NERA's Role in In RE: W.R. Grace & Co., et al

The Situation

On 2 April 2001, W.R. Grace & Co. ("Grace"), a global specialty chemicals and materials company that mines, produces, and markets vermiculite products, voluntarily filed for reorganization under Chapter 11 of the US Bankruptcy Code in the US Bankruptcy Court of the District of Delaware. Historically, the company produced Zonolite Attic Insulation (ZAI), which may contain trace amounts of a naturally occurring asbestos. Prior to 2000, Grace had faced a substantial but relatively stable volume of asbestos claims, which were resolved primarily through negotiated settlements. In 2000, however, the litigation environment changed with an unexpected 81% increase in claims, which increased the risk that Grace would not be able to resolve its pending and future asbestos claims under the current state court systems.
At the time of the filing, the company faced more than 129,000 personal injury claims. Over the next several years, thousands of additional claims and lawsuits were filed and negotiations with various stakeholders continued, as Grace worked to develop a plan of reorganization that would appease all stakeholders and the Bankruptcy Court.

NERA's Role

During the bankruptcy proceedings, NERA Senior Vice President Dr. Denise N. Martin was retained by Grace to assess whether the company was likely to be subject to substantial future property damage (PD) demands, arising out of the same or similar conduct or events that allegedly gave rise to PD claims covered under three sections of Grace's bankruptcy reorganization plan: Class 7B, Class 8, and Class 7A. Class 7B involved asbestos-related PD claims in the US related to ZAI; Class 8 involved asbestos-related PD claims in Canada related to ZAI; and Class 7A pertained to asbestos-related PD claims related to all other Grace products not covered in Class 7B or Class 8.
In her testimony, based on studies conducted by the EPA and the Canadian government concerning the amount of ZAI that had been installed historically along with her own estimates of the number of buildings constructed that might have used a Grace asbestos-containing product, Dr. Martin concluded that Grace was likely to be subject to substantial future PD demands for payment arising out of the same or similar conduct or events that gave rise to the ZAI and other PD claims. She also identified a variety of factors that would introduce risk and uncertainty into any forecast of such claims, rendering indeterminate their amounts, numbers, and timing.

The Result

On 31 January 2011, the Court found Grace's reorganization plan to be consistent with the best interests of creditors, citing Dr. Martin's testimony regarding the likelihood of demands, and issued an order recommending that the US District Court for the District of Delaware approve the plan. The order sets the company on a path towards emergence from Chapter 11 after nearly a decade under court protection.