In re G-I Holdings, Inc., Civil No. 02-3626 (WGB).

• Decision Date: 05 August 2005
• Docket Number: Bankr.Case No. 01-30135 (RG).,Bankr.Case No. 01-38790(RG).,Civil No. 02-3626 (WGB).,Adv. Pro. No. 01-3066(RG).
• Citation: 380 F.Supp.2d 469
• Parties: In re G-I HOLDINGS, INC., et al. (f/k/a GAF Corporation.), Debtor. G-I Holdings, Inc.,(f/k/a GAF Corp.), Building Materials Corporation of America, Building Materials Investment Corporation, and Building Materials Manufacturing Corporation, Plaintiff(s), v. Ruddles A. Bennet, Jr. et al., Defendant(s). Official Committee of Asbestos Claimants, Counterclaimant, v. G-I Holdings, Inc.,(f/k/a GAF Corp.), Building Materials Corporation of America, Building Materials Investment Corporation, and Building Materials Manufacturing Corporation, Counterdefendant(s).
• Court: U.S. District Court — District of New Jersey

Page 469

380 F.Supp.2d 469

In re G-I HOLDINGS, INC., et al. (f/k/a GAF Corporation.), Debtor.

G-I Holdings, Inc.,(f/k/a GAF Corp.), Building Materials Corporation of America, Building Materials Investment Corporation, and Building Materials Manufacturing Corporation, Plaintiff(s), v. Ruddles A. Bennet, Jr. et al., Defendant(s).

Official Committee of Asbestos Claimants, Counterclaimant, v. G-I Holdings, Inc.,(f/k/a GAF Corp.), Building Materials Corporation of America, Building Materials Investment Corporation, and Building Materials Manufacturing Corporation, Counterdefendant(s).

Civil No. 02-3626 (WGB).

Bankr.Case No. 01-30135 (RG).

Bankr.Case No. 01-38790(RG).

Adv. Pro. No. 01-3066(RG).

United States District Court, D. New Jersey.

August 5, 2005.

Riker, Danzig, Scherer, Hyland & Perretti LLP by Dennis J. O'Grady, Esq., Morristown, NJ, Weil, Gotshal & Manges LLP by Martin J. Bienenstock, Esq., Kathryn L. Turner, Esq., Ralph I. Miller, Esq., Debra L. Goldstein, Esq., John B. Kinchen, Esq., New York City, for Plaintiffs and Counterdefendants.

Saiber Schlesinger Satz & Goldstein, LLC by David R. Gross, Esq., Nancy A. Washington, Esq., Whitney R. Chelnik, Esq., Newark, NJ, Keating, Muething & Klekamp, P.L.L. by Kevin E. Irwin, Esq., Michael L. Scheier, Esq., Douglas Hensley, Esq., Cincinnati, OH, for the Legal Representative of Present and Future Holders of Asbestos-Related Demands.

Caplin & Drysdale, Chartered, by Elihu Inselbuch, Esq., New York City, Lowenstein Sandler, PC by John K. Sherwood, Esq., Rose E. Ramsay, Esq., Roseland, NJ, for the Official Committee of Asbestos Claimants.

Goldstein, Lem & Isaacson, PC by Nancy Isaacson, Esq., Springfield, NJ, for the Individual Defendants.

OPINION

BASSLER, Senior District Judge.

In this bankruptcy appeal, Plaintiffs G-I Holdings, Inc. (f/k/a GAF Corporation) ("G-I"), Building Materials Corporation of America ("BMCA"), Building Materials Investment Corporation ("BMIC"), and Building Materials Manufacturing Corporation ("BMMC") (collectively, "Plaintiffs") seek a declaratory judgment that BMCA, BMIC, and BMMC cannot be held liable for the asbestos-related claims brought against G-I under any theory of successor liability or "alter ego" (piercing the corporate veil). Defendant Official Committee of Asbestos Claimants (the "Official Committee") have counterclaimed, alleging that BMCA, BMIC, and BMMC could be held vicariously liable for the claims. The defendants also demanded a jury trial on both counts of the complaint and the counterclaims.

Plaintiffs have filed a motion to strike the jury demand. For the reasons stated below, the Court concludes that the defendants are entitled to a jury trial under the Seventh Amendment on both the issue of successor liability and the issue of piercing the corporate veil. Accordingly, the Court denies Plaintiffs' motion to strike the jury demand.

I. Background

G-I, formerly GAF Corporation ("GAF"), a holding company that owns BMCA, BMIC, and BMMC, filed for Chapter 11 bankruptcy on January 5, 2001 to provide for a fair resolution of all its liabilities, including a resolution of all asbestos-related claims against it. (First Am. Compl. ¶¶ 2,5.) G-I claims that it was forced to file for bankruptcy due to an increase in both the number of asbestos claims filed against G-I and the settlement amounts demanded by asbestos claimants. (Id. ¶ 4.) Additionally, asbestos claimants began joining BMCA, BMIC, and BMMC along with G-I in their tort suits, seeking money damages and alleging that G-I's subsidiaries were vicariously liable for GAF's asbestos torts on theories of piercing the corporate veil and successor liability. (Id. ¶ 3.)

In response to these complaints against BMCA, BMIC, and BMMC, Plaintiffs filed the above-captioned adversary proceeding seeking a declaration that BMCA, BMIC, and BMMC cannot be held liable for asbestos-related claims based on injuries alleged to have been caused by products sold by G-I and GAF. Specifically, in their First Amended Complaint, Plaintiffs have requested that the Court provide:

1. Entry of judgment on Count I for Plaintiffs declaring that BMCA, BMIC, and/or BMMC are not liable for Asbestos Claims under any theory of successor liability;

2. Entry of judgment on Count II for Plaintiffs declaring that BMCA, BMIC, and/or BMMC are not liable for Asbestos Claims based on a theory that MCA, BMIC, and/or BMMC are the "alter ego" of either G-I, GAF BMC, and/or GAF Corporation ...

(Id. at 11.) Plaintiffs filed the adversary proceeding against three groups: the Official Committee, individuals who sued BMCA and have become defendants in this case ("Individual Defendants")¹, and C. Judson Hamlin, the Legal Representative of Present and Future Holders of Asbestos-Related Demands ("Legal Representative"). The Legal Representative has since been dismissed from this action pursuant to the Court's Opinion and Order dated July 6, 2005.

The Individual Defendants filed their Answer to the First Amended Complaint with their Jury Demand on November 14, 2002. The Official Committee filed its Answer Affirmative Defenses, Counterclaims, and Demand for Jury Trial in Response to the First Amended Complaint on November 18, 2002. The Official Committee's Counterclaims seek a declaration that BMCA, BMIC, and BMMC are successors in liability to all of the asbestos-related claims against G-I and GAF (Count I) and that the corporate veil of these entities should be disregarded (Count II). If granted, the requested relief would allow asbestos claimants to hold BMCA, BMIC, and BMMC liable for asbestos-related claims based on products by G-I and GAF. Plaintiffs now move to strike the jury demand by the Official Committee and the Individual Defendants (collectively, "Defendants"). This Court exercised jurisdiction over this matter on May 13, 2003 by granting the Official Committee's request to withdraw the reference from the Bankruptcy Court with respect to this Adversary Proceeding, No. 01-3066.

II. Discussion

Defendants' assert that they have a constitutional right to a trial by jury under the Seventh Amendment of the United States Constitution. Ratified in 1791, the Seventh Amendment provides that "[i]n Suits at common law, where the value in controversy shall exceed twenty dollars, the right of trial by jury shall be preserved ..." U.S. Const. amend. VII. The phrase "Suits at common law" refers to "suits in which legal rights were to be ascertained and determined, in contradiction to those where equitable rights alone were recognized, and equitable remedies were administered." Feltner v. Columbia Pictures Television, Inc., 523 U.S. 340, 348, 118 S.Ct. 1279, 140 L.Ed.2d 438 (1998) (quoting Parsons v. Bedford, (1830)(emphasis in original)).

The Seventh Amendment also applies to claims that did not exist at common law in 1791, if they "are analogous to common-law causes of action ordinarily decided in English law courts in the late 18th century, as opposed to those customarily heard by courts of equity or admiralty." Feltner, 523 U.S. at 348, 118 S.Ct. 1279 (quoting Granfinanciera, S.A. v. Nordberg, 492 U.S. 33, 42, 109 S.Ct. 2782, 106 L.Ed.2d 26 (1989)).

"[T]o determine whether a [claim] is more analogous to cases tried in courts of law than to suits tried in court of equity or admiralty, [the court] examine[s] both the nature of the [claim] and the remedy sought." Feltner, 523 U.S. at 348, 118 S.Ct. 1279. The trial court engages in a two-step process:

First, [the court] compare[s] the [claim] to 18th-century actions brought in the courts of England prior to the merger of the courts of law and equity. Second, [the court] examine[s] the remedy sought and determine[s] whether it is legal or equitable in nature. The second stage of this analysis is more important than the first.

Granfinanciera, 492 U.S. at 42, 109 S.Ct. 2782 (citing Tull v. United States, 481 U.S. 412, 417-18, 107 S.Ct. 1831, 95 L.Ed.2d 365 (1987)). "`[A]ny seeming curtailment of the right to a jury trial should be scrutinized with the utmost care.'" Billing v. Ravin, Greenberg & Zackin, P.A., 22 F.3d 1242, 1260 (3d Cir.1994) (quoting Chauffeurs, Teamsters & Helpers Local No. 391 v. Terry, 494 U.S. 558, 565, 110 S.Ct. 1339, 108 L.Ed.2d 519 (1990)).

A. Effect of a Declaratory Judgment Action

Plaintiffs initiated this lawsuit as a declaratory judgment action. The fact that Plaintiffs have filed for a declaratory judgment does not affect Defendants' right to a jury trial. A declaratory judgment in itself is neither legal nor equitable in nature. See Gulfstream Aerospace Corp. v Mayacamas Corp., 485 U.S. 271, 284, 108 S.Ct. 1133, 99 L.Ed.2d 296 (1988). If the asbestos claimants would have been entitled to a trial by jury had they sued Plaintiffs for their injuries, the claimants cannot be deprived of their right to a jury trial merely because Plaintiffs filed for declaratory relief first. See Beacon Theatres, Inc. v. Westover, 359 U.S. 500, 504, 79 S.Ct. 948, 3 L.Ed.2d 988 (1959).

The Third Circuit Court of Appeals clarified the holding of Beacon Theatres in Owens-Illinois, Inc. v. Lake Shore Land Co., 610 F.2d 1185 (3d Cir.1979). That court held that the relevant question in determining whether a right to a jury trial exists in an action for declaratory relief is "in what kind of suit the claim would have come to the court if there was no declaratory judgment remedy," and whether a right to trial by jury applies to that underlying claim. Id. at 1189.

If the declaratory judgment action does not fit into one of the existing equitable patterns but is essentially an inverted law suit[,] an action brought by one who would have been a defendant at common law[,] then the parties have a right to a jury. But if the action is the counterpart of a suit in equity, there is no such right.

Id. In this case the issue is whether, had Defendants first brought an action for recovery on their asbestos claims against Plaintiffs, the underlying claims in that...