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Lack of “Scientific Certainty” Does Not Excuse Late Filing of a Proof of Claim

In re W.R. Grace & Co., No. 01-1139 (KG) (Bankr. D. Del. Dec. 28, 2016)

In this Opinion involving the standards for determining whether a party held an asbestos claim and excusable neglect for filing a late claim, the Court rejected Plum Creek Timber Co.’s (the “Claimant”) argument that it lacked “scientific certainty” with respect to its asbestos-related claim against W.R. Grace & Co. (together with its affiliated debtors, the “Debtors”).  Where the Claimant received actual and publication notice of the bar date in the case, the Court found the Claimant should have timely filed its claim even if it was contingent at the time of filing.  The Court also held that the Claimant did not satisfy the standards for excusable neglect and, as a result, granted the Debtors’ motion to enforce the discharge and injunction.

The Debtors owned and operated a mine in Libby, Montana that extracted vermiculite, a lightweight mineral used for insulation.  While vermiculite is non-asbestos, the mine itself was contaminated with asbestos such that when the vermiculite was processed, it created asbestos infected airborne dust.  The EPA filed a lawsuit related to the asbestos issues, which lead to the Debtors’ chapter 11 petitions in April 2001.  The Claimant owned thousands of acres of timberland in Libby, and quarantined more than 30,000 acres of trees until it knew whether its timberland was affected.  The EPA also closed an access road leading to the Claimant’s timber due to the hazardous condition in the air.  The Court later set March 31, 2003 as the bar date for filing claims.  The Debtors, acting cautiously, sent the bar date notice to all property owners in Libby, including the Claimant.  Prior to the bar date, the Claimant received correspondence from the EPA stating that the worst case scenario was that the contamination could be present on the timber’s bark, and acknowledged that detection of infected vermiculite on the timber would likely preclude logging.  Op. at *6-7.  In May 2010, the EPA issued a draft report raising the issue that the Claimant’s timberlands may be unsafe to log due to the presence of asbestos.  Thereafter, the Claimant filed a proof of claim against the Debtors along with a motion to allow the late-filed claim.  The Debtors filed the instant motion to enforce the discharge and injunction against the Claimant’s late-filed claim.

The crux of the Claimant’s argument was that due process was not satisfied, despite receiving actual notice of the bar date, because there was not scientific certainty as to whether vermiculite could be absorbed into tree bark in its timberlands.  In response, the Court was quick to point out that “scientific certainty” is not the standard to determine whether or not a party has a claim.  Rather, a “‘claim’ arises when an individual is exposed pre-petition to a product or other conduct giving rise to an injury, which underlies a ‘right to payment’ under the Bankruptcy Code.”  Op. at *13 (citing Jeld-Wen, Inc., f/k/a Grossman’s Inc. v. VanBrunt (In re Grossman’s), 607 F.3d 114, 125 (3d Cir. 2010).  In Grossman’s, the Third Circuit held that in determining whether an asbestos claim has been discharged, the court may consider: (i) the circumstances of the initial exposure to asbestos, (ii) whether and/or when the claimants were aware of their vulnerability to asbestos; (iii) whether the notice of the claims bar date came to their attention; (iv) whether the claimants were known or unknown creditors; (v) whether the claimants had a colorable claim at the time of the bar date; and (vi) other circumstances specific to the parties, including whether it was reasonable or possible for the debtor to establish a trust for future claimants under section 524(g).  Id.

In this case, the Court found that all of these factors weighed against the Claimant and its claim.  Importantly, the bar date notice made evidently clear that a proof of claim must be timely filed even if the claim was remote or contingent, and the Court found that the evidence established the Claimant’s knowledge well before the bar date “that there was a real, or at least a truly potential, problem with its timber[.]”  Op. at *13.  Accordingly, the Court granted the Debtors’ motion to enforce the discharge and injunction against the Claimant and its claim.