In re G-I Holdings, Inc.

• Decision Date: 08 June 2004
• Docket Number: Bankruptcy No. 01-30135(RG).,Adversary No. 01-3013(RG).
• Citation: 313 B.R. 612
• Parties: In re G-I HOLDINGS, INC. f/k/a GAF Corporation, et al., Debtors. G-I Holdings, Inc., Plaintiff, v. Those Parties Listed on Exhibit A, et al., Defendants.
• Court: U.S. Bankruptcy Court — District of New Jersey

313 B.R. 612

In re G-I HOLDINGS, INC. f/k/a GAF Corporation, et al., Debtors G-I Holdings, Inc., Plaintiff, v. Those Parties Listed on Exhibit A, et al., Defendants.

Bankruptcy No. 01-30135(RG).

Adversary No. 01-3013(RG).

United States Bankruptcy Court, D. New Jersey.

June 8, 2004.

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Dennis J. O'Grady, Mark E. Hall, Riker, Danzig, Scherer, Hyland & Perretti LLP, Morristown, NJ, Martin J. Bienenstock, Debra L. Goldstein, Kathryn L. Turner, Weil, Gotshal & Manges LLP, New York, NY, Co-Attorneys for the Debtors and Building Materials Corporation of America.

Jeffrey D. Prol, Jeffrey A. Kramer, Lowenstein Sandler, PC, Roseland, NJ Trevor W. Swett, Max C. Heerman, Caplin & Drysdale, Washington, DC, Co-Counsel to Official Committee of Asbestos Claimants.

David R. Gross, Nancy A. Washington, Saiber, Schlesinger, Satz & Goldstein LLC, Newark, NJ, Michael L. Scheier, Keating, Muething & Klekamp, P.L.L., Cincinnati, OH, Co-Counsel for the Legal Representatives of Present and Future Holders of Asbestos-Related Demands.

William S. Katchen, Duane Morris, LLP, Newark, NJ, Theodore Gewertz, Esq., Wachtell, Lipton, Rosen & Katz, New York, NY, Co-Counsel for the Bank of New York.

OPINION

ROSEMARY GAMBARDELLA, Chief Judge.

This matter is before the Court on a motion filed by the Official Committee of Asbestos Claimants (hereinafter the "Committee") seeking four separate, but interrelated, forms of relief. First, the Committee requests that this Court modify the February 22, 2002 Preliminary Injunction entered in this case so as to permit the Committee to commence an adversary proceeding as the representative of the Debtor G-I Holdings, Inc.'s (hereinafter "G-I Holdings") estate for the purposes of: a) avoiding and recovering the transfer of GAF Corporation's¹ roofing business to Building Materials Corporation of America (hereinafter "BMCA") in 1994; b) avoiding certain liens imposed on the assets of that roofing business in connection with a December, 2000 refinancing;² and c) avoiding and recovering payments made "under color of those liens" after the filing of G-I Holdings' bankruptcy petition.

Second, the Committee requests that this Court confer upon it, pursuant to §§ 1103(c)(5), 1109(b), and 105 of the Bankruptcy Code, the requisite authority to file and prosecute such a suit on behalf of the G-I Holdings estate and its creditors. Third, the Committee requests that this Court prohibit BMCA from carrying out its proposed issuance of new public notes, or any other related financing transaction, pending the resolution of this motion.³ Fourth, the Committee seeks an order "prohibiting BMCA from pre-paying outstanding notes as an inducement to existing Noteholders to `roll over' their present holdings by investing in BMCA's proposed new notes."

Both G-I Holdings and BMCA have submitted formal objections to the motion filed by the Committee. The Bank of New York (hereinafter "BNY") also filed a formal objection to the Committee's motion. Further, the Legal Representatives of Present and Future Holders of Asbestos-Related Demands (hereinafter "Legal Representative") filed papers with the Court "fully" supporting the motion filed by the Committee.⁴

This Court conducted a hearing with respect to the motion on March 29, 2004, at which time the Court reserved decision. The following constitute the Court's findings of fact and conclusions of law as required by Federal Rule of Bankruptcy Procedure 7052. See Fed. R. Bankr.P. 7052. Pursuant to 28 U.S.C. § 157, this matter is a core proceeding. See generally 28 U.S.C. § 157(b) (1994). Further, the Court has jurisdiction over this matter pursuant to 28 U.S.C. § 1334 and the Standing Order of Reference from the United States District Court for the District of New Jersey dated July 23, 1984. See 28 U.S.C. § 1334 (1993). Finally, venue is proper pursuant to 28 U.S.C. § 1409(a) (1993).

I. Parties Involved In This Motion

On January 5, 2001, G-I Holdings, which is a holding company, filed a voluntary petition under Chapter 11 of the Bankruptcy Code. On August 3, 2001, ACI, Inc., a subsidiary of G-I Holdings, filed a voluntary Chapter 11 petition. On October 10, 2001, this Court entered an Order directing the joint administration of the G-I Holdings and ACI, Inc. bankruptcy cases. Since the filing of its bankruptcy petition, G-I Holdings has been operating its business as a debtor-in-possession pursuant to §§ 1107(a) and 1108 of the Bankruptcy Code. See 11 U.S.C. § 1107(a)(West 2004); see also 11 U.S.C. § 1108 (West 2004). G-I Holdings is the successor-in-interest to GAF Corporation (hereinafter "GAF"), an entity named in approximately 500,000 asbestos actions prior to merging into G-I Holdings. The Committee submits that as successor-in-interest to GAF, G-I Holdings remains liable for approximately 150,000 asbestos lawsuits filed, but unresolved, as of the petition date and for unknown numbers of asbestos claims that will be filed in the future.

BMCA is an indirect subsidiary of G-I Holdings, and is also the primary operating subsidiary and principal asset of G-I Holdings. Significantly, BMCA is not a "debtor," as defined in § 101(13) of the Bankruptcy Code, in any bankruptcy proceeding. Established in 1994, BMCA received substantially all the assets of GAF's roofing products business and expressly assumed $204 million of asbestos liability, with G-I Holdings indemnifying BMCA against any additional asbestos liability. Notwithstanding that BMCA claims to have never manufactured any products containing asbestos, the Company has been named as an additional defendant in more than one thousand asbestos bodily injury lawsuits against GAF since September, 2000. Simply stated, the claims against BMCA are premised upon theories of successor liability or alter ego.

The Committee is an official committee of creditors appointed on January 22, 2001 by the United States Trustee pursuant to § 1102(a) of the Bankruptcy Code to represent those individuals who allegedly suffer injuries related to the inhalation of asbestos from products manufactured by the predecessors of G-I Holdings. See 11 U.S.C. § 1102(a)(West 2004).⁵ Further, the Legal Representative is a fiduciary appointed by the Court to represent persons who hold present and future asbestos-related claims against G-I Holdings. Finally, BNY is both a participant and agent for a group of institutional lenders with revolving credit working capital agreements with BMCA.

II. Factual And Procedural Background

On January 8, 2001, several days after filing for relief under Chapter 11 of the Bankruptcy Code, G-I Holdings moved pursuant to § 105(a)⁶ of the Code seeking a preliminary injunction prohibiting the filing or prosecution of present and future asbestos claims against BMCA, pending confirmation of a plan of reorganization for G-I Holdings or the issuance of a declaratory judgment as to whether BMCA bears successor liability or alter ego liability for asbestos claims. According to G-I Holdings, an injunction was necessary to protect the value of the estate, because otherwise BMCA would itself be forced into bankruptcy.

Moreover, contending that all asbestos claims against BMCA are also essentially pending against G-I Holdings based upon the parties' indemnification agreement, G-I Holdings argued that this Court would lose its ability to fashion a uniform and efficient method of resolving asbestos claims if the asbestos claimants were permitted to prosecute their respective claims in various courts throughout the country. BNY appeared in the matter, joining G-I Holdings' application for a preliminary injunction. The Committee interposed an objection, contending that this Court should not exercise jurisdiction over a non-debtor third party by extending the automatic stay to such third parties where the litigation would otherwise not affect property of the bankruptcy estate.

On February 8, 2001, the Committee commenced an adversary proceeding against G-I Holdings, BMCA Holdings Corporation, and BMCA (hereinafter the "Substantive Consolidation Action"). (See Appendix of the Committee, Vol. 1, Exhibit "12")(hereinafter "Comm. Appx."). In this two-count adversary proceeding, the Committee first requests that the Court substantively consolidate G-I Holdings and BMCA, nunc pro tunc, as of January 5, 2001, the date G-I Holdings filed its Chapter 11 petition. The second count of the Substantive Consolidation Action seeks, in the alternative, a "permanent mandatory injunction directing [G-I Holdings] to take all corporate action necessary to cause BMCA to file immediately a petition under Chapter 11 of the Bankruptcy Code." After a three day evidentiary hearing this Court denied the Committee's request for interim substantive consolidation. See Official Comm. of Asbestos Claimants v. G-I Holdings, Inc. (In re G-I Holdings, Inc.), 2001 WL 1598178 (Bankr.D.N.J.2001). This Substantive Consolidation Action is still pending before this Court.

On February 7, 2001, G-I Holdings and BMCA commenced an adversary proceeding in this Court for a judgment declaring that BMCA was not liable as a successor or alter ego for G-I Holdings' asbestos liabilities (hereinafter the "Successor Liability Action"). The Committee intervened as a defendant and counterclaimed for a judgment declaring that BMCA was liable for G-I Holdings' asbestos liabilities under theories of successor liability and "piercing the corporate veil." The Successor Liability Action is currently pending in the United States District Court for the District of New Jersey.⁷

By Order dated February 22, 2002⁸, this Court granted the relief requested by G-I Holdings and entered a preliminary injunction enjoining any asbestos claimants from prosecuting pending actions⁹ and future actions ¹⁰ against either G-I Holdings or BMCA. Moreover,...