Louisiana Bankruptcy Court Holds that Unknowable Product Liability Claims Are Not Discharged in Mass Tort Bankruptcy

In Babcock & Wilcox Co. v. Philadelphia Energy Solutions Refining & Marketing LLC, 2026 WL 1724858 (Bankr. E.D. La. June 13, 2026), Philadelphia Energy Solutions (“PES”) and its affiliates asserted product liability claims against the reorganized Babcock & Wilcox (“B&W”) entities. The claims stemmed from a 2019 explosion at a refinery formerly operated by one of the PES entities, allegedly caused by the failure of an elbow joint manufactured by B&W and installed in the early 1970s.

B&W filed for chapter 11 in 2000 to resolve its asbestos liabilities. Its plan, confirmed in 2006, channeled current and future asbestos claims to a trust and discharged all other prepetition claims. Id. at *15-16. The refinery’s then-owner, Sunoco, received notice and filed a proof of claim. Id. at *15. When the refinery’s successors sued in 2021, B&W reopened the bankruptcy case to enforce the discharge. Id. at *18.

The case turned on whether the explosion claims were prepetition claims at all—i.e., whether the claims arose prior to the bankruptcy case, such that they could be discharged. Under the Fifth Circuit’s prepetition-relationship test, a claim that was unmanifested at the time of plan confirmation is discharged only if (1) the injury was “relatively certain to manifest itself at some point” and attributable to the debtor, and (2) the debtor could identify the claimant and give notice satisfying due process. Id. at *21-*22 (citing Lemelle v. Universal Mfg. Corp., 18 F.3d 1268, 1277 (5th Cir. 1994)). The court found that the evidence showed the injury was not “relatively certain to manifest” because the refining industry was “just waking up” to the corrosion risk from residual metals while B&W’s bankruptcy was pending, inspections revealed no problems as late as 2001, and “[n]o one could have predicted” that this one elbow was nonconforming. Id. at *23-24. The court held that the claims therefore were not discharged under B&W’s plan.

Even though the plan defined “contingent” claims broadly, the court found that a debtor may not “circumvent due process regarding future claims by drafting language in a plan that obliterates any limit” on the discharge. Id. at *21 n.30. B&W has stated its intent to appeal the decision. We will continue to monitor this case as it works its way through the courts.