In re G-I Holdings, Inc.

• Decision Date: 17 June 2014
• Docket Number: Nos. 13–3335,13–3336.,s. 13–3335
• Citation: 755 F.3d 195
• Parties: In re G–I HOLDINGS, INC., formerly known as GAF Corporation, Debtor United States Gypsum Company, Appellant No. 13–3335 Quigley Company, Inc., Appellant No. 13–3336.
• Court: U.S. Court of Appeals — Third Circuit

755 F.3d 195

In re G–I HOLDINGS, INC., formerly known as GAF Corporation, Debtor

United States Gypsum Company, Appellant No. 13–3335

Quigley Company, Inc., Appellant No. 13–3336.

Nos. 13–3335, 13–3336.

United States Court of Appeals,Third Circuit.

Argued April 8, 2014.

Filed: June 17, 2014.

Rachel S. Bloomekatz, Esq., Argued, Jones Day, Columbus, OH, Brad B. Erens, Esq., Brian J. Murray, Esq., Jones Day, Chicago, IL, Counsel for Appellant United States Gypsum Co.

John P. DiIorio, Esq., Shapiro Croland, Hackensack, NJ, Stephen D. Hoffman, I, Esq., Argued, Wilk Auslander, New York, NY, Counsel for Appellant Quigley Co. Inc.

Mark E. Hall, Esq., Dennis J. O'Grady, Esq., Riker, Danzig, Scherer, Hyland & Perretti, Morristown, NJ, Andrew J. Rossman, Esq., Argued, Scott C. Shelley, Esq., Jacob J. Waldman, Esq., Quinn, Emanuel, Urquhart & Sullivan, New York, NY, Counsel for Appellees.

Before: FISHER and SCIRICA, Circuit Judges, and MARIANI,^* District Judge.

OPINION OF THE COURT

FISHER, Circuit Judge.

Due to the rising number of asbestos-related personal injury lawsuits filed in the 1980s, a group of producers of asbestos and asbestos-containing products (“Members” or “Participating Producers”) joined together and formed the Center for Claims Resolution (the “Center”) to administer asbestos personal injury claims on behalf of the Members. The Members negotiated and signed the Producer Agreement Concerning Center for Claims Resolution (the “Producer Agreement”), which established and set forth the mechanics of the Center and the obligations of the Members. Appellants United States Gypsum Company (“U.S. Gypsum”) and Quigley Company, Inc. (“Quigley”) and the predecessor-in-interest of Appellee G–I Holdings, Inc. (“G–I”) were among the roughly twenty asbestos producers who signed the Producer Agreement, thereby becoming Members of the Center.

After G–I failed to pay its contractually-calculated share due to pay out personal injury settlements and cover Center expenses, U.S. Gypsum and Quigley were obligated to pay additional sums to cover G–I's payment obligations. G–I filed for bankruptcy and the Center, U.S. Gypsum, and Quigley each filed a proof of claim in the Bankruptcy Court seeking to recover for G–I's nonpayment under the Producer Agreement. The Center eventually settled its claim with G–I.

Although arising in the context of a bankruptcy proceeding, this case concerns claims for breach of contract under Delaware law. We are asked to decide whether, under the Producer Agreement, U.S. Gypsum and Quigley (together, the “Former Members”) may maintain a breach of contract action against G–I. We hold that the Producer Agreement permits the Former Members to pursue a breach of contract action against G–I for its failure to pay contractually-obligated sums due to the Center, in light of the Former Members' payment of G–I's share. We therefore vacate the District Court's order affirming the Bankruptcy Court's grant of summary judgment in G–I's favor.

I.

A.

Facing a growing number of asbestos-related personal injury lawsuits, a group of producers of asbestos and asbestos-containing products joined together to form the Center in order to more effectively defend against and resolve the lawsuits. The Center was incorporated as a non-profit, non-stock Delaware corporation in September 1988 to “administer and arrange for the evaluation, settlement, payment, and defense of asbestos-related bodily injury claims.” (A–684).

The Producer Agreement sets forth the Members' purposes in entering the agreement and establishing the Center. The Members stated that they “believe it is important to establish an organization that will, on behalf of all Participating Producers, resolve meritorious asbestos-related claims in a fair and expeditious manner and, where necessary, defend asbestos-related claims efficiently and economically.” (A–715). They also sought to “enter into a constructive relationship with one another and to resolve any cross or counter claims that they may have against each other.” ( Id.).

The Center was governed by a five-person Board of Directors. A producer became a Member of the Center by signing the Producer Agreement, and membership could be terminated by a Member's written notice, by a Member's bankruptcy, or by resolution of the Board of Directors. However, even after termination of membership, the former Member would “continue to have and to honor all of the obligations incurred by it [under the Producer Agreement] or on its behalf as a member prior to the effective date of its membership termination.” (A–720).

The Producer Agreement designates the Center as each Member's “sole agent to administer and arrange on its behalf for the evaluation, settlement, payment or defense of all asbestos-related claims against such Participating Producer.” (A–721). The Producer Agreement defines “asbestos-related claims” as “claims or lawsuits against any Participating Producers or the Center ... seeking monetary relief ... for bodily injury, sickness, disease or death, alleged to have been caused in whole or in part by any asbestos or asbestos-containing product.” (A–716). After settling or otherwise resolving claims on behalf of the Members, the Center would bill and collect each Member's allocated share of liability payments and expenses based upon a formula set forth in an attachment to the Producer Agreement.

If a Member failed to pay its share of liability payments or expenses in a timely manner, the Producer Agreement provides that “the Center's Board of Directors may direct the Center to institute an ADR on behalf of the Center's Participating Producers against such Participating Producer to enforce payment of such obligations.” (A–731–32). With respect to claims between Members, the Producer Agreement provides that “[s]o long as it is a member of the Center each Participating Producer shall forego with respect to asbestos-related claims for contribution or indemnity (other than for contribution or indemnity assumed under written agreement) against all other Participating Producers that are members of the Center.” (A–730–31).

Finally, the Producer Agreement sets forth that it is “not intended to confer any rights or benefits upon any other persons” aside from Members, the Center, and some of the Members' insurers. (A–727). Other than the Center, a signatory Member, or a Member's insurer, “[n]o person ... shall have any legally enforceable rights under the Agreement.” ( Id ). “All rights of action for any breach of this Agreement by any signatory hereto are hereby reserved to the Center, Participating Producers and to Supporting Insurers that are paying unallocated expenses incurred by the Center.” ( Id.).

G–I is the successor-in-interest to GAF Corporation, which was named in a large number of asbestos-related lawsuits. G–I's membership in the Center was terminated by the Center's Board of Directors after the Board determined that G–I had breached the Producer Agreement by failing to pay its share of settlements and expenses. G–I's termination was effective January 17, 2000. Shortly after the termination of G–I's membership, the Center notified G–I that it owed the Center almost $300 million and commenced an ADR for payment. The ADR was stayed once G–I filed for bankruptcy in January of 2001. The Center sought additional payments from the remaining Members to satisfy G–I's share of settlements and expenses.

U.S. Gypsum and Quigley were Members of the Center at the same time as G–I. On February 1, 2001, Quigley withdrew from the Center, thereby terminating its membership. On June 25, 2001, U.S. Gypsum filed for Chapter 11 bankruptcy, which terminated its membership. U.S. Gypsum and Quigley assert that they made payments to the Center to cover the shortfall caused by G–I's failure to pay.

B.

G–I filed for Chapter 11 bankruptcy on January 5, 2001. The Bankruptcy Court fixed October 15, 2008 as the date by which all proofs of claim against any interest in the debtor had to be filed. On October 9, 2008, the Center filed a proof of claim alleging that G–I was liable to the Center for a total of $254.7 million due to its breach of the Producer Agreement.¹ The Center alleged that it paid out $29.5 million to asbestos claimants on G–I's behalf before it stopped paying out G–I's share of the settlements to asbestos claimants. It also asserted that G–I owed it $2.6 million for G–I's share of the Center's expenses. Finally, the Center claimed damages for settlement agreements that asbestos claimants had voided after G–I's membership terminated. Although the Center had not paid out any of these settlements, it claimed that G–I owed it $222.6 million as damages for the settlements that would not have been voided but for G–I's breach. In its proof of claim, the Center did not state whether it had sought reimbursement from the remaining Members of the Center for the $29.5 million it paid on G–I's behalf.

Both of the Former Members filed a separate proof of claim seeking to recover sums paid to the Center to cover G–I's obligations. U.S. Gypsum filed its proof of claim on October 15, 2008, asserting a breach of contract claim. U.S. Gypsum maintained that in November 2000, the Center sought reimbursement from the remaining Members of the Center, including U.S. Gypsum, for the Center's payment of $30 million to asbestos claimants on G–I's behalf. U.S. Gypsum paid roughly $6.3 million to the Center to reimburse the Center for the payments made on G–I's behalf. Quigley filed a proof of claim on October 13, 2008 seeking unliquidated damages for G–I's breach of the Producer Agreement. G–I filed objections to the proofs of claim.

The Center and G–I settled the Center's claim against G–I seeking $254.7 million for a cash payment of $9.9 million. On September 4, 2009, G–I moved for approval of the Settlement Agreement in the Bankruptcy Court. The Former Members objected to the settlement and sought clarification that the Settlement...