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District Court Certifies Estimation Appeal to the Third Circuit – Highlights Its Limited Role in Estimation Appeals

Specialty Products Holding Corp. v. Official Committee of Asbestos Personal Injury Claimants (In re Specialty Products Holding Corp.), No. 13-1244 (SLR), 2014 WL 545780 (D. Del. Feb. 7, 2014)

On February 7, 2014, Judge Sue L. Robinson of the District Court granted a motion filed by appellants, Specialty Products Holding Corp. and its affiliated debtors and debtors-in-possession, for certification of an order, which was entered by the Bankruptcy Court estimating the appellants’ liability for present and future asbestos claims asserted against the appellants’ bankruptcy estates, for immediate appeal to the Third Circuit.  In estimating the claims, the Bankruptcy Court “measured the debtors’ likely asbestos settlement payments had they remained in state courts” rather than estimating the claims based upon the appellants’ legal liability.  In rendering its decision, the District Court acknowledged the broad discretion afforded bankruptcy courts in the Third Circuit pursuant to Bittner v. Borne Chemical Co., Inc., 691 F.2d 134 (3d Cir. 1982), to fashion their own estimation methods, the lack of guidance from the Third Circuit as to the proper estimation process in the context of asbestos litigation, and the public importance in having a final claim value determination.  In closing, the District Court highlighted its limited role in estimation appeals, noting that “the Third Circuit precedent gives the bankruptcy courts wide-ranging discretion in making their estimation determinations, leaving the district courts unhelpful at best, impotent at worst, in any attempts to promote the resolution of these complex cases.”

Estimation under section 502(c) of the Bankruptcy Code is a world less traveled by both practitioners and courts. While those in the Third Circuit are fortunate to be guided by the Bittner decision, which requires courts to obtain a reasonable estimate of claims using “whatever method is best suited to the particular contingencies at issue”, 691 F.2d at 135, the decision leaves courts and practitioners on their own to fashion procedures for estimation on a fact-by-fact, case-by-case basis.  Given the due process concerns associated with the estimation and future discharge of such claims, as well as the heavy burden placed on estimation appellants, counsel should strive to be active participants in helping the bankruptcy court develop the procedures and methodology to be used in estimating claims at issue.