (formerly Unigard Mutual Insurance Company), Stonewall Insurance Company, and TIG Insurance Company (solely as successor by merger to International Insurance Company) Paul R. Koepff Andrew J. Frackman Tancred V. Schiavoni O’MELVENY & MYERS LLP Citigroup Center 153 East 53rd Street New York, New York 10022-4611 Telephone: (212) 326-2000 Facsimile: (212) 326-2061 Attorneys for Century Indemnity Company (as successor to both CCI Insurance Company (successor to Insurance Company of North America with respect to certain policies) and CIGNA Specialty Insurance Company (formerly California Union Insurance Company), Insurance - 36 - Company of North America, ACE Property & Casualty Insurance Company (formerly CIGNA Property and Casualty Insurance Company, formerly Aetna Insurance Company), Central National Insurance Company of Omaha, Pacific Employers Insurance Company, St. Paul Mercury Insurance Company (only with respect to policies issued as an affiliated member company of AFIA, an unincorporated insurance association), and U.S. Fire Insurance Company And, for purposes of this brief only, on behalf of the following insurers and their counsel: Samuel R. Grego (Pa. I.D. # 34920) Vinita K. Sinha (Pa. I.D. # 87868) DKW LAW GROUP LLC 600 Grant Street 58th Floor, U.S. Steel Tower Pittsburgh, Pennsylvania 15219 (412) 355-2600 Duane D. Morse Nancy Manzer WILMER, CUTLER & PICKERING 1600 Tysons Boulevard 10th Floor Tysons Corner, Virginia 22102 (703) 251-9700 Philip D. Anker James A. Shepherd Knight Elsberry Todd Brown WILMER, CUTLER & PICKERING 2445 M Street, N.W. Washington, D.C. 20037 (202) 663-6000 William J. Bowman James P. Ruggeri Edward B. Parks HOGAN & HARTSON LLP 555 Thirteenth Street, N.W. Washington, D.C. 20004 (202) 637-5600 - 37 - Attorneys for Hartford Accident and Indemnity Company, First State Insurance Company, New England Insurance Company, Hartford Casualty and Insurance Company, and Twin City Fire Insurance Company William P. Shelley John J. Dwyer Jacob C. Cohn COZEN O’CONNOR 1900 Market Street Philadelphia, Pennsylvania 19103 (215) 665-2000 Attorneys for Mt. McKinley Insurance Company (formerly Gibraltar Casualty Company), Everest Reinsurance Company (formerly Prudential Reinsurance Company), and Federal Insurance Company David P. McClain MCCLAIN & LEPPERT, PC 909 Fannin, Suite 4050 Houston, Texas 77010 (713) 654-8001 Attorneys for Mt. McKinley Insurance Company (formerly Gibraltar Casualty Company) and Everest Reinsurance Company (formerly Prudential Reinsurance Company) Robert B. Millner SONNENSCHEIN NATH & ROSENTHAL LLP 8000 Sears Tower Chicago, Illinois 60606 (312) 876-7994 Attorneys for Appalachian Insurance Company and Liberty Mutual Insurance Company Scott M. Seaman John K. Daly MECKLER, BULGER & TILSON 123 North Wacker Drive Suite 1800 - 38 - Chicago, Illinois 60606 (312) 474-7139 Alan S. Miller PICADIO SNEATH MILLER & NORTON, PC 4710 USX Tower Pittsburgh, Pennsylvania 15219 (412) 288-4004 Attorneys for Appalachian Insurance Company Katherine L. Billingham KATHERINE L. BILLINGHAM CO., L.P.A. 7985 Washington Woods Drive Centerville, Ohio 45458 (937) 435-2288 Attorneys for Northwestern National Insurance Company Elit R. Felix, II MARGOLIS EDELSTEIN The Curtis Center, 4th Floor 601 Walnut Street Philadelphia, Pennsylvania 19106-3304 (215) 931-5870 James S. Yoder WHITE AND WILLIAMS LLP 824 Market Street, Suite 902 Wilmington, Delaware 19899-0709 (302) 467-4524 Attorneys for Allianz AG, successor in interest to Allianz Versicherungs AG; Allianz Insurance Co.; and Allianz Underwriters Insurance Co., formerly known as Allianz Underwriters, Inc. George Snyder (Pa. I.D. # 53525) STONECIPHER, CUNNINGHAM, BEARD & SCHMITT, P.C. 125 First Avenue Pittsburgh, Pennsylvania 15222-1590 Telephone: (412) 391-8510 Facsimile: (412) 391-8522 - 39 - Steven M. Crane BERKES CRANE ROBINSON & SEAL LLP 515 South Figueroa Street, Suite 1500 Los Angeles, California 90071 Telephone: (213) 955-1150 Facsimile: (213) 955-1155 Attorneys for Continental Insurance Company (for itself and as successor-in-interest to policies alleged to be issued by Harbor Insurance Company), Continental Casualty Company, Columbia Casualty Company, Fidelity & Casualty Company of New York and Transcontinental Insurance Company William D. Sullivan ELZUFON AUSTIN REARDON TARLOV & MONDELL, P.A. 300 Delaware Avenue - Suite 1700 P.O. Box 1630 Wilmington, DE 19899-1630 (302) 428-3181 Warren T. Pratt Paul H. Saint-Antoine Daniel L. McAuliffe DRINKER BIDDLE & REATH LLP One Logan Square Philadelphia, PA 19103-6996 (215) 988-2700 Attorneys for Lumbermens Mutual Casualty Company Robert P. Siegel TRAUB EGLIN LIEBERMAN STRAUS Mid-Westchester Executive Park Seven Skyline Drive Hawthorne, New York 10532 (914) 347-2600 Attorneys for Evanston Insurance Company and Associated International Insurance Company Robert J. Bates, Jr. John E. Rodewald Bates & Carey 333 West Wacker Drive Suite 900 - 40 - Chicago, Illinois 60606 (312) 762-3100 Attorneys for American Re-Insurance Company and Executive Risk Indemnity, Inc. (as successor in interest to American Excess Insurance Company) 2105899 - 41 -