Wright v. Owens Corning, 450 B.R. 541 (W.D. Pa. 2011), aff’d in part, rev’d in part, 2012 WL 1759992 (3rd Cir. Pa.) (May 18, 2012).

In In re Grossman’s Inc., 607 F.3d 114 (3d Cir. 2010), the Court of Appeals established a new test to determine when a "claim" exists for bankruptcy purposes. Utilizing that new test in Wright v. Owens Corning, a consumer who purchased shingles prepetition, but suffered property damage post-confirmation, had a "prepetition claim," while a second consumer who purchased the shingles post-petition but suffered property damage post-confirmation had a "pre-confirmation claim." In Wright, the district court also found that because the plaintiffs’ claims had arisen by the time of confirmation, the published notices of the claims’ bar date afforded the plaintiffs due process, and hence the plaintiffs’ claims were discharged under the confirmed chapter 11 plan of the debtor.

On appeal, the Third Circuit reiterated the "two competing concerns with future claims: the Bankruptcy Code’s goal of providing a debtor with a fresh start by resolving all claims arising from the debtor’s conduct prior to its emergence from bankruptcy; and, the rights of the individuals who may be damaged by that conduct but are unaware of the potential harm at the time of the debtor’s bankruptcy." Wright v. Owens Corning, 2012 WL 1759992 at *4. In Grossman, the Court of Appeals adopted the rule that a "‘ claim’ arises when an individual is exposed pre-petition to a product or other conduct giving rise to an injury, which underlies a ‘right to payment’ under the Bankruptcy Code." In re Grossman’s Inc., 607 F.3d at 125. In affirming part of the district court’s opinion in Wright v. Owens Corning, the Court of Appeals extended its ruling in Grossman "to include post-petition, pre-confirmation exposure to a debtor’s conduct or product." Wright v. Owens Corning, 2012 WL 1759992 at *6.

However, the Court of Appeals reversed the discharge of the post-petition, pre-confirmation claims, finding due process was not afforded to the plaintiff in this case because the Owens Corning plan confirmation preceded the Grossman decision. Not until Grossman "did the Plaintiffs unexpectedly hold ‘claims’ that arguably could be discharged in the proceedings addressed in the Owens Corning bar date notices." Id. In refusing retroactive application of Grossman, the Court of Appeals held "due process affords a re-do in these special situations to be sure all claimants have equal rights." Id. Accordingly, the court reversed the finding of the district court that the confirmation of the Owens Corning chapter 11 plan resulted in the discharge of the plaintiffs’ claims.

PRACTICAL EFFECT

For "exposure type claims": (i) pre-petition exposure claims that occurred prior to the Grossman ruling (June 10, 2010) would not be claims subject to discharge under a confirmed chapter 11 plan; and (ii) post-petition, but pre-confirmation exposure claims that occurred prior to the Owens Corning ruling (May 18, 2012), would not be claims subject to discharge under a confirmed chapter 11 plan.