900 F.3d 126
3rd Cir.2018Background
- Montana plaintiffs are individuals injured by asbestos exposure from W.R. Grace’s Libby, Montana operations; they sued CNA (Continental Casualty Co. and Transportation Ins. Co.) alleging negligent industrial-hygiene inspections and related duties.
- Grace confirmed a Chapter 11 plan that created an Asbestos PI Trust and a § 524(g) channeling injunction directing asbestos PI claims to the Trust and protecting certain third parties (including insurers who settled) from suit.
- CNA and Grace entered a settlement: CNA agreed to contribute $84 million to the Trust; the Settlement identified 25 CNA policies and a catch‑all for “known and unknown” CNA policies through June 30, 1985.
- The Injunction bars claims against protected third parties “arising in whole or in part (directly or indirectly) by reason of” specified relationships, including provision of insurance; it expressly excludes rights or obligations that pertain solely to state workers’ compensation benefits.
- The Bankruptcy Court held the Montana Claims fall within the Injunction and granted CNA summary judgment; this appeal affirms coverage under the Injunction’s terms but vacates and remands the § 524(g)(4) legal‑relationship analysis for further state‑law fact/law work.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the Injunction, by its terms, covers the Montana Claims | Plaintiffs: CNA’s workers’ compensation/employers’ liability policies are not within the Settlement’s listed policies and workers’ compensation carve‑out preserves plaintiffs’ claims | CNA: The policies are covered by the Settlement (including catch‑all) and the claims fall within the Injunction | Court: Injunction’s terms cover the CNA policies (catch‑all) and the Montana Claims; workers’ comp carve‑out excludes only rights/obligations that pertain solely to workers’ compensation, which does not apply here |
| Whether the Montana Claims are derivative (i.e., seek to hold CNA directly/indirectly liable for Grace’s conduct) | Plaintiffs: Claims allege CNA’s independent wrongdoing and thus are non‑derivative | CNA: Claims arise from injuries caused by Grace asbestos and therefore are derivative attempts to impose liability tied to Grace | Court: Whether claims are derivative depends on applicable state law; remanded for the Bankruptcy Court to determine if CNA’s liability is "wholly separate" from or depends on Grace’s liability |
| Whether alleged liability “arises by reason of” CNA’s provision of insurance under § 524(g)(4) | Plaintiffs: CNA’s provision of insurance is not legally relevant to their independent negligence claims | CNA: Any duty to inspect/advise arises from the insurance relationship, making insurance a legally relevant basis for liability | Court: Whether the insurance relationship is a legally relevant factor must be decided under the governing state law; remanded for that analysis |
| Whether the Bankruptcy Court had jurisdiction to enforce the Injunction over the Montana Claims | Plaintiffs: Settlement reimbursements do not create federal jurisdiction to enjoin state tort claims | CNA: Trust’s contractual obligation to reimburse CNA (up to $13M) for payments gives the estate an interest and supports "related to" jurisdiction | Court: Bankruptcy court has "related to" jurisdiction because the Trust’s contractual indemnity could affect the bankruptcy estate; jurisdiction not disturbed |
Key Cases Cited
- In re Quigley Co., Inc., 676 F.3d 45 (2d Cir. 2012) (examining use of § 524(g) channeling injunctions and relevance of state law to derivative claims)
- In re Combustion Eng’g, Inc., 391 F.3d 190 (3d Cir. 2004) (distinguishing derivative third‑party claims from independent third‑party claims for purposes of § 524(g))
- In re W.R. Grace & Co., 729 F.3d 311 (3d Cir. 2013) (discussing § 524(g) injunctions, third‑party protection, and indemnification issues)
- In re Plant Insulation Co., 734 F.3d 900 (9th Cir. 2013) (describing trusts funded by insurers and securities and the purpose of § 524(g))
- In re Federal‑Mogul Global Inc., 684 F.3d 355 (3d Cir. 2012) (addressing asbestos trust formation and channeling injunctions)
- In re Thorpe Insulation Co., 677 F.3d 869 (9th Cir. 2012) (analyzing § 524(g) in asbestos reorganizations)
- Pacor, Inc. v. Higgins, 743 F.2d 984 (3d Cir. 1984) (establishing the "related to" jurisdiction standard in bankruptcy)
- In re Tronox Inc., 855 F.3d 84 (2d Cir. 2017) (interpreting limits on channeling injunctions and related state law questions)
- In re Johns‑Manville Corp., 517 F.3d 52 (2d Cir. 2008) (treated in opinion for contrast; addressed insurer liability pre‑§ 524(g))
- Travelers Indem. Co. v. Bailey, 557 U.S. 137 (2009) (Supreme Court decision reversing aspects of Johns‑Manville and addressing insurer liability and preconfirmation injunction issues)