Lippe v. Bairnco Corp.

• Decision Date: 14 March 2003
• Docket Number: No. 96 CIV. 7600(DC).,96 CIV. 7600(DC).
• Citation: 249 F.Supp.2d 357
• Parties: Richard A. LIPPE, Archie R. Dykes, and John J. Robbins, as Trustees for Keene Creditors Trust, Plaintiffs, v. BAIRNCO CORPORATION et al., Defendants.
• Court: U.S. District Court — Southern District of New York

249 F.Supp.2d 357

Richard A. LIPPE, Archie R. Dykes, and John J. Robbins, as Trustees for Keene Creditors Trust, Plaintiffs, v. BAIRNCO CORPORATION et al., Defendants.

No. 96 CIV. 7600(DC).

United States District Court, S.D. New York.

March 14, 2003.

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Levy Phillips & Konigsberg, LLP by Stanley J. Levy, Esq., Brian T. Fitz-Patrick, Esq., Benjamin Schneider, Esq., Lizabeth Burrell, Esq., New York City, Saiber Schlesinger Satz & Goldstein, LLC by David R. Gross, Esq., Geoffrey Gaulkin, Esq., Christopher Chiafullo, Esq. Whitney Chelnik, Esq., James H. Gianninoto, Esq., Christina Dente, Esq., Newark, NJ, Budd Larner Rosenbaum Greenberg & Sade, P.C. by Kathleen Marchetti, Esq., William D'Annunzio, Esq., Anthony DiMaggio, Esq., Short Hills, NJ, for Plaintiffs.

Debevoise & Plimpton by John H. Hall, Esq., Steven Klugman, Esq., Jeremy Feigelson, Esq., J. Paul Oetken, Esq., Steve Vaccaro, Esq., Jennifer R. Cowan, Esq., Caroline H. Luckenbach, Esq., Ross Hirsch, Esq., Schulte Roth & Zabel LLP by Irwin J. Sugarman, Esq., Brooks R. Burdette, Esq., David K. Momborquette, Esq., Michael S. Chernis, Esq., Mary Morabito Rosewater, Esq., Aron Egan Weiss, Esq., New York City, McCarter & English, LLP by Charles F. Rysavy, Esq., Alissa Pyrich, Esq., Newark, NJ, Abowitz, Timberlake & Dahnke, P.C. by Murray E. Abowitz, Esq., Oklahoma City, OK, for Defendants.

OPINION

CHIN, District Judge.

In 1993, after more than 100,000 asbestos lawsuits had been brought against it, Keene Corporation ("Keene") filed for bankruptcy. In this case, plaintiffs, the Trustees of the Keene Creditors Trust (the "Trust"), contend that Keene knew in the early 1980s, more than a decade before it went into bankruptcy, that someday it would be overrun by asbestos personal injury cases. Plaintiffs contend that Keene and its management consequently concocted a grand scheme to engage in a series of corporate transactions to hide Keene's assets from future asbestos claimants. Plaintiffs allege that Keene carried out this series of fraudulent conveyances over the course of the 1980s with the assistance of its lawyers and outside auditors.

Plaintiffs have been unable, however, to support their theory with any concrete evidence. To the contrary, on the record before the Court, no reasonable jury could find that Keene and its officers, directors, lawyers, and auditors engaged in any scheme to defraud. Although the asbestos cases were a real concern to Keene as early as the 1970s, the evidence shows, as a matter of law, that there were no fraudulent conveyances here. Instead, a reasonable jury could only find that the transactions were legitimate. The purchasing entities gave Keene $273.6 million in consideration for the transferred assets, and plaintiffs have presented no admissible evidence to show that less than fair value was paid. Moreover, Keene had more than $390 million in insurance coverage for the asbestos claims as well as other substantial assets. Keene could not predict the future, and it had no reason to know, at the time of the transfers, that years later it would be rendered insolvent by a flood of asbestos filings.

Before the Court are the motions of defendants Bairnco Corporation ("Bairnco"), Kaydon Corporation ("Kaydon"), the Genlyte Group, Inc. ("Genlyte"), Kasco Corporation ("Kasco"), Shielding Systems Corporation ("Shielding"), Arlon, Inc. ("Arlon"), and Glenn W. Bailey for summary judgment dismissing the amended complaint. Also before the Court are two additional motions filed by plaintiffs after the summary judgment motions were filed, briefed, and argued: a motion to substitute a new valuation expert or alternatively to submit a supplemental expert report and a motion to supplement the summary judgment record.

Plaintiffs' motions are denied, for plaintiffs have had a full and fair opportunity to litigate this case and defendants would be severely prejudiced if discovery and the record were reopened now. Accordingly, I decide the summary judgment motions on the basis of the existing record. Based on that record, I conclude that no reasonable jury could find in favor of plaintiffs. Defendants' motions are granted and plaintiffs' claims are dismissed.

BACKGROUND

A. The Facts

The facts are summarized in the Court's prior decisions in this case. See, e.g., Lippe v. Bairnco Corp., 288 B.R. 678, 681-85 (S.D.N.Y.2003); Lippe v. Bairnco Corp., 230 B.R. 906, 908-11 (S.D.N.Y. 1999); Lippe v. Bairnco Corp., 225 B.R. 846, 850 (S.D.N.Y.1998); Lippe v. Bairnco Corp., 218 B.R. 294, 297-300 (S.D.N.Y. 1998).

For purposes of these motions, I set forth the facts in detail, based on the evidence presented, drawing all reasonable inferences and resolving all conflicts and ambiguities in the evidence in favor of plaintiffs.

1. The Asbestos Liabilities

a) The Onset of Claims

Keene was created in 1967 when Bailey and others took over a small packaging company and renamed it Keene Corporation. (Bailey Dep. at 104-06, 108-09). With Bailey as its Chairman and President, Keene was conceived as a conglomerate—a corporation with businesses in different industries. (Bailey Decl. ¶¶ 2, 24).

In 1968, Keene acquired the Baldwin-Ehret-Hill Company ("BEH") for about $8 million. BEH was in the insulation business and its products contained asbestos. Keene operated the business through a subsidiary, and it stopped manufacturing asbestos products in 1972. (Bailey Dep. at 126-32; Bailey Decl. 113).

In 1971, the first asbestos personal injury case was brought against BEH and Keene. (DX 6). During the 1970s, the number of asbestos cases filed against Keene increased from 32 in 1975 to 1,506 in 1979. (DXs 8, 20, 31). In 1979, a jury rendered a $450,000 verdict against Keene in the Lopez case in Florida. (DX 25).

b) Keene's Response

In 1975, Keene established an Asbestos Task Force to address its asbestos litigation. Keene also hired Anderson, Russell, Kill & Olick ("ARKO") to pursue coverage litigation against its insurers as well as lawsuits against BEH's suppliers. (DXs 9, 10, 12, 75 at DP 1033928-29; Bailey Decl. ¶¶ 4-6; Metzger Dep. at 62-63; Herner Dep. at 47^9; Mileaf Dep. at 30-32).

The Lopez verdict led Keene to devote more attention to the asbestos litigations, and by 1980, Keene had developed a comprehensive program to deal with the asbestos cases. (Bailey Decl. ¶¶5-6; Herner Dep. at 121-22; Mileaf Decl. 113; DXs 25, 26). By the start of 1980, 2,367 cases were pending against Keene around the country. (DX 31). At that time, Keene's average per-case disposition cost was about $3,300, which covered 326 cases, including the Lopez case, the net cost of which was $280,000 (the $450,000 verdict less amounts paid by other defendants). (DX 32 at LIPPE 113115, 113121). These figures did not include defense costs.

As it made a greater effort to address the asbestos claims after the Lopez verdict, Keene had some success. From 1984 through 1990, it won defense verdicts in 366 of the 379 cases it tried to verdict, a 97% success rate, and the average damages award in the 3% of cases it lost was only $14,780—a total of $192,143 in adverse verdicts in the seven-year period. (DX 485 at PETERS 10026).¹ From 1985 through 1987, Keene obtained defense verdicts—zero recovery—in all 148 cases tried to verdict. (Id.). Although most of the cases that had been filed through 1980 were considered by Keene to be meritorious (DX 450 at LIPPE 96361), by 1980 Keene saw more and more of what it judged to be meritless—or "junk"—cases. (DXs 82, 162, 228; see, e.g., DXs 93, 112 (in Billy Bell cases, many claims withdrawn and remainder settled for average of less than $800 per case)).

In June 1985, Keene and approximately 30 other asbestos defendants formed the Asbestos Claims Facility (the "ACF") to resolve asbestos claims jointly. (DX 538; see also DX 275 at LIPPE 382686-91). The ACF rules required each member to make settlement payments in every case, regardless of whether it had been sued by the particular claimant. (DX 275 at LIPPE 382732-33; Herner Dep. at 497-99). Keene was not happy with its experience in the ACF and it withdrew in 1988, along with certain other members. (DX 391 at LIPPE 382377).

In 1988, Keene and 20 other former ACF members formed the Center for Claims Resolution (the "CCR"). (Id at LIPPE 382378; DX 548). The CCR was similar in concept to the ACF, but costs were allocated for each case according to each member's market share in the industry or trade in question. (DX 391 at LIPPE 382394). Keene resolved large numbers of claims in the CCR through 1990, including more than 20,000 claims in 1989. (DX 485 at PETERS 10019). In 1990, however, Keene left the CCR because it believed that too many non-meritorious claims were being settled. (DX 433; Mileaf Dep. at 233; Bailey Decl. 114).

c) Insurance

During the 1970s, Keene made efforts to clarify and maximize its insurance coverage. Two insurers were defending and indemnifying Keene, but other insurers disavowed coverage. In 1978, Keene sued its liability insurance carriers in a coverage action. Keene prevailed in the district court in part. Keene Corp. v. INA, 513 F.Supp. 47, 50-51 (D.D.C.1981). In October 1981, on appeal, the District of Columbia Circuit gave Keene an even greater victory as the court broadened both the coverage and the duty to defend. Keene Corp. v. INA 667 F.2d 1034, 1041, 1050-51 (D.C.Cir. 1981). The Supreme Court denied certiorari in March 1982. 455 U.S. 1007, 102 S.Ct. 1644, 71 L.Ed.2d 875 (1982).

The INA decision was significant, for it resolved any continuing doubts about the availability of insurance coverage. Keene's available insurance coverage effectively totaled some $390 million, not including defense costs that were to be absorbed by Keene's insurers without charge to policy limits. (DXs 98, 101, 131 at DP 1044024, 436 at BZ 111684 n. 9; Bailey Decl. 116-8). Members of Keene management have stated under oath that, with the INA decisi...