In re Johns-Manville Corp.
552 B.R. 221
Bankr. S.D.N.Y.2016Background
- Ms. Lynda Berry sued Graphic Packaging International in Louisiana state court for mesothelioma allegedly caused by secondary exposure to asbestos from her husband’s employment at a paper mill once owned by Manville Forest Products (MFP). Her husband filed and recovered from the Manville Personal Injury Trust.
- MFP was a wholly owned Manville subsidiary that filed chapter 11 as part of the Johns‑Manville bankruptcy in 1982; MFP confirmed a separate plan in 1984 discharging pre‑confirmation unsecured claims.
- Manville’s chapter 11 confirmed a plan that created the Manville Personal Injury Trust to resolve present and future asbestos claims and included a channeling injunction directing asbestos claims (including “Other Asbestos Obligations”) to the Trust and enjoining suits against Manville and its subsidiaries.
- Graphic (a successor to Riverwood/MFP) moved for an injunction enforcing the MFP discharge and the Manville channeling injunction to stop Berry’s state suit; Berry argued her claims were not discharged/channeled, that MFP is not a beneficiary of Manville’s injunction, that her exposure continued post‑confirmation, that Graphic waived the defense, and that she lacked due process in the bankruptcy.
- The bankruptcy court found (1) Berry’s asbestos exposure occurred prepetition (giving rise to a prepetition claim), (2) MFP’s confirmation discharged such claims or, as to asbestos victims, the Manville plan channeled them to the Trust, (3) publication and other notice plus a future claimants’ representative satisfied due process, and (4) Graphic had not waived the right to invoke the injunctions.
- The court enjoined Berry’s state law action against Graphic (and any claims against MFP/Manville) and directed her to pursue relief, if any, through the Manville Trust.
Issues
| Issue | Berry’s Argument | Graphic’s Argument | Held |
|---|---|---|---|
| Whether Berry’s claim is a prepetition claim subject to discharge/channeling | Her injury manifested later and exposure continued post‑confirmation so claim is post‑petition | Pre‑petition exposures (to 1982) created a contingent prepetition claim that is dischargeable or channeled | Held prepetition: exposure before petition gives rise to a §101(5) claim; channeling/discharge applies |
| Whether Manville channeling injunction covers MFP/Graphic (subsidiaries/successors) | MFP’s conduct is direct premises liability and not covered by Manville channeling | Manville Plan and Confirmation Order enjoin suits against Debtors’ subsidiaries and successors; MFP was a Manville debtor/subsidiary | Held channeling injunction bars suits vs. MFP and its successor Graphic; claims must go to Trust |
| Whether Berry received due process in the Manville/MFP proceedings | As an unknown future claimant she lacked actual notice; notices/disclosure insufficient; needed additional protections | Publication, national outreach, and appointment of a future‑claims representative satisfied due process | Held due process satisfied: publication notice and future claimants’ representative were adequate; res judicata applies |
| Whether Graphic waived enforcement of the bankruptcy injunctions by litigating in state court | Waiver asserted because Graphic initially defended in separate litigation | Discharge and injunction are not affirmative defenses that can be forfeited; they are continuing legal effects of confirmation | Held no waiver: injunction/discharge remain enforceable and not forfeited by initial actions |
Key Cases Cited
- Travelers Indem. Co. v. Bailey, 557 U.S. 137 (2009) (confirmation order injunctions and res judicata scope)
- Mullane v. Central Hanover Bank & Trust Co., 339 U.S. 306 (1950) (due process notice standard for unknown claimants)
- Kane v. Johns‑Manville Corp., 843 F.2d 636 (2d Cir. 1988) (treatment of future asbestos claimants and channeling injunction)
- In re Johns‑Manville Corp., 68 B.R. 618 (Bankr. S.D.N.Y. 1986) (confirmation of Manville Plan, creation of trust, appointment of future claimants’ representative)
- Olin Corp. v. Riverwood Int’l Corp. (In re Manville Forest Prods. Corp.), 209 F.3d 125 (2d Cir. 2000) (Second Circuit discussion of prepetition relationship/fair‑contemplation tests)