REVISED, JULY 25, 2000
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
_______________
m 99-10758 _______________
IN THE MATTER OF:
NATIONAL GYPSUM COMPANY, AND AANCOR HOLDINGS, INC.,
Debtors.
THE NEW NATIONAL GYPSUM COMPANY,
Appellant,
VERSUS
THE NATIONAL GYPSUM COMPANY SETTLEMENT TRUST,
Appellee.
*************** _______________
m 99-10760 _______________
NATIONAL GYPSUM COMPANY,
Debtor.
NGC SETTLEMENT TRUST AND THE ASBESTOS CLAIMS MANAGEMENT CORPORATION,
Appellees.
_________________________
Appeals from the United States District Court for the Northern District of Texas _________________________ July 18, 2000
Before REAVLEY, SMITH, and “Plan”) of Aancor Holdings, Inc. (“Aancor”), EMILIO M. GARZA, Circuit Judges. and its wholly-owned subsidiary, National Gypsum Company (“Old-NGC”), and approv- JERRY E. SMITH, Circuit Judge: ing certain plan documents. As a result of the bankruptcy reorganization, National Gypsum In 1993, the bankruptcy court entered an Company (“New-NGC”) was created as a new order (the “Confirmation Order”) confirming Delaware corporation. Four years later, the the joint chapter 11 plan of reorganization (the NGC Settlement Trust (the “Trust”) and its
2 subsidiary, formerly Old-NGC and now called (“Austin”), a design, engineering, and con- Asbestos Claims Management Corporation struction firm. Old-NGC also retained insur- (“ACMC”), filed this declaratory judgment ac- ance coverage (“Insurance”) available to pay tion in bankruptcy court, seeking a determina- some asbestos claims. tion that, under the Plan, New-NGC was liable for any unknown asbestos disease claims (the Old-NGC, the Asbestos Committee, and “Unknown Claims”) arising from Old-NGC’s the BT Committee agreed on how Old-NGC’s torts and not resolved by the Trust. assets would be used to pay commercial and asbestos claims. Commercial creditors would Following an adversary hearing, the bank- receive Gold Bond, and asbestos claimants ruptcy court delivered a bench ruling in which would receive Old-NGC and its assets, includ- it concluded that under the Plan, New-NGC ing Austin, the Insurance, certain insurance- was liable for Unknown Claims the Trust related claims, and $10 million from New- could not satisfy. New-NGC appealed to the NGC. Under a draft plan of reorganization district court, which affirmed. Concluding that (the “Draft Plan”), Aancor, the parent debtor, the Confirmation Order and other plan docu- would be merged into Old-NGC, with Old- ments do not transfer liability for these Un- NGC as the surviving entity. Old-NGC was to known Claims from Old-NGC to New-NGC, be renamed Asbestos Claims Management we reverse and remand. Corporation, and two new entities were to be created, the Trust and New-NGC. The Draft I. Plan was approved by the necessary classes of In October 1990, Old-NGC and Aancor commercial creditors and both classes of as- filed petitions, later consolidated, for relief un- bestos creditors. der chapter 11 of the Bankruptcy Code. Old- NGC faced two key groups of creditors: Un- Under the Draft Plan, New-NGC, a new secured bond and trade creditors that were Delaware corporation, would purchase from owed approximately $1.1 billion, and asbestos- Old-NGC the operating assets and business of related claimants who had an estimated $127 Gold Bond, including the name “National million due for pending claims and projected Gypsum Company.” The commercial credi- future disease claims of $695 million to $764 tors then would look to New-NGC, while the million. asbestos claimants would look to the Trust.
The bankruptcy court appointed commit- Because under the Draft Plan the commer- tees to represent the holders of the unsecured cial creditors would own New-NGC, worth bond and trade claims (the “BT Committee”) approximately $350 million, and because they and the asbestos claims (the “Asbestos Com- had, in return, agreed to extinguish over mittee”) and a legal representative to represent $1 billion in claims against Old-NGC, the holders of Unknown Claims. After selling commercial creditors also requested a perma- some of its assets, Old-NGC retained two of nent injunction, in the Confirmation Order, its subsidiary businesses: the Gold Bond Build- protecting New-NGC from future and Un- ing Products division (“Gold Bond”), which known Claims, to maximize the value of New- produces and sells gypsum and wallboard- NGC’s securities in the public markets by related products, and the Austin Company removing any taint from the possibility of
3 asbestos-related liability. Thus, the Draft Plan the Trust was required to give all claims, provided not only that the Trust would be whether current or unknown, “substantially established and would assume sole responsibil- equivalent” treatment. ity for all asbestos claims, including Unknown Claims, but also that the Confirmation Order If the then-pending Georgine settlement would contain a “channeling order and perma- were not approved, the Draft Plan included a nent injunction” that would channel all asbes- back-up option that required the Trust to tos claims to the Trust and forever would bar implement the “Alternate Asbestos Disease the assertion of any asbestos claims against Claims Resolution Facility” (the “Alternate New-NGC. Facility”), which would provide for the ratable distribution of Trust assets to all projected The Draft Plan also provided for the forma- asbestos claimants. A claimant would receive tion of the Trust, which would retain Austin a percentage of the liquidated value of his (valued at approximately $125 million), the claim, calculated by dividing the value of Trust Insurance (worth between $300 million and assets by the projected amount of all future $600 million, depending on how pending cov- liabilities. The Alternate Facility was designed, erage litigation was resolved), certain other therefore, to preserve “sufficient resources to insurance-related claims, and a $10 million pay future valid [asbestos claims] on a sub- cash payment from New-NGC. As a result, stantially equivalent basis.” the Draft Plan made it likely, but not a cer- tainty, that the Trust assets would be sufficient The Draft Plan was submitted to the bank- to pay all present and future asbestos diseases ruptcy court for approval. The legal represen- claims, particularly if the settlement in the re- tative of the Unknown Claimants opposed the lated litigation in Georgine v. Amchem Prod- provision for a permanent injunction, fearing ucts, Inc., 83 F.3d 610 (3d Cir. 1996), were that New-NGC would not assume even non- approved. asbestos-related claims arising post-petition and that, as a result, those obligations might This payment-in-full was to be accom- have to be born by Old-NGC or the Trust. plished through a joint defense facility, the Center for Claims Resolution (“CCR”), estab- Following hearings on asbestos issues in lished in 1988 by Old-NGC and nineteen other January 1993, the bankruptcy court decided former asbestos companies. CCR set up an that it lacked jurisdiction to enjoin permanently administrative compensation system that, in or to discharge Unknown Claims. It reasoned most cases, would replace judicial resolution that persons who had not yet suffered an injury of asbestos claims; this facility was subject to that was cognizable under applicable non- approval in the Georgine settlement.1 Regard- bankruptcy law did not hold “claims” within less of the level of funding that ultimately the meaning of section 101(5) of the Bank- would be available for these claims, however, ruptcy Code. The court also concluded, how- ever, that it did have the power to enter a tem- porary injunction that would require Unknown 1 See Amchem Products, Inc. v. Windsor, 521 Claims first to be exhausted from the Trust be- U.S. 591, 599-605 (1997) (describing the CCR’s fore the claimants asserting them could pursue system for settling and compensating asbestos- remedies against any other person, including related claims).
4 New-NGC. As approved, then, the Plan provided, in pertinent part, that current asbestos claimants Because they were uncertain how to re- were permanently enjoined from ever suing draft the injunctive language, the parties in any person other than the Trust, including February 1993 addressed to the bankruptcy New-NGC. Unknown Claimants were neither court the issue of the temporary injunction and discharged nor permanently enjoined but were New-NGC’s potential liability for any Un- “made beneficiaries of the [Trust] and, pending known Claims. The court, however, was un- exhaustion of the remedies of the [Trust] to re- willing to take a position on whether New- solve Unknown Claims, are enjoined” from NGC would be liable in the future for the pursuing litigation against any person, includ- Unknown Claims, noting that this liability ing New-NGC. This temporary injunction is should be decided according to non-bank- referred to throughout the Plan, Confirmation ruptcy law and that New-NGC could defend Order, and briefs as the “Channeling Order.” any future suits by claiming that it was not a successor to the debtors’ liabilities. The modifications to the Plan did not alter the previous Draft Plan’s section that provided As a consequence of the January 1993 that New-NGC would not assume asbestos lia- decision and the February 1993 hearing, the bilities of Old-NGC: “Upon consummation of Draft Plan was modified to eliminate the per- the Merger and this Plan, New-NGC shall per- manent injunction against Unknown Claims, form all of the obligations of the Debtors un- though that injunction would be in effect der this Plan (except for the obligations re- against current asbestos claims. In March garding the Asbestos Claims which shall be the 1993, Old-NGC proposed the Third Technical sole responsibility of the [Trust]).” “Asbestos Modifications to the Plan, which changed the Claims” were defined to include both current Draft Plan (1) by drawing a distinction be- and Unknown Claims. Likewise, the Confir- tween current claims and Unknown Claims to mation Order included a detailed description of exclude Unknown Claims from the discharge the Channeling Order and reiterated that and (2) by removing the permanent injunction “New-NGC shall not be subject to the com- against Unknown Claims and replacing it with mencement or continuation of litigation by any the more limited “Channeling Order and Injunc- person on or on account of Unknown Asbes- tion.” tos Disease Claims pending exhaustion of the remedy or remedies provided by the [Trust].” The BT Committee objected, arguing that this was a substantial change from the Draft Finally, the assets of Old-NGC were trans- Plan that would permit the Unknown Claims ferred to New-NGC pursuant to an asset pur- to be litigated against New-NGC after reme- chase agreement (the “APA”). The APA was dies against the Trust had been exhausted. expressly approved by the bankruptcy court’s The bankruptcy court rejected this objection, Confirmation Order and provided that New- however, and approved the Third Technical NGC would not assume any asbestos-related Modifications, reasoning that the changes to liabilities, including Unknown Claims. In July the Draft Plan did “not adversely change the 1993, the Plan was substantially consummated, treatment under the Plan of any [creditor].” and New-NGC issued to commercial creditors its securities, which subsequently were traded
5 in the public markets. mation Order, the Plan and the [APA] argu- ably support the Appellant’s arguments that In May 1996, the Third Circuit set aside the New NGC emerged from the bankruptcy pro- Georgine settlement, and the Supreme Court ceedings without any liability for unknown as- affirmed that decision in Amchem, 521 U.S. bestos claims.” Nevertheless, the district court at 629. This led directly to the filing of the concluded that those provisions should be read present lawsuit SSthe Trust alleged that be- in the context of the entire Plan, and it agreed cause it could no longer participate in the CCR that implicit in the Confirmation Order was the facility, its assets would be insufficient to pay idea “that if the Trust had insufficient assets to full tort values to all asbestos disease claim- satisfy the unknown claims, those claimants ants. The Trust, as a result, looked for alter- could look to New NGC.” nate funding for asbestos claimants and sought a determination that “the Plan Documents indi- II. cate New NGC has liability for the asbestos New-NGC asserts that the Trust is not the liabilities of Old NGC.” Specifically, the Trust real party in interest and, in a related argu- contended that the bankruptcy court’s 1993 ment, that the Trust does not have standing to denial of the permanent injunction, the entry of seek the determination that New-NGC is liable the Channeling Order, and the findings made in for Unknown Claims. First, New-NGC argues support of those decisions indicated that New- that the real parties in interest are any potential NGC was liable for the Unknown Claims. Unknown Claimants who first exhaust Trust remedies without having their claims resolved, The bankruptcy court agreed with the then obtain a judicial termination of the Chan- Trust, stating that “the plan as confirmed by neling Order as to their claims, and finally order of this court implicitly imposes or main- bring their claims against New-NGC in non- tains liability on New-NGC for asbestos dis- bankruptcy courts based on applicable state ease non-Bankruptcy Code claims not dis- law. New-NGC points out that no such claim- charged by the confirmation order and not sat- ants yet exist. isfied by the Trust.” The court explained why this result was only “implicit”: New-NGC asserts that the Trust has no substantive rights of its own against New- By implicitly addressing this asbestos NGC, because the Plan and Confirmation Or- liability, rather [than] explicitly doing so, der contemplate that the Trust retain liability and by deferring the matter as provided for all asbestos claims until its assets are ex- in the plan, the court enabled New NGC hausted. Thus, New-NGC ressons that be- to emerge in the marketplace post-con- cause the Trust has no rights under substantive firmation as an effective entity, poised, law against New-NGC, New-NGC cannot be under the right market conditions to the real party in interest.2 prosper, and thereby benefit all the con- stituencies. 2 See Farrell Constr. Co. v. Jefferson Parish, In affirming the bankruptcy court, the dis- La., 896 F.2d 136, 140 (5th Cir. 1990) (“[A] party trict court acknowledged that “[w]hen viewed not possessing a right under substantive law is not in isolation, certain provisions of the Confir- the real party in interest with respect to that right (continued...)
6 The Trust properly points out, however, that because the interpretation of a court order that the real party in interest is “not necessarily is purely a question of law, our review must be the person who will ultimately benefit from the de novo.3 recovery.” See Farrell, 896 F.2d at 140. Be- cause the Plan charges the Trust with the on- The Trust responds by arguing that a going duty of distributing the assets of the es- court’s interpretation of its own order should tate to the asbestos creditors, the substantive be entitled to deference if it is not plainly right the Trust seeks to be enforced is the right contradicted by the Plan documents.4 The to have the bankruptcy court interpret and Trust notes that the bankruptcy court presided construe the Confirmation Order, Plan, and at the confirmation hearings, considered the plan documents regarding matters as to which relevant factual and legal arguments, made there is a substantial and immediate contro- extensive findings and conclusions in connec- versy. tion with confirmation, and so developed a comprehensive understanding of the Plan. Without the bankruptcy court’s interpreta- Thus, the Trust urges that a deferential stan- tion of the meaning of the Plan, the Trust will dard is “eminently proper.” be faced with a fiduciary dilemma, in that it will be uncertain how to treat its beneficiaries, The proper reconciliation of these two posi- the Unknown Claimants. This dilemma exists tions is that we should review de novo the because the trustees cannot know whether purely legal issuesSSe.g., the effect of the these future claimants ultimately will have a documents on New-NGC’s liability for Un- remedy against New-NGC, and, as a result, known ClaimsSSbut should defer to the bank- the trustees cannot know, with any certainty, ruptcy court’s reasonable resolution of any whether the Trust must reduce the current ambiguities in those documents. Because pro-rata distribution under the Alternate Facil- New-NGC is correct that the bankruptcy ity. court’s ultimate determination of the meaning of the Plan and Confirmation Order is a legal Therefore, the Trust properly has brought one, however, the documents must truly be the current declaratory judgment action seek- ambiguous, even in light of other documents in ing a determination of whether, under the Con- the record, before we will defer. firmation Order and Plan, it can count on New-NGC to pay any of the Unknown Claims. B. Accordingly, the Trust is a real party in inter- New-NGC argues that the district court est and has standing.
III. 3 A. See In re Schimmelpenninck, 183 F.3d 347, 354 (5th Cir. 1999) (holding that in reviewing a The parties dispute the standard of review bankruptcy court’s order, we should perform “the of the bankruptcy court’s interpretation of its same task as did the district court: review the 1993 Confirmation Order. New-NGC argues bankruptcy court’s findings of fact for clear error and issues of law de novo”). 2 4 (...continued) See County of Suffolk v. Stone & Webster and may not assert it.”). Eng’g Corp., 106 F.3d 1112, 1115 (2d Cir. 1997).
7 erred in deciding that the Plan provided that tion of this statement is that once the New-NGC would be held liable for any Un- [Trust] is exhausted, Unknown Claim- known Claims that are unresolved following ants may commence litigation against exhaustion of the Trust’s assets. New-NGC [New-NGC].” asserts that rather than being liable under the bankruptcy Plan, it should be liable only if an (Internal citations omitted.) In defending the asbestos claimant can overcome the additional bankruptcy court’s and district court’s deci- hurdle of proving successor liability under sion, the Trust also argues that we should view applicable state law. New-NGC’s current position as an attempt to relitigate the issues that were squarely pre- In adopting the Trust’s position on this is- sented to, and expressly rejected by, the bank- sue, the bankruptcy court admitted that there ruptcy court in the 1993 Plan and confirmation are no express statements in the Plan or Con- proceedings. The Trust points out that the firmation Order that affirm New-NGC’s liabil- 1993 order was never appealed and is, there- ity. Nevertheless, the court found such liabil- fore, the law of the case. ity “implicit” in the Plan, reasoning that be- cause it previously had rejected a permanent But just because the Confirmation Order injunction against Unknown Claims, “the only and Plan are binding does not answer the more reading that gives meaning to [the] findings of difficult question of what those documents fact and conclusions of law [is] that this plan mean. Our duty is to read the Plan documents as confirmed by this court contemplated New to determine what is the best interpretation of NGC liability for claims not paid by the Trust the court’s intent with respect to New-NGC’s and not otherwise discharged.”5 liability for Unknown Claims. In this respect, New-NGC correctly notes, as an initial matter, The district court affirmed because, as it ex- that there are at least three positions the Plan plained, the Confirmation Order stated that could have adopted: (1) New-NGC could be immune from Unknown Claims; (2) New-NGC New NGC shall not be subject to the could be liable for Unknown Claims that were commencement or continuation of litiga- not resolved by the Trust, but only to the ex- tion by any person on or on account of tent of state law successor liability; or Unknown Asbestos Claims pending ex- (3) New-NGC could have been liable for all haustion of the remedy or remedies pro- Unknown Claims once the Trust was vided by the [Trust]. The clear implica- exhausted.
The bankruptcy court rejected the first of 5 these positions when it determined that it did In addition to challenging the underlying inter- not have jurisdiction permanently to enjoin pretation, New-NGC argues that it is never proper for a bankruptcy court to make an “implicit” rul- Unknown Claimants from suits against New- ing, particularly where that ruling conflicts with NGC. The bankruptcy court, district court, other express statements in the Plan. While this and the Trust make an immediate leap from argument is thus styled as a separate ground for the rejection of this first position to an reversal, it relies wholly on the conclusion that the adoption of the third position as the one underlying interpretation is wrong. As a conse- “implicit” in the 1993 orders. This leap is quence, we need not address it separately.
8 apparent in the Trust’s argument that because gues that it was erroneous for the bankruptcy the commercial creditors’ BT Committee court to treat the failure to create a permanent opposed the Channeling Order and its injunction against future asbestos claims as the temporary injunction, they equivalent of imposing liability for those claims on New-NGC. knew that under the confirmed Plan New-NGC would be liable for Unknown Likewise, the isolated statements pointed to AD Claims to the extent, if any, that the by both parties do little to resolve the Trust proved unable to resolve those interpretive question. The Trust emphasizes a Claims. Indeed, they objected statement contained in the transcript from the (unsuccessfully) to NGC’s third January 1993 bankruptcy ruling that “Non- Technical Modifications on this very Bankruptcy Code claimants must be able to ground, asserting that the modification pursue their remedies in the future after the would subordinate the majority of the exhaustion of the trust.” But once again, claims currently held by NGC’s bond either the second or third interpretation would and trade creditors to an undetermined be consistent with this statement, for the court amount of asbestos liability. could have intended that state-law successor liability would be sufficient, or, alternatively, The Trust’s conclusion does not flow in- the court could have been referring to an evitably, however, from the commercial immediate liability on exhaustion of the Trust. creditors’ objections. It is possible that these creditors were objecting to the imposition on Somewhat more informative are statements New-NGC of any risk of liability, including the New-NGC points to from the February 1993 (apparently) smaller risk of successor liability hearing, wherein the court specifically under state law. Because the previous Draft addressed the issue of New-NGC’s liability for Plan would have provided New-NGC with ab- Unknown Claims should the Trust be solute immunity from all asbestos claims, ei- exhausted, noting: ther the second or third interpretations would represent a less desirable reorganization plan The Court has already provided that if for these creditors, and either would have mo- these future claimants are [not] satisfied, tivated them to object.6 Thus, New-NGC ar- there is no permanent injunction and then that triggers the dispute is new NGC a successor, what liability is there 6 The dissent ignores this observation, thereby under whatever the applicable reflecting same error as did the bankruptcy court, corporate law would be. . . . My the district court, and the Trust, stating that “[o]ver concern is if you start getting into the the protest of Gypsum creditors who would own dispute on document drafting, you will the New-NGC the bankruptcy court refused to protect it from future unknown claims.” Like the Trust, however, the dissent assumes this conclusion 6 solely from the fact that the court rejected a (...continued) permanent injunction against Unknown Claims, NewNGC, instead of accruing the more limited and it fails to point to any language in the approved form of state-law successor liability, would be Plan or Confirmation Order that indicates that liable for all Unknown Claims once the Trust was (continued...) exhausted.
9 be necessarily changing by corporate documents. Nonetheless, where there is document what the Court would ambiguity in the documents, and especially anticipate would just be whatever the where there is a dispute as to what the parties application is of the appropriate understood them to mean, extrinsic evidence jurisdiction statute. . . . My only such as this should inform our analysis. concern is if you’re not in dispute as to what to put on any document with a That notwithstanding, the best indication of new entity, maybe that’s simply left the bankruptcy court’s intent with respect to better to the application of whatever these Unknown Claims still can be found in the governing law would be, nonbankruptcy documents themselves. First, and most governing law, in the event that there’s importantly, New-NGC points to the anything to fight about, in the event that Channeling Order, because it is the disputed some claims in the future . . . they can provision that represents the most significant proceed with their rights, and new NGC modification of the Draft Plan. The can defend and say we’re not a Channeling Order provided as follows: successor. Channeling OrderSSUnknown Disease (Emphasis added.) New-NGC asserts that Claims. these discussions form the context for the final version of the Plan, the Confirmation Order, (1) Injunction and Channeling Order. and the APA and that the bankruptcy court’s Pursuant to Section 6.5(b) of the Plan, comments reflect its understanding, at that all Persons who have held, hold, or may time, that even though there would be no hold Unknown Asbestos Disease Claims permanent injunction preventing Unknown are made beneficiaries of the [Trust] Claimants from seeking damages from New- and, pending exhaustion of the remedies NGC if the Trust were exhausted, nevertheless of that Fund to resolve Unknown those claims against New-NGC would still Asbestos Disease Claims, are enjoined have to meet the requirements for state-law (subject, however, to the provisions of successor liability. Section 10(b)(2) of this Order) on and after the Confirmation Date from . . . The Trust downplays these comments, sug- commencing or continuing in any gesting they are merely part of a discussion manner any action or other proceeding about what was then a completely speculative of any kind with respect to such and hypothetical event (the likelihood that the Unknown Asbestos Disease Claim Trust would ever be exhausted). It argues that against the Debtors, New NGC, these statements cannot, as a matter of law, Reorganized NGC, o r any of their substitute for what is in the Confirmation Or- respective officers, directors, employees, der and Plan. The Trust is correct that the representatives, Affiliates or Subsidiaries Plan and Confirmation Order form the basis of (other than Austin or its Subsidiaries), the binding agreement between the debtors the Insurance Companies, or any other and creditors, and any determination of the Person . . . . extent of New-NGC’s liability for the Unknown Claims must flow from those (2) Limitations on Injunction and
10 Channeling Order Regarding Asbestos Claimants might some day be allowed to Disease Claims. Nothing contained in pursue a remedy against them if one existed Section 10(b)(1) of this Order, however, under applicable non-bankruptcy law. In shall preclude an Unknown Asbestos contrast, the Trust’s reading would lead to the Disease Claimant from pursuing his unlikely conclusion that the bankruptcy court rights, if any, under applicable non- intended that all “Persons” would be bankruptcy law against any Person who automatically liable if the Trust’s assets were may be liable to such Unknown exhausted. Asbestos Disease Claimant after exhausting the remedy or remedies The next provision pointed to by New- provided by the [Trust]. NGC is section 6 of the Confirmation Order, which expressly approves the APA and orders (Emphasis added.) that the assets sold thereunder are to be transferred to New-NGC “free and clear of all New-NGC points to the quoted language Liens, Claims, Interests and other liabilities, for its conclusion that Old-NGC’s tort liability obligations, charges or encumbrances thereon to non-Code claimants does not attach or thereagainst . . . to the maximum exten[t] automatically to New-NGC. Specifically, permitted by the Bankruptcy Code.” Because New-NGC notes that section 10(b)(2) covers New-NGC, a newly-created corporation, can- any “Person,” not just New-NGC, and that the not automatically succeed to the liability of rights of Unknown Claimants are limited to Old-NGC without some affirmative act “rights, if any, under applicable non- (whether explicit or implicit) of the bankruptcy bankruptcy law.” New-NGC argues that, as a court, this provision further supports New- result, because the Trust must recognize that NGC’s argument that the bankruptcy court no automatic liability arose against all never intended to take such necessary action “Persons,”7 therefore the Trust must argue that to transfer liability. the Channeling Order somehow designated that only New-NGC would automatically In fact, the natural inference from this pro- succeed t o Old-NGC’s liabilities. But as the vision is that the court intended New-NGC to plain language of that order reflects, nothing in assume only “Liens, Claims, Interests and these provisions singles out New-NGC for other liabilities” that were specifically assigned special treatment, and New-NGC instead is or transferred in other parts of the dealt with in § 10(b)(2) the same as is any Confirmation Order; otherwise, New-NGC other Person. would be “free and clear . . . to the maximum New-NGC correctly observes that, extent permitted by the Bankruptcy Code.” consequently, the only sensible reading is that The plain language of the Confirmation Order all Persons, including New-NGC, were therefore refutes the bankruptcy court’s find- exposed to the possibility that Unknown ing of “implicit” liability.
As further support for its position, New- 7 Significantly, “Person” is defined broadly, NGC notes that section 5.2(d) of the Plan pro- under the Plan, as “any individual, firm, vides that New-NGC is not responsible for as- corporation, association, partnership, joint venture, bestos liabilities: “Upon consummation of the trust, or other entity.”
11 Merger and this Plan, New-NGC shall perform When viewed in isolation, certain all of the obligations of the Debtors under this provisions of the Confirmation Order, Plan (except for the obligations regarding the the Plan and the Asset Purchase Asbestos Claims which shall be the sole Agreement arguably support the responsibility of the [Trust].” (Emphasis ad- appellant’s arguments that New NGC ded.) “Asbestos Claims” are defined in the emerged from the bankruptcy Plan to include both current and Unknown proceedings without any liability for Claims. unknown asbestos claims. However, as the bankruptcy court explained, “the Finally, for textual support, New-NGC re- plan and its implementing documents lies on provisions of the APA, which were ap- must be read coherently, giving meaning proved by the bankruptcy court in the to all its provisions and terms, but doing Confirmation Order. Section 2.1(b) of the so consistent with the confirmation APA states that New-NGC will not have order, which governs. The plan and its liability for any asbestos claims (including implementing documents cannot be read Unknown Claims): “Exclusions to to render any provision of the Assumptions. Notwithstanding anything confirmation order meaningless or contained in this Section 2.1 to the contrary, superfluous.” [New-NGC] shall not assume, covenant to pay, perform, observe the terms of, satisfy (Internal quotations omitted.) and/or discharge any liability or obligation of [Old-NGC] to the extent such liability and In so stating, the district court erred in at obligation: (i) relates to Asbestos Claims. . . .” least two respects. First, New-NGC does not The APA adopted the definition of “Asbestos claim that it “emerged from the bankruptcy Claims” in the Plan, and, as we have said, that proceedings without any liability for unknown term includes Unknown Claims. asbestos claims.” Although this was the first of the three positions the bankruptcy court In challenging all these statements could have taken, all sides acknowledge that supporting New-NGC’s position, the Trust that option was expressly rejected when the relies primarily on the same reasoning as did permanent injunction was denied. Instead, the district court, which felt these statements New-NGC takes a more restrained position, and provisions are taken out of context and do asserting that it emerged with a more limited not reflect a coherent reading of the form of liability, state-law successor liability. documents as a whole.8 As the court stated, Second, the bankruptcy court’s and district court’s desire to avoid “render[ing] any 8 provision of the confirmation order Notably, the dissent also offers no theory of how or why we should ignore the plain language of meaningless or superfluous” is commendable, the Plan documents to reach the result desired by but that interpretive tool leads to a conclusion the Trust. Instead, the dissent criticizes the majority for having “chosen their own meaning of 8 the 1993 order,” but it does not tell us what is er- (...continued) roneous about our interpretations of the Channeling Order, section 6 of the Confirmation Order, section (continued...) 5.2(d) of the Plan, or section 2.1(b) of the APA.
12 opposite to the one those courts reached. To that the bankruptcy court’s bar on punitive reject the multiple statements advanced as damages evinces an intent on the court’s part support by New-NGC as contrary to the to impose liability on New-NGC. That is, if “implicit” meaning of the Confirmation Order the court intended to leave all questions of is to render those statements meaningless or New-NGC’s liability to state-law successor superfluous. In contrast, neither the Trust nor doctrine, it might seem odd that it would ex- the bankruptcy or district court has pointed to press any opinion on whether punitive dam- language that would be superfluous under ages could be recovered under state law. New-NGC’s more modest reading of successor liability. But to the extent that this observation about intent is correct, we should nevertheless The district court decided that New-NGC’s reject it as a matter of law. This is so because theory would render the entire Channeling Or- once the bankruptcy court had determined that der meaningless, reasoning that “if New NGC Unknown Claims were not “claims” within the was not to have any liability for unknown meaning of § 101(5) of the Bankruptcy Code, asbestos claims, the channeling order would it no longer retained jurisdiction to limit have been unnecessary.” But once again, this punitive damages awards in favor of these logic is built on the faulty premise that New- claimants.9 NGC is arguing for absolute immunity. As we have shown, the rejection of the permanent in- New-NGC correctly notes that it is junction, followed by imposition of the inherently inconsistent for the bankruptcy Channeling Order, is just as consistent with the court to rule that it is without the power theory that the bankruptcy court wanted to permanently to enjoin Unknown Claims impose at least state-law successor liability on because they do not fit within section 101(5), New-NGC. Our textual analysis of the but then to hold, nevertheless, that New-NGC Channeling Order demonstrates that the state- will be liable for those claims once the Trust is law-successor-liability theory was the most exhausted. This impermissibly benefits reasonable interpretation. Unknown Claimants, who do not hold Code claims, in relation to other non-Code creditors, Similarly deficient is the district court’s who would have to prevail under state-law conclusion that because “the Confirmation Or- der barred punitive damages by unknown as- 9 bestos claimants against New-NGC, [t]his in- The dissent argues that this “is a curious re- dicates that the order contemplated that New- sponse to the obvious point that the bankruptcy NGC would be liable for other types of court is assuming the same liability of New-NGC damages.” While this statement is correct, it in the channeling facility, rather than contemplating ‘state-law’ litigation.” But the dissent misses the does nothing to undermine New-NGC’s state- point that the bankruptcy court could not impose law-successor-liability theory; the bankruptcy liability on New-NGC for Unknown Claims, which court simply may have been closing the door were not properly within the bankruptcy system at to punitive damages even under the more lim- all. Thus, even if the bankruptcy court were not ited form of non-bankruptcy-law liability. contemplating “state-law” litigation, it did reason that it had no jurisdiction over future claims, and, On the other hand, the Trust may be correct accordingly, those claims should be handled outside of bankruptcy.
13 successor theories. Similarly, the district Unknown Claims should the Trust fail to court’s bar on punitive damages for Unknown satisfy them. Neither attempts to argue for Claims impermissibly disadvantages Unknown alternative interpretations of the provisions set Claims relative to other non-Code creditors forth by New-NGC; instead, they rely solely who are free to pursue punitive damages. on their theory that these are mere “isolated” Thus, we reject the argument that the punitive- statements in the documents. New-NGC, on damages bar has any bearing on New-NGC’s the other hand, points to multiple statements in liability for Unknown Claims, which were the record, and numerous provisions in the determined to be outside of the bankruptcy relevant documents, that are consistent only court’s power to enjoin. with its position that it should not be liable to the Unknown Claims unless they can establish In a failed attempt at its own textual state-law successor liability. analysis, the Trust argues that because the court recognized that “[N]ew NGC may Proper textual interpretation does not allow transfer additional assets to the [T]rust in the us to ignore those statements or to adopt an future,” therefore this right to add funds would “implicit” meaning that would render all these make sense only if New-NGC also has liability provisions meaningless, and we need not defer for the Unknown Claims. New-NGC cogently to the bankruptcy court’s interpretation of this points out, however, that the right to add unambiguous text. Nor does our interpretive funds is a recognition not that New-NGC role require us to ignore other extrinsic would retain liability for Unknown Claims, but evidence, such as the bankruptcy court’s instead that it provides New-NGC an option to discussion of non-bankruptcy law and shield itself even from successor liability. successor liability, that is consistent with the text. If New-NGC determines that it would be better off funding the Trust than defending In light of the Plan and Confirmation Order, against future state-law asbestos claims,10 the then, it is unlikely that the bankruptcy court Plan affords it this option. The court’s intended that non-Code claimants, who may statement is consistent, therefore, with New- have no right to recover against New-NGC NGC’s theory that the bankruptcy court under applicable state law, nevertheless are en- believed that New-NGC might want to retain titled automatically to a Code remedy against the ability to extend the temporary injunction New-NGC. Thus, all of these sources lead to by continuing to fund the Trust. the conclusion that, although the bankruptcy court determined that it did not have the Thus, the Trust and district court point to power permanently to enjoin Unknown no provisions of the Confirmation Order or the Claimants from seeking recovery from New- Plan that lead to the conclusion that New- NGC on exhaustion of the Trust, the court did NGC was necessarily to be liable for the not impose any certain liability on New-NGC.
C. 10 For example, New-NGC may determine that In the alternative, the Trust asserts that the its expected costs of litigation exceed the amount of structure of Old-NGC’s reorganization Plan funding needed to ensure continued viability of the makes New-NGC the de facto reorganized Trust.
14 debtor. Relying on Lemelle v. Universal Mfg. plain language of the bankruptcy documents. Corp., 18 F.3d 1268, 1274, 1278 (5th Cir. It notes that the Plan defined “Reorganized 1994), the Trust notes that, under bankruptcy NGC” as “NGC, on and after the Effective law, the reorganized debtor remains liable for Date, which entity shall be . . . the successor to any debt that is not discharged under the plan. NGC for all purposes.” Thus, in a prior Thus, the Trust explains that, in effect, the appeal, we recognized that the Trust “became rights and obligations of Old-NGC were the sole shareholder of the reorganized transferred to New-NGC, and, because the National Gypsum (which, in turn, became Unknown Claims were not discharged by the known as ‘Asbestos Claims Management Plan, New-NGC will be liable for them on Corporation (ACMC)’.” Insurance Co. of N. exhaustion of the Trust. Am. v. NGC Settlement Trust (In re Nat’l Gypsum Co.), 118 F.3d 1056, 1059 (5th Cir. As support, the Trust points to the 1997). In contrast, “New NGC” means “a following evidence: (1) New-NGC was Delaware corporation to be formed pursuant capitalized with approximately $350 million of to this Plan, and which shall do business from assets of Old-NGC; (2) to receive favorable and after the Effective Date as ‘National tax treatment, New-NGC was required to Gypsum Company.’” carry on the business of Old-NGC; (3) New- NGC retained Old-NGC’s attorney-client Similarly, the Trust Agreement provides privilege, even as against Old-NGC and that “[t]he purpose of the Trust is to assume ACMC; (4) Old-NGC’s management had any and all liabilities of the Debtors” (emphasis authority under the Plan to elect two of the added), and the Channeling Order provides for directors of New-NGC, and the remaining an injunction of actions against, among others, directors were elected by the commercial “the Debtors, New NGC, [or] Reorganized creditors; (5) New-NGC retained the NGC,” suggesting that New-NGC and the re- corporate name “National Gypsum Company”; organized debtor are not the same entity under (6) New-NGC’s stock was not sold to the Plan. Thus, treating New-NGC as the re- unrelated third parties in an arms-length organized debtor is contrary to the plain transaction, but instead was distributed to Old- language of the documents. NGC’s commercial creditors, and the same person executed the APA for both the buyer New-NGC also points out that the Trust’s and seller; and (7) the bankruptcy court stated reliance on Lemelle is misplaced and that that that New-NGC would carry on and preserve decision actually supports New-NGC’s the business of the debtor and that only those contention that Old-NGC/ACMC remains the assets given to the Trust would be liquidated. reorganized debtor. In Lemelle, the debtor corporation, Winston, sold its operating assets, While all this evidence is consistent with the during bankruptcy, in two separate Trust’s theory that New-NGC is the transactions, leaving it with miscellaneous non- reorganized debtor following bankruptcy, operating assets. See Lemelle, 18 F.3d at New-NGC points to its own evidence that 1270. Following the discharge, Winston Old-NGC, not New-NGC, emerged from the (through its successor) was sued for an act it bankruptcy proceeding as “Reorganized NGC” had committed before the bankruptcy. It under the Plan. First, New-NGC cites the defended, arguing that it had not succeeded to
15 any pre-bankruptcy liability, because it had not Lemelle teaches that, because the Trust cannot retained the operating assets of the debtor, and establish that Old-NGC was formally therefore it was liquidated. We rejected that liquidated, therefore Old-NGC remains the argument, concluding that Winston had not reorganized debtor following bankruptcy. been liquidated and that the liability was not one that had been discharged in the Winston As we have pointed out, the APA provided bankruptcy. See id. at 1273. for a limited assumption of liabilities and ex- pressly disavowed assumption of any current In rejecting Winston’s argument that it had or future asbestos claims. Moreover, Old- been liquidated, we refused to apply the “de NGC was no “empty shell” following facto liquidation” theory expressed in Erie bankruptcy: It retained hundreds of millions of Lackawanna Ry. v. Henning, 803 F.2d 881 dollars of assets, including the stock of the (6th Cir. 1986). Instead, we concluded that Austin Company, and it is still paying asbestos the Sixth Circuit’s theorySSwhich provided, in claims and suing insurance companies. the “admittedly unique” situation of a railroad Nothing about these circumstances suggests debtor, that although the debtor “had gone that the Trust and ACMC did not continue as through reorganization in form, in substance it Old-NGC’s reorganized debtor. had been liquidated” SSlacked applicability out- side the Rail Act context. See Lemelle, The Trust makes much of the fact that the 18 F.3d at 1273 n.3. The lack of a formal sale of Gold Bond was to Old-NGC’s liquidation in Lemelle, then, was dispositive of commercial creditors; it argues that because Winston’s claim that a liquidation had the sale was not an “arms-length” transaction, occurred. See id. at 1273. we should not allow these creditors to escape the conclusion that New-NGC is just a Thus, far from supporting the Trust’s posi- reorganized form of the old debtor. New- tion, Lemelle is an example of the original NGC cannot be a new corporation free from debtor’s remaining liable for non-Code claims, Old-NGC’s non-discharged debts, the Trust even where the operating assets were sold to argues, because the commercial creditors paid another party. Indeed, the sale of the no new consideration for the operating assets. operating assets in Lemelle did not even Thus, by concluding that New-NGC is liable contain the same restrictive language found in only under a state-law successor theory, we New-NGC’s sale agreement with the are shielding New-NGC’s new ownersSSwho commercial creditors.11 Consequently, were Old-NGC’s old commercial credi- torsSSfrom non-dischargeable liabilities. The Trust warns that we are sanctioning a “ruse” 11 In Lemelle, we ultimately rejected the argument that the party that had purchased Win- 11 ston’s operating assets was liable for the pre- (...continued) bankruptcy claims, because the terms of the pur- as restrictive as that in the APA, see id., and the chase agreement were not properly submitted by underlying point remains true: The Trust’s theory Winston in response to summary judgment. See that non-Code claims were assumed automatically Lemelle, 18 F.3d at 1274. Nevertheless, the pur- by the purchaser of the debtor’s operating assets is chase language that did appear in the order was not at least as doubtful in this case as it was in Le- (continued...) melle.
16 and inviting future debtors to advocate were extensive, and the legal representative of bankruptcy plans that incorporate this the Unknown Claimants successfully blocked strategy.12 court approval of the Draft Plan, which permanently would have enjoined even state- Much of this rhetoric is dependent on the law successor claims against New-NGC. Still, underlying argument that New-NGC, and not despite this setback, the commercial creditors Old-NGC, is the reorganized debtor. But the were willing to give more in value to Old- Trust offers no principled reason why the fact NGC for Gold Bond than were any other pur- that Gold Bond was purchased by Old-NGC’s chasers, and we should be hesitant to change commercial creditors should outweigh all the the terms of the deal after the fact just because textual evidence that Old-NGC/ACMC is the subsequent developments in the Georgine reorganized debtor under the Plan. It seems settlement have resulted in the Unknown that the Trust’s primary concerns seem to be Claims’ being underfunded in the Trust. with bankruptcy policy and the implications for future reorganization plans. This is not a case in which Old-NGC has won approval of a plan to bail out its There is, however, good reason why we shareholders, “forcing asbestos victims to would want to encourage these types of surrender their claims in exchange for a reorganizations and to enforce the express meager” portion of the company’s assets. See terms of the deal to which the parties have Flanagan, 90 F.3d at 993 (5th Cir. 1996) agreed. All sides were adequately represented (Smith, J., dissenting). Instead, Old-NGC’s during bankruptcy proceedings, and legal chapter 11 bankruptcy was motivated at least representatives were appointed for current and as much by the $1.1 billion owed to bond and future asbestos claimants and for commercial trade creditors as by the $800 or $900 million creditors and the company.13 Negotiations estimated liability for current and future asbestos disease claims. The bankruptcy court adopted a Plan whereby all the current and 12 In this way, the Trust seemingly hopes to future asbestos claims were expected to be equate this with earlier warnings in other asbestos paid in full by the Trust , while the bond and litigation. For example, in Flanagan v. Ahearn (In trade creditors received only $350 million in re Asbestos Litig.), 90 F.3d 963, 994 (5th Cir. assets in exchange for their $1.1 billion in 1996) (Smith, J., dissenting), vacated, 521 U.S. claims.14 This $750 million reduction in debt 1114 (1997), appeared the warning that “[t]he ma- jority’s unequivocal approval of Fibreboard’s liti- 13 gation strategy undoubtedly will lead other (...continued) financially threatened companies throughout the denied the class of asbestos claimants the right to nation to utilize it as a road map for sheltering their vote on the proposed settlement. See id. at 996 assets and improperly restricting the rights of their (Smith, J., dissenting). present and future victims.” (Internal quotations 14 and punctuation omitted.) Thus, because the bankruptcy court did not foresee that the CCR would be disapproved and 13 This is in stark contrast to the facts of Flan- the Trust would be insufficient to fund both current agan, in which it was noted that, by removing the and future asbestos claims, it is not, as the dissent settlement from the bankruptcy context, Fibreboard suggests, “incredible to believe that the bankruptcy (continued...) (continued...)
17 w a s s u f f i c i e n t “ c o n s i d e r a t i on , ” IV. notwithstanding the Trust’s arguments to the In the end, then, both of the Trust’s argu- contrary. ments fail. First, notwithstanding the bankruptcy and district courts’ findings to the Although the CCR ultimately was contrary, there is nothing “implicit” in the Plan disapproved, there is no reason to believe that documents or other bankruptcy court orders Unknown Claimants are now getting a worse that provides that New-NGC wi ll deal under the Alternate Facility than automatically succeed to Old-NGC’s liability commercial creditors originally received under for Unknown Claims. Instead, the express the Plan; there are, after all, hundreds of terms of the Plan compel the opposite millions of dollars in Insurance, Austin, and conclusionSSi.e., that New-NGC will be liable other assets in the Trust. Consequently, none only under non-bankruptcy, state-law of the Trust’s concerns about the implications successor liability. We see no reason to ignore of shielding the bond and trade creditors from the plain meaning of these Plan documents. more liability is especially compelling, and those concerns certainly are insufficient to Second, Old-NGC and New-NGC are not overcome the plain language of the Plan the same entity. Under the Plan, Old-NGC documents. became ACMC, a subsidiary of the NGC Settlement Trust. New-NGC was formed as a new corporation created to purchase the assets 14 of Gold Bond for Old-NGC’s commercial (...continued) creditors. Pursuant to the Asset Purchase court would create this new operating company Agreement, New-NGC did not assume liability with debtor assets, after holding that it had no au- for asbestos claims, whether known or thority to extinguish unknown asbestos claims of the debtor, and then leave it to state law governing unknown. In exchange, its shareholders successor liability to resolve the future asbestos surrendered approximately $750 million in net liability of its mutant creation.” Rather, the claims it held against Old-NGC, and it took bankruptcy court simply entered a compromise $350 million in assets “free and clear of all agreement whereby the largest group of creditors, liens. Thus, because there are no other the commercial creditors, would receive something provisions in the Plan that allocated the of value in return for their $1.1 billion in debt, liabilities for asbestos claims from Old-NGC to while the asbestos claimants would receive New-NGC, New-NGC cannot be considered everything else. to have assumed those debts, and it is not the reorganized debtor. Then, when subsequently it became apparent that the Trust would be insufficient to fund By contrast, the Trust documents expressly Unknown Claims, the bankruptcy court contemplate that the Trust and its subsidiary, unreasonably altered the meaning of the Plan documents to hold that future asbestos claimants Old-NGC/ACMC, assume liability for all as- could go after NewNGC. While this impulse may bestos claims. The Plan also expressly have been noble, and perhaps even socially provides that Old-NGC/ACMC is desirable, the bankruptcy court cannot now ignore “Reorganized NGC.” The Trust has not the plain meaning of the documents that created presented any compelling evidence why we New-NGC as a separate operating company with should ignore the plain meaning of all these no liability as a reorganized debtor.
18 documents, nor has it presented a plausible argument that it is not the reorganized debtor following bankruptcy. Accordingly, the judgment of the district court, affirming the order of the bankruptcy court, is REVERSED and REMANDED to the district court for further proceedings, as appropriate.
ENDRECORD
19 REAVLEY, Circuit Judge, dissenting:
The majority have chosen their own meaning of the 1993 order of the bankruptcy court
by leaving future asbestos claimants to tort actions against Gypsum without recourse to the
claims resolution facility of the bankruptcy order. I would follow the bankruptcy court’s
own construction of its order and avoid adding to the delay and lawyer fees for asbestos
victims, a result that joins the ongoing judicial contribution to the asbestos debacle.15 I
dissent.
The 1993 order confirming the plan provided in section 9(b) that New-NGC “shall not be
subject to the commencement or continuation of litigation by any person on or on account
of Unknown Asbestos Disease Claims pending exhaustion of the remedy or remedies
provided by the NGC Asbestos Settlement Fund,” i.e., the fund administered by the Trust.
Again, in the “channeling order” that is section 10(b) of the confirmation order, all persons
holding an unknown asbestos claim are enjoined from suit against New-NGC “pending
exhaustion of the remedies of the” Trust settlement fund. If the court was not directing that,
if necessary, New-NGC assets followed Trust assets in the settlement facility, it was lifting
its injunction and allowing an entirely new track for the claimants who waited for the second
track to begin. While lawyers for the claimants could not count on better recoveries when
the track changed, because New-NGC had the option of adding assets to the Trust Fund, the
lawyer fees could be larger. This able bankruptcy judge would have recognized the vice of
that scheme and would have avoided it.
15 1 For example, see Ortiz v. Fibreboard Corp., 527 U.S. 815, 119 S. Ct. 2295 (1999). When the financial creditors, who were to own New-NGC, objected to the court’s
channeling order for the reason that it “subordinates the majority of the claims currently held
by NGC’s bond and trade creditors to an undetermined amount of asbestos liability,” the
court rejected this objection. Over the protest of Gypsum creditors who would own the
New-NGC the bankruptcy court refused to protect it from future unknown claims but, as if
the bankruptcy court had not decided the matter, this majority opinion holds that the
bankruptcy court did not “transfer liability.” But then the majority relents and restrains the
transfer to the more limited “state-law successor liability.”
Then there is the provision of the order at section 9(c) that expressly bars punitive
damages by unknown claimants against New-NGC. The majority opinion dismisses this on
the ground that the bankruptcy court had no authority to limit those damage awards because
they were not “claims” within the meaning of the Bankruptcy Code. That is a curious
response to the obvious point that the bankruptcy court is assuming the same liability of
New-NGC in the channeling facility, rather than contemplating “state-law” litigation.
The bankruptcy court, in ruling in the pending adversary action, said: “With all due
respect to the learned and considered arguments of counsel, the only reading that gives
meaning to these findings of fact and conclusions of law are that this plan as confirmed by
this court contemplated new NGC liability for claims not paid by the Trust and not otherwise
discharged.” The district court followed the law and gave deference to the bankruptcy
court’s interpretation of its own confirmation order. See Farmland, Inc. v. Anel Eng’g
21 Indus., Inc.16 (“We see no basis for substituting our judgment for that of the district judge in
interpreting his own order.”). The bankruptcy judge will find demoralizing the majority
conclusions that he “never intended” or “wanted to impose” a channeling liability after
exhaustion of the Trust assets, or that the judge would reach this strange “state-law successor
liability” and then forget that he had so ruled. Actually, it is incredible to believe that the
bankruptcy court would create this new operating company with debtor assets, after holding
that it had no authority to extinguish unknown asbestos claims of the debtor, and then leave
it to state law governing successor liability to resolve the future asbestos liability of its
mutant creation, without leaving so much as a footnote in the controlling documents
suggesting such an intent. This appellate court should reject the incredible and stay with the
judgment of the bankruptcy court.
16 1 693 F.2d 1140, 1146 (5th Cir. 1982) (quoting SEC v. Sloan, 535 F.2d 679, 681 (2d Cir. 1976)).