In re W.R. Grace & Co.

• Decision Date: 29 May 2008
• Docket Number: No. 01-01139.,01-01139.
• Citation: 389 B.R. 373
• Parties: In re W.R. GRACE & CO., et al., Debtors.
• Court: U.S. Bankruptcy Court — District of Delaware

Page 373

389 B.R. 373

In re W.R. GRACE & CO., et al., Debtors.

No. 01-01139.

United States Bankruptcy Court, D. Delaware.

May 29, 2008.

James E. O'Neill, Kathleen P. Makowski, Laura Davis Jones, Pachulski Stang Ziehl & Jones LLP, Wilmington, DE, Michael R. Lastowski, Duane Morris LLP, Wilmington, DE, Paula Ann Galbraith, Chicago, IL, Richard Allen Keuler, Jr., Reed Smith LLP, Wilmington, DE, Richard F. Rescho, Law Offices of Christopher E. Grell, Oakland, CA, Robert J. Dehney, Morris, Nichols, Arsht & Tunnell, Wilmington, DE, Rosalie L. Spelman, Janssen Keenan & Ciardi P.C., Wilmington, DE, Stuart B. Drowos, State of Delaware Division of Revenue, Wilmington, DE, Timothy P. Cairns, Pachulski Stang Ziehl Young Jones, Wilmington, DE, William E. Chipman, Jr., Edwards Angell Palmer & Dodge, Wilmington, DE, Curtis A. Hehn, Pachulski Stang Ziehl Young Jones & Wein, Wilmington, DE, Daniel K. Hogan, The Hogan Firm, Wilmington, DE, Paul W. Turner, The Carlile Law Firm, Marshall, TX, for Debtors.

Charles Stein Siegel, Waters & Kraus LLP, Dallas, TX, Edward 0. Moody, Edward 0. Moody, P.A., Little Rock, AR, Gary Don Parish, The Parron Parish Firm, Arlington, TX, Scott R. Bickford, Martzell & Bickford, New Orleans, LA, William Roberts Wilson, Jr., Wm. Roberts Wilson, Jr., P.A., Flowood, MS, for plaintiffs.

MEMORANDUM OPINION¹

JUDITH K. FITZGERALD, Bankruptcy Judge.

Before the court is the Motion of Anderson Memorial Hospital ("Anderson Memorial") for Class Certification. The definition of the class requested in this case specifically excludes schools, colleges, government buildings and claimants represented by other counsel. (Transcript of 7/5/07 at 176, 11, Doc. No. 16422.) Specifically, the motion states:

Anderson seeks to certify an opt-out class action on behalf of itself and the class of other property owners whose buildings were, are or will be contaminated with asbestos fibers released from asbestos-containing surfacing materials for which the Debtors are legally responsible including, but not limited to, those claims identified in Exhibit A.² The class would explicitly exclude any building for which a property damage claim is currently pending in this bankruptcy not listed on Exhibit A.

Motion of Anderson Memorial Hospital for Class Certification, Doc. No. 10014, at 2.³ The requested class is to be an opt-out class and includes South Carolina building owners and non-South Carolina claimants whose buildings are allegedly contaminated with asbestos.

For the reasons which follow, we find that Anderson Memorial has not satisfied the numerosity requirement of Fed. R.Civ.P. 23(a), made applicable to bankruptcy proceedings by Fed.R.Bankr.P. 7023(a), and we will deny the motion.

Background

The Debtors ("Grace") were involved in the manufacture of asbestos-containing surfacing treatment from 1938 through 1978. On December 23, 1992, Anderson Memorial, represented by Speights & Runyan ("S & R"), filed a class action in a South Carolina state court against Grace and a number of other former manufacturers of asbestos-containing surfacing materials on behalf of certain building owners (hereafter "Anderson Memorial building owners"). In 1994, the South Carolina Circuit Court issued an order striking out-of-state class members from the Anderson Memorial Complaint based upon the South Carolina "Door Closing Statute." Thereafter, the South Carolina action proceeded only as to in-state buildings.

On February 9, 2001, in state court in South Carolina, S & R filed an "Emergency Petition For a Rule to Show Cause Why a Conditional Class Should Not Be Certified Against W.R. Grace." The South Carolina court granted S & R's petition for emergency relief ex parte, conditionally certifying the South Carolina class. In granting the petition, the court rejected any notion that a final certification was inevitable, and clarified that the action had no precedential value as to what the court would ultimately find, had absolutely no influential value, and was issued only under exigent circumstances.⁴

Grace filed a voluntary petition in bankruptcy in this court on April 2, 2001. In a letter to counsel dated May 7, 2001, the South Carolina judge directed counsel for Anderson Memorial Hospital to draft an order to provide for certification of a class only as to three remaining defendants and not as to Grace due to the bankruptcy stay applicable to Grace. Doc. No. 13186, Appendix in Further Support of Debtors' Opposition to Anderson Memorial's Motion for Class Certification, at Tab 5. The South Carolina court entered a final Order of Certification on June 29, 2001, which did not include Grace. Id. at Tab 6. Thus, there is no pre- or postpetition Anderson Memorial class certified as to Grace. Moreover, the class, as certified against three other defendants by the state court, applies only to buildings within the State of South Carolina.

On April 22, 2002, the Bankruptcy Court approved an extensive Notice Program and set March 31, 2003, as the bar date for asbestos property, damage claims. No one appealed the order. In June of 2002, the Asbestos Property Damage Committee (hereafter "PD Committee"), of which Daniel Speights of S & R is a member and co-chairman, filed a motion seeking abatement of the requirement in the Bar Date Notice that counsel of record for asbestos property damage claimants either (1) certify that they notified their clients of the bar date by transmitting to them the proof of claim package or (2) give names and addresses to Grace so Grace could notify them directly. See Doc. Nos. 2269, 2274. After a hearing, and over Grace's objection, the PD Committee's request was granted. See Order at Doc. No. 2745. See also Doc. No. 2394, Agenda for July 22, 2002; Doc. No. 2469 (docket notation of hearing held July 22, 2002); Transcript of 7/22/02 hearing, Doc. No. 2503, at 98-105.

Over 4,000 individual property damage claims were filed before the expiration of the bar date. S & R filed approximately 3,000 of those claims. These 3,000 claims included two class proofs of claim.⁵ See e.g., Transcript of January 26, 2006, Doc. No. 11707 at 59-60. As a result S & R's withdrawal of claims, this court's expungement of other claims, S & R's lack of authority to file claims on behalf of certain claimants, see Mission Towers v. W.R. Grace, 2007 WL 4333817 at *1 (D.Del. 2007), and the definition of "class" provided by Anderson Memorial which excluded schools, colleges, certain governmental buildings and claimants represented by counsel other than S & R, only that of Anderson Memorial, is for a South Carolina building. Doc. No. 16540 at 6.⁶

Rule 23(a)

To obtain class certification the claimant must meet the elements of Fed.R.Civ.P. 23(a) and (b), made applicable to bankruptcy cases by Fed.R.Bankr.P. 7023. Rule 23(a) requires (1) numerosity, (2) commonality, (3) typicality, and (4) adequate representation as prerequisites to a class action. If the requirements of Rule 23(a) are met, the claimant must meet one of the Rule 23(b) standard before a class can be certified. With respect to Rule 23(a), we address only numerosity as we find that to be dispositive.⁷ Anderson Memorial failed to meet the requirements of Rule 23.

Numerosity requires a finding that a class representative be appointed only if joinder of all members of the class would be impracticable. In re First Interregional Equity Corp., 227 B.R. 358, 367 (Bankr.D.N.J.1998); Fed.R.Civ.P. 23; Fed.R.Bankr.P. 7023. "Impracticability does not mean impossibility but only the difficulty or inconvenience of joining all members of the class." Id. at 367-68, quoting Zinberg v. Washington Bancorp, Inc., 138 F.R.D. 397, 406 (D.N.J.1990). In this case, the property damage claim creditor universe is known because the notice of the bar date was so extensive (over 8700 property damage claimants were served and international publication notice was made)⁸ there are not enough claims left to constitute a numerous base in the first place. Of the approximately 3,000 claims originally filed by S & R only 158⁹ remained when these matters were briefed in August of 2007, over 80 of them were not part of the putative class, and only one was a South Carolina claim. See Debtors' Post-Hearing Brief in Opposition to Anderson Memorial's Class Certification Motion, Doc. No. 16540, at 17-18. If we follow the lead of the South Carolina court which limited class certification to South Carolina buildings, there would be only one claimant. This court cannot conclude that one claim satisfies the numerosity requirement. Even at 158 claims, the number is certainly manageable in a bankruptcy context.

Although the Anderson Memorial motion seeks to expand the class beyond buildings located in South Carolina (provided that the claimants do not have other counsel or do not involve government, schools or college buildings), we have been presented with no persuasive authority or argument to show (1) how the bar date can or ought to be by-passed in this case so that claimants who did not file a proof of claim by the bar date of March 31, 2003, could now participate in a class proof of claim, a motion for which was filed over two years¹⁰ after the bar date and three years after the court ordered a motion to be filed; (2) why the extensive notice procedures already utilized in the case are insufficient or would be substantially enhanced by a class certification and notice process; or (3) why any remaining claims cannot be timely adjudicated through the property damage case management process already established and working in this case. Absent persuasive analysis on these points, with which, we have not been provided, and given the resolution of several thousand property damage claims without a class claim, we do not find a basis for numerosity. We find that the numerosity requirement is not met and class certification is not warranted under Rule 23(a).

Rule 23(b)

Notwithstanding the fact that Rule 23(a) elements were...