In re W.R. Grace & Co.

• Decision Date: 16 March 2021
• Docket Number: Case No. 01-01139-AMC (Jointly Administered)
• Citation: 626 B.R. 217
• Parties: IN RE: W.R. GRACE & CO., et al., Reorganized Debtor
• Court: U.S. Bankruptcy Court — District of Delaware

626 B.R. 217

IN RE: W.R. GRACE & CO., et al., Reorganized Debtor

Case No. 01-01139-AMC (Jointly Administered)

United States Bankruptcy Court, D. Delaware.

Signed March 16, 2021

Janet S. Baer, Baer Higgins Fruchtman LLC, Roger J. Higgins, P.C, David E Grassmick, The Law Offices of Roger Higgins LLC, Chicago, IL, Mark M. Billion, Billion Law, Dover, DE, Timothy P. Cairns, Bruce Grohsgal, Laura Davis Jones, Kathleen P. Makowski, James E O'Neill, James E O'Neill, Scotta Edelen McFarland, Pachulski Stang Young & Jones LLP, David W. Carickhoff, Archer & Greiner, P.C., Curtis A. Hehn, Law Office of Curtis A. Hehn, Daniel K. Hogan, HoganMcDaniel, Wilmington, DE, Gregory M. Gordon, Jones Day, Dallas, TX, Pamela D. Marks, Beveridge & Diamond PC, Baltimore, MD, Paul W. Turner, The Carlile Law Firm, Marshall, TX, for Reorganized Debtor.

Ashely M. Chan, United States Bankruptcy Judge

I. INTRODUCTION

The reorganized debtor in this matter, W.R. Grace & Co. ("Grace"), objects to proofs of claim filed by Gary Smolker ("Mr. Smolker"), Home Saving Termite Control, Inc. ("Termite Control"), and Wayne Morris ("Mr. Morris"), the owner of Termite Control (collectively, "Claims"), which are based upon prepetition litigation in TIG Insurance Company v. Gary Smolker, et al., Case No. BC 173952 (Los Angeles County Sup. Ct.) ("California State Court Litigation"). After the Bankruptcy Court entered an order lifting the permanent injunction in Grace's reorganization plan to permit the California State Court Litigation to proceed to judgment, Mr. Smolker's causes of action against Grace in that litigation were all dismissed with prejudice in January 2017 based on Mr. Smolker's failure to bring them to trial within five years. Similarly, Mr. Smolker's causes of action against Termite Control and Mr. Morris were all dismissed in November 2017 for failure to timely bring the causes of action to trial under California law.

Accordingly, Grace now moves for summary judgment on its objection to the Claims. Specifically, Grace objects to Mr. Smolker's claim on the basis that it is unenforceable under California law due to Grace's dismissal from the California State Court Litigation and the prepetition expiration of the statutes of limitations on the causes of action against it in that litigation. Similarly, Grace objects to the indemnity claims filed by Termite Control and Mr. Morris on the basis that Mr. Smolker's claims against them in the California State Court Litigation are unenforceable due to the dismissal of those claims and prepetition expiration of the statutes of limitations on those claims.

Mr. Smolker, representing himself pro se , in addition to objecting to the disallowance of his claim, seeks additional time pursuant to Federal Rules of Civil Procedure 6 and 56(d) to file a supplemental response in opposition to Grace's summary judgment motion and to conduct discovery. Neither Termite Control nor Mr. Morris has responded to Grace's motion for summary judgment.

With regard to Mr. Smolker's extension request, in light of the multiple extensions Mr. Smolker has already received and his failure to demonstrate that his inability to file a complete response was attributable to excusable neglect, neither Federal Rule of Civil Procedure 6 nor its bankruptcy equivalent, Federal Rule of Bankruptcy Procedure 9006, entitles Mr. Smolker to more time to respond. Furthermore, Federal Rule of Civil Procedure 56(d) does not entitle Mr. Smolker to conduct discovery because he has failed to demonstrate how discovery would create a genuine issue of material fact.

With regard to Grace's summary judgment motion, there is no genuine dispute that the causes of action against Grace in the California State Court Litigation forming the basis for Mr. Smolker's claim in this bankruptcy were dismissed and that the statutes of limitations on those causes of action expired prepetition. Accordingly, Mr. Smolker's claim against Grace is unenforceable under applicable California law. Therefore, 11 U.S.C. § 502(b)(1) and § 558 require the disallowance of Mr. Smolker's claim and entitle Grace to judgment as a matter of law.

Similarly, there is no genuine dispute that Mr. Smolker's causes of action against Termite Control and Mr. Morris in the California State Court Litigation are unenforceable under California law due to their dismissal, the prepetition expiration of the statutes of limitations on most of those causes of action, and mootness of the others. As such, there is no basis for concluding that Grace would have any liability towards Termite Control and Mr. Morris stemming from the California State Court Litigation. Therefore, 11 U.S.C. § 502(b)(1) and § 558 require the disallowance of their claims as well, and Grace is entitled to judgment as a matter of law.

II. FACTUAL AND PROCEDURAL BACKGROUND

By way of background, in 1996, Mr. Smolker owned a unit in a six-unit condominium complex ("Complex") located in Playa del Rey, California. Grace Ex. C-2 ¶¶ 1, 6 ("First Am. Cross Compl."); Smolker Jan. Decl. p. 1. On or around October 10 or 11, 1996, after being retained by the homeowners’ association for the Complex, Pacific Villas Homeowners Association ("Pacific Villas"), Termite Control treated the common areas of the Complex for termite infestation using an amorphous silica gel known as "syloid 244" ("Syloid"), allegedly manufactured and sold to Termite Control by Grace. First Am. Cross Compl. ¶ 3(b); Grace Ex. C-4 ¶¶ 18, 19, 69, 93, 99, 101 ("Fifth Am. Cross Compl."); Smolker Jan. Decl. p. 2. Mr. Smolker alleges that in the process of treating the Complex for termite infestation, his individual unit was contaminated with Syloid. Fifth Am. Cross Compl. ¶ 74.

In December 1996, Termite Control allegedly sent crews back to the Complex to clean Mr. Smolker's unit "after [Mr. Smolker] began to experience physical injuries and health problems as a result of the pesticide contamination in the Smolkers’ home." First Am. Cross Compl. ¶ 20. See also Fifth Am. Cross Compl. ¶ 78. Subsequently, in January and February 1997, Mr. Smolker continued to complain to Termite Control and Mr. Morris about Termite Control introducing poisonous, toxic substances into the Smolkers’ home, demanding that Termite Control remedy the problem and provide him with information on potential health effects from the pesticides applied in the Complex. Fifth Am. Cross Compl. ¶ 78.

Mr. Smolker also alleges that in March 1997, he first

notified Grace and Grace Davison that his home had been contaminated with Syloid 244, that Syloid 244 was in the walls [sic] cavities surrounding his home, that he was suffering adverse health effects from exposure to Syloid 244 and asked for information concerning the health effects and toxicological properties of Syloid 244, use restrictions on use of Syloid 244 as a pesticide, or otherwise, [and] whether the Smolkers were being exposed to danger under these circumstances... Fifth Am. Cross Compl. ¶ 79. See also First Am. Cross Compl. ¶ 20.

In March 1997, Mr. Smolker made a claim against TIG Insurance Company ("TIG") for alleged damage to his unit associated with the October 1996 termite extermination. First Am. Cross Compl. ¶ 60; Fifth Am. Cross Compl. ¶ 91. Thereafter, on July 2, 1997, TIG filed a declaratory relief action in the Superior Court of California for the County of Los Angeles ("Superior Court") in connection with its denial of coverage for Mr. Smolker's claim concerning his unit. Lewis Decl. ¶ 10; First Am. Cross Compl. ¶ 63; Grace Ex. C-1 ("Superior Court Docket").

Subsequently, on October 10, 1997, Mr. Smolker filed a cross complaint against, in relevant part, Grace, Termite Control, and Mr. Morris. Lewis Decl. ¶ 10; Grace Ex. C-14 ("2020 Cal. App. Op.") at *2; Superior Court Docket. On November 4, 1997, Mr. Smolker served on at least some cross-defendants an amended cross complaint ("First Amended Cross Complaint"). See generally First Am. Cross Compl. In the First Amended Cross Complaint, Mr. Smolker asserted causes of action against Grace for fraudulent concealment, negligence/violation of statutory duties, strict liability for a defective product, willful misconduct, and abatement of nuisance, alleging that Grace's conduct in failing to exercise reasonable care in manufacturing and selling Syloid, an unregistered, defective, and hazardous pesticide unsafe for intended and foreseeable uses, to Termite Control for use in the Complex's termite extermination in violation of state and federal law¹ and without warning of the defects injured Mr. Smolker's health, caused mental pain and suffering, damaged his property, resulted in Mr. Smolker incurring medical expenses and expenses to remove and replace contaminated property, and compromised his earnings and earning capacity. First Am. Cross Compl. ¶¶ 3, 4, 16, 17, 23, 24, 26, 28, 35, 36, 37, 38, 42, 44, 47, 49, 53, 54, 56.

Additionally, Mr. Smolker asserted causes of action against Termite Control and Mr. Morris for fraudulent concealment, negligence/violation of statutory duties, willful misconduct, and abatement of nuisance, alleging that Termite Control's illegal application of Syloid in an unsafe manner without exercising reasonable care violated various state and federal laws and contaminated Mr. Smolker's unit with Syloid without clear written notice or his consent, injuring his and his family's health, damaging their property, causing them mental pain and suffering, denying them peaceful use of their property, compromising their earnings and earning capacity, and causing them to incur medical expenses and expenses to remove and replace contaminated property. First Am. Cross Compl. ¶¶ 3, 4, 10, 16, 17, 18, 23, 24, 26, 28, 51, 52, 53, 54, 56. Furthermore, in connection with his claims against Termite Control and Mr. Morris, Mr. Smolker alleged that Termite Control wrongfully held itself out as a general building contractor, misrepresented that Syloid was safe and approved by the Environmental Protection Agency,...