623 B.R. 242
S.D.N.Y.2020Background
- Lydia Berry sued in Louisiana (filed 2015) for mesothelioma allegedly caused by asbestos fibers carried home from her husband’s work at a paper mill that was once owned by MFP (a Manville subsidiary).
- MFP and Johns‑Manville filed Chapter 11 in the early 1980s; MFP’s and Manville’s plans were confirmed (MFP Plan 1984; Manville Plan 1986); Manville’s plan created a Trust and broad channeling/injunction provisions covering asbestos liabilities caused by pre‑petition exposure.
- MFP later became Riverwood and merged into Graphic Packaging; Graphic moved in bankruptcy court to enforce the MFP and Manville confirmation orders and to enjoin Berry’s state‑court suit as barred or channeled to the Manville Trust.
- Bankruptcy Judge Cecilia Morris held Berry’s claim arose pre‑petition under the Second Circuit “relationship” test because her first exposure was pre‑petition, that notice/publication was constitutionally adequate (via the combined MFP/Manville notices and Manville process), and enjoined Berry’s claims against Graphic.
- Berry appealed, arguing (1) her actionable injury resulted from post‑petition exposure and thus no pre‑petition claim existed, (2) the bankruptcy court lacked subject‑matter jurisdiction or improperly decided factual issues, and (3) she was denied procedural due process by inadequate notice and lack of a future‑claimants representative for MFP.
Issues
| Issue | Berry (Plaintiff) Argument | Graphic (Defendant) Argument | Held |
|---|---|---|---|
| Whether Berry’s asbestos claim is a pre‑petition bankruptcy claim | Injury manifested post‑petition and post‑petition exposures caused the disease; therefore no pre‑petition claim | First exposure was pre‑petition; under the relationship test exposure creates a bankruptcy "claim" even if injury manifests later | Claim arose pre‑petition at first exposure; affirmed |
| Continuing/existing exposure and right to a jury fact determination | Causation and relative contribution of pre/post exposures are factual issues for a jury; court improperly resolved facts | Latency makes pinpointing cause impossible; relationship test is legal and precludes need for such resolution | Court’s ruling was a legal determination based on undisputed first‑exposure timing; no denial of jury due process |
| Bankruptcy court subject‑matter jurisdiction to enjoin state suit | Bankruptcy court exceeded jurisdiction and made dispositive factual findings beyond its power | Motion is a core proceeding; court may interpret/enforce confirmation orders and channel claims | Bankruptcy court had jurisdiction (core proceeding and power to enforce its orders); affirmed |
| Adequacy of notice / procedural due process | Publication notices by MFP were insufficient for unmanifested future claimants and MFP lacked a future‑claimants representative | Manville notice/process (which was adequate) and intertwined MFP/Manville proceedings put claimants on notice; Manville Plan channels claims | Notice was constitutionally adequate in context of the Manville/MFP proceedings; due process satisfied |
Key Cases Cited
- Mullane v. Central Hanover Bank & Trust Co., 339 U.S. 306 (U.S. 1950) (notice must be reasonably calculated to apprise interested parties and afford opportunity to object)
- Kane v. Johns‑Manville Corp., 843 F.2d 636 (2d Cir. 1988) (defines plan channeling of "Other Asbestos Obligations")
- In re Johns‑Manville Corp., 26 B.R. 405 (Bankr. S.D.N.Y. 1983) (background on Manville asbestos bankruptcies and their structure)
- In re Manville Forest Prod. Corp., 209 F.3d 125 (2d Cir. 2000) (relationship test; claim arises when debtor–creditor relationship contains elements giving rise to obligation)
- In re Mazzeo, 131 F.3d 295 (2d Cir. 1997) (definition of "claim" is broad under the Bankruptcy Code)
- Matter of Motors Liquidation Co., 829 F.3d 135 (2d Cir. 2016) (post‑petition conduct by successor can fall outside pre‑petition claim scope)
- In re Waterman S.S. Corp., 141 B.R. 552 (Bankr. S.D.N.Y. 1992) (asbestos claims arise at moment of exposure)
- In re Quigley Co., 383 B.R. 19 (Bankr. S.D.N.Y. 2008) (pre‑petition exposure gives rise to bankruptcy claim regardless of manifestation timing)
- Grossman’s, 607 F.3d 114 (3d Cir. 2010) (courts generally treat pre‑petition exposure as prerequisite for claim recognition)
- Travelers Indem. Co. v. Bailey, 557 U.S. 137 (U.S. 2009) (bankruptcy court has authority to interpret and enforce its prior orders)
- DPWN Holdings (USA), Inc. v. United Air Lines, Inc., 747 F.3d 145 (2d Cir. 2014) (claim cannot be discharged if claimant was denied due process by lack of adequate notice)