Korean v. Dow Silicones Corp.

• Court: Court of Appeals for the Sixth Circuit
• Decided: November 7, 2024
• Docket: 23-1936
• Status: Unpublished

Opinion

NOT RECOMMENDED FOR PUBLICATION File Name: 24a0447n.06

No. 23-1936

UNITED STATES COURT OF APPEALS FOR THE SIXTH CIRCUIT

) FILED ) Nov 07, 2024 In re: SETTLEMENT FACILITY DOW CORNING TRUST. KELLY L. STEPHENS, Clerk ) _________________________________________________ ) ) ON APPEAL FROM THE KOREAN CLAIMANTS, ) UNITED STATES DISTRICT Interested Parties-Appellants, ) COURT FOR THE EASTERN ) DISTRICT OF MICHIGAN v. ) ) OPINION DOW SILICONES CORPORATION, et al., ) ) Interested Parties-Appellees. )

Before: SUTTON, Chief Judge; READLER and BLOOMEKATZ, Circuit Judges.

READLER, Circuit Judge. For nearly three decades, Dow Corning Corporation’s 1995

bankruptcy has spawned a seemingly unending series of legal disputes involving numerous parties.

Take the Korean Claimants, for instance, who return to this Court for the fifth time. On this go-

round, they seek replacement checks from Dow Silicones Corporation (“Dow,” the successor to

Dow Corning Corporation) because their originally distributed settlement checks have expired.

But a district court order prevents them from doing so. That order, the Korean Claimants say,

violated numerous protections ensured to claimants by the Bankruptcy Code, the reorganization

plan, and even the United States Constitution.

We disagree. In the end, the Korean Claimants had a 180-day window to cash their duly

disbursed checks, and beyond that an additional four years to seek reissued payments or otherwise No. 23-1936, Korean Claimants v. Dow Silicones Corp., et al.

request relief from the district court. As no source of law requires anything more, we affirm the

district court’s order.

I.

For over two decades, Dow served as the predominant American manufacturer of silicone

gel breast implants. That market collapsed, however, when the Food and Drug Administration

ordered sharp restrictions on the use of silicone gel implants, given their potential link to various

auto-immune diseases. See Philip J. Hilts, F.D.A. Restricts Use of Implants Pending Studies, N.Y.

Times, Apr. 17, 1992, at A1. Hundreds of thousands of potentially affected implant recipients

sued Dow shortly thereafter, driving the company to file for reorganization under Chapter 11 of

the Bankruptcy Code in 1995. See Barnaby J. Feder, Dow Corning in Bankruptcy over Lawsuits,

N.Y. Times, May 16, 1995, at A1.

Four years later, the bankruptcy court confirmed the Amended Joint Plan of Reorganization

(“Reorganization Plan”). For those claimants interested in settling their claims, the Plan directed

them to the Settlement Facility. Wielding funds with a then–net present value of $1.95 billion, the

Settlement Facility resolved claims pursuant to the Settlement Facility and Fund Distribution

Agreement (“Settlement Facility Agreement”) and the Reorganization Plan. Under district court

supervision and with the aid of interested parties’ representatives, a Claims Administrator oversaw

“the processing and payment of Claims by the Settlement Facility.” To address settlement matters,

the district court created a new case, one distinct from the prior bankruptcy court case.

Cue the Korean Claimants. Comprised of certain Korean residents, the group opted for

settlement, and in turn qualified as “first-priority” claimants. See In re Settlement Facility Dow

Corning Tr., No. 21-2665, 2023 WL 2155056, at *1 (6th Cir. Feb. 22, 2023). This designation

meant they were “virtually guaranteed” to receive payment from the Settlement Facility. In re

2 No. 23-1936, Korean Claimants v. Dow Silicones Corp., et al.

Settlement Facility Dow Corning Tr., 754 F. App’x 409, 417 (6th Cir. 2018). And indeed, more

than a thousand eligible Claimants received checks. Only one problem: 200 of them never cashed

their payments within the 180-day expiration window. Like last week’s bread, their checks had

grown stale.

Like many things in life, the payment process could not last forever. The Settlement

Facility Agreement therefore established June 3, 2019, as the final deadline for filing claims. To

enforce this deadline, the district court issued a series of closing orders. Two are worth

emphasizing.

The first is Closing Order 2, which issued in March 2019. Closing Order 2 limited

disbursements of replacement checks after June 3, 2019, to two circumstances: where a claimant

was deceased; or where the claimant or their attorney demonstrated “good cause,” as determined

by the Claims Administrator. Closing Order 2 also indicated that the district court would specify

the last date upon which the Settlement Facility could issue payments absent express court

direction, labeled the “final distribution deadline.”

That deadline was set in the other relevant order, the Joint Stipulation and Agreed Order

for Procedures for Addressing Requests to Reissue Payments and to Establish the Final

Distribution Date for Such Claims, or “the Order.” Issued by the district court in October 2023,

the Order implemented the terms of Closing Order 2. The Order established December 1, 2023,

as the final distribution deadline. It also prohibited the replacement of checks that expired before

June 3, 2019, regardless of “good cause” for such reissuance; prohibited replacement checks for

claimants with stale-dated checks who had requested a replacement, whether granted or denied;

and gave a one-month period for all claimants outside these two groups to seek replacement

checks.

3 No. 23-1936, Korean Claimants v. Dow Silicones Corp., et al.

The Korean Claimants sought repayment to no avail. The Claims Administrator denied

repayment because their checks expired before June 3, 2019. Rather than seek relief in district

court, the claimants appealed the Order. That is the appeal before us today.

II.

Although Dow and the Korean Claimants agree that this Court has jurisdiction on this

appeal, we must assure ourselves that is in fact the case. Drake v. Gordon, 848 F.2d 701, 704 (6th

Cir. 1988) (explaining that “parties, even by express agreement, cannot confer jurisdiction on this

court to entertain an appeal from something less than a final, appealable order”). As courts of

limited jurisdiction, see Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375, 377 (1994),

federal appellate courts may ordinarily preside over only “final decisions of the district courts of

the United States,” 28 U.S.C. § 1291. A decision is “final” for purposes of § 1291 if it “ends the

litigation on the merits and leaves nothing for the court to do but execute the judgment.” Catlin v.

United States, 324 U.S. 229, 233 (1945) (citing St. Louis, Iron Mountain & S. Ry. Co. v. S. Express

Co., 108 U.S. 24, 28 (1883)).

We agree with the parties that jurisdiction exists. Consider the state of play when the

district court entered the Order. The Settlement Facility had finished accepting new claims and

was preparing to issue final checks for those approved. The Order furthered that effort by resolving

outstanding payments owed to claimants with expired, uncashed, or still-pending checks—

prohibiting some from seeking repayment entirely and allowing the rest to do so only until

November 1, 2023. By that date, in other words, the Settlement Facility knew the status of every

4 No. 23-1936, Korean Claimants v. Dow Silicones Corp., et al.

payment, and no further action could take place regarding the Korean Claimants’ checks. That

suffices for finality under § 1291.

True, the district court case remains open. But its post-Order actions involve modest

administrative matters, such as approving the Settlement Facility’s fees and expenses and

monitoring the return or destruction of sensitive data. As none of these tasks remotely concern the

Korean Claimants’ payments, they do not upset finality under § 1291. See Budinich v. Becton

Dickinson & Co., 486 U.S. 196, 200 (1988) (concluding attorney’s fee request did not disturb

finality under § 1291 because it “is not part of the merits of the action to which the fees pertain”).

III.

A. Moving to the merits, the Korean Claimants first argue that the Order violates principles

of due process set forth in Mullane v. Central Hanover Bank & Trust Co., 339 U.S. 306 (1950).

Mullane familiarly instructs that notice must be “reasonably calculated, under all the

circumstances, to apprise interested parties of the pendency of the action and afford them an

opportunity to present their objections.” Id. at 314 (citations omitted). According to the Korean

Claimants, the Order failed to honor these guarantees.

We disagree. On multiple occasions, the Korean Claimants received sufficient notice of

the final distribution deadline. In March 2019, the district court wrote (in bold text, no less) that

“[t]he final distribution deadline will be set forth in an order and will be posted on the SF-DCT

website so that claimants and attorneys receive appropriate notice.” In March 2023, Dow and

other interested parties requested a final distribution deadline consistent with Closing Order 2.

And in October 2023, the district court entered that deadline, setting it for December 1, 2023.

True, the district court entered the Order without holding a hearing that involved the

Korean Claimants. But it is difficult to see why that fact is dispositive, considering the surrounding

5 No. 23-1936, Korean Claimants v. Dow Silicones Corp., et al.

circumstances. Every deadline in Closing Order 2 and the Order was readily available to the

Korean Claimants. See Fed. R. Civ. P. 5(b)(2)(E) (deeming paper served from “sending it to a

registered user by filing it with the court’s electronic-filing system”). They knew for over four

years that the district court planned to set a final deadline for replacement checks. And they knew

for over six months that Dow and other interested parties moved the court to set that deadline.

Claimants enjoyed the right to challenge that motion by, say, submitting an objection or

recommending a different deadline. In short, all necessary parties—including the Korean

Claimants—received adequate notice and wielded the opportunity to be heard, if they so desired.

Yet the Korean Claimants waited to act until the Order issued. That fact is surprising, as Claimants

were responsive to many other aspects of this decades-long litigation, reflecting their familiarity

with the court’s electronic docket. And rather than asking to be heard in district court in response

to the Order, Claimants instead appealed it, asserting that their four-and-a-half years of notice

somehow fell below the constitutional floor. Due process does not demand more of the district

court.

B. Falling short on constitutional grounds, the Korean Claimants next invoke the

Bankruptcy Code. Citing 11 U.S.C. § 1129(b)(1), they allege that the Order improperly

discriminated against them or, alternatively, failed to satisfy the statute’s fair-and-equitable

standard by closing claims of those with uncashed checks.

At the outset, it bears mentioning that § 1129(b)(1) is a poor fit for this type of challenge.

Intended to permit so-called “cramdown” plans that lack the consent of each creditor class, see

RadLAX Gateway Hotel, LLC v. Amalgamated Bank, 566 U.S. 639, 641–42 (2012), the statute

codifies the “absolute priority rule” by providing that every senior creditor’s claim must be fully

satisfied before members of junior classes receive anything, see Case v. L.A. Lumber Prods. Co.,

6 No. 23-1936, Korean Claimants v. Dow Silicones Corp., et al.

308 U.S. 106, 116–17 (1939). Phrases like “discriminate unfairly” and “fair and equitable” in

§ 1129(b)(1) thus reference the judicial obligation to properly adhere to the priorities of creditors

in bankruptcy, see 1 Collier on Bankruptcy ¶ 1.07[3][d][vi] (16th ed. 2024), not the perceived

unfairness of an allegedly insufficient period to cash checks.

Even if § 1129(b)(1) more widely forbids discrimination and inequity, the Korean

Claimants still fall short. Far from serving a discriminatory purpose, the Order broadly applies to

all claims with expired checks issued before the final deadline. Nor were the Korean Claimants

treated unjustly. Rather, they enjoyed 180 days to cash their checks before they became stale-

dated—the customary action period for those instruments, see, e.g., U.C.C. § 4-404 (Am. L. Inst.

& Unif. L. Comm’n 2023)—as well as four-and-a-half years to request replacement checks

according to the terms of Closing Order 2. Back of the envelope math suggests that the Korean

Claimants had at least 1,764 days each to seek payment. Closing their claims past that date does

not strike us as unfair.

C. The Korean Claimants wage a final battle against the discharge of their claims, one

based on asserted promises by Dow. By way of background, a bankruptcy court’s confirmation

of a reorganization plan ordinarily discharges the borrower from any debt (including “liability on

a claim,” 11 U.S.C. § 101(12)) that arises before the date of confirmation. See 11 U.S.C.

§ 1141(d)(1)(A). Here, Dow’s discharge seemingly would encompass the claims made by the

Korean Claimants. Claimants seek an exception to that customary practice because Dow allegedly

falsely stated in 1999 that the claimants “would be taken care [of] in priority and would receive

compensation in full.”

As a starting point, Dow’s purported twenty-five-year-old promise seems to have been

honored by the Settlement Facility, which made payments available to the Korean Claimants.

7 No. 23-1936, Korean Claimants v. Dow Silicones Corp., et al.

After all, the Korean Claimants received valid checks. They simply failed to cash them in a timely

manner. The Korean Claimants’ citation to Grogan v. Garner, 498 U.S. 279 (1991), does not

change our thinking. At bottom, the issue there involved a statutory exception to bankruptcy

discharge that applies only to “individual debtor[s],” 11 U.S.C. § 523(a), which Dow is not, see

id. § 101(9)(A)(i) (excluding “an individual” from the definition of “corporation”).

Nor do we agree with the Korean Claimants that the district court abused its discretion in

issuing the Order, which they allege is inconsistent with the Reorganization Plan. Here, the Korean

Claimants emphasize the fact that the Reorganization Plan did not provide that claims underlying

checks issued before June 3, 2019, would be permanently closed. Perhaps so. But the

Reorganization Plan was never intended to be, nor could it feasibly have been, an all-seeing oracle

with perfect foresight. The Reorganization Plan laid the general foundation for Dow’s bankruptcy.

In tandem with the Settlement Facility Agreement, the Plan empowered the district court with

supervisory authority to oversee the morass of administrative issues that naturally arises from

processing tens of thousands of claims. Numerous provisions in both documents expressly confer

such power. E.g., R. 1701-2, PageID#32896–97 (“[T]he [Bankruptcy] Court and, as applicable,

the District Court, will retain exclusive jurisdiction . . . to enter orders in aid of this Plan and the

Plan Documents . . . .”); R. 1707-3, PageID#33172 (“The resolution of Claims under the terms of

this Settlement Facility Agreement . . . shall be supervised by the District Court.”); see also id.,

PageID#33172–73 (“With respect to claims administration functions, the Claims Administrator

shall be supervised by the District Court.”); id., PageID#33183 (“The Claims Administrator shall

have discretion to implement such additional procedures and routines as necessary to implement

the Claims Resolution Procedures . . . .”); id. (“The Claims Administrator shall institute procedures

. . . and shall develop claims-tracking and payment systems as necessary . . . .”); id., PageID#33186

8 No. 23-1936, Korean Claimants v. Dow Silicones Corp., et al.

(“The Claims Administrator shall have the plenary authority and obligation to institute procedures

. . . to assure that payment is distributed only for Claims that satisfy the Claims Resolution

Procedures.”). That is more than good enough to justify the limitations in the Order. We do not

expect a district court to specify every administrative minutia of a sprawling bankruptcy, let alone

do so for events a quarter century down the road.

* * * * *

We affirm the district court’s order.