Duro Dyne - Brief of DOJ in Opposition To FCR

Case 3:18-cv-15563-MAS Document 8 Filed 02/08/19 Page 1 of 75 PageID: 43
No. 3:18-cv-15563-MAS
Before the Honorable Michael A. Shipp, United States District Court Judge
IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF NEW JERSEY
In re DURO DYNE NATIONAL CORP., et al., Debtors
ANDREW R. VARA, ACTING UNITED STATES TRUSTEE, Appellant,
v.
DURO DYNE NATIONAL CORP., et al., Appellees.
ON APPEAL FROM THE UNITED STATES BANKRUPTCY COURT

FOR THE DISTRICT OF NEW JERSEY
BRIEF OF APPELLANT ANDREW R. VARA,

ACTING UNITED STATES TRUSTEE
RAMONA D. ELLIOTT ANDREW R. VARA

Deputy Director/General Counsel Acting United States Trustee, Region 3
P. MATTHEW SUTKO MARTHA R. HILDEBRANDT
Associate General Counsel Assistant United States Trustee
ROBERT J. SCHNEIDER, JR. MITCHELL B. HAUSMAN
JOHN SHEAHAN Trial Attorney
Trial Attorneys
Department of Justice
Department of Justice Office of the United States Trustee
Executive Office for United One Newark Center, Suite 2100
States Trustees Newark, NJ 07102
441 G Street, NW, Suite 6150 Tel: (973) 645-3014
Washington, DC 20530 Email: robert.j.schneider@usdoj.gov
TABLE OF CONTENTS
TABLE OF AUTHORITIES ................................................................................... iv

STATEMENT OF APPELLATE JURISDICTION ..................................................1
INTRODUCTION .....................................................................................................1
STATEMENT OF THE ISSUES...............................................................................4
STANDARD OF REVIEW .......................................................................................6
STATEMENT OF THE CASE ..................................................................................7
I. Statutory Framework ...................................................................................7

A. Section 524(g) and asbestos bankruptcies ...............................................7
B. The section 101(14) disinterestedness standard ......................................8

C. Code sections employing—and not employing—section 101(14) .........8
D. Statutory role of the United States Trustee .............................................9

II. Statement of the Facts ..................................................................................9
A. Duro Dyne, Mr. Fitzpatrick (who was being paid by Duro Dyne), and
lawyers representing present asbestos claimants craft a pre-negotiated
bankruptcy plan before a case is filed. ....................................................9
B. Duro Dyne files for chapter 11 relief and asks the bankruptcy court to
appoint Mr. Fitzpatrick as the FCR. ......................................................11
C. The United States Trustee objects to the FCR motion. .........................13

D. The bankruptcy court allows limited discovery—to which limited
responses are received. ..........................................................................14
E. The bankruptcy court conducts an evidentiary hearing, but restricts

inquiry into Mr. Fitzpatrick’s prepetition activities because of the
“common interest” privilege..................................................................17
i
F. The bankruptcy court appoints Mr. Fitzpatrick as FCR without

soliciting nominations............................................................................18
SUMMARY OF THE ARGUMENT ......................................................................20
ARGUMENT ...........................................................................................................24
I. The Court Erred by Limiting Its Consideration to a Single Candidate

Selected by the Debtors and the Lawyers for the Present Claimants. .......24
A. Section 524(g) requires an independent FCR who will protect the

interests of future claimants (victims whose interests are adverse to
those of the debtors and the present claimants).....................................24
B. Section 524(g)’s requirement that the bankruptcy court identify and

appoint an FCR of its own choosing places an obligation upon that
court which is unique under the Bankruptcy Code, one that precluded it
from simply appointing the person picked by the future claimants’
adversaries: the debtors and the Lawyers for the present claimants. ....27
II. The Court Below Also Erred as a Matter of Law by Considering Only
Whether Mr. Fitzpatrick Had a Disabling Conflict While Refusing to
Consider His Actions and Relationships in Other Cases. .........................32
III. The Court Below Erred by Applying Conflict Criteria That Govern Other
Code Provisions But Not Section 524(g), an Error That Caused It to
Ignore the Even Higher Standards That Apply to Fiduciaries Who
Represent Absent Parties When Deciding Mr. Fitzpatrick’s Eligibility to
Act as the FCR. ..........................................................................................36
A. Section 524(g)’s text and the Code’s structure establish the court used
the wrong conflicts standard. .................................................................36
B. Section 524(g)’s evident purpose confirms that the traditional standards
applicable to fiduciaries who represent absent parties must be used to
determine an applicant’s eligibility to represent absent asbestos
claimants. ...............................................................................................39
IV. Mr. Fitzpatrick Should Not Have Been Appointed as FCR under Either
Standard Because He Is Not an Independent Fiduciary under the Facts of
This Case....................................................................................................41
ii
V. The Bankruptcy Court Erred by Precluding Inquiry at Trial under the

Common Interest Privilege into Mr. Fitzpatrick’s Pre-Bankruptcy
Communications with the Debtors and the Lawyers for the Current
Claimants. ..................................................................................................49
CONCLUSION ........................................................................................................54
CERTIFICATE OF COMPLIANCE .......................................................................55
ADDENDUM ..........................................................................................................56
CERTIFICATE OF SERVICE ................................................................................63
iii
TABLE OF AUTHORITIES
Page(s)
Cases
Abramski v. United States,
573 U.S. 169 (2014) ............................................................................................27
ACandS Inc. v. Travelers Cas.,
No. 04-cv-00123-JJF (D. Del.) ...........................................................................34
In re ACandS, Inc.,
311 B.R. 36 (Bankr. D. Del. 2004) ...............................................................33, 34
Amchem Prods. v. Windsor,

521 U.S. 591 (1997) ............................................................................................25
In re ASARCO, LLC,
No. 05-21207, 2011 WL 2975716 (Bankr. S.D. Tex. July 20, 2011) ................ 31
In re Big Rivers Elec. Corp.,

355 F.3d 415 (6th Cir. 2004) ..............................................................................45
Bullard v. Blue Hills Bank,

135 S. Ct. 1686 (2015) ..........................................................................................1
In re Busy Beaver Bld. Ctrs., Inc.,
19 F.3d 833 (3d Cir. 1994) .................................................................................29
In re Channel Home Ctrs., Inc.,

989 F.2d 682 (3d Cir. 1993) .........................................................................21, 37
Collie v. Fergusson,
281 U.S. 52 (1930) ..............................................................................................39
In re Combustion Eng’g,
391 F.3d 190 (3d Cir. 2004), as amended (Feb. 23, 2005) ....................26, 40, 41
In re Congoleum,
426 F.3d 675 (3d Cir. 2005) ...............................................................................43
iv
In re Dalkon Shield IUD Prods. Liab. Litig.,

693 F.2d 847 (9th Cir. 1982), as amended (July 15, 1982) ................................47
In re Downing’s Estate,
162 Pa. Super. 354, 57 A.2d 710 (Pa. 1948) ......................................................46
In re Duro Dyne National Corp.,

Case No. 18-27963 (MBK) (Bankr. D.N.J.) .......................................................10
Eagan v. Jackson,
855 F. Supp. 765 (E.D. Pa. 1994) .......................................................................46
Eisen v. Carlisle & Jacquelin,

391 F.2d 555 (2d Cir. 1968) ...............................................................................47
Fed. Ins. Co. v. W.R. Grace,

No. 04-844, 2004 WL 5517843 (D. Del. Nov. 22, 2004).......................31, 36, 37
In re Federal-Mogul Glob. Inc.,
684 F.3d 355 (3d Cir. 2012) ...............................................................................38
In re Garlock Sealing Technologies, LLC,
504 B.R. 71 (Bankr. W.D.N.C. 2014) ................................................................35
General Dynamics Land Systems, Inc. v. Cline,

540 U.S. 581 (2004) ............................................................................................27
General Elec. Co. v. Joiner,
522 U.S. 136 (1997) ..............................................................................................7
In re General Motors Corp. Engine Interchange Litig.,
594 F.2d 1106 (7th Cir. 1979) ............................................................................50
Gray v. Gladney Ctr.,
79 Ark. App. 165, 87 S.W.3d 797 (Ark. Ct. App. 2002) (Hart, J.,
concurring) ..........................................................................................................48
Hansberry v. Lee,
311 U.S. 32 (1940) ............................................................................31, 39, 47, 48
v
In re Hathaway Ranch P’ship,

116 B.R. 208 (Bankr. C.D. Cal. 1990) ...............................................................43
In re Hechinger Inv. Co. of Del.,

298 F.3d 219 (3d Cir. 2002) ................................................................................. 6
In re Johns-Manville Corp.,
36 B.R. 743 (Bankr. S.D.N.Y. 1984)..................................................................31
In re Johns-Manville Corp.,
551 B.R. 104 (S.D.N.Y. 2016) ...........................................................................26
Kayes v. Pac. Lumber Co.,

51 F.3d 1449 (9th Cir. 1995) ..............................................................................40
Kollsman v. Cohen,
996 F.2d 702 (4th Cir. 1993) ..............................................................................39
Larson v. Dumke,
900 F.2d 1363 (9th Cir. 1990) ............................................................................39
In re Leslie Controls, Inc.,
437 B.R. 493 (Bankr. D. Del. 2010) .............................................................51, 52
In re Leslie Controls, Inc.,

No. 11-0013 2011 WL 1226402 (D. Del. Mar. 25, 2011) ......................36, 37, 51
In re Marvel Entertainment Group, Inc.,
140 F.3d 463 (3d Cir. 1998) .........................................................................32, 41
Mosser v. Darrow,
341 U.S. 267 (1951) ............................................................................................49
In re Motions Seeking Access to 2019 Statements,
585 B.R. 733 (D. Del. 2018), notice of appeal filed sub nom. In re
ACandS, Inc., et al., No. 18-1951 (3d Cir.) ........................................................34
In re Mountain States Power Co.,

118 F.2d 405 (3d Cir. 1941) ...............................................................................45
vi
Professional Ins. Mgmt. v. Ohio Cas. Grp. of Ins. Cos. (In re Prof’l
Ins. Mgmt.),
285 F.3d 268 (3d Cir. 2005) .................................................................................6
Prosser v. Gerber (In re Prosser),
777 F.3d 154 (3d Cir. 2015) ................................................................................. 7
In re Quigley Co., Inc.,

No. 04-15739, 2009 WL 9034027 (Bankr. S.D.N.Y. Apr. 24, 2009) ................ 25
Radner v. IAS Warranty, Inc.,

No. 17-12704, 2018 WL 4352692 (E.D. Mich. Sept. 12, 2018) ........................40
Rome v. Braunstein,
19 F.3d 54 (1st Cir. 1994) ...................................................................................46
Russello v. United States,

464 U.S. 16 (1983) ..............................................................................................38
Scott v. University of Del.,
601 F.2d 76 (3d Cir. 1979) .................................................................................26
In re Simplexity, LLC,
584 B.R. 495 (Bankr. D. Del. 2018) .............................................................50, 51
In re South Station, LLC,

464 B.R. 46 (Bankr. D. Utah 2011) ....................................................................43
In re Star Broad., Inc.,

81 B.R. 835 (Bankr. D.N.J. 1988) ......................................................................52
In re TBR USA, Inc.,
429 B.R. 599 (Bankr. N.D. Ind. 2010) ...............................................................30
In re Teleglobe Commc’ns Corp.,

493 F.3d 345 (3d Cir. 2007) ...............................................................................50
In re Thorpe Insulation Co.,

No. LA07-19271-BB (Bankr. C.D. Cal. Dec. 12, 2007) ..............................36, 37
vii
United States v. 6.45 Acres of Land,

409 F.3d 139 (3d Cir. 2005) ................................................................................. 6
Universal Minerals, Inc. v. C.A. Hughes & Co.,

669 F.2d 98 (3d Cir. 1981) ...................................................................................6
In re UNR Industries,
46 B.R. 671 (Bankr. N.D. Ill. 1985) .............................................................31, 37
Velazquez v. Massachusetts Fin. Servs. Co.,

320 F. Supp. 3d 252 (D. Mass. 2018) .................................................................45
In re Vouzianas,
259 F.3d 103 (2d Cir. 2001) ...............................................................................28
In re W.R. Grace & Co.,

729 F.3d 311 (3d Cir. 2013) .........................................................................24, 40
Williams v. Super. Ct.,
54 Cal. Rptr. 3d 13 (Cal. Ct. App. 2007) ......................................................40, 48
In re Williams,
277 B.R. 114 (Bankr. C.D. Cal. 2002) ...............................................................30
Woods v. City National Bank & Trust Co.,

312 U.S. 262 (1941) ............................................................................................49
Young v. Higbee Co.,
324 U.S. 204 (1945) ............................................................................................44
Statutes
11 U.S.C. § 101(14) ..........................................................................................passim
11 U.S.C. § 101(14)(C) ......................................................................................19, 52
11 U.S.C. § 307 ..........................................................................................................9
11 U.S.C. § 327 ............................................................................................23, 37, 38

11 U.S.C. § 327(a) .........................................................................................8, 28, 37
viii
11 U.S.C. § 332 ..................................................................................................23, 38

11 U.S.C. § 332(a) ...............................................................................................8, 37
11 U.S.C. § 333 ..................................................................................................23, 38
11 U.S.C. § 333(a)(2)(A) .....................................................................................8, 37
11 U.S.C. § 524(g) ............................................................................................passim

11 U.S.C. § 524(g)(2)(B)(ii)(V)...........................................................................7, 33
11 U.S.C. § 524(g)(4)(B)(i) ..............................................................................passim

11 U.S.C. § 524(g)(5).................................................................................................7
11 U.S.C. § 1101(1) ...................................................................................................8
11 U.S.C. § 1102 ......................................................................................................14
11 U.S.C. § 1103 ......................................................................................................14
11 U.S.C. § 1104 ...............................................................................................passim

11 U.S.C. § 1104(a)(1) ...............................................................................................8
11 U.S.C. § 1104(c) ...................................................................................................8
11 U.S.C. § 1104(d) .......................................................................................8, 28, 37
11 U.S.C. § 1125 ......................................................................................................12

11 U.S.C. § 1141(d)(1)(A) .........................................................................................7
28 U.S.C. § 157(a) .....................................................................................................1
28 U.S.C. § 157(b) .....................................................................................................1

28 U.S.C. § 158(a)(1) .................................................................................................1
28 U.S.C. § 158(c)(2) .................................................................................................1
28 U.S.C. §§ 581–589 ................................................................................................9
ix
28 U.S.C. § 1334(a) ...................................................................................................1
Other Authorities
Fed. R. Bankr. P. 8002(a)(1) ......................................................................................1
H.R. Rep. No. 95-595 (1977), reprinted in 1978 U.S.C.C.A.N. 5963 ...................... 9
Lester Brickman, Ethical Issues in Asbestos Litigation, 33 Hofstra L.

Rev. 833 (2005) ..................................................................................................45
Lester Brickman, Fraud and Abuse in Mesothelioma Litigation, 88
Tul. L. Rev. 1071 (2014) ....................................................................................35
Lloyd Dixon, Geoffrey McGovern & Amy Coombe, RAND Institute
for Civil Justice, Asbestos Bankruptcy Trusts: An Overview of
Trust Structure and Activity with Detailed Reports on the Largest
Trusts, 56 (2010) ...........................................................................................34, 42
Marc C. Scarcella & Peter R. Kelso, A Reorganized Mess: The

Current State of the Asbestos Bankruptcy Trust System, v. 14, #7
Mealey’s Asbestos Bankruptcy Report (Feb. 2015)...........................................44
Peter Kelso & Marc Scarcella, U.S. Chamber Inst. for Legal Reform,
Dubious Distribution: Asbestos Bankruptcy Trust Assets and
Compensation (Mar. 2018) ...................................................................................4
S. Todd Brown, How Long is Forever This Time? The Broken
Promise of Bankruptcy Trusts, 61 Buff. L. Rev. 537 (2013) ............................... 4
S. Todd Brown, Section 524(g) Without Compromise: Voting Rights
and the Asbestos Bankruptcy Paradox, 2008 Columbia Bus. Law
Rev. 841 ........................................................................................................44, 53
U.S. Chamber Inst. for Legal Reform, Insights & Inconsistencies:

Lessons from the Garlock Trust Claims (Feb. 2016)..........................................35
William P. Shelley, Jacob C. Cohn & Joseph A. Arnold, The Need For
Transparency Between the Tort System and Section 524(g) Asbestos Trusts,
17 J. Bankr. L. & Prac. 2 (April 2008).................................................................42
x
STATEMENT OF APPELLATE JURISDICTION
The bankruptcy court had jurisdiction under 28 U.S.C. §§ 157(a) and (b),
and 1334(a), over the chapter 11 bankruptcy cases filed by Duro Dyne National
Corp. and related entities. The bankruptcy court’s October 17, 2018, order
appointing a legal representative to represent future asbestos personal injury
claimants pursuant to 11 U.S.C. § 524(g)(4)(B)(i) was a final order. See Bullard v.
Blue Hills Bank, 135 S. Ct. 1686, 1692 (2015) (“Orders in bankruptcy cases may
be immediately appealed if they finally dispose of discrete disputes within the
larger case.”) (internal quotation omitted).
The government timely filed a notice of appeal under 28 U.S.C. § 158(c)(2)
and Fed. R. Bankr. P. 8002(a)(1) on October 31, 2018. This Court has jurisdiction
to hear this appeal under 28 U.S.C. § 158(a)(1), which grants district courts
jurisdiction to hear appeals from final judgments, orders, and decrees of
bankruptcy judges.
INTRODUCTION
Reversal is necessary so the court below may appoint an independent
fiduciary to represent people who used the debtors’ asbestos products and will later
become sick from them. Congress enacted section 524(g) of the Bankruptcy Code
to address the unique nature of asbestos bankruptcies like this one. Under it,
1
Congress gives the Duro Dyne debtors the substantial benefit of extinguishing all
their asbestos-related liabilities, including claims from people who are not yet sick.
In return, Congress requires the bankruptcy “court [to] appoint[] a legal
representative for purposes of protecting the rights of persons that might
subsequently” have claims. 11 U.S.C. § 524(g)(4)(B)(i). This fiduciary is
typically termed a “future claims representative”, or “FCR” for short. Because of
the extraordinary relief that section 524(g) grants, it is the only provision in the
Bankruptcy Code where Congress requires the court and not the parties to identify
and select the bankruptcy fiduciary.
The court erred here by simply deferring to the debtors’ and present
claimants’ (those already suffering from asbestos exposure) FCR choice, Mr.
Lawrence Fitzpatrick. Subject only to a limited conflicts inquiry, the court
accepted their choice despite their interests being adverse to the future claimants
the FCR would represent. The text, structure, and evident purpose of section
524(g) make plain this was an error of law. It was the court’s responsibility to
identify and select the best candidate, but it did not solicit other candidates or
invite others to make recommendations. Its actions do not satisfy the independent
responsibility that section 524(g) places upon it.
2
Mr. Fitzpatrick might be an appropriate FCR in another case, but not in this
one. Here, Mr. Fitzpatrick lacks necessary independence because he had been
retained and paid by the debtors for pre-bankruptcy asbestos work relating to their
case. He had agreed—again pre-bankruptcy—to become the FCR and had
committed in advance to support a bankruptcy plan the debtors and the present
claimants wanted. That plan guarantees Mr. Fitzpatrick future employment by the
post-bankruptcy trust. Given these entanglements, it was error to appoint him as
the future claimants’ representative.
Due process dictated that the absent future claimants have their interests
protected by an independent fiduciary. They are sheet metal workers and others
who work in the heating and cooling trades. They are not yet sick. Their
independent fiduciary must press the debtors to make larger plan contributions to
better cover future claims. He must press the present claimants (and their lawyers)
to accept procedures that ensure post-bankruptcy payments are not diluted by
overpaying current claimants. If, as has been the case in other asbestos
bankruptcies, the debtors pay too little into the trust or present claimants exhaust it
too quickly, then future claimants will receive little or nothing. 1
1
These concerns are not hypothetical. “[A]lthough trusts are established on the
promise to pay all current and future victims equitably, this promise has already
3
On remand, the court can protect future claimants by expanding its search to
identify a person who does not have Mr. Fitzpatrick’s entanglements with the
debtors and the present claimants. Selecting such an independent fiduciary will
provide future claimants the due process protections they have the right to receive.
STATEMENT OF THE ISSUES
1. In this asbestos bankruptcy case, 11 U.S.C. § 524(g)(4)(B)(i) required
the court below to appoint an independent fiduciary to be “the legal representative”
for people who will become sick from the debtors’ asbestos products, but who are
not yet sick. Given the obligation placed on the court to make the selection
independently, as section 524(g)’s and the Bankruptcy Code’s text, structure, and
evident purpose provide, did the court err by limiting its consideration to a single
candidate—Lawrence Fitzpatrick—who was nominated and supported by his
been broken at all but a few trusts.” S. Todd Brown, How Long is Forever This
Time? The Broken Promise of Bankruptcy Trusts, 61 Buff. L. Rev. 537, 538–39
(2013). According to one recent study, between 2008 and 2017, 60% of asbestos
trusts were forced to reduce their 2008 “payment percentages,” which determine
the actual payment that a claimant with a particular disease or settlement will
receive. See Peter Kelso & Marc Scarcella, U.S. Chamber Inst. for Legal Reform,
Dubious Distribution: Asbestos Bankruptcy Trust Assets and Compensation at 9
(Mar. 2018). For those trusts, the net recovery in 2014 represented a 46%
reduction compared to claim payments in 2008. Id. This erosion of trust assets—
which disproportionately prejudices future claimants—is the precise harm that the
future claims representative was intended to prevent.
4
adversaries: the debtors and the lawyers representing present claimants?
2. In determining whether to appoint the debtors’ and the present
claimants’ candidate, did the court err—given section 524(g)’s and the Code’s text,
structure, and evident purpose—by considering only whether Mr. Fitzpatrick had a
disabling conflict of interest while refusing to consider the entanglements and the
“qualifications of Mr. Fitzpatrick”?
3. In appointing Mr. Fitzpatrick, the court applied a statutory conflicts
standard (11 U.S.C. § 101(14)) that expressly applies elsewhere in the Bankruptcy
Code but not in section 524(g). Did it violate section 524(g)’s and the Code’s text,
structure, and evident purpose by applying that standard rather than the traditional
fiduciary standards that apply to fiduciaries who—like him—represent absent
parties?
4. Regardless, did the court err under both of these standards in
appointing Mr. Fitzpatrick as that fiduciary given that, among other things:
(a) Mr. Fitzpatrick was paid by the debtors to provide them pre-bankruptcy
services directly related to this bankruptcy case;
(b) before there even was a bankruptcy case, Mr. Fitzpatrick committed to
support the plan the debtors and present claimants sought to put forward;
and
(c) the debtors drafted a plan—even before there was a bankruptcy—that

gives Mr. Fitzpatrick a long-term job with the post-bankruptcy asbestos trust
created by the plan?
5
5. Did the court below err by sustaining a “common interest privilege”
among the debtors, the lawyers representing present claimants, and Mr.
Fitzpatrick at the evidentiary hearing on Mr. Fitzpatrick’s appointment, which
prevented the government from cross-examining Mr. Fitzpatrick about his pre-
bankruptcy interactions with parties whose interests were adverse to the future
claimants he was seeking to represent?
STANDARD OF REVIEW
The bankruptcy court’s interpretation of statutes is reviewed de novo. In re
Hechinger Inv. Co. of Del., 298 F.3d 219, 224 (3d Cir. 2002). So too is its
identification and application of the appropriate burden of proof. The bankruptcy
court’s findings of basic or historical facts are reviewed for clear error. Universal
Minerals, Inc. v. C.A. Hughes & Co., 669 F.2d 98, 102 (3d Cir. 1981). “Factual
findings are clearly erroneous if the findings are unsupported by substantial
evidence, lack adequate evidentiary support in the record, are against the clear
weight of evidence[,] or where the [trial] court has misapprehended the weight of
the evidence.” United States v. 6.45 Acres of Land, 409 F.3d 139, 145 n.10 (3d
Cir. 2005) (internal quotation omitted).
Decisions left to the bankruptcy court’s discretion are reviewed for abuse.
Professional Ins. Mgmt. v. Ohio Cas. Grp. of Ins. Cos. (In re Prof’l Ins. Mgmt.),
6
285 F.3d 268, 282–83 (3d Cir. 2005). A court abuses its discretion when it “bases
its opinion on a clearly erroneous finding of fact, an erroneous legal conclusion, or
an improper application of law to fact.” Prosser v. Gerber (In re Prosser), 777
F.3d 154, 161 (3d Cir. 2015) (internal quotation omitted). A bankruptcy court’s
evidentiary rulings are reviewed for abuse of discretion. General Elec. Co. v.
Joiner, 522 U.S. 136, 141 (1997).
STATEMENT OF THE CASE
I. Statutory Framework
A. Section 524(g) and asbestos bankruptcies
Section 524(g) of the Bankruptcy Code permits a debtor, its insurers, and
other non-debtor affiliates to eliminate all their current and future asbestos-related
liability by “channeling” that liability to a trust established by a chapter 11 plan of
reorganization. Unlike a typical bankruptcy discharge, which only affects existing
“claims,” see 11 U.S.C. § 1141(d)(1)(A), a section 524(g) asbestos injunction also
enjoins future “demands” that arise after the bankruptcy case has concluded. See
11 U.S.C. § 524(g)(5). For a court to approve such an asbestos plan, the trust
created by the plan must value and pay “present claims and future demands . . . in
substantially the same manner.” 11 U.S.C. § 524(g)(2)(B)(ii)(V).
7
Because people who have not yet become sick have their future claims
discharged and channeled to the trust for payment, constitutional due process and
section 524(g)(4)(B)(i) require the bankruptcy court to appoint a representative to
protect and advocate for these unknown, absent, and especially vulnerable parties.
B. The section 101(14) disinterestedness standard

Section 101(14) of the Bankruptcy Code defines disinterestedness. 11
U.S.C. § 101(14).
C. Code sections employing—and not employing—section 101(14)

Section 327(a) explicitly provides that a trustee may employ an attorney,
accountant, or other professional only if that person is disinterested. 11 U.S.C.
§ 327(a). Section 1104(d) authorizes the appointment of a disinterested chapter 11
trustee or examiner.2 11 U.S.C. § 1104(d). Sections 332(a) and 333(a)(2)(A)
authorize the appointment of a disinterested person to serve as a consumer privacy
ombudsman and a patient care ombudsman, respectively. 11 U.S.C. §§ 332(a),
333(a)(2)(A).
2
The chapter 11 debtor typically runs the bankruptcy estate. 11 U.S.C. § 1101(1).
Under 11 U.S.C. §§ 1104(a)(1) and (d), the court may, “for cause,” appoint a
disinterested person as trustee to perform the debtor’s duties. See also 11 U.S.C.
§§ 1104(c) and (d) (appointment of examiners).
8
Section 524(g) does not adopt a disinterestedness standard for FCRs. 11
U.S.C. § 524(g)(4)(B)(i).
D. Statutory role of the United States Trustee

The United States Trustee is a Department of Justice official appointed by
the Attorney General to supervise the administration of bankruptcy cases. 28
U.S.C. §§ 581–589. United States Trustees “serve as bankruptcy watch-dogs to
prevent fraud, dishonesty, and overreaching in the bankruptcy arena.” H.R. Rep.
No. 95-595, at 88 (1977), reprinted in 1978 U.S.C.C.A.N. 5963, 6049. To that
end, the United States Trustee has standing to appear and be heard on any issue in
any bankruptcy case. 11 U.S.C. § 307.
II. Statement of the Facts

A. Duro Dyne, Mr. Fitzpatrick (who was being paid by Duro Dyne),
and lawyers representing present asbestos claimants craft a pre-
negotiated bankruptcy plan before a case is filed.
Duro Dyne National Corp., Duro Dyne Machinery Corp., Duro Dyne Corp.,
Duro Dyne West Corp., and Duro Dyne Midwest Corp. (collectively, “Duro Dyne”
or “the debtors”) manufacture sheet metal accessories and equipment for the
heating, ventilating, and air conditioning industry. A82. 3 Over the years, Duro
3
“A[page number(s) of Appendix]” refers to Appellant’s Appendix.
9
Dyne has been named as a defendant in thousands of personal injury claims
stemming from exposure to products alleged to have contained asbestos. A85;
A473, Tr.at 16:24-25; A474, Tr. at 17:1-5.4
In spring 2015, Duro Dyne and attorneys representing current asbestos
claimants (the “Lawyers”)5 began discussing the possibility of a pre-negotiated
chapter 11 plan of reorganization that would include an injunction channeling all
asbestos claims to an asbestos trust. A86.
Two years after they first discussed that, the Lawyers for present claimants
inquired about Mr. Fitzpatrick’s interest in serving as the future claimants’
representative. A36, DE173-3.6 He was interested.
Duro Dyne subsequently interviewed Mr. Fitzpatrick and retained him to do
pre-bankruptcy work for it, with the intention that the bankruptcy court would later
appoint him as FCR under section 524(g) once Duro Dyne filed for bankruptcy.
4
Transcripts are cited as “Tr. at [page:line(s)].”
5
The Lawyers included Brayton Purcell LLP; Cooney and Conway; Early,
Lucarelli, Sweeney & Meisenkothen; Ferraro & Associates, P.A.; Gori Julian &
Associates, P.C.; Simmons Hanley Conroy; and Weitz & Luxenberg, P.C. A87.
The Lawyers retained Caplin & Drysdale, Chartered as their counsel. Id.
6
Entries on the bankruptcy case docket for In re Duro Dyne National Corp., Case
No. 18-27963 (MBK) (Bankr. D.N.J.), are cited as “DE[docket entry number(s)].”
10
A87; A598, Tr. at 20:21–25; A599, Tr. at 21:1-5; A639, Tr. at 61:19-25; A644, Tr.
at 66:7-10. Mr. Fitzpatrick then retained a law firm that had represented him in
many other FCR engagements. A88; A12, DE44-1; A43, DE217-1.
Under Mr. Fitzpatrick’s pre-bankruptcy engagement letter with Duro Dyne,
Mr. Fitzpatrick and his personal counsel could charge Duro Dyne up to $25,000
per month without any additional approval. A383‒A384. Although the Lawyers
for the present claimants were not a party to the engagement letter, the letter stated
that Duro Dyne and the Lawyers had both asked Mr. Fitzpatrick to serve as the
FCR once the case was filed, A382, and it obligated Duro Dyne to seek Mr.
Fitzpatrick’s appointment as FCR in the case, A384.
Before the bankruptcy case was filed and before the court had appointed Mr.
Fitzpatrick to represent future claimants, he agreed to the plan that Duro Dyne and
the Lawyers for the present claimants had drafted. A110; A617, Tr. at 39:1–13.
Their plan proposed to establish a section 524(g) asbestos trust and give Mr.
Fitzpatrick a position at the trust after the bankruptcy case ended. A140; A6,
DE19-1 at § 4.05; A208–A211; A6, DE19-1 at §§ 6.1‒6.5.
B. Duro Dyne files for chapter 11 relief and asks the bankruptcy
court to appoint Mr. Fitzpatrick as the FCR.
On September 7, 2018, Duro Dyne simultaneously filed:
(a) a chapter 11 petition commencing the bankruptcy case;

11
(b) the reorganization plan it had pre-negotiated with Mr. Fitzpatrick and
the Lawyers for the present claimants; and
(c) a disclosure statement.7
A2, DE1; A6, DE19 & DE20.
Four days later, the debtors filed a motion (the “FCR Motion”) asking the
court to appoint Mr. Fitzpatrick as the FCR. A354‒A392.
The debtors’ FCR Motion asserted that Mr. Fitzpatrick was the debtors’ and
the Lawyers’ first choice to serve as the FCR based on his “experience,”
“qualifications,” and “familiar[ity] with all aspects of this matter.” A363. In a
supporting certification, Mr. Fitzpatrick represented that he was “a disinterested
person” as defined in section 101(14) of the Bankruptcy Code, A372, and that he
had no connection with the Lawyers, except in connection with this case. A371‒
A372. The FCR Motion disclosed that the debtors had paid Mr. Fitzpatrick and his
counsel for their pre-bankruptcy services. A387.
7
The “disclosure” statement is a document setting forth important information
about the debtor and the proposed chapter 11 plan, which must be transmitted to
holders of claims and interests. 11 U.S.C. § 1125. In most cases, the bankruptcy
court must approve the disclosure statement before votes on the plan may be
solicited.
12
C. The United States Trustee objects to the FCR motion.

The United States Trustee asked the court to deny the FCR motion or
provide time to conduct discovery regarding “Mr. Fitzpatrick’s ability to be a
fiduciary for the future claimants.”8 A424‒A425. The opposition argued that the
FCR Motion provided insufficient “information to demonstrate that Mr. Fitzpatrick
is free of disqualifying conflicts of interest and that he is capable of serving as an
independent fiduciary who can adequately represent the interests of future
claimants.” A394. The objection argued that the FCR appointment process should
not be “controlled by the debtors or present asbestos claimants.” A403; A407. It
explained that Mr. Fitzpatrick was conflicted due to his work with the debtors and
the Lawyers. A417‒A424. And it noted the “powerful personal inducement for
Mr. Fitzpatrick to support the plan” because it gave him work with the post-
bankruptcy trust. A420–A421.
8
Several insurance companies independently opposed the FCR Motion, arguing
that an FCR is held to a higher standard than disinterestedness. A21‒A23, DE103;
DE108; DE114. The insurers contended the proper standard is the “appearance of
impropriety” standard that is “customarily applied to court officers and fiduciaries
acting on behalf of an absent party,” such as a guardian ad litem. A533–A534, Tr.
at 76:23-77:2; A534, Tr. at 77:1-2.
13
The debtors replied that section 524(g) does not preclude a chapter 11 debtor
from proposing a potential FCR, A436, but acknowledged that their “proposal of
Mr. Fitzpatrick to be appointed as the FCR in the bankruptcy case[s] puts his
prepetition services before the Court, making him answerable to the Court for
those services.” A441.
The Official Committee of [present] Asbestos Claimants (the “Official
Committee”)9 argued it should be heard on the FCR’s appointment “as the interests
of present and future claimants are closely aligned,” A452, an assertion the United
States Trustee contested, A399.
D. The bankruptcy court allows limited discovery—to which limited

responses are received.
The bankruptcy court initially took up the FCR Motion at an October 1,
2018, hearing. A458‒A554 (transcript October 1, 2018, hearing). There, the
United States Trustee asked the court to allow discovery on four points. 10
9
The Official Committee was appointed on September 27, 2018, by the United
States Trustee pursuant to 11 U.S.C. § 1102. A22; DE107. It employed the
Lawyers’ counsel, Caplin & Drysdale, to represent it under 11 U.S.C. § 1103. Id.;
see also A45, DE 225; A51, DE258.
10
Those were “[i] the circumstances surrounding Mr. Fitzpatrick’s selection,
including how he was brought to [Duro Dyne’s] attention, [ii] what Mr. Fitzpatrick
did during the prepetition period during which he was engaged to portray a future
claims representative, [iii] the terms of Mr. Fitzpatrick’s employment including
14
The court denied most of the requested discovery. It ruled that the issue
before it was not the “qualifications of Mr. Fitzpatrick.” A536, Tr. at 79:1-5.
Instead, the court saw the relevant issues as turning on “concrete narrow discr[ete]
issues as to Mr. Fitzpatrick’s disinterestedness,” reasoning that the section 101(14)
“disinterested person” standard should apply to its conflicts analysis because
Congress made the appointment of a chapter 11 trustee under section 1104 subject
to that standard. A540, Tr. at 83:6-14.
Duro Dyne, Mr. Fitzpatrick, and the Official Committee subsequently
objected to most of the government’s discovery, even as limited by the court and
refused to produce most of the documents based on the “joint defense privilege,”
“community-of-interest privilege,” and “common interest privilege.” Then they
heavily redacted the few documents they did produce. A557; see also A36,
DE173-7 and DE173-8.
The United States Trustee deposed Duro Dyne’s CEO, A715‒A772, who
testified that:
what constituted cause to terminate him, and the parameters of the cap on his fees,
. . . and [iv] the circumstances of Mr. Fitzpatrick’s hiring in other cases in which he
served as a future claims representative including whether his hiring was required
by any of the personal injury firms that constitute[d] the ad hoc committee.”
A504, Tr. at 47:7‒19.
15
• the only criteria Duro Dyne used in selecting an FCR was “experience doing
what we wanted him to be doing for us or the trust” and “being in New Jersey,”
A735‒A736, Tr. at 21:25‒22:9;
• Mr. Fitzpatrick was the only candidate Duro Dyne interviewed, A737‒A738,
Tr. at 23:19‒24:9;
• Duro Dyne did not consider or review the results of Mr. Fitzpatrick’s work on
behalf of future asbestos claimants in other cases, A768, Tr. at 54:20–24;
• he did not consider Mr. Fitzpatrick to be Duro Dyne’s adversary, A744, Tr. at
30:10–12; and
• he thought he could fire Mr. Fitzpatrick like any other professional hired by
Duro Dyne, A747, Tr. at 33:16–20, for reasons such as lack of progress toward
a consensual plan, A770, Tr. at 56:4–12.
The United States Trustee also deposed Mr. Fitzpatrick, A579‒A693, who
conceded that:
• notwithstanding his certification’s representation to the parties and the court

that he had no connections with any creditors or their attorneys, he actually has
decades-long working relationships with all of the personal injury law firms,
A601, Tr. at 23:2–21; A637‒A639, Tr. at 59:9‒61:1;
• he had agreed before the case was even filed to support confirmation of the
debtors/Lawyers’ proposed plan, A618, Tr. at 40:1–6; A619, Tr. at 41:1–5;
• he did not intend to do any further due diligence or renegotiate the plan on
behalf of his constituency, A620‒A621, Tr. at 42:18‒43:8; and
• he could not recall any specific changes he caused to be made to the plan, or
other documents, A651, Tr. at 73:1–8; A663, Tr. at 85:5–8; A666‒A667, Tr. at
88:25‒89:11; A668‒A669, Tr. at 90:2‒91:12.
16
On October 12, the United States Trustee filed a supplemental objection to
Mr. Fitzpatrick’s appointment.11 A555‒A832.
E. The bankruptcy court conducts an evidentiary hearing, but

restricts inquiry into Mr. Fitzpatrick’s prepetition activities
because of the “common interest” privilege.
The bankruptcy court heard the FCR motion at an October 15 evidentiary
hearing. A850‒A993 (transcript of October 15, 2018, hearing). At the hearing, the
Official Committee objected to any questions regarding Mr. Fitzpatrick’s
prepetition negotiations of plan-related documents, asserting the “common
interest” privilege among Mr. Fitzpatrick, Duro Dyne, and the Lawyers for the
current claimants. A890, Tr. at 41:2–12. The bankruptcy court sustained the
objection, thereby truncating any inquiry into what Mr. Fitzpatrick did prepetition
and why he did it. A895, Tr. at 46:13–25.
In his testimony, Mr. Fitzpatrick did not recall taking any positions that
would be “unpopular with the plaintiffs’ bar” to which the Lawyers belonged or
that were adverse to the Lawyers’ positions on behalf of the current claimants.
A886‒A887, Tr. at 37:24‒38:25; A889, Tr. at 40:4–9. And he did not recall any
specific changes made to the plan or other documents as a result of his prepetition
11
The insurers also filed a supplemental objection. A36, DE172; DE173.
17
participation. A889, Tr. at 40:16–20; A896, Tr. at 47:16–22. He also testified that
the plan and trust documents in this case were substantially similar to those in prior
cases where he served as FCR. A872, Tr. at 23:1–4. Mr. Fitzpatrick testified that
it was “typical” for the FCR to subsequently serve in the post-bankruptcy trust.
A882, Tr. at 33:11–17.
F. The bankruptcy court appoints Mr. Fitzpatrick as FCR without

soliciting nominations.
The next day, the court granted the debtors’ motion to appoint Mr.
Fitzpatrick to represent the absent future claimants. A994‒A1017 (transcript of
October 16, 2018, decision). The court “s[aw] no reason to retard the process by
appointing a different FCR.” A1016, Tr. at 23:9–12. Therefore, the court never
solicited nominations from other parties, it never notified anyone that they could
apply to become the FCR, and never considered candidates on its own.
In granting the motion, the court ruled that the section 101(14) “disinterested
person” standard, rather than “a higher appearance of impropriety standard,”
should apply when deciding whom to appoint as FCR because Congress elsewhere
made the disinterested person standard applicable to chapter 11 trustee
appointments under section 1104. A1002‒A1003, Tr. at 9:17‒10:4. The
bankruptcy court concluded that “[b]ased on the existing record,” Duro Dyne
carried its burden to prove that Mr. Fitzpatrick was disinterested. A1009, Tr. at
18
16:20–23. It held that the objecting parties had not “produced evidence of
sufficient other reasons to disqualify Mr. Fitzpatrick.” A1013, Tr. at 20:19–24.
The court further found that “Mr. Fitzpatrick does not hold a material interest
adverse to the future claimants” for purposes of section 101(14)(C), based either on
“his service as a prepetition FCR for the debtors or his service as an FCR in other
matters.” A1012‒A1013, Tr. at 19:22‒20:6. It also found that Mr. Fitzpatrick
“during the prepetition period negotiated effectively and can effectively represent
the interest of the future claimants going forward.” A1009‒A1010, Tr. at 16:24‒
17:2.
The bankruptcy court also found that:
• “Mr. Fitzpatrick has been working in the field of asbestos personal injury
and property claims recovery for approximately 38 years,” A1003, Tr. at
10:10–15;
• Mr. Fitzpatrick “has received ongoing court appointments as FCRs in

several asbestos bankruptcies,” id., Tr. at 10:16–17;
• “Throughout the course of his prepetition negotiations Mr. Fitzpatrick

worked and spoke through his counsel,” A1004, Tr. at 11:14–16;
• “Mr. Fitzpatrick testified and the Court finds credible that at the time he
was [originally] retained [by Duro Dyne, pre-bankruptcy,] . . . there was
no deal in place with the debtors and the [Lawyers] and that he engaged
in substantial negotiations and worked towards modifications of the
[then] existing and initial term sheet that had been presented,” A1005, Tr.
at 12:9–14;
• “[D]uring the [pre-bankruptcy] plan negotiation process the interest of

the future and present claimants were sufficiently aligned in efforts to
19
secure the highest level of funding from the debtor[s] and [their]
insurers,” A1006, Tr. at 13:2–5;
• “Testimony confirms that Mr. Fitzpatrick through counsel negotiated

changes to the proposed draft plan and” other documents, id., Tr. at 13:8–
10;
• “[I]n his testimony, Mr. Fitzpatrick confirm[ed] . . . his consent to the

currently filed plan and disclosure statement [but averred this] does not
tie his hands or preclude his consideration of any objections or proposed
modifications,” id., Tr. at 13:18–22;
• “Mr. Fitzpatrick confirm[ed] and the Court again finds credible that he
never demanded nor requested appointment as a post-confirmation FCR,
the practice [of giving him the post-bankruptcy position] was just
followed in a way that had been done in the past in prior cases,” A1006‒
A1007, Tr. at 13:23‒14:2; and
• “As to his concurrent work as a FCR in other pending cases, [Mr.

Fitzpatrick] notes that the conflicts will not arise given that the FCR does
not manage or oversee the trusts.” A1007, Tr. at 14:12–14.
On October 17, the bankruptcy court entered the order approving the
appointment of Mr. Fitzpatrick as the absent claimants’ FCR. A1018‒A1022. The
United States Trustee timely appealed on October 31. A1023‒A1032.
SUMMARY OF THE ARGUMENT
The debtors seek to rid themselves of their asbestos liability in this chapter
11 reorganization through an injunction that will confine recovery by present and
future asbestos victims to the assets of a trust established under 11 U.S.C. § 524(g).
Before the bankruptcy court may do that, it must appoint an independent fiduciary
(commonly known as an FCR) to protect the rights of future asbestos victims, an

20
absent, unknown, and especially vulnerable group. Acting as their protector, the
FCR must negotiate with the debtors and the present claimants to craft a plan that
creates a trust that will fairly compensate future claimants when they eventually
become sick.
This appeal will determine whether the court below misapplied section
524(g) when it chose Mr. Lawrence Fitzpatrick to be the independent fiduciary for
this vulnerable group. Like all questions of statutory construction, this will be
determined by the text, structure, and evident purpose of section 524(g) and the
Bankruptcy Code. See In re Channel Home Centers, Inc., 989 F.2d 682, 687 (3d
Cir. 1993) (when interpreting a statute courts should look to text, structure, and
evident purpose).
The text, structure, and evident purpose of section 524(g) and the
Bankruptcy Code establish that the court below violated section 524(g) in three
separate and independent ways.
First, section 524(g)’s text obligates the court—rather than a party—to pick
an FCR. The Bankruptcy Code’s structure reflects that section 524(g) is unique in
this regard because all other Code provisions require parties to pick bankruptcy
professionals and fiduciaries, subject to the court’s approval. Section 524(g)’s
evident purpose reveals why Congress treated FCR selections differently. Here,
21
the future claimants are not yet sick, so they are not a constituency that can identify
its own FCR who will be independent from the debtors and present claimants and
effectively protect their interests. Given this, due process requires the appointment
of an independent FCR by the court and not one selected by the competing parties
in the case.
The court’s actions fell short here. It simply appointed the FCR selected by
the future claimants’ adversaries—the debtors and the Lawyers who represent
present claimants—without any solicitation of other nominations and without
considering anyone else. This did not fulfill the independent responsibility that
section 524(g) places upon the court.
Second, text, structure, and evident purpose also establish that the court
erred as a matter of law by considering only whether Mr. Fitzpatrick had a
disabling conflict. It refused to determine whether Mr. Fitzpatrick’s role as the
FCR in other cases establish that he would act as an independent fiduciary here.
Third, in determining that Mr. Fitzpatrick has no disabling conflict, the court
erred by applying section 101(14)’s disinterestedness standard. Instead, it should
have applied the more demanding fiduciary standards that apply to those who wish
to become a fiduciary for absent parties. This is an error of law because section
524(g) does not mention disinterestedness and the Bankruptcy Code’s structure
22
reveals that the “disinterestedness” standard of 11 U.S.C. § 101(14) mandatorily
applies to appointments under sections 327, 332, 333 and 1104—but not under
section 524(g). Unlike those other sections, section 524(g) nowhere mentions or
incorporates the disinterestedness standard. The FCR as a fiduciary should
certainly be disinterested. But section 524(g)’s evident purpose reveals that the
court should have applied broader fiduciary standards that apply when the
fiduciary will be representing absent parties.
And given Mr. Fitzpatrick’s entanglements and conflicting interests, the
court below erred in appointing Mr. Fitzpatrick under either a disinterestedness
standard or the standards for those who represent absent parties. Mr. Fitzpatrick’s
(a) paid prepetition work for the debtors in this very bankruptcy case, (b)
commitment to the debtors’ and the present claimants’ plan, even before the case
was filed, and (c) agreement to the debtors and the present claimants crafting the
chapter 11 plan to give him a post-bankruptcy job with the trust establish that he
may not act as the future claimants’ independent fiduciary here.
The court compounded these errors by making an exclusionary evidentiary
ruling that kept out significant, probative evidence at the FCR evidentiary hearing.
At that hearing, the court sustained an objection based upon the common interest
privilege among the debtors, the Lawyers, and Mr. Fitzpatrick that precluded the
23
government from cross-examining Mr. Fitzpatrick about his prepetition
interactions with the debtors and the Lawyers for the present claimants. The facts
behind Mr. Fitzpatrick’s retention by the debtors and his actions were relevant to
whether he has interests that hinder his ability to act as an independent fiduciary
for the absent asbestos claimants.
ARGUMENT
I. The Court Erred by Limiting Its Consideration to a Single Candidate

Selected by the Debtors and the Lawyers for the Present Claimants.
A. Section 524(g) requires an independent FCR who will protect the
interests of future claimants (victims whose interests are adverse
to those of the debtors and the present claimants).
Section 524(g) profoundly affects the rights of future claimants in this
case—those who have not yet developed an asbestos-related illness and may not
even realize they have been exposed. Nor do they realize that one day they will
have claims against the debtors. Because of the section 524(g) asbestos injunction,
their rights—including the amount they will recover, the procedures they must
satisfy, and the defendants they can pursue—will be determined by a bankruptcy
plan that will be confirmed long before they became ill and which they had no
ability to negotiate. See In re W.R. Grace & Co., 729 F.3d 311, 323 (3d Cir. 2013)
(noting that future asbestos victims “lack the ability to protect their own interests
during the bankruptcy proceeding”).
24
The Duro Dyne future claimants are especially vulnerable for another
reason: during the bankruptcy case, their interests are adverse to those of every
other stakeholder. The debtor, its affiliates, and its insurers will seek to discharge
their liability for future claims. The debtors will want to pay as little as possible.
And present asbestos claimants naturally favor trust procedures that pay present
claims fully and rapidly, which will reduce the amount left in the fund to pay
future claimants because there is no source of payment once the trust is depleted.
Future claimants would favor a procedure that pays claims conservatively to
preserve trust assets for future claims. Similarly, first-in-line present claimants
may be unconcerned with whether the trust pays fraudulent or invalid claims—
because these payments are unlikely to affect their own distributions—but the
same issue is vitally important to future claimants, whose recoveries would be
denied if the trust were depleted before they manifest injury and assert claims. For
these reasons, present and future claimants have a “natural antagonism.” In re
Quigley Co., Inc., No. 04-15739, 2009 WL 9034027, at *5 (Bankr. S.D.N.Y. Apr.
24, 2009); see also Amchem Prods. v. Windsor, 521 U.S. 591, 626 (1997)
(providing that the goal of generous immediate payments “tugs against the interest
of exposure-only plaintiffs in ensuring an ample, inflation-protected fund for the
future”).
25
Section 524(g) was “specifically” drafted to give future claimants adequate
due process protections. In re Combustion Eng’g, 391 F.3d 190, 234 n. 45 (3d Cir.
2004), as amended (Feb. 23, 2005). As the Third Circuit explained in an
analogous context, “adequate representation . . . is constitutionally mandated if
absent class members are to be bound by the judgment.” Scott v. University of
Del., 601 F.2d 76, 84–85 (3d Cir. 1979) (discussing purported class action on
behalf of future and prospective job applicants).
To provide future claimants these necessary due process protections for the
loss of their claims in the bankruptcy case (beyond what goes into the trust),
section 524(g) makes it a responsibility of the court to “appoin[t] a legal
representative for the purpose of protecting the rights of persons that might
subsequently assert [asbestos] claims.” 11 U.S.C. § 524(g)(4)(B)(i); see also In re
Johns-Manville Corp., 551 B.R. 104, 114 (S.D.N.Y. 2016) (noting that a trust
mechanism that did not provide future claimants with adequate representation
would not satisfy due process).
Although the FCR is a fiduciary for the future claimants, see In re
Combustion Eng’g, 391 F.3d at 237, the FCR’s role differs fundamentally from
that of any other bankruptcy fiduciary. Unlike those, the FCR owes duties to
people who are unknown and absent. And future claimants cannot seek a
26
replacement should the FCR abandon his duties or fail to represent their interests
effectively. 12 For this reason, the selection and appointment of the FCR demands
the highest scrutiny.
B. Section 524(g)’s requirement that the bankruptcy court identify

and appoint an FCR of its own choosing places an obligation upon
that court which is unique under the Bankruptcy Code, one that
precluded it from simply appointing the person picked by the
future claimants’ adversaries: the debtors and the Lawyers for
the present claimants.
In construing a statute, a court must “interpret the relevant words not in a
vacuum, but with reference to the statutory context, ‘structure, history, and
purpose.’” Abramski v. United States, 573 U.S. 169, 179 (2014) (quoting Maracich
v. Spears, 133 S. Ct. 2191, 2209 (2013)). See also General Dynamics Land
Systems, Inc. v. Cline, 540 U.S. 581, 600 (2004) (reversing court of appeals where
“the text, structure, purpose, and history of the ADEA, along with its relationship
to other federal statutes, [] show[ed] that the statute does not mean to stop an
employer from favoring an older employee over a younger one.”).
12
The bankruptcy court based its decision to apply the section 101(14)
disinterestedness standard, in part, on its belief that it would be “incongruous” to
apply a higher standard than that which governs trustee appointments. A1002, Tr.
at 9:24–25; A1003, Tr. at 10:1–4. Trustees also act as fiduciaries, but the persons
to whom they owe their duties are existing creditors who can monitor their
performance.
27
Section 524(g)(4)(B)(i) plainly places the responsibility of selecting an FCR
on the court. The court’s failure to solicit candidates other than Mr. Fitzpatrick
enabled the debtors and the Lawyers to exercise a degree of control over the FCR
appointment process not contemplated by section 524(g).
By simply taking the debtors’ pick, subject only to possible disapproval for
disinterestedness under section 101(14), the bankruptcy court applied essentially
the same analysis to the appointment of Mr. Fitzpatrick as it would to a party’s
selection of its own counsel or the United States Trustee’s selection of a trustee or
examiner. See In re Vouzianas, 259 F.3d 103, 108 (2d Cir. 2001) (“[o]nly in the
rarest cases should the trustee be deprived of the privilege of selecting his own
counsel”) (alteration in original) (internal quotation omitted).
The Code’s structure establishes that this mere acquiescence overlooks a
fundamental difference between the way other professionals and fiduciaries are
appointed and how FCRs are appointed. In the case of trustees, examiners, and
estate professionals, the Bankruptcy Code expressly authorizes a party other than
the bankruptcy court to select the professional or fiduciary, subject to court
approval. See 11 U.S.C. §§ 327(a) (trustee or debtor “may employ” professionals);
1104(d) (United States Trustee “shall appoint” individual to serve as trustee or
examiner). In contrast, section 524(g) reserves the power to appoint the FCR to
28
the bankruptcy court alone—and given the due process concerns underlying
section 524(g), this was deliberate. Nothing in it entitles a debtor or present
asbestos claimants to select the FCR.
Once the bankruptcy court concluded that Mr. Fitzpatrick was eligible, it
terminated its inquiry, without considering whether any other candidates might
provide future claimants with superior representation. The court justified its
refusal to consider others based on a single factor: a new FCR would need to
“retain professionals, engage in his or her own due diligence, only to reach the
same point of review to which Mr. Fitzpatrick assents at this present time.”
A1015, Tr. at 22:7–10. But this reasoning would require a court to defer to a
debtor’s prepetition selection in every pre-negotiated and pre-packaged case—an
outcome that would delegate the bankruptcy court’s statutory duty to appoint under
section 524(g) to the debtor.
Even if the bankruptcy court had treated the nomination of Mr. Fitzpatrick as
a mere recommendation, it was error under section 524(g) for the court to accede
to the preferences of the debtors and the Lawyers without any attempt to solicit
other candidates. Cf. In re Busy Beaver Bld. Ctrs., Inc., 19 F.3d 833, 841-42 (3d
Cir. 1994) (explaining that even when Code provisions merely provide for the
court to approve parties’ fee requests, the court still has an independent obligation
29
to scrutinize them and alter as appropriate). Here, the bankruptcy court had a
range of options; it could have sought applicants, asked all parties to suggest
candidates, or asked the United States Trustee. Then the court would have taken
reasonable steps to produce a pool of applicants from which it could determine
who would best represent the future claimants in this particular case. At the end of
the day, it was the court’s duty to identify and select the best candidate, and it took
no affirmative steps to do so.
Allowing the debtors and the future claimants to select their adversary is just
as unreasonable as allowing a litigant to select the attorney for his opponent,
allowing the subject of an investigation to select the bankruptcy examiner, or
allowing the holder of a disputed claim to appoint the trustee against whom it will
litigate. See, e.g., In re TBR USA, Inc., 429 B.R. 599, 629 (Bankr. N.D. Ind. 2010)
(explaining “Congress did not intend to allow creditors who had disputed claims
against the estate to participate in a[] [trustee’s] election and choose their
opponent.”); In re Williams, 277 B.R. 114, 118 (Bankr. C.D. Cal. 2002) (noting
that “any creditor with a disputed claim would love to select her future opponent”).
The bankruptcy court’s deference to their preferences undermined section
524(g)’s purpose: ensuring future claimants will be represented by an independent
fiduciary. The notion that parties should not be allowed to select their own
30
adversaries is particularly relevant here because the FCR’s function is to protect
the due process rights of absent parties. See Hansberry v. Lee, 311 U.S. 32, 45
(1940). See also In re ASARCO, LLC, No. 05-21207, 2011 WL 2975716, at *3
(Bankr. S.D. Tex. July 20, 2011) (explaining “[t]he primary role of a representative
of future claimants in asbestos bankruptcy cases is that of a plan negotiator.”).
Even in the earliest asbestos cases, courts were sensitive to the danger that the
interests of future claimants would be overwhelmed by the competing interests of
present claimants. In re Johns-Manville Corp., 36 B.R. 743, 749 n.3 (Bankr.
S.D.N.Y. 1984) (rejecting argument that future claimants could be represented by
committee for present claimants and finding that “an independent representative
for future claimants is essential”).13
13
Neither Johns-Manville nor UNR Industries, 46 B.R. 671 (Bankr. N.D. Ill.
1985)—two early cases involving an FCR—allowed the debtor or the present
claimants to select the FCR. In Johns-Manville, the court apparently selected the
FCR directly, while in UNR, the court directed the United States Trustee to prepare
a list of candidates from which the court would make its selection. See Johns-
Manville, 36 B.R. at 758; UNR, 46 B.R. at 674–75. Nor was any such role later
incorporated into section 524(g), which was enacted after the decisions in Johns-
Manville and UNR. See Fed. Ins. Co. v. W.R. Grace, No. 04-844, 2004 WL
5517843 (D. Del. Nov. 22, 2004) (the court selected the FCR based on a procedure
that mirrored UNR and Johns-Manville).
31
II. The Court Below Also Erred as a Matter of Law by Considering Only
Whether Mr. Fitzpatrick Had a Disabling Conflict While Refusing to
Consider His Actions and Relationships in Other Cases.
The scope of the bankruptcy court’s review of Mr. Fitzpatrick’s
entanglements compounded that error. Rather than conduct an independent search
for an FCR, the court focused its inquiry of the debtors’ choice to determining
whether Mr. Fitzpatrick was disinterested under section 101(14). A1002-A1003,
Tr. at 9:17-10:4; A1011, Tr. at 18:8-14.
The court’s truncated analysis did not consider whether Mr. Fitzpatrick was
the best possible appointee, but only whether the court believed he was subject to
an absolute disqualification under section 101(14) as applied in In re Marvel
Entertainment Group, Inc., 140 F.3d 463, 476 (3d Cir. 1998). The court also
wrongly concluded that Mr. Fitzpatrick’s “qualifications” were not a relevant
factor. A536, Tr. at 79:2-5. This led the court to treat the debtors’ and the
Lawyers’ selection as presumptively valid. But that presumption has no basis in
the text or purpose of section 524(g).
Had the court considered other factors relevant to whether Mr. Fitzpatrick
was the best choice, such as his actions and entanglements in this and other cases,
the court may well have reached a different conclusion. In this case, Mr.
Fitzpatrick has consented to broad secrecy provisions in the proposed plan and
32
trust distribution procedures (TDP) negotiated with him by Duro Dyne and the
Lawyers prepetition, secrecy that would facilitate the filing of fraudulent claims
and inhibit investigations of fraud to the detriment of deserving present and future
claimants. A31, DE140.
Moreover, despite the discovery shield over this case, the public record
shows that Mr. Fitzpatrick’s performance as FCR in other cases has drawn scrutiny
and provides reason to look more closely at Mr. Fitzpatrick’s suitability to be the
FCR in this particular case. For example, in In re ACandS, Inc., 311 B.R. 36, 43
(Bankr. D. Del. 2004), it appears that Mr. Fitzpatrick, as FCR, sided with current
claimants over the interests of the future claimants he was actually representing. In
that case, the debtors and certain influential plaintiffs’ firms negotiated a pre-
bankruptcy agreement in which the bulk of the debtors’ insurance assets were
diverted to those firms and their clients, to the exclusion of all other claimants—
including, by definition, all future claimants. See id. at 40. Although it would be
difficult to imagine a plan more prejudicial to future claimants, Mr. Fitzpatrick—
who was appointed as the FCR on the motion of the debtors, as he was in Duro
Dyne—supported the plan and “vouch[ed] for its fairness.” Id. at 41.
The bankruptcy court viewed matters differently and refused to confirm the
plan, specifically finding that it did not satisfy section 524(g)(2)(B)(ii)(V) because
33
it discriminated against future claimants and would not pay present and future
claims in the same manner. Id. at 42. The court found the plan to be so
fundamentally unfair that it lacked good faith. Id. at 43. Despite these findings in
favor of the very claimants he purportedly represented, Mr. Fitzpatrick
immediately joined the debtors and the present claimants’ committee in filing a
notice of appeal against the bankruptcy court’s ruling. See ACandS Inc. v.
Travelers Cas., No. 04-cv-00123-JJF (D. Del.).
The debtors in ACandS ultimately elected to file an amended plan of
reorganization that presumably mooted the appeal of the bankruptcy court’s ruling.
Case No. 04-00123-JJF, Docket Entry 35 (D. Del. Jul. 17, 2007). But for future
claimants, the damage had already been done; a newly-diagnosed asbestos victim
who filed a claim in 2010 would have been entitled to a payout of 5.8 cents on the
dollar—among the lowest payment percentages among all major asbestos trusts.
See Lloyd Dixon, Geoffrey McGovern & Amy Coombe, RAND Institute for Civil
Justice, Asbestos Bankruptcy Trusts: An Overview of Trust Structure and Activity
with Detailed Reports on the Largest Trusts, 56 (2010) (the “RAND Report”).
Mr. Fitzpatrick also was among the parties who opposed unsealing certain
bankruptcy court records to investigate fraud in asbestos trusts. See In re Motions
Seeking Access to 2019 Statements, 585 B.R. 733, 738 & n.4 (D. Del. 2018), notice
34
of appeal filed sub nom. In re ACandS, Inc., et al., No. 18-1951 (3d Cir.). The
information sought to be unsealed involved past asbestos claimants—not the future
claimants Mr. Fitzpatrick represented—and it is unclear how those future claimants
would have benefitted from stopping an investigation into possible fraud by other
asbestos claimants. 14
Given this, the court below erred in not considering the candidate’s
qualifications and entanglements. Unless there is a reversal, the future victims of
Duro Dyne will never know what went on here between the three linked parties:
the debtors, the Lawyers, and their legal fiduciary.
14
There is a growing body of evidence that asbestos trusts are particularly
susceptible to abusive or fraudulent claims, arguably due in part to the lack of
transparency and divided interests under which such trusts operate. See Lester
Brickman, Fraud and Abuse in Mesothelioma Litigation, 88 Tul. L. Rev. 1071,
1126 (2014) (noting “numerous apparent anomalies” in a study of asbestos claims
to one trust, including thousands of claims by plaintiffs who alleged occupational
exposure to asbestos before their twelfth birthday); U.S. Chamber Inst. for Legal
Reform, Insights & Inconsistencies: Lessons from the Garlock Trust Claims (Feb.
2016) (discussing facially inconsistent representations made in a sample of trust
claims). Notably, much of this abuse has only come to light in recent years after
discovery was permitted into a limited number of trust claims in connection with
the bankruptcy case of In re Garlock Sealing Technologies, LLC, 504 B.R. 71
(Bankr. W.D.N.C. 2014).
35
III. The Court Below Erred by Applying Conflict Criteria That Govern
Other Code Provisions But Not Section 524(g), an Error That Caused It
to Ignore the Even Higher Standards That Apply to Fiduciaries Who
Represent Absent Parties When Deciding Mr. Fitzpatrick’s Eligibility
to Act as the FCR.
A. Section 524(g)’s text and the Code’s structure establish the court
used the wrong conflicts standard.
The bankruptcy court erred when it considered Mr. Fitzpatrick’s eligibility
and suitability only under the “disinterested person” standard in section 101(14) of
the Bankruptcy Code, rather than also applying the fiduciary standards applicable
to fiduciaries who protect the rights of absent parties. A536–A537, Tr. at 79:15‒
80:2; A1002–A1003, Tr. at 9:17‒10:4.
Section 524(g)’s text does not purport to govern FCR appointments by
section 101(14)’s disinterestedness standard. To the contrary, other than a bare
statement that the “court appoints” the FCR for the absent asbestos victims, section
524(g) does not specify the qualifications of an FCR.
The court below concluded that the disinterestedness standard defined in
section 101(14) should fill the gap.15 A1002, Tr. at 9:15-23. But the Bankruptcy
15
In its rulings, the bankruptcy court said it adopted a disinterestedness standard
based upon the reasoning in In re Leslie Controls, Inc., No. 11-0013, 2011 WL
1226402 (D. Del. Mar. 25, 2011); W.R. Grace, 2004 WL 5517843; and In re
Thorpe Insulation Co., No. LA07-19271-BB (Bankr. C.D. Cal. Dec. 12, 2007).
A1002, Tr. at 9:22–23. But none of them supports the bankruptcy court’s ruling.
36
Code’s structure belies that. See Channel Home Ctrs, Inc., 989 F.2d at 687 (when
interpreting a statute, courts should look to text, structure and “evident purpose” of
provision). Section 101(14) defines when a person is disinterested. 11 U.S.C.
§ 101(14). It does not explain when that matters. Id. Instead, Congress inserted
disinterestedness requirements into specific statutes when it wanted a person’s
employment or appointment to be premised on the person being disinterested. For
example, section 327(a) provides that a trustee may employ attorneys, accountants
or other professionals “that are disinterested persons.” 11 U.S.C. § 327(a).
Similarly, section 1104(d) authorizes the appointment of “one disinterested
person” “subject to the court’s approval” as a chapter 11 trustee or examiner. 11
U.S.C. § 1104(d). Accord 11 U.S.C. §§ 332(a) (consumer privacy ombudsman
must be “disinterested”); 333(a)(2)(A) (same for patient care ombudsman).
In Thorpe, the bankruptcy court expressly conceded that “I don’t think [section
101(14)] applies per se,” and declined to adopt the disinterested person standard
for FCRs, describing disinterestedness instead as a “minimum” qualification that
must be met. See DE125, tab 29, Tr. at 47:2–4. Leslie Controls never applied or
even mentioned the disinterested person standard, but instead focused on whether
the FCR had provided adequate representation. Leslie Controls, 2011 WL
1226402 at *5. The FCR in Grace was selected by the court based on a procedure
that mirrored UNR. Although the court characterized the standard for the court-
selected FCR as one of disinterestedness, it also rejected the argument that the
court should apply the same standards as it would to appointment of an estate
professional selected by the debtor under section 327. Grace, 2004 WL 5517843
at *9.
37
It is black letter law that “where Congress includes particular language in
one section of a statute but omits it in another section of the same Act, it is
generally presumed that Congress acts intentionally and purposely in the disparate
inclusion or exclusion.” Russello v. United States, 464 U.S. 16, 23 (1983) (internal
quotation omitted). Accord In re Federal-Mogul Glob. Inc., 684 F.3d 355, 373 (3d
Cir. 2012) (“[W]here the legislature has inserted a provision in only one of two
statutes that deal with closely related subject matter, it is reasonable to infer that
the failure to include that provision in the other statute was deliberate rather than
inadvertent.”).
Under this canon, disinterestedness is not sufficient under section 524(g).
Unlike sections 327, 332, 333, and 1104, section 524(g) does not adopt a
disinterestedness standard for FCRs. Given that Congress knew how to insert a
disinterestedness standard when it wished, its failure to do so here leads to the
obvious conclusion that it does not govern appointments of FCRs to represent
absent asbestos victims. Certainly, an FCR must be disinterested, but his
responsibility to absent parties requires more—he must also satisfy the more
rigorous fiduciary standard.
38
B. Section 524(g)’s evident purpose confirms that the traditional

standards applicable to fiduciaries who represent absent parties
must be used to determine an applicant’s eligibility to represent
absent asbestos claimants.
Section 524(g)’s evident purpose confirms that to be appointed under section
524(g), FCRs must satisfy fiduciary standards applicable to fiduciaries who
represent absent parties. See Collie v. Fergusson, 281 U.S. 52, 55 (1930) (statutory
language should be interpreted “in the light of the evident purpose” of the statute).
The standards for absent-party fiduciaries are even higher than the
disinterestedness requirements of section 101(14). The court’s failure to apply the
absent party criteria mandates reversal.
Although fiduciaries for absent parties are rare in bankruptcy cases, they
are well known in other areas of law. See, e.g., Kollsman v. Cohen, 996 F.2d 702,
706 (4th Cir. 1993) (holding that participation of guardian ad litem is
“necessitated” in litigation involving an absent party).
When an absent party will be bound by the decisions of a legal
representative, due process requires that the representative must “have the capacity
to vigorously and conscientiously prosecute” those parties’ rights and “be free
from economic interests that are antagonistic to the interests of the class.” Larson
v. Dumke, 900 F.2d 1363, 1367 (9th Cir. 1990). See also Hansberry, 311 U.S. at
45 (the representatives of an absent party should not hold an interest that conflicts
39
with the interests of the absent party). And, unlike disinterestedness,
disqualification is based on an appearance of conflict alone. See, e.g., Radner v.
IAS Warranty, Inc., No. 17-12704, 2018 WL 4352692, at *6 (E.D. Mich. Sept. 12,
2018) (denying appointment of proposed class representative based on appearance
of conflict arising out of proposed representative’s “multiple legal business
relationships” with counsel).
Given absent parties’ inability to protect themselves, courts have ruled that
the appointment of a guardian ad litem, class representative, or similar fiduciary
under common law cannot ignore even a potential conflict or the appearance of
impropriety. See Kayes v. Pac. Lumber Co., 51 F.3d 1449, 1465 (9th Cir. 1995)
(representation of absent class members “does not permit even the appearance of
divided loyalties”); Williams v. Super. Ct., 54 Cal. Rptr. 3d 13, 23 (Cal. Ct. App.
2007) (explaining a guardian ad litem cannot be subject to a potential conflict).
As the appointment of an FCR implicates these same due process concerns,
there is no reason to conclude Congress departed in section 524(g) from traditional
standards governing the appointment of fiduciaries for absent parties. Combustion
Eng’g, 391 F.3d at 234 n.45 (explaining that section 524(g) was “specifically
tailored to protect the due process rights of future claimants”); W.R. Grace, 729
40
F.3d at 323 (“Congress enacted § 524(g) to protect the due process rights of the
exposed yet unimpaired.”) (internal quotation omitted).
Here, the court below solely applied the narrower disinterestedness standard.
That error limited its analysis to the question of whether Mr. Fitzpatrick had a
materially adverse interest and led it not to examine whether his appointment gave
rise to a potential conflict or an appearance of impropriety. A1012–A1012, Tr.
18–19. See Marvel, 140 F.3d at 476 (holding that court need not disqualify a
bankruptcy professional for a potential conflict of interest under section 101(14)’s
disinterestedness standard). Congress’s decision not to use the section 101(14)
disinterestedness standard for FCR appointments, despite doing so for other
fiduciaries, reflects its choice not to dilute the familiar standards for appointing a
fiduciary representing absent parties.
IV. Mr. Fitzpatrick Should Not Have Been Appointed as FCR under Either
Standard Because He Is Not an Independent Fiduciary under the Facts
of This Case.
Future claimants “must be adequately represented throughout the process.”
In re Combustion Eng’g, Inc., 391 F.3d at 245. That did not happen in this case,
and the court below erred in appointing Mr. Fitzpatrick as the future claimants’
fiduciary. As Mr. Fitzpatrick freely conceded, he had agreed before the case was
even filed to support confirmation of the debtors’ and the Lawyers’ proposed plan.
41
A618, Tr. at 40:1–6; A619, Tr. at 41:1–5. He even said he would not perform any
due diligence or renegotiate the plan on behalf of his constituency if he were
appointed. A620‒A621, Tr. at 42:18‒43:8.
That pro-opponent, narrow view of his role was a natural outgrowth of Mr.
Fitzpatrick and his law firm having been on the debtors’ payroll. A36, DE173-3.
The debtors (at the Lawyers’ suggestion 16) retained him with the expectation that
the bankruptcy court would appoint him as the section 524(g) FCR once Duro
Dyne filed for bankruptcy. A87; A738, Tr. at 24:5–7. Indeed, the debtors’
retention letter said they and the Lawyers expected him to stop working for the
debtor and become the FCR once the case filed. A382. It even went so far as to
require the debtors to seek his appointment in the case. A384.
16
Most asbestos trust plans have historically been negotiated between debtors and
a small group of the same lawyers for the present claimants. See RAND Report at
11. These law firms, in turn, nominate the same individuals to serve as FCR and
the same law firms to serve as FCR counsel—with the result that asbestos
bankruptcies often involve a closed circle of the same fiduciaries and the same
professionals in the same roles. Id. That is what happened here. But this creates a
powerful incentive for the FCR and the FCR’s professionals to be subservient to
the law firms representing present claimants: should the FCR displease those firms,
the FCR and his or her counsel might lose their place in the circle and be deprived
of a valuable source of future employment. See William P. Shelley, Jacob C. Cohn
& Joseph A. Arnold, The Need For Transparency Between the Tort System and
Section 524(g) Asbestos Trusts, 17 J. Bankr. L. & Prac. 2 Art. 3 n.19 (April 2008)
(“In practice, the FCR is nominated by the claimant and debtor constituencies.”).
42
This was disqualifying under any standard. See In re Congoleum, 426 F.3d
675, 690 (3d Cir. 2005) (finding actual conflict of interest where proposed counsel
for asbestos debtor had performed work for claimants against the debtor
prepetition); In re South Station, LLC, 464 B.R. 46, 56 (Bankr. D. Utah 2011) (law
firm whose prepetition retainer was paid by creditors was not “disinterested” and
could not represent debtor in chapter 11 case); In re Hathaway Ranch P’ship, 116
B.R. 208, 219 (Bankr. C.D. Cal. 1990) (professional who accepts payment from
third party with adverse interests has “actual conflict”).
The future claimants had no say in what Mr. Fitzpatrick was doing. It was
impossible for them—unlike the debtors (at the Lawyers’ “suggestion”)—to
engage and pay him for prepetition work. The only entities participating in those
(still) secret prepetition negotiations to whom Mr. Fitzpatrick could have provided
services were the debtors and the Lawyers—both of whom had interests that
diverged from those of the future claimants.
As Congoleum demonstrates, a fiduciary may not represent one party before
the bankruptcy begins and a different, adverse party during the bankruptcy. 426
F.3d at 690. Here the bankruptcy court cited no findings and offered no analysis
for its determination that Mr. Fitzpatrick’s prepetition engagement did not create a
disabling conflict. A1012, Tr. at 19.
43
Worse, before that case was filed, the debtors and the Lawyers inserted a
provision in the plan, see A110; A617, Tr. at 39:1–13, that provides him
employment by the post-bankruptcy trust. A141; A6, DE19 at § 4.05; A208–
A211; A6, DE19-1 at §§ 6.1‒6.5. The debtors and the Lawyers have put Mr.
Fitzpatrick in a bind. He cannot oppose the plan on behalf of his constituents
without risking the loss of guaranteed future employment. 17 Standing alone, this is
disqualifying, both under the Bankruptcy Code’s disinterestedness test and the law
governing fiduciaries representing absent parties. Cf. Young v. Higbee Co., 324
U.S. 204 (1945) (former stockholders’ committee members violated their
continuing fiduciary duties to their constituents by settling litigation that could
have benefitted the entire stockholder class after they resigned from the
17
The danger that the attorneys of present claimants will use their leverage over
subsequent appointments to control FCR performance has been frequently noted.
In the words of one commentator, “much like the [asbestos plaintiffs’] attorneys
that control their appointment, legal representatives are repeat performers in
asbestos bankruptcies . . . in addition to case-specific incentives, legal
representatives for future victims have strong global incentives against taking
positions in any one case that may alienate these same attorneys.” S. Todd Brown,
Section 524(g) Without Compromise: Voting Rights and the Asbestos Bankruptcy
Paradox, 2008 Columbia Bus. Law Rev. 841, 900; see also Marc C. Scarcella &
Peter R. Kelso, A Reorganized Mess: The Current State of the Asbestos Bankruptcy
Trust System, 14 Mealey’s Asbestos Bankruptcy Report at 15 (Feb. 2015)
(describing present claimants’ influence over FCR selection as a “fox guarding the
henhouse” problem).
44
committee). See also In re Mountain States Power Co., 118 F.2d 405, 407 (3d Cir.
1941) (fiduciary in bankruptcy case has duty of “undivided loyalty”); In re Big
Rivers Elec. Corp., 355 F.3d 415, 433 (6th Cir. 2004) (section 1104 examiner may
not “in the slightest degree . . . have some interest or relationship that would color
the independent and impartial attitude required by the Code”); Velazquez v.
Massachusetts Fin. Servs. Co., 320 F. Supp. 3d 252, 259 (D. Mass. 2018) (holding
that under common law “the duty of loyalty prohibits a fiduciary from engaging in
transactions that involve self-dealing or that otherwise involve or create a conflict
between the trustee’s fiduciary duties and personal interests”) (internal citations
omitted).
Indeed, “[i]rrespective of whether it is in the interests of future claimants
that the proposed plan of reorganization be approved, it is in the financial interest
of the FCR that a plan be approved since the FCR’s fees, after approval, are
typically quite lucrative.” Lester Brickman, Ethical Issues in Asbestos Litigation,
33 Hofstra L. Rev. 833, 880 (2005). Here, the debtors, the Lawyers, and Mr.
Fitzpatrick cut that deal even before the case was filed.
The bankruptcy court nevertheless determined without proof that Mr.
Fitzpatrick’s acceptance of a benefit under the plan did not create an adverse
interest based on Mr. Fitzpatrick’s testimony that the future appointment “was not
45
determinative” in his decision to accept his employment as FCR, as well as his
testimony that such provisions are customary. A1012, Tr. at 19:13–21. But it was
not necessary for the court to find that Mr. Fitzpatrick acted in bad faith to deny his
appointment. See Rome v. Braunstein, 19 F.3d 54, 58 (1st Cir. 1994) (holding that
the Bankruptcy Code test for disinterestedness “is neither subjective, nor
significantly influenced by the court-appointed professional’s ‘protestations of
good faith’”).
Similarly, the bankruptcy court’s apparent belief that this interest would not
necessarily affect Mr. Fitzpatrick’s performance is irrelevant because a fiduciary’s
disqualifying interest “need not be such as ‘did affect his judgment’ but merely
such as ‘might affect his judgment.’” In re Downing’s Estate, 162 Pa. Super. 354,
57 A.2d 710, 712 (Pa. 1948); see also Eagan v. Jackson, 855 F. Supp. 765, 779
(E.D. Pa. 1994) (“It is unnecessary to show that the fiduciary succumbed to this
temptation, that he acted in bad faith, that he gained an advantage, fair or unfair,
[or] that the beneficiary was harmed. . . . [T]he fiduciary is punished for allowing
himself to be placed in a position of conflicting interests in order to discourage
such conduct in the future.”).
The parties’ actions after the United States Trustee opposed the FCR Motion
underscores the depth of the unacceptable entanglements among the debtors, the
46
Lawyers, and Mr. Fitzpatrick. When the government sought discovery about Mr.
Fitzpatrick’s relationship with these adverse parties, they claimed they need not
comply due to a joint defense privilege, a community-of-interest privilege, and a
common interest privilege. A786-A808. When the government sought to ask Mr.
Fitzpatrick at trial about his prepetition negotiation of plan-related matters, the
Official Committee objected on the ground there was a common interest privilege
among Mr. Fitzpatrick, the debtors, and the Lawyers. A890, Tr. at 41:2-9. The
court agreed. A895, Tr. at 46:13-17.
No future claimant should be saddled with a fiduciary who is so closely
bound to his or her adversaries that the interactions among them cannot even be
probed at trial to determine whether a conflict exists. Nothing is less calculated to
lead to competent representation than allowing the independent fiduciary to be
retained, paid, and later nominated by adversaries who will benefit if his
representation is weak or ineffective. Such a practice would create “opportunities .
. . for the fraudulent and collusive sacrifice of the rights of absent parties.”
Hansberry, 311 U.S. at 45. See also In re Dalkon Shield IUD Prods. Liab. Litig.,
693 F.2d 847, 855 (9th Cir. 1982), as amended (July 15, 1982) (“Adequacy of
representation depends on . . . the unlikelihood that the suit is collusive.”); Eisen v.
Carlisle & Jacquelin, 391 F.2d 555, 562 (2d Cir. 1968) (before finding adequate
47
representation, it is “necessary to eliminate so far as possible the likelihood that the
litigants are involved in a collusive suit”).
For this reason, courts have not hesitated to find a due process violation
when the representative for the absent parties has been selected by a party with an
adverse interest in the case. The Supreme Court held in Hansberry that absent
homeowners could not be bound by the result of an earlier lawsuit seeking to
uphold a racially restrictive covenant when the nominal defendants in the first
lawsuit were actually aligned with the plaintiffs and shared their interest in
enforcing the covenant. 311 U.S. at 45 (noting that “it does not appear that
[defendants’] interest in defeating the contract outweighed their interest in
establishing its validity”); see also Williams, 54 Cal. Rptr. 3d at 23 (parent who
had actual or potential conflict of interest with child could not select child’s
guardian ad litem); Gray v. Gladney Ctr., 79 Ark. App. 165, 176, 87 S.W.3d 797,
804 (Ark. Ct. App. 2002) (Hart, J., concurring) (noting that in adoption proceeding,
it would be “troubling” for person selected and paid by adoption agency to act as
guardian ad litem for minor mother). The same reasoning applies with equal force
here. Both the debtors and the attorneys representing present asbestos claimants
have interests that are in actual conflict with those of future claimants, and they
48
should not be allowed to select the fiduciary who will represent those adverse
future claimants.
The Supreme Court has made clear all bankruptcy fiduciaries are held to
high standards. See, e.g., Woods v. City National Bank & Trust Co., 312 U.S. 262,
268 (1941) (holding that “[o]nly strict adherence to . . . equitable principles [of
fiduciary law] can keep the standard of conduct for [committee member]
fiduciaries ‘at a level higher than that trodden by the crowd’”) (citing Cardozo,
C.J., in Meinhard v. Salmon, 249 N.Y. 458, 464, 164 N.E. 545, 546 (1928))
(emphasis supplied)). See also Mosser v. Darrow, 341 U.S. 267, 271 (1951)
(trustees are subject to “strict prohibitions”). Thus, the court below needed to deny
the debtors’ application to appoint Mr. Fitzpatrick regardless of whether the
fiduciary standards for absent parties or the section 101(14) disinterestedness
standard applied.
V. The Bankruptcy Court Erred by Precluding Inquiry at Trial under the

Common Interest Privilege into Mr. Fitzpatrick’s Pre-Bankruptcy
Communications with the Debtors and the Lawyers for the Current
Claimants.
At the October 15 evidentiary hearing on the FCR Motion, the court
sustained the Committee’s objection and blocked inquiry by the government into
Mr. Fitzpatrick’s pre-bankruptcy communications with the debtors and the
49
Lawyers under the common interest privilege. A542; A771‒A790; A782‒A793;
A26, DE173-7 and DE173-8; A890, Tr. at 41:2–12.
The bankruptcy court erred by applying the common interest privilege to
prevent the government from obtaining evidence regarding Mr. Fitzpatrick’s
prepetition communications. 18 Cf. In re General Motors Corp. Engine Interchange
Litig., 594 F.2d 1106, 1124 (7th Cir. 1979) (holding that where conduct of
negotiations was relevant to fairness of settlement, trial court’s refusal to permit
discovery into negotiations was abuse of discretion). The common interest
privilege applies only if the parties invoking it share a “substantially similar legal
interest” in the communication being disclosed. Teleglobe, 493 F.3d at 365. The
party invoking the privilege bears the burden of proving the existence of a common
legal interest. In re Simplexity, LLC, 584 B.R. 495, 498 (Bankr. D. Del. 2018).
The existence of a “Common Interest Agreement” among parties “does not create
the common interest privilege.” Id. at 499.
The primary case—and only published decision—cited by the Committee in
raising the “common interest privilege” objection at the evidentiary hearing was In
18
The common interest (or community-of-interest) privilege is the modern
successor to the “joint-defense privilege” that developed to enable criminal co-
defendants with separate counsel to coordinate their defenses. See In re Teleglobe
Commc’ns Corp., 493 F.3d 345, 363 (3d Cir. 2007).
50
re Leslie Controls, Inc., 437 B.R. 493 (Bankr. D. Del. 2010). A890‒A895, Tr. at
41:4‒46:12. There, the debtor, ad hoc committee, and future claimants’
representative shared a common legal interest in increasing the insurance proceeds
available to pay asbestos claims, and the court therefore upheld the privilege
against the insurers with respect to a memorandum and related documents on
insurance coverage issues that the debtor’s counsel shared with the committee and
the FCR. Id. at 495, 503. In Simplexity, by contrast, because one of the parties
invoking the privilege had “no legal exposure” relating to the communications for
which discovery was sought, the parties had no common legal interest, only a
common financial interest. 584 B.R. at 501. As a result, the common interest
privilege did not apply, and the requested discovery was required to be produced.
Id.
The same ruling should have been made here. The government sought to
determine whether the debtors’ and the Lawyers’ interactions with Mr. Fitzpatrick
prevented him from being appointed as the independent fiduciary for future
asbestos claimants. As the Leslie Controls court acknowledged, the common
interest privilege “requires the party invoking [it] to establish that the
communication was designed to further the common interest.” Leslie Controls,
437 B.R. at 497. But the privilege did not apply to Mr. Fitzpatrick’s prepetition
51
communications because he should have been acting as a zealous adversary of the
debtors and the present asbestos claimants rather than an ally. As Leslie Controls
makes clear, “communications relating to matters as to which they [hold] opposing
interests . . . lose any privilege.” Id. (alteration in original) (internal quotation
omitted).
Because Mr. Fitzpatrick and the other parties did not share a legitimate
common legal interest with regard to the communications the government sought
to discover, Mr. Fitzpatrick should have been required to disclose them. Without
knowing how Mr. Fitzpatrick carried out his prepetition duties, the court had no
way to determine whether Mr. Fitzpatrick was subject to conflicts of interest that
interfered with his ability to act post-petition as an independent fiduciary for future
asbestos claimants. Even a section 101(14)(C) adverse interest inquiry requires
consideration of “[i]ndirect or remote, as well as direct, associations or
affiliations.” In re Star Broad., Inc., 81 B.R. 835, 839 (Bankr. D.N.J. 1988)
(internal citations omitted). Mr. Fitzpatrick’s previous and current connections
with the debtors, personal injury law firms, and present asbestos claimants in other
asbestos trust matters fall within this definition, as do all facts relating to the
mutual decision of the debtors and the Lawyers to retain him in the course of their
prepetition negotiations. These issues are of particular importance in asbestos
52
cases, which often involve a high degree of connection between professionals in
different cases. See Brown, 2008 Columbia Bus. Law Rev. at 900. Cross-
examination about them should have taken place. If, however, the court properly
sustained the claim of common interest privilege—that is, if the legal interests of
the debtors, the Lawyers, and Mr. Fitzpatrick are so intertwined that prepetition
communications by one cannot be divulged without legally jeopardizing the
others—then Mr. Fitzpatrick has sufficient conflicts of interest to preclude his
appointment as FCR for the absent asbestos claimants under any standard.
53
CONCLUSION
For these reasons, the United States Trustee respectfully asks this Court to
reverse the order entered below.
February 8, 2019
Respectfully submitted,
ANDREW R. VARA
ACTING UNITED STATES TRUSTEE
REGION 3
By /s/ Robert J. Schneider, Jr.

Robert J. Schneider, Jr.
Trial Attorney
RAMONA D. ELLIOTT MARTHA R. HILDEBRANDT

Deputy Director/General Counsel Assistant United States Trustee
P. MATTHEW SUTKO MITCHELL B. HAUSMAN
Associate General Counsel Trial Attorney
ROBERT J. SCHNEIDER, JR.
JOHN SHEAHAN Department of Justice
Trial Attorneys Office of the United States Trustee
One Newark Center, Suite 2100
Department of Justice Newark, NJ 07102
Executive Office for United Tel: (973) 645-3014
States Trustees Email: robert.j.schneider@usdoj.gov
441 G Street, NW, Suite 6150
Washington, DC 20530
54
CERTIFICATE OF COMPLIANCE
I certify that the foregoing brief complies with the type-volume limitations
set forth in Federal Bankruptcy Rule 8015(a)(7)(B) in that the brief contains
11,996 words as counted by Microsoft Word.

Trial Attorney
55
ADDENDUM
• 11 U.S.C. § 524(g)
• 11 U.S.C. § 101(14)
• 11 U.S.C. § 327(a)
• 11 U.S.C. § 332(a)
• 11 U.S.C. § 333(a)
• 11 U.S.C. § 1104(d)
56
11 U.S.C. § 524(g)
(g)(1)(A) After notice and hearing, a court that enters an order confirming a plan
of reorganization under chapter 11 may issue, in connection with such order, an
injunction in accordance with this subsection to supplement the injunctive effect of
a discharge under this section.
(B) An injunction may be issued under subparagraph (A) to enjoin entities from
taking legal action for the purpose of directly or indirectly collecting, recovering,
or receiving payment or recovery with respect to any claim or demand that, under a
plan of reorganization, is to be paid in whole or in part by a trust described in
paragraph (2)(B)(i), except such legal actions as are expressly allowed by the
injunction, the confirmation order, or the plan of reorganization.
(2)(A) Subject to subsection (h), if the requirements of subparagraph (B) are met
at the time an injunction described in paragraph (1) is entered, then after entry of
such injunction, any proceeding that involves the validity, application,
construction, or modification of such injunction, or of this subsection with respect
to such injunction, may be commenced only in the district court in which such
injunction was entered, and such court shall have exclusive jurisdiction over any
such proceeding without regard to the amount in controversy.
(B) The requirements of this subparagraph are that—
(i) the injunction is to be implemented in connection with a trust that,
pursuant to the plan of reorganization—
(I) is to assume the liabilities of a debtor which at the time of entry of
the order for relief has been named as a defendant in personal injury,
wrongful death, or property-damage actions seeking recovery for
damages allegedly caused by the presence of, or exposure to, asbestos or
asbestos-containing products;
(II) is to be funded in whole or in part by the securities of 1 or more
debtors involved in such plan and by the obligation of such debtor or
debtors to make future payments, including dividends;
(III) is to own, or by the exercise of rights granted under such plan
would be entitled to own if specified contingencies occur, a majority of
the voting shares of—
(aa) each such debtor;
(bb) the parent corporation of each such debtor; or
(cc) a subsidiary of each such debtor that is also a debtor; and
(IV) is to use its assets or income to pay claims and demands; and
57
(ii) subject to subsection (h), the court determines that—

(I) the debtor is likely to be subject to substantial future demands for
payment arising out of the same or similar conduct or events that gave
rise to the claims that are addressed by the injunction;
(II) the actual amounts, numbers, and timing of such future demands
cannot be determined;
(III) pursuit of such demands outside the procedures prescribed by
such plan is likely to threaten the plan's purpose to deal equitably with
claims and future demands;
(IV) as part of the process of seeking confirmation of such plan—
(aa) the terms of the injunction proposed to be issued under
paragraph (1)(A), including any provisions barring actions against
third parties pursuant to paragraph (4)(A), are set out in such plan and
in any disclosure statement supporting the plan; and
(bb) a separate class or classes of the claimants whose claims are to
be addressed by a trust described in clause (i) is established and votes,
by at least 75 percent of those voting, in favor of the plan; and
(V) subject to subsection (h), pursuant to court orders or otherwise,
the trust will operate through mechanisms such as structured, periodic,
or supplemental payments, pro rata distributions, matrices, or periodic
review of estimates of the numbers and values of present claims and
future demands, or other comparable mechanisms, that provide
reasonable assurance that the trust will value, and be in a financial
position to pay, present claims and future demands that involve similar
claims in substantially the same manner.
(3)(A) If the requirements of paragraph (2)(B) are met and the order confirming
the plan of reorganization was issued or affirmed by the district court that has
jurisdiction over the reorganization case, then after the time for appeal of the order
that issues or affirms the plan—
(i) the injunction shall be valid and enforceable and may not be revoked
or modified by any court except through appeal in accordance with
paragraph (6);
(ii) no entity that pursuant to such plan or thereafter becomes a direct or
indirect transferee of, or successor to any assets of, a debtor or trust that is
the subject of the injunction shall be liable with respect to any claim or
demand made against such entity by reason of its becoming such a
transferee or successor; and
58
(iii) no entity that pursuant to such plan or thereafter makes a loan to

such a debtor or trust or to such a successor or transferee shall, by reason
of making the loan, be liable with respect to any claim or demand made
against such entity, nor shall any pledge of assets made in connection with
such a loan be upset or impaired for that reason;
(B) Subparagraph (A) shall not be construed to—
(i) imply that an entity described in subparagraph (A)(ii) or (iii) would,
if this paragraph were not applicable, necessarily be liable to any entity by
reason of any of the acts described in subparagraph (A);
(ii) relieve any such entity of the duty to comply with, or of liability
under, any Federal or State law regarding the making of a fraudulent
conveyance in a transaction described in subparagraph (A)(ii) or (iii); or
(iii) relieve a debtor of the debtor's obligation to comply with the terms
of the plan of reorganization, or affect the power of the court to exercise
its authority under sections 1141 and 1142 to compel the debtor to do so.
(4)(A)(i) Subject to subparagraph (B), an injunction described in paragraph (1)
shall be valid and enforceable against all entities that it addresses.
(ii) Notwithstanding the provisions of section 524(e), such an injunction may bar
any action directed against a third party who is identifiable from the terms of such
injunction (by name or as part of an identifiable group) and is alleged to be directly
or indirectly liable for the conduct of, claims against, or demands on the debtor to
the extent such alleged liability of such third party arises by reason of—
(I) the third party's ownership of a financial interest in the debtor, a past
or present affiliate of the debtor, or a predecessor in interest of the debtor;
(II) the third party's involvement in the management of the debtor or a
predecessor in interest of the debtor, or service as an officer, director or
employee of the debtor or a related party;
(III) the third party's provision of insurance to the debtor or a related
party; or
(IV) the third party's involvement in a transaction changing the
corporate structure, or in a loan or other financial transaction affecting the
financial condition, of the debtor or a related party, including but not
limited to—
(aa) involvement in providing financing (debt or equity), or advice to
an entity involved in such a transaction; or
(bb) acquiring or selling a financial interest in an entity as part of such
a transaction.
(iii) As used in this subparagraph, the term “related party” means—
59
(I) a past or present affiliate of the debtor;

(II) a predecessor in interest of the debtor; or
(III) any entity that owned a financial interest in—
(aa) the debtor;
(bb) a past or present affiliate of the debtor; or
(cc) a predecessor in interest of the debtor.
(B) Subject to subsection (h), if, under a plan of reorganization, a kind of
demand described in such plan is to be paid in whole or in part by a trust described
in paragraph (2)(B)(i) in connection with which an injunction described in
paragraph (1) is to be implemented, then such injunction shall be valid and
enforceable with respect to a demand of such kind made, after such plan is
confirmed, against the debtor or debtors involved, or against a third party described
in subparagraph (A)(ii), if—
(i) as part of the proceedings leading to issuance of such injunction, the
court appoints a legal representative for the purpose of protecting the
rights of persons that might subsequently assert demands of such kind, and
(ii) the court determines, before entering the order confirming such plan,
that identifying such debtor or debtors, or such third party (by name or as
part of an identifiable group), in such injunction with respect to such
demands for purposes of this subparagraph is fair and equitable with
respect to the persons that might subsequently assert such demands, in
light of the benefits provided, or to be provided, to such trust on behalf of
such debtor or debtors or such third party.
(5) In this subsection, the term “demand” means a demand for payment, present
or future, that—
(A) was not a claim during the proceedings leading to the confirmation
of a plan of reorganization;
(B) arises out of the same or similar conduct or events that gave rise to
the claims addressed by the injunction issued under paragraph (1); and
(C) pursuant to the plan, is to be paid by a trust described in paragraph
(2)(B)(i).
(6) Paragraph (3)(A)(i) does not bar an action taken by or at the direction of an
appellate court on appeal of an injunction issued under paragraph (1) or of the
order of confirmation that relates to the injunction.
(7) This subsection does not affect the operation of section 1144 or the power of
the district court to refer a proceeding under section 157 of title 28 or any reference
of a proceeding made prior to the date of the enactment of this subsection.
60
11 U.S.C. § 101(14)
In this title the following definitions shall apply:
***
(14) The term “disinterested person” means a person that—

(A) is not a creditor, an equity security holder, or an insider;
(B) is not and was not, within 2 years before the date of the filing of the
petition, a director, officer, or employee of the debtor; and
(C) does not have an interest materially adverse to the interest of the estate
or of any class of creditors or equity security holders, by reason of any direct
or indirect relationship to, connection with, or interest in, the debtor, or for any
other reason.
11 U.S.C. § 327(a)
(a) Except as otherwise provided in this section, the trustee, with the court's
approval, may employ one or more attorneys, accountants, appraisers, auctioneers,
or other professional persons, that do not hold or represent an interest adverse to
the estate, and that are disinterested persons, to represent or assist the trustee in
carrying out the trustee's duties under this title.
11 U.S.C. § 332(a)
(a) If a hearing is required under section 363(b)(1)(B), the court shall order the
United States trustee to appoint, not later than 7 days before the commencement of
the hearing, 1 disinterested person (other than the United States trustee) to serve as
the consumer privacy ombudsman in the case and shall require that notice of such
hearing be timely given to such ombudsman.
11 U.S.C. § 333(a)
(a) (1) If the debtor in a case under chapter 7, 9, or 11 is a health care business, the
court shall order, not later than 30 days after the commencement of the case, the
appointment of an ombudsman to monitor the quality of patient care and to
represent the interests of the patients of the health care business unless the court
61
finds that the appointment of such ombudsman is not necessary for the protection
of patients under the specific facts of the case.
(2) (A) If the court orders the appointment of an ombudsman under paragraph
(1), the United States trustee shall appoint 1 disinterested person (other than the
United States trustee) to serve as such ombudsman.
(B) If the debtor is a health care business that provides long-term care, then
the United States trustee may appoint the State Long-Term Care Ombudsman
appointed under the Older Americans Act of 1965 for the State in which the
case is pending to serve as the ombudsman required by paragraph (1).
(C) If the United States trustee does not appoint a State Long-Term Care
Ombudsman under subparagraph (B), the court shall notify the State Long-
Term Care Ombudsman appointed under the Older Americans Act of 1965 for
the State in which the case is pending, of the name and address of the person
who is appointed under subparagraph (A).
11 U.S.C. § 1104(d)
(d) If the court orders the appointment of a trustee or an examiner, if a trustee or

an examiner dies or resigns during the case or is removed under section 324 of this
title, or if a trustee fails to qualify under section 322 of this title, then the United
States trustee, after consultation with parties in interest, shall appoint, subject to the
court's approval, one disinterested person other than the United States trustee to
serve as trustee or examiner, as the case may be, in the case.
62
CERTIFICATE OF SERVICE
I certify that on February 8, 2019, I caused to be served the foregoing
BRIEF OF APPELLANT ANDREW R. VARA, ACTING UNITED STATES
TRUSTEE, via the CM/ECF Electronic Filing system and Electronic Mail on the
following:
Jeffrey D. Prol, Esq. Jeffrey A. Cooper, Esq.

Lowenstein Sandler Rabinowitz, Lubetkin, et al.
One Lowenstein Drive 293 Eisenhower Parkway, Suite 100
Roseland, NJ 07068 Livingston, NJ 07039
jprol@lowenstein.com jcooper@rltlawfirm.com
(Counsel for Duro Dyne National (Counsel for Creditor, 4 Site, LLC)
Corp., et al.)
John A. Fialcowitz, Esq. Mark S. Lichtenstein, Esq.

John A. Fialcowitz, LLC Crowell & Moring
89 Headquarters Plaza North, 590 Madison Avenue
Suite 1216 20th Floor
Morristown, NJ 07960 New York, NY 10022
john@fialcowitzlaw.com mlichtenstein@crowell.com
(Counsel for Official Committee of (Counsel for Federal Insurance
Asbestos Claimants) Company)
George R. Calhoun, Esq. Edwin J. Harron, Esq.

Ifrah PLLC Young Conaway Stargatt, et al.
1717 Pennsylvania Ave., NW Rodney Square
Washington, DC 20006 1000 North King Street
george@ifrahlaw.com Wilmington, DE 19801
(Counsel for Hartford Accident and eharron@ycst.com
Indemnity Company) (Counsel for Lawrence Fitzpatrick)
63
Jeffrey A. Liesener, Esq. Joshua D. Weinberg, Esq.

One Thomas Circle, N.W. Shipman & Goodwin LLP
Washington, DC 20005 400 Park Avenue, Fifth Floor
jleisener@capdale.com New York, NY 10022-4406
(Counsel for Official Committee of jweinberg@goodwin.com
Asbestos Claimants) (Counsel for Hartford Accident and
Indemnity Company)

Trial Attorney
64

Duro Dyne - Brief of DOJ in Opposition To FCR

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Case 3:18-cv-15563-MAS Document 8 Filed 02/08/19 Page 1 of 75 PageID: 43

IN THE UNITED STATES DISTRICT COURT

In re DURO DYNE NATIONAL CORP., et al., Debtors

ANDREW R. VARA, ACTING UNITED STATES TRUSTEE, Appellant,

DURO DYNE NATIONAL CORP., et al., Appellees.

ON APPEAL FROM THE UNITED STATES BANKRUPTCY COURT

BRIEF OF APPELLANT ANDREW R. VARA,

RAMONA D. ELLIOTT ANDREW R. VARA

TABLE OF AUTHORITIES ................................................................................... iv

STATEMENT OF THE CASE ..................................................................................7

I. Statutory Framework ...................................................................................7

B. The section 101(14) disinterestedness standard ......................................8

D. Statutory role of the United States Trustee .............................................9

C. The United States Trustee objects to the FCR motion. .........................13

E. The bankruptcy court conducts an evidentiary hearing, but restricts

F. The bankruptcy court appoints Mr. Fitzpatrick as FCR without

SUMMARY OF THE ARGUMENT ......................................................................20

I. The Court Erred by Limiting Its Consideration to a Single Candidate

A. Section 524(g) requires an independent FCR who will protect the

B. Section 524(g)’s requirement that the bankruptcy court identify and

V. The Bankruptcy Court Erred by Precluding Inquiry at Trial under the

CERTIFICATE OF SERVICE ................................................................................63

Amchem Prods. v. Windsor,

In re Big Rivers Elec. Corp.,

Bullard v. Blue Hills Bank,

In re Channel Home Ctrs., Inc.,

In re Dalkon Shield IUD Prods. Liab. Litig.,

In re Duro Dyne National Corp.,

Eisen v. Carlisle & Jacquelin,

Fed. Ins. Co. v. W.R. Grace,

General Dynamics Land Systems, Inc. v. Cline,

In re Hathaway Ranch P’ship,

In re Hechinger Inv. Co. of Del.,

Kayes v. Pac. Lumber Co.,

In re Leslie Controls, Inc.,

In re Mountain States Power Co.,

In re Quigley Co., Inc.,

Radner v. IAS Warranty, Inc.,

Russello v. United States,

In re South Station, LLC,

In re Star Broad., Inc.,

In re Teleglobe Commc’ns Corp.,

In re Thorpe Insulation Co.,

United States v. 6.45 Acres of Land,

Universal Minerals, Inc. v. C.A. Hughes & Co.,

Velazquez v. Massachusetts Fin. Servs. Co.,

In re W.R. Grace & Co.,

Woods v. City National Bank & Trust Co.,

11 U.S.C. § 101(14)(C) ......................................................................................19, 52

11 U.S.C. § 307 ..........................................................................................................9

11 U.S.C. § 327 ............................................................................................23, 37, 38

11 U.S.C. § 332 ..................................................................................................23, 38

11 U.S.C. § 333 ..................................................................................................23, 38

11 U.S.C. § 333(a)(2)(A) .....................................................................................8, 37

11 U.S.C. § 524(g) ............................................................................................passim

11 U.S.C. § 524(g)(4)(B)(i) ..............................................................................passim

11 U.S.C. § 1102 ......................................................................................................14

11 U.S.C. § 1103 ......................................................................................................14

11 U.S.C. § 1104 ...............................................................................................passim

11 U.S.C. § 1125 ......................................................................................................12

28 U.S.C. § 157(a) .....................................................................................................1

28 U.S.C. § 157(b) .....................................................................................................1

28 U.S.C. § 158(c)(2) .................................................................................................1

28 U.S.C. §§ 581–589 ................................................................................................9

28 U.S.C. § 1334(a) ...................................................................................................1

Lester Brickman, Ethical Issues in Asbestos Litigation, 33 Hofstra L.