Bogdan Law Firm v. Marsh USA, Inc. (In re Johns-Manville Corp.)

551 B.R. 104
CourtDistrict Court, S.D. New York
DecidedMarch 14, 2016
DocketAppeal arising from Case No. 82-B-11656 (CGM) 15-cv-06607 (SAS)
StatusPublished
Cited by3 cases

This text of 551 B.R. 104 (Bogdan Law Firm v. Marsh USA, Inc. (In re Johns-Manville Corp.)) is published on Counsel Stack Legal Research, covering District Court, S.D. New York primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Bogdan Law Firm v. Marsh USA, Inc. (In re Johns-Manville Corp.), 551 B.R. 104 (S.D.N.Y. 2016).

Opinion

OPINION AND ORDER

Shira A. Scheindlin, U.S.D.J.

Salvador J. Parra, Jr. (“Parra”) developed asbestosis and other conditions after he was exposed to asbestos while working as an insulator in the 1960s and 1970s. In 2009, he sued Marsh USA, Inc. (“Marsh”), an insurance broker, and others alleging that they had conspired with asbestos producers, distributors, and insurers to withhold information from the public regarding the dangers of asbestos inhalation. In response, Marsh filed a motion in the chapter 11 bankruptcy cases of the Johns-Man-ville Corporation (“Manville”), arguing that it had been relieved of any liability for Parra’s claims by the release and channeling injunction contained in the order confirming Manville’s chapter 11 plan.

The bankruptcy court issued a memorandum decision and accompanying order granting Marsh’s motion (the “July Order”).1 Parra now appeals from the July Order. For the reasons set forth below, the July Order is AFFIRMED in part, REVERSED in part, and REMANDED to the bankruptcy court for further proceedings consistent with this Opinion and Order.2

I. BACKGROUND

A. The Manville Bankruptcy and the 1986 Orders

“From the 1920s to the 1970s, Manville was, by most accounts, the largest supplier of raw asbestos and manufacturer of asbestos-containing products in the United States, and for much of that time Travelers was Manville’s primary liability insurer.”3 Marsh served as Manville’s primary insurance broker from 1944 until 1982. Travelers’ first Manville policy was issued in 1947.4 “In 1982, after asbestos-related [108]*108health problems triggered litigation, Man-ville, faced with the prospect of tremendous liability, filed a Chapter 11 petition for bankruptcy protection and reorganization.”5

Manville sued Marsh, alleging that it failed to procure sufficient insurance coverage. Travelers and other insurers were involved in a policy-coverage dispute with Manville, and contribution, indemnity, and cross claims were asserted among the insurers. Asbestos plaintiffs filed suits against Travelers and other insurers based on the insurers’ relationships with Man-ville.

On May 25, 1984, Manville announced that it had agreed in principle to a settlement of its insurance coverage disputes. Soon after the announcement, Manville and a group of insurers, executed a settlement agreement (the “1984 Insurance Settlement Agreement”).6 Notably, Marsh was not a party to the 1984 Insurance Settlement Agreement. In August 1984, the bankruptcy court appointed a future claims representative (“FCR”) to represent future asbestos claimants whose interest in the Manville Chapter 11 proceedings might arise after the insurance settlements were approved and Manville’s reorganization was confirmed.7 In the order appointing the FCR (the “FCR Order”), the bankruptcy court defined the class of future claimants represented by the FCR as “those persons who have been exposed to asbestos or asbestos products mined, manufactured or supplied by Manville pre-petition and have manifested or will manifest disease post-petition and who are not otherwise represented in these proceedings.”8

On December 18, 1986, the bankruptcy court approved various settlement agreements (the “Insurance Settlement Order”) among Manville. and the members of the Settling Insurer Group, including a settlement agreement between Marsh and Man-ville dated October 10, 1986.9 Four days later, on December 22,1986, the bankruptcy court confirmed Manville’s plan of reorganization (the “Confirmation Order” and together with the Insurance Settlement Order, the “1986 Orders”). The Insurance Settlement Order was incorporated by reference into the Confirmation Order.10

The Insurance Settlement Order established a transferred settlement fund (the “Manville Trust”), which was funded with $770 million in settlement payments from the Settling Insurer Group, including a $29.75 million payment by Marsh.11 Marsh received a release of, and injunction against, the “Marsh Claims.” The “Marsh Claims” are defined in the Insurance Settlement Order as:

[109]*109any and all claims, demands, allegations, duties, liabilities and obligations (whether or not presently known) which have been, or could have been, or might be, asserted by any Person against [Marsh] based upon, arising out of or relating to services (whether acts or omissions) performed by [Marsh] for [Manville], at any time, in connection with insurance policies issued to or for the benefit of [Man-ville] ... including, without limitation, the negotiation, placement and securing of such policies, and attempts to receive the proceeds of, as well as the application for, advice concerning and any claims asserted under, such policies.12

The Insurance Settlement Order further provides for a “channeling injunction,” which directs into the Manville Trust:

any and all claims, charges, or encumbrances which might otherwise have been assessable or assertable by any person against or with respect to [Man-ville’s] rights and interests based upon, arising out of or related to Marsh Claims, and any and all claims or causes of action in law, equity, admiralty or otherwise based upon, arising out of, or related to Marsh Claims which were or are assessable or assertable by any Person against any or all members of the Marsh Group are transferred, and shall attach, solely to the Transferred Settlement Fund.13

The Confirmation Order combines the injunctive provisions of the settlements into a comprehensive injunction. The Confirmation Order states that “[a]ll Persons and Governmental Units are hereby stayed, restrained and enjoined from ... [commencing, conducting, or continuing in any manner, directly or indirectly, any suit, action or other proceeding” against the parties to the Insurance Settlement Order.14 “The Trust has since paid out more than $3.2 billion to over 600,000 claimants.”15

B. The Travelers Litigation

The 1986 Orders were affirmed by the District Court and the Second Circuit and became final on October 28, 1988.16 In the early 2000s, Travelers faced a series of state-law actions in which plaintiffs alleged that Travelers was liable for its own “wrongdoing while acting as Manville’s insurer or of its misuse of information obtained from Manville as its insurer.”17 The state-law actions “came in two flavors: (1) ‘Statutory Direct Actions’ based on states’ statutory regulation of insurance practices; and (2) ‘Common Law Direct Actions,’ in which it was alleged that Travelers and others violated ‘duties to disclose certain asbestos-related information [that they] learned’ as asbestos-industry insurers.”18

Travelers sought an order from the bankruptcy court enforcing the injunction against the state-law plaintiffs. In November 2003, Travelers reached a settlement of the claims, agreeing to pay up to $445 million into a fund.

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Bluebook (online)
551 B.R. 104, Counsel Stack Legal Research, https://law.counselstack.com/opinion/bogdan-law-firm-v-marsh-usa-inc-in-re-johns-manville-corp-nysd-2016.