Davis, In re

Citation730 F.2d 176
Decision Date30 March 1984
Docket NumberNo. 83-3782,83-3782
PartiesBankr. L. Rep. P 69,857 In re Ernest DAVIS, Sr., Petitioner.
CourtU.S. Court of Appeals — Fifth Circuit

Gertler & Gertler, M.H. Gertler, New Orleans, La., for appellant.

Thomas Nosewicz, R. Patrick Vance, New Orleans, La., for Johns-Manville.

Terry Frieberger, New Orleans, La., for Mine Safety.

James C. Murphy, Jr., New Orleans, La., for Home Ins.

Ralph Aucoin, Timothy G. Schafer, New Orleans, La., for Travelers Ins.

Philip Wittmann, Stephen G. Bullock, New Orleans, La., for Welsh-Norton.

On Petition for Writ of Certiorari to the United States District Court for the Eastern District of Louisiana.

Before RUBIN, JOLLY, and DAVIS, Circuit Judges.

PER CURIAM:

After Johns-Manville had filed a petition for corporate reorganization, the bankruptcy court stayed all proceedings against it and its officers. The suits of 279 asbestos workers, who claimed damages for personal injury, were then stayed by the federal district court in which these claims were pending. Counsel for the asbestos workers sought to vacate the stay by seeking certiorari in this court. The bankruptcy court cited him for contempt of its stay order by thus seeking to vacate the stay. Counsel then applied to us for a writ of prohibition to prevent the contempt proceedings. We deny both applications.

I.

Separate suits were filed by 279 asbestos workers alleging that they suffered from asbestosis, cancer caused by inhaling asbestos fibers, and other asbestos-related diseases. The original defendants in all cases were (1) Mine Safety Appliance Company; (2) Norton Company and Textron, Inc.; and (3) Johns-Manville Corporation (Manville), the executive officers of Manville, and the insurers of both Manville and its executive officers--Travelers Insurance Company and Home Insurance Company. 1 The asbestos workers sued Travelers and Home Insurance companies under a Louisiana statute which affords injured persons "a right of direct action against the insurer ... alone, or against the insured and insurer jointly and in solido ...." La.R.S. Sec. 22:655.

In 112 cases, the asbestos-worker plaintiffs have settled their claims against Manville and its executive officers, but not with the other defendants. In 247 cases, the asbestos-worker plaintiffs have settled their claims against Mine Safety Appliance Company, but not those against Norton and Textron. The cases, therefore, now fit into three categories, according to the defendants still sought to be held liable. In one group of cases, the only defendant is Norton and Textron. In a second group, the defendants are Manville, Manville's executive officers, the insurers, Norton, and Textron. Mine Safety Appliance is no longer a defendant in these two groups of cases because it has settled with the plaintiffs in each of them. In a third group, 32 cases, no settlements have been reached, and the cases are still pending against all of the original defendants.

While these cases were pending, Manville filed a petition for reorganization in the Bankruptcy Court for the Southern District of New York. The petition caused an automatic stay of proceedings against Manville pursuant to 11 U.S.C.A. Sec. 362(a). Thereafter, the District Court for the Eastern District of Louisiana stayed proceedings as to all of the defendants. The plaintiffs sought review by writ of certiorari regarding the cases in the first category, those in which the only defendant is Norton and Textron. That case was consolidated by us with two appeals. In Wedgeworth v. Fibreboard, 706 F.2d 541 (5th Cir.1983), we considered both the two appeals and the asbestos workers' writ application, and held that the automatic stays applied only to Manville, not to the codefendants. We, therefore, vacated each of the district court orders which were predicated only on the automatic stay provisions.

In two of the cases considered in Wedgeworth, however, each district court had in addition invoked its own discretionary power to grant a stay against the codefendants in the interest of justice and in control of its docket. Quoting Landis v. North American Co., 299 U.S. 248, 254-55, 57 S.Ct. 163, 164-65, 81 L.Ed. 153 (1936), we held that, in considering whether or not to enter a stay, a district court must balance the interests involved. 706 F.2d at 545. "The party seeking a stay bears the burden of justifying a delay tagged to another legal proceeding," we said. It "must make out a clear case of hardship or inequity in being required to go forward, if there is even a fair possibility that the stay for which he prays will work damage to some one [sic] else. Only in rare circumstances will a litigant in one case be compelled to stand aside while a litigant in another settles the rule of law that will define the rights of both." 2 The court must also "carefully consider the time reasonably expected for resolution of the 'other case,' for 'stay orders will be reversed when they are found to be immoderate or of an indefinite duration.' 3 ... Thus, a stay must be 'so framed in the inception that its force will be spent within reasonable limits, so far at least as they are susceptible of prevision and description.' Landis, 299 U.S. at 257, 57 S.Ct. at 167."

We concluded that "the hardship of a stay on the plaintiffs, many of whom allege that they are dying from asbestosis, is substantial and, in some instances, permanent. The grim reaper has called while judgment waits. Just as obviously, the bankruptcy proceedings are not likely to conclude in the immediate future. A stay hinged on completion of those proceedings is manifestly 'indefinite.' " 706 F.2d at 545. Finding no "clear case" of hardship against or inequity to the co-defendants sufficient to offset the prejudice to the plaintiffs, we vacated the stays. 4

Thereafter, on September 15, 1983, the bankruptcy court issued an order (the "September order") that modified its prior orders. It expressly stayed "any and all suits against any past, present or future Manville officer, director or employee or against [his or her] insurers." 5 It added that this paragraph "will be modified and amended regarding the impact of these findings and conclusions on the discovery rights of the parties," such modification to be detailed in a separate order.

On October 6, one day before the bankruptcy court issued its promised supplemental order (the October order), the Louisiana district court, in response to the asbestos workers' motion to compel discovery against Travelers Insurance Company, stayed the proceedings pending before it to the extent prescribed in the September bankruptcy court order. Imputing to the September order a scope beyond its express terms, the district court also stayed discovery against Travelers Insurance Company which was the insurer both of Manville and its officers, directors, and employees. The court reasoned that, although the bankruptcy court had not explicitly stayed discovery against the insurer, the Travelers policy was issued to Manville and afforded coverage to the described individuals "in [Travelers'] capacity as Johns-Manville's insurer." Hence, the district court considered the bankruptcy court's failure to stay discovery against Travelers in its capacity as insurer of the individuals to be inadvertent, and sought to afford the bankruptcy court a reasonable time to fashion appropriate discovery provisions. The district court declined to certify its order for interlocutory appeal pursuant to 28 U.S.C. Sec. 1292(b).

The district court's perspicacity was confirmed the next day when the bankruptcy court issued the October order. That order modified the April order to enjoin "all entities" from "commencing, conducting, or continuing any discovery proceedings against Manville's insurers in any direct action suits...."

Counsel for the asbestos workers, meanwhile, had not been idle. On the New York front, counsel filed a notice that he was appealing the bankruptcy court's September order to the district court for the Southern District of New York (the New York district court). The bankruptcy court issued its October order before that appeal was docketed, however, so counsel filed another notice of appeal, this time from the October order, on November 7. Returning to Louisiana, counsel then petitioned this court for a writ of certiorari to obtain relief from the Louisiana district court's stay. Thereafter, counsel, back again in New York, notified all parties and the bankruptcy court of his intention to move for relief from that court's stays pursuant to 11 U.S.C. Sec. 362(d). 6 Alternatively, counsel requested an order modifying the stays to permit the suits against defendants other than Manville to proceed to judgment, but not to enforcement of a judgment. The asbestos workers' counsel subsequently requested that his motion be adjourned sine die.

Manville then countered by obtaining from the bankruptcy court an order commanding counsel for the asbestos workers to show cause why he should not be held in contempt for violating the bankruptcy court's stays by seeking a writ of certiorari from this court. The asbestos workers' counsel responded by petitioning this court for a writ of prohibition directed against the show cause order in the bankruptcy court. To give us time to act on that motion, that court postponed the hearing date on the show cause order until February 23.

We later denied the petition for writ of prohibition "without prejudice to the right of petitioner to renew it should [the] necessity appear and also without implying either that this Court has jurisdiction [to issue such a writ] or [that] the petition has merit." Thereafter, we denied the asbestos workers' petition for a writ of certiorari. In the light of these developments, the bankruptcy court continued contempt proceedings "without date."

At present, then, this is the situation:

1. The Louisiana district court has enforced, by its own stay order, the order...

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