Implications for Asbestos-Related Future Claims: In re Grossman's Inc.

INTRODUCTION

In an en banc decision filed on June 2, 2010, the Third Circuit held that a "claim," as that term is defined by the Bankruptcy Code, "arises when an individual is exposed pre-petition to a product or other conduct giving rise to an injury, which underlies a 'right to payment' under the Bankruptcy Code." In re Grossman's Inc., 2010 WL 2131291, Slip. Op., at 18 (3d Cir. June 2, 2010) (citing 11 U.S.C. § 101(5)). In so holding, the court reversed longstanding circuit precedent holding that a claim arises for bankruptcy purposes when the underlying state law cause of action accrues. See Avellino & Bienes v. M. Frenville Co. (Matter of M. Frenville Co.), 744 F.2d 332 (3d Cir. 1984). This memorandum outlines the case and the practical implications for clients facing potential unknown future tort claims.