Hazel v. Blitz U.S.A., Inc.
| Decision Date | 17 March 2021 |
| Docket Number | Appellate Case No. 2019-000220,Opinion No. 28016 |
| Citation | 857 S.E.2d 4,433 S.C. 120 |
| Court | South Carolina Supreme Court |
| Parties | Alice HAZEL, as guardian ad litem for Jacob N., Respondent, v. BLITZ U.S.A., INC., Fred's Stores of Tennessee, Inc., Tiger Express Varnville LLC, and James Nix, Defendants, Of Whom Fred's Stores of Tennessee, Inc. is the Petitioner. Melinda Cook, Respondent, v. Blitz U.S.A., Inc., Fred's Stores of Tennessee, Inc., Tiger Express Varnville, LLC, and James Nix, Defendants, Of Whom Fred's Stores of Tennessee, Inc. is the Petitioner. |
Matthew Clark LaFave, Crowe LaFave, LLC, of Columbia, for Petitioner.
Kathleen Chewning Barnes, Barnes Law Firm, LLC; Mark David Ball, Peters Murdaugh Parker Eltzroth & Detrick, PA, both of Hampton, for Respondent.
Petitioner Fred's Stores of Tennessee, Inc.1 contends the circuit court erred by refusing to enjoin these lawsuits under the terms of a bankruptcy court order and injunction entered in the bankruptcy proceedings of Blitz U.S.A., Inc. We find the circuit court correctly determined the bankruptcy court's order and injunction do not protect Fred's from these lawsuits. We remand to the circuit court for discovery and trial.
On November 5, 2010, James Nix poured kerosene from a gasoline can onto a burn pile in his yard. The kerosene ignited, and the flame entered the gas can through its unguarded pour spout. The gas can exploded and sprayed kerosene and fire onto Nix's five-year-old son Jacob, who was standing only a few yards away. Jacob suffered severe burn injuries to over 50% of his skin. Jacob has undergone numerous skin grafts and surgeries, but he continues to suffer from pain and limited range of motion. He has permanent scarring.
Blitz U.S.A., Inc. manufactured the gas can. Blitz gas cans have been involved in numerous other lawsuits involving burn injuries like Jacob's.2 Blitz sought bankruptcy protection in the United States Bankruptcy Court for the District of Delaware. In re Blitz U.S.A. Inc. , 475 B.R. 209 (Bankr. D. Del. 2012). According to the bankruptcy court, 475 B.R. at 211. Blitz filed the action seeking bankruptcy protection on November 9, 2011. Id.
Blitz distributed the gas can involved in Jacob's injury through Fred's, a retail store chain headquartered in Tennessee. Fred's sold the gas can to a consumer at its store in the town of Varnville, in Hampton County, South Carolina. The explosion and fire that burned Jacob occurred at Nix's home in Hampton County.
On November 5, 2013, Jacob's aunt Alice Hazel, who is also his legal guardian, and Jacob's mother Melinda Cook, filed separate but almost identical lawsuits in state court in Hampton County seeking damages for Jacob's injuries. Both plaintiffs asserted claims against Blitz on products liability theories of strict liability, breach of warranty, and negligence. Both plaintiffs asserted claims against Fred's for strict liability and breach of warranty based on the sale of the allegedly defective gas can. Both plaintiffs also asserted a claim against Fred's on a negligence theory based only on Fred's negligence, not based on the negligence of Blitz. This is the claim important to this appeal, and we will refer to it as "Hazel's claim."
Fred's moved to "permanently enjoin or alternatively stay" the two lawsuits. Fred's claimed the Blitz bankruptcy order and injunction foreclosed any claims against third-party sellers like Fred's. Before the initial hearing on Fred's motion, the plaintiffs asked for—and the court granted—permission to amend the complaints to withdraw any claims based on Blitz's conduct, and to allege against Fred's only Hazel's claim. The circuit court later filed a written order granting leave to amend the complaints, and denying Fred's motion to enjoin Hazel's claim. Fred's appealed the denial of the injunction to the court of appeals, which affirmed. Hazel v. Blitz U.S.A., Inc. , 425 S.C. 361, 822 S.E.2d 338 (Ct. App. 2018). We granted Fred's petition for a writ of certiorari.
Fred's motion to enjoin Hazel's claim, and its argument to this Court that the circuit court erred by denying it, is based on a 53-page order entered on January 30, 2014—with hundreds of pages of attachments—in the Blitz bankruptcy proceedings in Delaware. The text of the order—without attachments—may be found at In re Blitz U.S.A., Inc. , No. 11-13603 (PJW), 2014 WL 2582976 (Bankr. D. Del. Jan. 30, 2014). The attachment important to our analysis—the "Debtors' and Official Committee of Unsecured Creditors' First Amended Joint Plan of Liquidation"—may be found at In re BLITZ U.S.A., INC., et al., Debtors. , No. 11-13603 (PJW), 2013 WL 6825608 (Bankr. D. Del. Dec. 19, 2013). As the parties have done, we will refer to these documents as the "Confirmation Order" and the "Plan."
The United States Bankruptcy Code provides an "automatic stay" that prevents "the commencement or continuation" of most civil litigation against any debtor named in a bankruptcy proceeding. 11 U.S.C.A. § 362(a)(1) (2015). Fred's is not a named debtor in the Blitz bankruptcy proceeding. However, the Confirmation Order and Plan also enjoin civil actions against certain other parties who are not named as debtors. To accomplish this, the Confirmation Order permitted Wal-Mart Stores, Inc.3 and willing insurance companies to fund the Blitz Personal Injury Trust. In exchange for their contributions, the Confirmation Order protected Wal-Mart and the insurance companies who contributed to the Trust—the Participating Insurers—from all liability "based upon, arising out of, relating to, or in any way involving bodily injury and/or property damage" from a Blitz product. Under the operative language of the Confirmation Order and Plan,4 claims against Blitz, Wal-Mart, Participating Insurers, and Protected Parties are "channeled" into the Blitz Personal Injury Trust, and any party asserting such a claim is enjoined from pursuing the claim in any other forum.
Fred's argues it is a Protected Party under the operative language of the Confirmation Order and Plan. Thus, Fred's argues, Hazel's claim must be channeled to the Blitz Personal Injury Trust and may not be litigated in state court.5 The operative language of the Confirmation Order and Plan supports Fred's argument in some passages, but refutes the argument in other passages. We begin our discussion of Fred's primary argument by explaining the supporting language, then the contrary language. We will finish by attempting to reconcile the inconsistency to discern the bankruptcy court's intent.
The "Introduction" to the Plan summarizes the operative language, "Following the issuance of the Channeling Injunction, holders of Blitz Personal Injury Trust Claims will be permanently enjoined from seeking satisfaction of their Blitz Personal Injury Trust Claims against the Debtors or any other Protected Party." The definition of Blitz Personal Injury Trust Claim is extremely broad. The definition includes, "All claims for damages or other relief for, based upon, arising out of, relating to or in any way involving the products ... of the Debtors." This definition includes Hazel's claim. The term Protected Party is defined to include Vendors. The term Vendor is defined as "any Entity that ... sold or distributed any product manufactured ... by the Debtors." Fred's argues it is a Protected Party because it is a Vendor. Thus, Fred's argues, the Confirmation Order and Plan bar Hazel's claim because Fred's is a Protected Party.
The operative language itself also provides support for Fred's argument. The paragraph of the Confirmation Order entitled "Imposition of Channeling Injunction" provides, "Entities that ... assert any Blitz Personal Injury Trust Claim against the Protected Parties ... shall be permanently stayed, restrained and enjoined ...." The operative language of the Plan is found in sections 3.3.4 and 3.4.4. The third sentence of both sections provides "each holder of a Blitz Personal Injury Trust Claim shall have its Claim permanently channeled to the Blitz Injury Trust, and such [a] Claim may thereafter be asserted exclusively against the Blitz Personal Injury Trust."
The Channeling Injunction itself is section 4.3.3 of the Plan. That section includes two subsections, one of which provides "(i) all Blitz Personal Injury Trust Claims will be subject to the Channeling Injunction," and the other of which provides "(ii) the Protected Parties shall have no obligation to pay any liability of any nature or description arising out of, relating to, or in connection with any Blitz Personal Injury Trust Claims." Section 4.3.3.1 contains the "Terms" of the Channeling Injunction. That section provides, "all Entities ... that hold or assert any Blitz Personal Injury Trust Claim against the Protected Parties ... shall be permanently ... enjoined from taking any action for the purpose of ... recovery from any such Protected Party with respect to any such Blitz Personal Injury Trust Claim."
Fred's relies on these provisions to support its argument that Hazel's claim is channeled into the Blitz Personal Injury Trust and may be asserted only against the Trust.
There are other provisions of the Confirmation Order and Plan, however, which refute Fred's argument. First, several of the provisions quoted above that Fred's argues support its argument are inconsistent with each other. For example, the headings and first two sentences of sections 3.3.4 and 3.4.4 indicate the sections apply only to USA Debtors and BAH Debtors respectively, while later sentences indicate the sections apply to all Protected Parties. As another ex...
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