Common Law Settlement Counsel, Statutory and Hawaii Direct 39 Action Settlement Counsel, and Asbestos Personal Injury Plaintiffs 1 appeal from Judge Koeltl’s reversal of a bankruptcy court’s final judgment. Bankruptcy Judge Lifland had required appellees — The Travelers Indemnity Company and Travelers Casualty and Surety Company (together, “Travelers”)— to pay over $500 million to asbestos plaintiffs based on Travelers’ obligations under certain settlement agreements (the “Agreements”). The district court reversed, holding that conditions precedent to payment under the Agreements were never met, and that Travelers’ obligation to pay therefore never matured.
Because we conclude that the relevant conditions precedent were satisfied, we vacate the district court’s order and remand with instructions to reinstate the bankruptcy court’s final judgment. In addition, given that Travelers did not timely raise its arguments regarding the Agreements’ conditions that the movants either execute a specific number of releases and deliver them into escrow or dismiss their claims with prejudice, we deem those arguments waived. Finally, we hold that the bankruptcy court correctly applied prejudgment interest to the amount owed and that it correctly calculated the total payment due from the appropriate date.
BACKGROUND
For many years, Travelers was the primary insurer for the Johns-Manville Corporation (“Manville”), once the largest supplier of asbestos and asbestos-containing products.
In re Johns-Manville Corp. (Manville I),
Nos. 82 B 11656, 82 B 11657, 82 B 11660, 82 B 11661, 82 B 11665, 82 B 11673, 82 B 11675, 82 B 11676(BRL),
With Manville entangled in bankruptcy proceedings, asbestos plaintiffs began to file direct-action
2
suits against Travelers and other insurers based on the insurers’
Consequently, Travelers and the other insurers entered into a settlement agreement with Manville. Pursuant to the settlement, Travelers agreed to contribute roughly $80 million to a trust established as part of the bankruptcy estate (the “Manville Trust”) in exchange for a complete release of Manville policy-related liabilities.
Manville I,
The bankruptcy court eventually approved the settlement and entered two orders, the Insurance Settlement Order and the Confirmation Order (together, the “1986 Orders”).
Manville I
Despite the 1986 Orders, asbestos plaintiffs filed more actions against Travelers in several states. Id. at *17 ¶ 70. The majority of these claims did not allege violations derivative of Manville’s actions; instead, they were based on Travelers’ own alleged wrongdoing as Manville’s insurer. Although it is a misnomer, see infra note 3, we will style these claims as the “Direct Actions.” The Direct Actions were brought by three categories of plaintiffs. We will call them the “Statutory Direct Action Plaintiffs,” “Hawaii Direct Action Plaintiffs,” and “Common Law Direct Action Plaintiffs.” They asserted two categories of claims. First, the Statutory Direct Action Plaintiffs and Hawaii Direct Action Plaintiffs alleged, among other things, that Travelers “conspired to violate state laws prohibiting unfair insurance ... practices” by fraudulently perpetuating a “state of the art” defense, id. at *18-19 ¶¶ 74-79, and allegedly misrepresenting Manville’s knowledge of asbestos hazards. Second, the Common Law Direct Action Plaintiffs claimed similarly that Travelers violated common law duties when it failed to disclose what it knew about asbestos hazards from its relationship with Manville. Id. at *19 ¶¶ 80-82. 3
Under the Agreements, the Direct Action Plaintiffs were to be paid from the funds, but only after three conditions were satisfied. Id. at *22 ¶¶ 96-100. These conditions, described in detail immediately infra, concerned the breadth of an order to be entered by the bankruptcy court (“Clarifying Order”) regarding the interpretation of the 1986 Orders, the finality of the Clarifying Order, and various provisions regarding disposal of the Direct Actions.
First, the Agreements required that the bankruptcy court, once it approved the settlements, enter a “Clarifying Order.” The Statutory and Hawaii Direct Action Settlement Agreements required that the Clarifying Order “eontain[] prohibitions against Claims at least as broad as those contained in Exhibit A.” App. at 231, 269. Similarly, the Common Law Direct Action Agreement required that the Clarifying Order contain language “substantially in the form” of Exhibit A. 4 Id. at 307.
Exhibit A of each Agreement was a proposed Clarifying Order containing provisions barring all claims against Travelers arising out of, or relating to, Travelers’ handling of asbestos-related claims, including contribution and indemnity claims. The proposed Clarifying Order also expressly barred the new, nonderivative Direct Actions that were the subject of the settlements. Finally, each Exhibit A conveyed that the proposed Clarifying “Order is an order clarifying the Confirmation Order [of the 1986 Orders]” and that all the barred claims listed within the proposed Clarifying Order were “covered by the Confirmation Order and permanently enjoined as against Travelers, which [was] released therefrom under the Confirmation Order.” Id. at 245, 283.
Second, the Clarifying Order had to become a “Final Order” under the Agreements’ definition, i.e., an order from which no appeal is taken, or an order that has been “affirmed by the highest court to which such order was appealed or certiora-ri has been denied and the time to take any further appeal or petition for certiora-ri shall have expired.” Id. at 228, 265, 304.
With the Agreements in place, the parties moved for the bankruptcy court’s approval in 2004.
Manville I,
On August 17, 2004, the bankruptcy court rejected the objections and approved all three Agreements. It also entered the Clarifying Order (the “2004 Orders”). The language of Clarifying Order was substantially the same as the language contained in each Agreement’s appended Exhibit A. The bankruptcy court concluded that it had authority to enter both the Clarifying Order and the 1986 Orders, and that the Direct Actions — and related contribution and indemnity claims — were barred by the 1986 Orders.
5
Manville I,
Chubb and the other objectors appealed. The district court affirmed the bankruptcy court’s order in all material respects. It concluded that the bankruptcy court had authority to enter the Clarifying Order because it had jurisdiction to enter the 1986 Orders and that the Clarifying Order interpreted and enforced those orders.
Manville II,
The objectors appealed again, and this court vacated and remanded, concluding that entry of the 1986 Orders (as interpreted by the Clarifying Order) exceeded the proper bounds of the bankruptcy court’s jurisdiction insofar as they enjoined state-law claims, nonderivative of the debt- or’s wrongdoing, that did not seek recompense from the Manville corpus.
Manville III,
The Supreme Court granted certiorari and then reversed.
Bailey,
The Court concluded that the Clarifying Order’s entry was a proper exercise of the bankruptcy court’s jurisdiction because it “plainly had jurisdiction to interpret and enforce its own prior orders.”
Id.
at 151,
On remand, this court concluded that Chubb was not bound by the 1986 Orders — nor, by extension, the Clarifying Order — because it had not been afforded constitutionally sufficient notice of the 1986 Orders and their attendant proceedings.
Manville IV,
In September 2010, counsel for the Direct Action Plaintiffs, claiming that all the conditions precedent had been satisfied, moved before the bankruptcy court to compel Travelers to make the payments required by the Agreements. Travelers objected, contending only that the breadth and finality conditions precedent to payment under the Agreements were unsatisfied because Chubb was now free to bring claims against it.
In re Johns-Manville Corp. (Manville V),
The bankruptcy court granted the Direct Action Settlement Counsel’s motions to compel. See id. at 615. The court concluded that the disputed conditions precedent had been satisfied. It reasoned that: (i) a Clarifying Order of the required breadth had been entered in 2004, see id. at 613-14; (ii) the Order became a “Final Order” when “it was affirmed by the Supreme Court, the court of last resort, in Bailey on June 18, 2009,” id. at 614; and, (iii) even after Manville TV’s holding that Chubb was not bound by the injunctions due to its lack of notice, the Order enjoined the bargained-for breadth of claims, id. It explicitly noted for the record that satisfaction of the release/dismissal conditions precedent was not disputed by Travelers. Id. at 608. The bankruptcy court directed Travelers to fulfill its payment obligations immediately. Id. at 615.
The district court reversed on February 29, 2012, holding that the disputed conditions precedent had not been satisfied because (i) the breadth of the language represented in each Agreement’s Exhibit A had been narrowed by this court’s
Man-ville IV
decision; and (ii) the Clarifying Order never became a “Final Order” as defined in the Agreements.
In
re
Johns-Manville Corp. (Manville VI),
DISCUSSION
We review a bankruptcy court’s decision that has subsequently been appealed to the district court “independently.”
In re Baker,
a) Contested Conditions Precedent
The interpretation of unambiguous settlement-agreement terms is a question of law subject to
de novo
review.
See Tourangeau v. Uniroyal, Inc.,
1) Breadth and Finality of the Clarifying Order
The parties primarily contest whether: (i) the breadth of the bankruptcy court’s Clarifying Order met the breadth requirement in Exhibit A of the Agreements; and (ii) the Clarifying Order became “final” within the definition of the Agreements. These questions, of course, govern whether the conditions precedent to Travelers’ obligation to pay have been satisfied. We conclude that they have been satisfied.
A) Breadth
Under both the Statutory and Hawaii Direct Action Settlement Agreements, the relevant condition precedent requires entry of “a Clarifying Order containing prohibitions against Claims at least as broad as those contained in Exhibit A....” App. at 231, 269. Similarly, under the Common Law Direct Action Agreement, the relevant condition precedent requires the “[e]ntry of an order or orders of the Bank
We begin by observing that the injunc-tive languagé found in each Agreement’s appended Exhibit A was included, nearly verbatim, in the Clarifying Order. Travelers concedes as much. But Travelers argues, and the district court agreed, that this court’s holding in
Manville TV
diminished the reach of the Clarifying Order because the order became “jurisdietionally void” as to Chubb,
The Clarifying Order’s injunctive language was affirmed in
Bailey
and has not been altered since. In
Bailey,
the Supreme Court determined that the bankruptcy court had, in substance, properly interpreted the 1986 Orders in the Clarifying Order with respect to the new, nonder-ivative Direct Actions: “The Bankruptcy Court correctly understood that the Direct Actions fall within the scope of the 1986 Orders....”
Travelers had maintained that the 1986 Orders enjoined the Direct Actions throughout the 2002-2004 settlement negotiations,
Manville I,
The fact that Chubb may collaterally attack the applicability of the Clarifying Order to actions it might bring — because it never received constitutionally sufficient notice — does not alter our conclusion. The error in Travelers’ reading of the Clarifying Order stems from the conflation of two separate issues: (i) a party’s ability to collaterally attack an order for lack of constitutional notice; and (ii) the integrity of that order and the breadth of claims it bars.
Travelers’ reading asks us to adopt an interpretation of the Clarifying Order that could not reasonably have been intended by the parties, whatever Travelers’ private hopes and dreams, and is not supported by the language of the Agreements. The interpretation proposed by Travelers would have required the bankruptcy court either to: (i) certify that all potential claimants— all entities and individuals on the planet, from now until the end of time — have received constitutionally sufficient notice of the 1986 Orders and their relevant proceedings; or (ii) bar all claimants whether or not they had constitutionally sufficient notice. But neither action could have been intended by sophisticated parties because each would have been. well beyond the bankruptcy court’s power. Undoubtedly, that is the reason why no such requirement is found in the Agreements’ terms or their Exhibit As, whatever Travelers’ “se
The district court disagreed that Travelers’ position required the bankruptcy court “ ‘to enter an order clarifying that all Direct Action claims were enjoined ... regardless of whether the parties ... received constitutionally sufficient notice of the 1986 Orders.’ ”
Manville VI,
Moreover, Travelers’ interpretation amounts to a contractual term that is incapable of ever being fulfilled, because some claimant somewhere on the planet could always appear to attack the order collaterally. See id. § 76 cmt. b. Such an impossible condition — with no support in contractual language and clearly not intended by the parties — would have rendered the contract a nullity from its inception. See id.
Travelers’ interpretation must be rejected for the additional reason that the parties bargained only for a clarification, not an expansion, of the 1986 Orders, and the jurisdictional reach of those Orders was already at issue at the time of negotiations. Leaving aside the separate issue, discussed supra, of whether the bankruptcy court could have extended the Orders’ scope, the portions of the Agreements at issue here evidence no intent by the parties that the Clarifying Order would do so. Manville IV, therefore, was rooted in an interpretation of the breadth of the 1986 and Clarifying Orders, but that breadth had already been determined to be coextensive with respect to the issues here and could not have been affected by our decision in that ease.
Rooted in the 1986 Orders, the Clarifying Order could bar claims only by those parties that received constitutionally sufficient notice of the 1986 Orders and relevant proceedings. As a party to the proceedings leading up to the 1986 Orders, Travelers knew the scope of notice attendant to those proceedings. For example, Travelers knew that an FCR was appointed by the bankruptcy court to represent the interests of future asbestos claimants, but that no equivalent FCR had been appointed regarding the interests of future indemnity and contribution claimants.
To be sure, had Travelers believed that the bankruptcy court exercised
in rem,
as opposed to
in personam
jurisdiction in entering the 1986 Orders, it might also have believed that the Clarifying Order’s injunction barred Chubb’s attack.
See, e.g., Manville II,
But Travelers recognized the possibility of this: “In its October 26, 2009 post-argument submission, Travelers argued that the bankruptcy court’s notice procedures relating to the 1986 Orders were
Nonetheless, the pertinent portions of the Agreements did not provide for an injunction any greater than that contained within the 1986 Orders, nor did they address issues of notice or due process. A court “will not imply a term where the circumstances surrounding the formation of the contract indicate that the parties, when the contract was made, must have foreseen the contingency at issue and the agreement can be enforced according to its terms.”
Reiss v. Fin. Performance Corp.,
We therefore hold the Clarifying Order contains an injunction as broad as, or substantially in the form of, that contained in the Agreements’ Exhibit As.
B) Finality
We next consider whether the Clarifying Order became final and unap-pealable after the Supreme Court’s ruling in
Bailey.
Travelers argues here, and the district court concluded, that when
Man-ville IV
“reversed” the district court’s decision “as to Chubb,”
As noted, under the Agreements, a “Final Order” is an order from which no appeal is taken or one that has been “affirmed by the highest court to which such order was appealed or certiorari has been denied and the time to take any further appeal or petition for certiorari shall have expired.” App. at 227-28, 265, 304.
In reviewing the 2004 Orders,
Bailey
rejected the jurisdictional challenges brought by Chubb and the other objectors. It determined that the 1986 Orders, having been final for decades, were no longer subject to challenges to the bankruptcy court’s power to enjoin third-parties from bringing claims that did not affect the
res
of the bankruptcy estate against nondebt-ors.
Bailey,
Therefore, the pertinent portion of the injunction contained within the Clarifying Order, as an extension of the 1986 Orders, was similarly not subject to challenges regarding the bankruptcy court’s subject matter jurisdiction. Once Bailey determined that the bankruptcy court had jurisdiction to interpret the scope of the 1986 Orders, the Clarifying Order became a “Final Order” under the Agreements’ definition.
Travelers argues that: (i)
Bailey’s
remand to this court, and (ii) this court’s subsequent reversal of the district court in
Manville IV,
indicate that the Clarifying
First, the Supreme Court in
Bailey
reversed
Manville
III’s vacatur of the 2004 Orders (for the bankruptcy court’s purported lack of jurisdiction). This effectively reinstated the 2004 Orders, including the Clarifying Order. The Supreme Court’s remand with respect to Chubb’s due process argument had no bearing on the Clarifying Order’s finality. The case was remanded for a determination of whether Chubb failed to receive constitutionally sufficient notice of the 1986 Orders and whether Chubb was thus bound by them and the Clarifying Order.
Second, while Manville IV reversed as to Chubb, it did not alter any aspect of the Clarifying Order, the meaning of which is discussed in detail above. The fact that Chubb is not bound by the 1986 Orders does not, therefore, render the 1986 Orders any less “final.” In sum, neither Bailey nor this court’s holding in Manville IV deprived the Clarifying Order of finality-
As the Supreme Court recognized, “the 1986 Orders became final on direct review over two decades ago.”
Therefore, the Clarifying Order became final, as that term is defined in the Agreements, once Bailey was issued.
2) Conditions Precedent Regarding Releases/Dismissals
We next consider the Agreements’ conditions precedent that require either the escrowing of a certain number of releases or the dismissal of claims with prejudice. We hold that Travelers’ arguments in that regard are waived.
For Travelers’ payment obligation to mature under the Hawaii Direct Action Settlement, plaintiffs must dismiss with prejudice all claims against Travelers. Under the Common Law Direct Action Settlement Agreement, at least 14,000 general releases must be executed and delivered into escrow before Travelers is required to pay into the settlement fund.
Travelers argues that these conditions precedent have not been satisfied. Appellants assert that Travelers has waived these arguments by failing to raise them properly before the bankruptcy court in its papers in opposition to appellants’ motions to compel.
The motions to compel by their very nature, and explicitly to boot, put the various issues regarding satisfaction of the conditions precedent in play. Travelers’ opposition to the motions recognized this by claiming that the conditions precedent regarding the breadth and finality of the Clarifying Order were not satisfied. As a result, the bankruptcy court understood, and noted explicitly, that Travelers raised no objection regarding the release/dismissal conditions precedent. It stated:
Pursuant to the Settlements, Travelers’ payment obligations are contingent upon the satisfaction of three conditions precedent. These conditions, stated in general terms, are as follows: (a) entry of an order by this Court that becomes a “Final Order” clarifying that the Direct Actions were, and had always been, barred by this Court’s injunction contained in the 1986 Orders ...; (b) entryof an order, that becomes a “Final Order” approving the proposed Settlements; and (c) the execution and delivery into escrow of a specified number of General Releases.... None of the Parties disputes that conditions (b) and (c) have been satisfied.
Manville V,
Once the bankruptcy court determined that the Clarifying Order met the breadth and finality requirements, it ordered briefing and held oral argument regarding the issue of whether plaintiffs were entitled to interest on the settlement proceeds based on Travelers’ breach. Id. at 615. The arguments that Travelers sought to raise were that the motions to compel lacked adequate supporting evidence that the release/dismissal conditions had been met.
The bankruptcy court did not rule on the merits of those arguments. At the oral argument, the bankruptcy court noted Travelers’ earlier concession that certain conditions precedent had been satisfied: “If I recall back in all of the Sturm [and] Drang here, we had conditions which we’ll label A, B and C. And I think Travelers certainly conceded that B and C were met and claimed that A was not met. I opined otherwise. And that’s where we stand.” App. at 857.
On appeal to the district court, Travelers argued again that the release/dismissal conditions had not been satisfied. The district court did not reach these arguments, having found that the conditions precedent regarding scope and finality had not been fulfilled. See
Manville VI,
These arguments were available to Travelers in the bankruptcy court, and Travelers has not offered any reason for its failure to raise these issues in a timely manner in that court. Although we have discretion to consider a waived argument where necessary to avoid manifest injustice, “the circumstances normally do not militate in favor of an exercise of discretion to address ... new arguments on appeal where those arguments were available to the [parties] below and they proffer no reason for their failure to raise the arguments below.”
In re Nortel Networks Corp. Sec. Litig.,
In its brief on appeal, Travelers notes only that it raised these issues in the district court and does not claim to have raised them in its opposition in the bankruptcy court to the motions to compel. In opposing those motions, Travelers argued to the bankruptcy court only that the condition precedent regarding breadth and finality called for denial of the motions. Clearly, a failure to satisfy other conditions precedent should have been raised at that time. Instead, Travelers, which has had the benefit of competent, imaginative, and meticulous counsel, waited until the bankruptcy court disposed of the arguments before it on the motions to compel and turned to the prejudgment interest question. Under these circumstances, we see no reason to exercise our discretion to entertain Travelers’ untimely arguments. We, therefore, consider these arguments waived.
c) Calculation of Prejudgment Interest
Finally, we consider whether the bankruptcy court’s award of prejudgment interest was appropriate and, if so, whether the court erred in determining the date from which the award was calculated.
Travelers argues that the award is inappropriate because the Agreements do not include an express provision regarding prejudgment interest. Under New York law, however, the beneficiaries of the settlements are entitled to statutorily prescribed interest: “Interest shall be recovered upon a sum awarded because of a
Travelers argues further that the bankruptcy court erred in determining the date interest began to accrue. A court’s decision to award prejudgment interest running from a date certain is a question of fact,
see Ginett v. Computer Task Grp., Inc.,
Travelers asserts that no “Final Order” as defined by the Agreements could have existed until the proceedings were concluded, which, according to Travelers, was November 29, 2010, when the Supreme Court denied Travelers’ petitions for certiorari and mandamus with respect to Manville TV. This argument assumes incorrectly that Chubb’s due process claim had any bearing on the finality of the Clarifying Order. As discussed above, however, that is not the case. The bankruptcy court did not err in its assessment of prejudgment interest.
CONCLUSION
We have considered appellees’ remaining arguments and find them to be without merit. For the foregoing reasons, the order of the district court is vacated, and we remand with instructions to reinstate the order of the bankruptcy court.
Notes
. The nature of the various appellants will become clear, to the extent relevant, in the course of this opinion. The Asbestos Personal Injury Plaintiffs are six asbestos personal injury claimants who stand to recover from the Common Law Settlement Trust.
. A “direct action” is "[a] lawsuit by a person claiming against an insured but suing the
. As noted by the Supreme Court in
Travelers Indem. Co. v. Bailey,
. Although the language of the Common Law Direct Action Settlement Agreement differs somewhat from that of the Statutory and Hawaii Direct Action Settlement Agreements, we find, as did both the district court and the bankruptcy court, that the distinctions are not meaningful with regard to the issues on appeal.
See In re Johns-Manville Corp. (Manville VI),
. Specifically, the bankruptcy court determined that potential claims by insurers such as Chubb were properly barred by the 1986 Orders.
In re Johns-Manville Corp. (Manville I),
Nos. 82 B 11656, 82 B 11657, 82 B 11660, 82 B 11661, 82 B 11665, 82 B 11673, 82 B 11675, 82 B 11676(BRL),
. Travelers filed petitions for writs of certiora-ri and mandamus with the Supreme Court, and the petitions were denied on November 29, 2010.
See Travelers Indem. Co. v. Chubb Indem. Ins.
Co., - U.S. -,