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UNITED STATES BANKRUPTCY COURT

FOR THE WESTERN DISTRICT OF NORTH CAROLINA
Charlotte Division

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In re:
GARLOCK SEALING
TECHNOLOGIES LLC, et al.,
Debtors.1

Case No. 10-31607

Chapter 11
Jointly Administered

RESPONSE OF THE OFFICIAL COMMITTEE OF ASBESTOS CLAIMANTS AND

THE AD HOC COMMITTEE OF COLTEC ASBESTOS CLAIMANTS IN SUPPORT OF
THE DEBTORS MOTION TO APPROVE COMPROMISE AND SETTLEMENT OF
PRESENT AND FUTURE CANADIAN PROVINCIAL BOARD CLAIMS FOR
ASBESTOS-RELATED INJURY PAYMENTS
The Official Committee of Asbestos Claimants appointed in these Chapter 11 cases (the
Garlock ACC) and the Ad Hoc Committee of Coltec Asbestos Claimants (together, the
Committees) submit this response to the Debtors Motion to Approve Compromise and
Settlement of Present and Future Canadian Provincial Board Claims for Asbestos-Related Injury
Payments [Dkt. No. 5595] (the Motion).

In support of the Motion, the Committees

respectfully submit as follows:

1.

When, in early January 2016, the parties reopened negotiations in the

midst of what was then a hotly contested confirmation proceeding on an earlier plan, the Debtors
and Coltec Industries, Inc (Coltec) made clear the goal they were pursuing: a global resolution
that would effectively end asbestos-related litigation for their entire corporate group.

The

Debtors therefore sought means of resolving their exposure to asbestos claims not only in the

The Debtors are Garlock Sealing Technologies LLC (Garlock), Garrison Litigation
Management Group, Ltd. (Garrison), and The Anchor Packing Company.
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United States, but also in Canada. After difficult negotiations, the Debtors determined that two
agreements would be necessary to accomplish this ambitious objective: (1) a new plan of
reorganization that would win the support of the Committees and the Future Asbestos Claimants
Representative (the FCR), and (2) a separate agreement with workers compensation boards of
the provinces of Canada (the Provincial Boards) to curtail the risk and expense of asbestosrelated claims arising in Canada against Garlock of Canada Ltd. (Garlock of Canada), its
parent company, Garlock, or their affiliates.
2.

On March 17, 2016, the Debtors, Coltec, EnPro Industries, Inc. (EnPro), the

Committees, and the FCR executed the Term Sheet for Permanent Resolution of All Present and
Future GST Asbestos Claims and Coltec Asbestos Claims (Term Sheet), which formed the
basis for the consensual Modified Joint Plan of Reorganization (the Plan). But an agreement
with the ten Provincial Boards remained elusive. Accordingly, the Term Sheet provided that, as
a condition for confirmation of the Plan and for the occurrence of its Effective Date,
Debtors, EnPro, and Garlock of Canada Ltd shall have entered into
a written agreement with the Canadian provincial workers
compensation boards (the Provincial Boards) resolving all
remedies the Provincial Boards may possess under Canadian law
or in the United States under U.S. law against Garlock of Canada
Ltd, Debtors, or any Affiliate of Debtors and providing that the
Provincial Boards shall deliver releases for all pending asbestosrelated claims and a covenant not to bring suit or otherwise seek
recovery in the future from Garlock of Canada Ltd, GST, Coltec,
EnPro, the Trust, or any of Debtors or EnPros other Affiliates for
any present or future asbestos-related claim . . . .2
The Term Sheet also provided that the Debtors would move, on notice, for entry of an order
approving any agreement they might achieve with the Provincial Boards, and that confirmation
of the Plan and the occurrence of the Effective Date need not occur unless this Court

Term Sheet at 10 [Dkt. No. 5444-3].

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shall have entered an order that either approves such agreement or

concludes that bankruptcy court approval is not necessary and such
order shall have become a final order . . . .3
3.

In November 2016, Garlock of Canada, Garlock, Garrison, Coltec, and EnPro on

the one hand and the Provincial Boards on the other hand reached the written Stipulation and
Settlement Agreement of Present and Future Canadian Provincial Boards Claims for AsbestosRelated Injury Payments (the Settlement Agreement) that is attached to the Motion. The
Debtors so advised the FCR and the Committees and, by the Motion, promptly submitted the
Settlement Agreement for this Courts review and approval pursuant to Rule 9019 of the Federal
Rules of Bankruptcy Procedure. Although the Debtors, Coltec, and EnPro have the unilateral
right to waive the related conditions to the confirmation and consummation of the Plan, the Plan
does not obligate them to do so.4
4.

The Committees support the Motion and urge the Court to permit the signatories

to close and perform the Settlement Agreement in accordance with its terms. The Settlement
Agreement specifies that it shall not be binding unless and until the Plan is confirmed and takes
effect.5
5.

At the hearing on the Motion, the Debtors will undertake the burden of satisfying

the criteria for approval of a compromise under Rule 9019, to the extent that the Bankruptcy
Courts imprimatur may be necessary or appropriate for a settlement of the Canadian claims.
The Committees expect that ample factual and legal grounds will justify such approval.
7.

Among its other benefits, the Settlement Agreement will curtail any risk that

claims of the Provincial Boards could be asserted in the United States and turn into a significant
3

Id.
See Modified Joint Plan of Reorganization of Garlock Sealing Technologies LLC, et. al. and
Oldco, LLC, Proposed Successor by Merger to Coltec Industries Inc, 7.8(jj) [Dkt. No. 5443].
5
Motion, Ex. B, 7.
4

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burden on the Asbestos Trust. The releases and covenants not to sue that the Provincial Boards
will be obliged to deliver if the Settlement Agreement takes effect will protect the Asbestos
Trust, just as they will protect the various companies in the Debtors corporate group.6 Thus, the
Settlement Agreement holds assurance for the Asbestos Trust and its beneficiaries that claims of
the Provincial Boards, present and future, will never deplete the $480 million that the Debtors
and Coltec must contribute to the Trust under the Plan. The Settlement Agreement also calls for
the Provincial Boards to forego the assertion of any objections to confirmation of the Plan,7 the
prosecution of which could conceivably bog down these protracted Chapter 11 cases in yet more
litigation and delay the creation and funding of the Trust.
8.

The FCR opposes the Motion. The FCRs filed Objection [Dkt. No. 5629] does

not specify any grounds opposition, but he has elsewhere suggested that Motley Rice LLCs
representation of the Provincial Boards with respect to the Settlement Agreement is somehow
problematic because the firms lead partner, Joseph F. Rice, Esq., has served as co-chair of the
Garlock ACC.8 Any insinuation of that kind is misplaced, considering that:
a.

Mr. Rice and Motley Rice LLC recused themselves when the Committees

considered whether or not to accept the Term Sheet.

See Motion, Ex. B, 2 (obligating each Provincial Board to release and extinguish all claims
against any of the Garlock Parties, the Trust, or any Asbestos Protected Party) (emphasis
added).
7
See id. 9 (obligating each Provincial Board to refrain from filing any objection to the Joint
Plan).
8
See Future Claimants Representatives Obj. to Debtors Emergency Mot. to Extend
Canadian Provincial Workers Compensation Boards Voting and Obj. Deadlines at 2 [Dkt. No.
5599].
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b.

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[A] committees assent to a plan or a transaction does not bind its

members, let alone its constituents . . . .9 It follows that Motley Rice LLCs representation of a
claimant appointed to the Garlock ACC does not disable that firm or Mr. Rice from advocating
for the independent position of the Provincial Boards.
c.

In keeping with the presumptive territorial limits of American judicial

power, the Plan does not purport to affect the rights or remedies that foreign claimants may have
in foreign courts based on asbestos exposures suffered outside of the United States. Indeed, the
Plan expressly provides:
Notwithstanding anything herein to the contrary, nothing in
this Plan shall discharge, bar, enjoin, release, or extinguish any
Foreign Asbestos Claim, unless the Foreign Asbestos Claim is
filed, asserted, or sought to be enforced in or before any court or
tribunal within the judicial system of the United States.10
d.

Taking a realistic view of their situation, Garlock of Canada, EnPro,

Coltec, and the Debtors have concluded that the Settlement Agreement provides appropriate
means of resolving present and future claims of the Provincial Boards and thereby, in
conjunction with confirmation of the Plan, achieving a global peace. The FCR accepted the
Term Sheet and the Plan based on the Debtors and Coltecs commitment to contribute $480
million to the Trust. That their corporate group chooses to devote additional resources to settling
9

In re Refco Inc., 336 B.R. 187, 197 (Bankr. S.D.N.Y. 2006) (citations omitted); see also
Creditors Comm. of the Estate of Donlevys, Inc. v. Koo (In re Donlevys, Inc.), 111 B.R. 1, 2
(Bankr. D. Mass. 1990) (the committee does not have statutory authority to bind creditors to the
acceptance of a plan proposal).
10
Plan 8.5. A Foreign Asbestos Claim is an Asbestos Claim held or asserted by an Entity
that both is not a citizen or permanent resident of the United States, and whose Asbestos Claim is
not based on alleged exposure in the United States. Id. 1.1.82. Such a claim is not
compensable under the Claims Resolution Procedures promulgated by the Plan unless the
holder files a lawsuit in the United States, in which event the holder will be paid a minimal
amount if the claim otherwise qualifies under applicable criteria. Id., Ex. B. 4.5. The
Provincial Boards have no obligation to sue in the United States, and the Plan does not and could
not deprive them of the right to pursue remedies in Canada.
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claims of the Provincial Boardsa resolution that the Plan, itself, could not impose on those
foreign entitiesimplicates no interest for which the FCR is responsible and gives no just cause
for complaint.

CONCLUSION
The Motion should be granted.
Dated: December 20, 2016

Respectfully submitted,
CAPLIN & DRYSDALE, CHARTERED

By: /s/ Trevor W. Swett III_____________

Trevor W. Swett III
(tswett@capdale.com)
Jeffrey A. Liesemer
(jliesemer@capdale.com)
One Thomas Circle, N.W.
Washington, DC 20005
Telephone: (202) 862-5000
Elihu Inselbuch
(einselbuch@capdale.com)
600 Lexington Avenue, 21st Floor
New York, NY 10022
Telephone: (212) 379-0005
MOON WRIGHT & HOUSTON, PLLC
Travis W. Moon
(tmoon@mwhattorneys.com)
121 W. Trade Street
Charlotte, NC 28202
Telephone: (704) 944-6560

Co-Counsel for the Official Committee of

Asbestos Personal Injury Claimants

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