[00:00:01] Speaker 00:
The next case in Ray Ben Niko Inc.

[00:00:06] Speaker 00:
Chris Hoff appearing for appellants.

[00:00:10] Speaker 00:
Eve Karasik appearing for Appellee Debtor.

[00:00:15] Speaker 05:
Okay.

[00:00:15] Speaker 05:
Mr. Hoff, you want to reserve some time for a bottle?

[00:00:19] Speaker 02:
Yes, your honor.

[00:00:19] Speaker 02:
I intend to reserve five minutes.

[00:00:21] Speaker 05:
Five minutes.

[00:00:22] Speaker 05:
Okay.

[00:00:22] Speaker 05:
Please go ahead.

[00:00:24] Speaker 02:
Good afternoon and may it please the court.

[00:00:26] Speaker 02:
My name is Chris Hoff and I represent the appellants, the current claimants.

[00:00:31] Speaker 02:
Bankruptcy court below either failed to apply or misapplied controlling Ninth Circuit precedent.

[00:00:37] Speaker 02:
Jensen?

[00:00:38] Speaker 05:
Let me ask you a question first of all.

[00:00:39] Speaker 05:
I'm trying to figure out who's who.

[00:00:40] Speaker 05:
When you say current claimants, you mean people who have suffered injury and have filed proofs of claim?

[00:00:49] Speaker 02:
Yes, Your Honor.

[00:00:49] Speaker 02:
My clients are individuals who were used and were exposed to Ben Nye products.

[00:00:57] Speaker 05:
And your clients don't include anybody who's filed a claim but hasn't yet suffered injury?

[00:01:03] Speaker 02:
No, Your Honor, those are individuals are referred to in the briefing as potential future claimants, individuals who were exposed to Ben Nye products, but who have not yet contracted an asbestos related disease.

[00:01:18] Speaker 05:
Okay, there's a third category in my mind, and that's the people who haven't yet contracted disease and did not file a proof of claim.

[00:01:26] Speaker 05:
Now that's it.

[00:01:26] Speaker 05:
That's yet another category in my thinking.

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I just kind of want to lay that out for you.

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So go ahead.

[00:01:30] Speaker 02:
Yes, your honor.

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Those are individual.

[00:01:32] Speaker 02:
Yes.

[00:01:32] Speaker 02:
Absolutely.

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Your honor.

[00:01:35] Speaker 02:
Uh, the bankruptcy court below either failed to apply or misapplied controlling ninth circuit precedent.

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Jensen's fair contemplation test is the law in this circuit and it is the right rule to determine when a dischargeable claim arises under the bankruptcy code.

[00:01:51] Speaker 02:
It is the right rule because it requires that an individual have pre-petition notice and knowledge of a potential claim before it can be discharged.

[00:02:03] Speaker 02:
In other words, the fair... Let me stop you again.

[00:02:05] Speaker 05:
I'm sorry, but are you really concerned about which claims get discharged?

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Your client's claims having been filed, having suffered injury, they're going to get discharged, right?

[00:02:16] Speaker 02:
Yes, Your Honor.

[00:02:18] Speaker 02:
Our concern is that if the potential future claimants, individuals who have been exposed to Ben Nye's products, but who have not yet contracted an asbestos-related disease, are included as claimants, as the court did below, determines that those individuals, folks who have been exposed but are not sick, have claims under

[00:02:46] Speaker 02:
11 USC 1015.

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If they have claims, those claims can be charged and never brought again.

[00:02:52] Speaker 02:
And the issue with that is that this is a pot plan.

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Ben and I put $50,000 into the pot for all claimants.

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So if folks who were exposed but are not yet sick,

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are determined to have claims that can be discharged in the bankruptcy, then those individuals are recovering from the same pot of money as my clients.

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And that is an interest that's protected by due process and fundamentally by the Ninth Circuit's decision in Jensen, which applied the fair contemplation test.

[00:03:28] Speaker 05:
But can't that concern about sharing in the pot?

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Couldn't that be addressed by your clients or somebody else with an interest objecting to the claims of these future claimants who have filed proofs of claim?

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Isn't that come down to the amount that they're gonna share into the pot?

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And isn't the proper way to address that question through claims objections?

[00:03:48] Speaker 02:
Well, your honor, in the approved amended plan, only the trustee is permitted to object to claims.

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So we do not have... Council, did you object to that provision?

[00:04:03] Speaker 02:
I am not sure, your honor.

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I don't know off the top of my head whether we did or not.

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I was not involved in the bankruptcy court proceedings and I don't recall whether we objected to that provision.

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So counsel, a related question is, you know, why shouldn't the panel conclude that you've abandoned all the objections you made in the bankruptcy proceeding if that you asserted

[00:04:29] Speaker 04:
who are basis not to confirm the plan since you haven't included any of them in your current appeal.

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That's fair.

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Is that fair for us to conclude that you've, you raise good faith.

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You raise that the plan isn't fair and equitable.

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You raise that it doesn't comply with 1191 B and C. You didn't raise any of those issues on appeal with us.

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You argued about what the effect of future claimants has on the pot and how that's unfair to them and unfair to your clients, but you didn't make any of the arguments that you made below.

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Have you abandoned that?

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Your Honor, these appeals, they're two appeals from the bar date order and the confirmation order, that defines the scope of what's before this court, which is fundamentally whether the bar date order,

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complied with Ninth Circuit President and the Bankruptcy Code, which we believe it did not.

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I mean, to that point, if they have claims, because they filed them, they can be adjudicated.

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If they don't have claims, they'll go out and you'll get whatever is fair.

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I mean, ostensibly, only those allowed claims should be paid.

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And that doesn't harm your clients if they allow claims get paid.

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Because they have a claim.

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If they don't, then you can object to it.

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But by the plan, you're telling me only the trustee can.

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But there was no objection to that.

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But there was no objection to that.

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I don't know, Your Honor, whether we did object or not.

[00:06:07] Speaker 01:
I don't see it as the Judge Gantz point.

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I don't see it in the appellate briefing.

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Whether we objected to the provision that only the trustee can object to the claim.

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Or that you're challenging that the trustee is the only entity that can object to the claims.

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Well, fundamentally, Your Honors, we believe that the bar date order ran afoul of Ninth Circuit precedent.

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Why does that impact you as to the future bar date?

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Because if they have claims, they have filed them now, and they must have been in fair contemplation because they filed them, and that can be thrashed out through the claims process.

[00:06:47] Speaker 02:
Well, Your Honor, for one, there's no future rep here, no future claims rep here.

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So there's no one to assert their rights.

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And an evaluation of the potential future claimants due process rights and their rights generally is necessary to determine whether those individuals have dischargeable claims that can be included in this pot plan.

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And none of that has taken place yet.

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We don't know what's going to happen.

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Potential future claimants that have filed proofs of claim, correct?

[00:07:16] Speaker 01:
I'm sorry, Your Honor, I didn't hear all of that.

[00:07:18] Speaker 01:
Your brief makes it clear that there are numerous potential future claimants, as Judge Farris has defined it, those who have filed a claim but has not had any injury or illness manifest yet, correct?

[00:07:30] Speaker 01:
Correct.

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All right.

[00:07:32] Speaker 01:
Those are the people that can argue about the unfairness.

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They are not here.

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Why do you get to, why do the current claimants get to tell us what is unfair for potential future claimants?

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Because it affects my client's rights, including future claimants in a pot plan directly affects my client's pecuniary recovery.

[00:07:55] Speaker 01:
Well, go ahead.

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I'm going to say that that only applies to future claimants who filed proofs of claim, right?

[00:08:02] Speaker 05:
Because people who didn't file proofs of claim aren't going to share in the pot.

[00:08:05] Speaker 02:
That's correct, Your Honor.

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How does the treatment of people who didn't file proofs of claim, how does that affect your client?

[00:08:13] Speaker 02:
It does not directly affect them.

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I believe my clients are directly affected by the potential future claimants who have filed proofs of claim.

[00:08:21] Speaker 02:
I believe there's about 200 of them.

[00:08:26] Speaker 02:
In Jensen, the Ninth Circuit concluded that the state had sufficient knowledge of the Jensen's potential liability to give rise to a contingent claim for cleanup costs before the Jensens filed their bankruptcy petition.

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This is from the Ninth Circuit's decision in the Coolerfield case.

[00:08:45] Speaker 04:
Council, I don't want you to go through the analysis of what fair contemplation is.

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I think we understand that.

[00:08:51] Speaker 04:
The question for me really is the debtors raise the argument that there has been no case in the country ever decided that said that the Jensen Fair Contemplation Test applies in bankruptcy asbestos cases.

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or any asbestos litigation case.

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Have you been able to identify one where they have said Jensen's rationale applies and precludes either an asbestos claim in state or federal court or in a bankruptcy proceeding?

[00:09:25] Speaker 02:
No, Your Honor, I'm not aware of such a case, but I'm also not aware of any cases in the Ninth Circuit since 1993 when Jensen was decided that have interpreted what a claim is under the bankruptcy code that did not follow Jensen.

[00:09:43] Speaker 02:
Every single case from the Ninth Circuit itself, from this court, from district courts in the Ninth Circuit, bankruptcy courts in the Ninth Circuit have all uniformly followed Jensen to a wide variety of fact patterns.

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So if the appellants can obtain a reversal of the order confirming the plan, if we determine that the only method for obtaining a bankruptcy discharge of asbestos liability for un-matured claims that have not manifested any injury as of the petition date, but may have known exposure to the debtor's products pre-petition is by complying with Section 524G, does that solve the problem for you?

[00:10:24] Speaker 02:
The 524G Trust would have certainly addressed fundamentally the due process issues that are at play here.

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Within the Ninth Circuit, there's never been a decision that allowed the discharge of future claims absent a 524G Trust.

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Congress enacted 524-G in 1994 following the John's-Mann bill decision, and they created a mechanism whereby you can discharge future claims without running a file of due process.

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And we believe that that's something that the debtor could have done here, but chose not to do.

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So if we were to make such a holding that 524-G is the only way that they could discharge what I'm gonna call un-matured,

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asbestos claims because they may have known about the exposure, but haven't had manifested any injuries resulting from that exposure.

[00:11:27] Speaker 04:
Then wouldn't, would that obviate the need for us to determine that the fair contemplation test is the applicable test in all asbestos related litigation cases?

[00:11:40] Speaker 02:
Yes, your honor.

[00:11:42] Speaker 04:
All right.

[00:11:42] Speaker 01:
So either one of those.

[00:11:44] Speaker 01:
Council, I want to be clear, because I believe your briefing was pretty clear when I read it that you were not challenging that the debtor had to proceed under 524G.

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Is that correct?

[00:11:56] Speaker 02:
That's correct, Your Honor.

[00:11:57] Speaker 02:
I just was responding to Judge Gann's question that if the case were decided based on 524G being required, that that would resolve the fair contemplation, what test applies issue.

[00:12:08] Speaker 01:
Certainly.

[00:12:09] Speaker 01:
I just want to make that is not your point on appeal.

[00:12:12] Speaker 02:
Correct, Your Honor.

[00:12:13] Speaker 02:
That's right.

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Unless Your Honors have any further questions at this time, I'd like to reserve the remainder of my time for rebuttal.

[00:12:20] Speaker 05:
Very good.

[00:12:20] Speaker 05:
Very good.

[00:12:21] Speaker 05:
Thank you.

[00:12:23] Speaker 05:
Ms.

[00:12:23] Speaker 05:
Karasek, please go ahead.

[00:12:25] Speaker 03:
Good afternoon, Your Honors.

[00:12:26] Speaker 03:
May I please record Eve Karasek on behalf of Appellee Ben Niko, Inc.

[00:12:33] Speaker 03:
I don't want to repeat what's in my briefs.

[00:12:35] Speaker 03:
I do want to highlight for the panel

[00:12:38] Speaker 01:
With that beginning opening, I'm going to take you up on it.

[00:12:43] Speaker 01:
Can you explain the relationship between the plan, the bar date order and the confirmation, the injunction that results from that?

[00:12:54] Speaker 01:
I think I'm having a little bit trouble understanding it.

[00:12:56] Speaker 01:
My understanding of the plan, I mean, the bar date order is that it precludes anyone

[00:13:04] Speaker 01:
who may have used your client's product pre-petition from participating in the bankruptcy if they don't file a proof of claim.

[00:13:15] Speaker 01:
And if they do not file a proof of claim, they are forever barred from participating in the bankruptcy, but also from filing any other claim against the debtor?

[00:13:24] Speaker 03:
The bar date was set so that the claims, a universe of claims could be determined.

[00:13:32] Speaker 03:
It was an expansive bar date.

[00:13:37] Speaker 01:
The record shows that... For the operation of the bar date order, does it preclude anyone else from ever suing the reorganized debtor, regardless of whenever the injury manifests, if usage of the product was pre-petitioned?

[00:13:57] Speaker 03:
Let me just divert for a second on that.

[00:14:01] Speaker 03:
The record shows that no asbestos

[00:14:05] Speaker 03:
has ever been proven to be the product and that- We understand that point.

[00:14:12] Speaker 03:
Yeah, and the reason why that's important is a lot of this is hypothetical.

[00:14:15] Speaker 05:
I mean, there is no real injury- Okay, let's entertain us.

[00:14:20] Speaker 05:
What happens if somebody who didn't file a proof of claim gets sick from asbestos in 10 years and says they used benign cosmetics?

[00:14:29] Speaker 05:
What happens if they sue benign?

[00:14:32] Speaker 03:
Well, we reserved rights

[00:14:34] Speaker 03:
they have their rights under Bankruptcy Rule 3003C3.

[00:14:38] Speaker 03:
They can come to the court and they can say, listen, you know, yeah, they did this wonderful notice.

[00:14:44] Speaker 03:
They, you know, publish.

[00:14:45] Speaker 05:
Which notice are we talking about?

[00:14:47] Speaker 05:
The bar date notice or the plan confirmation notice?

[00:14:51] Speaker 05:
Which one?

[00:14:51] Speaker 05:
Either one?

[00:14:52] Speaker 05:
Both?

[00:14:52] Speaker 03:
The bar date notice would allow them to come back into, if they could satisfy 3003C3,

[00:15:01] Speaker 05:
My problem with that point is it seems to me you're taking the position that the bar date notice expands the discharge.

[00:15:09] Speaker 05:
And the bar date notice sets a deadline to file claims against the estate.

[00:15:13] Speaker 05:
But you're saying it has a broader effect that it basically is.

[00:15:17] Speaker 05:
It is sort of a discharge and I don't see how that could be proper.

[00:15:21] Speaker 03:
Well, the the bankruptcy court found that the 3003 C3 opening.

[00:15:31] Speaker 03:
helped would prevent, you know, protect the rights of those who were allegedly exposed to the product.

[00:15:40] Speaker 03:
Now, I mean, we really need to think about this in terms of the facts of this case in the record below.

[00:15:46] Speaker 03:
I mean, I know I've just said it.

[00:15:49] Speaker 03:
I'm going to say it again.

[00:15:50] Speaker 03:
There was no asbestos in this product.

[00:15:52] Speaker 05:
I mean, this is not... And I get that your client doesn't want to defend against these claims.

[00:15:56] Speaker 05:
We're trying to figure out whether the bankruptcy law

[00:15:59] Speaker 05:
permits your client to avoid mounting that defense in the future?

[00:16:05] Speaker 03:
I believe it does, Your Honor.

[00:16:09] Speaker 05:
Okay, let's get back to where I was headed there.

[00:16:12] Speaker 05:
What exactly, which order does that?

[00:16:15] Speaker 05:
Is it the bar date order?

[00:16:16] Speaker 05:
I think your answer is yes.

[00:16:18] Speaker 05:
And my question is, how could that be?

[00:16:20] Speaker 05:
How can you have a bar date order that somehow broadens the discharge in bankruptcy?

[00:16:24] Speaker 03:
Well, the bar and order allows them to come back in under 3000 and C3.

[00:16:28] Speaker 03:
That's a remedy that's there all the time for creditors to come in and assert a claim.

[00:16:34] Speaker 05:
Well, who want to assert a claim against the estate?

[00:16:36] Speaker 05:
Yes.

[00:16:37] Speaker 03:
Correct.

[00:16:38] Speaker 03:
Correct.

[00:16:39] Speaker 05:
But what about creditors whose claims would not otherwise be discharged?

[00:16:43] Speaker 03:
Well,

[00:16:45] Speaker 03:
You mean under the plan, the plan injunction that... Okay, let's go to the plan injunction then.

[00:16:49] Speaker 05:
What in the plan injunction provides for a discharge of these future, let's call them, unfiled, unmanifested claims?

[00:16:58] Speaker 05:
People who didn't file proofs of claim didn't get sick yet.

[00:17:02] Speaker 05:
What in the plan cuts those people off?

[00:17:04] Speaker 03:
Well, the courts have found that that's appropriate.

[00:17:08] Speaker 05:
They have, I mean, in... Under the discharge, the bankruptcy discharge.

[00:17:13] Speaker 05:
The statutory discharge?

[00:17:14] Speaker 03:
Correct.

[00:17:15] Speaker 03:
I mean, the Energy Futures Holdings case, the Grossman's case, and other circuits have found that that discharge can cut that type of liability off.

[00:17:24] Speaker 04:
But they're also based on a different standard than the Ninth Circuit's Jensen test, right?

[00:17:29] Speaker 04:
They're based on conduct.

[00:17:31] Speaker 04:
So if they say that the Future Energy's case isn't based on the idea that you had to know you had a claim, they just said you had a claim because their debtor

[00:17:43] Speaker 04:
disclose that it did certain work and you were aware that it did certain work, so therefore you're barred.

[00:17:49] Speaker 04:
The Jensen test requires that not only do you know you used the product, but that you suffered some, manifested itself in some injury beyond the, so it was fair contemplation.

[00:17:59] Speaker 04:
That was not what was applied in future energies, right?

[00:18:02] Speaker 03:
Well, Your Honor, actually the Third Circuit and the Second Circuit don't apply the conduct.

[00:18:09] Speaker 03:
The conduct test is, if you think of it as a continuous, way far on the left.

[00:18:14] Speaker 03:
What they adopted was the pre-petition relationship test, which is set forth in the 11th Circuit opinion in the Piper Aircraft case, which basically is- That was rejected by the court in Jensen, right?

[00:18:28] Speaker 04:
They said they weren't going to apply the relationship test.

[00:18:32] Speaker 04:
They weren't going to apply the conduct test.

[00:18:33] Speaker 03:
Correct.

[00:18:34] Speaker 04:
The fair contemplation test.

[00:18:37] Speaker 03:
in the context of an environmental claim where they're balancing the issues of the CERCLA statute against the issues in the bankruptcy code.

[00:18:47] Speaker 03:
Yes, since then, courts have applied the fair contemplation test in various situations where there's a determination as to whether there's a valid claim for purposes of the bankruptcy code.

[00:19:03] Speaker 03:
But none of those cases involve

[00:19:07] Speaker 03:
um, personal injury tort claims, let alone asbestos claim, which is with, with the delayed latency problem.

[00:19:14] Speaker 05:
And if you look at other kinds of environmental claims have a long latency period.

[00:19:19] Speaker 05:
Plenty of poisons beyond asbestos have long latency periods, don't they?

[00:19:23] Speaker 03:
It's, it's, it's a different situation because you don't know what you don't know.

[00:19:27] Speaker 03:
And asbestos tort claims, what was the factor that actually caused the harm?

[00:19:35] Speaker 03:
You don't know.

[00:19:36] Speaker 03:
They could have been exposed to so many other things along the way, other products.

[00:19:39] Speaker 05:
That's not unique to asbestos, is it?

[00:19:41] Speaker 03:
In an environment, you have a spill or a release or something, and it's that particular release.

[00:19:49] Speaker 03:
It's not necessarily, it's not, those types of cases don't involve multiple spills.

[00:19:54] Speaker 03:
Those are not what those cases are.

[00:19:56] Speaker 05:
But people are exposed to other environmental factors that can cause disease.

[00:20:01] Speaker 05:
Well, it's like asbestos, right?

[00:20:02] Speaker 03:
I mean, I think it's different.

[00:20:04] Speaker 03:
I think it is distinct and different that you have a, if you look at these environmental cases, you have in the Jensen case, it was a tank of fungicide that was left that hadn't even leaked yet.

[00:20:17] Speaker 03:
And then later there was an inspector who came during the corporate case and, and said, Hey, this might be a problem.

[00:20:24] Speaker 03:
You need to get rid of it.

[00:20:26] Speaker 03:
Okay.

[00:20:27] Speaker 03:
And, um,

[00:20:28] Speaker 03:
And so that, that, that's just different than an asbestos personal injury claim where you're exposed to a product and then, you know, it takes 30, 40 years for the disease to develop.

[00:20:41] Speaker 03:
And then along the way, you may have used other products that.

[00:20:45] Speaker 04:
Look, so council, just to clarify, you, you are suggesting that the bar, the bar, the bar date notice in combination with the plan in combination with the order confirming the plan.

[00:20:57] Speaker 04:
would preclude not only Mr. Hoff's clients who have claimed, it would preclude anybody who filed a proof of claim but doesn't have a manifested injury yet.

[00:21:10] Speaker 04:
And it would preclude anyone who didn't file a proof of claim but used the product pre-petition, if you could prove that, from ever pursuing the reorganized debtor post confirmation.

[00:21:24] Speaker 03:
Those who were exposed

[00:21:27] Speaker 03:
but haven't manifested prior to the confirmation of the plan would be bound by the bar date order unless they could argue under 3003 C that that applied.

[00:21:40] Speaker 03:
And therefore they have a claim that should have been filed that is discharged in the bankruptcy.

[00:21:47] Speaker 03:
Folks that are exposed post confirmation, however, would not be barred.

[00:21:54] Speaker 03:
And that's another thing that if you,

[00:21:56] Speaker 03:
What the parents are really arguing for is a manifestation argument for claims.

[00:22:05] Speaker 03:
And again, I do want to point out that there's been a bit of a sleight of hand here in the trial court.

[00:22:11] Speaker 03:
And you can see from the record, the argument was future claimants who aren't their clients, they're really future clients, were being

[00:22:23] Speaker 03:
their due process rights were being impaired.

[00:22:27] Speaker 03:
Then when they realized that that was going to be problematic, that they then switched gears on appeal and said, no, no, no, no, no.

[00:22:36] Speaker 03:
What we're really concerned about is our clients and the divvying up at the $50,000.

[00:22:40] Speaker 03:
I do want to note for the court that claims objections have been filed.

[00:22:47] Speaker 03:
The bankruptcy court docket will show that the

[00:22:50] Speaker 03:
that the sub-five trustee has objected to nearly all of those claims, because they were not substantiated by anything other than a face page, here's a claim, and it's for 10 million S, as we showed in the demonstration.

[00:23:04] Speaker 01:
How are they supposed to be substantiated?

[00:23:06] Speaker 01:
This ultimately gets to the reality of the situation, right?

[00:23:08] Speaker 01:
You told them if you have any possibility of having a claim, you need to file a claim.

[00:23:13] Speaker 01:
They file a claim.

[00:23:14] Speaker 01:
Now you object to it, right?

[00:23:15] Speaker 01:
So you get it

[00:23:17] Speaker 01:
And then 10 years later, Judge Farris says this person comes up with some horrible disease that they believe was attributable to Ben Nye's products, which I understand you are saying that can't happen because there's never been any issue.

[00:23:35] Speaker 01:
But having filed, adjudicated the claim and been held not to have a valid claim, what happens later if the person does manifest?

[00:23:47] Speaker 03:
If there had been a declaration or something attached, these are just face pages, my claim, $10 million.

[00:23:54] Speaker 03:
And there's nothing attached.

[00:23:57] Speaker 03:
If there had been a declaration attached that said, I used this product, I worked at Disney, I was a character in a Disney parade, and I used this product, and I don't know if I'm going to be sick or not, but I want to reserve my right, I don't believe the sub-five trustee would have been able to object to that claim.

[00:24:15] Speaker 05:
He'd have let a $10 million claim stand on that?

[00:24:19] Speaker 03:
Well, there's an issue there because the only types of claims the trustee can object to in the bankruptcy court because of the restrictions of 157B are sort of procedural insufficient evidence types of claims.

[00:24:36] Speaker 03:
The other claims have to be brought in the district court, which...

[00:24:40] Speaker 04:
In the ordinary asbestos case where you have a large manufacturer and you have potential claims, future claims, and you have ongoing claims, litigation claims, there's usually the debtor proposes that the future claimants be represented by a separate council and

[00:25:02] Speaker 04:
That way you protect the interest of future claimants.

[00:25:05] Speaker 04:
They have a seat at the table, they get to participate in the process.

[00:25:09] Speaker 04:
That didn't occur in this case.

[00:25:11] Speaker 04:
You didn't offer separate counsel for future claimants, right?

[00:25:17] Speaker 03:
We did not seek the appointment of a future claims representative, neither did the appellants.

[00:25:22] Speaker 03:
But you want the discharge.

[00:25:25] Speaker 04:
They don't want the discharge.

[00:25:26] Speaker 04:
You're the one that wants to make sure that this plan gets confirmed and the discharge has the effect of precluding all these parties who, now you say, don't get to make arguments on appeal because they don't represent the interests of someone that's completely unrepresented in this case.

[00:25:41] Speaker 04:
Who makes those people's arguments then?

[00:25:44] Speaker 04:
Well, I would, I mean, this is a sub-chapter five case also, this overlay.

[00:25:49] Speaker 04:
Who cares?

[00:25:49] Speaker 04:
You're getting a complete discharge under chapter 11 if it's successful.

[00:25:53] Speaker 04:
If your confirmation order stands, everybody's precluded.

[00:25:57] Speaker 04:
It doesn't matter what section of the code you're using.

[00:26:00] Speaker 04:
It's the effect of the discharge that's a concern to the claimant.

[00:26:04] Speaker 03:
My point was that this is a very, this is a small company, a small debtor.

[00:26:08] Speaker 03:
There's only so much they could,

[00:26:11] Speaker 03:
actually afford.

[00:26:13] Speaker 03:
I mean, if you brought in yet a futures representative, that would have added more burden, more costs.

[00:26:20] Speaker 03:
And already, as the record clearly shows, there was no money under the subchapter five.

[00:26:29] Speaker 04:
So why didn't they just put it?

[00:26:31] Speaker 04:
Why didn't they just liquidate under chapter seven and walk away from that situation and get the discharge they wanted without the obligation to continue the business and put money up and get the avoidance actions and get the discharge?

[00:26:43] Speaker 04:
Why did they go through all that if there isn't anything at stake here?

[00:26:48] Speaker 03:
There is going forward if they operate, but under the three years of not of disposable income, which was $230,000, which was eaten up because of

[00:27:01] Speaker 03:
the appellants continued objection to everything that we did in this case.

[00:27:07] Speaker 03:
There's a business here.

[00:27:10] Speaker 03:
We didn't want to do chapter seven and shut it down.

[00:27:12] Speaker 03:
That would not have been in the interest of appellants either, because they would have gotten zero.

[00:27:19] Speaker 04:
But it wouldn't have affected future claimants.

[00:27:21] Speaker 03:
Well, they would have gotten zero too, either way.

[00:27:24] Speaker 03:
Either way, they get nothing.

[00:27:28] Speaker 05:
Can I ask one last question?

[00:27:29] Speaker 05:
We've almost run out of your time.

[00:27:32] Speaker 05:
How is the combination of the bar order and the discharges you interpreted different from the injunction you would have gotten if you'd complied with 524G?

[00:27:42] Speaker 05:
Putting aside the third party release part of 524G, which you're not seeking, how is this different from a 524G injunction?

[00:27:53] Speaker 03:
Well, a 524G injunction, I mean, 524G permits future claimants

[00:28:01] Speaker 03:
First of all, we couldn't get a 524G because there are... Precisely.

[00:28:06] Speaker 05:
That's my point.

[00:28:07] Speaker 05:
We're getting a 524G.

[00:28:10] Speaker 03:
In part because there's requirements that you have enough evidence as best as judgments to show that there's a substantial likelihood that you're going to have substantially more claims that merit a 524G.

[00:28:26] Speaker 03:
You could not have met that statutory test because there are none.

[00:28:30] Speaker 05:
After 20 years of litigation, starting in 2004, no one ever found a... I certainly understand how you couldn't have sustained a 524G case for a number of reasons.

[00:28:41] Speaker 05:
My question is, aren't you getting the same thing as the 524G injunction without satisfying the requirement of that section?

[00:28:49] Speaker 03:
We are getting an injunction through a regular Chapter 11.

[00:28:54] Speaker 03:
Under 524G, you get an injunction too.

[00:28:59] Speaker 01:
They're both affecting the definition of claims.

[00:29:04] Speaker 01:
It's really the ultimate issue.

[00:29:06] Speaker 01:
By virtue of the bar date order, you have expanded what would otherwise on a nice circuit precedent be defined as the existing claims to include future claims despite 524 G. Okay, I think I think we've taken you past your time.

[00:29:25] Speaker 05:
So

[00:29:26] Speaker 05:
So thank you very much for that.

[00:29:28] Speaker 05:
Thank you very much.

[00:29:29] Speaker 05:
Mr. Hoff, you've got about three minutes or so.

[00:29:33] Speaker 05:
Yeah, three minutes.

[00:29:33] Speaker 05:
Okay, go ahead, please, Mr. Hoff.

[00:29:35] Speaker 02:
Thank you, Your Honor.

[00:29:36] Speaker 02:
Just a few points.

[00:29:38] Speaker 02:
If the court does not apply Jensen here, it creates significant due process issues.

[00:29:45] Speaker 02:
The Third Circuit's decisions in Grossman's and Energy Future Holdings

[00:29:51] Speaker 02:
support that conclusion.

[00:29:52] Speaker 02:
Energy future holdings, the court said that it was a cautionary tale for debtors seeking to circumvent Section 524G, and part of that was the increased litigation costs associated with attempting to circumvent 524G.

[00:30:09] Speaker 02:
In engrossment, the 2010 case from the Third Circuit

[00:30:13] Speaker 02:
The court, in a footnote, actually recites the Jensen fair contemplation test and quotes the Ninth Circuit in the Zillog case and says that the Ninth Circuit has extended the fair contemplation test to an employment discrimination claim, noting that the test has been applied to a range of non-environmental claims.

[00:30:34] Speaker 02:
And with regards to the due process concerns in those Third Circuit decisions, in Grossman's, the court entirely punted on due process and said it was for the district court and bankruptcy court to figure out on a case-by-case basis.

[00:30:48] Speaker 02:
And in the Energy Future Holdings case, the court at the very end of the opinion, feeling compelled to the conclusion that it came to because of the earlier Grossman decision,

[00:30:59] Speaker 02:
finds that C3 is sufficient to satisfy due process for unknown future claimants who have not filed claims.

[00:31:14] Speaker 02:
to my mind just seems absurd that somehow it could comport with an individual future claimants due process rights to be able to act 10 years down the line when you get sick that you can go back to the bankruptcy court in Los Angeles and file a rule, find a lawyer to file a rule.

[00:31:35] Speaker 04:
Yes, your honor.

[00:31:37] Speaker 04:
So what we're struggling with though is how you have the standing to make that argument on appeal.

[00:31:44] Speaker 04:
since you don't represent any of those people, how do you get over that argument that debtors made and that we're struggling with?

[00:31:53] Speaker 02:
Your honor, our, my client's rights are directly affected by the inclusion of these individuals.

[00:32:02] Speaker 04:
If they're all objected to and they're all excluded by a claim objection by the sub chapter five trustee, if all of those claims are knocked out, then how are you adversely impacted?

[00:32:16] Speaker 02:
I'm not sure that we are, Your Honor, but that hasn't taken place.

[00:32:19] Speaker 02:
That's not what the factual situation, procedural situation is as we sit here today deciding this case.

[00:32:27] Speaker 02:
Let me ask, Counsel, what exactly are you asking for?

[00:32:29] Speaker 02:
To vacate the BARD aid order?

[00:32:32] Speaker 01:
What does that mean?

[00:32:34] Speaker 01:
You still have a large number of potential future claimants who have filed proofs of claim.

[00:32:41] Speaker 01:
All right, so what does that do?

[00:32:43] Speaker 01:
I mean, they've already filed supposedly, they're in fair contemplation.

[00:32:50] Speaker 01:
So what does that get you in light of your stated harm that you don't want your distribution to be affected?

[00:33:00] Speaker 02:
Well, Your Honor, we think their inclusion as potential claimants who received notice and decided to submit claims was an error.

[00:33:08] Speaker 01:
How can it be an error if they file... You don't get to adjudicate that through an objection to the claims bar date or even confirmation.

[00:33:17] Speaker 01:
You get to do that through a claims objection.

[00:33:21] Speaker 01:
You're not asking us to deny all of the future potential claimants here, are you?

[00:33:28] Speaker 01:
That's not before the court, Your Honor.

[00:33:30] Speaker 01:
Because it seems like you did.

[00:33:32] Speaker 01:
In the conclusion, you asked that they reverse the bar order and order that potential future claimants have no claims and are not barred from pursuing the claims.

[00:33:44] Speaker 01:
So I'm having trouble reconciling that.

[00:33:46] Speaker 02:
Well, that would be involved, you know, if the bar date order is reversed, then those individuals would not have claims that can be discharged in bankruptcy.

[00:33:57] Speaker 02:
If futures are not included in the bar date, only current claimants are dealt with in the plan.

[00:34:04] Speaker 01:
I think I've taken you over your time.

[00:34:06] Speaker 01:
Thank you.

[00:34:07] Speaker 05:
Okay.

[00:34:07] Speaker 05:
Thank you both very much.

[00:34:08] Speaker 05:
This is an interesting case.

[00:34:10] Speaker 05:
The matter is submitted.

[00:34:12] Speaker 05:
Thank you.

[00:34:12] Speaker 05:
Thank you.