Common Law Settlement Counsel v. Travelers Indemnity Co. (In Re Johns-Manville Corp.), 759 F.3d 206

Background

Travelers insured Johns-Manville; Manville filed Chapter 11 in 1982 and the bankruptcy court approved 1986 Orders that released certain insurer liabilities and channeled claims to a Manville Trust.
In 2002–2004, former Governor Mario Cuomo-mediated settlements between Travelers and three groups of asbestos claimants (Statutory, Hawaii, and Common Law), under which Travelers agreed to fund three separate settlement pools totaling up to ~$445 million, payable only after specified conditions precedent were satisfied.
Each settlement required (1) entry of a “Clarifying Order” whose injunction language matched Exhibit A to the Agreements, (2) that the Clarifying Order become a “Final Order” (no further appeals), and (3) certain releases be executed or claims dismissed with prejudice (numerical release/dismissal thresholds varied by Agreement).
The bankruptcy court entered the Clarifying Order in 2004 and approved the settlements; the Supreme Court later affirmed (Travelers Indem. Co. v. Bailey), but this court (on remand) held that insurer Chubb had not received constitutionally adequate notice and therefore was not bound by the 1986 Orders.
In 2010 plaintiffs moved to compel payment; the bankruptcy court ordered Travelers to pay (finding the Clarifying Order satisfied the breadth and finality conditions and that release/dismissal conditions were not disputed). The district court reversed, holding the conditions were unmet; the Second Circuit vacated the district court and reinstated the bankruptcy court judgment.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether the Clarifying Order satisfied the Agreements’ breadth requirement	Exhibit A language was incorporated; Clarifying Order contains prohibitions at least as broad as Exhibit A	Because Manville IV held Chubb lacked notice, the Clarifying Order cannot bar all claims and thus fails the breadth condition	Held for plaintiffs: Clarifying Order contains injunction as broad/as in form of Exhibit A; Chubb’s collateral attack doesn’t narrow the injunction for purposes of the Agreements
Whether the Clarifying Order became a “Final Order” under the Agreements	Bailey affirmed the Clarifying Order and thus made it final as defined in the Agreements	Manville IV’s partial reversal as to Chubb (and remand) meant the Clarifying Order never became final	Held for plaintiffs: Bailey made the Clarifying Order final; Chubb’s later non-binding status does not negate finality
Whether release/dismissal numeric thresholds were unsatisfied	Plaintiffs contended those conditions were met (or undisputed below)	Travelers argued the escrowed releases / dismissals conditions were not satisfied and thus payment obligation never matured	Held: Travelers waived these arguments by failing to timely raise them before the bankruptcy court
Whether prejudgment interest was permissible and the correct accrual date	Plaintiffs sought interest from date obligation became due (June 18, 2009, Bailey date)	Travelers argued no interest or a later accrual date tied to conclusion of subsequent proceedings	Held for plaintiffs: Prejudgment interest is recoverable under New York law; interest accrues from June 18, 2009

Key Cases Cited

Travelers Indem. Co. v. Bailey, 557 U.S. 137 (Sup. Ct. 2009) (Supreme Court affirmed the Clarifying Order as an interpretation/enforcement of the 1986 Orders)
In re Johns-Manville Corp., 517 F.3d 52 (2d Cir. 2008) (Manville III) (vacated bankruptcy court’s broader injunction as exceeding jurisdiction)
In re Johns-Manville Corp., 600 F.3d 135 (2d Cir. 2010) (Manville IV) (held Chubb lacked constitutionally sufficient notice and therefore is not bound by 1986 Orders)
Greenfield v. Philles Records, 98 N.Y.2d 562 (N.Y. 2002) (New York law requires enforcement of clear, unambiguous written agreements)
MHR Capital Partners LP v. Presstek, Inc., 12 N.Y.3d 640 (N.Y. 2009) (express conditions must be literally performed)