DBMP LLC v. Those Parties Listed On Appendix A To Complaint (In re DBMP LLC)
| Decision Date | 10 August 2021 |
| Docket Number | Adv. Pro. 20-03004,20-30080 |
| Parties | In re: DBMP LLC, Debtor. v. THOSE PARTIES LISTED ON APPENDIX A TO COMPLAINT and JOHN AND JANE DOES 1- 1000, Defendants. DBMP LLC, Plaintiff, |
| Court | U.S. Bankruptcy Court — Western District of North Carolina |
I. PROCEDURAL BACKGROUND
1. On October 23, 2019, CertainTeed Corporation ("Old CertainTeed"), a building products manufacturer with significant asbestos liabilities, underwent a corporate restructuring, including a Texas state law divisional merger where it divided itself into two new entities. One CertainTeed LLC ("New CertainTeed"), was essentially a mirror image of Old CertainTeed: a fully operating company which retained all of Old CertainTeed's employees, the bulk of its assets and operations, and all of its non-asbestos creditors. The other entity, DBMP LLC ("DBMP" or the "Debtor") was quite different. The merger allocated to DBMP no employees, no operations, and few assets. However, in one respect the merger was generous with DBMP: it was allocated 100% of Old CertainTeed's considerable asbestos liabilities.
2. Three months later, on January 23, 2020 (the "Petition Date"), DBMP filed a voluntary chapter 11 petition (the "Chapter 11 Case") in this bankruptcy court as well as a complaint initiating this Adversary Proceeding [Adv. Pro. Dkt. 1].
3. The complaint in turn was accompanied by a motion for a temporary restraining order, a preliminary injunction and, in the alternative, declaratory relief (the "Injunction Motion") [Adv. Pro. Dkt. 2]. Through this Injunction Motion, DBMP sought to protect New CertainTeed, some 80 affiliated entities ("Other Affiliates") and certain nonbankrupt distributors of asbestos-containing products for which Old CertainTeed had liability ("Distributors") (collectively, the "Protected Parties") from the filing or continued prosecution of actions that sought recovery on the asbestos-related claims, including claims for exposure to asbestos-containing products manufactured or sold by the Debtor's predecessor, Old CertainTeed. These, of course, were the asbestos liabilities exclusively allocated to DBMP in the divisional merger. In the alternative, the Debtor sought a declaration that the automatic stay in 11 U.S.C. § 362 applied to actions asserting or pursuing DBMP Asbestos Claims.
4. On January 27, 2020, an emergency hearing was held on the Injunction Motion, and on January 29, 2020, this Court entered a Temporary Restraining Order ("TRO") [Adv. Pro. Dkt. 21].
5. On February 6, 2020, certain asbestos personal injury claimants filed objections to the TRO [Adv. Pro. Dkt. 29-31]. Through orders entered on February 18, 2020, and after, the TRO was extended. Later with the consent of the parties, the TRO was twice extended through an evidentiary hearing and a ruling on the Injunction Motion. This extension was intended to maintain the status quo so that the estate fiduciaries and their professionals could be appointed and to permit the parties to conduct discovery.
6. Upon appointment of the Official Committee of Asbestos Personal Injury Claimants (the "ACC") on February 14, 2020 [Dkt. 155] and later the Future Claimants' Representative on June 1, 2020 [Dkt. 310] (), the parties engaged in extensive discovery.[1]
7. On January 13, 2021, the ACC filed its objection to the Injunction Motion [Adv. Pro. Dkt. 216] (the "ACC Objection"). That same day, the FCR filed his objection to the Injunction Motion [Adv. Pro. Dkt. 192] (the "FCR Objection").
8. On February 5, 2021, the Debtor filed its Omnibus Reply in Support of the Motion [Adv. Pro. Dkt. 223] in response to both the ACC Objection and the FCR Objection (the "Reply"); and on February 19, 2021, the Debtor filed the Notice of Filing of Appendix in Connection with Omnibus Reply in Support of the Motion [Adv. Pro. Dkt. 236].
9. Meanwhile, on January 13, 2021, the ACC filed a Motion to Lift the Stay Pursuant to 11 U.S.C. § 362 as to Certain Asbestos Personal Injury Claims (the "Stay Motion") in both the base bankruptcy case and this Adversary Proceeding [Dkt. 614, Adv. Pro. Dkt. 195]. In the Stay Motion, the ACC seeks to permit all asbestos claims against the Debtor to be filed, prosecuted, liquidated, and paid in the tort system with funding provided under a Funding Agreement between DBMP and New CertainTeed, as described herein.
10. On February 5, 2021, the FCR joined the Stay Motion [Dkt. 654, Adv. Pro. Dkt. 220], whereas the Debtor and New CertainTeed objected to it [Dkt. 655-656, Adv. Pro. Dkt. 221].
11. On February 11, 2021, a Stipulation and Agreed Order Regarding the Automatic Stay [Dkt. 664, Adv. Pro. Dkt. 230] was entered, providing that, "[n]otwithstanding section 362(e) of the Bankruptcy Code, the automatic stay shall not terminate as requested in the [Stay] Motion and shall remain in place pending the entry of an order by the Court adjudicating the [Stay] Motion" [Dkt. 664, Adv. Pro. Dkt. 230 at ¶ 1]. As with the extended TRO, this Stipulation was entered to maintain the status quo while the parties engaged in discovery and prepared for a hearing.
12. By consent, the Injunction Motion in the adversary proceeding and the ACC's base case Stay Motion were heard together on March 1 through 3, 2021, upon a consolidated evidentiary record. Follow up hearings were conducted on March 11 and 25, 2021.
13. We would not ordinarily detail the evidence presented at hearing. But, due to the COVID-19 pandemic, it was necessary to conduct these hearings by video conferencing technology, and the extensive evidentiary record was presented electronically. For the benefit of a reviewing court, we will briefly summarize that evidence.
14. By agreement, and to streamline the evidentiary presentation, the Parties proffered, and this Court later admitted certain testimony related to the two Motions via declaration and deposition.[2]
15. On February 23, 2021, the Debtor filed its Notice of Filing of Declarations in Support of the Motion [Adv. Pro. Dkt. 238] and, with that notice, the declarations of Charles E. Bates, Ph.D. [Adv. Pro. Dkt. 238 at 4-57] ("Bates Decl."), Joseph N. Bondi [Adv. Pro. Dkt. 238 at 59-65] ("Bondi Decl."), Robert J. Panaro [Adv. Pro. Dkt. 238 at 67-77] ("Panaro Decl."), Mark Rayfield [Adv. Pro. Dkt. 238 at 79-83] ("Rayfield Decl."), and Michael T. Starczewski [Adv. Pro. Dkt. 238 at 85-107] ("Starczewski Decl." and, together with the Bates Decl., the Bondi Decl., the Panaro Decl., and the Rayfield Decl., the "Debtor's Hearing Declarations").
16. On February 25, 2021, the Debtor filed its Notice of Filing Debtor's Exhibits for March 1, 2021, Hearing [Adv. Pro. Dkt. 243] and provided the Court with electronic and paper copies of its exhibits.
17. On February 26, 2021, the Representatives filed their Notice of Filing of Select Cross-Examination of Certain of the Debtor's Witnesses by Deposition Testimony Designation [Adv. Pro. Dkt. 245]; and on February 28, 2021, the Debtor filed its Notice of Filing of Re-Direct Examination of Witnesses by Deposition Testimony and Supplemental Designation to Previously Designated Deposition Testimony [Adv. Pro. Dkt. 248].
18. The hearing conducted March 1 through March 3, 2021 included: (a) opening statements and arguments from the Debtor, the ACC, and the FCR; (b) live testimony from two expert witnesses on certain financial and restructuring matters: Stephen Coulombe of Berkeley Research Group, LLC ("BRG"), for the Debtor, and Matthew Diaz of FTI Consulting, Inc. ("FTI"), for the Representatives; (c) subject to certain evidentiary motions in limine and reservations of evidentiary objections, proffers of the Parties' evidence described above; i.e., the Debtor's Hearing Declarations, the deposition designations and the Parties' exhibits.[3]
19. After the Hearing, on March 24, 2021, the Parties filed the Evidentiary Stipulation in which the Parties agreed that several evidentiary motions in limine would be withdrawn, all previously asserted evidentiary objections would be withdrawn, and the Parties would not oppose admission into evidence of (a) the testimony proffered at the Hearing, whether elicited live during the Hearing or submitted through declarations or deposition designations or (b) the proffered exhibits [Adv. Pro. Dkt. 302].
20. On March 31, 2021, the Parties filed post-petition briefs to address questions by the Court concerning the Texas Divisional Merger Statutes, [Adv. Pro. Dkts. 310, 311, 312]. Also, each side was invited to, and did, proffer proposed findings and conclusions (collectively, the "Post-Hearing Briefs").
21. Since the Hearing, the Debtor offered its stipulation that the personal injury claim of any claimant who (a) had a pending DBMP Asbestos Claim as of the Petition Date and (b) was alive at that time, shall be preserved (with no impairment of the claimant's personal injury damages) even if the claimant subsequently dies (the "PI Damages Agreement").[4] Although the Representatives are adamantly opposed to the preliminary injunction, no party has objected to this concession should the injunction be granted.
Holding By virtue of the Texas merger statutes, the asbestos claims of Old CertainTeed which the Representatives seek to...
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