In re: W.R. Grace & Co.

Dec 31: In the U.S. Court of Appeals, Third Circuit, Case No. 08-3697/3720. In the case, W.R. Grace & Co. (Grace) and the State of Montana appeal an order from the United States District Court for the District of Delaware affirming an order from the District’s Bankruptcy Court denying Grace’s motion to expand a preliminary injunction. The proposed expansion would have enjoined claims against the State of Montana arising from Grace’s mining operations near Libby, Montana. Both the District Court and the Bankruptcy Court determined that the Bankruptcy Court lacked jurisdiction under 28 U.S.C. §§ 1334(b) and 157(a) to expand the injunction to enjoin those claims and, therefore, denied the motion. The Appeals Court agreed and affirmed the lower courts' decisions. This appeal is the fourth to be considered by the Third Circuit from Grace’s ongoing efforts to reorganize under Chapter 11 of the Bankruptcy Code, efforts which began in 2001 when Grace sought shelter from liabilities associated with asbestos litigation.

The Appeals Court said, "In conclusion, our precedent dictates that a federal bankruptcy court does not have related-to jurisdiction over a third-party lawsuit if that lawsuit would affect the bankruptcy proceeding only through the intervention of yet another lawsuit. Grace will not be bound by a judgment against Montana unless there is an additional adjudication. Accordingly, we affirm the judgment of the Bankruptcy Court and the District Court that subject matter jurisdiction does not exist to expand the § 105(a) injunction to include the Montana Actions."

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