Dеcision and Order Dismissing Class Action Adversary Proceeding ■
On January 31, 1985, the bar date for filing proofs of claim for asbestos-related property damage, the Creditors Committee for Asbestos-Related Property Damage School Claimants (“Schools Committee”) filed a so-called “class” proof of claim on behalf of all schools and school districts in the United States (“school claimants”). Of the approximately 42,500 school districts in the United States, about 5,000 had timely filed individual claims pursuant to this Court’s bar order. By filing this “class” proof of claim, the Schools Committee has attempted, by an act of prestidigitation, to materialize some 37,500 entities intо these proceedings as putative creditors despite their failure to file, acknowledge or press individual claims.
Simultaneously, the Schools Committee commenced this self-styled class action adversary proceeding against the debtor, Johns-Manville Corporation (“Manville”); for damages and injunctive relief. 1 By taking these steps, the Schools Committee sought to do for its constituency what most of its membership had failed to do for themselves — present their individual property damage claims for adjudication rather than have each barred as untimely pursuant to Bankruptcy Rule 3003.
1. Facts
On August 26, 1982 Manville filed a voluntary petition for reorganization under Chapter 11 of Title 11 of the Bankruрtcy Reform Act of 1978 (“the Code”). Prior to that date, Manville had been involved as a defendant in actions by schools and school districts seeking damages and equitable relief including mandatory injunctive relief arising out of asbestos-related property damage. Pursuant to Code § 1109(b), the Schools Committee was formed on September 29,1982 to represent public and private schools and school districts with claims against Manville for asbestos-related property damage. All such actions were stayed by the filing of the petition.
Pursuant to Code § 1109(b), 2 the Schools Committee was formed on September 29, 1982 to represent public and private schools and school districts with claims against Manville for asbestos-related property damage. The Committee sent a letter to each potential school claimant advising it of the reorganization proceeding, its potential right to assert a claim against Manville, and the formation of the Committee. Thereafter, the Schools Committee negotiated with Manville to develop procedures to resolve the schools’ claims, and assisted Manville in the preparation of a special proof of claim form for property damage claimants. The Schools Committee also participated in formulating the notice procedure for property damage claims that included direct mail notification to individual school claimants.
The bar date for all property damage claims was initially established as October 31, 1984 after notice was given and a hearing held as provided for in § 102(1). The bar order provided that all “claimants including individuals, partnerships, corporations, estates, trusts, and governmental units” who failed to file proofs of claim by that date would be “forever barred from asserting such claim[s] against the debtors,” and would not be treated as creditors of Manville for the purposes of voting on, and distribution under, any plan of reorganization. See Order Fixing Bar Date for the Filing of Certain Proofs of Claims, July 16, 1984.
After entry of the original bar order, the Schools Committee provided Manville with a list of approximately 42,500 schools across the country. Manville mailed a special proof of claim form to each of the schools on the list. See Affidavit of Dennis H. Markusson in Support of Manville’s Motion to Dismiss, dated February 27,1985, at If 7. In addition, Manville mailed special proof of claim forms to each of 886 schools which had specifically requested them. Notice of the bar date was also published in the fifty largest circulation newspapers in the country, the largest circulation newspaper in each state, the largest circulation newspapers in the major metropolitan areas of Canada and in miscellaneous trade publications.
On October 17, 1984, the Schools Committee moved for a ninety day extension of the bar date to January 31, 1985. This Court granted the motion, based in large part on the Schools Committee’s undertaking to mail notice of the extension to school claimants. The Schools Committee’s application acknowledged that “the Schools
Despite the clearly appropriate efforts of Manville and the Schools Committee to provide adequate notice of the bar date to all potential school claimants, Manville estimates that by January 31,1985, the extended bar date, only 5000 school claimants had actually filed individual propеrty damage claims against Manville. 4 On that date, the Schools Committee filed a proof of claim form on behalf of a “class” represented by the named plaintiff schools and school claimants. The same underlying relief is sought in both the “class” proof of claim and the complaint which was simultaneously filed against Manville. The “Class Action Complaint for Damages and Equitable Relief” alleges, inter alia, that the presence of asbestos in class members’ schools contaminated the schools and rendered them unfit for use because of the potential for personal injury from inhalation of asbestos. The class action is grounded in negligence, strict liability, breaсh of warranty, conspiracy, and intentional tort. In addition to damages, the class seeks equitable relief in the form of restitution and a mandatory injunction requiring Manville to perform a variety of asbestos abatement and monitoring procedures.
Manville has moved to dismiss the class action on essentially two grounds. First, Manville asserts that both the Bankruptcy Rules (“Rules”) and the bar order signed by this Court required each entity alleging a property damage claim to file an individual proof of claim by the bar date. No leave was sought or granted by the Court for the filing of a class proof of claim; nor is there any authority for such a filing. Thus, according to Mаnville, the class proof of claim failed to establish the school claimants as creditors of Manville for purposes of voting and distribution, and those members of the class who failed to timely file individual proofs of claim are barred from asserting any claims against Manville by virtue of their noncompliance with the bar order.
Second, Manville argues that even if the class were limited to those schools which
For the reasons enumerated below, the Court holds that this adversary proceeding may not be maintained. Therefore, Man-ville’s motion to dismiss is granted.
II. Discussion
A. Class Proofs of Claim are not Allowable in Bankruptcy Proceedings
The Code sections governing the filing of a proof of claim are § 501, which permits creditors to file proofs of claim in a bankruptcy proceeding, and § 1111, which provides that a proof of claim is deemed filed under § 501 for any claim scheduled by the debtor.
The procedure for filing proofs of claim is set forth in the Bankruptсy Rules. Rule 3003, applicable in Chapter 11 cases states, in pertinent part, that:
Any creditor ... whose claim or interest is not scheduled or scheduled as disputed, contingent, or unliquidated shall file a proof of claim or interest within the time prescribed by subdivision (c)(3) of this rule; and any creditor who fails to do so shall not be treated as a creditor with respect to such claim for the purposes of voting and distribution.
The court shall fix the time within which proofs of claim or interest may be filed.
R. 3003(c)(2) and (3). Thus, Rule 3003 imposes a “bar date” by which time creditors must file proofs of claim or they will be precluded from participating in the reorganization proceedings. 5
In the case at bar, a large number of the school claimants did not timely file individual proofs of claim, although they were given actual and constructive notice of the bar date. Consequently, Rule 3003 bars them from asserting their claims or otherwise participating as creditors in the Man-ville reorganization. The Schools Committee nevertheless asserts that by virtue of its timely filed class proof of claim, the school claimants’ claims have been safely interposed. This Court disagrees.
With the one exception of § 501(a), which is discussed below, the Code and the Rules contain no express provisions for the filing of a class proof of claim. Indeed, Rule 3001 provides that each proof of claim must be executed by the
creditor
or
his authorized agent. See In re Grocerland Cooperative, Inc.,
Congress’ awareness of the сlass proof of claim concept is demonstrated in Code § 501(a), which expressly permits an indenture trustee to file a class proof of claim.
See
H.R.Rep. No. 595, 95th Cong., 1st Sess. 351 (1977); S.Rep. No. 989, 95th Cong., 2d
Parenthetically, even when a class is represented by an indenture trustee, individual participation is required. Voting on a reorganization plan and distributions under thе plan are made on the basis of individual claims and individual claimants.
See In re Woodmoor Corp.,
Construing § 501 to exclude class proofs of claim is amply supported by caselaw. No court in this Circuit or any other Circuit has held that a class proof of claim is cognizable in bankruptcy.
See In re GAC Corp.,
In In re Society of the Divine Savior, the court was presented with the issue of whether a class proof of claim was allowable under Chapter XI of the former Bankruptcy Act. The Court found that § 355 of the Act (the predecessor to Code § 1111) “provide[s] the stringent requirement that each and every creditor shall file his proof of claim in order to participate. [Allowing one party representing the class to file a single claim on behalf of all members of the class would allow all such creditors to participate in the proceedings and to share in any distribution without fulfilling the statutory requirements of the Bankruptcy Act,” 15 F.R.Serv.2d at 298, and disallowed the class claim.
This holding was followed in In re GAC Corp. The GAC court observed that:
[The purported class representative] has failed to refer us to even one case holding that a class proof of claim is allowable in a Chapter XI proceeding. Our own review of the cases reveals that the few courts to consider the question have reached the opposite result_ Moreover, no provision of the Bankruptcy Act or the Bankruptcy Rules specifically authorizes the filing of a class of proof of claim.
Against this vigorous precedential backdrop, the Schools Committee has attempted to file a class proof of claim for most of the nation’s schools and school districts, including those which failed to file individual claims. More than adequate individual notice of the bar date, buttressed by extensive media publication was given. No one has asserted that the school claimants were deprived of ample opportunity to file individual proofs of claim. Indeed, throughout the negotiations for an extension of the bar date, the Schools Committee assured the Court that individual proofs of claim would be forthcoming. The members of this purported “class” received notice that was “reasonably calculated” to advise them of the necessity of filing individual proofs of claim.
Mullane v. Central Hanover Bank & Trust Co.,
B. The Class Action Adversary Proceeding Must Be Dismissed
The Bankruptcy Code provides the exclusive framework for asserting claims against a debtor and adjudicating claims disputes. According to § 502, a proof of claim is deemed allowed unless the debtor or a party in interest objects. Similarly, Bankruptcy Rule 3001(f) provides that a claim, properly executed and filed in accordance with § 501, constitutes prima fa-cie evidence of its “validity and amount.”
See
3
Collier
¶ 502.01 at 502-7. In
In re Woodmoor Corp.,
Creditors who are owed money by a [debtor] will have the debts owed them resolved in one of three ways. They may choose not to file a claim against the estate; they may choose to file a claim and it may be allowed without objection, or; they may choose to file a claim, the trustee may object to it and the court will allow, disallow or modify it.
Id. at 192. The trustee or debtor-in-possession has the duty of examining еach proof of claim and objecting to the allowance of any claim that is improper.
Bankruptcy Rule 7001, unduly relied upon by the Schools Committee, contains the exclusive list of matters which are classified as adversary proceedings. The list does not include a category for the recovery of claims against the debtor. 6 On the contrary, the Advisory Note which accompanies Rule 7001 specifically provides that:
Filing of proofs of claim and the allowances thereof are governed by Rules 3001-3005, and objections to claims are governed by Rule 3007. When an objection to a claim is joined with a demand for relief of the kind specified in this Rule 7001, the matter becomes an adversary proceeding. See Rule 3007. (emphasis added).
Thus it is plain that it is neither necessary nor appropriate for a creditor to commence an adversary proceeding in order to have his claim adjudicated, “for until objection is taken and sustained, that claim stands on equal footing with all other allowed claims for purposes of distribution of the debtor’s assets.” Collier 11 502.01 at 502-16.
Several cases have addressed the issue of whether a class action adversary proceeding may be commenced by claimants in lieu of filing individual proofs of claim. In
Shulman Transport,
The Court is not adverse to applying class action principles where appropriate. Certainly, a class action may be a valuable procedural tool in the claims adjudication process if it is invoked after creditors’ claims have been validly filed and objected to. In
In re REA Express, Inc.,
Since the trustee filed broad objections to the employees’ claims on grounds generally applicable to them as a class, and since, if the trustee prevailed, all claims would be disallowed without reference to individual circumstances, it is clear that general issues predominate in this action. In fact the only individual aspects of these claims is the question of amount to be paid each individual should the employees prevail. Furthermore, if class action status is not granted, each individual plaintiff would be forced to appear and comment on the manner in which the trustee’s general objections touch upon his or her claim. Other than through the use of class action there is no means for the employees to present a single coherent voice with impact equal to the trustee’s general objection to their claims.
Id. at 814.
REA Express differs from the instant case in several significant respects. In REA, each member of the class had already timely filed an individual proof of claim. The extent of the class was thus fixed, and its members were known. Id. at 815. Furthermore, unlike REA Express, a reading of the papers in the instant case shows that the claims and possible defenses are as varied and unique as the number of potential claimants. Indeed, it may result that, aside from certain legal issues none of the property damage claims present sufficient commonality to warrant a full Rule 7023 application. Finally, and most importantly for the purposes of this opinion, Manville has not yet objected to the claims which have been filed by the individual school claimants.
This Court agrees with the reasoning of the Shulman and REA courts that the only appropriate way to assert a claim against a debtor’s estate is through the timely filing of a properly executed proof of claim. To permit persons who fail to file proofs of claim to maintain an adversary proceeding to assert their claims against the debtor would be fundamentally unfair to those creditors who have complied with the filing requirements of the Code and the Rules. Nevertheless if, and when, the court determines that for purposes of the “fair and efficient adjudication” of objections to claims a class action for specific determinations is appropriate, the court can certify the class, in accordance with Fed.R. Civ.Pro. 23. 8
C. Injunctive Relief Is Not Appropriate
Bankruptcy Rule 7001(7) provides that adversary proceedings include one which seeks “to obtain an injunction or other equitable relief.” The purpose of this rule is to embrace a request for equitable relief within the scope of the Part YII Rules, which incorporate or adapt the Federal Rules of Civil Procedure. Rule 7001(7) must also be read in the context of other sections of the Code and easelaw which provide the methodology for claims adjudication.
The Schools Committee, however, seems to believe that by couching its damage claim partially in terms of injunctive relief, the claim may be asserted against Manville by means of an adversary proceеding rather than solely by way of a proof of claim. So long as the relief sought by the school claimants comports with the Code’s definition of “claim,” the mere label of “adversary proceeding” or the request for injunc-tive relief does not alter the fact that the school claimants are precluded from recovering from the Manville estate outside of the proof of claim process. Assuming that the Schools Committee “class” claim could be pursued, which it cannot, the claim is one which could be reduced to a money judgment and therefore the equitable relief sought in the form of an injunction must be denied.
Section § 101(4) dеfines “claim” as any legal or equitable obligation of the debtor
There is no suggestion by plaintiff that dеfendant can render performance under the affirmative obligation other than by the payment of money. We therefore conclude that plaintiff has a claim against defendant within the meaning of 11 U.S.C. § 101(4), and that defendant owes plaintiff a debt within the meaning of 11 U.S.C. § 101(11).
Id. at 709.
Likewise, in
In re Robinson,
We do not know from the record whether the plaintiff would be satisfied by the tender by the defendant of the money necessary to perform the restoration, but we do know that the restoration cannot be performed without the expenditure of money. Thus ... we find all of the prerequisites to a money judgment, and see no reason to determine that the defendant’s obligation should be excluded from the Code definition of “claim”.
Id.
at 139.
Accord In re Southern Industrial Banking Corp.,
As in Kovacs and Robinson, the Schools Committee’s claim is one which can be reduced to a money judgment. Thus, their adversary proceeding is not an appropriate vehicle for adjudicating the claim. Moreover, a mandatory injunction requiring Manville to remove asbestos as requested would force Manville to expend or liquidate all of the estate assets in order to begin to comply. The Schools Committee cannot obtain such preferential treatment to the detriment of all other creditors of the estate who are awaiting their own recovery in the context of a plan or other form of liquidation.
It having been determined that the filed class action claim may not be allowed or sustained in these proceedings and for the reasons set forth above, the class action adversary proceeding is dismissed.
IT IS SO ORDERED.
Notes
. The class is defined as: "all entities which own or operate in whole or in part any public educational facilities, as defined in ¶ 198(a)(10) of the Elementary and Secondary Education Act of 1965, 20 U.S.C. § 2854, throughout the United States, excluding the New York City School District, the Los Angeles Unified School District, the City of Chicago School District, the Detroit City School District, the District of Columbia Public Schools, the Baltimore School District, the Cleveland School District, and the Cincinnati School District; and all entities which own or operate in whole or in part any nonpublic, nonprofit elementary or secondary educational facilities, including entities with religious affiliations, in the United States, to the extent that such non-profit entities are owned or operated by one or more non-profit corporations or associations nо part of the net earnings of which inures, or may lawfully inure, to the benefit of any private shareholder or individual.” The public school districts specifically excluded from the class are excluded because their counsel have expressly advised the Schools Committee that it is not authorized to represent them.
. Code § 1109(b) provides:
A party in interest, including the debtor, the trustee, a creditor's committee, an equity security holders' committee, a creditor, an equity security holder, or any indenture trustee, may raise and may appear and be heard on any issue in any case under this chapter.
. The Application stated, in paragraph 11, that: Since notice of the extension of the bar date for schools claimants should be given to the public and private schools and school districts throughout the United States, the Schools Committee believes it would place an undue burden on the clerk of this Court if the clerk were directed to notify all those affected by the [order extending the bar date]. Therefore, the Schools Committee will assume responsibility to provide notice of the extension of the bar date as directed by the Court.
In its application the Schools Committee also proposed to send notice of the extension, by mail, to all public and private schools and school districts appearing on the National Center for Educational Statistics, United States Department of Education’s computer printouts, which had been filed with the court. In addition, the Schools Committee proposed to send notices to 12 school organizations, associations, and publications.
. It has been freely acknowledged and recognized that the failure of many schools and school districts to file claims in these proceedings is conscious and deliberate and is attributable in no small measure to the reticence of a large number of school authorities to call attention to the prоblems of identification and ac-knowledgement of an undesirable asbestos problem with its attendant financial and other consequences.
. The purpose of a bar date is to provide "a definitive cut-off date past which claims may not be filed,"
In re Mellen,
. Rule 7001 defines "adversary proceeding" as: a proceeding in a bankruptcy court (1) to recover money or property, except a proceeding under § 554(b) or § 725 of the Code, Rule 2017, or Rule 6002, (2) to determine the validity, priority, or extent of a lien or other interest in property, other than a proceeding under Rule 4003(d), (3) to obtain approval pursuant to § 363(h) for the sale of both the interest of the estate and of a co-owner in property, (4) to object to or revoke a discharge, (5) to revoke an order of confirmation of a chapter 11 or chapter 13 plan, (6) to determine the dischargeability of a debt, (7) to obtain an injunction or other equitable relief, (8) to subordinate any allowed claim or interest, except when subordination is provided in a chapter 9, 11, or 13 plan, (9) to obtain a declaratory judgment relating to any of the foregoing, or (10) to determine a claim or cause of action removed to a bankruptcy court.
. Fed.R.Civ.P. 23 provides that a class action may be maintained by or against representative parties on behalf of a class only if the following prerequisites are met:
(1) the class is so numerous that joinder of all members is impracticable, (2) there are questions of law or fact common to the class, (3) the claims or defenses of the representative parties are typical of the claims or defenses of the class, and (4) the representative parties will fairly and adequately protect the interests of the class.
Fed.R.Civ.P. 23(a). In addition, before an action may be commenced as a class action the court must find that the prosecution of separate actions would create a risk of inconsistent judgments or that "the questions of law or fact commоn to the members of the class predominate over any questions affecting only individual members, and that a class action is superior to other available methods for the fair and efficient adjudication of the controversy.” Fed.R. Civ.P. 23(b).
Bankruptcy Rule 7023 makes Fed.R.Civ.P. applicable in adversary proceedings commenced in the bankruptcy court. Rule 9014 gives the bankruptcy court discretion to apply Rule 7023 to a contested matter.
. Alternatively, the court may apply Fed.R. Civ.P. 20 if it determines that the relief sought by or against the school claimants arises “out of the same transactions or occurrences and if any question of law or fact common to all these persons will arise in the action.” Fed.R.Civ.P. 20(a).