CECELIA G. MORRIS, CHIEF UNITED STATES BANKRUPTCY JUDGE.
Before the Court is Graphic Packaging International's ("Graphic") emergency motion for enforcement of the confirmation orders of the Johns-Manville Corporation ("Manville") and the Manville Forest Products Corporation ("MFP"). By its motion, Graphic seeks to enjoin the lawsuit of plaintiff, Lynda Berry ("Ms.Berry"),
After a hearing before this Court, held on March 8, 2016, Ms. Berry requested an evidentiary hearing with regard to due process. Tr. Mar. 8, 2016 Hrg. 20:20-23, Mar. 8, 2016, ECF No. 4225 ("Tr."). This Court ordered supplemental briefing on the matter. Tr. 26:1-7. For the reasons and to the extent stated below, the Court grants Graphic's motion for an order enjoining Ms. Berry's state law claims against Graphic as a successor to MFP.
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), matters concerning the administration of the estate, and § 157(b)(2)(I), proceedings to determine the dischargeability of debt.
As provided in both the MFP and Manville Confirmation Orders, paragraphs 10 and 28 respectively, this Court retains jurisdiction to clarify its prior confirmation orders, to enforce its injunctions, and to adjudicate matters having to do with the administration of the confirmed chapter 11 plans of MFP and Manville. See Travelers Indem. Co. v. Bailey, 557 U.S. 137, 151, 129 S.Ct. 2195, 174 L.Ed.2d 99 (2009) (citations omitted).
After over thirty years of handling the ongoing Manville bankruptcy case, this Court is keenly aware that "[f]undamentally, the story of asbestos health litigation is the story of Johns-Manville." In re Johns-Manville Corp., 2004 WL 1876046, at *2, 2004 Bankr. LEXIS 2519, at *5 (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). As documented by this Court, Manville's story began in 1868, when "Henry Ward Johns had obtained a patent for an asbestos insulation product," leading to the establishment of his business, the H.W. Johns Company. In re Johns-Manville Corp., 2004 WL 1876046, at *2, 2004 Bankr. LEXIS 2519, at *6 (citations omitted). H.W. Johns sold its asbestos products through the Manville Covering Company. Id. The two companies merged in
Manville was "a diversified manufacturing, mining and forest products company," and by the 1970s was "the world's largest miner, processor, manufacturer and supplier of asbestos and asbestos-containing products." 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 *3, 2004 Bankr. LEXIS 2519, at *7 (citations omitted). Manville was not only a leading producer of asbestos products, these products "were used pervasively in a variety of industries for several decades throughout the United States." Manville Corp. v. Equity Sec. Holders Comm. (In re Johns-Manville Corp.), 66 B.R. 517, 521 (Bankr.S.D.N.Y.1986). Although asbestos products were widespread, the asbestos industry consisted of about thirty manufacturing firms that made asbestos products. John C. Coffee, Jr., Class Wars: The Dilemma of the Mass Tort Class Action, 95 Colum. L.Rev. 1343, 1365 (1995).
Manville eventually became "the prime supplier of asbestos fiber products," In re Johns-Manville Corp., 2004 WL 1876046, at *3, 2004 Bankr. LEXIS 2519, at *7, and a Fortune 500 company. In re Johns-Manville Corp. 97 B.R. 174, 176 (Bankr. S.D.N.Y.1989). Manville was "deemed a paradigm of success in corporate America by the financial community." In re Johns-Manville Corp., 36 B.R. 727, 729 (Bankr.S.D.N.Y 1984). Such was Manville's success in the asbestos industry that Manville's bankruptcy filing was surprising. Id. In fact, it was "the spectre of proliferating, overburdening litigation to be commenced in the next 20-30 years, which litigation would be beyond [Manville's] ability to manage, control, and pay for, which ... prompted this filing." 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).
The term "asbestos" describes "a group of naturally occurring fibrous minerals known for their properties of relative indestructibility and resistance to heat and fire." John P. Burns et al., Special Project: An Analysis of the Legal, Social, and Political Issues Raised by Asbestos Litigation, 36 Vand. L.Rev. 573, 578 (1983) (footnote omitted), cited in Stonewall Ins. Co. v. Asbestos Claims Mgmt. Corp., 73 F.3d 1178, 1192 n. 6 (2d Cir.1995). The documented use of asbestos dates back to the ancient Greeks and Romans and was used with increasing frequency after the industrial revolution in the 1870s. Id. at 578 (citing James W. Mehaffy, Asbestos-Related Lung Disease, 16 Forum 341, 341-42 (1980)). Despite its prevalent use, the dangers of asbestos were not widely known until the 1960s when latent asbestos injuries began to manifest throughout the nation. In re Asbestos Prods. Liab. Litig., 771 F.Supp. 415, 418 (J.P.M.L.1991) (quoting Judicial Conf. of the U.S., Report of the Judicial Conference Ad Hoc Committee on Asbestos Litigation 1-3 (1991)).
The health risks caused by asbestos were finally given broad acknowledgment on the legal front in 1973, when the United States Court of Appeals for the Fifth Circuit issued its landmark decision in Borel. Borel v. Fibreboard Paper Prod. Corp., 493 F.2d 1076 (5th Cir.1973). In Borel, the Fifth Circuit upheld a jury verdict finding asbestos manufacturers, including Manville, strictly liable for personal injuries of the plaintiff resulting from exposure to asbestos. See id. at 1086. The Fifth Circuit's decision found that "[a]sbestosis
Since the Fifth Circuit's decision in Borel, asbestos litigation has grown to gargantuan proportions. Patrick M. Hanlon & Anne Smetak, Asbestos Changes, 62 N.Y.U. Ann. Surv. Am. L. 525, 526-27 (2007). The judiciary has repeatedly called for Congress to create a national scheme to resolve all asbestos claims. See John C. Coffee, Jr., Class Wars: The Dilemma of the Mass Tort Class Action, 95 Colum. L.Rev. 1343, 1389 (1995) (footnotes omitted); see also Amchem Prods. v. Windsor, 521 U.S. 591, 598, 117 S.Ct. 2231, 138 L.Ed.2d 689 (1997) (discussing the March 1991 Report of the Judicial Conference Ad Hoc Committee on Asbestos Litigation, appointed by the Chief Justice in September of 1990); In re Asbestos Prods. Liab. Litig., 771 F.Supp. at 418. As recently as 2003, the Supreme Court again recognized the need for national legislation to deal with the "elephantine mass of asbestos cases lodged in state and federal courts." Norfolk & W. Ry. Co. v. Ayers, 538 U.S. 135, 166, 123 S.Ct. 1210, 155 L.Ed.2d 261 (2003) (internal quotation marks omitted) (quoting Ortiz v. Fibreboard Corp., 527 U.S. 815, 821, 119 S.Ct. 2295, 144 L.Ed.2d 715 (1999)). Congress has not heeded the call.
Although original asbestos litigation involved an individual plaintiff and asbestos producer, this landscape changed by the 1980s. After years of litigating individual cases, asbestos producers coalesced into an industry-wide consortium, presenting a unified litigation front. Coffee, supra, at 1364-66. The original asbestos consortium was known as the Asbestos Claims Facility. Id. at 1365 & n.83. The Asbestos Claims Facility evolved into the Center for Claims Resolution ("CCR") after several of the original members filed for bankruptcy. See id. at 1365 n.83; Amchem, 521 U.S. at 599-600, 117 S.Ct. 2231. 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. See Coffee, supra, at 1364-65, 1392 & nn.187-88 (citations omitted); Amchem, 521 U.S. at 599, 117 S.Ct. 2231. Representation of asbestos plaintiffs was led by the firms of Ronald Motley and Gene Locks. See Coffee, supra, at 1364-65, 1392 & nn. 187-88 (citations omitted); Amchem, 521 U.S. at 599, 117 S.Ct. 2231. At the legal level, asbestos litigation was essentially a game between "repeat players." Coffee, supra, at 1365.
While asbestos plaintiffs were vigorously suing asbestos defendants, Manville and its insurance firms were disputing which among them should bear the brunt of the mounting asbestos liability. See In re Johns-Manville Corp., 36 B.R. 743, 750 (Bankr.S.D.N.Y.1984). About twenty-five insurance carriers,
On August 26, 1982, Manville and twenty of its subsidiaries filed for protection under chapter 11 of the Bankruptcy Code. See In re Manville Forest Prods. Corp., 31 B.R. 991, 992 (S.D.N.Y.1983); In re Johns-Manville Corp. 97 B.R. 174, 176 (Bankr.S.D.N.Y.1989). An order of this Court entered on the same day as the filings "provides for joint administration of the 21 Manville companies." In re Manville Forest Prods. Corp., 31 B.R. 991, 992 (S.D.N.Y.1983). MFP was one of these original Manville debtors, filing for bankruptcy on the same day as Manville, and as part of the Manville bankruptcy. See In re Manville Forest Prods. Corp., 31 B.R. at 992; Graphic's Suppl. Br. 15-16, Apr. 11, 2016, ECF No. 4230 (citing Graphic's Mot. Ex. S, at 35).
MFP was "a timber company that was acquired by Johns-Manville through a hostile tender offer in 1978." In re Manville Forest Prods. Corp., 31 B.R. at 992. As part of its forest products business, MFP had acquired the West Monroe paper mill (the "Mill"). See Berry's Opp'n 2, 6-7; Graphic's Mot. 4. Originally, the Mill belonged to the Brown family who sold it to Olin Corporation in 1955. See Graves v. Riverwood Intl. Corp., 949 So.2d 576, 579 (La.Ct.App.2007).
Although MFP "never mined, manufactured or sold asbestos or any asbestos-containing product," In re Manville Forest
After MFP confirmed its plan of reorganization, it changed its name to Riverwood International Corporation ("Riverwood"). See Olin Corp. v. Riverwood Int'l Corp. (In re Manville Forest Products Corp.), 209 F.3d 125, 127 (2d Cir.2000). Manville retained its majority ownership interest in the company. See Clay v. Riverwood Int'l Corp., 157 F.3d 1259, 1261 (11th Cir.1998). Several years later, "[i]n early 1995, Riverwood's 81 percent stockholder, Manville Corporation, found itself in need of cash to settle asbestos litigation claims." Clay v. Riverwood Int'l Corp., 157 F.3d 1259, 1261 (11th Cir.1998). As a result, Riverwood was spun off and sold. See Graphic's Mot. 6. Riverwood merged with Graphic in 2003, adopting Graphic's corporate name. Graphic's Mot. 6; see also Riverwood Int'l Corp. v. Emplrs. Ins. of Wausau, 420 F.3d 378, 380 (5th Cir.2005). Before Riverwood merged with Graphic in 2003, Riverwood was sued by its employees for asbestos-related injuries. Riverwood Int'l Corp. v. Emplrs. Ins. of Wausau, 420 F.3d 378, 380 (5th Cir.2005). "Riverwood settled 260 employee claims for a lump sum of $ 1.513 million." Id. Riverwood attempted to recover on its insurance policies in force at the time from multiple insurance companies. Id. At least one of its insurers refused to contribute and the Fifth Circuit held that the insurer's policy's terms did not cover personal injuries resulting from exposure to asbestos. See id.
Ms. Berry now seeks to sue Graphic directly on her asbestos personal injury claims. On August 24, 2015, Ms. Berry filed a petition for damages in Louisiana state court. Ms. Berry seeks to recover against Graphic based on her derivative exposure to asbestos through her husband's work at the Mill. Berry's Opp'n 2-3, Ex. 6. Ms. Berry's husband worked at the Mill from 1961 to 2010, where he was exposed to asbestos and suffered his own asbestos-related injuries as a result. Id. at 5-6. Ms. Berry's husband filed a claim with the Trust for his injuries and received payment on his claim. Id. at 18; Tr. 8:1-15; 10:11-14. Ms. Berry was diagnosed with mesothelioma in March of 2015. Berry's Opp'n 4. She seeks damages for her asbestos-related injuries based on strict liability of the asbestos producers and distributors, which includes Manville, as well as the strict liability and negligence of the employer and premises owner, who, at the time, was MFP. Id. at 18, Ex. 6 ("Petition for Damages"). Ms. Berry's petition thus includes claims against Manville for asbestos
Graphic now seeks the protection of the bankruptcy court. Graphic alleges that Ms. Berry's law suit violates both MFP and Manville's Confirmation Orders, and that her claim should be enjoined by those orders. Graphic's Mot. 1-2. Graphic argues that Ms. Berry's only recourse for her asbestos related injuries is to submit a claim to the Manville Trust. Tr. 8:9-19. In opposition, Ms. Berry argues that (1) MFP is not a beneficiary of the Manville confirmation order and channeling injunction; (2) Ms. Berry's claims against MFP were not discharged, released or enjoined by the MFP Confirmation Order; (3) even if Ms. Berry's claims were addressed by the MFP or Manville Confirmation Orders, her exposure was continuing, so her claims are not discharged, released, channeled or enjoined by the MFP or Manville Confirmation Orders; and (4) Graphic has waived its right to rely on the bankruptcy discharge or injunction. See Berry's Opp'n 1. Ms. Berry admits that any claim she may have for exposure to Manville's asbestos would be channeled to the Manville Trust. Berry's Opp'n 3, 18. Ms. Berry contends that her claim against Graphic is not channeled due to the fact it is a claim based on premises liability, which was not included in the Manville Plan or Confirmation Order. Id.; see also Berry's Suppl. Br. 5, Mar. 29, 2016, ECF No. 4226; Tr. 15:2-11. Ms. Berry further argues that she did not receive due process in the underlying bankruptcy proceedings leading to MFP and Manville's confirmation orders. Berry's Suppl. Br. 21-36.
As will be explained below, Ms. Berry's lawsuit against MFP is merely an attempt to side-step the Manville Trust in order to recover more than other similarly situated asbestos victims by suing Manville and its subsidiaries directly. This is not merely unfair to the other victims, it is an attempt to sue on rights she does not have. Were it not for the Manville Trust, Ms. Berry's claims against MFP would have been discharged and she would not be entitled to any recovery for her asbestos related injuries. As it is, this Court finds that Ms. Berry holds a future asbestos claim, subject to the injunction in the Manville Plan and Confirmation Order, which channels direct and indirect claims against Manville to the Manville Trust and enjoins all persons holding future asbestos claims from suing Manville and Manville's subsidiaries.
Any direct claim Ms. Berry has against MFP would be a prepetition claim subject to discharge by MFP's Plan. Pursuant to § 1141(d)(1) of the Bankruptcy Code, and as held by this Court and affirmed on appeal, MFP's Confirmation Order discharges MFP from all unsecured, pre-confirmation debts. Riverwood Int'l Corp. v. Olin Corp. (In re Manville Forest Prods. Corp.), 225 B.R. 862, 864 (Bankr.S.D.N.Y. 1998) (citations omitted); see also Olin Corp. v. Riverwood Int'l Corp. (In re Manville Forest Products Corp.), 209 F.3d 125, 127 (2d Cir.2000). MFP's Confirmation Order provides that
Graphic's Mot. Ex. L, at 7. In addition to discharging all unsecured, pre-confirmation debts, MFP's Confirmation Order enjoins all entities whose debts are discharged from pursuing any litigation to collect such discharged debt from MFP. MFP's Confirmation Order provides that
Id. at 6-7. As such, if Ms. Berry holds a pre-confirmation claim against MFP, her claim would be discharged by the MFP Plan and Confirmation Order.
A debt is defined by the Bankruptcy Code to mean a "liability on a claim." 11 U.S.C. § 101(12). As prior cases have held, "[t]his definition reveals that Congress intended that the meanings of `debt' and `claim' be coextensive." Riverwood Int'l Corp., 225 B.R. at 865 (citing Pa. Dep't of Pub. Welfare v. Davenport, 495 U.S. 552, 552, 110 S.Ct. 2126, 109 L.Ed.2d 588 (1990)). Under the Bankruptcy Code, a claim is defined as "a right to payment whether or not such right is reduced to judgment, liquidated, unliquidated, fixed or contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured, or unsecured." 11 U.S.C. § 101(5).
MFP's Plan defines a claim synonymously with § 105(5) of the Bankruptcy Code to mean "a right to payment whether or not such right is reduced to judgment, liquidated, unliquidated, fixed or contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured, or unsecured." Graphic's Mot. Ex. L, at 2. The legislative history illustrates that "[b]y this broadest possible definition ... all legal obligations of the debtor, no matter how remote or contingent, will be able to be dealt with in the bankruptcy case." H.R.Rep. No. 95-595, at 309 (1978), reprinted in 1978 U.S.C.C.A.N. 5963, 6266. It is well established that "Congress unquestionably expected this definition to have wide scope." United States v. LTV Corp. (In re Chateaugay Corp.), 944 F.2d 997, 1003 (2d Cir.1991) (discussing the legislative history behind the Bankruptcy Code's definition of a "claim"). The Supreme Court "ha[s] said that `claim' has `the broadest available definition,' and ha[s] held that the `plain meaning of a `right to payment' is nothing more nor less than an enforceable obligation." F.C.C. v. NextWave Pers. Commc'ns Inc., 537 U.S. 293, 302-03, 123 S.Ct. 832, 154 L.Ed.2d 863 (2003) (quoting Johnson v. Home State Bank, 501 U.S. 78, 83, 111 S.Ct. 2150, 115 L.Ed.2d 66 (1991); Pa. Dep't of Pub. Welfare v. Davenport, 495 U.S. 552, 559, 110 S.Ct. 2126, 109 L.Ed.2d 588 (1990)).
Per the Bankruptcy Code, a right to payment includes contingent, unmatured, and unliquidated claims. 11 U.S.C. § 101(5). A claim is contingent where "the debtor's legal duty to pay does not come into existence until triggered by
The federal courts have developed several different tests to determine when a prepetition bankruptcy claim arises. The variations of this test are generally classifiable under the "accrual test," the "conduct test," and the "prepetition relationship test." See In re Piper Aircraft Corp., 162 B.R. 619, 624-26 (Bankr.S.D.Fla.1994), aff'd as modified sub nom. Epstein v. Official Comm. of Unsecured Creditors (In re Piper Aircraft Corp.), 58 F.3d 1573 (11th Cir.1995). Some sources also include a fourth approach, the "fair contemplation test" or the "foreseeability test," which was developed to include future environmental regulatory claims in the bankruptcy proceedings. In re Nat'l Gypsum Co., 139 B.R. 397, 405-06 (N.D.Tex.1992); see also In re Agway, Inc., 313 B.R. 31, 42 (Bankr.N.D.N.Y.2004). Most courts now rely on a version of the conduct test or the prepetition relationship test. See St. Catherine Hosp. of Ind., LLC v. Indiana Family & Soc. Servs. Admin., 800 F.3d 312, 315-16 (7th Cir.2015); JELD-WEN, Inc., 607 F.3d at 122.
The United States Court of Appeals for the Second Circuit appears to use both the relationship test and the fair contemplation test in cases involving regulatory environmental claims and contingent contract claims under the Bankruptcy Code. See Olin Corp. v. Riverwood Int'l (In re Manville Forest Prods.), 209 F.3d 125, 128 (2d Cir.2000); United States v. LTV Corp. (In re Chateaugay Corp.), 944 F.2d 997, 1004 (2d Cir.1991) ("Chateaugay I"). In Chateaugay I, the court held that the Environmental Protection Agency ("EPA") held prepetition claims for clean-up costs incurred post-confirmation where those costs resulted from the debtor's pre-petition release, or substantial threat thereof, of hazardous materials into the environment. Chateaugay I, 944 F.2d at 999-1000. This included releases the EPA had not determined the debtor was responsible for, and releases the EPA had not even discovered yet. Id. at 999. The court reasoned that when the clean-up "costs are incurred, EPA will unquestionably have what can fairly be called a right to payment. That right is currently unmatured...." Id. at 1004. The court knew with certainty that the EPAs clean-up costs would give rise to a right to payment, i.e., a claim. That the costs had not yet been incurred only meant that the claim was contingent. The court held that the relationship between the EPA, as the regulating government agency, and the debtor, as one subject to the EPAs regulations, made the parties sufficiently aware that the EPA would incur reimbursable clean-up costs. Id. at 1005. The awareness created by the parties relationship was enough to render the EPAs future clean-up costs for the debtors prepetition acts dischargeable, prepetition claims. Id.
Several years later, the Second Circuit was faced with the issue of whether the debtor's bankruptcy filing relieved it of its obligations under the Coal Act to make continuing payments to fund the health benefit scheme the debtor had once guaranteed to its retirees. LTV Steel Co. v. Shalala (In re Chateaugay Corp.), 53 F.3d 478, 496 (2d Cir.1995) ("Chateaugay II").
In the context of a contingent contract claim, the Second Circuit has also relied on the fair contemplation test. See, e.g., Olin Corp., 209 F.3d at 129 (internal quotation marks omitted) (quoting Chateaugay II, 53 F.3d at 497). What differs in the contingent contract situation, is the court's definition of a contingent claim. Where the claim objected to arises out of a contract, a dischargeable, contingent claim refers "to obligations that will become due upon the happening of a future event that was within the actual or presumed contemplation of the parties at the time the original relationship between the parties was created." Olin Corp., 209 F.3d at 128 (internal quotations omitted) (quoting Chateaugay I, 944 F.2d at 1004). This also forms the basis of the relationship test in Chateaugay I. See Chateaugay I, 944 F.2d at 1004-5. The difference between the relationship test and the fair contemplation test is that the fair contemplation test asks whether the relationship has resulted in prepetition conduct that could, in the fair contemplation of the parties, give rise to liability under the non-bankruptcy law. The relationship test asks whether the relationship was one in which both parties knew liability could arise. Although the Second Circuit has applied these tests in cases involving private contracts and other federal statutes, these standards for determining when a claim arises under the Bankruptcy Code have not been conclusively applied by the Second Circuit in the tort context.
Bankruptcy courts of the Second Circuit have adopted various approaches to determining when a tort claim may be said to arise for purposes of the Bankruptcy Code. Compare In re Agway, Inc., 313 B.R. 31, 42 (Bankr.N.D.N.Y.2004) (applying the fair contemplation test to find elements of statutory cause of action in negligence were met prepetition), with In re Quigley Co., 383 B.R. 19, 27 (Bankr. S.D.N.Y.2008) (applying the conduct test to find asbestos claimants exposed prepetition had prepetition claims).
Relying on Second Circuit dicta in Bald-win-United Corporation Litigation, this Court has already adopted, in proceedings in this case, an approach to determine when a claim arises. In that Manville decision, issued in 1986, this Court denied relief from the automatic stay to two claimants seeking to pursue state law indemnification and contribution remedies against Manville. In re Johns-Manville Corp., 57 B.R. 680, 681-82, 690 (Bankr. S.D.N.Y.1986) (quoting Erti v. Paine Webber Jackson & Curtis, Inc. (In re Baldwin-United Corp. Litig.), 765 F.2d 343, 348 n. 4 (2d Cir.1985)). In that decision, this Court found that the claimants had prepetition claims subject to the automatic stay based on the fact they had both incurred prepetition damages as a result of prepetition events. Id. at 686-88. This Court rejected "the state law analysis used by the United States Court of Appeals for the Third Circuit in Frenville," as creating an arbitrary classification system based on the timing of events in control of third-parties, Id. at 689. Further, this Court reasoned that the state law approach "distorts the underlying policies of the Code in equating a claim with a cause of action for indemnity or contribution under state law notwithstanding the clear pre-petition rooting of the right to payment being sought." Id. at 690. The Court determined that "the focus should be on the time when the acts giving rise to the alleged liability were performed...." Id. To the extent this Court's analysis has been modified by the Second Circuit's requirement to look for the existence of a relationship in the tort context, this Court looks to the holdings in other bankruptcy cases involving large numbers of future tort claimants.
The accrual test, championed by the Third Circuit in Frenville, looks to state law to determine when a claim arises under the Bankruptcy Code. See Avellino & Bienes v. M. Frenville Co. (In re M. Frenville Co.), 744 F.2d 332, 337 (3d Cir.1984), overruled by JELD-WEN, Inc. v. Van Brunt (In re Grossman's Inc.), 607 F.3d 114 (3d Cir.2010). The Third Circuit in Frenville stated that "while federal law controls which claims are cognizable under the Code, the threshold question of when a right to payment arises, absent overriding federal law, `is to be determined by reference to state law.'"
As stated above, this Court has already rejected the Frenville accrual test in proceedings in this case. In re Johns-Manville Corp., 57 B.R. 680, 681-82, 690 (Bankr.S.D.N.Y.1986) (quoting Erti v. Paine Webber Jackson & Curtis, Inc. (In re Baldwin-United Corp. Litig.), 765 F.2d 343, 348 n. 4 (2d Cir.1985)). Given the fact that the Third Circuit has overruled itself, this Court does not believe a resort to state law is appropriate to determine when a cause of action "accrues" for purposes of asserting a claim under the Bankruptcy Code.
The conduct test is similar to this Court's decision in the Manville decision denying relief from the automatic stay. The conduct test looks exclusively to when the acts giving rise to liability occurred. See, e.g., Grady v. A.H. Robins Co., 839 F.2d 198, 203 (4th Cir.1988); Watson v. Parker (In re Parker), 313 F.3d 1267, 1269-70 (10th Cir.2002). In Grady, the United States Court of Appeals for the Fourth Circuit was faced with the issue of whether a tort claimant, Mrs. Grady, had a prepetition claim against a pharmaceutical company, Robins, that filed for bankruptcy on August 21, 1985. Grady, 839 F.2d at 198. Robins had manufactured and marketed an intrauterine contraceptive device, called the Dalkon Shield, from 1971 to 1974. Id. Prior to the bankruptcy, Mrs. Grady had used a Dalkon Shield. Id. She thought it had fallen out. Id. Around the time of the bankruptcy, Mrs. Grady developed complications from the still-present device, resulting in surgical removal, pelvic inflammatory disease and ultimately a hysterectomy. Id. Mrs. Grady filed a state law claim against Robins and a motion in the bankruptcy court for a determination that she held a post-petition claim that was not subject to the automatic stay. Id. The bankruptcy court found Mrs. Grady held a prepetition claim against the debtor, Robins. See id. at 199. On appeal, the Fourth Circuit affirmed, holding that in the context of future tort claimants, "when the acts constituting the tort or breach of warranty have occurred prior to the filing of the petition," the future tort claimant holds a claim for purposes of the Bankruptcy Code. Id. at 203.
The conduct test has been criticized by some courts as too broad. See Epstein v. Official Comm. of Unsecured Creditors (In re Piper Aircraft, Corp.), 58 F.3d 1573,
On appeal, the United States Court of Appeals for the Eleventh Circuit affirmed, reasoning that even the courts relying on the conduct test acknowledge that "focusing solely on prepetition conduct ... would stretch the scope of § 101(5)." Epstein, 58 F.3d at 1577. The Eleventh Circuit, designating its test as the "Piper test," held that
Id. This precise formulation of the prepetition relationship test has been criticized by some. See, e.g., JELD-WEN, Inc. v. Van Brunt (In re Grossman's Inc.), 607 F.3d 114, 125 (3d Cir.2010) (discussing criticism by legal scholars and the National Bankruptcy Review Commission).
The Third Circuit, overruling Frenville, found that future asbestos claimants exposed to asbestos prepetition who did not manifest injury until later still held prepetition claims for purposes of the Bankruptcy Code. Id. at 125. The court noted that "[i]rrespective of the title used, there seems to be something approaching a consensus among the courts that a prerequisite for recognizing a `claim' is that the claimant's exposure to a product giving rise to the `claim' occurred pre-petition, even though the injury manifested after the reorganization." Id. The Third Circuit ultimately held "that a `claim' 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." Id. Despite the trend in case law toward a
In the context of future asbestos claimants, courts have repeatedly found that prepetition exposure to asbestos giving rise to a post-petition injury manifesting constitutes a prepetition claim in bankruptcy. See, e.g., In re Grossman's Inc., 607 F.3d at 125; Waterman S.S. Corp. v. Aguiar (In re Waterman S.S. Corp.), 141 B.R. 552, 556 (Bankr.S.D.N.Y.1992), vacated on other grounds, 157 B.R. 220 (S.D.N.Y.1993). "If the Asbestos ... Claimant was exposed to asbestos before the ... petition date, he or she holds a `claim.'" In re Quigley Co., 383 B.R. 19, 27 (Bankr.S.D.N.Y.2008); In re Lloyd E. Mitchell, Inc., 373 B.R. 416, 424 (Bankr. D.Md.2007) ("A claim arises upon exposure, not manifestation.") (citations omitted). Using the date of exposure as the act that creates the relationship is not only in line with the Eleventh Circuit's reasoning, it was also central to this Court's decision that future asbestos claimants were parties in interest to the Manville bankruptcy proceedings. See In re Johns-Manville Corp., 36 B.R. 743, 749-50 (Bankr.S.D.N.Y.1984). This Court concludes that under the relationship test set forth by the Second Circuit, a sufficient relationship is formed when the claimant is exposed to the asbestos as a result of the debtor's allegedly tortious conduct.
On the agreed upon facts here, this Court finds that if Ms. Berry were to have a claim against MFP at all, her prepetition exposure to asbestos would give rise to a prepetition claim under the Bankruptcy Code. Ms. Berry agrees that "the relevant inquiry is when the injured party was exposed to the product." Berry's Opp'n 7. Ms. Berry admits that "[t]he cause of this disease is clear: [she] was exposed — through unprotected contact with Mr. Berry's clothing — to the asbestos-laden products present throughout the Paper Mill until Mr. Berry's retirement in 2010." Id. at 3. Ms. Berry does not dispute that she was first exposed to asbestos prepetition. See Berry's Suppl. Br. 15-16. Ms. Berry argues instead, that due to the fact she was also exposed to asbestos post-confirmation, her prepetition claim is transformed into a post-petition injury not subject to discharge in MFP's Plan. Id. at 16, 20. Although Ms. Berry argues a continuing theory of exposure, her papers and her own state court witness admit that there is no way to determine at what point her cumulative exposure to asbestos became sufficient to cause her illness. Id. at 17-19 (citations omitted).
Ms. Berry's opposition papers attempt to use the inability to pinpoint the precise moment her exposure caused her mesothelioma to her advantage, claiming that "[b]ecause all exposures contribute and it is not scientifically plausible to attribute a single exposure or single period of exposure to the causation of mesothelioma," Graphic's contentions that the prepetition exposures are to blame are inaccurate. Id. at 20. Even if Graphic had argued the only possible cause of mesothelioma was Ms. Berry's prepetition exposure, that would not matter. Ms. Berry has admitted there is no way to prove the prepetition exposure did not cause her mesothelioma. Id. at 16. Even more significantly, Ms. Berry's papers acknowledge that her earlier exposures to asbestos were more likely to have contributed to her contraction of mesothelioma, as opposed to the later exposures. See id. at 19-20.
Presented with the typical asbestos case where asbestos exposure is followed by a long latency period prior to manifestation of injury, the Cole court acknowledged that "[t]he difficulties in asbestosis cases arise because, unlike in traditional personal injury cases in which the damage results from a single, identifiable act causing traumatic injury, in asbestosis cases the damage results from a continuous process — a slow development of this hidden disease over the years." Cole, 599 So.2d at 1065. In the Louisiana Supreme Court's view, "[t]his lengthy latency period renders efforts to pinpoint the date on which the disease was contracted virtually impossible, medically and legally." Id. at 1066 (citations omitted). It was the very continuous nature of the exposure that led the Louisiana Supreme Court to conclude that "the key relevant events giving rise to a claim in long-latency occupational disease cases are the repeated tortious exposures resulting in continuous, on-going damages, although the disease may not be considered contracted or manifested until later." Id. at 1066. The Cole court held "that substantial injury producing exposures giving rise to plaintiffs' claims occurred before the August 1, 1980, effective date of [the Act]," and so the asbestos plaintiffs' claims accrued before that date. Id. at 1068.
Although the Cole court favored an analysis that looked at when the "substantial injury producing exposures" occurred, the Cole court highlighted the fact that the wide recognition of the dangers caused by asbestos in the 1960s and early 1970s brought significant changes that dramatically reduced the possibility of exposure after 1970. "[I]n 1972, the federal government created the National Institute for Occupational Safety and Health (`OSHA'), and OSHA promulgated stringent guidelines in this area; manufacturers stopped using asbestos in their products; and insurance companies ceased issuing policies that adequately covered asbestos-related diseases." Id. at 1067 (footnotes omitted).
The Louisiana Supreme Court buttressed its determination with similar findings made by a Washington appellate court in a similar asbestos case involving the
Similarly, Ms. Berry's theories of continuing exposure do not change this Court's conclusion that her repeated prepetition exposures to asbestos should be treated as a dischargeable pre-petition claim against MFP. Even under a substantial injury producing exposure standard that takes into account a theory of continuing exposure, Ms. Berry's asbestos claims arose prior to both MFP and Manville's bankruptcy filing in 1982. The reasoning of the Louisiana Supreme Court in the Cole case takes into account the same arguments underpinning Ms. Berry's continuing exposure theory here. Ms. Berry admits that it is scientifically impossible to prove which set of exposures caused her asbestos injuries, and further states that the earlier exposures were more likely to have caused her injuries. According to the Louisiana Supreme Court, the "substantial injury producing exposures giving rise to plaintiffs' claims" were more likely to have occurred prior to 1980, especially given the increased federal oversight of asbestos use and the changes in the industry during the 1970s. Cole, 599 So.2d at 1067, 68. Even considering her continuing exposure theory, this Court sees no reason to conclude Ms. Berry holds a post-petition claim against MFP.
Despite the fact Ms. Berry has a prepetition claim against MFP, establishing the existence of a claim "is only the first step in determining whether [Ms. Berry's] claims were discharged." Placid Oil Co. v. Williams (In re Placid Oil Co.), 463 B.R. 803, 815 (Bankr.N.D.Tex.2012). "Any determination of whether a claim has been discharged `cannot be divorced from fundamental principles of due process.'" DPWN Holdings (USA), Inc. v. United Air Lines, Inc., 871 F.Supp.2d 143, 153 (E.D.N.Y.2012) (quoting JELD-WEN, Inc. v. Van Brunt (In re Grossman's Inc.), 607 F.3d 114, 125 (3d Cir.2010)). This Court finds that as Ms. Berry received due process in MFP's bankruptcy proceedings, any claims Ms. Berry asserts against MFP would have been discharged.
The Supreme Court has held that due process requires notice reasonably calculated to apprise interested parties of the pendency of the action and the opportunity to object. Mullane v. Central Hanover Bank & Trust Co., 339 U.S. 306, 314, 70 S.Ct. 652, 94 L.Ed. 865 (1950) (citations omitted). Actual notice is not required to satisfy due process concerns. Dusenbery
The Supreme Court has "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 bar to a final decree foreclosing their rights." Mullane, 339 U.S. at 317, 70 S.Ct. 652 (citations omitted). "[F]or unknown creditors whose identities or claims are not reasonably ascertainable, and for creditors who hold only conceivable, conjectural or speculative claims, constructive notice of the bar date by publication is sufficient" to satisfy due process. In re Chateaugay Corp. Reomar, Inc., 2009 WL 367490, at *5 (Bankr. S.D.N.Y. Jan. 14, 2009) (citing Barry v. L.F. Rothschild & Co. Inc. (In re L.F. Rothschild Holdings, Inc.), 1992 WL 200834, at *3 (S.D.N.Y. Aug. 3, 1992); Castleman v. Liquidating Trustee, 2007 WL 2492792, at *2 (N.D.N.Y. Aug. 28, 2007); N.Y. v. N.Y., N. Haven & Hartford R.R. Co., 344 U.S. 293, 296, 73 S.Ct. 299, 97 L.Ed. 333 (1953); Mullane, 339 U.S. at 317, 70 S.Ct. 652; Tulsa Prof'l Collection Servs., Inc. v. Pope, 485 U.S. 478, 490, 108 S.Ct. 1340, 99 L.Ed.2d 565 (1988); Chemetron Corp. v. Jones, 72 F.3d 341, 348 (3d Cir.1995); Emons Indus., Inc. v. Allen (In re Emons Indus., Inc.), 220 B.R. 182, 185-86 (Bankr.S.D.N.Y.1998)). As the Supreme Court noted in Martin v. Wilks, "where a special remedial scheme exists expressly foreclosing successive litigation by nonlitigants, as for example in bankruptcy or probate, legal proceedings may terminate preexisting rights if the scheme is otherwise consistent with due process."
Ms. Berry contends that due to the fact she was indirectly exposed to asbestos through her husband, she was unaware that she may later develop an asbestos injury or that she had a potential claim against MFP. Berry Opp'n 15, 17. Ms. Berry claims that that neither she nor Mr. Berry had "direct notice" of the MFP bankruptcy, and that Ms. Berry was unaware of MFP's bankruptcy until she was diagnosed with mesothelioma in 2015. Berry's Suppl. Br. 10-11. Ms. Berry claims it is impossible to provide future, unknown claimants with "adequate due process notice of the need to assert a claim (which they do not [ ] know that they have)." Berry Opp'n 15. Ms. Berry claims this leaves only one way to provide future unknown claimants with adequate due process and that is through the appointment of a future claims representative. Id. at 17. Ms. Berry claims that MFP disclosure statement did not provide notice that any future asbestos claim she may have would be channeled to the Manville Trust. Berry's Suppl. Br. 11-14. This Court finds Ms. Berry's assertions to be untenable.
This Court finds that MFP complied with the due process requirements articulated in Mullane, which requires that notice be reasonably calculated to apprise interested parties of the pendency of the action and afford them the opportunity to object. Mullane, 339 U.S. at 314, 70 S.Ct. 652 (citations omitted). At the time MFP confirmed its chapter 11 plan of reorganization, Ms. Berry agrees she was an unknown, future claimant. See Berry's Suppl. Br. 21. MFP gave publication notice of the bankruptcy proceedings and the bar date. See Berry's Suppl. Br. Exs. 23-24. This is sufficient in a bankruptcy proceeding where the identity of the creditor is unknown and not reasonably ascertainable. The bankruptcy estate only needs to "make `reasonably diligent efforts,' to uncover the identities of creditors. For creditors who are not `reasonably ascertainable,' publication notice can suffice. Nor is everyone who may conceivably have a claim properly considered a creditor entitled to actual notice." Tulsa Profl. Collection Servs., Inc., 485 U.S. at 490, 108 S.Ct. 1340 (citations omitted).
The content of MFP's publication notices were more than sufficient to alert any potential claimant of the conjoined nature of the MFP and Manville bankruptcy proceedings. One of the notices of MFP's confirmation hearing, published in the New Orleans Times-Picayune, includes a joint caption for both "Manville Forest Products Corporation," case number 82-11659, and Manville, case numbers 82-11656 through 82-11676. See Berry's Suppl. Br. Ex. 23. Another notice for MFP was published with only the Manville case caption, which included case numbers 82-11656 through 82-11676. See id. Ex. 24. The notices explicitly stated that all pre-petition claims arising prior to August 26, 1982 against MFP would be forever barred. Id. The notice advised claimants who had already filed proofs of claim in the Manville case to file amended proofs of claim against MFP specifically. Id. The notice further stated that any amended
In terms of actual notice, Ms. Berry's papers indicate MFP's undertook a massive effort to deal with the asbestos crisis at the Mill. Ms. Berry states that prior to MFP's confirmation, "MFP made it a point of becoming aware of policies and procedures underlying futile attempts to work safely with asbestos," and in "September, 1981, representatives of [MFP] attended the Asbestos Information Association Meeting and prepared a summary report including discussion of expected safety compliance policies expected from OSHA." Berry's Suppl. Br. 10. Ms. Berry's papers also indicate that MFP's efforts to remove asbestos from the Mill required "multiple trucks [to] remove even a small portion" of the asbestos. Id. It appears MFP made conspicuous attempts to deal with the removal of asbestos from the Mill.
Although Ms. Berry claims she was unaware of MFP's bankruptcy filing and of MFP's potential asbestos liability, at least some of MFP's employees in Louisiana had actual knowledge by 1983 that any action against MFP could not proceed without Manville and would require consideration of the effect on Manville's bankruptcy case. See In re Johns-Manville Corp., 34 B.R. 587, 588 (Bankr.W.D.La. 1983). When MFP filed for chapter 11 in 1982, two groups of its former employees had pending lawsuits in the United States District Court for the Western District of Louisiana and in the Fourth Judicial District Court for the Parish of Ouachita, State of Louisiana. Id. at 589. In an effort to continue their suits against MFP in Louisiana, the employee plaintiffs filed an adversary proceeding in the United States Bankruptcy Court for the Western District of Louisiana against "Manville Forest Products Corporation." See id. MFP had not filed for bankruptcy in Louisiana, yet these employee suits were brought there, seeking termination of MFP's automatic stay in the New York bankruptcy. See id.
On November 10, 1983, the Bankruptcy Court for the Western District of Louisiana refused to grant relief from the stay and transferred the adversary proceeding to this Court. Id. at 590. The Louisiana Bankruptcy Court noted that MFP and 20 affiliated entities, collectively referred to by the Louisiana Bankruptcy Court as "Manville," had filed petitions for reorganization in the United States Bankruptcy Court for the Southern District of New York. Id. at 588. In discussing the Manville bankruptcy filings in New York, the Louisiana Bankruptcy Court found that
Id. at 590. The Louisiana Bankruptcy Court's ruling makes it clear that MFP's bankruptcy proceedings were intertwined with Manville's, and that asbestos liability would play a factor in MFP's ability to reorganize. Mr. Berry was an employee at the Mill during this time. See Berry's Suppl. Br. 6 (stating that Graphic caused Mr. Berry's exposure to asbestos from 1961 to 2010). Mr. Berry filed his claim for asbestos injuries with the Manville Trust. It is hard to imagine that Ms. Berry could have been completely unaware that the Mill filed for bankruptcy, or that MFP's bankruptcy was linked to Manville's bankruptcy and asbestos litigation.
Notice of the MFP and Manville bankruptcy proceedings is not limited to publication notices or the content of disclosure statements. "From the inception of [the Manville] case, it has been obvious to all concerned that the very purpose of the initiation of these proceedings is to deal in some fashion with claimants exposed to the ravages of asbestos dust who have not as of the filing date manifested symptoms of asbestos disease." In re Johns-Manville Corp., 36 B.R. 743, 745 (Bankr.S.D.N.Y. 1984). As this Court has previously determined, Manville's extensive publicity campaign regarding the confirmation of the Manville Plan "was designed to inform as many future asbestos claimants as possible of the impact of the Manville reorganization upon whatever rights they might have against the Debtor and give them a voice in these proceedings." In re Johns-Manville Corp., 68 B.R. 618, 626 (Bankr. S.D.N.Y.1986). Manville's notice was not directed to a limited number of claimants wishing to sue "Manville." The enormous notice campaign provided for "national television and radio advertisements, newspaper advertisements in the six leading U.S. and Canadian newspapers and in the largest circulation daily newspaper in each state, the District of Columbia and each Canadian province." In re Johns-Manville Corp., 68 B.R. at 626. This Court found that notice was reasonably calculated to provide notice to all claimants — including unknown claimants like Ms. Berry. Id. at 626-27.
Ms. Berry's assertions that notice to future claimants is impossible are completely irrelevant here. Berry's Suppl. Br. 21-22. Ms. Berry arguments are based on a line of reasoning developed in a class action case decided under Federal Rule of Civil Procedure 23. See Berry's Suppl. Br. 21 (citing Amchem Prods. Inc. v. Windsor, 521 U.S. 591, 628, 117 S.Ct. 2231, 138 L.Ed.2d 689 (1997)). In the class action decision, also involving asbestos litigants, the Supreme Court found that the requirements to establish a class of asbestos plaintiffs under Rule 23(b)(3) had not been satisfied. Amchem, 521 U.S. at 622-28, 117 S.Ct. 2231. The Supreme Court held that the attempt by the asbestos plaintiffs to certify suit as a class did not meet the predominance requirements of Rule 23(b)(3), as the questions affecting individual asbestos victims did not "predominate" over the questions of law or fact common to the group. See id. at 622-625, 117 S.Ct. 2231. The Supreme Court also
Not only was the case decided under Rule 23(b)(3) grounds, the Supreme Court in Amchem was not worried about notice to unknown claimants generally speaking. The Supreme Court was specifically considering the mandatory notice of a putative class members' right to opt-out from the class. MFP was not giving notice to Ms. Berry for the purpose of establishing itself as a representative of all asbestos plaintiffs in a class action. MFP was not giving notice to claimants for purposes of allowing them to opt-out of a certified class. MFP was giving notice of its confirmation hearing and the bar date for claims against it for purposes of discharge. MFP's right to enjoin future claims is a function of the discharge injunction. The end result of a bankruptcy proceeding is the discharge and injunction of all prepetition claims against the debtor. There is no opting-out by creditors. All prepetition claims that can be discharged under the Bankruptcy Code will be extinguished. Notice in a bankruptcy case is not for the purpose of allowing a creditor to retain the right to sue the debtor at a later time. The discharge created by the Bankruptcy Code permanently enjoins any right to sue on a prepetition claim. The reasoning in Amchem simply does not apply here.
Ms. Berry's argument that future asbestos claimants are equivalent to legally incompetent persons, making publication notice insufficient for due process, is without merit. Berry's Suppl. Br. 24. The Manville Trust would not exist if due process for future asbestos claimants were impossible. Moreover, such reasoning would put every discharge in any bankruptcy case at risk of collateral attack by claimants alleging they were unaware they had a claim against the debtor's bankruptcy estate. Regardless, Ms. Berry's arguments overlook the point that her interests were adequately represented by a future claims representative in the Manville case.
Although any claim Ms. Berry has against MFP would be a prepetition claim that was discharged and enjoined by the MFP Plan, the Manville Plan preserves Ms. Berry's claim by channeling that claim to the Manville Trust. The Manville Plan enjoins Ms. Berry's claim in order to save it, and then funnels her claim to the Manville Trust. See In re Johns-Manville Corp., 68 B.R. 618, 628 (Bankr.S.D.N.Y. 1986). Ms. Berry retains her right to seek payment on her claim from the Manville Trust. That Ms. Berry has any recourse is due to Manville's establishment of the Manville Trust, which was created for the benefit of both present and future asbestos claimants, like Ms. Berry.
Manville filed for bankruptcy in the first place due to the existence of an as-yet, unknown class of future claimants like Ms. Berry. Of foremost importance here, is that "the very purpose of the initiation of [Manville's bankruptcy] proceedings [wa]s to deal in some fashion with claimants exposed to the ravages of asbestos dust
The Manville bankruptcy proceedings were particularly concerned with the treatment of the claims of future asbestos claimants. As summarized by the Second Circuit, "[b]ecause future asbestos-related liability was the raison d'etre of the Manville reorganization, an important question at the initial stages of the proceedings concerned the representation and treatment of what were termed `future asbestos health claimants'...." Kane v. Johns-Manville Corp., 843 F.2d 636, 639 (2d Cir. 1988). Shortly after Manville filed for bankruptcy, and without determining whether the future asbestos claimants had cognizable claims that could be discharged under the Bankruptcy Code, this Court determined that the future asbestos claimants were "parties in interest" under 11 U.S.C. § 1109(b) to Manville's proceeding. As parties in interest, whose "identities are yet unknown," this Court determined the future asbestos claimants needed their own legal representation to preserve their interests in the Manville bankruptcy proceedings. In re Johns-Manville Corp. 36 B.R. 743, 757 (Bankr.S.D.N.Y.1984). This Court granted the motion to appoint a future claims representative to represent the interest of future asbestos claimants on January 23, 1984. See id. In appointing the future claims representative, this Court explicitly considered whether the interests of the future asbestos claimants were already represented in the bankruptcy proceedings. This Court determined that the existing Committee of Asbestos Health Related Litigants, made up of lawyers representing present asbestos claimants, was unable to represent both groups as there was a conflict of interest between future asbestos claimants and present asbestos health claimants. Id. at 749 n. 3.
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., 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"). See 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 purpose of the Trust is to provide a means of satisfying Manville's ongoing personal injury liability while allowing Manville to
The Trust was carefully designed to ensure a continuing source of funds would be available to replenish the corpus of the Trust, so that all asbestos victims could be paid. In confirming the Manville Plan, this Court explained that the Manville Trust would receive annual payments of $75 million from Manville for 24 years, a timeframe which was later extended to 27 years, and would "own or have access to up to 80% of Manville's common stock," and "have the right to call on up to 20% of the profits of the corporation ... continuing for as long as necessary to satisfy asbestos health claims." Id. at 621; In re Johns-Manville Corp., 97 B.R. at 177. As this Court has explained,
In re Johns-Manville Corp., 97 B.R. at 177.
The successful reorganization of the Manville debtors depended on "the ability of the Trust to compensate the future asbestos-health claimants." Id. at 181. In no small part, the success of the Manville Trust depended on the guarantee that "health claims can be asserted only against the Trust and that Manville's operating entities will be protected from an onslaught of crippling lawsuits that could jeopardize the entire reorganization effort." Kane v. Johns-Manville Corp., 843 F.2d 636, 640 (2d Cir.1988). To this end, the Manville Plan provided for an injunction, which
Kane, 843 F.2d at 640. "The permanent injunction provided in Article IX, paragraph 9.2.A(3) of the [Manville] Plan ... was designed to prevent claimants from
The equitable injunction in the Manville Plan was also intended to "preserve the rights of all asbestos claimants by establishing a corpus of funds from which all can collect. In the absence of the Injunction, the intended beneficiaries of the reorganization will certainly suffer." In re Johns-Manville Corp., 68 B.R. 618, 626 (Bankr.S.D.N.Y.1986). The injunction also serves the purpose of "preventing the inequitable, piece-meal dismemberment of the debtor's estate." Id. at 625.
The Court finds that Ms. Berry holds an "Other Asbestos Obligation" as defined under the Manville Plan and as interpreted by this Court. Present asbestos claimants were included in the Manville Plan under the definition of an "AH Claim." See id. at 176 ("The ultimate challenge of these Chapter 11 cases was to formulate a plan of reorganization for the Debtors which would provide for payment to holders of present or known asbestos health related claims (AH Claims), and those persons who had not yet manifested an injury but who would manifest symptoms of asbestos-related illnesses at some future time (`Other Asbestos Obligations')"). The term "Other Asbestos Obligation" is meant to capture all future asbestos claimants. See id. The Manville Plan defines Other Asbestos Obligations as
Graphic's Mot. Ex. N, at 55. There can be no argument that Ms. Berry is now suffering from a terrible asbestos disease after being exposed to asbestos beginning in 1973. Berry's Opp'n 5. She claims she was exposed to asbestos as a result of her husband's work at the paper Mill owned by MFP, which was a wholly-owned subsidiary of Manville. Her exposure to asbestos is allegedly due to Manville's production of the asbestos at the Mill, or as a result of Manville's ownership of the Mill itself. Graphic's Mot. 2; Berry's Opp'n 18. The Manville Trust was established precisely so that future asbestos victims that were exposed to asbestos prior to 1982 and who did not manifest symptoms of any disease until long after confirmation would be able to recover on their claims. As such, Ms. Berry's claim is channeled to the Manville Trust.
All future asbestos claimants, defined as Other Asbestos Obligation holders, are enjoined from suing Manville and its subsidiaries. The Manville Confirmation Order provides that "[a]ll Persons ... are hereby stayed, restrained and enjoined from taking one or more of the following actions for the purpose of, directly or indirectly, collecting, recovering or receiving payment of, on or with respect to any Claim, Interest or Other Asbestos Obligation...." Graphic's Mot. Ex. O ¶ 29. A Person need not be a "creditor" of Manville to be enjoined. See Kane, 843 F.2d at 640. Nevertheless, this Court has interpreted the Manville Confirmation Order and channeling injunction to mean that
In re Johns-Manville Corp., 97 B.R. at 177.
The terms of the Manville Plan and the Manville Trust confirm that Ms. Berry's claim is channeled to the Manville Trust. The Manville Plan provides for release of those parties whose assets are contributed to the Trust assets, requiring all asbestos claimants to proceed against the Trust. Graphic's Mot. Ex. N at 6. The Manville Plan provides that Manville and the other Debtors are to give certain assets to the Trust, including 24 million shares of Manville common stock. Id. In consideration of the assets transferred, the Trust assumed all liabilities for the AH Claims and Other Asbestos Obligations. Id. The Trust Agreement, attached to the Manville Plan and explicitly approved in the confirmation order, explains that the purpose of the Trust is to provide for the payment of Trust Claims, and to use the Trust assets "to deliver fair, adequate and equitable compensation to bona fide Beneficiaries, whether presently known or unknown...." Id. Ex. T, at 3. A Trust Claim is defined to mean a claim asserting Trust Liabilities to a Beneficiary. Id. Ex. N, at 59. A Trust Liability means all Other Asbestos Obligations and Allowed AH Claims. Id. A Beneficiary, also a defined term, means a Person holding a Trust Claim. Id. at 48.
The liability for Ms. Berry's claim was transferred to the Manville Trust as part of the Manville Plan of reorganization. Per the definitions created by the Manville Plan and the purpose of the Manville Trust, Ms. Berry's only recourse is as a potential beneficiary of the Manville Trust. Under the definitions created by the Manville Plan, Ms. Berry is asserting an "Asbestos Obligation," which is a Trust Liability. Her claim is a claim for personal injuries caused by exposure to asbestos that began prior to MFP's and Manville's chapter 11 bankruptcy, through the direct or indirect acts or omissions taken by Manville and its subsidiaries. This is the very definition of an Other Asbestos Obligation, provided for by the Manville chapter 11 Plan. As such, Ms. Berry is a "Beneficiary," defined by the Manville Plan as a Person holding a Trust Claim. Whether she is a bona fide Beneficiary is not at issue before this Court. As her injuries are included within the sphere of claims delegated to the Manville Trust for administration, she must proceed with her claims against the Trust.
As stated by this Court, due process for the future asbestos claimants was not only met met in the Manville bankruptcy proceedings, ensuring that future claimants would be compensated was the subject of many hours of work by this Court and the lawyers litigating the case. Were it not for the establishment of the Manville Trust, the claims of the future asbestos claimants would most likely have been discharged as contingent claims arising prior to the petition date, with a focus "on the time when the acts giving rise to the alleged liability were performed...." In re Johns-Manville Corp., 57 B.R. 680, 690 (Bankr.S.D.N.Y.1986). Instead, the future asbestos claimants were accorded an interest in the bankruptcy case and given status as future claimants, with a right to submit a claim to the Manville Trust. As discussed above, the notice provided to all claimants in Manville's bankruptcy, and
In re Johns-Manville Corp., 68 B.R. 618, 626-27 (Bankr.S.D.N.Y.1986) (citing In re Johns-Manville Corp., 36 B.R.743 (Bankr. S.D.N.Y.1984); Hatch v. Riggs, 361 F.2d 559 (D.C.Cir.1966)). This Court has previously found that due process was accorded to future asbestos claimants:
In re Johns-Manville Corp., 68 B.R. at 627. Ms. Berry, as a future asbestos claimant, in addition to receiving publication notice of both MFP and Manville's bankruptcy, had her interests represented during the Manville bankruptcy proceedings by the future claims representative.
Putting aside matters of law, the facts of Ms. Berry's case do not logically support the conclusion that her claim is not channeled to the Manville Trust. Ms. Berry's asbestos exposure is allegedly due to her husband's work at the Mill. Berry's Opp'n 5. She was exposed to asbestos from the dust and fibers he brought home on his clothes. Id. Mr. Berry later contracted an asbestos-related injury, and submitted a claim to the Manville Trust. Graphic's Mot. 1; Graphic's Suppl. Br. 2. The Manville Trust determined he was eligible for recovery under the Trust procedures and reimbursed him on his claim. Graphic's Mot. 1. Ms. Berry's exposure was entirely derivative of her husband's. The Court does not see how she can assert a claim that she is entitled to sue the surviving corporate entities, when her husband was not. There is no logical or rational reason to allow Ms. Berry to subvert the procedures that were designed to preserve the rights of all asbestos claimants, especially when her husband, the indirect source of her exposure, was bound by them.
Instead of agreeing to submit her claims to the Manville Trust, as her husband did, Ms. Berry contends she is entitled to more than all the other future asbestos claimants. Ms. Berry asserts her claims against MFP make her special and unique, and that even though MFP is a subsidiary of Manville, MFP should not be covered by the Manville Plan or injunction. Ms. Berry
Although Ms. Berry claims the definition of subsidiary does not specifically include MFP, subsidiary is defined in the Manville Plan "with respect to any Person [sic] any corporation or other entity of which securities or other ownership interest having ordinary voting power to elect a majority of the board of directors or other Persons performing similar functions are at the time directly or indirectly owned by such Person." Graphic's Mot. Ex. N, at 58. This definition clearly includes MFP. As to whether the definition of "subsidiary" should be limited to only derivative claims against such subsidiaries based on Manville's conduct, the language of the Manville Plan and Confirmation Orders clearly refute this interpretation.
The Manville Confirmation Order provides that "[a]ll Persons ... are hereby stayed, restrained and enjoined from taking one or more of the following actions for the purpose of, directly or indirectly, collecting, recovering or receiving payment of, on or with respect to any Claim, Interest or Other Asbestos Obligation," including
Graphic's Mot. Ex. O, at ¶ 29. This definition clearly enjoins suit against subsidiaries of Manville by any person to collect on any interest, including an Other Asbestos Obligation.
As stated above, the provision of the Manville Plan providing for "Other Asbestos Obligations" is meant to capture all future asbestos claimants. The Manville Plan defines "Other Asbestos Obligations" as
Graphic's Mot. Ex. N, at 55. Based on the definition of Other Asbestos Obligations, the Manville Plan and Confirmation Order specifically enjoins the litigation of personal injury suits and suits for damage, caused indirectly or directly by exposure to asbestos, arising "directly or indirectly, from acts or omissions" attributable to Manville. Damages that are directly or indirectly caused by exposure to asbestos and arising from direct or indirect acts of Manville would include acts or
Further, the Second Circuit has previously dismissed arguments by asbestos claimants that the Manville injunction improperly benefits Manville subsidiaries that were not debtors in bankruptcy and as a result should not protect these subsidiaries from asbestos claims. Kane v. Johns-Manville Corp., 843 F.2d 636, 643 n. 4 (2d Cir.1988). Even for non-debtor subsidiaries, the Second Circuit has found that while "they may not lawfully be protected from creditors' claims if they are separate, viable entities in which Manville can shield its assets," they are still entitled to benefit from the injunction where "the subsidiaries either have been sold and their proceeds made part of the debtor's estate or are foreign corporations owned entirely by the Trust." Kane, 843 F.2d at 643 n. 4 (citing In re Unishops, Inc., 494 F.2d 689, 690 (2d Cir.1974); Feldman v. Trustees of Beck Industries, Inc. (In re Beck Industries, Inc.), 479 F.2d 410, 416 (2d Cir.), cert. denied, 414 U.S. 858, 94 S.Ct. 163, 38 L.Ed.2d 108 (1973)).
Here, MFP was not a "non-debtor subsidiary." MFP was a debtor in bankruptcy and, more importantly, it was an original Manville debtor. MFP filed its bankruptcy case as part of the original Manville bankruptcy filing. MFP's case was jointly administered with the other Manville entities that filed for bankruptcy. See Berry's Suppl. Br. Exs. 23-24. It was well known that MFP filed bankruptcy along with the other Manville debtors, even in Louisiana. In re Johns-Manville Corp., 34 B.R. 587, 588 (Bankr. W.D.La.1983). As a subsidiary of Manville, MFP's bankruptcy case was integrally linked to Manville's reorganization proceedings, and the disposition of MFP's assets and rights affected property of the Manville bankruptcy estate. See id.; see also In re Manville Forest Products Corp., 31 B.R. 991, 993 (S.D.N.Y.1983).
Even if MFP were somehow considered a non-debtor subsidiary of Manville, Manville did not use MFP to shield its assets. Instead, MFP's profits and earnings were accessible by Manville. This Court has previously "made reference to the fact that [MFP] represents a major component of the assets of the Manville companies." In re Manville Forest Products Corp., 31 B.R. 991, 993 (S.D.N.Y.1983). MFP's Plan included Manville in the Class 6 claims category, as the "holder of the shares of common stock of the Debtor...." Berry Suppl. Br. Ex. L, at 7. Manville remained a majority shareholder of MFP after bankruptcy and was able to draw directly upon MFP's assets, and MFP's profits went to fund the Manville Trust. See Clay v. Riverwood Int'l Corp., 157 F.3d 1259, 1261 (11th Cir.1998). Manville took action on the belief it had the ability to reach MFP's assets in order to satisfy Manville's obligation to fund the Manville Trust. Id.
Manville retained the obligation to fund the Manville Trust pursuant to the terms of the Manville Confirmation Order and Plan. This Court has explained in a decision
The Supreme Court has held that the Manville Confirmation Order is res judicata "to the parties and those in privity with them, not only as to every matter which was offered and received to sustain or defeat the claim or demand, but as to any other admissible matter which might have been offered for that purpose." Travelers Indem. Co. v. Bailey, 557 U.S. 137, 152, 129 S.Ct. 2195, 174 L.Ed.2d 99 (2009) (internal quotation marks omitted) (citing Nevada v. United States, 463 U.S. 110, 130, 103 S.Ct. 2906, 77 L.Ed.2d 509 (1983)). The Manville Plan and channeling injunction apply to any effort by Other Asbestos Obligation claim holders to sue Manville and its subsidiaries. This injunction applies to Ms. Berry, as she holds an Other Asbestos Obligation. She received due process in the Manville proceedings. For all the reasons stated above, the Manville Confirmation Order is res judicata and Ms. Berry's only recourse is to submit her claim to the Manville Trust.
The Court must also reject Ms. Berry's argument that Graphic waived its right to rely on the confirmation orders of MFP and Manville based on separate asbestos litigation against Graphic. The discharge injunction provided by the Bankruptcy Code is not extinguished by a debtor's initial failure to assert the protection of the injunction. This would vitiate the entire purpose of the bankruptcy discharge. The discharge operates to void a judgment of personal liability against the debtor at any time obtained where that judgment is for a dischargeable debt. 11 U.S.C. § 524(a). It is established law that "in 1970 the bankruptcy discharge lost its status as an affirmative defense. Thereafter, judgments establishing the personal liability of debtors on certain prepetition debts were `null and void' and creditors were enjoined from collection." Lone Star Sec. & Video, Inc. v. Gurrola (In re Gurrola), 328 B.R. 158, 168 (9th Cir. BAP 2005). The bankruptcy discharge is not an affirmative defense that can be waived. Neither is the injunction.
For the foregoing reasons, Ms. Berry's claims against Graphic in her state court action, currently pending in the Fourth Judicial District for the Parish of Ouachita in the State of Louisiana, seeking to recover for any injuries resulting from her exposure to asbestos are hereby enjoined pursuant to MFP's discharge injunction and the Manville channeling injunction. To the extent Ms. Berry asserts claims in her state court action against Manville or MFP seeking to recover for any injuries resulting from her exposure to asbestos, they too are enjoined pursuant to the discharge injunction. Ms. Berry's only recourse