In Re: Combustion Engineering, Inc. First State Insurance Company Hartford Accident and Indemnity Company

OPINION OF THE COURT

TABLE OF CONTENTS

OPINION OF THE COURT 199

I.Overview. 200

A. Combustion Engineering’s Asbestos-Induced Bankruptcy 201

B. Issues Presented on Appeal. 202

II.Background. 203

A. Combustion Engineering. 203

B. The Master Settlement Agreement. 204

C. The Pre-Pack Plan. 205

D. Plan Voting and Approval. 207

E. The Bankruptcy Court Proceedings. 208

F. District Court Proceedings and Plan Confirmation. 211

G. The Consolidated Appeals. 213

III.Standing. 214

A. Background. 214

B. Objecting Insurers and London Market Insurers. 215

C. Insurers. 220

D. Certain Cancer Claimants. 223

IV. “Related to” Jurisdiction. 224

A. Overview. 225

B. Jurisdiction Over Independent Claims Against Non-Debtors 227

*200 1. Corporate Affiliation.227

2. Financial Contributions.228

3. Related Liability.230

4. Shared Insurance .232

V. Section 105(a) Equitable Injunction . DO CO CO

A. The Requirements of Section 524(g)(4)(A) DO CO ^

B. Section 105(a). CO CO C71

YI. Two-Trust Structure. CO CO 00

A. Discriminatory Treatment of Claims_ CO CO CO

B. Creation of the “Stub Claims”. CO ^ CO

VII. Going Concern Requirement: Section 524(g)(2)(b)(i)(II) 248

VIII. Conclusion. 248

This case involves twelve 1 consolidated appeals from the District Court’s order approving Combustion Engineering’s bankruptcy Plan of Reorganization under 11 U.S.C. § 1101 et seq. 2 We will vacate and remand.

I.Overview

For decades, the state and federal judicial systems have struggled with an avalanche of asbestos lawsuits. For reasons well known to observers, a just and efficient resolution of these claims has often eluded our standard legal process — where an injured person with a legitimate claim (where liability and injury can be proven) obtains appropriate compensation without undue cost and undue delay. See Fed. R.Civ.P. 1 (goal “to secure the just, speedy and inexpensive determination of every action”). The difficulties with asbestos litigation have been well documented by RAND and others. 3

Efforts to resolve the asbestos problem through global settlement class actions under Fed.R.Civ.P. 23(b)(3) and 23(b)(1)(B) have so far been unsuccessful. See Am-chem Prods. v. Windsor, 521 U.S. 591, 117 S.Ct. 2231, 138 L.Ed.2d 689 (1997) (affirming denial of class certification of nationwide settlement class of asbestos claimants); Ortiz v. Fibreboard Corp., 527 U.S. 815, 119 S.Ct. 2295, 144 L.Ed.2d 715 (1999) (reversing grant of class certification in *201 limited fund class action under Fed. R.Civ.P. 23(b)(1)(B)). More than once, the Supreme Court has called on Congress to enact legislation creating a “national asbestos dispute-resolution scheme,” but Congress has yet to act. Amchem, 521 U.S. at 598, 117 S.Ct. 2231; Ortiz, 527 U.S. at 822, 119 S.Ct. 2295.

For some time now, mounting asbestos liabilities have pushed otherwise viable companies into bankruptcy. The current appeal represents a major effort to extricate a debtor and two non-debtor affiliates from asbestos liability through a prepackaged Chapter 11 bankruptcy reorganization that includes 11 U.S.C. §§ 524(g) and 105(a) “channeling injunctions” and a post-confirmation trust fund for asbestos claimants. The Plan has been presented as a pre-packaged Chapter 11 reorganization plan, but it more closely resembles, in form and in substance, a liquidation of the debtor with a post-confirmation trust funded in part by non-debtors. Although prepackaged bankruptcy may yet provide debtors and claimants with a vehicle for the general resolution of asbestos liability, we find the Combustion Engineering Plan defective for the reasons set forth.

A. Combustion Engineering’s Asbestos-Induced Bankruptcy

Combustion Engineering defended asbestos-related litigation for nearly four decades until mounting personal injury liabilities eventually brought the company to the brink of insolvency. In the fall of 2002, Combustion Engineering and its parent company, Asea Brown Boveri, Inc. (“U.S.ABB”), attempted to resolve Combustion Engineering’s asbestos problems, as well as those of two U.S. AJBB affiliates, ABB Lummus Global, Inc. and Basic, Inc., through a pre-packaged Chapter 11 bankruptcy reorganization. 4

To this end, Combustion Engineering contributed half of its assets to a pre-petition trust (the “CE Settlement Trust”) to pay asbestos claimants with pending lawsuits for part, but not the entire amount, of their claims. The remaining, unpaid portion of these claims, known as “stub claims,” provided prepetition trust participants with creditor status under the Bankruptcy Code. Combustion Engineering then filed a prepackaged bankruptcy Plan of Reorganization under Chapter 11. The centerpiece of the Plan is an injunction in favor of Combustion Engineering that channels all of its asbestos claims to a post-confirmation trust (the “Asbestos PI Trust”) created under § 524(g) of the Bankruptcy Code. The Plan also extends this asbestos liability shield to the non-debtor affiliates Basic and Lummus. Millions of dollars in cash and other assets have been offered to the post-confirmation trust by Combustion Engineering, Basic and Lummus, as well as their respective parent companies, U.S. ABB and ABB Limited, to compensate asbestos claimants and to cleanse the companies of asbestos liability.

After considerable negotiation, the Plan won approval from the majority of the asbestos claimants over the objections of several insurers and certain persons suf *202 fering from asbestos-related injuries. The Bankruptcy Court recommended confirmation of the Plan, but made two significant modifications. First, it added a “super-preemptory” provision to protect the pre-petition rights of certain insurers. Second, it reconfigured the § 524(g) injunction in favor of Basic and Lummus as an equitable injunction under § 105(a).

The District Court adopted the Bankruptcy Court’s findings of fact and conclusions of law and confirmed the Plan with two changes. The District Court modified the language of the “super-preemptory” provision and added a “neutrality” provision purporting to protect the debtor’s and insurers’ prepetition rights under certain insurance policies.

B. Issues Presented on Appeal

Although several difficult issues are presented on appeal, three are paramount. First, on the facts of this case, does the Bankruptcy Court have “related to” jurisdiction over the derivative and non-derivative claims against the non-debtors Basic and Lummus? Second, can a non-debtor that contributes assets to a post-confirmation trust take advantage of § 105 of the Bankruptcy Code to cleanse itself of non-derivative asbestos liability? Third, did the two-trust structure and use of “stub claims” in the voting process — which allowed certain asbestos claimants who were paid as much as 95% of their claims pre-petition to vote to confirm a Plan under which they appear to receive a larger recovery than other asbestos claimants — comply with the Bankruptcy Code? Also implicated are issues involving appellate standing and the propriety of the voting process.

We summarize our holding. On the appellate standing issues, we conclude the Objecting Insurers and London Market Insurers have limited standing — that is, they only have standing to challenge the District Court’s modification of the super-preemptory provision. On that issue, we will vacate the District Court’s modification of the super-preemptory provision, and reinstate paragraph 17 of the Plan as initially drafted by the Bankruptcy Court. The Certain Cancer Claimants have standing to challenge Plan confirmation, including the propriety of the voting process, entry of the § 105(a) injunction in favor of Lummus (but not Basic), and issues relating to the validity of the two-trust structure.

Based in part on the lack of factual findings in support of “related to” subject matter jurisdiction, we will vacate the § 105(a) injunction in favor of non-debtors Basic and Lummus. As the Plan’s proponents contend, and both the Bankruptcy Court and District Court found, extending the injunction to Basic and Lummus was essential to the Plan. As a practical matter, therefore, vacating the § 105(a) injunction defeats the proposed Plan of Reorganization. While we would normally remand for additional fact finding on the issue of subject matter jurisdiction, none is required here because the § 105(a) injunction must be rejected on substantive grounds as well. On the facts of this case, we hold the Bankruptcy Code precludes the use of § 105(a) to extend a channeling injunction to non-derivative third-party actions against a non-debtor.

With regard to the two-trust structure, we believe the pre-petition payments to the CE Settlement Trust participants and the use of stub claims to secure confirmation votes may violate the Bankruptcy Code and the “equality among creditors” principle that underlies it, requiring a remand to the District Court for further development and review in considering any revised reorganization proposal.

*203 II. Background

A. Combustion Engineering

The story of Combustion Engineering sounds a familiar refrain in the asbestos world. From the 1930s through the 1960s, Combustion Engineering manufactured steam boilers containing asbestos insulation. The company was first named as a defendant in an asbestos-related lawsuit in the 1960s, and its asbestos liability increased steadily over the next thirty years. By the mid-1970s, Combustion Engineering was receiving a few hundred asbestos-related claims per year. That number grew to 19,000 annual cases by 1990, and jumped again to over 79,000 cases by 2002.

Declining insurance reimbursements over the same period exacerbated the financial strain on the company. Prior to the mid-1990s, two-thirds of Combustion Engineering’s asbestos liability was covered by insurance. By 2002, some of the company’s insurers took the position that only one-third of Combustion Engineering’s asbestos liabilities were reimbursable. As a result, between 1990 and 2002 Combustion Engineering received only $517 million in insurance reimbursements for $950 million in asbestos-related liabilities. These factors left Combustion Engineering unable to meet its asbestos obligations without significant capital infusions from its parent corporation, U.S. ABB. 5

U.S. ABB acquired Combustion Engineering in 1990 in a leveraged buyout for $1.6 billion as part of a global acquisition of power technology companies by its parent company, ABB Limited, a diversified holding company of over 2,000 corporate entities based in Zurich, Switzerland. Between May 2000 and March 2002, U.S. ABB contributed $900 million in cash and other assets toward Combustion Engineering’s asbestos obligations. By late 2002, Combustion Engineering’s asbestos liability began to threaten ABB Limited’s financial viability as well. ABB Limited had borrowed heavily to finance an aggressive global expansion during the 1990s. As these acquisition costs came due, ABB Limited faced a $1.5 billion debt repayment obligation in December 2002, followed by another $2.1 billion repayment obligation in 2003. At the same time, ABB Limited experienced falling demand in its core businesses and a debt downgrade that reduced the conglomerate’s historical sources of liquidity. Significant debt obligations and Combustion Engineering’s rising asbestos liabilities threatened ABB Limited’s survival. With the conglomerate facing insolvency, ABB Limited’s lenders demanded immediate action and insisted that ABB take steps to resolve Combustion Engineering’s asbestos liabilities before extending additional credit. Some creditors threatened to institute an involuntary bankruptcy against U.S. ABB. 6

ABB Limited devised a divestment and restructuring program to resolve this financial crisis. ABB Limited’s lenders determined that certain businesses should be sold as part of the restructuring program, including Lummus and the rest of the oil, gas and petrochemical division of ABB, of *204 which Lummus was part. ABB’s lenders purportedly determined these units could not be sold so long as Lummus carried asbestos liabilities. 7 Therefore, ABB attempted to cleanse Lummus of asbestos-related liabilities before putting the company up for sale. In October 2002, Combustion Engineering and ABB began to formulate a voluntary Chapter 11 prepackaged bankruptcy reorganization to cleanse not only Combustion Engineering, but also Basic and Lummus, of asbestos liability once and for all.

Combustion Engineering and ABB Limited communicated with several key players in the world of asbestos litigation to facilitate the design and implementation of a pre-pack plan, including an attorney to serve as advisor on the interests of current claimants, and the general counsel of the Johns-Manville trust and president of the Claims Resolution Management Corporation (which manages claims processing for the Johns-Manville trust) to represent the interests of future claimants. 8

By late October 2002, the parties had negotiated the basic structure of a prepackaged plan of reorganization. Combustion Engineering would place half its assets into a pre-petition settlement trust (the “CE Settlement Trust”) to pay Combustion Engineering asbestos claimants who had claims in the legal system. Subsequently, Combustion Engineering, ABB Limited and several non-debtor subsidiaries of ABB Limited would contribute assets to a post-confirmation bankruptcy trust (the “Asbestos PI Trust”) created under § 524(g) of the Bankruptcy Code. The pre-pack plan would release certain parties from asbestos liability, including Combustion Engineering, Basic and Lum-mus, by channeling asbestos claims against those entities to the post-confirmation bankruptcy trust.

B. The Master Settlement Agreement

The parties funded and implemented the pre-petition CE Settlement Trust through a Master Settlement Agreement on November 22, 2002. To fund the trust, Combustion Engineering contributed $5 million in cash, a promissory note in the principal amount of approximately $100 million, and a $402 million loan agreement between U.S. ABB as borrower and Combustion Engineering as lender payable on demand. ABB Limited guaranteed both the note and the loan. These contributions comprised approximately half of Combustion Engineering’s total assets.

The District Court found that participation in the CE Settlement Trust was offered to all pre-petition claimants with *205 claims pending against Combustion Engineering as of November 14, 2002. 9 Participation was not expressly conditioned upon a vote in favor of the pre-pack Plan, although the Master Settlement Agreement provided that counsel for participating claimants would recommend, consistent with their ethical obligations, that each participating claimant accept the pre-pack Plan of Reorganization. Non-participating Combustion Engineering claimants were left to recover in the bankruptcy proceeding.

The Master Settlement Agreement initially provided for three categories of distribution from the CE Settlement Trust to current Combustion Engineering asbestos personal injury claimants, depending upon the status of their respective claims. Category One included claimants who had reached a final enforceable settlement with Combustion Engineering to be paid prior to November 15, 2002. Given the advanced stage of their respective settlement agreements, the Plan’s proponents allegedly believed this group of claimants might force Combustion Engineering into involuntary bankruptcy if not paid immediately. Category One claimants were to receive 95% of their settled claim value. Category Two included claimants who also had satisfied all conditions and requirements for settlement with Combustion Engineering, but had settlement payments due after November 14, 2002 and prior to March 1, 2003. Category Two claimants were to receive 85% of their settled claim value. Category Three provided a catch-all category for all otherwise eligible Combustion Engineering personal injury claimants who did not satisfy the requirements of Categories One or Two. Category Three claimants were to receive an initial payment of 37.5% of their settled claim value upon submission of certain required information, followed by a second payment not to exceed an additional 37.5% (for a maximum recovery of 75%) taken pro-rata from the CE Settlement Trust after all Category One and Two claims had been paid at the applicable rates.

Late in the pre-pack negotiations, 25,-000-30,000 additional claimants qualifying for payment under the Master Settlement Agreement appeared. These claimants were concentrated in jurisdictions with historically high asbestos claims payment averages. Once these additional Combustion Engineering claimants were factored in, it became clear the existing pre-petition trust assets were insufficient to pay participating claims under the original payment terms. ABB Limited, therefore, agreed to contribute an additional $30 million in cash to the CE Settlement Trust to pay these newly identified claimants — designated as Category Four claimants' — under the terms of a separate settlement agreement. The Category Four claimants agreed to accept less than 37.5% payment on then-liquidated claim value, and to subordinate their right to any second payment to the other settling claimants.

In exchange for these payments, CE Settlement Trust participants agreed to forbear the prosecution of claims against Combustion Engineering outside of bankruptcy, but reserved the right to pursue the remainder of their claims in bankruptcy. These “stub claims” provided CE Settlement Trust participants with creditor status in bankruptcy, which allowed them to vote on the pre-pack Plan and share proportionally in the post-confirmation trust.

C. The Pre-Pack Plan

Concurrent with the CE Settlement Trust negotiations, the claimants’ repre *206 sentatives undertook a due diligence review of Combustion Engineering and its affiliates. This included an assessment of ABB Limited’s financial condition and an examination of certain transactions between ABB entities and Combustion Engineering for evidence, among other things, of possible fraudulent transfers. In addition, the Combustion Engineering future claimants’ representative, Mr. Austern, retained several advisors to determine the value of available insurance assets, the financial condition of ABB Limited, and its ability to contribute to the Asbestos PI Trust. Following this review, Mr. Austern insisted that ABB Limited augment its financial contributions to the Plan. 10 The Official Committee of Unsecured Creditors likewise demanded several modifications to the trust distribution procedures. The parties settled on the final terms in January 2003.

The centerpiece of the pre-pack Plan involved an injunction in favor of debtor Combustion Engineering and non-debtors Basic and Lummus, channeling all asbestos-related claims against those companies to a single asbestos trust (the “Asbestos PI Trust”) created under 11 U.S.C. § 524(g) and prohibiting claims other than against the Asbestos PI Trust (the “channeling injunction”). The parties agreed the post-confirmation trust would be funded by contributions from Combustion Engineering, ABB Limited, U.S. ABB, Lum-mus and Basic. The Bankruptcy Court found that under the Plan Combustion Engineering would contribute its rights to proceeds under certain insurance policies and settlement agreements with a face amount exceeding $320 million. 11 It would *207 also contribute $51 million in cash, future excess cash flows and a $20 million secured note convertible into 80% of the equity of the restructured entity. ABB Limited would contribute 30,298,913 shares of its common stock (with an estimated value of $82 million), $250 million in cash from 2004 to 2006, and an additional $100 million between 2006 and 2011, contingent in part on its future financial performance. This commitment was guaranteed by various ABB Limited affiliates. ABB Limited also agreed to release all claims and interests in insurance policies covering Combustion Engineering’s asbestos personal injury claims. U.S. ABB agreed to indemnify all of Combustion Engineering’s environmental liabilities (estimated at the time at more than $100 million), to release its indemnification rights against Combustion Engineering for asbestos claims asserted after June 30, 1999, and to contribute a $5 million Limited Carrier Indemnity. Contingent upon the sale of Lummus within eighteen months of the effective date of the Plan, U.S. ABB would make additional payments of $5 million to the Asbestos PI Trust and $5 million to the pre-petition CE Settlement Trust. In addition, U.S. ABB agreed to contribute almost $38 million, deposited into a segregated account, to pay asbestos claims attributed solely to Basic and Lummus. Basic and Lummus agreed to release and assign to the Asbestos PI Trust all of their rights to proceeds under insurance policies covering asbestos personal injury claims.

Distributions from the Asbestos PI Trust were governed by trust distribution procedures similar to those historically used by the Connecticut Valley Claims Service Company (“CVCSC”) in servicing Combustion Engineering’s asbestos claims. 12 Combustion Engineering and the Asbestos PI Trust were given the exclusive right to determine whether to allow asbestos claims under the trust distribution procedures. 13 Under the pre-pack Plan, participating insurers were therefore excluded from the Asbestos PI Trust’s claims determination process.

D. Plan Voting and Approval

Solicitation for the pre-pack Plan began on or around January 22, 2003, when documents including a Disclosure Statement, the proposed Plan of Reorganization, a ballot, and letters from the current creditors’ representative and futures’ representative were sent to approximately 350 asbestos plaintiffs’ counsel. These solicitations, seeking approval of the Plan, were extended to any firms representing plaintiffs with claims against Combustion Engineering, Basic or Lummus. The packages included both master and individual ballots. Master ballots for multiple claim holders required the agent casting the ballot to include a valid power of attorney, proxy, or other written evidence *208 of agency for every Asbestos PI Trust claim holder identified on the ballot. CVCSC, Combustion Engineering’s claims processing organization, or Trumbull Associates, Combustion Engineering’s balloting agent, would communicate with any law firm that submitted a master ballot without a valid power of attorney.

Approximately 232,000 ballots were cast by the February 19, 2003 voting deadline, with 186,000 votes in favor of the Plan and 46,000 votes against. More than 107,908 of these ballots were not counted or were invalidated by Combustion Engineering’s balloting agent because they were not accompanied by a valid power of attorney. An additional 8,432 ballots were invalidated for other reasons. Of the resulting 115,787 valid ballots, 111,986 Combustion Engineering claimants voted in favor of the Plan (approximately 97% of total remaining claimants) while 3,594 voted against. 14 Of the 8,017 pending Lummus personal injury claims, 1,846 voted in favor of the Plan, and two voted against. Of the 3,715 pending Basic personal injury claims, 206 Basic claimants voted in favor of the Plan, and fourteen voted against. An estimated 99,000 of the tabulated votes appear to have been “stub claim” votes cast by CE Settlement Trust participants.

E. The Bankruptcy Court Proceedings

On February 17, 2003, Combustion Engineering filed a voluntary petition for bankruptcy relief under Chapter 11 of the Bankruptcy Code, along with a proposed Disclosure Statement and Plan of Reorganization, in the United States Bankruptcy Court for the District of Delaware. On March 31, 2003, this Court issued an order designating Judge Alfred M. Wolin as the district court judge and providing that the parties “will have an opportunity to be heard as to which aspects of the matter Judge Wolin will hear in the District Court and which matters will remain with ... the Bankruptcy Court.”

On May 9, 2003, Judge Wolin entered an order referring the case to the Bankruptcy Court. The order designated all matters to be adjudicated as part of Plan confirmation, including matters arising under 11 U.S.C. §§ 524(g) and 502(c), as non-core matters subject to de novo review and final order by the District Court.

The Bankruptcy Court conducted hearings on the Disclosure Statement and the Plan between April and June of 2003. Various parties objected to the Disclosure Statement, the Plan and the pre-pack solicitation procedures. Certain insurance companies argued that Plan provisions assigning policy proceeds to the Asbestos PI Trust violated existing policies and/or settlement agreements with Combustion Engineering. Other insurers who had negotiated pre-petition settlements with Combustion Engineering (the “Indemnified Insurers”) objected to the Plan on the ground that it impermissibly channeled indemnities under the settlements to the post-confirmation trust without providing sufficient funding to pay those indemnities. As a result, the Indemnified Insurers argued they were entitled to vote on Plan confirmation. The Certain Cancer Claimants argued the Plan impaired their substantive rights to recover *209 through the tort system. 15 The Bankruptcy Court allowed discovery on these objections, which resulted in several modifications to the proposed Plan and Disclosure Statement.

On June 23, 2003, the Bankruptcy Court entered findings of fact and conclusions of law regarding core matters, and proposed findings of fact and conclusions of law as to non-core matters. In re Combustion Eng’g, 295 B.R. 459 (Bankr.D.Del.2003). The Bankruptcy Court overruled all objections raised by the insurers and Certain Cancer Claimants as to core matters, and recommended the District Court overrule all remaining objections as to non-core matters. Id. at 462. The Bankruptcy Court found the trust distribution procedures provided the same protocol as the CVCSC previously used to adjudicate and pay asbestos claims, and therefore did “not change whatever rights the insurers had pre-petition regarding the payment of claims.” Id. at 473. “Although the [trust distribution procedures] do not provide for insurers to have a say in what claims are paid ... the insurers did not have such input pre-petition.” Id. But recognizing the Plan should not modify the contractual rights of insurers, the court added a provision to make clear the Plan did not alter the contractual rights of insurers under any insurance policy or settlement agreement. The super-preemptory provision provided:

[Notwithstanding anything to the contrary in this Order, the Plan or any of the Plan Documents, nothing in this Order, the Plan or any of the Plan documents (including any other provision that purports to be preemptory or supervening), shall in anyway [sic] operate to, or have the effect of, impairing the insurers’ legal, equitable or contractual rights, if any, in any respect. The rights of insurers shall be determined under the Subject Insurance Policies or Subject Insurance Settlement Agreements as applicable.

Id. at 494. The Bankruptcy Court explained, “the Plan has been modified to make clear that nothing impairs [the insurers’] rights.” Id. at 474 (emphasis in original). As a result, the Bankruptcy Court concluded the Objecting Insurers did not have a right to vote on Plan confirmation because the Plan expressly stated that “the rights of insurers shall be determined under the subject insurance policies or subject insurance agreements as applicable and nothing in the Plan is to affect that.” Id. The court also found there was “no litigation pending that would implicate the indemnities.” Id. at 475.

The Bankruptcy Court further determined the Plan satisfied the confirmation requirements set forth in §§ 1129(a) and 524(g) of the Bankruptcy Code. The Bankruptcy Court noted that, as a practical matter, the Plan offered the only feasible mechanism for ensuring Combustion Engineering’s creditors would receive any recovery. Moreover, the court found the purpose of negotiating the Master Settlement Agreement and CE Settlement Trust was to “buy immediate peace from thousands of asbestos lawsuits (pending and potential) against Combustion Engineering *210 so that Combustion Engineering could file a prepackaged bankruptcy plan rather than face a freefall bankruptcy.” Id. at 466. Contrary to the objections of the Certain Cancer Claimants, the Bankruptcy Court found that “[p]articipation in the [Master Settlement Agreement] was offered to all pre-petition claimants,” and participation “was not conditioned upon a favorable vote on the proposed plan.” Id. at 468.

With respect to the Asbestos PI Trust, the Bankruptcy Court concluded § 524(g)(4)(A)(ii) of the Code did not permit the inclusion of independent claims against non-debtors Basic and Lummus in the channeling injunction. But the Bankruptcy Court granted precisely the same relief — that is, channeling asbestos-related claims against Basic and Lummus to the Asbestos PI Trust — under § 105(a). Analyzing the factors announced in In re Dow Corning Corp., 280 F.3d 648, 658 (6th Cir.2002) (“Doiv Coming II”), the Bankruptcy Court determined it was appropriate to enjoin the independent, non-derivative claims against Basic and Lummus under § 105(a).

In Dow Coming II, the Court of Appeals for the Sixth Circuit held that a bankruptcy court may permanently enjoin third-party claims against a non-debtor if seven factors are met:

(1) there is an identity of interests between the debtor and the third party, usually an indemnity relationship, such that a suit against the nondebtor is, in essence, a suit against the debtor or will deplete the assets of the estate;

(2) the nondebtor has contributed substantial assets to the reorganization;

(3) the injunction is essential to the reorganization, namely, the reorganization hinges on the debtor being free from indirect suits against parties who would have indemnity or contribution claims against the debtor;

(4) the impacted class, or classes, has overwhelmingly voted to accept the plan;

(5) the plan provides a mechanism to pay all, or substantially all, of the class or classes affected by the injunction;

(6) the plan provides an opportunity for those claimants who choose not to settle to recover in full[;] and ...

(7) the bankruptcy court made a record of specific factual findings that support its conclusions.

In re Combustion Eng’g, 295 B.R. at 483 (citing Dow Coming II, 280 F.3d at 658).

The Bankruptcy Court concluded the injunction satisfied Dow Coming II factors one, two, three, six and seven. On the first factor, the court found Combustion Engineering shared an “identity of interest” with non-debtors Basic and Lummus because “ABB’s need to sell Lummus ... instigated ABB’s willingness to contribute to Combustion Engineering’s plan funding.” Id. at 484. On factor two, the court found that Basic and Lummus contributed to the Asbestos PI Trust their rights to certain shared insurance policies. The court determined the injunction satisfied factor three because it allowed ABB to restructure its debt and contribute substantial assets to the post-confirmation trust. The court found the injunction satisfied factor six because the $38 million in assets segregated to pay Basic’s and Lum-mus’ asbestos liabilities was “sufficient to provide the opportunity to pay any non-accepting creditor.” Id.

But the Bankruptcy Court initially held the Plan did not satisfy Dow Coming II factors four and five. The court concluded it was unclear from the record “what, if any, effort was made to identify, notify and solicit votes from creditors with claims only against Lummus and only against Basic; i.e., not shared with Combustion Engi *211 neering.” Id. Likewise, the court did not believe the Plan provided the requisite funding and distribution processes to pay the direct creditors of Lummus and Basic. Therefore, despite its approval of the Disclosure Statement and Plan, as modified through June 4, 2003, the Bankruptcy Court recommended the District Court withhold confirmation for ten days to allow the Plan’s proponents to provide additional information concerning the Basic and Lummus claimants. Specifically, the Bankruptcy Court ordered the Plan proponents to submit supplemental documentation showing that Basic and Lummus creditors were provided sufficient notification of the injunction, as well as establishing the process by which these creditors would be paid and identifying the source of funds.

On July 10, 2003, the Bankruptcy Court entered a Supplemental and Amendatory Order Making Additional Findings and Recommending Confirmation of the Plan of Reorganization. In its supplemental order, the Bankruptcy Court found, inter alia: the notice given to Lummus and Basic creditors comported with due process “under the unique circumstances of the case”; Basic claimants would receive more than they would receive without the Plan and Lummus claimants would receive at least as much as they would receive without the Plan; and the trust distribution procedures establish a sufficient method of paying Basic and Lummus claimants.

F. District Court Proceedings and Plan Confirmation

In reviewing the Bankruptcy Court’s proposed Findings of Fact and Conclusions of Law, the District Court acknowledged the proposed Plan of Reorganization was not without defect: “Today we consider for confirmation a pre-packaged bankruptcy plan. The plan is not perfect, but then we operate in an imperfect system and will substitute fairness and the greatest good for the greatest number for perfection.” The District Court recognized the Plan was “fragile,” and had to be confirmed “promptly to preserve ABB’s economic viability.” The District Court further explained that “[w]ere ABB to become insolvent, the possibility that Combustion Engineering could emerge as a reorganized debtor would be remote,” as would the “prospect of a viable trust to pay persons suffering from exposure to Combustion Engineering’s asbestos.”

In an unpublished oral opinion, the District Court rejected or overruled objections to Plan confirmation. The District Court concluded the insurers lacked standing to object to Plan confirmation because their pecuniary interests were not “directly and adversely affected” by the order of the Bankruptcy Court. The court explained the super-preeemptory provision added by the Bankruptcy Court made clear the insurers’ pre-petition rights would not be altered by the Plan:

[T]he plan specifically provides that payment of claims is subject to the rights of insurers under their policies or other agreements. Should the insurers claim that this provision [i.e., the super-preemptory provision] has been violated in the course of the administration of the personal injury trust, that will be the time to determine the rights of insurers in an appropriate proceeding.

Nonetheless, on the motion of the Future Claimants Representative and the Official Committee of Unsecured Creditors, the District Court modified the super-preemptory provision to state:

Notwithstanding anything to the contrary in this Order, the Plan or any of the Plan Documents, nothing in this Order, the Plan or any of the Plan documents (including any other provision *212 that purports to be preemptory or supervening), shall in any way operate to, or have the effect of, impairing the insurers’ legal, equitable or contractual rights, if any, in respect of any claims (as defined in Section 101(5) of the Bankruptcy Code). The rights of insurers shall be determined under the Subject Insurance Policies or Subject Insurance Settlement Agreements, as applicable, and under applicable law.

(emphasis added to indicate changes). In addition, the District Court supplemented the super-preemptory provision with the following “neutrality provision”:

Nothing in the Plan or in the Confirmation Order shall preclude any Entity from asserting in any proceeding any and all claims, defenses, rights or causes of action that it has or may have under or in connection with any Subject Insurance Policy or any Subject Insurance Settlement Agreement. Nothing in the Plan or the Confirmation Order shall be deemed to waive any claims, defenses, rights or causes of action that any Entity has or may have under the provisions, terms, conditions, defenses and/or exclusions contained in the Subject Insurance Policies and the Subject Insurance Settlement Agreements, including, but not limited to, any and all such claims, defenses, rights or causes of action based upon or arising out of Asbestos PI Trust Claims that are liquidated, resolved, discharged, channeled, or paid in connection with the Plan.

The District Court provided no rationale for these modifications.

Proceeding to the substantive objections, the District Court found the pre-petition trust payments did not induce CE Settlement Trust participants to vote in favor of the Plan, and rejected the argument that the pre-petition payments and creation of the stub claims were intended to manufacture a confirming vote. Instead, the District Court concluded that Combustion Engineering created the stub claims because it had “insufficient funds to pay the settlement trust claimants 100 percent of their claims,” and that the purpose of such payments was to provide Combustion Engineering “a little time, a breathing space, while the pre-packaged plan was negotiated.” Moreover, the court found the votes of the stub claims were not invalid as a result of a Master Settlement Agreement provision prohibiting CE Settlement Trust participants from pursuing their stub claims outside of bankruptcy.

The District Court found the Plan satisfied all requirements of 11 U.S.C. § 1129. Specifically, the District Court found the Plan provided between two and three times more assets than would a Chapter 7 liquidation, satisfying the § 1129(a)(7) “best interests of the creditors” test. In so holding, the District Court rejected the argument that the pre-petition transfer of assets to the CE Settlement Trust constituted a voidable preference under § 547 of the Bankruptcy Code, reasoning that this argument was “simply a restatement of the argument already dispensed with by comparing the liquidation value of the company with the value paid to claimants under the plan.” The District Court also found the Plan had been proposed in good faith under § 1129(a)(3).

The District Court rejected all challenges to the § 524(g) channeling injunction. The District Court found the contention that the Plan violated § 524(g) by treating present and future claimants differently was not supported by the record. Specifically, it found that all present claimants were free to participate in the Plan, and that the Asbestos PI Trust (from which future claimants would be paid) and the CE Settlement Trust employed substantially the same claims handling proce *213 dures. The court recognized that pre-petition settlement participants might receive more for their claims than non-participants, but reasoned this did not violate § 524(g) because these persons “simply were not similarly situated.” The District Court also found the reorganized Combustion Engineering satisfied the “going concern” requirement of § 524(g) because it would own and operate a real estate business after emerging from bankruptcy. The court rejected the argument that § 524(g)(2)(B)(i)(II) required Combustion Engineering to pay dividends, instead concluding § 524(g) merely required any dividends the company in fact paid be included in future payments to the Asbestos PI Trust. The court found the fact that the Bankruptcy Court did not estimate the total value of all asbestos claims did not defeat Plan confirmation, noting the Plan did not prevent estimation of claims in the future, if feasible.

The District Court concluded the Bankruptcy Court correctly analyzed the application of § 105(a) under Dow Coming II and properly extended the channeling injunction to non-debtors Basic and Lum-mus. In support of this conclusion, the District Court found the non-debtors’ asbestos liability was, in many cases, derivative of Combustion Engineering’s asbestos liability, and the channeling injunction was integral to the Plan.

On the issue of jurisdiction over claimants with independent claims against the non-debtors, the District Court found the analysis of the § 105(a) injunction and the “related to” jurisdiction inquiry “substantially overlap.” The court described a “unity of interest” between Combustion Engineering and the non-debtors that provided a basis for exercising “related to” jurisdiction over the independent claims against the