BILLY ARNOLD, JR., ET AL. v. GARLOCK, INC.
No. 01-41327 through 01-41335
No. 01-41366 (Consolidated)
No. 01-11481 (Consolidated)
No. 01-51209 (Consolidated)
No. 01-51241 (Consolidated)
UNITED STATES COURT OF APPEALS FOR THE FIFTH CIRCUIT
December 28, 2001
Aрpeals from the United States District Court for the Southern District of Texas, Corpus Christi
ROBERT M. PARKER, Circuit Judge:
Before us are 37 nearly identical motions by the Appellant, Garlock, Inc. (“Garlock“), to stay the proceedings of various district courts throughout the four federal districts in Texas
I. Background
The cases before us were all originally brought as personal injury tort or wrongful death (“PITWD“) claims by various plaintiffs against a group of co-defendants which is, by and large, similar in each case. The plaintiffs’ claims arise from exposure to asbestos in one manner
In October 2001, Federal-Mogul filed for protection pursuant to reorganization under Chapter 11 of Title 11 of the United States Code, in bankruptcy. Federal-Mogul included each of its 156 affiliates and subsidiaries, including Gasket Holdings, in the Chapter 11 filing. All of the bankruptcy cases were filed in the United States Bankruptcy Court for the District of Delaware.
In mid October, Garlock began systematically removing asbestos cases in which Garlock and Gasket Holdings appeared as co-defendants. Garlock asserted that because the Federal-Mogul group, including Gasket Holdings, was in bankruptcy and because Garlock had made a claim for contribution under Texas state law4 against Gasket Holdings, invoking federal jurisdiction was appropriate because the contribution claim was “related to” a claim under Title 11 in accordance with
In each of the 37 instant cases,5 Garlock moved in the respective district court for the entire case to be transferred to the United States District Court for the District of Delaware under
The plaintiffs in every such removed case uniformly responded with a motion to dismiss debtor Federal-Mogul/Gasket Holdings (hereinafter, “debtor“) as a defendant, a motion to sever any remaining
The district court in Corpus Christi dismissed the debtor with prejudice, severed all remaining claims against the debtor and transferred them under
The district court in Dallas referred to the Corpus Christi court‘s reasoning as “unassailable” and entered an order with identical results.
The district court in Galveston determined that bankruptcy subject matter jurisdiction under
The district court which ruled in the Beaumont and Pаris Division cases held that Garlock‘s claim for contribution was “scantily asserted” and unsupported, and even if real, was so tenuously related to the debtor‘s bankruptcy case as to be virtually immaterial. The court remanded for lack of subject matter jurisdiction under
The district court in San Antonio cited the decisions of several other federal district courts, including the Corpus Christi district court, and determined that subject matter jurisdiction did not exist, remanded its cases on that basis alone and dismissed the plaintiffs’ motions to sever as moot.
The district court in Austin severed all claims against the debtor and transferred them to the District of Delaware under
Following each of the district courts’ rulings, which occurred between November 9 and December 5, Garlock filed a notice of appeal and moved in the respective district court for a stay of the court‘s order pending appeal. Some of the district courts issued a denial and some had not yet ruled on Garlock‘s stay motion; regardless, Garlock filed emergency motions to stay the respective district courts’ orders under
Garlock asserts that it is not attempting to appeal an unappealable order of remand.
What Garlock seeks, essentially, is a procedural path that would invalidate the clerks’ certification of remand and freeze further action in the district courts while permitting Garlock to perfect its appeal on the
The appellees bring a different view to this court. They contend that Garlock‘s true intent is simply to delay any proceeding against it for as long as possible. Such a dilatory intent, аppellees contend, will have a devastating effect on them, some of whom are dying.
Appellees further contend that Garlock‘s dilatory intent is focused solely against these appellees because they have refused to enter into any standardized settlement plan or agreement such as those allegedly arranged between Garlock and other law firms engaged in asbestos litigation. It is true that Garlock has brought no other, similar case to this court on motions to stay or transfer except those in which the appellees’ counsel appears for the plaintiffs. On that basis, counsel characterizes Garlock‘s interest not as an attempt to legitimately pursue a coordinated remedy under the bankruptcy law but as a cynical attempt to minimize its exposure with a law firm which “treats each case individually and attempts to achieve maximum value for its clients.” See Appellees’ Additional Response at 3.
Because of the “emergency” nature of Garlock‘s motions, we implemented a temporary stay in each case to provide sufficient time to fairly consider whether a formal stay pending appeal should issue. We have determined that no such stay should issue and, by this order, dissolve the temporary stays.
Our decision in this case is predicated on two primary bases. First, that Garlock does not have a valid claim for contribution against Federal-Mogul or its associated business, Gasket Holdings, upon which to assert “related to” jurisdiction under the bankruptcy laws. Second, we find that Garlock has not otherwise met the elements necessary to obtain a discretionary stay pending appeal by this court. We will address each point raised in this complex matter.
II. Jurisdiction, Stays, Transfer of Claims, and Effect of Remand.
We will examine the basis for federal bankruptcy jurisdiction and the framework of Garlock‘s contentions therein.
A. Removal Authority and “Related To” Jurisdiction.
Authority to remove a case relating to a case under title 11 resides in
A party may remove any claim or cause of action in a civil action other than a proceeding before the United States Tax Court or a civil action by a governmental unit to enforce such governmental unit‘s police or regulatory power, to the district court for the district where such civil action is pending, if such district court has jurisdiction of such claim under section 1334 of this title.
Certain matters related to the debtor‘s bankruptcy may be included within the ambit of federal bankruptcy jurisdiction under
As the United States Supreme Court has noted, “related to” bankruptcy proceedings include (1) causes of action owned by the debtor which become property of the estate pursuant to
Most of the federal circuits, including the Fifth Circuit, derive their “related to” jurisprudence from Pacor, Inc. v. Higgins, 743 F.2d 984 (3rd Cir. 1984). See Celotex, 514 U.S. at 308 n.6. In Pacor, the Third Circuit determined that a third-party controversy not directly involving a debtor in bankruptcy was not related to the bankruptcy, but was, at best, a precursor to a claim against the debtor. See Pacor, 743 F.2d at 995. The Third Circuit so ruled on the basis that any judgment between the two third parties could not have any preclusive effect by either res judicata or collateral estoppel against the debtor, who would be free to relitigate any claim brought against it. Id. Thus, “related to” jurisdiction would not come into play until a litigant brought a direct claim under bankruptcy jurisdiction based on the result of the prior judgment.
Within the Fifth Circuit, the test for whether a proceeding properly invokes federal bankruptcy jurisdiction is the same as the Third Circuit‘s Pacor test, namely, whether “the outcome of that proceeding could conceivably have any effect on the estate being administered in bankruptcy.” In re Canion, 196 F.3d 579, 585 (5th Cir. 1999). Certainty, or even likelihood of such an effect is not a requirement. Id. at 587 n.30 (citing Copelin v. Sprico, Inc., 182 F.3d 174 (3rd Cir. 1999)).
In In re Canion, a judgment creditor of the debtor, Canion, brought a direct action against several family members, employees, friends and associates of the debtor, asserting claims of fraud and tortious interference with the judgment creditor‘s recovery of the judgment. In re Canion, 196 F.3d at 582. Our determination was thаt this circumstance fell within the “related to” bankruptcy jurisdiction at the time the case was referred to the bankruptcy court (which is the time at which jurisdiction is tested) because the outcome of the proceedings against the defendants conceivably could have increased the debtor‘s estate. Id. at 587. Appellees argue that Garlock presents no such direct claim and that its claim for contribution, not based on a contractual relationship, is too
1. “Contribution” as a basis for “related to” jurisdiction and the automatic stay provision in bankruptcy.
The Sixth Circuit has held that a claim for contribution is a sufficient basis for finding “related to” jurisdiction in bankruptcy and, in fact, is a sufficient ground upon which to direct a transfer of venue for related tort claims under
In In re Walker, 51 F.3d 562 (5th Cir. 1995), a party held liable to a debtor for a violation of the automatic stay provided in
B. Transfer of Personal Injury Tort and Wrongful Death Claims under 28 U.S.C. § 157(B)(5) .
Garlock seeks to transfer all of the PITWD claims in each of the lawsuits against it in accordance with
The district court shall order that personal injury tort and wrongful death claims shall be tried in the district court in which the bankruptcy case is pending, or in the district court in the district in which the claims arose, as determined by the district court in which the bankruptcy case is pending.
See
The Sixth Circuit has held that the denial of a motion to transfer under
C. Stays Applicable to Bankruptcy Proceedings.
1. Title 11 U.S.C. § 362.
Once a party files in bankruptcy, under Chapter 11, for example,
By exception, a bankruptcy court may invoke
2. Federal Rule of Civil Procedure 62.
Garlock has also asserted that
In the instant cases, however, the subject matter of Garlock‘s motion is not for a stay of judgment, declaratory or otherwise. It is for a stay of remand under
Further,
On that basis, Garlock is not entitled to the
D. Effect of Remand.
We have consolidated many of these cases according to date or by court, but as indicated in Part I, the orders are not entirely uniform. All of them include a remand for lack of subject matter jurisdiction, citing
1. Remand for lack of subject matter jurisdiction.
A remand for lack of subject matter jurisdiction under
Rather than fruitlessly attempting an appellate review of a district court‘s remand order, we instead examine the steps leading from a district judge‘s decision to remand to execution of the remand order.
A
Once the remand order is certified and mailed, however, the matter remanded is removed from federal jurisdiction. Of all the cases brought before us under Garlock‘s motions, most have already been cеrtified and mailed by the respective district clerks.
2. Equitable remand.
Of greater import in this particular case is the effect of an equitable remand.
The court to which [claim or cause of action related to bankruptcy cases] is removed may remand such claim or cause of action on any equitable ground. An order entered under this subsection remanding a claim or cause of action, or a decision to not remand, is not reviewable by appeal or otherwise by the court of appeals under section 158(d), 1291, or 1292 of this title or by the Supreme Court of the United States under section 1254 of this title.
See
Garlock‘s emergency petition seeks to halt the progress of a remand before it leaves the district court for an immediate appeal of a collateral order. The determination of venue for PITWD cases such as these under
Because some of the various subject-matter jurisdiction remands have not yet been certified and mailed, and because some have not been remanded equitably, we will proceed with an analysis of whether Garlock should otherwise be granted a stay pending appeal under our authority in
III. Merits of the Motion for Stay.
When presented with a motion for a discretionary stay pending appeal, we employ a four-part test. See In re First S. Sav. Assoc., 820 F.2d 700, 704 (5th Cir. 1987) (citing Ruiz v. Estelle, 666 F.2d 854, 856 (5th Cir. 1982) (“Ruiz II“)). While
A. Whether the movant has made a showing of likelihood of success on the merits.
Despite the possible availability of a discretionary stay pending appeal, even if Garlock had avoided remand, it cоuld not show a probability of success on appeal.
First, there was no
For those cases in which the debtor was formally dismissed,10 such dismissal was with prejudice and, under Texas law, eliminated Garlock‘s contribution claim against the debtor. It is well established under Texas case law that neither contribution nor indemnification can be recovered from a party against whom the injured party has no cause of action. See Safway Scaffold Co. of Houston, Inc. v. Safway Steel Products, Inc., 570 S.W.2d 225, 228-29 (Tex. App.--Houston [1st Dist.] 1978, writ ref‘d n.r.e.). In modern Texas code, a “responsible third party” from whom contribution is sought must “be liable to the plaintiff for all or a part of the damages claimed against the named defendant or defendants.” See
Second, the Texas code eliminates a debtor in bankruptcy as a “responsible third party” from whom contribution may be sought, except to the extent that liability insurance or other source of third party funding may be available to pay the claims asserted against that debtor.
Third, Garlock has relied in part on two past decisions transferring PITWD claims under
In A.H. Robins, the Fourth Circuit upheld an order of the United States District Court for the Eastern District of Virginia transferring, under
In In re Dow Corning, 86 F.3d at 498, the Sixth Circuit reversed and ordered the United States District Court for the Eastern District of Michigan to transfer under
Therefore, while we do not disagree that certain mass tort claims in some cirсumstances might be consolidated with bankruptcy proceedings in a single district in accordance with
Fourth, Garlock‘s contribution claim against the debtor is based on universally-pled claims against all defendants in all asbestos lawsuits in which Garlock appears as a co-defendant. Garlock has never litigated a contribution claim to collection in any of approximately 250,000 previous asbestos lawsuits in which Garlock was a co-defendant. In the face of this criticism, Garlock has made a late attempt to color its failure to pursue an actual payment of contribution.13 Garlock now asserts that in past lawsuits, the “larger” or “major” defendants, now in bankruptcy, had been present to pay their fair share of claims and that it was not cost-effective for Garlock to litigate the relatively small amounts left in controversy. It is only since the Federal-Mogul entities proceeded to Chapter 11 protection that, Garlock contends, it must seriously proceed with its claims for contribution. Garlock has not, however, commenced discovery in any of these cases, but has spent its time seeking the
Additionally, the district judges ruling in the various cases before us found, on the facts before them, no merit in Garlock‘s claims. One district judge, for example, noted that in his court, Garlock‘s claims were “scantily asserted” and presented no facts to support them. As such, the contribution claims were “so tenuously related to the bankruptcy case” as to be “virtually immaterial.” All of the district judges ultimately found no verifiable basis in Garlock‘s claims so as to justify a mаss transfer to the District of Delaware.
We are not prepared to say that Garlock‘s motives were purely dilatory and its motions frivolous. We need not, however, decide the issue of motivation when determining the potential for success on the merits of Garlock‘s “related to” jurisdiction assertion and associated motion to transfer under
Our determination in this element is sufficient to deny the stay pending appeal; however, we will briefly address the remaining points of analysis.
B. Whether the movant has made a showing of irreparable injury if the stay is not granted.
We have determined that Garlock has no valid claim for contribution against the debtor. Therefore, no irreparable harm will ensue if a stay is not granted.
C. Whether the granting of the stay would substantially harm the other parties.
There may be a danger of inconsistent results in the various state and federal courts in which Garlock and the other parties appear if these cases are not consolidated in the District of Delaware. That is, however, the circumstance under which asbestos litigation has proceeded for nearly 30 years.
What is certain is that delay where plaintiffs have mesothelioma, asbestosis, or pleural disease, or where decedents’ survivors await compensation for support substantially harms those parties.
Additionally, delay in or lengthy interruption of state court proceedings already in progress for months or years may substantially harm the ability of the state courts to resolve the cases.
We therefore hold that, in this circumstance, the harm to the plaintiffs in delay substantially outweighs the harm to Garlock if not delayed.
D. Whether the granting of the stay would serve the public interest.
Consolidatiоn of PITWD cases related to a bankruptcy would facilitate management of an estate in bankruptcy and potentially provide an even-handed and fair apportionment of the bankrupt‘s estate to its creditors, including those claiming contribution in the mass tort scenario.
Such consolidation would also deprive states and state courts of their right to conduct proceedings brought under state law. In a mass tort case of the scope of asbestos litigation, transferring cases related to a bankruptcy could well result in depriving the states of cognizance over thousands of cases. Many of these cases are founded on well-developed state law and years of precedent and represent a significant amount of time in individual litigation. The negative effect on comity between the federal and state court systems must be given some account.
At the bottom, there is justification for aggregation, but the tenuous relationship between Garlock and the debtor and the insubstantial claims of contribution reflected herein do not justify ignoring comity and loading thousands of cases on a single district in this case.
IV. Issue Preclusion.
Garlock contends that a transfer of venue to the District of Delaware would obtain “a ‘сentralized,’ ‘efficient,’ cost-effective application of a uniform, fair system for assessing and compensating asbestos-related claimants” under
To the extent that Garlock‘s contention can be read to embrace one made more explicitly by the “Big Three” automobile manufacturers15--that transfer to the District of Delaware bankruptcy court would facilitate a ruling on the ability of friction products to be a producing cause of asbestos-related diseases, a ruling that would be used for purposes of issue preclusion in other cases--Garlock faces formidable obstacles. As an initial matter, we note that
But no matter how creative the procedural avenue, and in spite of the fact that this litigation would benefit from a uniform approach, at almost every turn this circuit has rejected attempts at aggregation and issue preclusion in asbestos cases. Our adversity toward group resolution sounds in our concern that no one be deprived the right to a full and fair opportunity to litigate their claims. In C.A. Hardy v. Johns-Manville Sales Corp., 681 F.2d 334 (5th Cir. 1982), we turned aside a district court‘s order that nonparty asbestos companies were estopped from relitigating issues of dangerousness and causation as violative of the fundamental right to trial by jury. We reached this conclusion based on the manufacturers’ each having an interest in the plaintiffs proving thе same set of facts. Indeed, in Hardy we went so far as to conclude that the presence of inconsistent findings in other cases on the same questions at issue in Hardy made the application of collateral estoppel highly problematic even as to the parties themselves. Of course Garlock need not be reminded of Hardy‘s place in this circuit‘s jurisprudence for it was one of the defendants that opposed any attempt to bar the relitigation of key dispositive issues.
The passage of time has not weakened the teachings of Hardy. In re Fibreboard, 893 F.2d 706 (5th Cir. 1990), saw this court issue a writ of mandamus against the trial of a representative group of plaintiffs on the issues of duty and damages. There, we said that adherence to state substantive law and to the Seventh Amendment right to trial by jury would not tolerate making the resolution of a handful of claims binding as to defendant asbestos manufacturers’ liability with respect to all plaintiffs. In Cimino v. Raymark Industries, Inc., 151 F.3d 297 (5th Cir. 1998), we again revisited the same district court‘s revised effort аt mass resolution. There, we emphasized that federal rules providing for aggregation of claims--specifically,
The closest this circuit has come to utilization of issue preclusion in the asbestos context is Jenkins v. Raymark, 831 F.2d 550 (5th Cir. 1987). In that case, a certified class of 753 claimants were permitted to try common issues in a single trial, the result of which was applicable to the class. The procedure approved in Jenkins, however, still required individual jury determinations of causation and damages.
The efficiencies to be obtаined from issue preclusion, therefore, cannot in this circuit serve as a basis for the transfer of cases under
A
We agree with the district judge in Corpus Christi. Any abstention issues remaining in these cases regarding claims now before the bankruptcy court in the District of Delaware may be decided by that district court.
VI. Conclusion.
We do not disagree that the transfer provisions of
It is hereby ORDERED that,
The Petitioner‘s Motions for Stay under
The temporary stays issued in our consolidated Orders are hereby dissolved.
Notes
- 7 Living plaintiffs with asbestos-related mesothelioma;
- 18 Plaintiffs’ decedents with asbestos-related mesothelioma;
- 17 Living plaintiffs with asbestos-related lung cancer;
- 26 Plaintiffs’ decedents with asbestos-related lung cancer;
- 4 Living plaintiffs with asbestos-related laryngeal or esophageal cancer;
- 3 Plaintiffs’ decedents with asbestos-related laryngeal or esoрhageal cancer;
- 6 Living plaintiffs with asbestosis;
- 1 Living plaintiff with asbestos-related pleural disease.