In re Grossman's Inc.

• Decision Date: 09 June 2008
• Docket Number: Bankruptcy No. 97-00695 (PJW).,Bankruptcy No. 97-00696(PJW).,Adversary No. 07-51602.,Bankruptcy No. 97-00697(PJW).
• Citation: 389 B.R. 384
• Parties: In re GROSSMAN'S, INC., et al., Debtors. Jeld-Wen, Inc., f/k/a Grossman's Inc., Plaintiff, v. Mary Van Brunt and Gordan Van Brunt, Defendants.
• Court: U.S. Bankruptcy Court — District of Delaware

389 B.R. 384

In re GROSSMAN'S, INC., et al., Debtors Jeld-Wen, Inc., f/k/a Grossman's Inc., Plaintiff, v. Mary Van Brunt and Gordan Van Brunt, Defendants.

Bankruptcy No. 97-00695 (PJW).

Bankruptcy No. 97-00696(PJW).

Bankruptcy No. 97-00697(PJW).

Adversary No. 07-51602.

United States Bankruptcy Court, D. Delaware.

June 9, 2008.

Frederick B. Rosner, Duane Morris LLP, Wilmington, DE, Christopher M. Alston, Foster Pepper PLLC, Seattle, WA, to Plaintiff, JELD-WEN, Inc.

Daniel K. Hogan, The Hogan Firm, Wilmington, DE, Sander L. Esserman, Cliff I. Taylor, Stutzman, Bromberg, Esserman & Plifka, P.C., Dallas, TX, for Defendants, Mary Van Brunt and Gordan Van Brunt.

FINDINGS OF FACT AND CONCLUSIONS OF LAW

PETER J. WALSH, Bankruptcy Judge.

INTRODUCTION

Plaintiff JELD-WEN, inc. ("JELWEN") is successor-in-interest to Grossman's Inc., GRS Holding Company, Inc. and GRS Realty Company, Inc., as reorganized debtors (collectively, "Grossman's").

This Court confirmed Grossman's chapter 11 plan of reorganization (the "Plan") in December 1997. Pursuant to the Plan and the order confirming it, all claims against Grossman's were discharged. Through the Plan JELD-WEN acquired all of the stock of and subsequently merged with Grossman's. Almost ten years later, in May 2007, Defendants Mary and Gordan Van Brunt (the "Van Brunts") sued JELD-WEN and many other defendants in a New York state court for injuries allegedly due to exposure to products and materials containing asbestos. Specifically, the Van Brunts contend that Mary Van Brunt suffered from exposure to products containing asbestos which allegedly were acquired from a Grossman's store in 1977 (the "State Court Claims"). Since the events which give rise to the alleged injuries occurred decades before Grossman's Chapter 11 case, JELD-WEN contends the State Court Claims were discharged by the confirmed Plan.

In June 2007, JELD-WEN commenced this adversary proceeding with its Complaint for (1) permanent injunction enjoining defendants' prosecution of claims against JELD-WEN, inc., (2) determination that defendants' claims have been discharged, and (3) award of damages. The Complaint seeks declaratory and injunctive relief permanently enjoining the Van Brunts from prosecuting the State Court Claims. (Adv.Doc.# 1.¹) JELD-WEN also seeks an award of damages for the Van Brunts' prosecution of the State Court Claims. The Van Brunts filed their answer to the Complaint on July 27, 2007, contending the State Court Claims were not discharged, and denying all liability. (Adv.Doc.# 4.)

A pretrial order was entered on March 13, 2008. The Court conducted a brief evidentiary hearing on March 26, 2008. Counsel for the parties read deposition testimonies into the record in lieu of live testimonies.

The findings and conclusions set forth herein constitute the Court's findings of fact and conclusions of law pursuant to Feder'al Rule of Bankruptcy Procedure 7052. To the extent any of the following findings of fact are determined to be conclusions of law, they are adopted, and shall be construed and deemed, conclusions of law. To the extent any of the following conclusions of law are determined to be findings of fact, they are adopted, and shall be construed and deemed, as findings of fact.

FINDINGS OF FACT

Undisputed Facts.

The following facts are not disputed or have been agreed to or stipulated by the parties in the pretrial order:

1. Grossman's was a retailer of lumber, building materials and other home improvement products, and operated 43 stores in seven states under the names "Contractors' Warehouse," "Mr. 2nd, s Bargain Outlet," and "Grossman's Bargain Outlet."

2. Grossman's filed for protection under chapter 11 of the Bankruptcy Code on April 7, 1997.

3. This Court fixed August 4, 1997 as the deadline for filing proofs of claim (the "Claims Bar Date"). Notice of the Claims Bar Date was published in newspapers in major cities, including New York City, Dallas and Boston.

4. The Plan was confirmed by an order of this Court on December 9, 1997 (the "Confirmation Order").

5. A final report was filed and this Court entered an order closing the chapter 11 cases on June 20, 2001.

6. The Plan purports to discharge all debts and claims that arose before the effective date of the Plan.

7. The Plan provides that this Court retains jurisdiction over, among other things, the classification of claims of any creditor and to determine issues and disputes concerning the Confirmation Order or the Plan.

8. The Plan does not contain a channeling injunction authorized by 11 U.S.C. § 524(g). Indeed, it could not contain such an injunction. The use of a § 524(g) channeling injunction is limited to cases involving companies that have actually been sued for damages related to asbestos prior to the date of the bankruptcy petition. E.g., In re Eagle-Picher Industries, Inc., 203 B.R. 256 (S.D.Ohio 1996). There is no indication in the record before me that there were any asbestos related claims pending against Grossman's at the time it filed its petition.

9. During the chapter case, there was no appointment of a representative to receive notice on behalf of or to represent the interests of future asbestos claimants.

10. At the time of the chapter case, Grossman's was not aware of any product liability lawsuits based upon alleged exposure to asbestos-containing products that had been filed against Grossman's prior to their bankruptcy.

11. At the time of the chapter case, Grossman's knew of the adverse health risks associated with exposure to asbestos.

12. At the time of the chapter case, Grossman's had actual knowledge that it had previously sold asbestos containing products such as gypsum board and joint compound.

13. At the time of the chapter case, Grossman's was aware that asbestos manufacturers had been or were being sued by asbestos personal-injury claimants.

14. At the time of the chapter case, Grossman's was aware that producers of both gypsum board and joint compound were being sued for asbestos-related injuries.

15. In the State Court Claims the Van Brunts have asserted claims based upon alleged contact with products acquired from Grossman's which allegedly contained asbestos.

16. Mary Van Brunt was exposed to products that the Van Brunts claim contained asbestos, which Mary Van Brunt acquired from a Grossman's store in upstate New York during a home remodeling project in 1977.

17. The Van Brunts named approximately 57 other defendants in the lawsuit who allegedly caused Mary Van Brunt to be exposed to products containing asbestos and/or are responsible in some way for their injuries. These other defendants include the manufacturers whom the Van Brunts allege manufactured the products which Mary Van Brunt acquired from Grossman's in 1977.

18. Mary and Gordan Van Brunts' claims were unknown to them or to Grossman's at the time the Plan was confirmed.

19. Publication notice of Grossman's bankruptcy case and the Claims Bar Date did not indicate that Grossman's might have future asbestos liability.

20. Neither Mary Van Brunt nor Gordan Van Brunt filed a proof of claim in Grossman's chapter case prior to the confirmation of the Plan.

21. In March 2007 Mary Van Brunt was diagnosed with mesothelioma, a disease that can be caused by exposure to asbestos. Mary Van Brunt did not manifest symptoms of mesothelioma until late 2006.

22. JELD-WEN moved to reopen the chapter case to have this Court determine that claims such as those asserted by the Van Brunts were discharged by the Plan. On June 12, 2007, this Court entered an Order reopening this case. The Complaint was filed thereafter.

Mary Van Brunt's Exposure to Grossman's Asbestos-Containing Products.

23. Mary Van Brunt believes she was exposed to asbestos-containing products acquired from Grossman's in 1977 for remodeling projects at her home on Reist Street in Williamsville, New York. (Tr. at 12:19-25 and 15:10-19.)²

24. Mary Van Brunt does not know either the name or manufacturer of any of the products acquired from Grossman's for her remodeling projects in 1977. (Tr. at 15:10-19, 21:24-22:5, 26:6-16.)

CONCLUSIONS OF LAW

Jurisdiction and Venue.

The Court has jurisdiction over this matter pursuant to 28 U.S.C. §§ 157 and 1334, Rule 7004 of the Federal Rules of Bankruptcy Procedure, and Article 12.2(1), (3), (5), (10), (12), (14), (15) and (19) of the Plan (Doc. # 495), and Paragraph 14 of the Confirmation Order (Doc. # 813.) This is a core proceeding pursuant to 28 U.S.C. § 157(b)(2)(1) and (L). Venue is proper before this Court pursuant to 28 U.S.C. §§ 1408 and 1409. The statutory predicates for the relief requested herein are §§ 105, 524, 1141 of chapter 11 of Title 11 of the United States Code, Bankruptcy Rule 7065, and Fed.R.Civ.P. 65, and 28 U.S.C. § 2201.

It is not the function of this Court to weigh the merits of the Van Brunts' State Court Claims. The sole function here is for this Court to determine whether the State Court Claims are claims that arose prior to the effective date of the Plan and therefore barred from assertion at this time.

The Van Brunts did not have a "claim" that was discharged by the Confirmation Order.

1. JELD-WEN asserts that the Van Brunts' State Court Claims are enjoined by the Confirmation Order entered in Grossman's chapter case. Specifically, JELD-WEN relies on the injunctive provision of the Confirmation Order that bars the assertion of "claims and interests arising prior to the Effective Date." Thus, this Court must determine if the Van Brunts' State Court Claims arose before or after the effective date of Grossman's Plan.

2. It has long been the law in this circuit that a bankruptcy court must look to state law to determine when a claim or interest arises. In re Frenville Co., Inc., 744 F.2d 332 (3d Cir.1984); Schweitzer v. Consolidated Rail Corp., 758 F.2d 936, 943 (3d Cir.1985). As the Third Circuit held in Frenville, the "threshold question of when a right to payment arises, absent...