Falise v. American Tobacco Co.
| Decision Date | 02 November 1999 |
| Docket Number | No. CV 97-7640.,CV 97-7640. |
| Citation | 241 BR 48 |
| Parties | Robert A. FALISE, Louis Klein, Jr., Frank Macchiarola, Christian E. Markey, Jr., as Trustees, Plaintiffs, v. THE AMERICAN TOBACCO COMPANY; R.J. Reynolds Tobacco Company; B.A.T. Industries, PLC; Brown & Williamson Tobacco Corporation; Philip Morris Incorporated; Liggett Group, Inc.; Lorillard Tobacco Company, Defendants. |
| Court | U.S. District Court — Eastern District of New York |
COPYRIGHT MATERIAL OMITTED
Kazan, McClain, Edises, Simon & Abrams, Oakland, CA, By James L. Stengel, Steven L. Kazan, for Plaintiffs.
Greenberg Traurig, New York, By Alan Mansfield, Stephen L. Saxl, for Defendants Lorillard Tobacco Company, Philip Morris Incorporated, and R.J. Reynolds Tobacco Company.
Shook, Hardy & Bacon, Kansas City, MO, By Gary Long, Gay Tedder, Terrence Sexton, Andrew Carpenter, for Defendants Lorillard Tobacco Company and Philip Morris Incorporated.
Winston & Strawn, Chicago, IL, By Dan Webb, Jeffrey M. Wagner, for Defendant Philip Morris Incorporated.
Riker Danzig Scherer Hyland & Perretti, Morristown, NJ, By Alan Kraus, Keith Weingold, Womble Carlyle Sandridge & Rice, PLC, Winston-Salem, NC, By Thomas D. Schroeder, Womble Carlyle Sandridge & Rice, PLC, Atlanta, GA, By R. Dal Burton, for Defendant R.J. Reynolds Tobacco Company.
Kirkland & Ellis, Chicago, IL, By David M. Bernick, James Munson, Deirdre A. Fox, for Defendants the American Tobacco Company and Brown & Williamson Tobacco
Corporation, individually and as successor by merger to the American Tobacco Company.
TABLE OF CONTENTS
I. INTRODUCTION .................................................51
II. BRIEF HISTORY OF MANVILLE ASBESTOS LITIGATION ................52
A. Before Bankruptcy in 1982 .................................53
B. Bankruptcy Proceedings, 1982-88 ...........................54
C. First Period of Trust Operation, 1988-1996 ................54
D. Second Period of Trust Operation, 1996 to Present .........55
1. New Plan ...............................................55
2. Legal Controversies ....................................55
III. PRESENT LITIGATION ...........................................55
IV. JURISDICTIONAL LAW ...........................................56
A. "Related to" Bankruptcy Jurisdiction ......................56
1. Analysis of the Four Factors ..........................57
a. Debtor .............................................57
b. Administration of the Bankruptcy Case ..............57
c. Bankruptcy Estate ..................................58
d. Distribution to Creditors ..........................58
e. Conclusion .........................................58
2. The Plan's Terms ......................................58
3. Future Claimants ......................................60
4. The Bergstrom Decision ................................60
5. Supervision of the Trust ..............................61
B. Other Jurisdictional Contentions ..........................62
V. Application of Law to Facts ..................................62
VI. Conclusion ...................................................63
Plaintiffs represent a Trust established in 1988 as a result of the bankruptcy of Johns-Manville Corporation (Manville), a producer of asbestos products. Defendants are the major tobacco product manufacturers and related entities (Tobacco). The Trust seeks recovery for Tobacco's role in contributing to asbestos related injuries. Among other theories, the Trust argues that had it been aware of the malign synergistic medical effect of smoking on those claiming compensation because of exposure to Manville's asbestos, either it or Manville would have sued Tobacco years ago for contribution.
All of plaintiffs claims are based upon state law. They nonetheless allege federal subject matter jurisdiction (competence of the district court) predicated upon the federal courts' role in establishing the Trust in the bankruptcy proceeding and its continuing power over Trust. The action was assigned to the judge of the Eastern District of New York sitting by designation in the district court for the Southern District of New York.
Defendants move to dismiss on the ground that the federal courts lack competence to adjudicate the case. The motion must be granted. It is, therefore, unnecessary to address defendants' summary judgment motion arguing that the evidence cannot support a recovery predicated on the Trust's substantive theory.
Dismissal is mandated because bankruptcy courts possess only limited competence. This deficiency is particularly apparent where, as in the instant case, the plan of reorganization has already been confirmed, and the bankruptcy proceeding terminated. Continuing jurisdiction of federal courts over litigation affecting a long-established trust such as this one is limited to relatively minor matters such as interpreting prior orders and regulating the processing of claims. It does not extend to a major suit brought by the Trust against those not a party to the bankruptcy or to any closely related proceeding.
The sordid legal disasters constituting the asbestos, the tobacco and the overlapping litigations have often been told. See, e.g., In re Johns-Manville Corp., 36 B.R. 743 (Bankr.S.D.N.Y.1984) (); Kane v. Johns-Manville Corp. (In re Johns-Manville Corp.), 843 F.2d 636 (2d Cir.1988) (); In re Joint E. and S. Dist. Asbestos Litig. (In re Johns-Manville Corp.), Bankruptcy Nos. 82 B 11656(BRL) to 82 B 11676(BRL), 1990 WL 115772 (E.D.N.Y. July 16, 1990) (); In re Joint E. and S. Dist. Asbestos Litig. (In re Johns-Manville Corp.), Bankruptcy Nos. 82 B 11656(BRL) to 82 B 11676(BRL), 1990 WL 115772 (E.D.N.Y. July 16, 1990) (); Findley v. Blinken (In re Joint E. and S. Dist. Asbestos Litig.; In re Johns-Manville Corp.), 129 B.R. 710 (E.D.N.Y.1991) (), rev'd, 982 F.2d 721 (2d Cir.1992), modified, 993 F.2d 7 (2d Cir.1993); Findley v. Blinken (In re Joint E. and S. Dist. Asbestos Litig.; In re Johns-Manville Corp), Nos. 82 B 11656(BRL) to 82 B 11264(BRL), 1992 WL 364271 (E.D.N.Y. Dec. 7, 1992) (stay of payments); Findley v. Blinken (In re Joint E. and S. Dist. Asbestos Litig.; In re Johns-Manville Corp.), 830 F.Supp. 686 (E.D.N.Y.1993) (); Findley v. Blinken (In re Joint E. and S. Dist. Asbestos Litig.; In re Johns-Manville Corp.), 151 F.R.D. 540 (E.D.N.Y.1993) (); 1,087 Va. Asbestos Disease Judgment and Settlement Creditors of the Manville Corp. Asbestos Disease Compensation Fund v. Manville Personal Injury Settlement Trust (In re Joint E. and S. Dist. Asbestos Litig.; In re Johns-Manville Corp.), 14 F.3d 151 (2d Cir.1994) (); Findley v. Laughead (In re Johns-Manville Corp.), 27 F.3d 48 (2d Cir.1994) (); Findley v. Falise (In re Joint E. and S. Dist. Asbestos Litig.; In re Johns-Manville Corp.), 878 F.Supp. 473 (E.D.N.Y.1995) (), aff'd and remanded for further findings, 78 F.3d 764 (2nd Cir.1996); Findley v. Falise (In re Joint E. and S. Dist. Asbestos Litig.; In re Johns-Manville Corp.), 929 F.Supp. 1 (E.D.N.Y.1996) ( new Plan); Paul Brodeur, Outrageous Misconduct: The Asbestos Industry on Trial (1985); Barry I. Castleman, Asbestos: Medical and Legal Aspects (4th ed.1996); National Academy of Engineering, Product Liability and Innovation 135-36 (1994); George A. Peters & Barbara J. Peters, Sourcebook on Asbestos Diseases (1980-1999) (nineteen volumes); S. Elizabeth Gibson, Mass Torts Limited Fund and Bankruptcy Reorganization Settlements: Four Case Studies 1-45 (Federal Judicial Ctr.1999); Jay Tidmarsh, Mass Tort Settlement Class Actions: Five Case Studies 47-74 (Federal Judicial Ctr. 1998); Advisory Committee on Civil Rules and the Working Group on Mass Torts, Report on Mass Tort Litigation app. E (1999) (report without appendices is reported at 187 F.R.D. 293 (1999); Thomas E. Willging, Mass Torts Problems and Proposals: A Report to the Mass Torts Working Group, 187 F.R.D. 328 (1999); Conference on Mass Torts, Mass Torts Working Group, Phila., Pa., May 27-28, 1998, § 14 (1998) (discussing National Bankruptcy Review Commission's Proposal)); Frank J. Macchiarola, The Manville Personal Injury Settlement Trust: Lessons for the Future, 17 Cardozo L.Rev. 583 (1996); Stephen Labaton, How a Company Lets Its Cash Talk, N.Y. Times, Oct. 17, 1999, § 3, at 1 (); see generally Andrews Asbestos Litig. Rep. (semi-monthly Feb. 1979 to date); Mealey's Asbestos Litig. Rep. (semimonthly Feb. 1984 to date); 1 Sourcebook on Asbestos Diseases: Case Law Quarterly (1989-1990).
For the purpose of this motion, a summary will suffice to establish that Tobacco has not been legally involved in the Trust's genesis or life. Four periods are relevant: (1) the years leading up to Manville's 1982 bankruptcy filing; (2) the pendency of the bankruptcy proceeding until the Trust began operations under an approved Plan in 1988; (3) the operation of the Trust from 1988 to 1996 (it was stayed from making payments to claimants from 1990 to 1996); and (4) the operation of the Trust...
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