## Facts

- Grossman’s Inc., a home-improvement retailer, sold asbestos-containing products before filing for Chapter 11.
- A consumer (Anita Henry) alleged exposure to asbestos from products purchased from Grossman’s years before the bankruptcy.
- Grossman’s confirmed a Chapter 11 plan and obtained a discharge and injunction before Henry was diagnosed or aware of any asbestos-related illness.
- Years after confirmation, Henry was diagnosed with mesothelioma and filed a state-court tort action, including against JELD-WEN, Inc. as an alleged successor.
- JELD-WEN argued the tort action was barred by the bankruptcy discharge/injunction because Henry held a discharged prepetition “claim.”
- Lower courts applied the Third Circuit’s prior accrual-based approach (from *Frenville* and the later “Piper” framework), under which a bankruptcy “claim” generally did not arise until a cause of action was cognizable under nonbankruptcy law.
- The Third Circuit heard the matter en banc to reconsider its definition of when a bankruptcy “claim” arises for latent-injury tort victims.

## Issues

1. When does a “claim” arise under the Bankruptcy Code for a person exposed prepetition to a debtor’s product but diagnosed with injury only after plan confirmation?
2. Whether the Third Circuit should continue to follow an accrual/right-to-sue approach tied to nonbankruptcy law, or adopt a broader exposure/conduct-based rule.
3. Whether, even if a latent-injury claimant holds a prepetition “claim,” the discharge can be enforced consistent with constitutional due process notice requirements.

## Decision

- The en banc court overruled *Frenville*’s accrual-based rule for determining when a bankruptcy “claim” arises.
- The court held that a bankruptcy “claim” may arise upon prepetition exposure to a debtor’s product or conduct, even if the injury has not manifested and no cause of action has accrued under state law.
- The court concluded Henry’s asbestos-related right to payment could be a prepetition claim potentially subject to the discharge/injunction.
- The court vacated the enforcement determination and remanded to address whether applying the discharge to Henry would satisfy due process, including whether she received constitutionally adequate notice (or equivalent protection through representation).

## Legal Principles

- “Claim” under 11 U.S.C. § 101(5)(A) is defined broadly to include contingent, unmatured, and unliquidated rights to payment, not limited by state-law accrual rules.
- For latent-injury torts, a “claim” can arise when the debtor’s prepetition conduct and the claimant’s exposure establish the relationship that can later support liability, even if injury and diagnosis occur post-confirmation.
- A bankruptcy discharge’s reach is constrained by due process: a discharge cannot constitutionally bar a claimant who did not receive notice meeting the requirements applicable to known or unknown creditors.
- Determining dischargeability for future or unknown tort claimants may require claimant-specific analysis of notice and procedural protections, even where the Code’s definition of “claim” is satisfied.

## Conclusion

The Third Circuit replaced its prior accrual-based approach with an exposure/conduct-based rule, holding that latent-injury tort rights to payment can constitute prepetition bankruptcy claims upon exposure, while requiring remand to determine whether enforcing the discharge against the particular claimant would comport with due process notice requirements.


In re Grossman’s Inc., 607 F.3d 114 (3d Cir. 2010)