In re Solutia, Inc.

• Docket Number: 03-17949 (MG)
• Decision Date: 23 August 2023
• Parties: In re: SOLUTIA, INC., et al.,Reorganized Debtors.
• Court: U.S. Bankruptcy Court — Southern District of New York

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In re: SOLUTIA, INC., et al.,Reorganized Debtors.

No. 03-17949 (MG)

United States Bankruptcy Court, S.D. New York

August 23, 2023

WEIL, GOTSHAL & MANGES LLP Attorneys for Paramount Global and General Electric Co. By: Yehudah L. Buchweitz, Esq. Robert J. Lemons, Esq. Cameron Mae Bonk, Esq.

MCGUIREWOODS LLP Attorneys for Reorganized Solutia Inc. By: Dion W. Hayes, Esq. Shawn R. Fox, Esq. By: Andrew C. Papa, Esq.

THOMPSON COBURN LLP Attorneys for Monsanto Company and Pharmacia, LLC By: Christopher M. Hohn, Esq. David M. Mangian, Esq. Mark S. Indelicato, Esq. Mark T. Power, Esq

MINTZ, LEVIN, COHN, FERRIS, GLOVSKY, AND POPEO P.C. Attorneys for Kyocera AVX Components Corporation By: LisaMarie Collins, Esq. Kaitlyn Crowe, Esq.

BERRY SILBERBERG STOKES PC Attorneys for The Gillette Company LLC By: Robert P. Berry, Esq.

PHILLIPS LYTLE LLP Attorneys for Magnetek, Inc. By: Ryan A. Lema, Esq.

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MEMORANDUM OPINION AND ORDER DENYING MOTION TO REOPEN CLOSED CHAPTER 11 CASES AND, IN THE ALTERNATIVE, TO ABSTAIN FROM DECIDING

MARTIN GLENN CHIEF UNITED STATES BANKRUPTCY JUDGE

This Opinion addresses contested motions to reopen the closed chapter 11 cases of Solutia, Inc. and its affiliates (collectively, "Solutia"), or, in the alternative, to abstain from decision on the underlying issues in favor of pending proceedings in the Missouri Courts.^[1]

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Solutia's insolvency arose from its liabilities from the manufacture and sale of polychlorinated biphenyls ("PCBs"), a class of ubiquitous chemically inert and heat-resistant chemicals that were integral to manufacturing of electrical equipment, including transformers and capacitors, and many other manufacturing uses in the United States and worldwide, for most of the 20th century. PCBs, despite their beneficial uses, were also a scourge, leading to serious environmental contamination and health harms still being experienced today. They are often referred to as "forever chemicals" because they are persistent in the environment and can build up in the body over time.

Manufacturing and sales of PCBs were largely phased out for most uses beginning in the early 1970s. In 1979, the Environmental Protection Agency ("EPA") largely banned the continued manufacture of PCBs. Not surprisingly, the use and misuse of PCBs led to lawsuits in state and federal courts across the country, many such cases continuing today, with many defendants.

Solutia and its affiliates, created in 1977 as the result of a spin-off from Monsanto Chemical Company that had long been involved in the manufacture and sale of PCBs, were the chapter 11 debtors in these now-closed cases filed in this Court on December 17, 2003 and closed on March 29, 2010, after successfully confirming a chapter 11 plan on November 29, 2007 ("Plan," ECF Doc. # 4444). The cases were complicated, with a reorganization plan that reflected many settlements and compromises that many such complex plans entail. From the filing of the cases in 2003 until the cases were closed in 2010, Bankruptcy Judge Prudence C. Beatty presided over the cases.

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Solutia is now a wholly-owned subsidiary of Eastman Company, a New York Stock Exchange listed company. No one has suggested that Eastman or Solutia are insolvent or in financial distress. Eastman appears to have a market capitalization of nearly $10 billion.

The underlying issues raised by the pending motions are whether this Court or a non-bankruptcy court should decide the extent of the obligations, if any, of Solutia and the other parties to a series of written agreements. Those agreements, referred to as special undertaking agreements ("SUAs" explained in more detail below), require the purchasers of the PCBs to indemnify the seller (Monsanto or Solutia) for all liability arising from the PCBs. With some variation, the SUAs required the seller (Monsanto or Solutia) to cooperate in the defense of litigating any claims arising from the PCBs.

Solutia did not schedule the SUAs in its bankruptcy schedules, and it did not in express terms reserve rights to assert indemnification claims. The Movants (as defined below) assert that the SUAs were executory contracts that were deemed rejected upon confirmation of the Solutia chapter 11 Plan. Solutia disputes that the SUAs were executory contracts, and it also argues that it did not have to specifically reserve rights to assert indemnification claims against the SUA counterparties since it did not know of such claims at the time of confirmation.

After the motion to reopen the case was filed on May 3, 2023 ("Motion to Reopen," ECF Doc. # 4790), the closed cases were reassigned to me (ECF Doc. # 4794). The Motion to Reopen is contested by Solutia and others, and, in addition, Solutia has filed a motion to abstain (the "Motion to Abstain," ECF Doc. # 4823) in favor of adjudication of the issues in a Missouri court.

It is undisputed that the non-bankruptcy Missouri Courts where an action is currently pending have concurrent jurisdiction with this Court over the disputed issues. So, the issue for

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this Court is whether to reopen the Solutia chapter 11 case and decide the issue of the enforceability of at least some of the SUAs (there is some variation in the agreements and not all counterparties have appeared in this Court), or whether to either deny the motion to reopen the cases or abstain from deciding the underlying issues, leaving the issues to be decided by a non-bankruptcy court in Missouri that has concurrent jurisdiction.

For the reasons explained below, the Court DENIES the Motion to Reopen, and, in the alternative, GRANTS the Motion to Abstain.

I. BACKGROUND

Pending before the Court is the Motion to Reopen filed by Paramount Global ("Paramount") and General Electric Company ("GE," together, the "Movants"), which seeks entry of an order reopening the chapter 11 cases of the above-captioned reorganized debtor, Solutia, Inc. ("Solutia" or "Debtor," and together with the other debtors, the "Debtors") pursuant to section 350(b) of the Bankruptcy Code, Rule 5010 of the Federal Rules of Bankruptcy Procedure (the "Bankruptcy Rules"), and Rule 5010-1 of the Local Bankruptcy Rules for the United States Bankruptcy Court for the Southern District of New York in order to require compliance by Solutia with the Plan. In support of the Motion, the Movants submit the declarations of Robert Noethiger (the "Noethiger Declaration," ECF Doc. # 4791), Stephen Murray (the "Murray Declaration," ECF Doc. # 4792), and Yehudah L. Buchweitz ("Buchweitz Declaration," ECF Doc. # 4793. Attached to the Motion to Reopen as Exhibit B is the Motion of Paramount Global And General Electric Company To Compel Compliance With The Chapter 11 Plan And Confirmation Order, And Enjoin Solutia From Pursuing Unpreserved Claims ("Proposed Motion to Enforce"). These declarations and exhibits were admitted in evidence during the August 16, 2023 hearing on the Motions. The following parties filed Joinders to the

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Motion: The Gillette Company LLC ("Gillette," and its joinder, the "Gillette Joinder," ECF Doc. # 4818), Kyocera AVX Components Corporation ("KAVX," and its joinder, the "KAVX Joinder," ECF Doc. # 4810) and Magnetek, Inc. ("Magnetek," and its joinder the "Magnetek Joinder," ECF Doc. # 4807 and Magnatek, together with Gillette and KAVX, the "SUA Parties").

Reorganized Solutia, now a wholly-owned subsidiary of the Eastman Company, filed an objection, which included a motion to abstain (the "Abstention Motion," and the "Solutia Objection," ECF Doc. # 4823). Monsanto Company ("Monsanto") and Pharmacia, LLC ("Pharmacia", and together with Monsanto, the "Monsanto Parties") joined in the objection (the "Monsanto Objection Joinder," ECF Doc. # 4826). The Movants filed a reply (the "Reply," ECF Doc. # 4833) as well as a supplemental declaration of Yehudah L. Buchweitz (the "Supplemental Buchweitz Decl," ECF Doc. # 4834). KAVX and Magnatek filed joinders to the Reply. (ECF Doc. ## 4839, 4840.) Finally, Reorganized Solutia filed a reply with respect to their abstention motion (the "Abstention Reply," ECF Doc. # 4823) which Monsanto and Pharmacia joined. (See ECF Doc. # 4844.)

For the reasons discussed more fully below, the Court declines to reopen the cases, and in the alternative, decides to abstain in favor of permitting the non-bankruptcy court in Missouri, that has concurrent jurisdiction, to resolve the issues. The disputes involve non-debtor parties, not all of whom are parties in this Court. This Court cannot finally resolve the issues affecting all the non-debtor parties, but the non-bankruptcy court in Missouri can do so. Judicial efficiency is better served by leaving these issues to a Missouri court.

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A. The Manufacture, Sale, and Use of PCBs

As already stated, PCBs are a class of chemicals that were integral to the manufacturing of transformers and capacitors, among other things, in the United States for most of the 20th century. (Buchweitz Decl. Ex. 4, Monsanto Company et al. v. Magnetek, Inc. et al., First Amended Petition, No. 17SLCC03368 (Cir. Ct. St. Louis Cty. Mo., Aug. 3, 2022) (the "Missouri Comp." or "Missouri Complaint") at 3.) From approximately 1935 to 1977, Pharmacia, LLC f/k/a Old Monsanto Company a/k/a Monsanto Chemical Co. ("Old Monsanto") manufactured and sold PCBs in bulk to several industrial customers-including Paramount's predecessor-in-interest, Westinghouse Electric Corporation ("Westinghouse"), GE, Magnetek's predecessor-in-interest, Universal Manufacturing Corporation ("Universal"), Kyocera AVX's predecessor-in-interest, Aerovox Corporation ("Aerovox"), and Gillette's predecessor-in-interest, P.R. Mallory & Co. Inc. ("P.R. Mallory")-who incorporated those PCBs into a variety of products and then sold those products throughout the United States. (Id. at 2-3, 10-11.)

In 1970, in response to growing concerns that PCBs persisted in the environment, Old Monsanto announced that...