## Facts

- Johns-Manville, a major asbestos producer, faced extensive current and future asbestos personal-injury liability and filed for Chapter 11 reorganization.
- Prepetition asbestos personal-injury plaintiffs were stayed and treated as Class-4 creditors with unliquidated tort claims in the bankruptcy case.
- The confirmed plan created an Asbestos Health Trust to pay present and future asbestos claimants, funded in part by Manville’s ongoing business value.
- Persons exposed to Manville asbestos but not yet manifesting disease were treated as “future claimants” and represented in the case by a court-appointed legal representative.
- Lawrence Kane, a Class-4 creditor with a prepetition asbestos suit, objected to confirmation and appealed after the bankruptcy court confirmed the plan and the district court affirmed.

## Issues

1. Whether a present asbestos claimant had standing to challenge the plan as unlawfully impairing or discharging the rights of future asbestos claimants and other third parties.
2. Whether the plan’s notice and solicitation process violated due process or the Bankruptcy Code as to Kane and/or other affected persons.
3. Whether special voting procedures for Class-4 asbestos claimants violated the Bankruptcy Code or due process.
4. Whether the plan satisfied the confirmation requirements of 11 U.S.C. § 1129(a) and (b), including good faith, best interests, and feasibility.

## Decision

- The Second Circuit affirmed the district court’s order affirming confirmation of the Chapter 11 plan.
- The court held Kane lacked standing to attack the plan on the ground that it violated the rights of future claimants or other third parties, particularly where future claimants were represented by a court-appointed legal representative who did not join the appeal.
- The court rejected Kane’s remaining objections to voting and confirmation on the merits, concluding that alleged voting irregularities did not warrant reversal given overwhelming plan approval by present claimants.
- The court upheld findings that the plan met § 1129 requirements, including good faith, best interests, and feasibility.

## Legal Principles

- In bankruptcy appeals, a creditor may challenge a confirmed plan only to the extent the plan affects the creditor’s own direct economic interests; a present claimant generally cannot assert the rights of future claimants or other non-appealing third parties.
- Where future claimants are represented in the case by a court-appointed representative, a present claimant’s attempt to litigate future claimants’ rights may be rejected for lack of standing.
- Errors in plan voting or solicitation procedures do not require reversal absent prejudice affecting substantial rights; overwhelming approval can support a finding of harmlessness.
- A mass-tort reorganization plan may satisfy § 1129(a) and (b) when supported by good-faith proposal, a comparative showing that creditors are better off than in likely alternatives, and feasibility grounded in a workable funding and payment structure (including a dedicated trust mechanism).

## Conclusion

The court upheld the Johns-Manville reorganization plan and trust structure for resolving asbestos liabilities, limiting a present claimant’s appellate standing to his own interests and sustaining confirmation against challenges to voting procedures and § 1129 compliance.


Kane v. Johns-Manville Corp., 843 F.2d 636 (2d Cir. 1988)