581 B.R. 38
Bankr. S.D.N.Y.2018Background
- Johns‑Manville (Manville) filed Chapter 11 in 1982 amid massive asbestos liability; insurers settled and contributed to a Manville Trust, and the Bankruptcy Court’s 1986 Confirmation Order included a channeling injunction directing asbestos claims against settling insurers to the Trust.
- Marsh, a settling insurer, paid into the settlement and was released from further liability under the 1986 orders; the Manville Trust and Trust Distribution Procedures (TDP) now govern payments to present and future claimants.
- Salvador Parra, a future claimant at the time of confirmation, sued Marsh in state court (2010) alleging independent wrongdoing (conspiracy, aiding and abetting, negligent undertakings) based on Marsh’s long relationship with Manville.
- Marsh moved in bankruptcy court to enforce the 1986 channeling injunction; the bankruptcy court held Parra’s claims barred and that Parra had received due process.
- The District Court affirmed most rulings but remanded the due‑process question, instructing the bankruptcy court to apply the Second Circuit’s Chubb due‑process framework to determine whether the Future Claims Representative (FCR) was charged with and adequately represented future claimants’ in personam claims against settling insurers and whether any denial of process caused prejudice.
- On remand, the bankruptcy court found the FCR was aware of and considered the injunction’s scope, concluded Parra received constitutionally sufficient notice and representation (including Rule 23 parallels), and held Parra suffered no prejudice because he can recover from the Manville Trust; Marsh’s motion to enforce was granted.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Parra’s claims against Marsh are barred by the 1986 channeling injunction | Parra: his claims are in personam for Marsh’s independent misconduct and thus not subject to the injunction | Marsh: Parra’s alleged claims are related to Manville policies and fall within the channeling injunction | Court: Parra’s allegations are the same type of direct‑action claims previously found "related to" the policies and are barred |
| Whether Parra received constitutionally sufficient notice of the 1986 orders | Parra: he lacked adequate notice and opportunity to opt out re: in personam claims | Marsh: extensive solicitation, publication and FCR representation satisfied due process | Court: notice and representation were constitutionally sufficient (publication and extensive outreach; FCR participated) |
| Whether the Future Claims Representative was charged with and adequately represented future claimants’ in personam claims against settling insurers | Parra: FCR did not represent or could not foresee in personam claims against settling insurers | Marsh: FCR knew the injunction’s scope, objected and addressed insurer immunity for future claimants | Court: FCR was aware of and considered issues; representation adequate under due‑process/Rule 23 standards |
| Whether any due‑process defect caused prejudice warranting relief | Parra: loss of right to pursue independent claims and potentially greater recovery is prejudicial | Marsh: Parra can recover from the Manville Trust; permitting direct suits would jeopardize the Trust and equality among claimants | Court: No prejudice — Parra can present a claim to the Trust; permitting direct suits would undermine the Trust and other claimants’ recoveries |
Key Cases Cited
- Travelers Indem. Co. v. Bailey, 557 U.S. 137 (2009) (Supreme Court held 1986 orders final and res judicata but remanded notice/due‑process issue)
- Johns‑Manville Corp. v. Chubb Indemnity Ins. Co. (In re Johns‑Manville Corp.), 600 F.3d 135 (2d Cir. 2010) (articulated class‑action analogy for due process when in personam claims are bound)
- Macarthur Co. v. Johns‑Manville Corp., 837 F.2d 89 (2d Cir. 1988) (upheld bankruptcy court’s authority to channel claims "related to" debtor’s insurance policies)
- Mullane v. Central Hanover Bank & Trust Co., 339 U.S. 306 (1950) (due‑process notice standard; publication notice permissible for unknown or future claimants)
- Int’l Shoe Co. v. Washington, 326 U.S. 310 (1945) (minimum contacts and due‑process limits on personal jurisdiction)
- In re Joint E. & S. Dist. Asbestos Litig., 982 F.2d 721 (2d Cir. 1992) (approval of non‑opt‑out class treatment for present and future asbestos claimants under Rule 23)