                 NOT RECOMMENDED FOR FULL-TEXT PUBLICATION
                                        File Name: 15a0080n.06
                                               No. 14-1090
                             UNITED STATES COURT OF APPEALS
                                  FOR THE SIXTH CIRCUIT
                                                          )
In re: SETTLEMENT FACILITY DOW CORNING                    )
                                                                                          FILED
TRUST.                                                    )
                                                                                   Jan 27, 2015
_____________________________________                     )                    DEBORAH S. HUNT, Clerk
                                                          )
DOW CORNING CORPORATION; DEBTOR’S                         )
REPRESENTATIVES; THE DOW CHEMICAL                         )     ON APPEAL FROM THE
COMPANY; CORNING, INCORPORATED,                           )     UNITED STATES DISTRICT
                                                          )     COURT FOR THE EASTERN
        Interested Parties - Appellants,
                                                          )     DISTRICT OF MICHIGAN
v.                                                        )
                                                          )     OPINION
CLAIMANTS’ ADVISORY COMMITTEE;                            )
FINANCE COMMITTEE,                                        )
                                                          )
        Interested Parties - Appellees.                   )




Before: BOGGS and COOK, Circuit Judges; and QUIST, District Judge.*

        BOGGS, Circuit Judge. In this bankruptcy case, the bankrupt company challenges the

district court’s authorization of payments to lower-priority creditors, when not all higher-priority

creditors have yet been paid, as contrary to the requirements of the bankruptcy plan. In 1995,

Dow Corning filed for bankruptcy in response to numerous tort claims and established the

Settlement Fund to pay known and future claimants between 2004 and 2019. The Settlement and

Fund Distribution Agreement (“SFA”) permits early payments to lower-priority creditors subject

to a district-court determination that such payments would not jeopardize future payments to

higher-priority creditors. The SFA Finance Committee, with the support of the Claimants’


*
  The Honorable Gordon J. Quist, United States District Court for the Western District of Michigan, sitting by
designation.

                                                      1
Advisory Committee (“CAC”), requested that the district court authorize Premium Payments, a

category of lower-priority payments, and the district court approved. Dow Corning and its

shareholders, Dow Chemical and Corning Incorporated, appeal the district court’s judgment on

the ground that the court failed to follow SFA requirements. We reverse and remand.

                                         I.       BACKGROUND

        In order to settle thousands of breast-implant-related product-liability lawsuits, Dow

Corning filed for bankruptcy under Chapter 11 of the Bankruptcy Code in 1995.1 In re Dow

Corning Corp., 280 F.3d 648, 653-54 (6th Cir. 2002). In 1999, the Bankruptcy Court for the

Eastern District of Michigan confirmed the Amended Joint Plan of Reorganization (“Plan”), id.

at 654, which became effective on June 1, 2004, In re Settlement Facility Dow Corning Trust,

No. 00-00005, 2013 WL 6884990, at *1 (E.D. Mich. Dec. 31, 2013).

        The Plan provides that the United States District Court for the Eastern District of

Michigan will “resolve controversies and disputes regarding interpretation and implementation

of the Plan and the Plan Documents.” Plan § 8.7.3. The Plan provides for payments to claimants

until the end of 2019, up to an aggregate cap of $2.35 billion net present value (“NPV”).2

Claimants have the option of settling through a Settlement Facility or litigating against a

Litigation Facility. Id. § 5.4-5.4.2. A $400-million-NPV Litigation Fund is reserved for the

Litigation Facility, and $1.95 billion NPV is reserved for the Settlement Fund. Id. § 5.3; SFA

§ 3.02(a). Any assets remaining in the Litigation Fund at the end of 2019 revert to Dow

Corning. Litigation Facility Agreement § 8.03(b). If all settlement claimants are paid in full, the

CAC is authorized to disburse all remaining assets in the Settlement Fund to approved claimants

1
  Unlike most bankruptcy debtors, Dow Corning was solvent when it filed and has remained so since that time. In re
Dow Corning Corp., 456 F.3d 668, 671 (6th Cir. 2006 ).
2
  Net present value (NPV) expresses all payments from 2004 to 2019 in terms of the aggregate value of such
payments as of June 1, 2004. Plan § 1.102. The discount rate used for calculating NPV is 7% compounded
annually. Ibid.

                                                        2
on a pro rata basis, if cost effective, or to a medical research institute or university. SFA

§ 10.03(b).

       The Settlement Facility–Dow Corning Trust (“Settlement Facility”) resolves the claims

of those who settle.   Plan § 1.154. The Finance Committee “is responsible for financial

management of the Settlement Facility, including preparing recommendations to the District

Court regarding the release of funds for payment of Claims resolved by the Settlement Facility

and the Litigation Facility.” Id. § 1.67. The CAC represents claimants’ interests, and the

Debtor’s Representatives represent Dow Corning’s interests. SFA § 4.09.

       The SFA establishes four categories of payments: First Priority Payments, Settlement

Fund Other Payments, Second Priority Payments, and Litigation Payments. Id. § 7.01(a). First

Priority Payments includes all “base” payments identified in the settlement value chart that

specifies the value of each type of claim. Ibid. Settlement Fund Other Payments include

payments to certain classes of creditors and are considered a type of First Priority Payments.

Ibid. Second Priority Payments are divided into three subcategories: (1) Premium Payments for

certain classes of claimants; (2) Increased Severity Payments for certain claimants whose

conditions worsen; and (3) Class 16 payments, which reimburse Dow Chemical for settlement

payments made before the Plan came into effect in 2004. Ibid. Litigation Payments include

various litigation-related expenses. Ibid. Premium Payments are at the heart of this dispute.

They include an extra 20% payment to approved-and-paid First Priority claimants who meet

certain criteria and an extra 25% payment to approved-and-paid First Priority claimants who

suffered an in-body implant rupture. Ibid. Annex B, Settlement Grid Personal Injury Claims.

       In order to distribute Second Priority Payments—including Premium Payments—before

all First Priority and Litigation Payments have been made, the Finance Committee must obtain



                                              3
authorization from the district court. Id. § 7.03(a). The court may grant authorization only after

it holds a hearing and determines that “all Allowed and allowable First Priority Claims and all

Allowed and allowable Litigation Payments have been paid or that adequate provision has been

made to assure such payment . . . .” Ibid. (emphasis added). The SFA further notes that “[t]he

parties agree that any appeal of an order of the District Court regarding the [authorization of

Second Priority Payments] shall be on an abuse of discretion standard.” Ibid.

         In 2011, the Finance Committee requested that the district court authorize it to distribute

50% of historical and future Premium Payments before all First Priority and Litigation Payments

have been disbursed. The Finance Committee supported its recommendation with an assessment

from the SFA’s Independent Assessor, Analysis Research Planning Corporation (“ARPC”).

ARPC concluded that $1.981 billion NPV is available in the Settlement Fund,3 and that it would

cost $1.83 billion NPV to pay all First Priority claims, leaving $151 million NPV. The Finance

Committee relied upon this assessment to estimate that a fifty-percent disbursement of historical

and future Premium Payments would cost $83 million NPV, leaving a $68-million-NPV

“cushion” in the Settlement Fund.              The Finance Committee argued that this demonstrated

adequate provision to assure payment of all First Priority Payments, and further reassured the

district court that an additional $368 million in the Litigation Fund could be available to make

First Priority Payments in the event such required payments exceeded the balance in the

Settlement Fund. The CAC supported the Finance Committee’s recommendation.

         The Appellants opposed the Finance Committee’s recommendation on several grounds at

the payment-authorization hearing before the district court. First, they argued that the SFA


3
  This figure exceeds the $1.95 billion funding cap of the Settlement Fund because the Settlement Fund paid
$31 million to satisfy Litigation Claims. Therefore, the “Settlement Fund [will] not be exhausted until Dow Corning
[is] called upon to make Qualified Transfers of approximately $1.981 billion (i.e., $1.95 billion plus $31 million).”
Appellee’s Br. at 13 n.1.

                                                         4
requires that the ability to make First Priority Payments must be “virtually guaranteed” before

Second Priority Payments, including Premium Payments, can be made, and that the Finance

Committee did not meet this burden. In support of this argument, the Appellants submitted to

the district court reports and testimony that undermined the reliability of ARPC’s projections.

Second, the Appellants disputed the Finance Committee’s position that assets in the Litigation

Fund could be counted as available when the district court assessed whether adequate provision

exists to make all First Priority Payments.        Finally, they contended that making Premium

Payments without simultaneously making other Second Priority Payments would violate the SFA

by treating same-priority creditors differently.

       Interpreting the “adequate provision . . . to assure payment” language in § 7.03(a), the

district court rejected the “virtually guarantee” standard proposed by the Appellants in favor of

the Finance Committee’s less-strict “adequate assurance” standard.       The court declined to

consider exhibits and expert testimony that Appellants submitted and relied upon ARPC’s

projection of a $68-million-NPV post-disbursement “cushion” to conclude that adequate

provision has been made to assure all First Priority Payments. In re Settlement Facility Dow

Corning Trust, 2013 WL 6884990, at *10. It also determined that the amount in the Litigation

Fund and a $200 million “Time-Value Credit” are available assets for the purpose of determining

whether there are sufficient funds to assure all First Priority Claims, but did not rely on those

determinations in light of ARPC’s projection. Id. at *8-9. The district court did not address

whether non-Premium Second Priority Payments would have to be paid at the same time as the

requested Premium Payments. Accordingly, the district court granted the Finance Committee the

authority to make a fifty-percent distribution of historical and future Premium Payments. The

Appellants timely appeal.



                                                   5
                               II.    STANDARD OF REVIEW

       SFA § 7.03(a) states that “[t]he parties agree that any appeal of an order of the District

Court regarding [authorization of Second Priority Payments] shall be on an abuse of discretion

standard.”   This provision is unenforceable because parties “cannot determine this court’s

standard of review by agreement. Such a determination remains for this court to make for itself.”

K & T Enters., Inc. v. Zurich Ins. Co., 97 F.3d 171, 175 (6th Cir. 1996).

       The dispute in this case turns on conflicting interpretations of terms found in the Plan and

the SFA.     We apply principles of contract interpretation when interpreting a confirmed

bankruptcy plan. In re Dow Corning Corp., 456 F.3d 668, 676 (6th Cir. 2006). When reviewing

a district court’s interpretation of a bankruptcy plan where the district judge did not confirm the

plan but has extensive knowledge of the case, we grant the district court significant deference

with respect to its assessment of extrinsic evidence. In re Settlement Facility Dow Corning

Trust, 628 F.3d 769, 772 (6th Cir. 2010). However, we evaluate de novo a district court’s

interpretation that does not rely on extrinsic evidence. In re Settlement Facility Dow Corning

Trust, 517 F. App’x 368, 372 (6th Cir. 2013). As the district court did not rely upon extrinsic

evidence to interpret Plan and SFA provisions, we review its interpretations de novo. New York

Law governs our interpretation of the Plan and related documents. Plan § 6.13.

                                      III.   DISCUSSION

                                                A

       We first review the district court’s interpretation of the key requirement that it may

authorize Second Priority Payments only if “adequate provision has been made to assure” that all

future First Priority and Litigation Payments can be paid “based on available assets.” SFA

§ 7.03(a). The court interpreted this to mean that the SFA requires an “adequate assurance” of



                                                 6
payment. The parties agree that the district court must rely on projections of the availability of

funds, including the cost of making future First Priority and Litigation Payments and the cost of

the requested Second Priority Payments, to determine whether making Second Priority Payments

would jeopardize future First Priority and Litigation Payments. They disagree over the level of

confidence that the district court must have in the projections before it may authorize Second

Priority Payments.

        Appellants argue that the proper standard of confidence is one of “virtual guarantee”

because, under New York law, “assurance of payment” is equivalent to “guarantee of payment.”

Appellants’ Br. at 32. The Appellee argues for interpreting SFA § 7.03(a) to mean that the court

need only find that available assets provide “adequate assurance” that all higher-priority

payments can be made. Appellee’s Br. at 43. “Adequate assurance” is a term of art in the

Bankruptcy Code that denotes the assurance of performance that a trustee must provide to

assume a contract or lease after a default. 11 U.S.C. § 365(b)(1)(C). This level of assurance

falls below “absolute guarantee,” In re Fine Lumber Co., 383 B.R. 565, 573 (Bankr. E.D.N.Y.

2008), and can mean “a strong likelihood,” In re Bygaph, Inc., 56 B.R. 596, 605-06 (Bankr.

S.D.N.Y. 1986), or “more probable than not,” In re Patriot Place, Ltd., 486 B.R. 773, 803-04

(Bankr. W.D. Tex. 2013).4

        The district court adopted the Appellee’s “adequate assurance” standard. In re Settlement

Facility Dow Corning Trust, 2013 WL 6884990, at *6 (“The Court finds that the Finance

Committee’s and the CAC’s arguments regarding plan interpretation of the phrases at issue are

the more persuasive.”). Noting that the meaning of “adequate” depends upon context, id. at *7,

4
  “Adequate assurance” is also a term of art in contract law. Under the Uniform Commercial Code, it is the
assurance of performance that a contracting party can demand after discovering grounds for insecurity. U.C.C. 2-
609(1). “In appropriate circumstances, a promise to perform can be an adequate assurance.” Enron Power Mktg.,
Inc. v. Nev. Power Co., 2004 WL 2290486, at *6 (S.D.N.Y. Oct. 12, 2004).


                                                       7
the district court did not articulate a precise confidence level for “adequate,” but ruled that a

projection of a $68-million-NPV cushion meets that standard. Id. at *10.

       The district court rejected the “virtual guarantee” standard for two reasons, neither of

which we find persuasive. First, the district court found that it would frustrate SFA § 701(c)(v)’s

(denominated by the district court as the “Premium Payment provision”) purpose of giving “the

Finance Committee the discretion to seek court approval to pay Premium Payments

contemporaneously with the First Priority Payments if the Finance Committee is ‘reasonably

assured’ that there are sufficient funds to distribute both payments.” Id. at *6. The Premium

Payment provision is the only portion of the SFA that contemplates the contemporaneous

payment of lower- and higher-priority payments, and it states that:

       Nothing herein shall be interpreted as limiting the discretion of the Finance
       Committee with the approval of the District Court to pay lower priority payments
       and higher priority payments contemporaneously, so long as the ability to make
       timely payments of higher priority claims is reasonably assured.

SFA § 7.01(c)(v) (emphasis added). A condition precedent to this provision’s applicability is

district-court approval to make lower-priority payments, which could be granted only if

“adequate provision has been made to assure” higher-priority payments. Id. §§ 7.01(c)(iv),

7.03(a).   Therefore, to the extent that the Premium Payment provision has as its purpose

facilitating the contemporaneous payment of Premium and higher-priority Payments, that

purpose is subordinate to the district-court approval procedures and so cannot be the basis for

interpreting those procedures.    In sum, the “reasonably assured” language of the Premium

Payment provision is applicable only after the CAC and the Finance Committee demonstrate that

“adequate provision has been made to assure” payment of the First Priority and Litigation

Payments. SFA §§ 7.01(c)(iv), 7.03(a).




                                                8
       The district court also rejected the Appellants’ “virtual guarantee” interpretation because

it believed that the term “‘adequate provision’ modifies the term ‘assure,’” and that the cases

Appellants cited “[did] not construe the term ‘adequate provision,’ but only the term ‘assure.’”

In re Settlement Facility Dow Corning Trust, 2013 WL 6884990, at *6. The district court has it

backwards: the term “assure” provides context for the term “adequate provision.” If a borrower

tells a bank that he needs to borrow “enough money to buy a house,” we would not look to the

term “enough money” to find the meaning of “buy a house.” The obvious inquiry would be to

figure out the price for buying the house to determine how much money is enough. Similarly,

the relevant inquiry here is to determine what provision would be adequate. New York law

recognizes that defining “adequate provision” may be difficult because “the notion of ‘adequate’

is a variable one; some things are more adequate than others.” Broodstone Realty Corp. v.

Evans, 251 F. Supp. 58, 64 (S.D.N.Y. 1966). Fortunately, SFA § 7.03(a) makes the requisite

level of adequacy clear: the provision must be so adequate as to “assure” future First Priority and

Litigation Payments. We look to the word “assure” to interpret “adequate provision.” The New

York case cited by the parties interpret the word “assure,” made in the context of making future

payments, to mean guaranteeing that those payments will be made. Utils. Eng’g Inst. v. Kofod,

58 N.Y.S.2d 743, 744-745 (N.Y. Mun. Ct. 1945) (“It is true that the dictionary gives different

meanings to the word ‘assure’ depending on the way it is used. . . . In the way in which the word

was used here [i.e., to assure future payment], the word means ‘guarantee’ and all parties must

have so understood it.”).

       Because it is impossible to account for all possible future uncertainties, we will not

impose an “absolute guarantee” standard of confidence, as that would make SFA § 7.03(a)

superfluous. See Reyes v. Metromedia Software, Inc., 840 F. Supp. 2d 752, 756 (S.D.N.Y. 2012)



                                                9
(noting that it is a “cardinal rule that a contract should not be read to render any provision

superfluous”). Accordingly, we adopt the Appellant’s terminology of “virtual guarantee” to

describe the required confidence standard under SFA § 7.03(a). While this standard does not

require absolute certainty, it is nonetheless stricter than the “strong likelihood” or “more

probable than not” levels of confidence that describe “adequate assurance.”

                                                B

       We now turn to the question of whether the district court erred by refusing to consider the

Appellants’ reports and testimony. The Appellants sought to undermine ARPC’s projections at

the payment-authorization hearing by offering reports and expert testimony that criticize ARPC’s

methodologies and conclusions.      The district court declined to consider these reports and

testimony because “the SFA provides that the Court consider the recommendation of the Finance

Committee based on the Independent Assessor’s analysis and projections.” In re Settlement

Facility Dow Corning Trust, 2013 WL 6884990, at *9 (emphasis added). While the Appellants

are guaranteed an “opportunity to be heard with respect to the motion [to authorize the

distribution of Second Priority Payments]” under SFA § 7.03(a), the district court nonetheless

refused to consider their evidence because the Appellants already “had the opportunity to test

and challenge the Independent Assessor’s Reports throughout the years, yet no objections have

been brought to the Court’s attention that the Reports have been misleading or inaccurate.” Ibid.

       We first consider whether the Appellants’ “opportunity to challenge the Independent

Assessor’s Reports throughout the years,” ibid. (emphasis added), satisfied their contractual right

to an “opportunity to be heard with respect to the motion,” SFA § 7.03(a) (emphasis added), and

conclude that it did not.    In the due-process context, an “opportunity to be heard [is] an

opportunity which must be granted at a meaningful time in a meaningful manner.” Armstrong v.



                                                10
Manzo, 380 U.S. 545, 552 (1965).          We find this understanding of the term relevant to

interpretation of SFA § 7.03(a), which concerns the proper procedures for payment-authorization

hearings.   It would not be a meaningful opportunity if the Appellants must voice specific

objections to ARPC’s projections before they know what arguments those projections were being

used to support. For example, one of Appellant’s experts criticized ARPC’s methodology for

failing to specify the level of confidence in its projections. This criticism does not allege that the

projections are necessarily “misleading or inaccurate,” but rather that they do not prove what

they are cited as proving, i.e., high confidence in an accurate and precise projection. Because

ARPC projections were used for many purposes that do not require a confidence estimate, it is

understandable that the Appellants did not object to the lack of a confidence estimate in those

projections until the Finance Committee’s motion to disburse lower-priority payments under

SFA § 7.03(a) made confidence a relevant issue. Further, the phrase “with respect to the

motion” makes it clear that the Appellants’ “opportunity to be heard” applies to any evidence

offered at the payment-authorization hearing, even if they may have had opportunity to object in

the past.

        Next, we consider whether the Appellants’ right to an “opportunity to be heard” includes

the right to challenge ARPC’s projections and conclude that it does. While the district court is

correct in that it must make its decision to authorize Second Priority Payments “based on the

Independent Assessor’s analysis and projections,” In re Settlement Facility Dow Corning Trust,

2013 WL 6884990, at *9 (emphasis added), those projections are neither immune from criticism,

nor impervious to modification by the court, depending on evidence developed at the hearing. If

the parties intended that the Independent Assessor’s projections could not be challenged at the

hearing, they could have made them determinative, rather than requiring district-court review



                                                 11
and approval. An opportunity to be heard must include the right to make methodological

challenges at the relevant time. Accordingly, we reverse the district court’s judgment insofar as

it interpreted the SFA to grant it the discretion to ignore timely produced, otherwise admissible

evidence concerning whether ARPC’s projections demonstrate that “adequate provision has been

made.”

                                                   C

         The Appellants raise several other questions that we need not resolve in order to dispose

of this appeal. However, as the district court may consider these matters on remand, we note the

arguments. First, the Appellants argue that the district court’s asset-sufficiency analysis should

consider the cost of making non-Premium Second Priority Payments—Increased Severity and

Class 16 Payments—on the same basis as the requested Premium Payments. The Plan expressly

requires that Class 16 Payments must be made “on the same basis and with the same priority as

[other] ‘Second Priority Payments’ under the Settlement Facility Agreement,” Plan §§ 6.16.5,

6.16.6, and the CAC concedes that “all categories of Second Priority claims could be paid

simultaneously.” Appellee’s Br. at 36 (emphasis added).

         Second, the Appellants challenge the district court’s dicta that it can count the nearly

$400 million in the Litigation Fund as available for the purpose of determining whether there are

sufficient funds to assure all higher-priority payments. The SFA expressly provides that the

Litigation Fund is separate from the Settlement fund and “shall be used solely for the payment of

Litigation Payments.” Id. § 7.01(b)(ii) (emphasis added). The only exception to this rule is that

the Litigation Fund can be used, subject to district-court approval, to make First Priority

Payments “[i]n the event that the Settlement Fund lacks sufficient funds in the aggregate to pay

in full all First Priority Payments.” Id. § 7.03(b).



                                                  12
       Finally, Appellants dispute the district court’s dicta that the Settlement Fund will be

entitled to an additional $200 million. In 2013, we rejected Dow Corning’s request for a $200

million (nominal) “Time-Value Credit” for early payment of $1 billion (nominal) but expressly

left undecided the question of whether Dow Corning is also entitled to a net-present-value

adjustment. In re Settlement Facility Dow Corning Trust, 517 F. App’x at 378-79. Both issues

concern whether Dow Corning is overpaying, in nominal terms, its obligation to place

$1.95 billion NPV into the Settlement Fund. Id. at 372.

                                    IV.    CONCLUSION

       We REVERSE the district court’s judgment with respect to its rulings that (1) “adequate

assurance” is the proper standard for assessing the availability of funds under SFA § 7.03(a) and

(2) that the SFA grants it the discretion to ignore otherwise competent reports and testimony

challenging ARPC’s methodologies, and we REMAND for further proceedings consistent with

this opinion.




                                               13
