CECELIA G. MORRIS, CHIEF UNITED STATES BANKRUPTCY JUDGE.
The instant dispute between Salvador Parra, Jr. ("Parra") and Marsh USA
This Court has subject matter jurisdiction pursuant to 28 U.S.C. § 1334(a), 28 U.S.C. § 157(a) and the Standing Order of Reference signed by Chief Judge Loretta A. Preska dated January 31, 2012. This is a "core proceeding" under 28 U.S.C. § 157(b)(2)(A), involving matters concerning the administration of the estate. Further, the Supreme Court has held in prior litigation arising out of this very case that this Court has "jurisdiction to interpret and enforce its own prior orders." Travelers Indem. Co. v. Bailey, 557 U.S. 137, 151, 129 S.Ct. 2195, 174 L.Ed.2d 99 (2009) (citing Local Loan Co. v. Hunt, 292 U.S. 234, 239, 54 S.Ct. 695, 78 S.Ct. 1230 (1934)).
At the hearing on June 1, 2017, the Court read into the record the procedural posture of the case and the relevant facts that color the instant dispute. For purposes of completeness, the background portion of the record already established at the June 1, 2017 hearing is repeated herein.
The instant dispute arises out of more than thirty years of litigation in the Johns-Manville Corporation's ("Manville") chapter 11 bankruptcy case. See In re Manville Forest Prods. Corp., 31 B.R. 991, 992 (S.D.N.Y. 1983); In re Johns-Manville Corp., 36 B.R. 727, 729 (Bankr. S.D.N.Y. 1984); In re Johns-Manville Corp., 97 B.R. 174, 176 (Bankr. S.D.N.Y. 1989). Although Manville's reasons for filing are no secret, it bears repeating here.
Before filing for bankruptcy, Manville was the largest producer and provider of asbestos in the world. GAF Corp. v. Johns-Manville Corp. (In re Johns-Manville Corp.), 26 B.R. 405, 407 (Bankr. S.D.N.Y 1983), aff'd sub nom. Johns-Manville Corp. v. Asbestos Litig. Grp. (In re Johns-Manville Corp.), 40 B.R. 219 (S.D.N.Y. 1984); see also In re Johns-Manville Corp., 2004 WL 1876046, at *2-3, 2004 Bankr. LEXIS 2519, at *7 (citations omitted). Manville's asbestos was used widely throughout many industries for
Over the years asbestos litigation began to change shape. By the 1980s, "asbestos producers coalesced into an industry-wide consortium, presenting a unified litigation front." In re Johns-Manville Corp., 552 B.R. 221, 227 (Bankr. S.D.N.Y. 2016) (citing John C. Coffee, Jr., Class Wars: The Dilemma of the Mass Tort Class Action, 95 Colum. L. Rev. 1343, 1364-66 (1995)). "Counsel for asbestos plaintiffs were also operating on a narrow playing field. There were fewer than 50 firms representing asbestos plaintiffs, with most cases concentrated in the hands of a few." In re Johns-Manville Corp., 552 B.R. 221, 227 (Bankr. S.D.N.Y. 2016) (citing Coffee, supra, at 1364-65, 1392 & nn.187-88 (citations omitted); Amchem Prods. v. Windsor, 521 U.S. 591, 599, 117 S.Ct. 2231, 138 L.Ed.2d 689 (1997)).
While litigation between the asbestos producers' consortium and the asbestos-plaintiffs' firms continued, Manville and its insurers fought over who should bear the costs of the asbestos litigation against Manville. See In re Johns-Manville Corp., 552 B.R. 221, 227 (Bankr. S.D.N.Y. 2016) (citing In re Johns-Manville Corp., 36 B.R. 743, 750 (Bankr. S.D.N.Y. 1984)).
Manville filed for chapter 11 bankruptcy on August 26, 1982 due to the looming "spectre of proliferating, overburdening [asbestos] litigation to be commenced in the next 20-30 years, which litigation would be beyond [Manville's] ability to manage, control, and pay for...." In re Johns-Manville Corp., 36 B.R. 743, 745 (Bankr. S.D.N.Y. 1984), aff'd, 52 B.R. 940 (S.D.N.Y. 1985); see also In re Johns-Manville Corp., 36 B.R. 727, 729 (Bankr. S.D.N.Y. 1984). "Manville's financial inability to resolve the impending asbestos claims was a result of `the insurance industry's general disavowal of liability to Manville on policies written for this very purpose.'" Bogdan Law Firm v. Bevan & Assocs., LPA (In re Johns-Manville Corp.), 2016 WL 4506702, at *1, 2016 Bankr. LEXIS 3145, at *3 (Bankr. S.D.N.Y. Aug. 26, 2016) (quoting In re Johns-Manville Corp., 36 B.R. 727, at 729). In other words, it was not the asbestos lawsuits themselves but the "inability to look to at least $600 million in insurance coverage ..." that brought Manville to its knees. In re Johns-Manville Corp., 36 B.R. 743, at 750 (citations omitted) (emphasis added).
Manville's insurance disputes were no small or private affair. Prior to bankruptcy, "`Manville and its insurers litigated over the scope and limits of liability coverage, and Travelers faced suits by third
This Court recognized that "any forced payment to an asbestos litigant by one of Manville's liability carriers would obviously decrease the pool and leave fewer assets remaining to be divided among other claims. This effect could seriously undermine the whole purported purpose of Manville's bankruptcy petition, to wit: reasonable compensation for all asbestos victims." In re Johns-Manville Corp., 33 B.R. 254, 268 (Bankr. S.D.N.Y. 1983). "As such, the insurance policies were included as assets in Manville's bankruptcy estate." Bogdan Law Firm v. Bevan & Assocs., LPA (In re Johns-Manville Corp.), 2016 WL 4506702, at *2, 2016 Bankr. LEXIS 3145, at *4-5 (Bankr. S.D.N.Y. Aug. 26, 2016).
This Court reasoned that "Manville's insurance policies constitute one of its largest and most significant assets and are absolutely necessary for the formulation of any reorganization plan." Johns-Manville Corp. v. Asbestos Litig. Grp. (In re Johns-Manville Corp.), 33 B.R. 254, 260, 263 (Bankr. S.D.N.Y. 1983). In furtherance of this determination and to protect against the diminishment of Manville's primary assets, "this Court extended the automatic stay to cover all direct actions against Manville's insurers...." Bogdan Law Firm v. Bevan & Assocs., LPA (In re Johns-Manville Corp.), 2016 WL 4506702, at *2, 2016 Bankr. LEXIS 3145, at *3 (Bankr. S.D.N.Y. Aug. 26, 2016) (quoting Johns-Manville Corp. v. Asbestos Litig. Grp. (In re Johns-Manville Corp.), 33 B.R. 254, 260, 263 (Bankr. S.D.N.Y. 1983)).
As the bankruptcy litigation unfolded, Manville's insurers agreed to settle for approximately $770 million. MacArthur Co. v. Johns-Manville Corp., 837 F.2d 89, 90 (2d Cir. 1988). "The settlements provided that, in exchange for cash payments, the insurers would be relieved of all obligations related to the disputed policies and the insurers would be protected from claims based on such obligations by injunctive orders of the Bankruptcy Court." Id. Marsh was included in the group of settling insurers, and executed a settlement with Manville on October 10, 1986. See Marsh's Mot. Enforce at 2, Aug. 6, 2010, ECF No. 3915; Marsh's Mot. Enforce, Ex. A at 153, Aug. 6, 2010, ECF No. 3916-5. Marsh paid approximately $29.75 million as part of the settlement agreement, the proceeds of which "became the cornerstone of the Manville reorganization, providing the much-needed funding for the Manville Personal Injury Settlement Trust (the Manville "Trust") that was established for the benefit of future asbestos claimants." Bogdan Law Firm v. Bevan & Assocs., LPA (In re Johns-Manville Corp.), 2016 WL 4506702, at *3, 2016 Bankr.
The insurance settlement was so-ordered and incorporated into the confirmation order by this Court, and
Bogdan Law Firm v. Bevan & Assocs., LPA (In re Johns-Manville Corp.), 2016 WL 4506702, at *2, 2016 Bankr. LEXIS 3145, at *5-6 (Bankr. S.D.N.Y. Aug. 26, 2016) (quoting In re Johns-Manville Corp., 2004 WL 1876046, at *15-16, 2004 Bankr. LEXIS 2519, at *42-43 (Bankr. S.D.N.Y. Aug. 17, 2004)) (citing In re Johns-Manville Corp., 68 B.R. 618, 624 (Bankr. S.D.N.Y. 1986), aff'd 78 B.R. 407 (S.D.N.Y 1987), aff'd sub nom. MacArthur Co. v. Johns-Manville Corp., 837 F.2d 89 (2d Cir. 1988)).
"The Manville Plan, although concerned with future asbestos claimants, was also designed to treat both present asbestos claimants and future asbestos claimants equally." In re Johns-Manville Corp., 552 B.R. 221, 245 (Bankr. S.D.N.Y. 2016) (citing In re Johns-Manville Corp., 68 B.R. 618, 621 (Bankr. S.D.N.Y. 1986), aff'd sub nom. In re Johns-Manville Corp., 78 B.R. 407 (S.D.N.Y. 1987), aff'd sub nom. Kane v. Johns-Manville Corp., 843 F.2d 636 (2d Cir. 1988)). "In order to guarantee funds that would be available to both present and future asbestos claimants, the Manville Plan established two trusts, the Personal Injury Settlement Trust, ("Manville Trust") and the Manville Property Damage Trust ("Manville PD Trust")." Id. (citing In re Johns-Manville Corp., 68 B.R. at 621; In re Johns-Manville Corp., 97 B.R. 174, 176-77 (Bankr. S.D.N.Y. 1989)). The Manville Trust "draws no distinction between victims on the basis of the date of the manifestation of their disease." In re Johns-Manville Corp., 68 B.R. 618, 621 (Bankr. S.D.N.Y. 1986).
The Court appointed the Future Claims Representative to represent the interests of all future claimants. The Court found that the interest of the future claimants were distinct and separate from those of the current asbestos plaintiffs. Most importantly, the Manville Plan and Confirmation Order did not discharge the claims of future asbestos claimants. See In re Johns-Manville Corp., 68 B.R. 618, 628 (Bankr. S.D.N.Y. 1986) (discussing the category of "other asbestos obligations" in the Manville Plan and Trust, which covers the claims of potential future claimants). Instead,
Bogdan Law Firm v. Bevan & Assocs., LPA (In re Johns-Manville Corp.), 2016 WL 4506702, at *3, 2016 Bankr. LEXIS
The 1986 Orders, which include the Manville Plan, Trust documents, the Confirmation Order, and incorporated Insurance Settlement Order, barred claims by future asbestos claimants against settling insurers. The Second Circuit clearly stated and left no room for confusion, in MacArthur, when it affirmed and held that the 1986 Orders
MacArthur Co. v. Johns-Manville Corp., 837 F.2d 89, 91 (2d Cir. 1988). That case was brought by a distributor of Manville's asbestos, who claimed to be co-insured under Manville's policies. MacArthur asserted the Bankruptcy Court lacked jurisdiction or authority to enter the Insurance Settlement Order. In rejecting MacArthur's claims, the Second Circuit reasoned that "MacArthur's rights as an insured vendor are completely derivative of Manville's rights as the primary insured. Such derivative rights are no different in this respect from those of the asbestos victims who have already been barred from asserting direct actions against the insurers." Id. at 92 (citations omitted). In denying MacArthur's objection, the Second Circuit likened MacArthur's rights to those of the asbestos victims, who were also barred from directly suing the insurers.
Despite the Second Circuit's holding in MacArthur, asbestos plaintiffs continued to file so-called "direct" actions against Manville's insurers, including Travelers Indemnity Company, Travelers Casualty and Surety Company, and other affiliates ("Travelers").
Bogdan Law Firm v. Bevan & Assocs., LPA (In re Johns-Manville Corp.), 2016 WL 4506702, at *3, 2016 Bankr. LEXIS 3145, at *7 (Bankr. S.D.N.Y. Aug. 26, 2016) (citing 2004 WL 1876046 at *17-22, 2004 Bankr. LEXIS 2519 at *48-60).
In 2002, Travelers filed a motion to enforce the injunction contained in the 1986 Orders. See Mot. Temp. Restraining Order, Dkt. No. 3413. Ultimately this led to an agreement between Travelers and the asbestos victims, affirmed by the Bankruptcy Court in a thorough decision issued after an evidentiary trial. In re Johns-Manville Corp., 2004 WL 1876046, 2004 Bankr. LEXIS 2519, at *113 (Bankr. S.D.N.Y Aug. 17, 2004), aff'd in part, vacated in part, 340 B.R. 49 (S.D.N.Y. 2006), vacated sub nom. Johns-Manville Corp. v. Chubb Indem. Ins. Co. (In re Johns-Manville Corp.), 517 F.3d 52 (2d Cir. 2008), rev'd and remanded sub nom. Travelers Indem. Co. v. Bailey, 557 U.S. 137, 129 S.Ct. 2195, 174 L.Ed.2d 99 (2009)). This Court's decision and order found that the direct action suits against settling insurers had always been barred. The decision was appealed by a non-settling insurer, Chubb,
On appeal to the Second Circuit, the Circuit reversed the Bankruptcy Court and the District Court's conclusion that Chubb, a non-settling insurer, could not bring contribution and indemnification claims against Travelers.
On remand from the Supreme Court, the Second Circuit determined that its holding in MacArthur did not foreclose Chubb's due process argument and that Chubb was not barred from asserting in personam claims against Travelers for contribution and indemnification even though those claims are purported to be barred by the 1986 Orders. Johns-Manville Corp. v. Chubb Indemnity Ins. Co. (In re Johns-Manville Corp.), 600 F.3d 135, 158 (2d Cir. 2010). The Second Circuit then reversed the District Court's March 28, 2006 order and remanded Chubb back to the District Court. Id. at 159.
The Second Circuit's holding in Chubb, emboldened Parra to bring an action against a settling insurer in Mississippi alleging the same conspiracy and negligence-type claims that this Court dealt with in 2004. See Parra Resp., ECF No. 3919 at 5 ("arguing "that it is incumbent on this Court to conduct that analysis and to determine whether the future claims representative appointed in the 1986 bankruptcy case was charged with representing future asbestos claimants (who may or may not have future claims against Johns-Manville) with respect to their claims against Marsh for Marsh's independent wrongful conduct" and citing Johns-Manville Corp. v. Chubb Indemnity Ins. Co. (In re Johns-Manville Corp.), 600 F.3d 135, 158 (2d Cir. 2010)).
On February 10, 2010, Parra filed a complaint against Marsh USA ("Marsh") and others in the Circuit Court of Jones County, Mississippi ("Mississippi Litigation"). Parra claimed to have been exposed to asbestos while working as an insulator at various jobsites in Louisiana, Mississippi, Oklahoma, and Texas during the late 1960s and early 1970s. Marsh's Mot. Enforce, Ex. E at ¶ 2, ¶ 14, Aug. 6, 2010, ECF No. 3916-5. Parra claims that as a direct and proximate result of inhaling, ingesting, and general exposure to asbestos, he received injuries including asbestosis, impaired pulmonary capacity, reduced lung volume, interstitial lung fibrosis, injury to lung tissue and/or pleura, increased risk for cancer, and physical and mental anguish associated with any of the aforementioned
All of the defendants sued by Parra in the Mississippi Litigation were producers, distributors, or insurers of asbestos products. Id. at ¶ 8. Parra asserts that all of the defendants "knew or should have known through industry and medical studies ... of the health hazards ... inherent in the asbestos-containing products." Id. at ¶ 12. Parra's state court claims against Marsh seek to hold Marsh liable for its "negligent undertakings, conspiracy, aiding, and abetting courses of conduct," to conceal the known health hazards of asbestos from the public. Id. at ¶ 34. Parra alleges that Marsh "aided and abetted" and "conspired with" the Defendants and other entities "such as Johns Manville" to hide the effects of Parra's exposure to asbestos from materials including, but not limited to, Johns-Manville products. Id. at ¶ 33, 34, 53. Parra's state court complaint details Marsh's forty year insurance relationship with Manville, stating that it was unique, and that Marsh learned of the health hazards of asbestos through its dealings with Manville. Id. at ¶ 76-86.
On August 6, 2010, Marsh filed a motion in the Bankruptcy Court to enforce the channeling injunction and other orders entered in connection with the chapter 11 cases of Johns-Manville Corporation ("Manville"). Mot. Authorize, ECF No. 3915. In the motion, Marsh argued that Parra's claims against Marsh were barred by the channeling injunction and incorporated so-ordered settlements amongst Manville's insurers. Id. at 2. In response, Parra argued that Marsh was required to file an adversary; Parra was entitled to conduct discovery; Parra's claims were not barred by the 1986 channeling injunction and orders; and, even if technically covered by the 1986 orders, Parra did not receive notice sufficient to satisfy constitutional due process. Parra Resp., ECF No. 3919.
On July 27, 2015, this Court entered a memorandum decision, holding that (1) Marsh was not required to file an adversary proceeding as the Court was interpreting the scope of an existing injunction issued by this Court in the 1986 orders; (2) Parra was not entitled to discovery to develop an evidentiary record as this Court conducted extensive evidentiary hearings and issued findings of facts and conclusions of law interpreting the scope of the 1986 orders on this very issue in 2004, allowing this Court to determine from the facts alleged in Parra's complaint whether the claims were barred by the 1986 orders; (3) that the 1986 orders barred Parra's claims against Marsh; (4) Parra's due process rights were not violated; and (5) the Court would not limit Parra's right to amend his complaint in the Mississippi Litigation. See Mem. Dec., ECF No. 4171.
Parra appealed items (1) through (4) of this Court's July 27, 2015 decision to the District Court on August 19, 2015. Ntc. Appeal, ECF No. 4147. The District Court issued an opinion on April 11, 2016. Order U.S. Dist. Court, ECF No. 4229. The District Court affirmed this Court as to the first three issues. The District Court specifically held that no discovery was needed and that "[t]he allegations in Parra's Complaint are sufficient to establish the required nexus" between Parra's claims against Marsh and Marsh's insurance relationship with Manville, as the 1986 orders were interpreted by the Supreme Court in Travelers Indemnity Company v. Bailey, 557 U.S. 137, 129 S.Ct. 2195, 174 L.Ed.2d 99 (2009). The District Court reversed and
The District Court determined that Parra's claims against Marsh were in personam claims, as the claims seek to hold Marsh liable for its own wrongdoing, separate from its insurance relationship with Manville. The District Court further held that "Parra's claims do not seek to collect from the res of the Manville chapter 11 estate," and that "[t]hey are not claims against the insurance policies." The District Court then concluded that the due process principles articulated in the Second Circuit's opinion in Chubb on remand applied to Parra's claims against Marsh, even though Chubb, a non-settling insurer, had asserted indemnity and contribution claims against Travelers, while Parra suffered personal injuries as a result of Manville's asbestos.
After discussing the Second Circuit's Chubb opinions, the Parra District Court enunciated three principles to frame the question on remand to this Court: the 1986 orders do not speak to whether Parra received due process in the proceedings leading up to the entry of the 1986 orders; the requirements of due process are not the same for in personam and in rem proceedings and that the special due process exception for in rem bankruptcy proceedings does not apply where future claimants seek to pursue in personam claims against a non-debtor; and where in personam claims are involved, the appropriate standard for due process is the standard set forth in Federal Rule of Civil Procedure 23, regarding class action notice requirements to form a class.
From the District Court's understanding of the new in personam due process principles, the District Court reasoned that even if the Manville Future Claims Representative was appointed to represent all rights of the future claimants against both Manville and the settling insurers, "all rights" did not automatically include in personam rights against settling insurers, and that to have represented the future claimants' in personam rights, the Future Claims Representative would have had to "predict the bankruptcy court would exceed its in rem jurisdiction in entering the 1986 orders."
On remand, the District Court instructs this Court to make a factual determination as to whether Parra's in personam claims received adequate representation by the Future Claims Representative, at all times throughout the litigation, and notice reasonably calculated to apprise him of the pendency of the action. The District Court expects an answer to whether in personam claims were contemplated by the Future Claims Representative order, and whether the requisite representation was provided as to the in personam claims.
The District Court opinion provides as follows:
Parra v. Marsh, 551 B.R. at 123-24. The District Court concluded that regardless of
Parra was a future asbestos claimant at the time of the 1986 Orders. Parra now seeks to recover for his personal injuries resulting from his exposure to asbestos from Marsh, a settling insurer. Parra frames his claims against Marsh as direct claims against Marsh, for Marsh's own wrongdoing, separate and apart from any relationship Marsh had with Manville.
The District Court remanded for a determination consistent with the due process principles articulated in Chubb. Although the Supreme Court has held that this Court's subject matter jurisdiction to issue the Manville Plan, Confirmation Order and accompanying Settling Insurer Orders is res judicata, the question for this Court on remand is whether Parra had sufficient due process such that this Court could appropriately exercise personal jurisdiction over Parra's person, consistent with the Due Process Clause in the Constitution. In short, this Court finds that it properly exercised jurisdiction over Parra's claims against Marsh, even as an unknown future claimant, consistent with the Due Process Clause in Article III of the Constitution.
"Judicial jurisdiction" is defined in Black's Law Dictionary as "[t]he legal power and authority of a court to make a decision that binds the parties to any matter properly brought before it." Jurisdiction, Black's Law Dictionary (10th ed. 2014). In order to issue an enforceable order, "[a] court must have jurisdiction over subject matter but also over the person of the defendant." GP Credit Co., LLC v. Orlando Residence, Ltd., 349 F.3d 976, 979 (7th Cir. 2003). Here, the Supreme Court determined that whether or not this Court properly had subject matter jurisdiction to issue the Manville channeling injunction was res judicata. Travelers Indem. Co. v. Bailey, 557 U.S. 137, 152-53, 129 S.Ct. 2195, 174 L.Ed.2d 99 (2009). The only issue left open to challenge was whether or not the individual litigants were "given constitutionally sufficient notice of the 1986 Orders, so that due process absolves it from following them, whatever their scope." Id. at 155, 129 S.Ct. 2195 (citations omitted).
Due process concerns limit the ability of a court to adjudicate the rights of parties not before the court. Pennoyer v. Neff, 95 U.S. 714, 732-33, 24 S.Ct. 565 (1877). Historically, the power of the Court to decide so-called "personal rights" has required the court to obtain personal jurisdiction over the defendant, while the ability to determine title to or possession of property only requires jurisdiction over the property. See Mullane v. Cent. Hanover Bank & Tr. Co., 339 U.S. 306, 311-12, 70 S.Ct. 652, 94 S.Ct. 865 (1950). Thus, whether this Court was presiding over an in personam or in rem action, i.e., whether the Confirmation Order was a judgment adjudicating rights such that its issuance required personal jurisdiction over the affected parties, has thrown into issue whether the Court properly obtained personal jurisdiction over unknown litigants consistent with Constitutional due process.
"Historically the jurisdiction of courts to render judgment in personam is grounded on their de facto power over the defendant's person. Hence his presence within the territorial jurisdiction of a court was prerequisite to its rendition of a judgment personally binding him." Int'l Shoe Co. v. Washington, 326 U.S. 310, 316, 66 S.Ct. 154, 90 S.Ct. 95 (1945) (citing Pennoyer v. Neff, 95 U.S. at 733). The power
"The requirement that a court have personal jurisdiction flows not from Art. III, but from the Due Process Clause. The personal jurisdiction requirement recognizes and protects an individual liberty interest." Ins. Corp. of Ir. v. Compagnie des Bauxites de Guinee, 456 U.S. 694, 702, 102 S.Ct. 2099, 72 L.Ed.2d 492 (1982). The reach of a court's ability to exercise personal jurisdiction over a particular defendant is limited by due process, which requires that a defendant have a minimum level of contact with the forum exercising that jurisdiction "such that the maintenance of the suit does not offend `traditional notions of fair play and substantial justice.'" Int'l Shoe Co. v. Washington, 326 U.S. 310, 316, 66 S.Ct. 154, 158, 90 S.Ct. 95 (1945) (quoting Milliken v. Meyer, 311 U.S. 457, 463, 61 S.Ct. 339, 85 S.Ct. 278) (further citations omitted). In the context of a bankruptcy case, the authority exercising jurisdiction is the United States. See Diamond Mortg. Corp. v. Sugar, 913 F.2d 1233, 1244 (7th Cir. 1990); Enron Corp. v. Arora (In re Enron Corp.), 316 B.R. 434, 444 (Bankr. S.D.N.Y. 2004). A resident citizen of the United States would certainly have sufficient minimum contacts with the United States as a whole to be amenable to suit in federal court in a case involving a question of federal law. See In re Platinum & Palladium Antitrust Litig., No. 1:14-cv-9391, 2017 WL 1169626, at *39-40, 2017 U.S. Dist. LEXIS 46624, at *123 (S.D.N.Y. Mar. 28, 2017) (quoting Gucci Am. v. Bank of China, 768 F.3d 122, 142 n.21 (2d Cir. 2014)).
While a court may procedurally establish personal jurisdiction over a litigant through service of process, "[s]ervice of process has its own due process component, and must be `notice reasonably calculated... to apprise interested parties of the pendency of the action and afford them an opportunity to present their objections.'" SEC v. Ross, 504 F.3d 1130, 1138 (9th Cir. 2007) (quoting Mullane v. Cent. Hanover Bank & Trust Co., 339 U.S. 306, 314, 70 S.Ct. 652, 94 S.Ct. 865 (1950)).
If the proceeding requires the court to issue a determination adjudicating personal rights, the court must establish personal jurisdiction over the affected parties. Due to the fact that the in personam or in rem nature of any given proceeding is no longer clear on its face, "American courts have sometimes classed certain actions as in rem because personal service of process was not required, and at other times have held personal service of process not required because the action was in rem." Id. In other words, the question of whether a litigant must be served with process has become a circular one.
Although there is an abundance of case law determining whether a proceeding is in rem or in personam, there is relatively little discussion of why the nature of a proceeding matters when "personal rights" are involved such that personal service is required. The reason service is required when personal rights are adjudicated is notice to the litigant that they are subject to binding litigation in the forum jurisdiction, here the United States. The notice required by due process to alert litigants that they are subject to the court's territorial jurisdiction is the same regardless of whether the proceeding is in rem or in personam. "Notice by mail or other means as certain to ensure actual notice is a minimum constitutional precondition to a proceeding which will adversely affect the liberty or property interests of any party, whether unlettered or well versed in commercial practice, if its name and address are reasonably ascertainable." Mennonite Bd. of Missions v. Adams, 462 U.S. 791, 800, 103 S.Ct. 2706, 77 L.Ed.2d 180 (1983). Liberty and property interests both require notice, so long as the would-be defendant is known.
While service must be reasonably calculated to notify interested parties and to give them an opportunity to object, actual notice is not required to satisfy due process. Dusenbery v. United States, 534 U.S. 161, 170, 122 S.Ct. 694, 151 L.Ed.2d 597 (2002). ""The proper inquiry is whether the [party giving notice] acted reasonably in selecting means likely to inform persons affected, not whether [the intended recipient] actually received notice." Weigner v. City of New York, 852 F.2d 646, 649 (2d Cir. 1988). In Mullane, the Supreme Court "recognized that, in the case of persons missing or unknown, employment of an indirect and even a probably futile means of notification is all that the situation permits and creates no constitutional
This Court has repeatedly held that the unknown future asbestos claimants received due process in the 1986 proceedings. In the decision approving confirmation of the Manville Plan and overruling the due process objections made on behalf of the future claimants by the "Equity Interests and Kane Objectors," this Court noted it "has long been aware of the delicate and difficult notice problems inherent in the Debtor's efforts to equitably resolve all of its asbestos-related liabilities." In re Johns-Manville Corp., 68 B.R. 618, 626 (Bankr. S.D.N.Y. 1986), aff'd sub nom. Kane v. Johns-Manville Corp., 843 F.2d 636 (2d Cir. 1988) (determining that Kane, as a present claimant, did not have standing to assert the interests of future claimants and noting that the Future Claims Representative was more than competent to assert and protect the rights of future claimants). The Manville Debtors undertook a massive publicity campaign designed to give future asbestos claimants as much notice as possible. See id.
Id. The Court went on to find that the form of notice "clearly meets the standard set forth in Mullane where notice by publication is constitutionally adequate `to those beneficiaries whose interests are either conjectural or future.'" Id. (quoting Mullane, 339 U.S. at 317, 70 S.Ct. 652) (further citations omitted).
In the face of an objection to the Bankruptcy Court's jurisdiction to issue the injunction restraining all claims against the settling insurers, the Second Circuit has already held that "the Bankruptcy Court had jurisdiction over the insurance policies as property of the debtor's estate. Moreover, the court had authority to issue the
Even though the Second Circuit affirmatively determined that the settling insurers were protected from all claims "related to" the Manville insurance policies, and "[d]espite the existence of the Insurance Settlement Order and the channeling injunction, asbestos plaintiffs continued to file state court actions against Travelers," and other settling insurers. Bogdan Law Firm v. Bevan & Assocs., LPA (In re Johns-Manville Corp.), 2016 WL 4506702, at *3, 2016 Bankr. LEXIS 3145, at *7 (Bankr. S.D.N.Y. Aug. 26, 2016) (citing In re Johns-Manville Corp., 2004 WL 1876046, at *17, 2004Bankr. LEXIS 2519, at *48 (Bankr. S.D.N.Y. Aug. 17, 2004)).
The direct action claims that were the subject of this Court's 2004 decision are precisely the type of claim Parra seeks to assert against Marsh. Parra's state court complaint alleges that all of the defendants, including Marsh, "knew or should have known through industry and medical studies ... of the health hazards ... inherent in the asbestos-containing products." Marsh's Mot. Enforce, Ex. E at 14, Aug. 6, 2010, ECF No. 3916-5. Parra's state court claims against Marsh seek to hold Marsh liable for its "negligent undertakings, conspiracy, aiding, and abetting courses of conduct," to conceal the known health hazards of asbestos from the public. Id. at 21. Parra alleges that Marsh "aided and abetted and conspired with Defendants... and other entities such as Johns Manville .... [and that Parra] was exposed to asbestos from materials including, but not limited to, Johns-Manville pipe covering and Fibreboard Pabco pipe covering." Id. at 12. These allegations are substantively the same as those alleged in the proceedings before this Court initiated by Travelers in 2002, involving the alleged conspiracy of Marsh with Manville, based on Marsh's "relationship with asbestos manufacturer Johns-Manville for over forty years." Id. at 26.
The issues Parra seeks to relitigate have been extensively litigated in front of this Court and have been ruled upon. Parra is even represented by the same counsel that represented the asbestos claimants before this Court in the prior settling insurer litigation. See Bogdan Law Firm v. Bevan & Assocs., LPA (In re Johns-Manville Corp.), 2016 WL 4506702, 2016 Bankr. LEXIS 3145 (Bankr. S.D.N.Y. Aug. 26,
The Court's decision as to the settling insurers was not disturbed by the Second Circuit in its second Chubb decision. See Johns-Manville Corp. v. Chubb Indemnity Ins. Co. (In re Johns-Manville Corp.), 600 F.3d 135 (2d Cir. 2010). Instead, the Second Circuit held that non-settling insurer Chubb, seeking indemnification and contribution from settling insurer Travelers, did not have adequate notice regarding the treatment of its claim during the 1986 proceedings. Id. The Second Circuit reasoned that Chubb would have had to predict the 1986 orders would exceed the Bankruptcy Court's in rem jurisdiction. Id. at 157. The Second Circuit relied on an amendment to the settling insurer agreements that attempted to clarify that the channeling order is only intended to channel claims against the res to the settlement fund, and to enjoin claims against the res which may be asserted against the settling insurers. Based on the amendment, the Second Circuit reasoned that Chubb could not have known it was an interested party in Manville's bankruptcy or that the 1986 orders would bar its non-derivative in personam claims against Travelers. In other words, Chubb was not given notice sufficient to allow it to decide to opt in to the class, or opt out. Id. at 158. This is factually distinct from the situation now before the Court regarding Parra's claims against Marsh.
Parra would have been a future asbestos claimant at the time the 1986 Confirmation Orders were entered. Parra is now seeking to sue a settling insurer, Marsh, for alleged conspiracy with Manville and negligence in failing to warn the public. Parra is not like the non-settling insurer Chubb seeking to sue Travelers for indemnification and contribution on policy claims Chubb may be held liable for by other asbestos claimants. Instead, Parra is an asbestos claimant seeking to sue a settling insurer for claims that have been conclusively established by this Court to be sufficiently "related to" the Manville insurance policies so that Parra is enjoined by the channeling injunction in the Manville Plan and Confirmation Orders. While arguably this means that Parra's claim is in fact a claim against the res of the Manville bankruptcy estate, the District Court has determined that Parra's claim was actually in personam.
In point of fact, the Future Claims Representative was fully aware of the terms of the injunction against settling insurers and the types of claims that might be enjoined. See Marsh's Supp. Mem. Ex. C, ECF No. 4277-3. The Future Claims Representative submitted a response to the Debtor's proposed settling insurer order, questioning whether the proposed contribution amounts were reasonable given the fact that the settling insurers would be immune from liability. See id. Several other parties opposed the order as well, arguing that the injunction would bar any suit against the settling insurers based upon the insurers' knowledge regarding the hazards of asbestos, whether or not it had any connection to the Manville Debtors. See Marsh's Supp. Mem. 8, Ex. L at 5, 12, Ex. M at 5, 11. Given the extensive litigation on this matter and the fact that the Future Claims Representative was clearly aware of the consequences of such an order and the rights of the future claimants he was appointed to represent would also be affected by such an injunction, this Court cannot conclude that future asbestos claimants such as Parra seeking to sue settling insurers did not receive constitutionally sufficient "notice" to present all their objections. The very same objections Parra seeks to make now have been heard by this Court before and conclusively determined. Future asbestos' rights, including whatever in personam rights they may have had, were addressed and considered by the Future Claims Representative who considered the proposed order to enjoin actions against the settling insurers.
The Second Circuit, on remand from the Supreme Court, held in Chubb that "because the 1986 Orders purport to bind Chubb's in personam claims, the better due process analogy in terms of notice and representation principles is to class action settlements, not in rem bankruptcy proceedings." Chubb, 600 F.3d at 154. Those due process principles have already been considered by the Second Circuit when it approved a Rule 23 class action settlement with the Manville Trust that treats all present and future asbestos claimants as non-opt-out class members under Rule 23(b)(1)(B). In re Joint E. & S. Dist. Asbestos Litig., 982 F.2d 721, 739 (2d Cir. 1992); In re Joint E. & S. Dist. Asbestos Litig., 78 F.3d 764, 778 (2d Cir. 1996) (citations omitted).
The Manville Trust, the surviving entity that emerged from Manville's bankruptcy to ensure a recovery for all asbestos claimants, continued to pay claims until the payment mechanism in place led to serious and systemic depletion of the available Trust funds. In re Joint E. & S. Dist. Asbestos Litig., 129 B.R. 710, 732 (E.D.N.Y. 1991). In response to the crisis, the Manville Trust and a group of would-be plaintiffs filed a class action case, seeking an amendment to the Trust's distribution procedures before the joint District Courts for the Southern and Eastern Districts of New York. See id. at 733. Bankruptcy Judge Burton Lifland was also involved in the multi-district litigation involving the Manville Trust class action settlement. See generally id.
On February 13, 1991, the joint district courts "entered an order and partial judgment that certified a non-opt-out class pursuant
After the District Court approved the terms of the Manville Trust settlement, the Second Circuit addressed and overruled an objection by the D.C. Plaintiffs made on behalf of the asbestos claimants who had filed or would filed claims for asbestos related injuries in the District of Columbia. In re Joint E. & S. Dist. Asbestos Litig., 78 F.3d at 777. According to the Second Circuit, "The D.C. Plaintiffs prefer not to be bound by the Settlement because it will cost them the opportunity under District of Columbia law to recover fully from defendants other than the Trust," and that due process required them to be allowed to opt out of the class. Id. The Second Circuit reasoned that "whether a given group of plaintiffs should be allowed to opt out of a settlement of this litigation would depend on whether they received the protections accorded by Fed. R. Civ. P. 23." Id. at 778. "In the present case, the D.C. Plaintiffs have not suggested that counsel or the class representatives lacked the requisite qualifications to represent them in particular or the Plaintiff Class in general, or that class counsel neglected their duties toward their clients. Nor does the record suggest that any such contention would be meritorious." Id. The Second Circuit determined that the present and future claimants had been fairly and adequately represented under Rule 23 standards, and affirmed the District Court's denial of their motion to opt-out. See id. at 778-79. Any beneficiary under the Manville trust is a member of the non-opt out class.
The settlement proceeding was brought as a Rule 23 Class Action. The joint Courts ultimately approved a non-opt out class of plaintiffs including present and future asbestos plaintiffs. The Trust Distribution Procedures were amended to limit the right to sue the Manville Trust, and to give the Manville Trust more control over the distribution process. In re Joint E. & S. Dist. Asbestos Litig., 129 B.R. 710, 771 (E.D.N.Y. 1991). The Second Circuit approved the no-opt out class under Rule 23. In re Joint E. & S. Dist. Asbestos Litig., 78 F.3d 764, 780 (2d Cir. 1996). All future asbestos plaintiffs are bound to the class. See id. at 777-79. The Confirmation Order and Plan were undisturbed. The only thing amended was how the Manville Trust is permitted to deal with and payout on asbestos claims according to its Trust Distribution Procedures.
Parra and Marsh agree that Parra could recover from the Manville Trust. Bogdan's Br. Prejudice 12, ECF No. 4274; Marsh's Supp. Mem. 14, Ex. K at 4. As such, Parra is a beneficiary under the Manville Trust, and would be bound by the terms of the TDP, which channel all asbestos related
As such, a due process Rule 23 inquiry brings all members of the non-opt out asbestos plaintiff class right back to the 1986 channeling injunction in the Confirmation Order. As a beneficiary of the Trust, there is no escape from the Rule 23 class, which is enjoined by both the original channeling injunction and the additional injunctions in the TDP. Thus, there is no prejudice for any would-be beneficiary of the Trust, as they are part of a non-opt out Rule 23 class and subject to the injunction contained in the TDP, as well as the channeling injunction. Though the Rule 23 class action took place, the existence of the Rule 23 class action amending the terms of the TDP does not override the prior bankruptcy proceedings that took place, the 1986 Confirmation Orders, or the due process considerations that were undertaken when the Manville Plan was confirmed.
Even if the heightened due process standard under a Rule 23 class action did apply to the bankruptcy proceedings that occurred in 1986, "[c]ourts have consistently recognized that, even in Rule 23(b)(3) class actions, due process does not require that class members actually receive notice." Juris v. Inamed Corp., 685 F.3d 1294, 1321 (11th Cir. 2012) (citing Silber v. Mabon, 18 F.3d 1449, 1453-54 (9th Cir. 1994); Adams v. S. Farm Bureau Life Ins. Co., 417 F.Supp.2d 1373, 1380 n.6 (M.D. Ga. 2006), aff'd, 493 F.3d 1276 (11th Cir. 2007); In re Prudential Sec. Inc. Ltd. P'ships Litig., 164 F.R.D. 362, 368 (S.D.N.Y. 1996), aff'd, 107 F.3d 3 (2d Cir. 1996); Trist v. First Fed. Sav. & Loan Ass'n of Chester, 89 F.R.D. 1, 2 (E.D. Pa. 1980); 4 William B. Rubenstein et al., Newberg on Class Actions § 11:53 (4th ed. 2011); 7AA Charles Alan Wright et al., Federal Practice & Procedure § 1789.1 (3d ed. 2005)). The Second Circuit has held that "Rule 23(c)(2) requires only that members of a Rule 23(b)(3) class be given `the best notice practicable under the circumstances, including individual notice to all members who can be identified through reasonable effort.'" In re "Agent Orange" Prod. Liab. Litig., 818 F.2d 145, 168 (2d Cir. 1987). In the Second Circuit's In re "Agent Orange" decision, the court did an in depth analysis of Mullane and the permissibility of publication notice where interested parties were unknown to the trustee. The Second Circuit interpreted the Supreme Court's holding in Mullane as finding that "notice by publication was permissible as to persons whose whereabouts or interests could not be determined through due diligence or whose interests were either conjectural or future." Id. (citing Mullane, 339 U.S. at 317-18, 70 S.Ct. 652).
Prejudice in the due process context occurs "`when it is shown that an abridgment of due process is likely to have affected the outcome of the proceedings.'" Amouri v. Holder, 572 F.3d 29, 36 (1st Cir. 2009) (citing Pulisir v. Mukasey, 524 F.3d 302, 308 (1st Cir. 2008)). For prejudice, "the relevant inquiry is whether courts can be confident in the reliability of prior proceedings when there has been a procedural defect. In considering reliability, `[t]he entire record must be considered and the probable effect of the error determined in the light of all the evidence.'" Elliott v. GM LLC (In re Motors Liquidation Co.), 829 F.3d 135, 162 (2d Cir. 2016) (citing Lane Hollow Coal Co. v. Dir., Office of
On remand, the question for this Court is whether assuming there was some sort of due process violation, is Parra prejudiced, taking into consideration the fact that he can recover from the Manville Trust. The answer is clearly
Parra argues that even if he recovers from the Manville Trust, he will be prejudiced by a deprivation of his right to pursue independent claims against Marsh. Bogdan's Br. Prejudice 3. Parra argues that deprivation of the right to sue Marsh amounts to a due process violation of service of process, claiming he was deprived of notice and the right to be heard. Id. at 4-6. Parra also claims he is deprived of due process on the grounds the injunction unjustly limits the amount he can recover for his injuries. Id. at 9-10. Due process does not preserve for time immemorial the right to assert a claim against another individual. This cannot be so or the fundamental discharge injunction in every bankruptcy case would be a due process violation. Additionally, any statute of limitations would amount to a due process violation.
The injunction does not violate Parra's due process rights to notice and an opportunity to be heard. As this Court has already determined, the Manville bankruptcy proceedings satisfied Parra's due process rights to notice and an opportunity to object. Parra was adequately represented by the Future Claims Representative who took into consideration the effect of the settling insurers' order and injunction on the rights of the future claimants.
Further, the injunction does not violate due process by limiting the amount Parra is able to recover on his injury claims. Parra does not have a due process right to recover more than is available for distribution. The
The importance of the contribution and settlement of insurers cannot be overstated. The breadth of the problem is so vast — that even 35 years after this case was first filed the Court continues to deal with the aftermath. The only reason Parra has an ability to come to this Court and assert any rights at all against a settling insurer is because this Court created the Manville Trust. That Trust did two things
While Parra may not recover as much from the Manville Trust as he would like, it would be unfair to allow him to recover more than other similarly situated claimants. It would also be unfair to permit recovery against a settling insurer in a way that could jeopardize the continuing existence of the Manville Trust, thus, preventing recovery for the dozens, hundreds, or thousands of additional future claimants still yet unknown. As there is no dispute that Parra could submit a claim to the Manville Trust, pursuant to the District Court's questions on remand, this Court finds that Parra does not suffer any prejudice since he is able to recover from the Manville Trust. Parra received due process in every possible respect.
For the foregoing reasons, Marsh' motion to enforce the injunction is granted. The Court will issue a separate order in conformity with this opinion.
