Article III Standing to Object to a Company’s Bankruptcy Reorganizat...

By: James Scahill

St. John’s Law Student

American Bankruptcy Institute Law Review Staff

Adhering to the constitutional limits on a particular party’s standing to object, the Third Circuit in In re W.R. Grace & Co. affirmed the district court’s ruling and held that Garlock Sealing Technologies, LLC, (“Garlock”), did not have standing to object to W.R. Grace & Co.’s (“Grace”) proposed chapter 11 plan of reorganization.[1] Grace filed for chapter 11 bankruptcy protection after being threatened by numerous asbestos-related personal injury lawsuits.[2]  Since Garlock often purchased materials from Grace, the two companies were named as co-defendants in thousands of personal injury lawsuits.[3]  Garlock objected to Grace’s reorganization plan, alleging that as a former, current, and potential co-defendant, it had suffered injury because its contribution rights would be denied under the plan.[4]  But, the Third Circuit ruled that those future claims were insufficient to establish Article III standing because they were entirely speculative.  In particular, the court found that Garlock failed to introduce any evidence that it ever sought contribution from Grace, implied Grace in any claim, or suffered any judgment that would have entitled Garlock to assert contribution or setoff rights.[5]  Moreover, the court noted that Garlock had not even filed a claim in Grace’s bankruptcy case.[6]  The Third Circuit opined that for Garlock to have standing to assert contribution claims, the plaintiffs must either win or settle their cases, thereby giving rise to a contribution claim against Grace. Instead, the court noted that Garlock’s alleged injury was contingent on plaintiff verdicts or settlements, which made it more conjectural or hypothetical than actual or imminent, especially given that no such contribution claims had ever been asserted notwithstanding the thousands of ongoing cases involving Grace and Garlock.[7]

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