In Re Federal-Mogul Global Inc.

PRECEDENTIAL

UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
___________

Nos. 09-2230 & 09-2231
___________

In re: FEDERAL-MOGUL GLOBAL INC., et al,
Reorganized Debtors

Hartford Accident and Indemnity Company;
First State Insurance Company;
New England Insurance Company;
*Allianz Global Corporate & Specialty AG,
(as successor-by-patial-merger to Allianz Vericherungs AG
as to Policy No. H O 001 456);
*Allianz Global Risks U.S. Insurance Company,
(f/k/a Allianz Insurance Company);
*Allianz Underwriters Insurance Company,
(f/k/a Allianz Underwriters, Inc.);
Columbia Casualty Company;
Continental Casualty Company;
The Continental Insurance Company,
(both in its individual capacity and as successor to
certain interests of Harbor Insurance Company);
Fireman's Fund Insurance Company;
National Surety Company;
Certain Underwriters at Lloyd’s London;
 Certain London Market Companies,
Appellants

(*Dismissed pursuant to Court Order dated 12/28/10)
_______________________

On Appeal from the United States District Court
for the District of Delaware
D.C. Civil Action Nos. 08-cv-00229 & 08-cv-00230
(Honorable Joseph H. Rodriguez)
______________

Argued November 9, 2011
Before: SCIRICA, SMITH and JORDAN, Circuit Judges.

(Filed: May 1, 2012)

DANIELLE M. SPINELLI, ESQUIRE (ARGUED)
CRAIG GOLDBLATT, ESQUIRE
Wilmer Cutler Pickering Hale & Dorr
1875 Pennsylvania Avenue, N.W.
Washington, D.C. 20006
Attorneys for Appellants,
Hartford Accident and Indemnity Company;
First State Insurance Company;
New England Insurance Company

DAVID C. CHRISTIAN II, ESQUIRE
Seyfarth Shaw
131 South Dearborn Street, Suite 2400

2
Chicago, Illinois 60603
Attorney for Appellants,
Columbia Casualty Company;
Continental Casualty Company;
The Continental Insurance Company

JOHN D. DEMMY, ESQUIRE
Stevens & Lee
1105 North Market Street, Suite 700
Wilmington, Delaware 19801
Attorney for Appellants,
Fireman’s Fund Insurance Company;
National Surety Company

EILEEN T. McCABE, ESQUIRE
Mendes & Mount
750 Seventh Avenue
New York, New York 10019

MICHAEL A. SHINER, ESQUIRE
Tucker Arensberg
1500 One PPG Place
Pittsburgh, Pennsylvania 15222

RUSSELL W. ROTEN, ESQUIRE (ARGUED)
Duane Morris
865 South Figueroa Street, Suite 3100
Los Angeles, California 90017

RICHARD W. RILEY, ESQUIRE

3
Duane Morris
222 Delaware Avenue, Suite 1600
Wilmington, Delaware 19801
Attorneys for Appellants,
Certain Underwriters at Lloyd’s London;
Certain London Market Companies

WILLIAM A. EVANOFF, ESQUIRE
JEFFREY C. STEEN, ESQUIRE
Sidley Austin
One South Dearborn Street
Chicago, Illinois 60603

LAURA D. JONES, ESQUIRE
JAMES E. O'NEILL, III, ESQUIRE
Pachulski Stang Ziehl & Jones
919 North Market Street, 17th Floor
P.O. Box 8705
Wilmington, Delaware 19801
Attorneys for Appellees,
Federal-Mogul Global, Inc., et al.

KATHLEEN C. DAVIS, ESQUIRE
Campbell & Levine
800 North King Street, Suite 300
Wilmington, Delaware 19801

PETER VAN N. LOCKWOOD, ESQUIRE (ARGUED)
Caplin & Drysdale
One Thomas Circle, N.W., Suite 1100

4
Washington, D.C. 20005
Attorneys for Appellee,
Official Committee of Asbestos Claimants

EDWIN J. HARRON, ESQUIRE
SHARON M. ZIEG, ESQUIRE
Young Conaway Stargatt & Taylor
1000 North King Street
Rodney Square
Wilmington, Delaware 19801
Attorneys for Appellee,
Eric D. Green, Legal Representative for
Future Asbestos Claimants of
Federal-Mogul Global Inc., et al.
_________________

OPINION OF THE COURT
_________________

SCIRICA, Circuit Judge.

Federal-Mogul Global and its affiliates filed for
Chapter 11 bankruptcy and sought to resolve asbestos-related
liability through the creation of a personal-injury trust under
11 U.S.C. § 524(g). 1 As part of its reorganization plan, it

1
Besides the Reorganized-Debtors Federal-Mogul, there are
two additional Appellees: the Official Committee of Asbestos
Claimants and the Legal Representative for Future Asbestos

5
sought to transfer rights under insurance liability policies to
the trust. Appellants Insurers 2 had provided liability policies
to the debtors prior to bankruptcy and objected that the
transfer violated the policies’ anti-assignment provisions.
Federal-Mogul contended that 11 U.S.C. § 1123(a)(5)(B)
preempts those provisions, and the bankruptcy and district
courts agreed. We will affirm.

I.

A.

Claimants. For the sake of brevity, we will refer to the
Appellees collectively as “Federal-Mogul.”
2
Appellants are five groups of insurers: (1) Hartford Accident
and Indemnity Company, First State Insurance Company, and
New England Insurance Company; (2) Allianz Global
Corporate & Specialty AG, Allianz Global Risks U.S.
Insurance Company (formerly known as Allianz Insurance
Company), and Allianz Underwriters Insurance Company
(formerly known as Allianz Underwriters, Inc.); (3) Columbia
Casualty Company, Continental Casualty Company, and the
Continental Insurance Company (both in its individual
capacity and as successor to certain interests of Harbor
Insurance Company); (4) Fireman’s Fund Insurance
Company and National Surety Company; and (5) Certain
Underwriters at Lloyd’s, London and Certain London Market
Companies. Briefs were filed on behalf of the first four
groups under the caption “Certain Appellants,” and on behalf
of the fifth under the caption “London Market Insurers”
(“LMI”). We refer to Appellants collectively as “Insurers.”

6
 For almost two decades, Chapter 11 bankruptcies have
employed a statutory mechanism created by 11 U.S.C. §
524(g) to resolve massive asbestos liability and to evaluate
claims and allocate payments to current and future asbestos
claimants. When this provision’s requirements are satisfied,
the bankruptcy court may issue an injunction channeling all
current and future claims based on the debtor’s asbestos
liability to a personal injury trust. This case centers on these
trusts.

The salience of § 524(g) trusts stems from the ongoing
dilemma of asbestos liability, “the longest-running mass tort
litigation in the United States.” Stephen J. Carroll et al.,
RAND Inst. for Civil Justice, Asbestos Litigation 21-24
(2005). 3 As courts and commentators have noted, a just and
efficient resolution of asbestos claims has often eluded the

3
By the end of 2002, over 730,000 claimants had sought
relief from over 8,400 defendants. Carroll, supra, at 70-79.
More recent data demonstrates that asbestos filings peaked in
2003 and have fallen significantly since then, with the annual
number of filings at around 20% of 2001 levels. Mary
Elizabeth C. Stern et al., NERA Econ. Consulting, Snapshot
of Recent Trends in Asbestos Litigation: 2011 Update fig. 1
(2011), available at http://www.nera.com/nera-
files/PUB_Recent_Trends_Asbestos_Litigation_0711.pdf.
The number of pending claims has also fallen below 2001
levels after peaking mid-decade, while the value of each
resolved claim rose, likely due to a larger proportion of
malignant over non-malignant claims. Id. at 4-7.

7
traditional tort system. 4 See In re Congoleum Corp., 426
F.3d 675, 693 (3d Cir. 2005); In re Combustion Eng’g, Inc.,

4
Asbestos liability has also fit poorly into the usual dynamics
of insurance coverage. While the dangers of asbestos were
becoming known when insurers drafted comprehensive
general liability policies in the 1950s and 1960s, they likely
did not foresee the rise of enormous mass tort liability
decades later. See Kenneth S. Abraham, The Maze of Mega-
Coverage Litigation, 97 Colum. L. Rev. 2102, 2105 (1997).
Written on an injury- or occurrence-basis, the policies were
ill-fitted to address long-latency diseases based on prolonged
exposure. Id. Courts interpreted the policies’ coverage
language to impose a “continuous trigger” of insurance
coverage for asbestos liability, holding that every policy on
the risk between first exposure to manifestation—often a
period of decades—was triggered. See Keene Corp. v. Ins.
Co. of N. Am., 667 F.2d 1034, 1042-47 (D.C. Cir. 1981);
James M. Fischer, Insurance Coverage for Mass Exposure
Tort Claims: The Debate over the Appropriate Trigger Rule,
45 Drake L. Rev. 625, 646-50 (1997) (summarizing the
development and justifications for the continuous trigger of
coverage).
The result of the continuous trigger rule has been the
apportionment of liability among numerous insurers, often
posing difficult questions of allocation and likely
incentivizing policyholders to file suit against all insurers
who sold them coverage during the trigger period. Abraham,
supra, at 2106-07. Further complicating the situation is the
distorting effect of multiple insurance layers on insurers’

8
391 F.3d 190, 200 (3d Cir. 2004); see also Richard A.
Nagareda, Mass Torts in a World of Settlement x-xiii (2007).
The aggregate pressure of such claims has led to a variety of
quasi-administrative approaches to asbestos liability, 5 but

incentives. Primary insurers had the duty to defend against
claims that exceeded their policy limits, so they allegedly
minimized defense costs by rushing into aggregate
settlements that included claims of dubious value while
passing the settlements’ cost onto excess insurers. Richard A.
Nagareda, Mass Torts in a World of Settlement 27-28 (2007);
Michelle J. White, Why the Asbestos Genie Won’t Stay in the
Bankruptcy Bottle, 70 U. Cin. L. Rev. 1319, 1334-36 (2002).
5
Both courts and corporations have attempted to implement
innovative solutions to remedy the perceived deficiencies of
the tort system to address the flood of asbestos claims, but
these have proved unsuccessful because of the limitations on
the powers of courts and of private parties. In the Eastern
District of Texas, Judge Robert Parker sought to implement a
three-part trial procedure for addressing three thousand
asbestos claims by using statistical sampling and test trials to
create a compensation grid that would be extrapolated to all
pending claims. Cimino v. Raymark Indus., Inc., 751 F.
Supp. 649 (E.D. Tex. 1990). This plan was overturned on
appeal for violating the defendants’ Seventh Amendment
rights. Cimino v. Raymark Indus., Inc., 151 F.3d 297 (5th
Cir. 1998). Owens Corning, a major asbestos manufacturer,
sought to create a “National Settlement Program” outside the
judicial system by entering private contracts with plaintiffs’
firms that would have settled the claims of the firms’ clients

9
Congress has yet to create the “national asbestos dispute-
resolution scheme” requested by the Supreme Court, Amchem
Prods., Inc. v. Windsor, 521 U.S. 591, 598 (1997) (citing
Judicial Conference of the U.S., Report of the Judicial
Conference Ad Hoc Committee on Asbestos Litigation 3, 27-
35 (1991)); see also Ortiz v. Fibreboard Corp., 527 U.S. 815,
821 & n.1 (1999). 6 Initial attempts to employ the class action
device to resolve the claims of present and future asbestos
victims failed to adequately protect the interests of absent
class members. Amchem, 521 U.S. at 625-28; Ortiz, 527 U.S.
at 848-59.

A consequence of the failure to create a
comprehensive resolution to asbestos litigation has been a
reliance on the Bankruptcy Code to provide some

based on an administrative grid. Nagareda, supra, 108-13.
But Owens Corning could not create a universal binding
system through private contract, and so the innovation failed.
Id. The company filed for bankruptcy, creating a § 524(g)
trust to address its asbestos liability. Id.
6
Various alternatives have been proposed in Congress,
including several proposals along the lines of the
administrative scheme adopted for black lung compensation,
but they have not been enacted. See U.S. Gov’t
Accountability Office, GAO-11-819, Asbestos Injury
Compensation: The Role and Administration of Asbestos
Trusts app’x I (2011), available at
http://www.gao.gov/new.items/d11819.pdf (summarizing
congressional proposals to address asbestos litigation since
1973).

10
predictability and regularity in addressing mass tort liability.
Bankruptcy has proven an attractive alternative to the tort
system for corporations because it permits a global resolution
and discharge of current and future liability, while claimants’
interests are protected by the bankruptcy court’s power to use
future earnings to compensate similarly situated tort claimants
equitably. S. Elizabeth Gibson, Fed. Judicial Ctr., Judicial
Management of Mass Tort Bankruptcy Cases 1-2 (2005). The
primary bankruptcy innovation for addressing mass tort
liability has been the post-confirmation trust, which first
appeared in the bankruptcy proceedings of the Johns-
Manville Corporation, the largest producer of asbestos-
containing products. Lloyd Dixon et al., RAND Inst. for
Civil Justice, Asbestos Bankruptcy Trusts: An Overview of
Trust Structure and Activity with Detailed Reports on the
Largest Trusts 5 (2010) [hereinafter RAND Trust Report]. In
that case, the bankruptcy court issued a channeling injunction
under 11 U.S.C. § 105 requiring future asbestos claims be
brought against a trust created to compensate victims, and
barring actions against the reorganized debtor, its
subsidiaries, or any settling insurance company. 7 In re Johns-
Manville Corp., 68 B.R. 618, 624-28 (Bankr. S.D.N.Y. 1986),

7
Initially, the Johns-Manville trust paid claimants the full
value of their claims. RAND Trust Report, supra, at 5-6. The
number of claims quickly exceeded projections, and in 1995
the trust was reorganized to pay less than the full value of
claims, to give priority to seriously-ill claimants, and to create
an administrative role for a representative to protect future
claimants’ interests. Id.

11
aff’d, 78 B.R. 407 (S.D.N.Y. 1987), aff’d sub nom. Kane v.
Johns-Manville Corp. (In re Johns-Manville Corp.), 843 F.2d
636 (2d Cir. 1988).

Congress codified the Johns-Manville trust mechanism
as a “creative solution to help protect . . . future asbestos
claimants,” H.R. Rep. No. 103-835, at 47 (1994), reprinted in
1994 U.S.C.C.A.N. 3340, 3348, in the Bankruptcy Reform
Act of 1994, Pub. L. 103-394, § 111, 108 Stat. 4106, 4113-17
(codified at 11 U.S.C. § 524(g)-(h)). Congress intended the
trusts as a means to give “full consideration” to the interests
of future claimants by ensuring their claims would be
compensated comparably to present claims, while
simultaneously enabling corporations saddled with asbestos
liability to obtain the “fresh start” promised by bankruptcy. 8
H.R. Rep. No. 103-835, at 46-48. To achieve these goals and
“protect the due process rights of future claimants,” section
524(g) imposed “many statutory prerequisites” that must be

8
As one senator described it, § 524(g) “affirm[s] what
Chapter 11 reorganization is supposed to be about: allowing
an otherwise viable business to quantify, consolidate, and
manage its debt so that it can satisfy its creditors to the
maximum extent feasible, but without threatening its
continued existence and the thousands of jobs that it
provides.” 140 Cong. Rec. 28,358 (1994) (statement of Sen.
Brown).

12
satisfied before a channeling injunction may issue. 9
Combustion Eng’g, 391 F.3d at 234 n.45.

As of May 2011, there were fifty-six asbestos
personal-injury trusts, with several more in process. Lloyd
Dixon & Geoffrey McGovern, RAND Inst. for Civil Justice,
Asbestos Bankruptcy Trusts and Tort Compensation 1 n.1
(2011). Through 2010, the trusts have paid about 3.3 million
claims valued at roughly $17.5 billion. U.S. Gov’t
Accountability Office, supra, at 16. There is substantial
similarity among the various trusts in structure and function.
Nearly all the trusts are governed by trustees who manage
financial affairs, while a committee of advocates, consisting
of representatives of current and future claimants, must
approve substantial trust activities. 10 RAND Trust Report,
9
Under the law, the bankruptcy court may grant a channeling
injunction only if (1) the debtor is subject to substantial and
uncertain future asbestos liability, (2) the trust owns a
majority of the voting shares of the debtor or corporate
parent, (3) seventy-five percent of current claimants vote to
approve the plan, and (4) the trust operates through
mechanisms that assure the plan will pay “present claims and
future demands . . . in substantially the same manner.” 11
U.S.C. § 524(g)(2)(B). The injunction may bind future
claimants only if a future claims representative is appointed
during the reorganization and the bankruptcy court
determines the injunction is “fair and equitable” with respect
to future claimants. Id. § 524(g)(4)(B).
10
Although there are usually more representatives of current
than future claimants, they possess equal authority and must

13
supra, at 11-14. Moreover, like the Johns-Manville trust on
which they are modeled, 11 asbestos personal-injury trusts
receive funding from three primary sources: debtor cash,
debtor stock, and insurance settlements. See id. at app. B
(categorizing the initial funding of the 26 largest asbestos
trusts as “Cash from debtor(s),” “Stock from debtors(s) [sic],”
“Insurance settlements,” or “Other assets”). While some
trusts have been funded primarily with an initial infusion of
cash from the debtor, id. at 65, 105, 137, and others have
consisted primarily of funds obtained from insurance, id. at
55, 79, 115, 123, most rely on a mix of assets. Finally, all
trusts have Trust Distribution Protocols (TDPs) to govern

both consent to substantial modifications of the trust. RAND
Trust Report, supra, at 13-14.
11
When drafting § 524(g), Congress observed that the Johns-
Manville trust was funded “through stock of the emerging
debtor company and a portion of future profits, along with
contributions from Johns-Manville’s insurers.” H.R. Rep.
No. 103-835, at 47. The insurers’ contributions to the Johns-
Manville trust consisted of a negotiated settlement with
Johns-Manville following protracted litigation. The insurers
ultimately agreed to pay $770 million in return for injunctive
protection against all future claims. MacArthur Co. v. Johns-
Manville Corp. (In re Johns-Manville Corp.), 837 F.2d 89, 90
(2d Cir. 1988). This funding constituted “most of the initial
corpus of the Trust,” and was considered the “cornerstone of
the Manville reorganization.” Travelers Indem. Co. v. Bailey,
557 U.S. 137, ----, 129 S. Ct. 2195, 2199 (2009) (internal
quotation marks omitted).

14
how claims are processed and compensated. 12 These
procedures are approved as part of the bankruptcy
reorganization plan but may later be modified. Id. at 14.

12
TDP procedures are similar across most trusts, including
the Federal-Mogul trust. Claimants generally select between
expedited or individual review. RAND Trust Report, supra,
at 15. Under expedited review, a claimant presents evidence
to satisfy pre-established medical and exposure criteria. Id. at
17-19. Once met, the claim is liquidated according to a
compensation grid based on eight disease levels that provide
the highest payment to those suffering from mesothelioma
and other malignant diseases. Id. If a claimant seeks
individual review—mandated when medical and exposure
criteria are not satisfied, but also used to assess whether
special circumstances might warrant greater compensation—
the processing facility determines whether the claim would be
compensable in the tort system, with valuation based on
historical tort awards for similarly situated plaintiffs. Id. at
19-20. In the event of a dispute, claims are submitted to
nonbinding arbitration, or, if that fails, to the courts, although
such resolutions are reportedly rare. Id. at 21. Finally, after
valuation, claims are paid based on a payment percentage on
a first-in-first-out basis, subject to an annual cap on total
compensation and, in some trusts, a claim ratio that reserves a
certain percentage of annual compensation to claimants with
the most serious diseases. Id. at 21-22. Under the TDPs, few
trusts pay the full value of submitted claims: current payment
percentages range widely, but the median is 25%, with most

15
 As a quasi-administrative scheme, § 524(g) trusts have
drawn considerable commentary. 13 While Congress sought to
protect the interests of current claimants by requiring that
75% of them approve the trust, some have suggested that this
provision, without the “cram down” otherwise available in
bankruptcy, grants plaintiffs’ attorneys a de facto veto over
reorganization, allowing them to leverage concessions at the
expense of other stakeholders. 14 S. Todd Brown, Section

trusts paying between ten and forty-six percent of a claim’s
liquidated value. Id. tbl. 4.4.
13
See, e.g., Todd R. Snyder & Deanne C. Siemer, Asbestos
Pre-Packaged Bankruptcies: Apply the Brakes Carefully and
Retain Flexibility for Debtors, 13 Am. Bankr. Inst. L. Rev.
801 (2005); Ronald Barliant et al., From Free-Fall to Free-
for-All: The Rise of Pre-Packaged Asbestos Bankruptcies, 12
Am. Bankr. Inst. L. Rev. 441 (2004); Mark D. Plevin et al.,
Pre-Packaged Asbestos Bankruptcies: A Flawed Solution, 44
S. Tex. L. Rev. 883 (2003).
14
Another significant question that has received attention is
the relationship between tort and trust compensation, which
are linked in complex ways that vary from state to state. See
Dixon & McGovern, Asbestos Bankruptcy Trusts and Tort
Compensation, supra, at 3-7 (outlining the linkages between
the trusts and tort claims). Some have contended that the
confidentiality of the trust system allows claimants to
“double-dip” in both the tort and trust system and permits
reliance on dubious medical reports, while others have
disagreed with this assessment. See How Fraud and Abuse in
the Asbestos Compensation System Affect Victims, Jobs, the

16
524(g) Without Compromise: Voting Rights and the Asbestos
Bankruptcy Paradox, 2008 Colum. Bus. L. Rev. 841, 856-70;
cf. In re Congoleum Corp., 426 F.3d at 680 & n.4 (noting
that, in the absence of a cramdown provision, “[t]he realities
of securing favorable votes from thousands of claimants to
meet the 75% approval requirement [in 11 U.S.C. § 524(g)]
forc[e] debtors to work closely with the few attorneys who
represent large numbers of injured claimants.”). Others
criticize the voting procedure because it allows the more
numerous holders of small claims to outvote those with
mesothelioma and other serious injuries, who, unlike in a
class action settlement, cannot opt out of the trust mechanism.
See Nagareda, supra, at 20-21, 171-73. Our case law has
acknowledged some of these concerns. In Combustion
Engineering, we held that the use of a two-trust structure that
granted current asbestos claimants “privileged treatment”
prior to voting on the reorganization plan may have lacked
both the “good faith” and “indicia of support” among
creditors required by the Bankruptcy Code, as well as likely
contravening the constitutional guarantee of procedural due
process. 391 F.3d at 244-47. We also noted that the apparent
preferential treatment granted to slightly impaired claimants

Economy, and the Legal System: Hearing Before the
Subcomm. on the Constitution of the H. Comm. on the
Judiciary, 112th Cong. (2011) (presenting testimony on both
sides of this question); U.S. Gov’t Accountability Office,
supra, at 29-33 (summarizing differing views and various
proposals on whether and how trust claimant information
should be made available to outside parties) .

17
was “especially problematic in the asbestos context, where a
voting majority can be made to consist of non-malignant
claimants whose interests may be adverse to those of
claimants with more severe injuries.” Id. at 244. A later case
presented an allegation “of collusion between [the debtor] and
the asbestos’ claimants counsel” suggesting that the debtor
had “sold out . . . insurers by setting up a system in which
they would pay newly ginned-up silica claims in exchange for
the asbestos claimants casting their votes in favor of the
[Reorganization] Plan.” In re Global Indus. Techs., Inc., 645
F.3d 201, 214 (3d Cir. 2011) (en banc). We characterized this
assertion as a “profoundly serious charge . . . not without
record support.” Id.

Unlike in our earlier cases, these issues are not
properly before us. Conflicts of interest or other procedural
and structural deficiencies are properly raised in proceedings
to confirm the reorganization plan. Nevertheless, London
Market Insurers contend the plan here did not satisfy the
confirmation requirements of 11 U.S.C. § 524(g) because the
debtor employed complicated financial maneuvers to avoid
adequate trust funding. But no objection was raised before
the bankruptcy court in the confirmation proceedings, and we
decline to entertain a collateral attack on a final, non-
appealable judgment. Moreover, none of the parties here
allege, nor does the record provide, evidence of collusion of
the sort that was so troubling in Combustion Engineering and
Global Technologies.

Furthermore, the trusts appear to have fulfilled
Congress’s expectation that they would serve the interests of

18
both current and future asbestos claimants and corporations
saddled with asbestos liability. In particular, observers have
noted the trusts’ effectiveness in remedying some of the
intractable pathologies of asbestos litigation, especially given
the continued lack of a viable alternative providing a just and
comprehensive resolution. Empirical research suggests the
trusts considerably reduce transaction costs and attorneys’
fees over comparable rates in the tort system. Compare
RAND Trust Report, supra, at xiv & n. 1 (citing evidence that
the claimants received 95% of trust expenditures, while
limiting attorneys’ contingent fees at around 25%), with
Carroll, supra, at 98-103 (determining that in the tort system
claimants ultimately received 42% of total spending on
asbestos litigation, with contingency fee rates averaging 34%
of claimants’ recoveries), and Judicial Conference of the
U.S., supra, at 3, 12-14 (noting that transaction costs in
asbestos litigation exceeded victims’ recoveries by nearly two
to one). Recently, the trusts have required more rigorous
medical evidence, and significantly reduced the valuation for
non-malignant claims. Francis E. McGovern, The Evolution
of Asbestos Bankruptcy Trust Distribution Plans, 62 N.Y.U.
Ann. Surv. Am. L. 163, 171-74 (2006). Others have stressed
that problems over the difficulty of reconciling competing
interests of present and future claimants are not limited to the
creation of § 524(g) trusts, but extend to the current state of
asbestos and mass tort litigation generally. See Nagareda,
supra, at 182 (observing that the “challenge” raised in
Combustion Engineering of setting terms for both present and
future claimants “is not limited to the bankruptcy context but .
. . forms the fundamental problem posed by any peace

19
arrangement for mass tort litigation.”). Nevertheless, we
leave such systemic public policy questions to Congress.

In sum, section 524 trusts are the only national
statutory scheme extant to resolve asbestos litigation through
a quasi-administrative process. In function, the trusts are
similar to workers’ compensation or other administrative
remedies that employ valuation grids to compensate injuries,
subject to individualized and judicial review. Unlike those
schemes, the trusts place the authority to adjudicate claims in
private rather than public hands, a difference that has at times
given us and other observers pause, since it endows
potentially interested parties with considerable authority.

With this context, we turn to the specific facts of this
case.

B.

On October 1, 2001, Federal-Mogul Global, Inc., one
of the world’s largest manufacturers of automobile parts, and
over 150 affiliates filed Chapter 11 bankruptcy petitions in
the District of Delaware. The principal purpose of the
petitions was the resolution of Federal-Mogul’s enormous
asbestos-related liabilities. The company alleges that 500,000
personal-injury claims were pending on the petition date, with
many more anticipated in the future, and asserts it expended
over $350 million in the preceding year defending and
indemnifying asbestos claims. See generally In re Federal-
Mogul Global, Inc., 300 F.3d 368, 372-73 (3d Cir. 2002)
(describing the origins of the Federal-Mogul bankruptcy and

20
the “[t]ens of thousands” of asbestos claims against the debtor
at issue on appeal).

In its proposed plan for reorganization, Federal-Mogul
sought to obtain an injunction under 11 U.S.C. § 524(g) to
channel present and future asbestos-related claims to a post-
confirmation trust. The plan assigned various assets to the
trust, including Federal-Mogul’s rights to recovery under
liability insurance. The plan also contained “insurance
neutrality” provisions granting insurers the right to assert
against the trust any defense to coverage already available
under the policies, excepting only the defense that the transfer
to the trust violated the policies’ anti-assignment provisions.

Insurers here had issued liability policies to Federal-
Mogul prior to bankruptcy. They objected to the plan’s
confirmation, asserting the plan violated the policies’ anti-
assignment provisions—standard clauses in liability policies
that bar the insured from transferring the policies or insurance
rights without the insurers’ consent. See 2 Lee R. Russ,
Couch on Insurance § 34:25 (3d ed. 2011). Federal-Mogul
argued the anti-assignment provisions were preempted under
11 U.S.C. § 1123(a)(5)(B), which provides that a Chapter 11
reorganization plan shall provide adequate means for its
implementation, potentially including transfer of estate
property, “notwithstanding otherwise applicable
nonbankruptcy law.” The parties agreed to bifurcate the
proceedings and resolve this issue separately, with the right to
appeal the bankruptcy court’s preemption judgment. On
November 8, 2007, with all other objections resolved, the
Bankruptcy Court confirmed the plan of reorganization, and

21
the District Court affirmed. The plan went into effect on
December 27, 2007.

On March 19, 2008, the Bankruptcy Court issued its
Preemption Order and Memorandum Opinion, holding the
Bankruptcy Code preempted the anti-assignment provisions
within the insurers’ policies. In re Federal-Mogul Global
Inc., 385 B.R. 560 (Bankr. D. Del. 2008). It reasoned that 11
U.S.C. § 541 permitted the assignment of the insurance rights
to the bankruptcy estate, and 11 U.S.C. § 1123(a)(5) allowed
transfer of the rights to the § 524(g) trust. Id. at 566-67
(citing In re Combustion Eng’g, 391 F.3d at 219 & n.27). It
also relied on state insurance-law doctrine that assignment
after the occurrence giving rise to liability does not violate
anti-assignment provisions, since “there will be no additional
risk to the insurance companies by virtue of the assignments.”
Id. at 567-71. The court also rejected a number of the
insurers’ contentions, holding that the presumption against
preemption was inapplicable given the plain meaning of §
1123(a), that the preemptive scope of § 1123(a)(5) reaches
private contracts, and that the asbestos insurance policies
were not executory contracts subject to 11 U.S.C. § 365. Id.
at 571-76.

The District Court affirmed. In re Federal-Mogul
Global, 402 B.R. 625 (D. Del 2009). The Court first
determined that the “notwithstanding” clause in § 1123(a)
evinced clear congressional intent to expressly preempt
conflicting state law. Id. at 631-32. It then turned to the
scope of preemption, declining to entertain the insurers’
various arguments to distinguish the holding in Combustion

22
Engineering and agreeing with the Bankruptcy Court that the
case was dispositive on the question of whether § 1123(a)
preempted insurance policies’ anti-assignment provisions. Id.
at 632-38. Although the court believed that this conclusion
“effectively ends the matter,” it went on to address insurers’
statutory interpretation claims. Id. at 638. It distinguished as
contrary to circuit precedent and plain statutory meaning a
Ninth Circuit holding, rooted in legislative history, that
limited the scope of § 1123(a) to that of a similar clause in 11
U.S.C. § 1142(a) preempting only nonbankruptcy law
“relating to financial condition.” Id. at 640-44 (citing Pac.
Gas & Elec. Co. v. Cal. ex. rel. Cal. Dep’t of Toxic
Substances Control, 350 F.3d 932 (9th Cir. 2003)). Turning
to the “parade of horribles” the insurers claimed would ensue
from a broad preemptive reading, 15 the Court dismissed them
as speculative and declined to construct a limiting principle
when the relief sought fell “within the heartland of 1123(a).”
Id. at 642-44 (citing Nat’l Cable & Telecomms. Ass’n v. Gulf
Power Co., 534 U.S. 327, 341-342 (2002)). The court
concluded by noting that the assignment of the insurance
policies was consistent with public policy, since the contrary
result would grant the insurers a windfall because “debtors
with sizeable insurance assets could never avail themselves of

15
The insurers alleged that a broad reading of § 1123(a)
“would allow selling liquor to minors, trading with foreign
enemies, dumping toxic wastes, retaining unlawful controlled
substances such as drugs or explosives, or creating
monopolies—all in contravention to federal or state laws.” In
re Federal-Mogul Global, Inc., 402 B.R. at 642.

23
the very trust meant to alleviate” crushing asbestos liability.
Id. at 644-45.

Certain Appellants and London Market Insurers timely
appealed, and we consolidated their appeals. 16

16
We have jurisdiction over final judgments of a district court
under 28 U.S.C. § 1291, and over district court judgments on
appeal from a bankruptcy court under 28 U.S.C. § 158(d)(1).
We review the bankruptcy court’s order using the same
standard the district court applies. In re Cont’l Airlines, 203
F.3d 203, 208 (3d Cir. 2000). The scope of preemption
presents a pure question of law, which we review de novo.
Horn v. Thoratec Corp., 376 F.3d 163, 166 (3d Cir. 2004).

24
 II.

“It is a familiar and well-established principle that the
Supremacy Clause, U.S. Const., Art. VI, cl. 2, invalidates
state laws that ‘interfere with, or are contrary to,’ federal
law.” Hillsborough Cnty., Fla. v. Automated Med. Labs.,
Inc., 471 U.S. 707, 712 (1985) (quoting Gibbons v. Ogden, 22
U.S. (9 Wheat.) 1, 211 (1824)). State law may be preempted
“by express language in a congressional enactment, by
implication from the depth and breadth of a congressional
scheme that occupies the legislative field, or by implication
because of a conflict with a congressional enactment.”
Lorillard Tobacco Co. v. Reilly, 533 U.S. 525, 541 (2001)
(citations omitted).

Two foundational principles of preemption
jurisprudence inform our analysis. First, in every preemption
case, “[t]he purpose of Congress is the ultimate touchstone,”
which “primarily is discerned from the language of the pre-
emption statute and the statutory framework surrounding it,”
as well as from “the structure and purpose of the statute as a
whole.” Medtronic, Inc. v. Lohr, 518 U.S. 470, 485-86
(1996) (internal quotation marks omitted; alteration in
original). Second, we begin with a “presumption against pre-
emption” rooted in the respect for states as independent
sovereigns in our federal system. Wyeth v. Levine, 555 U.S.
555, 565 n.3 (2009). This presumption operates most
forcefully when Congress legislates “in a field which the
States have traditionally occupied,” particularly “regulation of
matters of health and safety.” Lohr, 518 U.S. at 485 (quoting
Rice v. Santa Fe Elevator Corp., 331 U.S. 218, 230 (1947)).

25
This “strong presumption against inferring Congressional
preemption” also applies “in the bankruptcy context.”
Integrated Solutions, Inc. v. Serv. Support Specialists, Inc.,
124 F.3d 487, 493 (3d Cir. 1997). The presumption may be
overcome, however, where “a Congressional purpose to
preempt . . . is clear and manifest.” Farina v. Nokia Inc., 625
F.3d 97, 117 (3d Cir. 2010), cert. denied, 132 S. Ct. 365
(2011) (quoting Fellner v. Tri-Union Seafoods, L.L.C., 539
F.3d 237, 249 (3d Cir. 2008)) (internal quotation marks
omitted).

A.

Insurers contend the disputed issue is one of first
impression. Federal-Mogul argues, and the Bankruptcy and
District Courts agreed, that our opinion in Combustion
Engineering, 391 F.3d 190, determined that § 1123(a)(5)
preempts anti-assignment provisions that would otherwise bar
the transfer of insurance rights to a § 524(g) trust.

Like the present case, Combustion Engineering arose
from the bankruptcy proceedings of a corporation that sought
to channel asbestos-related liabilities to a § 524(g) trust
funded in part through insurance. 391 F.3d at 204-07. As
here, various of the debtor’s insurers claimed assignment to
the trust would violate the terms of their policies. Id. at 208.
Unlike here, the plan at issue in Combustion Engineering
involved the participation of non-debtor affiliates in the trust
in return for a bar against asbestos claims, a provision we
ultimately determined exceeded the scope of the bankruptcy
court’s jurisdiction. Id. at 227-38.

26
 The preemption of anti-assignment provisions was not
one of the paramount issues on appeal, id. at 202, but the
question was raised in the proceedings below and the parties’
briefs, and we discussed it briefly in a section on the appellate
standing of London Market Insurers to challenge the
reorganization plan. We held that, “[w]ith respect to the anti-
assignment provisions, we agree with the District Court that
even if the subject insurance policies purported to prohibit
assignment of Combustion Engineering’s insurance proceeds,
these provisions would not prevent the assignment of
proceeds to the bankruptcy estate.” Combustion Eng’g, 391
F.3d at 218. In a footnote, we expanded:

Section 541 effectively preempts any
contractual provision that purports to limit or
restrict the rights of a debtor to transfer or
assigns [sic] its interest in bankruptcy. 11
U.S.C. § 541(c)(1) (“[A]n interest of the debtor
in property becomes property of the estate . . .
notwithstanding any provision in an agreement,
transfer instrument, or applicable
nonbankruptcy law—(A) that restricts or
conditions transfer of such interest by the
debtor”). The Bankruptcy Code expressly
contemplates the inclusion of debtor insurance
policies in the bankruptcy estate. Section
1123(a)(5) provides:
Notwithstanding any otherwise
applicable nonbankruptcy law, a
plan shall-
...

27
 (5) provide adequate means for
the plan’s implementation, such
as
...
(B) transfer of all or any part of
property of the estate to one or
more entities, whether organized
before or after the confirmation of
such plan.

Id. at 218 n.27.

This statement is clearer in context. There was no
dispute over whether Combustion Engineering could transfer
its insurance rights to the bankruptcy estate, a right well-
established under circuit law at the time. See Estate of
Lellock v. Prudential Ins. Co. of Am., 811 F.2d 186, 189 (3d
Cir. 1987) (“We hold that an insurance policy is property of
the estate within 11 U.S.C. § 541(a)(1).”). Rather, as we
noted elsewhere in the opinion, the assignment issue hinged
on whether Combustion Engineering could “contribute its
rights to proceeds under certain insurance policies” to “the
Asbestos PI Trust.” Combustion Eng’g, 391 F.3d at 206; see
also id. at 216 (“The Bankruptcy Court found the assignment
of insurance proceeds to the Asbestos PI Trust did not impair
the rights of insurers.”). Further context comes from our
stated agreement with the district court on this issue, since
that court had held that the anti-assignment provisions did not

28
bar transfer to the trust. 17 Moreover, although the language
refers to the bankruptcy estate alone, the reference to Section
1123—which describes transfers from the estate to other
“entities”—makes it clear that we contemplated transfers to a
trust as well as inclusion in the estate, since the citation would
otherwise be superfluous. See In re Congoleum Corp., No.
03-51524, 2008 WL 4186899, at *2 (Bankr. D.N.J. Sept. 2,
2008) (describing the “two stage analysis” necessarily
implicated in Combustion Engineering requiring first transfer
to the estate and then to the asbestos trust, and noting that
“any other conclusion” would make the citation to §
1123(a)(5) “nonsensical”).

As this context demonstrates, the question we
addressed in Combustion Engineering was the same we
confront here: whether a debtor could transfer its insurance
rights to a § 524(g) trust notwithstanding the policies’ anti-
17
In its unpublished oral opinion, that court rebuffed the
insurers’ contention that the assignment of “insurance
proceeds to the personal injury trust . . . violates anti-
assignment provisions in their policies.” Transcript of Oral
Opinion at 145, In re Combustion Eng’g, No. 03-10495 (D.
Del. July 31, 2003). It reasoned that, since contracts that
provide for forfeiture in the event of bankruptcy are “void
under Section 541 of the Code . . . . [i]f the insurers were
correct in reading the anti-assignment provisions of
Combustion Engineering’s insurance policies to bar even a
simple assignment of proceeds to a trust fund for claimants
created by the reorganization, then these provisions, too,
should be considered void.” Id. at 146.

29
assignment provisions. 18 Footnote 27 sets forth our
conclusion that any objection to the reorganization plan based

18
Insurers’ other attempts to distinguish Combustion
Engineering are unavailing. They suggest the term
“proceeds” in the opinion referred only to liquidated
insurance coverage, rather than insurance “rights,” as are at
issue here. But the opinion itself refers to “rights to
proceeds,” and makes it clear that the actual value of many of
Combustion Engineering’s insurance policies “had yet to be
determined.” Combustion Eng’g, 391 F.3d at 206 & n.11.
Insurers also suggest that we would not have reached a
different conclusion from the Ninth Circuit in Pacific Gas
without more than a brief discussion in a footnote. But
Pacific Gas had been brought to our attention, Letter Pursuant
to Rule 28(j) from Elit R. Felix, Esq., Counsel for Allianz
Insurance, In re Combustion Eng’g, 391 F.3d 190 (3d Cir.
May 27, 2004) (No. 03-3445), and it did not alter our
conclusion. We agree with the District Court that these
contentions are at base an argument that we “did not mean
what [we] said.” In re Federal-Mogul Global, 402 B.R. at
637.
Insurers also claim that a broad reading of Combustion
Engineering would conflict with our precedent in Integrated
Solutions, Inc. v. Service Support Specialties, Inc., 124 F.3d
487 (3d Cir. 1997). There, we held the Bankruptcy Code did
not preempt state law restrictions on the transfer of tort
claims. Id. at 491-96. Insurers argue that this transaction
would be allowed under a broad reading of § 1123(a). This
assertion is incorrect. The issue in Integrated was preemption

30
on the anti-assignment provisions could be overcome through
a combination of § 541 and § 1123. Furthermore, in a recent
en banc holding, we held that “the discussion of anti-
assignment provisions in Combustion Engineering should
suffice” to resolve whether insurance policies could be
transferred to a personal-injury trust. In re Global Indus.
Techs., 645 F.3d at 212 n.27 (internal citations removed); id.
at 218 n.4 (J. Nygaard, dissenting) (“[O]ur holding in
Combustion Engineering . . . validated the Bankruptcy Code’s
authorization to preempt anti-assignment policy provisions.”);
see also Motor Vehicle Cas. Ins. Co. v. Thorpe Insulation Co.
(In re Thorpe Insulation Co.), 671 F.3d 980, 1000 (9th Cir.
2012) (citing Combustion Engineering for the proposition that
“Congress has expressly preempted Appellants’ contract
rights” restricting the transfer of insurance rights to a 524(g)
trust), amended by --- F.3d ----, 2012 WL 1089503 (9th Cir.
2012); 7 Collier on Bankruptcy ¶ 1123.01[5] n.24 (Alan N.
Resnick & Henry J. Sommer eds., 16th ed. 2009) (citing

under §§ 363(b)(1) and 704(1), neither of which contained an
express preemption clause. 124 F.3d at 493. We contrasted
these sections with “other provisions of the Bankruptcy
Code” where Congress had employed “explicit language” that
showed it “intend[ed] to displace state nonbankruptcy law ,”
particularly the “notwithstanding” clause contained in §
1123(a). Id. Moreover, the sale of the tort claim at issue in
Integrated was not part of the reorganization plan, and so §
1123(a) was not applicable. Id. at 489-90.

31
Combustion Engineering for the proposition that § 1123(a)(5)
preempts state law). 19

Nevertheless, the proper scope of § 1123(a) was not
the focus of the many disputes in Combustion Engineering,
and our brief discussion of the provision did not examine the
statutory language, structure, and legislative history of § 1123
for a thorough preemption analysis. We turn to these factors
now.

B.

Section 1123 of the Bankruptcy Code establishes the
contents of a plan for reorganization under Chapter 11.
Subsection (a), at issue here, reads in part: 20

19
Numerous lower courts have also interpreted our holding
this way, including both lower courts in this case. See, e.g.,
Hartford Acc. and Indem. Co. v. Global Indus. Technologies,
Inc., No. 07-1749, 2008 WL 6838582, at *5-6 (W.D. Pa. July
25, 2008), rev’d on other grounds sub nom. In re Global
Indus. Technologies, 645 F.3d 201 (3d Cir. 2011); In re
Kaiser Aluminum Corp., 343 B.R. 88, 94-95 (D. Del 2006);
In re W.R. Grace & Co., 446 B.R. 96, 132 n.59 (Bankr. D.
Del. 2011); In re Congoleum Corp., No. 03-51524, 2008 WL
4186899, at *1-2 (Bankr. D.N.J. Sept. 2, 2008); In re
Pittsburgh Corning Corp., 417 B.R. 289, 313 (Bankr. W.D.
Pa. 2006).
20
The entirety of § 1123(a) provides:

32
(a) Notwithstanding any otherwise applicable
nonbankruptcy law, a plan shall—
(1) designate, subject to section 1122 of this
title, classes of claims, other than claims of a
kind specified in section 507(a)(2),
507(a)(3), or 507(a)(8) of this title, and
classes of interests;
(2) specify any class of claims or interests
that is not impaired under the plan;
(3) specify the treatment of any class of
claims or interests that is impaired under the
plan;
(4) provide the same treatment for each
claim or interest of a particular class, unless
the holder of a particular claim or interest
agrees to a less favorable treatment of such
particular claim or interest;
(5) provide adequate means for the plan’s
implementation, such as—
(A) retention by the debtor of all or any
part of the property of the estate;
(B) transfer of all or any part of the
property of the estate to one or more
entities, whether organized before or
after the confirmation of such plan;
(C) merger or consolidation of the debtor
with one or more persons;
(D) sale of all or any part of the property
of the estate, either subject to or free of

33
 any lien, or the distribution of all or any
part of the property of the estate among
those having an interest in such property
of the estate;
(E) satisfaction or modification of any
lien;
(F) cancellation or modification of any
indenture or similar instrument;
(G) curing or waiving of any default;
(H) extension of a maturity date or a
change in an interest rate or other term of
outstanding securities;
(I) amendment of the debtor’s charter; or
(J) issuance of securities of the debtor, or
of any entity referred to in subparagraph
(B) or (C) of this paragraph, for cash, for
property, for existing securities, or in
exchange for claims or interests, or for
any other appropriate purpose;
(6) provide for the inclusion in the charter of
the debtor, if the debtor is a corporation, or
of any corporation referred to in paragraph
(5)(B) or (5)(C) of this subsection, of a
provision prohibiting the issuance of
nonvoting equity securities, and providing,
as to the several classes of securities
possessing voting power, an appropriate
distribution of such power among such
classes, including, in the case of any class of

34
(a) Notwithstanding any otherwise applicable
nonbankruptcy law, a plan shall—
...
(5) provide adequate means for the plan's
implementation, such as—
...
(B) transfer of all or any part of
the property of the estate to one or

equity securities having a preference over
another class of equity securities with
respect to dividends, adequate provisions for
the election of directors representing such
preferred class in the event of default in the
payment of such dividends;
(7) contain only provisions that are
consistent with the interests of creditors and
equity security holders and with public
policy with respect to the manner of
selection of any officer, director, or trustee
under the plan and any successor to such
officer, director, or trustee; and
(8) in a case in which the debtor is an
individual, provide for the payment to
creditors under the plan of all or such
portion of earnings from personal services
performed by the debtor after the
commencement of the case or other future
income of the debtor as is necessary for the
execution of the plan.

35
 more entities, whether organized
before or after the confirmation of
such plan.

Besides the transfer of estate property, § 1123(a)(5)(A)-(J)
lists nine other transactions that can constitute “adequate
means” for plan implementation. Collier notes, “The types of
means listed in section 1123(a)(5) are clearly illustrative and
not exclusive.” 7 Collier on Bankruptcy ¶ 1123.01[5].

“When a federal law contains an express preemption
clause, ‘we focus on the plain wording of the clause, which
necessarily contains the best evidence of Congress’
preemptive intent.’” Chamber of Commerce of U.S. v.
Whiting, --- U.S. ----, 131 S.Ct. 1968, 1977 (2011) (quoting
CSX Transp., Inc. v. Easterwood, 507 U.S. 658, 664 (1993)).
The plain language of § 1123(a) evinces Congress’s clear
intent to preempt state law.

The critical words here are “Notwithstanding any
otherwise applicable nonbankruptcy law . . . .” The Supreme
Court has held that a “notwithstanding” clause “clearly
signals the drafter’s intention that the provisions of the
‘notwithstanding’ section override conflicting provisions,”
noting numerous instances when the courts of appeals “have
interpreted similar ‘notwithstanding’ language . . . to
supersede all other laws, stating that ‘[a] clearer statement is
difficult to imagine.’” Cisneros v. Alpine Ridge Grp., 508
U.S. 10, 16 (1993) (alteration in original) (internal quotation
marks omitted) (quoting in part N.J. Air Nat’l Guard v. Fed.
Labor Relations Auth., 677 F.2d 276, 283 (3d Cir. 1982), and

36
citing In re FCX, Inc., 853 F.2d 1149 (4th Cir. 1988)). We
have specifically cited § 1123(a) as an instance where
Congress used “explicit language” to demonstrate its intent
“to displace state nonbankruptcy law,” Integrated Solutions,
Inc., 124 F.3d at 493, and two other courts of appeals have
determined that the “notwithstanding” clause in § 1123(a)
expressly preempts state law, Pac. Gas, 350 F.3d at 946; In re
FCX, Inc., 853 F.2d at 1154-55.

Our conclusion that § 1123(a) preempts state law does
not end our inquiry, since we must still “identify the domain
expressly pre-empted” by the statutory language. Lohr, 518
U.S. at 484 (quoting Cippolone v. Liggett Grp., Inc., 505 U.S.
504, 517 (1992)). Even in instances of express preemption,
the presumption in favor of state law applies, requiring us to
accept “a plausible alternative reading . . . that disfavors pre-
emption.” Bates v. Dow Agrosciences LLC, 544 U.S. 431,
449 (2005). Federal-Mogul argues that the plain text of §
1123 forecloses any alternative reading and requires a
preemptive scope that reaches the transfer of insurance rights
at issue here. But Insurers offer several limiting principles
they contend construe § 1123 just as sensibly while
comporting with traditional respect for state law.

Insurers first argue from the structure of § 1123(a).
Section 1123(a) contains eight numbered subsections, (1)-(8),
specifying the required elements of a reorganization plan. As
discussed, under subsection (5) it also contains ten
transactions, (A)-(J), that can constitute “adequate means for
the plan’s implementation” as required by § 1123(a)(5).
These “means” include the “transfer of . . . the property of the

37
estate,” § 1123(a)(5)(B), at issue here, but also, among others,
the debtor’s retention of estate property, (A); sale or
distribution of estate property, (D); cancellation or
modification of any indenture, (F); and curing or waiving of a
default, (G).

Insurers propose a reading of § 1123(a) that excises §
1123(a)(5)(A)-(J) from the scope of § 1123(a), contending the
“means” listed there are not subject to the “notwithstanding”
clause. In other words, Insurers draw a sharp dichotomy
between what they style as the “illustrative examples of non-
required transactions” enumerated as adequate means and the
rest of subsection § 1123(a). Br. for Certain Appellants at 24-
25.

We disagree. It is hardly natural to read the
“notwithstanding” clause in § 1123(a) as applying only to
some, but not all, of subsection(a), an approach that
contravenes any normal method of statutory interpretation.
“The presumption is that the statute flows in orderly
progression from general statement to specific instance so
that ordinarily the qualification of a later clause upon an
earlier one is to be expected.” 1A Norman J. Singer & J.D.
Shambie Singer, Sutherland Statutes and Statutory
Construction § 20:7 (7th ed. 2007). This approach is also at
odds with the interpretation of the Fourth Circuit, which held
that, “[b]y its plain language,” the “notwithstanding” clause
encompassed § 1123(a)(5)(D). In re FCX, Inc., 853 F.2d at
1154. It could hardly be read otherwise; no other express
preemption provision is necessary. We also agree with the
District Court that the contrary interpretation would have

38
absurd results: many of the means listed would be impossible
to accomplish without preempting nonbankruptcy law. 21 For
these reasons, we conclude the preemptive scope of § 1123(a)
reaches all the provisions in subsection (a).

London Market Insurers further contend the phrase
“otherwise applicable nonbankruptcy law” in § 1123(a) does
not encompass private contracts. They note that elsewhere in
the Bankruptcy Code Congress used language that explicitly
preempts private contracts as well as governmental
enactments. See, e.g., 11 U.S.C. § 363(l) (“notwithstanding
any provision in a contract, a lease, or applicable law”); 11
U.S.C. § 1124(2) (“notwithstanding any contractual provision
or applicable law”).

We agree with the District Court in rejecting this
interpretation. Many of the transactions listed under §

21
We also find relevant § 1123(d), which provides:
“Notwithstanding subsection (a) of this section and sections
506(b), 1129(a)(7), and 1129(b) of this title, if it is proposed
in a plan to cure a default the amount necessary to cure the
default shall be determined in accordance with the underlying
agreement and applicable nonbankruptcy law.” The reference
to subsection (a) indicates that, absent this provision, § 1123
would operate to preempt nonbankruptcy law governing the
curing of defaults. The only reference to curing a default in §
1123 appears at § 1123(a)(5)(G), in the list of transactions
that could constitute “adequate means.” We find this strong
evidence that Congress interpreted § 1123(a) to reach the ten
transactions listed under § 1123(a)(5).

39
1123(a)(5) implicate contractual rights, and so demonstrate
clear congressional intent that the phrase “nonbankruptcy
law” encompass private contracts. The Fourth Circuit
endorsed this view when it held that § 1123(a) preempts the
contractual provisions of patronage certificates. In re FCX,
Inc., 853 F.2d at 1154- 55. Moreover, the Supreme Court
has held that the phrase “all other law” in a preemption
provision preempts private contracts. Norfolk & W. Ry. Co. v.
Am. Train Dispatchers Ass’n, 499 U.S. 117 (1991). Since
“[a] contract has no legal force apart from the [state] law that
acknowledges its binding character,” the Court concluded that
the preemptive language at issue “effects an override of
contractual obligations . . . by suspending application of the
law that makes the contract binding.” 22 Id. at 130. This

22
London Market Insurers attempt to distinguish Norfolk on
the ground that the collective bargaining agreement at issue in
that case was required by law, a fact that played no role in the
Court’s reasoning or conclusions about the preemptive scope
of the statute in that case. They also point to two other
Supreme Court cases, Cipollone v. Liggett Group, Inc., 505
U.S. 504 (1992), and American Airlines, Inc. v. Wolens, 513
U.S. 219 (1995), where the Court refused to apply preemption
clauses to contract provisions. But in both cases, the Court
specifically distinguished the language at issue in those
cases—which spoke to state “requirements and prohibitions”
and “enact[ments] and enforce[ments]” respectively—from
the “all other law” provision in Norfolk. Cipollone, 505 U.S.
at 526 n.24; Wolens, 513 U.S. at 229 nn.5-6. The Wolens
Court also stressed that, in Norfolk, the railroad

40
reasoning applies to § 1123(a) and the insurance policies at
issue. Accordingly, on the strength of statutory language and
precedent, we conclude the phrase “otherwise applicable
nonbankruptcy law” encompasses private contracts, including
the insurance policies at issue here.

Insurers also claim that the context and structure of the
Bankruptcy Code support a narrow reading of preemption.
See United Sav. Ass’n of Tex. v. Timbers of Inwood Forest
Assocs., Ltd., 484 U.S. 365, 371 (1988) (describing the
interpretation of the Bankruptcy Code as “a holistic
endeavor” where a single ambiguous provision “is often
clarified by the remainder of the statutory scheme”). They
point to other Code provisions they argue would be rendered
superfluous by a broad interpretation of § 1123(a)’s scope,
contending that Congress could not have intended § 1123 to
make a hash out of a carefully defined and balanced statutory
scheme.

As an initial matter, § 1123(a) by its express terms
does not displace other portions of the Bankruptcy Code.
Other Code provisions that place specific limitations on the
satisfaction of a lien, 11 U.S.C. § 1129(b)(2)(A), on the
curing of a default, id. § 365(b), on the issuance of securities
notwithstanding certain securities laws, id. § 1145, or on the

reorganization scheme at issue would have been impossible to
effect if collective bargaining agreements were not
preempted—an argument readily analogized to the context of
bankruptcy reorganization and private contracts. Wolens, 513
U.S. at 229 n.6.

41
use or sale of estate property, id. § 363(l), still operate to
condition § 1123(a). 23 Had Congress wanted to limit the

23
Moreover, we are unconvinced these provisions conflict
with § 1123(a). 11 U.S.C. § 1145—which appears in the
subchapter on “postconfirmation matters”—includes far more
than those securities issued under a reorganization plan and
encompasses numerous situations where § 1123 would not
apply. 11 U.S.C. § 1129 places specific limitations on when a
bankruptcy court may approve a plan, and so constitutes an
unambiguous check on a debtor’s power under § 1123. For
instance, the statement in § 1123(b)(1) that “a plan may
impair . . . any class of claims” is obviously not an
untrammeled right, but subject to the careful procedure set
out in § 1129 establishing when a plan may impair a claim
without a creditor’s consent. 11 U.S.C. § 365—which relates
only to executory contracts and leases, not the entire range of
potential defaults—is consonant with § 1123(d), described
above, which limits the otherwise applicable scope of
preemption under § 1123(a)(5)(G) concerning defaults.
Finally, the authorization in 11 U.S.C. § 363(l) for the “use,
sale, or lease of [estate] property” in a plan “notwithstanding
any provision in a contract, a lease, or applicable law that is
conditioned on the insolvency or financial condition of the
debtor” is distinct from the transfer provision at 11 U.S.C. §
1123(a)(5)(B). Although neither “sale” nor “use” are defined
terms in the Bankruptcy Code, the transfer of insurance rights
from the debtor to the § 524(g) trust at issue here would
constitute neither under the common and legal definitions of
those terms. Sections 363(l) and 1123(a)(5)(B) also address

42
preemptive scope of § 1123 based on specific sections of the
Bankruptcy Code, as Insurers suggest, it knew how to do
so—the Bankruptcy Code features many instances when the
exercise of a statutory right is expressly “subject to” the
provisions of another part of the Code. 24 But rather than
addressing the relationship between § 1123(a) and the rest of
the Code clause-by-clause, Congress unambiguously limited
the scope of the “notwithstanding” clause in § 1123(a) to
“nonbankruptcy law,” leaving other Code provisions intact.

different stages of the bankruptcy. As its location in the Code
makes clear, § 363 focuses on the consequences of entering
the bankruptcy process. It does not describe the requirements
for proposing and approving a Chapter 11 reorganization
plan, which are found in §§ 1121-1129. See In re Federal-
Mogul Global Inc., 385 B.R. at 572-73.
24
Several such instances appear within § 1123 itself. See,
e.g., 11 U.S.C. § 1123(a)(1) (“[A] plan shall designate,
subject to section 1122 of this title, classes of claims, other
than claims of a kind specified in section 507(a)(2), 507(a)(3),
or 507(a)(8) of this title, and classes of interests”); id. §
1123(b)(2) (“[A] plan may[,] subject to section 365 of this
title, provide for the assumption, rejection, or assignment of
any executory contract or unexpired lease of the debtor not
previously rejected under such section”); id. § 1123(c) (“In a
case concerning an individual, a plan proposed by an entity
other than the debtor may not provide for the use, sale, or
lease of property exempted under section 522 of this title,
unless the debtor consents to such use, sale, or lease.”).

43
 Insurers particularly urge that a broad reading of the
preemptive scope of § 1123(a) is inconsistent with 11 U.S.C.
§ 1142, which governs the implementation of the
reorganization plan. Section 1142(a) provides,
“Notwithstanding any otherwise applicable nonbankruptcy
law, rule, or regulation relating to financial condition, the
debtor and any entity organized or to be organized for the
purpose of carrying out the plan shall carry out the plan and
shall comply with any orders of the court.” 25 Insurers argue it
would be illogical for the scope of preemption in § 1123,
which provides what the plan should contain, to exceed that
provided for in § 1142, which provides for the plan’s
implementation, and so the two provisions must be read in
pari materia.

This contention finds support in Pacific Gas, 350 F.3d
932, where the court confronted a bankruptcy reorganization
plan that would have allowed the debtor, a public utility, to
25
The District Court ruled that, even if § 1142(a) did apply,
under the rule of the last antecedent the phrase “relating to
financial condition” referred only to regulations and not a
“law” or “rule.” We agree with Insurers that in this instance
this canon should not apply. See Shendock v. Dir., Office of
Workers’ Comp. Programs, 893 F.2d 1458, 1464 (3d Cir.
1990) (“[W]here the sense of the entire act requires that a
qualifying word or phrase apply to several preceding or even
succeeding sections, the word or phrase will not be restricted
to its immediate antecedent.” (quoting 2A N. Singer,
Sutherland Statutes and Statutory Construction § 47.33, at
245 (4th ed. 1984))).

44
contravene state law by disaggregating. Id. at 935-37. The
court limited the express preemptive scope of § 1123(a)(5) to
that of § 1142(a)—that is, to state laws “relating to financial
condition”—and remanded. Id. The court reached this
conclusion based primarily on legislative history, which we
will discuss, but also reasoned that importing the language of
§ 1142(a) into § 1123(a) made structural sense, because the
two sections work in tandem: § 1123(a) establishes what a
confirmable reorganization plan must contain, while §
1142(a) provides for the implementation of the plan. Id. at
946-48.

Although we regard Pacific Gas as factually
distinguishable from this case, 26 we are also unconvinced that
§§ 1123 and 1142 are so similar that they must be read
together. See Tooahnippah v. Hickel, 397 U.S. 598, 606
(1970) (declining to read two sections dealing with the same
subject in pari materia when “the coverage of these sections
26
After briefing and oral argument in this case, the Ninth
Circuit published an opinion holding that federal law
preempts anti-assignment provisions that purport to bar the
transfer of insurance rights to a § 524(g) trust. In re Thorpe
Insulation, 671 F.3d at 999-1001. Distinguishing Pacific Gas
and limiting its holding solely to the scope of § 1123, the
court determined that 11 U.S.C. § 541(c) expressly preempts
anti-assignment provisions and that 11 U.S.C. § 524(g)
impliedly preempts them as an obstacle to congressional
purposes. Id. Accordingly, even under Ninth Circuit case
law, the anti-assignment provisions at issue here would be
preempted.

45
is not identical”). Collier describes the plan provisions under
§ 1123 as “self-executing,” 7 Collier ¶ 1123.01[5], which
would seem to obviate the need for subsequent
“implementation” under § 1142. Federal-Mogul suggests
that, since § 1142 appears in a subchapter addressing
“postconfirmation matters,” it implicates a different stage in
the bankruptcy proceeding from § 1123 and provides a post-
confirmation safe harbor for certain actions taken in
conformity with the plan. This interpretation is at least
plausible, especially in light of the absence of any contrary
case law examining preemption under § 1142(a). 27 Section
1142 is also distinguishable from § 1123 because it
encompasses “orders of the court,” suggesting that the limited

27
The case law on preemption under § 1142(a) is sparse. The
handful of relevant cases include In re Sugarhouse Realty,
Inc., No. 92-23024 SR, 1995 WL 114151 at *31-*32 (Bankr.
E.D. Pa. March 15, 1995) (holding that under § 1142 the
bankruptcy court may require specific performance when it
might not be available under Pennsylvania law on the ground
that applying state law “would eviscerate the language of 11
U.S.C. § 1142 and seemingly contravene the supremacy
clause”); In re Am. Freight Sys., Inc., 179 B.R. 952, 961
(Bankr. D. Kan. 1995) (rejecting a claim by a freight carrier
that under § 1142 it may pursue certain post-confirmation
claims prohibited by federal law); In re Pearson Indus., 152
B.R. 546, 557 (Bankr. C.D. Ill. 1993) (holding that, while a
debtor post-confirmation was generally expected to comply
with “all applicable laws” like “any other business entity,” §
1142 preempted parts of the Illinois Corporation Act).

46
preemptive language might serve primarily as a check on the
court’s authority to trump non-bankruptcy law in
supplemental orders enacting the plan. Case law supports this
interpretation, since nearly all of the cases construing § 1142
have involved the proper scope of the bankruptcy court’s
postconfirmation jurisdiction and authority. 28

We need not resolve the scope of § 1142(a), however,
because well-established principles of statutory interpretation
militate against assimilating the two sections where Congress
employed different words. “[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.” 2B Sutherland Statutes
and Statutory Construction § 51.2. Thus, “limiting words”
that appear in one provision are not ordinarily read into
another that omits them, because we presume that “Congress
28
See, e.g., Goodman v. Phillip R. Curtis Enters., 809 F.2d
228 (4th Cir. 1987) (limiting the authority of the bankruptcy
court following confirmation of the plan to matters
concerning implementation or execution); Walnut Assocs. v.
Saidel, 164 B.R. 487 (E.D. Pa. 1994) (holding that subject
matter jurisdiction is conferred on the bankruptcy court only
to resolve postconfirmation matters); In re Johns-Manville
Corp., 97 B.R. 174 (Bankr. S.D.N.Y 1989) (determining that
bankruptcy court retains postconfirmation jurisdiction over
fundamental questions of the interpretation and
administration of plan in the context of asbestos suits filed
against debtor).

47
acts intentionally and purposely in the disparate inclusion or
exclusion.” Burlington N. & Santa Fe Ry. Co. v. White, 548
U.S. 53, 62-63 (2006) (quoting in part Russello v. United
States, 464 U.S. 16, 23 (1983)). 29 Moreover, even if §§ 1123
and 1142 were properly read in pari materia, “where two
statutes deal with the same subject matter, the more recent
enactment prevails as the latest expression of legislative will.”
2B Sutherland Statutes and Statutory Construction § 51.2.
Pacific Gas reversed this presumption by making the reading
of the 1984 amendment of § 1123 conditional on the earlier
passage of § 1142 in 1978. We believe the logical course is
to assume that Congress was aware of the preemptive
language of § 1142 when it subsequently amended § 1123 to
contain a preemptive provision with a different scope.
Therefore, we decline to limit the preemptive scope of §
1123(a) to those state laws relating to financial condition. 30

29
A number of cases have applied this canon in the
bankruptcy context. See Bank of Am. Nat’l Trust & Sav.
Ass’n. v. 203 N. LaSalle St. P’ship, 526 U.S. 434, 450 (1999)
(“It is unlikely that the drafters of legislation so long and
minutely contemplated as the 1978 Bankruptcy Code would
have used two distinctly different forms of words for the
same purpose”); Rea v. Federated Investors, 627 F.3d 937,
940-42 (3d Cir. 2010) (stating, in the context of two similar
bankruptcy provisions, “[w]e will not contravene
congressional intent by implying statutory language that
Congress omitted”).
30
We find further support for this conclusion in 11 U.S.C. §
1123(d). As discussed above, subsection (d) establishes that,

48
 In sum, we find no textual support to limit the scope of
the “notwithstanding” clause only to part of § 1123(a), to
state enactments, or to the preemptive reach of § 1142(a).
The plain language of § 1123(a) evinces clear congressional
intent for a preemptive scope that includes the transactions
listed under § 1123(a)(5) as “adequate means” for the plan’s
implementation, including the transfer of property authorized
by (a)(5)(B). The plain language also reaches private
contracts enforced by state common law, and overcomes the
presumption against preemption. As we will discuss, we do
not believe that the scope is limitless, but it is broad enough
to encompass the anti-assignment provisions of insurance
policies that purport to bar transfer to a § 524(g) trust.

“[n]otwithstanding subsection (a) of this section,” the amount
necessary to cure a default under the plan is determined by
applicable nonbankruptcy law. If subsection (a) only
preempted nonbankruptcy law related to financial condition,
such a proviso would likely be unnecessary, since a law
defining the amount necessary to cure a default does not
relate to financial condition, at least as that term is currently
defined as analogous in meaning to insolvency, see 11 U.S.C.
§ 541(c)(1)(B) (invalidating restrictions of the transfer of
property to the estate when “conditioned on the insolvency or
financial condition of the debtor”); In re Transcon Lines, 58
F.3d 1432, 1439-40 (9th Cir. 1995); In re Am. Freight Sys.,
Inc., 179 B.R. at 960.

49
 C.

Insurers also urge a narrow reading of § 1123(a) on the
basis of prior practice and legislative history. They suggest
preemption deviates from pre-Code bankruptcy practice and
should be disfavored, and legislative history establishes that
Congress intended the 1984 revisions to the Code to be
minor. But the evidence from these sources is too equivocal
to overcome the plain meaning of the text, which provides
compelling evidence of Congress’s intent to preempt contrary
non-bankruptcy law.

The legislative history of the “notwithstanding” clause
in § 1123(a) is thin and inconclusive. Section 1123, enacted
as part of the Bankruptcy Code in 1978, codified a similar
provision at § 77B(b)(9) of the earlier Bankruptcy Act. Pac.
Gas, 350 F.3d at 938. In its original form, § 1123(a)
specified, as it does now, the elements a Chapter 11
reorganization plan shall contain, mandating that it provide
“adequate means” including “the transfer of all or any of the
property of the estate.” An Act to Establish a Uniform Law
on the Subject of Bankruptcies, Pub. L. No. 95-598, §
1123(a), 92 Stat. 2549, 2631-32 (1978). It contained no
preemption provision. But § 1142(a), also enacted as part of
the 1978 Bankruptcy Code, provided for the “execution” of a
reorganization plan “notwithstanding any otherwise
applicable nonbankruptcy law . . . relating to financial
condition.” Id. § 1142, at 2639. During debate, one senator
read this preemptive language to encompass § 1123 as well,
noting that under § 1123 “[i]f the [reorganization] plan is
confirmed, then any action proposed in the plan may be taken

50
notwithstanding any otherwise applicable bankruptcy law in
accordance with section 1142(a) of title 11.” 124 Cong. Rec.
34,005 (1978) (statement of Sen. DeConcini). 31

The addition of the clause “notwithstanding any
otherwise applicable nonbankruptcy law” to § 1123(a) was
first proposed in 1980, reintroduced in 1983, and enacted as
part of the Bankruptcy and Federal Judgeship Act of 1984.
31
The import of this statement is the cause of some debate.
In Pacific Gas, the Ninth Circuit cited this as evidence that
Congress intended §§ 1123 and 1142 to be read together. 350
F.3d at 941-42, 948. The District Court in this case rejected
this view, citing “the inherent infirmity of relying on the floor
remarks of a single senate subcommittee chairman as
controlling authority,” and instead stressed the importance of
the difference in language between the two provisions. In re
Federal-Mogul Global, 402 B.R. at 640-41 (citing In re
Pelkowski, 990 F.2d 737, 743 (3d Cir. 1993)). This was
particularly true, the District Court found, because Congress
presumably had knowledge of the language of § 1142 when it
altered § 1123 six years later, and chose not to adopt it. Id.
We agree with the District Court that a statement by a single
senator suggesting the preemptive scope of § 1123 in 1978 is
not dispositive of its scope after modification in 1984. If
anything , Senator DeConcini’s statement seems to support
the presumption that Congress acted purposefully in selecting
different language for § 1123. Cf. In re FCX, Inc., 853 F.2d
at 1154 n.7 (citing Sen. DeConcini’s statement to support the
claim that § 1123(a) preempted the private contract
restrictions at issue).

51
This modification occasioned little discussion. When
originally proposed as part of a package of “technical
amendments” intended to redress errors in “printing, spelling,
punctuation, grammar, syntax, and numeration,” the changes
to § 1123 were described as “mak[ing] it clear that the rules
governing what is to be contained in the reorganization plan
are those specified in this section.” H.R. Rep. No. 96-1195,
at 1, 22 (1980). 32 In 1983, a Senate report described the
amendment as making “technical stylistic changes.” S. Rep.
No. 98-65, at 84 (1983). The amendment, including the
“notwithstanding” clause, passed the following year as part of
a subsection labeled “Miscellaneous Amendments to Title
11.” Pub. L. No. 98-353, Subtitle H, § 502, 98 Stat. 333, 367
& 385 (1984).

Insurers argue that the relative congressional silence
on the amendment of § 1123 is telling. Courts will not
presume a departure from pre-Code bankruptcy practice in
the absence of clear congressional intent. Hamilton v.
Lanning, --- U.S. ----, 130 S. Ct. 2464, 2473-74 (2010);
Cohen v. de la Cruz, 523 U.S. 213, 221-22 (1998); Pac. Gas,
350 F.3d at 943-44. Insurers characterize pre-Code practice
as requiring reorganization plans to conform to state law,
32
Insurers point to this statement as evidence for their
contention that preemption applies only to part of § 1123(a).
But this brief sentence is too equivocal to prove much. It
might also be reasonably interpreted to support the opposing
conclusion that the rules specified in the section, including
the transactions listed as “adequate means,” are the only laws
governing the contents of a reorganization plan.

52
arguing that an amendment characterized as “technical” and
“stylistic” does not demonstrate congressional intent to
substantially revise bankruptcy practice. This argument was
endorsed by the Ninth Circuit in limiting the preemptive
scope of § 1123 to laws relating to financial condition, Pac.
Gas, 350 F.3d at 947, and it also finds support, Insurers
claim, in the Supreme Court’s ruling in Cohen, which found
that a “stylistic change” enacted in the same 1984
amendments at issue here did not alter the meaning of a
different provision of the Bankruptcy Code, 523 U.S. at 221.

We see no reason to question Insurers’ account of pre-
Code bankruptcy practice, which seems borne out by case law
and commentary. 33 But we disagree with the inference that
this practice, coupled with the thin legislative history of §
1123, establishes their proposed narrow preemptive scope for
§ 1123.

Pre-Code bankruptcy practice was not the law when
the “notwithstanding” clause was added to § 1123 in 1984;

33
See, e.g., Brocket v. Winkle Terra Cotta Co., 81 F.2d 949
(8th Cir. 1936) (refusing to allow the issuance of stock under
a reorganization plan without adequate financial support
required by state law); 6A Collier on Bankruptcy ¶10.19, at
89 & n. 8 (14th ed. 1977) (“Whatever the means chosen [for
reorganization], it must be remembered that conformity with
other applicable state or federal laws may be necessary. . . .”);
Br. for Certain Appellants at 36 n.8 (collecting similar cases).
We are unconvinced by Federal-Mogul’s efforts to
demonstrate that pre-Code practice was otherwise.

53
the existing law was the 1978 Bankruptcy Code. The 1978
Code substantially altered earlier practice, see generally
David Skeel, Debt’s Dominion: A History of Bankruptcy Law
in America 131-83 (2001) (describing the Code’s
“transformative effect on bankruptcy as we know it”),
including the addition of the preemptive language in § 1142
that modified prior practice and allowed the implementation
of a plan notwithstanding some nonbankruptcy laws. 34 The
fifteenth edition of Collier, which came out after the 1978
Code, broke with prior editions’ admonition that a plan’s
terms may be required to conform to state law, and stated
instead that under § 1123, “a plan may propose such actions
notwithstanding nonbankruptcy law or agreements.” In re
Kizzac Mgmt. Corp., 44 B.R. 496, 504 (Bankr. S.D.N.Y.
1984) (quoting 5 Collier on Bankruptcy ¶ 1123.01 [5] at
1123–10 (15th ed. 1979)). Case law from the period between
1978 and 1984 generally, although not unanimously, held that
§ 1123 preempted state law. See In re Taddeo, 685 F.2d 24,
29 (2d Cir. 1982) (holding that, since § 1123(a)(5)(G)
provides the authority to cure a default in a Chapter 11
proceeding, “[a] state law to the contrary must fall before the
Bankruptcy Code”); Valente v. Sav. Bank of Rockville, 34

34
The addition of the “notwithstanding” clause in § 1142 was
the only meaningful modification of that section from the
corresponding Bankruptcy Act provision. 8 Collier ¶
1142.LH. This constituted a substantial break from pre-Code
practice: cases like Brocket would come out differently post-
Code, since the state law at issue in that case related to the
debtors’ financial condition under § 1142(a).

54
B.R. 362, 365-67 & n.3 (D. Conn. 1983) (concluding that §
1123(a)(5)(G) allows for the curing of defaults
notwithstanding state court judgments under the Supremacy
Clause); In re Kizzac Mgmt. Corp., 44 B.R. at 504 (holding
that § 1123(a)(5)(E) grants the bankruptcy court the power to
compel an assignment rather than a satisfaction of a
mortgage). 35 But see In re Celeste Court Apartments, Inc., 47
B.R. 470, 473-74 (D. Del. 1985) (finding no evidence in the
unamended text of § 1123 or its legislative history that
Congress intended it to upset a state court judgment on a
defaulted mortgage). Taken together, this evidence suggests
that the 1984 amendment did not mark a sharp break with
earlier practice under the Code, but rather clarified and
expanded the scope of preemption under § 1123. Notably,
this conclusion was endorsed by the Fourth Circuit. See In re
FCX, Inc., 853 F.2d at 1154 n.7 (“We do not understand the
amendment [to § 1123(a)] to have effected a substantive
change in prior law.”).

But whatever the proper characterization of prior
practice, it deserves little weight here. We decline to rely on
it, or on a thin and vague legislative history that says nearly
nothing about the intended preemptive scope of § 1123(a), to
overcome the plain and unambiguous meaning of the words
Congress chose. “As always, the most authoritative
35
Insurers argue that Valente and Kizzac stand only for the
proposition that the Bankruptcy Court may modify the rights
of creditors. Certain Appellants Reply Br. at 20 n.8. Yet
both courts analyzed the question presented under the Court’s
power under § 1123 to preempt state law.

55
indicators of what Congress intended are the words that it
chose in drafting the statute.” United States v. Lavin, 942
F.2d 177, 184 (3d Cir. 1991). Thus, “while pre-Code practice
informs our understanding of the language of the
[Bankruptcy] Code, it cannot overcome that language.”
Hartford Underwriters Ins. Co. v. Union Planters Bank, 530
U.S. 1, 10 (2000) (internal quotation marks and citation
omitted). “[W]here the meaning of the Bankruptcy Code’s
text is itself clear . . . its operation is unimpeded by contrary .
. . prior practice.” Id. (alteration and omissions in original)
(quoting BFP v. Resolution Trust Corp., 511 U.S. 531, 546
(1994)). Here, Congress chose words that it employed
throughout the Bankruptcy Code to mandate preemption,
words the Supreme Court has interpreted as the clearest
possible statement of preemptive intent. It would be an odd
method of interpretation to rummage deep into the legislative
history, and, finding practically nothing, conclude that this
silence implies that Congress could not have meant what it
said when it wrote the statute. The more sensible course
reads the statutory text itself as indicative of congressional
intent, which, based on the unambiguous language here, was
to preempt nonbankruptcy state and federal law.

The Supreme Court’s opinion in Cohen supports this
view. There, the petitioner argued the 1984 addition of the
phrase “to the extent obtained by” to 11 U.S.C. §
523(a)(2)(A), which barred discharge from liability for fraud,
limited recovery from his estate to the actual amount of fraud
and did not include the treble damages awarded by the
bankruptcy court in an adversary proceeding. Cohen, 523
U.S. at 215. In rejecting this argument, the Court turned first

56
to the plain language of the provision, noting that the
petitioner’s proposed interpretation was at odds with both the
“most straightforward reading” of the statute as well as the
phrase’s meaning in parallel provisions. Id. at 218-21. Only
after exhausting the statute’s wording did the Court turn to
the provision’s history, noting that, in addition to its
description in the legislative history as only a “stylistic
change,” the language of the 1984 amendment “in no way
signals an intention to narrow the established scope of the
fraud exception.” Id. at 221-22. “If . . . Congress wished to
limit the exception [to the amount of actual fraud],” the
Court continued, “one would expect Congress to have made
unmistakably clear its intent.” Id.

As this overview makes clear, the legislative history of
the 1984 amendment to the Bankruptcy Code was a minor
piece of corroborating evidence in an opinion that looked
primarily to plain text of the provision to discern
congressional intent. Fidelity to this approach in this case
demonstrates that Congress made its intent clear. As we have
discussed, the “most straightforward reading” of § 1123(a)
cuts against Insurers’ proposed narrow interpretation.
Moreover, unlike the ambiguous amendment in Cohen, the
addition of the “notwithstanding” clause to § 1123 is an
“unmistakably clear” signal of congressional intent to
preempt that overcomes any inference based on passing
references to “technical” or “stylistic” changes. In short, we
believe Cohen mandates rather than undermines an
interpretation derived from a statute’s plain text.

57
 Having examined the history of § 1123, we find
nothing that indicates we should read its preemptive scope
narrowly. While pre-Code practice may suggest that
historically courts did not allow a reorganization plan to
preempt contrary state law, the 1978 Code altered that prior
practice. The thin legislative history of the 1984 amendment
of § 1123 characterizing the change as “stylistic” and
“technical” does not overcome the plain and explicit language
of the preemption provision. That language unambiguously
provides for preemption, at least in this context, and we give
its meaning effect.

D.

Although our discussion resolves the legal question
before us, it bears noting that preemption here furthers the
purposes of the Bankruptcy Code. The debtor here seeks to
use its existing assets to address current and future claims
arising out of past occurrences and resolve its asbestos
liability, a goal consonant with the “fresh start” purpose of
bankruptcy. Because a 524(g) trust is created only through a
Chapter 11 proceeding, a contractual limitation on the
assignment of the debtors’ property to a trust functions
analogously to contract provisions that alter a debtor’s rights
in the event of insolvency. Such provisions are preempted
under 11 U.S.C. § 541(c)(1)(B), which provides that “an
interest of the debtor in property becomes property of the
estate . . . notwithstanding any provision in an agreement,
transfer instrument, or applicable nonbankruptcy law . . . that
is conditioned on the [debtor’s] insolvency.” The purpose of
this provision is to prevent creditors and others from

58
employing a debtor’s bankruptcy filing to diminish post-filing
contractual rights. Its inclusion in the Code establishes that
preemption in this instance—where the transfer of insurance
rights corresponds with the transfer of the debtor’s
preexisting liabilities into an asbestos trust authorized by the
Code—furthers the purposes of bankruptcy. Cf. In re Thorpe
Insulation, 671 F.3d at 1000 (holding that § 541(c) itself
preempts anti-assignment provisions that bar transfer to a
524(g) trust). 36

Preemption in this instance also furthers the purposes
of 11 U.S.C. § 524(g). Congress created 524(g) as the best
course to harmonize the interests of asbestos claimants and
reorganized debtors alike. See H.R. Rep. No. 103-835, at 46-
48 (1994). This approach would “help asbestos victims
receive maximum value,” 140 Cong. Rec. 28,358 (1994)
(statement of Sen. Heflin), but also ensure a company’s
continued profitability, converting it into the “goose that lays
the golden egg by remaining a viable operation and
maximizing the trust’s assets to pay claims,” id. at 8,021
(statement of Sen. Brown). The trust mechanism furthered
“the fundamental rationale of chapter 11, that a reorganized
debtor emerges from bankruptcy free and clear other than the
liability set by the plan.” Id.; see also H.R. Rep. No. 103-
835, at 47 (noting that the uncertainties surrounding asbestos-
related bankruptcies had “undermined the ‘fresh start’
36
Federal-Mogul did not argue either before the District
Court or on appeal that the trust is part of the estate, as the
Ninth Circuit concluded in Thorpe.

59
objectives of bankruptcy”). As these statements demonstrate,
Congress believed the transfer of a corporation’s assets to a
trust to ensure the equitable compensation of present and
future claimants, in return for a release from future liability,
served the “fundamental” purposes of bankruptcy. The anti-
assignment provisions at issue would impede these objectives
by depriving both debtors and claimants access to assets
specifically intended to compensate for potential losses. In
these circumstances, construing § 1123(a) to preempt these
contracts is consonant with congressional intent and public
policy. Cf. In re Thorpe Insulation, 671 F.3d at 1000-01
(holding that anti-assignment provisions barring transfer to a
trust are impliedly preempted because they are an “obstacle to
the accomplishment and execution of the full purposes and
objectives of Congress” in enacting § 524(g)).

Insurers argue, however, that the anti-assignment
provisions serve an important purpose in protecting them
from covering a risk different from the one they bargained
for. Although insurance neutrality language in the
reorganization plan preserves all other defenses to coverage,
Insurers contend that the transfer here nonetheless increases
their exposure because the trust allows claims that would be
barred in the tort system.

We doubt whether transfer in this instance materially
alters Insurers’ risk. The bankruptcy here shifted debtor’s
asbestos-related liabilities—based on events which had
already occurred and for which the insurers were already
potentially responsible—to the post-confirmation trust. We
have questioned whether such a transfer in the asbestos

60
context changes the risk an insurer agreed to cover. 37 See
Global Indus. Techs., Inc., 645 F.3d at 212 (observing that in
the Combustion Engineering reorganization plan, “the pre-
petition quantum of asbestos liability was known from four
decades of asbestos litigation, and moving the pre-petition
asbestos claims out of the tort system and into a trust system
did not increase in any meaningful way the insurers’ pre-
petition exposure to asbestos liability.”); see also 3 Couch on
Insurance § 35.8 (“The purpose of a no assignment clause is
to protect the insurer from increased liability, and after events
giving rise to the insurer's liability have occurred, the insurer's
risk cannot be increased by a change in the insured's
identity.”). Here, both the District and Bankruptcy Court
strongly challenged Insurers’ argument that their risk was
substantially altered. In re Federal-Mogul Global, Inc., 402

37
Global Industrial Technologies found that insurers’ risk
altered when a reorganization plan’s creation of a Silica Trust
expanded the number of silica claims from 169 to over 4,600,
a twenty-seven-fold increase, and when there was substantial
evidence of collusion. 645 F.3d at 213-14. No record
evidence supports a similar finding here. Instead, Insurers
argue transfer to the asbestos trust increases their risk solely
because it may “put[] administration of the trust and claims
resolution process in the hands of plaintiffs’ lawyers” or may
“pay[] claims that would not be entitled to payment in the tort
system.” Br. for Certain Appellants at 53-54; see also LMI
Br. at 14-16. These bare assertions do not rise to the
exceptional and well-documented increase in risk we found in
Global Industrial Technologies.

61
B.R. at 645 (“Appellants have no economic incentive to
prevent this assignment, particularly whereas here, the events
creating exposure to asbestos liability have already
occurred.”); In re Federal-Mogul Global, Inc., 385 B.R. at
567-69 (collecting cases to establish that “[i]n this case, to the
extent that the events giving rise to liability have already
occurred, there will be no additional risk to the insurance
companies by virtue of the assignments. Coverage issues . . .
are all preserved.”). Insurers have presented no evidence that
the transfer here alters their risk except, perhaps, through the
procedural shift that provides recovery through Trust
Distribution Protocols rather than through the tort system.
Significantly, those TDPs are mandated by Congress for
asbestos trusts and must be approved by the bankruptcy court.
11 U.S.C. § 524(g)(2)(B)(ii)(V). We cannot seriously
entertain a claim that the insurers had a contractual right to a
particular public policy. If, as has been proposed, Congress
removed all asbestos claims to a nationwide asbestos trust
that could recover from Federal-Mogul and other responsible
parties, with procedures identical to those currently provided
in the § 524(g) trusts, the insurers would have no anti-
assignment claim. As this hypothetical demonstrates,
Insurers’ true objection seems to be against the public policy
Congress chose to enact. 38

38
Insurers also urge that the anti-assignment defense is no
different from the other defenses specifically preserved to
them under the plan’s insurance neutrality, and so should also
be preserved. We disagree. Insurers could have offered the
fact-specific coverage defenses preserved to them in any

62
 Insurers also allege the trust mechanism might distort
ordinary incentives between insurer and insured, encouraging
the debtor to collude with claimants and impose costs on the
insurer. But as Federal-Mogul points out, this shift in
incentives is not unique to the asbestos context and occurs in
bankruptcy where there is a discharge of the liability of the
debtor but not that of the insurer. See 11 U.S.C. § 524(e)
(“[D]ischarge of the debt of the debtor does not affect the
liability of any other entity on, or the property of any other
entity for, such debt.”). Nor do the Insurers provide any
evidence of such collusion in this case. Such bare speculation
does not establish an increase in risk.

Although not present here, there may be circumstances
where the creation of a trust does alter an insurer’s
exposure—for instance, when its mere existence attracts
dramatically more claimants—although this is less likely
given the lengthy history of asbestos liability. See In re
Global Indus. Techs., Inc., 645 F.3d at 212 (detailing how the
creation of a silica trust alone “staggeringly increased—by
more than 27 times—the pre-petition liability exposure,”
while distinguishing the asbestos context because the

asbestos proceeding prior to bankruptcy. By contrast, the
anti-assignment defense here would exist only after and by
virtue of the bankruptcy reorganization, and could be invoked
by an insurer against any claim by the Trust, no matter how
meritorious. Moreover, to the extent a determination rested
on the legitimacy of the TDPs as a method of adjudication, it
could invite courts to second-guess the judgment of Congress
and the bankruptcy court.

63
quantum of liability has been established from “four decades
of asbestos litigation.”). As our precedent has also
recognized, there may also be instances where the evidence
suggests possible collusion between the debtor and the
claimants. See id. at 214. But granting a private party
powerful leverage that may amount to a de facto veto over the
reorganization proceeding does not seem a promising solution
to these potential problems. Cf. In re Thorpe Insulation Co.,
671 F.3d at 1001 (“[E]nforcing the anti-assignment
provisions would subject virtually all § 524(g)
reorganizations to an insurer veto”).

Congress sought to address these issues when it
enacted § 524(g) by codifying the “exceptional precautions at
every stage of the proceeding” employed in the original
Manville case. H.R. Rep. No. 103-835, at 47. Section 524(g)
accordingly contains many requirements that must be
satisfied before such a trust can be approved. See
Combustion Eng’g, 391 F.3d at 234 & n.45. In conjunction
with the requirements for plan approval and the rest of the
Bankruptcy Code, these provisions are intended to protect the
interests of all affected parties. Id. We recently ruled that
insurers have standing to participate in bankruptcy
proceedings when the creation of a trust “staggeringly
increase[s]” insurers’ risk and exposure. In re Global Indus.
Techs., Inc., 645 F.3d at 204, 212; see also In re Thorpe
Insulation, 671 F.3d at 999 (holding that insurers have
bankruptcy standing “to participate in the proceedings
culminating in approval of [a] § 524(g) plan”). We have
redressed procedural deficiencies in asbestos-related
bankruptcies that did not adequately satisfy the requirements

64
of the Code, including § 524(g). In re Congoleum Corp., 426
F.3d at 687-93; In re Combustion Eng’g, 391 F.3d at 233-48.
As these examples underscore, we believe careful
consideration of the protections of the Bankruptcy Code,
together with traditional requirements of procedural due
process, adequately guard the interests of all affected parties.

III.

Insurers raise hypotheticals proposing scenarios where
Chapter 11 debtors might employ the Bankruptcy Code to
avoid the strictures of federal or state law, and argue
Congress could not have intended this absurd result. Because
the Bankruptcy Code clearly provides preemption in this
instance, we need not decide whether it would also be proper
in the situations imagined by Insurers. Nonetheless, we
would find problematic attempts under § 1123(a) to disregard
large swaths of state and federal regulatory schemes. Cf. Pac.
Gas, 350 F.3d at 937 (rejecting an “across-the-board, take-no-
prisoners preemption strategy” in which the debtor, a public
utility, sought to disaggregate notwithstanding contrary state
law under § 1123(a), thereby avoiding regulation by the
California Public Utility Commission). Eighteen states have
previously filed an amicus brief with us on this issue,
cautioning that an “overly broad reading” of § 1123(a)
“would destroy [their] ability to preserve their regulatory
authority in the face of a bankruptcy filing.” Br. and App. of
Amicus Curiae States at 1-3, In re Global Indus. Techs., Inc.,
645 F.3d 201 (3d Cir. 2011) (No. 08-3650), 2008 WL
8134099 at *1-*3.

65
 But the scope of preemption under § 1123(a) is not
unlimited, and our holding does not suggest otherwise. Any
reorganization plan must still comply with all aspects of the
Bankruptcy Code and be approved by the bankruptcy court.
In particular, it must satisfy 11 U.S.C. § 1129(a)(3), which
provides that a court shall confirm a reorganization plan only
if it “has been proposed in good faith and not by any means
forbidden by law.” We have stated that this good faith
standard ensures that a plan will “fairly achieve a result
consistent with the objectives and purposes of the Bankruptcy
Code.” In re PWS Holding Corp., 228 F.3d 224, 242 (3d Cir.
2000) (quoting In re Abbotts Dairies of Pa., Inc., 788 F.2d
143, 150 n.5 (3d Cir. 1986)).

Moreover, although the text of § 1123(a) does not
explicitly state a limitation on its preemptive scope, well-
established principles suggest that its scope is not unbounded.
One important restriction is the long-standing presumption
against preemption of state police power laws and regulations
rooted in “federalism concerns and the historic primacy of
state regulation of matters of health and safety.” Lohr, 518
U.S. at 485. The Supreme Court relied on similar principles
to hold that the trustee of a debtor in Chapter 7 liquidation
proceedings could not abandon property in contravention of
state environmental law, despite enjoying the authority under
11 U.S.C. § 554(a) to abandon “any property of the estate that
is burdensome to the estate.” Midlantic Nat’l Bank v. N.J.
Dep’t of Envtl. Prot., 474 U.S. 494 (1986). Notwithstanding
the language of the statute, the Court reasoned that Congress
did not intend the abandonment power under § 554 to
preempt all state laws, citing as evidence pre-Code practice,

66
the Bankruptcy Code’s general solicitude for state safety and
health regulations, and congressional interest in enforcing
similar laws. Id. at 500-07. Although prior practice is more
mixed in this case, 39 the other justifications the Court invoked
to construct a common-law limitation also apply to § 1123(a).
In Montgomery County, Md. v. Barwood, Inc., 422 B.R. 40
(D. Md. 2009), the District of Maryland applied the Court’s
holding in Midlantic, as well as other relevant precedent, to
the preemptive scope of § 1123(a). It concluded that “§
1123(a) does not preempt otherwise applicable
nonbankruptcy laws that are concerned with protecting public
health, safety, and welfare.” Id. at 47.

The anti-assignment provisions at issue here do not
implicate public health, safety, and welfare. But limitation of
§ 1123(a)’s preemptive scope on these grounds is sensible,
and seemingly consonant with congressional intent, the
purposes of the Bankruptcy Code, and precedent. It has often
been noted that the Code exists not to provide a “haven for
wrongdoers,” but to “relieve the honest debtor from the
weight of oppressive indebtedness and permit him to start
afresh.” In re Davis, 194 F.3d 570, 573-74 (5th Cir. 1999)
(quoting in part Local Loan Co. v. Hunt, 292 U.S. 234, 244
39
At oral argument, Insurers distinguished Midlantic on this
basis. Tr. of Oral Arg. at 76, Nov. 9, 2011. But, as noted,
prior practice was only one of three grounds for the Court’s
decision. Moreover, under the Insurers’ characterization of
prior practice—one which, as discussed above, we regard as
accurate in part—the logic the Court employed in Midlantic
would control here as well.

67
(1934)). Extending the well-established presumption against
preemption of state police powers to § 1123(a) seems to
balance these aims, and might also forestall some of the more
problematic hypotheticals advanced by Insurers.

IV.

For the foregoing reasons, we hold that the anti-
assignment provisions in the relevant insurance policies are
preempted by § 1123(a)(5)(B) to the extent they prohibit
transfer to a § 524(g) trust. We will affirm the judgment of
the District Court.

68