Filing Date for Latent Asbestos Claimants Found Not to Violate Due Process in Reorganization Plan

United States Court of Appeals Third Circuit, February 18 2020

DELAWARE – The appellants are latent asbestos claimants who did not file by the bar date set by Chapter 11 bankruptcy but who were subsequently diagnosed with mesothelioma. The appellee is Energy Future Holdings Corporation (EFH), which was a holding company for several energy properties. Those subsidiaries became defunct long ago as a result of asbestos litigation. EFH also filed for bankruptcy as a result of vast sums of money owed to asbestos debtors. The reorganization plan called for a notice period to latent claimants followed by a subsequent bar date for claims. The bankruptcy court confirmed the plan known as the confirmation order, which set a bar date for future claims.

On appeal, the issue was whether due process had been violated. The court first concluded that the case was ripe despite EHF’s argument to the contrary. Specifically, the appellants in this matter suffer from mesothelioma and have an immediate need for whatever process is available to vindicate their claims for damages. EHF also argued that the appeal was an improper collateral attack on the order rejecting the latent filers bar date. EHF believed that the order should have been appealed below. However, relying on the Ritzen case, the court concluded that the order was not final for purposes of appeal. The appellants attempted to argue that the statute contained an exception that would support a procedural due process argument. The court disagreed and stated that it did not. As for substantive due process, the appellants had to show that they were deprived of “an individual interest that is encompassed within the Fourteenth Amendment’s protection of life, liberty or property and the absence of procedures that provide due process of law. The court agreed that the appellants had noted a deprived interest. The question then became what mechanism was used by the state to constitutionally protect that interest. The appellants concede that the notice was received. And a post confirmation hearing was also available. As for latent claims, each claimant still has the opportunity to attempt reinstatement of his or her claims. In sum, the confirmation order provides for an opportunity for latent claimants to reinstate their claims. Consequently, the bankruptcy court’s order was affirmed.