202 Cal. App. 4th 1316
Cal. Ct. App.2012Background
- Flores exposed to asbestos during 1989–1990 at Kmart Riverside store.
- Kmart and affiliates filed Chapter 11 on January 22, 2002; plan confirmed April 22, 2003, discharging known and unknown claims.
- Flores’s death from mesothelioma occurred June 19, 2008; wrongful death action filed December 17, 2008 by wife and two children.
- First amended complaint asserts negligence and related tort theories; no bankruptcy-litigation specifics against Kmart are alleged in the complaint.
- Kmart demurred, arguing the discharge barred plaintiffs’ claims; plaintiffs challenged due process due to lack of notice.
- Trial court sustained the demurrer; appellate court reversed, holding the record insufficient to prove discharge applicability against plaintiffs.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the plan discharge bars the Flores claims. | Flores claim exists pre-discharge and is not barred. | Discharge order forecloses all related claims. | Demurrer reversed; discharge not shown to conclusively bar claims. |
| Whether due process notice was constitutionally adequate. | No notice shown to Flores or plaintiffs; publication insufficient. | Publication and notice procedures were adequate; due process satisfied. | Due process not satisfied on the limited record; cannot enforce discharge at demurrer stage. |
| Whether state court can adjudicate discharge applicability. | State court may determine discharge scope; bankruptcy court lacked sufficient notice materials. | Bankruptcy court retains exclusive jurisdiction over discharge interpretation. | Court does not resolve exclusive jurisdiction at this stage; focus is on due process validity. |
Key Cases Cited
- Espinosa v. United Student Aid Funds, 559 U.S. _ (2010) (due process notice standard in bankruptcy plans)
- In re Grossman’s Inc., 607 F.3d 114 (3d Cir. 2010) (synthesizes tests for discharge of post-discharge asbestos claims)
- In re Gruntz, 202 F.3d 1074 (9th Cir. 2000) (bankruptcy discharge and due process considerations)
- Tulsa Professional Collection Services v. Pope, 485 U.S. 478 (1988) (notice adequacy when creditor identity known or unknown)
- Mullane v. Central Hanover Bank & Trust Co., 339 U.S. 306 (1950) (due process notice standard for notice by publication)
- FCC v. NextWave Personal Communications Inc., 537 U.S. 293 (2003) (definition of a claim and the effect of discharge)