Lead Opinion
Mr. Williаms and his children (“Williamses”) brought tort claims against Placid Oil Company (“Placid”) in connection with the allegedly asbestos-related illness and death of his wife. The bankruptcy court granted Placid’s motion for summary judgment, and the district court affirmed. Because we conclude that the
I
Placid, a Texas company, owned and operated a large natural gas production and processing facility near Black Lake, Louisiana. The company filed for bankruptcy in 1986. The bankruptcy court set January 31, 1987, as the bar date by which potential creditors were required to file claims. On three occasions in January 1987, Placid published a Notice of Bar Date in the Wall Street Journal, a newspaper of national circulation available in Louisiana. The notice informed creditors of the existence of the bankruptcy case, their opportunity to file proofs of claim, relevant deadlines, consequences of not filing a proof of claim, and how proofs of claim should be filed. On September 30, 1988, Placid confirmed its Fourth Amended Plan of Reorganization (“Plan”). The court order provided that all claims against Placid that arose on or before this confirmation date were forever discharged except for Placid’s obligations under the Plan, which did not address potential future asbestos liability.
Mr. Williams worked at the Black Lake facility from 1966 to 1995. For the purposes of this proceeding, the parties agreed that Mr. Williams was occupationally exposed to insulation containing asbestos, that Mrs. Williams was exposed to asbestos dust and fibers when laundering Mr. Williams’s clothing, and that the insulation was in Placid’s care, custody, and control prior to the sale of the facility in 1988. In 2003, Mrs. Williams’s health suddenly deteriorated. She was diagnosed with the asbestos-related lung cancer mesothelioma and passed away on August 9, 2003. In March 2004, in Louisiana state court, the Williamses brought a tort action against Placid, alleging that its negligence caused Mrs. Williams’s death and attendant damages. In November 2008, Placid filed a motion to reopen its bankruptcy case, and in September 2009, Placid filed a complaint asking the bankruptcy court to determine whether the Williamses’ claims were discharged, thereby commencing this adversary proceeding.
By the early 1980s, Placid was aware, generally, of the hazards of asbestos exposure and, specifically, of Mr. Williams’s exposure in the course of his employment. Prior to the Plan’s confirmation, no asbestos-related claims had ever been filed against Placid, and the Williamses did not file any proof of claim. After confirmation, other plaintiffs commenced asbestos-related suits against Placid, but Placid has neither been found liable in nor settled any such case. To Mr. Williams’s knowledge, none of his co-workers or their spouses has ever developed mesothelioma. Additionally, Mr. Williams testified that he was generally aware of Placid’s bankruptcy but does not recall any meetings, updates, or newspaper notices regarding the bankruptcy. To date, Placid has not been found liable in any lawsuit alleging asbestos exposure at a Placid facility, nor has it paid any money to settle such a case.
The bankruptcy court granted Placid’s motion for summary judgment and denied the Williamsеs’ cross-motion. The court found that the Williamses had pre-confir-mation claims and that the claims were discharged by Placid’s constructive notice. The district court affirmed. The Williamses now appeal, contending that because the method and substance of Placid’s notice were insufficient on due process grounds, their claims were not discharged.
We review a bankruptcy court’s grant of summary judgment de novo. See In re Kinkade,
III
The Williamses first contend that the bankruptcy court erred in finding that they were “unknown” creditors for whom constructive notice of the bar date satisfied due process.
Section 523(а)(3)(A) of the Bankruptcy Code provides that a creditor’s claim may be discharged upon the bankruptcy plan’s confirmation if the “creditor had notice or actual knowledge of the case in time for ... timely filing.” 11 U.S.C. § 523(a)(3)(A); see also In re Kendavis Holding Co.,
The level of notice required by the Due Process Clause depends on whether a creditor is “known” or “unknown.” A debtor must provide actual notice to all “known creditors” in order to discharge their claims. City of New York v. New York, N.H. & H.R. Co.,
The crux of this dispute is the meaning of Crystal Oil. In Crystal Oil, the Louisiana Department of Environmental Quality (“LDEQ”) brought environmental damage claims against Crystal Oil Company after its bankruptcy plan’s confirmation. Prior to the bankruptcy, a company representative had briefly corresponded with LDEQ. The LDEQ representative knew of contamination on a plot of land and, without informing Crystal Oil of the contamination or any potential environmental claim, asked оnly whether the company owned the land. After a faulty but good-faith title investigation, Crystal Oil replied in the negative. Id. at 293-95.
We held that although the issue was factually close, the bankruptcy court’s determination that LDEQ was an unknown creditor was not clear error. Id. at 298. We first synthesized the case law: “[I]n order for a claim to be reasonably ascertainable, the debtor must have in his possession, at the very least, some specific information that reasonably suggests both the claim for which the debtor may be liable and the entity to whom he would be liable.” Id. We reasoned that LDEQ might arguably be a known creditor since the Crystal Oil employee expressed concern that “there could be environmental problems” after speaking with the LDEQ representative. Id. at 298. Moreover, the fact that the LDEQ representative had mentioned Crystal Oil’s predecessor — the previous title holder of the land — meant that Crystal Oil had notice that LDEQ might have a claim. Id. On the other hand, LDEQ’s inquiry mentioned nothing about environmental problems, and Crystal Oil lacked concrete notice of any claim. Id. We thus concluded that the bankruptcy court’s finding that LDEQ was an unknown creditor was not clear error.
Here, we clarify this Circuit’s understanding of the rule of Crystal Oil. At one extreme, the law does not require that a creditor serve upon the debtor a formal complaint in order to make himself “reasonably ascertainable” or “known.” However, at a minimum, the debtor must possess “specific information” about a manifested injury, to make the claim more than merely foreseeable.
This understanding of Crystal Oil is informed by several authorities and by our sensitivity to the policy concerns underlying bankruptcy law. First, the Supreme Court’s opinion in Mullane, the origins of
The decisions of other courts of appeals also establish that the claim of a known creditor must be based оn an actualized injury, as opposed to merely foreseeable. The Third Circuit’s Chemetron decision, which we cited favorably in Crystal Oil, held that known claimants must be “reasonably ascertainable, not reasonably foreseeable.” Chemetron Corp. v. Jones,
Two appeals court opinions are particularly persuasive because they apply Crystal Oil. Those courts concluded that creditors were “known” because the debtor knew of specific complaints or injuries. The First Circuit in In re Arch Wireless, Inc.,
Furthermore, policy concerns specific to bankruptcy weigh heavily against defining known creditors as those with merely foreseeable claims. Bankruptcy offers the struggling debtor a clean start. In the interests of facilitating this recovery and balancing due process considerations, the courts have established a practical limit to the debtor’s duty to notify creditors: Actual notice is required only for “known” creditors. We decline today to alter this limit.
Applying the above principles, we hold that the bankruptcy court did not err in finding that the Williamses were unknown creditors under the undisputed facts presented here. Although Placid knew of the dangers of asbestos and Mr. Williams’s exposure, such information suggesting only a risk to the Williamses does not make the Williamses known creditors. Here, Placid had no specific knowledge of any actuаl injury to the Williamses prior to its bankruptcy plan’s confirmation. Cf. City of New York,
The Williamses invoke a series of policy arguments that are either inapplicable or unpersuasive. They first contend that delivering actual notice to Mr. Williams “would have been simple.” The proper threshold inquiry, however, is not the cost of providing actual notice, which is inevitably negligible when contemplating only an individual creditor. Rather, the bankruptcy court must assess the rеasonableness of ascertaining known creditors. As for this threshold question, the Williamses fail to explain how Placid should have reasonably ascertained that some of its hundreds of employees (not to mention former employees) had actual asbestos-related injuries. Next, the Williamses submit that because Placid had superior knowledge of asbestos-related risks, it must bear the consequences of its choice to provide constructive notice where it had “no contemplation of future claims.” But this theory misses the bankruptcy overlay: If a debt- or has “no contemplation” of a creditor’s pre-petition claim, then that creditor is by definition unknown, and constructive notice discharges the claim upon confirmation. Finally, the Williamses emphasize the unique situation presented by the latency of asbestos-related illness. Wе are not unsympathetic to fairness concerns, but on the record and briefing before us, we again conclude that bankruptcy norms
IV
The Williamses further contend that even if they were unknown creditors, Placid’s general notices of the bar date, published in the Wall Street Journal and not mentioning potential asbestos claims, were substantively insufficient for due process purposes.
We have never required bar date notices to contain information about specific potential claims. To the contrary, we have determined that publication in the national edition of the Wall Street Journal discharges the pre-confirmation claims of unknown creditors. In re Crystal Oil,
We hold that because a bar date notice need not inform unknown claimants of the nature of their potential claims, Placid’s notices were substantively sufficient to satisfy due process. Placid’s notice informed claimants of the existence of the bankruptcy case, the opportunity to file proofs of claim, relevant deadlines, consequences of not filing a proof of claim, and how proofs of claim should be filed.
For the foregoing reasons, we AFFIRM.
Notes
. Because the Williamses do not contest on appeal the bankruptcy court’s finding that they possessed pre-confirmation claims subject to discharge, this issue is waived. Procter & Gamble Co. v. Amway Corp.,
. We reject the Williamses’ interpretation at oral argument of the Third Circuit case In re Grossman's. The Williamses asserted that under Grossman’s, sufficiency of notice hinges on whether claimants were aware of their vulnerability to asbestos or on a "reasonableness” standard. Regarding the first test, awareness of vulnerability was only one of many factors that the court in dicta recommended that the lower court consider in its discharge analysis. Another factor was "whether the claimants were known or unknown creditors.” Jeld-Wen, Inc. v. Van Brunt (In re Grossman’s Inc.),
. Although Mullane defined unknown creditors in the context of judicial settlement of accounts by the trustee of a common trust fund, in Tulsa Professional Collection Services, the Supreme Court applied the Mullane definition to the analogous context of claims discharge in bankruptcy. Tulsa Prof'l Collection Servs.,
. To use the words of Mullane invoked by the dissent, post at 164-65 n. 5, individuals who lack any actual injury have only "interests [that] are either conjectural or future,” Mullane,
. In Chemetron, the Third Circuit also recognized that a creditor could become “known” without actually entering its claim into the “books and records” of the debtor, but that the facts of that case did not present the opportunity to address the issue. Chemetron,
. The Williamses also submit that a periodical article about risks to family members of asbestos factory workers demonstrates that Placid was aware of Mrs. Williams’s potential claim. However, Mr. Williams did not work in an asbestos factory, and the Williamses have not shown that Placid was aware of the level of Mrs. Williams's exposure.
. We again note the Williamses's failure to appeal the bankruptcy court’s finding that they had dischargeable pre-confirmation claims. See supra n. 1. Furthermore, as the bankruptcy court observed, Congress can enact a solution, as it has indeed begun to do in the asbestos injury context. But we reject the Williamses’ policy-driven reliance on Congress's amendment to the Bankruptcy Code. As the bankruptcy court correctly explained, the Code provisions providing special protection to asbestos victims would not have applied to Placid's bankruptcy since Placid had never been subjected to asbestos claims. See 11 U.S.C. § 524(g). We opt not to extend the statute beyond its scope.
. Furthermore, in Shelton Property Rural Acreage, L.L.C. v. Placid Oil Co. (In re Placid Oil Co.),
. The Williamses’ reading of the case law is unpersuasive. In DPWN Holdings (USA), Inc. v. United Air Lines, Inc.,
Dissenting Opinion
dissenting:
The underlying legal issue in this case is whether a bankruptcy court may, consistent with the Constitution’s guarantee of due process, hold that a state-law wrongful-death clаim based on the death of a housewife, who fatally contracted mesothe-lioma from asbestos fibers on her husband’s work clothes, was discharged in a bankruptcy filed by her husband’s former employer fifteen years before she developed or was aware of any symptom of the disease. In my view, the bankruptcy court in this case erred in failing to recognize that such a result would violate the constitutional guarantee of due process of law. The bankruptcy court was led into this constitutional error by its misinterpretation of our decision in Lemelle v. Universal Manufacturing Corp.,
Our duty to correct the bankruptcy court’s constitutional errors as well as its misreading of Lemelle is complicated, however, by the plaintiffs’ failure to adequately brief those issues in this court. On appeal, the plaintiffs squarely address only the issue of whether the constructive notice by publication provided to unknown, future claimants, such as the latent mesothelioma victim in this case, passed constitutional muster. Nevertheless, that alleged error inextricably relates directly to, and cannot adequately be addressed without considering, a more fundamental due procеss issue,
In Mullane v. Central Hanover Bank & Trust Co.,
[m]any persons in the exposure-only category, the Court of Appeals stressed,
Family members of asbestos-expоsed individuals may themselves fall prey to disease or may ultimately have ripe claims for loss of consortium. Yet large numbers of people in this category— future spouses and children of asbestos victims — could not be alerted to their class membership. And current spouses and children of the occupationally exposed may know nothing of that exposure.
Because we have concluded that the class in this case cannot satisfy the requirements of common issue predominance and adequacy of representation, we need not rule, definitively, on the notice given here. In accord with the Third Circuit, however, we recognize the gravity of the question whether class action notice sufficient under the Constitution and Rule 28 could ever be given to legions so unselfconscious and amorphous.
Id. at 628,
Several courts and commentators have also recognized that constructive notice to such unknown — and unknowing — future claimants fails to comport with the guarantee of due process. See, e.g., In re Hexcel Corp.,
“[W]hen an individuаl cannot recognize that he or she has a claim in a bankruptcy case and, therefore, cannot make a decision about how to assert that claim, that person is functionally or constructively ‘incompetent’ for purpose of the bankruptcy case.” Bartell, supra, at 366. “These claimants ... have no ability to represent their own interests in the bankruptcy case because they cannot be given the information necessary to enable them to make decisions about those interests.” Id. at 870. Consequently, “[Constructive notice cannot reach [them because they] do not know of their claims.” Id. In other words, “[publication is not notice at all.” Id.
However, “a bankruptcy court may appropriately appoint a guardian ad li-tem” — or, stated differently, a future-claims representative — “to represent their interests in an adversary proceeding under [Bankruptcy] Rule 7017.” Id. at 367; see Fed. R. BanxR.P. 7017 (stating that Federal Rule of Civil Procedure 17 “applies in adversary proceedings”); Fed. R. Civ. P. 17(c) (permitting “a general guardian,” “a committee,” “a conservator,” or “a like fiduciary” to “sue or defend on behalf of a minor or an incompetent person” and providing that “[t]he court must appoint a guardian at litem — or issue another appropriate order — to protect a minor or incompetent person who is unrepresented in an action”); cf. 11 U.S.C. § 524(g).
These and other authorities
The record in this case fаils to demonstrate that Myra Williams was aware of either her exposure to asbestos dust and fibers or that she might someday grow ill and die as a consequence of that exposure. Under these circumstances, she was functionally incompetent to receive notice of Placid’s bankruptcy because, even if she had in fact received notice of the proceedings, she would not have been able to recognize their effect on her or to understand that her rights could be affected by them. And because there was no future-claims representative to represent her interests, the bankruptcy court erred by concluding that she received constitutionally adequate notice that her claim would be discharged in the bankruptcy if she did not participate in the proceedings. In sum, constructive notice by publicаtion to asbestos-exposed individuals with unmanifested or latent mesothelioma, without appointment of a representative for such future claimants, does not satisfy due process. As the Court said in Mullane, “[w]e have before indicated in reference to notice by publication that, ‘Great caution should be used not to let fiction deny the fair play that can be secured only by a pretty close adhesion to fact.’ ”
For these reasons, I respectfully dissent.
. For the purpose of this opinion, and unless otherwise stated, “unknown, future claim” refers to the future claim of an asbestos-exposed individual whose disease has not manifested itself by the time of the bankruptcy filing. In other words, it is a claim that is unknown to either the debtor or the potential creditor at that time.
. Because there was no evidence in the record regarding whether the claimant, the mother of two men injured in mobilе-home fire, had purchased or acquired an allegedly defective mobile home from the debtor, a manufacturer of such homes, the Lemelle court concluded:
Where, as here, the injury and the manifestation of that injury occurred simultaneously — more than three years after [the debtor] filed its petition and more than two years after the plan was confirmed, we think that, at a minimum, there must be evidence that would permit the debtor to identify, during the course of the bankruptcy proceedings, potential victims and thereby permit notice to these potential victims of the pendency of the proceedings. This record is devoid of any evidence of any pre-petition contact, privity, or other relationship between [the debtor], on the one hand, and [the mother] or the decedents, on the other. We think the absence of this evidence precludes a finding by the district court that the claims asserted by [the mother] were discharged in [the debtor]'s bankruptcy proceedings.
. "Under § 524(g), a court-appointed fiduciary stands in for ... future asbestos claimants, and the court ensures that any proposed plan is fair to them.” In re Plant Insulation Co.,
. See Wright v. Owens Corning,
. Additionally, I believe that the majority also errs in attempting to put a gloss on what constitutes a ‘‘known” claim under Mullane. In Mullane, the Court said:
As to known present beneficiaries of known place of residence, however, notice by publication stands on a different footing. Exceptions in the name of necessity do not sweep away the rule that within the limits of practicability notice must be such as is reasonably calculated to reach interested parties. Where the names and post office addresses of those affected by a proceeding are at hand, the reasons disappear for resort to means less likely than the mails to apprise them of its pendency.
Id. at 318,