In re UNR Industries, Inc.
| Decision Date | 25 March 1983 |
| Docket Number | Bankruptcy No. 82 B 9841-82 B 9851. |
| Citation | 29 BR 741 |
| Parties | In re UNR INDUSTRIES, INC., Unarco Industries, Inc., UNR, Inc., UNR-Rohn, Inc. (Alabama), UNR-Rohn, Inc. (Indiana), Dart, Inc., Jobal Tube Co., Inc., National Plastics, Inc., UNR Products, Inc., Leavitt Structural Tubing Co., and Folding Carrier Corporation, Debtors. |
| Court | U.S. District Court — Northern District of Illinois |
Gregory P. von Schaumburg, S.E.C. Regional Office, Chicago, Ill., for S.E.C.
Ira Kolb, Richard M. Bendix, Jr., Malcolm M. Gaynor, Schwartz, Cooper, Kolb & Gaynor, Chtd., Robert N. Grant, Thomas Linden, Sonnenschein, Carlin, Nath & Rosenthal, Chicago, Ill., for debtors.
Robert B. Chatz, Arvey, Hodes, Costello & Burman, Chicago, Ill., for Pittsburgh Corning.
David Brown, U.S. Trustee's Office, Chicago, Ill., U.S. trustee.
J. William Cuncannon, Defrees & Fiske, Chicago, Ill., Committee of asbestos-related plaintiffs.
James C. Murray, Jr., Katten, Muchin, Zavis, Pearl & Galler, Chicago, Ill., for GAF Corp.
Norman H. Nachman, Nachman, Munitz & Sweig, Ltd., Chicago, Ill., for unsecured creditors committee.
Mark E. MacDonald, Sidley & Austin, Chicago, Ill., for Owens Illinois Corp.
The Court has before it an Application ("Application") for the Appointment of a Legal Representative for Unknown Putative Asbestos-Related Claimants ("putative claimants") in the above-captioned cases. For the reasons given below, the Application is denied.
On July 29, 1982, UNR Industries, Inc., and ten of its subsidiaries and affiliates ("the debtors") filed voluntary petitions for reorganizations under Chapter 11 of the Bankruptcy Code ("the Code"), 11 U.S.C. §§ 101 et seq. The cases have been consolidated for procedural purposes. The principal reason stated by the debtors for their filing the bankruptcy petitions is their involvement as defendants in some 17,000 asbestos-related personal injury lawsuits pending in various state and federal courts, exposing them to potential liabilities, high damages, and substantial costs of legal services.
The plaintiffs in the asbestos suits are individuals who allege that they contracted diseases as a result of exposure to asbestos manufactured or supplied by the debtors. The diseases associated with such exposure are asbestosis, mesothelioma, and bronchogenic carcinoma. Latency periods for these diseases range from fifteen to forty years, and in some cases might be even longer.
Pursuant to an order of the Bankruptcy Court, the United States Trustee appointed two creditors' committees:
On October 12, 1982, the debtors filed with the Bankruptcy Court the instant Application, and the Bankruptcy Court set a briefing schedule on the matter. On December 16, 1982, a General Order was adopted by this Court pursuant to which all cases under Title 11 were referred to the bankruptcy judges of this district. The General Order became effective on December 25, 1982.
On December 30, 1982, on motion of an interested party, the Application was withdrawn from the reference of this case to the Bankruptcy Court for consideration and ruling (order of Bua, J., sitting as emergency judge). This Court denied the debtors' motion to vacate the withdrawal of the reference as to the Application on January 7, 1983.
All interested parties have expressed their views on whether this Application should be granted or denied. The range of views covers the spectrum: some parties favor the Application and ask that a legal representative be appointed immediately; others believe the question is premature, and decision on the Application should be delayed; others believe the Application should be denied immediately.1 The Court will briefly outline the most significant positions asserted by the parties.
The Application requests the appointment of a legal representative to represent the interests of an unknown number of individuals who have in some way been exposed to asbestos (whether the exposure occurred within or without the workplace), who may in the future manifest an asbestos-related disease, and who may eventually claim money from the debtors for their injuries. The debtors contend that such a legal representative must be given the power to bind these putative claimants so that their claims can be discharged in these proceedings. Neither creditors' committee represents the interests of the putative claimants.
The debtors allege what will occur if the Court denies their Application: The 17,000 claims which already have been brought will be followed by between 30,000 and 120,000 more over the next forty years. No lenders will extend credit to companies burdened by litigation costs exceeding $1 million per month, with exposure to damages in the incalculable millions of dollars. If the putative claims cannot be dealt with in a reorganization, the debtors will have no choice but to liquidate. Whatever hope the putative claimants have to a future recovery would vanish, because by the time their diseases are discovered there will be no company left with any assets to satisfy a judgment.
The debtors suggest that it is premature to contemplate the precise authority and duties of the legal representative. All that is necessary at this juncture, they say, is to appoint such a representative. The scope of the responsibilities will be fleshed out later on. They concede that the appointment of such a representative is a "novel concept" not expressly authorized by the Code, but state that this Court has the inherent equitable power to order the relief they seek so as to fulfill the Congressional intent of the Code: providing debtors with the opportunity for a "fresh start."
It is clear from the Application that the legal representative would be called upon to provide adequate representation of the interests of the putative claimants in at least these ways:
The United States Trustee has stated that the Application raises more questions than it answers. The Trustee urges that because the debtors have failed to answer threshold questions, the Court should not rule on the Application at this time.2 Instead, the Court should immediately appoint an amicus curiae to study and to advise the Court as to the numerous legal problems posed by the Application.
First, the Court notes that the Trustee substantially duplicates the function of an amicus curiae—an advisor of the Court without the responsibility to represent a particular interest. Second, the Court has had the benefit of the briefs of many leading members of the bar representing all sides of the question and does not believe that it should impose additional expense on an estate already burdened with high administrative costs. Further, the Court finds that the questions raised by the Application are ripe for decision. Therefore the Court declines to appoint an amicus curiae.
The Application raises various statutory, practical, and constitutional problems. Despite the debtors' plea that these questions are premature and need not be addressed until after a legal representative is appointed, the Court finds that it would be a waste of judicial resources and the estate's financial resources as well were the Court not to address some of the obvious questions at this time.
The debtors agree that the Code by its terms does not provide for the appointment of a legal representative.3 Instead, they refer to a well respected text which they say shows that the Court has power to grant the relief they seek.
Where the Bankruptcy Code is silent, equitable principles will govern. But the equitable powers of the bankruptcy court will be exercised with the limits laid down by Title 11, and subject to and consistent with specific provisions contained in it.
1 Collier on Bankruptcy, ¶ 3.01(5)(b)(ii) (15th ed. 1979). A bankruptcy court does not have unlimited equitable power to stray from the facts of any case and to enter any orders which might be described as equitable. The equitable power of this Court sitting in bankruptcy is limited by the statute adopted by Congress.
The debtors suggest that the putative claimants are creditors with claims which can be discharged in bankruptcy pursuant to 11 U.S.C. § 502. Two statutory definitions govern. A "creditor" is a person who "has a claim against the debtor that arose at the time of or before the order for relief concerning the debtor." 11 U.S.C. § 101(9) (emphasis added). A "claim" is a "right to payment, whether or not such right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured, or unsecured . . ." 11 U.S.C. § 101(4)(A) (emphasis added). The debtors contend that the putative claimants are holders of contingent claims. Three principles determine the question presented here:
1. A claim of which a bankruptcy court may take cognizance must be one that is recognized by state or federal law. Vanston Bondholders Protective Committee v. Green, 329 U.S. 156, 170, 67 S.Ct. 237, 243-244, 91 L.Ed. 162 (1946) (Frankfurter, J., concurring). The asbestos claims and rights all arise under state law.
2. The existence of a claim turns on when it arose. Matter of Thomas, 12 B.R. 432 (Bkrtcy.S.D.Iowa 1981). In the case of a claim sounding in tort, it is not the wrongful or negligent act which gives rise to the claim. Instead, no claim arises until the plaintiff suffers an injury. United States v. Reid, 251 F.2d 691, 694 (5th Cir. 1958). W. Prosser, Law of Torts, 143-44 (4th Ed.1971).
3. The claim of an asbestos pla...
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