           REVISED, JULY 25, 2000

IN THE UNITED STATES COURT OF APPEALS

          FOR THE FIFTH CIRCUIT

                  _______________

                    m 99-10758
                  _______________

                IN THE MATTER OF:

            NATIONAL GYPSUM COMPANY,
                      AND
              AANCOR HOLDINGS, INC.,

                                    Debtors.


        THE NEW NATIONAL GYPSUM COMPANY,

                                    Appellant,

                     VERSUS

  THE NATIONAL GYPSUM COMPANY SETTLEMENT TRUST,

                                    Appellee.



              ***************
                                         _______________

                                           m 99-10760
                                         _______________

                                       IN THE MATTER OF:

                                NATIONAL GYPSUM COMPANY,

                                                              Debtor.


                                NATIONAL GYPSUM COMPANY,

                                                              Appellant,

                                              VERSUS

                                   NGC SETTLEMENT TRUST
                                       AND
                  THE ASBESTOS CLAIMS MANAGEMENT CORPORATION,

                                                              Appellees.


                                   _________________________

                           Appeals from the United States District Court
                                for the Northern District of Texas
                                 _________________________
                                          July 18, 2000



Before REAVLEY, SMITH, and                             “Plan”) of Aancor Holdings, Inc. (“Aancor”),
  EMILIO M. GARZA, Circuit Judges.                     and its wholly-owned subsidiary, National
                                                       Gypsum Company (“Old-NGC”), and approv-
JERRY E. SMITH, Circuit Judge:                         ing certain plan documents. As a result of the
                                                       bankruptcy reorganization, National Gypsum
   In 1993, the bankruptcy court entered an            Company (“New-NGC”) was created as a new
order (the “Confirmation Order”) confirming            Delaware corporation. Four years later, the
the joint chapter 11 plan of reorganization (the       NGC Settlement Trust (the “Trust”) and its


                                                   2
subsidiary, formerly Old-NGC and now called               (“Austin”), a design, engineering, and con-
Asbestos Claims Management Corporation                    struction firm. Old-NGC also retained insur-
(“ACMC”), filed this declaratory judgment ac-             ance coverage (“Insurance”) available to pay
tion in bankruptcy court, seeking a determina-            some asbestos claims.
tion that, under the Plan, New-NGC was liable
for any unknown asbestos disease claims (the                 Old-NGC, the Asbestos Committee, and
“Unknown Claims”) arising from Old-NGC’s                  the BT Committee agreed on how Old-NGC’s
torts and not resolved by the Trust.                      assets would be used to pay commercial and
                                                          asbestos claims. Commercial creditors would
    Following an adversary hearing, the bank-             receive Gold Bond, and asbestos claimants
ruptcy court delivered a bench ruling in which            would receive Old-NGC and its assets, includ-
it concluded that under the Plan, New-NGC                 ing Austin, the Insurance, certain insurance-
was liable for Unknown Claims the Trust                   related claims, and $10 million from New-
could not satisfy. New-NGC appealed to the                NGC. Under a draft plan of reorganization
district court, which affirmed. Concluding that           (the “Draft Plan”), Aancor, the parent debtor,
the Confirmation Order and other plan docu-               would be merged into Old-NGC, with Old-
ments do not transfer liability for these Un-             NGC as the surviving entity. Old-NGC was to
known Claims from Old-NGC to New-NGC,                     be renamed Asbestos Claims Management
we reverse and remand.                                    Corporation, and two new entities were to be
                                                          created, the Trust and New-NGC. The Draft
                         I.                               Plan was approved by the necessary classes of
    In October 1990, Old-NGC and Aancor                   commercial creditors and both classes of as-
filed petitions, later consolidated, for relief un-       bestos creditors.
der chapter 11 of the Bankruptcy Code. Old-
NGC faced two key groups of creditors: Un-                   Under the Draft Plan, New-NGC, a new
secured bond and trade creditors that were                Delaware corporation, would purchase from
owed approximately $1.1 billion, and asbestos-            Old-NGC the operating assets and business of
related claimants who had an estimated $127               Gold Bond, including the name “National
million due for pending claims and projected              Gypsum Company.” The commercial credi-
future disease claims of $695 million to $764             tors then would look to New-NGC, while the
million.                                                  asbestos claimants would look to the Trust.

    The bankruptcy court appointed commit-                   Because under the Draft Plan the commer-
tees to represent the holders of the unsecured            cial creditors would own New-NGC, worth
bond and trade claims (the “BT Committee”)                approximately $350 million, and because they
and the asbestos claims (the “Asbestos Com-               had, in return, agreed to extinguish over
mittee”) and a legal representative to represent          $1 billion in claims against Old-NGC, the
holders of Unknown Claims. After selling                  commercial creditors also requested a perma-
some of its assets, Old-NGC retained two of               nent injunction, in the Confirmation Order,
its subsidiary businesses: the Gold Bond Build-           protecting New-NGC from future and Un-
ing Products division (“Gold Bond”), which                known Claims, to maximize the value of New-
produces and sells gypsum and wallboard-                  NGC’s securities in the public markets by
related products, and the Austin Company                  removing any taint from the possibility of


                                                      3
asbestos-related liability. Thus, the Draft Plan        the Trust was required to give all claims,
provided not only that the Trust would be               whether current or unknown, “substantially
established and would assume sole responsibil-          equivalent” treatment.
ity for all asbestos claims, including Unknown
Claims, but also that the Confirmation Order                If the then-pending Georgine settlement
would contain a “channeling order and perma-            were not approved, the Draft Plan included a
nent injunction” that would channel all asbes-          back-up option that required the Trust to
tos claims to the Trust and forever would bar           implement the “Alternate Asbestos Disease
the assertion of any asbestos claims against            Claims Resolution Facility” (the “Alternate
New-NGC.                                                Facility”), which would provide for the ratable
                                                        distribution of Trust assets to all projected
   The Draft Plan also provided for the forma-          asbestos claimants. A claimant would receive
tion of the Trust, which would retain Austin            a percentage of the liquidated value of his
(valued at approximately $125 million), the             claim, calculated by dividing the value of Trust
Insurance (worth between $300 million and               assets by the projected amount of all future
$600 million, depending on how pending cov-             liabilities. The Alternate Facility was designed,
erage litigation was resolved), certain other           therefore, to preserve “sufficient resources to
insurance-related claims, and a $10 million             pay future valid [asbestos claims] on a sub-
cash payment from New-NGC. As a result,                 stantially equivalent basis.”
the Draft Plan made it likely, but not a cer-
tainty, that the Trust assets would be sufficient           The Draft Plan was submitted to the bank-
to pay all present and future asbestos diseases         ruptcy court for approval. The legal represen-
claims, particularly if the settlement in the re-       tative of the Unknown Claimants opposed the
lated litigation in Georgine v. Amchem Prod-            provision for a permanent injunction, fearing
ucts, Inc., 83 F.3d 610 (3d Cir. 1996), were            that New-NGC would not assume even non-
approved.                                               asbestos-related claims arising post-petition
                                                        and that, as a result, those obligations might
    This payment-in-full was to be accom-               have to be born by Old-NGC or the Trust.
plished through a joint defense facility, the
Center for Claims Resolution (“CCR”), estab-               Following hearings on asbestos issues in
lished in 1988 by Old-NGC and nineteen other            January 1993, the bankruptcy court decided
former asbestos companies. CCR set up an                that it lacked jurisdiction to enjoin permanently
administrative compensation system that, in             or to discharge Unknown Claims. It reasoned
most cases, would replace judicial resolution           that persons who had not yet suffered an injury
of asbestos claims; this facility was subject to        that was cognizable under applicable non-
approval in the Georgine settlement.1 Regard-           bankruptcy law did not hold “claims” within
less of the level of funding that ultimately            the meaning of section 101(5) of the Bank-
would be available for these claims, however,           ruptcy Code. The court also concluded, how-
                                                        ever, that it did have the power to enter a tem-
                                                        porary injunction that would require Unknown
   1
     See Amchem Products, Inc. v. Windsor, 521          Claims first to be exhausted from the Trust be-
U.S. 591, 599-605 (1997) (describing the CCR’s          fore the claimants asserting them could pursue
system for settling and compensating asbestos-          remedies against any other person, including
related claims).

                                                    4
New-NGC.                                                 As approved, then, the Plan provided, in
                                                      pertinent part, that current asbestos claimants
   Because they were uncertain how to re-             were permanently enjoined from ever suing
draft the injunctive language, the parties in         any person other than the Trust, including
February 1993 addressed to the bankruptcy             New-NGC. Unknown Claimants were neither
court the issue of the temporary injunction and       discharged nor permanently enjoined but were
New-NGC’s potential liability for any Un-             “made beneficiaries of the [Trust] and, pending
known Claims. The court, however, was un-             exhaustion of the remedies of the [Trust] to re-
willing to take a position on whether New-            solve Unknown Claims, are enjoined” from
NGC would be liable in the future for the             pursuing litigation against any person, includ-
Unknown Claims, noting that this liability            ing New-NGC. This temporary injunction is
should be decided according to non-bank-              referred to throughout the Plan, Confirmation
ruptcy law and that New-NGC could defend              Order, and briefs as the “Channeling Order.”
any future suits by claiming that it was not a
successor to the debtors’ liabilities.                    The modifications to the Plan did not alter
                                                      the previous Draft Plan’s section that provided
   As a consequence of the January 1993               that New-NGC would not assume asbestos lia-
decision and the February 1993 hearing, the           bilities of Old-NGC: “Upon consummation of
Draft Plan was modified to eliminate the per-         the Merger and this Plan, New-NGC shall per-
manent injunction against Unknown Claims,             form all of the obligations of the Debtors un-
though that injunction would be in effect             der this Plan (except for the obligations re-
against current asbestos claims. In March             garding the Asbestos Claims which shall be the
1993, Old-NGC proposed the Third Technical            sole responsibility of the [Trust]).” “Asbestos
Modifications to the Plan, which changed the          Claims” were defined to include both current
Draft Plan (1) by drawing a distinction be-           and Unknown Claims. Likewise, the Confir-
tween current claims and Unknown Claims to            mation Order included a detailed description of
exclude Unknown Claims from the discharge             the Channeling Order and reiterated that
and (2) by removing the permanent injunction          “New-NGC shall not be subject to the com-
against Unknown Claims and replacing it with          mencement or continuation of litigation by any
the more limited “Channeling Order and Injunc-        person on or on account of Unknown Asbes-
tion.”                                                tos Disease Claims pending exhaustion of the
                                                      remedy or remedies provided by the [Trust].”
   The BT Committee objected, arguing that
this was a substantial change from the Draft              Finally, the assets of Old-NGC were trans-
Plan that would permit the Unknown Claims             ferred to New-NGC pursuant to an asset pur-
to be litigated against New-NGC after reme-           chase agreement (the “APA”). The APA was
dies against the Trust had been exhausted.            expressly approved by the bankruptcy court’s
The bankruptcy court rejected this objection,         Confirmation Order and provided that New-
however, and approved the Third Technical             NGC would not assume any asbestos-related
Modifications, reasoning that the changes to          liabilities, including Unknown Claims. In July
the Draft Plan did “not adversely change the          1993, the Plan was substantially consummated,
treatment under the Plan of any [creditor].”          and New-NGC issued to commercial creditors
                                                      its securities, which subsequently were traded


                                                  5
in the public markets.                                  mation Order, the Plan and the [APA] argu-
                                                        ably support the Appellant’s arguments that
    In May 1996, the Third Circuit set aside the        New NGC emerged from the bankruptcy pro-
Georgine settlement, and the Supreme Court              ceedings without any liability for unknown as-
affirmed that decision in Amchem, 521 U.S.              bestos claims.” Nevertheless, the district court
at 629. This led directly to the filing of the          concluded that those provisions should be read
present lawsuit SSthe Trust alleged that be-            in the context of the entire Plan, and it agreed
cause it could no longer participate in the CCR         that implicit in the Confirmation Order was the
facility, its assets would be insufficient to pay       idea “that if the Trust had insufficient assets to
full tort values to all asbestos disease claim-         satisfy the unknown claims, those claimants
ants. The Trust, as a result, looked for alter-         could look to New NGC.”
nate funding for asbestos claimants and sought
a determination that “the Plan Documents indi-                                   II.
cate New NGC has liability for the asbestos                New-NGC asserts that the Trust is not the
liabilities of Old NGC.” Specifically, the Trust        real party in interest and, in a related argu-
contended that the bankruptcy court’s 1993              ment, that the Trust does not have standing to
denial of the permanent injunction, the entry of        seek the determination that New-NGC is liable
the Channeling Order, and the findings made in          for Unknown Claims. First, New-NGC argues
support of those decisions indicated that New-          that the real parties in interest are any potential
NGC was liable for the Unknown Claims.                  Unknown Claimants who first exhaust Trust
                                                        remedies without having their claims resolved,
    The bankruptcy court agreed with the                then obtain a judicial termination of the Chan-
Trust, stating that “the plan as confirmed by           neling Order as to their claims, and finally
order of this court implicitly imposes or main-         bring their claims against New-NGC in non-
tains liability on New-NGC for asbestos dis-            bankruptcy courts based on applicable state
ease non-Bankruptcy Code claims not dis-                law. New-NGC points out that no such claim-
charged by the confirmation order and not sat-          ants yet exist.
isfied by the Trust.” The court explained why
this result was only “implicit”:                           New-NGC asserts that the Trust has no
                                                        substantive rights of its own against New-
   By implicitly addressing this asbestos               NGC, because the Plan and Confirmation Or-
   liability, rather [than] explicitly doing so,        der contemplate that the Trust retain liability
   and by deferring the matter as provided              for all asbestos claims until its assets are ex-
   in the plan, the court enabled New NGC               hausted. Thus, New-NGC ressons that be-
   to emerge in the marketplace post-con-               cause the Trust has no rights under substantive
   firmation as an effective entity, poised,            law against New-NGC, New-NGC cannot be
   under the right market conditions to                 the real party in interest.2
   prosper, and thereby benefit all the con-
   stituencies.
                                                           2
                                                             See Farrell Constr. Co. v. Jefferson Parish,
    In affirming the bankruptcy court, the dis-         La., 896 F.2d 136, 140 (5th Cir. 1990) (“[A] party
trict court acknowledged that “[w]hen viewed            not possessing a right under substantive law is not
in isolation, certain provisions of the Confir-         the real party in interest with respect to that right
                                                                                              (continued...)

                                                    6
   The Trust properly points out, however,                that because the interpretation of a court order
that the real party in interest is “not necessarily       is purely a question of law, our review must be
the person who will ultimately benefit from the           de novo.3
recovery.” See Farrell, 896 F.2d at 140. Be-
cause the Plan charges the Trust with the on-                The Trust responds by arguing that a
going duty of distributing the assets of the es-          court’s interpretation of its own order should
tate to the asbestos creditors, the substantive           be entitled to deference if it is not plainly
right the Trust seeks to be enforced is the right         contradicted by the Plan documents.4 The
to have the bankruptcy court interpret and                Trust notes that the bankruptcy court presided
construe the Confirmation Order, Plan, and                at the confirmation hearings, considered the
plan documents regarding matters as to which              relevant factual and legal arguments, made
there is a substantial and immediate contro-              extensive findings and conclusions in connec-
versy.                                                    tion with confirmation, and so developed a
                                                          comprehensive understanding of the Plan.
    Without the bankruptcy court’s interpreta-            Thus, the Trust urges that a deferential stan-
tion of the meaning of the Plan, the Trust will           dard is “eminently proper.”
be faced with a fiduciary dilemma, in that it
will be uncertain how to treat its beneficiaries,            The proper reconciliation of these two posi-
the Unknown Claimants. This dilemma exists                tions is that we should review de novo the
because the trustees cannot know whether                  purely legal issuesSSe.g., the effect of the
these future claimants ultimately will have a             documents on New-NGC’s liability for Un-
remedy against New-NGC, and, as a result,                 known ClaimsSSbut should defer to the bank-
the trustees cannot know, with any certainty,             ruptcy court’s reasonable resolution of any
whether the Trust must reduce the current                 ambiguities in those documents. Because
pro-rata distribution under the Alternate Facil-          New-NGC is correct that the bankruptcy
ity.                                                      court’s ultimate determination of the meaning
                                                          of the Plan and Confirmation Order is a legal
   Therefore, the Trust properly has brought              one, however, the documents must truly be
the current declaratory judgment action seek-             ambiguous, even in light of other documents in
ing a determination of whether, under the Con-            the record, before we will defer.
firmation Order and Plan, it can count on
New-NGC to pay any of the Unknown Claims.                                  B.
Accordingly, the Trust is a real party in inter-             New-NGC argues that the district court
est and has standing.

                     III.                                    3
                     A.                                        See In re Schimmelpenninck, 183 F.3d 347,
                                                          354 (5th Cir. 1999) (holding that in reviewing a
   The parties dispute the standard of review
                                                          bankruptcy court’s order, we should perform “the
of the bankruptcy court’s interpretation of its           same task as did the district court: review the
1993 Confirmation Order. New-NGC argues                   bankruptcy court’s findings of fact for clear error
                                                          and issues of law de novo”).
   2                                                         4
    (...continued)                                            See County of Suffolk v. Stone & Webster
and may not assert it.”).                                 Eng’g Corp., 106 F.3d 1112, 1115 (2d Cir. 1997).

                                                      7
erred in deciding that the Plan provided that                  tion of this statement is that once the
New-NGC would be held liable for any Un-                       [Trust] is exhausted, Unknown Claim-
known Claims that are unresolved following                     ants may commence litigation against
exhaustion of the Trust’s assets. New-NGC                      [New-NGC].”
asserts that rather than being liable under the
bankruptcy Plan, it should be liable only if an             (Internal citations omitted.) In defending the
asbestos claimant can overcome the additional               bankruptcy court’s and district court’s deci-
hurdle of proving successor liability under                 sion, the Trust also argues that we should view
applicable state law.                                       New-NGC’s current position as an attempt to
                                                            relitigate the issues that were squarely pre-
    In adopting the Trust’s position on this is-            sented to, and expressly rejected by, the bank-
sue, the bankruptcy court admitted that there               ruptcy court in the 1993 Plan and confirmation
are no express statements in the Plan or Con-               proceedings. The Trust points out that the
firmation Order that affirm New-NGC’s liabil-               1993 order was never appealed and is, there-
ity. Nevertheless, the court found such liabil-             fore, the law of the case.
ity “implicit” in the Plan, reasoning that be-
cause it previously had rejected a permanent                    But just because the Confirmation Order
injunction against Unknown Claims, “the only                and Plan are binding does not answer the more
reading that gives meaning to [the] findings of             difficult question of what those documents
fact and conclusions of law [is] that this plan             mean. Our duty is to read the Plan documents
as confirmed by this court contemplated New                 to determine what is the best interpretation of
NGC liability for claims not paid by the Trust              the court’s intent with respect to New-NGC’s
and not otherwise discharged.”5                             liability for Unknown Claims. In this respect,
                                                            New-NGC correctly notes, as an initial matter,
   The district court affirmed because, as it ex-           that there are at least three positions the Plan
plained, the Confirmation Order stated that                 could have adopted: (1) New-NGC could be
                                                            immune from Unknown Claims; (2) New-NGC
   New NGC shall not be subject to the                      could be liable for Unknown Claims that were
   commencement or continuation of litiga-                  not resolved by the Trust, but only to the ex-
   tion by any person on or on account of                   tent of state law successor liability; or
   Unknown Asbestos Claims pending ex-                      (3) New-NGC could have been liable for all
   haustion of the remedy or remedies pro-                  Unknown Claims once the Trust was
   vided by the [Trust]. The clear implica-                 exhausted.

                                                               The bankruptcy court rejected the first of
   5
                                                            these positions when it determined that it did
     In addition to challenging the underlying inter-
                                                            not have jurisdiction permanently to enjoin
pretation, New-NGC argues that it is never proper
for a bankruptcy court to make an “implicit” rul-
                                                            Unknown Claimants from suits against New-
ing, particularly where that ruling conflicts with          NGC. The bankruptcy court, district court,
other express statements in the Plan. While this            and the Trust make an immediate leap from
argument is thus styled as a separate ground for            the rejection of this first position to an
reversal, it relies wholly on the conclusion that the       adoption of the third position as the one
underlying interpretation is wrong. As a conse-             “implicit” in the 1993 orders. This leap is
quence, we need not address it separately.

                                                        8
apparent in the Trust’s argument that because                 gues that it was erroneous for the bankruptcy
the commercial creditors’ BT Committee                        court to treat the failure to create a permanent
opposed the Channeling Order and its                          injunction against future asbestos claims as the
temporary injunction, they                                    equivalent of imposing liability for those claims
                                                              on New-NGC.
   knew that under the confirmed Plan
   New-NGC would be liable for Unknown                            Likewise, the isolated statements pointed to
   AD Claims to the extent, if any, that the                  by both parties do little to resolve the
   Trust proved unable to resolve those                       interpretive question. The Trust emphasizes a
   Claims.      Indeed, they objected                         statement contained in the transcript from the
   (unsuccessfully) to NGC’s third                            January 1993 bankruptcy ruling that “Non-
   Technical Modifications on this very                       Bankruptcy Code claimants must be able to
   ground, asserting that the modification                    pursue their remedies in the future after the
   would subordinate the majority of the                      exhaustion of the trust.” But once again,
   claims currently held by NGC’s bond                        either the second or third interpretation would
   and trade creditors to an undetermined                     be consistent with this statement, for the court
   amount of asbestos liability.                              could have intended that state-law successor
                                                              liability would be sufficient, or, alternatively,
   The Trust’s conclusion does not flow in-                   the court could have been referring to an
evitably, however, from the commercial                        immediate liability on exhaustion of the Trust.
creditors’ objections. It is possible that these
creditors were objecting to the imposition on                    Somewhat more informative are statements
New-NGC of any risk of liability, including the               New-NGC points to from the February 1993
(apparently) smaller risk of successor liability              hearing, wherein the court specifically
under state law. Because the previous Draft                   addressed the issue of New-NGC’s liability for
Plan would have provided New-NGC with ab-                     Unknown Claims should the Trust be
solute immunity from all asbestos claims, ei-                 exhausted, noting:
ther the second or third interpretations would
represent a less desirable reorganization plan                   The Court has already provided that if
for these creditors, and either would have mo-                   these future claimants are [not] satisfied,
tivated them to object.6 Thus, New-NGC ar-                       there is no permanent injunction and
                                                                 then that triggers the dispute is new
                                                                 NGC a successor, what liability is there
   6
     The dissent ignores this observation, thereby               under whatever the applicable
reflecting same error as did the bankruptcy court,               corporate law would be. . . . My
the district court, and the Trust, stating that “[o]ver          concern is if you start getting into the
the protest of Gypsum creditors who would own
                                                                 dispute on document drafting, you will
the New-NGC the bankruptcy court refused to
protect it from future unknown claims.” Like the
Trust, however, the dissent assumes this conclusion
                                                                 6
solely from the fact that the court rejected a                     (...continued)
permanent injunction against Unknown Claims,                  NewNGC, instead of accruing the more limited
and it fails to point to any language in the approved         form of state-law successor liability, would be
Plan or Confirmation Order that indicates that                liable for all Unknown Claims once the Trust was
                                         (continued...)       exhausted.

                                                          9
   be necessarily changing by corporate                 documents. Nonetheless, where there is
   document what the Court would                        ambiguity in the documents, and especially
   anticipate would just be whatever the                where there is a dispute as to what the parties
   application is of the appropriate                    understood them to mean, extrinsic evidence
   jurisdiction statute. . . . My only                  such as this should inform our analysis.
   concern is if you’re not in dispute as to
   what to put on any document with a                      That notwithstanding, the best indication of
   new entity, maybe that’s simply left                 the bankruptcy court’s intent with respect to
   better to the application of whatever                these Unknown Claims still can be found in the
   governing law would be, nonbankruptcy                documents themselves. First, and most
   governing law, in the event that there’s             importantly, New-NGC points to the
   anything to fight about, in the event that           Channeling Order, because it is the disputed
   some claims in the future . . . they can             provision that represents the most significant
   proceed with their rights, and new NGC               modification of the Draft Plan.            The
   can defend and say we’re not a                       Channeling Order provided as follows:
   successor.
                                                           Channeling     OrderSSUnknown        Disease
(Emphasis added.) New-NGC asserts that                  Claims.
these discussions form the context for the final
version of the Plan, the Confirmation Order,               (1) Injunction and Channeling Order.
and the APA and that the bankruptcy court’s                Pursuant to Section 6.5(b) of the Plan,
comments reflect its understanding, at that                all Persons who have held, hold, or may
time, that even though there would be no                   hold Unknown Asbestos Disease Claims
permanent injunction preventing Unknown                    are made beneficiaries of the [Trust]
Claimants from seeking damages from New-                   and, pending exhaustion of the remedies
NGC if the Trust were exhausted, nevertheless              of that Fund to resolve Unknown
those claims against New-NGC would still                   Asbestos Disease Claims, are enjoined
have to meet the requirements for state-law                (subject, however, to the provisions of
successor liability.                                       Section 10(b)(2) of this Order) on and
                                                           after the Confirmation Date from . . .
   The Trust downplays these comments, sug-                commencing or continuing in any
gesting they are merely part of a discussion               manner any action or other proceeding
about what was then a completely speculative               of any kind with respect to such
and hypothetical event (the likelihood that the            Unknown Asbestos Disease Claim
Trust would ever be exhausted). It argues that             against the Debtors, New NGC,
these statements cannot, as a matter of law,               Reorganized NGC, o r any of their
substitute for what is in the Confirmation Or-             respective officers, directors, employees,
der and Plan. The Trust is correct that the                representatives, Affiliates or Subsidiaries
Plan and Confirmation Order form the basis of              (other than Austin or its Subsidiaries),
the binding agreement between the debtors                  the Insurance Companies, or any other
and creditors, and any determination of the                Person . . . .
extent of New-NGC’s liability for the
Unknown Claims must flow from those                        (2) Limitations on Injunction and


                                                   10
   Channeling Order Regarding Asbestos                       Claimants might some day be allowed to
   Disease Claims. Nothing contained in                      pursue a remedy against them if one existed
   Section 10(b)(1) of this Order, however,                  under applicable non-bankruptcy law. In
   shall preclude an Unknown Asbestos                        contrast, the Trust’s reading would lead to the
   Disease Claimant from pursuing his                        unlikely conclusion that the bankruptcy court
   rights, if any, under applicable non-                     intended that all “Persons” would be
   bankruptcy law against any Person who                     automatically liable if the Trust’s assets were
   may be liable to such Unknown                             exhausted.
   Asbestos Disease Claimant after
   exhausting the remedy or remedies                             The next provision pointed to by New-
   provided by the [Trust].                                  NGC is section 6 of the Confirmation Order,
                                                             which expressly approves the APA and orders
(Emphasis added.)                                            that the assets sold thereunder are to be
                                                             transferred to New-NGC “free and clear of all
   New-NGC points to the quoted language                     Liens, Claims, Interests and other liabilities,
for its conclusion that Old-NGC’s tort liability             obligations, charges or encumbrances thereon
to non-Code claimants does not attach                        or thereagainst . . . to the maximum exten[t]
automatically to New-NGC. Specifically,                      permitted by the Bankruptcy Code.” Because
New-NGC notes that section 10(b)(2) covers                   New-NGC, a newly-created corporation, can-
any “Person,” not just New-NGC, and that the                 not automatically succeed to the liability of
rights of Unknown Claimants are limited to                   Old-NGC without some affirmative act
“rights, if any, under applicable non-                       (whether explicit or implicit) of the bankruptcy
bankruptcy law.” New-NGC argues that, as a                   court, this provision further supports New-
result, because the Trust must recognize that                NGC’s argument that the bankruptcy court
no automatic liability arose against all                     never intended to take such necessary action
“Persons,”7 therefore the Trust must argue that              to transfer liability.
the Channeling Order somehow designated
that only New-NGC would automatically                           In fact, the natural inference from this pro-
succeed t o Old-NGC’s liabilities. But as the                vision is that the court intended New-NGC to
plain language of that order reflects, nothing in            assume only “Liens, Claims, Interests and
these provisions singles out New-NGC for                     other liabilities” that were specifically assigned
special treatment, and New-NGC instead is                    or transferred in other parts of the
dealt with in § 10(b)(2) the same as is any                  Confirmation Order; otherwise, New-NGC
other Person.                                                would be “free and clear . . . to the maximum
   New-NGC correctly observes that,                          extent permitted by the Bankruptcy Code.”
consequently, the only sensible reading is that              The plain language of the Confirmation Order
all Persons, including New-NGC, were                         therefore refutes the bankruptcy court’s find-
exposed to the possibility that Unknown                      ing of “implicit” liability.

                                                                As further support for its position, New-
   7
      Significantly, “Person” is defined broadly,            NGC notes that section 5.2(d) of the Plan pro-
under the Plan, as “any individual, firm,                    vides that New-NGC is not responsible for as-
corporation, association, partnership, joint venture,        bestos liabilities: “Upon consummation of the
trust, or other entity.”

                                                        11
Merger and this Plan, New-NGC shall perform                     When viewed in isolation, certain
all of the obligations of the Debtors under this                provisions of the Confirmation Order,
Plan (except for the obligations regarding the                  the Plan and the Asset Purchase
Asbestos Claims which shall be the sole                         Agreement arguably support the
responsibility of the [Trust].” (Emphasis ad-                   appellant’s arguments that New NGC
ded.) “Asbestos Claims” are defined in the                      emerged from the bankruptcy
Plan to include both current and Unknown                        proceedings without any liability for
Claims.                                                         unknown asbestos claims. However, as
                                                                the bankruptcy court explained, “the
    Finally, for textual support, New-NGC re-                   plan and its implementing documents
lies on provisions of the APA, which were ap-                   must be read coherently, giving meaning
proved by the bankruptcy court in the                           to all its provisions and terms, but doing
Confirmation Order. Section 2.1(b) of the                       so consistent with the confirmation
APA states that New-NGC will not have                           order, which governs. The plan and its
liability for any asbestos claims (including                    implementing documents cannot be read
Unknown Claims):              “Exclusions to                    to render any provision of the
Assumptions.        Notwithstanding anything                    confirmation order meaningless or
contained in this Section 2.1 to the contrary,                  superfluous.”
[New-NGC] shall not assume, covenant to
pay, perform, observe the terms of, satisfy                  (Internal quotations omitted.)
and/or discharge any liability or obligation of
[Old-NGC] to the extent such liability and                      In so stating, the district court erred in at
obligation: (i) relates to Asbestos Claims. . . .”           least two respects. First, New-NGC does not
The APA adopted the definition of “Asbestos                  claim that it “emerged from the bankruptcy
Claims” in the Plan, and, as we have said, that              proceedings without any liability for unknown
term includes Unknown Claims.                                asbestos claims.” Although this was the first
                                                             of the three positions the bankruptcy court
    In challenging all these statements                      could have taken, all sides acknowledge that
supporting New-NGC’s position, the Trust                     that option was expressly rejected when the
relies primarily on the same reasoning as did                permanent injunction was denied. Instead,
the district court, which felt these statements              New-NGC takes a more restrained position,
and provisions are taken out of context and do               asserting that it emerged with a more limited
not reflect a coherent reading of the                        form of liability, state-law successor liability.
documents as a whole.8 As the court stated,
                                                                Second, the bankruptcy court’s and district
                                                             court’s desire to avoid “render[ing] any
   8                                                         provision of the confirmation order
     Notably, the dissent also offers no theory of
how or why we should ignore the plain language of
                                                             meaningless or superfluous” is commendable,
the Plan documents to reach the result desired by            but that interpretive tool leads to a conclusion
the Trust. Instead, the dissent criticizes the
majority for having “chosen their own meaning of
                                                                8
the 1993 order,” but it does not tell us what is er-             (...continued)
roneous about our interpretations of the Channeling          Order, section 6 of the Confirmation Order, section
                                       (continued...)        5.2(d) of the Plan, or section 2.1(b) of the APA.

                                                        12
opposite to the one those courts reached. To            that the bankruptcy court’s bar on punitive
reject the multiple statements advanced as              damages evinces an intent on the court’s part
support by New-NGC as contrary to the                   to impose liability on New-NGC. That is, if
“implicit” meaning of the Confirmation Order            the court intended to leave all questions of
is to render those statements meaningless or            New-NGC’s liability to state-law successor
superfluous. In contrast, neither the Trust nor         doctrine, it might seem odd that it would ex-
the bankruptcy or district court has pointed to         press any opinion on whether punitive dam-
language that would be superfluous under                ages could be recovered under state law.
New-NGC’s more modest reading of
successor liability.                                       But to the extent that this observation
                                                        about intent is correct, we should nevertheless
   The district court decided that New-NGC’s            reject it as a matter of law. This is so because
theory would render the entire Channeling Or-           once the bankruptcy court had determined that
der meaningless, reasoning that “if New NGC             Unknown Claims were not “claims” within the
was not to have any liability for unknown               meaning of § 101(5) of the Bankruptcy Code,
asbestos claims, the channeling order would             it no longer retained jurisdiction to limit
have been unnecessary.” But once again, this            punitive damages awards in favor of these
logic is built on the faulty premise that New-          claimants.9
NGC is arguing for absolute immunity. As we
have shown, the rejection of the permanent in-             New-NGC correctly notes that it is
junction, followed by imposition of the                 inherently inconsistent for the bankruptcy
Channeling Order, is just as consistent with the        court to rule that it is without the power
theory that the bankruptcy court wanted to              permanently to enjoin Unknown Claims
impose at least state-law successor liability on        because they do not fit within section 101(5),
New-NGC. Our textual analysis of the                    but then to hold, nevertheless, that New-NGC
Channeling Order demonstrates that the state-           will be liable for those claims once the Trust is
law-successor-liability theory was the most             exhausted.       This impermissibly benefits
reasonable interpretation.                              Unknown Claimants, who do not hold Code
                                                        claims, in relation to other non-Code creditors,
   Similarly deficient is the district court’s          who would have to prevail under state-law
conclusion that because “the Confirmation Or-
der barred punitive damages by unknown as-
                                                           9
bestos claimants against New-NGC, [t]his in-                  The dissent argues that this “is a curious re-
dicates that the order contemplated that New-           sponse to the obvious point that the bankruptcy
NGC would be liable for other types of                  court is assuming the same liability of New-NGC
damages.” While this statement is correct, it           in the channeling facility, rather than contemplating
                                                        ‘state-law’ litigation.” But the dissent misses the
does nothing to undermine New-NGC’s state-
                                                        point that the bankruptcy court could not impose
law-successor-liability theory; the bankruptcy          liability on New-NGC for Unknown Claims, which
court simply may have been closing the door             were not properly within the bankruptcy system at
to punitive damages even under the more lim-            all. Thus, even if the bankruptcy court were not
ited form of non-bankruptcy-law liability.              contemplating “state-law” litigation, it did reason
                                                        that it had no jurisdiction over future claims, and,
   On the other hand, the Trust may be correct          accordingly, those claims should be handled
                                                        outside of bankruptcy.

                                                   13
successor theories. Similarly, the district                  Unknown Claims should the Trust fail to
court’s bar on punitive damages for Unknown                  satisfy them. Neither attempts to argue for
Claims impermissibly disadvantages Unknown                   alternative interpretations of the provisions set
Claims relative to other non-Code creditors                  forth by New-NGC; instead, they rely solely
who are free to pursue punitive damages.                     on their theory that these are mere “isolated”
Thus, we reject the argument that the punitive-              statements in the documents. New-NGC, on
damages bar has any bearing on New-NGC’s                     the other hand, points to multiple statements in
liability for Unknown Claims, which were                     the record, and numerous provisions in the
determined to be outside of the bankruptcy                   relevant documents, that are consistent only
court’s power to enjoin.                                     with its position that it should not be liable to
                                                             the Unknown Claims unless they can establish
   In a failed attempt at its own textual                    state-law successor liability.
analysis, the Trust argues that because the
court recognized that “[N]ew NGC may                             Proper textual interpretation does not allow
transfer additional assets to the [T]rust in the             us to ignore those statements or to adopt an
future,” therefore this right to add funds would             “implicit” meaning that would render all these
make sense only if New-NGC also has liability                provisions meaningless, and we need not defer
for the Unknown Claims. New-NGC cogently                     to the bankruptcy court’s interpretation of this
points out, however, that the right to add                   unambiguous text. Nor does our interpretive
funds is a recognition not that New-NGC                      role require us to ignore other extrinsic
would retain liability for Unknown Claims, but               evidence, such as the bankruptcy court’s
instead that it provides New-NGC an option to                discussion of non-bankruptcy law and
shield itself even from successor liability.                 successor liability, that is consistent with the
                                                             text.
   If New-NGC determines that it would be
better off funding the Trust than defending                      In light of the Plan and Confirmation Order,
against future state-law asbestos claims,10 the              then, it is unlikely that the bankruptcy court
Plan affords it this option. The court’s                     intended that non-Code claimants, who may
statement is consistent, therefore, with New-                have no right to recover against New-NGC
NGC’s theory that the bankruptcy court                       under applicable state law, nevertheless are en-
believed that New-NGC might want to retain                   titled automatically to a Code remedy against
the ability to extend the temporary injunction               New-NGC. Thus, all of these sources lead to
by continuing to fund the Trust.                             the conclusion that, although the bankruptcy
                                                             court determined that it did not have the
   Thus, the Trust and district court point to               power permanently to enjoin Unknown
no provisions of the Confirmation Order or the               Claimants from seeking recovery from New-
Plan that lead to the conclusion that New-                   NGC on exhaustion of the Trust, the court did
NGC was necessarily to be liable for the                     not impose any certain liability on New-NGC.

                                                                                     C.
   10
      For example, New-NGC may determine that                   In the alternative, the Trust asserts that the
its expected costs of litigation exceed the amount of        structure of Old-NGC’s reorganization Plan
funding needed to ensure continued viability of the          makes New-NGC the de facto reorganized
Trust.

                                                        14
debtor. Relying on Lemelle v. Universal Mfg.             plain language of the bankruptcy documents.
Corp., 18 F.3d 1268, 1274, 1278 (5th Cir.                It notes that the Plan defined “Reorganized
1994), the Trust notes that, under bankruptcy            NGC” as “NGC, on and after the Effective
law, the reorganized debtor remains liable for           Date, which entity shall be . . . the successor to
any debt that is not discharged under the plan.          NGC for all purposes.” Thus, in a prior
Thus, the Trust explains that, in effect, the            appeal, we recognized that the Trust “became
rights and obligations of Old-NGC were                   the sole shareholder of the reorganized
transferred to New-NGC, and, because the                 National Gypsum (which, in turn, became
Unknown Claims were not discharged by the                known as ‘Asbestos Claims Management
Plan, New-NGC will be liable for them on                 Corporation (ACMC)’.” Insurance Co. of N.
exhaustion of the Trust.                                 Am. v. NGC Settlement Trust (In re Nat’l
                                                         Gypsum Co.), 118 F.3d 1056, 1059 (5th Cir.
    As support, the Trust points to the                  1997). In contrast, “New NGC” means “a
following evidence: (1) New-NGC was                      Delaware corporation to be formed pursuant
capitalized with approximately $350 million of           to this Plan, and which shall do business from
assets of Old-NGC; (2) to receive favorable              and after the Effective Date as ‘National
tax treatment, New-NGC was required to                   Gypsum Company.’”
carry on the business of Old-NGC; (3) New-
NGC retained Old-NGC’s attorney-client                      Similarly, the Trust Agreement provides
privilege, even as against Old-NGC and                   that “[t]he purpose of the Trust is to assume
ACMC; (4) Old-NGC’s management had                       any and all liabilities of the Debtors” (emphasis
authority under the Plan to elect two of the             added), and the Channeling Order provides for
directors of New-NGC, and the remaining                  an injunction of actions against, among others,
directors were elected by the commercial                 “the Debtors, New NGC, [or] Reorganized
creditors; (5) New-NGC retained the                      NGC,” suggesting that New-NGC and the re-
corporate name “National Gypsum Company”;                organized debtor are not the same entity under
(6) New-NGC’s stock was not sold to                      the Plan. Thus, treating New-NGC as the re-
unrelated third parties in an arms-length                organized debtor is contrary to the plain
transaction, but instead was distributed to Old-         language of the documents.
NGC’s commercial creditors, and the same
person executed the APA for both the buyer                   New-NGC also points out that the Trust’s
and seller; and (7) the bankruptcy court stated          reliance on Lemelle is misplaced and that that
that New-NGC would carry on and preserve                 decision actually supports New-NGC’s
the business of the debtor and that only those           contention that Old-NGC/ACMC remains the
assets given to the Trust would be liquidated.           reorganized debtor. In Lemelle, the debtor
                                                         corporation, Winston, sold its operating assets,
   While all this evidence is consistent with the        during bankruptcy, in two separate
Trust’s theory that New-NGC is the                       transactions, leaving it with miscellaneous non-
reorganized debtor following bankruptcy,                 operating assets. See Lemelle, 18 F.3d at
New-NGC points to its own evidence that                  1270. Following the discharge, Winston
Old-NGC, not New-NGC, emerged from the                   (through its successor) was sued for an act it
bankruptcy proceeding as “Reorganized NGC”               had committed before the bankruptcy. It
under the Plan. First, New-NGC cites the                 defended, arguing that it had not succeeded to


                                                    15
any pre-bankruptcy liability, because it had not            Lemelle teaches that, because the Trust cannot
retained the operating assets of the debtor, and            establish that Old-NGC was formally
therefore it was liquidated. We rejected that               liquidated, therefore Old-NGC remains the
argument, concluding that Winston had not                   reorganized debtor following bankruptcy.
been liquidated and that the liability was not
one that had been discharged in the Winston                    As we have pointed out, the APA provided
bankruptcy. See id. at 1273.                                for a limited assumption of liabilities and ex-
                                                            pressly disavowed assumption of any current
   In rejecting Winston’s argument that it had              or future asbestos claims. Moreover, Old-
been liquidated, we refused to apply the “de                NGC was no “empty shell” following
facto liquidation” theory expressed in Erie                 bankruptcy: It retained hundreds of millions of
Lackawanna Ry. v. Henning, 803 F.2d 881                     dollars of assets, including the stock of the
(6th Cir. 1986). Instead, we concluded that                 Austin Company, and it is still paying asbestos
the Sixth Circuit’s theorySSwhich provided, in              claims and suing insurance companies.
the “admittedly unique” situation of a railroad             Nothing about these circumstances suggests
debtor, that although the debtor “had gone                  that the Trust and ACMC did not continue as
through reorganization in form, in substance it             Old-NGC’s reorganized debtor.
had been liquidated” SSlacked applicability out-
side the Rail Act context. See Lemelle,                        The Trust makes much of the fact that the
18 F.3d at 1273 n.3. The lack of a formal                   sale of Gold Bond was to Old-NGC’s
liquidation in Lemelle, then, was dispositive of            commercial creditors; it argues that because
Winston’s claim that a liquidation had                      the sale was not an “arms-length” transaction,
occurred. See id. at 1273.                                  we should not allow these creditors to escape
                                                            the conclusion that New-NGC is just a
   Thus, far from supporting the Trust’s posi-              reorganized form of the old debtor. New-
tion, Lemelle is an example of the original                 NGC cannot be a new corporation free from
debtor’s remaining liable for non-Code claims,              Old-NGC’s non-discharged debts, the Trust
even where the operating assets were sold to                argues, because the commercial creditors paid
another party. Indeed, the sale of the                      no new consideration for the operating assets.
operating assets in Lemelle did not even                    Thus, by concluding that New-NGC is liable
contain the same restrictive language found in              only under a state-law successor theory, we
New-NGC’s sale agreement with the                           are shielding New-NGC’s new ownersSSwho
commercial creditors.11         Consequently,               were Old-NGC’s old commercial credi-
                                                            torsSSfrom non-dischargeable liabilities. The
                                                            Trust warns that we are sanctioning a “ruse”
   11
       In Lemelle, we ultimately rejected the
argument that the party that had purchased Win-
                                                               11
ston’s operating assets was liable for the pre-                  (...continued)
bankruptcy claims, because the terms of the pur-            as restrictive as that in the APA, see id., and the
chase agreement were not properly submitted by              underlying point remains true: The Trust’s theory
Winston in response to summary judgment. See                that non-Code claims were assumed automatically
Lemelle, 18 F.3d at 1274. Nevertheless, the pur-            by the purchaser of the debtor’s operating assets is
chase language that did appear in the order was not         at least as doubtful in this case as it was in Le-
                                      (continued...)        melle.

                                                       16
and inviting future debtors to advocate                        were extensive, and the legal representative of
bankruptcy plans that incorporate this                         the Unknown Claimants successfully blocked
strategy.12                                                    court approval of the Draft Plan, which
                                                               permanently would have enjoined even state-
   Much of this rhetoric is dependent on the                   law successor claims against New-NGC. Still,
underlying argument that New-NGC, and not                      despite this setback, the commercial creditors
Old-NGC, is the reorganized debtor. But the                    were willing to give more in value to Old-
Trust offers no principled reason why the fact                 NGC for Gold Bond than were any other pur-
that Gold Bond was purchased by Old-NGC’s                      chasers, and we should be hesitant to change
commercial creditors should outweigh all the                   the terms of the deal after the fact just because
textual evidence that Old-NGC/ACMC is the                      subsequent developments in the Georgine
reorganized debtor under the Plan. It seems                    settlement have resulted in the Unknown
that the Trust’s primary concerns seem to be                   Claims’ being underfunded in the Trust.
with bankruptcy policy and the implications for
future reorganization plans.                                      This is not a case in which Old-NGC has
                                                               won approval of a plan to bail out its
   There is, however, good reason why we                       shareholders, “forcing asbestos victims to
would want to encourage these types of                         surrender their claims in exchange for a
reorganizations and to enforce the express                     meager” portion of the company’s assets. See
terms of the deal to which the parties have                    Flanagan, 90 F.3d at 993 (5th Cir. 1996)
agreed. All sides were adequately represented                  (Smith, J., dissenting). Instead, Old-NGC’s
during bankruptcy proceedings, and legal                       chapter 11 bankruptcy was motivated at least
representatives were appointed for current and                 as much by the $1.1 billion owed to bond and
future asbestos claimants and for commercial                   trade creditors as by the $800 or $900 million
creditors and the company.13 Negotiations                      estimated liability for current and future
                                                               asbestos disease claims. The bankruptcy court
                                                               adopted a Plan whereby all the current and
   12
       In this way, the Trust seemingly hopes to               future asbestos claims were expected to be
equate this with earlier warnings in other asbestos            paid in full by the Trust , while the bond and
litigation. For example, in Flanagan v. Ahearn (In             trade creditors received only $350 million in
re Asbestos Litig.), 90 F.3d 963, 994 (5th Cir.                assets in exchange for their $1.1 billion in
1996) (Smith, J., dissenting), vacated, 521 U.S.               claims.14 This $750 million reduction in debt
1114 (1997), appeared the warning that “[t]he ma-
jority’s unequivocal approval of Fibreboard’s liti-
                                                                  13
gation strategy undoubtedly will lead other                         (...continued)
financially threatened companies throughout the                denied the class of asbestos claimants the right to
nation to utilize it as a road map for sheltering their        vote on the proposed settlement. See id. at 996
assets and improperly restricting the rights of their          (Smith, J., dissenting).
present and future victims.” (Internal quotations
                                                                  14
and punctuation omitted.)                                            Thus, because the bankruptcy court did not
                                                               foresee that the CCR would be disapproved and
   13
      This is in stark contrast to the facts of Flan-          the Trust would be insufficient to fund both current
agan, in which it was noted that, by removing the              and future asbestos claims, it is not, as the dissent
settlement from the bankruptcy context, Fibreboard             suggests, “incredible to believe that the bankruptcy
                                       (continued...)                                                  (continued...)

                                                          17
w a s s u f f i c i e n t “ c o n s i d e r a t i on , ”                               IV.
notwithstanding the Trust’s arguments to the                       In the end, then, both of the Trust’s argu-
contrary.                                                       ments fail.       First, notwithstanding the
                                                                bankruptcy and district courts’ findings to the
    Although the CCR ultimately was                             contrary, there is nothing “implicit” in the Plan
disapproved, there is no reason to believe that                 documents or other bankruptcy court orders
Unknown Claimants are now getting a worse                       that provides that New-NGC wi ll
deal under the Alternate Facility than                          automatically succeed to Old-NGC’s liability
commercial creditors originally received under                  for Unknown Claims. Instead, the express
the Plan; there are, after all, hundreds of                     terms of the Plan compel the opposite
millions of dollars in Insurance, Austin, and                   conclusionSSi.e., that New-NGC will be liable
other assets in the Trust. Consequently, none                   only under non-bankruptcy, state-law
of the Trust’s concerns about the implications                  successor liability. We see no reason to ignore
of shielding the bond and trade creditors from                  the plain meaning of these Plan documents.
more liability is especially compelling, and
those concerns certainly are insufficient to                        Second, Old-NGC and New-NGC are not
overcome the plain language of the Plan                         the same entity. Under the Plan, Old-NGC
documents.                                                      became ACMC, a subsidiary of the NGC
                                                                Settlement Trust. New-NGC was formed as a
                                                                new corporation created to purchase the assets
   14
                                                                of Gold Bond for Old-NGC’s commercial
      (...continued)                                            creditors. Pursuant to the Asset Purchase
court would create this new operating company
                                                                Agreement, New-NGC did not assume liability
with debtor assets, after holding that it had no au-
                                                                for asbestos claims, whether known or
thority to extinguish unknown asbestos claims of
the debtor, and then leave it to state law governing            unknown. In exchange, its shareholders
successor liability to resolve the future asbestos              surrendered approximately $750 million in net
liability of its mutant creation.” Rather, the                  claims it held against Old-NGC, and it took
bankruptcy court simply entered a compromise                    $350 million in assets “free and clear of all
agreement whereby the largest group of creditors,               liens. Thus, because there are no other
the commercial creditors, would receive something               provisions in the Plan that allocated the
of value in return for their $1.1 billion in debt,              liabilities for asbestos claims from Old-NGC to
while the asbestos claimants would receive                      New-NGC, New-NGC cannot be considered
everything else.                                                to have assumed those debts, and it is not the
                                                                reorganized debtor.
   Then, when subsequently it became apparent
that the Trust would be insufficient to fund                       By contrast, the Trust documents expressly
Unknown Claims, the bankruptcy court
                                                                contemplate that the Trust and its subsidiary,
unreasonably altered the meaning of the Plan
documents to hold that future asbestos claimants
                                                                Old-NGC/ACMC, assume liability for all as-
could go after NewNGC. While this impulse may                   bestos claims. The Plan also expressly
have been noble, and perhaps even socially                      provides that Old-NGC/ACMC is
desirable, the bankruptcy court cannot now ignore               “Reorganized NGC.” The Trust has not
the plain meaning of the documents that created                 presented any compelling evidence why we
New-NGC as a separate operating company with                    should ignore the plain meaning of all these
no liability as a reorganized debtor.

                                                           18
documents, nor has it presented a plausible
argument that it is not the reorganized debtor
following bankruptcy.
   Accordingly, the judgment of the district
court, affirming the order of the bankruptcy
court, is REVERSED and REMANDED to
the district court for further proceedings, as
appropriate.

ENDRECORD




                                                 19
    REAVLEY, Circuit Judge, dissenting:

      The majority have chosen their own meaning of the 1993 order of the bankruptcy court

    by leaving future asbestos claimants to tort actions against Gypsum without recourse to the

    claims resolution facility of the bankruptcy order. I would follow the bankruptcy court’s

    own construction of its order and avoid adding to the delay and lawyer fees for asbestos

    victims, a result that joins the ongoing judicial contribution to the asbestos debacle.15 I

    dissent.

      The 1993 order confirming the plan provided in section 9(b) that New-NGC “shall not be

    subject to the commencement or continuation of litigation by any person on or on account

    of Unknown Asbestos Disease Claims pending exhaustion of the remedy or remedies

    provided by the NGC Asbestos Settlement Fund,” i.e., the fund administered by the Trust.

    Again, in the “channeling order” that is section 10(b) of the confirmation order, all persons

    holding an unknown asbestos claim are enjoined from suit against New-NGC “pending

    exhaustion of the remedies of the” Trust settlement fund. If the court was not directing that,

    if necessary, New-NGC assets followed Trust assets in the settlement facility, it was lifting

    its injunction and allowing an entirely new track for the claimants who waited for the second

    track to begin. While lawyers for the claimants could not count on better recoveries when

    the track changed, because New-NGC had the option of adding assets to the Trust Fund, the

    lawyer fees could be larger. This able bankruptcy judge would have recognized the vice of

    that scheme and would have avoided it.



      15
1          For example, see Ortiz v. Fibreboard Corp., 527 U.S. 815, 119 S. Ct. 2295 (1999).
  When the financial creditors, who were to own New-NGC, objected to the court’s

channeling order for the reason that it “subordinates the majority of the claims currently held

by NGC’s bond and trade creditors to an undetermined amount of asbestos liability,” the

court rejected this objection. Over the protest of Gypsum creditors who would own the

New-NGC the bankruptcy court refused to protect it from future unknown claims but, as if

the bankruptcy court had not decided the matter, this majority opinion holds that the

bankruptcy court did not “transfer liability.” But then the majority relents and restrains the

transfer to the more limited “state-law successor liability.”

  Then there is the provision of the order at section 9(c) that expressly bars punitive

damages by unknown claimants against New-NGC. The majority opinion dismisses this on

the ground that the bankruptcy court had no authority to limit those damage awards because

they were not “claims” within the meaning of the Bankruptcy Code. That is a curious

response to the obvious point that the bankruptcy court is assuming the same liability of

New-NGC in the channeling facility, rather than contemplating “state-law” litigation.

  The bankruptcy court, in ruling in the pending adversary action, said: “With all due

respect to the learned and considered arguments of counsel, the only reading that gives

meaning to these findings of fact and conclusions of law are that this plan as confirmed by

this court contemplated new NGC liability for claims not paid by the Trust and not otherwise

discharged.” The district court followed the law and gave deference to the bankruptcy

court’s interpretation of its own confirmation order. See Farmland, Inc. v. Anel Eng’g



                                              21
    Indus., Inc.16 (“We see no basis for substituting our judgment for that of the district judge in

    interpreting his own order.”). The bankruptcy judge will find demoralizing the majority

    conclusions that he “never intended” or “wanted to impose” a channeling liability after

    exhaustion of the Trust assets, or that the judge would reach this strange “state-law successor

    liability” and then forget that he had so ruled. Actually, it is incredible to believe that the

    bankruptcy court would create this new operating company with debtor assets, after holding

    that it had no authority to extinguish unknown asbestos claims of the debtor, and then leave

    it to state law governing successor liability to resolve the future asbestos liability of its

    mutant creation, without leaving so much as a footnote in the controlling documents

    suggesting such an intent. This appellate court should reject the incredible and stay with the

    judgment of the bankruptcy court.




      16
1          693 F.2d 1140, 1146 (5th Cir. 1982) (quoting SEC v. Sloan, 535 F.2d 679, 681 (2d Cir. 1976)).

                                                       22
