Joint Eastern and Southern Dist. Asbestos Litigation, In re

Decision Date01 December 1993
Docket NumberNos. 832,836,834,621 and 837,D,835,833,s. 832
PartiesIn re JOINT EASTERN AND SOUTHERN DISTRICT ASBESTOS LITIGATION. In re KEENE CORPORATION. KEENE CORPORATION, Plaintiff-Appellee, v. Joseph FIORELLI; Victor E. Dacey; Leonard Saks; Michael Moe; X Corporation; Z Corporation; Asbestos Corporation, and all others similarly situated, Defendants, Robert G. Carlisle; Regis C. Coll; Francis S. Hanna; Harry Harbacho; Helen Kane; Sharon A. Mowry, Administratrix of the Estate of Andy Yuschak, Kansas City, Missouri; Martha Boring, Executrix of the Estate of Wilbur J. Boring, deceased; Veronica A. Fox, Administratrix of the Estate of Joseph F. Fox, deceased; Avanell Gallagher, Administratrix of the Estate of Joseph J. Gallagher, deceased; William C. Gorzelsky; Elizabeth Gorzelsky, his wife; Ethel Grove, Administratrix of the Estate of Charles G. Grove, deceased; Dorothy Kawchak, Executrix of the Estate of Mike Kawschak, deceased; Nick Kosjer; Mary Kosjer, his wife; Rosemary Luprek, Administratrix of the Estate of Steve J. Luprek, deceased; Leola March, Administratrix of the Estate of Charles March, deceased; Helen R. Petruska, Administratrix of the Estate of Joseph J. Petruska, deceased; Mary Jane Skelton, Administratrix of the Estate of Thomas Skelton, deceased; Irene Sprankle, Administratrix of the Estate of Clarence Sprankle, deceased; Janet Swanhart, Administratrix of the Estate of Raymond L. Swanhart, deceased; Eleanor Williams, Executrix of the Estate of Carl W. Williams, deceased; Catherine Yakicic, Administratrix of the Estate of Edward J. Yakicic, deceased; Victor Dacey, as individually and as Court appointed representative of the putative sub class of all asbestos claimants; Rachel Kalikstein, individually and as Executrix of the Estate of Kalman Kalikstein; Sylvia Bleiweiss, individually and as Executrix of the Estate of Arthur Bleiweiss; Semi Deutsch, individually and as Administratrix of the Estate of Eddy Deutsch, each on her own behalf and on behalf of all judgment creditor beneficiaries of certain New York State Ap
CourtU.S. Court of Appeals — Second Circuit

Russel H. Beatie, Jr., New York City (Charna L. Gerstenhaber, Peter S. Liaskos, Beatie, King & Abate, of counsel), for plaintiff-appellee.

Tybe A. Brett, Pittsburgh, PA (Thomas W. Henderson, Henderson & Goldberg, of counsel), for appellants Carlisle and Boring.

Henry P. Monaghan, New York City (Ellen P. Chapnick, of counsel), for appellant Kansas City, MO.

Gene Locks, New York City (Jonathan W. Miller, Erik Jacobs, Greitzer & Locks, of counsel), for appellants 309 Pennsylvania Settlement Creditors.

Steven J. Phillips, New York City (Robert I. Komitor, Alani Golanski, Jerry Kristal, Levy Phillips & Konigsberg, New York City, Greitzer & Locks, Philadelphia, PA, of counsel), for appellants Escrow Agreements Beneficiaries.

D. Bobbitt Noel, Jr., Houston, TX (Vinson & Elkins, of counsel), for appellant St. Paul Fire & Marine Ins. Co.

Peter G. Angelos, Timothy J. Hogan, Baltimore, MD, of counsel, for appellant Katherine I. Verdin.

Daniel J. Popeo, Paul D. Kamenar, Richard A. Samp, Washington Legal Foundation, Washington, DC, of counsel, for amicus Washington Legal Foundation.

Sherman L. Cohn, Washington, DC, for amicus Representative of Future Claimants.

Before: VAN GRAAFEILAND and WINTER, Circuit Judges, and POLLACK, District Judge. *

WINTER, Circuit Judge:

This is an appeal from Judge Weinstein's order issuing a preliminary injunction and certifying a mandatory limited-fund class action pursuant to Fed.R.Civ.P. 23(b)(1)(B). The underlying action's claim for relief is unique. It seeks a settlement with a mandatory class of all persons with present or future asbestos claims against Keene Corporation. Keene, however, does not claim that it has a right to such a settlement. Because this claim is not a case or controversy within the meaning of Article III, we vacate the district court's preliminary injunction and order the complaint dismissed.

BACKGROUND

In 1968, Keene purchased Baldwin-Ehret-Hill ("BEH"), a manufacturer of acoustical ceilings, ventilation systems, and thermal insulation products. BEH became a wholly owned subsidiary of Keene and was later merged into Keene Building Products Corporation ("KBPC"), another Keene subsidiary. From 1968 until 1972 or early 1973, BEH used asbestos in its insulation and acoustical products.

Keene's acquisition of BEH led to Keene's extensive involvement in asbestos litigation. Since 1977, Keene has been named in approximately 190,000 asbestos bodily injury claims. Keene has resolved over 95,000 of the claims, leaving roughly 98,000 claims pending against it. On average, some 2,000 new claims are filed against Keene each month, with no prospect of decline in the foreseeable future. Keene has spent $447 million on asbestos litigation so far.

As of May 31, 1993, Keene had liquid assets of $80,302,000, and non-liquid assets of $8,344,000 in the form of Keene's one operating subsidiary, Reinhold Industries, Inc. Keene has contingent assets of $25,500,000 in disputed insurance claims. Keene has current non-asbestos liabilities of $7,497,000, deferred liabilities of $2,062,000, and escrowed judgments and appeal bonds of approximately $53,225,000. Keene's net assets, therefore, are $51,362,000, including the disputed insurance claims.

Keene brought this action by filing papers styled a "Verified Class Action Complaint in Connection with Settlement" on May 13, 1993. Paragraphs 1 through 3 of the complaint claim subject matter jurisdiction based on diversity jurisdiction, 28 U.S.C. Sec. 1332(a), admiralty and maritime jurisdiction, 28 U.S.C. Sec. 1333, and supplemental jurisdiction, 28 U.S.C. Sec. 1367(a). Paragraphs 4 through 16 describe the parties. The defendants are named individuals who have asserted asbestos-related claims against Keene and a mandatory class of present or future asbestos claimants. Paragraphs 17 through 28 describe Keene's history of asbestos litigation. Paragraphs 29 through 48 recount Keene's expenditures on asbestos litigation and its current assets. Paragraphs 49 through 64, entitled "Class Action Allegations" allege facts supporting class certification and recommend subclass divisions. Paragraphs 65 through 73, entitled "The Settlement," read as follows:

65. This is a settlement class action. Keene seeks court assistance, as provided by Rule 23(b)(1)(B), to negotiate and eventually approve a settlement that fairly resolves the claims with the limited funds Keene has available.

66. The Settlement Agreement will be designed to ensure that Keene complies with its obligations to the Class, but at the same time will preserve a portion of its assets for continued operations, in order that Keene may achieve an adequate balance for the protection of its shareholders.

67. Certification of the Class for settlement purposes can avoid a potential bankruptcy of Keene by allowing the asbestos-related personal injury, wrongful death, property damage and contribution litigations against Keene to come to a successful and final resolution in an expeditious and fair manner with a minimum of transaction costs.

68. Keene is presently a defendant in approximately 98,000 asbestos-related personal injury and wrongful death actions and approximately 49 property damage actions, many of which are scheduled to commence trial in the spring and summer of 1993.

69. Continued prosecutions of the approximately 98,000 pending actions against Keene nationwide will defeat the purpose of the proposed Class Action and any chance for settlement by depleting the limited fund, thereby preventing the fair, adequate, and equitable compensation of the Class.

70. The continuation of asbestos-related personal injury, wrongful death, property damage, and contribution litigations against Keene will result in irreparable harm to Keene, the Class, and the limited fund.

71. An injunction barring all pending and future asbestos-related personal injury, wrongful death, and property damage litigation against Keene is necessary to preserve this Court's jurisdiction over the proposed class action and over the limited fund, and to protect any judgment issued herein.

72. Keene and all members of the Class, as claimants to the limited fund, are without an adequate remedy at law.

73. In the event the parties cannot reach a settlement, the order conditionally certifying the settlement class should be vacated.

Paragraphs 74 and 75 describe the "limited fund," essentially Keene's assets available to satisfy present and future asbestos claims. The remaining paragraphs, 76 through 78, specify the relief sought. In particular, paragraph 76 asks the court to "use its equitable powers to enter a declaratory judgment that Keene is not liable to defendants for any damages that relate to its manufacture and sale of products containing asbestos." Paragraph 77 asks that the court certify a class of asbestos claimants "[i]n connection with its request for a declaratory judgment." Paragraph 78 then provides: "The purpose of certifying this class is to facilitate the formation of a settlement that will mutually benefit both the claimants and Keene Corporation."

Upon filing of the complaint, Judge Weinstein referred the matter to Special Master Marvin E. Frankel for determination of the following questions:

(1) Whether the...

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