National Gypsum Co., Matter of
| Decision Date | 24 July 1997 |
| Docket Number | No. 96-11140,96-11140 |
| Citation | 118 F.3d 1056 |
| Parties | 38 Collier Bankr.Cas.2d 722, 31 Bankr.Ct.Dec. 237, 11 Tex.Bankr.Ct.Rep. 233 In the Matter of: NATIONAL GYPSUM COMPANY, a Delaware Corporation; Aancor Holdings, Inc., a Delaware Corporation, Debtors. INSURANCE COMPANY OF NORTH AMERICA, Appellant, v. NGC SETTLEMENT TRUST & ASBESTOS CLAIMS MANAGEMENT CORPORATION, Appellee. |
| Court | U.S. Court of Appeals — Fifth Circuit |
John G. Niles, Los Angeles, CA, Stephen A. Goodwin, Carrington, Coleman, Sloman & Blumenthal, Dallas, TX, Richard David Beller, O'Melveny & Myers, Los Angeles, CA, for Appellant.
David A. Murdoch, Donald E. Seymour, Kirkpatrick & Lockhart, Pittsburgh, PA, Sander L. Esserman, Dallas, TX, for Appellee.
Appeal from the United States District Court for the Northern District of Texas.
Before GARWOOD, BENAVIDES and STEWART, Circuit Judges.
Appellees Asbestos Claims Management Corporation (ACMC) and the NGC Settlement Trust (Trust), successors to National Gypsum Company, a Chapter 11 debtor, brought this declaratory judgment adversary proceeding in the bankruptcy court seeking a declaration that collection efforts by National Gypsum's liability insurance carrier, appellant Insurance Company of North America (INA), seeking to recover certain pre-confirmation debts were violative of the Chapter 11 discharge injunction or otherwise precluded by the terms of the Chapter 11 confirmed reorganization plan. INA filed a motion to stay ACMC and the Trust's adversary proceeding in favor of arbitration pursuant to the terms of a contractual arbitration clause. The Bankruptcy Court, holding that it had discretion to refuse to order the arbitration of core bankruptcy matters, denied the motion to stay. INA appealed. The district court affirmed. INA now appeals to this Court. We affirm.
As this appeal involves the application of an arbitration provision in a contract assumed by National Gypsum Company pursuant to its confirmed plan of reorganization, a brief synopsis of National Gypsum's journey through the bankruptcy process is appropriate.
National Gypsum, a Delaware corporation with its principal place of business in Garland, Texas, was a manufacturer and supplier of products and services for the building, construction, and shelter markets. Through its various divisions, National Gypsum manufactured, sold, and distributed products serving the residential, commercial, industrial, and repair and remodeling markets. National Gypsum also performed engineering and construction services. Historically, some of the products manufactured by National Gypsum contained asbestos.
Beginning in the 1970s, National Gypsum, as well as many other producers of asbestos-containing products, were named as defendants in many lawsuits across the country involving bodily-injury claims. INA was one of National Gypsum's insurers. 1 On June 19, 1985, as a result of the plethora of asbestos bodily-injury lawsuits and in recognition of various insurance coverage disputes, National Gypsum entered into an agreement (the Wellington Agreement) with sixteen property and casualty insurers and thirty-three former asbestos products producers regarding the handling of asbestos-related bodily-injury claims. The Wellington Agreement established the Asbestos Claims Facility to evaluate, defend, and settle all pending, threatened, and future asbestos bodily-injury claims presented to it by the signatory producers and to pay settlements, judgments (except for portions of awards attributable to punitive damages), and legal expenses incurred in the defense of all asbestos bodily-injury claims advanced against the signatory producers.
The Wellington Agreement, among other things, called for signatory insurers to advance liability payments on behalf of participating asbestos producers for amounts covered by insurance contracts issued by nonsignatory insurers. 2 Signatory producers who benefitted from such payments were required by the Wellington Agreement to pursue claims against the nonsignatory insurers, to repay the amounts advanced by the signatory insurers, and to pay interest on the amounts advanced beginning two years after the date the payments were made. 3
During the relevant period, on several occasions and in amounts not material to this appeal, INA contends that it advanced payments on behalf of National Gypsum for amounts owed by National Gypsum's nonsignatory insurers. ACMC and the Trust do not contest that these payments were made on National Gypsum's behalf.
On October 28, 1990, National Gypsum and Aancor Holdings, Inc. (a Delaware corporation and 100% owner of National Gypsum's outstanding shares) filed voluntary petitions for bankruptcy protection under Chapter 11 of the Bankruptcy Code in the United States Bankruptcy Court for the Northern District of Texas, Dallas Division.
National Gypsum and Aancor filed a "Debtors' First Amended and Restated Joint Plan of Reorganization" dated September 4, 1992. The Bankruptcy Court entered an order confirming the reorganization plan on March 9, 1993. Pursuant to the reorganization plan and the confirmation order, National Gypsum assumed the Wellington Agreement. 4 INA neither objected to, nor appealed, the Bankruptcy Court's confirmation of the reorganization plan. 5
National Gypsum's reorganization plan called for the establishment of a qualified settlement fund under section 468B of the Internal Revenue Code (the "NGC Settlement Trust (Trust)"), which became the sole shareholder of the reorganized National Gypsum (which, in turn, became known as "Asbestos Claims Management Corporation (ACMC)").
In a letter to the Trust dated July 12, 1995, INA demanded payment of $3,866,055, representing the amount purportedly advanced under paragraph XX(3) of the Wellington Agreement, plus $1,027,118 accrued interest under paragraph XX(4). INA's demand letter stated that, if payment were not received within thirty days, INA would "institute formal proceedings to collect the amount due." In a letter to INA dated October 9, 1995, counsel for the Trust and ACMC stated their position that the confirmed reorganization plan had discharged National Gypsum "from the obligations asserted in the Demand Letter" and admonished INA that post-confirmation collection efforts were violative of the section 524(a) discharge injunction, section 6.5 of the reorganization plan, and section 8(a) of the confirmation order. INA, through counsel, repeated its demand in a letter dated October 13, 1995. INA asserted that, as the Wellington Agreement was assumed by the reorganized National Gypsum (ACMC) rather than assigned to the "New NGC," the obligations were not subject to discharge.
On October 20, 1995, ACMC and the Trust filed this adversary proceeding-declaratory judgment complaint against INA in the National Gypsum Company Chapter 11 case in the United States Bankruptcy Court for the Northern District of Texas, Dallas Division. The complaint alleged that National Gypsum's confirmed reorganization plan barred INA's collection efforts 6 and sought declarations from the court that (1) INA was barred from obtaining recovery by operation of the Bankruptcy Code 7 and that (2) no assets of the Trust be permitted to satisfy INA's claims regardless of ACMC's liability. 8 The complaint asserted no other defenses to the Trust and ACMC's liability for the amounts set forth in INA's demand letter other than those premised on the operation of the confirmed reorganization plan and the injunctions provided by the Bankruptcy Code; other issues, such as ACMC and the Trust's liability for post-confirmation date interest, the proper calculation of interest under the Wellington Agreement, and equitable defenses to collection were not addressed by the complaint. ACMC and the Trust sought attorneys' fees and costs.
On December 4, 1995, counsel for INA sent a letter to the CPR Institute for Dispute Resolution requesting immediate docketing of the dispute between INA, ACMC, and the Trust, citing the alternative dispute resolution provisions of the Wellington Agreement. That same day, in lieu of an answer, INA also filed a motion in the Bankruptcy Court seeking, alternatively, abstention in favor of arbitration (28 U.S.C. § 1334(c)(1)), a stay pending arbitration (9 U.S.C. §§ 1-3), or a dismissal for lack of subject matter jurisdiction (28 U.S.C. § 1334(b); 28 U.S.C. § 157(c)(1)).
On January 26, 1996, the Bankruptcy Court entered an order denying INA's motion. The Bankruptcy Court found that, as the adversary proceeding sought to ascertain whether its Confirmation Order and the reorganization plan precluded INA's claim, it had "core" jurisdiction under 28 U.S.C. §§ 157(b)(2)(B) and (C). The Bankruptcy Court, further observing that its jurisdiction was concurrent (rather than exclusive), stated that ordinarily, given the passage of time after the substantive consummation of the confirmed plan, it would have abstained in favor of the nonbankruptcy forum (where ACMC and the Trust could have asserted bankruptcy discharge, the discharge injunction, and res judicata as affirmative defenses). The Bankruptcy Court, however, noted the absence of ongoing arbitration proceedings and found that bankruptcy court was the most efficient forum to determine the issue raised in the complaint. Accordingly, the Bankruptcy Court refused to abstain or to stay the adversary proceeding pending arbitration. 9
INA appealed the denial of its motion for a stay pending arbitration under the Federal Arbitration Act (the Act), 9 U.S.C. § 3, to the District Court. INA argued that the Bankruptcy Court applied an incorrect standard for determining whether to grant a motion to stay under the Act, that the Bankruptcy Court had a duty to grant a stay pending arbitration, and that the Bankruptcy Court did not have core jurisdiction over the adversary proceeding. The District Court affirmed the Bankruptcy Court, holding...
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